10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 29, 2012

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

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 of incorporation or organization)	(I.R.S. Employer Identification No.)
10943 N. Sam Houston Parkway W. Houston, TX	77064
(Address of principal executive offices)	(Zip Code)

(281) 897-7788

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 par value-20,347,925 shares as of May 29, 2012

TABLE OF CONTENTS

	PAGE
Part — Financial Information
Item 1. Unaudited Consolidated Financial Statements.		3
Consolidated Balance Sheets as of April 29, 2012 and October 30, 2011.		3
Consolidated Statements of Operations for the Fiscal Three and Six Month Periods Ended April  29, 2012 and May 1, 2011.		4
Consolidated Statements of Cash Flows for the Fiscal Six Month Periods Ended April  29, 2012 and May 1, 2011.		5
Notes to Consolidated Financial Statements.		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		23
Item 3. Quantitative and Qualitative Disclosures About Market Risk.		40
Item 4. Controls and Procedures.		42
Part II — Other Information
Item 1. Legal Proceedings.		42
Item 1A. Risk Factors.		42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		44
Item 6. Exhibits.		44

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PART I— FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements.

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	April 29, 2012			October 30, 2011
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	73,856		$	78,982
Restricted cash		––			2,836
Accounts receivable, net		83,051			95,381
Inventories, net		106,904			88,531
Deferred income taxes		19,313			20,405
Income tax receivable		1,591			1,272
Investments in debt and equity securities, at market		4,494			4,483
Prepaid expenses and other		18,820			14,847
Assets held for sale		4,875			4,874
Total current assets		312,904			311,611
Property, plant and equipment, net		211,346			208,514
Goodwill		5,200			5,200
Intangible assets, net		23,313			24,254
Other assets		9,898			11,575
Total assets	$	562,661		$	561,154
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Note payable	$	1,648		$	292
Accounts payable		85,259			88,158
Accrued compensation and benefits		35,382			34,616
Accrued interest		340			1,309
Other accrued expenses		50,579			49,668
Total current liabilities		173,208			174,043
Long-term debt		128,499			130,699
Deferred income taxes		7,377			7,312
Other long-term liabilities		10,070			10,081
Total long-term liabilities		145,946			148,092
Series B cumulative convertible participating preferred stock		290,304			273,950
Redeemable common stock		––			759
Stockholders’ deficit:
Common stock, $.01 par value, 100,000,000 shares authorized; 20,350,479 and 19,954,323 shares issued at April 29, 2012 and October 30, 2011, respectively; 20,349,093 and 19,829,898 shares outstanding at April 29, 2012 and October 30, 2011, respectively		924			924
Additional paid-in capital		222,774			237,244
Accumulated deficit		(264,987	)		(266,896	)
Accumulated other comprehensive loss		(5,501	)		(5,485	)
Treasury stock, at cost (1,386 shares and 124,425 shares at April 29, 2012 and October 30, 2011, respectively)		(7	)		(1,477	)
Total stockholders’ deficit		(46,797	)		(35,690	)
Total liabilities and stockholders’ deficit	$	562,661		$	561,154

See accompanying notes to consolidated financial statements.

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NCI BUILDING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Fiscal Three Months Ended						Fiscal Six Months Ended
	April 29, 2012			May 1, 2011			April 29, 2012			May 1, 2011
Sales	$	250,231		$	225,565		$	493,834		$	415,651
Cost of sales		192,229			174,752			382,210			331,293
Gross profit		58,002			50,813			111,624			84,358
Engineering, selling, general and administrative expenses		51,564			52,657			100,505			100,338
Acquisition-related costs		1,494			—			1,890			—
Income (loss) from operations		4,944			(1,844	)		9,229			(15,980	)
Interest income		28			30			56			77
Interest expense		(3,062	)		(3,900	)		(6,386	)		(8,124	)
Other income, net		353			699			379			1,278
Income (loss) before income taxes		2,263			(5,015	)		3,278			(22,749	)
Provision (benefit) for income taxes		942			(1,786	)		1,368			(6,795	)
Net income (loss)	$	1,321		$	(3,229	)	$	1,910		$	(15,954	)
Convertible preferred stock dividends and accretion		9,744			6,260			16,352			12,490
Convertible preferred stock beneficial conversion feature		7,858			(240	)		11,878			1,546
Net loss applicable to common shares	$	(16,281	)	$	(9,249	)	$	(26,320	)	$	(29,990	)
Loss per common share:
Basic	$	(0.86	)	$	(0.51	)	$	(1.40	)	$	(1.65	)
Diluted	$	(0.86	)	$	(0.51	)	$	(1.40	)	$	(1.65	)
Weighted average number of common shares outstanding:
Basic		18,832			18,275			18,760			18,215
Diluted		18,832			18,275			18,760			18,215

See accompanying notes to consolidated financial statements.

4

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Fiscal Six Months Ended
	April 29, 2012			May 1, 2011
Cash flows from operating activities:
Net income (loss)	$	1,910		$	(15,954	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		14,427			16,850
Share-based compensation expense		4,093			3,357
Loss on sale of property, plant and equipment		13			11
Provision for doubtful accounts		(692	)		690
Provision (benefit) from deferred income taxes		1,147			(6,978	)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		12,561			10,811
Inventories		(18,373	)		(26,176	)
Income tax receivable		169			15,702
Prepaid expenses and other		(2,972	)		(1,133	)
Accounts payable		(2,899	)		3,907
Accrued expenses		656			3,863
Other, net		(51	)		(408	)
Net cash provided by operating activities		9,989			4,542
Cash flows from investing activities:
Capital expenditures		(13,899	)		(8,070	)
Proceeds from sale of property, plant and equipment		37			143
Net cash used in investing activities		(13,862	)		(7,927	)
Cash flows from financing activities:
Decrease (increase) in restricted cash		2,836			(3	)
Proceeds from ABL Facility		—			5
Payments on ABL Facility		—			(3	)
Excess tax benefits from share-based compensation arrangements		1			464
Payments on term loan		(2,200	)		(3,750	)
Payments on note payable		(403	)		(667	)
Payment of financing costs		(50	)		(75	)
Payment of cash dividends on convertible preferred stock		—			(11,039	)
Purchase of treasury stock		(1,510	)		(1,477	)
Net cash used in financing activities		(1,326	)		(16,545	)
Effect of exchange rate changes on cash and cash equivalents		73			(80	)
Net decrease in cash and cash equivalents		(5,126	)		(20,010	)
Cash and cash equivalents at beginning of period		78,982			77,419
Cash and cash equivalents at end of period	$	73,856		$	57,409

See accompanying notes to consolidated financial statements.

5

NCI BUILDING SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 29, 2012

(Unaudited)

NOTE 1 — BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements for NCI Building Systems, Inc. (together with its subsidiaries, unless otherwise indicated, the “Company,” “we,” “us,” or “our”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements included herein contain all adjustments necessary to fairly present our financial position, results of operations and cash flows for the periods indicated. Such adjustments, other than nonrecurring adjustments that have been separately disclosed, are of a normal, recurring nature. Operating results for the fiscal three and six month periods ended April 29, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending October 28, 2012. Our sales and earnings are subject to both seasonal and cyclical trends and are influenced by general economic conditions, interest rates, the price of steel relative to other building materials, the level of nonresidential construction activity, roof repair and retrofit demand and the availability and cost of financing for construction projects.

We use a four-four-five week calendar each quarter with our year end being on the Sunday closest to October 31. The year end for fiscal 2012 is October 28, 2012.

For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended October 30, 2011 filed with the Securities and Exchange Commission (the “SEC”) on December 21, 2011.

NOTE 2 —ACCOUNTING PRONOUNCEMENTS

Adopted Accounting Pronouncements

In September 2011, the FASB issued ASU 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”), which gives companies the option to perform an annual qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount and, in some cases, by-pass the two-step impairment test. Early adoption is permitted. Therefore, we have early adopted this ASU in our fiscal year ending October 28, 2012. The adoption of ASU 2011-08 did not have a material impact on our consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). The amendments to this update provide a uniform framework for applying the principles of fair value measurement and include (i) amendments that clarify the Board’s intent about the application of existing fair value measurement and disclosure requirements and (ii) amendments that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. These amendments do not require additional fair value measurements. We adopted ASU 2011-04 in our second fiscal quarter ended April 29, 2012. The adoption of ASU 2011-04 did not have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”) which amends its guidance on the presentation of comprehensive income to increase the prominence of items reported in other comprehensive income. The new guidance requires that all components of comprehensive income in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance required entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (“ASU 2011-12”) which indefinitely deferred the guidance related to the presentation on the face of the financial statements of the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income. These amendments are to be applied retrospectively. We will adopt ASU 2011-05 and ASU 2011-12 in our first quarter of fiscal 2013 and we believe its adoption will not have any impact on our consolidated financial statements.

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NOTE 3 — RESTRICTED CASH

In prior year, we entered into a cash collateral agreement with our agent bank to secure letters of credit. The restricted cash was invested in a bank account securing our agent bank. As of April 29, 2012, we no longer had restricted cash as collateral related to our letters of credit because we utilized the ABL Facility to secure all our letters of credit. As of October 30, 2011, we had restricted cash in the amount of $2.8 million as collateral related to our $2.7 million of letters of credit for certain insurance policies, exclusive of letters of credit under our ABL Facility. Restricted cash was classified as a current asset as the underlying letters of credit were to expire within one year of the respective balance sheet date.

NOTE 4 — INVENTORIES

The components of inventory are as follows (in thousands):

	April 29, 2012		October 30, 2011
Raw materials	$	76,511	$	62,801
Work in process and finished goods		30,393		25,730
	$	106,904	$	88,531

NOTE 5 — SHARE-BASED COMPENSATION

Our 2003 Long-Term Stock Incentive Plan (“Incentive Plan”) is an equity-based compensation plan that allows us to grant a variety of types of awards, including stock options, restricted stock, restricted stock units, stock appreciation rights, performance share awards, phantom stock awards and cash awards. As of April 29, 2012 and May 1, 2011, and for all periods presented, our share-based awards under this plan have consisted of restricted stock grants and stock option grants, none of which can be settled through cash payments. Both our stock options and restricted stock awards are subject only to vesting requirements based on continued employment at the end of a specified time period and typically vest over four years or earlier upon death, disability or a change of control. However, our annual restricted stock awards also vest upon retirement and, only in the case of certain special one-time restricted stock awards, a portion vest on termination without cause or for good reason, as defined by the agreements governing such awards.

During the six month periods ended April 29, 2012 and May 1, 2011, we granted 92,832 and 121,669 stock options, respectively, and the weighted average grant-date fair value of options granted during fiscal 2012 and fiscal 2011 was $5.12 and $5.78, respectively.

The fair value of restricted stock awards classified as equity awards is based on the Company’s stock price as of the date of grant. During the six months ended April 29, 2012 and May 1, 2011, we granted restricted stock awards with a fair value of $6.8 million or 666,110 shares and $6.2 million or 515,053 shares, respectively.

NOTE 6 — LOSS PER COMMON SHARE

Basic loss per common share is computed by dividing net loss allocated to common shares by the weighted average number of common shares outstanding. Diluted income per common share, if applicable, considers the dilutive effect of common stock equivalents. The reconciliation of the numerator and denominator used for the computation of basic and diluted loss per common share is as follows (in thousands, except per share data):

	Fiscal Three Months Ended						Fiscal Six Months Ended
	April 29, 2012			May 1, 2011			April 29, 2012			May 1, 2011
Numerator for Basic and Diluted Loss Per Common Share Net loss allocated to common shares (1)	$	(16,281	)	$	(9,249	)	$	(26,320	)	$	(29,990	)
Denominator for Basic and Diluted Loss Per Common Share
Weighted average common shares outstanding for basic and diluted loss per share		18,832			18,275			18,760			18,215
Basic and Diluted loss per common share	$	(0.86	)	$	(0.51	)	$	(1.40	)	$	(1.65	)

(1) Participating securities consist of the holders of the Convertible Preferred Stock, as defined below, and the unvested restricted Common Stock related to our Incentive Plan. These participating securities do not have a contractual obligation to share in losses; therefore, no losses were allocated in any periods presented above. These participating securities will be allocated earnings when applicable.

7

We calculate earnings per share using the “two-class” method, whereby unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are “participating securities” and, therefore, these participating securities are treated as a separate class in computing earnings per share. The calculation of earnings per share for Common Stock presented here excludes the income, if any, attributable to the unvested restricted stock awards and our Series B Cumulative Convertible Participating Preferred Stock (“Convertible Preferred Stock,” and shares thereof, “Preferred Shares”) from the numerator and excludes the dilutive impact of those shares from the denominator. There was no income amount attributable to unvested restricted stock or Preferred Shares for the three and six month periods ended April 29, 2012 and May 1, 2011 as the restricted stock and Preferred Shares do not share in the net losses. However, in periods of net income allocated to common shares, a portion of this income will be allocable to the restricted stock and Preferred Shares. As of April 29, 2012 and October 30, 2011, the Preferred Shares were convertible into 48.9 million and 46.6 million shares of Common Stock, respectively.

For both the three and six month periods ended April 29, 2012 and May 1, 2011, all options and unvested restricted shares were anti-dilutive and, therefore, not included in the diluted loss per common share calculation.

NOTE 7 — WARRANTY

We sell weathertightness warranties to our customers for protection from leaks in our roofing systems related to weather. These warranties range from two years to 20 years. We sell two types of warranties, standard and Single Source™, and three grades of coverage for each. The type and grade of coverage determines the price to the customer. For standard warranties, our responsibility for leaks in a roofing system begins after 24 consecutive leak-free months. For Single Source™ warranties, the roofing system must pass our inspection before warranty coverage will be issued. Inspections are typically performed at three stages of the roofing project: (i) at the project start-up; (ii) at the project mid-point; and (iii) at the project completion. These inspections are included in the cost of the warranty. If the project requires or the customer requests additional inspections, those inspections are billed to the customer. Upon the sale of a warranty, we record the resulting revenue as deferred warranty revenue, which is included in other accrued expenses in our Consolidated Balance Sheets. We recognize deferred warranty revenue over the warranty coverage period in a manner that matches our estimated expenses relating to the warranty. Additionally, we maintain an accrued warranty at Robertson-Ceco II Corporation (“RCC”) in which the balance was $3.1 million at both April 29, 2012 and October 30, 2011. RCC’s accrued warranty programs have similar terms and characteristics to our other warranty programs although this warranty is not amortized in the same manner as our other warranty programs.

The following table represents the rollforward of our acquired accrued warranty obligation and deferred warranty revenue activity for each of the fiscal six months ended (in thousands):

	Fiscal Six Months Ended
	April 29, 2012			May 1, 2011
Beginning balance	$	17,941		$	16,977
Warranties sold		1,479			1,411
Revenue recognized		(803	)		(769	)
Costs incurred and other		(109	)		(302	)
Ending balance	$	18,508		$	17,317

NOTE 8 — LONG-TERM DEBT AND NOTE PAYABLE

Debt is comprised of the following (in thousands):

	April 29, 2012		October 30, 2011
Amended Credit Agreement, due April 2014 (interest at 6.5% at April 29, 2012 and 8.0% at October 30, 2011)	$	128,499	$	130,699
Asset-Based Lending Facility, due April 2014 (interest at 4.75%)		––		—
		128,499		130,699
Current portion of long-term debt		—		—
Total long-term debt, less current portion	$	128,499	$	130,699

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Amended Credit Agreement

On October 20, 2009, we entered into the Amended Credit Agreement (the “Amended Credit Agreement”), pursuant to which we repaid $143.3 million of the $293.3 million in principal amount of term loans outstanding under such credit agreement and modified the terms and maturity of the remaining $150.0 million balance. The terms of the term loan require quarterly principal payments in an amount equal to 0.25% of the principal amount of the term loan then outstanding as of the last day of each calendar quarter and a final payment of approximately $136.3 million at maturity on April 20, 2014. However, we have made mandatory and optional prepayments on the Amended Credit Agreement and these prepayments are allowed to be applied against the remaining required quarterly principal payments. As a result, we are not required to make any additional quarterly principal payments for the remaining term of the term loan, although we intend to continue to make voluntary prepayments.

The Company’s obligations under the Amended Credit Agreement and any interest rate protection agreements or other permitted hedging agreement entered into with any lender under the Amended Credit Agreement are irrevocably and unconditionally guaranteed on a joint and several basis by each direct and indirect domestic subsidiary of the Company (other than any domestic subsidiary that is a foreign subsidiary holding company or a subsidiary of a foreign subsidiary that is insignificant).

The obligations under the Amended Credit Agreement and under any permitted hedging agreement and the guarantees thereof are secured by (i) all of the capital stock and other equity interests of all direct domestic subsidiaries owned by the Company and the guarantors, (ii) up to 65% of the capital stock of certain direct foreign subsidiaries of the Company or any guarantor (it being understood that a foreign subsidiary holding company or a domestic subsidiary of a foreign subsidiary is considered a foreign subsidiary for these purposes) and (iii) substantially all other tangible and intangible assets owned by the Company and each guarantor, including liens on material real property, in each case to the extent permitted by applicable law. The liens securing the obligations under the Amended Credit Agreement, the permitted hedging agreements and the guarantees thereof are first in priority (as between the Amended Credit Agreement and the Asset-Based Lending Facility (the “ABL Facility”)) with respect to stock, material real property and assets other than accounts receivable, inventory, certain deposit accounts, associated intangibles and certain other specified assets of the Company and the guarantors. Such liens are second in priority (as between the Amended Credit Agreement and the ABL Facility) with respect to accounts receivable, inventory, associated intangibles and certain other specified assets of the Company and the guarantors.

The Amended Credit Agreement contains a number of covenants that, among other things, limit or restrict our ability to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make dividends and other restricted payments, create liens, make investments, make acquisitions, engage in mergers, change the nature of our business and engage in certain transactions with affiliates.

The Amended Credit Agreement did not require financial covenants until October 30, 2011 (subject to prepayment deferrals as noted below), at which time our consolidated leverage ratio of net indebtedness to EBITDA was to be no more than 5 to 1. Net indebtedness is defined as consolidated debt less the lesser of unrestricted cash or $50 million. This ratio steps down by 0.25 each quarter until October 28, 2012 at which time the maximum ratio is 4 to 1. The ratio continues to step down by 0.125 each quarter until November 3, 2013 to a ratio of 3.5 to 1, which remains the maximum ratio for each fiscal quarter thereafter. We will, however, not be subject to this financial covenant with respect to a specified period if certain prepayments or repurchases of the term loans under the Amended Credit Agreement are made prior to the specified period. Based on our prepayments made through April 29, 2012, the leverage ratio covenant has been deferred until the third quarter of fiscal 2013. The prepayments that have been made can be applied to continuously defer covenant requirements and are not reduced unless the Company’s actual leverage ratios are above the maximum requirement for a given period. Although our Amended Credit Agreement did not require any financial covenant compliance, at April 29, 2012 and October 30, 2011, our consolidated leverage ratio as of those dates was 1.30 and 2.27, respectively.

Term loans under the Amended Credit Agreement may be repaid at any time, without premium or penalty but subject to customary LIBOR breakage costs. We also have the ability to repurchase a portion of the term loans under the Amended Credit Agreement, subject to certain terms and conditions set forth in the Amended Credit Agreement. In addition, the Amended Credit Agreement requires mandatory prepayment and reduction in an amount equal to:

• the net cash proceeds of (1) certain asset sales, (2) certain debt offerings and (3) certain insurance recovery and condemnation events; and

• 50% of annual excess cash flow (as defined in the Amended Credit Agreement) for any fiscal year ended on or after October 31, 2010, unless a specified leverage ratio target is met.

The Amended Credit Agreement limited our ability to pay cash dividends on or prior to October 31, 2010 after which time we were permitted to pay dividends in an amount not to exceed the available amount (as defined in the Amended Credit Agreement). The available amount is defined as the sum of 50% of the cumulative consolidated net income from August 2, 2009 to the end of the most

9

recent fiscal quarter, plus net proceeds of property or assets received as capital contributions, less the sum of all dividends, payments or other distributions of such available amounts, in each case subject to certain adjustments and exceptions as specified in the Amended Credit Agreement. In the absence of accumulated earnings, cash dividends and other cash restricted payments are limited to $14.5 million in the aggregate during the term of the loan, of which we used $11.0 million as of April 29, 2012. Each quarterly dividend payment on the Convertible Preferred Stock cannot be split between cash and payment-in-kind.

The term loan under the Amended Credit Agreement bears interest, at our option, at either LIBOR or Base Rate plus an applicable margin. To date, we have selected LIBOR interest rates. Overdue amounts will bear interest at a rate that is 2% higher than the rate otherwise applicable. “Base Rate” is defined as the highest of (i) the Wells Fargo Bank, National Association prime rate, (ii) the overnight Federal Funds rate plus 0.5%, and (iii) 3%. “LIBOR” is defined as the applicable London interbank offered rate (not to be less than 2%) adjusted for reserves. The applicable margin until October 30, 2011 was 5.00% on Base Rate loans and 6.00% on LIBOR loans under the Amended Credit Agreement. Since October 30, 2011, the LIBOR-linked margin fluctuates based on our leverage ratio and shall be either 6% or 4.5%. Based on our leverage ratio at April 29, 2012, the applicable margin in the third quarter of fiscal 2012 will be 4.5%.

ABL Facility

On October 20, 2009, the subsidiaries of the Company, NCI Group, Inc. and RCC and the Company entered into the ABL Facility pursuant to a loan and security agreement that provided for a $125.0 million asset-based loan facility. The ABL Facility allows us an aggregate maximum borrowing of up to $125.0 million; however, the aggregate maximum borrowings are limited to $100.0 million under our Amended Credit Agreement. Borrowing availability under the ABL Facility is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of qualified cash, eligible inventory and eligible accounts receivable, less certain reserves and subject to certain other adjustments. At April 29, 2012 and October 30, 2011, our excess availability under the ABL Facility was $83.9 million and $87.8 million, respectively. The ABL Facility has a maturity of April 20, 2014 and includes borrowing capacity of up to $25 million for letters of credit and up to $10 million for swingline borrowings. Under the ABL Facility, there were no amounts of borrowings outstanding at both April 29, 2012 and October 30, 2011. In addition, at April 29, 2012 and October 30, 2011, standby letters of credit totaling approximately $9.1 million and $6.4 million, respectively, were issued under the ABL Facility related to certain insurance policies.

On December 3, 2010, we finalized an amendment of our ABL Facility that reduces the unused commitment fee from 1% or 0.75% based on the average daily balance of loans and letters of credit obligations outstanding to an annual rate of 0.5%. The calculation is determined on the amount by which the maximum credit exceeds the average daily principal balance of outstanding loans and letter of credit obligations. Additional customary fees in connection with the ABL Facility also apply. In addition, the amendment reduced the effective interest rate on borrowings, if any, by nearly 40% or 175 basis points. It also relaxes the prohibitions against making restricted payments or paying cash dividends, including on the Convertible Preferred Stock, to allow, in the aggregate, up to $6.5 million of restricted payments or cash dividends each calendar quarter, provided (i) certain excess availability conditions or (ii) certain other excess availability conditions and a fixed charge coverage ratio under the ABL Facility are satisfied. However, these prohibitions are second to the cash restricted payment limitations on the Amended Credit Agreement discussed above.

The obligations of the borrowers under the ABL Facility are guaranteed by us and each direct and indirect domestic subsidiary of the Company (other than any domestic subsidiary that is a foreign subsidiary holding company or a subsidiary of a foreign subsidiary that is insignificant) that is not a borrower under the ABL Facility. Our obligations under certain specified bank products agreements are guaranteed by each borrower and each other direct and indirect domestic subsidiary of the Company and the other guarantors. These guarantees are made pursuant to a guarantee agreement, dated as of October 20, 2009, entered into by the Company and each other guarantor with Wells Fargo Foothill, LLC, as administrative agent.

The obligations under the ABL Facility and the guarantees thereof are secured by a first priority lien on our accounts receivable, inventory, certain deposit accounts, associated intangibles and certain other specified assets of the Company and a second priority lien on the assets securing the term loans under the Amended Credit Agreement on a first-lien basis.

The ABL Facility contains a number of covenants that, among other things, limit or restrict our ability to dispose of assets, incur additional indebtedness, incur guarantee obligations, engage in sale and leaseback transactions, prepay other indebtedness, modify organizational documents and certain other agreements, create restrictions affecting subsidiaries, make dividends and other restricted payments, create liens, make investments, make acquisitions, engage in mergers, change the nature of our business and engage in certain transactions with affiliates.

Under the ABL Facility, a “Dominion Event” occurs if either an event of default is continuing or excess availability falls below certain levels, during which period, and for certain periods thereafter, the administrative agent may apply all amounts in the Company’s, the borrowers’ and the other guarantors’ concentration accounts to the repayment of the loans outstanding under the ABL Facility, subject

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to the Intercreditor Agreement. In addition, during such Dominion Event, we are required to make mandatory payments on our ABL Facility upon the occurrence of certain events, including the sale of assets and the issuance of debt, in each case subject to certain limitations and conditions set forth in the ABL Facility.

The ABL Facility includes a minimum fixed charge coverage ratio of one to one, which will apply if we fail to maintain at least $15 million of minimum borrowing capacity. Although our ABL Facility did not require any financial covenant compliance, at April 29, 2012 and October 30, 2011, our fixed charge coverage ratio as of those dates, which is calculated on a trailing twelve month basis, was 3.44 to one and 0.37 to one, respectively.

Loans under the ABL Facility bear interest, at our option, as follows:

(1) Base Rate loans at the Base Rate plus a margin. The margin ranges from 1.50% to 2.00% depending on the quarterly average excess availability under such facility, and

(2) LIBOR loans at LIBOR plus a margin. The margin ranges from 2.50% to 3.00% depending on the quarterly average excess availability under such facility.

During an event of default, loans under the ABL Facility will bear interest at a rate that is 2% higher than the rate otherwise applicable. “Base Rate” is defined as the higher of the Wells Fargo Bank, N.A. prime rate and the overnight Federal Funds rate plus 0.5% and “LIBOR” is defined as the applicable London interbank offered rate adjusted for reserves.

Deferred Financing Costs

At April 29, 2012 and October 30, 2011, the unamortized balance in deferred financing costs was $9.2 million and $11.6 million, respectively.

Insurance Note Payable

The note payable is related to financed insurance premiums. As of April 29, 2012 and October 30, 2011, we had outstanding a note payable in the amount of $1.6 million and $0.3 million, respectively. Insurance premium financings are generally secured by the unearned premiums under such policies.

NOTE 9 — SERIES B CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK

The CD&R Equity Investment

On August 14, 2009, the Company entered into an Investment Agreement (as amended, the “Investment Agreement”), by and between the Company and Clayton, Dubilier & Rice Fund VIII, L.P. (“CD&R Fund VIII”), pursuant to which the Company agreed to issue and sell to CD&R Fund VIII, and CD&R Fund VIII agreed to purchase from the Company, for an aggregate purchase price of $250 million (less reimbursement to CD&R Fund VIII or direct payment to its service providers of up to $14.5 million in the aggregate of transaction expenses and a deal fee, paid to Clayton, Dubilier & Rice, Inc., the manager of CD&R Fund VIII, of $8.25 million), 250,000 shares of Convertible Preferred Stock. Pursuant to the Investment Agreement, on October 20, 2009 (the “Closing Date”), the Company issued and sold to CD&R Fund VIII and CD&R Friends & Family Fund VIII, L.P. (the “CD&R Funds”), and the CD&R Funds purchased from the Company, an aggregate of 250,000 Preferred Shares, representing approximately 39.2 million shares of Common Stock or 68.4% of the voting power and Common Stock of the Company on an as-converted basis as of the Closing Date (such purchase and sale, the “CD&R Equity Investment”). At April 29, 2012 and October 30, 2011, the CD&R Funds own 70.6% and 70.1%, respectively, of the voting power and Common Stock of the Company on an as-converted basis.

Certain Terms of the Convertible Preferred Stock

In connection with the consummation of the CD&R Equity Investment, on October 19, 2009 we filed the Certificate of Designations of the Convertible Preferred Stock (the “Certificate of Designations”), setting forth the terms, rights, powers, and preferences, and the qualifications, limitations and restrictions thereof, of the Convertible Preferred Stock.

Liquidation Value. Each Preferred Share has an initial liquidation preference of $1,000.

Rank. The Convertible Preferred Stock ranks senior as to dividend rights, redemption payments and rights upon liquidation to the Common Stock and each other class or series of our equity securities, whether currently issued or to be issued in the future, that by its terms ranks junior to the Convertible Preferred Stock, and junior to each class or series of equity securities of the Company, whether

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currently issued or issued in the future, that by its terms ranks senior to the Convertible Preferred Stock. The Company does not have any outstanding securities ranking senior to the Convertible Preferred Stock. Pursuant to the Certificate of Designations, the issuance of any senior securities of the Company requires the approval of the holders of the Convertible Preferred Stock.

Dividends. Dividends on the Convertible Preferred Stock are payable, on a cumulative daily basis, as and if declared by the 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. If dividends are not paid on the dividend payment date, either in cash or in kind, such dividends compound on the dividend payment date. Members of the 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. The Company’s Amended Credit Agreement restricts the payment of cash dividends to 50% of cumulative earnings beginning with the fourth quarter of 2009, and in the absence of accumulated earnings, cash dividends and other cash restricted payments are limited to $14.5 million in the aggregate during the term of the loan, of which we used $11.0 million as of April 29, 2012.

Each quarterly dividend payment on the Convertible Preferred Stock cannot be split between cash and payment-in-kind. The Company’s ABL Facility, among other potentially available baskets, permits the Company to pay cash dividends, including on the Convertible Preferred Stock, up to $6.5 million each calendar quarter, provided (i) certain excess availability conditions or (ii) certain other excess availability conditions and a fixed charge coverage ratio under the ABL Facility are satisfied.

If, at any time after the 30-month anniversary of the Closing Date of October 20, 2009 (i.e., April 20, 2012), the trading price of the Common Stock exceeds $12.75, which is 200% of the initial conversion price of the Convertible Preferred Stock ($6.3740, as adjusted for any stock dividends, splits, combinations or similar events), for each of 20 consecutive trading days (the “Dividend Rate Reduction Event”), the dividend rate (excluding any applicable adjustments as a result of a default) will become 0.00%. However, this does not preclude the payment of default dividends after the 30-month anniversary of the Closing Date. As a result of certain restrictions on dividend payments in the Company’s Amended Credit Agreement and ABL Facility, the dividends for each quarter of fiscal 2010 were paid in-kind, at a pro rata rate of 12% per annum. The dividends for the December 15, 2010 and March 15, 2011 dividend payments were paid in cash and the dividends for the June 15, 2011 dividend payment was paid in-kind at a pro rata rate of 12% per annum. As a result of the two Consent and Waiver Agreements (discussed below), the September 15, 2011 and December 15, 2011 dividend payments were paid in-kind, at a pro rata rate of 8% per annum. See Note 8—Long-term Debt and Note Payable for more information on our Amended Credit Agreement and ABL Facility.

At any time prior to the Dividend Rate Reduction Event, if dividends are not paid in cash on the applicable dividend payment date, the rate at which such dividends are payable will be at least 12% per annum. Therefore, the Company accrues dividends daily based on the 12% rate and if and when the Company determines the dividends will be paid at a different rate due to either cash payment on the applicable dividend payment date or obtaining a waiver, the Company will record a subsequent benefit of the excess 4% accrual upon our board’s declaration of such cash dividend and reverse the beneficial conversion feature charge associated with such accrual. However, we currently cannot pay dividends in cash because the Company’s Amended Credit Agreement currently restricts the payment of cash dividends to 50% of cumulative earnings beginning with the fourth quarter of 2009, and in the absence of accumulated earnings, cash dividends and other cash restricted payments are limited to $14.5 million in the aggregate during the term of the loan, of which we used $11.0 million as of April 29, 2012.

The dividend rate will increase by up to 6% per annum above the rates described in the preceding paragraphs upon and during certain defaults specified in the Certificate of Designations involving the Company’s failure to have a number of authorized and unissued shares of Common Stock reserved and available sufficient for the conversion of all outstanding Preferred Shares. The Company currently has sufficient authorized, unissued and reserved shares of Common Stock to effect the conversion.

On the dividend payment date, the Company has the right to choose whether dividends are paid in cash or in-kind. However, the first dividend payment which was scheduled to be paid on December 15, 2009 in the amount of $4.6 million was required to be paid in cash by the Certificate of Designations but could not be paid in cash based on the terms of the Company’s Amended Credit Agreement and ABL Facility which restricted the Company’s ability to pay cash dividends until the first quarter of fiscal 2011 and until October 20, 2010, respectively. As a result, the dividend for the period up to the December 15, 2009 dividend payment date compounded at a rate of 12% per annum. We currently cannot pay this dividend in cash because the Company’s Amended Credit Agreement restricts the payment of cash dividends to 50% of cumulative earnings beginning with the fourth quarter of 2009, and in the absence of accumulated earnings, cash dividends and other cash restricted payments are limited to $14.5 million in the aggregate during the term of the loan, of which the Company used $11.0 million as of April 29, 2012. Each quarterly dividend payment on the Convertible Preferred Stock cannot be split between cash and payment-in-kind.

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In addition to any dividends declared and paid as described in the preceding paragraphs, holders of the outstanding Preferred Shares also have the right to participate equally and ratably, on an as-converted basis, with the holders of shares of Common Stock in all cash dividends and distributions paid on the Common Stock.

On March 15, 2012, the Preferred Dividend Payment Committee of the board of directors declared and paid to the holders of Convertible Preferred Stock, the CD&R Funds, a dividend of 8,924.762 shares of Convertible Preferred Stock at a pro rata rate of 12% per annum for the period from December 16, 2011 to March 15, 2012.

On December 9, 2011, the Company 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 the Company’s 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 December 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 fiscal year ending October 28, 2012, subject to certain exceptions. The December 9, 2011 Mutual Waiver and Consent does not extend to dividends on the Convertible Preferred Stock accruing after December 15, 2011 or restrict our issuance of capital stock after October 28, 2012.

In view of the December 9, 2011 Mutual Waiver and Consent, the Preferred Dividend Payment Committee of the board of directors declared and directed the payment of the December 15, 2011 dividend on the Preferred Shares in-kind at the reduced rate of 8% per annum. As a result, a dividend of 5,833.4913 Preferred Shares was paid to the holders of Convertible Preferred Stock for the period from September 16, 2011 to December 15, 2011. As a result of accruing the dividend at the stated 12% rate, and subsequently paying the lower 8% rate, the Company recorded a dividend accrual reversal of $2.9 million in the first quarter of fiscal 2012 related to dividends accrued between September 16, 2011 and December 15, 2011. Similarly, the Company recorded a beneficial conversion feature reversal of $1.1 million in the first quarter of fiscal 2012 related to beneficial conversion feature charges between September 16, 2011 and December 15, 2011 associated with the dividend reduction.

On March 15, 2011, the Preferred Dividend Payment Committee of the board of directors declared and paid to the holders of Convertible Preferred Stock, the CD&R Funds, a $5.5 million cash dividend at a pro rata rate of 8% per annum. As a result of paying an 8% cash dividend, we recorded a dividend accrual reversal of $2.7 million in the second quarter of fiscal 2011 related to dividends accrued in excess of 8% between December 16, 2010 and March 15, 2011. In addition, we reversed the related beneficial conversion feature previously recorded of $8.2 million in the second quarter of fiscal 2011 related to the paid-in-kind dividends accrued between December 16, 2010 and March 15, 2011.

On December 15, 2010, the Preferred Dividend Payment Committee of the board of directors declared and paid to the holders of Convertible Preferred Stock, the CD&R Funds, a $5.55 million cash dividend at the rate of 8% per annum. As a result of paying an 8% cash dividend, we recorded a dividend accrual reversal of $2.5 million in the first quarter of fiscal 2011 related to dividends accrued in excess of 8% between September 16, 2010 and December 15, 2010. In addition, we reversed the related beneficial conversion feature previously recorded of $5.1 million in the first quarter of fiscal 2011 related to the paid-in-kind dividends accrued between September 16, 2010 and December 15, 2010.

Convertibility and Anti-Dilution Adjustments. To the extent that we have authorized but unissued shares of Common Stock, holders of Preferred Shares have the right, at any time and from time to time, at their option, to convert any or all of their Preferred Shares, in whole or in part, into fully paid and non-assessable shares of the Company’s Common Stock at the conversion price set forth in the Certificate of Designations. The number of shares of Common Stock into which a Preferred Share is convertible is determined by dividing the sum of the liquidation preference of $1,000 per Preferred Share and the accrued and unpaid dividends of such share as of the time of conversion by the conversion price in effect at the time of conversion.

The initial conversion price of the Convertible Preferred Stock was equal to $6.3740. The conversion price is subject to adjustment as set forth in the Certificate of Designations and is subject to customary anti-dilution adjustments, including stock dividends, splits, combinations or similar events and issuance of our Common Stock at a price below the then-current market price and, within the first three years after the Closing Date, issuances of our Common Stock below the then applicable conversion price.

Milestone Redemption Right. The Company has the right, at any time on or after the tenth anniversary of the Closing Date, to redeem in whole, but not in part, all then-issued and outstanding shares of Convertible Preferred Stock in accordance with the procedures set forth in the Certificate of Designations. Any holder of Convertible Preferred Stock has the right, at any time on or after the tenth anniversary of the Closing Date, to require that the Company redeem all, but not less than all, of its shares of Convertible Preferred Stock in accordance with the procedures set forth in the Certificate of Designations. In each case, such right (the “Milestone Redemption Right”), is exercisable at a redemption price for each Preferred Share equal to the sum of the liquidation preference of $1,000 per Preferred Share and the accrued and unpaid dividends of such share as of the time of redemption.

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Change of Control Redemption Right. Upon certain change of control events specified in the Certificate of Designations, including certain business combinations involving the Company and certain changes to the beneficial ownership of the voting power of the Company, so long as the CD&R Funds do not own 45% or more of the voting power of the Company and directors designated by the CD&R Funds are not entitled to cast a majority of the total number of votes that can be cast by the Company’s board of directors or by the directors constituting the quorum approving or recommending such change of control event, holders of Preferred Shares are able to require redemption by the Company, in whole but not in part, of the Convertible Preferred Stock (1) if redeemed after the fourth anniversary of the Closing Date, at a purchase price equal to the sum of the liquidation value of such Preferred Shares and the accrued and unpaid dividends thereon as of the redemption date or (2) if redeemed prior to the fourth anniversary of the Closing Date, at a purchase price equal to the sum of (a) the liquidation value of such Preferred Shares plus the accrued and unpaid dividends thereon as of the redemption date and (b) a make-whole premium equal to the net present value of the sum of all dividends that would otherwise be payable on and after the redemption date, to and including such fourth anniversary date, assuming that such dividends are paid in cash. In addition, upon change of control events pursuant to the Amended Credit Agreement or the ABL Facility, holders of Preferred Shares are able to require redemption by the Company, in whole but not in part, of the Convertible Preferred Stock, at a purchase price equal to 101% of the sum of the liquidation value of such Preferred Shares and the accrued and unpaid dividends thereon as of the redemption date.

