NCI BUILDING SYSTEMS INC, 10-K, 1997-01-29

NCI BUILDING SYSTEMS INC
10-K, 1997-01-29
PREFABRICATED METAL BUILDINGS & COMPONENTS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended October 31, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission file number 0-19885

NCI BUILDING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)

Delaware 76-0127701
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)

7301 Fairview
Houston, Texas 77041
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code: (713) 466-7788

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$0.01 par value

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 period
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 .
--- ---

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained to the best of registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]

The aggregate market value of the voting stock held by
non-affiliates of the registrant on January 1, 1997, was $232,101,441.

The number of shares of common stock of the registrant
outstanding on January 1, 1997, was 8,022,595.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Parts I and II of this Annual
Report is incorporated by reference from the registrant's 1996 Annual Report to
Shareholders, and information required by Part III of this Annual Report is
incorporated by reference from the registrant's definitive proxy statement for
its annual meeting of shareholders to be held on March 5, 1997.

================================================================================
<PAGE> 2
PART I

ITEM 1. BUSINESS.

GENERAL

NCI Building Systems, Inc. (the "Company") designs,
manufactures and markets metal building and framing systems, self-storage
buildings, overhead doors and other building components for commercial,
industrial, agricultural, community service and residential uses. The Company
markets its products nationwide through direct sales forces and authorized
builder networks under several brand names, including "Metallic Buildings,"
"Mid-West Steel Buildings," "A&S Buildings," "NCI Building Components," "All
American Systems," "Steel Systems," "Mid-West Metallic", "DBCI" and "Mesco".
The Company operates from a total of 13 manufacturing facilities in the United
States. It manufactures framing systems as well as components at five of the
facilities, and components only at the regional "satellite" plants.

In April 1989, the Company leased and assumed operation of the
Houston facilities of the Mid-West Metallic division of American Buildings
Company, and purchased that facility in 1993. This facility with its framing
capacity, together with the acquisition of the rights to use the "Mid-West" and
"Metallic" names, enabled the Company to expand its product lines from building
components to metal building systems and resulted in a substantial increase in
the Company's authorized builder network in Texas and surrounding states. The
Company also established satellite manufacturing plants in Illinois,
Mississippi and California in May of 1991, 1994 and 1996, respectively, to
serve the regional markets surrounding those plants and to enhance the
Company's ability to develop and serve authorized builder networks in those
regions. In June 1996, the Company acquired a metal stud manufacturing
facility and equipment in Ennis, Texas from Alabama Metal Industries
Corporation.

The Company also has acquired a number of other businesses in
the last five fiscal years. In October 1992, the Company purchased 100% of the
capital stock of A&S Building Systems, Inc., a manufacturer of metal building
systems having a manufacturing facility with framing capacity in Caryville,
Tennessee and a network of approximately 170 authorized builders located
primarily in southeastern and midwestern states. In October 1994, the Company
acquired substantially all of the assets and business of Ellis Building
Components, Inc., a manufacturer of metal building systems having a
manufacturing facility with framing capacity in Tallapoosa, Georgia. In March
1995, the Company acquired substantially all of the assets and business of
Royal Metal Buildings, Inc., a manufacturer of metal building systems and
components with a manufacturing facility in Hobbs, New Mexico, which the
Company operates as a regional satellite plant. In November 1995, the Company
acquired substantially all of the assets and business of Doors & Building
Components, Inc., a manufacturer of roll-up steel overhead doors and interior
steel components for self-storage systems with manufacturing facilities in
Douglasville, Georgia and Chandler, Arizona. In March 1996, the Company
purchased the equipment and operating assets used by Carlisle Engineered
Metals, Inc. in its west coast component business and transferred those assets
and the acquired business to the Company's Atwater, California facility when it
was completed. In April 1996, the Company purchased substantially all of the
assets and business of the Mesco Metal Buildings division of Anderson
Industries, Inc., a manufacturer of metal building systems having manufacturing
facilities with framing capacity in Southlake, Texas and Chester, South
Carolina.

The Company was founded in 1984 and was reincorporated in
Delaware on December 31, 1991. Its principal offices are located at 7301
Fairview, Houston, Texas 77041 and its telephone number is (713) 466-7788.
Unless indicated otherwise, references herein to the Company include its
predecessors and its subsidiaries.

INDUSTRY OVERVIEW

Metal building systems are marketed for use primarily in the
construction of low-rise, non-residential structures of up to 150,000 square
feet. Based upon information published by the Metal Building Manufacturers
Association ("MBMA"), on a square footage basis metal building systems
accounted for approximately 66% of the structures of that type constructed in
1995.
<PAGE> 3
In the early years of the industry, metal building systems
were most often used for factories, warehouses, distribution centers and other
applications in which the exterior appearance of the building was not as
significant a consideration to customers as construction cost, efficiency,
speed of construction and other factors. Technological advances in products
and materials, as well as significant improvements in engineering and design
techniques, have led to the development of structural systems that are
compatible with more traditional construction materials. Architects and
designers now often combine a metal building system with masonry, glass and
wood exterior facades in order to meet the aesthetic requirements of potential
customers while preserving the inherent characteristics of metal building
systems. As a result, the uses for metal building systems now include office
buildings, showrooms, retail stores, banks, schools and government and
community centers for which aesthetics and architectural features are important
considerations of the end users.

In its marketing efforts the Company and other major
manufacturers generally emphasize the following characteristics of metal
building systems to distinguish them from other methods of construction:

Short Construction Time. In many instances, it takes less
time to construct a metal building in comparison to other building types. In
addition, since most of the work is done in the factory, the likelihood of
weather interruptions is reduced.

Efficient Material Utilization. The larger metal building
manufacturers use computer-aided analysis and design to fabricate structural
members with high strength-to-weight ratios, minimizing raw materials costs.

Low Construction Costs. The in-plant manufacture of metal
building systems, coupled with automation, allows the substitution of less
expensive factory labor for much of the skilled on-site construction labor
otherwise required.

Ease of Expansion. Metal building systems can be modified
quickly and economically before, during or after the building is completed to
accommodate all types of expansion. Typically, a building system can be
expanded by removing the end or side walls, erecting new framework and adding
matching wall and roof panels.

Low Maintenance Costs. Unlike wood, metal will not
deteriorate because of cracking, damp rot or insect damage. Furthermore,
factory-applied roof and siding panel coatings resist cracking, peeling,
chipping, chalking and fading.

Industry demand for metal building systems is cyclical,
dependent to a large degree upon the level of non-residential construction
activity, the availability of financing for construction projects, interest
rates and other factors that affect the construction industry. According to
information published by the MBMA, industry-wide metal building system sales
increased from approximately $1.0 billion in 1982 to approximately $1.7 billion
in 1989, then declined to approximately $1.2 billion by 1991 at which time the
industry began experiencing year-to-year increases, to approximately $2.3
billion by 1995.

PRODUCTS

Metal building systems consist of pre-engineered structural
beams and panels that are manufactured in a factory and shipped to a
construction site complete and ready for assembly. The Company designs and
engineers each metal building system to meet customer specifications and to
allow for easy on-site assembly by builders or independent contractors. Metal
building systems typically consist of three subsystems: (1) primary structural
framing; (2) secondary structural framing; and (3) the covering subsystem,
which includes the roof and walls.

Primary Structural Framing. The primary structural framing,
fabricated from heavy-gauge steel, supports the secondary structural framing,
roof, walls and all externally applied loads. Through the primary framing, the
force of all applied loads is structurally transferred to the foundation.

2
<PAGE> 4

Secondary Structural Framing. The secondary structural
framing consists of medium-gauge, roll-formed steel components called purlins
and girts. Purlins are attached to the primary frame to support the roof.
Girts are attached to the primary frame to support the walls. The secondary
structural framing is designed to strengthen the primary structural framing and
efficiently transfer applied loads from the roof and walls to the primary
structural framing.

Covering Subsystem. The covering subsystem consists of roof
and siding panels. These panels not only lock out the weather but also
contribute to the structural integrity of the overall building system. Roof
and siding panels are fabricated from light-gauge, roll-formed steel.
Accessory components complete the metal building system. These components
include doors, windows, gutters and interior partitions.

The Company's metal building component products consist of end
and side wall panels, roof panels, purlins, girts and other individual
components that otherwise are used in metal building systems, which are sold
directly to end users or to contractors for use in constructing small buildings
that do not require the design or structural features of complex building
systems. The Company also stocks and markets metal component parts for use in
the maintenance and repair of existing metal buildings and buildings
constructed of materials other than metal. Other component products
manufactured by the Company include roll-up doors, interior and exterior doors,
lockers, partitions, wall and header panels and related trim.

The Company has developed and patented a retrofit metal panel,
Retro-R(R), that is used to replace wall and roof panels of metal buildings.
Retro-R(R) can be installed over the top of existing metal panels to remodel or
preserve a standing structure.

During the previous five fiscal years, the Company's revenues
attributable to metal building systems and to components were approximately as
follows:

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Metal building systems . . . . $ 61,666 $104,792 $126,665 $173,882 $212,998
Components . . . . . . . . . . 17,342 29,714 41,102 60,333 119,882
-------- -------- -------- -------- --------

Total revenues . . . . . $ 79,008 $134,506 $167,767 $234,215 $332,880
======== ======== ======== ======== ========
</TABLE>

SALES AND MARKETING

The Company sells its products under multiple brand names
through various distribution channels. These channels include (i) sales
through the Company's authorized builder networks, (ii) direct sales to
contractors and (iii) private label sales to certain large builders.
Management believes that its multi-channel distribution strategy promotes brand
loyalty, improves customer service and increases sales. With each distribution
channel, the Company's engineering, manufacturing and marketing personnel work
directly with the builder or contractor to establish job specifications and
modifications, determine the appropriate pricing for the Company's products and
services, generate drawings and establish production and delivery schedules.
The Company sells to builders and contractors on customary payment terms.

The Metallic division and A&S sell metal building systems to
builders nationwide under the brand names "Metallic Buildings" and "A&S
Buildings," respectively. Since the Company acquired Mesco on April 1, 1996,
that division also sells metal building systems under the brand name "Mesco".
During fiscal 1995 and fiscal 1996, the combined metal building systems sales
of the Metallic division and A&S were $127.4 million and $143.3

3
<PAGE> 5
million, respectively. During the last seven months of fiscal 1996, the sales
of Mesco were $17.9 million. The Metallic division markets through an in-house
sales force of approximately 45 persons to an authorized builder network of 406
builders. A&S has its own authorized builder network of 300 builders managed by
an in-house sales force of approximately 16 persons. Mesco has an authorized
builder network of 125 builders and an in-house sales force of 19 persons.

The Company's authorized builder networks consist of
independent general contractors which market the Company's Metallic Buildings,
A&S Buildings and Mesco products to end users. The Company enters into an
agreement with an authorized builder, which generally grants the builder the
non-exclusive right to market the Company's products in a specified territory
and which is cancelable by either party on 60 days' notice. The agreements do
not prohibit the builder from marketing metal building systems of other
manufacturers. The Company establishes an annual sales goal for each builder
and provides to the builder sales and pricing information, design and
engineering manuals, drawings and assistance, application programs for
estimating and quoting jobs and advertising and promotional literature. The
Company also defrays a portion of the builder's advertising costs and provides
volume purchasing and other pricing incentives to encourage them to deal
exclusively or principally with the Company. The builder is required to
maintain a place of business in its designated territory, provide a sales
organization, conduct periodic advertising programs and perform construction,
warranty and other services for customers and potential customers. An
authorized builder usually is hired by an end user to erect a metal building
system on the customer's site and provide general contracting and other
services ancillary to the completion of the project. The Company sells its
products to the builder, which generally includes the price of the building as
a part of its overall construction contract with its customer.

Most of the Company's metal building system sales outside of
Texas and surrounding states are through its authorized builder networks. The
Company relies upon maintaining a satisfactory business relationship for the
continued receipt of job orders from its authorized builders and does not
consider the builder agreements to be material to its business. During fiscal
1996, the Company's largest authorized builder accounted for less than 3% of
the Company's total metal building systems sales.

The Mid-West division primarily markets metal building systems
under the brand name "Mid-West Steel Buildings" directly to contractors in
Texas and surrounding states using a sales force of ten persons. The Company
also sells metal building systems through the All American division under the
name "All American Systems" and various private labels.

Metal building components are sold directly to contractors and
other customers by the NCI Building Components division under the brand name
"NCI Building Components." The NCI Building Components division utilizes an
in-house sales force of approximately 60 persons. Roll-up doors, interior and
exterior doors, lockers, interior partitions and walls and header panels and
trim are sold directly to contractors and other customers by the Doors &
Building Components division under the brand names "Doors & Building
Components" or "DBCI". These components also are produced by that division for
integration into self storage and metal building systems sold by other
divisions of the Company. The Doors & Building Components division has an
in-house sales force of approximately six persons.

The Company also seeks to develop niche markets, which may
initially represent a small percentage of sales but present growth
opportunities and other advantages. The Company's Steel Systems division sells
its self-storage systems and components under the brand name "Steel Systems."
The Classic Metal Homes division's metal framing systems for residential-use
homes were in initial development during fiscal 1996.

The Company also markets its products to international
builders. Approximately 4.2%, 2.3% and 4.4% of the Company's sales in fiscal
1994, fiscal 1995 and fiscal 1996, respectively, were to customers located in
foreign countries. No single foreign country has represented a steady market
for the Company's products. Foreign sales are made in United States dollars
and under letters of credit.

4
<PAGE> 6
DESIGN AND MANUFACTURE

After the Company receives an order, the Company's engineers
design the metal building system to meet the customer's requirements and to
satisfy applicable building codes. In order to expedite this process, the
Company uses computer-aided design and engineering systems to generate
engineering and erection drawings and a bill of materials for the manufacture
of the building system.

Once the specifications and designs of the customer's project
have been finalized, the manufacturing process begins at one of the Company's
five full manufacturing facilities in Texas, Georgia, South Carolina or
Tennessee. The fabrication of the primary structural framing consists of a
process in which pieces of rigid steel plates are punched and sheared and then
routed through an automatic welding machine and sent through further fitting
and welding processes. This process is the most labor intensive in the
fabrication of metal building systems.

The secondary structural framing and the covering subsystem
are roll-formed steel products that are manufactured at the Company's full
manufacturing facilities as well as its regional satellite plants. In roll
forming, pre-finished coils of steel are unwound and passed through a series of
progressive forming rolls which form the steel into various profiles of
medium-gauge structural shapes and light-gauge sheets and panels. The
fabrication of the secondary framing and covering subsystems is more automated
and, thus, is less labor intensive than that of the primary structural framing.

Once manufactured, structural framing members and covering
subsystems are shipped to the job site for assembly by local contractors. The
Company generally is not responsible for any on-site construction. The time
elapsed between the Company's receipt of an order and shipment of a completed
building system has typically ranged from four to eight weeks, although
delivery can extend somewhat longer if engineering and drafting requirements
are extensive.

