Winchester-based cabinetry manufacturer American Woodmark Corp., is reducing its production capacity in response to the continuing housing slump, closing two plants and selling a third one that has been idle for nearly three years..
A component facility in Hardy County, W.Va., and lumber operation in Hazard, Ky., will close. The company also plans to put an assembly plant in Tahlequah, Okla., idled in early 2009, up for sale.
“The housing sector remains mired in a slump driven by low consumer confidence,” Kent Guichard, the company’s chairman and CEO, said in a statement. “The last four years have been the worst four years in new home construction levels since 1959. “
Guichard said the company expects the current business climate to continue to suppress consumer demand for home buying and home improvement.
He said that, although the company has continued to gain market share, the drop in demand has created excess production capacity that is too expensive to maintain.
“Our remaining network of nine manufacturing facilities will be more efficient, while retaining the ability to increase production by approximately 50 percent,” he said.
In addition to slimming down its production capacity, American Woodmark is freezing its defined-benefit pension plans while increasing its company match in its 401(k) plan, and enhancing the profit-sharing plan.
The company estimates it will incur pre-tax costs related to these moves of $18 million to $20 million, including $11 million to $13 million of non-cash charges. Substantially all of these charges will be recognized during its third quarter ending Jan. 31.
Once all actions have been completed, the company expects to realize ongoing cost savings of $16.5 million to $18.5 million a year.
For the quarter ended Oct. 31, American Woodmark reported a loss of $2.9 million, or 21 cents a share, compared with a year-earlier loss of $7.4 million, or 52 cents a share.
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