What changed in this filing

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Item 1. Financial Statements

2022-09-02 compared with 2022-06-03 · 145 added, 132 removed, 595 unchanged (32% of the section changed)

49 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended Six Months Ended

April 30, April 30,

Three Months Ended Nine Months Ended

July 31, July 31,

2022 2021 2022 2021

22 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended Six Months Ended

April 30, April 30,

Three Months Ended Nine Months Ended

July 31, July 31,

2022 2021 2022 2021

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

(In thousands)

1 unchanged sentence

Net income $ 63,669 $ 36,082

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

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization 30,554 32,543

12 unchanged sentences

Other, net ( 177 ) ( 183 )

Cash (used for) provided by operating activities ( 1,881 ) 28,960

Cash provided by operating activities 49,854 47,435

Investing activities:

5 unchanged sentences

Repayments of credit facility borrowings ( 70,500 ) ( 45,000 )

Debt issuance costs ( 1,210 ) —

Repayments of other long-term debt ( 1,301 ) ( 502 )

3 unchanged sentences

Purchase of treasury stock ( 6,600 ) ( 5,741 )

Cash provided by (used for) financing activities 16,502 ( 24,272 )

Cash used for financing activities ( 17,937 ) ( 43,480 )

Effect of exchange rate changes on cash and cash equivalents ( 2,594 ) 955

Decrease in cash and cash equivalents ( 1,161 ) ( 2,363 )

Increase (decrease) in cash and cash equivalents 9,969 ( 7,958 )

Cash and cash equivalents at beginning of period 40,061 51,621

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Six Months Ended April 30, 2022 Common

Nine Months Ended July 31, 2022 Common

Stock Additional

26 unchanged sentences

Balance at April 30, 2022 $ 373 $ 250,756 $ 292,221 $ ( 36,197 ) $ ( 70,979 ) $ 436,174

Six Months Ended April, 2021 Common

Net income — — 25,908 — — 25,908

Foreign currency translation adjustment — — — ( 5,168 ) — ( 5,168 )

Common dividends ($ 0.08 per share)

— — ( 2,658 ) — — ( 2,658 )

Purchase of treasury stock — — — — ( 5,031 ) ( 5,031 )

Stock-based compensation activity:

Expense related to stock-based compensation — 583 — — — 583

Stock options exercised — 20 — — 309 329

Balance at July 31, 2022 $ 373 $ 251,359 $ 315,471 $ ( 41,365 ) $ ( 75,701 ) $ 450,137

Nine Months Ended July 31, 2021 Common

Stock Additional

26 unchanged sentences

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

Net income — — 13,679 — — 13,679

Foreign currency translation adjustment — — — 424 — 424

Common dividends ($ 0.08 per share)

— — ( 2,687 ) — — ( 2,687 )

Purchase of treasury stock — — — — ( 1,773 ) ( 1,773 )

Stock-based compensation activity:

Expense related to stock-based compensation — 500 — — — 500

Stock options exercised — 15 — — 134 149

Balance at July 31, 2021 $ 373 $ 253,662 $ 241,582 $ ( 22,968 ) $ ( 67,260 ) $ 405,389

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

57 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes our product sales for the three and six months ended April 30, 2022 and 2021 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.

The following table summarizes our product sales for the three and nine months ended July 31, 2022 and 2021 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,

Three Months Ended Nine Months Ended

July 31, July 31,

2022 2021 2022 2021

27 unchanged sentences

Actual write-offs are charged against the allowance when collection efforts have been unsuccessful.

Property, Plant and Equipment and Intangible Assets with Defined Lives

During the three months ended July 31, 2022, our North American vinyl extrusion operations in our NA Fenestration segment experienced lower-than-expected operating results due to the continued impact of inflation and historical customer contracts which prevent us from passing on the full impact of higher costs to our customers.

We determined that this condition was an indicator of a triggering event which necessitated an evaluation of certain long-term assets used in this business for potential impairment.

We compared the projected undiscounted cash flows we expected to realize associated with these assets over the remaining useful lives of the primary operating assets to the net book value of the long-term assets and determined that these assets were not impaired.

Therefore, we did not record an impairment charge related to property, plant and equipment or intangible assets with defined lives during the nine months ended July 31, 2022, however, should we be unable to successfully increase prices to offset inflation, it is possible that we could incur an impairment in the future.

