NCI Building Systems Reports First Quarter Fiscal 2013 Results

-- Revenues Increased 22.2% to $298 Million --

-- Adjusted EBITDA was $13.4 Million --

-- Backlog Increased 17% to $260 Million --

-- More Favorable Mix to Drive Improved Sequential Adjusted EBITDA Performance in the Second Quarter --

-- Second Half 2013 Profitability to Benefit from Investments in Gross Margin Expansion --

HOUSTON, March 5, 2013/PRNewswire/ -- NCI Building Systems, Inc. (NYSE: NCS) today reported financial results for the first quarter ended January 27, 2013.

First Quarter 2013 Financial Results

“First quarter results were mixed as the impact of previously-disclosed items together with investments made in manufacturing capabilities resulted in a net loss for our seasonally weak first quarter. Revenue growth in the period was driven by mid-single-digit improvements in the organic performance of our Components and Buildings groups and the benefits of our June 2012 Metl-Span acquisition. Customer demand from end markets including retail, commercial, warehouses and industrial improved year-over-year. Gross profit increased 13.5% year-on-year, however gross profit margin declined 156 bps, primarily as a result of three factors: the mix of projects shipped by our Buildings group, which included a large proportion of lower-margin structural products; the additional costs associated with the ramp-up of the new Middletown, Ohio plant; and our decision to retain and train skilled manufacturing workers in order to capture additional efficiencies in the seasonally stronger second half of the fiscal year. While the latter reduced first quarter profitability and will impact the second quarter, although to a lesser extent, we believe it will strengthen the Buildings group’s positioning as a leader in quality, efficiency and shorter lead times,” commented Norman C. Chambers, Chairman, President and Chief Executive Officer.

“Our Buildings group’s backlog at the end of the quarter reached $260 million, up 17% year-over-year. Overall booking trends were similar to the levels achieved in last year’s first quarter, which had increased 16% over the comparable fiscal 2011 period. In addition, we have seen improved pricing coincident with first quarter booking trends,” Mr. Chambers said.

For the first quarter, sales were $297.6 million, up 22.2% from the $243.6 million reported in last year's first quarter. Gross profit increased 13.5% to $60.9 million from $53.6 million, but gross profit margin declined to 20.5% from 22.0% in the year-ago first quarter.

Engineering, selling, general and administrative expenses were $60.5 million up from $48.9 million, primarily as a result of our Metl-Span acquisition. As a percentage of revenues, however, ESG&A remained relatively constant at 20.3% in this year’s first quarter compared to 20.1% last year. The Company reported an adjusted operating profit of $0.4 million compared to an adjusted operating profit of $4.7 million in the similar 2012 period. Adjusted EBITDA, defined as earnings before interest, taxes, depreciation and amortization, and cash and other non-cash items, in accordance with the Company's bank credit agreement, was $13.4 million compared to $12.8 million in last year's first quarter.

For the first quarter of 2013, the Company reported a net loss of $3.6 million. In last year's first quarter, the Company reported net income of $0.6 million, but incurred a net loss applicable to common shares of $10.0 million, which included the accrual of preferred stock dividends and accretion of $6.6 million and a non-cash beneficial conversion feature charge of $4.0 million.

The net loss per diluted common share was $0.19 for the 2013 first quarter. This compares to an adjusted net loss per diluted common share of $0.31 and a reported net loss per diluted common share of $0.54 in last year's first quarter. The weighted average number of common shares used in the calculation of first quarter 2013 per share amounts was 19.2 million compared to 18.7 million last year.

Inventory levels increased 11.5% over the same period of the prior year to $113.8 million, mostly due to the acquisition of Metl-Span. Annualized inventory turnover was 8.5 turns for the first quarter compared to 7.9 turns in last year’s first quarter and 10.1 turns in the fourth quarter of fiscal 2012.

Capital expenditures were $6.1 million which included the refurbishment of our Middletown Ohio coating facility which became operational during the quarter. Net cash used in operating activities was $13.2 million, consistent with our normal seasonal working capital and cash flow cycle.

First Quarter Segment Performance

The Company reported operating income of $0.4 million, compared to operating income of $4.3 million in last year’s first quarter.

