<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED: April 30, 2000
COMMISSION FILE NUMBER: 1-14315
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.)
10943 N. Sam Houston Parkway W.
Houston, TX 77064
--------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(281) 897-7788
--------------------------------------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
7301 Fairview, Houston, TX 77041
------------------------------------------------------
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--17,882,409 shares as of April 30, 2000
<PAGE> 2
NCI BUILDING SYSTEMS, INC.
INDEX
<TABLE>
<CAPTION>
PART 1. FINANCIAL STATEMENTS PAGE NO.
--------
<S> <C>
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated balance sheets 1
April 30, 2000 and October 31, 1999
Consolidated statements of income 2
Three months ended April 30, 2000 and 1999
Consolidated statements of income 3
Six months ended April 30, 2000 and 1999
Condensed consolidated statements of cash flows 4
Six months ended April 30, 2000 and 1999
Notes to consolidated financial statements 5-6
April 30, 2000
ITEM 2. Management's Discussion and Analysis of Financial 7-11
Condition and Results of Operations
PART 2. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 12
ITEM 6. Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE> 3
NCI BUILDING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
April 30, October 31,
2000 1999
----------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,498 $ 16,089
Accounts receivable, net 118,861 105,608
Inventories 86,204 83,988
Deferred income taxes 6,943 6,943
Prepaid expenses 7,874 5,037
--------- ---------
Total current assets 222,380 217,665
Property, plant and equipment, net 226,638 197,855
--------- ---------
Excess of costs over fair value of acquired net assets 403,782 398,606
Other assets, primarily investment in joint ventures 18,162 41,357
--------- ---------
Total assets $ 870,962 $ 855,483
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 38,797 $ 36,297
Accounts payable 57,300 65,209
Accrued compensation and benefits 12,739 17,021
Accrued income taxes 4,085 10,454
Other accrued expenses 22,137 28,113
--------- ---------
Total current liabilities 135,058 157,094
--------- ---------
Long-term debt, noncurrent portion 426,235 397,062
Deferred income taxes 24,012 24,037
--------- ---------
Shareholders' equity:
Common stock 186 186
Additional paid in capital 97,464 97,289
Retained earnings 198,884 179,815
Treasury stock (10,877) --
--------- ---------
Total shareholders' equity 285,657 277,290
--------- ---------
Total liabilities and shareholders' equity $ 870,962 $ 855,483
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-1-
<PAGE> 4
NCI BUILDING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended April 30,
2000 1999
--------- --------
<S> <C> <C>
Sales $ 232,766 $ 217,365
Cost of sales 171,356 162,981
--------- ---------
Gross profit 61,410 54,384
Operating expenses 35,520 31,754
--------- ---------
Income from operations 25,890 22,630
Interest expense 9,505 9,188
Other (income) expense (721) (892)
Joint venture (income) expense (419) (1,039)
--------- ---------
Income before income taxes 17,525 15,373
Provision for income taxes 7,454 6,425
--------- ---------
Net income $ 10,071 $ 8,948
========= =========
Net income per share - basic $ .56 $ .49
========= =========
Net income per share - diluted $ .55 $ .47
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-2-
<PAGE> 5
NCI BUILDING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended April 30,
2000 1999
--------- ---------
<S> <C> <C>
Sales $ 464,818 $ 431,712
Cost of sales 344,012 323,051
--------- ---------
Gross profit 120,806 108,661
Operating expenses 70,703 63,824
--------- ---------
Income from operations 50,103 44,837
Interest expense 18,754 18,939
Other (income) expense (1,518) (1,562)
Joint venture (income) expense (523) (1,059)
--------- ---------
Income before income taxes 33,390 28,519
Provision for income taxes 14,321 12,146
--------- ---------
Net income $ 19,069 $ 16,373
========= =========
Net income per share - basic $ 1.05 $ .90
========= =========
Net income per share - diluted $ 1.03 $ .86
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-3-
<PAGE> 6
NCI BUILDING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended April 30,
2000 1999
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 19,069 $ 16,373
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 16,122 14,043
(Gain) loss on sale of fixed assets (64) (122)
Provision for doubtful accounts 1,096 1,509
Deferred income tax provision (25) (269)
Changes in working capital:
Current assets (8,674) (3,469)
Current liabilities (23,928) (5,438)
-------- --------
Net cash provided by operating activities $ 3,596 $ 22,627
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (13,937) (18,471)
Other 2,949 (2,598)
Acquisition of DOUBLECOTE L.L.C (24,408) --
-------- --------
Net cash used in investing activities (35,396) (21,069)
-------- --------
Cash flows from financing activities:
Proceeds from stock options exercise 516 693
Net (payments) borrowings on revolving lines of credit 49,173 3,923
Payments on long-term debt (17,500) (7,500)
Purchase of treasury stock (13,980) --
-------- --------
Net cash provided by (used in) financing activities 18,209 (2,884)
-------- --------
Net increase (decrease) in cash and cash equivalents $(13,591) $ (1,326)
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-4-
<PAGE> 7
NCI BUILDING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 2000
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated 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 and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three-month and six-month periods
ended April 30, 2000, are not necessarily indicative of the results that may be
expected for the fiscal year ended October 31, 2000.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1999 filed with the Securities and Exchange
Commission.