The doors, lockers, interior partitions and other panels and
trim products of the Doors & Building Components division are manufactured at
plants in Georgia, Texas and Arizona, each of which operates independently of
the Company's other component plants. The products are roll-formed or
fabricated at each plant using roll-formers and other metal working equipment.
Orders are processed at the division's home office in Georgia and sent to the
appropriate plant, which is generally determined in a manner to obtain the
lowest shipping cost. The division's capacity allows it to ship orders in a
two- to three-week time period.

RAW MATERIALS

The principal raw material used in the manufacture of the
Company's metal building and component products is steel. Components are
fabricated from common steel products produced by mills including bars, plates,
sheets and galvanized sheets. In fiscal 1996, the Company purchased more than
40% of its steel requirements from National Steel Corporation. No other steel
supplier accounted for more than 6% of the Company's steel purchases. The
Company believes concentration of its steel purchases among a small group of
suppliers that have mills and warehouse facilities in close proximity to the
facilities of the Company enables it, as a large customer of those suppliers,
to obtain better service and delivery than many other steel purchasers. These
suppliers generally maintain an inventory of the types of materials required by
the Company, enabling the Company to utilize a form of "just-in-time" inventory
management with regard to raw materials. The Company expects moderate steel
price increases during fiscal 1997.

The Company does not have any long-term contracts for the
purchase of raw materials. A prolonged labor strike against one or more of its
principal domestic suppliers could have a material adverse effect on the
Company's operations. Alternative sources, however, including foreign steel,
are currently believed to be sufficient to maintain required deliveries.

5
<PAGE> 7
BACKLOG

At October 31, 1996, the total backlog for orders believed by
the Company to be firm was $85.6 million. This compares with a total backlog
of $65.6 million at October 31, 1995 and $62.8 million at October 31, 1994.
The increases in backlog reflect the results of the marketing activities of the
Company, particularly the expansion of its authorized builder networks, market
demand and the acquisitions and satellite plant openings completed by the
Company since 1992. Job orders generally are cancelable by customers at any
time for any reason and, occasionally, orders in the backlog are not completed
and shipped for reasons that include changes in the requirements of the
customers and the inability of customers to obtain necessary financing or
zoning variances. None of the backlog at October 31, 1996 currently is
scheduled to extend beyond October 31, 1997.

WARRANTIES

The Company provides a limited warranty on all fabricated
products. This warranty generally provides for repair or replacement of
fabricated and roll-formed materials, but does not include the cost of field
installation. The Company also passes through to its customers certain
warranties it receives on paint coatings, which vary from three to 20 years,
and the 20-year warranties it receives on galvalume coated steel. To respond
to certain competitive situations, the Company may provide a limited weather
tightness warranty of up to 20 years covering potential leakage on certain
roofing systems offered by the Company. The Company has not experienced any
significant claims under any of its warranties.

COMPETITION

The Company competes with a number of other manufacturers of
metal building systems and components, ranging from small local firms to large
national firms, some of which may have greater financial, management and
marketing resources than the Company. Most of these competitors operate on a
regional basis, although the Company believes that four other manufacturers of
metal building systems and several manufacturers of components have nationwide
coverage. In addition, the Company and others in the metal building systems
and components industry compete with alternative methods of building
construction. Competition is based primarily on such factors as price, speed
of construction, quality of builder/dealer networks, the ability to provide
added value in the design of buildings and, among metal building and component
manufacturers, service, quality and delivery times.

Based on data reported to the MBMA for the calendar year 1995,
the Company believes it ranks as the fourth largest domestic manufacturer of
metal building systems, with approximately 12% of total reported industry
sales. The Company believes that the two largest metal building manufacturers
taken together have approximately 40% of industry sales reported to the MBMA.
Reliable information about component sales and the Company's ranking in that
market is not available, but the Company is not a significant factor in that
market. Foreign companies are not presently a significant factor in the
domestic marketplace, and the Company does not expect them to be in the near
future because of transportation costs and the short lead times generally
required by customers.

REGULATORY MATTERS

The Company's manufacturing facilities are subject to water
and air pollution control standards mandated by federal, state and local laws.
The Company believes it is in substantial compliance with all environmental
standards applicable to its operations. The Company does not anticipate
material capital expenditures to meet current environmental quality control
standards, but there can be no assurance that more stringent regulatory
standards will not be established which might require such expenditures. The
metal building systems manufactured by the Company must meet zoning and
building code requirements promulgated by local governmental agencies.

6
<PAGE> 8
PATENTS, LICENSES AND PROPRIETARY RIGHTS

The Company has a perpetual, nonexclusive license from Metal
Building Components, Inc. to manufacture, distribute, market and sell its
standing seam roof systems. The Company does not consider the license to be
material to its business due to the availability of other standing seam roof
systems, including its own roof system. The Company has a United States patent
on its Retro-R(R) retrofit metal panel and has applied for another patent with
respect to its Retro-R(R) panel. Another patent application is pending for a
vented closure for a metallic roofing system. Patent protection is not
considered by the Company to be a material competitive factor in its industry.

The Company has registered trademarks in the United States for
"Metallic" and design, "Retro-R", "Pittsburgh Loc," Trapezoidal Loc", "NCI" and
design, "A&S Building Systems", "Mid-West Steel Building Company", design for
Mid-West Steel, "Classic Metal Home" and design, "A&S" and design, "Mesco" and
design and "ARS" and design. In addition, the Company has pending U.S.
trademark registrations for "Royal K-70", "Dura-20", "VL-12", "VL-16",
"VL-18", "Metallic Building Company", "Steel System" and design, "NCI Express"
and design, "NCI Building Components", "NCI", "DBCI", "All American Systems",
"NCI" and design and "Vertical Loc." The "Metallic" and design mark is also
pending registration in Mexico.

EMPLOYEES

As of October 31, 1996, the Company employed approximately
2,163 employees, of whom 142 were management and supervisory personnel, 189
were administrative personnel, 191 were sales personnel, 206 were engineers and
draftsmen, and 1,435 were manufacturing personnel. The Company's employees are
not represented by a labor union or collective bargaining agreement, although
the United Steel Workers of America petitioned the National Labor Relations
Board to be recognized as the collective bargaining representative of the
production and maintenance employees of the Company's Tallapoosa facility. An
election for that purpose was held in January 1996 and the union lost the
election to be recognized as the collective bargaining representative of such
employees. The Company regards its employee relations as satisfactory.

ITEM 2. PROPERTIES.

The Company conducts manufacturing operations at the following
facilities:

<TABLE>
<CAPTION>
Square Owned/
Facility Products Feet Leased
-------- -------- ------ ------
<S> <C> <C> <C>
Houston, Texas (opened 1989) Metal building systems(1) 382,000 Owned
Components; overhead doors
Tallapoosa, Georgia (acquired 1992) Metal building systems(1) 246,000 Leased
Components
Caryville, Tennessee (acquired 1992) Metal building systems(1) 193,800 Owned
Components
Chester, South Carolina (acquired 1996) Metal building systems(1) 124,000 Owned
Components
Southlake, Texas (acquired 1996) Metal building systems(1) 123,000 Owned
Components
Houston, Texas (opened 1984) Components 97,000 Owned
Jackson, Mississippi (opened 1994) Secondary structures 96,000 Owned
Covering subsystems
Components
</TABLE>

7
<PAGE> 9
<TABLE>
<S> <C> <C> <C>
Mattoon, Illinois (opened 1991) Secondary structures 90,600 Owned
Covering subsystems
Components
Atwater, California (opened 1996) Secondary structures 85,700 Owned
Covering subsystems
Components
Hobbs, New Mexico (acquired 1995) Secondary structures 60,800 Leased
Covering subsystems
Components
Douglasville, Georgia (acquired 1995) Overhead doors 60,000 Owned
Components
Chandler, Arizona (acquired 1995) Overhead doors 35,000 Leased
Components
Ennis, Texas (acquired 1996) Components 33,000 Owned
Studs
</TABLE>

- ------------

(1) Includes primary structures, secondary structures and covering
subsystems.

The principal executive offices of the Company occupy 33,600 square
feet of the principal manufacturing facility in Houston. The principal offices
of A&S, DBCI and Mesco occupy 16,000 square feet of the Caryville facility,
4,000 square feet of the Douglasville facility, and 16,800 square feet of the
Southlake facility, respectively. The Company also maintains several drafting
office facilities and retail locations in various states. These office
facilities are subject to short-term leases.

ITEM 3. LEGAL PROCEEDINGS.

The Company is involved in various legal proceedings that the
Company considers to be in the normal course of business. Management of the
Company believes that such litigation will not result in any material losses.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

8
<PAGE> 10
PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.

The information required by this Item is incorporated by
reference from the Company's 1996 Annual Report to Shareholders, bottom of page
31, regarding the market for common stock of the Company.

During fiscal 1996, the Company issued and sold the following
securities without registration under the Securities Act of 1933, as amended
("Securities Act"); no underwriters were involved in either of the
transactions:

In November 1995, the Company issued 300,000 shares of Common
Stock to Doors & Building Components, Inc., of which David B. Curtis
was the sole shareholder, in connection with the acquisition by the
Company of substantially all of the assets of that company. The
issuance of the Common Stock was exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) because
the transaction did not involve a public offering.

In April 1995, the Registrant issued a $1,500,000 principal
amount, 7% subordinated convertible debenture due April 1, 2001, to
Anderson Industries, Inc. in connection with the purchase of the Mesco
Metal Buildings division of that company. The convertible debenture
was concurrently distributed by that company to John T. Eubanks, its
principal shareholder. The convertible debenture is convertible into
Common Stock of the Company after April 1, 1997 at a conversion price
of $29.925 per share. No underwriters participated in the
transaction. The issuance of the convertible debenture was exempt
from the registration requirements of the Securities Act pursuant to
Section 4(2) because the transaction did not involve a public
offering. Upon conversion thereof, the issuance of the Common Stock
will be exempt from the registration requirements of the Securities
Act pursuant to Section 3(a)(9) thereof.

ITEM 6. SELECTED FINANCIAL DATA.

The information required by this Item is incorporated by
reference from the Company's 1996 Annual Report to Shareholders, top of page 1.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.

The information required by this Item is incorporated by
reference from the following portions of the Company's 1996 Annual Report to
Shareholders: Management's Discussion and Analysis of Results of Operations
and Financial Condition, pages 28 through 30.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The following consolidated financial statements and
supplementary financial information are incorporated by reference from the
indicated pages in the Company's 1996 Annual Report to Shareholders.

<TABLE>
<CAPTION>
Pages of
Annual Report
to Shareholders
---------------
<S> <C>
Selected Financial Data 1

Consolidated statements of income for
each of the three years in the period
ended October 31, 1996 17
</TABLE>

9
<PAGE> 11
<TABLE>
<S> <C>
Consolidated balance sheets at
October 31, 1996 and 1995 18

Consolidated statements of shareholders'
equity for each of the three years in the
period ended October 31, 1996 19

Consolidated statements of cash flows
for each of the three years in the
period ended October 31, 1996 20

Notes to consolidated financial statements 21 - 26

Report of independent auditors 27

Management's Discussion and Analysis of
Results of Operations and Financial Condition 28 - 30

Unaudited Quarterly Financial Data 31
</TABLE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.

Not applicable.

10
<PAGE> 12
PART III

The information required by Items 10 through 13 of Part III is
incorporated by reference from the indicated pages of the Company's definitive
proxy statement for its annual meeting of shareholders to be held on March 5,
1997.

<TABLE>
<CAPTION>
Pages of
Proxy Statement
<S> <C> <C>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. 3 - 6

ITEM 11. EXECUTIVE COMPENSATION. 7 - 11

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT. 1 - 3

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. 17

</TABLE>

11
<PAGE> 13
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) The following documents are filed as a part of this report:

1. Consolidated financial statements (see Item 8).

2. Consolidated financial statement schedules.

Schedule II - Valuation and Qualifying Accounts

All other schedules are omitted because they are inapplicable
or the requested information is shown in the financial statements or noted
therein.

3. Exhibits.

3.1 Restated Certificate of Incorporation of the Company
(filed as Exhibit 3.1 to the Company's registration
statement no. 33-45612 and incorporated herein)

3.2 Certificate of Amendment to Restated Certificate of
Incorporation of the Company (filed as Exhibit 3.1.1 to
the Company's registration statement no. 33-45612 and
incorporated herein)

3.3 Certificate of Amendment to Restated Certificate of
Incorporation of the Company (filed as Exhibit 3.3 to
the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1994 and incorporated herein)

3.4 Amended and Restated By-Laws of the Company, as amended
through February 5, 1992 (filed as Exhibit 3.2 to the
Company's registration statement no. 33-45612 and
incorporated herein)

4.1 Form of certificate representing shares of Company's
common stock (filed as Exhibit 4.1 to the Company's
registration statement no. 33-45612 and incorporated
herein)

4.2 Stock Registration Agreement, dated April 10, 1989,
between the Company and Equus II Incorporated, formerly
Equus Investments II, L.P. ("Equus") (filed as Exhibit
4.2 to the Company's registration statement no.
33-45612 and incorporated herein)

4.3 Credit Agreement, dated April 30, 1993, between
NationsBank of Texas, N.A. and NCI Building Systems,
L.P. (filed as Exhibit 4.7 to the Company's Annual
Report on Form 10-K for the fiscal year ended October
31, 1993 and incorporated herein)

4.4 First Amendment Agreement, dated February 28, 1994,
between NationsBank of Texas, N.A. and NCI Building
System, L. P. (filed as Exhibit 4.4 to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1994 and incorporated herein)

4.5 Second Amendment Agreement, dated February 28, 1995,
between NationsBank of Texas, N.A. and NCI Building
Systems, L.P. (filed as Exhibit 4.13 to the Company's
registration statement no. 33- 99560 and incorporated
herein)

12
<PAGE> 14
4.6 $6,000,000 Revolving Credit Note, dated April 30, 1993,
in favor of NationsBank of Texas, N.A., executed by NCI
Building Systems, L.P. (filed as Exhibit 4.8 to the
Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1993 and incorporated herein)

4.7 $1,750,000 Revolving Credit Note, dated February 28,
1994, in favor of NationsBank of Texas, N.A., executed
by NCI Building Systems, L.P. (filed as Exhibit 4.6 to
the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1994 and incorporated herein)

4.8 Guaranty, dated April 30, 1993, between NationsBank of
Texas, N.A. and the Company (filed as Exhibit 4.9 to
the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1993 and incorporated herein)

4.9 Guaranty, dated April 30, 1993, between NationsBank of
Texas, N.A. and A & S Building Systems, Inc. (filed as
Exhibit 4.10 to the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1993 and
incorporated herein)

4.10 Loan Agreement "A," dated September 1, 1991, between
the City of Mattoon and the Company (filed as Exhibit
4.11 to the Company's registration statement no.
33-45612 and incorporated herein)

4.11 $250,000 Promissory Note A, dated October 31, 1991, in
favor of the City of Mattoon executed by the Company
(filed as Exhibit 4.12 to the Company's registration
statement no. 33-45612 and incorporated herein)

4.12 Loan Agreement "B," dated September 1, 1991, between
the City of Mattoon and the Company (filed as Exhibit
4.13 to the Company's registration statement no.
33-45612 and incorporated herein)

