What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-09-04 compared with 2020-06-05 · 118 added, 108 removed, 239 unchanged (49% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes as of April 30, 2020 , and for the three and six months ended April 30, 2020 and 2019 , included elsewhere herein.

The following discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes as of July 31, 2020, and for the three and nine months ended July 31, 2020 and 2019, included elsewhere herein.

For additional information pertaining to our business, including risk factors which should be considered before investing in our common stock, refer to our Annual Report on Form 10-K for the fiscal year ended October 31, 2019.

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On March 11, 2020, the WHO declared the outbreak of COVID-19 to be a global pandemic and recommended containment and mitigation measures.

Our first priority with regard to the COVID-19 pandemic is to do everything we can to ensure the safety, health and welfare of our employees, customers, suppliers and other partners.

With the implementation of health and safety practices at our facilities, we are continuing to supply the industry during this uncertain time, recognizing the important role the construction industry plays in providing housing and necessary infrastructure.

As federal, state and local governments react to the public health crisis, significant uncertainties have been created in the economy.

As of the date of this filing, we have been impacted by temporary facility closures and reduced hours of operations.

We believe that we incurred a reduction to net sales of $20 million to $25 million related to the pandemic and the resulting containment for the three and six months ended April 30, 2020, but some of those effects were mitigated by our ability to continue operations and deliver orders as an essential service provider.

The COVID-19 pandemic and actions taken in response thereto are continuing to have a significant adverse effect on many sectors of the economy, including new home building and remodeling activity and we may be further impacted by our role in that supply chain.

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• We are continuing to provide our products to support critical infrastructure needs while following national, state, and local guidelines required to continue operations during the existence of the pandemic and related local declarations of emergency.

All manufacturing facilities in the United States and Germany have been declared essential by the relevant authorities and have thus remained operational for the duration of the pandemic.

Government shutdown orders in the United Kingdom forced us to close both U.K.

plants for a number of weeks, but those plants have been reopened.

We have instituted rigorous cleaning and social distancing protocols as outlined by the Centers for Disease Control and Prevention, WHO and, where applicable, more stringent local requirements.

Employees able to work from home have been doing so since March 16, 2020.

We have reduced operating schedules, staggered shifts and implemented furloughs to balance production and demand and encourage social distancing.

All manufacturing facilities in the United States and Germany remained operational for the duration of the pandemic and both U.K.

plants became operational again during May 2020.

However, local or regional hotspots of the

pandemic could result in other locations being temporarily idled due to the need to deep clean areas where an employee who has tested positive for COVID-19 worked.

• While we currently expect any negative impact on sales to be temporary, the duration of the COVID-19 pandemic, the actions to contain the pandemic and treat its impacts, and the effects on our operations are highly uncertain and cannot be predicted at this time.

• We are taking precautionary measures and adjusting our operational needs, including a reduction of our 2020 capital expenditure plans by approximately 25% to 30%.

In March 2020, we borrowed $50 million under the Credit Facility as a precautionary measure to ensure funds were available to meet our obligations during the COVID-19 pandemic.

This borrowing was subsequently repaid in May 2020.

In the future, we may be required to borrow additional funds in order to be prepared for any unforeseen impacts of the COVID-19 pandemic.

We continue to monitor the rapidly evolving situation and guidance from international and domestic authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations.

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As a result, during the first quarter of fiscal 2020, we began to restructure our operations within that segment by announcing the closure of one of our plants.

We incurred expenses for severance, equipment moves, and other exit activities of $0.1 million and $0.3 million related to this plant closure during the three and six months ended April 30, 2020 and we may incur costs related to additional restructuring activities in future periods.

We incurred expenses for severance, equipment moves, and other exit activities of $0.3 million related to this plant closure during the nine months ended July 31, 2020 and we may incur costs related to additional restructuring activities in future periods.

Market Overview and Outlook

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residential wood cabinet demand.

In April 2020, the NAHB has forecasted calendar-year housing starts (excluding manufactured units) to be 1.1 million in 2020, 1.3 million in 2021, and 1.4 million in 2022.

