10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended October 30, 2004

OR

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

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 North Sam Houston Parkway West 77064
(Address of principal executive offices and zip code)

(281) 897-7788
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.01 par value	New York Stock Exchange
Rights to purchase Series A Junior Preferred Stock	New York Stock Exchange

Securities registered pursuant to section 12(g) of the Act: None

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 þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No ¨

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant on January 10, 2005, was $588,967,779, which aggregate market value was calculated using the closing sales price reported by the New York Stock Exchange as of the last day of the registrant’s most recently completed second fiscal quarter.

The number of shares of common stock of the registrant outstanding on January 10, 2005 was 20,605,087.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Parts I and II of this Annual Report is incorporated by reference from the registrant’s 2004 Annual Report to Shareholders, and certain information required by Part III of this Annual Report is incorporated by reference from the registrant’s definitive proxy statement for its annual meeting of shareholders to be held on March 11, 2005.

TABLE OF CONTENTS

PART I		4
Item 1.	Business	4
Item 2.	Properties	21
Item 3.	Legal Proceedings	23
Item 4.	Submission of Matters to a Vote of Security Holders	24
PART II		24
Item 5.	Market for Registrant's Common Equity and Related Stockholder Matters	24
Item 6.	Selected Financial Data	25
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 8.	Financial Statements and Supplementary Data	26
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	26
Item 9A.	Controls and Procedures	26
PART III		27
Item 10.	Directors and Executive Officers of the Registrant	27
Item 11.	Executive Compensation	27
Item 12.	Security Ownership of Certain Beneficial Owners and Management	27
Item 13.	Certain Relationships and Related Transactions	27
Item 14.	Principal Accounting Fees and Services	27
Item 15.	Exhibits and Financial Statement Schedules	27
Amended Bonus Program
Form of Restricted Stock Agmt - Senior Executive Officers
Special Long-Term Restricted Stock Award Agmt - A.R. Ginn, Jr.
2004 Annual Report to Shareholders
List of Subsidiaries
Consent of Ernst & Young LLP
Report of Ernst & Young LLP
Power of Attorney
Certifications Pursuant to Rule 13a-14(a)15d-14(a)
Certifications Pursuant to Rule 13a-14(a)15d-14(a)
Certifications Pursuant to Section 1350
Certifications Pursuant to Section 1350

This Annual Report contains forward-looking statements concerning our business and operations. Forward-looking statements involve a number of risks and uncertainties, and our actual performance may differ materially from that projected in such statements. Among the factors that could cause actual results to differ materially are industry cyclicality and seasonality, fluctuations in demand and prices for steel, the financial condition of our raw material suppliers, competitive activity and pricing pressure, ability to execute our acquisition strategy and general economic conditions affecting the construction industry. These and other factors that could affect our financial position and results of operations are described in further detail in the section captioned “Risk Factors.” We expressly disclaim any obligations to release publicly any updates or revisions to these forward-looking statements to reflect any changes in our expectations.

PART I

Item 1.        Business.

General

NCI Building Systems, Inc. is one of North America’s largest integrated manufacturers of products for the non-residential construction industry. We operate 37 manufacturing facilities located in 16 states and Mexico. We sell metal components, engineered building systems and metal coil coating services, offering one of the most extensive metal product lines in the building industry with well-recognized brand names. We believe that our leading market positions and strong track record of growth and profitability have resulted from our focus on:

•   controlling operating and administrative costs;

•   managing working capital and fixed assets;

•   developing new markets and products; and

•   successfully identifying strategic growth opportunities.

We believe that metal products have gained and continue to gain a greater share of the new non-residential construction and repair and retrofit markets. This is due to increasing acceptance and recognition of the benefits of metal products in building applications. Metal building 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 have a history of making acquisitions within our industry, and we regularly evaluate growth opportunities both through acquisitions and internal investment. On December 8, 2004, we purchased substantially all of the operating assets of Heritage Building Systems, Inc. and Steelbuilding.com, Inc., affiliated companies headquartered in Little Rock, Arkansas, for a combined purchase price of approximately $26 million, including $6 million in our common stock (199,767 shares), and assumed liabilities of approximately $2 million. Heritage primarily markets general purpose, engineered steel buildings, including for the agricultural market segment, and Steelbuilding.com is the largest marketer of engineered steel buildings via the Internet. We purchased these two companies because of their strong marketing operations and our belief that as part of our company they will be better positioned to leverage their sales and internet marketing and distribution channels to drive our sales growth. On December 13, 2004, we purchased our joint venture partner’s 49% interest in our manufacturing facility in Monterrey, Mexico, for approximately $10 million in cash. In addition, we also evaluate from time to time possible dispositions of assets or businesses when such assets or businesses are no longer core to our operations and do not fit into our long-term strategy.

On November 16, 2004, we completed an offering of $180 million principal amount of 2.125% convertible senior subordinated notes due 2024. We intend to use the net proceeds from the offering, which were approximately $176 million, to finance future and pending acquisitions, including approximately $17 million to pay the cash portion of the purchase price for Heritage Building Systems and Steelbuilding.com. Pending our use of the net proceeds from the convertible notes offering for acquisitions, we intend to invest such proceeds in short-term debt securities or similar investments. Under the terms of our senior credit agreement, as amended, if we do not use the net proceeds of the convertible notes offering to finance permitted acquisitions within 12 months (and in certain circumstances, 18 months) of the closing of the offering, we must apply the net proceeds to repay indebtedness under our existing senior credit agreement.

We were founded in 1984 and we reincorporated in Delaware in 1991. Our principal offices are located at 10943 North Sam Houston Parkway West, Houston, Texas 77064, and our telephone number is (281) 897-7788. Unless indicated otherwise, references in this report to NCI, us, or we include our predecessors and our subsidiaries.

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We file annual, quarterly and current reports and other information with the SEC. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, along with any amendments to those reports, are available free of charge at our corporate website at http://www.ncilp.com as soon as practicable after such material is electronically filed with, or furnished to, the SEC. In addition, our website includes other items related to corporate governance matters, including, among others, our corporate governance guidelines, charters of various committees of our board of directors and the code of business conduct and ethics applicable to our employees, officers and directors. You may obtain copies of these documents, free of charge, from our corporate website. However, the information on our website is not incorporated by reference into this Form 10-K.

Business Segments

We have divided our operations into three reportable segments: metal components, engineered building systems and metal coil coating, based upon similarities in product lines, manufacturing process, marketing and management of its business. Products of all three segments are similar in basic raw materials used. The engineered building systems segment includes the manufacturing of main frames, Long Bay® Systems and includes value added engineering and drafting, which are typically not part of metal building component or metal coil coating products or services. Metal coil coating consists of cleaning, treating and painting continuous steel coils before the steel is fabricated for use by construction and industrial users. Our approximate sales to outside customers, operating income and total assets attributable to these business segments were as follows for the periods indicated (in thousands):

	2002					2003					2004
Sales:
Metal components	$	507,079		53	%	$	473,499		53	%	$	576,808		53	%
Engineered building systems		317,926		33			297,304		33			385,246		36
Metal coil coating		128,437		14			127,347		14			122,809		11
Intersegment sales		97,024		10			106,338		12			195,191		18
Eliminations		(97,024	)	(10	)		(106,338	)	(12	)		(195,191	)	(18	)
Total net sales	$	953,442		100	%	$	898,150		100	%	$	1,084,863		100	%
Operating income:
Metal components	$	46,829		9	%	$	45,851		10	%	$	76,724		13	%
Engineered building systems		28,695		9			18,055		6			31,340		8
Metal coil coating		23,578		18			21,204		17			26,444		22
Corporate		(26,878	)	—			(27,947	)	—			(37,532	)	—
Total operating income (% of Sales)	$	72,224		8	%	$	57,163		6	%	$	96,976		9	%
Total assets:
Metal components	$	307,539		43	%	$	304,910		43	%	$	323,026		41	%
Engineered building systems		206,429		29			204,931		29			219,849		28
Metal coil coating		161,128		22			158,553		22			196,762		25
Corporate		46,169		6			44,766		6			43,220		6
Total assets	$	721,265		100	%	$	713,160		100	%	$	782,857		100	%

For more business segment information, please see the supplementary business segment information contained in footnote 15 to our consolidated financial statements included in our 2004 Annual Report to Shareholders.

Metal Components. We are one of the largest domestic suppliers of metal components to the non-residential building industry. We design, manufacture, sell and distribute one of the widest selections of components for a variety of new construction applications as well as repair and retrofit uses.

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The following are the types of products we sell: Our products are used in the following markets:

•	Metal roof and wall systems;	•	Industrial;
•	Secondary structural members;	•	Governmental;
•	Flashings and accessories;	•	Community;
•	Roll-up and sectional doors; and	•	Self-storage;
•	Interior partition systems.	•	Commercial;
		•	Agricultural; and
		•	Residential

We market our metal components products nationwide primarily through a direct sales force under several brand names. These brand names include “Metal Building Components,” “MBCI,” “American Building Components,” “ABC,” “Doors and Building Components,” “DBCI,” “NCI Metal Depots” and “Able Doors.”

Engineered Building Systems. We are one of the largest domestic suppliers of engineered building systems. We design, manufacture and market engineered building systems, self-storage building systems and metal home framing systems for commercial, industrial, agricultural, governmental, community and residential uses. We market these systems nationwide through authorized builder networks totaling over 1,600 builders and a direct sales force under several brand names. These brand names include “Metallic,” “Mid-West Steel,” “A & S,” “All American,” “Classic,” “Steel Systems,” “Mesco” and “IPS.”

Metal Coil Coating. We provide products and services including the cleaning, treatment and painting of various flat-rolled metal coil substrates and the slitting/embossing of painted coils. We clean, treat and coat hot roll and light gauge metal coils for our own use in our other two business segments, supplying substantially all of our internal metal coil coating requirements. In fiscal 2004, our internal use accounted for approximately 53% of our production. We also clean, treat and coat hot roll metal coils and light gauge metal for third parties for a variety of applications, including construction products, heating and air conditioning systems, water heaters, lighting fixtures and office furniture. We market our metal coil coating services nationwide under the brand names “Metal Coaters,” “Metal-Prep” and “DOUBLECOTE.”

Industry Overview

The building industry encompasses a broad range of metal products, principally composed of steel, sold through a variety of distribution channels for use in diverse applications. These metal products include metal components and engineered building systems.

METAL COMPONENTS. Metal components manufacturers supply products to the building industry. These products include metal roof and wall systems, metal partitions, metal trim, doors and other related accessories. These products are used in new construction and in repair and retrofit applications for commercial, industrial, agricultural, governmental, community, residential and self-storage uses. Metal building components are used in a wide variety of construction applications, including purlins and girts, roofing, standing seam roofing, walls, doors, trim and other parts of traditional buildings, as well as in architectural applications and engineered building systems. We estimate the metal components market including roofing applications to be a multi-billion dollar market, although market data is limited. We believe that the metal components business is less affected by economic cycles than the engineered building systems business due to the use of metal components in repair and retrofit applications. We believe that metal products have gained and continue to gain a greater share of new construction and repair and retrofit markets due to increasing acceptance and recognition of the benefits of metal products in building applications.

Metal roofing accounts for a significant portion of the overall metal components market, but less than 10% of total annual roofing material expenditures. As a result, we believe that significant opportunities exist for metal

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roofing, with its advantages over conventional roofing materials, to increase its overall share of this market. Metal roofing systems have several advantages over conventional roofing systems, including the following:

Lower lifecycle cost. The total cost over the life of metal roofing systems is lower than that of conventional roofing systems for both new construction and retrofit roofing. For new construction, the cost of installing metal roofing is greater than the cost of conventional roofing. Yet, the longer life and lower maintenance costs of metal roofing make the cost more attractive. For retrofit roofing, although installation costs are 60-70% higher for metal roofing due to the need for a sloping support system, the lower ongoing costs more than offset the initial cost.

Increased longevity. Metal roofing systems generally last for 20 years without requiring major maintenance or replacement. This compares to five to ten years for conventional roofs. The cost of leaks and roof failures associated with conventional roofing can be very high, including damage to building interiors and disruption of the functional usefulness of the building. Metal roofing prolongs the intervals between costly and time-consuming repair work.

Attractive aesthetics and design flexibility. Metal roofing systems allow architects and builders to integrate colors and geometric design into the roofing of new and existing buildings, providing an increasingly fashionable means of enhancing a building’s aesthetics. Conventional roofing material is generally tar paper or a gravel surface, and building designers tend to conceal roofs made with these materials.

ENGINEERED BUILDING SYSTEMS. Engineered building systems consist of engineered structural members and panels that are welded and roll formed in a factory and shipped to a construction site complete and ready for assembly. Engineered building systems manufacturers design an integrated system that meets applicable building code requirements. These systems consist of primary structural framing, secondary structural members (purlins and girts) and metal roof and wall systems.

Over the last 15 years, engineered building systems have significantly increased penetration of the market for non-residential low rise structures and are being used in a broad variety of other applications. According to the Metal Building Manufacturers Association (“MBMA”), reported sales of engineered building systems increased from approximately $1.5 billion in 1993 to $2.5 billion in 2000. We believe this increase resulted primarily from (1) the significant cost advantages offered by these systems, (2) increased architectural acceptance of engineered building systems for construction of commercial and industrial building projects, (3) advances in design versatility and production processes and (4) a favorable economic environment through the year 2000. In 2001, the MBMA reported a decline of 21% in sales to $2.0 billion, which was in-line with the general decline in non-residential construction. This downturn continued into 2002 with a further decline of 9% from the 2001 level to $1.8 billion. In 2003, MBMA reported that sales of engineered building systems declined an additional 4% to approximately $1.7 billion. Although final 2004 sales information is not yet available from MBMA, we estimate that sales of engineered building systems increased in 2004, based on published reports from McGraw-Hill Construction Information Group. We expect industry sales to continue to increase as non-residential construction markets show improvements.

We believe the cost of an engineered building system generally represents approximately 15-20% of the total cost of constructing a building, which includes land cost, labor, plumbing, electrical, heating and air conditioning systems installation and interior finish. Technological advances in products and materials, as well as significant improvements in engineering and design techniques, have led to the development of structural systems that are compatible with more traditional construction materials. Architects and designers now often combine an engineered building system with masonry, glass and wood exterior facades to meet the aesthetic requirements of customers while preserving the inherent characteristics of engineered building systems. As a result, the uses for engineered building systems now include office buildings, showrooms, retail stores, banks, schools, warehouses, factories, distribution centers, government buildings and community centers for which aesthetics and architectural features are important considerations of the end users.

In our marketing efforts, we and other major manufacturers generally emphasize the following characteristics of engineered building systems to distinguish them from other methods of construction:

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Shorter construction time. In many instances, it takes less time to construct an engineered building than other building types. In addition, because most of the work is done in the factory, the likelihood of weather interruptions is reduced.

More efficient material utilization. The larger engineered building systems manufacturers use computer-aided analysis and design to fabricate structural members with high strength-to-weight ratios, minimizing raw materials costs.

Lower construction costs. The in-plant manufacture of engineered building systems, coupled with automation, allows the substitution of less expensive factory labor for much of the skilled on-site construction labor otherwise required for traditional building methods.

Greater ease of expansion. Engineered building systems can be modified quickly and economically before, during or after the building is completed to accommodate all types of expansion. Typically, an engineered building system can be expanded by removing the end or side walls, erecting new framework and adding matching wall and roof panels.

Lower maintenance costs. Unlike wood, metal will not deteriorate because of cracking, rot or insect damage. Furthermore, factory-applied roof and siding panel coatings resist cracking, peeling, chipping, chalking and fading.

METAL COIL COATING. Metal coil coating consists of cleaning, treating and painting various flat rolled metal coil substrates, as well as slitting and/or embossing the painted coils, before the steel is fabricated for use by various industrial users. Light gauge and medium gauge steel coils that are painted, either for decorative or corrosion protection purposes, are used in the building industry by manufacturers of metal components and engineered building systems. In addition, these painted steel coils are used by manufacturers of other steel products, such as water heaters, lighting fixtures and ceiling grids.

According to information collected by the National Coil Coating Association and other market information available to us, we believe that approximately 4.5 million tons of light gauge steel and 1 million tons of hot rolled, medium gauge steel is coated in the United States annually.

Consolidation. Over the last several years, there has been consolidation in the metal components, engineered building systems and metal coil coating industries, which include a large number of small local and regional firms. We believe that these industries will continue to consolidate, driven by the needs of manufacturers to increase manufacturing capacity, achieve greater process integration and add geographic diversity to meet customers’ product and delivery needs, improve production efficiency and manage costs. We used a portion of the proceeds of our November offering of convertible notes to finance our acquisitions of Heritage Building Systems and Steelbuilding.com and our joint venture partner’s 49% interest in our Monterrey, Mexico manufacturing facility. We intend to use the remaining proceeds of the convertible notes to finance future acquisitions, as permitted under our senior credit agreement, within 12, and in certain circumstances, 18 months of the closing of the convertible notes offering.

Products and Markets

Our product lines consist of metal components, engineered building systems and metal coil coating services.

Metal Components. Our metal components consist of individual components, including secondary structural framing, metal roof and wall systems and associated metal trims, which are sold directly to contractors or end users for use in the building industry, including the construction of metal buildings. We also stock and market metal component parts for use in the maintenance and repair of existing buildings. Specific component products consist of metal roof and wall systems, purlins, girts, partitions, header panels and related trim and screws. We believe we offer the widest selection of metal components in the building industry.

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Purlins and girts are medium gauge, roll formed steel components. They are supplied to builders for secondary structural framing. We custom produce purlins and girts for our customers and offer the widest selection of sizes and profiles in the United States. Metal roof and wall systems protect the rest of the structure and the contents of the building from the weather. They may also contribute to the structural integrity of the building.

Our metal roofing products are attractive and durable. We use standing seam roof technology to replace traditional built-up and single-ply roofs as well as to provide a distinctive look to new construction. We manufacture and design metal roofing systems for sales to regional metal building manufacturers, general contractors and subcontractors. We believe we have the broadest line of standing seam roofing products in the building industry. In addition, we have granted 14 licenses relating to our standing seam roof technology. Although metal roofing is somewhat more expensive than traditional roofing in upfront costs, its durability and low maintenance costs make metal roofing a lower cost roofing product after the first 10 years.

We manufacture roll-up and sectional overhead doors and sell interior and exterior walk doors for use in the self storage industry and metal and other buildings.

Engineered Building Systems. Engineered building systems consist of pre-engineered structural members and panels that are welded and roll formed in a factory and shipped to a construction site complete and ready for assembly. We design an integrated engineered building system that meets customer specifications and allows easy on-site assembly by the builder or independent contractor. Engineered building systems typically consist of three systems:

Primary structural framing. Primary structural framing, fabricated from heavy-gauge steel, supports the secondary structural framing, roof, walls and all externally applied loads. Through the primary framing, the force of all applied loads is structurally transferred to the foundation.

Secondary structural framing. Secondary structural framing consists of medium-gauge, roll-formed steel components called purlins and girts. Purlins are attached to the primary frame to support the roof. Girts are attached to the primary frame to support the walls. The secondary structural framing is designed to strengthen the primary structural framing and efficiently transfer applied loads from the roof and walls to the primary structural framing.

Metal roof and wall systems. Metal roof and wall systems not only lock out the weather but may also contribute to the structural integrity of the overall building system. Roof and wall panels are fabricated from light-gauge, roll-formed steel.

Accessory components complete the engineered building system. These components include doors, windows, gutters and interior partitions.

Our patented Long Bay® System allows for the construction of metal buildings with base spacings of up to 60 feet without internal supports. This compares to base spacings of up to 30 feet under other engineered building systems. The Long Bay® System virtually eliminates all welding at the site, which significantly reduces erection time compared with conventional steel construction. Our patented Long Bay® System is designed for larger buildings that typically require less custom engineering and design than our other engineered building systems, which allows us to meet our customers’ needs more quickly.

Metal Coil Coating. We provide our own light gauge metal coil coating products and services for use in metal building component, door and engineered building systems manufacturing. We also provide pre-painted hot roll coils for our own use and to other manufacturers of engineered building systems and metal components. We also pre-paint light gauge steel coils for steel mills and metal service centers, which supply the painted coils to various industrial users, including manufacturers of engineered building systems, metal components, lighting fixtures, ceiling grids, water heaters and other products.

Our metal coil coating operations apply a variety of paint systems to metal coils. The process generally includes cleaning, treating and painting the coil and slitting and/or embossing it to customer specifications. We

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believe that pre-painted metal coils are a better quality product, environmentally cleaner and more cost-effective than painted metal products prepared in other manufacturers’ in-house painting operations. Painted metal coils also offer manufacturers the opportunity to produce a broader and more aesthetically pleasing range of products.

Sales, Marketing and Customers

Metal Components. We sell metal components directly to regional manufacturers, contractors, subcontractors, distributors, lumberyards, cooperative buying groups and other customers under the brand names “Metal Building Components,” “MBCI,” “American Building Components,” “ABC,” “Insulated Panel Systems,” “IPS” and “NCI Metal Depots.” Roll-up doors, sectional doors, interior and exterior doors, interior partitions and walls, header panels and trim are sold directly to contractors and other customers under the brand names “Doors and Building Components,” “DBCI” or “Able Doors.” These components also are produced for integration into self storage and engineered building systems sold by us. We also operate five NCI Metal Depots retail stores in Texas and New Mexico that sell components directly to the public.

We market our components products within four product lines: commercial/industrial, architectural, agricultural and residential.

Customers include small, medium and large contractors, specialty roofers, regional fabricators, regional engineered building fabricators and end users. Commercial and industrial businesses are heavy users of metal components and metal buildings systems. Standing seam roof and architectural customers are growing in importance. As metal buildings become a more acceptable building alternative and aesthetics become an increasingly important consideration for end users of metal buildings, we believe that architects are participating in metal building design and purchase decisions to a greater extent. Wood frame builders also purchase our metal components through distributors, lumberyards, cooperative buying groups and chain stores for various uses, including agricultural buildings. Residential customers are generally contractors building upscale homes that require an architect-specified product.

Our metal components sales operations are organized into four geographic regions. Each region is headed by a general sales manager supported by individual plant sales managers. Each local sales office is located adjacent to a manufacturing plant and is staffed by a direct sales force responsible for contacting customers and architects and a sales coordinator who supervises the sales process from the time the order is received until it is shipped and invoiced. The regional and local focus of our customers requires extensive knowledge of local business conditions. During fiscal 2004, our largest customer for metal components accounted for less than 2% of our total sales.

We provide our customers with product catalogs tailored to our product lines, which include product specifications and suggested list prices. Some of our catalogs are available on-line through the Internet, which enables architects and other customers to download drawings for use in developing project specifications. Customers place orders via telephone or facsimile to a sales coordinator at the regional office who enters it onto a standard order form. The form is then sent via computer to the plant and downloaded automatically to the production machines. We expect that our acquisition of Steelbuilding.com will help us improve our online sales and marketing and make us the leading online provider of components as well as engineered building systems.

Engineered Building Systems. We sell engineered building systems to builders, general contractors, developers and end users nationwide under the brand names “Metallic,” “Mid-West Steel,” “A & S,” “Classic,” and “Mesco.” We market engineered building systems through an in-house sales force to authorized builder networks of over 1,600 builders. We market engineered building systems under the brand name “Mid-West Steel” directly to contractors in Texas and surrounding states using an in-house sales force. We also sell engineered building systems under the names “All American” and “Steel Systems” to various private labels.

Our authorized builder networks consist of independent general contractors that market our Mid-West Steel Buildings, Metallic Buildings, A & S Buildings and Mesco products to end users. Most of our sales of engineered building systems outside of Texas and surrounding states are through our authorized builder networks. We rely upon maintaining a satisfactory business relationship for continuing job orders from our authorized builders and do not consider the builder agreements to be material to our business. During fiscal 2004, our largest customer for engineered building systems accounted for less than 1% of our total sales.

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We enter into an agreement with an authorized builder, which generally grants the builder the non-exclusive right to market our products in a specified territory. The agreement is cancelable by either party on 60 days’ notice. The agreement does not prohibit the builder from marketing engineered building systems of other manufacturers. We establish an annual sales goal for each builder and provide the builder with sales and pricing information, design and engineering manuals, drawings and assistance, application programs for estimating and quoting jobs and advertising and promotional literature. We also defray a portion of the builder’s advertising costs and provide volume purchasing and other pricing incentives to encourage it to deal exclusively or principally with us. The builder is required to maintain a place of business in its designated territory, provide a sales organization, conduct periodic advertising programs and perform construction, warranty and other services for customers and potential customers. An authorized builder usually is hired by an end-user to erect an engineered building system on the customer’s site and provide general contracting and other services related to the completion of the project. We sell our products to the builder, which generally includes the price of the building as a part of its overall construction contract with its customer.

Our patented Long Bay® System provides us with an entree to builders that focus on larger buildings. This also provides us with new opportunities to cross-sell our other products to these new builders and to compete with the conventional construction industry.

We have a National Accounts program, which is designed to provide our builders with access to the largest contractors and developers in the United States. We currently have a team of nine people who comprise our National Accounts group. We market our engineered building systems and our patented Long Bay® System under this program using the brand name “Metallic Buildings.”

We expect that our acquisition of Heritage Building Systems will allow us to increase our sales of engineered building systems by providing greater access and distribution to the evolving agricultural segment.

Metal Coil Coating. We have a small number of national accounts for our metal coil coating products and services. Each of our metal coil coating facilities has its own sales manager and sales staff. We market our metal coil coating products under the brand names DOUBLECOTE,” “Metal Coaters” and “Metal-Prep” and sell our products and services principally to manufacturers of painted steel products and steel mills, as well as to our own metal components and engineered building segments. During fiscal 2004, our largest customer accounted for 3% of our total sales.

Manufacture and Design

Metal Components. We operate 25 facilities in 15 states used for manufacturing of metal components for the non-residential construction industry, including four facilities for our door operations. With the exception of our architectural and standing seam products, we are not involved in the design process for the components we manufacture. Our doors, interior partitions and other related panel and trim products are manufactured at dedicated plants in Georgia, Texas and Arizona. Orders are processed at the Texas and Georgia plants and sent to the appropriate plant, which is generally determined based upon the lowest shipping cost.

Metal component products are roll-formed or fabricated at each plant using roll-formers and other metal working equipment. In roll forming, pre-finished coils of steel are unwound and passed through a series of progressive forming rolls which form the steel into various profiles of medium-gauge structural shapes and light-gauge roof and wall panels.

Engineered Building Systems. We operate seven facilities in four states, including our new state-of-the art facility located in Lexington, Tennessee, and one in Mexico, where our Long Bay® System is manufactured, for manufacturing and distributing engineered building systems. After we receive an order, our engineers design the engineered building system to meet the customer’s requirements and to satisfy applicable building codes and zoning requirements. To expedite this process, we use computer-aided design and engineering systems to generate engineering and erection drawings and a bill of materials for the manufacture of the engineered building system. We employ approximately 253 engineers and draftsmen in this area.

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Once the specifications and designs of the customer’s project have been finalized, the manufacturing of frames and other building systems begins at one of our five frame manufacturing facilities in Texas, Georgia, Tennessee or Mexico. The fabrication of the primary structural framing consists of a process in which steel plates are punched and sheared and then routed through an automatic welding machine and sent through further fitting and welding processes. The secondary structural framing and the covering subsystem are roll-formed steel products that are manufactured at our full manufacturing facilities as well as our components plants.

Once manufactured, structural framing members and metal roof and wall systems are shipped to the job site for assembly. Since on-site construction is performed by an unaffiliated, independent general contractor, usually one of our authorized builders, we generally are not responsible for claims by end users or owners attributable to faulty on-site construction. The time elapsed between our receipt of an order and shipment of a completed building system has typically ranged from four to eight weeks, although delivery can extend somewhat longer if engineering and drafting requirements are extensive.

Metal Coil Coating. We operate five metal coil coating facilities in five states, two of which are used for hot rolled, medium gauge steel coils and three of which are used for painting light gauge steel coils. These facilities primarily service our needs, but we also process steel coils at these facilities for other customers. Metal coil coating processes involve applying various types of chemical treatments and paint systems to flat rolled continuous coils of metal, including steel and aluminum. These processes give the coils a baked-on finish that both protects the metal and makes it more attractive. Initially, various metals in coil form are flattened, cleaned and pretreated. The metal is then coated, oven cured, cooled, recoiled and packaged for shipment. Slitting and embossing services can also be performed on the coated metal before shipping according to customer specifications. Hot roll steel coils typically are used in the production of secondary structural framing of metal buildings and other structural applications. Painted light gauge steel coils are used in the manufacture of products for building exteriors, metal doors, lighting fixtures, ceiling grids, water heaters and other products.

Raw Materials

The principal raw material used in manufacturing of our metal components and engineered building systems is steel. Our various products are fabricated from steel produced by mills including bars, plates, structural shapes, sheets, hot rolled coils and galvanized or galvalume-coated coils. During fiscal 2004, we purchased approximately 32% of our steel requirements from U.S. Steel, 28% from International Steel Group, Inc. and 15% from Nucor Steel. No other steel supplier accounted for more than 7% of steel purchases for the same period. We believe concentration of our steel purchases among a small group of suppliers that have mills and warehouse facilities close to our facilities enables us, as a large customer of those suppliers, to obtain better pricing, service and delivery. These suppliers generally maintain an inventory of the types of materials we require.

Normally, we do not keep on hand raw materials in excess of our current manufacturing requirements, and in prior years we kept steel on a consignment basis for our metal coil coating segment. However, in 2004 the raw materials we kept on hand increased significantly, from $59.3 million at November 1, 2003 to $138.4 million at October 30, 2004. This increase was primarily due to increased steel prices, the purchase of foreign steel on the spot market and the reduction of the consigned inventory programs by the steel mills.

We do not have any long-term contracts for the purchase of raw materials. A prolonged labor strike against one of our principal domestic suppliers, or financial or other difficulties of a principal supplier that affects its ability to produce steel, could have a material adverse effect on our operations. Alternative sources, however, including foreign steel, are currently believed to be sufficient to maintain required deliveries. During fiscal 2002 and the first nine months of fiscal 2003 our then existing two principal steel suppliers both operated under the protection of bankruptcy laws, but we did not experience unusual shortages, delivery or quality issues with those suppliers during that period. The assets of both suppliers were acquired by U.S. Steel and International Steel Group in the third quarter of 2003. In October 2004, International Steel Group announced that it had entered into a definitive agreement to merge with Ispat International N.V. If the transaction closes, the combined company will be renamed Mittal Steel Company N.V. We do not expect that the merger will have any material effect on our consolidated financial position or results of operations.

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Backlog

At October 30, 2004, the total backlog of orders for our products believed by us to be firm was $153.1 million. This compares with a total backlog for our products of $169.0 million at November 1, 2003. Backlog primarily consists of engineered building systems. Job orders generally are cancelable by customers at any time for any reason. Occasionally, orders in the backlog are not completed and shipped for reasons that include changes in the requirements of the customers and the inability of customers to obtain necessary financing or zoning variances. None of the backlog at October 30, 2004 currently is scheduled to extend beyond fiscal 2005.

Competition

We and other manufacturers of metal components and engineered building systems compete in the building industry with all other alternative methods of building construction such as tilt-wall, concrete and wood, single ply and built up, all of which may be perceived as more traditional, more aesthetically pleasing or having other advantages over our products. We compete with all manufacturers of building products, from small local firms to large national firms.

In addition, competition in the metal components and engineered building systems market of the building industry is intense. It is based primarily on:

•   quality;

•   service;

•   delivery;

•   ability to provide added value in the design and engineering of buildings;

•   price; and

•   speed of construction.

We compete with a number of other manufacturers of metal components and engineered building systems for the building industry, ranging from small local firms to large national firms. Most of these competitors operate on a regional basis, although we believe that at least four other manufacturers of engineered building systems and three manufacturers of metal components have nationwide coverage.

We operate 37 facilities in 16 states and Mexico used for manufacturing of metal components and engineered building systems for the building industry, including four for our doors operations. We believe this broad geographic penetration gives us an advantage over our components and building competitors because major elements of a customer’s decision are the speed and cost of delivery from the manufacturing facility to the product’s ultimate destination. We own or lease a fleet of trucks to deliver our products to our customers in a more timely manner than most of our competitors.

We compete with a number of other providers of metal coil coating services to manufacturers of metal components and engineered building systems for the building industry, ranging from small local firms to large national firms. Most of these competitors operate on a regional basis, although we believe that at least three other providers of light gauge metal coil coating services and two other providers of hot rolled, medium gauge metal coil coating services have nationwide coverage. Competition in the metal coil coating industry is intense and is based primarily on quality, service, delivery and price.

Environmental Matters

The operation of our business is subject to stringent and complex laws and regulations pertaining to health, safety and the environment. As an owner or operator of manufacturing facilities, we must comply with these laws

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and regulations at the federal, state and local levels. These laws and regulations can restrict or impact our business activities in many ways, such as:

•   restricting the way we can handle or dispose of our waste;

•   requiring remedial action to mitigate pollution conditions caused by our operations or attributable to former operators; and

•   enjoining the operations of facilities deemed in non-compliance with permits issued pursuant to such environmental laws and regulations.

Failure to comply with these laws and regulations may trigger a variety of administrative, civil and criminal enforcement measures, including the assessment of monetary penalties, the imposition of remedial requirements, and the issuance of orders enjoining future operations. Certain environmental statutes impose strict, joint and several liability for costs required to clean up and restore sites where hazardous substances have been disposed of or otherwise released. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of substances or other waste products into the environment.

The trend in environmental regulation is to place more restrictions and limitations on activities that may affect the environment. As a result, there can be no assurance as to the amount or timing of future expenditures for environmental compliance or remediation, and actual future expenditures may be different from the amounts we currently anticipate. We try to anticipate future regulatory requirements that might be imposed and plan accordingly to remain in compliance with changing environmental laws and regulations and to minimize the costs of such compliance.

We do not believe that compliance with federal, state or local environmental laws and regulations will have a material adverse effect on our business, financial position or results of operations. In addition, we believe that the various environmental activities in which we are presently engaged are not expected to materially interrupt or diminish our operational ability to manufacture our products. We cannot assure you, however, that future events, such as changes in existing laws, the promulgation of new laws, or the development or discovery of new facts or conditions will not cause us to incur significant costs. The following is a discussion of certain environmental and safety concerns that relate to our business.

Air Emissions. Our operations are subject to the federal Clean Air Act and comparable state laws and regulations. These laws and regulations regulate emissions of air pollutants from various industrial sources, including our manufacturing facilities, and also impose various monitoring and reporting requirements. Such laws and regulations may require that we obtain pre-approval for the construction or modification of certain projects or facilities expected to produce air emissions or result in the increase of existing air emissions, obtain and strictly comply with air permits containing various emissions and operational limitations, or utilize specific emission control technologies to limit emissions. Our failure to comply with these requirements could subject us to monetary penalties, injunctions, conditions or restrictions on operations, and, potentially, criminal enforcement actions. We will be required to incur certain capital and other expenditures in the future for air pollution control equipment in connection with obtaining and maintaining operating permits and approvals for air emissions. We believe, however, that our operations will not be materially adversely affected by such requirements, and the requirements are not expected to be any more burdensome to us than to any other similarly situated companies.

Hazardous and Solid Waste. Our operations generate wastes, including some hazardous wastes, that are subject to the federal Resource Conservation and Recovery Act, or RCRA, and comparable state laws, which impose detailed requirements for the handling, storage, treatment and disposal of hazardous and solid waste. For example, ordinary industrial waste such as paint waste, waste solvents, and waste oils may be regulated as hazardous waste. RCRA currently exempts many of our manufacturing wastes from classification as hazardous waste. However, these non-hazardous or exempted wastes are still regulated under state law or the less stringent solid waste requirements of RCRA.

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Site Remediation. The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or CERCLA, also known as “Superfund,” and comparable state laws impose liability, without regard to fault or the legality of the original conduct, on certain classes of persons responsible for the release of hazardous substances into the environment. Such classes of persons include the current and past owners or operators of sites where a hazardous substance was released, and companies that disposed or arranged for disposal of hazardous substances at offsite locations such as landfills. In the course of our ordinary operations we will generate wastes that may fall within the definition of a “hazardous substance.” CERCLA authorizes the EPA and, in some cases, third parties to take actions in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. Under CERCLA, we could be subject to joint and several liability for the costs of cleaning up and restoring sites where hazardous substances have been released, for damages to natural resources, and for the costs of certain health studies.

We currently own or lease, and have in the past owned or leased, numerous properties that for many years have been used for manufacturing operations. Hazardous substances or wastes may have been disposed of or released on or under the properties owned or leased by us, or on or under other locations where such wastes have been taken for disposal. In addition, some of these properties have been operated by third parties or by previous owners whose treatment and disposal or release of hazardous substances or wastes was not under our control. These properties and the substances disposed or released on them may be subject to CERCLA, RCRA and analogous state laws. Under such laws, we could be required to remove previously disposed wastes (including waste disposed of by prior owners or operators), remediate contaminated property (including groundwater contamination, whether from prior owners or operators or other historic activities or spills), or perform remedial plugging or pit closure operations to prevent future contamination.

We have discovered the existence of polychlorinated biphenyls (“PCBs”) and heavy metals at our Metal Prep Houston site, which is located in an industrial area in Houston, Texas. Soil borings have been sampled and analyzed to determine the impact on the soil at this site, and the findings indicate that remediation of the site will likely be necessary. We have filed an application with the Texas Commission of Environmental Quality (“TCEQ”) for entry into the Voluntary Cleanup Program. Based upon an analysis of projected remediation costs of the known contamination, we currently estimate that we will spend approximately $2.5 million to remediate this site, which includes future environmental consulting fees, oversight expenses and additional testing expenses. We have made an accrual in the amount of $2.5 million ($1.5 million and $1.0 million in fiscal 2003 and 2004, respectively) to cover the estimated anticipated costs of remediation of these environmental issues. We are, however, still in the process of conducting sampling activities, the results of which may require us to change our current work plan. Because the cleanup has not yet started and is expected to be a very complex process that may require changes in the current plan as the work progresses, because we are still in discussions with TCEQ as to the extent of additional investigation that needs to be performed to fully delineate the issues, and because we will need to work with both state and federal regulators to complete the investigation and remediation, we can give you no assurance that actual costs will not exceed our estimate, perhaps significantly. We have a contractual indemnity by the immediate prior owner of the property, which we believe obligates that party to reimburse our response costs with respect to this condition. We have brought suit against the prior owner asserting this indemnity, and that party has disputed liability. We are also investigating other potentially responsible parties from whom to seek contribution and/or indemnification. However, it is possible that our efforts to obtain reimbursement of our response costs at this site may not be successful or may not prove to be cost-effective for us.

