Quanex Building Products (NX) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1: Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements and notes for periods ended July 31, 2025, and October 31, 2024 Condensed Consolidated Balance Sheets Details the company's financial position, including assets, liabilities, and equity, at specific reporting dates Condensed Consolidated Balance Sheets (in thousands): | Item | July 31, 2025 | October 31, 2024 | Change ($K) | Change (%) | | :------------------------------------------ | :-------------- | :--------------- | :---------- | :--------- | | Cash and cash equivalents | $66,272 | $97,744 | $(31,472) | -32.2% | | Total current assets | $583,324 | $611,268 | $(27,944) | -4.6% | | Goodwill | $271,459 | $574,711 | $(303,252) | -52.8% | | Intangible assets, net | $558,768 | $597,909 | $(39,141) | -6.5% | | Total assets | $1,972,677 | $2,319,788 | $(347,111) | -15.0% | | Total current liabilities | $264,693 | $272,867 | $(8,174) | -3.0% | | Long-term debt | $695,605 | $737,198 | $(41,593) | -5.6% | | Total liabilities | $1,255,286 | $1,309,042 | $(53,756) | -4.1% | | Retained earnings | $148,795 | $430,405 | $(281,610) | -65.4% | | Total stockholders' equity | $717,391 | $1,010,746 | $(293,355) | -29.0% | Condensed Consolidated Statements of Income Summarizes the company's revenues, expenses, and net income or loss over specific reporting periods Condensed Consolidated Statements of Income (in thousands, except per share amounts): | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net sales | $495,273 | $280,345 | $1,347,795 | $785,701 | | Cost of sales (excluding D&A) | $357,305 | $209,441 | $986,129 | $597,127 | | Selling, general and administrative | $71,270 | $36,509 | $208,253 | $103,579 | | Restructuring charges | $1,367 | $0 | $10,207 | $0 | | Depreciation and amortization | $33,882 | $10,953 | $77,814 | $32,999 | | Asset impairment charges | $302,284 | $0 | $302,284 | $0 | | Operating (loss) income | $(270,835) | $23,442 | $(236,892) | $51,996 | | Interest expense | $(14,218) | $(878) | $(42,344) | $(2,896) | | Other, net | $855 | $9,474 | $1,925 | $10,520 | | (Loss) income before income taxes | $(284,198) | $32,038 | $(277,311) | $59,620 | | Income tax benefit (expense) | $8,191 | $(6,688) | $6,934 | $(12,644) | | Net (loss) income | $(276,007) | $25,350 | $(270,377) | $46,976 | | (Loss) earnings per common share (Basic & Diluted) | $(6.04) | $0.77 | $(5.83) | $1.43 (Basic), $1.42 (Diluted) | | Cash dividends per share | $0.08 | $0.08 | $0.24 | $0.24 | Condensed Consolidated Statements of Comprehensive Income Presents the total comprehensive income, including net income and other comprehensive income items, for the reporting periods Condensed Consolidated Statements of Comprehensive Income (in thousands): | Item | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net (loss) income | $(276,007) | $25,350 | $(270,377) | $46,976 | | Foreign currency translation (loss) gain, net of tax | $(3,467) | $4,500 | $15,927 | $8,010 | | Other comprehensive (loss) income, net of tax | $(3,467) | $4,500 | $15,927 | $8,010 | | Comprehensive (loss) income | $(279,474) | $29,850 | $(254,450) | $54,986 | Condensed Consolidated Statements of Cash Flows Outlines the cash inflows and outflows from operating, investing, and financing activities for the reporting periods Condensed Consolidated Statements of Cash Flows (Nine Months Ended July 31, in thousands): | Activity | 2025 | 2024 | Change ($K) | Change (%) | | :------------------------------------------ | :------- | :------- | :---------- | :--------- | | Cash provided by operating activities | $76,643 | $83,333 | $(6,690) | -8.0% | | Cash used for investing activities | $(40,635) | $(23,320) | $(17,315) | 74.2% | | Cash used for financing activities | $(87,379) | $(25,456) | $(61,923) | 243.2% | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | $16,302 | $935 | $15,367 | 1643.5% | | (Decrease) increase in cash, cash equivalents and restricted cash | $(35,069) | $35,492 | $(70,561) | -198.8% | | Cash, cash equivalents and restricted cash at end of period | $67,926 | $93,966 | $(26,040) | -27.7% | Condensed Consolidated Statement of Stockholders' Equity Details changes in the company's equity accounts, including common stock, retained earnings, and treasury stock, over the reporting period Condensed Consolidated Statement of Stockholders' Equity (Nine Months Ended July 31, 2025, in thousands): | Item | October 31, 2024 Balance | Net Loss | Foreign Currency Translation Adjustment | Common Dividends | Purchase of Treasury Stock | Stock-Based Compensation Activity | July 31, 2025 Balance | | :------------------------------------------ | :----------------------- | :--------- | :-------------------------------------- | :--------------- | :------------------------- | :-------------------------------- | :---------------------- | | Common Stock | $513 | — | — | — | — | $(1) | $512 | | Additional Paid-in Capital | $701,008 | — | — | — | — | $(1,902) | $699,106 | | Retained Earnings | $430,405 | $(270,377) | — | $(11,233) | — | — | $148,795 | | Accumulated Other Comprehensive Loss | $(46,428) | — | $15,927 | — | — | — | $(30,501) | | Treasury Stock | $(74,752) | — | — | — | $(29,248) | $3,479 | $(100,521) | | Total Stockholders' Equity | $1,010,746 | $(270,377) | $15,927 | $(11,233) | $(29,248) | $1,576 | $717,391 | - Total stockholders' equity decreased by $293,355K from October 31, 2024, to July 31, 2025, primarily due to a net loss of $(270,377)K and treasury stock purchases of $(29,248)K, partially offset by foreign currency translation adjustments of $15,927K[18] Notes to Unaudited Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements 1. Nature of Operations and Basis of Presentation Describes the company's business, operating segments, and the accounting principles used in preparing the financial statements - Quanex Building Products Corporation is a leading manufacturer and component supplier to OEMs in various industries, including window, door, solar, refrigeration, custom mixing, building access, and cabinetry markets[21] - The company operates through three reportable business segments: Hardware Solutions, Extruded Solutions, and Custom Solutions[21] - The accompanying interim unaudited condensed consolidated financial statements are prepared pursuant to SEC rules and U.S. GAAP, with certain information condensed or omitted[23] - Revenue from product sales is recognized at a point in time when control is transferred to the customer, generally upon shipment[27] Net Sales by Segment (Three Months Ended July 31, in thousands): | Segment | 2025 | 2024 | Change ($K) | Change (%) | | :-------------------- | :----- | :----- | :---------- | :--------- | | Hardware Solutions | $227,116 | $75,460 | $151,656 | 201% | | Extruded Solutions | $174,427 | $134,552 | $39,875 | 30% | | Custom Solutions | $102,264 | $72,667 | $29,597 | 41% | | Unallocated Corporate & Other (Eliminations) | $(8,534) | $(2,334) | $(6,200) | 266% | | Total Net Sales | $495,273 | $280,345 | $214,928 | 77% | Net Sales by Segment (Nine Months Ended July 31, in thousands): | Segment | 2025 | 2024 | Change ($K) | Change (%) | | :-------------------- | :----------- | :--------- | :---------- | :--------- | | Hardware Solutions | $614,791 | $204,127 | $410,664 | 201% | | Extruded Solutions | $478,024 | $379,860 | $98,164 | 26% | | Custom Solutions | $284,809 | $208,201 | $76,608 | 37% | | Unallocated Corporate & Other (Eliminations) | $(29,829) | $(6,487) | $(23,342) | 360% | | Total Net Sales | $1,347,795 | $785,701 | $562,094 | 72% | - Restructured reportable operating segments during the three months ended July 31, 2025, to integrate the acquisition of Tyman plc[38] - Incurred $1.4 million (3 months) and $10.2 million (9 months) in restructuring charges, primarily for workforce alignment costs[38] - A goodwill impairment test, triggered by the restructuring, resulted in an asset impairment of $302.3 million during the three months ended July 31, 2025[39] 2. Acquisition Details the acquisition of Tyman plc, including the purchase price allocation and pro forma financial impacts - Completed the acquisition of Tyman plc on August 1, 2024, for 14,139,477 newly issued Quanex common shares and approximately $504.1 million in cash[40] - An Amended Credit Agreement became effective on August 1, 2024, increasing the senior secured revolving credit facility to $475 million and providing a $500 million senior secured term loan A facility[41][42] - Measurement period adjustments resulted in a $4.1 million reduction in the preliminary goodwill initially recognized for the Tyman acquisition[44] Final Purchase Price Allocation for Tyman Acquisition (in thousands): | Net assets acquired | Final Purchase Price Allocation | | :-------------------------- | :---------------------------- | | Accounts receivable | $99,574 | | Inventories | $211,331 | | Prepaid and other assets | $19,762 | | Property, plant and equipment | $157,851 | | Operating lease right-of-use assets | $65,414 | | Goodwill | $380,941 | | Intangible assets | $539,285 | | Accounts payable | $(67,364) | | Accrued liabilities | $(41,958) | | Long-term debt | $(300,684) | | Operating lease liabilities | $(66,228) | | Deferred income taxes | $(138,808) | | Other liabilities | $(10,502) | | Net assets acquired | $848,614 | Pro Forma Results (Nine Months Ended July 31, 2024, in thousands, except per share amounts): | Metric | Pro Forma | Reported | | :-------------------- | :---------- | :--------- | | Net sales | $1,395,632 | $785,701 | | Net income | $48,846 | $46,976 | | Basic earnings per share | $1.04 | $1.43 | | Diluted earnings per share | $1.03 | $1.42 | 3. Inventories Provides a breakdown of inventory components, including raw materials, finished goods, and work in process Inventories (in thousands): | Category | July 31, 2025 | October 31, 2024 | Change ($K) | Change (%) | | :---------------------- | :-------------- | :--------------- | :---------- | :--------- | | Raw materials | $88,257 | $81,330 | $6,927 | 8.5% | | Finished goods and work in process | $181,374 | $192,448 | $(11,074) | -5.8% | | Supplies and other | $2,591 | $1,772 | $819 | 46.2% | | Total | $272,222 | $275,550 | $(3,328) | -1.2% | 4. Leases Outlines the company's lease accounting policies, including right-of-use assets, lease liabilities, and lease costs - The company recognizes right-of-use (ROU) assets and lease liabilities for operating and finance leases with contractual terms greater than 12 months[51] Lease-Related Assets and Liabilities (in thousands): | Category | July 31, 2025 | October 31, 2024 | Change ($K) | Change (%) | | :------------------------------------------ | :-------------- | :--------------- | :---------- | :--------- | | Operating lease right-of-use assets | $147,829 | $126,715 | $21,114 | 16.7% | | Finance lease assets | $71,521 | $67,046 | $4,475 | 6.7% | | Total lease assets | $219,350 | $193,761 | $25,589 | 13.2% | | Current operating lease liabilities | $15,243 | $12,475 | $2,768 | 22.2% | | Current maturities of long-term debt (Finance) | $4,257 | $3,688 | $569 | 15.4% | | Noncurrent operating lease liabilities | $138,246 | $117,560 | $20,686 | 17.6% | | Long-term debt (Finance) | $56,769 | $56,988 | $(219) | -0.4% | | Total lease liabilities | $214,515 | $190,711 | $23,804 | 12.5% | Components of Lease Costs (Three Months Ended July 31, in thousands): | Category | 2025 | 2024 | Change ($K) | Change (%) | | :---------------------- | :----- | :----- | :---------- | :--------- | | Operating lease cost | $8,112 | $3,722 | $4,390 | 118% | | Finance lease cost (Amortization) | $1,697 | $1,237 | $460 | 37.2% | | Finance lease cost (Interest) | $992 | $839 | $153 | 18.2% | | Variable lease costs | $899 | $523 | $376 | 71.9% | | Total lease cost | $11,700 | $6,321 | $5,379 | 85.1% | - Weighted-average remaining lease term for operating leases is 11.5 years (both 2025 and 2024), and for financing leases is 15.4 years (2025) vs 16.3 years (2024)[57] - Weighted-average discount rate for operating leases increased to 5.56% (2025) from 5.31% (2024), and for financing leases to 4.90% (2025) from 4.84% (2024)[57] 5. Property, Plant and Equipment Details the net carrying amount of property, plant, and equipment, along with depreciation and impairment information Property, Plant and Equipment, Net (in thousands): | Category | July 31, 2025 | October 31, 2024 | Change ($K) | Change (%) | | :-------------------------- | :-------------- | :--------------- | :---------- | :--------- | | Property, plant and equipment, net | $405,510 | $402,466 | $3,044 | 0.8% | - Depreciation expense for the three months ended July 31, 2025, was $21.6 million, up from $8.1 million in the prior year[58] - For the nine months, it was $48.2 million, up from $24.0 million[58] - A one-time depreciation charge of $7.3 million was recorded during the three months ended July 31, 2025, due to push-down accounting related to the Tyman acquisition[58] - No impairment charges related to property, plant and equipment or intangible assets were recorded for the periods ended July 31, 2025, and October 31, 2024[60][67] 6. Goodwill and Intangible Assets Provides information on goodwill carrying amounts, impairment charges, and amortizable intangible assets Goodwill Carrying Amount (Nine Months Ended July 31, 2025, in thousands): | Item | Amount | | :-------------------------- | :------- | | Beginning balance as of November 1, 2024 | $574,711 | | Measurement period adjustments | $(3,989) | | Goodwill impairment charge | $(302,284) | | Foreign currency translation adjustment | $3,021 | | Balance as of July 31, 2025 | $271,459 | - A non-cash goodwill impairment charge of $302.3 million was recognized during the three months ended July 31, 2025, due to a prolonged decline in market price and high industry uncertainty[63][64] - The impairment charge affected Hardware Solutions ($163.2 million), Extruded Solutions ($54.9 million), and Custom Solutions ($84.2 million)[119] Amortizable Intangible Assets (in thousands): | Category | July 31, 2025 Gross Carrying Amount | July 31, 2025 Accumulated Amortization | October 31, 2024 Gross Carrying Amount | October 31, 2024 Accumulated Amortization | | :-------------------------- | :---------------------------------- | :------------------------------------- | :----------------------------------- | :-------------------------------------- | | Customer relationships | $506,524 | $134,838 | $512,131 | $112,748 | | Trademarks and trade names | $240,667 | $56,947 | $243,434 | $47,685 | | Patents and other technology | $26,050 | $22,688 | $25,164 | $22,387 | | Total | $773,241 | $214,473 | $780,729 | $182,820 | - Amortization expense for intangible assets was $12.3 million (3 months) and $29.4 million (9 months) for 2025, significantly higher than $2.8 million and $9.0 million in 2024[66] 7. Debt and Finance Lease Obligations Details the company's long-term debt, finance lease obligations, and compliance with debt covenants Long-term Debt (in thousands): | Category | July 31, 2025 | October 31, 2024 | Change ($K) | Change (%) | | :------------------------------------------ | :-------------- | :--------------- | :---------- | :--------- | | Term Loan A Facility | $475,000 | $493,750 | $(18,750) | -3.8% | | Revolving Credit Facility | $197,500 | $222,500 | $(25,000) | -11.2% | | Finance lease obligations and other | $61,194 | $60,676 | $518 | 0.9% | | Unamortized deferred financing fees | $(11,776) | $(13,983) | $2,207 | -15.8% | | Total debt | $721,918 | $762,943 | $(41,025) | -5.4% | | Less: Current maturities of long-term debt | $26,313 | $25,745 | $568 | 2.2% | | Long-term debt (non-current) | $695,605 | $737,198 | $(41,593) | -5.6% | - The Amended Credit Agreement, effective August 1, 2024, increased the Revolving Credit Facility to $475 million and established a $500 million Term Loan A Facility, both maturing on August 1, 2029[70] - As of July 31, 2025, $672.5 million in borrowings were outstanding under the Facilities, accruing interest at 6.96% per annum, with $271.4 million available for use[77] - The weighted-average borrowing rate for the nine months ended July 31, 2025, was 6.81%, up from 6.69% in the prior year[77] - The company was in compliance with its debt covenants as of July 31, 2025[77] 8. Retirement Plans Reports on the company's retirement plan liabilities, specifically the non-qualified deferred compensation plan - The liability associated with the non-qualified deferred compensation plan decreased to approximately $4.1 million as of July 31, 2025, from $4.7 million as of October 31, 2024[78] 9. Income Taxes Discusses the company's income tax benefit/expense, effective tax rate, and valuation allowances - The estimated annual effective income tax rate for the nine months ended July 31, 2025, was 2.5%, a significant decrease from 21.2% in 2024[79] - The primary discrete item affecting the 2025 effective rate was a $10.8 million benefit related to the goodwill impairment[79] - The company maintains valuation allowances for certain state net operating losses ($0.2 million) and capital losses ($3.5 million) as of July 31, 2025[80] 10. Contingencies Outlines potential liabilities from environmental matters and legal claims, assessing their financial impact - The company is not currently involved in any material environmental remediation matters and does not expect to incur material expenses or capital expenditures related to environmental matters in fiscal 2025[82][83] - The company is party to multiple claims related to alleged defects in a commercial sealant product from the 2000s but believes the eventual outcome will not have a material adverse effect on its financial condition, results of operations, or cash flows[85] 11. Fair Value Measurement of Assets and Liabilities Explains how fair values are determined for various financial instruments and assets, including derivatives - Carrying amounts for cash, cash equivalents, accounts receivable, accounts payable, and variable rate debt approximate fair value due to their short-term maturity or frequent re-pricing[87] - Recognized a net gain of $0.3 million from forward foreign exchange contracts during the nine months ended July 31, 2025, with no outstanding contracts as of that date[89] - Subscribed to BOPREAL bonds, resulting in approximately $2.6 million in USD proceeds during the three months ended July 31, 2025, with no outstanding bonds as of that date[90] 12. Stock-Based Compensation Details the stock-based compensation expense, restricted stock awards, and treasury share repurchases Total Stock-Based Compensation Expense (in thousands): | Period | 2025 | 2024 | Change ($K) | Change (%) | | :-------------------------- | :----- | :----- | :---------- | :--------- | | Three Months Ended July 31 | $1,800 | $1,277 | $523 | 41.0% | | Nine Months Ended July 31 | $3,556 | $5,346 | $(1,790) | -33.5% | - Restricted stock awards granted during the nine months ended July 31, 2025, totaled 107,682 shares with a weighted-average grant date fair value of $29.19 per share[94] - As of July 31, 2025, total