NCI BUILDING SYSTEMS INC (Form: 10-Q, Received: 08/31/2016 17:01:45)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2016



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

For the transition period from to

Commission file number: 1-14315

NCI BUILDING SYSTEMS, INC.

(Exact name of registrant as specified in its charter)



Delaware	76-0127701
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)



10943 North Sam Houston Parkway West Houston, TX	77064
(Address of principal executive offices)	(Zip Code)

(281) 897-7788

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter 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 ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨	Accelerated filer	ý
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes ý No

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 par value - 71,230,961 shares as of August 25, 2016 .

TABLE OF CONTENTS



		PAGE
	Part I — Financial Information
Item 1.	Unaudited Consolidated Financial Statements	1
	Consolidated Balance Sheets as of July 31, 2016 and November 1, 2015	1
	Consolidated Statements of Operations for the Fiscal Three and Nine Month Periods Ended July 31, 2016 and August 2, 2015	2
	Consolidated Statements of Comprehensive Income (Loss) for the Fiscal Three and Nine Month Periods Ended July 31, 2016 and August 2, 2015	3
	Consolidated Statements of Stockholders’ Equity for the Fiscal Nine Month Period Ended July 31, 2016	4
	Consolidated Statements of Cash Flows for the Fiscal Nine Month Periods Ended July 31, 2016 and August 2, 2015	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	41

	Part II — Other Information
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 5.	Other Information	44
Item 6.	Exhibits	47

PART I — FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements.

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



	July 31, 2016			November 1, 2015
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	50,710		$	99,662
Restricted cash	726			682
Accounts receivable, net	175,387			166,800
Inventories, net	183,340			157,828
Deferred income taxes	31,404			27,390
Prepaid expenses and other	38,346			31,834
Investments in debt and equity securities, at market	5,885			5,890
Assets held for sale	4,256			6,261
Total current assets	490,054			496,347
Property, plant and equipment, net	244,347			257,892
Goodwill	158,106			158,026
Intangible assets, net	149,181			156,395
Other assets	10,131			11,069
Total assets	$	1,051,819		$	1,079,729
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Note payable	$	919		$	513
Accounts payable	146,417			145,917
Accrued compensation and benefits	65,919			62,200
Accrued interest	1,486			6,389
Accrued income taxes	5,374			9,296
Other accrued expenses	103,593			97,309
Total current liabilities	323,708			321,624
Long-term debt, net	414,147			444,147
Deferred income taxes	24,332			20,807
Other long-term liabilities	21,063			21,175
Total long-term liabilities	459,542			486,129
Stockholders’ equity:
Common stock, $.01 par value, 100,000,000 shares authorized; 71,545,242 and 74,529,750 shares issued at July 31, 2016 and November 1, 2015, respectively; 71,230,961 and 74,082,324 shares outstanding at July 31, 2016 and November 1, 2015, respectively	715			745
Additional paid-in capital	600,538			640,767
Accumulated deficit	(321,707		)	(353,733		)
Accumulated other comprehensive loss, net	(8,330		)	(8,280		)
Treasury stock, at cost (314,281 and 447,426 shares at July 31, 2016 and November 1, 2015, respectively)	(2,647		)	(7,523		)
Total stockholders’ equity	268,569			271,976
Total liabilities and stockholders’ equity	$	1,051,819		$	1,079,729

See accompanying notes to consolidated financial statements.

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



	Fiscal Three Months Ended						Fiscal Nine Months Ended
	July 31, 2016			August 2, 2015			July 31, 2016			August 2, 2015
Sales	$	462,353		$	420,789		$	1,204,614		$	1,103,862
Cost of sales	334,454			319,102			899,277			852,789
Fair value adjustment of acquired inventory	—			1,000			—			2,358
Gain on sale of assets and asset recovery	(52		)	—			(1,704		)	—
Gross profit	127,951			100,687			307,041			248,715
Engineering, selling, general and administrative expenses	80,414			74,520			224,912			210,424
Intangible asset amortization	2,405			5,338			7,226			11,206
Strategic development and acquisition related costs	819			701			2,080			3,058
Restructuring and impairment charges	778			750			3,437			3,695
Income from operations	43,535			19,378			69,386			20,332
Interest income	62			14			136			53
Interest expense	(7,747		)	(8,149		)	(23,460		)	(20,448		)
Foreign exchange loss	(922		)	(610		)	(1,088		)	(2,021		)
Gain from bargain purchase	—			—			1,864			—
Other income, net	414			107			476			439
Income (loss) before income taxes	35,342			10,740			47,314			(1,645		)
Provision (benefit) from income taxes	11,627			3,520			15,288			(1,057		)
Net income (loss)	$	23,715		$	7,220		$	32,026		$	(588	)
Net income allocated to participating securities	(165		)	(60		)	(265		)	—
Net income (loss) applicable to common shares	$	23,550		$	7,160		$	31,761		$	(588	)
Income (loss) per common share:
Basic	$	0.32		$	0.10		$	0.44		$	(0.01	)
Diluted	$	0.32		$	0.10		$	0.43		$	(0.01	)
Weighted average number of common shares outstanding:
Basic	73,104			73,341			72,932			73,170
Diluted	73,552			74,336			73,460			73,170

See accompanying notes to consolidated financial statements.

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)



	Fiscal Three Months Ended						Fiscal Nine Months Ended
	July 31, 2016			August 2, 2015			July 31, 2016			August 2, 2015
Comprehensive income (loss):
Net income (loss)	$	23,715		$	7,220		$	32,026		$	(588	)
Other comprehensive income, net of tax:
Foreign exchange translation losses and other, net of taxes ⁽¹⁾	(201		)	(431		)	(50		)	(431		)
Other comprehensive loss	(201		)	(431		)	(50		)	(431		)
Comprehensive income (loss)	$	23,514		$	6,789		$	31,976		$	(1,019	)


(1)	Foreign exchange translation gains (losses) and other are presented net of taxes of $0 in both the three months ended July 31, 2016 and August 2, 2015 , and $0 in both the nine months ended July 31, 2016 and August 2, 2015 .

See accompanying notes to consolidated financial statements.

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)



						Additional						Accumulated Other
	Common Stock					Paid-In			Accumulated			Comprehensive			Treasury Stock					Stockholders’
	Shares		Amount			Capital			Deficit			Loss			Shares		Amount			Equity
Balance, November 1, 2015	74,529,750		$	745		$	640,767		$	(353,733	)	$	(8,280	)	(447,426	)	$	(7,523	)	$	271,976
Treasury stock purchases	—		—			—			—			—			(4,128,786	)	(57,401		)	(57,401		)
Retirement of treasury shares	(4,423,564	)	(44		)	(62,233		)	—			—			4,423,564		62,277			—
Issuance of restricted stock	80,837		—			—			—			—			(161,633	)	—			—
Stock options exercised	1,358,219		14			12,041			—			—			—		—			12,055
Excess tax benefits from share-based compensation arrangements	—		—			867			—			—			—		—			867
Foreign exchange translation loss and other, net of taxes	—		—			—			—			(50		)	—		—			(50		)
Deferred compensation obligation	—		—			1,385			—			—			—		—			1,385
Share-based compensation	—		—			7,711			—			—			—		—			7,711
Net income	—		—			—			32,026			—			—		—			32,026
Balance, July 31, 2016	71,545,242		$	715		$	600,538		$	(321,707	)	$	(8,330	)	(314,281	)	$	(2,647	)	$	268,569

See accompanying notes to consolidated financial statements.

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Fiscal Nine Months Ended
	July 31, 2016			August 2, 2015
Cash flows from operating activities:
Net income (loss)	$	32,026		$	(588	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	32,107			38,038
Deferred financing cost amortization	1,431			1,006
Share-based compensation expense	7,711			7,702
Gain from bargain purchase	(1,864		)	—
Gain on sale of assets and asset recovery	(1,704		)	(15		)
Provision for (recovery of) doubtful accounts	1,515			(645		)
Provision for deferred income taxes	1,573			5,625
Excess tax benefits from share-based compensation arrangements	(867		)	(706		)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable	(10,102		)	13,254
Inventories	(25,309		)	(1,910		)
Income taxes receivable	—			(2,634		)
Prepaid expenses and other	1,150			1,071
Accounts payable	499			493
Accrued expenses	2,550			(22,106		)
Other, net	(117		)	6
Net cash provided by operating activities	40,599			38,591
Cash flows from investing activities:
Acquisitions, net of cash acquired	(4,343		)	(247,123		)
Capital expenditures	(15,140		)	(15,330		)
Proceeds from sale of property, plant and equipment	5,479			28
Net cash used in investing activities	(14,004		)	(262,425		)
Cash flows from financing activities:
Deposit of restricted cash	(44		)	—
Proceeds from stock options exercised	12,055			354
Issuance of debt	—			250,000
Payments on term loan	(30,000		)	(31,240		)
Payments on note payable	(974		)	(1,103		)
Payment of financing costs	—			(9,218		)
Excess tax benefits from share-based compensation arrangements	867			706
Purchases of treasury stock	(57,401		)	(3,273		)
Net cash (used in) provided by financing activities	(75,497		)	206,226
Effect of exchange rate changes on cash and cash equivalents	(50		)	(766		)
Net decrease in cash and cash equivalents	(48,952		)	(18,374		)
Cash and cash equivalents at beginning of period	99,662			66,651
Cash and cash equivalents at end of period	$	50,710		$	48,277

See accompanying notes to consolidated financial statements.

NCI BUILDING SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2016

(Unaudited)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements for NCI Building Systems, Inc. (together with its subsidiaries, unless otherwise indicated, the “Company,” “NCI,” “we,” “us” or “our”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements included herein contain all adjustments, which consist of normal recurring adjustments, necessary to fairly present our financial position, results of operations and cash flows for the periods indicated. Operating results for the fiscal three and nine month periods ended July 31, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending October 30, 2016 . Our sales and earnings are subject to both seasonal and cyclical trends and are influenced by general economic conditions, interest rates, the price of steel relative to other building materials, the level of nonresidential construction activity, roof repair and retrofit demand and the availability and cost of financing for construction projects.

For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended November 1, 2015 filed with the Securities and Exchange Commission (the “SEC”) on December 22, 2015.

Reporting Periods

We use a four-four-five week calendar each quarter with our fiscal year end being on the Sunday closest to October 31. The year end for fiscal 2016 is October 30, 2016 .

Insurance Recoveries

Involuntary conversions result from the loss of an asset because of an unforeseen event (e.g., destruction due to fire). Some of these events are insurable and result in property damage insurance recovery. Amounts the Company receives from insurance carriers are net of any deductibles related to the covered event. The Company records a receivable from insurance to the extent it recognizes a loss from an involuntary conversion event and the likelihood of recovering such loss is deemed probable at the balance sheet date. To the extent that any of the Company’s insurance claim receivables are later determined not probable of recovery (e.g., due to new information), such amounts are expensed. The Company recognizes gains on involuntary conversions when the amount received from insurers exceeds the net book value of the impaired asset(s). In addition, the Company does not recognize a gain related to insurance recoveries until the contingency related to such proceeds has been resolved, through either receipt of a non-refundable cash payment from the insurers or by execution of a binding settlement agreement with the insurers that clearly states that a non-refundable payment will be made. To the extent that an asset is rebuilt or new assets are acquired, the associated expenditures are capitalized, as appropriate, in the consolidated balance sheets and presented as capital expenditures in the Company’s consolidated statements of cash flows. With respect to business interruption insurance claims, the Company recognizes income only when non-refundable cash proceeds are received from insurers, which are presented in the Company’s consolidated statements of operations as a component of gross profit or operating income and in the consolidated statements of cash flows as an operating activity.

In June 2016, the Company experienced a fire at a facility in the metal components segment. We estimated that fixed assets with a net book value of approximately $6.7 million were impaired as a result of the fire. We recorded an insurance receivable of $6.7 million on the consolidated balance sheet in prepaid and other assets as an offset to the estimated loss on involuntary conversion of the fixed assets as of July 31, 2016, as we determined the insurance recovery was probable. We subsequently received cash proceeds from insurers in August 2016 in full satisfaction of the insurance receivable.

NOTE 2 — ACQUISITIONS

Fiscal 2016 acquisition

On November 3, 2015, we acquired manufacturing operations in Hamilton, Ontario, Canada for cash consideration of $2.2 million , net of post-closing working capital adjustments. This business allows us to service customers more competitively within the Canadian and Northeastern United States insulated metal panel (“IMP”) markets. Because the business was acquired from a seller in connection with a divestment required by a regulatory authority, the fair value of net assets acquired exceeded the purchase consideration by $1.9 million , which was recorded as a non-taxable gain from bargain purchase in the unaudited consolidated statements of operations during the first quarter of fiscal 2016.

The fair values of the assets acquired and liabilities assumed as part of this acquisition as of November 3, 2015, as determined in accordance with ASC Topic 805, were as follows (in thousands):



	November 3, 2015
Current assets	$	307
Property, plant and equipment	4,810
Assets acquired	5,117
Current liabilities assumed	380
Fair value of net assets acquired	4,737
Total cash consideration transferred	2,201
Deferred tax liabilities	672
Gain from bargain purchase	$	(1,864	)

The results of operations for this business are included in our metal components segment. Pro forma financial information and other disclosures for this acquisition have not been presented as it was not material to the Company’s financial position or reported results.

Fiscal 2015 acquisition

On January 16, 2015, NCI Group, Inc., a wholly-owned subsidiary of the Company, and Steelbuilding.com, LLC, a wholly owned subsidiary of NCI Group, Inc., completed the acquisition of CENTRIA (the “CENTRIA Acquisition”), a Pennsylvania general partnership (“CENTRIA”), pursuant to the terms of the Interest Purchase Agreement, dated November 7, 2014 (“Interest Purchase Agreement”) with SMST Management Corp., a Pennsylvania corporation, Riverfront Capital Fund, a Pennsylvania limited partnership, and CENTRIA. NCI acquired all of the general partnership interests of CENTRIA in exchange for $255.8 million in cash, including cash acquired of $8.7 million . The purchase price was subject to a post-closing adjustment to net working capital as provided in the Interest Purchase Agreement, which we settled during the first quarter of fiscal 2016 for additional cash consideration of approximately $2.1 million payable to the seller, which approximated the amount we previously accrued. The purchase price was funded through the issuance of $250.0 million of new indebtedness. See Note 12 — Long-Term Debt and Note Payable. CENTRIA is now an indirect, wholly-owned subsidiary of NCI.

Accordingly, the results of CENTRIA’s operations from January 16, 2015 are included in our consolidated financial statements. For the nine months ended July 31, 2016 and the period from January 16, 2015 to August 2, 2015 , CENTRIA contributed revenue of $170.2 million and $121.1 million and operating income (loss) of $8.4 million and $(3.7) million , respectively. CENTRIA is a leader in the design, engineering and manufacturing of architectural IMP wall and roof systems and a provider of integrated coil coating services for the nonresidential construction industry. CENTRIA operates four production facilities in the United States and a manufacturing facility in China.

We report on a fiscal year that ends on the Sunday closest to October 31. CENTRIA previously reported on a calendar year that ended December 31. In accordance with ASC Topic 805, the unaudited pro forma financial information presented below for the nine month period ended August 2, 2015 assumes the acquisition was completed on November 4, 2013, the first day of fiscal year 2014.

This unaudited pro forma financial information does not necessarily represent what would have occurred if the transaction had taken place on the date presented and should not be taken as representative of our future consolidated results of operations. The unaudited pro forma financial information includes adjustments for interest expense to match the new capital structure, amortization expense for identified intangibles, and depreciation expense based on the fair value and estimated lives of acquired property, plant and equipment. In addition, acquisition related costs and $16.1 million of transaction costs incurred by the seller

are excluded from the unaudited pro forma financial information. The pro forma information does not reflect any expected synergies or expense reductions that may result from the acquisition.

The following table shows our unaudited financial information and unaudited pro forma financial information for the nine month periods ended July 31, 2016 and August 2, 2015 , respectively (in thousands, except per share amounts):



	(Unaudited)		Pro Forma (Unaudited)
	Fiscal Nine Months Ended
	July 31, 2016		August 2, 2015
Sales	$	1,204,614	$	1,148,348
Net income applicable to common shares	31,761		785
Income per common share:
Basic	$	0.44	$	0.01
Diluted	$	0.43	$	0.01

The following table summarizes the fair values of the assets acquired and liabilities assumed as part of the CENTRIA Acquisition as of January 16, 2015 as determined in accordance with ASC Topic 805. The fair value of all assets acquired and liabilities assumed were finalized during the first quarter of fiscal 2016, including certain contingent assets and liabilities and the post-closing working capital adjustment, which did not result in any material adjustments during the first quarter of fiscal 2016. As we continue to integrate CENTRIA into our existing operations, we may identify integration charges that would be required to be recognized.



(In thousands)	January 16, 2015
Cash	$	8,718
Current assets, excluding cash	74,725
Property, plant and equipment	34,127
Intangible assets	128,280
Assets acquired	245,850
Current liabilities	61,869
Other long-term liabilities	8,893
Liabilities assumed	70,762
Fair value of net assets acquired	175,088
Total cash consideration transferred	257,927
Goodwill	$	82,839

The amount allocated to intangible assets was attributed to the following categories (in thousands):



			Useful Lives
Backlog	$	8,400	9 months
Trade names	13,980		15 years
Customer lists and relationships	105,900		20 years
	$	128,280

These intangible assets are amortized on a straight-line basis, which is presented in intangible asset amortization in our consolidated statements of operations. The backlog intangible asset was fully amortized during fiscal 2015. We also recorded a step-up in inventory fair value of approximately $2.4 million in fiscal 2015, which was recognized as an expense in fair value adjustment of acquired inventory in our consolidated statements of operations upon the sale of the related inventory.

The excess of the purchase price over the fair values of assets acquired and liabilities assumed was allocated to goodwill. The intention of this transaction was to strengthen our position as a fully integrated supplier to the nonresidential building products industry, by enhancing our existing portfolio of cold storage and commercial and industrial solutions, expanding our capabilities into high-end insulated metal panels and contributing specialty continuous metal coil coating capabilities. We believe the transaction will result in revenue synergies to our existing businesses, as well as improvements in supply chain efficiency, including alignment of purchase terms and pricing optimization. We include the results of CENTRIA in the metal components segment. Goodwill of $73.6 million and $9.1 million was recorded in our metal components segment and engineered building systems segment,

respectively, based on expected synergies pertaining to these segments from the CENTRIA Acquisition. Additionally, because CENTRIA was treated as a partnership for tax purposes, the tax basis of the acquired assets and liabilities has been adjusted to their fair value and goodwill will be deductible for tax purposes.

NOTE 3 — ACCOUNTING PRONOUNCEMENTS

Adopted Accounting Pronouncements

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 changes the requirement for reporting discontinued operations. A disposal of a component of an entity or a group of components of an entity will be required to be reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on an entity’s operations and financial results when the entity or group of components of an entity meets the criteria to be classified as held for sale or when it is disposed of by sale or other than by sale. The update also requires additional disclosures about discontinued operations, a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements, and an entity’s significant continuing involvement with a discontinued operation. We adopted ASU 2014-08 prospectively in our first quarter in fiscal 2016. The adoption of ASU 2014-08 did not have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition , and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB has also issued ASUs 2016-08 and 2016-10 to clarify guidance with respect to principal versus agent considerations, the identification of performance obligations, and licensing. These ASUs are effective for our fiscal year ending November 3, 2019, including interim periods within that fiscal year, and will be adopted using either a full or modified retrospective approach. We are currently assessing the potential effects of these changes to our consolidated financial statements.

In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period . ASU 2014-12 requires that a performance target that affects vesting and could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in FASB Accounting Standards Codification 718, Compensation — Stock Compensation , as it relates to such awards. ASU 2014-12 is effective for our first quarter in fiscal 2017, with early adoption permitted. We do not expect that the adoption of this guidance will have a material impact on our consolidated financial statements.

In January 2015, the FASB issued ASU 2015-01, Income Statement — Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items . ASU 2015-01 eliminates from U.S. GAAP the concept of extraordinary items. The guidance is effective for our fiscal year ending October 29, 2017, including interim periods within that fiscal year. A reporting entity may apply the amendments prospectively. We do not expect that the adoption of this guidance will have a material impact on our consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs . ASU 2015-03 requires debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as a separate asset. In circumstances where the costs are incurred before the debt liability is recorded, the costs will be reported on the balance sheet as an asset until the debt liability is recorded. Debt disclosures will include the face amount of the debt liability and the effective interest rate. The update requires retrospective application and is effective for our fiscal year ending October 29, 2017, including interim periods within that fiscal year. In August 2015, FASB issued ASU 2015-15, Interest - Imputation of Interest (Subtopic 835-30) - Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting), to provide further clarification to ASU 2015-03 as it relates to the presentation and subsequent measurement of debt issuance costs associated with line of credit arrangements. Upon adoption of this guidance, we expect to reclassify approximately $8 million in deferred financing costs as a reduction of the carrying amount of the debt liability.

the guidance specifies that the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. ASU 2015-05 further specifies that the customer should account for a cloud computing arrangement as a service contract if the arrangement does not include a software license. The guidance is effective for our fiscal year ending October 29, 2017, including interim periods within that fiscal year. We are currently assessing the impact of this guidance on our consolidated financial statements.

In July 2015, the FASB issues ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. ASU 2015-11 requires that inventory that has historically been measured using first-in, first-out (FIFO) or average cost method should now be measured at the lower of cost and net realizable value. The update requires prospective application and is effective for our fiscal year ending October 28, 2018, including interim periods within that fiscal year. We do not expect that the adoption of this guidance will have a material impact on our consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes . ASU 2015-17 requires all deferred tax assets and liabilities to be presented on the balance sheet as noncurrent. ASU 2015-17 is effective for our fiscal year ending October 28, 2018, including interim periods within that fiscal year. Upon adoption, we will present the net deferred tax assets as noncurrent and reclassify any current deferred tax assets and liabilities in our consolidated financial position on a retrospective basis.

In February 2016, the FASB issued ASU 2016-02, Leases , which will require lessees to record most leases on the balance sheet and modifies the classification criteria and accounting for sales-type leases and direct financing leases for lessors. ASU 2016-02 is effective for our fiscal year ending November 1, 2020, including interim periods within that fiscal year. The guidance requires entities to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. We are evaluating the impact that the adoption of this guidance will have on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , which is intended to simplify certain aspects of the accounting for share-based payment award transactions, including income tax effects when awards vest or settle, repurchase of employees’ shares to satisfy statutory tax withholding obligations, an option to account for forfeitures as they occur, and classification of certain amounts on the statement of cash flows. ASU 2016-09 is effective for our fiscal year ending October 28, 2018, including interim periods within that fiscal year. We are evaluating the impact that the adoption of this ASU will have on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires an entity to measure all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Entities will now incorporate forward-looking information based on expected losses to estimate credit losses. ASU 2016-13 is effective for our fiscal year ending October 31, 2021, including interim periods within that fiscal year. We are evaluating the impact that the adoption of this ASU will have on our consolidated financial position, result of operations and cash flows.