Water Discharges. Our operations are subject to the Federal Water Pollution Control Act of 1972, as amended, also known as the Clean Water Act, and analogous state laws and regulations. These laws and regulations impose detailed requirements and strict controls regarding the discharge of pollutants into waters of the United States. The unpermitted discharge of pollutants, including discharges resulting from a spill or leak incident, is prohibited. Any unpermitted release of pollutants from our facilities could result in fines or penalties as well as significant remedial obligations.

Employee Health and Safety. We are subject to the requirements of the Occupational Safety and Health Act, referred to as OSHA, and comparable state laws that regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires that information be maintained about hazardous materials used or produced in our operations and that this information be provided to employees, state and local government authorities and citizens.

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Zoning and Building Code Requirements

The engineered building systems and components we manufacture must meet zoning, building code and uplift requirements adopted by local governmental agencies. We believe that our products are in substantial compliance with applicable zoning, code and uplift requirements. Compliance does not have a material adverse affect on our business.

Patents, Licenses and Proprietary Rights

We have a number of United States patents and pending patent applications, including patents and applications relating to metal roofing systems, metal overhead doors, our new pier and header system and our patented Long Bay® System. We do not, however, consider patent protection to be a material competitive factor in our industry. We also have several registered trademarks and pending registrations in the United States.

Employees

As of October 30, 2004, we had approximately 3,801 employees, of whom 2,873 were manufacturing and engineering personnel. We regard our employee relations as satisfactory.

Our U.S. employees are not represented by a labor union or covered by a collective bargaining agreement. The United Steel Workers of America has periodically petitioned the National Labor Relations Board to be recognized as the collective bargaining representative of the production and maintenance employees at various facilities, but has lost the resulting union election each time. The last elections were at our Rancho Cucamonga, California facility in August 1998 and November 1999 and at our Jackson, Mississippi facility in May 2004. Hourly employees of our Monterrey, Mexico facility are represented by the Federacion Nacional de Sindicatos Independientes.

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Risk Factors

Our businesses are cyclical, and we cannot predict the timing or severity of future economic or industry downturns.

The non-residential construction industry is highly sensitive to national and regional economic conditions. From time to time, it has been adversely affected in various parts of the country by unfavorable economic conditions, low use of manufacturing capacity, high vacancy rates, changes in tax laws affecting the real estate industry, high interest rates and the unavailability of financing. Sales of our products may be adversely affected by weakness in demand for our products within particular customer groups, or a recession in the general construction industry or particular geographic regions. We cannot predict the timing or severity of future economic or industry downturns. Any economic downturn, particularly in states where many of our sales are made, could have a material adverse effect on our results of operations and financial condition.

Our businesses are seasonal, and our results of operations during our first two fiscal quarters may be adversely affected by seasonality.

The metal components, engineered building systems and metal coil coating businesses, and the construction industry in general, are seasonal in nature. Sales normally are lower in the first calendar quarter of each year compared to the other three quarters because of unfavorable weather conditions for construction and typical business planning cycles affecting construction. This seasonality adversely affects our results of operations for the first two fiscal quarters. Prolonged severe winter weather conditions can delay construction projects and otherwise adversely affect our business.

Continued price volatility and supply constraints in the steel market could prevent us from meeting delivery schedules to our customers or reduce our profit margins.

Our business is heavily dependent on the prices and supply of steel, which is the principal raw material used in our products. The steel industry is highly cyclical in nature, and steel prices have recently been volatile and may remain volatile in the future. Steel prices are influenced by numerous factors beyond our control, including general economic conditions, competition, labor costs, production costs, import duties and other trade restrictions. Beginning in our second fiscal quarter, there have been unusually rapid and significant pricing increases and severe shortages in the steel industry, due in part to increased demand from China’s expanding economy and high energy prices. 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, during fiscal 2004, we made some purchases in advance of announced steel price increases. We can give you no assurance that steel will remain available or that prices will not continue to be volatile. While most of our 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, we may, for competitive or other reasons, 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 our customers, 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.

We rely on two major suppliers for our supply of steel, and may be adversely affected by the bankruptcy, financial condition or other factors affecting those suppliers.

Our primary steel suppliers during fiscal 2003, Bethlehem Steel Corporation and National Steel Corporation, filed for protection under Federal bankruptcy laws in 2001 and 2002, respectively. During the third quarter of fiscal 2003, U.S. Steel bought substantially all of the integrated steel-making assets of National Steel, and International Steel Group, Inc. acquired the assets of Bethlehem Steel. During fiscal 2004, we purchased approximately 60% of our steel requirements from U.S. Steel and International Steel Group, Inc. Furthermore, a prolonged labor strike against one or more of our principal domestic suppliers could have a material adverse effect on our operations. If one or more of our current suppliers is unable for financial or any other reason to continue in business or to produce steel sufficient to meet our requirements, essential supply of our primary raw materials could be temporarily interrupted and adversely affect our business.

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We are subject to preference claims by our former steel suppliers.

In late 2003 and early 2004, a number of lawsuits were filed against several of our operating subsidiaries by Bethlehem Steel Corporation and National Steel Corporation in their respective bankruptcy proceedings, seeking reimbursement of preferential transfers allegedly made by the respective debtors in the 90 day period preceding their bankruptcy filings. Bethlehem alleges it made preferential payments to our subsidiaries of approximately $7.7 million, while National claims preferential payments in the aggregate amount of $6.3 million. We deny the material allegations in the lawsuits and are vigorously defending against these claims. While we are not able to predict whether we will incur any liability or to accurately estimate the damages, or the range of damages, if any, we might incur in connection with these proceedings, it is possible that these lawsuits will adversely affect our business.

Failure to retain key personnel could hurt our operations.

Our success depends to a significant degree upon the efforts, contributions and abilities of our senior management, plant managers and other highly skilled personnel, including our sales executives. If we do not retain the services of our key personnel, such loss may adversely affect our customer relationships, results of operations and financial condition.

We incur costs to comply with environmental laws and have liabilities for environmental cleanups.

Because we have air emissions, we discharge wastewater, we own and operate real property, and we handle hazardous substances and solid waste, we incur costs and liabilities to comply with environmental laws and regulations and may incur significant additional costs as those laws and regulations change in the future or if there is an accidental release of hazardous substances into the environment. The operations of our manufacturing facilities are subject to stringent and complex federal, state and local environmental laws and regulations. These include, for example, (i) the federal Clean Air Act and comparable state laws and regulations that impose obligations related to air emissions, (ii) the federal Resource Conservation and Recovery Act, or RCRA, and comparable state laws that impose requirements for the discharge of waste from our facilities and (iii) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA, also known as “Superfund,” and comparable state laws that regulate the cleanup of hazardous substances that may have been released at properties currently or previously owned or operated by us or locations to which we have sent waste for disposal. Failure to comply with these laws and regulations may trigger a variety of administrative, civil and criminal enforcement measures, including the assessment of monetary penalties, the imposition of remedial requirements, and the issuance of orders enjoining future operations.

Certain environmental statutes, including the Clean Air Act, RCRA, CERCLA and the federal Water Pollution Control Act of 1972, also known as the Clean Water Act, and analogous state laws and regulations, impose strict, joint and several liability for costs required to clean up and restore sites where hazardous substances have been disposed or otherwise released. CERCLA also provides for natural resource damages against responsible parties at these sites. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of hazardous substances or other waste products into the environment. We at times incur costs and liabilities in our business due to the need to perform cleanups required in light of our operations or because of pre-existing contamination resulting from historical operations and waste disposal practices. For example, we are currently undertaking a remediation of subsurface contamination at our Metal Prep Houston site, located in an industrial area in Houston, Texas, where we have discovered the existence of polychlorinated biphenyls (“PCBs”) and heavy metals. This process could subject us to substantial liabilities arising from environmental cleanup and restoration costs. Based upon an analysis of projected remediation costs of the known contamination, we currently estimate that we will spend approximately $2.5 million to remediate this site. We may not be able to recover these costs from potential sources of indemnity. Moreover, the possibility exists that stricter laws, regulations or enforcement policies could significantly increase our compliance costs and the cost of any remediation that may become necessary. Please read “Business — Environmental Matters.”

We believe our former president and CEO is starting up a business that will compete with us.

We believe that Johnie Schulte, our former President and CEO, is starting up a business that will compete with us in the Houston area in our metal components and engineered building systems business segments. Although

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we are challenging the actions of and have initiated legal action against Mr. Schulte based on a non-compete agreement, we may not be successful in such action. If Mr. Schulte is able to compete successfully against us, such competition could adversely affect us.

Our businesses are highly competitive.

Competition in the metal components and metal buildings markets of the building industry and in the metal coil coating industry is intense. It is based primarily on:

•   quality;

•   service;

•   delivery;

•   ability to provide added value in the design and engineering of buildings;

•   price; and

•   speed of construction in buildings and components.

We compete with a number of other manufacturers of metal components and engineered building systems and providers of coil coating services ranging from small local firms to large national firms. In addition, we and other manufacturers of metal components and engineered building systems compete with alternative methods of building construction. If these alternative building methods compete successfully against us, such competition could adversely affect us.

Our stock price has been and may continue to be volatile.

The trading price of our common stock has fluctuated in the past and is subject to significant fluctuations in response to the following factors, some of which are beyond our control:

•   variations in quarterly operating results;

•   changes in earnings estimates by analysts;

•   our announcements of significant contracts, acquisitions, strategic partnerships or joint ventures;

•   general conditions in the metal components and engineered building systems industries;

•   fluctuations in stock market price and volume; and

•   other general economic conditions.

In recent years, the stock market in general has experienced extreme price and volume fluctuations that have affected the market price for many companies in industries similar to ours. Some of these fluctuations have been unrelated to the operating performance of the affected companies. These market fluctuations may decrease the market price of our common stock in the future.

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Our acquisition strategy may be unsuccessful if we incorrectly predict operating results, are unable to identify and complete future acquisitions and integrate acquired assets or businesses, are unable to complete any such acquisition within the time period permitted under our existing senior credit agreement or are unable to raise alternative financing on acceptable terms.

We have a history of expansion through acquisitions, and we believe that as our industry continues to consolidate, our future success will depend, in part, on our ability to complete acquisitions and effectively integrate the operations or management of acquired assets or businesses. Acquisitions present other risks and challenges, including the risk of incorrect assumptions regarding the future results of the acquired operations or expected cost reductions or other synergies expected to be realized as a result of acquiring such operations and diversion of management’s attention from existing operations.

Although we expect acquisitions to be an integral part of our future growth, we are not currently in discussions or negotiations with any potential acquisition candidates. We can provide no assurance that we will be successful in identifying or completing any acquisitions or that any businesses or assets that we are able to acquire will be successfully integrated into our existing business. We cannot predict the effect, if any, that any announcement or consummation of an acquisition would have on the trading price of our common stock or the notes.

We expect to use a portion of the net proceeds from our offering of convertible notes in November 2004 to complete future acquisitions. To the extent we are unable to use the net proceeds from the convertible notes offering to complete such acquisitions within 12 months (and in certain circumstances, 18 months) of the closing date of the convertible notes offering or to repay indebtedness outstanding under our revolving credit facility that was incurred to finance permitted acquisitions, we will be required to use such net proceeds to prepay outstanding indebtedness under our senior credit agreement. In addition, if we are unable to use the net proceeds of the offering within the time periods described above, we may be unable to raise, on terms we find acceptable, any alternative debt or equity financing that may be required to complete any future contemplated acquisitions or that complies with the terms of our existing senior credit agreement.

We may not be able to service our debt.

In connection with our acquisition activity, especially the MBCI acquisition in 1998, we have incurred debt. We may also incur additional debt from time to time to finance additional acquisitions, capital expenditures or for other purposes if we comply with the restrictions in our senior credit agreement.

The debt that we carry may have important consequences to us, including the following:

•   Our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or additional financing may not be available on favorable terms.

•   We must use a portion of our cash flow to pay the principal and interest on our debt. These payments reduce the funds that would otherwise be available for our operations and future business opportunities.

•   A substantial decrease in our net operating cash flows could make it difficult for us to meet our debt service requirements and force us to modify our operations.

•   We may be more vulnerable to a downturn in our business or the economy generally.

If we cannot service our debt, we will be forced to take actions such as reducing or delaying acquisitions and/or capital expenditures, selling assets, restructuring or refinancing our debt or seeking additional equity capital. We can give you no assurance that we can do any of these things on satisfactory terms or at all.

In addition, under the terms of our convertible senior subordinated notes, the net share settlement provision requires that upon conversion we pay the principal return in cash; provided, that we are in compliance with the financial covenants of our existing or future credit facilities. Assuming that we have enough cash to pay the principal return, we may be cash constrained as a result, and this could adversely affect our ability to service our debt, borrow money or conduct our operations. The conversion price of the notes is $40.14 and the market price condition which triggers holders’ conversion rights is pegged to a stock price of $48.17.

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Restrictive covenants in our existing senior credit agreement may adversely affect us.

On July 18, 2004, we entered into a $325 million senior secured credit agreement with a group of lenders. We must comply with operating and financing restrictions in that agreement. We may also have similar restrictions with any future debt. These restrictions affect, and in many respects limit or prohibit our ability to:

•   incur additional indebtedness;

•   make restricted payments, including dividends or other distributions;

•   incur liens;

•   make investments, including joint venture investments;

•   sell assets;

•   repurchase capital stock; and

•   merge or consolidate with or into other companies or sell substantially all our assets.

We are required to make mandatory prepayments on our existing senior credit agreement upon the occurrence of certain events, including the sale of assets and the issuance of debt or equity securities, in each case subject to certain limitations and conditions set forth in our existing senior credit agreement. Under the terms of our existing senior credit agreement, to the extent we do not use the proceeds of our November 2004 convertible notes offering to finance a permitted acquisition within 12 months (and in certain circumstances, 18 months) of the closing of the notes offering or to repay indebtedness outstanding under our revolving credit facility that was incurred to finance permitted acquisitions, we must apply the proceeds of the convertible notes offering to repay debt outstanding under our existing senior credit agreement. Our senior credit agreement also requires us to achieve specified financial and operating results and satisfy set financial tests relating to our consolidated net worth and our leverage, fixed charge coverage and senior debt ratios. These restrictions could limit our ability to plan for or react to market conditions or meet extraordinary capital needs or otherwise could restrict our activities. These restrictions could also adversely affect our ability to finance our future operations or capital needs or to engage in other business activities that would be in our interest.

Item 2.        Properties.

We conduct manufacturing operations at the following facilities:

Facility	Products	Square Feet		Owned or Leased
Chandler, Arizona	Doors and related metal components		35,000	Leased
Tolleson, Arizona	Metal components (1)		65,980	Owned
Atwater, California	Metal components (2)		112,200	Owned
Rancho Cucamonga, California	Metal coil coating		98,000	Owned
Adel, Georgia	Metal components (1)		59,550	Owned
Douglasville, Georgia	Metal components (3)		110,536	Owned
Douglasville, Georgia	Doors and related metal components		60,000	Owned
Marietta, Georgia	Metal coil coating		125,700	Owned
Tallapoosa, Georgia	Engineered building systems (4)		249,000	Leased
Mattoon, Illinois	Metal components (2)		115,480	Owned
Shelbyville, Indiana	Metal components (1)		66,450	Owned
Oskaloosa, Iowa	Metal components (5)		62,702	Owned
Nicholasville, Kentucky	Metal components (5)		41,280	Owned
Monterrey, Mexico	Engineered building systems (6)		237,476	Owned

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Facility	Products	Square Feet		Owned or Leased
Big Rapids, Michigan	Metal components (5)		54,640	Owned
Jackson, Mississippi	Metal components (5)		96,000	Owned
Jackson, Mississippi	Metal coil coating		363,200	Owned
Hernando, Mississippi	Metal components (1)		71,720	Owned
Hernando, Mississippi	End wall framing (9)		32,500	Owned
Omaha, Nebraska	Metal components (5)		51,750	Owned
Rome, New York	Metal components (5)		57,700	Owned
Oklahoma City, Oklahoma	Metal components (1)		59,695	Owned
Caryville, Tennessee	Engineered building systems (4)		193,800	Owned
Lexington, Tennessee	Engineered building systems (6)		140,404	Owned
Memphis, Tennessee	Metal coil coating		61,500	Owned
Ennis, Texas	Metal components (1)		33,000	Owned
Houston, Texas	Metal components (3)		209,355	Owned
Houston, Texas	Metal coil coating		39,550	Owned
Houston, Texas	Engineered building systems (7)		410,980	Owned
Houston, Texas	Doors and related metal components		23,625	Owned
Houston, Texas	Engineered building systems (4)		148,500	Owned
Houston, Texas	Sectional doors		49,600	Owned
Lubbock, Texas	Metal components (1)		64,320	Owned
San Antonio, Texas	Metal components (5)		52,360	Owned
Stafford, Texas	Metal components (8)		56,840	Leased
Salt Lake City, Utah	Metal components (3)		93,150	Owned
Colonial Heights, Virginia	Metal components (1)		37,000	Owned

(1)	Secondary structures and metal roof and wall systems.
(2)	End walls, secondary structures and metal roof and wall systems for components and engineered building systems.
(3)	Full components product range.
(4)	Primary structures, secondary structures and metal roof and wall systems for engineered building systems.
(5)	Metal roof and wall systems.
(6)	Primary structures for engineered building systems.
(7)	Structural steel.
(8)	Insulated panel systems.
(9)	End wall framing for engineered building systems.

We also operate five NCI Metal Depots facilities that sell our products directly to the public. In addition, we lease five facilities that serve as distribution centers for our sectional doors.

We also maintain several drafting office facilities in various states. We have short-term leases for these additional facilities.

We believe that our present facilities are adequate for our current and projected operations.

Additionally, we own approximately six acres of land in Houston, Texas and have a 60,000 square foot facility that is used as our principal executive and administrative offices. Approximately 14,000 square feet of this

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facility is leased to third parties for a term of five years with approximately one and one-half years remaining on the lease term.

During fiscal 2003, we closed our manufacturing facility located in Southlake, Texas, which we are holding for sale. We are also holding for sale our manufacturing facility located in Chester, South Carolina, which we closed during fiscal 2002.

Item 3.        Legal Proceedings.

As a result of our restatement of our financial results for the last half of fiscal 1999, all of fiscal 2000 and the first quarter of fiscal 2001, several class action lawsuits were filed against us and certain of our current officers in the United States District Court for the Southern District of Texas, commencing in April 2001. The lawsuits were consolidated into one class action lawsuit on August 16, 2001, and the plaintiffs filed a consolidated amended complaint on February 1, 2002. In the consolidated complaint the plaintiffs alleged, among other things, that during the financial periods that were restated, we made materially false and misleading statements about the status and effectiveness of a management information and accounting system used by our components division and costs associated with that system, failed to assure that the system maintained books and records accurately reflecting inventory levels and costs of goods sold, failed to maintain internal controls on manual accounting entries made to certain inventory-related accounts in an effort to correct the data in the system, otherwise engaged in improper accounting practices that overstated earnings, and issued materially false and misleading financial statements. The plaintiffs further alleged that the individual defendants traded in our common stock while in possession of material, non-public information regarding the foregoing. The plaintiffs in the consolidated complaint asserted various claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and sought unspecified amounts of compensatory damages, interest and costs, including legal fees. On March 15, 2002, we filed a motion to dismiss plaintiffs’ consolidated complaint and a memorandum in support. In January 2004, we entered into an agreement to settle the lawsuits, without admitting any of the allegations against us or our officers, and agreed to pay $7.0 million for the dismissal of all claims, which is within our insurance coverage limits and has been agreed to by our insurance carriers. On June 10, 2004, the court agreed to the settlement and issued a final order dismissing the case with prejudice.

In late 2003, a number of lawsuits were filed against several of our operating subsidiaries by Bethlehem Steel Corporation and National Steel Corporation in their respective bankruptcy proceedings, seeking reimbursement of preferential transfers allegedly made by the respective debtors in the 90 day period preceding their bankruptcy filings. Bethlehem alleges it made preferential payments to our subsidiaries of approximately $7.7 million, while National claims preferential payments in the aggregate amount of $6.3 million. We have denied the material allegations in the lawsuits and are vigorously defending against these claims. While we are not able to predict whether we will incur any liability or to accurately estimate the damages, or the range of damages, if any, we might incur in connection with these proceedings, we believe that these legal proceedings will not have a material adverse effect on our business, consolidated financial condition or results of operations.

We have discovered the existence of polychlorinated biphenyls (“PCBs”) and heavy metals at our Metal Prep Houston site, which is located in an industrial area in Houston, Texas. Soil borings have been sampled and analyzed to determine the impact on the soil at this site, and the findings indicate that remediation of the site will likely be necessary. We have filed an application with the Texas Commission of Environmental Quality (“TCEQ”) for entry into the Voluntary Cleanup Program. Based upon an analysis of projected remediation costs of the known contamination, we currently estimate that we will spend approximately $2.5 million to remediate this site, which includes future environmental consulting fees, oversight expenses and additional testing expenses. We have made an accrual in the amount of $2.5 million ($1.5 million and $1.0 million in fiscal 2003 and 2004, respectively) to cover the estimated anticipated costs of remediation of these environmental issues. We are, however, still in the process of conducting sampling activities, the results of which may require us to change our current work plan. Because the cleanup has not yet started and is expected to be a very complex process that may require changes in the current plan as the work progresses, because we are still in discussions with TCEQ as to the extent of additional investigation that needs to be performed to fully delineate the issues, and because we will need to work with both state and federal regulators to complete the investigation and remediation, we can give you no assurance that actual costs will not exceed our estimate, perhaps significantly. We have a contractual indemnity by the immediate prior owner of the property, which we believe obligates that party to reimburse our response costs with respect to this condition. We

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have brought suit against the prior owner asserting this indemnity, and that party has disputed liability. We are also investigating other potentially responsible parties from whom to seek contribution and/or indemnification. However, it is possible that our efforts to obtain reimbursement of our response costs at this site may not be successful or may not prove to be cost-effective for us.

On September 8, 2004, we filed suit in the 280th Judicial District Court of Harris County, Texas against Johnie Schulte, our former President and CEO, because we believe he is violating covenants he has with us prohibiting him from using or divulging our confidential information, soliciting our employees to leave their employment with us, and competing with us. In our complaint, we asked the court to rule that the covenants made by Mr. Schulte are enforceable and to enjoin Mr. Schulte from further violations. Prior to filing the lawsuit, we conducted an investigation in an effort to determine whether Mr. Schulte was in violation of the restrictive covenants. We also asked the court to declare that we could terminate a stream of payments totaling over $3.6 million over a period of ten years to Mr. Schulte because he has violated these covenants.

From time to time, we are involved in various other legal proceedings and contingencies that are considered to be in the ordinary course of business. While we are not able to predict whether we will incur any liability in excess of insurance coverages or to accurately estimate the damages, or the range of damages, if any, that we might incur in connection with these legal proceedings, we believe that these legal proceedings will not have a material adverse effect on our business, consolidated financial condition or results of operations

Item 4.        Submission of Matters to a Vote of Security Holders.

Not applicable.

PART II

Item 5.        Market for Registrant’s Common Equity and Related Stockholder Matters.

The information required by this Item regarding the market for our common stock is incorporated by reference from the information in our 2004 Annual Report to Shareholders under the caption “Price Range of Common Stock.”

On December 8, 2004, we purchased substantially all of the operating assets of Heritage Building Systems, Inc. and Steelbuilding.com, Inc., affiliated companies headquartered in Little Rock, Arkansas, for a combined purchase price of approximately $26 million, including $6 million in our common stock, par value $0.01 per share (199,767 shares), and assumed liabilities of approximately $2 million. The shares were issued to certain of the shareholders of Heritage Building Systems and Steelbuilding.com in consideration of non-competition covenants entered into by such shareholders in connection with the transaction. The shares were issued in reliance on the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.

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The following table shows the Company’s purchases of its common stock during the fourth quarter of fiscal 2004:

ISSUER PURCHASES OF EQUITY SECURITIES

				(d) Maximum Number
				(or Approximate
			(c) Total Number of	Dollar Value) of
			Shares Purchased as	Shares that May Yet
		(b) Average Price	Part of Publicly	be Purchased Under
	(a) Total Number of	Paid per Share (or	Announced Plans or	the Plans or
Period	Shares Purchased	Unit)	Programs	Programs
August 1, 2004 to August 28, 2004					1,198,992
August 29, 2004 to September 25, 2004					1,198,992
September 26, 2004 to October 30, 2004					1,198,992
Total					1,198,992

(1) On November 15, 1999, the Company publicly announced that its board of directors authorized the repurchase of 1.0 million shares of its common stock. On November 9, 2000, the Company publicly announced that its board of directors authorized the repurchase of up to of 1.5 million shares of its common stock. There is no expiration date for the Company’s repurchase program.

Item 6.        Selected Financial Data.

The information required by this Item is incorporated by reference from the information in our 2004 Annual Report to Shareholders under the caption “Selected Financial Data.”

Item 7.        Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The information required by this Item is incorporated by reference from the information in our 2004 Annual Report to Shareholders under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 7A.        Quantitative and Qualitative Disclosures About Market Risk.

The information required by this Item is incorporated by reference from the information in our 2004 Annual Report to Shareholders under the caption “Market Risk Disclosure”

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Item 8.        Financial Statements and Supplementary Data.

The following consolidated financial statements and supplementary financial information are incorporated by reference from the indicated pages in our 2004 Annual Report to Shareholders.

	Pages of Annual
	Report to
	Shareholders
Selected quarterly financial data		28
Consolidated statements of operations for each of the three fiscal years in the period ended October 30, 2004		29
Consolidated balance sheets at October 30, 2004 and November 1, 2003		30
Consolidated statements of cash flows for each of the three fiscal years in the period ended October 30, 2004		31
Consolidated statements of shareholders’ equity for each of the three fiscal years in the period ended October 30, 2004		32
Notes to consolidated financial statements		33-47
Report of independent registered public accounting firm		48

Item 9.        Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A.        Controls and Procedures.

Disclosure Controls and Procedures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of the our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation, the CEO and the CFO concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Internal Control over Financial Reporting. During the fourth quarter of fiscal 2004, we have not made any change to our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our board of directors, management and other personnel, 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 and includes those policies and procedures that:

•   pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

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•   provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

•   provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

PART III

Item 10.        Directors and Executive Officers of the Registrant.

We have adopted a Code of Business Conduct and Ethics which we previously filed with the SEC in connection with our Annual Report to Shareholders for fiscal year 2003. A copy of our Code of Business Conduct and Ethics is available on our website at www.ncilp.com under the heading “Corporate Governance.”

The information under the captions “Election of Directors,” “Management,” “Section 16(a) Beneficial Ownership Reporting and Compliance” and “Corporate Governance” in our definitive proxy statement for our annual meeting of shareholders to be held on March 11, 2005 is incorporated by reference herein.

Item 11.        Executive Compensation.

The information under the caption “Executive Compensation” in our definitive proxy statement for our annual meeting of shareholders to be held on March 11, 2005 is incorporated by reference herein.

Item 12.        Security Ownership of Certain Beneficial Owners and Management.

The information under the captions “Outstanding Capital Stock” and “Proposal to Approve Amendment to 2003 Long-Term Stock Incentive Plan—New Plan Benefits—Securities Reserved for Issuance Under Our Executive Compensation Plans” in our definitive proxy statement for our annual meeting of shareholders to be held on March 11, 2005 is incorporated by reference herein.

Item 13.        Certain Relationships and Related Transactions.

The information under the caption “Transactions with Directors, Officers and Affiliates” in our definitive proxy statement for our annual meeting of shareholders to be held on March 11, 2005 is incorporated by reference herein.

Item 14.        Principal Accounting Fees and Services.

The information under the caption “Audit Committee and Auditors—Our Independent Registered Public Accounting Firm and Audit Fees” in our definitive proxy statement for our annual meeting of shareholders to be held on March 11, 2005 is incorporated by reference herein.

Item 15.        Exhibits and Financial Statement Schedules.

(a)   The following documents are filed as a part of this report:

1.	Consolidated financial statements (see Item 8).
2.	Consolidated financial statement schedules. Schedule II—Valuation and Qualifying Accounts
	All other schedules are omitted because they are inapplicable or the requested information is shown in the financial statements or noted therein.
3.	Exhibits

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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	Amended and Restated By-Laws, as amended through May 30, 2002 (filed as Exhibit 3.2 to NCI’s Annual Report on Form 10-K for the fiscal year ended November 2, 2002 and incorporated by reference herein)
4	.1	Form of certificate representing shares of NCI’s common stock (filed as Exhibit 1 to NCI’s registration statement on Form 8-A filed with the SEC on July 20, 1998 and incorporated by reference herein)
4	.2	Credit Agreement, dated June 18, 2004, by and among NCI, certain of its subsidiaries, as guarantors, Wachovia Bank, National Association, as administrative agent, Bank of America, N.A., as syndication agent, and the several lenders named therein (filed as Exhibit 4.1 to NCI’s Form 10-Q/A, filed with the SEC on September 16, 2004, amending its quarterly report on Form 10-Q for the quarter ended July 31, 2004 and incorporated by reference herein)
4	.3	First Amendment to Credit Agreement, dated as of November 9, 2004, between NCI Building Systems, Inc, as borrower, certain of its subsidiaries, as guarantors, Wachovia National Bank, National Association, as administrative agent and lender, and the several lenders named therein (filed as Exhibit 10.1 to NCI’s Current Report on Form 8-K dated November 16, 2004 and incorporated by reference herein)
4	.4	Rights Agreement, dated June 24, 1998, between NCI and Harris Trust and Savings Bank (filed as Exhibit 2 to NCI’s registration statement on Form 8-A filed with the SEC on July 20, 1998 and incorporated by reference herein)
4	.5	First Amendment to Rights Agreement, dated June 24, 1999, between NCI and Harris Trust and Savings Bank (filed as Exhibit 3 to NCI’s registration statement on Form 8-A, Amendment No. 1 filed with the SEC on June 25, 1999 and incorporated by reference herein)
4	.6	Indenture, dated November 16, 2004, by and among NCI, and The Bank of New York (filed as Exhibit 4.1 to NCI’s Current Report on Form 8-K dated November 16, 2004 and incorporated by reference herein)
4	.7	Registration Rights Agreement, dated November 16, 2004, among NCI Building Systems, Inc., UBS Securities LLC and Wachovia Capital Markets LLC. (filed as Exhibit 99.2 to NCI’s Current Report on Form 8-K dated November 16, 2004 and incorporated by reference herein)
†10	.1	Employment Agreement, dated April 12, 2004, among the Company, NCI Group, L.P. and Norman C. Chambers (filed as Exhibit 10.1 to NCI’s Quarterly Report on Form 10-Q for the quarter ended May 1, 2004 and incorporated by reference herein)
†*10	.2	Amended and Restated Bonus Program, as amended and restated as of October 25, 2004
†10	.3	Stock Option Plan, as amended and restated on December 14, 2000 (filed as Exhibit 10.4 to NCI’s Annual Report on Form 10-K for the fiscal year ended October 31, 2000 and incorporated by reference herein)

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†10	.4	Form of Nonqualified Stock Option Agreement (filed as Exhibit 10.5 to NCI’s Annual Report on Form 10-K for the fiscal year ended October 31, 2000 and incorporated by reference herein)
†10	.5	2003 Long-Term Stock Incentive Plan, as amended through March 14, 2003 (filed as Exhibit 4.1 to NCI’s registration statement no. 333-111139 and incorporated by reference herein)
†10	.6	Form of Nonqualified Stock Option Agreement (filed as Exhibit 4.2 to NCI’s registration statement no. 333-111139 and incorporated by reference herein)
†10	.7	Form of Incentive Stock Option Agreement (filed as Exhibit 4.3 to NCI’s registration statement no. 333-111139 and incorporated by reference herein)
†*10	.8	Form of Restricted Stock Agreement for Senior Executive Officers
†10	.9	Form of Restricted Stock Agreement for Non-Employee Directors (filed as Exhibit 4.5 to NCI’s registration statement no. 333-111139 and incorporated by reference herein)
†10	.10	Form of Restricted Stock Agreement for Special Long-Term Grant (filed as Exhibit 4.6 to NCI’s registration statement no. 333-111139 and incorporated by reference herein)
†10	.11	Amended and Restated Supplemental Benefit Plan (as amended and restated on December 12, 2002 (filed as Exhibit 10.8 to NCI’s Annual Report on Form 10-K for the fiscal year ended November 2, 2002 and incorporated by reference herein)
†10	.12	Supplemental Benefit Agreement, dated December 13, 2002, between NCI and A.R. Ginn, Jr. (filed as Exhibit 10.9 to NCI’s Annual Report on Form 10-K for the fiscal year ended November 2, 2002 and incorporated by reference herein)
†10	.13	Agreement Relating to Retirement, dated October 26, 2004, between NCI and Robert J. Medlock (filed as Exhibit 10.1 to NCI’s Current Report on Form 8-K dated October 25, 2004 and incorporated by reference herein)
†10	.14	Special Long-Term Restricted Stock Award Agreement, dated August 28, 2003 between NCI and Kelly R. Ginn (filed as Exhibit 10.21 to NCI’s Annual Report on Form 10-K for the fiscal year ended November 1, 2003 and incorporated by reference herein)
†*10	.15	Special Long-Term Restricted Stock Award Agreement, dated May 28, 2004, between NCI and A.R. Ginn, Jr.
†10	.16	Restricted Stock Agreement, dated April 26, 2004, between NCI and Norman C. Chambers (filed as exhibit 10.2 to NCI’s Quarterly Report on Form 10-Q for the quarter ended May 1, 2004 and incorporated by reference herein)
†10	.17	Form of Metal Building Components, L.P. (formerly, MBCI Operating, L.P.) (“MBC”) and NCI Group, L.P. (formerly, Metal Coaters Operating, L.P.) (“NCI Group”) Management Incentive Trust Agreement (as amended through December 12, 2002) in effect for A.R. Ginn, Jr. and Kenneth W. Maddox (filed as Exhibit 10.13 to NCI’s Annual Report on Form 10-K for the fiscal year ended November 2, 2002 and incorporated by reference herein)

29

†10	.18	Form of MBC and NCI Group Long-Term Management Incentive Plan (as amended through December 12, 2002) in effect for A.R. Ginn, Jr. and Kenneth W. Maddox (filed as Exhibit 10.14 to NCI’s Annual Report on Form 10-K for the fiscal year ended November 2, 2002 and incorporated by reference herein)
10	.19	Form of Metallic Builder Agreement (filed as Exhibit 10.10 to NCI’s registration statement no. 33-45612 and incorporated by reference herein)
10	.20	Form of A & S Builder Agreement (filed as Exhibit 10.17 to NCI’s Annual Report on Form 10-K for the fiscal year ended October 31, 1992 and incorporated by reference herein)
*13	.1	2004 Annual Report to Shareholders. With the exception of the information incorporated by reference into Items 5, 6, 7, 7A and 8 of this Form 10-K, the 2004 Annual Report to Shareholders is not to be deemed filed as part of this Form 10-K.
14	.1	Code of Business Conduct and Ethics (filed as Exhibit 10.20 to NCI’s Annual Report on Form 10-K for the fiscal year ended November 1, 2003 and incorporated by reference herein)
*21	.1	List of Subsidiaries
*23	.1	Consent of Independent Registered Public Accounting Firm
*23	.2	Report of Independent Registered Public Accounting Firm
*24	.1	Power of Attorney
*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)

*	Filed herewith
†	Management contracts or compensatory plans or arrangements

30

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on the 13th day of January, 2005.

NCI BUILDING SYSTEMS, INC.
By:	/s/ A.R. Ginn
	A.R. Ginn, Chairman of the Board
	and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of the 13th day of January, 2005.

Name	Title
/s/ A.R. Ginn A.R. Ginn	Chairman of the Board, Chief Executive Officer and Director (principal executive officer)
/s/ Norman C. Chambers Norman C. Chambers	President, Chief Operating Officer and Director
/s/ Robert J. Medlock Robert J. Medlock	Executive Vice President and Chief Financial Officer (principal accounting and financial officer)
* William D. Breedlove	Director
* Gary L. Forbes	Director
* Philip J. Hawk	Director
* Max L. Lukens	Director
* George Martinez	Director
* W.B. Pieper	Director
* John K. Sterling	Director

*By:	/s/ A.R. Ginn
	A.R. Ginn, Attorney-in-Fact

31

NCI BUILDING SYSTEMS, INC.

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

Description	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Deductions (1)		Balance at End of Period
Year ended October 30, 2004:
Reserves and allowances deducted from asset accounts:
Allowance for uncollectible accounts and backcharges	$	10,221	$	2,769	$	4,368	$	8,622
Year ended November 1, 2003:
Reserves and allowances deducted from asset accounts:
Allowance for uncollectible accounts and backcharges	$	7,419	$	3,842	$	1,040	$	10,221
Year ended November 2, 2002:
Reserves and allowances deducted from asset accounts:
Allowance for uncollectible accounts and backcharges	$	5,641	$	3,280	$	1,502	$	7,419

(1) Uncollectible accounts, net of recoveries.