There were no indicators of triggering events noted for any period in the year ended October 31, 2021.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Related Parties

N et sales for the six months ended April 30, 2022 included approximately $ 1.1 million of transactions with a customer which is a related party with one of our non-employee directors.

N et sales for the nine months ended July 31, 2022 included approximately $ 1.6 million of transactions with a customer which is a related party with one of our non-employee directors.

We performed a review of these transactions, of which no single transaction or series of related transactions exceeded $ 120,000 in amount, and determined that these transactions were enacted independently of each other in fair transactions.

We are not aware of any other related party transactions with any of our current non-employee directors or officers outside of their normal business functions or expected contractual duties.

COVID-19 Impact

On March 11, 2020, the World Health Organization (WHO) declared the outbreak of COVID-19 as a global pandemic and advised aggressive containment action.

The COVID-19 pandemic and its impacts are continuing to have an adverse effect on many sectors of the economy, including negative impacts to the global supply chain and increased inflation.

Measures providing for business shutdowns generally exclude certain essential services commonly including critical infrastructure such as

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

construction and the businesses that support that critical infrastructure.

To date, we have not experienced significant challenges or expenses implementing crisis management plans intended for containment and prevention.

The health and safety of our employees are high priorities.

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 report any COVID-19 symptoms to ensure safety as infection surges dictate.

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

As a result of the economic and business impact of COVID-19, including inflation and supply chain impact, 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.

Inventories consisted of the following at April 30, 2022 and October 31, 2021 (in thousands):

Inventories consisted of the following at July 31, 2022 and October 31, 2021 (in thousands):

2022 October 31,

7 unchanged sentences

Goodwill and Intangible Assets

The change in the carrying amount of goodwill for the six months ended April 30, 2022 was as follows (in thousands):

Six Months Ended

April 30, 2022

The change in the carrying amount of goodwill for the nine months ended July 31, 2022 was as follows (in thousands):

Nine Months Ended

July 31, 2022

Beginning balance as of November 1, 2021 $ 149,205

2 unchanged sentences

At our last annual test date, August 31, 2021, 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 and six months ended April 30, 2022 and determined that there were no triggering events.

We evaluated for indicators of impairment during the three and nine months ended July 31, 2022 and determined that there were no triggering events.

For a summary of the change in the carrying amount of goodwill by segment, see Note 11, “Segment Information.”

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Identifiable Intangible Assets

Amortizable intangible assets consisted of the following as of April 30, 2022 and October 31, 2021 (in thousands):

April 30, 2022 October 31, 2021

Amortizable intangible assets consisted of the following as of July 31, 2022 and October 31, 2021 (in thousands):

July 31, 2022 October 31, 2021

Gross Carrying

6 unchanged sentences

Total $ 219,204 $ 149,534 $ 225,169 $ 142,759

We had aggregate amortization expense related to intangible assets for the three and six months ended April 30, 2022 of $ 3.0 million and $ 6.0 million, respectively, and $ 3.3 million and $ 6.7 million for the comparable prior year periods.

We had aggregate amortization expense related to intangible assets for the three and nine months ended July 31, 2022 of $ 3.0 million and $ 9.0 million, respectively, and $ 3.0 million and $ 9.7 million for the comparable prior year periods.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Estimated remaining amortization expense, based on current intangible balances, for each of the fiscal years ending October 31, is as follows (in thousands):

Amortization Expense

2022 (remaining six months) $ 5,939

2022 (remaining three months) $ 2,949

Thereafter 27,263

1 unchanged sentence

Debt and Finance Lease Obligations

Long-term debt consisted of the following at April 30, 2022 and October 31, 2021 (in thousands):

Long-term debt consisted of the following at July 31, 2022 and October 31, 2021 (in thousands):

2022 October 31,

6 unchanged sentences

Revolving Credit Facility

As more fully described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021, on October 18, 2018, we amended and extended our prior credit facility by entering into a $ 325.0 million revolving credit facility (the “Credit Facility”), with Wells Fargo Bank, National Association, as Agent, Swingline Lender and Issuing Lender, and Bank of America, N.A.

