What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-03-10 compared with 2022-09-02 · 75 added, 150 removed, 125 unchanged (64% of the section changed)

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 July 31, 2022, and for the three and nine months ended July 31, 2022 and 2021, included elsewhere herein.

The following discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes as of January 31, 2023, and for the three months ended January 31, 2023 and 2022, 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, 2022.

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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.

In addition, we provide certain other non-fenestration components and products, which include solar panel sealants, trim moldings, vinyl decking, vinyl fencing, customized compounds, 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.

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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;

(1) North American Fenestration segment (“NA Fenestration”), comprising four operating segments, manufacturing vinyl profiles, IG spacers, screens, custom compound mixing, 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;

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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.

On November 1, 2022, we entered into an Asset Purchase Agreement with LMI and the equity owners of LMI, Lauren International, Ltd.

and Meteor-US-Beteiligungs GMBH.

Under the Purchase Agreement, we acquired substantially all of the operating assets comprising LMI’s polymer mixing and rubber compound production business and also agreed to assume certain liabilities relating to the Acquisition.

As consideration for the Purchased Assets, we agreed to pay LMI $92 million in cash, with $7.1 million of this amount funded into escrow substantially as security for the seller parties’ indemnification obligations.

In connection with the Acquisition, we amended our existing finance lease with Lauren Real Estate Holding LLC for the purpose of adding an additional lease renewal option and increasing rental space by approximately 60,000 square feet of rental space which was added to the 313,595 square feet of rentable area located in Cambridge, Ohio.

and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and 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 impact our customers and their demand for our products.

If this trend continues, this would not only negatively impact our

European manufacturing facilities, this may also 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.

pandemic and its related effects continue to have a significant adverse effect on many sectors of the economy and we may be further impacted.

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.

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residential wood cabinet demand.

In August 2022, the NAHB forecasted calendar-year housing starts to be 1.5 million in both the 2022 and 2023 calendar-years and 1.6 million in 2024.

In August 2022, the Ducker forecast indicated that total window shipments are expected to remain essentially flat for calendar-year 2022 and increase 1.9% in 2023.

In August 2022, Catal ina Research estimated that residential semi-custom cabinet sales in the U.S.

is estimated to increase 8.4% in 2022 and decrease 3.8% in 2023.

In February 2023 , the NAHB forecasted calendar-year housing starts to be 1.1 million in the 2023 calendar-year and 1.3 million in 2024.

In February 2023 , the Ducker forecast indicated that total window shipments are expected to increase 1% for calendar-year 2022 and decrease 5.7% in 2023.

In February 2023 , Catalina Research estimated that residential semi-custom cabinet sales in the U.S.

is estimated to decrease 3.6% in 2023 and increase 1.9% in 2024.

Several commodities in our business are subject to pricing fluctuations, including polyvinyl resin (PVC), titanium dioxide (TiO2), petroleum products, aluminum and wood.

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Results of Operations

Three Months Ended July 31, 2022 Compared to Three Months Ended July 31, 2021

Three Months Ended January 31, 2023 Compared to Three Months Ended January 31, 2022

Three Months Ended July 31,

2023 2022 Change $ % Variance

(Dollars in millions)

(Dollars in thousands)

Net sales $ 261,916 $ 267,040 $ (5,124) (2) %

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2023 2022 $ Change % Variance

(Dollars in millions)

(Dollars in thousands)

Net sales $ 152,980 $ 146,631 $ 6,349 4%

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Operating income margin 6 % 8 %

Net sales increased $37.1 million, or 25%, for the three months ended July 31, 2022 compared to the same period in 2021, which was primarily driven by an increase in price and raw material surcharges of $19.6 million and a $17.5 million increase in volumes.

Ne t sales increased $6.3 million, or 4%, for the three months ended January 31, 2023 compared to the same period in 2022, which was primarily driven by a $16.5 million contribution from LMI in 2023 and an increase in price and raw material surcharges of $5.1 million partially offset by a $15.2 million decrease in volumes due to customer destocking, softer market demand driven by weaker consumer confidence and a return to normal seasonality.

Cost of Sales.

The cost of sales increased $26.5 million, or 23%, for the three months ended July 31, 2022 compared to the same period in 2021.

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

The cost of sales increased $8.8 million, or 8%, for the three months ended January 31, 2023 as compared to the same period in 2022.

Cost of sales, including labor, increased primarily due to LMI’s cost of sales in 2023 and inflation of raw materials partially offset by lower volumes during the period.

Selling, General and Administrative.

