SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-14315
NCI BUILDING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 76-0127701
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
10943 North Sam Houston Parkway West
Houston, Texas 77064
(Address of principal executive offices) (Zip code)
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Registrant's telephone number, including area code: (281) 897-7788 Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.01 par value Securities registered pursuant to Section 12(g) of the Act: None |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X|
The aggregate market value of the voting stock held by non-affiliates of the registrant on January 2, 2001, was $289,570,792.
The number of shares of common stock of the registrant outstanding on January 2, 2001, was 17,689,313.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Parts I and II of this Annual Report is incorporated by reference from the registrant's 2000 Annual Report to Shareholders, and information required by Part III of this Annual Report is incorporated by reference from the registrant's definitive proxy statement for its annual meeting of shareholders to be held on March 1, 2001.
TABLE OF CONTENTS
PART I
Item 1. Business ..................................................................................1
Item 2. Properties ...............................................................................11
Item 3. Legal Proceedings ........................................................................12
Item 4. Submission of Matters to a Vote of Security Holders ......................................12
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters ....................12
Item 6. Selected Financial Data ..................................................................12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ....................................................................12
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ...............................12
Item 8. Financial Statements and Supplementary Data ..............................................13
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure .....................................................................13
PART III
Item 10. Directors and Executive Officers of the Registrant .......................................13
Item 11. Executive Compensation ...................................................................13
Item 12. Security Ownership of Certain Beneficial Owners and Management ...........................13
Item 13. Certain Relationships and Related Transactions ...........................................13
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K .........................14
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"This Annual Report contains forward-looking statements concerning our business and operations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, these expectations and the related statements are subject to risks, uncertainties, and other factors that could cause the actual results to differ materially from those projected. These risks, uncertainties, and other factors include, but are not limited to, industry cyclicality and seasonality, adverse weather conditions, fluctuations in customer demand and other patterns, raw material pricing, competitive activity and pricing pressure, the ability to make strategic acquisitions accretive to earnings, and general economic conditions affecting the construction industry, as well as other risks detailed in our filings with the SEC. We expressly disclaim any obligations to release publicly any updates or revisions to these forward-looking statements to reflect any changes in our expectations."
PART I
ITEM 1. BUSINESS.
GENERAL
NCI Building Systems, Inc. is one of North America's largest integrated manufacturers of metal products for the building industry. We operate 40 manufacturing and distribution facilities located in 18 states and Mexico. We sell metal building components and engineered building systems, offering one of the most extensive metal product lines in the building industry with well-recognized brand names. We believe that our leading market positions and strong track record of growth and profitability have resulted from our focus on:
o Controlling operating and administrative costs
o Managing working capital and fixed assets
o Developing new markets and products
o Successfully identifying strategic growth opportunities
We believe that metal products have gained and continue to gain a greater share of the new construction and repair and retrofit markets. This is due to increasing acceptance and recognition of the benefits of metal products in building applications. Metal building components offer builders, designers, architects and end-users several advantages, including lower long-term costs, longer life, attractive aesthetics and design flexibility. Similarly, engineered building systems offer a number of advantages over traditional construction alternatives, including shorter construction time, more efficient use of materials, lower construction costs, greater ease of expansion and lower maintenance costs.
In May 1998, we acquired Metal Building Components, Inc. ("MBCI") for a purchase price of $589 million. The MBCI acquisition, which doubled our revenue base, made us the largest domestic manufacturer of nonresidential metal building components and significantly improved our product mix.
In March 2000, we acquired the remaining 50% joint interest in DOUBLECOTE, L.L.C. from our previous joint venture partner. This acquisition gives us complete control over our principal metal coating facility. In December 2000, we bought substantially all of the assets of Midland Metals, Inc., an Iowa-based manufacturer of metal building components, which gives us a stronger presence in the Midwest.
We were founded in 1984 and we reincorporated in Delaware on December 31, 1991. Our principal offices are located at 10943 North Sam Houston Parkway West, Houston, Texas 77064 and our telephone number is (281) 897-7788. Unless indicated otherwise, references in this report to NCI, us, or we include our predecessors and our subsidiaries.
BUSINESS SEGMENTS
We have divided our operations into two reportable segments: engineered building systems and metal building components, based upon similarities in product line, manufacturing process, marketing and management of its business. Products of both segments are similar in basic raw materials used and manufacturing. The engineered building systems segment includes the manufacturing of structural framing and includes value added engineering and drafting, which are typically not part of metal building component products or services. Our approximate sales to outside customers, operating income and total assets attributable to these business segments were as follows for the periods indicated (in thousands):
1998 1999 2000
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SALES TO OUTSIDE CUSTOMERS:
Engineered building systems ....... $ 277,347 41% $ 310,324 33% $ 333,087 33%
Metal building components ......... 397,984 59 626,226 67 685,237 67
Intersegment sales ................ 25,094 4 59,692 6 47,107 5
Corporate/eliminations ............ (25,094) (4) (59,692) (6) (47,107) (5)
----------- ----------- ----------- ----------- ----------- -----------
Total net sales ........... $ 675,331 100% $ 936,550 100% $ 1,018,324 100%
=========== =========== =========== =========== =========== ===========
OPERATING INCOME:
Engineered building systems ....... $ 29,576 11% $ 37,509 12% $ 37,549 11%
Metal building components ......... 51,497 13 72,441 12 87,838 13
Corporate/eliminations ............ (1,764) -- 582 -- 430 --
----------- ----------- ----------- ----------- ----------- -----------
Total operating income ... $ 79,309 12% $ 110,532 12% $ 125,817 12%
=========== =========== =========== =========== =========== ===========
TOTAL ASSETS:
Engineered building systems ....... $ 86,342 10% $ 88,673 10% $ 97,130 11%
Metal building components ......... 352,407 43 364,533 43 403,415 46
Corporate/eliminations ............ 384,788 47 402,277 47 379,375 43
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Total assets ............. $ 823,537 100% $ 855,783 100% $ 879,920 100%
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For more business segment information, please see the Supplementary Business Segment Information contained in our 2000 Annual Report to Shareholders.
Metal Building Components. We are the largest domestic supplier of metal building components to the nonresidential building industry and have a market share at least twice that of our largest competitor. We are also one of the largest suppliers in the U.S. of roll-up doors for self-storage facilities. We design, manufacture, sell and distribute one of the widest selections of components for a variety of new construction applications as well as repair and retrofit uses.
The following are the types of components we sell:
o Metal roof and wall systems o Fascia
o Overhead doors o Mansard accessories
o Interior and exterior doors o Trim accessories
Our components are used in the following markets:
o Industrial o Commercial
o Governmental o Agricultural
o Community o Residential
As part of our metal building components manufacturing, we also provide hot roll and light gauge metal coil coating and painting services and products. We coat and paint hot roll metal coils for our own use in metal building components manufacturing, supplying substantially all of our internal metal coating and painting requirements. On average, our own use accounts for about 65% of our production. We also coat and paint hot roll metal coils and light gauge metal for third parties for a variety of applications, including heating and air conditioning systems, water heaters, lighting fixtures and office furniture.
We market our metal building components products and metal coating and painting services nationwide primarily through a direct sales force under several brand names. These brand names include "Metal Building Components," "American Building Components," "DBCI," "MBCI," "Midland Metals," "IPS," "Metal Coaters," "Metal-Prep," "DOUBLECOTE" and "Midwest Metal Coatings."
Engineered Building Systems. We are one of the largest domestic suppliers of engineered building systems. We design, manufacture and market engineered building systems, self-storage building systems and metal home framing systems for commercial, industrial, agricultural, governmental, community and residential uses. We market these systems nationwide through authorized builder networks totaling over 1,400 builders and a direct sales force under several brand names. These brand names include "Metallic Buildings," "Mid-West Steel Buildings," "A & S Buildings," "All American Systems," "Steel Systems" and "Mesco."
INDUSTRY OVERVIEW
The building industry encompasses a broad range of metal products, principally composed of steel, sold through a variety of distribution channels for use in diverse applications. These metal products include metal building components and engineered building systems.
Metal Building Components. Manufacturers of metal components supply products to the building industry. These products include roof and wall panels, doors, metal partitions, metal trim and other related accessories. These products are used in new construction and in repair and retrofit applications for commercial, industrial, agricultural, governmental, community and residential uses. Metal building components are used in a wide variety of construction applications, including purlins and girts, roofing, walls, doors, trim and other parts of traditional buildings, as well as in architectural applications and engineered building systems. We estimate the metal building components market including roofing applications to be a multi-billion dollar market, although market data is limited. We believe that the metal building components business is less affected by economic cycles than the engineered building systems business due to the use of metal building components in repair and retrofit applications. We believe that metal products have gained and continue to gain a greater share of new construction and repair and retrofit markets due to increasing acceptance and recognition of the benefits of metal products in building applications.
Metal roofing accounts for a significant portion of the overall metal building components market, but only approximately 6% of total annual roofing market expenditures, estimated at over $21 billion based on available industry information. As a result, we believe that significant opportunities exist for metal roofing, with its advantages over conventional roofing materials, to increase its overall share of this market. Metal roofing systems have several advantages over conventional roofing systems, including the following:
Lower lifecycle cost. The total cost over the life of metal roofing systems is lower than that of conventional roofing systems for both new construction and retrofit roofing. For new construction, the cost of installing metal roofing is greater than the cost of conventional roofing. Yet, the longer life and lower maintenance costs of metal roofing make the cost more attractive. For retrofit roofing, although installation costs are 60-70% higher for metal roofing due to the need for a sloping support system, the lower ongoing costs more than offset the initial cost.
o Increased longevity. Metal roofing systems generally last for 20 years without requiring major maintenance or replacement. This compares to five to ten years for conventional roofs. The cost of leaks and roof failures associated with conventional roofing can be very high, including damage to building interiors and disruption of the functional usefulness of the building. Metal roofing prolongs the intervals between costly and time-consuming repair work.
o Attractive aesthetics and design flexibility. Metal roofing systems allow architects and builders to integrate colors and geometric design into the roofing of new and existing buildings, providing an increasingly fashionable means of enhancing a building's aesthetics. Conventional roofing material is generally tar paper or a gravel surface, and building designers tend to conceal roofs made with these materials.
Engineered Building Systems. Engineered building systems consist of engineered structural beams and panels that are welded and roll formed in a factory and shipped to a construction site complete and ready for assembly. Engineered building systems manufacturers design an integrated system that meets applicable building
code requirements. These systems consist of primary structural framing, secondary structural members like purlins and girts and covering for roofs and walls. Over the last 15 years, engineered building systems have significantly increased penetration of the market for nonresidential low rise structures and are being used in a broad variety of other applications. According to the Metal Building Manufacturers Association, reported sales of engineered building systems have increased from approximately $1.5 billion in 1993 to $2.6 billion in 1999. We believe this increase has resulted primarily from (1) the significant cost advantages offered by these systems, (2) increased architectural acceptance of engineered building systems for construction of commercial and industrial building projects, (3) advances in design versatility and production processes and (4) a favorable economic environment. We believe the cost of an engineered building system generally represents approximately 15-20% of the total cost of constructing a building, which includes land cost, labor, plumbing, electrical, heating and air conditioning systems installation and interior finish. Technological advances in products and materials, as well as significant improvements in engineering and design techniques, have led to the development of structural systems that are compatible with more traditional construction materials. Architects and designers now often combine an engineered building system with masonry, glass and wood exterior facades to meet the aesthetic requirements of customers while preserving the inherent characteristics of engineered building systems. As a result, the uses for engineered building systems now include office buildings, showrooms, retail stores, banks, schools, warehouses, factories, distribution centers, government buildings and community centers for which aesthetics and architectural features are important considerations of the end-users.
In our marketing efforts, we and other major manufacturers generally emphasize the following characteristics of engineered building systems to distinguish them from other methods of construction:
o Shorter construction time. In many instances, it takes less time to construct an engineered building than other building types. In addition, because most of the work is done in the factory, the likelihood of weather interruptions is reduced.
o More efficient material utilization. The larger engineered building systems manufacturers use computer-aided analysis and design to fabricate structural members with high strength-to-weight ratios, minimizing raw materials costs.
o Lower construction costs. The in-plant manufacture of engineered building systems, coupled with automation, allows the substitution of less expensive factory labor for much of the skilled on-site construction labor otherwise required for traditional building methods.
o Greater ease of expansion. Engineered building systems can be modified quickly and economically before, during or after the building is completed to accommodate all types of expansion. Typically, an engineered building system can be expanded by removing the end or side walls, erecting new framework and adding matching wall and roof panels.
o Lower maintenance costs. Unlike wood, metal will not deteriorate because of cracking, rot or insect damage. Furthermore, factory-applied roof and siding panel coatings resist cracking, peeling, chipping, chalking and fading.
Consolidation. Over the last several years, there has been consolidation in the metal building components and engineered building systems industry, which includes a large number of small local and regional firms. We believe that this industry will continue to consolidate, driven by the needs of manufacturers to increase manufacturing capacity, achieve greater process integration and add geographic diversity to meet customers' product and delivery needs, improve production efficiency and manage costs.
PRODUCTS AND MARKETS
Our product lines consist of metal building components and engineered building systems.
Metal Building Components. Our metal building components consist of individual components, including secondary structural framing, covering systems and associated metal trims, that are sold directly to contractors or end-users for use in the building industry, including the construction of metal buildings. We also stock and market metal component parts for use in the maintenance and repair of existing buildings. Specific component products consist of end and side wall panels, roof panels, purlins, girts, partitions, header panels and related trim and screws. We believe we offer the widest selection of metal building components in the building industry.
Purlins and girts are medium gauge, roll formed steel components. They are supplied to builders for secondary structural framing. We custom produce purlins and girts for our customers and offer the widest selection of sizes and profiles in the United States. Covering systems, consisting of wall and roof panels, protect the rest of the structure and the contents of the building from the weather. They also contribute to the structural integrity of the building.
Our metal roofing products are attractive and durable. We use standing seam roof technology to replace traditional built-up and single-ply roofs as well as to provide a distinctive look to new construction. We manufacture and design metal roofing systems for sales to regional metal building manufacturers, general contractors and subcontractors. We believe we have the broadest line of standing seam roofing products in the building industry. We also have developed and patented a retrofit metal panel, Retro-R(R), that is used to replace wall and roof panels of metal buildings. Retro-R(R) can be installed over the top of existing metal panels to remodel or preserve a standing structure. Although metal roofing is somewhat more expensive than traditional roofing in upfront costs, its durability and low maintenance costs make metal roofing a lower cost roofing product after the first 10 years.
We manufacture overhead doors and interior and exterior doors for use in metal and other buildings. We are one of the largest suppliers in the U.S. of roll-up doors to builders of self-storage facilities.
During fiscal 2000, we introduced our new "pier and header" system that is used in the construction of self-storage warehouse facilities. Conventional metal building systems require approximately ten steps and processes to construct the areas between and above the doors of self-storage units. Our pier and header system requires only two and produces a facility that is more aesthetically pleasing with a clean, uncluttered profile.
We provide our own metal coating and painting products and services for use in component manufacturing. We also provide pre-painted hot roll coils to manufacturers of engineered building systems and metal building components. Either a customer provides coils through its own supply channels, which are processed by us, or we purchase hot roll coils and process them for sale as a packaged product. We also pre-paint light gauge steel coils for steel mills, which supply the painted coils to various industrial users, including manufacturers of engineered building systems, metal building components and lighting fixtures.
Our metal coating and painting operations apply a variety of paint systems to metal coils. The process generally includes cleaning and painting the coil and slitting it to customer specifications. We believe that pre-painted metal coils are a better quality product, environmentally cleaner and more cost-effective than painted metal products prepared in other manufacturers' in-house painting operations. Painted metal coils also offer manufacturers the opportunity to produce a broader and more aesthetically pleasing range of products.
Engineered Building Systems. Engineered building systems consist of pre-engineered structural beams and panels that are welded and roll formed in a factory and shipped to a construction site complete and ready for assembly. We design an integrated engineered building system that meets customer specifications and allows easy on-site assembly by the builder or independent contractor. Engineered building systems typically consist of three systems:
o Primary structural framing. Primary structural framing, fabricated from heavy-gauge steel, supports the secondary structural framing, roof, walls and all externally applied loads. Through the primary framing, the force of all applied loads is structurally transferred to the foundation.
o Secondary structural framing. Secondary structural framing consists of medium-gauge, roll-formed steel components called purlins and girts. Purlins are attached to the primary frame to support the roof. Girts are attached to the primary frame to support the walls. The secondary structural framing is designed to strengthen the primary structural framing and efficiently transfer applied loads from the roof and walls to the primary structural framing.
o Covering systems. Covering systems consist of roof and wall panels. These panels not only lock out the weather but also contribute to the structural integrity of the overall building system. Roof and siding panels are fabricated from light-gauge, roll-formed steel.
Accessory components complete the engineered building system. These components include doors, windows, gutters and interior partitions.
During the fourth quarter of fiscal 1999, we introduced our new "Long Bay System," that allows for the construction of metal buildings with spans up to 56 feet without internal supports. This compares to spans of up to 28 feet under other engineered building systems. The LB System virtually eliminates all welding at the site, which significantly reduces erection time compared with conventional steel construction. Our LB System is designed for larger buildings that typically require less custom engineering and design than our other engineered building systems, which allows us to meet our customers needs more quickly.
SALES, MARKETING AND CUSTOMERS
Metal Building Components. We sell metal building components directly to regional manufacturers, contractors, subcontractors, distributors, lumberyards, cooperative buying groups and other customers under the brand names "Metal Building Components," "American Building Components," "MBCI" and "IPS." Roll-up doors, interior and exterior doors, interior partitions and walls, header panels and trim are sold directly to contractors and other customers under the brand names "Doors & Building Components" or "DBCI." These components also are produced for integration into self storage and engineered building systems sold by us.
We market our components products within four product lines:
commercial/industrial, architectural, wood frame builders and residential.
Customers include regional engineered building systems manufacturers, general contractors, subcontractors, roofing installers, architects and end-users. Commercial and industrial businesses are heavy users of metal building components and metal buildings systems. Standing seam roof and architectural customers are growing in importance. As metal buildings become a more acceptable building alternative and aesthetics become an increasingly important consideration for end-users of metal buildings, we believe that architects are participating in metal building design and purchase decisions to a greater extent. Wood frame builders also purchase our metal building components through distributors, lumberyards, cooperative buying groups and chain stores for various uses, including agricultural buildings. Residential customers are generally contractors building upscale homes that require an architect-specified product.
Our metal building components sales operations are organized into four geographic regions. Each region is headed by a general sales manager supported by individual plant sales managers. In addition, our primary metal coating facility has its own sales manager. Each local sales office is located adjacent to a manufacturing plant and is staffed by a direct sales force responsible for contacting customers and architects and a sales coordinator who supervises the sales process from the time the order is received until it is shipped and invoiced. The regional and local focus of our customers requires extensive knowledge of local business conditions. During fiscal 2000, our largest customer for metal building components accounted for less than 2% of our total sales.
We provide our customers with product catalogs tailored to our product lines, which include product specifications and suggested list prices. Some of our catalogs are available on-line through the Internet, which enables architects and other customers to download drawings for use in developing project specifications. Customers place orders via telephone or facsimile to a sales coordinator at the regional office who enters it onto a standard order form. The form is then sent via computer to the plant and downloaded automatically to the production machines.
We have a small number of national accounts for our coating and painting products and services and rely on a single sales manager. Our metal coating joint venture has an independent sales force.
Engineered Building Systems. We sell engineered building systems to builders nationwide under the brand names "Metallic Buildings," "A&S Buildings" and "Mesco." We market engineered building systems through an in-house sales force to authorized builder networks of over 1,400 builders. We market engineered building systems under the brand name "Mid-West Steel Buildings" directly to contractors in Texas and surrounding states using an in-house sales force. We also sell engineered building systems under the names "All American Systems" and "Steel Systems" and various private labels.
Our authorized builder networks consist of independent general contractors that market our Metallic Buildings, A&S Buildings and Mesco products to end-users. Most of our sales of engineered building systems outside of Texas and surrounding states are through our authorized builder networks. We rely upon maintaining a satisfactory business relationship for continuing job orders from our authorized builders and do not consider the builder agreements to be material to our business. During fiscal 2000, our largest customer for engineered building systems accounted for less than 2% of our total sales.
We enter into an agreement with an authorized builder, which generally grants the builder the non-exclusive right to market our products in a specified territory. The agreement is cancelable by either party on 60 days notice. The agreement does not prohibit the builder from marketing engineered building systems of other manufacturers. We establish an annual sales goal for each builder and provide the builder with sales and pricing information, design and engineering manuals, drawings and assistance, application programs for estimating and quoting jobs and advertising and promotional literature. We also defray a portion of the builder's advertising costs and provide volume purchasing and other pricing incentives to encourage it to deal exclusively or principally with us. The builder is required to maintain a place of business in its designated territory, provide a sales organization, conduct periodic advertising programs and perform construction, warranty and other services for customers and potential customers. An authorized builder usually is hired by an end-user to erect an engineered building system on the customer's site and provide general contracting and other services related to the completion of the project. We sell our products to the builder, which generally includes the price of the building as a part of its overall construction contract with its customer.
Our LB System provides us with an entree to new larger builders. This also provides us with new opportunities to cross-sell our other products to these new builders.
MANUFACTURE AND DESIGN
Metal Building Components. We operate 39 facilities used for manufacturing of metal building components for the building industry, including our doors and our metal coating and painting operations. We believe this broad geographic penetration gives us an advantage over our components competitors because major elements of a customer's decision are the speed and cost of delivery from the manufacturing facility to the product's ultimate destination. With the exception of our architectural and standing seam products, we are not involved in the design process for the components we manufacture. We also own a fleet of trucks to deliver our products to our customers in a more timely manner than most of our competitors.
Our doors, interior partitions and other related panels and trim products are manufactured at dedicated plants in Georgia, Texas and Arizona. Orders are processed at the Georgia plant and sent to the appropriate plant, which is generally determined based upon the lowest shipping cost.
Metal component products are roll-formed or fabricated at each plant using roll-formers and other metal working equipment. In roll forming, pre-finished coils of steel are unwound and passed through a series of progressive forming rolls which form the steel into various profiles of medium-gauge structural shapes and light-gauge sheets and panels.
We operate two metal coating and painting facilities for hot rolled, medium gauge steel coils and three metal coating and painting facilities for painting light gauge steel coils. These facilities primarily service our needs, but we also process steel coils at these facilities for other manufacturers. Metal coating and painting processes involve applying various types of chemical treatments and paint systems to flat rolled continuous coils of metal, including steel and aluminum. These processes give the coils a baked-on finish that both protects the metal and makes it more attractive. Initially, various metals in coil form are flattened, cleaned and pretreated. The metal is then coated, oven cured, cooled, recoiled and packaged for shipment. Slitting and embossing services can also be performed on the coated metal before shipping according to customer specifications. Hot roll steel coils typically are used in the production of secondary structural framing of metal buildings and other structural applications. Painted light gauge steel coils are used in the manufacture of products for building exteriors, metal doors, lighting fixtures and appliances. Our metal coating operation is one of only two metal coaters in the United States to receive the Supplier Excellence Award from Bethlehem Steel Corporation.
We own 50% of a joint venture that operates a hot rolled coil coating facility in Granite City, Illinois that commenced operations in April 1999. The Granite City facility is used to slit and coat hot rolled coils of medium gauge steel for use in manufacturing purlins and girts. We have agreed to purchase a substantial portion of our production requirements for that product from the Granite City joint venture.