The May 2020 Ducker forecast indicated that window shipments in the R&R market are expected to decrease approximately 6% during the calendar year ended 2020 and increase 2% and 4% in 2021 and 2022, respectively.

Derived from reports published by Ducker, the overall increase in window shipments for the trailing twelve months ended March 31, 2020 was 4.7%.

During this period, new construction and R&R activities increased 9.3% and 1.1%, respectively.

In April 2020, Catalina Research estimated that residential semi-custom cabinet demand in the U.S.

In July 2020, the NAHB forecasted calendar-year housing starts (excluding manufactured units) to be 1.1 million in 2020, 1.2 million in 2021, and 1.4 million in 2022.

The August 2020, Ducker forecast indicated that window shipments in the R&R market are expected to decrease approximately 5% during the calendar year ended 2020 and increase 2% and 4% in 2021 and 2022, respectively.

Derived from reports published by Ducker, the overall decrease in window shipments for the trailing twelve months ended June 30, 2020 was 9.2%.

During this period, new construction and R&R activities decreased 11.2% and 7.8%, respectively.

In August 2020, Catalina Research estimated that residential semi-custom cabinet demand in the U.S.

will decline approximately 10% in 2020 and rebound approximately 2% in 2021.

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Results of Operations

Three Months Ended April 30, 2020 Compared to Three Months Ended April 30, 2019

Three Months Ended April 30,

Three Months Ended July 31, 2020 Compared to Three Months Ended July 31, 2019

Three Months Ended July 31,

2020 2019 Change $ % Variance

(Dollars in millions)

Net sales $ 212.1 $ 238.5 $ (26.4) (11) %

Cost of sales (excluding depreciation and amortization) 162.4 181.4 (19.0) 10 %

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Depreciation and amortization 11.0 12.2 (1.2) 10 %

Asset impairment charges

Operating income (loss)

Operating income $ 16.6 $ 19.1 $ (2.5) (13) %

Interest expense (1.2) (2.6) 1.4 54 %

Other, net (0.2) 0.3 (0.5) (167) %

Income tax expense (4.4) (5.0) 0.6 12 %

Net income (loss)

Net income $ 10.8 $ 11.8 $ (1.0) (8) %

Our period-over-period results by reportable segment follow.

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NA Fenestration

Three Months Ended April 30,

Three Months Ended July 31,

2020 2019 $ Change % Variance

(Dollars in millions)

Net sales $ 122.4 $ 136.3 $ (13.9) (10)%

Cost of sales (excluding depreciation and amortization) 92.6 101.7 (9.1) 9%

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Operating income margin 10 % 12 %

Net sales decreased $6.7 million , or 6% , for the three months ended April 30, 2020 compared to the same period in 2019 , which was primarily driven by a decrease in volumes including the impacts of COVID-19.

Net sales decreased $13.9 million, or 10%, for the three months ended July 31, 2020 compared to the same period in 2019, which was driven by a decrease in volumes including the impacts of COVID-19.

Cost of Sales.

The cost of sales decreased $4.9 million when comparing the three months ended April 30, 2020 to the same period in 2019 .

The cost of sales decreased $9.1 million when comparing the three months ended July 31, 2020 to the same period in 2019.

Cost of sales decreased due to lower volumes during the period, including a corresponding decrease in selling expenses as a result of the impacts of COVID-19 as mentioned above.

Selling, General and Administrative.

S elling, general and administrative expenses decreased $2.2 million when comparing the three months ended April 30, 2020 to the same period in 2019 primarily due to lower incentive compensation expense.

S elling, general and administrative expenses remained flat when comparing the three months ended July 31, 2020 to the same period in 2019.

Restructuring Charges.

Restructuring charges for each of the three month periods ended April 30, 2020 and 2019 of $0.1 million relate to facility lease expense for a vinyl extrusion plant which was closed in January 2017 in the U.S.

that has not been sublet or otherwise exited as of April 30, 2020 .

Restructuring charges for each of the three month periods ended July 31, 2020 and 2019 of $0.1 million relate to facility lease expense for a vinyl extrusion plant which was closed in January 2017 in the U.S.

that has not been sublet or otherwise exited as of July 31, 2020.

