<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 8-K/A
AMENDMENT NO. 3
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
---------------------
AUGUST 25, 1998
(Date of Report)
NCI BUILDING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-19885 76-0127701
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
7301 FAIRVIEW
HOUSTON, TEXAS 77041
(Address of principal executive offices)
(713) 466-7788
(Registrant's telephone number,
including area code)
<PAGE>
The unaudited results of operations of Amatek Holdings, Inc. ("Amatek")
for the three months ended March 31, 1998, included in the Financial
Statements of Amatek that were included in the Registrant's Form 8-K/A dated
July 19, 1998, have been restated to reflect certain adjustments made by
Amatek during April 1998. In addition, the Pro Forma Condensed Combined
Statement of Income for the six months ended April 30, 1998, included in the
Registrant's Form 8-K/A, Amendment No. 2, dated August 5, 1998, has been
restated to reflect those same adjustments. Accordingly, the Registrant
hereby files this Form 8-K/A, Amendment No. 3, in order to file the Financial
Statements of Amatek, as restated, and the related Pro Forma Financial
Information, as restated, that gives effect to the Registrant's acquisition
of Amatek.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired. The following
unaudited and audited Financial Statements of Amatek Holdings,
Inc. and its subsidiaries are attached hereto and made a part
hereof.
(i) Report of Ernst & Young LLP
(ii) Consolidated Balance Sheets--December 31, 1996 and 1997,
and March 31, 1998 (Unaudited)
(iii) Consolidated Statements of Operations--Years Ended
December 31, 1995, 1996 and 1997, and for the Three
Months Ended March 31, 1997 and 1998 (Unaudited)
(iv) Consolidated Statements of Cash Flows--Years Ended
December 31, 1995, 1996 and 1997, and for the Three
Months Ended March 31, 1997 and 1998 (Unaudited)
(v) Consolidated Statements of Stockholder's Equity--Years
Ended December 31, 1995, 1996 and 1997, and for the
Three Months Ended March 31, 1998 (Unaudited)
(vi) Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information. The following unaudited
Pro Forma Financial Information of NCI Building Systems, Inc.
is attached hereto and made a part hereof:
(i) Unaudited Pro Forma Condensed Combined Balance Sheet--
April 30, 1998
(ii) Unaudited Pro Forma Condensed Combined Statement of
Income--Twelve Months Ended October 31, 1997
(iii) Unaudited Pro Forma Condensed Combined Statement of
Income--Six Months Ended April 30, 1998
(iv) Notes to Unaudited Pro Forma Condensed Combined
Financial Statements
(c) Exhibits. The following exhibits are filed herewith:
*2.1 Stock Purchase Agreement, dated March 25, 1998, by and
among BTR Australia Limited and the Registrant, and
joined therein for certain purposes by BTR plc
*2.2 Letter Agreement, dated May 4, 1998, by and among the
Registrant, BTR Australia Limited and BTR plc, amending
the Stock Purchase Agreement
23 Consent of Ernst & Young LLP
- -------------
* Incorporated herein by reference from the Registrants's Form 8-K dated
May 4, 1998
<PAGE>
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)
By: /s/ Robert J. Medlock
-------------------------------------
Robert J. Medlock, Vice President and
Chief Financial Officer
Dated: August 25, 1998
2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Stockholder
Amatek Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Amatek
Holdings, Inc. and subsidiaries (the "Company"), as of December 31, 1997, and
1996, and the related consolidated statements of operations, cash flows, and
stockholder's equity for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on 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
misstatement. 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 financial position of Amatek
Holdings, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
----------------------------
ERNST & YOUNG LLP
Houston, Texas
August 5, 1998
F-1
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
---------------------- MARCH 31,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 3,622 $ 7,012 $ 1,345
Accounts receivable:
Trade, net of allowance for doubtful accounts of $576, $658, and $395... 41,942 44,599 43,162
Other................................................................... 2,835 6,659 3,737
Inventories............................................................... 32,410 43,479 47,516
Prepaid expenses.......................................................... 2,004 2,715 3,419
Income taxes receivable................................................... -- 437 --
Deferred tax asset........................................................ 853 1,186 1,186
---------- ---------- -----------
Total current assets........................................................ 83,666 106,087 100,365
Property, plant, and equipment:
Land...................................................................... 4,390 5,916 6,227
Buildings and improvements................................................ 31,104 40,845 41,425
Machinery and equipment................................................... 72,381 88,354 90,283
Construction-in-progress.................................................. 11,659 8,272 7,116
---------- ---------- -----------
119,534 143,387 145,051
Less accumulated depreciation............................................. (34,813) (39,252) (41,088)
---------- ---------- -----------
84,721 104,135 103,963
Receivable from affiliate................................................... 19,261 1,364 --
Investments in and advances to DOUBLECOTE................................... 19,031 19,200 19,415
Intangible assets........................................................... 13,822 13,652 13,612
