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NCI Building Systems Reports Second Quarter Fiscal 2009 Results

Posted on: Tuesday, 9 June 2009, 15:10 CDT

- Net Cash from Operating Activities was $10 million -

- Sequential Improvement Achieved in Gross Profit Margin, Exclusive of Special Charges -

- Implemented Further Cost Reductions to Achieve Additional Annualized Savings of $60 million; Year-to-Date Annual Cost Savings Total $120 million -

- Buildings Group's Backlog was $286 million, Stable with Prior Quarter after Adjusting for Sequential Steel Price Decline -

HOUSTON, June 9 /PRNewswire-FirstCall/ -- NCI Building Systems, Inc. (NYSE: NCS) today reported financial results for the second quarter ended May 3, 2009.

Second Quarter 2009 Financial Results

"The market situation worsened in our second fiscal quarter, with nonresidential construction activity in our commercial and industrial sectors down approximately 60% in square feet from comparable 2008 levels, according to recent McGraw Hill data," commented Norman C. Chambers, Chairman, President and Chief Executive. "The impact of this fall-off in demand and of the continued erosion of steel prices caused NCI to report an operating loss for the period that included a significant amount of non-cash impairment charges."

"We were able, however, to increase gross profit margin, exclusive of special charges, to 21.0% from 17.9% in the prior quarter, despite a 13.7% sequential decline in revenues. This was driven by an 11% sequential reduction in the non-material component of cost of goods sold resulting from our substantial cost cutting measures and reasonable pricing on lower cost steel. On a GAAP basis, gross profit margins for the second quarter were 13.9%, as compared to 6.3% for the first quarter."

For the second quarter, sales were $224.7 million compared to $416.1 million in last year's second quarter and $260.4 million in the 2009 first quarter. The Company reported a net loss of $120.2 million, or $6.17 per diluted share, which included a non-cash goodwill and other intangible asset impairment charge of $104.9 million, a $10.6 million charge to cost of goods sold related to a required inventory markdown to net realizable value in all three of NCI's business segments, a non-cash impairment charge related to plant closings of $5.3 million and a $3.8 million restructuring charge related to severance and plant closings. Exclusive of these charges, the net loss would have been $7.2 million, or $0.37 per diluted share. For the first quarter of 2009, the Company reported a net loss of $528.6 million, or $27.20 per diluted share. Exclusive of special charges, the Company's net loss for the 2009 first quarter would have been $8.0 million, or $0.42 per diluted share. For last year's second quarter the Company reported net income of $14.9 million, or $0.76 per diluted share. Included in the second quarter 2008 net income were special charges of approximately $2.8 million, related to executive retirement costs and exiting the Components segment's residential overhead door product line. Exclusive of these charges, net income for the second quarter of 2008 would have been $16.6 million, or $0.85 per diluted share.

Second Quarter 2009 Segment Performance

The Company reported an adjusted operating loss of $7.5 million, which is reconciled with the reported GAAP operating loss in the table below.

NCI BUILDING SYSTEMS, INC. BUSINESS SEGMENTS NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS RECONCILIATION OF OPERATING LOSS TO ADJUSTED OPERATING LOSS EXCLUDING SPECIAL CHARGES FOR THE THREE MONTHS ENDED MAY 3, 2009 (Unaudited) (In thousands) Goodwill and Operating Other Lower of Loss, Intangible Cost or "Adjusted" GAAP Asset Market Restructuring Asset Operating Basis Impairment Adj. Charges Impairment Loss (A) ----- ---------- ---------- ------- ---------- -------- Metal coil coating $(42,945) $39,105 $2,445 $29 $- $(1,366) Metal components (28,095) 31,108 2,668 580 714 6,975 Engineered building systems (46,565) 34,723 5,495 3,027 3,372 52 Corporate (14,569) - - 160 1,209 (13,200) ------ --- --- --- ----- ------ Total operating loss $(132,174) $104,936 $10,608 $3,796 $5,295 $(7,539) -------- -------- ------- ------ ------ ------- (A) The Company discloses a tabular comparison of "Adjusted" operating loss, which is a non-GAAP measure because it is referred to in the text of our press release and is instrumental in comparing the results from period to period. "Adjusted" operating loss should not be considered in isolation or as a substitute for operating loss as reported on the face of our statement of income.