S elling, general and administrative expenses increased $1.3 million, or 10%, for the three months ended July 31, 2022 compared to the sam e period in 2021, primarily due an increase in compensation expense, professional fees and general expenses year-over-year.

S elling, general and administrative expenses decreased $1.1 million, or 8%, for the three months ended January 31, 2023 as compared to the same period in 2022.

This decrease was primarily due to a decrease in labor costs and professional fees partially offset by an increase in miscellaneous general expenses year-over-year.

Depreciation and Amortization.

Depreciation and amortization expense increased $1.1 million, or 27%, for the three months ended January 31, 2023 as compared to the same period in 2022, primarily due to the Acquisition of LMI’s property, plant and equipment and intangible assets.

EU Fenestration

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2023 2022 $ Change Variance %

(Dollars in millions)

(Dollars in thousands)

Net sales $ 54,952 $ 58,914 $ (3,962) (7)%

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Operating income margin 13 % 13 %

Net sales decreased $3.5 million, or 5%, for the three months ended July 31, 2022 compared to the same period in 2021, which was primarily driven by a $7.9 million decrease in volumes and $8.9 million of foreign currency rate changes partially offset by $13.3 million of base price increases.

Net sales decreased $4.0 million, or 7%, comparing the three months ended January 31, 2023 to the same period in 2022, which was primarily driven by $6.0 million of foreign currency rate changes and a $4.4 million decrease in volumes due to customer destocking, softer market demand driven by weaker consumer confidence and a return to normal seasonality, partially offset by $6.4 million of base price increases.

Cost of Sales.

The cost of sales decreased $2.2 million, or 4%, for the three months ended July 31, 2022 compared to the same period in 2021.

Cost of sales decreased primarily due to lower volumes and foreign currency rate changes during the period partially offset by inflation of raw materials.

The cost of sales decreased $3.5 million, or 9%, for the three months ended January 31, 2023 compared to the same period in 2022.

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

Selling, General and Administrative.

Selling, general and administrative expense increased $0.7 million, or 9%, for the three months ended July 31, 2022 compared to the same period in 2021.

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

Selling, general and administrative expense increased $0.2 million, or 3%, for the three months ended January 31, 2023 compared to the same period in 2022.

The increase is primarily due to higher compensation and miscellaneous general expenses partially offset by a decrease in professional fees and foreign currency impacts year-over-year.

NA Cabinet Components

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2023 2022 $ Change Variance %

(Dollars in millions)

Net sales $ 72.4 $ 61.9 $ 10.5 17%

Cost of sales (excluding depreciation and amortization) 61.6 54.4 7.2 (13)%

Selling, general and administrative 5.3 5.2 0.1 (2)%

Depreciation and amortization 3.4 3.4 — —%

Operating income (loss) $ 2.1 $ (1.1) $ 3.2 291%

Operating income (loss) margin 3 % (2) %

N et sales increased $10.5 million, or 17%, for the three months ended July 31, 2022 compared to the same period in 2021, which was driven by an increase in price and raw material indexes of $15.0 million partially offset by a $4.5 million decrease in volumes due to labor and material shortages throughout the supply chain.

Cost of Sales .

Cost of sales increased $7.2 million, or 13%, for the three months ended July 31, 2022 compared to the same period in 2021.

Cost of sales increased primarily due to rising lumber prices, which are recovered on a lag, partially offset by lower volumes during the period.

Selling, General and Administrative .

Selling, general and administrative expense was similar to the three months ended July 31, 2022 compared to the same period in 2021.

Unallocated Corporate & Other

Three Months Ended July 31,

2022 2021 $ Change Variance %

(Dollars in millions)

(Dollars in thousands)

Net sales $ 54,674 $ 62,353 $ (7,679) (12)%

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Operating loss $ (1,189) $ (1,453) $ 264 18%

Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the three months ended July 31, 2022 and 2021.

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, gen eral and administrative expenses decreased $1.1 million, or 65%, for the three months ended July 31, 2022 compared to the same period in 2021.

This decrease is primarily attributable to a decrease of $2.6 million related to medical expense claims partially offset by $1.0 million of higher compensation expense including the valuations of our stock based compensation awards and a $0.5 million increase in professional fees during the three months ended July 31, 2022 as compared to the prior year period.

Changes related to Non-Operating Items:

Income Taxes .

We recorded inco me tax expense of $7.8 million on pre-tax income of $33.7 million for the three months ended July 31, 2022, an effective rate of 23.1%, and income tax expense of $7.5 million on pre-tax income of $21.2 million for the three months ended July 31, 2021, an effective rate of 35.3%.