On July 6, 2022, we entered into our Second Amended and Restated Credit Agreement (the “Credit Facility”) with Wells Fargo Securities, LLC, as Agent, Swingline Lender and Issuing Lender, and BofA Securities, Inc.

serving as Syndication Agent.

The Credit Facility has a five-year term, maturing on October 18, 2023.

On December 28, 2021, we entered into a second amendment (the “Amendment”) of the Credit Facility.

Pursuant to the Amendment, (a) the definition of “Capital Lease” was modified and clarified to provide an exclusion of certain agreed leases of the Company and its subsidiaries from the Credit Facility’s financial covenants and other provisions and (b) secured overnight financing rate, interest rate mechanics and interest rate reference benchmark replacement provisions were implemented to effectuate the transition from LIBOR as a reference interest rate.

We will, however, continue to use the One Month LIBOR Rate plus applicable margin for the Credit Facility until June of 2023 when One Month LIBOR will no longer be available.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Following the Amendment, interest payments are calculated, at our election and depending upon the Consolidated Leverage Ratio, at a Base Rate plus an applicable margin or at the same rate as One Month LIBOR for domestic borrowings, Eurocurrency Rate Loan, Transitioned RFR Loan or RFR Loan plus an applicable margin.

We capitalized $ 1.2 million of deferred financing fees related the Credit Facility during the three months ended July 31, 2022.

This $ 325.0 million revolving credit facility has a five-year term, maturing on July 6, 2027, and replaces our previous credit facility.

Our previous credit facility is more fully described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021.

Interest payments for the Credit Facility are calculated, at our election and depending upon the Consolidated Net Leverage Ratio, at a Base Rate plus an applicable margin or at the same rate as Risk-Free Rate (“RFR”) Loans for domestic borrowings or Eurocurrency Rate Loans plus an applicable margin.

In addition, we are subject to commitment fees for the unused portion of the Credit Facility.

The applicable margin and commitment fees are outlined in the following table:

Pricing Level Consolidated Leverage Ratio Commitment Fee LIBOR, Eurocurrency Rate Loans and Transitioned RFR Loans Initial RFR Loans Base Rate Loans

Pricing Level Consolidated Net Leverage Ratio Commitment Fee Eurocurrency Rate Loans and RFR Loans Base Rate Loans

I Less than or equal to 1.50 to 1.00 0.150 % 1.25 % 0.25 %

3 unchanged sentences

In the event of default, outstanding borrowings would accrue interest at the Default Rate, as defined, whereby the obligations will bear interest at a per annum rate equal to 2 % above the total per annum rate otherwise applicable.

The Credit Facility provides for incremental revolving credit commitments for a minimum principal amount of $ 10.0 million, up to an aggregate amount of $ 150.0 million, subject to the lender's discretion to elect or decline the incremental increase.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Credit Facility provides for incremental revolving credit commitments for a minimum principal amount of $ 10.0 million, up to an aggregate amount of $ 150.0 million or 100% of Consolidated EBITDA, subject to the lender's discretion to elect or decline the incremental increase.

We can also borrow up to the lesser of $ 15.0 million or the revolving credit commitment, as defined, under a Swingline feature of the Credit Facility.

The Credit Facility contains a:

(1) Consolidated Interest Coverage Ratio requirement whereby we must not permit the Consolidated Interest Coverage Ratio, as defined, to be less than 2.25 to 1.00, and (2) Consolidated Leverage Ratio requirement, whereby we must not permit the Consolidated Leverage Ratio, as defined, to be greater than 3.25 to 1.00.

(1) Consolidated Interest Coverage Ratio requirement whereby we must not permit the Consolidated Interest Coverage Ratio, as defined, to be less than 3.00 to 1.00, and (2) Consolidated Net Leverage Ratio requirement, whereby we must not permit the Consolidated Net Leverage Ratio, as defined, to be greater than 3.25 to 1.00.

In addition to maintaining these financial covenants, the Credit Facility also limits our ability to enter into certain business transactions, such as to incur indebtedness or liens, to acquire businesses or dispose of material assets, make restricted payments, pay dividends (limited to $ 25.0 million per year) and other transactions as further defined in the Credit Facility.

Some of these limitations, however, do not take effect so long as total leverage is less than or equal to 2.75 to 1.00 and available liquidity exceeds $ 25.0 million.