unrecognized compensation cost for unamortized restricted stock awards was $3.7 million, expected to be recognized over a weighted-average vesting period of 2.0 years[94] - The company repurchased 1,509,407 treasury shares during the nine months ended July 31, 2025[109] 13. Other, net Summarizes various non-operating income and expense items, including foreign currency impacts and interest income Other, net (in thousands): | Category | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Foreign currency transaction gains (losses) | $949 | $(38) | $118 | $(94) | | Foreign currency derivative gains (losses) | $(546) | $9,200 | $289 | $9,200 | | Pension service (costs) benefit | $(50) | $0 | $(39) | $903 | | Interest income | $591 | $300 | $1,678 | $772 | | Other | $(89) | $12 | $(121) | $(261) | | Total Other, net | $855 | $9,474 | $1,925 | $10,520 | 14. Segment Information Provides financial data by reportable segment, including net sales and operating income, reflecting recent restructuring - During the third quarter of 2025, the company restructured its reportable segments from four to three: Hardware Solutions, Extruded Solutions, and Custom Solutions, with prior period amounts recast[111][112] Operating (Loss) Income by Segment (Three Months Ended July 31, in thousands): | Segment | 2025 | 2024 | Change ($K) | Change (%) | | :-------------------- | :--------- | :--------- | :---------- | :--------- | | Hardware Solutions | $(157,445) | $8,237 | $(165,682) | -2011% | | Extruded Solutions | $(24,867) | $20,654 | $(45,521) | -220% | | Custom Solutions | $(76,093) | $1,924 | $(78,017) | -4055% | | Unallocated Corporate & Other | $(12,430) | $(7,373) | $(5,057) | 69% | | Total Operating (Loss) Income | $(270,835) | $23,442 | $(294,277) | -1255% | Operating (Loss) Income by Segment (Nine Months Ended July 31, in thousands): | Segment | 2025 | 2024 | Change ($K) | Change (%) | | :-------------------- | :--------- | :--------- | :---------- | :--------- | | Hardware Solutions | $(160,550) | $15,940 | $(176,490) | -1107% | | Extruded Solutions | $14,155 | $54,404 | $(40,249) | -74% | | Custom Solutions | $(68,973) | $1,695 | $(70,668) | -4169% | | Unallocated Corporate & Other | $(21,524) | $(20,043) | $(1,481) | 7% | | Total Operating (Loss) Income | $(236,892) | $51,996 | $(288,888) | -556% | - Goodwill impairment losses totaling $302.3 million were recognized, with $163.2 million pertaining to Hardware Solutions, $54.9 million to Extruded Solutions, and $84.2 million to Custom Solutions[119] 15. Earnings Per Share Presents basic and diluted earnings per common share, along with weighted-average shares outstanding Earnings Per Common Share: | Period | 2025 (Basic & Diluted) | 2024 (Basic) | 2024 (Diluted) | | :-------------------------- | :----------------------- | :------------- | :------------- | | Three Months Ended July 31 | $(6.04) | $0.77 | $0.77 | | Nine Months Ended July 31 | $(5.83) | $1.43 | $1.42 | - Weighted-average common shares outstanding (basic) for the nine months ended July 31, 2025, increased to 46,395 thousand from 32,857 thousand in 2024[122] - Anti-dilutive restricted stock award equivalents for the three and nine months ended July 31, 2025, were 37,142 and 21,538, respectively[122] 16. New Accounting Guidance Discusses recently issued accounting pronouncements and their potential impact on the company's financial statements - The company did not adopt any new accounting pronouncements during the three and nine months ended July 31, 2025[123] - The company is currently evaluating the potential impact of new FASB guidance on 'Expense Disaggregation Disclosures' (effective after Dec 15, 2026), 'Improvements to Income Tax Disclosures' (effective after Dec 15, 2024), and 'Improvements to Reportable Segment Disclosures' (effective after Dec 15, 2023)[124][125][126] Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on financial performance, condition, and outlook, including impacts of acquisitions, restructuring, and market dynamics Our Business Describes the company's core operations, market position, and strategic objectives for growth - Quanex is a leading manufacturer and component supplier to OEMs in window, door, solar, refrigeration, custom mixing, building access, and cabinetry markets[134] - The business is organized into three reportable segments: Hardware Solutions, Extruded Solutions, and Custom Solutions, following a recent restructuring[134][136] - The company aims to invest in organic growth and evaluate strategic acquisitions to expand its footprint, product offerings, and market leadership[135] Recent Transactions and Events Highlights significant corporate activities, including segment restructuring, acquisitions, and geopolitical monitoring - A restructuring of reportable