<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
NCI BUILDING SYSTEMS, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - --------------------------------------------------------------------------------
(3) Filing Party:
- - --------------------------------------------------------------------------------
(4) Date Filed:
- - --------------------------------------------------------------------------------
<PAGE> 2
January 30, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
NCI Building Systems, Inc. (the "Company") to be held at 10:00 a.m. local time,
on Wednesday, March 4, 1998, at the offices of the Company located at 7301
Fairview, Houston, Texas. At this meeting you will be asked to:
(i) Elect three directors to serve until the annual meeting of
stockholders to be held in 2001; and
(ii) Transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
It is important that your shares be represented at the meeting; therefore,
if you do not expect to attend in person, please sign and date the enclosed
proxy and return it in the enclosed envelope at your earliest convenience.
Very truly yours,
C.A. Rundell, Jr.,
Chairman of the Board
Houston, Texas
January 30, 1998
<PAGE> 3
NCI BUILDING SYSTEMS, INC.
7301 FAIRVIEW
HOUSTON, TEXAS 77041
----------------------------
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 4, 1998
----------------------------
The Annual Meeting of Stockholders of NCI Building Systems, Inc., a
Delaware corporation (hereinafter the "Company"), will be held at the offices of
the Company located at 7301 Fairview, Houston, Texas, on Wednesday, March 4,
1998, at 10:00 a.m. local time. The annual meeting will be held for the
following purposes:
1. Election of three directors to serve until the Annual Meeting of
Stockholders to be held in 2001; and
2. The transaction of such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on January 16, 1998
are entitled to notice of, and to vote at, the meeting or any adjournments
thereof. A list of stockholders entitled to vote at the meeting will be
available at the meeting for examination by any stockholder.
It is desirable that as large a proportion as possible of the stockholders'
interests be represented at the meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, IT IS REQUESTED THAT THE ENCLOSED FORM OF PROXY BE PROPERLY EXECUTED
AND PROMPTLY RETURNED TO THE COMPANY IN THE ENCLOSED ADDRESSED AND STAMPED
ENVELOPE. You may revoke the proxy at any time before the proxy is exercised by
delivering written notice of revocation to the Secretary of the Company, by
delivering a subsequently dated proxy or by attending the meeting and
withdrawing the proxy. Please date, sign and return the enclosed proxy
immediately in the stamped envelope provided.
By Order of the Board of Directors
Donnie R. Humphries,
Secretary
Houston, Texas
January 30, 1998
<PAGE> 4
NCI BUILDING SYSTEMS, INC.
7301 FAIRVIEW
HOUSTON, TEXAS 77041
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 4, 1998
This Proxy Statement is furnished to stockholders of NCI Building Systems,
Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies to be used at the Annual Meeting of Stockholders of the
Company to be held March 4, 1998 (the "Annual Meeting"). Proxies in the form
enclosed will be voted at the meeting if properly executed, returned to the
Company before the Annual Meeting and not revoked. Any stockholder giving such a
proxy may revoke it at any time before it is voted by delivering written notice
of revocation to the Secretary of the Company, by delivering a subsequently
dated proxy or by attending the meeting and withdrawing the proxy. Your
attendance at the meeting will not constitute automatic revocation of the proxy.
This Proxy Statement and the enclosed proxy form are first being sent to
stockholders on or about January 30, 1998.
ACTION TO BE TAKEN AT MEETING
When stockholders have appropriately specified how their proxies should be
voted, the proxies will be voted accordingly. Unless the stockholder otherwise
specifies therein, the accompanying proxy will be voted (i) FOR the election as
directors of the nominees listed under "Election of Directors," and (ii) at the
discretion of the proxy holders, either FOR or AGAINST any other matter or
business that may properly come before the meeting. The Board of Directors does
not know of any such other matter or business.
PERSONS MAKING THE SOLICITATION
The accompanying proxy is being solicited by the Board of Directors of the
Company. The cost of soliciting your proxy will be borne entirely by the Company
and no other person or persons will bear such costs either directly or
indirectly. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by directors and regular officers and
employees of the Company.
OUTSTANDING CAPITAL STOCK
The record date for stockholders entitled to notice of, and to vote at, the
Annual Meeting is January 16, 1998. At the close of business on that date the
Company had 8,179,241 shares of Common Stock, $0.01 par value per share, issued
and outstanding and entitled to vote at the Annual Meeting.
