EX-99.1 2 dex991.htm PRESS RELEASE Press Release

EXHIBIT 99.1

LOGO

 

Contact:    Norman C. Chambers
  

Chairman, President and

   Chief Executive Officer
  

(281) 897-7788

NCI BUILDING SYSTEMS REPORTS FIRST-QUARTER EARNINGS PER DILUTED

SHARE OF $0.39 AND ADJUSTED EARNINGS OF $0.45

HOUSTON (March 3, 2008) – NCI Building Systems, Inc. (NYSE: NCS) today announced financial results for the first quarter ended January 27, 2008. Sales for the first quarter of fiscal 2008 increased to $361.5 million compared with $359.3 million for the first quarter of fiscal 2007. Net income for the first quarter of fiscal 2008 was $7.5 million or $0.39 per diluted share compared to $0.49 per diluted share for the first quarter of fiscal 2007. NCI’s adjusted earnings per diluted share for the first quarter of fiscal 2008 were $0.45. Adjusted earnings excluded charges of $0.06 per diluted share, which consisted of an inventory charge of $0.03 related to the Coatings segment, a corporate charge of $0.02 related to executive retirement and charges of $0.01 related to exiting the Component segment’s residential overhead door product line. Adjusted earnings per diluted share for the first quarter of fiscal 2007 were $0.52, which excluded a $0.03 dilutive impact from NCI’s 2.125% Convertible Senior Subordinated Notes (the “Notes”). See page 9 for a reconciliation of all GAAP and non-GAAP financial information.

Norman C. Chambers, Chairman, President and Chief Executive Officer of NCI, remarked, “NCI produced solid operating results for the first quarter of fiscal 2008, especially given the difficult economy that began for us in early fiscal 2007. Over the latest quarter we saw a drop in new starts for nonresidential and low-rise construction, as well as increased steel prices. While we see reason for optimism on steel pricing towards the latter half of this year, we are taking a very cautious view given the unpredictability of this economy. That said, our competitive position is strong, backlog is up 12.4% from the same period last year and both working capital ratios and cash flows are strong. Further, we are confident that a good supply of competitively priced steel will remain available to us over the long-term, and our customer relationships and our product quality have never been better.”

Segment Performance

“First-quarter sales for our Buildings business were comparable with the first quarter of fiscal 2007,” continued Mr. Chambers, “and we completed the quarter with a backlog of $410 million, up 12.4% from $365 million at the same time in fiscal 2007. Consistent with trends experienced in fiscal 2007, our Buildings bookings continued to be weighted toward larger, more complex projects with longer production schedules, and the segment’s sales continued to reflect ongoing softness in the markets for small buildings. As a result, we produced third-party sales

 

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10943 N. Sam Houston Parkway W. Ÿ Houston, Texas 77064

P.O. Box 692055 Ÿ Houston, Texas 77269-2055 Ÿ Telephone: (281) 897-7788 Ÿ Fax: (281) 477-9675


NCI Building Systems Report First-Quarter Results

Page 2

March 3, 2008

 

for the first quarter that were slightly ahead of the first quarter of fiscal 2007, while lower intersegment sales related to small buildings reduced our capacity utilization and operating margin.

“Our Components business produced better than anticipated growth in tonnage for the first quarter, which increased 5% from the first quarter of fiscal 2007. This tonnage growth was driven by third-party sales, with intersegment sales declining as anticipated due to the scheduling of the Buildings backlog. Lower pricing and our decision to exit the residential overhead door product line resulted in slightly lower third-party sales and operating margin on a comparable-quarter basis.

“The results for our Coatings business for the latest quarter reflected an 18% increase in third-party sales due to a higher sales mix of package sales compared with the higher tolling sales in first quarter of fiscal 2007. These package sales masked a reduction in tonnage from third-party sales for the quarter coupled with temporarily higher material costs for intersegment sales. This reduced operating leverage coupled with a pre-tax inventory charge of approximately $0.9 million impacted the Coatings operating margin to half the level produced for the first quarter of fiscal 2007. The inventory charge resulted from adjusting the carrying values of certain painted hot-roll steel products to a manufactured standard value.”

Financial Guidance

NCI also announced today that it has revised its guidance for 2008. “Despite our strong Buildings backlog at the end of the first quarter, we believe it prudent to reduce estimated earnings per diluted share for first-half and full-year fiscal 2008,” Mr. Chambers said. “Our modification is based on significant steel price increases recently announced by certain major suppliers. We expect this will result in an increase in our weighted average cost of steel of 13% to 15% in our second quarter. Our modification is also based on the identification of the charges that impacted our first quarter, as well as additional, expected charges for the second quarter.”

Accordingly, the Company now expects earnings per diluted share for the first half in the range of $0.64 to $0.79, down from previously forecasted earnings per diluted share in the range of $0.90 to $1.05. This revised half-year guidance reflects the projected impact of the recently announced steel price increases and includes first-quarter charges of $0.06 per diluted share (discussed above) and additional charges totaling $0.05 per diluted share anticipated in the second quarter. Second-quarter charges consist of an estimated $0.03 related to exiting the residential door product line and $0.02 related to our previously disclosed executive retirement in the second quarter. The revised 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.