EU Fenestration

Three Months Ended April 30,

Three Months Ended July 31,

2020 2019 $ Change % Variance

(Dollars in millions)

Net sales $ 38.2 $ 44.3 $ (6.1) (14)%

Cost of sales (excluding depreciation and amortization) 25.8 30.7 (4.9) 16%

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Operating income margin 14 % 12 %

Net sales decreased $12.4 million , or 30% , when comparing the three months ended April 30, 2020 to the same period in 2019.

Net sales decreased $11.5 million year-over-year, including the impacts of COVID-19, and $1.5 million due to unfavorable foreign currency rate changes.

Net sales decreased $6.1 million, or 14%, when comparing the three months ended July 31, 2020 to the same period in 2019.

Net sales decreased $5.8 million year-over-year as a result of lower volumes, including the impacts of COVID-19, and $0.4 million due to unfavorable foreign currency rate changes.

These decreases were slightly offset by $0.1 million of base price increases.

Cost of Sales.

The cost of sales decreased $7.9 million for the three months ended April 30, 2020 compared to the same period in 2019 .

The cost of sales decreased $4.9 million for the three months ended July 31, 2020 compared to the same period in 2019.

Cost of sales decreased due to lower volumes during the period, primarily resulting from the impacts of COVID-19 as mentioned above.

Selling, General and Administrative.

Selling, general and administrative expense decreased $0.4 million , or 7% , for the three months ended April 30, 2020 compared to the same period in 2019 .

Savings from temporary COVID-19 related workforce furloughs and favorable foreign currency exchange rate changes were partially offset by normal compensation inflation.

Selling, general and administrative expense decreased $1.2 million, or 20%, for the three months ended July 31, 2020 compared to the same period in 2019.

The decrease is due to savings incurred from reduced marketing and other general expenses as a result of COVID-19 restrictions, reimbursements for labor costs in the UK from government aid for COVID-19 furloughs, and lower incentive compensation.

NA Cabinet Components

Three Months Ended April 30,

Three Months Ended July 31,

2020 2019 $ Change Variance %

(Dollars in millions)

Net sales $ 51.9 $ 58.7 $ (6.8) (12)%

Cost of sales (excluding depreciation and amortization) 44.2 49.4 (5.2) 11%

Selling, general and administrative 4.6 4.5 0.1 (2)%

Restructuring charges

Depreciation and amortization 3.2 3.3 (0.1) 3%

Asset impairment charges

Operating loss

Operating loss margin

Net sales decreased $12.1 million for the three months ended April 30, 2020 compared to the same period in 2019 .

Operating income $ (0.1) $ 1.5 $ (1.6) (107)%

Operating income margin — % 3 %

Net sales decreased $6.8 million for the three months ended July 31, 2020 compared to the same period in 2019.

Approximately $5.0 million of the decrease in sales was due to lower volume related to customer strategic shifts and the impacts of COVID-19.

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Cost of Sales .

Cost of sales decreased $9.5 million , or 18% , for the three months ended April 30, 2020 compared with the same period in 2019 primarily as a result of lower volume, including a corresponding decrease in selling expenses as a result of the impacts of COVID-19 as mentioned above.

Cost of sales decreased $5.2 million, or 11%, for the three months ended July 31, 2020 compared with the same period in 2019 primarily as a result of lower volume, including a corresponding decrease in selling expenses as a result of the impacts of COVID-19 as mentioned above.

Selling, General and Administrative .

Selling, general and administrative expense decreased $0.5 million for the three months ended April 30, 2020 compared to the same period in 2019 , largely driven by lower compensation expense.

Selling, general and administrative expense remained relatively flat for the three months ended July 31, 2020 compared to the same period in 2019.

Restructuring Charges .

Restructuring charges incurred during the three months ended April 30, 2020 related to severance, equipment moving and other charges incurred for a plant closure as further described in Note 1, "Nature of Operations and Basis of Presentation - Restructuring " to the accompanying unaudited condensed consolidated financial statements contained elsewhere herein.

