3102 Shawnee Drive
Winchester, Virginia 22601-4208
Telephone: (540) 665-9100
Fax: (540) 665-9176
Sales: $327 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: AMWD
NAIC: 33711 Wood Kitchen Cabinet and Countertop Manufacturing
American Woodmark is an organization of employees and shareholders who have combined their resources to pursue a common goal. What We Do. Our common goal is to create value by providing kitchens and baths "of pride" for the American family. Why We Do It. We pursue this goal to earn a profit, which allows us to reward our shareholders and employees and to make a contribution to our society. How We Do It. Four principles guide our actions. Customer Satisfaction: Providing the best possible quality, service and value to the greatest number of people. Doing whatever is reasonable, and sometimes unreasonable, to make certain that each customer's needs are met each and every day.
Integrity: Doing what is right. Caring about the dignity and rights of each individual. Acting fairly and responsibly with all parties. Being a good citizen in the communities in which we operate. Teamwork: Understanding that we must all work together if we are to be successful. Realizing that each individual must contribute to the team to remain a member of the team. Excellence: Striving to perform every job or action in a superior way. Being innovative, seeking new and better ways to get things done. Helping all individuals to become the best that they can be in their jobs and careers.
1951: Dr. Alvin Goldhush founds Formed Laminates Inc. to make dental cabinets.
1971: Goldhush sells his company, now named Raygold Corp., to Boise Cascade Corp.
1980: Four Boise executives buy the cabinet division in a leveraged buyout; name new company American Woodmark Corp.
1986: American Woodmark goes public.
1989: Company restructures, expanding lines of cabinets and number of assembly plants.
1996: American Woodmark pays first quarterly cash dividend.
1999: Company buys Knapp Woodworking and breaks ground for $10 million factory.
American Woodmark Corporation is one of the five largest cabinet manufacturers in the United States, specializing in custom and stock kitchen cabinets and bathroom vanities. From its headquarters in Winchester, Virginia, at the head of the Shenandoah Valley, the company operates nine manufacturing plants, in Arizona, Georgia, Kentucky, Virginia, and West Virginia, and 11 service centers around the country. It offers some 130 different cabinet lines to the remodeling and new home construction markets, with remodeling accounting for three-quarters of its 1999 sales. Its products include the brand names American Woodmark, Crestwood, Timberlake, Scots Pride, Coventry and Case, and Knapp. American Woodmark distributes its products nationally through three major channels: home centers, major builders, and independent dealer/distributors. Chairman of the Board and co-founder William F. Brandt, Jr. owns approximately 30 percent of the company.
Filling a Need for Dental Cabinets: 1951-71
The company that eventually became American Woodmark started in 1951, when a Long Island dentist, Dr. Alvin Goldhush, decided he could make better dental cabinets than those available. He named his new company Formed Laminates Inc., and he did so well that he eventually gave up dentistry. He also changed his company's name to Raygold Corp.
In 1971 Raygold caught the eye of Robert V. Hansberger, chairman of Boise Cascade Corp. Beginning in the late 1960s, Hansberger built the timber company into a conglomerate with holdings ranging from recreational vehicles to Latin American utilities. The year Boise Cascade acquired Raygold, the conglomerate's nonforest businesses accounted for $800 million or 44 percent of revenues.
By 1972, however, Hansberger's buying spree had burdened Boise Cascade with debt totaling $523.2 million and a loss that year of $170.6 million. He resigned, and John B. Fery, who had been with Boise Cascade since its founding in 1957, was named chairman.
A Division of Boise Cascade: 1971-79
Fery refocused the company on forest products, including cabinets, and sold off many of the noncore businesses over the next several years. He also implemented detailed five- and ten-year plans and took a more cautious approach to acquisitions. Between 1972 and 1978, Boise Cascade's capital spending reached $1.2 billion, as it built new facilities around the country, including a new plant and offices for its cabinet division in Winchester, Virginia, to which Raygold moved from Long Island.
In the mid-1970s, the company began to shift toward papermaking, a business that accounted for only a quarter of its pretax earnings in 1973. But the 1974-75 recession saw layoffs of mill workers as orders and prices of lumber and plywood dropped, and the company decided to refocus. In 1976, Boise Cascade bought a paper mill for $90 million, and by 1979, half of Boise Cascade's pretax profits came from its papermaking activities, as it converted and built new plants.
Starting a New Company: 1980-84
Recognizing that kitchen cabinets did not fit with Fery's "tilt toward paper," four executives of the company's cabinet division bought the division in a leveraged buyout in April 1980, getting financing help from General Electric Credit Corp. and Boise Cascade. They named their new company American Woodmark. William F. Brandt, Jr., who had been general manager of the division, became president and chairman. The other officers involved in the buyout were Richard A. Graber, who became marketing vice-president; Donald Mathias, operations vice-president; and Jeffrey Holcomb, vice-president of finance.
