What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-12-16 compared with 2021-12-17 · 99 added, 113 removed, 260 unchanged (45% of the section changed)

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Risk Factors.” Actual results could differ from our expectations due to several factors which include, but are not limited to:

the impact of the ongoing COVID-19 pandemic, market price and demand for our products, economic and competitive conditions, capital expenditures, new technology, regulatory changes and other uncertainties.

the impact of market price and demand for our products, economic and competitive conditions, capital expenditures, new technology, regulatory changes and other uncertainties.

Unless otherwise required by law, we undertake no obligation to publicly update any forward-looking statements, even if new information becomes available or other events occur in the future.

We manufacture components for original equipment manufacturers in the building products industry.

These components can be categorized as window and door (fenestration) components and kitchen and bath cabinet components.

We currently manufacture components for original equipment manufacturers in the building products industry.

The majority of 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.

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 production processes and engineering expertise to provide our customers with specialized products for their specific window, door, and cabinet applications.

We use low-cost production processes and engineering expertise to provide our customers with specialized products for their specific applications.

We believe these capabilities provide us with unique competitive advantages.

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Corporate general and administrative expenses allocated during the years ended October 31, 2022, 2021 and 2020 were $24.5 million , $21.6 million and $21.7 million, respectively.

Notable Items

COVID-19 Impacts

Recent Transactions and Events

and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine.

Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market or operational disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.

Russia, Europe’s largest provider of natural gas, has significantly reduced the export of natural gas compared to the same time last year resulting in the increase in natural gas prices and the potential for natural gas shortages.

If this trend continues, this would not only negatively impact our European manufacturing facilities, this may also negatively impact our customers and their demand for our products.

We continue to monitor these situations and their impact on our business.

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 affect 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 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 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 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.

Many of the limitations and mandates on operations have been lifted, however, the COVID-19 pandemic and its related effects continue to have an adverse effect on many sectors of the economy and we may be further impacted.

The war in Ukraine and the impact of COVID-19 on the global economy including inflation and the price of raw materials, supply chain disruptions, and the volatility in interest rates including home mortgage rates are unpredictable and there may be developments outside our control requiring us to adjust our operating plan.

Market Overview and Outlook

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residential wood cabinet demand.

In November 2021, the NAHB forecasted calendar-year housing starts (excluding manufactured units) to be 1.6 million in 2021, 2022 and 2023 calendar-years.

The November 2021, Ducker forecast indicated that window shipments in the R&R market are expected to increase approximately 4.5%, 4% and 3% in the calendar-years ended 2021, 2022, 2023, respectively, and window shipments in the new construction market are expected to grow 13%, 2%, and 1% in the calendar-years ended 2021, 2022, and 2023, respectively, resulting in overall window shipment improvements of 8% in 2021, 3% in 2022, and 2% in 2023.

In November 2022, the NAHB forecasted calendar-year housing starts (excluding manufactured units) to be 1.5 million, 1.4 million and 1.5 million in 2022, 2023 and 2024 calendar-years, respectively.

The November 2022, Ducker forecast indicated that window shipments in the R&R market are expected to increase approximately 3% and 2% in the calendar-years ended 2022 and 2023, respectively, and window shipments in the new construction market are expected to decrease 4% and 13% in the calendar-years ended 2022 and 2023, respectively, resulting in overall window shipment declines of 1% in 2022 and 5% in 2023.

Derived from reports published by Ducker, the overall increase in window shipments for the trailing twelve months ended September 30, 2022 was 3%.

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In November 2022, Catalina Research estimated that residential semi-custom cabinet demand in the U.S.

is estimated to increase 13.4% in 2021 and 5.2% in 2022.

is estimated to increase 13% in 2022 and decrease 4% in 2023.

vinyl business (commonly referred to as “Liniar”) is largely focused on the sale of vinyl house systems under the trade name “Liniar” to smaller window manufacturers in the U.K.

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Our business is seasonal, particularly our fenestration business, as inclement weather during the winter months tends to slow down construction, particularly as related to “outside of the house” construction.

To some extent, we believe our kitchen

and bathroom cabinet door business lessens the impact of seasonality on our operating results, as the cabinet business is “inside of the house” and less susceptible to weather.