Restructuring charges incurred during the three months ended July 31, 2020 related to severance, equipment moving and other charges incurred for a plant closure as further described in Note 1, "Nature of Operations and Basis of Presentation - Restructuring " to the accompanying unaudited condensed consolidated financial statements contained elsewhere herein.

Unallocated Corporate & Other

Three Months Ended April 30,

Three Months Ended July 31,

2020 2019 $ Change Variance %

(Dollars in millions)

Net sales $ (0.4) $ (0.8) $ 0.4 50%

Cost of sales (excluding depreciation and amortization) (0.2) (0.4) 0.2 (50)%

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Depreciation and amortization 0.1 0.1 — —%

Operating income (loss)

Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the three months ended April 30, 2020 and 2019 .

Operating loss $ (1.0) $ (3.8) $ 2.8 (74)%

Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the three months ended July 31, 2020 and 2019.

Cost of Sales .

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Selling, General and Administrative .

Selling, general and administrative expenses decreased $3.9 million for the three months ended April 30, 2020 compared to the same period in 2019 .

This decrease is attributable to (i) $3.5 million of lower compensation expense related to lower incentive accruals and reductions in the valuations of our stock based compensation awards, (ii) $1.0 million of lower medical expenses due to a lower claims experience during the three months ended April 30, 2020 as compared to the prior year period, and (iii) lower transaction costs.

The decrease was partially offset by an increase of $0.8 million related to executive severance expense.

Selling, general and administrative expenses decreased $2.6 million for the three months ended July 31, 2020 compared to the same period in 2019.

This decrease is attributable to $2.5 million of lower medical expenses due to a lower claims experience during the three months ended July 31, 2020 as compared to the prior year period and $1.2 million of lower executive severance expense year-over-year.

The overall decrease was partially offset by $1.0 million of higher incentive accruals.

Changes related to Non-Operating Items:

Interest Expense .

Interest expense decreased $1.0 million for the three months ended April 30, 2020 compared to the same period in 2019 as a result of lower interest rates during the period.

The increase in other, net of $0.3 million for the three months ended April 30, 2020 compared to the same period in 2019 relates to foreign currency translation gains and an increase in the pension service benefit.

Interest expense decreased $1.4 million for the three months ended July 31, 2020 compared to the same period in 2019 as a result of lower interest rates during the period.

The decrease in other, net of $0.5 million for the three months ended July 31, 2020 compared to the same period in 2019 relates to foreign currency translation losses, which were partially offset by an increase in the pension service benefit.

Income Taxes .

We recorded income tax expense of $2.1 million on pre-tax income of $7.6 million for the three months ended April 30, 2020 , an effective rate of 27.9% and income tax expense of $2.0 million on a pre-tax loss of $22.0 million for the three months ended April 30, 2019, an effective rate of 8.9%.

The difference in the effective rate between these periods is primarily related to the asset impairment charge recorded during the three months ended April 30, 2019, which did not generate a significant tax benefit.

Six Months Ended April 30, 2020 Compared to Six Months Ended April 30, 2019

Six Months Ended April 30,

We recorded income tax expense of $4.4 million on pre-tax income of $15.1 million for the three months ended July 31, 2020, an effective rate of 28.6% and income tax expense of $5.0 million on a pre-tax income of $16.8 million for the three months ended July 31, 2019, an effective rate of 29.5%.

The $0.6 million decrease in income tax expense year-over-year corresponds with the decline in pre-tax income.

Nine Months Ended July 31, 2020 Compared to Nine Months Ended July 31, 2019

Nine Months Ended July 31,

2020 2019 Change $ % Variance

(Dollars in millions)

Net sales $ 596.1 $ 653.4 $ (57.3) (9) %

Cost of sales (excluding depreciation and amortization) 469.6 511.3 (41.7) 8 %

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Interest expense (4.3) (7.6) 3.3 43 %

Other, net 0.1 0.4 (0.3) (75) %

Income tax expense (6.9) (5.9) (1.0) (17) %

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NA Fenestration

Six Months Ended April 30,

Nine Months Ended July 31,

2020 2019 $ Change % Variance

(Dollars in millions)

Net sales $ 341.4 $ 360.6 $ (19.2) (5)%

Cost of sales (excluding depreciation and amortization) 266.5 278.9 (12.4) 4%

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Operating income margin 6 % 7 %

Net sales decreased $5.4 million , or 2% , for the six months ended April 30, 2020 compared to the same period in 2019 , which was primarily driven by a decrease in volumes of $6.8 million, which includes the impacts of COVID-19.

