<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED: April 30, 1996
----------------
COMMISSION FILE NUMBER: 0-19885
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- --------------------------------------------------------------------------------
NCI BUILDING SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 76-0127701
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION IDENTIFICATION NO.)
7301 Fairview
Houston, Texas 77041
- ------------------------------------------- ----------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(713) 466-7788
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
Not Applicable
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT.
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH
SHORTER PERIODS THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH
REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE
PAST 90 DAYS. YES X NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICAL DATE.
Common Stock, $.01 Par Value--7,952,177 shares as of April 30, 1996
<PAGE> 2
NCI BUILDING SYSTEMS, INC.
INDEX
PART 1. FINANCIAL STATEMENTS PAGE NO.
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
<S> <C> <C>
Condensed consolidated balance sheets 1
April 30, 1996 and October 31, 1995.
Condensed consolidated statements of income 2
Three months ended April 30, 1996 and 1995.
Condensed consolidated statements of income 3
Six months ended April 30, 1996 and 1995.
Condensed consolidated statements of cash flows 4
Six months ended April 30, 1996 and 1995.
Notes to condensed consolidated financial 5-6
statements April 30, 1996.
ITEM 2. Management's Discussion and Analysis of Financial 7-9
Condition and Results of Operations.
PART 2. OTHER INFORMATION
- --------------------------
ITEM 4. Submission of matters to a vote of security holders 10
ITEM 6. Exhibits and Reports on Form 8-K 11
</TABLE>
<PAGE> 3
NCI BUILDING SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1996 1995
----------- -----------
(UNAUDITED) (NOTE)
ASSETS
- ------
<S> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 11,177,000 $ 17,631,000
ACCOUNTS RECEIVABLE 27,197,000 19,063,000
INVENTORIES 27,310,000 16,897,000
OTHER CURRENT ASSETS 2,327,000 1,868,000
------------ ------------
68,011,000 55,459,000
PROPERTY, PLANT AND EQUIPMENT 50,493,000 34,905,000
LESS-ACCUMULATED DEPRECIATION (11,304,000) (9,276,000)
------------ -------------
39,189,000 25,629,000
------------ ------------
OTHER ASSETS 24,678,000 1,994,000
------------ ------------
$131,878,000 $ 83,082,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
NOTES PAYABLE AND CURRENT
PORTION OF LONG-TERM DEBT $ 83,000 $ 83,000
ACCOUNTS PAYABLE 18,170,000 11,967,000
OTHER CURRENT LIABILITIES 10,590,000 11,722,000
------------ ------------
28,843,000 23,772,000
------------ ------------
LONG-TERM DEBT, NONCURRENT PORTION,
AND DEFERRED INCOME TAXES 2,930,000 1,628,000
------------ ------------
SHAREHOLDERS' EQUITY:
COMMON STOCK 80,000 63,000
PAID IN CAPITAL 47,029,000 13,696,000
RETAINED EARNINGS 52,996,000 43,923,000
------------ ------------
100,105,000 57,682,000
------------ ------------
$131,878,000 $ 83,082,000
============ ============
</TABLE>
NOTE: THE BALANCE SHEET AT OCTOBER 31, 1995 HAS BEEN DERIVED FROM THE
AUDITED FINANCIAL STATEMENTS AT THAT DATE
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 4
NCI BUILDING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30,
1996 1995
----------- -----------
<S> <C> <C>
SALES $72,171,000 $55,873,000
COST OF SALES 52,624,000 40,600,000
----------- -----------
GROSS PROFIT 19,547,000 15,273,000
OPERATING EXPENSES 11,818,000 9,132,000
----------- -----------
OPERATING INCOME 7,729,000 6,141,000
----------- -----------
INTEREST EXPENSE 24,000 9,000
OTHER (INCOME) EXPENSE (427,000) (184,000)
----------- -----------
(403,000) (175,000)
----------- -----------
INCOME BEFORE INCOME TAXES 8,132,000 6,316,000
PROVISION FOR INCOME TAXES 3,081,000 2,369,000
----------- -----------
NET INCOME $ 5,051,000 $ 3,947,000
