U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No.18402 / October 9, 2003

Accounting and Auditing Release No.1893 / October 9, 2003

Securities and Exchange Commission v. Gregory L. English, No.1:03-CV-02061 (COLLYER) (United States District Court for the District of Columbia).

FORMER CONTROLLER OF NCI BUILDING SYSTEMS, INC. SETTLES 10(b) CHARGE CONCERNING NCI'S OVERSTATED INVENTORY

NCI ALSO SETTLES CEASE-AND-DESIST PROCEEDING

A. The English Complaint

The U.S. Securities and Exchange Commission today filed a settled civil enforcement action in U.S. District Court for the District of Columbia against Gregory L. English, former corporate controller of NCI Building Systems, Inc. (NCI), a Houston-based manufacturer of metal products for the non-residential building industry. The complaint alleges:

• On June 8, 2001, NCI filed with the Commission a Form 10-K/A, restating its financial statements for fiscal 1999 and 2000 and a Form 10-Q/A, restating its financial statements for the first quarter of fiscal year 2001. According to these filings, NCI overstated net earnings by $1.3 million during the third and fourth quarters of fiscal 1999, $7.5 million for fiscal 2000 and $1.2 million for the first quarter of fiscal 2001.
   
• A number of accounting errors at NCI's Components Division had resulted in material misstatement of NCI's financial statements. The errors resulted primarily from: (1) NCI's failure to update standard costs and scrap metal factors following NCI's migration to a new management information system (the "MIS system") in May 1999, and (2) failed attempts by NCI accounting personnel to manually correct (via unsupported journal entries) for MIS problems in a key inventory liability account.
   
• In July 2000, following an annual physical inventory at the company's components division, an accounting employee informed English that a probable "pick-up" of approximately $2.6 million would be made on the books, resulting in an increase in recorded book inventory.

Soon after, the employee retracted this initial conclusion and informed English that book inventory exceeded the physical counts by more than $2 million, requiring that English decrease the book inventory number. Despite this information, in August 2000, English proceeded to authorize the erroneous $2.6 million entry.

• As NCI's corporate controller, English knew, or was reckless in not knowing, that the inventory overstatement would have a material effect on NCI's financial statements. In addition, English knew or should have known of errors with NCI's new MIS system and failed to correct them.

Without admitting or denying the allegations in the complaint, English consented to the entry of a Final Judgment permanently enjoining him from future violations of (or aiding and abetting violations of) Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-13 and 13b2-1. The Final Judgment also imposes a $25,000 civil penalty and prohibits English from serving as an officer or director of a public company for five years.

B. The Cease-and-Desist Order Against NCI

The Commission also issued a settled cease-and-desist order today (the "Order") against NCI. The findings in the Order involved a number of accounting errors at the company, many of which were caused by the implementation of the MIS system in May 1999. The Order notes that the Commission took into account remedial acts promptly undertaken by the respondent and cooperation afforded the Commission staff.

NCI neither admitted nor denied the findings in the Order. In the Order, the Commission Ordered that NCI cease and desist from committing or causing any violations and any future violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. NCI common stock trades on the New York Stock Exchange under the symbol NCS.