-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MJ1+ULqBWy2h3IyXkuO09l08BThN7ipUjjBCkkWc9/WUlHQou2laBAr/V87Xpdb4 bO5cro9r3OaqM7IaAk1NAA== 0000950134-01-002124.txt : 20010315 0000950134-01-002124.hdr.sgml : 20010315 ACCESSION NUMBER: 0000950134-01-002124 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010131 FILED AS OF DATE: 20010314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NCI BUILDING SYSTEMS INC CENTRAL INDEX KEY: 0000883902 STANDARD INDUSTRIAL CLASSIFICATION: PREFABRICATED METAL BUILDINGS & COMPONENTS [3448] IRS NUMBER: 760127701 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14315 FILM NUMBER: 1568204 BUSINESS ADDRESS: STREET 1: 7301 FAIRVIEW CITY: HOUSTON TEXAS STATE: TX ZIP: 77041 BUSINESS PHONE: 7134667788 MAIL ADDRESS: STREET 1: 7301 FAIRVIEW STREET 2: P O BOX 40220 CITY: HOUSTON STATE: TX ZIP: 77041 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL COMPONENTS INCORPORATED DATE OF NAME CHANGE: 19600201 10-Q 1 d85013e10-q.txt FORM 10-Q FOR QUARTER ENDED JANUARY 31, 2001 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED: January 31, 2001 COMMISSION FILE NUMBER: 1-14315 NCI BUILDING SYSTEMS, INC. - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 76-0127701 - ---------------------------------------- ------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 10943 N. Sam Houston Parkway W. Houston, TX 77064 - ---------------------------------------- ------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(281) 897-7788 - -------------------------------------------------------------------------------- REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE - -------------------------------------------------------------------------------- FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT. 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 PERIODS 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 --- APPLICABLE ONLY TO CORPORATE ISSUERS INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICAL DATE. Common Stock, $.01 Par Value--18,098,196 shares as of February 28, 2001 2 NCI BUILDING SYSTEMS, INC. INDEX
PAGE NO. -------- PART 1. FINANCIAL STATEMENTS ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) Consolidated balance sheets 1 January 31, 2001 and October 31, 2000 Consolidated statements of income 2 Three months ended January 31, 2001 and 2000 Condensed consolidated statements of cash flows 3 Three months ended January 31, 2001 and 2000 Notes to condensed consolidated financial statements 4 - 6 January 31, 2001 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 - 10 PART 2. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K 11
3 NCI BUILDING SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
January 31, October 31, 2001 2000 ----------- ----------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 7,897 $ 2,999 Accounts receivable, net 98,378 119,368 Inventories 109,037 98,612 Deferred income taxes 4,986 4,986 Prepaid expenses 7,898 7,482 --------- --------- Total current assets 228,196 233,447 Property, plant and equipment, net 230,722 231,042 Excess of costs over fair value of acquired net assets 396,167 395,073 Other assets, primarily investment in joint ventures 19,902 20,358 --------- --------- Total assets $ 874,987 $ 879,920 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long term debt $ 44,047 $ 42,806 Accounts payable 49,860 74,400 Accrued compensation and benefits 15,436 21,383 Accrued income taxes 1,170 3,194 Other accrued expenses 16,370 26,007 --------- --------- Total current liabilities 126,883 167,790 --------- --------- Long-term debt, noncurrent portion 404,524 374,448 Deferred income taxes 23,559 23,574 Shareholders' equity: Common stock 186 186 Additional paid in capital 96,178 97,224 Retained earnings 235,754 231,754 Treasury stock (12,097) (15,056) --------- --------- Total shareholders' equity 320,021 314,108 --------- --------- Total liabilities and shareholders' equity $ 874,987 $ 879,920 ========= =========
See accompanying notes to condensed consolidated financial statements. -1- 4 NCI BUILDING SYSTEMS, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended January 31, 2001 2000 ----------- ----------- Sales $ 216,562 $ 232,052 Cost of sales 164,845 172,656 --------- --------- Gross profit 51,717 59,396 Operating expenses 36,217 35,183 --------- --------- Income from operations 15,500 24,213 Interest expense 9,494 9,249 Other income, net (611) (901) --------- --------- Income before income taxes 6,617 15,865 Provision for income taxes 2,617 6,867 --------- --------- Net income $ 4,000 $ 8,998 ========= ========= Income per common and common equivalent share: Basic $ .23 $ .49 ========= ========= Diluted $ .22 $ .48 ========= =========