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Index to Exhibits

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	Amended and Restated By-Laws, as amended through May 30, 2002 (filed as Exhibit 3.2 to NCI’s Annual Report on Form 10-K for the fiscal year ended November 2, 2002 and incorporated by reference herein)
4.1	Form of certificate representing shares of NCI’s common stock (filed as Exhibit 1 to NCI’s registration statement on Form 8-A filed with the SEC on July 20, 1998 and incorporated by reference herein)
4.2	Credit Agreement, dated June 18, 2004, by and among NCI, certain of its subsidiaries, as guarantors, Wachovia Bank, National Association, as administrative agent, Bank of America, N.A., as syndication agent, and the several lenders named therein (filed as Exhibit 4.1 to NCI’s Form 10-Q/A, filed with the SEC on September 16, 2004, amending its quarterly report on Form 10-Q for the quarter ended July 31, 2004 and incorporated by reference herein)
4.3	First Amendment to Credit Agreement, dated as of November 9, 2004, between NCI Building Systems, Inc, as borrower, certain of its subsidiaries, as guarantors, Wachovia National Bank, National Association, as administrative agent and lender, and the several lenders named therein (filed as Exhibit 10.1 to NCI’s Current Report on Form 8-K dated November 16, 2004 and incorporated by reference herein)
4.4	Rights Agreement, dated June 24, 1998, between NCI and Harris Trust and Savings Bank (filed as Exhibit 2 to NCI’s registration statement on Form 8-A filed with the SEC on July 20, 1998 and incorporated by reference herein)
4.5	First Amendment to Rights Agreement, dated June 24, 1999, between NCI and Harris Trust and Savings Bank (filed as Exhibit 3 to NCI’s registration statement on Form 8-A, Amendment No. 1 filed with the SEC on June 25, 1999 and incorporated by reference herein)
4.6	Indenture, dated November 16, 2004, by and among NCI, and The Bank of New York (filed as Exhibit 4.1 to NCI’s Current Report on Form 8-K dated November 16, 2004 and incorporated by reference herein)
4.7	Registration Rights Agreement, dated November 16, 2004, among NCI Building Systems, Inc., UBS Securities LLC and Wachovia Capital Markets LLC. (filed as Exhibit 99.2 to NCI’s Current Report on Form 8-K dated November 16, 2004 and incorporated by reference herein)
†10.1	Employment Agreement, dated April 12, 2004, among the Company, NCI Group, L.P. and Norman C. Chambers (filed as Exhibit 10.1 to NCI’s Quarterly Report on Form 10-Q for the quarter ended May 1, 2004 and incorporated by reference herein)
†*10.2	Amended and Restated Bonus Program, as amended and restated as of October 25, 2004
†10.3	Stock Option Plan, as amended and restated on December 14, 2000 (filed as Exhibit 10.4 to NCI’s Annual Report on Form 10-K for the fiscal year ended October 31, 2000 and incorporated by reference herein)
†10.4	Form of Nonqualified Stock Option Agreement (filed as Exhibit 10.5 to NCI’s Annual Report on Form 10-K for the fiscal year ended October 31, 2000 and incorporated by reference herein)

33

†10.5	2003 Long-Term Stock Incentive Plan, as amended through March 14, 2003 (filed as Exhibit 4.1 to NCI’s registration statement no. 333-111139 and incorporated by reference herein)
†10.6	Form of Nonqualified Stock Option Agreement (filed as Exhibit 4.2 to NCI’s registration statement no. 333-111139 and incorporated by reference herein)
†10.7	Form of Incentive Stock Option Agreement (filed as Exhibit 4.3 to NCI’s registration statement no. 333-111139 and incorporated by reference herein)
†*10.8	Form of Restricted Stock Agreement for Senior Executive Officers
†10.9	Form of Restricted Stock Agreement for Non-Employee Directors (filed as Exhibit 4.5 to NCI’s registration statement no. 333-111139 and incorporated by reference herein)
†10.10	Form of Restricted Stock Agreement for Special Long-Term Grant (filed as Exhibit 4.6 to NCI’s registration statement no. 333-111139 and incorporated by reference herein)
†10.11	Amended and Restated Supplemental Benefit Plan (as amended and restated on December 12, 2002 (filed as Exhibit 10.8 to NCI’s Annual Report on Form 10-K for the fiscal year ended November 2, 2002 and incorporated by reference herein)
†10.12	Supplemental Benefit Agreement, dated December 13, 2002, between NCI and A.R. Ginn, Jr. (filed as Exhibit 10.9 to NCI’s Annual Report on Form 10-K for the fiscal year ended November 2, 2002 and incorporated by reference herein)
†10.13	Agreement Relating to Retirement, dated October 26, 2004, between NCI and Robert J. Medlock (filed as Exhibit 10.1 to NCI’s Current Report on Form 8-K dated October 25, 2004 and incorporated by reference herein)
†10.14	Special Long-Term Restricted Stock Award Agreement, dated August 28, 2003 between NCI and Kelly R. Ginn (filed as Exhibit 10.21 to NCI’s Annual Report on Form 10-K for the fiscal year ended November 1, 2003 and incorporated by reference herein)
†*10.15	Special Long-Term Restricted Stock Award Agreement, dated May 28, 2004, between NCI and A.R. Ginn, Jr.
†10.16	Restricted Stock Agreement, dated April 26, 2004, between NCI and Norman C. Chambers (filed as exhibit 10.2 to NCI’s Quarterly Report on Form 10-Q for the quarter ended May 1, 2004 and incorporated by reference herein)
†10.17	Form of Metal Building Components, L.P. (formerly, MBCI Operating, L.P.) (“MBC”) and NCI Group, L.P. (formerly, Metal Coaters Operating, L.P.) (“NCI Group”) Management Incentive Trust Agreement (as amended through December 12, 2002) in effect for A.R. Ginn, Jr. and Kenneth W. Maddox (filed as Exhibit 10.13 to NCI’s Annual Report on Form 10-K for the fiscal year ended November 2, 2002 and incorporated by reference herein)
†10.18	Form of MBC and NCI Group Long-Term Management Incentive Plan (as amended through December 12, 2002) in effect for A.R. Ginn, Jr. and Kenneth W. Maddox (filed as Exhibit 10.14 to NCI’s Annual Report on Form 10-K for the fiscal year ended November 2, 2002 and incorporated by reference herein)
10.19	Form of Metallic Builder Agreement (filed as Exhibit 10.10 to NCI’s registration statement no. 33-45612 and incorporated by reference herein)

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10.20	Form of A & S Builder Agreement (filed as Exhibit 10.17 to NCI’s Annual Report on Form 10-K for the fiscal year ended October 31, 1992 and incorporated by reference herein)
*13.1	2004 Annual Report to Shareholders. With the exception of the information incorporated by reference into Items 5, 6, 7, 7A and 8 of this Form 10-K, the 2004 Annual Report to Shareholders is not to be deemed filed as part of this Form 10-K.
14.1	Code of Business Conduct and Ethics (filed as Exhibit 10.20 to NCI’s Annual Report on Form 10-K for the fiscal year ended November 1, 2003 and incorporated by reference herein)
*21.1	List of Subsidiaries
*23.1	Consent of Independent Registered Public Accounting Firm
*23.2	Report of Independent Registered Public Accounting Firm
*24.1	Power of Attorney
*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)

*	Filed herewith
†	Management contracts or compensatory plans or arrangements

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EX-10.2

Exhibit 10.2

NCI BUILDING SYSTEMS, INC.

BONUS PROGRAM

[As Amended and Restated as of October 25, 2004]

The Bonus Program (the “Program”) is as follows:

     1. Purpose. The purpose of the Program is:

          (A) To provide exceptional cash rewards earned by exceptional performance; and

          (B) To focus management attention on key objectives of the Company by basing their bonus on return on assets and growth in earnings per share.

     2. Administration. The Program will be administered and interpreted by the Compensation Committee of the Board of Directors of the Company (the “Committee”).

     3. Maximum Bonuses and Bonus Performance Standards.

          (A) Maximum Bonuses. For fiscal 2004 and thereafter, the aggregate maximum bonus pool to be paid pursuant to the Program in any fiscal year (including all bonuses and any related 401(k) profit sharing plan matches, social security taxes and other employer costs) for all of the Company’s employees shall not exceed fifteen percent (15%) of the Company’s Adjusted Pre-Tax Profit before any accrual for bonuses payable pursuant to the Program for that fiscal year (the “Maximum Bonus Amount”). If the aggregate bonuses to be paid pursuant to the Program for Level 1A, Level 1B, Level 2, Level 3 and Level 4 participants and the Non-Management Bonus Pool in any fiscal year exceed the Maximum Bonus Amount, then the bonuses to be paid to Level 1A, Level 1B, Level 2, Level 3 and Level 4 participants shall be reduced on a pro rata basis to an amount such that the aggregate bonuses to be paid pursuant to the Program for Level 1A, Level 1B, Level 2, Level 3 and Level 4 participants and the Non-Management Bonus Pool in that fiscal year equal the Maximum Bonus Amount.

          (B) Combination of ROA and EPS. Level 1A, Level 1B and Level 2 participants will be eligible for the award of an annual cash bonus equal to a percentage of their respective base salaries, based upon the Company’s achievement of a specified ROA, a specified EPS Growth or a combination of ROA and EPS Growth for the fiscal year. No cash bonuses will be awarded to these participants if both ROA is less than 15% and EPS Growth is less than 10%.

               (1) Level 2 Participants. Subject to the minimum requirements for ROA and EPS Growth, Level 2 participants will be eligible for a cash bonus award based upon the grid of ROA and EPS Growth achievement attached hereto as Exhibit A, in which the bonus eligible for award is the percentage of base salary indicated at each intersecting grid mark for ROA and EPS Growth (e.g., ROA of 25% and EPS Growth of 15% results in a 50% cash bonus).

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               (2) Level 1A and 1B Participants. Cash bonus awards for which Level 1A and 1B participants are eligible also will be based on the grid of ROA and EPS Growth achievement attached hereto as Exhibit A, but (1) for Level 1A participants it will be 2.0 times the percentage of base salary indicated for Level 2 participants and (2) for Level 1B participants it will be 1.5 times the percentage of base salary indicated for the Level 2 participants.

          (C) ROA Only. Level 3 and Level 4 participants will be eligible for the award of a cash bonus equal to a percentage of their respective base salaries, based upon the Company’s achievement of a specified ROA for the fiscal year. No cash bonuses will be awarded to these participants if ROA is less than 15%.

               (1) Level 3 Participants. The Committee shall place all Level 3 participants in five categories. If ROA is 15% or more, Level 3 participants will be eligible for a cash bonus in accordance with the following table:

		Additional Percentage
	Minimum	of Base Salary for each
	Bonus	1% Increment of ROA
Category	(15% ROA)	in excess of 15%
A	7.5%	2.25%
B	8.75%	2.625%
C	10%	3%
D	11.25%	3.375%
E	12.5%	3.75%

               (2) Level 4 Participants. If ROA is 15% or more, Level 4 participants will be eligible for the award of a cash bonus equal to 6.25% of base salary and an additional 1.875% of base salary for each 1% increment in ROA over 15%.

          (D) Non-Management Bonus Pool. The Company shall establish a permanent minimum bonus pool for lower level, non-management employees (the “Non-Management Bonus Pool”), in an amount equal to the lesser of (i) $2,000,000, or (ii) ten percent (10%) of the Company’s Adjusted Pre-Tax Profit before any accrual for bonuses payable pursuant to the Program; provided, however, that the aggregate amount of the Non-Management Bonus Pool shall be adjusted annually by a percentage equal to the percentage increase in the then most recently published CPI (as hereinafter defined), over the CPI published for the immediately preceding fiscal year. If the CPI did not increase during the measurement period, no adjustment to the Non-Management Bonus Pool shall be made. For purposes of the Program, “CPI” means the Consumer Price Index for All Urban Customers for the Houston-Galveston-Brazoria area. If the CPI becomes unavailable to the public because publication is discontinued, or otherwise, then the Company and the Committee will substitute therefor a comparable index based upon changes in the cost of living or purchasing power of the consumer dollar, published by another governmental agency or, if no such index shall be available then a comparable index published by a major bank or other financial institution or by a recognized financial publication.

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          (E) No Individual Caps. Subject to the Maximum Bonus Amount set forth in Section 3(A) above, participants will not be subject to any cap on the maximum amount of an individual bonus. The grid attached hereto as Exhibit A illustrates the bonus levels payable up to 35% ROA Growth and 30% EPS Growth. Should either of these metrics exceed those levels, individual bonuses shall be increased by extrapolating the grid in a proportionate manner.

     4. Participants and Eligibility.

          (A) Whether or not to award a cash bonus to any particular participant is within the absolute discretion of the Company and the Committee. No bonus award to a Level 1A, 1B, 2 or 3 participant may be paid unless and until approved by the Committee, and no bonus award may be paid to a Level 4 participant unless and until the Committee has approved the aggregate employee bonus pool for that fiscal year.

          (B) A participant shall not be eligible for and shall not be entitled to receive a bonus for any fiscal year’s performance unless the participant is employed by the Company or one of its subsidiaries both on the last day of the fiscal year and on the date of approval by the Committee of the bonus (if a Level 1A, 1B, 2 or 3 participant) or the aggregate employee bonus pool for that year (if a Level 4 participant).

          (C) The Committee, in its sole discretion, shall determine the Level 1A, 1B, Level 2 and Level 3 participants for any given fiscal year; provided, however, the Committee and/or the Executive Committee shall determine the categories into which Level 3 participants will be placed, and provided further that the Executive Committee shall have the authority to move a Level 4 participant to the lowest category of Level 3 when that participant receives a promotion. Designation of a manager as a participant for any fiscal year is in the absolute discretion of the Company and the Committee and does not entitle that participant to remain as a participant in any subsequent year.

          (D) Addition, removal or movement of participants into, from or between any of Levels 1A, 1B, 2 or 3 must be submitted to and approved by the Committee; provided, however, that the Executive Committee shall have the authority to move a Level 4 participant to the lowest category of Level 3 when that participant receives a promotion. The Level 1 managers, with the approval of the Chairman of the Board and President, shall have discretion to add or remove participants at Level 4 without further action of the Committee, provided the aggregate bonuses paid to all employees do not exceed the amount of the employee bonus pool for that year approved by the Committee.

          (E) The Executive Committee, in its sole discretion, shall determine the participants in the Non-Management Bonus Pool for any given fiscal year. Designation of a non-management employee as a participant for any fiscal year is in the absolute discretion of the Company and the Executive Committee and does not entitle that participant to remain as a participant in any subsequent year.

     5. Definitions. As used in this Program, the following terms shall have the meanings set forth below:

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     “Adjusted EPS” means net income plus the after-tax impact of deferred financing costs and other non-recurring expenses approved by the Compensation Committee or the Board of Directors divided by the weighted average shares outstanding on a fully diluted basis for the period as set forth on the audited annual financial statements of the Company and, when appropriate to the calculations, the internally generated financial statements for each month and quarter of the fiscal year, prepared in accordance with generally accepted accounting principles.

     “Adjusted Operating Assets” means (x) total assets, less (y) cash and cash equivalents, deferred income taxes and goodwill, all as set forth on the audited annual financial statements of the Company and, when appropriate to the calculations, the internally generated financial statements for each month and quarter of the fiscal year, prepared in accordance with generally accepted accounting principles.

     “Adjusted Pre-Tax Profit” means EBIT plus deferred financing costs and other non-recurring expenses approved by the Compensation Committee or the Board of Directors as set forth on the audited annual financial statements of the Company and, when appropriate to the calculations, the internally generated financial statements for each month and quarter of the fiscal year, prepared in accordance with generally accepted accounting principles.

     “EBIT” means income before income taxes plus interest expense as set forth on the audited annual financial statements of the Company and, when appropriate to the calculations, the internally generated financial statements for each month and quarter of the fiscal year, prepared in accordance with generally accepted accounting principles.

     “EPS Growth” means (x) Adjusted EPS for the fiscal year less Adjusted EPS for the prior fiscal year, divided by (y) Adjusted EPS for the prior fiscal year. If the Company conducts a public offering of equity securities, the Committee will evaluate and determine at that time whether any adjustments should be made to the calculation of EPS Growth.

     “Maximum Bonus Amount” has the meaning set forth in Section 3(A) hereof.

     “Non-Management Bonus Pool” has the meaning set forth in Section 3(D) hereof.

     “ROA” means Adjusted Pre-Tax Profit divided by Adjusted Operating Assets.

     6. Interpretation. The Committee shall interpret the Program and shall prescribe such rules and regulations in connection with the operation of the Program as it determines to be advisable. The Committee may rescind and amend its rules, regulations and interpretations.

     7. Amendment or Termination. The Program may be terminated at any time or amended from time to time by the Committee without the consent or approval of the participants in the Program.

     8. Effect of Program. Neither the adoption of the Program nor any action of the Committee, including action taken at any time to terminate or amend the Program, shall be

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deemed to give any officer, manager, employee, participant or other person any right to receive a bonus or any other rights, whether as a third party beneficiary or otherwise.

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EX-10.8

Exhibit 10.8

FORM - 4 YEAR VESTING EMPLOYEE AWARD
As of December 9, 2004

NCI BUILDING SYSTEMS, INC. 2003 LONG-TERM STOCK INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

Grantee:
Number of Awarded Shares:
Date of Award:
Expiration of Restriction Period	See Section 3

NCI Building Systems, Inc., a Delaware corporation (the “Company”), hereby grants to the individual whose name appears above (“Grantee”), pursuant to the provisions of the NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan, as in effect on the date hereof (the “Plan”), a restricted stock award (this “Award”) of shares (the “Awarded Shares”) of its common stock, $0.01 par value per share (the “Common Stock”), effective as of the date of award as set forth above (the “Grant Date”), upon and subject to the terms and conditions set forth in this Restricted Stock Agreement (this “Agreement”) and in the Plan. Unless otherwise defined in this Agreement, capitalized terms used in this Agreement shall have the meanings assigned to them in the Plan. A copy of the Plan in effect as of the date hereof is attached hereto, the terms and conditions of which are incorporated herein by reference.

     1. Effect of the Plan. The Awarded Shares granted to Grantee are subject to all of the provisions of the Plan and of this Agreement, together with all rules and determinations from time to time issued by the Committee and by the Board pursuant to the Plan. The Company hereby reserves the right to amend, modify, restate, supplement or terminate the Plan without the consent of Grantee. This Award shall be subject, without further action by the Company or Grantee, to any amendment, modification, restatement or supplement to the Plan that is beneficial to, or increases the rights of, Grantee. This Award shall not be subject to any amendment, modification, restatement or supplement to the Plan that reduces or adversely affects the rights and benefits available to Grantee hereunder.

     2. Grant. This Award shall evidence Grantee’s ownership of the Awarded Shares, and Grantee acknowledges that he or she will not receive a stock certificate representing the Awarded Shares unless and until the Awarded Shares vest as provided in this Agreement and all tax withholding obligations applicable to the Vested Awarded Shares (as defined below) have been satisfied. The Awarded Shares will be held in custody for Grantee, by the Chief Financial Officer of the Company pursuant to joint escrow instructions between Grantee and the Company (substantially in the form of Exhibit A hereto), until the Awarded Shares have vested in accordance with Section 3 of this Award. Upon vesting of the Awarded Shares, the Company shall, unless otherwise paid by Grantee as described in Section 9(a) of this Award, withhold that number of Vested Awarded Shares necessary to satisfy any applicable tax withholding obligation of Grantee in accordance with the provisions of Section 9(a) of this Award, and thereafter instruct the Chief Financial Officer to deliver to Grantee all remaining Vested Awarded Shares.

Grantee agrees that the Awarded Shares shall be subject to all of the terms and conditions set forth in this Agreement and the Plan, including, but not limited to, the forfeiture conditions set forth in Section 4 of this Agreement, the restrictions on transfer set forth in Section 5 of this Agreement and the satisfaction of the Required Withholding as set forth in Section 9(a) of this Agreement.

     3. Vesting Schedule; Service Requirements. Except as provided otherwise in Section 4 of this Agreement, the Awarded Shares shall vest if Grantee’s continuing employment or consulting relationship with the Company or any Subsidiary (“Continuous Service”) is not terminated during the period commencing with the Grant Date and ending with the applicable date that such portion of the Awarded Shares vests (each, a “Vesting Date”). Awarded Shares that have vested pursuant to this Agreement are referred to herein as “Vested Awarded Shares” and Awarded Shares that have not yet vested pursuant to this Agreement are referred to herein as “Unvested Awarded Shares.” Subject to the provisions of Section 4 of this Agreement, if Grantee’s Continuous Service is not terminated prior to an applicable Vesting Date, the Awarded shares shall vest as follows:

          (i) twenty-five percent (25%) of the Awarded Shares shall vest on the first anniversary of the Grant Date;

          (ii) twenty-five-half percent (25%) of the Awarded Shares shall vest on the second anniversary of the Grant Date;

          (iii) twenty-five percent (25%) of the Awarded Shares shall vest on the third anniversary of the Grant Date; and

          (iv) the remaining Awarded Shares shall vest on the fourth anniversary of the Grant Date.

If an installment of the vesting would result in a fractional Vested Awarded Share, such installment will be rounded to the next higher or lower Awarded Share, as determined by the Company, except the final installment, which will be for the balance of the Awarded Shares.

     4. Conditions of Forfeiture.

          (a) Upon any termination of Grantee’s Continuous Service (the “Termination Date”) for any or no reason (other than due to Grantee’s death, his becoming Disabled or his retirement at or after Normal Retirement Age), including but not limited to Grantee’s voluntary resignation or termination by the Company with or without cause before all of the Awarded Shares become Vested Awarded Shares, all Unvested Awarded Shares as of the Termination Date shall, without further action of any kind by the Company or Grantee, be forfeited. Unvested Awarded Shares that are forfeited shall be deemed to be immediately transferred to the Company without any payment by the Company or action by Grantee, and the Company shall have the full right to cancel any evidence of Grantee’s ownership of such forfeited Unvested Awarded Shares and to take any other action necessary to demonstrate that Grantee no longer owns such forfeited Unvested Awarded Shares automatically upon such forfeiture. Following such forfeiture, Grantee shall have no further rights with respect to such forfeited Unvested Awarded Shares. Grantee, by his acceptance of the Award granted pursuant to this Agreement,

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irrevocably grants to the Company a power of attorney to transfer Unvested Awarded Shares that are forfeited to the Company and agrees to execute any documents requested by the Company, including but not limited to one or more stock assignments separate from the certificate substantially in the form of Exhibit B hereto, to facilitate such transfer upon forfeiture. The provisions of this Agreement regarding transfers of Unvested Awarded Shares that are forfeited shall be specifically performable by the Company in a court of equity or law.

          (b) Notwithstanding anything to the contrary in this Agreement, the Unvested Awarded Shares shall become vested (i) on the death of Grantee during Grantee’s Continuous Service; (ii) if Grantee becomes Disabled during Grantee’s Continuous Service; (iii) upon Grantee’s cessation of Continuous Service due to his retirement at or after Normal Retirement Age; or (iv) in accordance with the provisions of Section 12(b) of the Plan relating to a Change in Control.

          (c) For purposes of this Agreement, Normal Retirement Age shall be deemed to be 65 years of age.

     5. Non-Transferability. Grantee may not sell, transfer, pledge, exchange, hypothecate, or otherwise encumber or dispose of any of the Unvested Awarded Shares, or any right or interest therein, by operation of law or otherwise. Any transfer in violation of this Section 5 shall be void and of no force or effect, and shall result in the immediate forfeiture of all Unvested Awarded Shares.

     6. Dividend and Voting Rights. Subject to the restrictions contained in this Agreement, Grantee shall have the rights of a stockholder with respect to the Awarded Shares, including the right to vote all such Awarded Shares, including Unvested Awarded Shares, and to receive all dividends, cash or stock (other than stock dividends accounted for as a stock split), paid or delivered thereon, from and after the date hereof. In the event of forfeiture of Unvested Awarded Shares, Grantee shall have no further rights with respect to such Unvested Awarded Shares. However, the forfeiture of the Unvested Awarded Shares pursuant to Section 4 hereof shall not create any obligation to repay cash dividends or stock dividends (other than stock dividends accounted for as a stock split) received as to such Unvested Awarded Shares, nor shall such forfeiture invalidate any votes given by Grantee with respect to such Unvested Awarded Shares prior to forfeiture.

     7. Capital Adjustments and Corporate Events. If, from time to time during the term of this Agreement, there is any capital adjustment affecting the outstanding Common Stock as a class without the Company’s receipt of consideration (including stock dividends accounted for as a stock split), the Unvested Shares shall be adjusted in accordance with the provisions of Section 12 of the Plan. Any and all new, substituted or additional securities to which Grantee may be entitled by reason of Grantee’s ownership of the Unvested Awarded Shares hereunder because of a capital adjustment shall be immediately subject to the forfeiture provisions of this Agreement and included thereafter as “Unvested Awarded Shares” for purposes of this Agreement.

     8. Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Unvested Awarded Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or the Plan, or (ii) to treat as owner of such Unvested

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Awarded Shares, or accord the right to vote or pay or deliver dividends or other distributions to, any purchaser or other transferee to whom or which Grantee shall have attempted to transfer such Unvested Awarded Shares.

     9. Tax Matters.

          (a) The Company’s obligation to deliver Awarded Shares to Grantee upon the vesting of such shares shall be subject to the satisfaction of all applicable federal, state and local income and employment tax withholding requirements (the “Required Withholding”). The Company shall withhold from the Vested Awarded Shares that otherwise would have been delivered to Grantee the number of Vested Awarded Shares necessary to satisfy Grantee’s Required Withholding, and deliver the remaining Vested Awarded Shares to Grantee, unless Grantee has made arrangements with the Company for Grantee to deliver to the Company cash, a check or other available funds for the full amount of the Required Withholding by 5:00 P.M. Central Standard Time on the later of (i) the date Awarded Shares become Vested Awarded Shares or (ii) the date on which the Vested Awarded Shares are distributed to Grantee, or by such date Grantee has not made such other provision for the satisfaction of the Required Withholding in form satisfactory to the Committee or Board, in its sole discretion. The amount of the Required Withholding and the number of Vested Awarded Shares to be withheld by the Company, if applicable, to satisfy Grantee’s Required Withholding, as well as the amount reflected on tax reports filed by the Company, shall be based on the value of the Vested Awarded Shares determined by using the last sales price of the Common Stock (as reported by the New York Stock Exchange) on the date prior to the applicable Vesting Date or the date on which the Vested Awarded Shares are distributed to Grantee, as appropriate. The obligations of the Company under this Award will be conditioned on such satisfaction of the Required Withholding.

          (b) Grantee acknowledges that the tax consequences associated with the Award are complex and that the Company has urged Grantee to review with Grantee’s own tax advisors the federal, state, and local tax consequences of this Award. Grantee is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Grantee understands that Grantee (and not the Company) shall be responsible for Grantee’s own tax liability that may arise as a result of the Award. Grantee understands further that Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”), taxes as ordinary income the fair market value of the Vested Awarded Shares as of the Vesting Date for those shares. Grantee also understands that Grantee may elect to be taxed at Grant Date rather than at the time the Awarded Shares vest by filing an election under Section 83(b) of the Code with the Internal Revenue Service and by providing a copy of the election to the Company. GRANTEE ACKNOWLEDGES THAT HE OR SHE HAS BEEN INFORMED OF THE AVAILABILITY OF MAKING AN ELECTION IN ACCORDANCE WITH SECTION 83(b) OF THE CODE; THAT SUCH ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE (AND A COPY OF THE ELECTION GIVEN TO THE COMPANY) WITHIN 30 DAYS OF THE GRANT OF AWARDED SHARES TO GRANTEE; AND THAT GRANTEE IS SOLELY RESPONSIBLE FOR MAKING SUCH ELECTION.

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     10. Covenants of Grantee.

          (a) For the period beginning on the Grant Date through the fifth anniversary of the Grant Date, Grantee shall not, directly or indirectly and whether on his own behalf or on behalf of any other person, partnership, association, corporation or other entity, engage in or be an owner, director, officer, employee, agent, consultant or other representative of or for, or lend money or equipment to or otherwise support, any business that manufactures, engineers, markets, sells or provides, within a 250-mile radius of any then existing manufacturing facility of the Company and its subsidiaries and affiliates, metal building systems or components (including, without limitation, primary and secondary framing systems, roofing systems, end or side wall panels, doors, windows or other metal components of a building structure), coated or painted steel or metal coils, coil coating or painting services, or any other products or services that are the same as or similar to those manufactured, engineered, marketed, sold or provided by the Company or its subsidiaries and affiliates during the Continuous Service of Grantee. Ownership by Grantee of equity securities of the Company, or of equity securities in other publicly owned companies constituting less than 1% of the voting securities in such companies, shall be deemed not to be a breach of this covenant.

          (b) For the period beginning on the Grant Date through the fifth anniversary of the Grant Date, Grantee shall not, directly or indirectly and whether on his own behalf or on behalf of any other person, partnership, association, corporation or other entity, either (i) hire, seek to hire or solicit the employment or service of any employee, agent or consultant of the Company or its subsidiaries and affiliates, (ii) in any manner attempt to influence or induce any employee, agent or consultant of the Company or its Subsidiaries and affiliates to leave the employment or service of the Company or its Subsidiaries and affiliates; (iii) use or disclose to any person, partnership, association, corporation or other entity any information concerning the names and addresses of any employees, agents or consultants of the Company or its Subsidiaries and affiliates unless required by due process of law; or (iv) call upon, solicit, divert or attempt to call upon, solicit or divert the business of any customer, vendor or acquisition prospect of the Company or any of its Subsidiaries or affiliates with whom Grantee dealt, directly or indirectly, during his engagement with the Company or its Subsidiaries or affiliates.

          (c) Prior to the vesting of Grantee’s Unvested Awarded Shares, for purposes of the covenants made in this Section 10, the Company promises to provide Grantee (as is necessary for Grantee’s position) with various trade secrets and proprietary and confidential information consisting of, but not limited to, processes, computer programs, compilations of information, records, sales procedures, customer requirements, pricing techniques, customer lists, methods of doing business and other confidential information (collectively referred to as the “Trade Secrets”), which are owned by the Company and regularly used in the operation of its business, but in connection with which the Company takes precautions to prevent dissemination to persons other than certain directors, officers and employees. Grantee acknowledges and agrees that the Trade Secrets (a) are secret and not known in the industry or to the public; (b) are entrusted to him after being informed of their confidential and secret status by the Company and because of the fiduciary position occupied by him with the Company; (c) have been developed by the Company for, and on behalf of, the Company through substantial expenditures of time, effort and money and are used in its business; (d) give the Company an advantage over competitors who do not know or use the Trade Secrets; (e) are of such value and nature as to

5

make it reasonable and necessary to protect and preserve the confidentiality and secrecy of the Trade Secrets; and (f) the Trade Secrets are valuable, special and unique assets of the Company, the disclosure of which could cause substantial injury and loss of profits and goodwill to the Company. Grantee shall not use in any way or disclose any of the Trade Secrets, directly or indirectly, during his Continuous Service with the Company, or at any time thereafter, except as required in the course of his Continuous Service with the Company. All files, records, documents, information, data and similar items relating to the business of the Company, whether prepared by Grantee or otherwise coming into his possession, shall remain the exclusive property of the Company and shall not be removed from the premises of the Company under any circumstances without the prior written consent of the Board of Directors of the Company (except in the ordinary course of business during Grantee’s Continuous Service with the Company), and in any event shall be promptly delivered to the Company upon termination of Grantee’s Continuous Service for any reason. Grantee agrees that, upon his receipt of any subpoena, process or other request to produce or divulge, directly or indirectly, any Trade Secrets to any entity, agency, tribunal or person, he shall timely notify and promptly hand deliver a copy of the subpoena, process or other request to the Chairman of the Board and Chief Executive Officer of the Company. For this purpose, Grantee irrevocably nominates and appoints the Company (including any attorney retained by the Company), as his true and lawful attorney-in-fact, to act in his name, place and stead to perform any act that he might perform to defend and protect against any disclosure of any Trade Secrets.

          (d) For the period beginning on the Grant Date through the fifth anniversary of the Grant Date, Grantee shall not for any reason whatsoever (whether or not related to this Agreement or the Awarded Shares) institute any legal proceedings against the Company, any of its subsidiaries, or any of its officers, directors, agents or representatives.

     (e) (i) The parties hereto intend all provisions of subsections (a), (b), (c) and (d) of this Section 10 to be enforced to the fullest extent permitted by law. Accordingly, should a court of competent jurisdiction determine that the scope of any provision of subsections (a), (b), (c) or (d) of this Section 10 is too broad to be enforced as written, the parties intend that the court may reform the provision to such narrower scope as it determines to be reasonable and enforceable, and, in the event the court reforms Section 10(a) hereof, the Company may elect to either accept enforcement of the provision as so modified or require the return of cash or Shares as set forth in Section 10(e)(ii). In addition, however, Grantee agrees that the non-competition agreements, non-employment agreements, non-disclosure and no litigation agreements set forth above each constitute separate agreements independently supported by good and adequate consideration and shall survive this Agreement. The existence of any claim or cause of action of Grantee against the Company, except for a breach of this Agreement by the Company or its subsidiaries, shall not constitute a defense to the enforcement by the Company of the covenants and agreements of Grantee contained in the non-competition, non-employment, non-disclosure and no litigation agreements.

          (ii) If in connection with the challenge by Grantee of any provision of Section 10(a), any court of competent jurisdiction determines that the non-competition agreement in Section 10(a) hereof is void or unenforceable or modifies Section 10(a) and the Company declines to accept the modification, Grantee agrees to return to the

6

Company an amount equal to 80% of the total value awarded Grantee under this Award, whether in the form of (A) Vested Awarded Shares still owned by Grantee, (B) cash or other immediately available funds in an amount equal to the then fair market value of the Vested Awarded Shares determined by using the last sales price of the Common Stock (as reported by the New York Stock Exchange) on the date such determination is made, or (C) any combination of (A) and (B).

          (f) Grantee hereby agrees that a breach of any of the provisions of this Section 10 would cause irreparable injury to the Company and its Subsidiaries and affiliates, for which they would have no adequate remedy at law. If Grantee breaches or threatens to breach any of the covenants set forth in this Section 10, then without regard for any provision to the contrary, including Section 13 hereof, the Company shall have the right to immediately seek injunctive relief from a court having jurisdiction for any actual or threatened breach of this Section 10 without necessity of complying with any requirement as to the posting of a bond or other security (it being understood that Grantee hereby waives any such requirement). Any such injunctive relief shall be in addition to any other remedies to which the Company may be entitled at law, in equity or otherwise. Grantee hereby agrees that upon receipt of notice of the Company’s intent to seek injunctive relief, Grantee will not sell, transfer, pledge, exchange, hypothecate, or otherwise encumber or dispose of any of the Vested Awarded Shares, or any right or interest therein, pending the final resolution of such injunctive relief proceeding. In addition, Grantee shall, within ten (10) business days after it is ultimately determined that he has committed such a breach hereof, whether in an injunctive proceeding brought under this Section 10(f) or pursuant to the dispute resolution provisions of Section 13 hereof, either (i) redeliver to the Company the Vested Awarded Shares, if still owned by Grantee, or (ii) reimburse the Company an amount equal to the then fair market value of the Vested Awarded Shares determined by using the last sales price of the Common Stock (as reported by the New York Stock Exchange) on the date such determination is made; which amount shall be paid to the Company in cash or other immediately available funds.

          (g) By acceptance of this Agreement, Grantee agrees to cooperate with, provide information to, and to participate in such exams and activities as requested by, the Company, if the Company, in its sole discretion, elects to obtain insurance or make other financial arrangements to fund or otherwise assure or assist in the performance and satisfaction of the Company’s obligations and liabilities under this Agreement.

     11. Entire Agreement; Governing Law. The Plan and this Agreement constitute the entire agreement of the Company and Grantee (collectively, the “Parties”) with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Parties with respect to the subject matter hereof. If there is any inconsistency between the provisions of this Agreement and of the Plan, the provisions of the Plan shall govern. Nothing in the Plan and this Agreement (except as expressly provided therein or herein) is intended to confer any rights or remedies on any person other than the Parties. The Plan and this Agreement are to be construed in accordance with and governed by the internal laws of the State of Texas, without giving effect to any choice-of-law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Texas to the rights and duties of the Parties. Should any provision of the Plan or this Agreement relating to the Shares (excluding for this purpose the provisions of Section 10(a), which is addressed in Section 10(e)) be determined

7

by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.

     12. Interpretive Matters. Whenever required by the context, pronouns and any variation thereof shall be deemed to refer to the masculine, feminine, or neuter, and the singular shall include the plural, and vice versa. The term “include” or “including” does not denote or imply any limitation. The captions and headings used in this Agreement are inserted for convenience and shall not be deemed a part of the Restricted Stock Award or this Agreement for construction or interpretation.

     13. Dispute Resolution. Except as provided in Section 10 hereof, the provisions of this Section 13 shall be the exclusive means of resolving disputes of the Parties (including any other persons claiming any rights or having any obligations through the Company or Grantee) arising out of or relating to the Plan and this Agreement. The Parties shall attempt in good faith to resolve any disputes arising out of or relating to the Plan and this Agreement by negotiation between individuals who have authority to settle the controversy. Either Party may commence negotiations by delivering to the other Party a written statement of the Party’s position and the name and title of the individual who will represent the Party. Within thirty (30) days of the written notification, the Parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to resolve the dispute. If the dispute has not been resolved by negotiation within ninety (90) days of the written notification of the dispute, either Party may file suit and each Party agrees that any suit, action, or proceeding arising out of or relating to the Plan or this Agreement shall be brought in the United States District Court for the Southern District of Texas (or should such court lack jurisdiction to hear such action, suit or proceeding, in a Texas state court in Harris County, Texas) and that the Parties shall submit to the jurisdiction of such court. The Parties irrevocably waive, to the fullest extent permitted by law, any objection a Party may have to the laying of venue for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Section 13 shall for any reason be held invalid or unenforceable, it is the specific intent of the Parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.

     14. Nature of Payments. Any and all grants or deliveries of Awarded Shares hereunder shall constitute special incentive payments to Grantee and shall not be taken into account in computing the amount of salary or compensation of Grantee for the purpose of determining any retirement, death or other benefits under (a) any retirement, bonus, life insurance or other employee benefit plan of the Company, or (b) any agreement between the Company and Grantee, except as such plan or agreement shall otherwise expressly provide.

     15. Payment of Par Value. The Company’s obligation to deliver Awarded Shares to Grantee upon the vesting of such shares shall be subject to the payment in full of the requisite par value per share of the Awarded Shares prior to such issuance (collectively, the “Par Value”). If the Company has not received from Grantee cash, a check or other available funds for the full amount of the Par Value by 5:00 P.M. Central Standard Time within five (5) days after the Grant Date, or Grantee has not made by that date such other provision for the payment of the Par Value

8

in form satisfactory to the Committee or Board in its sole discretion, the Company shall pay the Par Value of the Awarded Shares on behalf of Grantee and will report the amount of such payment as income to Grantee for the taxable period of Grantee during which the Awarded Shares are granted. Grantee acknowledges and agrees that he shall be responsible for the payment of any and all federal, state and local taxes on such income if the Company pays the Par Value on behalf of Grantee.

     16. Amendment; Waiver. This Agreement may be amended or modified only by means of a written document or documents signed by the Company and Grantee. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board or by the Committee. A waiver on one occasion shall not be deemed to be a waiver of the same or any other breach on a future occasion.

     17. Notice. Any notice or other communication required or permitted hereunder shall be given in writing and shall be deemed given, effective, and received upon prepaid delivery in person or by courier or upon the earlier of delivery or the third business day after deposit in the United States mail if sent by certified mail, with postage and fees prepaid, addressed to the other Party at the Company’s principal executive office or the address of Grantee in the records and books of the Company, or to such other address as such Party may designate in writing from time to time by notice to the other Party in accordance with this Section 17.

NCI BUILDING SYSTEMS, INC.
BY:
	A. R. Ginn
	Chairman of the Board and
	Chief Executive Officer

GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SUBJECT TO THIS RESTRICTED STOCK AWARD SHALL VEST AND THE FORFEITURE PROVISIONS SHALL LAPSE, IF AT ALL, ONLY DURING THE PERIOD OF GRANTEE’S CONTINUOUS SERVICE OR AS OTHERWISE PROVIDED IN THIS AGREEMENT (NOT THROUGH THE ACT OF BEING GRANTED THE RESTRICTED STOCK AWARD). GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT OR THE PLAN SHALL CONFER UPON GRANTEE ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION OF GRANTEE’S CONTINUOUS SERVICE. Grantee acknowledges receipt of a copy of the Plan, represents that he or she is familiar with the terms and provisions thereof, and hereby accepts the Restricted Stock Award subject to all of the terms and provisions hereof and thereof. Grantee has reviewed this Agreement and the Plan in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement, and fully understands all provisions of this Agreement and the Plan. Grantee hereby agrees that all disputes arising out of or relating to this Agreement and the

9

Plan shall be resolved in accordance with Section 13 of this Agreement. Grantee further agrees to notify the Company upon any change in the address for notice indicated in this Agreement.

