<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: January 31, 1997
-----------------
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 of (I.R.S. Employer
incorporation or organization Identification No.)
7301 Fairview
Houston, Texas 77041
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
(713) 466-7788
- -------------------------------------------------------------------------------
Registrant's telephone number, including area code
Not Applicable
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports,
required to be filed, by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months. (Or for such shorter periods,
that the registrant was required to file such reports). And (2) has been
subject to such filing requirements for the past 90 days. Yes X No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common Stock, $.01 Par Value--8,049,002 shares as of January 31, 1997
- -------------------------------------------------------------------------------
<PAGE> 2
NCI BUILDING SYSTEMS, INC.
INDEX
<TABLE>
<CAPTION>
PART 1. FINANCIAL STATEMENTS PAGE NO.
- ------- -------------------- --------
<S> <C>
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets 1
January 31, 1997 and October 31, 1996.
Condensed consolidated statements of income 2
Three months ended January 31, 1997 and 1996.
Condensed consolidated statements of cash flows 3
Three months ended January 31, 1997 and 1996.
Notes to condensed consolidated financial 4-5
Statements January 31, 1997.
Item 2. Management's Discussion and Analysis of Financial 6-7
Condition and Results of Operations.
PART 2. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
</TABLE>
<PAGE> 3
NCI BUILDING SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
1997 1996
------------- -------------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 22,145,000 $ 20,944,000
ACCOUNTS RECEIVABLE 31,105,000 37,749,000
INVENTORIES 32,339,000 28,693,000
OTHER CURRENT ASSETS 3,419,000 3,224,000
------------- -------------
89,008,000 90,610,000
PROPERTY, PLANT AND EQUIPMENT 57,930,000 56,243,000
LESS-ACCUMULATED DEPRECIATION (14,776,000) (13,491,000)
------------- -------------
43,154,000 42,752,000
------------- -------------
OTHER ASSETS 24,527,000 24,964,000
------------- -------------
$ 156,689,000 $ 158,326,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
NOTES PAYABLE AND CURRENT
PORTION OF LONG-TERM DEBT $ 47,000 $ 47,000
ACCOUNTS PAYABLE 15,187,000 21,527,000
OTHER CURRENT LIABILITIES 14,307,000 17,077,000
------------- -------------
29,541,000 38,651,000
------------- -------------
LONG-TERM DEBT, NONCURRENT PORTION,
AND DEFERRED INCOME TAXES 3,472,000 3,500,000
------------- -------------
SHAREHOLDERS' EQUITY:
COMMON STOCK 81,000 80,000
PAID IN CAPITAL 49,707,000 47,359,000
RETAINED EARNINGS 73,888,000 68,736,000
------------- -------------
123,676,000 116,175,000
------------- -------------
$ 156,689,000 $ 158,326,000
============= =============
</TABLE>
NOTE: THE BALANCE SHEET AT OCTOBER 31, 1996 HAS BEEN DERIVED FROM THE AUDITED
FINANCIAL STATEMENTS AT THAT DATE
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1
<PAGE> 4
NCI BUILDING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JAN. 31,
1997 1996
------------ ------------
<S> <C> <C>
SALES $ 82,875,000 $ 67,350,000
COST OF SALES 60,465,000 49,966,000
------------ ------------
GROSS PROFIT 22,410,000 17,384,000
OPERATING EXPENSES 14,537,000 11,277,000
------------ ------------
OPERATING INCOME 7,873,000 6,107,000
INTEREST EXPENSE 37,000 4,000
OTHER (INCOME) EXPENSE (414,000) (382,000)
------------ ------------
(377,000) (378,000)
------------ ------------
INCOME BEFORE INCOME TAXES 8,250,000 6,485,000
PROVISION FOR INCOME TAXES 3,098,000 2,465,000
------------ ------------
NET INCOME $ 5,152,000 $ 4,020,000
============ ============
NET INCOME PER SHARE $ .61 $ .53
============ ============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE> 5
NCI BUILDING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JAN. 31
1997 1996
------------ ------------
<S> <C> <C>
CASH FROM OPERATIONS $ 2,475,000 $ 1,281,000
------------ ------------
INVESTING ACTIVITIES:
PURCHASE OF PROPERTY, PLANT (1,709,000) (1,538,000)
AND EQUIPMENT
ACQUISITION OF DBCI -- (11,000,000)
OTHER (75,000) 71,000
------------ ------------
(1,784,000) (12,467,000)
------------ ------------
FINANCING ACTIVITIES:
NET PROCEEDS FROM SALE OF STOCK -- 24,778,000
PROCEEDS FROM STOCK OPTIONS EXERCISE 522,000 378,000
REPAYMENT OF DEBT (12,000) (12,000)
------------ ------------
510,000 25,144,000
------------ ------------
INCREASE IN CASH $ 1,201,000 $ 13,958,000
============ ============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE> 6
NCI BUILDING SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JANUARY 31, 1997
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
three month period ended January 31, 1997, are not necessarily indicative
of the results that may be expected for the year ended October 31, 1997.
For further information, refer to the financial statements and footnotes
thereto included in the Company's Annual Report to Shareholders for the
year ended October 31, 1996.
NOTE 2 -- INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
January 31, October 31,
1997 1996
----------- -----------
<S> <C> <C>
Raw materials $25,758,000 $21,515,000
Work-in-process and finished goods 6,581,000 7,178,000
----------- -----------
$32,339,000 $28,693,000
=========== ===========
</TABLE>
NOTE 3 -- 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,
after giving effect to common stock equivalents. The number of shares used
in the computation for the three months ended January 31, 1997 and 1996
was 8,437,049 and 7,631,608, respectively.