NOTE 2 -- INVENTORIES
The components of inventory are as follows:
<TABLE>
<CAPTION>
April 30, October 31,
2000 1999
-------- ----------
<S> <C> <C>
Raw materials $66,171 $65,315
Work in process and finished goods 20,033 18,673
------- -------
$86,204 $83,988
======= =======
</TABLE>
NOTE 3 - BUSINESS SEGMENTS
The Company adopted SFAS No. 131, Disclosures About Segments of an Enterprise
and Related Information in 1999. The Company has divided its operations into two
reportable segments: engineered building systems and metal components, based on
similarities in product lines, manufacturing processes, marketing and management
of its businesses. Products of both segments are similar in basic raw materials
used and manufacturing. The engineered building systems segment includes the
manufacturing of structural framing and supplies value added engineering and
drafting, which are typically not part of component products or services. The
reporting segments follow the same accounting policies used for the Company's
consolidated financial statements. Management evaluates a segments' performance
based upon operating income. Intersegment sales are recorded based on prevailing
market prices, and consist primarily of products and services provided to the
engineered building systems segment by the metal building components segment,
including painting and coating of hot rolled material. Information with respect
to the segments is included in the Management's Discussion and Analysis of
Financial Condition and Results of Operations on page 7.
-5-
<PAGE> 8
NCI BUILDING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 2000
NOTE 4 -- NET INCOME PER SHARE
Basic earnings per common share is computed by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per
common share considers the effect of common stock equivalents. The computations
are as follows:
<TABLE>
<CAPTION>
Three Months Ended April 30, Six Months Ended April 30,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $10,071 $ 8,948 $19,069 $16,373
Add: Interest, net of tax on convertible
debenture assumed converted 17 17 34 34
------- ------- ------- -------
Adjusted net income 10,088 8,965 19,103 16,407
Weighted average common shares outstanding 17,901 18,368 18,088 18,268
Add: Common stock equivalents
Stock option plan 443 657 420 746
Convertible debentures 100 100 100 100
------- ------- ------- -------
Weighted average common shares
outstanding, assuming dilution 18,444 19,125 18,608 19,114
======= ======= ======= =======
Net income per share - Basic $ .56 $ .49 $ 1.05 $ .90
======= ======= ======= =======
Net income per share - Diluted $ .55 $ .47 $ 1.03 $ .86
======= ======= ======= =======
</TABLE>
NOTE 5 - ACQUISITION
On March 31, 2000, the Company acquired its partner's 50% share of DOUBLECOTE,
L.L.C., a metal coil coating business that it developed and previously owned
jointly with Consolidated Systems, Inc., a privately held company. The
transaction was valued at approximately $26 million, and accounted for using the
purchase method. The excess of cost over the fair value of the acquired assets
was approximately $9 million, based on our preliminary purchase price
allocation, which may be adjusted upon final valuation of certain assets and
liabilities. The consolidated results of operations for the six months ended
April 30, 2000 include five months of DOUBLECOTE earnings accounted for under
the equity method, and one month's consolidated operations, since it was
acquired on March 31, 2000.
