10q10k10q10k.net

What changed in Quanex Building Products CORP's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Quanex Building Products CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+198 added−181 removedSource: 10-K (2024-12-16) vs 10-K (2023-12-15)

Top changes in Quanex Building Products CORP's 2024 10-K

198 paragraphs added · 181 removed · 148 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

27 edited+4 added−3 removed28 unchanged
Biggest changeWe also use data related to cabinet demand in the U.S. to evaluate the residential cabinet market. 4 Table of Contents The following table presents calendar-year annual housing starts information as of November 2023 from the National Association of Home Builders (NAHB) (units in thousands): Single-family Units Multi-family Units Manufactured Units Period Units % Change Units % Change Units % Change Total Units Annual Data 2019 889 2% 402 7% 95 (1)% 1,386 2020 1,003 13% 394 (2)% 94 (1)% 1,491 2021 1,132 13% 474 20% 106 13% 1,712 2022 1,004 (11)% 547 15% 112 18% 1,663 Annual Data - Forecast 2023 905 (10)% 470 (14)% 87 (22)% 1,462 2024 946 5% 413 (12)% 102 17% 1,461 2025 1,027 9% 423 2% 115 13% 1,565 Ducker Worldwide LLC, a consulting and research firm, indicated in November 2023 that window shipments in the residential remodeling and replacement (R&R) market are expected to decrease approximately 6% for the calendar-year 2023 and increase approximately 1% in 2024.
Biggest changeWe also use data related to cabinet demand in the U.S. to evaluate the residential cabinet market, and commercial building starts to evaluate the commercial access market. 5 Table of Contents The following table presents calendar-year annual housing starts information as of November 2024 from the National Association of Home Builders (NAHB) (units in thousands): Single-family Units Multi-family Units Manufactured Units Period Units % Change Units % Change Units % Change Total Units Annual Data 2020 1,003 13% 394 (2)% 94 (1)% 1,491 2021 1,132 13% 474 20% 106 13% 1,712 2022 1,004 (11)% 547 15% 112 6% 1,663 2023 949 (5)% 473 (14)% 89 (21)% 1,511 Annual Data - Forecast 2024 1,003 6% 339 (28)% 104 17% 1,446 2025 1,024 2% 332 (2)% 113 9% 1,469 2026 1,101 8% 384 16% 121 7% 1,606 Ducker Worldwide LLC, a consulting and research firm, indicated in November 2024 that window shipments in the residential remodeling and replacement (R&R) market are expected to decrease approximately 5.9% for the calendar-year 2024 and increase approximately 4.0% in 2025.
These enhancements may include higher thermal efficiency, enhanced functionality, improved weatherability, better appearance and best-in-class quality for our fenestration and cabinet door products; • realize improved profitability in our manufacturing processes through: (1) ongoing preventive maintenance programs; (2) better utilization of our capacity by focusing on operational efficiencies and reducing scrap; (3) marketing our value added products; and (4) focusing on employee safety; • offer logistics solutions that provide our customers with just-in-time service which can reduce their processing costs; 5 Table of Contents • recognize the importance of sustainability by continually looking for ways to reduce our environmental impact and carbon footprint, protect the health and safety of our employees and communities, engage diverse workers and leaders, and remain committed to doing good in our community; • pursue targeted business acquisitions that allow us to expand our existing footprint, enhance our existing product offerings, acquire complementary technology, enhance our leadership position within the markets we serve, and expand into adjacent markets or service lines; and • exit unprofitable or non-core service lines or customer relationships.
These enhancements may include higher thermal efficiency, enhanced functionality, improved weatherability, better appearance and best-in-class quality for our fenestration and cabinet door products; • realize improved profitability in our manufacturing processes through: (1) ongoing preventive maintenance programs; (2) better utilization of our capacity by focusing on operational efficiencies and reducing scrap; (3) marketing our value added products; and (4) focusing on employee safety; • offer logistics solutions that provide our customers with just-in-time service which can reduce their processing costs; 6 Table of Contents • recognize the importance of sustainability by continually looking for ways to reduce our environmental impact and carbon footprint, protect the health and safety of our employees and communities, engage diverse workers and leaders, and remain committed to doing good in our community; • pursue targeted business acquisitions that allow us to expand our existing footprint, enhance our existing product offerings, acquire complementary technology, enhance our leadership position within the markets we serve, and expand into adjacent markets or service lines; and • exit unprofitable or non-core service lines or customer relationships.
Our sales force is tasked with selling and marketing our complete range of components, products and systems to national and regional OEMs through a direct sales force in North America and Europe, supplemented with the limited use of distributors and independent sales agents. Customers Certain of our businesses or product lines are largely dependent on a relatively few large customers.
Our sales force is tasked with selling and marketing our complete range of components, products and systems to national and regional OEMs through a direct sales force in North America and Europe, supplemented with the use of distributors and independent sales agents. Customers Certain of our businesses or product lines are largely dependent on a relatively few large customers.
Item 1. Business. Our Company Quanex was incorporated in Delaware on December 12, 2007, as Quanex Building Products Corporation. We currently manufacture components for original equipment manufacturers (OEM) in the building products industry. The majority of these components can be categorized as window and door (fenestration) components and kitchen and bath cabinet components.
Item 1. Business. Our Company Quanex was incorporated in Delaware on December 12, 2007, as Quanex Building Products Corporation. We currently manufacture and distribute components for original equipment manufacturers (OEM) in the building products industry. The majority of these components can be categorized as window and door (fenestration) components, and kitchen and bath cabinet components.
The cost of worker safety and environmental matters has not had a material adverse effect on our operations or financial condition in the past, and we are not currently aware of any existing conditions that we believe are likely to have a material adverse effect on our operations, financial condition, or cash flows. 7 Table of Contents Safety and Environmental Policies For many years, we have maintained compliance policies that are designed to help protect our workforce, to identify and reduce the potential for job-related accidents, and to minimize liabilities and other financial impacts related to worker safety and environmental issues.
The cost of worker safety and environmental matters has not had a material adverse effect on our operations or financial condition in the past, and we are not currently aware of any existing conditions that we believe are likely to have a material adverse effect on our operations, financial condition, or cash flows. 8 Table of Contents Safety and Environmental Policies For many years, we have maintained compliance policies that are designed to help protect our workforce, to identify and reduce the potential for job-related accidents, and to minimize liabilities and other financial impacts related to worker safety and environmental issues.
Our strategy to achieve this vision includes the following: • focus on growth with a purpose and explore markets that are synergistic with existing manufacturing capabilities and expand our market share with national and regional customers and collaborative partnerships by providing: (1) a quality product; (2) a high level of customer service; (3) product choices at different price points; and (4) an expanded product portfolio or enhancements to existing product offerings.
Our strategy to achieve this vision includes the following: • focus on growth with a purpose and explore markets that are synergistic with existing manufacturing capabilities and expand our market share with our customers and collaborative partnerships by providing: (1) a quality product; (2) a high level of customer service; (3) product choices at different price points; and (4) an expanded product portfolio or enhancements to existing product offerings.
We have not incurred any material expenses or capital expenditures related to environmental matters during the past three fiscal years, and do not expect to incur a material amount of such costs in fiscal 2024. While we will continue to have future expenditures related to environmental matters, any such amounts are impossible to reasonably estimate at this time.
We have not incurred any material expenses or capital expenditures related to environmental matters during the past three fiscal years, and do not expect to incur a material amount of such costs in fiscal 2025. While we will continue to have future expenditures related to environmental matters, any such amounts are impossible to reasonably estimate at this time.
The criteria for revenue recognition has not been met with regard to sales backlog, and therefore, we have not recor ded revenue or deferred revenue pursuant to these sales orders. If these sales orders result in a sale, we will record revenue in fiscal 2024 in accordance with our revenue recognition accounting policy.
The criteria for revenue recognition has not been met with regard to sales backlog, and therefore, we have not recor ded revenue or deferred revenue pursuant to these sales orders. If these sales orders result in a sale, we will record revenue in fiscal 2025 in accordance with our revenue recognition accounting policy.
These policies include extensive employee training and education, as well as internal policies embodied in our Code of Business Conduct and Ethics. We have a Director of Environmental, Health and Safety and maintain a company-wide committee, comprising leaders from across the organization, which meets regularly to discuss safety issues and drive safety improvements.
These policies include extensive employee training and education, as well as internal policies embodied in our Code of Business Conduct and Ethics. We have a Vice President of Environmental, Health and Safety and maintain a company-wide committee, comprising leaders from across the organization, which meets regularly to discuss safety issues and drive safety improvements.
We have noted the following trends which we believe affect our industry: • the recent growth in the housing market over the past several years has been predominately in new construction which has outpaced the growth in the residential remodeling and replacement sector; • programs in the U.S. such as Energy Star have improved customer awareness of the technological advances in window and door energy-efficiency, but the government has been reluctant to enforce stricter energy standards; • supply chain disruptions and inflationary pressures related to transportation, labor, and raw materials have increased causing delays in production and higher prices; • foreign currency rates in the U.K. and other European nations have changed significantly relative to the United States Dollar due in part to Brexit in the U.K., as well as other international unrest or uncertainties; • commodity prices have fluctuated in recent years, and to the extent we cannot pass this cost to our customers, this impacts the cost of critical materials used in our manufacturing processes such as resin, which affects margins related to our vinyl extrusion products; oil products such as butyl, which affects our insulating glass products; and aluminum, wood and silicone products used by our other businesses; and • higher energy efficiency standards in Europe should favorably impact sales of our insulating glass spacer products in the short- to mid-term.
We have noted the following trends which we believe affect our industry: • the recent growth in the hous ing market over the past several years has been predominately in new construction which has outpaced the growth in the residential remodeling and replacement sector; • programs in the U.S. such as Energy Star have improved customer awareness of the technological advances in window and door energy-efficiency, but the government has been reluctant to enforce stricter energy standards; • supply chain disruptions and inflationary pressures related to transportation, labor, and raw materials have increased causing delays in production and higher prices; • foreign currency rates in the U.K. and other European nations have changed significantly relative to the United States Dollar due in part to Brexit in the U.K., as well as other international unrest or uncertainties; • commodity prices have fluctuated in recent years, and to the extent we cannot pass this cost to our customers, this impacts the cost of critical materials used in our manufacturing processes such as resin, which affects margins related to our vinyl extrusion products; oil products such as butyl, which affects our insulating glass products; and stainless steel, zinc, aluminum, wood, polypropylene and silicone products used by our other businesses; and • higher energy efficiency standards in Europe should favorably impact sales of our insulating glass spacer and weather seal products in the short- to mid-term.
See Note 1, “Nature of Operations, Basis of Presentation and Significant Accounting Policies - Concentration of Credit Risk and Allowance for Credit Losses,” of the accompanying financial statements in this Annual Report on Form 10-K for related disclosure. 6 Table of Contents Sales Backlog Given the short lead times involved in our business, we have a backlog of approximat ely $42 million as of October 31, 2023.
See Note 1, “Nature of Operations, Basis of Presentation and Significant Accounting Policies - Concentration of Credit Risk and Allowance for Credit Losses,” of the accompanying financial statements in this Annual Report on Form 10-K for related disclosure. 7 Table of Contents Sales Backlog Given the short lead times involved in our business, we have a backlog of approximat ely $61.6 million as of October 31, 2024.