DATED:	SIGNED:
		GRANTEE

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EXHIBIT A

JOINT ESCROW INSTRUCTIONS

__________ __, 200_

Chief Financial Officer
NCI Building Systems, Inc.
10943 North Sam Houston Parkway West
Houston, Texas 77064

Dear Sir or Madam:

As Escrow Agent for both NCI Building Systems, Inc., a Delaware corporation (the “Company”), and the undersigned grantee (the “Grantee”) of shares of Common Stock of the Company (the “Shares”) under that certain Restricted Stock Agreement between the Company and the Grantee (the “Agreement”), you are hereby authorized and directed to hold the Shares, the stock certificate(s) evidencing the Shares, and any other property and documents delivered to you pursuant to the Agreement, in accordance with the following instructions:

     1. In the event the Shares are forfeited to the Company pursuant to the Agreement, the Company shall give the Grantee and you a written notice of such forfeiture and the number of the Shares to be forfeited thereunder (the “Notice”). The Grantee and the Company hereby irrevocably authorize and direct you to complete the transaction described in the Notice in accordance with the terms of the Notice. To complete the transaction described in the Notice at the closing, you are directed (a) to complete, as appropriate, the stock assignment(s) necessary for the transfer of forfeited Shares to the Company as described in the Notice, and (b) to deliver same, together with the certificate(s) evidencing the forfeited Shares to be transferred, to the Company.

     2. The Grantee irrevocably authorizes the Company to deposit with you any certificates evidencing the Shares to be held by you hereunder and any additions and substitutions to said Shares as described in the Agreement. The Grantee does hereby irrevocably constitute and appoint you as the Grantee’s attorney-in-fact and agent for the term of this escrow to execute with respect to such Shares all documents necessary or appropriate to make such Shares negotiable and to complete any transaction herein contemplated. Subject to the provisions of this paragraph 2, the Grantee shall exercise all rights and privileges of a shareholder of the Company with respect to the Shares while the Shares are held by you.

     3. Upon written request to you and to the Company by the Grantee following the lapse of the forfeiture provisions described in the Agreement, you shall deliver to the Grantee a stock certificate or stock certificates representing those Shares as to which the forfeiture provisions have lapsed.

     4. If, at the time of termination of this escrow (upon the lapse of forfeiture provisions regarding all of the Shares and other property in your possession in accordance with

A - 1

the Agreement), you should have in your possession any documents, securities, or other property belonging to the Grantee, you shall deliver all of the same to the Grantee and shall be discharged of all further obligations hereunder.

     5. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.

     6. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely, and you shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for the Grantee while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.

     7. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or entity, excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments, or decrees of any court. In case you obey or comply with any such order, judgment, or decree, you shall not be liable to any of the parties hereto or to any other person or entity by reason of such compliance, notwithstanding any such order, judgment, or decree being subsequently reversed, modified, annulled, set aside, vacated, or found to have been entered without jurisdiction.

     8. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering, or purporting to execute or deliver, the Agreement or any documents or papers deposited or called for hereunder.

     9. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor, for which you will be reimbursed by the Company.

     10. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be the Chief Financial Officer of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent, who may be any person or entity selected by the Company. In the absence of such appointment by the Company, or until it has so specifically appointed another person or entity as a successor Escrow Agent, the successor Escrow Agent automatically, without the necessity of any further action by the Company, shall be deemed to be the person appointed or elected as the successor Chief Financial Officer of the Company to succeed the Chief Financial Officer who so resigned or otherwise ceased to be the Chief Financial Officer of the Company.

     11. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary party or parties hereto shall join in furnishing such instruments.

A - 2

     12. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the Shares or any other property held by you hereunder, you are authorized and directed to retain in your possession, without liability to anyone, all or any part of such property until such dispute shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree, or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.

     13. Any notice required or permitted hereunder shall be given in writing and shall be given by personal or courier delivery or deposit in the United States mail, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses or at such other addresses as a party may designate by ten days’ advance written notice to each of the other parties hereto:

If to the Company:	NCI Building Systems, Inc.
	10943 North Sam Houston Parkway West
	Houston, Texas 77064
	Attention: Chairman of the Board
If to the Grantee:	The address set forth opposite the Grantee’s signature below, or if none, to the care of the Company at the Company’s address above.
If to the Escrow Agent:	c/o NCI Building Systems, Inc.
	10943 North Sam Houston Parkway West
	Houston, Texas 77064
	Attention: Chief Financial Officer

Any notice so given by personal or courier delivery shall be deemed to have been duly given upon delivery, and any notice so given by United States mail shall be deemed to have been duly given upon the earlier of receipt by the addressee or the fourth business day after deposit in the mail.

     14. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of the Joint Escrow Instructions; you do not become a party to the Agreement.

     15. This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

     16. These Joint Escrow Instructions shall be governed by, and construed and enforced in accordance with, the internal substantive laws, but not the choice of law rules, of the State of Texas.

A - 3

Sincerely,

NCI BUILDING SYSTEMS, INC.

By:
	A. R. Ginn
	Chairman of the Board and
	Chief Executive Officer

GRANTEE:

Signature	Street Address
Print Name	City, State Zip Code

ESCROW AGENT:

Chief Financial Officer

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EXHIBIT B

ASSIGNMENT SEPARATE FROM CERTIFICATE

     FOR VALUE RECEIVED, I,                                                             , hereby sell, assign and transfer unto NCI Building Systems, Inc. (the “Company”)                                          (                    ) shares of the Company’s Common Stock standing in my name of the books of the Company represented by Certificate No.                      delivered herewith, and do hereby irrevocably constitute and appoint                                                              as attorney-in-fact, with full power of substitution, to transfer the such shares on the books of the Company.

                                                            
(Signature)

                                                            
(Please print name)

INSTRUCTIONS:

Please do not fill in any blanks other than the signature lines. The purpose of this assignment is to enable the Company to receive the shares upon the occurrence of a forfeiture of all, or any portion of, the shares, as set forth in the Restricted Stock Agreement, without requiring additional signatures on the part of the Grantee.

B - 1

EX-10.15

Exhibit 10.15

SPECIAL LONG-TERM GRANT

NCI BUILDING SYSTEMS, INC. 2003 LONG-TERM STOCK INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

Grantee:	Albert R. Ginn, Jr.
Number of Awarded Shares:	75,000
Date of Award:	May 28, 2004
Expiration of Restriction Period:	See Section 3

NCI Building Systems, Inc., a Delaware corporation (the “Company”), hereby grants to the individual whose name appears above (“Grantee”), pursuant to the provisions of the NCI Building Systems, Inc. 2003 Long Term Stock Incentive Plan, as in effect on the date hereof (the “Plan”), a restricted stock award (this “Award”) of shares (the “Awarded Shares”) of its common stock, $0.01 par value per share (the “Common Stock”), effective as of the date of award as set forth above (the “Grant Date”), upon and subject to the terms and conditions set forth in this Restricted Stock Agreement (this “Agreement”) and in the Plan. Unless otherwise defined in this Agreement, capitalized terms used in this Agreement shall have the meanings assigned to them in the Plan. A copy of the Plan in effect as of the date hereof is attached hereto, the terms and conditions of which are incorporated herein by reference.

     1. Effect of The Plan. The Awarded Shares granted to Grantee are subject to all of the provisions of the Plan and of this Agreement, together with all rules and determinations from time to time issued by the Committee and by the Board pursuant to the Plan. The Company hereby reserves the right to amend, modify, restate, supplement or terminate the Plan without the consent of Grantee. This Award shall be subject, without further action by the Company or Grantee, to any amendment, modification, restatement or supplement to the Plan that is beneficial to, or increases the rights of, Grantee. This Award shall not be subject to any amendment, modification, restatement or supplement to the Plan that reduces or adversely affects the rights and benefits available to Grantee hereunder.

     2. Grant. This Award shall evidence Grantee’s ownership of the Awarded Shares, and Grantee acknowledges that he or she will not receive a stock certificate representing the Awarded Shares unless and until the Awarded Shares vest as provided in this Award and all tax withholding obligations applicable to the Vested Awarded Shares (as defined below) have been satisfied. The Awarded Shares will be held in custody for Grantee, by the Chief Financial Officer of the Company pursuant to joint escrow instructions between the Grantee and the Company (substantially in the form of Exhibit A hereto), until the Awarded Shares have vested in accordance with Section 3 of this Award. Upon vesting of the Awarded Shares, the Company shall, unless otherwise paid by Grantee as described in Section 9(a) of this Award, withhold that number of Vested Awarded Shares necessary to satisfy any applicable tax withholding obligation of Grantee in accordance with the provisions of Section 9(a) of this Award, and thereafter instruct the Chief Financial Officer to deliver to Grantee all remaining Vested Awarded Shares; provided, however that Grantee shall have the right to make a one-time irrevocable election, at

SPECIAL LONG-TERM GRANT

least six (6) months prior to a Vesting Date (as defined below), to receive the Vested Awarded Shares in up to twenty (20) annual installments, with the first installment being distributed to Grantee on the Vesting Date. Grantee shall exercise this right by delivering to the Company a written notice that states his election to defer the receipt of the Vested Awarded Shares pursuant to this Section 2, which notice shall include Grantee’s schedule of receipt of the Vested Awarded Shares in up to twenty (20) annual installments. Grantee agrees that the Awarded Shares shall be subject to all of the terms and conditions set forth in this Agreement and the Plan, including, but not limited to, the forfeiture conditions set forth in Section 4 of this Agreement, the restrictions on transfer set forth in Section 5 of this Agreement and the satisfaction of the Required Withholding as set forth in Section 9(a) of this Award.

     3. Vesting Schedule; Service Requirements. Except as provided otherwise in Section 4 of this Agreement, the Awarded Shares shall vest if Grantee’s continuing employment or consulting relationship with the Company or any Subsidiary of the Company (“Continuous Service”) is not terminated during the period commencing with the Grant Date and ending with the applicable date that such portion of the Awarded Shares vests (each, a “Vesting Date”). Awarded Shares that have vested pursuant to this Agreement are referred to herein as “Vested Awarded Shares” and Awarded Shares that have not yet vested pursuant to this Agreement are referred to herein as “Unvested Awarded Shares.” Subject to the provisions of Section 4 of this Agreement, if Grantee’s Continuous Service is not terminated prior to an applicable Vesting Date, the Awarded Shares shall vest on January 1, 2008.

     4. Conditions of Forfeiture.

     (a) Upon the date of termination of Grantee’s Continuous Service (the “Termination Date”):

     (i) by the Company for Cause (as hereinafter defined) or by Grantee’s voluntary resignation without Good Reason (as herein after defined) before all of the Awarded Shares become Vested Awarded Shares, all Unvested Awarded Shares as of the Termination Date shall, without further action of any kind by the Company or Grantee, be forfeited; or

     (ii) by the Company without Cause or by Grantee’s voluntary resignation with Good Reason before all of the Awarded Shares become Vested Awarded Shares, on the Termination Date, twenty-five percent (25%) of the Unvested Awarded Shares shall vest for each twelve-month period of Grantee’s Continuous Service completed since the Grant Date, and the remainder of the Unvested Awarded Shares as of the Termination Date shall, without further action of any kind by the Company or Grantee, be forfeited.

     (b) All Unvested Awarded Shares that are forfeited pursuant to the terms of this Agreement shall be deemed to be immediately transferred to the Company without any payment by the Company or action by Grantee, and the Company shall have the full right to cancel any evidence of Grantee’s ownership of such forfeited Unvested Awarded Shares and to take any other action necessary to demonstrate that Grantee no longer owns such forfeited

2

SPECIAL LONG-TERM GRANT

Unvested Awarded Shares automatically upon such forfeiture. Following such forfeiture, Grantee shall have no further rights with respect to such forfeited Unvested Awarded Shares. Grantee, by his acceptance of the Award granted pursuant to this Agreement, irrevocably grants to the Company a power of attorney to transfer Unvested Awarded Shares that are forfeited to the Company and agrees to execute any documents requested by the Company, including but not limited to one or more stock assignments separate from the certificate substantially in the form of Exhibit B hereto, to facilitate such transfer upon forfeiture. The provisions of this Agreement regarding transfers of Unvested Awarded Shares that are forfeited shall be specifically performable by the Company in a court of equity or law.

     (c) Notwithstanding anything to the contrary in this Agreement, the Unvested Awarded Shares shall become vested (i) on the death of Grantee during Grantee’s Continuous Service; (ii) if the Grantee suffers a Disability during Grantee’s Continuous Service; or (iii) in accordance with the provisions of Section 12(b) of the Plan relating to a Change in Control.

     (d) For purposes of the this Agreement, “Cause” means:

     (i) Grantee’s failure or inability for any reason to devote substantially all of his business time and effort to the performance of his duties and responsibilities to NCI Group, L.P. (“NCI Group”), the Company and their affiliates (vacation time and absence due to sickness or disability being excepted herefrom) and such failure or inability continues for a period of thirty (30) days after written notice by NCI Group or the Company of the existence of such failure or inability; provided, however, that only one such notice by NCI Group or the Company need be sent and, if such failure re-occurs thereafter, no further notice and opportunity to cure such failure shall be required;

     (ii) indictment for, or conviction of, or plea of nolo contendere to, a felony, other than a felony involving the operation of a motor vehicle which does not result in serious bodily harm to any person;

     (iii) disregard or failure to use commercially reasonable efforts to carry out the reasonable and lawful instructions of the Board of Directors of the Company, or a material violation of policies established by NCI Group or the Company, with respect to the operation of its business and affairs that continues for a period of thirty (30) days after written notice by NCI Group or the Company of the existence of such violation, disregard or failure; provided, however, that only one such notice by NCI Group or the Company need be sent and, if such violation, disregard or failure re-occurs thereafter, no further notice and opportunity to cure such violation, disregard or failure shall be required;

     (iv) an act committed by Grantee which (A) brings NCI Group or the Company into public disgrace, or (B) harms the business operations of NCI Group or the Company; provided, however, that the Board of Directors of the Company must first provide to Grantee written notice clearly and fully describing the particular acts or omissions which the Board reasonably believes in good faith constitutes Cause under this subsection and an opportunity, within thirty (30) days following his receipt of such notice, to meet in person with the Board of Directors to explain or defend the alleged acts

3

SPECIAL LONG-TERM GRANT

or omissions relied upon by the Board of Directors and, to the extent practicable, to cure such acts or omissions;

     (v) habitual insobriety or illegal use of controlled substances by Grantee; or

     (vi) breach or failure by Grantee to comply in any material respect with the Company’s Corporate Governance Guidelines or Code of Business Conduct and Ethics (as the same may be amended, restated, extended, supplemented or otherwise modified in writing from time to time in the sole discretion of the Board of Directors of the Company) that is not cured within thirty (30) days after written notice by NCI Group or the Company of the breach or failure to perform; provided, however, that only one such notice by NCI Group or the Company need be sent and, if such breach or failure reoccurs thereafter, no further notice and opportunity to cure such breach or failure shall be required.

For purposes of this Agreement, any termination of Grantee’s employment for Cause shall be effective only upon delivery to Grantee of a certified copy of a resolution of the Board of Directors of the Company, adopted by the affirmative vote of a majority of the entire membership of the Board of Directors (excluding Grantee) following a meeting at which Grantee was given an opportunity to be heard on at least five business days’ advance notice, finding that Grantee was guilty of the conduct constituting Cause, and specifying the particulars thereof.

     (e) For purposes of this Agreement, “Good Reason” means any of the following events that occurs without the Grantee’s prior written consent:

     (i) (A) Any reduction in the amount of the Grantee’s then current base salary in excess of ten percent (10%) in any twelve month period, or below Grantee’s base salary as in effect on June 1, 2004, (B) any material reduction in the aggregate amount of cash bonuses and other cash incentive compensation that Grantee has an opportunity to earn under the various bonus and inventive programs of the Company and NCI Group, or (C) any material reduction in the aggregate employee benefits as in effect for the benefit of Grantee from time to time (unless such reduction is pursuant to a general change in compensation or benefits applicable to all similarly situated employees of the Company and its affiliates); or

     (ii) (A) the removal of or failure to elect or appoint Grantee to the positions of Chairman of the Board and Chief Executive Officer of the Company, or (B) any material reduction in the nature or status of the Grantee’s authority or in his duties or responsibilities;

provided, however, that no act or omission shall constitute “Good Reason” for purposes of this Agreement unless Grantee provides to the Board of Directors of the Company a written notice clearly and fully describing the particular acts or omissions which Grantee

4

SPECIAL LONG-TERM GRANT

reasonably believes in good faith constitutes “Good Reason”, and an opportunity, within thirty (30) days following its receipt of such notice, to cure such acts or omissions.

     5. Non-Transferability. Grantee may not sell, transfer, pledge, exchange, hypothecate, or otherwise encumber or dispose of any of the Unvested Awarded Shares, or any right or interest therein, by operation of law or otherwise. Any transfer in violation of this Section 5 shall be void and of no force or effect, and shall result in the immediate forfeiture of all Unvested Awarded Shares.

     6. Dividend and Voting Rights. Subject to the restrictions contained in this Agreement, Grantee shall have the rights of a stockholder with respect to the Awarded Shares, including the right to vote all such Awarded Shares, including Unvested Awarded Shares, and to receive all dividends, cash or stock (other than stock dividends accounted for as a stock split), paid or delivered thereon, from and after the date hereof. In the event of forfeiture of Unvested Awarded Shares, Grantee shall have no further rights with respect to such Unvested Awarded Shares. However, the forfeiture of the Unvested Awarded Shares pursuant to Section 4 hereof shall not create any obligation to repay cash dividends or stock dividends (other than stock dividends accounted for as a stock split) received as to such Unvested Awarded Shares, nor shall such forfeiture invalidate any votes given by Grantee with respect to such Unvested Awarded Shares prior to forfeiture.

     7. Capital Adjustments and Corporate Events. If, from time to time during the term of this Agreement, there is any capital adjustment affecting the outstanding Common Stock as a class without the Company’s receipt of consideration (including stock dividends accounted for as a stock split), the Unvested Shares shall be adjusted in accordance with the provisions of Section 12 of the Plan. Any and all new, substituted or additional securities to which Grantee may be entitled by reason of Grantee’s ownership of the Unvested Awarded Shares hereunder because of a capital adjustment shall be immediately subject to the forfeiture provisions of this Agreement and included thereafter as “Unvested Awarded Shares” for purposes of this Agreement.

     8. Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Unvested Awarded Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or the Plan, or (ii) to treat as owner of such Unvested Awarded Shares, or accord the right to vote or pay or deliver dividends or other distributions to, any purchaser or other transferee to whom or which the Grantee shall have attempted to transfer such Unvested Awarded Shares.

     9. Tax Matters.

     (a) The Company’s obligation to deliver Awarded Shares to Grantee upon the vesting of such shares shall be subject to the satisfaction of all applicable federal, state and local income and employment tax withholding requirements (the “Required Withholding”). The Company shall withhold from the Vested Awarded Shares that otherwise would have been delivered to Grantee the number of Vested Awarded Shares necessary to satisfy Grantee’s Required Withholding, and deliver the remaining Vested Awarded Shares to Grantee, unless the

5

SPECIAL LONG-TERM GRANT

Grantee has made arrangements with the Company for the Grantee to deliver to the Company cash, a check or other available funds for the full amount of the Required Withholding by 5:00 P.M. Central Standard Time on the later of (i) the date Awarded Shares become Vested Awarded Shares or (ii) the date on which the Vested Awarded Shares are distributed to Grantee, or by such date Grantee has not made such other provision for the satisfaction of the Required Withholding in form satisfactory to the Committee or Board, in its sole discretion. The amount of the Required Withholding and the number of Vested Awarded Shares to be withheld by the Company, if applicable, to satisfy Grantee’s Required Withholding, as well as the amount reflected on tax reports filed by the Company, shall be based on the value of the Vested Awarded Shares determined by using the last sales price of the Common Stock (as reported by the New York Stock Exchange) on the date prior to the applicable Vesting Date or the date on which the Vested Awarded Shares are distributed to Grantee, as appropriate. The obligations of the Company under this Award will be conditioned on such satisfaction of the Required Withholding.

     (b) Grantee acknowledges that the tax consequences associated with the award are complex and that the Company has urged Grantee to review with Grantee’s own tax advisors the federal, state, and local tax consequences of this Award. Grantee is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Grantee understands that Grantee (and not the Company) shall be responsible for Grantee’s own tax liability that may arise as a result of the Award. Grantee understands further that Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”), taxes as ordinary income the fair market value of the Vested Awarded Shares as of the Vesting Date for those shares. Grantee also understands that Grantee may elect to be taxed at Grant Date rather than at the time the Awarded Shares vest by filing an election under Section 83(b) of the Code with the Internal Revenue Service and by providing a copy of the election to the Company. GRANTEE ACKNOWLEDGES THAT HE OR SHE HAS BEEN INFORMED OF THE AVAILABILITY OF MAKING AN ELECTION IN ACCORDANCE WITH SECTION 83(b) OF THE CODE; THAT SUCH ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE (AND A COPY OF THE ELECTION GIVEN TO THE COMPANY) WITHIN 30 DAYS OF THE GRANT OF AWARDED SHARES TO GRANTEE; AND THAT GRANTEE IS SOLELY RESPONSIBLE FOR MAKING SUCH ELECTION.

     10. Covenants of Grantee.

     (a) For a period for five (5) years immediately following Grantee’s receipt of any Vested Awarded Shares pursuant to this Agreement, Grantee shall not, directly or indirectly and whether on his own behalf or on behalf of any other person, partnership, association, corporation or other entity, engage in or be an owner, director, officer, employee, agent, consultant or other representative of or for any business that manufactures, engineers, markets, sells or provides, within a 250-mile radius of any then existing manufacturing facility of the Company and its subsidiaries and affiliates, metal building systems or components (including, without limitation, primary and secondary framing systems, roofing systems, end or side wall panels, doors, windows or other metal components of a building structure), coated or painted steel or metal coils, coil coating or painting services, or any other products or services that are the same as or similar to those manufactured, engineered, marketed, sold or provided by the

6

SPECIAL LONG-TERM GRANT

Company or its subsidiaries and affiliates during the Continuous Service of Grantee. Ownership by Grantee of equity securities of the Company, or of equity securities in other publicly owned companies constituting less than 1% of the voting securities in such companies, shall be deemed not to be a breach of this covenant.

     (b) For a period for five (5) years immediately following Grantee’s receipt of any Vested Awarded Shares pursuant to this Agreement, Grantee shall not, directly or indirectly and whether on his own behalf or on behalf of any other person, partnership, association, corporation or other entity, either hire, seek to hire or solicit the employment of any employee of the Company or its subsidiaries and affiliates or in any manner attempt to influence or induce any employee of the Company or its subsidiaries and affiliates to leave the employment of the Company or its subsidiaries and affiliates, or use or disclose to any person, partnership, association, corporation or other entity any information concerning the names and addresses of any employees of the Company or its subsidiaries and affiliates unless required by due process of law.

     (c) Grantee, during his Continuous Service with the Company, will have access to, and become familiar with, various trade secrets and proprietary and confidential information consisting of, but not limited to, processes, computer programs, compilations of information, records, sales procedures, customer requirements, pricing techniques, customer lists, methods of doing business and other confidential information (collectively referred to as the “Trade Secrets”), which are owned by the Company and regularly used in the operation of its business, but in connection with which the Company takes precautions to prevent dissemination to persons other than certain directors, officers and employees. Grantee acknowledges and agrees that the Trade Secrets (a) are secret and not known in the industry or to the public; (b) are entrusted to him after being informed of their confidential and secret status by the Company and because of the fiduciary position occupied by him with the Company; (c) have been developed by the Company for, and on behalf of, the Company through substantial expenditures of time, effort and money and are used in its business; (d) give the Company an advantage over competitors who do not know or use the Trade Secrets; (e) are of such value and nature as to make it reasonable and necessary to protect and preserve the confidentiality and secrecy of the Trade Secrets; and (f) the Trade Secrets are valuable, special and unique assets of the Company, the disclosure of which could cause substantial injury and loss of profits and goodwill to the Company. Grantee shall not use in any way or disclose any of the Trade Secrets, directly or indirectly, during his Continuous Service with the Company, or at any time thereafter, except as required in the course of his Continuous Service with the Company. All files, records, documents, information, data and similar items relating to the business of the Company, whether prepared by Grantee or otherwise coming into his possession, shall remain the exclusive property of the Company and shall not be removed from the premises of the Company under any circumstances without the prior written consent of the Board of Directors of the Company (except in the ordinary course of business during Grantee’s Continuous Service with the Company), and in any event shall be promptly delivered to the Company upon termination of Grantee’s Continuous Service for any reason. Grantee agrees that, upon his receipt of any subpoena, process or other request to produce or divulge, directly or indirectly, any Trade Secrets to any entity, agency, tribunal or person, he shall timely notify and promptly hand deliver a copy of the subpoena, process or other request to the Board of Directors of the Company. For

7

SPECIAL LONG-TERM GRANT

this purpose, Grantee irrevocably nominates and appoints the Company (including any attorney retained by the Company), as his true and lawful attorney-in-fact, to act in his name, place and stead to perform any act that he might perform to defend and protect against any disclosure of any Trade Secrets.

     (d) For a period for five (5) years immediately following Grantee’s receipt of any Vested Awarded Shares pursuant to this Agreement, Grantee shall not for any reason whatsoever (whether or not related to this Agreement or the Awarded Shares) institute any legal proceedings against the Company, any of its subsidiaries, or any of its officers, directors, agents or representatives.

     (e) The parties hereto intend all provisions of subsections (a), (b), (c) and (d) of this Section 10 to be enforced to the fullest extent permitted by law. Accordingly, should a court of competent jurisdiction determine that the scope of any provision of subsections (a), (b), (c) or (d) of this Section 10 is too broad to be enforced as written, the parties intend that the court reform the provision to such narrower scope as it determines to be reasonable and enforceable. In addition, however, Grantee agrees that the non-competition agreements, non-employment agreements, non-disclosure and no litigation agreements set forth above each constitute separate agreements independently supported by good and adequate consideration and shall be severable from the other provisions of this Agreement and shall survive this Agreement. The existence of any claim or cause of action of Grantee against the Company, except for a breach of this Agreement by the Company or its subsidiaries, shall not constitute a defense to the enforcement by the Company of the covenants and agreements of Grantee contained in the non-competition, non-employment, non-disclosure and no litigation agreements. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term hereof, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision never comprised a part of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

     (f) If Grantee breaches any of the covenants set forth in this Section 10, Grantee shall, within ten (10) business days after it is ultimately determined that he has committed such a breach pursuant to the dispute resolution provisions of Section 13 hereof, either (i) redeliver to the Company the Awarded Vested Shares, if still owned by Grantee, or (ii) reimburse the Company an amount equal to the then fair market value of the Awarded Vested Shares determined by using the last sales price of the Common Stock (as reported by the New York Stock Exchange) on the date such determination is made; which amount shall be paid to the Company in cash or other immediately available funds.

     (g) By acceptance of this Agreement, the Grantee agrees to cooperate with, provide information to, and to participate in such exams and activities as requested by, the Company, if the Company, in its sole discretion, elects to obtain insurance or make other

8

SPECIAL LONG-TERM GRANT

financial arrangements to fund or otherwise assure or assist in the performance and satisfaction of the Company’s obligations and liabilities under this Agreement.

     11. Entire Agreement; Governing Law. The Plan and this Agreement constitute the entire agreement of the Company and Grantee (collectively, the “Parties”) with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Parties with respect to the subject matter hereof. If there is any inconsistency between the provisions of this Agreement and of the Plan, the provisions of the Plan shall govern. Nothing in the Plan and this Agreement (except as expressly provided therein or herein) is intended to confer any rights or remedies on any person other than the Parties. The Plan and this Agreement are to be construed in accordance with and governed by the internal laws of the State of Texas, without giving effect to any choice-of-law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Texas to the rights and duties of the Parties. Should any provision of the Plan or this Agreement relating to the Shares be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.

     12. Interpretive Matters. Whenever required by the context, pronouns and any variation thereof shall be deemed to refer to the masculine, feminine, or neuter, and the singular shall include the plural, and vice versa. The term “include” or “including” does not denote or imply any limitation. The captions and headings used in this Agreement are inserted for convenience and shall not be deemed a part of the Restricted Stock Award or this Agreement for construction or interpretation.

     13. Dispute Resolution. The provisions of this Section 13 shall be the exclusive means of resolving disputes of the Parties (including any other persons claiming any rights or having any obligations through the Company or Grantee) arising out of or relating to the Plan and this Agreement. The Parties shall attempt in good faith to resolve any disputes arising out of or relating to the Plan and this Agreement by negotiation between individuals who have authority to settle the controversy. Either Party may commence negotiations by delivering to the other Party a written statement of the Party’s position and the name and title of the individual who will represent the Party. Within thirty (30) days of the written notification, the Parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to resolve the dispute. If the dispute has not been resolved by negotiation within ninety (90) days of the written notification of the dispute, either Party may file suit and each Party agrees that any suit, action, or proceeding arising out of or relating to the Plan or this Agreement shall be brought in the United States District Court for the Southern District of Texas (or should such court lack jurisdiction to hear such action, suit or proceeding, in a Texas state court in Harris County, Texas) and that the Parties shall submit to the jurisdiction of such court. The Parties irrevocably waive, to the fullest extent permitted by law, any objection a Party may have to the laying of venue for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Section 13 shall for any reason be held invalid or unenforceable, it is the specific intent of

9

SPECIAL LONG-TERM GRANT

the Parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.

     14. Nature of Payments. Any and all grants or deliveries of Awarded Shares hereunder shall constitute special incentive payments to Grantee and shall not be taken into account in computing the amount of salary or compensation of Grantee for the purpose of determining any retirement, death or other benefits under (a) any retirement, bonus, life insurance or other employee benefit plan of the Company, or (b) any agreement between the Company and Grantee, except as such plan or agreement shall otherwise expressly provide.

     15. Payment of Par Value. The Company’s obligation to deliver Awarded Shares to Grantee upon the vesting of such shares shall be subject to the payment in full of the requisite par value per share of the Awarded Shares prior to such issuance (collectively, the “Par Value”). If the Company has not received from Grantee cash, a check or other available funds for the full amount of the Par Value by 5:00 P.M. Central Standard Time within five (5) days after the Grant Date, or Grantee has not made by that date such other provision for the payment of the Par Value in form satisfactory to the Committee or Board in its sole discretion, the Company shall pay the Par Value of the Awarded Shares on behalf of Grantee and will report the amount of such payment as income to Grantee for the taxable period of Grantee during which the Awarded Shares are granted. The Grantee acknowledges and agrees that he shall be responsible for the payment of any and all federal, state and local taxes on such income if the Company pays the Par Value on behalf of the Grantee.

     16. Amendment; Waiver. This Agreement may be amended or modified only by means of a written document or documents signed by the Company and Grantee. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board or by the Committee. A waiver on one occasion shall not be deemed to be a waiver of the same or any other breach on a future occasion.

     17. Notice. Any notice or other communication required or permitted hereunder shall be given in writing and shall be deemed given, effective, and received upon prepaid delivery in person or by courier or upon the earlier of delivery or the third business day after deposit in the United States mail if sent by certified mail, with postage and fees prepaid, addressed to the other Party at the Company’s principal executive office or the address of the Grantee in the records and books of the Company, or to such other address as such Party may designate in writing from time to time by notice to the other Party in accordance with this Section 17.

NCI BUILDING SYSTEMS, INC.
By:	/s/ Robert J. Medlock
	Robert J. Medlock, Executive Vice President and Chief Financial Officer

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SPECIAL LONG-TERM GRANT

GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SUBJECT TO THIS RESTRICTED STOCK AWARD SHALL VEST AND THE FORFEITURE PROVISIONS SHALL LAPSE, IF AT ALL, ONLY DURING THE PERIOD OF GRANTEE’S CONTINUOUS SERVICE OR AS OTHERWISE PROVIDED IN THIS AGREEMENT (NOT THROUGH THE ACT OF BEING GRANTED THE RESTRICTED STOCK AWARD). GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT OR THE PLAN SHALL CONFER UPON GRANTEE ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION OF GRANTEE’S CONTINUOUS SERVICE. Grantee acknowledges receipt of a copy of the Plan, represents that he or she is familiar with the terms and provisions thereof, and hereby accepts the Restricted Stock Award subject to all of the terms and provisions hereof and thereof. Grantee has reviewed this Agreement and the Plan in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement, and fully understands all provisions of this Agreement and the Plan. Grantee hereby agrees that all disputes arising out of or relating to this Agreement and the Plan shall be resolved in accordance with Section 13 of this Agreement. Grantee further agrees to notify the Company upon any change in the address for notice indicated in this Agreement.

DATED: June 23, 2004	SIGNED: /s/ Albert R. Ginn, Jr.
	Albert R. Ginn, Jr.,
	GRANTEE

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SPECIAL LONG-TERM GRANT

EXHIBIT A

JOINT ESCROW INSTRUCTIONS

August 28, 2003

Chief Financial Officer
NCI Building Systems, Inc.
10943 North Sam Houston Parkway
West Houston, Texas 77064

Dear Sir or Madam:

As Escrow Agent for both NCI Building Systems, Inc., a Delaware corporation (the “Company”), and the undersigned grantee (the “Grantee”) of shares of Common Stock of the Company (the “Shares”) under that certain Restricted Stock Agreement between the Company and the Grantee (the “Agreement”), you are hereby authorized and directed to hold the Shares, the stock certificate(s) evidencing the Shares, and any other property and documents delivered to you pursuant to the Agreement, in accordance with the following instructions:

     1. In the event the Shares are forfeited to the Company pursuant to the Agreement, the Company shall give the Grantee and you a written notice of such forfeiture and the number of the Shares to be forfeited thereunder (the “Notice”). The Grantee and the Company hereby irrevocably authorize and direct you to complete the transaction described in the Notice in accordance with the terms of the Notice. To complete the transaction described in the Notice at the closing, you are directed (a) to complete, as appropriate, the stock assignment(s) necessary for the transfer of forfeited Shares to the Company as described in the Notice, and (b) to deliver same, together with the certificate(s) evidencing the forfeited Shares to be transferred, to the Company.

     2. The Grantee irrevocably authorizes the Company to deposit with you any certificates evidencing the Shares to be held by you hereunder and any additions and substitutions to said Shares as described in the Agreement. The Grantee does hereby irrevocably constitute and appoint you as the Grantee’s attorney-in-fact and agent for the term of this escrow to execute with respect to such Shares all documents necessary or appropriate to make such Shares negotiable and to complete any transaction herein contemplated. Subject to the provisions of this paragraph 2, the Grantee shall exercise all rights and privileges of a shareholder of the Company with respect to the Shares while the Shares are held by you.

     3. Upon written request to you and to the Company by the Grantee following the lapse of the forfeiture provisions described in the Agreement, you shall deliver to the Grantee a stock certificate or stock certificates representing those Shares as to which the forfeiture provisions have lapsed.

     4. If, at the time of termination of this escrow (upon the lapse of forfeiture provisions regarding all of the Shares and other property in your possession in accordance with

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SPECIAL LONG-TERM GRANT

the Agreement), you should have in your possession any documents, securities, or other property belonging to the Grantee, you shall deliver all of the same to the Grantee and shall be discharged of all further obligations hereunder.

     5. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.

     6. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely, and you shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for the Grantee while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.

     7. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or entity, excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments, or decrees of any court. In case you obey or comply with any such order, judgment, or decree, you shall not be liable to any of the parties hereto or to any other person or entity by reason of such compliance, notwithstanding any such order, judgment, or decree being subsequently reversed, modified, annulled, set aside, vacated, or found to have been entered without jurisdiction.

     8. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering, or purporting to execute or deliver, the Agreement or any documents or papers deposited or called for hereunder.

     9. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor, for which you will be reimbursed by the Company.

     10. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be the Chief Financial Officer of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent, who may be any person or entity selected by the Company. In the absence of such appointment by the Company, or until it has so specifically appointed another person or entity as a successor Escrow Agent, the successor Escrow Agent automatically, without the necessity of any further action by the Company, shall be deemed to be the person appointed or elected as the successor Chief Financial Officer of the Company to succeed the Chief Financial Officer who so resigned or otherwise ceased to be the Chief Financial Officer of the Company.

     11. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary party or parties hereto shall join in furnishing such instruments.

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SPECIAL LONG-TERM GRANT

     12. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the Shares or any other property held by you hereunder, you are authorized and directed to retain in your possession, without liability to anyone, all or any part of such property until such dispute shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree, or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.

     13. Any notice required or permitted hereunder shall be given in writing and shall be given by personal or courier delivery or deposit in the United States mail, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses or at such other addresses as a party may designate by ten days’ advance written notice to each of the other parties hereto:

If to the Company:	NCI Building Systems, Inc. 10943 North Sam Houston Parkway West Houston, Texas 77064 Attention: Board of Directors
If to the Grantee:	Albert R. Ginn, Jr. 23407 FM 362 Waller, Texas 77484
If to the Escrow Agent:	c/o NCI Building Systems, Inc. 10943 North Sam Houston Parkway West Houston, Texas 77064 Attention: Chief Financial Officer

Any notice so given by personal or courier delivery shall be deemed to have been duly given upon delivery, and any notice so given by United States mail shall be deemed to have been duly given upon the earlier of receipt by the addressee or the fourth business day after deposit in the mail.

     14. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of the Joint Escrow Instructions; you do not become a party to the Agreement.

     15. This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

     16. These Joint Escrow Instructions shall be governed by, and construed and enforced in accordance with, the internal substantive laws, but not the choice of law rules, of the State of Texas.

[The next following page is the signature page.]

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SPECIAL LONG-TERM GRANT

Very truly yours, NCI BUILDING SYSTEMS, INC.
By:	/s/ Robert J. Medlock
	Robert J. Medlock, Executive Vice
	President and Chief Financial Officer
GRANTEE:
/s/ Albert R. Ginn, Jr.
Signature
Albert R. Ginn, Jr.
Print Name
ESCROW AGENT:
/s/ Robert J. Medlock
Chief Financial Officer

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EXHIBIT B

ASSIGNMENT SEPARATE FROM CERTIFICATE

FOR VALUE RECEIVED, I,                     , hereby sell, assign and transfer unto NCI Building Systems, Inc. (the “Company”)                      (                    ) shares of the Company’s Common Stock standing in my name of the books of the Company represented by Certificate No. delivered herewith, and do hereby irrevocably constitute and appoint as attorney-in-fact, with full power of substitution, to transfer the such shares on the books of the Company.

/s/ Albert R. Ginn,Jr.  

(Signature) 

Albert R. Ginn, Jr.  