In the event of a merger or other business combination resulting in a change of control in which the holders of shares of our Common Stock receive cash or securities of an unaffiliated entity as consideration for such shares, if the holder of Preferred Shares does not exercise the change of control redemption right described in the paragraph above or is not entitled to the change of control redemption right in connection with such event, such holder will be entitled to receive, pursuant to such merger or business combination, the consideration such holder would have received for its Preferred Shares had it converted such shares immediately prior to the merger or business combination transaction. In the event of a merger or other business combination not resulting in a change of control in which the holders of shares of our Common Stock receive cash or securities of an unaffiliated entity as consideration for such shares, holders of Convertible Preferred Stock shall have the option to exchange their Preferred Shares for shares of the surviving entity’s capital stock having terms, preferences, rights, privileges and powers no less favorable than the terms, preferences, rights, privileges and powers under the Certificate of Designations.

Vote. Holders of Preferred Shares generally are entitled to vote with the holders of the shares of our Common Stock on all matters submitted for a vote of holders of shares of the Company’s Common Stock (voting together with the holders of shares of our Common Stock as one class) and are entitled to a number of votes equal to the number of shares of Common Stock issuable upon conversion of such holder’s Preferred Shares (without any limitations based on our authorized but unissued shares of the Company’s Common Stock) as of the applicable record date for the determination of stockholders entitled to vote on such matters.

Certain matters require the approval of the holders of a majority of the outstanding Preferred Shares, voting as a separate class, including (1) amendments or modifications to the Company’s Certificate of Incorporation, by-laws or the Certificate of Designations, that would adversely affect the terms or the powers, preferences, rights or privileges of the Convertible Preferred Stock, (2) authorization, creation, increase in the authorized amount of, or issuance of any class or series of senior securities or any security convertible into, or exchangeable or exercisable for, shares of senior securities and (3) any increase or decrease in the authorized number of Preferred Shares or the issuance of additional Preferred Shares.

In addition, in the event that the Company fails to fulfill its obligations to redeem the Convertible Preferred Stock in accordance with the terms of the Certificate of Designations following the exercise of the Milestone Redemption Right or change of control redemption rights described above, until such failure is remedied, certain additional actions of the Company shall require the approval of the holders of a majority of the outstanding Preferred Shares, voting as a separate class, including the adoption of an annual budget, the hiring and firing, or the changing of the compensation, of executive officers and the commitment, resolution or agreement to effect any business combination.

Restriction on Dividends on Junior Securities. The Company is prohibited from (i) paying any dividend with respect to our Common Stock or other junior securities, except for ordinary cash dividends in which the Convertible Preferred Stock participates and which are declared, paid or set aside after the base dividend rate for the Convertible Preferred Stock has been reduced to 0.00% as described above and dividends payable solely in shares of our Common Stock or other junior securities, or (ii) repurchasing or redeeming any shares of our Common Stock or other junior securities, unless, in each case, we have sufficient access to lawful funds immediately following such action such that we would be legally permitted to redeem in full all Preferred Shares then outstanding.

Accounting for Convertible Preferred Stock

The Convertible Preferred Stock balance and changes in the carrying amount of the Convertible Preferred Stock are as follows (in thousands):

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	Dividends and Accretion			Convertible Preferred Stock
Balance as of October 30, 2011				$	273,950
Accretion		688
Accrued paid-in-kind dividends(1)		8,837
Reversal of additional 4% accrued dividends(2)		(2,917	)
Subtotal					6,608
Balance as of January 29, 2012				$	280,558
Accretion		688
Accrued paid-in-kind dividends(1)		9,057
Subtotal					9,745
Balance as of April 29, 2012				$	290,303

(1) Dividends are accrued at the 12% rate on a daily basis until the dividend payment date.

(2) The reversal of the additional 4% accrued dividends relates to the period from September 16, 2011 to December 15, 2011.

In accordance with ASC Topic 815, Derivatives and Hedging, and ASC Topic 480, Distinguishing Liabilities from Equity, we classified the Convertible Preferred Stock as mezzanine equity because the Convertible Preferred Stock (1) can be settled in cash or shares of our Common Stock, (2) contains change of control rights allowing for early redemption, and (3) contains Milestone Redemption Rights which allow the Convertible Preferred Stock to remain outstanding without a stated maturity date.

In addition, the Certificate of Designations, which is the underlying contract of the Convertible Preferred Stock, includes features that are required to be bifurcated and recorded at fair value. We classified the Convertible Preferred Stock as an equity host contract because of (1) the voting rights, (2) the participating dividends on Common Stock and mandatory, cumulative preferred stock dividends, and (3) the Milestone Redemption Right which allows the Convertible Preferred Stock to remain outstanding without a stated maturity date. We then determined that the conditions resulting in the application of the default dividend rate are not clearly and closely related to this equity host contract and we bifurcated and separately recorded these features at fair value. As of both April 29, 2012 and October 30, 2011, the fair value carrying amount of the embedded derivative was $0.1 million.

Because the dividends accrue and accumulate on a daily basis and the amount payable upon redemption of the Convertible Preferred Stock is the liquidation preference plus accrued and unpaid dividends, accrued dividends are recorded into Convertible Preferred Stock.

In accordance with ASC Subtopic 470-20, Debt with Conversion and Other Options, the Convertible Preferred Stock contains a beneficial conversion feature because it was issued with an initial conversion price of $6.3740 and the closing stock price per share of Common Stock just prior to the execution of the CD&R Equity Investment was $12.55. The intrinsic value of the beneficial conversion feature cannot exceed the issuance proceeds of the Convertible Preferred Stock less the cash paid for the deal fee paid to the CD&R Funds manager in connection with the CD&R Equity Investment, and thus was $241.4 million as of October 20, 2009. At April 29, 2012 and October 30, 2011, all of the potentially 48.9 million and 46.6 million shares of Common Stock, respectively, issuable upon conversion of the Preferred Shares, which includes paid-in-kind dividends, were authorized and unissued.

As of April 29, 2012 and October 30, 2011, the Preferred Shares were convertible into 48.9 million and 46.6 million shares of Common Stock, respectively, at an initial conversion price of $6.3740. The Company recorded a $7.9 million and $8.0 million beneficial conversion feature charge, prior to any applicable reversal, in the three month periods ended April 29, 2012 and May 1, 2011, respectively, and $11.9 million and $14.9 million beneficial conversion feature charge, prior to any applicable reversal, in the six month periods ended April 29, 2012 and May 1, 2011, respectively, related to dividends that have accrued and are convertible into shares of Common Stock. As a result of accruing dividends at the stated 12% rate, and subsequently paying the lower 8% rate agreed to in the Mutual Waiver and Consent, we recorded a beneficial conversion feature reversal of $1.1 million in the first quarter of fiscal 2012 related to beneficial conversion feature charges between September 16, 2011 and December 15, 2011 associated with the dividend reduction. As a result of paying an 8% cash dividend in the second quarter of fiscal 2011, we reversed the related beneficial conversion feature previously recorded of $8.2 million in the second quarter of fiscal 2011 related to beneficial conversion feature charges between December 16, 2010 and March 15, 2011. As a result of paying an 8% cash dividend in the first quarter of fiscal 2011, we reversed the related beneficial conversion feature previously recorded of $5.1 million in the first quarter of fiscal 2011 related to beneficial conversion feature charges between September 16, 2010 and December 15, 2010. The Company’s policy is to recognize beneficial conversion feature charges on paid-in-kind dividends based on a daily dividend recognition and the daily closing stock price of our Common Stock.

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The Company’s aggregate liquidation preference plus accrued dividends of the Convertible Preferred Stock at April 29, 2012 and October 30, 2011 are as follows (in thousands):

	April 29, 2012		October 30, 2011
Liquidation preference	$	301,459	$	286,701
Accrued dividends		10,320		10,102
Total	$	311,779	$	296,803

At April 29, 2012 and October 30, 2011, we had 301,459 and 286,701 Preferred Shares outstanding.

NOTE 10 — FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Fair Value of Financial Instruments

The carrying amounts of cash, restricted cash, trade accounts receivable and accounts payable approximate fair value as of April 29, 2012 and October 30, 2011 because of the relatively short maturity of these instruments. The fair values of the remaining financial instruments not currently recognized at fair value on our Consolidated Balance Sheets at the respective fiscal period ends were (in thousands):

	April 29, 2012				October 30, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Amended Credit Agreement	$	128,499	$	127,857	$	130,699	$	127,106

The fair value of the Amended Credit Agreement was based on recent trading activities of comparable market instruments which are level 2 inputs.

Fair Value Measurements

ASC Subtopic 820-10, Fair Value Measurements and Disclosures, requires us to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:

Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.

Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities or market-corroborated inputs.

Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants would price the assets or liabilities.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. There have been no changes in the methodologies used at April 29, 2012 and October 30, 2011.

Money market: Money market funds have original maturities of three months or less. The original cost of these assets approximates fair value due to their short-term maturity.

Mutual funds: Mutual funds are valued at the closing price reported in the active market in which the mutual fund is traded.

Stocks, options and ETF’s: Stocks, options and ETF’s are valued at the closing price reported in the active market in which the fund is traded.

Foreign currency contracts: The fair value of the foreign currency derivatives are based on a market approach and take into consideration current foreign currency exchange rates and current creditworthiness of us or the counterparty, as applicable.

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Assets held for sale: Assets held for sale are valued based on current market conditions, prices of similar assets in similar condition and expected proceeds from the sale of the assets.

Deferred compensation plan liability: Deferred compensation plan liability is comprised of phantom investments in the deferred compensation plan and is valued at the closing price reported in the active market in which the money market, mutual fund or NCI stock phantom investments are traded.

Embedded derivative: The embedded derivative value is based on an income approach in which we used a probability-weighted discounted cash flow model and assigned probabilities for each qualified default event.

The following table summarizes information regarding our financial assets and liabilities that are measured at fair value on a recurring basis as of April 29, 2012, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1			Level 2			Level 3			Total
Assets:
Money market	$	10,000		$	—		$	—		$	10,000
Short-term investments in deferred compensation plan(1):
Money market		240			—			—			240
Mutual funds — Growth		630			—			—			630
Mutual funds — Blend		1,900			—			—			1,900
Mutual funds — Foreign blend		664			—			—			664
Mutual funds — Fixed income		—			556			—			556
Total short-term investments in deferred compensation plan		3,434			556			—			3,990
Other investments:
Cash		55			—			—			55
Stocks, options and ETF’s		373			—			—			373
Total other investments		428			—			—			428
Total assets	$	13,862		$	556		$	—		$	14,418
Liabilities:
Deferred compensation plan liability	$	(4,208	)	$	—		$	—		$	(4,208	)
Foreign currency contracts		—			(21	)		—			(21	)
Embedded derivative		—			—			(68	)		(68	)
Total liabilities	$	(4,208	)	$	(21	)	$	(68	)	$	(4,297	)

(1) Unrealized holding gains (losses) for the three months ended April 29, 2012 and May 1, 2011 were $0.2 million and $0.2 million, respectively. Unrealized holding gains (losses) for the six months ended April 29, 2012 and May 1, 2011 were $0.2 million and $0.3 million, respectively. These unrealized holding gains (losses) are primarily offset by changes in the deferred compensation plan liability.

The following table summarizes information regarding our financial assets that are measured at fair value on a nonrecurring basis as of April 29, 2012, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Assets held for sale(1)	$	—	$	—	$	2,500		2,500
Total assets	$	—	$	—	$	2,500	$	2,500

(1) Certain assets held for sale are valued at fair value and are measured at fair value on a nonrecurring basis. Assets held for sale are reported at fair value, if, on an individual basis, the fair value of the asset is less than cost. The fair value of assets held for sale is estimated using Level 3 inputs, such as broker quotes for like-kind assets or other market indications of a potential selling value which approximates fair value. As of April 29, 2012, the fair value of one asset group held for sale exceeded that asset group’s cost and carrying value. Accordingly, that asset group held for sale has been excluded from the table as of April 29, 2012.

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The following table summarizes information regarding our financial assets and liabilities that are measured at fair value on a recurring basis as of October 30, 2011, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2			Level 3			Total
Assets:
Money market	$	12,837	$	—		$	—		$	12,837
Short-term investments in deferred compensation plan(1):
Money market	$	149	$	—		$	—		$	149
Mutual funds — Growth		682		—			—			682
Mutual funds — Blend		1,798		—			—			1,798
Mutual funds — Foreign blend		743		—			—			743
Mutual funds — Fixed income		—		638			—			638
Total short-term investments in deferred compensation plan	$	3,372	$	638		$	—		$	4,010
Other investments:
Cash		45		—			—			45
Stocks, options and ETF’s		429		—			—			429
Total other investments		474		—			—			474
Foreign currency contracts		—		42			—			42
Total assets	$	16,683	$	680		$	—		$	17,363
Liabilities:
Deferred compensation plan liability	$	—	$	(4,077	)	$	—		$	(4,077	)
Embedded derivative		—		—			(79	)		(79	)
Total liabilities	$	—	$	(4,077	)	$	(79	)	$	(4,156	)

The following table summarizes information regarding our financial assets that are measured at fair value on a nonrecurring basis as of October 30, 2011, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Assets held for sale(1)	$	—	$	—	$	2,500	$	2,500
Total assets	$	—	$	—	$	2,500	$	2,500

(1) Certain assets held for sale are valued at fair value and are measured at fair value on a nonrecurring basis. Assets held for sale are reported at fair value, if, on an individual basis, the fair value of the asset is less than cost. The fair value of assets held for sale is estimated using Level 3 inputs, such as broker quotes for like-kind assets or other market indications of a potential selling value which approximates fair value. As of October 30, 2011, the fair value of one asset group held for sale exceeded that asset group’s cost and carrying value. Accordingly, that asset group held for sale has been excluded from the table as of October 30, 2011.

The following table summarizes the activity in Level 3 financial instruments during the six months ended April 29, 2012 and May 1, 2011 (in thousands):

	April 29, 2012			May 1, 2011
Beginning balance	$	(79	)	$	(104	)
Unrealized gains (1)		11			13
Ending balance	$	(68	)	$	(91	)

(1) Unrealized gains on the embedded derivative are recorded in other income, net in the Consolidated Statements of Operations during the six months ended April 29, 2012 and May 1, 2011.

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NOTE 11 — INCOME TAXES

The reconciliation of income tax computed at the statutory tax rate to the effective income tax rate is as follows:

	Fiscal Three Months Ended						Fiscal Six Months Ended
	April 29, 2012			May 1, 2011			April 29, 2012			May 1, 2011
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%		35.0	%
State income taxes		4.8	%		(1.9	)%		4.7	%		(1.9	)%
Canada valuation allowance		––			(0.5	)%		––			(0.9	)%
Non-deductible expenses		1.9	%		(2.9	)%		1.9	%		(2.9	)%
Other		(0.1	)%		5.9	%		0.1	%		0.6	%
Effective tax rate		41.6	%		35.6	%		41.7	%		29.9	%

We expect to generate sufficient operating profits in future periods to fully utilize our U.S. net deferred tax assets of $13.4 million. In evaluating our expectations, we have evaluated a variety of factors including multiple industry sources citing expectations of continued growth in the nonresidential construction market into 2012 and 2013, our continued market strength in the commercial and industrial subsectors of the nonresidential market that are experiencing growth above that of the overall nonresidential construction market and our internal forecast projections which we believe will continue the profitable trends experienced in the remainder of fiscal 2011 and in fiscal 2012. Our expectations could change in the near term if nonresidential construction fails to continue its projected recovery. In the event our operating results or expectations of future operating results change, a valuation allowance may be required on our existing unreserved net U.S. deferred tax assets.

The total amount of unrecognized tax benefit at both April 29, 2012 and October 30, 2011 was $0.3 million, all of which would impact our effective tax rate, if recognized. We do not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months.

NOTE 12 — COMPREHENSIVE INCOME (LOSS)

Comprehensive loss consists of the following (in thousands):

	Fiscal Three Months Ended					Fiscal Six Months Ended
	April 29, 2012		May 1, 2011			April 29, 2012			May 1, 2011
Net income (loss)	$	1,321	$	(3,229	)	$	1,910		$	(15,954	)
Foreign exchange translation gain (loss) and other, net of tax		6		(70	)		1			80
Gain in fair value of foreign currency derivative, net of tax		72		75			(17	)		(75	)
Comprehensive income (loss)	$	1,399	$	(3,224	)	$	1,894		$	(15,959	)

Accumulated other comprehensive loss consists of the following (in thousands):

	April 29, 2012			May 1, 2011
Foreign exchange translation adjustments, net of tax	$	569		$	507
Defined benefit pension plan actuarial losses, net of tax		(6,058	)		(2,524	)
Foreign currency derivative, net of tax		(12	)		75
Accumulated other comprehensive loss	$	(5,501	)	$	(1,942	)

A summary of the components of other comprehensive income (loss) and the related tax effects for each of the periods presented is as follows (in thousands):

	Fiscal Three Months Ended April 29, 2012							Fiscal Three Months Ended May 1, 2011
	Before-Tax Amount		Tax (Expense) or Benefit			Net-of-Tax Amount		Before-Tax Amount			Tax (Expense) or Benefit			Net-of-Tax Amount
Foreign exchange translation gain (loss) and other	$	6	$	—		$	6	$	(70	)	$	––		$	(70	)
Gain in fair value of foreign currency derivative	$	82	$	(10	)	$	72	$	121		$	(46	)	$	75
Other Comprehensive income (loss)	$	88	$	(10	)	$	78	$	51		$	(46	)	$	5

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	Fiscal Six Months Ended April 29, 2012								Fiscal Six Months Ended May 1, 2011
	Before-Tax Amount			Tax (Expense) or Benefit		Net-of-Tax Amount			Before-Tax Amount			Tax (Expense) or Benefit			Net-of-Tax Amount
Foreign exchange translation gain (loss) and other	$	1		$	—	$	1		$	(80	)	$	—		$	(80	)
(Loss) gain in fair value of foreign currency derivative	$	(63	)	$	46	$	(17	)	$	121		$	(46	)	$	75
Other Comprehensive income (loss)	$	(62	)	$	46	$	(16	)	$	41		$	(46	)	$	(5	)

NOTE 13 — BUSINESS SEGMENTS

We have aggregated our operations into three reportable segments based upon similarities in product lines, manufacturing processes, marketing and management of our businesses: metal coil coating; metal components; and engineered building systems. All business segments operate primarily in the nonresidential construction market. Sales and earnings are influenced by general economic conditions, the level of nonresidential construction activity, metal roof repair and retrofit demand and the availability and terms of financing available for construction. Products of our business segments use similar basic raw materials. The metal coil coating segment consists of cleaning, treating, painting and slitting continuous steel coils before the steel is fabricated for use by construction and industrial users. The metal components segment products include metal roof and wall panels, doors, metal partitions, metal trim, insulated panels and other related accessories. The engineered building systems segment includes the manufacturing of main frames, Long Bay^® Systems and value added engineering and drafting, which are typically not part of metal components or metal coil coating products or services. The reporting segments follow the same accounting policies used for our consolidated financial statements.

We evaluate a segment’s performance based primarily upon operating income before corporate expenses. Intersegment sales are recorded based on standard material costs plus a standard markup to cover labor and overhead and consist of: (i) hot-rolled, light gauge painted and slit material and other services provided by the metal coil coating segment to both the engineered building systems and metal components segments; (ii) building components provided by the metal components segment to the engineered building systems segment; and (iii) structural framing provided by the engineered building systems segment to the metal components segment. Corporate assets consist primarily of cash but also include deferred financing costs, deferred taxes and property, plant and equipment associated with our headquarters in Houston, Texas. These items (and income and expenses related to these items) are not allocated to the business segments. Corporate unallocated expenses include executive, legal, finance, tax, treasury, human resources, information technology, purchasing, marketing and corporate travel expenses. Additional unallocated expenses include interest income, interest expense and other (expense) income.

The following table represents sales, operating income and total assets attributable to these business segments for the periods indicated (in thousands):

	Fiscal Three Months Ended						Fiscal Six Months Ended
	April 29, 2012			May 1, 2011			April 29, 2012			May 1, 2011
Total sales:
Metal coil coating	$	48,839		$	47,927		$	97,922		$	90,201
Metal components		106,742			103,375			212,494			193,680
Engineered building systems		148,715			129,790			289,013			231,202
Intersegment sales		(54,065	)		(55,527	)		(105,595	)		(99,432	)
Total sales	$	250,231		$	225,565		$	493,834		$	415,651
External sales:
Metal coil coating	$	19,572		$	16,985		$	39,810		$	34,178
Metal components		85,324			82,613			172,620			156,629
Engineered building systems		145,335			125,967			281,404			224,844
Total sales	$	250,231		$	225,565		$	493,834		$	415,651
Operating income (loss):
Metal coil coating	$	4,890		$	4,378		$	10,192		$	7,822
Metal components		9,018			7,400			14,559			7,753
Engineered building systems		6,740			(154	)		14,336			(5,564	)
Corporate		(15,704	)		(13,468	)		(29,858	)		(25,991	)
Total operating income (loss)	$	4,944		$	(1,844	)	$	9,229		$	(15,980	)
Unallocated other expense		(2,681	)		(3,171	)		(5,951	)		(6,769	)
Income (loss) before income taxes	$	2,263		$	(5,015	)	$	3,278		$	(22,749	)

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	April 29, 2012		October 30, 2011
Total assets:
Metal coil coating	$	63,072	$	55,509
Metal components		184,151		175,906
Engineered building systems		200,400		206,232
Corporate		115,038		123,507
Total assets	$	562,661	$	561,154

NOTE 14 — CONTINGENCIES

As a manufacturer of products primarily for use in nonresidential building construction, we are inherently exposed to various types of contingent claims, both asserted and unasserted, in the ordinary course of business. As a result, from time to time, we and/or our subsidiaries become involved in various legal proceedings or other contingent matters arising from claims, or potential claims. We insure against these risks to the extent deemed prudent by our management and to the extent insurance is available. Many of these insurance policies contain deductibles or self-insured retentions in amounts we deem prudent and for which we are responsible for payment. In determining the amount of self-insurance, it is our policy to self-insure those losses that are predictable, measurable and recurring in nature, such as claims for automobile liability, general liability and workers compensation. The Company regularly reviews the status of on-going proceedings and other contingent matters along with legal counsel. Liabilities for such items are recorded when it is probable that the liability has been incurred and when the amount of the liability can be reasonably estimated. Liabilities are adjusted when additional information becomes available. Management believes that the ultimate disposition of these matters will not have a material adverse effect on the Company’s operations or financial position taken as a whole.

NOTE 15 — SUBSEQUENT EVENTS

Definitive Agreement to Purchase Metl-Span LLC

On May 2, 2012, NCI Group, Inc. (“NCI”), a wholly owned subsidiary of the Company, entered into a definitive agreement with VSMA, Inc. (“VSMA”), Metl-Span LLC, and BlueScope Steel North America Corporation (“Equity Purchase Agreement”) to purchase Metl-Span LLC (“Metl-Span”) from VSMA, Inc., a subsidiary of BlueScope Steel North America Corporation, for $145 million in cash (such acquisition, the “Acquisition”). Metl-Span operates five manufacturing facilities in the United States serving the nonresidential building products market with cost-effective and energy efficient insulated metal wall and roof panels. For the year ended December 31, 2011, Metl-Span had estimated revenues of $170 million. Metl-Span is being sold on a cash-free, debt-free basis, and the purchase price is subject to adjustment based on Metl-Span’s working capital at closing.

Each of NCI, VSMA and Metl-Span has made customary representations and warranties and has agreed to customary covenants in the Equity Purchase Agreement. The closing of the Acquisition, which is currently expected to close before the end of the calendar year, is subject to (i) the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and (ii) other customary conditions to closing, including the execution and delivery of (a) a transition services agreement between VSMA and Metl-Span, (b) a supply agreement among Steelscape, Inc., a California corporation and affiliate of VSMA (“Steelscape”), Metl-Span and NCI, pursuant to which Steelscape has agreed to supply certain metallic-coated and painted steel coils for use in Metl-Span’s product lines, (c) an OEM supply agreement between Metl-Span and BlueScope Buildings North America, Inc., a Delaware corporation and affiliate of VSMA (“BBNA”), pursuant to which Metl-Span has agreed to sell certain insulated wall, roof and ceiling panel products to BBNA, and (d) certain other related transaction documents.

The Equity Purchase Agreement is subject to termination by either NCI or VSMA for various reasons, including the failure of the closing of the Acquisition to occur on or before October 15, 2012 (the “Initial Termination Date”), provided that (i) NCI may extend such termination date under certain circumstances (a) to the date that is two days after the marketing period under the Commitment Letter (as described below) or (b) up to 60 days after the Initial Termination Date if all conditions to the closing of the Acquisition have been satisfied other than with respect to the HSR Act and those conditions that by their nature cannot be satisfied other than at the closing (each of which conditions is capable of being satisfied at the date of termination if the closing of the Acquisition were to occur at such time), and (ii) VSMA may extend such termination date under certain circumstances to a date that is three business days after the Initial Termination Date. The obligations of NCI to consummate the Acquisition are not subject to the availability of financing.

The Equity Purchase Agreement provides that NCI will be required to pay to VSMA a reverse termination fee of $10.15 million upon termination under certain specified circumstances, including in the event of VSMA’s termination due to NCI’s failure to consummate the Acquisition if all of the conditions to its obligations have been satisfied or waived (other than those that by their nature will not be satisfied until the closing, each of which is capable of being satisfied at the date of termination if the closing were to occur at that time). Under certain other specified circumstances, NCI will be required to pay a reverse termination fee of $14.5 million including in the case of VSMA’s termination under the circumstances described in the preceding sentence if either (i) the proceeds of the Term

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Loan Facility (as described below) could have been funded upon delivery of a drawdown notice or (ii) could not be funded and the failure of such funding was the result of a breach by NCI of any of its covenants under the Equity Purchase Agreement.

NCI and VSMA have agreed to indemnify each other for losses arising from breaches of the representations, warranties and covenants of the Equity Purchase Agreement and for certain other liabilities, subject to specified limitations. BSNA has agreed to guarantee the performance of VSMA’s obligations under the Equity Purchase Agreement.

In connection with the transaction, NCI will refinance its existing ABL Facility and Term Loan, which both mature in April 2014. NCI will utilize its ABL Facility and Term Loan Facility, together with cash on hand, to fund the Acquisition.

On May 2, 2012, we entered into a debt financing commitment letter (the “Commitment Letter”) for a $250.0 million senior secured credit facility (the “Term Loan Facility”) to be available on the closing date of the Acquisition. Proceeds from the Term Loan Facility will be used, together with approximately $25 million of cash on hand and/or certain borrowings under the Loan and Security Agreement, as amended by the ABL Facility Amendment (in each case, as defined below), to finance the acquisition, the repayment of the existing Term Loan of NCI and the related fees and expenses. On May 16, 2012, we amended and restated the Commitment Letter solely to include an additional financial institution as a lender under the Term Loan Facility.

The Term Loan Facility will include certain representations and warranties, affirmative and negative covenants, events of default and collateral and guarantee arrangements, as described in the Commitment Letter. The Commitment Parties’ obligations to provide the financing are subject to the satisfaction of specified conditions, including the consummation of the Acquisition in accordance with the terms of the Equity Purchase Agreement, the accuracy of specified representations and the absence of a material adverse effect on Metl-Span, as described in the Commitment Letter.

As a result of the anticipated terms of the Commitment Letter, in our third fiscal quarter 2012, we expect to recognize a one-time, non-cash debt extinguishment charge related to the existing Term Loan of approximately $4 to $5 million subject to the funding of the new Term Loan Facility.

On May 2, 2012, we entered into Amendment No. 2 (the “ABL Facility Amendment”) to the Loan and Security Agreement (the “Loan and Security Agreement”) to (i) permit the acquisition, the entry by the Company into the Term Loan Facility and the incurrence of debt thereunder and the repayment of existing indebtedness under NCI’s existing Term Loan, (ii) increase the amount available for borrowing thereunder to $150 million (subject to a borrowing base), (iii) increase the amount available for letters of credit thereunder to $30 million, and (iv) extend the final maturity thereunder to May 2, 2017.

As a result of the ABL Facility Amendment, in our third fiscal quarter 2012, we expect to recognize a one-time, non-cash debt extinguishment charge of approximately $2 million.

Agreement with Holders of Convertible Preferred Stock to Eliminate Future Dividend Obligations

On May 1, 2012, we reached an understanding in principle and on May 8, 2012, we entered into an Amendment Agreement (the “Amendment Agreement”) with the CD&R Funds, the holders of our convertible preferred shares, to eliminate our quarterly dividend obligation on the preferred shares, which accrued at an annual rate of 12% unless paid in cash at 8%. However, this does not preclude the payment of contingent default dividends, if applicable.

Under the terms of the Certificate of Designations, Preferences and Rights of Series B Cumulative Convertible Participating Preferred Stock (the “Certificate of Designations”), we were contractually obligated to pay quarterly dividends to the holders of the convertible preferred shares from October 20, 2009, through October 20, 2019, subject to certain dividend “knock-out” provisions. The Amendment Agreement provides for the Certificate of Designations to be amended to terminate the dividend obligation from and after March 15, 2012 (the “Dividend Knock-out”).

As consideration for the Dividend Knock-out, the CD&R Funds will receive a total of 37,834 additional shares of Convertible Preferred Stock, representing (i) approximately $6.5 million of dividends accrued from March 15, 2012 through May 18, 2012 (20 trading days after April 20, 2012, on which date the dividend “knock-out” measurement period commenced) and (ii) approximately $31.4 million in additional liquidation preference of Convertible Preferred Stock, or 10% of the approximate total $313.7 million of accreted value as of May 18, 2012. Upon the closing of the transactions contemplated by the Amendment Agreement, funds managed by CD&R will hold Convertible Preferred Stock with an aggregate liquidation preference and accrued dividends of approximately $345 million. The Convertible Preferred Stock and accrued dividends entitle the funds managed by CD&R to receive approximately 54.1 million shares of common stock, representing 72.7% of the voting power and common stock of the Company on an as-converted basis and an increase of approximately 2% from CD&R’s position at April 29, 2012.

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The Amendment Agreement with the CD&R Funds has been approved by the Company’s independent directors, as “independence” is defined by the rules and regulations of the Securities and Exchange Commission and the listing standards of the New York Stock Exchange, as well as by all of the Company’s directors who are independent of and not affiliated with the CD&R Funds.

As a result of the Amendment Agreement, in our third fiscal quarter 2012 we expect to recognize a one-time, non-cash dividend charge related to the extinguishment of the Convertible Preferred Stock of approximately $55 million subject to the final determination of fair value of the Convertible Preferred Stock. The actual charge will depend on completing the financial accounting analysis and the fair value assessments of the Convertible Preferred Stock. As a result, the actual noncash charge may vary significantly from our current estimate. We further expect the carrying value of the Convertible Preferred Stock to be increased to fair value from the current carrying value of $290 million. We expect the change in carrying value to fair value to reduce additional paid-in-capital and increase accumulated deficit, collectively.

NCI BUILDING SYSTEMS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following information should be read in conjunction with the unaudited consolidated financial statements included herein under “Item 1. Unaudited Consolidated Financial Statements” and the audited consolidated financial statements and the notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended October 30, 2011.

FORWARD LOOKING STATEMENTS

This Quarterly Report includes statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied by these statements. In some cases, our forward-looking statements can be identified by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “will” or other similar words. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on any forward-looking information, including any earnings guidance. 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 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;

• ability to service or refinance our debt, including additional debt to finance the Acquisition (as defined below), and 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 our debt;

• recognition of asset impairment charges;

• commodity price increases and/or limited availability of raw materials, including steel;

• the ability to make strategic acquisitions accretive to earnings;

• our ability to consummate the transactions contemplated by the Equity Purchase Agreement, dated as of May 2, 2012, by and among the Company, VSMA, Inc., a Delaware corporation, Metl-Span LLC, a Texas limited liability company, and BlueScope Steel North America Corporation, a Delaware corporation (the “Acquisition”);

• our ability to realize the anticipated benefits of the Acquisition;

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• 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;

• the volatility of the Company’s stock price;

• the substantial rights, seniority and dilutive effect on our common stockholders of the Convertible Preferred Stock issued to the CD&R Funds;

• breaches of our information security system security measures;

• 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;

• costs and other effects of legal and administrative proceedings, settlements, investigations, claims and other matters; and

• other risks detailed under the caption “Risk Factors” in our most recent Annual Report on Form 10-K as filed with the SEC.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. However, we caution you that assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending on the circumstances. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this report and those described under the caption “Risk Factors” in our most recent Annual Report on Form 10-K as filed 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 unless the securities laws require us to do so.

OVERVIEW

NCI Building Systems, Inc. (together with its subsidiaries, unless the context requires otherwise, the “Company,” “we,” “us” or “our”) is one of North America’s largest integrated manufacturers and marketers of metal products for the nonresidential construction industry. We provide metal coil coating services and design, engineer, manufacture and market metal components and engineered building systems primarily for nonresidential construction use. We manufacture and distribute extensive lines of metal products for the nonresidential construction market under multiple brand names through a nationwide network of plants and distribution centers. We sell our products for both new construction and repair and retrofit applications.

Metal 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.

We assess performance across our business segments by analyzing and evaluating (i) gross profit, operating income and whether or not each segment has achieved its projected sales goals, and (ii) non-financial efficiency indicators such as gross profit per employee, man hours per ton of steel produced and shipped tons per day. In assessing our overall financial performance, we regard return on adjusted operating assets, as well as growth in earnings, as key indicators of shareholder value.

Second Fiscal Quarter

Our strong second quarter of fiscal 2012 results demonstrated solid execution across each of our business segments and the success of our external and internal initiatives to generate profitable growth in a market that continues to be very challenging. Revenue growth was led by the strong performance of our engineered metal building systems and metal coil coating segments and operating profitability benefitted from a more favorable business mix as well as ongoing efficiency improvements in our manufacturing,

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engineering and supply chain operations. Bookings in the second quarter of fiscal 2012 were 39% above the comparable year-ago period. Backlog at the end of the second quarter of fiscal 2012 reached $259 million which was 23% higher than at the end of the second quarter of fiscal 2011. Both the bookings and backlog are positive indicators as we enter the seasonally stronger second half of fiscal 2012. The velocity in converting our backlog to production continued at high levels in the second quarter of fiscal 2012 compared to both last year’s and historical levels. All three of our business segments posted operating profits in the second quarter of fiscal 2012, led by the strong recovery of our engineered building systems segment.

The metal coil coating segment remained focused on building share in their traditional markets and growing their business in new markets. Third-party sales increased 15% and operating profit was up 12%. Refurbishment of the new Middletown, Ohio facility is proceeding on schedule, and the plant is expected to begin operating by the end of calendar 2013, providing important access to new geographic markets and enhanced logistic efficiencies for internal coating demands.

In the metal components segment, improved conditions in the manufacturing and agricultural markets offset sluggish conditions in certain commercial and industrial sectors. Third-party sales increased 3%, while operating income improved 22%, benefitting from an unusual recovery of self-insured general liability costs of $1.9 million.

The engineered metal buildings segment’s revenues increased 15% in the second quarter of fiscal 2012, compared to the second quarter of fiscal 2011, and operating profit was $6.7 million, compared to the loss of $0.2 million in the same period in the prior year. Revenue gains were driven by improved demand from the manufacturing, warehousing and retail sectors, and operating profitability reflected an improved mix of higher and lower complexity projects.

Industry Conditions

Our sales and earnings are subject to both seasonal and cyclical trends and are influenced by general economic conditions, interest rates, the price of steel relative to other building materials, the level of nonresidential construction activity, roof repair and retrofit demand and the availability and cost of financing for construction projects.

The nonresidential construction industry is highly sensitive to national and regional macroeconomic conditions. One of the primary challenges we face is that the United States economy is slowly recovering from a recession and is in a period of significant volatility which, beginning in the third quarter of 2008, reduced demand for our products and adversely affected our business. In addition, the tightening of credit in financial markets over the same period adversely affected the ability of our customers to obtain financing for construction projects. As a result, we have experienced decreases in orders and cancellations of orders for our products in previous fiscal quarters, and the ability of our customers to make payments has been adversely affected. Similar factors could cause our suppliers to experience financial distress or bankruptcy, resulting in temporary raw material shortages. The lack of credit also adversely affects nonresidential construction, which is the focus of our business. While economic growth has either resumed or remains flat, the nonresidential construction industry continues to face significant challenges. The graph below shows the annual nonresidential new construction starts, measured in square feet, since 1968 as compiled and reported by McGraw-Hill:

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Source: McGraw-Hill

When assessing the state of the metal construction market, we review information from various industry associations, third-party research, and various government reports such as industrial production and capacity utilization. One such industry association is the Metal Building Manufacturers Association (“MBMA”), which provides summary member sales information and promotes the design and construction of metal buildings and metal roofing systems. Another is McGraw-Hill Construction Information Group, which we review for information regarding actual and forecasted growth in various construction related industries, including the overall nonresidential construction market. McGraw-Hill Construction’s nonresidential construction forecast for calendar 2012, published in April 2012, indicates an increase of 2% in square footage and a decrease of 1% in dollar value as compared to the prior calendar year. In calendar 2013, the nonresidential construction forecast is expected to increase compared to calendar 2012, with an expected increase of 16% in square footage and an increase of 14% in dollar value. Additionally, we review the American Institute of Architects’ (“AIA”) survey for inquiry and billing activity for the industrial, commercial and institutional sectors. The AIA’s architecture billings index (“ABI”) is a closely watched metric, as billings growth for architecture services generally leads to construction spending growth 9 to 12 months forward. An ABI reading above 50 indicates an increase in month-to-month billings and a reading below 50 indicates a decrease in month-to-month billings. AIA’s ABI published for April 2012 was below 50 at 48.4 but the commercial and industrial component of the index was 53.8, the eighth consecutive month above 50.

Another challenge we face both short and long term is the volatility in the price of steel. Our business is heavily dependent on the supply of steel and is significantly impacted by steel prices. For the fiscal six months ended April 29, 2012, steel represented approximately 72% of our cost of goods sold. The steel industry is highly cyclical in nature, and steel prices have been volatile in recent years and may remain volatile in the future. Steel prices are influenced by numerous factors beyond our control, including general economic conditions domestically and internationally, competition, labor costs, production costs, import duties and other trade restrictions. The monthly CRU North American Steel Price Index, published by the CRU Group, has decreased 15.9% from October 2011 to April 2012 and was 0.8% higher in April 2012 compared to April 2011.

We do not have any long-term contracts for the purchase of steel and normally do not maintain an inventory of steel in excess of our current production requirements. However, from time to time, we may purchase steel in advance of announced steel price increases. We can give no assurance that steel will be readily available or that prices will not continue to be volatile. While most of our sales contracts have escalation clauses that allow us, under certain circumstances, to pass along all or a portion of increases in the price of steel after the date of the contract but prior to delivery, for competitive or other reasons we may not be able to pass such price increases along. If the available supply of steel declines, we could experience price increases that we are not able to pass on to the end users, a deterioration of service from our suppliers or interruptions or delays that may cause us not to meet delivery schedules to our customers. Any of these problems could adversely affect our results of operations and financial condition. For additional discussion please see “Item 3. Quantitative and Qualitative Disclosures About Market Risk -Steel Prices.”

