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What changed in Quanex Building Products CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Quanex Building Products CORP's 2022 and 2023 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 2023 report.

+141 added−150 removedSource: 10-K (2023-12-15) vs 10-K (2022-12-16)

Top changes in Quanex Building Products CORP's 2023 10-K

141 paragraphs added · 150 removed · 123 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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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 2022 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 2018 871 3% 376 6% 96 3% 1,343 2019 889 2% 402 7% 95 (1)% 1,386 2020 1,002 13% 393 (2)% 94 (1)% 1,489 2021 1,131 13% 474 21% 106 13% 1,711 Annual Data - Forecast 2022 978 (14)% 560 18% 119 12% 1,657 2023 886 (9)% 515 (8)% 120 1% 1,521 2024 1,035 17% 490 (5)% 126 5% 1,651 Ducker Worldwide LLC, a consulting and research firm, indicated in November 2022 that window shipments in the residential remodeling and replacement (R&R) market are expected to increase approximately 3% for the calendar-year 2022 and approximately 2% in 2023.
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.
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 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.
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.
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 2023. 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 2024. While we will continue to have future expenditures related to environmental matters, any such amounts are impossible to reasonably estimate at this time.
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. 6 Table of Contents 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 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.
Primary competitors 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 and Fenzi Group. Competitors in the vinyl extrusion business in the U.K. include Epwin, Veka, Profine UK Extrusions Ltd., Eurocell and others.
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; 5 Table of Contents • 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; • recognize the importance of environmental, social, and corporate governance by continually looking for ways to reduce our environmental impact, including reducing our carbon footprint, protecting the health and safety of our employees and communities, and engaging 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 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; 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.
As of October 31, 2022, we oper ated 27 manufacturing facilities located in 15 states in the U.S., two facilities in the U.K., and one in Germany.
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.
These facilities feature effi cient 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.
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.
As of October 31, 2022, we had 3,875 employees. Of these employees, 3,141 were domiciled in the U.S., 622 in the U.K., and 112 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.
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.
Our exposure to seasonality was somewhat tempered with the entry into the kitchen and bathroom cabinet door industry, which is focused "inside the house" and less susceptible to inclement weather. Expenses for labor and other costs are generally semi-variable throughout the year.
We typically experience more favorable results in the third and fourth quarters of the fiscal year. Our exposure to seasonality was somewhat tempered with the entry into the kitchen and bathroom cabinet door industry, which is focused "inside the house" and less susceptible to inclement weather. Expenses for labor and other costs are generally semi-variable throughout the year.
Derived from reports published by Ducker, the overall increase in window shipments for the trailing twelve months ended September 30, 2022 was 3%. During this period, new construction activity increased 2% and R&R replacement increased 4% respectively.
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.
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.
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.
Employee turnover rates are monitored monthly at 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. We offer our employees online training courses and on-the-job training on job duties, safety requirements, and leadership skills.
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.
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.
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.
If these sales orders result in a sale, we will record revenue in fiscal 2023 in accordance with our revenue recognition accounting policy. Seasonal Nature of Business Our business is impacted by seasonality. We have historically experienced lower sales for our products during the first half of our fiscal year as winter weather reduces homebuilding and home improvement activity.
Seasonal Nature of Business Our business is impacted by seasonality. We have historically experienced lower sales for our products during the first half of our fiscal year as winter weather reduces homebuilding and home improvement activity. Our operating income tends to decline during this period of lower sales because a higher percentage of our operating expenses are fixed overhead.
Sales Backlog Given the short lead times involved in our business, we have a backlog of approximat ely $56 million as of October 31, 2022. 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.
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.
Removed
Projections from Catalina Research, a consulting and research firm, as of November 2022 include growth rates for semi-custom (the cabinet market we primarily operate in) and overall cabinet markets. The semi-custom market increased 11% in calendar-year 2021, and is forecasted to increase 13% in 2022 followed by a forecasted decrease of 4% in 2023.
Removed
The overall cabinet market increased 16% in 2021 calendar-year, and is forecasted to increase 15% in 2022 followed by a forecasted decrease of 3% in 2023.
