Quanex Building Products Corp (NX) SEC Annual Report (10-K) for 2015

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(Mark One)

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Registrant's telephone number, including area code: (713) 961-4600

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: NONE

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes  x No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes ¨ No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   ¨ No x

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of April 30, 2015, computed by reference to the closing price for the Common Stock on the New York Stock Exchange, Inc. on that date, was $647,082,082 . Such calculation assumes only the registrant's officers and directors at such date were affiliates of the registrant.

At December 11, 2015 there were outstanding 33,971,483 shares of the registrant's Common Stock, $0.01 par value.

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DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement for its 2016 Annual Meeting of Stockholders to be filed with the Commission within 120 days of October 31, 2015 are incorporated herein by reference in Part III of this Annual Report on Form 10-K.

TABLE OF CONTENTS

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.

Cautionary Note Regarding Forward-Looking Statements

Certain of the statements contained in this document and in documents incorporated by reference herein, including those made under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" are "forward-looking" statements as defined under the Private Securities Litigation Reform Act of 1995. Generally, the words "expect," "believe," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward looking statements are (1) all statements which address future operating performance, (2)events or developments that we expect or anticipate will occur in the future, including statements relating to volume, sales, operating income and earnings per share, and (3) statements expressing general outlook about future operating results. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our current projections or expectations. As and when made, we believe that these forward-looking statements are reasonable. However, caution should be taken not to place undue reliance on any such forward-looking statements since such statements speak only as of the date when made and there can be no assurance that such forward-looking statements will occur. We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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

Additional factors that could cause actual results to differ materially are discussed under Item 1A, " Risk Factors " included elsewhere in this Annual Report on Form 10-K.

About Third-Party Information

In this report, we rely on and refer to information regarding industry data obtained from market research, publicly available information, industry publications, United States government sources and other third parties. Although we believe this information is reliable, we cannot guarantee the accuracy or completeness of the information and have not independently verified it.

PART I

Item 1. Business (Continuing Operations).

Our Company

Quanex was incorporated in Delaware on December 12, 2007 as Quanex Building Products Corporation. We manufacture components primarily for the window and door (fenestration) industry, which include (1) energy-efficient flexible insulating glass spacers, (2) extruded vinyl profiles, (3) window and door screens, and (4) precision-formed metal and wood products for original equipment manufacturers (OEMs), as well as certain non-fenestration components and products, which include solar panel sealants, wood flooring, trim moldings, plastic decking, fencing, water retention barriers, hardware, and conservatory roof components. We use low-cost production processes and engineering expertise to provide our customers with specialized products for their specific window and door applications. We believe these capabilities provide us with unique competitive advantages. We serve a primary customer base in North America and the United Kingdom, and also serve customers in international markets through our operating plants in the United Kingdom and Germany, as well as through sales and marketing efforts in other countries.

Our History

Our predecessor company, Quanex Corporation, was organized in Michigan in 1927 as Michigan Seamless Tube Company, and was later reincorporated in Delaware in 1968. In 1977, Michigan Seamless Tube Company changed its name to Quanex Corporation. On December 12, 2007, Quanex Building Products Corporation was incorporated as a wholly-owned subsidiary in the state of Delaware, in order to facilitate the separation of Quanex Corporation's vehicular products and building products businesses. This separation became effective on April 23, 2008, through a spin-off of the building products business to Quanex Corporation's then-existing shareholders. Immediately following the spin-off, our former parent company, consisting principally of the vehicular products business and all non-building products related corporate accounts, merged with a wholly-owned subsidiary of Gerdau S.A.

Since the spin-off in 2008, we have evolved our business by making investments in organic growth initiatives and taking a disciplined approach to new business and strategic acquisition opportunities, and disposing of non-core businesses while seeking to provide superior value to our customers.

Notable developments and transactions which occurred since the spin-off include the following:

As of October 31, 2015, we operated 23 manufacturing facilities located in 13 states in the United States, five facilities in the United Kingdom, and another in Germany. These facilities feature efficient plant design and flexible manufacturing processes, enabling us to produce a wide variety of custom engineered products and components primarily focused on the window and door segment of the residential building products markets. We are able to maintain minimal levels of finished goods inventories at most locations because we typically manufacture products upon order to customer specifications. We believe the primary drivers of our operating results are new home construction and residential remodeling and replacement activity.

Our Industry

Our business is largely North American based and dependent upon the spending and growth activity levels of our customers which include national and regional residential window and door manufacturers. With the HLP acquisition in June 2015, we have expanded our international presence and acquired a platform from which to sell vinyl extruded lineal for house systems to smaller customers primarily in the United Kingdom.

We use data related to United States and United Kingdom housing starts and window shipments, as published by or derived from third-party sources, to evaluate the United States and United Kingdom fenestration market.

The following table presents calendar-year annual and quarterly housing starts information, as published by the United States Census Bureau based on data collected from the National Association of Home Builders (NAHB), (units in thousands):

The following table presents calendar-year annual and quarterly window shipments information, derived from reports published by Ducker Worldwide LLC, a consulting and research firm, (units in thousands):

The following table presents calendar-year annual housing starts information in the United Kingdom, derived from reports published by D&G Consulting, a consulting and research firm, (units in thousands):

We have noted the following trends which we believe affect our industry:

Strategy

Our vision is to be the preferred supplier to our customers in each market we serve. Our strategy to achieve this vision includes the following:

Business Segments

We have two reportable business segments: (1) Engineered Products, comprised of our four operating segments focused primarily on North American fenestration, and (2) International Extrusion, comprised solely of HLP acquired on June 15, 2015. In addition, we recorded LIFO inventory adjustments, corporate office charges and inter-segment eliminations as Corporate & Other. Prior to April 1, 2014, we presented two reportable segments: (1) Engineered Products, and (2) Aluminum Sheet Products as well as corporate and other. On April 1, 2014, we sold Nichols, the sole operating segment included in our Aluminum Sheet Products reportable segment. To account for Nichols as a discontinued operation, we reclassified certain costs from Corporate & Other to Nichols, including a portion of the LIFO reserve, as well as insurance accruals related to workers compensation claims, to properly reflect these direct expenses as a component of the disposal group. The accounting policies of our operating segments are the same as those used to prepare our accompanying consolidated financial statements. Financial information specific to each segment is located in note 18 of the accompanying financial statements.

We produce window and door components for original equipment manufacturers that primarily serve the residential new construction, and residential remodeling and replacement markets. We manufacture insulating glass (IG) spacer systems, window and door profiles, window and patio door screens, aluminum cladding and other roll formed metal window components, door components such as thresholds and astragals, patio screen doors and custom window grilles, trim and architectural moldings in a variety of woods, thin film solar panel sealants, and engineered wood flooring. We operate five flexible IG spacer facilities, five polyvinyl chloride (PVC) extrusion facilities, nine facilities producing window and door screens, two facilities producing wood fenestration (door and window) components, one facility producing engineered wood flooring, four facilities producing other fenestration products, and two facilities producing PVC, plastic decking, fencing, hardware, conservatory roof component, and water retention barriers.  The insulating glass facilities use compound-extrusion and laminating technology to produce highly engineered insulating glass spacer products from butyl, ethylene propylene dieneterpolymer (EPDM), composite and silicone-based raw materials. These spacer products separate two or three panes of glass in an IG unit to improve its thermal performance. Our vinyl extrusion facilities use automated production processes to manufacture vinyl and composite profiles which constitute the framing material used in the assembly of vinyl windows and patio doors.

We believe our strengths include design expertise, new technology development capability, customer service, just-in-time delivery systems, high quality manufacturing, the ability to generate unique patented products and participation in industry and governmental advocacy.

Raw Materials and Supplies

We purchase a diverse range of raw materials, which include PVC, epoxy resin, butyl, titanium dioxide (TiO 2 ) desiccant powder, silicone and EPDM rubber compounds, coated and uncoated aluminum sheet and wood (both hardwood and softwood).  These raw materials are generally available from several suppliers at market prices. We may enter into sole sourcing arrangements with our suppliers from time to time if we believe we can realize beneficial savings, but only after we have determined that the vendor can reliably supply our raw material requirements. These sole sourcing arrangements, generally have termination clauses to protect us if a sole sourced vendor could not provide raw materials timely and on economically feasible terms. We believe there are other qualified suppliers from which we could purchase raw materials and supplies.

Competition

Our products are sold under highly competitive conditions. We compete with a number of companies, some of which have greater financial resources than us. We believe the primary competitive factors in the markets we serve include price, product quality, delivery and the ability to manufacture to customer specifications. The volume of engineered building products that we manufacture represents a small percentage of annual domestic consumption. Similarly, our subsidiaries in the United Kingdom compete against some larger vinyl producers and many smaller window manufacturers.

We compete against a range of small and mid-size metal, vinyl and wood products suppliers, wood molding companies, and the in-house operations of customers who have vertically integrated fenestration operations. We also compete against IG spacer manufacturing firms. IG systems are used in numerous end markets including residential housing, commercial construction, appliances and transportation vehicles, but we primarily serve the residential housing market. Competition is largely based on regional presence, custom engineering, product development, quality, service and price. Primary competitors include, but are not limited to, Veka, Deceuninck, Axiall, Vision Extrusions, GED Integrated Solutions, Technoform, Swiss Spacer, Thermix, Rite Screen, Allmetal and Endura.