See accompanying notes to condensed consolidated financial statements. -2- 5 NCI BUILDING SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Three Months Ended January 31, 2001 2000 ------------ ---------- Cash flows from operating activities: Income before extraordinary loss $ 4,000 $ 8,998 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 8,970 7,880 Gain on sale of fixed assets (4) (66) Provision for doubtful accounts 545 563 Deferred income tax benefit (15) (15) Changes in working capital: Current assets 9,518 (6,971) Current liabilities (42,195) (25,116) -------- -------- Net cash used in operating activities $(19,181) $(14,727) -------- -------- Cash flows from investing activities: Purchase of property, plant and equipment (3,746) (6,113) Acquisition of Midland Metals, Inc. (5,521) -- Other 1,007 2,378 -------- -------- Net cash used in investing activities (8,260) (3,735) -------- -------- Cash flows from financing activities: Proceeds from stock options exercise 1,341 182 Net borrowings on revolving lines of credit 41,318 24,587 Payments on long-term debt (10,000) (8,750) Purchase of treasury stock (320) (7,006) -------- -------- Net cash provided by financing activities 32,339 9,013 -------- -------- Net increase (decrease) in cash and cash equivalents $ 4,898 $ (9,449) ======== ========
See accompanying notes to condensed consolidated financial statements. -3- 6 NCI BUILDING SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JANUARY 31, 2001 NOTE 1 -- BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Certain prior year amounts have been reclassified to conform with the current year presentation. Operating results for the three-month period ended January 31, 2001 are not necessarily indicative of the results that may be expected for the fiscal year ended October 31, 2001. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2000 filed with the Securities and Exchange Commission. NOTE 2 -- INVENTORIES The components of inventory are as follows:
January 31, October 31, 2001 2000 ----------- ----------- (in thousands) Raw materials $ 78,559 $ 75,209 Work in process and finished goods 30,478 23,403 -------- -------- $109,037 $ 98,612 ======== ========
NOTE 3 - BUSINESS SEGMENTS The Company has divided its operations into two reportable segments: engineered building systems and metal building components, based on similarities in product lines, manufacturing processes, marketing and management of its businesses. Products of both segments are similar in basic raw materials used and manufacturing. The engineered building systems segment includes the manufacturing of structural framing and supplies value added engineering and drafting, which are typically not part of component products or services. The reporting segments follow the same accounting policies used for the Company's consolidated financial statements. Management evaluates a segment's performance based upon operating income. Intersegment sales are recorded based on prevailing market prices, and consist primarily of products and services provided to the engineered building systems segment by the metal building components segment, including painting and coating of hot rolled material. Information with respect to the segments is included in Management's Discussion and Analysis of Financial Condition and Results of Operations. -4- 7 NCI BUILDING SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JANUARY 31, 2001 NOTE 4 -- NET INCOME PER SHARE Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per common share considers the effect of common stock equivalents. The computations are as follows:
Three Months Ended January 31, 2001 2000 ---------- ----------- (in thousands, except per share data) Net income $ 4,000 $ 8,998 Add: Interest, net of tax on convertible debenture assumed converted 17 17 ------- ------- Adjusted net income $ 4,017 $ 9,015 ======= ======= Weighted average common shares outstanding 17,739 18,274 Add: Common stock equivalents Stock options 275 261 Convertible debentures 100 100 ------- ------- Weighted average common shares outstanding, assuming dilution 18,114 18,635 ======= ======= Income per common and common equivalent share: Basic $ .23 $ .49 ======= ======= Diluted $ .22 $ .48 ======= =======
