HOUSTON, Aug. 30 /PRNewswire-FirstCall/ -- NCI Building Systems, Inc. today announced financial results for the third quarter ended July 30, 2006. Sales were a record $449.4 million for the quarter, up 54% from $292.7 million for the third quarter of fiscal 2005. Net income for the third quarter of fiscal 2006 was $21.7 million, or $1.00 per diluted share, which included a $0.02 expense related to the adoption of FAS 123(R) and a $0.06 dilutive impact from NCI's 2.125% Convertible Senior Subordinated Notes (the "Notes"). Excluding the impact of the Notes, net income per diluted share was $1.06. Net income for the third quarter last year was $14.7 million, or $0.70 per diluted share. Pro forma net income per diluted share for the third quarter of fiscal 2005, reflecting the impact of FAS 123 (R) had it been applicable, was $0.66.
A. R. Ginn, Chairman and Chief Executive Officer of NCI, said, "We are very pleased with NCI's sales and margin performance for the third quarter of fiscal 2006. With a 54% increase in sales for the quarter, we have now produced four consecutive quarters of accelerating comparable-quarter sales growth. As we anticipated, this growth primarily reflected the continuing expansion of the nonresidential construction industry, our increasing industry market share and the acquisition of Robertson-Ceco Corporation (RCC) in April 2006.
"Our tons shipped for the third quarter increased approximately 40% compared with the third quarter of fiscal 2005, with our existing operations accounting for approximately 10% growth and the addition of RCC's sales accounting for the remainder. With increased costs for the third quarter of fiscal 2006 related to the assimilation of RCC, rising steel prices and FAS 123 (R), our income from operations totaled 9.2% of sales for the third quarter of fiscal 2006, even with the third quarter of fiscal 2005.
"The impact of RCC was evident in the 97% increase in sales for the Buildings segment for the third quarter and the more than doubling of the Company's backlog, to $436 million at the quarter end from $204 million at the end of the third quarter of fiscal 2005. Our quarter-end backlog also increased 14% from the end of the second quarter of fiscal 2006, as we continued to increase share in an expanding market. The segment's operating income rose 36% for the quarter to $19.4 million, or 8% of Buildings sales, from $14.3 million, or 11% of Buildings sales, for the third quarter of fiscal 2005. The segment's operating margin increased sequentially from 7% for the second quarter of fiscal 2006.
"The Company's Components segment sales increased 23% for the third quarter to $206 million from $168 million for the third quarter of the prior fiscal year. A stronger pricing environment combined with volume-driven improvements in operating leverage generated a 57% increase in Components operating income, which also increased as a percentage of Components sales to 14% from 11% for the third quarter of fiscal 2005 and 11% for the second quarter of fiscal 2006.
"Strong internal demand and continued steady expansion of third party sales produced 31% growth in Coatings segment sales for the third quarter to $75 million from $57 million for the third quarter of fiscal 2005. The segment's operating margin increased to 11% for the latest quarter, as operating income increased 146% from the third quarter of fiscal 2005. The Coatings operating margin on third-party sales increased to 29% for the third quarter compared with 13% for the third quarter of fiscal 2005.
"Our substantial profitable growth for the quarter enabled us to continue the incremental strengthening of our financial position, in spite of stock repurchases during the third quarter totaling approximately $17 million. On a net debt (total debt minus cash and cash equivalents) basis, our debt to total capitalization improved 120 basis points sequentially to 51.5% at the quarter end from 52.7% at the end of the second quarter of fiscal 2006. In addition, the ratio of quarter-end net debt to our trailing 12 months adjusted EBITDA improved to 3.1 at the end of the third quarter from 3.6 at the end of the second quarter.
"Based on our strong results for the third quarter and first nine months of fiscal 2006, as well as our record backlog and market outlook for the remainder of the fiscal year, we are today refining our established guidance for fiscal 2006 earnings per diluted share to a range of $3.55 to $3.60, from our previous range of $3.50 to $3.60. Our guidance includes an expense of $0.10 related to the adoption of FAS 123(R) but 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. Among the other assumptions on which this guidance is based, we expect 6% growth in square footage in the nonresidential construction industry for 2006, which, combined with the RCC acquisition, is expected to produce 25% growth in our total tons shipped for fiscal 2006. Our guidance for fiscal 2006 also assumes an increase in the weighted average cost of our steel supplies of approximately 16%, as well as an estimated income tax rate of 39%.