Sales, Marketing, and Distribution

We sell our products to customers in various countries. Therefore, we have sales representatives whose territories essentially cover the United States, Canada, Europe, and to a lesser extent, the Middle East, Latin and South America, Australia and Asia. Our sales force is tasked with selling and marketing our complete range of components, products and systems to national and regional OEMs through a direct sales force in North America and the United Kingdom, supplemented with the limited use of distributors and independent sales agents. 

Customers

Certain of our businesses or product lines are largely dependent on a relatively few large customers. See page 51 of this Annual Report on form 10-K for related disclosure.

Sales Backlog

Given the short lead times involved in our business, we have a relatively low backlog, approximately $21 million as of October 31, 2015.The criteria for revenue recognition has not been met, and therefore, we have not recorded revenue or deferred revenue with regard to these sales orders.  If these sales orders result in a sale, we will record as revenue during Fiscal 2016.  

Seasonal Nature of Business

Our business is impacted by seasonality. We have historically experienced lower sales for our products during the first half of our fiscal year as winter weather reduces homebuilding and home improvement activity. Our operating income tends to decline during this period of lower sales because a high percentage of our operating expenses are fixed overhead. We typically experience more favorable results in the third and fourth quarters of the fiscal year. Expenses for labor and other costs are generally semi-variable throughout the year.

Working Capital

We fund operations through a combination of available cash and cash equivalents, short-term investments, and cash flow generated from our operations. In addition, our revolving credit facility is available for working capital needs. We extend credit to our domestic customers in the ordinary course of business generally for a term of 30 days, while the terms for our international customers vary from cash advances to 90 days. Inventory of raw materials are carried in quantities deemed necessary to ensure a smooth production process, some of which are governed by consignment agreements with suppliers. We strive to maintain minimal finished goods inventories, while ensuring an adequate supply on hand to service customer needs.

Service Marks, Trademarks, Trade Names, and Patents

Our federally registered trademarks or service marks include QUANEX, QUANEX and design, "Q" design, TRUSEAL TECHNOLOGIES, DURASEAL, DURALITE, SOLARGAIN EDGE TAPE, ENVIROSEALED WINDOWS, EDGETHERM, COLONIAL CRAFT, EDGETECH, ECOBLEND, SUPER SPACER, TSS, TRUE WARM, E & Design, QUIET EDGE, HEALTH SMART WINDOWS, ENERGY WISE WINDOWS, DESI-ROPE, 360 and design, INTELLICLIP, SUSTAINAVIEW, MIKRON, MIKRONWOOD, MIKRONBLEND, MIKRON BLEND and design, ENERGYCORE, FUSION INSULATED SYSTEM, AIRCELL, SUPERCOAT, SUPERCAP, STYLELOCK, STYLELOCK and design, K2 MIKRON and design, HOMESHIELD, HOMESHIELD and design, and STORM SEAL. We consider the following marks, design marks and associated trade names to be valuable in the conduct of our business: HOMESHIELD, COLONIAL CRAFT, TRUSEAL TECHNOLOGIES, EDGETECH, MIKRON and QUANEX. With the acquisition of HLP in June 2015, we acquired a number of registered designs, patents and trademarks registered in the United Kingdom, which include: MODLOK, LINIAR, SUPERCUT, and various other trade marks and patents which are pending approval. Generally, our business does not depend on patent protection, but patents obtained with regard to our vinyl extrusion products and processes, fabricated metal components and IG spacer products business remain a valuable competitive advantage over other building products manufacturers. We obtain patent protection for various dyes and other tooling created in connection with the production of customer-specific vinyl profile designs and vinyl extrusions. Our fabricated metal components business obtains patent protection for its thresholds. Our window sealant business unit relies on patents to protect the design of several of its window spacer products. Although we hold numerous patents, the proprietary process technology that has been developed is also considered a source of competitive advantage.

Research and Development

In general, we expense research and development costs as incurred. We devote time, effort and expense to: (1) custom- engineer products for specific customer applications; (2) develop superior, proprietary process technology; and (3) partner with customers to develop new products. In addition, we may acquire businesses with patented technology in order to expand our product offerings.

Environmental and Employee Safety Matters

We are subject to extensive laws and regulations concerning worker safety, the discharge of materials into the environment and the remediation of chemical contamination. To satisfy such requirements, we must make capital and other expenditures on an on-going basis. The cost of worker safety and environmental matters has not had a material adverse effect on our operations or financial condition in the past, and we are not currently aware of any existing conditions that we believe are likely to have a material adverse effect on our operations, financial condition, or cash flows.

Safety and Environmental Policies

For many years, we have maintained compliance policies that are designed to help protect our workforce, to identify and reduce the potential for job-related accidents, and to minimize liabilities and other financial impacts related to worker safety and environmental issues. These policies include extensive employee training and education, as well as internal policies embodied in our Code of Business Conduct and Ethics. We have a Director of Environmental, Health and Safety and maintain a company-wide Safety Council, comprised of leaders from across the organization, which meets regularly to discuss safety issues and drive safety improvements. We plan to continue to focus on safety in particular as a core strategy to improve our operational efficiency and financial performance.

Remediation

Under applicable state and federal laws, we may be responsible for, among other things, all or part of the costs required to remove or remediate wastes or hazardous substances at locations we, or our predecessors, have owned or operated. 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.

Environmental Compliance Costs

We have incurred expenses to comply with existing environmental regulations which total approximately $0.2 million, $0.4 million and $0.3 million for the years ended October 31, 2015, 2014 and 2013, respectively. We have not incurred capital expenditures related to environmental matters during these years and we do not expect to incur such costs for fiscal 2016. However, future expenditures relating to environmental matters may result from the identification of new environmental issues, changes in regulations or environmental laws, or governmental actions with regards to existing sites. We will continue to have expenditures beyond fiscal 2015 in connection with environmental matters, including control of air emissions, control of water discharges and plant decommissioning costs. It is not possible at this time to reasonably estimate the amount of those expenditures, except as discussed above, due to uncertainties about emission levels, control technologies, the positions of governmental authorities and the application of requirements to us. Based upon our experience to date, we do not believe that our compliance with environmental requirements will have a material adverse effect on our operations, financial condition or cash flows.

Employees

As of October 31, 2015, we had 2,693 employees. Of these employees, 2,140 were domiciled in the United States, 490 in the United Kingdom, and 63 in Germany.

Geographic Information

Our manufacturing facilities and all long-lived assets are located in the United States, United Kingdom and Germany. Financial information specific to each geographic area is located in note 18 of the accompanying financial statements.

For Investors

We periodically file or furnish documents to the Securities and Exchange Commission (SEC), including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports as required. These reports are also available free of charge from the Investor Relations Section of our website at http://www.quanex.com , as soon as reasonably practicable after we file such material, or furnish it to the SEC. As permitted by the SEC rules, we post relevant information on our website. However, the information contained on our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this report.

Item 1A. Risk Factors.

The following risk factors, along with other information contained elsewhere in this Annual Report on Form 10-K and our other public filings with the SEC, should be carefully considered before deciding to invest in our securities. Additional risks and uncertainties that are not currently known to us or that we may view as immaterial could impair our business if such risks were to develop into actual events. Therefore, any of these risks could have a material adverse effect on our financial condition, results of operations and cash flows. This listing of risk factors is not all-inclusive and is not necessarily presented in order of importance.

Industry Risks

Any sustained decline in residential remodeling, replacement activities, or housing starts could have a material adverse effect on our business, financial condition and results of operations.

The primary drivers of our business are residential remodeling, replacement activities and housing starts. The home building and residential construction industry is cyclical and seasonal, and product demand is based on numerous factors such as interest rates, general economic conditions, consumer confidence and other factors beyond our control. Declines in the number of housing starts and remodeling expenditures resulting from such factors could have a material adverse effect on our business, results of operations and financial condition.

If the availability of critical raw materials were to become scarce or if the price of these items were to increase significantly, we might not be able to timely produce products for our customers or maintain our profit levels.

We purchase from outside sources significant amounts of raw materials, such as butyl, titanium dioxide, vinyl resin, aluminum, steel and wood products for use in our manufacturing facilities. Because we do not have long-term contracts for the supply of many of our raw materials, their availability and price are subject to market fluctuation and may be subject to curtailment or change. Any of these factors could affect our ability to timely and cost-effectively manufacture products for our customers.

Compliance with, or liabilities under, existing or future environmental laws and regulations could significantly increase our costs of doing business.

We are subject to extensive federal, state and local laws and regulations concerning the discharge of materials into the environment and the remediation of chemical contamination. To satisfy such requirements, we must make capital and other expenditures on an on-going basis. Future expenditures relating to environmental matters will necessarily depend upon whether such regulations and future governmental decisions or interpretations of these regulations apply to us and our facilities. It is likely that we will be subject to increasingly stringent environmental standards, and we will incur additional expenditures to comply with such standards. Furthermore, if we fail to comply with applicable environmental regulations, we could be subject to substantial fines or penalties and to civil and criminal liability.

Our goodwill and indefinite-lived intangible assets may become impaired and could result in a charge to income.

We evaluate our goodwill and indefinite-lived intangible assets at least annually to determine whether we must test for impairment. In making this assessment, we must use judgment to make estimates of future operating results and appropriate residual values. Actual future operating results and residual values associated with our operations could differ significantly from these estimates, which may result in an impairment charge in a future period, resulting in a decrease in net income from operations in the year of the impairment, as well as a decline in our recorded net worth.