Raw Materials and Supplies We purchase a diverse range of raw materials, which include PVC resin, epoxy resin, butyl, titanium dioxide (TiO2) desiccant powder, silicone and EPDM rubber compounds, coated and uncoated aluminum sheet and wood (both hardwood and softwood). These raw materials are generally available from several suppliers at market prices.
Raw Materials and Supplies We purchase a diverse range of raw materials, which include PVC resin, epoxy resin, butyl, titanium dioxide (TiO2) desiccant powder, silicone and EPDM rubber compounds, polypropylene, coated and uncoated aluminum sheet, steel, stainless steel, zinc and wood (both hardwood and softwood). These raw materials are generally available from several suppliers at market prices.
These facilities feature efficient plant design and flexible manufacturing processes, enabling us to produce a wide variety of custom engineered products and components primarily f ocused on the window and door segment of the residential building products markets.
These facilities feature efficient plant design and flexible manufacturing processes, enabling us to produce a wide variety of custom engineered products and components primarily focused on the window and door segment of the residential building products markets.
Examples of fenestration components include (1) energy-efficient flexible insulating glass spacers, (2) extruded vinyl profiles, (3) window and door screens, and (4) precision-formed metal and wood products. In addition, we provide certain other non-fenestration components and products, which include solar panel sealants, trim moldings, vinyl decking, vinyl fencing, water retention barriers, and conservatory roof components.
Examples of fenestration components include energy-efficient flexible insulating glass spacers, extruded vinyl profiles, window and door screens, precision-formed metal and wood products, window and door seals, and window and door hardware. In addition, we provide certain other non-fenestration components and products, which include solar panel sealants, trim moldings, vinyl decking, water retention barriers, conservatory roof components, and commercial access solutions.
We serve a primary customer base in North America and the United Kingdom (U.K.), and also serve customers in international markets through our operating plants in the U.K. and Germany, as well as through sales and marketing efforts in other countries.
We serve a primary customer base in North America and the U.K., and also serve customers in international markets through our operating locations in the U.K., Germany, Mexico, Canada, and Italy, as well as through sales and marketing efforts in other countries.
Primary competitors in the North American Fenestration business include, but are not limited to, Veka, Deceuninck, Energi, Vision Extrusions, GED Integrated Solutions, Technoform, Swiss Spacer, Thermix, RiteScreen, Allmetal, Endura, Klinger, Thermoseal and Fenzi Group. Competitors in the vinyl extrusion business in the U.K. include Epwin, Veka, Profine UK Extrusions Ltd., Eurocell and others.
Primary competitors in the North American Fenestration business include, but are not limited to, Veka, Deceuninck, Energi, Vision Extrusions, GED Integrated Solutions, Technoform, Swiss Spacer, Thermix, RiteScreen, Allmetal, Endura, Klinger, Thermoseal, Fenzi Group, Caldwell, Roto, Hoppe, Ultrafab, Vision Hardware, and Radisson Industries. Competitors in the vinyl extrusion business in the U.K. include Epwin, Veka, Profine U.K.
Since the spin-off in 2008, we have evolved our business by making investments in organic growth initiatives and taking a disciplined approach to new business and strategic acquisition opportunities, while disposing of non-core businesses.
Since the spin-off in 2008, we have evolved our business by making investments in organic growth initiatives and taking a disciplined approach to new business and strategic acquisition opportunities, while disposing of non-core businesses. On August 1, 2024, we completed our acquisition of Tyman plc, a company incorporated in England and Wales.
Derived from reports published by Ducker, the overall decrease in window shipments for the trailing twelve months ended September 30, 2023 was 8%. During this period, new construction activity decreased 13% and R&R replacement decreased 3% respectively.
Derived from reports published by Ducker, the overall decrease in window shipments for the trailing twelve months ended September 30, 2024 was 0.7%. During this period, new construction activity decreased 2.5% and R&R replacement increased 1.1% respectively.
Similarly, our subsidiaries in the U.K. compete against some larger vinyl producers and smaller window manufacturers. For our kitchen and bathroom cabinet door business, we believe we are the largest supplier to OEMs in the U.S., but we compete with other national and regional businesses, including OEMs who are vertically integrated.
For our kitchen and bathroom cabinet door business, we believe we are the largest supplier to OEMs in the U.S., but we compete with other national and regional businesses, including OEMs who are vertically integrated.
We offer our employees online training courses and on-the-job training on job duties, safety requirements, and leadership skills. For Investors We periodically file or furnish documents to the Securities and Exchange Commission (SEC), including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports as required.
For Investors We periodically file or furnish documents to the Securities and Exchange Commission (SEC), including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports as required.
Strategy Our vision is to be the preferred supplier to our customers in each market we serve.
Strategy Our vision is to be the preferred supplier to our customers in each market we serve and exceed expectations of all stakeholders.
We compete with a number of companies, some of which have greater financial resources than us. We believe the primary competitive factors in the markets we serve include price, product quality, delivery performance, and the ability to manufacture to customer specifications. The volume of engineered building products that we manufacture represents a small percentage of annual domestic consumption.
Competition Our products are sold under highly competitive conditions. We compete with a number of companies, some of which have greater financial resources than us. We believe the primary competitive factors in the markets we serve include price, product quality, delivery performance, and the ability to manufacture to customer specifications.
Primary competitors in the cabinet door business in the U.S. include Conestoga, Appalachian Wood, Olon, Northern Contours and others. Sales, Marketing, and Distribution We sell our products to customers in various countries.
Extrusions Ltd., Eurocell and others. Primary competitors in the cabinet door business in the U.S. include Conestoga, Appalachian Wood, Olon, Northern Contours and others. Primary competitors in the U.K. and European hardware and seals businesses include Assa Abloy, Roto, Siegenia, Hoppe, GU, Maco, and Tecseal. Sales, Marketing, and Distri bution We sell our products to customers in various countries.
We consider the following marks, design marks and associated trade names to be valuable in the conduct of our business: HOMESHIELD, TRUSEAL TECHNOLOGIES, EDGETECH, MIKRON, WOODCRAFT and QUANEX.
We consider the following marks, design marks and associated trade names to be valuable in the conduct of our business: AMESBURYTRUTH, ASHLAND,BILCO, EDGETECH, ERA, GIESSE, HOMESHIELD, HOWE GREEN, LAWRENCE, MIKRON, REGUITTI, SAFEGAURD, SECUREGAURD, SCHLEGEL, TRUSEAL TECHNOLOGIES, TRUTH HARDWARE, TYMAN, QUANEX, and ZOO.
As of October 31, 2023, we oper ated 28 manufacturing facilities located in 15 states in the U.S., two facilities in the U.K., and one in Germany.
As of October 31, 2024, we operated 35 manufacturing facilities located in 18 states in the U.S., seven facilities in the U.K., three facilities in Mexico, two facilities in Italy, one facility in Germany, and one facility in Canada.
Our Industry Our business is largely based in North America and dependent upon the spending and growth activity levels of our customers which include national and regional residential window, door and cabinet manufacturers. Our international presence includes vinyl extruded lineals for large house systems to smaller individual customers. We also have insulating glass businesses in the U.K. and Germany.
Our Industry Our business is largely based in North America and dependent upon the spending and growth activity levels of our customers which include national and regional residential window, door and cabinet manufacturers and distributors, and commercial construction contractors.
Employee turnover rates are monitored monthly a t the division and plant levels. Both voluntary and involuntary terminations, including retirements, are used to calculate the turnover rate. Our human capital objectives include attracting, developing, motivating, rewarding, and retaining our existing and new employees.
As of October 31, 2024, we had 7,068 employees located throughout our global organization. Generally, the total number of employees of Quanex and its subsidiaries does not significantly fluctuate throughout the year. Employee turnover rates are monitored monthly a t the division and plant levels. Both voluntary and involuntary terminations, including retirements, are used to calculate the turnover rate.
Removed
We may enter into sole sourcing arrangements with our suppliers from time to time if we believe we can realize beneficial savings, but only after we have determined that the vendor can reliably supply our raw material requirements.
Added
This strategic acquisition creates an enlarged group with significant cross-selling opportunities amongst a highly complementary customer base, increases the Company’s global reach by adding Tyman’s international footprint, enhances scale, optimizes the Company’s asset portfolio, and moves Quanex closer to being a comprehensive solutions provider.
Removed
These sole sourcing arrangements generally have termination clauses to protect us if a sole sourced vendor could not provide raw materials timely and on economically feasible terms. We believe there are other qualified suppliers from which we could purchase raw materials and supplies. Competition Our products are sold under highly competitive conditions.
Added
Our international presence includes vinyl extruded lineals for large house systems to smaller individual customers, as well as window and door hardware, seals, an d extrusions to OEMs, system houses, and distributors. Additionally, we also have insulating glass and window and door hardware businesses in the U.K., Germany and Italy.
Removed
As of October 31, 2023, we had 3,792 employees. Of these employees, 3,053 were domiciled in the U.S., 632 in the U.K., and 107 in Germany. Generally, the total number of employees of Quanex and its subsidiaries does not significantly fluctuate throughout the year. Currently, none of our employees are subject to collective bargaining agreements.
Added
The volume of engineered building products that we sell in the U.S. represents a small percentage of annual domestic consumption. Similarly, our subsidiaries in the U.K. compete against some larger vinyl producers and smaller window manufacturers. The U.K. and International fenestration components market is highly fragmented and we compete with a large number of other component suppliers.
Added
Our human capital objectives include attracting, developing, motivating, rewarding, and retaining our existing and new employees. We offer our employees online training courses and on-the-job training on job duties, safety requirements, and leadership skills.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

23 edited+10 added−5 removed60 unchanged
Biggest changeWe purchase from outside sources significant amounts of raw materials, such as butyl, titanium dioxide, vinyl resin, aluminum, steel, silicone and wood products for use in our manufacturing facilities.
Biggest changeWe purchase significant amounts of raw materials, such as butyl, titanium dioxide, vinyl resin, aluminum, steel, silicone, zinc, polypropylene and wood products, from outside sources for use in our manufacturing facilities. Because we do not have long-term contracts for the supply of many of these materials, their availability and price are subject to market fluctuations and other disruptions.
This listing of risk factors is not all-inclusive and is not necessarily presented in order of importance. 8 Table of Contents Industry Risks Any sustained decline in residential remodeling, replacement activities, or housing starts could have a material adverse effect on our business, financial condition and results of operations.
This listing of risk factors is not all-inclusive and is not necessarily presented in order of importance. 9 Table of Contents Industry Risks Any sustained decline in residential remodeling, replacement activities, or housing starts could have a material adverse effect on our business, financial condition and results of operations.
Company Risks Our business, financial condition, and results of operations could be adversely affected by disruptions in the global economy caused by the wars in Ukraine and Gaza. U.S. and global markets are experiencing volatility and disruption related to the escalation of geopolitical tensions and the military conflict currently ongoing in Ukraine and the Gaza Strip.
Our business, financial condition, and results of operations could be adversely affected by disruptions in the global economy caused by the wars in Ukraine and Gaza. U.S. and global markets are experiencing volatility and disruption related to the escalation of geopolitical tensions and the military conflict currently ongoing in Ukraine and the Gaza Strip.
We may not be able to successfully manage or integrate acquisitions, and if we are unable to do so, then our profitability could be adversely affected. We cannot provide assurance that we will successfully manage or integrate acquisition targets once we have purchased them.