4.13 $250,000 Promissory Note B, dated January 20, 1992, in
favor of the City of Mattoon executed by the Company
(filed as Exhibit 4.14 to the Company's registration
statement no. 33-45612 and incorporated herein)

4.14 Stock Retention and Registration Agreement, dated
November 13, 1995, by and between the Company, Doors &
Building Components, Inc., and David B. Curtis (filed
as Exhibit 4.14 to the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1995 and
incorporated herein)

*4.15 7% Convertible Subordinated Debenture dated April 1,
1996 Due April 1, 2001 between NCI Building Systems,
Inc. and John T. Eubanks

10.1 Employment Agreement, dated April 10, 1989, between the
Company and Johnie Schulte, Jr. (filed as Exhibit 10.1
to the Company's registration statement no. 33-45612
and incorporated herein)

10.2 Amendment to Employment Agreement, dated February 21,
1992, between the Company and Johnie Schulte, Jr.
(filed as Exhibit 10.1.1 to the Company's registration
statement no. 33-45612 and incorporated herein)

10.3 Summary of Bonus Program (filed as Exhibit 10.2 to the
Company's registration statement no. 33-45612 and
incorporated herein)

13
<PAGE> 15
10.4 Employee Stock Option Plan (filed as Exhibit 4.1 to the
Company's registration statement no. 33-52080 and
incorporated herein)

10.5 Amendment No. 1 to Stock Option Plan (filed as Exhibit
4.2 to the Company's registration statement no.
33-52080 and incorporated herein)

10.6 Amendment No. 2 to Stock Option Plan (filed as Exhibit
10.6 in the Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1992 and incorporated
herein)

10.7 Form of Employee Stock Option Agreement (filed as
Exhibit 4.3 to the Company's registration statement no.
33-52080 and incorporated herein)

10.8 Form of Director Stock Option Agreement (filed as
Exhibit 4.4 to the Company's registration statement no.
33-52080 and incorporated herein)

10.9 License Agreement, dated June 30, 1989, between Metal
Building Components, Inc. and the Company (filed as
Exhibit 10.6 to the Company's registration statement
no. 33-45612 and incorporated herein)

10.10 401(k) Profit Sharing Plan (filed as Exhibit 4.1 to the
Company's registration statement no. 33-52078 and
incorporated herein)

10.11 Form of Metallic Builder Agreement (filed as Exhibit
10.10 to the Company's registration statement no.
33-45612 and incorporated herein)

10.12 Form of A&S Builder Agreement (filed as Exhibit 10.17
to the Company's Annual Report on Form 10- K for the
fiscal year ended October 31, 1992 and incorporated
herein)

10.13 Purchase Agreement, dated September 7, 1994, between
NCI Building Systems, L.P., Ellis Building Components,
Inc., Tony Ellis and Ronald Ellis (filed as Exhibit 2.1
to the Company's Current Report on Form 8-K dated
October 14, 1994 and incorporated herein)

10.14 Amendment to Purchase Agreement, dated October 14,
1994, between NCI Building Systems, L.P., Ellis
Building Components, Inc., Tony Ellis and Ronald Ellis
(filed as Exhibit 2.2 to the Company's Current Report
on Form 8-K dated October 14, 1994 and incorporated
herein)

*10.15 Form of Mesco Metal Buildings Agreement

10.16 Amendment No. 3 to Stock Option Plan (filed as Exhibit
4.6 to the Company's Registration Statement No.
333-12921 and incorporated herein)

10.17 Asset Purchase Agreement, dated October 13, 1995, by
and among Doors & Building Components, Inc., David B.
Curtis, DBCI Acquisition Corp. and the Company (filed
as Exhibit 2 to the Company's Current Report on Form
8-K dated November 13, 1995 and incorporated herein)

10.18 Asset Purchase Agreement, dated April 1, 1996, by and
among Anderson Industries, Inc., Charles W. Anderson,
Thomas L. Anderson, Jr., John T. Eubanks, Robert K.
Landon, NCI Building Systems, L.P. and the Company
(filed as Exhibit 2 to the Company's Current Report on
Form 8-K dated April 1, 1996 and incorporated herein).

14
<PAGE> 16
*13 1995 Annual Report to Shareholders. With the exception
of the information incorporated by reference into Items
5, 6, 7, and 8 of this Form 10-K, the 1995 Annual
Report to Shareholders is not to be deemed filed as
part of this Form 10-K.

*21 List of Subsidiaries

*23 Consent of Ernst & Young LLP

*27 Financial Data Schedule
- -----------

* Filed herewith

(b) Reports on Form 8-K.

None.

15
<PAGE> 17
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on the 27th day of
January, 1997.

NCI BUILDING SYSTEMS, INC.

By: /s/ Johnie Schulte
------------------------------------
Johnie Schulte, President and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of the 27th day of January, 1997.

Name Title

/s/ Johnie Schulte President, Chief Executive Officer and Director
- -------------------------- (principal executive officer)
Johnie Schulte

/s/ Robert J. Medlock Vice President, Chief Financial Officer and Treasurer
- -------------------------- (principal financial and accounting officer)
Robert J. Medlock

Director
- --------------------------
Thomas C. Arnett

/s/ William D. Breedlove Director
- --------------------------
William D. Breedlove

/s/ Gary L. Forbes Director
- --------------------------
Gary L. Forbes

/s/ Leonard F. George Executive Vice President and Director
- --------------------------
Leonard F. George

16
<PAGE> 18
/s/ Robert N. McDonald Director
- --------------------------
Robert N. McDonald

/s/ C.A. Rundell, Jr. Director
- --------------------------
C. A. Rundell, Jr.

/s/ Daniel D. Zabcik Director
- --------------------------
Daniel D. Zabcik

17
<PAGE> 19
NCI BUILDING SYSTEMS, INC.

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
Additions
Balance at ----------------- Balance
Beginning Charged to Costs at End
Description of Period and Expenses Deductions(1) of Period
----------- ---------- ---------------- ------------- ---------
<S> <C> <C> <C> <C>
Year ended October 31, 1996:
Reserves and allowances
deducted from asset accounts:
Allowance for uncollectible
accounts and backcharges . . . . . . . . . $ 1,339,772 $ 680,633 $ 391,203 $ 1,629,202

Year ended October 31, 1995:
Reserves and allowances
deducted from asset accounts:
Allowance for uncollectible
accounts and backcharges . . . . . . . . . $ 1,040,828 $ 1,101,038 $ 802,094 $ 1,339,772

Year ended October 31, 1994:
Reserves and allowances
deducted from asset accounts:
Allowance for uncollectible
accounts and backcharges . . . . . . . . . $ 990,012 $ 651,215 $ 600,399 $ 1,040,828

</TABLE>

- --------------

(1) Uncollectible accounts, net of recoveries.

18
<PAGE> 20
INDEX TO EXHIBITS

Sequentially
Numbered
Page
------------
3.1 Restated Certificate of Incorporation of the Company
(filed as Exhibit 3.1 to the Company's registration
statement no. 33-45612 and incorporated herein)

3.2 Certificate of Amendment to Restated Certificate of
Incorporation of the Company (filed as Exhibit 3.1.1
to the Company's registration statement no. 33-45612
and incorporated herein)

3.3 Certificate of Amendment to Restated Certificate of
Incorporation of the Company (filed as Exhibit 3.3 to
the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1994 and incorporated
herein)

3.4 Amended and Restated By-Laws of the Company, as
amended through February 5, 1992 (filed as Exhibit
3.2 to the Company's registration statement no.
33-45612 and incorporated herein)

4.1 Form of certificate representing shares of Company's
common stock (filed as Exhibit 4.1 to the Company's
registration statement no. 33-45612 and incorporated
herein)

4.2 Stock Registration Agreement, dated April 10, 1989,
between the Company and Equus II Incorporated,
formerly Equus Investments II, L.P. ("Equus") (filed
as Exhibit 4.2 to the Company's registration
statement no. 33-45612 and incorporated herein)

4.6 $6,000,000 Revolving Credit Note, dated April 30,
1993, in favor of NationsBank of Texas, N.A.,
executed by NCI Building Systems, L.P. (filed as
Exhibit 4.8 to the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1993 and
incorporated herein)

<PAGE> 21
Sequentially
Numbered
Page
------------

4.7 $1,750,000 Revolving Credit Note, dated February 28,
1994, in favor of NationsBank of Texas, N.A.,
executed by NCI Building Systems, L.P. (filed as
Exhibit 4.6 to the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1994 and
incorporated herein)

4.8 Guaranty, dated April 30, 1993, between NationsBank
of Texas, N.A. and the Company (filed as Exhibit 4.9
to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1993 and incorporated
herein)

4.9 Guaranty, dated April 30, 1993, between NationsBank
of Texas, N.A. and A & S Building Systems, Inc.
(filed as Exhibit 4.10 to the Company's Annual Report
on Form 10-K for the fiscal year ended October 31,
1993 and incorporated herein)

4.10 Loan Agreement "A," dated September 1, 1991, between
the City of Mattoon and the Company (filed as Exhibit
4.11 to the Company's registration statement no.
33-45612 and incorporated herein)

4.11 $250,000 Promissory Note A, dated October 31, 1991,
in favor of the City of Mattoon executed by the
Company (filed as Exhibit 4.12 to the Company's
registration statement no. 33-45612 and incorporated
herein)

4.12 Loan Agreement "B," dated September 1, 1991, between
the City of Mattoon and the Company (filed as Exhibit
4.13 to the Company's registration statement no.
33-45612 and incorporated herein)

4.13 $250,000 Promissory Note B, dated January 20, 1992,
in favor of the City of Mattoon executed by the
Company (filed as Exhibit 4.14 to the Company's
registration statement no. 33-45612 and incorporated
herein)

4.14 Stock Retention and Registration Agreement, dated
November 13, 1995, by and between the Company, Doors
& Building Components, Inc., and David B. Curtis (Filed
as Exhibit 4.14 to the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1995 and
incorporated herein)

*4.15 7% Convertible Subordinated Debenture dated April 1,
1996 Due April 1, 2001 between NCI Building Systems,
Inc. and John T. Eubanks

10.1 Employment Agreement, dated April 10, 1989, between
the Company and Johnie Schulte, Jr. (filed as Exhibit
10.1 to the Company's registration statement no.
33-45612 and incorporated herein)

10.2 Amendment to Employment Agreement, dated February 21,
1992, between the Company and Johnie Schulte, Jr.
(filed as Exhibit 10.1.1 to the Company's
registration statement no. 33-45612 and incorporated
herein)

<PAGE> 22
Sequentially
Numbered
Page
------------

10.3 Summary of Bonus Program (filed as Exhibit 10.2 to
the Company's registration statement no. 33-45612 and
incorporated herein)

10.4 Employee Stock Option Plan (filed as Exhibit 4.1 to
the Company's registration statement no. 33-52080 and
incorporated herein)

10.5 Amendment No. 1 to Stock Option Plan (filed as
Exhibit 4.2 to the Company's registration statement
no. 33-52080 and incorporated herein)

10.6 Amendment No. 2 to Stock Option Plan (filed as
Exhibit 10.6 in the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1992 and
incorporated herein)

10.7 Form of Employee Stock Option Agreement (filed as
Exhibit 4.3 to the Company's registration statement
no. 33-52080 and incorporated herein)

10.8 Form of Director Stock Option Agreement (filed as
Exhibit 4.4 to the Company's registration statement
no. 33-52080 and incorporated herein)

10.10 401(k) Profit Sharing Plan (filed as Exhibit 4.1 to
the Company's registration statement no. 33-52078 and
incorporated herein)

10.11 Form of Metallic Builder Agreement (filed as Exhibit
10.10 to the Company's registration statement no.
33-45612 and incorporated herein)

10.12 Form of A&S Builder Agreement (filed as Exhibit 10.17
in the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1992 and incorporated
herein)

10.13 Purchase Agreement, dated September 7, 1994, between
NCI Building Systems, L.P., Ellis Building
Components, Inc., Tony Ellis and Ronald Ellis (filed
as Exhibit 2.1 in the Company's Current Report on
Form 8-K dated October 14, 1994 and incorporated
herein)

10.14 Amendment to Purchase Agreement, dated October 14,
1994, between NCI Building Systems, L.P., Ellis
Building Components, Inc., Tony Ellis and Ronald
Ellis (filed as Exhibit 2.2 in the Company's Current
Report on Form 8-K dated October 14, 1994 and
incorporated herein)

*10.15 Form of Mesco Metal Buildings Agreement

<PAGE> 23
Sequentially
Numbered
Page
------------

10.16 Amendment No. 3 to Stock Option Plan (filed as
Exhibit 4.6 to the Company's Registration Statement
No. 333-12921 and incorporated herein)

10.18 Asset Purchase Agreement, dated April 1, 1996, by and
among Anderson Industries, Inc., Charles W. Anderson,
Thomas L. Anderson, Jr., John T. Eubanks, Robert K.
Landon, NCI Building Systems, L.P. and the Company
(filed as Exhibit 2 to the Company's Current Report
on Form 8-K dated April 1, 1996 and incorporated
herein)

*13 1995 Annual Report to Shareholders. With the
exception of the information incorporated by
reference into Items 5, 6, 7, and 8 of this Form
10-K, the 1995 Annual Report to Shareholders is not
to be deemed filed as part of this Form 10-K.

*21 List of Subsidiaries

*23 Consent of Ernst & Young LLP

*27 Financial Data Schedule

- ---------------

* Filed herewith

<PAGE> 1
EXHIBIT 4.15

THIS DEBENTURE AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY OTHER APPLICABLE SECURITIES
LAWS AND MAY NOT BE TRANSFERRED ABSENT REGISTRATION THEREUNDER OR AN APPLICABLE
EXEMPTION THEREFROM.

NCI BUILDING SYSTEMS, INC.

7% CONVERTIBLE SUBORDINATED DEBENTURE
DUE APRIL 1, 2001

$1,500,000.00 Houston, Texas
April 1, 1996

NCI Building Systems, Inc., a Delaware corporation (the "Company"),
for value received hereby promises to pay to John T. Eubanks, or registered
assigns ("Holder"), the principal sum of ONE MILLION FIVE HUNDRED THOUSAND AND
NO/100 DOLLARS ($1,500,000.00) on April 1, 2001, in such coin or currency of
the United States of America as at the time of payment shall be legal tender
for the payment of public and private debts, and to pay interest at the rate of
7% per annum from April 1, 1996 on said principal sum, or so much thereof as
shall be outstanding, quarterly on April 30, July 31, October 31, and January
31 of each year, commencing April 30, 1996, and at maturity. The principal and
interest due hereunder shall be payable at the office or agency of the Company
in Houston, Texas.

1. Conversion of Debentures.

(a) The Holder shall have the right, at his option, at any time
after April 1, 1997 and on or prior to April 1, 2001 (or if the Debenture is
called for redemption, then to and including but not after the close of
business on the date fixed for redemption, unless the Company shall default in
the payment due upon redemption) to convert the principal amount of the
Debenture, or any portion of which is $1,000 or an integral multiple thereof,
into as many fully paid and nonassessable shares of Common Stock (as such
Common Stock shall then be constituted) of the Company (the "Company Common
Stock"), as the principal amount of the Debenture or portion hereof to be
converted is an integral multiple of the conversion price of $29.925 per share
(as adjusted as provided in the Debenture, the "Conversion Price").