The strongest performer in the first quarter was the Components group, which produced a 56.4% increase in third-party revenues driven by the acquisition of Metl-Span and modest organic growth. Operating income increased 9.6% year-over-year as higher margin insulated metal panel products offset some of the impact of pricing pressure in the core commercial and industrial components business and higher operating expense to support growth in the second half of 2013.

The Coatings group reported a 4.5% year-on-year increase in operating income on flat sales, as higher internal revenue enabled manufacturing efficiencies and offset part of the impact of weather-related shipment delays. In January 2013, the new coatings plant in Middletown, OH, was officially opened and is expected to benefit all three of NCI’s business segments and provide the Company with both additional capacity and broader geographic reach. The new plant is expected to increase the Coatings group’s revenues progressively in fiscal 2013 and be incremental to profits in the fourth quarter of this fiscal year.

The Buildings group's third-party revenues increased 4.2% year-over-year, but operating profit declined to $4.0 million from $7.6 million in last year’s first quarter due to the combination of less favorable project mix and higher labor costs incurred in anticipation of higher volumes in the seasonally stronger second half of the year.

Market Commentary

In the first quarter of our fiscal 2013, low-rise nonresidential construction activity measured in square feet increased 4.4% from the comparable period in fiscal 2012, as reported by McGraw-Hill.

The American Institute of Architect's Architectural Billing Index published for January 2013 was 54.2 and the commercial and industrial component of the Index remained above 50 for the fourth consecutive month.

McGraw-Hill is currently forecasting that nonresidential construction activity measured in square feet will be 8% higher in calendar 2013 compared to calendar 2012. McGraw-Hill projects calendar 2013 square footage at 800 million, up from 743 million in 2012, with most of the increase taking place in the second half of the calendar year. 

Summary and Outlook

“Each of our business units produced operating profits in the first quarter despite weather-related plant closures and shipment delays, product mix issues, and higher personnel-related manufacturing costs," Mr. Chambers said. "Based on our current visibility, we expect second quarter adjusted EBITDA to be ahead of first quarter results on a sequential basis, driven by a more favorable project mix in our Buildings group, and to be in line with last year's reported levels. We expect our first half 2013 results to show positive year-on-year comparisons across key financial metrics, including revenues and adjusted EBITDA.”

“Our outlook for full year 2013 remains unchanged. Although the impact of sequestration on market demand remains uncertain, we believe that second half performance will benefit from improving market conditions and our strong operating leverage, which has been further enhanced by first quarter investments to expand gross margin. Thus, we expect to report second half results that are significantly ahead of the comparable period last year,” Mr. Chambers concluded.

Conference Call Information

The NCI Building Systems, Inc. first quarter conference call is scheduled for Tuesday, March 5, 2013, at 5:00 PM ET. Please call 1-412-858-4600 or 1-800-860-2442 to participate in the call. To listen to a live broadcast of the call over the Internet or to review the archived call, please visit the Company's website at www.ncigroup.com. To access the taped replay, please dial 1-412-317-0088 or 1-877-344-7529 and the passcode 10025274# when prompted. The Webcast archive and taped replay will both be available two hours after the call through March 12, 2013.

NCI Building Systems, Inc. is one of North America's largest integrated manufacturers of metal products for the nonresidential building industry. NCI is comprised of a family of companies operating manufacturing facilities across the United States and Mexico, with additional sales and distribution offices throughout the United States and Canada.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "guidance," "potential," "expect," "should," "will," "forecast" 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 reflect our current expectations, assumptions and/or beliefs concerning future events. As a result, these forward-looking statements rely on a number of assumptions, forecasts, and estimates and, as a result, these forward-looking statements are subject to a number of risks and uncertainties that may cause the Company's actual performance to differ materially from that projected in such statements. Among the factors that could cause actual results to differ materially include, but are not limited to industry cyclicality and seasonality and adverse weather conditions; ability to service the Company's debt; ability to integrate Metl-Span with the Company's business or to realize the anticipated benefits of such acquisition; fluctuations in customer demand and other patterns; raw material pricing and supply; competitive activity and pricing pressure; general economic conditions affecting the construction industry; financial crises or fluctuations in the U.S. and abroad; changes in laws or regulations; and the volatility of the Company's stock price. The Company's SEC filings, including our most recent reports on Form 10-K, particularly under Item 1A "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended October 28, 2012, identify 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.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