NOTE 6 - OTHER ITEMS
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial Statements. SAB
101, which is effective for the first fiscal quarter of the fiscal year
beginning after December 15, 1999, provides guidance on applying generally
accepted accounting principles to revenue recognition issues in financial
statements. The Company will adopt SAB 101 as required in the first fiscal
quarter of the fiscal year ended October 31, 2001, and is evaluating the effect
that such adoption may have on its consolidated results of operations and
financial position.
-6-
<PAGE> 9
NCI BUILDING SYSTEMS, INC.
ITEM 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company's various product lines have been aggregated into two business
segments: metal building components and engineered building systems. These
aggregations are based on the similar nature of the products, distribution of
products and management and reporting of those products within the Company. Both
segments operate primarily in the nonresidential construction market. Sales and
earnings are influenced by general economic conditions, the level of
nonresidential construction activity, roof repair and retrofit demand and the
availability and terms of financing available for construction.
Products of both business segments are similar in basic raw materials used and
manufacturing. Engineered building systems includes the manufacturing of
structural framing and value added engineering and drafting, which are typically
not part of component products or services. The Company believes it has one of
the broadest product offerings of metal building products in the industry.
Intersegment sales consist primarily of products and services provided to the
engineered buildings segment by the components segment, including painting and
coating of hot rolled material. This provides better customer service, shorter
delivery time and minimizes transportation costs to the customer.
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
APRIL 30, 2000 APRIL 30, 1999
---------------------- ----------------------
% %
---------- ----------
<S> <C> <C> <C> <C>
SALES TO OUTSIDE CUSTOMERS:
Engineered building systems ... $ 74,379 32 $ 70,720 33
Metal building components ..... 158,387 68 146,645 67
Intersegment sales ............ 10,488 5 13,547 6
Corporate/eliminations ........ (10,488) (5) (13,547) (6)
--------- --------- --------- ---------
Total net sales .......... $ 232,766 100 $ 217,365 100
--------- --------- --------- ---------
OPERATING INCOME:
Engineered building systems ... $ 8,236 11 $ 7,163 10
Metal building components ..... 18,169 11 15,423 11
Corporate/eliminations ........ (515) -- 44 --
--------- --------- --------- ---------
Total operating income ... $ 25,890 11 $ 22,630 10
--------- --------- --------- ---------
TOTAL ASSETS:
Engineered building systems ... $ 95,382 11 $ 86,647 10
Metal building components ..... 383,033 44 348,290 42
Corporate/eliminations ........ 392,547 45 391,754 48
--------- --------- --------- ---------
Total assets ............. $ 870,962 100 $ 826,691 100
--------- --------- --------- ---------
</TABLE>
-7-
<PAGE> 10
NCI BUILDING SYSTEMS, INC.
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
APRIL 30, 2000 APRIL 30, 1999
---------------------- ----------------------
% %
--------- ----------
<S> <C> <C> <C> <C>
SALES TO OUTSIDE CUSTOMERS:
Engineered building systems ... $ 151,157 33 $ 146,458 34
Metal building components ..... 313,661 67 285,254 66
Intersegment sales ............ 21,693 5 27,946 6
Corporate/eliminations ........ (21,693) (5) (27,946) (6)
--------- --------- --------- ---------
Total net sales .......... $ 464,818 100 $ 431,712 100
--------- --------- --------- ---------
OPERATING INCOME:
Engineered building systems ... $ 15,301 10 $ 16,316 11
Metal building components ..... 35,719 11 28,740 10
Corporate/eliminations ........ (917) -- (219) --
--------- --------- --------- ---------
Total operating income ... $ 50,103 11 $ 44,837 10
--------- --------- --------- ---------
</TABLE>
THREE MONTHS ENDED APRIL 30, 2000 COMPARED TO THREE MONTHS ENDED APRIL 30, 1999
Consolidated sales for the second quarter of fiscal 2000 increased by $15.4
million, or 7%, compared to the second quarter of fiscal 1999. This increase in
sales includes a $2.8 million contribution from DOUBLECOTE, which was acquired
on March 31, 2000.