operating segments during the three months ended July 31, 2025, triggered a $302.3 million goodwill impairment charge[137] - The acquisition of Tyman plc was completed on August 1, 2024, involving 14,139,477 new Quanex shares and approximately $504.1 million in cash[139] - The company is monitoring geopolitical tensions and military conflicts (e.g., Ukraine and Gaza) for potential impacts on commodity prices, supply chains, and product demand[140][141] Market Overview and Outlook Analyzes key market drivers, industry forecasts, and commodity price trends affecting the company's operations - North American residential remodeling and replacement (R&R) and new home construction activity are the primary drivers of operating results[142] - NAHB forecasted calendar-year housing starts to be approximately 1.4 million for 2025, 2026, and 2027[143] - Ducker forecast indicates total window shipments are expected to decrease 4.3% in 2025 and 1.5% in 2026[143] - Commodities like PVC, titanium dioxide, petroleum products, stainless steel, zinc, aluminum, and wood are subject to pricing fluctuations, with price adjusters in place for most customers to mitigate long-term exposure[144] Results of Operations (Three Months Ended July 31, 2025 Compared to Three Months Ended July 31, 2024) Compares the company's financial performance for the three months ended July 31, 2025, against the same period in 2024 Consolidated Financial Performance (Three Months Ended July 31, in thousands): | Metric | 2025 | 2024 | Change ($K) | Change (%) | | :------------------------------------------ | :--------- | :--------- | :---------- | :--------- | | Net sales | $495,273 | $280,345 | $214,928 | 77% | | Operating (loss) income | $(270,835) | $23,442 | $(294,277) | -1255% | | Net (loss) income | $(276,007) | $25,350 | $(301,357) | -1189% | - Net sales increased by $214.9 million (77%) primarily due to the Tyman acquisition[146] - Operating income shifted from a gain of $23.4 million to a loss of $(270.8) million, largely due to $302.3 million in asset impairment charges[146] - Interest expense increased by $13.3 million (1,519%) due to higher borrowings[146][161] - Income tax shifted from an expense of $6.7 million to a benefit of $8.2 million, driven by the asset impairment charges[146][162] Hardware Solutions Analyzes the financial performance of the Hardware Solutions segment, including sales growth and operating income changes - Net sales increased by $151.7 million (201%) to $227.1 million, primarily driven by the Tyman acquisition ($150.8 million)[147] - Operating income shifted from $8.2 million to a loss of $(157.4) million, mainly due to a $163.2 million goodwill impairment charge[147][150] Extruded Solutions Examines the financial performance of the Extruded Solutions segment, focusing on sales and operating income fluctuations - Net sales increased by $39.9 million (30%) to $174.4 million, primarily due to the Tyman acquisition ($39.9 million)[151] - Operating income shifted from $20.7 million to a loss of $(24.9) million, mainly due to a $54.9 million goodwill impairment charge[151][154] Custom Solutions Reviews the financial performance of the Custom Solutions segment, detailing sales growth and operating income changes - Net sales increased by $29.6 million (41%) to $102.3 million, primarily driven by the Tyman acquisition ($27.4 million)[154] - Operating income shifted from $1.9 million to a loss of $(76.1) million, mainly due to an $84.2 million goodwill impairment charge[154][158] Unallocated Corporate & Other Discusses changes in unallocated corporate expenses, including selling, general, and administrative costs - Selling, general and administrative expenses decreased by $1.5 million (21%) due to lower transaction and advisory fees and compensation expense[160] Results of Operations (Nine Months Ended July 31, 2025 Compared to Nine Months Ended July 31, 2024) Compares the company's financial performance for the nine months ended July 31, 2025, against the same period in 2024 Consolidated Financial Performance (Nine Months Ended July 31, in thousands): | Metric | 2025 | 2024 | Change ($K) | Change (%) | | :------------------------------------------ | :----------- | :--------- | :---------- | :--------- | | Net sales | $1,347,795 | $785,701 | $562,094 | 72% | | Operating (loss) income | $(236,892) | $51,996 | $(288,888) | -556% | | Net (loss) income | $(270,377) | $46,976 | $(317,353) | -676% | - Net sales increased by $562.1 million (72%) primarily due to the Tyman acquisition[164] - Operating income shifted from a gain of $52.0 million to a loss of $(236.9) million, largely due to $302.3 million in asset impairment charges[164] - Interest expense increased by $39.4 million (1,362%) due to higher borrowings[164][178] - Income tax