Other assets................................................................ -- 5,325 5,871
---------- ---------- -----------
Total assets................................................................ $ 220,501 $ 249,763 $ 243,226
---------- ---------- -----------
---------- ---------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................................... $ 32,638 $ 18,174 $ 9,288
Accrued liabilities....................................................... 13,495 15,659 11,526
Income taxes payable...................................................... 2,544 -- 3,426
---------- ---------- -----------
Total current liabilities............................................. 48,677 33,833 24,240
Deferred tax liability...................................................... 6,776 11,142 10,588
Stockholder's equity:
Common stock--par value $-0-; 119,500, 3,500, 3,500 shares issued and
outstanding at March 31, 1998, December 31, 1997, and December 31,
1996.................................................................... 2,600 2,600 182,172
Additional paid-in capital................................................ 4,380 4,380 4,380
Retained earnings......................................................... 158,068 197,808 21,846
---------- ---------- -----------
Total stockholder's equity.................................................. 165,048 204,788 208,398
---------- ---------- -----------
Total liabilities and stockholder's equity.................................. $ 220,501 $ 249,763 $ 243,226
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes.
F-2
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------------------- ----------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales............................................. $ 315,737 $ 362,867 $ 407,967 $ 82,505 $ 84,172
Cost of sales..................................... (234,042) (271,299) (312,329) (63,896) (68,864)
----------- ----------- ----------- ---------- ----------
Gross profit...................................... 81,695 91,568 95,638 18,609 15,308
Selling, general, and administrative
expenses........................................ (24,900) (29,652) (36,637) (8,543) (9,598)
Equity in income (losses) of DOUBLECOTE........... (1,293) (304) 83 (170) (161)
Interest income, net.............................. 1,379 1,871 2,019 267 267
Unusual/nonrecurring gain......................... -- -- 3,284 -- --
----------- ----------- ----------- ---------- ----------
Income before income taxes........................ 56,881 63,483 64,387 10,163 5,816
Provision for income taxes........................ (22,993) (24,920) (24,647) (4,096) (2,206)
----------- ----------- ----------- ---------- ----------
Net income........................................ $ 33,888 $ 38,563 $ 39,740 $ 6,067 $ 3,610
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
</TABLE>
See accompanying notes.
F-3
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
---------------------------------- ----------------------
1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income..................................................... $ 33,888 $ 38,563 $ 39,740 $ 6,067 $ 3,610
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization................................ 4,136 5,477 6,844 1,639 2,019
Provision for deferred income taxes.......................... 82 716 4,033 1,866 (554)
Provision for losses on accounts receivable.................. 71 (266) 262 1,867 (82)
Changes in operating assets and liabilities:
Increase in accounts receivable--trade..................... (1,980) (5,517) (2,919) 924 1,519
Increase in other accounts receivable...................... 134 (2,326) (3,824) (1,357) 2,922
Increase in inventories.................................... 5,383 (6,744) (11,069) 102 (4,037)
Increase in prepaid expenses............................... (123) (1,163) (711) 208 (704)
(Increase) decrease in other assets........................ (432) 1,018 (5,962) 84 (546)
(Decrease) increase in accounts payable and accrued
liabilities.............................................. 2,307 13,169 (12,300) (18,808) (13,019)
(Decrease) increase in income taxes payable................ (1,438) 1,239 (2,544) 1,053 3,426
---------- ---------- ---------- ---------- ----------
Net cash (used in) provided by operating activities............ 42,028 44,166 11,550 (6,355) (5,446)
INVESTING ACTIVITIES
Purchase of property, plant, and equipment..................... (12,501) (21,146) (27,166) (5,847) (1,646)
Proceeds from sale of property, plant, and equipment........... 32 73 1,632 -- --
Advances to and investments in DOUBLECOTE...................... (2,835) (2,000) (86) (369) (376)
Cash paid for acquired business................................ -- (21,221) -- -- --
---------- ---------- ---------- ---------- ----------
Net cash used in investing activities.......................... (15,304) (44,294) (25,620) (6,216) (2,022)
FINANCING ACTIVITIES
Net borrowings under credit facilities......................... (4,754) -- -- -- --
Proceeds to related party...................................... (21,471) 1,080 17,460 13,549 1,801
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) financing activities............ (26,225) 1,080 17,460 13,549 1,801
---------- ---------- ---------- ---------- ----------
Net (decrease) increase in cash and cash equivalents........... 499 952 3,390 978 (5,667)
Cash and cash equivalents at beginning of year................. 2,171 2,670 3,622 3,622 7,012
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of year....................... $ 2,670 $ 3,622 $ 7,012 $ 4,600 $ 1,345
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
See accompanying notes.