The following table sets forth, as of January 1, 1998, the number of shares
of Common Stock beneficially owned by (1) each person or group known by the
Company to own beneficially more than 5% of the outstanding shares
1
<PAGE> 5
of Common Stock, (2) each director and each nominee for director, (3) the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers, and (4) all directors and officers as a
group. Except as otherwise indicated, each of the persons or groups named below
has sole voting power and investment power with respect to such Common Stock.
<TABLE>
<CAPTION>
Beneficial Ownership (1)
------------------------
Name of Beneficial Number of
Owner or Group Shares Percent
------------------ --------- -------
<S> <C> <C>
Dresdner RCM Global Investors, L.L.C. (2) 820,000 10.0%
Johnie Schulte, Jr. (3)(4) 469,849 5.7%
Daniel D. Zabcik (5) 195,884 2.0%
David B. Curtis (6) 170,473 2.1%
C.A. Rundell, Jr. 140,114 1.7%
Gary L. Forbes (7) 102,000 1.2%
Leonard F. George (8) 80,901 1.0%
Alvan E. Richey, Jr. (9) 43,577 *
Robert J. Medlock (10) 42,899 *
William D. Breedlove (11) 20,789 *
La Plaza Partnership (12) 20,037 *
Thomas C. Arnett
Robert N. McDonald (11) 10,789 *
All officers and directors as a group
(fourteen persons) (13) 1,479,891 18.1%
- - -------------------------------
* Less than one percent
</TABLE>
(1) Includes shares beneficially owned by such persons, including shares owned
pursuant to the NCI 401(k) Profit Sharing Plan. If a person has the right
to acquire beneficial ownership of any shares by exercise of options within
60 days after January 1, 1998, such shares are deemed beneficially owned by
such person and are deemed to be outstanding solely for the purpose of
determining the percentage of the Common Stock that he owns. Such shares
are not included in the computations for any other person.
(2) Dresdner RCM Global Investors, L.L.C. ("Dresdner RCM") is an investment
advisor registered under the Investment Advisers Act of 1940 and a wholly
owned subsidiary of Dresdner Bank AG, which may be deemed to have
beneficial ownership of the shares owned by Dresdner RCM. RCM Limited L.P.,
the Managing Agent of Dresdner RCM, and its general partner, RCM General
Corporation, may also be deemed to have beneficial ownership of the shares
owned by Dresdner RCM. The principal place of business of Dresdner RCM, RCM
Limited L.P. and RCM General Corporation is Four Embarcadero Center, Suite
2900, San Francisco, California 94111. The principal place of business of
Dresdner Bank AG is Jurgen-Ponto-Platz 1, 60301 Frankfurt, Germany.
(3) Includes 3,000 shares held by his daughter and options to purchase 84,333
shares held by Mr. Schulte which were exercisable as of January 1, 1998.
Mr. Schulte holds an option to purchase an additional 18,750 shares which
was not exercisable at that date.
(4) The principal business address of Mr. Schulte is 7301 Fairview, Houston,
Texas 77041.
(5) Includes 60,000 shares held in a testamentary trust, of which Mr. Zabcik is
sole trustee, for the benefit of his children, and options to purchase
41,728 shares held by Mr. Zabcik which were exercisable as of January 1,
1998. Mr. Zabcik holds an option to purchase an additional 1,000 shares
which was not exercisable at that date.
(6) Includes 170,000 shares held by David B. Curtis Industries, Inc., of which
Mr. Curtis is sole shareholder, and may be deemed to hold voting and
investment power with respect to such shares.
2
<PAGE> 6
(7) Includes 100,000 shares held by Equus II Incorporated, of which Mr. Forbes
is a Vice President and may be deemed to share voting and investment power
with respect to such shares. Mr. Forbes disclaims beneficial ownership of
such shares.
(8) Includes options to purchase 74,014 shares held by Mr. George which were
exercisable as of January 1, 1998. Mr. George holds options to purchase an
additional 16,750 shares which were not exercisable at that date.
(9) Includes options to purchase 42,277 shares held by Mr. Richey which were
exercisable as of January 1, 1998. Mr. Richey holds options to purchase an
additional 11,000 shares which were not exercisable at that date.
(10) Includes options to purchase 40,974 shares held by Mr. Medlock which were
exercisable as of January 1, 1998. Mr. Medlock holds options to purchase an
additional 9,500 shares which were not exercisable at that date.
(11) Includes options to purchase 15,789 and 10,789 shares held by Messrs.
Breedlove and McDonald, respectively, which were exercisable as of January
1, 1998. Each of Messrs. Breedlove and McDonald holds an option to purchase
an additional 1,000 shares which was not exercisable at that date.
