NCI BUILDING SYSTEMS INC, 10-K405, 2000-02-01

NCI BUILDING SYSTEMS INC
10-K405, 2000-02-01
PREFABRICATED METAL BUILDINGS & COMPONENTS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended October 31, 1999

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

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 (I.R.S. employer
of incorporation or organization) identification no.)

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

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

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

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

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ] .

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

The aggregate market value of the voting stock held by
non-affiliates of the registrant on January 5, 2000, was $274,331,448.

The number of shares of common stock of the registrant
outstanding on January 5, 2000, was 18,566,412.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Parts I and II of this Annual
Report is incorporated by reference from the registrant's 1999 Annual Report to
Shareholders, and information required by Part III of this Annual Report is
incorporated by reference from the registrant's definitive proxy statement for
its annual meeting of shareholders to be held on March 1, 2000.

===============================================================================

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PART I

ITEM 1. BUSINESS.

GENERAL

NCI Building Systems, Inc. is one of North America's largest
integrated manufacturers of metal products for the building industry. We
operate 39 manufacturing and distribution facilities located in 17 states and
Mexico. We sell metal components and engineered building systems, offering one
of the most extensive metal product lines in the building industry with
well-recognized brand names. We believe that our leading market positions and
strong track record of growth and profitability have resulted from our focus
on:

o Controlling operating and administrative costs

o Managing working capital and fixed assets

o Developing new markets

o Successfully identifying strategic growth opportunities

We believe that metal products have gained and continue to gain a
greater share of the new construction and repair and retrofit markets. This is
due to increasing acceptance and recognition of the benefits of metal products
in building applications. Metal components offer builders, designers,
architects and end-users several advantages, including lower long-term costs,
longer life, attractive aesthetics and design flexibility. Similarly,
engineered building systems offer a number of advantages over traditional
construction alternatives, including shorter construction time, more efficient
use of materials, lower construction costs, greater ease of expansion and lower
maintenance costs.

In May 1998, we acquired Metal Building Components, Inc. ("MBCI") for
a purchase price of $588.5 million. The MBCI acquisition, which doubled our
revenue base, made us the largest domestic manufacturer of nonresidential metal
components and significantly improved our product mix.

Before our combination with MBCI, both companies had individually
demonstrated strong growth in sales. Over the five fiscal years before the MBCI
acquisition, NCI achieved compound annual growth rates of 32.0% in sales. Over
the five fiscal years before its acquisition by NCI, MBCI achieved compound
annual growth rates of 15.8% in sales.

We were founded in 1984 and we reincorporated in Delaware on December
31, 1991. Our principal offices are located at 7301 Fairview, Houston, Texas
77041 and our telephone number is (713) 466-7788. Unless indicated otherwise,
references in this report to NCI, us, or we include our predecessors and our
subsidiaries.

BUSINESS SEGMENTS

We have divided our operations into two reportable segments:
engineered building systems and metal building components, based upon
similarities in product line, manufacturing process, marketing and management
of its business. 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 metal building component products or
services. Our approximate sales to outside customers, operating income and
total assets attributable to these business segments were as follows for the
periods indicated (in thousands):

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1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
SALES TO OUTSIDE CUSTOMERS:
Engineered building systems ..... $ 257,093 63% $ 277,347 41% $ 310,324 33%
Metal building components ....... 150,658 37 397,984 59 626,226 67
Intersegment sales .............. -- -- 25,094 4 59,692 6
Corporate eliminations .......... -- -- (25,094) (4) (59,692) (6)
----------- ------- ----------- -------- ----------- -------
Total net sales ............. $ 407,751 100% $ 675,331 100% $ 936,550 100%
=========== ======= =========== ======== =========== =======
OPERATING INCOME:
Engineered building systems ..... $ 25,518 10% $ 29,576 11% $ 37,509 12%
Metal building components ....... 17,064 11 51,497 13 72,441 12
Corporate eliminations .......... (293) -- (1,764) -- 582 --
----------- ------- ----------- -------- ----------- -------
Total operating income ...... $ 42,289 10% $ 79,309 12% $ 110,532 12%
=========== ======= =========== ======== =========== =======
TOTAL ASSETS:
Engineered building systems ..... $ 91,703 47% $ 86,342 10% $ 88,673 10%
Metal building components ....... 61,911 32 352,407 43 364,533 43
Corporate eliminations .......... 42,718 22 384,788 47 402,277 47
----------- ------- ----------- -------- ----------- -------
Total assets ................ $ 196,332 100% $ 823,537 100% $ 855,783 100%
=========== ======= =========== ======== =========== =======
</TABLE>

For more business segment information, please see the Supplementary
Business Segment Information contained in our 1999 Annual Report to
Shareholders.

Metal Building Components. We are the largest domestic supplier of
metal components to the nonresidential building industry and have a market
share at least twice that of our largest competitor. We are also one of the
largest suppliers in the U.S. of roll-up doors for self-storage facilities. We
design, manufacture, sell and distribute one of the widest selections of
components for a variety of new construction applications as well as repair and
retrofit uses.

The following are the types of components we sell:

o Metal roof and wall systems o Fascia
o Overhead doors o Mansard accessories
o Interior and exterior doors o Trim accessories

Our components are used in the following markets:

o Industrial o Commercial
o Governmental o Agricultural
o Community o Residential

As part of our metal components manufacturing, we also provide hot
roll and light gauge metal coil coating and painting services and products. We
coat and paint hot roll metal coils for our own use in metal components
manufacturing, supplying substantially all of our internal metal coating and
painting requirements. On average, our own use accounts for about 75% of our
production. We also coat and paint hot roll metal coils and light gauge metal
for third parties for a variety of applications, including heating and air
conditioning systems, water heaters, lighting fixtures and office furniture.

We market our metal components products and metal coating and painting
services nationwide primarily through a direct sales force under several brand
names. These brand names include "Metal Building Components," "American
Building Components," "DBCI," "MBCI," "IPS," "Metal Coaters," "Metal-Prep,"
"DOUBLECOTE" and "Midwest Metal Coatings."

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Engineered Building Systems. We are one of the largest domestic
suppliers of engineered building systems. We design, manufacture and market
engineered building systems, self-storage building systems and metal home
framing systems for commercial, industrial, agricultural, governmental,
community and residential uses. We market these systems nationwide through
authorized builder networks totaling over 1,200 builders and a direct sales
force under several brand names. These brand names include "Metallic
Buildings," "Mid-West Steel Buildings," "A & S Buildings," "All American
Systems," "Steel Systems" and "Mesco."

INDUSTRY OVERVIEW

The building industry encompasses a broad range of metal products,
principally composed of steel, sold through a variety of distribution channels
for use in diverse applications. These metal products include metal components
and engineered building systems.

Metal Building Components. Manufacturers of metal components for the
building industry supply pre-formed components, including roof and wall panels,
doors, partitions, related trim, accessories and other metal components used in
engineered building systems and other repair, retrofit and new construction
applications for commercial, industrial, agricultural, governmental, community
and residential uses. Metal components are used in a wide variety of
construction applications, including purlins and girts, roofing, walls, doors,
trim and other parts of traditional buildings, as well as in architectural
applications and engineered building systems. We estimate the metal components
market including roofing applications to be a multi-billion dollar market,
although market data is limited. We believe that the metal components business
is less affected by economic cycles than the engineered building systems
business due to the use of metal components in repair and retrofit
applications. We believe that metal products have gained and continue to gain a
greater share of new construction and repair and retrofit markets due to
increasing acceptance and recognition of the benefits of metal products in
building applications.

Metal roofing accounts for a significant portion of the overall metal
components market, but only approximately 6% of total annual roofing market
expenditures, estimated at over $21.0 billion based on available industry
information. As a result, we believe that significant opportunities exist for
metal roofing, with its advantages over conventional roofing materials, to
increase its overall share of this market. Metal roofing systems have several
advantages over conventional roofing systems, including the following:

o Lower lifecycle cost. The total cost over the life of metal
roofing systems is lower than that of conventional roofing
systems for both new construction and retrofit roofing. For
new construction, the cost of installing metal roofing is
greater than the cost of conventional roofing. Yet, the
longer life and lower maintenance costs of metal roofing make
the cost more attractive. For retrofit roofing, although
installation costs are 60-70% higher for metal roofing due to
the need for a sloping support system, the lower ongoing
costs more than offset the initial cost.

o Increased longevity. Metal roofing systems generally last for
20 years without requiring major maintenance or replacement.
This compares to five to ten years for conventional roofs.
The cost of leaks and roof failures associated with
conventional roofing can be very high, including damage to
building interiors and disruption of the functional
usefulness of the building. Metal roofing prolongs the
intervals between costly and time-consuming repair work.

o Attractive aesthetics and design flexibility. Metal roofing
systems allow architects and builders to integrate colors and
geometric design into the roofing of new and existing
buildings, providing an increasingly fashionable means of
enhancing a building's aesthetics. Conventional roofing
material is generally tar paper or a gravel surface, and
building designers tend to conceal roofs made with these
materials.

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Engineered Building Systems. Engineered building systems consist of
engineered structural beams and panels that are welded and roll formed in a
factory and shipped to a construction site complete and ready for assembly.
Engineered building systems manufacturers design an integrated system that
meets applicable building code requirements. These systems consist of primary
structural framing, secondary structural members like purlins and girts and
covering for roofs and walls. Over the last 15 years, engineered building
systems have significantly increased penetration of the market for
nonresidential low rise structures and are being used in a broad variety of
other applications. According to the Metal Building Manufacturers Association,
reported sales of engineered building systems have increased from approximately
$1.5 billion in 1993 to $2.7 billion in 1998. We believe this increase has
resulted primarily from (1) the significant cost advantages offered by these
systems, (2) increased architectural acceptance of engineered building systems
for construction of commercial and industrial building projects, (3) advances
in design versatility and production processes and (4) a favorable economic
environment. We believe the cost of an engineered building system generally
represents approximately 15-20% of the total cost of constructing a building,
which includes land cost, labor, plumbing, electrical, heating and air
conditioning systems installation and interior finish. Technological advances
in products and materials, as well as significant improvements in engineering
and design techniques, have led to the development of structural systems that
are compatible with more traditional construction materials. Architects and
designers now often combine an engineered building system with masonry, glass
and wood exterior facades to meet the aesthetic requirements of customers while
preserving the inherent characteristics of engineered building systems. As a
result, the uses for engineered building systems now include office buildings,
showrooms, retail stores, banks, schools, warehouses, factories and
distribution centers, and government and community centers for which aesthetics
and architectural features are important considerations of the end users.

In our marketing efforts, we and other major manufacturers generally
emphasize the following characteristics of engineered building systems to
distinguish them from other methods of construction:

o Shorter construction time. In many instances, it takes less
time to construct an engineered building than other building
types. In addition, because most of the work is done in the
factory, the likelihood of weather interruptions is reduced.

o More efficient material utilization. The larger engineered
building systems manufacturers use computer-aided analysis
and design to fabricate structural members with high
strength-to-weight ratios, minimizing raw materials costs.

o Lower construction costs. The in-plant manufacture of
engineered building systems, coupled with automation, allows
the substitution of less expensive factory labor for much of
the skilled on-site construction labor otherwise required for
traditional building methods.

o Greater ease of expansion. Engineered building systems can be
modified quickly and economically before, during or after the
building is completed to accommodate all types of expansion.
Typically, an engineered building system can be expanded by
removing the end or side walls, erecting new framework and
adding matching wall and roof panels.

o Lower maintenance costs. Unlike wood, metal will not
deteriorate because of cracking, rot or insect damage.
Furthermore, factory-applied roof and siding panel coatings
resist cracking, peeling, chipping, chalking and fading.

Consolidation. Over the last several years, there has been
consolidation in the metal components and engineered building systems industry,
which includes a large number of small local and regional firms. We believe
that this industry will continue to consolidate, driven by the needs of
manufacturers to increase manufacturing capacity, achieve greater process
integration and add geographic diversity to meet customers' product and
delivery needs, improve production efficiency and manage costs.

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PRODUCTS AND MARKETS

Our product lines consist of metal components for the building
industry and engineered building systems.

Metal Building Components. Our metal components consist of individual
components, including secondary structural framing, covering systems and
associated metal trims, that are sold directly to contractors or end users for
use in the building industry, including the construction of metal buildings. We
also stock and market metal component parts for use in the maintenance and
repair of existing buildings. Specific component products consist of end and
side wall panels, roof panels, purlins, girts, partitions, header panels and
related trim and screws. We believe we offer the widest selection of metal
components in the building industry.

Purlins and girts are medium gauge, roll formed steel components. They
are supplied to builders for secondary structural framing. We custom produce
purlins and girts for our customers and offer the widest selection of sizes and
profiles in the United States. Covering systems, consisting of wall and roof
panels, protect the rest of the structure and the contents of the building from
the weather. They also contribute to the structural integrity of the building.

Our metal roofing products are attractive and durable. We use standing
seam roof technology to replace traditional built-up and single-ply roofs as
well as to provide a distinctive look to new construction. We manufacture and
design metal roofing systems for sales to regional metal building
manufacturers, general contractors and subcontractors. We believe we have the
broadest line of standing seam roofing products in the building industry. We
also have developed and patented a retrofit metal panel, Retro-R(R), that is
used to replace wall and roof panels of metal buildings. Retro-R(R) can be
installed over the top of existing metal panels to remodel or preserve a
standing structure. Although metal roofing is somewhat more expensive than
traditional roofing in upfront costs, its durability and low maintenance costs
make metal roofing a lower cost roofing product after the first 10 years.

We manufacture overhead doors and interior and exterior doors for use
in metal and other buildings. We are one of the largest suppliers in the U.S.
of roll-up doors to builders of self-storage facilities.

We provide our own metal coating and painting products and services
for use in component manufacturing. We also provide pre-painted hot roll coils
to manufacturers of engineered building systems and metal components. Either a
customer provides coils through its own supply channels, which are processed by
us, or we purchase hot roll coils and process them for sale as a packaged
product. We also pre-paint light gauge steel coils for steel mills, which
supply the painted coils to various industrial users, including manufacturers
of engineered building systems, metal components and lighting fixtures.

Our metal coating and painting operations apply a variety of paint
systems to metal coils. The process generally includes cleaning and painting
the coil and slitting it to customer specifications. We believe that
pre-painted metal coils are a better quality product, environmentally cleaner
and more cost-effective than painted metal products prepared in other
manufacturers' in-house painting operations. Painted metal coils also offer
manufacturers the opportunity to produce a broader and more aesthetically
pleasing range of products.

Engineered Building Systems. Engineered building systems consist of
pre-engineered structural beams and panels that are welded and roll formed in a
factory and shipped to a construction site complete and ready for assembly. We
design an integrated engineered building system that meets customer
specifications and allows easy on-site assembly by the builder or independent
contractor. Engineered building systems typically consist of three systems:

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

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

o Covering systems. Covering systems consist of roof and wall
panels. These panels not only lock out the weather but also
contribute to the structural integrity of the overall
building system. Roof and siding panels are fabricated from
light-gauge, roll-formed steel.

Accessory components complete the engineered building system. These
components include doors, windows, gutters and interior partitions.

SALES, MARKETING AND CUSTOMERS

Metal Building Components. We sell metal components directly to
regional manufacturers, contractors, subcontractors, distributors, lumberyards,
cooperative buying groups and other customers under the brand names "Metal
Building Components," "American Building Components," "MBCI" and "IPS." Roll-up
doors, interior and exterior doors, interior partitions and walls, header
panels and trim are sold directly to contractors and other customers under the
brand names "Doors & Building Components" or "DBCI." These components also are
produced for integration into self storage and engineered building systems sold
by us.

We market our components products within four product lines:
commercial/industrial, architectural, wood frame builders and residential.

Customers include regional engineered building systems manufacturers,
general contractors, subcontractors, roofing installers, architects and
end-users. Commercial and industrial businesses are heavy users of metal
components and metal buildings systems. Standing seam roof and architectural
customers are growing in importance. As metal buildings become a more
acceptable building alternative and aesthetics become an increasingly important
consideration for end users of metal buildings, we believe that architects are
participating in metal building design and purchase decisions to a greater
extent. Wood frame builders also purchase our metal components through
distributors, lumberyards, cooperative buying groups and chain stores for
various uses, including agricultural buildings. Residential customers are
generally contractors building upscale homes that require an
architect-specified product.

Our metal components sales operations are organized into four
geographic regions. Each region is headed by a general sales manager supported
by individual plant sales managers. Each local sales office is located adjacent
to a manufacturing plant and is staffed by a direct sales force responsible for
contacting customers and architects and a sales coordinator who supervises the
sales process from the time the order is received until it is shipped and
invoiced. The regional and local focus of our customers requires extensive
knowledge of local business conditions. During fiscal 1999, our largest
customer for metal components accounted for less than 2% of our total sales.

We provide our customers with product catalogs tailored to our product
lines, which include product specifications and suggested list prices. Some of
our catalogs are available on-line through the Internet, which enables
architects and other customers to download drawings for use in developing
project specifications.

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Customers place orders via telephone or facsimile to a sales coordinator at the
regional office who enters it onto a standard order form. The form is then sent
via computer to the plant and downloaded automatically to the production
machines.

We have a small number of national accounts for our coating and
painting products and services and rely on a single sales manager. Our metal
coating joint ventures have independent sales forces.

Engineered Building Systems. We sell engineered building systems to
builders nationwide under the brand names "Metallic Buildings," "A&S Buildings"
and "Mesco." We market engineered building systems through an in-house sales
force to authorized builder networks of over 1,200 builders. We market
engineered building systems under the brand name "Mid-West Steel Buildings"
directly to contractors in Texas and surrounding states using an in-house sales
force. We also sell engineered building systems under the name "All American
Systems" and various private labels.