(Please print name) 

INSTRUCTIONS:

Please do not fill in any blanks other than the signature lines. The purpose of this assignment is to enable the Company to receive the shares upon the occurrence of a forfeiture of all, or any portion of, the shares, as set forth in the Restricted Stock Agreement, without requiring additional signatures on the part of the Grantee.

EX-13.1

Exhibit 13.1

CONTENTS 2 Letter to Our Shareholders 7 Company Review 28 Financial Overview 2000 2001 2002 2003 2004 Sales $ 1,018,324 $ 954,877 $ 953,442 $ 898,150 $ 1,084,863 Income before cumulative effect 44,407 1 16,535 1,2 31,314 1,3,4 22,800 44,890 3 of change in accounting principle Income before cumulative 2.43 1 0.91 1,2 1.68 1,3,4 1.20 2.24 3 effect of change in accounting principle per diluted share Working capital 56,913 49,461 80,157 66,585 127,237 Total assets 868,921 838,812 721,265 713,160 782,857 Long-term debt 417,254 367,500 297,300 248,750 216,700 (Including current portion) Shareholders’ equity 5 $ 305,280 $ 330,343 $ 303,459 $ 331,751 $ 401,177 Average common shares 18,286 18,265 18,692 18,969 19,996 (Assuming dilution) In thousands, except per share data (1) Includes goodwill amortization of $10.6 million and $11.2 million (net of tax effect), or $0.58 and $0.61 per diluted share. Goodwill is no longer amortized beginning in fiscal 2002 in accordance with the provisions of SFAS No. 142. Refer to Note 3 to the consolidated financial statements for additional information. (2) Includes restructuring charge of $2.8 million ($1.8 million after tax, or $0.09 per diluted share) in 2001. (3) Includes $1.2 million ($0.8 million after tax) and $9.9 million ($5.8 million after tax) in .scal 2002 and .scal 2004, respectively. (4) During .scal 2002, the Company recorded a transitional impairment loss as required per SFAS No. 142 which was disclosed as a cumulative effect of change in accounting principle in the amount of $65.1 million ($3.49 per diluted share). This resulted in a net loss of $33.8 million ($1.81 per diluted share). (5) Historically, the Company has not paid dividends. Selected Financial Data SEGMENT Metal Components Engineered Building Systems Metal Coil Coating PRODUCTS • Pre-formed metal roof and wall systems · Secondary structural members · Flashings and accessories · Roll-up and sectional doors and interior partition systems · Engineered custom-use buildings · Commercial and industrial buildings · Self-storage mini warehouses · Steel-framed homes · Insulated roof and wall panels · Cleans, treats and coats various .at rolled metal coil substrates · Slits and/or embosses coated coils CUSTOMERS • Small, medium and large contractors · Specialty roofers · Regional fabricators · Engineered building fabricators · End users · Builders · General contractors · Developers · End users

· Manufacturers of painted steel products · Steel mills INTER-COMPANY RELATIONSHIP • Produces metal components for the engineered building systems segment · Roll-up and sectional doors · Produces main frames, Long Bay ¨ Systems and light commercial systems for all brands and depots · Supplies painted light gauge coils for panels and flashings and heavy gauge coils for secondary structural products NCI at a Glance

•   Meta Components
•   Engineered Building Systems
•   Metal Coil Coating
•   Door Manufacturing
•   NCI Metal Depots (Retall)

NCI Building Systems, Inc. is an integrated manufacturer and marketer of metal products and services for the building industry. Its operations are conducted in three business segments: metal components, engineered building systems and metal coil coating. The metal components segment designs, manufactures, sells and distributes a selection of components for a wide variety of new construction applications, as well as repair and retrofit uses. The engineered building systems segment designs, manufactures and markets engineered building systems, self-storage building systems and metal home framing systems. Both segments market products for commercial, industrial, agricultural, governmental, community and residential uses. The metal coil coating segment provides hot-roll and light-gauge metal coil painting and slitting services.

Fellow Shareholders and Friends:

We are pleased to report that, in a challenging period for the non-residential construction industry, NCI achieved strong, profitable growth for fiscal 2004.

This growth reflected the initial emergence of the non-residential construction industry from a multi-year downturn, as well as the rapid and substantial steel price increases that occurred during the fiscal year. In spite of the disruptions these price increases – and the associated supply scarcity – caused throughout our industry, we strengthened our position of industry leadership. During fiscal 2004, this was achieved by supporting and protecting our customers, by maintaining our pricing discipline and by producing four consecutive quarters of increased comparable-quarter revenue and earnings growth.

     The foundation for our fiscal 2004 results was our consistent implementation over several years of a long-term growth strategy that, recognizing the influence of the national economic cycle on industry demand, is based on a commitment to superior customer service, high quality products, innovative design, low-cost operating leadership and a conservative financial position. Through this strategy, we minimized the impact of the industry downturn, while positioning ourselves to produce stronger results as the economic cycle improves. As a result, we were well prepared to leverage better

industry conditions in fiscal 2004. With substantially greater steel price and supply stability expected for fiscal 2005, we are confident of our growth prospects for the year. We are proud of this organization and the people who created this performance and pleased that it has contributed to the growth in our stock price and market capitalization to record levels.

STRONG PROFITABLE
GROWTH FOR FISCAL 2004

     The highlights of NCI’s performance for fiscal 2004 included the following:

•   Sales increased 21% for fiscal 2004 to a record $1,084.9 million from $898.2 million for fiscal 2003, which drove 97% growth in net income to $44.9 million from $22.8 million and 87% growth in earnings per diluted share to $2.24 from $1.20. These results included a charge for debt refinancing costs of $9.9 million ($5.8 million, or $0.29 per diluted share, after tax).

•   NCI’s operating income profit margin expanded to 8.9% for fiscal 2004 from 6.4% for fiscal 2003, while its net profit margin increased to 4.1% from 2.5%. All three of

2

The Company significantly
strengthened its financial
position during fiscal 2004
through continued debt
reduction and substantial
earnings growth.

NCI’s businesses contributed to this increased profitability. Our gains primarily resulted from greater economies of scale, as revenue growth leveraged our fixed operating expenses, and from continued expansion in productivity and operating efficiencies. Consistent with our determined efforts during the year to help each of our individual customers weather the severe steel price increases, we generally held our margins from product sales at levels approximating our margins before the price increases accelerated.

•

The Company significantly strengthened its financial position during fiscal 2004 through continued debt reduction and substantial earnings growth. As a result, we reduced our ratio of debt to total capitalization for the fifth consecutive year, to 35.1%, compared with 42.9% at the end of fiscal 2003.

     In addition, during the year, NCI initiated a series of financial transactions that significantly lowered its interest rates and increased its financial flexibility. These transactions included refinancing our existing bank debt with a new $325 million senior secured credit facility and then using this facility to redeem $125 million of 9.25% senior subordinated notes. Assuming consistent interest rates and loan balances, the restructuring

of our debt would reduce annual interest payments by approximately $8 million. At the end of fiscal 2004, the Company had available borrowings under its credit facility of approximately $104 million.

     Subsequent to the end of fiscal 2004, we increased our cash availability through an offering of $180 million 2.125% convertible senior subordinated notes. In addition to paying the cash portion of the purchase price for Heritage Building Systems, Steelbuilding.com and the remaining 49% of our Monterrey, Mexico Manufacturing facility, which were consummated during the first quarter of fiscal 2005, we intend to use the net proceeds from the offering to finance future acquisitions. Any of the net proceeds not used to fund acquisitions in 12 to 18 months after the completion of the offering will be applied towards the repayment of our senior term loan.

•   During fiscal 2004, we made further progress in our multi-year initiative to build the highest quality professional management team in the industry. This progress included naming Norm Chambers President and Chief Operating Officer of NCI and electing Philip Hawk and John Sterling to our Board of Directors, which gives us seven independent directors on a nine-member board. In addition to supporting a strong ethical

3

climate through improved corporate governance, our management initiatives during the fiscal year produced enhanced strategic and succession planning. We also implemented additional intensive development and training programs for the talented individuals in our middle management who will play key roles in our long-term growth.

FISCAL 2005 OUTLOOK FOR
CONTINUED GROWTH TO
RECORD NET INCOME
PER DILUTED SHARE

Based on our fiscal 2004 financial results and our expectations for stabilized steel pricing and improving industry and economic conditions, we have established guidance for net income per diluted share for fiscal 2005 in a range of $2.80 to $3.05. (We will update this guidance at least on a quarterly basis as our year unfolds.) Supporting this guidance, as well as our confidence in NCI’s ability to achieve long-term profitable growth, are several key considerations.

     First, NCI participates in an industry with strong growth dynamics in both the short and long terms. According to industry analysts, after the three-year industry downturn, non-residential construction spending is expected to increase annually to $203 billion for 2008 from $154 billion for 2003. More generally, the non-residential construction industry’s past and expected future growth reflects the long-term growth prospects of the national economy, which, while subject to cycles, has produced a long-term record of growth for more than 60 years. In addition, because of the increasing versatility of metal components and engineered building systems, and their competitive pricing, we are confident of our industry segment’s prospects for gaining additional market share within the non-residential construction market.

     Second, NCI is well positioned to leverage continued economic recovery into further profitable growth. We are the clear market leader in our Components business, with the

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NCI 2004 Board of Directors (L-R): WILLAM BREEDLOVE, MAX LUKENS, PHILIP J. HAWK, A.R. GINN, Chairman & CEO, W.B. PIEPER, NORMAN CHAMBERS, President & COO, GARY FORBES, GEORGE MARTINEZ and JOHN K. STERLING.

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largest product line and the broadest distribution network. We also hold strong market share positions in both our Engineered Building business and Coating business. In addition to the impact of our economies of scale in highly fragmented markets, vertically integrated business model, buying power and commitment to cost control, we have strengthened our position as the low-cost producer through steadily improving productivity and operating efficiency. We have built a veteran management organization with experience gained through a number of economic cycles, and we enjoy a strong financial position.

     Finally, NCI has also consistently demonstrated its ability to build market share through both organic growth and accretive acquisitions, throughout the economic cycle. We attribute our organic growth primarily to the strength of our customer service, the breadth and quality of our product line, and our constant efforts to expand the market through investments in innovative new products and state-of-the-art manufacturing processes. Similarly, NCI has an extensive record of enhancing the Company’s ability to serve the customer through accretive

acquisitions that broaden the product line, increase the customer base and expand geographic reach. Although our earnings guidance for 2005 does not include the impact of any future acquisitions, we are confident we have the experience and financial strength to pursue appropriate acquisition opportunities in our fragmented, consolidating markets.

     In summary, and as the cover of this annual report suggests, our results for fiscal 2004 and our outlook for fiscal 2005 are about building performance. Like most great performances, NCI’s is the reflection of consistent effort and steadfast dedication through years of incremental improvement. While the environment in which we perform will continue to evolve, we are confident the effort and dedication will remain consistent.

     Before closing, we wish to thank the people of NCI, who are responsible for our successful performance in fiscal 2004 and our prospects for fiscal 2005. We extend this thanks as well to our customers and suppliers and for their support under trying circumstances during the last year. Last, we express our sincere appreciation to you, our fellow shareholders, for your past and future support.

A.R. Ginn	Norman C. Chambers
Chairman of the Board	President & Chief Operating
and Chief Executive Officer	Officer

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Building Performance exemplifies the way in which we run our fine company, as well as the enduring value we create for our employees, customers and shareholders. We are more than just a leading business in the non-residential construction industry. We are builders in the strongest sense—constructing beneficial new relationships, developing innovative products and services, and defining sound new strategies for growth. Our foremost goal is to ensure that we are building performance now, and for many years to come. Join us as we review our accomplishments over the past year, and embark upon our journey to a promising future.

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leadership
and
results

At NCI Building Systems, we are taking bold new steps to ensure a future of lasting prosperity. As a leader of the metal construction industry, we continue to perpetuate our legacy of excellence through such characteristics as innovation, accountability and foresight.

     In 2004, intelligent leadership and powerful strategies for growth yielded optimal results for our company. Operational enhancements were implemented throughout all of our business segments to promote speed, accuracy and efficiency in the production and delivery of products. The effective management of sales, finances and acquisitions enabled us to elevate our financial strength, increase revenues and positively impact shareholder value.

     Finally, 2004 marked the beginning of a significant cultural shift at NCI. Employees, managers and leaders were engaged in a companywide initiative to transform the focus of our corporation from a manufacturing-pulled organization into a customer-centric one. While enacting a campaign of change throughout an enterprise as large and diverse as NCI has been no easy undertaking, the results to date have been significant. Within one year we have broadened our capabilities, heightened the acuteness of our operations and made considerable improvements in customer service.

     Looking ahead, we are confident that the many enhancements underway at NCI will empower us to go farther and accomplish even more than we have in years past. Please join us as we review our achievements of 2004, and explore the strategies guiding our successes yet to come.

In 2004, intelligent leadership and powerful strategies for growth yielded optimal results for our company.

the people
of nci

EMPLOYEES

Approximately 3,800 dedicated people serve as the fabric that makes up the diverse, effective and powerful organization NCI has grown to be. We recognize that state-of-the-art buildings, equipment and products are inconsequential without well-trained, professional and caring employees driving our business.

     Underpinning our focus on hiring, training and retaining employees of the highest caliber is a firm commitment to providing a culture of opportunity and professional development. We offer a broad spectrum of training programs for employees to improve their knowledge and skills in the areas of professional ethics, sales, marketing, equipment operation, new technologies, customer satisfaction and safety.

     NCI employees are encouraged to take ownership of their careers through a unique system of responsibility and rewards by which individuals are evaluated on how well individual job expectations are met. At the close of the year, each employee is eligible to receive a bonus based on the overall performance of the company, rather than by specific divisions or departments. Not only does this program encourage our people to work more effectively, but it also promotes an environment of cooperation and teamwork in meeting the overarching goals of NCI.

MANAGERS

At the forefront of our business are highly disciplined managers, wholly devoted to directing NCI personnel, programs and processes to achieve optimal results.

     In 2004, NCI began an extensive upgrade of its

Performance Management Program with the articulation and implementation of succession planning. After conducting an extensive assessment of managerial competencies spanning all departments and divisions, we formalized a strategic process for identifying and cultivating candidates for future leadership.

     Our new succession plan provides that each manager is given clear direction for professional development, as well as a designated mentor to guide and monitor career progress.

EXECUTIVE LEADERSHIP

Our leadership team is comprised of executive officers and board members representing a broad array of professions and talents. All of our leaders are accustomed to blending their capabilities to achieve ambitious goals in asset performance.

     In April, 2004, we were pleased to welcome Norman C. Chambers, an active NCI board member and respected business professional, to the position of President and Chief Operating Officer of NCI. Our Board of Directors expanded when we welcomed Philip J. Hawk and John K. Sterling to our governing body, giving us a total of nine board members, seven of which serve as independent directors.

     We expect these leadership changes to further enhance the maturity and ingenuity of our management activities, providing us additional advantages as we continue to grow the breadth and scope of our organization.

Approximately 3,800 dedicated people serve as the fabric that makes up the diverse, effective and powerful organization NCI has grown to be.

focus on
customer
relationships

SERVING OUR CUSTOMERS

Good customer relationships have always been a hallmark of our business. Our reputation as a leading organization stems from end-user perceptions of NCI as a reliable, resourceful and capable partner. Because we hold our relationships with customers in the highest regard, we consistently strive to produce results that effectively enhance their performance. Our support shows up in the form of comprehensive product offerings, training and certification courses, and marketing programs, all of which are complemented
by our outstanding service in the way of project management and technical proficiencies.

IMPROVING PROCESSES

In April 2004, NCI launched an important customer-service initiative through its engineered buildings systems group called the Continuous Improvement Process. Employees representing multiple departments united in week-long rallies with the goal of refining and improving order-fulfillment processes. Working together, employees were able to eliminate unnecessary steps in workflow practices to reduce lead times, decrease the occurrence of common errors and ultimately create a faster, more effective way to serve customers. The rallies for Continuous Improvement Process have been so successful that we intend to introduce the process throughout all NCI business segments over the next few years.

DELIVERING PRODUCTS

Ensuring the timely delivery of products to customers is a top priority. NCI was faced with many challenges in 2004, including a worldwide steel supply shortage that inflated material prices, high fuel costs and a volatile trucking industry. However, as a company we were able to overcome conflicts to effectively serve our customers. We succeeded in our efforts by leveraging supplier relationships and optimizing our synergies in purchasing, transportation and shipping.

•   Purchasing: The effective management of resources and strong supplier relationships enabled us to mitigate steel supply shortages and ultimately acquire the materials necessary to meet end-user demand. As we continuously adjust our operations in accordance with industry changes, we are exploring alternate sources for the procurement of materials. Much emphasis has been placed on helping our customers succeed by ensuring the availability of a stable product supply.

•   Transportation: When the volatility of the trucking industry was compounded by a nationwide reduction of fleets and new DOT regulations, NCI took an aggressive approach in streamlining contract negotiations to recruit additional carriers. We also used existing technology to improve efficiency in tracking and scheduling, resulting in timelier product delivery.

•   Shipping: NCI continued to expand its primary shipping locations in 2004 to more effectively serve large geographic areas with building frames and components. We are now able to better service our building group customers directly from newly established facilities located in Lexington, Tennessee and Hernando, Mississippi.

CUSTOMER SERVICE

Throughout the year, NCI was engaged in the complete restructuring of its customer service department. New software applications were developed and implemented to create an effective system of data capture, order tracking and customer feedback. We will continue to improve upon these systems throughout 2005 so that we may steadily enhance our performance for responding to customer needs in a timely and efficient manner.

Good customer relationships have always been a hallmark of our business. Our reputation as a leading organization stems from end-user perceptions of NCI as a reliable, resourceful and capable partner.

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14

design &
engineering

PRODUCT DEVELOPMENT

NCI is fully engaged in the creation and improvement of innovative products designed to support the needs of our customers. Our Product Development Committee includes engineers, research and certification specialists and other industry professionals possessing expertise in a broad range of disciplines. The committee is currently working on such product performance enhancements as greater wind resistance for Standing Seam Roof Systems and panel wind uplift augmentation. Product innovations that have come as a result of our Research and Development initiatives include our patented Long Bay^® System and our proprietary Light Commercial building solution.

Our Product Development Department is continually testing and refining products. We recently introduced the S-5 Wind Clamp for two of our roof systems. Created for use at the eave and ridge zones in high wind pressure conditions, it can significantly reduce the amount of labor in most instances while meeting the uplift requirements. Another new product is a four-inch wide sliding clip that allows for an extremely long roof run from the eave to the ridge on very wide buildings. The clip eliminates the need for an expensive, labor-intensive step-up in the roof design.

TESTING

NCI is strongly committed to going above and beyond traditional expectations for product performance. It is for this reason that we consistently exceed industry standards for product testing. Many NCI products are frequently tested and certified within our own established testing facilities on equipment approved by Underwriters Laboratories (UL). Our facility is expertly equipped with an authorized replica of the American Society for Testing and Materials (ASTM) test chamber and a working model of the Factory Mutual (FM) test chamber. Because NCI serves a diversity of markets representing a multitude of code mandates, we also partner with a number of experienced and accredited third-party laboratories to ensure compliance.

ENHANCING EFFICIENCY

As part of the NCI Continuous Improvement Process, certain segments of engineering and drafting have been reorganized to enhance speed and efficiency. Changes made to workflow processes effectively hastened the fulfillment of low-complexity projects, and similar enhancements will soon be applied to higher-complexity ones. In addition, alterations to the order-review process have improved accuracy in meeting customer-dictated specifications, while modifications to detailing software enhanced our end-wall and frame detailing applications.

NCI is strongly committed to going above and beyond traditional expectations for product performance. It is for this reason that we consistently exceed industry standards for product testing.

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manufacturing
excellence

OUR FACILITIES

Proficiencies in the manufacturing sector consistently distinguish NCI from its competitors. Our 37 plants strategically located across the U.S. and in Mexico give us uncommon geographic reach, enabling the fast and cost-effective delivery of products to customers. State-of-the-art technologies allow for the smooth, seamless fabrication of a diverse line of high-quality metal components and custom engineered building systems.

NEW LOCATIONS

We continued to expand our geographic reach in 2004 with the opening of an additional facility in Hernando, Mississippi. Specializing in the fabrication of light end wall frames and framed openings, the new location receives components and systems from alternate NCI plants to effectively ship complete buildings directly to customer job sites.

   The Hernando facility serves as a staging area that complements the manufacturing operations of our Lexington, Tennessee plant. Established in 2003, this plant boasts exceptional production systems for the automated development of quality products, with top-notch operational efficiencies that continue to exceed our expectations for manufacturing excellence.

QUALITY ASSURANCE & CERTIFICATION

NCI provides superior quality for the forming and fabrication of its products. In 2004, all facilities complied with our governing certification programs. Collectively, our manufacturing locations continue to receive higher scores each year. Ongoing Quality Assurance programs ensure the integrity of our manufacturing practices which serve to provide our customers with the highest standard of products available.

SAFETY

Nothing is more important than the safety and well-being of our valued employees. Every year, NCI continues to shape its “zero tolerance” safety culture through specialized safety training programs, with an emphasis on behavior-based safety processes.

     Our employees achieved another excellent safety record for 2004, a feat that has resulted in a 13 percent reduction in total lost workdays and a 19 percent reduction in total Severity Rate compared to fiscal year 2003. In addition, 25 of 37 manufacturing facilities have surpassed at least one year with no lost-time injuries. Five of these facilities have operated for more than five years without a lost-time injury, and two facilities have operated for more than 10 years with no lost-time injuries.

     NCI has remained an industry leader in safety performance based upon Frequency and Severity Rates, as well as the Lost-Workday Index (LWDI). Perhaps even more significant is the implication that our employees’ constant attention to safety issues is a true testament of their concern for one another.

ONGOING IMPROVEMENTS

We believe that our manufacturing success is contingent on the ongoing improvement of our operations. In order to gain a better understanding of customer needs, our components group has initiated a program that sends plant managers, superintendents and foremen to meet customers and discuss how service can be improved. These face-to-face discussions provide valuable customer feedback while building lasting business relationships.

     To help our plant managers run facilities more efficiently, we have streamlined reporting procedures to speed up the generation of monthly reports that measure and monitor production, tons of steel, man-hours, quality and safety. As a result, overall operational costs have been reduced from the time the plant receives an order to the time it is shipped.

Our 37 plants strategically located across the U.S. and Mexico give us uncommon geographic reach, enabling the fast and cost-effective delivery of products to customers.

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17

18

             sales & marketing

CUSTOMER-FOCUSED SELLING

Across all sales channels, NCI is committed to serving its customers with honesty and integrity. A recent example of our “High Road” approach to customer communications occurred when we realized that the markets for our ABC division were becoming a commodity.

     We decided to take the “High Road,” immediately revamping the ABC warranties so they would be easily understood when compared to competitors. In addition, we initiated a sales strategy targeting customers who were buying non-warranted material so that they would purchase prime material with a true warranty. Our sales and marketing personnel did an outstanding job of telling the real story in our original Know What You Are Buying campaign.

CUSTOMER LOYALTY & COMMUNICATION

At NCI, we have always placed a strong emphasis on building customer loyalty. 2004 proved that honesty and openness in customer relations is always the best policy. Our customers endured unprecedented challenges in the face of a worldwide steel shortage. This placed immense hardship on customers in regards to meeting deadlines and pricing barriers.

     NCI reinforced our standing with these constituents through constant communication regarding pricing increases, scheduling and material availability. We did everything within our power to provide the best, most accurate and timely information available to aid our customers in their performance. Ultimately this approach was successful for all the parties involved, as evidenced by the feedback we received. A strong focus on communications is the cornerstone of customer relations and one of NCI’s greatest strengths. This approach continues to serve us well through turbulent and stable times.

SALES TRAINING

Sales training designed to challenge and build the capabilities of our sales personnel is an important key to our growth. In addition to an ongoing supervisory training program, we facilitate training courses and schedule seminars to enhance the performance of our sales force. Most recently, we offered a Business Based Development seminar to educate our inside sales personnel on such important tasks as how to

reach key decision makers, which questions to ask, and how to effectively qualify a prospect.

MARKETING INITIATIVES

NCI makes significant investments in marketing programs designed to drive new business, as well as to equip our loyal customers with useful tools for the resale of certain divisional products and services. National print media, tradeshows and a comprehensive array of marketing literature are the primary communication vehicles used by our business segments. Special events and authorized customer incentive programs play an important role in building customer loyalty and encouraging repeat sales.

     In 2004, we were pleased to redesign and launch an all-new web site for NCI Building Systems. Residing at www.ncilp.com, the new site offers a complete overview of our business segments and divisions while providing up-to-date news and stock information to site users.

VALUE-ADDED SERVICES

At NCI, we offer superior solutions to ensure quality in the application and long-term usability of our products. Our commitment to exceptional product performance is demonstrated in the value-added services we provide to customers.

     Two ongoing programs that have become increasingly popular with architects and owners are the Certified Erection Program and our Single Source Warranty Program. Nearly 400 contractors were certified in the proper installation of specific roofing systems through NCI supported programs. Recognized for yielding particularly accurate and effective construction results, we are finding that architects are now more frequently specifying both of these programs in their design criteria.

     Our company recently formed the NCI Special Services Group to provide customers with single-source access to a comprehensive array of non-residential construction services. The group is intimately familiar with products spanning all NCI groups and capable of providing end-to-end project management services for large and complex structures. Since its inception, Special Services has significantly increased sales for the engineered building systems segment and has been imperative in helping corporate clients meet and exceed their objectives for product performance.

National print media, trade shows and a comprehensive array of marketing literature are the primary communication vehicles used by our business segments.

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information
& engineering
technologies

NCI recognizes the importance of embracing new technologies to enhance internal and external business practices. In 2004, we employed new software systems and developed new programs to increase the efficiency of our operations and to support many of our new customer-improvement initiatives.

IT REORGANIZATION

Our Information Technology department was consolidated and realigned to optimize its capabilities for serving NCI offices and manufacturing facilities across the United States and Mexico.

CUSTOMER PROJECT TRACKING

In our efforts to enhance customer communication, we developed and integrated real-time project tracking systems into multiple buildings division web sites. The system enables customers to check the status of their projects at anytime from any Internet connection.

EMPLOYEE HELPDESK

An efficient system of submission, tracking and fulfillment was established for employees to address needs for personal desktop issues and project-oriented IT requests.

SOFTWARE DEVELOPMENT DEPARTMENT

A new software development team was formed and charged with developing an integrated software solution designed to function throughout all company divisions. The system under development is expected to benefit both employees and customers by more effectively processing an order from its inception at sales through delivery.

INVENTORY MANAGEMENT SYSTEMS

New inventory tracking tools were implemented to improve the accuracy, flexibility and speed of functions encompassing scheduling, material procurement, and vendor management.

NCI recognizes the importance of embracing new technologies to enhance internal and external business practices.

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business segments

NCI is always working to enhance and expand the three business segments under which all our brands are grouped: metal components, engineered building systems and metal coil coating. Our three segments are comprised of multiple subsidiaries from which all NCI products and services are marketed under well-recognized brand names. Collectively, our business segments offer one of the largest and most diverse metal product lines in the industry.

HISTORIC GROWTH

Acquisition has been an intricate and contributory strategy in the development of NCI. Our core business is manufacturing, so the focus of many previous acquisitions has been on the increase of production capacity and efficiency. However, in our drive to better equip customers with a comprehensive array of services, we have also pursued accretive acquisitions that provide additional market opportunities, technologically advanced products, and turnkey building solutions. Such strategic additions to the NCI

family have created new revenue streams and added beneficial vendor and customer relationships into the mix. Most importantly, our acquisitions have resulted in the integration of new ideas, personnel and strategies into our corporate body.

NEW ACQUISITIONS

Sustainable growth is not only a principal aspect of our history, it is also a compelling goal for our future. In 2004, we effectively realized strategic growth initiatives by entering into an agreement to purchase two leading businesses in the rural market segment: Heritage Building Systems and Steelbuilding.com.

     The addition of these two companies to our asset portfolio will enable NCI to penetrate promising new markets, infusing growth and maximizing our earnings potential. Together, these businesses have generated approximate revenues of $80 million for the 2004 calendar year. After eliminating inter-company transactions, these businesses are expected to contribute $40 million in additional revenues to the Company

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in 2005. Unlike many of our historic purchases, these acquisitions are not intended to enhance the breadth of our manufacturing operations. Instead, our intention is to add marketing reach and powerful Internet technologies to our primary service offerings.

•   Heritage Building Systems: A solid 25-year history coupled with innovative marketing practices has made Heritage a particularly attractive purchase for NCI. The company’s established presence as an engineered buildings provider for the evolving agricultural segment will account for considerable gains in market share. In addition, the company’s specialized marketing approach will enable us to reach multiple niche markets more effectively.

•   Steelbuilding.com: Steelbuilding.com is today the largest Internet-based marketer of metal building systems, offering superior technologies for the ordering and purchasing of such systems online. The acquisition is intended to drive our e-commerce

initiatives, jump-starting NCI in to the leading online provider of metal building systems and components. We will also benefit from the company’s established channels within the agricultural and small buildings markets – a key benefit to NCI in its pursuit to earn more niche market share. Most importantly, NCI now owns the sophisticated technology to open up new mediums for the sale of multiple product lines over the Internet.

In addition, we purchased the remaining 49% of our Monterrey, Mexico Manufacturing facility giving us greater control and efficiency. The Mexico facility produces frames and Long Bay^® Systems for shipping to customers and builders throughout the U.S. Our Mexico facility is renowned for the state-of-the-art manufacturing equipment which enhances our quality and workmanship. Highly efficient singlelift transfer of materials for onward shipment is performed at our Laredo, TX transportation facility.

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2004 Highlights

Creation and successful promotion of new collaborative systems warranty partnership between Dow and MBCI

Increased retail sales through
Metal Depots outlets

Successful development and
launch of two new standing seam clip products

A metal roof works well
with the environmental terrain for added aesthetics.

Overview

This segment provides metal component products and services encompassing pre-formed metal roof and wall systems, secondary structural members, flashings and accessories, roll-up and sectional doors and interior partition systems.

Customers

The segment serves small, medium and large contractors, specialty roofers, regional fabricators, regional engineered building fabricators and end users.

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2004 Highlights

Successful introduction and implementation

of Continuous Improvement
Process to refine and improve customer-service initiatives

Effective launch
of award-winning print

marketing campaign

for Metallic brand

Increased corporate accounts sales through

new Special Services Group

This exposed metal frame adds
new dimensions to this building.

Overview

The engineered buildings segment designs, manufactures and delivers a wide range of custom metal buildings encompassing commercial and industrial warehouses, offices, manufacturing and distribution facilities, churches, schools, hangars, auto dealerships, recreational arenas, agricultural structures, mini-storage buildings and steel-frame homes.

Customers

Key customers of this segment include builders, general contractors, developers and end users.

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metal coil coating 2004 Highlights

Implementation of new technology to centralize
the procurement and scheduling of coil coating

Integrated into centralized purchasing system to enhance communication between divisions and increase effectiveness of order reporting

Painted hot roll coils
ready for shipment.

Overview

The metal coil coating segment provides products and services including the cleaning, treatment and painting of various flat-rolled metal coil substrates, and the slitting/embossing of painted coils.

Customers

The segment serves manufacturers of painted steel products, steel mills, as well as NCI metal components and engineered buildings segments.

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corporate
integrity

CORPORATE VALUES

NCI is a business that builds up its infrastructure by cultivating mutually beneficial relationships with our people, customers and shareholders. We do this by consistently providing structures, components and materials of the utmost quality, durability and longevity. Efficient construction, fast erection and superior functionality are the byproducts of our key belief—do it right the first time, every time. We are devoted to helping our customers succeed and are proud of the values exemplified by our employees in all of our endeavors.

CORPORATE GOVERNANCE

As a publicly traded company, NCI is subject to governmental regulations and mandates that serve to reinforce our corporate values. We choose to view these not as a burden, but rather as guidelines for good business practices and procedures. Simply put, our Corporate Governance gives us one more measure of how well we are performing to our own high expectations. We have committed to timely meeting all of the Sarbanes-Oxley and SEC requirements. While this is a daunting task, the ultimate reward for the completion is not just legal compliance, but also an exemplification of our integrity.

OUR COMMITMENTS

NCI is dedicated to serving its employees, customers and shareholders with integrity, vision and mutual respect. We recognize the contributions of each one of these groups as being of paramount importance to our past, present and future successes. It is for

these reasons that we conduct ourselves and our business according to a distinctive set of promises:

OUR PROMISE TO EMPLOYEES

We promise to provide you with a respectful, ethical and positive work environment. We will encourage a culture of fairness and strive to foster open communication between you, your peers and your superiors. We will recognize your accomplishments and reward your hard work with opportunities for personal and professional growth.

OUR PROMISE TO CUSTOMERS

We promise to deliver products of the highest quality and to provide you with a level of service that meets or exceeds the most demanding expectations. We will practice business ethically and honestly, and work with you to enhance your results and ensure your needs are met in a responsive manner. We will appreciate the trust and enduring relationship you have given us and will acknowledge your contributions with gratitude and loyalty.

OUR PROMISE TO SHAREHOLDERS

We promise to abide by all applicable laws as dictated by the governing entities of the United States of America. We will engage in ethical business practices and adhere to the policies and procedures in accordance with our official corporate governance documents. We will employ and empower strong, capable leaders to direct the operations of our company and to articulate and forward our goals and vision. We will constantly strive to improve our processes and to grow the size, scope and financial success of your company.

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Financial Performance

2004 Annual Report Selected Financial Data 2000 2001 2002 2003 2004 Sales $1,018,324 $954,877 $953,442 $898,150 $1,084,863 Income before cumulative effect 44,407 1 16,535 1,2 31,314 1,3,4 22,800 44,890 3 of change in accounting principle Income before cumulative 2.43 1 0.91 1,2 1.68 1,3,4 1.20 2.24 3 effect of change in accounting principle per diluted share Working capital 56,913 49,461 80,157 66,585 127,237 Total assets 868,921 838,812 721,265 713,160 782,857 Long-term debt 417,254 367,500 297,300 248,750 216,700 (Including current portion)

Shareholders’ equity 5 $ 305,280 $330,343 $303,459 $331,751 $ 401,177 Average common shares 18,286 18,265 18,692 18,969 19,996

(Assuming dilution)
(1) Includes goodwill amortization of $10.6 million and $11.2 million (net of tax effect), or $0.58 and $0.61 per diluted share. Goodwill is no longer amortized beginning in fiscal 2002 in accordance with the provisions of SFAS No. 142. Refer to Note 3 to the consolidated financial statements for additional information. (2) Includes restructuring charge of $2.8 million ($1.8 million after tax, or $0.09 per diluted share) in 2001. (3) Includes $1.2 million ($0.8 million after tax) and $9.9 million ($5.8 million after tax) in fiscal 2002 and fiscal 2004, respectively. (4) During fiscal 2002, the Company recorded a transitional impairment loss as required per SFAS No. 142 which was disclosed as a cumulative effect of change in accounting principle in the amount of $65.1 million ($3.49 per diluted share). This resulted in a net loss of $33.8 million ($1.81 per diluted share). (5) Historically, the Company has not paid dividends.

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Consolidated Statements
of Operations

NCI BUILDING SYSTEMS, INC.
In thousands, except per share data

				Fiscal year ended
	November 2, 2002			November 1, 2003			October 30, 2004
Sales	$	953,442		$	898,150		$	1,084,863
Cost of sales		740,577			700,631			822,722
Gross profit		212,865			197,519			262,141
Selling, general and administrative expenses		140,641			140,356			165,165
Income from operations		72,224			57,163			96,976
Interest expense		(21,591	)		(19,777	)		(15,126	)
Loss on debt extinguishment		(1,243	)		—			(9,879	)
Other income net		1 459			172			2,686
Income before income taxes and cumulative effect of change in accounting principle		50,849			37,558			74,657
Provision for income taxes		19,535			14,758			29,767
Income before cumulative effect of change in accounting principle		31,314			22,800			44,890
Cumulative effect of change in accounting principle, net of tax		(65,087	)		—			—
Net income (loss)	$	(33,773	)	$	22,800		$	44,890
INCOME (LOSS) PER SHARE
Basic:
Income before cumulative effect of change in accounting principle	$	1.70		$	1.21		$	2.28
Cumulative effect of change in accounting principle, net of tax		(3.52	)		—			—
Net income (loss)	$	(1.82	)	$	1.21		$	2.28
Diluted:
Income before cumulative effect of change in accounting principle	$	1.68		$	1.20		$	2.24
Cumulative effect of change in accounting principle, net of tax		(3.49	)		—			—
Net income (loss)	$	(1.81	)	$	1.20		$	2.24

See accompanying notes to the consolidated financial statements.

29

Consolidated
Balance Sheets

NCI BUILDING SYSTEMS, INC.
In thousands, except share data

	November 1, 2003			October 30, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	14,204		$	8,222
Accounts receivable, net		96,620			108,869
Inventories		59,334			138,363
Deferred income taxes		8,904			12,873
Prepaid expenses		6,243			6,491
Total current assets		185,305			274,818
Property, plant and equipment, net		201,826			185,687
Excess of cost over fair value of acquired net assets		318,247			318,247
Other assets		7,782			4,105
Total assets	$	713,160		$	782,857
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	6,250		$	2,000
Accounts payable		55,106			57,569
Accrued compensation and benefits		19,529			41,007
Accrued interest		6,406			980
Other accrued expenses		31,429			46,025
Total current liabilities		118,720			147,581
Long-term debt, noncurrent portion		242,500			214,700
Deferred income taxes		20,189			19,399
SHAREHOLDERS’ EQUITY
Preferred stock, $1 par value, 1.0 million shares authorized, none outstanding		—			—
Common stock, $.01 par value, 50.0 million shares authorized; 19.0 million shares and 20.3 million shares issued in 2003 and 2004, respectively		190			204
Additional paid-in capital		103,076			134,210
Retained earnings		228,488			273,378
Unearned portion of restricted stock compensation		—			(6,612	)
Treasury stock; (0.0002 million shares in 2003 and 2004), at cost		(3	)		(3	)
Total shareholders’ equity		331,751			401,177
Total liabilities and shareholders’ equity	$	713,160		$	782,857

See accompanying notes to the consolidated financial statements.

30

Consolidated Statements of Cash Flows

NCI BUILDING SYSTEMS, INC.