The increase in income tax expense year-over-year was primarily driven by the increase in pre-tax book income during the t hree months ended July 31, 2022, relative to the three months ended July 31, 2021.

The decrease in the effective tax rate for the t hree months ended July 31, 2022, was primarily driven by a non-recurring tax detriment that occurred during the three months ended July 31, 2021, associated with the remeasurement of U.K.

deferred taxes from a 19% to 25% tax rate as a result of an enacted tax law change during the period.

Nine Months Ended July 31, 2022 Compared to Nine Months Ended July 31, 2021

Nine Months Ended July 31,

2022 2021 Change $ % Variance

(Dollars in millions)

Net sales $ 914.0 $ 780.4 $ 133.6 17 %

Cost of sales (excluding depreciation and amortization) 712.9 604.7 108.2 (18) %

Selling, general and administrative 87.8 88.3 (0.5) 1 %

Depreciation and amortization 30.6 32.5 (1.9) 6 %

Operating income 82.7 54.9 27.8 51 %

Interest expense (1.8) (2.0) 0.2 10 %

Other, net 0.9 0.6 0.3 (50) %

Income tax expense (18.1) (17.4) (0.7) (4) %

Net income $ 63.7 $ 36.1 $ 27.6 76 %

Our period-over-period results by reportable segment follow.

Changes Related to Operating Income by Reportable Segment:

NA Fenestration

Nine Months Ended July 31,

2022 2021 $ Change % Variance

(Dollars in millions)

Net sales $ 509.3 $ 422.0 $ 87.3 21%

Cost of sales (excluding depreciation and amortization) 396.5 328.3 68.2 (21)%

Selling, general and administrative 43.1 38.9 4.2 (11)%

Depreciation and amortization 12.2 14.4 (2.2) 15%

Operating income $ 57.5 $ 40.4 $ 17.1 42%

Operating income margin 11 % 10 %

Ne t sales increased $87.3 million, or 21%, for the nine months ended July 31, 2022 compared to the same period in 2021, which was primarily driven by an increase in price and raw material surcharges of $52.6 million and a $34.7 million increase in volumes.

Cost of Sales.

The cost of sales increased $68.2 million, or 21%, for the nine months ended July 31, 2022 as compared to the same period in 2021.

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.

S elling, general and administrative expenses increased $4.2 million, or 11%, for the nine months ended July 31, 2022 as compared to the same period in 2021.

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

Depreciation and Amortization.

Depreciation and amortization expense decreased $2.2 million, or 15%, for the nine months ended July 31, 2022 as compared to the same period in 2021, reflecting the run-off of depreciation expense related to existing assets and disposals during the period.

EU Fenestration

Nine Months Ended July 31,

2022 2021 $ Change Variance %

(Dollars in millions)

Net sales $ 200.0 $ 181.9 $ 18.1 10%

Cost of sales (excluding depreciation and amortization) 138.1 122.6 15.5 (13)%

Selling, general and administrative 24.2 21.6 2.6 (12)%

Depreciation and amortization 7.4 7.8 (0.4) 5%

Operating income $ 30.3 $ 29.9 $ 0.4 1%

Operating income margin 15 % 16 %

Net sales increased $18.1 million, o r 10%, comparing the nine months ended July 31, 2022 to the same period in 2021, which was primarily driven by $35.8 million of base price increases partially offset by $11.7 million of foreign currency rate changes and $6.0 million decrease in volumes.

Cost of Sales.

The cost of sales increased $15.5 million, or 13%, for the nine months ended July 31, 2022 compared to the same period in 2021.

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.

Selling, general an d administrative expense increased $2.6 million, or 12%, for the nine months ended July 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

Nine Months Ended July 31,

2022 2021 $ Change Variance %

(Dollars in millions)

Net sales $ 207.7 $ 179.5 $ 28.2 16%

Cost of sales (excluding depreciation and amortization) 179.8 155.4 24.4 (16)%

Selling, general and administrative 15.8 15.4 0.4 (3)%

Depreciation and amortization 10.7 10.0 0.7 (7)%

Operating income (loss) $ 1.4 $ (1.3) $ 2.7 208%

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

Net sales increased $28.2 million, or 16%, for the nine months ended July 31, 2022 compared to the same period in 2021, which was driven by a $47.7 million increase in price and raw material indexes partially offset by $19.5 million decrease in volumes due to labor and material shortages throughout the supply chain.

