What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-09-06 compared with 2024-06-07 · 89 added, 93 removed, 210 unchanged (46% 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 April 30, 2024, and for the three and six months ended April 30, 2024 and 2023, 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 July 31, 2024, and for the three and nine months ended July 31, 2024 and 2023, 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, 2023.

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Recent Transactions and Events

On April 22, 2024, we announced that we reached an agreement with Tyman plc, a company incorporated in England and Wales (LSE:TYMN) (“Tyman”) on the terms of a cash and share offer (the “Tyman Acquisition”), under which we will acquire the entire issued and to be issued share capital of Tyman for approximately $1.1 billion (based on the each of the £/US$ exchange rate and the Company’s last reported trading price as of April 19, 2024) in enterprise value.

Under the terms of the Tyman Acquisition, Tyman shareholders will be entitled to elect to receive:

(i) 240 pence in cash and 0.05715 of a share of Quanex common stock, par value of $0.01 per share, to be newly issued in connection with the Tyman Acquisition (the “New Quanex Shares”) for each Tyman ordinary share (such shares, the “Tyman Shares” and such option, the “Main Offer”) or (ii) under an alternative to the Main Offer, New Quanex Shares at an exchange ratio of 0.14288 of a New Quanex Share for each Tyman Share (such option, the “Capped All-Share Alternative”), provided, that, the Capped All-Share Alternative shall be made available for up to 25% of the Tyman Shares outstanding.

The Tyman Acquisition will be implemented by means of a court-sanctioned scheme of arrangement under the UK Companies Act 2006, as amended (the” Scheme”).

The Tyman Acquisition has been unanimously approved by the Boards of Directors of both Quanex and Tyman and is currently expected to close in the second half of calendar year 2024, subject to the satisfaction of customary closing conditions, including shareholder approval from both Tyman and Quanex shareholders and regulatory approvals.

On May 2, 2024, we entered into a deal contingent foreign exchange forward currency contract to manage our exposure to foreign currency exchange rate fluctuations against the USD and GBP for approximately $605 million of the $1.1 billion purchase consideration for the proposed Tyman Acquisition.

This forward contract will expire if the Tyman Acquisition terminates or does not close by March 18, 2025.

This forward contract will be accounted for as a derivative and will be classified in other current assets and other current liabilities on the consolidated balance sheet, with changes in fair value recognized in the consolidated income statement.

Tyman’s family of brands includes highly regarded names that boast wide customer bases and offer product solutions in the window and door hardware, commercial access solutions, and seals and extrusions vertical segments for residential and commercial users across its North America, UK and Ireland, and International divisions.

On August 1, 2024, we completed our Tyman Acquisition of Tyman plc, a company incorporated in England and Wales (“Tyman”).

The aggregate consideration due pursuant to the Tyman Acquisition at closing comprised of 14,139,477 New Quanex Shares and cash consideration of approximately $504.1 million (being the Pound Sterling amount of cash consideration of £392.2 million in respect of all of the Tyman Shares converted to U.S.

Dollars at an exchange rate of 1.2855).

New Quanex Shares issued in connection with the Tyman Acquisition on the New York Stock Exchange took effect on August 2, 2024 and Tyman’s shares on the London Stock Exchange were canceled.

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.

Under the Asset 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.

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

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.

In connection with the LMI 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 conflicts currently ongoing in Ukraine and Gaza.

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residential wood cabinet demand.

In April 2024 , the NAHB forecasted calendar-year housing starts to be approximately 1.4 million in the 2024 and 2025 calendar-years.

In May 2024 , the Ducker forecast indicated that total window shipments are expected to decrease 1.4% in calendar-year 2024 and increase 2.9% in 2025.

In July 2024 , the NAHB forecasted calendar-year housing starts to be approximately 1.3 million, 1.4 million and 1.5 million in the 2024, 2025 and 2026 calendar-years, respectively.

In August 2024 , the Ducker forecast indicated that total window shipments are expected to decrease 3.3% in calendar-year 2024 and increase 3.1% in 2025.

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

These and other macro-economic factors have impacted the

global financial markets, which may have contributed to significant changes in foreign currencies.

These and other macro-economic factors have impacted the global financial markets, which may have contributed to significant changes in foreign currencies.

We continue to monitor our exposure to changes in exchange rates.