NOTE 5 - ACQUISITIONS On March 31, 2000, the Company acquired its partner's 50% share of DOUBLECOTE, L.L.C., a metal coil coating business that it developed and previously owned jointly with Consolidated Systems, Inc., a privately held company. The transaction was valued at approximately $22.6 million, and was accounted for using the purchase method. The excess of cost over the fair value of the acquired assets was approximately $10 million. In December 2000, the Company bought substantially all of the assets of Midland Metals, Inc., an Iowa-based manufacturer of metal building components for $5.5 million in cash. NOTE 6 - OTHER ITEMS In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial Statements. SAB 101 provides guidance on applying generally accepted accounting principles to revenue recognition issues in financial statements. In June 2000, the SEC issued Staff Accounting Bulletin No. 101B ("SAB 101B"), Amendment: Revenue Recognition in Financial Statements. SAB 101B delays the implementation date of SAB 101 to the fourth fiscal quarter for registrants with fiscal years that begin after December 15, 1999. The Company will adopt SAB 101 as required in the fourth fiscal quarter of 2001 and is evaluating the effect that such adoption may have on its consolidated results of operations and financial position. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("FAS 133"), Accounting for Derivative Instruments and Hedging Activities. FAS 133, as amended, is effective for all fiscal years beginning after June 15, 2000. FAS 133 requires that all derivatives be recorded on the balance sheet at fair value. Changes in the fair value of derivatives is required to be recorded each period in current earnings or -5- 8 other comprehensive income, depending on whether a derivative is designated as part of a hedged transaction and the type of hedge transaction. The ineffective portion of all hedges is required to be recognized in earnings. NCI adopted FAS 133 effective November 1, 2000, and such adoption did not have a material effect on consolidated results of operations or financial position. -6- 9 NCI BUILDING SYSTEMS, INC. ITEM 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The Company's various product lines have been aggregated into two business segments: metal building components and engineered building systems. These aggregations are based on the similar nature of the products, distribution of products and management and reporting of those products within the Company. Both segments operate primarily in the nonresidential construction market. Sales and earnings are influenced by general economic conditions, the level of nonresidential construction activity, roof repair and retrofit demand and the availability and terms of financing available for construction. Products of both business segments are similar in basic raw materials used and manufacturing. Engineered building systems includes the manufacturing of structural framing and value added engineering and drafting, which are typically not part of component products or services. The Company believes it has one of the broadest product offerings of metal building products in the industry. Intersegment sales consist primarily of products and services provided to the engineered buildings segment by the components segment, including painting and coating of hot rolled material. This provides better customer service, shorter delivery time and minimizes transportation costs to the customer. During the quarter ended January 31, 2001, the Company reclassified administrative expenses incurred by corporate headquarters from identified reportable segments to corporate expenses for purposes of management reporting. Financial data for prior periods has been restated to conform to the current presentation.
THREE MONTHS ENDED THREE MONTHS ENDED JANUARY 31, 2001 JANUARY 31, 2000 ---------------------- ---------------------- % % ---------------------- ---------------------- SALES TO OUTSIDE CUSTOMERS: Engineered building systems .......... $ 74,973 35 $ 76,778 33 Metal building components ............ 141,589 65 155,274 67 Intersegment sales ................... 11,670 5 11,204 5 Corporate/eliminations ............... (11,670) (5) (11,204) (5) --------- --------- --------- --------- Total net sales ................. $ 216,562 100 $ 232,052 100 --------- --------- --------- --------- OPERATING INCOME: Engineered building systems .......... $ 9,372 13 $ 9,545 12 Metal building components ............ 12,657 9 20,910 13 Corporate/eliminations ............... (6,529) -- (6,242) -- --------- --------- --------- --------- Total operating income .......... $ 15,500 7 $ 24,213 10 --------- --------- --------- --------- TOTAL ASSETS: Engineered building systems .......... $ 86,609 10 $ 95,953 11 Metal building components ............ 385,523 44 358,150 42 Corporate/eliminations ............... 402,855 46 394,246 47 --------- --------- --------- --------- Total assets .................... $ 874,987 100 $ 848,349 100 --------- --------- --------- ---------
