Form 8-K NCI BUILDING SYSTEMS For: Dec 30

��

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

��

�

FORM 8-K

��

�

CURRENT REPORT

�

Pursuant to Section�13 or 15(d) of the

Securities Exchange Act of 1934

�

Date of Report (Date of earliest event reported): December 30, 2014 (December 30, 2014)

�

��

�

NCI Building Systems, Inc.

(Exact name of Registrant as specified in its charter)

��

�

Delaware (State or other jurisdiction of incorporation)

001-14315 (Commission File Number)

76-0127701 (IRS Employer Identification No.)

��

10943 North Sam Houston Parkway West Houston, Texas (Address of principal executive offices)

�

� 77064 (Zip Code)

�

Registrant’s telephone number, including area code: (281)�897-7788

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�

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

�

�

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

�

�

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

�

�

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

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�

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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�

Item 8.01. Other Events.

�

On November 12, 2014, NCI Building Systems, Inc. (the “Company” or “NCI”), filed a Current Report on Form 8-K with the Securities and Exchange Commission announcing, among other things, that NCI Group, Inc., a wholly-owned subsidiary of the Company and Steelbuilding.com, Inc., a wholly owned subsidiary of NCI Group, Inc. (together with NCI Group, Inc., the “Buyers”), had entered into an Interest Purchase Agreement (“Interest Purchase Agreement”) with SMST Management Corp., a Pennsylvania corporation, and Riverfront Capital Fund, a Pennsylvania limited partnership (each a “Seller” and collectively, “Sellers”), and CENTRIA, a Pennsylvania general partnership (“CENTRIA”), pursuant to which Buyers have agreed, subject to the terms and conditions set forth therein, to acquire all of the general partnership interests of CENTRIA, in exchange for $245,000,000 in cash (such acquisition, the “Acquisition”).

�

The Company is filing this Current Report on Form 8-K in order to make publicly available certain audited and unaudited historical financial information of CENTRIA and unaudited pro forma financial information of NCI described in Items 9.01(a) and (b) below and incorporated by reference herein.

�

Item�9.01. Financial Statements and Exhibits.

�

(a) Financial Statements of Business to be Acquired.

�

1. The audited balance sheets of CENTRIA as of December 31, 2013 and 2012 and the related statements of earnings, partners’ equity and cash flows for the years ended December 31, 2013, 2012 and 2011 and the notes to these financial statements, together with the report thereon of Ernst & Young, filed as Exhibit 99.1 hereto and incorporated by reference herein.

�

2. The unaudited interim balance sheets of CENTRIA as of September 30, 2014 and 2013 and the related unaudited interim statements of earnings, partners’ equity and cash flows for the nine-month periods then ended and the notes to these financial statements, filed as Exhibit 99.2 hereto and incorporated by reference herein.

�

(b) Pro Forma Financial Information.

�

The unaudited pro forma combined balance sheet of NCI Building Systems, Inc. at November 2, 2014 and unaudited pro forma combined statements of operations of NCI Building Systems, Inc. for the fiscal year ended November 2, 2014 are attached hereto as Exhibit 99.3 and are incorporated by reference herein.

�

(d) Exhibits.

�

Exhibit Number	�	Description
�	�	�
23.1	�	Consent of Ernst & Young.
�	�	�
99.1	�	Audited Financial Statements of CENTRIA for the years ended December 31, 2013, 2012 and 2011.
�	�	�
99.2	�	Unaudited Interim Financial Statements of CENTRIA for the nine-month periods ended September 30, 2014 and 2013.
�	�	�
99.3	�	Unaudited Pro Forma Combined Consolidated Financial Information.

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�

SIGNATURES

�

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

�

�	NCI BUILDING SYSTEMS, INC.
�	�
�	BY:	/s/ Mark E. Johnson
�	�	Mark E. Johnson
�	�	Executive Vice President, Chief Financial
�	�	Officer and Treasurer

�

Date: December 30, 2014

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Exhibit Index

��

Exhibit Number	�	Description
�	�	�
23.1	�	Consent of Ernst & Young.
�	�	�
99.1	�	Audited Financial Statements of CENTRIA for the years ended December 31, 2013, 2012 and 2011.
�	�	�
99.2	�	Unaudited Interim Financial Statements of CENTRIA for the nine-month periods ended September 30, 2014 and 2013.
�	�	�
99.3	�	Unaudited Pro Forma Combined Consolidated Financial Information.

�

�

�

Exhibit 23.1

�

Consent of Independent Auditors

�

We consent to the incorporation by reference of our report dated March 3, 2014, with respect to the consolidated financial statements of CENTRIA and subsidiaries included in this Current Report (Form 8-K), as of December 31, 2013 and 2012 and for the three years in the period ended December 31, 2013, in the following registration statements and related prospectuses:

�

NCI Building Systems, Inc. Form S-8	�	File No. 333-186467
NCI Building Systems, Inc. Form S-8	�	File No. 333-176737
NCI Building Systems, Inc. Form S-8	�	File No. 333-193057
NCI Building Systems, Inc. Form S-8	�	File No. 333-173417
NCI Building Systems, Inc. Form S-8	�	File No. 333-172822
NCI Building Systems, Inc. Form S-8	�	File No. 333-166279
NCI Building Systems, Inc. Form S-8	�	File No. 333-162568
NCI Building Systems, Inc. Form S-8	�	File No. 333-139983
NCI Building Systems, Inc. Form S-8	�	File No. 333-124266
NCI Building Systems, Inc. Form S-8	�	File No. 333-111142
NCI Building Systems, Inc. Form S-8	�	File No. 333-111139
NCI Building Systems, Inc. Form S-8	�	File No. 333-34899
NCI Building Systems, Inc. Form S-8	�	File No. 333-14957
NCI Building Systems, Inc. Form S-8	�	File No. 333-12921
NCI Building Systems, Inc. Form S-3	�	File No. 333-186466
NCI Building Systems, Inc. Form S-3	�	File No. 333-156448

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�

	/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania	�
December�29, 2014	�

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�

Exhibit 99.1

�

Consolidated Financial Statements

�

CENTRIA and Subsidiaries

Years Ended December�31, 2013, 2012, and 2011

With Report of Independent Auditors

�

�

CENTRIA and Subsidiaries

�

Consolidated Financial Statements

�

Years Ended December�31, 2013, 2012, and 2011

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Contents

�

Report of Independent Auditors	1
�	�
Consolidated Financial Statements	�
�	�
Consolidated Balance Sheets	3
Consolidated Statements of Income	5
Consolidated Statements of Comprehensive Income	6
Consolidated Statements of Partners’ Capital	7
Consolidated Statements of Cash Flows	8
Notes to Consolidated Financial Statements	9

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Report of Independent Auditors

�

The Partners

CENTRIA

�

We have audited the accompanying consolidated financial statements of CENTRIA (a�Pennsylvania general partnership) and subsidiaries, which comprise the consolidated balance sheets as of December�31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, partners’ capital, and cash flows for each of the three years in the period ended December�31, 2013, and the related notes to the consolidated financial statements.

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Management’s Responsibility for the Financial Statements

�

Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

�

Auditor’s Responsibility

�

Our responsibility is to express an opinion on these financial statements based on our audits. We�conducted our audits in accordance with auditing standards generally accepted in the United�States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

�

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

�

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Opinion

�

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of CENTRIA and subsidiaries at December�31, 2013 and 2012, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December�31, 2013, in conformity with U.S. generally accepted accounting principles.

�

/s/ Ernst & Young LLP

Pittsburgh, Pennsylvania

March 3, 2014

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�

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CENTRIA and Subsidiaries

�

Consolidated Balance Sheets

�

�	�	December 31						�
�	�	2013		�	�	2012		�
Assets	�	�	�	�	�	�	�	�
Current assets:	�	�	�	�	�	�	�	�
Cash and cash equivalents	�	$	8,932,316	�	�	$	19,633,246	�
Accounts receivable, net of allowance for uncollectible amounts of $2,238,000 and $2,633,000, respectively	�	�	33,627,364	�	�	�	24,914,145	�
Costs and estimated earnings in excess of billings on uncompleted contracts	�	�	1,320,129	�	�	�	2,101,598	�
Inventories, net of reserves of $2,558,000 and $2,218,000, respectively	�	�	23,591,426	�	�	�	26,744,088	�
Prepaid expenses and other current assets	�	�	2,045,108	�	�	�	1,834,701	�
Unbilled retention	�	�	652,151	�	�	�	506,055	�
Total current assets	�	�	70,168,494	�	�	�	75,733,833	�
�	�	�	�	�	�	�	�	�
Property and equipment:	�	�	�	�	�	�	�	�
Land and buildings	�	�	10,376,917	�	�	�	10,376,917	�
Machinery and equipment	�	�	77,523,220	�	�	�	73,146,334	�
Construction-in-process	�	�	693,494	�	�	�	805,524	�
Office furniture and equipment	�	�	6,097,237	�	�	�	5,459,535	�
Vehicles	�	�	141,443	�	�	�	141,443	�
�	�	�	94,832,311	�	�	�	89,929,753	�
Less accumulated depreciation and amortization	�	�	68,765,997	�	�	�	64,202,595	�
Net property and equipment	�	�	26,066,314	�	�	�	25,727,158	�
�	�	�	�	�	�	�	�	�
Prepaid pension expense	�	�	1,322,117	�	�	�	–	�
Other noncurrent assets	�	�	100,467	�	�	�	100,728	�
Total assets	�	$	97,657,392	�	�	$	101,561,719	�

�

See accompanying notes.

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�	�	December 31						�
�	�	2013		�	�	2012		�
Liabilities and partners’ capital	�	�	�	�	�	�	�	�
Current liabilities:	�	�	�	�	�	�	�	�
Current portion of long-term debt	�	$	2,090,284	�	�	$	610,323	�
Accounts payable	�	�	10,291,172	�	�	�	14,393,670	�
Bank overdrafts	�	�	2,973,663	�	�	�	3,469,842	�
Accrued wages and benefits	�	�	8,001,440	�	�	�	7,376,590	�
Other accrued expenses	�	�	11,767,105	�	�	�	10,673,299	�
Billings in excess of costs and estimated earnings on uncompleted contracts	�	�	18,331,928	�	�	�	22,717,373	�
Total current liabilities	�	�	53,455,592	�	�	�	59,241,097	�
�	�	�	�	�	�	�	�	�
Deferred revenue for long-term warranty	�	�	2,358,891	�	�	�	2,618,916	�
Long-term debt	�	�	3,700,000	�	�	�	5,793,980	�
Pension and other postretirement benefits	�	�	6,814,234	�	�	�	9,963,403	�
Other noncurrent liabilities	�	�	5,189,593	�	�	�	6,656,668	�
Total liabilities	�	�	71,518,310	�	�	�	84,274,064	�
�	�	�	�	�	�	�	�	�
Partners’ capital:	�	�	�	�	�	�	�	�
Limited and general partners	�	�	35,571,237	�	�	�	31,927,591	�
Note receivable from partner	�	�	(4,422,544	)	�	�	(4,422,544	)
Accumulated other comprehensive loss	�	�	(5,009,611	)	�	�	(10,217,392	)
Total partners’ capital	�	�	26,139,082	�	�	�	17,287,655	�
�	�	�	�	�	�	�	�	�
Total liabilities and partners’ capital	�	$	97,657,392	�	�	$	101,561,719	�

�

See accompanying notes.

�

��

CENTRIA and Subsidiaries

�

Consolidated Statements of Income

��

�

�

Year Ended December 31

�

�

�

2013

�

�

2012

�

�

2011

�

�

�

�

�

�

�

�

�

�

�

Revenues

�

$

225,932,819

�

�

$

214,764,000

�

�

$

218,311,434

�

Cost of goods sold

�

�

169,182,698

�

�

�

164,122,614

�

�

�

171,017,748

�

Gross profit

�

�

56,750,121

�

�

�

50,641,386

�

�

�

47,293,686

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Operating expenses:

�

�

�

�

�

�

�

�

�

�

�

�

Selling

�

�

16,571,769

�

�

�

16,077,677

�

�

�

15,561,988

�

General and administrative

�

�

15,947,274

�

�

�

16,134,417

�

�

�

13,678,301

�

Depreciation

�

�

5,020,757

�

�

�

4,904,516

�

�

�

4,833,405

�

Total operating expenses

�

�

37,539,800

�

�

�

37,116,610

�

�

�

34,073,694

�

Income from operations

�

�

19,210,321

�

�

�

13,524,776

�

�

�

13,219,992

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Other expense (income):

�

�

�

�

�

�

�

�

�

�

�

�

Interest expense

�

�

62,479

�

�

�

183,615

�

�

�

253,978

�

Other income, net

�

�

141

�

�

�

(20,313

)

�

�

(27,037

)

Total other expense

�

�

62,620

�

�

�

163,302

�

�

�

226,941

�

Income before income tax provision

�

�

19,147,701

�

�

�

13,361,474

�

�

�

12,993,051

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Provision for income taxes:

�

�

�

�

�

�

�

�

�

�

�

�

Current

�

�

104,055

�

�

�

89,315

�

�

�

18,853

�

Deferred

�

�

–

�

�

�

(67,800

)

�

�

(50,307

)

Change in valuation allowance

�

�

–

�

�

�

67,800

�

�

�

50,307

�

Total provision for income taxes

�

�

104,055

�

�

�

89,315

�

�

�

18,853

�

Net income

�

$

19,043,646

�

�

$

13,272,159

�

�

$

12,974,198

�

�

See accompanying notes.

�

��

CENTRIA and Subsidiaries

�

Consolidated Statements of Comprehensive Income

��

�

�

Year Ended December 31

�

�

�

2013

�

�

2012

�

�

2011

�

�

�

�

�

�

�

�

�

�

�

Net income

�

$

19,043,646

�

�

$

13,272,159

�

�

$

12,974,198

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Other comprehensive income (loss):

�

�

�

�

�

�

�

�

�

�

�

�

Pension and other postretirement benefits liability

�

�

5,207,781

�

�

�

766,709

�

�

�

(3,253,947

)

Other comprehensive income (loss)

�

�

5,207,781

�

�

�

766,709

�

�

�

(3,253,947

)

Comprehensive income

�

$

24,251,427

�

�

$

14,038,868

�

�

$

9,720,251

�

�

See accompanying notes.

�

��

CENTRIA and Subsidiaries

�

Consolidated Statements of Partners’ Capital

�

�

�

�

�

�

Note

�

�

Accumulated

�

�

�

�

�

�

�

�

�

Receivable

�

�

Other

�

�

�

�

�

�

Partners’

�

�

From

�

�

Comprehensive

�

�

�

�

�

�

Capital

�

�

Partner

�

�

Income (Loss)

�

�

Total

�

�

�

�

�

�

�

�

�

�

�

�

�

�

December 31, 2010

�

$

35,481,234

�

�

$

(4,422,544

)

�

$

(7,730,154

)

�

$

23,328,536

�

Net income

�

�

12,974,198

�

�

�

–

�

�

�

–

�

�

�

12,974,198

�

Other comprehensive loss

�

�

–

�

�

�

–

�

�

�

(3,253,947

)

�

�

(3,253,947

)

Distribution to partners

�

�

(15,400,000

)

�

�

–

�

�

�

–

�

�

�

(15,400,000

)

December 31, 2011

�

�

33,055,432

�

�

�

(4,422,544

)

�

�

(10,984,101

)

�

�

17,648,787

�

Net income

�

�

13,272,159

�

�

�

–

�

�

�

–

�

�

�

13,272,159

�

Other comprehensive income

�

�

–

�

�

�

–

�

�

�

766,709

�

�

�

766,709

�

Distribution to partners

�

�

(14,400,000

)

�

�

–

�

�

�

–

�

�

�

(14,400,000

)

December 31, 2012

�

�

31,927,591

�

�

�

(4,422,544

)

�

�

(10,217,392

)

�

�

17,287,655

�

Net income

�

�

19,043,646

�

�

�

–

�

�

�

–

�

�

�

19,043,646

�

Other comprehensive income

�

�

–

�

�

�

–

�

�

�

5,207,781

�

�

�

5,207,781

�

Distribution to partners

�

�

(15,400,000

)

�

�

–

�

�

�

–

�

�

�

(15,400,000

)

December 31, 2013

�

$

35,571,237

�

�

$

(4,422,544

)

�

$

(5,009,611

)

�

$

26,139,082

�

�

See accompanying notes.

�

��

CENTRIA and Subsidiaries

�

Consolidated Statements of Cash Flows

��

�

�

Year Ended December 31

�

�

�

2013

�

�

2012

�

�

2011

�

Operating activities

�

�

�

�

�

�

�

�

�

�

�

�

Net income

�

$

19,043,646

�

�

$

13,272,159

�

�

$

12,974,198

�

Adjustments to reconcile net income to net cash provided by operating activities:

�

�

�

�

�

�

�

�

�

�

�

�

Depreciation

�

�

5,020,757

�

�

�

4,904,516

�

�

�

4,833,405

�

Changes in assets and liabilities:

�

�

�

�

�

�

�

�

�

�

�

�

Accounts receivable

�

�

(8,713,219

)

�

�

9,926,216

�

�

�

(6,162,303

)

Costs and estimated earnings in excess of billings on uncompleted contracts

�

�

781,469

�

�

�

811,878

�

�

�

(1,111,532

)

Inventories

�

�

3,152,662

�

�

�

(4,439,470

)

�

�

(5,460,401

)

Prepaid expenses and other current assets, and noncurrent assets

�

�

(210,407

)

�

�

202,944

�

�

�

(277,360

)

Unbilled retention

�

�

(146,096

)

�

�

808,550

�

�

�

(182,990

)

Accounts payable

�

�

(4,502,237

)

�

�

(2,208,810

)

�

�

5,971,013

�

Accrued expenses, deferred revenue, and other noncurrent liabilities

�

�

(504,623

)

�

�

8,853,865

�

�

�

(604,997

)

Billings in excess of costs and estimated earnings on uncompleted contracts

�

�

(4,385,445

)

�

�

3,220,917

�

�

�

2,690,448

�

Pension and other postretirement benefits

�

�

736,495

�

�

�

34,537

�

�

�

(813,928

)

Net cash provided by operating activities

�

�

10,273,002

�

�

�

35,387,302

�

�

�

11,855,553

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Investing activities

�

�

�

�

�

�

�

�

�

�

�

�

Capital expenditures, net

�

�

(5,359,913

)

�

�

(5,463,169

)

�

�

(5,018,061

)

Net cash used in investing activities

�

�

(5,359,913

)

�

�

(5,463,169

)

�

�

(5,018,061

)

�

�

�

�

�

�

�

�

�

�

�

�

�

Financing activities

�

�

�

�

�

�

�

�

�

�

�

�

Payments on debt, net

�

�

(614,019

)

�

�

(2,769,867

)

�

�

(2,012,936

)

Distributions to partners

�

�

(15,000,000

)

�

�

(14,000,000

)

�

�

(15,400,000

)

Net cash used in financing activities

�

�

(15,614,019

)

�

�

(16,769,867

)

�

�

(17,412,936

)

�

�

�

�

�

�

�

�

�

�

�

�

�

Net (decrease) increase in cash and cash equivalents

�

�

(10,700,930

)

�

�

13,154,266

�

�

�

(10,575,444

)

Cash and cash equivalents, beginning of year

�

�

19,633,246

�

�

�

6,478,980

�

�

�

17,054,424

�

Cash and cash equivalents, end of year

�

$

8,932,316

�

�

$

19,633,246

�

�

$

6,478,980

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Supplemental data

�

�

�

�

�

�

�

�

�

�

�

�

Cash paid during the year for:

�

�

�

�

�

�

�

�

�

�

�

�

Interest

�

$

65,111

�

�

$

188,655

�

�

$

256,938

�

�

See accompanying notes.

�

���

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements

�

December�31, 2013 and 2012

�

1. Organization and Operation

�

CENTRIA (the Partnership) is engaged in the manufacturing of exterior metal wall and roof systems for the nonresidential construction market primarily throughout the United States. CENTRIA, Inc. (CI) is a wholly owned subsidiary of the Partnership and is engaged in the installation of exterior metal wall and roof systems, usually under long-term, fixed-price, construction-type contracts. CENTRIA International LLC (International) is a single-member LLC that is engaged in the international sales and manufacture of CENTRIA products. MetalWorks, L.P. (MetalWorks) is a majority-owned subsidiary of the Partnership that was engaged in the manufacture and distribution of steel roofing shingles for residential and commercial buildings throughout North America (see Note�4).

�

2. Partnership Agreement

�

The Partnership was formed by a Partnership Agreement dated February�11, 1993, by three general partners pursuant to the Pennsylvania Uniform Partnership Act. This agreement was amended on April�25, 1997, effective as of January�1, 1997, in connection with the buyout of the former owners of H.H. Robertson. The Amended and Restated Partnership Agreement provides, among other things:

�

a.

The term of the Partnership expires December�31, 2050; however, dissolution will occur as the result of the sale or other disposition of all or substantially all of the Partnership’s properties. In addition, dissolution will occur with the written consent or affirmative vote of all of the partners.

�

b.

With certain exceptions, net profits and losses are to be allocated to the managing general partner until its capital account balance reaches a defined balance, then 20% to the managing general partner and 80% to the other partner.

�

c.

Distributions are to be made by the managing general partner to pay the federal and state income tax liabilities resulting from ownership interests in the Partnership. Tax distributions were approximately $5,000,000 during each of the years ended 2013, 2012, and 2011, respectively. Also, partner distributions paid during 2013, 2012, and 2011 were approximately $10,000,000, $9,000,000, and $10,000,000, respectively. The managing general partner receives a management fee of approximately $400,000 per year. The aforementioned amounts are recorded as equity distributions.

�

�

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

���

3. Summary of Significant Accounting Policies

�

The accompanying consolidated financial statements reflect the application of the following significant accounting policies.

�

Principles of Consolidation

�

The consolidated financial statements include the accounts of the Partnership, CI, International, and MetalWorks (see Note�4). All significant intercompany transactions and accounts have been eliminated.

�

Reclassification

�

Certain reclassifications were made to the prior period accompanying financial statements to conform to the current period presentation.

�

The December�31, 2012 other accrued expenses was decreased and the other noncurrent liabilities was increased by $5,460,000 to properly present the current and long-term portion of a vendor obligation. The reclassification had no impact on the results of operations or liquidity of the Partnership.

�

Operating Cycle

�

The length of CI’s construction contracts vary, but are typically between 6 and 24 months. Amounts applicable to construction contracts are classified as current assets and liabilities in the accompanying consolidated financial statements, even though some portions are not expected to be realized within one year.

�

Revenue Recognition

�

Revenue for manufactured products is recognized as the material is shipped to the customer, while revenues for engineered and long-term construction contracts are recognized under the percentage-of-completion method of accounting. Revenues under this method are measured by the percentage of direct costs (primarily material and labor) incurred to date to the total estimated cost for each engineered or construction contract. Shipping and handling fees charged to customers are recorded as revenues and the related costs are recorded as cost of sales.

�

All indirect costs related to contract performance and general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

�

�

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

��

3. Summary of Significant Accounting Policies (continued)

�

Cash and Cash Equivalents

�

The Partnership considers all short-term investments with maturities of three months or less when acquired to be cash equivalents. The carrying amount approximates fair value.

�

Accounts Receivable and Allowance for Uncollectible Accounts

�

Management continually evaluates its accounts receivable and adjusts its allowance for uncollectible accounts for changes in potential credit risk. The Partnership does not require collateral for its trade accounts receivable. Trade accounts receivable are charged off directly to the allowance for uncollectible accounts when deemed uncollectible. The allowance is estimated based on the aging of the accounts receivable and historical collection experience.

�

There are no significant concentrations of credit risk exceeding 10% to any individual customer.

�

Inventories

�

Inventories, net of reserves, are carried at the lower of first-in, first-out (FIFO) cost or market and consist of the following:

�

�	�	December�31						�
�	�	2013		�	�	2012		�
�	�	�		�	�	�		�
Raw materials	�	$	11,881,906	�	�	$	11,836,882	�
Work-in-process	�	�	5,493,220	�	�	�	6,528,439	�
Finished goods	�	�	6,216,300	�	�	�	8,378,767	�
�	�	$	23,591,426	�	�	$	26,744,088	�

�

Work-in-process and finished goods inventories include material, labor, and overhead and other direct expenses applied to the production of contract work.

�

�

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

��

3. Summary of Significant Accounting Policies (continued)

�

Property and Equipment

�

Property and equipment are stated at cost. Depreciation, including amortization of assets held under capital lease, is provided using the straight-line method over the estimated useful lives of the assets, which are as follows:

�

Buildings	40 years
Manufacturing equipment	12 years
Office furniture, equipment, and computers	6–10 years
Automobiles and trucks	3–5 years

�

Leasehold improvements are amortized over the lesser of ten years or the term of the lease. Assets capitalized under capital leases are amortized in accordance with the respective class of owned assets or the life of the lease, whichever is shorter. Expenses for repairs, maintenance, and renewals are charged to operations as incurred. Expenditures that improve an asset or extend its useful life are capitalized.

�

Long-Lived Assets

�

It is the Partnership’s current policy to review long-lived assets for possible impairment when indicators of potential impairment are present on the basis of whether the carrying amount of such assets is fully recoverable from projected, undiscounted net cash flows from the related business. If such review indicates that the carrying amount of long-lived assets is not recoverable, then the Partnership’s current policy is to reduce the carrying amount of such assets to their fair value.

�

Note Receivable

�

The Partnership has a note receivable of approximately $4,423,000 due from one of its partners. As this note will ultimately be repaid through equity distributions, the balance is displayed as a reduction to partners’ capital. The note accrues interest at the average Euro rate (1.68% as of December�31, 2013), and interest is paid semiannually. The note had an original maturity of February�28, 2008, but was extended during 2007 until February�28, 2018.

��

�

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

���

3. Summary of Significant Accounting Policies (continued)

�

Workers’ Compensation

�

The Partnership is a member of Affinity Insurance Ltd. (Affinity) which provides for insurance related to workers’ compensation, general liability, and automobile coverage. Affinity was created to provide long-term insurance security for a group of participants, which is a form of a captive insurance company owned by its insureds (called shareholders) domiciled in the Cayman Islands. In 2013 the Partnership replaced an outstanding letter of credit to Affinity of approximately $278,000 with a deposit of $197,000. The undiscounted estimated liability of approximately $248,000 and $289,000 included in other accrued expenses at December�31, 2013 and 2012, respectively, includes the estimate of the ultimate costs for incidents that may have occurred but have not yet been reported, and amounts for the maximum funded premium requirements.

�

Advertising

�

Advertising costs are expensed as incurred and totaled approximately $2,400,000, $2,500,000, and $2,440,000 for 2013, 2012, and 2011, respectively. These amounts are included in selling expenses in the accompanying consolidated statements of income.

�

Customer Concessions

�

The Partnership provides for the estimated costs that may be incurred to remedy deficiencies of quality or performance in its products. These concessions extend over a specified period of time depending upon the product. The Partnership accrues a provision for estimated future costs based upon the historical relationship between claims and costs incurred. The reserve is included in other accrued expenses in the accompanying consolidated balance sheets. The Partnership periodically reviews the adequacy of the accrual for product claims and adjusts the customer concession reserve for actual experience as necessary.

�

Vendor Rebates

�

The Partnership recognizes revenues on vendor rebates based upon the percentage of product purchased by the total quantity per the agreement.

�

��

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

�

3. Summary of Significant Accounting Policies (continued)

�

Extended Warranties/Deferred Revenue

�

The Partnership also sells extended warranties to certain customers. Provisions for estimated future warranty costs are accrued based upon the project’s square footage. Once accrued, the Partnership expenses claims as they are incurred and recognizes the warranty income ratably over the life of the contract. The reserve is included in deferred revenue in the accompanying consolidated balance sheets.

�

The following table reconciles the changes in the Partnership’s product warranty reserve:

�

�

�

Year Ended December�31

�

�

�

2013

�

�

2012

�

�

2011

�

�

�

�

�

�

�

�

�

�

�

Balance at January�1

�

$

2,618,916

�

�

$

2,459,943

�

�

$

2,216,164

�

Deferred revenue for sales of extended warranties in�the current year

�

�

67,286

�

�

�

346,620

�

�

�

455,945

�

Warranty income

�

�

(327,311

)

�

�

(187,647

)

�

�

(212,166

)

Balance at December�31

�

$

2,358,891

�

�

$

2,618,916

�

�

$

2,459,943

�

��

Fair Value Measurements

�

As of December�31, 2013 and 2012, the Partnership held cash and cash equivalents that are required to be measured at fair value on a recurring basis. The valuation techniques used to measure fair value are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs are generally unsupported by market activity. The three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value, include:

�

•

Level�1�– Quoted prices for identical assets or liabilities in active markets.

�

•

Level�2�– Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable.

�

•

Level�3�– Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

�

��

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

�

3. Summary of Significant Accounting Policies (continued)

�

As of December�31, 2013 and 2012, the Partnership’s cash and cash equivalents were comprised of $5,423,500 and $14,247,257 of money market securities classified as Level�2, respectively. The remaining cash balance of $3,508,816 and $5,385,989 was classified as Level�1. These financial assets are measured at fair value on a recurring basis based upon quoted prices in active markets.

�

Use of Estimates in Preparation of Financial Statements

�

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The use of estimates is an integral part of applying the percentage-of-completion method of accounting for contracts.

�

Recent Accounting Pronouncements Adopted

�

In May�2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.�2011-04, Fair Value Measurements, to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with GAAP and International Financial Reporting Standards (IFRSs). The amendments explain how to measure fair value. They do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices. The amendments result in common fair value measurement and disclosure requirements in GAAP and IFRS. Some of the amendments clarify the application of existing fair value measurement requirements and others change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. Many of the previous fair value requirements are not changed by this standard. The amendments in this standard are to be applied prospectively and are effective during interim and annual periods beginning after December�15, 2011. Adoption of this standard did not have a material effect on the consolidated financial statements, results of operations, or liquidity of the Partnership.

�

��

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

�

3. Summary of Significant Accounting Policies (continued)

�

In June�2011, the FASB issued amendments to financial accounting standards related to the presentation of comprehensive income which requires entities to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, these amendments require an entity to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. In December�2012, the FASB deferred the requirement for presenting the reclassification adjustments from comprehensive income to net income by component within the face of the financial statements. These amendments, with retrospective application, are effective for interim and annual periods in fiscal year 2013. A separate consolidated statement of comprehensive income is included in these consolidated financial statements. Other than the change in presentation, these changes do not have an impact on the consolidated financial statements, results of operations, or liquidity of the Partnership.

�

In February�2013, the FASB issued ASU No.�2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The standard requires reporting and disclosure about changes in accumulated other comprehensive income (AOCI) balances and reclassifications out of AOCI. The guidance is to be applied prospectively and is effective for fiscal years beginning after December�15, 2013 with early adoption permitted. The Partnership will adopt this standard for fiscal year ending December�31, 2014 and does not anticipate this adoption to have an impact on the consolidated financial statements, results of operations, or liquidity of the Partnership.

�

4. Sale of MetalWorks

�

In May�2004, substantially all of the assets of MetalWorks were sold. Proceeds from the sale were $6,200,000 with cash of approximately $5,700,000 received at closing plus an escrow of $500,000 which was paid to the Partnership in May�2007. The asset sales agreement includes an earn-out extending for ten years based on product produced and sold by the buyer to be paid quarterly to MetalWorks. Warranty and product return liability obligations for certain time frames were retained by MetalWorks as provided in the asset sales agreement. These expired in 2011. A supply agreement was signed between the Partnership and the buyer for the materials required by the buyer to produce the MetalWorks products. The future earn-out has not been recorded since it is contingent upon the buyer reaching certain product sales milestones. The Partnership received no earn-outs in 2013, 2012, or 2011.

�

��

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

�

5. Other Accrued Expenses

�

The components of other accrued expenses were as follows:

�

�	�	2013		�	�	2012		�
�	�	�		�	�	�		�
Warranty	�	$	7,365,957	�	�	$	6,013,155	�
Other taxes and interest	�	�	787,082	�	�	�	406,117	�
Vendor obligation	�	�	1,440,000	�	�	�	1,440,000	�
Current pension and OPEB obligation	�	�	587,224	�	�	�	1,255,282	�
Workers’ compensation	�	�	247,628	�	�	�	289,501	�
Other	�	�	1,339,214	�	�	�	1,269,244	�
Total	�	$	11,767,105	�	�	$	10,673,299	�

�

6. Revolving Loan and Credit Agreement

�

The Partnership entered into an amended and restated credit agreement with a bank that is scheduled to expire on January�31, 2016 (the Credit Facility). The Credit Facility has a maximum availability under a revolving loan facility of $22,000,000. Revolver borrowings are limited to the extent the Partnership does not maintain a borrowing base for qualified accounts receivable and inventory as defined.

�

The Credit Facility enables the Partnership to incur additional senior indebtedness up to $750,000 to finance equipment. The Credit Facility also provides the Partnership with additional borrowing capacity for a new capital expenditure term loan up to $6,000,000. During 2009, the Partnership utilized $4,170,000 related to the capital expenditure term loan, of which $0 and $0 remained outstanding as of December�31, 2013 and 2012, respectively.

�

All borrowings under the Credit Facility bear interest at a defined base rate or Euro rate selected at the discretion of the Partnership, plus an additional applicable margin that is based on a formula taking into consideration the Partnership’s ratio of funded debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) on a rolling four-quarter basis.

�

Letters of credit outstanding and available as of December�31, 2013, are $7,016,000 and $2,984,000, respectively.

�

��

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

�

6. Revolving Loan and Credit Agreement (continued)

�

The Credit Facility requires the Partnership to maintain compliance with certain financial covenants, and places restrictions on distributions to the partners in certain circumstances. The Credit Facility also contains acceleration clauses in the event of a material adverse change in the Partnership’s business. The Partnership’s other debt agreements contain cross-default provisions for events of default in the revolving and term loan agreement. Borrowings on the line of credit are also cross-collateralized by the security granted for the term loan discussed in Note�7. No amounts are outstanding as of December�31, 2013 and 2012. The Partnership is in compliance with all covenants in the credit agreement as of December�31, 2013.

�

7. Long-Term Debt

�

Long-term debt consisted of the following:

�

�	�	December�31						�
�	�	2013		�	�	2012		�
Sheridan Industrial Revenue Bonds, with interest payable monthly at variable rates based on U.S. treasury obligations capped at 11.0% through August�1, 2014 (.2% at December�31, 2013). $2.7�million due August�1, 2020, $2.0�million due August�1, 2014 and $1.0�million due August�1, 2016. Secured by letter of credit.	�	$	5,700,000	�	�	$	5,700,000	�
Capital lease with payments due monthly of $53,527 with imputed interest rate of 7.27%. Payments due through March�2014.	�	�	90,284	�	�	�	704,303	�
Total	�	�	5,790,284	�	�	�	6,404,303	�
Less current portion of long-term debt	�	�	2,090,284	�	�	�	610,323	�
Long-term debt	�	$	3,700,000	�	�	$	5,793,980	�

��

Borrowings for the term loans under the credit agreement are secured by substantially all of the Partnership’s assets and a cross-collateralization of the security granted for the revolving loan discussed in Note�6.

�

In 2004, the Partnership entered into a financing lease that meets the criteria for capital lease accounting. The Partnership is required to make monthly payments of $41,816 for 84 months through March�2014. The lease is secured by equipment at the Cambridge plant.

�

��

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

�

7. Long-Term Debt (continued)

�

The carrying amounts of the Partnership’s variable rate long-term debt approximate fair value. Certain of the Partnership’s long-term borrowings do bear interest at fixed rates. Since these borrowings are privately held and their fair value is dependent upon the evaluation by a willing buyer of many company-specific and general economic variables, an estimate of the fair value of these long-term borrowings is not readily available; however, management estimates that the market value approximates the carrying value.

�

Future minimum payments for all long-term debt and capital leases are as follows:

�

2014	�	$	2,090,284	�
2015	�	�	–	�
2016	�	�	1,000,000	�
2017	�	�	–	�
2018	�	�	–	�
Thereafter	�	�	2,700,000	�
Total	�	$	5,790,284	�

��

8. Employee Benefit Plans

�

The Partnership has noncontributory defined benefit pension plans covering certain of its hourly employees. Benefits are calculated based on fixed amounts for each year of service rendered. Partnership contributions to the plan are made based upon the amounts required or allowed under the Employee Retirement Income Security Act of 1974 (ERISA).

�

The Partnership sponsors postretirement medical and life insurance plans that cover certain of its employees and their spouses. The contributions to the plans by retirees vary from none to 25% of the total premiums paid. The postretirement plan was amended in August�2009, and an adjustment of approximately $582,000 was recorded to reduce the obligation for retiree medical participants. The amendment grandfathered current retirees in the previous retiree plan, but as active participants retire, they will be entered into the new plan that includes a higher deductible.

�

��

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

�

8. Employee Benefit Plans (continued)

�

On December�8, 2003, the Prescription Drug, Improvement and Modernization Act of 2003 (the�Act) was signed into law. The Act introduces a prescription drug benefit under Medicare, as well as a federal subsidy to certain sponsors of postretirement health care benefit plans that provide a prescription drug benefit to their enrollees. On May�19, 2004, the FASB issued guidance related to accounting and disclosure requirements related to the Prescription Drug, Improvement and Modernization Act of 2003, that provides guidance on accounting for the effects of the Act for employers that sponsor postretirement health care plans that provide drug benefits. The guidance also requires employers to provide certain disclosures regarding the effect of the federal subsidy provided by the Act.

�

The Partnership’s actuary has calculated that the Partnership’s drug benefits are actuarially equivalent to the Act. The Partnership has not elected to file for the subsidy. It is estimated that upon election of the credit, the impact would be a decrease to the accumulated benefit obligation of approximately $345,000, with the offset to the actuarial gain/loss. There would be no impact to the net amount recognized in the accompanying consolidated balance sheets.

�

The financial statement disclosures for the years ended December�31^st, for the Partnership’s employee benefit plans are as follows:

�

�

�

Pension Benefits

�

�

Other Benefits

�

�

�

2013

�

�

2012

�

�

2011

�

�

2013

�

�

2012

�

�

2011

�

Change in benefit obligation

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Benefit obligation at beginning of year

�

$

12,471,299

�

�

$

11,120,815

�

�

$

9,253,893

�

�

$

9,179,518

�

�

$

9,724,924

�

�

$

8,736,587

�

Service cost

�

�

179,161

�

�

�

164,585

�

�

�

166,514

�

�

�

51,817

�

�

�

47,167

�

�

�

39,313

�

Interest cost

�

�

456,522

�

�

�

496,632

�

�

�

496,622

�

�

�

275,380

�

�

�

398,151

�

�

�

440,043

�

Actuarial loss (gain)

�

�

(825,168

)

�

�

1,212,059

�

�

�

1,711,646

�

�

�

(1,598,151

)

�

�

(482,382

)

�

�

1,308,038

�

Benefits paid

�

�

(534,575

)

�

�

(522,792

)

�

�

(507,860

)

�

�

(507,106

)

�

�

(508,342

)

�

�

(799,057

)

Benefit obligation at end of year

�

$

11,747,239

�

�

$

12,471,299

�

�

$

11,120,815

�

�

$

7,401,458

�

�

$

9,179,518

�

�

$

9,724,924

�

�

��

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

�

8. Employee Benefit Plans (continued)

�

�

�

Pension Benefits

�

�

Other Benefits

�

�

�

2013

�

�

2012

�

�

2013

�

�

2012

�

Change in plan assets

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Fair value of plan assets at beginning of�year

�

$

10,432,132

�

�

$

8,933,075

�

�

$

–

�

�

$

–

�

Actual gain (loss) on plan assets

�

�

2,459,799

�

�

�

1,309,849

�

�

�

–

�

�

�

–

�

Employer contributions

�

�

712,000

�

�

�

712,000

�

�

�

–

�

�

�

–

�

Benefits paid

�

�

(534,575

)�

�

�

(522,792

)

�

�

–

�

�

�

–

�

Fair value of plan assets at end of year

�

$

13,069,356

�

�

$

10,432,132

�

�

$

–

�

�

$

–

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Funded status at end of year

�

$

1,322,117

�

�

$

(2,039,167

)

�

$

(7,401,458

)

�

$

(9,179,518

)

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Funded status at end of year

�

$

1,322,117

�

�

$

(2,039,167

)

�

$

(7,401,458

)

�

$

(9,179,518

)

Unrecognized net actuarial loss

�

�

2,956,876

�

�

�

6,105,628

�

�

�

2,029,101

�

�

�

4,098,927

�

Unrecognized prior service cost (benefit)

�

�

149,592

�

�

�

214,427

�

�

�

(279,757

)

�

�

(355,389

)

Net amount recognized

�

$

4,428,585

�

�

$

4,280,888

�

�

$

(5,652,114

)

�

$

(5,435,980

)

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Amounts recognized in the consolidated balance sheets consist of

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Prepaid benefit cost�– noncurrent

�

$

1,322,117

�

�

$

–

�

�

$

–

�

�

$

–

�

Accrued benefit liability�– current

�

�

–

�

�

�

(549,003

)

�

�

(587,224

)

�

�

(706,279

)

Accrued benefit liability�– long-term

�

�

–

�

�

�

(1,490,164

)

�

�

(6,814,234

)

�

�

(8,473,239

)

Accumulated other comprehensive loss

�

�

3,106,468

�

�

�

6,320,055

�

�

�

1,749,344

�

�

�

3,743,538

�

Net amount recognized

�

$

4,428,585

�

�

$

4,280,888

�

�

$

(5,652,114

)

�

$

(5,435,980

)

�

The primary actuarial assumptions used in determining the actuarial present value of the projected benefit obligation are as follows:

�

�

�

Pension Benefits

�

�

Other Benefits

�

�

�

2013

�

�

2012

�

�

2013

�

�

2012

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Discount rate

�

�

4.50

%

�

�

3.75

%

�

�

3.75

%

�

�

3.25

%

Expected return on plan assets

�

�

7.75

%

�

�

7.75

%

�

�

7.75

%

�

�

7.75

%

�

��

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

�

8. Employee Benefit Plans (continued)

�

Net periodic pension expense for the years ended December�31 includes the following components:

�

�

�

Pension Benefits

�

�

Other Benefits

�

�

�

2013

�

�

2012

�

�

2011

�

�

2013

�

�

2012

�

�

2011

�

Service cost�– benefits earned during the year

�

$

179,161

�

�

$

164,585

�

�

$

166,514

�

�

$

51,817

�

�

$

47,167

�

�

$

39,313

�

Interest cost on projected benefit obligation

�

�

456,522

�

�

�

496,632

�

�

�

496,622

�

�

�

275,380

�

�

�

398,151

�

�

�

440,043

�

Expected return on plan assets

�

�

(778,841

)

�

�

(752,815

)

�

�

(730,808

)

�

�

–

�

�

�

–

�

�

�

–

�

Net amortization and deferral

�

�

707,461

�

�

�

506,782

�

�

�

340,147

�

�

�

396,043

�

�

�

432,570

�

�

�

372,575

�

Net periodic pension expense

�

$

564,303

�

�

$

415,184

�

�

$

272,475

�

�

$

723,240

�

�

$

877,888

�

�

$

851,931

�

�

The assumptions used in determining the net periodic pension expense for the years ended December�31 are as follows:

�

�

�

Pension Benefits

�

�

Other Benefits

�

�

�

2013

�

�

2012

�

�

2011

�

�

2013

�

�

2012

�

�

2011

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Discount rate

�

�

3.75

%

�

�

4.50

%

�

�

5.50

%

�

�

3.25

%

�

�

4.30

%

�

�

5.50

%

Expected return on plan assets

�

�

7.75

%

�

�

7.75

%

�

�

7.75

%

�

�

7.75

%

�

�

7.75

%

�

�

7.75

%

�

The Partnership’s expected return on plan assets is estimated based on consideration of actual historical returns assuming current asset allocations, as well as judgments about future return prospects for the same current asset allocations based on all available, known information.

�

For measurement purposes, an 8% annual rate of increase in the per capita cost of covered health care benefits was assumed for the first three years beginning in 2013, 7% for the next four years, 6% for the next four years, and 5% per year thereafter.

�

At December�31, 2013, the plan assets exceeded accumulated benefit obligations for pensions. The prepaid pension cost was $1,322,117. The accumulated benefit obligation for the other benefits was $7,401,458.

�

��

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

�

8. Employee Benefit Plans (continued)

�

The accounting records of the Partnership’s pension plans are maintained on the accrual basis of accounting. The assets of the plans are maintained within Principal investment funds. The fair values of the plans’ assets represent their proportionate interest in the fair value of the funds, which is based upon the quoted market value of the underlying investments as of the last business day of the plan year.

�

The following table sets forth by level, within the fair value hierarchy, the pension plan assets carried at fair value as of:

�

�

�

Level�1 (Quoted Prices in Active Markets for Identical Assets)

�

�

Level�2 (Significant Other Observable Inputs)

�

�

Level�3 (Significant Unobservable Inputs)

�

�

Total

�

December�31, 2013

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Equity mutual funds

�

$

9,616,619

�

�

$

149,763

�

�

$

–

�

�

$

9,766,382

�

International equity mutual funds

�

�

258,620

�

�

�

1,952,777

�

�

�

–

�

�

�

2,211,397

�

Bond, mortgage, and other funds

�

�

87,217

�

�

�

965,827

�

�

�

38,533

�

�

�

1,091,577

�

Total assets at fair value

�

$

9,962,456

�

�

$

3,068,367

�

�

$

38,533

�

�

$

13,069,356

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

December�31, 2012

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Equity mutual funds

�

$

7,373,735

�

�

$

81,414

�

�

$

–

�

�

$

7,455,149

�

International equity mutual funds

�

�

228,229

�

�

�

1,713,429

�

�

�

–

�

�

�

1,941,658

�

Bond, mortgage, and other funds

�

�

103,838

�

�

�

894,268

�

�

�

37,219

�

�

�

1,035,325

�

Total assets at fair value

�

$

7,705,802

�

�

$

2,689,111

�

�

$

37,219

�

�

$

10,432,132

�

�

The valuation techniques required by the fair value guidance are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. These two types of inputs create the fair value hierarchy as presented in Note�3.

�

��

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

�

8. Employee Benefit Plans (continued)

�

Level�2 assets held by the Partnership’s pension plan are valued primarily using observable inputs. When Level�2 quoted market prices are unobservable, quotes from independent pricing vendors based on recent trading activity and other relevant information, including market interest rate curves, referenced credit spreads and estimated prepayment rates where applicable, are used for valuation purposes. Alternative investments, which are classified as Level�3, are not readily marketable. They are carried at estimated fair value as provided by investment managers based primarily on unobservable information. Those estimated fair values may differ significantly from the values that would have been used had a ready market for these securities existed. As of December�31, 2013 and 2012, the Partnership’s plan held $38,533 and $37,219, respectively, in investments classified as Level�3. Activity related to these investments was insignificant during the year.

�

The Partnership’s pension plan weighted-average asset allocations, by asset category, are as follows:

�

�	�	December�31						�
�	�	2013		�	�	2012		�
�	�	�		�	�	�		�
Equity mutual funds	�	�	91.65	%	�	�	90.08	%
Debt securities	�	�	8.35	�	�	�	9.92	�
Total	�	�	100.00	%	�	�	100.00	%

�

The Partnership’s investment policies and strategies are set by management and consist of allocations to achieve a reasonable balance between performance and risk aversion. Management and its investment consultant monitor the long-term return rates for its portfolio and change the fund allocation accordingly between large cap, small cap, and international equity mutual funds to achieve the desired return and risk. The current target allocations are 0%–50% mutual fund fixed income securities and 50%–95% mutual fund equities.

�

Planned contributions for fiscal 2014 are expected to approximate $712,000.

�

��

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

�

8. Employee Benefit Plans (continued)

�

The following benefit payments, which reflect expected future service as appropriate, are expected to be paid by the pension plan during the year ending December�31:

�

�	�	Pension Benefits		�	�	Other Benefits		�
�	�	�		�	�	�		�
2014	�	$	642,562	�	�	$	587,224	�
2015	�	�	622,485	�	�	�	613,842	�
2016	�	�	630,813	�	�	�	600,634	�
2017	�	�	641,723	�	�	�	638,940	�
2018	�	�	675,274	�	�	�	663,496	�
2019–2023	�	�	3,997,592	�	�	�	2,944,986	�

�

Amounts in accumulated other comprehensive income (loss) that are expected to be recognized as components of net periodic benefit cost in 2014, are:

�

�

�

Pension

�

�

Other Benefits

�

�

Total

�

�

�

�

�

�

�

�

�

�

�

Amortization of prior service cost

�

$

64,472

�

�

$

(75,632

)

�

$

(11,160

)

Amortization of net actuarial loss

�

�

403,776

�

�

�

244,818

�

�

�

648,594

�

Amortization of accumulated other comprehensive loss

�

$

468,248

�

�

$

169,186

�

�

$

637,434

�

�

To develop the expected long-term rate of return on assets assumption, the Partnership considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.

�

��

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

�

8. Employee Benefit Plans (continued)

�

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

�

�	�	One- Percentage- Point Increase		�	�	One- Percentage- Point Decrease		�
�	�	�		�	�	�		�
Effect on total of service and interest components	�	$	24,791	�	�	$	(21,841	)
Effect on the postretirement benefit obligation	�	�	530,279	�	�	�	(469,533	)

�

The Partnership maintains qualified 401(k) and profit-sharing plans covering substantially all employees. Under the terms of the plans, the Partnership will match 60% of the first 6% of participant contributions and make additional contributions as required by the plans. The Partnership may also make discretionary contributions to the plans. During 2013 and 2012, the Partnership made a matching contribution of approximately $837,000 and $918,000, respectively. The total matching and discretionary contributions made by the Partnership were $3,831,000 and $3,548,000 for the years ended December�31, 2013 and 2012, respectively.

�

9. Accumulated Other Comprehensive Loss

�

The following table sets forth the accumulated other comprehensive loss (income) and consists of the following components:

�

�

�

Currency Translation Adjustment

�

�

Pension and OPEB Minimum Liability

�

�

Accumulated Other Comprehensive Loss (Income)

�

�

�

�

�

�

�

�

�

�

�

Balances, December�31, 2010

�

$

153,799

�

�

$

7,576,355

�

�

$

7,730,154

�

2011 activity

�

�

–

�

�

�

3,253,947

�

�

�

3,253,947

�

Balances, December�31, 2011

�

�

153,799

�

�

�

10,830,302

�

�

�

10,984,101

�

2012 activity

�

�

–

�

�

�

(766,709

)

�

�

(766,709

)

Balances, December�31, 2012

�

�

153,799

�

�

�

10,063,593

�

�

�

10,217,392

�

2013 activity

�

�

–

�

�

�

(5,207,781

)

�

�

(5,207,781

)

Balances, December�31, 2013

�

$

153,799

�

�

$

4,855,812

�

�

$

5,009,611

�

�

��

CENTRIA and Subsidiaries

�

Notes to Consolidated Financial Statements (continued)

�

10. Commitments and Contingencies

�

Minimum annual rental payments under noncancelable operating leases as of December�31, 2013, are as follows:

�

2014	�	$	2,126,827	�
2015	�	�	1,787,376	�
2016	�	�	1,784,706	�
2017	�	�	1,693,624	�
2018	�	�	1,615,912	�
Thereafter	�	�	2,568,370	�

�

The noncancelable operating leases relate to office and warehouse space, forklift trucks, as well as office equipment. Rental expense was approximately $2,051,000 and $1,933,000 during 2013 and 2012, respectively.

�

The Partnership is involved in various claims and litigation incidental to the conduct of its business. Based on consultation with legal counsel, management does not believe that any of these other claims of litigation to which the Partnership is a party will have a material effect on the Partnership’s consolidated financial position or results of operations.

�

11. Subsequent Events

�

Management evaluated subsequent events through March�3, 2014, the date the financial statements were available to be issued.

�

�

��

Exhibit 99.2

�

�	Unaudited Interim Consolidated Financial Statements
�	�
�	CENTRIA and Subsidiaries
�	September 30, 2014

�

��

CENTRIA and Subsidiaries

�

Unaudited Interim Consolidated Financial Statements

�

September�30, 2014

�

Contents

�

Unaudited Interim Consolidated Financial Statements

�

Consolidated Balance Sheets	1
Consolidated Statements of Income	3
Consolidated Statements of Comprehensive Income	4
Consolidated Statements of Partners’ Capital	5
Consolidated Statements of Cash Flows	6
Notes to Unaudited Interim Consolidated Financial Statements	7

�

��

CENTRIA and Subsidiaries

�

Consolidated Balance Sheets

�

�	�	September 30, 2014		�	�	December 31, 2013		�
�	�	(Unaudited)		�	�	�		�
Assets	�	�	�	�	�	�	�	�
Current assets:	�	�	�	�	�	�	�	�
Cash and cash equivalents	�	$	3,163,552	�	�	$	8,932,316	�
Accounts receivable, net of allowance for uncollectible amounts of $2,047,000 and $2,238,000, respectively	�	�	37,478,429	�	�	�	33,627,364	�
Costs and estimated earnings in excess of billings on uncompleted contracts	�	�	3,149,200	�	�	�	1,320,129	�
Inventories, net of reserves of $2,153,000 and $2,558,000, respectively	�	�	28,421,870	�	�	�	23,591,426	�
Prepaid expenses and other current assets	�	�	2,389,769	�	�	�	2,045,108	�
Unbilled retention	�	�	1,043,182	�	�	�	652,151	�
Total current assets	�	�	75,646,002	�	�	�	70,168,494	�
�	�	�	�	�	�	�	�	�
Property and equipment:	�	�	�	�	�	�	�	�
Land and buildings	�	�	10,376,917	�	�	�	10,376,917	�
Machinery and equipment	�	�	77,551,310	�	�	�	77,523,220	�
Construction-in-process	�	�	3,118,836	�	�	�	693,494	�
Office furniture and equipment	�	�	6,097,237	�	�	�	6,097,237	�
Vehicles	�	�	141,443	�	�	�	141,443	�
�	�	�	97,285,743	�	�	�	94,832,311	�
Less accumulated depreciation and amortization	�	�	72,577,869	�	�	�	68,765,997	�
Net property and equipment	�	�	24,707,874	�	�	�	26,066,314	�
�	�	�	�	�	�	�	�	�
Prepaid pension expense	�	�	1,322,117	�	�	�	1,322,117	�
Other noncurrent assets	�	�	101,160	�	�	�	100,467	�
Total assets	�	$	101,777,153	�	�	$	97,657,392	�

�

See accompanying notes.

��

�	�	September 30, 2014		�	�	December 31, 2013		�
�	�	(Unaudited)		�	�	�		�
Liabilities and partners’ capital	�	�	�	�	�	�	�	�
Current liabilities:	�	�	�	�	�	�	�	�
Current portion of long-term debt	�	$	688,439	�	�	$	2,090,284	�
Accounts payable	�	�	16,000,654	�	�	�	10,291,172	�
Bank overdrafts	�	�	4,285,633	�	�	�	2,973,663	�
Accrued wages and benefits	�	�	6,363,543	�	�	�	8,001,440	�
Other accrued expenses	�	�	11,746,739	�	�	�	11,767,105	�
Billings in excess of costs and estimated earnings on uncompleted contracts	�	�	14,663,413	�	�	�	18,331,928	�
Total current liabilities	�	�	53,748,421	�	�	�	53,455,592	�
�	�	�	�	�	�	�	�	�
Deferred revenue for long-term warranty	�	�	2,323,443	�	�	�	2,358,891	�
Long-term debt	�	�	3,700,000	�	�	�	3,700,000	�
Pension and other postretirement benefits	�	�	6,905,807	�	�	�	6,814,234	�
Other noncurrent liabilities	�	�	4,375,964	�	�	�	5,189,593	�
Total liabilities	�	�	71,053,635	�	�	�	71,518,310	�
�	�	�	�	�	�	�	�	�
Partners’ capital:	�	�	�	�	�	�	�	�
Limited and general partners	�	�	39,677,597	�	�	�	35,571,237	�
Note receivable from partner	�	�	(4,422,544	)	�	�	(4,422,544	)
Accumulated other comprehensive loss	�	�	(4,531,535	)	�	�	(5,009,611	)
Total partners’ capital	�	�	30,723,518	�	�	�	26,139,082	�
�	�	�	�	�	�	�	�	�
Total liabilities and partners’ capital	�	$	101,777,153	�	�	$	97,657,392	�

�

See accompanying notes.

�

��

CENTRIA and Subsidiaries

�

Consolidated Statements of Income

(Unaudited)

��

�	�	Nine Months Ended						�
�	�	September 30						�
�	�	2014		�	�	2013		�
�	�	�		�	�	�		�
Revenues	�	$	177,118,067	�	�	$	171,666,103	�
Cost of goods sold	�	�	135,930,609	�	�	�	130,900,006	�
Gross profit	�	�	41,187,458	�	�	�	40,766,097	�
�	�	�	�	�	�	�	�	�
Operating expenses:	�	�	�	�	�	�	�	�
Selling	�	�	13,164,083	�	�	�	12,435,993	�
General and administrative	�	�	11,716,323	�	�	�	11,438,456	�
Depreciation	�	�	3,811,870	�	�	�	4,053,000	�
Total operating expenses	�	�	28,692,276	�	�	�	27,927,449	�
Income from operations	�	�	12,495,182	�	�	�	12,838,648	�
�	�	�	�	�	�	�	�	�
Other expense (income):	�	�	�	�	�	�	�	�
Interest expense	�	�	86,070	�	�	�	57,412	�
Other income, net	�	�	–	�	�	�	–	�
Total other expense	�	�	86,070	�	�	�	57,412	�
Income before income tax provision	�	�	12,409,112	�	�	�	12,781,236	�
�	�	�	�	�	�	�	�	�
Provision for income taxes	�	�	2,752	�	�	�	21,256	�
Net income	�	$	12,406,360	�	�	$	12,759,980	�

�

See accompanying notes.

�

��

CENTRIA and Subsidiaries

�

Consolidated Statements of Comprehensive Income

(Unaudited)

�

�	�	Nine Months Ended						�
�	�	September 30						�
�	�	2014		�	�	2013		�
�	�	�		�	�	�		�
Net income	�	$	12,406,360	�	�	$	12,759,980	�
�	�	�	�	�	�	�	�	�
Other comprehensive income:	�	�	�	�	�	�	�	�
Pension and other postretirement benefits	�	�	478,076	�	�	�	827,628	�
Other comprehensive income	�	�	478,076	�	�	�	827,628	�
Comprehensive income	�	$	12,884,436	�	�	$	13,587,608	�

�

See accompanying notes.

�

��

CENTRIA and Subsidiaries

�

Consolidated Statements of Partners’ Capital

(Unaudited)

�

�

�

�

�

�

Note

�

�

Accumulated

�

�

�

�

�

�

�

�

�

Receivable

�

�

Other

�

�

�

�

�

�

Partners’

�

�

From

�

�

Comprehensive

�

�

�

�

�

�

Capital

�

�

Partner

�

�

Income (Loss)

�

�

Total

�

�

�

�

�

�

�

�

�

�

�

�

�

�

December 31, 2012

�

$

31,927,591

�

�

$

(4,422,544

)

�

$

(10,217,392

)

�

$

17,287,655

�

Net income

�

�

12,759,980

�

�

�

–

�

�

�

–

�

�

�

12,759,980

�

Other comprehensive income

�

�

–

�

�

�

–

�

�

�

827,628

�

�

�

827,628

�

Distribution to partners

�

�

(15,300,000

)

�

�

–

�

�

�

–

�

�

�

(15,300,000

)

September 30, 2013

�

$

29,387,571

�

�

$

(4,422,544

)

�

$

(9,389,764

)

�

$

15,575,263

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

December 31, 2013

�

$

35,571,237

�

�

$

(4,422,544

)

�

$

(5,009,611

)

�

$

26,139,082

�

Net income

�

�

12,406,360

�

�

�

–

�

�

�

–

�

�

�

12,406,360

�

Other comprehensive income

�

�

–

�

�

�

–

�

�

�

478,076

�

�

�

478,076

�

Distribution to partners

�

�

(8,300,000

)

�

�

–

�

�

�

–

�

�

�

(8,300,000

)

September 30, 2014

�

$

39,677,597

�

�

$

(4,422,544

)

�

$

(4,531,535

)

�

$

30,723,518

�

�

See accompanying notes.

�

��

CENTRIA and Subsidiaries

�

Consolidated Statements of Cash Flows

(Unaudited)

�

�	�	Nine Months Ended						�
�	�	September 30						�
�	�	2014		�	�	2013		�
Operating activities	�	�	�	�	�	�	�	�
Net income	�	$	12,406,360	�	�	$	12,759,980	�
Adjustments to reconcile net income to net cash provided by operating activities:	�	�	�	�	�	�	�	�
Depreciation	�	�	3,811,870	�	�	�	4,053,000	�
Changes in assets and liabilities:	�	�	�	�	�	�	�	�
Accounts receivable	�	�	(3,851,065	)	�	�	(9,174,677	)
Costs and estimated earnings in excess of billings on uncompleted contracts	�	�	(1,829,071	)	�	�	(707,069	)
Inventories	�	�	(4,830,444	)	�	�	2,185,652	�
Prepaid expenses and other current assets, and noncurrent assets	�	�	(345,354	)	�	�	(368,874	)
Unbilled retention	�	�	(391,031	)	�	�	(60,479	)
Accounts payable	�	�	5,709,482	�	�	�	1,093,126	�
Accrued expenses, deferred revenue, and other noncurrent liabilities	�	�	(717,294	)	�	�	(1,489,104	)
Billings in excess of costs and estimated earnings on uncompleted contracts	�	�	(3,668,515	)	�	�	(2,318,145	)
Pension and other postretirement benefits	�	�	91,573	�	�	�	(1,011,975	)
Net cash provided by operating activities	�	�	6,386,511	�	�	�	4,961,435	�
�	�	�	�	�	�	�	�	�
Investing activities	�	�	�	�	�	�	�	�
Capital expenditures, net	�	�	(2,453,430	)	�	�	(4,783,759	)
Net cash used in investing activities	�	�	(2,453,430	)	�	�	(4,783,759	)
�	�	�	�	�	�	�	�	�
Financing activities	�	�	�	�	�	�	�	�
Payments on debt, net	�	�	(1,401,845	)	�	�	(144,427	)
Distributions to partners	�	�	(8,300,000	)	�	�	(15,300,000	)
Net cash used in financing activities	�	�	(9,701,845	)	�	�	(15,444,427	)
�	�	�	�	�	�	�	�	�
Net decrease in cash and cash equivalents	�	�	(5,768,764	)	�	�	(15,266,751	)
Cash and cash equivalents, beginning of year	�	�	8,932,316	�	�	�	19,633,246	�
Cash and cash equivalents, end of year	�	$	3,163,552	�	�	$	4,366,495	�
�	�	�	�	�	�	�	�	�
Supplemental data	�	�	�	�	�	�	�	�
Cash paid during the year for:	�	�	�	�	�	�	�	�
Interest	�	$	86,238	�	�	$	56,628	�

�

See accompanying notes.

�

��

CENTRIA and Subsidiaries

�

Notes to Unaudited Interim Consolidated Financial Statements

�

September�30, 2014

�

1. Description of Business and Basis of Presentation

�

Description of Business

�

CENTRIA (the Partnership) is engaged in the manufacturing of exterior metal wall and roof systems for the nonresidential construction market primarily throughout the United States. CENTRIA, Inc. (CI) is a wholly owned subsidiary of the Partnership and is engaged in the installation of exterior metal wall and roof systems, usually under long-term, fixed-price, construction-type contracts. CENTRIA International LLC (International) is a single-member LLC that is engaged in the international sales and manufacture of CENTRIA products. MetalWorks, L.P. (MetalWorks) is a majority-owned subsidiary of the Partnership that is engaged in the manufacture and distribution of steel roofing shingles for residential and commercial buildings throughout North America.

�

Basis of Presentation

�

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal and recurring nature. The accompanying unaudited interim consolidated financial statements include the accounts of CENTRIA and its subsidiaries. Intercompany accounts and transactions are eliminated in consolidation. For further information, refer to the audited consolidated financial statements and notes thereto as of and for the year ended December�31, 2013.

�

2. Partnership Agreement

�

The Partnership was formed by a Partnership Agreement dated February�11, 1993, by three general partners pursuant to the Pennsylvania Uniform Partnership Act. This agreement was amended on April�25, 1997, effective as of January�1, 1997, in connection with the buyout of the former owners of H.H. Robertson. The Amended and Restated Partnership Agreement provides, among other things:

�

a.

The term of the Partnership expires December�31, 2050; however, dissolution will occur as the result of the sale or other disposition of all or substantially all of the Partnership’s properties. In addition, dissolution will occur with the written consent or affirmative vote of all of the partners.

�

��

2. Partnership Agreement (continued)

�

b.

With certain exceptions, net profits and losses are to be allocated to the managing general partner until its capital account balance reaches a defined balance, then 20% to the managing general partner and 80% to the other partner.

�

c.

Distributions are to be made by the managing general partner to pay the federal and state income tax liabilities resulting from ownership interests in the Partnership. Tax distributions were approximately $5,000,000 and $5,000,000 during the nine-month period ended September�30, 2014, and year ended December�31, 2013, respectively. Also, partner distributions paid during the nine-month period ended September�30, 2014, and year ended December�31, 2013, were approximately $3,000,000 and $10,000,000, respectively. The managing general partner receives a management fee of approximately $400,000 per year. The aforementioned amounts are recorded as equity distributions.

�

The Partnership has a note receivable of approximately $4,423,000 due from one of its partners. As this note will ultimately be repaid through equity distributions, the balance is displayed as a reduction to partners’ capital. The note accrues interest at the average Euro rate (1.65% as of September�30, 2014), and interest is paid semiannually. The note had an original maturity of February�28, 2008, but was extended during 2007 until February�28, 2018.

�

3. Accounting Pronouncements

�

In February�2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.�2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The standard requires reporting and disclosure about changes in accumulated other comprehensive income (AOCI) balances and reclassifications out of AOCI. The guidance is to be applied prospectively and is effective for fiscal years beginning after December�15, 2013, with early adoption permitted. The Partnership adopted this standard for fiscal year ending December�31, 2014, and is reflected in the September 30, 2014 financial statements.

�

In May�2014, the FASB issued ASU No.�2014-09 (ASU 2014-09), Revenue from Contracts with Customers, to clarify the principles for recognizing revenue and to improve financial reporting by creating common revenue recognition guidance for GAAP and International Financial Reporting Standards. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December�15, 2017, including interim periods within that reporting period. Early application is not permitted.

�

��

3. Accounting Pronouncements (continued)

�

An entity should apply the amendments in this update using either a full retrospective application or a modified retrospective application. Under the full retrospective application, an entity will apply the standard to each prior reporting period presented. Under the modified retrospective application, an entity recognizes the cumulative effect of initially applying the new standard as an adjustment to the opening balance of retained earnings at the date of initial application. Revenue in periods presented before that date will continue to be reported under guidance in effect before the change. The Partnership is evaluating this new guidance and has not yet determined which approach it will adopt to apply the amendments in ASU 2014-09 or the impact that the adoption of this update will have on its financial statements.

�

4. Inventories

�

Inventories, net of reserves, are carried at the lower of first-in, first-out (FIFO) cost or market and consist of the following:

�

�	�	September�30, 2014		�	�	December�31, 2013		�
�	�	�		�	�	�		�
Raw materials	�	$	12,793,995	�	�	$	11,881,906	�
Work-in-process	�	�	7,478,381	�	�	�	5,493,220	�
Finished goods	�	�	8,149,494	�	�	�	6,216,300	�
�	�	$	28,421,870	�	�	$	23,591,426	�

�

Work-in-process and finished goods inventories include material, labor, and overhead and other direct expenses applied to the production of contract work.

�

5. Extended Warranties/Deferred Revenue

�

The Partnership sells extended warranties to certain customers. Provisions for estimated future warranty costs are accrued based upon the project’s square footage. Once accrued, the Partnership expenses claims as they are incurred and recognizes the warranty income ratably over the life of the contract. The reserve is included in deferred revenue in the accompanying consolidated balance sheets.

�

5. Extended Warranties/Deferred Revenue (continued)

�

The following table reconciles the changes in the Partnership’s product warranty reserve:

�

�	�	September�30, 2014		�	�	December�31, 2013		�
�	�	�		�	�	�		�
Beginning balance	�	$	2,358,891	�	�	$	2,618,916	�
Deferred revenue for sales of extended warranties in�the current year	�	�	249,547	�	�	�	67,286	�
Warranty income	�	�	(284,995	)	�	�	(327,311	)
Ending balance	�	$	2,323,443	�	�	$	2,358,891	�

�

��

6. Revolving Loan and Credit Agreement

�

The Partnership entered into an amended and restated credit agreement with a bank that is scheduled to expire on January�31, 2016 (the Credit Facility). The Credit Facility has a maximum availability under a revolving loan facility of $22,000,000. Revolver borrowings are limited to the extent the Partnership does not maintain a borrowing base for qualified accounts receivable and inventory as defined.

�

The Credit Facility enables the Partnership to incur additional senior indebtedness up to $750,000 to finance equipment. The Credit Facility also provides the Partnership with additional borrowing capacity for a new capital expenditure term loan up to $6,000,000. During 2009, the Partnership utilized $4,170,000 related to the capital expenditure term loan none of which remained outstanding at December 31, 2013.

�

All borrowings under the Credit Facility bear interest at a defined base rate or Euro rate selected at the discretion of the Partnership, plus an additional applicable margin that is based on a formula taking into consideration the Partnership’s ratio of funded debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) on a rolling four-quarter basis.

�

Letters of credit outstanding and available as of September�30, 2014, are $4,650,000 and $5,350,000, respectively.

�

��

7. Long-Term Debt

�

Long-term debt consisted of the following:

�

�	�	September�30, 2014		�	�	December�31, 2013		�
Sheridan Industrial Revenue Bonds, with interest payable monthly at variable rates based on U.S. treasury obligations capped at 6.0% through August�1, 2016 (.2%�at September�30, 2014). $2.7�million due August�1, 2020, and $1.0�million due August�1, 2016. Secured by letter of credit.	�	$	3,700,000	�	�	$	5,700,000	�
Credit facility (Note�6)	�	�	688,439	�	�	�	–	�
Capital lease with payments due monthly of $53,527 with imputed interest rate of 7.27%. Paid complete March�2014.	�	�	–	�	�	�	90,284	�
Total	�	�	4,388,439	�	�	�	5,790,284	�
Less current portion of long-term debt	�	�	688,439	�	�	�	2,090,284	�
Long-term debt	�	$	3,700,000	�	�	$	3,700,000	�

�

Borrowings for the term loans under the credit agreement are secured by substantially all of the Partnership’s assets and a cross-collateralization of the security granted for the revolving loan.

�

8. Employee Benefit Plans

�

The Partnership has noncontributory defined benefit pension plans covering certain of its hourly employees. Benefits are calculated based on fixed amounts for each year of service rendered. Partnership contributions to the plan are made based upon the amounts required or allowed under the Employee Retirement Income Security Act of 1974.

�

��

8. Employee Benefit Plans (continued)

�

The components of net periodic pension cost for the Partnership’s employee benefit plans for the nine-month periods ended September�30, 2014 and 2013 are as follows:

�

�

�

Pension Benefits

�

�

Other Benefits

�

�

�

2014

�

�

2013

�

�

2014

�

�

2013

�

Service cost�– benefits earned during the year

�

$

108,482

�

�

$

134,371

�

�

$

27,591

�

�

$

38,863

�

Interest cost on projected benefit obligation

�

�

384,721

�

�

�

342,392

�

�

�

191,651

�

�

�

206,535

�

Expected return on plan assets

�

�

(675,288

)

�

�

(584,131

)

�

�

–

�

�

�

–

�

Net amortization and deferral

�

�

351,186

�

�

�

530,596

�

�

�

126,890

�

�

�

297,032

�

Net periodic pension expense

�

$

169,101

�

�

$

423,228

�

�

$

346,132

�

�

$

542,430

�

�

During the nine-month periods ended September�30, 2014 and 2013, the Partnership made contributions to the employee benefit plans of $534,000 and $534,000, respectively.

�

9. Fair Value Measurements

�

As of September�30, 2014 and December�31, 2013, the Partnership held cash and cash equivalents that are required to be measured at fair value on a recurring basis. The valuation techniques used to measure fair value are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs are generally unsupported by market activity. The three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value, includes:

�

•

Level�1�–�Quoted prices for identical assets or liabilities in active markets.

�

•

Level�2�–�Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable.

�

•

Level�3�–�Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

�

As of September�30, 2014 and December�31, 2013, the Partnership’s cash and cash equivalents were comprised of $0 and $5,423,500 of money market securities classified as Level�2, respectively. The remaining cash balance of $3,163,552 and $3,508,816 was classified as Level�1. These financial assets are measured at fair value on a recurring basis based upon quoted prices in active markets.

�

10. Contingencies

�

The Partnership is involved in various claims and litigation incidental to the conduct of its business. Based on consultation with legal counsel, management does not believe that any of these other claims of litigation to which the Partnership is a party will have a material effect on the Partnership’s consolidated financial position or results of operations.

�

��

11. Subsequent Events

�

On November�7, 2014, the Partnership entered into an Interest Purchase Agreement to be acquired for approximately $245�million in cash.

�

Management evaluated subsequent events through December�23, 2014, the date the financial statements were available to be issued.

�

�

�

Exhibit 99.3

�

Unaudited Pro Forma Combined Consolidated Financial Information

�

On November 7, 2014, NCI Group, Inc., a Nevada corporation (“NCI Group”) and a wholly owned subsidiary of NCI Building Systems, Inc. (“NCI” or the “Company”), and Steelbuilding.com, Inc., a Delaware corporation and direct wholly owned subsidiary of NCI Group (together with NCI Group, “Buyers”), entered into an Interest Purchase Agreement (“Interest Purchase Agreement”) with SMST Management Corp., a Pennsylvania corporation, and Riverfront Captial Fund, a Pennsylvania limited partnership (each a “Seller” and collectively, “Sellers”), and CENTRIA, a Pennsylvania general partnership (“CENTRIA”), pursuant to which Buyers have agreed, subject to the terms and conditions set forth therein, to acquire all of the general partnership interests of CENTRIA, in exchange for $245,000,000 in cash (such acquisition, the “Acquisition”). CENTRIA is being sold on a cash-free, debt-free basis, and the purchase price is subject to adjustment based on CENTRIA’s working capital at closing.

�

The following unaudited pro forma combined consolidated financial statements are based upon the historical consolidated financial statements of NCI and CENTRIA and have been prepared to give effect to (i) the Acquisition and (ii) the incurrence of an anticipated $250 million of senior unsecured indebtedness in connection therewith and the expected use of the proceeds thereof (together with the Acquisition, the “Transactions”).

�

The unaudited pro forma combined consolidated balance sheet combines the historical consolidated balance sheets of NCI and CENTRIA as of November 2, 2014 and September 30, 2014, respectively, and reflects the pro forma effects of the Transactions as if they had occurred on November 2, 2014. The unaudited pro forma combined consolidated statements of income for the fiscal year ended November 2, 2014 combine the historical statements of income of NCI and CENTRIA, adjusted to reflect the pro forma effects of the Transactions as if they had occurred on November 4, 2013, the beginning of the fiscal period presented. Due to the differing accounting periods of NCI and CENTRIA, the consolidated statement of income of NCI for the fiscal year ended November 2, 2014 has been presented on a combined basis with the statement of income of CENTRIA for the twelve month period ended September 30, 2014.

�

The historical consolidated financial statements referred to above for NCI were included in NCI’s Annual Report on Form 10-K for the fiscal year ended November 2, 2014. The historical financial statements and related notes thereto of CENTRIA are filed with this Form 8-K. CENTRIA’s results of operations will be included in NCI’s results of operations beginning upon the consummation of the Acquisition. The unaudited pro forma combined consolidated financial statements are presented in accordance with Article 11 of Regulation S-X. The accompanying unaudited pro forma combined consolidated financial information and the historical consolidated financial information presented therein should be read in conjunction with and are qualified by the historical consolidated financial statements and notes thereto for NCI described above. The historical financial statements of CENTRIA have been adjusted to reflect certain reclassifications to conform with the Company's financial statement presentation.

�

The unaudited pro forma combined consolidated balance sheet and statements of income include pro forma adjustments which reflect transactions and events that (a) are directly attributable to the Transactions, (b) are factually supportable, and (c) with respect to the statement of income, do not have a continuing impact on consolidated results. The pro forma adjustments are described in the accompanying combined notes to the unaudited pro forma combined consolidated financial statements.

�

�

The unaudited pro forma condensed combined financial statements do not reflect the costs of any integration activities or the synergies expected from the Acquisition. We cannot assure you that we will not incur charges in excess of those included in the pro forma total consideration related to the Transactions or that management will be successful in its efforts to integrate the operations of the companies. The unaudited pro forma combined consolidated financial information is provided for informational purposes only and is not necessarily indicative of the operating results that would have occurred if the Acquisition had been consummated as of the beginning of the fiscal periods presented nor is it necessarily indicative of our future operating results. The pro forma adjustments are based upon information and assumptions available at the time of the filing of this Form 8-K and result in a preliminary allocation of the purchase price based on estimates of the fair value of the assets acquired and liabilities assumed. The fair value of certain assets acquired and liabilities assumed are preliminary, and final determination of required adjustments will be made only upon the completion of our fair value assessments. In addition, NCI has not yet performed the due diligence necessary to identify all of the adjustments required to conform CENTRIA’s accounting policies to NCI’s accounting policies. In addition, the unaudited pro forma combined consolidated financial information is based on certain financing assumptions, including type of financing, interest rates, amounts and timing of the issuance of debt. The actual financing obtained may differ materially from the information presented in the accompanying unaudited pro forma combined consolidated financial information and those differences could have a material impact on the unaudited pro forma combined consolidated financial information and the combined company’s future results of operations and financial performance.

�

The following table summarizes the estimated fair values of the assets we expect to acquire and liabilities we expect to assume in connection with the Acquisition. The fair value of certain assets acquired and liabilities assumed are preliminary and the final determination of any required adjustments will be made upon the completion of our fair value assessments.

�

NCI has retained an independent valuation firm to assist in the fair value determination of property, plant and equipment and identifiable intangible assets. NCI expects to finalize these values in the second quarter of fiscal 2015.

�

As the Acquisition has not yet been consummated, NCI has not begun to functionally integrate CENTRIA’s operations into NCI’s existing operations. As a result, the initial purchase price allocations may be adjusted for changes in estimates of the fair value of assets acquired and liabilities assumed.

�

(In thousands)	�	November 2, 2014		�
Current assets	�	$	73,982	�
Current deferred income taxes	�	�	-	�
Property, plant and equipment	�	�	36,785	�
Intangible assets	�	�	73,330	�
Other assets	�	�	1,423	�
Assets acquired	�	�	185,520	�
Current liabilities	�	�	53,060	�
Deferred income taxes	�	�	-	�
Other liabilities	�	�	13,605	�
Liabilities assumed	�	�	66,665	�
Fair value of net assets acquired	�	�	118,855	�
Total consideration paid	�	�	248,467	�
Goodwill	�	$	129,612	�

�

Based on the preliminary value of property, plant and equipment, if an additional $10.0 million of purchase price is allocated to fixed assets, this would increase depreciation expense by approximately $1.6 million per year.

�

Identified intangible assets include backlog, customer lists and relationships and trade names in the amount of $6.7 million, $52.4 million and $14.3 million, respectively. The backlog, customer lists and relationships and trade names have estimated useful lives of 9 months, 20 years, and 15 years, respectively, and are being amortized on a straight-line basis. These intangible assets have a weighted average useful life of approximately 17.3 years.

�

The excess of the purchase price over the tangible and identifiable intangible assets was recorded as goodwill and amounted to approximately $129.6 million. In accordance with current accounting standards, the goodwill will be tested for impairment as required by ASC 350, Intangibles–– Goodwill and Other.

�

Additionally, because the entity acquired was a partnership for tax purposes, the tax basis of the acquired assets and liabilities have been carried over at their fair value and goodwill will be deductible for tax purposes.

�

NCI currently reports on a fiscal year that ends the Sunday closest to October 31. CENTRIA currently reports on a calendar year that ends on December 31.

�

�

NCI BUILDING SYSTEMS, INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

(In thousands, except per share data)

�

�

�

NCI

�

�

CENTRIA

�

�

Pro Forma

�

�

NCI

�

�

�

November 2, 2014

�

�

September 30, 2014

�

�

Adjustments

�

�

Pro Forma

�

�

(Audited)

�

�

(Unaudited)

�

�

�

�

�

�

�

ASSETS

�

�

�

�

�

�

�

�

�

�

�

�

Current assets:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Cash and cash equivalents

�

$

66,651

�

�

$

3,164

�

�

$

(13,302

)(a)

�

$

56,513

�

Accounts receivable, net

�

�

136,923

�

�

�

37,478

�

�

�

�

�

�

�

174,401

�

Inventories, net

�

�

131,497

�

�

�

28,422

�

�

�

1,500

(d)

�

�

161,419

�

Deferred income taxes

�

�

21,447

�

�

�

-

�

�

�

�

�

�

�

21,447

�

Investments in debt and equity securities, at market

�

�

5,549

�

�

�

-

�

�

�

�

�

�

�

5,549

�

Prepaid expenses and other

�

�

22,773

�

�

�

6,582

�

�

�

�

�

�

�

29,355

�

Assets held for sale

�

�

5,690

�

�

�

-

�

�

�

�

�

�

�

5,690

�

Total current assets

�

�

390,530

�

�

�

75,646

�

�

�

(11,802

)

�

�

454,374

�

Property, plant and equipment, net

�

�

244,714

�

�

�

24,708

�

�

�

12,077

(d)

�

�

281,499

�

Goodwill

�

�

75,226

�

�

�

-

�

�

�

129,612

(d)

�

�

204,838

�

Intangible assets, net

�

�

44,923

�

�

�

-

�

�

�

73,330

(d)

�

�

118,253

�

Other assets

�

�

3,290

�

�

�

1,423

�

�

�

10,000

(b)

�

�

14,713

�

Total assets

�

�

758,683

�

�

�

101,777

�

�

�

213,217

�

�

�

1,073,677

�

LIABILITIES AND STOCKHOLDERS’ EQUITY

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Current liabilities:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Current portion of long-term debt

�

$

2,384

�

�

$

688

�

�

$

(688

)(c)

�

$

2,384

�

Note payable

�

�

418

�

�

�

-

�

�

�

�

�

�

�

418

�

Accounts payable

�

�

118,164

�

�

�

16,001

�

�

�

(1,396

)(e)

�

�

132,769

�

Accrued compensation and benefits

�

�

50,666

�

�

�

6,364

�

�

�

�

�

�

�

57,030

�

Accrued interest

�

�

1,820

�

�

�

-

�

�

�

�

�

�

�

1,820

�

Other accrued expenses

�

�

72,259

�

�

�

11,747

�

�

�

�

�

�

�

84,006

�

Bank overdrafts

�

�

-

�

�

�

4,286

�

�

�

�

�

�

�

4,286

�

Billings in excess of costs and estimated earnings on uncompleted contracts

�

�

-

�

�

�

14,663

�

�

�

�

�

�

�

14,663

�

Total current liabilities

�

�

245,711

�

�

�

53,749

�

�

�

(2,084

)

�

�

297,376

�

Long-term debt

�

�

233,003

�

�

�

3,700

�

�

�

246,300

(c)

�

�

483,003

�

Deferred income taxes

�

�

20,219

�

�

�

-

�

�

�

�

�

�

�

20,219

�

Other long-term liabilities

�

�

13,208

�

�

�

13,605

�

�

�

�

�

�

�

26,813

�

Total long-term liabilities

�

�

266,430

�

�

�

17,305

�

�

�

246,300

�

�

�

530,035

�

Stockholders’ equity:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Common stock

�

�

737

�

�

�

-

�

�

�

�

�

�

�

737

�

Additional paid-in capital

�

�

630,297

�

�

�

-

�

�

�

�

�

�

�

630,297

�

Accumulated deficit

�

�

(371,550

)

�

�

35,255

�

�

�

(35,531

)(f)

�

�

(371,826

)

Accumulated other comprehensive loss

�

�

(8,739

)

�

�

(4,532

)

�

�

4,532

(f)

�

�

(8,739

)

Treasury stock, at cost

�

�

(4,203

)

�

�

-

�

�

�

�

�

�

�

(4,203

)

Total stockholders’ equity

�

�

246,542

�

�

�

30,723

�

�

�

(30,999

)

�

�

246,266

�

Total liabilities and stockholders’ equity

�

$

758,683

�

�

$

101,777

�

�

$

213,217

�

�

$

1,073,677

�

�

See accompanying notes to unaudited pro forma combined financial statements.

�

�

NCI BUILDING SYSTEMS, INC.

UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME

(In thousands, except per share data)

�

�

�

NCI

�

�

CENTRIA

�

�

�

�

�

�

�

�

�

Fiscal year ended

�

�

Twelve months ended

�

�

Pro Forma

�

�

NCI

�

�

�

November 2, 2014

�

�

September 30, 2014(1)

�

�

Adjustments

�

�

Pro Forma

�

�

�

(Audited)

�

�

(Unaudited)

�

�

�

�

�

�

�

Sales

�

$

1,370,540

�

�

$

231,385

�

�

$

�

�

�

$

1,601,925

�

Cost of sales, excluding asset impairments (recovery)

�

�

1,080,027

�

�

�

174,213

�

�

�

6,623

(g),(j)

�

�

1,260,863

�

Gain on insurance recovery

�

�

(1,311

)

�

�

––

�

�

�

�

�

�

�

(1,311

)

Gross profit

�

�

291,824

�

�

�

57,172

�

�

�

(6,623

)

�

�

342,373

�

Engineering, selling, general and administrative expenses

�

�

261,730

�

�

�

38,305

�

�

�

5,965

(g),(h)

�

�

306,000

�

Strategic development costs

�

�

4,998

�

�

�

––

�

�

�

(2,053

)(i)

�

�

2,945

�

Income (loss) from operations

�

�

25,096

�

�

�

18,867

�

�

�

(10,535

)

�

�

33,428

�

Interest income

�

�

126

�

�

�

––

�

�

�

�

�

�

�

126

�

Interest expense

�

�

(12,455

)

�

�

(91

)

�

�

(20,846

)(k)

�

�

(33,392

)

Other income (expense), net

�

�

(92

)

�

�

––

�

�

�

�

�

�

�

(92

)

Income (loss) before income taxes

�

�

12,675

�

�

�

18,776

�

�

�

(31,381

)

�

�

70

�

Provision (benefit) for income taxes

�

�

1,490

�

�

�

86

�

�

�

(4,839

)(l)

�

�

(3,263

)

Net income

�

$

11,185

�

�

�

18,690

�

�

�

(26,542

)

�

$

3,333

�

Net income allocated to participating securities

�

�

(100

)

�

�

-

�

�

�

-

�

�

�

(100

)

Net income applicable to common shares

�

$

11,085

�

�

$

18,690

�

�

$

(26,542

)

�

$

3,233

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Loss per common share:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Basic

�

$

0.15

�

�

�

�

�

�

�

�

�

�

$

0.04

�

Diluted

�

$

0.15

�

�

�

�

�

�

�

�

�

�

$

0.04

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Weighted average number of common shares outstanding:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Basic

�

�

73,079

�

�

�

�

�

�

�

�

�

�

�

73,079

�

Diluted

�

�

74,709

�

�

�

�

�

�

�

�

�

�

�

74,709

�

�

(1)

The unaudited consolidated statement of income of CENTRIA for the twelve months ended September 30, 2014 has been derived by taking the consolidated statement of income for the year ended December 31, 2013, less the consolidated statement of income for the nine months ended September 30, 2013, plus the consolidated statement of income for the nine months ended September 30, 2014.

�

See accompanying notes to unaudited pro forma combined financial statements.

�

�

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

�

1.

Basis of Presentation

�

The accompanying unaudited pro forma combined consolidated financial statements present the pro forma results of operations of NCI Building Systems, Inc. (“NCI”) and CENTRIA, a Pennsylvania general partnership (“CENTRIA”) on a combined basis based on the historical financial information of each company after giving effect to the acquisition of CENTRIA by NCI. The unaudited pro forma combined consolidated statement of operations has been prepared assuming the Transactions occurred on November 4, 2013, the beginning of the fiscal period presented. The unaudited pro forma combined consolidated balance sheet as of November 2, 2014 reflects the Transactions as if they had occurred on that date.

�

In accordance with generally accepted accounting principles in the United States, the Transactions are being accounted for using the purchase method of accounting. As a result, the unaudited pro forma combined consolidated balance sheet has been adjusted to reflect the preliminary allocation of the purchase price to identify net assets acquired based primarily on NCI’s review of a fair value assessment and the excess purchase price to goodwill. The purchase price allocation in these unaudited pro forma combined condensed consolidated financial statements is based upon a purchase price of approximately $245.0 million.

�

2.

Pro Forma Adjustments

�

The following are brief descriptions of each of the pro forma adjustments included in the unaudited pro forma condensed combined financial statements:

�

a)

To record the cash purchase price of $245 million, which includes expected repayment at closing of estimated indebtedness of CENTRIA of $4.4 million, plus working capital adjustment and transaction related expenses, net of $250 million in debt proceeds.

b)

To record estimated debt incurrence costs.

c)

To record proceeds from the incurrence of $250 million in principal amount of new indebtedness net of repayment of existing debt.

d)

To record estimated goodwill and the fair value of assets acquired from the sellers.

e)

To reverse the accrual for transaction related expenses accrued as of the balance sheet date.

f)

To remove the pre-acquisition equity of CENTRIA, including $39.7 million in accumulated deficit, $4.5 million in accumulated other comprehensive loss and a $4.4 million note receivable from a partner as well as to record additional transaction expenses.

g)

To reflect an increase in depreciation expense on the fair value of CENTRIA’s property, plant and equipment and a reclassification of a portion of depreciation expense from operating expenses to cost of sales. The additional depreciation expense was recorded on a straight-line basis using a weighted average useful life of 6.2 years.

h)

To reflect an increase of amortization expense on the fair value of identified intangible assets which include backlog, customer lists and relationships and trade names in the amount of $6.7 million, $52.4 million and $14.3 million, respectively. The backlog, customer lists and relationships and trade names have estimated useful lives of 9 months, 20 years, and 15 years, respectively, and are being amortized on a straight-line basis. Goodwill resulting from the acquisition is not amortized.

i)

To remove acquisition-related costs.

j)

To record $1.5 million of additional cost of sales estimated to result from the adjustment to increase inventory to its fair market value.

k)

To reflect an increase in estimated interest expense on the $250.0 million indebtedness of NCI expected to be incurred in connection with the financing of the Acquisition. Estimated interest expense has been calculated based on an assumed interest rate of 7.875%. See discussion of the impact of a change in interest rates within Footnote 4 to these unaudited pro forma combined consolidated financial statements.

l)

To reflect the effective statutory tax rate of 38.4% for the fiscal year ended November 2, 2014 on pro forma adjustments and the pre-tax income of CENTRIA.

�

�

3.

Pro Forma Net Income Per Share

�

The unaudited pro forma basic and diluted net income per share is based upon the weighted average number of outstanding shares of common stock of NCI during the periods presented. See Footnote 7 to the audited financial statements for the period ended November 2, 2014 filed on Form 10-K for discussion of the calculation of the weighted average number of outstanding shares of common stock.

�

4.

Pro Forma Interest Expense

�

An immediate change of 12.5 basis points in the interest rate would cause a change in pro forma interest expense of approximately $312,500 on an annual basis.

�

