NCI Building Systems Reports Fourth Quarter and 2017 Fiscal Year End Results

December 6, 2017 4:15 PM

HOUSTON, Dec. 6, 2017 /PRNewswire/ -- NCI Building Systems, Inc. (NYSE: NCS) ("NCI" or the "Company") today reported financial results for the fourth fiscal quarter and fiscal year ended October 29, 2017.

Fourth Quarter 2017 Financial and Operational Highlights:

  • Sales rose 1.8% to $488.7 million for the quarter, compared to $480.3 million in the prior year's fourth quarter
  • Gross profit for the quarter was $116.3 million or 23.8% of revenues, compared to $120.8 million or 25.2% of revenues in the prior year's fourth quarter
  • Net income was $17.5 million for the quarter, compared to $19.0 million in last year's fourth quarter. Adjusted Net Income was $22.3 million this quarter, compared to $19.8 million in the prior year's fourth quarter
  • Net income per diluted common share for the quarter was $0.25, compared to $0.27 in the prior year's fourth quarter. Adjusted Net Income was $0.32 per diluted common share, compared to $0.28 in the prior year's fourth quarter
  • Adjusted EBITDA was $53.9 million or 11.0% of revenues for the quarter, compared to Adjusted EBITDA of $53.7 million or 11.2% of revenues in the prior year's fourth quarter.
  • Repurchased over 2.6 million shares at an average purchase price of $14.73 per share using $37.6 million. For fiscal 2017, the Company repurchased 2.8 million shares at an average purchase price of $14.68
  • Total consolidated backlog increased to $545.6 million, up 5.8% year-over-year
  • For the period, the Company estimated the hurricanes negatively impacted sales by approximately $16.0 million, gross profit by approximately $8.3 million and Adjusted EBITDA by approximately $8.5 million

"While 2017 was a demanding year, in spite of the overall challenges we finished the year on a strong note in terms of bookings and shipments," said Donald R. Riley, President and Chief Executive Officer. "In closing out the year, we achieved many goals critical to realizing our long-term vision for NCI. We completed the rationalization of our manufacturing footprint, met our cost reduction initiative goals a year ahead of schedule, resulting in a combined annual savings of $31.9 million, and produced double digit growth in our Insulated Metal Panels business."

"As we look towards fiscal 2018, we are excited and optimistic about our opportunities to continue driving NCI forward. The next phase of the Company's evolution will be focused on implementing continuous improvement processes throughout the entire company with an emphasis on customer service and efficiency, expanding our sales through further product adjacencies, incorporating advanced automation across our manufacturing facilities and taking additional costs out of the business. We believe these efforts will position us to realize our long range goals," concluded Riley.

Fourth Quarter 2017 Results

Fourth quarter 2017 sales increased to $488.7 million, up 1.8% from $480.3 million in last year's fourth quarter, primarily due to continued commercial discipline in the pass-through of higher material costs. On a year-over-year basis, tonnage volumes were significantly lower in the Buildings segment resulting from the impact of hurricane related disruptions, customers access to job sites and transportation delays. The Company estimated the hurricanes reduced sales by approximately $16.0 million for the quarter.

Gross profit was $116.3 million this quarter, down from $120.8 million in the fourth quarter of 2016 and gross profit margins were 23.8% for the this year's fourth quarter compared to 25.2% in the fourth quarter of 2016. Gross margins in the fourth quarter of the year declined primarily as a result of lower volumes in the Buildings segment, uneven production flow and increased transportation costs. The Company estimated the hurricanes impacted gross profits by approximately $8.3 million for the quarter.

Engineering, selling, general and administrative ("ESG&A") expenses were $72.7 million for the quarter, compared to $77.6 million in the fourth quarter of 2016. As a percentage of revenues, ESG&A expenses decreased approximately 130 basis points to 14.9% in the 2017 fourth quarter compared to 16.2% in the prior year's fourth quarter, primarily driven by the Company's cost reduction initiatives, integration activities and lower incentive compensation costs.