(12) Mr. Arnett is a general partner of La Plaza Partnership and may be deemed
to share voting and investment power with respect to such shares.
(13) In addition to the shares identified in notes (2) through (12), includes
options to purchase 29,000 shares held by other officers which were
exercisable as of January 1, 1998 and 50,125 shares with respect to a
convertible debenture held by another officer, which was exercisable as of
January 1, 1998. These other officers also hold options to purchase an
additional 37,000 shares which were not exercisable at that date.
QUORUM AND VOTING
The presence in person or by proxy of the holders of a majority of the
outstanding shares of the Common Stock is necessary to constitute a quorum at
the Annual Meeting of Stockholders. Each outstanding share of Common Stock is
entitled to one vote. Abstentions will be included in vote totals and, as such,
will have the same effect as a negative vote on each proposal other than the
election of directors. Broker non-votes, if any, will not be included in vote
totals and, as such, will have no effect on any proposal. Cumulative voting is
prohibited in the election of directors. To be elected a director, each nominee
must receive a plurality of all of the votes cast at the Annual Meeting for the
election of directors.
ELECTION OF DIRECTORS
Three Class II directors are to be elected at the Annual Meeting for a term
expiring at the Annual Meeting of Stockholders to be held in 2001 or until their
respective successors are duly elected and qualified. Stockholders are not
permitted to cumulatively vote their shares in connection with the election of
directors.
Set forth below is certain information concerning the persons nominated for
election as directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE
NOMINEES.
CLASS II NOMINEES TO SERVE UNTIL THE ANNUAL MEETING TO BE HELD IN 2001:
GARY L. FORBES
Mr. Forbes, age 53, has served as a director of the Company since December
1991. Mr. Forbes has been a Vice President of Equus II Incorporated, an
investment company, since November 1991. Mr. Forbes is a certified public
accountant. Mr. Forbes is also a director of Consolidated Graphics, Inc., a
commercial printing company, Advanced
3
<PAGE> 7
Technical Products, Inc., a manufacturer of high performance composite parts,
and Drypers Corporation, a manufacturer of disposable diapers.
ROBERT N. MCDONALD
Mr. McDonald, age 70, has served as a director since March 1992. Mr.
McDonald was a marketing consultant for American Buildings Company, a metal
buildings manufacturer ("ABC"), from 1985 until February 1992, and served as a
director of that company from 1989 to 1990. From 1956 to 1970, Mr. McDonald was
employed by Butler Manufacturing Company, a metal building manufacturer, and
served as Vice President of Marketing for ABC from 1970 to 1978.
C.A. RUNDELL, JR.
Mr. Rundell, age 66, has served as director and Chairman of the Board of
the Company since April 1989. Since October 1997, Mr. Rundell has been
President, Chief Executive Officer and a director of Tyler Corporation, a
company engaged in providing information management services to county and other
local governments and in distributing automotive aftermarket parts. Mr.
Rundell served as Chairman of the Board of Tyler Corporation from October 1996
until October 1997, and as its temporary Chief Executive Officer from October
1996 to March 1997. Since May 1988, Mr. Rundell has owned and operated Rundell
Enterprises, a venture capital and investments company engaged in providing
acquisition and financial consulting services to various business enterprises.
From 1977 to 1988, Mr. Rundell was the President, Chief Executive Officer and a
director of Cronus Industries, Inc. ("Cronus")(now known as BRC Holdings, Inc.),
which is a holding company that during the period of Mr. Rundell's association
owned a number of manufacturing, engineering and information service companies,
including ABC.
The present directors of the Company whose terms will expire after 1997 are
as follows:
CLASS III DIRECTORS WHO SERVE UNTIL THE ANNUAL MEETING TO BE HELD IN 1999:
WILLIAM D. BREEDLOVE
Mr. Breedlove, age 58, has served as a director of the Company since March
1992. Since August 1, 1996, Mr. Breedlove has been the Vice Chairman of HBW
Holdings, Inc., which manages a private merchant banking fund and owns Hoak
Breedlove Wesneski & Co., a registered broker-dealer. For more than five years
prior to August 1, 1996, Mr. Breedlove was the Chairman and Managing Director of
Breedlove Wesneski & Co., a private merchant banking firm and a predecessor of
the HBW Holdings, Inc. group of companies.
LEONARD F. GEORGE
Leonard F. George, age 45, has served as a director of the Company since
March 1993 and as an Executive Vice President of the Company since September
1992. From 1987 to September 1992, Mr. George was employed as President, Vice
President of Engineering, Assistant Vice President of Engineering and Regional
Sales Manager of ABC. Mr. George has spent over 20 years in the metal building
industry.
