What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-06-02 compared with 2023-03-10 · 174 added, 125 removed, 660 unchanged (31% of the section changed)

49 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

Three Months Ended Six Months Ended

April 30, April 30,

2023 2022 2023 2022

(In thousands, except per share amounts)

20 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

Three Months Ended Six Months Ended

April 30, April 30,

2023 2022 2023 2022

(In thousands)

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(In thousands)

1 unchanged sentence

Net income $ 23,421 $ 37,761

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

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

Depreciation and amortization 21,076 20,820

3 unchanged sentences

Changes in assets and liabilities:

Decrease in accounts receivable 20,502 8,340

Decrease (increase) in accounts receivable 11,564 ( 13,008 )

Decrease (increase) in inventory 14,799 ( 39,771 )

Increase in other current assets ( 1,746 ) ( 3,541 )

Decrease in accounts payable ( 21,379 ) ( 8,391 )

(Decrease) increase in accounts payable ( 19,825 ) 7,381

Decrease in accrued liabilities ( 14,407 ) ( 15,984 )

Increase in income taxes payable 536 1,391

(Decrease) increase in income taxes payable ( 1,754 ) 1,679

Increase (decrease) in deferred pension benefits 17 ( 159 )

14 unchanged sentences

Payroll tax paid to settle shares forfeited upon vesting of stock ( 567 ) ( 1,412 )

Purchase of treasury stock ( 5,593 ) ( 1,569 )

Cash provided by financing activities 54,313 16,502

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended January 31, 2023 Common

Six Months Ended April 30, 2023 Common

Stock Additional

16 unchanged sentences

Balance at January 31, 2023 $ 372 $ 249,730 $ 336,704 $ ( 38,050 ) $ ( 73,068 ) $ 475,688

Three Months Ended January 31, 2022 Common

Net income — — 21,512 — — 21,512

Foreign currency translation adjustment — — — 3,082 — 3,082

Common dividends ($ 0.08 per share)

— — ( 2,659 ) — — ( 2,659 )

Purchase of treasury stock — — — — ( 5,593 ) ( 5,593 )

Stock-based compensation activity:

Expense related to stock-based compensation — 719 — — — 719

Other — ( 22 ) — — — ( 22 )

Balance at April 30, 2023 $ 372 $ 250,427 $ 355,557 $ ( 34,968 ) $ ( 78,661 ) $ 492,727

Six Months Ended April 30, 2022 Common

Stock Additional

16 unchanged sentences

Balance at January 31, 2022 $ 373 $ 250,204 $ 268,370 $ ( 24,929 ) $ ( 69,519 ) $ 424,499

Net income — — 26,522 — — 26,522

Foreign currency translation adjustment — — — ( 11,268 ) — ( 11,268 )

Common dividends ($ 0.08 per share)

— — ( 2,671 ) — — ( 2,671 )

Purchase of treasury stock — — — — ( 1,569 ) ( 1,569 )

Stock-based compensation activity:

Expense related to stock-based compensation — 572 — — — 572

Stock options exercised — 9 — — 109 118

Other — ( 29 ) — — — ( 29 )

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

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

59 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes our product sales for the three months ended January 31, 2023 and 2022 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 six months ended April 30, 2023 and 2022 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 13, “Segment Information”.

Three Months Ended

Three Months Ended Six Months Ended

April 30, April 30,

2023 2022 2023 2022

(In thousands)

27 unchanged sentences

Related Parties

N et sales include transactions with a customer which is a related party with one of our non-employee directors for the three months ended January 31, 2023 of approxim ately $ 0.2 million and $ 0.4 million for the comparable prior year period .

N et sales include transactions with a customer which is a related party with one of our non-employee directors for the six months ended April 30, 2023 of approxim ately $ 0.6 million and $ 1.1 million for the comparable prior year period .

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.

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Under the Purchase Agreement, we acquired substantially all of the operating assets comprising LMI’s polymer mixing and rubber compound production business (collectively, the “Purchased Assets”) and also agreed to assume certain liabilities relating to the Purchased Assets (collectively, 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 as security for the seller parties’ indemnification obligations.