Removed
Our operating income tends to decline during this period of lower sales because a higher percentage of our operating expenses are fixed overhead. We typically experience more favorable results in the third and fourth quarters of the fiscal year.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAlthough 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.
Biggest changeAlthough 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.
If supply chain interruptions or other disruptions result in an increase to the price of raw materials or other commodities, we could experience a negative impact on our operating results, profitability and future cash flows.
If supply chain interruptions or other disruptions result in the unavailability of raw materials or an increase to the price of raw materials or other commodities, we could experience a negative impact on our operating results, profitability and future cash flows.
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, 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 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.
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.
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.
In addition to this potential direct 11 Table of Contents impact on our facilities and operations, continuing outbreaks of the virus could negatively impact our industry and end markets as a whole, or result in a longer-term economic recession. Any of these factors could negatively affect our business, financial condition, cash flows, profitability, and results of operations.
In addition to this potential direct impact on our facilities and operations, continuing outbreaks of the virus could negatively impact our industry and end markets as a whole, or result in a longer-term economic recession. Any of these factors could negatively affect our business, financial condition, cash flows, profitability, and results of operations.
However, our efforts in this regard may not be successful and our operating margins could be negatively impacted. 10 Table of Contents Our revenues could decline or we may lose business if our customers vertically integrate their operations, diversify their supplier base, or transfer manufacturing capacity to other regions.
However, our efforts in this regard may not be successful and our operating margins could be negatively impacted. Our revenues could decline or we may lose business if our customers vertically integrate their operations, diversify their supplier base, or transfer manufacturing capacity to other regions.
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 37,211,056 were issued at October 31, 2022. 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 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.
Russia, Europe’s largest provider of natural gas, has significantly reduced the export of natural gas compared to the same time last year resulting in the increase in natural gas prices and the potential for natural gas shortages. In many European countries, including Germany, alternatives to natural gas have limited capacity.
Russia, Europe’s largest provider of natural gas, has significantly reduced the export of natural gas compared to the beginning of the conflict resulting in the increase in natural gas prices and the potential for natural gas shortages. In many European countries, including Germany, alternatives to natural gas have limited capacity.
Goodwill totaled $137.9 million at October 31, 2022. The results of goodwill impairment testing are described in the accompanying notes to the audited financial statements, Note 6, “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 $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.
This conflict in Ukraine could lead to market or operational disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.
These conflicts could lead to market or operational disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.
Company Risks Our business, financial condition, and results of operations could be adversely affected by disruptions in the global economy caused by the war in Ukraine. U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine.
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.
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.
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.
Removed
We have the ability to issue additional equity securities, which would lead to dilution of our issued and outstanding common stock.
Added
In addition, one of t he suppliers of a vapor barrier used in t he production of our insulating glass spacers is located in Israel and may experience a disruption as a result of the ongoing conflict in Gaza.
Added
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
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
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
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.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation Character & 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 and solar adhesives 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.
Biggest changeLocation 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.
Item 2. Properties. The following table lists our principal properties by location, general character and use as of October 31, 2022.
Item 2. Properties. The following table lists our principal properties by location, general character and use as of October 31, 2023.
Cloud, Minnesota Hardwood doors & components for kitchen and bath * These locations are leased as of October 31, 2022.
Cloud, Minnesota Hardwood doors and components for kitchen and bath * These locations are leased as of October 31, 2023.
In fiscal 2022, on a consolidated basis, our facilities operated at approximately 58% of machi ne capacity. This capacity utilization is subject to variability by product line, seasonality, location, labor shortages and supply chain interruptions.
In 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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeNevertheless, 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. 14 Table of Contents We reserve for litigation loss contingencies that are both probable and reasonably estimable.
Biggest changeNevertheless, 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.