Operating income for the quarter was $33.3 million, compared to $39.4 million in the prior year's fourth quarter. Adjusted Operating Income, a non-GAAP measure which excludes certain identified items, was $41.3 million in the current quarter, compared to $40.9 million in the fourth quarter of 2016. The Company estimated the hurricanes impacted Adjusted Operating Income by approximately $8.5 million for the quarter.

Net income applicable to common shares in the quarter was $17.4 million, or $0.25 per diluted common share, compared to $19.0 million, or $0.27 per diluted common share in the prior year's fourth quarter. Net income was impacted by the following special items: $6.0 million non-cash goodwill impairment charge related to the coil coating operations of CENTRIA, $1.1 million of restructuring charges predominately attributable to severance costs, $0.6 million for asset impairments and $0.2 million of strategic development and acquisition related costs, partially offset by $3.1 million from the associated tax effect of these items. Excluding the impact of these special items, the Company reported Adjusted Net Income, a non-GAAP measure, of $22.3 million, or $0.32 per diluted common share, compared to $19.8 million, or $0.28 per diluted common share, in the fourth quarter of 2016.

Adjusted EBITDA, a non-GAAP measure, defined in accordance with the Company's Credit Agreement as earnings before interest, taxes, depreciation and amortization, and certain other cash and non-cash items, was $53.9 million this quarter, compared to $53.7 million in the prior year's fourth quarter. The Company estimated that the fourth quarter of fiscal 2017 was impacted by $8.5 million as a result of job site disruptions, uneven production flow and increased transportation costs related to the various hurricanes during the period.

Please see the reconciliation of Adjusted Operating Income, Adjusted Net Income and Adjusted EBITDA in the accompanying financial tables.

Cash and cash equivalents at the end of the fourth quarter were $65.7 million, compared to $65.4 million at the end of the fourth quarter of fiscal 2016. Cash and cash equivalents increased sequentially from $45.9 million at the end of the third quarter of fiscal 2017 as a result of strong operating cash flow offset by $37.6 million of share repurchases during the period. NCI's net debt leverage ratio (net debt/EBITDA) at the end of the fourth quarter was 2.0x. In addition, the Company's $150.0 million ABL facility remained undrawn as of October 29, 2017.

Fourth Quarter 2017 Segment Performance

Third party sales in the Buildings segment were $178.2 million in the fourth quarter compared to $196.6 million in the prior year period, as a result of significantly lower volumes during the period, largely driven by hurricane related disruptions. Operating income decreased to $13.0 million this quarter, compared to $22.8 million in the fourth quarter of 2016. Adjusted Operating Income decreased to $13.7 million in the current quarter, compared to $23.1 million in the fourth quarter of fiscal 2016. The year-over-year decrease in the Building segment's operating margins relates largely to lower plant utilization driven by lower volumes during the period, uneven production flow and increased transportation costs. The hurricanes had a disproportionate effect on the Buildings segment due to the larger transaction size and longer lead times from order to delivery.

The Components segment generated $281.3 million in third party sales during the quarter, an increase of 10.3% from $255.1 million in the fourth quarter of fiscal 2016, led by growth in the insulated panel product lines, as well as commercial pricing discipline and higher volumes across the segment. Operating income was $32.8 million for the quarter compared to $31.1 million in the fourth quarter of 2016. Adjusted Operating Income was $39.7 million, compared to $31.6 million in the fourth quarter of fiscal 2016. The Components segment's profitability was improved by higher volumes and capacity utilization across the legacy single skin product lines and a strong product mix in insulated panel sales.

Third party sales in the Coatings segment were $29.2 million, compared to $28.6 million in the fourth quarter of fiscal 2016. Operating income was $6.6 million for the quarter, compared to $7.0 million in the fourth quarter of 2016. Operating margins in the Coatings group were impacted by lower third party volumes offset by improved commercial discipline and higher internal volumes.