To fund the amounts paid in connection with the Acquisition, we used a combination of cash on hand and funds borrowed under our Credit Facility.

Subsequent to the acquisition, we had approximately $ 215 million available for use under the Credit Facility.

For the period from the date of the Acquisition, through January 31, 2023, our consolidated operating results included net sales o f $ 16.5 million and operating income of $ 2.0 million, res pectively, associated with LMI.

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.

As of January 31, 2023, we are still determining the purchase price allocation for LMI .

As consideration for the Purchased Assets, we paid $91.3 million in cash utilizing funds borrowed under our Credit Facility.

Subsequent to the Acquisition, we had approximately $ 215 million available for use under t he Credit Facility.

For the three and six months ended April 30, 2023, our consolidated operating results included net sales of $ 17.8 million and $ 34.2 million, respectively, and operating income of $ 1.4 million and $ 3.4 million, respectively, associated with LMI.

In connection with the Acquisition, we amended our existing financ e 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.

As of April 30, 2023, we are still determining the purchase price allocation for LMI .

A preliminary purchase price allocation of the fair value of the assets acquired and liabilities assumed is included in the table below.

These estimates are subject to change and will likely result in an increase or decrease in goodwill, particularly with regard to third-party valuations and our estimates of fixed assets, intangible assets, and inventory, during the measurement period, which may extend up to one year from the acquisition date.

During the three months ended April 30, 2023, we reduced both the opening balance of goodwill and consideration paid by $ 0.7 million due to the settlement of the post-closing working capital adjustment with LMI.

As of Date of

18 unchanged sentences

Pro Forma Results

We calculated the pro forma impact of the LMI acquisitions and the associated debt financing on our operating results for the three months ended January 31, 2022.

We calculated the pro forma impact of the LMI acquisitions and the associated debt financing on our operating results for the three months ended April 30, 2022.

The following pro forma results give effect to these acquisitions, assuming the transactions occurred on November 1, 2021.

2 unchanged sentences

Pro Forma Results

For the Three Months Ended

January 31, 2022

For the Three Months Ended For the Six Months Ended

April 30, 2022 April 30, 2022

(In thousands, except per share amounts)

4 unchanged sentences

We derived the pro forma results for the LMI acquisition based on historical financial information obtained from the sellers and certain management assumptions.

Our pro forma adjustm ents relate to the elimination of our intercompany sales to our North American Fenestration reportable segment and related cost of sales, incremental depreciation and amortization expense associated with property, plant and equipment and intangible assets to effect the transactions, assu ming a November 1, 2021 effective date.

Our pro forma adjustm ents relate to the elimination of LMI intercompany sales to our North American Fenestration reportable segment and related cost of sales, incremental depreciation and amortization expense associated with property, plant and equipment and intangible assets to affect the transactions, assu ming a November 1, 2021 effective date.

In addition, we calculated the tax impact of these adjustments at a 25 % effective tax rate.

Inventories consisted of the following at January 31, 2023 and October 31, 2022 (in thousands):

Inventories consisted of the following at April 30, 2023 and October 31, 2022 (in thousands):

2023 October 31,

9 unchanged sentences

Leases with an original term of 12 months or less are not recognized on the balance sheet, and the rent expense related to those short-term leases is recognized over the lease term.

We do not account for lease and non-lease (e.g.

common area maintenance) components of contracts separately for any underlying asset class.

We do not account for lease and non-lease (e.g., common area maintenance) components of contracts separately for any underlying asset class.

We lease certain manufacturing plants, warehouses, office space, vehicles and equipment under finance and operating leases.

19 unchanged sentences

Additionally, we monitor for events or changes in circumstances that may require a reassessment of one of our leases and determine if a remeasurement is required.