JOHNIE SCHULTE, JR.
Mr. Schulte, age 62, a founder of the Company, has been a director,
President and Chief Executive Officer of the Company since 1984. Mr. Schulte
founded and was President of Mid-West Steel Buildings Co., Inc. from 1970 until
its sale to ABC in 1980. Mr. Schulte remained as President of the Mid-West
Metallic Division of ABC until 1984, when he left to form the Company. Mr.
Schulte has spent 42 years in the metal building industry.
4
<PAGE> 8
CLASS I DIRECTORS WHO SERVE UNTIL THE ANNUAL MEETING TO BE HELD IN 2000:
THOMAS C. ARNETT
Mr. Arnett, age 65, has served as a director of the Company since April
1989. Mr. Arnett is currently retired and manages his own investments. Mr.
Arnett was an Executive Vice President of Cronus from 1977 to 1985 and served as
a director of Cronus from 1977 to 1988.
DANIEL D. ZABCIK
Mr. Zabcik, age 69, has been a director of the Company since April 1989 and
served as an Executive Vice President of the Company from April 1989 until
October 1993, when he resigned as an officer and assumed part-time employee
status since terminated. Since 1986, Mr. Zabcik has also served as Director of
Southwest Bolt, Inc., a distributor of structural bolts. From 1980 until April
1989, Mr. Zabcik was employed as President, Executive Vice President, and Vice
Chairman of the Mid-West Metallic division of ABC. Mr. Zabcik has spent 38 years
in the metal building industry. Mr. Zabcik is a licensed engineer and served on
the Executive Committee and as Chairman of the Metal Building Manufacturers
Association in 1993.
MANAGEMENT
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
C. A. Rundell, Jr. Chairman of the Board
Johnie Schulte, Jr. President and Chief Executive Officer
Leonard F. George Executive Vice President
Robert J. Medlock Vice President, Treasurer, and Chief Financial Officer
Alvan E. Richey, Jr. Vice President, Sales and Marketing
Fredrick D. Koetting Vice President, Operations
David B. Curtis President, Doors & Building Components
John T. Eubanks President, Mesco Metal Buildings
Donnie R. Humphries Vice President, Human Relations and Secretary
</TABLE>
Information concerning the business experience of Messrs. Rundell, Schulte
and George is provided under the section entitled "Election of Directors."
Robert J. Medlock, age 58, has served as Vice President and Chief Financial
Officer of the Company since February 1992. Mr. Medlock served as the Chief
Financial Officer and Treasurer of Enviropact, Inc., an environmental services
company, from 1989 to 1991. Mr. Medlock is a certified public accountant and has
over 14 years of experience in the metal building industry.
Alvan E. Richey, Jr., age 62, has been Vice President Sales and Marketing
of the Company since July 1, 1995 and President of A & S since December 1992.
Prior to joining the Company in September 1992, Mr. Richey was employed by ABC
for over five years. Mr. Richey has over 29 years of experience in the metal
building industry.
5
<PAGE> 9
Fredrick D. Koetting, age 39, has been a Vice President of the Company
since May 1994. Prior to joining the Company in May 1994, Mr. Koetting served as
an Account Manager for National Steel Corporation, a steel supplier of the
Company, from 1991 until May 1994.
David B. Curtis, age 37, has served as President of the Doors & Building
Components Division of the Company since it was acquired from Doors & Building
Components, Inc. in November 1995. Mr. Curtis was the founder of Doors &
Building Components, Inc. and served as its President and Chief Executive
Officer for more than five years.
John T. Eubanks, age 57, has served as President of the Mesco Metal
Buildings Division of the Company since 1989. Mesco Metal Buildings was a
division of Anderson Industries, Inc. prior to April 1, 1996, at which time it
was acquired by a subsidiary of the Company. Mr. Eubanks has also been President
of Anderson Industries, Inc. since 1994, which is in the process of liquidating.
He has over 20 years of experience in the metal building industry.
Donnie R. Humphries, age 48, has been Vice President and Secretary of the
Company since 1985 and Vice President, Human Relations since 1997. Mr. Humphries
was employed by Mid-West Steel Buildings Co., Inc. from 1976 to 1980 and by ABC
from 1980 to 1985. Mr. Humphries has over 21 years of experience in the metal
building industry.