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RESULTS OF OPERATIONS

We have aggregated our operations into three reportable segments based upon similarities in product lines, manufacturing processes, marketing and management of our businesses: (i) metal coil coating; (ii) metal components; and (iii) engineered building systems. All business segments operate primarily in the nonresidential construction market. Sales and earnings are influenced by general economic conditions, the level of nonresidential construction activity, metal roof repair and retrofit demand and the availability and terms of financing available for construction. Products of all business segments use similar basic raw materials. The metal coil coating segment consists of cleaning, treating, painting and slitting continuous steel coils before the steel is fabricated for use by construction and industrial users. The metal components segment products include metal roof and wall panels, doors, metal partitions, metal trim, insulated panels and other related accessories. The engineered building systems segment includes the manufacturing of main frames, Long Bay^® Systems and value-added engineering and drafting, which are typically not part of metal components or metal coil coating products or services. The reporting segments follow the same accounting policies used for our consolidated financial statements.

We evaluate a segment’s performance based primarily upon operating income before corporate expenses. Intersegment sales are recorded based on standard material costs plus a standard markup to cover labor and overhead and consist of: (i) hot-rolled, light gauge painted, and slit material and other services provided by the metal coil coating segment to both the metal components and engineered building systems segments; (ii) building components provided by the metal components segment to the engineered building systems segment; and (iii) structural framing provided by the engineered building systems segment to the metal components segment.

Corporate assets consist primarily of cash but also include deferred financing costs, deferred taxes and property, plant and equipment associated with our headquarters in Houston, Texas. These items (and income and expenses related to these items) are not allocated to the business segments. Corporate unallocated expenses include executive, legal, finance, tax, treasury, human resources, information technology, purchasing, marketing and corporate travel expenses. Additional unallocated expenses include interest income, interest expense and other (expense) income. Segment information is included in Note 13 of our consolidated financial statements.

The following table represents sales and operating income attributable to these business segments for the periods indicated (in thousands, except percentages):

	Fiscal Three Months Ended												Fiscal Six Months Ended
	April 29, 2012			%			May 1, 2011			%			April 29, 2012			%			May 1, 2011			%
Total sales:
Metal coil coating	$	48,839			20		$	47,927			21		$	97,922			20		$	90,201			22
Metal components		106,742			43			103,375			46			212,494			43			193,680			46
Engineered building systems		148,715			59			129,790			58			289,013			59			231,202			56
Intersegment sales		(54,065	)		(22	)		(55,527	)		(25	)		(105,595	)		(22	)		(99,432	)		(24	)
Total sales	$	250,231			100		$	225,565			100		$	493,834			100		$	415,651			100
Operating income (loss):
Metal coil coating	$	4,890					$	4,378					$	10,192					$	7,822
Metal components		9,018						7,400						14,559						7,753
Engineered building systems		6,740						(154	)					14,336						(5,564	)
Corporate		(15,704	)					(13,468	)					(29,858	)					(25,991	)
Total operating income (loss)	$	4,944					$	(1,844	)				$	9,229					$	(15,980	)
Unallocated other expense		(2,681	)					(3,171	)					(5,951	)					(6,769	)
Income (loss) before income taxes	$	2,263					$	(5,015	)				$	3,278					$	(22,749	)

FISCAL THREE MONTHS ENDED APRIL 29, 2012 COMPARED TO FISCAL THREE MONTHS ENDED MAY 1, 2011

Consolidated sales increased by 10.9%, or $24.7 million for the three months ended April 29, 2012, compared to the three months ended May 1, 2011. This increase resulted from higher relative sales prices in our metal components and engineered building systems segments, which increased as a result of the pass-through of higher underlying steel costs and higher transaction prices resulting from an improved production mix toward higher value-added projects. In addition, the increase resulted from higher tonnage volumes in each of our segments for the three months ended April 29, 2012 compared to the same period in 2011 which was driven by improved demand in the end use sectors we serve compared to the prior year.

Consolidated cost of sales increased by 10.0%, or $17.5 million for the three months ended April 29, 2012, compared to the three months ended May 1, 2011. Gross margins were 23.2% for the three months ended April 29, 2012 compared to 22.5% for the same period in the prior year. The increase in gross margins was the result of higher relative sales prices in our engineered building systems segment, increased volumes in our engineered building systems and metal coil coating segments, and lower per unit conversion and delivery costs in our engineered building systems segment.

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Metal coil coating sales increased by 1.9%, or $0.9 million to $48.8 million in the three months ended April 29, 2012, compared to $47.9 million in the same period in the prior year. Sales to third parties for the three months ended April 29, 2012 increased by 15.2% to $19.6 million from $17.0 million in the same period in the prior year, primarily as a result of a 30.2% increase in tons shipped due to the acquisition of new customers and end users. This increase was partially offset by a shift in product mix from package sales of coated steel products to tolling revenue for coating services. Package sales include both the toll processing services and the sale of the steel coil while toll processing services include only the toll processing service performed on the steel coil already in the customer’s ownership. The remaining $1.7 million represents a decrease in intersegment sales for the three months ended April 29, 2012 compared to the same period in the prior year. Metal coil coating third-party sales accounted for 7.8% of total consolidated third-party sales in the three months ended April 29, 2012 compared to 7.5% in the three months ended May 1, 2011.

Operating income of the metal coil coating segment increased to $4.9 million in the three months ended April 29, 2012, compared to $4.4 million in the same period in the prior year. The $0.5 million increase resulted primarily from a $0.4 million decrease in selling and administrative expenses related to various immaterial costs.

Metal components sales increased 3.3%, or $3.4 million to $106.7 million in the three months ended April 29, 2012, compared to $103.4 million in the same period in the prior year. This increase was primarily due to higher sales prices, which mainly increased as a result of the pass-through of higher underlying steel costs, and a 0.9% increase in external tons shipped. Sales to third parties for the three months ended April 29, 2012 increased $2.7 million to $85.3 million from $82.6 million in the same period in the prior year. The remaining $0.7 million represents an increase in intersegment sales. Metal components third-party sales accounted for 34.1% of total consolidated third-party sales in the three months ended April 29, 2012 compared to 36.6% in the three months ended May 1, 2011.

Operating income of the metal components segment increased to $9.0 million in the three months ended April 29, 2012, compared to $7.4 million in the same period in the prior year. The $1.6 million increase resulted from a $1.9 million recovery in the current period compared to a $1.3 million charge in the same period of the prior year related to an actuarial determined general liability charge, partially offset by margin compression related to pricing pressure coupled with increasing steel costs. In addition, the increase in operating income was partially offset by a $0.2 million increase in selling and administrative expenses related to a $0.9 million increase in wages and commissions, partially offset by a $0.7 million decrease in bad debt expense.

Engineered building systems sales increased 14.6%, or $18.9 million to $148.7 million in the three months ended April 29, 2012, compared to $129.8 million in the same period in prior year. This increase resulted from higher sales prices which increased as a result of the pass-through of higher underlying steel costs and a 3.6% increase in external tons shipped. Sales to third parties for the three months ended April 29, 2012 increased $19.4 million to $145.3 million from $126.0 million in the same period in the prior year. The remaining $0.4 million represents an decrease in intersegment sales. These results were driven by improved demand in the end use sectors we serve in the three months ended April 29, 2012. Engineered building systems third-party sales accounted for 58.1% of total consolidated third-party sales in the three months ended April 29, 2012 compared to 55.8% in the three months ended May 1, 2011.

Operating income (loss) of the engineered building systems segment improved to income $6.7 million in the three months ended April 29, 2012 compared to a loss of $0.2 million in the same period in the prior year. This $6.9 million improvement resulted from an $8.6 million increase in gross profit. The increase in gross profit was due to increases in relative sales prices and external tons shipped as noted above. These improvements were partially offset by a $1.7 million increase in engineering, selling and administrative expenses primarily due to a $1.3 million increase in wages, commissions and benefit costs which was mainly the result of higher volume and $0.7 million increase in marketing costs.

Consolidated engineering, selling, general and administrative expenses, consisting of engineering, drafting, selling and administrative costs, decreased to $51.6 million in the three months ended April 29, 2012, compared to $52.7 million in the same period in the prior year. The $1.1 million decrease in engineering, selling and administrative expenses was primarily due to a $1.9 million recovery in the current period compared to a $1.3 million charge in the same period of the prior year related to an actuarial determined general liability charge and a $0.9 million decrease in bad debt expense, partially offset by a $2.8 million increase in wages, commissions and benefit costs which was mainly the result of higher volume, $0.8 million increase in marketing costs and $0.5 million in one-time executive retirement costs. As a percentage of sales, engineering, selling, general and administrative expenses were 20.6% for the three months ended April 29, 2012 as compared to 23.3% for the three months ended May 1, 2011.

Acquisition-related costs for the three months ended April 29, 2012 were $1.5 million. There was no amount recorded in the same period of the prior year. These costs represent various services to enter into a definitive agreement to purchase Metl-Span LLC for $145 million in cash. See “—Definitive Agreement to Purchase Metl-Span LLC.”

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Consolidated interest expense decreased by 21.5% to $3.1 million for the three months ended April 29, 2012, compared to $3.9 million for the same period of the prior year. Interest expense decreased primarily due to the decrease in the interest rate on the term loan on October 31, 2011 from 8% to 6.5% and decreases in the underlying debt balances.

Consolidated provision (benefit) for income taxes was a $0.9 million provision for the three months ended April 29, 2012, compared to a benefit of $1.8 million for the same period in the prior year. The effective tax rate for the three months ended April 29, 2012 was 41.6% compared to 35.6% for the same period in the prior year. The increase in the effective tax rate for the three months ended April 29, 2012 compared to the same period in the prior year was the result of state income taxes and non-deductible expenses resulting from an increase in pre-tax profit.

Consolidated Convertible Preferred Stock dividends and accretion for the three months ended April 29, 2012 was $9.7 million compared to $6.3 million in the same period in the prior year and related primarily to our paying accrued dividends on our Series B Cumulative Convertible Participating Preferred Stock, par value $1.00 per share (“Convertible Preferred Stock,” and shares thereof, “Preferred Shares”), which accrue and accumulate on a daily basis at 12% per annum. We paid dividends in-kind at the rate of 12% per annum on the Preferred Shares in March 2012. Because we paid $5.5 million of dividends on the Preferred Shares in cash in March 2011, we reversed the additional 4% of dividends accrued at 12% amounting to $2.7 million of dividends accrued between December 16, 2010 and March 15, 2011. We do not expect to pay dividends on the Preferred Shares in future periods as a result of the Amendment Agreement. See “—Convertible Preferred Stock.”

Consolidated Convertible Preferred Stock beneficial conversion feature charge was $7.9 million in the three months ended April 29, 2012 compared to a $(0.2) million in the same period in the prior year and related to dividends that have accrued on our Convertible Preferred Stock and are convertible into shares of Common Stock at a conversion price below the prevailing market price of Common Stock during the accrual period. The increase was the result of (1) our paying the March 2011 dividends in cash (at the rate of 8% per annum), rather than in-kind (at the rate of 12% per annum) and (2) our paying the March 2012 dividend in-kind at the rate of 12% per annum.

Diluted loss per common share improved to a loss of $(0.86) per diluted common share for the three months ended April 29, 2012, compared to a loss of $(0.51) per diluted common share for the same period in the prior year. The increase in the diluted loss per common share was primarily due to the increase in the beneficial conversion charge and the dividends and accretion on the Convertible Preferred Stock as noted above, partially offset by a $4.6 million improvement in net income (loss) applicable to shares of our Common Stock resulting from the factors described above in this section. At April 29, 2012, the Preferred Shares were convertible into 48.9 million shares of Common Stock. The Convertible Preferred Stock and the unvested restricted Common Stock related to our Incentive Plan do not have a contractual obligation to share in losses; therefore, no losses were allocated to these shares in both periods presented. These participating securities will be allocated earnings when applicable.

FISCAL SIX MONTHS ENDED APRIL 29, 2012 COMPARED TO FISCAL SIX MONTHS ENDED MAY 1, 2011

Consolidated sales increased by 18.8%, or $78.2 million for the six months ended April 29, 2012, compared to the six months ended May 1, 2011. The increase resulted from higher tonnage volumes in each of our segments for the six months ended April 29, 2012 compared to the same period in 2011 which was driven by improved demand in the end use sectors we serve compared to the prior year. In addition, this increase resulted from higher relative sales prices in each of our segments, which mainly increased as a result of the pass-through of higher underlying steel costs.

Consolidated cost of sales increased by 15.4%, or $50.9 million for the six months ended April 29, 2012, compared to the six months ended May 1, 2011. Gross margins were 22.6% for the six months ended April 29, 2012 compared to 20.3% for the same period in the prior year. The increase in gross margins was the result of higher relative sales prices and increased volumes in each of our segments.

Metal coil coating sales increased by 8.6%, or $7.7 million to $97.9 million in the six months ended April 29, 2012, compared to $90.2 million in the same period in the prior year. Sales to third parties for the six months ended April 29, 2012 increased by 16.5% to $39.8 million from $34.2 million in the same period in the prior year, primarily as a result of a 19.5% increase in tons shipped due to the acquisition of new customers and end users and a 3.5% increase in sales prices, which mainly increased as a result of the pass-through of higher underlying raw material costs. This increase was partially offset by a shift in product mix from package sales of coated steel products to tolling revenue for coating services. Package sales include both the toll processing services and the sale of the steel coil while toll processing services include only the toll processing service performed on the steel coil already in the customer’s ownership. The remaining $2.1 million represents an increase in intersegment sales for the six months ended April 29, 2012 compared to the same period in the prior year. Metal coil coating third-party sales accounted for 8.1% of total consolidated third-party sales in the six months ended April 29, 2012 compared to 8.2% in the six months ended May 1, 2011.

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Operating income of the metal coil coating segment increased to $10.2 million in the six months ended April 29, 2012, compared to $7.8 million in the same period in the prior year. The $2.4 million increase resulted from a $1.4 million increase in gross profit due to the improvements in our manufacturing efficiencies, pass-through of higher underlying steel costs and a $1.0 million decrease in selling and administrative expenses related to lower legal expenses.

Metal components sales increased 9.7%, or $18.8 million to $212.5 million in the six months ended April 29, 2012, compared to $193.7 million in the same period in the prior year. This increase was primarily due to higher sales prices, which mainly increased as a result of the pass-through of higher underlying steel costs, and a 3.6% increase in external tons shipped. Sales to third parties for the six months ended April 29, 2012 increased $16.0 million to $172.6 million from $156.6 million in the same period in the prior year. The remaining $2.8 million represents an increase in intersegment sales. Metal components third-party sales accounted for 35.0% of total consolidated third-party sales in the six months ended April 29, 2012 compared to 37.7% in the six months ended May 1, 2011.

Operating income of the metal components segment increased to $14.6 million in the six months ended April 29, 2012, compared to $7.8 million in the same period in the prior year. The $6.8 million increase resulted from a $7.6 million increase in gross profit due to an increase resulted from a $1.9 million recovery in the current period compared to a $2.4 million charge in the same period of the prior year related to an actuarial determined general liability charge, an increase in sales prices and external tons shipped as noted above. This increase was partially offset by a $0.8 million increase in selling and administrative expenses related to a $1.3 million increase in wages and commissions, partially offset by a $0.7 million decrease in bad debt expense.

Engineered building systems sales increased 25.0%, or $57.8 million to $289.0 million in the six months ended April 29, 2012, compared to $231.2 million in the same period in prior year. This increase resulted from a 13.3% increase in external tons shipped and higher sales prices which mainly increased as a result of the pass-through of higher underlying steel costs. Sales to third parties for the six months ended April 29, 2012 increased $56.6 million to $281.4 million from $224.8 million in the same period in the prior year. The remaining $1.3 million represents an increase in intersegment sales. These results were driven by improved demand in the end use sectors we serve in the six months ended April 29, 2012. Engineered building systems third-party sales accounted for 57.0% of total consolidated third-party sales in the six months ended April 29, 2012 compared to 54.1% in the six months ended May 1, 2011.

Operating income (loss) of the engineered building systems segment improved to income of $14.3 million in the six months ended April 29, 2012 compared to a loss of $5.6 million in the same period in the prior year. This $19.9 million improvement resulted from a $22.9 million increase in gross profit. The increase in gross profit was due to increases in relative sales prices and external tons shipped as noted above as well as an improvement in manufacturing efficiencies. These improvements were partially offset by a $3.0 million increase in engineering, selling and administrative expenses primarily due to a $3.4 million increase in wages, commissions and benefit costs which was mainly the result of higher volume and $0.6 million increase in marketing costs, both partially offset by a decrease of $0.5 million in bad debt expense.

Consolidated engineering, selling, general and administrative expenses, consisting of engineering, drafting, selling and administrative costs, increased to $100.5 million in the six months ended April 29, 2012, compared to $100.3 million in the same period in the prior year. The $0.2 million increase in engineering, selling and administrative expenses was primarily due to a $5.1 million increase in wages, commissions and benefit costs which was mainly the result of higher volume, $0.8 million increase in marketing costs, and $0.5 million in one-time executive retirement costs, partially offset by a $1.9 million recovery in the current period compared to a $2.4 million charge in the same period of the prior year related to an actuarial determined general liability charge and a $1.4 million decrease in bad debt expense. As a percentage of sales, engineering, selling, general and administrative expenses were 20.4% for the six months ended April 29, 2012 as compared to 24.1% for the six months ended May 1, 2011.

Acquisition-related costs for the six months ended April 29, 2012 were $1.9 million. There was no amount recorded in the same period of the prior year. These costs represent various services to enter into a definitive agreement to purchase Metl-Span LLC for $145 million in cash. See “—Definitive Agreement to Purchase Metl-Span LLC.”

Consolidated interest expense decreased by 21.4% to $6.4 million for the six months ended April 29, 2012, compared to $8.1 million for the same period of the prior year. Interest expense decreased primarily due to the decrease in the interest rate on the term loan on October 31, 2011 from 8% to 6.5% and decreases in the underlying debt balances.

Consolidated provision (benefit) for income taxes was a $1.4 million provision for the six months ended April 29, 2012, compared to a benefit of $6.8 million for the same period in the prior year. The effective tax rate for the six months ended April 29, 2012 was 41.7% compared to 29.9% for the same period in the prior year. The increase in the effective tax rate for the six months ended April 29, 2012 compared to the same period in the prior year was the result of state income taxes and non-deductible expenses resulting from an increase in pre-tax profit.

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Consolidated Convertible Preferred Stock dividends and accretion for the six months ended April 29, 2012 was $16.4 million compared to $12.5 million in the same period in the prior year and related primarily to our paying accrued dividends on the Preferred Shares which accrue and accumulate on a daily basis at 12% per annum. We paid dividends in-kind at the rate of 8% per annum on the Preferred Shares in December 2011 as a result of the December 9, 2011 Mutual Waiver and Consent and paid dividends in-kind at the rate of 12% per annum in March 2012. We paid $11.0 million of dividends at the rate of 8% per annum on the Preferred Shares in cash which were related to the December 15, 2010 and March 15, 2011 dividend payments. We do not expect to pay dividends on the Preferred Shares in future periods as a result of the Amendment Agreement. See “—Convertible Preferred Stock.”

Consolidated Convertible Preferred Stock beneficial conversion feature charge was $11.9 million in the six months ended April 29, 2012 compared to a $1.5 million in the same period in the prior year and related to dividends that have accrued on our Convertible Preferred Stock and are convertible into shares of Common Stock at a conversion price below the prevailing market price of Common Stock during the accrual period. The increase was the result of (1) our paying the December 2010 and March 2011 dividends in cash (at the rate of 8% per annum), rather than in-kind (at the rate of 12% per annum) and (2) our paying the December 2011 dividend in-kind at the rate of 8% per annum (rather than the stated 12%) as a result of the December 9, 2011 Mutual Waiver and Consent and paying the March 2012 dividend in-kind at the rate of 12% per annum.

Diluted loss per common share improved to a loss of $(1.40) per diluted common share for the six months ended April 29, 2012, compared to a loss of $(1.65) per diluted common share for the same period in the prior year. The decrease in the diluted loss per common share was primarily due to a $17.9 million improvement in net income (loss) applicable to shares of our Common Stock resulting from the factors described above in this section, partially offset by an increase in the beneficial conversion charge and the dividends and accretion on the Convertible Preferred Stock as noted above. At April 29, 2012, the Preferred Shares were convertible into 48.9 million shares of Common Stock. The Convertible Preferred Stock and the unvested restricted Common Stock related to our Incentive Plan do not have a contractual obligation to share in losses; therefore, no losses were allocated to these shares in both periods presented. These participating securities will be allocated earnings when applicable.

LIQUIDITY AND CAPITAL RESOURCES

General

Working capital was $139.7 million and $137.6 million at April 29, 2012 and October 30, 2011, respectively. The $2.1 million increase in working capital during the six months ended April 29, 2012 was primarily due to earnings in the period, partially offset by normal seasonal changes in accounts receivable, inventory, accounts payable and accrued expenses.

Cash provided by operating activities was $10.0 million and $4.5 million for the six months ended April 29, 2012 and May 1, 2011, respectively. The $10.0 million in cash provided by operating activities during the six months ended April 29, 2012 was attributable to the increase in earnings, partially offset by a $10.9 million decrease in working capital, excluding cash. During the six months ended May 1, 2011, we had a $15.6 million decrease in income taxes receivable due to a federal income tax refund received in April 2011.

Cash used in investing activities was $13.9 million and $7.9 million for the six months ended April 29, 2012 and May 1, 2011, respectively. The $13.9 million used in investing activities during the six months ended April 29, 2012 was primarily attributable to $13.9 million used for capital expenditures predominantly related to two new insulated panel system facilities, computer software and machinery and equipment.

Cash used in financing activities was $1.3 million and $16.5 million for the six months ended April 29, 2012 and May 1, 2011, respectively. The $1.3 million used in financing activities during the six months ended April 29, 2012 was primarily attributable to $2.6 million of note payable and term loan principal payments and $1.5 million of restricted stock that was repurchased as treasury shares to satisfy minimum tax-withholding obligations arising in connection with the vesting of awards of restricted stock, partially offset by a $2.8 million decrease in restricted cash as a result of the release of the restricted cash held as collateral on our letters of credit. During the six months ended May 1, 2011, we paid $11.0 million of dividends in cash on the Convertible Preferred Stock and made $4.4 million of note payable and term loan payments.

We invest our excess cash in various overnight investments which are issued or guaranteed by the federal government.

Convertible Preferred Stock

On October 20, 2009, we closed the $250.0 million equity investment by the CD&R Funds in the Company. As a result of that equity investment, the CD&R Funds acquired 250,000 shares of Convertible Preferred Stock (such purchase and sale, the “CD&R Equity Investment”), which represented 68.4% of the then voting power and Common Stock of the Company on an as-converted basis. As of April 29, 2012 and October 30, 2011, the Preferred Shares, including shares issued as in-kind dividends on the CD&R Equity Investment, were convertible into approximately 48.9 million and 46.6 million shares of Common Stock, respectively, at an initial conversion price of $6.3740.

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At April 29, 2012 and October 30, 2011, we had 301,459 and 286,701 Preferred Shares outstanding, respectively. In addition, at April 29, 2012 and October 30, 2011, we had accrued but unpaid cash and in-kind dividends on the Preferred Shares with a value of $10.3 million and $10.1 million, respectively. As of April 29, 2012 and October 30, 2011, the aggregate liquidation preference plus aggregate accrued dividends of the Convertible Preferred Stock was $311.8 million and $296.8 million, respectively.

Our Amended Credit Agreement restricts the payment of cash dividends to 50% of cumulative earnings beginning with the fourth quarter of 2009, and in the absence of accumulated earnings, cash dividends and other cash restricted payments are limited to $14.5 million in the aggregate during the term of the loan, of which we used $11.0 million as of April 29, 2012. We paid the first two quarters of fiscal 2011 dividends on the Preferred Shares totaling $11.0 million in cash. We paid the June 15, 2011, September 15, 2011, December 15, 2011 and March 15, 2012 dividend payments on the Preferred Shares in-kind. The determination of cash payment versus payment-in-kind or “PIK” of the Convertible Preferred Stock dividends will be made each quarter adhering to the limitations of our Amended Credit Agreement and ABL Facility as well as the Company’s intermediate and long term cash flow requirements.

On December 9, 2011, the Company 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 the Company’s 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 December 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 fiscal year ending October 28, 2012, subject to certain exceptions. The December 9, 2011 Mutual Waiver and Consent does not extend to dividends on the Convertible Preferred Stock accruing after December 15, 2011 or restrict our issuance of capital stock after October 28, 2012.

In view of the December 9, 2011 Mutual Waiver and Consent, the Preferred Dividend Payment Committee of the board of directors declared and directed the payment of the December 15, 2011 dividend on the Preferred Shares in-kind at the reduced rate of 8% per annum. As a result, a dividend of 5,833.4913 Preferred Shares was paid to the holders of Convertible Preferred Stock for the period from September 16, 2011 to December 15, 2011. As a result of accruing the dividend at the stated 12% rate, and subsequently paying to the lower 8% rate, the Company recorded a dividend accrual reversal of $2.9 million in the first quarter of fiscal 2012 related to dividends accrued between September 16, 2011 and December 15, 2011. Similarly, the Company recorded a beneficial conversion feature reversal of $1.1 million in the first quarter of fiscal 2012 related to beneficial conversion feature charges between September 16, 2011 and December 15, 2011 associated with the dividend reduction.

On May 1, 2012, we reached an understanding in principle and on May 8, 2012, we entered into an Amendment Agreement (the “Amendment Agreement”) with the CD&R Funds, the holders of our convertible preferred shares, to eliminate our quarterly dividend obligation on the preferred shares, which accrued at an annual rate of 12% unless paid in cash at 8%. However, this does not preclude the payment of contingent default dividends, if applicable.

Under the terms of the Certificate of Designations, Preferences and Rights of Series B Cumulative Convertible Participating Preferred Stock (the “Certificate of Designations”), we are contractually obligated to pay quarterly dividends to the holders of the convertible preferred shares from October 20, 2009, through October 20, 2019, subject to certain dividend “knock-out” provisions. The Amendment Agreement provides for the Certificate of Designations to be amended to terminate the dividend obligation from and after March 15, 2012 (the “Dividend Knock-out”).

As consideration for the Dividend Knock-out, the CD&R Funds will receive a total of 37,834 additional shares of Convertible Preferred Stock, representing (i) approximately $6.5 million of dividends accrued from March 15, 2012 through May 18, 2012 (20 trading days after April 20, 2012, on which date the dividend “knock-out” measurement period commenced) and (ii) approximately $31.4 million in additional liquidation preference of Convertible Preferred Stock, or 10% of the approximate total $313.7 million of accreted value as of May 18, 2012. Upon the closing of the transactions contemplated by the Amendment Agreement, funds managed by CD&R will hold Convertible Preferred Stock with an aggregate liquidation preference and accrued dividends of approximately $345 million. The Convertible Preferred Stock and accrued dividends entitle the funds managed by CD&R to receive approximately 54.1 million shares of common stock, representing 72.7% of the voting power and common stock of the Company on an as-converted basis and an increase of approximately 2% from CD&R’s position at April 29, 2012.

The Amendment Agreement with the CD&R Funds has been approved by the Company’s independent directors, as “independence” is defined by the rules and regulations of the Securities and Exchange Commission and the listing standards of the New York Stock Exchange, as well as by all of the Company’s directors who are independent of and not affiliated with the CD&R Funds.

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See Note 15 — Subsequent Events to the consolidated financial statements for more information on the material terms of our Amendment Agreement.

Debt

We have an Amended Credit Agreement (the “Amended Credit Agreement”) which includes an initial $150 million in term loans. The term loans under the Amended Credit Agreement will mature on April 20, 2014 and, prior to that date, we are required to pay quarterly installments equal to 0.25% of the principal amount of the term loan then outstanding as of the last day of each calendar quarter. However, we have made mandatory and optional prepayments under the Amended Credit Agreement and these prepayments are allowed to be applied against the required quarterly principal payments. As a result, we are not required to make the above mentioned quarterly principal payments for the remaining term of the term loans. In addition, these prepayments have deferred our leverage ratio covenant until the third quarter of fiscal 2013. At April 29, 2012 and October 30, 2011, amounts outstanding under the Amended Credit Agreement were $128.5 million and $130.7 million, respectively.

In addition to our Amended Credit Agreement, we have an Asset-Based Lending Facility (the “ABL Facility”) which allows aggregate maximum borrowings of up to $125.0 million; however, the aggregate maximum borrowings are limited to $100.0 million under our Amended Credit Agreement. Borrowing availability on the ABL Facility is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of qualified cash, eligible inventory and eligible accounts receivable, less certain reserves and subject to certain other adjustments. The ABL Facility has a maturity of April 20, 2014 and includes borrowing capacity of up to $25 million for letters of credit and up to $10 million for swingline borrowings. See “—Definitive Agreement to Purchase Metl-Span LLC” for a description of the Amended Credit Agreement refinancing and ABL Facility Amendment.

Amended Credit Agreement. The Company’s obligations under the Amended Credit Agreement and any interest rate protection agreements or other permitted hedging agreement entered into with any lender under the Amended Credit Agreement are irrevocably and unconditionally guaranteed on a joint and several basis by each direct and indirect domestic subsidiary of the Company (other than any domestic subsidiary that is a foreign subsidiary holding company or a subsidiary of a foreign subsidiary that is insignificant). Our obligations under the Amended Credit Agreement and the permitted hedging agreements and the guarantees thereof are secured pursuant to a guarantee and collateral agreement, dated as of October 20, 2009, made by the Company and other grantors (as defined therein), in favor of the term loan administrative agent and term loan collateral agent, by (i) all of the capital stock and other equity interests of all direct domestic subsidiaries owned by the Company and the guarantors, (ii) up to 65% of the capital stock of certain direct foreign subsidiaries of the Company or any guarantor (it being understood that a foreign subsidiary holding company or a domestic subsidiary of a foreign subsidiary will be deemed a foreign subsidiary) and (iii) substantially all other tangible and intangible assets owned by the Company and each guarantor, including liens on material real property, in each case to the extent permitted by applicable law and subject to certain enumerated exceptions. The liens securing the obligations under the Amended Credit Agreement, the permitted hedging agreements and the guarantees thereof are first in priority (as between the Amended Credit Agreement and the ABL Facility) with respect to stock, material real property and assets other than accounts receivable, inventory, certain deposit accounts, associated intangibles and certain other specified assets of the Company and the guarantors. Such liens are second in priority (as between the Amended Credit Agreement and the ABL Facility) with respect to accounts receivable, inventory, associated intangibles of the Company and certain other specified assets of the guarantors. As of April 29, 2012, we do not have any outstanding interest rate hedges.

The Amended Credit Agreement contains a number of covenants that, among other things, limit or restrict our ability to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make dividends and other restricted payments, create liens, make investments, make acquisitions, engage in mergers, change the nature of our business and engage in certain transactions with affiliates.

The Amended Credit Agreement had no financial covenants until October 30, 2011 (subject to prepayment deferrals as noted below), at which time our consolidated leverage ratio of net indebtedness to EBITDA was to be no more than 5 to 1. Net indebtedness is defined as consolidated debt less the lesser of unrestricted cash or $50 million. This ratio steps down by 0.25 each quarter until October 28, 2012 at which time the maximum ratio is 4 to 1. The ratio continues to step down by 0.125 each quarter until November 3, 2013 to a ratio of 3.5 to 1, which remains the maximum ratio for each fiscal quarter thereafter. We will, however, not be subject to this financial covenant with respect to a specified period if certain prepayments or repurchases of the term loans under the Amended Credit Agreement are made prior to the specified period. Based on our prepayments made through April 29, 2012, the

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leverage ratio covenant has been deferred until the third quarter of fiscal 2013. The prepayments that have been made can be applied to continuously defer covenant requirements and are not reduced unless the Company’s actual leverage ratios are above the maximum requirement for a given period. Although our Amended Credit Agreement did not require any financial covenant compliance, at April 29, 2012 and October 30, 2011, our consolidated leverage ratio as of those dates was 1.30 and 2.27, respectively.

Term loans under the Amended Credit Agreement may be repaid at any time, without premium or penalty but subject to customary LIBOR breakage costs. We also have the ability to repurchase a portion of the term loans under the Amended Credit Agreement, subject to certain terms and conditions set forth in the Amended Credit Agreement. In addition, the term loans under the Amended Credit Agreement are subject to mandatory prepayment and reduction in an amount equal to:

• the net cash proceeds of (1) certain asset sales, (2) certain debt offerings and (3) certain insurance recovery and condemnation events; and

• 50% of annual excess cash flow (as defined in the Amended Credit Agreement) for any fiscal year ended on or after October 31, 2010, unless a specified leverage ratio target is met.

Term loans under the Amended Credit Agreement bear interest, at our option, as follows:

(1) Base Rate loans at the Base Rate plus a margin. After October 30, 2011, the margin fluctuates based on our leverage ratio and shall be either 5% or 3.5% if our leverage ratio is less than 3.5 to 1. As of the first fiscal quarter commencing January 30, 2012, the margin in each case increases by 0.25% per annum on the first day of each fiscal quarter unless the aggregate principal amount of term loans outstanding under the Amended Credit Agreement in the immediately preceding fiscal quarter of the Company has been reduced by $3,750,000 (excluding scheduled principal amortization payments), less any prior reductions not previously applied to prevent an increase in the applicable margin, and

(2) LIBOR loans at LIBOR (having a minimum rate of 2%) plus a margin. Since October 30, 2011, the LIBOR-linked margin fluctuates based on our leverage ratio and shall be either 6% or 4.5% if our leverage ratio is less than 3.5 to 1. As of the first fiscal quarter commencing January 30, 2012, the margin in each case increases by 0.25% per annum on the first day of each fiscal quarter unless the aggregate principal amount of term loans outstanding under the Amended Credit Agreement in the immediately preceding fiscal quarter of the Company has been reduced by $3,750,000 (excluding scheduled principal amortization payments), less any prior reductions not previously applied to prevent an increase in the applicable margin. At April 29, 2012 and October 30, 2011, the interest rate on our Amended Credit Agreement was 6.5% and 8.0%, respectively. Based on our leverage ratio at April 29, 2012, the applicable margin in the third quarter of fiscal 2012 will be 4.5%.

Overdue amounts will bear interest at a rate that is 2% higher than the rate otherwise applicable. “Base Rate” is defined as the highest of (i) the Wells Fargo Bank, National Association prime rate; (ii) the overnight Federal Funds rate plus 0.5%; and (iii) 3.0% and “LIBOR” is defined as the applicable London interbank offered rate (not to be less than 2%) adjusted for reserves.

ABL Facility. The ABL Facility provides for an asset-based revolving credit facility which allows aggregate maximum borrowings by NCI Group, Inc. and Robertson-Ceco II Corporation of up to $125.0 million; however, the aggregate maximum borrowings are limited to $100.0 million under our Amended Credit Agreement. Borrowing availability under the ABL Facility is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of qualified cash, eligible inventory and eligible accounts receivable, less certain reserves and subject to certain other adjustments. At April 29, 2012 and October 30, 2011, our excess availability under the ABL Facility was $83.9 million and $87.8 million, respectively. Under the ABL Facility, there were no amounts of borrowings outstanding at both April 29, 2012 and October 30, 2011. In addition, at both April 29, 2012 and October 30, 2011, letters of credit totaling approximately $9.1 million were outstanding under the ABL Facility.

On December 3, 2010, we finalized an amendment of our ABL Facility that reduces the unused commitment fee from 1% or 0.75% based on the average daily balance of loans and letters of credit obligations outstanding to an annual rate of 0.5%, reduces the effective interest rate on borrowings, if any, by nearly 40% or 175 basis points and relaxes the prohibitions against making restricted payments or paying cash dividends, including on the Convertible Preferred Stock, to allow, in the aggregate, up to $6.5 million of restricted payments or cash dividends each calendar quarter, provided (i) certain excess availability conditions or (ii) certain other excess availability conditions and a fixed charge coverage ratio under the ABL Facility are satisfied. However, these prohibitions are second to the cash restricted payment limitations on the Amended Credit Agreement discussed above.

An unused commitment fee is paid monthly on the ABL Facility at an annual rate of 0.50% based on the amount by which the maximum credit exceeds the average daily principal balance of outstanding loans and letter of credit obligations. Additional customary fees in connection with the ABL Facility also apply.

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The obligations of the borrowers under the ABL Facility are guaranteed by the Company and each direct and indirect domestic subsidiary of the Company (other than any domestic subsidiary that is a foreign subsidiary holding company or a subsidiary of a foreign subsidiary that is insignificant) that is not a borrower under the ABL Facility. The obligations of the Company under certain specified bank products agreements are guaranteed by each borrower and each other direct and indirect domestic subsidiary of the Company and the other guarantors. These guarantees are made pursuant to a guarantee agreement, dated as of October 20, 2009, entered into by the Company and each other guarantor with Wells Fargo Foothill, LLC, as administrative agent.

The obligations under the ABL Facility, and the guarantees thereof, are secured by a first priority lien on our accounts receivable, inventory, certain deposit accounts, associated intangibles and certain other specified assets of the Company and a second priority lien on the assets securing the term loans under the Amended Credit Agreement on a first-lien basis, in each case subject to certain exceptions.

The ABL Facility contains a number of covenants that, among other things, limit or restrict our ability to dispose of assets, incur additional indebtedness, incur guarantee obligations, engage in sale and leaseback transactions, prepay other indebtedness, modify organizational documents and certain other agreements, create restrictions affecting subsidiaries, make dividends and other restricted payments, create liens, make investments, make acquisitions, engage in mergers, change the nature of our business and engage in certain transactions with affiliates.

Under the ABL Facility, a “Dominion Event” occurs if either an event of default is continuing or excess availability falls below certain levels, during which period, and for certain periods thereafter, the administrative agent may apply all amounts in the Company’s, the borrowers’ and the other guarantors’ concentration accounts to the repayment of the loans outstanding under the ABL Facility, subject to the Intercreditor Agreement and certain specified exceptions. In addition, during such Dominion Event, we are required to make mandatory payments on our ABL Facility upon the occurrence of certain events, including the sale of assets and the issuance of debt, in each case subject to certain limitations and conditions set forth in the ABL Facility.

The ABL Facility includes a minimum fixed charge coverage ratio of one to one, which will apply if we fail to maintain at least $15.0 million of borrowing capacity. Although our ABL Facility did not require any financial covenant compliance, at April 29, 2012 and October 30, 2011, our fixed charge coverage ratio as of those dates, which is calculated on a trailing twelve month basis, was 3.44 to one and 0.37 to one, respectively.

Loans under the ABL Facility bear interest, at our option, as follows:

(1) Base Rate loans at the Base Rate plus a margin. The margin ranges from 1.50% to 2.00% depending on the quarterly average excess availability under such facility, and

(2) LIBOR loans at LIBOR plus a margin. The margin ranges from 2.50% to 3.00% depending on the quarterly average excess availability under such facility. At both April 29, 2012 and October 30, 2011, the interest rate on our ABL Facility was 4.75%.

During an event of default, loans under the ABL Facility will bear interest at a rate that is 2% higher than the rate otherwise applicable. “Base Rate” is defined as the higher of the Wells Fargo Bank, N.A. prime rate and the overnight Federal Funds rate plus 0.5% and “LIBOR” is defined as the applicable London interbank offered rate adjusted for reserves.