Net sales decreased $19.2 million, or 5%, for the nine months ended July 31, 2020 compared to the same period in 2019, which was primarily driven by a decrease in volumes of $20.6 million, which includes the impacts of COVID-19.

The decrease in volume was partially offset by increases in prices and surcharges of $1.4 million.

Cost of Sales.

The cost of sales decreased $3.4 million , or 2% , when comparing the six months ended April 30, 2020 to the same period in 2019 .

The cost of sales decreased $12.4 million, or 4%, when comparing the nine months ended July 31, 2020 to the same period in 2019.

Cost of sales decreased due to lower volumes during the period, including a corresponding decrease in selling expenses as a result of the impacts of COVID-19 as mentioned above.

Selling, General and Administrative.

S elling, general and administrative expenses decreased $2.3 million , or 9% , when comparing the six months ended April 30, 2020 to the same period in 2019 .

This decrease was due primarily to lower incentive compensation expense.

S elling, general and administrative expenses decreased $2.2 million, or 6%, when comparing the nine months ended July 31, 2020 to the same period in 2019.

This decrease was due primarily to lower general expenses due to COVID-19 restrictions and lower compensation and benefits year-over-year.

Restructuring Charges.

Restructuring charges for each of the six month periods ended April 30, 2020 and 2019 of $0.2 million relate to facility lease expense for a vinyl extrusion plant which was closed in January 2017 in the U.S.

that has not been sublet or otherwise exited as of April 30, 2020 .

Restructuring charges for each of the nine month periods ended July 31, 2020 and 2019 relate to facility lease expense for a vinyl extrusion plant which was closed in January 2017 in the U.S.

that has not been sublet or otherwise exited as of July 31, 2020.

Depreciation and Amortization.

Depreciation and amortization expense decreased $0.7 million when comparing the six months ended April 30, 2020 and 2019 , reflecting the run-off of depreciation expense related to existing assets and disposals during the period.

Depreciation and amortization expense decreased $1.9 million when comparing the nine months ended July 31, 2020 and 2019, reflecting the run-off of depreciation expense related to existing assets and disposals during the period.

EU Fenestration

Six Months Ended April 30,

Nine Months Ended July 31,

2020 2019 $ Change Variance %

(Dollars in millions)

Net sales $ 104.2 $ 121.2 $ (17.0) (14)%

Cost of sales (excluding depreciation and amortization) 72.1 84.1 (12.0) 14%

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Operating income margin 9 % 11 %

Net sales decreased $10.9 million , or 14% , when comparing the six months ended April 30, 2020 to the same period in 2019 .

Net sales decreased $17.0 million, or 14%, when comparing the nine months ended July 31, 2020 to the same period in 2019.

Net sales volumes decreased $16.4 million year-over-year, which includes of the impacts of COVID-19, and $1.6 million due to unfavorable foreign currency rate changes.

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Cost of Sales.

The cost of sales increased $7.2 million , or 13% , for the six months ended April 30, 2020 compared to the same period in 2019 .

The cost of sales increased $12.0 million, or 14%, for the nine months ended July 31, 2020 compared to the same period in 2019.

Cost of sales decreased due to lower volumes during the period, including a corresponding decrease in selling expenses as a result of the impacts of COVID-19 as mentioned above.

Selling, General and Administrative.

Selling, general and administrative expense remained flat for the six months ended April 30, 2020 compared to the same period in 2019 .

Savings from temporary COVID-19 related workforce furloughs and favorable foreign currency exchange rate changes were partially offset by normal compensation inflation.

Selling, general and administrative expense remained flat for the nine months ended July 31, 2020 compared to the same period in 2019.