We may not be able to protect our intellectual property.

We rely on a combination of copyright, patent, trade secrets, confidentiality procedures and contractual commitments to protect our proprietary information. However, these measures can only provide limited protection and unauthorized third parties may try to copy or reverse engineer portions of our products or may otherwise obtain and use our intellectual property. If we cannot protect our proprietary information against unauthorized use, we may not be able to retain a perceived competitive advantage and we may lose sales to the infringing sellers, which may have a material adverse effect on our financial condition, results of operations and cash flows.

We are subject to various existing and contemplated laws, regulations and government initiatives that may materially impact the demand for our products, our profitability or our costs of doing business.

Our business may be materially impacted by various governmental laws, regulations and initiatives that may artificially create, deflate, accelerate, or decelerate consumer demand for our products. For example, when the government issues tax credits designed to encourage increased homebuilding or energy-efficient window purchases, the credits may create a spike in demand that would not otherwise have occurred and our production capabilities may not be able to keep pace, which could materially impact our profitability. Likewise, when such laws, regulations or initiatives expire, our business may experience a material loss in sales volume or an increase in production costs as a result of the decline in consumer demand.

Our operations outside the United States require us to comply with a number of United States and international anti-corruption regulations, violations of which could have a material adverse effect on our consolidated results of operations and consolidated financial condition.

Our international operations require us to comply with a number of United States and international regulations, including the Foreign Corrupt Practices Act (FCPA) and the United Kingdom Bribery Act 2010. While we have implemented appropriate training and compliance programs to prevent violations of these anti-bribery regulations, we cannot ensure that our policies, procedures and programs will always protect us from reckless or criminal acts committed by our employees or agents. Allegations of violations of applicable anti-corruption laws, may result in internal, independent, or government investigations, and violations of anti-corruption laws may result in severe criminal or civil sanctions or other liabilities which could have a material adverse effect on our business, consolidated results of operations and consolidated financial condition.

Failure to achieve and maintain effective internal controls could have a material adverse effect on our business and on our stock price.

Effective internal controls are necessary for us to effectively monitor our business, prevent fraud or theft, remain in compliance with our credit facility covenants, and provide reliable financial reports, both to the public and to our lenders. If we fail to maintain the adequacy of our internal controls, both in accordance with current standards and as standards are modified over time, we could trigger an event of default under our credit facilities or lose the confidence of the investing community, both of which could result in a material adverse effect on our stock price, limit our ability to borrow funds, or result in the application of unfavorable commercial terms to borrowings then outstanding.

Company Risks

Our business will suffer if we are unable to adequately address potential supplier or customer pricing pressures, particularly with respect to original equipment manufacturers that have significant pricing leverage over suppliers.

Our primary customers are OEMs, who have substantial leverage in setting purchasing and payment terms. We attempt to manage this pricing pressure and to preserve our business relationships with the OEMs by negotiating reasonable price concessions when needed, and by reducing our production costs through various measures, which may include managing our purchase process to control the cost of our raw materials and components, and implementing cost-effective process improvements. However, our efforts may not be successful and our operating margins could be negatively impacted.

Our revenues could decline or we may lose business if our customers vertically integrate their operations, diversify their supplier base, or transfer manufacturing capacity to other regions.

Certain of our businesses or product lines are largely dependent on a relatively few large customers. Although we believe we have an extensive customer base, if we were to lose one of these large customers or if such customer were to materially reduce its purchases as a result of vertical integration, supplier diversification, or a shift in regional focus, our revenue, general financial condition and results of operations could be adversely affected.

Our credit facility contains certain operational restrictions, reporting requirements, and financial covenants that limit the aggregate availability of funds.

Our credit facility is comprised of an asset-based lending (ABL) revolver and a term loan, each of which contains certain financial covenants and other operating and reporting requirements that could present risk to our operating results or limit our ability to access capital for use in the business. For a full discussion of the various covenants and operating requirements imposed by our new credit facility and information related to the potential limitations on our ability to access capital, see Item 7 page 31. Management's Discussion and Analysis of Financial Conditions and Results of Operations-Liquidity and Capital Resources , in this Annual Report on Form 10-K.

We may not be able to successfully identify, manage or integrate future acquisitions, and if we are unable to do so, then our rate of growth and profitability could be adversely affected.

We cannot provide assurance that we will be able to identify appropriate targets for acquisition, or that we will successfully manage or integrate acquisition targets once we have purchased them. If we acquire a business for which we do not fully understand or appreciate the specific business risks, if we overvalue an acquisition or fail to conduct effective due diligence on an acquisition, or if we fail to effectively and efficiently integrate a business that we acquire, then there could be a material adverse effect on our ability to achieve the projected growth and cash flow goals associated with the new business, which could result in an overall material adverse effect on our long-term profitability or revenue generation.

If our information technology systems fail, or if we experience an interruption in our operations due to an aging IT infrastructure, then our results of operations and financial condition could be materially adversely affected.

The failure of our information technology systems, our inability to successfully maintain, enhance and/or replace our information technology systems when necessary, or a significant compromise of the integrity or security of the data that is generated from our information technology systems, could adversely affect our results of operations and could disrupt business and prevent or severely limit our ability to respond to data requests from our customers, suppliers, auditors, shareholders, employees or government authorities.

We may not have the right personnel in place to achieve our operating goals and the rural location of some of our operations may make it difficult to locate or hire highly skilled employees.

We operate in some rural areas and small towns where the competition for labor can be fierce, and where the pool of qualified employees may be very small. If we are unable to obtain skilled workers and adequately trained professionals to conduct our business, we may not be able to manage our business to the necessary high standards. In addition, we may be forced to pay higher wages or offer other benefits that might impact our cost of labor and thereby negatively impact our profitability.

Equipment failures or catastrophic loss at any of our manufacturing facilities could prevent us from manufacturing our products.

An interruption in production capabilities at any of our facilities due to equipment failure, catastrophic loss, or other reasons could result in our inability to manufacture products, which could severely affect delivery times, return or cancellation rates, and future sales, any of which could result in lower sales and earnings or the loss of customers. Although we have a disaster recovery plan in place, we currently have one plant which is the sole source for our insulating spacer business in the United States. If that plant were to experience a catastrophic loss and our disaster recovery plan were to fail, it could have a material adverse effect on our results of operations or financial condition.

Product liability claims and product replacements could harm our reputation, revenue generation and financial condition, or could result in costs related to litigation, warranty claims, or customer accommodations.

We have, on occasion, found flaws and deficiencies in the manufacturing, design, testing or installation of our products, which may result from a product defect, a defect in a component part provided by our suppliers, or as a result of the product being installed incorrectly by our customer or an end user. The failure of products before or after installation could result in litigation or claims by our customers or other users of the products, which may result in the need for us to expend legal fees or other related warranty coverage, settlement, or customer accommodation costs related to the replacement of products or the retrofitting of affected structures.

Risks Associated with Investment in Quanex Securities

Our corporate governance documents or the provisions of Delaware law may delay or preclude a business acquisition or divestiture that stockholders may consider to be favorable, which might result in a decrease in the value of our common shares.

Our certificate of incorporation and bylaws and Delaware law contain provisions that could make it more difficult for a third party to acquire us without the consent of our Board of Directors. These provisions include restrictions on the ability of our stockholders to remove directors and supermajority voting requirements for stockholders to amend our organizational documents, a classified Board of Directors, and limitations on action by our stockholders by written consent. Our Board has recently approved amendments to our Certificate of Incorporation that are designed to declassify director elections and lower our supermajority voting thresholds, and plans to present those amendments for stockholder approval at our 2016 annual meeting. However, those proposed changes might not be approved by our stockholders and, as such, the current classified Board structure and supermajority voting requirements may continue to apply in the future. In addition, our Board of Directors has the right to issue preferred stock without stockholder approval, which could be used to dilute the stock ownership of a potential hostile acquirer. Although we believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics, and thereby provide for an opportunity for us to receive a higher bid by requiring potential acquirers to negotiate with our Board of Directors, these provisions apply even if the offer may be considered beneficial by some stockholders.

We have the ability to issue additional equity securities, which would lead to dilution of our issued and outstanding common stock.

We are authorized to issue, without stockholder approval, 1,000,000 shares of preferred stock, no par value, in one or more series, which may give other stockholders dividend, conversion, voting, and liquidation rights, among other rights, which may be superior to the rights of holders of our common stock. The issuance of additional equity securities or securities convertible into equity securities would result in dilution of existing stockholders' equity interests. Our Board of Directors has no present intention to issue any such preferred shares, but has the right to do so in the future. In addition, we were authorized, by prior stockholder approval, to issue up to 125,000,000 shares of our common stock, $0.01 par value per share. These authorized shares can be issued, without stockholder approval, as securities convertible into either common stock or preferred stock.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

The following table lists our principal properties by location, general character and use as of October 31, 2015. These properties are owned by us, unless indicated otherwise.

We believe our operating properties are in good condition and well maintained, and are generally suitable and adequate to carry on our business. In fiscal 2015, our facilities operated at approximately 60% of capacity.

Item 3. Legal Proceedings.

From time to time, we, along with our subsidiaries, are party to various legal proceedings arising in the ordinary course of business. We reserve for litigation loss contingencies that are both probable and reasonably estimable. We do not expect that losses resulting from any current legal proceedings will have a material adverse effect on our consolidated financial statements if or when such losses are incurred.