ENGINEERED BUILDING SYSTEMS
For the quarter, engineered building systems sales increased by $3.7 million, or
5%, compared to the same period in 1999. This increase was in line with general
increases in the metal building industry sales for the same period. For the
quarter, this segment accounted for 32% of total sales compared to 33% for the
same period in 1999. As of April 30, 2000, the backlog of orders for this
segment was up 16% compared to April 30, 1999.
Operating income of engineered building systems increased in the second quarter
of fiscal 2000 by 15% to $8.2 million compared to $7.2 million in the second
quarter of fiscal 1999. Improved manufacturing efficiencies and better
performance from one of the segment's regional operations in the current quarter
accounted for these gains. As a percent of engineered building systems' sales,
operating income improved to 11% in the current quarter compared to 10% in the
prior year's second quarter.
METAL BUILDING COMPONENTS
For the quarter, metal building component sales increased by $11.7 million, or
8%, compared to the same period in 1999. The second quarter's increase was less
than the first quarter percentage increase due to the seasonal nature of the
business in the second quarter of the fiscal year. This segment accounted for
68% of consolidated sales in the second quarter of fiscal 2000 compared to 67%
for the same period in fiscal 1999.
Operating income for the second quarter of fiscal year 2000 increased by 18%
over the prior year's second quarter. Operating income increased at a faster
rate than sales due to better utilization of manufacturing facilities and
improved cost controls in the quarter.
CONSOLIDATED OPERATING EXPENSES, consisting of engineering, drafting, selling
and administrative costs, increased to $35.5 million in the second quarter
compared to $31.8 million in the second quarter last year. This represented an
increase of 12% which was higher than the 7% increase in sales. Operating
expenses grew at a faster rate than
-8-
<PAGE> 11
sales due primarily to a larger operating and selling base required to support
anticipated growth in fiscal 2000 and information technology cost related to the
completion of various systems implementations.
INTEREST EXPENSE increased to $9.5 million in the second quarter of fiscal 2000
compared to $9.2 million in the second quarter of fiscal 1999. Increased
borrowings to fund the acquisition of DOUBLECOTE and the repurchase of common
stock and the general increase in floating interest rates in fiscal 2000
accounted for this increase.
JOINT VENTURE INCOME includes 50% interests in both light gauge and heavy gauge
coating operations in the United States and a 50% interest in a Mexico drafting
and sales operation. Income is recognized on the equity method of accounting. On
March 31, 2000, the company acquired the remaining 50% interest in DOUBLECOTE (
the light gauge coating operation). Since DOUBLECOTE was consolidated for one
month of the second quarter, joint venture income represented only two months
compared to three months in the second quarter of fiscal 1999.
SIX MONTHS ENDED APRIL 30, 2000 COMPARED TO SIX MONTHS ENDED APRIL 30, 1999
Consolidated sales for the six months ended April 30, 2000, increased by $33.1
million, or 8%, compared to the six months ended April 30, 1999. Most of this
increase was attributable to the metal building components segment, which was up
10% over the prior year's six month period.
ENGINEERED BUILDING SYSTEMS
For the six months, sales increased by $4.7 million, or 3%, compared to the same
period in fiscal 1999. Poor performance in one of the regional operating units
in the first quarter resulted in a six month increase that was slightly less
than the increase achieved in the second quarter. Engineered building systems
accounted for 33% of total consolidated sales in the first six months of fiscal
2000 compared to 34% for the same period in fiscal 1999.
Operating income declined in the current six months by 6% to $15.3 million
compared to $16.3 million for the same period in fiscal 1999. This decline is
attributed to first quarter results for which operating income was down 23% as
compared to the first quarter of 1999. As a percent of sales, operating income
was 10% in the six months ended April 30, 2000 compared to the 11% for the same
period in fiscal 1999.