6
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid to the Company's Chairman, Chief Executive Officer and each of the
Company's four other most highly compensated executive officers, with respect to
each of the Company's last three fiscal years based on salary and bonus earned
during each year.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------- ------------
Securities
Name Under- All Other
and lying Compen-
Principal Options sation
Position Year Salary ($) Bonus ($) (#)(1) ($)(2)
- - ------------- ---- ---------- --------- ------ -----
<S> <C> <C> <C> <C> <C>
Johnie Schulte, Jr. 1997 $254,167 $195,000 25,000 --
President and 1996 233,333 168,750 -- --
Chief Executive 1995 211,538 161,250 -- --
Officer
Leonard F. George 1997 $215,000 $165,000 12,000 $ 9,500
Executive Vice 1996 188,333 142,500 10,000 9,500
President 1995 177,404 135,000 15,000 9,240
Alvan E. Richey, Jr. 1997 $161,667 $123,750 8,000 $ 55,870
Vice President, 1996 144,666 108,750 -- 194,727
Sales and Marketing 1995 118,625 71,667 10,000 9,240
John T. Eubanks 1997 $150,000 $112,500 -- $ 9,500
President, 1996 87,500 65,625 25,000 4,688
Mesco Metal Buildings 1995 -- -- -- --
Robert J. Medlock 1997 $147,500 $112,500 6,000 $ 55,822
Vice President, 1996 131,667 101,250 5,000 241,097
Treasurer, and 1995 113,183 86,250 10,000 9,240
Chief Financial
Officer
C.A. Rundell, Jr. 1997 $120,834 $ 89,062 25,000 $ 32,660
Chairman of 1996 100,000 71,250 -- 124,361
the Board 1995 100,000 71,250 -- 8,563
</TABLE>
- - ---------------------
(1) Options to acquire shares of Common Stock.
(2) This column is comprised of: (a) the Company's matching contribution under
its 401(k) plan and (b) with respect to Messrs. Rundell, Medlock and
Richey, an amount which represents the increase in present value during
each of the three fiscal years of a retirement benefit under the Company's
Supplemental Retirement Plan payable beginning when Mr. Rundell reaches the
age of 70 and the other officers reach the age of 65. The increase in
present value of the vested portion of the retirement benefit included in
this column for Messrs. Rundell, Richey and Medlock for fiscal 1996 was
$115,798, $185,227 and $231,597, respectively. The increase for fiscal 1997
was $23,160, $46,370 and $46,322, respectively.
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<PAGE> 11
OPTION GRANTS DURING 1997 FISCAL YEAR
The following table sets forth the options granted during fiscal 1997 to
the Chairman, Chief Executive Officer and the four other most highly compensated
executive officers of the Company pursuant to the Company's Nonqualified Stock
Option Plan. The Company did not grant any stock appreciation rights during
fiscal 1997.
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term
---------------------------------------------- ----------------------
% of
Total
Options
Granted to Exercise
Options Employees or Base Expira-
Granted in Fiscal Price tion
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
- - ---- -------- --------- -------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Johnie Schulte, Jr. 25,000 12% $ 28.50 12-12-06 $448,000 $941,000
Leonard F. George 12,000 8% $ 28.50 12-12-06 $215,040 $451,680
Alvan E. Richey, Jr. 8,000 5% $ 28.50 12-12-06 $143,360 $301,120
John T. Eubanks -- -- -- -- -- --
Robert J. Medlock 6,000 4% $ 28.50 12-12-06 $107,520 $225,840
C.A. Rundell, Jr. 25,000 12% $ 28.50 12-12-06 $448,000 $941,000
</TABLE>
OPTION EXERCISES DURING 1997 FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table provides information related to options exercised by
the named executive officers during the 1997 fiscal year and the number and
value of options held at fiscal year end. The Company does not have any
outstanding stock appreciation rights.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Under- Value of
lying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized (1) Unexercisable Unexercisable (1)
- - -------------- --------------- ------------------ ------------- -----------------
<S> <C> <C> <C> <C>
Johnie Schulte, Jr. -- -- 84,333/18,750 $2,770,037/148,875
Leonard F. George 8,000 $230,160 74,014/16,750 $1,956,666/190,183
Alvan E. Richey, Jr. -- -- 37,777/7,500 $1,195,731/144,840
John T. Eubanks -- -- 6,250/18,750 $ 49,625/148,875
Robert J. Medlock 10,000 $294,200 40,974/9,500 $1,070,647/111,055
C.A. Rundell, Jr. -- -- 6,250/18,750 $ 49,625/148,875
</TABLE>
- - ---------------
(1) Value is calculated on the basis of the difference between the option
exercise price and the market value of the Common Stock on the exercise
date.