Our authorized builder networks consist of independent general
contractors that market our Metallic Buildings, A&S Buildings and Mesco
products to end users. Most of our sales of engineered building systems outside
of Texas and surrounding states are through our authorized builder networks. We
rely upon maintaining a satisfactory business relationship for continuing job
orders from our authorized builders and do not consider the builder agreements
to be material to our business. During fiscal 1999, our largest customer for
engineered building systems accounted for less than 2% of our total sales.

We enter into an agreement with an authorized builder, which generally
grants the builder the non-exclusive right to market our products in a
specified territory. The agreement is cancelable by either party on 60 days
notice. The agreement does not prohibit the builder from marketing engineered
building systems of other manufacturers. We establish an annual sales goal for
each builder and provide the builder with sales and pricing information, design
and engineering manuals, drawings and assistance, application programs for
estimating and quoting jobs and advertising and promotional literature. We also
defray a portion of the builder's advertising costs and provide volume
purchasing and other pricing incentives to encourage it to deal exclusively or
principally with us. The builder is required to maintain a place of business in
its designated territory, provide a sales organization, conduct periodic
advertising programs and perform construction, warranty and other services for
customers and potential customers. An authorized builder usually is hired by an
end user to erect an engineered building system on the customer's site and
provide general contracting and other services related to the completion of the
project. We sell our products to the builder, which generally includes the
price of the building as a part of its overall construction contract with its
customer.

MANUFACTURE AND DESIGN

Metal Building Components. We operate 37 facilities used for
manufacturing of metal components for the building industry, including our
metal coating and painting operations. We believe this broad geographic
penetration gives us an advantage over our components competitors because major
elements of a customer's decision are the speed and cost of delivery from the
manufacturing facility to the product's ultimate destination. With the
exception of our architectural and standing seam products, we are not involved
in the design process for the components we manufacture. We also own a fleet of
trucks to deliver our products to our customers in a more timely manner than
most of our competitors.

Our doors, interior partitions and other related panels and trim
products are manufactured at dedicated plants in Georgia, Texas and Arizona.
Orders are processed at the Georgia plant and sent to the appropriate plant,
which is generally determined based upon the lowest shipping cost.

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Metal component products are roll-formed or fabricated at each plant
using roll-formers and other metal working equipment. In roll forming,
pre-finished coils of steel are unwound and passed through a series of
progressive forming rolls which form the steel into various profiles of
medium-gauge structural shapes and light-gauge sheets and panels.

We operate two metal coating and painting facilities for hot rolled,
medium gauge steel coils and two metal coating and painting facilities for
painting light gauge steel coils. These facilities primarily service our needs,
but we also process steel coils at these facilities for other manufacturers.
Metal coating and painting processes involve applying various types of chemical
treatments and paint systems to flat rolled continuous coils of metal,
including steel and aluminum. These processes give the coils a baked-on finish
that both protects the metal and makes it more attractive. Initially, various
metals in coil form are flattened, cleaned and pretreated. The metal is then
coated, oven cured, cooled, recoiled and packaged for shipment. Slitting and
embossing services can also be performed on the coated metal before shipping
according to customer specifications. Hot roll steel coils typically are used
in the production of secondary structural framing of metal buildings and other
structural applications. Painted light gauge steel coils are used in the
manufacture of products for building exteriors, metal doors, lighting fixtures
and appliances. Our metal coating operation is one of only two metal coaters in
the United States to receive the Supplier Excellence Award from Bethlehem Steel
Corporation.

We are a joint venture partner in two metal coating operations. We own
50% of a metal coating joint venture with a processing plant in Jackson,
Mississippi for painting light gauge steel coils. We also own 50% of a joint
venture that recently constructed a hot rolled coil coating facility in Granite
City, Illinois that commenced operations in April, 1999. The Granite City
facility is used to slit and coat hot rolled coils of medium gauge steel for
use in manufacturing purlins and girts. We have agreed to purchase a
substantial portion of our production requirements for that product from the
Granite City joint venture.

Engineered Building Systems. After we receive an order, our engineers
design the engineered building system to meet the customer's requirements and
to satisfy applicable building codes and zoning requirements. To expedite this
process, we use computer-aided design and engineering systems to generate
engineering and erection drawings and a bill of materials for the manufacture
of the engineered building system. We employ approximately 228 engineers and
draftsmen in this area.

Once the specifications and designs of the customer's project have
been finalized, the manufacturing of frames and other building systems begins
at one of our six frame manufacturing facilities in Texas, Georgia, South
Carolina or Tennessee or our joint venture facility in Mexico. The fabrication
of the primary structural framing consists of a process in which rigid steel
plates are punched and sheared and then routed through an automatic welding
machine and sent through further fitting and welding processes. The secondary
structural framing and the covering subsystem are roll-formed steel products
that are manufactured at our full manufacturing facilities as well as our
components plants.

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

We own 51% of a joint venture, which began operation of a framing
facility in Monterrey, Mexico in July 1997. We purchase substantially all of
the framing systems produced by the Mexico joint venture.

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RAW MATERIALS

The principal raw material used in the manufacture of our metal
components products and engineered building systems is steel. Components are
fabricated from common steel products produced by mills including bars, plates,
sheets and galvanized sheets. During the 1999 fiscal year, we purchased
approximately 82% of our steel requirements from National Steel Corporation and
Bethlehem Steel Corporation. No other steel supplier accounted for more than
10% of steel purchases for the same period. We believe concentration of our
steel purchases among a small group of suppliers that have mills and warehouse
facilities close to our facilities enables us, as a large customer of those
suppliers, to obtain better service and delivery. These suppliers generally
maintain an inventory of the types of materials we require. This enables us to
utilize a form of "just-in-time" inventory management with regard to raw
materials.

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

BACKLOG

At October 31, 1999, the total backlog for orders for our products
believed by us to be firm was $157 million. This compares with a total backlog
for our products of $137 million at October 31, 1998. The increases in backlog
reflect the results of our marketing activities and market demand. Backlog
primarily consists of engineered building systems. Job orders generally are
cancelable by customers at any time for any reason. Occasionally, orders in the
backlog are not completed and shipped for reasons that include changes in the
requirements of the customers and the inability of customers to obtain
necessary financing or zoning variances. None of the backlog at October 31,
1999 currently is scheduled to extend beyond October 31, 2000.

COMPETITION

Competition in the metal components and metal buildings markets of the
building industry is intense. It is based primarily on:

o price
o speed of construction
o ability to provide added value in the design and engineering of
buildings
o service
o quality
o delivery

We compete with a number of other manufacturers of metal components
and engineered building systems for the building industry, ranging from small
local firms to large national firms. Most of these competitors operate on a
regional basis, although we believe that at least four other manufacturers of
engineered building systems and several manufacturers of metal components have
nationwide coverage. In addition, we and other manufacturers of metal
components and engineered building systems compete with alternative methods of
building construction, which may be perceived as more traditional, more
aesthetically pleasing or having other advantages.

REGULATORY MATTERS

We must comply with a wide variety of federal, state and local laws
and regulations governing the protection of the environment. These laws and
regulations cover air emissions, discharges to water, the generation, handling,
storage, transportation, treatment and disposal of hazardous substances, the
cleanup of contamination, the control of noise and odors and other materials
and health and safety matters. Laws protecting the environment

9
<PAGE> 11

generally have become more stringent than in the past and are expected to
continue to do so. Environmental laws and regulations generally impose strict
liability. This means that in some situations we could be exposed to liability
for cleanup costs, and toxic tort or other damages as a result of conduct that
was lawful at the time it occurred or because of the conduct of or conditions
caused by prior operators or other third parties. This strict liability is
regardless of fault on our part. We believe we are in substantial compliance
with all environmental standards applicable to our operations. We cannot assure
you, however, that cleanup costs, natural resource damages, criminal sanctions,
toxic tort or other damages arising as a result of environmental laws and costs
associated with complying with changes in environmental laws and regulations
will not be substantial and will not have a material adverse effect on our
financial condition. From time to time, claims have been made against us under
environmental laws. We have insurance coverage applicable to some environmental
claims and to specified locations after payment of the applicable deductible.
We do not anticipate material capital expenditures to meet current
environmental quality control standards. We cannot assure you that more
stringent regulatory standards will not be established that might require
material capital expenditures.

We also must comply with federal, state and local laws and regulations
governing occupational safety and health, including review by the federal
Occupational Health and Safety Administration and similar state agencies. We
believe we are in substantial compliance with applicable laws and regulations.
Compliance does not have a material adverse affect on our business.

The engineered building systems we manufacture must meet zoning and
building code requirements adopted by local governmental agencies.

PATENTS, LICENSES AND PROPRIETARY RIGHTS

We have a number of United States patents and pending patent
applications, including patents relating to metal roofing systems and metal
overhead doors. We do not, however, consider patent protection to be a material
competitive factor in our industry. We also have several registered trademarks
and pending registrations in the United States.

EMPLOYEES

As of October 31, 1999, we had approximately 3,550 employees, of whom
over 2,570 were manufacturing and engineering personnel. We regard our employee
relations as satisfactory.

Our employees are not represented by a labor union or collective
bargaining agreement. The United Steel Workers of America petitioned the
National Labor Relations Board to be recognized as the collective bargaining
representative of the production and maintenance employees of our Tallapoosa,
Georgia facility. A union election was held at the Tallapoosa facility in
January 1996, and the union lost the election. Similar elections were held at
our Mattoon, Illinois facility in November 1997 and our Rancho Cucamongo,
California facility in August 1998 and November 1999. The United Steel Workers
of America lost each of those elections.

ITEM 2. PROPERTIES.

The Company conducts manufacturing operations at the following
facilities:

Square Owned
Facility Products Feet or Leased
- -------- -------- ------- ---------
<S> <C> <C> <C>
Chandler, Arizona Doors and related metal components 35,000 Leased
Tomlinson, Arizona Metal components(1) 65,980 Owned
Atwater, California Metal components(2) 85,700 Owned
Rancho Cucamonga, California Metal coating and painting 98,000 Owned
</TABLE>

<PAGE> 12

Square Owned
Facility Products Feet or Leased
- -------- -------- ------- ---------
<S> <C> <C> <C>
Tampa, Florida Metal components(3) 28,775 Owned
Adel, Georgia Metal components(1) 59,550 Owned
Douglasville, Georgia Metal components(4) 110,536 Owned
Douglasville, Georgia Doors and related metal components 60,000 Owned
Marietta, Georgia Metal coating and painting 125,700 Owned
Tallapoosa, Georgia Engineered building systems(5) 246,000 Leased
Metal components
Nampa, Idaho Metal components(3) 42,900 Owned
Granite City, Illinois(6) Metal coating and painting 94,000 Owned
Mattoon, Illinois Metal components(2) 90,600 Owned
Shelbyville, Indiana Metal components(3) 66,450 Owned
Nicholasville, Kentucky Metal components(7) 41,280 Owned
Monterrey, Mexico(8) Engineered building systems(9) 64,125 Owned
Jackson, Mississippi Metal components(2) 96,000 Owned
Jackson, Mississippi(9) Metal coating and painting 363,200 Owned
Omaha, Nebraska Metal components(6) 51,750 Owned
Rome, New York Metal components(3) 57,700 Owned
Oklahoma City, Oklahoma Metal components(1) 59,695 Owned
Chester, South Carolina Engineered building systems(5) 124,000 Owned
Metal components
Caryville, Tennessee Engineered building systems(5) 193,800 Owned
Metal components
Memphis, Tennessee Metal coating and painting 61,500 Owned
Nesbitt, Tennessee Metal components(1) 71,720 Owned
Ennis, Texas Metal components and studs 33,000 Owned
Grand Prairie, Texas Metal components(1) 48,027 Owned
Houston, Texas Metal components 97,000 Owned
Houston, Texas (10) Metal components(4) 209,355 Owned
Houston, Texas Metal coating and painting 39,550 Owned
Houston, Texas(11) Engineered building systems(5) 358,375 Owned
Metal components
Houston, Texas Doors 23,625 Owned
Houston, Texas Engineered building systems (9) 70,200 Leased
Lubbock, Texas Metal components(1)(7) 64,320 Owned
San Antonio, Texas Metal components(3) 52,360 Owned
Southlake, Texas Engineered building systems(5) 123,000 Owned
Metal components
Stafford, Texas Metal components 56,840 Leased
Salt Lake City, Utah Metal components(1) 93,150 Owned
Colonial Heights, Virginia Metal components(1) 37,000 Owned
</TABLE>
- ---------------------

(1) Secondary structures and covering systems.
(2) Includes secondary structures and covering systems.
(3) Covering systems or products.
(4) Full components product range.
(5) Primary structures, secondary structures and covering systems.
(6) We own a 50% interest in a joint venture that owns this facility.
(7) Specialized products.
(8) We own a 51% interest in a joint venture that owns this facility.
(9) Primary structures.
(10) Includes 18,000 square feet used for the principal offices of the metal
building components division.
(11) Includes 33,600 square feet used for our principal executive offices and
the principal offices of the engineered buildings division.

11
<PAGE> 13

We also maintain several drafting office facilities and retail
locations in various states. We have short-term leases for these additional
facilities.

We believe that our present facilities are adequate for our current
and projected operations.

We have purchased approximately five acres of land in Houston, Texas
where we have constructed a new 60,000 square foot facility. The new facility
will be used as our principal executive and administrative offices.

We are constructing a new facility on land that we already own in
Houston, which will manufacture primary structures. When completed, the new
facility will replace the manufacturing facility for primary structures that we
currently lease in Houston.

ITEM 3. LEGAL PROCEEDINGS.

We are involved in various legal proceedings that we consider to be in
the normal course of business. We believe that these proceedings will not have
a material adverse effect on our results of operations or financial condition.

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

Not applicable.

PART II

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

The information required by this Item is incorporated by reference
from our 1999 Annual Report to Shareholders, bottom of page 28, regarding the
market for our common stock.

ITEM 6. SELECTED FINANCIAL DATA.

The information required by this Item is incorporated by reference
from our 1999 Annual Report to Shareholders, top of the inside front cover.

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

The information required by this Item is incorporated by reference
from the following portions of our 1999 Annual Report to Shareholders:
Management's Discussion and Analysis of Results of Operations and Financial
Condition, pages 25 through 27.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The information required by this Item is incorporated by reference
from our 1999 Annual Report to Shareholders, page 27.

12
<PAGE> 14

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The following consolidated financial statements and supplementary
financial information are incorporated by reference from the indicated pages in
our 1999 Annual Report to Shareholders.

Pages of
Annual Report
to Shareholders
---------------
<S> <C>
Selected quarterly financial data 28

Consolidated statements of income for
each of the three years in the period
ended October 31, 1999 14

Consolidated balance sheets at
October 31, 1999 and 1998 15

Consolidated statements of shareholders'
equity for each of the three years in the
period ended October 31, 1999 16

Consolidated statements of cash flows
for each of the three years in the
period ended October 31, 1999 17

Notes to consolidated financial statements 18--23

Report of independent auditors 23
</TABLE>

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

Not applicable.

PART III

The information required by Items 10 through 13 of Part III is
incorporated by reference from the indicated pages of our definitive proxy
statement for our annual meeting of shareholders to be held on March 1, 2000.

Pages of
Proxy Statement
---------------
<S> <C> <C>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. 3--7

ITEM 11. EXECUTIVE COMPENSATION. 8--11

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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. 15
</TABLE>

<PAGE> 15

PART IV

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

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

1. Consolidated financial statements (see Item 8).

2. Consolidated financial statement schedules.

Schedule II--Valuation and Qualifying Accounts

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

3. Exhibits.

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

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

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

3.4 Certificate of Amendment to Restated Certificate of
Incorporation of NCI (filed as Exhibit 2.4 to NCI's
registration statement on Form 8-A filed with the SEC on
July 20, 1998 and incorporated by reference herein)

3.5 Certificate of Amendment to Restated Certificate of
Incorporation of NCI (filed as Exhibit 3.5 to NCI's Annual
Report on Form 10-K for the fiscal year ended October 31,
1998 and incorporated by reference herein)

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

3.7 Amendment No. 1 to Amended and Restated By-Laws of NCI
(filed as Exhibit 3.7 to NCI's registration statement no.
333-80029 and incorporated by reference herein)

*3.8 Amendment No. 2 to Amended and Restated By-Laws of NCI

4.1 Form of certificate representing shares of Company's
common stock (filed as Exhibit 1 to NCI's registration
statement on Form 8-A filed with the SEC on July 20, 1998
and incorporated by reference herein)

<PAGE> 16

4.2 Credit Agreement, dated March 25, 1998 (the "Credit
Agreement"), by and among NCI, NationsBank, N.A. (as
successor in interest to NationsBank of Texas, N.A.), as
administrative agent ("NationsBank"), NationsBanc
Montgomery Securities LLC, as arranger and syndication
agent, Swiss Bank Corporation, as documentation agent
("Swiss Bank"), and the several lenders named therein
(filed as Exhibit 4.3 to NCI's Annual Report on Form
10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)

4.3 First Amendment to Credit Agreement, dated May 1, 1998,
among NCI, NationsBank, Swiss Bank and the parties named
therein (filed as Exhibit 4.4 to NCI's Annual Report on
Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)

4.4 Second Amendment to Credit Agreement, dated May 5, 1998,
among NCI, NationsBank, Swiss Bank and the parties named
therein (filed as Exhibit 4.5 to NCI's Annual Report on
Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)

4.5 Waiver, Consent and Third Amendment to Credit Agreement,
dated May 5, 1999, among NCI, Nations Bank, UBS AG and
the parties named therein (filed as Exhibit 4.5 to NCI's
registration statement No. 333-80029 and incorporated by
reference herein)

4.6 Master Assignment and Acceptance, dated as of May 6,
1998, among NationsBank, Swiss Bank and the several
lenders named therein (filed as Exhibit 4.6 to NCI's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference herein)

4.7 Facility A Notes (Revolving Credit), dated May 6, 1998,
of NCI in favor of lenders named therein (filed as
Exhibit 4.7 to NCI's Annual Report on Form 10-K for the
fiscal year ended October 31, 1998 and incorporated by
reference herein)