Operating loss margin (2) % (2) %

Net sales decreased $7.7 million, or 12%, for the three months ended January 31, 2023 compared to the same period in 2022, which was driven by an $11.0 million decrease in volumes due to softer market demand driven by weaker consumer confidence and a return to normal seasonality partially offset by a $3.3 million increase in price and raw material indexes.

Cost of Sales .

Cost of sales increased $24.4 million, or 16%, for the nine months ended July 31, 2022 compared with 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.

Cost of sales decreased $7.0 million, or 13%, for the three months ended January 31, 2023 compared with the same period in 2022, primarily as a result of lower volumes year-over-year partially offset by lumber price inflation, which is recovered on a lag.

Selling, General and Administrative .

Selling, general and administrative expense increased $0.4 million, or 3%, for the nine months ended July 31, 2022 compared to the same period in 2021 due to an increase in general expenses year-over-year.

Selling, general and administrative expense decreased $0.4 million, or 8%, for the three months ended January 31, 2023 compared to the same period in 2022 due to a decrease in labor costs partially offset by an increase in miscellaneous general expenses year-over-year.

Unallocated Corporate & Other

Nine Months Ended July 31,

Three Months Ended July 31,

2023 2022 $ Change Variance %

(Dollars in millions)

(Dollars in thousands)

Net sales $ (690) $ (858) $ 168 20%

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Operating loss $ (11,527) $ (4,387) $ (7,140) (163)%

Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the nine months ended July 31, 2022 and 2021.

Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the three months ended January 31, 2023 and 2022.

Cost of Sales .

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Selling, General and Administrative .

Selling, general and administrative expenses decreased $7.7 million, or 62%, for the nine months ended July 31, 2022 compared to the same period in 2021.

This decrease is primarily attributable to $3.7 million of decreased compensation expense including the valuations of our stock based compensation awards, a decrease of $2.9 million related to medical expense claims and a decrease of $0.5 million related to workers’ compensation claims partially offset by an increase of $0.8 million professional fees during the nine months ended July 31, 2022 as compared to the prior year period.

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

Selling, general and administrative expenses increased $7.2 million, or 186%, for the three months ended January 31, 2023 compared to the same period in 2022.

This increase is primarily attributable to $5.4 million of transaction fees and a $2.0 million increase in compensation expense including the valuations of our stock based compensation awards, partially offset by a decrease of $0.6 million related to medical expense claims during the three months ended January 31, 2023 as compared to the prior year period.

Changes related to Non-Operating Items:

Interest Exp ense .

Interest expense increased $1.7 million for the three months ended January 31, 2023 compared to the same period in 2022 as a result of higher borrowings outstanding during the period and an increase in interest rates.

Income Taxes .

We recorded income tax expense of $18.1 million on pre-tax income of $81.8 million for the nine months ended July 31, 2022, an effective rate of 22.2%, and income tax expense of $17.4 million on a pre-tax income of $53.4 million for the nine months ended July 31, 2021, an effective rate of 32.5%.

The increase in income tax expense year-over-year was primarily driven by the increase in pre-tax book income during the nine months ended July 31, 2022, relative to the nine months ended July 31, 2021.

The decrease in the effective tax rate for the nine months ended July 31, 2022, was primarily driven by a non-recurring tax detriment that occurred during the nine months ended July 31, 2021, associated with the remeasurement of U.K.

deferred taxes from a 19% to 25% tax rate as a result of an enacted tax law change during the period as well as a charge related to the vesting or exercise of equity-based compensation awards.

We recorded income tax expense of $0.5 million on pre-tax income of $2.4 million for the three months ended January 31, 2023, an effective rate of 19.2%, and income tax expense of $2.4 million on a pre-tax income of $13.6 million for the three months ended January 31, 2022, an effective rate of 17.7%.

The decrease in income tax expense year-over-year was primarily driven by the decrease in pre-tax book income during the three months ended January 31, 2023, relative to the three months ended January 31, 2022.

Liquidity and Capital Resources

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We maintain a $325.0 million revolving credit facility (the Credit Facility) that matures in 2027 (5-year term) and requires interest payments calculated at a variable market rate depending upon our Consolidated Net Leverage Ratio.

The applicable rate during the nine months ended July 31, 2022 was RFR Rate + 1.25%.

The applicable rate during the three months ended January 31, 2023 was RFR Rate + 1.25%.

Our cost of capital could increase depending upon the Consolidated Net Leverage Ratio at the end of any given quarter.