8
<PAGE> 12
COMPENSATION OF DIRECTORS
Directors of the Company who are employees of the Company do not receive
compensation as directors. The Company paid each non-employee director an annual
fee of $15,000 plus expenses incurred by him and $500 for each meeting of the
board of directors or committee meeting that he attended. Each non-employee
director also receives an annual grant of an option to purchase 1,000 shares of
Common Stock of the Company pursuant to the Company's Nonqualified Stock Option
Plan. In addition, upon election to the Board of Directors, each new
non-employee director will receive an initial grant of an option to purchase
5,000 shares.
The Company has a deferred compensation agreement with Mr. McDonald,
pursuant to which the payment of $65,000 earned by him for special services in
1993 has been deferred until 2004. Interest on the deferred compensation is
accruing at the annual rate of 1 1/2% below the prime rate of the Company's
principal lending bank.
EMPLOYMENT AND CHANGE-IN-CONTROL AGREEMENTS
Under the terms of an employment agreement, Mr. Schulte has agreed to serve
in an executive capacity for the Company through December 1995, and thereafter
for successive one-month periods until his discharge by the Company, his
voluntary resignation or his death or disability, at a minimum annual salary of
$125,000. His base salary rate may be increased at the discretion of the Board
of Directors. If Mr. Schulte's employment with the Company is terminated,
whether by voluntary termination by Mr. Schulte or by termination with or
without cause by the Company, Mr. Schulte has agreed not to compete with the
Company within a 500-mile radius of any of the Company's manufacturing
facilities for a three-year period after such termination. In consideration of
Mr. Schulte's covenant not to compete, Mr. Schulte is entitled to receive 100%
of his then current base salary for the first 30 days after such termination or
discharge, and will thereafter receive 75% of his base salary for the remainder
of the three-year period. In addition, Mr. Schulte may continue to participate
in the Company's group health insurance plan. The Company may elect to cease
making noncompete payments to Mr. Schulte at any time, in which case Mr. Schulte
would be relieved of his covenant not to compete.
The Company entered into an employment agreement with Mr. Eubanks in April
1996, whereby he agreed to serve as the Chief Operating Officer of the Mesco
Metal Buildings division for a period of five years at a base salary of $150,000
per year. Mr. Eubanks is also entitled to participate in the Company's bonus
program as a Level I participant. Pursuant to the employment contract, upon
employment Mr. Eubanks received an option to purchase 25,000 shares of the
Common Stock of the Company pursuant to the Company's Nonqualified Stock Option
Plan, at $28.50 per share. Mr. Eubanks also receives, pursuant to his employment
contract, reimbursement for premiums on a life insurance policy in the amount of
$40,410 per year.
The Company maintains a nonqualified, unfunded benefit plan (the
"Supplemental Plan") pursuant to which certain key employees of the Company are
eligible to receive monthly benefits following their retirement with the
Company, or if a participating key employee dies prior to retirement, his
designated beneficiary is eligible to receive monthly preretirement survivor
benefits. The Board of Directors determines the amount of retirement benefit to
be payable to an eligible employee at the time the Board designates such
employee as eligible to participate in the Supplemental Plan. Generally, a
participant becomes vested in his retirement benefit under the Supplemental Plan
at the rate of 10% for each year of service with the Company and becomes fully
vested upon his disability or upon the occurrence of a change in control of the
Company (as defined in the Supplemental Plan). Messrs. Rundell, Medlock and
Richey are currently participants in the Supplemental Plan. The benefit payable
to Mr. Rundell, beginning at age 70, is $50,000 per year for 10 years. The
benefit payable to Messrs. Richey and Medlock, beginning at age 65, is $100,000
per year for 10 years. The Company has acquired certain life insurance policies
to be used to discharge its obligations under the Supplemental Plan.
The Company has entered into Split Dollar Life Insurance Agreements with
certain key employees, including Mr. George, pursuant to which they are the
owners of life insurance policies providing death benefits. The Company
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advances the annual premium on each policy and the insured employee pays income
tax on the one-year term cost of his policy. Each insured employee has
collaterally assigned an interest in his respective policy to the Company in an
amount equal to the premiums paid by the Company. The policy on Mr. George
provides a death benefit of $3,000,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is responsible for
determining executive compensation. Mr. Arnett and Mr. McDonald are the only
members of the Compensation Committee. Neither Mr. Arnett nor Mr. McDonald are
officers or employees of the Company.
