NCI Building Systems Inc.
) reported adjusted earnings per share of 2 cents in the third
quarter ended July 28, 2013. Even though the company rebounded
from the 28 cents loss incurred in the prior quarter, its
earnings declined 60% year on year and was way behind the Zacks
Consensus Estimate of 12 cents per share.
Including on time items, NCI Building reported GAAP net loss per
share of 19 cents in the reported quarter, compared with a loss
per share of $2.74 in the year-ago quarter.
Sales increased 6% year over year and 8% sequentially to $317
million in the quarter, missing the Zacks Consensus Estimate of
$348 million. The year-over-year growth was mainly driven by
contribution from the Metl-Span acquisition.
Cost of sales during the quarter increased 7% to $250 million.
Gross profit increased 2% to $67 million. However, gross margin
contracted 90 basis points to 21.1% in the quarter. This was due
to the pricing pressure, and increased manufacturing costs due to
ongoing investments in strategic initiatives as well as ramp-up
costs at its Middletown, Ohio coating and Mattoon, Ill.,
insulated metal panel facilities.
Engineering, selling, general and administrative expenses
increased 13% to $62.8 million, mainly due to the additional cost
related to the acquisition of Metl-Span and investments in
strategic initiatives. Operating profit dropped to $4.3 million
in the third quarter from an adjusted operating profit of $9.98
million in the prior-year quarter. The decline was due to
lower-than-anticipated volumes, competitive pricing and the
incremental costs associated with strategic initiatives.
Revenues at Engineered Building Systems dipped 4% year over year
to $158 million. The segment reported an operating income of $6.1
million in the quarter, down 33% from the year-ago quarter's
income of $9.1 million, mainly due to continued pricing pressures
in the low-demand environment as well as lower leverage on fixed
Revenues from the Metal Coil Coating segment increased 4% year
over year to $56.5 million led by HVAC, lighting fixtures, and
appliance sales and strong shipments of heavy gauge packages to
construction markets. Operating profit was $5.5 million in the
quarter, up 8% from the prior-year quarter.
The Metal Component segment generated revenues of $161 million,
up 13% year over year. The segment benefited from the recent
Metl-Span acquisition. Operating profit for the segment decreased
14% to $8 million in the quarter due to increase in costs
associated with the integration of Metl-Span, the ramp up of the
recently renovated Mattoon, Ill., plant, and increased
costs for sales and marketing. However, increased volume in
insulated metal panels as a result of the Metl-Span acquisition
was a minor deterrent.
As of Jul 28, 2013, NCI Building Systems had cash and cash
equivalents of $16.1 million, down from $55 million as of Oct 28,
2012. Long-term debt increased to $241 million as of Jul 28, 2013
from $234 million as of Oct 28, 2012. Cash used in operating
activities was $9.1 million in the first nine months of 2013
compared with cash provided by operating activities of $20.2
million in the prior-year comparable period.
Management did not provide any specific guidance for fiscal 2013.
The company noted that low-rise non-residential construction
starts have declined in the first nine months of fiscal 2013;
suggesting that the market is unlikely to recover sufficiently to
deliver annual growth in volumes. However, NCI Building
remains positive that the industry will return to the 40-year
trend of 1.3 billion square feet of new construction starts
during the next few years.
The company expects to benefit from strong backlog in the fourth
quarter of 2013. Furthermore, the Coatings group continues to
benefit from higher volumes and expanding margin and the
Middletown, Ohio, light gauge paint line has ramped up production
and remains on track to become profitable in the fourth quarter
of 2013. Revenues will also benefit from the announced price
increase for several of its product lines.
NCI Building Systems' acquisition of Metl-Span LLC will position
NCI Building as a leader in the insulated metal panel business by
diversifying and expanding its existing product range. In
addition, NCI Building will also be benefited by a growing
customer base as well as a distribution network in North America.
The American Institute of Architect's Architectural Billing Index
in Jul 2013 was at 52.7, up from 51.6 in June and projects
inquiry index increased to 66.4 in July from 62.6 in June. The
non-residential construction is showing signs of a turnaround,
which will benefit NCI Building Systems.
Based in Texas, NCI Building Systems is one of the largest
integrated manufacturers of metal products for the North American
non-residential construction industry. Currently, the shares of
NCI Building Systems retain a Zacks Rank #3 (Hold). Other
companies in the building and construction industry with
favorable Zacks Ranks are
CaesarStone Sdot-Yam Ltd.
), with a Zacks Rank #1 (Strong Buy), while
Drew Industries Inc
) both carry a Zacks Rank #2 (Buy).
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