FinanceLooker

Excrept from filing document 2024-10-31

The aggregate market value of the voting and non voting common equity held by non affiliates as of April 30 2024 computed by reference to the closing price for the Common Stock on the New York Stock Exchange Inc on that dat
Portions of the Registrant s definitive Proxy Statement for its 2025 Annual Meeting of Stockholders to be filed with the Commission within 120 days of October 31 2024 are incorporated herein by reference in Part III of this Annual Report on Form 10 K
are forward looking statements as defined under the Private Securities Litigation Reform Act of 1995 Generally the words expect believe intend estimate anticipate project will and similar expressions identify forward looking statements which generally are not historical in nature Forward looking statements are 1 all statements which address future operating performance 2 events or developments that we expect or anticipate will occur in the future including statements relating to volume sales operating income and earnings per share and 3 statements expressing general outlook about future operating results Forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our current projections or expectations As and when made we believe that these forward looking statements are reasonable However caution should be taken not to place undue reliance on any such forward looking statements since such statements speak only as of the date when made and there can be no assurance that such forward looking statements will occur We are not obligated to publicly update or revise any forward looking statements whether as a result of new information future events or otherwise Factors that could cause actual results to differ materially from those expressed or implied by the forward looking statements include but are not limited to the following
impacts from public health issues including pandemics such as the COVID 19 pandemic and quarantines on the economy demand for our products or our operations including the responses of governmental authorities to contain such public health issues
changes in availability and prices of raw material including inflationary pressures and supply chain challenges which could be exacerbated by political or global unrest such as the current military conflicts in Ukraine and Gaza
In this report we rely on and refer to information regarding industry data obtained from market research publicly available information industry publications United States government sources and other third parties Although we believe this information is reliable we cannot guarantee the accuracy or completeness of the information and have not independently verified it
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 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 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 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
Our predecessor company Quanex Corporation was organized in Michigan in 1927 as Michigan Seamless Tube Company and was later reincorporated in Delaware in 1968 In 1977 Michigan Seamless Tube Company changed its name to Quanex Corporation On December 12 2007 Quanex Building Products Corporation was incorporated as a wholly owned subsidiary in the state of Delaware in order to facilitate the separation of Quanex Corporation s vehicular products and building products businesses This separation became effective on April 23 2008 through a spin off of the building products business to Quanex Corporation s then existing shareholders Immediately following the spin off our former parent company consisting principally of the vehicular products business and all non building products related corporate accounts merged with a wholly owned subsidiary of Gerdau S A
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 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
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 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 We are able to maintain minimal levels of finished goods inventories at most locations because we typically manufacture products upon order to customer specifications We believe the primary drivers of our operating results are residential remodeling and replacement activity and new home construction in the markets we serve
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 Our international presence includes vinyl extruded lineals for large house systems to smaller individual customers as well as window and door hardware seals an
We use data related to housing starts and window shipments in the U S as published by or derived from third party sources to evaluate the fenestration market We 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
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 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
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
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
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 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
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
We believe our strengths include design expertise new technology development capability high quality manufacturing just in time delivery systems customer service and the ability to generate unique patented products
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
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 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 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 compete against a range of small and mid size metal vinyl and wood products suppliers wood molding companies and the in house operations of customers who have vertically integrated fenestration operations We also compete against insulating glass IG spacer manufacturing firms IG systems are used in numerous end markets including residential housing commercial construction appliances and transportation vehicles but we primarily serve the residential housing market Competition is largely based on regional presence custom engineering product development quality service and price 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 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
We sell our products to customers in various countries Therefore we have sales representatives whose territories essentially cover the U S Canada Europe and to a lesser extent the Middle East Latin and South America Australia New Zealand and Asia 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
Certain of our businesses or product lines are largely dependent on a relatively few large customers 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
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 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
We fund operations through a combination of available cash and cash equivalents cash flow generated from our operations and borrowings from our revolving credit facility We extend credit to our domestic customers in the ordinary course of business generally for a term of 30 days while the terms for our international customers vary from cash advances to 90 days Inventories of raw materials are carried in quantities deemed necessary to ensure a smooth production process some of which are governed by consignment agreements with suppliers We strive to maintain minimal finished goods inventories while ensuring an adequate supply on hand to service customer needs
Our federally registered trademarks or service marks include QUANEX QUANEX and design Q design TRUSEAL TECHNOLOGIES DURASEAL DURALITE SOLARGAIN ENVIROSEALED WINDOWS EDGETHERM EDGETECH ECOBLEND SUPER SPACER TSS TRUE WARM E Design QUIET EDGE HEALTH SMART WINDOWS ENERGY WISE WINDOWS DESI ROPE 360 and design INTELLICLIP SUSTAINAVIEW MIKRON MIKRONWOOD MIKRONBLEND MIKRON BLEND and design ENERGYCORE FUSION INSULATED SYSTEM AIRCELL SUPERCOAT SUPERCAP STYLELOCK STYLELOCK and design MIKRON and design HOMESHIELD HOMESHIELD and design STORM SEAL and TENON 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 Through Liniar we hold a number of registered designs patents and trademarks registered in the U K which include MODLOK LINIAR SUPER CUT ENERGY PLUS Device FLAMSTEAD HOLDINGS Device HL PLASTICS Device VINTAGE WINDOWS Device RESURGENCE FUSE ELEVATE SWITCHBOARD and various other trademarks and patents which are pending approval Generally our business does not depend on patent protection but patents obtained with regard to our vinyl extrusion products and processes fabricated metal components and IG spacer products business remain a valuable competitive advantage over other building products manufacturers We obtain patent protection for various dyes and other tooling created in connection with the production of customer specific vinyl profile designs and vinyl extrusions Our fabricated metal components business obtains patent protection for its thresholds Our window sealant business unit relies on patents to protect the design of several of its window spacer products Although we hold numerous patents the proprietary process technology that has been developed is also considered a source of competitive advantage
We are subject to extensive laws and regulations concerning worker safety the discharge of materials into the environment and the remediation of chemical contamination To satisfy such requirements we must make capital and other expenditures on an ongoing basis 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
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 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 plan to continue to focus on safety in particular as a core strategy to improve our operational efficiency and financial performance
Under applicable state and federal laws we may be responsible for among other things all or part of the costs required to remove or remediate wastes or hazardous substances at locations we or our predecessors have owned or operated From time to time we also have been alleged to be liable for all or part of the costs incurred to clean up third party sites where there might have been an alleged improper disposal of hazardous substances At present we are not involved in any such matters
From time to time we incur routine expenses and capital expenditures associated with compliance with existing environmental regulations including control of air emissions and water discharges and plant decommissioning costs 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 Based upon our experience to date we do not believe that our compliance with environmental requirements will have a material adverse effect on our operations financial condition or cash flows
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
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 We offer our employees online training courses and on the job training on job duties safety requirements and leadership skills
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 These reports are also available free of charge from the Investor Relations Section of our website at http www quanex com as soon as reasonably practicable after we file such material or furnish it to the SEC As permitted by the SEC rules we post relevant information on our website However the information contained on our website is not incorporated by reference into this Annual Report on Form 10 K and should not be considered part of this report
The following risk factors along with other information contained elsewhere in this Annual Report on Form 10 K and our other public filings with the SEC should be carefully considered before deciding to invest in our securities Additional risks and uncertainties that are not currently known to us or that we may view as immaterial could impair our business if such risks were to develop into actual events Therefore any of these risks could have a material adverse effect on our financial condition results of operations and cash flows This listing of risk factors is not all inclusive and is not necessarily presented in order of importance
The primary drivers of our business are residential remodeling replacement activities and housing starts The home building and residential construction industry is cyclical and seasonal and product demand is based on numerous factors such as interest rates general economic conditions consumer confidence and other factors beyond our control Declines in the number of housing starts and remodeling expenditures resulting from such factors could have a material adverse effect on our business results of operations and financial condition
If the availability of critical raw materials were to become scarce or if the price of these items were to increase significantly we might not be able to timely produce products for our customers or maintain our profit levels
We 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 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
We are subject to extensive federal state and local laws and regulations concerning the discharge of materials into the environment and the prevention and or remediation of chemical contamination To satisfy such requirements we must make capital and other expenditures on an ongoing basis Future expenditures relating to environmental matters will necessarily depend upon whether such regulations and future governmental decisions or interpretations of these regulations apply to us and our facilities It is likely that we will be subject to increasingly stringent environmental standards and we will incur additional expenditures to comply with such standards Furthermore if we fail to comply with applicable environmental regulations we could be subject to substantial fines or penalties and to civil and criminal liability
We evaluate our goodwill and indefinite lived intangible assets at least annually to determine whether we must test for impairment In making this assessment we must use judgment to make estimates of future operating results and appropriate residual values Actual future operating results and residual values associated with our operations could differ significantly from these estimates which may result in an impairment charge in a future period resulting in a decrease in net income from operations in the year of the impairment as well as a decline in our recorded net worth 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 rely on a combination of copyright patent trade secrets confidentiality procedures and contractual commitments to protect our proprietary information However these measures can only provide limited protection and unauthorized third parties may try to copy or reverse engineer portions of our products or may otherwise obtain and use our intellectual property If we cannot protect our proprietary information against unauthorized use we may not be able to retain a perceived competitive advantage and we may lose sales to the infringing sellers which may have a material adverse effect on our financial condition results of operations and cash flows
Our business may be materially impacted by various governmental laws regulations and initiatives that may artificially create deflate accelerate or decelerate consumer demand for our products 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 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
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 international operations require us to comply with a number of U S and international regulations including the Foreign Corrupt Practices Act FCPA and the United Kingdom Bribery Act 2010 While we have implemented appropriate training and compliance programs to prevent violations of these anti bribery regulations we cannot ensure that our policies procedures and programs will always protect us from reckless or criminal acts committed by our employees or agents Allegations of violations of applicable anti corruption laws may result in internal independent or government investigations and violations of anti corruption laws may result in severe criminal or civil sanctions or other liabilities which could have a material adverse effect on our business consolidated results of operations and financial condition
Effective internal controls are necessary for us to effectively monitor our business prevent fraud or theft remain in compliance with our credit facility covenants and provide reliable financial reports both to the public and to our lenders If we fail to maintain the adequacy of our internal controls both in accordance with current standards and as standards are modified over time we could trigger an event of default under our credit facilities or lose the confidence of the investing community both of which could result in a material adverse effect on our stock price limit our ability to borrow funds or result in the application of unfavorable commercial terms to borrowings then outstanding
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 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 In addition we may be unable to find a domestic supplier to provide the necessary raw materials on an economical basis in the amounts we require 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
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 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 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 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 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 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 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
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 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
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 This has had and may continue to have a negative impact on the energy costs of our European manufacturing facilities and may also negatively impact our customers and their demand for our products In addition one of 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 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
Our business will suffer if we are unable to adequately address potential supplier or customer pricing pressures both with respect to OEMs that have significant pricing leverage over suppliers and to large suppliers who have significant pricing leverage over their customers
Our primary customers are OEMs who have substantial leverage in setting purchasing and payment terms In addition many of our suppliers are large international conglomerates with numerous customers that are much larger than us which lessens our leverage in pricing and supply negotiations 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 However our efforts in this regard may not be successful and our operating margins could be negatively impacted
Certain of our businesses or product lines are largely dependent on a relatively few large customers 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
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 For a full discussion of the various covenants and operating requirements imposed by our revolving credit facility and information related to the potential limitations on our ability to access capital see Item 7 Management s Discussion and Analysis of Financial Conditions and Results of Operations Liquidity and Capital Resources included elsewhere in this Annual Report on Form 10 K
We cannot provide assurance that we will successfully manage or integrate acquisition targets once we have purchased them including Tyman If we acquire a business for which we do not fully understand or appreciate the specific business risks if we overvalue or fail to conduct effective due diligence on an acquisition or if we fail to effectively and efficiently integrate a business that we acquire then there could be a material adverse effect on our ability to achieve the projected growth and cash flow goals associated with the new business which could result in an overall material adverse effect on our long term profitability or revenue generation