The decrease is due to savings incurred from reduced marketing and other

general expenses as a result of COVID-19 restrictions, reimbursements for labor costs in the UK from government aid for COVID-19 furloughs, and lower incentive compensation.

NA Cabinet Components

Six Months Ended April 30,

Nine Months Ended July 31,

2020 2019 $ Change Variance %

(Dollars in millions)

Net sales $ 152.6 $ 175.4 $ (22.8) (13)%

Cost of sales (excluding depreciation and amortization) 132.2 150.9 (18.7) 12%

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Operating loss margin (2) % (17) %

Net sales decreased $16.0 million , or 14% , for the six months ended April 30, 2020 compared to the same period in 2019 .

Net sales decreased $22.8 million, or 13%, for the nine months ended July 31, 2020 compared to the same period in 2019.

Approximately $18.4 million of the decrease in sales was due to lower volume related to customer strategic shifts and the impacts of COVID-19.

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Cost of Sales .

Cost of sales decreased $13.6 million , or 13% , for the six months ended April 30, 2020 compared with the same period in 2019 as a result of lower volume, including a corresponding decrease in selling expenses as a result of the impacts of COVID-19 as mentioned above.

Cost of sales decreased $18.7 million, or 12%, for the nine months ended July 31, 2020 compared with the same period in 2019 as a result of lower volume, including a corresponding decrease in selling expenses as a result of the impacts of COVID-19 as mentioned above.

Selling, General and Administrative .

Selling, general and administrative expense decreased $0.6 million , or 6% , for the six months ended April 30, 2020 compared to the same period in 2019 , largely driven by lower compensation expense.

Selling, general and administrative expense decreased $0.5 million, or 4%, for the nine months ended July 31, 2020 compared to the same period in 2019, largely driven by lower compensation.

Restructuring Charges .

Restructuring charges of $0.2 million in the six months ended April 30, 2020 related to severance, equipment moving and other charges incurred for a plant closure as further described in Note 1, "Nature of Operations and Basis of Presentation - Restructuring " to the accompanying unaudited condensed consolidated financial statements contained elsewhere herein.

Restructuring charges of $0.3 million in the nine months ended July 31, 2020 related to severance, equipment moving and other charges incurred for a plant closure as further described in Note 1, "Nature of Operations and Basis of Presentation - Restructuring " to the accompanying unaudited condensed consolidated financial statements contained elsewhere herein.

Asset impairment charges.

Asset impairment charges of $30.0 million for the six months ended April 30, 2019 represent a goodwill impairment which was recorded as a result of an industry-wide shift from custom cabinets to stock cabinets.

Asset impairment charges of $30.0 million for the nine months ended July 31, 2019 represent a goodwill impairment which was recorded as a result of an industry-wide shift from custom cabinets to stock cabinets.

Unallocated Corporate & Other

Six Months Ended April 30,

Nine Months Ended July 31,

2020 2019 $ Change Variance %

(Dollars in millions)

Net sales $ (2.1) $ (3.8) $ 1.7 45%

Cost of sales (excluding depreciation and amortization) (1.2) (2.6) 1.4 (54)%

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Operating income (loss) $ 0.3 $ (10.4) $ 10.7 103%

Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the six months ended April 30, 2020 and 2019 .

Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the nine months ended July 31, 2020 and 2019.

Cost of Sales .

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Selling, General and Administrative .

Selling, general and administrative expenses decreased $7.9 million for the six months ended April 30, 2020 compared to the same period in 2019 .

This decrease is attributable to (i) $3.9 million of lower medical expenses due to a lower claims experience during the six months ended April 30, 2020 as compared to the prior year period, (ii) $3.3 million of lower compensation expense related to the valuations of our stock based compensation awards and reductions in

incentive accruals, and (iii) lower transaction costs of $0.9 million.

The overall decrease was partially offset by higher executive severance expense of $0.2 million.

Selling, general and administrative expenses decreased $10.5 million for the nine months ended July 31, 2020 compared to the same period in 2019.