Mr. Chambers added, “As a result, we are adjusting our original full-year fiscal 2008 guidance from $3.35 to $3.70 per diluted share to $3.09 to $3.44 per diluted share, excluding any potential share dilution related to NCI’s Notes. This adjustment gives effect to the modifications of our first-half guidance that includes the charges of $0.11 previously described. We believe this adjusted guidance represents an achievable range based on a number of assumptions including our ability to manage the balance between volume and pricing during a rising steel

 

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NCI Building Systems Report First-Quarter Results

Page 3

March 3, 2008

 

price environment. Additionally, we are assuming that our favorable quoting activity will translate into a strong April 2008 backlog consistent with our adjusted full-year guidance. We expect to update our full-year guidance at the time we report our second-quarter results when we have assessed the market drivers that will impact the second half of fiscal 2008.”

Outlook

Mr. Chambers concluded, “We expect to continue enhancing our ability to produce further profitable growth in difficult market conditions through technology-driven improvements in operating efficiencies. We have achieved steady progress with our major ongoing technology initiatives, such as the engineering systems integration initiative made possible by the RCC acquisition, our Oracle 11i implementation and our web-based order entry system. In addition to these investments, we have also continued to strengthen our financial position including additional debt reduction during the first quarter. As the leading provider of metal buildings and components, we expect our consistent focus on strategies that produce long-term growth in earnings and shareholder value will enable us to continue to outperform our industry throughout the economic cycle.”

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 Tuesday, March 4, 2008. 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 28, 2007, 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 Report First-Quarter Results

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March 3, 2008

 

NCI BUILDING SYSTEMS, INC.

STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)

 

     For the Three Months Ended  
     January 27,     January 28,  
     2008     2007  

Sales

   $ 361,489     $ 359,303  

Cost of sales

     279,058       271,619  
                

Gross profit

     82,431       87,684  
     22.8 %     24.4 %

Selling, general and administrative expenses

     63,935       63,649  
                

Income from operations

     18,496       24,035  

Interest income

     658       124  

Interest expense

     (6,904 )     (7,292 )

Other income, net

     (38 )     214  
                

Income before income taxes

     12,212       17,081  

Provision for income taxes

     4,702       6,628  
                
     38.5 %     38.8 %

Net income

   $ 7,510     $ 10,453  
                

Net income per share:

    

Basic

   $ 0.39     $ 0.53  

Diluted

   $ 0.39     $ 0.49  

Average shares outstanding:

    

Basic

     19,250       19,699  

Diluted

     19,402       21,214  

Depreciation/amortization expense

     9,344       8,369  

Increase in sales

     0.6 %  

Decrease in diluted earnings per share

     -20.4 %  

Gross profit percentage

     22.8 %     24.4 %

Selling, general and administrative expenses percentage

     17.7 %     17.7 %

Income from operations percentage

     5.1 %     6.7 %

 

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NCI Building Systems Report First-Quarter Results

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March 3, 2008

 

NCI BUILDING SYSTEMS, INC.

CONDENSED BALANCE SHEETS

(In thousands)

 

     January 27,
2008
   October 28,
2007
     (Unaudited)     

ASSETS

     

Cash and cash equivalents

   $ 26,402    $ 75,054

Accounts receivable, net

     127,553      158,435

Inventories

     152,927      137,725

Deferred income taxes

     23,049      23,439

Prepaid expenses and other

     17,645      16,606
             

Total current assets

     347,576      411,259
             

Property and equipment, net

     259,167      261,647

Goodwill

     616,400      616,400

Other assets

     53,103      53,752
             

Total assets

   $ 1,276,246    $ 1,343,058
             

LIABILITIES AND SHAREHOLDERS’ EQUITY

     

Current portion of long-term debt

   $ 920    $ 22,312

Accounts payable

     105,407      130,161

Accrued expenses

     99,685      129,298
             

Total current liabilities

     206,012      281,771
             

Long-term debt

     474,170      474,725

Deferred income taxes

     43,701      43,638

Other long-term liabilities

     6,382      3,228

Shareholders’ equity

     545,981      539,696
             

Total liabilities and shareholders’ equity

   $ 1,276,246    $ 1,343,058
             

 

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NCI Building Systems Report First-Quarter Results

Page 6

March 3, 2008

 

NCI BUILDING SYSTEMS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

     For the Three Months Ended  
     January 27, 2008     January 28, 2007  

Net cash used in operating activities

   $ (19,986 )   $ (23,102 )
                

Cash flows from investing activities:

    

Capital expenditures

     (5,803 )     (11,016 )

Other, net

     299       459  
                

Net cash used in investing activities

     (5,504 )     (10,557 )
                

Cash flows from financing activities:

    

Payments on revolving line of credit

     —         (10,000 )

Borrowings on revolving line of credit

     —         30,000  

Payments on long-term debt

     (21,947 )     (237 )

Proceeds from stock option exercises

     327       480  

Excess tax benefits from stock-based compensation arrangements

     128       206  

Purchase of treasury stock

     (1,513 )     (804 )
                

Net cash provided (used in) by financing activities

     (23,005 )     19,645  
                

Effect of exchange rate changes on cash and cash equivalents

     (157 )     (329 )
                

Net decrease in cash

     (48,652 )     (14,343 )

Cash at beginning of period

     75,054       25,038  
                

Cash at end of period

   $ 26,402     $ 10,695  
                

 

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NCI Building Systems Report First-Quarter Results

Page 7

March 3, 2008

 

NCI Building Systems, Inc.

