SOURCE: NCI Building Systems, Inc.

NCI Building Systems, Inc.

March 09, 2010 16:13 ET

NCI Building Systems Reports First Quarter Fiscal 2010 Results

Q1 Performance in Line With Management Expectations

Year-Over-Year Improvement in Gross Margin

Coatings and Components Groups Post Operating Profits

Buildings Group's Backlog Was $242 Million

HOUSTON, TX--(Marketwire - March 9, 2010) - NCI Building Systems, Inc. (NYSE: NCS) today reported financial results for the first quarter ended January 31, 2010.

First Quarter Financial Results

"As expected, first quarter fiscal 2010 results reflected the impact of both continued soft market demand and a 37% year-over-year decrease in steel prices in what has traditionally been our seasonally weakest quarter," said Norman C. Chambers, NCI's Chairman, President and Chief Executive Officer. "According to McGraw-Hill, nonresidential construction starts declined by over 40% in square footage terms compared to the prior year. Despite those trends, we are pleased to report that our tonnage volume in the first quarter of fiscal 2010 remained stable compared to the same period last year, declining by only one percent. Combined volumes in our Components and Buildings groups were down 9% year-over-year, but this decline was mostly offset by increases in tolling volume in our Coaters group."

"Gross margin, exclusive of special charges in both years, improved to 18.2% in the first quarter of 2010 from 17.9% in the same period in 2009. Strong pricing discipline and a rising steel price environment yielded year-over-year improvement in our spread over material costs. In addition, our gross margin benefitted from the cost reduction actions we took in late fiscal 2008 and 2009, reducing the level of negative absorption in non-material cost of goods sold," Mr. Chambers noted.

"Both our Coatings group and our Components group, which tend to respond more quickly to changes in the market, produced operating profits for the period. As anticipated, our Buildings group generated an operating loss for the quarter, driven largely by the completion of orders booked during the last few months of fiscal 2009. The profitability on those bookings reflected both the difficult external market environment as well as aggressive marketing by the Buildings group to maintain market share despite customer concerns over the completion of our recapitalization."

"Following its normal seasonal pattern, the Buildings group's backlog at the end of the first quarter was stable as compared to the prior quarter. Quoting activity modestly increased, and we improved our pricing discipline. These positive indications, in combination with our new sales initiatives and our continuous engineering and manufacturing improvements, give us confidence in the profitable growth prospects for this segment," Mr. Chambers said.

"The recapitalization has significantly strengthened NCI's balance sheet, and we believe it has made us one of the financially strongest companies in our industry, giving us important flexibility to make investments in technology, processes and opportunistic raw material purchases to support our customers in this very tough business climate," Mr. Chambers noted.

For the first quarter, sales were $182.9 million, down 29.8% from the $260.4 million reported for last year's first quarter. Cost of sales declined 30% to $149.7 million from $213.8 million, reflecting the decline in material costs and the major cost reduction programs we implemented in late 2008 and 2009. Gross margin was 17.6% compared to 6.3% in last year's first quarter. In this year's period, the Company incurred an asset impairment charge of $1.0 million. First quarter 2009 results included a lower of cost or market adjustment of $29.4 million and an asset impairment charge of $623,000.

Selling, general and administrative expenses declined 18.2% to $44.4 million from $54.3 million in the similar period last year.

The Company incurred an adjusted operating loss, exclusive of special charges, of $11.2 million. On a reported basis, the operating loss was $12.7 million, inclusive of an asset impairment and restructuring charge of $1.5 million. In last year's first quarter, the Company incurred an operating loss of $557.9 million, which included a $517.6 million charge related to goodwill and other intangible asset impairments and a restructuring charge of $2.5 million.

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 a loss of $2.6 million for the 2010 first quarter compared with earnings of $1.6 million in last year's first quarter.

For the first quarter, the Company reported a net loss applicable to common shares of $18.8 million, which included the accrual of convertible preferred stock dividends and accretion and a beneficial conversion feature of $8.3 million. This compares to a net loss applicable to common shares of $530 million in the 2009 first quarter. The loss per diluted share in this year's first quarter was $1.04 compared to $136.32 in last year's first quarter, each adjusted for the 1-for-5 reverse split that was effective at the close of market on March 5, 2010. In addition, the Company's results for the first quarter of 2009 have been revised to reflect a new accounting standard, which became effective on November 2, 2009, related to convertible debt.