For discussion of environmental issues, see Item 1 , "Business - Environmental and Employee Safety Matters" discussed elsewhere in this Annual Report on Form 10-K.

Item 4. Mine Safety Disclosures.

Not Applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock, $0.01 par value, has been listed on the New York Stock Exchange under the ticker symbol NX since April 24, 2008. The following table sets forth, for the periods indicated, the high and low sales price per share of our common stock as reported, and the quarterly cash dividend declared per share on our common stock.

The terms of our revolving credit agreement as of October 31, 2015 do not specifically limit the total amount of dividends or other distributions to our shareholders. Dividends and other distributions are permitted so long as after giving effect to such dividend or stock repurchase, there is no event of default.

There were approximately 2,415 holders of our common stock (excluding individual participants in securities positions listings) on record as of December 11, 2015.

Equity Compensation Plan Information

The following table summarizes certain information regarding equity compensation to our employees, officers and directors under equity compensation plans as of October 31, 2015:

Issuer Purchases of Equity Securities

On September 5, 2014, our Board of Directors approved a stock repurchase program authorizing us to use up to $75.0 million to repurchase shares of our common stock. During the year ended October 31, 2014, we purchased 1,316,326 shares at a cost of $24.2 million under this program. During the year ended October 31, 2015, we purchased an additional 2,675,903 shares at a cost of $50.8 million. From inception of the program, we purchased 3,992,229 shares at a cost of $75.0 million, an average price of $18.77 per share. This program is now closed and no additional purchases are being made thereunder.

Stock Performance Graph

The following chart represents a comparison of the five year total return of our common stock to the Standard & Poor's 500 Index (S&P 500), the Russell 2000 Index, and a peer group index selected by us, which includes companies offering similar products and services as ours. The companies included in the peer group are American Woodmark Corp, Apogee Enterprises Inc, Builders FirstSource Inc., Drew Industries Inc., Eagle Materials Inc., Gibraltar Industries Inc., Griffon Corp., Louisiana-Pacific Corp., Simpson Manufacturing Company Inc., Trex Company Inc., NCI Building Systems Inc., Nortek Inc., Ply Gem Holding Inc., and Universal Forest Products Inc.

Item 6. Selected Financial Data.

The following table presents selected historical consolidated financial and operating data for the periods shown. The selected consolidated financial data as of October 31, 2015, 2014, 2013, 2012 and 2011 and for each of the fiscal years then ended was derived from our audited consolidated financial statements for those dates and periods, adjusted for discontinued operations, as indicated. The following information should be read in conjunction with " Management's Discussion and Analysis of Financial Condition and Results of Operations " and our financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

(2) In April 2014, we sold Nichols to Aleris. Accordingly, the assets and liabilities of Nichols were reported as discontinued operations in the consolidated balance sheets for the applicable periods presented, and the related operating results are reported as discontinued operations in the consolidated statements of income (loss) presented, as applicable.

(3) In December 2012, we acquired substantially all the assets of Alumco, Inc. and its subsidiaries, a manufacturer of window screens, with multiple facilities within the United States. Alumco provided revenues of $49.1 million and a net loss of approximately $0.1 million for the period December 2012 through October 31, 2013.

(4) In November 2011, we announced a consolidation program for two of our insulating glass manufacturing facilities, whereby we closed a facility in Barbourville, Kentucky. This facility consolidation was completed ahead of schedule in August 2012. In fiscal 2012, we recorded expenses totaling $9.0 million ($5.9 million net of tax) related to this consolidation.

(5) In fiscal 2012, we experienced a strike at two of our Nichols facilities in Davenport, Iowa, which had a negative impact on income (loss) from discontinued operations, reducing operating income by approximately $11.1 million ($7.3 million net of tax), including a reduction in sales volume and incremental direct costs.

(6) In March 2011, we acquired Edgetech, I.G. Inc. and its German subsidiary. Headquartered in Cambridge, Ohio, Edgetech has three manufacturing facilities, one each in the United States, United Kingdom and Germany, that produced and marketed a full line of warm edge insulating glass spacer systems for window and door customers in North America and abroad. In addition, in March 2011, we acquired a small vinyl extrusion facility in Yakima, Washington. Accordingly, the estimated fair value of assets acquired in the acquisition and the results of operations were included in our consolidated financial statements as of the effective date of the acquisition.

(7) In fiscal 2011, we recognized an expense of $1.9 million ($1.1 million net of tax) to increase our warranty reserve associated with a discontinued legacy product and claims. In fiscal 2014, we decreased our warranty reserve and reduced expense by $2.8 million ($1.8 million net of tax) related to claims associated with this discontinued legacy product.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis contains forward-looking statements based on our current assumptions, expectations, estimates and projections about our business and the homebuilding industry, and therefore, it should be read in conjunction with our consolidated financial statements and related notes thereto, as well as "Cautionary Note Regarding Forward-Looking Statements" discussed elsewhere within this Annual Report on Form 10-K. For a listing of potential risks and uncertainties which impact our business and industry, see Item 1A, "Risk Factors." Actual results could differ from our expectations due to several factors which include, but are not limited to: market price and demand for our products, economic and competitive conditions, capital expenditures, new technology, regulatory changes and other uncertainties. Unless otherwise required by law, we undertake no obligation to publicly update any forward-looking statements, even if new information becomes available or other events occur in the future.

Our Business

We manufacture components primarily for the window and door (fenestration) industry, which include (1) energy-efficient flexible insulating glass spacers, (2) extruded vinyl profiles, (3) window and door screens, and (4) precision-formed metal and wood products for original equipment manufacturers (OEMs). In addition, we provide certain non-fenestration components and products, which include solar panel sealants, wood flooring, trim moldings, plastic decking, fencing, water retention barriers, hardware and conservatory roof components. In November 2015, we expanded our product offerings by acquiring a business that manufactures cabinet doors and other components for OEMs in the kitchen and bathroom cabinet industry. We use low-cost production processes and engineering expertise to provide our customers with specialized products for their specific window, door, wood flooring, and cabinet applications. We believe these capabilities provide us with unique competitive advantages. We serve a primary customer base in North America and the United Kingdom, and also serve customers in international markets through our operating plants in the United Kingdom and Germany, as well as through sales and marketing efforts in other countries.

We continue to invest in organic growth initiatives and have completed several targeted business acquisitions. We intend to continue to pursue business acquisitions which may include vertically integrated vinyl extrusion businesses, screen manufacturers, wood product or cabinet door manufacturers or businesses in complementary industries that allow us to expand our existing fenestration and wood product footprint, enhance our product offerings, provide new complementary technology, enhance our leadership position within the markets we serve, and expand into new markets or service lines.

We have two reportable business segments: (1) Engineered Products segment, comprised of four operating segments focused on the fenestration market, primarily within North America, and (2) International Extrusion segment, comprised solely of a United Kingdom-based vinyl extrusion business acquired on June 15, 2015. We are currently evaluating our reportable segment presentation with regard to the cabinet door business acquired in November 2015, and with regard to the International Extrusion segment and the presentation of our European fenestration business. The accounting policies of our operating segments are the same as those used to prepare our accompanying consolidated financial statements.

Subsequent Event

On November 2, 2015, we completed the merger of QWMS, Inc., a Delaware corporation which was a newly-formed and wholly-owned Quanex subsidiary, and WII Holding, Inc. (WII), a Delaware corporation. Upon satisfaction or waiver of conditions set forth in the merger agreement, QWMS, Inc. merged with and into WII, and WII became our wholly-owned subsidiary, through which we acquired all the subsidiaries of WII (referred to collectively as Woodcraft). Woodcraft is a manufacturer of cabinet doors and other components to OEMs in the kitchen and bathroom cabinet industry. Woodcraft operates 12 plants within the United States and one plant in Mexico. Woodcraft is a leader in outsourced doors and components to OEMs in the kitchen and bathroom cabinet industry. We believe Woodcraft operates under a similar business model as us by cultivating relationships with industry-leading OEMs and providing quality value-added products. This acquisition represents our entry into a new segment of the building products industry, which is experiencing favorable growth and which is less susceptible to the impact of seasonality due to inclement weather.

Recent Transactions

On June 15, 2015, we acquired the outstanding ownership shares of Flamstead Holdings Limited, an extruder of vinyl lineal products and manufacturer of other plastic products incorporated and registered in England and Wales, for $131.7 million in cash, net of cash acquired, $7.7 million of debt assumed and contingent consideration of $10.3 million, resulting in preliminary goodwill of approximately $61.5 million. Following a pre-sale reorganization and purchase, Flamstead Holdings Limited owned 100% of the ownership shares of the following subsidiaries: HL Plastics Limited, Vintage Windows Limited, Wegoma Machinery Sales Limited, and Liniar Limited (collectively referred to as "HLP"), and each registered in England and Wales. This acquisition is subject to an earn-out provision calculated as a percentage of EBITDA earned, as defined in the agreement, and permits the former owner to select the measurement periods as one of the three succeeding twelve-month periods ended July 31 (2016, 2017 or 2018). For purposes of the preliminary purchase price allocation, the earn-out has been calculated using a probability weighting and has been adjusted for the time-value of money, with greater weight given to the third (and final) twelve-month period (when the EBITDA measure is expected to be greatest). We believe that this acquisition expands our vinyl extrusion product offerings and expands our international presence in the global fenestration business.