We may not be able to successfully manage or integrate acquisitions, and if we are unable to do so, then our profitability could be adversely affected. We cannot provide assurance that we will successfully manage or integrate acquisition targets once we have purchased them, including Tyman.
We attempt to manage this pricing pressure and to preserve our business relationships with suppliers and OEMs by negotiating reasonable price concessions when needed, and by reducing our production costs through various measures, which may include managing our purchase process to control the cost of our raw materials and components, maintaining multiple supply sources where possible, and implementing cost-effective process 10 Table of Contents improvements.
We attempt to manage this pricing pressure and to preserve our business relationships with suppliers and OEMs by negotiating reasonable price concessions when needed, and by reducing our production costs through various measures, which may include managing our purchase process to control the cost of our raw materials and components, maintaining multiple supply sources where possible, and implementing cost-effective process improvements.
If our suppliers are unable to timely meet our supply needs, it could impact our ability to provide our customers with high quality products on a timely basis, which could result in order cancellations, delivery refusals, price concessions, or other negative customer outcomes, any of which could negatively impact our business, revenues, financial condition, results of operations and liquidity.
If our suppliers are unable to timely meet our supply needs, it could impact our ability to provide our customers with high quality products on a timely basis, which could result in order cancellations, delivery refusals, price concessions, or other negative customer outcomes, any of which could 13 Table of Contents negatively impact our business, revenues, financial condition, results of operations and liquidity.
Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could have a material adverse effect on the results of our operations, financial condition, or cash flows. We file income tax returns, including tax returns for our subsidiaries, with federal, state, local, and foreign jurisdictions.
Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could have a material adverse effect on the results of our operations, financial condition, or cash flows. 14 Table of Contents We file income tax returns, including tax returns for our subsidiaries, with federal, state, local, and foreign jurisdictions.
For example, when the government issues tax credits designed to encourage increased homebuilding or energy-efficient window purchases, the credits may create a spike in demand that would not otherwise have occurred and our production capabilities may not be able to keep pace, which could materially impact our profitability.
For example, when the government issues tax credits designed to encourage increased homebuilding or energy-efficient window purchases, the credits may create a spike in demand that would not otherwise have occurred and our production capabilities may not be able to keep pace, which could 10 Table of Contents materially impact our profitability.
Goodwill totaled $183.0 million at October 31, 2023. The results of goodwill impairment testing are described in the accompanying notes to the audited financial statements, Note 7, “Goodwill and Intangible Assets” of the accompanying financial statements in this Annual Report on Form 10-K. We may not be able to protect our intellectual property.
Goodwill totaled $574.7 million at October 31, 2024. The results of goodwill impairment testing are described in the accompanying notes to the audited financial statements, Note 7, “Goodwill and Intangible Assets” of the accompanying financial statements in this Annual Report on Form 10-K. We may not be able to protect our intellectual property.
If the COVID-19 coronavirus, or any other epidemic or pandemic, disrupts the worldwide economy, or if similar widespread disease outbreaks occur in the future, our business, financial condition and results of operations could be negatively affected to the extent such event harms the economy or region in which we operate.
If an epidemic or pandemic, such as COVID-19, disrupts the worldwide economy, or if similar widespread disease outbreaks occur in the future, our business, financial condition and results of operations could be negatively affected to the extent such event harms the economy or region in which we operate.
The impact of foreign trade relations and associated tariffs could adversely impact our business. We currently source a number of raw materials from international suppliers.
The impact of foreign trade relations and associated tariffs could result in a global trade war and adversely impact our business. We currently source a number of raw materials from international suppliers.
Import tariffs, taxes, customs duties and/or other trading regulations imposed by the U.S. government on foreign countries, or by foreign countries on the U.S., could significantly increase the prices we pay for certain raw materials, such as aluminum and wood, that are critical to our ability to manufacture our products.
Import tariffs, taxes, customs duties and/or other trading regulations imposed by the U.S. government on foreign countries, or by foreign countries on the U.S., could result in a global trade war which may significantly increase the prices we pay for certain raw materials, such as aluminum and wood, that are critical to our ability to manufacture our products.
Our credit facility contains certain operational restrictions, reporting requirements, and financial covenants that limit the aggregate availability of funds. Our revolving credit facility contains certain financial covenants and other operating and reporting requirements that could present risk to our operating results or limit our ability to access capital for use in the business.
Our revolving credit facility contains certain financial covenants and other operating and reporting requirements that could present risk to our operating results or limit our ability to access capital for use in the business.
In particular, any outbreak or resurgence of COVID-19 such as the spread of the Omicron variant, Delta variant or any other future variants, or governmental imposition of mandatory or voluntary closures in areas where our manufacturing facilities, 11 Table of Contents suppliers or customers are located, could severely disrupt our operations and result in (a) plant slowdowns or shutdowns, (b) difficulty obtaining necessary supplies, and (c) reduced customer orders and revenues.
In particular, any outbreak or resurgence of COVID-19 or any other future variants, or governmental imposition of mandatory or voluntary closures in areas where our manufacturing facilities, suppliers or customers are located, could severely disrupt our operations and result in (a) plant slowdowns or shutdowns, (b) difficulty obtaining necessary supplies, and (c) reduced customer orders and revenues.
The COVID-19 pandemic has had and may continue to create inefficiencies or interruptions in the supply chain as our suppliers may be forced to close their own plants or prove unable to obtain their own raw materials.
Pandemics have had and may continue to create inefficiencies or interruptions in the supply chain as our suppliers may be forced to close their own plants or prove unable to obtain their own raw materials.
In addition, we were authorized, by prior stockholder approval, to issue up to 125,000,000 shares of our common stock, $0.01 par value per share, of which 37,176,958 were issued at October 31, 2023. These authorized shares can be issued, without stockholder approval, as securities convertible into either common stock or preferred stock.
In addition, we were authorized, by prior stockholder approval, to issue up to 125,000,000 shares of our common stock, $0.01 par value per share, of which 51,266,501 were issued at October 31, 2024. These authorized shares can be issued, without stockholder approval, as securities convertible into either common stock or preferred stock. Item 1B. Unresolved Staff Comments. None.
Although we believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics, and thereby provide for an opportunity for us to receive a higher bid by requiring potential acquirers to negotiate with our Board of Directors, these provisions apply even if the offer may be considered beneficial by some stockholders. 13 Table of Contents We have the ability to issue additional equity securities, which would lead to dilution of our issued and outstanding common stock.
Although we believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics, and thereby provide for an opportunity for us to receive a higher bid by requiring potential acquirers to negotiate with our Board of Directors, these provisions apply even if the offer may be considered beneficial by some stockholders.
Although we believe we have an extensive customer base, if we were to lose one of these large customers or if one such customer were to materially reduce its purchases as a result of vertical integration, supplier diversification, or a shift in regional focus, our revenue, general financial condition and results of operations could be adversely affected.
Although we believe we have an extensive customer base, if we were to lose one of these large customers or if one such customer were to materially reduce its purchases as a result of vertical integration, supplier diversification, or a shift in regional focus, our revenue, general financial condition and results of operations could be adversely affected. 12 Table of Contents Our credit facility contains certain operational restrictions, reporting requirements, and financial covenants that limit the aggregate availability of funds.
Changes in federal, state, or local tax laws, adverse tax audit results, or adverse tax rulings on positions taken could have a material adverse effect on the results of our operations, financial condition, or cash flows. Bank failures or other events affecting financial institutions could adversely affect our liquidity and financial performance.
Changes in federal, state, or local tax laws, adverse tax audit results, or adverse tax rulings on positions taken could have a material adverse effect on the results of our operations, financial condition, or cash flows.
We, along with many of our customers and suppliers, operate manufacturing facilities in areas at risk for extreme weather events such as hurricanes, tornadoes, drought, wildfires, winter storms, or floods.
Climate change and related extreme weather events could disrupt our supply chain, decrease customer demand for our products, or damage our manufacturing facilities. We, along with many of our customers and suppliers, operate manufacturing facilities in areas at risk for extreme weather events such as hurricanes, tornadoes, drought, wildfires, winter storms, or floods.
If our insurers refuse to cover claims, in whole or in part, or if we exhaust our available insurance coverage at some point in the future, then we might be forced to expend legal fees and settlement or judgment costs, which could negatively impact our profitability, results of operations, cash flows and financial condition. 12 Table of Contents Climate change and related extreme weather events could disrupt our supply chain, decrease customer demand for our products, or damage our manufacturing facilities.
If our insurers refuse to cover claims, in whole or in part, or if we exhaust our available insurance coverage at some point in the future, then we might be forced to expend legal fees and settlement or judgment costs, which could negatively impact our profitability, results of operations, cash flows and financial condition.
If the cost of our raw materials increases, or if we are unable to procure the necessary raw materials required to manufacture our products, then we could experience a negative impact on our operating results, profitability, customer relationships and future cash flows.
If the cost of our raw materials increases, or if we are unable to procure the necessary raw materials required to manufacture our products, then we could experience a negative impact on our operating results, profitability, customer relationships and future cash flows. 11 Table of Contents Company Risks We have identified a material weakness in our internal control over financial reporting which may, if not remediated, result in material misstatements in our financial statements.
Likewise, when such laws, regulations or initiatives expire, our business may experience a material loss in sales volume or an increase in production costs as a result of the decline in consumer demand. 9 Table of Contents Our operations outside the U.S. require us to comply with a number of U.S. and international anti-corruption regulations, violations of which could have a material adverse effect on our consolidated results of operations and consolidated financial condition.
Our operations outside the U.S. require us to comply with a number of U.S. and international anti-corruption regulations, violations of which could have a material adverse effect on our consolidated results of operations and consolidated financial condition.
Removed
Because we do not have long-term contracts for the supply of many of our raw materials, their availability and price are subject to market fluctuation and may be subject to curtailment or change. Any of these factors could affect our ability to timely and cost-effectively manufacture products for our customers.
Added
In addition, logistical challenges such as port strikes or transportation delays could further impact the supply chain, potentially curtailing our access to key raw materials. Any of these factors could affect our ability to manufacture products for our customers in a timely and cost-effective manner.
Removed
The recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures and banking industry instability could materially and adversely affect the Company’s liquidity, access to cash and credit, and the Company’s business, financial condition and results of operations, as well as those of the Company’s third-party suppliers or vendors.
Added
Likewise, when such laws, regulations or initiatives expire, our business may experience a material loss in sales volume or an increase in production costs as a result of the decline in consumer demand.
Removed
The recent closures of Silicon Valley Bank (SVB) and Signature Bank and their placement into receivership with the Federal Deposit Insurance Company (FDIC) along with the FDIC’s seizure and sale of First Republic Bank created market disruption and uncertainty with respect to the financial condition of a number of other banking institutions in the United States.
Added
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. As disclosed in Item 9A, “Controls and Procedures,” our controls and procedures were not effective as a result of a material weakness in internal controls over financial reporting.
Removed
While the Company does not have any direct exposure to SVB, Signature Bank, or First Republic Bank, the Company does maintain its cash at financial institutions, sometimes in balances that exceed the current FDIC insurance limits.
Added
The material weakness related to an error pertaining to the improper inclusion of the equity component of the Company’s purchase of Tyman in the statement of cash flows under “Cash used for Investing Activities” rather than its proper classification as a noncash item.