Some of these limitations, however, do not take effect so long as Consolidated Net Leverage Ratio is less than or equal to 2.75 to 1.00 and available liquidity exceeds $ 25.0 million.

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

As of April 30, 2022, we ha d $ 63.0 million of borrowings outstanding under the Credit Facility (reduced by unamortized debt issuance costs of $0.4 million), $ 4.4 million of outstanding letters of credit and $ 14.0 million outstanding primarily under finance leases and other debt.

We had $ 257.6 million available for use under the 2018 Credit Facility at April 30, 2022.

As of July 31, 2022, we ha d $ 38.0 million of borrowings outstanding under the Credit Facility (reduced by unamortized debt issuance costs of $1.6 million), $ 5.1 million of outstanding letters of credit and $ 20.1 million outstanding primarily under finance leases and other debt.

We had $ 281.9 million available for use under the Credit Facility at July 31, 2022.

Outstanding borrowings under the Credit Facility accrue interest at 3.08 % per annum.

Our weighted average borrowing rate for borrowings outstanding during the six months ended April 30, 2022 and 2021 was 1.48 % and 1.47 %, respectively.

We were in compliance with our debt covenants as of April 30, 2022.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our weighted average borrowing rate for borrowings outstanding during the nine months ended July 31, 2022 and 2021 was 1.81 % and 1.43 %, respectively.

We were in compliance with our debt covenants as of July 31, 2022.

Retirement Plans

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

The net periodic pension cost for this plan for the three and six months ended April 30, 2022 and 2021 was as follows (in thousands):

Three Months Ended Six Months Ended

April 30, April 30,

The net periodic pension cost for this plan for the three and nine months ended July 31, 2022 and 2021 was as follows (in thousands):

Three Months Ended Nine Months Ended

July 31, July 31,

2022 2021 2022 2021

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 April 30, 2022 and October 31, 2021, our liability under the supplemental benefit plan was approxim ately $ 2.9 million.

As of April 30, 2022 and October 31, 2021, the liability associated with the deferred compensation plan was approximately $ 3.2 million and $ 3.4 million, respectively.

As of July 31, 2022 and October 31, 2021, our liability under the supplemental benefit plan was approxim ately $ 2.9 million.

As of July 31, 2022 and October 31, 2021, the liability associated with the deferred compensation plan was approximately $ 3.5 million and $ 3.4 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.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

To determine our income tax expense or benefit for interim periods, consistent with accounting standards, we apply the estimated annual effective income tax rate t o year-to-date results, plus any applicable discrete items, which are recorded in the period in which they occur.

Discrete items include, among others, such events as changes in estimates due to the finalization of tax returns, tax audit settlements, expiration of statutes of limitations, tax benefits on equity compensation, and increase or decrease in valuation allowances on deferred tax assets.

Our annual effective tax rates from continuing operations for the six months ended April 30, 2022 and 2021 were 25.2 % and 27.3 %, respectively.

Our effective tax rates from continuing operations for the nine months ended July 31, 2022 and 2021 were 22.2 % and 32.5 %, respectively.

The difference between our effective income tax rate and the U.S.

3 unchanged sentences

The primary discrete items affecting the 2022 effective rate were a benefit of $ 0.2 million related to the vesting or exercise of equity-based compensation awards and a benefit of $ 1.0 million for the true-up of our accruals and related deferred taxes from prior year.

The 2021 effective tax rate was primarily impacted by 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.

As of April 30, 2022, our liability for uncertain tax positions (UTP) of $ 1.4 million relates to certain U.S.

The primary discrete items affecting the 2021 effective rate were the $ 3.1 million remeasurement of our deferred income tax assets and liabilities related to the increase in the corporate tax rate in the U.K.

from 19 % to 25 %, a charge of $ 0.6 million related to the vesting or exercise of equity-based compensation awards and a benefit of $ 0.6 million for the true-up of our accruals and related deferred taxes from prior year filings.

As of July 31, 2022, our liability for uncertain tax positions (UTP) of $ 1.4 million relates to certain U.S.

federal and state tax items regarding the interpretation of tax laws and regulations, including a minimal amount of interest and penalties.

4 unchanged sentences

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 $ 1.3 million as of April 30, 2022 and October 31, 2021.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

We maintain a valuation allowance for certain state net operating losses which totaled $ 1.3 million as of July 31, 2022 and October 31, 2021.