Second quarter 2009 adjusted operating results include the benefits of phases one and two of the Company's cost reduction program.

"In light of the unprecedented year-over-year declines in demand and pricing, the adjusted second quarter operating results of our three segments, Coil Coating, Components and Building Systems, benefited from the actions we have taken," Mr. Chambers noted. "Their performance reflects NCI's leadership in our markets, success in addressing those markets which have been most resilient, and the efficiencies created by our integrated business model and our restructuring initiatives."

"Our Buildings group's backlog was $286 million at the end of the second quarter which, on a steel price-adjusted basis, is approximately equal to the $302 million reported at the end of the 2009 first quarter," Mr. Chambers said.

Update on Financing

On May 21, 2009, NCI announced that it had obtained waivers from its senior credit facility lenders that will remain in effect through July 15, 2009 and automatically extend to September 15, 2009, upon the signing of a definitive agreement for an equity investment. Previously, the Company had disclosed that it was assessing a comprehensive range of potential alternatives to strengthen its balance sheet and enhance its long term financial position. In its May 21st release, the Company disclosed that it is in advanced stages of negotiations with a leading private equity firm, with regard to a substantial equity investment in the Company, but that any transaction will require considerable cooperation from its lenders and note holders, and will be subject to customary closing conditions, including refinancing of its existing credit facilities and a recapitalization or redemption of its convertible notes, and would be very dilutive to current shareholders.

Outlook

"To date, we have not seen any indication of a pick-up in demand," Mr. Chambers commented. "While there is some anecdotal evidence of increased activity due to seasonal factors, there is no discernible trend to report. At the same time, steel prices have declined approximately 54% over the last eight months and, while we believe we are close to the bottom, we remain cautious."

"Within this difficult environment, NCI is moving forward to build upon our leading market position, sustain a continued market downturn and emerge even stronger once conditions improve. To that end, we are working closely with our builder network and key customers to provide them with the most efficient solutions; we continue to address subsets of our existing markets to capture additional business; and we are expanding our geographic reach."

"We have completed approximately 90% of phase three of our cost reduction program," Mr. Chambers said. "In the aggregate, phases one through three should result in annualized cost savings of almost $120 million. As a result, we expect to enter fiscal 2010 able to efficiently support all of our builder networks and customers throughout our various distribution channels with 25% fewer plants and a material reduction in labor costs, which will allow the Company to compete effectively as the economy improves."

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.

