What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-06-04 compared with 2021-03-05 · 183 added, 115 removed, 545 unchanged (35% of the section changed)

27 unchanged sentences

Long-term debt 87,195 116,728

Non current operating lease liabilities 46,086 44,873

Noncurrent operating lease liabilities 48,989 44,873

Deferred pension and postretirement benefits 10,819 10,923

19 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

Three Months Ended Six Months Ended

April 30, April 30,

2021 2020 2021 2020

(In thousands, except per share amounts)

20 unchanged sentences

QUANEX BUILDING PRODUCTS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended Six Months Ended

April 30, April 30,

2021 2020 2021 2020

(In thousands)

Net income $ 14,551 $ 5,501 $ 22,403 $ 5,511

Other comprehensive income:

Foreign currency translation gain 8,600 2,743

Other comprehensive income (loss):

Foreign currency translation gain (loss) 1,032 ( 6,999 ) 9,632 ( 4,256 )

Change in pension from net unamortized gain adjustment (pretax) — — — 2,519

Change in pension from net unamortized gain adjustment tax expense — — — ( 609 )

Other comprehensive income 8,600 4,653

Comprehensive income $ 16,452 $ 4,663

Other comprehensive income (loss) 1,032 ( 6,999 ) 9,632 ( 2,346 )

Comprehensive income (loss) $ 15,583 $ ( 1,498 ) $ 32,035 $ 3,165

The accompanying notes are an integral part of the financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(In thousands)

1 unchanged sentence

Net income $ 22,403 $ 5,511

Adjustments to reconcile net income to cash used for operating activities:

Adjustments to reconcile net income to cash (used for) provided by operating activities:

Depreciation and amortization 21,860 24,791

3 unchanged sentences

Changes in assets and liabilities:

Decrease in accounts receivable 7,103 18,641

(Increase) decrease in accounts receivable ( 6,726 ) 14,682

Increase in inventory ( 18,265 ) ( 8,363 )

(Increase) decrease in other current assets ( 873 ) 1,200

Decrease in accounts payable ( 14,577 ) ( 12,063 )

Decrease in accrued liabilities ( 2,692 ) ( 12,519 )

Increase in other current assets ( 2,013 ) ( 559 )

Increase (decrease) in accounts payable 5,584 ( 16,807 )

Increase (decrease) in accrued liabilities 994 ( 13,673 )

Decrease in income taxes payable ( 4,071 ) ( 4,052 )

(Decrease) increase in deferred pension and postretirement benefits ( 104 ) 562

Decrease in other long-term liabilities ( 399 ) ( 405 )

Increase (decrease) in other long-term liabilities 642 ( 787 )

Other, net 298 ( 576 )

Cash used for operating activities ( 3,395 ) ( 3,657 )

Cash provided by operating activities 28,960 2,472

Investing activities:

12 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents 1,083 ( 323 )

Decrease in cash and cash equivalents ( 8,195 ) ( 7,754 )

(Decrease) increase in cash and cash equivalents ( 2,363 ) 49,384

Cash and cash equivalents at beginning of period 51,621 30,868

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended January 31, 2021 Common

Six Months Ended April 30, 2021 Common

Stock Additional

17 unchanged sentences

Balance at January 31, 2021 $ 373 $ 252,277 $ 218,732 $ ( 24,424 ) $ ( 69,250 ) $ 377,708

Three Months Ended January 31, 2020 Common

Net income — — 14,551 — — 14,551

Foreign currency translation adjustment — — — 1,032 — 1,032

Common dividends ($ 0.08 per share)

— — ( 2,693 ) — — ( 2,693 )

Purchase of treasury stock — — — — ( 2,041 ) ( 2,041 )

Stock-based compensation activity:

Expense related to stock-based compensation — 447 — — — 447

Stock options exercised — 423 — — 5,670 6,093

Balance at April 30, 2021 $ 373 $ 253,147 $ 230,590 $ ( 23,392 ) $ ( 65,621 ) $ 395,097