In thousands

				Fiscal year ended
	November 2, 2002			November 1, 2003			October 30, 2004
Cash flows from operating activities:
Net income (loss)	$	(33,773	)	$	22,800		$	44,890
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Cumulative effect of change in accounting principle, net of tax		65,087			—			—
Loss on debt extinguishment		1,243			—			9,879
Depreciation and amortization		22,883			23,007			22,974
(Gain) loss on sale of fixed assets		(782	)		975			202
Provision for doubtful accounts		3,280			3,842			2,769
Deferred income tax benefit		(885	)		(705	)		(4,759	)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts and other receivables		9,745			(5,506	)		(15,018	)
Inventories		4,019			10,065			(79,029	)
Prepaid expenses		(576	)		(114	)		(248	)
Accounts payable		(23,414	)		6,094			2,463
Accrued expenses		10,885			8,810			39,607
Net cash provided by operating activities		57,712			69,268			23,730
Cash flows used in investing activities:
Proceeds from sale of fixed assets		5,788			1,634			1,458
Acquisitions		—			(4,310	)		—
Changes in other noncurrent assets		1,524			2,257			1,858
Capital expenditures		(9,175	)		(17,912	)		(9,327	)
Net cash used in investing activities		(1,863	)		(18,331	)		(6,011	)
Cash flows used in financing activities:
Proceeds from stock options exercised		2,931			2,401			16,409
Net borrowings (payments) on revolving lines of credit		(75,450	)		(42,300	)		11,700
Borrowings on long-term debt		125,000			—			200,000
Payments on long-term debt		(119,750	)		(6,250	)		(243,750	)
Payment of refinancing costs		—			—			(8,060	)
Purchase of treasury stock		(175	)		(114	)		—
Net cash used in financing activities		(67,444	)		(46,263	)		(23,701	)
Net increase (decrease) in cash and cash equivalents		(11,595	)		4,674			(5,982	)
Cash and cash equivalents at beginning of period		21,125			9,530			14,204
Cash and cash equivalents at end of period	$	9,530		$	14,204		$	8,222

See accompanying notes to the consolidated financial statements.

31

Consolidated Statements of Shareholders’ Equity

NCI BUILDING SYSTEMS, INC.

In thousands

									Unearned
			Additional						Restricted
	Common		Paid-in			Retained			Stock			Treasury			Shareholders’
	Stock		Capital			Earnings			Compensation			Stock			Equity
Balance, October 31, 2001	$	186	$	95,649		$	239,461		$	—		$	(4,953	)	$	330,343
Treasury stock purchases		—		—			—			—			(175	)		(175	)
Treasury stock used for stock option exercises		—		(1,007	)		—			—			3,938			2,931
Tax benefit from stock option exercises		—		825			—			—			—			825
Common stock issued for contribution to 401(k) plan		1		2,435			—			—			—			2,436
Treasury stock used for contribution to 401(k) plan		—		1			—			—			871			872
Net loss		—		—			(33,773	)		—			—			(33,773	)
Balance, November 2, 2002		187		97,903			205,688			—			(319	)		303,459
Treasury stock purchases		—		—			—			—			(114	)		(114	)
Treasury stock used for stock option exercises		—		(79	)		—			—			430			351
Tax benefit from stock option exercises		—		585			—			—			—			585
Common stock issued for contribution to 401(k) plan		1		2,619			—			—			—			2,620
Common stock issued for stock option exercises		2		2,048			—			—			—			2,050
Net income		—		—			22,800			—			—			22,800
Balance, November 1, 2003		190		103,076			228,488			—			(3	)		331,751
Tax benefit from stock option exercises		—		3,126			—			—			—			3,126
Common stock issued for contribution to 401(k) plan		2		4,316			—			—			—			4,318
Common stock issued for stock option exercises		10		16,399			—						—			16,409
Issuance of restricted stock		2		7,293			—			(7,295	)		—			—
Earned portion of restricted stock compensation		—		—			—			683			—			683
Net income		—		—			44,890			—			—			44,890
Balance, October 30, 2004	$	204	$	134,210		$	273,378		$	(6,612	)	$	(3	)	$	401,177

See accompanying notes to the consolidated financial statements.

32

Notes to Consolidated
Financial Statements

NCI BUILDING SYSTEMS, INC.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Reporting Entity

     These financial statements include the operations and activities of NCI Building Systems, Inc. and its subsidiaries (the “Company”) after the elimination of intercompany accounts and balances. The Company designs, manufactures and markets metal components and engineered building systems and provides metal coil coating services primarily for non-residential construction use. The Company follows an accounting calendar which incorporates a four-four-five week calendar each quarter with year end on the Saturday closest to October 31. The year end for fiscal 2004 is October 30, 2004.

     The Company historically accounted for its operations as two reportable segments: metal components and engineered building systems. Prior to fiscal 2003, operating results of the metal coil coating operations were included in the metal components segment. Effective as of the fourth quarter of fiscal 2003, the Company began reporting metal coil coating as a separate segment. Prior periods have been reclassified to conform to the current presentation.

(b) Revenue Recognition

     The Company recognizes revenues when the following conditions are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectibility is reasonably assured. Generally, these criteria are met at the time product is shipped or services are complete. Provisions are made upon the sale for estimated product returns and warranty liabilities. Costs associated with shipping and handling of products are included in cost of sales.

     Prior to the third quarter of fiscal 2004, a portion of the revenue for the metal coil coating segment was recognized upon completion of the painting process for consigned coils owned by the customer, which in most cases were steel mills. This accounting treatment met the criteria to be recognized as revenue in accordance with SEC Staff Accounting Bulletin No. 101. In 2004, many steel mills which traditionally had consigned steel coils to the Company in this manner, abandoned that procedure, resulting in the Company purchasing and recognizing steel coils as inventory upon the arrival of such raw materials

at the Company’s coil coating plants. As a result, during the third quarter of fiscal 2004, the Company changed its policy to recognize revenue upon shipment of the coils from the coil coating facilities to third parties. The impact of the accounting change during the third quarter of 2004, which was not material, was a reduction to the Company’s revenues and operating income of approximately $4.5 million and $0.8 million, respectively. This change would not have had a material effect on any prior periods presented and is not expected to materially affect future results.

(c) Accounts Receivable and Related Allowance

     The Company reports accounts receivable net of the allowance for doubtful accounts of $10.2 million and $8.6 million at November 1, 2003 and October 30, 2004, respectively. Trade accounts receivable are the result of sales of building systems, components and coating services to customers throughout the United States and affiliated territories, including international builders who resell to end users. All sales are denominated in United States dollars. Credit sales do not normally require a pledge of collateral; however, various types of liens may be filed to enhance the collection process. The Company’s allowance for doubtful accounts reflects reserves for customer receivables to reduce receivables to amounts expected to be collected. The Company determines past due status as of the contractual payment date.

(d) Inventories

     Inventories are stated at the lower of cost or market value, using specific identification or the weighted-average method for steel coils and other raw materials.

The components of inventory are as follows:

	Nov. 1, 2003		Oct. 30, 2004
	(in thousands)
Raw materials	$	40,173	$	103,411
Work in process and finished goods		19,161		34,952
	$	59,334	$	138,363

     Raw materials increased $63.2 million due to the increase in steel prices, the purchase of foreign steel on the

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spot market and the reduction of the consigned inventory programs by the steel mills.

     During fiscal 2004, the Company purchased approximately 32% of its steel requirements from U.S. Steel and 28% of its steel requirements from International Steel Group. No other steel supplier accounted for more than 15% of steel purchases for the same period.

(e) Property, Plant and Equipment

     Property, plant and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives. Computer software developed or purchased for internal use is depreciated using the straight-line method over its estimated useful life.

     Depreciation expense for fiscal 2002, 2003 and 2004 was $22.9 million, $23.0 million and $23.0 million, respectively.

Property, plant and equipment consist of the following:

	Nov. 1, 2003			Oct. 30, 2004
	(in thousands)
Land	$	12,395		$	13,251
Buildings and improvements		113,500			120,660
Machinery, equipment and furniture		164,691			153,512
Transportation equipment		3,587			2,731
Computer software and equipment		34,687			36,978
		328,860			327,132
Less accumulated depreciation		(127,034	)		(141,445	)
	$	201,826		$	185,687

Estimated useful lives for depreciation are:

Buildings and improvements	10 - 39 years
Machinery, equipment and furniture	3 - 10 years
Transportation equipment	5 - 10 years
Computer software and equipment	3 -   7 years

(f) Statement of Cash Flows

     For purposes of the statements of cash flows, the Company considers all highly liquid investments with an

original maturity date of three months or less to be cash equivalents. The following table sets forth interest and taxes paid in each of the three fiscal years presented:

	Fiscal Year Ended
	Nov. 2, 2002		Nov. 1, 2003		Oct. 30, 2004
Interest paid	$	28,881	$	13,954	$	20,552
Taxes paid	$	18,861	$	14,794	$	26,276

     Noncash investing or financing activities included 401(k) contributions that are based on a calendar year. Fiscal 2002 included $2.4 million in 401(k) plan contributions through the third quarter of 2002, and $0.9 million for the related 2001 contributions; fiscal 2003 included $1.6 million in 401(k) plan contributions through the third quarter of 2003, and $1.0 million for the related 2002 contributions; and fiscal 2004 included $2.6 million in 401(k) plan contributions through the third quarter of 2004, and $1.7 million for the related 2003 contributions. All 401(k) contributions were paid in common stock.

(g) Goodwill

     The Company reviews the carrying values of goodwill and identifiable intangibles whenever events or changes in circumstances indicate that such carrying values may not be recoverable and annually for goodwill as required by the Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets. Unforeseen events, changes in circumstances and market conditions and material differences in the value of intangible assets due to changes in estimates of future cash flows could negatively affect the fair value of the Company’s assets and result in a non-cash impairment charge. Some factors considered important which could trigger an impairment review include the following: significant underperformance relative to expected historical or projected future operating results, significant changes in the manner of the Company’s use of the acquired assets or the strategy for its overall business and significant negative industry or economic trends. Fair value is the amount at which the asset could be bought or sold in a current transaction between willing parties and may be estimated using a number of techniques, including quoted market prices or valuations by third parties, present value techniques based on estimates of cash flow, or multiples of earnings or revenue performance measures. The fair value of the asset could be different using different estimates and assumptions in these valuation techniques. Refer to Note 3 for additional discussion of the adoption of SFAS No. 142.

34

(b) Use of Estimates

     The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Examples include provisions for bad debts, inventory reserves, accruals for employee benefits, warranties and certain contingencies. Actual results could differ from those estimates.

(i) Employee Benefits

     The Company is self insured for a substantial portion of the cost of employee group health insurance and for the cost of workers compensation benefits. The Company purchases insurance from third parties which provides individual and aggregate stop loss protection for these costs. Each reporting period, the Company records the costs of its health insurance plan, including paid claims, an estimate of the change in incurred but not reported (“IBNR”) claims, taxes and administrative fees (collectively the “Plan Costs”) as general and administrative expenses in the Consolidated Statements of Operations. The estimated IBNR claims are based upon both (i) a recent average level of paid claims under the plan; and (ii) an estimated lag factor, to provide for those claims which have been incurred but not yet paid. For workers compensation costs, the Company monitors the number of accidents and the severity of such accidents to develop appropriate estimates for expected costs to provide both medical care and benefits during the period an employee is unable to work. These accruals are developed using third party estimates of the expected cost and length of time an employee will be unable to work based on industry statistics for the cost of similar disabilities. This statistical information is trended to provide estimates of future expected costs based on factors developed from the Company’s experience of actual claims cost compared to original estimates. The Company expensed approximately $17 million and $19 million for health insurance in fiscal 2003 and 2004, respectively and $3 million and $4 million for workers’ compensation in fiscal 2003 and 2004, respectively. The health insurance accrual balance was $5 million and $6 million at November 1, 2003 and October 30, 2004, respectively and the workers’ compensation accrual balance was $4 million and $5 million at November 1, 2003 and October 30, 2004, respectively.

(j) Advertising Costs

     Advertising costs are expensed as incurred. Advertising expense was $2.5 million, $2.6 million and $3.1 million in fiscal 2002, 2003 and 2004, respectively.

(k) Long-Lived Assets

     The Company assesses impairment of property and equipment under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected future cash flows from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized based on the fair value of the asset.

(l) Stock-Based Compensation

     The Company accounts for stock-based employee compensation using the intrinsic value method described in Accounting Principles Board (“APB”) Opinion No. 25 and related interpretations, which generally requires the amount of compensation cost that must be recognized, if any, is the difference between the exercise price and the market price of the underlying stock on the date of the grant. Alternatively, SFAS No. 123, Accounting for Stock-Based Compensation, employs fair value-based measurement and generally results in the recognition of compensation expense for all stock-based awards to employees. SFAS No. 123 did not require an entity to adopt these provisions, but permitted continued application of APB Opinion No. 25. The Company has elected to continue accounting for its stock-based employee compensation plan under APB Opinion No. 25 and related interpretations. In December 2004, the Financial Accounting Standards Board (“FASB”) published SFAS No. 123(R), Share-Based Payment. This statement will require the recognition of compensation expense for all share-based compensation. The Company will be required to adopt SFAS No. 123(10 effective at the beginning of the Company’s fourth quarter in fiscal 2005. Refer to Note l(n) for additional discussion of SFAS No. 123(R). Since the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of the grant, the Company records no compensation expense for its stock option awards. The Company awarded 0.3 million shares of restricted stock, with a weighted average fair market value per share at

35

the date of grant of $28.36, under its incentive plan in fiscal 2004. The Company recorded pretax compensation expense of $0.7 million for 2004 for restricted stock grants.

     The compensation expense recorded for restricted stock awards under the intrinsic value method is consistent with the expense that would be recorded under the fair value-based method. The following schedule reflects the pro forma impact on net income and earnings per

common share of accounting for the Company’s stock option grants using the fair value method, which would result in the recognition of compensation expense over the vesting period for the fair value of stock option grants as computed using the Black-Scholes option-pricing model.

     

				Fiscal Year Ended
	Nov. 2, 2002			Nov. 1, 2003			Oct. 30, 2004
	(in thousands, except per share data)
Reported income	$	31,314		$	22,800		$	44,890
Add stock-based employee
compensation expense included in reported income, net of tax		—			—			444
Deduct stock-based employee
compensation expense determined under the fair value based method for all awards, net of tax		(2,170	)		(2,278	)		(3,062	)
Pro forma income	$	29,144		$	20,522		$	42,272
Pro forma basic income per share	$	1.57		$	1.09		$	2.14
Pro forma diluted income per share	$	1.56		$	1.08		$	2.11

The weighted average grant-date fair value of options granted during fiscal 2002, 2003, and 2004 was $10.56, $11.40 and $17.38, respectively. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions:

	Fiscal Year Ended
	Nov. 2, 2002			Nov. 1, 2003			Oct. 30, 2004
Risk-free interest rate		4.6% – 4.9	%		2 70% – 3.7	%		3.5% - 4.4	%
Expected dividend yield		—			—			—
Expected volatility		62.7	%		55.6	%		54.5	%
Weighted average expected life (in years)		7			7			8

     

(m) Reclassifications

     Certain prior year amounts have been reclassified to conform to the current year presentation.

(n) Recent Accounting Pronouncements

     In January 2003, the FASB issued Financial Interpretation (“FIN”) No. 46, Consolidation of Variable Interest Entities. FIN No. 46 requires variable interest entities (“VIEs”) to be consolidated by their primary beneficiaries. A primary

beneficiary is the party that absorbs a majority of the entity’s expected losses or receives a majority of the entity’s expected residual returns, or both, as a result of the ownership, contractual or other financial interests in the entity. In December 2003, the FASB revised FIN No. 46 to provide companies with clarification of key terms, additional exemptions for application and an extended initial application period. FIN No. 46 is currently effective for all variable interest entities. The Company adopted FIN

36

No. 46 as of March 31, 2004, and the adoption did not have a material impact on the Company’s financial position or results of operations.

     On October 11, 2004, the FASB ratified EITF Issue No. 04-8, Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings Per Share which is effective for all periods ending after December 15, 2004 and is to be applied by retrospectively restating previously reported earnings per share (EPS). EITF Issue No. 04-8 addresses when the dilutive effect of contingently convertible debt with a market price trigger should be included in diluted EPS. Under EITF Issue No. 04-8, the market price contingency should be ignored and these securities should be treated as non-contingent, convertible securities and always included in the diluted EPS computation. Notwithstanding the foregoing, if convertible debt has a “net share settlement” provision whereby all conversions are settled for a combination of cash (in an amount equal to the lesser of the principal amount of the notes and their conversion value) and shares, if any (shares are issuable only to the extent the conversion value exceeds the principal amount), then the issuer of such convertible debt is not required to include any shares issuable upon conversion in its calculation of fully diluted EPS until the market price of the underlying common stock exceeds the conversion price. In the event that the market price does exceed the conversion price, then the issuer of the convertible debt is required to use the treasury stock method of accounting for the difference between the market price in the applicable reporting period and the conversion price. The shares required to cover the difference will be included in calculating diluted earnings per share. On November 16, 2004, the Company completed an offering of $180 million of 2.125% convertible senior subordinated

notes due 2024. Refer to note 14 — Subsequent Events for additional discussion. Because the 2.125% convertible senior subordinated notes have a net share settlement provision, if, in future reporting periods, the market price of the Company’s common stock is less than the conversion price at fiscal year-end, the notes will not be included on an “if converted” basis in the calculation of the Company’s fully diluted EPS. The Company will be required to apply EITF Issue No. 04-8 beginning in the fiscal quarter ended January 28, 2005.

     On December 16, 2004, the FASB issued SFAS No. 123 (revised 2004), Share Based Payment (“SFAS No. 123(R)”), which replaces SFAS No. 123, and supersedes APB Opinion No. 25. SFAS No. 123(R) requires that all stock-based payments to employees, including grants of employee stock options, be recognized as compensation expense in the financial statements based on their fair values. SFAS No. 123(R) also requires that tax benefits associated with these stock-based payments be classified as financing activities in the statement of cash flows rather than operating activities as currently permitted. SFAS No. 123(R) will be effective for periods beginning after June 15, 2005. Accordingly, the Company will be required to apply SFAS No. 123(R) beginning in the fiscal quarter ended October 29, 2005. SFAS No. 123(R) offers alternative methods of adopting this final rule. At the present time, the Company has not yet determined which alternative method it will use. Depending on the method the Company adopts to calculate stock-based compensation expense upon the adoption of SFAS No. 123(R), the pro forma disclosure in Note 1 to the Consolidated Financial Statements may not be indicative of the stock-based compensation expense to be recognized in periods beginning after June 15, 2005.

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2. LONG-TERM DEBT

	Nov. 1, 2003			Oct. 30, 2004
	(in thousands)
Five-year revolving credit line with banks	$	5,000		$	16,700
Six-year term loan payable to banks		118,750			200,000
Unsecured senior subordinated notes bearing interest at a rate of 9.25%, maturing on May 1, 2009		125,000			—
		248,750			216,700
Current portion of long-term debt		(6,250	)		(2,000	)
Noncurrent portion of long-term debt	$	242,500		$	214,700

     Aggregate required principal reductions are as follows for the respective fiscal years (in thousands):

2005	$	2,000
2006		2,000
2007		2,000
2008		2,000
2009 and thereafter		208,700
	$	216,700

     On June 18, 2004, the Company completed a $325 million senior secured credit facility with a group of lenders and used the initial borrowings to repay in full its then existing credit facility and redeem its $125 million of senior subordinated notes due 2009. The Company believes that the new credit facility provides it with increased financial flexibility and decreased borrowing costs. The current facility includes a $125 million (outstanding balance of $16.7 million at October 30, 2004), five-year revolving loan maturing on June 18, 2009 and a $200 million (outstanding balance of $200 million at October 30, 2004), six-year term loan maturing on June 18, 2010. The term loan requires mandatory prepayments of $0.5 million each quarter beginning in November 2004 with a final payment of $188.5 million at maturity.

     As a result of the June 18, 2004 refinancing of the senior credit facility, unamortized deferred financing costs of $4.1 million ($2.6 million after tax effect of $1.5 million) were written off during the third quarter of fiscal 2004. At November 1, 2003 and October 30, 2004, the unamortized

balance in deferred financing costs was $4.8 million and $2.1 million, respectively.

     Loans on the senior credit facility bear interest, at the Company’s option, as follows: (1) base rate loans at the base rate plus a margin that fluctuates based on the Company’s leverage ratio and ranges from .25% to 1.25% on the revolving loan and 1.0% on the term loan and (2) LIBOR loans at LIBOR plus a margin that fluctuates based on the Company’s leverage ratio and ranges from 1.25% to 2.25% on the revolving loan and 2.00% on the term loan. Base rate is defined as the higher of the Wachovia Bank, National Association prime rate or the overnight Federal Funds rate plus 0.5% and LIBOR is defined as the applicable London interbank offered rate adjusted for reserves. Based on its current leverage ratios, the Company will pay a margin of 0.25% on base rate loans and 1.25% on LIBOR loans under the revolving loan and a margin of 1% on base rate loans and 2% on LIBOR loans under the term loan during the first quarter of fiscal 2005.

     The senior credit facility is secured by security interests in (1) accounts receivable, inventory and equipment and related assets such as software, chattel paper, instruments and contract rights of the Company (excluding foreign operations) and (2) 100% of the capital stock and other equity interests in each of the direct and indirect operating domestic subsidiaries of the Company.

     The senior credit facility contains covenants that limit the Company’s senior debt and leverage ratios and require the Company to maintain minimum interest coverage ratios and net worth, as those terms are defined in the senior

38

credit facility. The required ratios for the periods indicated are as follows:

	2004		2005			2006		2007			2008
Maximum leverage ratio		4.00		4.00			4.00		4.00			4.00
Minimum interest coverage ratio		3.50		3.50	1		4.00		4.00	2		4.50	3
Maximum senior debt ratio		3.50		3.50	4		3.25		3.25	5		3.00	6

(1) Increases to 4.00 on May 1, 2005	(2) Increases to 4.50 on May 1, 2007
(3) Increases to 5.00 on May 1, 2008	(4) Decreases to 3.25 on May 1, 2005
(5) Decreases to 3.00 on May 1, 2007	(6) Decreases to 2.75 on May 1, 2008

     At October 30, 2004, the Company’s leverage ratio was 1.73 to 1, its interest coverage ratio was 8.98 to 1, its senior debt ratio was 1.73 to 1, and the Company was in compliance with all of these requirements. The senior credit facility also limits the amount of permitted spending for capital additions ($30 million per year), the disposition of assets and the amount of investments and other indebtedness. The maximum amount of capital expenditures may be increased in any fiscal year by carrying forward any unused amount (up to $10 million) in the immediately preceding fiscal year. The Company was also in compliance with all of these limits at October 30, 2004.

     The senior credit facility limits the Company’s ability to pay cash dividends and repurchase capital stock. Under the terms of the senior credit facility, the Company had available approximately $12 million to use for those purposes at October 30, 2004.

     Borrowings under the senior credit facility may be prepaid and the voluntary reduction of the unutilized portion of the five-year revolver may be made at any time, in certain amounts, without premium or penalty but subject to LIBOR breakage costs. The Company is required to make mandatory prepayments on the senior credit facility upon the occurrence of certain events, including the sale of assets and the issuance and sale of equity securities, in each case subject to certain limitations and conditions. These prepayments must first be applied to the term loan and then to the reduction of the revolving commitment.

     At October 30, 2004, the Company had approximately $104 million in unused borrowing capacity (net of letters of credit outstanding of approximately $5 million) under the senior credit facility, of which a total of $20 million can be utilized for standby letters of credit.

     At October 30, 2004, the fair value of the Company’s long-term debt, based on current interest rates and quoted market prices, was estimated to equal the carrying amount of $216.7 million.

     On November 16, 2004, the Company completed an offering of $180 million of 2.125% convertible senior subordinated notes due 2024. Refer to Note 14 — Subsequent Events of the consolidated financial statements for additional discussion.

3. ADOPTION OF SFAS NO. 142,
“GOODWILL AND OTHER INTANGIBLE ASSETS”

     Effective November 1, 2001, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, which prohibits the amortization of goodwill and intangible assets with indefinite useful lives. SFAS No. 142 requires that these assets be reviewed for impairment at least annually. Intangible assets with finite lives will continue to be amortized over their estimated useful lives.

     SFAS No. 142 requires that goodwill be tested for impairment at the reporting unit level upon adoption and at least annually thereafter, utilizing a two-step methodology. The initial step requires the Company to determine the fair value of each reporting unit and compare it to the carrying value, including goodwill, of such unit. If the fair value exceeds the carrying value, no impairment loss would be recognized. However, if the carrying value of the reporting unit exceeds its fair value, the goodwill of this unit may be impaired. The amount of the impairment, if any, would then be measured in the second step. The Company determines the fair value of each reporting unit by using a combination of present value and multiple of earnings valuation techniques and compares it to each reporting unit’s carrying value. The Company completed the first step during the second quarter of fiscal 2002 which indicated that goodwill recorded in the metal components and metal coil coating segments was impaired as of November 1, 2001. Due to the potential impairment, the Company then completed step two of the test to measure the amount of the impairment. Based on that analysis, the transitional impairment losses for the metal components and metal coil coating segments were $57.1 million ($55.4 million after tax effect of $1.7 million) and $10.3 million ($9.7 million after tax effect of $0.6 million), respectively. The total transitional impairment loss of $67.4 million ($65.1 million after tax effect of $2.3 million) was recognized during the second quarter of fiscal 2002 as a cumulative effect of a change in accounting principle. The Company has updated this review at each subsequent fiscal year end as required by SFAS No. 142 and identified no additional impairment of goodwill.

39

The following table reflects the Company’s comparative income before and after the cumulative effect of the change in accounting principle (in thousands, except per share data):

	Fiscal year ended
	Nov. 2, 2002			Nov. 1, 2003		Oct. 30, 2004
Reported income before cumulative effect of change in accounting principle	$	31,314		$	22,800	$	44,890
Cumulative effect of change in accounting principle, net of tax		(65,087	)		—		—
Adjusted net income (loss)	$	(33,773	)	$	22,800	$	44,890
BASIC INCOME (LOSS) PER SHARE:
Reported income before cumulative effect of change in accounting principle	$	1.70		$	1.21	$	2.28
Cumulative effect of change in accounting principle, net of tax		(3.52	)		—		—
Adjusted net income (loss)	$	(1.82	)	$	1.21	$	2.28
DILUTED INCOME (LOSS) PER SHARE:
Reported income before cumulative effect of change in accounting principle	$	1.68		$	1.20	$	2.24
Cumulative effect of change in accounting principle, net of tax		(3.49	)		—		—
Adjusted net income (loss)	$	(1.81	)	$	1.20	$	2.24

The following table displays the changes in the carrying amount of goodwill by operating segment (in thousands):

			Transitional
	Balance		Impairment						Balance		Impairment		Balance		Impairment		Balance
	Nov. 1, 2001		Charge			Other1			Nov. 2, 2002		Charge		Nov. 1, 2003		Charge		Oct. 30, 2004
Metal components	$	176,158	$	(57,052	)	$	(1,500	)	$	117,606	$	—	$	117,606	$	—	$	117,606
Engineered building systems		118,682		—			—			118,682		—		118,682		—		118,682
Metal coil coating2		92,428		(10,307	)		(162	)		81,959		—		81,959		—		81,959
Total	$	387,268	$	(67,359	)	$	(1,662	)	$	318,247	$	—	$	318,247	$	—	$	318,247

(1) Other refers to a purchase accounting adjustment to goodwill associated with a contingency that was resolved during fiscal 2002 relating to a specifically identified deferred tax asset from a prior acquisition.

(2) During fiscal year 2003, the Company determined that metal coil coating should be a reportable segment. Metal coil coating was previously included in the metal components segment. (1)

40

4. INCOME TAXES

Income tax expense is based on pretax financial accounting income. Deferred income taxes are recognized for the temporary differences between the recorded amounts of assets and liabilities for financial reporting purposes and such amounts for income tax purposes. The income tax provision (benefit) for the fiscal years ended 2002, 2003 and 2004, consisted of the following:

				Fiscal year ended
	Nov. 2, 2002			Nov. 1, 2003			Oct. 30, 2004
				(in thousands)
CURRENT:
Federal	$	18,392		$	13,882		$	30,799
State		2,028			1,581			3,727
Total current		20,420			15,463			34,526
DEFERRED:
Federal		(823	)		(606	)		(4,472	)
State		(62	)		(99	)		(287	)
Total deferred		(885	)		(705	)		(4,759	)
Total provision	$	19,535		$	14,758		$	29,767

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

				Fiscal year ended
	Nov. 2, 2002			Nov. 1, 2003			Oct. 30, 2004
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State income taxes		2.5	%		2.6	%		3.2	%
Other		0.9	%		1.7	%		1.7	%
Effective tax rate		38.4	%		39.3	%		39.9	%

Deferred income taxes reflect the net impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. The tax effects of the temporary differences for fiscal 2003 and 2004 are as follows:

	Nov. 1, 2003			Oct. 30, 2004
	(in thousands)
DEFERRED TAX ASSETS:
Inventory	$	1,523		$	2,129
Bad debt reserve		2,709			3,381
Accrued insurance reserves		2,487			3,380
Warranty reserve		1,728			2,050
Restructuring and impairment		791			776
Accrued and deferred compensation		2,756			3,570
Other reserves		1,115			1,156
Total deferred tax assets		13,109			16,442
DEFERRED TAX LIABILITIES:
Depreciation and amortization		22,421			22,968
Other		1,973			—
Total deferred tax liabilities		24,394			22,968
Net deferred tax liability	$	(11,285	)	$	(6,256	)

Other accrued expenses include accrued income taxes of $2.2 million at November 1, 2003 and $7.7 million at October 30, 2004.

The Company carries out its business operations through legal entities in the U.S. and Mexico jurisdictions. These operations require that the Company file corporate income tax returns that are subject to U.S., state and foreign tax laws. The Company is subject to income tax audits in these multiple jurisdictions. The Company’s provision for income taxes includes amounts intended to satisfy income tax assessments that may result from the examination of the Company’s tax returns that have been filed in these jurisdictions. The amounts ultimately paid upon resolution of these examinations could be materially different from the amounts included in the provision for income taxes and result in additional tax benefit or expense depending on the ultimate outcome.

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5. OPERATING LEASE COMMITMENTS

     Total rental expense incurred from operating leases for fiscal 2002, 2003 and 2004 was $6.9 million, $6.0 million and $7.8 million, respectively. Aggregate minimum required annual payments on long-term non-cancelable operating leases are as follows for the respective fiscal years (in thousands):

2005	$	4,382
2006	$	3,127
2007	$	2,383
2008	$	1,590
2009 & thereafter	$	4,079

6. SHAREHOLDERS’ RIGHTS PLAN

     In June 1998, the Board of Directors adopted a Shareholders’ Rights Plan and declared a dividend of one preferred stock purchase right (“Right”) for each outstanding share of the Company’s common stock for stockholders of record at the close of business on July 8, 1998. Each Right entitles the holder to purchase one one-hundredth (l/100th) of a share of the Company’s Series A Junior Participating Preferred Stock at a price of $62.50 per share upon certain events. Generally, if a person or entity acquires, or initiates a tender offer to acquire, at least 20% of the Company’s then outstanding common stock, the Rights will become exercisable for common stock having a value equal to two times the exercise price of the Right, or effectively at one-half of the Company’s then current stock price. The Rights are redeemable under certain circumstances at $0.005 per Right and will expire, unless earlier redeemed, on June 24, 2008.

7. SHAREHOLDERS’ EQUITY

     On November 3,1999, the Company’s Board of Directors authorized the repurchase of 1.0 million shares of the Company’s common stock, and authorized the repurchase of an additional 1.5 million shares on November 7, 2000. Subject to applicable federal securities law, such purchases occur at times and in amounts that the Company deems appropriate. No time limit was placed on the duration of the repurchase program. Shares repurchased are reserved primarily for later re-issuance in connection with the Company’s stock option and 401(k) profit sharing plans. At October 30, 2004, the Company had repurchased 1.3 million shares of its common stock for $21.6 million since the inception of the repurchase program in November 1999.

Changes in treasury common stock, at cost, were as follows:

	Number
	of Shares			Amount
	(in thousands)
Balance, November 2, 2002		20		$	319
Purchases		8			114
Issued in exercise of stock options		(28	)		(430	)
Issued in 401(k) contributions		—			—
Balance, November 1, 2003		—			3
Purchases		—			—
Issued in exercise of stock options		—			—
Issued in 401(k) contributions		—			—
Balance, October 30, 2004		—		$	3

8. STOCK INCENTIVE PLANS

     On December 12, 2002, the Board of Directors approved a new long-term stock incentive plan that provides for the grant of stock options, stock appreciation rights, restricted stock awards, performance share awards and phantom stock awards. The aggregate number of shares of common stock that may be issued under the new plan may not exceed 1.5 million. Awards will normally terminate on the earlier of (i) 10 years from the date of grant, (ii) 30 days after termination of employment or service for a reason other than death, disability or retirement, (iii) one year after death or (iv) one year (for incentive stock options) or five years (for other awards) after disability or retirement. Awards are non-transferable except by disposition on death or to certain family members, trusts and other family entities as the Compensation Committee may approve. Awards may be paid in cash, shares of the Company’s common stock or a combination, in lump sum or installments and currently or by deferred payment, all as determined by the Compensation Committee. Prior to December 16, 2002, the Company maintained an employee stock option plan. No further options are permitted to be granted under the old plan after the shareholders approved the new long-term stock incentive plan in March 2003. At November 1, 2003 and October 30, 2004, a total of 1.4 million shares and 0.4 million shares were available under the new plan for the further grants of awards.

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Stock option transactions during fiscal 2002, 2003 and 2004 were as follows (in thousands, except weighted average exercise prices):

	Number			Weighted Average
	of Shares			Exercise Price
Balance October 31, 2001		1,663		$	16.82
Granted		491			16.01
Cancelled		(53	)		(19.00	)
Exercised		(239	)		(12.21	)
Balance November 2, 2002		1,862		$	17.14
Granted		292			19.37
Cancelled		(26	)		(19.53	)
Exercised		(196	)		(12.25	)
Balance November 1, 2003		1,932		$	17.94
Granted		677			29.22
Cancelled		(100	)		(17.65	)
Exercised		(916	)		(17.91	)
Balance October 30, 2004		1,593		$	22.77

Options exercisable at fiscal 2002, 2003 and 2004 were 1.0 million, 1.1 million and 0.5 million, respectively. The weighted average exercise prices for options exercisable at fiscal years ended 2002, 2003 and 2004 were $17.97, $18.50 and $18.15, respectively. Exercise prices for options outstanding at October 30, 2004 range from $13.50 to $32.55. The weighted average remaining contractual life of options outstanding at October 30, 2004 was 7.9 years. The following summarizes additional information concerning outstanding options at October 30, 2004:

Options Outstanding

Range of			Weighted Average	Weighted Average
Exercise Prices	Number of Options		Remaining Life	Exercise Price
$13.50 - 15.30		297,462	6.7 years	$	15.13
$15.75 - 18.38		384,401	7.1 years	$	17.45
$18.63 - 32.55		910,771	8.6 years	$	27.43
		1,592,634

Options Exercisable

Range of			Weighted Average
Exercise Prices	Number of Options		Exercise Price
$13.50 - 15.30		178,566	$	15.11
$15.75 - 18.38		218,399	$	17.12
$18.63 - 32.55		145,840	$	23.40
		542,805

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9. NET INCOME PER SHARE

Basic and diluted net income per share was derived using the following information:

	Fiscal year ended
	Nov. 2, 2002			Nov. 1, 2003		Oct. 30, 2004
	(in thousands)
Income before cumulative effect of change in accounting principle	$	31,314		$	22,800	$	44,890
Cumulative effect of change in accounting principle, net of tax	$	(65,087	)		—		—
Net income (loss)	$	(33,773	)	$	22,800	$	44,890
Weighted average common shares outstanding		18,512			18,811		19,709
Common stock equivalents:
Stock options		180			158		275
Restricted stock awards		—			—		12
Weighted average common shares outstanding, assuming dilution		18,692			18,969		19,996

10. EMPLOYEE BENEFIT PLAN

     The Company has a 401(k) profit sharing plan (the “Savings Plan”) which covers all eligible employees. The Savings Plan requires the Company to match employee contributions up to a certain percentage of a participant’s salary. Contributions expense for the fiscal 2002, 2003 and 2004 was $3.6 million, $3.2 million and $5.1 million, respectively, for contributions to the Savings Plan, all of which were made by contributing shares of common stock of the Company. The Company match ranges from 67% to 100%, depending on the return on adjusted operating assets. The Company match was 67% in fiscal 2003 and 100% in fiscal 2004, due to the Company achieving its targeted return on adjusted operating assets.

11. ACQUISITIONS

     During July 2003, the Company acquired certain operating assets and the business of Able Manufacturing and Wholesale Garage Door Company (“Able”) in a cash transaction of approximately $3.2 million. Able manufactures and distributes a complete line of metal sectional doors for both the commercial and residential markets. In a separate transaction, the Company also acquired a retail store located in Baytown, Texas. The purchase price for the assets of the Baytown location was approximately $1.1 million.

     During December 2004, the Company purchased substantially all of the operating assets of Heritage Building Systems, Inc. and Steelbuilding.com, Inc., as well as its joint venture partner’s 49% minority interest in the Company’s manufacturing facility in Monterrey, Mexico. Refer to Note 14 – Subsequent Events for additional discussion.

12. RESTRUCTURING

     In October 2001, management announced a plan to realign its manufacturing capabilities to increase efficiencies, raise productivity and lower operating expenses. The pretax restructuring charge of $2.8 million related to the planned closing of five manufacturing facilities as part of this plan. This included a $2.1 million non-cash charge for an identified impairment to property, plant and equipment for the expected loss on the sale of two of the five facilities. The actions were substantially completed by the end of the first quarter of fiscal 2002. During fiscal 2002, the Company recognized a gain of $1.3 million ($0.8 million after tax) for the sale of certain real estate and equipment associated with the restructuring. During fiscal 2003, the Company recognized a loss of $0.9 million ($0.6 million after tax) due to the sale of one of the facilities and the reduction in the carrying value of the remaining facility due to the continuing deterioration of the local industrial resale market. The remaining facility, not yet sold, has a net carrying value of $0.5 million and the Company does not anticipate a selling price significantly different from this amount.

13. CONTINGENCIES

     In late 2003 and early 2004, a number of lawsuits were filed against several of the Company’s operating subsidiaries by Bethlehem Steel Corporation and National Steel Corporation in their respective bankruptcy proceedings, seeking reimbursement of preferential transfers allegedly made by the respective debtors in the 90 day period preceding their bankruptcy filings. Bethlehem alleges it made preferential payments to the Company’s subsidiaries

44

of approximately $7.7 million, while National claims preferential payments in the aggregate amount of $6.3 million. The Company has denied the material allegations in the lawsuits and is vigorously defending against these claims. The Company believes these legal proceedings will not have a material adverse effect on its business, consolidated financial condition or results of operations.