METAL BUILDING COMPONENTS
For the six months, sales increased by $28.4 million, or 10%, compared to the
same period in fiscal 1999. Higher sales resulted from a general increase in
industry sales, higher volume in painting and coating resulting from increased
activity, and higher sales in the self-storage industry. This segment accounted
for 67% of total sales in the six months ended April 30, 2000 compared to 66% in
the same period of fiscal 1999.
Operating income increased by $7.0 million, or 24%, compared to the same period
in fiscal 1999. This increase was due primarily to the increased sales volume
and higher plant utilization in the current year. As a percent of sales,
operating income improved to 11% in fiscal 2000 compared to 10% in fiscal 1999.
CONSOLIDATED OPERATING EXPENSES increased by $6.9 million, or 11%, in the
current six months compared to the same period of 1999. Operating expenses
increased at a faster rate than sales due to costs incurred to meet expected
increases in sales demand and technology related costs incurred to complete
projects in the six month period. As a percent of sales, operating expenses were
15.2% in fiscal 2000 compared to 14.8% in the same period in fiscal 1999.
INTEREST EXPENSE for the six month period was $18.8 million compared to $18.9
million in the prior year's six month period. Lower average borrowing levels in
fiscal 2000 were offset by higher rates in the current year.
JOINT VENTURE operations are described under the three month discussion. The
decline in joint venture income resulted in the difference in accounting
treatment for DOUBLECOTE as a result of its acquisition discussed above.
-9-
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
As of April 30, 2000, the Company had working capital of $87.3 million compared
to $60.6 million at the end of fiscal 1999. The majority of this increase came
from a reduction in current liabilities related to payments of year end
incentives and income tax payments for fiscal 2000. The Company generated cash
flow from operations before changes in working capital components of $36.2
million during the first six months of fiscal 2000. This cash flow, along with
additional borrowings under the Company's credit agreements of $31.7 million,
was used to finance the acquisition of DOUBLECOTE, net repurchases of Company
common stock of $13.9 million and capital expenditures of $13.9 million. Because
of the seasonal nature of the Company's operations, working capital needs are
generally funded by debt borrowings early in the year with the majority of debt
reduction occurring in the second half of the year as sales and income increase.
The Company has a $440 million senior credit facility from a syndicate of banks,
which includes a $40 million 364-day facility and a $200 million five-year
revolver which matures on July 1, 2003. In addition, the Company has a five-year
term loan which matures on July 1, 2003 and requires current quarterly payments
of $8.75 million in the second quarter of 2000 and gradually increasing to $12.5
million at maturity. As of April 30, 2000, the Company had $196.2 million
outstanding under the revolving credit facility and had $143.8 million
outstanding under the five-year term loan.
Loans bear interest, at the Company's option, as follows: (1) base rate loans at
the base rate plus a margin that ranges from 0% to 0.5% and (2) LIBOR loans at
LIBOR plus a margin that ranges from 0.75% to 2.0%. Base rate is defined as the
higher of the Bank of America, N.A. prime rate or the overnight Federal funds
rate plus 0.5% and LIBOR is defined as the applicable London interbank offered
rate adjusted for reserves. Based on its current ratios, the Company is paying a
margin of 1.375% on LIBOR loans and 0% on base rate loans.
The 364-day revolver matures on May 1, 2001. Borrowing under the senior credit
facility may be prepaid and the voluntary reduction of the unutilized portion of
the five-year revolver may be made at any time, in certain amounts, without
premium or penalty but subject to LIBOR breakage costs. The Company is required
to make mandatory prepayments on the senior credit facility upon the occurrence
of certain events, including the sale of assets and the issuance and sale of
equity securities, in each case subject to certain limitations.
In addition, the Company has $125 million of senior subordinated notes, which
mature on May 1, 2009. The notes bear interest at the rate of 9.25%.
During the first six months of fiscal 2000, the Company spent $13.9 million for
capital additions for plant expansions, capital replacements and betterments and
the completion of management information systems. The Company plans to spend an
additional $12 million in capital additions during fiscal 2000. Delays, changes
or cancellations of planned projects could increase or decrease capital spending
from the amounts anticipated at the current time.