Six Months Ended April 30, 2020 Common

Stock Additional

3 unchanged sentences

Stockholders’

(In thousands, no per share amounts shown except in verbiage)

Balance at October 31, 2019 $ 374 $ 254,673 $ 185,703 $ ( 33,817 ) $ ( 76,746 ) $ 330,187

13 unchanged sentences

Balance at January 31, 2020 $ 373 $ 252,495 $ 182,989 $ ( 29,164 ) $ ( 76,760 ) $ 329,933

Net income — — 5,501 — — 5,501

Foreign currency translation adjustment — — — ( 6,999 ) — ( 6,999 )

Common dividends ($ 0.08 per share)

— — ( 2,628 ) — — ( 2,628 )

Purchase of treasury stock — — — — ( 2,054 ) ( 2,054 )

Stock-based compensation activity:

Expense related to stock-based compensation — 325 — — — 325

Stock options exercised — ( 38 ) ( 83 ) — — ( 121 )

Restricted stock awards granted — ( 65 ) — — 65 —

Balance at April 30, 2020 $ 373 $ 252,717 $ 185,779 $ ( 36,163 ) $ ( 78,749 ) $ 323,957

The accompanying notes are an integral part of the financial statements.

7 unchanged sentences

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 solar panel sealants, trim moldings, vinyl decking, fencing, water retention barriers, and conservatory roof components.

In addition, we provide certain other non-fenestration components and products, which include solar panel sealants, trim moldings, vinyl decking, vinyl fencing, water retention barriers, and conservatory roof components.

We have organized our business into three reportable business segments.

29 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Pricing and sales incentives

Pricing is established at or prior to the time of sale with our customers and we record sales at the agreed-upon net selling price, reflective of current and prospective discounts.

Practical expedients and exemptions

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.

Pricing and sales incentives

Pricing is established at or prior to the time of sale with our customers and we record sales at the agreed-upon net selling price, reflective of current and prospective discounts.

Shipping and handling costs

10 unchanged sentences

In addition, we produce certain non-fenestration products, including kitchen and bath cabinet doors and components, flooring and trim moldings, solar edge tape, plastic decking, fencing, water retention barriers, conservatory roof components, and other products.

The following table summarizes our product sales for the three months ended January 31, 2021 and 2020 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 11 “Segment Information”.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Three Months Ended

The following table summarizes our product sales for the three and six months ended April 30, 2021 and 2020 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 11, “Segment Information”.

Three Months Ended Six Months Ended

April 30, April 30,

2021 2020 2021 2020

(In thousands)

34 unchanged sentences

In response to the COVID-19 pandemic, we have taken additional measures to limit possible infections at the workplace by implementing social distancing, sanitizing the workspace, and requiring employees to wear masks and other measures necessary to ensure safety as infection surges dictate.

As a result of the economic and business impact of COVID-19, we may be required to revise certain accounting estimates and judgments such as, but not limited to, those related to the valuation of goodwill, intangibles, right-of-use assets, long-lived assets, accounts receivable (including allowances for credit losses), and inventory, which could have a material adverse effect on our financial position and results of operations.

We continue to assess and refine these measures on an ongoing basis as public health guidance and applicable laws and regulations continue to evolve.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Inventories consisted of the following at January 31, 2021 and October 31, 2020 (in thousands):

Inventories consisted of the following at April 30, 2021 and October 31, 2020 (in thousands):

2021 October 31,

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Goodwill and Intangible Assets

The change in the carrying amount of goodwill for the three months ended January 31, 2021 was as follows (in thousands):

Three Months Ended

January 31, 2021

The change in the carrying amount of goodwill for the six months ended April 30, 2021 was as follows (in thousands):

Six Months Ended

April 30, 2021

Beginning balance as of November 1, 2020 $ 146,154

2 unchanged sentences

At our last annual test date, August 31, 2020, we evaluated the recoverability of goodwill at each of our five reporting units with goodwill balances and determined that our goodwill was no t impaired.