Market Commentary

The key leading indicators that NCI follows and that typically have the most meaningful correlation to nonresidential low-rise construction starts are the American Institute of Architects' ("AIA") Architecture Mixed Use Index, the Dodge Residential single family starts and the Conference Board Leading Economic Index ("LEI"). Historically, there has been a very high correlation to low-rise nonresidential starts when the three leading indicators are combined and then seasonally adjusted. The combined forward projection of these metrics, based on a 9- to 14-month historical lag for each metric, indicates an expected positive growth of 2.0% to 4.0% for low-rise new construction starts for the Company's addressable market in fiscal 2018.

Internal bookings and quoting activity indicates a continuation of low single digit growth as compared to the prior year. Offices and banks, educational and governmental end-markets have shown positive year-over-year growth. In NCI's geographic markets South Atlantic, New England and East North Central regions showed the strongest growth year-over-year.

Cost Initiatives and Guidance

The Company's two cost savings initiatives in manufacturing and ESG&A were ahead of schedule at the end of the fourth quarter. The Company is targeting an additional $40 - $50 million in cost savings reductions and efficiencies by the end of 2020.

For the first quarter of fiscal 2018, NCI expects revenues to be in the range of $390 to $410 million and Adjusted EBITDA to be in the range of $24 to $34 million.

The Company has provided additional detailed financial guidance in the quarterly supplemental presentation at www.ncibuildingsystems.com under the "Investors" section.

Conference Call Information

The NCI Building Systems, Inc. fourth quarter 2017 conference call is scheduled for Thursday, December 7, 2017, at 9:00 a.m. ET (8:00 a.m. CT). Please dial 1-412-902-0003 or 1-877-407-0672 (toll-free) 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 telephone replay, please dial 1-201-612-7415 or 1-877-660-6853 (toll-free) and the passcode 13673308# when prompted. The taped replay will be available two hours after the call through December 21, 2017. A replay of the webcast will be available on the Company's website under the Event Calendar, Calls & Webcast section of the Investor Relations page of the NCI website for approximately 90 days.

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, Canada, Mexico and China with additional sales and distribution offices throughout the United States and Canada. For more information visit www.ncibuildingsystems.com.

Contact:

K. Darcey MatthewsVice President, Investor Relations281-897-7785

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," "anticipate," "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. Such forward-looking statements may include, but are not limited to, statements concerning our market commentary and expectations for new nonresidential low-rise construction starts in fiscal 2018 and our financial outlook and guidance, including our first quarter fiscal 2018 forecasted revenues and Adjusted EBITDA, long term targets with respect to cost savings and other consolidated financial performance guidance. Among the factors that could cause actual results to differ materially include, but are not limited to, industry cyclicality and seasonality; adverse weather conditions; challenging economic conditions affecting the nonresidential construction industry; volatility in the U.S. economy and abroad, generally, and in the credit markets; substantial indebtedness and our ability to incur substantially more or refinance indebtedness; our ability to generate significant cash flow required to service or refinance our existing debt, including the 8.25% senior notes due 2023, and obtain future financing; our ability to comply with the financial tests and covenants in our existing and future debt obligations; operational limitations or restrictions in connection with our debt; increases in interest rates; recognition of asset impairment charges; commodity price increases and/or limited availability of raw materials, including steel; interruptions in our supply chain; our ability to make strategic acquisitions accretive to earnings; retention and replacement of key personnel; our ability to carry out our restructuring plans and to fully realize expected cost savings; enforcement and obsolescence of intellectual property rights; fluctuations in customer demand; costs related to environmental clean-ups and liabilities; competitive activity and pricing pressure; increases in energy prices; volatility of the Company's stock price; effect on the price of the Company's common stock of 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 us to liabilities and possible losses, which may not be covered by insurance; changes in laws or regulations, including the Dodd-Frank Act; the timing and amount of our stock repurchases; and costs and other effects of legal and administrative proceedings, settlements, investigations, claims and other matters. See also the "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended October 29, 2017, and other risks described in documents subsequently filed by the Company from time to time 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.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Fiscal Three Months Ended