	For the Three Months Ended
	January 27,			January 29,
	2013			2012
Sales	$	297,584		$	243,603
Cost of sales		236,715			189,981
Gross profit		60,869			53,622
		20.5%			22.0%
Engineering, selling, general and administrative expenses		60,471			48,941
Acquisition-related costs		-			396
Income from operations		398			4,285
Interest income		30			28
Interest expense		(6,274	)		(3,324	)
Other income, net		394			26
Income (loss) before income taxes		(5,452	)		1,015
Provision (benefit) from income taxes		(1,825	)		426
		33.5%			42.0%
Net income (loss)		(3,627	)		589
Convertible preferred stock dividends and accretion		-			6,608
Convertible preferred stock beneficial conversion feature		-			4,020
Net loss applicable to common shares	$	(3,627	)	$	(10,039	)
Loss per common share:
Basic	$	(0.19	)	$	(0.54	)
Diluted	$	(0.19	)	$	(0.54	)
Weighted average number of common shares outstanding:
Basic		19,237			18,693
Diluted		19,237			18,693
Increase in sales		22.2%
Gross profit percentage		20.5%			22.0%
Engineering, selling, general and administrative
expenses percentage		20.3%			20.1%

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

	January 27,			October 28,
	2013			2012
	(Unaudited)
ASSETS
Cash and cash equivalents	$	25,827		$	55,158
Restricted cash		1,376			1,375
Accounts receivable, net		108,953			133,475
Inventories, net		113,770			106,015
Deferred income taxes		25,941			21,926
Income tax receivable		964			549
Prepaid expenses and other		17,189			16,864
Investments in debt and equity securities, at market		4,118			4,076
Assets held for sale		2,397			2,397
Total current assets		300,535			341,835
Property, plant and equipment, net		266,812			268,875
Goodwill		76,856			76,746
Intangible assets, net		52,015			53,028
Other assets, net		10,505			11,000
Total assets	$	706,723		$	751,484
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current portion of long-term debt	$	2,500		$	2,500
Note payable		-			515
Accounts payable		84,208			113,177
Accrued compensation and benefits		37,571			43,066
Accrued interest		3,535			345
Other accrued expenses		55,620			60,455
Total current liabilities		183,434			220,058
Long-term debt		226,215			234,444
Deferred income taxes		36,579			35,565
Other long-term liabilities		12,013			11,995
Total long-term liabilities		274,807			282,004
Series B cumulative convertible participating preferred stock		619,950			619,950
Common stock		925			925
Additional paid-in capital		7,676			4,991
Accumulated deficit		(373,477	)		(369,850	)
Accumulated other comprehensive loss		(6,592	)		(6,568	)
Treasury stock, at cost		-			(26	)
Stockholders' deficit		(371,468	)		(370,528	)
Total liabilities and stockholders' deficit	$	706,723		$	751,484

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	For the Three Months Ended
	January 27, 2013			January 29, 2012
Cash flows from operating activities:
Net income (loss)	$	(3,627	)	$	589
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization		10,206			7,371
Share-based compensation expense		3,442			1,972
Loss on sale of property, plant and equipment		-			2
Provision for doubtful accounts		1,305			(6	)
Provision (benefit) from deferred income taxes		(1,990	)		292
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		23,217			15,204
Inventories		(7,755	)		(13,524	)
Income tax receivable		(415	)		174
Prepaid expenses and other		(615	)		591
Accounts payable		(28,969	)		(8,836	)
Accrued expenses		(7,181	)		(7,987	)
Other, net		(790	)		(47	)
Net cash used in operating activities		(13,172	)		(4,205	)
Cash flows from investing activities:
Capital expenditures		(6,071	)		(5,770	)
Proceeds from sale of property, plant and equipment		-			25
Net cash used in investing activities		(6,071	)		(5,745	)
Cash flows from financing activities:
Proceeds from stock options exercised		674			-
Excess tax benefits from share-based compensation arrangements		941			-
Increase in restricted cash		(1	)		(1	)
Proceeds from Amended ABL Facility		5,001			-
Payments on Amended ABL Facility		(5,000	)		-
Payments on term loan		(8,750	)		(500	)
Payments on note payable		(515	)		(292	)
Payment of financing costs		(68	)		(25	)
Purchase of treasury stock		(2,346	)		(1,503	)
Net cash used in financing activities		(10,064	)		(2,321	)
Effect of exchange rate changes on cash and cash equivalents		(24	)		(5	)
Net decrease in cash and cash equivalents		(29,331	)		(12,276	)
Cash and cash equivalents at beginning of period		55,158			78,982
Cash and cash equivalents at end of period	$	25,827		$	66,706

NCI Building Systems, Inc.

