HOUSTON, March 8, 2016 /PRNewswire/ -- NCI Building Systems, Inc. (NYSE: NCS) ("NCI" or the "Company") today reported financial results for its first fiscal quarter ended January 31, 2016.

First Quarter 2016 Financial and Operational Highlights:

• Sales rose 14.6% to $370.0 million, compared to $322.9 million in last year's first quarter, primarily driven by the acquisition of CENTRIA that closed in January 2015.
• Gross profit increased 24.4% to $89.7 million and gross margin expanded 190 basis points year-over-year to 24.2%.
• Net income per diluted common share was $0.08, which included several offsetting special items that had a $0.01 favorable net impact on results.
• Adjusted EBITDA increased 48.4% to $29.1 million and Adjusted EBITDA margin expanded 180 basis points to 7.9% compared to the prior year's first quarter.
• Buildings segment backlog grew 6% year-over-year and the consolidated backlog increased to $477.8 million, which now includes CENTRIA's backlog of $117.8 million.

Norman C. Chambers, Chairman and Chief Executive Officer, commented, "Our first quarter results reflect the improvements we expected, as we continue to enhance our ability to manage our businesses despite market headwinds. We are pleased to have achieved both gross margin expansion and adjusted EBITDA growth, marking the seventh consecutive quarter of year-over-year improvement. Our solid financial and operational performance helped us deliver our best first quarter results since 2008.

NCI's improved performance over fiscal 2015, which took place against a backdrop of choppy nonresidential markets and declining steel prices, is a direct result of our focused execution across our commercial, manufacturing, and supply chain initiatives. Our simplified organizational structure in both our manufacturing and commercial operations has enabled us to achieve an improved level of integration and productivity that continues to drive meaningful earnings growth."

First Quarter 2016 Results

First quarter 2016 sales increased to $370.0 million, or 14.6%, from $322.9 million in last year's first quarter, due mainly to increased volumes across all three segments and the impact of the CENTRIA acquisition.  While maintaining commercial discipline across each brand, revenue growth was lower than the underlying increase in volumes due to the pass-through of lower steel costs of approximately $15.0 million, compared to the year ago quarter. Each of the three operating segments produced year-over-year growth in operating income, with particularly strong results in the Components and Buildings group segments.

Gross profit increased 24.4% to $89.7 million from $72.1 million in the first quarter of 2015, while gross profit margin expanded 190 basis points to 24.2%, compared to 22.3% in the prior year period. The improved margin performance was driven largely by a combination of commercial discipline, effective supply chain initiatives and an improved product portfolio mix, including the investments in insulated metal panels (IMPs).

Engineering, selling, general and administrative (ESG&A) expenses increased 11.1% to $69.8 million from $62.9 million in the first quarter of 2015 due largely to the inclusion of CENTRIA. As a percentage of revenues, ESG&A expenses decreased approximately 60 basis points to 18.9% in the 2016 first quarter compared to 19.5% in the prior year's period.

Adjusted operating income, a non-GAAP measure, increased 91.2% to $16.7 million in the current quarter from $8.7 million in the first quarter of 2015 due to the expansion in gross profit margin. On a GAAP basis, operating income increased to $15.3 million, or 233.8%, compared to $4.6 million in the prior year's first quarter. Please see the reconciliation of Adjusted Operating Income, Adjusted EBITDA and Adjusted Net Income in the accompanying financial tables.

Adjusted EBITDA, a non-GAAP measure, defined in accordance with the Company's term loan credit agreement as earnings before interest, taxes, depreciation and amortization, and other cash and non-cash items, was $29.1 million, up 48.4% from $19.6 million in the prior year's first quarter. This performance marks a continuation from the fourth quarter 2015, in which Adjusted EBITDA increased 55.6% year-over-year and the first 2016 quarter marks the 7th consecutive quarter of year-over-year growth in adjusted EBITDA.

First quarter 2016 net income was $5.9 million, or $0.08 per diluted common share, which included $1.3 million of one-time after tax charges related to $0.9 million of restructuring and severance charges and $0.4 million of strategic development and acquisition related costs pertaining to acquisitions that have been completed. Offsetting these charges was an after tax gain of $0.4 million, reflecting the asset recovery on the sale of an industrial facility in California, as well as a $1.9 million non-taxable bargain purchase gain recorded in association with the purchase of a Canadian IMP facility during the first quarter of fiscal 2016. 

Interest expense increased to $7.9 million in the first quarter of 2016, compared to $4.0 million in last year's first quarter as a result of the $250 million 8.25% senior notes issued to finance the CENTRIA acquisition.

Cash and cash equivalents at quarter's end was $73.8 million compared to $50.7 million at the comparable period in fiscal 2015 and sequentially was $99.7 million at the end of the fourth quarter of fiscal 2015. The Company paid down an additional $10 million under its term loan in the first quarter of fiscal 2016, and expects to make total debt repayments of $40 million during the current fiscal year.  NCI's net debt leverage ratio at the end of the first fiscal quarter improved to 2.6x, moving closer to the pre-CENTRIA acquisition net leverage of 2.2x.  In addition, the Company's $150.0 million asset base lending facility remained undrawn as of January 31, 2016.

First Quarter 2016 Segment Performance

Third party sales in the Buildings group increased slightly to $146.0 million in the first quarter from $144.5 million in the prior year quarter, primarily due to higher volumes offset by lower steel cost pass-through. Adjusted operating income increased 27.6% to $12.2 million in the current quarter, compared to $9.6 million in the first quarter of fiscal 2015. The improved margins in the Buildings segment were driven by improvements in commercial discipline, supply chain management and manufacturing efficiencies.