Removed
If other banks and financial institutions enter receivership or become insolvent in the future due to financial conditions affecting the banking system and financial markets, the Company’s ability to access its cash and cash equivalents, including transferring funds, making payments or receiving funds, and the Company’s access to credit, as well as those of its third-party suppliers or vendors, may be threatened and could have a material adverse effect on the Company’s business and financial condition.
Added
A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Added
As a result of this material weakness, our management concluded that our internal control over financial reporting and related disclosure controls and procedures were not effective. We are actively engaged in developing a remediation plan designed to address this material weakness.
Added
If our remedial measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected.
Added
If we are unable to remediate the material weakness, or if we are otherwise unable to maintain effective internal control over financial reporting, our financial statements may contain material misstatements and we could be required to restate our financial results.
Added
If our financial statements are not filed on a timely basis or we are required to restate our financial results, we could be in violation of covenants contained in the agreements governing our debt and other borrowings.
Added
We have the ability to issue additional equity securities, which would lead to dilution of our issued and outstanding common stock.

Item 2. Properties

Properties — owned and leased real estate

5 edited+0 added−1 removed0 unchanged
Biggest changeIn fiscal 2023, on a consolidated basis, our facilities operated at approximately 54% of machi ne capacity. This capacity utilization is subject to variability by product line, seasonality, location, labor shortages and supply chain interruptions.
Biggest changeWe believe our operating properties are in good condition and well maintained, and are generally suitable and adequate to carry on our business. In fiscal 2024, on a consolidated basis, our facilities operated at approximately 51% of machine capac ity. This capacity utilization is subject to variability by product line, seasonality, location, labor shortages and supply chain interruptions.
Location Character and Use of Property Executive Offices Houston, Texas* Executive corporate office North American Fenestration Segment Akron, Ohio* Segment executive office and R&D facility Rice Lake, Wisconsin Fenestration products Cambridge, Ohio* Flexible spacer, solar adhesives and custom compound mixing Richmond, Kentucky Vinyl and composite extrusions Kent, Washington* Vinyl and composite extrusions European Fenestration Segment Denby, United Kingdom* Vinyl and composite extrusions Heinsberg, Germany* Flexible spacer North American Cabinet Components Segment St.
Location Character and Use of Property Executive Offices Houston, Texas* Executive corporate office North American Fenestration Segment Akron, Ohio* Segment executive office and R&D facility Rice Lake, Wisconsin Fenestration products Cambridge, Ohio* Flexible spacer, solar adhesives and custom compound mixing Kent, Washington* Vinyl and composite extrusions European Fenestration Segment Denby, United Kingdom* Vinyl and composite extrusions Heinsberg, Germanyc Flexible spacer North American Cabinet Components Segment St.
Item 2. Properties. The following table lists our principal properties by location, general character and use as of October 31, 2023.
Item 2. Properties. The following table lists our principal properties by location, general character and use as of October 31, 2024.
In addition to the locations identified above, our North American Fenestration Segm ent maintains 14 additional facilities for the manufacture and distribution of fenestration, spacer and extrusion products within the continental U.S., our European Fenestration Segment maintains one additional location for the production of spacer in the U.K., and our North American Cabinet Components Segment maintains 11 locations to manufacture hardwood doors and other wood components for kitchen and bath cabinets.
In addition to the locations identified above, our North American Fenestration Segment maintains 13 additional facilities for the manufacture and distribution of fenestration, spacer and extrusion products within the continental U.S., our European Fenestration Segment maintains two additional locations for the production of spacers in the U.K., our North American Cabinet Components Segment maintains 10 additional locations to manufacture hardwood doors and other wood components for kitchen and bath cabinets, and our Tyman Segment maintains 12 additional locations to manufacture fenestration and commercial access products.
Cloud, Minnesota Hardwood doors and components for kitchen and bath * These locations are leased as of October 31, 2023.
Cloud, Minnesota Hardwood doors and components for kitchen and bath Tyman Segment Owatonna, Minnesota Fenestration products Juarez, Mexico Fenestration products Statesville, NC Fenestration products Wolverhampton, United Kingdom* Fenestration products Budrio, Italy Fenestration products * These locations are leased as of October 31, 2024.
Removed
See Note 1, “Nature of Operations, Basis of Presentation and Significant Accounting Po licies - Restructuring,” to the accompanying consolidated financial statements included elsewhere in this Annual Report on Form 10-K. We believe our operating properties are in good condition and well maintained, and are generally suitable and adequate to carry on our business.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

4 edited+1 added−1 removed3 unchanged
Biggest changeWe do not expect that losses resulting from any current legal proceedings will have a material adverse effect on our consolidated financial statements if or when such losses are incurred. For discussion of environmental issues, see Item 1, “Business - Environmental and Employee Safety Matters,” discussed elsewhere in this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures.
Biggest changeWe reserve for litigation loss contingencies that are both probable and reasonably estimable. We do not expect that losses resulting from any current legal proceedings will have a material adverse effect on our consolidated financial statements if or when such losses are incurred.
While we believe that our product was not defective and that we would prevail in these commercial sealant product claims if taken to trial, the timing, ultimate resolution and potential impact of these claims is not currently determinable.
While we believe that our product was not defective and that we would prevail in 17 Table of Contents these commercial sealant product claims if taken to trial, the timing, ultimate resolution and potential impact of these claims is not currently determinable.
We have been and are currently party to multiple claims, some of which are in litigation, relating to alleged defects in a commercial sealant product that was manufactured and sold during the 2000’s. Several claims were resolved during fiscal 2020, 2021 and 2022, and we continue to defend the remaining claims.
We have been and are currently party to multiple claims, some of which are in litigation, relating to alleged defects in a commercial sealant product that was manufactured and sold during the 2000s. Several claims have been resolved and we continue to defend the remaining claims.
Nevertheless, after taking into account all currently available information, including our defenses, the advice of our counsel, and the extent and currently-expected availability of our existing insurance coverage, we believe that the eventual outcome of these commercial sealant claims will not have a material adverse effect on our overall financial condition, results of operations or cash flows, and we have not recorded any accrual with regard to these claims. 15 Table of Contents We reserve for litigation loss contingencies that are both probable and reasonably estimable.
Nevertheless, after taking into account all currently available information, including our defenses, the advice of our counsel, and the extent and currently-expected availability of our existing insurance coverage, we believe that the eventual outcome of these commercial sealant claims will not have a material adverse effect on our overall financial condition, results of operations or cash flows, and we have not recorded any accrual with regard to these claims.
Removed
Not Applicable. 16 Table of Contents PART II
Added
For discussion of environmental issues, see Item 1, “Business - Environmental and Employee Safety Matters,” discussed elsewhere in this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures. Not Applicable. 18 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

10 edited+0 added−0 removed3 unchanged
Biggest changeDuring December 2021, our Board of Directors approved a new stock repurchase program that authorized the repurchase of up to $75.0 million worth of shares of our common stock. Repurchases under the new program will be made in open market transactions or privately negotiated transactions, subject to market conditions, applicable legal requirements and other relevant factors.
Biggest changeRepurchases under the new program will be made in open market transactions or privately negotiated transactions, subject to market conditions, applicable legal requirements and other relevant factors.
The new program does not have an expiration date or a limit on the number of shares that may be purchased. 17 Table of Contents Stock Performance Graph The following chart represents a comparison of the five year total return of our common stock to the Standard & Poor’s 600 Building Products Industry Index (S&P 600 Building Products), the Russell 2000 Index, and a peer group index selected by us, which includes companies offering similar products and services to ours.
The new program does not have an expiration date or a limit on the number of shares that may be purchased. 19 Table of Contents Stock Performance Graph The following chart represents a comparison of the five year total return of our common stock to the Standard & Poor’s 600 Building Products Industry Index (S&P 600 Building Products), the Russell 2000 Index, and a peer group index selected by us, which includes companies offering similar products and services to ours.
The companies in our peer group for the year ended October 31, 2023 are AAON Inc., American Woodmark Corp, Apogee Enterprises Inc., Armstrong Flooring Inc., CSW Industrials Inc., Gibraltar Industries Inc., Griffon Corporation, Insteel Industries Inc., L.B.
The companies in our peer group for the year ended October 31, 2024 are AAON Inc., American Woodmark Corporation, Apogee Enterprises Inc., Armstrong Flooring Inc., CIRCOR International, Inc., CSW Industrials Inc., Gibraltar Industries Inc., Griffon Corporation, Insteel Industries Inc., L.B.
Equity Compensation Plan Information The following table summarizes certain information regarding equity compensation to our employees, officers and directors under equity compensation plans as of October 31, 2023: (a) (b) (c) Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) Weighted-average exercise price of outstanding options, warrants and rights (2) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders 304,630 $ 19.48 2,718,886 (1) Column (a) includes securities that may be issued upon future vesting of performance restricted stock units that have been previously granted to key employees and officers.
Equity Compensation Plan Information The following table summarizes certain information regarding equity compensation to our employees, officers and directors under equity compensation plans as of October 31, 2024: (a) (b) (c) Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) Weighted-average exercise price of outstanding options, warrants and rights (2) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders 283,150 $ 19.45 2,542,429 (1) Column (a) includes securities that may be issued upon future vesting of performance restricted stock units that have been previously granted to key employees and officers.
During the three months ended October 31, 2023, we did not purchase any shares under this program and as of October 31, 2023 we had a maximum of $62.8 million available to purchase shares under this program.
During the year ended October 31, 2024, we did not purchase any shares under this program and as of October 31, 2024 we had a maximum of $62.8 million available to purchase shares under this program.
Foster Company, Masonite International Corp, Mueller Water Products, Inc., Patrick Industries Inc., PGT Innovations, Inc., Simpson Manufacturing Company Inc., Tredegar Corp, and Trex Company Inc.
Foster Company, Masonite International Corporation, Mueller Water Products, Inc., PGT Innovations, Inc., Simpson Manufacturing Company Inc., Tredegar Corporation, and Trex Company Inc.
During the years ended October 31, 2023, 2022 and 2021, we purchased 275,000, 291,000 and 478,311 shares, respectively, at a cost of $5.6 million, $6.6 million and $11.2 million, respectively, u nder these programs.
During the years ended October 31, 2023 and 2022, we purchased 275,000 and 291,000 shares, respectively, at a cost of $5.6 million and $6.6 million, respectively, under these programs.
Issuer Purchases of Equity Securities On August 30, 2018, our Board of Directors approved a stock repurchase program that authorized the repurchase of up to $60.0 million worth of shares of our common stock. As of October 31, 2021, this share repurchase authorization was exhausted and the program was complete.
Issuer Purchases of Equity Securities During December 2021, our Board of Directors approved a new stock repurchase program that authorized the repurchase of up to $75.0 million worth of shares of our common stock.
There were approxima tely 1,535 hol ders of our common stock (excluding individual participants in securities positions listings) on record as of December 7, 2023.
There were appro ximately 2,697 holders of o ur common stock (excluding individual participants in securities positions listings) on record as of December 3, 2024.