F-4
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1994................................... $ 2,600 $ 4,380 $ 85,617 $ 92,597
Net income................................................... -- -- 33,888 33,888
---------- ----------- ----------- -----------
Balance at December 31, 1995................................... 2,600 4,380 119,505 126,485
Net income................................................... -- -- 38,563 38,563
---------- ----------- ----------- -----------
Balance at December 31, 1996................................... 2,600 4,380 158,068 165,048
Net income................................................... -- -- 39,740 39,740
---------- ----------- ----------- -----------
Balance at December 31, 1997................................... 2,600 4,380 197,808 204,788
Net income................................................... -- -- 3,610 3,610
Dividend to Parent............................................. -- -- (179,572) (179,572)
Capital contribution from Parent............................... 179,572 -- -- 179,572
---------- ----------- ----------- -----------
Balance at March 31, 1998 (Unaudited).......................... $ 182,172 $ 4,380 $ 21,846 $ 208,398
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
See accompanying notes.
F-5
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OWNERSHIP AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
All outstanding common stock of Amatek Holdings, Inc. ("AHI"), is owned by
Amatek Limited (the "Parent," which is an Australian company), a wholly owned
subsidiary of BTR Nylex (an Australian company), which is ultimately owned by
BTR plc (a British company). AHI is a manufacturer of steel roofing and siding
products. Principal markets are in the continental United States.
The consolidated financial statements include the accounts of AHI and all
majority-owned subsidiaries (the "Company"). The Company's investment in
DOUBLECOTE, L.L.C. ("DOUBLECOTE"), is accounted for using the equity method (see
Note 9). All significant intercompany balances and transactions have been
eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of all cash balances and highly liquid
investments which have a maturity of three months or less when acquired.
INVENTORY
Inventories are valued at the lower of cost or market, determined on the
first-in, first-out method.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. The cost of repairs and
maintenance is charged to operations as incurred. Depreciation of property,
plant, and equipment is provided on a straight-line basis over the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Building and improvements..................................... 40 years
Machinery and equipment....................................... 4 to 13 years
Computer and office equipment................................. 3 to 10 years
</TABLE>
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. This statement
generally requires a periodic review of long-lived assets for indications that
their carrying amounts may not be recoverable, and governs the measurement and
disclosure of any resulting impairment loss. Its application did not have a
material impact on the Company's financial position or results of operations.
INCOME TAXES
The Company uses SFAS No. 109, ACCOUNTING FOR INCOME TAXES, in accounting
for income taxes. This statement requires an asset and liability approach for
financial accounting and reporting of income taxes.
INTANGIBLE ASSETS
Goodwill of $15,479,000, $15,333,000, and $14,777,000, which relates to the
acquisition of certain assets and other stockholder interest at March 31, 1998
and December 31, 1997 and 1996, respectively, is being amortized on a
straight-line basis over 20 years. Accumulated amortization of goodwill was
$1,867,000, $1,681,000, and $955,000 as of March 31, 1998 and December 31, 1997
and 1996, respectively.
F-6
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. OWNERSHIP AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments (cash, accounts
receivable, and accounts payable) approximates fair value.
MANAGEMENT ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires the Company 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.
RECLASSIFICATIONS
Certain reclassifications have been made to 1996 financial information in
order to conform to 1997 presentation.