Fiscal Year Ended

October 29,

October 30,

October 29,

October 30,

2017

2016

2017

2016

Sales

$ 488,726

$ 480,314

$ 1,770,278

$ 1,684,928

Cost of sales

372,421

359,403

1,354,077

1,258,680

Loss (gain) on sale of assets and asset recovery

-

62

137

(1,642)

Gross profit

116,305

120,849

416,064

427,890

23.8%

25.2%

23.5%

25.4%

Engineering, selling, general and administrative expenses

72,671

77,640

293,145

302,551

Intangible asset amortization

2,405

2,412

9,620

9,638

Goodwill impairment

6,000

-

6,000

-

Strategic development and acquisition related costs

193

590

1,971

2,670

Restructuring and impairment charges

1,710

815

5,297

4,252

Gain on insurance recovery

-

-

(9,749)

-

Income from operations

33,326

39,392

109,780

108,779

Interest income

74

11

238

146

Interest expense

(7,161)

(7,559)

(28,899)

(31,019)

Foreign exchange (loss) gain

(488)

(312)

547

(1,401)

Gain from bargain purchase

-

-

-

1,864

Other income, net

427

118

1,472

595

Income before income taxes

26,178

31,650

83,138

78,964

Provision for income taxes

8,688

12,649

28,414

27,937

33.2%

40.0%

34.2%

35.4%

Net income

$ 17,490

$ 19,001

$ 54,724

$ 51,027

Net income allocated to participating securities

(78)

(105)

(325)

(389)

Net income applicable to common shares

$ 17,412

$ 18,896

$ 54,399

$ 50,638

Check

Income per common share:

Basic

$ 0.25

$ 0.27

$ 0.77

$ 0.70

Diluted

$ 0.25

$ 0.27

$ 0.77

$ 0.70

Weighted average number of common shares outstanding:

Basic

69,629

70,845

70,629

72,411

Diluted

69,741

71,020

70,778

72,857

Increase in sales

1.8%

4.5%

5.1%

7.8%

Engineering, selling, general and administrative expenses percentage

14.9%

16.2%

16.6%

18.0%

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

October 29,

October 30,

2017

2016

ASSETS

Current assets:

Cash and cash equivalents

$ 65,658

$ 65,403

Restricted cash

136

310

Accounts receivable, net

199,897

182,258

Inventories, net

198,296

186,824

Income taxes receivable

3,617

982

Deferred income taxes

22,605

29,104

Investments in debt and equity securities, at market

6,481

5,748

Prepaid expenses and other

33,086

29,971

Assets held for sale

5,582

4,256

Total current assets

535,358

504,856

Property, plant and equipment, net

226,995

242,212

Goodwill

148,291

154,271

Intangible assets, net

137,148

146,769

Other assets, net

1,875

2,092

Total assets

$ 1,049,667

$ 1,050,200

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Note payable

$ 440

$ 460

Accounts payable

147,772

142,913

Accrued compensation and benefits

58,408

72,612

Accrued interest

6,414

7,165

Other accrued expenses

103,253

103,384

Total current liabilities

316,287

326,534

Long-term debt, net of deferred financing costs of $6,857 and $8,096

387,290

396,051

Deferred income taxes

23,396

24,804

Other long-term liabilities

18,953

21,494

Total long-term liabilities

429,639

442,349

Common stock

687

715

Additional paid-in capital

562,277

603,120

Accumulated deficit

(248,046)

(302,706)

Accumulated other comprehensive loss, net

(9,037)

(10,553)

Treasury stock, at cost

(2,140)

(9,259)

Total stockholders' equity

303,741

281,317

Total liabilities and stockholders' equity

$ 1,049,667

$ 1,050,200

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Fiscal Year Ended

October 29,

October 30,

2017

2016

Cash flows from operating activities:

Net income

$ 54,724

$ 51,027

Adjustments to reconcile net income to net cash from operating activities

Depreciation and amortization

41,318

41,924

Amortization of deferred financing costs

1,819

1,908

Share-based compensation expense

10,230

10,892

Losses (gains) on assets, net

1,371

(2,673)

Goodwill impairment

6,000

-

Gain on insurance recovery

(9,749)