INDEXED RETURNS For the Years Ended Company Name / Index 10/31/2018 10/31/2019 10/31/2020 10/31/2021 10/31/2022 10/31/2023 Quanex Building Products Corporation $ 100.00 $ 132.79 $ 127.97 $ 147.65 $ 160.22 $ 196.71 S&P 600 Building Products $ 100.00 $ 135.71 $ 134.31 $ 193.08 $ 177.99 $ 199.14 Russell 2000 Index $ 100.00 $ 104.90 $ 104.76 $ 157.98 $ 128.69 $ 117.67 Peer Group $ 100.00 $ 129.30 $ 150.25 $ 205.78 $ 145.44 $ 186.71 18 Table of Contents
INDEXED RETURNS For the Years Ended Company Name / Index 10/31/2019 10/31/2020 10/31/2021 10/31/2022 10/31/2023 10/31/2024 Quanex Building Products Corporation $ 100.00 $ 96.37 $ 111.19 $ 120.66 $ 148.14 $ 162.03 S&P 600 Building Products $ 100.00 $ 98.96 $ 142.27 $ 131.15 $ 146.74 $ 219.24 Russell 2000 Index $ 100.00 $ 99.86 $ 150.59 $ 122.67 $ 112.17 $ 150.39 Peer Group $ 100.00 $ 107.26 $ 150.23 $ 107.36 $ 135.09 $ 213.91 20 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

79 edited+35 added−23 removed57 unchanged
Biggest changeAnalysis of Cash Flow The following table summarizes our cash flow results for the years ended October 31, 2023, 2022, and 2021: Year Ended October 31, 2023 2022 2021 (In thousands) Cash flows provided by operating activities $ 147,052 $ 97,965 $ 78,588 Cash flows used for investing activities $ (128,439) $ (32,962) $ (18,708) Cash flows used for financing activities $ (16,151) $ (45,879) $ (71,861) Our year-over-year cash flow analysis follows.
Biggest changeAnalysis of Cash Flow The following table summarizes our cash flow results for the years ended October 31, 2024, 2023, and 2022: Year Ended October 31, 2024 2023 2022 (In thousands) Cash flows provided by operating activities $ 88,812 $ 147,052 $ 97,965 Cash flows used for investing activities $ (420,594) $ (128,439) $ (32,962) Cash flows provided by (used for) financing activities $ 385,156 $ (16,151) $ (45,879) Our cash flow analysis for the fiscal years ended October 31, 2023 and 2022 for the prior year comparative periods can be found in the annual report on Form 10-K for the year ended October 31, 2023. 27 Table of Contents Operating Activities Cash provided by operating activities decreased $58.2 million for the year ended October 31, 2024 compared to the year ended October 31, 2023.
In addition, some of these commodities are in high demand, particularly in Europe, which can affect the cost of the raw materials, a portion of which we may not be able to fully recover. The global economy remains uncertain due to currency devaluations, political unrest, terror threats, global pandemics such as COVID-19, and even the political landscape in the U.S.
In addition, some of these commodities are in high demand, particularly in Europe, which can affect the cost of the raw materials, a portion of which we may not be able to fully recover. The global economy remains uncertain due to currency devaluations, political unrest, terror threats, global pandemics such as COVID-19, and the political landscape in the U.S.
No impairment charges w ere incurred with regard to our property, plant and equipment for the years ended October 31, 2023, 2022 and 2021. We monitor relevant circumstances, including industry trends, general economic conditions, and the potential impact that such circumstances might have on the valuation of our identifiable intangibles.
No impairment charges w ere incurred with regard to our property, plant and equipment for the years ended October 31, 2024, 2023 and 2022. We monitor relevant circumstances, including industry trends, general economic conditions, and the potential impact that such circumstances might have on the valuation of our identifiable intangibles.
Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standards setting bodies that we adopt as of the specified effective date. We did not adopt any new accounting pronouncements during the twelve months ended October 31, 2023.
Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standards setting bodies that we adopt as of the specified effective date. We did not adopt any new accounting pronouncements during the twelve months ended October 31, 2024.
In the event that our estimates and assumptions indicate we will not generate sufficient future taxable income to realize our deferred tax assets, we will record a valuation allowance, to the extent indicated, to reduce our deferred tax assets to their realizable value.
In the event that our estimates and assumptions indicate we will not generate sufficient future taxable income to realize our deferred t ax assets, we will record a valuation allowance, to the extent indicated, to reduce our deferred tax assets to their realizable value.
Our comparison of the results for the fiscal years ended October 31, 2022 and 2021 by reportable segment for the prior year comparative periods can be found in the annual report on Form 10-K for the year ended October 31, 2022.
Our comparison of the results for the fiscal years ended October 31, 2023 and 2022 by reportable segment for the prior year comparative periods can be found in the annual report on Form 10-K for the year ended October 31, 2023.
While we maintain surcharges and other adjusters to manage our exposure to changes in the prices of our critical raw materials, we use several commodities in our business that are not covered by contractual surcharges or adjusters for which pricing can fluctuate, including PVC compound micro ingredients, silicone and other inputs. 29 Table of Contents
While we maintain surcharges and other adjusters to manage our exposure to changes in the prices of our critical raw materials, we use several commodities in our business that are not covered by contractual surcharges or adjusters for which pricing can fluctuate, including PVC compound micro ingredients, silicone, polypropylene and other inputs. 33 Table of Contents
For the majority of our customers and critical suppliers, we have price 20 Table of Contents adjusters in place which effectively share the base pass-through price changes for our primary commodities with our customers commensurate with the market at large. Our long-term exposure to these price fluctuations is somewhat mitigated due to the contractual component of the adjuster program.
For the majority of our customers and critical suppliers, we have price adjusters in place which effectively share the base pass-through price changes for our primary commodities with our customers commensurate with the market at large. Our long-term exposure to these price fluctuations is somewhat mitigated due to the contractual component of the adjuster program.
Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the twelve months ended October 31, 2023 and 2022. Cost of Sales . Cost of sales for Corporate & Other consists of the elimination of inter-segment sales, profit in inventory, and other costs. Selling, General and Administrative .
Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the twelve months ended October 31, 2024 and 2023. Cost of Sales . Cost of sales for Corporate & Other consists of the elimination of inter-segment sales, profit in inventory, and other costs. Selling, General and Administrative .
Under the Purchase Agreement, we acquired substantially all of the operating assets comprising LMI’s polymer mixing and rubber compound production business and also agreed to assume certain liabilities relating to the Acquisition. LMI is allocated entirely to our North American Fenestration reportable operating segment.
Under the Purchase Agreement, we acquired substantially all of the operating assets comprising LMI’s polymer mixing and rubber compound production business and also agreed to assume certain liabilities relating to the Acquisition. L MI is allocated entirely to our North American Fenestration reportable operating segment.
We evaluate recoverability based on an estimate of future taxable income using the long-term forecasts we use to evaluate long-lived assets, goodwill and intangible assets for impairment, taking into consideration the future reversal of existing taxable temporary differences and reviewing our current financial operations.
We evaluate recoverability based on an estimate of future taxable income using the long-term forecasts we use to evaluate long-lived assets, goodwill and intangible assets for impairment, taki ng into consideration the future reversal of existing taxable temporary differences and reviewing our current financial operations.
These manufacturers seek the quality and technology of the specific products identified by the Liniar trade name. In addition, Liniar services non-fenestration markets including the manufacture of roofing for conservatories, vinyl decking and vinyl water retention barriers used for landscaping.
These manufacturers seek the quality and technology of the specific products identified by the Liniar trade name. In addition, Liniar services non-fenestration markets including the manufacture of roofing for conservatories, vinyl decking and vinyl water retention barriers 22 Table of Contents used for landscaping.
We have historically evaluated the market using data from the National Association of Homebuilders (NAHB) with regard to housing starts, and published reports by Ducker Worldwide, LLC (Ducker), a consulting and research firm, with regard to window shipments in the U.S.
We have historically evaluated the market using data from the National Association of Homebuilders (NAHB) with regard to housing starts and R&R activity, and published reports by Ducker Worldwide, LLC (Duc ker), a consulting and research firm, with regard to window shipments in the U.S.
These tax positions related to certain federal and state tax items regarding the interpretation of tax laws and regulations. We believe we will have sufficient taxable income in the future to fully utilize our deferred tax assets recorded as of October 31, 2023, net of our valuation allowance.
The tax positions related to certain state tax items regarding the interpretation of tax laws and regulations. We believe we will have sufficient taxable income in the future to fully utilize our deferred tax assets recorded as of October 31, 2024, net of our valuation allowance.
Annually, we evaluate our tax positions to determine if there have been any changes in uncertain tax positions or if there has been a lapse in the statute of limitations with regard to such positions. As of October 31, 2023 and 2022 our liability for uncertain tax positions was $0.3 million and $1.4 million, respectively.
Annually, we evaluate our tax positions to determine if there have been any changes in uncertain tax positions or if there has been a lapse in the statute of limitations with regard to such positions. As of October 31, 2024 and 2023 our liability for uncertain tax positions was zero and $0.3 million, respectively.
Effects of Inflation We have experienced the impact of inflation on our cost of raw materials, labor, freight and overhead, particularly during the year ended October 31, 2023.
Effects of Inflation We have experienced the impact of inflation on our cost of raw materials, labor, freight and overhead, particularly during the years ended October 31, 2024 and 2023.
Several commodities in our business are subject to pricing fluctuations, including polyvinyl resin (PVC), titanium dioxide (TiO2), petroleum products, aluminum and wood.
Several commodities in our business are subject to pricing fluctuations, including polyvinyl resin (PVC), titanium dioxide (TiO2), petroleum products, stainless steel, zinc, aluminum and wood.
In addition, we provide certain other non-fenestration components and products, which include solar panel sealants, trim moldings, vinyl decking, vinyl fencing, water retention barriers, custom compound mixing, and conservatory roof components. We use low-cost production processes and engineering expertise to provide our customers with specialized products for their specific applications. We believe these capabilities provide us with unique competitive advantages.
In addition, we provide certain other non-fenestration components and products, which include solar panel sealants, trim moldings, vinyl decking, water retention barriers, conservatory roof components, and commercial access solutions. We use low-cost production processes and engineering expertise to provide our customers with specialized products for their specific applications. We believe these capabilities provide us with unique competitive advantages.
We believe the estimates and assumptions used in our impairment assessment are reasonable based on available market information, but variations in any of the assumptions could result in materially different calculations of fair value and determinations of whether or not an impairment is indicated during current or future periods. 26 Table of Contents At our annual testing date, August 31, 2023, we had six reporting units with goodwill balances: three reporting units included in our NA Fenestration operating segment, two reporting units included in our EU Fenestration operating segment, and one reporting unit included in our NA Cabinet Components operating segment.
We believe the estimates and assumptions used in our impairment assessment are reasonable based on available market information, but variations in any of the assumptions could result in materially different calculations of fair value and determinations of whether or not an impairment is indicated during current or future periods. 30 Table of Contents At our annual testing date, August 31, 2024, we had seven reporting units with goodwill balances: three reporting units included in our NA Fenestration operating segment, two reporting units included in our EU Fenestration operating segment, one reporting unit included in our NA Cabinet Components operating segment, and one reporting unit included in our Tyman operating segment, which was acquired on August 1, 2024.
We serve a primary customer base in North America and the U.K., and also serve customers in international markets through our operating plants in the U.K. and Germany, as well as through sales and marketing efforts in other countries.
We serve a primary customer base in North America and the U.K., and also serve customers in international markets through our operating locations in the U.K., Germany, Mexico, Canada, and Italy, as well as through sales and marketing efforts in other countries.
The majority of these components can be categorized as window and door (fenestration) components and kitchen and bath cabinet components. Examples of fenestration components include (1) energy-efficient flexible insulating glass spacers, (2) extruded vinyl profiles, (3) window and door screens, and (4) precision-formed metal and wood products.