NOTE 4 —RESTRUCTURING AND ASSET IMPAIRMENTS

As part of the plans developed in the fourth quarter of fiscal 2015 to improve cost efficiency and optimize our combined manufacturing footprint, given the Company’s recent acquisitions and restructuring efforts, we incurred severance related costs of $0.8 million , including $0.1 million and $0.3 million in the engineered building systems segment and metal components segment, respectively, during the three months ended July 31, 2016 . For the nine months ended July 31, 2016 , we incurred severance related costs of $3.4 million , including $0.8 million and $1.2 million in the engineered building systems segment and metal components segment, respectively, and the remaining amount at corporate.

The following table summarizes our restructuring plan costs and charges related to the restructuring plans during the three and nine months ended July 31, 2016 (in thousands), which are recorded in restructuring and impairment charges in the Company’s consolidated statements of operations:



	Fiscal Three Months Ended		Fiscal Nine Months Ended
	July 31, 2016		July 31, 2016		Cost Incurred To Date (since inception)		Remaining Anticipated Cost	Total Anticipated Cost
General severance	$	725	$	2,658	$	6,545	*	*
Plant closing severance	53		149		1,724		*	*
Asset impairments	—		—		5,844		*	*
Other restructuring costs	—		630		630		*	*
Total restructuring costs	$	778	$	3,437	$	14,743	*	*


*	We expect to fully execute our plans in phases over the next 6 months to 24 months and estimate that we will incur future additional restructuring charges associated with these plans. We are unable at this time to make a good faith determination of cost estimates, or ranges of cost estimates, associated with future phases of these plans.

The following table summarizes our severance liability and cash payments made pursuant to the restructuring plans from inception through July 31, 2016 (in thousands):



	General Severance			Plant Closing Severance			Total
Balance at November 2, 2014	$	—		$	—		$	—
Costs incurred	3,887			1,575			5,462
Cash payments	(2,941		)	(1,575		)	(4,516		)
Accrued severance ⁽¹⁾	739			—			739
Balance at November 1, 2015	$	1,685		$	—		$	1,685
Costs incurred ⁽¹⁾	1,997			149			2,146
Cash payments	(3,390		)	(149		)	(3,539		)
Balance at July 31, 2016	$	292		$	—		$	292

(1)

During the second and fourth quarters of fiscal 2015, we entered into transition and separation agreements with certain executive officers. Each terminated executive officer was entitled to severance benefit payments issuable in two installments. The termination benefits were measured initially at the separation dates based on the fair value of the liability as of the termination date and were recognized ratably over the future service period. Costs incurred during the nine months ended July 31, 2016 exclude $0.7 million of amortization expense associated with these termination benefits.

NOTE 5 — RESTRICTED CASH

We have entered into a cash collateral agreement with PNC Bank to backstop existing CENTRIA letters of credit until they expire. The restricted cash is held in a bank account with PNC Bank as the secured party. As of July 31, 2016 , we had restricted cash in the amount of approximately $0.7 million as collateral related to our letters of credit for international projects with CENTRIA, exclusive of letters of credit under our Amended ABL Facility. See Note 12 — Long-Term Debt and Note Payable for more information on the material terms of our Amended ABL Facility. Restricted cash as of July 31, 2016 is classified as current as the underlying letters of credit expire within one year of the respective balance sheet date. Any renewal or replacement of the CENTRIA letters of credit is expected to occur under our Amended ABL Facility.

NOTE 6 — INVENTORIES

The components of inventory are as follows (in thousands):



	July 31, 2016		November 1, 2015
Raw materials	$	135,812	$	109,455
Work in process and finished goods	47,528		48,373
Inventories, net	$	183,340	$	157,828

NOTE 7 — ASSETS HELD FOR SALE

We record assets held for sale at the lower of the carrying value or fair value less costs to sell. The following criteria are used to determine if property is held for sale: (i) management has the authority and commits to a plan to sell the property; (ii) the property is available for immediate sale in its present condition; (iii) there is an active program to locate a buyer and the plan to sell the property has been initiated; (iv) the sale of the property is probable within one year; (v) the property is being actively marketed at a reasonable sale price relative to its current fair value; and (vi) it is unlikely that the plan to sell will be withdrawn or that significant changes to the plan will be made.

In determining the fair value of the assets less cost to sell, we consider factors including current sales prices for comparable assets in the area, recent market analysis studies, appraisals and any recent legitimate offers. If the estimated fair value less cost to sell of an asset is less than its current carrying value, the asset is written down to its estimated fair value less cost to sell. During the third quarter of fiscal 2016, we reclassified $1.6 million from property, plant and equipment to assets held for sale for a facility in our engineering building systems segment that met the held for sale criteria. The total carrying value of assets held for sale (primarily representing idled facilities in our engineered building systems segment) was $4.3 million and $6.3 million as of July 31, 2016 and November 1, 2015 , respectively. All of these assets continued to be actively marketed for sale at July 31, 2016 .

During the nine months ended July 31, 2016 , we sold certain idled facilities in our engineered building systems segment, along with related equipment, which previously had been classified as held for sale. In connection with the sales of these assets, during the three and nine months ended July 31, 2016 , we received net cash proceeds of $0.8 million and $5.5 million , respectively, and recognized net gains of $0.1 million and $1.7 million , respectively, which are included in gain on sale of assets and asset recovery in the unaudited consolidated statements of operations.

Due to uncertainties in the estimation process, it is reasonably possible that actual results could differ from the estimates used in our historical analysis. Our assumptions about property sales prices require significant judgment because the current market is highly sensitive to changes in economic conditions. We calculated the estimated fair values of assets held for sale based on current market conditions and assumptions made by management, which may differ from actual results and may result in impairments if market conditions deteriorate.

NOTE 8 — SHARE-BASED COMPENSATION

Restricted Stock and Performance Awards

Our 2003 Long-Term Stock Incentive Plan (“Incentive Plan”) is an equity-based compensation plan that allows us to grant a variety of types of awards, including stock options, restricted stock, restricted stock units, stock appreciation rights, performance share units (“PSUs”), phantom stock awards, long-term incentive awards with performance conditions (“Performance Share Awards”) and cash awards. As of July 31, 2016 , and for all periods presented, our share-based awards under this plan have consisted of restricted stock grants, PSUs and stock option grants, none of which can be settled through cash payments, and Performance Share Awards. Both our stock options and restricted stock awards are subject only to vesting requirements based on continued employment at the end of a specified time period and typically vest in annual increments over one to four years or earlier upon death, disability or a change of control. However, our annual restricted stock awards issued prior to December 15, 2013 also vest upon attainment of age 65 and, only in the case of certain special one-time restricted stock awards, a portion vest on termination without cause or for good reason, as defined by the agreements governing such awards. Restricted stock awards issued after December 15, 2013 do not vest upon attainment of age 65, as provided by the agreements governing such awards. The vesting of our Performance Share Awards is described below.

In December 2015, we granted long-term incentive awards, with a three -year performance period, to our senior executives (“2015 Executive Awards”). 40% of the value of the long-term incentive awards consists of time-based restricted stock units and 60% of the value of the award consists of PSUs. The restricted stock units are time-vesting based on continued employment, with

one-third of the restricted stock units vesting on each of the first, second and third anniversaries of the grant date. The PSUs vest based on the achievement of performance goals and continued employment at the end of the three-year performance period. The PSU performance goals are based on three metrics: (1) cumulative free cash flow (weighted 40% ); (2) cumulative earnings per share (weighted 40% ); and (3) total shareholder return (weighted 20% ), in each case during the performance period. The number of shares that may be received upon the vesting of the PSUs will depend upon the satisfaction of the performance goals, up to a maximum of 200% of the target number of the PSUs. The PSUs vest pro rata if an executive’s employment terminates prior to the end of the performance period due to death, disability, or termination by NCI without cause or by the executive for good reason. If an executive’s employment terminates for any other reason prior to the end of the performance period, all outstanding unvested PSUs, whether earned or unearned, will be forfeited and cancelled. If a change in control of NCI occurs prior to the end of the performance period, the PSU payout will be calculated and paid assuming that the maximum benefit had been achieved. If an executive’s employment terminates due to death or disability while any of the restricted stock units are unvested, then all of the executive’s unvested restricted stock units will become vested. If an executive’s employment is terminated for any other reason, the executive’s unvested restricted stock units will be forfeited. If a change in control of NCI occurs prior to the end of the performance period, the restricted stock units fully vest.

The fair value of the 2015 Executive Awards is based on the Company’s stock price as of the grant date. A portion of the compensation cost of the 2015 Executive Awards is based on the probable outcome of the performance conditions associated with the respective shares, as determined by management. During the nine months ended July 31, 2016 and August 2, 2015 , we granted PSUs with a fair value of approximately $5.2 million and $3.7 million , respectively.

The fair value of restricted stock units classified as equity awards is based on the Company’s stock price as of the date of grant. During the nine months ended July 31, 2016 and August 2, 2015 , we granted time-based restricted stock units with a fair value of $4.2 million , representing 328,780 shares, and $6.6 million , representing 389,323 shares, respectively.

Also, in December 2015, we granted Performance Cash and Share Awards to certain key employees that will be paid 50% in cash and 50% in stock (“2015 Key Employee Awards”). The amount of cash and number of shares that may be received upon the vesting of these awards will be based on the achievement of free cash flow and earnings per share targets over a three -year performance period. The 2015 Key Employee Awards vest three years from the grant date and will be earned based on the performance against the pre-established targets for the requisite service period. A key employee’s awards also vest in full upon death, disability or a change of control, and a pro-rated portion of the key employee’s awards may vest on termination without cause or after reaching normal retirement age prior to the vesting date, as defined by the agreements governing such awards. The fair value of the 2015 Key Employee Awards is based on the Company’s stock price as of the grant date. Compensation cost is recorded based on the probable outcome of the performance conditions associated with the shares, as determined by management. During the nine months ended July 31, 2016 and August 2, 2015 , we granted awards to key employees with an equity fair value of $2.4 million and $1.5 million and a cash value of $2.1 million and $1.7 million , respectively.

During the nine month periods ended July 31, 2016 and August 2, 2015 , we also granted 28,535 and 10,543 stock options, respectively. The grant date fair value of options granted during the nine month periods ended July 31, 2016 and August 2, 2015 was $5.38 and $7.91 , respectively. The Company received cash proceeds of $10.7 million and $12.1 million from exercises of 1,202,885 and 1,358,219 stock options during the three and nine month periods ended July 31, 2016 , respectively.

During the nine month periods ended July 31, 2016 and August 2, 2015 , we recorded share-based compensation expense for all awards of $7.7 million and $7.7 million , respectively.

Deferred Compensation

On February 26, 2016, the Company amended its Deferred Compensation Plan (“Plan”), with an effective date of January 31, 2016, to require that amounts deferred into the Company Stock Fund remain invested in the Company Stock Fund until distribution. In accordance with the terms of the Plan, the deferred compensation obligation related to the Company’s stock may only be settled by the delivery of a fixed number of the Company’s common shares held on the participant’s behalf. As a result, we have a deferred compensation obligation of $1.4 million related to the Company Stock Fund that is recorded within equity in additional paid-in capital on the consolidated balance sheet as of July 31, 2016 . Subsequent changes in the fair value of the deferred compensation obligation classified within equity are not recognized. Additionally, the Company currently holds 144,857 shares in treasury shares, relating to deferred, vested 2012 PSU awards, until participants are eligible to receive benefits under the terms of the plan.

NOTE 9 — EARNINGS (LOSS) PER COMMON SHARE

Basic earnings (loss) per common share is computed by dividing net income (loss) allocated to common shares by the weighted average number of common shares outstanding. Diluted earnings per common share, if applicable, considers the dilutive effect of common stock equivalents. The reconciliation of the numerator and denominator used for the computation of basic and diluted earnings (loss) per common share is as follows (in thousands, except per share data):



	Fiscal Three Months Ended						Fiscal Nine Months Ended
	July 31, 2016			August 2, 2015			July 31, 2016			August 2, 2015
Numerator for Basic and Diluted Income (Loss) Per Common Share
Net income (loss)	$	23,715		$	7,220		$	32,026		$	(588	)
Less: Net income applicable to participating securities	(165		)	(60		)	(265		)	—
Net income (loss) applicable to common shares	$	23,550		$	7,160		$	31,761		$	(588	)
Denominator for Basic and Diluted Income (Loss) Per Common Share
Weighted average basic number of common shares outstanding	73,104			73,341			72,932			73,170
Common stock equivalents:
Employee stock options	441			650			528			—
PSUs and Performance Share Awards	7			345			—			—
Weighted average diluted number of common shares outstanding	73,552			74,336			73,460			73,170
Basic income (loss) per common share	$	0.32		$	0.10		$	0.44		$	(0.01	)
Diluted income (loss) per common share	$	0.32		$	0.10		$	0.43		$	(0.01	)

We calculate earnings (loss) per share using the “two-class” method, whereby unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are “participating securities” and, therefore, are treated as a separate class in computing earnings (loss) per share. Participating securities consist of unvested restricted stock units related to our Incentive Plan. For the three and nine month periods ended July 31, 2016 and the three month period ended August 2, 2015 , undistributed earnings attributable to participating securities were approximately $0.2 million , $0.3 million and $0.1 million , respectively. There was no amount attributable to participating securities for the nine month period ended August 2, 2015 , as the participating securities do not contractually share in net losses.

For the three and nine month periods ended July 31, 2016 , all PSUs and Performance Share Awards that are contingent upon the achievement of performance targets as described in Note 8 were excluded from the diluted income per common share calculation as the performance targets were not met as of July 31, 2016 . Additionally, for the nine month period ended July 31, 2016 , the number of weighted average options and Performance Share Awards that were not included in the diluted earnings per share calculations because the effect would have been anti-dilutive represented approximately 0.1 million shares.

NOTE 10 — WARRANTY

We sell weathertightness warranties to our customers for protection from leaks in our roofing systems related to weather. These warranties range from 2 years to 20 years. We sell two types of warranties, standard and Single Source™, and three grades of coverage for each. The type and grade of coverage determines the price to the customer. For standard warranties, our responsibility for leaks in a roofing system begins after 24 consecutive leak-free months. For Single Source™ warranties, the roofing system must pass our inspection before warranty coverage will be issued. Inspections are typically performed at three stages of the roofing project: (i) at the project start-up; (ii) at the project mid-point; and (iii) at the project completion. These inspections are included in the cost of the warranty. If the project requires or the customer requests additional inspections, those inspections are billed to the customer. Upon the sale of a warranty, we record the resulting revenue as deferred revenue, which is included in other accrued expenses on our consolidated balance sheets.

The following table represents the rollforward of our accrued warranty obligation and deferred warranty revenue activity for each of the fiscal nine months ended (in thousands):



	Fiscal Nine Months Ended
	July 31, 2016			August 2, 2015
Beginning balance	$	25,669		$	23,685
Warranties sold	2,606			2,022
Revenue recognized	(2,415		)	(2,025		)
Other ⁽¹⁾	—			1,609
Ending balance	$	25,860		$	25,291

(1)

Represents the fair value of accrued warranty obligations in the amount of $1.6 million assumed in the CENTRIA Acquisition. CENTRIA offers weathertightness warranties to certain customers. Weathertightness warranties are offered in various configurations for time periods from 5 to 20 years, prorated or non-prorated and on either a dollar limit or no dollar limit basis, as required by the buyer. These warranties are available only if certain conditions, some of which relate to installation, are met.

NOTE 11 — DEFINED BENEFIT PLANS

RCC Pension Plan — With the acquisition of Robertson-Ceco II Corporation (“RCC”) on April 7, 2006, we assumed a defined benefit plan (the “RCC Pension Plan”). Benefits under the RCC Pension Plan are primarily based on years of service and the employee’s compensation. The RCC Pension Plan is frozen and, therefore, employees do not accrue additional service benefits. Plan assets of the RCC Pension Plan are invested in broadly diversified portfolios of government obligations, mutual funds, stocks, bonds, fixed income securities and master limited partnerships.

CENTRIA Benefit Plans — As a result of the CENTRIA Acquisition on January 16, 2015, we assumed noncontributory defined benefit plans covering certain hourly employees (the “CENTRIA Benefit Plans”) and are closed to new participants. Benefits under the CENTRIA Benefit Plans are calculated based on fixed amounts for each year of service rendered, although benefits accruals for one of the plans previously ceased. Plan assets of the CENTRIA Benefit Plans are invested in broadly diversified portfolios of equity mutual funds, international equity mutual funds, bonds, mortgages and other funds. CENTRIA also sponsors postretirement medical and life insurance plans that cover certain of its employees and their spouses (the “OPEB Plans”).

The following table sets forth the components of the net periodic benefit cost, before tax, and funding contributions, for the periods indicated (in thousands):



	Fiscal Three Months Ended July 31, 2016											Fiscal Three Months Ended August 2, 2015
	RCC Pension Plan			CENTRIA Benefit Plans			OPEB Plans		Total			RCC Pension Plan			CENTRIA Benefit Plans			OPEB Plans		Total
Service cost	$	—		$	34		$	8	$	42		$	—		$	42		$	8	$	50
Interest cost	450			139			65		654			483			165			80		728
Expected return on assets	(475		)	(270		)	—		(745		)	(551		)	(311		)	—		(862		)
Prior service cost amortization	(2		)	—			—		(2		)	(2		)	—			—		(2		)
Unrecognized net loss	292			—			—		292			361			—			—		361
Net periodic pension cost	$	265		$	(97	)	$	73	$	241		$	291		$	(104	)	$	88	$	275

Funding contributions	$	234		$	160		$	—	$	394		$	260		$	160		$	—	$	420



	Fiscal Nine Months Ended July 31, 2016											Fiscal Nine Months Ended August 2, 2015
	RCC Pension Plan			CENTRIA Benefit Plans			OPEB Plans		Total			RCC Pension Plan			CENTRIA Benefit Plans			OPEB Plans		Total
Service cost	$	—		$	103		$	25	$	128		$	—		$	79		$	15	$	94
Interest cost	1,350			416			196		1,962			1,450			307			149		1,906
Expected return on assets	(1,426		)	(809		)	—		(2,235		)	(1,653		)	(577		)	—		(2,230		)
Prior service cost amortization	(7		)	—			—		(7		)	(7		)	—			—		(7		)
Unrecognized net loss	877			—			—		877			1,082			—			—		1,082
Net periodic pension cost	$	794		$	(290	)	$	221	$	725		$	872		$	(191	)	$	164	$	845

Funding contributions	$	679		$	480		$	—	$	1,159		$	755		$	320		$	—	$	1,075

We expect to contribute an additional $0.4 million and $0.2 million to the RCC Pension Plan and the CENTRIA Benefit Plans, respectively, for the remainder of fiscal 2016. Currently, our policy is to fund the CENTRIA Benefit Plans and OPEB Plans as required by minimum funding standards of the Internal Revenue Code. The contributions to the OPEB Plans by retirees vary from none to 25% of the total premium cost.

In addition to the CENTRIA Benefit Plans, CENTRIA contributes to a multi-employer plan, Steelworkers Pension Trust. The current contract expires on June 1, 2019. The minimum required annual contribution to this plan is $0.3 million . If we were to withdraw our participation from this multi-employer plan, we would have a complete withdrawal liability of approximately $0.7 million .

NOTE 12 — LONG-TERM DEBT AND NOTE PAYABLE

Debt is comprised of the following (in thousands):



	July 31, 2016		November 1, 2015
Credit Agreement, due June 2019 (variable interest, at 4.25% on July 31, 2016 and November 1, 2015)	$	164,147	$	194,147
8.25% senior notes, due January 2023	250,000		250,000
Amended Asset-Based lending facility, due June 2019 (interest at 4.25% on July 31, 2016 and 4.00% on November 1, 2015)	—		—
Current portion of long-term debt	—		—
Total long-term debt, net	$	414,147	$	444,147

8.25% Senior Notes Due January 2023

The Company’s $250.0 million in aggregate principal amount of 8.25% senior notes due 2023 (the “Notes”) bear interest at 8.25% per annum and will mature on January 15, 2023. Interest is payable semi-annually in arrears on January 15 and July 15 of each year.

The Company may redeem the Notes at any time prior to January 15, 2018, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, plus the applicable make-whole premium. On or after January 15, 2018, the Company may redeem all or a part of the Notes at redemption prices (expressed as percentages of principal amount thereof) set forth below, plus accrued and unpaid interest, if any, to the applicable redemption date of the Notes, if redeemed during the 12-month period beginning on January 15 of the year as follows:



Year		Percentage
2018		106.188%
2019		104.125%
2020		102.063%
2021 and thereafter		100.000%

In addition, prior to January 15, 2018, the Company may redeem the Notes in an aggregate principal amount of up to 40.0% of the original aggregate principal amount of the Notes with funds in an equal aggregate amount not exceeding the aggregate proceeds of one or more equity offerings, at a redemption price of 108.250% , plus accrued and unpaid interest, if any, to the applicable redemption date of the Notes.

Credit Agreement

The Company’s Credit Agreement provided for a term loan credit facility (“Term Loan”) in an original aggregate principal amount of $250.0 million . The Credit Agreement will mature on June 24, 2019. The Term Loan amortizes in nominal quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum. The Term Loan will bear interest at a floating rate measured by reference to, at the Company’s option, either (i) an adjusted LIBOR not less than 1.00% plus a borrowing margin of 3.25% per annum or (ii) an alternate base rate plus a borrowing margin of 2.25% per annum. At both July 31, 2016 and November 1, 2015 , the interest rate on the Term Loan was 4.25% .

During the three and nine month periods ended July 31, 2016 , the Company made voluntary prepayments of $10.0 million and $30.0 million , respectively, on the outstanding principal amount of the Term Loan.

Amended ABL Facility

The Company’s Asset-Based Lending Facility (“Amended ABL Facility”) provides for revolving loans of up to $150.0 million (subject to a borrowing base) and letters of credit of up to $30.0 million . Borrowing availability under the Amended ABL Facility is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of qualified cash, eligible inventory and eligible accounts receivable, less certain reserves and subject to certain other adjustments. At July 31, 2016 and November 1, 2015 , the Company’s excess availability under the Amended ABL Facility was $140.9 million and $131.0 million , respectively. At both July 31, 2016 and November 1, 2015 , the Company had no revolving loans outstanding under the Amended ABL Facility. In addition, at July 31, 2016 and November 1, 2015 , standby letters of credit related to certain insurance policies totaling approximately $9.1 million and $8.7 million , respectively, were outstanding but undrawn under the Amended ABL Facility. The Amended ABL Facility will mature on June 24, 2019.

The Amended ABL Facility includes a minimum fixed charge coverage ratio of one to one, which will apply if we fail to maintain a specified minimum borrowing capacity. The minimum level of borrowing capacity as of July 31, 2016 and November 1, 2015 was $21.1 million and $19.7 million , respectively. Although the Amended ABL Facility did not require any financial covenant compliance, at July 31, 2016 and November 1, 2015 , NCI’s fixed charge coverage ratio as of those dates, which is calculated on a trailing twelve month basis, was 2.78 :1.00 and 3.54 :1.00, respectively. These ratios include the pro forma impact of the CENTRIA Acquisition.