(b) In order to exercise the conversion privilege, the Holder
shall surrender this Debenture at the office or agency maintained by the
Company in Houston, Texas and shall give written notice to the Company at such
office or agency that the Holder elects to convert the Debenture or the portion
specified in the notice. The notice shall also state the name or names (with
address and subject to compliance with applicable securities laws to the
Company's satisfaction) in which the certificate or certificates for the
Company Common Stock issuable on such conversion shall be issued. The
Debenture shall, unless the shares issuable on conversion are to be issued in
the same name as the registered holder of the Debenture, be accompanied by
instruments of transfer, in form satisfactory to the Company, duly executed by
the Holder or his duly authorized attorney. As promptly as practicable after
the surrender of the Debenture and the receipt of the notice, the Company shall
deliver at such office or agency to the Holder, or on his written order, a
certificate or certificates for the number of full shares of Company Common
Stock deliverable upon the conversion of the Debenture or portion hereof, a
check or cash in respect of any
<PAGE> 2
fractional interest in a share of Company Common Stock arising upon such
conversion, and a new Debenture in a principal amount equal to the unconverted
portion of the Debenture so surrendered. Each conversion shall be deemed to
have been effected on the date on which the Debenture shall have been
surrendered and such notice received by the Company as aforesaid, and
the-person or persons in whose name or names any certificate for Company Common
Stock shall be issuable upon such conversion shall be deemed to have become on
said date the holder or holders of record of the shares represented thereby. No
adjustment shall be made for interest accrued on any Debenture that shall be
converted or for dividends on any Company Common Stock that shall be delivered
upon the conversion of the Debenture.

(c) No fractional interest in a share of Company Common Stock
shall be delivered upon conversion of the Debenture. If any fractional
interest of a share of Company Common Stock would be deliverable upon the
conversion of the Debenture (or specified portions thereof), the Company shall
make an adjustment therefor in cash equal to the principal amount of the
Debenture which would otherwise result in delivery of a fractional share.

(d) If the Company shall hereafter (i) pay a dividend or make a
distribution in shares of its capital stock (whether of Company Common Stock or
of capital stock of any other class), (ii) subdivide the outstanding Company
Common Stock into a greater number of shares, (iii) combine the outstanding
Company Common Stock into a smaller number of shares, or (iv) issue by
reclassification of the Company Common Stock any other shares of its capital
stock, the conversion privilege and the Conversion Price in effect immediately
prior to such action shall be adjusted so that the Holder of the Debenture
thereafter surrendered for conversion shall be entitled to receive the number
of shares of capital stock of the Company which he would have owned immediately
following such action had such Debenture been converted immediately prior
thereto. An adjustment made pursuant to this subsection shall become effective
immediately after the record date in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made pursuant to this
subsection, the holder of any Debenture thereafter surrendered for conversion
shall become entitled to receive shares of two or more classes of capital stock
of the Company, the Board of Directors of the Company shall determine the
allocation of the adjusted conversion price between or among shares of such
classes of capital stock. The Company shall maintain reserved for issuance
upon conversion of the Debenture a sufficient number of the securities into
which the Debenture may be converted.

(e) If either of the following shall occur: (i) any consolidation
or merger to which the Company is a party, other than a merger in which the
Company is the continuing corporation and which does not result in any
reclassification of, or change (other than a change in par value or from par
value to no par value or from no par value to par value, or as a result of a
subdivision or combination) in, outstanding shares of the Company Common Stock,
or (ii) any sale or conveyance to another corporation, person or entity of the
property of the Company as an entirety or substantially as an entirety, then
provision shall be made as part of the terms of such transaction so that the
Holder shall have the right to convert the Debenture into the kind and amount
of shares of stock and other securities and property receivable upon such
consolidation, merger, sale or conveyance by a holder of the number of shares
of Company Common Stock issuable upon conversion of the Debenture immediately
prior to such consolidation, merger, sale or conveyance.

2
<PAGE> 3
2. Subordination of Debentures.

(a) Each holder of the Debenture by his acceptance hereof
covenants and agrees that the payment of the principal of (and premium, if any)
and interest on this Debenture is hereby expressly subordinated to the prior
payment in full of all "Senior Indebtedness," which for purposes hereof is
defined to be:

(i) any indebtedness, matured or unmatured, whether or
not contingent, of the Company for borrowed money or evidenced by
other debentures, notes or corporate debt securities issued by the
Company;

(ii) any foreign exchange or interest rate contract,
interest rate swap agreement or other similar agreement or arrangement
designed to protect the Company or any of its subsidiaries against
fluctuations in currency values or interest rates;

(iii) obligations as lessee under leases of real or personal
property recorded as capitalized leases or in connection with any sale
and leaseback transactions;

(iv) indebtedness of others of any of the kinds described in
the preceding clauses (i) through (iii) assumed or guaranteed by the
Company; or

(v) any modification, extension, renewal or refunding of
any of the obligations, indebtedness or guaranties included in the
preceding clauses (i) through (iv);

whether now outstanding or hereafter created or incurred, unless the instrument
evidencing such indebtedness expressly provides that such indebtedness shall
not be senior in right to the Debenture.

(b) The Company shall not make any payment on account of the
principal of, premium (if any) or interest on the Debenture, unless full
payment of all amounts then due for principal, sinking fund, premium (if any)
and interest on any and all Senior Indebtedness shall have been made or duly
provided for in accordance with the terms of such Senior Indebtedness; and the
Company shall not make any payment on account of the principal of or the
premium (if any) or interest on the Debenture if, at the time thereof or
immediately after giving effect thereto, there shall exist under any Senior
Indebtedness, or under any agreement pursuant to which Senior Indebtedness
shall have been issued, any default or any event of default which with the
giving of notice and the passage of time would result in a default, which shall
not have been waived, so as to entitle the holders of such Senior Indebtedness,
or any trustee therefor to declare the principal of such Senior Indebtedness,
if not already due and payable, to be due and payable; provided that, upon cure
or waiver of such default, such payment on the Debenture postponed by this
subsection shall then be due unless the terms of such waiver prohibit such
payment. If, notwithstanding the provisions of this subsection, the Company
shall make any payment to the Holder on account of the principal of, premium
(if any) or interest on the Debenture after the happening of such a default or
such an event of default, then, unless and until such default or event of
default shall have been cured or waived or shall have ceased to exist, such
payment shall be held by the Holder in trust for the benefit of, and shall be
paid over and delivered to, the holders of Senior Indebtedness (pro rata as to
each of such holders on the basis of the respective amounts of Senior
Indebtedness held by them) or their representative or the trustee under the
indenture or other agreement (if any) pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the

3
<PAGE> 4
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in accordance with the terms of such Senior
Indebtedness, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Indebtedness. The Company shall give prompt
written notice to the Holder of any default under any Senior Indebtedness or
under any agreement pursuant to which Senior Indebtedness may have been issued.

(c) Upon (i) any acceleration of the principal amount due on the
Debenture or (ii) any payment or distribution of assets of the Company of any
kind or character to creditors upon any dissolution, winding up, liquidation or
reorganization of the Company (whether voluntary or involuntary or in
bankruptcy, insolvency or receivership proceedings or upon an assignment for
the benefit of creditors or otherwise):

(A) the holders of all Senior Indebtedness shall first be
entitled to receive payment in full before the Holder is entitled to
receive any payment on account of the Debenture; and

(B) any payment or distribution of assets of the Company
of any kind or character, to which the Holder would be entitled except
for the provisions of this Section 2, shall be paid by the liquidating
trustee or agent directly to the holders of Senior Indebtedness or
their representative or representatives, to the extent necessary to
make payment in full of all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution or
provision therefor to the holders of such Senior Indebtedness.

(d) Subject to the prior payment in full of all Senior
Indebtedness, the Holder shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of assets of the
Company applicable to the Senior Indebtedness until the Debenture shall be paid
in full, and for the purpose of such subrogation no payments or distributions
to the holders of the Senior Indebtedness by or on behalf of the Company or by
or on behalf of the Holder shall, as between the Company and the Holder, be
deemed to be payment by the Company to or on account of the Debenture.

3. Redemption of Debenture.

(a) The Debenture may be redeemed, at the option of the Company,
in whole or in part, at any time after April 1, 1997 and prior to maturity,
upon the notice referred to below, at 100% of the principal amount thereof,
plus accrued interest; provided, however, that the Company may not redeem this
Debenture (in whole or in part), unless the Current Market Price (as defined in
Section 3(c) hereof) of the Company Common Stock at the time the notice of
redemption is mailed by the Company is at least 150% of the Conversion Price
and upon or after a Change of Control.

(b) The notice of redemption shall be mailed by the Company at
least 30 and not more than 60 days prior to the date fixed for the redemption
to the Holder at his last address as it shall appear on the registry books.
Upon any partial redemption of the Debenture, the Debenture shall be
surrendered to the Company in exchange for one or more new Debentures for the
principal amount of the unredeemed portion of the Debenture.

(c) For the purpose of any redemption under this Section 3, the
"Current Market Price" per share of the Company Common Stock at any date shall
be deemed to be the average of the last reported sales prices of the 20
consecutive Trading Days (as hereinafter defined) commencing 25 Trading Days

4
<PAGE> 5
before the day a notice of redemption is mailed by the Company. As used
herein, the "last reported sales price" for each day shall be (i) the last
reported sales price of the Company Common Stock on the National Market System
of the National Association of Securities Dealers, Inc., Automated Quotation
System ("NASDAQ/NMS"), or any similar system of automated dissemination of
quotations of securities prices then in common use, if so quoted, or (ii) if
not quoted as described in clause (i), the mean between the high bid and low
asked quotations for the Company Common Stock as reported by the National
Quotation Bureau Incorporated if at least two securities dealers have inserted
both bid and asked quotations for such class of stock on at least five of the
10 preceding days, or (iii) if the Company Common Stock is listed or admitted
for trading on any national securities exchange, the last reported sales price,
or the closing bid price if no sale occurred, of such class of stock on the
principal securities exchange on which such class of stock is listed. If the
Company Common Stock is quoted on a national securities or central market
system, in lieu of a market or quotation system described above, the last
reported sales price shall be determined in the manner set forth in clause (ii)
of the preceding sentence if bid and asked quotations are reported but actual
transactions are not, and in the manner set forth in clause (iii) of the
preceding sentence if actual transactions are reported. If none of the
conditions set forth above is met, the last reported sales price of the Company
Common Stock on any day or the average of such last reported sales prices for
any period shall be the fair market value of such class of stock as determined
by a member firm of the New York Stock Exchange, Inc. selected by the Company.
As used herein, the term "Trading Days" with respect to the Company Common
Stock means (A) if such class of stock is quoted on the NASDAQ/NMS or any
similar system of automated dissemination of quotations of securities prices,
days on which trades may be made on such system, (B) if such class of stock is
listed or admitted for trading on any national securities exchange, days on
which the principal national securities exchange on which such class of stock
is listed or admitted for trading is open for business or (C) if not quoted or
listed as described in clause (A) or (B), days on which the New York Stock
Exchange is open for business.

(d) For the purpose hereof, a "Change of Control" shall be deemed
to have occurred if the Company sells all or substantially all of its assets,
is a party to any merger, consolidation or corporate reorganization, or any
other person makes a tender or exchange offer for stock of the Company, and as
a result of any such transaction the stockholders of the Company immediately
prior to the consummation thereof own 50% or less of the common stock of the
surviving, resulting or purchasing corporation immediately following the
consummation thereof.

4. Events of Default.

In case one or more of the following "Events of Default" shall have
occurred and be continuing:

(a) default in the due and punctual payment of any installment of
interest upon the Debenture as and when the same shall become due and payable,
whether or not such payment is prohibited by the provisions of Section 2, and
continuance of such default for a period of 5 business days after receipt by
the Company of written notice from Holder of such failure to pay; or

(b) default in the due and punctual payment of the principal of
(or premium, if any, on) the Debenture as and when the same shall become due
and payable either at maturity, upon redemption, by declaration or otherwise,
whether or not such payment is prohibited by the provisions of Section 2; or

5
<PAGE> 6
(c) a decree or order by a court shall have been entered adjudging
the Company a bankrupt or insolvent, or appointing a receiver or trustee for
the affairs or assets of the Company, and such decree or order shall have
remained in force undischarged or unstayed for a period of 60 days; or

(d) the Company shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of any such petition or to
the appointment of a receiver or trustee or shall make an assignment for the
benefit of creditors;

then, so long as such Event of Default shall not have been remedied, unless the
principal of the Debenture shall have already become due and payable, the
Holder by notice in writing to the Company may declare the principal of the
Debenture then outstanding and the interest accrued thereon, if not already due
and payable, to be due and payable immediately, and upon any such declaration
the same shall become and shall be immediately due and payable, anything in
this Debenture contained to the contrary notwithstanding.

5. Governing Law. This Debenture shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to the conflicts
of laws principles thereof. Venue for any action pursuant hereto shall be in
the appropriate state or federal court in Harris County, Texas.

6. Miscellaneous.

(a) Prior to due presentment for registration of transfer of this
Debenture, the Company may deem and treat the registered holder hereof as the
absolute owner of the Debenture (whether or not the Debenture shall be overdue
and notwithstanding any notes of ownership or writing hereof made by anyone
other than the Company), for the purpose of receiving payment of or on account
of the principal hereof (and premium, if any) and interest hereon, for the
conversion hereof and for all other purposes, and the Company shall not be
affected by any notice to the contrary. All such payments or conversions shall
be valid and effectual to satisfy and discharge the liability upon the
Debenture to the extent of the sum or sums so paid, or the conversions so made.

(b) No recourse shall be had for the payment of the principal of
(or premiums, if any) or the interest on the Debenture, or for any claim based
hereon, or otherwise in respect hereof, against any incorporator, stockholder,
officer or director, as such, past, present or future, of the Company or of any
successor corporation, either directly or through the Company or otherwise,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment, or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the
issuance hereof, expressly waived and released.

NCI BUILDING SYSTEMS, INC.

BY: /s/ Robert J. Medlock
-----------------------------------
ROBERT J. MEDLOCK, Vice President
and Chief Financial Officer

6
<PAGE> 7
(FORM OF ASSIGNMENT)

FOR VALUE RECEIVED, __________________________________________ hereby
sell(s), assign(s) and transfer(s) unto ___________________________________ the
written Debenture, and all rights thereunder, hereby irrevocably constituting
and appointing _______________________________________________ attorney to
transfer said Debenture on the registry books of the Company, with full power
of substitution in the premises.

_______________________________________

Dated:_____________________________

NOTICE: The signature on this assignment must correspond with the
name as written upon the face of the within Debenture in every particular,
without alteration or enlargement or any change whatsoever.