On August 16, 2002 the Inflation Reduction Act of 2022 was signed into law.

We are evaluating the regulations but do not believe they will result in a material impact to our consolidated financial statements.

Contingencies

10 unchanged sentences

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.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

11 unchanged sentences

• Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

As of April 30, 2022, foreign currency derivatives were being measured on a recurring basis.

Less than $ 0.1 million of foreign currency derivatives were included in total assets as of April 30, 2022.

There were no outstanding foreign currency

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

derivatives as of October 31, 2021.

As of July 31, 2022, foreign currency derivatives were being measured on a recurring basis.

Less than $ 0.1 million of foreign currency derivatives were included in total liabilities as of July 31, 2022.

There were no outstanding foreign currency derivatives as of October 31, 2021.

All of our derivative contracts are valued using quoted market prices from brokers or exchanges and are classified within Level 2 of the fair value hierarchy.

1 unchanged sentence

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 April 30, 2022, and October 31, 2021 (Level 2 measurement).

As a result, the fair value of our debt instrument approximates carrying value at July 31, 2022, and October 31, 2021 (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).

9 unchanged sentences

Occasionally, we may make additional grants to key employees at other times during the year.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Restricted Stock Awards

3 unchanged sentences

Shares are generally issued from treasury stock at the time of grant.

A summary of non-vested restricted stock awards activity during the six months ended April 30, 2022 is presented below:

A summary of non-vested restricted stock awards activity during the nine months ended July 31, 2022 is presented below:

Restricted Stock Awards Weighted Average

4 unchanged sentences

Vested ( 88,700 ) 13.74

Non-vested at April 30, 2022 212,100 $ 20.86

The total weighted average grant-date fair value of restricted stock awards that vested during each of the six months ended April 30, 2022 and 2021 was $ 1.2 million and $ 0.9 million, respectively.

As of April 30, 2022, total unrecognized compensation cost related to unamortized restricted stock awards was $ 2.7 million.

Non-vested at July 31, 2022 212,100 $ 20.86

The total weighted average grant-date fair value of restricted stock awards that vested during each of the nine months ended July 31, 2022 and 2021 was $ 1.2 million and $ 0.9 million, respectively.

As of July 31, 2022, total unrecognized compensation cost related to unamortized restricted stock awards was $ 2.3 million.

We expect to recognize this expense over the remaining weighted average vesting period of 2.0 years.

5 unchanged sentences

Our stock options may be exercised up to a maximum of ten years from the date of grant.

The fair value of the stock options was determined on the grant date and expensed over the vesting period resulting in an

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

increase in additional paid-in-capital.

The fair value of the stock options was determined on the grant date and expensed over the vesting period resulting in an increase in additional paid-in-capital.

For employees who were nearing retirement-eligibility, we recognized stock option expense ratably over the shorter of the vesting period or the period from the grant-date to the retirement-eligibility date.

1 unchanged sentence

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, 2021.

The following table summarizes our stock option activity for the six months ended April 30, 2022:

The following table summarizes our stock option activity for the nine months ended July 31, 2022:

Stock Options Weighted Average

5 unchanged sentences

Forfeited/Expired ( 1,600 ) 16.33

Outstanding at April 30, 2022 209,067 $ 19.36 3.0 $ 38

Vested at April 30, 2022 209,067 $ 19.36 3.0 $ 38

Exercisable at April 30, 2022 209,067 $ 19.36 3.0 $ 38

Outstanding at July 31, 2022 190,993 $ 19.37 3.0 $ 1,000

Vested at July 31, 2022 190,993 $ 19.37 3.0 $ 1,000

Exercisable at July 31, 2022 190,993 $ 19.37 3.0 $ 1,000

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 six months ended April 30, 2022 and 2021 was less than $ 0.1 million and $ 4.2 million, respectively.

The total intrinsic value of stock options exercised during the nine months ended July 31, 2022 and 2021 was $ 0.1 million and $ 4.2 million, respectively.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Restricted Stock Units

5 unchanged sentences

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 six months ended April 30, 2022 and 2021, non-employee directors received 36,669 and 28,826 restricted stock units, respectively, at a weighted average grant date fair value of $ 22.52 per share and $ 18.79 per share, respectively, which vested immediately.