The weighted number of common shares outstanding used in the calculation of first quarter 2010 per share amounts, adjusted for the reverse stock split, was 18.1 million compared to 3.9 million last year. The per share amounts for the first quarter were calculated after giving effect to the 1-for-5 reverse stock split.

Inventory levels increased 25.8% sequentially to $90 million, reflecting restocking after significant draw downs in 2009. Annualized inventory turnover was 7.3 turns for the first quarter, compared to 5.0 turns in the first quarter of 2009.

Net cash used in operating activities was $19.2 million for the first quarter. Capital expenditures were $1.3 million; fiscal 2010 capital expenditures are expected to be between $11 million and $12 million.

First Quarter Segment Performance

The Company reported an adjusted operating loss of $11.2 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 INCOME (LOSS) TO ADJUSTED OPERATING INCOME
                     (LOSS) EXCLUDING SPECIAL CHARGES
              FOR THE THREE MONTHS ENDED JANUARY 31, 2010
                                (Unaudited)
                              (In thousands)


                          For the Three Months Ended January 31, 2010
                     ------------------------------------------------------
                                           Engineered
                     Metal Coil   Metal     Building             Consoli-
                      Coating   Components  Systems   Corporate   dated
                     ---------- ---------- ---------  ---------  ---------

Operating income
 (loss), GAAP basis  $    3,119 $    1,791 $  (5,829) $ (11,824) $ (12,743)
Asset impairment              -          -     1,029          -      1,029
Restructuring
 charges                      -        109       415          -        524
                     ---------- ---------- ---------  ---------  ---------
"Adjusted" operating
 income (loss) (1)   $    3,119 $    1,900 $  (4,385) $ (11,824) $ (11,190)
                     ========== ========== =========  =========  =========


(1)  The Company discloses a tabular comparison of "Adjusted" operating
     income (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 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 income.


The Components group maintained operating profitability in the face of lower volume and pricing, benefitting from operating efficiencies, growing opportunities in retro-fit projects and the ramp up of our new insulated panel plant.

The Coatings group processed higher volume than in the 2009 first quarter, when there was significant de-stocking affecting both intersegment and external sales. This group is effectively adding work outside of its traditional metal building markets.

The Buildings group was the segment most impacted by the uncertainty surrounding NCI's refinancing. With that resolved, there has been a slight pick-up in quoting activity and additional opportunities with Leadership in Energy and Environmental Design (LEED) green building certification system projects, but pricing remains competitive.

Market Environment

Nonresidential construction activity measured in square feet declined significantly from the comparable period in 2009. McGraw-Hill reported that low-rise new construction activity measured in square feet was down 42% in our fiscal first quarter year over year, and NCI's traditionally strong commercial and industrial markets were off approximately 53% as reflected in McGraw-Hill's January report.

The American Institute of Architect's Architectural Billing Index published for January indicated that both billings and inquiry levels are down sharply from prior month levels. McGraw-Hill is now forecasting that nonresidential construction activity measured in square feet will be 5% lower in calendar 2010 compared to calendar 2009.

Recent Corporate Developments

-- On February 19, 2010, NCI's board of directors authorized a
   reverse stock split at a 1-for-5 ratio of its outstanding common
   stock. The reverse stock split was approved by stockholders at the
   Company's annual meeting, held immediately before the meeting of
   the board of directors on February 19, 2010, and was effective at
   the close of market on March 5, 2010.

-- As previously disclosed, the completion of the reverse stock
   split eliminated the contingencies regarding the convertibility
   of our convertible preferred stock to investment funds managed by
   Clayton, Dubilier & Rice (CD&R) and will result in the recognition
   of the previously-deferred non-cash beneficial conversion charge
   of $231 million in the second quarter of fiscal 2010.