4
<PAGE> 7
NOTE 4 -- ACQUISITION
In April 1996, the Company acquired substantially all 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 $22.3 million, including a cash consideration of
$20.8 million and the issuance of a $1.5 million, 7% convertible subordinated
debenture due April 1, 2001. The excess of cost over the fair value of the
acquired net assets was approximately $10.9 million. Assuming the acquisition
of Mesco had been consummated November 1, 1995, the pro forma unaudited results
of operations for the three months ended January 31, 1996 are as follows. (in
thousands, except per share data.)
<TABLE>
<S> <C>
Sales $75,965
Net income $ 4,805
Net income per share $ 0.63
</TABLE>
NOTE 5 - SUBSEQUENT EVENTS
In February 1997, the Company purchased substantially all of the real estate,
machinery, equipment and inventories and a plant facility located in Jemison,
Alabama of Carlisle Engineered Metals, Incorporated for approximately $6.2
million. As a part of the transaction, the Company also leased two plant
facilities located in Houston, Texas.
5
<PAGE> 8
NCI BUILDING SYSTEMS, INC.
Item 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
THREE MONTHS ENDED JANUARY 31, 1997 COMPARED TO THREE MONTHS ENDED JANUARY 31,
1996.
Sales in the first quarter of fiscal year 1997 increased by $15.5 million, or
23%, compared to the first quarter of fiscal year 1996. Approximately $8.4
million of this increase resulted from the acquisition of Mesco Metal Buildings
(MESCO) in April 1996. The remaining increase of $7 million, or 11%, was due
primarily to the increase in market penetration of building system sales and
higher sales in the component division, enabled in part by the increased
capacity provided by the new manufacturing facility in Atwater, California
which was not open in the prior years' first quarter.
Gross profit in the first quarter increased $5.0 million, or 29%, compared to
the prior year's first quarter. Gross margin percentage improved from 25.8%
last year to 27.0% in the current quarter. The inclusion of Mesco in the
results of operations and improved operations of the Company's door division
accounted for the increase in gross margin percentage.
Operating expenses, which consist of engineering, selling and administrative
costs increased by $3.3 million, or 29%, in the current quarter compared to the
same period last year. As a percent of sales, operating expenses were 17.5%
compared to 16.7% a year ago. This increase was comprised primarily of salaries
and commissions for additional employees hired to support the increased volume
of orders and sales over the prior year and the inclusion of Mesco for the
first time. These percentage increases resulted primarily from the inclusion of
Mesco and somewhat lower sales than expected due to adverse weather in the
first quarter, which delayed the shipment of customer orders.
Interest expense increased by $33,000 in the current quarter compared to the
prior year's first quarter due to $1.5 million in debt related to the
acquisition of Mesco.
Other income increased by $32,000 in the current quarter due to a higher level
of investable cash during the quarter compared to last year.
Income before income taxes increased by $1.8 million, or 27%, as a result of
the increased sales volume and improved gross margins. As a percent of sales,
income before taxes was 10.0% in the current quarter compared to 9.6% in the
same quarter a year ago.
6
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its operations from cash flow from
operations, the sale of equity and bank borrowing. It maintains a revolving
credit facility with a bank lender that provides for a maximum credit on an
unsecured basis of $6.0 million, which matures in March 1997. The Company also
has a six-year reducing line of credit with a current borrowing limit of $1.0
million. The Company has no outstanding balance under either of these credit
facilities and has not borrowed any funds in the current quarter.
During the quarter, the Company spent $1.7 million in capital additions for
its manufacturing facilities and for management information systems
enhancements. All of these additions were funded from internally generated
cash.
At January 31, 1997, the ratio of current assets to current liabilities was 3.0
to 1 compared to 2.3 to 1 at October 31, 1996. Working capital generated from
operations before changes in current assets and liabilities was $7.0 million.
Liquidity in future periods will be dependent on internally generated cash
flows, the ability to obtain adequate external financing for expansion, when
needed, and the amount of increased working capital necessary to support
expected growth. Based on current capitalization, it is expected future cash
flows from operations and the availability of alternative sources of external
financing should be sufficient to provide adequate liquidity in future periods.
7
<PAGE> 10
NCI BUILDING SYSTEMS, INC.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) None
(b) There were no reports filed under Form 8-K for the quarter ended
January 31,1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NCI BUILDING SYSTEMS, INC.
--------------------------
(Registrant)
Date: March 10, 1997 /s/ ROBERT J. MEDLOCK
------------------- --------------------------
Robert J. Medlock
Vice President and
Chief Financial Officer
8
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 22,145,000
<SECURITIES> 0
<RECEIVABLES> 32,739,000
<ALLOWANCES> 1,634,000
<INVENTORY> 32,339,000
<CURRENT-ASSETS> 89,008,000
<PP&E> 57,930,000
<DEPRECIATION> 14,776,000
<TOTAL-ASSETS> 156,689,000
<CURRENT-LIABILITIES> 29,541,000
<BONDS> 0
0
0
<COMMON> 81,000
<OTHER-SE> 123,595,000
<TOTAL-LIABILITY-AND-EQUITY> 156,689,000
<SALES> 82,875,000
<TOTAL-REVENUES> 82,875,000
<CGS> 60,465,000
<TOTAL-COSTS> 14,537,000
<OTHER-EXPENSES> (414,000)
<LOSS-PROVISION> 294,000
<INTEREST-EXPENSE> 37,000
<INCOME-PRETAX> 8,250,000
<INCOME-TAX> 3,098,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,152,000
<EPS-PRIMARY> .61
<EPS-DILUTED> .0
</TABLE>