In the opinion of management, the unaudited consolidated financial
statements include all adjustments, consisting solely of normal recurring
adjustments, necessary for a fair presentation of the financial position as of
March 31, 1998, and the results of operations and cash flows for each of the
three-month periods ended March 31, 1998 and 1997. Although management believes
the disclosures in these financial statements are adequate to make the
information presented not misleading, certain information and footnote
disclosures normally included in annual audited financial statements prepared in
accordance with generally accepted accounting principals have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. The results of operations and the cash flows for the three-month
period ended March 31, 1998 are not necessarily indicative of the results to be
expected for the full year.
2. INVENTORIES
The components of inventories were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------- MARCH 31
1996 1997 1998
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials.............................................. $ 22,581 $ 34,638 $ 35,247
Finished goods............................................. 9,829 8,841 12,269
--------- --------- -----------
Total...................................................... $ 32,410 $ 43,479 $ 47,516
--------- --------- -----------
--------- --------- -----------
</TABLE>
3. NOTES PAYABLE TO BANK
The Company had an overdraft line of credit facility for $10 million which
terminated on March 31, 1998. There were no advances outstanding at March 31,
1998 and December 31, 1997 and 1996.
4. RELATED PARTY TRANSACTIONS
The Company periodically advances funds to its Parent and charges the Parent
interest at a rate which approximates prime for net advances. In addition, the
Company remits its federal income taxes payable to
F-7
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
the Parent (see Notes 5 and 7). Based on intercompany lending rates for
advances and payables with similar terms, the fair value of these advances
approximates their carrying values.
5. FEDERAL INCOME TAX
The provisions for federal income taxes are composed of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current income taxes......................................... $ 22,917 $ 24,203 $ 20,612 $ 2,229 $ 2,761
Deferred income taxes........................................ 76 717 4,035 1,867 (555)
--------- --------- --------- --------- ---------
Total........................................................ $ 22,993 $ 24,920 $ 24,647 $ 4,096 $ 2,206
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The effective income tax rate of the Company approximates the sum of the
statutory federal income tax rate and certain state income tax rates less
related federal tax benefit.
Significant components of the Company's deferred tax assets and liabilities
were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31
-------------------------------------------------- ------------------------
1996 1997 1998
------------------------ ------------------------ ------------------------
CURRENT LONG-TERM CURRENT LONG-TERM CURRENT LONG-TERM
----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Property....................................... $ -- $ (9,442) $ -- $ (14,069) $ -- $ (14,368)
Insurance reserves............................. 461 -- 782 -- 782 --
Bad debt reserve............................... 147 -- 248 -- 248 --
Inventory...................................... 245 -- 183 -- 183 --
Deferred compensation and incentive
plan......................................... -- 2,660 -- 2,931 -- 3,780
Other.......................................... -- 11 (27) -- (27)
----- ----------- ----------- ----------- ----------- -----------
Total.......................................... $ 853 $ (6,771) $ 1,186 $ (11,138) $ 1,186 $ (10,588)
----- ----------- ----------- ----------- ----------- -----------
----- ----------- ----------- ----------- ----------- -----------
Total deferred tax assets...................... $ 3,524 $ 4,346 $ 4,993
Total deferred tax liabilities................. (9,442) (14,298) (14,395)
----------- ----------- -----------
Net deferred tax liability..................... $ (5,918) $ (9,952) $ (9,402)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
6. LEASES
The Company leases certain equipment (primarily vehicles) and operating
facilities under operating leases expiring at various dates through 2000. Total
rental expense under operating leases was $1,514,000,
F-8
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LEASES (CONTINUED)
$1,291,000, and $1,096,000 in 1997, 1996, and 1995, respectively.
Aggregate minimum lease payments under operating leases are as follows (in
thousands):
<TABLE>
<S> <C>
1998................................................................ $ 508
1999................................................................ 567
2000................................................................ 391
2001................................................................ 72
---------
$ 1,538
---------
---------
</TABLE>
7. SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid for interest during the years ended December 31, 1997, 1996, and
1995 was $81,000, $80,000, and $131,000, respectively. Cash paid for income
taxes during the years ended December 31, 1997, 1996, and 1995 was $24,349,000,
$21,402,000, and $23,639,000, respectively.
8. EMPLOYEE BENEFIT PLANS
The Company sponsors a 401(k) savings plan for its full-time employees. The
Company matches 100% of employee-elected pre-tax contributions to a maximum of
4% of their salaries. The Company's contributions were $1,132,000, $943,000, and
$830,000 in 1997, 1996, and 1995, respectively.