This release contains forward-looking statements concerning the potential equity investment in NCI and the outcome of related negotiations and NCI's business, 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 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 November 2, 2008, 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. STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data) For the Three For the Six Months Ended Months Ended May 3, April 27, May 3, April 27, 2009 2008 2009 2008 ---- ---- ---- ---- Sales $224,719 $416,143 $485,083 $777,632 Cost of sales 177,604 312,223 391,440 591,067 Lower of cost or market adjustment 10,608 - 39,986 - Asset impairment 5,295 - 5,918 - ----- --- ----- --- Gross profit 31,212 103,920 47,739 186,565 13.9% 25.0% 9.8% 24.0% Selling, general and administrative expenses 54,654 73,768 108,961 137,691 Goodwill and other intangible asset impairment 104,936 - 622,564 - Restructuring charge 3,796 640 6,275 866 ----- --- ----- --- Income (loss) from operations (132,174) 29,512 (690,061) 48,008 Interest income 84 102 279 760 Interest expense (4,052) (5,591) (8,660) (12,495) Other income, net 404 252 87 214 --- --- -- --- Income (loss) before income taxes (135,738) 24,275 (698,355) 36,487 Provision (benefit) for income taxes (15,531) 9,409 (49,538) 14,111 ------- ----- ------- ------ 11.4% 38.8% 7.1% 38.7% Net income (loss) $(120,207) $14,866 $(648,817) $22,376 ========= ======= ========= ======= Net income (loss) per share: Basic $(6.17) $0.77 $(33.35) $1.16 Diluted $(6.17) $0.76 $(33.35) $1.15 Average shares outstanding: Basic 19,470 19,312 19,454 19,281 Diluted 19,470 19,440 19,454 19,420 Depreciation/ amortization expense 8,634 8,845 17,157 18,189 Decrease in sales -46.0% -37.6% Gross profit percentage 13.9% 25.0% 9.8% 24.0% Selling, general and administrative expenses percentage 24.3% 17.7% 22.5% 17.7% NCI BUILDING SYSTEMS, INC. CONDENSED BALANCE SHEETS (In thousands) May 3, November 2, 2009 2008 ---- ---- (Unaudited) ASSETS Cash and cash equivalents $91,721 $68,201 Accounts receivable, net 72,347 163,005 Inventories 96,595 192,011 Deferred income taxes 23,922 24,259 Income taxes receivable 26,625 - Prepaid expenses and other 25,646 18,374 ------ ------ Total current assets 336,856 465,850 ------- ------- Property and equipment, net 244,816 251,163 Goodwill 5,200 616,626 Other assets 34,305 47,062 ------ ------ Total assets $621,177 $1,380,701 ======== ========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current portion of long-term debt $473,940 $920 Note payable 1,964 - Accounts payable 58,961 104,348 Accrued expenses 85,974 129,864 ------ ------- Total current liabilities 620,839 235,132 ------- ------- Long-term debt - 473,480 Deferred income taxes 20,284 44,332 Other long-term liabilities 3,996 3,928 Stockholders' equity (deficit) (23,942) 623,829 ------- ------- Total liabilities and stockholders' equity (deficit) $621,177 $1,380,701 ======== ========== NCI BUILDING SYSTEMS, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) For the Six Months Ended May 3, 2009 April 27, 2008 ----------- -------------- Net cash provided by (used in) operating activities $40,038 $(4,206) ------- ------- Cash flows from investing activities: Capital expenditures (14,219) (13,285) Other 637 2,795 --- ----- Net cash used in investing activities (13,582) (10,490) ------- ------- Cash flows from financing activities: Payments on long-term debt (460) (22,177) Payment on note payable (245) (649) Proceeds from stock option exercises 12 447 Excess tax benefits from stock-based compensation arrangements - 154 Payment of financing costs (1,796) - Purchase of treasury stock (446) (2,216) ---- ------ Net cash used in financing activities (2,935) (24,441) ------ ------- Effect of exchange rate changes on cash and cash equivalents (1) (170) -- ---- Net (decrease) increase in cash 23,520 (39,307) Cash at beginning of period 68,201 75,054 ------ ------ Cash at end of period $91,721 $35,747 ======= ======= NCI Building Systems, Inc. Business Segments (Unaudited) (In thousands) Three Months Three Months Ended Ended May 3, April 27, $ % 2009 2008 Inc/(Dec) Change ---------------- -------------- --------- ------ % of % of Total Total Sales: Sales Sales Metal coil coating $39,526 18 $80,171 19 $(40,645) -50.7% Metal components 101,554 44 165,384 40 (63,830) -38.6% Engineered building systems 129,233 58 259,653 62 (130,420) -50.2% Intersegment sales (45,594) (20) (89,065) (21) 43,471 -48.8% ------- --- ------- --- ------ ----- Total net sales $224,719 100 $416,143 100 $(191,424) -46.0% -------- --- -------- --- --------- ----- Operating income % of % of (loss): Sales Sales Metal coil coating $(42,945) n/a $6,705 8 $(49,650) n/a Metal components (28,095) n/a 15,171 9 (43,266) n/a Engineered building systems (46,565) n/a 25,292 10 (71,857) n/a Corporate (14,569) - (17,656) - 3,087 n/a ------- ------- ----- --- Total operating income (loss) (% of sales) $(132,174) n/a $29,512 7 $(161,686) n/a --------- ------- --------- --- Six Months Six Months Ended Ended May 3, April 27, $ % 2009 2008 Inc/(Dec) Change --------------- --------------- --------- ------ % of % of Total Total Sales: Sales Sales Metal coil coating $81,027 17 $142,446 18 $(61,419) -43.1% Metal components 223,034 46 310,551 40 (87,517) -28.2% Engineered building systems 281,642 58 486,052 63 (204,410) -42.1% Intersegment sales (100,620) (21) (161,417) (21) 60,797 -37.7% -------- --- -------- --- ------ ----- Total net sales $485,083 100 $777,632 100 $(292,549) -37.6% -------- --- -------- --- --------- ----- Operating income % of % of (loss): Sales Sales Metal coil coating $(106,698) n/a $9,400 7 $(116,098) n/a Metal components (156,698) n/a 24,693 8 (181,391) n/a Engineered building systems (398,844) n/a 45,730 9 (444,574) n/a Corporate (27,821) - (31,815) - 3,994 n/a ------- ------- ----- --- Total operating income (loss) (% of sales) $(690,061) n/a $48,008 6 $(738,069) n/a --------- ------- --------- --- NCI BUILDING SYSTEMS, INC. BUSINESS SEGMENTS NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS RECONCILIATION OF OPERATING LOSS TO ADJUSTED OPERATING LOSS EXCLUDING SPECIAL CHARGES FOR THE THREE MONTHS AND SIX MONTHS ENDED MAY 3, 2009 (Unaudited) (In thousands) For the Three Months Ended May 3, 2009 Goodwill and Operating Other Lower of Loss, Intangible Cost or "Adjusted" GAAP Asset Market Restructuring Asset Operating Basis Impairment Adj. Charges Impairment Loss (A) ----- ---------- ---------- ------- ---------- -------- Metal coil coating $(42,945) $39,105 $2,445 $29 $- $(1,366) Metal components (28,095) 31,108 2,668 580 714 6,975 Engineered building systems (46,565) 34,723 5,495 3,027 3,372 52 Corporate (14,569) - - 160 1,209 (13,200) ------- --- --- --- ----- ------- Total operating loss $(132,174) $104,936 $10,608 $3,796 $5,295 $(7,539) --------- -------- ------- ------ ------ ------- For the Six Months Ended May 3, 2009 Goodwill and Operating Other Lower of Loss, Intangible Cost or "Adjusted" GAAP Asset Market Restructuring Asset Operating Basis Impairment Adj. Charges Impairment Loss (A) ----- ---------- ---------- ------- ---------- -------- Metal coil coating $(106,698) $98,959 $8,102 $73 $- $436 Metal Components (156,698) 147,239 17,152 1,162 714 9,569 Engineered building systems (398,844) 376,366 14,732 4,862 3,995 1,111 Corporate (27,821) - - 178 1,209 (26,434) ------- --- --- --- ----- ------- Total operating loss $(690,061) $622,564 $39,986 $6,275 $5,918 $(15,318) --------- -------- ------- ------ ------ -------- (A) The Company discloses a tabular comparison of "Adjusted" operating loss, which is a non-GAAP measure because it is referred to in the text of our press release and is instrumental in comparing the results from period to period. "Adjusted" operating loss should not be considered in isolation or as a substitute for operating loss as reported on the face of our statement of income. NCI BUILDING SYSTEMS, INC. NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS "ADJUSTED" EARNINGS (LOSS) PER DILUTED SHARE AND NET INCOME (LOSS) COMPARISON (Unaudited) Fiscal Three Fiscal Six Months Months Ended Ended May 3, April 27, May 3, April 27, 2009 2008 2009 2008 ---- ---- ---- ---- Earnings (loss) per diluted share, GAAP basis $(6.17) $0.76 $(33.35) $1.15 Goodwill and other intangible asset impairment 5.13 - 30.84 - Lower of cost or market adjustment 0.36 - 1.32 - Restructuring charges 0.13 - 0.21 - Asset impairment 0.18 - 0.20 - Executive retirement costs - 0.07 - 0.09 Exiting Component's