Not Applicable. 15 Table of Contents PART II
Not Applicable. 16 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeINDEXED RETURNS For the Years Ended Company Name / Index 10/31/2017 10/31/2018 10/31/2019 10/31/2020 10/31/2021 10/31/2022 Quanex Building Products Corporation $ 100.00 $ 68.21 $ 90.57 $ 87.29 $ 100.71 $ 109.28 S&P 500 Index $ 100.00 $ 107.35 $ 122.72 $ 134.64 $ 192.42 $ 164.31 Russell 2000 Index $ 100.00 $ 101.87 $ 106.87 $ 106.72 $ 160.93 $ 131.10 Peer Group $ 100.00 $ 91.74 $ 115.76 $ 134.75 $ 186.72 $ 140.43 17 Table of Contents
Biggest changeINDEXED 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
(2) The weighted-average exercise price in column (b) does not include the impacts of the performance share awards or any securities that may be issued thereunder. For additional details, see Note 13, “Stock-Based Compensation,” of the accompanying financial statements in this Annual Report on Form 10-K.
(2) The weighted-average exercise price in column (b) does not include the impacts of the performance share awards or any securities that may be issued thereunder. For additional details, see Note 14, “Stock-Based Compensation,” of the accompanying financial statements in this Annual Report on Form 10-K.
The new program does not have an expiration date or a limit on the number of shares that may be purchased. 16 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 500 Index (S&P 500 Index), 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. 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 companies in our peer group for the year ended October 31, 2022 are AAON Inc., American Woodmark Corp, Apogee Enterprises Inc., Armstrong Flooring Inc., Cornerstone Building Brands 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, 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.
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, 2022: (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 361,567 $ 19.39 2,863,024 (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, 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.
During the three months ended October 31, 2022, we did not purchase any shares under this program and as of October 31, 2022 we had a maximum of $68.4 million available to purchase shares under this program.
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.
There were approxima tely 1,631 hol ders of our common stock (excluding individual participants in securities positions listings) on record as of December 8, 2022.
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.
During the years ended October 31, 2022, 2021 and 2020, we purchased 291,000, 478,311 and 450,000 shares, respectively, at a cost of $6.6 million, $11.2 million and $ 7. 2 million, respectively, under these programs.
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.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThis decreased due to $4.0 million of decreased compensation expense including the valuations of our stock based compensation awards, a decrease of $3.2 million related to medical expense claims, and a decrease of $0.5 million related to workers’ compensation claims partially offset by an increase of $1.4 million professional fees during the twelve months ended October 31, 2022 compared to the same period in 2021.
Biggest changeThis 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 .
While we maintain surcharges and other adjusters to manage our exposure to changes in the prices of our critical raw materials, we use several 28 Table of Contents 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 and other inputs. 29 Table of Contents
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. 24 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. 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.
Interest payments for the Credit Facility are calculated, at our election and depending upon the Consolidated Net Leverage Ratio, at a Base Rate (0.25% to 1.00%) plus an applicable margin or at the same rate as Risk-Free Rate (“RFR”) Loans for 22 Table of Contents domestic borrowings or Eurocurrency Rate Loans (1.25% to 2.00%) plus an applicable margin.
Interest payments for the Credit Facility are calculated, at our election and depending upon the Consolidated Net Leverage Ratio, at a Base Rate (0.25% to 1.00%) plus an applicable margin or at the same rate as Risk-Free Rate (“RFR”) Loans for 23 Table of Contents domestic borrowings or Eurocurrency Rate Loans (1.25% to 2.00%) plus an applicable margin.
No impairment charges w ere incurred with regard to our property, plant and equipment for the years ended October 31, 2022, 2021 and 2020. 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, 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.
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. 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, 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.
Our comparison of the results for the fiscal years ended October 31, 2021 and 2020 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, 2021.
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.
Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the twelve months ended October 31, 2022 and 2021. 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, 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 .
Our cash flow analysis for the fiscal years ended October 31, 2021 and 2020 for the prior year comparative periods can be found in the annual report on Form 10-K for the year ended October 31, 2021.
Our cash flow analysis for the fiscal years ended October 31, 2022 and 2021 for the prior year comparative periods can be found in the annual report on Form 10-K for the year ended October 31, 2022.
We were in compliance with our debt covenants as of October 31, 2022. For additional details of the Revolving Credit Facility, see Note 8, “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.
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.
However, these adjusters are not in place with all customers and for all 19 Table of Contents commodities, and there is a level of exposure to such volatility due to the lag associated with the timing of price updates in accordance with our customer agreements, particularly with regard to hardwoods.