Cash Flow

We periodically evaluate our liquidity requirements, capital needs and availability of resources in view of inventory levels, expansion plans, debt service requirements and other operating cash needs. To meet our short- and long-term liquidity requirements, including payment of operating expenses and repaying debt, we rely primarily on cash from operations. Beyond cash generated from operations, we have an undrawn ABL Facility with $83.9 million available at April 29, 2012 and $73.9 million of unrestricted cash at April 29, 2012. However, we have in the past, sought to raise additional capital.

We expect that, for the next 12 months, cash generated from operations will be sufficient to provide us the ability to fund our operations, provide the increased working capital necessary to support our strategy and fund planned capital expenditures of between approximately $22 million and $24 million for the remainder of fiscal 2012 and expansion when needed.

In the past, we have used available funds to repurchase shares of our Common Stock under our stock repurchase program though we have no intention to repurchase shares in the near-term. Although we did not purchase any Common Stock during the three months ended April 29, 2012 under the stock repurchase program, we did withhold shares of restricted stock to satisfy tax withholding obligations arising in connection with the vesting of awards of restricted stock related to our 2003 Long-Term Stock Incentive Plan.

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Our corporate strategy seeks potential acquisitions which provide additional synergies in our metal coil coating, metal components and engineered building systems segments. From time to time, we may enter into letters of intent or agreements to acquire assets or companies in these business lines. The consummation of these transactions could require substantial cash payments and/or issuance of additional debt. See “— Definitive Agreement to Purchase Metl-Span LLC” below.

The Company may from time to time repurchase or otherwise retire the Company’s debt and take other steps to reduce the Company’s debt or otherwise improve the Company’s financial position. These actions may include open market debt repurchases, negotiated repurchases, other retirements of outstanding debt and opportunistic refinancing of debt. The amount of debt that may be repurchased or otherwise retired, if any, will depend on market conditions, trading levels of the Company’s debt, the Company’s cash position, compliance with debt covenants and other considerations. Affiliates of the Company may also purchase the Company’s debt from time to time, through open market purchases or other transactions. In such cases, the Company’s debt may not be retired, in which case the Company would continue to pay interest in accordance with the terms of the debt, and the Company would continue to reflect the debt as outstanding in it is Consolidated Balance Sheets.

Definitive Agreement to Purchase Metl-Span LLC

On May 2, 2012, NCI Group, Inc. (“NCI”), a wholly owned subsidiary of the Company, entered into a definitive agreement with VSMA, Inc. (“VSMA”), Metl-Span LLC, and BlueScope Steel North America Corporation (“Equity Purchase Agreement”) to purchase Metl-Span LLC (“Metl-Span”) from VSMA, Inc., a subsidiary of BlueScope Steel North America Corporation, for $145 million in cash (such acquisition, the “Acquisition”). Metl-Span operates five manufacturing facilities in the United States serving the nonresidential building products market with cost-effective and energy efficient insulated metal wall and roof panels. For the year ended December 31, 2011, Metl-Span had estimated revenues of $170 million. Metl-Span is being sold on a cash-free, debt-free basis, and the purchase price is subject to adjustment based on Metl-Span’s working capital at closing.

Each of NCI, VSMA and Metl-Span has made customary representations and warranties and has agreed to customary covenants in the Equity Purchase Agreement. The closing of the Acquisition, which is currently expected to close before the end of the calendar year, is subject to (i) the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and (ii) other customary conditions to closing, including the execution and delivery of (a) a transition services agreement between VSMA and Metl-Span, (b) a supply agreement among Steelscape, Inc., a California corporation and affiliate of VSMA (“Steelscape”), Metl-Span and NCI, pursuant to which Steelscape has agreed to supply certain metallic-coated and painted steel coils for use in Metl-Span’s product lines, (c) an OEM supply agreement between Metl-Span and BlueScope Buildings North America, Inc., a Delaware corporation and affiliate of VSMA (“BBNA”), pursuant to which Metl-Span has agreed to sell certain insulated wall, roof and ceiling panel products to BBNA, and (d) certain other related transaction documents.

The Equity Purchase Agreement is subject to termination by either NCI or VSMA for various reasons, including the failure of the closing of the Acquisition to occur on or before October 15, 2012 (the “Initial Termination Date”), provided that (i) NCI may extend such termination date under certain circumstances (a) to the date that is two days after the marketing period under the Commitment Letter (as described below) or (b) up to 60 days after the Initial Termination Date if all conditions to the closing of the Acquisition have been satisfied other than with respect to the HSR Act and those conditions that by their nature cannot be satisfied other than at the closing (each of which conditions is capable of being satisfied at the date of termination if the closing of the Acquisition were to occur at such time), and (ii) VSMA may extend such termination date under certain circumstances to a date that is three business days after the Initial Termination Date. The obligations of NCI to consummate the Acquisition are not subject to the availability of financing.

The Equity Purchase Agreement provides that NCI will be required to pay to VSMA a reverse termination fee of $10.15 million upon termination under certain specified circumstances, including in the event of VSMA’s termination due to NCI’s failure to consummate the Acquisition if all of the conditions to its obligations have been satisfied or waived (other than those that by their nature will not be satisfied until the closing, each of which is capable of being satisfied at the date of termination if the closing were to occur at that time). Under certain other specified circumstances, NCI will be required to pay a reverse termination fee of $14.5 million including in the case of VSMA’s termination under the circumstances described in the preceding sentence if either (i) the proceeds of the Term Loan Facility (as described below) could have been funded upon delivery of a drawdown notice or (ii) could not be funded and the failure of such funding was the result of a breach by NCI of any of its covenants under the Equity Purchase Agreement.

NCI and VSMA have agreed to indemnify each other for losses arising from breaches of the representations, warranties and covenants of the Equity Purchase Agreement and for certain other liabilities, subject to specified limitations. BSNA has agreed to guarantee the performance of VSMA’s obligations under the Equity Purchase Agreement. In connection with the transaction, NCI will refinance its existing ABL Facility and Term Loan, which both mature in April 2014. NCI will utilize its ABL Facility and Term Loan Facility, together with cash on hand, to fund the Acquisition.

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On May 2, 2012, we entered into a debt financing commitment letter (the “Commitment Letter”) for a $250.0 million senior secured credit facility (the “Term Loan Facility”) to be available on the closing date of the Acquisition. Proceeds from the Term Loan Facility will be used, together with approximately $25 million of cash on hand and/or certain borrowings under the Loan and Security Agreement, as amended by the ABL Facility Amendment (in each case, as defined below), to finance the acquisition, the repayment of the existing Term Loan of NCI and the related fees and expenses. On May 16, 2012, we amended and restated the Commitment Letter solely to include an additional financial institution as a lender under the Term Loan Facility.

The Term Loan Facility will include certain representations and warranties, affirmative and negative covenants, events of default and collateral and guarantee arrangements, as described in the Commitment Letter. The Commitment Parties’ obligations to provide the financing are subject to the satisfaction of specified conditions, including the consummation of the Acquisition in accordance with the terms of the Equity Purchase Agreement, the accuracy of specified representations and the absence of a material adverse effect on Metl-Span, as described in the Commitment Letter.

On May 2, 2012, we entered into Amendment No. 2 (the “ABL Facility Amendment”) to the Loan and Security Agreement (the “Loan and Security Agreement”) to (i) permit the acquisition, the entry by the Company into the Term Loan Facility and the incurrence of debt thereunder and the repayment of existing indebtedness under NCI’s existing Term Loan, (ii) increase the amount available for borrowing thereunder to $150 million (subject to a borrowing base), (iii) increase the amount available for letters of credit thereunder to $30 million, and (iv) extend the final maturity thereunder to May 2, 2017.

See Note 15 — Subsequent Events to the consolidated financial statements for more information on the material terms of our Equity Purchase Agreement, Commitment Letter and ABL Facility Amendment.

NON-GAAP MEASURES

Set forth below are certain non-GAAP measures which include adjusted operating income (loss), adjusted diluted earnings (loss) per common share and adjusted EBITDA. Such measurements are not prepared in accordance with U.S. GAAP and should not be construed as an alternative to reported results determined in accordance with U.S. GAAP. Management believes the use of such non-GAAP measures on a consolidated and business segment basis assists investors in understanding the ongoing operating performance by presenting the financial results between periods on a more comparable basis. In addition, certain financial covenants related to our Amended Credit Agreement and ABL Facility are based on similar non-GAAP measures. The non-GAAP information provided is unique to the Company and may not be consistent with the methodologies used by other companies.

The following tables reconcile adjusted operating income (loss) to operating income (loss) for the periods indicated (in thousands):

	For the Three Months Ended April 29, 2012
	Metal Coil Coating		Metal Components			Engineered Building Systems		Corporate			Consolidated
Operating income (loss), GAAP basis	$	4,890	$	9,018		$	6,740	$	(15,704	)	$	4,944
Acquisition-related costs		––		––			––		1,494			1,494
Actuarial determined general liability self-insurance charges (recovery)		—		(1,929	)		—		—			(1,929	)
Executive retirement		—		––			—		508			508
“Adjusted” operating income (loss)	$	4,890	$	7,089		$	6,740	$	(13,702	)	$	5,017

	For the Three Months Ended May 1, 2011
	Metal Coil Coating		Metal Components		Engineered Building Systems			Corporate			Consolidated
Operating income (loss), GAAP basis	$	4,378	$	7,400	$	(154	)	$	(13,468	)	$	(1,844	)
Actuarial determined general liability self-insurance charges		—		1,297		—			—			1,297
“Adjusted” operating income (loss)	$	4,378	$	8,697	$	(154	)	$	(13,468	)	$	(547	)

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	For the Six Months Ended April 29, 2012
	Metal Coil Coating		Metal Components			Engineered Building Systems		Corporate			Consolidated
Operating income (loss), GAAP basis	$	10,192	$	14,559		$	14,336	$	(29,858	)	$	9,229
Acquisition-related costs		—		—			––		1,890			1,890
Actuarial determined general liability self-insurance charges (recovery)		—		(1,929	)		—		—			(1,929	)
Executive retirement		—		––			—		508			508
“Adjusted” operating income (loss)	$	10,192	$	12,630		$	14,336	$	(27,460	)	$	9,698

	For the Six Months Ended May 1, 2011
	Metal Coil Coating		Metal Components		Engineered Building Systems			Corporate			Consolidated
Operating income (loss), GAAP basis	$	7,822	$	7,753	$	(5,564	)	$	(25,991	)	$	(15,980	)
Pre-acquisition contingency adjustment		—		—		252			—			252
Actuarial determined general liability self-insurance charges		—		2,398		—			—			2,398
“Adjusted” operating income (loss)	$	7,822	$	10,151	$	(5,312	)	$	(25,991	)	$	(13,330	)

The following tables reconcile adjusted EBITDA to Net Income (Loss) for the periods indicated (in thousands):

	3rd Quarter July  31, 2011			4th Quarter October 30, 2011			1st Quarter January 29, 2012			2nd Quarter April 29, 2012			Trailing 12 Months April 29, 2012
Net income	$	2,593		$	3,411		$	589		$	1,321		$	7,914
Add:
Depreciation and amortization		7,187			6,753			6,158			5,841			25,939
Consolidated interest expense, net		3,864			3,685			3,296			3,034			13,879
Provision (benefit) for income taxes		—			398			426			942			1,766
Acquisition-related costs		—			––			396			1,494			1,890
Cash restructuring charges (recovery)		(575	)		283			––			––			(292	)
Executive retirement		—			––			––			508			508
Non-cash charges:
Stock-based compensation		1,776			1,776			1,972			2,119			7,643
Asset impairments (recoveries)		(93	)		1,214			––			––			1,121
Embedded derivative		(6	)		(6	)		(5	)		(6	)		(23	)
Adjusted EBITDA	$	14,746		$	17,514		$	12,832		$	15,253		$	60,345

	3rd  Quarter August 1, 2010			4th Quarter October 31, 2010			1st Quarter January 30, 2011			2nd Quarter May 1, 2011			Trailing 12 Months May 1, 2011
Net loss	$	(3,299	)	$	(5,436	)	$	(12,725	)	$	(3,229	)	$	(24,689	)
Add:
Depreciation and amortization		7,457			7,309			7,236			7,187			29,189
Consolidated interest expense, net		4,392			4,258			4,177			3,870			16,697
Benefit from income taxes		(221	)		(1,794	)		(5,009	)		(1,786	)		(8,810	)
Cash restructuring charges		551			1,628			—			—			2,179
Transaction costs		—			(250	)		—			—			(250	)
Non-cash charges:
Stock-based compensation		1,374			1,375			1,685			1,671			6,105
Asset impairments (recoveries)		(64	)		221			—			—			157
Embedded derivative		(7	)		(7	)		(7	)		(6	)		(27	)
Pre-acquisition contingency adjustment		––			178			252			––			430
Adjusted EBITDA	$	10,183		$	7,482		$	(4,391	)	$	7,707		$	20,981

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The following tables reconcile adjusted diluted loss per common share to loss per diluted common share and adjusted loss applicable to common shares to loss applicable to common shares for the periods indicated (in thousands):

	Fiscal Three Months Ended						Fiscal Six Months Ended
	April 29, 2012			May 1, 2011			April 29, 2012			May 1, 2011
Loss per diluted common share, GAAP basis	$	(0.86	)	$	(0.51	)	$	(1.40	)	$	(1.65	)
Convertible preferred stock beneficial conversion feature		0.42			(0.01	)		0.63			0.08
Acquisition-related costs, net of taxes		0.05			—			0.06			—
Actuarial determined general liability self-insurance charges (recovery), net of taxes		(0.06	)		0.04			(0.06	)		0.08
Executive retirement, net of taxes		0.02			––			0.02			––
Gain on embedded derivative, net of taxes		(0.00	)		(0.00	)		(0.00	)		(0.00	)
Pre-acquisition contingency adjustment, net of taxes		—			—			––			0.01
“Adjusted” diluted loss per common share	$	(0.45	)	$	(0.48	)	$	(0.75	)	$	(1.48	)
	Fiscal Three Months Ended						Fiscal Six Months Ended
	April 29, 2012			May 1, 2011			April 29, 2012			May 1, 2011
Net loss applicable to common shares, GAAP basis	$	(16,281	)	$	(9,249	)	$	(26,320	)	$	(29,990	)
Convertible preferred stock beneficial conversion feature		7,858			(240	)		11,878			1,546
Acquisition-related costs, net of taxes		920			—			1,164			—
Actuarial determined general liability self-insurance charges (recovery), net of taxes		(1,188	)		799			(1,188	)		1,477
Executive retirement, net of taxes		313			––			313			––
Gain on embedded derivative, net of taxes		(4	)		(4	)		(7	)		(8	)
Pre-acquisition contingency adjustment, net of taxes		—			––			––			181
“Adjusted” net loss applicable to common shares	$	(8,382	)	$	(8,694	)	$	(14,160	)	$	(26,794	)

OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (“SPEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of April 29, 2012, we were not involved in any unconsolidated SPE transactions.

CONTRACTUAL OBLIGATIONS

In general, purchase orders issued in the normal course of business can be terminated in whole or in part for any reason without liability until the product is received.

During the three months ended April 29, 2012, we committed to a natural gas purchase obligation related to one of our Metal Coaters facilities totaling $1.3 million over the next two years.

There have been no other material changes in our future contractual obligations since the end of fiscal 2011 other than the normal expiration of existing contractual obligations. See Item 7 of our Annual Report on Form 10-K for the fiscal year ended October 30, 2011 for more information on contractual obligations. See Note 15 — Subsequent Events to the consolidated financial statements for more information on the material terms of our Equity Purchase Agreement, Commitment Letter and ABL Facility Amendment.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that are most important to the portrayal of our financial position and results of operations. These policies require our most subjective judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. Our most critical accounting policies include those that pertain to revenue recognition, insurance accruals, share-based compensation, income taxes, accounting for acquisitions, intangible assets and goodwill, allowance for doubtful accounts, inventory valuation, property, plant and equipment valuation, contingencies and beneficial conversion features and dividend policy, which are described in Item 7 of our Annual Report on Form 10-K for the year ended October 30, 2011.

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RECENT ACCOUNTING PRONOUNCEMENTS

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”) which amends its guidance on the presentation of comprehensive income to increase the prominence of items reported in other comprehensive income. The new guidance requires that all components of comprehensive income in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance required entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (“ASU 2011-12”) which indefinitely deferred the guidance related to the presentation on the face of the financial statements of the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income. These amendments are to be applied retrospectively. We will adopt ASU 2011-05 and ASU 2011-12 in our first quarter of fiscal 2013 and we believe its adoption will not have any impact on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Steel Prices

We are subject to market risk exposure related to volatility in the price of steel. For the fiscal six months ended April 29, 2012, steel constituted approximately 72% of our cost of sales. Our business is heavily dependent on the price and supply of steel. Our various products are fabricated from steel produced by mills to forms including bars, plates, structural shapes, sheets, hot-rolled coils and galvanized or Galvalume^®-coated coils. The steel industry is highly cyclical in nature, and steel prices have been volatile in recent years and may remain volatile in the future. Steel prices are influenced by numerous factors beyond our control, including general economic conditions, domestically and internationally, the availability of raw materials, competition, labor costs, freight and transportation costs, production costs, import duties and other trade restrictions. Given the level of steel industry consolidation, the expanded capacity on the gulf coast and slow economic recovery, we believe steel prices will continue to be volatile. On average, we expect the average market price in fiscal 2012 to be in line with the prices we experienced during fiscal 2011.

Although we have the ability to purchase steel from a number of suppliers, a production cutback by one or more of our current suppliers could create challenges in meeting delivery schedules to our customers. Because we have periodically adjusted our contract prices, particularly in the engineered building systems segment, we have generally been able to pass increases in our raw material costs through to our customers. The graph below shows the monthly CRU index data for the North American Steel Price Index over the historical five-year period. The CRU North American Steel Price Index has been published by the CRU Group since 1994 and we believe this index appropriately depicts the volatility of steel prices. The index, based on a CRU survey of industry participants, is now commonly used in the settlement of physical and financial contracts in the steel industry. The prices surveyed are purchases for forward delivery, according to lead time, which will vary. For example, the April index would likely approximate our June or July steel purchase deliveries based on current lead-times. The volatility in this steel price index is comparable to the volatility we experience in our average cost of steel. Further, due to market conditions described above, the most recent CRU prices have been based on a lower than normal trading volume.

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Source: www.crugroup.com

We do not have any long-term contracts for the purchase of steel and normally do not maintain an inventory of steel in excess of our current production requirements. However, from time to time, we may purchase steel in advance of announced steel price increases. We can give no assurance that steel will remain available or that prices will not continue to be volatile.

We rely on a few major suppliers for our supply of steel and may be adversely affected by bankruptcy, change in control, financial condition or other factors affecting those suppliers. During the first six months of fiscal 2012, we purchased approximately 28% of our steel requirements from two vendors in the United States. No other vendor accounted for over 10% of our steel requirements during the first six months of fiscal 2012. Due to unfavorable market conditions and our inventory supply requirements, during the first six months of fiscal 2012, we purchased insignificant amounts of steel from foreign suppliers. Limiting purchases to domestic suppliers further reduces our available steel supply base.

With steel accounting for approximately 72% of our cost of sales for the fiscal six months ended April 29, 2012, a one percent change in the cost of steel would have resulted in a pre-tax impact on cost of sales of approximately $2.7 million for the six months ended April 29, 2012, if such costs were not passed on to our customers. The impact to our financial results of operations would be significantly dependent on the competitive environment and the costs of other alternative building products, which could impact our ability to pass on these higher costs.

Interest Rates

We are subject to market risk exposure related to changes in interest rates on our Amended Credit Agreement and ABL Facility. These instruments bear interest at an agreed upon percentage point spread from either the prime interest rate or LIBOR. Under our Amended Credit Agreement, we may, at our option, fix the interest rate for certain borrowings based on a spread over LIBOR for 30 days to six months. At April 29, 2012, we had $128.5 million outstanding under our senior Amended Credit Agreement. Based on this balance, an immediate change of one percent in the interest rate would cause a change in interest expense of approximately $1.3 million on an annual basis. The fair value of our Amended Credit Agreement at both April 29, 2012 and October 30, 2011 was approximately $127.9 million compared to the face value of $128.5 million and $130.7 million, respectively.

See Note 8 — Long-Term Debt and Note Payable to the consolidated financial statements for more information on the material terms of our long-term debt.

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Foreign Currency Exchange Rates

We are exposed to the effect of exchange rate fluctuations on the U.S. dollar value of foreign currency denominated operating revenue and expenses. The functional currency for our Mexico operations is the U.S. dollar. Adjustments resulting from the re-measurement of the local currency financial statements into the U.S. dollar functional currency, which uses a combination of current and historical exchange rates, are included in net income in the current period. Net foreign currency re-measurement losses for both the three and six month periods ended April 29, 2012 were $0.1 million. Net foreign currency re-measurement gains for the three and six month periods ended May 1, 2011 were $0.2 million and $0.3 million, respectively.

The functional currency for our Canada operations is the Canadian dollar. Translation adjustments resulting from translating the functional currency financial statements into U.S. dollar equivalents are reported separately in accumulated other comprehensive income in stockholders’ equity. The net foreign currency exchange gains (losses) included in net income for the three month period ended April 29, 2012 was $0.1 million and was insignificant for the six month period ended April 29, 2012. The net foreign currency exchange gains included in net income for the three and six month periods ended May 1, 2011 were $0.2 million and $0.1 million, respectively. The net foreign currency translation adjustment, net of tax, and included in other comprehensive income (loss) for both the three and six month periods ended April 29, 2012 was insignificant and was $(0.1) million for both the three and six month periods ended May 1, 2011.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of April 29, 2012. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding the required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management believes that our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and based on the evaluation of our disclosure controls and procedures as of April 29, 2012, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at such reasonable assurance level.

Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

NCI BUILDING SYSTEMS, INC.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

See Part I, Item 1, Unaudited Consolidated Financial Statements, Note 14, which is incorporated herein by reference.

Item 1A. Risk Factors.

In addition to the risk factors described below, please refer to Item 1A, Risk Factors included in our Annual Report on Form 10-K for the fiscal year ended October 30, 2011 filed with the Securities and Exchange Commission (the “SEC”) and incorporated herein by reference.

The proposed acquisition of Met’l Span, LLC may not be completed on a timely basis, on anticipated terms, or at all, and there are uncertainties and risks to consummating the acquisition.

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As previously described, on May 2, 2012, NCI Group, Inc. (“NCI”) entered into a definitive agreement with VSMA, Inc. (“VSMA”), Metl-Span LLC, and BlueScope Steel North America Corporation (“BlueScope”) to purchase all of the outstanding membership interests of Metl-Span LLC (“Metl-Span”) from VSMA., a subsidiary of BlueScope, for $145 million in cash (such acquisition, the “Acquisition”). Metl-Span is being sold on a cash-free, debt-free basis, and the purchase price is subject to adjustment based on Metl-Span’s working capital at closing.

Each of NCI, VSMA and Metl-Span has made customary representations and warranties and has agreed to customary covenants in the Equity Purchase Agreement. The closing of the Acquisition is subject to (i) the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and (ii) the satisfaction or waiver of other customary conditions to closing. As a result, the Acquisition may not be successfully completed. Furthermore, if the completion of the Acquisition is substantially delayed, we may not be able to realize the expected benefits of the Acquisition on a timely basis or at all.

The Equity Purchase Agreement provides that NCI will be required to pay to VSMA a reverse termination fee of $10.15 million or $14.50 million upon termination of the Equity Purchase Agreement under specified circumstances. If we are required to make this payment, such payment would reduce our short-term liquidity and cash flow.

Even if the Acquisition were completed, the successful integration of Metl-Span’s business and operations into those of our own and our ability to realize the expected synergies and benefits of the transaction are subject to a number of risks and uncertainties, many of which are outside of our control. These risks and uncertainties include, among other things:

• our ability to complete the timely integration of organizations, operations, procedures, policies and technologies, as well as the harmonization of differences in the business cultures of the two companies and retention of key personnel;

• our ability to minimize the diversion of management attention from ongoing business concerns during the process of integrating the two companies; and

• our ability to preserve customer, supplier and other important relationships of both NCI and Metl-Span and resolve potential conflicts that may arise.

In addition, the Acquisition may not be accretive and may cause dilution to the combined company’s earnings per share, which may negatively affect the price of our common stock following consummation of the Acquisition.

If we are unable to complete the proposed Acquisition, we will have incurred substantial expenses and diverted significant management time and resources from our ongoing business. Even if we consummate the proposed Acquisition, we will still have incurred substantial expenses but may not realize the anticipated cost synergies and other benefits of the Acquisition. Given the size and significance of the Acquisition, we may encounter difficulties in the integration of the operations of the Metl-Span business, which could adversely affect our combined business and financial performance. Any failure to realize the full benefits and synergies of the Acquisition could adversely impact our business, results of operation and financial condition.

We currently expect to take on significant debt to finance the Acquisition, and such increased debt levels could adversely affect its business, cash flow and results of operations.

We expect to incur a substantial amount of indebtedness in connection with our acquisition of Metl-Span. As a result of this indebtedness, our interest payment obligations will increase. The degree to which we are leveraged could have adverse effects on our business, including the following:

• Making it difficult for us to satisfy our obligations under our credit facility and contractual and commercial commitments;

• Requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, dividends and other general corporate purposes;

• Limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate;

43

• Restricting us from making additional strategic acquisitions or exploiting business opportunities;

• Placing us at a competitive disadvantage compared to our competitors that have less debt;

• Limiting our ability to borrow additional funds; and

• Decreasing our ability to compete effectively or operate successfully under adverse economic and industry conditions.

If we incur additional debt, these risks will intensify. Our ability to meet our debt service obligations will depend upon our future performance, which will be subject to the financial, business and other factors affecting our operations, many of which are beyond our control.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table shows our purchases of our Common Stock during the second quarter of fiscal 2012:

ISSUER PURCHASES OF EQUITY SECURITIES

Period	(a) Total Number of Shares Purchased(1)		(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs(2)
January 30, 2012 to February 26, 2012		—		—		—		129,218
February 27, 2012 to March 25, 2012		1,386	$	10.96		—		129,218
March 26, 2012 to April 29, 2012		—		—		—		129,218
Total		1,386	$	10.96		—		129,218

(1) These shares were shares of restricted stock that were withheld to satisfy tax-withholding obligations arising in connection with the vesting of awards of restricted stock. The required withholding is calculated using the closing sales price on the previous business day prior to the vesting date as reported by the NYSE.

(2) Our board of directors has authorized a stock repurchase program. Subject to applicable federal securities law and the Certificate of Designations of our Convertible Preferred Stock, such purchases may occur, if at all, at times and in amounts that we deem appropriate. Shares repurchased are usually retired. On February 28, 2007, we publicly announced that our board of directors authorized the repurchase of an additional 0.2 million shares of our Common Stock. There is no time limit on the duration of the program. During the second quarter of fiscal 2012, we did not repurchase any shares of Common Stock. At April 29, 2012, there were 129,218 shares of Common Stock remaining authorized for repurchase under the program.

Item 6. Exhibits.

Exhibits

Those exhibits required to be filed by Item 601 of Regulation S-K are listed in the Index to Exhibits immediately preceding the exhibits filed herewith and such listing is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements 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.

	NCI BUILDING SYSTEMS, INC. (Registrant)
Date: May 30, 2012	By:	/s/ Mark E. Johnson
		Mark E. Johnson Executive Vice President, Chief Financial Officer and Treasurer

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Index to Exhibits

2.1	Equity Purchase Agreement, dated as of May 2, 2012, by and among VSMA, Inc., Metl-Span LLC, NCI Group, Inc. and BlueScope Steel North America Corporation (filed as Exhibit 2.1 to NCI’s Current Report on Form 8-K dated May 8, 2012 and incorporated by reference herein)
3.1	Restated Certificate of Incorporation, as amended through September 30, 1998 (filed as Exhibit 3.1 to NCI’s Annual Report on Form 10-K for the fiscal year ended November 2, 2002 and incorporated by reference herein)
3.2	Certificate of Amendment to Restated Certificate of Incorporation, effective as of March 12, 2007 (filed as Exhibit 3.2 to NCI’s Quarterly Report on Form 10-Q for the quarter ended April 29, 2007 and incorporated by reference herein)
3.3	Certificate of Amendment to the Restated Certificate of Incorporation, effective as of March 4, 2010 (filed as Exhibit 4.3 to NCI’s registration statement on Form S-8 filed with the SEC on April 23, 2010 and incorporated by reference herein)
3.4	Second Amended and Restated By-Laws, effective as of October 20, 2009 (filed as Exhibit 3.4 to NCI’s Current Report on Form 8-K dated October 26, 2009 and incorporated by reference herein)
3.5	Third Amended and Restated By-laws, effective as of February 19, 2010 (filed as Exhibit 3.1 to NCI’s Current Report on Form 8-K dated February 24, 2010 and incorporated by reference herein)
4.1	Amendment Agreement, dated as of May 8, 2012 (filed as Exhibit 4.1 to NCI’s Current Report on Form 8-K dated May 14, 2012 and incorporated by reference herein)
10.1	Consulting Agreement, effective March 23, 2012, by and between NCI Building Systems, Inc. and Charles W. Dickinson (filed as Exhibit 99.1 to NCI’s Current Report on Form 8-K dated March 26, 2012 and incorporated by reference herein)
10.2	Form of First Amendment to the Restricted Stock Agreement by and between NCI Building Systems, Inc. and Charles W. Dickinson (filed as Exhibit 99.2 to NCI’s Current Report on Form 8-K dated March 26, 2012 and incorporated by reference herein)
10.3	First Amendment to the Nonqualified Stock Option Agreement, effective March 23, 2012, by and between NCI Building Systems, Inc. and Charles W. Dickinson (filed as Exhibit 99.3 to NCI’s Current Report on Form 8-K dated March 26, 2012 and incorporated by reference herein)
10.4	Form of 2010 Nonqualified Stock Option Agreement to Top Eight (8) Executive Officers (filed as Exhibit 99.4 to NCI’s Current Report on Form 8-K dated March 26, 2012 and incorporated by reference herein)
10.5	Commitment Letter, dated as of May 2, 2012, from Credit Suisse AG, Credit Suisse Securities (USA) LLC, UBS Loan Finance LLC, UBS Securities LLC, Royal Bank of Canada and RBC Capital Markets (filed as Exhibit 10.1 to NCI’s Current Report on Form 8-K dated May 8, 2012 and incorporated by reference herein)
*10.6	Amended and Restated Commitment Letter, dated as of May 16, 2012, from Credit Suisse AG, Credit Suisse Securities (USA) LLC, UBS Loan Finance LLC, UBS Securities LLC, Royal Bank of Canada, RBC Capital Markets and Citigroup Global Markets Inc.
10.7	Amendment No. 2 to Loan and Security Agreement, dated as of May 2, 2012 (filed as Exhibit 10.2 to NCI’s Current Report on Form 8-K dated May 8, 2012 and incorporated by reference herein)
*31.1	Rule 13a-14(a)/15d-14(a) Certifications (Section 302 of the Sarbanes-Oxley Act of 2002)
*31.2	Rule 13a-14(a)/15d-14(a) Certifications (Section 302 of the Sarbanes-Oxley Act of 2002)
**32.1	Certifications pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act of 2002)
**32.2	Certifications pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act of 2002)

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**101.INS	XBRL Instance Document
**101.SCH	XBRL Taxonomy Extension Schema Document
**101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
**101.LAB	XBRL Taxonomy Extension Label Linkbase Document
**101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

** Furnished herewith

47

EX-10.6

Exhibit 10.6

CREDIT SUISSE AG Eleven Madison Avenue New York, NY 10010	ROYAL BANK OF CANADA Three World Financial Center 200 Vesey Street New York, New York 10281	UBS LOAN FINANCE LLC 677 Washington Boulevard Stamford, CT 06901
CREDIT SUISSE SECURITIES (USA) LLC Eleven Madison Avenue New York, NY 10010		UBS SECURITIES LLC 299 Park Avenue New York, NY 10171
	CITIGROUP GLOBAL MARKETS INC. 390 Greenwich Street New York, NY 10013

CONFIDENTIAL

May 16, 2012

NCI Building Systems, Inc.

10943 North Sam Houston Parkway West

Houston, Texas 77064

Attention: Mark E. Johnson, Chief Financial Officer

Project Verde

Amended and Restated Commitment Letter

Ladies and Gentlemen:

You have advised us that NCI Building Systems, Inc., a Delaware corporation (the “Company” or “you”), intends to acquire (the “Acquisition”), directly or indirectly, all of the equity interests of Metl-Span LLC (the “Acquired Business”) pursuant to the Acquisition Agreement (as defined in Exhibit A hereto). You have further advised each of Credit Suisse AG (acting through such of its affiliates or branches as it deems appropriate, “CS”) and Credit Suisse Securities (USA) LLC (“CS Securities” and, together with CS and their respective affiliates, “Credit Suisse”), UBS Loan Finance LLC (“UBSLF”) and UBS Securities LLC (“UBSS” and, together with UBSLF, “UBS”), Royal Bank of Canada (“Royal Bank”) and RBC Capital Markets¹ (“RBCCM” and, together with Royal Bank, “RBC”) and Citi (as defined below and, collectively with

¹  RBC Capital Markets is a marketing name for the investment banking activities of Royal Bank of Canada and its affiliates.

Credit Suisse, UBS and RBC, the “Committed Lenders”, “we” or “us”) that, in connection with the foregoing, you intend to consummate the other Transactions described in the Transaction Description attached hereto as Exhibit A (the “Transaction Description”). Capitalized terms used but not defined herein shall have the meanings assigned to them in the Transaction Description and in the Summaries of Principal Terms and Conditions attached hereto as Exhibit B (the “Term Sheet”) and the Summary of Additional Conditions attached hereto as Exhibit C (the “Summary of Additional Conditions”; together with this commitment letter, the Transaction Description and the Term Sheet, collectively, the “Commitment Letter”). For purposes of this Commitment Letter, “Citi” shall mean Citigroup Global Markets Inc. (“CGMI”), Citibank, N.A., Citigroup USA, Inc., Citicorp North America, Inc. and/or any of their affiliates as any of them shall determine to be appropriate to provide the services contemplated herein (subject to the confidentiality, assignment and other provisions hereof). It is understood and agreed that CGMI is entering into this Commitment Letter for and on behalf of Citi.

You have further advised each of the Committed Lenders that, in connection therewith, it is intended that the financing for the Transactions will include the $250.0 million senior secured term loan facility (the “Term Loan Facility”) described in the Term Sheet.

In connection with the foregoing, in each case subject only to the conditions set forth in the Funding Conditions Provision (as defined below) and in Exhibit C hereto, the Committed Lenders agree as follows:

(a) CS is pleased to advise you of its commitment, severally and not jointly, to provide 28 1/3% of the Term Loan Facility;

(b) UBSLF is pleased to advise you of its commitment, severally and not jointly, to provide 28 1/3% of the Term Loan Facility;

(c) Royal Bank is pleased to advise you of its commitment, severally and not jointly, to provide 28 1/3% of the Term Loan Facility; and

(d) Citi is pleased to advise you of its commitment, severally and not jointly, to provide 15% of the Term Loan Facility.

It is agreed that each of CS Securities, RBCCM, UBSS and Citi will act as a joint lead arranger and joint bookrunner for the Term Loan Facility (each of CS Securities, RBCCM, UBSS and Citi in such capacity, a “Lead Arranger” and collectively, the “Lead Arrangers”).

No compensation (other than that expressly contemplated by this Commitment Letter and the Fee Letter referred to below) will be paid to any Lender in connection with the Term Loan Facility unless you and we shall so agree.

2

The Committed Lenders reserve the right, prior to or after the execution of definitive documentation for the Term Loan Facility (which we agree will be initially drafted by your counsel), to syndicate all or a portion of the Committed Lenders’ commitments hereunder to a group of financial institutions (together with the Committed Lenders, the “Lenders”) identified by the Committed Lenders in consultation with you and reasonably acceptable to them and you with respect to the identity of such Lender (your consent not to be unreasonably withheld), it being understood that we will not syndicate to those persons identified by you in writing to the Committed Lenders (or to their affiliates so designated in writing) prior to the date of the Original Commitment Letter (as defined below) or to any competitors of the Company or to any affiliates of such competitors (such persons, collectively, the “Disqualified Institutions”); provided that, notwithstanding each Committed Lender’s right to syndicate the Term Loan Facility and receive commitments with respect thereto, it is agreed that any syndication of, or receipt of commitments in respect of, all or any portion of a Committed Lender’s commitment hereunder prior to the initial funding under the Term Loan Facility shall not be a condition to such Committed Lender’s commitment nor reduce such Committed Lender’s commitment hereunder with respect to the Term Loan Facility (provided, however, that, notwithstanding the foregoing, assignments of a Committed Lender’s commitment, which are effective simultaneously with the funding of such commitment by the assignee, shall be permitted) (the date of such initial funding under the Term Loan Facility, the “Closing Date”) and, unless you otherwise agree in writing, each Committed Lender shall retain exclusive control over all rights and obligations with respect to its commitment, including all rights with respect to consents, modifications and amendments, until the Closing Date has occurred. Without limiting your obligations to assist with syndication efforts as set forth below, it is understood that the Committed Lenders’ commitments hereunder are not subject to syndication of the Term Loan Facility. The Committed Lenders intend to commence syndication efforts promptly upon the execution of this Commitment Letter and as part of their syndication efforts, it is their intent to have Lenders commit to the Term Loan Facility prior to the Closing Date (subject to the limitations set forth in the second preceding sentence). You agree actively to assist the Committed Lenders (and to use your commercially reasonable efforts to cause Clayton Dubilier & Rice LLC and its affiliates (collectively, the “Sponsor”) and the Acquired Business to actively assist the Committed Lenders) in completing a timely syndication that is reasonably satisfactory to them and you. Such assistance shall include, without limitation, until the earlier to occur of (i) a Successful Syndication (as defined in the Fee Letter) and (ii) 60 days after the Closing Date (a) your using commercially reasonable efforts to ensure that any syndication efforts benefit materially from the existing lending and investment banking relationships of you and the Sponsor, (b) direct contact between senior management, representatives and advisors of you and the Sponsor, on the one hand, and the proposed Lenders, on the other hand (and your using commercially reasonable efforts to ensure contact between senior management, representatives and advisors of the Acquired Business, on the one hand, and the proposed Lenders, on the other hand), in all such cases at times mutually agreed upon, (c) your and the Sponsor’s assistance, and your using commercially reasonable efforts to cause the Acquired Business to assist, in the preparation of a customary confidential information memorandum for the Term Loan Facility and other marketing materials to be used in connection with the syndication (the “Confidential Information Memorandum”), and your using commercially reasonable efforts to provide such Confidential Information Memorandum (other than the portions

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thereof customarily provided by financing arrangers, and limited, in the case of information relating to the Acquired Business, to Required Information (as defined in the Acquisition Agreement)) no less than 20 consecutive calendar days prior to the Closing Date (provided that (i) such period shall not include any day from and including June 29, 2012 through and including July 9, 2012 and (ii) if such period has not ended prior to August 17, 2012, such period shall be deemed not to have commenced until September 4, 2012), (d) prior to the launch of the syndication, using your commercially reasonable efforts to procure or confirm a corporate credit rating and a corporate family rating in respect of the Borrower from Standard & Poor’s Ratings Services (“S&P”) and Moody’s Investors Service, Inc. (“Moody’s”), respectively, and ratings for the Term Loan Facility from each of S&P and Moody’s, (e) the hosting, with the Committed Lenders, of no more than two meetings to be mutually agreed upon of prospective Lenders at times and locations to be mutually agreed upon and (f) your ensuring that there shall be no competing issues of debt securities or commercial bank or other credit facilities of the Company, the Acquired Business or any of their respective subsidiaries being offered, placed or arranged (other than replacements, extensions and renewals of existing indebtedness that matures prior to the Closing Date and any other indebtedness of the Acquired Business and its subsidiaries permitted to be incurred pursuant to the Acquisition Agreement) if the offering, placement or arrangement of such debt securities or commercial bank or other credit facilities would have, in the reasonable judgment of the Lead Arrangers, a detrimental effect upon the primary syndication of the Term Loan Facility. Notwithstanding anything to the contrary contained in this Commitment Letter or the Fee Letter (as defined below), but without limiting your obligations to assist with syndication efforts as set forth herein, it is understood that neither the commencement nor completion of the syndication of the Term Loan Facility shall constitute a condition to the availability of the Term Loan Facility on the Closing Date or at any time thereafter.

