HOUSTON, Dec. 9, 2014 /PRNewswire/ -- NCI Building Systems, Inc. (NYSE: NCS) today reported financial results for the fourth quarter and fiscal year ended November 2, 2014.

Fourth Quarter 2014 Financial and Operational Highlights:

• Net income per diluted common share was $0.19, up from $0.11 in last year's fourth quarter.
• Buildings backlog grew 9% year-over-year and consolidated backlog increased 4% to $334 million.
• Gross profit margin expanded 200 basis points year-over-year.
• Sales declined 1.9%, compared to the prior year's fourth quarter, which included an extra week of operations.
• Adjusted EBITDA increased 20.6% to $36.3 million compared to the prior year's fourth quarter.
• Adjusted to reflect a comparable number of days as in the prior year's fourth quarter, revenue grew approximately 6.2% and Adjusted EBITDA grew approximately 33.3%.
• Entered into a definitive agreement to acquire CENTRIA, a leader in the design, engineering, and manufacturing of architectural insulated metal panel (IMP) wall and roof systems.

Fiscal 2014 Financial and Operational Highlights:

• Net income per diluted common share was $0.15, up from a net loss of ($0.29) in fiscal 2013. Adjusted net income per diluted common share was $0.16 up from $0.00 in fiscal 2013. 
• Sales rose 4.7% to $1.4 billion from $1.3 billion in the prior year.
• Gross profit increased 5.7% to $291.8 million from $276.0 million in fiscal 2013.
• Adjusted EBITDA rose 6.5% to $75.5 million from $71.0 in last fiscal year.

Norman C. Chambers, Chairman, President and Chief Executive, commented, "I'm very pleased to report we finished the fiscal year with increasing profitability in our fourth quarter and our best second half performance since 2008.  After a first half plagued by extreme winter weather, supply chain disruptions and a stymied economy we were able to rebound in our second half and deliver a 152% year-over-year improvement in earnings per share for the fiscal year.  Despite the choppiness of the nonresidential construction market this year, our initiatives have gained traction and we are beginning to see expanding margins and accelerating profitability.  The health of our backlog and pace of bookings provide the momentum to generate meaningful improvements in the first half that will set the stage for a step up in earnings for fiscal 2015."

Fourth Quarter 2014 Results

For the fourth quarter, sales decreased slightly to $392.4 million, or 1.9%, from $400.2 million in last year's fourth quarter, due to slightly lower volumes in our Components and Buildings segments.   Adjusting for the impact of the extra week in fiscal 2013, sales increased an estimated 6.2% in the fourth quarter of fiscal 2014. On a sequential basis, sales increased 8.5% from $361.6 million in the third quarter.

Gross profit increased 7.0% to $93.4 million from $87.3 million in the fourth quarter of 2013 while gross profit margin rose to 23.8%, compared to 21.8% in the prior year's period. The improved performance was driven by the impact of commercial discipline combined with value pricing and improved product mix.

Engineering, selling, general and administrative (ESG&A) expenses decreased 3.5% to $68.4 million from $70.8 million in the fourth quarter of 2013. As a percentage of revenues, ESG&A decreased approximately 30 basis points to 17.4% in the 2014 fourth quarter compared to 17.7% in the prior year's period and was down from 18.2% in the 2014 third quarter. The decrease in costs from the prior year was due primarily to the inclusion of an extra week of activity in 2013 and higher operating leverage.

Operating income increased to $21.6 million from $16.5 million, or 31%, due to the expansion in gross profit margins.

Cash and cash equivalents at the end of the fourth quarter was $66.7 million compared to $77.4 million in the comparable period in fiscal 2013 and grew sequentially from $27.7 million at the end of the third quarter of fiscal 2014.  In addition, the Company's $150.0 million ABL facility remains undrawn at the end of the fourth quarter.

As noted above, Adjusted EBITDA, a non-GAAP measure, defined as earnings before interest, taxes, depreciation and amortization, and cash and other non-cash items, in accordance with the Company's credit agreement was $36.3 million, up 20.6% from $30.1 million in the prior year's fourth quarter and 45.4% higher than the $25.0 million of Adjusted EBITDA in this year's third quarter. Adjusting for the impact of the extra week in fiscal 2013, Adjusted EBITDA increased an estimated 33.3% year-over-year in the fourth quarter of fiscal 2014. This growth marks a continuation of the trend from our third quarter, in which Adjusted EBITDA increased 47% year-over-year. Please see the reconciliation of Adjusted EBITDA to net income (loss) in the accompanying financial tables.

The 2014 income tax provision includes a $2.7 million, or $0.03 per diluted common share, benefit for the release of a deferred tax valuation allowance related to our Canadian subsidiary, Robertson Buildings. The valuation allowance was released due to the current profitability and future expectations that the Canadian operations will remain profitable and realize the benefits of the existing net deferred tax assets.

For the fourth quarter of 2014, the Company reported net income of $14.3 million, or $0.19 per diluted common share. Acquisition related costs were offset by the aforementioned favorable tax benefit, resulting in adjusted net income of $13.9 million, or $0.19 per diluted common share. In last year's fourth quarter, the Company reported net income of $8.3 million, or $0.11 per diluted common share.

