10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 _______________________

FORM 10-Q

_______________________

(Mark One)

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

For the quarterly period ended February 2, 2014

or

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

For the transition period from to

Commission file number: 1-14315

_______________________

NCI BUILDING SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

_______________________

Delaware		76-0127701
	(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
10943 N. Sam Houston Parkway W. Houston, TX		77064
(Address of principal executive offices)		(Zip Code)

(281) 897-7788

(Registrant’s telephone number, including area code)

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

_______________________

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

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS

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

Common Stock, $.01 par value - 73,570,925 shares as of March 7, 2014.

TABLE OF CONTENTS 

		PAGE
	Part I — Financial Information
Item 1.	Unaudited Consolidated Financial Statements.	3
	Consolidated Balance Sheets as of February 2, 2014 and November 3, 2013.	3
	Consolidated Statements of Operations for the Fiscal Three Month Periods Ended February 2, 2014 and January 27, 2013.	4
	Consolidated Statements of Comprehensive Income (Loss) for the Fiscal Three Month Periods Ended February 2, 2014 and January 27, 2013	5
	Consolidated Statements of Stockholders’ Equity for the Fiscal Three Month Period Ended February 2, 2014.	6
	Consolidated Statements of Cash Flows for the Fiscal Three Month Periods Ended February 2, 2014 and January 27, 2013.	7
	Notes to Consolidated Financial Statements.	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	29
Item 4.	Controls and Procedures.	31
	Part II — Other Information
Item 1.	Legal Proceedings.	32
Item 1A.	Risk Factors.	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	32
Item 6.	Exhibits.	32

2

 

PART I — FINANCIAL INFORMATION

Item 1.Unaudited Consolidated Financial Statements.

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	February 2, 2014		November 3, 2013
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	16,599	$	77,436
Accounts receivable, net		111,646		135,368
Inventories, net		137,626		122,105
Deferred income taxes		30,445		27,736
Income tax receivable		1,065		1,112
Investments in debt and equity securities, at market		4,924		4,892
Prepaid expenses and other		19,334		19,300
Assets held for sale		2,879		2,879
Total current assets		324,518		390,828
Property, plant and equipment, net		257,887		260,918
Goodwill		75,226		75,226
Intangible assets, net		47,962		48,975
Deferred financing costs, net		4,053		4,316
Total assets	$	709,646	$	780,263
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	2,384	$	2,384
Note payable		131		613
Accounts payable		105,208		144,553
Accrued compensation and benefits		40,062		40,954
Accrued interest		1,956		1,844
Other accrued expenses		56,548		61,266
Total current liabilities		206,289		251,614
Long-term debt, net		234,791		235,391
Deferred income taxes		30,602		32,185
Other long-term liabilities		8,292		8,315
Total long-term liabilities		273,685		275,891
Stockholders’ equity:
Common stock, $.01 par value, 100,000,000 shares authorized; 73,782,566 and 74,793,249     shares issued at February 2, 2014 and November 3, 2013, respectively; 73,571,261 and     74,785,726 shares outstanding at February 2, 2014 and November 3, 2013, respectively		1,460		1,471
Additional paid-in capital		623,630		638,574
Accumulated deficit		(386,993)		(382,735)
Accumulated other comprehensive loss		(4,701)		(4,436)
Treasury stock, at cost (211,305 and 7,523 shares at February 2, 2014 and November 3,     2013, respectively)		(3,724)		(116)
Total stockholders’ equity		229,672		252,758
Total liabilities and stockholders’ equity	$	709,646	$	780,263

See accompanying notes to consolidated financial statements.

3

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Fiscal Three Months Ended
	February 2,		January 27,
	2014		2013
Sales	$	310,666	$	297,584
Cost of sales, excluding gain on insurance recovery		252,428		236,715
Gain on insurance recovery		(987)		—
Gross profit		59,225		60,869
Engineering, selling, general and administrative expenses		62,393		60,471
(Loss) income from operations		(3,168)		398
Interest income		26		30
Interest expense		(3,126)		(6,274)
Other income (expense), net		(496)		394
Loss before income taxes		(6,764)		(5,452)
Benefit from income taxes		(2,506)		(1,825)
Net loss	$	(4,258)	$	(3,627)
Loss per common share:
Basic	$	(0.06)	$	(0.19)
Diluted	$	(0.06)	$	(0.19)
Weighted average number of common shares outstanding:
Basic		73,515		19,237
Diluted		73,515		19,237

See accompanying notes to consolidated financial statements.

