Item 2. Management’s Discussion and Analysis
Item 2. 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, 2021, and for the three and six months ended April 30, 2021 and 2020, 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, 2020.
Our Business
We manufacture components for original equipment manufacturers (OEMs) in the building products industry. These components can be categorized as window and door (fenestration) components and kitchen and bath cabinet components. Examples of fenestration components include (1) energy-efficient flexible insulating glass spacers, (2) extruded vinyl profiles, (3) window and door screens, and (4) precision-formed metal and wood products. We also manufacture cabinet doors and other components for OEMs in the kitchen and bathroom cabinet industry. In addition, we provide certain other non-fenestration components and products, which include solar panel sealants, trim moldings, vinyl decking, vinyl fencing, water retention barriers, and conservatory roof components. We use low-cost, short lead-time production processes and engineering expertise to provide our customers with specialized products for their specific window, door, and cabinet applications. We believe these capabilities provide us with unique competitive advantages. We serve a primary customer base in North America and the U.K., and also serve customers in international markets through our operating plants in the U.K. and Germany, as well as through sales and marketing efforts in other countries.
We continue to invest in organic growth initiatives and we intend to continue evaluating business acquisitions that allow us to expand our existing fenestration and cabinet component footprint, enhance our product offerings, provide new complementary technology, enhance our leadership position within the markets we serve and expand into new markets or service lines. We have disposed of non-core businesses in the past, and continue to evaluate our business portfolio to ensure that we are investing in markets where we believe there is potential future growth.
We currently have three reportable business segments: (1) North American Fenestration segment (“NA Fenestration”), comprising three operating segments, manufacturing vinyl profiles, IG spacers, screens and other fenestration components; (2) European Fenestration segment (“EU Fenestration”), comprising our U.K.-based vinyl extrusion business, manufacturing vinyl profiles and conservatories, and the European insulating glass business manufacturing IG spacers; and (3) North American Cabinet Components segment (“NA Cabinet Components”), comprising our North American cabinet door and components business and two wood-manufacturing plants. We maintain a grouping called Unallocated Corporate & Other, which includes transaction expenses, stock-based compensation, long-term incentive awards based on the performance of our common stock and other factors, certain severance, legal, and other costs not deemed to be allocable to all segments, depreciation of corporate assets, interest expense, other, net, income taxes and inter-segment eliminations, and executive incentive compensation and medical expense fluctuations relative to planned costs as determined during the annual planning process. Other corporate general and administrative costs have been allocated to the reportable business segments, based upon a relative measure of profitability in order to more accurately reflect each reportable business segment's administrative costs. 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 our accompanying condensed consolidated financial statements.
Recent Transactions and Events
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 essential 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. The COVID-19 pandemic and its related effects continue to have a significant adverse effect on many sectors of the economy and we may be further impacted.
As part of our response to the COVID-19 pandemic, we have taken the following measures:
• 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. However, local or regional hotspots of the pandemic could result in other locations being temporarily idled
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due to the need to deep clean areas where an employee who has tested positive for COVID-19 worked or any similar impacts in our supply chain. We work with our customers to the extent idling affects fulfillment timing.
• We have taken precautionary measures intended to help minimize the risk of the virus to our employees, including temporarily requiring some employees to work remotely.
• 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. In these circumstances, there may be developments outside our control requiring us to adjust our operating plan.
Market Overview and Outlook
We believe the primary drivers of our operating results continue to be North American new home construction and residential remodeling and replacement (R&R) activity. We believe that housing starts and window shipments are indicators of activity levels in the homebuilding and window industries, and we use this data, as published by or derived from third-party sources, to evaluate the market. We have evaluated the market using data from the National Association of Homebuilders (NAHB) with regard to housing starts, and published reports by Ducker Worldwide, LLC (Ducker), a consulting and research firm, with regard to window shipments in the U.S. We obtain market data from Catalina Research, a consulting and research firm, for insight into the U.S. residential wood cabinet demand.
In May 2021, the NAHB forecasted calendar-year housing starts to be 1.5 million for the 2021 calendar-year and 1.6 million for 2022 and 2023. The May 2021, Ducker forecast indicated that total window shipments are expected to increase approximately 8.5% for calendar-year 2021 and approximately 2% for each of the 2022 and 2023 calendar-years. The estimated increase in window shipments for the year ended December 31, 2021 includes an increase in new construction shipments of approximately 13% and an increase in R&R shipments of approximately 4%. In May 2021, Catalina Research estimated that residential semi-custom cabinet demand in the U.S. is estimated to increase 8.0% in 2021 and 6.5% in 2022.