Inventory levels increased 8% over the same period of the prior year to $131.5 million due to anticipated higher volume levels associated with the rising backlog. Annualized inventory turnover was 8.7 turns for the fourth quarter compared to 9.2 turns in last year's fourth quarter and 8.2 turns in the third quarter of fiscal 2014.

Capital expenditures were $18.0 million for fiscal year 2014. The majority of our expenditures were targeted at upgrading and improving facilities and systems.

Fourth Quarter 2014 Segment Performance

The Coatings group third party sales were $32.4 million, representing year-over-year and sequential quarter increases of 12.3% and 4.0%, respectively. Adjusting for the additional week in fiscal 2013, fourth quarter sales posted an estimated 21.2% increase over the prior year. Total sales, including internal activity, increased $3 million, or 5% compared to last year.  Operating income decreased 15.6% to $6.9 million in the fourth quarter of 2014 from $8.2 million in the fourth quarter of the last fiscal year, but increased sequentially from $6.7 million in the 2014 third quarter. The group's year-over-year decrease was primarily due to a $1.0 million gain on insurance recovery in 2013, lowered intercompany margins on coated heavy gauge material, and lower external margins from weaker product mix as we continue to fill our new Ohio coating facility.

The Components group generated $170.3 million in third-party sales, a 3.0% decrease from $175.6 million in the prior year's fourth quarter, but a 5.0% increase sequentially from the fiscal third quarter of 2014. Adjusting for the additional week in fiscal 2013, fourth quarter sales increased 4.8% over the fourth quarter of 2013. Operating income decreased to $14.2 million from $16.9 million in the same quarter last fiscal year, but increased sequentially from $10.4 million in the 2014 third quarter. In addition to the impact of lower volume driven by fewer operating days, the segment's year-over-year decrease in operating income was due to approximately $1.1 million in incremental costs associated with the ramp up of the new architectural panel facility. We believe these incremental costs will decline going forward as a result of the anticipated acquisition of CENTRIA, which has the capabilities in architectural panels that were previously being built internally.

The Buildings group total third party sales declined to $189.7 million, a 3.1% decrease, compared to $195.8 million in last year's fourth quarter, but rose 12.7% sequentially from $168.3 million in the 2014 third quarter. Adjusting for the extra week in fiscal 2013, fourth quarter sales were up 5.2% over the fourth quarter of 2013. Operating income increased 114.4% to $19.4 million from $9.0 million in the prior year's fourth quarter, and represented a 69.3% sequential improvement from $11.5 million in the prior quarter. The profitability of the Buildings group was enhanced by improving margins from the combination of commercial discipline, value pricing and improvements in operational efficiency.

Recent Developments

On November 10, 2014, NCI announced the signing of a definitive agreement for the acquisition of CENTRIA, a leader in the design, engineering, and manufacturing of architectural insulated metal panel (IMP) wall and roof systems and a provider of integrated coil coating services for the nonresidential construction industry, for approximately $245 million in cash.  CENTRIA's revenue for the twelve months ended September 30, 2014 was approximately $230 million. The company operates four production facilities in the United States, 36 satellite sales locations and a new manufacturing facility in China.  

CENTRIA has established a distinguished position in the high-end architectural insulated metal panel segment and architectural single skin segment by continually providing fresh and exciting new aesthetics in metal architecture that weds sustainable design and thermal efficiency.  When combined with CENTRIA's innovative product offering NCI will be well positioned to fully serve the cold storage, commercial and industrial and architectural market segments with the highest quality insulated metal panel product offerings available.   

For additional information, please see the CENTRIA Acquisition supplement at www.ncibuildingsystems.com  under the "Investors" section.

Market Commentary

Leading indicators for nonresidential construction activity continued to trend positive in the fiscal fourth quarter.  According to CBRE Econometric Advisors data, robust absorption drove a 20 basis point decline in the national industrial availability rate to 10.5% in the calendar third quarter.  Warehouse, the largest component of the industrial property sector, and manufacturing, each registered an availability drop of 20 basis points, which we expect will lead to a healthy pace of new construction starts to meet increasing demand in 2015. 

The American Institute of Architects' (AIA) Architecture Mixed Use Index increased from 54.8 in September 2014 to 56.9 in October 2014. The index has been above 50, which indicates an increase in billings, the last seven months and in growth territory for 22 of the last 26 months. In the first half of our fiscal year, the index was below 50 four of the six months.  This dip in the index accurately foreshadowed the slower growth in sales volume we experienced during our fourth quarter in our Components group and validates our confidence in the index as a leading indicator.  The index level suggests healthy levels of construction spending in the next nine to twelve months and supports expectations for U.S. nonresidential construction growth to accelerate in 2015. Furthermore, the New Projects Inquiry Index scored 64.8 in September and 62.7 in October, signaling continued positive momentum for near-term architectural billings. 