residential overhead door product line - 0.02 - 0.03 --- ---- --- ---- "Adjusted" diluted earnings (loss) per share (A) $(0.37) $0.85 $(0.78) $1.27 ====== ===== ====== ===== Fiscal Three Fiscal Six Months Months Ended Ended May 3, April 27, May 3, April 27, 2009 2008 2009 2008 ---- ---- ---- ---- Net income (loss), GAAP basis $(120,207) $14,866 $(648,817) $22,376 Goodwill and other intangible asset impairment 100,084 - 599,966 - Lower of cost or market adjustment 7,033 - 25,773 - Restructuring charges 2,463 - 4,045 - Asset impairment 3,417 - 3,814 - Executive retirement costs - 1,342 - 1,748 Exiting Component's residential overhead door product line - 393 - 531 --- --- --- --- "Adjusted" net income (loss) (A) $(7,210) $16,601 $(15,219) $24,655 ======= ======= ======== ======= (A) The Company discloses a tabular comparison of "Adjusted" earnings (loss) per diluted share and net income (loss), 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" diluted earnings (loss) per share and net income (loss) should not be considered in isolation or as a substitute for earnings (loss) per diluted share and net income (loss) as reported on the face of our statement of income. 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 May 3, April 27, 2009 2008 ---- ---- Net income (loss) $(592,312) $69,141 Add: Provision for income taxes (12,150) 44,271 Interest expense 19,472 26,382 Depreciation and amortization 33,703 36,372 Non-cash FAS 123(R) 5,740 10,775 Goodwill and other intangible asset impairment 622,564 - Lower of cost or market adjustment 24,286 - Asset impairment 6,111 - ----- - Adjusted EBITDA (1) $107,414 $186,941 -------- -------- (1) Adjusted EBITDA is calculated based on the terms contained in the Company's credit agreement at the respective dates presented herein. Adjusted EBITDA excludes non-cash charges for goodwill and other asset impairments, a lower of cost or market adjustment and stock compensation. 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. Reconciliation of Segment Sales to Third Party Segment Sales (Internal Information) (Unaudited) (In thousands) 2nd Qtr 2nd Qtr Inc/ % 2009 2008 (Dec) Change ------ ------ Metal Coil Coating Total Sales 39,526 15% 80,171 16% (40,645) -51% Intersegment (27,313) (52,883) 25,570 -48% ------- ------- Third Party Sales 12,213 5% 27,288 7% (15,075) -55% Operating Income (Loss) (42,945) n/a 6,705 25% (49,650) n/a Metal Components Total 101,554 37% 165,384 33% (63,830) -39% Intersegment (14,874) (26,031) 11,157 -43% ------- ------- Third Party Sales 86,680 39% 139,353 33% (52,673) -38% Operating Income (Loss) (28,095) n/a 15,171 11% (43,266) n/a Engineered Building Systems Total 129,233 48% 259,653 51% (130,420) -50% Intersegment (3,407) (10,151) 6,744 -66% ------ ------- Third Party Sales 125,826 56% 249,502 60% (123,676) -50% Operating Income (Loss) (46,565) n/a 25,292 10% (71,857) n/a Consolidated Total 270,313 100% 505,208 100% (234,895) -46% Intersegment (45,594) (89,065) 43,471 -49% ------- ------- Third Party Sales 224,719 100% 416,143 100% (191,424) -46% Operating Income (Loss) (132,174) n/a 29,512 7% (161,686) n/a YTD YTD 2nd Qtr 2nd Qtr Inc/ % 2009 2008 (Dec) Change ------ ------ Metal Coil Coating Total Sales 81,027 14% 142,446 15% (61,419) -43% Intersegment (57,390) (95,776) 38,386 -40% ------- ------- Third Party Sales 23,637 5% 46,670 6% (23,033) -49% Operating Income (Loss) (106,698) n/a 9,400 20% (116,098) n/a Metal Components Total 223,034 38% 310,551 33% (87,517) -28% Intersegment (35,312) (47,835) 12,523 -26% ------- ------- Third Party Sales 187,722 39% 262,716 34% (74,994) -29% Operating Income (Loss) (156,698) n/a 24,693 9% (181,391) n/a Engineered Building Systems Total 281,642 48% 486,052 52% (204,410) -42% Intersegment (7,918) (17,806) 9,888 -56% ------ ------- Third Party Sales 273,724 56% 468,246 60% (194,522) -42% Operating Income (Loss) (398,844) n/a 45,730 10% (444,574) n/a Consolidated Total 585,703 100% 939,049 100% (353,346) -38% Intersegment (100,620) (161,417) 60,797 -38% -------- -------- Third Party Sales 485,083 100% 777,632 100% (292,549) -38% Operating Income (Loss) (690,061) n/a 48,008 6% (738,069) n/a

SOURCE NCI Building Systems, Inc.

Source: PR Newswire

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