This decrease is attributable to (i) $6.5 million of lower medical expenses due to a lower claims experience during the nine months ended July 31, 2020 as compared to the prior year period, (ii) $1.9 million of lower compensation expense related to the valuations of our stock based compensation awards and

reductions in incentive accruals, (iii) lower transaction costs of $1.2 million, and (iv) lower executive severance expense of $1.0 million.

Changes related to Non-Operating Items:

Interest Expense .

Interest expense decreased $1.9 million for the six months ended April 30, 2020 compared to the same period in 2019 as a result of lower interest rates.

The increase in other, net of $0.1 million at April 30, 2020 compared to the same period in 2019 relates primarily to an increase in net pension service benefits.

Interest expense decreased $3.3 million for the nine months ended July 31, 2020 compared to the same period in 2019 as a result of lower interest rates.

The decrease in other, net of $0.3 million at July 31, 2020 compared to the same period in 2019 relates primarily to foreign currency translation losses.

Income Taxes .

We recorded income tax expense of $2.6 million on pre-tax income of $8.1 million for the six months ended April 30, 2020, an effective rate of 31.7% and income tax expense of $1.0 million on a pre-tax loss of $26.7 million for the six months ended April 30, 2019, an effective rate of 3.6%.

The difference in the effective rates between these periods is primarily due to the fact that a majority of the asset impairment charge in the North American Cabinet Components segment recorded during the six months ended April 30, 2019 did not generate a tax benefit.

We recorded income tax expense of $6.9 million on pre-tax income of $23.2 million for the nine months ended July 31, 2020, an effective rate of 29.7% and income tax expense of $5.9 million on a pre-tax loss of $9.9 million for the nine months ended July 31, 2019, an effective rate of 60.1%.

The difference in the effective rates between these periods is primarily due to the fact that a majority of the asset impairment charge in the North American Cabinet Components segment recorded during the nine months ended July 31, 2019 did not generate a tax benefit.

Liquidity and Capital Resources

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We maintain a $325.0 million revolving credit facility (the Credit Facility) that matures in 2023 (5-year term) and requires interest payments calculated at a variable market rate depending upon our Consolidated Leverage Ratio.

The applicable rate during the six months ended April 30, 2020 was LIBOR + 1.50%.

The applicable rate during the nine months ended July 31, 2020 ranged from LIBOR + 1.50% to LIBOR + 1.75%.

Our cost of capital could increase depending upon the Consolidated Leverage Ratio at the end of any given quarter.

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For further details of the Credit Facility, refer to Note 5, "Debt and Finance Lease Obligations" to the accompanying unaudited condensed consolidated financial statements contained elsewhere herein.

As of April 30, 2020 , we had $80.3 million of cash and equivalents, $216.0 million outstanding under the Credit Facility, $4.8 million of outstanding letters of credit and $15.4 million outstanding under finance leases and other debt.

We had $104.2 million available for use under the Credit Facility at April 30, 2020 .

We repatriated $3.1 million and $5.3 million of foreign cash during the six months ended April 30, 2020 and 2019, respectively.

As of July 31, 2020, we had $41.1 million of cash and equivalents, $138.0 million outstanding under the Credit Facility, $4.8 million of outstanding letters of credit and $15.7 million outstanding under finance leases and other debt.

We had $182.2 million available for use under the Credit Facility at July 31, 2020.

We repatriated $12.6 million and $13.9 million of foreign cash during the nine months ended July 31, 2020 and 2019, respectively.

We expect to repatriate excess cash moving forward and utilize the funds to retire debt or meet current working capital needs.

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Analysis of Cash Flow

The following table summarizes our cash flow results for the six months ended April 30, 2020 and 2019 :

Six Months Ended

The following table summarizes our cash flow results for the nine months ended July 31, 2020 and 2019:

Nine Months Ended

(In millions)

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Cash used for investing activities $ (20.5) $ (16.7)

Cash provided by financing activities

Cash used for financing activities $ (17.4) $ (30.5)

Operating Activities .

Cash provided by operating activities for the six months ended April 30, 2020 increased approximately $2.4 million compared to the six months ended April 30, 2019 .

Cash receipts were favorably impacted by an increase in net income

due to favorable operating results prior to the impacts of COVID-19.