-

Provision for doubtful accounts

1,948

1,343

Provision for deferred income taxes

866

1,318

Excess tax (benefits) shortfalls from share-based compensation arrangements

(1,515)

289

Changes in operating assets and liabilities, net of effect of acquisitions:

Accounts receivable

(19,582)

(18,141)

Inventories

(11,473)

(29,054)

Income taxes

(2,637)

(1,953)

Prepaid expenses and other

(3,293)

671

Accounts payable

4,858

(1,598)

Accrued expenses

(11,299)

12,656

Other, net

(1,227)

159

Net cash provided by operating activities

62,359

68,768

Cash flows from investing activities:

Acquisitions, net of cash acquired

-

(4,343)

Capital expenditures

(22,074)

(21,024)

Proceeds from sale of property, plant and equipment

3,197

5,417

Proceeds from insurance

8,593

10,000

Net cash used in investing activities

(10,284)

(9,950)

Cash flows from financing activities:

Refund of restricted cash

173

370

Proceeds from stock options exercised

1,651

12,612

Excess tax benefits (shortfalls) from share-based compensation arrangements

1,515

(289)

Proceeds from Amended ABL facility

35,000

-

Payments on Amended ABL facility

(35,000)

-

Payments on term loan

(10,180)

(40,000)

Payments on note payable

(1,570)

(1,430)

Purchases of treasury stock

(43,603)

(64,015)

Net cash used in financing activities

(52,014)

(92,752)

Effect of exchange rate changes on cash and cash equivalents

194

(325)

Net increase (decrease) in cash and cash equivalents

255

(34,259)

Cash and cash equivalents at beginning of period

65,403

99,662

Cash and cash equivalents at end of period

$ 65,658

$ 65,403

NCI BUILDING SYSTEMS, INC.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

ADJUSTED NET INCOME PER DILUTED COMMON SHARE AND NET INCOME COMPARISON

(Unaudited)

Fiscal Three Months Ended

Fiscal Year Ended

October 29,

October 30,

October 29,

October 30,

2017

2016

2017

2016

Net income per diluted common share, GAAP basis

$ 0.25

$ 0.27

$ 0.77

$ 0.70

Goodwill impairment

0.09

-

0.08

-

Restructuring and impairment charges

0.02

0.01

0.07

0.06

Strategic development and acquisition related costs

0.00

0.01

0.03

0.04

(Gain) on insurance recovery

-

-

(0.14)

-

Unreimbursed business interruption costs

0.00

-

0.01

-

Other losses (gains), net

-

0.00

0.00

(0.06)

Tax effect of applicable non-GAAP adjustments (1)

(0.04)

(0.01)

(0.02)

(0.03)

Adjusted net income per diluted common share (2)

$ 0.32

$ 0.28

$ 0.80

$ 0.71

Fiscal Three Months Ended

Fiscal Year Ended

October 29,

October 30,

October 29,

October 30,

2017

2016

2017

2016

Net income applicable to common shares, GAAP basis

$ 17,412

$ 18,896

$ 54,399

$ 50,638

Goodwill impairment

6,000

-

6,000

-

Restructuring and impairment charges

1,710

815

5,297

4,252

Strategic development and acquisition related costs

193

590

1,971

2,670

(Gain) on insurance recovery

-

-

(9,749)

-

Unreimbursed business interruption costs

28

-

454

-

Other losses (gains), net

-

62

137

(3,506)

Tax effect of applicable non-GAAP adjustments (1)

(3,093)

(572)

(1,603)

(2,059)

Adjusted net income applicable to common shares (2)

$ 22,250

$ 19,791

$ 56,906

$ 51,995

(1)

The Company calculated the tax effect of non-GAAP adjustments by applying the applicable statutory tax rate for the period to each applicable non-GAAP item.

(2)

The Company discloses a tabular comparison of Adjusted net income per diluted common share and Adjusted net income 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 income per diluted common share and Adjusted net income applicable to common shares should not be considered in isolation or as a substitute for net income per diluted common share and net income applicable to common shares as reported on the face of our consolidated statements of operations.