The Lead Arrangers will, in consultation with you, manage all aspects of any syndication of the Term Loan Facility, including decisions as to the selection of institutions to be approached and when they will be approached, when their commitments will be accepted, which institutions will participate (which institutions shall be reasonably acceptable to you), the allocation of the commitments among the Lenders and the amount and distribution of fees among the Lenders. To assist the Lead Arrangers in their syndication efforts, you agree promptly to prepare and provide (and to use commercially reasonable efforts to cause the Sponsor and the Acquired Business to provide) to the Committed Lenders all customary information with respect to you, the Acquired Business and each of your and its respective subsidiaries and the Transactions, including all financial information and projections (including financial estimates, budgets, forecasts and other forward-looking information, the “Projections”), as the Committed Lenders may reasonably request in connection with the structuring, arrangement and syndication of the Term Loan Facility. You hereby represent and warrant that (with respect to information relating to the Acquired Business and its subsidiaries to your knowledge), (a) all written information and written data other than the Projections and information of a general economic or general industry nature (the “Information”) that has been or will be made available to the Committed Lenders by or on behalf of you or any of your representatives, taken as a whole, is or will be, when furnished, correct in all

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material respects and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made (after giving effect to all supplements thereto) and (b) the Projections that have been or will be made available to the Committed Lenders by or on behalf of you or any of your representatives have been or will be prepared in good faith based upon assumptions that you believe to be reasonable at the time made and at the time the related Projections are made available to the Committed Lenders; it being understood that the Projections are as to future events and are not to be viewed as facts and that actual results during the period or periods covered by any such Projections may differ significantly from the projected results and such differences may be material. You agree that if, at any time prior to the Closing Date and, thereafter, until the earlier to occur of (i) a Successful Syndication and (ii) 60 days after the Closing Date, you become aware that any of the representations in the preceding sentence would be incorrect (to the best of your knowledge with respect to information relating to the Acquired Business and its subsidiaries) in any material respect if the Information and Projections were being furnished, and such representations were being made, at such time, then you will use commercially reasonable efforts to promptly supplement the Information and the Projections so that such representations will be correct (to the best of your knowledge with respect to information relating to the Acquired Business and its subsidiaries) in all material respects under those circumstances. In arranging and syndicating the Term Loan Facility, the Committed Lenders will be entitled to use and rely primarily on the Information and the Projections without responsibility for independent verification thereof.

You hereby acknowledge that (a) the Committed Lenders will make available Information and Projections to the proposed syndicate of Lenders by posting such Information and Projections on IntraLinks, SyndTrak Online or similar electronic means and (b) certain of the Lenders (each, a “Public Lender”) may wish to receive only information that is not material non-public information with respect to you or your securities for purposes of United States federal and state securities laws (as reasonably determined by you) (the “Public Side Information”). If reasonably requested by the Committed Lenders you will use commercially reasonable efforts to assist us in preparing a customary additional version of the Confidential Information Memorandum to be used by Public Lenders. The information to be included in the additional version of the Confidential Information Memorandum will contain only Public Side Information. It is understood that in connection with your assistance described above, authorization letters, in form substantially similar to authorization letters delivered by companies sponsored by the Sponsor, will be included in any Confidential Information Memorandum that authorize the distribution of the Confidential Information Memorandum to prospective Lenders, containing a representation to the Lead Arrangers that the public-side version contains only Public Side Information (and, in each case, a “10b-5” representation customary for companies sponsored by the Sponsor), which Confidential Information Memorandum shall exculpate you, the Sponsor, the Acquired Business, and your and their respective affiliates and us with respect to any liability related to the use of the Confidential Information Memorandum or any related marketing material by the

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recipients thereof. You agree to use commercially reasonable efforts to identify that portion of the Information that may be distributed to the Public Lenders as “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof. You agree that by your marking such materials “PUBLIC,” you shall be deemed to have authorized the Lead Arrangers (subject to the confidentiality and other provisions of this Commitment Letter) to treat such materials as information that is Public Side Information. You agree that, subject to the confidentiality and other provisions of this Commitment Letter, the Lead Arrangers on your behalf may distribute the following documents to all prospective lenders in the form provided to you and to your counsel a reasonable time prior to their distribution, unless you or your counsel advise the Lead Arrangers in writing (including by email) within a reasonable time prior to their intended distribution that such material should only be distributed to prospective lenders that are not Public Lenders (each, a “Private Lender”): (a) the Term Sheet, (b) drafts and final definitive documentation with respect to the Term Loan Facility; (c) administrative materials prepared by the Committed Lenders for prospective Lenders (such as a lender meeting invitation, allocations and funding and closing memoranda); and (d) notification of changes in the terms of the Term Loan Facility. If you advise us that any of the foregoing items should be distributed only to Private Lenders, then none of the Lead Arrangers and the Committed Lenders will distribute such materials to Public Lenders without further discussions with you.

As consideration for the commitments of the Committed Lenders hereunder and their agreement to perform the services described herein, you agree to pay (or cause to be paid) the fees set forth in the Term Sheet and in the Amended and Restated Fee Letter dated the date hereof and delivered herewith with respect to the Term Loan Facility (the “Fee Letter”). Once paid, such fees shall not be refundable under any circumstances.

The commitments of the Committed Lenders hereunder and their agreement to perform the services described herein are subject solely to the conditions set forth in the next sentence of this paragraph, in the Summary of Additional Conditions and under the heading “Conditions Precedent to Initial Extensions of Credit” in the Term Sheet. The commitments of the Committed Lenders hereunder are subject to the execution and delivery by the Borrower, the Guarantors and the officers and advisors thereof, as the case may be, of definitive documentation, closing certificates (including evidences of authority, charter documents, and officers’ incumbency certificates), public officials’ certifications, customary lien and judgment searches and customary legal opinions with respect to the Term Loan Facility (collectively, the “Term Loan Facility Documentation”), in each case consistent with this Commitment Letter and Fee Letter; provided that, notwithstanding anything in this Commitment Letter, the Fee Letter, the Term Loan Facility Documentation or any other letter agreement or other undertaking concerning the financing of the Transactions to the contrary, (i) the only representations and warranties the making of which shall be a condition to the availability of the Term Loan Facility on the Closing Date shall be (A) the Specified Representations (as defined below) and (B) the representations and warranties relating to the Acquired Business, its subsidiaries and their respective businesses made by the Acquired Business or the Seller (as defined in Exhibit A) in the Acquisition Agreement as are material to the interests of the Lenders,

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but only to the extent that you have the right to terminate your obligations under the Acquisition Agreement (or otherwise decline to consummate the Acquisition) as a result of a breach of such representations and warranties in the Acquisition Agreement (the “Acquired Business Representations”) and (ii) the terms of the Term Loan Facility Documentation shall be in a form such that they do not impair availability of the Term Loan Facility on the Closing Date if the conditions set forth in this paragraph, in the Summary of Additional Conditions and under the heading “Conditions Precedent to Initial Extensions of Credit” in the Term Sheet are satisfied (it being understood that, to the extent any Collateral (as defined in Exhibit B hereto) or any security interest therein (other than the pledge and perfection of security interests in the pledged certificated stock of U.S.-organized entities (including the delivery of such share certificates) (to the extent required under the Term Sheet) and other assets pursuant to which a lien may be perfected by the filing of a financing statement under the Uniform Commercial Code) is not provided on the Closing Date after your use of commercially reasonable efforts to do so, the delivery of such Collateral (and perfection of security interests therein) shall not constitute a condition precedent to the availability of the Term Loan Facility on the Closing Date but shall be required to be delivered and perfected after the Closing Date (and in any event, in the case of the pledge and perfection of Collateral not otherwise required on the Closing Date, within 90 days after the Closing Date plus any extensions granted by the Administrative Agent in its sole discretion) pursuant to arrangements to be mutually agreed). For purposes hereof, “Specified Representations” means the representations and warranties made by the Borrower in the Term Loan Facility Documentation and set forth in the Term Sheet relating to corporate existence, power and authority, the execution, delivery and enforceability of the Term Loan Facility Documentation, no conflict with constitutional documents, solvency of the Borrower and its subsidiaries on a consolidated basis on the Closing Date after giving effect to the Transactions (solvency to be defined in a manner consistent with the solvency certificate set forth in Annex C-II to Exhibit C), creation, validity and perfection of security interests in the collateral to be perfected on the Closing Date (subject to the foregoing provisions of this paragraph relating to Collateral), U.S. Federal Reserve margin regulations, the PATRIOT Act and the U.S. Investment Company Act. This paragraph is referred to as the “Funding Conditions Provision”. There shall be no conditions (implied or otherwise) to the commitments hereunder, including compliance with the terms of this Commitment Letter, the Fee Letter or the Term Loan Facility Documentation, other than those expressly stated in the second sentence of this paragraph, in the Summary of Additional Conditions and under the heading “Conditions Precedent to Initial Extension of Credit” in the Term Sheet to be conditions to the initial funding under the Term Loan Facility on the Closing Date. Without limiting the conditions precedent provided herein to funding the consummation of the Acquisition with the proceeds of the Term Loan Facility, the Lead Arrangers will cooperate with you as reasonably requested in coordinating the timing and procedures for the funding of the Term Loan Facility in a manner consistent with the Acquisition Agreement.

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You agree (a) to indemnify and hold harmless the Administrative Agents, the Lead Arrangers, each of the Committed Lenders and their respective affiliates and controlling persons and the respective officers, directors, employees, agents, members and successors and assigns of each of the foregoing, but excluding any of the foregoing in its capacity as financial advisor to the Acquired Business or the Seller in connection with the Acquisition (each, a “Sell-Side Advisor”) and any Related Person (as defined below) of such Sell-Side Advisor in such capacity (each, other than such excluded parties, an “Indemnified Person”) from and against any and all losses, claims, damages, liabilities and expenses, joint or several, of any kind or nature whatsoever to which such Indemnified Person may become subject arising out of or in connection with this Commitment Letter, the Fee Letter, the Transactions, the Term Loan Facility or any related transaction or any claim, litigation, investigation or proceeding, actual or threatened, relating to any of the foregoing (any of the foregoing, a “Proceeding”), regardless of whether such Indemnified Person is a party thereto and whether or not such Proceedings are brought by you, your equity holders, affiliates, creditors or any other person, and to reimburse such Indemnified Person upon demand for any reasonable and documented out-of-pocket legal expenses of one firm of counsel for all Indemnified Persons and, if necessary, one firm of local counsel in each appropriate jurisdiction, in each case for all Indemnified Persons (and, in the case of an actual or perceived conflict of interest where the Indemnified Person affected by such conflict informs you of such conflict and thereafter, after receipt of your consent (which shall not be unreasonably withheld), retains its own counsel, of another firm of counsel for such affected Indemnified Person) or other reasonable and documented out-of-pocket expenses incurred in connection with investigating or defending any of the foregoing; provided that the foregoing indemnity will not, as to any Indemnified Person, apply to losses, claims, damages, liabilities or expenses (i) to the extent they have resulted from the willful misconduct, bad faith or gross negligence of such Indemnified Person or any Related Person of such Indemnified Person (as determined by a court of competent jurisdiction in a final and non-appealable decision), (ii) to the extent arising from a material breach of the obligations of such Indemnified Person or any Related Person under this Commitment Letter or the Term Loan Facility Documentation (as determined by a court of competent jurisdiction in a final non-appealable decision) or (iii) arising out of, or in connection with, any Proceeding that does not involve an act or omission by you or any of your affiliates and that is brought by an Indemnified Person against any other Indemnified Person other than any Proceeding against the relevant Indemnified Person in its capacity or in fulfilling its role as an agent, arranger or similar role under the Term Loan Facility, and (b) to reimburse the Committed Lenders and each Indemnified Person from time to time, upon presentation of a summary statement, for all reasonable and documented out-of-pocket expenses (including but not limited to expenses of the Committed Lenders’ due diligence investigation (and with respect to third party diligence expenses, to the extent any such expenses have been previously approved by you) (such approval not to be unreasonably withheld), syndication expenses, travel expenses and reasonable fees, disbursements and other charges of counsel to the Committed Lenders identified in the Term Sheet and of a single local counsel to the Committed Lenders in each relevant jurisdiction (subject to actual conflicts), except allocated costs of in-house counsel), in each case incurred by the Committed Lenders in connection with the Term Loan Facility and the preparation of this Commitment Letter, the Fee Letter and the Term Loan Facility Documentation (collectively, the “Expenses”); provided that, except as set forth in the Fee Letter, you shall not be required to reimburse any of the Expenses in the event the

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Closing Date does not occur. Notwithstanding any other provision of this Commitment Letter, (i) no Indemnified Person shall be liable for any damages arising from the use by others of information or other materials obtained through electronic, telecommunications or other information transmission systems (including IntraLinks or SyndTrak Online), except to the extent such damages have resulted from the willful misconduct, bad faith or gross negligence of such Indemnified Person or any Related Person of such Indemnified Person (as determined by a court of competent jurisdiction in a final and non-appealable decision) and (ii) neither you nor any Indemnified Person shall be liable for any indirect, special, punitive or consequential damages in connection with your or its activities related to the Term Loan Facility or this Commitment Letter; provided that, nothing contained in this clause (ii) shall limit your indemnity or reimbursement obligations to the extent such indirect, special, punitive or consequential damages are included in any third party claim in connection with which such Indemnified Person is entitled to indemnification hereunder. For purposes hereof, a “Related Person” of an Indemnified Person (or any Sell-Side Advisor) means, if such Indemnified Person (or Sell-Side Advisor) is an Administrative Agent, a Lead Arranger or a Committed Lender or any of its affiliates and controlling persons, or any of its or their respective officers, directors, employees, agents, members, successors and assigns, any of such Administrative Agent, Lead Arranger or Committed Lender and its affiliates and controlling persons, or any of its or their respective officers, directors, employees, agents, members, successors and assigns.

Your indemnity and reimbursement obligations hereunder will be in addition to any liability which you may otherwise have and will be binding upon and inure to the benefit of any of your successors and assigns and the Indemnified Persons.

You acknowledge that the Committed Lenders and their affiliates may be providing debt financing, equity capital or other services (including financial advisory services) to other persons in respect of which you may have conflicting interests regarding the transactions described herein and otherwise. Neither the Committed Lenders nor any of their affiliates will use confidential information obtained from or on behalf of you by virtue of the transactions contemplated by this Commitment Letter or their other relationships with you in connection with the performance by them of services for other persons, and neither the Committed Lenders nor any of their affiliates will furnish any such information to other persons. You also acknowledge that neither the Committed Lenders nor any of their affiliates have any obligation to use in connection with the transactions contemplated by this Commitment Letter, or to furnish to you, confidential information obtained by them from other persons.

As you know, each Committed Lender is a full service securities firm engaged, either directly or through its affiliates, in various activities, including securities trading, commodities trading, investment management, research, financing and brokerage activities and financial planning and benefits counseling for both companies and individuals. In the ordinary course of these activities, the Committed Lenders and their respective affiliates may actively engage in commodities trading or trade the debt and equity securities (or related derivative securities) and financial instruments (including

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bank loans and other obligations) of you, the Acquired Business and other companies that may be the subject of the arrangements contemplated by this letter for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities. Each Committed Lender and its affiliates may also co-invest with, make direct investments in, and invest or co-invest client monies in or with funds or other investment vehicles managed by other parties, and such funds or other investment vehicles may trade or make investments in securities of you, the Acquired Business or other companies that may be the subject of the arrangements contemplated by this Commitment Letter or engage in commodities trading with any thereof.

The Committed Lenders and their respective affiliates may have economic interests that conflict with those of the Acquired Business and you. Each Committed Lender may, at any time, (i) provide services to any other person or (ii) act in relation to any matter for any other person whose interests may be adverse to you, the Acquired Business or any member of your group (a “Third Party”), and may retain for its own benefit any related remuneration or profit, notwithstanding that a conflict of interest exists or may arise and/or any Committed Lender is in possession or has come or comes into possession (whether before, during or after the agreements hereunder) of information provided hereunder that is confidential to you; provided that such information shall not (except as expressly permitted by the confidentiality provisions hereof) be shared with any Third Party. You accept that permanent or ad hoc arrangements/information barriers may be used between and within divisions of the Committed Lenders or their affiliates for this purpose and that locating directors, officers or employees in separate workplaces is not necessary for such purpose. Information which is held elsewhere within a Committed Lender but of which none of the individual directors, officers or employees having the conduct of transactions contemplated by this letter actually has knowledge (or can properly obtain knowledge without breach of internal procedures), shall not for any purpose be taken into account in determining such Committed Lender’s responsibilities to you hereunder. No Committed Lender shall have any duty to disclose to, or utilize for the benefit of, you, the Acquired Business or the Sponsor any non-public information acquired in the course of providing services to any other person, engaging in any transaction (on its own account or otherwise) or otherwise carrying on its business. You agree that the Committed Lenders will act under this letter as independent contractors and that nothing in this Commitment Letter or the Fee Letter or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between the Committed Lenders and you and the Acquired Business, your and their respective stockholders or your and their respective affiliates with respect to the transactions contemplated by this Commitment Letter and the Fee Letter. You acknowledge and agree that (i) the transactions contemplated by this Commitment Letter and the Fee Letter are arm’s-length commercial transactions between the Committed Lenders, on the one hand, and you and the Acquired Business, on the other, (ii) in connection therewith and with the process leading to such transactions each Committed Lender is acting solely as a principal and not as agents or fiduciaries of you, the Acquired Business, your and their management, stockholders, creditors or any other person, (iii) the Committed Lenders have not assumed an advisory or fiduciary responsibility or any other obligation in favor of you with respect to the transactions contemplated hereby

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or the process leading thereto (irrespective of whether the Committed Lenders or any of their respective affiliates have advised or are currently advising you or the Acquired Business on other matters) except the obligations expressly set forth in this Commitment Letter and the Fee Letter and (iv) you have consulted your own legal and financial advisors to the extent you deemed appropriate. You further acknowledge and agree that you are responsible for making your own independent judgment with respect to such transactions and the process leading thereto, and that any opinions or views expressed by us to you regarding the Transactions, including but not limited to any opinions or views with respect to the price or market for you or your subsidiaries’ debt, do not constitute advice or recommendations to you or any of your subsidiaries. Please note that the Committed Lenders and their affiliates do not provide tax, accounting or legal advice. You hereby waive and release any claims that you may have against the Committed Lenders (in their capacity as such) with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transactions contemplated by this Commitment Letter. It is understood that this paragraph shall not apply to or modify or otherwise affect any arrangement with any Sell-Side Advisor or any financial advisor separately retained by you or any of your affiliates in connection with the Acquisition, in its capacity as such.

This Commitment Letter and the commitments hereunder shall not be assignable by you without the prior written consent of the Committed Lenders, not to be unreasonably withheld (and any attempted assignment without such consent shall be null and void), is intended to be solely for the benefit of the parties hereto (and the Indemnified Persons), is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto (and the Indemnified Persons) and is not intended to create a fiduciary relationship among the parties hereto. Any and all obligations of, and services to be provided by, the Committed Lenders hereunder (including, without limitation, its commitment) may be performed and any and all rights of the Committed Lenders hereunder may be exercised by or through any of their affiliates or branches; provided that with respect to the commitments, any assignments thereof to an affiliate will not relieve the Committed Lenders from any of their obligations hereunder unless and until such affiliate shall have funded the portion of the commitment so assigned. This Commitment Letter may not be amended or any provision hereof waived or modified except by an instrument in writing signed by each of the Committed Lenders and you. This Commitment Letter may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this Commitment Letter by facsimile transmission or other electronic transmission (i.e., a “pdf” or “tiff”) shall be effective as delivery of a manually executed counterpart hereof. This Commitment Letter and the Fee Letter (i) are the only agreements that have been entered into among the parties hereto with respect to the Term Loan Facility and (ii) supersede all prior understandings, whether written or oral, among us with respect to the Term Loan Facility and set forth the entire understanding of the parties hereto with respect thereto. This Commitment Letter (including the Annexes and Exhibits hereto) amends and restates that certain commitment letter (the “Original Commitment Letter”) dated May 2, 2012, among Credit Suisse AG, Credit Suisse Securities (USA) LLC, UBS

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Loan Finance LLC, UBS Securities LLC, Royal Bank of Canada and the Company, and such Original Commitment Letter shall be deemed superseded hereby upon the effectiveness of this Commitment Letter. It is understood and agreed that Citi shall be entitled to the benefits of the indemnification provisions of this Commitment Letter as if they were in effect on the date of the Original Commitment Letter.

Each of the parties hereto agrees that (i) this Commitment Letter is a binding and enforceable agreement (subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization and other similar laws relating to or affecting creditors’ rights generally and general principles of equity (whether considered in a proceeding in equity or law)) with respect to the subject matter contained herein, including an agreement to negotiate in good faith the Term Loan Facility Documentation by the parties hereto in a manner consistent with this Commitment Letter, it being acknowledged and agreed that the funding of the Term Loan Facility is subject to conditions precedent and (ii) the Fee Letter is a binding and enforceable agreement (subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization and other similar laws relating to or affecting creditors’ rights generally and general principles of equity (whether considered in a proceeding in equity or law)) of the parties thereto with respect to the subject matter set forth therein.

THIS COMMITMENT LETTER AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES ARE NOT MANDATORILY APPLICABLE BY STATUTE AND WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION, PROVIDED THAT, NOTWITHSTANDING THE FOREGOING TO THE CONTRARY, IT IS UNDERSTOOD AND AGREED THAT ANY DETERMINATIONS AS TO (I) WHETHER ANY REPRESENTATIONS AND WARRANTIES RELATING TO THE ACQUIRED BUSINESS, ITS SUBSIDIARIES AND THEIR RESPECTIVE BUSINESSES MADE BY THE ACQUIRED BUSINESS OR THE SELLER IN THE ACQUISITION AGREEMENT HAVE BEEN BREACHED, (II) WHETHER YOU CAN TERMINATE YOUR OBLIGATIONS UNDER THE ACQUISITION AGREEMENT (OR OTHERWISE DECLINE TO CONSUMMATE THE ACQUISITION) AND (III) WHETHER AN ACQUIRED BUSINESS MATERIAL ADVERSE EFFECT (AS DEFINED IN ANNEX C-I TO EXHIBIT C) HAS OCCURRED, SHALL, IN EACH CASE BE GOVERNED BY THE LAWS OF THE STATE OR JURISDICTION THE LAWS OF WHICH GOVERN THE ACQUISITION AGREEMENT.

EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF THIS COMMITMENT LETTER OR THE PERFORMANCE OF SERVICES HEREUNDER.

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Each of the parties hereto hereby irrevocably and unconditionally (a) submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Commitment Letter and the Fee Letter, or the transactions contemplated hereby, and agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court, (b) waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Commitment Letter, the Fee Letter, or the transactions contemplated hereby, in any such New York State court or in any such Federal court and (c) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. Each of the parties hereto agrees to commence any such action, suit, proceeding or claim either in the United States District Court for the Southern District of New York or in the Supreme Court of the State of New York, New York County located in the Borough of Manhattan.

This Commitment Letter is delivered to you on the understanding that none of the Fee Letter and its terms or substance, or this Commitment Letter and its terms or substance, shall be disclosed, directly or indirectly, to any other person or entity (including other lenders, underwriters, placement agents, advisors or any similar persons) except (a) to the Sponsor and to your and their respective officers, directors, employees, attorneys, accountants and advisors on a confidential and need-to-know basis, (b) if the Committed Lenders consent to such proposed disclosure (such consent not to be unreasonably withheld), (c) pursuant to the order of any court or administrative agency in any pending legal or administrative proceeding, or otherwise as required by applicable law or compulsory legal process or, to the extent requested or required by governmental and/or regulatory authorities, in each case based on the reasonable advice of your legal counsel (in which case, you agree, to the extent practicable and not prohibited by law, to notify us of the proposed disclosure in advance of such disclosure and if you are unable to notify us in advance of such disclosure, such notice shall be delivered to us promptly thereafter to the extent permitted by law) or (d) to the extent necessary in connection with the exercise of any remedy or enforcement of any right hereunder; provided that (i) you may disclose this Commitment Letter and the contents hereof to the Seller, the Acquired Business and their respective officers, directors, equity holders, employees, attorneys, accountants and advisors, on a confidential and need-to-know basis, (ii) you may disclose the Commitment Letter and its contents in any proxy or other public filing relating to the Acquisition and in the Confidential Information Memorandum in a manner to be mutually agreed upon, (iii) you may disclose this Commitment Letter, and the contents hereof, to potential Lenders and potential equity investors on a confidential and need-to-know basis and to rating agencies in connection with obtaining ratings for the Borrower and the Term Loan Facility, (iv) you may disclose the fees contained in the Fee Letter as

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part of a generic disclosure of aggregate sources and uses related to fee amounts to the extent customary or required in marketing materials, any proxy or other public filing or in the Confidential Information Memorandum, (v) to the extent portions thereof have been redacted in a customary manner (including, without limitation, redaction of fee amounts), you may disclose the Fee Letter and the contents thereof to the Seller, the Acquired Business and their respective officers, directors, equity holders, employees, attorneys, accountants and advisors, on a confidential and need-to-know basis, (vi) you may disclose the Fee Letter and the contents thereof to any prospective equity investor and its officers, directors, employees, attorneys, accountants and advisors on a confidential and need-to-know basis and (vii) you may disclose this Commitment Letter and the contents hereof to the lenders and agents under the ABL Facility and their respective officers, directors, employees, attorneys, accountants and advisors, on a confidential and need-to-know basis. The obligations under this paragraph with respect to the Commitment Letter shall terminate automatically after the Term Loan Facility Documentation shall have been executed and delivered by the parties thereto.

You agree that you will permit us to review and approve (such approval not to be unreasonably withheld) any reference to us or any of our affiliates in connection with the Term Loan Facility or the transactions contemplated hereby contained in any press release or similar written public disclosure prior to public release.

The Committed Lenders and their affiliates will use all confidential information provided to them or such affiliates by or on behalf of you hereunder solely for the purpose of providing the services that are the subject of this Commitment Letter and shall treat confidentially all such information; provided that nothing herein shall prevent the Committed Lenders from disclosing any such information (a) pursuant to the order of any court or administrative agency or in any pending legal or administrative proceeding, or otherwise as required by applicable law or compulsory legal process (in which case the Committed Lenders, to the extent practicable and not prohibited by applicable law, agree (except with respect to any routine or ordinary course audit or examination conducted by bank accountants or any governmental bank regulatory authority exercising examination or regulatory authority) to inform you promptly thereof), (b) upon the request or demand of any regulatory authority having jurisdiction over the Committed Lenders or any of their affiliates (in which case the Committed Lenders, to the extent practicable and not prohibited by law, agree (except with respect to any routine or ordinary course audit or examination conducted by bank accountants or any governmental bank regulatory authority exercising examination or regulatory authority) to inform you promptly thereof and if the Committed Lenders are unable to notify you in advance of such disclosure, such notice shall be delivered to you promptly thereafter to the extent permitted by law), (c) to the extent that such information becomes publicly available other than by reason of improper disclosure by the Committed Lenders or any of their affiliates or any related parties thereto in violation of any confidentiality obligations owing to you, the Seller or any of its subsidiaries (including those set forth in this paragraph), (d) to the extent that such information is received by the Committed Lenders from a third party that is not to the Committed Lenders’ knowledge subject to confidentiality obligations owing to you, the Seller or any of its subsidiaries, (e) to the extent that such information was already in

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the Committed Lenders’ possession or is independently developed by the Committed Lenders, (f) to the Committed Lenders’ affiliates and the Committed Lenders’ and such affiliates’ respective partners, trustees, officers, directors, employees, attorneys, accountants, agents, advisors and other representatives who need to know such information in connection with the Transactions and are informed of the confidential nature of such information and who agree to be bound by the terms of this paragraph (or language substantially similar to this paragraph) or are subject to customary confidentiality obligations, (g) to potential or prospective Lenders, participants or assignees and any direct or indirect contractual counterparties to any swap or derivative transaction relating to the Borrower and its obligations under the Term Loan Facility (in each case, other than a Disqualified Institution), in each case who agree to be bound by the terms of this paragraph (or language substantially similar to this paragraph), (h) subject to your prior approval of the information to be disclosed (such approval not to be unreasonably withheld, conditioned or delayed), to rating agencies in connection with obtaining ratings for the Borrower and the Term Loan Facility, (i) for purposes of establishing a “due diligence defense”, (j) to the extent necessary in connection with the exercise of any remedy or enforcement of any rights hereunder, (k) to any other party hereto or (l) to the extent you consent to such proposed disclosure. The Committed Lenders’ obligations under this paragraph shall automatically terminate and be superseded by the confidentiality provisions in the definitive documentation relating to the Term Loan Facility upon the initial funding thereunder, if and to the extent the Committed Lenders are party thereto, and shall in any event terminate upon the second anniversary of the date of the Original Commitment Letter.

The syndication, reimbursement and compensation provisions (if applicable in accordance with the terms hereof and the Fee Letter), indemnification, waiver of special damages, confidentiality (except to the extent set forth herein), jurisdiction, governing law, venue, absence of fiduciary relationship and waiver of jury trial provisions contained herein and in the Fee Letter shall remain in full force and effect regardless of whether Term Loan Facility Documentation shall be executed and delivered and notwithstanding the termination of this Commitment Letter or the Committed Lenders’ commitments hereunder; provided that your obligations under this Commitment Letter, other than those relating to the confidentiality of the Fee Letter and the syndication of the Term Loan Facility (including with respect to correcting or supplementing any Information or Projections hereunder until the earlier to occur of (i) a Successful Syndication and (ii) 60 days after the Closing Date), shall automatically terminate and be superseded by the Term Loan Facility Documentation upon the initial funding thereunder and the payment of all amounts owing at such time hereunder and under the Fee Letter, and you shall be automatically released from all liability in connection therewith at such time.

We hereby notify you that pursuant to the requirements of the U.S. PATRIOT Improvement and Reauthorization Act, Title III of Pub. L.107-56 (signed into law October 26, 2001, as amended from time to time, the “PATRIOT Act”), each of the Committed Lenders and each other Lender is required to obtain, verify and record information that identifies the Borrower and each Guarantor, which information includes the name, address, tax identification number and other information regarding the

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Borrower and each Guarantor that will allow any of the Committed Lenders or such Lender to identify such Borrower and such Guarantor in accordance with the PATRIOT Act. This notice is given in accordance with the requirements of the PATRIOT Act and is effective as to the Committed Lenders and each Lender.

If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms of this Commitment Letter and of the Fee Letter by returning to Credit Suisse, on behalf of the Committed Lenders, executed counterparts hereof and of the Fee Letter not later than 9:00 p.m., New York City time, on May 16, 2012. The Committed Lenders’ commitments hereunder and agreements contained herein will expire at such time in the event that Credit Suisse has not received such executed counterparts in accordance with the immediately preceding sentence. This Commitment Letter and the commitments and undertakings of each of the Committed Lenders hereunder shall automatically terminate upon the first to occur of (i) the termination of the definitive documentation for the Acquisition, including the Acquisition Agreement, (ii) November 7, 2012, unless each of the Committed Lenders shall, in their discretion, agree to an extension and (iii) the consummation of the Transaction with or without the funding of the Term Loan Facility. You shall have the right to terminate this Commitment Letter and the commitments of the Committed-Lenders hereunder with respect to the Term Loan Facility (or a portion thereof pro rata among the Committed Lenders) at any time upon written notice to the Committed Lenders from you, subject to your surviving obligations as set forth in the third to last paragraph of this Commitment Letter and in the Fee Letter.

[Remainder of this page intentionally left blank]

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The Committed Lender is pleased to have been given the opportunity to assist you in connection with the financing for the Acquisition.

Very truly yours,

[signature pages follow]

[Signature Page to Amended & Restated Commitment Letter]

CREDIT SUISSE SECURITIES (USA) LLC
By:	/s/ Sarah Marie Martin
	Name: Sarah Marie Martin
	Title: Managing Director
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH
By:	/s/ Robert Hetu
	Name: Robert Hetu
	Title: Managing Director
By:	/s/ Rahul Parmar
	Name: Rahul Parmar
	Title: Associate

[Signature Page to Amended & Restated Commitment Letter]

UBS LOAN FINANCE LLC
By:	/s/ John C. Duggan
	Name: John C. Duggan
	Title: Managing Director
	Leveraged Capital Markets
By:	/s/ Kristine M. Shryock
	Name: Kristine M. Shryock
	Title: Director and Counsel
	Region Americas Legal
UBS SECURITIES LLC
By:	/s/ John C. Duggan
	Name: John C. Duggan
	Title: Managing Director
	Leveraged Capital Markets
By:	/s/ Kristine M. Shryock
	Name: Kristine M. Shryock
	Title: Director and Counsel
	Region Americas Legal

[Signature Page to Amended & Restated Commitment Letter]

ROYAL BANK OF CANADA
By:	/s/ James S. Wolfe
	Name: James S. Wolfe
	Title: Managing Director
	Head of US Leveraged Finance

[Signature Page to Amended & Restated Commitment Letter]

CITIGROUP GLOBAL MARKETS INC.
By:	/s/ David Leland
	Name: David Leland
	Title: Managing Director

[Signature Page to Amended & Restated Commitment Letter]

Accepted and agreed to as of

the date first above written:

NCI BUILDING SYSTEMS, INC.
By:	/s/ Todd R. Moore
	Name: Todd R. Moore
	Title: Executive Vice President & General Counsel

[Signature Page to Amended & Restated Commitment Letter]

CONFIDENTIAL EXHIBIT A

Project Verde

Transaction Description

Capitalized terms used but not defined in this Exhibit A shall have the meanings set forth in the Commitment Letter to which this Exhibit A is attached (the “Commitment Letter”) or in the other Exhibits to the Commitment Letter.

NCI Building Systems, Inc., a Delaware corporation (the “Company” or “you”), intends to acquire (the “Acquisition”), directly or indirectly, all of the equity interests of Metl-Span LLC (the “Acquired Business”).

In connection with the foregoing, it is intended that:

a) Pursuant to the Equity Purchase Agreement (together with the Acquired Business’s disclosure schedules delivered in connection therewith, collectively, the “Acquisition Agreement”) among NCI Group, Inc., VSMA, Inc. (the “Seller”), the Acquired Business and BlueScope Steel North America Corporation, the Company will, directly or indirectly, acquire (the “Acquisition”) the Acquired Business. Pursuant to the Acquisition, the Seller shall have the right to receive the amount required to consummate the Acquisition (the “Acquisition Consideration”) in accordance with the terms of the Acquisition Agreement.

b) The Borrower will obtain up to $250.0 million under the Term Loan Facility on the closing date of the Acquisition, which amount shall be used, together with borrowings under the Company’s Loan and Security Agreement, dated as of October 20, 2009, among the Company, certain of its subsidiaries, the lenders party thereto and Wells Fargo Foothill, LLC, as administrative agent and co-collateral agent and Bank of America, N.A. and General Electric Capital Corporation, each as co-collateral agent (the “ABL Facility”) and/or cash on hand, inter alia to consummate the Acquisition, to redeem or repay certain existing indebtedness of the Company and its subsidiaries, including the Existing Term Loan Facility and the Repaid Indebtedness (each as defined below) (the “Refinancing”) and to pay fees, premiums and expenses incurred in connection with the Transactions (such fees, premiums and expenses, the “Transaction Costs”, and together with the Acquisition Consideration (as defined above) and the Refinancing, the “Acquisition Costs”).

c) All indebtedness for borrowed money under the Company’s existing Amended and Restated Credit Agreement, dated as of October 20, 2009, among the Company, the lenders party thereto, and Wachovia Bank, National Association (the “Existing Term Loan Facility”) that is outstanding on the Closing Date will be repaid.

d) All third party indebtedness for borrowed money of the Acquired Business and its subsidiaries (other than indebtedness incurred or issued pursuant to the Transactions) that is outstanding on the Closing Date will be repaid, redeemed, defeased or otherwise discharged (or irrevocable notice for the redemption thereof will be given) (collectively, the “Repaid Indebtedness”), except for any existing third party indebtedness for borrowed money of the Acquired Business and its subsidiaries (“Existing Indebtedness”) that the Company has requested to be permitted to remain outstanding with the approval of the Lead Arrangers (not to be unreasonably withheld) and any capital leases existing on the date of the Original Commitment Letter or permitted to be incurred under the Acquisition Agreement, which shall remain outstanding after the Closing Date.

e) The Borrower will obtain an amendment to the Intercreditor Agreement (as defined in Exhibit B), in substantially the form of Exhibit D to the Commitment Letter (the “Intercreditor Agreement Amendment”), in order to permit the Term Loans incurred on the Closing Date to constitute “Term Loan Obligations” thereunder.

The transactions described above and the payment of related fees, premiums and expenses are collectively referred to herein as the “Transactions”.

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CONFIDENTIAL EXHIBIT B

Project Verde

$250.0 million Term Loan Facility

Summary of Principal Terms and Conditions

All capitalized terms used but not defined herein shall have the meanings given to them in the Commitment Letter to which this term sheet is attached, including the other Exhibits thereto.