We evaluated for indicators of impairment during the three months ended January 31, 2021 and determined that there were no triggering events related to the impacts of COVID-19 or any other areas of our operations.

We evaluated for indicators of impairment during the three and six months ended April 30, 2021 and determined that there were no triggering events related to the impacts of COVID-19 or any other areas of our operations.

However, the long term effects of the COVID-19 pandemic on the demand and pricing of our products may result in future impairment charges.

1 unchanged sentence

Identifiable Intangible Assets

Amortizable intangible assets consisted of the following as of January 31, 2021 and October 31, 2020 (in thousands):

January 31, 2021 October 31, 2020

Amortizable intangible assets consisted of the following as of April 30, 2021 and October 31, 2020 (in thousands):

April 30, 2021 October 31, 2020

Gross Carrying

6 unchanged sentences

Total $ 225,691 $ 136,841 $ 232,135 $ 139,067

We had aggregate amortization expense related to intangible assets for the three months ended January 31, 2021 of $ 3.4 million and $ 3.7 million for the comparable prior year period.

We retired fully amortized identifiable assets of $ 9.9 million related to customer relationships during the three months ended January 31, 2021.

We had aggregate amortization expense related to intangible assets for the three and six months ended April 30, 2021 of $ 3.3 million and $ 6.7 million, respectively, and $ 3.6 million and $ 7.4 million, respectively, for the comparable prior year periods.

We retired fully amortized identifiable assets of $ 9.9 million related to customer relationships during the six months ended April 30, 2021.

QUANEX BUILDING PRODUCTS CORPORATION

2 unchanged sentences

Amortization Expense

2021 (remaining nine months) $ 9,369

2021 (remaining six months) $ 6,105

Thereafter 39,100

Total $ 88,850

Debt and Finance Lease Obligations

Long-term debt consisted of the following at January 31, 2021 and October 31, 2020 (in thousands):

Long-term debt consisted of the following at April 30, 2021 and October 31, 2020 (in thousands):

2021 October 31,

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Substantially all of our domestic assets, with the exception of real property, are used as collateral for the Credit Agreement.

As of January 31, 2021, we had $ 98.0 million of borrowings outstanding under the 2018 Credit Facility (reduced by unamortized debt issuance costs of $ 0.8 million), $ 4.5 million of outstanding letters of credit and $ 15.6 million outstanding primarily under finance leases and other debt.

We had $ 222.5 million available for use under the 2018 Credit Facility at January 31, 2021.

Outstanding borrowings under the 2018 Credit Facility accrue interest at 1.37 % per annum.

Our weighted average borrowing rate for borrowings outstanding during the three months ended January 31, 2021 and 2020 was 1.56 % and 3.27 %, respectively.

We were in compliance with our debt covenants as of January 31, 2021.

As of April 30, 2021, we ha d $ 73.0 million of borrowings outstanding under the 2018 Credit Facility (reduced by unamortized debt issuance costs of $0.7 million ), $ 4.5 million of outstanding letters of credit and $ 15.7 million outstanding primarily under finance leases and other debt.

We had $ 247.5 million available for use under the 2018 Credit Facility at April 30, 2021.

Outstanding borrowings under the 2018 Credit Facility accrue interes t at 1.36 % per annum.

Our weighted average borrowing rate for borrowings outstanding during the six months ended April 30, 2021 and 2020 was 1.47 % and 3.03 %, respectively.

We were in compliance with our debt covenants as of April 30, 2021.

Retirement Plans

Our non-contributory, single employer defined benefit pension plan covers a majority of our employees in the U.S.

The net periodic pension cost for this plan for the three months ended January 31, 2021 and 2020 was as follows (in thousands):

Three Months Ended

The net periodic pension cost for this plan for the three and six months ended April 30, 2021 and 2020 was as follows (in thousands):

Three Months Ended Six Months Ended

April 30, April 30,

2021 2020 2021 2020

Service cost $ 212 $ 242 $ 425 $ 780

7 unchanged sentences

We also have a supplemental benefit plan covering certain executive officers and key employees and a non-qualified deferred compensation plan covering members of the Board of Directors and certain key employees.