Loans under the Amended ABL Facility bear interest, at NCI’s option, as follows:


(1)	Base Rate loans at the Base Rate plus a margin. The margin ranges from 0.75% to 1.25% depending on the quarterly average excess availability under such facility, and


(2)	LIBOR loans at LIBOR plus a margin. The margin ranges from 1.75% to 2.25% depending on the quarterly average excess availability under such facility.

An unused commitment fee is paid monthly on the Amended ABL Facility at an annual rate of 0.50% based on the amount by which the maximum credit exceeds the average daily principal balance of outstanding loans and letter of credit obligations. Additional customary fees in connection with the Amended ABL Facility also apply.

For additional information on the Notes, Credit Agreement and the Amended ABL Facility, including guarantees and security, see our Annual Report on Form 10-K for the fiscal year ended November 1, 2015 .

Debt Covenants

The Company’s outstanding debt agreements contain a number of covenants that, among other things, limit or restrict the ability of the Company and its subsidiaries to dispose of assets, make acquisitions and engage in mergers. As of July 31, 2016 , the Company was in compliance with all covenants that were in effect on such date. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended November 1, 2015 .

Deferred Financing Costs

At July 31, 2016 and November 1, 2015 , the unamortized balance in deferred financing costs related to the Notes, Credit Agreement and Amended ABL Facility was $9.6 million and $11.1 million , respectively.

Insurance Note Payable

As of July 31, 2016 and November 1, 2015 , the Company had an outstanding note payable in the amount of $0.9 million and $0.5 million , respectively, related to financed insurance premiums. Insurance premium financings are generally secured by the unearned premiums under such policies.

NOTE 13 — EQUITY INVESTMENT

On August 14, 2009, the Company entered into an Investment Agreement (as amended, the “Investment Agreement”), by and between the Company and Clayton, Dubilier & Rice Fund VIII, L.P. (“CD&R Fund VIII”). In connection with the Investment Agreement, the CD&R Fund VIII and the Clayton, Dubilier & Rice Friends & Family Fund VIII, L.P. (collectively, the “CD&R Funds”) purchased convertible preferred stock, which was later converted to shares of our common stock on May 14, 2013. Also, on October 20, 2009, the Company entered into a Stockholders Agreement with the CD&R Funds.

On July 25, 2016, the CD&R Funds completed a registered underwritten offering, in which the CD&R Funds offered 9.0 million shares of our common stock at a price to the public of $16.15 per share (the “Secondary Offering”). The underwriters also exercised their option to purchase 1.35 million additional shares of our common stock from the CD&R Funds. The aggregate offering price for the 10.35 million shares sold in the Secondary Offering was approximately $160.1 million , net of underwriting discounts and commissions. The CD&R Funds received all of the proceeds from the Secondary Offering and no shares in the Secondary Offering were sold by the Company or any of its officers or directors (although certain of our directors are affiliated with the CD&R Funds). As disclosed in Note 14, concurrent with the Secondary Offering, the Company repurchased approximately 2.9 million shares from the CD&R Funds. In connection with the Secondary Offering and Stock Repurchase (defined below), we incurred approximately $0.7 million in expenses, which were included in engineering, selling, general and administrative expenses in the unaudited consolidated statement of operations for the three and nine months ended July 31, 2016 .

At July 31, 2016 and November 1, 2015 , the CD&R Funds owned approximately 42.0% and 58.4% , respectively, of the outstanding shares of our common stock. See “Transactions with Related Persons” in our Proxy Statement on Schedule 14A, as filed with the SEC on January 27, 2016, for a description of the rights held by the CD&R Funds under the terms and conditions of the Investment Agreement and the Stockholders Agreement.

NOTE 14 — STOCK REPURCHASE PROGRAM

In January 2016, our board of directors authorized a stock repurchase program for up to an aggregate of $50.0 million of the Company’s outstanding common stock. In July 2016, our board of directors authorized the stock repurchase program to be increased for up to an aggregate of $56.3 million of the Company’s outstanding common stock.

On July 18, 2016, the Company entered into an agreement with the CD&R Funds to repurchase approximately 2.9 million shares of our common stock at the price per share equal to the price per share paid by the underwriters to the CD&R Funds in the Secondary Offering (the “Stock Repurchase”). The Stock Repurchase represented a private, non-underwritten transaction between the Company and the CD&R Funds that was approved and recommended by the Affiliate Transactions Committee of our board of directors. The closing of the Stock Repurchase occurred on July 25, 2016 concurrently with the closing of the Secondary Offering. Following completion of the Stock Repurchase, the Company canceled the shares repurchased from the CD&R Funds, resulting in a $45.0 million decrease in both additional paid in capital and treasury stock. The Stock Repurchase was funded by the Company’s cash on hand.

During the three and nine months ended July 31, 2016 , we repurchased approximately 2.9 million shares for $45.0 million and 4.0 million shares for $56.3 million , respectively, under the stock repurchase program. Following the Stock Repurchase, the Company has repurchased the maximum amount authorized under the stock repurchase program. Approximately 0.1 million shares remain authorized for repurchase under a previous program. The previously authorized program has no time limit on its duration, but our Credit Agreement, Amended ABL Facility, and Notes apply certain limitations on our repurchase of shares of our common stock. The timing and method of any repurchases, which will depend on a variety of factors, including market conditions, are subject to results of operations, financial conditions, cash requirements and other factors, and may be suspended or discontinued at any time. In addition to the common stock repurchased during the three and nine months ended July 31, 2016 under our stock repurchase programs, we also withheld shares of restricted stock to satisfy minimum tax withholding obligations arising in connection with the vesting of restricted stock units, which are included in treasury stock purchases in the consolidated statements of stockholders’ equity.

NOTE 15 — FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, restricted cash, trade accounts receivable and accounts payable approximate fair value as of July 31, 2016 and November 1, 2015 because of the relatively short maturity of these instruments. The fair values of the remaining financial instruments not currently recognized at fair value on our consolidated balance sheets at the respective fiscal period ends were (in thousands):



	July 31, 2016				November 1, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Credit Agreement, due June 2019	$	164,147	$	163,737	$	194,147	$	193,662
8.25% senior notes, due January 2023	250,000		272,500		250,000		263,750

The fair values of the Credit Agreement and the Notes were based on recent trading activities of comparable market instruments which are level 2 inputs.

Fair Value Measurements

ASC Subtopic 820-10, Fair Value Measurements and Disclosures , requires us to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:

Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.

Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities or market-corroborated inputs.

Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants would price the assets or liabilities.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. There have been no changes in the methodologies used at July 31, 2016 and November 1, 2015

Money market: Money market funds have original maturities of three months or less. The original cost of these assets approximates fair value due to their short-term maturity.

Mutual funds: Mutual funds are valued at the closing price reported in the active market in which the mutual fund is traded.

Assets held for sale: Assets held for sale are valued based on current market conditions, prices of similar assets in similar condition and expected proceeds from the sale of the assets.

Deferred compensation plan liability: Deferred compensation plan liability is comprised of phantom investments in the deferred compensation plan and is valued at the closing price reported in the active market in which the money market or mutual fund is traded.

The following table summarizes information regarding our financial assets and liabilities that are measured at fair value on a recurring basis as of July 31, 2016 , segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):



	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments in deferred compensation plan ⁽¹⁾ :
Money market	$	483	$	—	$	—	$	483
Mutual funds – Growth	795		—		—		795
Mutual funds – Blend	3,170		—		—		3,170
Mutual funds – Foreign blend	725		—		—		725
Mutual funds – Fixed income	—		712		—		712
Total short-term investments in deferred compensation plan	5,173		712		—		5,885
Total assets	$	5,173	$	712	$	—	$	5,885
Liabilities:
Deferred compensation plan liability	$	—	$	3,813	$	—	$	3,813
Total liabilities	$	—	$	3,813	$	—	$	3,813


(1)	Unrealized holding gains for the three months ended July 31, 2016 and August 2, 2015 were $0.3 million and insignificant , respectively. Unrealized holding gains for the nine months ended July 31, 2016 and August 2, 2015 were $0.1 million and $0.1 million , respectively. These unrealized holding gains were primarily offset by changes in the deferred compensation plan liability.

The following table summarizes information regarding our financial assets and liabilities that are measured at fair value on a recurring basis as of November 1, 2015 , segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):



	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments in deferred compensation plan ⁽¹⁾ :
Money market	$	744	$	—	$	—	$	744
Mutual funds – Growth	764		—		—		764
Mutual funds – Blend	2,984		—		—		2,984
Mutual funds – Foreign blend	724		—		—		724
Mutual funds – Fixed income	—		673		—		673
Total short-term investments in deferred compensation plan	$	5,216	$	673	$	—	$	5,889
Total assets	$	5,216	$	673	$	—	$	5,889
Liabilities:
Deferred compensation plan liability	$	—	$	5,164	$	—	$	5,164
Total liabilities	$	—	$	5,164	$	—	$	5,164


(1)	Unrealized holding gain for the fiscal year ended November 1, 2015 was insignificant . This unrealized holding gain was primarily offset by changes in the deferred compensation plan liability.

The following table summarizes information regarding our financial assets that are measured at fair value on a nonrecurring basis as of July 31, 2016 and November 1, 2015 (in thousands):



	Level 3
	July 31, 2016		November 1, 2015
Assets:
Assets held for sale ⁽¹⁾	$	—	$	2,280
Total assets	$	—	$	2,280

(1)

Certain assets held for sale were valued at fair value and were measured at fair value on a nonrecurring basis. Assets held for sale are reported at fair value, if, on an individual basis, the fair value of the asset is less than cost. The fair value of assets held for sale is estimated using level 3 inputs, such as broker quotes for like-kind assets or other market indications of a potential selling value which approximates fair value. The assets that were previously reported at fair value as of November 1, 2015 were sold in January 2016. See Note 7 — Assets Held for Sale for additional information.

NOTE 16 — OPERATING SEGMENTS

Operating segments are defined as components of an enterprise that engage in business activities and by which discrete financial information is available that is evaluated on a regular basis by the chief operating decision maker to make decisions about how to allocate resources to the segment and assess the performance of the segment. We have three operating segments: engineered building systems; metal components; and metal coil coating. All operating segments operate primarily in the nonresidential construction market. Sales and earnings are influenced by general economic conditions, the level of nonresidential construction activity, metal roof repair and retrofit demand and the availability and terms of financing available for construction. Products of our operating segments use similar basic raw materials. The engineered building systems segment includes the manufacturing of main frames, Long Bay® Systems and value-added engineering and drafting, which are typically not part of metal components or metal coil coating products or services. The metal components segment products include metal roof and wall panels, doors, metal partitions, metal trim, insulated panels and other related accessories. CENTRIA is included in the metal components segment. The metal coil coating segment consists of cleaning, treating, painting and slitting continuous steel coils before the steel is fabricated for use by construction and industrial users. The operating segments follow the same accounting policies used for our consolidated financial statements.

We evaluate a segment’s performance based primarily upon operating income before corporate expenses. Intersegment sales are recorded based on standard material costs plus a standard markup to cover labor and overhead and consist of (i) structural framing provided by the engineered building systems segment to the metal components segment; (ii) building components provided by the metal components segment to the engineered building systems segment; and (iii) hot-rolled, light gauge painted and slit material and other services provided by the metal coil coating segment to both the metal components and engineered building systems segments.

Corporate assets consist primarily of cash but also include deferred financing costs, deferred taxes and property, plant and equipment associated with our headquarters in Houston, Texas. These items (and income and expenses related to these items) are not allocated to the operating segments. Corporate unallocated expenses include share-based compensation expenses, and executive, legal, finance, tax, treasury, human resources, information technology, purchasing, marketing and corporate travel expenses. Additional unallocated expenses include interest income, interest expense, strategic development and acquisition related costs and other (expense) income.

The following table represents sales, operating income (loss) and total assets attributable to these operating segments for the periods indicated (in thousands):



	Fiscal Three Months Ended						Fiscal Nine Months Ended
	July 31, 2016			August 2, 2015			July 31, 2016			August 2, 2015
Total sales:
Engineered building systems	$	181,029		$	176,519		$	468,028		$	469,564
Metal components	287,307			251,191			751,610			645,098
Metal coil coating	72,069			62,383			178,452			167,991
Intersegment sales	(78,052		)	(69,304		)	(193,476		)	(178,791		)
Total sales	$	462,353		$	420,789		$	1,204,614		$	1,103,862
External sales:
Engineered building systems	$	175,471		$	172,223		$	455,876		$	455,379
Metal components	256,195			221,958			670,757			574,667
Metal coil coating	30,687			26,608			77,981			73,816
Total sales	$	462,353		$	420,789		$	1,204,614		$	1,103,862
Operating income (loss):
Engineered building systems	$	19,561		$	14,363		$	39,216		$	25,937
Metal components	37,497			17,025			71,436			32,302
Metal coil coating	8,748			5,497			18,272			11,872
Corporate	(22,271		)	(17,507		)	(59,538		)	(49,779		)
Total operating income	$	43,535		$	19,378		$	69,386		$	20,332
Unallocated other expense, net	(8,193		)	(8,638		)	(22,072		)	(21,977		)
Income (loss) before income taxes	$	35,342		$	10,740		$	47,314		$	(1,645	)



	July 31, 2016		November 1, 2015
Total assets:
Engineered building systems	$	232,587	$	218,646
Metal components	658,674		654,762
Metal coil coating	85,964		81,456
Corporate	74,594		124,865
Total assets	$	1,051,819	$	1,079,729

NOTE 17 — CONTINGENCIES

As a manufacturer of products primarily for use in nonresidential building construction, the Company is inherently exposed to various types of contingent claims, both asserted and unasserted, in the ordinary course of business. As a result, from time to time, the Company and/or its subsidiaries become involved in various legal proceedings or other contingent matters arising from claims, or potential claims. The Company insures against these risks to the extent deemed prudent by its management and to the extent insurance is available. Many of these insurance policies contain deductibles or self-insured retentions in amounts the Company deems prudent and for which the Company is responsible for payment. In determining the amount of self-insurance, it is the Company’s policy to self-insure those losses that are predictable, measurable and recurring in nature, such as claims for automobile liability and general liability. The Company regularly reviews the status of on-going proceedings and other contingent matters along with legal counsel. Liabilities for such items are recorded when it is probable that the liability has been incurred and when the amount of the liability can be reasonably estimated. Liabilities are adjusted when additional information becomes available. Management believes that the ultimate disposition of these matters will not have a material adverse effect on the Company’s results of operations, financial position or cash flows. However, such matters are subject to many uncertainties and outcomes are not predictable with assurance.

NCI BUILDING SYSTEMS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following information should be read in conjunction with the unaudited consolidated financial statements included herein under “Item 1. Unaudited Consolidated Financial Statements” and the audited consolidated financial statements and the notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended November 1, 2015 .

FORWARD LOOKING STATEMENTS

This Quarterly Report includes statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied by these statements. In some cases, our forward-looking statements can be identified by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “will” or other similar words. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on any forward-looking information, including any earnings guidance, if applicable. 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 and adverse weather conditions;


•	challenging economic conditions affecting the nonresidential construction industry;


•	volatility in the U.S. economy and abroad, generally, and in the credit markets;


•	substantial indebtedness and our ability to incur substantially more indebtedness;


•	our ability to generate significant cash flow required to service or refinance our existing debt, including the 8.25% senior notes due 2023, and obtain future financing;


•	our ability to comply with the financial tests and covenants in our existing and future debt obligations;


•	operational limitations or restrictions in connection with our debt;


•	increases in interest rates;


•	recognition of asset impairment charges;


•	commodity price increases and/or limited availability of raw materials, including steel;


•	our ability to make strategic acquisitions accretive to earnings;


•	retention and replacement of key personnel;


•	enforcement and obsolescence of intellectual property rights;


•	fluctuations in customer demand;


•	costs related to environmental clean-ups and liabilities;


•	competitive activity and pricing pressure;


•	increases in energy prices;


•	volatility of the Company’s stock price;


•	dilutive effect on the Company’s common stockholders of potential future sales of the Company’s Common Stock held by our sponsor;


•	substantial governance and other rights held by our sponsor;


•	breaches of our information system security measures and damage to our major information management systems;


•	hazards that may cause personal injury or property damage, thereby subjecting us to liabilities and possible losses, which may not be covered by insurance;


•	changes in laws or regulations, including the Dodd–Frank Act;


•	our ability to integrate the acquisition of CENTRIA with our business and to realize the anticipated benefits of such acquisition;


•	costs and other effects of legal and administrative proceedings, settlements, investigations, claims and other matters;


•	timing and amount of our stock repurchases; and


•	other risks detailed under the caption “Risk Factors” in Part I, Item 1A in our most recent Annual Report on Form 10-K as filed with the SEC.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. However, we caution you that assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending on the circumstances. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this report, including those described under the caption “Risk Factors” in our most recent Annual Report on Form 10-K as filed with the SEC and other risks described in documents subsequently filed by the Company from time to time 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 unless the securities laws require us to do so.

OVERVIEW

NCI Building Systems, Inc. (together with its subsidiaries, unless the context requires otherwise, the “Company,” “NCI,” “we,” “us” or “our”) is one of North America’s largest integrated manufacturers and marketers of metal products for the nonresidential construction industry. We design, engineer, manufacture and market engineered building systems and metal components primarily for nonresidential construction use. We manufacture and distribute extensive lines of metal products for the nonresidential construction market under multiple brand names through a nationwide network of plants and distribution centers. We sell our products for both new construction and repair and retrofit applications. We also provide metal coil coating services for commercial and construction applications, servicing both internal and external customers.

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. Similarly, metal components offer builders, designers, architects and end-users several advantages, including lower long-term costs, longer life, attractive aesthetics and design flexibility.

We use a 52/53 week year with our fiscal year end on the Sunday closest to October 31. In fiscal 2016 , our year end will be October 30, 2016 which is the Sunday closest to October 31.

We assess performance across our operating segments by analyzing and evaluating, among other indicators, gross profit and operating income, as well as whether each segment has achieved its projected sales goals. In assessing our overall financial performance, we regard return on adjusted operating assets, as well as growth in earnings, as key indicators of shareholder value.

Third Fiscal Quarter

Our third quarter results showed meaningful year-over-year improvement in gross margin, net income, and Adjusted EBITDA. We continue to focus on growing and integrating insulated panel products into our building and components businesses. We are realizing the benefits of focused and integrated execution across our commercial, manufacturing, and supply chain activities, and our investments to improve our manufacturing productivity and overall cost efficiency. We are also maintaining commercial pricing discipline in an environment of volatile steel prices.

Consolidated revenues increased by approximately 9.9% from the same period in the prior year. The year-over-year improvement was primarily driven by tonnage volume growth, most notably in the metal components and metal coil coating segments. Revenue growth was lower than the underlying increase in volumes due to the pass-through of lower steel costs.

All operating segments achieved underlying gross margin growth through increased tonnage volume, commercial discipline and manufacturing efficiencies. Gross margin in the third quarter increased by 380 basis points to 27.7% of sales from the same period last year. Engineering, selling, general and administrative expenses as a percentage of revenues decreased by 30 basis points to 17.4% compared to the same period last year, as we continue to execute on our strategic initiatives.

For market context, reported low-rise nonresidential new construction starts, measured in square feet and comprising buildings of up to five stories, as reported by Dodge Data & Analytics, were down as much as 12% in the first nine months of our fiscal 2016 as compared to the same period in the prior year. While it is common for the reported new construction starts to be subsequently adjusted upwards, we believe the underlying growth we are achieving is outpacing market activity.

Overall, we delivered net income, adjusted EBITDA, diluted earnings per share and adjusted diluted earnings per share in the 2016 third quarter that meaningfully exceeded the prior year’s results. We remain focused on increasing our operating leverage and manufacturing efficiency. Our objective is to continue to execute on our strategic initiatives in order to increase market penetration and deliver top-line growth above nonresidential market growth during fiscal 2016 in our legacy businesses and also in our insulated metal panel (“IMP”) products through our multiple sales channels.

Industry Conditions

Our sales and earnings are subject to both seasonal and cyclical trends and are influenced by general economic conditions, interest rates, the price of steel relative to other building materials, the level of nonresidential construction activity, roof repair and retrofit demand and the availability and cost of financing for construction projects. Our sales are normally lower in the first half of each fiscal year compared to the second half because of unfavorable weather conditions for construction and typical business planning cycles affecting construction.

The nonresidential construction industry is highly sensitive to national and regional macroeconomic conditions. The current recovery of low-rise construction has been uneven and slow. The annual volume of new construction starts remains below previous cyclical trough levels of activity from the last 50 years. However, we believe that the economy is recovering and that the nonresidential construction industry will return to mid-cycle levels of activity over the next several years. The graph below shows the annual nonresidential new construction starts, measured in square feet, since 1968, as compiled and reported by Dodge Data & Analytics:

Current market data continues to show uneven activity across the nonresidential construction markets. According to Dodge Data & Analytics, low-rise nonresidential new construction starts, as measured in square feet and comprising buildings of up to five stories, were down as much as 12% for the first nine months of fiscal 2016 as compared to the same period in fiscal 2015. However, leading indicators for low-rise, nonresidential construction activity continue to indicate positive momentum for fiscal year 2016.

The leading indicators that we believe typically have the most meaningful correlation to nonresidential low-rise construction starts are the American Institute of Architects’ (“AIA”) Architecture Mixed Use Index, Dodge Residential single family starts and the Conference Board Leading Economic Index (“LEI”). Historically, there has been a very high correlation to the Dodge low-rise nonresidential starts when the three leading indicators are combined and then seasonally adjusted. The combined forward projection of these metrics, based on a 9 to 14 month historical lag for each metric, indicates modest growth of 4%-6% for low-rise new construction starts in fiscal 2016, with the majority of that growth occurring in the second half of our fiscal year.

We normally do not maintain an inventory of steel in excess of our current production requirements. However, from time to time, we may purchase steel in advance of announced steel price increases. We can give no assurance that steel will be readily available or that prices will not continue to be volatile. Most of our sales contracts have escalation clauses that allow us, under certain circumstances, to pass along all or a portion of increases in the price of steel after the date of the contract but prior to delivery. However, for competitive or other reasons, we may not be able to pass such price increases along. If the available supply

of steel declines, we could experience price increases that we are not able to pass on to the end users, a deterioration of service from our suppliers or interruptions or delays that may cause us not to meet delivery schedules to our customers. Any of these problems could adversely affect our results of operations and financial condition. For additional discussion, see “Item 3. Quantitative and Qualitative Disclosures About Market Risk — Steel Prices.”

Restructuring

We have developed plans to improve cost efficiency and optimize our combined manufacturing plant footprint, given the Company’s recent acquisitions and restructuring efforts. During the three months ended July 31, 2016 , we incurred severance related charges of $0.8 million associated with restructuring actions, including $0.1 million and $0.3 million associated with our engineered building systems and metal components segments, respectively.

The Company believes that the successful execution of these plans in phases over the next 6 to 24 months will result in annual cost savings ranging between $15.0 million and $20.0 million when completed. We are currently unable to make a good faith determination of cost estimates, or range of cost estimates, for additional actions associated with the plans. Restructuring charges will be recorded for the plans as they become estimable and probable. See Note 4 — Restructuring and Asset Impairments in the notes to the unaudited consolidated financial statements for additional information.

