EX-99.1 2 h49697exv99w1.htm PRESS RELEASE exv99w1
 

Exhibit 99.1
(NCI Logo)
Contact:   Norman C. Chambers
President & Chief Executive Officer
(281) 897-7788
NCI BUILDING SYSTEMS REPORTS THIRD-QUARTER EARNINGS OF $1.02 PER DILUTED SHARE AND
ADJUSTED EARNINGS OF $1.07 PER DILUTED SHARE
 
AFFIRMS FISCAL 2007 EARNINGS GUIDANCE IN RANGE OF
$3.30 TO $3.80 PER DILUTED SHARE
HOUSTON (September 4, 2007) — NCI Building Systems, Inc. (NYSE: NCS) today announced financial results for the third quarter and nine months ended July 29, 2007. Sales for the quarter were $433.8 million compared with $449.4 million for the third quarter of fiscal 2006. Net income for the third quarter of fiscal 2007 was $21.3 million, or $1.02 per diluted share, which included a $0.05 dilutive impact from NCI’s 2.125% Convertible Senior Subordinated Notes (the “Notes”). Excluding the impact of the Notes, adjusted net income per diluted share was $1.07. Net income for the third quarter of fiscal 2006 was $21.7 million, or $1.00 per diluted share, which included a $0.06 dilutive impact from the Notes.
     Sales increased to $1,160.9 million for the first nine months of fiscal 2007 from $1,072.0 million for the comparable period in fiscal 2006. Net income was $38.3 million, or $1.82 per diluted share, for the first nine months of fiscal 2007, which included a $0.10 dilutive impact from the Notes. For the first nine months of fiscal 2006, net income was $45.7 million, or $2.13 per diluted share, including a $0.11 dilutive impact from the Notes.
     Norm Chambers, President and Chief Executive Officer of NCI, remarked, “We are encouraged by our operating and financial results for the third quarter. Difficult industry conditions for much of the first half of fiscal 2007 improved toward the end of the second fiscal quarter and throughout the third fiscal quarter. While, in part, seasonal, the strength of this rebound supports McGraw-Hill’s expectation that nonresidential construction square footage for calendar 2007 will match calendar 2006. By driving a significant improvement in our third quarter results compared with our second quarter, it also supports our confidence in achieving our sales, margin and earnings goals for fiscal 2007.
     “The strengthening environment was reflected in a 21% sequential-quarter increase in third-party sales for our Metal Components business, which, because of short lead times, is more immediately affected by current industry conditions. Greater capacity utilization contributed to growth in the Components operating margin to 10% of sales for the third quarter from 7% for the second quarter, as well as an 85% sequential-quarter increase in operating income. Although we are pleased with the progress Components demonstrated toward our operating margin goal for
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10943 N. Sam Houston Parkway W. • Houston, Texas 77064
P.O. Box 692055 • Houston, Texas 77269-2055 • Telephone: (281) 897-7788 • Fax: (281) 477-9675

 

 