An Incentive Compensation Plan (the "Plan") was established in 1992, in part
because of the purchase of the minority interest of a partnership of which
certain officers of the Company were limited partners. Under the terms of the
Plan, an annual contribution is determined based upon the Company's earnings and
revenues. Annual contributions are placed in trust (with the trustee,
NationsBank) and vest to participants over a seven- to ten-year period. In the
event that a participant voluntarily leaves the Company or is terminated for
"good cause," the unvested portion of contributions to the Plan is forfeited to
the Company. The contributions were $4,302,000, $3,714,000, and $2,766,000 for
1997, 1996, and 1995, respectively.
9. INVESTMENT IN DOUBLECOTE
The Company, through a subsidiary, owns 50% of the common stock in
DOUBLECOTE, a corporate joint venture.
F-9
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INVESTMENT IN DOUBLECOTE (CONTINUED)
Summarized financial information of DOUBLECOTE is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------------- MARCH 31
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets............................................................... $ 7,266 $ 8,165 $ 9,210
Noncurrent assets............................................................ 30,524 28,601 28,102
---------- ---------- -----------
Total assets................................................................. $ 37,790 $ 36,766 $ 37,312
---------- ---------- -----------
---------- ---------- -----------
Liabilities--advances from stockholder....................................... $ 36,232 $ 36,404 $ 37,157
Other liabilities............................................................ 2,753 1,390 1,505
Stockholder's equity:
Contributed capital........................................................ 2,000 2,000 2,000
Accumulated deficit........................................................ (3,195) (3,028) (3,350)
---------- ---------- -----------
Total liabilities and stockholder's equity................................... $ 37,790 $ 36,766 $ 37,312
---------- ---------- -----------
---------- ---------- -----------
Sales........................................................................ $ 28,034 $ 30,348 $ 6,427
Cost of sales................................................................ (24,682) (26,150) (5,722)
---------- ---------- -----------
Gross profit................................................................. 3,352 4,198 705
Selling, general, and administrative expenses................................ (964) (1,080) (303)
Interest expense............................................................. (2,997) (2,952) (724)
---------- ---------- -----------
Net income (loss)............................................................ $ (609) $ 166 $ (322)
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
The facility owned by DOUBLECOTE was completed and began operations in 1995.
DOUBLECOTE is charged interest at prime for advances by the Company. Total
interest income earned by the Company was $1,500,000 in 1997 and 1996 and
$1,465,000 in 1995.
10. LUBBOCK PLANT FIRE
In February 1997, the Company's Lubbock, Texas, plant sustained major damage
from a fire. The Company has since rebuilt the plant, and resumed operations in
July 1997.
The Company maintains insurance under one policy for both property damage
and business interruption applicable to its production facilities. The policy
provides coverage subject to a $25,000 deductible. Insurance recoveries as of
December 31, 1997 included $1.5 million for property damage and $500,000 for
business interruption. The Company is pursuing additional recoveries of $4
million related to the damage of the Lubbock plant.
Insurance recoveries for property damage associated with events of this type
require the recognition of a new cost basis for the rebuilt facility. As a
result, the Company has recognized a $3.3 million unusual/ nonrecurring
adjustment in its income statement for the year ended December 31, 1997. Total
spending to restore the Lubbock plant was approximately $4.8 million.
11. ACQUISITION OF BUSINESS
On April 1, 1996, the Company purchased certain assets of Steelco Metal
Construction Products and Construction Metals ("Steelco") for a total cost of
approximately $21,221,000. Steelco was engaged in the manufacturing of steel
roofing and siding products. The acquisition was accounted for as a purchase.
The
F-10
<PAGE>
AMATEK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. ACQUISITION OF BUSINESS (CONTINUED)
excess of the purchase price over the fair values of the net assets acquired
of $11,266,000 has been recorded as goodwill and is being amortized over a
period of 20 years. The statement of operations for 1996 includes the
operating results of Steelco since the date of acquisition.
12. YEAR 2000 (UNAUDITED)
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and is
implementing its plan to resolve the issue. The Year 2000 problem is a result of
computer programs being written using two digits (rather than four) to define
the applicable year. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in major system failure or miscalculation. The Company
presently believes that, with modifications to existing software and converting
to new software, the Year 2000 problem will not pose significant operational
problems for the Company's computer systems as so modified and converted.
However, if such modifications or conversions are not made, or not completed
timely, the Year 2000 issue could have a material impact on the Company's
operations.