However, these adjusters are not in place with all customers and for all commodities, and there is a level of exposure to such volatility due to the lag associated with the timing of price updates in accordance with our customer agreements, particularly with regard to hardwoods.
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, 2022.
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.
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 the NA Cabinet Components segment and the second reportable unit in the NA Fenestration segment.
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.
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, 2022, 2021 and 2020 were $24.5 million , $21.6 million and $21.7 million, respectively.
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.
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. 25 Table of Contents At our annual testing date, August 31, 2022, we had five reporting units with goodwill balances: two 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. 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.
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 $13.6 million and $10.6 million as of October 31, 2022 and 2021.
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.
We currently have three reportable business segments: (1) North American Fenestration segment (“NA Fenestration”), comprising three operating segments, manufacturing vinyl profiles, IG spacers, screens 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 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 expect to use our cash flow from operations to fund operations for the next twelve months and the foreseeable future. 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 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.
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, 2022, the applicable rate was RFR + 1.25%. The weighted average interest rate of borrowings outstanding for the twelve-month periods ended October 31, 2022 and 2021 was 2.16% and 1.42%, respectively.
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.
During the years ended October 31, 2022, 2021 and 2020, we purchased 291,000, 478,311 and 450,000 shares, respectively, at a cost of $6.6 million, $11.2 million and $ 7. 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, 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.
Based upon the balances of the variable rate debt at October 31, 2022, a hypothetical 1.0% increase or decrease in interest rates could result in approximately $0.1 milli on 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, 2022.
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.
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.
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.
We performed a qualitative assessment of one of the two reporting units in the NA Fenestration segment and the two reporting units in the EU Fenestration segment.
We performed a qualitative assessment for the three of the reporting units in the NA Fenestration segment and the two reporting units in the EU Fenestration segment.
Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market or operational disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.
Although the length and impact of these ongoing military conflicts are highly unpredictable, the conflicts could lead to market or operational disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.
We determined the fair value of these reportable units exceeded the carrying value b y 12.0% and 384.9%, respectively, and 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 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.
The war in Ukraine and the impact of COVID-19 on the global economy including inflation and the price of raw materials, supply chain disruptions, and the volatility in interest rates including home mortgage rates are unpredictable and there may be developments outside our control requiring us to adjust our operating plan.
The conflicts in Ukraine and Gaza and their impacts on the global economy, including inflation and the price of raw materials, supply chain disruptions, and the volatility in interest rates including home mortgage rates, are unpredictable and there may be developments outside our control requiring us to adjust our operating plan.
Russia, Europe’s largest provider of natural gas, has significantly reduced the export of natural gas compared to the same time last year resulting in the increase in natural gas prices and the potential for natural gas shortages.
Russia, Europe’s largest provider of natural gas, has significantly reduced the export of natural gas compared to the beginning of the conflict resulting in the increase in natural gas prices and the potential for natural gas shortages.
The November 2022, Ducker forecast indicated that window shipments in the R&R market are expected to increase approximately 3% and 2% in the calendar-years ended 2022 and 2023, respectively, and window shipments in the new construction market are expected to decrease 4% and 13% in the calendar-years ended 2022 and 2023, respectively, resulting in overall window shipment declines of 1% in 2022 and 5% in 2023.
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.
Item 7A . Quantitative and Qualitative Disclosures About Market Risk. The following discussion of our exposure to various market risks contains “forward looking statements” regarding our estimates, assumptions and beliefs concerning our exposure.
The following discussion of our exposure to various market risks contains “forward looking statements” regarding our estimates, assumptions and beliefs concerning our exposure.
During the years ended October 31, 2022 and 2021, we repatria ted $28.9 million and $28.4 million, respectively, of foreign earnings from our international divisions. 23 Table of Contents We believe that we have sufficient funds and adequate financial resources available to meet our anticipated liquidity needs.
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.
Derived from reports published by Ducker, the overall increase in window shipments for the trailing twelve months ended September 30, 2022 was 3%. During this period, new construction activities increased 2% and R&R increased 4%.
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%.
Our selling, general and admi nistrative exp ense increased $2.0 million, or 7%, for the twelve months ended October 31, 2022 compared to the same period in 2021. The increase is primarily due to higher compensation and general expenses partially offset by foreign currency impacts year-over-year.