To some extent, we believe our kitchen and bathroom cabinet door business lessens the impact of seasonality on our operating results, as the cabinet business is “inside of the house” and less susceptible to weather.

We are impacted by regulation of energy standards.

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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.

We also began to experience some supply disruptions as high demand reduced availability of raw materials.

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 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.

We continue to experience some supply disruptions as high demand reduced availability of raw materials.

The global economy remains uncertain due to global supply chain interruptions, inflationary pressures, currency devaluations, political unrest, terror threats, global pandemics such as COVID-19, and even the political landscape in the U.S.

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For the Years Ended October 31,

2021 2020 2021 vs.

Amounts % of Sales Amounts % of Sales $ Change Variance %

(Dollars in millions)

2022 2021 $ Change Variance %

(Dollars in thousands)

Net sales $ 1,221,502 $ 1,072,149 $ 149,353 14%

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2022 2021 $ Change Variance %

(Dollars in millions)

(Dollars in thousands)

Net sales $ 687,458 $ 578,332 $ 109,126 19%

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Operating income margin 11 % 10 %

Net sales increased $94.9 million, or 20%, for the twelve months ended October 31, 2021 compared to the same period in 2020, which was primarily driven by a $74.7 million increase in volumes, including a recovery from prior year COVID-19 impacts, and an increase in price and raw material surcharges of $20.2 million.

Net sales increased $109.1 million, or 19%, for the twelve months ended October 31, 2022 compared to the same period in 2021, which was primarily driven by an increase in price and raw material surcharges of $68.5 million and a $40.7 million increase in volumes.

Cost of Sales.

Cost of sales increased $87.5 million, or 19%, for the twelve months ended October 31, 2022 compared to the same period in 2021.

Cost of sales, including labor, increased primarily due to higher volumes and price inflation during the period.

Cost of sales, including labor, increased primarily due to higher volumes during the period as well as

the inflation of raw materials.

Selling, General and Administrative.

Our selling, general and administrative expenses increased by $5.8 million, or 11%, for the twelve mont hs ended October 31, 2022 compared to the same period in 2021.

This increase was due primarily to higher compensation, including higher incentive accruals based on financial performance, and benefits year-over-year.

Restructuring Charges.

Restructuring charges incurred during the twelve months ended October 31, 2020 relate to facility lease expense for a vinyl extrusion plant in the U.S.

which was closed in January 2017.

We exited the lease during December 2020.

This increase was due primarily to an increase in compensation expense, professional fees and general expenses year-over-year.

Depreciation and Amortization.

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2022 2021 $ Change Variance %

(Dollars in millions)

(Dollars in thousands)

Net sales $ 262,058 $ 251,599 $ 10,459 4%

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Operating income margin 15 % 16 %

Net sales increased $90.5 million, or 56%, when comparing the twelve months ended October 31, 2021 compared to the same period in 2020 , which was primarily driven by a $70.7 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, $11.8 million of foreign currency rate changes, and $8.0 million of base price increases.

Net sales increased $10.5 million, or 4%, when comparing the twelve months ended October 31, 2022 compared to the same period in 2021 , which was primarily driven by a $47.4 million of base price increases partially offset by $22.1 million of foreign currency rate changes and a $14.8 million decrease in volumes.

Cost of Sales .

The cost of sales increased $8.2 million, or 5%, for the twelve months ended October 31, 2022 compared to the same period in 2021.

Cost of sales increased primarily due to higher volumes and price inflation during the period.

Cost of sales increased primarily due to inflation of raw materials partially offset by a decrease in volumes and foreign currency impacts.

Selling, General and Administrative .

Our selling, general and admi nistrative expense increased $7.2 million, or 32%, for the twelve months ended October 31, 2021 compared to the same period in 2020.

The increase is primarily due to higher

compensation, including higher incentive accruals based on financial performance, general expenses and foreign currency impacts year-over-year.

Our selling, general and admi nistrative exp ense increased $2.0 million, or 7%, for the twelve months ended October 31, 2022 compared to the same period in 2021.

The increase is primarily due to higher compensation and general expenses partially offset by foreign currency impacts year-over-year.