-7- 10 NCI BUILDING SYSTEMS, INC. THREE MONTHS ENDED JANUARY 31, 2001 COMPARED TO THREE MONTHS ENDED JANUARY 31, 2000 Consolidated sales for the quarter ended January 31, 2001 decreased by $15.5 million, or 6.7%, compared to the first quarter of fiscal 2000. Exceptionally poor weather conditions reduced construction activity this winter much more than normal, causing shipments in all aspects of the Company's business to be delayed. Weather conditions have been more severe than those experienced in the past four or five years. These conditions accounted for the bulk of the decline in sales for the first quarter. These conditions continued into February and will impact sales and earnings performance in the second quarter. Engineered Building Systems sales decreased by 2.4% in the first quarter compared to the prior year's first quarter. All divisions were impacted by weather related delays during the quarter. Based on published information, the decrease in sales was less than experienced by the Company's major competitors. Incoming orders for engineered building systems were 1.0% over the prior year and backlog at the end of the quarter was up 7.5%. Operating income of the engineered building systems segment declined in the first quarter of fiscal 2001 by 1.8% to $9.4 million compared to $9.5 million in the prior year's first quarter. The decrease in operating income was in line with the decrease in sales for the period. As a percent of sales, engineered building systems' operating income was 12.5% in the current quarter compared to 12.4% in the prior year. Metal Building Components sales decreased by 8.8% in the first quarter compared to the prior year's first quarter. The majority of this decline resulted from the more severe weather conditions being experienced this quarter compared to the prior year. Both the mini storage and rural sections of the components business were impacted by the unfavorable weather to a greater degree than other sections. Lower sales led to lower utilization of the coating plants and the severe weather resulted in lost production days in some mid-west and northern components plants, with resultant adverse impact on margins. Coupled with higher energy costs, primarily a doubling of natural gas costs in the first quarter, operating income of the building components segment declined by 39.5% in fiscal 2001 compared to fiscal 2000. As a percent of sales, operating income was 8.9% compared to 13.5% in the prior year's first quarter. Consolidated operating expenses, consisting of engineering and drafting, selling and administrative costs, increased to $36.2 million in the first quarter of fiscal 2001 compared to $35.2 million in fiscal 2000. This represented an increase of 2.9% compared to the sales decline of 6.7%. Due to seasonal factors, the first half of the fiscal year is historically not as strong as the second half and operating expense increases tend to be proportionally higher in the first half of the fiscal year. As a percent of sales, operating expenses were 16.7% in fiscal 2001 compared to 15.2% in fiscal 2000. Interest expense in fiscal 2001 increased to $9.5 million compared to $9.2 million in fiscal 2000. This increase resulted from a higher borrowing rate in fiscal 2001 compared to fiscal 2000 based on higher LIBOR and prime rates. -8- 11 LIQUIDITY AND CAPITAL RESOURCES As of January 31, 2001, the Company had working capital of $101.3 million compared to $65.7 million at the end of fiscal year 2000. The majority of this increase came from a reduction in current liabilities related to payments of year-end incentives, timing of trade accounts payable and income tax payments for fiscal year 2000. During the first quarter of fiscal 2001, the Company generated cash flow from operations before changes in working capital components of $13.5 million. This cash flow along with borrowing under the Company's senior revolving credit agreements of $31.3 million, was used to finance the $35.6 million increase in working capital, the $5.5 million acquisition of Midland Metals and capital expenditures of $3.7 million. Because of the seasonal nature of the Company's operations, working capital needs are generally funded by debt borrowing in the first half of the year with the majority of debt reduction occurring in the second half of the year as sales and income increase. The Company has a $240 million senior credit facility from banks which includes a $40 million 364 day facility that matures on April 30, 2001, unless renewed, and a $200 million revolver which matures on July 1, 2003. In addition, the Company has a term loan which matures on July 1, 2003 and requires quarterly payments of $10.0 million currently and gradually increasing to $12.5 million at maturity. As of January 31, 2001, the Company had $207.0 million outstanding under the revolving credit facility and had $115.0 million outstanding under the five-year term loan. Loans bear interest, at the Company's option, as follows: (1) base rate loans at the base rate plus a margin that ranges from 0% to 0.5% and (2) LIBOR loans at LIBOR plus a margin that ranges from 0.75% to 2.0%. Base rate is defined as the higher of Bank of America, N.A. prime rate or the overnight Federal Funds rate plus 0.5% and LIBOR is defined as the applicable London interbank offered rate adjusted for reserves. Based on