As of April 30, 2022, 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, 2022 we paid $ 1.0 million and $ 0.8 million for the comparable prior year to settle vested restricted stock units.

During the nine months ended July 31, 2022 and 2021, non-employee directors received 36,669 and 28,826 restricted stock units, respectively, at a weighted average grant date fair value of $ 22.52 per share and $ 18.79 per share, respectively, which vested immediately.

As of July 31, 2022, 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 nine months ended July 31, 2022 we paid $ 1.0 million and $ 0.8 million for the comparable prior year to settle vested restricted stock units.

Performance Share Awards

3 unchanged sentences

Depending on the achievement of the performance conditions, 0 % to 200 % of the awarded performance shares may ultimately vest.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes our performance share grants and the grant date fair value for the RONA performance metrics:

9 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.

12 unchanged sentences

December 9, 2021 50,900 $ 21.06 —

During the six months ended April 30, 2022 , 87,919 performance restricted stock units vested.

During the nine months ended July 31, 2022 , 87,919 performance restricted stock units vested.

The performance restricted stock units are not considered outstanding shares, do not have voting rights, and are exclud ed 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 April 30, 2022, we have de emed 27,979 shares related to the December 2019 grant of performance restricted stock units as probable to vest.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes amounts expensed as selling, general and administrative expense related to restricted stock awards, stock options, restricted stock units, performance share awards and performance restricted stock units for the three and six months ended April 30, 2022 and 2021 (in thousands):

Three Months Ended Six Months Ended

April 30, April 30,

As of July 31, 2022, we have de emed 41,269 shares related to the December 2019 grant of performance restricted stock units as probable to vest.

The following table summarizes amounts expensed as selling, general and administrative expense related to restricted stock awards, stock options, restricted stock units, performance share awards and performance restricted stock units for the three and nine months ended July 31, 2022 and 2021 (in thousands):

Three Months Ended Nine Months Ended

July 31, 2022 July 31, 2022

2022 2021 2022 2021

10 unchanged sentences

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 six months ended April 30, 2022.

The following table summarizes the treasury stock activity during the six months ended April 30, 2022:

Six Months Ended

April 30, 2022

There were no charges to retained earnings during the nine months ended July 31, 2022.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the treasury stock activity during the nine months ended July 31, 2022:

Nine Months Ended

July 31, 2022

Beginning Balance as of November 1, 2021 3,998,725

3 unchanged sentences

Treasury stock repurchases 291,000

Balance at April 30, 2022 3,892,669

Other, net on the condensed consolidated statements of income consisted of the following for the three and six months ended April 30, 2022 and 2021 (in thousands):

Three Months Ended Six Months Ended

April 30, April 30,

Balance at July 31, 2022 4,091,695

Other, net on the condensed consolidated statements of income consisted of the following for the three and nine months ended July 31, 2022 and 2021 (in thousands):

Three Months Ended Nine Months Ended

July 31, July 31,

2022 2021 2022 2021

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Other, net $ 398 $ 188 $ 905 $ 645

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Segment Information

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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, 2022 was $ 5.5 million and $ 11.3 million, respectively, and $ 5.4 million and $ 10.7 million for the comparable prior year periods.

Corporate general and administrative expense allocated during the three and nine month period ended July 31, 2022 was $ 5.8 million and $ 17.1 million, respectively, and $ 4.9 million and $ 15.6 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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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Segment information for the three and six months ended April 30, 2022 and 2021, and total assets as of April 30, 2022 and October 31, 2021 are summarized in the following table (in thousands):

Segment information for the three and nine months ended July 31, 2022 and 2021, and total assets as of July 31, 2022 and October 31, 2021 are summarized in the following table (in thousands):

NA Fenestration EU Fenestration NA Cabinet Comp.