4.8 Facility B Notes (Term Loan), dated May 6, 1998, of NCI
in favor of lenders named therein (filed as Exhibit 4.8
to NCI's Annual Report on Form 10-K for the fiscal year
ended October 31, 1998 and incorporated by reference
herein)

4.9 Guaranty, dated May 1, 1998, between NationsBank and A&S
Building Systems, L.P. (filed as Exhibit 4.10 to NCI's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference herein)

4.10 Guaranty, dated May 1, 1998, between NationsBank and NCI
Building Systems, L.P. (filed as Exhibit 4.11 to NCI's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference herein)

4.11 Guaranty, dated May 1, 1998, between NationsBank and NCI
Holding Corp. (filed as Exhibit 4.12 to NCI's Annual
Report on Form 10-K for the fiscal year ended October
31, 1998 and incorporated by reference herein)

4.12 Guaranty, dated May 1, 1998, between NationsBank and NCI
Operating Corp. (filed as Exhibit 4.13 to NCI's Annual
Report on Form 10-K for the fiscal year ended October
31, 1998 and incorporated by reference herein)

15
<PAGE> 17

4.13 Guaranty, dated May 1, 1998, between NationsBank and
Metal Building Components, L.P. (formerly MBCI
Operating, L.P.) (filed as Exhibit 4.16 to NCI's Annual
Report on Form 10-K for the fiscal year ended October
31, 1998 and incorporated by reference herein)

4.14 Guaranty, dated May 1, 1998, between NationsBank and
Metal Coaters Operating, L.P. (filed as Exhibit 4.17 to
NCI's Annual Report on Form 10-K for the fiscal year
ended October 31, 1998 and incorporated by reference
herein)

4.15 Guaranty, dated May 13, 1998, between NationsBank and
Metal Coaters of California, Inc. (filed as Exhibit 4.18
to NCI's Annual Report on Form 10-K for the fiscal year
ended October 31, 1998 and incorporated by reference
herein)

4.16 Pledge Agreement, dated May 1, 1998, between NCI and
NationsBank (filed as Exhibit 4.19 to NCI's Annual
Report on Form 10-K for the fiscal year ended October
31, 1998 and incorporated by reference herein)

4.17 Pledge Agreement, dated May 1, 1998, between NCI Holding
Corp. and NationsBank (filed as Exhibit 4.20 to NCI's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference herein)

4.18 Assignment of Partnership Interests, dated May 1, 1998,
between NCI Operating Corp. and NationsBank (filed as
Exhibit 4.22 to NCI's Annual Report on Form 10-K for the
fiscal year ended October 31, 1998 and incorporated by
reference herein)

4.19 Assignment of Partnership Interests, dated May 1, 1998,
between NCI Holding Corp. and NationsBank (filed as
Exhibit 4.23 to NCI's Annual Report on Form 10-K for the
fiscal year ended October 31, 1998 and incorporated by
reference herein)

4.20 Promissory Note, dated May 5, 1998, of NCI Holding Corp.
in favor of NCI (filed as Exhibit 4.26 to NCI's Annual
Report on Form 10-K for the fiscal year ended October
31, 1998 and incorporated by reference herein)

4.21 Note Pledge Agreement, dated May 5, 1998, between NCI
and NationsBank (filed as Exhibit 4.27 to NCI's Annual
Report on Form 10-K for the fiscal year ended October
31, 1998 and incorporated by reference herein)

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

4.23 $250,000 Promissory Note A, dated October 31, 1991, in
favor of the City of Mattoon executed by NCI (filed as
Exhibit 4.12 to NCI's registration statement no.
33-45612 and incorporated by reference herein)

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

16
<PAGE> 18

4.25 $250,000 Promissory Note B, dated January 20, 1992, in
favor of the City of Mattoon executed by NCI (filed as
Exhibit 4.14 to NCI's registration statement no.
33-45612 and incorporated by reference herein)

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

4.27 7% Convertible Subordinated Debenture dated April 1,
1996, Due April 1, 2001, between NCI Building Systems,
Inc. and John T. Eubanks (filed as Exhibit 4.15 to NCI's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1996, and incorporated by reference herein)

4.28 Rights Agreement, dated June 24, 1998, between NCI and
Harris Trust and Savings Bank (filed as Exhibit 2 to
NCI's registration statement on Form 8-A (filed with the
SEC on July 9, 1998 and incorporated by reference
herein)

4.29 First Amendment to Rights Agreement, dated June 24,
1999, by and between NCI and Harris Trust and Savings
Bank (filed as Exhibit 3 to NCI's registration statement
on Form 8- A, Amendment No. 1 filed with the SEC on June
25, 1999 and incorporated by reference herein)

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

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

*10.3 Amended and Restated Bonus Program, as amended and
restated on December 11, 1998 and September 9, 1999

10.4 Amended and Restated Nonqualified Stock Option Plan, as
amended and restated on December 12, 1996 (filed as
Exhibit 10.4 to NCI's Annual Report on Form 10-K for the
fiscal year ended October 31, 1998 and incorporated by
reference herein)

*10.5 Amendment No. 1 to Amended and Restated Stock Option
Plan

*10.6 Amendment No. 2 to Amended and Restated Stock Option
Plan

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

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

10.9 401(k) Profit Sharing Plan (filed as Exhibit 4.1 to
NCI's registration statement no. 33-52078 and
incorporated by reference herein)

<PAGE> 19

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

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

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

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

10.14 Form of Mesco Metal Buildings Agreement (filed as
Exhibit 4.13 to NCI's Annual Report on Form 10-K for the
fiscal year ended October 31, 1996 and incorporated by
reference herein)

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

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

10.17 Employment Agreement, dated April 1, 1996, between NCI
and John T. Eubanks (filed as Exhibit 10.19 to NCI's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1997 and incorporated by reference herein)

10.18 Stock Purchase Agreement, dated March 25, 1998, by and
among BTR Australia Limited and NCI, and joined therein
for certain purposes by BTR plc (filed as Exhibit 2.1 to
NCI's Current Report on Form 8-K dated May 19, 1998 and
incorporated by reference herein)

10.19 Letter Agreement, dated May 4, 1998, by and among NCI,
BTR Australia Limited and BTR plc, amending the Stock
Purchase Agreement (filed as Exhibit 2.2 to NCI's
Current Report on Form 8-K dated May 19, 1998 and
incorporated by reference herein)

10.20 Note Purchase Agreement, dated April 30, 1999, by and
among NCI, the guarantors named therein, Warburg Dillon
Read LLC, Montgomery NationsBanc Securities LLC, First
Union Capital Markets Corp. and Bear, Stearns & Co. Inc.
(filed as Exhibit 10.18 to NCI's registration statement
no. 333-80029 and incorporated by reference herein)

18
<PAGE> 20

10.21 Registration Rights Agreement, dated May 5, 1999, by and
among NCI, the guarantors named therein, Warburg Dillon
Read LLC, Montgomery NationsBanc Securities LLC, First
Union Capital Markets Corp. and Bear, Stearns & Co. Inc.
(filed as Exhibit 10.19 to NCI's registration statement
no. 333-80029 and incorporated by reference herein)

10.22 Indenture, dated May 5, 1999, by and among NCI, the
guarantors named therein and Harris Trust Company of New
York (filed as Exhibit 10.20 to NCI's registration
statement no. 333-80029 and incorporated by reference
herein)

*13 1999 Annual Report to Shareholders. With the exception
of the information incorporated by reference into Items
5, 6, 7 and 8 of this Form 10-K, the 1999 Annual Report
to Shareholders is not to be deemed filed as part of
this Form 10-K.

*21 List of Subsidiaries

*23 Consent of Independent Auditors

*27 Financial Data Schedule

- --------------------------
* Filed herewith

(b) Reports on Form 8-K.

None

"This Annual Report contains forward-looking statements concerning our business
and operations. Although we believe that the expectations reflected in the
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 other factors include, but are not limited to,
industry cyclicality and seasonality, adverse weather conditions, fluctuations
in customer demand and other 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 our filings with the
SEC. We expressly disclaim any obligations to release publicly any updates or
revisions to these forward-looking statements to reflect any changes in our
expectations."

<PAGE> 21

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 31st day of
January, 1999.

NCI BUILDING SYSTEMS, INC.

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

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of the 31st day of January, 1999.

Name Title
---- -----
<S> <C>
/s/ Johnie Schulte Chief Executive Officer and Director
- -------------------------- (principal executive officer)
Johnie Schulte

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

/s/ Thomas C. Arnett Director
- --------------------------
Thomas C. Arnett

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

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

/s/ A.R. Ginn Director
- --------------------------
A.R. Ginn

/s/ Kenneth W. Maddox Director
- --------------------------
Kenneth W. Maddox

/s/ Robert N. McDonald Director
- --------------------------
Robert N. McDonald

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

/s/ Daniel D. Zabcik Director
- --------------------------
Daniel D. Zabcik
</TABLE>

<PAGE> 22

NCI BUILDING SYSTEMS, INC.

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

Balance at Additions Balance
Beginning Charged to Costs at End
Description of Period and Expenses Deductions(1) of Period
----------- --------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Year ended October 31, 1999:
Reserves and allowances
deducted from asset accounts:
Allowance for uncollectible
accounts and backcharges ............ $ 2,321,000 $ 2,402,000 $ 1,414,000 $ 3,309,000
Year ended October 31, 1998:
Reserves and allowances
deducted from asset accounts:
Allowance for uncollectible
accounts and backcharges ............ $ 1,498,000 $ 2,625,000 $ 1,802,000 $ 2,321,000
Year ended October 31, 1997:
Reserves and allowances
deducted from asset accounts:
Allowance for uncollectible
accounts and backcharges ............ $ 1,629,000 $ 1,223,000 $ 1,354,000 $ 1,498,000
</TABLE>

(1) Uncollectible accounts, net of recoveries.

<PAGE> 23

INDEX TO EXHIBITS

Exhibit
Number Description
------- -----------
<S> <C>

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

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

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

3.4 Certificate of Amendment to Restated Certificate of
Incorporation of NCI (filed as Exhibit 2.4 to NCI's
registration statement on Form 8-A filed with the
SEC on July 20, 1998 and incorporated by reference
herein)

3.5 Certificate of Amendment to Restated Certificate of
Incorporation of NCI (filed as Exhibit 3.5 to NCI's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference
herein)

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

3.7 Amendment No. 1 to Amended and Restated By-Laws of
NCI (filed as Exhibit 3.7 to NCI's registration
statement no. 333-80029 and incorporated by
reference herein)

*3.8 Amendment No. 2 to Amended and Restated By-Laws of
NCI

4.1 Form of certificate representing shares of Company's
common stock (filed as Exhibit 1 to NCI's
registration statement on Form 8-A filed with the
SEC on July 20, 1998 and incorporated by reference
herein)

4.2 Credit Agreement, dated March 25, 1998 (the "Credit
Agreement"), by and among NCI, NationsBank, N.A. (as
successor in interest to NationsBank of Texas,
N.A.), as administrative agent ("NationsBank"),
NationsBanc Montgomery Securities LLC, as arranger
and syndication agent, Swiss Bank Corporation, as
documentation agent ("Swiss Bank"), and the several
lenders named therein (filed as Exhibit 4.3 to NCI's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference
herein)

4.3 First Amendment to Credit Agreement, dated May 1,
1998, among NCI, NationsBank, Swiss Bank and the
parties named therein (filed as Exhibit 4.4 to NCI's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference
herein)
</TABLE>

<PAGE> 24

<TABLE>

<S> <C>
4.4 Second Amendment to Credit Agreement, dated May 5,
1998, among NCI, NationsBank, Swiss Bank and the
parties named therein (filed as Exhibit 4.5 to NCI's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference
herein)

4.5 Waiver, Consent and Third Amendment to Credit
Agreement, dated May 5, 1999, among NCI, Nations
Bank, UBS AG and the parties named therein (filed as
Exhibit 4.5 to NCI's registration statement No.
333-80029 and incorporated by reference herein)

4.7 Facility A Notes (Revolving Credit), dated May 6,
1998, of NCI in favor of lenders named therein
(filed as Exhibit 4.7 to NCI's Annual Report on Form
10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)

4.8 Facility B Notes (Term Loan), dated May 6, 1998, of
NCI in favor of lenders named therein (filed as
Exhibit 4.8 to NCI's Annual Report on Form 10-K for
the fiscal year ended October 31, 1998 and
incorporated by reference herein)

4.9 Guaranty, dated May 1, 1998, between NationsBank and
A&S Building Systems, L.P. (filed as Exhibit 4.10 to
NCI's Annual Report on Form 10-K for the fiscal year
ended October 31, 1998 and incorporated by reference
herein)

4.10 Guaranty, dated May 1, 1998, between NationsBank and
NCI Building Systems, L.P. (filed as Exhibit 4.11 to
NCI's Annual Report on Form 10-K for the fiscal year
ended October 31, 1998 and incorporated by reference
herein)

4.11 Guaranty, dated May 1, 1998, between NationsBank and
NCI Holding Corp. (filed as Exhibit 4.12 to NCI's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference
herein)

4.12 Guaranty, dated May 1, 1998, between NationsBank and
NCI Operating Corp. (filed as Exhibit 4.13 to NCI's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference
herein)

4.13 Guaranty, dated May 1, 1998, between NationsBank and
Metal Building Components, L.P. (formerly MBCI
Operating, L.P.) (filed as Exhibit 4.16 to NCI's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference
herein)

4.14 Guaranty, dated May 1, 1998, between NationsBank and
Metal Coaters Operating, L.P. (filed as Exhibit 4.17
to NCI's Annual Report on Form 10-K for the fiscal
year ended October 31, 1998 and incorporated by
reference herein)

4.15 Guaranty, dated May 13, 1998, between NationsBank
and Metal Coaters of California, Inc. (filed as
Exhibit 4.18 to NCI's Annual Report on Form 10-K for
the fiscal year ended October 31, 1998 and
incorporated by reference herein)
</TABLE>

<PAGE> 25

<TABLE>

<S> <C>
4.16 Pledge Agreement, dated May 1, 1998, between NCI and
NationsBank (filed as Exhibit 4.19 to NCI's Annual
Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference
herein)

4.17 Pledge Agreement, dated May 1, 1998, between NCI
Holding Corp. and NationsBank (filed as Exhibit 4.20
to NCI's Annual Report on Form 10-K for the fiscal
year ended October 31, 1998 and incorporated by
reference herein)

4.18 Assignment of Partnership Interests, dated May 1,
1998, between NCI Operating Corp. and NationsBank
(filed as Exhibit 4.22 to NCI's Annual Report on
Form 10-K for the fiscal year ended October 31, 1998
and incorporated by reference herein)

4.19 Assignment of Partnership Interests, dated May 1,
1998, between NCI Holding Corp. and NationsBank
(filed as Exhibit 4.23 to NCI's Annual Report on
Form 10-K for the fiscal year ended October 31, 1998
and incorporated by reference herein)

4.20 Promissory Note, dated May 5, 1998, of NCI Holding
Corp. in favor of NCI (filed as Exhibit 4.26 to
NCI's Annual Report on Form 10-K for the fiscal year
ended October 31, 1998 and incorporated by reference
herein)

4.21 Note Pledge Agreement, dated May 5, 1998, between
NCI and NationsBank (filed as Exhibit 4.27 to NCI's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference
herein)

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

4.23 $250,000 Promissory Note A, dated October 31, 1991,
in favor of the City of Mattoon executed by NCI
(filed as Exhibit 4.12 to NCI's registration
statement no. 33-45612 and incorporated by reference
herein)

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

4.25 $250,000 Promissory Note B, dated January 20, 1992,
in favor of the City of Mattoon executed by NCI
(filed as Exhibit 4.14 to NCI's registration
statement no. 33-45612 and incorporated by reference
herein)

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

4.27 7% Convertible Subordinated Debenture dated April 1,
1996, Due April 1, 2001, between NCI Building
Systems, Inc. and John T. Eubanks (filed as Exhibit
4.15 to NCI's Annual Report on Form 10-K for the
fiscal year ended October 31, 1996, and incorporated
by reference herein)
</TABLE>

<PAGE> 26

<TABLE>

<S> <C>
4.28 Rights Agreement, dated June 24, 1998, between NCI
and Harris Trust and Savings Bank (filed as Exhibit
2 to NCI's registration statement on Form 8-A (filed
with the SEC on July 9, 1998 and incorporated by
reference herein)

4.29 First Amendment to Rights Agreement, dated June 24,
1999, by and between NCI and Harris Trust and
Savings Bank (filed as Exhibit 3 to NCI's
registration statement on Form 8- A, Amendment No. 1
filed with the SEC on June 25, 1999 and incorporated
by reference herein)

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

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

*10.3 Amended and Restated Bonus Program, as amended and
restated on December 11, 1998 and September 9, 1999

10.4 Amended and Restated Nonqualified Stock Option Plan,
as amended and restated on December 12, 1996 (filed
as Exhibit 10.4 to NCI's Annual Report on Form 10-K
for the fiscal year ended October 31, 1998 and
incorporated by reference herein)

*10.5 Amendment No. 1 to Amended and Restated Stock Option
Plan

*10.6 Amendment No. 2 to Amended and Restated Stock Option
Plan

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

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

10.9 401(k) Profit Sharing Plan (filed as Exhibit 4.1 to
NCI's registration statement no. 33-52078 and
incorporated by reference herein)

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

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

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

<PAGE> 27

<TABLE>

<S> <C>
10.13 Amendment to Purchase Agreement, dated October 14,
1994, between NCI Building Systems, L.P., Ellis
Building Components, Inc., Tony Ellis and Ronald
Ellis (filed as Exhibit 2.2 to NCI's Current Report
on Form 8-K dated October 14, 1994 and incorporated
by reference herein)

10.14 Form of Mesco Metal Buildings Agreement (filed as
Exhibit 4.13 to NCI's Annual Report on Form 10-K for
the fiscal year ended October 31, 1996 and
incorporated by reference herein)

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

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

10.17 Employment Agreement, dated April 1, 1996, between
NCI and John T. Eubanks (filed as Exhibit 10.19 to
NCI's Annual Report on Form 10-K for the fiscal year
ended October 31, 1997 and incorporated by reference
herein)

10.18 Stock Purchase Agreement, dated March 25, 1998, by
and among BTR Australia Limited and NCI, and joined
therein for certain purposes by BTR plc (filed as
Exhibit 2.1 to NCI's Current Report on Form 8-K
dated May 19, 1998 and incorporated by reference
herein)

10.19 Letter Agreement, dated May 4, 1998, by and among
NCI, BTR Australia Limited and BTR plc, amending the
Stock Purchase Agreement (filed as Exhibit 2.2 to
NCI's Current Report on Form 8-K dated May 19, 1998
and incorporated by reference herein)

10.20 Note Purchase Agreement, dated April 30, 1999, by
and among NCI, the guarantors named therein, Warburg
Dillon Read LLC, Montgomery NationsBanc Securities
LLC, First Union Capital Markets Corp. and Bear,
Stearns & Co. Inc. (filed as Exhibit 10.18 to NCI's
registration statement no. 333-80029 and
incorporated by reference herein)

10.21 Registration Rights Agreement, dated May 5, 1999, by
and among NCI, the guarantors named therein, Warburg
Dillon Read LLC, Montgomery NationsBanc Securities
LLC, First Union Capital Markets Corp. and Bear,
Stearns & Co. Inc. (filed as Exhibit 10.19 to NCI's
registration statement no. 333-80029 and
incorporated by reference herein)

10.22 Indenture, dated May 5, 1999, by and among NCI, the
guarantors named therein and Harris Trust Company of
New York (filed as Exhibit 10.20 to NCI's
registration statement no. 333-80029 and
incorporated by reference herein)

*13 1999 Annual Report to Shareholders. With the
exception of the information incorporated by
reference into Items 5, 6, 7 and 8 of this Form
10-K, the 1999 Annual Report to Shareholders is not
to be deemed filed as part of this Form 10-K.