NCI Building Systems, Inc

Business Segments

(In thousands)

(Unaudited)

Fiscal Three Months Ended

Fiscal Three Months Ended

$

%

October 29, 2017

October 30, 2016

Inc/(Dec)

Change

% of

% of

Total

Total

Sales:

Sales

Sales

Engineered building systems

$ 188,183

32

$ 204,208

36

$(16,025)

-7.8%

Metal components

316,716

55

292,430

52

24,286

8.3%

Metal coil coating

73,007

13

69,283

12

3,724

5.4%

Total sales

577,906

100

565,921

100

11,985

2.1%

Less: Intersegment sales

89,180

15

85,607

15

3,573

4.2%

Total net sales

$ 488,726

85

$ 480,314

85

$ 8,412

1.8%

% of

% of

Operating income (loss):

Sales

Sales

Engineered building systems

$ 13,043

7

$ 22,830

11

$ (9,787)

-42.9%

Metal components

32,818

10

31,059

11

1,759

5.7%

Metal coil coating

6,615

9

7,018

10

(403)

-5.7%

Corporate

(19,150)

-

(21,515)

-

2,365

11.0%

Total operating income

$ 33,326

7

$ 39,392

8

$ (6,066)

-15.4%

% of

% of

Adjusted operating income (loss) (1):

Sales

Sales

Engineered building systems

$ 13,738

7

$ 23,103

11

$ (9,365)

-40.5%

Metal components

39,689

13

31,565

11

8,124

25.7%

Metal coil coating

6,615

9

7,018

10

(403)

-5.7%

Corporate

(18,785)

-

(20,827)

-

2,042

9.8%

Total adjusted operating income

$ 41,257

8

$ 40,859

9

$ 398

1.0%

Fiscal Year Ended

Fiscal Year Ended

$

%

October 29, 2017

October 30, 2016

Inc/(Dec)

Change

% of

% of

Total

Total

Sales:

Sales

Sales

Engineered building systems

$ 693,980

33

$ 672,235

34

$ 21,745

3.2%

Metal components

1,129,816

54

1,044,040

53

85,776

8.2%

Metal coil coating

271,085

13

247,736

13

23,349

9.4%

Total sales

2,094,881

100

1,964,011

100

130,870

6.7%

Less: Intersegment sales

324,603

15

279,083

14

45,520

16.3%

Total net sales

$ 1,770,278

85

$ 1,684,928

86

$ 85,350

5.1%

% of

% of

Operating income (loss):

Sales

Sales

Engineered building systems

$ 41,388

6

$ 62,046

9

$(20,658)

-33.3%

Metal components

124,224

11

102,495

10

21,729

21.2%

Metal coil coating

23,935

9

25,289

10

(1,354)

-5.4%

Corporate

(79,767)

-

(81,051)

-

1,284

1.6%

Total operating income

$ 109,780

6

$ 108,779

6

$ 1,001

0.9%

% of

% of

Adjusted operating income (loss) (1):

Sales

Sales

Engineered building systems

$ 45,257

7

$ 61,370

9

$(16,113)

-26.3%

Metal components

122,273

11

104,559

10

17,714

16.9%

Metal coil coating

23,935

9

25,328

10

(1,393)

-5.5%

Corporate

(77,575)

-

(77,198)

-

(377)

-0.5%

Total adjusted operating income

$ 113,890

6

$ 114,059

7

$ (169)

-0.1%

(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 statements of operations. See the reconciliation of Adjusted operating income (loss) to operating income (loss) on the following page.