"Consistent with this guidance, we have today established our guidance for earnings per diluted share for the fourth quarter of fiscal 2006 in a range of $1.35 to $1.40, which includes an expense of $0.03 related to the adoption of FAS 123(R) but excludes any potential share dilution related to NCI's Notes. Earnings per diluted share for the fourth quarter of 2005 were $0.96, and pro forma earnings per diluted share for the fourth quarter of 2005, reflecting the impact of FAS 123 (R) had it been applicable, were $0.83."
Mr. Ginn added, "Our confidence in NCI's near-term prospects for growth is supported by the progress we are making in our initiatives designed to create greater synergies from the acquisition of RCC. Among these initiatives, our efforts to mitigate potential lost sales resulting from the acquisition have succeeded well beyond our assumptions. We also remain on schedule to consolidate our procurement activities and are now painting all of the light gauge coil for RCC. In addition, we are progressing more quickly than expected in migrating RCC's engineering systems to NCI's Buildings segment, which will significantly strengthen our ability to implement our 'hub and spoke' delivery system throughout our combined 44 plants. Longer-term, we expect to continue growing market share by building on our position of industry leadership within the metal buildings and metal building components industry, which continues to account for an increasing portion of an expanding market for nonresidential construction. We have tangibly demonstrated our confidence in NCI's short-term and long-term growth prospects through the repurchase of 323 thousand shares of the Company's common stock during the third quarter and 410 thousand shares to date during the fourth quarter."
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 http://www.ncilp.com/ or http://www.earnings.com/ beginning at 10:30 a.m. (Eastern Time) on Thursday, August 31, 2006. 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, 2005, 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 17 states, as well as Mexico and Canada.
NCI BUILDING SYSTEMS, INC.
STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Three Months For the Nine Months
Ended Ended
July 30, July 30, July 30, July 30,
2006 2005 2006 2005
Sales $449,393 $292,734 $1,072,007 $788,544
Cost of sales 335,731 221,572 810,386 597,113
Gross profit 113,662 71,162 261,621 191,431
25.3% 24.3% 24.4% 24.3%
Selling, general and
administrative expenses 72,187 44,130 175,574 124,198
Income from operations 41,475 27,032 86,047 67,233
Interest income 799 1,407 4,806 3,171
Interest expense (8,026) (3,993) (17,627) (10,712)
Other income, net 82 330 614 1,020
Income before income taxes 34,330 24,776 73,840 60,712
Provision for income taxes 12,655 10,087 28,093 24,569
36.9% 40.7% 38.0% 40.5%
Net income $21,675 $14,689 $45,747 $36,143
Net income per share:
Basic $1.08 $0.71 $2.28 $1.76
Diluted $1.00 $0.70 $2.13 $1.73
Average shares outstanding:
Basic 20,065 20,738 20,079 20,565
Diluted 21,718 21,012 21,479 20,919
Increase in sales 53.5% 35.9%
Increase in diluted earnings
per share 42.9% 23.1%
Gross profit percentage 25.3% 24.3% 24.4% 24.3%
Selling, general and
administrative
expenses percentage 16.1% 15.1% 16.4% 15.8%
Income from operations
percentage 9.2% 9.2% 8.0% 8.5%
NCI BUILDING SYSTEMS, INC.