*21 List of Subsidiaries
</TABLE>

<PAGE> 28

<TABLE>

<S> <C>

*23 Consent of Independent Auditors

*27 Financial Data Schedule
</TABLE>
- ----------------------
* Filed herewith

<PAGE> 1

EXHIBIT 3.8

AMENDMENT NO. 2
TO THE
AMENDED AND RESTATED BY-LAWS OF
NCI BUILDING SYSTEMS, INC.

September 9, 1999

The Amended and Restated By-Laws, dated as of February 5, 1992 (the
"By-Laws") and as amended by Amendment No. 1 thereto dated as of March 17, 1999,
of NCI Building Systems, Inc., a Delaware corporation (the "Company") are hereby
amended as follows:

1. Section 13 of the By-Laws is hereby amended to read in its
entirety as follows:

SECTION 13. How Constituted and Powers. The board of directors
may, by resolution passed by a majority of the whole board, designate
one or more committees, each committee to consist of one or more of the
directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. If no
alternate be so appointed, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such
absent or disqualified member; provided, that members of the Audit
Committee and the Compensation Committee may only appoint a
"non-employee director" (as defined in Rule 16b-3 promulgated under the
Securities and Exchange Act of 1934, as amended) of the Board of
Directors. Any committee, to the extent provided in the resolution of
the board of directors and not prohibited by law, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may
authorize the seal of the corporation to be affixed to all papers that
may require it. At any meeting of a committee, a majority of the
members of the committee shall constitute a quorum for the transaction
of business, and the act of a majority of the members present at any
meeting at which a quorum is present shall be the act of the
committee."

<PAGE> 1

EXHIBIT 10.3

NCI BUILDING SYSTEMS, INC.

BONUS PROGRAM

[AMENDED AND RESTATED AS OF DECEMBER 11, 1998 AND SEPTEMBER 9, 1999]

In 1989, the Board of Directors of NCI Building Systems, Inc. (then
named National Components Incorporated), a Delaware corporation (the "Company"),
adopted the Bonus Program (the "Program"). The Company subsequently amended the
Program from time to time.

On December 11, 1998, the Board of Directors of the Company amended and
restated the Program in its entirety to, among other things, provide for a new
bonus performance standard for persons eligible to participate in the Program
and set forth certain adjustments to return on assets and earnings per share
growth figures in calculating bonus levels under the Program, and on September
9, 1999, the Compensation Committee of the Board of Directors adopted a
corrective amendment and restatement of the Program.

The Program, as so amended and restated, is as follows:

1. Purpose. The purpose of the Bonus Program (the "Program") is:

(A) To provide exceptional cash rewards earned by exceptional
performance such that the aggregate bonuses paid to all of the Company's
employees in a fiscal year, including those awarded under the Program,
approximate 10% of the pre-tax, pre-bonus profits of the Company for that fiscal
year; and

(B) To focus management attention on key objectives of the
Company by basing their bonus on return on assets and growth in earnings per
share.

2. Administration. The Program will be administered and
interpreted by the Compensation Committee of the Board of Directors of the
Company (the "Committee").

3. Bonus Performance Standards.

(A) Combination of ROA and EPS. Level 1 and Level 2
participants will be eligible for the award of an annual cash bonus equal to a
percentage of their respective base salaries, based upon the Company's
achievement of both a specified return on assets ("ROA") and a specified
increase in earnings per share ("EPS Growth") for the fiscal year.

No cash bonuses will be awarded to these participants if
(1) both ROA and EPS Growth are less than 20%, or (2) ROA is less than 10%.

<PAGE> 2

Subject to the minimum requirements for ROA and EPS
Growth, Level 2 participants will be eligible for a cash bonus award based upon
the attached grid of ROA and EPS Growth achievement, in which the bonus eligible
for award is the percentage of base salary indicated at each intersecting grid
mark for ROA and EPS Growth (e.g., ROA of 30% and EPS Growth of 20% results in a
50% cash bonus). The maximum bonus for Level 2 participants will be 85% of base
salary.

Cash bonus awards for which Level 1 participants are
eligible also will be based on the attached grid of ROA and EPS Growth
achievement, but will be 1.5 times the percentage of base salary indicated for
the Level 2 participants. The maximum bonus for Level 1 participants will be
127.5% of base salary.

(B) ROA Only. Level 3 and Level 4 participants will be
eligible for the award of a cash bonus equal to a percentage of their respective
base salaries, based upon the Company's achievement of a specified ROA for the
fiscal year.

No cash bonuses will be awarded to these participants if
ROA is less than 20%.

If ROA is 20% or more, Level 3 participants will be
eligible for the award of a cash bonus equal to 25% of base salary and an
additional 2.50% of base salary for each 1% increment in ROA over 20%. The
maximum bonus for Level 3 participants will be 50% of base salary.

If ROA is 20% or more, Level 4 participants will be
eligible for the award of a cash bonus equal to 12.5% of base salary and an
additional 1.25% of base salary for each 1% increment in ROA over 20%. The
maximum bonus for Level 4 participants will be 25% of base salary.

4. Participants and Eligibility.

(A) Whether or not to award a cash bonus to any particular
participant is within the absolute discretion of the Company and the Committee.
No bonus award to a Level 1, 2 or 3 participant may be paid unless and until and
approved by the Committee, and no bonus award may be paid to a Level 4
participant unless and until the Committee has approved the aggregate employee
bonus pool for that fiscal year.

(B) A participant shall not be eligible for and shall not be
entitled to receive a bonus for any fiscal year's performance unless the
participant is employed by the Company or one of its subsidiaries both on the
last day of the fiscal year and on the date of approval by the Committee of the
bonus (if a Level 1, 2 or 3 participant) or the aggregate employee bonus pool
for that year (if a Level 4 participant).

-2-
<PAGE> 3

(C) The Committee, in its sole discretion, shall determine the
Level 1, Level 2 and Level 3 participants for any given fiscal year. Designation
of a manager as a participant for any fiscal year is in the absolute discretion
of the Company and the Committee and does not entitle that participant to remain
as a participant in any subsequent year.

(D) Addition, removal or movement of participants into, from
or between any of Levels 1, 2 or 3 must be submitted to and approved by the
Committee. The Level 1 managers, with the approval of the Chairman of the Board
and President, shall have discretion to add or remove participants at Level 4
without further action of the Committee, provided the aggregate bonuses paid to
all employees do not exceed the amount of the employee bonus pool for that year
approved by the Committee.

5. ROA and EPS Calculation. The ROA and EPS for each fiscal year
(including 1998) shall be calculated using the asset and pre-tax income amounts
set forth on the audited annual financial statements of the Company for that
fiscal year and, when appropriate to the calculations, the internally generated
financial statements for each month and quarter of the fiscal year, prepared in
accordance with generally accepted accounting principles, with the following
adjustments:

(A) For all fiscal years, the following shall be excluded from
the calculation of assets: (i) cash; (ii) credit balances on accounts
receivable; (iii) deferred income taxes; (iv) deferred financing costs; and (v)
goodwill resulting from the acquisition of Amatek Holdings, Inc. and its
subsidiaries, including Metal Building Components, Inc. ("MBCI Goodwill").

(B) For fiscal years 1998 and 1999 only, the unamortized
investment in Midwest Metal Coatings, LLC shall be excluded from the calculation
of assets.

(C) For all fiscal years, interest expense shall be added back
to pre-tax income and income from investment of cash, if any, shall be deducted.

(D) For fiscal years 1998 and 1999 only, amortization and
depreciation of the MBCI Goodwill and of the investment in Midwest Metal
Coatings, LLC shall be added back to pre-tax income and the income or loss of
Midwest Metal Coatings, LLC shall be excluded.

If the Company conducts a public offering of equity securities, the Committee
will evaluate and determine at that time whether any adjustments should be made
to the calculation of EPS Growth.

6. Interpretation. The Committee shall interpret the Program and
shall prescribe such rules and regulations in connection with the operation of
the Program as it determines to be advisable. The Committee may rescind and
amend its rules, regulations and interpretations.

7. Amendment or Termination. The Program may be terminated at
any time or amended from time to time by the Committee without the consent or
approval of the participants in the Program.

-3-

<PAGE> 4

8. Effect of Program. Neither the adoption of the Program nor any
action of the Committee, including action taken at any time to terminate or
amend the Program, shall be deemed to give any officer, manager, employee,
participant or other person any right to receive a bonus or any other rights,
whether as a third party beneficiary or otherwise.

-4-

<PAGE> 1

EXHIBIT 10.5

AMENDMENT NO. 1
TO THE
NCI BUILDING SYSTEMS, INC.
NONQUALIFIED STOCK OPTION PLAN

MARCH 4, 1998

The NCI Nonqualified Stock Option Plan (amended and restated as of
December 12, 1996) (the "Plan") is hereby amended as follows:

1. Section 9 of the Plan is hereby restated in its entirety as
follows:

9. RIGHTS OF ESTATE OR BENEFICIARIES IN EVENT OF DEATH.
If a participant dies prior to termination of his or her right to
exercise an option in accordance with the provisions of the Plan or his
or her stock option agreement without having totally exercised the
option, the option may be exercised during the remainder of the Option
Period by the participant's estate or by the person who acquired the
right to exercise the option by bequest or by reason of the death of
the participant, either pursuant to the laws of descent and
distribution or by beneficiary designation; however, the option must be
exercised prior to the date of expiration of the Option Period or one
year from the date of the participant's death, whichever first occurs.
The participant may designate a beneficiary to exercise an option
pursuant to this Section 9 in the event of his or her death on a form
designated by the Board for such purpose.

2. Section 13 of the Plan is hereby restated in its entirety as
follows:

13. NON-ASSIGNABILITY. Options may not be transferred
other than by will or by the laws of descent and distribution or by a
beneficiary designation made by the participant. During a participant's
lifetime, options granted to a participant may be exercised only by the
participant.

Signed to be effective the date first written above.

/s/ Donnie R. Humphries
--------------------------------
Donnie R. Humphries, Secretary

<PAGE> 1

EXHIBIT 10.6

AMENDMENT NO. 2
TO THE
NCI BUILDING SYSTEMS, INC.
NONQUALIFIED STOCK OPTION PLAN

November 4, 1999

The NCI Nonqualified Stock Option Plan, as amended and restated as of
December 12, 1996 and as amended by Amendment No. 1 to the NCI Building
Systems, Inc. Nonqualified Stock Option Plan, dated March 4, 1998 (the "Plan"),
is hereby amended as follows:

1. Section 18(g) of the Plan is hereby restated in its entirety
as follows:

"(g) "Normal Retirement Age" means the age established by the
Board from time to time as the normal age for retirement of a
director or employee, as applicable. In the absence of a
determination by the Board, the Normal Retirement Age for all
participants shall be deemed to be 65 years of age."

Except as amended by this Amendment No. 2, the Plan shall continue in
full force and effect as originally executed and delivered. Any reference in
the Plan to the "Plan" shall refer to the Plan as amended by this Amendment No.
2. All capitalized terms used herein and not otherwise defined shall have the
meanings assigned to those terms in the Plan.

Signed to be effective the date first written above.

/s/ Donnie R. Humphries
-----------------------
Donnie R. Humphries, Secretary

<PAGE> 1

NCI
BUILDING SYSTEMS, INC.
1999 ANNUAL REPORT

<PAGE> 2

SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
Year ended October 31,(1)
----------------------------------------------------
1995 1996 1997 1998 1999
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Sales ........................................... $ 234,215 $ 332,880 $ 407,751 $ 675,331 936,550
Net income ...................................... 17,032 24,814 27,887 37,318 45,873
Net income per share - diluted .................. 1.26 1.51 1.64 2.05 2.46
Working capital ................................. 31,687 51,958 76,746 58,393 33,261
Total assets .................................... 83,082 158,326 196,332 823,537 856,112
Long-term debt, noncurrent portion .............. 278 1,730 1,679 444,477 433,359
Shareholders' equity ............................ $ 57,682 $ 116,175 $ 147,815 $ 223,612 277,290
--------- --------- --------- --------- --------
Average common shares,
assuming dilution ............................. 13,530 16,455 17,085 18,192 19,100
========= ========= ========= ========= ========
</TABLE>

(1) All numbers in thousands except net income per share.

BUSINESS DESCRIPTION

NCI Building Systems is one of the largest integrated manufacturers and
marketers of metal building components and engineered metal building systems in
North America, and NCI offers one of the most extensive metal product lines in
the building industry, under well-recognized brand names.

Through internal growth and strategic acquisitions, the company has compiled a
record of revenue and earnings growth well above the industry average. In 1998,
NCI doubled its size by combining with Metal Building Components, Inc.,
establishing NCI as a leader in each of its key markets.

Today, NCI is:

o The largest producer and distributor of metal components for building
construction -- growing at an estimated 15% annual rate.

o The second largest producer of pre-engineered metal building systems.

o The largest supplier of metal roofs in an estimated $20 billion roofing
industry.

o A leading provider of metal coating and painting services.

o An industry leader in growth, profitability and innovation.

o A low-cost supplier.

The Company is benefiting from a larger sales force and customer base, broader
product lines, expanded geographic distribution sites, and increased
manufacturing capacity. NCI's long term tar-gets are 15% annual revenue growth,
20% earnings growth and 30% Return on Operating Assets based on it's sound
growth strategy and assuming a relatively stable industry economic outlook.

NCI CONTINUES TO SUCCESSFULLY MANAGE ITS "MOMENTUM FOR GROWTH."

<PAGE> 3

NCI LOCATIONS

[MAP]

PLANT LOCATIONS:
Atwater, California
Caryville, Tennessee
Chandler, Arizona
Chester,
South Carolina
Douglasville,
Georgia
Ennis, Texas
Grapevine, Texas
Hobbs, New Mexico
Houston, Texas (6)
Jackson,
Mississippi (2)
Mattoon, Illinois
Tallapoosa, Georgia
Stafford, Texas
Monterrey, Mexico
Oklahoma City,
Oklahoma
Converse, Texas
Grand Prairie, Texas
Lubbock, Texas
Rome, New York
Adel, Georgia
Salt Lake City, Utah
Hernando,
Mississippi
Memphis, Tennessee
Nicholasville,
Kentucky
Atlanta, Georgia
Plant City, Florida
Colonial Heights,
Virginia
Shelbyville, Indiana
Omaha, Nebraska
Nampa, Florida
Tolleson, Arizona
Marietta, Georgia

<PAGE> 4

OPERATING POLICIES

RETURN ON ASSETS

Return on Assets (ROA) is defined as operating income divided by average
operating assets used in the business (eliminating primarily cash, goodwill,
and certain other non-operating assets). NCI's management and directors are
thoroughly convinced that this ratio is the best measure of operating
performance. Tight control over inventory, receivables, and fixed investment is
as important as, and interrelated to, the income statement. Return on Assets is
a proxy for cash flow, which can reward shareholders with undiluted growth. In
fiscal year 1999, NCI earned a return on operating assets employed in the
business of 29%.

GROWTH

The company is dedicated to increasing its market share through strong marketing
and low cost, quality manufacturing. Special niches that provide unusual profit
and growth opportunities are sought. Overall profit growth of at least 20% per
year is a strategic goal of the company with larger increments possible in the
short-term. This growth may be internally generated or it may come from
carefully selected acquisitions. Earnings per share increased 20% in fiscal
year 1999.

DIVIDENDS

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

COMPENSATION

The company believes in providing base salaries for its management on the low
side of industry norm with opportunities, based on performance, to obtain very
high bonuses. Specifically, Return on Assets and growth in earnings per share
are the criteria for performance measurement. Bonuses begin when the ratio of
operating income divided by assets used in the business is equal to 20%.
Maximum bonuses, at a very high level, can be earned when 30% returns and 20%
growth in earnings per share are achieved.