Several commodities in our business are subject to pricing fluctuations, including polyvinyl resin (PVC), titanium dioxide (TiO2), petroleum products, aluminum and wood. For the majority of our customers and critical suppliers, we have price adjusters in place which effectively share the base pass-through price changes for our primary commodities with our customers commensurate with the market at large. Our long -term exposure to these price fluctuations is somewhat mitigated due to the contractual component of the adjuster program. However, these adjusters are not in place with all customers and for all commodities, and there is a level of exposure to such volatility due to the lag associated with the timing of price updates in accordance with our customer agreements, particularly with regard to hardwoods. In addition, some of these commodities, such as silicone, are in high demand, particularly in Europe, which can affect the cost of the raw materials, a portion of which we may not be able to fully recover. Thus far we have not experienced notable supply or logistics disruptions.
On June 23, 2016, citizens of the U.K. voted to exit the European Union (E.U.) (referred to as Brexit). In October 2019, the U.K. and E.U. ratified a withdrawal agreement, and subsequently the U.K. left the E.U. on January 31, 2020. The E.U. rules for trade, travel, and business for the U.K. lapsed on December 31, 2020. In early 2021, the U.K. and the E.U. agreed on a 100% tariff liberalization trade agreement. There will be no tariffs or quotas on the movement of goods produced between the U.K. and the E.U. During this settling in period we could experience extended lead times for raw material imports.
Given the lack of comparable precedent, it is difficult for us to predict the future impacts on our U.K. based operations, which accounted for approximately 15% of our total sales for the year ended October 31, 2020. Since we manufacture and sell a majority of our U.K. products within the U.K., there is minimal risk to our ability to physically deliver goods and complete sales. The primary risk mitigation focus for our U.K. operations centers on the availability and pricing of raw materials. While we source the majority of our raw materials from within the U.K., many of the primary upstream raw materials our vendors use are being sourced from outside of the U.K., which could expose us to cross-border issues and raw material price impacts. We will mitigate this potential impact of Brexit on the import of goods to the U.K. by strategically managing our inventory levels and logistical channels.
The global economy remains uncertain due to currency devaluations, political unrest, terror threats, global pandemics such as COVID-19, and even the political landscape in the U.S. These and other macro-economic factors have impacted the global financial markets, which may have contributed to significant changes in foreign currencies. We continue to monitor our exposure to changes in exchange rates.
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Results of Operations
Three Months Ended April 30, 2021 Compared to Three Months Ended April 30, 2020
Three Months Ended April 30,
2021 2020 Change $ % Variance
(Dollars in millions)
Net sales $ 270.4 $ 187.5 $ 82.9 44 %
Cost of sales (excluding depreciation and amortization) 208.5 149.7 58.8 (39) %
Selling, general and administrative 29.6 16.7 12.9 (77) %
Restructuring charges — 0.3 (0.3) 100 %
Depreciation and amortization 10.9 11.9 (1.0) 8 %
Operating income 21.4 8.9 12.5 140 %
Interest expense (0.6) (1.6) 1.0 63 %
Other, net 0.3 0.3 — — %
Income tax expense (6.5) (2.1) (4.4) (210) %
Net income $ 14.6 $ 5.5 $ 9.1 165 %
Our period-over-period results by reportable segment follow.
Changes Related to Operating Income by Reportable Segment:
NA Fenestration
Three Months Ended April 30,
2021 2020 $ Change % Variance
(Dollars in millions)
Net sales $ 146.2 $ 108.6 $ 37.6 35%
Cost of sales (excluding depreciation and amortization) 112.4 85.1 27.3 (32)%
Selling, general and administrative 13.2 10.0 3.2 (32)%
Restructuring charges — 0.1 (0.1) 100%
Depreciation and amortization 4.9 6.0 (1.1) 18%
Operating income $ 15.7 $ 7.4 $ 8.3 112%
Operating income margin 11 % 7 %
Net Sales. Net sales increased $37.6 million, or 35%, for the three months ended April 30, 2021 compared to the same period in 2020, which was primarily driven by a $33.5 million increase in volumes, including a recovery from prior year COVID-19 impacts, and an increase in price and raw material surcharges of $4.1 million.