Engineered Building Systems. After we receive an order, our engineers design the engineered building system to meet the customer's requirements and to satisfy applicable building codes and zoning requirements. To expedite this process, we use computer-aided design and engineering systems to generate engineering and erection drawings and a bill of materials for the manufacture of the engineered building system. We employ approximately 237 engineers and draftsmen in this area.
Once the specifications and designs of the customer's project have been finalized, the manufacturing of frames and other building systems begins at one of our six frame manufacturing facilities in Texas, Georgia, South Carolina or Tennessee or our joint venture facility in Mexico. The fabrication of the primary structural framing consists of a process in which rigid steel plates are punched and sheared and then routed through an automatic welding machine and sent through further fitting and welding processes. The secondary structural framing and the covering subsystem are roll-formed steel products that are manufactured at our full manufacturing facilities as well as our components plants.
Once manufactured, structural framing members and covering systems are shipped to the job site for assembly. We generally are not responsible for any on-site construction. The time elapsed between our receipt of an order and shipment of a completed building system has typically ranged from four to eight weeks, although delivery can extend somewhat longer if engineering and drafting requirements are extensive.
We own 51% of a joint venture, which began operation of a framing facility in Monterrey, Mexico in July 1997. We purchase substantially all of the framing systems produced by the Mexico joint venture.
RAW MATERIALS
The principal raw material used in the manufacture of our metal building components and engineered building systems is steel. Components are fabricated from common steel products produced by mills including bars, plates, sheets and galvanized sheets. During the 2000 fiscal year, we purchased approximately 90% of our steel requirements from National Steel Corporation, Bethlehem Steel Corporation and U.S. Steel. No other steel supplier accounted for more than 3% of steel purchases for the same period. We believe concentration of our steel purchases among a small group of suppliers that have mills and warehouse facilities close to our facilities enables us, as a large customer of those suppliers, to obtain better service and delivery. These suppliers generally maintain an inventory of the types of materials we require.
We do not have any long-term contracts for the purchase of raw materials. A prolonged labor strike against one of our principal domestic suppliers could have a material adverse effect on our operations. Alternative sources, however, including foreign steel, are currently believed to be sufficient to maintain required deliveries.
BACKLOG
At October 31, 2000, the total backlog of orders for our products believed by us to be firm was $169 million. This compares with a total backlog for our products of $157 million at October 31, 1999. The increase in backlog reflects the results of our marketing activities and market demand. Backlog primarily consists of engineered building systems. Job orders generally are cancelable by customers at any time for any reason. Occasionally, orders in the backlog are not completed and shipped for reasons that include changes in the requirements of the customers and the inability of customers to obtain necessary financing or zoning variances. None of the backlog at October 31, 2000 currently is scheduled to extend beyond October 31, 2001.
COMPETITION
We and other manufacturers of metal building components and engineered building systems compete in the building industry with all other alternative methods of building construction such as tilt-wall, concrete and wood, all of which may be perceived as more traditional, more aesthetically pleasing or having other advantages over our products. We compete with all manufacturers of building products, from small local firms to large national firms.
In addition, competition in the metal building components and engineered building systems market of the building industry is intense. It is based primarily on:
o price
o speed of construction
o ability to provide added value in the design and engineering of buildings
o service
o quality
o delivery
We compete with a number of other manufacturers of metal building components and engineered building systems for the building industry, ranging from small local firms to large national firms. Most of these competitors operate on a regional basis, although we believe that at least four other manufacturers of engineered building systems and several manufacturers of metal building components have nationwide coverage.
REGULATORY MATTERS
We must comply with a wide variety of federal, state and local laws and regulations governing the protection of the environment. These laws and regulations cover air emissions, discharges to water, the generation, handling, storage, transportation, treatment and disposal of hazardous substances, the cleanup of contamination, the control of noise and odors and other materials and health and safety matters. Laws protecting the environment generally have become more stringent than in the past and are expected to continue to do so. Environmental laws and regulations generally impose strict liability. This means that in some situations we could be exposed to liability for cleanup costs, and toxic tort or other damages as a result of conduct that was lawful at the time it occurred or because of the conduct of or conditions caused by prior operators or other third parties. This strict liability is regardless of fault on our part. We believe we are in substantial compliance with all environmental standards applicable to our operations. We cannot assure you, however, that cleanup costs, natural resource damages, criminal sanctions, toxic tort or other damages arising as a result of environmental laws and costs associated with complying with changes in environmental laws and regulations will not be substantial and will not have a material adverse effect on our financial condition. From time to time, claims have been made against us under environmental laws. We have insurance coverage applicable to some environmental claims and to specified locations after payment of the applicable deductible. We do not anticipate material capital expenditures to meet current environmental quality control standards. We cannot assure you that more stringent regulatory standards will not be established that might require material capital expenditures.
We also must comply with federal, state and local laws and regulations governing occupational safety and health, including review by the federal Occupational Health and Safety Administration and similar state agencies. We believe we are in substantial compliance with applicable laws and regulations. Compliance does not have a material adverse affect on our business.
The engineered building systems we manufacture must meet zoning and building code requirements adopted by local governmental agencies.
PATENTS, LICENSES AND PROPRIETARY RIGHTS
We have a number of United States patents and pending patent applications, including patents and applications relating to metal roofing systems, metal overhead doors, our new pier and header system, our LB System and Retro-R(R) panel. We do not, however, consider patent protection to be a material competitive factor in our industry. We also have several registered trademarks and pending registrations in the United States.
EMPLOYEES
As of October 31, 2000, we had approximately 4,250 employees, of whom over 3,055 were manufacturing and engineering personnel. We regard our employee relations as satisfactory.
Our employees are not represented by a labor union or collective bargaining agreement. The United Steel Workers of America petitioned the National Labor Relations Board to be recognized as the collective bargaining representative of the production and maintenance employees of our Tallapoosa, Georgia facility. A union election was held at the Tallapoosa facility in January 1996, and the union lost the election. Similar elections were held at our Mattoon, Illinois facility in November 1997 and our Rancho Cucamonga, California facility in August 1998 and November 1999. The United Steel Workers of America lost each of those elections.
ITEM 2. PROPERTIES.
The Company conducts manufacturing operations at the following facilities:
Square Owned
Facility Products Feet or Leased
-------- -------- ------- ---------
Chandler, Arizona Doors and related metal components 35,000 Leased
Tomlinson, Arizona Metal components(1) 65,980 Owned
Atwater, California Metal components(2) 85,700 Owned
Rancho Cucamonga, California Metal coating and painting 98,000 Owned
Tampa, Florida Metal components(3) 28,775 Owned
Adel, Georgia Metal components(1) 59,550 Owned
Douglasville, Georgia Metal components(4) 110,536 Owned
Douglasville, Georgia Doors and related metal components 60,000 Owned
Marietta, Georgia Metal coating and painting 125,700 Owned
Tallapoosa, Georgia Engineered building systems(5) 246,000 Leased
Metal components
Nampa, Idaho Metal components(3) 42,900 Owned
Granite City, Illinois(6) Metal coating and painting 94,000 Owned
Mattoon, Illinois Metal components(2) 90,600 Owned
Shelbyville, Indiana Metal components(3) 66,450 Owned
Oskaloosa, Iowa Metal components 62,702 Owned
Nicholasville, Kentucky Metal components(7) 41,280 Owned
Monterrey, Mexico(8) Engineered building systems(9) 237,476 Owned
Jackson, Mississippi Metal components(2) 96,000 Owned
Jackson, Mississippi Metal coating and painting(9) 363,200 Owned
Omaha, Nebraska Metal components(7) 51,750 Owned
Rome, New York Metal components(3) 57,700 Owned
Oklahoma City, Oklahoma Metal components(1) 59,695 Owned
Chester, South Carolina Engineered building systems(5) 124,000 Owned
Metal components
Caryville, Tennessee Engineered building systems(5) 193,800 Owned
Metal components
Memphis, Tennessee Metal coating and painting 61,500 Owned
Nesbitt, Tennessee Metal components(1) 71,720 Owned
Ennis, Texas Metal components and studs 33,000 Owned
Grand Prairie, Texas Metal components(1) 48,027 Owned
Houston, Texas Metal components 97,000 Owned
Houston, Texas Metal components(4) 209,355 Owned
Houston, Texas Metal coating and painting 39,550 Owned
Houston, Texas Engineered building systems(5) 358,375 Owned
Metal components
Houston, Texas Doors 23,625 Owned
Houston, Texas Engineered building systems(9) 148,523 Owned
Lubbock, Texas Metal components(1)(7) 64,320 Owned
San Antonio, Texas Metal components(3) 52,360 Owned
Southlake, Texas Engineered building systems(5) 123,000 Owned
Metal components
Stafford, Texas Metal components 56,840 Leased
Salt Lake City, Utah Metal components(1) 93,150 Owned
Colonial Heights, Virginia Metal components(1) 37,000 Owned
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(1) Secondary structures and covering systems.
(2) Includes secondary structures and covering systems.
(3) Covering systems or products.
(4) Full components product range.
(5) Primary structures, secondary structures and covering systems.
(6) We own a 50% interest in a joint venture that owns this facility.
(7) Specialized products.
(8) We own a 51% interest in a joint venture that owns this facility.
(9) Primary structures.
We also maintain several drafting office facilities and retail locations in various states. We have short-term leases for these additional facilities.
We believe that our present facilities are adequate for our current and projected operations.
Additionally, we own approximately five acres of land in Houston, Texas where we have constructed a new 60,000 square foot facility. This facility is used as our principal executive and administrative offices.
In December 2000, our board of directors authorized the leasing of a new metal building components facility in Grand Rapids, Michigan that is expected to be operational during the third quarter of fiscal 2001.
ITEM 3. LEGAL PROCEEDINGS.
We are involved in various legal proceedings that we consider to be in the normal course of business. We believe that these proceedings will not have a material adverse effect on our results of operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
The information required by this Item is incorporated by reference from our 2000 Annual Report to Shareholders, bottom of page 40, regarding the market for our common stock.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this Item is incorporated by reference from our 2000 Annual Report to Shareholders, top of the inside front cover.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The information required by this Item is incorporated by reference from the following portions of our 2000 Annual Report to Shareholders: Management's Discussion and Analysis of Results of Operations and Financial Condition, pages 36 through 39.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by this Item is incorporated by reference from our 2000 Annual Report to Shareholders, page 39.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements and supplementary financial information are incorporated by reference from the indicated pages in our 2000 Annual Report to Shareholders.
Pages of Annual
Report to
Shareholders
---------------
Selected quarterly financial data 40
Consolidated statements of income for each of the three years in
the period ended October 31, 2000 22
Consolidated balance sheets at October 31, 2000 and 1999 23
Consolidated statements of shareholders' equity for each of the
three years in the period ended October 31, 2000 24
Consolidated statements of cash flows for each of the three years
in the period ended October 31, 2000 25
Notes to consolidated financial statements 26 - 33
Report of independent auditors 34
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
The information required by Items 10 through 13 of Part III is incorporated by reference from the indicated pages of our definitive proxy statement for our annual meeting of shareholders to be held on March 1, 2001.
Pages of
Proxy Statement
---------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. 3 - 7, 20
ITEM 11. EXECUTIVE COMPENSATION. 8 - 14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT. 1 - 3
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. 20
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
1. Consolidated financial statements (see Item 8).
2. Consolidated financial statement schedules.
Schedule II--Valuation and Qualifying Accounts
All other schedules are omitted because they are inapplicable or the requested information is shown in the financial statements or noted therein.
3. Exhibits.
3.1 Restated Certificate of Incorporation of NCI (filed as Exhibit 3.1 to NCI's registration statement no. 33-45612 and incorporated by reference herein)
3.2 Certificate of Amendment to Restated Certificate of Incorporation of NCI (filed as Exhibit 3.1.1 to NCI's registration statement no. 33-45612 and incorporated by reference herein)
3.3 Certificate of Amendment to Restated Certificate of Incorporation of NCI (filed as Exhibit 3.3 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1994 and incorporated by reference herein)
3.4 Certificate of Amendment to Restated Certificate of Incorporation of NCI (filed as Exhibit 2.4 to NCI's registration statement on Form 8-A filed with the SEC on July 20, 1998 and incorporated by reference herein)
3.5 Certificate of Amendment to Restated Certificate of Incorporation of NCI (filed as Exhibit 3.5 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
3.6 Amended and Restated By-Laws of NCI, as amended through February 5, 1992 (the "By-Laws") (filed as Exhibit 3.2 to NCI's registration statement no. 33-45612 and incorporated by reference herein)
3.7 Amendment No. 1 to By-Laws (filed as Exhibit 3.7 to NCI's registration statement no. 333-80029 and incorporated by reference herein)
3.8 Amendment No. 2 to By-Laws of NCI (filed as Exhibit 3.8 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1999 and incorporated by reference herein)
*3.9 Amendment No. 3 to By-Laws
4.1 Form of certificate representing shares of Company's common stock (filed as Exhibit 1 to NCI's registration statement on Form 8-A filed with the SEC on July 20, 1998 and incorporated by reference herein)
4.2 Credit Agreement, dated March 25, 1998 (the "Credit Agreement"), by and among NCI, Bank of America, N.A. (as successor in interest to NationsBank, N.A.), as administrative agent ("BOA"), NationsBanc Montgomery Securities LLC, as arranger and syndication agent, UBS AG, as documentation agent ("UBS"), and the several lenders named therein (filed as Exhibit 4.3 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.3 First Amendment to Credit Agreement, dated May 1, 1998, among NCI, BOA, UBS and the parties named therein (filed as Exhibit 4.4 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.4 Second Amendment to Credit Agreement, dated May 5, 1998, among NCI, BOA, UBS and the parties named therein (filed as Exhibit 4.5 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.5 Waiver, Consent and Third Amendment to Credit Agreement, dated May 5, 1999, among NCI, BOA, UBS and the parties named therein (filed as Exhibit 4.5 to NCI's registration statement no. 333-80029 and incorporated by reference herein)
*4.6 Fourth Amendment to Credit Agreement, dated October 30, 2000, among NCI, BOA, UBS and the parties named therein
4.7 Master Assignment and Acceptance, dated as of May 6, 1998, among BOA, UBS and the several lenders named therein (filed as Exhibit 4.6 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.8 Facility A Notes (Revolving Credit), dated May 6, 1998, of NCI in favor of lenders named therein (filed as Exhibit 4.7 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.9 Facility B Notes (Term Loan), dated May 6, 1998, of NCI in favor of lenders named therein (filed as Exhibit 4.8 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.10 Guaranty, dated May 1, 1998, between BOA and A&S Building Systems, L.P. (filed as Exhibit 4.10 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.11 Guaranty, dated May 1, 1998, between BOA and NCI Building Systems, L.P. (filed as Exhibit 4.11 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.12 Guaranty, dated May 1, 1998, between BOA and NCI Holding Corp. (filed as Exhibit 4.12 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.13 Guaranty, dated May 1, 1998, between BOA and NCI Operating Corp. (filed as Exhibit 4.13 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.14 Guaranty, dated May 1, 1998, between BOA and Metal Building Components, L.P. (formerly MBCI Operating, L.P.) (filed as Exhibit 4.16 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.15 Guaranty, dated May 1, 1998, between BOA and Metal Coaters Operating, L.P. (filed as Exhibit 4.17 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.16 Guaranty, dated May 13, 1998, between BOA and Metal Coaters of California, Inc. (filed as Exhibit 4.18 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.17 Pledge Agreement, dated May 1, 1998, between NCI and BOA (filed as Exhibit 4.19 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.18 Pledge Agreement, dated May 1, 1998, between NCI Holding Corp. and BOA (filed as Exhibit 4.20 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.19 Assignment of Partnership Interests, dated May 1, 1998, between NCI Operating Corp. and BOA (filed as Exhibit 4.22 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.20 Assignment of Partnership Interests, dated May 1, 1998, between NCI Holding Corp. and BOA (filed as Exhibit 4.23 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.21 Promissory Note, dated May 5, 1998, of NCI Holding Corp. in favor of NCI (filed as Exhibit 4.26 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.22 Note Pledge Agreement, dated May 5, 1998, between NCI and BOA (filed as Exhibit 4.27 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein)
4.23 7% Convertible Subordinated Debenture dated April 1, 1996, due April 1, 2001, between NCI Building Systems, Inc. and John T. Eubanks (filed as Exhibit 4.15 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1996 and incorporated by reference herein)
4.24 Rights Agreement, dated June 24, 1998, between NCI and Harris Trust and Savings Bank (filed as Exhibit 2 to NCI's registration statement on Form 8-A (filed with the SEC on July 9, 1998 and incorporated by reference herein)
4.25 First Amendment to Rights Agreement, dated June 24, 1999, by and between NCI and Harris Trust and Savings Bank (filed as Exhibit 3 to NCI's registration statement on Form 8-A, Amendment No. 1 filed with the SEC on June 25, 1999 and incorporated by reference herein)
10.1 Employment Agreement, dated April 10, 1989, between
NCI and Johnie Schulte, Jr. (filed as Exhibit 10.1 to
NCI's registration statement no. 33-45612 and
incorporated by reference herein)
10.2 Amendment to Employment Agreement, dated February 21,
1992, between NCI and Johnie Schulte, Jr. (filed as
Exhibit 10.1.1 to NCI's registration statement no.
33-45612 and incorporated by reference herein)
*10.3 Amended and Restated Bonus Program, as amended and
restated on December 11, 1998, September 9, 1999 and
December 7, 2000
*10.4 Stock Option Plan, as amended and restated on
December 14, 2000
*10.5 Form of Nonqualified Stock Option Agreement
*10.6 Form of Incentive Stock Option Agreement
10.7 401(k) Profit Sharing Plan (filed as Exhibit 4.1 to
NCI's registration statement no. 33-52078 and
incorporated by reference herein)
10.8 Form of Metallic Builder Agreement (filed as Exhibit
10.10 to NCI's registration statement no. 33-45612
and incorporated by reference herein)
10.9 Form of A&S Builder Agreement (filed as Exhibit 10.17
to NCI's Annual Report on Form 10-K for the fiscal
year ended October 31, 1992 and incorporated by
reference herein)
10.10 Stock Purchase Agreement, dated March 25, 1998, by
and among BTR Australia Limited and NCI, and joined
therein for certain purposes by BTR plc (filed as
Exhibit 2.1 to NCI's Current Report on Form 8-K dated
May 19, 1998 and incorporated by reference herein)
10.11 Letter Agreement, dated May 4, 1998, by and among
NCI, BTR Australia Limited and BTR plc, amending the
Stock Purchase Agreement (filed as Exhibit 2.2 to
NCI's Current Report on Form 8-K dated May 19, 1998
and incorporated by reference herein)
10.12 Note Purchase Agreement, dated April 30, 1999, by and
among NCI, the guarantors named therein, Warburg
Dillon Read LLC, Montgomery NationsBanc Securities
LLC, First Union Capital Markets Corp. and Bear,
Stearns & Co. Inc. (filed as Exhibit 10.18 to NCI's
registration statement no. 333-80029 and incorporated
by reference herein)
10.13 Registration Rights Agreement, dated May 5, 1999, by
and among NCI, the guarantors named therein, Warburg
Dillon Read LLC, Montgomery NationsBanc Securities
LLC, First Union Capital Markets Corp. and Bear,
Stearns & Co. Inc. (filed as Exhibit 10.19 to NCI's
registration statement no. 333-80029 and incorporated
by reference herein)
10.14 Indenture, dated May 5, 1999, by and among NCI, the
guarantors named therein and Harris Trust Company of
New York (filed as Exhibit 10.20 to NCI's
registration statement no. 333-80029 and incorporated
by reference herein)
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*13 2000 Annual Report to Shareholders. With the exception of the information incorporated by reference into Items 5, 6, 7 and 8 of this Form 10-K, the 2000 Annual Report to Shareholders is not to be deemed filed as part of this Form 10-K.
*21 List of Subsidiaries
*23 Consent of Independent Auditors
* Filed herewith
(b) Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 29th day of January, 2001.
NCI BUILDING SYSTEMS, INC.
By: /s/ Johnie Schulte ----------------------------------- Johnie Schulte, President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of the 29th day of January, 2001.
Name Title
---- -----
/s/ Johnie Schulte President and Chief Executive Officer and Director
------------------------ (principal executive officer)
Johnie Schulte
/s/ Robert J. Medlock Executive Vice President and Chief Financial Officer
------------------------ (principal accounting and financial officer)
Robert J. Medlock
/s/ William D. Breedlove Director
------------------------
William D. Breedlove
Director
------------------------
Sheldon R. Erikson
/s/ Gary L. Forbes Director
------------------------
Gary L. Forbes
/s/ A.R. Ginn Director
------------------------
A.R. Ginn
/s/ Robert N. McDonald Director
------------------------
Robert N. McDonald
/s/ W.B. Pieper Director
------------------------
W.B. Pieper
/s/ Daniel D. Zabcik Director
------------------------
Daniel D. Zabcik
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NCI BUILDING SYSTEMS, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED TO COSTS AT END
DESCRIPTION OF PERIOD AND EXPENSES DEDUCTIONS(1) OF PERIOD
----------- ---------- ---------------- ------------- ---------
Year ended October 31, 2000:
Reserves and allowances
deducted from asset accounts:
Allowance for uncollectible
accounts and backcharges........... $3,309,000 $2,645,000 $2,298,000 $3,656,000
Year ended October 31, 1999:
Reserves and allowances
deducted from asset accounts:
Allowance for uncollectible $2,321,000 $2,402,000 $1,414,000 $3,309,000
accounts and backcharges...........
Year ended October 31, 1998:
Reserves and allowances
deducted from asset accounts:
Allowance for uncollectible $1,498,000 $2,625,000 $1,802,000 $2,321,000
accounts and backcharges...........
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(1) Uncollectible accounts, net of recoveries.
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Restated Certificate of Incorporation of NCI (filed as Exhibit
3.1 to NCI's registration statement no. 33-45612 and
incorporated by reference herein)
3.2 Certificate of Amendment to Restated Certificate of
Incorporation of NCI (filed as Exhibit 3.1.1 to NCI's
registration statement no. 33-45612 and incorporated by
reference herein)
3.3 Certificate of Amendment to Restated Certificate of
Incorporation of NCI (filed as Exhibit 3.3 to NCI's Annual
Report on Form 10-K for the fiscal year ended October 31, 1994
and incorporated by reference herein)
3.4 Certificate of Amendment to Restated Certificate of
Incorporation of NCI (filed as Exhibit 2.4 to NCI's
registration statement on Form 8-A filed with the SEC on July
20, 1998 and incorporated by reference herein)
3.5 Certificate of Amendment to Restated Certificate of
Incorporation of NCI (filed as Exhibit 3.5 to NCI's Annual
Report on Form 10-K for the fiscal year ended October 31, 1998
and incorporated by reference herein)
3.6 Amended and Restated By-Laws of NCI, as amended through
February 5, 1992 (the "By-Laws") (filed as Exhibit 3.2 to
NCI's registration statement no. 33-45612 and incorporated by
reference herein)
3.7 Amendment No. 1 to By-Laws (filed as Exhibit 3.7 to NCI's
registration statement no. 333-80029 and incorporated by
reference herein)
3.8 Amendment No. 2 to By-Laws (filed as Exhibit 3.8 to NCI's
Annual Report on Form 10-K for the fiscal year ended October
31, 1999 and incorporated by reference herein)
*3.9 Amendment No. 3 to By-Laws
4.1 Form of certificate representing shares of Company's common
stock (filed as Exhibit 1 to NCI's registration statement on
Form 8-A filed with the SEC on July 20, 1998 and incorporated
by reference herein)
4.2 Credit Agreement, dated March 25, 1998 (the "Credit
Agreement"), by and among NCI, Bank of America, N.A. (as
successor in interest to NationsBank, N.A.), as administrative
agent ("BOA"), NationsBanc Montgomery Securities LLC, as
arranger and syndication agent, UBS AG, as documentation agent
("UBS"), and the several lenders named therein (filed as
Exhibit 4.3 to NCI's Annual Report on Form 10-K for the fiscal
year ended October 31, 1998 and incorporated by reference
herein)
4.3 First Amendment to Credit Agreement, dated May 1, 1998, among
NCI, BOA, UBS and the parties named therein (filed as Exhibit
4.4 to NCI's Annual Report on Form 10-K for the fiscal year
ended October 31, 1998 and incorporated by reference herein)
|
4.4 Second Amendment to Credit Agreement, dated May 5, 1998, among
NCI, BOA, UBS and the parties named therein (filed as Exhibit
4.5 to NCI's Annual Report on Form 10-K for the fiscal year
ended October 31, 1998 and incorporated by reference herein)
4.5 Waiver, Consent and Third Amendment to Credit Agreement, dated
May 5, 1999, among NCI, BOA, UBS and the parties named therein
(filed as Exhibit 4.5 to NCI's registration statement no.