CORPORATE RESPONSIBILITY

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

<PAGE> 5

FELLOW SHAREHOLDERS:

NCI realized very good progress during fiscal 1999. We not only achieved new
highs in net sales and net income but also substantially completed the
successful integration of MBCI that had been acquired in May 1998. A quick
synopsis of the financial and operational highlights for the year includes:

o Net sales increased 39% to a new record of $936.6 million.

o Each quarter included year-to-year gains in sales and income.

o Income, excluding an extraordinary item, rose to $46.9 million, up 26%.

o Earnings, excluding an extraordinary item, increased to $2.46 per share,
up 20% from fiscal 1998.

o Offering of $125 million in senior subordinated notes completed.

o Debt reduction of $42 million accomplished.

o New long-bay metal manufacturing facility opened in Monterrey, Mexico.

o Stock repurchase plan approved (11/99).

Our goal in this report is not just to summarize the Company's performance for
fiscal 1999 but also to communicate why we are confident about NCI's prospects
for future growth. To that end, we thought that it would be interesting to
include a section that answers the questions we typically get from investors.
NCI has a firm commitment to build long-term value for shareholders, and an
important part of that mission involves making sure that our strategy and
fundamentals are thoroughly understood by Wall Street. We believe you will find
their questions pertinent and our answers hopefully clear and informative.

FINANCIAL GAINS CONTINUE GROWTH

Our record sales of $936.6 million for fiscal 1999 represent more than a
fivefold increase in NCI's size over the past five years. Net income over this
same period has risen more than fourfold. Earnings, excluding extraordinary
items, have increased from $0.77 per share in 1994 to $2.46 per share, a
compound growth of 26%. We are especially pleased that our growth during fiscal
1999 included year-to-year increases in net sales and net income in each
quarter. The incremental contribution from MBCI was obviously a positive factor
influencing our performance, but we recorded meaningful progress throughout the
organization. The strides reflected in the Company's income statement translated

[PICTURE]

From left to right: C.A. Rundell, Johnie Schulte, Jr., and
A.R. Ginn.

1
<PAGE> 6

directly into our ability to effect a meaningful reduction in our long-term
debt. Although we funded a relatively large capital expenditure program of $33
million during fiscal 1999, we generated sufficient cash to reduce our
indebtedness by $42 million. We also essentially converted $125 million of our
bank debt into fixed rate obligations through the successful public offering of
10-year senior subordinated notes. We understood that the opportunity to acquire
MBCI meant accepting a period in which we would operate with more financial
leverage than was typical for NCI. Our results for fiscal 1999 solidly
substantiated our ability to manage these increased borrowings and still
accomplish above-average growth in earnings. We believe that we will continue
to generate cash beyond our capital spending needs and will use a portion of
those funds to reduce our financial leverage further.

INTEGRATION OF MBCI PROVIDES ADDITIONAL BENEFITS

As we indicated a year ago, a key focus of our energies during fiscal 1999 was
the full integration of MBCI. This scope of this acquisition was considerable.
We more than doubled our annualized net sales, expanded our manufacturing
facilities from 22 to 38 and increased our base of employees by 50%. We readily
acknowledge that growth through acquisitions, no matter how logical to one's
existing operations, is challenging. Perhaps the most complicated dimension of
bringing two businesses together involves a merging of cultures. That sounds
like a concept strictly out of a business textbook, but our experience in prior
transactions is that it is central to the success of any integration process. We
knew that our two organizations had considerable similarities with aggressive
marketing programs and an emphasis on customer service. We also recognized the
truth of the adage that if one thinks all contingencies have been addressed in
any major business combination, one should just think again.

<TABLE>
<CAPTION>
93 94 95 96 97 98 99
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS PER SHARE 0.48 0.77 1.26 1.52 1.64 2.05 2.46
</TABLE>

We are very pleased to report that the net effect of this major step for NCI has
been overwhelmingly positive. We were cautious enough to decide that the
rational way to effect this unification was gradual. Our immediate goal was to
capture the increased purchasing leverage that our larger size afforded us with
suppliers. We also began to realize synergies by closing surplus plants,
rationalizing corporate functions and relying more on captive units for
functions such as coating. These savings to date on an annualized basis have
been more than $15 million. The gains beyond this point will come through
cross-selling opportunities as well as further economies of scale, particularly
as we consolidate the administrative and sales units during the coming year.
These latter savings are difficult to predict but should provide vital impetus
to our future growth. The essential factor in realizing these synergies will be
teamwork within our entire organization. NCI has always worked hard to operate
as efficiently as possible, and the additional tasks imposed by the MBCI
transaction presented real challenges to our management. A solid commitment to
our plan, hard work and longer hours have brought us to the point where we can
look back with a sound sense of accomplishment. The path has not been without
some bumps along the way, which were expected. We also counted on a "can-do"
spirit that fully met our expectations.

We still have further tasks to complete in realizing the full benefit of our
combined size and resources and know that we can depend on the same level of
energy that has been evident from each individual within NCI.

2
<PAGE> 7

INDUSTRY OUTLOOK REMAINS BRIGHT

Other sections of this report highlight the main points that make us confident
about the growth outlook for NCI. The metal building industry has accomplished
much in terms of penetrating the commercial construction market. Originally
viewed as just an economical, fast method to erect buildings, the industry's
introduction of new products and development of new designs has literally
transformed our market so that today almost half of all commercial buildings
are either entirely metal systems or employ metal components, notably, roofs.
Further refinements in coatings and the ability to meet higher tolerances in the
manufacturing process suggest that the future is bright indeed.

[PICTURE]

NEW LONG BAY CAPACITY HIGHLIGHTS GROWTH INITIATIVES

Innovation is a hallmark of NCI. We were far from the first metal building
manufacturer when this company was founded in 1984. We knew that our success
would depend on doing things differently than the competition. We welcomed that
challenge and believe that much of what we have accomplished has established
industry benchmarks for productivity and customer service. We are keenly aware
that the expectations that count are not ours but those of our customers, and we
are always seeking ways to meet their needs more efficiently. During fiscal 1999
we completed our new venture into the long-bay metal building market that
appears to offer exceptional growth potential for NCI. We have established a
low-cost operating structure in this initiative that provides a solid platform
for future progress and expect fiscal 2000 to benefit from this activity.
We are also excited about our development of a metal garage system that appears
to have very broad commercial and consumer appeal, especially in rural markets.
The system we have developed includes all of the metal structural items and
fasteners and is engineered with tolerances that guarantee easy bolt-up
assembly.

[PICTURE]

LBS INSTALLATION: The Long Bay System is easily installed because of its
inherent rigidity and is then bolted in place.

3
<PAGE> 8

STOCK VALUATION DISCUSSED

The price action of our shares during fiscal 1999 is difficult to reconcile with
our financial performance. We accept our responsibility as managers to generate
the corporate results that will yield long-term appreciation for shareholders.
We then expect investors to value our shares based on our record and apparent
prospects for future gains. It is obvious, however, that the factors which
influence investors' valuation of equities involve dynamics well beyond any
corporation's own results. This reasonably means that there are periods in which
a firm's valuation can be out of synch with its performance. The inescapable
fact is that fiscal 1999 is now in the record books, and we have to look ahead.
We view the outlook for fiscal 2000 favorably and are set on executing the plan
that has been established for increased sales and net income. The plan approved
by the Board in November to repurchase approximately 1 million shares tangibly
expresses our confidence in NCI's outlook. Beyond that commitment, we will
continue to pro-actively seek to build broader awareness of NCI among
institutional and individual investors to make sure that our fundamentals are
properly understood.

GROWTH STRATEGY REMAINS UNCHANGED

"If it's not broke, don't try fixing it." We agree. NCI has attained a solid
record of growth through a strategic plan founded on the simple premise of
building an organization committed to leading change, not following it. We like
the modifiers of "aggressive," "energized" and "competitive." We accept that in
stretching ourselves to the fullest, we will make mistakes; but the greater
concern would be in not encouraging our team to find ways to offer customers new
products and services. We like our prospects in the metal construction products
industry, and we appreciate the endorsement you have given by becoming a
shareholder. We promise our best to make this a successful investment for you.

Sincerely,

/s/ C. A. RUNDELL
-----------------------------
C. A. Rundell
Chairman of the Board

/s/ JOHNIE SCHULTE, JR.
-----------------------------
Johnie Schulte, Jr.
Chief Executive Officer

/s/ A. R. GINN
-----------------------------
A. R. Ginn
President and Chief Operating

[PICTURE]

AESTHETICS AND FEASIBILITY ARE HIGHLY CONSIDERED DURING THE DESIGN PHASE OF
COMPLEX METAL BUILDINGS. THE FINISHED PRODUCT IS AN ATTRACTIVE FACILITY WITH
MAXIMUM USABLE SPACE.

4
<PAGE> 9

ANSWERS TO QUESTIONS FROM ANALYSTS AND INVESTORS

NCI is fortunate to have its shares actively covered by a number of analysts
with prominent brokerage firms. In addition to ongoing contacts with these
analysts, we meet regularly with institutional investors to advise them of our
progress and respond to their inquiries. We thought it would be helpful to offer
the following section that answers the questions typically asked by analysts and
investors about NCI.

WHAT IMPACT WOULD AN OVERALL ECONOMIC SLOWDOWN HAVE ON
YOUR BUSINESS?

Although economic trends appear favorable for continued progress in fiscal 2000,
demand for metal building systems and components is obviously influenced by the
general pace of business and the buoyancy of the economy. It is interesting to
contrast the historical pattern of demand for our products, however, with the
wide cyclical swings typically associated with new construction. Shipments of
metal building components through our MBCI unit have increased every year since
this business unit was started in 1976. MBCI did complete some acquisitions over
this period, but the core trend over this 23 year period was one of steadily
mounting demand in the components market and aggressive increase in market
share. Repair and remodeling activities do account for a significant portion of
the demand for components so perhaps the consistency of that growth is not
surprising. The other portion of our business is engineered metal building
systems where one might reasonably expect more of an impact from changes in
capital spending plans by companies. Here too, however, we have a record of more
than 10 years without a decline in sales. Our growth in some years was clearly
stronger than in others, but we recorded gains each year. We are optimistic that
the broad economic trends remain favorable over the next several quarters, but
our record suggests that NCI's exposure to normal fluctuations in business
conditions would be muted.

<TABLE>
<CAPTION>
93 94 95 96 97 98 99
-------- -------- -------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
GROWTH CHART - SALES 134,506 167,767 234,215 332,880 407,751 675,331 936,550
</TABLE>

[PICTURE]

METAL BUILDING PRODUCTION IS AUTOMATED FOR PRECISION, WHICH ALLOWS FOR FAST,
EXACT ERECTION.

5
<PAGE> 10

WHAT IS THE CURRENT MIX OF YOUR SALES BETWEEN METAL BUILDING SYSTEMS AND
COMPONENTS?

Of our $936.6 million in net sales for fiscal 1999, components accounted for 67%
and engineered building systems represented 33% of sales. Excluding the impact
from possible future acquisitions, we expect relatively little change in the mix
of sales over the next several years. Prior to the acquisition of MBCI and a
coating operation in 1998, engineered metal building systems accounted for more
than two-thirds of our total sales. Our current mix presents a more diversified
and stable base of business targeted not only at new construction but also
repair and remodeling.

[PICTURE]

Red iron going up: Metal building systems are erected quickly enabling specialty
crews to begin the finishing process.

[PICTURE]

Components protect and serve: The rockwall insulated panels on this distribution
center protect the interior contents and provide a beautifully finished
appearance.

BUT HAVEN'T ACQUISITIONS ACCOUNTED FOR A SIGNIFICANT PORTION OF YOUR GROWTH?

We have successfully augmented our internal growth in both the systems and
components segments of our business. We have also added complementary operations
including metal coating and door manufacturing units. Although these
acquisitions have added constructively to our growth, we have still recorded
internal gains and are confident about the future opportunity for continued
organic expansion as a result of the growth of the metal building industry as a
whole and our plans to capture increasing market share.

NCI/MBCI TIMELINE OF SUCCESSFUL ACQUISITIONS

[CHART]

6
<PAGE> 11

WHAT IS THE LIKELIHOOD OF ADDITIONAL ACQUISITIONS?

Although we obviously cannot predict the timing or probability of any future
acquisitions, we believe the fundamental dynamics of our industry favor
additional opportunities for NCI to purchase complementary operations. NCI's
growth and above-average profitability provide tangible evidence of the
significant economies of scale that are attainable in our business. Increased
procurement leverage with steel producers and other suppliers; improved quality
control and manufacturing scheduling as a result of our vertical integration;
and increased productivity because of our size are advantages for NCI that
translate into value for customers. Smaller, independent manufacturers and
marketers of systems and components face the need to invest increasing sums of
capital in information systems and new manufacturing processes to remain
competitive. This translates into persistent pressure on their margins. Trade
statistics indicate that there are an estimated 50 manufacturers that compete in
the metal building industry. We believe that there will be ongoing consolidation
among these firms and intend to remain active in reviewing potential
acquisitions. We also are interested in intensifying and broadening our
vertical integration through operations such as the metal coating business units
that we have purchased in recent years.

[PICTURE]

WHAT LEVEL OF CAPITAL INVESTMENT ARE YOU BUDGETING FOR FISCAL 2000?

Our business demands an ongoing capital investment program, and we are committed
to making the appropriate expenditures to remain a leader in establishing
industry benchmarks for productivity and efficiency. Our spending for fiscal
2000 is budgeted to be $20-$25 million, down from $33 million in fiscal 1999.
The timing of large projects such as the long bay system manufacturing facility
that was completed in fiscal 1999 will cause our spending to fluctuate somewhat
from one year to the next.

[PICTURE]

Components add color and definition: NCI's wide variety of panel profiles and
colors provide a distinctive appearance to multi-building projects.

<TABLE>
<CAPTION>
93 94 95 96 97 98 99
------ ------ ------ ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL EXPENDITURE 3,000 4,200 6,700 10,300 11,332 20,834 33,261
</TABLE>

[PICTURE]

Computer controlled machinery ensures that all components are manufactured to
exacting standards.

7
<PAGE> 12

IS THE HIGHER DEBT/CAPITAL RATIO THAT RESULTED FROM THE MBCI TRANSACTION CAUSING
YOU TO DEFER ANY CAPITAL SPENDING NEEDS?

Not at all. One of our imperative requirements in the MBCI transaction was
retaining a sound financial position that would allow us to make the
investments in information systems, additional manufacturing capacity and other
distribution facilities necessary to support the Company's future growth. Our
EBITDA in fiscal 1999 totaled $144 million. That was sufficient not only to fund
an unusually large level of capital expenditures but also to reduce our debt by
$42 million.

[PICTURE]

NCI'S HIGHLY TRAINED TECHNICIANS CREATE COMPUTER GENERATED MODELS FOR TESTING
BEFORE THE MANUFACTURING PROCESS BEGINS.

<TABLE>
<CAPTION>
99 98
-------- --------
(in thousands)
<S> <C> <C>
DEBT REDUCTION 444,477 397,062
</TABLE>

WHAT ARE YOUR PLANS FOR A FURTHER REDUCTION IN YOUR FINANCIAL LEVERAGE?

Based on the balance sheet at the close of fiscal 1999, we had reduced our debt
by $130 million, or 23%, from the level immediately after the MBCI transaction.
That pay down was accomplished over an approximate 18-month period. Assuming the
same level of EBITDA as in fiscal 1999, we believe that there should be at least
$55 million in available funds for additional debt reduction and stock
repurchase in fiscal 2000. During fiscal 1999 we also lowered our exposure to
fluctuations in short-term interest rates and our debt repayment schedule by
refinancing $125 million of our debt by issuing fixed-rate, 10-year
senior subordinated notes. Our coverage ratios relating to this debt have
increased considerably as the debt has been reduced and our equity base
increased.

[CHART]

WHY INSTITUTE A STOCK REPURCHASE PROGRAM VERSUS USING THOSE FUNDS TO REDUCE
DEBT?

We believe the repurchase of our shares at prevailing market levels offers a
very attractive investment alternative for NCI. We believe that the funds
generated from operations will be sufficient not only to execute this program
but also to continue reducing our leverage. Market conditions will obviously
determine how many shares we repurchase, but the Board decided that a repurchase
program tangibly reinforced its confidence in NCI's prospects as well as
providing the potential for a significant return on the capital committed to
this activity.

WHAT ARE YOUR INTERNAL GROWTH GOALS?

According to industry figures, sales of metal building systems have increased 7%
annually for the past five years and amount to approximately $3 billion
annually. Demand for metal building components is estimated to have risen at a
rate possibly twice this level. Factors driving this expansion are proven
durability and cost effectiveness as well as enhanced aesthetics. The cost of
constructing a metal building can be as much as 20% less than that of a
conventional building. With that impressive cost advantage, metal buildings are
expected to continue accounting for an increasing portion of the total
commercial building market. Components, which represent a larger portion of
sales than metal building systems, have broader growth opporunities. Most
observers believe that the intrinsic growth in demand for metal components will
also be aided by an increasing penetration of metal roofs into the residential
housing market. In some areas of the country, metal roofs are today the standard
for both commercial and residential construction.

8
<PAGE> 13

Against this positive industry backdrop, our strategic goal is to continue
increasing NCI's market share. We have a well-established position as a low-cost
supplier that we have been able to capitalize on by accounting for more than our
present customers' needs while expanding our marketing base. We have a broad
geographic footprint with manufacturing/distribution facilities in 18 states,
and our efficient "hub-and-spoke" concept offers meaningful advantages in terms
of transportation costs and local market responsiveness.

In sum, we believe there is substantial potential to grow through our present
operations and have identified a number of other marketing initiatives that we
intend to pursue. The entry into the long bay building market is just such an
effort. We completed construction of our facility in Mexico to build these
systems during fiscal 1999 and are planning to focus considerable marketing
resources on this product category in fiscal 2000.