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 total gross deferred tax assets at October 31, 2022 and 2021 totaled $13.9 million and $13.8 million, respectively, against which we had recorded a valuation allowance of $0.5 million and $1.2 million, respectively. 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, 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.
We recorded 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%, and income tax expense of $23.1 million on pre-tax income of $80.1 million for the twelve months ended October 31, 2021, an effective rate of 28.9%.
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%.
The cost of sales increased $8.2 million, or 5%, for the twelve months ended October 31, 2022 compared to the same period in 2021. Cost of sales increased primarily due to inflation of raw materials partially offset by a decrease in volumes and foreign currency impacts. Selling, General and Administrative .
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 .
Our selling, general and administrative expense increased $1.1 million, or 5%, for the twelve months ended October 31, 2022 compared to the same period in 2021.
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.
Interest expense remained flat for the twelve months ended October 31, 2022 compared to the same period in 2021. The weighted average interest rate for borrowings outstanding for the twelve months ended October 31, 2022 was 2.16% compared with 1.42% for the twelve months ended October 31, 2021. Other, net .
The weighted average interest rate for borrowings outstanding for the twelve months ended October 31, 2023 was 6.01% compared with 2.16% for the twelve months ended October 31, 2022. Other, net . Other loss increased $6.6 million for the twelve months ended October 31, 2023 compared to the same period in 2022.
If this trend continues, this would not only negatively impact our European manufacturing facilities, this may also negatively impact our customers and their demand for our products.
If these trends continues, this would not only negatively impact our European manufacturing facilities, this may also impact our customers and their demand for our products. We continue to monitor these situations and their impact on our business.
We continue to monitor our exposure to changes in exchange rates. Comparison of the fiscal years ended October 31, 2022 and 2021 This table sets forth our consolidated results of operations for the twelve-month periods ended October 31, 2022 and 2021.
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.
The effective rate for the twelve months ended October 31, 2021 was impacted by state income taxes, global intangible low-taxed income, and changes in uncertain tax positions, partially offset by U.S. foreign tax credits. 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, 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.
This $325.0 million revolving credit facility has a five-year term, maturing on July 6, 2027, and replaces our previous credit facility we entered into on October 18, 2018.
We capitalized $1.2 million of deferred financing fees related to the Credit Facility during the year ended October 31, 2022 . This $325.0 million revolving credit facility has a five-year term, maturing on July 6, 2027, and replaces our previous credit facility we entered into on October 18, 2018.
We did not adopt any new accounting pronouncements during the twelve months ended October 31, 2022. As of October 31, 2022, we believe the impact of any recently issued standards that are not yet effective are either not applicable to us at this time or will not have a material impact on our condensed consolidated financial statements upon adoption.
As of October 31, 2023, we believe the impact of any recently issued standards that are not yet effective are either not applicable to us at this time or will not have a material impact on our condensed consolidated financial statements upon adoption. Item 7A . Quantitative and Qualitative Disclosures About Market Risk.
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.
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.
We believe we will have sufficient taxable income in the future to fully utilize our deferred tax assets recorded as of October 31, 2022, net of our valuation allowance.
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.
Depreciation and amortization expense decreased $2.5 million, or 13%, f or the twelve months ended October 31, 2022 compared to the same period in 2021 , reflecting the run-off of depreciation expense related to existing assets and disposals during the period.
Depreciation and amortization expense decreased $1.6 million, or 12%, for the twelve 22 Table of Contents months ended October 31, 2023 as compared to the same period in 2022, reflecting the run-off of depreciation expense related to existing assets.
Although we use contractual price indexing along with periodic base price increases to 27 Table of Contents minimize the effect of inflation on our results, we have not been able to fully recover all of the inflationary cost increases.
Although we use contractual price indexing along with periodic base price increases to minimize the effect of inflation on our results, we have not been able to fully recover all of the inflationary cost increases. We cannot provide assurance that our results of operations and financial position will not be materially impacted by inflation in the future.
On July 6, 2022, we entered into our Second Amended and Restated Credit Agreement (the “Credit Facility”) with Wells Fargo Securities, LLC, as Agent, Swingline Lender and Issuing Lender, and BofA Securities, Inc. serving as Syndication Agent. We capitalized $1.2 million of deferred financing fees related to the Credit Facility during the year ended October 31, 2022 .
