EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

 

Contact:   Norman C. Chambers
  President & Chief Operating Officer
  (281) 897-7788

NCI BUILDING SYSTEMS ACHIEVES EARNINGS GUIDANCE FOR

FIRST-QUARTER FISCAL 2007

 


AFFIRMS FISCAL 2007 EARNINGS GUIDANCE IN RANGE OF $4.55 TO $4.80

 


ANNOUNCES BOARD AUTHORIZATION OF

NEW STOCK REPURCHASE PLAN OF UP TO 1 MILLION SHARES

HOUSTON (February 28, 2007) – NCI Building Systems, Inc. (NYSE: NCS) today announced financial results for the first quarter ended January 28, 2007. Sales increased 23% for the quarter to $359.3 million from $293.3 million for the first quarter of fiscal 2006. Net income for the first quarter of fiscal 2007 was $10.5 million, or $0.49 per diluted share, which included a $0.03 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 $0.52, within the Company’s range of guidance for the quarter. Net income for the first quarter of fiscal 2006 was $12.9 million, or $0.62 per diluted share, which included a $0.02 dilutive impact from the Notes.

Norm Chambers, President and Chief Executive Officer of NCI, commented, “We were pleased to achieve our earnings guidance for the first quarter, a period about which we were correct to be cautious. Our Engineered Building Systems segment drove our results for the quarter, with sales growth of more than 80% and a more than doubling of operating income. This growth supported increased intersegment sales with both the Metal Components and Metal Coil Coating segments, which was more than offset by the impact of lower third-party sales at both of these businesses.

“While the business outlook for fiscal 2007 remains attractive, we now expect the combination of excess industry inventory and winter weather will affect our second quarter as it did the first, producing similar operating results. Consistent with our long-term focus on cost control and the value of a strong financial position, we have initiated an overhead expense reduction program targeting $15 million to $20 million for fiscal 2007. We are also reducing our capital expenditure plan for fiscal 2007 to approximately $50 million from our original budget of approximately $60 million. This latter decision reflects our determination to achieve our debt reduction goals, while maintaining stock repurchase flexibility and our commitment to the major manufacturing and engineering automation projects primarily being funded by our fiscal 2007 capital expenditures.

 

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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 First-Quarter Results

Page 2

February 28, 2007

“For the first quarter of fiscal 2007, Buildings sales increased 83% to $218.0 million, including an 89% increase in third party sales. While majority of this growth in this seasonally slow quarter was related to the acquisition of Robertson-Ceco Corporation (RCC) in April 2006, the operating leverage generated by this growth, combined with increased efficiencies captured through our integration initiatives, produced an increase in operating margin for third-party Buildings sales to 10% from 9% for the first quarter of fiscal 2006. We completed the first quarter with a backlog of $365 million, nearly double the backlog of $185 million at the end of the comparable prior-year quarter.

“Components sales were $157.0 million for the latest quarter, down from $174.8 million for the comparable quarter in fiscal 2006. As expected, the Components market had an oversupply of inventory during the quarter, and we responded with commercial discipline, which we continue to believe is in our best long-term interests as the market leader, in spite of the short-term impact. The Components operating margin on third-party sales, at 9% for the quarter compared with 14% for the first quarter of fiscal 2006, reflected the deleveraging effect of this sales reduction.

“Sales for the Coatings segment were $59.2 million for the first quarter of fiscal 2007 versus $63.3 million for the first quarter of fiscal 2006, even though intersegment volume primarily related to RCC rose 25% for the quarter. As anticipated, third-party sales included a greater level of tolling, again related to heavy industry inventory levels. Due primarily to the base-loading impact of greater intersegment sales, the Coatings operating margin on third party sales increased to 28% for the latest quarter from 15% for the first quarter of fiscal 2006.

“In addition to the normal seasonal sales impact, which has been magnified by severe winter weather, we expect the second quarter of fiscal 2007 will continue to be affected by excess inventory, which will challenge our ability to expand sales in Components and Coatings. As a result, we have established our guidance for earnings per diluted share for the second quarter in a range of $0.50 to $0.55. Our 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

“In spite of our outlook for the first half of fiscal 2007, our quoting activity has been consistent with industry expectations for continued growth during the seasonally busy part of the year, which coincides with the second half of our fiscal year. Among these industry expectations, the Dodge Report’s projected 2007 growth in industry square footage remains at 2% and dollar value at 6%. Based on our outlook for industry activity and our solid backlog, we continue to expect to produce 10% growth in tons shipped for the fiscal year and increase average plant utilization to approximately 80%. We also continue to expect our income tax rate for fiscal 2007 to be approximately 39%. Due to recent indications from steel producers, we now expect the average weighted cost of steel to increase as the fiscal year progresses.