Borrower:	The Company (the “Borrower”).
Transaction:	As set forth in Exhibit A to the Commitment Letter.
Agents:	Credit Suisse AG (acting through such of its affiliates or branches as it deems appropriate) will act as sole and exclusive administrative agent and collateral agent (in such capacity, the “Administrative Agent”) in respect of the Term Loan Facility, Royal Bank of Canada and UBS Loan Finance LLC will act as syndication agent(s) for the Term Loan Facility and a bank or banks to be agreed will act as documentation agent(s) for the Term Loan Facility (collectively, the “Agents”), in each case for a syndicate of financial institutions to be reasonably acceptable to the Lead Arranger and the Borrower (together with the Committed Lenders, the “Lenders”), and will perform the duties customarily associated with such roles.
Lead Arrangers:	Credit Suisse Securities (USA) LLC, RBC Capital Markets, UBS Securities LLC and Citi (in such capacity, each a “Lead Arranger” and, collectively, the “Lead Arrangers”).
Term Loan Facility:	A senior secured term loan facility in an aggregate principal amount of $250.0 million (the “Term Loan Facility”; the loans thereunder, the “Term Loans”).
Incremental Facilities:	The Term Loan Facility will permit the Borrower to add additional term loans under the Term Loan Facility or one or more incremental term loan facilities to be included in the Term Loan Facility (each, an “Incremental Term Facility”) and/or one or more revolving credit facility commitments or letter of credit facility commitments to be included in the Term Loan

Facility (each, an “Incremental Revolving Facility”; together with any Incremental Term Facility, the “Incremental Facilities”) in an aggregate principal amount for all such increases and incremental facilities not to exceed (a) $75.0 million plus (b) an additional amount if, after giving effect to the incurrence of such additional amount, the Total Secured Leverage Ratio (as defined below) is equal to or less than 3.50:1.00 (and assuming all such additional amounts were secured, whether or not so secured); provided that (i) no existing Lender will be required to participate in any such Incremental Facility, (ii) no payment or bankruptcy event of default exists, or would exist after, giving effect thereto, (iii) the final maturity date and the weighted average maturity of any such Incremental Term Facility shall not be earlier than, or shorter than, as the case may be, the maturity date or the weighted average life, as applicable, of the Term Loan Facility (subject to exceptions for customary bridge financings), (iv) the interest rates applicable to any Incremental Facilities, and the amortization schedule applicable to any Incremental Term Facility shall be determined by the Borrower and the lenders thereunder, provided that with respect to any Incremental Term Facility made on or prior to the date that is 24 months after the Closing Date, if the applicable interest rate relating to the Incremental Term Facility exceeds the applicable interest rate relating to the existing Term Loan Facility by more than 50 basis points, the applicable interest rate relating to the existing Term Loan Facility shall be adjusted to be equal to the applicable interest rate relating to the Incremental Term Facility minus 50 basis points; provided further that in determining such applicable interest rates, (x) original issue discount (“OID”) or upfront fees (but exclusive of any arrangement, structuring or other fees payable in connection therewith that are not shared with all Lenders providing such Incremental Term Facility or the existing Term Loan Facility, as applicable) (which upfront fees shall be deemed to constitute a like amount of OID) paid by the Borrower to the Lenders under the Incremental Term Facility and the existing Term Loan Facility in the initial primary syndication thereof shall be included and equated to interest rate (with OID being equated to

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interest based on an assumed four-year life to maturity) and (y) any amendments to the applicable margin on the existing Term Loan Facility that became effective subsequent to the Closing Date but prior to the time of such Incremental Term Facility shall also be included in such calculations; provided further that if Adjusted LIBOR (as defined below) or ABR (as defined below) in respect of such Incremental Term Facility includes an interest rate floor greater than the interest rate floor applicable to the existing Term Loan Facility, such increased amount shall be equated to interest margin for purposes of determining whether an increase to the applicable interest margin under the existing Term Loan Facility shall be required, to the extent an increase in the interest rate floor in the existing Term Loan Facility would cause an increase in the interest rate then in effect thereunder, and in such case the interest rate floor (but not the interest rate margin) applicable to the existing Term Loan Facility shall be increased by such increased amount, and (v) any Incremental Facility shall be on terms and pursuant to documentation reasonably satisfactory to the Borrower, provided that, to the extent such terms and documentation are not consistent with the Term Loan Facility (except to the extent permitted by clause (iii) or (iv) above), they shall be reasonably satisfactory to the Administrative Agent and the Borrower.

As used herein, the “Total Secured Leverage Ratio” means the ratio of total secured net debt for borrowed money including capital leases and purchase money obligations (calculated net of unrestricted cash and cash equivalents, other than proceeds of Incremental Term Facilities that are not intended to be used for working capital, if applicable, borrowed at the time of determination) to trailing four-quarter EBITDA (to be defined on a basis consistent with the standard set forth under “Documentation” below).

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The Term Loan Facility will permit the Borrower to utilize availability under the Incremental Facilities amount to issue first or junior lien secured notes or loans (subject (i) in the case of first lien secured notes or loans to the Intercreditor Agreement, dated as of October 20, 2009, by and among the Company, certain of the Company’s subsidiaries, Wells Fargo Foothill, LLC, as the Working Capital Agent and the Working Capital Administrative Agent, Wachovia Bank, National Association, as the Term Loan Agent and the Term Loan Administrative Agent, and Wells Fargo Bank, National Association, as the Controlling Agent, which shall be amended to permit any debt incurred under the ABL Facility in compliance with the debt and lien covenants contained in the Term Loan Facility Documentation to constitute “Working Capital Obligations” thereunder (as so amended, the “Intercreditor Agreement”) and (ii) in the case of junior lien secured notes or loans to intercreditor terms to be set forth in an exhibit to the definitive documentation for the Term Loan Facility which will be consistent with and substantially in the form of the Intercreditor Agreement attached as Exhibit L to the Precedent Term Loan Facility (as defined below) or on other terms to be agreed (the “Intercreditor Terms”)) or unsecured notes or loans, with the amount of such secured or unsecured notes or loans reducing the aggregate principal amount available for the Incremental Facilities; provided that such secured or unsecured notes or loans (i) do not mature on or prior to the maturity date of, or have a shorter weighted average life than, loans under the Term Loan Facility (subject to exceptions for customary bridge financings), (ii) do not provide for mandatory prepayments of any such junior priority or unsecured notes or loans (subject to customary exceptions) except to the extent that prepayments are made, to the extent required under the Term Loan Facility Documentation, first pro rata to the Term Loan Facility and any first lien secured notes or loans to the extent required by the terms of the documentation governing such first lien secured notes or loans, (iii) shall not be secured by any lien on any asset of the Borrower or any Guarantor that does not also secure the Term Loan Facility, or be guaranteed by any person other than the Guarantors, and (iv) in the case of any such secured notes or loans, shall be subject to an intercreditor agreement consistent with the Intercreditor Terms above or on other terms to be agreed.

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Purpose:	The proceeds of borrowings under the Term Loan Facility will be used by the Borrower on the Closing Date solely to finance Acquisition Costs.
Availability:	The Term Loan Facility will be available in a single drawing on the Closing Date. Amounts borrowed under the Term Loan Facility that are repaid or prepaid may not be reborrowed.
Interest Rates and Fees:	As set forth in Annex I hereto.
Default Rate:	With respect to overdue principal, the applicable interest rate plus 2.00% per annum, and with respect to any other overdue amount, including overdue interest, the interest rate applicable to ABR loans (as defined in Annex I) plus 2.00% per annum.
Final Maturity and Amortization:	The Term Loan Facility will mature on the date that is seven years after the Closing Date and will amortize in equal quarterly installments in aggregate annual amounts equal to 1.00% of the original principal amount of the Term Loan Facility with the balance payable on the seventh anniversary of the Closing Date; provided that the Term Loan Facility Documentation shall provide the right of individual Lenders to agree to extend the maturity of their Term Loans upon the request of the Borrower and without the consent of any other Lender (as further described under the heading “Voting” below).
Guarantees:	All obligations of (i) the Borrower under the Term Loan Facility (the “Borrower Obligations”) and (ii) the Borrower or any Guarantor (as defined below) under interest rate protection, commodity trading or hedging, currency exchange or other non-speculative hedging or swap arrangements or cash management arrangements designated by the Borrower, including any entered into with any Lender or any affiliate of a Lender (the “Hedging/Cash Management Arrangements”) will be unconditionally guaranteed jointly and severally on a senior secured basis by each existing and subsequently acquired or organized direct or indirect wholly-owned U.S. restricted subsidiary of the Borrower (other than any

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such subsidiary (u) that is a subsidiary of a foreign subsidiary of the Borrower, (v) that is an unrestricted subsidiary, (w) that is individually, and together with any other subsidiaries deemed immaterial subsidiaries pursuant to the foregoing, below materiality thresholds to be mutually agreed, (x) that is not permitted by law, regulation or contract to provide such guarantee, or would require governmental (including regulatory) consent, approval, license or authorization to provide such guarantee, unless such consent, approval, license or authorization has been received, or for which the provision of such guarantee would result in a material adverse tax consequence to the Borrower or one of its subsidiaries (as reasonably determined by the Borrower), (y) certain special purpose entities or (z) that is formed solely for the purpose of becoming a parent entity of the Borrower, or merging with the Borrower in connection with another wholly owned U.S. subsidiary becoming a parent entity of the Borrower, or otherwise creating or forming a parent entity of the Borrower); it being understood that a foreign subsidiary holding company, substantially all of whose assets consist of capital stock and/or indebtedness of one or more foreign subsidiaries, intellectual property relating to such foreign subsidiaries and any other assets incidental thereto, will be deemed a foreign subsidiary for purposes of this provision (such guarantors, the “Guarantors”); provided that any domestic subsidiary providing a guarantee in respect of the ABL Facility shall be a Guarantor under the Term Loan Facility. In addition, certain subsidiaries may be excluded from the guarantee requirements under the Term Loan Facility Documentation in circumstances where the Borrower and the Administrative Agent reasonably agree that the cost of providing such a guarantee is excessive in relation to the value afforded thereby.

Subject to the restricted payment covenant and the definition of Investment in the Term Loan Facility Documentation, the Borrower may designate any subsidiary as an “unrestricted subsidiary” and subsequently redesignate any such unrestricted subsidiary as a restricted subsidiary so long as,

B-6

immediately after giving effect to such designation, (x) the Consolidated Coverage Ratio (to be defined on a basis consistent with the standard set forth under “Documentation” below) would be equal to or greater than 2.00:1.00 or (y) the Consolidated Coverage Ratio would be equal to or greater than it was immediately prior to giving effect to such designation. Unrestricted subsidiaries will not be subject to the representations and warranties, covenants, events of default or other provisions of the Term Loan Facility Documentation, and the results of operations and indebtedness of unrestricted subsidiaries will not be taken into account for purposes of calculating any financial metric contained in the Term Loan Facility Documentation except to the extent of distributions received therefrom.

Security:

Subject to the limitations set forth below in this section, and, on the Closing Date, to the Funding Conditions Provision, the Borrower Obligations, the Guarantees and any Hedging/Cash Management Arrangements will be secured by (i) a security interest in substantially all the present and after-acquired tangible and intangible assets of the Borrower and each Guarantor (collectively, but excluding the Working Capital Priority Collateral (as defined in the Intercreditor Agreement) and Excluded Assets (as defined below), the “Term Loan Priority Collateral” and together with the Working Capital Priority Collateral, the “Collateral”), which security interest in the Term Loan Priority Collateral will be first in priority (as between the Term Loan Facility and the ABL Facility) and shall include (except as to Excluded Assets) but not be limited to (a) a perfected pledge of all the capital stock of each direct material wholly-owned restricted subsidiary held by the Borrower or any Guarantor (which pledge, in the case of any foreign subsidiary of a U.S. entity shall be limited to 65% of each series of capital stock of such foreign subsidiary and it being understood that a foreign subsidiary holding company, substantially all of whose assets consist of capital stock and/or indebtedness of one or more foreign subsidiaries, intellectual property relating to such foreign subsidiaries and any other assets incidental thereto, will be deemed a foreign subsidiary for purposes of this

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provision) and (b) perfected security interests in, and mortgages on, equipment, general intangibles, investment property, intellectual property, material fee-owned real property, intercompany notes and proceeds of the foregoing and (ii) a security interest in the Working Capital Priority Collateral, which security interest in the Working Capital Priority Collateral will be second in priority (as between the Term Loan Facility and the ABL Facility).

The priority of security interests and relative rights of the Lenders under the Term Loan Facility and the lenders under the ABL Facility shall be subject to the Intercreditor Agreement. The Administrative Agent shall execute a joinder to the Intercreditor Agreement in substantially the form of Exhibit B thereto.

Notwithstanding anything to the contrary, the Collateral shall exclude the following: (i) any fee owned real property with a value of less than an amount to be agreed (with all required mortgages being permitted to be delivered post-closing; provided that the Borrower uses commercially reasonable efforts to provide the required mortgages on the Closing Date), (ii) leasehold interests (including requirements to deliver landlord lien waivers, estoppels and collateral access letters), motor vehicles and assets subject to certificates of title, aircraft, non-U.S. intellectual property, letter of credit rights with a value of less than an amount to be agreed and commercial tort claims with a value of less than an amount to be agreed, (iii) assets specifically requiring perfection through control agreements (i.e., cash, deposit accounts or other bank or securities accounts, etc.) other than, to the extent required under the ABL Facility, Cash Management Accounts and Concentration Accounts (in each case as defined in the ABL Facility), (iv) margin stock and, those assets over which the granting of security interests in such assets would be prohibited by contract, applicable law or regulation or the organizational documents of any non-wholly owned subsidiary (including permitted liens, leases and licenses) (in each case, after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code,

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other than proceeds and receivables thereof, the assignment of which is expressly deemed effective under the Uniform Commercial Code notwithstanding such prohibitions), or to the extent that such security interests would result in adverse tax consequences as determined by the Borrower, (v) the Acquisition Agreement and any rights therein or arising thereunder (it being understood that this clause (v) shall not apply to any proceeds of the Acquisition Agreement), (vi) equity interests of unrestricted subsidiaries, (vii) those assets as to which the Administrative Agent and the Borrower reasonably determine that the costs of obtaining such security interests in such assets or perfection thereof are excessive in relation to the benefit to the Lenders of the security to be afforded thereby, and (viii) other exceptions to be mutually agreed upon or that are usual and customary for facilities of this type consistent with the standard set forth under “Documentation” below. The foregoing described in clauses (i) through (viii) are, collectively, the “Excluded Assets”.

Notwithstanding anything herein to the contrary, any property of the Borrower or any Guarantor that is pledged to secure obligations under the ABL Facility shall be pledged to secure the Borrower Obligations, the Guarantees and the Hedging/Cash Management Arrangements.

All the above-described pledges, security interests and mortgages shall be created and perfected on terms, and pursuant to documentation, consistent with and substantially similar to (a) that certain Guarantee and Collateral Agreement, dated as of May 25, 2011, among CDRT Acquisition Corporation, Emergency Medical Services Corporation, the guarantors party thereto and Deutsche Bank AG New York Branch and (b) Exhibit C to the Precedent Term Loan Facility, and none of the Collateral shall be subject to any other pledges, security interests or mortgages, subject to customary exceptions for financings of this kind consistent with the standard set forth under “Documentation” below.

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For the avoidance of doubt, no actions in any non-U.S. jurisdiction or required by the laws of any non-U.S. jurisdiction shall be required in order to create any security interests in assets located or titled outside of the U.S. or to perfect any security interests therein (it being understood that there shall be no security agreements or pledge agreements governed under the laws of any non-U.S. jurisdiction).

Mandatory Prepayments:

The Term Loans shall be prepaid with (a) commencing with the first full fiscal year of the Borrower to occur after the Closing Date, 50% of Excess Cash Flow (to be defined consistent with “Documentation” below), with a reduction to zero based upon achievement of a ratio of total net debt to EBITDA (the “Leverage Ratio”) (to be defined consistent with “Documentation” below; provided that there shall be no cap on the netting of cash and cash equivalents); provided that any voluntary prepayments of loans (including loans under the ABL Facility and any Incremental Revolving Facility to the extent any commitments with respect thereto are permanently reduced) shall be credited against excess cash flow prepayment obligations on a dollar-for-dollar basis (other than to the extent such prepayments are funded with the proceeds of long-term indebtedness); (b) 100% of the net cash proceeds received from the incurrence of indebtedness by the Borrower or any of its restricted subsidiaries (other than the incurrence of indebtedness permitted under the Term Loan Facility); and (c) 100% of the net cash proceeds of all non-ordinary course asset sales or other dispositions of property by the Borrower and its restricted subsidiaries (including insurance and condemnation proceeds) in excess of an amount to be agreed and subject to the right of the Borrower to reinvest such proceeds if such proceeds are reinvested (or committed to be reinvested) within 12 months and, if so committed to reinvestment, reinvested within 6 months thereafter, and other exceptions to be agreed upon consistent with the standard set forth under “Documentation” above. Notwithstanding the foregoing, mandatory prepayments made pursuant to clauses (a), (b) and (c) above shall be limited to the extent that the Borrower determines that such prepayments would result in material adverse tax consequences related to the repatriation of funds in connection therewith by foreign subsidiaries.

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	Within the Term Loan Facility, mandatory prepayments shall be applied first, to accrued interest and fees due on the amount of the prepayment under the Term Loan Facility and second, to the remaining amortization payments under the Term Loan Facility as directed by the Borrower (and in case of no direction, applied in direct order of maturity).
	Any Lender may elect not to accept any mandatory prepayment made pursuant to clause (a) or (c) (each a “Declining Lender”). Any prepayment amount declined by a Declining Lender may be retained by the Borrower and will increase the basket for repayment of specified junior debt in the restricted payments covenant.
Voluntary Prepayments:	Voluntary prepayments of borrowings under the Term Loan Facility will be permitted at any time, in minimum principal amounts to be agreed upon, without premium or penalty, subject to reimbursement of the Lenders’ redeployment costs actually incurred in the case of a prepayment of Adjusted LIBOR borrowings other than on the last day of the relevant interest period. All voluntary prepayments of the Term Loan Facility will be applied to the remaining amortization payments under the Term Loan Facility as directed by the Borrower.
Documentation:	The definitive documentation for the Term Loan Facility (the “Term Loan Facility Documentation”), the definitive terms of which will be negotiated in good faith, will be “covenant-lite” and will contain incurrence-based covenants consistent with this Term Sheet and, subject to the foregoing, will otherwise be consistent with and substantially similar to, that certain Credit Agreement, dated as of May 25, 2011 (the “Precedent Term Loan Facility”), among CDRT Merger Sub, Inc., as borrower, the lenders from time to time party thereto, and Deutsche Bank AG New York Branch, as administrative agent and collateral agent, and will take into account and be modified fully as appropriate to reflect the terms set forth in the Commitment Letter and, if applicable, the flex provisions of the Fee Letter, taking into account

B-11

	differences related to the Borrower and its business (including as to operational and strategic requirements of the Company, the Acquired Business and their respective subsidiaries in light of their size, industries, businesses, business practices and business plans) (it being understood that basket sizes will be set taking into account the relative EBITDA and consolidated total assets of the Borrower) and operational and administrative changes reasonably requested by the Administrative Agent, and in any event will contain only those conditions to borrowing, representations and warranties, covenants and events of default expressly set forth in this Term Sheet. Notwithstanding the foregoing, the only conditions to the availability of the Term Loan Facility on the Closing Date shall be the conditions set forth in the Funding Conditions Provision and in Exhibit C to the Commitment Letter.
Representations and Warranties:	Limited to the following: organizational status, authority and enforceability of the Term Loan Facility Documentation, no violation of, or conflict with, law, charter documents or agreements, litigation, margin regulations, governmental approvals, U.S. Investment Company Act, PATRIOT Act, laws applicable to sanctioned persons, accuracy of disclosure, financial statements and no material adverse change (as defined in the Acquisition Agreement) on the Closing Date, no default (after the Closing Date), no default under contractual obligations, no undisclosed liabilities, taxes, ERISA, labor matters, subsidiaries, intellectual property, insurance, creation and perfection of security interests, compliance with laws, environmental matters, properties, use of proceeds and consolidated closing date solvency, subject, in the case of each of the foregoing representations and warranties, to qualifications and limitations for materiality consistent with the standard set forth under “Documentation” above.
	The representations and warranties will be required to be made in connection with each extension of credit (including the extensions of credit on the Closing Date), except that the failure of any representation or warranty (other than the Specified Representations and the Acquired Business Representations) to be true and correct on the Closing Date will not constitute the failure of a condition precedent to funding or a default under the Term Loan Facility.

B-12

Conditions Precedent to Initial Extensions of Credit:

The initial extensions of credit under the Term Loan Facility will be subject solely to (a) the applicable conditions set forth in the Funding Conditions Provision and in Exhibit C to the Commitment Letter and (b) the condition that the Specified Representations and Acquired Business Representations shall be true and correct in all material respects on and as of the Closing Date (although any Specified Representation or Acquired Business Representation which expressly relates to a given date or period shall be required only to be true and correct in all material respects as of the respective date or for the respective period, as the case may be).

Affirmative Covenants:

Limited to the following: delivery of annual and quarterly financial statements and other information (accompanied, in the case of annual financial statements, by an audit opinion from nationally recognized auditors that is not subject to qualification as to “going concern” or the scope of such audit other than solely with respect to, or resulting solely from (i) an upcoming maturity date under the Term Loan Facility occurring within one year from the time such opinion is delivered or (ii) any potential inability to satisfy any financial maintenance covenant on a future date or in a future period), delivery of notices of defaults and certain material events (including ERISA events), inspection rights (including books and records), maintenance of existence and rights and privileges, maintenance of insurance, payment of taxes and obligations, compliance with laws (including environmental laws), maintenance of books and records, maintenance of properties, including real property, changes in fiscal year (which shall provide that the Company will be able to change its fiscal year once during the term of the Term Loan Facility), use of proceeds, commercially reasonable efforts to maintain ratings, additional guarantors and collateral and further assurances on collateral matters, subject, in the case of each of the foregoing covenants, to exceptions and qualifications consistent with the standard set forth under “Documentation” above.

B-13

Negative Covenants:	Limited to the following incurrence-based high yield covenants: limitations on the incurrence of debt, liens, fundamental changes, restrictions on subsidiary distributions, transactions with affiliates (with exceptions to include among other things transactions approved by a majority of disinterested directors), further negative pledge, asset sales (which shall be permitted subject to (i) a customary minimum cash consideration requirement to be agreed, (ii) a fair market value requirement, and (iii) a requirement that the proceeds of asset sales be applied in accordance with “Mandatory Prepayments”), restricted payments (limited to dividends, investments and repayment of specified junior debt), amendments of documents related to specified junior debt and line of business, in the case of each of the foregoing covenants subject to exceptions, qualifications and, as appropriate, baskets to be agreed upon consistent with the standard set forth under “Documentation” above. The ability to incur “ratio debt” will be consistent with the Precedent Term Loan Facility, provided that the aggregate amount of Indebtedness permitted to be incurred by non-guarantor subsidiaries shall be subject to a cap to be agreed.
Financial Covenant:	None.
Events of Default:	Limited to the following: nonpayment of principal, interest or other amounts; violation of covenants; incorrectness of representations and warranties in any material respect; cross default (other than in the case of any financial maintenance covenant) and cross acceleration to material indebtedness; bankruptcy and insolvency of the Borrower or its significant subsidiaries; material monetary judgments; ERISA events; actual or asserted invalidity of material guarantees or security documents; and change of control, in the case of each of the foregoing defaults subject to threshold, notice and grace period provisions consistent with the standard set forth under “Documentation” above.

B-14

Voting:	Amendments and waivers of the Term Loan Facility Documentation will require the approval of Lenders holding more than 50% of the aggregate amount of the loans and commitments under the Term Loan Facility (the “Required Lenders”), except that (i) the consent of each Lender directly and adversely affected thereby shall be required with respect to: (A) increases in the commitment of such Lender, (B) reductions of principal (including scheduled amortization), interest or fees, (C) extensions or postponement of final maturity or any scheduled amortization, and (D) releases of all or substantially all the value of the Guarantees or releases of liens on all or substantially all of the Collateral, (ii) the consent of 100% of the Lenders will be required with respect to (A) modifications to any of the voting percentages and (B) modifications to certain provisions requiring the pro rata treatment of Lenders and (iii) customary protections for the Administrative Agent will be provided.
	The Term Loan Facility shall contain provisions permitting the Borrower to replace or, if no payment or bankruptcy event of default has occurred and is continuing, prepay the Loans and terminate the commitments of non-consenting Lenders in connection with amendments and waivers requiring the consent of all Lenders or of all Lenders directly affected thereby so long as Lenders holding more than 50% of the aggregate amount of the loans and commitments under the Term Loan Facility shall have consented thereto.
	Notwithstanding anything to the contrary set forth herein, the Term Loan Facility shall provide that the Borrower may at any time and from time to time request that all or a portion of any Term Loans be:
	(a) converted to extend the scheduled maturity date(s) of any payment of principal with respect to all or a portion of any principal amount of such Term Loans (any such Term Loans which have been so converted, “Extended Loans”) and upon such request of the Borrower any individual Lender shall have the right to agree to extend the maturity date of its outstanding Term Loans without

B-15

	the consent of any other Lender; provided that all such requests shall be made pro rata to all Lenders. The terms of Extended Loans shall be substantially similar to the existing loans except for interest rates, fees, amortization, final maturity date, provisions requiring optional and mandatory prepayments to be directed first to the non-extended loans prior to being applied to Extended Loans and certain other customary provisions to be agreed; or
	(b) exchanged for unsecured notes or secured notes ranking pari passu with or junior to the Term Loan Facility (“Term Loan Facility Exchange Indebtedness”); provided that such Term Loan Facility Exchange Indebtedness (i) has a weighted average maturity outside the final stated maturity of the Term Loan Facility, (ii) shall be issued in exchange for loans under the Term Loan Facility pursuant to an offer made on a pro rata basis to all Lenders holding Term Loans, and any Term Loans that are so exchanged shall be immediately cancelled, (iii) is in an aggregate principal amount equal to the aggregate principal amount of the Term Loans exchanged therefor and (iv) has covenants not materially more restrictive taken as a whole (as determined by the Borrower in good faith) than the Term Loan Facility.
Cost and Yield Protection:	Usual for facilities and transactions of this type and consistent with “Documentation” above, and to include increased cost protection as a result of the Dodd-Frank Act, Basel III or any successor or similar authority.
Assignments and Participations:	The Lenders will be permitted to assign Term Loans with the consent of the Borrower (not to be unreasonably withheld); provided that no consent of the Borrower shall be required (i) after the occurrence and during the continuance of a payment or bankruptcy Event of Default (with respect to the Borrower) or (ii) for assignments of Term Loans to any existing Lender or an affiliate of an existing Lender or an Approved Fund (to be defined consistent with “Documentation” above, and an “Approved Fund”). All assignments will require the consent of the Administrative Agent unless such assignment is an assignment of Term Loans to another

B-16

Lender, an affiliate of a Lender or an Approved Fund, not to be unreasonably withheld. Assignments to any Disqualified Institution (except to the extent the Borrower has consented to such assignment) and natural persons shall be prohibited. Each assignment will be in an amount of an integral multiple of $1.0 million with respect to the Term Loan Facility or, if less, all of such Lender’s remaining loans and commitments of the applicable class. Assignments will be by novation. The Administrative Agent shall receive a processing and recordation fee of $3,500 for each assignment (unless waived by the Administrative Agent).

The Lenders will be permitted to sell participations in Term Loans without restriction, other than as set forth in the next two sentences, and in accordance with applicable law. Voting rights of participants shall be limited to matters in respect of (a) increases in commitments participated to such participants, (b) reductions of principal, interest or fees, (c) extensions of final maturity and (d) releases of all or substantially all of the value of the Guarantees or all or substantially all of the Collateral. Participations to any Disqualified Institution and natural persons shall be prohibited.

The Term Loan Facility Documentation shall provide that (a) Term Loans may be purchased and assigned on a non-pro rata basis through (i) open market purchases and (ii) Dutch auction or similar procedures to be agreed that are offered to all Lenders on a pro rata basis in accordance with customary procedures to be agreed and subject to customary restrictions to be agreed, provided that, in the case of any prepayment pursuant to clause (ii), no payment or bankruptcy event of default has occurred and is continuing at the time of such prepayment, and (b) the Sponsor, the Borrower and any other affiliates of the Borrower shall be eligible assignees; provided that (i) any such Term Loans acquired by the Borrower or any of its subsidiaries shall be retired and cancelled promptly upon acquisition thereof (or contribution thereto, including as contemplated by the following clause (ii)) and (ii) any such Term Loans acquired by the Sponsor or any of its

B-17

affiliates may, with the consent of the Borrower, be contributed to the Borrower (whether through any of its direct or indirect parent entities or otherwise) and exchanged for debt or equity securities of such parent entity or the Borrower that are otherwise permitted to be issued by such entity at such time.

Assignments to the Sponsor and its affiliates (other than any such affiliate that is a bona fide debt fund (an “Affiliated Debt Fund”)) (each, an “Affiliated Lender”) shall be permitted subject to the following limitations:

(i) Affiliated Lenders (A) will not receive information provided solely to the Administrative Agent or Lenders and will not be permitted to attend/participate in Lender meetings and (B) shall not receive advice of counsel to the Administrative Agent or the Lenders or challenge their attorney-client privilege;

(ii) the Affiliated Lenders shall have no right to vote any of its interest under the Term Loan Facility (such interest will be deemed voted in the same proportion as non-affiliated Lenders voting on such matter) except with respect to any amendment (A) to increase the commitment of the relevant Affiliated Lender, (B) to extend or postpone the final maturity or scheduled date of amortization, (C) to reduce the principal, interest or fees, (D) to release all or substantially all the value of the Guarantees or to release liens on all or substantially all of the Collateral, (E) which would affect such Affiliated Lender differently than other Lenders or (F) which would otherwise require the consent of all Lenders or all Lenders directly and adversely affected, and the Affiliated Lenders shall have no right to direct the Administrative Agent to take any action except with respect to any action set forth in the foregoing clauses (A) through (F); provided that no amendment, modification or waiver of the Term Loan Facility Documentation shall, without the consent of the Affiliated Lenders, deprive any Affiliated Lender of its pro rata share of any payment to which all Lenders of the same class are entitled;

B-18

	(iii) the amount of Term Loans purchased (including under the Incremental Term Facility) by Affiliated Lenders shall not exceed 25% of the aggregate outstanding amount of Term Loans (including under the Incremental Term Facility) at any time; and
	(iv) for any “Required Lender” vote, Affiliated Debt Funds cannot, in the aggregate, account for more than 50% of the amounts included in determining whether the “Required Lenders”, as applicable, have consented to any amendment, waiver or other action.
	The Term Loan Facility Documentation will not require the Borrower or an Affiliated Lender, as applicable, to make a “no MNPI” representation in connection with Borrower repurchases or Affiliated Lender assignments and will require that the parties thereto waive any potential claims arising from the Borrower or the applicable Affiliated Lender being in possession of undisclosed information that may be material to a Lender’s decision to participate.
	For the avoidance of doubt, the foregoing limitations set forth in clauses (i) through (iii) shall not be applicable to Affiliated Debt Funds.
Successor Administrative Agent:	The Administrative Agent and the Collateral Agent may each resign or, if it or a controlling affiliate thereof is subject to an Agent-Related Distress Event (to be defined consistent with “Documentation” above), be removed by the Borrower or the Required Lenders, in each case upon 10 days’ notice by the applicable parties and in each case subject to the appointment of a successor administrative agent. Such successor shall be approved by the Borrower, which approval shall not be unreasonably withheld if such successor is a commercial bank with a combined capital and surplus of at least $5.0 billion, and otherwise may be withheld in the Borrower’s sole discretion; provided that such approval shall not be required during the continuance of a payment or bankruptcy event of default. The Borrower shall have no obligation to pay any fee to any successor that is greater than or in addition to the fees payable to the Administrative Agent or Collateral Agent on the Closing Date.

B-19

Expenses and Indemnification:

The Borrower shall pay, if the Closing Date occurs, all reasonable and documented out-of-pocket expenses of the Lead Arranger, the Agents and Administrative Agent (without duplication) in connection with the syndication of the Term Loan Facility and the preparation, execution, delivery, administration, amendment, waiver or modification and enforcement of the Term Loan Facility Documentation (including the reasonable fees, disbursements and other charges of counsel identified herein or otherwise retained with the Borrower’s consent (such consent not to be unreasonably withheld)).

Consistent with “Documentation” above, the Borrower will indemnify the Lead Arranger, the Agents and the Lenders and hold them harmless from and against all reasonable and documented out-of-pocket costs, expenses (including reasonable fees, disbursements and other charges of one firm of counsel for all Lead Arranger, the Agents and Lenders and, if necessary, one firm of local counsel in each appropriate jurisdiction) and liabilities of the Lead Arranger, the Agents and the Lenders arising out of or relating to any claim or any litigation or other proceeding (regardless of whether the Lead Arranger, the Agents or any Lender is a party thereto) that relates to the Transactions, including the financing contemplated hereby, the Acquisition or any transactions connected therewith, regardless of whether any such indemnified person is a party thereto and whether or not such proceedings are brought by you, your equity holders, affiliates, creditors or any other person; provided that none of the Lead Arranger, the Agents or any Lender will be indemnified for any cost, expense or liability to the extent determined by a court of competent jurisdiction in a final and non-appealable decision to have resulted from (i) the gross negligence, bad faith or willful misconduct of such person or any of its affiliates or controlling persons or any of the officers, directors, employees, agents or members of any of the foregoing (as determined by a court of competent jurisdiction in a final and non-appealable decision), (ii) a material breach of the Term Loan Facility

B-20

	Documentation by any such persons (as determined by a court of competent jurisdiction in a final and non-appealable decision) or (iii) disputes between and among indemnified persons (other than disputes involving claims against the Lead Arranger, the Agents, and the Administrative Agent in their capacity as such).
Governing Law and Forum:	New York (except security documentation that the Lead Arranger reasonably determine should be governed by local law).
Counsel to the Committed Lenders:	Davis Polk & Wardwell LLP

B-21

CONFIDENTIAL	ANNEX I to
	EXHIBIT B

Interest Rates:	The interest rates under the Term Loan Facility will be as follows:
	At the option of the Borrower, initially, Adjusted LIBOR plus 5.50% or ABR plus 4.50%.
	The Borrower may elect interest periods of 1, 2, 3 or 6 months (or, if available to all relevant Lenders, 9 or 12 months or a shorter period) for Adjusted LIBOR borrowings.
	Calculation of interest shall be on the basis of the actual days elapsed in a year of 360 days (or 365 or 366 days, as the case may be, in the case of ABR loans based on the Prime Rate) and interest shall be payable at the end of each interest period and, in any event, at least every 3 months.
	ABR is the highest of (i) the rate of interest publicly announced by the Administrative Agent as its prime rate in effect at its principal office in New York City (the “Prime Rate”), (ii) the federal funds effective rate from time to time plus 0.50% and (iii) the Adjusted LIBOR applicable for an interest period of one month plus 1.00%; provided, that the ABR in respect of the Term Loan Facility shall not be less than 2.25% per annum.
	Adjusted LIBOR is the London interbank offered rate for dollars, for the relevant interest period, adjusted for statutory reserve requirements; provided, that the Adjusted LIBOR in respect of the Term Loan Facility shall not be less than 1.25% per annum.

EXHIBIT C

Project Verde

Summary of Additional Conditions

All capitalized terms used but not defined herein shall have the meaning given to them in the Commitment Letter to which this Summary of Additional Conditions is attached, including the other Exhibits thereto.

Except as otherwise set forth below, the initial borrowing under the Term Loan Facility shall be subject to the satisfaction or waiver of the following additional conditions:

1. The Acquisition shall have been or, substantially concurrently with the initial borrowing under the Term Loan Facility shall be, consummated in accordance with the terms of the Acquisition Agreement, without giving effect to any modifications, amendments, express waivers or express consents thereto that are materially adverse to the Lenders without the reasonable consent of the Lead Arrangers (it being understood and agreed that any reduction in the purchase price shall not be deemed to be materially adverse to the Lenders but any resulting reduction in cash uses shall be allocated 100% to a reduction in the Term Loan Facility).

2. Immediately following the Transactions, neither the Company nor any of its subsidiaries will have any outstanding third party indebtedness for borrowed money other than the Term Loan Facility, the ABL Facility, Existing Indebtedness that the Lead Arrangers otherwise have agreed to permit to remain outstanding and any capital leases existing on the date of the Commitment Letter or permitted to be incurred under the Acquisition Agreement.

3. Except as disclosed in Section 4.8 of the Company Disclosure Letter, since June 30, 2011, there shall not have been and shall not exist any event, occurrence, development or state of circumstances or facts which, individually or in the aggregate, has had or could be expected to have an Acquired Business Material Adverse Effect (as defined in Annex C-I hereto).

4. All fees related to the Transaction payable to the Lead Arrangers, the Agents or the Lenders shall have been paid to the extent due.

5. The Lead Arrangers shall have received (a) audited consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of the Company and its subsidiaries (excluding the Acquired Business and its subsidiaries) for the three most recently completed fiscal years ended at least 90 days before the Closing Date and (b) unaudited consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of the Company and its subsidiaries (excluding the Acquired Business and its subsidiaries) for each subsequent fiscal quarter ended at least 45 days before the Closing Date, in each case prepared in accordance with GAAP.

6. The Lead Arrangers shall have received unaudited consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of the Acquired Business and its subsidiaries for each fiscal quarter ended after June 30, 2011 and at least 45 days before the Closing Date, prepared in accordance with GAAP (other than adjustments identified in Section 4.6 of the Company Disclosure Letter).

7. The Lead Arrangers shall have received an unaudited pro forma consolidated balance sheet and a related unaudited pro forma consolidated statement of income of the Borrower as of and for the twelve-month period ending on the last day of the most recently completed four-fiscal quarter period ended at least 45 days before the Closing Date, prepared after giving effect to the Transactions as if the Transactions had occurred as of such date (in the case of such balance sheet) or at the beginning of such period (in the case of such statement of income).

8. The Lead Arrangers shall have received a certificate of the chief financial officer (or other comparable officer) of the Company substantially in the form of Annex C-II hereto certifying the solvency, after giving effect to the Transactions, of the Company and its subsidiaries on a consolidated basis.

9. The Lead Arrangers shall have received at least three calendar days prior to the Closing Date all documentation and information as is reasonably requested in writing by the Administrative Agent, at least 10 calendar days prior to the Closing Date, about the Borrower and its subsidiaries mutually agreed to be required by U.S. regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the PATRIOT Act.

10. Subject in all respects to the Funding Conditions Provision, (a) the Guarantees with respect to the Term Loan Facility shall have been executed by the Guarantors and be in full force and effect or substantially simultaneously with the initial borrowing under the Term Loan Facility, shall be executed and become in full force and effect and (b) all documents and instruments required to perfect the Administrative Agent’s security interest in the Collateral with respect to the Term Loan Facility shall have been executed and delivered by the Borrower and the Guarantors and, if applicable, be in proper form for filing, and none of the Collateral shall be subject to any other pledges, security interest or mortgages, except for the liens permitted under the Term Loan Facility Documentation or to be released on or prior to the Closing Date.

C-2

11. The Company shall have used commercially reasonable efforts to provide to the Lead Arrangers, not less than 20 consecutive calendar days prior to the Closing Date (provided that (i) such period shall not include any day from and including June 29, 2012 through and including July 9, 2012 and (ii) if such period has not ended prior to August 17, 2012, such period shall be deemed not to have commenced until September 4, 2012), a customary Confidential Information Memorandum (other than the portions thereof customarily provided by financing arrangers, and limited, in the case of information relating to the Acquired Business, to Required Information (as defined in the Acquisition Agreement)).

C-3

ANNEX C-I

Capitalized terms used in the following definition shall have the meaning given to them in the Acquisition Agreement, and any references to a “section” shall mean the specified Section of the Acquisition Agreement.