RESULTS OF OPERATIONS

Operating segments are defined as components of an enterprise that engage in business activities and by which discrete financial information is available that is evaluated on a regular basis by the chief operating decision maker to make decisions about how to allocate resources to the segment and assess the performance of the segment. We have three operating segments: (i) engineered building systems; (ii) metal components; and (iii) metal coil coating. All operating segments operate primarily in the nonresidential construction market. Sales and earnings are influenced by general economic conditions, the level of nonresidential construction activity, metal roof repair and retrofit demand and the availability and terms of financing available for construction. Our operating segments are vertically integrated and benefit from similar basic raw materials. The engineered building systems segment includes the manufacturing of main frames, Long-Bay® Systems and value-added engineering and drafting, which are typically not part of metal components or metal coil coating products or services. The metal components segment products include metal roof and wall panels, doors, metal partitions, metal trim, insulated panels and other related accessories. CENTRIA is included in the metal components segment. The metal coil coating segment consists of cleaning, treating, painting and slitting continuous steel coils before the steel is fabricated for use by construction and industrial users. The manufacturing and distribution activities of our segments are effectively coupled through the use of our nationwide hub-and-spoke manufacturing and distribution system, which supports and enhances our vertical integration. The operating segments follow the same accounting policies used for our consolidated financial statements.

We evaluate a segment’s performance based primarily upon operating income before corporate expenses. Intersegment sales are recorded based on standard material costs plus a standard markup to cover labor and overhead and consist of: (i) structural framing provided by the engineered building systems segment to the metal components segment; (ii) building components provided by the metal components segment to the engineered building systems segment; and (iii) hot-rolled, light gauge painted, and slit material and other services provided by the metal coil coating segment to both the metal components and engineered building systems segments.

The following table represents sales and operating income (loss) attributable to these operating segments for the periods indicated (in thousands):



	Fiscal Three Months Ended						Fiscal Nine Months Ended
	July 31, 2016			August 2, 2015			July 31, 2016			August 2, 2015
Total sales:
Engineered building systems	$	181,029		$	176,519		$	468,028		$	469,564
Metal components	287,307			251,191			751,610			645,098
Metal coil coating	72,069			62,383			178,452			167,991
Intersegment sales	(78,052		)	(69,304		)	(193,476		)	(178,791		)
Total sales	$	462,353		$	420,789		$	1,204,614		$	1,103,862
External sales:
Engineered building systems	$	175,471		$	172,223		$	455,876		$	455,379
Metal components	256,195			221,958			670,757			574,667
Metal coil coating	30,687			26,608			77,981			73,816
Total sales	$	462,353		$	420,789		$	1,204,614		$	1,103,862
Operating income (loss):
Engineered building systems	$	19,561		$	14,363		$	39,216		$	25,937
Metal components	37,497			17,025			71,436			32,302
Metal coil coating	8,748			5,497			18,272			11,872
Corporate	(22,271		)	(17,507		)	(59,538		)	(49,779		)
Total operating income	$	43,535		$	19,378		$	69,386		$	20,332
Unallocated other expense	(8,193		)	(8,638		)	(22,072		)	(21,977		)
Income (loss) before income taxes	$	35,342		$	10,740		$	47,314		$	(1,645	)

FISCAL THREE MONTHS ENDED JULY 31, 2016 COMPARED TO FISCAL THREE MONTHS ENDED AUGUST 2, 2015

Consolidated sales increased by 9.9% , or $41.6 million , for the three months ended July 31, 2016 , compared to the three months ended August 2, 2015 . All operating segments had higher total tonnage volume during the current period, especially in our metal components and metal coil coating segments. The increase related to higher tonnage volumes was partially offset by the pass-through of lower steel costs.

Consolidated cost of sales increased by 4.8% , or $15.4 million , for the three months ended July 31, 2016 , compared to the three months ended August 2, 2015 . The impact of lower materials costs, primarily from lower steel prices, was partially offset by higher tonnage volume.

Gross margin percentage was 27.7% for the three months ended July 31, 2016 , compared to 23.9% for the same period in the prior year. The increase in gross margin was the result of increased operating leverage from higher tonnage volume, favorable sales mix, and continued focus on value-oriented commercial sales discipline.

Engineered building systems sales increased by 2.6% , or $4.5 million , to $181.0 million in the three months ended July 31, 2016 , from $176.5 million in the same period in the prior year. Sales to third parties for the three months ended July 31, 2016 increased by $3.3 million to $175.5 million from $172.2 million in the same period in the prior year, primarily due to higher tonnage volume, partially offset by the pass-through of lower steel costs. Engineered building systems third-party sales accounted for 38.0% of total consolidated third-party sales in the three months ended July 31, 2016 , compared to 40.9% in the three months ended August 2, 2015 .

Operating income of the engineered building systems segment increased to $19.6 million in the three months ended July 31, 2016 , from $14.4 million in the same period in the prior year. The $5.2 million increase resulted from commercial discipline as well as supply chain management and manufacturing efficiencies.

Metal components sales increased by 14.4% , or $36.1 million , to $287.3 million in the three months ended July 31, 2016 , from $251.2 million in the same period in the prior year. The increase in sales was primarily driven by higher tonnage volume from substantially all divisions within the segment. Sales to third parties for the three months ended July 31, 2016 increased by $34.2 million to $256.2 million from $222.0 million in the same period in the prior year. Metal components third-party sales

accounted for 55.4% of total consolidated third-party sales in the three months ended July 31, 2016 , compared to 52.7% in the three months ended August 2, 2015 .

Operating income of the metal components segment increased to $37.5 million in the three months ended July 31, 2016 , compared to $ 17.0 million in the same period in the prior year. The $20.5 million increase was driven primarily by the increased sales discussed above, and from a combined benefit of effective supply chain management and commercial discipline, as well as greater efficiencies resulting from our manufacturing reorganization.

Metal coil coating sales increased by 15.5% , or $9.7 million , to $72.1 million in the three months ended July 31, 2016 , compared to $62.4 million in the same period in the prior year. Sales to third parties for the three months ended July 31, 2016 increased by $4.1 million to $30.7 million from $26.6 million in the same period in the prior year, primarily as a result of an increase in tonnage volume. Metal coil coating third-party sales accounted for 6.6% of total consolidated third-party sales in the three months ended July 31, 2016 , compared to 6.3% in the three months ended August 2, 2015 .

Operating income of the metal coil coating segment increased to $8.7 million in the three months ended July 31, 2016 , from $5.5 million in the same period in the prior year. The $3.2 million increase was primarily due to the increase in sales as noted above as well as manufacturing efficiencies.

Consolidated engineering, selling, general and administrative expenses increased to $80.4 million in the three months ended July 31, 2016 , compared to $74.5 million in the same period in the prior year. As a percentage of sales, engineering, selling, general and administrative expenses were 17.4% for the three months ended July 31, 2016 , as compared to 17.7% for the three months ended August 2, 2015 . The $5.9 million increase was primarily due to increased tonnage volume and to higher incentive compensation costs from overall improvement in operating results during the current period, partially offset by lower costs from efficiencies and the execution of strategic initiatives.

Consolidated intangible amortization decreased to $2.4 million in the three months ended July 31, 2016 , compared to $5.3 million in the same period in the prior year. The prior period amount included short-lived intangible assets from the CENTRIA Acquisition that have since been fully amortized.

Consolidated strategic development and acquisition related costs for the three months ended July 31, 2016 were $0.8 million , compared to $0.7 million for the three months ended August 2, 2015 . These non-operational costs resulted from acquisition-related activities that support our future growth targets and performance goals and generally include external legal, financial and due diligence costs incurred to pursue specific acquisition targets. These costs also included $0.7 million in expenses we incurred in connection with the Secondary Offering and Stock Repurchase. Costs incurred during the three months ended August 2, 2015 were primarily related to the CENTRIA Acquisition.

Consolidated restructuring and impairment charges for the three months ended July 31, 2016 and August 2, 2015 were $0.8 million and $0.8 million , respectively. These charges relate to our actions taken to streamline our management and engineering and drafting activities, and also to optimize our overall manufacturing structure and footprint.

Consolidated interest expense decreased to $7.7 million for the three months ended July 31, 2016 , compared to $8.1 million for the same period of the prior year. The decrease in interest expense was due to a lower outstanding principal balance on the Company’s Term Loan resulting from voluntary principal prepayments made during the latter half of fiscal 2015 and the first nine months of fiscal 2016.

Consolidated foreign exchange gain (loss) for the three months ended July 31, 2016 was a $0.9 million loss , compared to a $0.6 million loss for the same period of the prior year, due to exchange rate fluctuations in the Mexican peso and Canadian dollar relative to the U.S. dollar.

Consolidated provision for income taxes was $11.6 million for the three months ended July 31, 2016 , compared to $3.5 million for the same period in the prior year. The effective tax rate for the three months ended July 31, 2016 was 32.9% , compared to 32.8% for the same period in the prior year, resulting from higher pre-tax income in the current period, partially offset by the benefit related to the research and development credit for fiscal year 2016 that was permanently extended by the Protecting Americans from Tax Hikes Act of 2015.

FISCAL NINE MONTHS ENDED JULY 31, 2016 COMPARED TO FISCAL NINE MONTHS ENDED AUGUST 2, 2015

Consolidated sales increased by 9.1% , or $100.8 million , for the nine months ended July 31, 2016 , compared to the nine months ended August 2, 2015 . CENTRIA contributed an incremental $49.1 million of external sales during the nine months ended July 31, 2016 . All operating segments had higher total tonnage volume during the current period, especially from our legacy single-skin products; however, this increase was partially offset by the impact of lower steel prices in the current period.

Consolidated cost of sales increased by 5.5% , or $46.5 million , for the nine months ended July 31, 2016 , compared to the nine months ended August 2, 2015 . This increase resulted in part from the inclusion of CENTRIA in the full current period, which contributed an incremental $36.0 million of cost of sales during the nine months ended July 31, 2016 . The impact of lower materials costs, primarily from lower steel prices, was partially offset by higher tonnage volume.

Gross margin was 25.5% for the nine months ended July 31, 2016 , compared to 22.5% for the same period in the prior year. The increase in gross margin was the result of commercial discipline in all operating segments; higher margin product mix in our metal components and metal coil coating segments, especially from insulated metal panel products and the inclusion of CENTRIA in the full current period, and lower materials costs. We also recognized a $1.7 million gain (recovery) on the sale of certain idled facilities in our engineered building systems segment.

Engineered building systems sales were lower in the nine months ended July 31, 2016 , with total sales of $468.0 million , compared to $469.6 million in the same period in the prior year. Sales to third parties for the nine months ended July 31, 2016 increased by $0.5 million to $455.9 million from $455.4 million in the same period in the prior year, primarily due to the pass-through of lower steel prices, partially offset by higher tonnage volume. Engineered building systems third-party sales accounted for 37.8% of total consolidated third-party sales in the nine months ended July 31, 2016 , compared to 41.3% in the nine months ended August 2, 2015 .

Operating income of the engineered building systems segment increased to $39.2 million in the nine months ended July 31, 2016 , compared to $25.9 million in the same period in the prior year. This $13.3 million increase was driven by improvements in commercial discipline, supply chain management and manufacturing efficiencies. We also recognized a $1.7 million gain (recovery) on the sale of certain idled facilities in the current period.

Metal components sales increased by 16.5% , or $106.5 million , to $751.6 million in the nine months ended July 31, 2016 , compared to $645.1 million in the same period in the prior year. The results were driven in part by the inclusion of CENTRIA in the full current period, which contributed an incremental $49.1 million of external sales during the nine months ended July 31, 2016 . This increase was also due to higher tonnage volume of legacy single skin products as well as combined benefits from effective supply chain management and the manufacturing reorganization, partially offset by the pass-through of lower steel prices. Sales to third parties for the nine months ended July 31, 2016 increased by $96.1 million to $670.8 million from $574.7 million in the same period in the prior year. Metal components third-party sales accounted for 55.7% of total consolidated third-party sales in the nine months ended July 31, 2016 , compared to 52.1% in the nine months ended August 2, 2015 .

Operating income of the metal components segment increased to $71.4 million in the nine months ended July 31, 2016 , compared to $ 32.3 million in the same period in the prior year. The $39.1 million increase was driven by the increased sales discussed above, as well as improved product mix, primarily from our insulated metal panel products, and manufacturing efficiencies. CENTRIA contributed an incremental $12.1 million in operating income for the nine months ended July 31, 2016 .

Metal coil coating sales increased by 6.2% , or $10.5 million , to $178.5 million in the nine months ended July 31, 2016 , compared to $168.0 million in the same period in the prior year. Sales to third parties for the nine months ended July 31, 2016 increased by $4.2 million to $78.0 million from $73.8 million in the same period in the prior year, primarily as a result of an increase in tonnage volume, partially offset by lower steel prices. Metal coil coating third-party sales accounted for 6.5% of total consolidated third-party sales in the nine months ended July 31, 2016 , compared to 6.7% in the nine months ended August 2, 2015 .

Operating income of the metal coil coating segment increased to $18.3 million in the nine months ended July 31, 2016 , compared to $11.9 million in the same period in the prior year. The $6.4 million increase was primarily due to higher revenue discussed above and lower materials costs, along with manufacturing efficiencies.

Consolidated engineering, selling, general and administrative expenses increased to $224.9 million in the nine months ended July 31, 2016 , compared to $210.4 million in the same period in the prior year. As a percentage of sales, engineering, selling, general and administrative expenses were 18.7% for the nine months ended July 31, 2016 , as compared to 19.1% for the nine months ended August 2, 2015 . The $14.5 million increase was partially due to the inclusion of CENTRIA in the full current period,

which contributed an incremental $4.8 million of engineering, selling, general and administrative costs during the nine months ended July 31, 2016 , and was also due to increased tonnage volume and to higher incentive compensation costs from overall improvement in operating results during the current period, partially offset by lower costs from operational efficiencies and the execution of strategic initiatives.

Consolidated intangible amortization decreased to $7.2 million in the nine months ended July 31, 2016 , compared to $11.2 million in the same period in the prior year. This decrease is directly related to the valuation of intangible assets acquired in the CENTRIA Acquisition in January 2015. The prior period amount included short-lived intangible assets from the CENTRIA Acquisition that have since been fully amortized.

Consolidated strategic development and acquisition related costs for the nine months ended July 31, 2016 were $2.1 million , compared to $3.1 million for the nine months ended August 2, 2015 . These non-operational costs resulted from acquisition-related activities that support our future growth targets and performance goals and generally include external legal, financial and due diligence costs incurred to pursue specific acquisition targets. These costs also included $0.7 million in expenses we incurred in connection with the Secondary Offering and Stock Repurchase. Costs incurred during the nine months ended August 2, 2015 were primarily related to the CENTRIA Acquisition.

Consolidated restructuring and impairment charges for the nine months ended July 31, 2016 and August 2, 2015 were $3.4 million and $3.7 million , respectively. These charges relate to our efforts to streamline our management and engineering and drafting activities as well as to optimize our overall manufacturing structure and footprint.

Consolidated interest expense increased to $23.5 million for the nine months ended July 31, 2016 , compared to $20.4 million for the same period of the prior year. On January 16, 2015, we issued $250.0 million in aggregate principal amount of 8.25% senior notes due 2023 to fund the CENTRIA Acquisition, which increased our consolidated interest expense. This increase was partially offset by lower interest expense on our Credit Agreement due to voluntary principal prepayments the Company made during the latter half of fiscal 2015 and first nine months of fiscal 2016.

Consolidated foreign exchange gain (loss) decreased to a $1.1 million loss for the nine months ended July 31, 2016 , compared to a $2.0 million loss for the same period of the prior year, due to the fluctuations of the U.S. dollar against the Mexican peso and Canadian dollar.

Consolidated gain from bargain purchase was $1.9 million for the nine months ended July 31, 2016 , which resulted from the acquisition of manufacturing operations in Hamilton, Ontario, Canada during the first quarter of fiscal 2016. The fair value of the net assets acquired exceeded the purchase consideration. There was no corresponding amount recorded for the nine months ended August 2, 2015 .

Consolidated provision for income taxes was $15.3 million for the nine months ended July 31, 2016 , compared to a benefit of $1.1 million for the same period in the prior year. The effective tax rate for the nine months ended July 31, 2016 was 32.3% , compared to 64.3% for the same period in the prior year, resulting primarily from pre-tax income in the current period, the benefit related to the non-taxable gain from bargain purchase associated with the acquisition of the Hamilton operations, and the benefit related to the research and development credit for fiscal year 2016 that was permanently extended by the Protecting Americans from Tax Hikes Act of 2015.

LIQUIDITY AND CAPITAL RESOURCES

General

Our cash and cash equivalents decreased from $99.7 million as of November 1, 2015 to $50.7 million as of July 31, 2016 . The following table summarizes our consolidated cash flows for the nine months ended July 31, 2016 and August 2, 2015 (in thousands):



	Fiscal Nine Months Ended
	July 31, 2016			August 2, 2015
Net cash provided by operating activities	$	40,599		$	38,591
Net cash used in investing activities	(14,004		)	(262,425		)
Net cash provided by (used in) financing activities	(75,497		)	206,226
Effect of exchange rate changes on cash and cash equivalents	(50		)	(766		)
Net decrease in cash and cash equivalents	(48,952		)	(18,374		)
Cash and cash equivalents at beginning of period	99,662			66,651
Cash and cash equivalents at end of period	$	50,710		$	48,277

Operating Activities

Our business is both seasonal and cyclical and cash flows from operating activities may fluctuate during the year and from year to year due to economic conditions. We rely on cash and short-term borrowings to meet cyclical and seasonal increases in working capital needs. These needs generally rise during periods of increased economic activity or increasing raw material prices due to higher levels of inventory and accounts receivable. During economic slowdowns, or periods of decreasing raw material costs, working capital needs generally decrease as a result of the reduction of inventories and accounts receivable.

Net cash provided by operating activities was $40.6 million during the nine months ended July 31, 2016 compared to $38.6 million in the comparable period of fiscal 2015. The net cash provided in the current period was primarily a result of net income of $32.0 million in the nine months ended July 31, 2016 , compared to net loss of $0.6 million in the same period of fiscal 2015. Our primary use of cash in operating activities was for working capital.

Net cash used in accounts receivable was $10.1 million for the nine months ended July 31, 2016 , whereas net cash provided by accounts receivable was $13.3 million for the nine months ended August 2, 2015 . Our days sales outstanding as of July 31, 2016 and August 2, 2015 were 33.4 days and 35.2 days, respectively. The increase in our accounts receivable balance was primarily the result of higher sales during the current period.

For the nine months ended July 31, 2016 , the change in cash relating to inventory was $23.4 million and resulted partially from higher inventory purchases to support higher sales, and also in part from volatility in steel prices. Our days inventory on-hand decreased to 46.5 days as of July 31, 2016 from 47.6 days as of August 2, 2015 .

Net cash used in accounts payable for the nine months ended July 31, 2016 was consistent with the nine months ended August 2, 2015 . Our vendor payments can significantly fluctuate based on the timing of disbursements, inventory purchases and vendor payment terms. Our days payable outstanding as of July 31, 2016 decreased to 35.7 days from 37.5 days as of August 2, 2015 .

Investing Activities

Net cash used in investing activities decreased during the nine months ended July 31, 2016 to $ 14.0 million from $ 262.4 million in the comparable period in the prior year. The decrease in cash used is primarily attributable to the CENTRIA Acquisition in the nine months ended August 2, 2015 . In the nine months ended July 31, 2016 , $15.1 million in cash was used for capital expenditures, $2.1 million was used for the final payment of the post-close working capital adjustment related to the CENTRIA Acquisition, and $2.2 million was used for the acquisition of the Hamilton operations. Additionally, we sold assets that had been classified as held for sale for $5.5 million .

Financing Activities

Net cash used in financing activities was $ 75.5 million during the nine months ended July 31, 2016 compared to $ 206.2 million of cash provided by financing activities in the comparable prior year period. During the nine months ended July 31, 2016 , we used $56.3 million to repurchase shares of our outstanding common stock under the program previously approved by the Board of Directors (including $45.0 million for the Stock Repurchase), $1.1 million for purchases of shares related to restricted stock that was withheld to satisfy minimum tax withholding obligations arising in connection with the vesting of restricted stock awards, and $30.0 million to make voluntary principal prepayments on borrowings under our Credit Agreement. We received $12.1 million in cash proceeds from exercises of stock options. During the nine months ended August 2, 2015 , we issued $250.0 million in aggregate principal amount of 8.25% senior notes due 2023 to fund the CENTRIA Acquisition, partially offset by $9.2 million of payments for financing costs, $31.2 million of payments on our term loan and $3.3 million in purchases of our common stock.

We invest our excess cash in various overnight investments which are issued or guaranteed by the U.S. federal government.

Debt

As of July 31, 2016 , we had an aggregate principal amount of $414.1 million of outstanding indebtedness, comprising $164.1 million of borrowings under our Credit Agreement and $250.0 million in aggregate principal amount of 8.25% senior notes due 2023. Our excess availability under the Amended ABL Facility was $140.9 million as of July 31, 2016 . In addition, standby letters of credit related to certain insurance policies totaling approximately $9.1 million were outstanding but undrawn under the Amended ABL Facility. At July 31, 2016 , we had no revolving loans outstanding under the Amended ABL Facility.

For additional information, see Note 12 — Long-Term Debt and Note Payable in the notes to the unaudited consolidated financial statements.

Equity investment

On July 25, 2016, the CD&R Funds completed a registered underwritten offering, in which the CD&R Funds offered 9.0 million shares of our common stock at a price to the public of $16.15 per share (the “Secondary Offering”). The underwriters also exercised their option to purchase 1.35 million additional shares of our common stock from the CD&R Funds. The aggregate offering price for the 10.35 million shares sold in the Secondary Offering was approximately $160.1 million , net of underwriting discounts and commissions. The CD&R Funds received all of the proceeds from the Secondary Offering and no shares in the Secondary Offering were sold by the Company or any of its officers or directors (although certain of our directors are affiliated with the CD&R Funds). In connection with the Secondary Offering and Stock Repurchase, we incurred approximately $0.7 million in expenses, which were included in engineering, selling, general and administrative expenses in the consolidated statements of operations for the three and nine months ended July 31, 2016 .

On July 18, 2016, the Company entered into an agreement with the CD&R Funds to repurchase approximately 2.9 million shares of our common stock at the price per share equal to the price per share paid by the underwriters to the CD&R Funds in the Secondary Offering (the “Stock Repurchase”). The Stock Repurchase, which was completed concurrently with the Secondary Offering on July 25, 2016, represented a private, non-underwritten transaction between the Company and the CD&R Funds that was approved and recommended by the Affiliate Transactions Committee of our board of directors. Following completion of the Stock Repurchase, the Company canceled the shares repurchased from the CD&R Funds, resulting in a $45.0 million decrease in both additional paid in capital and treasury stock. The Stock Repurchase was funded through the Company’s cash on hand.