Outlook

"As we noted last quarter, neither industry forecasts nor our field intelligence points to any meaningful pick-up in nonresidential construction activity in 2010, although we do expect a seasonal increase in demand similar to what we experienced in 2009," noted Mr. Chambers. "Within this environment, however, we believe that NCI has important opportunities to achieve profitable operating results. Our focus remains on retaining and building upon our market leadership positions in our three business segments.

-- Our Coaters group is positioned to gain market share resulting
   from its production efficiencies, entry into new markets and the
   contraction of its competitive universe.

-- Our Components group is benefitting from the investments we have
   made in insulated metal panels, which support its IPS and
   Eco-ficient® brands; re-roofing initiatives; and its exposure to
   the retrofit market.

-- Our Buildings group is set to increase its market penetration as
   a result of our strong financial position.  Additionally, our
   hub-and-spoke delivery systems, shorter design and delivery times
   and sustainable building products set us apart in the marketplace,"
   Mr. Chambers said.

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 and Section 27A of the Securities Act. These statements and other statements identified by words such as "believe," "guidance," "potential," "expect," "should," "will" 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 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; fluctuations in customer demand and other patterns; raw material pricing and supply; competitive activity and pricing pressure; general economic conditions affecting the construction industry; the current financial crisis and U.S. recession; changes in laws or regulations; and the volatility of the Company's stock price. Item 1A "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended November 1, 2009, 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)
                          (2009 as Adjusted (1))

                                                 For the Three Months Ended
                                                  January 31,  February 1,
                                                      2010         2009
                                                  -----------  -----------

 Sales                                            $   182,887  $   260,364
 Cost of sales                                        149,669      213,842
 Lower of cost or market adjustment                         -       29,378
 Asset impairment                                       1,029          623
                                                  -----------  -----------
      Gross profit                                     32,189       16,521
                                                         17.6%         6.3%

 Selling, general and administrative expenses          44,408       54,316
 Goodwill and other intangible asset impairment             -      517,628
 Restructuring charge                                     524        2,479
                                                  -----------  -----------
      Loss from operations                            (12,743)    (557,902)

 Interest income                                           25          195
 Interest expense                                      (4,532)      (6,818)
 Debt extinguishment and refinancing costs               (174)           -
 Other income (expense), net                            1,159         (317)
                                                  -----------  -----------

 Loss before income taxes                             (16,265)    (564,842)
 Benefit for income taxes                              (5,779)     (34,861)
                                                  -----------  -----------
                                                         35.5%         6.2%

 Net loss                                         $   (10,486) $  (529,981)
 Convertible preferred stock dividends and
  accretion                                             8,134            -
 Convertible preferred stock beneficial
  conversion feature                                      187            -
                                                  -----------  -----------
 Net loss applicable to common shares             $   (18,807) $  (529,981)
                                                  ===========  ===========


 Loss per share:
    Basic                                         $     (1.04) $   (136.32)
    Diluted                                       $     (1.04) $   (136.32)

 Weight average number of common shares
  outstanding:
    Basic                                              18,093        3,888
    Diluted                                            18,093        3,888

 Decrease in sales                                      -29.8%

 Gross profit percentage                                 17.6%         6.3%

 Selling, general and administrative
    expenses percentage                                  24.3%        20.9%


 (1) Amounts have been retrospectively adjusted as a result of the
     adoption, effective November 2, 2009, of ASC Subtopic 470-20,
     "Debt with Conversion and Other Options", and ASC Subtopic 260-10,
     "Earnings per Share." In addition, on March 5, 2010, the Company
     filed an amendment to its Certificate of Incorporation to effect the
     Reverse Stock Split at an exchange ratio of 1-for-5.  As such, we
     have retrospectively adjusted basic and diluted earnings per share,
     common stock, stock options and common stock equivalents for the
     reverse stock split in all periods presented.





                        NCI BUILDING SYSTEMS, INC.
                         CONDENSED BALANCE SHEETS
                              (In thousands)
                          (2009 as Adjusted (1))


                                                    January 31, November 1,
                                                       2010        2009
                                                    ----------- -----------
                                                    (Unaudited)
 ASSETS
     Cash and cash equivalents                      $    77,666 $    90,419
     Restricted cash                                      4,207       5,154
     Accounts receivable, net                            61,085      82,889
     Inventories                                         89,980      71,537
     Deferred income taxes                               18,989      18,787
     Income taxes receivable                             33,592      27,622
     Investments in debt and equity securities, at
      market                                              3,529       3,359
     Prepaid expenses and other                          13,081      14,494
     Assets held for sale                                 3,930       4,963
                                                    ----------- -----------
         Total current assets                           306,059     319,224
                                                    ----------- -----------

     Property and equipment, net                        225,933     232,510
     Goodwill                                             5,200       5,200
     Other assets                                        47,721      57,584
                                                    ----------- -----------
         Total assets                               $   584,913 $   614,518
                                                    =========== ===========

 LIABILITIES AND SHAREHOLDERS' EQUITY
     Current portion of long-term debt              $    14,434 $    14,164
     Note payable                                             -         481
     Accounts payable                                    71,313      73,594
     Accrued expenses                                    74,928      90,446
                                                    ----------- -----------
         Total current liabilities                      160,675     178,685
                                                    ----------- -----------

     Long-term debt                                     135,569     136,085
     Deferred income taxes                               18,891      18,848
     Other long-term liabilities                          7,785       8,007

     Series B cumulative convertible participating
      preferred stock                                   230,949     222,815

     Shareholders' equity                                31,044      50,078
                                                    ----------- -----------
         Total liabilities and shareholders' equity $   584,913 $   614,518
                                                    =========== ===========

 (1) Amounts have been retrospectively adjusted as a result of the
     adoption, effective November 2, 2009, of ASC Subtopic 470-20, "Debt
     with Conversion and Other Options."




                        NCI BUILDING SYSTEMS, INC.
                    CONDENSED STATEMENTS OF CASH FLOWS
                                (Unaudited)
                          (2009 as Adjusted (1))
                              (In thousands)

                                                 For the Three Months Ended
                                                  January 31,  February 1,
                                                      2010         2009
                                                  -----------  -----------

Cash flows from operating activities:
      Net loss                                    $   (10,486) $  (529,981)
      Adjustments to reconcile net loss to net
       cash (used in) provided by operating
       activities:
         Depreciation and amortization                  8,701        8,649
         Non-cash interest expense on convertible
          notes                                             -        2,099
         Share-based compensation expense                 801        1,372
         Gain on embedded derivative                     (919)           -
         Loss on sale of property, plant and
          equipment                                       103           11
         Lower of cost or market reserve                    -       29,378
         Provision for doubtful accounts                 (416)         975
         Provision (benefit) for deferred income
          taxes                                            45      (17,380)
         Asset impairments                              1,029          623
         Impairment of goodwill and intangible
          assets                                            -      517,628
Changes in operating assets and liabilities, net
 of effect of acquisitions:
         Accounts receivable                           22,231       76,865
         Inventories                                  (18,443)      19,725
         Income tax receivable                         (4,253)      (1,608)
         Prepaid expenses and other                      (233)        (376)
         Accounts payable                              (1,468)     (21,028)
         Accrued expenses                             (15,836)     (55,778)
         Other, net                                       (32)      (1,002)
                                                  -----------  -----------

Net cash (used in) provided by operating
 activities                                           (19,176)      30,172
                                                  -----------  -----------

Cash flows from investing activities:
      Capital expenditures                             (1,287)      (7,016)
      Proceeds from the sale of property, plant
       and equipment                                       52           51
      Other                                                 -           67
                                                  -----------  -----------

Net cash used in investing activities                  (1,235)      (6,898)
                                                  -----------  -----------

Cash flows from financing activities:
      Refund of restricted cash                         8,772            -
      Proceeds from ABL facility                            3            -
      Payment of convertible notes                        (59)           -
      Payments on long-term debt                         (190)        (230)
      Payments of financing costs                           -          (18)
      Payments on note payable                           (481)           -
      Proceeds from stock option exercises                  -           12
      Purchase of treasury stock                         (379)        (413)
                                                  -----------  -----------

Net cash provided by (used in) financing
 activities                                             7,666         (649)
                                                  -----------  -----------

Effect of exchange rate changes on cash and cash
 equivalents                                               (8)          16
                                                  -----------  -----------

Net (decrease) increase in cash                       (12,753)      22,641

Cash at beginning of period                            90,419       68,201
                                                  -----------  -----------

Cash at end of period                             $    77,666  $    90,842
                                                  ===========  ===========

(1) Amounts have been retrospectively adjusted as a result of the
    adoption, effective November 2, 2009, of ASC Subtopic 470-20, "Debt
    with Conversion and Other Options."



                        NCI Building Systems, Inc.
                            Business Segments
                                (Unaudited)
                              (In thousands)
                          (2009 as Adjusted (1))

                   Three Months Ended Three Months Ended     $        %
                     January 31, 2010  February 1, 2009  Inc/(Dec)  Change
                     ----------------  ----------------  ---------  ------
                                % of              % of
                                Total             Total
Sales:                          Sales             Sales
  Metal coil coating $  39,031     21  $  41,501     16  $  (2,470)   -6.0%
  Metal components      86,806     48    121,480     46    (34,674)  -28.5%
  Engineered building
   systems             102,618     56    152,409     59    (49,791)  -32.7%
  Intersegment sales   (45,568)   (25)   (55,026)   (21)     9,458   -17.2%
                     ---------  -----  ---------  -----  ---------  ------
    Total net sales  $ 182,887    100  $ 260,364    100  $ (77,477)  -29.8%
                     =========  =====  =========  =====  =========  ======

                                % of              % of
Operating income (loss):        Sales             Sales
  Metal coil
   coating           $   3,119      8  $ (63,760)  (154) $  66,879   104.9%
  Metal components       1,791      2   (128,607)  (106)   130,398   101.4%
  Engineered building
   systems              (5,829)    (6)  (352,283)  (231)   346,454    98.3%
  Corporate            (11,824)     -    (13,252)     -      1,428    10.8%
                     ---------  -----  ---------  -----  ---------  ------
    Total operating
     income (loss)
     (% of sales)    $ (12,743)    (7) $(557,902)  (214) $ 545,159    97.7%
                     =========  =====  =========  =====  =========  ======

(1) Amounts have been retrospectively adjusted as a result of the
    adoption, effective November 2, 2009, of ASC Subtopic 470-20, "Debt
    with Conversion and Other Options."





                        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 31, 2010 and FEBRUARY 1, 2009
                                (Unaudited)
                              (In thousands)
                          (2009 as Adjusted (2))


                         For the Three Months Ended January 31, 2010
                   -------------------------------------------------------
                     Metal               Engineered
                     Coil      Metal      Building
                   Coating   Components    Systems   Corporate Consolidated
                   --------  ----------  ----------  --------  -----------

Operating income
 (loss), GAAP
 basis             $  3,119  $    1,791  $   (5,829) $(11,824) $   (12,743)
Goodwill impairment       -           -           -         -            -
Lower of cost or
 market charge            -           -           -         -            -
Asset impairment          -           -       1,029         -        1,029
Restructuring
 charges                  -         109         415         -          524
                   --------  ----------  ----------  --------  -----------
"Adjusted" operating
 income (loss) (1) $  3,119  $    1,900  $   (4,385) $(11,824) $   (11,190)
                   ========  ==========  ==========  ========  ===========



                         For the Three Months Ended February 1, 2009
                   -------------------------------------------------------
                     Metal               Engineered
                     Coil      Metal      Building
                   Coating   Components    Systems   Corporate Consolidated
                   --------  ----------  ----------  --------  -----------
Operating income
 (loss), GAAP
 basis             $(63,760) $ (128,607) $ (352,283) $(13,252) $  (557,902)
Goodwill impairment  59,854     116,131     341,643         -      517,628
Lower of cost or
 market charge        5,657      14,484       9,237         -       29,378
Asset impairment          -           -         623         -          623
Restructuring
 charges                 44         582       1,835        18        2,479
                   --------  ----------  ----------  --------  -----------
"Adjusted" operating
 income (loss) (1) $  1,795  $    2,590  $    1,055  $(13,234) $    (7,794)
                   ========  ==========  ==========  ========  ===========


(1) The Company discloses a tabular comparison of "Adjusted" operating
    income (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 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
    income.