NA Cabinet Components

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2022 2021 $ Change Variance %

(Dollars in millions)

(Dollars in thousands)

Net sales $ 275,704 $ 246,075 $ 29,629 12%

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Selling, general and administrative 21,934 20,828 1,106 (5)%

Restructuring charges — 0.3 (0.3) 100%

Depreciation and amortization 13,830 13,263 567 (4)%

Operating income (loss) $ 0.9 $ (2.4) $ 3.3 138%

Operating income (loss) margin — % (1) %

Net sales increased $36.0 million, or 17%, for the twelve months ended October 31, 2021 compared to the same period in 2020, which was primarily driven by a $19.8 million increase in price and raw material indexes and a $16.2 million increase in volumes.

Operating income $ 3,245 $ 896 $ 2,349 262%

Operating income margin 1 % — %

Net sales increased $29.6 million, or 12%, for the twelve months ended October 31, 2022 compared to the same period in 2021, which was primarily driven by a $57.1 million increase in price and raw material indexes partially offset by $27.5 million decrease in volumes due to labor and material shortages throughout the supply chain.

Cost of Sales .

The cost of sales increased $31.3 million, or 17%, for the twelve months ended October 31, 2021 compared to the same period in 2020 as a primarily as a result of higher volumes and rising lumber prices, which are recovered on a lag.

The cost of sales increased $25.6 million, or 12%, for the twelve months ended October 31, 2022 compared to the same period in 2021, primarily as a result of lumber price inflation, which is recovered on a lag, partially offset by lower volumes during the period.

Selling, General and Administrative .

Our selling, general and administrative expense increased $1.1 million, or 5%, for the twelve months ended October 31, 2022 compared to the same period in 2021.

The increase is primarily due to higher compensation, including higher incentive accruals based on financial performance, and general expenses year-over-year .

Restructuring Charges.

Restructuring charges of $0.3 million in the twelve months ended October 31, 2020 related to severance, equipment moving and other charges incurred for a plant closure.

The increase is primarily due to an increase in general expenses year-over-year.

Unallocated Corporate & Other

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2022 2021 $ Change Variance %

(Dollars in millions)

(Dollars in thousands)

Net sales $ (3,718) $ (3,857) $ 139 4%

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Selling, General and Administrative .

Our selling, general and administrative expenses increased $11.8 million, or 2,360%, for the twelve months ended October 31, 2021 compared to the same period in 2020.

This increase is attributable to $7.3 million of higher compensation expense related to the valuations of our stock based compensation awards and executive bonuses due to financial performance, $4.8 million of medical expenses due to a higher claims experience during the twelve months ended October 31, 2021 compared to the same period in 2020, 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.

Our selling, general and administrative expenses decreased $7.7 million, or 63%, for the twelve months ended October 31, 2022 compared to the same period in 2021.

This decreased due to $4.0 million of decreased compensation expense including the valuations of our stock based compensation awards, a decrease of $3.2 million related to medical expense claims, and a decrease of $0.5 million related to workers’ compensation claims partially offset by an increase of $1.4 million professional fees during the twelve months ended October 31, 2022 compared to the same period in 2021.

Additionally, we recorded a $1.4 million loss on the sale of a plant during the twelve months ended December 31, 2021, for which we did not have a comparable expense in the corresponding twelve months ended October 31, 2022.

Changes Related to Non-Operating Items:

Interest Expense .

Inte rest expense decreased $2.7 million for the twelve months ended October 31, 2021 compared to the same period in 2020 primarily due to lower interest rates and lower overall debt outstanding.

Interest expense remained flat for the twelve months ended October 31, 2022 compared to the same period in 2021.

The weighted average interest rate for borrowings outstanding for the twelve months ended October 31, 2022 was 2.16% compared with 1.42% for the twelve months ended October 31, 2021.

Other, net increased $0.3 million for the twelve months ended October 31, 2022 compared to the same period in 2021.

The increase is primarily due to an increase in pension benefits year-over-year.

The increase is primarily due to an increase in foreign currency transaction gains partially offset by pension benefits year-over-year.

Income Taxes .

We recorded income tax expense of $21.4 million on pre-tax income of $109.8 million for the twelve months ended October 31, 2022, an effective rate of 19.5%, and income tax expense of $23.1 million on pre-tax income of $80.1 million for the twelve months ended October 31, 2021, an effective rate of 28.9%.