“Acquired Business Material Adverse Effect” shall mean any change, effect, occurrence or development that

(a) has or would reasonably be expected to have a material adverse effect on the condition (financial or otherwise), business, properties, assets, liabilities or results of operations of the Company, provided that to the extent any effect is caused by or results from any of the following, it shall not be taken into account in determining whether there has been a material adverse effect:

(i) changes in conditions in the U.S. economy or capital or financial markets generally, including changes in interest or exchange rates;

(ii) changes that are the result of factors generally adversely affecting the industries within the geographic areas in which the Company conducts business;

(iii) changes in GAAP or authoritative interpretation thereof;

(iv) changes in general legal, regulatory, political, economic or business conditions in the U.S., in each case, generally affecting the industries in which the Company conducts business;

(v) the negotiation, execution, announcement or performance of the Acquisition Agreement or the consummation of the transactions contemplated by the Acquisition Agreement, including any loss, or threatened loss of, or adverse impact on, the relationships (contractual or otherwise) with, customers, suppliers, distributors, partners or Employees of the Company (provided that this clause (v) shall be disregarded for purposes of any representations and warranties set forth in Section 4.2 and Section 4.5);

(vi) the commencement, occurrence, continuation or escalation of any war, armed hostilities or acts of terrorism involving any geographic region in which the Company conducts business;

(vii) any action required to be taken by the Company pursuant to the terms of the Acquisition Agreement or any action taken by the Company with the Purchaser’s and the Lead Arrangers’ consent;

(viii) any change in applicable Laws or the application or authoritative interpretation thereof, including the effects of any duties on products of the type manufactured by the Company; and

(ix) changes in the price of raw materials, including steel, of the type and grade customarily purchased by the Company;

except in the case of clauses (i), (ii), (iv) and (ix), to the extent that such adverse effect has a materially greater adverse effect on the Company as compared to other companies operating in the same industries and markets in which the Company operates;

or

(b) would, or would reasonably be expected to, have a material adverse effect on the ability of the Company to perform its obligations under the Acquisition Agreement or to consummate the transactions contemplated thereby.

C-I-2

ANNEX C-II

Form of Solvency Certificate

Date:             , 201[ ]

To the Administrative Agent and each of the Lenders party to the Credit Agreement referred to below:

I, the undersigned, the Chief Financial Officer of                     , a                                   (the “Borrower”), in that capacity only and not in my individual capacity (and without personal liability), do hereby certify as of the date hereof, and based upon facts and circumstances as they exist as of the date hereof (and disclaiming any responsibility for changes in such fact and circumstances after the date hereof), that:

1. This certificate is furnished to the Administrative Agent and the Lenders pursuant to Section          of the Credit Agreement, dated as of                                  , 201[ ], among                      (the “Credit Agreement”). Unless otherwise defined herein, capitalized terms used in this certificate shall have the meanings set forth in the Credit Agreement.

2. For purposes of this certificate, the terms below shall have the following definitions:

(a) “Fair Value”

The amount at which the assets (both tangible and intangible), in their entirety, of the Borrower and its Subsidiaries taken as a whole would change hands between a willing buyer and a willing seller, within a commercially reasonable period of time, each having reasonable knowledge of the relevant facts, with neither being under any compulsion to act.

(b) “Present Fair Salable Value”

The amount that could be obtained by an independent willing seller from an independent willing buyer if the assets of the Borrower and its Subsidiaries taken as a whole are sold with reasonable promptness in an arm’s-length transaction under present conditions for the sale of comparable business enterprises insofar as such conditions can be reasonably evaluated.

(c) “Stated Liabilities”

The recorded liabilities (including contingent liabilities that would be recorded in accordance with GAAP) of the Borrower and its Subsidiaries taken as a whole, as of the date hereof after giving effect to the consummation of the Transactions, determined in accordance with GAAP consistently applied.

(d) “Identified Contingent Liabilities”

The maximum estimated amount of liabilities reasonably likely to result from pending litigation, asserted claims and assessments, guaranties, uninsured risks and other contingent liabilities of the Borrower and its Subsidiaries taken as a whole after giving effect to the Transactions (including all fees and expenses related thereto but exclusive of such contingent liabilities to the extent reflected in Stated Liabilities), as identified and explained in terms of their nature and estimated magnitude by responsible officers of the Borrower.

(e) “Will be able to pay their Stated Liabilities and Identified Contingent Liabilities as they mature”

For the period from the date hereof through the Maturity Date, the Borrower and its Subsidiaries taken as a whole will have sufficient assets and cash flow to pay their respective Stated Liabilities and Identified Contingent Liabilities as those liabilities mature or (in the case of contingent liabilities) otherwise become payable.

(f) “Do not have Unreasonably Small Capital”

For the period from the date hereof through the Maturity Date, the Borrower and its Subsidiaries taken as a whole after consummation of the Transactions is a going concern and has sufficient capital to ensure that it will continue to be a going concern for such period.

3. For purposes of this certificate, I, or officers of the Borrower under my direction and supervision, have performed the following procedures as of and for the periods set forth below.

(a) I have reviewed the financial statements (including the pro forma financial statements) referred to in Section          of the Credit Agreement.

(b) I have knowledge of and have reviewed to my satisfaction the Credit Agreement.

(c) As chief financial officer of the Borrower, I am familiar with the financial condition of the Borrower and its Subsidiaries.

4. Based on and subject to the foregoing, I hereby certify on behalf of the Borrower that after giving effect to the consummation of the Transactions, it is my opinion that (i) the Fair Value and Present Fair Salable Value of the assets of the Borrower and its Subsidiaries taken as a whole exceed their Stated Liabilities and

Identified Contingent Liabilities; (ii) the Borrower and its Subsidiaries taken as a whole do not have Unreasonably Small Capital; and (iii) the Borrower and its Subsidiaries taken as a whole will be able to pay their Stated Liabilities and Identified Contingent Liabilities as they mature.

* * *

IN WITNESS WHEREOF, the Borrower has caused this certificate to be executed on its behalf by its Chief Financial Officer as of the date first written above.

[Borrower]
By:
Name:
Title:	Chief Financial Officer

EXHIBIT D

[FORM OF INTERCREDITOR AGREEMENT AMENDMENT]

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(b)/15d-14(a)

I, Norman C. Chambers, certify that:

1. I have reviewed this quarterly report on Form 10-Q of NCI Building Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 30, 2012

/s/ Norman C. Chambers

Norman C. Chambers

Chairman of the Board,

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(b)/15d-14(a)

I, Mark E. Johnson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of NCI Building Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 30, 2012

/s/ Mark E. Johnson

Mark E. Johnson

Executive Vice President,

Chief Financial Officer and Treasurer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT

In connection with the quarterly report of NCI Building Systems, Inc. (the “Company”) for the quarter ended April 29, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Norman C. Chambers, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. I have reviewed this Report of the Company;

2. This Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

3. The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 30, 2012

/s/ Norman C. Chambers

Norman C. Chambers

Chairman of the Board,

President and Chief Executive Officer

(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to NCI Building Systems, Inc. and will be retained by NCI Building Systems, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

This Certification shall not be deemed to be “filed” or part of the Report or incorporated by reference into any of the registrant’s filings with the Securities and Exchange Commission by implication or by any reference in any such filing to the Report.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT

In connection with the quarterly report of NCI Building Systems, Inc. (the “Company”) for the quarter ended April 29, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark E. Johnson, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. I have reviewed this Report of the Company;

2. This Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

3. The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 30, 2012

/s/ Mark E. Johnson

Mark E. Johnson

Executive Vice President,

Chief Financial Officer and Treasurer

(Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to NCI Building Systems, Inc. and will be retained by NCI Building Systems, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

This Certification shall not be deemed to be “filed” or part of the Report or incorporated by reference into any of the registrant’s filings with the Securities and Exchange Commission by implication or by any reference in any such filing to the Report.

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Inventories

6 Months Ended

Apr. 29, 2012

Inventories [Abstract]

INVENTORIES

NOTE 4 — INVENTORIES

The components of inventory are as follows (in thousands):

	April 29, 2012		October 30, 2011
Raw materials	$	76,511	$	62,801
Work in process and finished goods		30,393		25,730
	$	106,904	$	88,531

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Restricted Cash

6 Months Ended

Apr. 29, 2012

Restricted Cash [Abstract]

RESTRICTED CASH

NOTE 3 — RESTRICTED CASH

In prior year, we entered into a cash collateral agreement with our agent bank to secure letters of credit. The restricted cash was invested in a bank account securing our agent bank. As of April 29, 2012, we no longer had restricted cash as collateral related to our letters of credit because we utilized the ABL Facility to secure all our letters of credit. As of October 30, 2011, we had restricted cash in the amount of $2.8 million as collateral related to our $2.7 million of letters of credit for certain insurance policies, exclusive of letters of credit under our ABL Facility. Restricted cash was classified as a current asset as the underlying letters of credit were to expire within one year of the respective balance sheet date.

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Apr. 29, 2012	Oct. 30, 2011
Current assets:
Cash and cash equivalents	$ 73,856	$ 78,982
Restricted cash	0	2,836
Accounts receivable, net	83,051	95,381
Inventories, net	106,904	88,531
Deferred income taxes	19,313	20,405
Income tax receivable	1,591	1,272
Investments in debt and equity securities, at market	4,494	4,483
Prepaid expenses and other	18,820	14,847
Assets held for sale	4,875	4,874
Total current assets	312,904	311,611
Property, plant and equipment, net	211,346	208,514
Goodwill	5,200	5,200
Intangible assets, net	23,313	24,254
Other assets	9,898	11,575
Total assets	562,661	561,154
Current liabilities:
Note payable	1,648	292
Accounts payable	85,259	88,158
Accrued compensation and benefits	35,382	34,616
Accrued interest	340	1,309
Other accrued expenses	50,579	49,668
Total current liabilities	173,208	174,043
Long-term debt	128,499	130,699
Deferred income taxes	7,377	7,312
Other long-term liabilities	10,070	10,081
Total long-term liabilities	145,946	148,092
Series B cumulative convertible participating preferred stock	290,304	273,950
Redeemable common stock	0	759
Stockholders' deficit:
Common stock, $.01 par value, 100,000,000 shares authorized; 20,350,479 and 19,954,323 shares issued at April 29, 2012 and October 30, 2011, respectively; 20,349,093 and 19,829,898 shares outstanding at April 29, 2012 and October 30, 2011, respectively	924	924
Additional paid-in capital	222,774	237,244
Accumulated deficit	(264,987)	(266,896)
Accumulated other comprehensive loss	(5,501)	(5,485)
Treasury stock, at cost (1,386 shares and 124,425 shares at April 29, 2012 and October 30, 2011, respectively)	(7)	(1,477)
Total stockholders' deficit	(46,797)	(35,690)
Total liabilities and stockholders' deficit	$ 562,661	$ 561,154

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Basis of Presentation

6 Months Ended

Apr. 29, 2012

Basis of Presentation [Abstract]

BASIS OF PRESENTATION

NOTE 1 — BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements for NCI Building Systems, Inc. (together with its subsidiaries, unless otherwise indicated, the “Company,” “we,” “us,” or “our”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements included herein contain all adjustments necessary to fairly present our financial position, results of operations and cash flows for the periods indicated. Such adjustments, other than nonrecurring adjustments that have been separately disclosed, are of a normal, recurring nature. Operating results for the fiscal three and six month periods ended April 29, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending October 28, 2012. Our sales and earnings are subject to both seasonal and cyclical trends and are influenced by general economic conditions, interest rates, the price of steel relative to other building materials, the level of nonresidential construction activity, roof repair and retrofit demand and the availability and cost of financing for construction projects.

We use a four-four-five week calendar each quarter with our year end being on the Sunday closest to October 31. The year end for fiscal 2012 is October 28, 2012.

For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended October 30, 2011 filed with the Securities and Exchange Commission (the “SEC”) on December 21, 2011.

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Accounting Pronouncements

6 Months Ended

Apr. 29, 2012

Accounting Pronouncements [Abstract]

ACCOUNTING PRONOUNCEMENTS

NOTE 2 —ACCOUNTING PRONOUNCEMENTS

Adopted Accounting Pronouncements

In September 2011, the FASB issued ASU 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”), which gives companies the option to perform an annual qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount and, in some cases, by-pass the two-step impairment test. Early adoption is permitted. Therefore, we have early adopted this ASU in our fiscal year ending October 28, 2012. The adoption of ASU 2011-08 did not have a material impact on our consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). The amendments to this update provide a uniform framework for applying the principles of fair value measurement and include (i) amendments that clarify the Board’s intent about the application of existing fair value measurement and disclosure requirements and (ii) amendments that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. These amendments do not require additional fair value measurements. We adopted ASU 2011-04 in our second fiscal quarter ended April 29, 2012. The adoption of ASU 2011-04 did not have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”) which amends its guidance on the presentation of comprehensive income to increase the prominence of items reported in other comprehensive income. The new guidance requires that all components of comprehensive income in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance required entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (“ASU 2011-12”) which indefinitely deferred the guidance related to the presentation on the face of the financial statements of the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income. These amendments are to be applied retrospectively. We will adopt ASU 2011-05 and ASU 2011-12 in our first quarter of fiscal 2013 and we believe its adoption will not have any impact on our consolidated financial statements.

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Consolidated Balance Sheets (Parenthetical) (USD $)	Apr. 29, 2012	Oct. 30, 2011
Consolidated Balance Sheets [Abstract]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	20,350,479	19,954,323
Common stock, shares outstanding	20,349,093	19,829,898
Treasury securities, common shares	1,386	124,425

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Comprehensive Income (Loss)

6 Months Ended

Apr. 29, 2012

Comprehensive Income (Loss) [Abstract]

COMPREHENSIVE INCOME (LOSS)

NOTE 12 — COMPREHENSIVE INCOME (LOSS)

Comprehensive loss consists of the following (in thousands):

	Fiscal Three Months Ended					Fiscal Six Months Ended
	April 29, 2012		May 1, 2011			April 29, 2012			May 1, 2011
Net income (loss)	$	1,321	$	(3,229	)	$	1,910		$	(15,954	)
Foreign exchange translation gain (loss) and other, net of tax		6		(70	)		1			80
Gain in fair value of foreign currency derivative, net of tax		72		75			(17	)		(75	)
Comprehensive income (loss)	$	1,399	$	(3,224	)	$	1,894		$	(15,959	)

Accumulated other comprehensive loss consists of the following (in thousands):

	April 29, 2012			May 1, 2011
Foreign exchange translation adjustments, net of tax	$	569		$	507
Defined benefit pension plan actuarial losses, net of tax		(6,058	)		(2,524	)
Foreign currency derivative, net of tax		(12	)		75
Accumulated other comprehensive loss	$	(5,501	)	$	(1,942	)

A summary of the components of other comprehensive income (loss) and the related tax effects for each of the periods presented is as follows (in thousands):

	Fiscal Three Months Ended April 29, 2012							Fiscal Three Months Ended May 1, 2011
	Before-Tax Amount		Tax (Expense) or Benefit			Net-of-Tax Amount		Before-Tax Amount			Tax (Expense) or Benefit			Net-of-Tax Amount
Foreign exchange translation gain (loss) and other	$	6	$	—		$	6	$	(70	)	$	––		$	(70	)
Gain in fair value of foreign currency derivative	$	82	$	(10	)	$	72	$	121		$	(46	)	$	75
Other Comprehensive income (loss)	$	88	$	(10	)	$	78	$	51		$	(46	)	$	5

	Fiscal Six Months Ended April 29, 2012								Fiscal Six Months Ended May 1, 2011
	Before-Tax Amount			Tax (Expense) or Benefit		Net-of-Tax Amount			Before-Tax Amount			Tax (Expense) or Benefit			Net-of-Tax Amount
Foreign exchange translation gain (loss) and other	$	1		$	—	$	1		$	(80	)	$	—		$	(80	)
(Loss) gain in fair value of foreign currency derivative	$	(63	)	$	46	$	(17	)	$	121		$	(46	)	$	75
Other Comprehensive income (loss)	$	(62	)	$	46	$	(16	)	$	41		$	(46	)	$	(5	)

XML

Document and Entity Information	6 Months Ended
	Apr. 29, 2012	May 29, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	NCI BUILDING SYSTEMS INC
Entity Central Index Key	0000883902
Document Type	10-Q
Document Period End Date	Apr. 29, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--10-30
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		20,347,925

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Business Segments

6 Months Ended

Apr. 29, 2012

Business Segments [Abstract]

BUSINESS SEGMENTS

NOTE 13 — BUSINESS SEGMENTS

We have aggregated our operations into three reportable segments based upon similarities in product lines, manufacturing processes, marketing and management of our businesses: metal coil coating; metal components; and engineered building systems. All business segments operate primarily in the nonresidential construction market. Sales and earnings are influenced by general economic conditions, the level of nonresidential construction activity, metal roof repair and retrofit demand and the availability and terms of financing available for construction. Products of our business segments use similar basic raw materials. The metal coil coating segment consists of cleaning, treating, painting and slitting continuous steel coils before the steel is fabricated for use by construction and industrial users. The metal components segment products include metal roof and wall panels, doors, metal partitions, metal trim, insulated panels and other related accessories. The engineered building systems segment includes the manufacturing of main frames, Long Bay ^® Systems and value added engineering and drafting, which are typically not part of metal components or metal coil coating products or services. The reporting segments follow the same accounting policies used for our consolidated financial statements.

We evaluate a segment’s performance based primarily upon operating income before corporate expenses. Intersegment sales are recorded based on standard material costs plus a standard markup to cover labor and overhead and consist of: (i) hot-rolled, light gauge painted and slit material and other services provided by the metal coil coating segment to both the engineered building systems and metal components segments; (ii) building components provided by the metal components segment to the engineered building systems segment; and (iii) structural framing provided by the engineered building systems segment to the metal components segment. Corporate assets consist primarily of cash but also include deferred financing costs, deferred taxes and property, plant and equipment associated with our headquarters in Houston, Texas. These items (and income and expenses related to these items) are not allocated to the business segments. Corporate unallocated expenses include executive, legal, finance, tax, treasury, human resources, information technology, purchasing, marketing and corporate travel expenses. Additional unallocated expenses include interest income, interest expense and other (expense) income.

The following table represents sales, operating income and total assets attributable to these business segments for the periods indicated (in thousands):

	Fiscal Three Months Ended						Fiscal Six Months Ended
	April 29, 2012			May 1, 2011			April 29, 2012			May 1, 2011
Total sales:
Metal coil coating	$	48,839		$	47,927		$	97,922		$	90,201
Metal components		106,742			103,375			212,494			193,680
Engineered building systems		148,715			129,790			289,013			231,202
Intersegment sales		(54,065	)		(55,527	)		(105,595	)		(99,432	)
Total sales	$	250,231		$	225,565		$	493,834		$	415,651
External sales:
Metal coil coating	$	19,572		$	16,985		$	39,810		$	34,178
Metal components		85,324			82,613			172,620			156,629
Engineered building systems		145,335			125,967			281,404			224,844
Total sales	$	250,231		$	225,565		$	493,834		$	415,651
Operating income (loss):
Metal coil coating	$	4,890		$	4,378		$	10,192		$	7,822
Metal components		9,018			7,400			14,559			7,753
Engineered building systems		6,740			(154	)		14,336			(5,564	)
Corporate		(15,704	)		(13,468	)		(29,858	)		(25,991	)
Total operating income (loss)	$	4,944		$	(1,844	)	$	9,229		$	(15,980	)
Unallocated other expense		(2,681	)		(3,171	)		(5,951	)		(6,769	)
Income (loss) before income taxes	$	2,263		$	(5,015	)	$	3,278		$	(22,749	)

	April 29, 2012		October 30, 2011
Total assets:
Metal coil coating	$	63,072	$	55,509
Metal components		184,151		175,906
Engineered building systems		200,400		206,232
Corporate		115,038		123,507
Total assets	$	562,661	$	561,154

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Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Apr. 29, 2012	May 01, 2011	Apr. 29, 2012	May 01, 2011
Consolidated Statements of Operations [Abstract]
Sales	$ 250,231	$ 225,565	$ 493,834	$ 415,651
Cost of sales	192,229	174,752	382,210	331,293
Gross profit	58,002	50,813	111,624	84,358
Engineering, selling, general and administrative expenses	51,564	52,657	100,505	100,338
Acquisition-related costs	1,494		1,890
Income (loss) from operations	4,944	(1,844)	9,229	(15,980)
Interest income	28	30	56	77
Interest expense	(3,062)	(3,900)	(6,386)	(8,124)
Other income, net	353	699	379	1,278
Income (loss) before income taxes	2,263	(5,015)	3,278	(22,749)
Provision (benefit) for income taxes	942	(1,786)	1,368	(6,795)
Net income (loss)	1,321	(3,229)	1,910	(15,954)
Convertible preferred stock dividends and accretion	9,744	6,260	16,352	12,490
Convertible preferred stock beneficial conversion feature	7,858	(240)	11,878	1,546
Net loss applicable to common shares	$ (16,281)	$ (9,249)	$ (26,320)	$ (29,990)
Loss per common share:
Basic	$ (0.86)	$ (0.51)	$ (1.40)	$ (1.65)
Diluted	$ (0.86)	$ (0.51)	$ (1.40)	$ (1.65)
Weighted average number of common shares outstanding:
Basic	18,832	18,275	18,760	18,215
Diluted	18,832	18,275	18,760	18,215

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Warranty

6 Months Ended

Apr. 29, 2012

Warranty [Abstract]

WARRANTY

NOTE 7 — WARRANTY

We sell weathertightness warranties to our customers for protection from leaks in our roofing systems related to weather. These warranties range from two years to 20 years. We sell two types of warranties, standard and Single Source™, and three grades of coverage for each. The type and grade of coverage determines the price to the customer. For standard warranties, our responsibility for leaks in a roofing system begins after 24 consecutive leak-free months. For Single Source™ warranties, the roofing system must pass our inspection before warranty coverage will be issued. Inspections are typically performed at three stages of the roofing project: (i) at the project start-up; (ii) at the project mid-point; and (iii) at the project completion. These inspections are included in the cost of the warranty. If the project requires or the customer requests additional inspections, those inspections are billed to the customer. Upon the sale of a warranty, we record the resulting revenue as deferred warranty revenue, which is included in other accrued expenses in our Consolidated Balance Sheets. We recognize deferred warranty revenue over the warranty coverage period in a manner that matches our estimated expenses relating to the warranty. Additionally, we maintain an accrued warranty at Robertson-Ceco II Corporation (“RCC”) in which the balance was $3.1 million at both April 29, 2012 and October 30, 2011. RCC’s accrued warranty programs have similar terms and characteristics to our other warranty programs although this warranty is not amortized in the same manner as our other warranty programs.

The following table represents the rollforward of our acquired accrued warranty obligation and deferred warranty revenue activity for each of the fiscal six months ended (in thousands):

	Fiscal Six Months Ended
	April 29, 2012			May 1, 2011
Beginning balance	$	17,941		$	16,977
Warranties sold		1,479			1,411
Revenue recognized		(803	)		(769	)
Costs incurred and other		(109	)		(302	)
Ending balance	$	18,508		$	17,317

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Loss Per Common Share

6 Months Ended

Apr. 29, 2012

Earnings Per Share [Abstract]

LOSS PER COMMON SHARE

NOTE 6 — LOSS PER COMMON SHARE

Basic loss per common share is computed by dividing net loss allocated to common shares by the weighted average number of common shares outstanding. Diluted income per common share, if applicable, considers the dilutive effect of common stock equivalents. The reconciliation of the numerator and denominator used for the computation of basic and diluted loss per common share is as follows (in thousands, except per share data):

	Fiscal Three Months Ended						Fiscal Six Months Ended
	April 29, 2012			May 1, 2011			April 29, 2012			May 1, 2011
Numerator for Basic and Diluted Loss Per Common Share Net loss allocated to common shares (1)	$	(16,281	)	$	(9,249	)	$	(26,320	)	$	(29,990	)
Denominator for Basic and Diluted Loss Per Common Share
Weighted average common shares outstanding for basic and diluted loss per share		18,832			18,275			18,760			18,215
Basic and Diluted loss per common share	$	(0.86	)	$	(0.51	)	$	(1.40	)	$	(1.65	)

(1) Participating securities consist of the holders of the Convertible Preferred Stock, as defined below, and the unvested restricted Common Stock related to our Incentive Plan. These participating securities do not have a contractual obligation to share in losses; therefore, no losses were allocated in any periods presented above. These participating securities will be allocated earnings when applicable.

We calculate earnings per share using the “two-class” method, whereby unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are “participating securities” and, therefore, these participating securities are treated as a separate class in computing earnings per share. The calculation of earnings per share for Common Stock presented here excludes the income, if any, attributable to the unvested restricted stock awards and our Series B Cumulative Convertible Participating Preferred Stock (“Convertible Preferred Stock,” and shares thereof, “Preferred Shares”) from the numerator and excludes the dilutive impact of those shares from the denominator. There was no income amount attributable to unvested restricted stock or Preferred Shares for the three and six month periods ended April 29, 2012 and May 1, 2011 as the restricted stock and Preferred Shares do not share in the net losses. However, in periods of net income allocated to common shares, a portion of this income will be allocable to the restricted stock and Preferred Shares. As of April 29, 2012 and October 30, 2011, the Preferred Shares were convertible into 48.9 million and 46.6 million shares of Common Stock, respectively.

For both the three and six month periods ended April 29, 2012 and May 1, 2011, all options and unvested restricted shares were anti-dilutive and, therefore, not included in the diluted loss per common share calculation.

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Contingencies

6 Months Ended

Apr. 29, 2012

Contingencies [Abstract]

CONTINGENCIES

NOTE 14 — CONTINGENCIES

As a manufacturer of products primarily for use in nonresidential building construction, we are inherently exposed to various types of contingent claims, both asserted and unasserted, in the ordinary course of business. As a result, from time to time, we and/or our subsidiaries become involved in various legal proceedings or other contingent matters arising from claims, or potential claims. We insure against these risks to the extent deemed prudent by our management and to the extent insurance is available. Many of these insurance policies contain deductibles or self-insured retentions in amounts we deem prudent and for which we are responsible for payment. In determining the amount of self-insurance, it is our policy to self-insure those losses that are predictable, measurable and recurring in nature, such as claims for automobile liability, general liability and workers compensation. The Company regularly reviews the status of on-going proceedings and other contingent matters along with legal counsel. Liabilities for such items are recorded when it is probable that the liability has been incurred and when the amount of the liability can be reasonably estimated. Liabilities are adjusted when additional information becomes available. Management believes that the ultimate disposition of these matters will not have a material adverse effect on the Company’s operations or financial position taken as a whole.

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Fair Value of Financial Instruments and Fair Value Measurements

6 Months Ended

Apr. 29, 2012

Fair Value of Financial Instruments and Fair Value Measurements [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

NOTE 10 — FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Fair Value of Financial Instruments

The carrying amounts of cash, restricted cash, trade accounts receivable and accounts payable approximate fair value as of April 29, 2012 and October 30, 2011 because of the relatively short maturity of these instruments. The fair values of the remaining financial instruments not currently recognized at fair value on our Consolidated Balance Sheets at the respective fiscal period ends were (in thousands):

	April 29, 2012				October 30, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Amended Credit Agreement	$	128,499	$	127,857	$	130,699	$	127,106

The fair value of the Amended Credit Agreement was based on recent trading activities of comparable market instruments which are level 2 inputs.

Fair Value Measurements

ASC Subtopic 820-10, Fair Value Measurements and Disclosures, requires us to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:

Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.

Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities or market-corroborated inputs.

Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants would price the assets or liabilities.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. There have been no changes in the methodologies used at April 29, 2012 and October 30, 2011.

Money market: Money market funds have original maturities of three months or less. The original cost of these assets approximates fair value due to their short-term maturity.

Mutual funds: Mutual funds are valued at the closing price reported in the active market in which the mutual fund is traded.

Stocks, options and ETF’s: Stocks, options and ETF’s are valued at the closing price reported in the active market in which the fund is traded.

Foreign currency contracts: The fair value of the foreign currency derivatives are based on a market approach and take into consideration current foreign currency exchange rates and current creditworthiness of us or the counterparty, as applicable.

Assets held for sale: Assets held for sale are valued based on current market conditions, prices of similar assets in similar condition and expected proceeds from the sale of the assets.

Deferred compensation plan liability: Deferred compensation plan liability is comprised of phantom investments in the deferred compensation plan and is valued at the closing price reported in the active market in which the money market, mutual fund or NCI stock phantom investments are traded.

Embedded derivative: The embedded derivative value is based on an income approach in which we used a probability-weighted discounted cash flow model and assigned probabilities for each qualified default event.

The following table summarizes information regarding our financial assets and liabilities that are measured at fair value on a recurring basis as of April 29, 2012, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1			Level 2			Level 3			Total
Assets:
Money market	$	10,000		$	—		$	—		$	10,000
Short-term investments in deferred compensation plan(1):
Money market		240			—			—			240
Mutual funds — Growth		630			—			—			630
Mutual funds — Blend		1,900			—			—			1,900
Mutual funds — Foreign blend		664			—			—			664
Mutual funds — Fixed income		—			556			—			556
Total short-term investments in deferred compensation plan		3,434			556			—			3,990
Other investments:
Cash		55			—			—			55
Stocks, options and ETF’s		373			—			—			373
Total other investments		428			—			—			428
Total assets	$	13,862		$	556		$	—		$	14,418
Liabilities:
Deferred compensation plan liability	$	(4,208	)	$	—		$	—		$	(4,208	)
Foreign currency contracts		—			(21	)		—			(21	)
Embedded derivative		—			—			(68	)		(68	)
Total liabilities	$	(4,208	)	$	(21	)	$	(68	)	$	(4,297	)

(1) Unrealized holding gains (losses) for the three months ended April 29, 2012 and May 1, 2011 were $0.2 million and $0.2 million, respectively. Unrealized holding gains (losses) for the six months ended April 29, 2012 and May 1, 2011 were $0.2 million and $0.3 million, respectively. These unrealized holding gains (losses) are primarily offset by changes in the deferred compensation plan liability.

The following table summarizes information regarding our financial assets that are measured at fair value on a nonrecurring basis as of April 29, 2012, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Assets held for sale(1)	$	—	$	—	$	2,500		2,500
Total assets	$	—	$	—	$	2,500	$	2,500

(1) Certain assets held for sale are valued at fair value and are measured at fair value on a nonrecurring basis. Assets held for sale are reported at fair value, if, on an individual basis, the fair value of the asset is less than cost. The fair value of assets held for sale is estimated using Level 3 inputs, such as broker quotes for like-kind assets or other market indications of a potential selling value which approximates fair value. As of April 29, 2012, the fair value of one asset group held for sale exceeded that asset group’s cost and carrying value. Accordingly, that asset group held for sale has been excluded from the table as of April 29, 2012.

The following table summarizes information regarding our financial assets and liabilities that are measured at fair value on a recurring basis as of October 30, 2011, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2			Level 3			Total
Assets:
Money market	$	12,837	$	—		$	—		$	12,837
Short-term investments in deferred compensation plan(1):
Money market	$	149	$	—		$	—		$	149
Mutual funds — Growth		682		—			—			682
Mutual funds — Blend		1,798		—			—			1,798
Mutual funds — Foreign blend		743		—			—			743
Mutual funds — Fixed income		—		638			—			638
Total short-term investments in deferred compensation plan	$	3,372	$	638		$	—		$	4,010
Other investments:
Cash		45		—			—			45
Stocks, options and ETF’s		429		—			—			429
Total other investments		474		—			—			474
Foreign currency contracts		—		42			—			42
Total assets	$	16,683	$	680		$	—		$	17,363
Liabilities:
Deferred compensation plan liability	$	—	$	(4,077	)	$	—		$	(4,077	)
Embedded derivative		—		—			(79	)		(79	)
Total liabilities	$	—	$	(4,077	)	$	(79	)	$	(4,156	)

The following table summarizes information regarding our financial assets that are measured at fair value on a nonrecurring basis as of October 30, 2011, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Assets held for sale(1)	$	—	$	—	$	2,500	$	2,500
Total assets	$	—	$	—	$	2,500	$	2,500

(1) Certain assets held for sale are valued at fair value and are measured at fair value on a nonrecurring basis. Assets held for sale are reported at fair value, if, on an individual basis, the fair value of the asset is less than cost. The fair value of assets held for sale is estimated using Level 3 inputs, such as broker quotes for like-kind assets or other market indications of a potential selling value which approximates fair value. As of October 30, 2011, the fair value of one asset group held for sale exceeded that asset group’s cost and carrying value. Accordingly, that asset group held for sale has been excluded from the table as of October 30, 2011.

The following table summarizes the activity in Level 3 financial instruments during the six months ended April 29, 2012 and May 1, 2011 (in thousands):

	April 29, 2012			May 1, 2011
Beginning balance	$	(79	)	$	(104	)
Unrealized gains (1)		11			13
Ending balance	$	(68	)	$	(91	)

(1) Unrealized gains on the embedded derivative are recorded in other income, net in the Consolidated Statements of Operations during the six months ended April 29, 2012 and May 1, 2011.

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Long-Term Debt and Notes Payable

6 Months Ended

Apr. 29, 2012

Long-Term Debt and Notes Payable [Abstract]

LONG-TERM DEBT AND NOTE PAYABLE

NOTE 8 — LONG-TERM DEBT AND NOTE PAYABLE

Debt is comprised of the following (in thousands):

	April 29, 2012		October 30, 2011
Amended Credit Agreement, due April 2014 (interest at 6.5% at April 29, 2012 and 8.0% at October 30, 2011)	$	128,499	$	130,699
Asset-Based Lending Facility, due April 2014 (interest at 4.75%)		––		—
		128,499		130,699
Current portion of long-term debt		—		—
Total long-term debt, less current portion	$	128,499	$	130,699

Amended Credit Agreement

On October 20, 2009, we entered into the Amended Credit Agreement (the “Amended Credit Agreement”), pursuant to which we repaid $143.3 million of the $293.3 million in principal amount of term loans outstanding under such credit agreement and modified the terms and maturity of the remaining $150.0 million balance. The terms of the term loan require quarterly principal payments in an amount equal to 0.25% of the principal amount of the term loan then outstanding as of the last day of each calendar quarter and a final payment of approximately $136.3 million at maturity on April 20, 2014. However, we have made mandatory and optional prepayments on the Amended Credit Agreement and these prepayments are allowed to be applied against the remaining required quarterly principal payments. As a result, we are not required to make any additional quarterly principal payments for the remaining term of the term loan, although we intend to continue to make voluntary prepayments.

The Company’s obligations under the Amended Credit Agreement and any interest rate protection agreements or other permitted hedging agreement entered into with any lender under the Amended Credit Agreement are irrevocably and unconditionally guaranteed on a joint and several basis by each direct and indirect domestic subsidiary of the Company (other than any domestic subsidiary that is a foreign subsidiary holding company or a subsidiary of a foreign subsidiary that is insignificant).

The obligations under the Amended Credit Agreement and under any permitted hedging agreement and the guarantees thereof are secured by (i) all of the capital stock and other equity interests of all direct domestic subsidiaries owned by the Company and the guarantors, (ii) up to 65% of the capital stock of certain direct foreign subsidiaries of the Company or any guarantor (it being understood that a foreign subsidiary holding company or a domestic subsidiary of a foreign subsidiary is considered a foreign subsidiary for these purposes) and (iii) substantially all other tangible and intangible assets owned by the Company and each guarantor, including liens on material real property, in each case to the extent permitted by applicable law. The liens securing the obligations under the Amended Credit Agreement, the permitted hedging agreements and the guarantees thereof are first in priority (as between the Amended Credit Agreement and the Asset-Based Lending Facility (the “ABL Facility”)) with respect to stock, material real property and assets other than accounts receivable, inventory, certain deposit accounts, associated intangibles and certain other specified assets of the Company and the guarantors. Such liens are second in priority (as between the Amended Credit Agreement and the ABL Facility) with respect to accounts receivable, inventory, associated intangibles and certain other specified assets of the Company and the guarantors.

The Amended Credit Agreement contains a number of covenants that, among other things, limit or restrict our ability to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make dividends and other restricted payments, create liens, make investments, make acquisitions, engage in mergers, change the nature of our business and engage in certain transactions with affiliates.

The Amended Credit Agreement did not require financial covenants until October 30, 2011 (subject to prepayment deferrals as noted below), at which time our consolidated leverage ratio of net indebtedness to EBITDA was to be no more than 5 to 1. Net indebtedness is defined as consolidated debt less the lesser of unrestricted cash or $50 million. This ratio steps down by 0.25 each quarter until October 28, 2012 at which time the maximum ratio is 4 to 1. The ratio continues to step down by 0.125 each quarter until November 3, 2013 to a ratio of 3.5 to 1, which remains the maximum ratio for each fiscal quarter thereafter. We will, however, not be subject to this financial covenant with respect to a specified period if certain prepayments or repurchases of the term loans under the Amended Credit Agreement are made prior to the specified period. Based on our prepayments made through April 29, 2012, the leverage ratio covenant has been deferred until the third quarter of fiscal 2013. The prepayments that have been made can be applied to continuously defer covenant requirements and are not reduced unless the Company’s actual leverage ratios are above the maximum requirement for a given period. Although our Amended Credit Agreement did not require any financial covenant compliance, at April 29, 2012 and October 30, 2011, our consolidated leverage ratio as of those dates was 1.30 and 2.27, respectively.

Term loans under the Amended Credit Agreement may be repaid at any time, without premium or penalty but subject to customary LIBOR breakage costs. We also have the ability to repurchase a portion of the term loans under the Amended Credit Agreement, subject to certain terms and conditions set forth in the Amended Credit Agreement. In addition, the Amended Credit Agreement requires mandatory prepayment and reduction in an amount equal to:

• the net cash proceeds of (1) certain asset sales, (2) certain debt offerings and (3) certain insurance recovery and condemnation events; and

• 50% of annual excess cash flow (as defined in the Amended Credit Agreement) for any fiscal year ended on or after October 31, 2010, unless a specified leverage ratio target is met.

The Amended Credit Agreement limited our ability to pay cash dividends on or prior to October 31, 2010 after which time we were permitted to pay dividends in an amount not to exceed the available amount (as defined in the Amended Credit Agreement). The available amount is defined as the sum of 50% of the cumulative consolidated net income from August 2, 2009 to the end of the most recent fiscal quarter, plus net proceeds of property or assets received as capital contributions, less the sum of all dividends, payments or other distributions of such available amounts, in each case subject to certain adjustments and exceptions as specified in the Amended Credit Agreement. In the absence of accumulated earnings, cash dividends and other cash restricted payments are limited to $14.5 million in the aggregate during the term of the loan, of which we used $11.0 million as of April 29, 2012. Each quarterly dividend payment on the Convertible Preferred Stock cannot be split between cash and payment-in-kind.

The term loan under the Amended Credit Agreement bears interest, at our option, at either LIBOR or Base Rate plus an applicable margin. To date, we have selected LIBOR interest rates. Overdue amounts will bear interest at a rate that is 2% higher than the rate otherwise applicable. “Base Rate” is defined as the highest of (i) the Wells Fargo Bank, National Association prime rate, (ii) the overnight Federal Funds rate plus 0.5%, and (iii) 3%. “LIBOR” is defined as the applicable London interbank offered rate (not to be less than 2%) adjusted for reserves. The applicable margin until October 30, 2011 was 5.00% on Base Rate loans and 6.00% on LIBOR loans under the Amended Credit Agreement. Since October 30, 2011, the LIBOR-linked margin fluctuates based on our leverage ratio and shall be either 6% or 4.5%. Based on our leverage ratio at April 29, 2012, the applicable margin in the third quarter of fiscal 2012 will be 4.5%.