=========== ===========
NET INCOME PER SHARE $ .60 $ .58
=========== ===========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-2-
<PAGE> 5
NCI BUILDING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30,
1996 1995
------------ ------------
<S> <C> <C>
SALES $139,521,000 $108,175,000
COST OF SALES 102,590,000 79,383,000
------------ ------------
GROSS PROFIT 36,931,000 28,792,000
OPERATING EXPENSES 23,094,000 17,766,000
------------ ------------
OPERATING INCOME 13,837,000 11,026,000
------------ ------------
INTEREST EXPENSE 27,000 16,000
OTHER (INCOME) EXPENSE (809,000) (366,000)
------------ ------------
(782,000) (350,000)
------------ ------------
INCOME BEFORE INCOME TAXES 14,619,000 11,376,000
PROVISION FOR INCOME TAXES 5,546,000 4,235,000
------------ ------------
NET INCOME $ 9,073,000 $ 7,141,000
============ ============
NET INCOME PER SHARE $ 1.13 $ 1.06
============ ============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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<PAGE> 6
NCI BUILDING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30,
1996 1995
----------- -----------
<S> <C> <C>
CASH FROM OPERATIONS $ 6,235,000 $ 3,064,000
----------- -----------
INVESTING ACTIVITIES:
PURCHASE OF PROPERTY, PLANT (4,342,000) (2,551,000)
AND EQUIPMENT
ACQUISITION OF ROYAL BUILDINGS --- (910,000)
ACQUISITION OF DBCI (11,000,000) ---
ACQUISITION OF MESCO (19,963,000) ---
ACQUISITION OF CARLISLE (2,522,000) ---
OTHER (281,000) 101,000
----------- -----------
(38,108,000) (3,360,000)
----------- -----------
FINANCING ACTIVITIES:
NET PROCEEDS FROM SALE OF STOCK 24,770,000 ---
PROCEEDS FROM STOCK OPTION EXERCISE 673,000 ---
BORROWING AND REPAYMENT OF DEBT
AND OTHER (24,000) (23,000)
----------- -----------
25,419,000 (23,000)
----------- -----------
INCREASE(DECREASE) IN CASH $(6,454,000) $ (319,000)
=========== ===========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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<PAGE> 7
NCI BUILDING SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
APRIL 30, 1996
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information for footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month and six month
periods ended April 30, 1996, are not necessarily indicative of the
results that may be expected for the year ended October 31, 1996.
For further information, refer to the financial statements and
footnotes thereto included in the Company's Annual Report to
Shareholders for the year ended October 31, 1995.
NOTE 2 -- INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
----------- -----------
<S> <C> <C>
Raw materials $21,488,000 $12,597,000
Work in process 5,822,000 4,300,000
----------- -----------
$27,310,000 $16,897,000
=========== ===========
</TABLE>
NOTE 3 -- NET INCOME PER SHARE
Net income per common share is computed by dividing net income after
taxes by the weighted average number of common shares outstanding, after giving
effect to common stock equivalents. The number of shares used in the
computation for the three months ended April 30, 1996 and 1995 was 8,388,220
and 6,759,686, respectively. The number of shares used in the computation for
the six months ended April 30, 1996 and 1995 was 8,009,921 and 6,741,399,
respectively.
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<PAGE> 8
NOTE 4 -- ACQUISITIONS
In November, 1995, the Company acquired substantially all the assets
and assumed certain liabilities of Doors and Building Components, Inc. (DBCI),
a manufacturer of overhead doors, for approximately $18.0 million. The excess
of cost over the fair value of the acquired net assets was approximately $11.8
million. In April, 1996, the Company acquired substantially all the assets and
assumed certain liabilities of Mesco Metal Buildings (Mesco) for approximately
$22.0 million, including a cash consideration of $20.5 million and the issuance
of a $1.5 million, 7% subordinated convertible debenture due April 1, 2001.