As of January 31, 2021 and October 31, 2020, our liability under the supplemental benefit plan was approximately $ 2.7 million and $ 2.6 million, respectively.

As of January 31, 2021 and October 31, 2020, the liability associated with the deferred compensation plan was approximately $ 4.2 million and $ 3.3 million, respectively.

We record the current portion of liabilities associated with these plans under the caption "Accrued Liabilities," and the long-term portion under the caption "Other Liabilities" in the accompanying condensed consolidated balance sheets.

To determine our income tax expense or benefit for interim periods, consistent with accounting standards, we apply the estimated annual effective income tax rate to year-to-date results.

Our estimated annual effective tax rates for the three months

As of April 30, 2021 and October 31, 2020, our liability under the supplemental benefit plan was approximat ely $ 2.8 million and $ 2.6 million, respectively.

As of April 30, 2021 and October 31, 2020, the liability associated with the deferred compensation plan was approximately $ 4.6 million and $ 3.3 million, respectively.

We record the current portion of liabilities as sociated with these plans under the caption “Accrued Liabilities,” and the long-term portion under the caption “Other Liabilities” in the accompanying condensed consolidated balance sheets.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

ended January 31, 2021 and 2020 was 26.0 % and 20.5 %, respectively, excluding discrete items.

The 2021 effective tax rate was primarily impacted by a discrete benefit of $ 0.5 million related to the vesting or exercise of equity-based compensation awards and a charge of $ 0.8 million for the true-up of our deferred taxes from prior year filings.

To determine our income tax expense or benefit for interim periods, consistent with accounting standards, we apply the estimated annual effective income tax rate to year-to-date results.

Our estimated annual effective tax rates for the six months ended April 30, 2021 and 2020 were 27.3 % and 25.8 %, respectively, excluding discrete items.

The 2021 effective tax rate is higher than the U.S.

Statutory rate of 21 % primarily due to state income taxes and the $ 0.8 million true-up of our deferred taxes from prior year filings, partially offset by a discrete benefit of $ 0.6 million related to the vesting or exercise of equity-based compensation awards.

The 2020 effective tax rate was primarily impacted by a discrete charge of $ 0.4 million related to the vesting or exercise of equity-based compensation awards.

As of January 31, 2021, our liability for uncertain tax positions (UTP) of $ 0.5 million, compared to $ 0.6 million for the comparable prior year period, relates to certain state tax items regarding the interpretation of tax laws and regulations.

As of April 30, 2021, our liability for uncertain tax p ositions (UTP ) of $ 0.5 million relates to certain state tax items regarding the interpretation of tax laws and regulations.

Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns.

2 unchanged sentences

The disallowance of the UTP would not materially affect the annual effective tax rate.

We do not believe any of the UTP at January 31, 2021 will be recognized within the next twelve months.

We do not believe any of the UTP at April 30, 2021 will be recognized within the next twelve months.

We evaluate the likelihood of realization of our deferred tax assets by considering both positive and negative evidence.

We maintain a valuation allowance for certain state net operating losses which totaled $ 1.5 million at January 31, 2021 and October 31, 2020.

We maintain a valuation allowance for certain state net operating losses which totaled $ 1.5 million as o f April 30, 2021 and October 31, 2020.

Final regulations were published by the Internal Revenue Service regarding Uniform Capitalization (UNICAP) that became effective during fiscal 2020.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law.

In addition, the Consolidated Appropriations Act, 2021 (CAA) was signed into law on December 27, 2020.

In addition, the Consolidated Appropriations Act, 2021 (CAA) was signed into law on December 27, 2020 and the American Rescue Plan Act of 2021 (American Rescue Plan) was signed into law on March 11, 2021.