ABL Facility

On October 20, 2009, the subsidiaries of the Company, NCI Group, Inc. and RCC and the Company entered into the ABL Facility pursuant to a loan and security agreement that provided for a $125.0 million asset-based loan facility. The ABL Facility allows us an aggregate maximum borrowing of up to $125.0 million; however, the aggregate maximum borrowings are limited to $100.0 million under our Amended Credit Agreement. Borrowing availability under the ABL Facility is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of qualified cash, eligible inventory and eligible accounts receivable, less certain reserves and subject to certain other adjustments. At April 29, 2012 and October 30, 2011, our excess availability under the ABL Facility was $83.9 million and $87.8 million, respectively. The ABL Facility has a maturity of April 20, 2014 and includes borrowing capacity of up to $25 million for letters of credit and up to $10 million for swingline borrowings. Under the ABL Facility, there were no amounts of borrowings outstanding at both April 29, 2012 and October 30, 2011. In addition, at April 29, 2012 and October 30, 2011, standby letters of credit totaling approximately $9.1 million and $6.4 million, respectively, were issued under the ABL Facility related to certain insurance policies.

On December 3, 2010, we finalized an amendment of our ABL Facility that reduces the unused commitment fee from 1% or 0.75% based on the average daily balance of loans and letters of credit obligations outstanding to an annual rate of 0.5%. The calculation is determined on the amount by which the maximum credit exceeds the average daily principal balance of outstanding loans and letter of credit obligations. Additional customary fees in connection with the ABL Facility also apply. In addition, the amendment reduced the effective interest rate on borrowings, if any, by nearly 40% or 175 basis points. It also relaxes the prohibitions against making restricted payments or paying cash dividends, including on the Convertible Preferred Stock, to allow, in the aggregate, up to $6.5 million of restricted payments or cash dividends each calendar quarter, provided (i) certain excess availability conditions or (ii) certain other excess availability conditions and a fixed charge coverage ratio under the ABL Facility are satisfied. However, these prohibitions are second to the cash restricted payment limitations on the Amended Credit Agreement discussed above.

The obligations of the borrowers under the ABL Facility are guaranteed by us and each direct and indirect domestic subsidiary of the Company (other than any domestic subsidiary that is a foreign subsidiary holding company or a subsidiary of a foreign subsidiary that is insignificant) that is not a borrower under the ABL Facility. Our obligations under certain specified bank products agreements are guaranteed by each borrower and each other direct and indirect domestic subsidiary of the Company and the other guarantors. These guarantees are made pursuant to a guarantee agreement, dated as of October 20, 2009, entered into by the Company and each other guarantor with Wells Fargo Foothill, LLC, as administrative agent.

The obligations under the ABL Facility and the guarantees thereof are secured by a first priority lien on our accounts receivable, inventory, certain deposit accounts, associated intangibles and certain other specified assets of the Company and a second priority lien on the assets securing the term loans under the Amended Credit Agreement on a first-lien basis.

The ABL Facility contains a number of covenants that, among other things, limit or restrict our ability to dispose of assets, incur additional indebtedness, incur guarantee obligations, engage in sale and leaseback transactions, prepay other indebtedness, modify organizational documents and certain other agreements, create restrictions affecting subsidiaries, make dividends and other restricted payments, create liens, make investments, make acquisitions, engage in mergers, change the nature of our business and engage in certain transactions with affiliates.

Under the ABL Facility, a “Dominion Event” occurs if either an event of default is continuing or excess availability falls below certain levels, during which period, and for certain periods thereafter, the administrative agent may apply all amounts in the Company’s, the borrowers’ and the other guarantors’ concentration accounts to the repayment of the loans outstanding under the ABL Facility, subject to the Intercreditor Agreement. In addition, during such Dominion Event, we are required to make mandatory payments on our ABL Facility upon the occurrence of certain events, including the sale of assets and the issuance of debt, in each case subject to certain limitations and conditions set forth in the ABL Facility.

The ABL Facility includes a minimum fixed charge coverage ratio of one to one, which will apply if we fail to maintain at least $15 million of minimum borrowing capacity. Although our ABL Facility did not require any financial covenant compliance, at April 29, 2012 and October 30, 2011, our fixed charge coverage ratio as of those dates, which is calculated on a trailing twelve month basis, was 3.44 to one and 0.37 to one, respectively.

Loans under the ABL Facility bear interest, at our option, as follows:

(1) Base Rate loans at the Base Rate plus a margin. The margin ranges from 1.50% to 2.00% depending on the quarterly average excess availability under such facility, and

(2) LIBOR loans at LIBOR plus a margin. The margin ranges from 2.50% to 3.00% depending on the quarterly average excess availability under such facility.

During an event of default, loans under the ABL Facility will bear interest at a rate that is 2% higher than the rate otherwise applicable. “Base Rate” is defined as the higher of the Wells Fargo Bank, N.A. prime rate and the overnight Federal Funds rate plus 0.5% and “LIBOR” is defined as the applicable London interbank offered rate adjusted for reserves.

Deferred Financing Costs

At April 29, 2012 and October 30, 2011, the unamortized balance in deferred financing costs was $9.2 million and $11.6 million, respectively.

Insurance Note Payable

The note payable is related to financed insurance premiums. As of April 29, 2012 and October 30, 2011, we had outstanding a note payable in the amount of $1.6 million and $0.3 million, respectively. Insurance premium financings are generally secured by the unearned premiums under such policies.

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Series B Cumulative Convertible Participating Preferred Stock

6 Months Ended

Apr. 29, 2012

Series B Cumulative Convertible Participating Preferred Stock [Abstract]

SERIES B CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK

NOTE 9 — SERIES B CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK

The CD&R Equity Investment

On August 14, 2009, the Company entered into an Investment Agreement (as amended, the “Investment Agreement”), by and between the Company and Clayton, Dubilier & Rice Fund VIII, L.P. (“CD&R Fund VIII”), pursuant to which the Company agreed to issue and sell to CD&R Fund VIII, and CD&R Fund VIII agreed to purchase from the Company, for an aggregate purchase price of $250 million (less reimbursement to CD&R Fund VIII or direct payment to its service providers of up to $14.5 million in the aggregate of transaction expenses and a deal fee, paid to Clayton, Dubilier & Rice, Inc., the manager of CD&R Fund VIII, of $8.25 million), 250,000 shares of Convertible Preferred Stock. Pursuant to the Investment Agreement, on October 20, 2009 (the “Closing Date”), the Company issued and sold to CD&R Fund VIII and CD&R Friends & Family Fund VIII, L.P. (the “CD&R Funds”), and the CD&R Funds purchased from the Company, an aggregate of 250,000 Preferred Shares, representing approximately 39.2 million shares of Common Stock or 68.4% of the voting power and Common Stock of the Company on an as-converted basis as of the Closing Date (such purchase and sale, the “CD&R Equity Investment”). At April 29, 2012 and October 30, 2011, the CD&R Funds own 70.6% and 70.1%, respectively, of the voting power and Common Stock of the Company on an as-converted basis.

Certain Terms of the Convertible Preferred Stock

In connection with the consummation of the CD&R Equity Investment, on October 19, 2009 we filed the Certificate of Designations of the Convertible Preferred Stock (the “Certificate of Designations”), setting forth the terms, rights, powers, and preferences, and the qualifications, limitations and restrictions thereof, of the Convertible Preferred Stock.

Liquidation Value. Each Preferred Share has an initial liquidation preference of $1,000.

Rank. The Convertible Preferred Stock ranks senior as to dividend rights, redemption payments and rights upon liquidation to the Common Stock and each other class or series of our equity securities, whether currently issued or to be issued in the future, that by its terms ranks junior to the Convertible Preferred Stock, and junior to each class or series of equity securities of the Company, whether currently issued or issued in the future, that by its terms ranks senior to the Convertible Preferred Stock. The Company does not have any outstanding securities ranking senior to the Convertible Preferred Stock. Pursuant to the Certificate of Designations, the issuance of any senior securities of the Company requires the approval of the holders of the Convertible Preferred Stock.

Dividends. Dividends on the Convertible Preferred Stock are payable, on a cumulative daily basis, as and if declared by the 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. If dividends are not paid on the dividend payment date, either in cash or in kind, such dividends compound on the dividend payment date. Members of the 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. The Company’s Amended Credit Agreement restricts the payment of cash dividends to 50% of cumulative earnings beginning with the fourth quarter of 2009, and in the absence of accumulated earnings, cash dividends and other cash restricted payments are limited to $14.5 million in the aggregate during the term of the loan, of which we used $11.0 million as of April 29, 2012.

Each quarterly dividend payment on the Convertible Preferred Stock cannot be split between cash and payment-in-kind. The Company’s ABL Facility, among other potentially available baskets, permits the Company to pay cash dividends, including on the Convertible Preferred Stock, up to $6.5 million each calendar quarter, provided (i) certain excess availability conditions or (ii) certain other excess availability conditions and a fixed charge coverage ratio under the ABL Facility are satisfied.

If, at any time after the 30-month anniversary of the Closing Date of October 20, 2009 (i.e., April 20, 2012), the trading price of the Common Stock exceeds $12.75, which is 200% of the initial conversion price of the Convertible Preferred Stock ($6.3740, as adjusted for any stock dividends, splits, combinations or similar events), for each of 20 consecutive trading days (the “Dividend Rate Reduction Event”), the dividend rate (excluding any applicable adjustments as a result of a default) will become 0.00%. However, this does not preclude the payment of default dividends after the 30-month anniversary of the Closing Date. As a result of certain restrictions on dividend payments in the Company’s Amended Credit Agreement and ABL Facility, the dividends for each quarter of fiscal 2010 were paid in-kind, at a pro rata rate of 12% per annum. The dividends for the December 15, 2010 and March 15, 2011 dividend payments were paid in cash and the dividends for the June 15, 2011 dividend payment was paid in-kind at a pro rata rate of 12% per annum. As a result of the two Consent and Waiver Agreements (discussed below), the September 15, 2011 and December 15, 2011 dividend payments were paid in-kind, at a pro rata rate of 8% per annum. See Note 8—Long-term Debt and Note Payable for more information on our Amended Credit Agreement and ABL Facility.

At any time prior to the Dividend Rate Reduction Event, if dividends are not paid in cash on the applicable dividend payment date, the rate at which such dividends are payable will be at least 12% per annum. Therefore, the Company accrues dividends daily based on the 12% rate and if and when the Company determines the dividends will be paid at a different rate due to either cash payment on the applicable dividend payment date or obtaining a waiver, the Company will record a subsequent benefit of the excess 4% accrual upon our board’s declaration of such cash dividend and reverse the beneficial conversion feature charge associated with such accrual. However, we currently cannot pay dividends in cash because the Company’s Amended Credit Agreement currently restricts the payment of cash dividends to 50% of cumulative earnings beginning with the fourth quarter of 2009, and in the absence of accumulated earnings, cash dividends and other cash restricted payments are limited to $14.5 million in the aggregate during the term of the loan, of which we used $11.0 million as of April 29, 2012.

The dividend rate will increase by up to 6% per annum above the rates described in the preceding paragraphs upon and during certain defaults specified in the Certificate of Designations involving the Company’s failure to have a number of authorized and unissued shares of Common Stock reserved and available sufficient for the conversion of all outstanding Preferred Shares. The Company currently has sufficient authorized, unissued and reserved shares of Common Stock to effect the conversion.

On the dividend payment date, the Company has the right to choose whether dividends are paid in cash or in-kind. However, the first dividend payment which was scheduled to be paid on December 15, 2009 in the amount of $4.6 million was required to be paid in cash by the Certificate of Designations but could not be paid in cash based on the terms of the Company’s Amended Credit Agreement and ABL Facility which restricted the Company’s ability to pay cash dividends until the first quarter of fiscal 2011 and until October 20, 2010, respectively. As a result, the dividend for the period up to the December 15, 2009 dividend payment date compounded at a rate of 12% per annum. We currently cannot pay this dividend in cash because the Company’s Amended Credit Agreement restricts the payment of cash dividends to 50% of cumulative earnings beginning with the fourth quarter of 2009, and in the absence of accumulated earnings, cash dividends and other cash restricted payments are limited to $14.5 million in the aggregate during the term of the loan, of which the Company used $11.0 million as of April 29, 2012. Each quarterly dividend payment on the Convertible Preferred Stock cannot be split between cash and payment-in-kind.

In addition to any dividends declared and paid as described in the preceding paragraphs, holders of the outstanding Preferred Shares also have the right to participate equally and ratably, on an as-converted basis, with the holders of shares of Common Stock in all cash dividends and distributions paid on the Common Stock.

On March 15, 2012, the Preferred Dividend Payment Committee of the board of directors declared and paid to the holders of Convertible Preferred Stock, the CD&R Funds, a dividend of 8,924.762 shares of Convertible Preferred Stock at a pro rata rate of 12% per annum for the period from December 16, 2011 to March 15, 2012.

On December 9, 2011, the Company 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 the Company’s 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 December 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 fiscal year ending October 28, 2012, subject to certain exceptions. The December 9, 2011 Mutual Waiver and Consent does not extend to dividends on the Convertible Preferred Stock accruing after December 15, 2011 or restrict our issuance of capital stock after October 28, 2012.

In view of the December 9, 2011 Mutual Waiver and Consent, the Preferred Dividend Payment Committee of the board of directors declared and directed the payment of the December 15, 2011 dividend on the Preferred Shares in-kind at the reduced rate of 8% per annum. As a result, a dividend of 5,833.4913 Preferred Shares was paid to the holders of Convertible Preferred Stock for the period from September 16, 2011 to December 15, 2011. As a result of accruing the dividend at the stated 12% rate, and subsequently paying the lower 8% rate, the Company recorded a dividend accrual reversal of $2.9 million in the first quarter of fiscal 2012 related to dividends accrued between September 16, 2011 and December 15, 2011. Similarly, the Company recorded a beneficial conversion feature reversal of $1.1 million in the first quarter of fiscal 2012 related to beneficial conversion feature charges between September 16, 2011 and December 15, 2011 associated with the dividend reduction.

On March 15, 2011, the Preferred Dividend Payment Committee of the board of directors declared and paid to the holders of Convertible Preferred Stock, the CD&R Funds, a $5.5 million cash dividend at a pro rata rate of 8% per annum. As a result of paying an 8% cash dividend, we recorded a dividend accrual reversal of $2.7 million in the second quarter of fiscal 2011 related to dividends accrued in excess of 8% between December 16, 2010 and March 15, 2011. In addition, we reversed the related beneficial conversion feature previously recorded of $8.2 million in the second quarter of fiscal 2011 related to the paid-in-kind dividends accrued between December 16, 2010 and March 15, 2011.

On December 15, 2010, the Preferred Dividend Payment Committee of the board of directors declared and paid to the holders of Convertible Preferred Stock, the CD&R Funds, a $5.55 million cash dividend at the rate of 8% per annum. As a result of paying an 8% cash dividend, we recorded a dividend accrual reversal of $2.5 million in the first quarter of fiscal 2011 related to dividends accrued in excess of 8% between September 16, 2010 and December 15, 2010. In addition, we reversed the related beneficial conversion feature previously recorded of $5.1 million in the first quarter of fiscal 2011 related to the paid-in-kind dividends accrued between September 16, 2010 and December 15, 2010.

Convertibility and Anti-Dilution Adjustments. To the extent that we have authorized but unissued shares of Common Stock, holders of Preferred Shares have the right, at any time and from time to time, at their option, to convert any or all of their Preferred Shares, in whole or in part, into fully paid and non-assessable shares of the Company’s Common Stock at the conversion price set forth in the Certificate of Designations. The number of shares of Common Stock into which a Preferred Share is convertible is determined by dividing the sum of the liquidation preference of $1,000 per Preferred Share and the accrued and unpaid dividends of such share as of the time of conversion by the conversion price in effect at the time of conversion.

The initial conversion price of the Convertible Preferred Stock was equal to $6.3740. The conversion price is subject to adjustment as set forth in the Certificate of Designations and is subject to customary anti-dilution adjustments, including stock dividends, splits, combinations or similar events and issuance of our Common Stock at a price below the then-current market price and, within the first three years after the Closing Date, issuances of our Common Stock below the then applicable conversion price.

Milestone Redemption Right. The Company has the right, at any time on or after the tenth anniversary of the Closing Date, to redeem in whole, but not in part, all then-issued and outstanding shares of Convertible Preferred Stock in accordance with the procedures set forth in the Certificate of Designations. Any holder of Convertible Preferred Stock has the right, at any time on or after the tenth anniversary of the Closing Date, to require that the Company redeem all, but not less than all, of its shares of Convertible Preferred Stock in accordance with the procedures set forth in the Certificate of Designations. In each case, such right (the “Milestone Redemption Right”), is exercisable at a redemption price for each Preferred Share equal to the sum of the liquidation preference of $1,000 per Preferred Share and the accrued and unpaid dividends of such share as of the time of redemption.

Change of Control Redemption Right. Upon certain change of control events specified in the Certificate of Designations, including certain business combinations involving the Company and certain changes to the beneficial ownership of the voting power of the Company, so long as the CD&R Funds do not own 45% or more of the voting power of the Company and directors designated by the CD&R Funds are not entitled to cast a majority of the total number of votes that can be cast by the Company’s board of directors or by the directors constituting the quorum approving or recommending such change of control event, holders of Preferred Shares are able to require redemption by the Company, in whole but not in part, of the Convertible Preferred Stock (1) if redeemed after the fourth anniversary of the Closing Date, at a purchase price equal to the sum of the liquidation value of such Preferred Shares and the accrued and unpaid dividends thereon as of the redemption date or (2) if redeemed prior to the fourth anniversary of the Closing Date, at a purchase price equal to the sum of (a) the liquidation value of such Preferred Shares plus the accrued and unpaid dividends thereon as of the redemption date and (b) a make-whole premium equal to the net present value of the sum of all dividends that would otherwise be payable on and after the redemption date, to and including such fourth anniversary date, assuming that such dividends are paid in cash. In addition, upon change of control events pursuant to the Amended Credit Agreement or the ABL Facility, holders of Preferred Shares are able to require redemption by the Company, in whole but not in part, of the Convertible Preferred Stock, at a purchase price equal to 101% of the sum of the liquidation value of such Preferred Shares and the accrued and unpaid dividends thereon as of the redemption date.

In the event of a merger or other business combination resulting in a change of control in which the holders of shares of our Common Stock receive cash or securities of an unaffiliated entity as consideration for such shares, if the holder of Preferred Shares does not exercise the change of control redemption right described in the paragraph above or is not entitled to the change of control redemption right in connection with such event, such holder will be entitled to receive, pursuant to such merger or business combination, the consideration such holder would have received for its Preferred Shares had it converted such shares immediately prior to the merger or business combination transaction. In the event of a merger or other business combination not resulting in a change of control in which the holders of shares of our Common Stock receive cash or securities of an unaffiliated entity as consideration for such shares, holders of Convertible Preferred Stock shall have the option to exchange their Preferred Shares for shares of the surviving entity’s capital stock having terms, preferences, rights, privileges and powers no less favorable than the terms, preferences, rights, privileges and powers under the Certificate of Designations.

Vote. Holders of Preferred Shares generally are entitled to vote with the holders of the shares of our Common Stock on all matters submitted for a vote of holders of shares of the Company’s Common Stock (voting together with the holders of shares of our Common Stock as one class) and are entitled to a number of votes equal to the number of shares of Common Stock issuable upon conversion of such holder’s Preferred Shares (without any limitations based on our authorized but unissued shares of the Company’s Common Stock) as of the applicable record date for the determination of stockholders entitled to vote on such matters.

Certain matters require the approval of the holders of a majority of the outstanding Preferred Shares, voting as a separate class, including (1) amendments or modifications to the Company’s Certificate of Incorporation, by-laws or the Certificate of Designations, that would adversely affect the terms or the powers, preferences, rights or privileges of the Convertible Preferred Stock, (2) authorization, creation, increase in the authorized amount of, or issuance of any class or series of senior securities or any security convertible into, or exchangeable or exercisable for, shares of senior securities and (3) any increase or decrease in the authorized number of Preferred Shares or the issuance of additional Preferred Shares.

In addition, in the event that the Company fails to fulfill its obligations to redeem the Convertible Preferred Stock in accordance with the terms of the Certificate of Designations following the exercise of the Milestone Redemption Right or change of control redemption rights described above, until such failure is remedied, certain additional actions of the Company shall require the approval of the holders of a majority of the outstanding Preferred Shares, voting as a separate class, including the adoption of an annual budget, the hiring and firing, or the changing of the compensation, of executive officers and the commitment, resolution or agreement to effect any business combination.

Restriction on Dividends on Junior Securities. The Company is prohibited from (i) paying any dividend with respect to our Common Stock or other junior securities, except for ordinary cash dividends in which the Convertible Preferred Stock participates and which are declared, paid or set aside after the base dividend rate for the Convertible Preferred Stock has been reduced to 0.00% as described above and dividends payable solely in shares of our Common Stock or other junior securities, or (ii) repurchasing or redeeming any shares of our Common Stock or other junior securities, unless, in each case, we have sufficient access to lawful funds immediately following such action such that we would be legally permitted to redeem in full all Preferred Shares then outstanding.

Accounting for Convertible Preferred Stock

The Convertible Preferred Stock balance and changes in the carrying amount of the Convertible Preferred Stock are as follows (in thousands):

	Dividends and Accretion			Convertible Preferred Stock
Balance as of October 30, 2011				$	273,950
Accretion		688
Accrued paid-in-kind dividends(1)		8,837
Reversal of additional 4% accrued dividends(2)		(2,917	)
Subtotal					6,608
Balance as of January 29, 2012				$	280,558
Accretion		688
Accrued paid-in-kind dividends(1)		9,057
Subtotal					9,745
Balance as of April 29, 2012				$	290,303

(1) Dividends are accrued at the 12% rate on a daily basis until the dividend payment date.

(2) The reversal of the additional 4% accrued dividends relates to the period from September 16, 2011 to December 15, 2011.

In accordance with ASC Topic 815, Derivatives and Hedging, and ASC Topic 480, Distinguishing Liabilities from Equity, we classified the Convertible Preferred Stock as mezzanine equity because the Convertible Preferred Stock (1) can be settled in cash or shares of our Common Stock, (2) contains change of control rights allowing for early redemption, and (3) contains Milestone Redemption Rights which allow the Convertible Preferred Stock to remain outstanding without a stated maturity date.

In addition, the Certificate of Designations, which is the underlying contract of the Convertible Preferred Stock, includes features that are required to be bifurcated and recorded at fair value. We classified the Convertible Preferred Stock as an equity host contract because of (1) the voting rights, (2) the participating dividends on Common Stock and mandatory, cumulative preferred stock dividends, and (3) the Milestone Redemption Right which allows the Convertible Preferred Stock to remain outstanding without a stated maturity date. We then determined that the conditions resulting in the application of the default dividend rate are not clearly and closely related to this equity host contract and we bifurcated and separately recorded these features at fair value. As of both April 29, 2012 and October 30, 2011, the fair value carrying amount of the embedded derivative was $0.1 million.

Because the dividends accrue and accumulate on a daily basis and the amount payable upon redemption of the Convertible Preferred Stock is the liquidation preference plus accrued and unpaid dividends, accrued dividends are recorded into Convertible Preferred Stock.

In accordance with ASC Subtopic 470-20, Debt with Conversion and Other Options, the Convertible Preferred Stock contains a beneficial conversion feature because it was issued with an initial conversion price of $6.3740 and the closing stock price per share of Common Stock just prior to the execution of the CD&R Equity Investment was $12.55. The intrinsic value of the beneficial conversion feature cannot exceed the issuance proceeds of the Convertible Preferred Stock less the cash paid for the deal fee paid to the CD&R Funds manager in connection with the CD&R Equity Investment, and thus was $241.4 million as of October 20, 2009. At April 29, 2012 and October 30, 2011, all of the potentially 48.9 million and 46.6 million shares of Common Stock, respectively, issuable upon conversion of the Preferred Shares, which includes paid-in-kind dividends, were authorized and unissued.

As of April 29, 2012 and October 30, 2011, the Preferred Shares were convertible into 48.9 million and 46.6 million shares of Common Stock, respectively, at an initial conversion price of $6.3740. The Company recorded a $7.9 million and $8.0 million beneficial conversion feature charge, prior to any applicable reversal, in the three month periods ended April 29, 2012 and May 1, 2011, respectively, and $11.9 million and $14.9 million beneficial conversion feature charge, prior to any applicable reversal, in the six month periods ended April 29, 2012 and May 1, 2011, respectively, related to dividends that have accrued and are convertible into shares of Common Stock. As a result of accruing dividends at the stated 12% rate, and subsequently paying the lower 8% rate agreed to in the Mutual Waiver and Consent, we recorded a beneficial conversion feature reversal of $1.1 million in the first quarter of fiscal 2012 related to beneficial conversion feature charges between September 16, 2011 and December 15, 2011 associated with the dividend reduction. As a result of paying an 8% cash dividend in the second quarter of fiscal 2011, we reversed the related beneficial conversion feature previously recorded of $8.2 million in the second quarter of fiscal 2011 related to beneficial conversion feature charges between December 16, 2010 and March 15, 2011. As a result of paying an 8% cash dividend in the first quarter of fiscal 2011, we reversed the related beneficial conversion feature previously recorded of $5.1 million in the first quarter of fiscal 2011 related to beneficial conversion feature charges between September 16, 2010 and December 15, 2010. The Company’s policy is to recognize beneficial conversion feature charges on paid-in-kind dividends based on a daily dividend recognition and the daily closing stock price of our Common Stock.

The Company’s aggregate liquidation preference plus accrued dividends of the Convertible Preferred Stock at April 29, 2012 and October 30, 2011 are as follows (in thousands):

	April 29, 2012		October 30, 2011
Liquidation preference	$	301,459	$	286,701
Accrued dividends		10,320		10,102
Total	$	311,779	$	296,803

At April 29, 2012 and October 30, 2011, we had 301,459 and 286,701 Preferred Shares outstanding.

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Income Taxes

6 Months Ended

Apr. 29, 2012

Income Taxes [Abstract]

INCOME TAXES

NOTE 11 — INCOME TAXES

The reconciliation of income tax computed at the statutory tax rate to the effective income tax rate is as follows:

	Fiscal Three Months Ended						Fiscal Six Months Ended
	April 29, 2012			May 1, 2011			April 29, 2012			May 1, 2011
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%		35.0	%
State income taxes		4.8	%		(1.9	)%		4.7	%		(1.9	)%
Canada valuation allowance		––			(0.5	)%		––			(0.9	)%
Non-deductible expenses		1.9	%		(2.9	)%		1.9	%		(2.9	)%
Other		(0.1	)%		5.9	%		0.1	%		0.6	%
Effective tax rate		41.6	%		35.6	%		41.7	%		29.9	%

We expect to generate sufficient operating profits in future periods to fully utilize our U.S. net deferred tax assets of $13.4 million. In evaluating our expectations, we have evaluated a variety of factors including multiple industry sources citing expectations of continued growth in the nonresidential construction market into 2012 and 2013, our continued market strength in the commercial and industrial subsectors of the nonresidential market that are experiencing growth above that of the overall nonresidential construction market and our internal forecast projections which we believe will continue the profitable trends experienced in the remainder of fiscal 2011 and in fiscal 2012. Our expectations could change in the near term if nonresidential construction fails to continue its projected recovery. In the event our operating results or expectations of future operating results change, a valuation allowance may be required on our existing unreserved net U.S. deferred tax assets.

The total amount of unrecognized tax benefit at both April 29, 2012 and October 30, 2011 was $0.3 million, all of which would impact our effective tax rate, if recognized. We do not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months.

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Apr. 29, 2012	May 01, 2011
Cash flows from operating activities:
Net income (loss)	$ 1,910	$ (15,954)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	14,427	16,850
Share-based compensation expense	4,093	3,357
Loss on sale of property, plant and equipment	13	11
Provision for doubtful accounts	(692)	690
Provision (benefit) from deferred income taxes	1,147	(6,978)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable	12,561	10,811
Inventories	(18,373)	(26,176)
Income tax receivable	169	15,702
Prepaid expenses and other	(2,972)	(1,133)
Accounts payable	(2,899)	3,907
Accrued expenses	656	3,863
Other, net	(51)	(408)
Net cash provided by operating activities	9,989	4,542
Cash flows from investing activities:
Capital expenditures	(13,899)	(8,070)
Proceeds from sale of property, plant and equipment	37	143
Net cash used in investing activities	(13,862)	(7,927)
Cash flows from financing activities:
Decrease (increase) in restricted cash	2,836	(3)
Proceeds from ABL Facility		5
Payments on ABL Facility		(3)
Excess tax benefits from share-based compensation arrangements	1	464
Payments on term loan	(2,200)	(3,750)
Payments on note payable	(403)	(667)
Payment of financing costs	(50)	(75)
Payment of cash dividends on convertible preferred stock		(11,039)
Purchase of treasury stock	(1,510)	(1,477)
Net cash used in financing activities	(1,326)	(16,545)
Effect of exchange rate changes on cash and cash equivalents	73	(80)
Net decrease in cash and cash equivalents	(5,126)	(20,010)
Cash and cash equivalents at beginning of period	78,982	77,419
Cash and cash equivalents at end of period	$ 73,856	$ 57,409

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Share-Based Compensation

6 Months Ended

Apr. 29, 2012

Share-Based Compensation [Abstract]

SHARE-BASED COMPENSATION

NOTE 5 — SHARE-BASED COMPENSATION

Our 2003 Long-Term Stock Incentive Plan (“Incentive Plan”) is an equity-based compensation plan that allows us to grant a variety of types of awards, including stock options, restricted stock, restricted stock units, stock appreciation rights, performance share awards, phantom stock awards and cash awards. As of April 29, 2012 and May 1, 2011, and for all periods presented, our share-based awards under this plan have consisted of restricted stock grants and stock option grants, none of which can be settled through cash payments. Both our stock options and restricted stock awards are subject only to vesting requirements based on continued employment at the end of a specified time period and typically vest over four years or earlier upon death, disability or a change of control. However, our annual restricted stock awards also vest upon retirement and, only in the case of certain special one-time restricted stock awards, a portion vest on termination without cause or for good reason, as defined by the agreements governing such awards.

During the six month periods ended April 29, 2012 and May 1, 2011, we granted 92,832 and 121,669 stock options, respectively, and the weighted average grant-date fair value of options granted during fiscal 2012 and fiscal 2011 was $5.12 and $5.78, respectively.

The fair value of restricted stock awards classified as equity awards is based on the Company’s stock price as of the date of grant. During the six months ended April 29, 2012 and May 1, 2011, we granted restricted stock awards with a fair value of $6.8 million or 666,110 shares and $6.2 million or 515,053 shares, respectively.

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Subsequent events

6 Months Ended

Apr. 29, 2012

Subsequent events [Abstract]

SUBEQUENT EVENTS

NOTE 15 — SUBSEQUENT EVENTS

Definitive Agreement to Purchase Metl-Span LLC

On May 2, 2012, NCI Group, Inc. (“NCI”), a wholly owned subsidiary of the Company, entered into a definitive agreement with VSMA, Inc. (“VSMA”), Metl-Span LLC, and BlueScope Steel North America Corporation (“Equity Purchase Agreement”) to purchase Metl-Span LLC (“Metl-Span”) from VSMA, Inc., a subsidiary of BlueScope Steel North America Corporation, for $145 million in cash (such acquisition, the “Acquisition”). Metl-Span operates five manufacturing facilities in the United States serving the nonresidential building products market with cost-effective and energy efficient insulated metal wall and roof panels. For the year ended December 31, 2011, Metl-Span had estimated revenues of $170 million. Metl-Span is being sold on a cash-free, debt-free basis, and the purchase price is subject to adjustment based on Metl-Span’s working capital at closing.

Each of NCI, VSMA and Metl-Span has made customary representations and warranties and has agreed to customary covenants in the Equity Purchase Agreement. The closing of the Acquisition, which is currently expected to close before the end of the calendar year, is subject to (i) the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and (ii) other customary conditions to closing, including the execution and delivery of (a) a transition services agreement between VSMA and Metl-Span, (b) a supply agreement among Steelscape, Inc., a California corporation and affiliate of VSMA (“Steelscape”), Metl-Span and NCI, pursuant to which Steelscape has agreed to supply certain metallic-coated and painted steel coils for use in Metl-Span’s product lines, (c) an OEM supply agreement between Metl-Span and BlueScope Buildings North America, Inc., a Delaware corporation and affiliate of VSMA (“BBNA”), pursuant to which Metl-Span has agreed to sell certain insulated wall, roof and ceiling panel products to BBNA, and (d) certain other related transaction documents.

The Equity Purchase Agreement is subject to termination by either NCI or VSMA for various reasons, including the failure of the closing of the Acquisition to occur on or before October 15, 2012 (the “Initial Termination Date”), provided that (i) NCI may extend such termination date under certain circumstances (a) to the date that is two days after the marketing period under the Commitment Letter (as described below) or (b) up to 60 days after the Initial Termination Date if all conditions to the closing of the Acquisition have been satisfied other than with respect to the HSR Act and those conditions that by their nature cannot be satisfied other than at the closing (each of which conditions is capable of being satisfied at the date of termination if the closing of the Acquisition were to occur at such time), and (ii) VSMA may extend such termination date under certain circumstances to a date that is three business days after the Initial Termination Date. The obligations of NCI to consummate the Acquisition are not subject to the availability of financing.

The Equity Purchase Agreement provides that NCI will be required to pay to VSMA a reverse termination fee of $10.15 million upon termination under certain specified circumstances, including in the event of VSMA’s termination due to NCI’s failure to consummate the Acquisition if all of the conditions to its obligations have been satisfied or waived (other than those that by their nature will not be satisfied until the closing, each of which is capable of being satisfied at the date of termination if the closing were to occur at that time). Under certain other specified circumstances, NCI will be required to pay a reverse termination fee of $14.5 million including in the case of VSMA’s termination under the circumstances described in the preceding sentence if either (i) the proceeds of the Term Loan Facility (as described below) could have been funded upon delivery of a drawdown notice or (ii) could not be funded and the failure of such funding was the result of a breach by NCI of any of its covenants under the Equity Purchase Agreement.

NCI and VSMA have agreed to indemnify each other for losses arising from breaches of the representations, warranties and covenants of the Equity Purchase Agreement and for certain other liabilities, subject to specified limitations. BSNA has agreed to guarantee the performance of VSMA’s obligations under the Equity Purchase Agreement.

In connection with the transaction, NCI will refinance its existing ABL Facility and Term Loan, which both mature in April 2014. NCI will utilize its ABL Facility and Term Loan Facility, together with cash on hand, to fund the Acquisition.

On May 2, 2012, we entered into a debt financing commitment letter (the “Commitment Letter”) for a $250.0 million senior secured credit facility (the “Term Loan Facility”) to be available on the closing date of the Acquisition. Proceeds from the Term Loan Facility will be used, together with approximately $25 million of cash on hand and/or certain borrowings under the Loan and Security Agreement, as amended by the ABL Facility Amendment (in each case, as defined below), to finance the acquisition, the repayment of the existing Term Loan of NCI and the related fees and expenses. On May 16, 2012, we amended and restated the Commitment Letter solely to include an additional financial institution as a lender under the Term Loan Facility.

The Term Loan Facility will include certain representations and warranties, affirmative and negative covenants, events of default and collateral and guarantee arrangements, as described in the Commitment Letter. The Commitment Parties’ obligations to provide the financing are subject to the satisfaction of specified conditions, including the consummation of the Acquisition in accordance with the terms of the Equity Purchase Agreement, the accuracy of specified representations and the absence of a material adverse effect on Metl-Span, as described in the Commitment Letter.

As a result of the anticipated terms of the Commitment Letter, in our third fiscal quarter 2012, we expect to recognize a one-time, non-cash debt extinguishment charge related to the existing Term Loan of approximately $4 to $5 million subject to the funding of the new Term Loan Facility.

On May 2, 2012, we entered into Amendment No. 2 (the “ABL Facility Amendment”) to the Loan and Security Agreement (the “Loan and Security Agreement”) to (i) permit the acquisition, the entry by the Company into the Term Loan Facility and the incurrence of debt thereunder and the repayment of existing indebtedness under NCI’s existing Term Loan, (ii) increase the amount available for borrowing thereunder to $150 million (subject to a borrowing base), (iii) increase the amount available for letters of credit thereunder to $30 million, and (iv) extend the final maturity thereunder to May 2, 2017.

As a result of the ABL Facility Amendment, in our third fiscal quarter 2012, we expect to recognize a one-time, non-cash debt extinguishment charge of approximately $2 million.

Agreement with Holders of Convertible Preferred Stock to Eliminate Future Dividend Obligations

On May 1, 2012, we reached an understanding in principle and on May 8, 2012, we entered into an Amendment Agreement (the “Amendment Agreement”) with the CD&R Funds, the holders of our convertible preferred shares, to eliminate our quarterly dividend obligation on the preferred shares, which accrued at an annual rate of 12% unless paid in cash at 8%. However, this does not preclude the payment of contingent default dividends, if applicable.

Under the terms of the Certificate of Designations, Preferences and Rights of Series B Cumulative Convertible Participating Preferred Stock (the “Certificate of Designations”), we were contractually obligated to pay quarterly dividends to the holders of the convertible preferred shares from October 20, 2009, through October 20, 2019, subject to certain dividend “knock-out” provisions. The Amendment Agreement provides for the Certificate of Designations to be amended to terminate the dividend obligation from and after March 15, 2012 (the “Dividend Knock-out”).

As consideration for the Dividend Knock-out, the CD&R Funds will receive a total of 37,834 additional shares of Convertible Preferred Stock, representing (i) approximately $6.5 million of dividends accrued from March 15, 2012 through May 18, 2012 (20 trading days after April 20, 2012, on which date the dividend “knock-out” measurement period commenced) and (ii) approximately $31.4 million in additional liquidation preference of Convertible Preferred Stock, or 10% of the approximate total $313.7 million of accreted value as of May 18, 2012. Upon the closing of the transactions contemplated by the Amendment Agreement, funds managed by CD&R will hold Convertible Preferred Stock with an aggregate liquidation preference and accrued dividends of approximately $345 million. The Convertible Preferred Stock and accrued dividends entitle the funds managed by CD&R to receive approximately 54.1 million shares of common stock, representing 72.7% of the voting power and common stock of the Company on an as-converted basis and an increase of approximately 2% from CD&R’s position at April 29, 2012.

The Amendment Agreement with the CD&R Funds has been approved by the Company’s independent directors, as “independence” is defined by the rules and regulations of the Securities and Exchange Commission and the listing standards of the New York Stock Exchange, as well as by all of the Company’s directors who are independent of and not affiliated with the CD&R Funds.

As a result of the Amendment Agreement, in our third fiscal quarter 2012 we expect to recognize a one-time, non-cash dividend charge related to the extinguishment of the Convertible Preferred Stock of approximately $55 million subject to the final determination of fair value of the Convertible Preferred Stock. The actual charge will depend on completing the financial accounting analysis and the fair value assessments of the Convertible Preferred Stock. As a result, the actual noncash charge may vary significantly from our current estimate. We further expect the carrying value of the Convertible Preferred Stock to be increased to fair value from the current carrying value of $290 million. We expect the change in carrying value to fair value to reduce additional paid-in-capital and increase accumulated deficit, collectively.