The majority of these components can be categorized as window and door (fenestration) components and kitchen and bath cabinet components. Examples of fenestration components include energy-efficient flexible insulating glass spacers, extruded vinyl profiles, window and door screens, precision-formed metal and wood products, window and door seals, and window and door hardware.
In November 2023, the NAHB forecasted calendar-year housing starts (excluding manufactured units) to be 1.4 million in the 2023, 2024 and 2025 calendar-years.
In November 2024, the NAHB forecasted calendar-year housing starts (excluding manufactured units) to be 1.4 million in the 2024, 1.5 million in 2025, and 1.6 million in 2026 calendar-years.
We were in compliance with our debt covenants as of October 31, 2023. For additional details of the Revolving Credit Facility, see Note 9, “Debt,” included elsewhere within this Annual Report on Form 10-K. We expect to repatriate excess cash moving forward and use the funds to retire debt or meet current working capital needs.
For additional details of the Revolving Credit Facility, see Note 9, “Debt,” included elsewhere within this Annual Report on Form 10-K. We expect to repatriate excess cash moving forward and use the funds to retire debt or meet current working capital needs.
Therefore, no additional testing was deemed necessary for the reporting units in the NA Fenestration segment and the EU Fenestration segment that were assessed qualitatively. We also updated the quantitative assessments for the reportable unit in th e NA Cabinet Components segment.
Therefore, no additional testing was deemed necessary for the reporting units in the NA Fenestration, EU Fenestration, and Tyman operating segments that were assessed qualitatively. We also updated the quantitative assessment for the reportable unit in the NA Cabinet Components segment.
Although the U.S. government has been less aggressively pursuing higher energy efficiency standards in recent years, other countries have implemented higher energy efficiency standards which should bode well for our fenestration-related business in these markets, particularly our warm-edge spacer products.
Although the U.S. government has been less aggressively pursuing higher energy efficiency standards in recent years, other countries have implemented higher energy efficiency standards which should bode well for our fenestration-related business in these markets, particularly our warm-edge spacer products, window and door seals and tilt ‘n’ turn micro-ventilation products.
During the years ended October 31, 2023, 2022 and 2021, we purchased 275,000, 291,000 and 478,311 shares, respectively, at a cost of $5.6 million, $6.6 million and $11.2 million, respectively, under these programs. Critical Accounting Policies and Estimates The preparation of our financial statements in accordance with accounting principles generally accepted in the United States of America (U.S.
During the years ended October 31, 2024 , 2023 and 2022, we purchased zero, 275,000 and 291,000 shares, respectively, at a cost of zero, $5.6 million and $6.6 million, respectively, under this program. Critical Accounting Policies and Estimates The preparation of our financial statements in accordance with accounting principles generally accepted in the United States of America (U.S.
The November 2022 Ducker forecast indicated that window shipments in the R&R market are expected to decrease approximately 6% and increase 1% in the calendar-years ended 2023 and 2024, respectively, and window shipments in the new construction market are expected to decrease 10% and increase 5% in the calendar-years ended 2023 and 2024, respectively, resulting in overall window shipment decline of 8% in 2023 and increase 3% in 2024.
The November 2022 Ducker forecast indicated that window shipments in the R&R market are expected to decrease approximately 5.9% and increase 4.0% in the calendar-years ended 2024 and 2025, respectively, and window shipments in the new construction market are expected to increase 0.9% and 1.6% in the calendar-years ended 2024 and 2025, respectively, resulting in overall window shipment decline of 2.7% in 2024 and increase 2.8% in 2025.
We recorded income tax expense of $14.5 million on pre-tax income of $97.0 million for the twelve months ended October 31, 2023, an effective rate of 15.0%, and income tax expense of $21.4 million on pre-tax income of $109.8 million for the twelve months ended October 31, 2022, an effective rate of 19.5%.
We recorded income tax expense of $9.0 million on pre-tax income of $42.1 million for the twelve months ended October 31, 2024, an effective rate of 21.4%, and income tax expense of $14.5 million on pre-tax income of $97.0 million for the twelve months ended October 31, 2023, an effective rate of 15.0%.
Cost of Sales . The cost of sales decreased $21.8 million, or 12%, for the twelve months ended October 31, 2023 compared to the same period in 2022. Cost of sales decreased primarily due to a decrease in volumes, deflation in the price of raw materials and foreign currency impacts. Selling, General and Administrative .
Cost of Sales . The cost of sales decreased $13.9 million, or 9%, for the twe lve months ended October 31, 2024 compared to the same period in 2023. Cost of sales decreased primarily due to a decrease in volumes, deflation in the price of raw materials and foreign currency impacts. Selling, General and Administrative .
These and other macro-economic factors have impacted the global financial markets, which may have contributed to significant changes in foreign currencies. We continue to monitor our exposure to changes in exchange rates.
These and other macro-economic factors have impacted the global financial markets, which may have contributed to significant changes in foreign currencies.
Investing Activities Cash used for investing activities for the year ended October 31, 2023 increased $95.5 million compared to the year ended October 31, 2022, primarily as a result of the acquisition of the LMI Custom Mixing assets. At October 31, 2023, we had firm purchase commitments of approximately $1.4 million for the purchase or construction of capital assets.
Investing Activities Cash used for investing activities for the year ended October 31, 2024 increased $292.2 million compared to the year ended October 31, 2023, primarily as a result of the acquisition of Tyman. At October 31, 2024, we had firm purchase commitments of approximately $2.5 million for the purchase or construction of capital assets.
The Credit Facility provides for revolving credit commitments for a minimum principal amount of $10.0 million, up to an aggregate amount of $150.0 million or 100% of Consolidated EBITDA, subject to the lender's discretion to elect or decline the incremental increase.
In addition, we are subject to commitment fees for the unused portion of the Revolving Credit Facility The Credit Facility provides for revolving credit commitments for a minimum principal amount of $10.0 million, up to an aggregate amount of $310.0 million or 100% of Consolidated EBITDA, subject to the lender's discretion to elect or decline the incremental increase.
This review included an analysis of historical goodwill test results, operating results relative to forecast, projected results over the next five years, and other measures and concluded that there were no indicators of potential impairment associated with these reporting units.
We performed a qualitative assessment for the reporting units in the NA Fenestration, EU Fenestration, and Tyman operating segments. This review included an analysis of historical goodwill test results, operating results relative to forecast, projected results over the next five years, and other measures and concluded that there were no indicators of potential impairment associated with these reporting units.
The effective rate for the twelve months ended October 31, 2022 was impacted by U.S. patent box benefit, state and local income taxes, non U.S. income tax and nondeductible expenses. Liquidity and Capital Resources Overview Historically, our principal sources of funds have been cash on hand, cash flow from operations, and borrowings under our credit facilities.
The effective rate for the twelve months ended October 31, 2023 was impacted due to the U.K. patent box benefit, tax return to accrual adjustments, and changes in uncertain tax positions, offset by state and local income tax, non U.S. income tax and nondeductible expenses. 26 Table of Contents Liquidity and Capital Resources Overview Historically, our principal sources of funds have been cash on hand, cash flow from operations, and borrowings under our credit facilities.
Net sales decreased $60.3 million, or 22%, for the twelve months ended October 31, 2023 compared to the same period in 2022, which was primarily driven by a $49.5 million decrease in volumes due to softer market demand driven by weaker consumer confidence and a $10.8 million decrease in raw material indexes. Cost of Sales .
Net sales decreased $17.0 million, or 8%, for the twelve months ended October 31, 2024 compared to the same period in 2023, which was primarily driven by a $13.5 million decrease in volumes due to softer market demand driven by weaker consumer confidence and a $3.5 million decrease in price from lower raw material index impacts. Cost of Sales .
The cabinet door market is stratified as follows: stock (low-cost, low-variations), semi-custom (more customized, just-in-time manufacturing, higher price point) and custom (precise customer specifications, just-in-time manufacturing, high-end price point). NA Cabinet Component's primary market is semi-custom.
The cabinet door market is stratified as follows: stock (low-cost, low-variations), semi-custom (more customized, just-in-time manufacturing, higher price point) and custom (precise customer specifications, just-in-time manufacturing, high-end price point). NA Cabinet Component's primary market is semi-custom. The Tyman business manufactures and distributes engineered door and window components and access solutions to the construction industry.
Derived from reports published by Ducker, the overall decrease in window shipments for the trailing twelve months ended September 30, 2023 was 8%. During this period, new construction activities decreased 13% and R&R decreased 3%.
Derived from reports published by Ducker, the overall decrease in window shipments for the trailing twelve months ended September 30, 2024 was 0.7%. During this period, new construction activities decreased 2.5% and R&R increased 1.1%.
The cost of sales decreased $58.5 million, or 25%, for the twelve months ended October 31, 2023 compared to the same period in 2022, primarily as a result of lower volumes year-over-year and lumber price deflation. Selling, General and Administrative .
The cost of sales decreased $9.8 million, or 5%, for the twelve months ended October 31, 2024 compared to the same period in 2023, primaril y as a result of lower volumes year-over-year. Selling, General and Administrative .
We currently have three reportable business segments: (1) North American Fenestration segment (“NA Fenestration”), comprising three operating segments, consisting of manufacturing vinyl profiles, IG spacers, screens, custom compound mixing and other fenestration components; (2) European Fenestration segment (“EU Fenestration”), comprising our U.K.-based vinyl extrusion business, manufacturing vinyl profiles and conservatories, and the European insulating glass business manufacturing IG spacers; and (3) North American Cabinet Components segment (“NA Cabinet Components”), comprising our North American cabinet door and components business and two wood-manufacturing plants.
We currently have four reportable business segments: (1) North American Fenestration segment (“NA Fenestration”), comprising three operating segments, consisting of vinyl profiles, IG spacers, screens, custom compound mixing and other fenestration components; (2) European Fenestration segment (“EU Fenestration”), comprising our U.K.-based vinyl extrusion business, manufacturing vinyl profiles and conservatories, and the European insulating glass business manufacturing IG spacers; (3) North American Cabinet Components segment (“NA Cabinet Components”), comprising our North American cabinet door and components business and two wood-manufacturing plants, and (4) Tyman, which was acquired on August 1, 2024, comprising a leading international supplier of engineered fenestration components and access solutions to the construction industry.
We determined the fair value of these reportable units exceeded the carrying value by 12.9% an d concluded that no impairment was necessary. Income Taxes We operate in various jurisdictions and therefore our income tax expense relates to income taxes in the U.S., U.K., Canada, and Germany, as well as local and state income taxes.
We determined the fair value of this reportable unit exceeded the carrying value by 20.5% and concluded that no impairment was necessary. Income Taxes We operate in various jurisdictions and therefore our income tax expense relates primarily to income taxes in the U.S. and the U.K., as well as local, state and foreign income taxes.
Our selling, general and administrative expenses increased $9.0 million, or 195%, for the twelve months ended October 31, 2023 compared to the same period in 2022.
Our selling, general and administrative expenses decreased by $0.3 million, or 1%, for the twelve months ended October 31, 2024 compared to the same period in 2023.
Our selling, general and admi nistrative exp ense increased $0.5 million, or 2%, for the twelve months ended October 31, 2023 compared to the same period in 2022. The increase is primarily due to an increase in labor costs partially offset by a decrease in professional fees and foreign currency impacts year-over-year.