The table below presents the lease-related assets and liabilities recorded on the balance sheet at January 31, 2023 and October 31, 2022 (in thousands):

Leases Classification January 31,

The table below presents the lease-related assets and liabilities recorded on the balance sheet at April 30, 2023 and October 31, 2022 (in thousands):

Leases Classification April 30,

2023 October 31,

8 unchanged sentences

Total lease liabilities $ 102,214 $ 76,165

The table below presents the components of lease costs for the three months ended January 31, 2023 and 2022 was as follows (in thousands):

Three Months Ended

The table below presents the components of lease costs for the three and six months ended April 30, 2023 and 2022 was as follows (in thousands):

Three Months Ended Six Months Ended

April 30, April 30,

2023 2022 2023 2022

Operating lease cost

4 unchanged sentences

Variable lease costs

467 257 790 480

Total lease cost $ 4,123 $ 3,216 $ 8,014 $ 6,407

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The table below presents supplemental cash flow information related to leases for the three months ended January 31, 2023 and 2022 was as follows (in thousands):

Three Months Ended

The table below presents supplemental cash flow information related to leases for the six months ended April 30, 2023 and 2022 was as follows (in thousands):

Six Months Ended

Cash paid for amounts included in the measurement of lease liabilities:

5 unchanged sentences

Finance leases $ 25,206 $ 167

The table below presents the weighted average remaining lease terms and weighted average discount rates for the Company's leases as of January 31, 2023 and October 31, 2022:

January 31, 2023 October 31,

The table below presents the weighted-average remaining lease terms and weighted-average discount rates for the Company's leases as of April 30, 2023 and October 31, 2022:

April 30, 2023 October 31,

Weighted-average remaining lease term (in years)

4 unchanged sentences

Financing leases 4.48 % 3.78 %

The table below presents the maturity of the lease liabilities as of January 31, 2023 (in thousands):

The table below presents the maturity of the lease liabilities as of April 30, 2023 (in thousands):

Operating Leases Finance Leases

2023 (remaining nine months) $ 6,663 $ 3,505

2023 (remaining six months) $ 4,626 $ 2,403

2024 8,452 4,793

9 unchanged sentences

Goodwill and Intangible Assets

The change in the carrying amount of goodwill for the three months ended January 31, 2023 was as follows (in thousands):

Three Months Ended

January 31, 2023

The change in the carrying amount of goodwill for the six months ended April 30, 2023 was as follows (in thousands):

Six Months Ended

April 30, 2023

Beginning balance as of November 1, 2022 $ 137,855

3 unchanged sentences

At our last annual test date, August 31, 2022, 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.

An additional reporting unit was acquired during the three months ended January 31, 2023.

We evaluated for indicators of impairment for all reporting units during the three months ended January 31, 2023 and determined that there were no triggering events.

An additional reporting unit was acquired during the six months ended April 30, 2023.

We evaluated for indicators of impairment for all reporting units during the three and six months ended April 30, 2023 and determined that there were no triggering events.

For additional discussion of change in reporting units and a summary of the change in the carrying amount of goodwill by segment, see Note 12, “Segment Information.”

Identifiable Intangible Assets

Amortizable intangible assets consisted of the following as of January 31, 2023 and October 31, 2022 (in thousands):

January 31, 2023 October 31, 2022

Amortizable intangible assets consisted of the following as of April 30, 2023 and October 31, 2022 (in thousands):

April 30, 2023 October 31, 2022

Gross Carrying

7 unchanged sentences

In connection to the LMI Acquisition, we added gross carrying intangibles of $ 16.0 million of customer relationships, $ 3.0 million of other technology and $ 0.5 million of trade names.

We had aggregate amortization expense related to intangible assets for the three months ended January 31, 2023 of $ 3.1 million and $ 3.0 million for the comparable prior year period.

Estimated remaining amortization expense, assuming current intangible balances and no new acquisitions, for future fiscal years as of January 31, 2023 (in thousands):

We had aggregate amortization expense related to intangible assets for the three and six months ended April 30, 2023 of $ 3.0 million and $ 6.1 million, respectively, $ 3.0 million and $ 6.0 million for the comparable prior year periods.

Estimated remaining amortization expense, assuming current intangible balances and no new acquisitions, for future fiscal years as of April 30, 2023 (in thousands):

Amortization Expense

2023 (remaining nine months) $ 8,937

2023 (remaining six months) $ 5,981

Thereafter 33,365

3 unchanged sentences

Debt and Finance Lease Obligations

Long-term debt consisted of the following at January 31, 2023 and October 31, 2022 (in thousands):

Long-term debt consisted of the following at April 30, 2023 and October 31, 2022 (in thousands):

2023 October 31,

8 unchanged sentences

serving as Syndication Agent.