333-80029 and incorporated by reference herein)
*4.6 Fourth Amendment to Credit Agreement, dated October 30, 2000,
among NCI, BOA, UBS and the parties named therein
4.7 Master Assignment and Acceptance, dated as of May 6, 1998,
among BOA, UBS and the several lenders named therein (filed as
Exhibit 4.6 to NCI's Annual Report on Form 10-K for the fiscal
year ended October 31, 1998 and incorporated by reference
herein)
4.8 Facility A Notes (Revolving Credit), dated May 6, 1998, of NCI
in favor of lenders named therein (filed as Exhibit 4.7 to
NCI's Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference herein)
4.9 Facility B Notes (Term Loan), dated May 6, 1998, of NCI in
favor of lenders named therein (filed as Exhibit 4.8 to NCI's
Annual Report on Form 10-K for the fiscal year ended October
31, 1998 and incorporated by reference herein)
4.10 Guaranty, dated May 1, 1998, between BOA and A&S Building
Systems, L.P. (filed as Exhibit 4.10 to NCI's Annual Report on
Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
4.11 Guaranty, dated May 1, 1998, between BOA and NCI Building
Systems, L.P. (filed as Exhibit 4.11 to NCI's Annual Report on
Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
4.12 Guaranty, dated May 1, 1998, between BOA and NCI Holding Corp.
(filed as Exhibit 4.12 to NCI's Annual Report on Form 10-K for
the fiscal year ended October 31, 1998 and incorporated by
reference herein)
4.13 Guaranty, dated May 1, 1998, between BOA and NCI Operating
Corp. (filed as Exhibit 4.13 to NCI's Annual Report on Form
10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
4.14 Guaranty, dated May 1, 1998, between BOA and Metal Building
Components, L.P. (formerly MBCI Operating, L.P.) (filed as
Exhibit 4.16 to NCI's Annual Report on Form 10-K for the
fiscal year ended October 31, 1998 and incorporated by
reference herein)
4.15 Guaranty, dated May 1, 1998, between BOA and Metal Coaters
Operating, L.P. (filed as Exhibit 4.17 to NCI's Annual Report
on Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
4.16 Guaranty, dated May 13, 1998, between BOA and Metal Coaters of
California, Inc. (filed as Exhibit 4.18 to NCI's Annual Report
on Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
4.17 Pledge Agreement, dated May 1, 1998, between NCI and BOA
(filed as Exhibit 4.19 to NCI's Annual Report on Form 10-K for
the fiscal year ended October 31, 1998 and incorporated by
reference herein)
|
4.18 Pledge Agreement, dated May 1, 1998, between NCI Holding Corp.
and BOA (filed as Exhibit 4.20 to NCI's Annual Report on Form
10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
4.19 Assignment of Partnership Interests, dated May 1, 1998,
between NCI Operating Corp. and BOA (filed as Exhibit 4.22 to
NCI's Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference herein)
4.20 Assignment of Partnership Interests, dated May 1, 1998,
between NCI Holding Corp. and BOA (filed as Exhibit 4.23 to
NCI's Annual Report on Form 10-K for the fiscal year ended
October 31, 1998 and incorporated by reference herein)
4.21 Promissory Note, dated May 5, 1998, of NCI Holding Corp. in
favor of NCI (filed as Exhibit 4.26 to NCI's Annual Report on
Form 10-K for the fiscal year ended October 31, 1998 and
incorporated by reference herein)
4.22 Note Pledge Agreement, dated May 5, 1998, between NCI and BOA
(filed as Exhibit 4.27 to NCI's Annual Report on Form 10-K for
the fiscal year ended October 31, 1998 and incorporated by
reference herein)
4.23 7% Convertible Subordinated Debenture dated April 1, 1996, due
April 1, 2001, between NCI Building Systems, Inc. and John T.
Eubanks (filed as Exhibit 4.15 to NCI's Annual Report on Form
10-K for the fiscal year ended October 31, 1996 and
incorporated by reference herein)
4.24 Rights Agreement, dated June 24, 1998, between NCI and Harris
Trust and Savings Bank (filed as Exhibit 2 to NCI's
registration statement on Form 8-A (filed with the SEC on July
9, 1998 and incorporated by reference herein)
4.25 First Amendment to Rights Agreement, dated June 24, 1999, by
and between NCI and Harris Trust and Savings Bank (filed as
Exhibit 3 to NCI's registration statement on Form 8-A,
Amendment No. 1 filed with the SEC on June 25, 1999 and
incorporated by reference herein)
10.1 Employment Agreement, dated April 10, 1989, between NCI and
Johnie Schulte, Jr. (filed as Exhibit 10.1 to NCI's
registration statement no. 33-45612 and incorporated by
reference herein)
10.2 Amendment to Employment Agreement, dated February 21, 1992,
between NCI and Johnie Schulte, Jr. (filed as Exhibit 10.1.1
to NCI's registration statement no. 33-45612 and incorporated
by reference herein)
*10.3 Amended and Restated Bonus Program, as amended and restated on
December 11, 1998, September 9, 1999 and December 7, 2000
*10.4 Stock Option Plan, as amended and restated on December 14,
2000
*10.5 Form of Nonqualified Stock Option Agreement
*10.6 Form of Incentive Stock Option Agreement
10.7 401(k) Profit Sharing Plan (filed as Exhibit 4.1 to NCI's
registration statement no. 33-52078 and incorporated by
reference herein)
10.8 Form of Metallic Builder Agreement (filed as Exhibit 10.10 to
NCI's registration statement no. 33-45612 and incorporated by
reference herein)
|
10.9 Form of A&S Builder Agreement (filed as Exhibit 10.17 to NCI's
Annual Report on Form 10-K for the fiscal year ended October
31, 1992 and incorporated by reference herein)
10.10 Stock Purchase Agreement, dated March 25, 1998, by and among
BTR Australia Limited and NCI, and joined therein for certain
purposes by BTR plc (filed as Exhibit 2.1 to NCI's Current
Report on Form 8-K dated May 19, 1998 and incorporated by
reference herein)
10.11 Letter Agreement, dated May 4, 1998, by and among NCI, BTR
Australia Limited and BTR plc, amending the Stock Purchase
Agreement (filed as Exhibit 2.2 to NCI's Current Report on
Form 8-K dated May 19, 1998 and incorporated by reference
herein)
10.12 Note Purchase Agreement, dated April 30, 1999, by and among
NCI, the guarantors named therein, Warburg Dillon Read LLC,
Montgomery NationsBanc Securities LLC, First Union Capital
Markets Corp. and Bear, Stearns & Co. Inc. (filed as Exhibit
10.18 to NCI's registration statement no. 333-80029 and
incorporated by reference herein)
10.13 Registration Rights Agreement, dated May 5, 1999, by and among
NCI, the guarantors named therein, Warburg Dillon Read LLC,
Montgomery NationsBanc Securities LLC, First Union Capital
Markets Corp. and Bear, Stearns & Co. Inc. (filed as Exhibit
10.19 to NCI's registration statement no. 333-80029 and
incorporated by reference herein)
10.14 Indenture, dated May 5, 1999, by and among NCI, the guarantors
named therein and Harris Trust Company of New York (filed as
Exhibit 10.20 to NCI's registration statement no. 333-80029
and incorporated by reference herein)
*13 2000 Annual Report to Shareholders. With the exception of the
information incorporated by reference into Items 5, 6, 7 and 8
of this Form 10-K, the 2000 Annual Report to Shareholders is
not to be deemed filed as part of this Form 10-K.
*21 List of Subsidiaries
*23 Consent of Independent Auditors
|
* Filed herewith
EXHIBIT 3.9
AMENDMENT NO. 3
TO THE
AMENDED AND RESTATED BY-LAWS OF
NCI BUILDING SYSTEMS, INC.
September 7, 2000
The Amended and Restated By-Laws, dated as of February 5, 1992 and as amended by Amendment No. 1 thereto dated as of March 17, 1999 and Amendment No. 2 thereto dated September 9, 1999 (the "By-Laws"), of NCI Building Systems, Inc., a Delaware corporation (the "Company") are hereby amended as follows:
1. Article VI, Section 2 of the By-Laws is hereby amended to read in its entirety as follows:
"SECTION 2. Prepaid Expenses. Expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the corporation as incurred and in advance of the final disposition of such action, suit or proceeding, provided the party undertakes in writing (in form and substance reasonably satisfactory to the corporation) to repay the amount paid or reimbursed if it is ultimately determined that such party is
not entitled to indemnification for such expenses."
EXHIBIT 4.6
FOURTH AMENDMENT
THIS FOURTH AMENDMENT (this "AMENDMENT") is entered into as of October 30, 2000, among NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Bank of America, N.A., successor by merger to NationsBank, N.A., as Administrative Agent ("AGENT"), UBS AG, Stamford Branch, successor by merger to Swiss Bank Corporation, as Documentation Agent ("DOCUMENTATION AGENT"), and the financial institutions named as Lenders therein (collectively, "LENDERS"). Capitalized terms not defined herein have the meaning given such terms in the Credit Agreement described below.
RECITALS
A. Borrower, Agent, Documentation Agent, NationsBank Montgomery Securities LLC, as Syndication Agent, and Lenders executed a Credit Agreement dated as of March 25, 1998 (as previously modified by the First Amendment dated May 1, 1998, the Second Amendment dated May 5, 1998, the Waiver, Consent and Third Amendment dated May 5, 1999, the Waiver and Consent dated November 15, 1999, and the Waiver and Consent dated March 21, 2000, and as amended, restated or supplemented from time to time, the "CREDIT AGREEMENT").
B. Borrower has requested certain modifications to SECTIONS 9.9 and 10.4 of the Credit Agreement in return for modifications to SECTIONS 10.2 and 10.3 thereof. Determining Lenders are willing to accept such modifications, subject to the terms and conditions set forth in this Amendment.
NOW THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agree as follows:
1. Amendments to Credit Agreement. The Credit Agreement is hereby amended as follows:
(a) The first sentence of SECTION 9.9 ("Dividends and Distributions") of the Credit Agreement is hereby amended to read in its entirety as follows:
"Borrower may not declare, make or pay any Distribution, other than (a) Distributions declared, made or paid by Borrower wholly in the form of its capital stock and (b) repurchases by Borrower of up to $50,000,000 of its common stock through a series of open-market transactions or in privately negotiated, off-market transactions."
(b) SECTION 10.2 ("Maximum Leverage Ratio") of the Credit Agreement is hereby amended so that the ratio for the dates set forth below shall be the ratio set forth below opposite such dates:
October 31, 2000 3.50 to 1.00 Thereafter 3.50 to 1.00 |
(c) SECTION 10.3 ("Maximum Senior Debt Ratio") of the Credit Agreement is hereby amended so that the ratio for the dates set forth below shall be the ratio set forth below opposite such dates:
October 31, 2000 2.50 to 1.00 Thereafter 2.50 to 1.00 |
(d) SECTION 10.4 ("Minimum Fixed Charge Coverage Ratio") of the Credit Agreement is hereby amended by changing the ratio required as of October 31, 2000 from 1.35 to 1.00 to 1.30 to 1.00.
(e) SCHEDULE 1 to the Credit Agreement is hereby replaced with the SCHEDULE 1 attached to this Amendment.
2. Merger of NationsBank, N.A. and Bank of America, N.A. All references in the Loan Documents to NationsBank, N.A., and NationsBanc Montgomery Securities LLC are hereby replaced with references to Bank of America, N.A., and Banc of America Securities LLC, respectively.
3. Merger of Swiss Bank Corporation and UBS, AG. All references in the Loan Documents to Swiss Bank Corporation are hereby replaced with references to UBS AG, Stamford Branch.
4. Conditions. This Amendment shall not be effective until (a) it has been duly executed and delivered by (i) Borrower, (ii) each Guarantor, (iii) Agent, (iv) Documentation Agent, and (v) at least Determining Lenders, and (b) Borrower has delivered to Agent for the benefit of each Lender that executes and delivers this Amendment on or before October 30, 2000, an amendment fee equal to 0.05% of such Lender's Commitment.
5. Representations and Warranties. Borrower hereby represents and warrants to Agent and each Lender that: (a) the execution and delivery of this Amendment has been authorized by all requisite action on its part and will not violate its organizational documents (and Borrower hereby agrees to furnish Agent with evidence of such authorization upon request); (b) the representations and warranties in each Loan Document to which it is a party are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof (except to the extent that (i) such representations and warranties speak to a specific date, or (ii) the facts on which such representations and warranties are based have been changed by transactions contemplated by the Credit Agreement); (c) it is in full compliance with all Loan Documents to which it is a party; and (d) no default or Potential Default exists.
6. Miscellaneous. This Amendment is a Loan Document, and, therefore, this Amendment is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated herein by reference the same as if set forth herein verbatim. Except as affected by this Amendment, the Loan Documents are unchanged and continue in full force and effect. Borrower agrees that all the Loan Documents to which it is a party remain in full force and effect and continue to evidence its legal, valid, and binding obligations enforceable in accordance with their terms (as the same are affected by this Amendment). Borrower hereby releases Agent and each Lender from any liability for actions or
failures to act in connection with the Loan Documents prior to the date hereof. This Amendment shall be binding upon and inure to the benefit of each of the undersigned and their respective successors and permitted assigns.
7. Fees and Expenses. Borrower agrees to pay the reasonable fees and expenses of counsel to Agent for services rendered in connection with the preparation, negotiation and execution of this Amendment.
8. Form. Each agreement, document, instrument or other writing to be furnished Agent or Lenders under any provision of this Amendment must be in form and substance satisfactory to Agent and its counsel.
9. Counterparts. This Amendment may be executed in more than one counterpart, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument.
10. Final Agreement. THE LOAN DOCUMENTS, AS AMENDED HEREBY, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL, AGREEMENTS AMONG THE PARTIES.
EXECUTED as of the date first written above.
NCI BUILDING SYSTEMS, INC., as Borrower
By: /s/ Robert J. Medlock ---------------------------- Robert J. Medlock Executive Vice President and Chief Financial Officer |
BANK OF AMERICA, N.A., as Administrative Agent and a Lender
By: /s/ Richard L. Nichols, Jr. -------------------------------------- Richard L. Nichols, Jr. Managing Director |
UBS AG, STAMFORD BRANCH, as Documentation Agent and a Lender
By: /s/ Wilfred V. Saint
--------------------------------------
Name: Wilfred V. Saint
---------------------------------
Title: Associate Director
Banking Product Services US
--------------------------------
By: /s/ Lynne B. Alfarone
--------------------------------------
Name: Lynne B. Alfarone
---------------------------------
Title: Associate Director
Banking Product Services US
--------------------------------
|
THE BANK OF NOVA SCOTIA, as a Lender
By: /s/ A.S. Norsworthy
--------------------------------------
Name: A.S. Norsworthy
---------------------------------
Title: SR. Team Leader-Loan Operations
--------------------------------
|
UNION BANK OF CALIFORNIA, N.A., as a
Lender
By: /s/ Hagop V. Jazmadarian
--------------------------------------
Name: Hagop V. Jazmadarian
---------------------------------
Title: Vice President
--------------------------------
|
IMPERIAL BANK, as a Lender
By: /s/ Ray Vadalma
--------------------------------------
Name: Ray Vadalma
---------------------------------
Title: Senior Managing Director
--------------------------------
|
FIRST UNION NATIONAL BANK, as a Lender
By: /s/ David C. Hauglid
--------------------------------------
Name: David C. Hauglid
---------------------------------
Title: Vice President
--------------------------------
|
CREDIT INDUSTRIEL ET COMMERICAL, as a
Lender
By: /s/ Anthony Rock
--------------------------------------
Name: Anthony Rock
---------------------------------
Title: Vice President
--------------------------------
By: /s/ Brian O'Leary
--------------------------------------
Name: Brian O'Leary
---------------------------------
Title: Vice President
--------------------------------
|
COMERICA BANK, as a Lender
By: /s/ T. Brancroft Mattei
--------------------------------------
Name: T. Brancroft Mattei
---------------------------------
Title: Account Officer
--------------------------------
|
CREDIT LYONNAIS NEW YORK BRANCH, as a
Lender
By: /s/ Attla Koc
--------------------------------------
Name: Attla Koc
---------------------------------
Title: Sr. V.P.
--------------------------------
|
BANK AUSTRIA CREDITANSTALT CORPORATE
FINANCE, INC., as a Lender
By: /s/ John Taylor
--------------------------------------
Name: John Taylor
---------------------------------
Title: Vice President
--------------------------------
By: /s/ Scott Kray
--------------------------------------
Name: Scott Kray
---------------------------------
Title: Senior Vice President
--------------------------------
|
GENERAL ELECTRIC CAPITAL CORPORATION, as
a Lender
By: /s/ Gregory Hong
--------------------------------------
Name: Gregory Hong
---------------------------------
Title: Duly Authorized Signatory
--------------------------------
|
WACHOVIA BANK, N.A., as a Lender
CIBC, INC., as a Lender
By: /s/ Stephanie E. DeVane
--------------------------------------
Name: Stephanie E. DeVane
---------------------------------
Title: Executive Director
CIBC World Markets Corp., as
Agent
--------------------------------
|
CREDIT AGRICOLE INDOSUEZ, as a Lender
By: /s/ Patrick Cocquerel
--------------------------------------
Name: Patrick Cocquerel
---------------------------------
Title: FVP, Managing Director
--------------------------------
By: /s/ Michael R. Quiray
--------------------------------------
Name: Michael R. Quiray
---------------------------------
Title: VP, SR Manager
--------------------------------
|
THE FUJI BANK, LIMITED, as a Lender
By: /s/ Nohucki Koike
--------------------------------------
Name: Nohuoki Koike
---------------------------------
Title: Vice President & Senior Team
Leader
--------------------------------
|
THE INDUSTRIAL BANK OF JAPAN, LIMITED, as
a Lender
By: /s/ J. Kenneth Biegen
--------------------------------------
Name: J. Kenneth Biegen
---------------------------------
Title: Senior Vice President
--------------------------------
|
THE SUMITOMO BANK, as a Lender
By: /s/ Suresh S. Tata
--------------------------------------
Name: Suresh S. Tata
---------------------------------
Title: Senior Vice President
--------------------------------
|
SOUTHWEST BANK OF TEXAS, N.A., as a
Lender
By: /s/ Gary Tolbert
--------------------------------------
Name: Gary Tolbert
---------------------------------
Title: Sr. V.P.
--------------------------------
|
SUNTRUST BANK, as a Lender
By: /s/ Donald L. Gaudette, Jr.
--------------------------------------
Name: Donald L. Gaudette, Jr.
---------------------------------
Title: Director
--------------------------------
|
NATIONAL CITY BANK, as a Lender
By: /s/ Scott Brewer
--------------------------------------
Name: Scott Brewer
---------------------------------
Title: VP
--------------------------------
|
TEXTRON FINANCIAL CORPORATION, as a
Lender
By: /s/ Stuart Schulman
--------------------------------------
Name: Stuart Schulman
---------------------------------
Title: Managing Director
--------------------------------
|
GUARANTORS' CONSENT
Each of the undersigned:
(a) consents and agrees to this Amendment and agrees that the Loan Documents to which it is a party shall remain in full force and effect and shall continue to be the legal, valid, and binding obligations of the undersigned enforceable in accordance with their terms:
(b) represents and warrants to each Lender that: (a) the execution and delivery of this Amendment have been authorized by all requisite action on its part and will not violate its organizational documents (and agrees to furnish Agent with evidence of such authorization upon request); (b) the representations and warranties in each Loan Document to which it is a party are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof (except to the extent that (i) such representations and warranties speak to a specific date, or (ii) the facts on which such representations and warranties are based have been changed by transactions contemplated by the Credit Agreement); and (c) it is in full compliance with all Loan Documents to which it is a party; and (d) no Default or Potential Default exists; and
(c) releases Agent, Documentation Agent and each Lender from any liability for actions or failures to act in connection with the Loan Documents prior to the date hereof.
NCI HOLDING CORP.
NCI OPERATING CORP.
METAL COATERS OF CALIFORNIA, INC.
DOUBLECOTE, L.L.C.
By: /s/ Robert J. Medlock -------------------------------------- Robert J. Medlock Executive Vice President and Chief Financial Officer |
A & S BUILDING SYSTEMS, L.P.
NCI BUILDING SYSTEMS, L.P.
METAL BUILDING COMPONENTS, L.P.
METAL COATERS OPERATING, L.P.
By: NCI OPERATING CORP.,
as General Partner
By: /s/ Robert J. Medlock -------------------------------------- Robert J. Medlock Executive Vice President and Chief Financial Officer |
SCHEDULE 1
(As of October 30, 2000)
Borrower and Guarantors
NCI Building Systems, Inc.
10943 North Sam Houston Parkway West
Houston, Texas 77064
Attn: Robert J. Medlock
Chief Financial Officer
FAX: (281) 477-9675
Agent
Bank of America, N.A.
NCI-007-17-11
100 North Tryon Street, 17th Floor
Charlotte, North Carolina 28255-0001
Attn: Richard L. Nichols, Jr.
Managing Director
FAX: (704) 386-3271
Copy to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002
Attn: F. Walter Bistline, Jr.
FAX: (713) 226-0281
EXHIBIT 10.3
NCI BUILDING SYSTEMS, INC.
BONUS PROGRAM
[AMENDED AND RESTATED AS OF DECEMBER 11, 1998,
SEPTEMBER 9, 1999, NOVEMBER 8, 2000 AND DECEMBER 7, 2000]
The Bonus Program (the "Program") is as follows:
1. Purpose. The purpose of the Program is:
(A) To provide exceptional cash rewards earned by exceptional performance such that the aggregate bonuses paid to all of the Company's employees in a fiscal year, including those awarded under the Program, approximate 10% of the pre-tax, pre-bonus profits of the Company for that fiscal year; and
(B) To focus management attention on key objectives of the Company by basing their bonus on return on assets and growth in earnings per share.
2. Administration. The Program will be administered and interpreted by the Compensation Committee of the Board of Directors of the Company (the "Committee").