“Based on these assumptions, we affirm our guidance for fiscal 2007 earnings per diluted share in a range of $4.55 to $4.80. Our 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.”

 

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NCI Building Systems Reports First-Quarter Results

Page 3

February 28, 2007

Mr. Chambers concluded, “As our guidance indicates, we expect the second half of fiscal 2007 to drive the fiscal year’s results consistent with historical patterns. In spite of expectations that the seasonally weak first half of the fiscal year will be somewhat below our original budgets, our substantial backlog, our cost reduction and capital expenditure initiatives and the completion of the Garco Building Systems acquisition all support our confidence in our ability to meet our guidance. The Company has made this confidence tangible through the Board’s authorization of a new 1 million share stock repurchase plan.”

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 Thursday, March 1, 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 45 manufacturing and distribution facilities located in 18 states, as well as Mexico and Canada.

 

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NCI Building Systems Reports First-Quarter Results

Page 4

February 28, 2007

NCI BUILDING SYSTEMS, INC.

STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)

 

      For the Three Months Ended  
      January 28,
2007
    January 29,
2006
 

Sales

   $ 359,303     $ 293,252  

Cost of sales

     271,619       220,843  
                

Gross profit

     87,684       72,409  
     24.4 %     24.7 %

Selling, general and administrative expenses

     63,649       49,698  
                

Income from operations

     24,035       22,711  

Interest income

     124       2,185  

Interest expense

     (7,292 )     (4,176 )

Other income, net

     214       425  
                

Income before income taxes

     17,081       21,145  

Provision for income taxes

     6,628       8,252  
                
     38.8 %     39.0 %

Net income

   $ 10,453     $ 12,893  
                

Net income per share:

    

Basic

   $ 0.53     $ 0.64  

Diluted

   $ 0.49     $ 0.62  

Average shares outstanding:

    

Basic

     19,699       19,993  

Diluted

     21,214       20,652  

Increase in sales

     22.5 %  

Decrease in diluted earnings per share

     -21.0 %  

Gross profit percentage

     24.4 %     24.7 %

Selling, general and administrative expenses percentage

     17.7 %     17.0 %

Income from operations percentage

     6.7 %     7.7 %

 

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NCI Building Systems Reports First-Quarter Results

Page 5

February 28, 2007

NCI BUILDING SYSTEMS, INC.

CONDENSED BALANCE SHEETS

(In thousands)

 

     January 28,
2007
   October 29,
2006
     (Unaudited)     

ASSETS

     

Cash and cash equivalents

   $ 10,695    $ 25,038

Accounts receivable, net

     116,072      163,814

Inventories

     187,932      160,208

Deferred income taxes

     22,503      22,864

Prepaid expenses and other

     10,533      11,054
             

Total current assets

     347,735      382,978
             

Property and equipment, net

     256,620      252,580

Goodwill

     614,616      614,461

Other assets

     52,944      54,224
             

Total assets

   $ 1,271,915    $ 1,304,243
             

LIABILITIES AND SHAREHOLDERS’ EQUITY

     

Current portion of long-term debt

   $ 710    $ 947

Accounts payable

     79,738      116,028

Accrued expenses

     106,698      133,937
             

Total current liabilities

     187,146      250,912
             

Long-term debt

     517,037      497,037

Deferred income taxes

     52,053      52,168

Other long-term liabilities

     4,766      5,717

Shareholders’ equity

     510,913      498,409
             

Total liabilities and shareholders’ equity

   $ 1,271,915    $ 1,304,243
             

 

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NCI Building Systems Reports First-Quarter Results

Page 6

February 28, 2007

NCI BUILDING SYSTEMS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

     For the Three Months Ended  
     January 28,
2007
    January 29,
2006
 

Net cash (used in) provided by operating activities

     (23,102 )     19,098  
                

Cash flows from investing activities:

    

Acquisitions, net of cash acquired

     (155 )     —    

Capital expenditures

     (11,016 )     (4,097 )

Other

     614       252  
                

Net cash used in investing activities

     (10,557 )     (3,845 )
                

Cash flows from financing activities:

    

Proceeds from stock option exercises

     480       1,272  

Excess tax benefits from stock-based compensation arrangements

     206       769  

Net borrowings on revolving line of credit

     20,000       —    

Payments on long-term debt

     (237 )     (500 )

Purchase of treasury stock

     (804 )     (645 )
                

Net cash provided by financing activities

     19,645       896  
                

Effect of exchange rate changes on cash and cash equivalents

     (329 )     —    
                

Net (decrease) increase in cash

     (14,343 )     16,149  

Cash at beginning of period

     25,038       200,716  
                

Cash at end of period

   $ 10,695     $ 216,865  
                

 

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NCI Building Systems Reports First-Quarter Results

Page 7

February 28, 2007

NCI Building Systems, Inc.