(2) Amounts have been retrospectively adjusted as a result of the
    adoption, effective November 2, 2009, of  ASC Subtopic 470-20, "Debt
    with Conversion and Other Options."






                        NCI BUILDING SYSTEMS, INC.
              NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
     "ADJUSTED" LOSS PER DILUTED COMMON SHARE AND NET LOSS COMPARISON
                                (Unaudited)
                          (2009 as Adjusted (2))

                                                  Fiscal Three Months Ended
                                                   January 31,  February 1,
                                                       2010        2009
                                                    ----------  ----------
Loss per diluted common share, GAAP basis           $    (1.04) $  (136.32)
Goodwill and other intangible asset impairment               -      128.57
Debt extinguishment and refinancing costs                 0.01           -
Lower of cost or market adjustment                           -        4.82
Convertible preferred stock beneficial conversion
 feature                                                  0.01           -
Restructuring charge                                      0.02        0.41
Asset impairment                                          0.04        0.10
Gain on embedded derivative                              (0.03)          -
                                                    ----------  ----------
"Adjusted" diluted loss per common share (1)        $    (0.99) $    (2.42)
                                                    ==========  ==========


                                                  Fiscal Three Months Ended
                                                   January 31,  February 1,
                                                       2010        2009
                                                    ----------  ----------
Net loss applicable to common shares, GAAP basis    $  (18,807) $ (529,981)
Goodwill and other intangible asset impairment               -     499,883
Debt extinguishment and refinancing costs                  113           -
Lower of cost or market adjustment                           -      18,740
Convertible preferred stock beneficial conversion
 feature                                                   187           -
Restructuring charge                                       340       1,581
Asset impairment                                           669         397
Gain on embedded derivative                               (597)          -
                                                    ----------  ----------
"Adjusted" net loss applicable to common shares (1) $  (18,095) $   (9,380)
                                                    ==========  ==========



(1) The Company discloses a tabular comparison of "Adjusted" loss per
    diluted common s hare 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.

(2) Amounts have been retrospectively adjusted as a result of the
    adoption, effective November 2, 2009, of  ASC Subtopic 470-20, "Debt
    with Conversion and Other Options", and ASC Subtopic 260-10, "Earnings
    per Share." In addition, on March 5, 2010, the Company filed an
    amendment to its Certificate of Incorporation to effect the Reverse
    Stock Split at an exchange ratio of 1-for-5.  As such, we have
    retrospectively adjusted basic and diluted earnings per share, common
    stock, stock options, and common stock equivalents for the reverse
    stock split in all periods presented.





                        NCI BUILDING SYSTEMS, INC.
              NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
      COMPUTATION OF EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION,
         AMORTIZATION, CASH AND OTHER NONCASH ITEMS ("ADJUSTED EBITDA")
                                (Unaudited)
                              (In thousands)
                          (2009 as Adjusted (2))

                                                                 Trailing
                       2nd Qtr   3rd Qtr    4th Qtr    1st Qtr   12 Months
                        May 3,   August 2, November 1, January    January
                        2009       2009      2009      31, 2010  31, 2010
                      ---------  --------- ---------  ---------  ---------
Net income (loss)     $(121,571) $   2,607 $(101,851) $ (10,486) $(231,301)
Add:
  Depreciation and
   amortization           8,436      7,586     7,640      7,522     31,184
  Consolidated
   interest expense,
   net                    6,168      6,487     9,578      4,507     26,740
  Provision for taxes   (16,382)     1,825    (7,495)    (5,779)   (27,831)
  Non-cash charges:
    Stock-based
     compensation         1,177      1,241     1,045        801      4,264
    Goodwill and
     intangible
     impairment         104,936          -         -          -    104,936
    Asset impairment      5,295         26       347      1,029      6,697
    Lower of cost or
     market charges      10,608          -         -          -     10,608
    Embedded derivative       -          -         -       (919)      (919)
  Cash restructuring
   charges                3,796      1,213     1,564        524      7,097
  Transaction costs         629        401   107,718        174    108,922
                      ---------  --------- ---------  ---------  ---------