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 OCTOBER 29, 2017 AND OCTOBER 30, 2016

(In thousands)

(Unaudited)

Fiscal Three Months Ended October 29, 2017

Engineered Building Systems

Metal Components

Metal Coil Coating

Corporate

Consolidated

Operating income (loss), GAAP basis

$ 13,043

$ 32,818

$ 6,615

$ (19,150)

$ 33,326

Goodwill impairment

-

6,000

-

-

6,000

Restructuring and impairment charges

695

753

-

262

1,710

Strategic development and acquisition related costs

-

90

-

103

193

Unreimbursed business interruption costs

-

28

-

-

28

Adjusted operating income (loss) (1)

$ 13,738

$ 39,689

$ 6,615

$ (18,785)

$ 41,257

Fiscal Three Months Ended October 30, 2016

Engineered Building Systems

Metal Components

Metal Coil Coating

Corporate

Consolidated

Operating income (loss), GAAP basis

$ 22,830

$ 31,059

$ 7,018

$ (21,515)

$ 39,392

Restructuring and impairment charges

211

506

-

98

815

Strategic development and acquisition related costs

-

-

-

590

590

Loss on sale of assets and asset recovery

62

-

-

-

62

Adjusted operating income (loss) (1)

$ 23,103

$ 31,565

$ 7,018

$ (20,827)

$ 40,859

(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 statements 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 YEAR ENDED OCTOBER 29, 2017 AND OCTOBER 30, 2016

(In thousands)

(Unaudited)

Fiscal Year Ended October 29, 2017

Engineered Building Systems

Metal Components

Metal Coil Coating

Corporate

Consolidated

Operating income (loss), GAAP basis

$ 41,388

$ 124,224

$ 23,935

$ (79,767)

$ 109,780

Goodwill impairment

-

6,000

-

-

6,000

Restructuring and impairment charges

3,732

1,254

-

311

5,297

Strategic development and acquisition related costs

-

90

-

1,881

1,971

Loss on sale of assets and assets recovery

137

-

-

-

137

(Gain) on insurance recovery

-

(9,749)

-

-

(9,749)

Unreimbursed business interruption costs

-

454

-

-

454

Adjusted operating income (loss) (1)

$ 45,257

$ 122,273

$ 23,935

$ (77,575)

$ 113,890

Fiscal Year Ended October 30, 2016

Engineered Building Systems

Metal Components

Metal Coil Coating

Corporate

Consolidated

Operating income (loss), GAAP basis

$ 62,046

$ 102,495

$ 25,289

$ (81,051)

$ 108,779

Restructuring and impairment charges

966

1,661

39

1,586

4,252

Strategic development and acquisition related costs

-

403

-

2,267

2,670

(Gain) on sale of assets and asset recovery

(1,642)

-

-

-

(1,642)

Adjusted operating income (loss) (1)

$ 61,370

$ 104,559

$ 25,328

$ (77,198)

$ 114,059

(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 statements 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)

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Fiscal Year Ended

January 29,

April 30,

July 30,

October 29,

October 29,

2017

2017

2017

2017

2017

Net income

$ 2,039

$ 16,974

$ 18,221

$ 17,490

$ 54,724

Add:

Depreciation and amortization

10,315

10,062

10,278

10,663

41,318

Consolidated interest expense, net

6,881

7,341

7,353

7,086

28,661

Provision for income taxes

1,275

8,606

9,845

8,688

28,414

Restructuring and impairment charges

2,264

315

1,009

1,709

5,297

Strategic development and acquisition related costs

357

124

1,297

193

1,971

Share-based compensation

3,042

2,820

2,284

2,084

10,230

Goodwill impairment

-

-

-

6,000

6,000

Loss on sale of assets and asset recovery

-

137

-

-

137

(Gain) on insurance recovery

-

(9,601)

(148)

-

(9,749)

Unreimbursed business interruption costs

-

191

235

28

454

Adjusted EBITDA(1)

$ 26,173

$ 36,969

$ 50,374

$ 53,941

$ 167,457

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Fiscal Year Ended

January 31,

May 1,

July 31,

October 30,

October 30,

2016

2016

2016

2016

2016

Net income

$ 5,892

$ 2,420

$ 23,715

$ 19,001

$ 51,028

Add:

Depreciation and amortization

10,747

10,765

10,595

9,817

41,924

Consolidated interest expense, net

7,847

7,792

7,685

7,548

30,872

Provision for income taxes

2,453

1,209

11,627

12,649

27,938

Restructuring and impairment charges

1,510

1,149

778

815

4,252

(Gain) from bargain purchase

(1,864)

-

-

-

(1,864)

Strategic development and acquisition related costs

681

579

819

590

2,669

Share-based compensation

2,582

2,468

2,661

3,181

10,892

(Gain) loss on sale of assets and asset recovery

(725)

(927)

(52)

62

(1,642)

Adjusted EBITDA (1)

$ 29,123

$ 25,455

$ 57,828

$ 53,663

$ 166,069

(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 special 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 special 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.