REPORT OF THE COMPENSATION COMMITTEE
The principal elements of compensation provided to executive and other
officers of the Company, including Mr. Johnie Schulte, the President and Chief
Executive Officer of the Company, historically have consisted of a base salary,
supplemented with the opportunity to earn a bonus under the Company's annual
cash bonus program ("Bonus Program") if performance exceeds targeted levels.
Option grants under the Company's Nonqualified Stock Option Plan also have been
utilized as a principal component of compensation.
Mr. Schulte, the President and Chief Executive Officer of the Company, is
entitled to receive a minimum annual salary of $125,000 pursuant to his
employment agreement with the Company. Subject to this minimum, Mr. Schulte's
base salary rate may be adjusted at the discretion of the Board of Directors
based upon such factors as the Board of Directors deems appropriate. Mr.
Schulte's base salary for fiscal 1997 was $254,167.
The Bonus Program provides annual cash bonuses to members of management
based on the return on assets of the Company for the fiscal year. No bonus may
be given pursuant to the Bonus Program unless the return on assets of the
Company is at least 20%. If the return on assets is 20%, Level I participants,
including Mr. Schulte, Mr. George, Mr. Richey, Mr. Medlock, Mr. Koetting, Mr.
Eubanks and Mr. Rundell, may receive bonuses equal to 37.5% of their base salary
for the fiscal year and Level II and Level III participants may receive bonuses
equal to 25% and 12-1/2%, respectively, of their base salary for the fiscal
year. The percentage of base salary payable as a bonus increases proportionately
with increases in the return on assets achieved. The maximum bonuses payable
under the Bonus Program are 75%, 50% and 25% of base salary for Level I, II and
III participants, respectively, if the return on assets for the Company is 30%
or more. In fiscal 1997, the return on assets for the Company exceeded 30%, so
all eligible participants received the maximum available bonus.
The Compensation Committee believes that this performance-based bonus
program enables the Company to provide base compensation to its management group
below comparable rates paid by other companies, in exchange for generous bonuses
when warranted by the Company's performance. The Compensation Committee believes
that basing bonuses on achievement of a specified return on assets provides
incentives to management to aggressively manage asset accounts as well as income
and expense items. The Compensation Committee believes that these incentives
result in increased cash flows to the Company.
Certain members of management also receive benefits pursuant to the
Supplemental Plan and the Split Dollar Life Insurance Agreements described above
under "Employment and Change-in-Control Agreements". The Compensation Committee
believes that benefit programs such as these, which address the unique
circumstances of executives in light of limitations imposed on benefits payable
from qualified welfare, profit-sharing and retirement plans, are critical in
attracting and retaining quality executives.
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In December 1996, the Compensation Committee engaged an independent
compensation consultant to compare the overall management salary, bonus and
option programs of the Company to the compensation programs of other companies
in its industry and size range, and utilized the results of that study to assist
it in determining the appropriate adjustments to salaries, bonus eligibility and
option grants for key employees and directors of the Company for the 1997 fiscal
year.
At this time, based on the Company's current executive structure, the
Company does not believe it is necessary to adopt a policy with respect to
qualifying executive compensation in excess of $1.0 million for deductibility
under Section 162(m) of the Internal Revenue Code of 1986, as amended.
This report is submitted by the members of the Compensation Committee.
T.C. ARNETT
ROBERT N. MCDONALD
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STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the cumulative
stockholder return on the Company's Common Stock from November 1993 to the end
of the fiscal year ended October 31, 1997 with the cumulative total return on
the Nasdaq Market Index and the MG Industry Group 058 - Other Building
Materials, a peer group. The comparison assumes $100 was invested on November 1,
1993 in the Company's Common Stock and in each of the foregoing indices and
assumes reinvestment of dividends.
[CHART]
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BOARD MEETINGS, COMMITTEES AND ATTENDANCE
The Board of Directors of the Company met five times during the fiscal year
ended October 31, 1997. Each director attended at least 80% of the called
meetings. The Board of Directors currently has appointed three committees, the
Executive Committee, the Audit Committee and the Compensation Committee.
EXECUTIVE COMMITTEE
The Executive Committee is generally authorized to act on behalf of the
Board of Directors of the Company between scheduled meetings of the Board of
Directors to the fullest extent permitted by Delaware corporate law. The members
of the Executive Committee are Mr. Rundell, Mr. Schulte and Mr. Zabcik. The
Executive Committee did not meet during the fiscal year ended October 31, 1997.
AUDIT COMMITTEE
The Audit Committee is responsible for engaging and discharging the
independent auditors of the Company and for monitoring internal audit functions
and procedures. The members of the Audit Committee are Mr. Breedlove and Mr.