WHAT IS THE POTENTIAL FOR NCI IN THE LONG BAY MARKET?

We believe the demand for long bay systems exceed $1 billion annually. This is
essentially a new market for NCI, and we believe our strategy for success is
sound. These larger buildings typically involve considerably less custom
engineering and design than the metal systems in which NCI already has a strong
market position. Because of this relative standardization, long bay systems
demand close control over manufacturing costs to realize an attractive return on
capital. We believe the manufacturing capacity we have established in Mexico
provides a highly efficient infrastructure for NCI. We are especially pleased
about the opportunity this venture offers to establish a marketing presence in
the conventional construction market, notably in those warehouses and other
commercial buildings that involve erected concrete walls spanned by a metal
roof.

[PICTURE]

HUGE COILS OF STEEL ARE COLD ROLLED TO CREATE NCI'S 100 PANEL PROFILES.

[PICTURE]

The Long Bay System fits in place...

[PICTURE]

...is bolted to the main frame...

[PICTURE]

...and is quickly ready for the roofing system to be installed.

9
<PAGE> 14

WHAT LED TO THE LARGE ACTIVITY IN INSIDER TRANSACTIONS DURING FISCAL 1999?

Much of the insider activity during fiscal 1999 was driven by tax considerations
related to the May 1998 acquisition of MBCI. Although shares of NCI were issued
to certain MBCI owners, that stock was considered ordinary income to the
recipients. This led to considerable tax liabilities in some instances, and the
need to meet those cash obligations through personal borrowings. During fiscal
1999 several of these individuals decided to eliminate or reduce these loans by
selling at least a portion of their holdings.

[PICTURE]

RESEARCH & DEVELOPMENT: COMPONENTS ARE TESTED FOR WIND RESISTANCE IN NCI'S R&D
LABORATORY AT THE HARDY STREET FACILITY.

[PICTURE]

ENVIRONMENTAL PRESSURES ARE APPLIED...

[PICTURE]

...AND RESULTS ARE CAREFULLY LOGGED.

10
<PAGE> 15

ARE YOU SATISFIED WITH THE DEGREE OF SYNERGIES THAT HAVE BEEN REALIZED TO DATE
WITH THE INTEGRATION OF MBCI AND OTHER RECENT ACQUISITIONS?

We have realized approximately $20 million in cost savings as a result of
capitalizing on our increased procurement leverage with suppliers. That is well
within the goal that we set when completing MBCI and the other transactions. We
also had identified considerable cross-selling opportunities that we
anticipated would involve more time to attain. We established solid momentum in
this area during fiscal 1999, and an important objective for us in fiscal 2000
is to extend this progress.

[PICTURE]

TESTING, CORRECTING, AND RETESTING FOR PERFECT RESULTS PROVIDE QUALITY PRODUCTS
ON WHICH NCI STAKES ITS REPUTATION.

[PICTURE]

The finished product is the result of years of experience, technical precision,
and attention to detail. This makes NCI Building Systems one of the largest
integrated manufacturers and marketers of metal building components and
engineered metal building systems in North America.

11
<PAGE> 16

PROFILE

NCI is a manufacturer and marketer of engineered metal building systems and
components. The company contributes to the building process by designing
structures to user specifications, then manufacturing the appropriate parts for
its customers -- frequently authorized builders -- to erect and make ready for
occupancy. Components are sold to many of the same markets where engineering is
not required. NCI aggressively markets its products nationwide through several
channels under the following trade names: Metallic Building Company, Mid-West
Steel Building Company, Doors & Building Components, Steel Systems, A&S Building
Systems, Classic Steel Frame Homes, Mesco Metal Buildings, MBCI, ABC, IPS,
DOUBLECOTE, Metal Prep, Metal Coaters of Georgia, Metal Coaters of California
and Mid-West Metal Coatings. NCI's products are directed at the non-residential
market, primarily industrial and low-rise commercial applications.

[PICTURE]

NEW CORPORATE HEADQUARTERS SCHEDULED TO BE COMPLETED IN 2000. LOCATED AT 10943
NORTH SAM HOUSTON PARKWAY WEST, HOUSTON, TEXAS 77064.

FORWARD - LOOKING STATEMENTS

"This Annual Report 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 earning, 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 most recent annual
and quarterly reports on Forms 10(k) and 10(Q), the Company expressly disclaims
any obligation to release publicly any updates or revisions to these
forward-looking statements to reflect any changes in its expectations."

12
<PAGE> 17

1999 FINANCIAL REVIEW

13
<PAGE> 18

CONSOLIDATED STATEMENTS OF INCOME
NCI BUILDING SYSTEMS, INC.

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
October 31,
-------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Sales ............................................... $ 407,751 $ 675,331 $ 936,550
Cost of sales ....................................... 299,407 497,862 694,909
--------- --------- ---------
Gross profit .................................... 108,344 177,469 241,641
Operating expenses .................................. 66,055 96,100 131,109
Nonrecurring acquisition expense .................... -- 2,060 --
--------- --------- ---------
Income from operations .......................... 42,289 79,309 110,532
Interest expense .................................... (163) (20,756) (35,449)
Other income ........................................ 1,999 2,559 3,204
Joint venture income ................................ -- 737 1,675
--------- --------- ---------
Income before income taxes ...................... 44,125 61,849 79,962
--------- --------- ---------
Provision for income taxes
Current ......................................... 15,920 16,573 30,066
Deferred ........................................ 318 7,958 3,022
--------- --------- ---------
Total income tax .................................... 16,238 24,531 33,088
--------- --------- ---------
Income before extraordinary loss ................ 27,887 37,318 46,874
Extraordinary loss on debt refinancing, net of tax .. -- -- (1,001)
--------- --------- ---------
Net income .......................................... $ 27,887 $ 37,318 $ 45,873
========= ========= =========
Net income per common and common equivalent share
Basic:
Income before extraordinary loss ................ $ 1.73 $ 2.17 $ 2.55
Extraordinary loss .............................. -- -- (0.05)
--------- --------- ---------
Net income ...................................... $ 1.73 $ 2.17 $ 2.50
========= ========= =========
Diluted:
Income before extraordinary loss ................ $ 1.64 $ 2.05 $ 2.46
Extraordinary loss .............................. -- -- (0.05)
========= ========= =========
Net income .......................................... $ 1.64 $ 2.05 $ 2.41
========= ========= =========
</TABLE>

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

14
<PAGE> 19

CONSOLIDATED BALANCESHEETS
NCI BUILDING SYSTEMS, INC.

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
October 31,
---------------------
1998 1999
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................................. $ 4,599 $ 16,089
Accounts receivable, net ................................................... 99,261 105,608
Inventories ................................................................ 78,001 83,988
Deferred income taxes ...................................................... 6,495 6,943
Prepaid expenses ........................................................... 4,214 5,037
Total current assets ....................................................... 192,570 217,665
Property, plant and equipment, net ............................................. 179,500 197,855
Excess of cost over fair value of acquired net assets .......................... 413,288 398,606
Investment in joint ventures and other assets .................................. 38,179 41,357
Total assets ................................................................... $ 823,537 $ 855,483

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .......................................... $ 31,297 $ 36,297
Accounts payable ........................................................... 62,694 65,209
Accrued compensation and benefits .......................................... 16,261 17,021
Other accrued expense ...................................................... 23,925 38,567
Total current liabilities .................................................. 134,177 157,094
Long-term debt, noncurrent portion ............................................. 444,477 397,062
Deferred income taxes .......................................................... 21,271 24,037
Contingencies
Shareholders' equity
Preferred stock, $1 par value, 1,000,000
shares authorized, none outstanding .................................... -- --
Common stock, $.01 par value, 50,000,000 shares authorized, 18,064,000
and 18,520,000 shares issued and outstanding, respectively ............. 181 186
Additional paid-in capital ................................................. 89,489 97,289
Retained earnings .......................................................... 133,942 179,815
Total shareholders' equity ..................................................... 223,612 277,290
Total liabilities and shareholders' equity ..................................... $ 823,537 $ 855,483
</TABLE>

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

15
<PAGE> 20

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
NCI BUILDING SYSTEMS, INC.

(IN THOUSANDS)

<TABLE>
<CAPTION>
Additional
Common Paid-In Retained Shareholders'
Stock Capital Earnings Equity
------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Balance, October 31, 1996 ........................... $ 80 $ 47,358 $ 68,737 $ 116,175
Proceeds from exercise of stock options,
including tax benefit thereon ................... 1 2,234 -- 2,235
Shares issued for
contribution to 401(k) plan 1 1,517 -- 1,518
Net income .......................................... -- -- 27,887 27,887
------- ---------- ---------- -------------
Balance, October 31, 1997 ........................... 82 51,109 96,624 147,815
Proceeds from exercise of stock options,
including tax benefit thereon ................... 2 4,317 -- 4,319
Two for one split of common stock ................... 82 (82) -- --
Shares issued in connection with the
purchase of MBCI ................................ 14 32,186 -- 32,200
Shares issued for
contribution to 401(k) plan ..................... 1 1,959 -- 1,960
Net income .......................................... -- -- 37,318 37,318
------- ---------- ---------- -------------
Balance, October 31, 1998 ........................... 181 89,489 133,942 223,612
Proceeds from exercise of stock options,
including tax benefit thereon ................... 3 3,076 -- 3,079
Shares issued for
contribution to 401(k) plan ..................... 2 4,724 -- 4,726
Net income .......................................... -- -- 45,873 45,873
------- ---------- ---------- -------------
Balance, October 31, 1999 ........................... $ 186 $ 97,289 $ 179,815 $ 277,290
======= ========== ========== =============
</TABLE>

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

<PAGE> 21

CONSOLIDATED STATEMENTS OF CASHFLOWS
NCI BUILDING SYSTEMS, INC.

(IN THOUSANDS)

<TABLE>
<CAPTION>
October 31,
------------------------------
1997 1998 1999
-------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Income before extraordinary loss ............................................... $ 27,887 $ 37,318 $ 46,874
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization ............................................ 7,876 17,818 28,542
Gain on sale of fixed assets ............................................. (3) (32) (11)
Provision for doubtful accounts .......................................... 1,223 2,625 2,402
Extraordinary loss on debt refinancing, net of tax ....................... -- -- (1,001)
Deferred income tax provision ............................................ 318 7,958 3,022
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts, notes and other receivables .................................... (10,481) (3,663) (8,749)
Inventories .............................................................. (5,552) 9,951 (5,987)
Prepaid expenses ......................................................... (625) 109 (823)
Accounts payable ......................................................... 2,394 24,189 2,515
Accrued expenses ......................................................... 5,579 13,772 27,444
-------- --------- ---------
Net cash provided by operating activities ................................ 28,616 110,045 94,228

Cash flows from investing activities:
Proceeds from the sale of fixed assets ......................................... 25 98 1,561
Acquisition of Carlisle Engineered Metals, Inc. ................................ (6,230) -- --
Acquisition of Metal Building Components, Inc. ................................. -- (553,510) --
Acquisition of California Finished Metals, Inc. ................................ -- (15,458) --
Changes in other noncurrent assets ............................................. (1,147) (24,450) (9,574)
Capital expenditures ........................................................... (11,332) (20,834) (33,262)
-------- --------- ---------
Net cash used in investing activities .................................... (18,684) (614,154) (41,275)

Cash flows from financing activities:
Exercise of stock options ...................................................... 1,340 2,494 952
Net (payments) borrowing on revolving lines of credit .......................... -- 281,600 (136,112)
Borrowings on long-term debt ................................................... -- 200,000 125,000
Payments on long-term debt ..................................................... (50) (7,552) (31,303)
-------- --------- ---------
Net cash provided by (used in) financing activities ...................... 1,290 476,542 (41,463)
Net increase (decrease) in cash .................................................... 11,222 (27,567) 11,490
Cash at beginning of period ........................................................ 20,944 32,166 4,599
-------- --------- ---------
Cash at end of period .............................................................. $ 32,166 $ 4,599 $ 16,089
======== ========= =========
</TABLE>

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

17
<PAGE> 22

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Reporting Entity

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

Certain prior year amounts have been reclassified to conform with the
current year presentation.

(b) Accounts Receivable

The Company reports accounts receivable net of the allowance for doubtful
accounts of $2,321,000 and $3,309,000 at October 31, 1998 and 1999,
respectively. Trade accounts receivable are the result of sales of building
systems and components to customers throughout the United States and affiliated
territories including international builders who resell to end users. All sales
are denominated in United States dollars. Credit sales do not normally require
a pledge of collateral; however, various types of liens may be filed to enhance
the collection process.

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

<TABLE>
<CAPTION>
October 31,
-------------------
1998 1999
-------- --------
(in thousands)
<S> <C> <C>
Raw materials ................ $ 55,190 $ 65,315
Work-in-process and
finished goods ............ 22,811 18,673
-------- --------
$ 78,001 $ 83,988
======== ========
</TABLE>

(d) Property, Plant and Equipment

Property, plant and equipment are stated at cost and depreciated over their
estimated useful lives. Depreciation is computed using the straight-line method
for financial reporting purposes and both straight-line and accelerated methods
for income tax purposes. Depreciation expense for the years ended October 31,
1997, 1998 and 1999 was $5,893,000, $9,970,000, and $13,468,000 respectively.
The Company capitalizes certain costs related to internal use software in
accordance with Statement of Position 98-1, Accounting for the Costs of Computer
Software Developed for Internal Use.

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
October 31,
-------------------
1998 1999
-------- --------
(in thousands)
<S> <C> <C>

Land ......................... $ 11,184 $ 12,417
Buildings and improvements ... 74,510 87,893
Machinery, equipment
and furniture ............ 109,763 115,768
Transportation equipment ..... 4,711 4,721
Computer software
and equipment ............ 8,003 17,759
-------- --------
208,171 238,558
Less accumulated depreciation. (28,671) (40,703)
-------- --------
$179,500 $197,855
======== ========
</TABLE>

Estimated useful lives for depreciation are:

<TABLE>
<S> <C>
Buildings and improvements ............... 10 - 40 years
Machinery, equipment
and furniture ...................... 5 - 13 years
Transportation equipment ................. 3 - 10 years
Computer software
and equipment ...................... 5 - 7 years
</TABLE>

(e) Statement of Cash Flows

For purposes of the cash flows statement, the Company considers all highly
liquid investments with an original maturity date of three months or less to be
cash equivalents. Total interest paid for the years ended October 31, 1997, 1998
and 1999 was $163,000, $16,733,000, and $30,198,000, respectively. Income taxes
paid, net of refunds received, for the years ended October 31, 1997, 1998 and
1999 was $15,676,000, $19,915,000 and $13,247,000, respectively. Non-cash
investing or financing activities included: $2,301,000 for the 1999 401(k) plan
contributions through the third fiscal quarter of 1999 and $2,428,000 for the
related 1998 contributions which were paid in common stock in 1999, $1,960,000
for the 1997 contribution paid in common stock in 1998, and $1,518,000 for 1996
contribution paid in common stock in 1997.

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

Excess of cost over fair value of acquired net assets is amortized on a
straight-line basis over periods of fifteen to forty years. Accumulated
amortization as of October 31, 1998 was $9,788,000, and $21,581,000 as of
October 31, 1999. The carry-

18
<PAGE> 23

ing value of goodwill is reviewed if the facts and circumstances suggest that it
may be impaired. If this review indicates that goodwill will not be
recoverable, as determined based on the undiscounted cash flows of the entity
acquired over the remaining amortization period, the Company's carrying value of
the goodwill would be reduced by the estimated shortfall of cash flows.

(g) Use of Estimates

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

(h) Advertising Costs

Advertising costs are expensed as incurred. Advertising expense was $1,416,000,
$2,301,000 and $3,851,000 in 1997, 1998 and 1999, respectively.

(i) Long-Lived Assets

Impairment losses are recognized when indicators of impairment are present and
the estimated undiscounted cash flows are not sufficient to recover the assets
carrying amount. Assets held for disposal are measured at the lower of carrying
value or estimated fair value, less costs to sell.

(j) Stock-Based Compensation

The Company uses the intrinsic value method in accounting for its stock-based
employee compensation plans.

(k) Pending Accounting Changes

The Company plans to adopt Statement of Financial Accounting Standards "(SFAS)"
No. 133, Accounting for Derivative Instruments and Hedging Activities, effective
at the beginning of fiscal 2001. This statement will require derivative
positions to be recognized in the balance sheet at fair value. The Company is in
the process of reviewing the Statement, and has not yet determined the effect of
adoption on results of operations or financial position.

(l) 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 building components,
based upon 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 and 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 three-year
comparison labeled Supplementary Business Segment Information on page 24.

(2) LONG-TERM DEBT

<TABLE>
<CAPTION>
October 31,
---------------------
1998 1999
--------- ---------
(in thousands)
<S> <C> <C>

Five-year revolving credit line with banks
bearing interest at a rate of 30-day LIBOR
plus 1.375% (6.9% at October 31, 1999),
maturing on July 1, 2003 .................. $ 141,600 $ 124,800

Five-year term loan payable to banks
bearing interest at a rate of 90-day LIBOR
plus 1.375% (7.0% at October 31, 1999)
repayable beginning on October 31, 1998,
in quarterly installments beginning with
$7.5 million and gradually increasing
to $12.5 million on the maturity date,
July 1, 2003 .............................. 192,500 161,250

364-day revolving credit facility with banks
bearing interest at a rate of 30-day LIBOR
plus 1.375% (6.9% at October 31, 1999)
maturing on May 1, 2000 ................... 140,000 20,688

Unsecured senior subordinated notes bearing
interest at a rate of 9 1/4%,
maturing on May 1, 2009 ................... -- 125,000

Note payable to employee bearing
interest at 7%, maturing April 1, 2001,
with an option to convert into common
stock at $14.96 per share ................. 1,500 1,500

Other ..................................... 174 121
--------- ---------
475,774 433,359

Current portion of long-term debt ......... (31,297) (36,297)
--------- ---------
$ 444,477 $ 397,062
========= =========
</TABLE>

19
<PAGE> 24

Aggregate required principal reductions are as follows:

<TABLE>
<CAPTION>
Year Ended October 31,
----------------------
(in thousands)
<S> <C>
2000 ................. 36,305
2001 ................. 42,807
2002 ................. 46,260
2003 ................. 182,987
2004 and thereafter .. 125,000
---------
$ 433,359
=========
</TABLE>

The Company has a senior credit facility from a syndicated group of banks, which
consists of (i) a five-year revolving credit facility of up to $200 million, of
which up to $20 million may be utilized in the form of commercial and standby
letters of credit, (ii) a five-year term loan facility and (iii) a 364-day
revolving credit facility which originally provided for up to $200 million.
Loans and letters of credit under the five-year revolver will be available, and
amounts repaid may be reborrowed, at any time until July, 2003, subject to the
fulfillment of certain conditions precedent, includ-ing the absence of default
under the facility. If the 364-day revolver is not repaid by the Company or
extended by the lenders, the Company has the option to convert it to a
three-year term note. The Company's obligations under the senior credit facility
are secured by the pledge of all capital stock, partnership interests and other
equity interests of the Company's domestic subsidiaries. All obligations are
also guaranteed by each of the Company's domestic corporate subsidiaries and
operating limited partnerships. The senior credit facility contains customary
financial and restrictive covenants with amounts and ratios negotiated between
the Company and the lender.

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.

On May 5, 1999, the Company completed its offering of $125 million of
unsecured Senior Subordinated Notes due 2009 (the "Notes"). The net proceeds of
the offering, approximately $121 million, were used to repay a portion of
outstanding borrowings under the existing senior credit facility. The indenture
governing the Notes provides for interest at 9 1/4%, and the Notes mature on
May 1, 2009. The indenture governing the Notes also contains covenants
restricting certain activities and transactions by the Company and its
subsidiaries including dividends, repurchases of stock, incurrence of
additional debt and liens, investments in non-wholly owned entities or ventures
and acquisitions or mergers, unless certain financial tests and other
requirements are met.

As a result of the offering of the Notes, the Company reduced the maximum
available borrowings under its 364 day revolver from $200 million to $40
million. The restructuring of the existing senior credit facility resulted in
the write-off of approximately $1.6 million ($1.0 million after tax) in
deferred financing costs. At October 31, 1999, the remaining unamortized
balance in deferred financing costs relating to the senior credit facility and
the Notes were $6,201,000 and $3,975,000, respectively. At October 31, 1999, the
fair value of the Company's long term debt, based on current interest rates and
quoted market prices was $426.7 million, compared with the carrying amount of
$433.4 million. At October 31, 1998, the carrying amount of the Company's
long-term debt approximated its fair value.

(3) RELATED PARTY TRANSACTIONS

During 1997, 1998 and 1999, the Company purchased $1,869,000, $1,862,000, and
$1,072,000 respectively, of materials from a related party under arm's length
transactions.

(4) INCOME TAXES

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

Taxes on income from continuing operations consist of the
following:

<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------
1997 1998 1999
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Current: Federal ............... $ 15,478 $ 15,371 $ 27,534
State ................. 442 1,202 2,532
-------- -------- --------
Total current ................ 15,920 16,573 30,066
Deferred: Federal .............. 304 7,292 2,760
State ................. 14 666 262
-------- -------- --------
Total deferred ............... 318 7,958 3,022
-------- -------- --------
Total provision ................ $ 16,238 $ 24,531 $ 33,088
======== ======== ========
</TABLE>

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

20
<PAGE> 25

<TABLE>
<CAPTION>
Year Ended October 31,
----------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Non-deductible goodwill
amortization ........................... -- 2.7% 4.2%
State income taxes ...................... 1.2% 2.1% 2.3%
Other ................................... 0.6 (0.1%) (0.1%)
---- ---- ----
Effective tax rate ..................... 36.8% 39.7% 41.4%
==== ==== ====
</TABLE>

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

<TABLE>
<CAPTION>
------------------
1998 1999
-------- --------
(in thousands)
<S> <C> <C>
Deferred tax assets
Inventory ................................ $ 1,968 $ 1,693
Bad debt reserve ......................... 1,446 1,328
Accrued insurance reserves ............... 1,258 1,480
Deferred compensation .................... 711 1,416
Other reserves ........................... 1,112 1,026
-------- -------
Total deferred tax assets ................. 6,495 6,943
-------- -------

Deferred tax liabilities
Depreciation and amortization ............ 18,327 21,098
Other .................................... 2,944 2,939
-------- -------
Total deferred tax liabilities ............ 21,271 24,037
-------- -------
Net deferred tax asset (liability) ........ $(14,776) $(17,094)
-------- -------
</TABLE>

Other accrued liabilities includes accrued income taxes of $10,454,000 at
October 31, 1999 and income tax receivables of $3,710,000 at October 31, 1998.

(5) OPERATING LEASE COMMITMENTS

Total rental expense incurred from operating non-cancelable leases for the years
ended October 31, 1997, 1998 and 1999 was $4,644,000, $5,527,000 and $6,795,000,
respectively.

Aggregate minimum required annual payments on long-term operating
leases at October 31, 1999 were as follows:

Year Ended October 31, (in thousands)
- -------------------------------------------
2000 ........................ $ 2,055
2001 ........................ 1,417
2002 ........................ 829
2003 ........................ 417
2004 ........................ 198
-------
$ 4,916
=======

(6) SHAREHOLDERS' RIGHTS PLAN

In June 1998 the Board of Directors adopted a Shareholders' Rights Plan in which
one preferred stock purchase right (Right) was declared as a dividend for each
common share outstanding. Each Right entitles shareholders to purchase, under
certain conditions, one one-hundredth (1 /100th) of a share of newly authorized
Series A Junior Participating Preferred Stock at an exercise price of $62.50.
Rights will be exercisable only if a person or group acquires beneficial
ownership of 20 percent or more of the common shares or commences a tender or
exchange offer, upon consummation of which such person or group would
beneficially own 20 percent or more of the common shares. In the event that a
person or group acquires 20 percent or more of the common shares, the Rights
enable dilution of the acquiring person's or group's interest by providing for a
50 percent discount on the purchase of common shares by the non-controlling
shareholders. The company will generally be entitled to redeem the Rights at
$0.005 per Right at any time before a person or group acquires 20 percent or
more of the common shares. Rights will expire on June 24, 2008, unless earlier
exercised, redeemed or exchanged.

(7) COMMON STOCK

In June 1998, the Company's Board of Directors approved a two-for-one split of
the Common Stock effective for stockholders of record on July 8, 1998. Share and
per share amounts have been restated to reflect the stock split. The Board of
Directors has approved a non-statutory employee stock option plan. This plan
includes the future granting of stock options to purchase up to 4,100,000 shares
as an incentive and reward for key management personnel. Options expire ten
years from date of grant. The right to acquire the option shares is earned in
25% increments over the first four years of the option period. Stock option
transactions during 1997, 1998 and 1999 are as follows (in thousands, except per
share amounts):

<TABLE>
<CAPTION>
Weighted
Number Average
of Shares Exercise Price
----------- --------------
<S> <C> <C>
Balance, October 31, 1996 ...................... 1,616 $ 7.39
Granted .................................... 314 15.23
Canceled ................................... (10) (12.09)
Exercised .................................. (211) (6.34)
------ --------
Balance, October 31, 1997 ...................... 1,709 8.94
Granted .................................... 517 23.65
Canceled ................................... (22) (14.56)
Exercised .................................. (313) (7.98)
------ --------
Balance, October 31, 1998 ...................... 1,891 $ 13.06
Granted .................................... 118 22.72
Canceled ................................... (37) (13.27)
Exercised .................................. (271) (3.57)
------ --------
Balance, October 31, 1999 ...................... 1,701 $ 15.23
====== ========
</TABLE>

Options exercisable at October 31, 1997, 1998, and 1999 were 841,000, 910,000,
and 929,000 respectively. The weighted average exercise prices for options
exercisable at October 31, 1997,

21
<PAGE> 26

1998 and 1999 were $4.60, $6.67 and $11.11. Exercise prices for options
outstanding at October 31, 1999 range from $1.36 to $28.13. The weighted average
remaining contractual life of options outstanding at October 31, 1999 is 6.6
years. The following summarizes additional information concerning outstanding
options as of October 31, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING

Range of Number of Weighted-Average
Exercise Prices Options Remaining Life Exercise Price
- --------------- ---------- ---------------- --------------
<S> <C> <C> <C>
$ 1.36 - 9.13 428,000 3.4 years $ 4.98
$ 11.50 - 19.38 707,000 6.9 years $ 14.43
$ 21.56 - 28.13 566,000 8.6 years $ 23.98
----------
1,701,000
==========
</TABLE>

<TABLE>
<CAPTION>
OPTIONS EXERCISABLE

Range of Number of Weighted-Average
Exercise Prices Options Exercise Price
- --------------- --------- ----------------
<S> <C> <C>
$ 1.36 - 9.13 428,000 $ 4.98
$ 11.50 - 19.38 383,000 $ 13.95
$ 21.56 - 28.13 118,000 $ 24.04
---------
929,000
=========
</TABLE>

In accordance with the terms of APB No. 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of the grant, the Company records no compensation expense for its
stock option awards. As required by SFAS No. 123, the Company provides the
following disclosure of hypothetical values for these awards. The weighted
average grant-date fair value of options granted during 1997, 1998 and 1999 was
$7.89, $12.07 and $12.83, respectively. These values were estimated using the
Black-Scholes option-pricing model with the following weighted average
assumptions: no expected dividend, expected volatility of 38.4%, risk free
interest rates ranging from 6.4% to 6.9% for 1997, 4.6% to 5.9% for 1998 and
4.4% to 6.2% for 1999, and expected lives of 7 years. Had compensation expense
been recorded based on these hypothetical values, the Company's income and
earnings per share would have been as follows (in thousands, except per share
data):

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Proforma net income before
extraordinary loss ....................... $ 27,081 $ 35,887 $ 44,911
Proforma income per share before
extraordinary loss - Basic ............... $ 1.68 $ 2.08 $ 2.44
- Diluted ............. $ 1.59 $ 1.98 $ 2.35
</TABLE>

Because options vest over several years and additional options grants are
expected, the effects of these hypothetical calculations are not likely to be
representative of similar future calculations.

(8) LITIGATION

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

(9) NET INCOME PER SHARE

Basic and diluted net income per share computations are as follows:

<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------------
1997 1998 1999
-------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C>
Income before extraordinary item $ 27,887 $ 37,318 $ 46,874
Add: Interest, net of tax,
on convertible debenture
assumed converted ............... 66 66 66
-------- -------- --------
Adjusted income before
Extraordinary loss ................ $ 27,953 $ 37,384 $ 46,940
======== ======== ========
Extraordinary loss on
debt refinancing, net of tax .... -- -- 1,001
-------- -------- --------
Adjusted net income ................. $ 27,953 $ 37,384 $ 45,939
======== ======== ========
Weighted average common
shares outstanding ................. 16,127 17,212 18,378
Add: Common stock equivalents:
Stock options ...................... 858 880 622
Convertible debenture .............. 100 100 100
Weighted average common shares
-------- -------- --------
outstanding, assuming dilution ..... 17,085 18,192 19,100
======== ======== ========
Income per common and
common equivalent share:
Basic:
Income before extraordinary loss $ 1.73 $ 2.17 $ 2.55
Extraordinary loss ................. -- -- (0.05)
-------- -------- --------
Net Income ......................... $ 1.73 $ 2.17 $ 2.50
======== ======== ========
Diluted:
Income before extraordinary loss $ 1.64 $ 2.05 $ 2.46
Extraordinary Loss ................. -- -- (0.05)
-------- -------- --------
Net income .......................... $ 1.64 $ 2.05 $ 2.41
======== ======== ========
</TABLE>

(10) EMPLOYEE BENEFIT PLAN

The Company has a 401(k) profit sharing plan (the "Savings Plan") which covers
all eligible employees. The Savings Plan requires the Company to match employee
contributions up to a certain percentage of a participant's salary. No other
contributions may be made to the Savings Plan. Contributions expense for the
years ended October 31, 1997, 1998 and 1999 were $1,967,000, $2,575,000 and
$4,144,000 respectively for contributions to the Savings Plan.

(11) ACQUISITIONS

On May 4, 1998, the Company acquired Metal Building Components, Inc. ("MBCI")
through the purchase of all of the outstanding capital stock of Amatek Holdings,
Inc. from BTR

22
<PAGE> 27

Australia Limited, a wholly owned subsidiary of BTR plc, for a purchase price of
approximately $589 million, including cash of $550 million (plus transaction
costs) and 1.4 million shares of the Company's common stock valued at $32.2
million. MBCI designs, manufactures, sells and distributes metal components for
commercial, industrial, architectural, agricultural and residential construction
uses. MBCI also processes its own hot roll coil metal for use in component
manufacturing, as well as processing hot roll coil metal and toll coating light
gauge metal for use by other parties in the construction of metal building
components and numerous other products. The funds for this acquisition were
provided from the proceeds of a new $600 million bank credit facility under
which the Company initially borrowed $540 million. The acquisition was
accounted for using the purchase method of accounting. The excess of cost over
the fair value of the acquired assets was approximately $389 million. The
consolidated results of operations for 1998 include MBCI since the date of
acquisition. Assuming the acquisition of MBCI had been consummated as at the
beginning of the period pre-sented, the proforma unaudited results of operations
are as follows (in thousands, except per share data):

<TABLE>
<CAPTION>
Year Ended October 31, 1998
---------------------------
<S> <C>
Sales $ 871,026
Net income $ 37,143
Net income per share - basic $ 2.07
Net income per share - diluted $ 1.97
</TABLE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
NCI Building Systems, Inc.

We have audited the accompanying consolidated balance sheets of NCI Building
Systems, Inc. as of October 31, 1999 and 1998, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended October 31, 1999. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material mistatement. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of NCI Building
Systems, Inc. at October 31, 1999 and 1998 and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
October 31, 1999, in conformity with accounting principles generally accepted in
the United States.

ERNST & YOUNG LLP
Houston, Texas
December 7, 1999

<PAGE> 28
SUPPLEMENTARY BUSINESS SEGMENT INFORMATION
(DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
1997 % 1998 % 1999 %
--------- ---- --------- ---- --------- ----
<S> <C> <C> <C> <C> <C> <C>
%Tot %Tot %Tot
SALES TO OUTSIDE CUSTOMERS:
Engineered building systems............................ 257,093 63 277,347 41 310,324 33
Metal building components.............................. 150,658 37 397,984 59 626,226 67
Intersegment sales..................................... -- 25,094 4 59,692 6
Corporate/eliminations................................. -- (25,094) (4) (59,692) (6)
--------- --- --------- --- --------- ---
Total net sales(1)................................... $ 407,751 100 $ 675,331 100 $ 936,550 100
========= === ========= === ========= ===

% Sale % Sale % Sale
OPERATING INCOME:
Engineered building systems............................ 25,518 10 29,576 11 37,509 12
Metal building components.............................. 17,064 11 51,497 13 72,441 12
Corporate/eliminations................................. (293) -- (1,764) -- 582 --
--------- --- --------- --- --------- ---
Total operating income............................... $ 42,289 10 $ 79,309 12 $ 110,532 12
========= === ========= === ========= ===

%Tot %Tot %Tot
JOINT VENTURE INCOME:
Engineered building systems............................ -- -- 8 1 150 9
Metal building components.............................. -- -- 729 99 1,525 91
Corporate/eliminations................................. -- -- -- -- -- --
--------- --- --------- --- --------- ---
Total joint venture income .......................... $ -- -- $ 737 100 $ 1,675 100
========= === ========= === ========= ===

INVESTMENT IN JOINT VENTURES:
Engineered building systems............................ 20 28 178
Metal building components.............................. 500 25,937 30,301
Corporate/eliminations................................. -- -- --
--------- --- --------- --- --------- ---
Total investment in joint ventures................... $ 520 $ 25,965 $ 30,479
========= === ========= === ========= ===

%Tot %Tot %Tot
PROPERTY, PLANT AND EQUIPMENT:
Engineered building systems............................ 30,712 60 33,244 19 35,931 18
Metal building components ............................. 16,851 33 142,637 79 153,156 77
Corporate/eliminations................................. 3,660 7 3,619 2 8,768 5
--------- --- --------- --- --------- ---
Total property, plant and equipment, net............. $ 51,223 100 $ 179,500 100 $ 197,855 100
========= === ========= === ========= ===

DEPRECIATION AND AMORTIZATION:
Engineered building systems............................ 4,197 5,958 6,893
Metal building components ............................. 3,471 10,346 17,590
Corporate/eliminations................................. 208 1,514 4,059
--------- --- --------- --- --------- ---
Total depreciation and amortization ................. $ 7,876 $ 17,818 $ 28,542
========= === ========= === ========= ===

CAPITAL EXPENDITURES:
Engineered building systems............................ 10,205 7,297 10,067
Metal building components.............................. 818 13,233 17,769
Corporate/eliminations................................. 309 304 5,426
--------- --- --------- --- --------- ---
Total capital expenditures........................... $ 11,332 $ 20,834 $ 33,262
========= === ========= === ========= ===

%Tot %Tot %Tot
TOTAL ASSETS:
Engineered building systems............................ 91,703 47 86,342 10 88,673 10
Metal building components.............................. 61,911 31 352,407 43 364,533 43
Corporate/eliminations ................................ 42,718 22 384,788 47 402,277 47
--------- --- --------- --- --------- ---
Total assets ........................................ $ 196,332 100 $ 823,537 100 $ 855,483 100
========= === ========= === ========= ===
</TABLE>

(1) The company is not dependent on any one significant customer or group of
customers. Substantially all of the company's sales are made within the
United States.