CONDENSED BALANCE SHEETS
(In thousands)
July 30, October 29,
2006 2005
(Unaudited)
ASSETS
Cash and cash equivalents $57,744 $200,716
Accounts receivable, net 160,223 110,094
Inventories 175,307 113,421
Deferred income taxes 23,812 15,470
Prepaid expenses 7,129 2,963
Total current assets 424,215 442,664
Property and equipment, net 247,522 185,278
Goodwill 612,208 339,157
Other assets 58,342 23,120
Total assets $1,342,287 $990,219
LIABILITIES AND SHAREHOLDERS' EQUITY
Current portion of long-term debt $5,044 $2,000
Accounts payable 106,632 55,874
Accrued expenses 113,996 91,739
Total current liabilities 225,672 149,613
Long-term debt 569,187 371,000
Deferred income taxes 50,866 25,462
Pension liability 8,713 -
Other long-term liability 1,093 -
Shareholders' equity 486,756 444,144
Total liabilities and
shareholders' equity $1,342,287 $990,219
NCI BUILDING SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
For the Nine Months Ended
July 30, 2006 July 30, 2005
Net income $45,747 $36,143
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 22,183 18,115
Stock-based compensation expense 6,145 2,501
(Gain) loss on sale of fixed assets (7) 135
Inventory obsolescence (510) 93
Provision for doubtful accounts 1,450 27
Deferred income tax benefit (317) 3,612
(Increase) decrease in current assets (33,230) 54,082
Increase (decrease) in current liabilities 13,540 (44,530)
Other, net (457) -
Net cash provided by operating activities 54,544 70,178
Cash flows from investing activities:
Acquisitions, net of cash acquired (366,490) (27,145)
Capital expenditures (19,364) (14,555)
Other (203) 1,418
Net cash used in investing activities (386,057) (40,282)
Cash flows from financing activities:
Proceeds from stock option exercises 5,492 4,957
Excess tax benefits from stock-based
compensation arrangements 3,361 -
Issuance of convertible debt - 180,000
Issuance of long-term debt 200,000 -
Net payments on revolving lines
of credit - (16,700)
Payments on long-term debt (2,264) (6,500)
Payment of refinancing costs (594) (4,790)
Purchase of treasury stock (17,580) -
Net cash provided by financing activities 188,415 156,967
Effect of exchange rate changes on
cash and cash equivalents 126 -
Net (decrease) increase in cash (142,972) 186,863
Cash at beginning of period 200,716 8,222
Cash at end of period $57,744 $195,085
NCI BUILDING SYSTEMS, INC.
BUSINESS SEGMENTS
(Unaudited)
(In thousands)
Three Months Ended Three Months Ended
July 30, 2006 July 30, 2005
% of % of
Total Total
Sales: Sales Sales
Metal components $206,270 46 $167,750 57
Engineered building systems 250,907 55 127,446 44
Metal coil coating 74,813 17 57,254 19
Intersegment sales (82,597) (18) (59,716) (20)
Total net sales $449,393 100 $292,734 100
% of % of
Operating income: Sales Sales
Metal components $28,663 14 $18,229 11
Engineered building systems 19,396 8 14,288 11
Metal coil coating 8,435 11 3,430 6
Corporate (15,019) - (8,915) -
Total operating income
(% of sales) $41,475 9 $27,032 9
Nine Months Ended Nine Months Ended
July 30, 2006 July 30, 2005
% of % of
Total Total
Sales: Sales Sales
Metal components $555,167 52 $452,302 57
Engineered building systems 524,221 48 332,085 42
Metal coil coating 199,169 19 164,154 21
Intersegment sales (206,550) (19) (159,997) (20)
Total net sales $1,072,007 100 $788,544 100
% of % of
Operating income: Sales Sales
Metal components $68,203 12 $52,399 12
Engineered building systems 39,386 8 31,337 9
Metal coil coating 18,421 9 11,537 7
Corporate (39,963) - (28,040) -
Total operating income
(% of sales) $86,047 8 $67,233 9
$ %
Inc/(Dec) Change
Sales:
Metal components $38,520 23.0%
Engineered building systems 123,461 96.9%
Metal coil coating 17,559 30.7%
Intersegment sales (22,881) 38.3%
Total net sales $156,659 53.5%
Operating income:
Metal components $10,434 57.2%
Engineered building systems 5,108 35.8%
Metal coil coating 5,005 145.9%
Corporate (6,104) 68.5%
Total operating income (%
of sales) $14,443 53.4%
$ %
Inc/(Dec) Change
Sales:
Metal components $102,865 22.7%
Engineered building systems 192,136 57.9%
Metal coil coating 35,015 21.3%
Intersegment sales (46,553) 29.1%
Total net sales $283,463 35.9%
Operating income:
Metal components $15,804 30.2%
Engineered building systems 8,049 25.7%
Metal coil coating 6,884 59.7%
Corporate (11,923) 42.5%
Total operating income (% of sales) $18,814 28.0%
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 30, July 30,
2006 2005
Net income $65,555 $59,177
Add:
Provision for income taxes 43,784 38,345
Interest expense 21,071 13,046
Depreciation and amortization 27,970 23,880
401(k) noncash contributions - 5,699
Loss on debt refinancing - -
Non-cash FAS 123(R) 7,327 2,848
Adjusted EBITDA (1) $165,707 $142,995
(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. 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.