The effective rate for the twelve months ended October 31, 2021 was primarily impacted by state income taxes, global intangible low-taxed income , and changes in uncertain tax positions, partially offset by U.S.

The October 31, 2022 effective rate is lower than the U.S.

federal statutory rate of 21% primarily due to the rate differential of non-U.S.

income taxes, U.S.

foreign tax credits and tax benefits associated with stock-based compensation, partially offset by U.S.

taxes and non-U.S.

earnings and the true-up of our accruals and related deferred taxes from prior year filings.

The effective rate for the twelve months ended October 31, 2021 was impacted by state income taxes, global intangible low-taxed income, and changes in uncertain tax positions, partially offset by U.S.

foreign tax credits.

The effective rate for the twelve months ended October 31, 2020 was impacted by the true-up of our accruals and related deferred taxes from prior year filings and settled audits.

Liquidity and Capital Resources

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We had $307.0 million available for use under a revolving credit facility at October 31, 2022.

On October 18, 2018, we entered into a $325.0 million revolving credit facility (the “Credit Facility”), under which we borrowed $205.0 million.

The proceeds from the Credit Facility, along with additional funding of $10.0 million of cash on hand, were used to repay outstanding borrowings under a previous credit agreement of $213.5 million, to settle outstanding interest accrued under the prior facility, and to pay loan fees which totaled $1.0 million.

In addition, we expensed $1.1 million to write-off unamortized deferred financing fees associated with the previous credit agreement.

The Credit Facility matures in 2023 (5-year term) and requires interest payments calculated, at our election and depending upon our Consolidated Leverage Ratio, at either a Base Rate plus an applicable margin (0.25% to 1.00%) or the LIBOR Rate plus an applicable margin (1.25% to 2.00%).

We included deferred financing fees of $1.5 million as a contra-liability account, and are amortizing this balance straight-line over the term of the facility.

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.

We capitalized $1.2 million of deferred financing fees related to the Credit Facility during the year ended October 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 we entered into on October 18, 2018.

Interest payments for the Credit Facility are calculated, at our election and depending upon the Consolidated Net Leverage Ratio, at a Base Rate (0.25% to 1.00%) plus an applicable margin or at the same rate as Risk-Free Rate (“RFR”) Loans for

domestic borrowings or Eurocurrency Rate Loans (1.25% to 2.00%) plus an applicable margin.

In addition, we are subject to commitment fees (0.150% to 0.250) for the unused portion of the Credit Facility.

As of October 31, 2022, the applicable rate was RFR + 1.25%.

The weighted average interest rate of borrowings outstanding for the twelve-month periods ended October 31, 2022 and 2021 was 2.16% and 1.42%, respectively.

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

For additional details of the Credit Agreement, see “Item 1A.

Risk Factors,” included elsewhere within this Annual Report on Form 10-K.

For additional details of the Revolving Credit Facility, see Note 8, “Debt,” included elsewhere within this Annual Report on Form 10-K.

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

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 through the COVID-19 crisis as it continues to unfold.

Analysis of Cash Flow

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Operating Activities

Operating cash flow for the year ended October 31, 2021 decreased $22.2 million while cash flow for the year ended October 31, 2020 increased by $4.4 million.

The decrease in cash provided by operating activities is primarily due to an increase in working capital partially offset by higher net income year-over-year due to increased demand.

The increase in working capital was largely driven by an inventory build and raw material price inflation and an increase in accounts receivable.

Operating cash flow for the year ended October 31, 2022 increased $19.4 million while cash flow for the year ended October 31, 2021 decreased by $22.2 million.

The increase in operating cash flows is primarily due to higher net income year-over-year due to increased pricing offset by unfavorable changes in working capital.

The unfavorable changes in working capital were largely driven by changes in accounts receivable and payable, as well as an increase in accrued incentives year over year.

Investing Activities

Cash used for investing activities for the year ended October 31, 2021 decreased $6.5 million compared to the year ended October 31, 2020 due to an increase of $4.8 million in proceeds from the disposition of capital assets and a $1.7 million decrease in capital expenditures.