___________________________

NOTICE: THIS DEBENTURE AND THE SECURITIES INTO WHICH IT IS
CONVERTIBLE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS DEBENTURE NOR SUCH SECURITIES
MAY BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF UNLESS AT THE TIME
EITHER THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THAT ACT AND OTHER
APPLICABLE SECURITIES LAWS RELATING TO THE TRANSACTION, OR, IN THE OPINION OF
COUNSEL TO THE HOLDER ACCEPTABLE TO THE COMPANY, THE TRANSACTION IS EXEMPT FROM
REGISTRATION UNDER THAT ACT AND UNDER OTHER APPLICABLE SECURITIES LAWS.

<PAGE> 1
EXHIBIT 10.15

[MESCO LOGO] AUTHORIZED BUILDER AGREEMENT

MESCO METAL BUILDINGS - P.O. BOX 20 - GRAPEVINE, TEXAS 76099-0020 - 817/488-8511

This Agreement is made and entered into by and between MESCO METAL
BUILDINGS, with principal offices in Grapevine, Texas, herein called "MESCO"
and "BUILDER", whose name, legal entity and address are shown below:

ARTICLE 1: GENERAL PURPOSE AND TERM OF AGREEMENT

The general purpose of this Agreement is to assist BUILDER as an
independent building contractor who sells and erects MESCO's buildings,
components, and products herein called "MESCO Buildings" and to set forth the
respective functions, obligations and responsibilities of MESCO and of BUILDER.

MESCO's primary objective in entering this Agreement is to develop a
continuing mutually profitable relationship. To assist in the accomplishment of
this objective, the term of this Agreement shall be for a period of one (1)
year and shall be automatically renewed for an additional period of one (1)
year, subject to the provisions of this Agreement.

ARTICLE 2: AREA OF PRIMARY RESPONSIBILITY

During the term of this Agreement, BUILDER undertakes and accepts
responsibility for promoting, developing and maintaining the market for MESCO
Buildings in the non-exclusive area of primary responsibility hereinafter
described, which shall be referred to as the "Territory":

Nothing herein shall be construed as in any way limiting or restricting
the area or territory within, or the persons to whom, BUILDER may sell MESCO
Buildings.

ARTICLE 3: MUTUAL OBLIGATIONS

The development of a successful builder-manufacturer relationship is
based on mutual respect and the recognition of certain fundamental obligations,
in recognition of these obligations;

MESCO agrees to:

a) respect the rights of BUILDER as an independent contractor and
extend the courtesies and cooperation due him as a customer;

b) develop amd manufacture quality products that provide opportunity
for sales by BUILDER at competitive margins;

c) assist in the development of BUILDER's sales through the planned
program of cooperative promotion and advertising as provided by the
Builder Advertising Assistance Program;

d) make available to BUILDER such general specifications and other
technical data describing MESCO Buildings and reflecting usual and
standard MESCO design and manufacturing standards as are presently
existing or hereafter complied by MESCO for BUILDER's aid and
assistance in selecting, specifying and/or selling MESCO Buildings;

e) place full responsibility for the development and management of the
Territory upon the BUILDER, provided however that MESCO, upon
BUILDER's request therefor, will furnish such marketing and
technical assistance as MESCO may be in a position to provide to
aid or assist BUILDER in increasing or effecting sales of MESCO
Buildings.

BUILDER agrees to:

a) aggressively develop the Territory by maintaining market
penetration and customer relations satisfactory to MESCO;

b) develop and maintain an energetic and professional organization,
capable of offering and providing at a high standard of quality,
complete "turn-key" construction services including planning,
design, erection and construction;

c) promote and advertise MESCO Buildings and BUILDER's services in an
accurate and responsible manner acceptance to MESCO throughout the
Territory;

d) provide sufficient qualified sales personnel to adequately cover the
Territory and service all available sales inquiries;

e) maintain an adequate inventory of MESCO sales aids;

f) establish and maintain sound business management practices
necessary to effectively administer general construction;

g) provide a suitable, attractive place of business to obtain
recognition with the Territory.

ARTICLE 4: MESCO'S SALES POLICY

MESCO intends to rely on its builder organization for sales and
promotion of MESCO Buildings. When, in MESCO's opinion, circumstances exist
which require otherwise, MESCO may, at its option, make sales directly to any
persons or in any other manner that it may elect. In such event, MESCO may
inform BUILDER of such sale in order that BUILDER may have a reasonable
opportunity to bid for the erection or construction thereof.

ARTICLE 5: RELATIONSHIP

The relationship between BUILDER and MESCO is that of buyer and seller.
Nothing herein shall be construed to constitute a franchise, partnership or
joint venture between BUILDER and MESCO. BUILDER is not an agent or employee of
MESCO, and BUILDER shall not, at any time, purport to act as or represent that
he is an agent or employee of MESCO. Neither party to this Agreement is
authorized or empowered to assume or create any obligation or responsibility,
express or implied, on behalf of or in the name of the other party save and
except BUILDER's delivery of MESCO's warranty on the express terms and
conditions set forth therein and not otherwise.
<PAGE> 2
ARTICLE 6: TRADEMARKS AND TRADENAMES

BUILDER acknowledges that the word "MESCO" and the MESCO trademark
constitute trademarks and tradenames owned by MESCO, that valuable goodwill
attaches thereto, and that such words have secondary meaning in the minds of
the general public.

BUILDER shall not use or incorporate the word "MESCO" or any derivative
thereof in the name under which BUILDER operates or conducts business. BUILDER
will identify itself as an authorized MESCO builder by prominently displaying
the MESCO name in all ways in which BUILDER presents itself to the public as a
metal building contractor, including a prominent display of the name at
BUILDER's place of business, on its stationary and on all advertising media.
All listings in telephone directories or other printed matter in which the
tradename and trademark MESCO is used, shall be accompanied by an
identification of BUILDER in a manner to clearly indicate that BUILDER is an
authorized builder of MESCO buildings. BUILDER shall submit to MESCO actual
samples or accurate photographs or facsimiles of any and all intended uses of
the MESCO name prior to the use thereof, for MESCO's prior written approval.

ARTICLE 7: SALES AIDS AND MESCO MANUALS

BUILDER agrees to purchase, upon execution of this agreement, an
adequate inventory of Sales Aids. All Sales Aids will remain the property of
BUILDER.

MESCO will provide BUILDER with sales manuals concerning MESCO's prices,
products, policies and procedures for BUILDER's use in performing this
Agreement. Such sales manuals constitute trade secrets and are valuable
property of MESCO, shall be held confidential by BUILDER, and will be returned
by BUILDER upon request from MESCO. BUILDER shall not, without prior written
consent of MESCO, copy, duplicate or reproduce or permit any person to have
access to any of the information contained therein.

MESCO expressly reserves the rights, at any time, to develop, formulate
and promulgate new or amended pricing information, product descriptions,
policies or procedures, without notice to BUILDER. BUILDER hereby agrees to
observe any such new or amended expressions upon the receipt of the same from
MESCO.

ARTICLE 8: USE OF BUILDINGS

BUILDER shall insure that all MESCO Buildings sold by BUILDER are
suitable for the intended use, are adequate to withstand auxiliary loads and
local weather conditions, and comply with laws, ordinances, codes and
regulations of the locality where the building is located. BUILDER is solely
liable and responsible for any claims, demands or damages arising by reason of
breach of this provision by BUILDER and BUILDER will indemnify and save MESCO
harmless from any claims, demands or damages sought against MESCO by reason
thereof, including attorneys' fees and costs.

BUILDER shall advise MESCO, on each purchase order, of all special
requirements and conditions of use which BUILDER deems necessary for the
intended use thereof. IT IS EXPRESSLY UNDERSTOOD BY BUILDER THAT NO WARRANTY,
EXPRESS OR IMPLIED, WHETHER AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR OTHERWISE SHALL EXIST, NOR SHALL THE SAME ARISE AS TO ANY ITEMS NOT
SO DISCLOSED OR SPECIFIED BY BUILDER TO MESCO ON EACH PURCHASE ORDER.

BUILDER expressly agrees to notify any intended customer selecting
MESCO Buildings which may not be appropriate for the intended use or locality,
that such use thereof is not recommended by BUILDER or by MESCO. Such
notification shall be in writing, and shall further advise said customer that
MESCO has no liability or responsibility under its warranty or otherwise to
BUILDER or such customer by reason of using MESCO Buildings in such manner or
under such circumstances. A copy of such notice by BUILDER shall be
concurrently furnished MESCO.

ARTICLE 9: ERECTION OF BUILDINGS

BUILDER recognizes that proper erection of MESCO Buildings is of utmost
importance to MESCO and to BUILDER. BUILDER agrees to provide a high standard
of quality in the erection of all MESCO Buildings and to furnish or supply
competent, trained and experienced erectors to accomplish the same. In those
instances where BUILDER elects to have MESCO Buildings erected by an
independent third party, BUILDER shall, nevertheless, be responsible for the
quality and manner of such erection. In any event, BUILDER shall be responsible
for all phases of erection of MESCO Buildings and for all claims demands or
actions arising directly or indirectly therefrom or incident thereto.

ARTICLE 10: PURCHASES BY BUILDER

MESCO will sell MESCO Buildings to BUILDER at its established list
prices less any applicable discounts effective at the time of purchase.

MESCO reserves the right to change its published list prices and
discounts at any time upon thirty (30) days written notice to BUILDER. Factory
quoted list prices and applicable discount shall be binding on MESCO for a
period of thirty (30) days from date of such written quotation. All orders
properly submitted in writing on MESCO's forms prior to the time of any price
increase shall not be affected thereby so long as they are not subsequently
changed or postponed by BUILDER.

All MESCO Buildings are sold F.O.B. factory, regardless of terms of
credit extended. All amounts owing MESCO by BUILDER for purchases from MESCO or
otherwise are expressly payable at MESCO's offices in Grapevine, Texas.

ARTICLE 11: PERMITS AND TAXES

BUILDER agrees that all purchases from MESCO will be outright and are
for BUILDER's own use or for resale to others. BUILDER will obtain any and all
permits and licenses required by any governmental agency or authority for
BUILDER to conduct the business contemplated by this Agreement.

Any taxes incident to the sale or use of MESCO's Buildings shall be
paid by BUILDER. When required by law or if deemed necessary by MESCO, MESCO
will collect any such taxes from BUILDER and remit such taxes directly to the
applicable taxing authorities, in the event any particular transaction is
exempt from such taxes, BUILDER shall so designate on the purchase order and
furnish MESCO with such exemption or resale certificates as may be required.

ARTICLE 12: PROCESSING OF ORDERS

All purchase orders issued by BUILDER to MESCO shall be prepared in
accordance with MESCO's Policies and Procedures than in effect and shall be
submitted on forms provided by MESCO. Orders by BUILDER shall be subject to the
terms and conditions of the purchase order, and shall be subject to acceptance
by MESCO. Such acceptance will be acknowledged in writing by MESCO and MESCO's
written acknowledgment will reflect MESCO's interpretation of BUILDER's entire
requirements and specifications for the order.

BUILDER understands that minor corrections may be required on BUILDER's
purchase order to clarify BUILDER's pricing procedures. Each such accepted
order shall constitute the contract of sale between BUILDER and MESCO for the
MESCO Building thereby specified.

MESCO shall fabricate or manufacture each order for MESCO Buildings in
accordance with BUILDER's requirements as specified by BUILDER on each accepted
purchase order. IT IS EXPRESSLY UNDERSTOOD BY BUILDER THAT NO WARRANTY, EXPRESS
OR IMPLIED, WHETHER AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR OTHERWISE SHALL EXIST, NOR SHALL THE SAME ARISE AS TO ANY ITEMS NOT SO
DISCLOSED OR SPECIFIED BY BUILDER TO MESCO ON EACH PURCHASE ORDER.
<PAGE> 3
ARTICLE 13: CHANGES IN ORDERS

BUILDER may revise, postpone or cancel an order after it has been
accepted by MESCO, subject to the terms and conditions of the purchase order
and MESCO's Policies and Procedures, and not otherwise. All such changes in
orders shall be confirmed in writing by BUILDER in form satisfactory to MESCO.

BUILDER agrees that any revision, postponement or cancellation of an
accepted order shall be subject to appropriate charges determined by MESCO
consistent with the amount of work performed and expenses incurred on the
order, including allowance for normal overhead.

ARTICLE 14: SHIPPING SCHEDULES

All orders should specify the delivery date desired by BUILDER. MESCO
reorganizes its obligation to fill orders promptly and agrees that it will at
all times use its best efforts to make shipments of ordered materials in the
period shown on the order acknowledgement. However, MESCO shall not be liable
for any damages due to late deliveries or delays in delivery.

ARTICLE 15: TRANSPORTATION

Unless otherwise designated by BUILDER, MESCO will transport MESCO
Buildings by the best means available. All procedures and policies regarding
transportation will be in accordance with MESCO's Policies and Procedures then
in effect, and the terms and conditions of the purchase order. In the event a
common carrier is used, BUILDER expressly agrees to be bound by the regulations
then existing for carriers with regard to delivery, shortages and damage of
materials. BUILDER accepts all risk of loss or damage to materials upon loading
on BUILDER's own transportation or upon delivery to a common carrier.

ARTICLE 16: SHORTAGES AND CLAIMS

BUILDER agrees to inspect MESCO Buildings upon arrival at the place of
delivery designated on the purchase order. Claims for shortages in shipment
must be promptly reported in writing to MESCO. BUILDER understands that all
such claims for alleged shortages will be disallowed unless MESCO shall have
been given written notice thereof in accordance with the terms and conditions
of the purchase order and MESCO's Policies and Procedures then in effect.

BUILDER agrees to immediately report to MESCO any misfit which
allegedly prevents the proper assembly of parts during the course of erection.
BUILDER understands that all claims for correction of alleged misfits will be
disallowed unless MESCO shall have been given written notice thereof in
accordance with the terms and conditions of the purchase order and MESCO's
Policies and Procedures then in effect, and BUILDER shall have received written
authorization for the cost of repair.

BUILDER expressly agrees that no set-off or deduction from the total
net price due MESCO shall be made because of any alleged shortage or claim for
correction of misfit.

ARTICLE 17: CREDIT

MESCO will review possible credit terms for BUILDER based on BUILDER's
financial strength, prior payment history and current needs. Extension of
credit terms will be established between BUILDER and MESCO's Manager of Credit
after current operating and financial information has been submitted by BUILDER
in accordance with the Policies and Procedures of MESCO then in effect.

BUILDER will be advised in writing of the terms of credit extended and
the conditions under which such credit remains effective. Unless terms of
credit are extended by MESCO in writing, BUILDER agrees that payment is to be
in readily available funds or in such other manner as may be specified by
MESCO.

ARTICLE 18: WARRANTIES AND GUARANTEES

MESCO Buildings are warranted by MESCO only in accordance with its
Manufacturer's Warranty, and not otherwise. Color coating of certain MESCO
panels are guaranteed by MESCO only in accordance with its Color-Cote
Guarantee. NO OTHER WARRANTIES, EXPRESS OR IMPLIED, ARE MADE BY MESCO, NO
IMPLIED WARRANTIES AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
ARE MADE BY MESCO, AND BUILDER HEREBY EXPRESSLY WAIVES ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, BY MESCO. No other conduct, promises or representations
shall be made by BUILDER to its customer or relied upon by BUILDER regarding
MESCO Buildings. MESCO's warranties do not extend to and BUILDER hereby waives
all claims for consequential damage, however occasioned, including loss of use
or of profits.