Results of Operations

Three Months Ended April 30, 2024 Compared to Three Months Ended April 30, 2023

Three Months Ended April 30,

Three Months Ended July 31, 2024 Compared to Three Months Ended July 31, 2023

Three Months Ended July 31,

2024 2023 Change $ % Variance

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NA Fenestration

Three Months Ended April 30,

Three Months Ended July 31,

2024 2023 $ Change % Variance

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Operating income margin 10 % 13 %

Net s ales increased $2.8 million, or 2%, for the three months ended April 30, 2024 compared to the same period in 2023, which was primarily driven by a $2.6 million increase in volumes due to a return to normal seasonality and an increase in price and raw material indexes of $0.2 million.

Net s ales decreased $6.8 million, or 4%, for the three months ended July 31, 2024 compared to the same period in 2023, which was primarily driven by a $8.8 million decrease in volumes due to softer market demand driven by weaker consumer confidence partially offset by an increase in price and raw material indexes of $2.0 million.

Cost of Sales.

The cost of sales decreased $0.2 million, for the three months ended April 30, 2024 compared to the same period in 2023.

Cost of sales decreased primarily due to deflation of raw materials during the period.

The cost of sales decreased $4.8 million, or 4%, for the three months ended July 31, 2024 compared to the same period in 2023.

Cost of sales decreased primarily due to decrease in volumes partially offset by pricing and inflation of raw materials during the period.

Selling, General and Administrative.

S elling, general and administrative expenses decreased $0.4 million, or 3%, for the three months ended April 30, 2024 compared to the sa me period in 2023 primarily due to decreases in professional fees year-over-year.

S elling, general and administrative expenses increased $2.7 million, or 19%, for the three months ended July 31, 2024 compared to the sa me period in 2023.

The increase is primarily due to increases in labor costs and professional fees year-over-year.

EU Fenestration

Three Months Ended April 30,

Three Months Ended July 31,

2024 2023 $ Change % Variance

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Operating income margin 21 % 24 %

Net sales decreased $7.2 million, or 11%, for the three months ended April 30, 2024 compared to the same period in 2023, which was primarily driven by a $6.1 million decrease in volumes largely due to softer market demand and $1.7 million of base price decreases partially offset by $0.6 million benefit from foreign currency rate change.

Net sales decreased $8.3 million, or 12%, for the three months ended July 31, 2024 compared to the same period in 2023, which was primarily driven by a $5.6 million decrease in volumes largely due to softer market demand driven by weaker consumer confidence, $1.8 million of base price decreases and $0.9 million of foreign currency rate change.

Cost of Sales.

The cost of sales decreased $4.8 million, or 12%, for the three months ended April 30, 2024 compared to the same period in 2023.

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

The cost of sales decreased $4.3 million, or 11%, for the three months ended July 31, 2024 compared to the same period in 2023.

Cost of sales decreased primarily due to lower volumes, the deflation of the price of raw materials and foreign currency rate changes during the period.

Selling, General and Administrative.

Selling, general and administrative expense decreased $0.6 million, or 7%, for the three months ended April 30, 2024 compared to the same period in 2023.

The decrease is primarily due to a decrease in professional fees, partially offset by an increase in labor costs, year-over-year.

Selling, general and administrative expense decreased $0.6 million, or 8%, for the three months ended July 31, 2024 compared to the same period in 2023.

The decrease is primarily due to a decrease in labor costs and a decrease in professional fees year-over-year.

NA Cabinet Components

Three Months Ended April 30,

Three Months Ended July 31,

2024 2023 $ Change Variance %

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Operating income margin 1 % 4 %

N et sales decreased $2.4 million, or 5%, for the three months ended April 30, 2024 compared to the same period in 2023, which was driven by a $1.6 million decrease in price and raw material surcharges and a $0.8 million decrease in volumes due to softer market demand driven by weaker consumer confidence.

N et sales decreased $3.9 million, or 7%, for the three months ended July 31, 2024 compared to the same period in 2023, which was driven by a $4.6 million decrease in volumes due to softer market demand driven by weaker consumer confidence partially offset by a $0.7 million increase in price and raw material surcharges.

Cost of Sales .

Cost of sales decreased $1.1 million, or 3%, for the three months ended April 30, 2024 compared to the same period in 2023.

Cost of sales decreased primarily due to lumber price deflation and lower volumes during the period.

Cost of sales decreased $2.0 million, or 5%, for the three months ended July 31, 2024 compared to the same period in 2023.

Cost of sales decreased primarily due to lower volumes partially offset by lumber price inflation during the period.

Selling, General and Administrative .