NCI Building Systems Reports Third-Quarter Results
Page 2
September 4, 2007
the fiscal year, the segment’s sales and margins, as anticipated, did not match those for the third quarter of fiscal 2006, which had the strongest low-rise, nonresidential construction activity in over four years.
     “NCI’s Engineered Buildings segment also benefited from firmer industry conditions during the third quarter. Having entered the quarter with a record backlog of $449 million, Buildings third-party sales increased 17% sequentially from the second quarter and 2% from the third quarter of fiscal 2006. In spite of this sales growth, strong quote activity during the quarter enabled us to expand our Buildings backlog to $453 million at the quarter’s end, compared with $436 million at the end of the third quarter of fiscal 2006.
     “The growth in Buildings sales drove an expansion in the segment’s operating margin to 13% from 7% for the second quarter. Compared with the 8% Buildings operating margin for the third quarter of fiscal 2006, our performance for the latest quarter also reflected greater synergies from the Robertson-Ceco (RCC) acquisition in April 2006.
     “The operating leverage potential in our Metal Coatings business was evident in the third quarter of fiscal 2007, as 13% sequential-quarter growth in total segment sales compared with the second quarter produced a 42% increase in operating income to 35% of sales from 28%. The RCC acquisition again had a positive impact on the Coatings segment, accounting for much of the 14% increase in intersegment sales and base-loading the segment’s manufacturing capacity. In addition, improved product mix within our third-party sales, which increased 12% sequentially, contributed to the expansion in operating margin versus both the second quarter of fiscal 2007 and the third quarter of fiscal 2006.”
     Based on the Company’s results for the first nine months of fiscal 2007, its record backlog and its outlook for the fourth quarter, NCI today affirmed its guidance for earnings per diluted share for the full fiscal year in a range of $3.30 to $3.80. This guidance excludes any potential share dilution related to NCI’s Notes, because that amount, if any, will be dependent upon the future price of the Company’s stock, and other extraordinary items resulting from the Company’s review of its business segments and manufacturing facilities. Key assumptions supporting this guidance include: stronger starts in nonresidential square footage for the second half of fiscal 2007 so that total new square footage for the full fiscal year is flat with fiscal 2006; a 4% increase in NCI’s tons shipped for the fiscal year; steel prices for the fiscal year that are broadly consistent with the end of fiscal 2006; and an income tax rate for the fiscal year of approximately 39.7%. Based on this guidance, NCI also today established its guidance for earnings per diluted share for the fourth quarter of fiscal 2007 in a range of $1.38 to $1.88, excluding any potential share dilution related to the Notes.
     Mr. Chambers concluded, “While we recognize that the turmoil in the credit markets could yet have an impact on nonresidential construction, industry momentum has remained firm as reflected in our backlog and ongoing quote activity. In addition, we are continuing our initiatives to reduce selling, general and administrative expense, now by approximately $30 million from our beginning budget for the fiscal year. As we approach the end of fiscal 2007, we are also making further progress in our efforts to complete the migration of RCC’s engineering systems to NCI, scheduled for fiscal 2008, which will then position us to expand our ‘hub and
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NCI Building Systems Reports Third-Quarter Results
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September 4, 2007
spoke’ delivery system throughout our network of 44 manufacturing facilities. As a result, we remain confident of the long-term growth potential inherent in our position of market leadership, and we expect our performance to continue outpacing the overall nonresidential construction industry.”
     NCI will provide an online, real-time webcast and rebroadcast of its conference call tomorrow to discuss this announcement. The live broadcast of this conference call will be available online at www.ncilp.com or www.earnings.com beginning at 10:30 a.m. (Eastern Time) on Wednesday, September 5, 2007. The online replay will be available at approximately 12:30 p.m. (Eastern Time) and continue for one week.
     This release contains forward-looking statements concerning NCI’s business and operations and industry conditions, including among others industry trends, steel pricing, growth expectations and margin expansion. These statements and other statements identified by words such as “guidance,” “potential,” “expect,” “should” and similar expressions are forward looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties that may cause NCI’s actual performance to differ materially from that projected in such statements. Among the factors that could cause actual results to differ materially are the possibility that the anticipated benefits from the RCC acquisition cannot be fully realized; the possibility that costs or difficulties related to the integration of the RCC operations into the Company’s operations will be greater than expected; industry cyclicality and seasonality; fluctuations in demand and prices for steel; the financial condition of NCI’s raw material suppliers; competitive activity and pricing pressure; ability to execute NCI’s acquisition strategy; and general economic conditions affecting the construction industry. Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended October 29, 2006, identifies other important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements. NCI expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any changes in its expectations.
     NCI Building Systems, Inc. is one of North America’s largest integrated manufacturers of metal products for the nonresidential building industry. The Company operates 44 manufacturing and distribution facilities located in 18 states, as well as Mexico and Canada.
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NCI Building Systems Reports Third-Quarter Results
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September 4, 2007
NCI BUILDING SYSTEMS, INC.
STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
                                 
    For the Three Months Ended     For the Nine Months Ended  
    July 29,     July 30,     July 29,     July 30,  
    2007     2006     2007     2006  
Sales
   $ 433,844     $ 449,393     $ 1,160,874     $ 1,072,007  
Cost of sales
     324,053       335,731       878,009       810,386  
 
                        
Gross profit
     109,791       113,662       282,865       261,621  
 
     25.3 %     25.3 %     24.4 %     24.4 %
 
                                
Selling, general and administrative expenses
     67,781       72,187       199,530       175,574  
 
                        
Income from operations
     42,010       41,475       83,335       86,047  
 
                                
Interest income
     7       799       246       4,806  
Interest expense
     (7,206 )     (8,026 )     (21,918 )     (17,627 )
Other income, net
     362       82       1,411       614  
 