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

We capitalized $ 1.2 million of deferred financing fees related to the Credit Facility .

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, 2022.

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.

Interest payments for the Credit Facility are calculated, at our election and depending upon the Consolidated Net Leverage Ratio, at a Base Rate (as defined within the Credit Facility) 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.

13 unchanged sentences

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

As of January 31, 2023, we ha d $ 100.0 million of borrowings outstanding under the Credit Facility (reduced by unamortized debt issuance costs of $1.4 million), $ 5.1 million of outstanding letters of credit and $ 55.1 million outstanding

As of April 30, 2023, we ha d $ 80.0 million of borrowings outstanding under the Credit Facility (reduced by unamortized debt issuance costs of $1.4 million), $ 5.1 million of outstanding letters of credit and $ 55.6 million outstanding primarily under finance leases and other debt.

We had $ 239.9 million available for use under the Credit Facility at April 30, 2023.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

primarily under finance leases and other debt.

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

Outstanding borrowings under the Credit Facility accrue interest at 5.91 % per annum.

Our weighted average borrowing rate for borrowings outstanding during the three months ended January 31, 2023 and 2022 was 5.43 % and 1.35 %, respectively.

We were in compliance with our debt covenants as of January 31, 2023.

borrowings under the Credit Facility accrue interest at 6.33 % per annum.

Our weighted-average borrowing rate for borrowings outstanding during the six months ended April 30, 2023 and 2022 was 5.71 % and 1.48 %, respectively.

We were in compliance with our debt covenants as of April 30, 2023.

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 months ended January 31, 2023 and 2022 was as follows (in thousands):

Three Months Ended

The net periodic pension cost for this plan for the three and six months ended April 30, 2023 and 2022 was as follows (in thousands):

Three Months Ended Six Months Ended

April 30, April 30,

2023 2022 2023 2022

Service cost $ 96 $ 214 $ 192 $ 430

3 unchanged sentences

Net periodic pension benefit $ 129 $ ( 80 ) $ 259 $ ( 159 )

During the three months ended January 31, 2022 , we made no contributions to fund our plan.

During the six months ended April 30, 2022 , we made no contributions to fund our plan.

During fiscal 2023 , we do not expect to need to make a contribution to the pension plan to maintain targeted funding levels and meet minimum contribution requirements.

2 unchanged sentences

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

As of January 31, 2023 and October 31, 2022, our liability under the supplemental benefit plan was approximately $ 1.9 million.

As of January 31, 2023 and October 31, 2022, the liability associated with the deferred compensation plan was approximately $ 3.7 million and $ 3.3 million, respectively.

As of April 30, 2023 and October 31, 2022, our liability under the supplemental benefit plan was approximately $ 2.0 million and $ 1.9 million, respectively.

As of April 30, 2023 and October 31, 2022, the liability associated with the deferred compensation plan was approximately $ 3.4 million and $ 3.3 million, respectively.

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

1 unchanged sentence

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 effective tax rates from continuing operations for the three months ended January 31, 2023 and 2022 were 19.18 % and 17.70 %, respectively.

Our annual effective tax rates from continuing operations for the six months ended April 30, 2023 and 2022 were 19.74 % and 25.20 %, respectively.

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

2 unchanged sentences

tax rate differential and other permanent differences.

The primary discrete items affecting the 2023 effective rate was a benefit of $ 0.2 million related to the non-U.S.

tax rate differential.

The primary discrete items affecting the 2023 effective rate was a benefit of $ 0.2 million related to the rate change on deferred taxes.

The primary discrete items affecting the 2022 effective rate were the charge 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 filings.

As of January 31, 2023, our liability for uncertain tax positions (UTP) of $ 1.4 million relates to certain U.S.

As of April 30, 2023, 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.

3 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of April 30, 2023, we have an income tax receivable of $ 0.6 million included in current assets under the caption “Prepaid and other current assets” in the accompanying condensed consolidated balance sheets.