BUILDER acknowledges having examined MESCO's warranties and agrees to
incorporate appropriate provisions relating to MESCO's warranties in each offer
to sell or contract of sale entered into by BUILDER. BUILDER expressly agrees
to deliver MESCO's warranties to its customers.

MESCO reserves the right to revise its warranties from time to time.
Any such revised warranties shall be accepted or used by BUILDER, after written
notice to BUILDER thereof, in lieu of any prior warranty by MESCO.

ARTICLE 19: RECORDS AND REPORTS

In order that MESCO may effectively coordinate its marketing efforts,
BUILDER agrees to furnish periodic reports and estimates concerning the
condition of his business including operating information and sales activity
which MESCO may reasonably request.

BUILDER further agrees to keep his books, records and accounts in
accordance with accepted accounting practice and furnish in a form acceptable
to MESCO its annual financial statement.

ARTICLE 20: INSURANCE

MESCO shall maintain in force for the term of this Agreement
Comprehensive General Liability Insurance with excess coverage of $1,000,000
including Contractual Liability, Completed Operations and Product Liability.
MESCO agrees to have its insurance carrier provide BUILDER, on request, a
certificate of insurance evidencing such coverage.

BUILDER shall maintain in force, for the term of this Agreement,
Comprehensive General Liability Insurance with limits not less than $100,000
per person, $300,000 per occurrence for bodily injury and $100,000 per
occurrence for property damage including Contractual Liability, Completed
Operations and Product Liability. BUILDER agrees to have its insurance carrier
provide MESCO a certificate of insurance evidencing such coverage and agrees to
notify MESCO at least thirty (30) days prior to any intended modification or
termination of BUILDER's policy.

ARTICLE 21: ASSIGNABILITY

This Agreement may be assigned or transferred by BUILDER provided that
the prior written consent of MESCO is obtained, subject to the provisions of
this Agreement. The provisions of this article apply to any transfer by
BUILDER, whether by sale, testamentary disposition, operation of law or
otherwise.

It is understood by BUILDER that in considering any application to
MESCO for its consent to a proposed sale or transfer of this Agreement or a
change in the controlling ownership of the holders of BUILDER's stock, a
determination will be made by MESCO in its sole and exclusive discretion as to
the party or parties who propose to continue the business operations
contemplated by this Agreement, and the ability or capability of such person or
persons to perform the same. MESCO's determination in this regard shall be
conclusive upon BUILDER and such proposed purchaser.

Except as permitted by the provisions hereof, this Agreement shall not
be assigned or transferred by BUILDER. In the event of a sale or transfer in
violation of the provisions hereof, the same shall constitute an act of default
by BUILDER. This Agreement, its interest, value, benefits and responsibilities
shall inure to the benefit of the successors and assigns of MESCO.

<PAGE> 4
ARTICLE 22: TERMINATION

MESCO or BUILDER may terminate this Agreement at any time and for any
reason upon thirty (30) days prior written notice to the other party.

This Agreement may be terminated by MESCO without prejudice to any
remedies which it may otherwise have hereunder, on written notice to BUILDER of
its election to do so, upon the occurrence of any of the following events:

a) If BUILDER defaults in the performance of any of the terms and
conditions of this Agreement, any purchase orders or any other agreement or
contract between MESCO and BUILDER;

b) If BUILDER be adjudicated bankrupt or becomes insolvent or if a
receiver, whether permanent or temporary, of BUILDER's property or any part
thereof, shall be appointed by a court of competent authority;

c) If BUILDER shall make a general assignment for the benefit of his
creditors, or shall fail to make payment of indebtedness to MESCO, as and when
the same becomes due and payable, or if procedures for recognition or
rearrangement of BUILDER's affairs are instituted for or against BUILDER;

d) Upon conviction of BUILDER or any principal of BUILDER of any crime
tending to adversely affect the ownership and the operation, management or
business of BUILDER or MESCO;

e) Cessation of BUILDER's business for any reason.

In the event of termination of this Agreement, BUILDER shall
immediately discontinue the use of MESCO's tradename and trademarks. BUILDER
shall remove all forms of advertising bearing MESCO's tradename and trademark,
and will not thereafter operate or do business in any manner that would tend to
give the general public the impression that this Agreement is still in effect.
All MESCO sales manuals shall be returned to MESCO within fifteen (15) days of
such termination, otherwise, BUILDER agrees that damages of not less than five
hundred (500) dollars, injunctive relief and all costs of enforcement,
including reasonable attorneys' fees, shall be recoverable by MESCO from
BUILDER.

ARTICLE 23: FORCE MAJEURE

MESCO shall not be liable for any direct or consequential damage which
BUILDER or its customer may suffer by reason of MESCO's delay in performance or
failure of performance under this Agreement or an accepted purchase order
resulting from fire, storms, accidents, labor disturbances, regulations or acts
of governmental authority, inability to secure required materials or labor,
failure of machinery or equipment, or any other cause or circumstance beyond
MESCO's reasonable control . The happening of any such event or the occurrence
of any such delay, shall be deemed to extend the date for performance by MESCO
accordingly.

ARTICLE 24: GENERAL

This Agreement supersedes any and all other agreements, either oral or
in writing, between the parties hereto with respect to the subject matter
herein.

No changes in this Agreement shall be valid or binding upon either
party unless in writing and unless expressly declared to be a modification of
this Agreement and signed by an authorized executive of each party.

This Agreement, all purchase orders, invoices and all questions
relating to the relationship of MESCO and BUILDER, shall be governed and
interpreted in accordance with the laws of the State of Texas.

If any part or provision of this Agreement, or the application of any
such part or provision, shall be held illegal, invalid or unenforceable under
the laws of any jurisdiction, then such illegality, invalidity or
unenforceability shall not invalidate the remainder, and this Agreement shall in
all other respects continue in full force and effect. Neither MESCO or BUILDER
shall, by reason of the termination of this Agreement, be liable for
compensation, reimbursement or damages on account of expenditures, investments,
leases, improvements, commitments or loss of anticipated sales of future
profits in connection with their business or goodwill; all rights or claims of
such nature being hereby expressly, unconditionally and irrevocably waived by
both parties. However, this shall not discharge or release BUILDER from any
claim owing in conjunction with purchase orders theretofore accepted by MESCO
or for actual damages resulting from breach of this Agreement by BUILDER, nor
shall it release MESCO from any claims arising under its Manufacturer's
Warranty or Color-Cote Guarantee.

IN WITNESS WHEREOF, this Agreement shall be deemed to have been delivered as of
this _______ day of ________________, 19__ at Grapevine, Tarrant County, Texas.

MESCO METAL BUILDINGS BUILDER: _____________________________________

BY: ________________________________________ BY: __________________________________________

NAME: ______________________________________ NAME: ________________________________________

TITLE: _____________________________________ TITLE: _______________________________________

ADDRESS: _____________________________________

______________________________________________

</TABLE>

<PAGE> 1
EXHIBIT 13

SELECTED FINANCIAL DATA
(in thousands except per share)

<TABLE>
<CAPTION>
Year ended October 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . . $79,008 $134,506 $167,767 $234,215 $332,880
Net Income . . . . . . . . . . . . . . . . . . 3,611 6,333 10,256 17,032 24,814
Net income per share . . . . . . . . . . . . . .67 .96 1.53 2.52 3.03
Working capital . . . . . . . . . . . . . . . . 4,835 15,511 16,885 31,687 51,958
Total assets . . . . . . . . . . . . . . . . . 34,187 46,733 63,373 83,082 158,326
Long-term debt, noncurrent portion . . . . . . 2,185 1,899 326 278 1,730
Shareholders' equity . . . . . . . . . . . . . $21,232 $28,655 $39,682 $57,682 $116,175
Average common shares and equivalents . . . . . 5,432 6,578 6,695 6,765 8,198

</TABLE>

OPERATING POLICIES

RETURN ON ASSETS

Return on assets is defined as operating income divided by average assets used
in the business (eliminating primarily cash). NCI's management and directors
are thoroughly convinced that this ratio is the best measure of operating
performance. Tight control over inventory, receivables, and fixed investment
is as important as, and interrelated to, control of the income statement.
Return on assets is a proxy for cash flow, which can reward shareholders with
undiluted growth. In fiscal year 1996, NCI earned a return on assets employed
in the business of 34%.

GROWTH

The company is dedicated to increasing its market share through strong marketing
and low cost, quality manufacturing. Special niches that provide unusual profit
and growth opportunities are sought. Overall profit growth of at least 15% per
year is an intermediate goal of the company with larger increments possible in
the short-term. This growth may be internally generated or it may come from
carefully selected acquisitions.

DIVIDENDS

The company's officers and directors are all large stock or option holders.
Thus, there is much sympathy for dividends. However, it is considered
appropriate, at this stage of the company's development and in view of the
available returns, to invest that money in the growth of the equity of the
company as opposed to paying dividends.

COMPENSATION

The company believes in providing base salaries for its management on the low
side of industry norms with opportunities, based on performance, to obtain very
high bonuses. Specifically, return assets is the criterion for performance
measurement. Bonuses begin when the ratio of operating income divided by assets
used in the business is equal to 20%. Maximum bonuses, at a very high level,
can be earned when 30% returns are achieved. This measure is felt to be most
important because management of both the balance sheet and the income statement
are critical to long-term success, especially in a cyclical industry.

CORPORATE RESPONSIBILITY

The company is committed to the goal of being an exemplary corporate citizen.
Toward that end, we have an intense safety program ongoing in the workplace. We
also provide broad coverage health insurance to all employees. There are not
only employment, but advancement opportunities through our growth. We have
proper awareness and concern for the overall environment. Finally, we employ
high quality engineering professionals to ensure that our products are designed
using sound engineering practices and principles.

Cover: The symbol on our cover embodies our central philosophy that our
suppliers, employees, and our customers are all critical parts of a coordinated
team necessary to produce a product that fulfills an economic need. We all
understand that each team member must work together with the others to provide
the appropriate quality, service, and price, and that commitment to teamwork is
what has made NCI successful.

<PAGE> 2
CONSOLIDATED STATEMENTS OF INCOME

NCI BUILDING SYSTEMS, INC.

<TABLE>
<CAPTION>
October 31,
-----------------------------------------------
1994 1995 1996
-----------------------------------------------
<S> <C> <C> <C>
Sales ........................................................... $167,766,770 $234,214,508 $332,879,707
Cost of sales ................................................... 124,125,815 169,814,614 241,373,691
-----------------------------------------------
Gross Profit ............................................... 43,640,955 64,399,894 91,506,016
-----------------------------------------------
Engineering ..................................................... 6,870,911 8,934,916 11,078,691
Selling ......................................................... 11,265,957 15,777,253 22,365,791
General and administrative ...................................... 10,064,368 13,399,120 19,650,136
-----------------------------------------------
Total operating expenses ........................................ 28,201,236 38,111,289 53,094,618
-----------------------------------------------
Income from operations ..................................... 15,439,719 26,288,605 38,411,398
Interest expense ................................................ (82,364) (55,871) (108,203)
Other income .................................................... 640,892 821,722 1,585,960
-----------------------------------------------
Income before income taxes ................................. 15,998,247 27,054,456 39,889,155
-----------------------------------------------
Provision (benefit) for income taxes - Note 5 ...................
Current .................................................... 5,983,924 10,493,151 15,898,356
Deferred ................................................... (241,768) (470,495) (822,737)
-----------------------------------------------
Total income tax ................................................ 5,742,156 10,022,656 15,075,619
-----------------------------------------------
Net Income ...................................................... $ 10,256,091 $ 17,031,800 $ 24,813,536
===============================================
Net income per common and
common equivalent share - Note 9 ........................... $ 1.53 $ 2.52 $ 3.03
===============================================
</TABLE>

See Independent Auditor's Report and Accompanying Notes to the Consolidated
Financial Statements.

17
<PAGE> 3
CONSOLIDATED BALANCE SHEETS

NCI BUILDING SYSTEMS, INC.

<TABLE>
<CAPTION>
October 31,
---------------------------
1995 1996
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $17,631,409 $ 20,943,664
Accounts receivable - Trade.................... 18,443,034 35,477,296
Other receivables - Note 11.................... 619,891 2,271,674
Inventories - Note 1........................... 16,897,455 28,692,930
Deferred income taxes - Note 5................. 1,681,992 2,925,249
Prepaid expenses............................... 185,063 298,702
----------- ------------
Total current assets........................... 55,458,844 90,609,515
----------- ------------
Property, plant and equipment, net - Note 1...... 25,629,382 42,751,545
----------- ------------
Other assets:
Excess of cost over fair value of acquired net
assets - Note 1.............................. 1,581,945 22,672,916
Other.......................................... 412,129 2,292,322
----------- ------------
Total other assets............................. 1,994,074 24,965,238
----------- ------------
Total assets..................................... $83,082,300 $158,326,298
=========== ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.............. $ 83,402 $ 47,402
Accounts payable............................... 11,966,447 21,527,027
Accrued compensation and benefits.............. 6,575,656 7,762,288
Other accrued expense.......................... 4,436,488 6,737,346
Accrued income taxes........................... 709,692 2,577,168
----------- ------------
Total current liabilities...................... 23,771,685 38,651,231
----------- ------------
Long-term debt, noncurrent portion - Note 3...... 278,396 1,729,566
----------- ------------
Deferred income taxes - Note 5................... 1,349,734 1,770,255
----------- ------------
Contingencies - Note 6
Shareholders' equity - Note 7
Preferred stock, $1 par value, 1,000,000
shared authorized, none outstanding.......... -- --
Common stock, $.01 par value, 15,000,000 shared
authorized, 6,290,595 and 7,966,777 shares
issued and outstanding, respectively......... 62,906 79,668
Additional paid-in capital..................... 13,696,475 47,358,938
Retained earnings.............................. 43,923,104 68,736,640
----------- ------------
Total shareholders' equity..................... 57,682,485 116,175,246
----------- ------------
Total liabilities and shareholders' equity....... $83,082,300 $158,326,298
=========== ============
</TABLE>

See Independent Auditor's Report and Accompanying Notes to the
Consolidated Financial Statements.

18
<PAGE> 4
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

NCI BUILDING SYSTEMS, INC.