Business Segments

(Unaudited)

(In thousands)

 

     Three Months
Ended

January 27, 2008
    Three Months
Ended

January 28, 2007
    $
Inc/(Dec)
    %
Change
 
     % of       % of      
     Total       Total      

Sales:

     Sales       Sales      

Metal coil coating

   $ 62,275     17     $ 59,219     16     $ 3,056     5.2 %

Metal components

     154,838     43       157,021     44       (2,183 )   -1.4 %

Engineered building systems

     216,728     60       218,043     61       (1,315 )   -0.6 %

Intersegment sales

     (72,352 )   (20 )     (74,980 )   (21 )     2,628     -3.5 %
                                          

Total net sales

   $ 361,489     100     $ 359,303     100     $ 2,186     0.6 %
                                          
     % of       % of      

Operating income:

     Sales       Sales      

Metal coil coating

   $ 2,695     4     $ 4,643     8     $ (1,948 )   -42.0 %

Metal components

     11,091     7       12,086     8       (995 )   -8.2 %

Engineered building systems

     18,869     9       20,536     9       (1,667 )   -8.1 %

Corporate

     (14,159 )   —         (13,230 )   —         (929 )   -7.0 %
                                          

Total operating income (% of sales)

   $ 18,496     5     $ 24,035     7     $ (5,539 )   -23.0 %
                                          

 

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NCI Building Systems Report First-Quarter Results

Page 8

March 3, 2008

 

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 27,
2008
   January 28,
2007

Net income

   $ 60,786    $ 71,356

Add:

     

Provision for income taxes

     39,170      43,612

Interest expense

     28,212      27,803

Depreciation and amortization

     35,658      32,178

Non-cash FAS 123(R)

     9,621      7,126
             

Adjusted EBITDA (1)

   $ 173,447    $ 182,075
             

 

(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 Report First-Quarter Results

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March 3, 2008

 

NCI BUILDING SYSTEMS, INC.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

“ADJUSTED” EARNINGS PER SHARE COMPARISON

(Unaudited)

 

     Three Months Ended  
     January 27,
2008
   January 28,
2007
 

Earnings per diluted share, GAAP basis

   $ 0.39    $ 0.49  

Effect of convertible notes

     —        0.03 (1)

Coatings inventory charge

     0.03   

Executive retirement

     0.02   

Exit costs—residential overhead doors

     0.01      —    
               

“Adjusted” diluted earnings per share (A)

   $ 0.45    $ 0.52  
               

 

(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 January 28, 2007 of 1,194,631 shares of the Company’s convertible notes as if they were converted during the period.

 

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NCI Building Systems Report First-Quarter Results

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March 3, 2008

 

NCI Building Systems, Inc.

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

(Unaudited)

(In thousands)

 

     1st Qtr 2008           1st Qtr 2007           Inc/(Dec)     %
Change
 

Metal Coil Coating

            

Total Sales

   62,275     14 %   59,219     14 %   3,056     5 %

Intersegment

   (42,893 )     (42,788 )     (105 )   0 %
                    

Third Party Sales

   19,382     5 %   16,431     5 %   2,951     18 %

Operating Income

   2,695     14 %   4,643     28 %   (1,948 )   -42 %

Metal Components

            

Total

   154,838     36 %   157,021     36 %   (2,183 )   -1 %

Intersegment

   (21,804 )     (22,838 )     1,034     -5 %
                    

Third Party Sales

   133,034     37 %   134,183     37 %   (1,149 )   -1 %

Operating Income

   11,091     8 %   12,086     9 %   (995 )   -8 %

Engineered Building Systems

            

Total

   216,728     50 %   218,043     50 %   (1,315 )   -1 %

Intersegment

   (7,655 )     (9,354 )     1,699     -18 %
                    

Third Party Sales

   209,073     58 %   208,689     58 %   384     0 %

Operating Income

   18,869     9 %   20,536     10 %   (1,667 )   -8 %

Consolidated

            

Total

   433,841     100 %   434,283     100 %   (442 )   0 %

Intersegment

   (72,352 )     (74,980 )     2,628     -4 %
                    

Third Party Sales

   361,489     100 %   359,303     100 %   2,186     1 %

Operating Income

   18,496     5 %   24,035     7 %   (5,539 )   -23 %

 

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