3. Bonus Performance Standards.
(A) Combination of ROA and EPS. Level 1 and Level 2 participants will be eligible for the award of an annual cash bonus equal to a percentage of their respective base salaries, based upon the Company's achievement of both a specified return on assets ("ROA") and a specified increase in earnings per share ("EPS Growth") for the fiscal year.
No cash bonuses will be awarded to these participants if (1) both ROA and EPS Growth are less than 20%, or (2) ROA is less than 10%.
Subject to the minimum requirements for ROA and EPS Growth, Level 2 participants will be eligible for a cash bonus award based upon the attached grid of ROA and EPS Growth achievement, in which the bonus eligible for award is the percentage of base salary indicated at each intersecting grid mark for ROA and EPS Growth (e.g., ROA of 30% and EPS Growth of 20% results in a 50% cash bonus). The maximum bonus for Level 2 participants will be 85% of base salary.
Cash bonus awards for which Level 1 participants are eligible also will be based on the attached grid of ROA and EPS Growth achievement, but will be 1.5 times the percentage of base salary indicated for the Level 2 participants. The maximum bonus for Level 1 participants will be 127.5% of base salary.
(B) ROA Only. Level 3 and Level 4 participants will be eligible for the award of a cash bonus equal to a percentage of their respective base salaries, based upon the Company's achievement of a specified ROA for the fiscal year.
No cash bonuses will be awarded to these participants if ROA is less than 20%.
Effective for fiscal year 2001 and thereafter, the Committee shall place all Level 3 participants in five categories. The minimum bonuses for Level 3 participants shall range from 15% to 25% of base salary. If ROA is between 20% and 30%, Level 3 participants will be eligible for a cash bonus in accordance with the following table, up to a maximum bonus of double their minimum bonus:
Additional Percentage
Minimum of Base Salary for each Maximum
Category Bonus 1% Increment of ROA Bonus
-------- ------- ----------------------- -------
A 15% 1.5% 30%
B 17.5% 1.75% 35%
C 20% 2% 40%
D 22.5% 2.25% 45%
E 25% 2.5% 50%
|
If ROA is 20% or more, Level 4 participants will be eligible for the award of a cash bonus equal to 12.5% of base salary and an additional 1.25% of base salary for each 1% increment in ROA over 20%. The maximum bonus for Level 4 participants will be 25% of base salary.
4. Participants and Eligibility.
(A) Whether or not to award a cash bonus to any particular participant is within the absolute discretion of the Company and the Committee. No bonus award to a Level 1, 2 or 3 participant may be paid unless and until and approved by the Committee, and no bonus award may be paid to a Level 4 participant unless and until the Committee has approved the aggregate employee bonus pool for that fiscal year.
(B) A participant shall not be eligible for and shall not be entitled to receive a bonus for any fiscal year's performance unless the participant is employed by the Company or one of its subsidiaries both on the last day of the fiscal year and on the date of approval by the Committee of the bonus (if a Level 1, 2 or 3 participant) or the aggregate employee bonus pool for that year (if a Level 4 participant).
(C) The Committee, in its sole discretion, shall determine the Level 1, Level 2 and Level 3 participants for any given fiscal year; provided, however, the Committee and/or the Executive Committee shall determine the categories into which Level 3 participants will be placed. Designation of a manager as a participant for any fiscal year is in the absolute discretion of the Company and the Committee and does not entitle that participant to remain as a participant in any subsequent year.
(D) Addition, removal or movement of participants into, from or between any of Levels 1, 2 or 3 must be submitted to and approved by the Committee. The Level 1 managers, with the approval of the Chairman of the Board and President, shall have discretion to add or remove participants at Level 4 without further action of the Committee, provided the aggregate bonuses paid to all employees do not exceed the amount of the employee bonus pool for that year approved by the Committee.
5. ROA and EPS Calculation. The ROA and EPS for each fiscal year (including 1998) shall be calculated using the asset and pre-tax income amounts set forth on the audited annual financial statements of the Company for that fiscal year and, when appropriate to the calculations, the internally generated financial statements for each month and quarter of the fiscal year, prepared in accordance with generally accepted accounting principles, with the following adjustments:
(A) For all fiscal years, the following shall be excluded from the calculation of assets: (i) cash; (ii) credit balances on accounts receivable; (iii) deferred income taxes; (iv) deferred financing costs; and (v) goodwill resulting from the acquisition of Amatek Holdings, Inc. and its subsidiaries, including Metal Building Components, Inc. ("MBCI Goodwill").
(B) For all fiscal years, interest expense shall be added back to pre-tax income and income from investment of cash, if any, shall be deducted.
(C) For fiscal years 1998 and 1999 only, amortization and depreciation of the MBCI Goodwill and of the investment in Midwest Metal Coatings, LLC shall be added back to pre-tax income and the income or loss of Midwest Metal Coatings, LLC shall be excluded.
(D) For fiscal 2000 and all fiscal years thereafter, the following shall be excluded from the calculation of assets: (i) the Company's investment in its corporate headquarters facility (the "Headquarters"); and (ii) the Company's investment in the 50% ownership interest in DOUBLECOTE, L.L.C. ("DOUBLECOTE") acquired from Consolidated Systems, Inc.
(E) For fiscal 2000 and all fiscal years thereafter, the following shall be excluded from the operating income used to calculate ROA: (i) any rentals or other revenue received with respect to the Headquarters; and (ii) the following operating income of
DOUBLECOTE (the forecasted additional income presented to the Board of Directors in connection with its approval of the purchase of the 50% interest):
FY 2000 $2,085,416 (7/12ths of total for FY 2000) FY 2001 $3,958,000 FY 2002 $4,358,000 FY 2003 $4,729,000 FY 2004 $5,076,000 FY 2005 $5,076,000 FY 2006 $5,076,000 FY 2007 $5,076,000 FY 2008 $5,076,000 FY 2009 $5,076,000 |
(If actual income for DOUBLECOTE exceeds or falls short of the amount forecasted for each period, it will increase or decrease the amount determined each year for employee bonuses.)
If the Company conducts a public offering of equity securities, the Committee will evaluate and determine at that time whether any adjustments should be made to the calculation of EPS Growth.
6. Interpretation. The Committee shall interpret the Program and shall prescribe such rules and regulations in connection with the operation of the Program as it determines to be advisable. The Committee may rescind and amend its rules, regulations and interpretations.
7. Amendment or Termination. The Program may be terminated at any time or amended from time to time by the Committee without the consent or approval of the participants in the Program.
8. Effect of Program. Neither the adoption of the Program nor any action of the Committee, including action taken at any time to terminate or amend the Program, shall be deemed to give any officer, manager, employee, participant or other person any right to receive a bonus or any other rights, whether as a third party beneficiary or otherwise.
EXHIBIT 10.4
NCI BUILDING SYSTEMS, INC.
STOCK OPTION PLAN
[AMENDED AND RESTATED AS OF DECEMBER 14, 2000]
On April 11, 1989, the Board of Directors of NCI Building Systems, Inc. (then named National Components Incorporated), a Delaware corporation (the "Company"), adopted the Nonqualified Stock Option Plan (the "Plan"). The Company subsequently amended the Plan from time to time.
On December 12, 1996, the Board of Directors of the Company amended and restated the Plan in its entirety to, among other things, increase the number of shares of Common Stock that may be made the subject of options under the Plan, set forth the terms for the automatic grant of options to Non-Employee Directors, extend the term of the Plan and provide that stockholder approval of any amendments to the Plan shall not be required except for an amendment that would increase the number of securities that may be issued under the Plan. The Company subsequently amended the Plan, as amended and restated as of December 12, 1996, from time to time.
On December 14, 2000, the Board of Directors of the Company amended and
restated the Plan in its entirety to, among other things, increase the number of
shares of Common Stock that may be made the subject of options under the Plan
and provide for the granting of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended.
The Plan, as so amended and restated on December 14, 2000, is as follows:
1. PURPOSE. The purpose of the Plan is to provide certain Key Employees and consultants (i.e., persons who provide management or consulting services) of the Company and the Non-Employee Directors with a proprietary interest in the Company through the granting of Options which will
(a) increase the interest of the Key Employees, consultants, and Non-Employee Directors in the Company's welfare;
(b) furnish an incentive to the Key Employees, consultants, and Non-Employee Directors to continue their services for the Company; and
(c) provide a means through which the Company may attract able persons to enter its employ or to provide management and consulting services to the Company or to serve as Non-Employee Directors.
2. ADMINISTRATION. The Plan will be administered and interpreted by the Board. The Board may delegate to any Committee or Committees of the Board the power and authority to grant Options to any or all classes of Key Employees of the Company and to administer and interpret the Plan as its relates to such Key Employees and any Options granted to them.
3. PARTICIPANTS. The Board may from time to time select the particular Key Employees of and consultants to the Company and its Subsidiaries to whom Options are to be granted, and who will, upon such grant, become Participants in the Plan. Each Non-Employee Director of the Company shall be granted an Option under the Plan from time to time as provided herein and, upon the initial grant of an Option, will become a Participant in the Plan. The Board has the authority, in its complete discretion, to grant Options to Participants. A Participant may be granted more than one Option under the Plan, and Options may be granted at any time or time during the term of the Plan.
4. STOCK OWNERSHIP LIMITATION. No Incentive Option may be granted to an Employee who owns more than 10% of the voting power of all classes of stock of the Company or its Subsidiaries. This limitation will not apply if the Option price is at least 110% of the fair market value of the Common Stock at the time the Incentive Option is granted and the Incentive Option is not exercisable more than five years from the date it is granted.
5. SHARES SUBJECT TO PLAN. After December 14, 2000, the Board may grant Options under the Plan for not more than 1,427,694 shares of Common Stock. Options may not be granted to any Participant for more than 200,000 shares of Common Stock. These numbers may be adjusted to reflect, if deemed appropriate by the Board, any stock dividend, stock split, share combination, recapitalization or the like, of or by the Company. Shares to be optioned and sold may be made available from either authorized but unissued Common Stock or Common Stock held by the Company in its treasury. Shares that by reason of the expiration of an Option or otherwise are no longer subject to purchase pursuant to an Option granted under the Plan may be reoffered under the Plan.
6. LIMITATION ON AMOUNT. The aggregate fair market value (determined at the time of grant) of the shares of Common Stock which any Employee is first eligible to purchase in any calendar year by exercise of Incentive Options granted under the Plan and all incentive stock option plans (within the meaning of Section 422 of the Code) of the Company or its Subsidiaries shall not exceed $100,000. For this purpose, the fair market value (determined at the respective date of grant of each option) of the stock purchasable by exercise of an Incentive Option (or an installment thereof) shall be counted against the $100,000 annual limitation for an Employee only for the calendar year such stock is first purchasable under the terms of the Incentive Option.
7. GRANT OF OPTIONS; ALLOTMENT OF SHARES.
(a) The Board is authorized to grant Incentive Options, Nonqualified Options, or a combination of both under the Plan; however, Incentive Options may be granted only to Employees. The Board shall determine the number of shares of Common Stock to be offered from time to time by grant of Options to Key Employees of or consultants to the Company or its Subsidiaries. The grant of an Option to a Key Employee or consultant shall not be deemed either to entitle the Key Employee or consultant to, or to disqualify the Key Employee or consultant from, participation in any other grant of Options under the Plan.
(b) On the date of his or her initial election or appointment to the Board, a Non-Employee Director shall be granted a Nonqualified Option to purchase 5,000 shares of Common Stock. Beginning on December 15, 2000 and on each June 15th and December 15th thereafter, each Non-Employee Director who shall have served at least six months on that date shall be granted a Nonqualified Option to purchase that number of whole shares of Common Stock having a fair market value equal to (i) $30,000 if the Non-Employee Director is the Chairman of any committee of directors appointed by the Board or (ii) $25,000 if the Non-Employee Director does not serve as the Chairman of any committee of directors appointed by the Board. Fractional shares subject to the Nonqualified Option shall be rounded to the nearest full shares. Fractional shares of 0.5 shall be rounded upward.
8. OPTION AGREEMENTS. Options granted pursuant to the Plan shall be evidenced by Option Agreements containing such terms and provisions as are approved by the Board, but not inconsistent with the Plan, including provisions that may be necessary to assure that any Option that is intended to be an Incentive Option will comply with Section 422 of the Code. The Company shall execute Option Agreements upon instructions from the Board.
9. OPTION PRICE.
(a) With respect to Options granted to Key Employees or
consultants, the Option price shall be not less than 100% of the fair market
value per share of the Common Stock (or 110% of such amount as required by
Section 4) on the date the Option is granted. The Board shall determine the fair
market value of the Common Stock, and shall set forth the determination in its
minutes, using any reasonable valuation method. Unless the Board determines that
another valuation method should be used for a particular grant, the fair market
value of the Common Stock shall be deemed to be the last sale price of the
Common Stock on the major securities exchange or market on which it is traded on
the last trading day immediately preceding the date of grant of the Option.
(b) With respect to Nonqualified Options granted to Non-Employee Directors, the Option price shall be equal to 100% of the fair market value per share of the Common Stock on the date of grant of that Option, which for these purposes shall be deemed to be the last sale price of the Common Stock on the major securities exchange or market on which it is traded on the last trading day immediately preceding the date of grant.
10. OPTION PERIOD; VESTING.
(a) The Option Period for any Option granted to a Key Employee
or consultant will begin on the date the Option is granted, which will be the
date the Board authorizes the Option unless the Board specifies a later date. No
Option may terminate later than ten years (or five years as required by Section
4) from the date the Option is granted. The Board may provide for the Options to
vest and become exercisable in installments and subject to the provisions
hereof, upon such other terms, conditions and restrictions as it may determine.
The Board may provide for earlier termination of the Option and the Option
Period in the case of termination of the employment or consulting relationship,
or for any other reason. If the Key
Employee or consultant dies or becomes permanently disabled (as determined in the sole discretion of the Board) while serving in the employment of or as a consultant to the Company or retires from such employment or consulting relationship at or after Normal Retirement Age, or if there occurs a Change in Control, then 100% of the shares subject to his or her Options will become vested and will be available thereafter for purchase during the Option Period.
(b) The Option Period for Options granted to a Non-Employee
Director will begin on the date the Option is granted and will terminate on the
earlier of (i) the tenth anniversary of the date of grant; (ii) the 30th day
after the Non-Employee Director is no longer a director of the Company for a
reason other than death, permanent disability (as determined in the sole
discretion of the Board) or retirement at or after the Normal Retirement Age; or
(iii) one year after death or permanent disability (as determined in the sole
discretion of the Board) of the Non-Employee Director or after his or her
retirement as a director of the Company at or after the Normal Retirement Age.
On the anniversary of the date of grant of each such Option, 25% of the shares
subject to the Option will become vested and will be available thereafter for
purchase during the Option Period, provided that from the date of grant through
such vesting date the Non-Employee Director had served continuously as a
director of the Company. If the Non-Employee Director dies or becomes
permanently disabled (as determined in the sole discretion of the Board) while
serving as a director of the Company or retires as a director of the Company at
or after Normal Retirement Age, or if there occurs a Change in Control, then
100% of the shares subject to the Option will become vested and will be
available thereafter for purchase during the Option Period.
11. RIGHTS OF ESTATE OR BENEFICIARIES IN EVENT OF DEATH. If a Participant dies prior to termination of his or her right to exercise an Option in accordance with the provisions of the Plan or his or her Option Agreement without having totally exercised the Option, the Option may be exercised during the remainder of the Option Period by the Participant's estate or by the person who acquired the right to exercise the Option by bequest or by reason of the death of the Participant, either pursuant to the laws of descent and distribution or by beneficiary designation; however, the Option must be exercised prior to the date of expiration of the Option Period or one year from the date of the Participant's death, whichever first occurs. The Participant may designate a beneficiary to exercise an Option pursuant to this Section 11 in the event of his or her death on a form designated by the Board for such purpose.
12. PAYMENT. Full payment for shares of Common Stock purchased upon exercising an Option shall be made in cash or by check at the time of exercise, or on such other terms as are set forth in the applicable Option Agreement. The Board may permit a Participant exercising an Option to simultaneously exercise the Option and sell a portion of the shares acquired, pursuant to a brokerage or similar arrangement approved in advance by the Board, and use the proceeds from the sale as payment of the Option price of the Common Stock being acquired by exercise of the Option. In addition, the Participant shall tender payment of the amount as may be requested by the Company, if any, for the purpose of satisfying its statutory liability to withhold federal, state or local income or other taxes incurred by reason of the exercise of an Option. No shares may be issued until full payment of the purchase price therefor
has been made, and a Participant will have none of the rights of a stockholder until shares are issued to him or her.
13. EXERCISE OF OPTION. Unless otherwise provided in this Plan, all Options granted under the Plan may be exercised during the Option Period, at such times, in such amounts, in accordance with such terms and subject to such restrictions as are set forth in the applicable Option Agreements. In no event may an Option be exercised or shares be issued pursuant to an Option if any requisite action, approval or consent of any governmental authority of any kind having jurisdiction over the exercise of Options shall not have been taken or secured.
14. CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The number of shares of Common Stock covered by each outstanding Option granted under the Plan (including those held by Non-Employee Directors), and the Option prices thereof, may be adjusted to reflect, as deemed appropriate by the Board, any stock dividend, stock split, share combination, exchange of shares, recapitalization, merger, consolidation, separation, reorganization, liquidation or the like, of or by the Company. The number of shares to be made the subject of an initial grant and annual grants to Non-Employee Directors, as set forth in Section 7 hereof, shall not be adjusted for any stock dividend or stock split that may occur prior to the grant, but shall be adjusted to reflect any share combination, exchange of shares, recapitalization, merger, consolidation, separation, reorganization, liquidation or the like, of or by the Company that occurs prior to the grant, in the same manner as outstanding Options held by all Participants are adjusted by the Board. If a Change of Control shall occur, the holder of an Option will be entitled to receive upon exercise of his or her Option, for the aggregate exercise price payable upon exercise of his or her Option and in lieu of the Common Stock or other consideration otherwise issuable to him or her upon exercise of the Option, the same kind and amount of securities or assets as may be distributable, in or pursuant to the transaction or transactions resulting in the Change of Control, to a holder of the same number of outstanding shares of Common Stock as the number of shares of Common Stock that are subject to the Option immediately prior to such transaction or transactions.
15. TAX WITHHOLDING. The Board may establish such rules and procedures as it considers desirable in order to satisfy any obligation of the Company to withhold the statutory prescribed minimum amount of federal income taxes or other taxes with respect to the exercise of any Option granted under the Plan. Such rules and procedures may provide that in the case of the exercise of a Nonqualified Option, the withholding obligation shall be satisfied by the Company withholding shares of Common Stock otherwise issuable upon exercise of such Option in an amount equal to the statutory prescribed minimum withholding applicable to the ordinary income resulting from the exercise of that Nonqualified Option.
16. NON-ASSIGNABILITY. Options may not be transferred other than by will or by the laws of descent and distribution or by a beneficiary designation made by the Participant. Except in the case of the death or disability of a Participant, Options granted to a Participant may be exercised only by the Participant.
17. INTERPRETATION. The Board shall interpret the Plan and shall prescribe such rules and regulations in connection with the operation of the Plan as it determines to be advisable for the administration of the Plan. The Board may rescind and amend its rules and regulations.
18. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or discontinued by the Board without the approval of the stockholders of the Company, except that any amendment that would (a) materially increase the number of securities that may be issued under the Plan or (b) materially modify the requirements of eligibility for participation by Employees in the Plan must be approved by the stockholders of the Company.
19. EFFECT OF PLAN. Neither the adoption of the Plan nor any action of
the Board shall be deemed to give any officer, Employee, consultant or director
any right to be granted an Option to purchase Common Stock or any other rights
except as may be evidenced by the Option Agreement, or any amendment thereto,
duly authorized by the Board and executed on behalf of the Company, and then
only to the extent and on the terms and conditions expressly set forth therein
and in the Plan. The existence of the Plan and the Options granted hereunder
shall not affect in any way the right of the Board, the Committee or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, or shares of preferred stock ahead of or affecting Common
Stock or the rights thereof, the dissolution or liquidation of the Company or
any sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding. Nothing contained in the Plan or in any Option
Agreement shall confer upon any Employee, director or consultant any right to
(i) continue in the employ of the Company or any of its Subsidiaries, or
continue as a director or consultant of the Company or any of its Subsidiaries
or (ii) interfere in any way with the right of the Company or any of its
Subsidiaries to terminate his or her employment, directorship or consultant
relationship at any time.
20. TERM. Unless sooner terminated by action of the Board, this Plan will terminate on December 13, 2010. The Board may not grant Options under the Plan after that date, but Options granted before that date will continue to be effective in accordance with their terms.
21. DEFINITIONS. For the purpose of this Plan, unless the context requires otherwise, the following terms shall have the meanings indicated:
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means any sale of substantially all of the assets of the Company, or any merger, consolidation or corporate reorganization of the Company, or any tender offer or exchange offer for stock of the Company, as a result of which the holders of Common Stock of the Company immediately prior to the consummation of such transactions or series of transactions own or could own capital stock representing less than 50.1% of the equity or less than 50.1% of the voting power of all classes of stock of the surviving, resulting or purchasing corporation that is outstanding immediately following the consummation thereof.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means any committee of the Board to which it has delegated the power and authority to grant options to any or all classes of key employees of the Company and to administer and interpret the Plan as its relates to such employees or consultants and any options granted to them.
(e) "Common Stock" means the Company's Common Stock, $.01 par value, which the Company is currently authorized to issue or may in the future be authorized to issue (as long as the common stock varies from that currently authorized, if at all, only in amount of par value).
(f) "Employee" means an individual who is employed, within the meaning of Section 3401 of the Code, by the Company or by a Subsidiary. The Board shall determine when an Employee's period of employment terminates and when such period of employment is deemed to be continued during an approved leave of absence.
(g) "Incentive Option" means an Option granted under the Plan which meets the requirements of Section 422 of the Code.
(h) "Key Employee" means any Employee of the Company or a Subsidiary whose performance and responsibilities are determined by the Board to have a direct and significant effect on the performance of the Company and its Subsidiaries.
(i) "Non-Employee Director" means an independent director who:
(1) Is not currently an officer of the Company or a Subsidiary, or otherwise currently employed by the Company or a Subsidiary;
(2) Does not receive compensation, either directly or indirectly, from the Company or a Subsidiary for services rendered as a consultant or in any capacity other than as a director, except for an amount that does not exceed the dollar amount for which the disclosure would be required under the Securities Acts;
(3) Does not possess an interest in any other transaction for which disclosure would be required under the Securities Acts; and
(4) Is not engaged in a business relationship for which disclosure would be required pursuant to the Securities Acts.
(j) "Nonqualified Option" means an Option granted under the Plan which is not intended to be an Incentive Option.
(k) "Normal Retirement Age" means the age established by the Board from time to time as the normal age for retirement of a director or Employee, as applicable. In the
absence of a determination by the Board, the Normal Retirement Age for all Participants shall be deemed to be 65 years of age.
(l) "Option Agreement" means, with respect to each Option granted to a Participant, the signed written agreement between the Participant and the Company setting forth the terms and conditions of the Option.
(m) "Option Period" means the period beginning on the date of grant of an Option and terminating on the last day an Option may be exercised, as provided in the Plan or, if applicable, the related Option Agreement.
(n) "Participant" means an individual to whom an Option has been granted under the Plan.
(o) "Plan" means the NCI Building Systems, Inc. Stock Option Plan, as amended and restated as of December 14, 2000, as hereafter amended from time to time.