We had $305.0 million available for use under a revolving credit facility at October 31, 2023. On July 6, 2022, we entered into our Second Amended and Restated Credit Agreement (the “Credit Facility”) with Wells Fargo Securities, LLC, as Agent, Swingline Lender and Issuing Lender, and BofA Securities, Inc. serving as Syndication Agent.
NA Cabinet Components manufactures kitchen and bathroom cabinet doors and components, amongst other products, using a variety of woods from traditional hardwoods to engineered wood products. Currently, most of the revenue in the NA Cabinet Components is earned in the U.S., so domestic housing starts and R&R activity constitute the primary drivers of this business as well.
Currently, most of the revenue in the NA Cabinet Components segment is earned in the U.S., so domestic housing starts and R&R activity constitute the primary drivers of this business as well.
The cost of sales increased $25.6 million, or 12%, for the twelve months ended October 31, 2022 compared to the same period in 2021, primarily as a result of lumber price inflation, which is recovered on a lag, partially offset by lower volumes during the period. Selling, General and Administrative .
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 .
Our selling, general and administrative expenses increased by $5.8 million, or 11%, for the twelve mont hs ended October 31, 2022 compared to the same period in 2021. This increase was due primarily to an increase in compensation expense, professional fees and general expenses year-over-year. Depreciation and Amortization.
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.
Net sales increased $10.5 million, or 4%, when comparing the twelve months ended October 31, 2022 compared to the same period in 2021 , which was primarily driven by a $47.4 million of base price increases partially offset by $22.1 million of foreign currency rate changes and a $14.8 million decrease in volumes. Cost of Sales .
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.
NA Cabinet Components For the Years Ended October 31, 2022 2021 $ Change Variance % (Dollars in thousands) Net sales $ 275,704 $ 246,075 $ 29,629 12% Cost of sales (excluding depreciation and amortization) 236,695 211,088 25,607 (12)% Selling, general and administrative 21,934 20,828 1,106 (5)% Depreciation and amortization 13,830 13,263 567 (4)% Operating income $ 3,245 $ 896 $ 2,349 262% Operating income margin 1 % — % Net Sales .
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 .
Operating Activities Operating cash flow for the year ended October 31, 2022 increased $19.4 million while cash flow for the year ended October 31, 2021 decreased by $22.2 million. The increase in operating cash flows is primarily due to higher net income year-over-year due to increased pricing offset by unfavorable changes in working capital.
Operating Activities Cash provided by operating activities increased $49.1 million for the year ended October 31, 2023 compared to the year ended October 31, 2022. The increase in operating cash flows is primarily due to favorable changes to working capital partially offset by lower net income year-over-year due to a decrease in customer demand.
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. In addition, during fiscal 2023, we do not expect to need to contribute to our pension plan to meet our minimum contribution requirements.
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.
Analysis of Cash Flow The following table summarizes our cash flow results for the years ended October 31, 2022, 2021, and 2020: Year Ended October 31, 2022 2021 2020 (In millions) Cash flows provided by operating activities $ 98.0 $ 78.6 $ 100.8 Cash flows used for investing activities $ (33.0) $ (18.7) $ (25.2) Cash flows used for financing activities $ (45.9) $ (71.9) $ (55.1) Our year-over-year cash flow analysis follows.
Analysis 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.
We cannot provide assurance, however, that our results of operations and financial position will not be materially impacted by inflation in the future. 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.
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.
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. We continue to experience some supply disruptions as high demand reduced availability of raw materials.
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.
Changes Related to Operating Income by Reportable Segment: NA Fenestration For the Years Ended October 31, 2022 2021 $ Change Variance % (Dollars in thousands) Net sales $ 687,458 $ 578,332 $ 109,126 19% Cost of sales (excluding depreciation and amortization) 537,900 450,356 87,544 (19)% Selling, general and administrative 58,735 52,959 5,776 (11)% Restructuring charges — 39 (39) 100% Depreciation and amortization 16,253 18,730 (2,477) 13% Operating income $ 74,570 $ 56,248 $ 18,322 33% Operating income margin 11 % 10 % Net Sale s .