If our information technology systems fail or if we experience an interruption in our operations due to an aging information system infrastructure then our results of operations and financial condition could be materially adversely affected
The failure of our information technology systems our inability to successfully maintain enhance and or replace our information technology systems when necessary or a significant compromise of the integrity or security of the data that is generated from our information technology systems could adversely affect our results of operations and could disrupt business and prevent or severely limit our ability to respond to data requests from our customers suppliers auditors shareholders employees or government authorities
In addition to our own sensitive and proprietary business information we collect transactional and personal information about our customers and employees Any breach including ransomware attacks or other cybersecurity breaches of our or our service providers network or other vendor systems may result in the loss of confidential business and financial data misappropriation of our consumers or employees personal information or a disruption of our business Any of these outcomes could have a material adverse effect on our business or our vendor and customer relationships and could also result in unwanted media attention reputational damage or the imposition of fines lawsuits or significant legal or remediation expenses
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
Our business could be materially and adversely affected by the occurrence of a widespread health epidemic or pandemic 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 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
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 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 We could also be forced to pay higher prices for the supplies we purchase which could negatively impact our results of operations and profitability
We operate in some rural areas and small towns where the competition for labor can be fierce and where the pool of qualified employees may be very small If we are unable to obtain or retain skilled workers and adequately trained professionals to conduct our business we may not be able to manage our business to the necessary high standards In addition we may be forced to pay higher wages or offer other benefits that might impact our cost of labor and thereby negatively impact our profitability
An interruption in production capabilities at any of our facilities due to equipment failure catastrophic loss or other reasons could result in our inability to manufacture products which could severely affect delivery times return or cancellation rates and future sales any of which could result in lower sales and earnings or the loss of customers Although we have a disaster recovery plan in place we currently have one plant which is the sole source for our insulating glass spacer business in the U S If that plant were to experience a catastrophic loss and our disaster recovery plan were to fail it could have a material adverse effect on our results of operations or financial condition
Product liability claims and product replacements could harm our reputation revenue generation and financial condition or could result in costs related to litigation warranty claims or customer accommodations
We have on occasion found flaws and deficiencies in the manufacturing design testing or installation of our products which may result from a product defect a defect in a component part provided by our suppliers or as a result of the product being installed incorrectly by our customer or an end user The failure of products before or after installation could result in litigation or claims by our customers or other users of the products or in the expenditure of costs related to warranty coverage claim settlement litigation or customer accommodation In addition we are currently party to certain legal claims related to a commercial sealant product and there is no assurance that we will prevail on those claims We may be required to expend legal fees expert costs and other costs associated with defending the claims and or lawsuits We may elect to enter into legal settlements or be forced to pay any judgments that result from an adverse court decision Any such settlements judgments fees and or costs could negatively impact our profitability results of operations cash flows and financial condition
While we maintain a robust insurance program that is reasonably designed to cover our known and unknown risks there is no assurance that our insurance carriers will voluntarily agree to cover every potential liability or that our insurance policies include limits high enough to cover all liabilities associated with our business or products In addition coverage under our insurance policies may be unavailable in the future for certain products For example during a prior renewal of our insurance program our insurance carriers excluded future coverage of a product line we no longer manufacture or sell 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
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 Ongoing climate change has increased the frequency and severity of these events and the related risk of a catastrophic weather event affecting one of our plants or a plant owned by one of our customers or suppliers If such an event occurs at a facility belonging to one of our customers we could see reduced demand for our products If such an event occurs at a facility belonging to us or one of our suppliers we may be unable to timely and cost effectively manufacture products for our customers These declines in demand or impacts to our ability to manufacture our products could negatively impact our revenues earnings cash flow and other operating results
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 We consider the United States to be our most significant jurisdiction however all tax returns are subject to routine compliance review by the taxing authorities in the jurisdictions in which we file tax returns in the ordinary course of business We make judgments regarding the utilization of existing deferred tax assets and the potential tax effects of various financial transactions and results of operations to estimate our obligations to taxing authorities Tax obligations include income franchise real estate sales and use and employment related taxes These judgments include reserves for potential adverse outcomes regarding tax positions that have been taken 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
Our corporate governance documents and the provisions of Delaware law may delay or preclude a business acquisition or divestiture that stockholders may consider to be favorable which might result in a decrease in the value of our common shares
Our certificate of incorporation and bylaws and Delaware law contain provisions that could make it more difficult for a third party to acquire us without the consent of our Board of Directors These provisions include restrictions on the ability of our stockholders to remove directors and supermajority voting requirements for stockholders to amend our organizational documents and limitations on action by our stockholders by written consent In addition our Board of Directors has the right to issue preferred stock without stockholder approval which could be used to dilute the stock ownership of a potential hostile acquirer 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
We are authorized to issue without stockholder approval 1 000 000 shares of preferred stock no par value in one or more series which may give other stockholders dividend conversion voting and liquidation rights among other rights which may be superior to the rights of holders of our common stock The issuance of additional equity securities or securities convertible into equity securities would result in dilution of existing stockholders equity interests Our Board of Directors has no present intention to issue any such preferred shares but has the right to do so in the future 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
The Company s information technology systems as well as those of the Company s third party service providers are subject to cybersecurity threats Significant cybersecurity threats including intrusions into compromises of or disruptions in the information technology systems of the Company or its third party service providers could adversely affect the Company s financial condition and results of operations The Company maintains and updates its information technology systems to mitigate the risk of cybersecurity threats
The Board of Directors have oversight responsibility for the Company s cybersecurity risks While the Company s employees play a key role in cybersecurity the Company s Chief Information Officer General Counsel and other members of management have shared responsibility for assessing and managing the Company s cybersecurity risks The Company s management has sufficient knowledge experience and expertise for assessing and managing the Company s cybersecurity risks The Board of Directors and Audit Committee receive updates from management regarding cybersecurity risks cybersecurity threats that could impact the Company and cybersecurity initiatives to enhance the Company s cybersecurity practices The Audit Committee also receives updates on the results of assessments and audits of the Company s information technology systems and controls
The Company has information technology security practices to protect its information technology systems and data and to monitor for potential cybersecurity threats These practices are integrated into the Company s risk management framework and include
Additionally the Company assesses and manages cybersecurity threats associated with its third party service providers information technology systems that could compromise the Company s information security or data Identified cybersecurity threats are communicated to management for review response and mitigation as appropriate
The Company assesses cybersecurity risks and changes in the cyber environment and adjusts its practices as deemed appropriate To date we have not identified risks from known cybersecurity threats including as a result of any prior cybersecurity incidents that have materially affected or are reasonably likely to materially affect us including our operations business strategy results of operations or financial condition Refer to
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
We 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
From time to time we along with our subsidiaries are involved in various litigation matters arising in the ordinary course of our business including those arising from or related to contractual matters commercial disputes intellectual property personal injury environmental matters product performance or warranties product liability insurance coverage and personnel and employment disputes
We regularly review with legal counsel the status of all ongoing proceedings and we maintain insurance against these risks to the extent deemed prudent by our management and to the extent such insurance is available However there is no assurance that we will prevail in these matters or that our insurers will accept full coverage of these matters and we could in the future incur judgments enter into settlements of claims or revise our expectations regarding the outcome or insurability of matters we face which could materially impact our results of operations
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 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 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
We 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
Our common stock has been listed on the New York Stock Exchange under the ticker symbol NX since April 24 2008 Electronic copies of our public filings are available on the Securities and Exchange Commission s website www sec gov There were appro
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 The number of securities reflected in this column includes the maximum number of shares that would be issued pursuant to these performance restricted stock units assuming the performance measures are achieved The performance measures may not be achieved
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
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 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 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 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 The new program does not have an expiration date or a limit on the number of shares that may be purchased
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 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 Foster Company Masonite International Corporation Mueller Water Products Inc PGT Innovations Inc Simpson Manufacturing Company Inc Tredegar Corporation and Trex Company Inc
The following discussion and analysis contains forward looking statements based on our current assumptions expectations estimates and projections about our business and the homebuilding industry and therefore it should be read in conjunction with our consolidated financial statements and related notes thereto as well as our
elsewhere within this Annual Report on Form 10 K For a listing of potential risks and uncertainties which impact our business and industry see Item 1A Risk Factors Actual results could differ from our expectations due to several factors which include but are not limited to the impact of market price and demand for our products economic and competitive conditions capital expenditures new technology regulatory changes and other uncertainties Unless otherwise required by law we undertake no obligation to publicly update any forward looking statements even if new information becomes available or other events occur in the future
We currently manufacture components for original equipment manufacturers 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 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 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 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
We continue to invest in organic growth initiatives and we intend to continue evaluating business acquisitions that allow us to expand our existing fenestration and cabinet component footprint enhance our product offerings provide new complementary technology enhance our leadership position within the markets we serve and expand into new markets or service lines We have disposed of non core businesses in the past and continue to evaluate our business portfolio to ensure that we are investing in markets where we believe there is potential future growth
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 maintain a grouping called Unallocated Corporate Other which includes transaction expenses stock based compensation long term incentive awards based on the performance of our common stock and other factors certain severance and legal costs not deemed to be allocable to all segments depreciation of corporate assets interest expense other net income taxes and inter segment eliminations and executive incentive compensation and medical expense fluctuations relative to planned costs as determined during the annual planning process 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 Corporate general and administrative expenses allocated during the years ended October 31 2024 2023 and 2022 were 27 3 million 23 5 million and 24 5 million respectively
On August 1 2024 we completed the acquisition of Tyman plc the Tyman Acquisition a company incorporated in England and Wales Tyman The aggregate consideration due pursuant to the Tyman Acquisition at closing comprised of 14 139 477 newly issued Quanex common shares New Quanex Shares and cash consideration of approximately 504 1 million being the Pound Sterling amount of cash consideration of 392 2 million in respect of all of the Tyman Shares converted to U S Dollars at an exchange rate of 1 2855 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 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
MI is allocated entirely to our North American Fenestration reportable operating segment As consideration for the Purchased Assets we paid 91 3 million in cash utilizing funds borrowed under our Credit Facility 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
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 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 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 addition one of 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 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
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
We believe the primary drivers of our operating results continue to be North American residential remodeling and replacement R R and new home construction activity We believe that housing starts and window shipments are indicators of activity levels in the homebuilding and window industries and we use this data as published by or derived from third party sources to evaluate the market 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
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 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 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
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 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 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
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 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 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 Approximately 60 of revenue is earned in the U S so domestic housing starts and R R activity also constitute the primary drivers of this business as well as commercial building starts being the main driver of the access solutions business Sales in the U S are predominantly to large OEMs as well as through distributors Approximately 15 of Tyman s revenue is earned in the U K with the majority being derived from R R activity We have historically evaluated the U K market using data from the Construction Products Association CPA U K customers are smaller window and door manufacturers and distributors The remainder of revenue is earned in Canada Italy and Continental Europe with sales and marketing efforts in other countries internationally The drivers of these businesses are largely housing starts and R R activity in these countries
Our business is seasonal particularly our fenestration business as inclement weather during the winter months tends to slow down construction particularly as related to outside of the house construction To some extent we believe our kitchen and bathroom cabinet door business lessens the impact of seasonality on our operating results as the cabinet business is inside of the house and less susceptible to weather
We are impacted by regulation of energy standards 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
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 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 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 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 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
Our year over year results by reportable segment follow 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
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
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 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
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
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
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