Forbes. The Audit Committee is comprised solely of directors who are not
officers or employees of the Company. The Audit Committee met two times during
the fiscal year ended October 31, 1997.
COMPENSATION COMMITTEE
The Compensation Committee is responsible for review and making
recommendations to the Board of Directors on all matters relating to
compensation and benefits provided to executive management. The members of the
Compensation Committee are Mr. Arnett and Mr. McDonald. The Compensation
Committee is comprised solely of directors who are not officers or employees of
the Company. The Compensation Committee met two times during the fiscal year
ended October 31, 1997.
SECTION 16 REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission (the "SEC") and the Nasdaq Stock Market. Such persons are required by
the SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it with
respect to fiscal 1997, or written representations from certain reporting
persons, the Company believes that all filing requirements applicable to its
directors, officers and persons who own more than 10% of a registered class of
the Company's equity securities have been complied with.
TRANSACTIONS WITH DIRECTORS, OFFICERS AND AFFILIATES
Southwest Bolt, Inc., a corporation in which Mr. Zabcik is the President
and owns 32% of the capital stock, is the Company's primary supplier of
structural bolts. In fiscal 1997, the Company made purchases from Southwest
Bolt, Inc. in the amount of $1,868,922.
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<PAGE> 17
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP served as the independent auditors of the Company for the
fiscal year ended October 31, 1997. A representative of Ernst & Young LLP is
expected to be present at the Annual Meeting and will have the opportunity to
make a statement. The representative will be available to answer appropriate
stockholder questions.
STOCKHOLDERS' PROPOSALS
Stockholders must submit their proposals to the Secretary of the Company on
or before October 2, 1998 for consideration at the Company's next Annual
Meeting.
MISCELLANEOUS
The Board of Directors knows of no business other than that set forth above
to be transacted at the Annual Meeting. If other matters requiring a vote of the
stockholders arise, the persons designated as proxies will vote the shares of
Common Stock represented by the proxies in accordance with their judgment on
such matters.
The information contained in the Proxy Statement relating to the
occupations and security holdings of the directors and officers of the Company
and their transactions with the Company is based upon information received from
the individual directors and officers. All information relating to any
beneficial owner of more than 5% of the Company's Common Stock is based upon
information contained in reports filed by such owner with the Securities and
Exchange Commission.
By Order of the Board of Directors
Donnie R. Humphries,
Secretary
Houston, Texas
January 30, 1998
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<PAGE> 18
NCI BUILDING SYSTEMS, INC.
The undersigned hereby (i) acknowledges receipt of the Notice dated January 30,
1998, of the Annual Meeting of Stockholders of NCI Building Systems, Inc. (the
"Company") to be held at the Company's offices located at 7301 Fairview,
Houston, Texas on Wednesday, March 4, 1998 at 10:00 a.m., local time, and the
Proxy Statement in connection therewith; and (ii) appoints C.A. Rundell, Jr. and
Johnie Schulte, and each of them, his proxies with full power of substitution,
for and in the name, place and stead of the undersigned, to vote upon and act
with respect to all of the shares of Common Stock of the Company standing in the
name of the undersigned or with respect to which the undersigned is entitled to
vote and act, at the meeting and at any adjournment thereof, and the undersigned
directs that his proxy be voted as follows:
(a) Proposal to elect three Class II directors to serve until the 2001 Annual
Meeting of Stockholders, or until their respective successors are elected
and qualified.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary) for all nominees listed below
Directors: Gary L. Forbes, Robert N. McDonald and C.A. Rundell, Jr.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW)
- - --------------------------------------------------------------------------------
(b) In the discretion of the proxies on any other matter that may properly come
before the meeting or any adjournment thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 19
(CONTINUED FROM OTHER SIDE)
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR THE MATTERS SPECIFICALLY REFERRED TO ABOVE.
If more than one of the proxies named above shall be present in person or by
substitute at the meeting or any adjournment thereof, both of the proxies so
present and voting, either in person or by substitute, shall exercise all of the
proxies hereby given.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such Common Stock and hereby ratifies and confirms
all that the proxies, their substitutes, or any of them may lawfully do by
virtue hereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
Dated:
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Please date this Proxy and sign your name
exactly as it appears hereon. Where there is
more than one owner, each should sign. When
signing as an attorney, administrator,
executor, guardian or trustee, please add
your title as such. If executed by a
corporation, the Proxy should be signed by a
duly authorized officer.
Please date, sign and mail this proxy card
in the enclosed envelope. No postage is
required.