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 $ 0.5 million as of January 31, 2023 and October 31, 2022.

We maintain a valuation allowance for certain state net operating losses which totaled $ 0.5 million as of April 30, 2023 and October 31, 2022, respectively.

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

4 unchanged sentences

From time to time, we also have been alleged to be liable for all or part of the costs incurred to clean up third-party sites where there might have been an alleged improper disposal of hazardous substances.

At present, we are not involved in any such matters.

Currently, we are not involved in any such matters.

From time to time, we incur routine expenses and capital expenditures associated with compliance with existing environmental regulations, including control of air emissions and water discharges, and plant decommissioning costs.

14 unchanged sentences

• Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

• Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly including quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are not active;

inputs other than quoted prices that are observable for the

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

asset or liability (e.g., interest rates) and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

quoted prices for identical or similar assets or liabilities in markets that are not active;

inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates) and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

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

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 January 31, 2023, and October 31, 2022 (Level 2 measurement).

As a result, the fair value of our debt instrument approximates carrying value at April 30, 2023, and October 31, 2022 (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).

13 unchanged sentences

Restricted stock awards are granted to key employees and officers annually, and typically cliff vest over a three-year period with service and continued employment as the only vesting criteria.

The recipient of the restricted stock award is entitled to all of the rights of a shareholder, except that the award is nontransferable during the vesting period.

The recipient of the restricted stock award is entitled to all of the rights of a shareholder, except that the award is nontransferable during the vesting period and quarterly dividends are not paid until the award vests.

The fair value of the restricted stock award is established on the grant date and then expensed over the vesting period resulting in an increase in additional paid-in-capital.

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

A summary of non-vested restricted stock awards activity during the three months ended January 31, 2023 is presented below:

A summary of non-vested restricted stock awards activity during the six months ended April 30, 2023 is presented below:

Restricted Stock Awards Weighted-Average

4 unchanged sentences

Vested ( 50,700 ) 18.72

Non-vested at January 31, 2023 259,800 $ 22.08

The total weighted average grant-date fair value of restricted stock awards that vested during each of the three months ended January 31, 2023 and 2022 was $ 0.9 million and $ 1.1 million, respecti vely.

As of January 31, 2023, total unrecognized compensation cost related to unamortized restricted stock awards was $ 3.7 million.

We expect to recognize this expense over the remaining weighted average vesting period of 2.3 years.

Non-vested at April 30, 2023 256,100 $ 22.26

The total weighted-average grant-date fair value of restricted stock awards that vested during each of the six months ended April 30, 2023 and 2022 was $ 0.9 million and $ 1.2 million, respectively.

As of April 30, 2023, total unrecognized

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

compensation cost related to unamortized restricted stock awards was $ 3.3 million.

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

Stock Options

8 unchanged sentences

A description of the methodology for the valuation assumptions was disclosed in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022.

The following table summarizes our stock option activity for the three months ended January 31, 2023:

The following table summarizes our stock option activity for the six months ended April 30, 2023:

Stock Options Weighted-Average

5 unchanged sentences

Forfeited/Expired ( 4,000 ) 21.11

Outstanding at January 31, 2023 166,117 $ 19.34 2.8 $ 1,088

Vested at January 31, 2023 166,117 $ 19.34 2.8 $ 1,088

Exercisable at January 31, 2023 166,117 $ 19.34 2.8 $ 1,088

Outstanding at April 30, 2023 166,117 $ 19.34 2.6 $ 20

Vested at April 30, 2023 166,117 $ 19.34 2.6 $ 20

Exercisable at April 30, 2023 166,117 $ 19.34 2.6 $ 20

Intrinsic value is the amount by which the market price of the common stock on the date of exercise exceeds the exercise price of the stock option.

The total intrinsic value of stock options exercised during the three months ended January 31, 2023 and 2022 was less than $ 0.1 million.

The total intrinsic value of stock options exercised during the six months ended April 30, 2023 and 2022 was less than $ 0.1 million.