Our selling, general and admi n istrative expense decreased $1.0 million, or 3%, for the twelve months ended October 31, 2024 compared to the same period in 2023. The decrease is primarily due to a decrease in professional fees, labor costs partially offset by a decrease in professional fees and foreign currency impacts year-over-year.
During the three months ended October 31, 2023, we contributed $6.3 million to the pension plan and settled the pension benefit obligation and the defined benefit pension plan as terminated. As a result, our accumulated benefit obligation was zero as of October 31, 2023. Under U.S.
During the three months ended October 31, 2023, we contributed $6.3 million to the pension plan and settled the pension benefit obligation and the defined benefit pension plan as terminated.
As such, our long-term exposure to increases in oil-based raw material prices is significantly reduced under this program. Similarly, NA Cabinet Components includes a price index provision in the majority of its customer arrangements to insulate against significant fluctuations in the price for various hardwood products used as the primary raw material for kitchen and bathroom cabinet doors.
Similarly, NA Cabinet Components includes a price index provision in the majority of its customer arrangements to insulate against significant fluctuations in the price for various hardwood products used as the primary raw material for kitchen and bathroom cabinet doors.
In connection with the Acquisition, we amended our existing finance lease with Lauren Real Estate Holding LLC for the purpose of adding an additional lease renewal option and increasing rental space by approximately 60,000 square feet of rental space which was added to the 313,595 square feet of rentable area located in Cambridge, Ohio. 19 Table of Contents U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the military conflicts currently ongoing in Ukraine and Gaza.
In connection with the Acquisition, we amended our existing finance lease with Lauren Real Estate Holding LLC for the purpose of adding an additional lease renewal option and increasing rental space by approximately 60,000 square feet of rental space which was added to the 313,595 square feet of rentable area located in Cambridge, Ohio.
Based upon the balances of the variable rate debt at October 31, 2023, a hypothetical 1.0% increase or decrease in interest rates could result in approximately $0.2 million of additional pre-tax charges or credit to our operating results. This sensitivity pertains primarily to our outstanding revolving credit facility borrowings outstanding under the Credit Facility as of October 31, 2023.
Based upon the balan ces of the variable rate debt at October 31, 2024, a hypothetical 1.0% increase or decrease in interest rates could result in approximately $7.2 million of additional pre-tax charges or credit to our operating results.
The October 31, 2023 effective rate is lower than the U.S. federal statutory rate of 21% primarily due to the U.K. patent box benefit, tax return to accrual adjustments, and changes in uncertain tax positions, offset by state and local income tax, non U.S. income tax and nondeductible expenses.
The October 31, 2024 effective rate is higher than the U.S. federal statutory rate of 21% primarily due to state and local income tax, non U.S. income inclusion, and nondeductible expenses, offset by the U.K. patent box benefit, foreign tax credit, and change in the valuation allowance.
Net sales decreased $11.3 million, or 4%, when comparing the twelve months ended October 31, 2023 compared to the same period in 2022, which was primarily driven by a $19.2 million decrease in volumes largely due to softer market demand, a return to normal seasonality, and customer destocking, and $4.1 million of foreign currency rate change, partially offset by $12.0 million of base price increases.
Net sales decreased $20.1 million, or 8%, when comparing the twelve months ended October 31, 2024 compared to the same period in 2023, which was primarily driven by an $18.4 million decrease in volumes largely due to softer market demand driven by weaker consumer confidence and base price decreases of $4.2 million, partially offset by favorable foreign currency rate change of $2.5 million.
In addition to maintaining these financial covenants, the Credit Facility also limits our ability to enter into certain business transactions, such as to incur indebtedness or liens, to acquire businesses or dispose of material assets, make restricted payments, pay dividends (limited to $25.0 million per year) and to conduct other transactions as further defined in the Credit Facility.
The Credit Facility contains a: (1) Consolidated Interest Coverage Ratio requirement whereby we must not permit the Consolidated Interest Coverage Ratio, as defined, to be less than 3.00 to 1.00, and (2) Consolidated Net Leverage Ratio requirement, whereby we must not permit the Consolidated Net Leverage Ratio, as defined, to be greater than 3.25 to 1.00. 28 Table of Contents In addition to maintaining these financial covenants, the Credit Facility also limits our ability to enter into certain business transactions, such as to incur indebtedness or liens, to acquire businesses or dispose of material assets, make restricted payments, pay dividends (limited to $35.0 million per year) and to conduct other transactions as further defined in the Credit Facility.
Changes Related to Operating Income by Reportable Segment: NA Fenestration For the Years Ended October 31, 2023 2022 $ Change % Change (Dollars in thousands) Net sales $ 667,482 $ 687,458 $ (19,976) (3)% Cost of sales (excluding depreciation and amortization) 517,805 537,900 (20,095) (4)% Selling, general and administrative 56,979 58,735 (1,756) (3)% Depreciation and amortization 20,539 16,253 4,286 26% Operating income $ 72,159 $ 74,570 $ (2,411) (3)% Operating income margin 11 % 11 % Net Sale s .
Changes Related to Operating Income by Reportable Segment: NA Fenestration For the Years Ended October 31, 2024 2023 $ Change % Change (Dollars in thousands) Net sales $ 650,058 $ 667,482 $ (17,424) (3)% Cost of sales (excluding depreciation and amortization) 498,378 517,805 (19,427) (4)% Selling, general and administrative 56,630 56,979 (349) (1)% Depreciation and amortization 20,994 20,539 455 2% Operating income $ 74,056 $ 72,159 $ 1,897 3% Operating income margin 11 % 11 % Net Sale s .
In addition, we are subject to commitment fees (0.150% to 0.250%) for the unused portion of the Credit Facility. As of October 31, 2023, the applicable rate was RFR + 1.25%. The weighted average interest rate of borrowings outstanding for the twelve-month periods ended October 31, 2023 and 2022 was 6.01% and 2.16%, respectively.
In addition, we are subject to commitment fees for the unused portion of the Revolving Credit Facility. The weighted average interest rate of borrowings outstanding for the twelve-month periods ended October 31, 2024 and 2023 was 7.20% and 6.01%, respectively. We were in compliance with our debt covenants as of October 31, 2024.
Comparison of the fiscal years ended October 31, 2023 and 2022 This table sets forth our consolidated results of operations for the twelve-month periods ended October 31, 2023 and 2022.
We continue to monitor our exposure to changes in exchange rates. 23 Table of Contents Comparison of the fiscal years ended October 31, 2024 and 2023 This table sets forth our consolidated results of operations for the twelve-month periods ended October 31, 2024 and 2023.
Like our vinyl extrusion business, we are exposed to short-term volatility in wood prices due to a lag in the timing of price updates which generally could extend for up to three months.
Like our vinyl extrusion business, we are exposed to short-term volatility in wood prices due to a lag in the timing of price updates which generally could extend for up to three months. In the Tyman business, contractual price adjustment mechanisms are in place for key commodities including stainless steel and zinc for most large U.S. customers, but not all.
Liquidity Requirements Our strategy for deploying cash is to invest in organic growth opportunities, develop our infrastructure, and explore strategic acquisitions. Other uses of cash include paying cash dividends to our shareholders and repurchasing our own stock. We maintain cash balances in foreign countries which tot aled $17.8 million and $13.6 million as of October 31, 2023 and 2022.
During the years ended October 31, 2024 and 2023, we acquired Tyman and LMI, respectively. Liquidity Requirements Our strategy for deploying cash is to invest in organic growth opportunities, develop our infrastructure, and explore strategic acquisitions. Other uses of cash include paying cash dividends to our shareholders and repurchasing our own stock.
As of October 31, 2023, we had $58.5 million of cash and cash equiv alents, $15.0 million outstanding under our credit facilities, $5.0 million of outstanding letters of credit and $55.0 million outstanding leases under finance leases and other debt. Of the $55.0 million outstanding under finance leases and other debt, $51.5 million relates to real estate leases.
A s of October 31, 2024, we had $97.7 million of cash and cash equivalents, $716.3 million outstanding under our credit facilities, $7.0 million of outstanding letters of credit and $60.7 million outstanding leases under finance leases and other debt. Of the $60.7 million outstanding under finance leases and other debt, $50.3 million relates to real estate leases.
This increase is primarily attributable to an increase in transaction fees and compensation expense including the valuations of our stock-based compensation awards during the twelve months ended October 31, 2023 compared to the same period in 2022. Changes Related to Non-Operating Items: Interest Expense .
Our selling, general and administrative expenses increased $23.8 million, or 176%, for the twelve months ended October 31, 2024 compared to the same period in 2023. This increase is primarily attributable to an increase in transaction fees year-over-year. Changes Related to Non-Operating Items: Interest Expense .
As a result, our liabilities for these plans will be distributed in June 2024 in accordance with IRS requirements. As of October 31, 2023, our liability under the supplemental benefit plan and the deferred compensation plan was approximat ely $2.0 million and $3.9 million, re spectively.
Our supplemental benefit plan was terminated in June 2023. As a result, our liability for this plan was distributed in June 2024 in a ccordance with IRS requirements. As of October 31, 2024, our liability under the deferred compensation plan was approximately $4.7 million.
Significant unanticipated changes to our forecasts or changes in the net realizable value of our inventory would require a change in the pr ovision for excess or obsolete inventory. For the years ended October 31, 2023, 2022 and 2021, our inventory reserves are approximately 3% of gross inventory. Retirement Plans We have historically sponsored a defined benefit pension plan.
For the years ended October 31, 2024 and 2023, our inventory reserves are approximately 1% and 3% of gross inventory, respectively. Retirement Plans We have historically sponsored a defined benefit pension plan.
We have resin adjusters in place with a majority of our customers and our resin supplier that is adjusted based upon published indices for lagging resin prices. These adjusters effectively share the base pass-through price changes of PVC with our customers commensurate with the market at large.
Commodity Price Risk We purchase PVC as the significant raw material consumed in the manufacture of vinyl extrusions. We have resin adjusters in place with a majority of our customers and our resin supplier that is adjusted based upon published indices for lagging resin prices.
Our long-term exposure to changes in PVC prices is somewhat mitigated due to the contractual component of the resin adjuster program. However, there is a level of exposure to short-term volatility due to timing lags. We adjust the pricing of petroleum-based raw materials for the majority of our customers who purchase products using these materials.
These adjusters effectively share the base pass-through price changes of PVC with our customers commensurate with the market at large. Our long-term exposure to changes in PVC prices is somewhat mitigated due to the contractual component of the resin adjuster program. However, there is a level of exposure to short-term volatility due to timing lags.
Interest expense increased $5.6 million, or 218%, for the twelve months ended October 31, 2023 compared to the same period in 2022 as a result of higher borrowings outstanding during the period and an increase in interest rates.
Interest expense increased $12.5 million, or 153%, for the twelve months ended October 31, 2024 compared to the same period in 2023 as primarily as result of higher borrowings outstanding during the period. Borrowings under credit facilities increased to $716.3 million as of October 31, 2024 compared with $15.0 million as of October 31, 2023. Other, net .
Other corporate general and administrative costs have been allocated to the reportable business segments, based upon a relative measure of profitability in order to more accurately reflect each reportable business segment's administrative costs. We allocate corporate expenses to businesses acquired mid-year from the date of acquisition.
Other corporate general and administrative costs have been allocated to the reportable business segments, based upon a relative measure of profitability in order to more accurately reflect each reportable business segment's administrative costs. The accounting policies of our operating segments are the same as those used to prepare our accompanying consolidated financial statements.