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
The Tyman reportable segment is comprised solely of the business acquired on August 1 2024 The results for the period ended August 1 2024 through October 31 2024 are summarized in the following table including the effect of the amortization of the step up of inventory of approximately 28 5 million and accounts receivable of approximately 0 6 million and 10 4 million of transaction fees incurred to support the acquisition during the twelve months ended October 31 2024
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
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 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 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
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 We had 245 5 million available for use under a revolving credit facility at October 31 2024
On June 12 2024 in connection with the Tyman Acquisition the Company Wells Fargo Bank National Association Wells Fargo Bank acting as agent swingline lender and issuing lender the Agent the other entities therein specified in the capacities therein specified and the lenders parties thereto entered into an amendment to the Second Amended and Restated Credit Agreement dated as of July 6 2022 the Existing Credit Agreement and the Existing Credit Agreement as so amended the Amended Credit Agreement The Amended Credit Agreement did not become effective until August 1 2024 upon the completion of the Tyman Acquisition
The Amended Credit Agreement i increased the senior secured revolving credit facility to an aggregate principal amount of 475 million the Revolving Credit Facility and ii provides for a senior secured term loan A facility in an aggregate principal amount of 500 million the Term A Facility and together with the Revolving Credit Facility the Facilities The Revolving Credit Facility included alternative currency letter of credit and swing line sub facilities of 100 million 30 million and 15 million respectively We capitalized 13 8 million of deferred financing fees related to the Amended Credit Agreement The maturity date of the Facilities will be five years after the acquisition effective date maturing on August 1 2029
The Term A Facility amortizes on a quarterly basis at 5 per annum of the original principal amount of the Term A Facility with the remainder due at maturity The Term A Facility must be prepaid with 100 of the net cash proceeds of the issuance or incurrence of debt and 100 of the net cash proceeds of all asset sales insurance and condemnation recoveries and other asset dispositions
Borrowings under the Facilities bear interest at our option at 1 the Base Rate plus an applicable margin or 2 Adjusted Term SOFR plus an applicable margin The applicable margin will range from 1 0 to 1 75 for Base Rate loans and 2 0 to 2 75 for Adjusted Term SOFR loans In addition we are subject to commitment fees for the unused portion of the Revolving Credit Facility
and 6 01 respectively We were in compliance with our debt covenants as of October 31 2024 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 We believe our business model our current cash reserves and the recent steps we have taken to strengthen our balance sheet leave us well positioned to manage our business and remain in compliance with our debt covenants
A portion of this decrease is attributable to the activities of Tyman which was acquired on August 1 2024 Excluding this acquisition improvements in working capital partially offset lower sales due to a reduction in demand
At October 31 2024 we had firm purchase commitments of approximately 2 5 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
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 During the years ended October 31 2024 and 2023 we acquired Tyman and LMI respectively
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 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
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 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 maintain our 475 million Revolving Credit Facility and 500 million Term A Facility with Wells Fargo Bank acting as agent swingline lender and issuing lender The Revolving Credit Facility includes alternative currency letter of credit and swing line sub facilities of 100 million 30 million and 15 million respectively The maturity date of the Facilities will be five years after the acquisition effective date maturing on August 1 2029
The Term A Facility amortizes on a quarterly basis at 5 per annum of the original principal amount of the Term A Facility with the remainder due at maturity The Term A Facility must be prepaid with 100 of the net cash proceeds of the issuance or incurrence of debt and 100 of the net cash proceeds of all asset sales insurance and condemnation recoveries and other asset dispositions
Borrowings under the Facilities bear interest at our option at 1 the Base Rate plus an applicable margin or 2 Adjusted Term SOFR plus an applicable margin The applicable margin will range from 1 0 to 1 75 for Base Rate loans and 2 0 to 2 75 for Adjusted Term SOFR loans 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 We can also borrow up to the lesser of 15 0 million or the revolving credit commitment as defined under a Swingline feature of 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
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 Some of these limitations however do not take effect so long as Consolidated Net Leverage Ratio is less than or equal to 2 75 to 1 00 and available liquidity exceeds 25 0 million Substantially all of our domestic assets with the exception of real property are pledged as collateral for the Credit Facility
The preparation of our financial statements in accordance with accounting principles generally accepted in the United States of America U S GAAP requires us to make estimates and assumptions that affect the reported amount of assets liabilities revenues and expenses and related disclosures of contingent assets and liabilities Estimates and assumptions about future events and their effects cannot be perceived with certainty Estimates may change as new events occur as more experience is acquired as additional information becomes available and as our operating environment changes We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances and that we believe provide a basis for making judgments about the carrying value of assets and liabilities that are not readily available through open market quotes We must use our judgment with regard to uncertainties in order to make these estimates Actual results could differ from these estimates
We believe the following are the most critical accounting policies used in the preparation of our consolidated financial statements as well as the significant judgments and uncertainties affecting the application of these policies 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
We apply the acquisition method of accounting for business combinations in accordance with U S GAAP which requires us to make use of estimates and judgements to allocate the purchase price paid for acquisitions to the fair value of the net assets and liabilities acquired We use established valuation techniques and engage reputable valuation specialists to assist us with these valuations However there is a risk that we may not identify all pre acquisition contingencies or that our estimates may not reflect the actual results when realized We use a a reasonable measurement period to record any adjustment related to the opening balance sheet generally less than one year After the measurement period changes to the opening balance sheet can result in the recognition of income or expense as period costs If our purchase accounting estimates are not correct or if we do not recognize contingent liabilities within the measurement period we may incur losses
We make judgments and estimates in conjunction with the carrying value of our long term assets including property plant and equipment and identifiable intangibles These judgments may include the basis for capitalization depreciation and amortization methods and the useful lives of the underlying assets In accordance with U S GAAP we review the carrying values of these assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable We determine that the carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset If the carrying value exceeds the sum of the undiscounted cash flows and after considering alternate uses for the asset an impairment charge would be recorded in the period in which such review is performed We measure the impairment loss as the amount by which the carrying amount of the long lived asset exceeds its fair value Fair value is determined by reference to quoted market prices in active markets if available or by calculating the discounted cash flows associated with the use and eventual disposition of the asset Therefore if there are indicators of impairment we are required to make long term forecasts of our future revenues and costs related to the assets subject to review Forecasts require assumptions about demand for our products and future market conditions Although there may be no indicators of impairment in the current period unanticipated changes to assumptions or circumstances in future periods could result in an impairment charge in the period of the cha
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 Events and changes in circumstances that may cause a triggering event and necessitate such a review include but are not limited to a decrease in sales for certain customers improvements or changes in technology and or a decision to phase out a trademark or trade name Such events could negatively impact the carrying value of our identifiable intangibles It is possible that changes in such circumstances or in the numerous variables associated with the judgments assumptions and estimates made by us in assessing the appropriate valuation of our identifiable intangibles could require us to further write down a portion of our identifiable intangibles and record related non cash impairment charges in the future We apply a variety of techniques to establish the carrying value of our intangible assets including the relief from royalty and excess current year earnings methods
We use the acquisition method to account for business combinations and to the extent that the purchase price exceeds the fair value of the net assets acquired we record goodwill In accordance with U S GAAP we are required to evaluate our goodwill at least annually We perform our annual goodwill assessment as of August 31 or more frequently if indicators of impairment exist Qualitative factors that indicate impairment could include but are not limited to i macroeconomic conditions ii industry and market considerations iii cost factors iv overall financial performance of the reporting unit and v other relevant entity specific events The first step in our annual goodwill assessment is to perform the optional qualitative assessment allowed by ASC Topic 350 Intangibles Goodwill and Other ASC 350 In our qualitative assessment we evaluate relevant events or circumstances to determine whether it is more likely than not i e greater than 50 that the fair value of a reporting unit is less than its carrying amount If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount ASC 350 requires us to compare the fair value of such reporting unit to its carrying value including goodwill To determine the fair value of our reporting units we use multiple valuation techniques including a discounted cash flow analysis using the applicable weighted average cost of capital in combination with a market approach that uses market multiples and a selection of guideline public companies This test requires us to make assumptions about the future growth of our business and the market in general as well as other variables such as the level of investment in capital expenditure growth in working capital requirements and the terminal or residual value of our reporting units beyond the periods of estimated annual cash flows We use a third party valuation firm to assist us with this analysis If the fair value of each reporting unit exceeds its carrying value no action is required Otherwise an impairment loss is recorded to the extent that the carrying amount of the reporting unit including goodwill exceeds the fair value of that reporting unit 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
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 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 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 We determined the fair value of this reportable unit exceeded the carrying value by 20 5 and concluded that no impairment was necessary
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 We recognize the effect of a change in tax rates in the period of the change We record the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and the amounts reported in our consolidated balance sheets as well as net operating losses and tax credit carry forward We evaluate the carrying value of our net deferred tax assets and determine if our business will generate sufficient future taxable income to realize the net deferred tax assets We perform this review for recoverability on a jurisdictional basis whereby we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets The weight given to the positive and negative evidence is commensurate with the extent to which the evidence can be objectively verified 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 The company classifies interest on income tax as income tax expense and classifies penalties on income tax as other expenses In the event that our estimates and assumptions indicate we will not generate sufficient future taxable income to realize our deferred t
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 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 There is a risk that our estimates related to the future use of loss carry forwards and our ability to realize our deferred tax assets may not come to fruition and that the results could materially impact our financial position and results of operations 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 record inventory at the lower of cost or net realizable value Inventories are valued using the first in first out FIFO method 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 Significant unanticipated changes to our forecasts or changes in the net realizable value of our inventory would require a change in the pr
We have historically sponsored a defined benefit pension plan On January 1 2020 we enacted changes to our pension plan whereby the benefits for all participants were frozen and thereafter those participants will receive increased benefits in the company sponsored defined contribution plan in lieu of participation in a defined benefit plan 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 During the year ended October 31 2024 we received a 0 9 million settlement reimbursement related to the 2023 contribution
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 do not have any off balance sheet arrangements as such term is defined in the rules promulgated by the SEC that we believe would be material to investors and for which it is reasonably likely to have a current or future effect on our financial condition results of operations liquidity capital expenditures or capital resources
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 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
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 November 2023 the FASB issued Segment Reporting Topic 280 Improvements to Reportable Segment Disclosures which is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses The guidance is effective for fiscal years beginning after December 15 2023 and interim periods within fiscal years beginning after December 15 2024 with early adoption is permitted The guidance is to be applied retrospectively to all prior periods presented in the financial statements We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures
In December 2023 the FASB issued Income Taxes Topic 740 Improvements to Income Tax Disclosures which includes updates to the income tax disclosures related to the rate reconciliation and disaggregation of income taxes paid by jurisdiction The amendments are effective for fiscal years beginning after December 15 2024 with early adoption permitted The amendments should be applied prospectively however retrospective application is permitted We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures
The following discussion of our exposure to various market risks contains forward looking statements regarding our estimates assumptions and beliefs concerning our exposure Although we believe these estimates and assumptions are reasonable in light of information currently available to us we cannot provide assurance that these estimates will not materially differ from actual results due to the inherent unpredictability of interest rates foreign currency rates and commodity prices as well as other factors We do not use derivative financial instruments for speculative or trading purposes
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 This sensitivity pertains primarily to our outstanding revolving credit facility borrowings outstanding under the Credit Facility as of October 31 2024
Our international operations have exposure to foreign currency rate risks primarily due to fluctuations in the Euro and the British Pound Sterling From time to time we enter into foreign exchange contracts associated with our operations to manage a portion of the foreign currency rate risk Our outstanding forward foreign exchange contracts have a notional principal amount of 18 6 million at October 31 2024 Hedge accounting is not applied to our foreign exchange contracts During the year ended October 31 2024 and 2023 we recognized a loss of 0 3 million and zero respectively related to our forward foreign exchange contracts The value of our forward foreign exchange contracts fluctuates based on exchange rate fluctuations against the USD and GBP
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 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
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 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 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 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 For those customers not covered by contractual mechanisms we have successfully implemented surcharges and general price increases to share the impact of price changes with our customers Like our other businesses there is exposure to short term volatility due to a lag in the timing of implementing price increases
We have begun implementing additional programs for other raw materials to facilitate more accurate pricing and reduce our exposure to changing material costs when necessary however these are also subject to timing lags 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
We have audited the accompanying consolidated balance sheets of Quanex Building Products Corporation a Delaware corporation and subsidiaries the Company as of October 31 2024 and 2023 the related consolidated statements of income comprehensive income stockholders equity and cash flows for each of the three years in the period ended October 31 2024 and the related notes collectively referred to as the financial statements In our opinion the financial statements present fairly in all material respects the financial position of the Company as of October 31 2024 and 2023 and the results of its operations and its cash flows for each of the three years in the period ended October 31 2024 in conformity with accounting principles generally accepted in the United States of America