(p) "Securities Acts" means the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and the regulations issued thereunder.
(q) "Subsidiary" means any corporation in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain, and "Subsidiaries" means more than one of any such corporations.
EXHIBIT 10.5
[NONQUALIFIED]
as of 12/14/00
NCI BUILDING SYSTEMS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
NCI Building Systems, Inc. (the "Company") hereby grants a Nonqualified Option (the "Option") to purchase shares of its Common Stock, $0.01 par value, to:
The Option is granted on the following terms and conditions:
1. NUMBER OF SHARES AND PRICE. The number of shares subject to this Option, and the exercise price, are:
This Option is not intended to constitute an Incentive Option.
2. OPTION PERIOD. The term of this Option (the "Option Period") will commence on the date of grant noted below, and will expire at 5:00 o'clock p.m. Houston time on the earlier of (i) the 30th day after termination of Optionee's continuing employment or consulting relationship with the Company and its Subsidiaries or directorship with the Company for any reason other than death, permanent disability (as determined in the sole discretion of the Board) or retirement at or after Normal Retirement Age; (ii) one year after the death or permanent disability of Optionee or the retirement of Optionee at or after Normal Retirement Age; or (iii) the expiration date noted below. After the expiration date, no further shares may be purchased under this Option.
3. VESTING. Effective on each anniversary of the date of grant of this Option, 25% of the Option shares shall become vested and will be available thereafter for purchase by Optionee during the remaining term of the Option Period, provided that, on each such vesting date, Optionee has been in a continuing employment or consulting relationship with the Company and its Subsidiaries or has served continuously as a director of the Company
since the date of grant of this Option. If Optionee dies or becomes permanently disabled (as determined in the sole discretion of the Board) or retires from such employment or consulting relationship or directorship at or after Normal Retirement Age, 100% of the shares subject to his Options will become vested and immediately available for purchase by Optionee, or in the case of death of Optionee, by the person(s) specified in Section 6(b) of this Agreement.
4. VESTING UPON CHANGE OF CONTROL. If the Company proposes to sell substantially all of its assets or to be a party to any merger, consolidation or corporate reorganization, or if any other person or entity makes a tender or exchange offer for stock of the Company, and as a result of any such transaction the stockholders of the Company immediately prior to the consummation thereof would own 50.1% or less of the equity or voting power of the surviving, resulting or purchasing corporation that is outstanding immediately following the consummation thereof, then 100% of the Option shares will become vested and immediately available for purchase by Optionee, and Optionee will be entitled to receive, for the aggregate exercise price payable upon exercise of this Option, in lieu of the Common Stock otherwise issuable to him upon exercise of this Option, the same kind and amount of securities or assets as may be distributable upon such sale, merger, consolidation or corporate reorganization, to a holder of the number of shares of Common Stock of the company into which this Option is convertible immediately prior to the date of such transactions.
5. EXERCISE OF OPTION. Subject to Section 6 below, this Option shall be exercisable at any time and from time to time after the date of grant and on or prior to its expiration date, in whole or in part with respect to any portion of the Option shares that has become vested at the time of exercise. No fractional shares will be issued. If an exercise covers a fractional share, the number of shares to be issued on exercise will be rounded to the next lowest share and the exercise price for the fraction will be returned to Optionee.
6. RIGHT TO EXERCISE; RESTRICTIONS. This Option shall be exercisable during its term only by Optionee and only if, at the time of exercise, Optionee has been in a continuing employment or consulting relationship with the Company and its Subsidiaries or has served as a director of the Company since the date of grant of this Option, except that:
(a) Optionee may exercise this Option, with respect only to shares that were vested on the date of termination of his continuing employment or consulting relationship with the Company and its Subsidiaries or his directorship with the Company, for a period of thirty days after such termination;
(b) If Optionee should die while in a continuing employment or consulting relationship with the Company and its Subsidiaries or while serving as a director of the Company, this Option may be exercised by the estate of Optionee or by a person who acquired the right to exercise this Option by bequest or inheritance or by reason of the death of Optionee for a period of one year after the death of Optionee; and
(c) If Optionee should become permanently disabled (as determined in the sole discretion of the Board) or retire at or after Normal Retirement Age while in a continuing employment or consulting relationship with the Company and its Subsidiaries or while serving as a director of the Company, Optionee may exercise this Option for a period of one year after such event.
For purposes of this Option, the term "continuing employment or consulting relationship" means the absence of any interruption or termination of Optionee's employment by or consulting relationship with the Company or any Subsidiary which now exists or hereafter is organized or acquired by the Company or one of its Subsidiaries. For purposes of this Option, a director shall have served continuously as a director until such director resigns from the Board, is removed with or without cause by the Board or stockholders or fails to be re-elected as a director upon the expiration of his current term. A continuing employment or consulting relationship shall not be considered interrupted in the case of sick leave, military leave or any other leave of absence approved by the Board. In the event of Optionee's change in status from Employee, Non-Employee Director or consultant to any other status of Employee, Non-Employee Director or consultant, this Option shall remain in effect and, except to the extent otherwise determined by the Board, continue to vest. Optionee shall not be deemed to have retired until termination of or retirement from his employment or consulting relationship and his membership on the Board.
This Option may not be exercised, or if exercised no shares need be issued by the Company, unless and until the Company has obtained all necessary approvals and consents of government authorities and other persons such as lenders to the Company.
7. MANNER OF EXERCISE. This Option shall be exercisable by a written notice which:
(a) States the election to exercise this Option and the number of shares with respect to which it is being exercised;
(b) Contains an undertaking to provide such information as is required, in the discretion of counsel for the Company, to determine whether an exemption from registration of such shares is available under federal and applicable state securities laws and to make such representations and warranties regarding Optionee's investment intent as such counsel may require; and
(c) Is signed by Optionee or other person or persons authorized to exercise this Option and, if signed by a person other than Optionee, is accompanied by appropriate evidence or proof of the authority or right of such person to exercise this Option.
The written notice shall be accompanied by cash or a check in the amount of the exercise price for the total number of shares being purchased. The Company may permit Optionee to
exercise this Option by delivering to the Company a properly executed exercise notice together with irrevocable instructions to a securities broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the Option price; provided that Optionee and the broker shall comply with such procedures, and enter into such agreements of indemnity and other agreements, as the Company shall prescribe as a condition of such payment procedure.
8. NON-TRANSFERABILITY. This Option may not be transferred or assigned in any manner by Optionee otherwise than by will or the laws of descent and distribution, and may be exercised only by Optionee during his lifetime.
9. RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a stockholder with respect to any shares covered by this Option, until such time as a certificate is issued to him for the shares. Except as provided in Section 10, no adjustment will be made for dividends or other rights of stockholders for which the record date is prior to the issuance of a certificate for the shares.
10. CAPITAL ADJUSTMENTS. If all or any portion of this Option is exercised subsequent to any stock dividend, stock split, combination or exchange of shares, recapitalization, merger, consolidation, separation, reorganization or other similar transaction of or by the Company, as a result of which shares of any class are issued with respect to outstanding shares of Common Stock or the shares of Common Stock are changed into the same or a different number of shares of the same or another class or classes of shares, Optionee will be entitled to receive, for the aggregate exercise price payable upon exercise of this Option, the aggregate number and class of shares equal to the number and class of shares Optionee would have had on the date of exercise had the shares been purchased for the same aggregate purchase price at the date this Option was granted and had not been disposed of, taking into consideration such stock dividend, stock split, combination or exchange of shares, recapitalization, merger, consolidation, separation, reorganization or other similar transaction; provided that no fractional share will be issued upon any such exercise and the aggregate price paid will be appropriately reduced on account of any fractional share not issued.
11. RESERVATION OF SHARES. The Company will reserve, out of its treasury shares or out of authorized but previously unissued shares, such number of the shares of its Common Stock or other class of shares as are from time to time issuable hereunder.
12. NOTICES. Each notice relating to this Option will be in writing and
delivered in person or by certified mail to the proper address. Each notice will
be deemed to have been given on the date it is received. Notices to the Company
will be mailed or delivered to it at its principal office, 10943 North Sam
Houston Parkway West, Houston, Texas, 77064 Attention: Secretary. Notices to
Optionee will be addressed to Optionee at his home address as reflected on the
personnel records of the Company. Any party may change its address for notices
under this Option by giving a notice to that effect in accordance with this
Section 12.
13. WITHHOLDING. It shall be a condition to the obligation of the Company to issue or transfer shares of stock upon exercise of this Option that Optionee pay to the Company, upon its demand, such amount as may be requested by the Company for the purpose of satisfying its statutory liability to withhold the prescribed minimum amount of federal, state or local income or other taxes incurred by reason of the exercise of this Option. If the amount requested is not paid, the Company may refuse to issue or transfer shares of stock upon exercise of this Option.
14. BENEFITS OF AGREEMENT. Subject to the restrictions against transfer or assignment set forth herein, the provisions of this Agreement shall inure to the benefit of, and shall be binding upon, the assignee, successors in interest, personal representatives, guardians, estates, heirs, and legatees of the parties hereto (as appropriate). Except as permitted or contemplated by this Agreement, Optionee agrees that he will not hypothecate or otherwise create or suffer to exist any lien, claim, or encumbrance on this Option. Except as provided herein, this Agreement is not intended to confer any rights or benefits upon any person or entity that is not a party hereto.
15. RESOLUTION OF DISPUTES. Any dispute or disagreement about the interpretation, construction or application of this Agreement will be determined by the Board. Any determination made by the Board will be final, binding and conclusive for all purposes.
16. STOCK OPTION PLAN. This Option is granted pursuant to the NCI Building Systems, Inc. Stock Option Plan, as amended from time to time. In the event of any conflict or inconsistency between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and provisions of the Plan shall be controlling. Capitalized terms used in this Agreement and not otherwise deferred herein shall have the meanings set forth in the Plan. In addition, this Option is subject to any rules and regulations promulgated pursuant to the Plan, now or hereafter in effect.
IN WITNESS WHEREOF, the Company and Optionee have caused this Agreement to be executed as of the date of grant noted above.
OPTIONEE NCI BUILDING SYSTEMS, INC.
BY:
---------------------------------- --------------------------------------
A.R. Ginn
Optionee Chairman of the Board
S.S.N.: or
Johnie Schulte
President and Chief Executive Officer
|
EXHIBIT 10.6
[INCENTIVE]
as of 12/14/00
NCI BUILDING SYSTEMS, INC.
INCENTIVE STOCK OPTION AGREEMENT
NCI Building Systems, Inc. (the "Company") hereby grants an Incentive Option (the "Option") to purchase shares of its Common Stock, $0.01 par value, to:
The Option is granted on the following terms and conditions:
1. NUMBER OF SHARES AND PRICE. The number of shares subject to this Option, and the exercise price, are:
2. OPTION PERIOD. The term of this Option (the "Option Period") will commence on the date of grant noted below, and will expire at 5:00 o'clock p.m. Houston time on the earlier of (i) the 30th day after termination of Optionee's continuing employment with the Company and its Subsidiaries for any reason other than death, permanent disability (within the meaning of Section 22(e)(3) of the Code) or retirement at or after Normal Retirement Age; (ii) one year after the death or permanent disability of Optionee or the retirement of Optionee at or after Normal Retirement Age; or (iii) the expiration date noted below. After the expiration date, no further shares may be purchased under this Option.
3. VESTING. Effective on each anniversary of the date of grant of this Option, 25% of the Option shares shall become vested and will be available thereafter for purchase by Optionee during the remaining term of the Option Period, provided that, on each such vesting date, Optionee has been in a continuing employment with the Company and its Subsidiaries since the date of grant of this Option. If Optionee dies or becomes permanently disabled (within the meaning of Section 22(e)(3) of the Code) or retires from such
employment at or after Normal Retirement Age, 100% of the shares subject to his Options will become vested and immediately available for purchase by Optionee, or in the case of death of Optionee, by the person(s) specified in Section 6(b) of this Agreement.
4. VESTING UPON CHANGE OF CONTROL. If the Company proposes to sell substantially all of its assets or to be a party to any merger, consolidation or corporate reorganization, or if any other person or entity makes a tender or exchange offer for stock of the Company, and as a result of any such transaction the stockholders of the Company immediately prior to the consummation thereof would own 50.1% or less of the equity or voting power of the surviving, resulting or purchasing corporation that is outstanding immediately following the consummation thereof, then 100% of the Option shares will become vested and immediately available for purchase by Optionee, and Optionee will be entitled to receive, for the aggregate exercise price payable upon exercise of this Option, in lieu of the Common Stock otherwise issuable to him upon exercise of this Option, the same kind and amount of securities or assets as may be distributable upon such sale, merger, consolidation or corporate reorganization, to a holder of the number of shares of Common Stock of the company into which this Option is convertible immediately prior to the date of such transactions.
5. EXERCISE OF OPTION. Subject to Section 6 below, this Option shall be exercisable at any time and from time to time after the date of grant and on or prior to its expiration date, in whole or in part with respect to any portion of the Option shares that has become vested at the time of exercise. No fractional shares will be issued. If an exercise covers a fractional share, the number of shares to be issued on exercise will be rounded to the next lowest share and the exercise price for the fraction will be returned to Optionee.
6. RIGHT TO EXERCISE; RESTRICTIONS. This Option shall be exercisable during its term only by Optionee and only if, at the time of exercise, Optionee has been in a continuing employment relationship with the Company since the date of grant of this Option, except that:
(a) Optionee may exercise this Option, with respect only to shares that were vested on the date of termination of his continuing employment with the Company and its Subsidiaries, for a period of thirty days after such termination;
(b) If Optionee should die while in a continuing employment with the Company and its Subsidiaries, this Option may be exercised by the estate of Optionee or by a person who acquired the right to exercise this Option by bequest or inheritance or by reason of the death of Optionee for a period of one year after the death of Optionee; and
(c) If Optionee should become permanently disabled (as determined in the sole discretion of the Board) or retire at or after Normal Retirement Age while in a continuing employment with the Company and its Subsidiaries, Optionee may exercise this Option for a period of one year after such event.
For purposes of this Option, the term "continuing employment" means the absence of any interruption or termination of Optionee's employment by the Company or any Subsidiary which now exists or hereafter is organized or acquired by the Company or one of its Subsidiaries. A continuing employment shall not be considered interrupted in the case of sick leave, military leave or any other leave of absence approved by the Board. In the event of Optionee's change in status from Employee to any other status of Non-Employee Director or consultant, this Option shall remain in effect and, except to the extent otherwise determined by the Board, continue to vest; provided, however, that this Option shall cease to be treated as an Incentive Option and shall be treated as a Nonqualified Option on the day that is three months and one day following such change in status. Optionee shall not be deemed to have retired until termination of or retirement from his employment or consulting relationship and his membership on the Board.
This Option may not be exercised, or if exercised no shares need be issued by the Company, unless and until the Company has obtained all necessary approvals and consents of government authorities and other persons such as lenders to the Company.
7. MANNER OF EXERCISE. This Option shall be exercisable by a written notice which:
(a) States the election to exercise this Option and the number of shares with respect to which it is being exercised;
(b) Contains an undertaking to provide such information as is required, in the discretion of counsel for the Company, to determine whether an exemption from registration of such shares is available under federal and applicable state securities laws and to make such representations and warranties regarding Optionee's investment intent as such counsel may require; and
(c) Is signed by Optionee or other person or persons authorized to exercise this Option and, if signed by a person other than Optionee, is accompanied by appropriate evidence or proof of the authority or right of such person to exercise this Option.
The written notice shall be accompanied by cash or a check in the amount of the exercise price for the total number of shares being purchased. The Company may permit Optionee to exercise this Option by delivering to the Company a properly executed exercise notice
together with irrevocable instructions to a securities broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the Option price; provided that Optionee and the broker shall comply with such procedures, and enter into such agreements of indemnity and other agreements, as the Company shall prescribe as a condition of such payment procedure.
8. NON-TRANSFERABILITY. This Option may not be transferred or assigned in any manner by Optionee otherwise than by will or the laws of descent and distribution, and may be exercised only by Optionee during his lifetime.
9. RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a stockholder with respect to any shares covered by this Option, until such time as a certificate is issued to him for the shares. Except as provided in Section 10, no adjustment will be made for dividends or other rights of stockholders for which the record date is prior to the issuance of a certificate for the shares.
10. CAPITAL ADJUSTMENTS. If all or any portion of this Option is exercised subsequent to any stock dividend, stock split, combination or exchange of shares, recapitalization, merger, consolidation, separation, reorganization or other similar transaction of or by the Company, as a result of which shares of any class are issued with respect to outstanding shares of Common Stock or the shares of Common Stock are changed into the same or a different number of shares of the same or another class or classes of shares, Optionee will be entitled to receive, for the aggregate exercise price payable upon exercise of this Option, the aggregate number and class of shares equal to the number and class of shares Optionee would have had on the date of exercise had the shares been purchased for the same aggregate purchase price at the date this Option was granted and had not been disposed of, taking into consideration such stock dividend, stock split, combination or exchange of shares, recapitalization, merger, consolidation, separation, reorganization or other similar transaction; provided that no fractional share will be issued upon any such exercise and the aggregate price paid will be appropriately reduced on account of any fractional share not issued.
11. RESERVATION OF SHARES. The Company will reserve, out of its treasury shares or out of authorized but previously unissued shares, such number of the shares of its Common Stock or other class of shares as are from time to time issuable hereunder.
12. NOTICES. Each notice relating to this Option will be in writing and delivered in person or by certified mail to the proper address. Each notice will be deemed to have been given on the date it is received. Notices to the Company will be mailed or delivered to it at its principal office, 10943 North Sam Houston Parkway, Houston, Texas, 77064, Attention: Secretary. Notices to Optionee will be addressed to Optionee at his home address as
reflected on the personnel records of the Company. Any party may change its address for notices under this Option by giving a notice to that effect in accordance with this Section 12.
13. BENEFITS OF AGREEMENT. Subject to the restrictions against transfer or assignment set forth herein, the provisions of this Agreement shall inure to the benefit of, and shall be binding upon, the assignee, successors in interest, personal representatives, guardians, estates, heirs, and legatees of the parties hereto (as appropriate). Except as permitted or contemplated by this Agreement, Optionee agrees that he will not hypothecate or otherwise create or suffer to exist any lien, claim, or encumbrance on this Option. Except as provided herein, this Agreement is not intended to confer any rights or benefits upon any person or entity that is not a party hereto.
14. RESOLUTION OF DISPUTES. Any dispute or disagreement about the interpretation, construction or application of this option agreement will be determined by the Board. Any determination made by the Board will be final, binding and conclusive for all purposes.
15. STOCK OPTION PLAN. This Option is granted pursuant to the NCI Building Systems, Inc. Stock Option Plan, as amended from time to time. In the event of any conflict or inconsistency between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and provisions of the Plan shall be controlling. Capitalized terms used in this Agreement and not otherwise deferred herein shall have the meanings set forth in the Plan. In addition, this Option is subject to any rules and regulations promulgated pursuant to the Plan, now or hereafter in effect.
IN WITNESS WHEREOF, the Company and Optionee have caused this Agreement to be executed as of the date of grant noted above.
OPTIONEE NCI BUILDING SYSTEMS, INC.
BY:
---------------------------------- --------------------------------------
A.R. Ginn
Optionee Chairman of the Board
S.S.N.: or
Johnie Schulte
President and Chief Executive Officer
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EXHIBIT 13
[NCI BUILDING SYSTEMS LOGO]
[NCI PICTURE]
2000 Annual Report
METAL COMPONENTS BUILDING SYSTEMS
DOORS COMPONENTS COATERS SPECIALTY BUILDINGS INTERNATIONAL
DBCI MBCI MCCI IPS METALLIC BUILDINGS
DE MEXICO
ABC MCG SSI A&S METALLIC
DE MEXICO
MIDLAND DOUBLECOTE CLASSIC MID-WEST
METALS
METAL PREP MESCO
MIDWEST ALL-AMERICAN
METAL
COATERS
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o Coating
+ Components
* Framing
[MAP]
[ ] Doors
PLANT
LOCATIONS
Atwater, California o Caryville, Tennessee o Chandler, Arizona o Chester,
South Carolina Douglasville, Georgia o Ennis, Texas o Grapevine, Texas
o Rome, NewYork o Houston, Texas (6) Jackson, Mississippi (2)o Mattoon, Illinois
o Tallapoosa, Georgia o Stafford, Texas Oklahoma City, Oklahoma
o Converse, Texas o Grand Prairie, Texas o Lubbock, Texas
o Adel, Georgia Salt Lake City, Utah o Hernando, Mississippi
o Memphis, Tennessee o Nicholasville, Kentucky Atlanta, Georgia
o Plant City, Florida o Colonial Heights, Virginia
o Shelbyville, Indiana Omaha, Nebraska o Nampa, Idaho o Tolleson, Arizona
o Marietta, Georgia o Oskaloosa, Iowa Monterrey, Mexico
o Rancho Cucamonga, California o Granite City, Illinois
SELECTED FINANCIAL DATA
YEAR ENDED OCTOBER 31(1)
1992 1993 1994 1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- ---------- ---------- ---------- ---------- ----------
Sales $ 79,008 $134,506 $167,767 $234,215 $ 332,880 $ 407,751 $ 675,331 $ 936,550 $1,018,324
Net Income 3,611 6,333 10,256 17,032 24,814 27,887 37,318 45,873 51,939
Net Income per Share
(Diluted) .34 .48 .77 1.26 1.51 1.64 2.05 2.41(2) 2.84
Working Capital 4,835 15,511 16,885 31,687 51,958 76,746 58,393 60,571 65,657
Total Assets 34,187 46,733 63,373 83,032 158,326 196,332 823,537 855,483 879,920
Long-term Debt
(Noncurrent Portion) 2,185 1,899 326 278 1,730 1,679 444,477 397,062 374,448
Shareholders' Equity $ 21,232 $ 28,655 $ 39,682 $ 57,682 $ 116,175 $ 147,815 $ 223,612 $ 277,290 $ 314,108
-------- -------- -------- -------- ---------- ---------- ---------- ---------- ----------
Average Common Shares
(Assuming Dilution) 10,864 13,156 13,390 13,530 16,455 17,085 18,192 19,100 18,286
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(1) All numbers in thousands except net income per share
(2) Includes an extraordinary loss on debt refinancing, net of tax, of $1.0 million or $0.05 per share.
BUSINESS DESCRIPTION
NCI Building Systems is one of the largest integrated manufacturers and marketers of metal building components and engineered metal buildings in North America. NCI also offers one of the most extensive metal product lines in the building industry, under well-recognized brand names.
Through internal growth and strategic acquisitions, the company has compiled a record of revenue and earnings growth well above the industry average. In 1998, NCI doubled its size by combining with Metal Building Components, Inc. establishing NCI as a leader in each of its key markets.
Today, NCI is...
The largest producer and distributor of metal components for building construction -- growing at an estimated 10% annual rate.
The second largest producer of engineered metal building systems.
The largest supplier of metal roofs in an estimated $20 billion roofing industry.
A leading provider of metal coating and painting services.
An industry leader in growth, profitability and innovation.
A low-cost supplier.
The Company is benefiting from a larger sales force and customer base, broader product lines, expanded geographic distribution sites and increased manufacturing capacity. NCI's long-term targets are 10% annual revenue growth, 15% earnings growth and 30% return on operating assets based on its sound growth strategy and assuming a relatively stable economic outlook.
NCI continues to successfully manage its "Momentum for Industry Leadership."