We evaluated the UNICAP regulations and the CARES Act and determined that there were no material impacts on our condensed consolidated financial statements.

We are evaluating the CAA and do not believe there will be a material impact on our condensed consolidated financial statements.

We are evaluating the CAA and the American Rescue Plan and do not believe there will be a material impact on our condensed consolidated financial statements.

Contingencies

4 unchanged sentences

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 2021.

We have not incurred any material expenses or capital expenditures related to environmental matters during the past six fiscal years, and do not expect to incur a material amount of such costs in fiscal 2021.

While we will continue to have future expenditures related to environmental matters, any such amounts are impossible to reasonably estimate at this time.

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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.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 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.

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 Measurement of Assets and Liabilities

10 unchanged sentences

Our outstanding debt is variable rate debt that re-prices frequently, thereby limiting our exposure to significant change in interest rate risk.

As a result, the fair value of our debt instrument approximates carrying value at January 31, 2021, and October 31, 2020 (Level 2 measurement).

As a result, the fair value of our debt instrument approximates carrying value at April 30, 2021, and October 31, 2020 (Level 2 measurement).

Our performance share awards are marked-to-market on a quarterly basis during a three-year vesting period based on market data (Level 2 measurement).

16 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

A summary of non-vested restricted stock awards activity during the three months ended January 31, 2021 is presented below:

A summary of non-vested restricted stock awards activity during the six months ended April 30, 2021 is presented below:

Restricted Stock Awards Weighted Average

4 unchanged sentences

Vested ( 44,400 ) 20.70

Non-vested at January 31, 2021 216,400 $ 17.28

The total weighted average grant-date fair value of restricted stock awards that vested during each of the three months ended January 31, 2021 and 2020 was $ 0.9 million and $ 1.1 million, respectively.

As of January 31, 2021, total unrecognized compensation cost related to unamortized restricted stock awards was $ 2.7 million.

Non-vested at April 30, 2021 216,400 $ 17.28

The total weighted average grant-date fair value of restricted stock awards that vested during each of the six months ended April 30, 2021 and 2020 was $ 0.9 million and $ 1.1 million , respectively.

As of April 30, 2021, total unrecognized compensation cost related to unamortized restricted stock awards was $ 2.1 million.

We expect to recognize this expense over the remaining weighted average vesting period of 2.1 years.

9 unchanged sentences

A description of the methodology for the valuation assumptions was disclosed in our Annual Report on Form 10-K for the fiscal year ended October 31, 2020.

The following table summarizes our stock option activity for the three months ended January 31, 2021:

The following table summarizes our stock option activity for the six months ended April 30, 2021:

Stock Options Weighted Average

5 unchanged sentences

Forfeited/Expired ( 2,500 ) 18.22

Outstanding at January 31, 2021 557,768 $ 19.07 4.3 $ 1,628

Vested at January 31, 2021 557,768 $ 19.07 4.3 $ 1,628

Exercisable at January 31, 2021 557,768 $ 19.07 4.3 $ 1,628

Outstanding at April 30, 2021 234,936 $ 19.22 3.8 $ 1,896

Vested at April 30, 2021 234,936 $ 19.22 3.8 $ 1,896

Exercisable at April 30, 2021 234,936 $ 19.22 3.8 $ 1,896

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.

The total intrinsic value of stock options exercised during the three months ended January 31, 2021 and 2020 was $ 2.3 million and $ 0.5 million, respectively.

The weighted-average grant date fair value of stock options that vested during the three months ended January 31, 2020 was $ 0.4 million.

As of January 31, 2020, all compensation cost related to stock options has been recognized.

The total intrinsic value of stock options exercised during the six months ended April 30, 2021 and 2020 was $ 4.2 million and $ 0.5 million, respectively.

The weighted-average grant date fair value of stock options that vested during the six months ended April 30, 2020 was $ 0.4 million.

Restricted Stock Units

1 unchanged sentence

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

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

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

employment as the vesting conditions.

outstanding common shares.