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the Company s internal control over financial reporting as of October 31 2024 based on criteria established in the 2013
These financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on the Company s financial statements based on our audits We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud Our audits included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that 1 relates to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments The communication of the critical audit matter does not alter in any way our opinion on the financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates
As described in Note 1 to the financial statements the Company performs its annual goodwill impairment test as of August 31 The Company performed a quantitative assessment of the reporting unit included in the North American Cabinet Components operating segment primarily due to the history of a narrow margin of fair value over carrying value in the quantitative assessments performed in prior years We identified the estimation of the fair value of this reporting unit as a critical audit matter
The principal considerations for our determination that the estimation of the fair value of this reporting unit is a critical audit matter relates to the use of the income approach which is one method management uses to estimate the fair value of the reporting unit Auditing the fair value of the reporting unit involved a high degree of auditor judgment subjectivity and audit effort in evaluating management s significant assumptions used in the income approach including future cash flows related to the reporting unit and the weighted average cost of capital WACC In addition the audit effort involved the use of valuation specialists to assist in performing these procedures and evaluating the audit evidence obtained
We tested the effectiveness of controls over goodwill impairment including those over the determination of fair value including controls relating to management s development of forecasts of future revenues earnings cash flows and WACC
We evaluated the reasonableness of management s forecasts of revenues earnings and cash flows by comparing the forecasts to historical revenues earnings and cash flows current budgets our understanding of the current business strategy communications to the Board of Directors press releases and industry reports
We utilized our valuation specialists to evaluate the reasonableness of the WACC used by management including the testing of underlying source information and developing a range of independent estimates and comparing those to the rate selected by management
We have audited the internal control over financial reporting of Quanex Building Products Corporation a Delaware corporation and subsidiaries the Company as of October 31 2024 based on criteria established in the 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission COSO In our opinion because of the effect of the material weakness described in the following paragraphs on the achievement of the objectives of the control criteria the Company has not maintained effective internal control over financial reporting as of October 31 2024 based on criteria established in the 2013 Internal Control Integrated Framework issued by COSO
A material weakness is a deficiency or combination of control deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company s annual or interim financial statements will not be prevented or detected on a timely basis The following material weakness has been identified and included in management s assessment
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the consolidated financial statements of the Company as of and for the year ended October 31 2024 The material weakness identified above was considered in determining the nature timing and extent of audit tests applied in our audit of the 2024 consolidated financial statements and this report does not affect our report dated December 16 2024 which expressed an unqualified opinion on those financial statements
The Company s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Annual Report on Internal Control Over Financial Reporting Our responsibility is to express an opinion on the Company s internal control over financial reporting based on our audit We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audit in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects Our audit included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists testing and evaluating the design and operating effectiveness of internal control based on the assessed risk and performing such other procedures as we considered necessary in the circumstances We believe that our audit provides a reasonable basis for our opinion
Our audit of and opinion on the Company s internal control over financial reporting does not include the internal control over financial reporting of Tyman plc a wholly owned subsidiary whose financial statements reflect total assets and revenues constituting 54 and 16 respectively of the related consolidated financial statement amounts as of and for the year ended October 31 2024 As indicated in Management s Annual Report on Internal Control Over Financial Reporting Tyman plc was acquired on August 1 2024 Managements assertion on the effectiveness of the Company s internal control over financial reporting excluded internal controls over financial reporting of Tyman plc
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
Management of the Company including the Chief Executive Officer and Chief Financial Officer is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a 15 f under the Securities Exchange Act of 1934 as amended The Company s internal control system was designed to provide reasonable assurance to management and the Company s Board of Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles
All internal control systems no matter how well designed have inherent limitations A system of internal control may become inadequate over time because of changes in conditions or deterioration in the degree of compliance with the policies or procedures Therefore even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation
As permitted under the SEC rules we have elected to exclude Tyman plc from management s assessment of effectiveness of internal controls as of October 31 2024 Prior to acquisition by us on August 1 2024 Tyman plc was listed publicly on the London Stock Exchange which reported financial results pursuant to International Financial Reporting Standards and therefore had no requirement to comply with the Sarbanes Oxley Act of 2002 We are evaluating internal control procedures and expect to implement changes in internal control over financial reporting to fully comply with the Sarbanes Oxley Act of 2002 during fiscal 2025
Management assessed the effectiveness of the Company s internal control over financial reporting as of October 31 2024 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control Integrated Framework 2013 Based on this assessment management identified a material weakness in the Company s internal control over financial reporting related to related to the design and operation of controls over the Company s preparation and review of the statement of cash flows
A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company s annual or interim financial statements will not be prevented or detected on a timely basis As a result of the identified material weakness management has concluded that the Company s internal control over financial reporting was not effective as of October 31 2024 We are actively implementing remedial measures to address the identified material weakness We expect the remediation of this material weakness to be completed prior to the end of fiscal year 2025
Quanex Building Products Corporation is a component supplier to original equipment manufacturers OEMs in the building products industry 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 4 window and door hardware and 5 precision formed metal and wood products We also manufacture cabinet doors and other components for OEMs in the kitchen and bathroom cabinet industry In addition we provide certain other non fenestration components and products which include custom mixing solar panel sealants trim moldings vinyl decking water retention barriers conservatory roof components and commercial access solutions We have organized our business into four reportable business segments 1 North American Fenestration NA Fenestration 2 European Fenestration EU Fenestration 3 North American Cabinet Components NA Cabinet Components and 4 Tyman which was acquired on August 1 2024 For additional discussion of our reportable business segments see Note 17 Segment Information We use low cost production processes and engineering expertise to provide our customers with specialized products for their specific window door and cabinet applications We believe these capabilities provide us with unique competitive advantages 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 locations in the U K Germany Mexico Canada and Italy as well as through sales and marketing efforts in other countries
Our consolidated financial statements have been prepared by us in accordance with accounting principles generally accepted in the United States of America U S GAAP We consolidate our wholly owned subsidiaries and eliminate intercompany sales and transactions We have no cost or equity investments in companies that are not wholl
In preparing financial statements we make informed judgments and estimates that affect the reported amounts of assets and liabilities as of the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting period We review our estimates on an ongoing basis including those related to impairment of long lived assets and goodwill pension and retirement liabilities contingencies and income taxes Changes in facts and circumstances may result in revised estimates and actual results may differ from these estimates
We recognize revenue that reflects the consideration we expect to receive for product sales upon transfer to customers Revenue for product sales is recognized when control of the promised products is transferred to our customers and we are entitled to consideration in exchange for such transfer We account for a contract when a customer provides us with a firm purchase order that identifies the products to be provided the payment terms for those products and when collectability of the consideration due is reasonably assured
A performance obligation is a promise to provide the customer with a good or service Our performance obligations include product sales with each product included in a customer contract being recognized as a separate performance obligation For contracts with multiple performance obligations the standalone selling price of each product is generally readily observable
Revenue from product sales is recognized at a point in time when the product is transferred to the customer in accordance with the shipping terms which is generally upon shipment We estimate a provision for sales returns and warranty allowances to acc
We generally expense incremental costs of obtaining a contract when incurred because the amortization period would be less than one year Additionally we do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less
We account for shipping and handling services as fulfillment services accordingly freight revenue is combined with the product deliverable rather than being accounted for as a distinct performance obligation within the terms of the agreement Shipping and handling costs incurred by us for the delivery of goods to customers are considered a cost to fulfill the contract and are included in cost of sales in the accompanying consolidated statements of income
We produce a wide variety of products that are used in the fenestration industry including insulating glass spacer systems extruded vinyl products metal fabricated products and astragals thresholds and screens In addition we produce certain non fenestration products including kitchen and bath cabinet door and components flooring and trim moldings solar edge tape plastic decking fencing water retention barriers conservatory roof components commercial building starts to evaluate the commercial access market and other products
The following table summarizes our product sales for the three years ended October 31 2024 2023 and 2022 into groupings by segment which we believe depicts how the nature amount timing and uncertainty of our revenues and cash flows are affected by economic factors For further details regarding our results by segment refer to Note 17 Segment Information
be short term investments Restricted cash is cash held in a foreign subsidiary that is not available for use as a result of exchange control restrictions We maintain cash cash equivalents and restricted cash at several financial institutions which at times may not be federally insured or may exceed federally insured limits We have not experienced any losses in such accounts and believe we are not exposed to any significant credit risks on such accounts
Certain of our businesses or product lines are largely dependent on a relatively few large customers Although we believe we have an extensive customer base the loss of one of these large customers or if such customers were to incur a prolonged period of decline in business our financial condition and results of operations could be adversely affected For the years ended October 31 2024 2023 and 2022 one customer provided more than 10 of our consolidated net sales and accounts receivable
d an allowance for credit losses to estimate the risk of loss associated with our accounts receivable balances Our policy for determining the allowance is based on factors that affect collectability including a historical trends of write offs recoveries and credit losses b the credit quality of our customers and c projected economic and market conditions We believe our allowance is adequate to absorb any known or probable lo
We apply the acquisition method of accounting for business combinations which requires us to make use of estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the assets and liabilities acquired We account for contingent assets and liabilities at fair value on the acquisition date and record changes to fair value associated with these asse
ts and liabilities as a period cost as incurred We use established valuation techniques and engage reputable valuation specialists to assist us with these valuations However there is a risk that we may not identify all pre acquisition contingencies or that our estimates may not reflect the actual results when realized We use a reasonable measurement period to record any adjustment related to the opening balance sheet generally less than one year After the measurement period changes to the opening balance sheet can result in the recognition of income or expense as period costs To the extent these items stem from contingencies that existed at the balance sheet date but are contingent upon the realization of future events the cost is charged to expense at the time the future event becomes known
We record inventory at the lower of cost or net realizable value Inventories are valued using the first in first out FIFO method Fixed costs related to excess manufacturing capacity are evaluated and expensed in the period to ensure that inventory is properly capitalized Inventory quantities are regularly reviewed and provisions for excess or obsolete inventory are recorded primarily based on our forecast of future demand and our estimates regarding current and future market conditions Significant unanticipated variances to our forecasts could require a change in the provision for excess or obsolete inventory resulting in a charge to net income during the period of the change
We make judgments and estimates related to the carrying value of property plant and equipment intangible assets with defined lives and long lived assets which include determining when to capitalize costs the depreciation and amortization methods to use and the useful lives of these assets We evaluate these assets for impairment when there are indicators that the carrying values of these assets might not be recoverable Such indicators of impairment may include changes in technology significant market fluctuations historical losses or loss of a significant customer or other changes in circumstance that could affect the assets ability to generate future cash flows When we evaluate these assets for impairment we compare the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset to its carrying value If the carrying value exceeds the sum of the undiscounted cash flows and there is no alternative use for the asset we determine that the asset is impaired To measure the impairment charge we compare the carrying amount of the long lived asset to its fair value as determined by quoted market prices in active markets if available or by discounting the projected future cash flows This calculation of fair value requires us to develop and employ long term forecasts of future operating results related to these assets These forecasts are based on assumptions about demand for our products and future market conditions Future events and unanticipated changes to these assumptions could require a provision for impairment resulting in a charge to net income during the period of the change
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 intangible assets with finite lives Events and changes in circumstance that may cause a triggering event and necessitate such a review include but are not limited to a decrease in sales for certain customers improvements or changes in technology and or a decision to discontinue the use of a trademark or trade name or to allow a patent to lapse Such events could negatively impact the fair value of our identifiable intangible assets In such circumstances we may evaluate the underlying assumptions and estimates made by us in order to assess the appropriate valuation of these identifiable intangible assets and compare to the carrying value of the assets We may be required to write down these identifiable intangible assets and record a non cash impairment charge When we originally value our intangible assets we use a variety of techniques to establish the carrying value of the assets including the relief from royalty method excess current year earnings method and income method
During the year ended October 31 2022 our North American vinyl extrusion operations in our NA Fenestration segment experienced lower than expected operating results due to the continued impact of inflation and historical customer contracts which prevent us from passing on the full impact of higher costs to our customers We determined that this condition was an indicator of a triggering event which necessitated an evaluation of certain long term assets used in this business for potential impairment We compared the projected undiscounted cash flows we expected to realize associated with these assets over the remaining useful lives of the primary operating assets to the net book value of the long term assets and determined that these
There were no other indicators of triggering events noted for any period in the years ended October 31 2024 and 2023 Therefore we did not record an impairment charge related to property plant and equipment or intangible assets with defined lives during the years ended October 31 2024 2023 and 2022
Software development costs including costs incurred to purchase third party software are capitalized when we have determined that the technology is capable of meeting our performance requirements and we have authorized funding for the project We cease capitalization of software costs when the software is substantially complete and is ready for its intended use The software is then amortized over its estimated useful life When events or circumstances indicate the carrying value of internal use software might not be recoverable we assess the recoverability of these assets by comparing the carrying value of the asset to the undiscounted future cash flows expected to be generated from the asset s use consistent with the methodology to test other property plant and equipment for impairment