Cost of Sales. The cost of sales increased $27.3 million, or 32%, for the three months ended April 30, 2021 compared to the same period in 2020. Cost of sales increased primarily due to higher volumes during the period.
Selling, General and Administrative. S elling, general and administrative expenses increased $3.2 million, or 32%, for the three months ended April 30, 2021 compared to the same period in 2020, primarily due to higher compensation and increased general expenses year-over-year.
Restructuring Charges. Restructuring charges for the three months ended April 30, 2020 relate to facility lease expense for a U.S. vinyl extrusion plant which was closed in January 2017. We exited the lease during December 2020.
Depreciation and Amortization. Depreciation and amortization expense decreased $1.1 million for the three months ended April 30, 2021 compared to the same period in 2020, reflecting the run-off of depreciation expense related to existing assets and disposals during the period.
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EU Fenestration
Three Months Ended April 30,
2021 2020 $ Change % Variance
(Dollars in millions)
Net sales $ 61.6 $ 29.2 $ 32.4 111%
Cost of sales (excluding depreciation and amortization) 41.4 21.0 20.4 (97)%
Selling, general and administrative 7.4 5.3 2.1 (40)%
Depreciation and amortization 2.6 2.3 0.3 (13)%
Operating income $ 10.2 $ 0.6 $ 9.6 1,600%
Operating income margin 17 % 2 %
Net Sales . Net sales increased $32.4 million, or 111%, for the three months ended April 30, 2021 compared to the same period in 2020, which was primarily driven by a $28.3 million increase in volumes, including a recovery from prior year COVID-19 impacts and the reopening of manufacturing facilities in the U.K. which were forced to close for several weeks in the second quarter of 2020, $2.9 million of foreign currency rate changes, and $1.2 million of base price increases.
Cost of Sales. The cost of sales increased $20.4 million, or 97%, for the three months ended April 30, 2021 compared to the same period in 2020. Cost of sales increased primarily due to higher volumes during the period.
Selling, General and Administrative. Selling, general and administrative expense increased $2.1 million, or 40%, for the three months ended April 30, 2021 compared to the same period in 2020. The increase is primarily due to higher compensation, general expenses and foreign currency impacts year-over-year.
NA Cabinet Components
Three Months Ended April 30,
2021 2020 $ Change Variance %
(Dollars in millions)
Net sales $ 63.6 $ 50.7 $ 12.9 25%
Cost of sales (excluding depreciation and amortization) 55.1 44.2 10.9 (25)%
Selling, general and administrative 5.3 4.0 1.3 (33)%
Restructuring charges — 0.2 (0.2) 100%
Depreciation and amortization 3.3 3.5 (0.2) 6%
Operating loss $ (0.1) $ (1.2) $ 1.1 92%
Operating loss margin — % (2) %
Net Sales . Net sales increased $12.9 million, or 25%, for the three months ended April 30, 2021 compared to the same period in 2020, which was driven by an $11.4 million increase in volumes, including a recovery from prior year COVID-19 impacts, and an increase in price and raw material indexes of $1.5 million.
Cost of Sales . Cost of sales increased $10.9 million, or 25%, for the three months ended April 30, 2021 compared to the same period in 2020. Cost of sales increased primarily due to higher volumes during the period and rising lumber prices, which are recovered on a lag.
Selling, General and Administrative . Selling, general and administrative expense increased $1.3 million, or 33%, for the three months ended April 30, 2021 compared to the same period in 2020, primarily due to higher compensation and general expenses year-over-year.
Restructuring Charges . Restructuring charges for the three months ended April 30, 2020 related to severance, equipment moving, and other charges incurred for a plant closure.
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Unallocated Corporate & Other
Three Months Ended April 30,
2021 2020 $ Change Variance %
(Dollars in millions)
Net sales $ (1.0) $ (1.0) $ — —%
Cost of sales (excluding depreciation and amortization) (0.4) (0.6) 0.2 (33)%
Selling, general and administrative 3.7 (2.6) 6.3 (242)%
Depreciation and amortization 0.1 0.1 — —%
Operating (loss) income $ (4.4) $ 2.1 $ (6.5) (310)%
Net Sales . Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the three months ended April 30, 2021 and 2020.