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 three months ended January 31, 2023 and 2022, non-employee directors received 38,704 and 33,579 restricted stock units, respectively, at a weighted average grant date fair value of $ 20.67 per share and $ 22.54 per share, respectively, which vested immediately.

During the three months ended January 31, 2023, 21,774 restricted stock units, which were awarded to key employees, have vested.

D uring the three months ended January 31, 2023 we paid $ 0.4 million and $ 0.1 million for the comparable prior year to settle vested restricted stock units.

During the six months ended April 30, 2023 and 2022, non-employee directors received 38,704 and 36,669 restricted stock units, respectively, at a weighted-average grant date fair value of $ 20.67 per share and $ 22.52 per share, respectively, which vested immediately.

During the six months ended April 30, 2023, 21,774 restricted stock units, which were awarded to key employees, vested.

D uring the six months ended April 30, 2023, we paid $ 0.4 million and $ 1.0 million for the comparable prior year to settle vested restricted stock units.

Performance Share Awards

1 unchanged sentence

Performance share awards vest with return on net assets (RONA) as the vesting condition and pay out 100 % in cash, and are accounted for as liability.

The expected cash settlement of the performance share award is recorded as a liability and is being marked to market over the three-year term of the award and can fluctuate depending on the number of shares ultimately expected to vest.

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)

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

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

23 unchanged sentences

December 7, 2022 51,500 $ 23.22 —

During the three months ended January 31, 2023 , 32,680 performance restricted stock units vested.

During the six months ended April 30, 2023 , 32,680 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 January 31, 2023, we have de emed 42,962 shares related to the December 2020 grant of performance restricted stock units as probable to vest.

As of April 30, 2023, we have de emed 27,882 shares related to the December 2020 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 months ended January 31, 2023 and 2022 (in thousands):

Three Months Ended

January 31, 2023

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, 2023 and 2022 (in thousands):

Three Months Ended Six Months Ended

April 30, 2023 April 30, 2023

2023 2022 2023 2022

Restricted stock awards $ 464 $ 360 $ 902 $ 708

8 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 three months ended January 31, 2023.

The following table summarizes the treasury stock activity during the three months ended January 31, 2023:

Three Months Ended

January 31, 2023

There were no charges to retained earnings during the six months ended April 30, 2023.

The following table summarizes the treasury stock activity during the six months ended April 30, 2023:

Six Months Ended

April 30, 2023

Beginning Balance as of November 1, 2022 4,081,806

2 unchanged sentences

Stock options exercised ( 5,000 )

Balance at January 31, 2023 3,949,426

Other, net on the condensed consolidated statements of income consisted of the following for the three months ended January 31, 2023 and 2022 (in thousands):

Three Months Ended

Foreign currency transaction gains (losses) $ 42 $ ( 41 )

Foreign currency derivative losses ( 15 ) —

Pension service benefit 34 295

Interest income 26 15

Other 131 ( 215 )

Other, net $ 218 $ 54

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Treasury stock repurchases 275,000

Balance at April 30, 2023 4,224,426

Segment Information

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

Corporate general and administrative expense allocated during the three month period ended January 31, 2023 was $ 4.3 million and $ 5.8 million for the comparable prior year period.

Corporate general and administrative expense allocated during the three and six month period ended April 30, 2023 was $ 6.1 million and $ 10.8 million, respectively, and $ 5.5 million and $ 11.3 million for the comparable prior year periods.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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and (6) converging long-term economic similarities.

Segment information for the three months ended January 31, 2023 and 2022, and total assets as of January 31, 2023 and October 31, 2022 are summarized in the following table (in thousands):

Segment information for the three and six months ended April 30, 2023 and 2022, and total assets as of April 30, 2023 and October 31, 2022 are summarized in the following table (in thousands):

NA Fenestration EU Fenestration NA Cabinet Comp.