Property plant and equipment is stated at cost and is depreciated using the straight line method over the estimated useful lives of the assets We capitalize betterments which extend the useful lives or significantly improve the operational efficiency of assets We expense repair and maintenance costs as incurred
We use the acquisition method to account for business combinations and to the extent that the purchase price exceeds the fair value of the net assets acquired we record goodwill In accordance with U S GAAP we are required to evaluate our goodwill at least annually We perform our annual goodwill assessment as of August 31 or more frequently if indicators of impairment exist Qualitative factors that indicate impairment could include but are not limited to i macroeconomic conditions ii industry and market considerations iii cost factors iv overall financial performance of the reporting unit and v other relevant entity specific events The first step in our annual goodwill assessment is to perform the optional qualitative assessment allowed by ASC Topic 350 Intangibles Goodwill and Other ASC 350 In our qualitative assessment we evaluate relevant events or circumstances to determine whether it is more likely than not i e greater than 50 that the fair value of a reporting unit is less than its carrying amount If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount ASC 350 requires us to compare the fair value of such reporting unit to its carrying value including goodwill To determine the fair value of our reporting units we use multiple valuation techniques including a discounted cash flow analysis using the applicable weighted average cost of capital in combination with a market approach that uses market multiples and a selection of guideline public companies This test requires us to make assumptions about the future growth of our business and the market in general as well as other variables such as the level of investment in capital expenditure growth in working capital requirements and the terminal or residual value of our reporting units beyond the periods of estimated annual cash flows We use a third party valuation firm to assist us with this analysis If the fair value of each reporting unit exceeds its carrying value no action is required Otherwise an impairment loss is recorded to the extent that the carrying amount of the reporting unit including goodwill exceeds the fair value of that reporting unit 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
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 segmen
We performed a qualitative assessment of 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 Therefore no additional testing was deemed necessary for these six reporting units Also at our annual testing date we performed a quantitative assessment of the reporting unit in our NA Cabinet Components segment primarily due to the impairment of goodwill during the second and fourth quarters of 2019 and the history of a narrow margin of fair value above carrying value in quantitative assessments performed in prior years We determined that the fair value of this reporting unit exceeded the carrying value
We accrue one time severance costs pursuant to an approved plan of restructuring at the communication date when affected employees have been notified of the potential severance and sufficient information has been provided for the employee to calculate severance benefits in the event the employee is involuntarily terminated In addition we accrue costs associated with the termination of contractual commitments including leases at the time the lease is terminated pursuant to the lease provisions or in accordance with another agreement with the landlord Otherwise we continue to recognize lease expense through the cease use date After the cease use date we determine if our operating lease payments are at market We assume sublet of the facility at the market rate To the extent our lease obligations exceed the fair value rentals we discount to arrive at the present value and record a liability If the facility is not sublet we expense the amount of the assumed sublet in the current period For other costs directly related to the restructuring effort such as equipment moving costs we expense in the period incurred
We manage our exposure to losses for workers compensation group medical property casualty and other insurance claims through a combination of self insurance retentions and insurance coverage with third party carriers We record undiscounted liabilities associated with our portion of these exposures which we estimate by considering various factors such as our historical claims experience severity factors and estimated claims incurred but not reported for which we have developed loss development factors which are estimates as to how claims will develop over time until closed While we consider a number of factors in preparing the estimates sensitive assumptions using significant judgment are made in determining the amounts that are accrued in the financial statements Actual claims could differ significantly from these estimated liabilities depending on future claims experience We do not record insurance recoveries until any contingencies relating to the claim have been resolved
We historically sponsored a defined benefit pension plan To measure our liabilities associated with these plans we made assumptions related to future events including expected return on plan assets and rate of compensation increases The discount rate reflected the rate at which benefits could be effectively settled on the measurement date We determined our discount rate using a FTSE Above Median pension discount curve whereby target yields were developed from bonds across a range of maturity points and a curve was fitted to those targets Spot rates zero coupon bond yields were developed from the curve and used to discount benefit payments associated with each future year During the year ended October 31 2023 the defined benefit pension plan as terminated and the pension obligation was settled
We accrue warranty obligations when we recognize revenue for certain products Our provision for warranty obligations is based on historical costs incurred for such obligations and is adjusted where appropriate based on current conditions and factors Our ability to estimate our warranty obligations is subject to significant uncertainties including changes in product design and our overall product sales mix
We record the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and the amounts reported in our consolidated balance sheets as well as net operating losses and tax credit carry forwards We evaluate the carrying value of the net deferred tax assets and determine whether we will be able to generate sufficient future taxable income to realize our deferred tax assets We perform this review for recoverability on a jurisdictional basis whereby we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets The weight given to the positive and negative evidence is commensurate with the extent to which the evidence can be objectively verified Cumulative losses in recent years is a significant piece of negative evidence that is difficult to overcome in determining that a valuation allowance is not needed against deferred tax assets Thus it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses We believe we will fully realize our deferred tax assets net of a recorded valuation allowance We project future taxable income using the same forecasts used to test long lived assets and intangibles for impairment scheduling out the future reversal of existing taxable temporary differences and reviewing our most recent financial operations In the event the estimates and assumptions indicate we will not generate sufficient future taxable income to realize our deferred tax assets we record a valuation allowance against a portion of our deferred tax assets
We evaluate our ongoing tax positions to determine if it is more likely than not we will be successful in defending such positions if challenged by taxing authorities To the extent that our tax positions do not meet the more likely than not criteria we record a liability for uncertain tax positions As of October 31 2024 we do not have any liability for uncertain tax positions recorded
We have historically used financial and commodity based derivative contracts to manage our exposure to fluctuations in foreign currency exchange rates and raw material prices All derivatives are measured at fair value on a recurring basis We have not designated the derivative instruments we use as cash flow hedges under ASC Topic 815 Derivatives and Hedging ASC 815 Therefore all gains and losses both realized and unrealized are recognized in the consolidated statements of income loss in the period of the change as the underlying assets and liabilities are marked to market We do not enter into derivative instruments for speculative or trading purposes As such these instruments are considered economic hedges and are reflected in the operating activities section of the consolidated statements of cash flow
Our consolidated financial statements are presented in our reporting currency the United States Dollar Our foreign operations are measured using the local currency as the functional currency The assets and liabilities of our foreign operations which are denominated in other currencies are translated to United States Dollars using the prevailing exchange rates as of the balance sheet date Revenues and expenses are translated at the average exchange rates for the applicable period The resulting translation adjustments are recorded as a component of accumulated other comprehensive loss on the consolidated balance sheets
We enter into transactions that are denominated in currencies other than our functional currency At each balance sheet date we translate these asset or liability accounts to our functional currency and record unrealized transaction gains or losses When these assets or liabilities settle we record realized transaction gains or losses These realized and unrealized gains or losses are included in the accompanying consolidated statements of income under the caption Other net
We have issued stock based compensation in the form of stock options to directors employees and officers and non vested restricted stock awards to certain key employees and officers We apply the provisions of ASC Topic 718 Compensation Stock Compensation ASC 718 to determine the fair value of stock option awards on the date of grant using the Black Scholes valuation model We recognize the fair value as compensation expense on a straight line basis over the requisite service period of the award based on awards ultimately expected to vest Stock options granted to directors vest immediately while the stock options granted to our employees and officers typically vest ratably over a three year period with service and continued employment as the vesting conditions For new option grants to retirement eligible employees we recognize expense and vest immediately upon grant consistent with the retirement vesting acceleration provisions of these grants For employees near retirement age we amortize such grants over the period from the grant date to the retirement eligibility date if such period is shorter than the standard vesting schedule For grants of non vested restricted stock we calculate the compensation expense at the grant date as the number of shares granted multiplied by the closing stock price of our common stock on the date of grant This expense is recognized ratably over the vesting period Our non vested restricted stock grants to officers and employees cliff vest over a three year period with service and continued employment as the only vesting criteria Our fair value determination of stock based payment awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables These variables include but are not limited to our expected stock price volatility over the term of the awards actual and projected employee stock option exercise behavior over the expected term our dividend rate risk free rate and expectation with regards to forfeitures Option pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable Because our employee stock options have certain characteristics that are significantly different from traded options and because changes in the subjective assumptions can materially affect the estimated value the valuation models may not provide an accurate measure of the fair value of our employee stock options Accordingly that value may not be indicative of the fair value observed in a willing buyer willing seller market transaction
We have granted other awards which are linked to the performance of our common stock but will settle in cash rather than the issuance of shares of our common stock The value of these awards fluctuates with changes in our stock price with the resulting gains or losses reflected in the period of the change We have recorded current and non current liabilities related to these awards reflected in the accompanying consolidated balance sheets at October 31 2024 and 2023 See Note 14 Stock based Compensation
In addition we have granted performance share awards which use return on net assets as the vesting condition and the awards settle in cash We use a Monte Carlo simulation model to value the market condition and our stock price on the date of grant to value the internal performance condition and recognize expense ratably over the vesting period of three years We esti
We have also granted performance restricted stock units which settle in shares upon vesting These awards cliff vest upon a three year service period with the absolute performance of our common stock as the vesting criteria The number of performance restricted stock units earned is variable depending on the metric achieved and the settlement method is 100 in our common stock with accrued dividends paid in cash at the time of vesting assuming the shares had been outstanding throughout the performance period To value the performance restricted stock units we use a Monte Carlo simulation model to arrive at a grant date fair value This amount will be adjusted for forfeitures and expensed over the three year term of the award with a credit to additional paid in capital Similar to performance shares the performance restricted stock units are not considered outstanding shares do not have voting rights and are excluded from diluted weighted average shares used to calculate earnings per share until the performance criteria is probable to result in the issuance of contingent shares As of October 31 2024 we have deemed 69 877 shares related to the December
We use the cost method to record treasury stock purchases whereby the entire cost of the acquired shares of our common stock is recorded as treasury stock at cost When we subsequently reissue these shares proceeds in excess of cost upon the issuance of treasury shares are credited to additional paid in capital while any deficiency is charged to retained earnings
We calculate basic earnings per share based on the weighted average number of our common shares outstanding for the applicable period We calculate diluted earnings per share based on the weighted average number of our common shares outstanding for the period plus all potentially dilutive securities using the treasury stock method whereby we assume that all such shares are converted into common shares at the beginning of the period if deemed to be dilutive If we incur a loss from continuing operations the effects of potentially dilutive common stock equivalents stock options and unvested restricted stock awards are excluded from the calculation of diluted earnings per share because the effect would be anti dilutive Performance shares and performance restricted stock units are excluded from contingent shares for purposes of calculating diluted weighted average shares until the performance measure criteria is probable and shares are likely to be issued
zero of transactions with a customer which is a related party with one of our non employee directors We performed a review of these transactions of which no single transaction or series of related transactions exceeded 120 000 in amount and determined that these transactions were enacted independently of each other in fair transactions We are not aware of any other related party transactions with any of our current non employee directors or officers outside of their normal business functions or expected contractual duties
On August 1 2024 we completed the acquisition of Tyman plc the Tyman Acquisition a company incorporated in England and Wales Tyman The aggregate consideration due pursuant to the Tyman Acquisition at closing comprised of 14 139 477 newly issued Quanex common shares New Quanex Shares and cash consideration of approximately 504 1 million being the Pound Sterling amount of cash consideration of 392 2 million in respect of all of the Tyman Shares converted to U S Dollars at an exchange rate of 1 2855 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 June 12 2024 in connection with the Tyman Acquisition the Company Wells Fargo Bank National Association Wells Fargo Bank acting as agent swingline lender and issuing lender the Agent the other entities therein specified in the capacities therein specified and the lenders parties thereto entered into an amendment to the Second Amended and Restated Credit Agreement dated as of July 6 2022 the Existing Credit Agreement and the Existing Credit Agreement as so
The Amended Credit Agreement i increased the senior secured revolving credit facility to an aggregate principal amount of 475 million the Revolving Credit Facility and ii provided for a senior secured term loan A facility in an aggregate principal amount of 500 million the Term Loan A Facility and together with the Revolving Credit Facility the Facilities The Revolving Credit Facility includes alternative currency letter of credit and swing line sub facilities of 100 million 30 million and 15 million respectively The maturity date of the Facilities will be five years after the acquisition effective date maturing on August 1 2029
As of October 31 2024 we are still determining the purchase price allocation for the Tyman Acquisition A preliminary purchase price allocation of the fair value of the assets acquired and liabilities assumed is included in the table below These estimates are subject to change and will likely result in an increase or decrease in goodwill particularly with regard to third party valuations and our estimates of fixed assets intangible assets inventory and deferred income taxes during the measurement period which may extend up to one year from the acquisition date
We used recognized valuation techniques to determine the preliminary fair value of the assets and liabilities including the multi period excess earnings method for customer relationships and relief from royalty method for trade names and other technology with a discount rate that reflects the risk of the expected future cash flows Tyman is allocated entirely to our Tyman reportable operating segment
On November 1 2022 we entered into an Asset Purchase Agreement the Purchase Agreement with LMI Custom Mixing LLC LMI and the equity owners of LMI Lauren International Ltd and Meteor US Beteiligungs GMBH Under the Purchase Agreement we acquired substantially all of the operating assets comprising LMI s polymer mixing and rubber compound production business collectively the Purchased Assets and also agreed to assume certain liabilities relating to the Purchased Assets collectively the LMI Acquisition As consideration for the Purchased Assets we paid