The cabinet division had brought in approximately $30 million in sales for Boise Cascade in the fiscal year ending April 1980. But it was a bad time to be launching a heavily indebted company whose business depended on a strong economy and lots of housing construction. The prime interest rate was up to 18.5 percent and housing starts had dropped to a five-year low.
The company's first two years were lean and required laying off both managerial and production staff. In 1982, however, American Woodmark's fortunes began to improve as interest rates dropped and the economy started picking up. From a loss of $697,000 for the fiscal year ending in April 1982, American Woodmark had a profit of $2.4 million in fiscal 1983, which increased to $4.1 million in fiscal 1984.
Thank Heavens for Remodeling: 1985-87
Profits dropped to $2.3 million for 1985, but were up to $5.5 million for fiscal 1986, on annual sales of $97 million. The company claimed that it was one of the five largest cabinet manufacturers in the lucrative but highly fragmented cabinet industry, with between three and four percent of the market. The industry owed much of its profitability to the growing home improvement sector of the business. In 1985, the industry as a whole sold some $2.5 billion worth of cabinets and vanities, with slightly more than half of these sold to go into new homes and the rest for remodeling. American Woodmark, however, sold 60 percent of its cabinets to the remodeling market, and the rest for new homes.
American Woodmark, which had four manufacturing plants (in Virginia, West Virginia, and Georgia) and ten distribution centers, went public in 1986, offering 1.25 million shares at $15 per share. The company itself, which sold 750,000 shares, raised $11.25 million before commissions. It used $6 million to reduce its debt to $16 million. Other proceeds went for capital spending. Company officials sold another half a million shares (for which they originally paid an average of nine cents) for $7.5 million, but retained solid control of the company.
Following the IPO, the company expanded its manufacturing facility in West Virginia and built a second plant in Georgia, 100,000 square feet in size. In fiscal 1987, the company offered 18 lines of cabinets and sales topped $100 million for the first time, reaching $116 million.
Restructuring the Company: 1988-94
By fiscal 1989, annual sales were more than $158 million and CEO Bill Brandt began a five-year restructuring program, upgrading and expanding the company's product lines, broadening its customer base, and pushing decision-making down to lower levels within the organization. Much of the efforts concentrated on increasing the speed with which American Woodmark could get its products to stores and contractors by building more assembly plants and warehouses around the country and shipping directly to the customer rather than depending heavily on independent distributors.
To implement the changes, Brandt initiated a variety of training efforts to get employees to think and work differently. According to Bob Filipczak in a 1996 article in Training magazine, Brandt did not have much success until he developed his "level-to-level" training. In this "peer training meets trickle-down theory" approach, Brandt himself received training in a subject and then trained the executives who reported to him. They, in turn, trained their subordinates, who continued the process. Before anyone conducted any training, however, he or she had to "model" the skills on the job, thus building accountability into the program at every level.
As part of a $34 million capital spending program, the company bought Amende Cabinetry, an Alabama-based manufacturer with $2 million in sales throughout the Southeast. With that purchase, the company operated seven manufacturing facilities and 11 regional distribution centers.
In 1990, as interest rates rose and housing starts dropped due to the 1990-91 recession, American Woodmark saw its revenues fall. The company continued its restructuring, however. During fiscal 1991, American Woodmark increased its offerings to 45 different cabinet lines, which ranged from relatively inexpensive to medium and higher priced styles. The lines all shared a common box, with the front frame (oak, maple, or cherry) and the type (low pressure laminate or wood), style, and color of cabinet door causing the price differences. The cabinets were sold under the brand names American Woodmark Cabinets, Coventry & Chase Cabinets, and Timberlake Cabinets, introduced in April 1990.
Recognizing the importance of the home remodeling sector to its business and that market's reduced dependence on interest rate fluctuations, American Woodmark focused on winning a greater share of business from the growing home improvement "superstores." Two of its customers, Builders Square, Inc. (a subsidiary of Kmart Corporation) and Home Depot, each accounted for more than ten percent of the cabinetmaker's sales. The company still had seven manufacturing plants, but had reduced the number of regional distribution centers to eight.
In fiscal 1993, four years into the restructuring plan, revenues finally began growing again, with a 22 percent jump to $167.3 million, and the company issued a special ten percent stock dividend, payable in common stock. Explained Bill Brandt, "This special dividend rewards the shareholders who have patiently stayed with us during a long and sometimes difficult period."