Cost of Sales . Cost of sales for Unallocated Corporate & Other consists of the elimination of inter-segment sales, profit in inventory, and other costs.
Selling, General and Administrative . Selling, general and administrative expenses increased $6.3 million, or 242%, for the three months ended April 30, 2021 compared to the same period in 2020. This increase is attributable to $5.2 million of higher compensation expense related to the valuations of our stock based compensation awards and executive bonuses and $1.5 million of medical expenses due to a higher claims experience during the three months ended April 30, 2021 as compared to the prior year period. These increases were partially offset by a reduction in executive severance and legal charges.
Changes related to Non-Operating Items:
Interest Expense . Interest expense decreased $1.0 million for the three months ended April 30, 2021 compared to the same period in 2020 as a result of lower interest rates and lower borrowings during the period.
Income Taxes . We recorded income tax expense of $6.5 million on pre-tax income of $21.0 million for the three months ended April 30, 2021, an effective rate of 30.7%, and 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%. The $4.4 million increase in income tax expense year-over-year corresponds with the increase in pre-tax income .
Six Months Ended April 30, 2021 Compared to Six Months Ended April 30, 2020
Six Months Ended April 30,
2021 2020 Change $ % Variance
(Dollars in millions)
Net sales $ 500.5 $ 384.1 $ 116.4 30 %
Cost of sales (excluding depreciation and amortization) 384.9 307.2 77.7 (25) %
Selling, general and administrative 60.5 40.8 19.7 (48) %
Restructuring charges — 0.4 (0.4) 100 %
Depreciation and amortization 21.9 24.8 (2.9) 12 %
Operating income 33.2 10.9 22.3 205 %
Interest expense (1.4) (3.1) 1.7 55 %
Other, net 0.5 0.3 0.2 67 %
Income tax expense (9.9) (2.6) (7.3) (281) %
Net income $ 22.4 $ 5.5 $ 16.9 307 %
Our period-over-period results by reportable segment follow.
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Changes Related to Operating Income by Reportable Segment:
NA Fenestration
Six Months Ended April 30,
2021 2020 $ Change % Variance
(Dollars in millions)
Net sales $ 274.3 $ 219.0 $ 55.3 25%
Cost of sales (excluding depreciation and amortization) 211.8 173.8 38.0 (22)%
Selling, general and administrative 25.6 23.0 2.6 (11)%
Restructuring charges — 0.2 (0.2) 100%
Depreciation and amortization 10.0 12.9 (2.9) 22%
Operating income $ 26.9 $ 9.1 $ 17.8 196%
Operating income margin 10 % 4 %
Net Sales. Net sales increased $55.3 million , o r 25%, for the six months ended April 30, 2021 compared to the same period in 2020, which was primarily driven by a $48.3 million increase in volumes, including a recovery from prior year COVID-19 impacts, and an increase in price and raw material surcharges of $7.0 million.
Cost of Sales. The cost of sales increased $38.0 million, or 22%, for the six months ended April 30, 2021 as compared to the same period in 2020. Cost of sales increased primarily due to higher volumes during the period.
Selling, General and Administrative. S elling, general and administrative expenses increased $2.6 million, or 11%, for the six months ended April 30, 2021 as compared to the same period in 2020. This increase was due primarily to higher compensation year-over-year.
Restructuring Charges. Restructuring charges for the six months April, 30 2020 relate to facility lease expense for a U.S. vinyl extrusion plant which was closed in January 2017. We exited the lease during December 2020.
Depreciation and Amortization. Depreciation and amortization expense decreased $2.9 million compared to the six months ended April 30, 2021 and 2020, reflecting the run-off of depreciation expense related to existing assets and disposals during the period.
EU Fenestration
Six Months Ended April 30,
2021 2020 $ Change Variance %
(Dollars in millions)
Net sales $ 110.7 $ 66.0 $ 44.7 68%
Cost of sales (excluding depreciation and amortization) 73.2 46.2 27.0 (58)%
Selling, general and administrative 14.0 11.3 2.7 (24)%
Depreciation and amortization 5.1 4.7 0.4 (9)%
Operating income $ 18.4 $ 3.8 $ 14.6 384%
Operating income margin 17 % 6 %
Net Sales . Net sales increased $44.7 million, or 68%, comparing the six months ended April 30, 2021 to the same period in 2020, which was primarily driven by a $37.5 million increase in volumes, including a recovery from prior year COVID-19 impacts and the reopening of manufacturing facilities in the U.K. which were forced to close for several weeks in the second quarter of 2020, $4.8 million of foreign currency rate changes, and $2.4 million of base price increases.