The debenture is convertible into common stock any time after April 1, 1997, at
a conversion price of $29.925 per share and may be redeemed, at the option of
the Company, in whole or part, at any time after April 1, 1997, at 100% of the
principal amount thereof, plus accrued interest, provided the market price (as
defined) at the time is at least 150% of the conversion rate. The excess of
cost over the fair value of the acquired net assets was approximately $10.9
million. The consolidated results of operations for 1996 include DBCI and
MESCO since the date of acquisitions. The acquistions were accounted for using
the purchase method. Assuming the acquisitions of DBCI and MESCO had been
consummated November 1, 1994, the pro forma unaudited results of operations are
as follows (in thousands, except per share date):
<TABLE>
<CAPTION>
Six Months Ended April 30,
1996 1995
---------- ----------
<S> <C> <C>
Sales $ 154,095 $ 140,275
Net income 10,482 9,144
Net income per share $ 1.31 $ 1.30
</TABLE>
-6-
<PAGE> 9
NCI BUILDING SYSTEMS, INC.
ITEM 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
THREE MONTHS ENDED APRIL 30, 1996 COMPARED TO THREE MONTHS ENDED
APRIL 30, 1995
Sales in the second quarter of fiscal year 1996 increased by $16 million, or
29%, compared to the second quarter of fiscal year 1995. Approximately $11.5
million of this increase resulted from the inclusion of Doors and Building
Components, Inc. ("DBCI") which was acquired in November, 1995 and Mesco
Buildings Company ("Mesco") which was acquired in April, 1996 in the second
quarter results for fiscal year 1996. The remaining increase of $4.5 million
resulted from higher sales through the Company's authorized builder
organizations, increased market penetration in the Midwest, Western and
Southeast regions, and increased market penetration in the components division
of the Company.
Gross profit for the second quarter of fiscal 1996 increased $4.3 million, or
28%, compared to the prior year's second quarter. Gross profit percentage was
27.1% in the current quarter compared to 27.3% in the prior year's quarter.
This decrease in gross profit percentage resulted from lower gross profit
percentages at DBCI rather than the Company's other businesses and slightly
lower plant utilization of manufacturing facilities due to the seasonality of
the Company's sales in the first half of the fiscal year.
Operating expenses which consist of engineering, sales and administrative costs
increased by $2.7 million, or 29%, in the current quarter compared to the same
period a year ago. As a percent of sales, operating expenses were 16.4%
compared to 16.3% a year ago. The increase in other income of $243,000
resulted primarily from the higher level of investable cash during the second
quarter of the current fiscal year compared to the same period a year ago.
Income before income taxes increased by $1.8 million, or 29%. This was in line
with the increase in sales and gross profit for the current quarter. As a
percent of sales, income before income tax was 11.3% in both the current and
prior year's quarter.
As a percent of income before income tax, the provision for income tax
increased from 37.5% in the prior year to 37.9% in the current quarter. This
increase resulted from a higher marginal federal income tax rate and increased
state income taxes.
-7-
<PAGE> 10
SIX MONTHS ENDED APRIL 30, 1996 COMPARED TO SIX MONTHS ENDED
APRIL 30, 1995
Sales for the six months ended April 30, 1996 increased 29% over the same
period a year ago. Factors which contributed to this increase were higher sales
through the authorized builder organization, increased market penetration in
the components business and continued geographical expansion in the midwest,
western and southeast areas of the country. Approximately 62% of this increase
was due to the inclusion of DBCI and Mesco in the current year both of which
were acquired in the current fiscal year and accounted for as purchase
transactions as discussed in footnote 4 to the condensed financial statements.
Gross profit increased 28% for the six month period ended April 30, 1996
compared to the same period a year ago. This increase was in line with the
increase in sales for the period. As a percent of sales, gross profit was
26.5% in the current period compared to 26.7% in the same period last year.
Operating expenses increased $5.3 million, or 30%, compared to the six months
ended April 30, 1995. As a percent of sales, operating expenses were 16.6% and
16.4%, respectively, for the six month periods ended April 30, 1996 and 1995.
The dollar increase in expenses resulted from the higher level of sales for the
current period. Sales expense increased slightly more than the increase in
sales due to the cost of expanding marketing to the Western states in
anticipation of the opening of a new manufacturing facility in Atwater,
California in June 1996.
Interest expense increased by $11,000 due to the debt incurred in connection
with the acquisition of Mesco. Other income increased slightly by $443,000 as
a result of higher levels of investable cash in the current year.
As a percent of sales, income before taxes was 10.5% in both the current six
months and the same period last year.
The provision for income taxes as a percent of income before income tax
increased to 37.9% in the current year compared to 37.2% in the prior year as a
result of a higher marginal Federal income tax rate and higher state income
taxes.