On April 1, 2014, we sold our interest in a limited liability company which held the net assets of our Nichols Aluminum business (Nichols) to Aleris International, Inc. (Aleris), a privately held Delaware corporation which provides aluminum rolled products and extrusions, aluminum recycling and specification aluminum alloy production. We received net proceeds of $107.4 million, which includes a working capital adjustment of $2.6 million which we paid in June 2014, resulting in a gain on the transaction of $24.1 million, net of related taxes of $15.0 million. Our purchases of aluminum product from Nichols for the years ended October 31, 2015, 2014 and 2013 were $9.5 million, $14.9 million and $12.6 million, respectively.

Prior to the sale, Nichols was the sole operating segment included in our Aluminum Sheet Products reportable segment. Consistent with U.S. GAAP, we have recorded this business as a discontinued operation for all applicable periods presented, and reclassified the results of operations of Nichols into a single caption on the accompanying statements of income (loss) as "Income (Loss) from Discontinued Operations, net of Taxes."

In November 2013, Nichols experienced a fire at its Decatur, Alabama facility, which damaged a cold mill used to press aluminum sheeting to a desired thickness. The loss was insured, subject to a $0.5 million deductible. We capitalized $6.5 million to rebuild the asset, which was returned to service as of March 31, 2014. We incurred costs of $2.3 million associated with this loss, including an impairment of $0.5 million related to retirement of the asset, moving costs, outside service costs, clean-up and the deductible. We received insurance proceeds totaling $6.1 million, resulting in a recognized gain on involuntary conversion of $3.7 million.

In December 2013, we acquired certain vinyl extrusion assets of Atrium Windows and Doors, Inc. (Atrium) at a facility in Greenville, Texas, for $5.2 million in cash (Greenville). We accounted for this transaction as a business combination resulting in an insignificant gain on the purchase. We entered into a supply agreement with Atrium related to the products manufactured at Greenville. We believe this acquisition expanded our vinyl extrusion capacity and positioned us with a platform from which to better serve our customers in the southern United States.

Market Overview and Outlook

We believe the primary drivers of our operating results continue to be North American new home construction and residential remodeling and replacement (R&R) activity. We believe that housing starts and window shipments are indicators of activity levels in the home building and window industries, and we use this data, as published by or derived from third-party sources, to evaluate the market. We have historically evaluated the market using data from the National Association of Homebuilders (NAHB) with regard to housing starts, and published reports by Ducker Worldwide, LLC (Ducker), a consulting and research firm, with regard to window shipments. These sources generally provide information about activity levels in the United States.

Housing starts and window shipments in the United States have increased in recent years, although the rate of increase in 2015 has been slower than forecasted since the housing recovery began in 2010. The National Association of Homebuilders (NAHB) has forecasted calendar-year housing starts to increase from 1.1 million units in 2014 to 1.2 million units in 2015 and 1.3 million units in 2016, reflecting increasing consumer confidence and a healthier economy. Ducker indicated that window shipments in the R&R market are expected to increase from 26.8 million units in 2014 to 27.7 million units in 2015 and 29.1 million units in 2016, and new construction window shipments are forecasted to increase at a higher pace. Derived from reports published by Ducker, the overall growth in window shipments for the trailing twelve-month period ended September 30, 2015 was 6.5%. During this period, growth in new construction increased 9.9%, while growth in R&R activity increased 4.0%. Growth in new construction continues to outpace the growth in R&R, with a greater portion of the new construction growth associated with multi-family housing. While our analysis and market intelligence projects a continued steady recovery in the housing market, due to numerous

macroeconomic and demographic factors, we have a more conservative outlook on the growth and recovery of the market than NAHB and Ducker.

As a result of the acquisition of HLP in June 2015, our international presence has expanded. The HLP business is largely focused on the sale of vinyl house systems under the trade name "Liniar" to smaller window manufacturers in the United Kingdom. HLP is one of the larger providers of vinyl extruded product in the United Kingdom in terms of volume shipped. Similar to our domestic business, management evaluates the fenestration market in the United Kingdom based on published reports and forecasts in terms of housing starts in the public and private sectors and window shipments. Currently, the United Kingdom is experiencing a shortage in affordable housing, with rising demand due in part to a growing immigrant population. HLP's primary customers are smaller window fabricators, as opposed to the larger OEMs that comprise a large portion of the North American market. These manufacturers seek the perceived quality and technology of the specific products identified by the Liniar trade name. In addition, HLP services non-fenestration markets including the manufacture of roofing for conservatories, vinyl decking and vinyl water retention barriers used for landscaping. We believe there are growth opportunities within these markets in the United Kingdom and potential synergies which may enable us to sell complementary products.

Woodcraft manufactures kitchen and bathroom cabinet doors, amongst other products, using a variety of woods from traditional hardwoods to engineered wood products. Currently, Woodcraft sells all of its products in the United States, so domestic housing starts and R&R activity constitute the primary drivers of this business as well. Although NAHB forecasts indicate expected continued growth in the United States housing market, much of this anticipated growth is in new construction for multi-family dwellings, or rental properties, which is not the primary market for Woodcraft's products.

Changes in regulation of energy standards can impact our business. Regulators in the United States have not made significant changes to energy standards in recent years. Higher energy efficiency standards are being implemented in Europe, which should bode well for our fenestration-related business in the European markets that we serve. We continue to be optimistic about our growth prospects in Europe, particularly in the United Kingdom, Germany and Scandinavian countries, where the push for higher energy efficiency standards has been the strongest. Older technology cold-edge spacers are still a dominant force in these regions and garner a larger portion of the total market share in Europe relative to the United States. We operate warm-edge spacer plants in the United Kingdom and in Germany. We believe we can become the provider of choice as demand for more energy-efficient warm-edge spacers grows and eventually displaces cold-edge spacers.

The housing recovery continues to improve in the United States, but there remain challenges to growth prospects in the markets that we serve. In the United States, our growth is somewhat dependent upon the growth of our customers, particularly the national OEMs. If these customers lose market share or exert pricing pressure on us, our business may be negatively impacted. Furthermore, our growth can be impeded by the availability and pricing of critical raw materials, and our ability to pass this incremental cost to our customers through surcharges. We utilize several commodities in our business for which pricing can fluctuate, including polyvinyl resin (PVC), petroleum products, aluminum and wood. We typically include surcharges in our customer contracts which allow us to pass a portion of these price fluctuations onto our customers. However, these surcharges are negotiated with our customers and may not be fully effective in reducing our exposure to changing commodity prices. Although we benefit from lower commodity prices associated with these products used in our business, our customer contracts may require concessions if prices decline below a designated threshold, which has impacted our operating results during fiscal 2015.

Outside the United States, we continue to experience demand for our products in certain markets, such as Europe, Australia and Scandinavia, but less demand in other traditional markets, such as Canada. Conflict in Russia and Ukraine has impacted our spacer export business during 2015, and recovery of the global economy remains uncertain due to currency devaluations, political unrest and terror threats. These and other macro-economic factors have impacted the global financial markets, which may have contributed to significant changes in foreign currencies which have impacted our operating results during 2015.

We are optimistic about our growth prospects in the near-term. We believe the recent acquisitions of HLP and Woodcraft diversify our product offerings and provide new avenues to grow our business, while we continue to focus on enhancing manufacturing efficiencies and customer service in order to provide a quality, value-added product to our North American fenestration customers.

Comparison of the fiscal years ended October 31, 2015 and 2014

This table sets forth our consolidated results of operations for the twelve-month periods ended October 31, 2015 and 2014.

Our operating results for 2015 include the contribution of HLP for the period from the date of acquisition, June 15, 2015, through October 31, 2015. The following table presents our consolidated operating results for the year ended October 31, 2015 excluding the results of HLP:

Excluding the contribution of HLP, we experienced modest sales growth on a year-over-year basis. The year-over-year growth in window shipments as derived from preliminary data provided by Ducker for the twelve months ended September 30, 2015 was 6.5%. By comparison, our sales growth was 0.8%, as adjusted for certain foreign and other results to be more comparable to Ducker and excluding HLP. Our operations were impacted by the effects in foreign exchange rates and a decrease in revenue from oil surcharges and a planned decline in our vinyl profile business, as more fully described below. We expect our growth rates to converge with the Ducker growth rates during fiscal 2016. Our year-over-year results by reportable segment follows.

Changes Related to Operating Income by Reportable Segment:

Engineered Products

Net Sales . Net sales increased $7.9 million, or 1%, for the twelve months ended October 31, 2015 compared to the same period in 2014. On a year-over-year basis, we experienced an $8.6 million increase in sales attributable to favorable pricing and an additional $9.7 million increase in sales associated with an increase in volume. Although we experienced a decrease in volume associated with a large customer for our vinyl extrusion business, the decline was more than offset by the contribution of other customers and a general increase in activity levels in 2015 relative to 2014. However, these gains were partially offset by the unfavorable effect of changes in foreign exchange rates which reduced sales by $7.8 million, due to movements of the United States dollar during 2015 relative to the euro and British pounds sterling, as well as a decline in revenues of $3.2 million associated with an oil surcharge on our butyl-based products (offset by a decrease in the cost of this commodity, which minimized the impact to our operating margin).