     The Company discovered the existence of polychlorinated biphenyls and heavy metals at its Metal Prep Houston site, which is located in an industrial area in Houston, Texas. Soil borings have been sampled and analyzed to determine the impact on the soil at this site, and the findings indicate that remediation of the site will likely be necessary. The Company has filed an application with the Texas Commission of Environmental quality (“TCEQ”) for entry into the Voluntary Cleanup Program. Based upon an analysis of projected remediation costs of the known contamination, the Company currently estimates that it will spend approximately $2.5 million to remediate this site, which includes future environmental consulting fees, oversight expenses and additional testing expenses. The Company has made a total accrual of $2.5 million ($1.5 million and $1.0 million in fiscal 2003 and 2004, respectively) to cover the estimated anticipated costs of remediation of these environmental issues. The Company is, however, still in the process of conducting sampling activities, the results of which may require it to change its current work plan. Because cleanup has not yet started and is expected to be a very complex process that may require changes in the current plan as the work progresses, because the Company is still in discussions with TCEQ as to the extent of additional investigation that needs to be performed to fully delineate the issues, and because the Company will need to work with both state and federal regulators to complete the investigation and remediation, the Company is not able to give assurance that actual costs will not exceed its estimate, perhaps significantly. The Company has a contractual indemnity by the immediate prior owner of the property, which it believes obligates that party to reimburse its response costs with respect to this condition. The Company has brought suit against the prior owner asserting this indemnity, and that party has disputed liability. The Company is also investigating other potentially responsible parties from whom to seek contribution and/or indemnification. However, it is possible that the Company’s efforts to obtain reimbursement of its response costs at this site may not be successful or may not prove to be cost effective for it. The Company has not recorded any receivables for potential reimbursements from third parties.

     On September 8, 2004, the Company filed suit in the 280th Judicial District Court of Harris County, Texas

against Johnie Schulte, its former President and CEO, because it believes he is violating covenants he has with the Company prohibiting him from using or divulging its confidential information, soliciting its employees to leave the Company’s employment, and competing with the Company. In its complaint, NCI asked the court to rule that the covenants made by Mr. Schulte are enforceable and to enjoin Mr. Schulte from further violations. Prior to filing the lawsuit, the Company conducted an investigation in an effort to determine whether Mr. Schulte was in violation of the restrictive covenants. NCI also asked the court to declare that it could terminate a stream of payments totaling over $3.6 million over a period of ten years to Mr. Schulte because he has violated these covenants.

     From time to time, the Company is involved in various other legal proceedings and contingencies considered to be in the ordinary course of business. While the Company is not able to predict whether it will incur any liability in excess of insurance coverages or to accurately estimate the damages, or the range of damages, if any, the Company might incur in connection with these legal proceedings, the Company believes these legal proceedings will not have a material adverse effect on its business, consolidated financial condition or results of operations.

14. SUBSEQUENT EVENTS
Convertible Debt Issuance

     On November 16, 2004, the Company completed an offering of $180 million of 2.125% convertible senior subordinated notes due 2024. The Company plans to use the net proceeds of the offering to finance future and pending acquisitions, and in December used approximately $17 million to pay the cash portion of the purchase price for Heritage Building Systems, Inc. and Steelbuilding.com, and $10 million to purchase the Company’s joint venture partner’s 49% interest in the Company’s manufacturing facility in Monterrey, Mexico. Pending the Company’s use of the remaining net proceeds for acquisitions, it has invested the balance in short-term debt securities or similar investments. If the Company does not apply the proceeds towards either (1) the purchase price of an acquisition or acquisitions within 12 months (and in certain circumstances, 18 months) of the closing of this offering or (b) the repayment of indebtedness outstanding under its revolving credit facility that was incurred to finance acquisitions, the remaining proceeds will, pursuant to the terms of the Company’s existing senior credit agreement, be applied towards the repayment of the outstanding balance on the Company’s senior term loan.

     The notes pay interest semi-annually at the rate of 2.125% per annum. The notes will be convertible into cash or, in certain circumstances, a combination of cash and shares of the Company’s common stock at an initial

45

conversion rate equivalent to 24.9121 shares of common stock per $1,000 principal amount of notes, representing a conversion price of approximately $40.14 per common share. The notes will be convertible only in specified circumstances relating to, among other things, the trading price of shares of the Company’s common stock during any calendar quarter exceeding 120% of the conversion price then in effect for specified periods of time, subject to certain exceptions, the trading price of the notes being less than a specified percentage of the product of the closing price of the Company’s common stock and the applicable conversion rate for five consecutive trading days, the notes having been called for redemption by the Company, and the occurrence of certain corporate transactions and designated events. In addition, a make whole premium will be payable in connection with conversions of notes made in connection with certain designated events that occur on or prior to November 15, 2009. The notes will be general unsecured obligations of the Company and will be subordinated to the Company’s present and future senior indebtedness.

     The Company will have the right to redeem the notes beginning on November 20, 2029 at a redemption price equal to par plus accrued and unpaid interest (including additional amounts), if any. Holders of the notes will have the right to require the Company to repurchase all or some of their notes on November 15, 2009, November 15, 2014 and November 15, 2019 at a redemption price equal to par plus accrued and unpaid interest (including additional amounts), if any and, in certain circumstances, a make whole premium (see Note l(n)-EITF Issue No. 04-8).

Acquisitions

     On December 8, 2004, the Company purchased substantially all of the operating assets of Heritage Building Systems, Inc. and Steelbuilding.com, Inc., affiliated companies headquartered in North Little Rock, Arkansas. The purchase price for the two companies was approximately $26 million, including $6 million in NCI common stock (199,767 shares), and assumed liabilities of approximately $2 million.

     On December 13, 2004, the Company purchased its joint venture partner’s 49% minority interest in the Company’s manufacturing facility in Monterrey, Mexico for approximately $10 million in cash.

15. BUSINESS SEGMENTS

     The Company has divided its operations into three reportable segments based upon similarities in product lines, manufacturing processes, marketing and management of its businesses: metal components, engineered building systems and metal coil coating. Products of all three segments are similar in basic raw materials used. The metal components segment products include metal roof and wall panels, doors, metal partitions, metal trim 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 metal coil coating segment consists of cleaning, treating, painting and slitting continuous steel coils before the steel is fabricated for use by various industrial users. The reporting segments follow the same accounting policies used for the Company’s consolidated financial statements. Management evaluates a segment’s performance based primarily upon operating income before corporate expenses. Intersegment sales are recorded based on weighted average costs and consist of building components provided to the engineered building systems segment, structural framing provided to the metal components segment by the engineered building systems segment, and hot rolled, light gauge painted, and slit material and other services provided by the metal coil coating segment to both of the other segments. The Company is not dependent on any one significant customer or group of customers. Substantially all of the Company’s sales are made within the United States. Certain financial data for prior periods has been reclassified to conform to the current presentation.

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Summary financial data by segment is as follows (in thousands, except percentages):

	2002			%			2003			%			2004			%
SALES:
Metal components	$	507,079			53		$	473,499			53		$	576,808			53
Engineered building systems		317,926			33			297,304			33			385,246			36
Metal coil coating		128,437			14			127,347			14			122,809			11
Intersegment sales		97,024			10			106,338			12			195,191			18
Eliminations		(97,024	)		(10	)		(106,338	)		(12	)		(195,191	)		(18	)
Total net sales	$	953,442			100		$	898,150			100		$	1,084,863			100
OPERATING INCOME:
Metal components	$	46,829			9		$	45,851			10		$	76,724			13
Engineered building systems		28,695			9			18,055			6			31,340			8
Metal coil coating		23,578			18			21,204			17			26,444			22
Corporate		(26,878	)		—			(27,947	)		—			(37,532	)		—
Total operating income (% of sales)	$	72,224			8		$	57,163			6		$	96,976			9
PROPERTY, PLANT AND EQUIPMENT, NET:
Metal components	$	93,577			46		$	90,428			45		$	82,223			44
Engineered building systems		44,006			21			47,831			24			44,554			24
Metal coil coating		51,394			25			48,487			24			44,836			24
Corporate		16,357			8			15,080			7			14,074			8
Total property, plant and equipment, net	$	205,334			100		$	201,826			100		$	185,687			100
DEPRECIATION AND AMORTIZATION:
Metal components	$	9,336			41		$	9,042			39		$	8,400			37
Engineered building systems		6,401			28			6,134			27			6,810			30
Metal coil coating		4,523			20			4,919			21			4,911			21
Corporate		2,623			11			2,912			13			2,853			12
Total depreciation and amortization	$	22,883			100		$	23,007			100		$	22,974			100
CAPITAL EXPENDITURES:
Metal components	$	4,179			46		$	4,023			22		$	1,901			20
Engineered building systems		1,589			17			10,309			58			3,652			39
Metal coil coating		2,512			27			1,962			11			1,744			19
Corporate		895			10			1,618			9			2,030			22
Total capital expenditures	$	9,175			100		$	17,912			100		$	9,327			100
TOTAL ASSETS:
Metal components	$	307,539			43		$	304,910			43		$	323,026			41
Engineered building systems		206,429			29			204,931			29			219,849			28
Metal coil coating		161,128			22			158,553			22			196,762			25
Corporate		46,169			6			44,766			6			43,220			6
Total assets	$	721,265			100		$	713,160			100		$	782,857			100

 47

Report of Independent
Registered Public
Accounting Firm

The Board of Directors and Shareholders
NCI Building Systems, Inc.

We have audited the accompanying consolidated balance sheets of NCI Building Systems, Inc. and subsidiaries as of November 1, 2003 and October 30, 2004, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three fiscal years in the period ended October 30, 2004. Our audits also included the financial statement schedule listed in the Index to item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of NCI Building Systems, Inc. at November 1, 2003 and October 30, 2004 and the consolidated results of its operations and its cash flows for each of the three fiscal years in the period ended October 30, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 3 to the consolidated financial statements, effective November 1, 2001, the Company changed its method of accounting for goodwill.

ERNST & YOUNG LLP
Houston, Texas
December 9, 2004

48

Management’s Discussion and
Analysis of Financial Condition
and Results of Operations

NCI BUILDING SYSTEMS, INC.

FORWARD LOOKING STATEMENTS

     This Annual Report includes statements concerning the Company’s 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, the Company’s 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. The Company has based its forward-looking statements on its management’s beliefs and assumptions based on information available to the Company’s management at the time the statements are made. The Company cautions that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, the Company cannot give assurance that actual results will not differ materially from those expressed or implied by the Company’s forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on any forward-looking information, including any earnings guidance. Although the Company believes 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;

•   fluctuations in customer demand and other patterns;

•   raw material pricing;

•   competitive activity and pricing pressure;

•   the ability to make strategic acquisitions accretive to earnings, and general economic conditions affecting the construction industry; and

•   other risks detailed under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K as filed with the SEC

     The Company expressly disclaims any obligations to release publicly any updates or revisions to these forward-looking statements to reflect any changes in its expectations.

OVERVIEW

     NCI Building Systems, Inc. is one of North America’s largest integrated manufacturers and marketers of products for the non-residential construction industry. The Company designs, manufactures and markets metal components and engineered building systems and provides metal coil coating services primarily for non-residential construction use. It manufactures and distributes extensive lines of metal products for the non-residential construction market under multiple brand names through a nationwide network of plants and distribution centers. The Company sells its 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.

     Sales and earnings are influenced by general economic conditions, interest rates, the price of steel relative to other building materials, the level of non-residential construction activity, roof repair and retrofit demand and the availability and cost of financing for construction projects.

     One of the primary challenges facing the Company both short and long-term is the volatility in the price of steel, the primary raw material used by the Company. Steel represents approximately 70% of the Company’s costs of goods sold. The steel industry is cyclical in nature and steel prices are influenced by numerous factors beyond the Company’s

 49

control, including general economic conditions, competition, labor costs, production costs, import duties and other trade restrictions. Beginning in the second quarter of fiscal 2004, there were unusually rapid and significant increases in steel prices and severe shortages in the steel industry due in part to increased demand from China’s expanding economy and high energy prices. Prices from the domestic steel manufacturers and available foreign spot purchases have stabilized during the Company’s fourth fiscal quarter. The Company was generally able to pass increases in its raw materials costs through to its customers, and this is a principal reason why sales and operating income increased from fiscal 2003 to 2004.

     While the Company was able to quickly revise its pricing to customers of the metal components and metal coil coating segments, the longer lead time and the fixed price nature of the engineered building systems segment prevented the Company from immediately implementing price increases in this segment. This pricing issue in the engineered building systems segment with respect to its backlog initially contributed to a deterioration in operating margins in this segment. By the fourth fiscal quarter, the Company had renegotiated existing contracts in the engineered building systems segment to adjust for the higher raw material costs and began to work revised pricing terms into new contracts.

     The Company believes that it was successful in passing on steel cost increases largely because the increases were market driven and prices of alternative building materials, such as wood and concrete, also increased during 2004. If steel prices increase at a faster rate than prices for alternative building materials, the Company might not be able to continue to pass steel price increases through to its customers, and this could have an adverse effect on the Company’s sales. It is the Company’s opinion that steel prices will increase slightly at least through the first half of fiscal 2005. However, price volatility in world markets, especially China and India, may alter this outlook. To mitigate future risks, the Company has incorporated steel price adjustment clauses in standard sales contracts. The Company does not have any long-term contracts for the purchase of steel and normally does not maintain an inventory of steel in excess of its current production requirements. However, during fiscal 2004, the Company made some purchases in advance of announced steel price increases.

     In assessing the state of the metal construction market, the Company relies upon 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 the Company looks to for reports of actual and forecasted growth in various construction related industries, including the overall non-residential construction market. McGraw-Hill Construction’s forecast for 2004 expects total non-residential square footage construction growth of 1% in total with 4% to 5% in the manufacturing and warehouse markets.

     With the higher level of sales, the Company was able to leverage its fixed manufacturing costs through higher plant efficiencies and the use of overtime during peak production months. Plant manufacturing costs as a percent of sales accounted for 15% and 17% in fiscal years 2004 and 2003 respectively.

     Selling, general and administrative expenses increased 18% to $165.2 million in fiscal 2004 from $140.4 million in the prior year. This increase was driven by the 21% sales increase as well as a $14.7 million increase in employee benefit costs. Employee benefit costs increased in fiscal 2004 primarily due to bonus expenses for all employees because the Company achieved its targeted return on assets. The Company did not pay any bonuses in fiscal 2003 because it failed to achieve its targeted return. Under the Company’s bonus program, bonuses are subject to a maximum of 15% of the Company’s earnings before interest and tax (“EBIT”) plus deferred financing costs, before accrual for bonuses. Bonus payouts accounted for approximately 50% of the increase in selling, general and administrative expenses.

     Inventory increased 133% from $59.3 million at November 1, 2003 to $138.4 million at October 30, 2004. Raw materials increased $63.2 million due to the increase in steel prices, the purchase of foreign steel on the spot market (to build up inventory in light of shortages in the supply of steel) and the reduction of the consigned inventory programs by the steel mills, as discussed in Note 1 of the consolidated financial statements. Inventory levels were highest during September 2004, and were reduced by $18 million by the end of October 2004, due to cancelling and/or delaying purchase orders for hot roll coils. The Company expects inventory levels to continue trending downward during fiscal 2005, but does not expect a return to fiscal 2003 levels due to increased steel prices and the reduction of consigned inventory programs by the steel mills.

     The Company assesses performance across its 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 revenue per employee, man hours per ton of steel produced and shipped tons per

50

employee. In assessing its overall financial performance, the Company regards return on adjusted operating assets, as well as growth in earnings per share, as key indicators of shareholder value. Consequently, the Company pays management bonuses only if it achieves a return on adjusted operating assets (“ROA”) of at least 15% or, for the senior executives, a growth in earnings per share of at least 10%. The Company’s bonus program provides that ROA is calculated by dividing the Company’s EBIT plus deferred financing costs by its assets, excluding cash, deferred taxes and goodwill.

     During fiscal 2004, the Company positioned itself to execute its internal and external growth strategy by refinancing its bank debt, redeeming its senior subordinated notes and preparing for its offering of convertible senior subordinated notes which was completed in November 2004. In fiscal 2004, the Company began executing its growth strategy by successfully negotiating (i) the acquisition of Heritage Building Systems and Steelbuilding.com in an effort to increase its retail sales and (ii) the buyout of its joint venture partner’s 49% interest in its Mexico operations to give the Company more control and flexibility of that business. Both of these transactions were completed in December 2004.

RESULTS OF OPERATIONS

The following table presents, as a percentage of sales, certain selected consolidated financial data for the Company for the periods indicated:

				Fiscal year ended
	November 2, 2002			November 1, 2003			October 30, 2004
Sales		100.0	%		100.0	%		100.0	%
Cost of sales		77.7			78.0			75.8
Gross profit		22.3			22.0			24.2
Selling, general and administrative expenses		14.7			15.6			15.2
Income from operations		7.6			6.4			9.0
Interest expense		(2.3	)		(2.2	)		(1.4	)
Loss on debt extinguishment		—			—			(0.9	)
Other income, net		—			—			0.2
Income before income taxes and cumulative effect of change in accounting principle		5.3			4.2			6.9
Provision for income taxes		2.0			1.7			2.7
Income before cumulative effect of change in accounting principle		3.3			2.5			4.2
Cumulative effect of change in accounting principle, net of tax		(6.8	)		—			—
Net income (loss)		(3.5	)%		2.5	%		4.2	%

 51

SUPPLEMENTARY BUSINESS
SEGMENT INFORMATION

     The Company’s various product lines have been aggregated into three business segments: metal components, engineered building systems and metal coil coating. These aggregations are based on the similar nature of the products, distribution channels, and management and reporting for those products within the Company. All segments operate primarily in the non-residential construction market. Sales and earnings are influenced by general economic conditions, the level of non-residential construction activity, metal roof repair and retrofit demand and the availability and terms of financing available for construction. The reporting segments follow the same accounting policies used for the Company’s consolidated financial statements.

     Products of all business segments are similar in basic raw materials used. The metal components segment products include metal roof and wall panels, doors, metal partitions, metal trim 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. Metal coil coating consists of cleaning, treating, painting and slitting continuous steel coils before the steel is fabricated for use by various industrial users. The Company believes it has one of the broadest offerings of products in the metal construction industry.

     Intersegment sales are based on weighted average costs and consist of components provided by the metal components segment to the engineered building systems segment, main frames provided by the engineered building systems segment to the metal components segment, and hot roll, light gauge painted, and slit material and other services provided by the metal coil coating segment to both of the metal components and engineered building systems segments. This provides better customer service, shorter delivery time and minimizes transportation costs to the customer. Segment information is included in the three-year comparison in Note 15 of the consolidated financial statements.

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

	2002			%			2003			%			2004			%
SALES:
Metal components	$	507,079			53		$	473,499			53		$	576,808			53
Engineered building systems		317,926			33			297,304			33			385,246			36
Metal coil coating		128,437			14			127,347			14			122,809			11
Intersegment sales		97,024			10			106,338			12			195,191			18
Eliminations		(97,024	)		(10	)		(106,338	)		(12	)		(195,191	)		(18	)
Total net sales.	$	953,442			100		$	898,150			100		$	1,084,863			100
OPERATING INCOME:
Metal components	$	46,829			9		$	45,851			10		$	76,724			13
Engineered building systems		28,695			9			18,055			6			31,340			8
Metal coil coating		23,578			18			21,204			17			26,444			22
Corporate		(26,878	)		—			(27,947	)		—			(37,532	)		—
Total operating income (% of sales)	$	72,224			8		$	57,163			6		$	96,976			9
TOTAL ASSETS:
Metal components	$	307,539			43		$	304,910			43		$	323,026			41
Engineered building systems		206,429			29			204,931			29			219,849			28
Metal coil coating		161,128			22			158,553			22			196,762			25
Corporate		46,169			6			44,766			6			43,220			6
Total assets	$	721,265			100		$	713,160			100		$	782,857			100

For more business segment information, please refer to Note 15 of the consolidated financial statements.

52

RESULTS OF OPERATIONS FOR
FISCAL 2004 COMPARED TO 2003

     Consolidated sales for fiscal 2004 were $1.1 billion compared with $898.2 million for fiscal 2003. Sales were up 21% primarily due to an increase in selling prices resulting from steel cost increases, and higher demand primarily in the engineered building systems segment. Higher volumes were driven by an improving market for non-residential construction. Intersegment sales in fiscal 2004 of $195.2 million represent products and services provided among the three segments for metal components, engineered building systems and metal coil coating of $60.9 million, $22.2 million and $112.1 million, respectively.

     Metal components sales for fiscal 2004 increased to $576.8 million from $473.5 million for fiscal 2003. This $103.3 million (22%) increase was attributable primarily to the increase in selling prices due to steel cost increases experienced during fiscal 2004.

     Operating income of the metal components segment increased 67% in fiscal 2004 to $76.7 million from $45.9 million in fiscal 2003. The $30.8 million increase was attributable to higher gross margins of $39.9 million driven primarily by higher sales prices and leveraging fixed manufacturing costs, offset by an increase of $9.1 million in selling and administrative expenses consisting of the inclusion of Able for twelve months in fiscal 2004 versus six months in fiscal 2003 when acquired ($3.2 million), and increases in employee benefits ($3.3 million), outside services ($1.4 million), advertising expenses ($0.6 million), provision for doubtful accounts ($0.3 million) and research and development costs ($0.2 million) and other expenses ($0.1 million).

     Engineered building systems sales were $385.2 million for fiscal 2004 compared with $297.3 million for fiscal 2003. This 30% increase in sales was primarily attributable to renegotiating some existing backlog to incorporate steel price increases into the Company’s pricing and incorporating such higher prices into new contracts.

     Operating income of the engineered building systems segment increased 74% in fiscal 2004, to $31.3 million, compared to $18.0 million in the prior year. The $13.3 million increase was attributable to $23.3 million gross margin on the additional sales offset by a $5.5 million decrease in margins due to the lower priced backlog, which limited the Company’s ability to pass through all steel price increases to customers, and an increase of $4.5 million in selling and administrative expenses consisting of increases in employee benefits ($4.8 million), commissions ($1.5 million) and engineering expenses ($0.8 million), offset by a lower provision for doubtful accounts compared to the prior year for the Company’s Mexico operations ($2.5 million) and decreases in other expenses ($0.1 million).

     Metal coil coating sales decreased 4%, to $122.8 million in fiscal 2004 from $127.3 million in fiscal 2003. This was primarily attributable to shifting production capacity to internal uses for the metal components and engineered building systems segments. Total sales activity including intercompany was approximately 34% higher as compared to the prior fiscal year.

     Prior to the third quarter of fiscal 2004, a portion of the revenue for the metal coil coating segment was recognized upon completion of the painting process for consigned coils owned by the customer, which in most cases were steel mills. This accounting treatment met the criteria to be recognized as revenue in accordance with SEC Staff Accounting Bulletin No. 101. In 2004, many steel mills which traditionally had consigned steel coils to the Company in this manner abandoned that procedure, resulting in the Company purchasing and recognizing steel coils as inventory upon the arrival of such raw materials at the Company’s coil coating plants. As a result, during the third quarter of fiscal 2004, the Company changed its policy to recognize revenue upon shipment of the coils from the coil coating facilities to third parties. The impact of the accounting change during the third quarter of 2004, which was not material, was a reduction to the Company’s revenues and operating income of approximately $4.5 million and $0.8 million, respectively. This change would not have had a material effect on any prior periods presented and is not expected to materially affect future results.

     Operating income of the metal coil coating segment increased 25%, to $26.4 million, compared to $21.2 million in the prior year. The $5.2 million increase is attributable to higher margins of $7.8 million due to higher prices and significantly increased plant efficiency as intercompany sales volume increased 133% from $48.0 million in fiscal 2003 to $112.1 million in fiscal 2004. This was offset by a $0.9 million impact due to a decrease in external sales and a $1.7 million increase in selling and administrative expenses consisting of increases in employee benefits ($0.9 million), outside services ($0.3 million), provision for doubtful accounts ($0.3 million) and other expenses ($0.2 million).

     Consolidated selling, general and administrative expenses increased to $165.2 million in fiscal 2004 from $140.4 million in the prior year due to increases in employee benefits ($14.7 million), outside services ($3.7 million), the inclusion of Able for twelve months in fiscal 2004 versus six months in fiscal 2003 ($3.2 million), commissions ($1.5 million), engineering expenses (0.8 million), advertising expenses ($0.6 million), offset by a higher provision for doubtful accounts in the prior year for the Company’s

 53

Mexico operations ($2.5 million). As a percent of sales, selling, general and administrative expenses for fiscal 2004 were 15% compared to 16% for fiscal 2003.

     Consolidated interest expense for fiscal 2004 decreased by 24%, to $15.1 million compared to $19.8 million for the prior year. This decline was primarily due to a decrease in outstanding debt for the year of $32.1 million and reduced interest rates resulting from the debt refinancing completed during the third quarter of fiscal 2004.

     Loss on debt extinguishment for fiscal 2004 was $9.9 million and consisted of a premium paid on the redemption of the Company’s 9.25% senior subordinated notes of $5.8 million and the write off of the unamortized deferred financing costs on the old credit facilities of $4.1 million because of the debt refinancing completed during the third quarter of fiscal 2004.

     Consolidated provision for income taxes for fiscal 2004 increased 102%, to $29.8 million compared to $14.8 million for the prior year. This increase was primarily due to an increase in income before taxes as the effective rate was 39.9% and 39.3% for 2004 and 2003, respectively.

RESULTS OF OPERATIONS FOR
FISCAL 2003 COMPARED TO 2002

     Consolidated sales for fiscal 2003 were $898.2 million compared with $953.4 million for fiscal 2002. Sales were down 6% due to the continued slowdown in non-residential construction. The metal construction industry has experienced declines beginning in 2001 and this trend continued throughout fiscal 2003. Based on Metal Building Manufacturers Association reports and public company information, the Company believes it outperformed its competitors in the metal construction industry, despite the difficult environment, due to increased market penetration, a low cost infrastructure, and a broad product offering including retrofit and repair, which is counter cyclical in an economic downturn. Intersegment sales in fiscal 2003 of $106.3 million represent products and services provided between the three segments for metal components, engineered building systems and metal coil coating of $45.1 million, $13.2 million and $48.0 million, respectively.

     Metal components sales for fiscal 2003 were $473.5 million compared to $507.1 million for fiscal 2002. Sales were down 7% due to the decline in general industry activity.

     Operating income of the metal components segment declined in fiscal 2003 by 2%, to $45.9 million compared to $46.8 million in the prior year. Of this $0.9 million decline, $6.3 million resulted from lower sales volume offset by an increase in margins of $2.5 million and a decrease of $2.9 million in selling and administrative expenses. As a percent of sales, operating income in fiscal 2003 was 10%

compared to 9% in fiscal 2002.

     Engineered building systems sales were $297.3 million for fiscal 2003 compared with $317.9 million for fiscal 2002, representing a 6% decline. The sales were down due to the industry decline in non-residential construction. Fiscal 2003 continued to see an overall decline in larger, more expensive projects and an increased focus on smaller, more complex projects that provided lower overall operating margins and required additional engineering effort, which was harder to absorb on smaller projects.

     Operating income of the engineered building systems segment declined in fiscal 2003 by 37%, to $18.1 million, compared to $28.7 million in the prior year. Of this $10.6 million decline, $5.7 million resulted from lower sales volume, $3.1 million resulted from lower margins because of unabsorbed overhead and lower selling prices due to competition, $4.0 million resulted from higher engineering and selling expenses driven by smaller, more complex jobs and increases in the provision for doubtful accounts offset by a decrease in administrative expenses of $2.2 million. As a percent of sales, operating income in fiscal 2003 was 6% compared to 9% in fiscal 2002.

     Metal coil coating sales were $127.3 million for fiscal 2003 compared with $128.4 million for fiscal 2002, representing a 1% decline. Sales were down slightly due to the decline in non-residential construction activity.

     Operating income of the metal coil coating segment declined in fiscal 2003 by 10%, to $21.2 million, compared to $23.6 million in the prior year. Of this $2.4 million decline, $0.2 million resulted from lower sales volume, $2.7 million resulted from lower margins due to a $1.5 million expense associated with the establishment of a reserve for a known environmental liability discussed in Note 13 and lower selling prices due to competition offset by a $0.5 million decrease in selling and administrative expenses. As a percent of sales, operating income in fiscal 2003 was 17% compared to 18% in fiscal 2002.

     Consolidated selling, general and administrative expenses, consisting of engineering, drafting, selling and administrative costs, decreased only slightly to $140.4 million in fiscal 2003 compared to $140.6 million in the prior year. Decreases in selling and administrative costs described above were partially offset by increased drafting and engineering expenses involved with the greater proportion of small, complex projects of the engineered building systems segment. As a percent of sales, selling, general and administrative expenses for fiscal 2003 were 16% compared to 15% for fiscal 2002.

     Consolidated interest expense for fiscal 2003 decreased by 8%, to $19.8 million compared to $21.6 million for the prior year. This decline resulted from a decrease in outstanding

54

debt for the period of $48.6 million. Although LIBOR and prime rates in fiscal 2003 were lower than fiscal 2002, the Company’s borrowing rates increased slightly in fiscal 2003 as a result of the debt refinancing in September 2002.

LIQUIDITY AND CAPITAL RESOURCES

General

     On October 30, 2004, the Company had working capital of $127.2 million compared to $66.6 million at the end of fiscal 2003. This 91% increase resulted primarily from increases in inventory and accounts receivable of $79.0 million and $12.2 million, respectively, offset by increases in accrued compensation and benefits and other accrued expenses of $21.5 million and $9.2 million, respectively. During fiscal 2004, the Company generated cash flow from operations of $23.7 million. This cash flow, along with cash from the beginning of the period, was used to fund capital expenditures of $9.3 million and repay $32.1 million in debt under the Company’s senior credit facilities.

Debt

     On June 18, 2004, the Company completed a $325 million senior secured credit facility with a group of lenders and used the initial borrowings to repay in full its then existing credit facility and redeem its $125 million of senior subordinated notes due 2009. The Company believes that the new credit facility provides it with increased financial flexibility and decreased borrowing costs. The current facility includes a $125 million (outstanding balance of $16.7 million at October 30, 2004), five-year revolving loan maturing on June 18, 2009 and a $200 million (outstanding balance of $200 million at October 30, 2004), six-year term loan maturing on June 18, 2010. The term loan requires mandatory prepayments of $0.5 million each quarter

beginning in November 2004 with a final payment of $188.5 million at maturity.

     As a result of the June 18, 2004 refinancing of the senior credit facility, unamortized deferred financing costs of $4.1 million ($2.6 million after tax effect of $1.5 million) were written off during the third quarter of fiscal 2004. At November 1, 2003 and October 30, 2004, the unamortized balance in deferred financing costs was $4.8 million and $2.1 million, respectively.

     Loans on the senior credit facility bear interest, at the Company’s option, as follows: (1) base rate loans at the base rate plus a margin that fluctuates based on the Company’s leverage ratio and ranges from .25% to 1.25% on the revolving loan and 1.0% on the term loan and (2) LIBOR loans at LIBOR plus a margin that fluctuates based on the Company’s leverage ratio and ranges from 1.25% to 2.25% on the revolving loan and 2.00% on the term loan. Base rate is defined as the higher of the Wachovia Bank, National Association prime rate or the overnight Federal Funds rate plus 0.5% and LIBOR is defined as the applicable London interbank offered rate adjusted for reserves. Based on its current leverage ratios, the Company will pay a margin of 0.25% on base rate loans and 1.25% on LIBOR loans under the revolving loan and a margin of 1% on base rate loans and 2% on LIBOR loans under the term loan during the first quarter of fiscal 2005.

     The senior credit facility is secured by security interests in (1) accounts receivable, inventory and equipment and related assets such as software, chattel paper, instruments and contract rights of the Company (excluding foreign operations) and (2) 100% of the capital stock and other equity interests in each of the direct and indirect operating domestic subsidiaries of the Company.

The senior credit facility contains covenants that limit the

The required ratios for the periods indicated are as follows:

	2004		2005			2006		2007			2008
Maximum leverage ratio		4.00		4.00			4.00		4.00			4.00
Minimum interest coverage ratio		3.50		3.50	1		4.00		4.00	2		4.50	3
Maximum senior debt ratio		3.50		3.50	4		3.25		3.25	5		3.00	6

1 Increases to 4.00 on May 1, 2005	2 Increases to 4.50 on May 1, 2007	3 Increases to 5.00 on May 1, 2008
4 Decreases to 3.25 on May 1, 2005	5 Decreases to 3.00 on May 1, 2007	6 Decreases to 2.75 on May 1, 2008

 55

Company’s senior debt and leverage ratios and require the Company to maintain minimum interest coverage ratios and net worth, as those terms are defined in the senior credit facility.

     At October 30, 2004, the Company’s leverage ratio was 1.73 to 1, its interest coverage ratio was 8.98 to 1, its senior debt ratio was 1.73 to 1, and the Company was in compliance with all of these requirements. The senior credit facility also limits the amount of permitted spending for capital additions ($30 million per year), the disposition of assets and the amount of investments and other indebtedness. The Company also was in compliance with all of these limits at October 30, 2004.

     The senior credit facility limits the Company’s ability to pay cash dividends and repurchase capital stock. Under the terms of the senior credit facility, the Company had available approximately $12 million to use for those purposes at October 30, 2004.

     The senior credit facility also restricts the Company’s ability to undertake additional debt or equity financing.

     Borrowings under the senior credit facility may be prepaid and the voluntary reduction of the unutilized portion of the five-year revolver may be made at any time, in certain amounts, without premium or penalty but subject to LIBOR breakage costs. The Company is required to make mandatory prepayments on the senior credit facility upon the occurrence of certain events, including the sale of assets and the issuance and sale of equity securities, in each case subject to certain limitations and conditions. These prepayments must first be applied to the term loan and then to the reduction of the revolving commitment.

     At October 30, 2004, the Company had approximately $104 million in unused borrowing capacity (net of letters of credit outstanding of approximately $5 million) under the senior credit facility, of which a total of $20 million can be utilized for standby letters of credit.

     During the third quarter of fiscal 2004, the Company redeemed $125 million principal amount of its 9.25% senior subordinated notes for an aggregate of $130.8 million, including a redemption premium of $5.8 million.

     At October 30, 2004, the fair value of the Company’s long-term debt, based on current interest rates and quoted market price, was estimated to equal the carrying amount of $216.7 million.

     On November 16, 2004, the Company completed an offering of $180 million of 2.125% convertible senior subordinated notes due 2024. Refer to Note 14 – Subsequent Events of the consolidated financial statements for additional discussion.

     Part of the Company’s growth strategy is to make strategic acquisitions. During fiscal 2004, the Company positioned itself to execute this external growth strategy by refinancing its bank debt, redeeming its senior subordinated notes and preparing for its offering of convertible senior subordinated notes. On November 16, 2004, the Company completed the offering of $180 million of 2.125% convertible senior subordinated notes due 2024. The Company plans to use the net proceeds of the offering to finance future and pending acquisitions, and in December used approximately $17 million to pay the cash portion of the purchase price for Heritage Building Systems, Inc. and Steelbuilding. com, and $10 million to purchase the Company’s joint venture partner’s 49% minority interest in the Company’s manufacturing facility in Monterrey, Mexico. Pending the Company’s use of the remaining net proceeds for acquisitions, it has invested the balance in short-term debt securities or similar investments. If the Company does not apply the proceeds towards either (a) the purchase price of an acquisition or acquisitions within 12 months (and in certain circumstances, 18 months) of the closing of this offering or (b) the repayment of indebtedness outstanding under its revolving credit facility that was incurred to finance acquisitions, the remaining proceeds will, pursuant to the terms of the Company’s existing senior credit agreement, be applied towards the repayment of the outstanding balance on the Company’s senior term loan.

     The notes pay interest semi-annually at the rate of 2.125% per annum. The notes will be convertible into cash or, in certain circumstances, a combination of cash and shares of the Company’s common stock at an initial conversion rate equivalent to 24.9121 shares of common stock per $1,000 principal amount of notes, representing a conversion price of approximately $40.14 per common share. The notes will be convertible only in specified circumstances relating to, among other things, the trading price of shares of the Company’s common stock during any calendar quarter exceeding 120% of the conversion price then in effect for specified periods of time, subject to certain exceptions, the trading price of the notes being less than a specified percentage of the product of the closing price of the Company’s common stock and the applicable conversion rate for five consecutive trading days, the notes having been called for redemption by the Company, and the occurrence

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of certain corporate transactions and designated events. In addition, a make whole premium will be payable in connection with conversions of notes made in connection with certain designated events that occur on or prior to November 15, 2009. The notes will be general unsecured obligations of the Company and will be subordinated to the Company’s present and future senior indebtedness.

     The Company will have the right to redeem the notes beginning on November 20, 2009 at a redemption price equal to par plus accrued and unpaid interest (including additional amounts), if any. Holders of the notes will have the right to require the Company to repurchase all or some of their notes on November 15, 2009, November 15, 2014 and November 15, 2019 at a redemption price equal to par plus accrued and unpaid interest (including additional amounts), if any. Upon the occurrence of certain designated events, holders of the notes will also have the right to require the Company to purchase all or some of their notes at a redemption price equal to par plus accrued and unpaid interest (including additional amounts), if any and, in certain circumstances, a make whole premium.

Cash Flow

     The Company periodically evaluates its liquidity requirements, capital needs and availability of resources in view of, among other things, inventory levels, expansion plans, debt service requirements and other operating cash needs. To meet its short- and long-term liquidity requirements, including payment of operating expenses and repaying debt, the Company relies primarily on cash from operations. However, the Company has recently, as well as in the past, sought to raise additional capital and may do so again in the future.

     Historically since 1999, cash generated from operations and from sales of assets and investments has generated sufficient cash to fund acquisitions for an aggregate of approximately $34 million and to repay an aggregate of $348 million of the $565 million of long-term indebtedness outstanding after the acquisition of Metal Building Components, Inc. and California Finished Metals, Inc. in May 1998. The Company expects that, for the foreseeable future, cash generated from operations, sales of assets no longer needed for efficient operations and the available borrowings under its senior credit facility as well as the net proceeds from its recent offering of convertible senior subordinated notes will be sufficient to provide it the ability to fund its operations, provide the increased working capital necessary to support expected growth, fund planned capital expenditures for fiscal 2005 of approximately $27 million and expansion when needed, and pay scheduled interest and principal payments on its indebtedness. To the extent

that the net proceeds of approximately $176 million from the Company’s offering of convertible senior subordinated notes are insufficient to fund acquisitions, the Company may be required to obtain funds from other sources, which may include refinancing or increasing its senior debt facility and issuing public or private debt or equity, or a combination thereof, all of which will be dependent on the Company’s continued compliance with the financial and other covenants in its existing senior credit facility and the indenture for its convertible senior subordinated notes. The Company expects that, to the extent it has not been able to prepay in full the outstanding balance of the revolving portion of its senior credit facility when it matures on June 18, 2009, or the $188.5 million final installment of its term loan when it matures on June 18, 2010, it will refinance any then outstanding balance by means of a new senior credit facility or other public or private equity or debt financings. There can be no assurance that any of these external sources of funds will be available to the Company at the time they are needed or that any of those financings can be arranged on acceptable terms, or terms as favorable as those now enjoyed by the Company under its existing indebtedness.