Selling, general and administrative expense decreased $0.9 million, or 15%, for the three months ended April 30, 2024 compared to the same period in 2023 primarily due to a decrease in labor costs and professional fees year-over-year.

Selling, general and administrative expense remained flat for the three months ended July 31, 2024 compared to the same period in 2023.

Unallocated Corporate & Other

Three Months Ended April 30,

Three Months Ended July 31,

2024 2023 $ Change Variance %

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Depreciation and amortization 57 45 12 27%

Operating (loss) income $ (8,712) $ 689 $ (9,401) (1,364)%

Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the three months ended April 30, 2024 and 2023.

Operating loss $ (7,373) $ (3,626) $ (3,747) 103%

Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the three months ended July 31, 2024 and 2023.

Cost of Sales .

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Selling, General and Administrative .

Selling, general and administrative expenses increased $9.2 million, or 764%, for the three months ended April 30, 2024 compared to the same period in 2023.

This increase is primarily attributable to a $7.0 million increase in transaction and advisory fees, higher compensation expense including the valuations of our stock-based compensation awards, and an increase in medical claims expense during the three months ended April 30, 2024 as compared to the prior year period.

Selling, general and administrative expenses increased $3.9 million, or 125%, for the three months ended July 31, 2024 compared to the same period in 2023.

This increase is primarily attributable to a $5.6 increase in transaction and advisory fees partially offset by lower compensation expense including the valuations of our stock-based compensation awards during the three months ended July 31, 2024 as compared to the prior year period.

Changes related to Non-Operating Items:

Interest Exp ense .

Interest expense decreased $1.3 million for the three months ended April 30, 2024 compared to the same period in 2023 as a result of lower borrowings outstanding during the three months ended April 30, 2024 as compared to the prior year period.

Interest expense decreased $1.2 million for the three months ended July 31, 2024 compared to the same period in 2023 as a result of lower borrowings outstanding during the three months ended July 31, 2024 as compared to the prior year period.

Income Taxes .

We recorded inco me tax expense of $4.3 million on pre-tax income of $19.7 million for the three months ended April 30, 2024, an effective rate of 21.9%, and income tax expense of $5.6 million on pre-tax income of $27.1 million for the three months ended April 30, 2023, an effective rate of 20.5%.

We recorded income tax expense of $6.7 million on pre-tax income of $32.0 million for the three months ended July 31, 2024, an effective rate of 20.9%, and income tax expense of $4.1 million on pre-tax income of $35.8 million for the three months ended July 31, 2023, an effective rate of 11.5%.

The increase in the effective tax rate year-over-year was primarily driven by an increase in non-deductible permanent differences.

Six Months Ended April 30, 2024 Compared to Six Months Ended April 30, 2023

Six Months Ended April 30,

Nine Months Ended July 31, 2024 Compared to Nine Months Ended July 31, 2023

Nine Months Ended July 31,

2024 2023 Change $ % Variance

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NA Fenestration

Six Months Ended April 30,

Nine Months Ended July 31,

2024 2023 $ Change % Variance

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Operating income margin 9 % 10 %

Net sales decreased $2.2 million, or 1%, for the six months ended April 30, 2024 compared to the same period in 2023, which was primarily driven by a $1.7 million decrease in volumes mainly due to softer market demand and a return to lower volumes in the fall and early winter months due a return of normal seasonality and a $0.5 million decrease in price and raw material indexes.

Net sales decreased $9.0 million, or 2%, for the nine months ended July 31, 2024 compared to the same period in 2023, which was primarily driven by a $10.5 million decrease in volumes mainly due to softer market demand driven by weaker consumer confidence partially offset by a $1.5 million increase in price and raw material indexes.

Cost of Sales.

The cost of sales decreased $6.6 million, or 3%, for the six months ended April 30, 2024 as compared to the same period in 2023.

Cost of sales, including labor, decreased primarily due to lower volumes and deflation of raw materials during the period.

The cost of sales decreased $11.4 million, or 3%, for the nine months ended July 31, 2024 as compared to the same period in 2023.

Cost of sales, including labor, decreased primarily due to a decrease in volumes partially offset by inflation of raw materials during the period.

Se lling, General and Administrative.

S elling, general and administrative expenses increased $2.2 million, or 8%, for the six months ended April 30, 2024 as compared to the same period in 2023.

The increase is primarily due to increases in labor costs, partially offset by a decrease in professional fees year-over-year.

S elling, general and administrative expenses increased $4.9 million, or 12%, for the nine months ended July 31, 2024 as compared to the same period in 2023.