At July 31, 2016 and November 1, 2015 , the CD&R Funds owned approximately 42.0% and 58.4% , respectively, of the outstanding shares of our common stock.

Cash Flow

We periodically evaluate our liquidity requirements, capital needs and availability of resources in view of inventory levels, expansion plans, debt service requirements and other operating cash needs. To meet our short- and long-term liquidity requirements, including payment of operating expenses and repaying debt, we rely primarily on cash from operations. Beyond cash generated from operations, our Amended ABL Facility is undrawn with $140.9 million available at July 31, 2016 and $50.7 million of cash as of July 31, 2016 .

We expect that, for the next 12 months, cash generated from operations and our Amended ABL Facility will be sufficient to provide us the ability to fund our operations, provide the increased working capital necessary to support our strategy and fund planned capital expenditures of between approximately $24 million and $28 million for fiscal 2016 and expansion when needed.

From time to time, we have used available funds to repurchase shares of our common stock under our stock repurchase programs. In January 2016, our Board of Directors authorized a stock repurchase program for up to an aggregate of $50.0 million of the Company’s outstanding common stock, which the Board of Directors authorized to be increased for up to an aggregate of $56.3 million of the Company’s common stock in July 2016. Following the Stock Repurchase, the Company has repurchased the maximum amount authorized under the stock repurchase program. During the nine months ended July 31, 2016 , we repurchased 4.0 million shares for $56.3 million under the stock repurchase program. The timing and method of any additional repurchases under the previously authorized program will depend on a variety of factors, including applicable securities laws and market conditions, and are subject to results of operations, financial conditions, cash requirements and other factors, and may be suspended or discontinued at any time. In addition to the common stock repurchased during the nine months ended July 31, 2016 under our

stock repurchase programs, we also withheld shares of restricted stock to satisfy minimum tax withholding obligations arising in connection with the vesting of awards of restricted stock related to our 2003 Long-Term Stock Incentive Plan.

Our corporate strategy seeks potential acquisitions that would provide additional synergies in our engineered building systems, metal components and metal coil coating segments. From time to time, we may enter into letters of intent or agreements to acquire assets or companies in these business lines. The consummation of these transactions could require substantial cash payments and/or issuance of additional debt.

The Company may repurchase, redeem or otherwise retire the Company’s debt and take other steps to reduce the Company’s debt or otherwise improve the Company’s financial position. These actions could include open market debt repurchases, negotiated repurchases, other redemptions or retirements of outstanding debt and opportunistic refinancing of debt. The amount of debt that may be repurchased or otherwise retired, if any, will depend on market conditions, trading levels of the Company’s debt, the Company’s cash position, compliance with debt covenants and other considerations. Affiliates of the Company may also purchase the Company’s debt from time to time through open market purchases or other transactions. In such cases, the Company’s debt may not be retired, in which case the Company would continue to pay interest in accordance with the terms of the debt, and the Company would continue to reflect the debt as outstanding on its consolidated balance sheets.

NON-GAAP MEASURES

Set forth below are certain non-GAAP measures which include adjusted operating income (loss), adjusted EBITDA, adjusted net income (loss) per diluted common share and adjusted net income (loss) applicable to common shares. We define adjusted EBITDA as net income (loss) before interest expense, income tax expense (benefit) and depreciation and amortization, adjusted for items broadly consisting of selected items which management does not consider representative of our ongoing operations and certain non-cash items of the Company. Such measurements are not prepared in accordance with U.S. GAAP and should not be construed as an alternative to reported results determined in accordance with U.S. GAAP. Management believes the use of such non-GAAP measures on a consolidated and operating segment basis assists investors in understanding the ongoing operating performance by presenting the financial results between periods on a more comparable basis. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating these measures, you should be aware that in the future we may incur expenses that are the same as, or similar to, some of the adjustments in these non-GAAP measures. In addition, certain financial covenants related to our Credit Agreement, Amended ABL Facility, and Notes are based on similar non-GAAP measures. The non-GAAP information provided is unique to the Company and may not be consistent with the methodologies used by other companies.

The following tables reconcile adjusted operating income (loss) to operating income (loss) for the periods indicated (in thousands):



	Three Months Ended July 31, 2016
	Engineered Building Systems			Metal Components		Metal Coil Coating		Corporate			Consolidated
Operating income (loss), GAAP basis	$	19,561		$	37,497	$	8,748	$	(22,271	)	$	43,535
Restructuring and impairment charges	106			261		—		411			778
Strategic development and acquisition related costs	—			9		—		810			819
Gain on sale of assets and asset recovery	(52		)	—		—		—			(52		)
Adjusted operating income (loss)	$	19,615		$	37,767	$	8,748	$	(21,050	)	$	45,080



	Three Months Ended August 2, 2015
	Engineered Building Systems		Metal Components		Metal Coil Coating		Corporate			Consolidated
Operating income (loss), GAAP basis	$	14,363	$	17,025	$	5,497	$	(17,507	)	$	19,378
Restructuring and impairment charges	138		262		—		350			750
Strategic development and acquisition related costs	—		—		—		701			701
Fair value adjustment of acquired inventory	—		1,000		—		—			1,000
Short lived acquisition method fair value adjustments	—		3,334		—		—			3,334
Adjusted operating income (loss)	$	14,501	$	21,621	$	5,497	$	(16,456	)	$	25,163



	Nine Months Ended July 31, 2016
	Engineered Building Systems			Metal Components		Metal Coil Coating		Corporate			Consolidated
Operating income (loss), GAAP basis	$	39,216		$	71,436	$	18,272	$	(59,538	)	$	69,386
Restructuring and impairment charges	755			1,155		39		1,488			3,437
Strategic development and acquisition related costs	—			403		—		1,677			2,080
Gain on sale of assets and asset recovery	(1,704		)	—		—		—			(1,704		)
Adjusted operating income (loss)	$	38,267		$	72,994	$	18,311	$	(56,373	)	$	73,199



	Nine Months Ended August 2, 2015
	Engineered Building Systems		Metal Components		Metal Coil Coating		Corporate			Consolidated
Operating income (loss), GAAP basis	$	25,937	$	32,302	$	11,872	$	(49,779	)	$	20,332
Restructuring and impairment charges	1,797		1,500		254		144			3,695
Strategic development and acquisition related costs	—		—		—		3,058			3,058
Fair value adjustment of acquired inventory	—		2,358		—		—			2,358
Short lived acquisition method fair value adjustments	—		6,057		—		—			6,057
Adjusted operating income (loss)	$	27,734	$	42,217	$	12,126	$	(46,577	)	$	35,500

The following tables reconcile adjusted EBITDA to net income (loss) for the periods indicated (in thousands):



	4th Quarter November 1, 2015			1st Quarter January 31, 2016			2nd Quarter May 1, 2016			3rd Quarter July 31, 2016			Trailing 12 Months July 31, 2016
Net income	$	18,407		$	5,892		$	2,420		$	23,715		$	50,434
Add:
Depreciation and amortization	13,354			10,747			10,765			10,595			45,461
Consolidated interest expense, net	7,993			7,847			7,792			7,685			31,317
Provision for income taxes	10,029			2,453			1,209			11,627			25,318
Restructuring and impairment charges	7,611			1,510			1,149			778			11,048
Gain from bargain purchase	—			(1,864		)	—			—			(1,864		)
Strategic development and acquisition related costs	1,143			681			579			819			3,222
Gain on legal settlements	(3,765		)	—			—			—			(3,765		)
Fair value adjustments of acquired inventory	—			—			—			—			—
Share-based compensation	1,677			2,582			2,468			2,661			9,388
Gain on sale of assets and asset recovery	—			(725		)	(927		)	(52		)	(1,704		)
Adjusted EBITDA	$	56,449		$	29,123		$	25,455		$	57,828		$	168,855



	4th Quarter November 2, 2014		1st Quarter February 1, 2015			2nd Quarter May 3, 2015			3rd Quarter August 2, 2015		Trailing 12 Months August 2, 2015
Net income (loss)	$	14,259	$	(320	)	$	(7,488	)	$	7,220	$	13,671
Add:
Depreciation and amortization	9,220		9,731			13,766			14,541		47,258
Consolidated interest expense, net	3,053		3,980			8,280			8,135		23,448
Provision (benefit) for income taxes	4,215		(490		)	(4,087		)	3,520		3,158
Restructuring and impairment charges	—		1,477			1,759			504		3,740
Strategic development and acquisition related costs	3,512		1,729			628			701		6,570
Fair value adjustments of acquired inventory	—		583			775			1,000		2,358
Share-based compensation	2,022		2,933			2,201			2,568		9,724
Adjusted EBITDA	$	36,281	$	19,623		$	15,834		$	38,189	$	109,927

The following tables reconcile adjusted net income (loss) per diluted common share to net income (loss) per diluted common share and adjusted net income (loss) applicable to common shares to net income (loss) applicable to common shares for the periods indicated (in thousands):



	Fiscal Three Months Ended						Fiscal Nine Months Ended
	July 31, 2016			August 2, 2015			July 31, 2016			August 2, 2015
Net income (loss) per diluted common share, GAAP basis	$	0.32		$	0.10		$	0.43		$	(0.01	)
Restructuring and impairment charges	0.01			0.01			0.05			0.05
Strategic development and acquisition related costs	0.01			0.01			0.03			0.04
Gain on sale of assets and asset recovery	—			—			(0.02		)	—
Gain from bargain purchase	—			—			0.03			—
Fair value adjustment of acquired inventory	—			0.01			—			0.03
Short lived acquisition method fair value adjustments	—			0.05			—			0.08
Tax effect of applicable non-GAAP adjustments ⁽¹⁾	$	(0.01	)	$	(0.03	)	$	(0.02	)	$	(0.08	)
Adjusted net income per diluted common share	$	0.33		$	0.15		$	0.50		$	0.11


(1)	The Company calculated the tax effect of non-GAAP adjustments by applying the applicable statutory tax rate for the period to each applicable non-GAAP item.



	Fiscal Three Months Ended						Fiscal Nine Months Ended
	July 31, 2016			August 2, 2015			July 31, 2016			August 2, 2015
Net income (loss) applicable to common shares, GAAP basis	$	23,550		$	7,160		$	31,761		$	(588	)
Restructuring and impairment charges	778			750			3,437			3,695
Strategic development and acquisition related costs	819			701			2,080			3,058
Gain on sale of assets and asset recovery	(52		)	—			(1,704		)	—
Gain from bargain purchase	—			—			1,864			—
Fair value adjustment of acquired inventory	—			1,000			—			2,358
Short lived acquisition method fair value adjustments	—			3,390			—			6,112
Tax effect of applicable non-GAAP adjustments ⁽¹⁾	(603		)	(2,243		)	(1,487		)	(5,846		)
Adjusted net income applicable to common shares	$	24,492		$	10,758		$	35,951		$	8,789


(1)	The Company calculated the tax effect of non-GAAP adjustments by applying the applicable statutory tax rate for the period to each applicable non-GAAP item.

OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (“SPEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of July 31, 2016 , we were not involved in any material unconsolidated SPE transactions.

CONTRACTUAL OBLIGATIONS

In general, purchase orders issued in the normal course of business can be terminated in whole or in part for any reason without liability until the product is received.

During the nine months ended July 31, 2016 , we completed the acquisition of a manufacturing business in Hamilton, Ontario, Canada for net cash consideration of $2.2 million . There have been no other material changes in our future contractual obligations since the end of fiscal 2015 other than the normal expiration of existing contractual obligations. See Part 2, Item 7 of our Annual Report on Form 10-K for the fiscal year ended November 1, 2015 for more information on our contractual obligations. See Note

12 — Long-Term Debt and Note Payable in the notes to the unaudited consolidated financial statements for more information on the material terms of our Notes, Credit Agreement and Amended ABL Facility.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that are most important to the portrayal of our financial position and results of operations. These policies require our most subjective judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. Our most critical accounting policies include those that pertain to revenue recognition, insurance accruals, share-based compensation, income taxes, accounting for acquisitions, intangible assets and goodwill, allowance for doubtful accounts, inventory valuation, property, plant and equipment valuation and contingencies, which are described in Item 7 of our Annual Report on Form 10-K for the year ended November 1, 2015 .

RECENT ACCOUNTING PRONOUNCEMENTS

In April 2015, the FASB issued ASU 2015-05, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement . ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the guidance specifies that the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. ASU 2015-05 further specifies that the customer should account for a cloud computing arrangement as a service contract if the arrangement does not include a software license. The guidance is effective for our fiscal year ending October 29, 2017, including interim periods within that fiscal year. We are currently assessing the impact of this guidance on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Steel Prices

We are subject to market risk exposure related to volatility in the price of steel. For the fiscal nine months ended July 31, 2016 , steel constituted approximately 67% of our cost of sales. Our business is heavily dependent on the price and supply of steel. Our various products are fabricated from steel produced by mills to forms including bars, plates, structural shapes, sheets, hot-rolled coils and galvanized or Galvalume ® — coated coils ⁽¹⁾ . The steel industry is highly cyclical in nature, and steel prices have been volatile in recent years and may remain volatile in the future. Steel prices are influenced by numerous factors beyond our control, including general economic conditions, domestically and internationally, the availability of raw materials, competition, labor costs, freight and transportation costs, production costs, import duties and other trade restrictions. Based on the cyclical nature of the steel industry, we expect steel prices will continue to be volatile. Although we have the ability to purchase steel from a number of suppliers, a production cutback by one or more of our current suppliers could create challenges in meeting delivery schedules to our customers. Because we have periodically adjusted our contract prices, particularly in the engineered building systems segment, we have generally been able to pass increases in our raw material costs through to our customers. The graph below shows the monthly CRU Index data for the North American Steel Price Index over a historical seven-year period. The CRU North American Steel Price Index has been published by the CRU Group since 1994 and we believe this index appropriately depicts the volatility we have experienced in steel prices. The index, based on a CRU survey of industry participants, is now commonly used in the settlement of physical and financial contracts in the steel industry. The prices surveyed are purchases for forward delivery, according to lead time, which will vary. For example, the January index would likely approximate our fiscal March steel purchase deliveries based on current lead-times. The volatility in this steel price index is comparable to the volatility we experience in our average cost of steel.


⁽¹⁾	Galvalume ® is a registered trademark of Biec International, Inc.

We normally do not maintain an inventory of steel in excess of our current production requirements. However, from time to time, we may purchase steel in advance of announced steel price increases. In addition, it is our current practice to purchase all steel inventory that has been ordered but is not in our possession. Therefore, our inventory may increase if demand for our products declines. We can give no assurance that steel will remain available or that prices will not continue to be volatile.

With steel accounting for approximately 67% of our cost of sales for the fiscal nine months ended July 31, 2016 , a one percent change in the cost of steel would have resulted in a pre-tax impact on cost of sales of approximately $6.1 million for the nine

months ended July 31, 2016 , if such costs were not passed on to our customers. The impact to our financial results of operations would be significantly dependent on the competitive environment and the costs of other alternative building products, which could impact our ability to pass on these higher costs.

Other Commodity Risks

In addition to market risk exposure related to the volatility in the price of steel, we are subject to market risk exposure related to volatility in the price of natural gas. As a result, we occasionally enter into both index-priced and fixed-price contracts for the purchase of natural gas. We have evaluated these contracts to determine whether the contracts are derivative instruments. Certain contracts that meet the criteria for characterization as a derivative instrument may be exempted from hedge accounting treatment as normal purchases and normal sales and, therefore, these forward contracts are not marked to market. At July 31, 2016 , all of our contracts for the purchase of natural gas met the scope exemption for normal purchases and normal sales.

Interest Rates

We are subject to market risk exposure related to changes in interest rates on our Credit Agreement and the Amended ABL Facility. These instruments bear interest at an agreed upon percentage point spread from either the prime interest rate or LIBOR. Under our Credit Agreement, we may, at our option, fix the interest rate for certain borrowings based on a spread over LIBOR for 30 days to 6 months. At July 31, 2016 , we had $164.1 million outstanding under our Credit Agreement. Based on this balance, an immediate change of one percent in the interest rate would cause a change in interest expense of approximately $1.6 million on an annual basis. The fair value of our Credit Agreement at July 31, 2016 was approximately $163.7 million compared to the face value of $164.1 million . The fair value of our Credit Agreement at November 1, 2015 was approximately $193.7 million compared to the face value of $194.1 million . The fair value of the Notes at July 31, 2016 was approximately $272.5 million compared to the face value of $250.0 million . The fair value of the Notes at November 1, 2015 was approximately $ 263.8 million compared to the face value of $ 250.0 million .

See Note 12 — Long-Term Debt and Note Payable in the notes to the unaudited consolidated financial statements for information on the material terms of our long-term debt.

Foreign Currency Exchange Rates

We are exposed to the effect of exchange rate fluctuations on the U.S. dollar value of foreign currency denominated operating revenue and expenses. The functional currency for our Mexico operations is the U.S. dollar. Adjustments resulting from the re-measurement of the local currency financial statements into the U.S. dollar functional currency, which uses a combination of current and historical exchange rates, are included in net income (loss) in the current period. The net foreign currency re-measurement gain (loss) for the three month periods ended July 31, 2016 and August 2, 2015 was $(0.5) million and $(0.5) million , respectively. The net foreign currency re-measurement gain (loss) for the nine month periods ended July 31, 2016 and August 2, 2015 was $(0.7) million and $(1.7) million , respectively.

The functional currency for our Canada operations is the Canadian dollar. Translation adjustments resulting from translating the functional currency financial statements into U.S. dollar equivalents are reported separately in accumulated other comprehensive income in stockholders’ equity. The net foreign currency exchange gain (loss) included in net income (loss) for the three month periods ended July 31, 2016 and August 2, 2015 was $(0.4) million and $(0.2) million , respectively. The net foreign currency exchange gain (loss) included in net income (loss) for the nine month periods ended July 31, 2016 and August 2, 2015 was $(0.4) million and $(0.4) million , respectively. The net foreign currency translation gain, net of taxes, included in other comprehensive income (loss) for the three month periods ended July 31, 2016 and August 2, 2015 was $(0.2) million and $(0.4) million , respectively. The net foreign currency translation adjustment gain, net of taxes, included in other comprehensive income (loss) for the nine month periods ended July 31, 2016 and August 2, 2015 was $(0.1) million and $(0.4) million , respectively.

As a result of the CENTRIA Acquisition, we have operations in China and are exposed to fluctuations in the foreign currency exchange rate between the U.S. dollar and Chinese yuan. The functional currency for our China operations is the Chinese yuan. The net foreign currency translation adjustment was insignificant for the three and nine month periods ended July 31, 2016 and August 2, 2015 .

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of July 31, 2016 . The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding the required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management believes that our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and based on the evaluation of our disclosure controls and procedures as of July 31, 2016 , our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at such reasonable assurance level.

Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

NCI BUILDING SYSTEMS, INC.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

See Part I, Item 1, “Unaudited Consolidated Financial Statements”, Note 17 , which is incorporated herein by reference.

Item 1A. Risk Factors.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended November 1, 2015 . The risks disclosed in our Annual Report on Form 10-K and information provided elsewhere in this report, could materially adversely affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known or we currently deem to be immaterial may materially adversely affect our business, financial condition or results of operations. We believe there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended November 1, 2015 .

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table summarizes the stock repurchase activity during the third quarter of fiscal 2016 relating to all the Company’s plans and programs and the approximate number and dollar value of shares that may yet be purchased pursuant to our stock repurchase programs (in thousands, except share data):

ISSUER PURCHASES OF EQUITY SECURITIES



Period	(a) Total Number of Shares Purchased ⁽¹⁾	(b) Average Price Paid per Share (or Unit)			(c) Total Number of Shares Purchased as Part of Publicly Announced Programs	(d) Maximum Number of Shares that May Yet be Purchased Under the 2007 Program ⁽²⁾	(e) Maximum Dollar Value of Shares that May Yet be Purchased Under the 2016 Program ⁽²⁾
May 2, 2016 to May 29, 2016	—	$	—		—	129,218	$	38,739
May 30, 2016 to June 26, 2016	948	15.54			—	129,218	38,739
June 27, 2016 to July 31, 2016	2,910,156	15.46		⁽³⁾	2,910,054	129,218	—
Total	2,911,104	$	15.46		2,910,054

(1)

On July 25, 2016, we repurchased approximately 2.9 million shares of our common stock in the Stock Repurchase. The Stock Repurchase represented a private, non-underwritten transaction that was approved and recommended by the Affiliate Transactions Committee of our board of directors. Following the completion of the Secondary Offering and the concurrent Stock Repurchase, the Company canceled the shares repurchased from the CD&R Funds.

The total number of shares purchased includes our common stock repurchased under the programs described below as well as shares of restricted stock that were withheld to satisfy minimum tax withholding obligations arising in connection with the vesting of awards of restricted stock. The required withholding is calculated using the closing sales price on the previous business day prior to the vesting date as reported by the NYSE.

(2)

Our board of directors has authorized stock repurchase programs. Subject to applicable federal securities law, such purchases may occur, if at all, at times and in amounts that we deem appropriate. Shares repurchased are usually retired. On February 28, 2007, we publicly announced that our board of directors authorized the repurchase of 0.2 million shares of our common stock. There is no time limit on the duration of the program. At July 31, 2016 , there were approximately 0.1 million shares of our common stock remaining authorized for repurchase under this program.

On January 20, 2016, we publicly announced that our board of directors authorized the repurchase of up to an aggregate of $50.0 million of the Company’s outstanding common stock. In July 2016, in connection with the Secondary Offering and concurrent Stock Repurchase, our board of directors authorized the stock repurchase program to be increased for up to an aggregate of $56.3 million of the Company’s outstanding common stock. Following the completion of the Secondary Offering and the concurrent Stock Repurchase, the Company has repurchased the maximum amount authorized under the stock repurchase program.


(3)	Represents the price per share of the Stock Repurchase, net of underwriting discounts.

Item 5. Other Information.

Change in NYSE “Controlled Company” Status

As a result of the Secondary Offering and Stock Repurchase discussed above, the CD&R Funds’ ownership percentage decreased from approximately 59% to approximately 42%. As a result, the Company no longer qualifies as a “controlled company” within the meaning of the New York Stock Exchange (“NYSE”). Consequently, under the NYSE corporate governance rules, we will be required to (i) have a majority of independent directors on our board of directors within one year of the date we no longer qualify as a “controlled company,” (ii) appoint a majority of independent directors to each of the compensation and nominating and corporate governance committees within 90 days of the date we no longer qualify as a “controlled company” and have such committees be composed entirely of independent directors within one year of such date and (iii) have an annual performance evaluation of the nominating and corporate governance and compensation committees.

In addition, pursuant to Section 3.1(b)(i) of the Stockholders Agreement, by and between the Company and the CD&R Funds, the CD&R Funds currently have the right to nominate a number of directors to the Company’s board in proportion to its voting interest, rounded to the nearest whole number. Prior to the Secondary Offering and Stock Repurchase, the CD&R Funds’ approximate 59% interest permitted the CD&R Funds to nominate for election 6 of the 11 directors on the Company’s board. As a result of the decrease in CD&R Funds’ ownership percentage to approximately 42%, the CD&R Funds are permitted to nominate for election 5 of the 11 directors on the Company’s board.