Once the 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 three months ended January 31, 2021 and 2020, non-employee directors received 28,826 and 25,326 restricted stock units, respectively, at a grant date fair value of $ 18.79 per share and $ 19.02 per share, respectively, which vested immediately.

As of January 31, 2021, there were 21,774 non-vested restricted stock units, which were awarded in January 2020 to key employees at a weighted average grant date fair value of $ 17.08 .

During the three months ended January 31, 2021 we paid $ 0.1 million to settle vested restricted stock units.

There were no corresponding payments to settle vested restricted stock during the three months ended January 31, 2020.

During the six months ended April 30, 2021 and 2020, non-employee directors received 28,826 and 25,326 restricted stock units, respectively, at a grant date fair value of $ 18.79 per share and $ 19.02 per share, respectively, which vested immediately.

As of April 30, 2021, there were 21,774 non-vested restricted stock units, which were awarded in January 2020 to key employees at a weighted average grant date fair value of $ 17.08 .

During the six months ended April 30, 2021 we paid $ 0.8 million to settle vested restricted stock units.

There were no corresponding payments to settle vested restricted stock during the six months ended April 30, 2020.

Performance Share Awards

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In December 2020, the December 2017 grant vested, however, no shares were awarded as performance criteria were not met.

We recorded compensation expense of $ 2.7 million for the three months ended January 31, 2021 related to the expected payout of our performance share awards that were outstanding as of January 31, 2021.

We recorded a decrease in compensation expense of $ 0.5 million for the three months ended January 31, 2020 related to the expected payout of our performance share awards that were outstanding as of January 31, 2020.

We recorded compensation expense of $ 0.6 million and $ 3.3 million, respectively , for the three and six months ended April 30, 2021 related to the expected payout of our performance share awards that were outstanding as of April 30, 2021.

We recorded compensation expense of $ 0.1 million for the three months ended April 30, 2020 and a decrease in compensation expense of $ 0.4 million for the six months ended April 30, 2020 related to the expected payout of our performance share awards that were outstanding as of April 30, 2020.

Performance share awards are not considered outstanding shares and do not have voting rights, although dividends are accrued over the performance period and will be payable in cash based upon the number of performance shares ultimately earned.

3 unchanged sentences

The number of shares 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.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

To value the performance restricted stock units, we used a Monte Carlo simulation model to arrive at a grant-date fair value.

2 unchanged sentences

Specifically, the awards vest on a continuum with the following Absolute Total Shareholder Return (A-TSR) milestones:

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Vesting Level Vesting Criteria Percentage of Award Vested

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The following table summarizes our performance restricted stock unit grants and the grant date fair value for the A-TSR performance metric:

Grant Date Shares Awarded Grand Date Fair Value Shares Forfeited

Grant Date Shares Awarded Grant Date Fair Value Shares Forfeited

December 5, 2018 89,200 $ 13.63 25,500

1 unchanged sentence

December 2, 2020 38,400 $ 20.68 —

During the three months ended January 31, 2021, 32,322 performance restricted stock units vested.

We recorded compensation expense of approximately $ 0.2 million and $ 0.1 million, respectively, for the three months ending January 31, 2021 and 2020 related to our performance restricted stock units.

During the six months ended April 30, 2021 , 32,322 perfo rmance restricted stock units vested.

We recorded compensation expense related to our performance restricted stock units of approximately $ 0.2 million and $ 0.4 million, respec tively, for the three and six months ending April 30, 2021 and $ 0.1 million and $ 0.3 million, respectively, for the comparable prior year periods.

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 January 31, 2021, we have deemed 71,484 shares related to the December 2018 grant of performance restricted stock units as probable to vest.

As of April 30, 2021, we have de emed 91,460 shares related to the December 2018 grant of performance restricted stock units as probable to vest.

Treasury Shares

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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.

There were no charges to retained earnings during the three months ended January 31, 2021.