4

 

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

	Fiscal Three Months Ended
	February 2, 2014		January 27, 2013
Comprehensive loss:
Net loss	$	(4,258)	$	(3,627)
Other comprehensive loss, net of tax:
Foreign exchange translation losses and other, net of taxes(1)		(265)		(24)
Other comprehensive loss		(265)		(24)
Comprehensive loss	$	(4,523)	$	(3,651)

_______________

(1) Foreign exchange translation losses and other are presented net of taxes of $0 in both of the three months ended February 2, 2014 and January 27, 2013.

See accompanying notes to the consolidated financial statements.

5

 

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

									Accumulated
					Additional				Other
	Common Stock				Paid-In		Retained		Comprehensive		Treasury Stock				Stockholders’
	Shares		Amount		Capital		Deficit		Loss		Shares			Amount	Equity
Balance, November 3, 2013		74,793,249	$	1,471	$	638,574	$	(382,735)	$	(4,436)		(7,523)	$	(116)	$	252,758
Treasury stock purchases		—		—		––		—		—		(1,353,782)		(23,325)		(23,325)
Retirement of treasury shares		(1,150,000)		(12)		(19,705)		—		—		1,150,000		19,717		—
Issuance of restricted stock		139,317		1		(1)		—		—		—		—		—
Excess tax benefits from share-based compensation     arrangements		—		—		1,583		—		—		—		—		1,583
Foreign exchange translation gain (loss) and other		—		—		—		—		(265)		—		—		(265)
Share-based compensation		—		—		3,179		—		—		—		—		3,179
Net loss		—		—		—		(4,258)		—		—		—		(4,258)
Balance, February 2, 2014		73,782,566	$	1,460	$	623,630	$	(386,993)	$	(4,701)		(211,305)	$	(3,724)	$	229,672

See accompanying notes to the consolidated financial statements.

6

                   

NCI BUILDING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Fiscal Three Months Ended
	February 2, 2014		January 27, 2013
Cash flows from operating activities:
Net loss	$	(4,258)	$	(3,627)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		8,767		9,122
Deferred financing cost amortization		288		1,084
Share-based compensation expense		3,179		3,442
Gain on insurance recovery		(987)		-
Provision for doubtful accounts		1,009		1,305
Benefit from deferred income taxes		(2,564)		(1,990)
Excess tax benefits from share-based compensation arrangements		(1,583)		(941)
Changes in operating assets and liabilities:
Accounts receivable		22,713		23,217
Inventories		(15,521)		(7,755)
Income tax receivable		26		(415)
Prepaid expenses and other		(70)		(615)
Accounts payable		(39,345)		(28,969)
Accrued expenses		(5,498)		(7,181)
Other, net		(131)		151
Net cash used in operating activities		(33,975)		(13,172)
Cash flows from investing activities:
Capital expenditures		(4,735)		(6,071)
Proceeds from insurance		987		-
Net cash used in investing activities		(3,748)		(6,071)
Cash flows from financing activities:
Proceeds from stock options exercised		-		674
Increase in restricted cash		-		(1)
Payments on term loan		(600)		(8,750)
Payments on note payable		(482)		(515)
Proceeds from Amended ABL Facility		20,000		5,001
Payments on Amended ABL Facility		(20,000)		(5,000)
Payment of financing costs		(25)		(68)
Excess tax benefits from share-based compensation arrangements		1,583		941
Purchase of treasury stock		(23,325)		(2,346)
Net cash used in financing activities		(22,849)		(10,064)
Effect of exchange rate changes on cash and cash equivalents		(265)		(24)
Net decrease in cash and cash equivalents		(60,837)		(29,331)
Cash and cash equivalents at beginning of period		77,436		55,158
Cash and cash equivalents at end of period	$	16,599	$	25,827

See accompanying notes to consolidated financial statements.

7

NCI BUILDING SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 2, 2014

(Unaudited)

NOTE 1 — BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements for NCI Building Systems, Inc. (together with its subsidiaries, unless otherwise indicated, the “Company,” “NCI,” “we,” “us,” or “our”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements included herein contain all adjustments, which consist of normal recurring adjustments, necessary to fairly present our financial position, results of operations and cash flows for the periods indicated. Operating results for the fiscal three month period ended February 2, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending November 2, 2014. Our sales and earnings are subject to both seasonal and cyclical trends and are influenced by general economic conditions, interest rates, the price of steel relative to other building materials, the level of nonresidential construction activity, roof repair and retrofit demand and the availability and cost of financing for construction projects.