under the Credit Facility For the twelve months ended October 31 2023 our consolidated operating results included net sales of 75 6 million and operating income of 8 3 million associated with LMI In connection with the Acquisition we amended our existing finance lease with Lauren Real Estate Hol
We used recognized valuation techniques to determine the preliminary fair value of the assets and liabilities including the excess earnings method for customer relationships and relief from royalty method for trade names and other technology with a discount rate that reflects the risk of the expected future cash flows The goodwill balance is deductible for tax purposes LMI is allocated entirely to our North American Fenestration reportable operating segment
We calculated the pro forma impact of the Tyman and LMI acquisitions and the associated debt financing on our operating results for the twelve months ended October 31 2024 2023 and 2022 The following pro forma results give effect to these acquisitions assuming the transaction occurred on November 1 2021
We derived the pro forma results for the Tyman and LMI acquisition based on historical financial information obtained from the sellers and certain management assumptions Our Tyman pro forma adjustments
relate to the impact of preliminary fair value adjustments on the underlying assets and liabilities of Tyman transaction costs and the financing of the Tyman Acquisition and the conversion of Tyman s financial information prepared in accordance with IFRS to Quanex accounting policies in accordance with U S GAAP
If there are indicators of potential impairment we evaluate our property plant and equipment for recoverability over the remaining useful lives of the assets We did not incur impairment losses associated with these assets for the years ended
October 31 2024 2023 and 2022 See further discussion at Note 1 Nature of Operations Basis of Presentation and Significant Accounting Policies Long Lived Assets Property Plant and Equipment and Intangible Assets with Defined Lives
We recognize a right of use ROU asset and lease liability for each operating and finance lease with a contractual term greater than 12 months at the time of lease inception We include ROU assets and lease liabilities for leases that exist within other contracts Leases with an original term of 12 months or less are not recognized on the balance sheet and the rent expense related to those short term leases is recognized over the lease term We do not account for lease and non lease e g common area maintenance components of contracts separately for any underlying asset class
We lease certain manufacturing plants warehouses office space vehicles and equipment under finance and operating leases Lease commencement occurs on the date we take possession or control of the property or equipment Original terms for our real estate related leases are generally between five and twenty years Original terms for equipment related leases primarily manufacturing equipment and vehicles are generally between one and ten years Some of our leases also include rental escalation clauses Renewal options are included in the determination of lease payments when management determines the options are reasonably certain of exercise considering financial performance strategic importance and or invested capital
If readily determinable the rate implicit in the lease is used to discount lease payments to present value however substantially all of our leases do not provide a readily determinable implicit rate When the implicit rate is not determinable our estimated incremental borrowing rate is utilized determined on a collateralized basis to discount lease payments based on information available at lease commencement
Total lease costs recorded include fixed operating lease costs and variable lease costs Most of our real estate leases require we pay certain expenses such as common area maintenance costs of which the fixed portion is included in operating lease costs We recognize operating lease costs on a straight line basis over the lease term In addition to the above costs variable lease costs are recognized when probable and are not included in determining the present value of our lease liability
The ROU asset is measured at the initial amount of the lease liability calculated as the present value of lease payments over the term of the lease adjusted for lease payments made at or before the lease commencement date and initial direct costs For operating leases ROU assets are reduced over the lease term by the recognized straight line lease expense less the amount of accretion of the lease liability determined using the effective interest method For finance leases ROU assets are amortized on a straight line basis over the shorter of the useful life of the leased asset or the lease term Interest expense on each finance lease liability is recognized utilizing the effective interest method ROU assets are tested for impairment in the same manner as long lived assets and we determined there have been no triggering events for impairment Additionally we monitor for events or changes in circumstances that may require a reassessment of one of our leases and determine if a remeasurement is required
41 4 million 35 9 million and 2 8 million two units were included in our EU Fenestration segment with goodwill balances of 50 7 million and 16 5 million our NA Cabinet Components segment had one unit with a goodwill balance of 39 1 million and our Tyman segment which was acquired on August 1 2024 had one unit with a goodwill balance of 388 3 million
Nature of Operations Basis of Presentation and Significant Accounting Policies Long Lived Assets Goodwill For a summary of the change in the carrying amount of goodwill by segment see Note 17 Segment Information
We do not estimate a residual value associated with these intangible assets See additional disclosure at Note 1 Nature of Operations Basis of Presentation and Significant Accounting Policies Restructuring
In connection to the Tyman Acquisition we added gross carrying intangibles of 352 3 million of customer relationships and 187 2 million of trade names with the weighted average amortization of eighteen and nineteen years respectively
On June 12 2024 in connection with the Tyman Acquisition the Company Wells Fargo Bank National Association Wells Fargo Bank acting as agent swingline lender and issuing lender the Agent the other entities therein specified in the capacities therein specified and the lenders parties thereto entered into an amendment to the Second Amended and Restated Credit Agreement dated as of July 6 2022 the Existing Credit Agreement and the Existing Credit Agreement as so amended the Amended Credit Agreement The Amended Credit Agreement did not become effective until August 1 2024 upon the completion of the Tyman Acquisition Our previous credit facility is more fully described in our Annual Report on Form 10 K for the fiscal year ended October 31 2023
The Amended Credit Agreement i increased the senior secured revolving credit facility to an aggregate principal amount of 475 million the Revolving Credit Facility and ii provides for a senior secured term loan A facility in an aggregate principal amount of 500 million the Term A Facility and together with the Revolving Credit Facility the Facilities The Revolving Credit Facility will include alternative currency letter of credit and swing line sub facilities of 100 million 30 million and 15 million respectively We capitalized 13 8 million of deferred financing fees related to the Amended Credit Agreement The maturity date of the Facilities will be five years after the acquisition effective date maturing on August 1 2029
The Term A Facility amortizes on a quarterly basis at 5 per annum of the original principal amount of the Term A Facility with the remainder due at maturity The Term A Facility must be prepaid with 100 of the net cash proceeds of the
Borrowings under the Facilities bear interest at our option at 1 the Base Rate plus an applicable margin or 2 Adjusted Term SOFR plus an applicable margin The applicable margin will range from 1 0 to 1 75 for Base Rate loans and 2 0 to 2 75 for Adjusted Term SOFR loans In addition we are subject to commitment fees for the unused portion of the Revolving Credit Facility
In the event of default outstanding borrowings accrue interest at the Default Rate as defined whereby the obligations will bear interest at a per annum rate equal to 2 above the total per annum rate otherwise applicable
The Facilities provides for incremental revolving credit commitments for a minimum principal amount of 10 0 million up to an aggregate amount of the greater of 1 310 0 million and 2 100 of Consolidated EBITDA subject to the lender s discretion to elect or decline the incremental increase We can also borrow up to the lesser of 15 0 million or the revolving credit commitment as defined under a Swingline feature of the Credit Agreement
The Facilities 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 the Consolidated Net Leverage Ratio as defined must be greater than 3 25 to 1 00
In addition to maintaining these financial covenants the Facilities 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 other transactions as further defined in the Credit Facility Some of these limitations however do not take effect so long as total leverage is less than or equal to 2 75 to 1 00 and available liquidity exceeds 25 0 million Substantially all of our domestic assets with the exception of real property were used as collateral for the Credit Agreement
we had 716 3 million of borrowings outstanding under the Facilities reduced by unamortized debt issuance costs of 14 0 million 7 0 million of outstanding letters of credit and 60 7 million outstanding primarily under finance leases and other debt We had 245 5 million available for use under the Revolving Credit Facility at October 31 2024 The borrowings outstanding as of October 31 2024 under the Facilities accrue interest at 6 79 per annum and our weighted average borrowing rate for borrowings outstanding during the years 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
We have a number of retirement plans covering substantially all employees We provide both defined benefit and defined contribution plans In general an employee s coverage for retirement benefits depends on the location of employment
Our non contributory single employer defined benefit pension plan covered certain of our employees in the U S On January 1 2020 we enacted changes to our pension plan whereby the benefits for all participants were frozen and thereafter those participants will receive increased benefits in the Company sponsored defined benefit plan in lieu of participation in a defined benefit plan As a result of freezing the plan on January 1 2020 we remeasured the pension assets and obligations for the pension plan which resulted in a decrease to our projected benefit obligation and a corresponding net actuarial gain that was recorded in accumulated other comprehensive income
During the year ended October 31 2023 we terminated our defined contribution plan and settled the obligation during the three months ended October 31 2023 Until such time that the termination was complete the participants received an interest related credit on their respective balance equivalent to the prevailing 30 year Treasury rate The majority of our pension plan participants had their benefit determined pursuant to the cash balance formula For the remaining participants the benefit formula was a traditional formula for retirement benefits whereby the plan payed benefits to employees using a formula which considered years of service and pensionable compensation We contributed 6 3 million to the plan in connection with the termination and distribution of the obligation
We also sponsor several defined contribution plans into which we and our employees make contributions We match 100 up to between the first 3 to 5 of employee annual salary deferrals under our plan for all employees We do not offer our common stock as a direct investment option under these plans For the years ended October 31 2024 2023 and 2022 we contributed approximately
nd 3 9 million respectively As of October 31 2024 and 2023 the current portion of these liabilities was recorded under the caption Accrued Liabilities and the long term portion was included under the caption Other Liabilities in the accompanying balance sheets
The provision or benefit for income taxes includes U S federal income taxes foreign income taxes and state income taxes We provide for income taxes on taxable income at the applicable statutory rates The following table summarizes the components of income tax expense for the years ended October 31 2024 2023 and 2022 in thousands
Our earnings from our foreign subsidiaries qualifies for Federal and Dividend Received Deduction and are not subject to withholding taxes upon remittances to the U S However some of the states do not conform to the Federal Dividend Received Deduction As a result we have 0 5 million of future tax liability related to potential repatriation of unremitted foreign retained earnings The amount of undistributed foreign earnings and profits from international operations as of the years ended
The Organization for Economic Co operation and Development OECD Inclusive Framework on Base Erosion and Profit Shifting BEPS developed an agreement on a two pillar approach to help address the tax challenges arising from the digitalization of the economy Pillar One applies to large multinational enterprises and re allocate part of their profit to the countries where they sell their products and provide services Quanex does not expect to be subject to the Pillar One rules Pillar Two aims to establish a minimum global tax rate of 15 assessed through a top up tax imposed on a country by country basis In 2023 certain jurisdictions in which we operate enacted legislation consistent with the OECD Pillar Two model effective for taxation year beginning on or after January 1 2024 The Pillar Two legislation does not impact our FY2024 annual effective tax rate However further changes to our entity structure or changes in jurisdictions in which we operate could adversely impact analysis
As of October 31 2024 foreign capital loss net operating loss and gross state operating loss carry forwards totaled 14 0 million 18 8 million and 19 6 million respectively The capital loss and the majority of the foreign net operating loss can be carried forward indefinitely The majority of the state losses begin to expire in 2033 We evaluate tax benefits of operating losses and tax credit carry forwards on an ongoing basis including a review of historical and projected future operating results the eligible carry forward period and other circumstances We have recorded a valuation allowance for the foreign capital loss and certain foreign operating and state net operating losses as of October 31 2024 and 2023 totaling 3 8 million and 0 6 million respectively The valuation allowa
nges to statutory tax rates and changes in estimates of future taxable income To fully realize these net deferred tax assets we will need to generate sufficient future taxable income in the jurisdictions where these tax attributes exist during the periods in which the attributes can be utilized As of each reporting date management considers the weight of all evidence both positive and negative to determine if a valuation allowance is necessary for each jurisdiction s net deferred tax assets We place greater weight on historical evidence over future predictions of our ability to utilize net deferred tax assets We consider future reversals of existing taxable temporary differences future taxable income exclusive of reversing temporary differences and taxable income in prior carryback year s if carryback is permitted under applicable law
en in a tax return is required to meet before being recognized in the financial statements During the year ended October 31 2024 we reversed 0 3 million of unrecognized tax benefits due to certain state tax items regarding nexus as voluntary disclosure have been filed
We along with our subsidiaries file income tax returns in the U S and various state and foreign jurisdictions In certain jurisdictions the statute of limitations has not yet expired We generally remain subject to examination of our U S income tax returns for 2021 and subsequent years We generally remain subject to examination of our various state and foreign income tax returns for a period of four to five years from the date the return was filed The state impact of a reported federal adjustment or change remains subject to examination by various states within the longer of one year or the expiration date of the otherwise applicable statute of limitations We classifies interest on income tax as income tax expenses and classifies penalties on income tax as other expenses
condary aluminum used in our manufacturing processes as well as expenditures related to capital projects in progress We paid 4 5 million and 10 1 million pursuant to these arrangements for the years ended October 31 2024 and 2023 respectively These obligations total 2 5 million and 7 9 million at October 31 2024 and 2023 respectively and extend through fiscal 2025 Future amounts paid pursuant to th
We maintain asset retirement obligations associated with leased facilities primarily in the U K We have estimated our future cash flows associated with this asset retirement obligation and recorded an asset and corresponding liability We are depreciating the assets and accre
Under applicable state and federal laws we may be responsible for among other things all or part of the costs required to remove or remediate wastes or hazardous substances at locations we or our predecessors have owned or operated From time to time we also have been alleged to be liable for all or part of the costs incurred to clean up third party sites where there might have been an alleged improper disposal of hazardous substances At present we are not involved in any such matters
From time to time we incur routine expenses and capital expenditures associated with compliance with existing environmental regulations including control of air emissions and water discharges and plant decommissioning costs 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 fi
ile we will continue to have future expenditures related to environmental matters any such amounts are impossible to reasonably estimate at this time Based upon our experience to date we do not believe that our compliance with environmental requirements will have a material adverse effect on our operations financial condition or cash flows
From time to time we along with our subsidiaries are involved in various litigation matters arising in the ordinary course of our business including those arising from or related to contractual matters commercial disputes intellectual property personal injury environmental matters product performance or warranties product liability insurance coverage and personnel and employment disputes
We regularly review with legal counsel the status of all ongoing proceedings and we maintain insurance against these risks to the extent deemed prudent by our management and to the extent such insurance is available However there is no assurance that we will prevail in these matters or that our insurers will accept full coverage of these matters and we could in the future incur judgments enter into settlements of claims or revise our expectations regarding the outcome or insurability of matters we face which could materially impact our results of operations
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 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 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