Business Segments

(Unaudited)

(In thousands)

	Three Months Ended					Three Months Ended					$			%
	January 27, 2013					January 29, 2012					Inc/(Dec)			Change
				% of					% of
				Total					Total
Sales:				Sales					Sales
Metal coil coating	$	49,271			14	$	49,083			16	$	188			0.4%
Metal components		153,904			44		105,752			36		48,152			45.5%
Engineered building systems		147,566			42		140,298			48		7,268			5.2%
Total sales		350,741			100		295,133			100		55,608			18.8%
Less: Intersegment sales		53,157			15		51,530			17		1,627			3.2%
Total net sales	$	297,584			85	$	243,603			83	$	53,981			22.2%
				% of					% of
Operating income (loss):				Sales					Sales
Metal coil coating	$	5,542			11	$	5,302			11	$	240			4.5%
Metal components		6,072			4		5,541			5		531			9.6%
Engineered building systems		4,041			3		7,596			5		(3,555	)		-46.8%
Corporate		(15,257	)		-		(14,154	)		-		(1,103	)		-7.8%
Total operating income (loss) (% of sales)	$	398			0	$	4,285			2	$	(3,887	)		-90.7%

NCI BUILDING SYSTEMS, INC.

BUSINESS SEGMENTS

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED OPERATING INCOME (LOSS) EXCLUDING SPECIAL CHARGES

For the Three Months Ended January 27, 2013 and January 29, 2012

(Unaudited)

(In thousands)

	For the Three Months Ended January 27, 2013
	Metal Coil Coating		Metal Components		Engineered Building Systems		Corporate			Consolidated
Operating income (loss), GAAP basis	$	5,542	$	6,072	$	4,041	$	(15,257	)	$	398
Acquisition-related costs		-		-		-		-			-
"Adjusted" operating income (loss) (1)	$	5,542	$	6,072	$	4,041	$	(15,257	)	$	398

	For the Three Months Ended January 29, 2012
	Metal Coil Coating		Metal Components		Engineered Building Systems		Corporate			Consolidated
Operating income (loss), GAAP basis	$	5,302	$	5,541	$	7,596	$	(14,154	)	$	4,285
Acquisition-related costs		-		-		-		396			396
"Adjusted" operating income (loss) (1)	$	5,302	$	5,541	$	7,596	$	(13,758	)	$	4,681

(1) The Company discloses a tabular comparison of "Adjusted" operating income (loss), which is a non-GAAP measure because it is instrumental in comparing the results from period to period. "Adjusted" operating income (loss) should not be considered in isolation or as a substitute for operating income (loss) as reported on the face of our statement of operations.

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)

	2nd Qtr			3rd Qtr			4th Qtr			1st Qtr			Trailing 12 Months
	April 29,			July 29,			October 28,			January 27,			January 27,
	2012			2012			2012			2013			2013
Net income (loss)	$	1,321		$	(3,267	)	$	6,270		$	(3,627	)	$	697
Add:
Depreciation and amortization		5,841			7,248			10,355			9,122			32,566
Consolidated interest expense, net		3,034			4,159			6,226			6,244			19,663
Provision (benefit) for taxes		942			(663	)		3,379			(1,825	)		1,833
Acquisition-related costs, net		1,494			2,946			153			-			4,593
Transaction costs		-			6,437			-			-			6,437
Executive retirement		508			-			-			-			508
Non-cash charges:
Stock-based compensation		2,119			2,090			3,116			3,442			10,767
Asset recovery		-			(22	)		13			-			(9	)
Embedded derivative		(6	)		(5	)		(5	)		(5	)		(21	)
Adjusted EBITDA (1)	$	15,253		$	18,923		$	29,507		$	13,351		$	77,034