<TABLE>
<CAPTION>
Additional
Common Paid-In Retained Shareholders'
Stock Capital Earnings Equity
---------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, October 31, 1993............... $61,767 $11,958,205 $16,635,213 $ 28,655,185
Proceeds from exercise of stock options,
including tax benefit thereon......... 112 87,438 -- 87,550
Shares issued for
contribution to 401K plan............. 407 682,438 -- 682,845
Net income.............................. -- -- 10,256,091 10,256,091
--------------------------------------------------------
Balance, October 31, 1994............... 62,286 12,728,081 26,891,304 39,681,671
Proceeds from exercise of stock options,
including tax benefit thereon......... 142 145,474 -- 145,616
Shares issued for
contribution to 401K plan............. 478 822,920 -- 823,398
Net income.............................. -- -- 17,031,800 17,031,800
--------------------------------------------------------
Balance, October 31, 1995............... 62,906 13,696,475 49,923,104 57,682,485
Proceeds from stock offering............ 10,865 24,759,142 -- 24,770,007
Proceeds from exercise of stock options,
including tax benefit thereon......... 2,458 2,722,474 -- 2,724,932
Shares issued for
contribution to 401K plan............. 439 1,008,847 -- 1,009,286
Shares issued in connection with the
purchase of DBCI...................... 3,000 5,172,000 -- 5,175,000
Net income.............................. -- -- 24,813,536 24,813,536
--------------------------------------------------------
Balance, October 31, 1996............... $79,668 $47,358,938 $68,736,640 $116,175,246
========================================================
</TABLE>

See Independent Auditor's Report and Accompanying Notes to the Consolidated
Financial Statements.

19
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS

NCI BUILDING SYSTEMS, INC.

<TABLE>
<CAPTION>
October 31,
--------------------------------------------
1994 1995 1996
--------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,256,091 $ 17,031,800 $ 24,813,536
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization. . . . . . . . . . . . . . 2,219,558 3,226,384 5,791,493
Loss on sale of fixed assets . . . . . . . . . . . . . . -- 3,701 1,543
Provision for doubtful accounts . . . . . . . . . . . . 651,215 1,101,038 680,633
Deferred income tax benefit. . . . . . . . . . . . . . . (241,768) (470,495) (822,736)
Changes in current assets and liability accounts,
net of effects of acquisitions:
Increase in accounts, notes and other receivable . . . . . . (1,020,612) (3,097,101) (9,856,815)
Increase in inventories . . . . . . . . . . . . . . . . . . (4,975,310) (2,482,505) (4,520,569)
(Increase) decrease in prepaid expenses. . . . . . . . . . . (41,103) 97,467 (35,491)
Increase (decrease) in accounts payable. . . . . . . . . . . 4,768,451 (2,009,477) 3,042,752
Increase in accrued expenses . . . . . . . . . . . . . . . . 1,992,380 4,857,823 1,603,120
Increase (decrease) in income taxes payable. . . . . . . . . 751,249 (244,592) 3,843,170
--------------------------------------------
Net cash provided by operating activities. . . . . . . . 14,360,151 18,014,043 24,540,636
--------------------------------------------
Cash flows from investing activities:
Proceeds from the sale of fixed assets . . . . . . . . . . . -- 7,181 115,071
Acquisition of Ellis Building Components . . . . . . . . . . (4,250,000) -- --
Acquisition of Royal Buildings . . . . . . . . . . . . . . . -- (910,000) --
Acquisition of Mesco Metal Buildings . . . . . . . . . . . . -- -- (20,631,222)
Acquisition of Doors & Building Components, Inc. . . . . . . -- -- (11,000,000)
Acquisition of Carlisle Engineered Metals, Inc . . . . . . . -- -- (2,840,117)
(Increase) decrease in other noncurrent assets . . . . . . . 54,541 7,725 (1,988,127)
Capital expenditures . . . . . . . . . . . . . . . . . . . . (5,935,522) (5,836,820) (10,318,399)
--------------------------------------------
Net cash applied to investing activities . . . . . . . . (10,130,981) (6,731,914) (46,662,794)
--------------------------------------------
Cash flows from financing activities:
Net proceeds from sale of stock. . . . . . . . . . . . . . . -- -- 24,770,007
Exercise of stock options. . . . . . . . . . . . . . . . . . 37,040 71,555 749,240
Borrowings on line of credit and notes . . . . . . . . . . . 1,000,000 -- --
Principal payments on long-term debt, line of
credit and notes payable . . . . . . . . . . . . . . . . (2,812,723) (47,389) (84,834)
--------------------------------------------
Net cash provided by (used in) financing activities . . (1,775,683) 24,166 25,434,413
--------------------------------------------
Net increase in cash . . . . . . . . . . . . . . . . . . 2,453,487 11,306,295 3,312,255
Cash beginning of period . . . . . . . . . . . . . . . . . . . . 3,871,627 6,325,114 17,631,409
--------------------------------------------
Cash at end of period . . . . . . . . . . . . . . . . . . . . . $ 6,325,114 $ 17,631,409 $ 20,943,664
============================================

</TABLE>
See Independent Auditor's Report and Accompanying Notes to the Consolidated
Financial Statements.

<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NCI BUILDING SYSTEMS, INC.

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Reporting Entity

These financial statements include the operations and activities of NCI
Building Systems, Inc. and its wholly-owned subsidiaries (Company) after the
elimination of all material intercompany accounts and balances. The Company
designs, manufactures and markets metal building systems and components for
commercial, industrial, agricultural and community service use. The Company
recognizes revenues as jobs are shipped.

(b) Accounts Receivable

The Company reports accounts receivable net of the allowance for doubtful
accounts of $1,339,772 and $1,629,202 at October 31, 1995 and 1996,
respectively. Trade accounts receivable are the result of sales of buildings
and components to customers throughout the United States and affiliated
territories including international builders who resell to end users. Although
the Company's sales historically have been concentrated in Texas and
surrounding states, in recent years it has been expanding its authorized
builder organization and customer base into the midwestern states and, to a
lesser extent, into south central, southeastern and coastal states. All sales
are denominated in United States dollars. Credit sales do not normally require
a pledge of collateral; however, various types of liens may be filed to enhance
the collection process. Company management is not aware of any significant
concentrations of credit or market risks related to receivables or other
financial instruments reported in these financial statements.

Inventories are stated at the lower of cost or market value, using specific
identification for steel coils and weighted-average method for other raw
materials. A summary of inventories follows:

<TABLE>
<CAPTION>
October 31,
---------------------------
1995 1996
---------------------------
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . $12,255,393 $21,514,510
Work-in-process and
finished goods . . . . . . . . . . . 4,642,062 7,178,420
---------------------------
$16,897,455 $28,692,930
===========================
</TABLE>

(d) Property, Plant and Equipment

Property, plant and equipment are stated at cost and depreciated over their
estimated useful lives. Depreciation is computed using the straight line method
for financial reporting purposes and both straight line and accelerated methods
for income tax purposes. Depreciation expense for the years ended October 31,
1994, 1995 and 1996 was $2,172,336, $2,995,051 and $4,236,397, respectively.

<TABLE>
<CAPTION>
October 31,
---------------------------
1995 1996
---------------------------
<S> <C> <C>
Land. . . . . . . . . . . . . . . . . . . $ 1,458,993 $ 3,174,539
Buildings and improvements . . . . . . . 11,401,480 20,136,496
Machinery, equipment
and furniture . . . . . . . . . . . . 21,292,363 31,865,638
Transportation equipment . . . . . . . . 582,371 910,801
Computer software . . . . . . . . . . . . 169,764 155,876
---------------------------
34,904,971 56,243,350
Less accumulated depreciation . . . . . . (9,275,589) (13,491,805)
---------------------------
$25,629,382 $ 42,751,545
===========================
</TABLE>

Estimated useful lives for depreciation are:

<TABLE>
<S> <C>
Buildings and improvements . . . . . . . . 10-20 years
Machinery, equipment and
furniture. . . . . . . . . . . . . . . 5-10 years
Transportation equipment . . . . . . . . . 3-10 years
Computer software. . . . . . . . . . . . . 5 years

</TABLE>

(e) Cash Flows Statement

For purposes of the cash flows statement, the Company considers all highly
liquid investments with an original maturity date of three months or less to be
cash equivalents. Total

<PAGE> 7
interest paid for the years ended October 31, 1994, 1995 and 1996 was $82,364,
$55,871 and $108,203, respectively. Income taxes paid for the years ended
October 31, 1994, 1995 and 1996 was $5,620,566, $11,032,810 and $12,762,769
respectively. Non-cash investing or financing activities included: $1,009,286
for the 1995 contribution for the 401k plan which was paid in common stock in
1995, $823,398 for the 1994 contribution for the 401k plan which was paid in
common stock in 1994 and $583,000 in additional purchase price related to the
acquisition of Ellis Building Components for the year ended October 31, 1994.

(f) Excess of Cost Over Fair Value of Acquired Net Assets

Excess of cost over fair value of acquired net assets is amortized on a
straight-line basis over fifteen years. Accumulated amortization as of October
31, 1996 was $1,440,785, and $118,056 as of October 31, 1995. The carrying
value of goodwill is reviewed if the facts and circumstances suggest that it
may be impaired. If this review indicates that goodwill will not be
recoverable, as determined based on the undiscounted cash flows of the entity
acquired over the remaining amortization period, the Company's carrying value
of the goodwill would be reduced by the estimated shortfall of cash flows.

(g) Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

(h) Advertising Costs

Advertising costs are expensed as incurred. Advertising expense was $1,054,951,
$1,196,471 and $1,267,431 in 1994, 1995 and 1996, respectively.

(i) Long-Lived Assets

In March 1995, the FASB issued Statement No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which
requires impairment losses to be recorded on long-lived assets used in
operation when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt Statement
121 in the first quarter of fiscal 1997 and, based on current circumstances,
does not believe the effect of adoption will be material.

(j) Accounting for Stock-Based Compensation

In October 1995, the FASB issued Statement No. 123, Accounting for Stock-based
Compensation, which encourages companies to apply a new fair value approach and
to record compensation expense in the income statement measured at the grant
date of the award using an option pricing model. Alternatively, companies are
permitted to continue using current accounting rules for employee stock
options, but will be required to provide pro forma net income and earnings per
share information as if the new fair value approach had been adopted. The
Company presently plans to continue to use the current accounting rules with
the new disclosures required in the year ended October 31, 1997.

22
<PAGE> 8
(2) NOTES PAYABLE (SHORT-TERM BORROWINGS)

The Company has a revolving unsecured credit line of $6 million with a
bank bearing interest that fluctuates with prime, (commitment fee 1/4% on
unused portion) all of which was unused at October 31, 1995 and 1996,
respectively.

(3) LONG-TERM DEBT

<TABLE>
<CAPTION>
October 31,
----------------------
1995 1996
----------------------
<S> <C> <C>
Six year reducing revolving credit line of
$1 million with a bank bearing interest that
fluctuates with prime, with $72,900 quarterly
reducing borrowing base ............................. $ -- $ --

Notes payable to City of Mattoon bearing interest
at 3% secured by certain equipment, repayable by
certain equipment, repayable in aggregate monthly
installments of $4,828 maturing through
November 2001 ....................................... 325,798 276,968

Note payable to employee bearing interest at 7%
maturing April 1, 2001, with an option to
convert into common stock at $29.925 per share....... -- 1,500,000

Other ............................................... 36,000 --
----------------------
361,798 1,776,968
Current portion of long-term debt ................... (83,402) (47,402)
----------------------
$278,396 $1,729,566
======================
</TABLE>

Aggregate required principal reductions are as follows:

<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------------
<S> <C>
1997 ......................................... $ 47,402
1998 ......................................... 51,846
1999 ......................................... 53,423
2000 ......................................... 55,048
2001 ......................................... 1,556,722
Thereafter ................................... 12,527
----------
$1,776,968
==========
</TABLE>

The loan agreements related to the revolving line and short-term
borrowings contain, among other things, provisions relative to additional
borrowings and restrictions on the amount of retained earnings available for
the payment of dividends and the repurchase of common stock and provisions
requiring the maintenance of certain net worth and other financial ratios.
Under the most restrictive of these covenants, such dividends or stock
repurchases are limited to 20% of the Company's net income for any 12-month
period, which is further restricted on a quarterly basis, based on the ratio of
cash flow (Net Income plus Depreciation and Amortization) for the previous
12-month period to current maturities of long-term debt plus dividends and
stock repurchases.

The carrying amount of the Company's long-term debt approximates its
fair value.

(4) RELATED PARTY TRANSACTIONS

During 1994, 1995 and 1996, the Company purchased $740,573, $1,052,829
and $1,417,064 respectively, of materials from a related party under an arm's
length transaction.

(5) INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.

<PAGE> 9
Taxes on income from continuing operations consist of the following:

<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------
1994 1995 1996
----------------------------------------
<S> <C> <C> <C>
Current: Federal................... $5,630,366 $ 9,733,381 $14,530,670
State..................... 353,558 759,770 1,367,686
----------------------------------------
Total current..................... 5,983,924 10,493,151 15,898,356
Deferred: Federal................... (233,304) (445,063) (745,472)
State..................... (8,464) (25,432) (77,265)
----------------------------------------
Total deferred.................... (241,768) (470,495) (822,737)
----------------------------------------
Total provision..................... $5,742,156 $10,022,656 $15,075,619
----------------------------------------
</TABLE>

The reconciliation of income tax computed at the United States federal
statutory tax rate to the effective income tax rate is as follows:

<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------
1994 1995 1996
----------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate... 35.0% 35.0% 35.0%
State income taxes.................. 0.8 1.8 2.4
Other............................... 0.1 0.3 0.4
----------------------------------------
Effective tax rate................ 35.9% 37.1% 37.8%
========================================
</TABLE>

Significant components of the Company's deferred tax liabilities and assets are
as follows:

<TABLE>
<CAPTION>
1994 1995 1996
----------------------------------------
<S> <C> <C> <C>
Deferred tax assets
Capitalized overhead in inventory.. $ 475,384 $ 819,766 $1,210,913
Bad debt reserve................... 374,698 495,716 602,804
Accrued reserves................... 255,960 240,738 637,293
Other.............................. 194,296 251,982 572,876
----------------------------------------
Total deferred tax assets............ 1,300,338 1,808,202 3,023,886
----------------------------------------
Deferred tax liabilities
Depreciation and amortization...... 1,323,670 1,140,082 1,426,749
Other.............................. 114,905 335,864 442,143
----------------------------------------
Total deferred tax liabilities....... 1,438,575 1,475,946 1,868,892
----------------------------------------
Net deferred tax asset (liability)... $ (138,237) $ 332,256 $1,154,994
========================================
</TABLE>

(6) OPERATING LEASE COMMITMENTS

Total rental expense incurred from operating leases for the years ended
October 31, 1994, 1995 and 1996 was $1,142,105, $2,639,201 and $3,989,603
respectively.

Aggregate minimum required annual payments on long-term operating leases at
October 31, 1996 were as follows:

Year Ended October 31,
-------------------------------------------------
<S> <C>
1997................................. $1,948,478
1998................................. 1,581,772
1999................................. 995,319
2000................................. 437,756
2001................................. 188,795
----------
$5,152,120
==========
</TABLE>

(7) STOCK OPTIONS

The Board of Directors has approved a non-statutory employee stock option
plan. This plan includes the future granting of stock options to purchase up to
1,550,000 shares as an incentive and reward for key management personnel. As of
October 31, 1996, the following tables reflects activity for the year. Options
expire ten years from date of grant. The rights to acquire the option shares is
earned in 25% increments over the first four years of the option period.