Cash used for investing activities for the year ended October 31, 2022 increased $14.3 million compared to the year ended October 31, 2021 due to an increase of $9.1 million in capital expenditures and a decrease of $5.2 million proceeds from the disposition of capital assets.

At October 31, 2022, we had firm purchase commitments of approximately $1.7 million for the purchase or construction of capital assets.

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Financing Activities

In the year ended October 31, 2021 , cash used for financing activities was $71.9 million and related primarily to net debt repayments of $65.7 million, share repurchases of $11.2 million and payment of dividends of $10.8 million, partially offset by $16.3 million of proceeds from the exercise of stock options.

In the year ended October 31, 2020, cash used for financing activities was $55.1 million and related primarily to net debt repayments of $40.5 million, payment of dividends of $10.5 million, and share repurchases of $7.2 million.

For the year end ed October 31, 2022, cash used for financing activities was $45.9 million and related primarily to net debt repayments of $26.7 million, payment of dividends of $10.6 million and share repurchases of $6.6 million.

For the year ended October 31, 2021, cash used for financing activities was $71.9 million and related primarily to net debt repayments of $65.7 million, share repurchases of $11.2 million and payment of dividends of $10.8 million, partially offset by $16.3 million of proceeds from the exercise of stock options.

Liquidity Requirements

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

We maintain cash balances in foreign countries which totaled $10.6 million and $16.8 million as of October 31, 2021 and 2020.

During the years ended October 31, 2021 and 2020, we repatriated $28.4 million and $31.9 million, respectively, of foreign earnings from our international divisions.

We maintain cash balances in foreign countries which tot aled $13.6 million and $10.6 million as of October 31, 2022 and 2021.

During the years ended October 31, 2022 and 2021, we repatria ted $28.9 million and $28.4 million, respectively, of foreign earnings from our international divisions.

We believe that we have sufficient funds and adequate financial resources available to meet our anticipated liquidity needs.

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We believe these funds should be adequate to provide for our working capital requirements, capital expenditures, and dividends, while continuing to meet our debt service requirements.

Senior Credit Facility

We maintain our $325.0 million Credit Facility, which contains a revolving credit facility, with Wells Fargo Bank, National Association, as Agent, Swingline Lender and Issuing Lender, and Bank of America, N.A.

Revolving Credit Facility

We maintain our $325.0 million Credit Facility, which contains a revolving 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, and requires interest payments calculated, at our election and depending upon our Consolidated Leverage Ratio, at either a Base Rate plus an applicable margin or the LIBOR Rate plus an applicable margin.

At the time of the initial borrowing, the applicable rate was LIBOR + 1.50%.

The Credit Facility has a five-year term, maturing on July 6, 2027, and requires interest payments calculated, at our election and depending upon our 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.

At the time of the initial borrowing, the applicable rate was RFR + 1.25%.

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

The applicable margin and commitment fees range from 0.45% to 2.30%, depending upon the type of loan and consolidated leverage ratio.

The Credit Facility contains appropriate provisions to substitute LIBOR with a replacement rate upon transition away from LIBOR.

These provisions include a temporary conversion of applicable interest for all borrowings outstanding to be calculated as base rate loans until such time that the replacement rate is agreed upon.

The Credit Facility provides for 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.

The applicable margin and commitment fees range from 0.15% to 0.25%, depending upon the type of loan and Consolidated Net Leverage Ratio.

The Credit Facility provides for 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 to conduct 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 pledged as collateral for the Credit Facility.

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On August 30, 2018, our Board of Directors approved a stock repurchase program that authorized the repurchase of up to $60.0 million worth of shares of our common stock.

Repurchases under the program were made in open market transactions or privately negotiated transactions, subject to market conditions, applicable legal requirements and other relevant factors.

During the yea rs ended October 31, 2021, 2020 and 2019, we purchased 478,311, 450,000 and 583,398 shares, respectively, at a cost of $11.2 million, $7.2 million and $9.6 million, respectively, under this program.

As of October 31, 2021, this share repurchase authorization was exhausted and the program is now complete.

As of October 31, 2021, this share repurchase authorization was exhausted and the program was complete.