Rule 10b5-1 Trading Plan

The Company expects that Norman C. Chambers, Chairman and Chief Executive Officer, will execute a written trading plan pursuant to Rule 10b5-1 of the Exchange Act, as amended, pursuant to which he may sell up to 345,891 shares of the Company’s common stock, including 109,495 shares upon the exercise of outstanding stock options. Assuming those shares are sold, Mr. Chambers will hold approximately 876,000 shares including options, vested shares, unvested RSUs, and PSUs. This does not include RSU and PSU awards that may be granted in the future as part of his compensation.

Item 6. Exhibits.

Exhibits

Those exhibits required to be filed by Item 601 of Regulation S-K are listed in the Index to Exhibits immediately preceding the exhibits filed herewith and such listing is incorporated herein by reference.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	NCI BUILDING SYSTEMS, INC.

Date: August 31, 2016	By:	/s/ Mark E. Johnson
		Mark E. Johnson
		Executive Vice President, Chief Financial Officer
		and Treasurer

Index to Exhibits



*†10.1		First Amendment to the NCI Buildings Systems, Inc. 2003 Long-Term Stock Incentive Plan, as amended and restated October 16, 2012, dated May 31, 2016

*†10.2		Amendment to Employment Agreement by and between NCI Building Systems, Inc. and Norman C. Chambers, dated June 15, 2016

*†10.3		Form of Employment Agreement between NCI Building Systems, Inc. and named executive officers

*†10.4		Form of Employment Agreement between NCI Building Systems, Inc. and executive officers

10.5		Stock Repurchase Agreement among NCI Building Systems, Inc., Clayton, Dubilier & Rice Fund VIII, L.P. and CD&R Friends & Family Fund VIII, L.P., dated July 18, 2016 (filed as Exhibit 10.1 to NCI’s Current Report on Form 8-K, dated July 20, 2016 and incorporated by reference herein)

*31.1		Rule 13a-14(a)/15d-14(a) Certifications (Section 302 of the Sarbanes-Oxley Act of 2002)

*31.2		Rule 13a-14(a)/15d-14(a) Certifications (Section 302 of the Sarbanes-Oxley Act of 2002)

**32.1		Certifications pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act of 2002)

**32.2		Certifications pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act of 2002)

*101.INS		XBRL Instance Document

*101.SCH		XBRL Taxonomy Extension Schema Document

*101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

*101.DEF		XBRL Taxonomy Definition Linkbase Document

*101.LAB		XBRL Taxonomy Extension Label Linkbase Document

*101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document



	*	Filed herewith



	**	Furnished herewith



	†	Management contracts or compensatory plans or arrangements

Exhibit 10.1

FIRST AMENDMENT

TO THE NCI BUILDING SYSTEMS, INC.

2003 LONG-TERM STOCK INCENTIVE PLAN

(As Amended and Restated Effective October 16, 2012)

WHEREAS , NCI Building Systems, Inc. (the “ Company ”), a Delaware corporation, maintains the NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan, as amended from time to time (the “ Plan ”, with capitalized terms used herein but not defined herein having the meanings set forth in the Plan);

WHEREAS , pursuant to the Plan, the Committee may amend or modify the Plan at any time; and

WHEREAS , the Committee desires to amend the definition of the term “Change in Control,” as that term is used in the Plan, with respect to Awards granted following May 31, 2016.

NOW THEREFORE:


1.	Effective Date . The amendment contemplated hereby shall be effective as of May 31, 2016.


2.	Section 19(e) of the Plan is hereby amended as follows (with insertions in bold):

“Change in Control" of the Company means

(A) with respect to Awards granted prior to May 31, 2016:

the occurrence of any of the following events: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20 percent or more of the combined voting power of the Company's then outstanding securities (provided, that, with respect to each Award granted after December 1, 2009, the acquisition of additional voting securities by a person that, prior to such acquisition, is the beneficial owner of securities of the Company representing 20 percent or more of the combined voting power of the Company's then outstanding securities (a "Controlling Person") shall not constitute a Change in Control hereunder); (ii) as a result of, or in connection with, any tender offer or exchange offer, merger, or other business combination (a "Transaction"), the persons who were directors of the Company immediately before the Transaction shall cease to constitute a majority of the Board of Directors of the Company or any successor to the Company; (iii) the Company is merged or consolidated with another corporation or transfers substantially all of its assets to another corporation and as a result of the merger, consolidation or transfer less than 50 percent of the outstanding voting securities of the surviving or resulting corporation shall then be owned in the aggregate by the former stockholders of the Company; or (iv) a tender offer or exchange offer is made and consummated for the ownership of securities of the Company representing 30 percent or more of the combined voting power of the Company's then outstanding voting securities (other than such a tender offer made and consummated by a Controlling Person); and

(B) with respect to Awards granted on or after May 31, 2016:

the first occurrence of any of the following events following the date of grant of such Awards: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25 percent or more of the combined voting power of the Company’s then outstanding securities, excluding (x) any such acquisition by any person that owns such percentage of the Company’s then outstanding securities as of the date of grant of such Award (a “ Controlling Person ”) and (y) any acquisition of the Company’s then outstanding securities following the date of grant of such Award by a person which is inadvertent and/or otherwise not entered into for the purpose of, and does not have the effect of, changing or influencing the control of, the Company (including, but not limited to, the sale of securities by a Controlling Person in the public market) (clause (x) or (y), a “ Non-Control Transaction ”), (ii) as a result of, or in connection with, any tender offer or exchange offer, merger, or other business combination (a “ Transaction ”), the persons who were directors of the Company immediately before the

Transaction (each, an “ Incumbent Director ”) shall cease to constitute a majority of the Board or the board of directors of any successor to the Company (or, if applicable, the parent thereof resulting from the Transaction); provided that any director elected or nominated for election to the Board (or such board) by a majority of the Incumbent Directors then still in office shall be deemed to be an Incumbent Director for purposes of this clause (ii), except that that any member of the Board whose initial assumption of office occurs as a result of (including by reason of the settlement of) an actual or threatened proxy contest, election contest or other contested election of directors shall in no event be considered an Incumbent Director, (iii) the Company is merged or consolidated with another person, or transfers substantially all of its assets to another person, and immediately following the merger, consolidation or transfer either (x)(I) less than 50 percent of the outstanding voting securities of the acquiring, surviving or resulting person (as applicable) shall then be owned in the aggregate by the former stockholders of the Company or (II) 50 percent or more of the outstanding voting securities of the acquiring, surviving or resulting person (as applicable) shall then be owned in the aggregate by the former stockholders of the Company but other than in substantially the same relative proportions as immediately prior to such transaction, and in each case excluding a Non-Control Transaction or (y) the individuals who were members of the Incumbent Board immediately prior to the agreement providing for such transaction constitute less than a majority of the members of the board of directors of the acquiring, surviving or resulting person (as applicable), or, if applicable the ultimate parent entity of such person, and in each case excluding a Non-Control Transaction, or (iv) a tender offer or exchange offer is made and consummated for the ownership of securities of the Company representing 25 percent or more of the combined voting power of the Company’s then outstanding voting securities (excluding a Non-Control Transaction). In addition, and for the avoidance of doubt, with respect to Awards granted on or after May 31, 2016, in no event shall a Change in Control be deemed to have occurred solely as a result of investment funds affiliated with Clayton, Dubilier & Rice, LLC selling in the public market equity securities held by them as of May 31, 2016.


3.	Except as expressly modified hereby, the terms and provisions of the Plan shall remain in full force and effect.

[ signature page follows ]

IN WITNESS WHEREOF, the Company has executed this amendment to the Plan as of the 31st day of May, 2016.

NCI Building Systems, Inc.

By:___________________________

Name: Todd R. Moore

Title: Executive Vice President,

General Counsel and Corporate Secretary

Exhibit 10.2

AMENDMENT

This AMENDMENT (the “ Amendment ”), dated as of June 15, 2016, is entered into by and between NCI Building Systems, Inc., a Delaware corporation (“ NCI ”), and Norman C. Chambers (“ Executive ”).

WHEREAS, NCI and Executive are parties to that certain Employment Agreement (the “ Agreement ”), dated as of September 1, 2015; and

WHEREAS, NCI and Executive intend hereby to amend certain matters in the Agreement as set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein and other good and valuable consideration, and intending to be legally bound hereby, the parties hereto agree as set forth below:


1.	Clause (2) of Section 3(a) of the Agreement is hereby amended as follows (with additions indicated in bold and underlined):

(2) Executive shall be eligible to receive a prorated annual bonus for the Fiscal Year of Termination based upon the elapsed number of days in the Fiscal Year of Termination through the date of termination applied to the bonus, if any, that would have been earned by Executive for such fiscal year if he had remained employed on the normal payment date of such bonus, based on actual performance under applicable financial metrics (the “Pro Rata Bonus”) , payable at the time that annual bonuses are paid to employees, or such later date as may be required pursuant to Section 4(j) hereof.


2.	Section 3(d) of the Agreement is hereby amended as follows (with additions indicated in bold and underlined and deletions indicated in strikethrough text):

If a Change in Control shall occur (which, for avoidance of doubt, shall have the same meaning as under the 2003 Plan, as amended by the First Amendment to the 2003 Plan, dated as of June 1, 2016, as applicable to equity awards granted on or following May 31, 2016 set forth in the 2003 Plan as modified by the 2014 LTI Award Agreement but shall not be deemed to have occurred solely as a result of investment funds affiliated with Clayton, Dubilier & Rice, LLC selling equity securities currently held by them as of the date of this Agreement in the public market ) prior to March 31, 2018 and Executive’s employment is terminated by NCI without Cause or by the Executive with Good Reason upon or following the Change in Control and prior to March 31, 2018, or if Executive’s employment is terminated by NCI prior to March 31, 2018 without Cause or by Executive with Good Reason during a Potential Change in Control Period, then, in lieu of any payment under Section 3(a), Executive shall be entitled to be paid, as severance pay, an amount equal to the sum of (i) two times Executive’s base salary at an annual rate as determined pursuant to Section 3(a)(1)(A) or (B), as applicable , (ii) two times the Executive’s target annual bonus under the Bonus Plan and (iii) the Pro Rata Bonus . Any amounts payable to Executive pursuant to this Section 3(d) shall be paid in a single lump sum in cash within sixty (60) days following the date of termination, or such later date as may be required pursuant to Section 4(j) hereof; provided, however, that the Pro Rata Bonus shall be payable at the time indicated in Section 3(a)(2) hereof.

The Executive agrees that the definition of Change in Control set forth in the 2003 Plan, as amended by the First Amendment to the 2003 Plan, dated as of June 1, 2016, as applicable to equity awards granted on or following May 31, 2016, shall apply for all purposes under the compensation plans and benefit arrangements of NCI to which the Executive is a party (including equity awards) such that, if a transaction or other event would not be a Change in Control under the definition set forth in the 2003 Plan, as amended by the First Amendment to the 2003 Plan, dated as of June 1, 2016, as applicable to equity awards granted on or following May 31, 2016, but would be a Change in Control under another such plan or arrangement, such transaction or other event shall also not be a Change in Control under such other plan or arrangement.


3.	The following shall be inserted as Section 3(i) of the Agreement:

(i) For purposes of this Agreement, the following terms shall have the following meanings:


(i)	A “ Potential Change in Control ” of NCI shall be deemed to have occurred, if:


(1)	NCI enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of NCI;


(2)	any person (including NCI) publicly announces an intention to take or to consider taking

actions which if consummated would constitute a Change in Control of NCI; or


(3)	the Board (excluding Executive, if he is then a member of the Board) adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

(ii)

“ Potential Change in Control Period ” means the period beginning on the date the Potential Change in Control occurs and ending as of the earlier of (i) the date on which a Change in Control occurs or (ii) the date the Board makes a good faith determination that the risk of a Change in Control has terminated. In addition, Executive’s employment shall be deemed to have been terminated during a Potential Change in Control Period if such termination occurs prior to a Change in Control and (x) at the request of the counterparty in such Change in Control or (y) otherwise reasonably in anticipation of such Change in Control, and such Change in Control actually occurs.


4.	The following shall be inserted as Section 4(p) of the Agreement:

(p) Attorneys’ Fees . In the event of any suit or judicial proceeding (other than an arbitration proceeding) between NCI and Executive with respect to this Agreement, the court in which such suit is decided may award reasonable attorneys’ fees and costs, as actually incurred and including, without limitation, attorneys’ fees and costs incurred in appellate proceedings to the party that prevails in such dispute; provided , however that in respect of a suit that arises in respect of matters occurring during a Change in Control Protection Period or following a Change in Control, only Executive will be entitled to recover the attorneys’ fees and costs under the circumstances described in this Section.

Except as amended hereby, the Agreement shall remain in full force and effect. After giving effect to this Amendment, each reference in the Agreement to “this Agreement,” “hereof,” “hereunder,” “herein,” “hereby” or words of like import referring to the Agreement shall refer to the Agreement, as amended by this Amendment. For purposes of this Amendment and the Agreement, the defined term “2003 Plan” refers to the NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan (As Amended and Restated Effective as of October 16, 2012), and the reference to NCI’s Amended and Restated 2003 Long-Term Incentive Plan in Section 2(a)(iii) of the Agreement is a typographical error.

The interpretation, construction and performance of this Amendment shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware without regard to the principle of conflicts of laws. This Amendment may be executed in counterparts, each of which shall be deemed an original. This Amendment may be executed and delivered in .pdf or other electronic form, and entry into this Amendment using any such method and delivery shall be fully effective.


7.	Effective Date . The amendment contemplated hereby shall be effective as of the date first written above.

(Signatures on following page)

IN WITNESS WHEREOF , Executive has hereunto set his hand, and NCI has caused these presents to be executed in its name on its behalf, all as of the effective date hereof.



NCI BUILDING SYSTEMS, INC.

By:	Todd R. Moore
Its:	EVP & General Counsel

EXECUTIVE

Norman C. Chambers

Exhibit 10.3

AGREEMENT

THIS AGREEMENT (this “ Agreement ”) is entered into as of __________ __, 2016 (the “ Effective Date ”), between NCI Building Systems, Inc., a Delaware corporation (the “ Company ”), and its wholly-owned subsidiary, NCI Group, Inc., a Nevada corporation (“ Employer ”), and _________________, a resident of the State of ___________ (“ Employee ”). The Company, Employer and Employee are sometimes hereinafter collectively referred to as the “ Parties .”

BACKGROUND

Employer hires and retains in its employment such personnel as are required by the Company and its other Affiliates, and makes its employees so retained available to provide services to the Company and its Affiliates.

Effective as of the Effective Date, this Agreement sets forth the terms and conditions of the employment of Employee by Employer, and the duties and responsibilities of Employee, on the one hand, and of Employer and the Company, on the other hand, to each other. [Further, when executed by the parties hereto, this Agreement is intended to amend and restate, and supersede in its entirety, that certain Agreement, dated as of [date], into which the Parties previously entered.]

Capitalized terms not defined in the body of this Agreement have the meanings set forth on the attached Appendix “A.”

AGREEMENT AMONG PARTIES

In consideration of the foregoing and of the mutual covenants and agreements set forth in this Agreement, and subject to the terms and conditions set forth herein, the Parties agree as follows:

1. Employment. During the term of this Agreement, Employer hereby agrees to continue Employee in its employ, and Employee hereby agrees to remain in the employ of Employer, pursuant to the terms and conditions set forth herein.

2. Duties and Authority. During the term of this Agreement, Employee shall serve as the ___________________________ of the Company or such other position or title to which Employee is promoted, with those authorities, duties and responsibilities customary to that position and such other authorities, duties and responsibilities as the Board of Directors of the Company (the “ Board ”) or the Chief Executive Officer or his designee may reasonably assign Employee from time to time. Employee shall use Employee’s best efforts, including the highest standards of professional competence and integrity, and shall devote substantially all of Employee’s business time and effort in and to Employee’s employment hereunder, and shall not engage in any other business activity which would conflict with the rendition of Employee’s services hereunder, except that Employee may hold directorships or related positions in charitable, educational or not-for-profit organizations, or directorships in business organizations if expressly approved by the Board, and make passive investments, which do not unreasonably interfere with Employee’s day-to-day performance of Employee’s responsibilities to the Company.

3. Term. This Agreement shall be effective as of the Effective Date, and shall remain in effect until ________ ___, 2017 subject to earlier termination or extension as described below. The period from the Effective Date until this Agreement shall have expired in accordance with this Section 3 or been terminated in accordance with Section 5 is hereafter referred to as “the term hereof” or “the term of this Agreement.” The term hereof shall be extended automatically for an additional year as of __________ __, 2017 and as of each subsequent annual anniversary of such date (each such extension date is referred to herein as a “ Renewal Date ”) unless at least one (1) year prior to any such Renewal Date either Party shall have given notice to the other Party that the term of this Agreement shall not be so extended. Notwithstanding any provision of this Agreement to the contrary, if a Change in Control occurs, the term of this Agreement shall be extended for a period of two (2) years after the date of the occurrence of the Change in Control or Potential Change in Control, and, if this Agreement does not terminate during such period, the last day of such extended term shall become the applicable Renewal Date.

4. Compensation.

a. Base Salary. Employer shall pay Employee a base salary in the amount of not less than $__________ per year during the term hereof, payable in accordance with Employer’s normal payroll procedures. The salary of Employee will be reviewed at least once annually by the Company and/or, to the extent required, the Compensation Committee of the Board (the “Compensation Committee”). In the event that Employee’s salary is required to be approved by the Compensation Committee, such review shall be conducted by the Compensation Committee at the same time as it reviews

the salaries of other senior executives of the Company, and any adjustment shall be solely within the discretion of the Compensation Committee.

b. Annual Bonus. During the term of this Agreement, Employee shall participate under the currently existing cash annual incentive plan of NCI Building Systems, Inc., as amended and restated from time to time (the “ Bonus Plan ”) or, if the Bonus Plan is amended, replaced or superseded, under any amended, replacement or successor bonus program adopted for senior executives of the Company and its Affiliates. Bonuses, if any, paid to Employee pursuant to the Bonus Plan shall be paid after the end of each fiscal year of the Company at the same time as bonuses are paid to other participants, but no later than March 15 of the following calendar year. Employee understands that bonuses cannot be earned under the Bonus Plan except as specifically set forth therein based on the level of participation specified by the Compensation Committee in its discretion and, if the employment of a participant terminates for any reason prior to certain dates specified in the Bonus Plan, no bonus shall be payable thereunder except as expressly provided in this Section 4 and in Section 5 of this Agreement. In the event that Employee’s employment terminates for any reason other than by the Company for Cause, after the end of the fiscal year but before payment of the bonus for that fiscal year, Employee shall be entitled to receive the amount of the bonus that would have otherwise been payable under the Bonus Plan, as determined by the Compensation Committee, on the date bonuses are paid to other participants. Employee also understands that the Bonus Plan may be amended, replaced, superseded or terminated at any time and from time to time by the Board in its sole discretion.

c. Retirement, Health and Welfare Benefits. Employee shall be entitled to participate in and receive the health, hospitalization, medical, dental, life insurance, accidental death, disability and other insurance plans and benefits provided by Employer and the Company, and to participate in the 401(k) and other qualified profit-sharing, deferred compensation, pension, savings and other similar plans of Employer and the Company, as and to the extent Employer and the Company provide such benefits generally to other employees of Employer and the Company or to executive employees of the Company. It is understood and agreed that such benefits may be changed or discontinued from time to time in the sole discretion of Employer and the Company.

5. Termination Payments.

a. Minimum Termination Compensation. Employee shall serve in an at-will capacity and the Company and/or Employer may terminate the employment of Employee at any time with or without Cause. Upon any termination of employment of Employee for any reason other than as set forth in Section 5.b or Section 5.c, whether on, before or after the expiration of the term of this Agreement (including any extension of the term hereof pursuant to the provisions of this Agreement), Employee shall be entitled to receive (i) that portion of Employee’s annual base salary, at the rate then in effect, earned by Employee or accrued for Employee’s account through the date of the termination of Employee’s employment hereunder or for which Employee is entitled to payment for events or circumstances occurring on or through the date of termination of Employee’s employment, (ii) any bonus to which Employee is entitled under the Bonus Plan pursuant to Section 4.b for the fiscal year ending prior to the date of termination, (iii) reimbursement of business expenses properly incurred in accordance with applicable Company policy prior to the date of termination and (iv) subject to Section 5.e, any generally applicable vested benefits to which Employee is entitled as a former employee under the employee benefit plans of the Company and its Affiliates.

b. Payment Other than Following a Change in Control and Other than During a Potential Change in Control Period. If Employee’s employment is terminated by the Company without Cause or by Employee for Good Reason, in either case other than within twenty-four (24) months after a Change in Control and other than during a Potential Change in Control Period, then Employee shall be entitled to receive (i) one (1) times Employee’s annual base salary at the highest annualized rate in effect during the one (1) year period immediately preceding the date of termination (the “ Base Severance Payment ”), (ii) a prorated annual bonus under the Bonus Plan for the fiscal year in which the date of termination occurs based upon the elapsed number of days in such fiscal year through the date of termination applied to the bonus, if any, that would have been earned by Employee for such fiscal year if Employee had remained employed on the normal payment date of such bonus, based on actual performance under applicable financial metrics and applying any discretionary factors in substantially the same manner as such factors are applied to the senior executive officers of the Company whose employment has not terminated (the “ Pro Rata Bonus ”) and (iii) medical and dental coverage at the active employee rate for the period of coverage applicable to Employee (up to a maximum of twelve (12) months) under the Consolidated Omnibus Budget Reconciliation Act of 1985, currently embodied in Section 4980B of the Internal Revenue Code of 1986, as amended (the “ Code ”) (provided, that, in the case of clause (iii), because of the current uncertainty in the taxation of health benefits, in the event that the Company determines that the provision of health benefits in the manner provided hereunder becomes legally prohibited or would subject Employee or the Company to a material tax or penalty, or that such benefits are otherwise unable to be provided in a manner consistent with the intent of the parties to provide Employee

2 of 12

with a non-taxable benefit (both as the cost of the coverage and the provision of benefits under such coverage), the Company and Employee shall cooperate reasonably and in good faith to preserve, to the maximum extent practicable without the imposition of material additional cost to the Company, the intended benefits hereunder) (the “ Medical and Dental Coverage ”). The Base Severance Payment shall be payable in substantially equal installments on regular payroll dates over the one (1) year period following the date of termination, except as otherwise set forth in Section 25 hereof and subject to the next following sentence; provided that any installments that would be paid if the Release Effective Date (as defined below) were the date of termination shall be paid on the first payroll date after the Release Effective Date, unless the Release Period (as defined below) begins in one calendar year and ends in the subsequent calendar year, in which case such installments shall be paid on the first payroll date in the subsequent calendar year. Employee’s right to receive the Base Severance Payment, the Pro Rata Bonus and the Medical and Dental Coverage shall be conditioned on Employee’s execution, delivery and non-revocation of a general release of any and all claims against the Company and its Affiliates within thirty (30) days following the date of termination (such release of claims, the “ Release ”; such thirty (30) day period, the “ Release Period ”, and the effective date of the Release, the “ Release Effective Date ”), which Release shall include the release of claims attached hereto as Appendix B and such other terms and conditions as may be mutually agreed by the Parties. The Pro Rata Bonus shall be paid in a lump sum not later than March 15 ^th of the year following the year in which the date of termination occurs.