Cost of Sales. The cos t of sales increased $27.0 million, or 58%, for the six months ended April 30, 2021 compared to the same period in 2020. Cost of sales increased primarily due to higher volumes during the period.
Selling, General and Administrative. Selling, general and administrative expense increased $2.7 million, or 24%, for the six months ended April 30, 2021 compared to the same period in 2020. The increase is primarily due to higher compensation, general expenses and foreign currency impacts year-over-year.
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NA Cabinet Components
Six Months Ended April 30,
2021 2020 $ Change Variance %
(Dollars in millions)
Net sales $ 117.6 $ 100.7 $ 16.9 17%
Cost of sales (excluding depreciation and amortization) 101.0 88.0 13.0 (15)%
Selling, general and administrative 10.2 8.8 1.4 (16)%
Restructuring charges — 0.2 (0.2) 100%
Depreciation and amortization 6.6 6.9 (0.3) 4%
Operating loss $ (0.2) $ (3.2) $ 3.0 94%
Operating loss margin — % (3) %
Net Sales . Net sales increased $16.9 million , or 17% , for the six months ended April 30, 2021 compared to the same period in 2020 , which was driven by a $15.8 million increase in volumes, including a recovery from prior year COVID-19 impacts, and an increase in price and raw material indexes of $1.1 million.
Cost of Sales . Cost of sales increased $13.0 million , or 15%, for the six months ended April 30, 2021 compared with the same period in 2020, primarily as a result of higher volumes and rising lumber prices, which are recovered on a lag.
Selling, General and Administrative . Selling, general and administrative expense increased $1.4 million, or 16%, for the six months ended April 30, 2021 compared to the same period in 2020, primarily due to higher compensation and general expenses year-over-year.
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.
Unallocated Corporate & Other
Six Months Ended April 30,
2021 2020 $ Change Variance %
(Dollars in millions)
Net sales $ (2.1) $ (1.6) $ (0.5) (31)%
Cost of sales (excluding depreciation and amortization) (1.1) (0.8) (0.3) (38)%
Selling, general and administrative 10.7 (2.3) 13.0 (565)%
Depreciation and amortization 0.2 0.3 (0.1) 33%
Operating (loss) income $ (11.9) $ 1.2 $ (13.1) (1,092)%
Net Sales . Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the six months ended April 30, 2021 and 2020.
Cost of Sales . Cost of sales for Unallocated Corporate & Other consists of the elimination of inter-segment sales, profit in inventory, and other costs.
Selling, General and Administrative . Selling, general and administrative expenses increased $13.0 million, or 565%, for the six months ended April 30, 2021 compared to the same period in 2020. This increase is attributable to $9.7 million of higher compensation expense related to the valuations of our stock based compensation awards and executive bonuses, $3.1 million of medical expenses due to a higher claims experience during the six months ended April 30, 2021 as compared to the prior year period, and $1.4 million of loss on the sale of a plant. These increases were partially offset by a reduction in executive severance and legal charges.
Changes related to Non-Operating Items:
Interest Exp ense . Interest expense decreased $1.7 million for the six months ended April 30, 2021 compared to the same period in 2020 as a result of lower interest rates and lower borrowings during the period.
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Income Taxes . We recorded income tax expense of $9.9 million on pre-tax income of $32.3 million for the six months ended April 30, 2021, an effective rate of 30.6%, and income tax expense of $2.6 million on a pre-tax income of $8.1 million for the six months ended April 30, 2020, an effective rate of 31.7%. The $7.3 million increase in income tax expense year-over-year corresponds with the increase in pre-tax income.
Liquidity and Capital Resources
Overview
Historically, our principal sources of funds have been cash on hand, cash flow from operations, and borrowings under our credit facilities.
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, 2021 ranged from LIBOR + 1.50% to LIBOR + 1.25%. Our cost of capital could increase depending upon the Consolidated Leverage Ratio at the end of any given quarter. In addition to the Consolidated Leverage Ratio covenant, we are required to meet a Consolidated Interest Coverage Ratio covenant, and there are limitations on certain transactions including our ability to incur indebtedness, incur liens, dispose of material assets, acquire businesses, make restricted payments and pay dividends (limited to $20.0 million per year). We are amortizing deferred financing fees of $0.7 million straight-line over the remaining term of the facility. For further details of the Credit Facility, refer to Note 4, “Debt and Finance Lease Obligations” to the accompanying unaudited condensed consolidated financial statements contained elsewhere herein.