Our ability to continue operations and deliver orders as an essential service provider mitigated some of the effects of COVID-19, allowing overall growth in cash provided by operating activities as compared to 2019.

Cash provided by operating activities for the nine months ended July 31, 2020 increased approximately $17.6 million compared to the nine months ended July 31, 2019.

Cash receipts were favorably impacted by improved working capital, particularly related to inventory.

Our ability to continue operations and deliver orders as an essential service provider mitigated some of the effects of COVID-19.

Our efforts to maintain operating levels in accordance with demand allowed us to remain efficient with our working capital and utilize inventory effectively.

To date, slower paying customers as a result of COVID-19 have not significantly impacted our liquidity, but this could become a concern in the future.

Investing Activities.

Cash used for investing activities increased $3.6 million when comparing the six months ended April 30, 2020 to the same period in 2019 as a result of higher capital expenditures.

Cash used for investing activities increased $3.8 million when comparing the nine months ended July 31, 2020 to the same period in 2019 as a result of higher capital expenditures.

As a result of the outbreak of the COVID-19 pandemic, we reduced capital expenditure plans by approximately 25% to 30% for the year ended October 31, 2020.

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Financing Activities.

Cash provided by financing activities was $63.5 million for the six months ended April 30, 2020 , primarily attributable to $73.0 million of net debt borrowings.

In March 2020, we borrowed $50.0 million under our credit facility.

We did this as a precautionary measure to ensure funds were available to meet our obligations during the COVID-19 pandemic.

This borrowing was subsequently repaid in May 2020.

Cash used for financing activities was $17.4 million for the nine months ended July 31, 2020, which included $7.9 million of dividends paid to our shareholders, $6.7 million of treasury stock repurchases, and $5.3 million of net debt repayments.

Our use of cash was partially offset by $3.0 million of proceeds from stock option exercises.

Our net debt repayments of $5.3 million include the borrowing and subsequent repayment of $50.0 million of funds under our credit facility as a precautionary measure to ensure funds were available to meet our obligations during the COVID-19 pandemic.

In the future, we may be required to borrow additional funds in order to be prepared for any unforeseen impacts of the COVID-19 pandemic.

In addition to our net debt borrowings, we also received $3.0 million of proceeds from stock option exercises.

Our proceeds were partially offset by $6.7 million related to the purchase of treasury stock and $5.3 million of dividends paid to our shareholders.

For the six months ended April 30, 2019 , cash provided by financing activities was $3.9 million, primarily attributable to $14.2 million of net borrowings of debt, partially offset by dividends paid to our shareholders of $5.3 million, and $4.7 million related to the purchase of treasury stock.

For the nine months ended July 31, 2019, cash used for financing activities was $30.5 million, primarily attributable to $18.6 million of net repayments of debt, $8.0 million of dividends paid to our shareholders, and $6.3 million related to the purchase of treasury stock, partially offset by $2.7 million of proceeds received from stock option exercises.

Liquidity Requirements

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Other uses of cash include paying cash dividends to our shareholders and repurchasing our common stock.

As of April 30, 2020, we also had a higher than usual cash balance in order to be prepared for any unforeseen impacts of the COVID-19 pandemic.

During the six months ended April 30, 2020 and 2019, we repatriated $3.1 million and $5.3 million , respectively, of foreign earnings from our foreign locations.

We maintain cash balances in foreign countries which total $15.1 million as of April 30, 2020 .

During the nine months ended July 31, 2020 and 2019, we repatriated $12.6 million and $13.9 million, respectively, of foreign earnings from our foreign locations.

We maintain cash balances in foreign countries which total $13.4 million as of July 31, 2020.

Critical Accounting Policies and Estimates

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For a description of our critical accounting policies and estimates, see our Annual Report on Form 10-K for the fiscal year ended October 31, 2019.

During the six months ended April 30, 2020 , we adopted new lease accounting guidance.

During the nine months ended July 31, 2020, we adopted new lease accounting guidance.

For further details of this change, refer to "Part I, Financial Information" of this Quarterly Report on Form 10-Q.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis