Form 8-K NCI BUILDING SYSTEMS For: Jun 02

 

 

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): June 2, 2015

 

 

NCI BUILDING SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware	1-14315	76-0127701
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

 

10943 North Sam Houston Parkway West Houston, Texas	77064
(Address of principal executive offices)	(Zip Code)

 

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

 

 

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 communication 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))

 

¨

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

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On June 2, 2015, NCI Building Systems, Inc. (“NCI”) issued a press release (the “Press Release”) announcing NCI’s financial results for the fiscal second quarter ended May 3, 2015. A copy of the Press Release is attached as Exhibit 99.1.

 

NCI’s Press Release includes Adjusted EBITDA, Adjusted Operating Income (Loss), Adjusted Net Loss Applicable to Common Shares and Adjusted Net Loss Per Diluted Common Share, which are non-GAAP financial measures. Adjusted EBITDA excludes share-based compensation costs, gain on embedded derivative, short lived acquisition method inventory fair value adjustments, debt extinguishment costs, net, gain on insurance recovery, unreimbursed business interruption costs, secondary offering costs, restructuring charges and strategic development and acquisition related costs. Adjusted Operating Income (Loss) excludes gain on insurance recovery, secondary offering costs, restructuring charges, short lived acquisition method fair value adjustments and strategic development and acquisition related costs. Adjusted Net Loss Applicable to Common Shares and Adjusted Net Loss Per Diluted Common Share exclude gain on insurance recovery, net of taxes, secondary offering costs, net of taxes, foreign exchange loss, net of taxes, strategic development and acquisition related costs, net of taxes, restructuring charges, net of taxes and short lived acquisition method fair value adjustments, net of taxes. Adjusted EBITDA is calculated based on the terms contained in NCI’s term loan credit agreement. Adjusted EBITDA, Adjusted Operating Income (Loss), Adjusted Net Loss Applicable to Common Shares and Adjusted Net Loss Per Diluted Common Share are measures used by management and, therefore, provided to investors to provide comparability between periods of underlying operational results. Adjusted EBITDA, Adjusted Operating Income (Loss), Adjusted Net Loss Applicable to Common Shares and Adjusted Net Loss Per Diluted Common Share should not be considered in isolation or as substitutes for net income (loss), operating income (loss), net loss applicable to common shares or net loss per diluted common share determined in accordance with generally accepted accounting principles in the United States. The non-GAAP financial measures and reconciliations thereof to the most directly comparable measures prepared in accordance with generally accepted accounting principles are included in the Press Release furnished as Exhibit 99.1 hereto.

 

Attached hereto as Exhibit 99.2 is financial information and commentary by Mark E. Johnson, Executive Vice President, Chief Financial Officer and Treasurer of NCI, regarding results for the fiscal second quarter ended May 3, 2015 and forward-looking statements relating to the fiscal third quarter ending August 2, 2015 (the “CFO Commentary”). The CFO Commentary will be posted on the company’s website, www.ncibuildingsystems.com, on June 2, 2015.

  

The CFO Commentary includes Adjusted EBITDA and Adjusted Operating Income (Loss) which are non-GAAP financial measures. Adjusted EBITDA excludes share-based compensation costs, gain on embedded derivative, short lived acquisition method inventory fair value adjustments, debt extinguishment costs, net, gain on insurance recovery, unreimbursed business interruption costs, secondary offering costs, restructuring charges and strategic development and acquisition related costs. Adjusted Operating Income (Loss) excludes gain on insurance recovery, secondary offering costs, restructuring charges, short lived acquisition method fair value adjustments and strategic development and acquisition related costs. Adjusted EBITDA and Adjusted Operating Income (Loss) are measures used by management and, therefore, provided to investors to provide comparability between periods of underlying operational results. Adjusted EBITDA and Adjusted Operating Income (Loss) should not be considered in isolation or as a substitute for net income (loss) or operating income (loss) determined in accordance with generally accepted accounting principles in the United States. This non-GAAP financial measures and reconciliations thereof to the most directly comparable measures prepared in accordance with generally accepted accounting principles are included in the CFO Commentary furnished as Exhibit 99.2 hereto.

  

The information in this Item 2.02, and in Exhibit 99.1 and Exhibit 99.2 which are attached to this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that Section, nor shall they be deemed incorporated by reference in any registration statement or other filing under the Securities Act of 1933, as amended, or the Exchange Act, except in the event that NCI expressly states that such information is to be considered “filed” under the Exchange Act or incorporates it by specific reference in such filing.

 

Item 9.01. Financial Statements and Exhibits.

 

(d)

Exhibits.

 

Exhibit Number		Description
99.1		Press Release dated June 2, 2015
99.2		CFO Commentary dated June 2, 2015

 

 

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 thereunto duly authorized.

 

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

 

Dated: June 2, 2015

 

 

EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Press Release dated June 2, 2015
99.2		CFO Commentary dated June 2, 2015

 

 

 

Exhibit 99.1

 

NEWS RELEASE

 

NCI Building Systems Reports

Second Quarter 2015 Fiscal Year Results

 

HOUSTON, June 2, 2015 — NCI Building Systems, Inc. (NYSE: NCS) today reported financial results for the second fiscal quarter ended May 3, 2015.

 

Second Quarter 2015 Financial and Operational Highlights:

 

·

Sales rose 18% to $360.1 million, compared to last year’s second quarter, primarily driven by the recent acquisition of CENTRIA

·

Gross profit margin expanded 160 basis points year-over-year to 21.1%

·

Net loss per diluted common share was $(0.10) and adjusted net loss per diluted common share was $(0.06)

·

Excluding an estimated $2.6 million Adjusted EBITDA contribution from CENTRIA, Adjusted EBITDA rose 110% compared to last year’s second quarter

·

Buildings backlog grew 18% year-over-year and consolidated backlog increased 51% to $504 million, which includes CENTRIA’s backlog of $117 million

·

Buildings Group bookings grew 18% year-over-year

 

Norman C. Chambers, Chairman, President and Chief Executive, commented, “We continue to deliver solid results and our second quarter financial performance marks the fourth consecutive quarter of year-over-year improvement in gross profit margin and Adjusted EBITDA. We are entering the second half of our fiscal year with a seven-year high backlog and double digit year-over-year bookings growth. We believe we are well positioned to leverage our streamlined operational structure during our seasonally stronger second half and realize meaningful growth in revenue and earnings.”

 

Second Quarter 2015 Results

 

Second quarter sales increased 18% to $360.1 million from $305.8 million in last year's second quarter, driven principally by the full quarter’s contribution of the CENTRIA business as well as commercial discipline and higher volumes in our legacy single skin and insulated metal panel businesses. The Company estimates the impact of inclement weather was approximately $11 million in revenue for the quarter, largely due to delayed shipments because of poor worksite conditions.

 

 

Gross profit increased 27% to $75.9 million from $59.6 million in the second quarter of 2014, and gross profit margin expanded 160 basis points to 21.1%, compared to 19.5% in the prior year’s period. Contributing to the higher margins were continued commercial discipline in both the Components and Buildings groups, higher margin product mix, and improved manufacturing and supply chain efficiencies.

 

Adjusted operating income, a non-GAAP measure defined in the accompanying financial tables, increased to $1.6 million in the current quarter from a loss of $5.8 million in the second quarter of 2014 due to the expansion in sales and gross profit margin. On a GAAP basis, operating loss was $(3.6) million for the second quarter compared to $(5.5) million in the prior year’s quarter.

 

Adjusted EBITDA, a non-GAAP measure, defined as earnings before interest, taxes, depreciation and amortization, and cash and other non-cash items, in accordance with the Company's term loan credit agreement was $15.8 million, up 151% from $6.3 million in the prior year’s period. The Company estimates the impact of inclement weather in the quarter was between $3 million and $4 million in EBITDA. Please see the reconciliation of Adjusted EBITDA to net income (loss) in the accompanying financial tables.

 

Interest expense increased to $8.3 million in the second quarter compared to $3.1 million in last year’s second quarter as a result of the recently issued $250 million, 8.25% senior notes, used to finance the CENTRIA acquisition.

 

The Company reported a net loss of $7.5 million, or $(0.10) per diluted common share in the second quarter of 2015, which was impacted by several unusual after-tax charges including: $0.6 million of acquisition related costs; $1.5 million of restructuring charges associated with the realignment of the management structure and closure of our Caryville, Tennessee manufacturing facility; and $3.1 million of accounting fair value adjustments related to the acquisition of CENTRIA. Excluding the impact of these special items, the Company reported an adjusted net loss, a non-GAAP measure, of $4.3 million, or $(0.06) per diluted common share compared to an adjusted net loss of $5.3 million, or $(0.07) per diluted common share, in the second quarter of 2014.

 

Cash and cash equivalents ended at $25.3 million compared to $12.5 million in the comparable period in fiscal 2014. The Company paid down $21 million of principal on its term loan in the quarter. In addition, the Company’s $150.0 million ABL facility remained undrawn as of May 3, 2015.

 

Fiscal Second Quarter 2015 Segment Performance

 

Third party sales in the Coatings group were $22.8 million, an 11% decline from $25.5 million in last year’s second quarter. Total sales, including intercompany activity, decreased $4.3 million, or 8%, to $50.0 million from $54.3 million when compared to the same quarter in 2014. Operating income declined to $2.4 million in the second quarter of fiscal 2015 compared to $3.9 million reported in the same period last year. The volume decline and the resulting lower manufacturing leverage negatively impacted margins. The Coatings segment continues to diversify its customer base while improving its operating efficiencies in order to drive improved profitability.

 

 

The Components group generated $198.7 million in third-party sales during the quarter, an increase of 46% from $135.7 million in the second quarter of 2014. Total sales, including intercompany sales, increased $66.0 million, or 43%, to $221.1 million from $155.1 million in the prior year’s quarter. Operating income increased 52% to $6.9 million compared to $4.6 million in the same quarter in 2014. A combination of increased legacy single skin and insulated metal panel (IMP) sales improved operating leverage for the division. During the quarter, CENTRIA contributed $53.4 million in sales, an operating loss of $(3.1) million and $2.6 million in Adjusted EBITDA, reflecting its first full quarter of results. CENTRIA’s operating loss includes $3.3 million of acquisition related special charges.

 

Third party sales in the Buildings group declined 4% to $138.7 million in the second quarter from $144.6 million in the prior year’s quarter, primarily due to weather induced lower volumes. Total sales, including intercompany activity, were $143.2 million, or a decrease of 4%, from $149.4 million in the same period in 2014. Operating income increased significantly to $2.9 million in the current quarter when compared to near break even in the second quarter of 2014. The Buildings group continues to benefit from strong margins led by improved project mix and commercial discipline, combined with lean manufacturing improvements.

 

Market Commentary

 

Leading indicators for nonresidential construction activity continue to indicate positive momentum into the second half of fiscal year 2015, despite uneven industry statistics during the seasonally weaker winter season. Industrial vacancies continue to decline and according to Jones Lang LaSalle research, the current industrial vacancy rate of 6.8% marks a 10-year low. Net absorption outpaced completed projects, indicating tenant demand is likely to support new construction starts.

 

The American Institute of Architects’ (AIA) Architecture Mixed Use Index increased from 47.2 in February to 51.8 in April 2015. The Architectural Billings Index expanded in March by 1.3 points to 51.7 but softened in April to 48.8. The AIA cited weather in both the Midwest and the Northeast as the main driver behind the April decline. Due to the leading nature of the Architectural Billings Index, the reported index values in the last six months of 2014, which were all above 50, suggest increasing levels of U.S. nonresidential construction spending for the remainder of 2015. Further, the New Projects Inquiry Index increased from 58.2 in March to 60.1 in April, coming in above 60 for the first time since October 2014 and signaling continued positive momentum for near-term architectural billings.

 

 

Outlook and Guidance

 

Mr. Chambers remarked, “Our continued Adjusted EBITDA growth in our second quarter 2015 results from the internal changes we have implemented over the past several quarters, including our acquisition activity. Our streamlined manufacturing and commercial organizations, supply chain management and commercial discipline drove meaningful improvement in our financial results despite the headwinds of declining steel prices and inclement weather. We remain focused on our goals of delivering sustainable margin expansion and increasing levels of profitability as we take advantage of strong revenue growth and operating leverage during the seasonally stronger second half of 2015.”

 

“We are encouraged by the strength of our bookings and backlog as they indicate a potential for nonresidential recovery that is beginning to accelerate and expand beyond the commercial and industrial end markets. We expect the investments we’ve made in insulated metal panels over the past few years, including the recent acquisition of CENTRIA, will ideally position us to unlock the accelerated growth potential of the underpenetrated North American market. Based upon our current level of bookings and strong backlog, we expect year-over-year revenue growth in the second half of our fiscal year to drive Adjusted EBITDA growth. ”

 

For additional information, please see the CFO Commentary at www.ncibuildingsystems.com under the tab Quarterly Earnings and Transcripts.

 

Conference Call Information

 

The NCI Building Systems, Inc. second quarter 2015 conference call is scheduled for Wednesday, June 3, 2015, at 9:00 AM ET. Please dial 1-877-407-0672 (toll free) or 412-902-0003 to participate in the call. To listen to a live broadcast of the call over the Internet or to review the archived call, please visit the Company's website at www.ncibuildingsystems.com. To access the taped replay, please dial 1-877-660-6853 (toll free) or 201-612-7415 and the passcode 13608557# when prompted. The taped replay will be available two hours after the call through June 10, 2015.

 

About NCI Building Systems

 

NCI Building Systems, Inc. is one of North America's largest integrated manufacturers of metal products for the nonresidential building industry. NCI is comprised of a family of companies operating manufacturing facilities across the United States, Mexico and China with additional sales and distribution offices throughout the United States and Canada. For more information visit www.ncibuildingsystems.com.

 

Contact:

Layne de Alvarez

Vice President, Investor Relations

281-897-7710

 

 

Forward-Looking Statements

 

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "guidance," “plan”, "potential," "expect," "should," "will," "forecast" and similar expressions are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current expectations, assumptions and/or beliefs concerning future events. As a result, these forward-looking statements rely on a number of assumptions, forecasts, and estimates and, therefore, these forward-looking statements are subject to a number of risks and uncertainties that may cause the Company's actual performance to differ materially from that projected in such statements. Among the factors that could cause actual results to differ materially include, but are not limited to, the Company’s ability to integrate CENTRIA with the Company’s business and realize anticipated benefits of such acquisition; industry cyclicality and seasonality and adverse weather conditions; ability to service or refinance the Company's debt and obtain future financing; the Company’s ability to comply with the financial tests and covenants in its existing and future debt obligations; operational limitations or restrictions in connection with our debt; recognition of asset impairment charges; the ability to make strategic acquisitions accretive to earnings; retention and replacement of key personnel; enforcement and obsolescence of intellectual property rights; fluctuations in customer demand; commodity price increases and/or limited availability of raw materials, including steel; increases in energy prices, competitive activity and pricing pressure; challenging economic conditions affecting the non-residential construction industry; volatility in the U.S. economy and abroad generally, and in the credit markets; costs related to environmental clean-ups and liabilities; changes in laws or regulations, including the Dodd-Frank Act; the dilutive effect on the Company’s common stockholders of potential future sales of the Company’s common stock held by our sponsor; substantial governance and other rights held by our sponsor; breaches of our information system security measures and damage to our major information management systems; hazards that may cause personal injury or property damage, thereby subjecting the Company to liabilities and possible losses, which may not be covered by insurance; costs and other effects of legal and administrative proceedings, settlements, investigations, claims and other matters; and the volatility of the Company's stock price. The Company's SEC filings, including our most recent reports on Form 10-K, particularly under Item 1A "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended November 2, 2014 and in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended February 1, 2015, identify other important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements. NCI expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any changes in its expectations.

 

###

 

  

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

		Fiscal Three Months Ended								Fiscal Six Months Ended
		May 3,				May 4,				May 3,				May 4,
		2015				2014				2015				2014
Sales		$	360,147			$	305,800			$	683,073			$	616,466
Cost of sales, excluding gain on insurance recovery			284,258				246,527				535,045				498,955
Gain on insurance recovery			-				(324	)			-				(1,311	)
Gross profit			75,889				59,597				148,028				118,822
			21.1	%			19.5	%			21.7	%			19.3	%
Engineering, selling, general and administrative expenses			73,035				64,097				135,904				125,477
Intangible asset amortization			4,375				1,013				5,868				2,026
Strategic development and acquisition related costs			628				-				2,357				-
Restructuring charges			1,468				-				2,945				-
Income (loss) from operations			(3,617	)			(5,513	)			954				(8,681	)
Interest income			32				24				39				50
Interest expense			(8,312	)			(3,059	)			(12,299	)			(6,185	)
Foreign exchange gain/(loss)			(10	)			262				(1,411	)			(439	)
Other income, net			332				324				332				529
Loss before income taxes			(11,575	)			(7,962	)			(12,385	)			(14,726	)
Benefit from income taxes			(4,087	)			(3,057	)			(4,577	)			(5,563	)
			35.3	%			38.4	%			37.0	%			37.8	%
Net loss		$	(7,488	)		$	(4,905	)		$	(7,808	)		$	(9,163	)
Loss per common share:
Basic		$	(0.10	)		$	(0.07	)		$	(0.11	)		$	(0.13	)
Diluted		$	(0.10	)		$	(0.07	)		$	(0.11	)		$	(0.13	)
Weighted average number of common shares outstanding:
Basic			73,133				72,838				73,102				73,177
Diluted			73,133				72,838				73,102				73,177
Increase in sales			17.8	%			4.2	%			10.8	%			4.3	%
Gross profit percentage			21.1	%			19.5	%			21.7	%			19.3	%
Engineering, selling, general and administrative expenses percentage			20.3	%			21.0	%			19.9	%			20.4	%

 

  

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

		May 3,				November 2,
		2015				2014
		(Unaudited)
ASSETS
Cash and cash equivalents		$	25,276			$	66,651
Restricted cash			980				-
Accounts receivable, net			141,895				136,923
Inventories, net			159,681				131,497
Deferred income taxes			21,998				21,447
Income tax receivable			7,438				-
Prepaid expenses and other			33,045				22,773
Investments in debt and equity securities, at market			5,786				5,549
Assets held for sale			6,261				5,690
Total current assets			402,360				390,530
Property, plant and equipment, net			270,003				244,714
Goodwill			198,169				75,226
Intangible assets, net			131,141				44,923
Deferred financing costs, net			12,051				3,290
Total assets		$	1,013,724			$	758,683
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt		$	2,384			$	2,384
Note payable			1,713				418
Accounts payable			120,913				118,164
Accrued compensation and benefits			51,631				50,666
Accrued interest			7,844				1,820
Other accrued expenses			79,728				72,259
Total current liabilities			264,213				245,711
Long-term debt, net			461,765				233,003
Deferred income taxes			23,129				20,219
Other long-term liabilities			21,550				13,208
Total long-term liabilities			506,444				266,430
Common stock			741				737
Additional paid-in capital			636,165				630,297
Accumulated deficit			(379,358	)			(371,550	)
Accumulated other comprehensive loss			(8,739	)			(8,739	)
Treasury stock, at cost			(5,742	)			(4,203	)
Total stockholders' equity			243,067				246,542
Total liabilities and stockholders' equity		$	1,013,724			$	758,683

 

 

 

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

		Fiscal Six Months Ended
		May 3,				May 4,
		2015				2014
Cash flows from operating activities:
Net loss		$	(7,808	)		$	(9,163	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			23,497				17,708
Deferred financing cost amortization			118				592
Share-based compensation expense			5,134				5,742
Gain on sale of property			(26	)			-
Gain on insurance recovery			-				(1,311	)
(Recovery of) Provision for doubtful accounts			(129	)			585
Provision for (benefit from) deferred income taxes			5,506				(5,884	)
Excess tax benefits from share-based compensation arrangements			(384	)			(760	)
Changes in operating assets and liabilities:
Accounts receivable			30,268				25,132
Inventories			1,660				(14,140	)
Income tax receivable			(6,373	)			(2	)
Investments in debt and equity securities			(238	)			-
Prepaid expenses and other			62				862
Accounts payable			(25,044	)			(43,610	)
Accrued expenses			(28,910	)			(7,051	)
Other, net			(634	)			47
Net cash provided by operating activities			(3,301	)			(31,253	)
Cash flows from investing activities:
Acquisition, net of cash acquired			(247,123	)			-
Proceeds from sale of property, plant and equipment			26				-
Proceeds from insurance			-				1,311
Capital expenditures			(9,307	)			(10,004	)
Net cash used in investing activities			(256,404	)			(8,693	)
Cash flows from financing activities:
Proceeds from stock options exercised			354				-
Issuance of debt			250,000				-
Payments on term loan			(21,239	)			(1,196	)
Payments on note payable			(417	)			(547	)
Proceeds from Amended ABL Facility			-				47,000
Payments on Amended ABL Facility			-				(47,000	)
Payment of financing costs			(8,879	)			(75	)
Purchase of treasury stock			(1,539	)			(23,743	)
Excess tax benefits from share-based compensation arrangements			384				760
Net cash provided by (used in) financing activities			218,664				(24,801	)
Effect of exchange rate changes on cash and cash equivalents			(334	)			(221	)
Net decrease in cash and cash equivalents			(41,375	)			(64,968	)
Cash and cash equivalents at beginning of period			66,651				77,436
Cash and cash equivalents at end of period			25,276				12,468

 

  

NCI Building Systems, Inc.

Business Segments

(In thousands)

(Unaudited) 

 

		Fiscal Three Months Ended								Fiscal Three Months Ended								$				%
		May 3, 2015								May 4, 2014								Inc/(Dec)				Change
						% of								% of
						Total Sales								Total Sales
Sales:
Metal coil coating		$	49,998				12			$	54,307				15			$	(4,309	)			-7.9	%
Metal components			221,118				53				155,085				43				66,033				42.6	%
Engineered building systems			143,245				35				149,411				42				(6,166	)			-4.1	%
Total sales			414,361				100				358,803				100				55,558				15.5	%
Less: Intersegment sales			54,214				13				53,003				15				1,211				2.3	%
Total net sales		$	360,147				87			$	305,800				85			$	54,347				17.8	%
						% of Sales								% of Sales
Operating income (loss):
Metal coil coating		$	2,397				5			$	3,893				7			$	(1,496	)			-38.4	%
Metal components			6,941				3				4,559				3				2,382				52.2	%
Engineered building systems			2,855				2				36				0				2,819				7830.6	%
Corporate			(15,810	)			-				(14,001	)			-				(1,809	)			-12.9	%
Total operating income (loss) (% of sales)		$	(3,617	)			(1	)		$	(5,513	)			(2	)		$	1,896				34.4	%
		Fiscal Six  Months Ended								Fiscal Six  Months Ended								$				%
		May 3, 2015								May 4, 2014								Inc/(Dec)				Change
						% of								% of
						Total								Total
						Sales								Sales
Sales:
Metal coil coating		$	105,608				13			$	108,574				15			$	(2,966	)			-2.7	%
Metal components			393,907				50				313,278				43				80,629				25.7	%
Engineered building systems			293,045				37				301,648				42				(8,603	)			-2.9	%
Total sales			792,560				100				723,500				100				69,060				9.5	%
Intersegment sales			109,487				14				107,034				15				2,453				2.3	%
Total net sales		$	683,073				86			$	616,466				85			$	66,607				10.8	%
						% of								% of
						Sales								Sales
Operating income (loss):
Metal coil coating		$	6,375				6			$	10,388				10			$	(4,013	)			-38.6	%
Metal components			15,277				4				8,670				3				6,607				76.2	%
Engineered building systems			11,574				4				1,676				1				9,898				590.6	%
Corporate			(32,272	)			-				(29,415	)			-				(2,857	)			-9.7	%
Total operating income (loss) (% of sales)		$	954				-			$	(8,681	)			(1	)		$	9,635				111.0	%

 

  

NCI BUILDING SYSTEMS, INC.

BUSINESS SEGMENTS

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED OPERATING INCOME (LOSS) EXCLUDING SPECIAL CHARGES

FISCAL THREE MONTHS ENDED MAY 3, 2015 AND MAY 4, 2014

(In thousands)

(Unaudited)

 

		Fiscal Three Months Ended May 3, 2015
		Metal Coil Coating				Metal Components				Engineered Building Systems				Corporate				Consolidated
Operating income (loss), GAAP basis		$	2,397			$	6,941			$	2,855			$	(15,810	)		$	(3,617	)
Restructuring charges			254				629				792				(207	)			1,468
Strategic development and acquisition related costs			-				-				-				628				628
Short lived acquisition method fair value adjustments			-				3,109				-				-				3,109
Adjusted operating income (loss) (1)		$	2,651			$	10,679			$	3,647			$	(15,389	)		$	1,588
		Fiscal Three Months Ended May 4, 2014
		Metal Coil Coating				Metal Components				Engineered Building Systems				Corporate				Consolidated
Operating income (loss), GAAP basis		$	3,893			$	4,559			$	36			$	(14,001	)		$	(5,513	)
Gain on insurance recovery			(324	)			-				-				-				(324	)
Secondary offering costs			-				-				-				50				50
Adjusted operating income (loss) (1)		$	3,569			$	4,559			$	36			$	(13,951	)		$	(5,787	)

 

(1)

The Company discloses a tabular comparison of Adjusted operating income (loss), which is a non-GAAP measure because it is instrumental in comparing the results from period to period. Adjusted operating income (loss) should not be considered in isolation or as a substitute for operating income (loss) as reported on the face of our statement of operations.

 

  

NCI BUILDING SYSTEMS, INC.

BUSINESS SEGMENTS

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED OPERATING INCOME (LOSS) EXCLUDING SPECIAL CHARGES

FISCAL SIX MONTHS ENDED MAY 3, 2015 AND MAY 4, 2014

(In thousands)

(Unaudited)

 

		Fiscal Six Months Ended May 3, 2015
		Metal Coil Coating				Metal Components				Engineered Building Systems				Corporate				Consolidated
Operating income (loss), GAAP basis		$	6,375			$	15,277			$	11,574			$	(32,272	)		$	954
Restructuring charges			254				1,237				1,661				(207	)			2,945
Strategic development and acquisition related costs			-				-				-				2,357				2,357
Short lived acquisition method fair value adjustments			-				4,081				-				-				4,081
Adjusted operating income (loss) (1)		$	6,629			$	20,595			$	13,235			$	(30,122	)		$	10,337
		Fiscal Six Months Ended May 4, 2014
		Metal Coil Coating				Metal Components				Engineered Building Systems				Corporate				Consolidated
Operating income (loss), GAAP basis		$	10,388			$	8,670			$	1,676			$	(29,415	)		$	(8,681	)
Gain on insurance recovery			(1,311	)			-				-				-				(1,311	)
Secondary offering costs			-				-				-				754				754
Adjusted operating income (loss) (1)		$	9,077			$	8,670			$	1,676			$	(28,661	)		$	(9,238	)

 

(1)

The Company discloses a tabular comparison of Adjusted operating income (loss), which is a non-GAAP measure because it is instrumental in comparing the results from period to period. Adjusted operating income (loss) should not be considered in isolation or as a substitute for operating income (loss) as reported on the face of our statement of operations.

 

  

NCI BUILDING SYSTEMS, INC.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

COMPUTATION OF EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION,

AMORTIZATION AND OTHER NONCASH ITEMS (ADJUSTED EBITDA)

(In thousands)

(Unaudited)

 

		3rd Qtr				4th Qtr				1st Qtr				2nd Qtr				Trailing 12 Months
		August 3,				November 2,				February 1,				May 3,				May 3,
		2014				2014				2015				2015				2015
Net income (loss)		$	6,089			$	14,259			$	(320	)		$	(7,488	)		$	12,540
Add:
Depreciation and amortization			8,994				9,220				9,731				13,766				41,711
Consolidated interest expense, net			3,142				3,053				3,980				8,280				18,455
Provision (benefit) for income taxes			2,837				4,215				(490	)			(4,087	)			2,475
Restructuring charges			-				-				1,477				1,759				3,236
Strategic development and acquisition related costs			1,486				3,512				1,729				628				7,355
Short lived acquisition method inventory fair value adjustments			-				-				583				775				1,358
Non-cash charges:
Share-based compensation			2,404				2,022				2,933				2,201				9,560
Adjusted EBITDA (1)		$	24,952			$	36,281			$	19,623			$	15,834			$	96,690
		3rd Qtr				4th Qtr				1st Qtr				2nd Qtr				Trailing 12 Months
		July 28,				November 3,				February 2,				May 4,				May 4,
		2013				2013				2014				2014				2014
Net income (loss)		$	(12,192	)		$	8,276			$	(4,258	)		$	(4,905	)		$	(13,079	)
Add:
Depreciation and amortization			9,066				9,012				8,767				8,941				35,786
Consolidated interest expense, net			5,130				3,334				3,100				3,035				14,599
Provision (benefit) for income taxes			(9,933	)			5,410				(2,506	)			(3,057	)			(10,086	)
Debt extinguishment costs, net			21,491				-				-				-				21,491
Gain on insurance recovery			-				(1,023	)			(987	)			(324	)			(2,334	)
Unreimbursed business interruption costs			-				500				-				-				500
Secondary offering costs			-				-				704				50				754
Non-cash charges:
Share-based compensation			3,448				4,565				3,179				2,563				13,755
Embedded derivative			(50	)			-				-				-				(50	)
Adjusted EBITDA (1)		$	16,960			$	30,074			$	7,999			$	6,303			$	61,336

 

(1)

The Company's Credit Agreement defines Adjusted EBITDA. Adjusted EBITDA excludes non-cash charges for goodwill and other asset impairments and stock compensation as well as certain non-recurring charges. As such, the historical information is presented in accordance with the definition above. Concurrent with the amendment and restatement of the Term Loan facility, the Company entered into an Asset-Based Lending facility which has substantially the same definition of Adjusted EBITDA except that the ABL Facility caps certain non-recurring charges. The Company is disclosing Adjusted EBITDA, which is a non-GAAP measure, because it is used by management and provided to investors to provide comparability of underlying operational results.