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date The fair value hierarchy distinguishes between 1 market participant assumptions developed based on market data obtained from independent sources observable inputs and 2 an entity s own assumptions about market participant assumptions developed based on the best information available in the circumstances unobservable inputs The fair value hierarchy consists of three broad levels which gives the highest priority to Level 1 and the lowest priority to Level 3 The three levels of the fair value hierarchy are described below
Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly including quoted prices for similar assets or liabilities in active markets quoted prices for identical or similar assets or liabilities in markets that are not active inputs other than quoted prices that are observable for the asset or liability e g interest rates and inputs that are derived principally from or corroborated by observable market data b
ts accounts receivable and accounts payable approximate fair value due to the short term maturity of these instruments Our outstanding debt is variable rate debt that re prices frequently thereby limiting our exposure to significant changes in interest rate risk As a result the fair value of our debt instruments approximates carrying value at October 31 2024 and 2023 Level 2 measurement
Our outstanding forward foreign exchange contracts have a notional principal amount of 18 6 million at October 31 2024 Hedge accounting is not applied to our forward exchange contracts These contracts have a range of maturities up to May 12 2025 Our forward foreign exchange contracts are adjusted to fair value by recording gains and losses to Other net and we record the related liability to Current Liabilities in the accompanying condensed consolidated statement of income and condensed consolidated balance sheets respectively During the year ended October 31 2024 and 2023 we recognized a loss of 0 3 million and zero respectively related to our forward foreign exchange contracts The value of our forward foreign exchange contracts fluctuates based on exchange rate fluctuations against the USD and GBP Level 2 measurement
Our restricted stock units and performance share awards are marked to market on a quarterly basis during a three year vesting period based on market data For further information refer to Note 14 Stock Based Compensation Performance Share Awards
We performed a fair value assessment corresponding with the purchase of Tyman Due to the unique nature of this acquisition this is considered a Level 3 measurement For further information refer to Note 2 Acquisitions
We have established and maintain an Omnibus Incentive Plan 2020 Plan that provides for the granting of restricted stock awards stock options restricted stock units performance share awards performance restricted stock units and other stock based and cash based awards The 2020 Plan is administered by the Compensation and Management Development Committee of the Board of Directors
The aggregate number of shares of common stock authorized for grant under the 2020 Plan is 3 139 895 as approved by the shareholders Any officer key employee and or non employee director is eligible for awards under the 2020 Plan We grant restricted stock units to non employee directors on the first business day of each fiscal year As approved by the Compensation Management Development Committee of our Board of Directors annually we grant a mix of restricted stock awards performance shares and or performance restricted stock units to officers management and key employees We also historically granted stock options to certain officers directors and key employees Occasionally we may make additional grants to key employees at other times during the year
Restricted stock awards are granted to key employees and officers annually and typically cliff vest over a three year period with service and continued employment as the only vesting criteria The recipient of a restricted stock award is entitled to all of the rights of a shareholder except that the awards are nontransferable during the vesting period and dividends are not paid until vesting The fair value of the restricted stock award is established on the grant date and then expensed over the vesting period resulting in an increase in additional paid in capital Shares are generally issued from treasury stock at the time of grant
s 1 4 million 1 0 million and 1 2 million respectively As of October 31 2024 total unrecognized compensation cost related to unamortized restricted stock awards totaled 2 4 million We expect to recognize this expense over the remaining weighted average period of 1 7 years
Historically stock options have been awarded to key employees officers and non employee directors In December 2017 the Compensation Management Development Committee of the Board of Directors approved a change to the long term incentive award program eliminating the grant of stock options and replacing this award with a grant of performance restricted stock units as further described below As a result stock options were not granted during the years ended
vesting conditions Our stock options may be exercised up to a maximum of ten years from the date of grant The fair value of the stock options was determined on the grant date and expensed over the vesting period resulting in an increase in additional paid in capital We used the Black Scholes pricing model to estimate the grant date fair value The inputs to this model included expected volatility expected term a risk free rate and expected dividend rate at the time of grant For employees who were nearing retirement eligibility we recognized stock option expense ratably over the shorter of the vesting period or the period from the grant date to the retirement eligibility date
Intrinsic value is the amount by which the market price of the common stock on the date of exercise exceeds the exercise price of the stock option For the years ended October 31 2024 2023 and 2022 the total intrinsic value of our stock options that were exercised to
Restricted stock units may be awarded to key employees and officers from time to time and annually to non employee directors The non employee director restricted stock units vest immediately but are payable only upon the director s cessation of service unless an election is made by the non employee director to settle and pay the award on an earlier specified date Restricted stock units awarded to employees and officers typically cliff vest after a three year period with service and continued employment as the vesting conditions Restricted stock units are not considered outstanding shares and do not have voting rights although the holder does receive a cash payment equivalent to the dividend paid on a one for one basis on our outstanding common shares Once the vesting criteria is met each restricted stock unit is payable to the holder in cash based on the market value of one share of our common stock Accordingly we record a liability for the restricted stock units on our balance sheet and recognize any changes in the market value during each reporting period as compensation expense
During the years ended October 31 2024 2023 and 2022 26 215 38 704 and 36 669 restricted stock units respectively were granted with corresponding weighted average grant date fair value of 26 70 20 67 and 22 52 respectively During the fiscal year ended October 31 2023 21 774 restricted stock units which were awarded to key employees vested During the years ended October 31 2024 2023 and 2022 we paid 0 6 million 0 4 million and 1 0 million to settle restricted stock units
During the year ended October 31 2024 166 070 restricted stock units were granted to key employees with a weighted average grant date fair value of 31 83 These key employee grants vest in accordance with criteria which extend up to three years During the year 42 933 of these grants vested and 1 242 were forfeited We paid approximately 1 2 million to settle these grants during the year
We have awarded annual grants of performance shares to key employees and officers Beginning with the fiscal year ended October 31 2019 performance share awards vest with return on net assets RONA as the vesting condition pay out 100 in cash and are accounted for as liability
The expected cash settlement of the performance share award is recorded as a liability and is being marked to market over the three year term of the award and could fluctuate depending on the number of shares ultimately expected to vest Depending on the achievement of the performance conditions 0 to 200 of the awarded performance shares may ultimately vest
In December 2023 122 400 shares vested pursuant to the December 2020 grant which were settled with a cash payment of 3 4 million In December 2022 101 200 shares vested pursuant to the December 2019 grant which were settled with a cash payment of 2 2 million
We awarded performance restricted stock units to key employees and officers These awards cliff vest upon a three year service period with the absolute total shareholder return of our common stock over this three year term as the vesting criteria The number of performance restricted stock units earned is variable depending on the metric achieved and the settlement method is 100 in our common stock with accrued dividends paid in cash at the time of vesting assuming the shares had been outstanding throughout the performance period
To value the performance restricted stock units we utilized a Monte Carlo simulation model to arrive at a grant date fair value This amount will be adjusted for forfeitures and expensed over the three year term of the award with a credit to additional paid in capital Depending on the achievement of the performance conditions a minimum of 0 and a maximum of 150 of the awarded performance restricted stock units may vest Specifically the awards vest on a continuum with the following Absolute Total Shareholder Return A TSR milestones
The performance restricted stock units are not considered outstanding shares do not have voting rights and are excluded from diluted weighted average shares used to calculate earnings per share until the performance criteria is probable to result in the issuance of contingent shares
The following table summarizes amounts expensed as selling general and administrative expense related to restricted stock awards stock options restricted stock units performance share awards and performance restricted stock units for the years ended October 31 2024 2023 and 2022 in thousands
no par value As of October 31 2024 and 2023 we had 51 266 501 and 37 176 958 shares of common stock issued respectively and 47 252 070 and 33 011 119 shares of common stock outstanding respectively There were no shares of preferred stock issued or outstanding at October 31 2024 and 2023
During December 2021 our Board of Directors approved a stock repurchase program that authorized the repurchase of up to 75 0 million worth of shares of our common stock Repurchases under the program are made in open market transactions or privately negotiated transactions subject to market conditions applicable legal requirements and other relevant factors The program does not have an expiration date or a limit on the number of shares that may be purchas
We record treasury stock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock Shares are generally issued from treasury stock at the time of grant of restricted stock awards upon the exercise of stock options and upon the vesting of performance shares and performance restricted stock units On the subsequent issuance of treasury shares we record proceeds in excess of cost as an increase in additional paid in capital A deficiency of such proceeds relative to costs would be applied to reduce paid in capital associated with prior issuances to the extent available with the remainder recorded as a charge to retained earnings
We present four reportable business segments 1 NA Fenestration comprising four operating segments primarily focused on the fenestration market in North America including vinyl profiles insulating glass spacers screens custom compound mixing and other fenestration components 2 EU Fenestration comprising our U K based vinyl extrusion business manufacturing vinyl profiles and conservatories and the European insulating glass business manufacturing insulating glass spacers 3 NA Cabinet Components comprising our cabinet door and components segment 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 maintain a grouping called Unallocated Corporate Other which includes transaction expenses stock based compensation long term incentive awards based on the performance of our common stock and other factors certain severance and legal costs not deemed to be allocable to all segments depreciation of corporate assets interest expense other net income taxes and inter segment eliminations and executive incentive compensation and medical expense fluctuations relative to planned costs as determined during the annual planning process Other general and administrative costs associated with the corporate office are allocated to the reportable 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 the accompanying consolidated financial statements Corporate general and administrative expenses allocated during the years ended October 31 2024 2023 and 2022 were 27 3 million 23 5 million and 24 5 million respectively
ASC Topic 280 10 50 Segment Reporting ASC 280 permits aggregation of operating segments based on factors including but not limited to 1 similar nature of products serving the building products industry primarily the fenestration business 2 similar production processes although there are some differences in the amount of automation amongst operating plants 3 similar types or classes of customers namely the primary OEMs 4 similar distribution methods for product delivery although the extent of the use of third party distributors will vary amongst the businesses 5 similar regulatory environment and 6 converging long term economic similarities
We did not allocate non operating expense or income tax expense to the reportable segments The following table reconciles operating income as reported above to net income for the years ended October 31 2024 2023 and 2022 in thousands
Our manufacturing facilities and all long lived assets are located primarily in the U S and Europe We attribute our net sales to a geographic region based on the location of the customer The following tables provide information concerning our net sales for the years ended October 31 2024 2023 and 2022 and our long lived assets as of October 31 2024 and 2023 in thousands
We compute basic earnings per share by dividing net income by the weighted average number of common shares outstanding during the period Diluted earnings per common and potential common shares include the weighted average of additional shares associated with the incremental effect of dilutive employee stock options non vested restricted stock as determined using the treasury stock method and contingent shares associated with performance share awards if dilutive
We do not include equity instruments in our calculation of diluted earnings per share if those instruments would be antidilutive We had 1 471 of anti dilutive restricted stock award equivalents for the year ended October 31 2024 and no corresponding equivalents for the comparable prior years Such dilution is dependent on the excess of the market price of our stock over the exercise price and other components of the treasury stock method
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 November 2023 the FASB issued Segment Reporting Topic 280 Improvements to Reportable Segment Disclosures which is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses The guidance is effective for fiscal years beginning after December 15 2023 and interim periods within fiscal years beginning after December 15 2024 with early adoption is permitted The guidance is to be applied retrospectively to all prior periods presented in the financial statements We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures
In December 2023 the FASB issued Income Taxes Topic 740 Improvements to Income Tax Disclosures which includes updates to the income tax disclosures related to the rate reconciliation and disaggregation of income taxes paid by jurisdiction The amendments are effective for fiscal years beginning after December 15 2024 with early adoption permitted The amendments should be applied prospectively however retrospective application is permitted We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures
It is the responsibility of the management of Quanex Building Products Corporation to establish and maintain adequate disclosure controls and procedures Disclosure controls and procedures are defined in Rules 13a 15 e and 15d 15 e under the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded processed summarized and reported within the time periods specified in the SEC s rules and forms and that such information is accumulated and communicated to management including our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure
Based on their evaluation as of the end of the period covered by this Annual Report on Form 10 K our Chief Executive Officer and Chief Financial Officer have concluded that as of such date our disclosure controls and procedures were not effective as a result of the material weakness in internal control over financial reporting as described below
Internal control over financial reporting refers to the process designed by or under the supervision of our Chief Executive Officer and Chief Financial Officer and effected by our Board of Directors management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of our assets that could have a material effect on the consolidated financial statements
Management has used the framework set forth in the report entitled Internal Control Integrated Framework published by the Committee of Sponsoring Organizations COSO of the Treadway Commission 2013 Framework to evaluate the effectiveness of its internal control over financial reporting Based upon this assessment management concluded that our internal control over financial reporting was not effective as of October 31 2024 because of a material weakness in the design and operation of the controls over the preparation and review of the statement of cash flows 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
We analyzed the impact of this error and while the value of the corrected amounts are quantitively material on a line item basis within the Statement of Cash Flow there were no changes to the Balance Sheet Income Statement Statement of Stockholders Equity or Statement of Comprehensive Income Additionally this error related only to the fourth quarter of 2024 results and do not impact prior period results Management s conclusion is that the error was quantitatively material within the Investing Activities and Financing Activities sections of the statement of cash flows however all other aspects of the Company s purchase of Tyman were correctly accounted for including the reported change in cash cash equivalents and restricted cash for the period
The Company is committed to remediating the above noted material weakness and we are in the process of developing and implementing remediation plans to address it Actions with respect to the remediation plan are expected to include implementing improved procedures and controls related to our quarterly and annual close processes and enhancement of the quarterly and annual close and reporting checklists The remediation plan is subject to oversight by the Audit Committee of the Board of Directors and the identified material weakness will not be considered remediated until the remediation plan has been fully implemented the applicable controls operate for a sufficient period of time and the Company has concluded that newly implemented controls are operating effectively We expect the remediation of this material weakness to be completed prior to the end of fiscal year 2025