During December 2021, our Board of Directors approved a new stock repurchase program that authorized the repurchase of up to $75.0 million worth of shares of our common stock.

During the years ended October 31, 2022, 2021 and 2020, we purchased 291,000, 478,311 and 450,000 shares, respectively, at a cost of $6.6 million, $11.2 million and $ 7.

2 million, respectively, under these programs.

Critical Accounting Policies and Estimates

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We consider an estimate to be critical if it is subjective and if changes in the estimate using different assumptions would result in a material impact to our financial position or results of operations.

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.

Impairment or Disposal of Long-Lived Assets

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Forecasts require assumptions about demand for our products and future market conditions.

Although there may be no indicators of impairment in the current period, unanticipated changes to assumptions or circumstances in future

periods could result in an impairment charge in the period of the cha nge.

Although there may be no indicators of impairment in the current period, unanticipated changes to assumptions or circumstances in future periods could result in an impairment charge in the period of the cha nge.

No impairment charges w ere incurred with regard to our property, plant and equipment for the years ended October 31, 2022, 2021 and 2020.

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We believe the estimates and assumptions used in our impairment assessment are reasonable based on available market information, but variations in any of the assumptions could result in materially different calculations of fair value and determinations of whether or not an impairment is indicated during current or future periods.

As a result of quantitative assessments performed during the year ended October 31, 2019, we recorded impairment charges totaling $74.6 million during the year ended October 31, 2019, reducing the goodwill balance applicable to the reporting unit included in our NA Cabinet Components operating segment from $113.7 million to $39.1 million.

For the year ended October 31, 2020, the World Health Organization's declaration of COVID-19 as a global pandemic also created significant changes in market conditions that were indicators of triggering events which necessitated an evaluation of certain long-term assets, including goodwill, for potential impairment.

We performed quantitative assessments based upon 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, including goodwill, and determined that these assets, including goodwill, were not impaired.

At our annual testing date, August 31, 2022, we had five reporting units with goodwill balances:

two reporting units included in our NA Fenestration operating segment, two reporting units included in our EU Fenestration operating segment, and one reporting unit included in our NA Cabinet Components operating segment.

We performed a qualitative assessment of the two reporting units in the NA Fenestration segment and one of the two reporting units in the EU Fenestration segment.

We performed a qualitative assessment of one of the two reporting units in the NA Fenestration segment and the two reporting units in the EU Fenestration segment.

This review included an analysis of historical goodwill test results, operating results relative to forecast, projected results over the next five years, and other measures and concluded that there were no indicators of potential impairment associated with these reporting units.

Therefore, no additional testing was deemed necessary for the reporting units in the NA Fenestration segment and the EU Fenestration segment that were assessed qualitatively.

We also updated the quantitative assessments for the reportable unit in the NA Cabinet Components segment and the second reportable unit in the EU Fenestration segment.

We determined the fair value of these reportable units exceeded the carrying value by 17.6% and 113.6% , respectively, and concluded that no impairment was necessary.

We also updated the quantitative assessments for the reportable unit in the NA Cabinet Components segment and the second reportable unit in the NA Fenestration segment.

We determined the fair value of these reportable units exceeded the carrying value b y 12.0% and 384.9%, respectively, and concluded that no impairment was necessary.

We operate in various jurisdictions and therefore our income tax expense relates to income taxes in the U.S., U.K., Canada, and Germany, as well as local and state income taxes.

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Annually, we evaluate our tax positions to determine if there have been any changes in uncertain tax positions or if there has been a lapse in the statute of limitations with regard to such positions.

Our liability for uncertain tax positions at October 31, 2021 and 2020 totaled $1.4 million and $0.5 million, respectively, and related to certain federal and state tax items regarding the interpretation of tax laws and regulations.

Our liability for uncertain tax positions at October 31, 2022 and 2021 to taled $1.4 million and are related to certain federal and state tax items regarding the interpretation of tax laws and regulations.

We believe we will have sufficient taxable income in the future to fully utilize our deferred tax assets recorded as of October 31, 2022, net of our valuation allowance.

There is a risk that our estimates related to the future use of loss carry forwards and our ability to realize our deferred tax assets may not come to fruition, and that the results could materially impact our financial position and results of operations.