                        
 
                                
Income before income taxes
     35,173       34,330       63,074       73,840  
Provision for income taxes
     13,846       12,655       24,783       28,093  
 
                        
 
     39.4 %     36.9 %     39.3 %     38.0 %
 
                                
Net income
   $ 21,327     $ 21,675     $ 38,291     $ 45,747  
 
                        
 
                                
Net income per share:
                                
Basic
   $ 1.09     $ 1.08     $ 1.95     $ 2.28  
Diluted
   $ 1.02     $ 1.00     $ 1.82     $ 2.13  
 
                                
Average shares outstanding:
                                
Basic
     19,655       20,065       19,661       20,079  
Diluted
     20,881       21,718       21,022       21,479  
 
                                
Depreciation/amortization expense
     9,519       8,767       26,021       22,183  
 
                                
Increase (decrease) in sales
     -3.5 %             8.3 %        
 
                                
Increase (decrease) in diluted earnings per share
     2.0 %             -14.6 %        
 
                                
Gross profit percentage
     25.3 %     25.3 %     24.4 %     24.4 %
 
                                
Selling, general and administrative expenses percentage
     15.6 %     16.1 %     17.2 %     16.4 %
 
                                
Income from operations percentage
     9.7 %     9.2 %     7.2 %     8.0 %
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NCI Building Systems Reports Third-Quarter Results
Page 5
September 4, 2007
NCI BUILDING SYSTEMS, INC.
CONDENSED BALANCE SHEETS
(In thousands)
                 
    July 29,     October 29,  
    2007     2006  
    (Unaudited)          
ASSETS
                
Cash and cash equivalents
   $ 7,454     $ 25,038  
Accounts receivable, net
     145,473       163,814  
Inventories
     170,290       160,208  
Deferred income taxes
     22,980       22,864  
Prepaid expenses and other
     13,014       11,054  
 
            
Total current assets
     359,211       382,978  
 
            
 
                
Property and equipment, net
     268,933       252,580  
 
                
Goodwill
     616,384       614,461  
Other assets
     55,962       54,224  
 
            
Total assets
   $ 1,300,490     $ 1,304,243  
 
            
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current portion of long-term debt
   $ 934     $ 947  
Accounts payable
     98,687       116,028  
Accrued expenses
     109,548       133,937  
 
            
Total current liabilities
     209,169       250,912  
 
            
 
                
Long-term debt
     496,340       497,037  
Deferred income taxes
     51,492       52,168  
Other long-term liabilities
     5,046       5,717  
 
                
Shareholders’ equity
     538,443       498,409  
 
            
Total liabilities and shareholders’ equity
   $ 1,300,490     $ 1,304,243  
 
            
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NCI Building Systems Reports Third-Quarter Results
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September 4, 2007
NCI BUILDING SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
                 
    For the Nine Months Ended  
    July 29, 2007     July 30, 2006  
Net cash provided by operating activities
     42,725       54,544  
 
            
 
                
Cash flows from investing activities:
                
Acquisitions, net of cash acquired
     (18,859 )     (366,490 )
Capital expenditures
     (33,440 )     (19,364 )
Other
     (401 )     (203 )
 
            
 
                
Net cash used in investing activities
     (52,700 )     (386,057 )
 
            
 
                
Cash flows from financing activities:
                
Payments on revolving line of credit
     (90,500 )     —  
Borrowings on revolving line of credit
     90,500       —  
Issuance of long-term debt
     —       200,000  
Payments on long-term debt
     (710 )     (2,264 )
Proceeds from stock option exercises
     3,787       5,492  
Excess tax benefits from stock-based compensation arrangements
     1,459       3,361  
Payment of financing costs
     (75 )     (594 )
Purchase of treasury stock
     (12,286 )     (17,580 )
 
            
 
                
Net cash provided (used in) by financing activities
     (7,825 )     188,415  
 
            
 
                
Effect of exchange rate changes on cash and cash equivalents
     216       126  
 
            
 
                
Net decrease in cash
     (17,584 )     (142,972 )
 
                
Cash at beginning of period
     25,038       200,716  
 
            
 
                
Cash at end of period
   $ 7,454     $ 57,744  
 
            
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NCI Building Systems Reports Third-Quarter Results
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September 4, 2007
NCI Building Systems, Inc.
Business Segments
(Unaudited)
(In thousands)
                                                 