This is intended to offset the fluctuating cost of products which are highly correlated to the price of oil including butyl and other oil-based raw materials. This program is adjusted monthly based upon the 90-day average published price for Brent crude. The oil-based raw materials that we purchase are subject to similar pricing schemes.
We adjust the pricing of petroleum-based raw materials for the majority of our U.S. customers who purchase products using these materials. This is intended to offset the fluctuating cost of products which are highly correlated to the price of oil including butyl and other oil-based raw materials.
Net sales decreased $20.0 million, or 3%, for the twelve months ended October 31, 2023 compared to the same period in 2022, which was primarily driven by an $86.9 million decrease in volumes mainly due to softer market demand, a return to normal seasonality, customer destocking, and a decrease in price and raw material surcharges of $8.7 million, partially offset by a $75.6 million contribution from the addition of LMI in 2023.
Net sales decreased $17.4 million, or 3%, for the twelve months ended October 31, 2024 compared to the same period in 2023 , which was primarily driven by a $20.9 million decrease in volumes mainly due to softer market demand driven by lower consumer confidence, as well as the strategic sale of a plant in October 2024, partially offset by favorable price and surcharge impacts of $3.5 million.
Cost of sales, including labor, decreased primarily due to lower volumes and deflation of raw materials during the period partially offset by the addition of LMI’s cost of sales in 2023. 21 Table of Contents Selling, General and Administrati ve.
Cost of Sales. Cost of sales decreased $19.4 million, or 4%, for the twelve months ended October 31, 2024 compared to the same period in 2023. Cost of sales, including labor, decreased primarily due to lower volumes and deflation in the price of raw materials during the period. Selling, General and Administrati ve.
Recent Transactions and Events On November 1, 2022, we entered into an Asset Purchase Agreement with LMI and the equity owners of LMI, Lauren International, Ltd. and Meteor-US-Beteiligungs GMBH.
New Quanex Shares issued in connection with the Tyman Acquisition on the New York Stock Exchange took effect on August 2, 2024 and Tyman’s shares on the London Stock Exchange were canceled. On November 1, 2022, we entered into an Asset Purchase Agreement with LMI and the equity owners of LMI, Lauren International, Ltd. and Meteor-US-Beteiligungs GMBH.
Our selling, general and administrative expenses decreased by $1.8 million, or 3%, for the twelve months ended October 31, 2023 compared to the same period in 2022. This decrease was due primarily to decreases in labor costs year-over-year. Depreciation and Amortization.
Our selling, general and administrative expense decreased $0.3 million, or 2%, for the twelve months ended October 31, 2024 compared to the same period in 2023. The decrease is primarily due to lower labor costs and professional fees year-over-year. 25 Table of Contents Tyman The Tyman reportable segment is comprised solely of the business acquired on August 1, 2024.
NA Cabinet Components For the Years Ended October 31, 2023 2022 $ Change % Change (Dollars in thousands) Net sales $ 215,445 $ 275,704 $ (60,259) (22)% Cost of sales (excluding depreciation and amortization) 178,210 236,695 (58,485) (25)% Selling, general and administrative 21,074 21,934 (860) (4)% Depreciation and amortization 12,208 13,830 (1,622) (12)% Operating income $ 3,953 $ 3,245 $ 708 22% Operating income margin 2 % 1 % Net Sales .
NA Cabinet Components For the Years Ended October 31, 2024 2023 $ Change % Change (Dollars in thousands) Net sales $ 198,424 $ 215,445 $ (17,021) (8)% Cost of sales (excluding depreciation and amortization) 168,414 178,210 (9,796) (5)% Selling, general and administrative 20,727 21,074 (347) (2)% Depreciation and amortization 12,244 12,208 36 —% Operating (loss) income $ (2,961) $ 3,953 $ (6,914) (175)% Operating (loss) income margin (1) % 2 % Net Sales .
Fixed costs related to excess manufacturing capacity have been expensed in the period, and therefore, are not capitalized into inventory. Inventory quantities are regularly reviewed and provisions for excess or obsolete inventory are recorded primarily based on our forecast of future demand and market conditions.
Inventory quantities are regularly reviewed and provisions for excess or obsolete inventory are recorded primarily based on our forecast of future demand and market conditions. Significant unanticipated changes to our forecasts or changes in the net realizable value of our inventory would require a change in the pr ovision for excess or obsolete inventory.
We plan to fund these capital expenditures through cash from operations or borrowings under our revolving credit facility.
We plan to fund these capital expenditures through cash from operations or borrowings under our revolving credit facility. Financing Activities Cash provided by financing activities was $385.2 million for the year ended October 31, 2024 compared to cash used for financing opportunities during the year ended October 31, 2023.
Contractual Obligations and Commercial Commitments Our contractual obligations and commercial commitments include unconditional purchase obligations which consist of commitments to buy miscellaneous parts, inventory, and expenditures related to capital projects in progress. Our supplemental benefit plan and deferred compensation plans were terminated in June 2023.
During the year ended October 31, 2024, we received a $0.9 million settlement reimbursement related to the 2023 contribution. 31 Table of Contents Contractual Obligations and Commercial Commitments Our contractual obligations and commercial commitments include unconditional purchase obligations which consist of commitments to buy miscellaneous parts, inventory, and expenditures related to capital projects in progress.
We consider an estimate to be critical if it is subjective and if changes in the estimate using different assumptions would result in a material impact to our financial position or results of operations. 25 Table of Contents Impairment or Disposal of Long-Lived Assets Property, Plant and Equipment and Intangible Assets with Defined Lives We make judgments and estimates in conjunction with the carrying value of our long-term assets, including property, plant and equipment, and identifiable intangibles.
We consider an estimate to be critical if it is subjective and if changes in the estimate using different assumptions would result in a material impact to our financial position or results of operations. Business Combinations - Contingencies We apply the acquisition method of accounting for business combinations in accordance with U.S.
Our total gross deferred tax assets as of October 31, 2023 and 2022 were $11.8 million and $13.9 million, respectively, for which we reserved a valuation allowance of $0.6 million and $0.5 million for the corresponding periods. Inventory We record inventory at the lower of cost or net realizable value. Inventories are valued using the first-in first-out (FIFO) method.
Our total gross deferred tax assets as of October 31, 2024 and 2023 were $60.3 million and $18.1 million, respectively, for which we reserved a valuation allowance of $4.4 million and $0.6 million for the corresponding periods. The deferred tax assets, net of valuation allowance, offset the deferred liability within a jurisdiction.
We expect to use our cash flow from operations to fund operations for the next twelve months and the foreseeable future. 24 Table of Contents We believe these funds should be adequate to provide for our working capital requirements, capital expenditures, and dividends, while continuing to meet our debt service requirements.
We believe that we have sufficient funds and adequate financial resources available to meet our anticipated liquidity needs. We expect to use our cash flow from operations to fund operations for the next twelve months and the foreseeable future.
For the Years Ended October 31, 2023 2022 $ Change % Change (Dollars in thousands) Net sales $ 1,130,583 $ 1,221,502 $ (90,919) (7)% Cost of sales (excluding depreciation and amortization) 853,059 953,004 (99,945) (10)% Selling, general and administrative 123,957 117,108 6,849 6% Depreciation and amortization 42,866 40,109 2,757 7% Operating income 110,701 111,281 (580) (1)% Interest expense (8,136) (2,559) (5,577) (218)% Other, net (5,519) 1,041 (6,560) (630)% Income tax expense (14,545) (21,427) 6,882 32% Net income $ 82,501 $ 88,336 $ (5,835) (7)% Our year-over-year results by reportable segment follow.
For the Years Ended October 31, 2024 2023 $ Change % Change (Dollars in thousands) Net sales $ 1,277,862 $ 1,130,583 $ 147,279 13% Cost of sales (excluding depreciation and amortization) 972,238 853,059 119,179 14% Selling, general and administrative 190,470 123,957 66,513 54% Depreciation and amortization 60,328 42,866 17,462 41% Operating income 54,826 110,701 (55,875) (50)% Interest expense (20,593) (8,136) (12,457) (153)% Other, net 7,849 (5,519) 13,368 (242)% Income tax expense (9,023) (14,545) 5,522 38% Net income $ 33,059 $ 82,501 $ (49,442) (60)% Our year-over-year results by reportable segment follow.
Foreign Currency Rate Risk Our international operations have exposure to foreign currency rate risks, primarily due to fluctuations in the Euro, the British Pound Sterling and the Canadian Dollar. From time to time, we enter into foreign exchange contracts associated with our operations to manage a portion of the foreign currency rate risk.
This sensitivity pertains primarily to our outstanding revolving credit facility borrowings outstanding under the Credit Facility as of October 31, 2024. 32 Table of Contents Foreign Currency Rate Risk Our international operations have exposure to foreign currency rate risks, primarily due to fluctuations in the Euro and the British Pound Sterling.
EU Fenestration For the Years Ended October 31, 2023 2022 $ Change % Change (Dollars in thousands) Net sales $ 250,774 $ 262,058 $ (11,284) (4)% Cost of sales (excluding depreciation and amortization) 158,491 180,268 (21,777) (12)% Selling, general and administrative 32,350 31,846 504 2% Depreciation and amortization 9,849 9,674 175 2% Operating income $ 50,084 $ 40,270 $ 9,814 24% Operating income margin 20 % 15 % Net Sales .
This decrease was due primarily to the gain on disposition of capital assets during the twelve months ended October 31, 2024 partially offset by an increases in labor costs year-over-year. 24 Table of Contents EU Fenestration For the Years Ended October 31, 2024 2023 $ Change % Change (Dollars in thousands) Net sales $ 230,712 $ 250,774 $ (20,062) (8)% Cost of sales (excluding depreciation and amortization) 144,585 158,491 (13,906) (9)% Selling, general and administrative 31,318 32,350 (1,032) (3)% Depreciation and amortization 10,420 9,849 571 6% Operating income $ 44,389 $ 50,084 $ (5,695) (11)% Operating income margin 19 % 20 % Net Sales .
During the years ended October 31, 2023 and 2022, we repatr iated $47.1 million and $28.9 million, respectively, of foreign earnings from our international divisions. We believe that we have sufficient funds and adequate financial resources available to meet our anticipated liquidity needs.
We maintain cash balances in foreign countries which totaled $44.0 million and $17.8 million as of October 31, 2024 and 2023. During the years ended October 31, 2024 and 2023, we repatriated $49.2 million and $47.1 million, respectively, of foreign earnings from our international divisions.
Our selling, general and administrative expense decreased $0.9 million, or 4%, for the twelve months ended October 31, 2023 compared to the same period in 2022. The decrease is primarily due to lower labor costs partially offset by an increase in professional fees and the loss on an asset caused by wind damage to a manufacturing facility. Depreciation and Amortization.
Other income increased $13.4 million for the twelve months ended October 31, 2024 compared to other loss in the same period in 2023. The increase is primarily due to an increase in foreign currency derivative gains and a decrease in expenses incurred for pension termination in the prior year. Income Taxes .
Removed
The accounting policies of our operating segments are the same as those used to prepare our accompanying consolidated financial statements. Corporate general and administrative expenses allocated during the years ended October 31, 2023, 2022 and 2021 were $23.5 million , $24.5 million and $21.6 million, respectively.

… 57 more changes not shown on this page.

Other NX 10-K year-over-year comparisons