shifted from an expense of $12.6 million to a benefit of $6.9 million, driven by the asset impairment charges[164][179] Hardware Solutions Analyzes the financial performance of the Hardware Solutions segment for the nine-month period, including sales growth and operating income changes - Net sales increased by $410.7 million (201%) to $614.8 million, primarily driven by the Tyman acquisition ($413.4 million)[165] - Operating income shifted from $15.9 million to a loss of $(160.6) million, mainly due to a $163.2 million goodwill impairment charge[165][168] Extruded Solutions Examines the financial performance of the Extruded Solutions segment for the nine-month period, focusing on sales and operating income fluctuations - Net sales increased by $98.2 million (26%) to $478.0 million, primarily due to the Tyman acquisition ($115.2 million)[169] - Operating income decreased by $40.2 million (74%) to $14.2 million, impacted by a $54.9 million goodwill impairment charge[169][172] Custom Solutions Reviews the financial performance of the Custom Solutions segment for the nine-month period, detailing sales growth and operating income changes - Net sales increased by $76.6 million (37%) to $284.8 million, primarily driven by the Tyman acquisition ($74.2 million)[172] - Operating income shifted from $1.7 million to a loss of $(69.0) million, mainly due to an $84.2 million goodwill impairment charge[172][175] Unallocated Corporate & Other Discusses changes in unallocated corporate expenses for the nine-month period, including selling, general, and administrative costs - Selling, general and administrative expenses decreased by $5.1 million (26%) due to lower transaction and advisory fees and compensation expense[177] Liquidity and Capital Resources Analyzes the company's ability to generate and manage cash, including sources of funds, debt facilities, and cash flow activities - Principal sources of funds include cash on hand, cash flow from operations, and borrowings under credit facilities[180] - The Amended Credit Agreement, effective August 1, 2024, increased the revolving credit facility to $475 million and added a $500 million term loan A facility[181][182][183] - As of July 31, 2025, the company had $66.3 million in cash and equivalents, $672.5 million outstanding under the Facilities, and $271.4 million available under the Revolving Credit Agreement[186] - Cash provided by operating activities decreased by $6.7 million for the nine months ended July 31, 2025, compared to the prior year[189] - Cash used for investing activities increased by $17.3 million, primarily due to higher capital expenditures for businesses acquired in the Tyman Acquisition[190] - Cash used for financing activities increased by $61.9 million, mainly due to increased treasury share purchases and repayments of long-term debt[191] - The company repurchased 100,000 shares in July 2025, with $33.6 million remaining under its $75.0 million stock repurchase program[187][220] Critical Accounting Policies and Estimates Identifies accounting policies requiring significant judgment and estimation, which could materially impact financial results - The preparation of financial statements requires significant estimates and assumptions that affect reported amounts of assets, liabilities, revenues, and expenses[193] - Critical accounting policies and estimates have not materially changed during the nine months ended July 31, 2025[194] New Accounting Pronouncements Discusses recently issued accounting pronouncements and their potential impact on the company's financial statements - No new accounting pronouncements were adopted during the three and nine months ended July 31, 2025[195] - The company is evaluating the potential impact of new FASB guidance on expense disaggregation, income tax disclosures, and reportable segment disclosures, effective in future periods[196][197][198] Item 3: Quantitative and Qualitative Disclosures About Market Risk Outlines the company's exposure to interest rate, foreign currency, and commodity price risks, and mitigation strategies Interest Rate Risk Assesses the company's exposure to fluctuations in interest rates, particularly on variable-rate debt - The company's debt bears interest at variable rates, making it sensitive to changes in interest rates[200] - A hypothetical 1.0% increase or decrease in interest rates could result in approximately $6.7 million of additional pretax charges or credits to net income per year[200] Foreign Currency Rate Risk Evaluates the impact of foreign currency exchange rate fluctuations on international operations and hedging strategies - International operations are exposed to foreign currency rate risks, primarily from fluctuations in the Euro, British Pound Sterling (GBP), and Mexican Peso (MXN)[201] - The company uses foreign exchange contracts to manage a portion of this risk, recognizing a net gain of $0.3 million during the nine months ended July 31, 2025[201] - As of July 31, 2025, there were no outstanding forward foreign exchange contracts[201] Commodity Price Risk Analyzes the company's exposure to price volatility in key raw materials and strategies to mitigate these risks - The company is exposed to price fluctuations in key raw materials such as PVC, petroleum products, stainless steel, zinc, aluminum, and wood[144][202][205] - Price adjusters are in place with a majority of customers and suppliers for PVC, petroleum-based materials, and hardwood products to mitigate long-term exposure to price changes[202][203][204] - Short-term volatility remains due to timing lags in implementing price updates for various commodities[202][204][205][206] - Strategies like surcharges and utilizing local supply chains are being implemented to mitigate potential tariff impacts on raw materials[207] Item 4: Controls and Procedures Reports on the effectiveness of disclosure controls and internal controls over financial reporting, including any material weaknesses and remediation efforts Evaluation of Disclosure Controls and Procedures Assesses the effectiveness of the company's disclosure controls and procedures, identifying any material weaknesses - Disclosure controls and procedures were not effective as of July 31, 2025, due to a material weakness in internal controls over financial reporting related to the preparation and review of the Statement of Cash Flows[209] - The recently acquired Tyman business was excluded from management's assessment of the effectiveness of internal controls over financial reporting as of July 31, 2025[210] - Despite the material weakness, management concluded that the financial statements fairly present the financial position, results of operations, and cash flows[211] Changes in Internal Control over Financial Reporting Details any changes in internal control over financial reporting, including remediation efforts for identified weaknesses - Remediation efforts for the material weakness include enhanced review procedures and a structured non-cash transaction checklist for the Statement of Cash Flow[212][215] - The company expects to conclude the remediation efforts with the October 31, 2025, control evaluation[212] - Integration of Tyman's financial reporting systems and internal control framework is in progress and expected to be completed during fiscal 2025[213] PART II. OTHER INFORMATION Item 1A: Risk Factors Highlights potential risks to the company's business, including geopolitical instability and trade barriers - No material changes from the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended October 31, 2024[217] - New discussions highlight risks from regional or global trade barriers, tariffs, and geopolitical instability (e.g., Ukraine and Gaza conflicts) that could increase raw material costs and impact supply chains[218][219] Item 2: Unregistered Sales of Equity Securities and Use of Proceeds Reports on the company's common stock repurchases under its publicly announced stock repurchase program Issuer Purchases of Equity Securities (Three Months Ended July 31, 2025): | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of a Publicly Announced Plans or Programs | Maximum US Dollars Remaining that May Yet Be Used to Purchase Shares Under the Plans or Programs | | :------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------- | :-------------------------------------------------------------------------------- | | May 2025 | — | $— | — | $35,612,848 | | June 2025 | — | $— | — | $35,612,848 | | July 2025 | 100,000 | $20.54 | 100,000 | $33,559,078 | | Total | 100,000 | $20.54 | 100,000 | | - The stock repurchase program, approved in December 2021, authorized up to $75.0 million worth of shares, with no expiration date or limit on the number of shares[220] Item 5: Other Information Provides disclosures on any other material information not covered in previous sections, such as trading arrangements - No directors or executive officers adopted or terminated any Rule 10b5-1(c) or 'non-Rule 10b5-1 trading arrangement' during the three months ended July 31, 2025[221] Item 6: Exhibits Lists all exhibits filed with the Form 10-Q, including agreements, corporate documents, and certifications - The exhibit index lists various documents, including those related to the Tyman acquisition (Rule 2.7 Announcement, Co-operation Agreement), the Amended Credit Agreement, and corporate governance documents[229] - Certifications by the Chief Executive Officer and Chief Financial Officer (31.1, 31.2) and pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (32.1) are filed herewith[229]