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& Other Total

Three Months Ended April 30, 2022

Three Months Ended July 31, 2022

Net sales $ 184,744 $ 67,613 $ 72,480 $ ( 800 ) $ 324,037

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Capital expenditures 4,166 621 916 — 5,703

Three Months Ended April 30, 2021

Three Months Ended July 31, 2021

Net sales $ 147,818 $ 71,114 $ 61,936 $ ( 991 ) $ 279,877

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Capital expenditures 2,651 2,285 1,115 156 6,207

Six Months Ended April 30, 2022

Nine Months Ended July 31, 2022

Net sales $ 509,283 $ 199,954 $ 207,711 $ ( 2,978 ) $ 913,970

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Capital expenditures 13,103 2,827 3,488 70 19,488

Six Months Ended April 30, 2021

Nine Months Ended July 31, 2021

Net sales $ 422,077 $ 181,862 $ 179,492 $ ( 3,050 ) $ 780,381

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Capital expenditures 7,472 4,025 4,228 281 16,006

As of April 30, 2022

As of July 31, 2022

Total assets $ 296,443 $ 223,803 $ 184,683 $ 38,678 $ 743,607

1 unchanged sentence

Total assets $ 268,773 $ 236,755 $ 178,671 $ 33,124 $ 717,323

The following table summarizes the change in the carrying amount of goodwill by reportable business segment for the six months ended April 30, 2022 (in thousands):

The following table summarizes the change in the carrying amount of goodwill by reportable business segment for the nine months ended July 31, 2022 (in thousands):

NA Fenestration EU Fenestration NA Cabinet Comp.

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Foreign currency translation adjustment — ( 7,956 ) — — ( 7,956 )

Balance as of April 30, 2022 $ 38,712 $ 65,409 $ 39,147 $ — $ 143,268

Balance as of July 31, 2022 $ 38,712 $ 63,390 $ 39,147 $ — $ 141,249

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

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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 and six months ended April 30, 2022 and 2021 (in thousands):

Three Months Ended Six Months Ended

April 30, April 30,

The following table reconciles operating income as reported above to net income for the three and nine months ended July 31, 2022 and 2021 (in thousands):

Three Months Ended Nine Months Ended

July 31, July 31,

2022 2021 2022 2021

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Basic and diluted earnings per share for the three and six months ended April 30, 2022 and 2021 were calculated as follows (in thousands, except per share data):

Basic and diluted earnings per share for the three and nine months ended July 31, 2022 and 2021 were calculated as follows (in thousands, except per share data):

Net Income Weighted Average Shares Per Share

Three Months Ended April 30, 2022

Three Months Ended July 31, 2022

Basic earnings per common share $ 25,908 32,999 $ 0.79

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Diluted earnings per common share $ 25,908 33,173 $ 0.78

Three Months Ended April 30, 2021

Three Months Ended July 31, 2021

Basic earnings per common share $ 13,679 33,359 $ 0.41

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Diluted earnings per common share $ 13,679 33,650 $ 0.41

Six Months Ended April 30, 2022

Nine Months Ended July 31, 2022

Basic earnings per common share $ 63,669 33,093 $ 1.92

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Diluted earnings per common share $ 63,669 33,256 $ 1.91

Six Months Ended April 30, 2021

Nine Months Ended July 31, 2021

Basic earnings per common share $ 36,082 33,194 $ 1.09

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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.

There were no anti-dilutive instruments for the three and six months ended April 30, 2022 and 2021.

There were no anti-dilutive instruments for the three and nine months ended July 31, 2022 and 2021.

New Accounting Guidance

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.

We did not adopt any new accounting pronouncements during the three and six months ended April 30, 2022.

As of April 30, 2022, 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.

We did not adopt any new accounting pronouncements during the three and nine months ended July 31, 2022.

As of July 31, 2022, 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.

Unless the context indicates otherwise, references to “Quanex”, the “Company”, “we”, “us” and “our” refer to the consolidated business operations of Quanex Building Products Corporation and its subsidiaries.

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Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to the following:

• impacts from public health issues (including pandemics, such as the recent COVID-19 pandemic and quarantines) on the economy, demand for our products or our operations, including the responses of governmental authorities to contain such public health issues;

• impacts from public health issues (including pandemics, such as the COVID-19 pandemic and quarantines) on the economy, demand for our products or our operations, including the responses of governmental authorities to contain such public health issues;

• changes in market conditio ns, particularly in the new home construction, and residential remodeling and replacement (R&R) activity markets in the United States, United Kingdom, Germany and elsewhere;

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• changes in warranty obligations;

• changes in energy costs;

• changes in energy costs and the availability of energy;

• changes in tax laws, and interpretations thereof;

11 unchanged sentences

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