    Three Months Ended   Three Months Ended   $   %
    July 29, 2007   July 30, 2006   Inc/(Dec)   Change
 
           % of           % of                
 
           Total           Total                
Sales:
           Sales           Sales                
Metal components
   $ 193,140       44     $ 206,270       46     $ (13,130 )     -6.4 %
Engineered building systems
     256,086       59       250,907       55       5,179       2.1 %
Metal coil coating
     72,275       17       74,813       17       (2,538 )     -3.4 %
Intersegment sales
     (87,657 )     (20 )     (82,597 )     (18 )     (5,060 )     6.1 %
     
Total net sales
   $ 433,844       100     $ 449,393       100     $ (15,549 )     -3.5 %
     
 
                                                
 
           % of           % of                
Operating income:
           Sales           Sales                
Metal components
   $ 16,852       9     $ 28,663       14     $ (11,811 )     -41.2 %
Engineered building systems
     30,639       12       19,396       8       11,243       58.0 %
Metal coil coating
     8,166       11       8,435       11       (269 )     -3.2 %
Corporate
     (13,647 )     —       (15,019 )     —       1,372       9.1 %
                                     
Total operating income (% of sales)
   $ 42,010       10     $ 41,475       9     $ 535       1.3 %
                                     
                                                 
    Nine Months Ended     Nine Months Ended     $     %  
    July 29, 2007     July 30, 2006     Inc/(Dec)     Change  
 
           % of           % of                
 
           Total           Total                
Sales:
           Sales           Sales                
Metal components
   $ 511,257       44     $ 555,167       52     $ (43,910 )     -7.9 %
Engineered building systems
     692,393       60       524,221       48       168,172       32.1 %
Metal coil coating
     195,338       17       199,169       19       (3,831 )     -1.9 %
Intersegment sales
     (238,114 )     (21 )     (206,550 )     (19 )     (31,564 )     15.3 %
     
Total net sales
   $ 1,160,874       100     $ 1,072,007       100     $ 88,867       8.3 %
     
 
                                                
 
           % of           % of                
Operating income:
           Sales           Sales                
Metal components
   $ 38,060       7     $ 68,203       12     $ (30,143 )     -44.2 %
Engineered building systems
     66,682       10       39,386       8       27,296       69.3 %
Metal coil coating
     18,570       10       18,421       9       149       0.8 %
Corporate
     (39,977 )     —       (39,963 )     —       (14 )     0.0 %
                                 
Total operating income (% of sales)
   $ 83,335       7     $ 86,047       8     $ (2,712 )     -3.2 %
                                 

 

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NCI Building Systems Reports Third-Quarter Results
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September 4, 2007
NCI BUILDING SYSTEMS, INC.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
COMPUTATION OF EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION,
AMORTIZATION AND OTHER NONCASH ITEMS (“ADJUSTED EBITDA”)
(Unaudited)
(In thousands)
                 
    Trailing 12 Months  
    July 29,     July 30,  
    2007     2006  
Net income
   $ 66,341     $ 65,555  
Add:
                
Provision for income taxes
     41,926       43,784  
Interest expense
     28,978       21,071  
Depreciation and amortization
     34,074       27,970  
Non-cash FAS 123(R)
     7,427       7,327  
 
            
 
                
Adjusted EBITDA (1)
   $ 178,746     $ 165,707  
 
            
 
(1)   The Company discloses adjusted EBITDA, which is a non-GAAP measure, because it is a widely accepted financial indicator in the metal construction industry of a company’s profitability, ability to finance its operations, and meet its growth plans. This measure is also used by NCI internally to make acquisition and investment decisions. Adjusted EBITDA is calculated based on the terms contained in the Company’s credit agreement at the respective dates presented herein. Results of operations of businesses acquired are included in this measure for periods subsequent to the acquisition and are not included on a pro forma basis. Adjusted EBITDA should not be considered in isolation or as a substitute for net income determined in accordance with generally accepted accounting principles in the United States.
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NCI Building Systems Reports Third-Quarter Results
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September 4, 2007
NCI BUILDING SYSTEMS, INC.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
“ADJUSTED” EARNINGS PER SHARE COMPARISON
(Unaudited)
                 
    Fiscal Three Months Ended
    July 29,   July 30,
    2007   2006
Earnings per diluted share, GAAP basis
   $ 1.02     $ 1.00  
Effect of convertible notes
     0.05 (1)     0.06 (1)
 