c. Payment Following a Change in Control or During a Potential Change in Control Period. If Employee’s employment is terminated by the Company without Cause or by Employee for Good Reason within twenty-four (24) months after a Change in Control, then Employee shall be entitled to receive (i) the Base Severance Payment, (ii) an additional severance payment equal to the sum of (x) one (1) times Employee’s annual base salary at the highest annualized rate in effect during the one (1) year period immediately preceding the date of the Change in Control, plus (y) two (2) times the target annual bonus of Employee for the year in which the date of termination occurs (the sum of clauses (x) and (y), the “ CIC Severance Payment ”), (iii) the Pro Rata Bonus and (iv) the Medical and Dental Coverage, except that the Medical and Dental Coverage shall be for eighteen (18) months rather than twelve (12) months. The CIC Severance Payment shall be payable in a lump sum on the first payroll date following the Release Effective Date, except as otherwise set forth in Section 25 hereof. Employee’s right to receive the CIC Severance Payment, the Pro Rata Bonus and the Medical and Dental Coverage shall be conditioned on Employee’s execution, delivery and non-revocation of the Release during the Release Period. The Pro Rata Bonus shall be paid in a lump sum not later than March 15 ^th of the year following the year in which the date of termination occurs. In addition, if Employee is entitled to payment of both the Base Severance Payment and the CIC Severance Payment hereunder, then, to the maximum extent permissible under Section 409A (including, but not limited to, the application of Treas. Reg. §1.409A-1(b)(4), Treas. Reg. §1.409A-1(b)(9)(iii) and Treas. Reg. §1.409A-3(c) (clause (1) (in each case as and to the extent applicable)), the Base Severance Payment shall be paid in a lump sum at the same time as the CIC Severance Payment (and any portion of the Base Severance Payment that is not capable of being paid at the same time as the CIC Severance Payment shall be paid as provided in Section 5.b as aforesaid, and subject to Section 25). If Employee’s employment is terminated by the Company without Cause or by Employee for Good Reason during a Potential Change in Control Period, then Employee will be entitled to the severance payments and termination benefits set forth in Section 5.b subject to the terms and conditions of such Section, and, if and when the Change in Control related to such Potential Change in Control Period subsequently occurs, (x) Employee will also be entitled to receive the CIC Severance Payment subject to the terms and conditions of this Section 5.c, and (y) an additional six (6) months shall be added to the duration of the Medical and Dental Coverage as provided herein.

d. Parachute Tax Limitation. Notwithstanding anything in this Agreement to the contrary, if any amounts due to Employee under this Agreement and any other plan or program or award of Employer, the Company or any Affiliate constitute a “parachute payment,” as such term is defined in Section 280G(b)(2) of the Code, and the amount of the parachute payment, reduced by the excise tax imposed pursuant to Section 4999 of the Code, is less than the amount Employee would receive if Employee were paid three times Employee’s “base amount,” as defined in Section 280G(b)(3) of the Code, less one dollar, then the aggregate of the amounts constituting the parachute payment shall be reduced to an amount that will equal three times Employee’s base amount less one dollar. The calculations to be made with respect to this subsection shall be made by an accounting firm jointly selected by the Company and Employee and paid by the Company.

e. No Duty to Mitigate Nor Offsets; No Other Severance; No Reduction for Deferred Compensation. Notwithstanding anything in this Agreement to the contrary, if Employee’s employment is terminated following a Change in Control of the Company, Employee shall have no duty to seek other employment nor shall any payments made or to be made to Employee pursuant to this Agreement following such Change in Control be offset by any amount earned from other employment or for any other reason. The payments to be provided to Employee pursuant to this Section 5 upon termination of Employee’s employment shall constitute the exclusive payments in the nature of severance or termination pay or salary continuation and termination benefits which shall be due to Employee upon a termination of employment

3 of 12

and shall be in lieu of any other such payments under any plan, program, policy or other arrangement which has heretofore been or shall hereafter be established by the Company or any of its Affiliates. The calculations of the Base Severance Payment and the CIC Severance Payment shall be made without reduction for any voluntary deferral of compensation made by Employee.

f. Full Satisfaction of Obligations. Payment by Employer or the Company of the amounts owed to Employee pursuant to this Section 5 shall fully satisfy all obligations of Employer and the Company to Employee under this Agreement if the employment of Employee is terminated hereunder prior to the expiration of the term of this Agreement, and all obligations of Employer and Employee to each other set forth in Sections 1 through 4 of this Agreement shall terminate and be of no further force or effect as of the date of termination. No termination of employment hereunder, whether by Employer or Employee and whether with or without Cause or Good Reason, shall terminate the provisions of Sections 6 or 7 or any subsequent sections of this Agreement and each of such sections shall remain in full force and effect as binding obligations of the Parties in accordance with their express terms.

6. Business Disclosures. Employee acknowledges that Employee has had and will have access to and has or will become familiar with all or substantially all of the Confidential Information of the Company and its Affiliates. As a material inducement to the Company and Employer to enter into this Agreement and to pay to Employee the compensation stated herein, Employee covenants and agrees that Employee will not, at any time during or following the termination of Employee’s employment with the Company, directly or indirectly divulge or disclose for any purpose whatsoever any Confidential Information that has been obtained by or disclosed to Employee in connection with Employee’s employment with the Company or any of its Affiliates. If Employee is required in or pursuant to any legal, judicial or administrative proceeding (by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) to disclose any Confidential Information, Employee shall notify, as promptly as practicable, the Company of such request or requirement so that the Company, at its expense, may seek an appropriate protective order or waive compliance with the provisions of this Agreement, and/or take any other action deemed appropriate by the Company. If, in the absence of a protective order or the receipt of a waiver hereunder, Employee is compelled or required by law or the order of any governmental, regulatory or self-regulatory body to disclose the Confidential Information, Employee may disclose only that portion of the requested Confidential Information which Employee is compelled or required to disclose, and Employee will exercise Employee’s reasonable efforts to obtain reliable assurance that confidential treatment will be accorded the Confidential Information.

7. Non-Competition; Non-Solicitation; Non-Disparagement and Non-Interference.

a. Employee shall not, directly or indirectly and whether on Employee’s own behalf or on behalf of any other person, partnership, association, corporation or other entity, engage in or be an owner, director, officer, employee, agent, consultant or other representative of or for, or lend money or equipment to or otherwise support, any business that manufactures, engineers, markets, sells or provides, within a 250-mile radius of any then existing manufacturing facility of the Company and its subsidiaries and Affiliates, metal building systems or components (including, without limitation, primary and secondary framing systems, roofing systems, end or side wall panels, insulated metal panels, sectional or roll-up doors, windows, or other metal components of a building structure), coated or painted steel or metal coils, coil coating or coil painting services, or any other products or services that are the same as or similar to those manufactured, engineered, marketed, sold or provided by the Company or its subsidiaries and such Affiliates during the period of employment of Employee. Ownership by Employee of equity securities of the Company, or of equity securities in other public or privately-owned companies that compete with the Company constituting less than 1% of the voting securities in such companies, shall be deemed not to be a breach of this covenant. Employee agrees and stipulates that in any action or claim brought by Employee or in any action or claim brought against Employee involving the provisions of this Section 7, Employee hereby waives any claim or defense that the above non-competition covenants are unenforceable, void or voidable, for any reason, including, but not limited to, fraud, misrepresentation, illegality, unenforceable restraint of trade, failure of consideration, illusory contract, mistake, or any other substantive legal defense.

4 of 12

soliciting the employment or service of an agent or consultant of the Company or its Affiliates for purposes which do not violate Section 7 of this Agreement. Employee agrees and stipulates that in any action or claim brought by Employee or in any action or claim brought against Employee involving the provisions of this Section 7, Employee hereby waives any claim or defense that the above non-solicitation covenants are unenforceable, void or voidable, for any reason, including, but not limited to, fraud, misrepresentation, illegality, unenforceable restraint of trade, failure of consideration, illusory contract, mistake, or any other substantive legal defense.

c. To the extent permitted by the law, Employee agrees to refrain from any criticisms or disparaging comments about the Company or any Affiliates (including any current officer, director or employee of the Company), and Employee agrees not to take any action, or assist any person in taking any other action, that is adverse to the interests of the Company or any Affiliate or inconsistent with fostering the goodwill of the Company and its Affiliates; provided, however, that nothing in this Agreement shall apply to or restrict in any way the communication of information by the Company or Employee to any state or federal law enforcement, regulatory or judicial agency or official or to the Board or senior management of the Company or require notice to the Company thereof, and Employee will not be in breach of the covenant contained above solely by reason of testimony which is compelled by process of law. Nothing in this paragraph restricts, or is intended to restrict, any rights of Employee that cannot be lawfully restricted.

The foregoing covenants in this Section 7 shall remain in effect (i) during the period of employment of Employee by the Company and Employer, and (ii) for a period of one (1) year following Employee’s termination of employment (whether initiated by Employee or by the Company or Employer) for any reason.

8. Consideration for Covenants; Reasonableness. Employee acknowledges and agrees as follows:

a. The Confidential Information of the Company and its Affiliates is unique and was developed or acquired by them through the expenditure of valuable time and resources; that Employer, the Company and their Affiliates derive independent economic value from this Confidential Information not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; that Employer, the Company and their Affiliates have taken all prudent and necessary measures to preserve the proprietary and confidential nature of its Confidential Information, and that the covenants set forth in Sections 6 and 7 are the most reasonable, efficient and practical means to protect the Confidential Information.

b. The covenants set forth in Sections 6 and 7 are necessary to protect the goodwill of the Company and its Affiliates during the employment of Employee hereunder, and to ensure that such goodwill will be preserved and continued for the benefit of the Company and its Affiliates after Employee’s employment terminates.

c. Due to the nature of the business as heretofore conducted by the Company and its Affiliates and as contemplated to be continued and conducted by the Company and its Affiliates, the scope and the duration of the covenants set forth in Sections 6 and 7 of this Agreement are in all respects reasonable.

d. The covenants set forth in Sections 6 and 7 each constitute a separate agreement independently supported by good and adequate consideration and that each such agreement shall be severable from the other provisions of this Agreement and shall survive this Agreement. The existence of any claim or cause of action of Employee against Employer or the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Employer and the Company of the covenants and agreements of Employee set forth in Sections 6 and 7.

9. Surrender of Books and Records. Employee shall on the termination of Employee’s employment in any manner immediately surrender to the Company all lists, books, and records and other documents incident to the business of the Company and its Affiliates, and all other property belonging to any of them, it being understood that all such lists, books, records and other documents are the property of the Company and its Affiliates.

10. Waiver of Breach. The failure of the Company, Employer or Employee at any time to require performance by the other of any provision hereof shall in no way affect any of their respective rights thereafter to enforce the same, nor shall the waiver by the Company, Employer or Employee of any breach of any provision hereof be taken or held to be a waiver of any succeeding breach of any provision or as a waiver of the provision itself.

5 of 12

or extent of the irreparable harm suffered by it. The right of the Company and/or Employer to such relief shall not be construed to prevent it from pursuing, either consecutively or concurrently, any and all other legal or equitable remedies available to it for such breach or threatened breach, specifically including, without limitation, the recovery of monetary damages. Without limiting the generality of the relief that may be sought by the Company and/or Employer pursuant to this Section 11, the Company and/or Employer shall be entitled, under the circumstances set forth herein, to cause any unpaid portion of the severance payments and termination benefits otherwise payable under this Agreement to be irrevocably forfeited, and, at the demand of the Company and/or Employer, Employee shall be required to repay the severance payments that have previously been paid to Employee.

12. Severability. It is the desire and intent of the Parties that the provisions of Sections 6 and 7 be enforced to the fullest extent permissible under the laws and public policies of each jurisdiction in which enforcement is sought. If any provision of Sections 6 or 7 relating to the time period, scope of activities or geographic area of restrictions is declared by a court of competent jurisdiction to exceed the maximum permissible time period, scope of activities or geographic area, the same shall be reduced to the maximum which such court deems enforceable. If any provisions of Sections 6 and 7 other than those described in the preceding sentence are adjudicated to be invalid or unenforceable, the invalid or unenforceable provisions shall be deemed amended (with respect only to the jurisdiction in which such adjudication is made) in such manner as to render them enforceable and to effectuate as nearly as possible the intentions and agreement of the Parties. Furthermore, if any other provision contained in this Agreement should be held illegal, invalid or unenforceable in whole or in part by a court of competent jurisdiction, then it is the intent of the Parties hereto that the balance of this Agreement be enforced to the fullest extent permitted by applicable law and, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such invalid provision as may be possible and be legal, valid, and enforceable.

13. Attorneys’ Fees. In the event of any suit or judicial proceeding (other than an arbitration proceeding) between the Parties hereto with respect to this Agreement, the court in which such suit is decided may award reasonable attorneys’ fees and costs, as actually incurred and including, without limitation, attorneys’ fees and costs incurred in appellate proceedings to the party that prevails in such dispute; provided, however, that in respect of a suit that arises in respect of matters occurring during a Potential Change in Control Period or following a Change in Control, only Employee will be entitled to recover the attorneys’ fees and costs under the circumstances described in this Section.

14. Survival. Notwithstanding anything to the contrary contained herein, the provisions of this Agreement that contemplate performance by the Parties following termination of this Agreement (including without limitation Sections 5-7 hereof) shall survive the termination of this Agreement.

15. Notice. All notices hereunder shall be in writing and shall be delivered personally, sent by facsimile transmission or sent by certified, registered or overnight mail, postage prepaid. Such notices shall be deemed to have been duly given upon receipt, if personally delivered, upon telephonic confirmation of receipt if sent by facsimile transmission, and if mailed, five days after the date of mailing (two days in the case of overnight mail), in each case addressed to the Parties at the following addresses or at such other addresses as shall be specified in writing and in accordance with this Section:




If to Employee:		Address shown on the employment records of the Company

If to the Company or Employer:		NCI Building Systems, Inc. 10943 North Sam Houston Parkway West Houston, Texas 77064 Telecopier: (281) 477-9670 Attention: Chief Executive Officer

16. Entire Agreement. This Agreement, together with the execution copies of the agreements attached as exhibits hereto, supersedes any and all other agreements, either oral or written, between the Parties hereto with respect to the subject matter hereof, and contains all of the covenants and agreements between the Parties with respect thereto[, including, without limitation, that certain “Agreement”, dated as of [date], previously entered into by the Parties hereto]; provided , that the covenants in Sections 6, 7 and 8 of this Agreement shall not supersede any similar covenants to which Employee is a party with the Company or any of its Affiliates. Except as expressly provided herein, the specific arrangements referred to herein are not intended to exclude or limit Employee’s participation in other benefits available to Employee or personnel of the Company generally, or to preclude or limit other compensation or benefits as may be authorized by the Board at any time, or to limit or reduce any compensation or benefits to which Employee would be entitled but for the Agreement.

17. Modification. No change or modification of this Agreement shall be valid or binding upon the Parties hereto,

6 of 12

nor shall any waiver of any term or condition in the future be so binding, unless such change or modification or waiver shall be in writing and signed by the Parties hereto.

18. Governing Law and Venue. This Agreement, and the rights and obligations of the Parties hereunder, shall be governed by and construed in accordance with the laws of the State of Texas and venue for any action pursuant hereto shall be in the appropriate state or federal court in Harris County, Texas.

19. Acknowledgment Regarding Counsel. Each of the Parties to this Agreement acknowledges that each of them has had the opportunity to seek and has sought counsel to review this Agreement and to obtain and has obtained the advice of such counsel relating thereto.

20. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which shall constitute one and the same document.

21. Assignment. Subject to compliance with the provisions of this Agreement, each of the Company and Employer shall have the right to assign this Agreement and its obligations hereunder to any of their Affiliates. No such assignment shall operate to relieve Employer, the Company or any successor assignor from liability hereunder, and this Agreement shall remain an enforceable obligation of Employer, the Company and each such successor. The rights, duties and benefits to Employee hereunder are personal to him, and no such right or benefit may be assigned by him. For purposes of this Agreement, all references herein to Employer and the Company is deemed to be also a reference to any Affiliate of Employer or the Company that either has or is required to assume the obligations of the Company pursuant to this section.

22. Tax Withholding. The Company and/or Employer, as appropriate, may withhold from any payments or benefits payable under this Agreement all federal, state, city or other taxes required to be withheld pursuant to any law or governmental regulation or ruling.

23. Joint and Several Obligations. The duties and obligations of Employer and the Company set forth herein shall be the joint and several obligations of each of them.

24. Payment to Estate. If Employee dies prior to full satisfaction of the obligations owed to Employee under this Agreement, any monies that may be due Employee under this Agreement as of the date of Employee’s death will be paid to Employee’s estate.

25. Section 409A.

a. If Employee is a “specified employee,” as such term is defined in Section 409A and determined as described below in this Section 25(a), and if any portion of the Base Severance Payment or CIC Severance Payment is subject to Section 409A, the character and timing of the payment thereof shall be as determined in this Section 25(a). It is hereby specified that as much of the Base Severance Payment or CIC Severance Payment as can be paid without the application of Section 409A(a)(2)(B)(i) and Treas. Reg. §1.409A-1(i) shall be paid at times consistent with Section 5.b or Section 5.c as applicable and without application of this Section 25. The remaining portion of the Base Severance Payment or CIC Severance Payment shall not be payable before the earlier of (i) the date that is six months after Employee’s termination, (ii) the date of Employee’s death, or (iii) one or more dates that otherwise comply with the requirements of Section 409A. Employee shall be a “specified employee” for the twelve-month period beginning on April 1 of a year if Employee is a “key employee” as defined in Section 416(i) of the Code (without regard to Section 416(i)(5)) as of December 31 of the preceding year or using such dates as designated by the Compensation Committee in accordance with Section 409A and in a manner that is consistent with respect to all of the Company’s nonqualified deferred compensation plans. For purposes of determining the identity of specified employees, the Compensation Committee may establish such procedures as it deems appropriate in accordance with Section 409A.

b. Employee and the Company agree that this Agreement is intended to comply with or be exempt from Section 409A and that any ambiguous provisions will be construed in a manner that is compliant with or exempt from the application of Section 409A. Without limiting the generality of the immediately preceding sentence, it is intended that the CIC Severance Payment and the Pro Rata Bonus shall be “short-term deferrals” within the meaning of Treas. Reg. §1.409A-1(b)(4) that are exempt from Section 409A. For purposes of Section 409A, each installment in a series of installment payments is intended to be a separate payment.

26. Captions. The captions, headings, and arrangements used in this Agreement are for convenience only and do

7 of 12

not in any way affect, limit, amplify, or modify the terms and provisions hereof.

27. Binding Effect. This Agreement shall be binding upon the Parties hereto, together with their respective executors, administrators, successors, personal representatives, heirs and assigns.

IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date set forth herein.

EMPLOYEE

______________________________

NCI BUILDING SYSTEMS, INC.

By: ______________________________

Todd R. Moore

Executive Vice President

and General Counsel

NCI GROUP, INC.

By: ______________________________

Todd R. Moore

Executive Vice President

and General Counsel

8 of 12

APPENDIX A

DEFINITIONS

The following terms have the indicated meanings for purposes of this Agreement:

(a) “Affiliate” means any entity controlled by, controlling or under common control with a person or entity.

(b) “Bonus Plan” has the meaning set forth in Section 4.b.

(c) “Cause” shall mean any of the following occurring after the Effective Date: (i) Employee’s willful and continued failure to substantially perform Employee’s duties and other obligations under this Agreement, if such failure continues for a period of thirty (30) days after written notice by the Company of the existence of such failure; provided, however, that only one such notice by the Company need be sent and, if such failure re-occurs thereafter, no further notice and opportunity to cure such failure shall be required; (ii) the willful engaging by Employee in gross misconduct materially and demonstrably injurious to the Company, as determined by the Company; or (iii) Employee’s conviction for committing an act of fraud, embezzlement, theft or other act constituting a felony (which shall not include any act or offense involving the operation of a motor vehicle); provided, however , that the Board or the then current Chairman of the Board must first provide to Employee written notice clearly and fully describing the particular acts or omissions which the Board or the then current Chairman of the Board reasonably believes in good faith constitutes Cause hereunder, and providing an opportunity, within thirty (30) days following the receipt of such notice, to meet in person with the Board or the then current Chairman of the Board to explain the alleged acts or omissions relied upon by the Board and, to the extent practicable, to cure such acts or omissions. For purposes of this Agreement, any termination of Employee’s employment for Cause shall be effective only upon delivery to Employee of a certified copy of a resolution of the Board, adopted by the affirmative vote of a majority of the entire membership of the Board following a meeting at which Employee was given an opportunity to be heard on at least five (5) business days’ advance written notice, finding that Employee was guilty of the conduct constituting Cause, and specifying the particulars thereof. Further, for the purposes of this Agreement, no act or failure to act on Employee’s part shall be considered willful unless done, or omitted from being done, by Employee not in good faith and without reasonable belief that Employee’s action or omission was in the best interest of the Company.

(d) “Change in Control” of the Company means the first occurrence of any of the following events following the Effective Date:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25 percent or more of the combined voting power of the Company’s then outstanding securities, excluding (x) any such acquisition by any person that owns such percentage of the Company’s then outstanding securities as of the Effective Date (a “ Controlling Person ”) and (y) any acquisition of the Company’s then outstanding securities following the Effective Date by a person which is inadvertent and/or otherwise not entered into for the purpose of, and does not have the effect of, changing or influencing the control of, the Company (including, but not limited to, the sale of securities by a Controlling Person in the public market) (clause (x) or (y), a “ Non-Control Transaction ”);

(ii) as a result of, or in connection with, any tender offer or exchange offer, merger, or other business combination (a “ Transaction ”), the persons who were directors of the Company immediately before the Transaction (each, an “ Incumbent Director ”) shall cease to constitute a majority of the Board or the board of directors or any successor to the Company (or, if applicable, the parent thereof resulting from the Transaction); provided that any director elected or nominated for election to the Board (or such board) by a majority of the Incumbent Directors then still in office shall be deemed to be an Incumbent Director for purposes of this clause (ii), except that that any member of the Board whose initial assumption of office occurs as a result of (including by reason of the settlement of) an actual or threatened proxy contest, election contest or other contested election of directors shall in no event be considered an Incumbent Director;

(iii) the Company is merged or consolidated with another person, or transfers substantially all of its assets to another person, and immediately following the merger, consolidation or transfer either (x)(I) less than 50 percent of the outstanding voting securities of the acquiring, surviving or resulting person (as applicable) shall then be owned in the aggregate by the former stockholders of the Company or (II) 50 percent or more of the outstanding voting securities of the acquiring, surviving or resulting person (as applicable) shall then be owned in the aggregate by the former stockholders of the Company but other than in substantially the same relative proportions as immediately prior to such transaction, and in each case excluding a Non-Control

9 of 12

Transaction or (y) the individuals who were members of the Incumbent Board immediately prior to the agreement providing for such transaction constitute less than a majority of the members of the board of directors of the acquiring, surviving or resulting person (as applicable), or, if applicable the ultimate parent entity of such person, and in each case excluding a Non-Control Transaction; or

(iv) a tender offer or exchange offer is made and consummated for the ownership of securities of the Company representing 25 percent or more of the combined voting power of the Company’s then outstanding voting securities (excluding a Non-Control Transaction).