13. COMMITMENTS AND CONTINGENCIES
In March 1998, the Company entered into an agreement with NCI Building
Systems, Inc. to purchase 100% of the stock of the Company, which was effective
May 4, 1998. Upon the successful completion of this acquisition, certain
executives of the Company will receive compensation payments totaling
approximately $8.5 million.
F-11
<PAGE>
NCI BUILDING SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
APRIL 30, 1998
------------------------------------------------------------------------
PRO FORMA
NCI AHI AHI AHI ACQUISITION PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS ADJUSTED ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................ $ 37,972 $ 1,345 $ (1,345)(B) $ -- $ (27,800)(C) $ 10,172
Accounts receivable, net................. 35,954 46,899 46,899 82,853
Inventory, net........................... 40,725 47,516 47,516 88,241
Deferred income taxes.................... 3,462 1,186 1,186 4,648
Prepaid expenses......................... 1,233 3,419 3,419 4,652
---------- ---------- ----------- ---------- ----------- ----------
Total current assets..................... 119,346 100,365 (1,345) 99,020 (27,800) 190,566
Property, plant and equipment.............. 74,381 145,051 145,051 219,432
Accumulated depreciation................... (22,623) (41,088) (41,088) (63,711)
---------- ---------- ----------- ---------- ----------- ----------
51,758 103,963 -- 103,963 -- 155,721
Goodwill................................... 20,361 13,612 13,612 393,000(C) 426,973
Capitalized debt issue costs............... -- -- -- 10,822(K) 10,822
Investment in and advances to DOUBLECOTE... -- 19,415 19,415 19,415
Other assets............................... 5,237 5,871 5,871 11,108
---------- ---------- ----------- ---------- ----------- ----------
Total assets............................... $ 196,702 $ 243,226 $ (1,345) $ 241,881 $ 376,022 $ 814,605
---------- ---------- ----------- ---------- ----------- ----------
---------- ---------- ----------- ---------- ----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt........ $ 47 $ -- $ $ -- $ 22,500(E) $ 22,547
Accounts payable......................... 14,993 9,288 9,288 24,281
Accrued expenses......................... 13,658 11,526 11,526 10,875(C) 36,059
Accrued income taxes..................... (662) 3,426 3,426 2,764
---------- ---------- ----------- ---------- ----------- ----------
Total current liabilities................ 28,036 24,240 -- 24,240 33,375 85,651
Long-term debt, non-current portion........ 1,653 -- -- 517,500 (E) 519,153
Deferred income taxes...................... 2,596 10,588 10,588 13,184
Shareholders' equity:
Common stock............................. 166 182,172 182,172 (182,158)(F) 180
Additional paid-in capital............... 55,179 4,380 4,380 27,806 (F) 87,365
Retained earnings........................ 109,072 21,846 (1,345)(B) 20,501 (20,501)(F) 109,072
---------- ---------- ----------- ---------- ----------- ----------
Total shareholders' equity............... 164,417 208,398 (1,345) 207,053 (174,853) 196,617
---------- ---------- ----------- ---------- ----------- ----------
Total liabilities and shareholders'
equity................................... $ 196,702 $ 243,226 $ (1,345) $ 241,881 $ 376,022 $ 814,605
---------- ---------- ----------- ---------- ----------- ----------
---------- ---------- ----------- ---------- ----------- ----------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
1
<PAGE>
NCI BUILDING SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED OCTOBER 31, 1997
--------------------------------------------------------
HISTORICAL PRO FORMA
---------------------- ACQUISITION PRO FORMA
NCI AHI ADJUSTMENTS COMBINED
---------- ---------- --------------- ---------------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue................................................ $ 407,751 $ 407,967 $ -- $ 815,718
Cost of sales.......................................... 299,407 312,329 -- 611,736(D)
---------- ---------- --------------- ---------------
Gross profit........................................... 108,344 95,638 -- 203,982
Operating expenses..................................... 66,055 36,637 9,825 (G) 108,771(D)
(3,746)(G)
---------- ---------- --------------- ---------------
Income from operations................................. 42,289 59,001 6,079 95,211
Equity income in DOUBLECOTE............................ -- 83 -- 83
Nonrecurring gain...................................... -- 3,284 -- 3,284
Interest expense....................................... (163) -- (42,050)(H) (44,377)
(2,164)(H)
Other income........................................... 1,999 2,019 (1,390)(I) 2,628
---------- ---------- --------------- ---------------
Income (loss) before taxes............................. 44,125 64,387 (51,683) 56,829
Provision for income taxes............................. 16,238 24,647 (15,488)(J) 25,397