Inflation has not significantly affected the Company's financial position or
operations. Metal components and engineered building systems sales are affected
more by the availability of funds for construction than interest rates. No
assurance can be given that inflation or interest rates will not fluctuate
significantly, either or both of which could have an adverse effect on the
Company's operations.
Liquidity in future periods will be dependent on internally generated cash
flows, the ability to obtain adequate financing for capital expenditures and
expansion when needed, and the amount of increased working capital necessary to
support expected growth. Based on current capitalization, it is expected that
future cash flows from operations and the availability of alternative sources of
external financing should be sufficient to provide adequate liquidity for the
foreseeable future.
-10-
<PAGE> 13
IMPACT OF YEAR 2000 ISSUE
During 1999, the Company completed a review of its computer systems to identify
the systems that could be affected by the year 2000 issue and implemented its
plans to ensure that its management information systems ("MIS") and computer
software were year 2000 compliant.
To date, the company has not experienced any year 2000 problems with either its
internal MIS or with any third parties with whom it transacts business. The
Company believes that it has addressed all issues which could have a material
adverse effect on its business, financial condition or results of operations.
MARKET RISK DISCLOSURE
The Company is subject to market risk exposure related to changes in interest
rates on its senior credit facility, which includes revolving credit notes and
term notes. These instruments carry interest at a pre-agreed upon percentage
point spread from either the prime interest rate or LIBOR. Under its senior
credit facility, the Company may, at its option, fix the interest rate for
certain borrowings based on a spread over LIBOR for 30 days to six months. At
April 30, 2000, the Company had $340.0 million outstanding under its senior
credit facility. Based on this balance, an immediate change of one percent in
the interest rate would cause a change in interest expense of approximately $3.4
million on an annual basis. The Company's objective in maintaining these
variable rate borrowings is the flexibility obtained regarding early repayment
without penalties and lower overall cost as compared to fixed-rate borrowings.
FORWARD LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements concerning the business and
operations of the Company. Although the Company believes that the expectations
reflected in these forward-looking statements are reasonable, these expectations
and the related statements are subject to risks, uncertainties, and other
factors that could cause the actual results to differ materially from those
projected. These risks, uncertainties, and factors include, but are not limited
to, industry cyclicality and seasonality, adverse weather conditions,
fluctuations in customer demand and order patterns, raw material pricing,
competitive activity and pricing pressure, the ability to make strategic
activities accretive to earnings, and general economic conditions affecting the
construction industry as well as other risks detailed in the Company's filings
with the Securities and Exchange Commission, including its annual report on Form
10-K for the year ended October 31, 1999. The Company expressly disclaims any
obligation to release publicly any updates or revisions to these forward-looking
statements to reflect any change in its expectations.
-11-
<PAGE> 14
NCI BUILDING SYSTEMS, INC.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders (the "Annual Meeting") on
Wednesday, March 1, 2000. At the Annual Meeting, the stockholders of the Company
elected three Class I directors to serve until the annual meeting of
stockholders to be held in 2003. Of the 16,866,733 shares of Common Stock, $0.01
par value, of the Company present at the Annual Meeting, in person or by proxy,
the following table shows the votes cast for and withheld from each of the three
nominees for director:
<TABLE>
<CAPTION>
Votes Cast Votes Withheld
Nominee For Nominee From Nominee
------- ----------- ------------
<S> <C> <C>
CLASS I:
A. R. Ginn 16,321,234 545,499
Kenneth W. Maddox 16,320,034 546,699
Daniel D. Zabcik 16,310,834 555,899
</TABLE>
In addition to Messrs. Ginn, Maddox and Zabcik, the following persons
have a term of office as a director of the Company that continued after the
Annual Meeting: William D. Breedlove, Gary L. Forbes, Robert N. McDonald, Robert
J. Medlock, C.A. Rundell, Jr. and Johnie Schulte.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
-12-
<PAGE> 15
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the
undersigned thereunto duly authorized.
NCI BUILDING SYSTEMS, INC.
--------------------------
(Registrant)
Date: June 13, 2000 By: /s/ ROBERT J. MEDLOCK
--------------------------
Robert J. Medlock
Executive Vice President and
Chief Financial Officer
-13-
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