	2nd Qtr			3rd Qtr			4th Qtr			1st Qtr			Trailing 12 Months
	May 1,			July 31,			October 30,			January 29,			January 29,
	2011			2011			2011			2012			2012
Net income (loss)	$	(3,229	)	$	2,593		$	3,411		$	589		$	3,364
Add:
Depreciation and amortization		7,187			7,187			6,753			6,158			27,285
Consolidated interest expense, net		3,870			3,864			3,685			3,296			14,715
Benefit from income taxes		(1,786	)		-			398			426			(962	)
Acquisition-related costs, net		-			-			-			396			396
Cash restructuring charges (recovery)		-			(575	)		283			-			(292	)
Non-cash charges:
Stock-based compensation		1,671			1,776			1,776			1,972			7,195
Asset impairments (recoveries)		-			(93	)		1,214			-			1,121
Embedded derivative		(6	)		(6	)		(6	)		(5	)		(23	)
					-
Adjusted EBITDA (1)	$	7,707		$	14,746		$	17,514		$	12,832		$	52,799

(1) The Company's Credit Agreement defines adjusted EBITDA. Adjusted EBITDA excludes non-cash charges for goodwill and other asset impairments and stock compensation as well as certain non-recurring charges. As such, the historical information is presented in accordance with the definition above. Concurrent with the amendment and restatement of the Term Note facility, the Company entered into an Asset-Backed Lending facility which has substantially the same definition of adjusted EBITDA except that the ABL facility caps certain non-recurring charges. The Company is disclosing adjusted EBITDA, which is a non-GAAP measure, because it is used by management and provided to investors to provide comparability of underlying operational results.

NCI BUILDING SYSTEMS, INC.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

"ADJUSTED" LOSS PER DILUTED COMMON SHARE AND NET LOSS COMPARISON

(Unaudited)

	Fiscal Three Months Ended
	January 27,			January 29,
	2013			2012
Net loss per diluted common share, GAAP basis	$	(0.19	)	$	(0.54	)
Convertible preferred stock beneficial conversion feature and amendment		-			0.22
Acquisition-related costs, net of taxes		-			0.01
"Adjusted" net loss per diluted common share (1)	$	(0.19	)	$	(0.31	)

	Fiscal Three Months Ended
	January 27,			January 29,
	2013			2012
Net loss applicable to common shares, GAAP basis	$	(3,627	)	$	(10,039	)
Convertible preferred stock beneficial conversion feature and amendment		-			4,020
Acquisition-related costs, net of taxes		-			244
"Adjusted" net loss applicable to common shares (1)	$	(3,627	)	$	(5,775	)

(1) The Company discloses a tabular comparison of "Adjusted" loss per diluted common share and net loss applicable to common shares, which are non-GAAP measures, because they are referred to in the text of our press releases and are instrumental in comparing the results from period to period. "Adjusted" loss per diluted common share and net loss applicable to common shares should not be considered in isolation or as a substitute for loss per diluted common share and net loss applicable to common shares as reported on the face of our statement of operations.

NCI Building Systems, Inc.

Reconciliation of Segment Sales to Third Party Segment Sales (Internal Information)

(Unaudited)

(In thousands)

	1st Qtr 2013			1st Qtr 2012			Inc/(Dec)			Change
Metal Coil Coating
Total Sales	$	49,271	14%	$	49,083	16%	$	188			0%
Less: Intersegment sales		30,050			28,845			1,205			4%
Third Party Sales		19,221	6%		20,238	8%		(1,017	)		-5%
Operating Income (Loss)		5,542	29%		5,302	26%		240			5%
Metal Components
Total Sales		153,904	44%		105,752	36%		48,152			46%
Less: Intersegment sales		17,376			18,456			(1,080	)		-6%
Third Party Sales		136,528	46%		87,296	36%		49,232			56%
Operating Income (Loss)		6,072	4%		5,541	6%		531			10%
Engineered Building Systems
Total Sales		147,566	42%		140,298	48%		7,268			5%
Less: Intersegment sales		5,731			4,229			1,502			36%
Third Party Sales		141,835	48%		136,069	56%		5,766			4%
Operating Income (Loss)		4,041	3%		7,596	6%		(3,555	)		-47%
Consolidated
Total Sales		350,741	100%		295,133	100%		55,608			19%
Intersegment		53,157			51,530			1,627			3%
Third Party Sales		297,584	100%		243,603	100%		53,981			22%
		-
Operating Income (Loss)	$	398	0%	$	4,285	2%	$	(3,887	)		-91%