NCI is listed on the New York Stock Exchange (NYSE) as NCS.
[THE NCI FAMILY]
LETTER TO SHAREHOLDERS
[PICTURE]
[NCI LOGO] 2000
[NCI BUILDING SYSTEMS LOGO]
FELLOW SHAREHOLDERS:
NCI's financial performance clearly showcased fiscal 2000 as a year of growth and progress. The record net sales, which topped one billion dollars for the first time, and the new high in net income are rewarding; but they represent only part of the message we want to communicate to our shareholders. As gratifying as those achievements are, much of our managerial emphasis during the year was on the actions necessary to sustain our future progress and maximize the return on our current resources.
A summary of the financial and operational highlights for fiscal 2000 includes:
Net sales increased 8.7% to a new record of $1.02 billion.
Each quarter included year-to-year gains in sales and income.
Earnings increased to $2.84 per share, up 15.4% from fiscal 1999.
Debt reduction of $16 million accomplished.
Organizational changes included naming three divisional presidents.
Acquired complete ownership of DOUBLECOTE.
$20 million invested in stock repurchases.
Additional 1.5 million shares approved for stock repurchase program.
We decided to dedicate the theme of this annual report as an introduction to NCI. Our rapid growth into one of the largest metal construction companies in the nation has been generated through both internal and external gains. It therefore seemed appropriate to pause and highlight our various operating units to show the breadth of our product line and our geographic coverage. Behind the logomarks and photographs of products and facilities is a team of more than 4,000 individuals solidly committed to doing their best every day to satisfy our customers and in so doing, continuing to build our competitive presence and providing an attractive long-term return to our shareholders.
RECORD NET SALES AND EARNINGS ACHIEVED
We set records in virtually every category of our income statement for fiscal 2000. We are especially pleased that the advance in net sales to $1.02 billion and the 15.4% increase in earnings to $2.84 per share represent not only positive year-to-year comparisons but also extend our longer term record of growth. Over the past five years, NCI's sales have risen from $332.9 million, a compound rate of 34%. Earnings per share over the same period have more than doubled. Because of the seasonal characteristics of the construction industry, the second half of our fiscal year continues to generate the majority of our sales and earnings, but we achieved gains in each quarter during the year.
The financial highlights for fiscal 2000 also include meaningful progress in our balance sheet management. Although we used $24.4 million to take advantage of acquiring complete ownership
[BAR GRAPH]
9-YEAR SALES
YEAR ENDED OCTOBER 31
(IN MILLIONS)
of our principal metal coating operation in March 2000, our long-term debt of $374.4 million at the close of fiscal 2000 was down from $397.1 million in the prior year. Our EBITDA for fiscal 2000 totaled $169 million, up from $150 million in fiscal 1999. This strong cash flow position enabled us to make the additional investment in DOUBLECOTE, fund capital expenditures of $28.9 million and invest $20.4 million in stock repurchases. We believe that the use of a portion of our capital to repurchase our shares will yield a positive return for shareholders. The 3.9% reduction in the average number of outstanding shares for fiscal 2000 had an immediate positive impact on our earnings per share, and that benefit will carry over into future periods. We are pleased that shortly after the close of fiscal 2000 the Board approved the purchase of an additional 1.5 million shares for stock repurchases. Our planning for fiscal 2000 includes a lower level of capital spending, and based on the expected cash from operations, we will have the capability to affect a significant debt reduction.
NEW UNIT PRESIDENTS HIGHLIGHT ORGANIZATIONAL CHANGES
NCI's culture encourages individuals to reach for increasing responsibility. This demands providing them the resources and training to accomplish more and then recognizing those who have successfully demonstrated their abilities. During 2000 several organizational changes were highlighted by the promotion of executives to serve in the position of president of three operating units. The appointments included Len George as president of Mesco Metal Buildings, Kelly Ginn as president of the MBCI components group and Fred Koetting as president of the NCILP buildings group.
These promotions were directly related to the changes made in August 2000 which included reducing the size of our Board. Our goal through these actions was to establish a structure that encourages and rewards our personnel to pursue the growth opportunities aggressively in their respective areas. Although we will continue to encourage cross-selling across our various units, we believe these three operating units will benefit from having their own president who can set unique goals to accelerate our progress in the respective market sectors. Each of these individuals has extensive experience in the metal construction industry and has demonstrated highly successful capabilities in their prior positions at NCI.
SUCCESSFUL LONG BAY SYSTEM UNDERSCORES OPERATIONAL GAINS
Probably the signal event of our operational gains during fiscal 2000 was the success of our innovative Long Bay System ("LBS") that enables customers to construct highly competitive metal buildings with spans up to 56 feet. The patent pending LBS system was introduced during the fourth quarter of fiscal 1999. Installations to date confirm that it offers distinct advantages over conventional construction techniques in lower costs and faster erection times. LBS essentially integrates the best features of conventional construction into metal building design. Our system virtually eliminates field welding and significantly reduces erection time compared with conventional steel construction. We are finding typical LBS buildings covering 400,000 square feet being completed in approximately five weeks versus the eight-week period that is normal for conventional construction techniques. We are also focused on responding to orders much faster than is the norm. LBS standard delivery reduces the shipment time that many contractors are used to experiencing.
LBS is specifically designed for large buildings that typically involve considerably less custom engineering and design than the metal systems and components in which NCI already has a strong market position. Because of this relative standardization, long bay systems demand a careful blend of strict quality standards and tight control over manufacturing costs. To meet those requirements, we established an entirely new manufacturing facility in Mexico dedicated to LBS. These operations
[BAR GRAPH]
EARNINGS PER SHARE
YEAR ENDED OCTOBER 31
[BAR GRAPH]
SHAREHOLDERS' EQUITY
YEAR ENDED OCTOBER 31
(IN MILLIONS)
are proving to be highly efficient, and a second production shift was added during the fourth quarter of fiscal 2000 that effectively doubled the capacity of our assembly operation. The success to date of LBS endorses the value to NCI of pioneering innovative metal construction techniques.
Our most recent new system is the "Pier and Header," a revolutionary new way to fabricate self-storage warehouse facilities. In conventional self-storage systems, about ten different parts and processes are required to construct the building areas between and above the doors on self-storage units. Our process requires only two and produces a building that is much more aesthetically pleasing with a clean, uncluttered profile. Translating the concept for this new building system into a marketable product demanded a dedicated effort by our research and development department. Initial response from developers and builders has been overwhelmingly positive, and we will be making a concerted effort to introduce the new system nationwide during fiscal 2001.
ACQUISITIONS REMAIN IN GROWTH STRATEGY
NCI's growth over the past decade has been aided by strategic acquisitions that added capacity, expanded our geographic reach or enhanced the Company's vertical integration. The decision to purchase full ownership of DOUBLECOTE in March 2000 was based on an attractive financial analysis and the opportunity to integrate this coating capacity more effectively with our manufacturing of metal building systems and components. Meeting customers' building schedules reliably is a key objective for NCI, and having sufficient coating capacity available is a vital factor in meeting that goal.
Our most recent acquisition was the purchase in December 2000 of Midland Metals, Inc., a manufacturer and marketer of metal building components. This transaction has strategically expanded our metal building component business in the Midwest. We believe there is considerable potential for further expansion in this area and have identified considerable synergies in cost savings that we expect to realize from the acquired operation. The addition of the incremental volume from Midland Metals will also benefit our metal coating operations.
FOCUS SET ON FUTURE GROWTH
Based on current trends, we are optimistic that fiscal 2001 will be another year of growth for NCI. The pace of new construction and the level of interest rates are key uncertainties, but our internal momentum encourages us about our prospects. The metal construction industry offers us exciting potential, and we are committed to continue unifying best practices throughout our business to capitalize on this opportunity. NCI ranks as one of the top companies in this economic sector, and there is no reason that we cannot move forward by gaining market share.
We are pleased to welcome Sheldon Erikson and Bernard Pieper to our Board and look forward to their active involvement in guiding our future progress. We appreciate the hard work of every associate within NCI which helped make fiscal 2000 a success and extend a special thanks to our customers for the chance to meet their needs.
Sincerely,
/s/ JOHNIE SCHULTE, JR. /s/ A.R. GINN Johnie Schulte, Jr. A.R. Ginn President and Chief Executive Officer Chairman of the Board |
[Johnie Schulte Photo]
Johnie Schulte
President, NCI
[A.R. Ginn Photo]
A.R. Ginn
Chairman, NCI
COMPANY REVIEW
PROFILE
NCI is a manufacturer and marketer of engineered metal building systems and components.
The Company contributes to the building process by designing structures to
user specifications, then manufacturing the appropriate parts for its customers
- frequently authorized builders - to erect and make ready for occupancy.
Components are sold to many of the same markets where engineering is not required.
NCI's products are directed at the non-residential market, primarily industrial and low-rise commercial applications.
NCI aggressively markets its products nationwide through several channels under the following trade names:
Metallic Building Company
Mid-West Steel Building Company
DBCI
Steel Systems
A&S Building Systems
Classic steel Frame Homes
Mesco Metal Buildings
MBCI
ABC
IPS
Midland Metals, Inc.
Midwest Metal Coatings
Doublecote
Metal Prep
Metal Coaters of Georgia
Metal Coaters of California
[NCI LOGO]
is...
Buildings
Metallic, Mid-West, A&S, Mesco
The NCI family of building system companies -- Metallic, Mid-West, A&S, Mesco -- engineer and manufacture primary framing, secondary framing and cladding for metal buildings. These manufactured parts are delivered to the job site where our authorized builders erect and enclose the projects, then add the plumbing, electrical, HVAC, concrete, flooring, windows, doors and interior walls. The building systems are marketed to end-users through the nearly 1400 "authorized builders" nationwide. Builders provide their customers with ready to move in buildings. End-use applications include: Warehousing, Manufacturing, Educational, Distribution, Institutional, Recreation, Offices and Commercial.
[PICTURES]
[FLOOR PLAN]
Buildings
Metallic, Mid-West, A&S, Mesco
[PICTURES]
[A&S BUILDING SYSTEMS LOGO] [MESCO LOGO]
[METALLIC BUILDING COMPANY LOGO] [MID-WEST STEEL BUILDING COMPANY LOGO]
plus...
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MBCI
Metal Roof and Wall Systems
Unlike the building systems companies, MBCI does not manufacture the
primary framing. The Company manufactures the secondary framing, the cladding,
and a full line of color matched trim and accessories such as ventilators,
gutters, trim and fasteners. MBCI services primarily three market segments:
Commercial-Industrial, Architectural and Self-Storage. Commercial-Industrial
includes small and large manufacturers of primary frames. They combine MBCI
products with their frames thereby allowing them to offer a proprietary building
system. Architectural utilizes MBCI products on conventional construction
framing systems. It includes architects who specify MBCI products, general
contractors, and subcontractors.
[PICTURES]
MBCI
Metal Roof and Wall Systems
[PICTURES]
[FLOOR PLAN]
[MBCI METAL ROOF AND WALL SYSTEMS LOGO]
plus...
ABC
American Building Components
ABC manufactures and markets cladding and accessory products, which are generally installed over wood framing. Market areas include residential, light commercial and agricultural segments. ABC customers include wholesale roofing distributors such as retail and large lumber dealers, chain store dealers and cooperatives, large pole barn builders, and independent distributors selling to farmers and contractors.
[PICTURES]
ABC
American Building Components
[PICTURES]
[ABC LOGO]
plus...
COATERS
Coil Coating
Our coating companies clean, paint and slit coils for use by component and building manufacturers in the industry as well as the NCI divisions. This coating service operates under the watchful eyes of strict quality control personnel to insure that the paint will adhere to the steel properly and will not lose its integrity once the material is installed on a building. Metal Prep and Midwest Metal Coatings(*) serve the secondary framing market. Metal Coaters of Georgia, Metal Coaters of California, Inc., and DOUBLECOTE service the cladding market.
(*)50% joint venture with Precoat Metals
[PICTURES]
COATERS
Coil Coating
[PICTURES]
[METAL COATERS(R) OF CALIFORNIA, INC. LOGO]
[METAL COATERS(R) OF GEORGIA LOGO]
[METAL-PREP(R) LOGO]
[MMC MIDWEST METAL COATINGS LOGO]
[DOUBLECOTE(R) LOGO]
plus...
DBCI
Doors
Self-Storage I Doors & Components
DBCI manufactures roll-up doors, partitions and panels for the self-storage and commercial markets. For the self-storage industry, DBCI's product line includes the mini storage rollup door, Securawall partition, Corawall panels, Coradoors and Lockerdoors. These products are manufactured with a higher grade steel -- making them stronger and more resistant to damage. They also come in over 20 standard colors! Providing added reassurance on the durability of DBCI products, all colors come with a 20-year film integrity warranty and up to a 20-year guarantee against chalking and fading. DBCI has the largest segment of the rollup door business in the self storage industry.
[PICTURES]
DBCI
Self-Storage I Doors & Components
[PICTURES]
[DOORS & BUILDING COMPONENTS LOGO]
plus...
Classic Steel Frame Homes
Classic Steel Frame Homes designs and manufactures steel framed homes that are stronger, straighter and longer lasting than other home framing materials. Since the outer frame fully supports the structure, there is no need for interior load bearing walls. Rooms can be as large or as small as needed. With the rising cost of wood products and the increasing deforestation of earth, the steel framed home is quickly becoming the home of choice for an increasing number of homebuyers. Not only is steel recyclable, it is resistant to termites. Classic homes can be up to 40% more energy efficient than wood framed homes because the depth of the steel beams provides wider spacing for more insulation -- thicker walls block out noise. In addition, steel is not combustible.
[CLASSIC STEEL FRAME HOMES LOGO]
[PICTURES]
plus...
IPS
Insulated Panel Systems
IPS manufactures a complete line of insulated panels for wall and roof application. The insulation is foamed-in-place at the factory and sandwiched between two steel sheets for exterior as well as interior beauty and performance. The panels are 1" to 5" thick depending upon thermal requirements and come in a variety of colors, including the "Rockwall" system. The Rockwall process bonds real stone aggregate to steel panels, combining the advantages of steel with the durability and beauty of stone. IPS sells insulated panels to builders and contractors that service the specialty markets, such as food and beverage producers, distributors and wholesalers.
[INSULATED PANEL SYSTEMS LOGO]
[PICTURES]
plus...
SSI
Self-Storage Systems
Steel Systems is dedicated to the sole task of designing, engineering, and manufacturing self-storage buildings. SSI manufactures one, two and three story climate controlled and boat/RV buildings. Sizes range from the standard 10' x 10' grid to unlimited width and length. Exterior wall panels and roofing systems are available in a wide variety of colors; interior panels are white for better lighting. SSI's experienced staff custom designs any type of storage facility to suit end-user requirements and site restrictions.
[STEEL SYSTEMS LOGO]
plus...
AAS
All-American Systems
All-American Systems manufactures and markets metal building systems for companies who specialize in smaller, less complex buildings.
[AAS LOGO]
Plus...
R&D
Research & Development
The backbone of most successful companies is Research & Development. NCI is no exception. Each division has access to test and revise its products. In fact, we test so much and so often that we built our own authorized replica of the UL (Underwriter Laboratories) test chamber and a working model of the FM (Factory Mutual) test chamber. Our tests give us a depth of knowledge about our products -- weather tightness and structural integrity under deadload and uplift -- that is unequalled in the industry. And, the more we test, the more accurate our information becomes. Our testing can fine tune improvements, improve the safety factor for engineering design, and make sure our products satisfy or exceed building code requirements.
[PICTURES]
Plus...
Training
Sales, Product, Installation
NCI has one of the only training centers in the metal building industry. The Johnie Schulte Conference Center (located at the Fairview facility in Houston, Texas) is a 7,600 square foot, "hands-on" training center. This large building allows up to four 75 person classes to operate simultaneously while an open, two story section of the center enables instructors and students to actually erect a one-story, light frame building...complete with wall and roof panels! Builders get hands-on experience pricing buildings using NCI's proprietary pricing software. The "Product & Sales School" teaches NCI builders how to sell NCI products and the "Erection Train-the-Trainer School" familiarizes new Builders with the erection process. This center is also used for departmental, divisional, and corporate meetings. Extensive education and training are important to NCI's strategy to be a major force in the metal building industry.
[PICTURES]
plus...
Technology plus Innovation equals
NCI Success
Technology, innovation and, most importantly, NCI people, have maintained our position at the leading edge of the metal building industry. Last year's introduction of the Long Bay System was more successful than expected! Over 1 million square feet of Long Bay Systems have been erected and twice that already quoted. The new state-of-the-art structural fabrication facility opened its doors in July, 2000 on the Fairview grounds with a capacity of 2,300 tons per month. The shop has 144,000 square feet under its roof and is capable of fabricating oversize trusses, large crane beams and many other steel support materials. A suggestion from MBCI's largest self-storage customer in 1997 turned into the most sophisticated manufacturing process the self-storage industry has ever seen. September 14, 2000 marked the roll-out date for the new MBCI metal Pier & Header System. Not only does it make self-storage units more aesthetically pleasing, but construction time and expense are drastically reduced. "The magnitude of these projects and the time frame in which they were completed offered many challenges," said A.R. Ginn. "The brilliance and dedication of the people of NCI, plus today's technology, brought these innovations successfully to the marketplace."
[PICTURES]
[DIAGRAM]
[NCI LOGO]
FINANCIAL REVIEW
2000
FORWARD LOOKING STATEMENTS
"This annual report contains forward-looking statements concerning the business and operations of the Company.
Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, these expectations and the related statements are subject to risks, uncertainties, and other factors that could cause the actual results to differ materially from those projected.
These risks, uncertainties, and factors include, but are not limited to, industry cyclicality and seasonality, adverse weather conditions, fluctuations in customer demand and order patterns, raw material pricing, competitive strategic activities accretive to earning, and general economic conditions affecting the construction industry, as well as other risks detailed in the company's filings with the Securities and Exchange Commission, including its most recent annual and quarterly reports on Forms 10(k) and 10(Q), the Company expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any changes in its expectations."
[NCI LOGO]
CONSOLIDATED STATEMENTS OF INCOME
NCI BUILDING SYSTEMS, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
October 31,
------------------------------------------------
1998 1999 2000
------------ ------------ ------------
Sales ................................................. $ 675,331 $ 936,550 $ 1,018,324
Cost of sales ......................................... 497,862 694,909 749,555
------------ ------------ ------------
Gross profit ....................................... 177,469 241,641 268,769
Operating expenses .................................... 96,100 131,109 142,952
Nonrecurring acquisition expenses ..................... 2,060 -- --
------------ ------------ ------------
Income from operations ............................ 79,309 110,532 125,817
Interest expense ...................................... (20,756) (35,449) (39,069)
Other income, net ..................................... 2,559 3,204 2,262
Joint venture income .................................. 737 1,675 410
------------ ------------ ------------
Income before income taxes ........................ 61,849 79,962 89,420
------------ ------------ ------------
Provision for income taxes
Current ........................................... 16,573 30,066 35,987
Deferred .......................................... 7,958 3,022 1,494
------------ ------------ ------------
Total income tax ...................................... 24,531 33,088 37,481
------------ ------------ ------------
Income before extraordinary loss .................. 37,318 46,874 51,939
Extraordinary loss on debt financing, net of tax ...... -- (1,001) --
------------ ------------ ------------
Net income ............................................ $ 37,318 $ 45,873 $ 51,939
============ ============ ============
Income per common and common equivalent share:
Basic:
Income before extraordinary loss .................. $ 2.17 $ 2.55 $ 2.90
Extraordinary loss, net of tax .................... -- (0.05) --
------------ ------------ ------------
Net income ........................................ $ 2.17 $ 2.50 $ 2.90
============ ============ ============
Diluted:
Income before extraordinary loss .................. $ 2.05 $ 2.46 $ 2.84
Extraordinary loss, net of tax .................... -- (0.05) --
------------ ------------ ------------
Net income ........................................ $ 2.05 $ 2.41 $ 2.84
============ ============ ============
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See accompanying notes to the consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
NCI BUILDING SYSTEMS, INC.
(IN THOUSANDS)
October 31,
-------------------------
1999 2000
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents ....................................................... $ 16,089 $ 2,999
Accounts receivable, net ........................................................ 105,608 119,368
Inventories ..................................................................... 83,988 98,612
Deferred income taxes ........................................................... 6,943 4,986
Prepaid expenses ................................................................ 5,037 7,482
---------- ----------
Total current assets ............................................................ 217,665 233,447
Property, plant and equipment, net .................................................. 197,855 231,042
Excess of costs over fair value of acquired net assets .............................. 398,606 395,073
Other assets, primarily investment in joint ventures ................................ 41,357 20,358
---------- ----------
Total assets ........................................................................ $ 855,483 $ 879,920
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt ............................................... $ 36,297 $ 42,806
Accounts payable ................................................................ 65,209 74,400
Accrued compensation and benefits ............................................... 17,021 21,383
Accrued income taxes ............................................................ 10,454 3,194
Other accrued expenses .......................................................... 28,113 26,007
---------- ----------
Total current liabilities ....................................................... 157,094 167,790
Long-term debt, noncurrent portion .................................................. 397,062 374,448
Deferred income taxes ............................................................... 24,037 23,574
Commitments and contingencies (Note 4)
Shareholders' equity:
Preferred stock, $1 par value, 1,000,000 shares authorized, none outstanding .... -- --
Common stock, $.01 par value, 50,000,000 authorized, 18,520,000
and 17,675,000 shares issued and outstanding, respectively .................. 186 186
Additional paid in capital ...................................................... 97,289 97,224
Retained earnings ............................................................... 179,815 231,754
Treasury stock .................................................................. -- (15,056)
---------- ----------
Total shareholders' equity .......................................................... 277,290 314,108
---------- ----------
Total liabilities and shareholders' equity .......................................... $ 855,483 $ 879,920
========== ==========
|
See accompanying notes to the consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
NCI BUILDING SYSTEMS, INC.
(IN THOUSANDS)
Common Additional Treasury Retained Shareholders'
Stock Paid-In Capital Stock Earnings Equity
---------- --------------- ---------- ---------- -------------
Balance, October 31, 1997 ........................ $ 82 $ 51,109 $ -- $ 96,624 $ 147,815
Proceeds from exercise of stock options,
including tax benefit thereon ................ 2 4,317 -- -- 4,319
Two for one split of common stock ................ 82 (82) -- -- --
Shares issued in connection with
purchase of MBCI ............................. 14 32,186 -- -- 32,200
Shares issued for contribution to 401(k) plan .... 1 1,959 -- -- 1,960
Net income ....................................... -- -- -- 37,318 37,318
---------- ---------- ---------- ---------- ----------
Balance, October 31, 1998 ........................ 181 89,489 -- 133,942 223,612
Proceeds from exercise of stock options,
including tax benefit thereon ................ 3 3,076 -- -- 3,079
Shares issued for contribution to 401(k) plan .... 2 4,724 -- -- 4,726
Net income ....................................... -- -- -- 45,873 45,873
---------- ---------- ---------- ---------- ----------
Balance, October 31, 1999 ........................ 186 97,289 -- 179,815 277,290
Treasury stock purchases ......................... -- -- (20,416) -- (20,416)
Proceeds from exercise of stock options,
including tax benefit thereon ................ -- 202 -- -- 202
Treasury stock reissued for
stock options exercised ...................... (604) 1,442 -- 838
Shares issued from treasury stock
for contribution to 401(k) plan .............. -- 337 3,918 -- 4,255
Net income ....................................... -- -- -- 51,939 51,939
---------- ---------- ---------- ---------- ----------
Balance, October 31, 2000 ........................ $ 186 $ 97,224 $ (15,056) $ 231,754 $ 314,108
========== ========== ========== ========== ==========
|
See accompanying notes to the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NCI BUILDING SYSTEMS, INC.