Cost of Sales . The cost of sales was consistent for the twelve months ended October 31, 2015 and 2014. However, for 2014, the results included a benefit associated with a decrease in warranty accruals of $3.0 million, of which $2.8 million related to a warranty reserve reversal for a certain spacer product for which claim activity had ceased. Excluding this warranty reversal, cost of sales would have decreased $3.0 million, or 1%. Consistent with the net sales discussion above, cost of sales was impacted by changes in sales volume and the resulting impact on product mix. Excluding the warranty reversal, the overall decrease in cost of sales was primarily attributable to lower year-over-year repair and maintenance costs for our vinyl extrusion business, reduced material costs attributable to lower commodity prices and renegotiated supplier agreements, as well as some favorable labor efficiencies, partially offset by higher health insurance and workers' compensation insurance costs and increases in inventory reserves.

Selling, General and Administrative . Our selling, general and administrative expenses decreased by $2.1 million, or 4%, for the twelve months ended October 31, 2015 compared to the same period in 2014. The decrease in expense reflects selected headcount reductions and workforce realignments which occurred during 2014, resulting in severance accruals that did not recur in 2015.

Depreciation and Amortization . Depreciation and amortization expense decreased $0.2 million for the twelve months ended October 31, 2015 compared to the same period in 2014 as the incremental depreciation and amortization expense associated with property, plant and equipment and intangible assets placed into service during the trailing twelve months ended October 31, 2015, was offset by the run-off of depreciation expense associated with existing assets and disposals.

Asset Impairment Charges . We recorded an impairment loss of $0.5 million in April 2014 to reduce the value of a facility in Barbourville, Kentucky to market value as of April 30, 2014. This facility was subsequently sold in May 2014, resulting in an insignificant realized loss on the sale. No such impairment was incurred during the twelve months ended October 31, 2015.

Corporate & Other

Cost of Sales . Cost of sales for Corporate & Other consists of the elimination of inter-segment profit in inventory and changes in the LIFO reserve and other costs.

Selling, General and Administrative . Our selling, general and administrative expenses increased $3.4 million, or 14%, for the twelve months ended October 31, 2015 compared to the same period in 2014, due primarily to an increase in transaction fees of $5.1 million associated with the acquisitions of HLP and Woodcraft. Partially offsetting this increase in expense was a decrease in long-term incentive compensation which fluctuates due to changes in the price of our common stock, reduced headcount and lower deferred compensation costs, partially offset by an increase in health insurance costs and incentive accruals based on earnings.

Depreciation and Amortization . Depreciation and amortization expense decreased $1.8 million, or 58%, for the twelve months ended October 31, 2015 compared to the same period in 2014, reflecting the discontinuance of an ERP project in 2013, for which certain assets remained in use for several months during fiscal year 2014, and therefore provided depreciation expense in 2014 that did not recur in 2015, and reflecting the normal run-off of depreciation expense associated with other related computer software, hardware and licensing through January 2015.

Changes related to Non-Operating Items:

Interest Expense . Interest expense increased $0.4 million for the twelve-month period ended October 31, 2015 compared to the same period in 2014 due to a higher debt balance under our revolving credit facility. We borrowed $92.0 million in June 2015 to facilitate the acquisition of HLP, of which $42.0 million had been repaid as of October 31, 2015.

Other, net . The increase in other net expense of $0.6 million for the twelve months ended October 31, 2015 compared to the same period in 2014 was due primarily to net foreign exchange transaction losses, including a realized loss of $0.2 million associated with an unhedged foreign currency position with regard to the borrowings to fund the HLP transaction. The HLP entities were recapitalized in late 2015 in order to reduce our exposure to foreign currency rate changes.

Income Taxes . We recorded income tax expense of $7.6 million for the twelve months ended October 31, 2015, an effective rate of 32.6%, which included a discrete benefit of $0.8 million associated with the reversal of a liability for tax benefit associated with an uncertain tax position which stems from the 2008 spin-off of Quanex from a predecessor company. Excluding this discrete item, the effective tax rate would have been 36.0%. For the twelve months ended October 31, 2014, we recorded an income tax expense of $5.5 million, an effective rate of 39.6%, which included a discrete expense item of $0.7 million, net of tax, associated with the incorporation of a subsidiary in the United Kingdom. Excluding this discrete item, the effective tax rate would have been 34.9%. The remaining difference in the effective rates between these periods relates to the impact of the foreign tax rate differential and permanent items.

Income from Discontinued Operations, Net of Tax . During the twelve months ended October 31, 2015, we recorded a gain on involuntary conversion of $0.5 million, net of tax, associated with the receipt of insurance proceeds from a fire experienced by a Nichols facility in 2013. During the twelve months ended October 31, 2014, we recorded a gain on the sale of Nichols of $24.1 million, net of tax of $15.0 million as of April 1, 2014. Excluding this gain, we would have recorded a loss from discontinued operations during 2014 of $3.2 million. Of this amount, we recorded a loss of $5.1 million from operations for the period November 1, 2013 through April 1, 2014, reflecting relatively higher aluminum commodity prices resulting in lower throughput and lower volume, partially offset by the gain on involuntary conversion associated with the cold mill fire of $1.9 million, net of tax and impairment charge, received during 2014.

Comparison of the fiscal years ended October 31, 2014 and 2013

This table sets forth our consolidated results of operations for the twelve-month periods ended October 31, 2014 and 2013.

Window shipments, derived from preliminary data provided by Ducker for the year-over-year twelve-month periods ended September 30, 2014 and 2013, reflect an overall growth rate of 5.3% compared to a growth rate of 5.4% for our year-over-year results during the same period, as adjusted for certain foreign and other results, including pro forma results for Alumco for the period November 1, 2012 through the date of acquisition, December 31, 2012, to be more comparable to Ducker.

Changes Related to Operating Income (Loss) by Reportable Segment:

Engineered Products

Net Sales . Net sales increased $40.5 million, or 7%, for fiscal 2014 compared to fiscal 2013. The results for 2014 include incremental sales of $12.7 million associated with the Alumco business acquired in December 2012, reflecting a full year of activity in 2014 versus ten months of activity in 2013, as well as the effect of price increases during the latter half of 2014 and higher volume. We experienced higher sales volume for our insulating glass spacer products, including strong core United States sales, increased export sales, better-than-expected results for our solar product line, and favorable sales associated with the European operations, despite some challenges with customer returns and allowances in Europe. In addition, our window screen accessory products were in higher demand in 2014 resulting in favorable pricing, primarily for our wood products. Our vinyl profile product sales were favorably impacted by the volume associated with the Greenville asset acquisition in December 2013, as well as an increase from resin surcharges for a portion of our vinyl profiles as resin prices increased throughout 2014. Our vinyl profile product sales were unfavorably impacted by price concessions, contractual provisions in annual contracts that limit the amount of increased vinyl resin cost we can pass to customers, other pricing pressure and an increase in sales returns and allowances. Overall

improvement in the housing market in the United States is trending toward new construction of multi-family homes which generally contain lower-cost, less energy-efficient windows.

Cost of Sales . The increase in cost of sales of $45.1 million, or 11%, for fiscal 2014 compared to fiscal 2013 correlates to a 7% increase in net sales, as described above. The primary reason for the decrease in margin during 2014 was related to a series of increases in the cost of resin, a major raw material used in our vinyl products. We also experienced labor inefficiencies partially attributable to delays associated with new extrusion lines, higher repair and maintenance costs, and freight costs. These increases in cost were partially offset by favorable material price variances for butyl, a commodity used for our IG spacer products, as well as other material savings. We recorded a decrease in warranty accruals of $3.0 million, of which $2.8 million related to a warranty accrual for a specific customer which was settled in December 2013. Furthermore, we continue to evaluate our cost structure to reduce overhead and align our staffing needs to maximize efficiency.

Selling, General and Administrative . Our selling, general and administrative expenses were consistent in 2014 compared to 2013.

Depreciation and Amortization . Depreciation and amortization expense decreased $0.5 million, or 2%, for fiscal 2014 compared to fiscal 2013 primarily due to the incremental depreciation and amortization expense associated with the Alumco acquisition, which had a larger impact on fiscal 2013, as many of the assets acquired had a relatively short useful life assigned, and due to the normal run-off of fixed assets and intangible assets which became fully depreciated during these periods. Partially offsetting these decreases in depreciation and amortization expense was the expense associated with assets placed into service during fiscal 2014, including the Greenville assets acquired in December 2013.

Asset Impairment Charges . We recorded an impairment loss of $0.5 million in April 2014 associated with a facility in Barbourville, Kentucky. This facility was subsequently sold in May 2014, resulting in an insignificant realized loss on the sale.

Corporate & Other

Cost of Sales . Cost of sales for Corporate & Other consists of the elimination of inter-segment profit in inventory, changes in the LIFO reserve and other costs.

Selling, General and Administrative . Our selling, general and administrative expenses decreased $16.8 million, or 40%, for fiscal 2014 compared to fiscal 2013. Of this amount, $9.9 million represents the cost incurred in 2013 associated with our ERP implementation project which was ceased in August 2013. No such implementation costs were incurred for the comparative period in 2014. In addition, we reduced our headcount associated with the information technology structure that was originally built to support the ERP project; we streamlined our sales and marketing group; and we implemented selective headcount reductions. Costs associated with transaction fees totaled $0.5 million in 2014 compared to $1.0 million of such fees in 2013. Although our stock-based compensation expense declined year-over-year, this decline was offset by an increase in compensation cost associated with long-term incentive arrangements tied to the performance of our common stock. In addition, our incentive compensation costs increased in 2014 as a result of more favorable operating results year-over-year.

