NCI Building Systems Reports Higher Second Quarter Results

HOUSTON, June 2 /PRNewswire-FirstCall/ -- NCI Building Systems, Inc. today announced financial results for the second quarter ended April 27, 2008. Sales for the second quarter of fiscal 2008 increased 13.1% to $416.1 million compared with $367.9 million for the second quarter of fiscal 2007. Net income for the second quarter of fiscal 2008 was $14.9 million or $0.76 per diluted share compared to $6.5 million, or $0.31 per diluted share, for the second quarter of fiscal 2007. Included in the second quarter 2008 net income were special charges of approximately $2.8 million or $0.09 per diluted share, related to executive retirement costs and exiting the Components segment's residential overhead door product line.

Norman C. Chambers, Chairman, President and Chief Executive Officer of NCI, remarked, "We posted very strong operating results this quarter, substantially exceeding expectations. Solid demand from the industrial, institutional and agricultural markets resulted in year-over-year volume increases across all of our product groups. We achieved significant operating leverage resulting from increased plant capacity utilization and the benefits of continued integration of RCC with our hub and spoke delivery system."

"Within today's difficult business environment, we worked effectively with customers to optimize their visibility in the face of rising steel costs. Our Buildings Group shipping schedule remained firm; our Components Group performed exceptionally well, benefiting from strong third party demand, which drove a significant increase in operating profits."

Segment Performance

The Coatings group posted strong revenue and operating performance on both a year-over-year and sequential basis. The increase was primarily attributable to higher revenues as a result of the product shift from toll coating services to package sales, which are higher Dollar but lower margin transactions, as well as rising steel prices. Plant capacity utilization during the second quarter was 77% and operating margin was 25%, in line with the Company's target range, which reflects the product mix shift.

The Components group achieved operating margin improvement as operating performance has continued to recover from the second quarter of 2007. Revenue increases were driven by volume growth and to a lesser extent, the increased price of steel. Significant improvement in utilization as a result of higher volumes, combined with cost reduction initiatives, which were initially undertaken in the second half of 2007, contributed to the improvement in operating income.

Revenue for the Buildings Group rose 14% on both a year-over-year and sequential basis. Plant utilization increased to 71% for the period and the Buildings Group recorded solid operating margin improvement. The backlog for the Buildings Group was $449 million at the end of the quarter, flat with the 2007 second quarter and up 9.3% from the first quarter of 2008.

Outlook

"We continue to see solid demand from key end markets, as evidenced by our Buildings Group backlog and the current level of quoting activity. In our third fiscal quarter we expect accelerated steel price increases. We are actively monitoring the impact of higher prices on bookings and continue to work with customers to effectively manage through this challenging period," Mr. Chambers said.

Based upon currently available information and performance to date, the Company has narrowed its guidance, expecting full year 2008 earnings per diluted share to range from $3.19 to $3.44. Therefore our guidance for the second half of our fiscal year is $2.04 to $2.29 per diluted share.

"We continue to execute on our longer term strategic plan, building upon our strong competitive position, our reputation for superior customer service and our solid relationships with steel mills. Significant growth in profitability will be driven by technological advances, manufacturing and engineering efficiencies and new products," concluded Mr. Chambers.

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/ beginning at 10:30 a.m. (Eastern Time) on Tuesday, June 3, 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.

NCI BUILDING SYSTEMS, INC. STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data) For the Three For the Six Months Ended Months Ended April 27, April 29, April 27, April 29, 2008 2007 2008 2007 Sales $416,143 $367,912 $777,632 $727,413 Cost of sales 312,703 282,337 591,761 553,956 Gross profit 103,440 85,575 185,871 173,457 24.9% 23.3% 23.9% 23.8% Selling, general and administrative expenses 73,928 68,100 137,863 131,749 Income from operations 29,512 17,475 48,008 41,708 Interest income 102 102 760 226 Interest expense (5,591) (7,420) (12,495) (14,712) Other income, net 252 663 214 679 Income before income taxes 24,275 10,820 36,487 27,901 Provision for income taxes 9,409 4,309 14,111 10,937 38.8% 39.8% 38.7% 39.2% Net income $ 14,866 $ 6,511 $ 22,376 $ 16,964 Net income per share: Basic $ 0.77 $ 0.33 $ 1.16 $ 0.86 Diluted $ 0.76 $ 0.31 $ 1.15 $ 0.80 Average shares outstanding: Basic 19,312 19,628 19,281 19,663 Diluted 19,440 20,962 19,420 21,091 Depreciation/amortization expense 8,845 8,133 18,189 16,502 Increase in sales 13.1% 6.9% Increase in diluted earnings per share 145.2% 43.8% Gross profit percentage 24.9% 23.3% 23.9% 23.8% Selling, general and administrative expenses percentage 17.8% 18.5% 17.7% 18.1% Income from operations percentage 7.1% 4.8% 6.2% 5.7% NCI BUILDING SYSTEMS, INC. CONDENSED BALANCE SHEETS (In thousands) April 27, October 28, 2008 2007 (Unaudited) ASSETS Cash and cash equivalents $ 35,747 $ 75,054 Accounts receivable, net 152,782 158,435 Inventories 158,537 137,725 Deferred income taxes 24,212 23,439 Prepaid expenses and other 24,630 16,259 Total current assets 395,908 410,912 Property and equipment, net 256,333 261,994 Goodwill 616,400 616,400 Other assets 52,655 53,752 Total assets $1,321,296 $1,343,058 LIABILITIES AND SHAREHOLDERS' EQUITY Current portion of long-term debt $ 920 $ 22,312 Note payable 3,243 - Accounts payable 121,719 130,161 Accrued expenses 106,980 129,298 Total current liabilities 232,862 281,771 Long-term debt 473,940 474,725 Deferred income taxes 44,839 43,638 Other long-term liabilities 5,246 3,228 Shareholders' equity 564,409 539,696 Total liabilities and shareholders' equity $1,321,296 $1,343,058 NCI BUILDING SYSTEMS, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) For the Six Months Ended April 27, 2008 April 29, 2007 Net used in operating activities (4,206) (13,700) Cash flows from investing activities: Acquisitions, net of cash acquired - (18,829) Capital expenditures (13,285) (22,350) Other 2,795 570 Net cash used in investing activities (10,490) (40,609) Cash flows from financing activities: Payments on revolving line of credit - (42,000) Borrowings on revolving line of credit - 86,000 Payments on long-term debt (22,177) (474) Payment on note payable (649) - Proceeds from stock option exercises 447 940 Excess tax benefits from stock-based compensation arrangements 154 546 Purchase of treasury stock (2,216) (10,763) Net cash (used in) provided by financing activities (24,441) 34,249 Effect of exchange rate changes on cash and cash equivalents (170) (31) Net decrease in cash (39,307) (20,091) Cash at beginning of period 75,054 25,038 Cash at end of period $ 35,747 $ 4,947 NCI Building Systems, Inc. Business Segments (Unaudited) (In thousands) Three Months Three Months Ended Ended April 27, 2008 April 29, 2007 % of % of $ Total Total Inc/ % Sales Sales (Dec) Change Sales: Metal coil coating $ 80,171 19 $ 63,844 17 $16,327 25.6% Metal components 176,534 42 161,096 44 15,438 9.6% Engineered building systems 248,503 60 218,449 59 30,054 13.8% Intersegment sales (89,065) (21) (75,477) (20) (13,588) 18.0% Total net sales $416,143 100 $367,912 100 $48,231 13.1% % of % of Operating income: Sales Sales Metal coil coating $ 6,705 8 $ 5,761 9 $944 16.4% Metal components 17,734 10 9,122 6 8,612 94.4% Engineered building systems 22,729 9 15,741 7 6,988 44.4% Corporate (17,656) - (13,149) - (4,507) 34.3% Total operating income (% of sales) $ 29,512 7 $ 17,475 5 $12,037 68.9% Six Months Six Months Ended Ended April 27, 2008 April 29, 2007 % of % of $ Total Total Inc/ % Sales Sales (Dec) Change Sales: Metal coil coating $142,446 18 $123,063 17 $19,383 15.8% Metal components 331,372 43 318,117 44 13,255 4.2% Engineered building systems 465,231 60 436,690 60 28,541 6.5% Intersegment sales (161,417) (21) (150,457) (21) (10,960) 7.3% Total net sales $777,632 100 $727,413 100 $50,219 6.9% % of % of Operating income: Sales Sales Metal coil coating $9,400 7 $10,404 8 $(1,004) -9.7% Metal components 28,825 9 21,208 7 7,617 35.9% Engineered building systems 41,598 9 36,442 8 5,156 14.1% Corporate (31,815) - (26,346) - (5,469) 20.8% Total operating income (% of sales) $ 48,008 6 $ 41,708 6 $ 6,300 15.1% 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 April 27, April 29, 2008 2007 Net income $ 69,141 $ 66,688 Add: Provision for income taxes 44,271 40,735 Interest expense 26,382 29,798 Depreciation and amortization 36,372 33,320 Non-cash FAS 123(R) 10,775 7,276 Adjusted EBITDA (1) $ 186,941 $ 177,817 (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. NCI BUILDING SYSTEMS, INC. NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS "ADJUSTED" EARNINGS PER SHARE COMPARISON (Unaudited) Fiscal Three Months Ended April 27, April 29, 2008 2007 Earnings per diluted share, GAAP basis $ 0.76 $ 0.31 Effect of convertible notes - (1) 0.02 (1) "Adjusted" diluted earnings per share (A) $ 0.76 $ 0.33 Fiscal Six Months Ended April 27, April 29, 2008 2007 Earnings per diluted share, GAAP basis $ 1.15 $ 0.80 Effect of convertible notes - (1) 0.05 (1) "Adjusted" diluted earnings per share (A) $ 1.15 $ 0.85 (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 April 29, 2007 of 1,006,940 shares and for the six months ended April 29, 2007 of 1,103,388 shares of the Company's convertible notes as if they were converted during the period. NCI Building Systems, Inc. Reconciliation of Segment Sales to Third Party Segment Sales (Internal Information) (Unaudited) (In thousands) Inc/ % 2nd Qtr 2008 2nd Qtr 2007 (Dec) Change Metal Coil Coating Total Sales 80,171 16% 63,844 15% 16,327 26% Intersegment (52,883) (43,019) (9,864) 23% Third Party Sales 27,288 7% 20,825 6% 6,463 31% Operating Income 6,705 25% 5,761 28% 944 16% Metal Components Total 176,534 35% 161,096 36% 15,438 10% Intersegment (26,031) (23,376) (2,655) 11% Third Party Sales 150,503 36% 137,720 37% 12,783 9% Operating Income 17,734 12% 9,122 7% 8,612 94% Engineered Building Systems Total 248,503 49% 218,449 49% 30,054 14% Intersegment (10,151) (9,082) (1,069) 12% Third Party Sales 238,352 57% 209,367 57% 28,985 14% Operating Income 22,729 10% 15,741 8% 6,988 44% Consolidated Total 505,208 100% 443,389 100% 61,819 14% Intersegment (89,065) (75,477) (13,588) 18% Third Party Sales 416,143 100% 367,912 100% 48,231 13% Operating Income 29,512 7% 17,475 5% 12,037 69% YTD YTD Inc/ % 2nd Qtr 2008 2nd Qtr 2007 (Dec) Change Metal Coil Coating Total Sales 142,446 15% 123,063 14% 19,383 16% Intersegment (95,776) (85,807) (9,969) 12% Third Party Sales 46,670 6% 37,256 5% 9,414 25% Operating Income 9,400 20% 10,404 28% (1,004) -10% Metal Components Total 331,372 35% 318,117 36% 13,255 4% Intersegment (47,835) (46,214) (1,621) 4% Third Party Sales 283,537 36% 271,903 37% 11,634 4% Operating Income 28,825 10% 21,208 8% 7,617 36% Engineered Building Systems Total 465,231 50% 436,690 50% 28,541 7% Intersegment (17,806) (18,436) 630 -3% Third Party Sales 447,425 58% 418,254 58% 29,171 7% Operating Income 41,598 9% 36,442 9% 5,156 14% Consolidated Total 939,049 100% 877,870 100% 61,179 7% Intersegment (161,417) (150,457) (10,960) 7% Third Party Sales 777,632 100% 727,413 100% 50,219 7% Operating Income 48,008 6% 41,708 6% 6,300 15%