 

 

 

NCI BUILDING SYSTEMS, INC.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

ADJUSTED NET INCOME (LOSS) PER DILUTED COMMON SHARE AND NET INCOME (LOSS) COMPARISON

(Unaudited)

 

		Fiscal Three Months Ended								Fiscal Six Months Ended
		May 3,				May 4,				May 3,				May 4,
		2015				2014				2015				2014
Net loss per diluted common share, GAAP basis		$	(0.10	)		$	(0.07	)		$	(0.11	)		$	(0.13	)
Gain on insurance recovery, net of taxes			-				(0.00	)			-				(0.01	)
Secondary offering costs, net of taxes			-				0.00				-				0.01
Foreign exchange loss, net of taxes			-				(0.00	)			-				0.00
Strategic development and acquisition related costs, net of taxes			0.00				-				0.02				-
Restructuring charges, net of taxes			0.01				-				0.03				-
Short lived acquisition method fair value adjustments, net of taxes			0.03				-				0.03				-
Adjusted net loss per diluted common share (1)		$	(0.06	)		$	(0.07	)		$	(0.03	)		$	(0.13	)

 

		Fiscal Three Months Ended								Fiscal Six Months Ended
		May 3,				May 4,				May 3,				May 4,
		2015				2014				2015				2014
Net loss applicable to common shares, GAAP basis		$	(7,488	)		$	(4,905	)		$	(7,808	)		$	(9,163	)
Gain on insurance recovery, net of taxes			-				(199	)			-				(807	)
Secondary offering costs, net of taxes			-				31				-				465
Foreign exchange loss, net of taxes			-				(211	)			-				325
Strategic development and acquisition related costs, net of taxes			387				-				1,452				-
Restructuring charges, net of taxes			904				-				1,814				-
Short lived acquisition method fair value adjustments, net of taxes			1,915				-				2,514				-
Adjusted net loss applicable to common shares (1)		$	(4,282	)		$	(5,284	)		$	(2,028	)		$	(9,180	)

 

(1) The Company discloses a tabular comparison of Adjusted net loss per diluted common share and Adjusted net loss applicable to common shares, which are non-GAAP measures, because they are referred to in the text of our press releases and are instrumental in comparing the results from period to period. Adjusted net loss per diluted common share and Adjusted net loss applicable to common shares should not be considered in isolation or as a substitute for net loss per diluted common share and net loss applicable to common shares as reported on the face of our consolidated statement of operations.

 

  

NCI Building Systems, Inc.

Reconciliation of Segment Sales to Third Party Segment Sales

(In thousands)

(Unaudited)

 

		Fiscal								Fiscal												%
		2nd Qtr 2015								2nd Qtr 2014								Inc/(Dec)				Change
Metal Coil Coating
Total Sales		$	49,998				12	%		$	54,307				15	%			(4,309	)			-7.9	%
Less: Intersegment sales			27,194								28,799								(1,605	)			-5.6	%
Third Party Sales		$	22,804				6	%		$	25,508				9	%			(2,704	)			-10.6	%
Operating Income		$	2,397				11	%		$	3,893				15	%			(1,496	)			-38.4	%
Metal Components
Total Sales		$	221,118				53	%		$	155,085				43	%			66,033				42.6	%
Less: Intersegment sales			22,437								19,351								3,086				15.9	%
Third Party Sales		$	198,681				55	%		$	135,734				44	%			62,947				46.4	%
Operating Income		$	6,941				3	%		$	4,559				3	%			2,382				52.2	%
Engineered Building Systems
Total Sales		$	143,245				35	%		$	149,411				42	%			(6,166	)			-4.1	%
Less: Intersegment sales			4,583								4,853								(270	)			-5.6	%
Third Party Sales		$	138,662				39	%		$	144,558				47	%			(5,896	)			-4.1	%
Operating Income		$	2,855				2	%		$	36				0	%			2,819				7830.6	%
Consolidated
Total Sales		$	414,361				100	%		$	358,803				100	%			55,558				15.5	%
Less: Intersegment			54,214								53,003								1,211				2.3	%
Third Party Sales		$	360,147				100	%		$	305,800				100	%			54,347				17.8	%
Operating Loss		$	(3,617	)			-1	%		$	(5,513	)			-2	%			1,896				-34.4	%
		Fiscal YTD								Fiscal YTD												%
		2nd Qtr 2015								2nd Qtr 2014								Inc/(Dec)				Change
Metal Coil Coating
Total Sales		$	105,608				13	%		$	108,574				15	%			(2,966	)			-2.7	%
Less: Intersegment sales			58,400								58,476								(76	)			-0.1	%
Third Party Sales		$	47,208				7	%		$	50,098				8	%			(2,890	)			-5.8	%
Operating Income		$	6,375				14	%		$	10,388				21	%			(4,013	)			-38.6	%
Metal Components
Total Sales		$	393,907				50	%		$	313,278				43	%			80,629				25.7	%
Less: Intersegment sales			41,198								38,198								3,000				7.9	%
Third Party Sales		$	352,709				52	%		$	275,080				45	%			77,629				28.2	%
Operating Income		$	15,277				4	%		$	8,670				3	%			6,607				76.2	%
Engineered Building Systems
Total Sales		$	293,045				37	%		$	301,648				42	%			(8,603	)			-2.9	%
Less: Intersegment sales			9,889								10,360								(471	)			-4.5	%
Third Party Sales		$	283,156				41	%		$	291,288				47	%			(8,132	)			-2.8	%
Operating Income		$	11,574				4	%		$	1,676				1	%			9,898				590.6	%
Consolidated
Total Sales		$	792,560				100	%		$	723,500				100	%			69,060				9.5	%
Less: Intersegment sales			109,487								107,034								2,453				2.3	%
Third Party Sales		$	683,073				100	%		$	616,466				100	%			66,607				10.8	%
Operating Income (Loss)		$	954				0	%		$	(8,681	)			-1	%			9,635				111.0	%

 

 

 

 

Exhibit 99.2

 

CFO Commentary on Second Quarter 2015 Results

 

Summary

 

The second quarter 2015 results compared to last year’s second quarter were as follows:

 

•

Revenue of $360.1 million increased 17.8% from $305.8 million. The current year period includes $53.4 million related to recently acquired CENTRIA

 

•

Gross margin of 21.1% increased over the comparable prior year period by 160 basis points

 

•

Operating loss was $3.6 million compared to a loss of $5.5 million in the prior year period.

*Adjusted for special items, operating income was $1.6 million compared to a loss of $5.8 million in the prior year period.

 

•

Net loss applicable to diluted common shares was $7.5 million compared to the prior year period loss of $4.9 million.

 

•

*Adjusted EBITDA grew to $15.8 million from the prior year period’s $6.3 million

 

*   Reconciliations of non-GAAP financial measures to the nearest GAAP measure are included in the Company’s financial tables accompanying this CFO Commentary.