The following year, the company was making nearly 100 styles of stock and semicustom cabinets and vanities and had added the Crestwood and Scots Pride brand names to its offerings. Sixty percent of its $171.3 million in sales continued to go to the home remodeling business, with the remainder to new housing construction.
Creating a Growth Company: 1995-99
By fiscal 1995, sales had reached $197.4 million. In 1996 Brandt resigned as CEO, while remaining chairman. James J. "Jake" Gosa, who had been with American Woodmark since 1991, was named president and CEO. In August that year, following two quarters of record earnings and increased financial strength, the company paid its first quarterly cash dividend to shareholders. This move made it possible for those mutual funds that were required to invest in companies that paid dividends to buy shares in American Woodmark.
Sales continued to grow, topping $241 million in fiscal 1998. The company's growth mirrored that of the home center industry, with American Woodmark the leading supplier of stock cabinets to all 1,242 Home Depot and Lowe's big box outlet stores. These two chains were expected to grow their stores to 2,000 by the year 2003, and American Woodmark planned to grow with them.
The company had perfected its "just-in-time" manufacturing process, making cabinets and accessories such as spice, towel, and wine racks in its seven factories and distributing them directly to customers from the company's three assembly plants or one of its seven service centers around the country. As an example of the company's distribution proficiency, almost two-thirds of all American Woodmark cabinets sold by home centers were shipped directly to the end customer in fiscal 1999. Customers received their cabinets seven to ten days after American Woodmark got their order.
But whereas cabinets for home improvements now accounted for 70 percent of its business, American Woodmark was also a leading cabinet supplier to the new construction industry, serving seven of the Top Ten and 35 of the Top 100 home builders in the United States directly, as well as local and regional builders. It also was one of the first cabinet makers to provide improved kitchen quality and features to the prefabricated housing industry. One of the reasons builders and retailers liked American Woodmark was that the company could produce new designs and products quickly, taking a product from concept to market in less than 120 days.
The company now offered some 130 lines of framed stock cabinets, with 40 different door designs, seven colors, and four types of wood, including hickory, introduced in fiscal 1998. Its custom cabinetry included 50 door styles with 20 colors, eight glazes, and two sheens.
1999 and Beyond
During fiscal 1999, American Woodmark spent almost $22 million in capital investments, including the purchase of Knapp Woodworking, Inc. and the ground-breaking for a $10 million factory in Indiana. It needed the additional capacity. That year and into fiscal 2000, business was so good the company had to outsource some work to keep up with the demand.
With the good economy, the company expected continued growth. Even if the economy were to slacken, American Woodmark had weathered two recessions already and was confident of its ability to do so again if necessary. As an officer of the Kitchen Cabinet Manufacturers Association told Amy Joyce in a 1999 article in the Washington Post, "They have made some good moves being competitive, winning the bidding to get into the big [retailers]. You chalk that up to some visionary management and good implementation."
Principal Competitors: Merillat Industries; Masco; Triangle Pacific; Fortune Brands.
Adams, Larry, "Cabinet Industry on the Rebound," Wood & Wood Products, May 1992, p. 58.
"American Woodmark Breaks Ground for $10 Million Kitchen Cabinet Factory," Associated Press, April 15, 1999.
"American Woodmark Commences Initial Public Offering," Business Wire, July 18, 1986.
"American Woodmark Corporation Announces First Cash Dividend," Business Wire, August 22, 1996.
"Boise Cascade Corp. Plans to Sell Cabinet Division," Wall Street Journal, April 28, 1980, p. 23.
"Expansionism That Now Sticks Close to Home," Business Week, February 19, 1979, p. 54.
Filipczak, Bob, "CEOs Who Train," Training, June 1996, p. 56.
Hinden, Stan, "Dentist Fills Kitchen Cabinet Orders Instead of Teeth," Washington Post, September 8, 1986, p. F43.
------, "Home Improvement Shares Show Improving Stock Values," Washington Post, November 30, 1987, p. F49.
------, "Regional Stocks Didn't Escape Market's Battering," Washington Post, April 4, 1994, p. F29.
Joyce, Amy, "Building on a Remodeling Boom," Washington Post, June 21, 1999, p. F9.
Knight, Jerry, "Washington Investing," Washington Post, August 30, 1999, p. F27.
"Lowe's Turns 50," National Home Center News, October 21, 1996, p. 43.
Serwer, Andrew Evan, "To Find Tomorrow's Hot Stocks, Go Where the Big Boys Aren't," Fortune, February 27, 1989, p. 29.
Tai, Jennifer, "Movers & Shakers," Washington Times, August 22, 1996, p. B8.
"U.S. Wood Products Industry Enduring Severe Downturn," New York Times, April 17, 1980, p. D1.
Source: International Directory of Company Histories, Vol. 31. St. James Press, 2000.