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 .
Net sales increased $29.6 million, or 12%, for the twelve months ended October 31, 2022 compared to the same period in 2021, which was primarily driven by a $57.1 million increase in price and raw material indexes partially offset by $27.5 million decrease in volumes due to labor and material shortages throughout the supply chain. Cost of Sales .
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 .
At October 31, 2022, we had firm purchase commitments of approximately $1.7 million for the purchase or construction of capital assets. 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.
As of October 31, 2022, our liability under the supplemental benefit plan and the deferred compensation plan was approximat ely $1.9 million and $3.3 million, re spectively.
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.
Several commodities in our business are subject to pricing fluctuations, including polyvinyl resin (PVC), titanium dioxide (TiO2), petroleum products, aluminum and wood. 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.
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.
Our selling, general and administrative expenses decreased $7.7 million, or 63%, for the twelve months ended October 31, 2022 compared to the same period in 2021.
Cost of Sales. Cost of sales decreased $20.1 million, or 4%, for the twelve months ended October 31, 2023 compared to the same period in 2022.
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.
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.
Accordingly, actual funding may differ greatly from current estimates. Under U.S. GAAP, we are not required to immediately recognize the effects of a deviation between actual and assumed experience under our pension plan, or to revise our estimate as a result.
GAAP, we are not required to immediately recognize the effects of a deviation between actual and assumed experience under our pension plan, or to revise our estimate as a result. This approach allows the favorable and unfavorable effects that fall within an acceptable range to be netted and disclosed as an unrecognized gain or loss.
In November 2022, Catalina Research estimated that residential semi-custom cabinet demand in the U.S. is estimated to increase 13% in 2022 and decrease 4% in 2023. Our U.K. vinyl business (commonly referred to as “Liniar”) is largely focused on the sale of vinyl house systems under the trade name “Liniar” to smaller window manufacturers in the U.K.
Our U.K. vinyl business (commonly referred to as “Liniar”) is largely focused on the sale of vinyl house systems under the trade name “Liniar” to smaller window manufacturers in the U.K. Liniar is one of the larger providers of vinyl extruded products in the U.K. in terms of volume shipped.
EU Fenestration For the Years Ended October 31, 2022 2021 $ Change Variance % (Dollars in thousands) Net sales $ 262,058 $ 251,599 $ 10,459 4% Cost of sales (excluding depreciation and amortization) 180,268 172,033 8,235 (5)% Selling, general and administrative 31,846 29,894 1,952 (7)% Depreciation and amortization 9,674 10,373 (699) 7% Operating income $ 40,270 $ 39,299 $ 971 2% Operating income margin 15 % 16 % Net Sales .
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 .
As of October 31, 2022, we had $55.1 million of cash and cash equiv alents, $13.0 million outstanding under our credit facilities, $5.0 million of outstanding letters of credit and $19.2 million outstanding under finance leases. We had $307.0 million available for use under a revolving credit facility at October 31, 2022.
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.
We obtain market data from Catalina research, a consulting and research firm, for insight into the U.S. residential wood cabinet demand. In November 2022, the NAHB forecasted calendar-year housing starts (excluding manufactured units) to be 1.5 million, 1.4 million and 1.5 million in 2022, 2023 and 2024 calendar-years, respectively.
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 addition, Liniar services non-fenestration markets including the manufacture of roofing for conservatories, vinyl decking and vinyl water retention barriers used for landscaping. We believe there are growth opportunities within these markets in the U.K. and potential synergies which may enable us to sell complementary products.
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.
For the Years Ended October 31, 2022 2021 $ Change Variance % (Dollars in thousands) Net sales $ 1,221,502 $ 1,072,149 $ 149,353 14% Cost of sales (excluding depreciation and amortization) 953,004 831,541 121,463 (15)% Selling, general and administrative 117,108 115,967 1,141 (1)% Restructuring charges — 39 (39) 100% Depreciation and amortization 40,109 42,732 (2,623) 6% Operating income 111,281 81,870 29,411 36% Interest expense (2,559) (2,530) (29) (1)% Other, net 1,041 754 287 38% Income tax expense (21,427) (23,114) 1,687 7% Net income $ 88,336 $ 56,980 $ 31,356 55% Our year-over-year results by reportable segment follow.