Depreciation and Amortization . Depreciation and amortization expense decreased $19.1 million, or 86%, for fiscal 2014 compared to fiscal 2013, primarily associated with the cessation of our ERP project in 2013. For the year ended October 31, 2013, we incurred incremental costs of $19.8 million of depreciation expense associated with the assets placed in service in conjunction with the ERP implementation. When the project ceased in August 2013, the remaining useful lives for the majority of the assets were accelerated to October 2013. Therefore, a relatively small amount of depreciation expense incurred in fiscal 2014 was associated with the ERP implementation effort.

Changes Related to Non-Operating Items:

Interest Expense . Interest expense decreased slightly during fiscal 2014 compared to fiscal 2013. During 2013, we borrowed $23.5 million to fund the Alumco acquisition and other working capital needs. This debt was retired within several months. No similar borrowings occurred during 2014.

Other, Net . Other, net expense was not significant during fiscal 2014 or fiscal 2013, and related primarily to net gains and losses on foreign currency exchange transactions and interest income.

Income Taxes . We recorded income tax expense associated with continuing operations of $5.5 million during fiscal 2014 compared to a tax benefit of $6.9 million during fiscal 2013. The change in tax expense was driven by the change in pre-tax income which totaled $13.8 million for the year ended October 31, 2014 compared to a pre-tax loss of $19.3 million for the year ended October 31, 2013, reflecting an effective tax rate of 39.6% and 35.7% for the respective years. Additional items impacting the effective rate were the foreign tax rate differential, the effect of permanent book-to-tax differences, return to actual results and a discrete item totaling $1.1 million in 2014 associated with the incorporation a branch in the United Kingdom as a subsidiary. In addition, we implemented certain tax strategies during 2014 which we believe will favorably reduce our effective rate in future periods, but had an unfavorable impact on the deferred tax rate for fiscal 2014.

Income from Discontinued Operations . We sold Nichols on April 1, 2014 and recorded a gain on the sale of $24.1 million, net of tax of $15.0 million. Excluding this gain, the loss from discontinued operations would have been a loss of $5.1 million for the period from November 1, 2013 (start of the fiscal year) through the date of sale, April 1, 2014, compared to income of $0.7 million for the year ended October 31, 2013. The results for Nichols prior to the sale in 2014 reflected the unfavorable impact of aluminum commodity prices, which contributed to lower throughput and lower volume, partially offset by the gain on involuntary conversion associated with the cold mill fire. The results for Nichols in 2013 include a full-year of activity.

Liquidity and Capital Resources

Overview

Historically, our principal sources of funds were cash on hand, cash flow from operations, and borrowings under our $150 million Senior Unsecured Revolving Credit Facility (the Credit Facility).  As of October 31, 2015 we had $23.1 million of cash and equivalents, $86.6 million available under the Credit Facility and outstanding letters of credit of $5.9 million, which included $50.0 million of borrowings outstanding under our Credit Facility and $6.9 million outstanding under capital leases and other debt vehicles.

On November 2, 2015, we acquired Woodcraft, a manufacturer of cabinet doors and other components supplying OEMs in the kitchen and bathroom cabinet industry, for which we paid $245.9 million in cash, net of cash acquired, subject to a working capital true-up and including certain holdbacks with regard to potential indemnity claims, as more fully described in the accompanying notes to consolidated financial statements (Note 22, "Subsequent Events"). We expect this acquisition to generate incremental earnings and cash flows for fiscal 2016.

In order to fund this acquisition, we entered into a commitment letter arrangement on August 30, 2015, with Wells Fargo Bank, National Association ("Wells Fargo") and Wells Fargo Securities, LLC, through which Wells Fargo committed to provide us with senior secured credit facilities of $410.0 million consisting of an asset-based lending (ABL) revolving credit facility of $100.0 million (for which the borrowing base would be determined monthly) and a term loan facility of $310.0 million. This facility was syndicated in October 2015, and a consortium of banks and investors agreed to provide the funding for this credit facility, with Wells Fargo as Administrative Agent. On November 2, 2015, we borrowed $310.0 million under the term loan facility and $10.5 million under the ABL facility to fund the Woodcraft acquisition, to refinance and retire outstanding debt of $50.0 million under our then-existing credit facility and to pay fees associated with the new credit facility. We may borrow funds under this facility in the future to pay transaction related costs and to fund other general working capital needs. We recorded an expense charge of $0.5 million in November 2015 to write off the unamortized deferred financing fees associated with our prior credit facility.

Cash and cash equivalents decreased by $97.3 million during the year ended October 31, 2015 due primarily to the acquisition of HLP, the purchase of treasury shares, use of capital to invest in our manufacturing facilities, payment of dividends to our shareholders and funding on-going operational activities.

Analysis of Cash Flow

The following table summarizes our cash flow results for the years ended October 31, 2015, 2014 and 2013:

Operating Activities

Cash provided by operating activities increased $46.3 million for the year ended October 31, 2015 compared to the year ended October 31, 2014. To a large extent, this year-over-year change is due to the sale of the Nichols business on April 1, 2014, for which we incurred an operating loss for five months in 2014, resulting in a net loss before the gain on the sale of the business in April 2014, with no comparable activity for fiscal year 2015. As permitted by GAAP, we combined the Nichols discontinued operations with our continuing operations for cash flow presentation, which resulted in significant changes in working capital items such as inventory, receivables and payables. In addition, the overall increase in operating cash flow in 2015 reflects higher net income, partially attributable to the contribution of HLP for the period from the date of acquisition, June 15, 2015 through October 31, 2015, and increased cash receipts associated with incremental sales. Other items impacting the operating cash flow during 2015 is our investment in inventory, funding of pension commitments and the timing associated with receivable collections and payables. We expect the Woodcraft acquisition to impact working capital, and to reduce the variability of operating cash flows between quarters as Woodcraft in general tends to experience less seasonality during the fiscal year. However, the increase in debt to fund the Woodcraft acquisition will increase our interest costs and have a negative impact on cash flow from operating activities.

Cash provided by operating activities decreased by $22.7 million for the year ended October 31, 2014 compared to the year ended October 31, 2013. As discussed above, a portion of this decrease is attributable to the Nichols business which was sold on April 1, 2014, for which there were five months of activity in 2014 compared to a full-year for 2013. The overall decline in operating cash flow also reflects an incremental investment in inventory, as management built inventory in preparation for the busy season in 2014, but the inventory build was in excess of the amount sold, a decrease in long-term liabilities as payments were made related to long-term incentive arrangements for a retired officer and due to changes in, and the timing of, receivable collections and payables. These decreases in operating cash flow in 2014 were partially offset by an increase in net income, driven by an increase in revenues which generated more cash receipts.

Working capital was $84.0 million, $186.2 million and $114.4 million as of October 31, 2015, 2014 and 2013, respectively. The primary driver of the change in working capital is the change in cash on hand, with a decrease in 2015 reflecting the use of cash to purchase HLP and to acquire our own treasury stock through our share repurchase program. The overall increase in cash for 2014 reflected the receipt of cash from the sale of Nichols.

Investing Activities

Cash used for investing activities totaled $160.1 million for 2015 and cash provided by investing activities totaled $74.1 million for 2014, a net decrease of $234.2 million. Of this amount, $131.7 million was used to acquire HLP in 2015 and $107.4 million was provided from the sale of Nichols in 2014, less a net decrease in investment in capital expenditures year-over-year of $3.8 million, and a net decrease in insurance proceeds of $3.5 million related to the cold mill fire at Nichols.

Cash provided by investing activities totaled $74.1 million for 2014 and cash used for investing activities totaled $59.7 million for 2013, a net change of $133.8 million. The primary driver of this increase was net proceeds of $107.4 million from the sale of Nichols, an incremental decrease in cash used for acquisitions and capital expenditures of $16.9 million and $4.2 million for these periods, respectively, and an increase in cash of $4.8 million for insurance proceeds related to the cold mill fire at Nichols.

At October 31, 2015, we had firm purchase commitments of approximately $3.7 million for the purchase or construction of capital assets. We plan to fund these capital expenditures through cash from operations.

Financing Activities

Cash used for financing activities declined $19.9 million in 2015 compared to 2014. For 2015, the net use of cash of $4.6 million resulted from an inflow of cash from net debt borrowings of $49.0 million and use of $52.7 million to purchase treasury shares, with a remaining change of $0.9 million attributable to other financing activities. For 2014, we used cash on hand to purchase treasury shares totaling $22.3 million with no significant borrowings under our credit facilities, thereby resulting in a net increase in cash flow from financing activities in 2015 relative to 2014. This use of cash in 2014 also contributed to the increase in cash used for financing activities when comparing 2014 and 2013. For the years ended October 31, 2015, 2014 and 2013, we paid dividends to our shareholders of $5.5 million, $6.0 million and $5.9 million, respectively, and received cash from the exercise of employee stock options totaling $5.1 million, $3.2 million and $2.6 million, respectively.