-8-
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its operations from cash flow from
operations, bank borrowings and sales of equity. It maintains a revolving
credit facility with a bank lender that provides for a maximum credit on an
unsecured basis of $6.0 million which matures in March 1997. In addition, the
Company has a $1.75 million six year reducing revolving credit line from a bank
with a current borrowing base of $1.2 million. The Company had no outstanding
balance under these revolving credit facilities at April 30, 1996 and had not
borrowed any funds during the quarter then ended.
At April 30, 1996, the ratio of current assets to current liabilities was 2.4
to 1 compared to a ratio of 2.3 to 1 at October 31, 1995, and outstanding
funded debt was $1,754,000. The increase in receivables, inventories, other
assets and accounts payable resulted from the acquisitions of DBCI and Mesco in
the current year.
During the first six months, the Company spent $4.3 million for capital
additions primarily related to the construction of a new plant in Atwater,
California. In addition, the Company spent $11.0 million in cash for the
acquisition of DBCI, $20 million for the acquisition of Mesco and $2.5 million
in cash for the western operations of Carlisle Metals. These acquisitions were
funded from the proceeds of a secondary sale of equity of 1,086,450 shares of
common stock which yielded net proceeds of $24.8 million, existing cash
balances and internally generated funds.
Liquidity in future periods will be dependent on internally generated cash
flows, the ability to obtain adequate financing for capital expenditures and
expansion, when needed, and the amount of increased working capital necessary
to support expected growth. Based on current capitalization, it is expected
that future cash flows from operations and the availability of alternative
sources of external financing should be sufficient to provide adequate
liquidity in future periods.
-9-
<PAGE> 12
NCI BUILDING SYSTEMS, INC.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders (the "Annual Meeting") on
Wednesday, March 6, 1996. At the Annual Meeting, the stockholders of the
Company approved an amendment to the Company's Nonqualified Stock Option Plan
(the "Option Plan") that increased the number of shares issuable under the
Option Plan from 1,050,000 to 1,550,000. Of the 7,925,927 shares of Common
Stock, $0.01 par value ("Common Stock"), of the Company present at the Annual
Meeting, in person or by proxy, the votes cast for and against the proposed
amendment to the Option Plan were 4,047,092 and 1,837,200 respectively, with
32,291 shares abstaining.
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<PAGE> 13
NCI BUILDING SYSTEMS, INC.
PART II. OTHER INFORMATION
- ---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) None
(b) Form 8-K, dated April 1, 1996, as filed with the Securities
and Exchange Commission on April 9, 1996, and Form 8-KA dated
May 31, 1996, as filed with the Securities and Exchange
Commission on May 31, 1996, reflecting the Registrant's
acquisition of substantially all of the assets and business of
Mesco Metal Buildings, a division of Anderson Industries, Inc.
27 Financial Data Schedule
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.
--------------------------
(Registrant)
Date: June 13, 1996 /s/ ROBERT J. MEDLOCK
-------------- --------------------------
Robert J. Medlock
Vice President and
Chief Financial Officer
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> FEB-01-1996
<PERIOD-END> APR-30-1996
<CASH> 11,177,000
<SECURITIES> 0
<RECEIVABLES> 28,662,000
<ALLOWANCES> 1,465,000
<INVENTORY> 27,310,000
<CURRENT-ASSETS> 68,011,000
<PP&E> 50,493,000
<DEPRECIATION> (11,304,000)
<TOTAL-ASSETS> 131,878,000
<CURRENT-LIABILITIES> 28,843,000
<BONDS> 0
<COMMON> 80,000
0
0
<OTHER-SE> 100,025,000
<TOTAL-LIABILITY-AND-EQUITY> 131,878,000
<SALES> 72,171,000
<TOTAL-REVENUES> 72,171,000
<CGS> 52,624,000
<TOTAL-COSTS> 11,633,000
<OTHER-EXPENSES> (427,000)
<LOSS-PROVISION> 185,000
<INTEREST-EXPENSE> 24,000
<INCOME-PRETAX> 8,132,000
<INCOME-TAX> 3,081,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,051,000
<EPS-PRIMARY> .60
<EPS-DILUTED> 0
</TABLE>