The October 2014 Federal Reserve's Senior Loan Officer Survey reported continued easing of lending standards for construction and land development loans and commercial real estate loans. Over the past three months, banks experienced modest increased demand for loans to nonresidential investments in commercial and industrial projects.

Summary/Outlook

"Despite a 40% year-over-year decline in Adjusted EBITDA for our first half, and slow second half market growth of just 2.2% in new construction starts for low-rise buildings, as measured in square feet, we achieved meaningful full year financial improvement.  Commercial discipline combined with the recent realignment of manufacturing operations are driving top line growth and margin expansion across each of our business units as we continue to deliver high quality products and service.  As our strategic initiatives continue to gain traction we expect the level of profitability we achieved in our second half to continue into 2015. 

"We are encouraged that our bookings and backlog trends continue to suggest a broadening recovery in our non-residential construction markets.  Notably, in November, the first month of fiscal year 2015, our backlog increased 11% year-over-year and bookings showed 27% growth over the same period last year. Although the recent decline in oil prices may create a slight headwind for our brands that operate in the oil and gas segment, historically the segment has accounted for less than 5% of our consolidated annual revenue.  The anticipated addition of CENTRIA to the NCI family, as well as our continuing focus on manufacturing excellence and brand execution further strengthens our position to maintain our value pricing and accelerate our improving financial performance into 2015," Mr. Chambers concluded.

For additional information, please see the CFO Commentary at www.ncibuildingsystems.com under the "Investors" section.

Conference Call Information

The NCI Building Systems, Inc. fourth quarter and fiscal year end 2014 conference call is scheduled for Wednesday, December 10, 2014, at 9:00 AM ET. Please dial 1-719-457-2697 or 1-888-503-8175 to participate in the call. To listen to a live broadcast of the call over the Internet or to review the archived call, please visit the Company's website at www.ncibuildingsystems.com. To access the taped replay, please dial 1-719-457-0820 or 1-888-203-1112 and the passcode 5189329# when prompted. The taped replay will be available two hours after the call through 12:00 PM ET on December 17, 2014.

About NCI Building Systems

NCI Building Systems, Inc. is one of North America's largest integrated manufacturers of metal products for the nonresidential building industry. NCI is comprised of a family of companies operating manufacturing facilities across the United States and Mexico, with additional sales and distribution offices throughout the United States and Canada. For more information visit

www.ncibuildingsystems.com

Contact:
Layne de Alvarez
Vice President, Investor Relations
281-897-7710

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "guidance," "plan," "potential," "expect," "should," "will," "forecast" and similar expressions are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the Company's current expectations, assumptions and/or beliefs concerning future events. As a result, these forward-looking statements rely on a number of assumptions, forecasts, and estimates and, therefore, these forward-looking statements are subject to a number of risks and uncertainties that may cause the Company's actual performance to differ materially from that projected in such statements. Such forward-looking statements include, but are not limited to, the Company's expectation that the combination with CENTRIA will position the Company to better serve particular market segments with insulated metal panel product, the Company's expectation for the current growth trend for construction spending in the next nine and twelve months and the expectation for U.S. nonresidential construction growth to accelerate in 2015, and the Company's summary/outlook for the full year of 2015. Among the factors that could cause actual results to differ materially include, but are not limited to, the Company's ability to consummate the acquisition ("Acquisition") of CENTRIA on a timely basis, or at all; the Company's ability to integrate CENTRIA with the Company's business and to realize anticipated benefits of such Acquisition; ability to make strategic acquisitions accretive to earnings; industry cyclicality and seasonality and adverse weather conditions; ability to service or refinance the Company's existing debt, including significant additional debt to finance the Acquisition, and ability to obtain future financing; the Company's ability to comply with the financial tests and covenants in its existing and future debt obligations; operational limitations or restrictions in connection with the Company's debt; recognition of asset impairment charges; fluctuations in customer demand; retention and replacement of key personnel; enforcement and obsolescence of intellectual property rights; commodity price increases and/or limited availability of raw materials, including steel; competitive activity and pricing pressure; increases in energy prices; challenging economic conditions affecting the non-residential construction industry; volatility in the U.S. economy and abroad generally, and in the credit markets; hazards that may cause personal injury or property damage, thereby subjecting the Company to liabilities and possible losses, which may not be covered by insurance; breaches of the Company's information system security measures and damage to the Company's major information management systems; costs and other effects of legal and administrative proceedings, settlements, investigations, claims and other matters; costs related to environmental clean-ups and liabilities; changes in laws or regulations, including the Dodd-Frank Act; the volatility of the Company's stock price; the dilutive effect on the Company's common stockholders of potential future sales of the Company's common stock held by our sponsor; and substantial governance and other rights held by our sponsor. The Company's SEC filings, including the Company's most recent reports on Form 10-K, particularly under Item 1A "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended November 3, 2013 and in the Company's Quarterly Reports on Form 10-Q for the quarterly periods ended February 2, 2014, May 4, 2014, August 3, 2014 identify other important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements. NCI expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any changes in its expectations.