Quanex reported tough news in recent weeks, starting with a drop in net sales in its second-quarter financial reporting. Net sales came in at $266.2 million for the three months ended April 30, marking a 2.7% decrease over the same period in 2023. Meanwhile, concerns arose about the company’s share price amid a deal to acquire Tyman PLC, the U.K.-based Morningstar Inc. reported. A Washington federal judge also rebuffed a motion to dismiss filed by the company in a lawsuit alleging it knowingly sold defective components for insulating glass units (IGU).

But the news wasn’t all bad. Net sales for the company’s North American Fenestration segment increased by 1.8%, primarily due to improved volume. The company also reported an increase in adjusted earnings following a decline in raw material costs and lower expenses for income tax and interest. To address concerns among Tyman shareholders over the acquisition, the company also tabled a revised deal with special dividends.

The Case at Hand

The Fifteen Twenty-One Avenue Condominium Association filed a suit in Washington Federal Court in late December 2023 against Viracon, a subsidiary of Apogee Enterprises Inc., Quanex and the Insulating Glass Certification Council (IGCC). In its case against Quanex, Fifteen Twenty-One alleges that the Texas-based component manufacturer conspired to violate the Washington Consumer Protection Act after allegedly selling defective IGU sealants to Viracon. The IGUs were installed in a 38-story luxury condominium at 1521 Second Avenue, Seattle. Fifteen Twenty-One argues that Quanex’s gray sealant lacked Carbon Black, which protects from the sun’s ultraviolet rays. Association officials said that a lack of Carbon Black contributed to dual-seal structural silicon degradation after long-term sun exposure. Nearly 8,000 window units failed, they said.

Fifteen Twenty-One alleges that Quanex was aware of the defective sealants and obtained a “false and misleading certification of quality” on every IGU by IGCC. The association claims that Quanex was aware of the defective sealants as early as 2008.

Quanex moved to dismiss the case in February 2024, arguing that Fifteen Twenty-One failed to provide enough evidence that it committed an intentional act. It also claimed that the Washington court lacked jurisdiction, since the company sold IGU components nationwide, not just in Washington.

In a dismissal filed June 25, United States district judge Barbara Rothstein said that while Quanex does sell IGU components nationwide, Washington consumers, who comprise a large volume of IGU purchasers, were directly impacted. Rothstein said that Quanex also failed to dispute Fifteen Twenty-Ones’ claims.

Sweetening the Deal

In April, Quanex announced it will acquire Tyman PLC, a London-based producer of fenestration components and access solutions (including U.S.-based subsidiaries AmesburyTruth, Lawrence and Bilco). With a cash and share value of approximately $1.1 billion, the deal gathers two major suppliers of the door and window industry.

The transaction is currently expected to become effective in the second half of 2024, subject to shareholder approval, regulatory approvals and customary conditions, but, according to Morningstar Inc., concerns over a decline in Quanex’s share price and adverse movement in the dollar to pound exchange rates “brought about discussions between the boards of both companies.” Both boards have since reached an agreement for Tyman investors to receive a special dividend as part of a revised offer.

Amid reporting the company’s second-quarter results, Quanex chairperson, president and CEO George Wilson said financial results came in “as expected and we continue to execute.” Wilson pointed to volumes in North America, which increased compared to the first quarter of the year, following what he identified as normal seasonality.

A 2.7% decrease in net sales was largely attributable to softer market demand in the company’s European Fenestration and North American Cabinet Components segments, officials reported.

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