In addition, and for avoidance of doubt, in no event shall a Change in Control be deemed to have occurred solely as a result of investment funds affiliated with Clayton, Dubilier & Rice, LLC selling in the public market equity securities held by them as of the Effective Date.

Employee agrees that the foregoing definition of “Change in Control” shall apply for all purposes under the compensation plans and benefit arrangements of the Company and Employer to which Employee is a party (including equity awards) such that, if a transaction or other event would not be a Change in Control under the foregoing definition but would be a Change in Control under another such plan or arrangement, such transaction or other event shall also not be a Change in Control under such other plan or arrangement.

(e) “Confidential Information” means all information, whether oral or written, previously or hereafter developed, that relates to the business as heretofore conducted by the Company, or which is hereafter otherwise acquired or used by the Company or its subsidiaries and Affiliates, that is not generally known to others in the Company’s area of business or, if known, was obtained wrongfully by such other person or entity or with knowledge that it was proprietary or confidential information of or relating to the business as heretofore conducted by the Company or of or relating to the business of the Company or its subsidiaries and Affiliates. Confidential Information shall include, without limitation, trade secrets, methods or practices, financial results or plans, customer or client lists, personnel information, information relating to negotiations with clients or prospective clients, proprietary software, databases, programming or data transmission methods, or copyrighted materials (including without limitation, brochures, layouts, letters, art work, copy, photographs or illustrations). It is expressly understood that the foregoing list shall be illustrative only and is not intended to be an exclusive or exhaustive list of Confidential Information.

(f) “Good Reason” means any of the following events that occurs without Employee’s prior written consent after the Effective Date:

(i) any material reduction in the amount of Employee’s then current base salary or target bonus opportunity, in either case other than as part of a reduction of less than ten percent (10%) applied generally across-the-board to all of the senior executive officers of the Company;

(ii) (A) a material reduction in Employee’s title; or (B) a material, adverse reduction in the duties or responsibilities of Employee relative to Employee’s duties or responsibilities as described in Section 2 hereof;

(iii) the breach or failure by the Company or Employer to perform any of its material covenants contained in this Agreement;

(iv) any relocation of Employee’s principal place of employment by more than fifty (50) miles, as long as such relocation increases Employee’s normal daily commute; or

(v) the Company’s failure to cause any successor to all or substantially all of the business or assets of the Company and/or the Employer to expressly agree to assume the obligations of the Company and/or the Employer under this Agreement, unless such assumption occurs automatically by operation of law.

In order for a termination of Employee to constitute a termination for Good Reason, Employee must notify the Company of the circumstances claimed to constitute Good Reason in writing not later than the thirtieth (30th) day after such circumstances have arisen or occurred and must provide the Company with at least thirty (30) days within which to cure such circumstances before terminating employment, and, failing a cure, Employee must terminate Employee’s employment within thirty (30) days following the expiration of such cure period.

(g) “Potential Change in Control” of the Company shall be deemed to have occurred, if:

(i) the Company enters into an agreement, the consummation of which would result in the

10 of 12

occurrence of a Change in Control of the Company;

(ii) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control of the Company; or

(iii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

(h) “Potential Change in Control Period” means the period beginning on the date the Potential Change in Control occurs and ending as of the earlier of (i) the date on which a Change in Control occurs or (ii) the date the Board makes a good faith determination that the risk of a Change in Control has terminated. In addition, Employee’s employment shall be deemed to have been terminated during a Potential Change in Control Period if such termination occurs prior to a Change in Control and such termination is by the Company other than for Cause and is (x) at the request of the counterparty in such Change in Control or (y) otherwise reasonably in anticipation of such Change in Control, provided that such Change in Control actually occurs.

(i) “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

11 of 12

Appendix B

General Release

Release and Waiver of Claims . In consideration of the payments and benefits to which you are entitled under that certain Agreement, dated as of [date], to which you, NCI Building Systems, Inc., and NCI Group, Inc. (the “ Companies ”) are parties (the “ Agreement ”), you hereby waive and release and forever discharge each of the Companies and their respective parent entities, subsidiaries, divisions, limited partnerships, affiliated corporations, successors and assigns and their respective past and present directors, managers, officers, stockholders, partners, agents, employees, insurers, attorneys, and servants each in his, her or its capacity as such, and each of them, separately and collectively (collectively, “ Releasees ”), from any and all existing claims, charges, complaints, liens, demands, causes of action, obligations, damages and liabilities, known or unknown, suspected or unsuspected, whether or not mature or ripe, that you ever had and now have against any Releasee arising out of or in any way related to your employment with or separation from the Companies, to any services performed for the Companies, to any status, term or condition in such employment, or to any physical or mental harm or distress from such employment or non-employment or claim to any hire, rehire or future employment of any kind by the Companies, all to the extent allowed by applicable law. This release of claims includes, but is not limited to, claims based on express or implied contract, compensation plans, covenants of good faith and fair dealing, wrongful discharge, claims for discrimination, harassment and retaliation, violation of public policy, tort or common law, whistleblower or retaliation claims; and claims for additional compensation or damages or attorneys’ fees or claims under federal, state, and local laws, regulations and ordinances, including but not limited to Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Worker Adjustment and Retraining Notification Act (“ WARN ”), or equivalent state WARN act, the Employee Retirement Income Security Act, and the Sarbanes-Oxley Act of 2002. You understand that this release of claims includes a release of all known and unknown claims through the date on which this release of claims becomes irrevocable.

Limitation of Release : Notwithstanding the foregoing, this release of claims will not prohibit you from filing a charge of discrimination with the National Labor Relations Board, the Equal Employment Opportunity Commission or an equivalent state civil rights agency, but you agree and understand that you are waiving your right to monetary compensation thereby if any such agency elects to pursue a claim on your behalf. Further, nothing in this release of claims shall be construed to waive any right that is not subject to waiver by private agreement under federal, state or local employment or other laws, such as claims for workers’ compensation or unemployment benefits or any claims that may arise after the date on which this release of claims becomes irrevocable. In addition, nothing in this release of claims will be construed to affect any of the following claims, all rights in respect of which are reserved:

(a) Any payment or benefit set forth in the Agreement;

(b) Any rights as a shareholder of NCI Building Systems, Inc.;

(c) Reimbursement of unreimbursed business expenses properly incurred prior to the termination date in accordance with policy of the Companies;

(d) Claims in respect of equity compensation owned by you;

(e) Vested benefits under the general employee benefit plans (other than severance pay or termination benefits under general policy of the Companies, all rights to which are hereby waived and released);

(f) Any claim for unemployment compensation or workers’ compensation administered by a state government to which you are presently or may become entitled;

(g) Any claim that either of the Companies has breached this release of claims; and

(h) Indemnification as a current or former director or officer of either of the Companies or any of its subsidiaries (including as a fiduciary of any employee benefit plan), or inclusion as a beneficiary of any insurance policy related to your service in such capacity.

12 of 12

Exhibit 10.4

AGREEMENT

BACKGROUND

Capitalized terms not defined in the body of this Agreement have the meanings set forth on the attached Appendix “A.”

AGREEMENT AMONG PARTIES

In consideration of the foregoing and of the mutual covenants and agreements set forth in this Agreement, and subject to the terms and conditions set forth herein, the Parties agree as follows:

4. Compensation.

Compensation Committee, such review shall be conducted by the Compensation Committee at the same time as it reviews the salaries of other senior executives of the Company, and any adjustment shall be solely within the discretion of the Compensation Committee.

5. Termination Payments.

a. Minimum Termination Compensation. Employee shall serve in an at-will capacity and the Company and/or Employer may terminate the employment of Employee at any time with or without Cause. Upon any termination of employment of Employee for any reason other than as set forth in Section 5.b, whether on, before or after the expiration of the term of this Agreement (including any extension of the term hereof pursuant to the provisions of this Agreement), Employee shall be entitled to receive (i) that portion of Employee’s annual base salary, at the rate then in effect, earned by Employee or accrued for Employee’s account through the date of the termination of Employee’s employment hereunder or for which Employee is entitled to payment for events or circumstances occurring on or through the date of termination of Employee’s employment, (ii) any bonus to which Employee is entitled under the Bonus Plan pursuant to Section 4.b for the fiscal year ending prior to the date of termination, (iii) reimbursement of business expenses properly incurred in accordance with applicable Company policy prior to the date of termination and (iv) subject to Section 5.d, any generally applicable vested benefits to which Employee is entitled as a former employee under the employee benefit plans of the Company and its Affiliates.

b. Payment Following a Change in Control or During a Potential Change in Control Period. If Employee’s employment is terminated by the Company without Cause or by Employee for Good Reason within twenty-four (24) months after a Change in Control, then Employee shall be entitled to receive (i) two (2) times Employee’s annual base salary at the highest annualized rate in effect during the one (1) year period immediately preceding the date of termination (the “ Severance Payment ”), (ii) a prorated annual bonus under the Bonus Plan for the fiscal year in which the date of termination occurs based upon the elapsed number of days in such fiscal year through the date of termination applied to the bonus, if any, that would have been earned by Employee for such fiscal year if Employee had remained employed on the normal payment date of such bonus, based on actual performance under applicable financial metrics and applying any discretionary factors in substantially the same manner as such factors are applied to the senior executive officers of the Company whose employment has not terminated (the “ Pro Rata Bonus ”) and (iii) medical and dental coverage at the active employee rate for the period of coverage applicable to Employee (up to a maximum of eighteen (18) months) under the Consolidated Omnibus Budget Reconciliation Act of 1985, currently embodied in Section 4980B of the Internal Revenue Code of 1986, as amended (the “ Code ”) (provided, that, in the case of clause (iii), because of the current uncertainty in the taxation of health benefits, in the event that the Company determines that the provision of health benefits in the manner provided hereunder becomes legally prohibited or would subject Employee or the Company

2 of 12

to a material tax or penalty, or that such benefits are otherwise unable to be provided in a manner consistent with the intent of the parties to provide Employee with a non-taxable benefit (both as the cost of the coverage and the provision of benefits under such coverage), the Company and Employee shall cooperate reasonably and in good faith to preserve, to the maximum extent practicable without the imposition of material additional cost to the Company, the intended benefits hereunder) (the “ Medical and Dental Coverage ”). The Severance Payment shall be payable in a lump sum on the first payroll date following the Release Effective Date, except as otherwise set forth in Section 25 hereof. The Pro Rata Bonus shall be paid in a lump sum not later than March 15 ^th of the year following the year in which the date of termination occurs. If Employee’s employment is terminated by the Company without Cause or by Employee for Good Reason during a Potential Change in Control Period, then Employee will be entitled to the severance payments and termination benefits set forth in this Section 5.b subject to the terms and conditions herein, if and when the Change in Control related to such Potential Change in Control Period subsequently occurs. Employee’s right to receive the Severance Payment, the Pro Rata Bonus and the Medical and Dental Coverage shall be conditioned on Employee’s execution, delivery and non-revocation of a general release of any and all claims against the Company and its Affiliates within thirty (30) days following the date of termination (such release of claims, the “ Release ”; such thirty (30) day period, and the effective date of the Release, the “ Release Effective Date ”), which Release shall include the release of claims attached hereto as Appendix B and such other terms and conditions as may be mutually agreed by the Parties.

c. Parachute Tax Limitation. Notwithstanding anything in this Agreement to the contrary, if any amounts due to Employee under this Agreement and any other plan or program or award of Employer, the Company or any Affiliate constitute a “parachute payment,” as such term is defined in Section 280G(b)(2) of the Code, and the amount of the parachute payment, reduced by the excise tax imposed pursuant to Section 4999 of the Code, is less than the amount Employee would receive if Employee were paid three times Employee’s “base amount,” as defined in Section 280G(b)(3) of the Code, less one dollar, then the aggregate of the amounts constituting the parachute payment shall be reduced to an amount that will equal three times Employee’s base amount less one dollar. The calculations to be made with respect to this subsection shall be made by an accounting firm jointly selected by the Company and Employee and paid by the Company.

d. No Duty to Mitigate Nor Offsets; No Other Severance; No Reduction for Deferred Compensation. Notwithstanding anything in this Agreement to the contrary, if Employee’s employment is terminated following a Change in Control of the Company, Employee shall have no duty to seek other employment nor shall any payments made or to be made to Employee pursuant to this Agreement following such Change in Control be offset by any amount earned from other employment or for any other reason. The payments to be provided to Employee pursuant to this Section 5 upon termination of Employee’s employment shall constitute the exclusive payments in the nature of severance or termination pay or salary continuation and termination benefits which shall be due to Employee upon a termination of employment and shall be in lieu of any other such payments under any plan, program, policy or other arrangement which has heretofore been or shall hereafter be established by the Company or any of its Affiliates. The calculations of the Severance Payment shall be made without reduction for any voluntary deferral of compensation made by Employee.

e. Full Satisfaction of Obligations. Payment by Employer or the Company of the amounts owed to Employee pursuant to this Section 5 shall fully satisfy all obligations of Employer and the Company to Employee under this Agreement if the employment of Employee is terminated hereunder prior to the expiration of the term of this Agreement, and all obligations of Employer and Employee to each other set forth in Sections 1 through 4 of this Agreement shall terminate and be of no further force or effect as of the date of termination. No termination of employment hereunder, whether by Employer or Employee and whether with or without Cause or Good Reason, shall terminate the provisions of Sections 6 or 7 or any subsequent sections of this Agreement and each of such sections shall remain in full force and effect as binding obligations of the Parties in accordance with their express terms.

3 of 12

compelled or required by law or the order of any governmental, regulatory or self-regulatory body to disclose the Confidential Information, Employee may disclose only that portion of the requested Confidential Information which Employee is compelled or required to disclose, and Employee will exercise Employee’s reasonable efforts to obtain reliable assurance that confidential treatment will be accorded the Confidential Information.

7. Non-Competition; Non-Solicitation; Non-Disparagement and Non-Interference.

b. Employee shall not, directly or indirectly and whether on Employee’s own behalf or on behalf of any other person, partnership, association, corporation or other entity, either (i) seek to hire or solicit the employment or service of any employee, agent or consultant of the Company or its Affiliates in a commercial capacity; (ii) in any manner attempt to influence or induce any employee, agent or consultant of the Company or its Affiliates to leave the employment or service of the Company or its Affiliates; (iii) use or disclose to any person, partnership, association, corporation or other entity any information concerning the names and addresses of any employees, agents or consultants of the Company or its Affiliates unless such use or disclosure is of a personal nature, is requested by the Company or is required by due process of law; or (iv) call upon, solicit, divert or attempt to call upon, solicit or divert the business of any customer, vendor or acquisition prospect of the Company or any of its Affiliates with whom Employee dealt, directly or indirectly, during Employee’s engagement with the Company or its Affiliates. Employee shall not be prohibited from hiring or soliciting the employment or service of an agent or consultant of the Company or its Affiliates for purposes which do not violate Section 7 of this Agreement. Employee agrees and stipulates that in any action or claim brought by Employee or in any action or claim brought against Employee involving the provisions of this Section 7, Employee hereby waives any claim or defense that the above non-solicitation covenants are unenforceable, void or voidable, for any reason, including, but not limited to, fraud, misrepresentation, illegality, unenforceable restraint of trade, failure of consideration, illusory contract, mistake, or any other substantive legal defense.

8. Consideration for Covenants; Reasonableness. Employee acknowledges and agrees as follows:

4 of 12

11. Remedies. In the event of Employee’s breach, or threatened breach, of any term or provision contained in Section 6 or 7 of this Agreement, Employee agrees that the Company and its Affiliates shall suffer irreparable harm not compensable by damages or other legal remedies, and that accordingly the Company and/or Employer shall be entitled to both temporary and permanent injunctive relief without the necessity of independent proof by it as to the inadequacy of legal remedies or the nature or extent of the irreparable harm suffered by it. The right of the Company and/or Employer to such relief shall not be construed to prevent it from pursuing, either consecutively or concurrently, any and all other legal or equitable remedies available to it for such breach or threatened breach, specifically including, without limitation, the recovery of monetary damages. Without limiting the generality of the relief that may be sought by the Company and/or Employer pursuant to this Section 11, the Company and/or Employer shall be entitled, under the circumstances set forth herein, to cause any unpaid portion of the severance payments and termination benefits otherwise payable under this Agreement to be irrevocably forfeited, and, at the demand of the Company and/or Employer, Employee shall be required to repay the severance payments that have previously been paid to Employee.

5 of 12




If to Employee:		Address shown on the employment records of the Company

If to the Company or Employer:		NCI Building Systems, Inc. 10943 North Sam Houston Parkway West Houston, Texas 77064 Telecopier: (281) 477-9670 Attention: Chief Executive Officer

17. Modification. No change or modification of this Agreement shall be valid or binding upon the Parties hereto, nor shall any waiver of any term or condition in the future be so binding, unless such change or modification or waiver shall be in writing and signed by the Parties hereto.

20. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which shall constitute one and the same document.

6 of 12

to Employer and the Company is deemed to be also a reference to any Affiliate of Employer or the Company that either has or is required to assume the obligations of the Company pursuant to this section.

23. Joint and Several Obligations. The duties and obligations of Employer and the Company set forth herein shall be the joint and several obligations of each of them.

25. Section 409A.

a. If Employee is a “specified employee,” as such term is defined in Section 409A and determined as described below in this Section 25(a), and if any portion of the Severance Payment is subject to Section 409A, the character and timing of the payment thereof shall be as determined in this Section 25(a). It is hereby specified that as much of the Severance Payment as can be paid without the application of Section 409A(a)(2)(B)(i) and Treas. Reg. §1.409A-1(i) shall be paid at times consistent with Section 5.b and without application of this Section 25. The remaining portion of the Severance Payment shall not be payable before the earlier of (i) the date that is six months after Employee’s termination, (ii) the date of Employee’s death, or (iii) one or more dates that otherwise comply with the requirements of Section 409A. Employee shall be a “specified employee” for the twelve-month period beginning on April 1 of a year if Employee is a “key employee” as defined in Section 416(i) of the Code (without regard to Section 416(i)(5)) as of December 31 of the preceding year or using such dates as designated by the Compensation Committee in accordance with Section 409A and in a manner that is consistent with respect to all of the Company’s nonqualified deferred compensation plans. For purposes of determining the identity of specified employees, the Compensation Committee may establish such procedures as it deems appropriate in accordance with Section 409A.

b. Employee and the Company agree that this Agreement is intended to comply with or be exempt from Section 409A and that any ambiguous provisions will be construed in a manner that is compliant with or exempt from the application of Section 409A. Without limiting the generality of the immediately preceding sentence, it is intended that the Severance Payment and the Pro Rata Bonus shall be “short-term deferrals” within the meaning of Treas. Reg. §1.409A-1(b)(4) that are exempt from Section 409A. For purposes of Section 409A, each installment in a series of installment payments is intended to be a separate payment.

26. Captions. The captions, headings, and arrangements used in this Agreement are for convenience only and do not in any way affect, limit, amplify, or modify the terms and provisions hereof.

27. Binding Effect. This Agreement shall be binding upon the Parties hereto, together with their respective executors, administrators, successors, personal representatives, heirs and assigns.

7 of 12

IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date set forth herein.

EMPLOYEE

NCI BUILDING SYSTEMS, INC.

By:

Todd R. Moore

Executive Vice President

and General Counsel

NCI GROUP, INC.

By:

Todd R. Moore

Executive Vice President

and General Counsel

8 of 12

APPENDIX A

DEFINITIONS

The following terms have the indicated meanings for purposes of this Agreement:

(a) “Affiliate” means any entity controlled by, controlling or under common control with a person or entity.

(b) “Bonus Plan” has the meaning set forth in Section 4.b.

(d) “Change in Control” of the Company means the first occurrence of any of the following events following the Effective Date:

9 of 12

the outstanding voting securities of the acquiring, surviving or resulting person (as applicable) shall then be owned in the aggregate by the former stockholders of the Company but other than in substantially the same relative proportions as immediately prior to such transaction, and in each case excluding a Non-Control Transaction or (y) the individuals who were members of the Incumbent Board immediately prior to the agreement providing for such transaction constitute less than a majority of the members of the board of directors of the acquiring, surviving or resulting person (as applicable), or, if applicable the ultimate parent entity of such person, and in each case excluding a Non-Control Transaction; or

(f) “Good Reason” means any of the following events that occurs without Employee’s prior written consent after the Effective Date:

(iii) the breach or failure by the Company or Employer to perform any of its material covenants contained in this Agreement;

(iv) any relocation of Employee’s principal place of employment by more than fifty (50) miles, as long as such relocation increases Employee’s normal daily commute; or

10 of 12

(g) “Potential Change in Control” of the Company shall be deemed to have occurred, if:

(i) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company;

(ii) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control of the Company; or

(iii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

(i) “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

11 of 12

Appendix B
General Release

(a) Any payment or benefit set forth in the Agreement;

(b) Any rights as a shareholder of NCI Building Systems, Inc.;

(c) Reimbursement of unreimbursed business expenses properly incurred prior to the termination date in accordance with policy of the Companies;

(d) Claims in respect of equity compensation owned by you;

(f) Any claim for unemployment compensation or workers’ compensation administered by a state government to which you are presently or may become entitled;

(g) Any claim that either of the Companies has breached this release of claims; and

12 of 12

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(b)/15d-14(a)

I, Norman C. Chambers, certify that:

1. I have reviewed this quarterly report on Form 10-Q of NCI Building Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 31, 2016



	/s/ Norman C. Chambers
	Norman C. Chambers
	Chairman of the Board and Chief Executive Officer
	(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(b)/15d-14(a)

I, Mark E. Johnson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of NCI Building Systems, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 31, 2016



	/s/ Mark E. Johnson
	Mark E. Johnson
	Executive Vice President,
	Chief Financial Officer and Treasurer
	(Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT

In connection with the quarterly report of NCI Building Systems, Inc. (the “Company”) for the quarter ended July 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Norman C. Chambers, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:



	1.	I have reviewed this Report of the Company;



	2.	This Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



	3.	The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 31, 2016



	/s/ Norman C. Chambers
	Norman C. Chambers
	Chairman of the Board and Chief Executive Officer
	(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to NCI Building Systems, Inc. and will be retained by NCI Building Systems, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

This Certification shall not be deemed to be “filed” or part of the Report or incorporated by reference into any of the registrant’s filings with the Securities and Exchange Commission by implication or by any reference in any such filing to the Report.

Exhibit 32.2

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT

In connection with the quarterly report of NCI Building Systems, Inc. (the “Company”) for the quarter ended July 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark E. Johnson, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:



	1.	I have reviewed this Report of the Company;



	2.	This Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



	3.	The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 31, 2016



	/s/ Mark E. Johnson
	Mark E. Johnson
	Executive Vice President,
	Chief Financial Officer and Treasurer
	(Principal Financial Officer)