The increase is primarily due to increases in labor costs and professional fees year-over-year.

EU Fenestration

Six Months Ended April 30,

Nine Months Ended July 31,

2024 2023 $ Change Variance %

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Operating income margin 18 % 19 %

Net sales decreased $12.7 million, or 11%, comparing the six months ended April 30, 2024 to the same period in 2023, which was primarily driven by a $12.8 million decrease in volumes largely due to softer market demand and $1.5 million of base price decreases, partially offset by $1.6 million of foreign currency rate change.

Net sales decreased $21.0 million, or 11%, comparing the nine months ended July 31, 2024 to the same period in 2023, which was primarily driven by a $18.4 million decrease in volumes largely due to softer market demand driven by weaker consumer confidence and $3.3 million of base price decreases, partially offset by $0.7 million benefit from foreign currency rate change.

Cost of Sales.

The cost of sales decreased $10.8 million, or 14%, for the six months ended April 30, 2024 compared to the same period in 2023.

Cost of sales decreased primarily due to a decrease in volumes, deflation in the price of raw materials and foreign currency impacts.

The cost of sales decreased $15.1 million, or 13%, for the nine months ended July 31, 2024 compared to the same period in 2023.

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

Selling, General and Administrative.

Selling, general and administrative expense decreased $0.3 million, or 2%, for the six months ended April 30, 2024 compared to the same period in 2023.

The decrease is primarily due to a decrease in professional fees, partially offset by an increase in labor costs, year-over-year.

Selling, general and administrative expense decreased $1.0 million, or 4%, for the nine months ended July 31, 2024 compared to the same period in 2023.

The decrease is primarily due to a decrease in professional fees and decrease in labor costs, year-over-year.

NA Cabinet Components

Six Months Ended April 30,

Nine Months Ended July 31,

2024 2023 $ Change Variance %

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Depreciation and amortization 9,240 8,988 252 3%

Operating loss $ (3,491) $ (343) $ (3,148) 918%

Operating loss margin (4) % — %

Net sales decreased $14.0 million, or 13%, for the six months ended April 30, 2024 compared to the same period in 2023, which was driven by a $7.2 million decrease in volumes due to softer market demand driven by weaker consumer confidence and a $6.8 million decrease in raw material surcharges.

Operating (loss) income $ (3,209) $ 1,928 $ (5,137) (266)%

Operating (loss) income margin (2) % 1 %

Net sales decreased $17.9 million, or 11%, for the nine months ended July 31, 2024 compared to the same period in 2023, which was driven by an $11.8 million decrease in volumes due to softer market demand driven by weaker consumer confidence and a $6.1 million decrease in raw material surcharges.

Cost of Sales .

Cost of sales decreased $10.4 million, or 11%, for the six months ended April 30, 2024 compared with the same period in 2023, primarily as a result of lower volumes year-over-year.

Cost of sales decreased $12.4 million, or 9%, for the nine months ended July 31, 2024 compared with the same period in 2023.

Cost of sales decreased primarily as a result of lower volumes year-over-year.

Selling, General and Administrative .

Selling, general and administrative expense decreased $0.7 million, or 6%, for the six months e nded April 30, 2024 compared to the same period in 2023.

Selling, general and administrative expense decreased $0.6 million, or 4%, for the nine months ended July 31, 2024 compared to the same period in 2023.

This decrease is primarily due to a decrease in labor costs and professional fees year-over-year.

Unallocated Corporate & Other

Six Months Ended April 30,

Nine Months Ended July 31,

2024 2023 $ Change Variance %

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Operating loss $ (20,044) $ (14,464) $ (5,580) 39%

Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the six months ended April 30, 2024 and 2023.

Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the nine months ended July 31, 2024 and 2023.

Cost of Sales .

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Selling, General and Administrative .

Selling, general and administrative expenses increased $1.8 million, or 18%, for the six months ended April 30, 2024 compared to the same period in 2023.

This increase is primarily attributable to an increase in transaction and advisory fees and an increase in medical claims expense during the six months ended April 30, 2024 as compared to the prior year period.

Selling, general and administrative expenses increased $5.7 million, or 44%, for the nine months ended July 31, 2024 compared to the same period in 2023.

This increase is primarily attributable to a $7.4 million increase in transaction and advisory fees and an increase in medical claims expense partially offset by lower compensation expense including the valuations of our stock-based compensation awards during the nine months ended July 31, 2024 as compared to the prior year period.