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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 July 31, 2022, w e had $50.0 million of cash and equivalents, $38.0 million outstanding under the Credit Facility, $5.1 million of outstanding letters of credit and $20.1 million outstanding under finance leases and other debt.

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

We repatriated $18.2 million and $17.7 million of f oreign cash during the nine months ended July 31, 2022 and 2021, respectively.

As of January 31, 2023, we had $43.1 million of cash and equivalents, $100.0 million outstanding under the Credit Facility, $5.1 million of outstanding letters of credit and $55.1 million outstanding under finance leases and other debt.

Of the $55.1 million outstanding under finance leases and other debt, $53.2 million relates to real estate leases.

We had $219.9 million available for use under the Credit Facility at January 31, 2023.

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

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

During the three months ended January 31, 2023, we did not purchase any shares under this program and as of

January 31, 2023 we had a maximum of $68.4 million available to purchase shares under this program.

The program does not have an expiration date or a limit on the number of shares that may be purchased.

We repatriated $4.3 million and $1.2 million of f oreign cash during the three months ended January 31, 2023 and 2022, respectively.

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

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Analysis of Cash Flow

The following table summarizes our cash flow results for the nine months ended July 31, 2022 and 2021:

Nine Months Ended

(In millions)

Cash provided by operating activities $ 49.9 $ 47.4

The following table summarizes our cash flow results for the three months ended January 31, 2023 and 2022:

Three Months Ended

(Dollars in thousands)

Cash provided by (used for) operating activities $ 3,135 $ (21,651)

Cash used for investing activities $ (99,484) $ (7,360)

Cash used for financing activities $ (17.9) $ (43.5)

Cash provided by financing activities $ 83,314 $ 20,857

Operating A ctivities .

Cash provided by operating activities increased $2.5 million for the nine months ended July 31, 2022 compared to the nine months ended July 31, 2021.

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

The unfavorable changes in working capital were largely driven by an increase in inventory value due to raw material price inflation and a higher payout of accrued incentives.

Cash provided by operating activities increased $24.8 million for the three months ended January 31, 2023 compared to the three months ended January 31, 2022.

The increase in operating cash flows is primarily due to favorable changes to working capital partially offset by lower net income year-over-year due to a decrease in customer demand.

The favorable changes in working capital were largely driven by an increase in inventory value due to raw material price inflation and a decrease in accounts receivable partially offset by a decrease in accounts payable.

Investing Activities.

Cash used f or investing activities increased $6.5 million for the nine months ended July 31, 2022 compared to the same period in 2021, primarily as a result of an increase in capital expenditures and a decrease in proceeds from dispositions.

Cash used f or investing activities increased $92.1 million for the three months ended January 31, 2023 compared to the same period in 2022, primarily as a result of the Acquisition of LMI.

Financing Activities.

Cash provided by financing activities was $17.9 million for the nine months ended July 31, 2022, which included $7.9 million of dividends paid to our shareholders, $6.6 million purchase of treasury stock, $1.4 million of payroll tax paid to settle shares forfeited upon vesting of stock, $1.3 million of net repayment of long-term debt and $1.2 million of debt issuance costs.

Cash provided by financing activities was $83.3 million for the three months ended January 31, 2023, which included $86.4 million of net borrowings of long-term debt, $2.7 million of dividends paid to our shareholders, and $0.6 million of payroll tax paid to settle shares forfeited upon vesting of stock.

Liquidity Requirements

Historically, our strategy for deploying cash has been to invest in organic growth opportunities, develop our infrastructure, and explore strategic acquisitions.

Historically, our strategy for deploying cash has been to invest in organic growth opportunities, develop our infrastructure, and ex plore strategic acquisitions.

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

During the nine months ended July 31, 2022 and 2021, we repatriated $18.2 million and $17.7 million, respectively, of foreign earnings from our foreign locations.

We maintain cash balances in foreign countries which total $14.9 million as of July 31, 2022.

During the three months ended January 31, 2023 and 2022, we repatriated $4.3 million and $1.2 million, respectively, of foreign earnings from our foreign locations.

We maintain cash balances in foreign countries which total $12.9 million as of January 31, 2023.

Critical Accounting Policies and Estimates

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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, 2022.

Our critical accounting policies and estimates have not changed materially during the nine months ended July 31, 2022.

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.

Our critical accounting policies and estimates have not changed materially during the three months ended January 31, 2023.

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.

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 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 consolidated financial statements upon adoption.

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 months ended January 31, 2023.

As of January 31, 2023, 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-Q

Item 2. Management’s Discussion and Analysis