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.
Net sales increased $109.1 million, or 19%, for the twelve months ended October 31, 2022 compared to the same period in 2021, which was primarily driven by an increase in price and raw material surcharges of $68.5 million and a $40.7 million increase in volumes. Cost of Sales.
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.
Liniar is one of the larger providers of vinyl extruded products in the U.K. in terms of volume shipped. Currently, the U.K. is experiencing a shortage in affordable housing, with rising demand due in part to a growing immigrant population.
Currently, the U.K. is experiencing a shortage in affordable housing, with rising demand due in part to a growing immigrant population. Liniar’s current primary customers are smaller window fabricators, as opposed to the larger OEMs that comprise a large portion of the North American market.
The increase is primarily due to an increase in general expenses year-over-year. 21 Table of Contents Unallocated Corporate & Other For the Years Ended October 31, 2022 2021 $ Change Variance % (Dollars in thousands) Net sales $ (3,718) $ (3,857) $ 139 4% Cost of sales (excluding depreciation and amortization) (1,859) (1,936) 77 (4)% Selling, general and administrative 4,593 12,286 (7,693) 63% Depreciation and amortization 352 366 (14) 4% Operating loss $ (6,804) $ (14,573) $ 7,769 53% Net Sales .
Unallocated Corporate & Other For the Years Ended October 31, 2023 2022 $ Change % Change (Dollars in thousands) Net sales $ (3,118) $ (3,718) $ 600 (16)% Cost of sales (excluding depreciation and amortization) (1,447) (1,859) 412 (22)% Selling, general and administrative 13,554 4,593 8,961 195% Depreciation and amortization 270 352 (82) (23)% Operating loss $ (15,495) $ (6,804) $ (8,691) (128)% Net Sales .
This approach allows the favorable and unfavorable effects that fall within an acceptable range to be netted and disclosed as an unrecognized gain or loss. As of October 31, 2022 and 2021, a net actuarial loss of $3.6 million an d $4.5 million, respectively, was included in our accumulated other comprehensive income.
As of October 31, 2023 27 Table of Contents and 2022, a net actuarial loss of zero an d $3.6 million, respectively, was included in our accumulated other comprehensive income. There were no net prior service costs or transition obligations for the years ended October 31, 2023 and 2022.
Financing Activities For the year end ed October 31, 2022, cash used for financing activities was $45.9 million and related primarily to net debt repayments of $26.7 million, payment of dividends of $10.6 million and share repurchases of $6.6 million.
Financing Activities Cash used for financing activities was $16.2 million for the year ended October 31, 2023 compared to the year ended October 31, 2022, which included $10.6 million of dividends paid to our shareholders, and $5.6 million related to the purchase of treasury stock.
Cost of sales increased $87.5 million, or 19%, for the twelve months ended October 31, 2022 compared to the same period in 2021. Cost of sales, including labor, increased primarily due to higher volumes during the period as well as the inflation of raw materials. 20 Table of Contents Selling, General and Administrative.
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.
The global economy remains uncertain due to global supply chain interruptions, inflationary pressures, currency devaluations, political unrest, terror threats, global pandemics such as COVID-19, and even the political landscape in the U.S. These and other macro-economic factors have impacted the global financial markets, which may have contributed to significant changes in foreign currencies.
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.
Investing Activities Cash used for investing activities for the year ended October 31, 2022 increased $14.3 million compared to the year ended October 31, 2021 due to an increase of $9.1 million in capital expenditures and a decrease of $5.2 million proceeds from the disposition of capital assets.
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.
To the extent the gain or loss on the derivative instrument offsets the gain or loss from the re-measurement of the underlying foreign currency balance, changes in exchange rates should have no effect. Commodity Price Risk We purchase PVC as the significant raw material consumed in the manufacture of vinyl extrusions.
There were no derivatives outstanding as of October 31, 2023 or 2022. 28 Table of Contents Commodity Price Risk We purchase PVC as the significant raw material consumed in the manufacture of vinyl extrusions.

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