its current ratios, the Company is paying a margin of 1.375% on LIBOR loans and 0% on base rate loans. The Company intends to request a one year extension of the maturity date of the 364-day revolver. If the 364-day revolver is not extended by the lenders, the Company has the option to convert it to a term note that would mature on July 1, 2003. Borrowing under the senior credit facility may be prepaid and the voluntary reduction of the unutilized portion of the five-year revolver may be made at any time, in certain amounts, without premium or penalty but subject to LIBOR breakage costs. The Company is required to make mandatory prepayments on the senior credit facility upon the occurrence of certain events, including the sale of assets and the issuance and sale of equity securities, in each case subject to certain limitations. In addition, the Company has $125 million of senior subordinated notes which mature on May 1, 2009. The notes bear interest at a rate of 9.25%. During the quarter, the Company spent $3.7 million for capital additions for plant expansions and capital replacements and betterments. In addition, the Company spent $5.5 million to acquire the assets and business of Midland Metals, Inc. The Company plans to spend approximately $15 million in capital additions in fiscal 2001, in addition to the Midland Metals, Inc. acquisition. Delays, changes or cancellations of planned projects could increase or decrease capital spending from the amounts anticipated at the current time. Inflation has not significantly affected the Company's financial position or operations. Metal components and engineered building systems sales are affected more by the availability of funds for construction than interest rates. No assurance can be given that inflation or interest rates will not fluctuate significantly, either or both of which could have an adverse effect on the Company's operations. -9- 12 Liquidity in future periods will be dependent on internally generated cash flows, the ability to obtain adequate financing for capital expenditures and expansion when needed, and the amount of increased working capital necessary to support expected growth. Based on current capitalization, it is expected that future cash flows from operations and the availability of alternative sources of external financing should be sufficient to provide adequate liquidity for the foreseeable future. MARKET RISK DISCLOSURE The Company is subject to market risk exposure related to changes in interest rates on its senior credit facility, which includes revolving credit notes and term notes. These instruments carry interest at a pre-agreed upon percentage point spread from either the prime interest rate or LIBOR. Under its senior credit facility, the Company may, at its option, fix the interest rate for certain borrowings based on a spread over LIBOR for 30 days to six months. At January 31, 2001, the Company had $322.0 million outstanding under its senior credit facility. Based on this balance, an immediate change of one percent in the interest rate would cause a change in interest expense of approximately $3.2 million on an annual basis. The Company's objective in maintaining these variable rate borrowings is the flexibility obtained regarding early repayment without penalties and lower overall cost as compared to fixed-rate borrowings. - -------------------------------------------------------------------------------- FORWARD LOOKING STATEMENTS This Form 10-Q contains forward-looking statements concerning the business and operations of the Company. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, these expectations and the related statements are subject to risks, uncertainties, and other factors that could cause the actual results to differ materially from those projected. These risks, uncertainties, and factors include, but are not limited to, industry cyclicality and seasonality, adverse weather conditions, fluctuations in customer demand and order patterns, raw material pricing, competitive activity and pricing pressure, the ability to make strategic acquisitions accretive to earnings, and general economic conditions affecting the construction industry as well as other risks detailed in the Company's filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended October 31, 2000. The Company expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any change in its expectations. -10- 13 NCI BUILDING SYSTEMS, INC. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS None (b) REPORTS ON FORM 8-K None -11- 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NCI BUILDING SYSTEMS, INC. -------------------------- (Registrant) Date: March 14, 2001 By: /s/ Robert J. Medlock ---------------------- Robert J. Medlock Executive Vice President and Chief Financial Officer -12- -----END PRIVACY-ENHANCED MESSAGE-----