Liquidity Requirements

Our strategy for deploying cash is to invest in organic growth opportunities, develop our infrastructure and make strategic acquisitions. Other uses of cash include paying cash dividends to our shareholders and opportunistically repurchasing our common stock. We have historically invested cash and cash equivalents in commercial paper with terms of three months or less. Prior to April 2014, we invested in overnight money market funds. The funds were diversified by security type across Treasuries, Government Agencies and Prime Corporate. These funds were all AAA-rated, approved by the National Association of Insurance Commissioners and compliant with Rule 2A-7 of the Investment Company Act of 1940. Our investments are diversified across multiple institutions that we believe are financially sound. To the extent we have excess cash which has not been applied to reduce our outstanding borrowings under our credit facilities, we intend to remain in commercial paper, highly rated money market funds, financial institutions and treasuries following a prudent investment philosophy. From time to time, to prepare for potential disruption in the money markets, we may temporarily move funds into operating bank accounts of highly-rated financial institutions to meet on-going operational liquidity requirements. We did not experience any material losses on our cash and marketable securities investments during the years ended October 31, 2015 and 2014. We maintain cash balances in foreign countries which totaled $11.8 million and $3.0 million as of October 31, 2015 and 2014. We do not intend to repatriate earnings of our foreign subsidiaries. However, we have capitalized HLP with funds on hand and borrowings under our prior credit facility. We anticipate that we will utilize cash flow from HLP to fund the operation in the United Kingdom, to repay a note arrangement implemented as part of the initial capitalization of the acquisition, and to fund future equity distributions.

We believe that we have sufficient funds and adequate financial resources available to meet our anticipated liquidity needs. Our cash position has changed due to the acquisitions of HLP and Woodcraft. We expect to use our cash flow from operations and borrowings under our credit facilities to fund operations for the next twelve months and the foreseeable future. We believe these sources of funding should be adequate to provide for our working capital requirements, capital expenditures, and dividends, while continuing to meet our debt service requirements.

Senior Credit Facility

Prior to January 28, 2013, we maintained a $270.0 million senior unsecured revolving credit facility (the Retired Facility) which had been executed on April 23, 2008 and was scheduled to mature on April 23, 2013. The Retired Facility provided for up to $50.0 million of standby letters of credit, limited based on availability, as defined. Amounts borrowed under the facility were to bear interest at a spread above the London Interbank Borrowing Rate (LIBOR) based on a combined leverage and ratings grid. In addition, the Retired Facility contained restrictive debt covenants, as defined in the indenture, and contained certain limits on additional indebtedness, asset or equity sales and acquisitions. For the period from November 1, 2012 through January 28, 2013, we were in compliance with our debt covenants and did not borrow funds pursuant to the Retired Facility.

On January 28, 2013, we replaced the Retired Facility by entering into the Credit Facility, a new $150 million senior unsecured revolving credit facility that had a five-year term, maturing on January 28, 2018, and which permitted aggregate borrowings at any time of up to $150 million, with a letter of credit sub-facility, a swing line sub-facility and a multi-currency sub-facility. Borrowings denominated in United States dollars bore interest at a spread above LIBOR or a base rate derived from the prime rate. Foreign denominated borrowings bore interest at a spread above the LIBOR applicable to such currencies. Subject to customary conditions, we could have requested that the aggregate commitments under the Credit Facility be increased by up to $100 million, with total commitments not to exceed $250 million.

The Credit Facility required us to comply with certain financial covenants, the terms of which are defined therein. Specifically, we must not permit, on a quarterly basis, our ratio of consolidated EBITDA to consolidated interest expense as defined (Minimum Interest Coverage Ratio), to fall below 3.00:1 or our ratio of consolidated funded debt to consolidated EBITDA, as defined (Maximum Consolidated Leverage Ratio), to exceed 3.25:1. The Maximum Consolidated Leverage Ratio is the ratio of consolidated EBITDA to consolidated interest expense, in each case for the previous four consecutive fiscal quarters. EBITDA is defined by the indenture to include pro forma EBITDA of acquisitions and to exclude certain items such as goodwill and intangible asset impairments and certain other non-cash charges and non-recurring items. Subject to our compliance with the covenant requirements,

the amount available under the Credit Facility was a function of: (1) our trailing twelve month EBITDA; (2) the Minimum Interest Coverage Ratio and Maximum Consolidated Leverage Ratio allowed under the Credit Facility; and (3) the aggregate amount of our outstanding debt and letters of credit. As of October 31, 2015, we were in compliance with the financial covenants set forth in the Credit Facility, as indicated in the table below:

The Credit Facility also contained certain limitations on additional indebtedness, asset or equity sales and acquisitions. The payment of dividends and other distributions was permitted, provided there is no event of default after giving effect to such transactions. If the counterparties to the Credit Facility were unable to fulfill their commitments, the funds available to us could have been reduced.

As of October 31, 2015, the amount available to us for use under the Credit Facility was limited to $86.6 million and we had outstanding letters of credit of $5.9 million. For the twelve-month period ended October 31, 2014, we did not borrow any amount under the Credit Facility, and thus had no outstanding borrowings at October 31, 2014. The weighted average interest rate on outstanding borrowings during the year ended October 31, 2015 was 1.28%. Our borrowing rates under the Credit Facility were 3.50% and 1.45% for the swing line sub facility and the revolver, respectively, at October 31, 2015. Our borrowing rates under the Credit Facility were 3.25% and 1.20% for the swing line sub facility and the revolver, respectively, at October 31, 2014.

On November 2, 2015, we refinanced and retired the Credit Facility by entering into a $310.0 Million Term Loan Credit Agreement and a $100.0 million ABL Credit Agreement (collectively the "New Credit Facilities") with Wells Fargo, National Association, as Agent, and Bank of America, N.A. serving as Syndication Agent. The term loan portion of the New Credit Facilities matures on November 2, 2022, and requires quarterly principal payments equal to 0.25% of the aggregate borrowings. Interest is computed, at our election, based on a Base Rate plus applicable margin of 4.25%, or LIBOR plus applicable margin of 5.25% (with the stipulation that LIBOR cannot be less than 1%). In the event of default, outstanding borrowings will accrue interest at the Default Rate, as defined, which includes interest on outstanding borrowings at a per annum rate equal to 2% above the total per annum rate otherwise applicable. The term loan provides for incremental term loan commitments for a minimum principal amount of $25.0 million, up to an aggregate amount of $50.0 million, to the extent that such borrowings do not cause the Consolidated Senior Secured Leverage Ratio to exceed 3.00 to 1.00. The term loan agreement permits prepayment of the term loan of at least an aggregate amount of $5.0 million or any whole multiple of $1.0 million in excess thereof without penalty, except if such prepayment is made before November 2, 2016, we are subject to a fee equal to 1% of such prepayment. The ABL portion of the New Credit Facilities matures on November 2, 2020 with no stated principal repayment terms prior to maturity. Borrowing capacity and availability is determined based upon the dollar equivalent of certain working capital items, such as receivables and inventory, subject to eligibility as determined by Wells Fargo, National Association, as Administrative Agent, up to the facility maximum of $100.0 million. Interest is computed, at our election, on a grid as the Base Rate plus an Applicable Margin, as defined in the agreement, or LIBOR plus an Applicable Margin. The Applicable Margin is outlined in the following table:

With regard to the applicable margin calculation, Level I is applied for the period from November 2, 2015 to March 31, 2016.

In addition, the ABL portion of the New Credit Facility requires payment of a commitment fee (unused line fee) in accordance with the following table:

With regard to the unused line fee, Level II is applied for the period from November 2, 2015 to March 31, 2016.

The New Credit Facility contains restrictive debt covenants which include:

Furthermore, the New Credit Facility requires periodic reporting, as well as monthly borrowing base calculation pursuant to the ABL portion of the facility, and could restrict or limit our ability to engage in certain business activities such as: (1) future business acquisitions or liquidations; (2) incurring new indebtedness, liens or encumbrances; (3) merging or consolidating operations; (4) disposing of significant assets; (5) prepaying subordinated debt; (6) engaging in certain transactions with affiliates; or (7) modifying our incentive plans or governance documents, amongst other restrictions (including a limitation on annual dividend payments of $8.0 million).

Repurchases of Outstanding Securities

On September 5, 2014, our Board of Directors approved a stock repurchase program authorizing us to use up to $75.0 million to repurchase shares of our common stock. During the year ended October 31, 2014, we purchased 1,316,326 shares at a cost of $24.2 million under this program. During the year ended October 31, 2015, we purchased an additional 2,675,903 shares at a cost of $50.8 million. From inception of the program, we purchased 3,992,229 shares at a cost of $75.0 million, an average price of $18.77 per share. This program is now closed and no additional purchases are being made thereunder.

Contractual Obligations and Commercial Commitments

The following table summarizes our known contractual obligations and commitments as of October 31, 2015:

During fiscal 2016, we expect to contribute approximately $2.3 million to our pension plan to meet our 100% funding threshold and maintain minimum contribution requirements. Pension contributions beyond 2016 cannot be determined since the amount of any contribution is heavily dependent on the future economic environment and investment returns on pension plan assets. Obligations are based on current and projected obligations of the plans, performance of the plan assets, if applicable, and

any participant contributions. At October 31, 2015, we have recorded a long-term liability for deferred pension and postretirement benefits totaling $5.7 million. We believe the effect of the plans on liquidity is not significant to our overall financial condition.

Our supplemental benefit plan and deferred compensation plan liabilities fluctuate based on changes in the market value of certain equity securities, including our common stock. As of October 31, 2015, our liability under the supplemental benefit plan and the deferred compensation plan was approximately $1.7 million and $3.3 million, respectively.

The following table reflects other commercial commitments or potential cash outflows that may result from a contingent event.