NCI BUILDING SYSTEMS, INC.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
RECONCILIATION OF TOTAL DEBT TO NET DEBT
(Unaudited)
(In thousands)
July 30, April 30,
2006 2006
Total debt $574,231 $575,491
Less: cash (57,744) (39,769)
Total net debt $516,487 $535,722
NCI BUILDING SYSTEMS, INC.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
"ADJUSTED" EARNINGS PER SHARE COMPARISON
(Unaudited)
Fiscal Three Months Ended
July 30, July 30,
2006 2005
Earnings per diluted share, excluding
impact of FAS 123R $1.02 $0.70 (1)
FAS 123R Expense (0.02) (0.04)(2)
Earnings per diluted share, including
impact of FAS 123R $1.00 (1) $0.66
Effect of convertible notes $0.06 (3) -
"Adjusted" diluted earnings per share (A) $1.06 $0.66
Fiscal Nine Months Ended
July 30, July 30,
2006 2005
Earnings per diluted share, excluding
impact of FAS 123R $2.21 $1.73 (1)
FAS 123R Expense (0.08) (0.13)(2)
Earnings per diluted share, including
impact of FAS 123R $2.13 (1) $1.60
Effect of convertible notes 0.11 (3) -
Gain on health care cost - (0.06)(4)
"Adjusted" diluted earnings per share (A) $2.24 $1.54
(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) Earnings per diluted share, GAAP basis
(2) Pro forma share-based compensation expense, as if the Company had
adopted FAS 123R in 2005
(3) Dilutive impact of the Company's convertible notes as if they were
converted during the period.
(4) In the first quarter of 2005, the Company recognized a benefit
related to health care costs which did not occur in 2006.
NCI Building Systems, Inc.
Reconciliation of Segment Sales to Third Party Segment Sales
3rd Qtr 3rd Qtr Inc/ %
2006 2005 (Dec) Change
Metal Components
Total Sales 206,270 39% 167,750 48% 38,520 23%
Intersegment (25,055) (23,342) (1,713) 7%
Third Party Sales 181,215 40% 144,408 49% 36,807 25%
Operating Income 28,663 16% 18,229 13% 10,434 57%
Engineered Building Systems
Total 250,907 47% 127,446 36% 123,461 97%
Intersegment (11,346) (5,538) (5,808) 105%
Third Party Sales 239,561 54% 121,908 42% 117,653 97%
Operating Income 19,396 8% 14,288 12% 5,108 36%
Metal Coil Coating
Total 74,813 14% 57,254 16% 17,559 31%
Intersegment (46,196) (30,836) (15,360) 50%
Third Party Sales 28,617 6% 26,418 9% 2,199 8%
Operating Income 8,435 29% 3,430 13% 5,005 146%
Consolidated
Total 531,990 100% 352,450 100% 179,540 51%
Intersegment (82,597) (59,716) (22,881) 38%
Third Party Sales 449,393 100% 292,734 100% 156,659 54%
Operating Income 41,475 9% 27,032 9% 14,443 53%
NCI Building Systems, Inc.
Reconciliation of Segment Sales to Third Party Segment Sales
YTD YTD
3rd Qtr 3rd Qtr Inc/ %
2006 2005 (Dec) Change
Metal Components
Total Sales 555,167 43% 452,302 48% 102,865 23%
Intersegment (68,616) (59,154) (9,462) 16%
Third Party Sales 486,551 46% 393,148 50% 93,403 24%
Operating Income 68,203 14% 52,399 13% 15,804 30%
Engineered Building Systems
Total 524,221 41% 332,085 35% 192,136 58%
Intersegment (29,290) (14,883) (14,407) 97%
Third Party Sales 494,931 46% 317,202 40% 177,729 56%
Operating Income 39,386 8% 31,337 10% 8,049 26%
Metal Coil Coating
Total 199,169 16% 164,154 17% 35,015 21%
Intersegment (108,644) (85,960) (22,684) 26%
Third Party Sales 90,525 8% 78,194 10% 12,331 16%
Operating Income 18,421 20% 11,537 15% 6,884 60%
Consolidated
Total 1,278,557 100% 948,541 100% 330,016 35%
Intersegment (206,550) (159,997) (46,553) 29%
Third Party Sales 1,072,007 100% 788,544 100% 283,463 36%
Operating Income 86,047 8% 67,233 9% 18,814 28%