---------- ---------- --------------- ---------------
Net income............................................. $ 27,887 $ 39,740 $ (36,195) $ 31,432
---------- ---------- --------------- ---------------
---------- ---------- --------------- ---------------
Net income per share:
Basic................................................ $ 1.73 -- -- $ 1.79
---------- ---------------
---------- ---------------
Diluted.............................................. $ 1.64 -- -- $ 1.70
---------- ---------------
---------- ---------------
Weighted average number of common shares:
Basic................................................ 16,127 -- 1,400(F) 17,527
Diluted.............................................. 17,085 -- 1,400(F) 18,485
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
2
<PAGE>
NCI BUILDING SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30, 1998
--------------------------------------------------------
HISTORICAL PRO FORMA
---------------------- ACQUISITION PRO FORMA
NCI AHI ADJUSTMENTS COMBINED
---------- ---------- --------------- ---------------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue................................................ $ 192,672 $ 195,695 $ -- $ 388,367
Cost of sales.......................................... 140,621 153,306 -- 293,927(D)
---------- ---------- --------------- ---------------
Gross profit........................................... 52,051 42,389 -- 94,440
Operating expenses..................................... 34,030 19,458 4,913(G) 56,548(D)
(1,853)(G)
---------- ---------- --------------- ---------------
Income from Operations................................. 18,021 22,931 (3,060) 37,892
Equity income in DOUBLECOTE............................ -- 14 -- 14
Nonrecurring gain...................................... -- 3,284 -- 3,284
Interest expense....................................... (84) -- (21,025)(H) (22,191)
(1,082)(H)
Other income........................................... 1,492 761 (695)(I) 1,558
---------- ---------- --------------- ---------------
Income (loss) before taxes............................. 19,429 26,990 (25,862) 20,557
Provision for income taxes............................. 6,981 9,763 (7,751)(J) 8,993
---------- ---------- --------------- ---------------
Net income............................................. $ 12,448 $ 17,227 $ (18,111) $ 11,564
---------- ---------- --------------- ---------------
---------- ---------- --------------- ---------------
Net income per share:
Basic................................................ $ 0.76 -- -- $ 0.65
---------- ---------------
---------- ---------------
Diluted.............................................. $ 0.72 -- -- $ 0.62
---------- ---------------
---------- ---------------
Weighted average number of common shares:
Basic................................................ 16,390 -- 1,400(F) 17,790
Diluted.............................................. 17,386 -- 1,400(F) 18,786
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
3
<PAGE>
NCI BUILDING SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(A) BASIS OF PRESENTATION--The Unaudited Pro Forma Condensed Combined financial
statements are presented to give pro forma effect to the acquisition of
Amatek Holdings, Inc. and Subsidiaries (AHI).
The purchase method of accounting has been used in preparing the Unaudited
Pro Forma Condensed Combined Financial Statements of NCI Building Systems,
Inc. (the Company) with respect to the acquisition of AHI. The Unaudited Pro
Forma Condensed Combined Statements of Income for the six months ended April
30, 1998 and fiscal year ended October 31, 1997 combine the results of
operations for the Company's six months ended April 30, 1998 and fiscal year
ended October 31, 1997 with AHI's results for the six months ended March 31,
1998 and fiscal year ended December 31, 1997, respectively. The Unaudited
Pro Forma Condensed Combined Balance Sheet as of April 30, 1998 combines
the balance sheet of the Company as of April 30, 1998 with AHI's balance
sheet as of March 31, 1998. The Unaudited Pro Forma Condensed Combined
Statements of Income give effect to the AHI acquisition as if it had
occurred on November 1, 1996. AHI's results of operations for the three
months ended March 31, 1998 have been restated to reflect adjustments to
revenues and cost of sales of $2.7 million (related to customer credit
memos) and $1.0 million (related to an inventory write-off of scrap metal),
respectively, which were taken by AHI in April 1998. The Unaudited Pro
Forma Condensed Combined Balance Sheet gives effect to the AHI
acquisition as if it had occurred on April 30, 1998. Purchase accounting
values have been assigned on a preliminary basis and will be adjusted
upon the completion of a valuation study. Management does not expect such
adjustments to be material.