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& Other Total

Three Months Ended January 31, 2023

Three Months Ended April 30, 2023

Net sales $ 156,975 $ 63,763 $ 53,518 $ ( 721 ) $ 273,535

Depreciation and amortization 5,050 2,353 2,970 83 10,456

Operating income 15,295 12,506 846 689 29,336

Capital expenditures 4,859 1,100 1,481 52 7,492

Three Months Ended April 30, 2022

Net sales $ 177,908 $ 73,427 $ 72,878 $ ( 1,320 ) $ 322,893

Depreciation and amortization 4,038 2,522 3,917 86 10,563

Operating income (loss) 22,221 12,596 568 ( 835 ) 34,550

Capital expenditures 3,632 1,252 1,499 32 6,415

Three Months Ended January 31, 2022

Six Months Ended April 30, 2023

Net sales $ 309,955 $ 118,715 $ 108,192 $ ( 1,411 ) $ 535,451

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Capital expenditures 8,472 3,056 3,341 205 15,074

As of January 31, 2023

Six Months Ended April 30, 2022

Net sales $ 324,539 $ 132,341 $ 135,231 $ ( 2,178 ) $ 589,933

Depreciation and amortization 8,177 5,091 7,380 172 20,820

Operating income (loss) 34,372 20,411 ( 885 ) ( 5,222 ) 48,676

Capital expenditures 8,937 2,206 2,572 70 13,785

As of April 30, 2023

Total assets $ 385,283 $ 238,604 $ 162,154 $ 36,071 $ 822,112

1 unchanged sentence

Total assets $ 279,139 $ 223,729 $ 176,154 $ 45,595 $ 724,617

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the change in the carrying amount of goodwill by reportable business segment for the three months ended January 31, 2023 (in thousands):

The following table summarizes the change in the carrying amount of goodwill by reportable business segment for the six months ended April 30, 2023 (in thousands):

NA Fenestration EU Fenestration NA Cabinet Comp.

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Foreign currency translation adjustment — 5,976 — — 5,976

Balance as of January 31, 2023 $ 80,803 $ 64,756 $ 39,147 $ — $ 184,706

Balance as of April 30, 2023 $ 80,105 $ 65,972 $ 39,147 $ — $ 185,224

For further details of Goodwill, see Note 5, “Goodwill & Intangible Assets,” located herewith.

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

The following table reconciles operating income as reported above to net income for the three months ended January 31, 2023 and 2022 (in thousands):

Three Months Ended

The following table reconciles operating income as reported above to net income for the three and six months ended April 30, 2023 and 2022 (in thousands):

Three Months Ended Six Months Ended

April 30, April 30,

2023 2022 2023 2022

Operating income $ 29,336 $ 34,550 $ 33,739 $ 48,676

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GAAP and contingent shares associated with performance share awards, if dilutive.

Basic and diluted earnings per share for the three months ended January 31, 2023 and 2022 were calculated as follows (in thousands, except per share data):

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Basic and diluted earnings per share for the three and six months ended April 30, 2023 and 2022 were calculated as follows (in thousands, except per share data):

Net Income Weighted-Average Shares Per Share

Three Months Ended January 31, 2023

Three Months Ended April 30, 2023

Basic earnings per common share $ 21,512 32,858 $ 0.65

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Diluted earnings per common share $ 21,512 33,017 $ 0.65

Three Months Ended January 31, 2022

Three Months Ended April 30, 2022

Basic earnings per common share $ 26,522 33,157 $ 0.80

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Diluted earnings per common share $ 26,522 33,291 $ 0.80

QUANEX BUILDING PRODUCTS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Six Months Ended April 30, 2023

Basic earnings per common share $ 23,421 32,905 $ 0.71

Effect of dilutive securities:

Stock options — 28 —

Restricted stock awards — 109 —

Performance restricted stock units — 28 —

Diluted earnings per common share $ 23,421 33,070 $ 0.71

Six Months Ended April 30, 2022

Basic earnings per common share $ 37,761 33,140 $ 1.14

Effect of dilutive securities:

Stock options — 29 —

Restricted stock awards — 95 —

Performance restricted stock units — 28 —

Diluted earnings per common share $ 37,761 33,292 $ 1.13

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

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

There were no anti-dilutive instruments for the three months ended January 31, 2023 and 2022.

There were no anti-dilutive instruments for the three and six months ended April 30, 2023 and 2022.

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 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.

We did not adopt any new accounting pronouncements during the three and six months ended April 30, 2023.

As of April 30, 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.

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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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