  Adjusted EBITDA (1) $   3,092  $  21,386 $  18,546  $  (2,627) $  40,397
                      ---------  --------- ---------  ---------  ---------


                                                                  Trailing
                       2nd Qtr    3rd Qtr   4th Qtr    1st Qtr   12 Months
                      April 27,   July 27,  November   February   February
                         2008       2008    2, 2008    1, 2009    1, 2009
                      ---------  --------- ---------  ---------  ---------
Net income (loss)     $  13,466  $  30,494 $  23,218  $(529,981) $(462,803)
Add:
  Depreciation and
   amortization           8,645      8,665     8,334      8,324     33,968
  Consolidated interest
   expense, net           7,748      7,463     7,761      6,623     29,595
  Provision for taxes     8,537     18,554    17,092    (34,861)     9,322
  Non-cash charges:
    Stock-based
     compensation         3,442      1,563     1,628      1,372      8,005
    Goodwill and
     intangible
     impairment               -          -         -    517,628    517,628
    Asset impairment          -          -       157        623        780
    Lower of cost or
     market charges           -          -     2,739     29,378     32,117
    Embedded derivative       -          -         -          -          -
  Cash restructuring
   charges                  640         43       150      2,479      3,312
  Transaction costs           -          -         -          -          -
                      ---------  --------- ---------  ---------  ---------

  Adjusted EBITDA (1) $  42,478  $  66,782 $  61,079  $   1,585  $ 171,924
                      ---------  --------- ---------  ---------  ---------


(1) On October 20, 2009, the Company amended and restated its Term Note
    facility which defines adjusted EBITDA.  Adjusted EBITDA excludes
    non-cash charges for goodwill and other asset impairments, lower of
    cost or market charges 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.

(2) Amounts have been retrospectively adjusted as a result of the
    adoption, effective November 2, 2009, of  ASC Subtopic 470-20, "Debt
    with Conversion and Other Options."





                        NCI Building Systems, Inc.
  Reconciliation of Segment Sales to Third Party Segment Sales (Internal
                               Information)
                               (Unaudited)
                              (In thousands)
                          (2009 as Adjusted (1))


                             1st Qtr       1st Qtr                     %
                               2010          2009          Inc/(Dec) Change
                             -------       --------
 Metal Coil Coating
     Total Sales              39,031   17%   41,501    13%  (2,470)     -6%
     Intersegment            (26,223)       (30,077)         3,854     -13%
                             -------       --------
     Third Party Sales        12,808    7%   11,424     4%   1,384      12%

     Operating Income (Loss)   3,119   24%  (63,760) -558%  66,879     105%

 Metal Components
     Total                    86,806   38%  121,480    39% (34,674)    -29%
     Intersegment            (16,668)       (20,438)         3,770     -18%
                             -------       --------
     Third Party Sales        70,138   38%  101,042    39% (30,904)    -31%

     Operating Income (Loss)   1,791    3% (128,607) -127% 130,398     101%

 Engineered Building Systems
     Total                   102,618   45%  152,409    48% (49,791)    -33%
     Intersegment             (2,677)        (4,511)         1,834     -41%
                             -------       --------
     Third Party Sales        99,941   55%  147,898    57% (47,957)    -32%

     Operating Income (Loss)  (5,829)  -6% (352,283) -238% 346,454      98%

 Consolidated
     Total                   228,455  100%  315,390   100% (86,935)    -28%
     Intersegment            (45,568)       (55,026)         9,458     -17%
                             -------       --------
     Third Party Sales       182,887  100%  260,364   100% (77,477)    -30%

     Operating Income (Loss) (12,743)  -7% (557,902) -214% 545,159      98%

(1) Amounts have been retrospectively adjusted as a result of the
    adoption, effective November 2, 2009, of  ASC Subtopic 470-20, "Debt
    with Conversion and Other Options."

Contact Information

  • CONTACT:
    Betsy Brod or Lynn Morgen
    MBS Value Partners
    +1-212-750-5800
    for NCI Building Systems, Inc.