Due to the different fiscal year ends of the Company and AHI as discussed
above, AHI's results of operations for the three months ended December 31,
1997 are included in both the Unaudited Pro Forma Condensed Combined
Statements of Income for the six months ended April 30, 1998 and fiscal year
ended October 31, 1997, and AHI's results of operations for the month ended
April 30, 1998 are excluded from the Unaudited Pro Forma Condensed Combined
Statement of Income for the six months ended April 30, 1998. AHI's revenues
and net income for the three months ended December 31, 1997 were
$111.5 million and $13.6 million, respectively, which includes a
nonrecurring pre-tax gain of $3.3 million from insurance recoveries related
to a plant fire. AHI's revenues and net loss for the month ended April 30,
1998 were $37.2 million and $4.0 million, respectively, which net loss
includes a nonrecurring pre-tax charge related to the acquisition of
$8.6 million for payments to certain AHI management required due to change
in control of AHI.
In June 1998, the Company's Board of Directors approved a two-for-one common
stock split effective for shareholders of record on July 8, 1998. Share and
per share amounts have been restated to reflect the stock split.
(B) The unaudited condensed balance sheet for AHI as of March 31, 1998 has been
adjusted to exclude cash not acquired as subject to the stock purchase
agreement.
(C) To reflect the purchase of AHI for consideration of $550.0 million in cash
plus 1,400,000 shares of Company common stock valued at $32.2 million issued
to AHI employees to replace the management
4
<PAGE>
NCI BUILDING SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS (CONTINUED)
incentive plan in place at AHI. In addition, there are estimated to be $17.8
million in transaction costs. Goodwill has been preliminarily calculated as
follows:
<TABLE>
<CAPTION>
<S> <C>
Purchase Price:
Cash................................................ $ 550,000
Equity issued....................................... 32,200
Estimated transaction costs........................... 17,800
Less: Net assets acquired............................. 207,000
----------
Goodwill.............................................. $ 393,000
</TABLE>
(D) Anticipated synergies and cost savings resulting from internal rather than
third party coating of NCI products, plant consolidations, sales and
marketing consolidation, purchasing efficiencies and administrative cost
savings and efficiencies of approximately $15 million annually have not been
reflected in the above Unaudited Pro Forma Condensed Combined Financial
Statements.
(E) For purposes of the Unaudited Pro Forma Condensed Combined Balance Sheet,
the proceeds for the AHI acquisition were assumed to have been provided with
$27.8 million of available cash and additional borrowings as follows:
<TABLE>
<CAPTION>
<S> <C>
AHI net assets acquired,
plus excess of purchase price over net assets....... $ 600,000
Less:
Excess cash used to fund acquisition.................. 27,800
Equity issued......................................... 32,200
----------
$ 540,000
Current portion....................................... $ 22,500
Long-term portion..................................... $ 517,500
</TABLE>
(F) To record the elimination of the AHI stock acquired, offset by the impact on
shareholders' equity of the additional 1,400,000 shares of Company common
stock issued to certain officers and employees of AHI in exchange for their
interests in AHI's management incentive plan.
(G) To record additional amortization expense associated with the goodwill
generated from the AHI acquisition (assigned useful life of 40 years),
offset by elimination of a management incentive charge incurred by AHI on a
historical basis.
(H) To record additional interest expense and amortization of debt issuance
costs related to debt incurred in connection with the acquisition of AHI.
(I) To eliminate daily cash investment interest income for the portion of the
Company's excess cash utilized for the acquisition.
(J) To record the tax effect on the pro forma adjustments.
(K) To record cost related to the issuance of debt, as discussed in Note (E).
5
<PAGE>
INDEX TO EXHIBITS
Exhibit 23 Consent of Ernst & Young LLP
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements Form
S-8 (No. 333-14957 and No. 33-52078) pertaining to the 401 (k) Profit Sharing
Plan of NCI Building Systems, Inc. and Form S-8 (No. 333-34899, No. 33-52080,
and No. 333-12921) pertaining to the Nonqualified Stock Option Plan of NCI
Building Systems, Inc. of our report dated August 5, 1998 with respect to the
consolidated financial statements of Amatek Holdings, Inc. and Subsidiaries
for the year ended December 31, 1997, included in this Current Report (Form
8-K/A Amendment No. 3).
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Houston, Texas
August 21, 1998