<PAGE> 10
<TABLE>
<CAPTION>
Balance at Option Balance at Exercisable at
Year October 31, 1995 Price Granted Canceled Exercised October 31, 1996 October 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1989 319,811 $1.60 -- -- (200,000) 119,811 119,811
1990 59,344 2.71 -- -- (16,500) 42,844 42,844
1992 168,093 5.66 to -- -- (5,000) 163,093 163,093
6.33
1993 46,125 12.50 -- (4,500) (13,350) 28,275 17,025
1994 89,000 16.25 to -- -- (7,500) 81,500 33,250
17.00
1995 79,500 17.00 to -- (5,250) (3,500) 70,750 15,625
18.25
1996 -- 23.00 to 315,000 (13,332) -- 301,668 --
28.50
- ----------------------------------------------------------------------------------------------------------------------------
Total 761,873 315,000 (23,082) (245,850) 807,941 391,648
============================================================================================================================
</TABLE>

(8) LITIGATION

The Company is involved in certain litigation that the Company
considers to be in the normal course of business. Management of the Company
believes that such litigation will not result in any material losses.

(9) NET INCOME PER SHARE

Net income per common share is computed by dividing net income after
income taxes by the weighted average number of common shares outstanding during
1994, 1995 and 1996 after giving effect for common stock equivalents.

Net income per share is calculated as follows:

<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------------
1994 1995 1996
-------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C>
Net income ................................... $10,256 $17,032 $24,814
Average common shares outstanding............. 6,217 6,272 7,749
Common equivalent shares for:
Stock options ........................... 478 493 449
Average shares and equivalents ............... 6,695 6,765 8,198
Net income per share ......................... $ 1.53 $ 2.52 $ 3.03
</TABLE>

(10) EMPLOYEE BENEFIT PLAN

Effective January 1, 1992, the Company approved implementation of a
401(k) profit sharing plan (the "Savings Plan") which covers all eligible
employees. The Savings Plan requires the Company to match employee
contributions up to a certain percentage of a participant's salary. No other
contributions may be made to the Savings Plan. Contributions accrued for the
Savings Plan for the year ended October 31, 1994, 1995 and 1996 were $629,559,
$775,190 and $1,154,696 respectively.

(11) ACQUISITIONS

In November 1995, the Company acquired substantially all of the assets
and assumed certain liabilities of Doors and Building Components, Inc.
("DBCI"), a manufacturer of roll-up steel overhead doors used primarily in
self-storage and commercial/industrial applications, for approximately $12
million in cash and 300,000 shares of common stock of the Company, valued at
$5.2 million. Based on the final determination of book value of the purchased
assets, the price was

25
<PAGE> 11
reduced by approximately $2.5 million of which $1.5 million is due from the
seller and is recorded as a receivable in the October 31, 1996 balance sheet.
This amount was settled in cash in December, 1996. The excess of cost over fair
value of the acquired net assets recorded was $11.4 million.

In April, 1996, the Company acquired substantially all of the assets
and assumed certain liabilities of Mesco Metal Buildings, a division of
Anderson Industries, Inc. ("Mesco"), a manufacturer of metal building systems
and components, for approximately $20.8 million in cash and a $1.5 million 7%
convertible subordinated debenture due April, 2001. The excess of cost over
fair value of the acquired net assets recorded was $10.9 million.

Accordingly, the consolidated results of operations for 1996 included
DBCI and Mesco since the date of acquisition. Both acquisitions were accounted
for using the purchase method. Assuming the acquisitions of DBCI and Mesco had
been consummated as of November 1, 1994, the pro forma unaudited results of
operations for the years ended October 31 are as follows:

<TABLE>
<CAPTION>
(Unaudited)
-------------------------------------
1995 1996
-------------------------------------
(in thousands, except per share data)
<S> <C> <C>
Sales ................................ $305,772 $347,404
Net income ........................... 19,571 26,345
Net income per share ............... $ 2.40 $ 3.21
</TABLE>

26
<PAGE> 12
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders
NCI Building Systems, Inc.
Houston, Texas

We have audited the accompanying balance sheets of NCI Building Systems, Inc. as
of October 31, 1996 and 1995, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended October 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based upon our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of NCI Building Systems, Inc. at October 31, 1996 and 1995 and the consolidated
results of its operations and its cash flow for each of the three years in the
period ended October 31, 1996, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Houston, Texas
December 6, 1996

27
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION

RESULTS OF OPERATIONS

The following table presents, as a percentage of sales, certain selected
financial data for the Company for the periods indicated:

<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------
1994 1995 1996
----------------------------
<S> <C> <C> <C>
Sales ........................................ 100.0% 100.0% 100.0%
Cost of sales ................................ 74.0 72.5 72.5
----------------------------
Gross profit ................................. 26.0 27.5 27.5
Engineering expense .......................... 4.1 3.8 3.4
Selling, general and administrative expense... 12.7 12.5 12.6
----------------------------
Income from operations ....................... 9.2 11.2 11.5
Interest expense ............................. 0.1 0.0 0.0
Other (income) expense ....................... (0.4) (0.4) (0.5)
----------------------------
Income before income taxes ................... 9.5 11.6 12.0
Provision for income taxes ................... 3.4 4.3 4.5
----------------------------
Net income ................................... 6.1% 7.3% 7.5%
============================
</TABLE>

FISCAL 1996 COMPARED TO FISCAL 1995

Sales in fiscal 1996 increased by $98.7 million, or 42%, compared to fiscal
1995. The acquisition of Doors and Buildings Components, Inc. ("DBCI") in
November 1995 and Mesco Metal Buildings, a division of Anderson Industries,
Inc. ("Mesco") in April 1996 accounted for $58.7 million of this increase.
Excluding the 1996 sales of these two acquisitions, sales increased in 1996 by
17% compared to the prior year. This growth resulted from increased market
penetration by the Company in the metal building market, expansion into the
Western United States with the opening of a new plant in California and growth
of the component division of the Company.

Gross profit increased in fiscal 1996 by $27.1 million, or 42%,
compared to fiscal 1995. This was in line with the increase in sales
experienced for the year. Gross profit percent of 27.5% was the same as the
percent achieved in fiscal year 1995. Slight increases in raw material costs
during the year were offset by spreading fixed manufacturing costs over a
higher sales base.

Engineering expenses increased $2.1 million, or 24%, in the current
year compared to fiscal 1995. Engineering expenses increased at a slower rate
than sales due to increased sales of products which require less engineering
effort such as components and DBCI products. Selling, general and
administrative expenses ("SG&A") increased $12.8 million, or 44%, compared to
the prior year. SG&A increased slightly faster than sales due to the
establishment of a west coast sales function to support the new plant location
and additional expenses resulting from the two acquisitions made in the
current year.

Interest expense increased by $52,000 as a result of the issuance of a
$1.5 million subordinated debenture in connection with the acquisition of
Mesco. Other income, which consists primarily of interest income, increased by
$764,000 in the current year compared to fiscal 1995. This increase resulted
primarily from the higher level of cash invested during the year and slightly
higher average rates of returns on invested cash.

Provision for income taxes increased by 50.4% in the current year and
increased as a percent of sales from 4.3% to 4.5%. This increase was due to the
increase in state income taxes in the current year compared to the prior year.

28
<PAGE> 14
FISCAL 1995 COMPARED TO FISCAL 1994

Sales in fiscal 1995 increased by $66.4 million, or 40%, compared to fiscal
1994. The acquisition of Ellis Building in Georgia in October 1994 and of Royal
Buildings in New Mexico in March 1995 permitted the Company to continue its
geographic expansion in the southeast and southwest region of the country. This
expansion coupled with the approximately 18% growth in industry sales in 1995
accounted for the majority of the Company's increase in sales.

Gross profit for fiscal 1995 increased by $20.8 million, or 48%,
compared to fiscal year 1994. The improvement in gross profit percent of 1.5%
of sales to 27.5% in 1995 resulted from stable raw material costs, increased
plant capacity from acquired facilities, better plant utilization and spreading
of fixed manufacturing costs over a higher sales volume.

Engineering expenses increased $2.1 million, or 30%, compared to fiscal
year 1994. Engineering expenses increased at a slower rate than sales due
increased sales of products which required less engineering effort and
spreading of fixed costs over the higher sales volume. Selling, general and
administrative expenses increased by $7.8 million, or 37%, compared to fiscal
year 1994. Selling, general and administrative increased at a slower rate than
sales due to spreading of fixed costs.

Interest expense decreased by $26,000 due lower outstanding debt
resulting from normal scheduled repayments. Other income increased by $181,000
due to a higher average balance of invested cash and higher rates of return in
fiscal year 1995 compared to the prior year.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically funded its operations from cash flow from
operations, bank borrowing and the sale of equity in the Company. Internal cash
generation has been aided, in the opinion of the Company, by a compensation
program under which bonuses are earned based on achieving specified return on
assets goals. This program encourages management of the balance sheet as well
as the income statement.

Net cash flow from operations before changes in working capital
components increased to $30.5 million in fiscal 1996 from $20.9 million in
fiscal 1995. At October 31, 1996, working capital was approximately $52.0
million, an increase of $20.3 million from fiscal year 1995.

The Company maintains a revolving credit facility with a bank lender
that currently provides for a maximum credit, subject to borrowing base
requirements, of $6.0 million and a six year reducing term revolver with a
current borrowing base of $1.0 million. The revolving credit facility matures
in February 1997 and bears interest at the prime rate. At October 31, 1996, the
Company had no borrowing outstanding under either revolving credit facility and
had not borrowed during the year.

During the year, the Company invested $10.3 million in capital
additions including a new plant built in Atwater, CA at a cost of approximately
$4.0 million, a new DBCI plant in Houston, Texas at a cost of approximately
$1.0 million, and acquired a plant location in Ennis, Texas for approximately
$1.2 million. The remainder was spent primarily at other plant locations to
increase production capacity. All of these expenditures were paid from
internally generated cash.

In December 1995, the Company sold in a secondary offering 1,086,000
shares of its common stock for approximately $24.8 million. The proceeds from
this offering were used partially to fund the acquisitions of DBCI and Mesco as
described in Note 11 to the Company's consolidated financial statements.

29
<PAGE> 15
Inflation has not significantly affected the Company's financial position
or operations. Metal building system sales are affected more by the
availability of funds for financing construction than by the rate of interest
charged by the lender. No assurance can be given that inflation or the prime
rate of interest will not fluctuate significantly, either or both of which
could have an adverse effect on the Company's operations.

Liquidity in future periods will be dependent on internally generated cash
flows, the ability to obtain adequate financing for capital expenditures and
the amount of increased working capital necessary to support expected growth.

Historically, two-thirds of the Company's total assets are classified as
current assets, which consists primarily of trade receivables from customers
and raw material inventory; and the ratio of "quick assets" (cash plus
receivables) to current liabilities has exceeded a 1 to 1 ratio.

Based on the current capitalization of the Company, it is expected future
cash flow from operations and availability of alternative sources of financing
should be sufficient to provide adequate liquidity in future periods. There can
be no assurance that liquidity would not be impacted by a severe decline in
general economic conditions and higher interest rates which would affect the
Company's ability to obtain external financing.

<PAGE> 16
UNAUDITED QUARTERLY FINANCIAL DATA
(in thousands, except per share data)

<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------------------------------------------
<S> <C> <C> <C> <C>
Fiscal Year 1996
Net sales ............................................ $67,350 $72,171 $91,980 $101,379
Gross profit ......................................... 17,384 19,547 25,476 29,099
Income before income taxes ........................... 6,485 8,132 11,495 13,775
Net income ........................................... 4,020 5,051 7,139 8,602
Net income per common and
common equivalent share(1) ......................... $0.53 $0.60 $0.85 $1.03

Fiscal Year 1995
Net sales ............................................ $52,302 $55,873 $58,941 $ 67,099
Gross profit ......................................... 13,519 15,273 16,566 19,042
Income before income taxes ........................... 5,060 6,316 7,159 8,519
Net income ........................................... 3,194 3,947 4,523 5,368
Net income per common and
common equivalent share ............................ $0.48 $0.58 $0.67 $0.79
</TABLE>

(1) The sum of the quarterly income per share amounts do not equal the annual
amount reported, as per share amounts are computed independently for each
quarter and for the full year based on the respective weighted average common
shares outstanding.

PRICE RANGE OF COMMON STOCK

The following table sets forth the quarterly high and low closing sale prices
of the Company's common stock, as reported on NASDAQ/NMS for the prior two
years. The prices quoted represent prices between dealers in securities,
without adjustments for mark-ups, mark-downs, or commissions, and do not
necessarily reflect actual transactions.

<TABLE>
<CAPTION>
Fiscal Year 1996 High Low
- -------------------------------------------------------------------------
<S> <C> <C>
January 31 ........................................... $28.63 $21.00
April 30 ............................................. $38.00 $26.50
July 31 .............................................. $38.50 $22.75
October 31 ........................................... $35.13 $21.75

Fiscal Year 1995 High Low
- -------------------------------------------------------------------------
January 31 ........................................... $19.50 $15.88
April 30 ............................................. $19.38 $16.50
July 31 .............................................. $19.50 $16.00
October 31 ........................................... $25.00 $18.50
</TABLE>

<PAGE> 1
EXHIBIT 21

NCI BUILDING SYSTEMS, INC.

List of Subsidiaries

Doors & Building Components, Inc. Delaware

NCI Holding Corp. Delaware

NCI Operating Corp. Nevada

A & S Building Systems, Inc. Texas

<PAGE> 1

EXHIBIT 23

Consent of Independent Auditors

We consent to the incorporation by reference in this Annual Report (Form 10-K)
of NCI Building Systems, Inc. of our report dated December 6, 1996, included
in the 1996 Annual Report to Shareholders of NCI Building Systems, Inc.

Our audits also included the financial statement schedule of NCI Building
Systems, Inc. listed in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

Additionally, we consent to the incorporation by reference in Registration
Statements (Form S-8 No. 33-52078 and No. 333-14957) pertaining to the 401(k)
Profit Sharing Plan of NCI Building Systems, Inc. and (Form S-8 No. 33-52080
and No. 333-12921) pertaining to the Nonqualified Stock Option Plan of NCI
Building Systems, Inc., of our reports with respect to the consolidated
financial statements and schedules of NCI Building Systems, Inc., for the year
ended October 31, 1996.

ERNST & YOUNG LLP

Houston, Texas
January 24, 1997

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<CASH> 20,943,664
<SECURITIES> 0
<RECEIVABLES> 39,378,172
<ALLOWANCES> 1,629,202
<INVENTORY> 28,692,930
<CURRENT-ASSETS> 90,609,515
<PP&E> 56,243,350
<DEPRECIATION> 13,491,805
<TOTAL-ASSETS> 158,326,298
<CURRENT-LIABILITIES> 38,651,231
<BONDS> 0
0
0
<COMMON> 79,668
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 158,326,298
<SALES> 332,879,707
<TOTAL-REVENUES> 332,879,707
<CGS> 241,373,691
<TOTAL-COSTS> 241,373,691
<OTHER-EXPENSES> 52,413,985
<LOSS-PROVISION> 680,633
<INTEREST-EXPENSE> 108,203
<INCOME-PRETAX> 39,889,155
<INCOME-TAX> 15,075,619
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,813,356
<EPS-PRIMARY> 3.03
<EPS-DILUTED> 0

</TABLE>