                
“Adjusted” diluted earnings per share (A)
   $ 1.07     $ 1.06  
 
                
                 
    Fiscal Nine Months Ended
    July 29,   July 30,
    2007   2006
Earnings per diluted share, GAAP basis
   $ 1.82     $ 2.13  
Effect of convertible notes
     0.10 (1)     0.11 (1)
 
                
“Adjusted” diluted earnings per share (A)
   $ 1.92     $ 2.24  
 
                
     
(A)
  The Company discloses a tabular comparison of “Adjusted” earnings per diluted share, which is a non-GAAP measure because it is referred to in the text of our press releases and is instrumental in comparing the results from period to period. “Adjusted” earnings per share should not be considered in isolation or as a substitute for earnings per share as reported on the face of our statement of income.
 
    
(1)
  Dilutive impact for the three months ended July 29, 2007 and July 30, 2006 of 926,055 shares and 1,291,306 shares, respectively, and for the nine months ended July 29, 2007 and July 30, 2006 of 1,046,274 shares and 1,052,247 shares, respectively, of the Company’s convertible notes as if they were converted during the period.
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NCI Building Systems Reports Third-Quarter Results
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September 4, 2007
NCI Building Systems, Inc.
Reconciliation of Segment Sales to Third Party Segment Sales
(Unaudited)
(In thousands)
                                                                                                 
                                            %   YTD           YTD                   %
    3rd Qtr 2007           3rd Qtr 2006           Inc/(Dec)   Change   3rd Qtr 2007           3rd Qtr 2006           Inc/(Dec)   Change
Metal Components                                                                                        
Total Sales
     193,140       37 %     206,270       39 %     (13,130 )     -6 %     511,257       37 %     555,167       43 %     (43,910 )     -8 %
Intersegment
     (26,849 )             (25,055 )             (1,794 )     7 %     (73,063 )             (68,616 )             (4,447 )     6 %
 
                                                                                                
Third Party Sales
     166,291       38 %     181,215       40 %     (14,924 )     -8 %     438,194       38 %     486,551       46 %     (48,357 )     -10 %
 
                                                                                                
Operating Income
     16,852       10 %     28,663       16 %     (11,811 )     -41 %     38,060       9 %     68,203       14 %     (30,143 )     -44 %
 
                                                                                                
Engineered Building Systems
                                                                                                
Total
     256,086       49 %     250,907       47 %     5,179       2 %     692,393       49 %     524,221       41 %     168,172       32 %
Intersegment
     (11,795 )             (11,346 )             (449 )     4 %     (30,231 )             (29,290 )             (941 )     3 %
 
                                                                                                
Third Party Sales
     244,291       56 %     239,561       54 %     4,730       2 %     662,162       57 %     494,931       46 %     167,231       34 %
 
                                                                                                
Operating Income
     30,639       13 %     19,396       8 %     11,243       58 %     66,682       10 %     39,386       8 %     27,296       69 %
 
                                                                                                
Metal Coil Coating                                                                                        
Total
     72,275       14 %     74,813       14 %     (2,538 )     -3 %     195,338       14 %     199,169       16 %     (3,831 )     -2 %
Intersegment
     (49,013 )             (46,196 )             (2,817 )     6 %     (134,820 )             (108,644 )             (26,176 )     24 %
 
                                                                                                
Third Party Sales
     23,262       6 %     28,617       6 %     (5,355 )     -19 %     60,518       5 %     90,525       8 %     (30,007 )     -33 %
 
                                                                                                
Operating Income
     8,166       35 %     8,435       29 %     (269 )     -3 %     18,570       31 %     18,421       20 %     149       1 %
 
                                                                                                
Consolidated                                                                                        
Total
     521,501       100 %     531,990       100 %     (10,489 )     -2 %     1,398,988       100 %     1,278,557       100 %     120,431       9 %
Intersegment
     (87,657 )             (82,597 )             (5,060 )     6 %     (238,114 )             (206,550 )             (31,564 )     15 %
 
                                                                                                
Third Party Sales
     433,844       100 %     449,393       100 %     (15,549 )     -3 %     1,160,874       100 %     1,072,007       100 %     88,867       8 %
 
                                                                                                
Operating Income
     42,010       10 %     41,475       9 %     535       1 %     83,335       7 %     86,047       8 %     (2,712 )     -3 %

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