Business Segments

(Unaudited)

(In thousands)

 

     Three Months Ended
January 28, 2007
    Three Months Ended
January 29, 2006
   

$

Inc/(Dec)

    %
Change
 
           % of
Total
Sales
          % of
Total
Sales
             

Sales:

            

Metal components

   $ 157,021     44     $ 174,819     60     $ (17,798 )   -10.2 %

Engineered building systems

     218,043     61       118,825     40       99,218     83.5 %

Metal coil coating

     59,219     16       63,301     22       (4,082 )   -6.4 %

Intersegment sales

     (74,980 )   (21 )     (63,693 )   (22 )     (11,287 )   17.7 %
                                          

Total net sales

   $ 359,303     100     $ 293,252     100     $ 66,051     22.5 %
                                          
           % of
Total
Sales
          % of
Total
Sales
             

Operating income:

            

Metal components

   $ 12,086     8     $ 21,215     12     $ (9,129 )   -43.0 %

Engineered building systems

     20,536     9       9,843     8       10,693     108.6 %

Metal coil coating

     4,643     8       4,421     7       222     5.0 %

Corporate

     (13,230 )   —         (12,768 )   —         (462 )   3.6 %
                                  

Total operating income (% of sales)

   $ 24,035     7     $ 22,711     8     $ 1,324     5.8 %
                                  

 

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NCI Building Systems Reports First-Quarter Results

Page 8

February 28, 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
     January 28,
2007
   January 29,
2006

Net income

   $ 71,356    $ 58,122

Add:

     

Provision for income taxes

     43,612      41,179

Interest expense

     27,803      15,181

Depreciation and amortization

     32,178      24,952

401(k) noncash contributions

     —        2,401

Non-cash FAS 123(R)

     7,126      4,874
             

Adjusted EBITDA (1)

   $ 182,075    $ 146,709
             

(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 First-Quarter Results

Page 9

February 28, 2007

NCI BUILDING SYSTEMS, INC.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

“ADJUSTED” EARNINGS PER SHARE COMPARISON

(Unaudited)

 

     Fiscal Three Months Ended  
     January 28,
2007
    January 29,
2006
 

Earnings per diluted share, GAAP basis

   $ 0.49     $ 0.62  

Effect of convertible notes

   $ 0.03 (1)   $ 0.02 (1)
                

“Adjusted” diluted earnings per share (A)

   $ 0.52     $ 0.64  
                

(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 Q1 2007 and Q1 2006 of 1,194,631 shares and 383,143 shares, respectively, of the Company’s convertible notes as if they were converted during the period.

 

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NCI Building Systems Reports First-Quarter Results

Page 10

February 28, 2007

NCI Building Systems, Inc.

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

(Unaudited)

(In thousands)

 

      1st Qtr 2007           1st Qtr 2006           Inc/(Dec)     % Change  

Metal Components

            

Total Sales

   157,021     36 %   174,819     49 %   (17,798 )   -10 %

Intersegment

   (22,838 )     (21,069 )     (1,769 )   8 %
                    

Third Party Sales

   134,183     37 %   153,750     52 %   (19,567 )   -13 %

Operating Income

   12,086     9 %   21,215     14 %   (9,129 )   -43 %

Engineered Building Systems

            

Total

   218,043     50 %   118,825     33 %   99,218     83 %

Intersegment

   (9,354 )     (8,384 )     (970 )   12 %
                    

Third Party Sales

   208,689     58 %   110,441     38 %   98,248     89 %

Operating Income

   20,536     10 %   9,843     9 %   10,693     109 %

Metal Coil Coating

            

Total

   59,219     14 %   63,301     18 %   (4,082 )   -6 %

Intersegment

   (42,788 )     (34,240 )     (8,548 )   25 %
                    

Third Party Sales

   16,431     5 %   29,061     10 %   (12,630 )   -43 %

Operating Income

   4,643     28 %   4,421     15 %   222     5 %

Consolidated

            

Total

   434,283     100 %   356,945     100 %   77,338     22 %

Intersegment

   (74,980 )     (63,693 )     (11,287 )   18 %
                    

Third Party Sales

   359,303     100 %   293,252     100 %   66,051     23 %

Operating Income

   24,035     7 %   22,711     8 %   1,324     6 %

 

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