 

Revenue

 

Revenue of $360.1 million was up by 17.8% from a year ago. However, this quarter includes a full quarter for recently acquired CENTRIA, which produced revenue during that time of $53.4 million. The performance of our three operating segments was as follows:

 

•

Coater’s third-party revenue of $22.8 million decreased by 10.6% with third-party volumes down by 12% versus last year’s second quarter results. Total revenue, including intercompany activity decreased 7.9%.

 

•

Component’s third-party revenue of $198.7 million increased by 46.4%, with third party volumes up by 6.2% versus last year’s second quarter. Adjusted to exclude CENTRIA, third-party revenue increased approximately 7.1% and volumes increased by 8%.

 

•

Building’s third-party revenue of $138.7 million decreased by 4.1% with third-party volumes down by 7.6% versus last year’s comparable quarter.

 

The current year period was negatively impacted by elevated winter weather events in February as well as unusually high levels of precipitation in March and April. It is difficult to definitively measure the impact this had on our shipments for the period, but we estimate that revenue was reduced by approximately $11 million as a result.

 

Gross Margin

 

Gross profit increased to $75.9 million, up $16.3 million from last year’s second quarter. Our investments to improve our manufacturing responsiveness and focus on value oriented commercial discipline are beginning to be reflected in our improving gross margins.

 

Gross Margin Reconciliation: Q2’14 to Q2’15 (19.5% to 21.1%, up 160 basis points)

 

 

[note: point attributions are approximate]

 

	•	+ 122 bps:	Commercial discipline and value oriented pricing
	•	+ 32 bps:	Production and logistic efficiency improvements, net of leverage reduction
	•	+ 38 bps:	Improving product mix, including increased architectural insulated panels
	•	- 22 bps:	Short term impact of acquisition accounting for CENTRIA
	•	- 10 bps:	Prior year insurance gain not recurring in the current period.

 

ESG&A Expenses

 

ESG&A expenses were $73.0 million, up $8.9 million from prior year second quarter. ESG&A expenses as a percent of revenues decreased from 21.0% last year to 20.3% in the current quarter. The change in ESG&A expenses over the prior year is attributable primarily to the following:

 

•

approximately $8.1 million increase due to the inclusion of CENTRIA in the current year period

 

*Adjusted EBITDA

 

*Adjusted EBITDA increased $9.5 million from $6.3 million last year to $15.8 million in the current quarter. The increase in Adjusted EBITDA is attributable to the following:

 

	•	+ $9.5	million  improvements  in  product  mix,  production  and  logistic  efficiencies, commercial discipline and value based pricing
	•	+ $ 2.6	million contribution from recently acquired CENTRIA
	•	- $ 1.7	million net effect of lower business volumes in our Buildings and Coaters segment
	•	- $ 0.3	million from foreign currency transaction losses and other income/expense items
	•	- $ 0.6	million from other items

 

Working Capital

 

Our average days sales outstanding for the quarter including our new acquisition CENTRIA increased to 36.5 days, compared to 33.2 days in the prior year same period. Our average days in inventory outstanding increased to 52.8 days, compared to 51.3 days in the prior year. And finally, our average days in payables outstanding increased to 36.2 days compared to 33.3 days from the same period of the prior year.

 

In general, the increases in our working capital metrics are caused by the inclusion of CENTRIA. Adjusted to exclude CENTRIA our metrics have each improved over the prior year. We expect that over time CENTRIAs metrics will converge with our historical levels.

 

Q3 2015 Outlook

 

The following are our current expectations for certain financial items for our third fiscal quarter of 2015, which will include the activities of CENTRIA for the full quarter.

 

ESG&A Expenses

 

We expect our ESG&A expenses to range between $77.5 million and $79.5 million. This amount excludes the amortization of intangible assets, which are shown on a separate line item on the statement of operations and discussed below.

 

 

Intangible asset amortization

 

We expect our intangible asset amortization to range between $4.0 million and $4.5 million. This quarterly estimate includes approximately $2.3 million for amortization of short lived assets related to the CENTRIA acquisition which will continue through the fourth quarter of fiscal 2015. For comparison, total intangible amortization expense in the third quarter of 2014 was only $1.0 million.

 

Interest Expense

 

We expect our interest expense, related to our new $250 million 8.25% Senior Notes, our Term Loan Facility, amortization of deferred financing costs and costs from our ABL Facility, to range between $7.9 million and $8.2 million.

 

Effective Tax Rate

 

We expect our tax rate for the upcoming quarter to range between 36% and 38%. However, we continue to expect volatility in our quarterly tax rate as slight changes in earnings will have an outsized impact on the effective tax rate given the seasonal variation in earning levels that typically occur. Our quarterly effective tax rate percentage can and has varied significantly from expectations as a result.

 

Diluted Shares

 

We expect our weighted average diluted common share count used in calculating our earnings per share to be approximately 74.6 million for the upcoming quarter and 75.0    million for fiscal 2015. This compares to the 73.1 million shares used in the calculation of diluted EPS for the second quarter of 2015. The variation in the share count is driven by the inclusion or exclusion of common stock equivalents in the EPS calculation for each period, which depends on whether they are dilutive or antidilutive to the calculation in that period.

 

Balance Sheet and Cash Flow Items

 

We expect our total capital expenditures in fiscal 2015 to range between $26 million and $30 million with the inclusion of CENTRIA.