As of April 30, 2021, w e had $49.3 million of cash and equivalents, $73.0 million outstanding under the Credit Facility, $4.5 million of outstanding letters of credit and $15.7 million outstanding under finance leases and other debt. We had $247.5 million available for use under the Credit Facility at April 30, 2021.
We repatriated $8.8 million and $3.1 million of f oreign cash during the six months ended April 30, 2021 and 2020, respectively. We expect to repatriate excess cash moving forward and use the funds to retire debt or meet current working capital needs. Funds from operations may be impacted by softer demand and liquidity concerns of our customers as a result of COVID-19. In the U.K., we insure against a portion of our credit losses. In light of the COVID-19 pandemic, the Company has implemented a range of actions aimed at reducing costs and preserving liquidity. We believe our business model, our current cash reserves and the recent steps we have taken to strengthen our balance sheet leave us well-positioned to manage our business and remain in compliance with our debt covenants.
Analysis of Cash Flow
The following table summarizes our cash flow results for the six months ended April 30, 2021 and 2020:
Six Months Ended
April 30,
2021 2020
(In millions)
Cash provided by operating activities $ 29.0 $ 2.5
Cash used for investing activities $ (8.1) $ (16.3)
Cash (used for) provided by financing activities $ (24.3) $ 63.5
Operating Activities . Cash provided by operating activities for the six months ended April 30, 2021 increased $26.5 million compared to the six months ended April 30, 2020 . Higher net income year-over-year due to increased demand and improvements in working capital management were the primary drivers of this operating cash growth.
Investing Activities. Cash used f or investing activities decreased $8.2 million for the six months ended April 30, 2021 compared to the same period in 2020, primarily as a result of lower capital expenditures.
Financing Activities. Cash used for financing activities was $24.3 million for the six months ended April 30, 2021, which included $30.6 million of net debt repayments, $5.3 million of dividends paid to our shareholders, and $4.0 million of treasury stock repurchases. Our use of cash was partially offset by $16.1 million of proceeds from stoc k option exercises.
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Liquidity Requirements
Historically, our strategy for deploying cash has been to invest in organic growth opportunities, develop our infrastructure, and explore strategic acquisitions. Other uses of cash include paying cash dividends to our shareholders and repurchasing our common stock. During the six months ended April 30, 2021 and 2020, we repatriated repatriations $8.8 million and $3.1 million, respectively, of foreign earnings from our foreign locations. We maintain cash balances in foreign countries which total $15.0 million as of April 30, 2021.
Critical Accounting Policies and Estimates
The preparation of our financial statements in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP) requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. Estimates and assumptions about future events and their effects cannot be perceived with certainty. Estimates may change as new events occur, as more experience is acquired, as additional information becomes available and as our operating environment changes. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, and that we believe provide a basis for making judgments about the carrying value of assets and liabilities that are not readily available through open market quotes. We must use our judgment with regard to uncertainties in order to make these estimates. Actual results could differ from these estimates.
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, 2020. Our critical accounting policies and estimates have not changed materially during the six months ended April 30, 2021.
While there have been no changes in the application of principles, methods, and assumptions used to determine our significant estimates, we may be required to revise certain accounting estimates and judgments related to the economic and business impact of the COVID-19 pandemic, such as, but not limited to, those related to the valuation of goodwill, intangibles, long-lived assets, accounts receivable, and inventory, which could have a material adverse effect on our financial position and results of operations.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standards setting bodies that we adopt as of the specified effective date. Unless otherwise discussed, we believe the impact of any recently issued standards that are not yet effective are either not applicable to us at this time or will not have a material impact on our condensed consolidated financial statements upon adoption.
In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326) . This ASU sets forth a “current expected credit loss” model, which requires the measurement of all expected credit losses for financial instruments or other assets (e.g., trade receivables), held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. We adopted this amendment on November 1, 2020, with no material impact on our condensed consolidated financial statements.
Refer to our Annual Report on Form 10-K for the fiscal year ended October 31, 2020 for additional standards we are currently evaluating.
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