There have been no changes in our internal control over financial reporting as defined in Rules 13a 15 f and 15d 15 f under the Exchange Act during the quarter ended October 31 2024 that materially affected or are reasonably likely to materially affect our internal control over financial reporting
There have been no changes in internal controls over financial reporting as defined in Rules 13a 15 f and 15d 15 f under the 1934 Act during the most recent fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting
During the three months ended October 31 2024 none of our directors or executive officers adopted or terminated any contract instruction or written plan for the purchase or sale of our securities to satisfy the affirmative defense conditions of Rule 10b5 1 c or any non Rule 10b5 1 trading arrangement except as follows
George Wilson our Chairman President and CEO adopted a Rule 10b5 1 trading arrangement on June 11 2024 Under this arrangement a total of 37 800 shares of our common stock may be sold subject to certain conditions before the plan expires on November 30 2026
is incorporated herein by reference from the Registrant s Definitive Proxy Statement relating to the 2025 Annual Meeting of Stockholders of Quanex Building Products Corporation or an amendment to this Form 10 K which is to be filed with the SEC pursuant to Regulation 14A under the Securities Exchange Act of 1934 as amended within 120 days after the close of the fiscal year ended October 31 2024
is incorporated herein by reference from the Registrant s Definitive Proxy Statement relating to the 2025 Annual Meeting of Stockholders of Quanex Building Products Corporation or an amendment to this Form 10 K which is to be filed with the SEC pursuant to Regulation 14A under the Securities Exchange Act of 1934 as amended within 120 days after the close of the fiscal year ended October 31 2024
is incorporated herein by reference from the Registrant s Definitive Proxy Statement relating to the 2025 Annual Meeting of Stockholders of Quanex Building Products Corporation or an amendment to this Form 10 K which is to be filed with the SEC pursuant to Regulation 14A under the Securities Exchange Act of 1934 as amended within 120 days after the close of the fiscal year ended October 31 2024
is incorporated herein by reference from the Registrant s Definitive Proxy Statement relating to the 2025 Annual Meeting of Stockholders of Quanex Building Products Corporation or an amendment to this Form 10 K which is to be filed with the SEC pursuant to Regulation 14A under the Securities Exchange Act of 1934 as amended within 120 days after the close of the fiscal year ended October 31 2024
is incorporated herein by reference from the Registrant s Definitive Proxy Statement relating to the 2025 Annual Meeting of Stockholders of Quanex Building Products Corporation or an amendment to this Form 10 K which is to be filed with the SEC pursuant to Regulation 14A under the Securities Exchange Act of 1934 as amended within 120 days after the close of the fiscal year ended October 31 2024
Certain of our exhibits as denoted with a between exhibits 10 1 through 10 40 listed in the Exhibit Index filed herewith are management or compensatory plans or arrangements required to be filed as exhibits to this Annual Report on Form 10 K pursuant to Item 15 b thereof
Pursuant to the requirements of Section 13 or 15 d of the Securities Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated
Distribution Agreement among Quanex Corporation Quanex Building Products LLC and Quanex Building Products Corporation incorporated by reference to Exhibit 10 1 to Quanex Corporation s Current Report on Form 8 K Reg No 001 05725 filed with the Commission on December 24 2007
Agreement and Plan of Merger dated as of January 31 2011 by and among Quanex Building Products Corporation QSB Inc Lauren Holdco Inc Lauren International Inc and Kevin E Gray as agent for the shareholders of Lauren Holdco Inc filed as Exhibit 2 1 of the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on February 2 2011 and incorporated herein by reference
Limited Liability Company Interest Purchase Agreement dated February 7 2014 by and among Quanex Building Products Corporation Nichols Aluminum LLC and Aleris International Inc filed as Exhibit 2 1 of the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on February 10 2014 and incorporated herein by reference
First Amendment to Limited Liability Company Interest Purchase Agreement dated April 1 2014 by and among Quanex Building Products Corporation Nichols Aluminum LLC and Aleris International Inc filed as Exhibit 10 1 of the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on April 7 2014 and incorporated herein by reference
Share Purchase Agreement dated June 15 2015 by and among R L Hartshorn and others and Quanex Building Products Corporation filed as Exhibit 2 1 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on June 16 2015 and incorporated herein by reference
Agreement and Plan of Merger dated as of August 30 2015 by and among Quanex Building Products Corporation QWMS Inc WII Holding Inc and Olympus Growth Fund IV L P solely in its capacity as the representative of the stockholders of WII Holding Inc filed as Exhibit 2 1 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on August 30 2015 and incorporated herein by reference
Asset Purchase Agreement dated November 1 2022 among Quanex IG Systems Inc LMI Custom Mixing LLC Lauren International Ltd and Meteor US Beteiligungs GMBH filed as Exhibit 2 1 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on November 1 2022 and incorporated herein by reference
Rule 2 7 Announcement dated as of April 22 2024 as filed as Exhibit 2 1 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on April 22 2024 and incorporated herein by reference
Co operation Agreement dated as of April 22 2024 as filed as Exhibit 2 2 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on April 22 2024 and incorporated herein by reference
Form of Deed of Irrevocable Undertaking dated as of April 22 2024 as filed as Exhibit 2 3 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on April 22 2024 and incorporated herein by reference
Restated Certificate of Incorporation of the Registrant dated as of March 4 2016 filed as Exhibit 3 1 of the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on March 7 2016 and incorporated herein by reference
Fourth Amended and Restated Bylaws of the Registrant dated as of February 27 2020 filed as Exhibit 3 2 of the Registrant s Quarterly Report on Form 10 Q Reg No 001 33913 for the quarter ended January 31 2020
Form of Registrant s common stock certificate filed as Exhibit 4 1 of Amendment No 1 to the Registrant s Registration Statement on Form 10 Reg No 001 33913 as filed with the Securities and Exchange Commission on February 14 2008 and incorporated herein by reference
Second Amended and Restated Credit Agreement dated as of July 6 2022 by and among the Company the lenders party thereto and Wells Fargo Bank National Association as Agent filed as Exhibit 10 1 of the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on July 6 2022 and incorporated herein by reference
Amendment No 1 to the Second Amended and Restated Credit Agreement among the Company acting as borrower the Company subsidiaries acting as guarantors thereto Wells Fargo Bank National Association as agent swingline lender and issuing lender and the other parties thereto dated as of June 12 2024 filed as Exhibit 10 1 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on June 12 2024 and incorporated herein by reference
Quanex Building Products Corporation Amended and Restated 2008 Omnibus Incentive Plan filed as Exhibit 10 1 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on February 27 2014 and incorporated herein by reference
Quanex Building Products Corporation Deferred Compensation Plan as amended filed as Exhibit 10 2 to the Registrant s Quarterly Report on Form 10 Q Reg No 001 33913 for the quarter ended January 31 2014 as filed with the Securities and Exchange Commission on March 6 2014 and incorporated herein by reference
Quanex Building Products Corporation Restoration Plan filed as Exhibit 10 8 of Amendment No 4 to the Registrant s Registration Statement on Form 10 Reg No 001 33913 as filed with the Securities and Exchange Commission on March 17 2008 and incorporated herein by reference
Quanex Building Products Corporation Supplemental Employees Retirement Plan filed as Exhibit 10 9 of Amendment No 4 to the Registrant s Registration Statement on Form 10 Reg No 001 33913 as filed with the Securities and Exchange Commission on March 17 2008 and incorporated herein by reference
Form of Executive Severance Policy applicable to the Registrant and certain of its executive officers filed as Exhibit 10 1 of the Registrant s current report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on March 2 2020 and incorporated herein by reference
Form of Indemnity Agreement between the Registrant and each of its independent directors filed as Exhibit 10 1 of the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on August 29 2008 and incorporated herein by reference
Form of Indemnity Agreement between the Registrant and each of its officers filed as Exhibit 10 2 of the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on August 29 2008 and incorporated herein by reference
Form of Stock Option Agreement for Employees under the Quanex Building Products Corporation 2008 Omnibus Incentive Plan as amended filed as Exhibit 10 1 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on April 29 2014 and incorporated herein by reference
Form of Stock Option Agreement for Section 16 Officers under the Quanex Building Products Corporation 2008 Omnibus Incentive Plan as amended filed as Exhibit 10 2 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on April 29 2014 and incorporated herein by reference
Form of Stock Option Agreement for Key Leaders under the Quanex Building Products Corporation 2008 Omnibus Incentive Plan as amended filed as Exhibit 10 3 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on April 29 2014 and incorporated herein by reference
Form of Stock Option Agreement for Non Employee Directors under the Quanex Building Products Corporation 2008 Omnibus Incentive Plan as amended filed as Exhibit 10 4 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on April 29 2014 and incorporated herein by reference
Form of Restricted Stock Award Agreement for Section 16 Officers under the Quanex Building Products Corporation 2008 Omnibus Incentive Plan as amended filed as Exhibit 10 6 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on April 29 2014 and incorporated herein by reference
Form of Restricted Stock Award Agreement for Key Leaders under the Quanex Building Products Corporation 2008 Omnibus Incentive Plan as amended filed as Exhibit 10 7 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on April 29 2014 and incorporated herein by reference
Form of Restricted Stock Unit Award Agreement for Section 16 Officers under the Quanex Building Products Corporation 2008 Omnibus Incentive Plan as amended filed as Exhibit 10 10 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on April 29 2014 and incorporated herein by reference
Form of Restricted Stock Unit Award Agreement for Key Leaders under the Quanex Building Products Corporation 2008 Omnibus Incentive Plan as amended filed as Exhibit 10 11 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on April 29 2014 and incorporated herein by reference
Form of Restricted Stock Unit Award Agreement for Non Employee Directors under the Quanex Building Products Corporation 2008 Omnibus Incentive Plan as amended filed as Exhibit 10 12 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on April 29 2014 and incorporated herein by reference
Amended Form of Performance Share Award Agreement for Section 16 Officers under the Quanex Building Products Corporation 2008 Omnibus Incentive Plan as amended filed as Exhibit 10 2 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on December 7 2015 and incorporated herein by reference
Amended Form of Performance Share Award Agreement for Key Leaders under the Quanex Building Products Corporation 2008 Omnibus Incentive Plan as amended filed as Exhibit 10 3 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on December 7 2015 and incorporated herein by reference
Agreement between Quanex Building Products Corporation and Scott Zuehlke effective November 1 2019 filed as Exhibit 10 1 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on November 1 2019 and incorporated herein by reference
Lease dated February 9 2016 between Garner Properties Ltd and HL Plastics Limited filed as Exhibit 10 44 to the Registrant s Annual Report on Form 10 K Reg No 001 33913 for the year ended October 31 2016 as filed with the Securities and Exchange Commission on December 16 2016 and incorporated herein by reference
Amended and Completely Restated Lease Agreement dated August 25 2016 between Lauren Real Estate Holding LLC and Quanex IG Systems Inc filed as Exhibit 10 1 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on August 26 2016 and incorporated herein by reference
Amended and Restated Employee Stock Purchase Plan as amended and restated effective April 1 2017 filed as Annex A to the Registrant s Definitive Proxy Statement on Schedule 14A for its 2017 Annual Meeting of Stockholders Reg No 001 33919 as filed with the Securities and Exchange Commission on January 31 2017 and incorporated herein by reference
Agreement between Quanex Building Products Corporation and George Wilson effective August 1 2017 filed as Exhibit 10 1 of the Registrant s Current Report on Form 8 K Reg No 001 33919 as filed with the Securities and Exchange Commission on July 27 2017 and herein incorporated by reference
Form of Key Leader Stock Settled Performance Restricted Stock Units Award Agreement filed as Exhibit 10 50 to the Registrant s Annual Report on Form 10 K Reg No 001 33913 for the year ended October 31 2017 as filed with the Securities and Exchange Commission on December 12 2017 and incorporated herein by reference
Form of Section 16 Officer Stock Settled Performance Restricted Stock Units Award Agreement filed as Exhibit 10 51 to the Registrant s Annual Report on Form 10 K Reg No 001 33913 for the year ended October 31 2017 as filed with the Securities and Exchange Commission on December 12 2017 and incorporated herein by reference
First Amendment to the Amended and Completely Restated Lease Agreement by and among Quanex IG Systems Inc and Lauren Real Estate Holding LLC dated November 1 2022 as filed as Exhibit 10 1 of the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on November 1 2022 and incorporated herein by reference
Agreement between Quanex Building Products Corporation and Paul Cornett effective November 1 2019 filed as Exhibit 10 4 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on November 1 2019 and incorporated herein by reference
Quanex Building Products Corporation 2020 Omnibus Incentive Plan filed as Exhibit 10 2 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on March 2 2020 and incorporated herein by reference
Form of Restricted Stock Award Agreement for Employees under the Quanex Building Products Corporation 2020 Omnibus Incentive Plan filed as Exhibit 10 1 of the Registrant s Quarterly Report on Form 10 Q Reg No 001 33913 as filed with the Securities and Exchange Commission on March 6 2020 and incorporated herein by reference
Form of Annual Incentive Award Agreement for Employees under the Quanex Building Products Corporation 2020 Omnibus Incentive Plan filed as Exhibit 10 1 of the Registrant s Quarterly Report on Form 10 Q Reg No 001 33913 as filed with the Securities and Exchange Commission on June 5 2020 and incorporated herein by reference
Form of Restricted Stock Award Agreement for Employees under the Quanex Building Products Corporation 2020 Omnibus Incentive Plan filed as Exhibit 10 2 of the Registrant s Quarterly Report on Form 10 Q Reg No 001 33913 as filed with the Securities and Exchange Commission on June 5 2020 and incorporated herein by reference
Form of Restricted Stock Unit Award Agreement for Employees under the Quanex Building Products Corporation 2020 Omnibus Incentive Plan filed as Exhibit 10 3 of the Registrant s Quarterly Report on Form 10 Q Reg No 001 33913 as filed with the Securities and Exchange Commission on June 5 2020 and incorporated herein by reference
Form of Performance Share Award Agreement for Employees under the Quanex Building Products Corporation 2020 Omnibus Incentive Plan filed as Exhibit 10 4 of the Registrant s Quarterly Report on Form 10 Q Reg No 001 33913 as filed with the Securities and Exchange Commission on June 5 2020 and incorporated herein by reference
Form of Performance Restricted Stock Unit Award Agreement for Employees under the Quanex Building Products Corporation 2020 Omnibus Incentive Plan filed as Exhibit 10 5 of the Registrant s Quarterly Report on Form 10 Q Reg No 001 33913 as filed with the Securities and Exchange Commission on June 5 2020 and incorporated herein by reference
Form of Restricted Stock Unit Award Agreement for independent Directors under the Quanex Building Products Corporation 2020 Omnibus Incentive Plan filed as Exhibit 10 39 of the Registrant s Annual Report on Form 10 K Reg No 001 33913 as filed with the Securities and Exchange Commission on December 11 2020 and incorporated herein by reference
Lease Relating to Land and Buildings at Denby Hall Business Park Denby Ripley Derbyshire DE5 8JX dated as of October 21 2022 by and among Garner Holdings Limited Liniar Limited and Ryfields Close Management Company Limited filed as Exhibit 10 1 of the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on October 26 2022 and incorporated herein by reference
First Amendment to the Amended and Completely Restated Lease Agreement by and among Quanex IG Systems Inc and Lauren Real Estate Holding LLC dated November 1 2022 filed as Exhibit 10 1 to the Registrant s Current Report on Form 8 K Reg No 001 33913 as filed with the Securities and Exchange Commission on November 1 2022 and incorporated herein by reference
Amendment to Quanex Building Products Corporation Restoration Plan dated June 1 2023 as filed as Exhibit 10 1 on Form 10 Q Reg No 001 33913 as filed with the Securities and Exchange Commission on June 2 2023 and incorporated herein by reference
Amendment to Quanex Building Products Corporation Supplemental Employees Retirement Plan dated June 1 2023 as filed as Exhibit 10 2 on Form 10 Q Reg No 001 33913 as filed with the Securities and Exchange Commission on June 2 2023 and incorporated herein by reference
Quanex Building Products Corporation Clawback Policy filed as Exhibit 97 1 to the Registrant s Annual Report on Form 10 K Reg No 001 33913 for the year ended October 31 2023 as filed with the Securities and Exchange Commission on December 15 2023 and incorporated herein by reference
As permitted by Item 601 b 4 iii A of Regulation S K the Registrant has not filed with this Annual Report on Form 10 K certain instruments defining the rights of holders of long term debt of the Registrant and its subsidiaries because the total amount of securities authorized under any of such instruments does not exceed 10 of the total assets of the Registrant and its subsidiaries on a consolidated basis The Registrant agrees to furnish a copy of any such agreements to the Securities and Exchange Commission upon request

Company Name	Quanex Building Products CORP Vist SEC web-site
Category	ROLLING DRAWING & EXTRUDING OF NONFERROUS METALS
Trading Symbol	NX