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From time to time, we enter into foreign exchange contracts associated with our operations to manage a portion of the foreign currency rate risk.
−Removed: The notional and fair market values of these positions at October 31, 2019 and 2018 , were as follows:
−Removed: Notional as indicated
−Removed: Fair Value in $
−Removed: October 31, 2019
−Removed: October 31, 2018
−Removed: October 31, 2019
−Removed: October 31, 2018
−Removed: Foreign currency exchange derivatives:
−Removed: (In thousands)
−Removed: Buy EUR, Sell USD
−Removed: Sell CAD, Buy USD
−Removed: Sell GBP, Buy USD
−Removed: Buy EUR, Sell GBP
−Removed: Buy USD, Sell EUR
−Removed: At October 31, 2019 and 2018 , we held foreign currency derivative contracts hedging cross-border intercompany and commercial activity for our insulating glass spacer business.
−Removed: Although these derivatives hedge our exposure to fluctuations in foreign currency rates, we do not apply hedge accounting and therefore, the change in the fair value of these foreign currency derivatives is recorded directly to other income and expense in the accompanying consolidated statements of (loss) income.
+Added: Less than $0.1 million of foreign exchange derivatives were included in total assets as of October 31, 2019.
+Added: There were no corresponding derivatives outstanding as of October 31, 2020.
+Added: These foreign currency derivative contracts hedge cross-border intercompany and commercial activity for our insulating glass spacer business.
+Added: Although these derivatives hedge our exposure to fluctuations in foreign currency rates, we do not apply hedge accounting and therefore, the change in the fair value of these foreign currency derivatives is recorded directly to other, net in the accompanying consolidated statements of income (loss).
To the extent the gain or loss on the derivative instrument offsets the gain or loss from the remeasurement of the underlying foreign currency balance, changes in exchange rates should have no effect.
−Removed: See Note 12 , " Derivative Instruments ", contained elsewhere herein this Annual Report on Form 10-K.
−Removed: During October 2018, we settled an unhedged foreign currency intercompany loan which facilitated the HLP acquisition.
+Added: During October 2018, we settled an unhedged foreign currency intercompany loan which facilitated the Liniar acquisition.
For the year ended October 31, 2018, we realized a loss of less than $0.1 million related to this foreign currency exposure.
−Removed: For the year ended October 31, 2017, we recorded a foreign currency gain of $0.7 million, of which $0.5 million was realized.
−Removed: On June 23, 2016, voters in the U.K.
−Removed: voted for the U.K.
−Removed: to exit the E.U.
−Removed: (referred to as Brexit).
−Removed: is currently due to leave the E.U.
−Removed: on January 31, 2020, but the actual timing, terms of its withdrawal and the nature of its future with the E.U.
−Removed: are still being debated.
−Removed: Since the 2016 vote, the primary impact on our financial performance has been related to foreign currency fluctuations of the British Pound Sterling.
+Added: Since the 2016 Brexit vote, the primary impact on Quanex’s financial performance has been related to foreign currency fluctuations of the British Pound Sterling.
This fluctuation has driven foreign currency translation impacts, as well as raw material cost increases from upstream suppliers located outside of the U.K.
−Removed: Given the lack of comparable precedent, it is difficult for us to predict the future impacts on our U.K.
−Removed: based operations, which accounted for approximately 15% of our total sales for the year ended October 31, 2019.
−Removed: Due to the fact that we manufacture and sell a majority of our U.K.
−Removed: products within the U.K., there is minimal risk to our ability to physically deliver goods and complete sales.
−Removed: As such, we believe we are well positioned within the U.K.
−Removed: to respond to potential changes to underlying demand as a result
−Removed: of the final Brexit outcome.
−Removed: The primary focus for our U.K.
−Removed: operations centers on the availability and pricing of raw materials.
−Removed: While we source the majority of our raw materials from within the U.K., many of the primary upstream raw materials our vendors utilize are being sourced from outside of the U.K., which could expose us to cross-border issues and raw material price impacts due to foreign currency volatility.
−Removed: exits the E.U.
−Removed: without an agreement (referred to as a hard Brexit), there could be complete closure of the U.K.
−Removed: border which could have widespread negative ramifications for the U.K.
−Removed: We do not expect a full closure to occur and instead assume at a minimum that trading with certain countries will continue uninterrupted.
−Removed: Since we purchase the same raw materials utilized in our U.K.
−Removed: facilities at our other non-U.K.
−Removed: facilities and source raw materials from multiple countries, we believe we are prepared to utilize our existing Quanex-wide supply infrastructure to minimize potential supply disruptions as much as possible.
Commodity Price Risk
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In addition, there is a level of exposure to short-term volatility due to the one month lag.
−Removed: We also charge our customers a surcharge related to petroleum-based raw materials.
−Removed: The surcharge is intended to offset the rising cost of products which are highly correlated to the price of oil including butyl and other oil-based raw materials.
+Added: We have historically charged certain customers a surcharge related to petroleum-based raw materials.
+Added: The surcharge was intended to offset the rising cost of products which are highly correlated to the price of oil including butyl and other oil-based raw materials.
The surcharge is in place with the majority of our customers who purchase these products and 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.
−Removed: As such, our long-term exposure to changes in oil-based raw material prices is significantly reduced under this surcharge program.
−Removed: Similarly, Woodcraft includes a surcharge 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.
+Added: As such, our long-term exposure to increases in oil-based raw material prices is significantly reduced under this surcharge program, but given the recent disruptions in the oil and gas market, we bear an obligation to repay customers for the fall in commodity price that is not reflected in the pricing of products sold to them.
+Added: In March and October 2020, we sent a notice to our customers on this to address the mismatch.
+Added: 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.
+Added: 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 titanium dioxide (TiO2), silicone and other inputs.
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.