The Components group generated $202.9 million in third-party sales during the quarter, an increase of 31.7% from $154.0 million in the first quarter of fiscal 2015, led by CENTRIA's contribution, as well as continued strength of the legacy single skin and roll-up door product lines.  Adjusted operating income increased to $16.8 million from $9.9 million in the same quarter last fiscal year. The Components segment's profitability benefited from CENTRIA's contribution, an improved product mix favoring insulated metal panels and manufacturing efficiencies. During the first quarter of fiscal 2016, CENTRIA contributed an incremental $45.4 million to the growth in sales and $1.5 million to the growth in Adjusted Operating Income.

Third party sales in the Coatings group were $21.2 million, a 13.3% decline from $24.4 million in last year's first quarter. Adjusted operating income increased 21.2% to $4.8 million in the first quarter of fiscal 2016, compared to $4.0 million reported in the same period last year. The Coatings segment's adjusted operating income profitability was driven primarily by increased operating leverage on higher total volumes processed, combined with cost reductions from restructuring efforts.

Market Commentary

Current market data continues to show subdued activity in nonresidential markets. According to Dodge Data & Analytics, low rise nonresidential new construction starts (0-5 stories), as measured in square feet reported to date, were down as much as 10% for the first quarter of our fiscal 2016 as compared to the first quarter of fiscal 2015. Based on expected subsequent revisions, we would expect that the final reported starts will be revised upward to range between slightly down to flat for the first quarter. However, leading indicators for low-rise, nonresidential construction activity continue to indicate positive momentum for fiscal year 2016, as discussed below.  

The American Institute of Architects' (AIA) Architecture Mixed Use Index has been a 9 to 11 month leading indicator for low rise nonresidential starts. Index readings over 50 are an indicator of year-over-year growth. Over the last 23 months, the Mixed Use Index has been above 50 in 14 of those months. Recently, this index decreased from 49.2 in November to 46.6 in December but increased 2.4 points to 49.0 in January 2016.  

The Dodge Residential single family starts measured in square feet, which has been a 12 to 14 month leading indicator for square footage of nonresidential low rise starts, has shown year-over-year growth in 23 of the last 27 months. 

Outlook

NCI expects to deliver the eighth consecutive quarter of year-over-year improvement in gross profit margin and Adjusted EBITDA in the second quarter of fiscal 2016. For the full year, NCI continues to expect 2016 to be a better year than 2015 in terms of both gross margin and Adjusted EBITDA. Similar to past years' seasonal trends, the Company expects the second half performance in fiscal 2016 to be stronger than the first half.

For additional information and a more detailed outlook on the second quarter, please see the CFO Commentary at www.ncibuildingsystems.com under the "Investors" section.

Conference Call Information

The NCI Building Systems, Inc. first quarter 2016 conference call is scheduled for Wednesday, March 9, 2016, at 9:00 a.m. ET (8:00 a.m. CT). Please dial 1-412-902-0003 or 1-877-407-0672 (toll-free) 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 1-201-612-7415 or 1-877-660-6853 (toll-free) and the passcode 13630696# when prompted. The taped replay will be available two hours after the call through March 16, 2016.

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, Mexico and China with additional sales and distribution offices throughout the United States and Canada. For more information visit www.ncibuildingsystems.com.

Contact:
Darcey Matthews
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," "anticipate," "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 our 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 of improvement in gross profit margin and Adjusted EBITDA, the Company's expectation to generate significant cash from operating activities in fiscal 2016, the outlook for both operating performance and the nonresidential markets for fiscal 2016, the Company's expectation of year-over-year improvement in gross profit margin and Adjusted EBITDA, and the Company's expectation to reduce its debt by $40 million in fiscal 2016. Among the factors that could cause actual results to differ materially include, but are not limited to, industry cyclicality and seasonality and adverse weather conditions; challenging economic conditions affecting the nonresidential construction industry; volatility in the U.S. economy and abroad, generally, and in the credit markets; substantial indebtedness and our ability to incur substantially more indebtedness; our ability to generate significant cash flow required to service or refinance our existing debt, including the 8.25% senior notes due 2023, and obtain future financing; our ability to comply with the financial tests and covenants in our existing and future debt obligations; operational limitations or restrictions in connection with our debt; increases in interest rates; recognition of asset impairment charges; commodity price increases and/or limited availability of raw materials, including steel; our ability to make strategic acquisitions accretive to earnings; retention and replacement of key personnel; enforcement and obsolescence of intellectual property rights; fluctuations in customer demand; costs related to environmental clean-ups and liabilities; competitive activity and pricing pressure; increases in energy prices; volatility of the Company's stock price; dilutive effect on the Company's common stockholders of potential future sales of the Company's Common Stock held by our sponsor; substantial governance and other rights held by our sponsor; breaches of our information system security measures and damage to our major information management systems; hazards that may cause personal injury or property damage, thereby subjecting us to liabilities and possible losses, which may not be covered by insurance; changes in laws or regulations, including the Dodd–Frank Act; our ability to integrate the acquisition of CENTRIA with our business and to realize the anticipated benefits of such acquisition; the timing and amount of our stock repurchases; and costs and other effects of legal and administrative proceedings, settlements, investigations, claims and other matters. See also the "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended November 1, 2015, which identifies 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. The Company expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements, whether as a result of new information, future events, or otherwise.

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SOURCE NCI Building Systems, Inc.