24
<PAGE> 29

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
Year Ended October 31,
------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Sales.................................. 100.0% 100.0% 100.0%
Cost of sales.......................... 73.4 73.7 74.2
----- ----- -----
Gross profit........................... 26.6 26.3 25.8
Operating expenses..................... 16.3 14.2 14.0
Nonrecurring acquisition expense....... -- 0.3 --
----- ----- -----
Income from operations................. 10.3 11.8 11.8
Interest expense....................... -- 3.1 3.8
Other income net....................... (0.5) (0.5) (0.5)
----- ----- -----
Income before income taxes............. 10.8 9.2 8.5
Provision for income taxes............. 4.0 3.6 3.5
Income before extraordinary loss....... 6.8 5.6 5.0
Extraordinary loss on debt refinancing,
net of tax........................... -- -- (0.1)
Net income............................. 6.8% 5.6% 4.9%
===== ===== =====
</TABLE>

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 supplies 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 component segment including painting and
coating of hot rolled material. This provides better customer service, shorter
delivery time and minimizes transportation costs to the customer.

RESULTS OF OPERATIONS FOR FISCAL 1999 COMPARED TO 1998

Consolidated sales increased by 39% in the current year compared to the prior
year. Most of this increase resulted from the inclusion of MBCI (acquired in May
1998) for the full year in 1999 compared to only six months in 1998. On a pro
forma basis, the increase in sales would have been approximately 8%.

ENGINEERED BUILDING SYSTEMS sales increased by 12% in 1999 compared to 1998
due to increased market penetration, increased geographic coverage through
utilization of component plants and increased product offerings available to
engineered building systems customers after the MBCI acquisition. Operating
income in 1999 increased by 27% over 1998 which represented 12.1% of sales
compared to 10.7% of sales for 1998. Operating income increased at a faster rate
than sales volume growth as a result of synergies of the MBCI acquisition
including purchase pricing and efficiencies, vertical integration of painting
and coating, lower distribution costs from broader geographical locations,
improved manufacturing utilization, and product procurement from the metal
component segment.

METAL BUILDING COMPONENT sales increased 57% in 1999 compared to 1998
primarily from the inclusion of the MBCI acquisition for the full year in 1999.
On a pro forma basis, the sales increase would have been approximately 7% for
the year. Top line sales growth has been reduced by sales which became
intersegment sales after the combination of MBCI with the Company. Since 90% of
coating and painting requirements of the Company are performed internally,
external sales opportunities may be lost during peak periods. In addition, the
external sales which are diverted to one of the Company's joint ventures may
result in a reduction of sales growth. Although sales increased by 57%,
operating income increased by only 41% in the current year, representing 11.6%
of sales in 1999 compared to 12.9% in 1998. A more competitive pricing
environment in the current year and new competition in some market areas
accounted for the decline in margin performance.

CONSOLIDATED OPERATING EXPENSES consisting of engineering and drafting,
selling and administrative costs, increased by $35 million, or 36%, in 1999
compared to 1998 which was slightly less than the 39% increase in consolidated
sales. As a percent of sales, operating expenses were 14.0% in 1999 compared to
14.2% in 1998. The improvement resulted primarily from the leveraging of fixed
costs over the higher sales volume.

INTEREST EXPENSE for 1999 was $35.4 million compared to $20.8 million in
1998. In May 1998, the Company borrowed approximately $540 million in bank debt
to finance the acquisition of MBCI. During the last six months of 1998 and in
1999, the Company reduced its total indebtedness to $433 million. The reduction
in debt coupled with lower interest costs (as leverage decreased) resulted in a
lower percentage increase in interest cost being a lower percentage of sales in
1999 as compared to 1998.

JOINT VENTURE INCOME increased from $.7 million in 1998 to $1.7 million in
1999 due to the inclusion of MBCI's joint venture operations for the whole year.
In April 1999, a 50% joint

25
<PAGE> 30

venture for the painting of heavy gauge hot roll coils began operation. This
joint venture has incurred start up losses which reduced the overall increase in
total joint venture income in 1999.

RESULTS OF OPERATIONS FOR FISCAL 1998 COMPARED TO 1997

Consolidated sales for fiscal 1998 increased from $407.8 million in 1997 to
$675.3 million, or 66%. The 1998 fiscal year includes the sales of MBCI
(acquired in May 1998) for six months. On a pro forma basis, the increase in
sales for fiscal 1998 would have been approximately 7% from 1997. Intersegment
sales of $25.1 million represent product and services provided by the metal
building component segment, principally coating and painting services which were
outside sales to the engineered buildings segment in 1997. If these sales had
been considered external sales in 1998 as they were in 1997, the sales increase
for the year would have been approximately 10% in fiscal year 1998.

ENGINEERED BUILDING SYSTEMS sales increased approximately 7% in fiscal 1998
compared to fiscal 1997. This increase resulted from increased market
penetration due to growth in the builder customer base and wider geographical
distribution. Operating income for fiscal 1998 increased by 16% over fiscal 1997
and represented 10.6% of sales in 1998 and 9.9% in 1997. Improvement in
operating income margins resulted from better utilization of manufacturing
facilities, lower cost from vertical integration of coating and painting
services and lower raw material costs from the consolidation and increase in
purchasing power after the acquisition of MBCI.

METAL BUILDING COMPONENTS sales increased in fiscal 1998 by 164% compared
to fiscal year 1997. The majority of this increase resulted from the MBCI
acquisition and the inclusion of MBCI's sales for the last six months of 1998.
Operating income of this segment increased by 201% in fiscal year 1998 compared
to fiscal 1997 and represented 12.9% of sales in fiscal 1998 and 11.3% in fiscal
1997. The improvement in operating income margin resulted from consolidation of
the sales and marketing functions of the component operations of the two
companies, improved purchasing power, vertical integration of coating and
painting and better utilization of manufacturing facilities.

CONSOLIDATED OPERATING EXPENSES increased $30.0 million, or 45%, in fiscal
1998 compared to fiscal 1997 which was less than the 66% sales increase.
Operating expenses increased at a slower rate than sales due to improved
leverage of fixed costs and the consolidation of the sales and marketing
functions of the compo-nent operations. As a percent of sales, operating
expenses represented 16.2% in fiscal year 1997 and 14.2% in fiscal year 1998.

JOINT VENTURE INCOME of $737,000 in fiscal year 1998 resulted primarily
from a 50% ownership of a coil paint line which was acquired as part of the MBCI
acquisition. The Company had no joint venture income in 1997.

LIQUIDITY AND CAPITAL RESOURCES

As of October 31, 1999, the Company had working capital of $60.6 million
compared to $58.4 million at the end of fiscal 1998. Better inventory control
management and strict credit policies allowed the Company to finance its growth
without an increase in net working capital. During fiscal year 1999, the
company generated $79.8 million in cash flow from operations before changes in
working capital components. This was approximately 21% higher than the $65.7
million generated in fiscal 1998. This cash flow was used primarily to fund
capital additions of $33.3 million and reduce debt by $42.4 million during
fiscal 1999.

In May, 1999, the Company completed its offering of $125 million of senior
subordinated notes which mature on May 1, 2009. The notes have an interest rate
of 9.25%. The net proceeds of approximately $121 million were used to repay bank
indebtedness. As a result of the offering, the Company reduced the maximum
available borrowings under its existing 364-day senior revolving credit facility
from $200 million to $40 million.

After the above refinancing, the Company has a $40 million 364-day senior
revolving credit facility which matures on May 1, 2000. At October 31, 1999, the
Company had $20.7 million out-standing under this facility . If this revolver is
not further extended by the lenders, the Company has the option to convert it
to a three-year term note. The Company has a $200 million five year senior
revolving credit facility which matures on July 1, 2003 and had $124.8 million
outstanding at October 31, 1999. Borrowing under both revolvers may be prepaid
and the voluntary reduction of the unutilized portion may be made at anytime in
certain agreed minimum amounts, without premium or penalty but subject to LIBOR
breakage fees. The Company also has a $200 million senior term loan facility
which matures on July 1, 2003. Loans under the term loan are payable in
successive quarterly installments, which began on October 31, 1998, with $7.5
million and gradually increasing to $12.5 million on the maturity date.
Repayments on the term facility may not be reborrowed by the Company. The
balance on the term facility was $161.2 million at October 31, 1999. The Company
is required to make mandatory prepayments on the senior credit facilities 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. At
October 31, 1999, the Company had approximately $95 million in borrowing
capacity under its senior credit facilities.

During the year, the Company spent $33.3 million in capital additions for
plant expansions, development of new management information systems and a new
corporate headquarters building. The Company plans to spend approximately $26
million in capital spending in fiscal 2000. Delays or cancellation of planned
projects or changes in the economic outlook could increase or decrease capital
spending from the amounts currently anticipated.

<PAGE> 31

Inflation has not significantly affected the Company's financial position or
operations. Metal components and engineered building systems 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 and 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.

IMPACT OF THE YEAR 2000 ISSUE

The year 2000 issue is the result of computer programs having been written using
two digits rather than four to define the applicable year. Any computer programs
that have date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.

The Company has completed a review of its computer systems to identify the
systems that could be affected by the year 2000 issue and has implemented its
plans to attempt to ensure that its management information systems ("MIS") and
computer software are year 2000 compliant. This review was part of the Company's
overall upgrade of its MIS, which is substantially complete and includes the
installation of new systems. As a result, the Company has no separate budget for
year 2000 compliance. Expenses relating to reviewing and assessing systems are
included in historical operating expenses as part of management information
expenses and have not been separately identified. Management completed the
upgrade with respect to substantially all of the Company's operations in 1999.
Management believes that with the installation of the new systems, conversion to
new software and modifications to existing software, the year 2000 issue will
pose no significant operational problems for the Company.

The Company has discussed with its major vendors and customers the
possibility of any year 2000 interface difficulties that may affect the company.
The ability of third parties with whom the Company transacts business to address
adequately their year 2000 issue is, however, outside the Company's control.

To date, the Company has not identified any information technology assets
under the control of the Company that present a material risk of not being year
2000 ready or for which a suitable alternative has not been implemented. There
can be no assurance, however, that the Company has addressed all issues which
could have a materially adverse effect on the Company's business, financial
condition and results of operations. In addition, if any third parties who
provide goods and services that are critical to the Company's business
activities fail to appropriately address their year 2000 issues, there could be
a materially adverse effect on the Company's business, results of operations and
financial position.

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
October 31, 1999, the Company had $306.7 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 $3.1
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.

27
<PAGE> 32

QUARTERLY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
FISCAL YEAR 1998

Sales ................................. $ 97,323 $ 95,349 $ 229,547 $ 253,112
Gross profit........................... 25,437 26,614 60,716 64,702
Income before income taxes............. 9,448 9,981 19,310 23,110
Net income............................. $ 6,052 $ 6,396 $ 11,098 $ 13,772
Net income per common and common
equivalent share - Basic(1).......... $ 0.37 $ 0.39 $ 0.62 $ 0.76
Net income per common and common
equivalent share - Diluted(1)........ $ 0.35 $ 0.37 $ 0.58 $ 0.73

FISCAL YEAR 1999
Sales.................................. $214,347 $217,365 $ 243,770 $ 261,068
Gross profit........................... 54,277 54,384 63,450 69,530
Income before taxes.................... 13,146 15,373 22,461 28,982
Income before extraordinary loss....... 7,425 8,948 13,495 17,006
Extraordinary loss on debt refinancing,
net of tax........................... -- -- (1,001) --
Net income............................. $ 7,425 $ 8,948 $ 12,494 $ 17,006
Net income per common and common
equivalent share
Basic:(1)............................ $ 0.41 $ 0.49 $ 0.73 $ 0.92
Income before extraordinary loss... -- -- (0.05) --
Net income......................... $ 0.41 $ 0.49 $ 0.68 $ 0.92
Diluted:(1).......................... $ 0.39 $ 0.47 $ 0.71 $ 0.89
Income before extraordinary loss... -- -- (0.05) --
Net income......................... $ 0.39 $ 0.47 $ 0.66 $ 0.89
</TABLE>

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

PRICE RANGE OF COMMON STOCK

The Company's common stock began trading on the NYSE under the symbol "NCS" on
August 13, 1998. The Company's stock previously traded on the Nasdaq National
Market. The following table sets forth the quarterly high and low closing sale
prices of the Company's common stock, as reported by the Nasdaq National Market
or the NYSE, as applicable, for the prior two years. The prices quoted represent
prices between dealers in securities, without adjustments for mark-ups,
mark-downs, or commissions, and do not necessarily reflect actual transactions.

<TABLE>
<CAPTION>
Fiscal Year 1999 High Low
- ---------------- ---- ---
<S> <C> <C>
January 31......................................... $ 19.78 $ 16.88
April 30........................................... $ 26.00 $ 18.06
July 31............................................ $ 32.25 $ 23.13
October 31......................................... $ 27.38 $ 15.44

Fiscal Year 1999
- ----------------
January 31......................................... $ 28.38 $ 21.25
April 30........................................... $ 26.25 $ 20.75
July 31............................................ $ 25.25 $ 18.56
October 31......................................... $ 19.94 $ 15.81
</TABLE>

<PAGE> 33

CORPORATE DATA

CORPORATE HEADQUARTERS
NCI Building Systems, Inc.
7301 Fairview
Houston, Texas 77041
713/466-7788

COMMON STOCK TRANSFER AGENT AND REGISTRAR
Harris Trust and Savings Bank
Houston, Texas

LEGAL COUNSEL
Gardere & Wynne, L.L.P.

AUDITORS
Ernst & Young LLP

FORM 10-K
The Company's Annual Report on Form 10-K Report for the year ended October 31,
1999, as filed with the Securities and Exchange Commission, is available without
charge upon request to Robert J. Medlock at the address of the Corporate
Offices. The Company's common stock is traded on the NYSE under the trading
symbol NCS.

NUMBER OF SHAREHOLDERS
As of October 31, 1999, there were 217 shareholders of record of the Company's
common stock. The Company has over 9,100 beneficial shareholders.

CORPORATE DIRECTORY BOARD OF DIRECTORS

<TABLE>
<CAPTION>
OFFICERS DIRECTORS
<S> <C> <C>

C.A. RUNDELL, JR. C.A. RUNDELL, JR. T.C. ARNETT*
Chairman of the Board Chairman of the Board Private Investor
NCI Building Systems, Inc.
JOHNIE SCHULTE, JR. GARY L. FORBES**
CEO & Chairman of the Executive Committee JOHNIE SCHULTE, JR. Vice President
CEO & Chairman of the Executive Committee Equus Incorporated
A.R. GINN NCI Building Systems, Inc.
President & Chief Operating Officer WILLIAM D. BREEDLOVE**
A.R. GINN Vice Chairman
KENNETH W. MADDOX President and Chief Operating Officer Hoak Breedlove Wesneski & Co.
Executive Vice President, Administration NCI Building Systems, Inc.
ROBERT N. MCDONALD*
ROBERT J. MEDLOCK KENNETH W. MADDOX Private Investor
Executive Vice President & Executive Vice President, Administration
Chief Financial Officer * Compensation Committee
DANIEL D. ZABCIK ** Audit Committee
DONNIE R. HUMPHRIES Private Investor
Secretary
</TABLE>

ANNUAL MEETING

The Annual Meeting of shareholders of NCI Building Systems will be held at 10:00
a.m. (CST) on Wednesday, March 1, 2000, at the Johnie Schulte Conference Center,
Houston, Texas. Shareholders of record as of January 5, 2000, will be entitled
to vote at this meeting.

NCI BUILDING SYSTEMS, INC.
7301 Fairview o Houston, Texas 77041
(713) 466-7788 o www.ncilp.com

[LOGO] This annual report is printed on recycled paper containing recovered,
post-consumer waste paper.

<PAGE> 34

[BACK COVER]

NCI BUILDING SYSTEMS, INC.
7301 Fairview
Houston, Texas 77041
(713) 466-7788
www.ncilp.com

<PAGE> 1

EXHIBIT 21

NCI BUILDING SYSTEMS, INC.

List of Subsidiaries

NCI Holding Corp. Delaware

NCI Operating Corp. Nevada

Metal Coaters of California, Inc. Texas

Building Systems de Mexico, S.A. de C.V. Mexico

<PAGE> 1

EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in this Annual Report (Form 10-K)
of NCI Building Systems, Inc. of our report dated December 7, 1999, included in
the 1999 Annual Report to Shareholders of NCI Building Systems, Inc.

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

We consent to the incorporation by reference in the 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., Registration Statements (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., and Registration Statement
(Form S-4 No. 333-80029) of NCI Building Systems, Inc. and in the related
Prospectus of our reports with respect to the consolidated financial statements
and schedule of NCI Building Systems, Inc., for the year ended October 31, 1999.

/s/ ERNST & YOUNG LLP

ERNST & YOUNG LLP

Houston, Texas
January 26, 2000

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<CASH> 16,089
<SECURITIES> 0
<RECEIVABLES> 108,917
<ALLOWANCES> 3,309
<INVENTORY> 83,988
<CURRENT-ASSETS> 217,665
<PP&E> 238,558
<DEPRECIATION> 40,703
<TOTAL-ASSETS> 855,483
<CURRENT-LIABILITIES> 157,094
<BONDS> 0
0
0
<COMMON> 186
<OTHER-SE> 277,104
<TOTAL-LIABILITY-AND-EQUITY> 855,483
<SALES> 936,550
<TOTAL-REVENUES> 936,550
<CGS> 694,909
<TOTAL-COSTS> 694,909
<OTHER-EXPENSES> 128,707
<LOSS-PROVISION> 2,402
<INTEREST-EXPENSE> 30,570
<INCOME-PRETAX> 79,962
<INCOME-TAX> 33,088
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 1,001
<CHANGES> 0
<NET-INCOME> 45,875
<EPS-BASIC> 2.50
<EPS-DILUTED> 2.41

</TABLE>