(IN THOUSANDS)
October 31,
------------------------------------------
1998 1999 2000
---------- ---------- ----------
Cash flows from operating activities:
Income before extraordinary loss ............................. $ 37,318 $ 46,874 $ 51,939
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization ............................ 17,818 28,542 33,487
Gain on sale of fixed assets ............................. (32) (11) (201)
Provision for doubtful accounts .......................... 2,625 2,402 2,645
Extraordinary loss on debt refinancing, net of tax ....... -- (1,001) --
Deferred income tax provision ............................ 7,958 3,022 1,494
Changes in operating assets and liabilities,
net of effect of acquisitions:
Accounts, notes and other receivables .................... (3,663) (8,749) (7,403)
Inventories .............................................. 9,951 (5,987) (13,355)
Prepaid expenses ......................................... 109 (823) (2,056)
Accounts payable ......................................... 24,189 2,515 7,592
Accrued expenses ......................................... 13,772 27,444 (1,302)
---------- ---------- ----------
Net cash provided by operating activities .................... 110,045 94,228 72,840
Cash flows from investing activities:
Proceeds from sale of fixed assets ....................... 98 1,561 383
Acquisition of Metal Building Components, Inc. ........... (553,510) -- --
Acquisition of California Finished Metals, Inc. .......... (15,458) -- --
Acquisition of DOUBLECOTE, L.L.C. ........................ -- -- (24,408)
Changes in other noncurrent assets ....................... (24,450) (9,574) 2,780
Capital expenditures ..................................... (20,834) (33,262) (28,885)
---------- ---------- ----------
Net cash used in investing activities ........................ (614,154) (41,275) (50,130)
Cash flows from financing activities:
Proceeds from stock options exercised ...................... 2,494 952 721
Net (payments) borrowings on revolving lines of credit ..... 281,600 (136,112) 20,145
Borrowings on long-term debt ............................... 200,000 125,000 --
Payments on long-term debt ................................. (7,552) (31,303) (36,250)
Purchase of treasury stock ................................. -- -- (20,416)
---------- ---------- ----------
Net cash provided by (used in) financing activities .......... 476,542 (41,463) (35,800)
Net increase (decrease) in cash and cash equivalents ............. (27,567) 11,490 (13,090)
Cash at beginning of period ...................................... 32,166 4,599 16,089
---------- ---------- ----------
Cash at end of period ............................................ $ 4,599 $ 16,089 $ 2,999
========== ========== ==========
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See accompanying notes to the consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NCI BUILDING SYSTEMS, INC.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Reporting Entity
These financial statements include the operations and activities of NCI Building Systems, Inc. and its subsidiaries ("the Company") after the elimination of all material intercompany accounts and balances. The Company designs, manufactures and markets metal building systems and components for commercial, industrial, agricultural and community service use.
(b) Revenue Recognition
The Company recognizes revenues when the following conditions are met:
persuasive evidence of an arrangement exists, delivery has occurred or services
have been rendered, the price is fixed or determinable, and collectibility is
reasonably assured. Adequate provision is made, upon shipment, for estimated
product returns and warranties. Costs associated with shipping and handling of
products are included in cost of sales.
(c) Accounts Receivable
The Company reports accounts receivable net of the allowance for doubtful accounts of $3,309,000 and $3,656,000 at October 31, 1999 and 2000, respectively. Trade accounts receivable are the result of sales of building systems and components to customers throughout the United States and affiliated territories including international builders who resell to end users. All sales are denominated in United States dollars. Credit sales do not normally require a pledge of collateral; however, various types of liens may be filed to enhance the collection process.
(d) Inventories
Inventories are stated at the lower of cost or market value, using specific identification or the weighted-average method for steel coils and other raw materials.
The components of inventory are as follows:
October 31,
-------------------------
1999 2000
---------- ----------
(in thousands)
Raw materials .............. $ 65,315 $ 75,209
Work in process
and finished goods ...... 18,673 23,403
---------- ----------
$ 83,988 $ 98,612
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(e) Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated over their estimated useful lives. Depreciation is computed using the straight-line method for financial reporting purposes and both straight-line and accelerated methods for income tax purposes.
Depreciation expense for the years ended October 31, 1998, 1999 and 2000 was $9,970,000, $13,468,000, and $19,005,000, respectively. The Company capitalizes certain costs related to internal use software in accordance with Statement of Position 98-1, Accounting for the Costs of Computer Software Developed for Internal Use.
Property, plant and equipment consist of the following:
October 31,
--------------------------
1999 2000
---------- ----------
(in thousands)
Land ............................ $ 12,417 $ 12,912
Buildings and improvements ...... 87,893 104,883
Machinery, equipment
and furniture ................ 115,768 150,187
Transportation equipment ........ 4,721 4,609
Computer software
and equipment ................ 17,759 27,188
---------- ----------
$ 238,558 $ 299,779
Less accumulated depreciation ... (40,703) (68,737)
---------- ----------
$ 197,855 231,042
========== ==========
|
Estimated useful lives for depreciation are:
Buildings and improvements ............. 10 - 40 years Machinery, equipment and furniture ..... 5 - 13 years Transportation equipment ............... 3 - 10 years Computer software and equipment ........ 5 - 7 years |
(f) Statement of Cash Flows
For purposes of the cash flows statement, the Company considers all highly liquid investments with an original maturity date of three months or less to be cash equivalents. Total interest paid for the years ended October 31, 1998, 1999 and 2000 was $16,733,000, $30,198,000, and $37,186,000, respectively. Income taxes paid, net of refunds received, for the years ended October 31, 1998, 1999 and 2000 were $19,915,000, $13,247,000, and
$42,885,000 (of which $11,748,000 related to 1999, but was payable in 2000), respectively. Non-cash investing or financing activities included: $2,342,000 for the 2000 401(k) plan contributions through the third fiscal quarter of 2000, and $1,912,000 for the related 1999 contributions which were paid in common stock in 2000; $2,301,000 for the 1999 401(k) plan contributions through the third fiscal quarter of 1999 and $2,425,000 for the related 1998 contributions which were paid in common stock in 1999; and $1,960,000 for the 1997 contribution paid in common stock in 1998.
(g) Excess of Cost Over Fair Value of Acquired Net Assets
Excess of cost over fair value of acquired net assets is amortized on a straight-line basis over periods of fifteen to forty years. Accumulated amortization as of October 31, 1999 was $21,581,000, and $32,802,000 as of October 31, 2000. The carrying value of goodwill is reviewed if the facts and circumstances suggest that it may be impaired. If this review indicates that goodwill will not be recoverable, as determined based on the undiscounted cash flows of the entity acquired over the remaining amortization period, the Company's carrying value of the goodwill would be reduced by the estimated shortfall of cash flows.
(h) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(i) Advertising Costs
Advertising costs are expensed as incurred. Advertising expense was $2,301,000, $3,851,000 and $3,083,000 in 1998, 1999 and 2000, respectively.
(j) Long-Lived Assets
Impairment losses are recognized when indicators of impairment are present and the estimated undiscounted cash flows are not sufficient to recover the assets carrying amount. Assets held for disposal are measured at the lower of carrying value or estimated fair value, less costs to sell.
(k) Stock-Based Compensation
The Company uses the intrinsic value method in accounting for its stock-based employee compensation plans.
(l) Pending Accounting Changes
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("FAS 133"), Accounting for Derivative Instruments and Hedging Activities. FAS 133, as amended, is effective for all fiscal years beginning after June 15, 2000. FAS 133 requires that all derivatives be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedged transaction and the type of hedge transaction. The ineffective portion of all hedges will be recognized in earnings. NCI has elected to adopt FAS 133 effective November 1, 2000, and accordingly, NCI will be required to adjust hedging instruments to fair value in the balance sheet and recognize the offsetting gains or losses as adjustments to be reported in net income or other comprehensive income, as appropriate. NCI believes that such adoption will not have a material effect on its consolidated results of operations or financial position.
In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial Statements. SAB 101 provides guidance on applying generally accepted accounting principles to revenue recognition issues in financial statements. In June 2000, the SEC issued Staff Accounting Bulletin No. 101B ("SAB 101B"), Amendment: Revenue Recognition in Financial Statements. SAB 101B delays the implementation date of SAB 101 to the fourth fiscal quarter for registrants with fiscal years that begin after December 15, 1999. The Company will adopt SAB 101 as required in the fourth fiscal quarter of 2001 and is evaluating the effect that such adoption may have on its consolidated results of operations and financial position.
(m) Business Segments
The Company adopted SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information in 1999. The Company has divided its operations into two reportable segments: engineered building systems and metal building components, based upon similarities in product lines, manufacturing processes, marketing and management of its businesses. Products of both segments are similar in basic
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raw materials used and manufacturing. The engineered building systems segment includes the manufacturing of structural framing and supplies and value added engineering and drafting, which are typically not part of component products or services. The reporting segments follow the same accounting policies used for the Company's consolidated financial statements. Management evaluates a segments' performance based upon operating income. Intersegment sales are recorded based on prevailing market prices, and consist primarily of products and services provided to the engineered building systems segment by the metal building components segment, including painting and coating of hot rolled material. Information with respect to the segments is included in the three-year comparison labeled Supplementary Business Segment Information on page 35.
2. LONG-TERM DEBT
October 31,
--------------------------
1999 2000
---------- ----------
(in thousands)
Five-year revolving credit line with banks bearing interest
at a rate of 30-day LIBOR plus 1.375% (8.0% at October 31,
2000), maturing on July 1, 2003 .................................. $ 124,800 $ 145,000
Five-year term loan payable to banks bearing interest at a
rate of 90-day LIBOR plus 1.375% (8.0% at October 31, 2000)
repayable beginning on October 31, 1998, in quarterly
installments beginning with $7.5 million and gradually
increasing to $12.5 million on the maturity date, July 1,
2003 ............................................................. 161,250 125,000
364-day revolving credit facility with banks bearing
interest at a rate of 30-day LIBOR plus 1.375% (8.1% at
October 31, 2000) maturing on May 1, 2001 ........................ 20,688 20,688
Unsecured senior subordinated notes bearing interest at a
rate of 9.25%, maturing on May 1, 2009 ........................... 125,000 125,000
Note payable to employee bearing interest at 7%, maturing
April 1, 2001, with an option to convert into common stock
at $14.96 per share .............................................. 1,500 1,500
Other ............................................................ 121 66
---------- ----------
433,359 417,254
Current portion of long-term debt ................................ (36,297) (42,806)
---------- ----------
$ 397,062 $ 374,448
========== ==========
|
Aggregate required principal reductions are as follows:
Year Ended October 31,
----------------------
(in thousands)
----------------------
2001 ...................................... $ 42,806
2002 ...................................... 46,260
2003 ...................................... 203,188
2004 ...................................... --
2005 and thereafter ....................... 125,000
----------
$ 417,254
==========
|
The Company has a senior credit facility from a syndicated group of banks, which consists of (i) a five-year revolving credit facility of up to $200 million, of which up to $20 million may be utilized in the form of commercial and standby letters of credit, (ii) a five-year term loan facility and (iii) a 364-day revolving credit facility which originally provided for up to $200 million. Loans and letters of credit under the five-year revolver will be available, and amounts repaid may be reborrowed at any time until July 2003, subject to the fulfillment of certain conditions precedent, including the absence of default under the facility. If the 364-day revolver is not repaid by the Company or extended by the lenders, the Company has the option to convert it to a three-year term note. The Company's obligations under the senior credit facility are secured by the pledge of all capital stock, partnership interests and other equity interests of the Company's domestic subsidiaries. All obligations are also guaranteed by each of the Company's domestic corporate subsidiaries and operating limited partnerships. The senior credit facility contains customary financial and restrictive covenants with amounts and ratios negotiated between the Company and the lender. The Company is required to make
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mandatory prepayments on the senior credit facility upon the occurrence of certain events, including the sale of assets and the issuance and sale of equity securities, in each case subject to certain limitations.
On May 5, 1999, the Company completed its offering of $125 million of unsecured Senior Subordinated Notes due 2009 (the "Notes"). The net proceeds of the offering, approximately $121 million, were used to repay a portion of outstanding borrowings under the existing senior credit facility. The indenture governing the Notes provides for interest at 9.25%, and the Notes mature on May 1, 2009. The indenture governing the Notes also contains covenants restricting certain activities and transactions by the Company and its subsidiaries including dividends, repurchases of stock, incurrence of additional debt and liens, investments in non-wholly owned entities or ventures and acquisitions or mergers, unless certain financial tests and other requirements are met.
In 1999, as a result of the offering of the Notes, the Company reduced the maximum available borrowings under its 364-day revolver from $200 million to $40 million. During 1999, the restructuring of the existing senior credit facility resulted in the write-off of approximately $1.6 million ($1.0 million after tax) in deferred financing costs. At October 31, 1999 and 2000, the remaining unamortized balance in deferred financing costs relating to the senior credit facility and the Notes were $4,429,000 and $3,549,000, respectively.
At October 31, 2000, the fair value of the Company's long-term debt, based on current interest rates and quoted market prices, was $409.8 million, compared with the carrying amount of $417.3 million.
3. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Taxes on income from continuing operations consist of the following:
Year Ended October 31,
----------------------------------------
1998 1999 2000
---------- ---------- ----------
(in thousands)
Current:
Federal ...................... $ 15,371 $ 27,534 $ 32,224
State ........................ 1,202 2,532 3,763
---------- ---------- ----------
Total current ................ 16,573 30,066 35,987
Deferred:
Federal ...................... 7,292 2,760 1,378
State ........................ 666 262 116
---------- ---------- ----------
Total deferred ............... 7,958 3,022 1,494
---------- ---------- ----------
Total provision ................. $ 24,531 $ 33,088 $ 37,481
========== ========== ==========
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The reconciliation of income tax computed at the United States federal statutory tax rate to the effective income tax rate is as follows:
Year Ended October 31,
--------------------------------------
1998 1999 2000
-------- -------- --------
Statutory federal income
tax rate ..................... 35.0% 35.0% 35.0%
State income taxes .............. 2.1% 2.3% 2.8%
Non-deductible
goodwill amortization ........ 2.7% 4.2% 3.6%
Other ........................... (0.1)% (0.1)% 0.5%
-------- -------- --------
Effective tax rate .............. 39.7% 41.4% 41.9%
======== ======== ========
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Significant components of the Company's deferred tax liabilities and assets are as follows:
October 31,
--------------------------
1999 2000
---------- ----------
(in thousands)
Deferred tax assets
Inventory ............................... $ 1,693 $ 1,539
Bad debt reserve ........................ 1,328 1,416
Accrued insurance reserves .............. 1,480 2,006
Deferred compensation ................... 1,416 754
Other reserves .......................... 1,026 1,364
---------- ----------
Total deferred tax assets .................. 6,943 7,079
Deferred tax liabilities
Depreciation and amortization ........... 21,098 22,174
Other ................................... 2,939 3,493
---------- ----------
Total deferred tax liabilities ............. 24,037 25,667
---------- ----------
Net deferred tax asset (liability) ......... $ (17,094) $ (18,588)
========== ==========
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4. OPERATING LEASE COMMITMENTS
Total rental expense incurred from operating non-cancelable leases for the years ended October 31, 1998, 1999 and 2000 was $5,527,000, $6,795,000 and $7,279,000, respectively. Aggregate minimum required annual payments on long-term operating leases at October 31, 2000 were as follows:
Year Ended October 31,
----------------------
(in thousands)
2001 ................................................. $ 3,618
2002 ................................................. 3,031
2003 ................................................. 907
2004 ................................................. 480
2005 ................................................. 207
--------
$ 8,243
========
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5. SHAREHOLDERS' RIGHTS PLAN
In June 1998 the Board of Directors adopted a Shareholders' Rights Plan in which one preferred stock purchase right (Right) was declared as a dividend for each common share outstanding. Each Right entitles shareholders to purchase, under certain conditions, one one-hundredth (1/100th) of a share of newly authorized Series A Junior Participating Preferred Stock at an exercise price of $62.50. Rights will be exercisable only if a person or group acquires beneficial ownership of 20% or more of the common shares or commences a tender or exchange offer, upon consummation of which such person or group would beneficially own 20% or more of the common shares. In the event that a person or group acquires 20% or more of the common shares, the Rights enable dilution of the acquiring person's or group's interest by providing for a 50% discount on the purchase of common shares by the non-controlling shareholders.
The company will generally be entitled to redeem the Rights at $0.005 per Right at any time before a person or group acquires 20% or more of the common shares. Rights will expire on June 24, 2008, unless earlier exercised, redeemed or exchanged.
6. PREFERRED, COMMON AND TREASURY STOCK
Preferred Stock
The Company has 1 million shares of authorized preferred stock, none of which was outstanding as of October 31, 2000.
Common Stock
The Company has 50 million shares of authorized common stock, of which 18,520,000 and 17,675,000 were outstanding at October 31, 1999 and 2000, respectively. In June 1998, the Company's Board of Directors approved a two-for-one split of the Common Stock effective for stockholders of record on July 8, 1998. Share and per share amounts have been restated to reflect the stock split.
Treasury Stock
On November 3, 1999, the Company's Board of Directors authorized the repurchase of 1.0 million shares of the Company's common
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stock, and an additional 1.5 million shares on November 7, 2000. Subject to applicable federal securities law, such purchases occur at times and in amounts that the Company deems appropriate. No time limit was placed on the duration of the repurchase program. Shares repurchased are reserved for later re-issuance in connection with possible future acquisitions, the Company's stock option and 401(k) profit sharing plans. As of October 31, 2000, the Company had repurchased 1,219,508 shares of its common stock for $20.4 million since the inception of the repurchase program in November 1999.
Changes in treasury common stock were as follows:
Number
of Shares Amount
---------- ----------
(in thousands)
Balance, October 31, 1999 .............. -- $ --
Purchases ............................ 1,220 20,416
Issued in exercise
of stock options .................. (88) (1,442)
Issued in 401(k) contributions ....... (239) (3,918)
---------- ----------
Balance, October 31, 2000 .............. 893 $ 15,056
========== ==========
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7. STOCK OPTION PLAN
The Board of Directors has approved a non-statutory employee stock option plan. This plan includes the future granting of stock options to purchase up to 4,100,000 shares as an incentive and reward for key management personnel. Options expire ten years from date of grant. Generally, the right to acquire the option shares is earned in 25% increments over the first four years of the option period. Stock option transactions during 1998, 1999 and 2000 are as follows (in thousands, except per share amounts):
Number Weighted Avg.
of Shares Exercise Price
---------- --------------
Balance October 31, 1997 ........ 1,709 $ 8.94
Granted ....................... 517 23.65
Cancelled ..................... (22) (14.56)
Exercised ..................... (313) (7.98)
---------- ----------
Balance October 31, 1998 ........ 1,891 13.06
Granted ....................... 118 22.72
Cancelled ..................... (37) (13.27)
Exercised ..................... (271) (3.57)
---------- ----------
Balance October 31, 1999 ........ 1,701 15.23
Granted ....................... 503 15.88
Cancelled ..................... (217) (19.00)
Exercised ..................... (103) (7.02)
---------- ----------
Balance October 31, 2000 ........ 1,884 $ 15.42
========== ==========
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Options exercisable at October 31, 1998, 1999 and 2000 were 910,000, 929,000, and 1,423,000, respectively. The weighted average exercise prices for options exercisable at October 31, 1998, 1999 and 2000 were $6.67, $11.11 and $13.73, respectively. Exercise prices for options outstanding at October 31, 2000 range from $2.83 to $28.13. The weighted average remaining contractual life of options outstanding at October 31, 2000 is 6.5 years. The following summarizes additional information concerning outstanding options as of October 31, 2000:
Options Outstanding
Range of Number of Weighted Average Exercise
Exercise Prices Options Remaining Life Price
------------------- ------------ ---------------- ------------
$ 2.83 - 11.50 452,000 3.1 years $ 6.48
$12.00 - 15.75 791,000 7.4 years $ 14.80
$16.38 - 28.13 641,000 7.7 years $ 22.49
------------
1,884,000
============
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Options Exercisable
Range of Number Weighted Average
Exercise Prices of Options Exercise Price
--------------- ------------ ----------------
$ 2.83 - 11.50 452,000 $ 6.48
$12.00 - 15.75 665,000 $ 14.71
$16.38 - 28.13 306,000 $ 22.31
------------
1,423,000
============
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In accordance with the terms of APB No. 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of the grant,
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the Company records no compensation expense for its stock option awards. As required by SFAS No. 123, the Company provides the following disclosure of hypothetical values for these awards. The weighted average grant-date fair value of options granted during 1998, 1999 and 2000 was $12.07, $12.83 and $9.49, respectively. These values were estimated using the Black-Scholes option-pricing model with the following weighted average assumptions: no expected dividend, expected volatility of 38.4% for 1998 and 1999, and 50.0% for 2000, risk free interest rates ranging from 4.6% to 5.9% for 1998, 4.4% to 6.2% for 1999, and 6.2% to 6.84% for 2000, and expected lives of 7 years. Had compensation expense been recorded based on these values, the Company's income and earnings per share would have been as follows (in thousands, except per share data):
Year Ended October 31,
----------------------------------------
1998 1999 2000
---------- ---------- ----------
Proforma income before
extraordinary loss ...... $ 35,887 $ 44,911 $ 50,449
Proforma income
per share before
extraordinary loss:
Basic ................ $ 2.08 $ 2.44 $ 2.82
Diluted .............. $ 1.98 $ 2.35 $ 2.76
|
Because options vest over several years and additional option grants are expected, the effects of these calculations are not likely to be representative of similar future calculations.
8. NET INCOME PER SHARE
Basic and diluted net income per share computations are as follows:
Year Ended October 31,
-----------------------------------------
1998 1999 2000
---------- ---------- ----------
(in thousands, except per share data)
Income before
extraordinary item .............. $ 37,318 $ 46,874 $ 51,939
Add: Interest, net of
tax, on convertible
debenture assumed
converted .................... 66 66 66
---------- ---------- ----------
Adjusted income before
extraordinary loss .............. 37,384 46,940 52,005
Extraordinary loss on debt
refinancing, net of tax ......... -- (1,001) --
---------- ---------- ----------
Adjusted net income ............... $ 37,384 $ 45,939 $ 52,005
========== ========== ==========
Weighted average common
shares outstanding .............. 17,212 18,378 17,904
Add: Common
stock equivalents:
Stock options ................ 880 622 282
Convertible debenture ........ 100 100 100
---------- ---------- ----------
Weighted average common
shares outstanding,
assuming dilution ............... 18,192 19,100 18,286
========== ========== ==========
Income per common and
common equivalent share:
Basic:
Income before
extraordinary loss ........... $ 2.17 $ 2.55 $ 2.90
Extraordinary loss .............. -- (0.05) --
---------- ---------- ----------
Net income ...................... $ 2.17 $ 2.50 $ 2.90
========== ========== ==========
Diluted:
Income before
extraordinary loss ........... $ 2.05 $ 2.46 $ 2.84
Extraordinary loss .............. -- (0.05) --
---------- ---------- ----------
Net income ...................... $ 2.05 $ 2.41 $ 2.84
========== ========== ==========
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9. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) profit sharing plan (the "Savings Plan") which covers all eligible employees. The Savings Plan requires the Company to match employee contributions up to a certain percentage of a participant's salary. No other contributions may be made to the Savings Plan. Contributions expense for the years ended October 31, 1998, 1999 and 2000 were $2,575,000, $4,144,000 and $3,677,000, respectively for contributions to the Savings Plan.