Our total gross deferred tax assets at October 31, 2021 and 2020 totaled $13.8 million and $14.3 million, respectively, against which we had recorded a valuation allowance of $1.2 million and $1.5 mi llion, respectively.

Our total gross deferred tax assets at October 31, 2022 and 2021 totaled $13.9 million and $13.8 million, respectively, against which we had recorded a valuation allowance of $0.5 million and $1.2 million, respectively.

We record inventory at the lower of cost or net realizable value.

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On January 1, 2020, we enacted changes to our pension plan whereby the benefits for all participants were frozen and thereafter those participants will receive increased benefits in the company sponsored defined contribution plan in lieu of participation in a defined benefit plan.

During the three months ended October 31, 2022, we notified participants that our pension plan will be terminated effective November 1, 2022, with final settlement expected to occur in fiscal 2024.

The measurement of liabilities related to these plans is based on our assumptions related to future events, including expected return on plan assets and healthcare cost trend rates.

The discount rate reflects the rate at which benefits could be effectively settled on the measurement date.

We determine our discount rate using a RATE:

Link Model whereby target yields are developed from bonds across a range of maturity points, and a curve is fitted to those targets.

We determine our discount rate using a FTSE Above Median Model whereby target yields are developed from bonds across a range of maturity points, and a curve is fitted to those targets.

Spot rates (zero coupon bond yields) are developed from the curve and used to discount benefit payments associated with each future year.

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As a comparison, our PBO and ABO exceeded the fair value of plan assets by $4.7 million as of October 31, 2021.

During fiscal 2021, we contributed $0.5 million to the pension plan to meet minimum contribution requirements.

During fiscal 2022, no contributions to the pension plan were needed to meet minimum contribution requirements.

Expected contributions are dependent on many variables, including the variability of the market value of the assets as compared to the obligation and other market or regulatory conditions.

In addition, we take into

consideration our business investment opportunities and our cash requirements.

In addition, we take into consideration our business investment opportunities and our cash requirements.

Accordingly, actual funding may differ greatly from current estimates.

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This approach allows the favorable and unfavorable effects that fall within an acceptable range to be netted and disclosed as an unrecognized gain or loss.

As of October 31, 2021 and 2020, a net actuarial loss of $4.5 million an d $9.9 million, respectively, was included in our accumulated other comprehensive (loss) income.

As of October 31, 2022 and 2021, a net actuarial loss of $3.6 million an d $4.5 million, respectively, was included in our accumulated other comprehensive income.

There were no net prior service costs or transition obligations for the years ended October 31, 2022 and 2021.

The effect on fiscal years after 2022 will depend on the actual experience of the plans.

Mortality assumptions used to determine the obligations for our pension plans are based on the Pri-2012 base mortality table with MP-2020 mortality improvement scale.

Mortality assumptions used to determine the obligations f or our pension plans are based on the Pri-2012 base mortality table with MP-2021 mortality improvement scale.

Contractual Obligations and Commercial Commitments

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Our supplemental benefit plan and deferred compensation plan liabilities fluctuate based on changes in the market value of certain equity securities, including our common stock.

As of October 31, 2021, our liability under the supplemental benefit plan and the deferred compensation plan was approximately $2.9 million and $3.4 million , respectively.

As of October 31, 2022, our liability under the supplemental benefit plan and the deferred compensation plan was approximat ely $1.9 million and $3.3 million, re spectively.

Off-Balance Sheet Arrangements

2 unchanged sentences

We have experienced the impact of inflation on our cost of raw materials, labor, freight and overhead, particularly during the year ended October 31, 2022.

Although we use contractual price indexing along with periodic base price increases to minimize the effect of inflation on our results, we have not been able to fully recover all of the inflationary cost increases.

Although we use contractual price indexing along with periodic base price increases to

minimize the effect of inflation on our results, we have not been able to fully recover all of the inflationary cost increases.

We cannot provide assurance, however, that our results of operations and financial position will not be materially impacted by inflation in the future.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board 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 as pre-existing processes for estimating credit losses for trade receivables aligned with the expected credit loss model.

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 twelve months ended October 31, 2022.

As of October 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.

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-K

Item 7. Management’s Discussion and Analysis