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NCI Building Systems Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: December 21, 2011 04:39PM
NCI Building Systems Inc. (NCS) filed Annual Report for the period ended 2011-10-30. Nci Building Systems Inc. has a market cap of $207.3 million; its shares were traded at around $10.42 with and P/S ratio of 0.2.
Highlight of Business Operations:Dividends on the Convertible Preferred Stock are payable, on a cumulative daily basis, as and if declared by our board of directors, at a rate per annum of 12% of the sum of the liquidation preference of $1,000 per Preferred Share plus accrued and unpaid dividends thereon or at a rate per annum of 8% of the sum of the liquidation preference of $1,000 per Preferred Share plus any accrued and unpaid dividends thereon if paid in cash on the dividend payment date on which such dividends would otherwise compound. Members of our board of directors who are not affiliated with the CD&R Funds, have the right to choose whether such dividends are paid in cash or in-kind, subject to the conditions of the Amended Credit Agreement and ABL Facility.
On September 6, 2011, we entered into a Mutual Waiver and Consent with the CD&R Funds, under which (1) the CD&R Funds, as the holders of all of our issued and outstanding Convertible Preferred Stock, agreed to accept a paid-in-kind dividend on their Preferred Shares for the quarterly dividend payment period ended September 15, 2011 computed at the dividend rate of 8% per annum, rather than the dividend rate of 12% per annum provided for in the Certificate of Designations applicable to the Preferred Shares, and (2) the Company waived its right under the Stockholders Agreement with the CD&R Funds to issue up to $5 million of its capital stock without the consent of the CD&R Funds during the remainder of its fiscal year ending October 30, 2011, subject to certain exceptions.
Throughout the twentieth century, the applications of metal buildings have significantly evolved from small, portable structures that prospered during World War II into fully customizable building solutions spanning virtually every commercial low-rise end-use market. According to the MBMA, domestic and export sales of engineered building systems by its members, which represent a portion of the number of actual buildings manufactured totaled approximately $1.7 billion for each of 2010 and 2009, while tons shipped increased 11% over the same period. Although final 2011 sales information is not yet available from the MBMA, we estimate that sales of engineered building systems will increase in 2011 compared with 2010 while tons shipped will be relatively flat over the same period. McGraw-Hill Construction reported that the low-rise nonresidential market, measured in square footage, actually declined by 5.9% during our fiscal year 2011. McGraw-Hill Constructions forecast for calendar 2011 indicates a total nonresidential construction reduction of 4% in square footage and 6% in dollar value. The forecast for calendar 2012 indicates a total nonresidential construction expected increase of 2% in square footage and 2% in dollar value over 2011.
The principal raw material used in manufacturing of our metal components and engineered building systems is steel. Our various products are fabricated from steel produced by mills including bars, plates, structural shapes, sheets, hot-rolled coils and galvanized or Galvalume®-coated coils. We purchased approximately 33% of our steel requirements from two vendors in fiscal 2011 and 36% of our steel requirements from two vendors in fiscal 2010. No other vendor accounted for over 10% of our steel requirements during fiscal 2011 or 2010. Although 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 pricing, service and delivery, the loss of one or all of these suppliers could have a material adverse effect on our ability to obtain the raw materials required to meet delivery schedules to our customers. These suppliers generally maintain an inventory of the types of materials we require.
Our raw materials on hand increased to $64.2 million at October 30, 2011 from $56.8 million at October 31, 2010 due to increased steel costs, partially offset by a decrease in tons on-hand. During fiscal 2009, we recorded a charge of $40.0 million to reduce the carrying amount on certain raw material inventory to the lower of cost or market due to the rapid deceleration in construction activity combined with precipitous declines in steel costs. No such charge was required during fiscal 2011 or 2010.
Stocks Discussed: NCS,