10. ACQUISITIONS
On March 31, 2000, the Company acquired its partner's 50% share of DOUBLECOTE, L.L.C., a metal coil coating business that it developed and previously owned jointly with Consolidated Systems, Inc., a privately held company. The transaction was valued at approximately $24.4 million, and was accounted for using the purchase method. The excess of cost over the fair value of the acquired assets was approximately $10 million.
On May 4, 1998, the Company acquired Metal Building Components, Inc. ("MBCI") through the purchase of all of the outstanding capital stock of Amatek Holdings, Inc. from BTR Australia Limited, a wholly owned subsidiary of BTR plc, for a purchase price of $589 million, including cash of $550 million (plus transaction costs) and 1.4 million shares of the Company's common stock valued at $32.2 million. MBCI designs, manufactures, sells and distributes metal components for commercial, industrial, architectural, agricultural and residential construction uses. MBCI also processes its own hot roll coil metal for use in component manufacturing, as well as processing hot roll coil metal and toll coating light gauge metal for use by other parties in the construction of metal building components and numerous other products. The funds for this acquisition were provided from the proceeds of a $600 million bank credit facility under which the Company initially borrowed $540 million. The acquisition was accounted for using the purchase method of accounting. The excess of cost over the fair value of the acquired assets was approximately $389 million. The consolidated results of operations for 1998 include MBCI since the date of acquisition.
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REPORT OF INDEPENDENT AUDITORS
We have audited the accompanying consolidated balance sheets of NCI Building Systems, Inc. as of October 31, 2000 and 1999, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended October 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of NCI Building Systems, Inc. at October 31, 2000 and 1999 and the consolidated results of its operations and its cash flows for each of the three years in the period ended October 31, 2000, in conformity with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Houston, Texas
December 4, 2000
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SUPPLEMENTARY BUSINESS SEGMENT INFORMATION
NCI BUILDING SYSTEMS, INC.
(IN THOUSANDS)
1998 % 1999 % 2000 %
------------ ---- ------------ ---- ------------ ----
Sales to outside customers:
Engineered building systems .................... $ 277,347 41 $ 310,324 33 $ 333,087 33
Metal building components ...................... 397,984 59 626,226 67 685,237 67
Intersegment sales ............................. 25,094 4 59,692 6 47,107 5
Corporate/eliminations ......................... (25,094) (4) (59,692) (6) (47,107) (5)
------------ ---- ------------ ---- ------------ ----
Total net sales(1) ......................... $ 675,331 100 $ 936,550 100 $ 1,018,324 100
============ ==== ============ ==== ============ ====
Operating income:
Engineered building systems .................... $ 29,576 11 $ 37,509 12 $ 37,549 11
Metal building components ...................... 51,497 13 72,441 12 87,838 13
Corporate/eliminations ......................... (1,764) -- 582 -- 430 --
------------ ---- ------------ ---- ------------ ----
Total operating income ..................... $ 79,309 12 $ 110,532 12 $ 125,817 12
============ ==== ============ ==== ============ ====
Joint venture income:
Engineered building systems .................... $ 8 1 $ 150 9 $ 575 140
Metal building components ...................... 729 99 1,525 91 (165) (40)
Corporate/eliminations ......................... -- -- -- -- -- --
------------ ---- ------------ ---- ------------ ----
Total joint venture income ................. $ 737 100 $ 1,675 100 $ 410 100
============ ==== ============ ==== ============ ====
Investment in joint ventures:
Engineered building systems .................... $ 28 -- $ 178 1 $ 303 3
Metal building components ...................... 25,937 100 30,301 99 9,065 97
Corporate/eliminations ......................... -- -- -- -- -- --
------------ ---- ------------ ---- ------------ ----
Total investment in joint ventures ......... $ 25,965 $30,479 100 $ 9,368 100
============ ==== ============ ==== ============ ====
Property, plant and equipment:
Engineered building systems .................... $ 33,244 19 $ 35,931 18 $ 42,002 18
Metal building components ...................... 142,637 79 153,156 77 173,837 75
Corporate/eliminations ......................... 3,619 2 8,768 5 15,203 7
------------ ---- ------------ ---- ------------ ----
Total property, plant and equipment, net ... $ 179,500 100 $ 197,855 100 $ 231,042 100
============ ==== ============ ==== ============ ====
Depreciation and amortization:
Engineered building systems .................... $ 5,958 33 $ 6,893 24 $ 7,894 24
Metal building components ...................... 10,346 58 17,590 62 23,080 69
Corporate/eliminations ......................... 1,514 9 4,059 14 2,513 7
------------ ---- ------------ ---- ------------ ----
Total depreciation and amortization ........ $ 17,818 100 $ 28,542 100 $ 33,487 100
============ ==== ============ ==== ============ ====
Capital expenditures:
Engineered building systems .................... $ 7,297 35 $ 10,067 31 $ 12,813 44
Metal building components ...................... 13,233 64 17,769 53 9,217 32
Corporate/eliminations ......................... 304 1 5,426 16 6,855 24
------------ ---- ------------ ---- ------------ ----
Total capital expenditures ................. $ 20,834 100 $ 33,262 100 $ 28,885 100
============ ==== ============ ==== ============ ====
Total assets:
Engineered building systems .................... $ 86,342 10 $ 88,673 10 $ 97,130 11
Metal building components ...................... 352,407 43 364,533 43 403,415 46
Corporate/eliminations ......................... 384,788 47 402,277 47 379,375 43
------------ ---- ------------ ---- ------------ ----
Total assets ............................... $ 823,537 100 $ 855,483 100 $ 879,920 100
============ ==== ============ ==== ============ ====
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(1) The company is not dependent on any one significant customer or group of customers. Substantially all of the Company's sales are made within the United States.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents, as a percentage of sales, certain selected consolidated financial data for the Company for the periods indicated:
Year Ended October 31,
--------------------------------------
1998 1999 2000
-------- -------- --------
Sales ........................... 100.0% 100.0% 100.0%
Cost of sales ................... 73.7 74.2 73.6
Gross profit .................. 26.3 25.8 26.4
Operating expenses .............. 14.2 14.0 14.0
Nonrecurring acquisition
expense ....................... 0.3 -- --
-------- -------- --------
Income from operations ........ 11.8 11.8 12.4
Interest expense ................ 3.1 3.8 3.8
Other income, net ............... (0.5) (0.5) (0.2)
-------- -------- --------
Income before income taxes .... 9.2 8.5 8.8
Provision for income taxes ...... 3.6 3.5 3.7
-------- -------- --------
Income before extraordinary
loss .......................... 5.6 5.0 5.1
Extraordinary loss on debt
refinancing, net of tax ....... -- (0.1) --
Net income ...................... 5.6% 4.9% 5.1%
======== ======== ========
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SUPPLEMENTARY BUSINESS SEGMENT INFORMATION
The Company's various product lines have been aggregated into two business segments: metal building components and engineered building systems. These aggregations are based on the similar nature of the products, distribution of products, and management and reporting for those products within the Company. Both segments operate primarily in the nonresidential construction market. Sales and earnings are influenced by general economic conditions, the level of nonresidential construction activity, roof repair and retrofit demand and the availability and terms of financing available for construction.
Products of both business segments are similar in basic raw materials used and manufacturing. Engineered building systems include the manufacturing of structural framing and supplies and value added engineering and drafting, which are typically not part of component products or services. The Company believes it has one of the broadest product offerings of metal building products in the industry.
Intersegment sales consist primarily of products and services provided to the engineered buildings segment by the component segment, including painting and coating of hot rolled material. This provides better customer service, shorter delivery time and minimizes transportation costs to the customer.
RESULTS OF OPERATIONS FOR FISCAL 2000 COMPARED TO 1999
Consolidated sales for fiscal 2000 exceeded $1 billion for the first time and totaled $1.02 billion which represents an increase of 9% as compared to fiscal 1999 sales of $936.6 million. The fiscal 2000 growth is attributable to increased market penetration, new sales related to the new long bay building systems in the engineered buildings segment, additional revenues in the metal building components segment related to the acquisition of DOUBLECOTE and the related consolidation of its results for the last seven months of fiscal 2000. Intersegment sales of $47.1 million represent product and services provided by the metal building components segment, principally coating and painting services to the engineered buildings segment in fiscal 2000.
Engineered Building Systems sales increased approximately 7% in fiscal 2000 as compared to fiscal 1999. This increase resulted from increased market penetration due to growth in the builder customer base and wider geographical distribution, as well as the introduction of our new long bay building systems. Operating income for fiscal 2000 remained consistent with fiscal 1999 and represented 11% of sales in fiscal 2000 and 12% in fiscal 1999. The slight deterioration in operating income margins is due primarily to the building systems absorption of non-capitalizable costs associated with the consolidation and relocation of our corporate headquarters, post-implementation costs associated with
the management information systems, and an increase in employee related costs related to the increase in sales.
Metal Building Components sales increased in fiscal 2000 by 9% compared to fiscal 1999. The majority of this increase resulted from the DOUBLECOTE acquisition and the inclusion of DOUBLECOTE's sales for the last seven months of 2000. Operating income of this segment increased by $15.4 million or 21% in fiscal 2000 compared to fiscal 1999 and represented 13% of sales in fiscal 2000 and 12% in fiscal 1999. The improvement in operating income margin resulted from consolidation of sales and various other functions of the DOUBLECOTE facility with existing resources, additional improvement in purchasing power, and better utilization of manufacturing facilities.
Consolidated operating expenses increased $11.8 million, or 9%, in fiscal 2000 as compared to fiscal 1999 which was generally in line with the 9% increase in sales. As a percent of sales, operating expenses were 14% in fiscal 1999 and 2000.
Joint venture income decreased $1.3 million to $0.4 million in fiscal 2000 as compared to fiscal 1999 due primarily to the purchase of our partner's 50% ownership of DOUBLECOTE, a coil paint line whose results are included in the Company's consolidated results of operations for the last seven months of fiscal 2000.
RESULTS OF OPERATIONS FOR FISCAL 1999 COMPARED TO 1998
Consolidated sales for fiscal 1999 increased by 39% as compared to fiscal 1998. Most of this increase resulted from the inclusion of MBCI (acquired in May 1998) for the full year in 1999 compared to only six months in 1998. On a pro forma basis, the increase in sales would have been approximately 8%.
Engineered Building Systems sales increased by 12% in 1999 compared to 1998 due to increased market penetration, increased geographic coverage through utilization of component plants and increased product offerings available to engineered building systems' customers after the MBCI acquisition. Operating income in 1999 increased by 27% over 1998 which represented 12% of sales compared to 11% of sales for 1998. Operating income increased at a faster rate than sales volume growth as a result of synergies of the MBCI acquisition including purchase pricing and efficiencies, vertical integration of painting and coating, lower distribution costs from broader geographical locations, improved manufacturing utilization, and product procurement from the metal component segment.
Metal Building Components sales increased 57% in 1999 compared to 1998 primarily from the inclusion of the MBCI acquisition for the full year in 1999. On a pro forma basis, the sales increase would have been approximately 7% for the year. Top line sales growth has been reduced by sales which became intersegment sales after the combination of MBCI with the Company. Since 90% of coating and painting requirements of the Company are performed internally, external sales opportunities may be lost during peak periods. In addition, the external sales which are diverted to one of the Company's joint ventures may result in a reduction of sales growth. Although sales increased by 57%, operating income increased by only 41% in the current year, representing 12% of sales in 1999 compared to 13% in 1998. A more competitive pricing environment in 1999 and new competition in some market areas accounted for the decline in margin performance.
Consolidated operating expenses consisting of engineering and drafting, selling and administrative costs, increased by $35 million, or 36%, in 1999 compared to 1998 which was slightly less than the 39% increase in consolidated sales. As a percent of sales, operating expenses were 14% in 1999 compared to 14.2% in 1998. The improvement resulted primarily from the leveraging of fixed costs over the higher sales volume.
Interest expense for 1999 was $35.4 million compared to $20.8 million in 1998. In May 1998, the Company borrowed approximately $540 million in bank debt to finance the acquisition of MBCI. During the last six months of 1998 and in 1999, the Company reduced its total indebtedness to $433 million. The reduction in debt coupled with lower interest costs (as leverage decreased)
[NCI LOGO]
resulted in a lower percentage increase in interest cost being a lower percentage of sales in 1999 as compared to 1998.
Joint venture income increased from $.7 million in 1998 to $1.7 million in 1999 due to the inclusion of MBCI's joint venture operations for the whole year. In April 1999, a 50% joint venture for the painting of heavy gauge hot roll coils began operation. This joint venture has incurred start up losses which reduced the overall increase in total joint venture income in 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 2000, the Company had working capital of $65.7 million compared to $60.6 million at the end of fiscal 1999. Better inventory management and strict credit policies allowed the Company to finance its growth without a significant increase in net working capital. During fiscal 2000, the Company generated $89.4 million in cash flow from operations before changes in working capital components. This was approximately 12% higher than the $79.8 million generated in fiscal 1999. This cash flow was used primarily to fund capital additions of $28.9 million, purchase treasury stock of $20.4 million, acquire DOUBLECOTE for $24.4 million, and reduce debt by $16.1 million during fiscal 2000.
In May 1999, the Company completed its offering of $125 million of senior subordinated notes which mature on May 1, 2009. The notes have an interest rate of 9.25%. The net proceeds of approximately $121 million were used to repay bank indebtedness. As a result of the offering, the Company reduced the maximum available borrowings under its existing 364-day senior revolving credit facility from $200 million to $40 million.
After the above refinancing, the Company has a $40 million 364-day senior revolving credit facility which matures on May 1, 2001. At October 31, 2000, the Company had $20.7 million outstanding under this facility. If this revolver is not further extended by the lenders, the Company has the option to convert it to a term note that would mature on July 1, 2003. The Company has a $200 million five year senior revolving credit facility which matures on July 1, 2003 and had $145.0 million outstanding at October 31, 2000. Borrowings under both revolvers may be prepaid and the voluntary reduction of the unutilized portion may be made at anytime in certain agreed minimum amounts, without premium or penalty but subject to LIBOR breakage fees. The Company also has a $200 million senior term loan facility which matures on July 1, 2003.
Borrowings under the term loan are payable in successive quarterly installments, which began on October 31, 1998, with $7.5 million and gradually increase to $12.5 million on the maturity date. Repayments on the term facility may not be reborrowed by the Company. The balance on the term facility was $125.0 million at October 31, 2000. The Company is required to make mandatory prepayments on the senior credit facilities upon the occurrence of certain events, including the sale of assets and the issuance and sale of equity securities, in each case subject to certain limitations. At October 31, 2000, the Company had approximately $74.3 million in borrowing capacity under its senior credit facilities.
During the year, the Company spent $28.9 million in capital additions for plant expansions, development of new management information systems and a new corporate headquarters building. The Company plans to spend approximately $15.3 million on capital projects in fiscal 2001. Delays or cancellation of planned projects or changes in the economic outlook could increase or decrease capital spending from the amounts currently anticipated.
Inflation has not significantly affected the Company's financial position or operations. Metal components and engineered building systems are affected more by the availability of funds for construction than interest rates. No assurance can be given that inflation or interest rates will not fluctuate significantly, either or both of which could have an adverse effect on the Company's operations.
[NCI LOGO]
Liquidity in future periods will be dependent on internally generated cash flows and the ability to obtain adequate financing for capital expenditures and expansion when needed, and the amount of increased working capital necessary to support expected growth. Based on current capitalization, it is expected that future cash flows from operations and the availability of alternative sources of external financing should be sufficient to provide adequate liquidity for the foreseeable future.
MARKET RISK DISCLOSURE
The Company is subject to market risk exposure related to changes in interest rates on its senior credit facility, which includes revolving credit notes and term notes. These instruments carry interest at a pre-agreed upon percentage point spread from either the prime interest rate or LIBOR. Under its senior credit facility, the Company may, at its option, fix the interest rate for certain borrowings based on a spread over LIBOR for 30 days to six months. At October 31, 2000, the Company had $291 million outstanding under its senior credit facility. Based on this balance, an immediate change of one percent in the interest rate would cause a change in interest expense of approximately $3 million on an annual basis. The Company's objective in maintaining these variable rate borrowings is the flexibility obtained regarding early repayment without penalties and lower overall cost as compared to fixed-rate borrowings.
[NCI LOGO]
QUARTERLY FINANCIAL INFORMATION
NCI BUILDING SYSTEMS, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEAR 1999
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
Sales ................................................. $ 214,347 $ 217,365 $ 243,770 $ 261,068
Gross profit .......................................... 54,277 54,384 63,450 69,530
Income before taxes ................................... 13,146 15,373 22,461 28,982
Income before extraordinary loss ...................... 7,425 8,948 13,495 17,006
Extraordinary loss on debt refinancing, net of tax .... -- -- (1,001) --
------------ ------------ ------------ ------------
Net Income ............................................ $ 7,425 $ 8,948 $ 12,494 $ 17,006
============ ============ ============ ============
Net income per common and common equivalent share(1)
Basic: ............................................ $ 0.41 $ 0.49 $ 0.73 $ 0.92
Extraordinary loss ............................ -- -- (0.05) --
------------ ------------ ------------ ------------
Net income .................................... $ 0.41 $ 0.49 $ 0.68 $ 0.92
Diluted: .......................................... 0.39 0.47 0.71 0.89
Extraordinary loss ............................ -- -- (0.05) --
------------ ------------ ------------ ------------
Net income .................................... $ 0.39 $ 0.47 $ 0.66 $ 0.89
============ ============ ============ ============
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FISCAL YEAR 2000
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
Sales ................................................. $ 232,052 $ 232,766 $ 272,749 $ 280,757
Gross profit .......................................... 59,396 61,410 72,479 75,484
Income before income taxes ............................ 15,865 17,525 25,249 30,781
------------ ------------ ------------ ------------
Net income ............................................ $ 8,998 $ 10,071 $ 14,901 $ 17,969
============ ============ ============ ============
Net income per common and common equivalent share(1)
Basic: ............................................ $ 0.49 $ 0.56 $ 0.84 $ 1.02
------------ ------------ ------------ ------------
Net income per common and common equivalent share
Diluted: .......................................... $ 0.48 $ 0.55 $ 0.82 $ 1.00
============ ============ ============ ============
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(1) The sum of the quarterly income per share amounts do not equal the annual amount reported, as per share amounts are computed independently for each quarter and for the full year based on the respective weighted average common shares outstanding.
PRICE RANGE OF COMMON STOCK
The Company's common stock is listed on the NYSE under the symbol "NCS." The following table sets forth the quarterly high and low closing sale prices of the Company's common stock, as reported by the NYSE for the prior two years. The prices quoted represent prices between dealers in securities, without adjustments for mark-ups, markdowns, or commissions, and do not necessarily reflect actual transactions.
FISCAL YEAR 1999 High Low ---------------- ---------- ---------- January 31 ................... $ 28.38 $ 21.25 April 30 ..................... $ 26.25 $ 20.75 July 31 ...................... $ 25.25 $ 18.56 October 31 ................... $ 19.94 $ 15.81 |
FISCAL YEAR 2000 High Low ---------------- ---------- ---------- January 31 ................... $ 18.50 $ 14.50 April 30 ..................... $ 20.00 $ 14.50 July 31 ...................... $ 21.13 $ 16.75 October 31 ................... $ 18.63 $ 13.19 |
CORPORATE DIRECTORY, BOARD OF DIRECTORS & OFFICERS
NCI BUILDING SYSTEMS, INC.
OFFICERS SENIOR CORPORATE HEADQUARTERS
EXECUTIVES NCI BUILDING SYSTEMS
A.R. GINN 10943 N. Sam Houston Pkwy W.
Chairman of the Board TOM BISHOP Houston, Texas 77064
DBCI President 281.897.7788
JOHNIE SCHULTE
President JERRY BOEN COMMON STOCK TRANSFER AGENT & REGISTRAR
VP Marketing COMPUTERSHARE INVESTOR SERVICES
KENNETH W. MADDOX 2 North LaSalle Avenue
Executive Vice President, WAYNE DICKINSON Chicago, Illinois 60602
Administration MBCI Executive VP
LEGAL COUNSEL
ROBERT J. MEDLOCK MARK DOBBINS GARDERE WYNNE SEWELL LLP
Executive Vice President MBCI Operations VP
Chief Financial Officer AUDITORS
Treasurer GREG ENGLISH ERNST & YOUNG LLP
VP Controller
DONNIE R. HUMPHRIES FORM 10-K
Human Resources VP, LEN GEORGE The Company's Annual Report on Form 10-K Report
Secretary MESCO President for the year ended October 31, 2000, as filed with the
Securities and Exchange Commission, is available without
DIRECTORS KELLY GINN charge upon request to Robert J. Medlock at the address
MBCI President of the Corporate Offices. The Company's common stock
A.R. GINN is traded on the New York Stock Exchange (NYSE) under
Chairman of the Board DICK KLEIN the trading symbol NCS.
COATERS President
JOHNIE SCHULTE ANNUAL MEETING
President FRED KOETTING The Annual Meeting of Shareholders of NCI Building
NCILP President Systems will be held at 10:00 a.m. (CST) on Thursday,
WILLIAM D. BREEDLOVE(*) (**) March 1, 2001, at the Johnie Schulte Conference Center
Vice Chairman ROGER LOCKE in Houston, Texas. Shareholders of record as of January 2,
Hoak Breedlove Wesneski & Co. Chief Information Officer 2001 will be entitled to vote at this time.
SHELDON ERIKSON(1) TODD MOORE
Chairman,President & VP,General Counsel
Chief Executive Officer of
Cooper Cameron Corporation AL RICHEY
NCILP Executive VP
GARY L. FORBES(**)
Vice President, MIKE YOUNG
Equus Incorporated A&S President
ROBERT N. MCDONALD(*)
Private Investor
W. BERNARD PIEPER(1) [NCI BUILDING SYSTEMS LOGO]
Private Investor
DANIEL D. ZABCIK(*) (**)
Private Investor
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(*) Compensation Committee (**) Audit Committee (1) Elected to the Board December 20, 2000 |
EXHIBIT 21
NCI BUILDING SYSTEMS, INC.
List of Subsidiaries
NCI Holding Corp. Delaware NCI Operating Corp. Nevada Metal Coaters of California, Inc. Texas DOUBLECOTE, L.L.C. Delaware Building Systems de Mexico, S.A. de C.V. Mexico |
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K) of NCI Building Systems, Inc. of our report dated December 4, 2000, included in the 2000 Annual Report to Shareholders of NCI Building Systems, Inc.
Our audits also included the financial statement schedule of NCI Building Systems, Inc. listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-14957 and No. 33-52078) pertaining to the 401(k) Profit Sharing Plan of NCI Building Systems, Inc., Registration Statements (Form S-8 No. 333-34899, No. 33-52080 and No. 333-12921) pertaining to the Nonqualified Stock Option Plan of NCI Building Systems, Inc., and Registration Statement (Form S-4 No. 333-80029) of NCI Building Systems, Inc. and in the related Prospectus of our reports with respect to the consolidated financial statements and schedule of NCI Building Systems, Inc., for the year ended October 31, 2000.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Houston, Texas
January 25, 2001
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