Reconciliation of Segment Sales to Third Party Segment Sales

(In thousands)

(Unaudited)

Fiscal

Fiscal

$

%

4th Qtr 2017

4th Qtr 2016

Inc/(Dec)

Change

Engineered Building Systems

Total Sales

$ 188,183

32%

$ 204,208

36%

$ (16,025)

-7.8%

Less: Intersegment sales

9,961

7,612

2,349

30.9%

Third Party Sales

$ 178,222

36%

$ 196,596

41%

$ (18,374)

-9.3%

Operating Income

$ 13,043

7%

$ 22,830

12%

$ (9,787)

-42.9%

Metal Components

Total Sales

$ 316,716

55%

$ 292,430

52%

$ 24,286

8.3%

Less: Intersegment sales

35,458

37,324

(1,866)

-5.0%

Third Party Sales

$ 281,258

58%

$ 255,106

53%

$ 26,152

10.3%

Operating Income

$ 32,818

12%

$ 31,059

12%

$ 1,759

5.7%

Metal Coil Coating

Total Sales

$ 73,007

13%

$ 69,283

12%

$ 3,724

5.4%

Less: Intersegment sales

43,761

40,671

3,090

7.6%

Third Party Sales

$ 29,246

6%

$ 28,612

6%

$ 634

2.2%

Operating Income

$ 6,615

23%

$ 7,018

25%

$ (403)

-5.7%

Consolidated

Total Sales

$ 577,906

100%

$ 565,921

100%

$ 11,985

2.1%

Less: Intersegment

89,180

85,607

3,573

4.2%

Third Party Sales

$ 488,726

100%

$ 480,314

100%

$ 8,412

1.8%

Operating Income

$ 33,326

7%

$ 39,392

8%

$ (6,066)

-15.4%

Fiscal YTD

Fiscal YTD

$

%

4th Qtr 2017

4th Qtr 2016

Inc/(Dec)

Change

Engineered Building Systems

Total Sales

$ 693,980

33%

$ 672,235

34%

$ 21,745

3.2%

Less: Intersegment sales

34,117

19,764

14,353

72.6%

Third Party Sales

$ 659,863

37%

$ 652,471

39%

$ 7,392

1.1%

Operating Income

$ 41,388

6%

$ 62,046

10%

$ (20,658)

-33.3%

Metal Components

Total Sales

$ 1,129,816

54%

$ 1,044,040

53%

$ 85,776

8.2%

Less: Intersegment sales

131,537

118,177

13,360

11.3%

Third Party Sales

$ 998,279

57%

$ 925,863

55%

$ 72,416

7.8%

Operating Income

$ 124,224

12%

$ 102,495

11%

$ 21,729

21.2%

Metal Coil Coating

Total Sales

$ 271,085

13%

$ 247,736

13%

$ 23,349

9.4%

Less: Intersegment sales

158,949

141,142

17,807

12.6%

Third Party Sales

$ 112,136

6%

$ 106,594

6%

$ 5,542

5.2%

Operating Income

$ 23,935

21%

$ 25,289

24%

$ (1,354)

-5.4%

Consolidated

Total Sales

$ 2,094,881

100%

$ 1,964,011

100%

$ 130,870

6.7%

Less: Intersegment sales

324,603

279,083

45,520

16.3%

Third Party Sales

$ 1,770,278

100%

$ 1,684,928

100%

$ 85,350

5.1%

Operating Income

$ 109,780

6%

$ 108,779

6%

$ 1,001

0.9%

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SOURCE NCI Building Systems, Inc.

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