 

 

Forward-Looking Statements

Certain statements and information in this CFO Commentary may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “anticipate,” “plan,” “intend,” “foresee,” “guidance,” “potential,” “expect,” “should,” “will” “continue,” “could,” “estimate,” “forecast,” “goal,” “may,” “objective,” “predict,” “projection,” or similar expressions are intended to identify forward-looking statements (including those contained in certain visual depictions) in this CFO Commentary. These forward-looking statements reflect the Company's current expectations and/or beliefs concerning future events. The Company has made every reasonable effort to ensure that the information, estimates, forecasts and assumptions on which these statements are based are current, reasonable and complete. However, these forward-looking statements are subject to a number of risks and uncertainties that may cause the Company's actual performance to differ materially from that projected in such statements. Among the factors that could cause actual results to differ materially include, but are not limited to, our ability to integrate CENTRIA with the Company’s business and to realize the anticipated benefits of such acquisition, ability to make strategic acquisitions accretive to earnings; industry cyclicality and seasonality and adverse weather conditions; ability to service or refinance the Company's existing debt, including its 8.250% Senior Notes due 2023, and ability to obtain future financing; ability to comply with financial tests and covenants contained in the Company’s existing and future debt obligations; operational limitations or restrictions in connection with the Company’s debt; recognition of asset impairment charges; fluctuations in customer demand; retention and replacement of key personnel; enforcement and obsolescence of intellectual property rights; commodity price increases and/or limited availability of raw materials, including steel; competitive activity and pricing pressure; increases in energy prices; challenging economic conditions affecting the nonresidential construction industry; volatility in the U.S. economy and abroad generally, and in the credit markets; hazards that may cause personal injury or property damage, thereby subjecting the Company to liabilities and possible losses, which may not be covered by insurance; breaches of the Company’s information system security measures and damage to our major information management systems; costs and other effects of legal and administrative proceedings, settlements, investigations, claims and other matters; costs related to environmental cleanups and liabilities; changes in laws or regulations, including the Dodd-Frank Act; the volatility of the Company's stock price, the dilutive effect on the Company’s common stockholders of potential future sales of the Company’s common stock held by our sponsor; and substantial governance and other rights held by our sponsor. See also the “Risk Factors” in the Company's Annual Report on Form 10-K for the fiscal year ended November 2, 2014 and in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended February 1, 2015 and in other reports we file with the SEC, which identify other important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements. The Company expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements, whether as a result of new information, future events, or otherwise.

 

 

NCI BUILDING SYSTEMS, INC.

BUSINESS SEGMENTS

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED OPERATING INCOME (LOSS) EXCLUDING SPECIAL CHARGES

FISCAL THREE MONTHS ENDED MAY 3, 2015 AND MAY 4, 2014

(In thousands)

(Unaudited)

 

		Fiscal Three Months Ended May 3, 2015
		Metal Coil Coating				Metal Components				Engineered Building Systems				Corporate				Consolidated
Operating income (loss), GAAP basis		$	2,397			$	6,941			$	2,855			$	(15,810	)		$	(3,617	)
Restructuring charges			254				629				792				(207	)			1,468
Strategic development and acquisition related costs			-				-				-				628				628
Short lived acquisition method fair value adjustments			-				3,109				-				-				3,109
Adjusted operating income (loss) (1)		$	2,651			$	10,679			$	3,647			$	(15,389	)		$	1,588

 

		Fiscal Three Months Ended May 4, 2014
		Metal Coil Coating				Metal Components				Engineered Building Systems				Corporate				Consolidated
Operating income (loss), GAAP basis		$	3,893			$	4,559			$	36			$	(14,001	)		$	(5,513	)
Gain on insurance recovery			(324	)			-				-				-				(324	)
Secondary offering costs			-				-				-				50				50
Adjusted operating income (loss) (1)		$	3,569			$	4,559			$	36			$	(13,951	)		$	(5,787	)

 

(1)

The Company discloses a tabular comparison of Adjusted operating income (loss), which is a non-GAAP measure because it is instrumental in comparing the results from period to period. Adjusted operating income (loss) should not be considered in isolation or as a substitute for operating income (loss) as reported on the face of our statement of operations.

 

 

NCI BUILDING SYSTEMS, INC.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

COMPUTATION OF EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION,

AMORTIZATION AND OTHER NONCASH ITEMS (ADJUSTED EBITDA)

(In thousands)

(Unaudited)

 

		3rd Qtr				4th Qtr				1st Qtr				2nd Qtr				Trailing 12 Months
		August 3,				November 2,				February 1,				May 3,				May 3,
		2014				2014				2015				2015				2015
Net income (loss)		$	6,089			$	14,259			$	(320	)		$	(7,488	)		$	12,540
Add:
Depreciation and amortization			8,994				9,220				9,731				13,766				41,711
Consolidated interest expense, net			3,142				3,053				3,980				8,280				18,455
Provision (benefit) for income taxes			2,837				4,215				(490	)			(4,087	)			2,475
Restructuring charges			-				-				1,477				1,759				3,236
Strategic development and acquisition related costs			1,486				3,512				1,729				628				7,355
Short lived acquisition method inventory fair value adjustments			-				-				583				775				1,358
Non-cash charges:
Share-based compensation			2,404				2,022				2,933				2,201				9,560
Adjusted EBITDA (1)		$	24,952			$	36,281			$	19,623			$	15,834			$	96,690

 

		3rd Qtr				4th Qtr				1st Qtr				2nd Qtr				Trailing 12 Months
		July 28,				November 3,				February 2,				May 4,				May 4,
		2013				2013				2014				2014				2014
Net income (loss)		$	(12,192	)		$	8,276			$	(4,258	)		$	(4,905	)		$	(13,079	)
Add:
Depreciation and amortization			9,066				9,012				8,767				8,941				35,786
Consolidated interest expense, net			5,130				3,334				3,100				3,035				14,599
Provision (benefit) for income taxes			(9,933	)			5,410				(2,506	)			(3,057	)			(10,086	)
Debt extinguishment costs, net			21,491				-				-				-				21,491
Gain on insurance recovery			-				(1,023	)			(987	)			(324	)			(2,334	)
Unreimbursed business interruption costs			-				500				-				-				500
Secondary offering costs			-				-				704				50				754
Non-cash charges:
Share-based compensation			3,448				4,565				3,179				2,563				13,755
Embedded derivative			(50	)			-				-				-				(50	)
Adjusted EBITDA (1)		$	16,960			$	30,074			$	7,999			$	6,303			$	61,336

 

(1)

The Company's Credit Agreement defines Adjusted EBITDA. Adjusted EBITDA excludes non-cash charges for goodwill and other asset impairments and stock compensation as well as certain non-recurring charges. As such, the historical information is presented in accordance with the definition above. Concurrent with the amendment and restatement of the Term Loan facility, the Company entered into an Asset-Based Lending facility which has substantially the same definition of Adjusted EBITDA except that the ABL Facility caps certain non-recurring charges. The Company is disclosing Adjusted EBITDA, which is a non-GAAP measure, because it is used by management and provided to investors to provide comparability of underlying operational results.