The following table summarizes the treasury stock activity during the three months ended January 31, 2021:

Three Months Ended

January 31, 2021

There were no charges to retained earnings during the six months ended April 30, 2021.

The following table summarizes the treasury stock activity during the six months ended April 30, 2021:

Six Months Ended

April 30, 2021

Beginning Balance as of November 1, 2020 4,491,429

Restricted stock awards granted ( 73,300 )

Performance share awards vested ( 32,322 )

Performance restricted stock units vested ( 32,322 )

Stock options exercised ( 857,893 )

Treasury stock repurchases 157,051

Balance at January 31, 2021 3,925,741

Balance at April 30, 2021 3,684,965

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Other income, included under the caption "Other, net" on the accompanying condensed consolidated statements of income, consisted of the following for the three months ended January 31, 2021 and 2020 (in thousands):

Three Months Ended

Foreign currency transaction losses $ ( 78 ) $ ( 49 )

Foreign currency derivative gains (losses) — ( 11 )

Other income, included under the caption “Other, net” on the accompanying condensed consolidated statements of income, consisted of the following for the three and six months ended April 30, 2021 and 2020 (in thousands):

Three Months Ended Six Months Ended

April 30, April 30,

2021 2020 2021 2020

Foreign currency transaction gains (losses) $ ( 4 ) $ 132 $ ( 82 ) $ 83

Foreign currency derivative losses — ( 4 ) — ( 15 )

Pension service benefit 265 127 530 217

Interest income 1 14 4 19

Other 3 31 5 32

Other, net $ 265 $ 300 $ 457 $ 336

6 unchanged sentences

We allocate corporate expenses to businesses acquired mid-year from the date of acquisition.

The accounting policies of our operating segments are the same as those used to prepare the accompanying condensed consolidated financial statements.

Corporate general and administrative expense allocated during the three month period ended January 31, 2021 was $ 5.2 million and $ 5.5 million for the comparable prior year period.

The accounting polic ies of our operating segments are the same as those used to prepare the accompanying condensed consolidated financial statements.

Corporate general and administrative expense allocated during the three and six month period ended April 30, 2021 was $ 5.4 million and $ 10.7 million, respectively, and $ 4.6 million and $ 10.2 million for the comparable prior year periods.

ASC Topic 280-10-50, “Segment Reporting” (ASC 280) permits aggregation of operating segments based on factors including, but not limited to:

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and (6) converging long-term economic similarities.

Segment information for the three months ended January 31, 2021 and 2020, and total assets as of January 31, 2021 and October 31, 2020 are summarized in the following table (in thousands):

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Segment information for the three and six months ended April 30, 2021 and 2020, and total assets as of April 30, 2021 and October 31, 2020 are summarized in the following table (in thousands):

NA Fenestration EU Fenestration NA Cabinet Comp.

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& Other Total

Three Months Ended January 31, 2021

Three Months Ended April 30, 2021

Net sales $ 146,143 $ 61,657 $ 63,562 $ ( 1,005 ) $ 270,357

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Capital expenditures 2,001 1,268 1,160 124 4,553

Three Months Ended January 31, 2020

Three Months Ended April 30, 2020

Net sales $ 108,593 $ 29,200 $ 50,664 $ ( 982 ) $ 187,475

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Capital expenditures 4,308 407 2,269 17 7,001

As of January 31, 2021

Six Months Ended April 30, 2021

Net sales $ 274,259 $ 110,748 $ 117,556 $ ( 2,059 ) $ 500,504

Depreciation and amortization 9,957 5,125 6,575 203 21,860

Operating income (loss) 26,986 18,437 ( 297 ) ( 11,911 ) 33,215

Capital expenditures 4,821 1,740 3,113 125 9,799

Six Months Ended April 30, 2020

Net sales $ 219,045 $ 65,966 $ 100,708 $ ( 1,647 ) $ 384,072

Depreciation and amortization 12,940 4,738 6,875 238 24,791

Operating income (loss) 9,058 3,776 ( 3,288 ) 1,327 10,873

Capital expenditures 11,236 1,626 3,344 107 16,313

As of April 30, 2021

Total assets $ 261,311 $ 238,109 $ 175,769 $ 40,383 $ 715,572

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Total assets $ 252,703 $ 223,248 $ 174,713 $ 40,921 $ 691,585

The following table summarizes the change in the carrying amount of goodwill by reportable business segment for the three months ended January 31, 2021 (in thousands):

The following table summarizes the change in the carrying amount of goodwill by reportable business segment for the six months ended April 30, 2021 (in thousands):

NA Fenestration EU Fenestration NA Cabinet Comp.

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Foreign currency translation adjustment — 4,148 — — 4,148

Balance as of January 31, 2021 $ 38,712 $ 72,082 $ 39,147 $ — $ 149,941

Balance as of April 30, 2021 $ 38,712 $ 72,443 $ 39,147 $ — $ 150,302

For further details of Goodwill, see Note 3, “Goodwill & Intangible Assets”, located herewith.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

We did not allocate non-operating loss or income tax benefit to the reportable segments.

The following table reconciles operating income as reported above to net income for the three months ended January 31, 2021 and 2020 (in thousands):

Three Months Ended

The following table reconciles operating income as reported above to net income for the three and six months ended April 30, 2021 and 2020 (in thousands):

Three Months Ended Six Months Ended

April 30, April 30,

2021 2020 2021 2020

Operating income $ 21,380 $ 8,893 $ 33,215 $ 10,873

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Basic and diluted earnings per share for the three months ended January 31, 2021 and 2020 were calculated as follows (in thousands, except per share data):

Basic and diluted earnings per share for the three and six months ended April 30, 2021 and 2020 were calculated as follows (in thousands, except per share data):

Net Income Weighted Average Shares Per Share

Three Months Ended January 31, 2021

Three Months Ended April 30, 2021

Basic earnings per common share $ 14,551 33,355 $ 0.44

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Diluted earnings per common share $ 14,551 33,637 $ 0.43

Three Months Ended January 31, 2020

Three Months Ended April 30, 2020

Basic earnings per common share $ 5,501 32,676 $ 0.17

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Diluted earnings per common share $ 5,501 32,793 $ 0.17

We had no common stock equivalents that were potentially dilutive in future earnings per share calculations for the three months ended January 31, 2021 and 772,756 for the comparable prior year period.

We also had no restricted stock award equivalents that were potentially dilutive in future earnings per calculations for the three months ended January 31, 2021 and 56,000 corresponding equivalents for the corresponding prior year period.

Such dilution will be dependent on the excess of the market price of our stock over the exercise price and other components of the treasury stock method.

Six Months Ended April 30, 2021

Basic earnings per common share $ 22,403 33,110 $ 0.68

Effect of dilutive securities:

Stock options — 135 —

Restricted stock awards — 108 —

Performance restricted stock units — 91 —

Diluted earnings per common share $ 22,403 33,444 $ 0.67

Six Months Ended April 30, 2020

Basic earnings per common share $ 5,511 32,770 $ 0.17

Effect of dilutive securities:

Stock options — 12 —

Restricted stock awards — 83 —

Performance shares — 17 —

Performance restricted stock units — 25 —

Diluted earnings per common share $ 5,511 32,907 $ 0.17

We do not include equity instruments in our calculation of diluted earnings per share if those instruments would be anti-dilutive.

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.

The following table shows anti-dilutive instruments for the three and six months ended April 30, 2021 and 2020 (shares in thousands):

Three Months Ended Six Months Ended

April 30, April 30,

2021 2020 2021 2020

Stock options — 1,174 — 1,116

Restricted stock awards — 51 — 51

Total — 1,225 — 1,167

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

New Accounting Guidance

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• changes in domestic and international economic conditions;

• changes in availability of raw materials;

• changes in purchases by our principal customers;

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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 1. Financial Statements