Inflation

     Inflation has not significantly affected the Company’s financial position or operations over the last three fiscal years. Metal components and engineered building systems sales are affected more by the availability of funds for construction and interest rates. No assurance can be given that inflation or interest rates will not fluctuate significantly, either or both of which could have an adverse effect on the Company’s operations.

Steel Prices

     The Company’s business is heavily dependent on the prices and supply of steel, which is the principal raw material used in its products. The steel industry is highly cyclical in nature, and steel prices have recently been volatile and may remain volatile in the future. Steel prices are influenced by numerous factors beyond the Company’s control, including general economic conditions, competition, labor costs, production costs, import duties and other trade restrictions. Beginning in the second quarter of fiscal 2004, there have been unusually rapid and significant pricing increases and severe shortages in the steel industry due in part to increased demand from China’s expanding economy and high energy prices. The Company does not have any long-term contracts for the purchase of steel and normally does not maintain an inventory of steel in excess of its current production requirements. However, during fiscal 2004, the Company made some purchases in advance of announced steel price

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increases. The Company can give no assurance that steel will remain available or that prices will not continue to be volatile. While most of the Company’s contracts have escalation clauses that allow the Company, 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, the Company may, for competitive or other reasons, not be able to pass such price increases along. If the available supply of steel declines, the Company could experience price increases that it is not able to pass on to its customers, a deterioration of service from its suppliers or interruptions or delays that may cause it not to meet delivery schedules to its customers. Any of these problems could adversely affect the Company’s results of operations and financial condition.

     The Company relies on two major suppliers for its supply of steel, and may be adversely affected by the bankruptcy, financial condition or other factors affecting those suppliers. During 2001 and 2002, the Company’s primary steel suppliers, Bethlehem Steel Corporation and National Steel Corporation, respectively, filed for protection under Federal bankruptcy laws. During the third quarter of fiscal 2003, U.S. Steel bought substantially all of the integrated steel-making assets of National Steel, and International

Steel Group, Inc. acquired the assets of Bethlehem Steel. During fiscal 2004, the Company purchased approximately 32% of its steel requirements from U.S. Steel and 28% of its steel requirements from International Steel Group, Inc. A prolonged labor strike against one or more of the Company’s principal domestic suppliers could have a material adverse effect on the Company’s operations. Furthermore, if one or more of the Company’s current suppliers is unable for financial or any other reason to continue in business or to produce steel sufficient to meet the Company’s requirements, essential supply of the Company’s primary raw materials could be temporarily interrupted and adversely affect the Company’s business.

OFF-BALANCE SHEET ARRANGEMENTS

     As part of its ongoing business, the Company does 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 October 30, 2004, the Company was not involved in any material unconsolidated SPE transactions.

CONTRACTUAL OBLIGATIONS

The following table shows the Company’s known contractual obligations as of October 30, 2004 (in thousands):

	Payments due by period
			Less than						More than
Contractual Obligation		Total		1 year		1-3 years		4-5 years		5 years
Total debt	$	216,700	$	2,000	$	6,000	$	4,000	$	204,700
Operating leases		15,561		4,382		5,510		2,778		2,891
Purchase obligations 1		13,985		13,480		505		—		—
Other long-term obligations 2		6,297		536		1,895		1,318		2,548
Total contractual obligations	$	252,543	$	20,398	$	13,910	$	8,096	$	210,139

(1) Includes various agreements for steel delivery obligations, gas contracts and telephone service obligations. In general, purchase orders issued by the Company in the normal course of business can be terminated in whole or part for any reason without liability until receipt of product by the Company. (2) Includes contractual payments to or on behalf of former executives and projected supplemental retirement benefits for certain of the Company’s former and current executive officers.

CONTINGENT LIABILITIES AND COMMITMENTS

     NCI is required to have standby letters of credit as a collateral requirement of its insurance carrier for the Company’s projected exposure for worker’s compensation, general liability and auto claims. For all insurance carriers, the total standby letters of credit are approximately $5 million at October 30, 2004 and the Company has $20 million total available under its current senior credit facility.

CRITICAL ACCOUNTING POLICIES

     The consolidated financial statements of the Company are prepared in accordance with United States generally accepted accounting principles, which require the Company to make estimates and assumptions. The significant accounting policies of the Company are disclosed in Note 1 to the consolidated financial statements. The following discussion of critical accounting policies addresses those

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policies which are both important to the portrayal of the Company’s financial condition and results of operations and require significant judgment and estimates. The Company bases its estimates and judgment on historical experience and on various other factors that are believed to be reasonable. Actual results may differ from these estimates under different assumptions or conditions.

Revenue recognition

     The Company recognizes revenues when all of the following conditions are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectibility is reasonably assured. Generally, these criteria are met at the time product is shipped or services are complete. Provisions are made, upon the sale, for estimated product returns and warranty liabilities. Costs associated with shipping and handling of products are included in cost of sales.

     Prior to the third quarter of fiscal 2004, a portion of the revenue for the metal coil coating segment was recognized upon completion of the painting process for consigned coils owned by the customer, which in most cases were the steel mills. This accounting treatment met the criteria to be recognized as revenue in accordance with SEC Staff Accounting Bulletin No. 101. In 2004, many steel mills which traditionally had consigned steel coils to the Company in this manner, abandoned that procedure, resulting in the Company purchasing and recognizing steel coils as inventory upon the arrival of such raw materials at the Company’s coil coating plants. As a result, during the third quarter of fiscal 2004, the Company changed its policy to recognize revenue upon shipment of the coils from the coil coating facilities to third parties. The impact of the accounting change during the third quarter of 2004 was not a material reduction to revenues and operating income for the Company of approximately $4.5 million and $0.8 million, respectively. This change would not have had a material effect on any prior periods presented and is not expected to materially affect future results.

Accruals for employee benefits

     The Company is self insured for a substantial portion of the cost of employee group health insurance and for the cost of workers’ compensation benefits. The Company purchases insurance from third parties which provides individual and aggregate stop loss protection for these costs. Each reporting period, the Company records the costs of its health insurance plan, including paid claims, an estimate of the change in incurred but not reported (“IBNR”) claims, taxes and administrative fees (collectively the “Plan Costs”)

as general and administrative expenses in the Consolidated Statements of Operations. The estimated IBNR claims are based upon both (i) a recent average level of paid claims under the plan; and (ii) an estimated lag factor to provide for those claims which have been incurred but no yet paid. For workers’ compensation costs, the Company monitors the number of accidents and the severity of such accidents to develop appropriate estimates for expected costs to provide both medical care and benefits during the period an employee is unable to work. These accruals are developed using third party estimates of the expected cost and length of time an employee will be unable to work based on industry statistics for the cost of similar disabilities. This statistical information is trended to provide estimates of future expected costs based on factors developed from the Company’s experience of actual claims cost compared to original estimates.

     The Company believes that the assumptions and information used to develop these accruals provide the best basis for these estimates each quarter because as a general matter, the accruals have historically proven to be reasonable and accurate. However, significant changes in expected medical and health care costs, negative changes in the severity of previously reported claims or changes in laws which govern the administration of these plans could have an impact on the determination of the amount of these accruals in future periods. The Company expensed approximately $17 million and $19 million for health insurance in fiscal 2003 and 2004, respectively and $3 million and $4 million for workers’ compensation in fiscal 2003 and 2004, respectively. The health insurance accrual balance was $5 million and $6 million at November 1, 2003 and October 30, 2004, respectively and the workers’ compensation accrual balance was $4 million and $5 million at November 1, 2003 and October 30, 2004, respectively. For the health insurance accrual, a change of 10% in the lag assumption would result in a financial impact of $0.5 million.

Goodwill

     The Company reviews the carrying values of its long-lived assets, including goodwill and identifiable intangibles, whenever events or changes in circumstances indicate that such carrying values may not be recoverable and annually for goodwill as required by SFAS No. 142. Unforeseen events, changes in circumstances and market conditions and material differences in the value of intangible assets due to changes in estimates of future cash flows could negatively affect the fair value of the Company’s assets and result in a non-cash impairment charge. Some factors considered important which could trigger an impairment review include

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the following: significant underperformance relative to expected historical or projected future operating results, significant changes in the manner of the Company’s use of the acquired assets or the strategy for its overall business and significant negative industry or economic trends. Fair value is the amount at which the asset could be bought or sold in a current transaction between willing parties and may be estimated using a number of techniques, including quoted market prices or valuations by third parties, present value techniques based on estimates of cash flow, or multiples of earnings or revenue performance measures. The fair value of the asset could be different using different estimates and assumptions in these valuation techniques. At October 30, 2004, the total value of goodwill was $318.2 million.

     As required by SFAS No. 142, goodwill must be tested for impairment at the reporting unit level upon adoption and at least annually thereafter, utilizing a two-step methodology. The initial step requires the Company to determine the fair value of each reporting unit and compare it to the carrying value, including goodwill, of such unit. The Company determined the fair value of each reporting unit by using a combination of present value and multiple of earnings valuation techniques and compared it to each reporting unit’s carrying value. If the fair value exceeds the carrying value, no impairment loss would be recognized. However, if the carrying value of the reporting unit exceeds its fair value, the goodwill of this unit may be impaired. The amount, if any, of the impairment would then be measured in the second step. The Company completed the first step during the second quarter of fiscal 2002 which indicated that goodwill recorded in the metal components and metal coil coating segments was impaired as of November 1, 2001. Due to the potential impairment, the Company then completed step two of the test to measure the amount of the impairment. Based on that analysis, the transitional impairment losses for the metal components and metal coil coating segments were $57.1 million ($55.4 million after tax effect of $1.7 million) and $10.3 million ($9.7 million after tax effect of $0.6 million), respectively. The total transitional impairment charge of $67.4 million ($65.1 million after tax) was recognized as a cumulative effect of a change in accounting principle. The Company updated this review at year end as required by SFAS No. 142 and identified no additional impairment of goodwill. Based on current industry conditions and the Company’s performance, the operating units would have to experience a reduction of approximately 25% in forecasted discounted cash flow before any additional impairment would be required. See Note 3 of the consolidated financial statements for additional discussion of the adoption of SFAS No. 142.

Allowance for Doubtful Accounts

     The Company’s allowance for doubtful accounts reflects reserves for customer receivables to reduce receivables to amounts expected to be collected. Management uses significant judgment in estimating uncollectible amounts. In estimating uncollectible amounts, management considers factors such as current overall economic conditions, industry-specific economic conditions, historical customer performance and anticipated customer performance. While the Company believes these processes effectively address its exposure for doubtful accounts and credit losses have historically been within expectations, changes in the economy, industry, or specific customer conditions may require adjustments to the allowance for doubtful accounts recorded by the Company. The Company had bad debt expense of $2.8 million for fiscal 2004 and at October 30, 2004, the balance of the consolidated allowance for doubtful accounts was $8.6 million.

Contingencies

     As discussed in Note 13 to the consolidated financial statements, the Company is involved in various legal proceedings and other contingencies, including environmental remediation, and the Company records liabilities for these types of matters in accordance with SFAS No. 5, Accounting for Contingencies. SFAS No. 5 requires a liability to be recorded based on the Company’s estimates of the probable cost of the resolution of a contingency. The Company estimates the probable cost by evaluating historical precedent as well as the specific facts relating to each particular contingency (including the opinion of outside advisors, professionals and experts). Historically, the Company’s estimates have been close to actual. The actual resolution of these contingencies may differ from the Company’s estimates and an appropriate adjustment to income could be required in a future period.

RECENT ACCOUNTING PRONOUNCEMENTS

     In January 2003, the FASB issued Financial Interpretation (“FASB”) No. 46, Consolidation of Variable Interest Entities. FIN No. 46 requires variable interest entities (“VIEs”) to be consolidated by their primary beneficiaries. A primary beneficiary is the party that absorbs a majority of the entity’s expected losses or receives a majority of the entity’s expected residual returns, or both, as a result of the ownership, contractual or other financial interests in the entity. In December 2003, the FASB revised FIN No. 46 to provide companies with clarification of key terms, additional exemptions for application and an extended initial application period. FIN No. 46 is currently effective

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for all variable interest entities. The Company adopted FIN No. 46 as of March 31, 2004, and the adoption did not have a material impact on the Company’s financial position or results of operations.

     On October 11, 2004, the FASB ratified EITF Issue No. 04-8, Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings Per Share which is effective for all periods ending after December 15, 2004 and is to be applied by retrospectively restating previously reported earnings per share (EPS). EITF Issue No. 04-8 addresses when the dilutive effect of contingently convertible debt with a market price trigger should be included in diluted EPS. Under EITF Issue No. 04-8, the market price contingency should be ignored and these securities should be treated as non-contingent, convertible securities and always included in the diluted EPS computation. Notwithstanding the foregoing, if convertible debt has a “net share settlement” provision whereby all conversions are settled for a combination of cash (in an amount equal to the lesser of the principal amount of the notes and their conversion value) and shares, if any (shares are issuable only to the extent the conversion value exceeds the principal amount), then the issuer of such convertible debt is not required to include any shares issuable upon conversion in its calculation of fully diluted EPS until the market price of the underlying common stock exceeds the conversion price. In the event that the market price does exceed the conversion price, then the issuer of the convertible debt is required to use the treasury stock method of accounting for the difference between the market price in the applicable reporting period and the conversion price. The shares required to cover the difference will be included in calculating diluted earnings per share. On November 16, 2004, the Company completed an offering of $180 million of 2.125% convertible senior subordinated notes due 2024. Refer to Note 14 – Subsequent Events of the consolidated financial statements for additional discussion. Because the 2.125% convertible senior subordinated notes have a net share settlement provision, if, in future reporting periods, the market price of the Company’s common stock is less than the conversion price at fiscal year-end, the notes will not be included on an “if converted” basis in the calculation of the Company’s fully diluted EPS. The Company will be required to apply EITF Issue No. 04-8 beginning in the fiscal quarter ended January 28, 2005.

     On December 16, 2004, the FASB issued SFAS No. 123 (revised 2004), Share Based Payment (“SFAS No. 123(R)”), which replaces SFAS No. 123, and supersedes APB Opinion No. 25. SFAS No. 123(R) requires that all stock-based payments to employees, including grants of employee stock options, be recognized as compensation expense in

the financial statements based on their fair values. SFAS No. 123(R) also requires that tax benefits associated with these stock-based payments be classified as financing activities in the statement of cash flow rather than operating activities as currently permitted. SFAS No. 123(R) will be effective for periods beginning after June 15, 2005. Accordingly, the Company will be required to apply SFAS No. 123(R) beginning in the fiscal quarter ended October 29, 2005. SFAS No. 123(R) offers alternative methods of adopting this final rule. At the present time, the Company has not yet determined which alternative method it will use. Depending on the method the Company adopts to calculate stock-based compensation expense upon the adoption of SFAS No. 123(R), the pro forma disclosure in Note 1 to the Consolidated Financial Statements may not be indicative of the stock-based compensation expense to be recognized in periods beginning after June 15, 2005.

LEGAL PROCEEDINGS

     As a result of the Company’s restatement of its financial results for the last half of fiscal 1999, all of fiscal 2000 and the first quarter of fiscal 2001, several class action lawsuits were filed against the Company and certain of its current officers in the United States District Court for the Southern District of Texas, commencing in April 2001. The lawsuits were consolidated into one class action lawsuit on August 16, 2001, and the plaintiffs filed a consolidated amended complaint on February 1, 2002. In the consolidated complaint the plaintiffs alleged, among other things, that during the financial periods that were restated, the Company made materially false and misleading statements about the status and effectiveness of a management information and accounting system used by the Company’s components division and costs associated with that system, failed to assure the system maintained books and records accurately reflecting inventory levels and costs of goods sold, failed to maintain internal controls on manual accounting entries made to certain inventory-related accounts in an effort to correct the data in the system, otherwise engaged in improper accounting practices that overstated earnings, and issued materially false and misleading financial statements. The plaintiffs further alleged the individual defendants traded in the Company’s common stock while in possession of material, non-public information regarding the foregoing. The plaintiffs in the consolidated complaint asserted various claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and sought unspecified amounts of compensatory damages, interest and costs, including legal fees. On March 15, 2002, the Company filed a motion to dismiss plaintiffs’ consolidated complaint and a memorandum in support. In January 2004, the Company

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entered into an agreement to settle the lawsuits, without admitting any of the allegations against the Company or its officers, and agreed to pay $7.0 million for the dismissal of all claims, which is within the Company’s insurance coverage limits and has been agreed to by the Company’s insurance carriers. On June 10, 2004, the court agreed to the settlement and issued a final order dismissing the case with prejudice.

     In late 2003 and early 2004, a number of lawsuits were filed against several of the Company’s operating subsidiaries by Bethlehem Steel Corporation and National Steel Corporation in their respective bankruptcy proceedings, seeking reimbursement of preferential transfers allegedly made by the respective debtors in the 90 day period preceding their bankruptcy filings. Bethlehem alleges it made preferential payments to the Company’s subsidiaries of approximately $7.7 million, while National claims preferential payments in the aggregate amount of $6.3 million. The Company has denied the material allegations in the lawsuits and is vigorously defending against these claims. The Company believes these legal proceedings will not have a material adverse effect on its business, consolidated financial condition or results of operations.

     The Company discovered the existence of polychlorinated biphenyls and heavy metals at its Metal Prep Houston site, which is located in an industrial area in Houston, Texas. Soil borings have been sampled and analyzed to determine the impact on the soil at this site, and the findings indicate that remediation of the site will likely be necessary. The Company has filed an application with the Texas Commission of Environmental quality (“TCEQ”) for entry into the Voluntary Cleanup Program. Based upon an analysis of projected remediation costs of the known contamination, the Company currently estimates that it will spend approximately $2.5 million to remediate this site, which includes future environmental consulting fees, oversight expenses and additional testing expenses. The Company has made a total accrual of $2.5 million ($1.5 million and $1.0 million in fiscal 2003 and 2004, respectively) to cover the estimated anticipated costs of remediation of these environmental issues. The Company is, however, still in the process of conducting sampling activities, the results of which may require it to change its current work plan. Because cleanup has not yet started and is expected to be a very complex process that may require changes in the current plan as the work progresses, because the Company is still in discussions with TCEQ as to the extent of additional investigation that needs to be performed to fully delineate the issues, and because the Company will need to work with both state and federal regulators to complete the investigation and remediation,

the Company is not able to give assurance that actual costs will not exceed its estimate, perhaps significantly. The Company has a contractual indemnity by the immediate prior owner of the property, which it believes obligates that party to reimburse its response costs with respect to this condition. The Company has brought suit against the prior owner asserting this indemnity, and that party has disputed liability. The Company is also investigating other potentially responsible parties from whom to seek contribution and/or indemnification. However, it is possible that the Company’s efforts to obtain reimbursement of its response costs at this site may not be successful or may not prove to be cost effective for it. The Company has not recorded any receivables for potential reimbursements from third parties.

     On September 8, 2004, the Company filed suit in the 280^th Judicial District Court of Harris County, Texas against Johnie Schulte, its former President and CEO, because it believes he is violating covenants he has with the Company prohibiting him from using or divulging its confidential information, soliciting its employees to leave the Company’s employment, and competing with the Company. In its complaint, NCI asked the court to rule that the covenants made by Mr. Schulte are enforceable and to enjoin Mr. Schulte from further violations. Prior to filing the lawsuit, the Company conducted an investigation in an effort to determine whether Mr. Schulte was in violation of the restrictive covenants. NCI also asked the court to declare that it could terminate a stream of payments totaling over $3.6 million over a period of ten years to Mr. Schulte because he has violated these covenants.

     From time to time, the Company is involved in various other legal proceedings and contingencies considered to be in the ordinary course of business. While the Company is not able to predict whether it will incur any liability in excess of insurance coverages or to accurately estimate the damages, or the range of damages, if any, the Company might incur in connection with these legal proceedings, the Company believes these legal proceedings will not have a material adverse effect on its business, consolidated financial condition or results of operations.

MARKET RISK DISCLOSURE

     The Company is subject to market risk exposure related to changes in its material cost. Steel constituted approximately 70% of the Company’s cost of sales for the fiscal year ended October 30, 2004. Beginning in the second quarter of fiscal 2004, there have been unusually rapid and significant pricing increases in the steel industry, which in many cases have resulted in up to 100% higher costs that have not yet fully worked their way through the Company’s pricing and

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cost structures. The steel industry is highly cyclical in nature, and steel prices are influenced by numerous factors beyond the Company’s control. These factors include general economic conditions, competition, labor costs, import duties, world-wide demand and other trade restrictions. Furthermore, a prolonged labor strike against one or more of the Company’s principal domestic suppliers could have a material adverse effect on the Company’s operations. If the available supply of steel declines or if one or more of the Company’s current suppliers is unable for financial or any other reason to continue in business or produce steel sufficient to meet the Company’s requirements, the Company could experience price increases that it could not pass along, a deterioration of service from its suppliers or interruptions or delays that may cause the Company not to meet delivery schedules to its customers. Additionally, with continued rapid steel price increases, the Company may not be able to pass on such increases or they may result in project delays or cancellations, resulting in lower gross margins and resulting profits, particularly in the engineered building systems segment. In a time of rapidly escalating steel prices, this segment is particularly vulnerable to pricing exposure because of longer lead times between quoting a job and shipment, typically two months or more. Additionally, a rapid decline in steel prices could affect the Company’s performance. Any of these problems could adversely affect the Company’s financial condition and results of operations.

     The Company is subject to market risk exposure related to changes in interest rates on its senior credit facility, which includes revolving credit notes and term notes. These instruments bear interest at a pre-agreed upon percentage point spread from either the prime interest rate or LIBOR.

     Under its senior credit facility, the Company may, at its option, fix the interest rate for certain borrowings based on a spread over LIBOR for 30 days to six months. At October 30, 2004, the Company had $216.7 million outstanding under its senior credit facilities. Based on this balance, an immediate change of one percent in the interest rate would cause a change in interest expense of approximately $2.2 million on an annual basis. Based on November 1, 2003 outstanding floating rate debt, a one percent change in the interest rate would have caused a change in interest expense of approximately $1.2 million on an annual basis. The Company’s objective in maintaining these variable rate borrowings is the flexibility obtained regarding early repayment without penalties and expected lower overall cost as compared to fixed-rate borrowings.

     The Company redeemed its 9.25% senior subordinated notes due 2009 with the proceeds of its new $325 million senior credit facility described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.” As a result of replacing the fixed rate notes with variable rate debt under the new credit facility, the Company will be subject to increased market risk as interest rates fluctuate. In the short-term, however, the Company believes it will experience a positive impact on earnings and cash flows as current interest rates are substantially lower that the 9.25% interest rate previously paid on the notes. The Company may from time to time utilize interest rate swaps to manage overall borrowing costs and reduce exposure to adverse fluctuations in interest rates; however, there were no such swaps outstanding during any of the periods presented herein.

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QUARTERLY FINANCIAL INFORMATION

NCI BUILDING SYSTEMS, INC.
In thousands, except per share data

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Fiscal Year 2004
Sales	$	215,406	$	254,686	$	295,814	$	318,957
Gross profit	$	50,217	$	57,618	$	68,236	$	86,070
Net income 1	$	5,768	$	7,693	$	8,395	$	23,034
Net income per share: 1,2
Basic	$	0.30	$	0.39	$	0.42	$	1.15
Diluted	$	0.29	$	0.39	$	0.41	$	1.13
Fiscal Year 2003
Sales	$	207,864	$	199,198	$	236,262	$	254,826
Gross profit	$	43,881	$	41,600	$	53,308	$	58,730
Net income	$	3,842	$	2,018	$	6,828	$	10,112
Net income per share: 2
Basic	$	0.21	$	0.11	$	0.36	$	0.53
Diluted	$	0.20	$	0.11	$	0.36	$	0.53

(1) During the third quarter of fiscal 2004, the Company completed a debt refinancing that consisted of a premium paid on the redemption of the Company’s 9.25% senior subordinated notes of $5.8 million and the write off of the unamortized deferred financing costs on the old credit facilities of $4.1 million for a total of $9.9 million ($5.8 million after tax). (2) The sum of the quarterly income per share amounts may not equal the annual amount reported, as per share amounts are computed independently for each quarter and for the full year based on the respective weighted average common shares outstanding.

PRICE RANGE OF COMMON STOCK

The Company’s common stock is listed on the NYSE under the symbol “NCS.” As of January 10, 2005, there were 106 holders of record of the Company’s common stock. The Company has over 8,700 beneficial owners. The following table sets forth the quarterly high and low sale prices of the Company’s common stock, as reported by the NYSE, for the prior two years. The Company has never paid dividends on its common stock and is currently prohibited from doing so because of the terms of its senior credit facility.

Fiscal Year 2003	High		Low		Fiscal Year 2004	High		Low
February 1	$	23.03	$	17.98	January 31	$	25.95	$	21.75
May 3	$	21.50	$	14.90	April 30	$	32.00	$	22.55
August 1	$	18.83	$	16.55	July 31	$	33.54	$	27.15
November 1	$	22.40	$	17.07	October 30	$	34.75	$	27.25

64

Officers	Directors	Senior Executives
A.R. Ginn	A.R. Ginn1	Jimmy D. Anderson
Chairman of the Board,	Chairman of the Board	President, DBCI & Able Doors
Chief Executive Officer
	Norman C. Chambers1	Charles W. Dickinson
Norman C. Chambers	President & Chief Operating Officer	Executive Vice President, Sales
President & Chief Operating Officer		Metal Components
	William D. Breedlove2,4
Eric J. Brown	Former Vice Chairman,	Mark W. Dobbins
Vice President & CIO	Hoak, Breedlove, Wesneski & Co.	Vice President, Manufacturing
		Metal Components
Kelly R. Ginn	Gary L. Forbes 1,2,3
President & COO, Metal Components	Vice President, EQUUS II Incorporated	Keith E. Fischer
		President, Metallic Building Company
Donnie R. Humphries	Philip J. Hawk2,3
Secretary	Chairman & CEO, Team, Inc.	Richard F. Klein
		President & COO, Metal Coaters
William A. Lawrence	Max L. Lukens 3,4
Vice President & Controller	President & CEO	Dennis P. McDeavitt
	Stewart & Stevenson Services, Inc.	President, A&S
Kenneth W. Maddox
Executive Vice President, Administration	George Martinez 3,4	Stephen C. Theall
	President, Chrysalis Partners, LLC	Vice President, Manufacturing
Robert J. Medlock	& Former Chairman, Sterling Bancshares, Inc.	Engineered Building Systems
Executive Vice President
CFO & Treasurer	W. Bernard Pieper2,4	Kimball D. Wells
	Private Investor	President, MESCO
Todd R. Moore	Former Vice Chairman, Halliburton Co.
Vice President & Ceneral Counsel		1 Executive Committee
	John K. Sterling2,4	2 Compensation Committee
William M. Young	Executive Vice President,Corporate Development	3 Audit Committee    4 Nominating and Corporate
President & COO, Engineered Buildings	Global 360, Inc.	Governance Committee

Corporate Headquarters	Common Stock Transfer Agent & Registrar
NCI BUILDING SYSTEMS, INC.	COMPUTERSHARE INVESTOR SERVICES
10943 North Sam Houston Parkway West	2 North Lasalle Avenue
Houston, Texas 77064 • 281-897-7788	Chicago, Illinois 60602
Legal Counsel	Auditors
BAKER BOTTS L.L.P.	ERNST & YOUNG L.L.P.

FORM 10-K

The Company’s Annual Report on Form 10-K for the year ended October 30, 2004, as filed with the Securities and
Exchange Commission, is available without charge upon request to Todd R. Moore at the address of the Corporate Headquarters.
The Company’s common stock is traded on the New York Stock Exchange (NYSE) under the trading symbol NCS.

CERTIFICATIONS

The Company has filed the required certifications under Section 302 of the Sarbanes-Oxley Act
of 2002 regarding the quality of our public disclosures as Exhibits 31.1 and 31.2 to our annual
report on Form 10-K for the fiscal year ended October 30, 2004. After the fiscal 2004 Annual
Meeting of Stockholders, the Company intends to file with the New York Stock Exchange the CEO
certification regarding its compliance with the NYSE’s corporate governance listing standards as
required by NYSE Rule 303A.12. Last year, the Company filed this CEO certification with the NYSE
on March 23, 2004.

ANNUAL MEETING

The Annual Meeting of Shareholders of NCI Building Systems, Inc. will be held at 10:00 a.m. on
Friday, March 11, 2005, at the NCI Conference & Training Center, 7313 Fairview, Houston, Texas
77041. Shareholders of record as of January 10, 2005 will be entitled notice of and to vote at this
time.

NCI Building Systems, INC.
10943 North Sam Houston Parkway West
Houston, Texas 77064
www.ncilp.com

EX-21.1

Exhibit 21.1

NCI BUILDING SYSTEMS, INC.

List of Subsidiaries

NCI Holding Corp.	Delaware
NCI Operating Corp.	Nevada
Metal Coaters of California, Inc.	Texas
NCI Building Systems, L.P.	Texas
A&S Building Systems, L.P.	Texas
Metal Building Components, L.P.	Texas
NCI Group, L.P.	Texas
Steelbuilding.com, Inc.	Arkansas
Building Systems de Mexico, S.A.	Mexico

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Form S‑8 No. 333‑14957, No. 33‑52078 and No. 333‑111142) pertaining to the 401(k) Profit Sharing Plan of NCI Building Systems, Inc., Registration Statements (Form S‑8) No. 333‑34899, No. 33‑52080 and No. 333‑12921) pertaining to the Nonqualified Stock Option Plan of NCI Building Systems, Inc., Registration Statement (Form S‑8 No. 333‑11139) pertaining to the 2003 Long-Term Stock Incentive Plan of our report dated December 9, 2004, with respect to the consolidated financial statements of NCI Building Systems, Inc. incorporated by reference in the Annual Report (Form 10‑K) for the fiscal year ended October 30, 2004, and our report dated December 9, 2004 with respect to the financial statement schedule of NCI Building Systems, Inc. included in the Annual Report (Form 10‑K) for the fiscal year ended October 30, 2004.

/s/ Ernst & Young LLP

Houston, Texas
January 11, 2005

EX-23.2

Exhibit 23.2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
NCI Building Systems, Inc.

We have audited the accompanying consolidated balance sheets of NCI Building Systems, Inc. and subsidiaries as of November 1, 2003 and October 30, 2004, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three fiscal years in the period ended October 30, 2004. Our audits also included the financial statement schedule listed in the Index to item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of NCI Building Systems, Inc. at November 1, 2003 and October 30, 2004 and the consolidated results of its operations and its cash flows for each of the three fiscal years in the period ended October 30, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 3 to the consolidated financial statements, effective November 1, 2001, the Company changed its method of accounting for goodwill.

/s/ Ernst & Young LLP

Houston, Texas
December 9, 2004

EX-24.1

Exhibit 24.1

NCI BUILDING SYSTEMS, INC.

Power of Attorney

     WHEREAS, NCI BUILDING SYSTEMS, INC., a Delaware corporation (the “Company”), intends to file with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, its Annual Report on Form 10-K, together with any and all exhibits, documents and other instruments and documents necessary, advisable or appropriate in connection therewith, including any amendments thereto (the “Form 10-K”);

     NOW, THEREFORE, the undersigned, in his or her capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint A.R. Ginn and Norman C. Chambers, and each of them severally, his or her true and lawful attorney or attorneys with power to act with or without the other, and with full power of substitution and resubstitution, to execute in his or her name, place and stead, in his or her capacity as director, officer or both, as the case may be, of the Company, the Form 10-K and any and all amendments thereto, including any and all exhibits and other instruments and documents said attorney or attorneys shall deem necessary, appropriate or advisable in connection therewith, and to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts that said attorneys and each of them, or their or his or her substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of this 9 day of December, 2004.

By:	/s/ William D. Breedlove
	William D. Breedlove
	Director

NCI BUILDING SYSTEMS, INC.

Power of Attorney

     WHEREAS, NCI BUILDING SYSTEMS, INC., a Delaware corporation (the “Company”), intends to file with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, its Annual Report on Form 10-K, together with any and all exhibits, documents and other instruments and documents necessary, advisable or appropriate in connection therewith, including any amendments thereto (the “Form 10-K”);

     NOW, THEREFORE, the undersigned, in his or her capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint A.R. Ginn and Norman C. Chambers, and each of them severally, his or her true and lawful attorney or attorneys with power to act with or without the other, and with full power of substitution and resubstitution, to execute in his or her name, place and stead, in his or her capacity as director, officer or both, as the case may be, of the Company, the Form 10-K and any and all amendments thereto, including any and all exhibits and other instruments and documents said attorney or attorneys shall deem necessary, appropriate or advisable in connection therewith, and to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts that said attorneys and each of them, or their or his or her substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of this 9 day of December, 2004.

By:	/s/ Gary L. Forbes
	Gary L. Forbes
	Director

NCI BUILDING SYSTEMS, INC.

Power of Attorney

     WHEREAS, NCI BUILDING SYSTEMS, INC., a Delaware corporation (the “Company”), intends to file with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, its Annual Report on Form 10-K, together with any and all exhibits, documents and other instruments and documents necessary, advisable or appropriate in connection therewith, including any amendments thereto (the “Form 10-K”);

     NOW, THEREFORE, the undersigned, in his or her capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint A.R. Ginn and Norman C. Chambers, and each of them severally, his or her true and lawful attorney or attorneys with power to act with or without the other, and with full power of substitution and resubstitution, to execute in his or her name, place and stead, in his or her capacity as director, officer or both, as the case may be, of the Company, the Form 10-K and any and all amendments thereto, including any and all exhibits and other instruments and documents said attorney or attorneys shall deem necessary, appropriate or advisable in connection therewith, and to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts that said attorneys and each of them, or their or his or her substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of this 9 day of December, 2004.

By:	/s/ Philip J. Hawk
	Philip J. Hawk
	Director

NCI BUILDING SYSTEMS, INC.

Power of Attorney

     WHEREAS, NCI BUILDING SYSTEMS, INC., a Delaware corporation (the “Company”), intends to file with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, its Annual Report on Form 10-K, together with any and all exhibits, documents and other instruments and documents necessary, advisable or appropriate in connection therewith, including any amendments thereto (the “Form 10-K”);

     NOW, THEREFORE, the undersigned, in his or her capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint A.R. Ginn and Norman C. Chambers, and each of them severally, his or her true and lawful attorney or attorneys with power to act with or without the other, and with full power of substitution and resubstitution, to execute in his or her name, place and stead, in his or her capacity as director, officer or both, as the case may be, of the Company, the Form 10-K and any and all amendments thereto, including any and all exhibits and other instruments and documents said attorney or attorneys shall deem necessary, appropriate or advisable in connection therewith, and to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts that said attorneys and each of them, or their or his or her substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of this 9 day of December, 2004.

By:	/s/ Max L. Lukens
	Max L. Lukens
	Director

NCI BUILDING SYSTEMS, INC.

Power of Attorney

     WHEREAS, NCI BUILDING SYSTEMS, INC., a Delaware corporation (the “Company”), intends to file with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, its Annual Report on Form 10-K, together with any and all exhibits, documents and other instruments and documents necessary, advisable or appropriate in connection therewith, including any amendments thereto (the “Form 10-K”);

     NOW, THEREFORE, the undersigned, in his or her capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint A.R. Ginn and Norman C. Chambers, and each of them severally, his or her true and lawful attorney or attorneys with power to act with or without the other, and with full power of substitution and resubstitution, to execute in his or her name, place and stead, in his or her capacity as director, officer or both, as the case may be, of the Company, the Form 10-K and any and all amendments thereto, including any and all exhibits and other instruments and documents said attorney or attorneys shall deem necessary, appropriate or advisable in connection therewith, and to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts that said attorneys and each of them, or their or his or her substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of this 9 day of December, 2004.

By:	/s/ George Martinez
	George Martinez
	Director

NCI BUILDING SYSTEMS, INC.

Power of Attorney

     WHEREAS, NCI BUILDING SYSTEMS, INC., a Delaware corporation (the “Company”), intends to file with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, its Annual Report on Form 10-K, together with any and all exhibits, documents and other instruments and documents necessary, advisable or appropriate in connection therewith, including any amendments thereto (the “Form 10-K”);

     NOW, THEREFORE, the undersigned, in his or her capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint A.R. Ginn and Norman C. Chambers, and each of them severally, his or her true and lawful attorney or attorneys with power to act with or without the other, and with full power of substitution and resubstitution, to execute in his or her name, place and stead, in his or her capacity as director, officer or both, as the case may be, of the Company, the Form 10-K and any and all amendments thereto, including any and all exhibits and other instruments and documents said attorney or attorneys shall deem necessary, appropriate or advisable in connection therewith, and to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts that said attorneys and each of them, or their or his or her substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of this 9 day of December, 2004.

By:	/s/ W. B. Pieper
	W. B. Pieper
	Director

NCI BUILDING SYSTEMS, INC.

Power of Attorney

     WHEREAS, NCI BUILDING SYSTEMS, INC., a Delaware corporation (the “Company”), intends to file with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, its Annual Report on Form 10-K, together with any and all exhibits, documents and other instruments and documents necessary, advisable or appropriate in connection therewith, including any amendments thereto (the “Form 10-K”);

     NOW, THEREFORE, the undersigned, in his or her capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint A.R. Ginn and Norman C. Chambers, and each of them severally, his or her true and lawful attorney or attorneys with power to act with or without the other, and with full power of substitution and resubstitution, to execute in his or her name, place and stead, in his or her capacity as director, officer or both, as the case may be, of the Company, the Form 10-K and any and all amendments thereto, including any and all exhibits and other instruments and documents said attorney or attorneys shall deem necessary, appropriate or advisable in connection therewith, and to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts that said attorneys and each of them, or their or his or her substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of this 9 day of December, 2004.

By:	/s/ John K. Sterling
	John K. Sterling
	Director

EX-31.1

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATIONS

I, A. R. Ginn, certify that:

     1. I have reviewed this annual report on Form 10-K 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)) 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) 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

     (c) 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: January 13, 2005

/s/ A.R. Ginn

A. R. Ginn

Chairman of the Board and
Chief Executive Officer

EX-31.2

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATIONS

I, Robert J. Medlock, certify that:

     1. I have reviewed this annual report on Form 10-K 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)) 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) 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

     (c) 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: January 13, 2005

/s/ Robert J. Medlock

Robert J. Medlock

Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO SECTION 1350
OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE

I, A. R. Ginn, certify that:

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

     2. This annual 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 annual report fairly presents, in all material respects, the financial condition and results of operations of NCI Building Systems, Inc.

Date: January 13, 2005

/s/ A.R. Ginn

A. R. Ginn

Chairman of the Board and
Chief 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.

These Certifications 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

CERTIFICATIONS PURSUANT TO SECTION 1350
OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE

I, Robert J. Medlock, certify that:

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

     2. This annual 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 annual report fairly presents, in all material respects, the financial condition and results of operations of NCI Building Systems, Inc.

Date: January 13, 2005

/s/ Robert J. Medlock

Robert J. Medlock

Executive Vice President and
Chief 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.

These Certifications 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.