Changes related to Non-Operating Items:

Interest Exp ense .

Interest expense decreased $2.5 million for the six months ended April 30, 2024 compared to the same period in 2023 primarily as a result of lower borrowings outstanding during the six months ended April 30, 2024 as compared to the prior year period.

Interest expense decreased $3.7 million for the nine months ended July 31, 2024 compared to the same period in 2023 primarily as a result of lower borrowings outstanding during the nine months ended July 31, 2024 as compared to the prior year period.

Income Taxes .

We recorded income tax expense of $6.0 million on pre-tax income of $27.6 million for the six months ended April 30, 2024, an effective rate of 21.6%, and income tax expense of $6.0 million on a pre-tax income of $29.4 million for the six months ended April 30, 2023, an effective rate of 20.4%.

We recorded income tax expense of $12.6 million on pre-tax income of $59.6 million for the nine months ended July 31, 2024, an effective rate of 21.2%, and income tax expense of $10.1 million on a pre-tax income of $65.2 million for the nine months ended July 31, 2023, an effective rate of 15.5%.

The increase in the effective tax rate year-over-year was primarily driven by an increase in non-deductible permanent differences.

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Historically, our principal sources of funds have been cash on hand, cash flow from operations, and borrowings under our credit facilities.

We maintain a $325.0 million revolving credit facility (the Credit Facility) that matures in 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 six months ended April 30, 2024 was RFR Rate + 1.25%.

We maintain a $325.0 million revolving credit facility (the Existing Credit Agreement) 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, 2024 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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We are amortizing deferred financing fees of $0.9 million straight-line over the remaining term of the facility.

For further details of the Credit Facility, refer to Note 6, “Debt and Finance Lease Obligations” to the accompanying unaudited condensed consolidated financial statements contained elsewhere herein.

As of April 30, 2024, we had $56.1 million of cash and equivalents, zero outstanding under the Credit Facility, $3.7 million of outstanding letters of credit and $55.2 million outstanding under finance leases and other debt.

For further details of the Existing Credit Agreement , refer to Note 6, “Debt and Finance Lease Obligations” to the accompanying unaudited condensed consolidated financial statements contained elsewhere herein.

On June 12, 2024, in connection with the Tyman Acquisition, the Company, Wells Fargo Bank, National Association (“Wells Fargo Bank”, acting as agent, swingline lender and issuing lender, the “Agent”), the other entities therein specified in the capacities therein specified, and the lenders parties thereto, entered into an amendment to the Second Amended and Restated Credit Agreement, dated as of July 6, 2022 the Existing Credit Agreement, and the Existing Credit Agreement as so amended, the “Amended Credit Agreement”).

The Amended Credit Agreement did not become effective until August 1, 2024 upon the completion the Tyman Acquisition.

For further information regarding the Tyman Acquisition and the Amended Credit Agreement, refer to Note 16, “Subsequent Events.”

The Amended Credit Agreement will (i) increase the senior secured revolving credit facility to an aggregate principal amount of $475 million (the “Revolving Credit Facility”) and (ii) provide for a senior secured term loan A facility in an aggregate principal amount of $500 million (the “Term A Facility” and together with the Revolving Credit Facility, the “Facilities”).

The Revolving Credit Facility will include alternative currency, letter of credit, and swing-line sub-facilities of $100 million, $30 million, and $15 million, respectively.

The maturity date of the Facilities will be five years after the acquisition effective date, maturing on August 1, 2029.

As of July 31, 2024, we had $94.0 million of cash and equivalents, zero outstanding under the Existing Credit Agreement , $3.7 million of outstanding letters of credit and $55.0 million outstanding under finance leases and other debt.

Of the $55.0 million outstanding under finance leases and other debt, $50.7 million relates to real estate leases.

We had $321.3 million available for use under the Credit Facility at April 30, 2024.

On April 21, 2024, the Company and certain financial institution parties entered into the Interim Facility Agreement, pursuant to which Wells Fargo Bank, National Association, as interim facility agent and interim security agent, and a syndicate of lenders agreed to provide the Company with a $750 million term loan interim facility (“ Interim Facility ”) and the Commitment Letter, pursuant to which certain financial institution parties agreed to provide to the Company, subject to the execution of definitive financing documents, certain term loan and revolving facilities on the terms and conditions set forth in the Commitment Letter (collectively, the “ Facilities ”) in order to, among other things, finance the cash consideration payable by

the Company in connection with the Tyman Acquisition.

The availability of the borrowings under the Facilities (or, in the event that the commitments under the Facilities are not funded on the closing date of the Tyman Acquisition, the Interim Facility Agreement) are subject to the satisfaction of certain customary conditions for financings of this nature.

The Interim Facility Agreement contains, and any definitive financing documentation for the Facilities will contain, customary representations and warranties, events of default and covenants for transactions of this type.

To the extent any borrowings are made under the Interim Facility Agreement, such loans will mature on the date falling 90 days after the date of first drawdown under the Interim Facility Agreement.

We had $321.3 million available for use under the Existing Credit Agreement at July 31, 2024.

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

Repurchases under the 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 April 30, 2024, we did not purchase any shares under this program and as of April 30, 2024 we had a maximum of $62.8 million available to purchase shares under this program.

During the three months ended July 31, 2024, we did not purchase any shares under this program and as of July 31, 2024 we had a maximum of $62.8 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 $15.3 million and $21.2 million of f oreign cash during the six months ended April 30, 2024 and 2023, respectively.

We repatriated $33.2 million and $30.2 million of f oreign cash during the nine months ended July 31, 2024 and 2023, 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 six months ended April 30, 2024 and 2023:

Six Months Ended

The following table summarizes our cash flow results for the nine months ended July 31, 2024 and 2023:

Nine Months Ended

(Dollars in thousands)

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Operating A ctivities .

Cash provided by operating activities decreased $1.5 million for the six months ended April 30, 2024 compared to the six months ended April 30, 2023.

The decrease in operating cash flow is primarily due to a decrease in net income year-over-year partially offset by favorable changes to net working capital.

Cash provided by operating activities decreased $19.2 million for the nine months ended July 31, 2024 compared to the same period in 2023.

The decrease in operating cash flow is primarily due to a decrease in net income year-over-year and unfavorable changes to net working capital.

The unfavorable changes in working capital were largely driven by a decrease in cash inflows related to inventory in 2024 as compared to the prior year, partially offset by a decrease in income tax receivables.

Investing Activities.

Cash used for investing activities decreased $89.2 million for the six months ended April 30, 2024 compared to the same period in 2023, primarily as a result of no business acquisitions in 2024 compared to the acquisition of LMI in 2023.

Cash used for investing activities decreased $90.2 million for the nine months ended July 31, 2024 compared to the same period in 2023, primarily as a result of no business acquisitions during the nine months ended July 31, 2024 compared to the $91.3 million acquisition of LMI in the prior year period.

Financing Activities.

Cash used for financing activities was $21.9 million for the six months ended April 30, 2024 compared to cash provided by financing activities of $54.3 million for the same period in 2023.

The change in investing cash flows is primarily as a result of a decrease in net borrowings of long-term debt.

During the six months ended April 30, 2023, $91.3 million of the borrowings of long-term debt were related to the acquisition of LMI.

Cash used for financing activities was $25.5 million for the nine months ended July 31, 2024 compared to cash provided by financing activities of $26.7 million for the same period in 2023.

The change in investing cash flows is primarily as a result of a decrease in net borrowings of long-term debt partially offset by a decrease in the purchase of treasury shares.

Liquidity Requirements

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

During the six months ended April 30, 2024 and 2023, we repatriated $15.3 million and $21.2 million, respectively, of foreign earnings from our foreign locations.

We maintain cash balances in foreign countries which total $16.0 million as of April 30, 2024.

During the nine months ended July 31, 2024 and 2023, we repatriated $33.2 million and $30.2 million, respectively, of foreign earnings from our foreign locations.

We maintain cash balances in foreign countries which total $16.0 million as of July 31, 2024.

Critical Accounting Policies and Estimates

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Estimates and assumptions about future events and their effects cannot be perceived with certainty.

Estimates may change as new events occur, as more experience is acquired, as

additional information becomes available and as our operating environment changes.

Estimates may change as new events occur, as more experience is acquired, as additional information becomes available and as our operating environment changes.

We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, and that we believe provide a basis for making judgments about the carrying value of assets and liabilities that are not readily available through open market quotes.

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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, 2023.

Our critical accounting policies and estimates have not changed materially during the six months ended April 30, 2024.

Our critical accounting policies and estimates have not changed materially during the nine months ended July 31, 2024.

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 six months ended April 30, 2024.

We did not adopt any new accounting pronouncements during the three and nine months ended July 31, 2024.

Accounting Standards Not Yet Adopted

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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 2. Management’s Discussion and Analysis