We use a four-four-five week calendar each quarter with our year end being on the Sunday closest to October 31. The year end for fiscal 2014 is November 2, 2014. 

For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended November 3, 2013 filed with the Securities and Exchange Commission (the “SEC”) on December 23, 2013.

NOTE 2 — ACCOUNTING PRONOUNCEMENTS

Adopted Accounting Pronouncements

In February 2013, the FASB issued ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires that companies present, either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. We adopted ASU 2013-02 in our first quarter in fiscal 2014. The adoption of ASU 2013-02 did not have any impact on our consolidated financial statements.

NOTE 3 — GAIN ON INSURANCE RECOVERY

On August 6, 2013, our metal coil coating segment facility in Jackson, Mississippi experienced a fire caused by an exhaust fan failure that damaged the roof and walls of two curing ovens. The ovens were repaired and operations resumed in September 2013. In the first quarter of fiscal 2014, we received $1.0 million from insurance proceeds, which have been separately stated as “Gain on insurance recovery” on our consolidated statement of operations. These insurance proceeds were used to purchase assets to rebuild the roof and walls of the affected assets. The new assets were capitalized and depreciated over their estimated useful life of 10 years. Over the next year, we anticipate recouping additional equipment costs from our insurance carriers and will record these amounts when received or assured.

8

NOTE 4 — INVENTORIES

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

	February 2, 2014		November 3, 2013
Raw materials	$	102,689	$	87,567
Work in process and finished goods		34,937		34,538
	$	137,626	$	122,105

NOTE 5 — SHARE-BASED COMPENSATION

Our 2003 Long-Term Stock Incentive Plan (“Incentive Plan”) is an equity-based compensation plan that allows us to grant a variety of types of awards, including stock options, restricted stock, restricted stock units, performance share awards, stock appreciation rights, performance share units (“PSUs”), phantom stock awards and cash awards. As of February 2, 2014 and January 27, 2013, and for all periods presented, our share-based awards under this plan have consisted of restricted stock grants, PSUs and stock option grants, none of which can be settled through cash payments. Both our stock options and restricted stock awards are subject only to vesting requirements based on continued employment at the end of a specified time period and typically vest over four years or earlier upon death, disability or a change of control. However, our annual restricted stock awards issued prior to December 15, 2013 also vest upon attainment of age 65 and, only in the case of certain special one-time restricted stock awards, a portion vest on termination without cause or for good reason, as defined by the agreements governing such awards.

Our PSUs vest pro rata if an executive’s employment terminates prior to a three-year performance period ending on June 30, 2015 due to death, disability, or termination by NCI without cause or by the executive with good reason. If the executive’s employment terminates for any other reason prior to the end of the performance period, all PSUs are forfeited. If a change in control of NCI occurs prior to the end of the performance period, the performance period will immediately end at the time of the change in control and an executive will earn a percentage of the target number of PSUs based on the total shareholder return achieved determined by reference to the value of NCI Common Stock at the time of the change in control.

During the three month periods ended February 2, 2014 and January 27, 2013, we granted 5,058 and 2,101 stock options, respectively, and the grant-date fair value of options granted during the three month periods ended February 2, 2014 and January 27, 2013 was $9.09 and $7.22, respectively. There were no options exercised during the three months ended February 2, 2014. Cash received from option exercises from a retired executive due to expiration in accordance with the terms of the agreement was $0.7 million during the three months ended January 27, 2013. The actual tax benefit realized for the tax deductions from option exercises totaled $0.2 million for the three months ended January 27, 2013.

The fair value of restricted stock awards classified as equity awards is based on the Company’s stock price as of the date of grant. During the three months ended February 2, 2014 and January 27, 2013, we granted restricted stock awards with a fair value of $2.6 million or 147,124 shares and $6.3 million or 442,198 shares, respectively.

In December 2013, we granted long-term incentive awards with performance conditions that will be paid 50% in cash and 50% in stock (“Performance Share Awards”). The final number of Performance Share Awards earned for these awards granted in December 2013 will be based on the achievement of free cash flow and earnings per share targets over a three-year period. These Performance Share Awards cliff vest three years from the date of grant and will be earned based on the performance against the pre-established targets for the requisite service period. The Performance Share Awards also vest earlier upon death, disability or a change of control. However, a portion of the awards may vest on termination without cause or after reaching normal retirement age prior to the vesting date, as defined by the agreements governing such awards. The fair value of Performance Share Awards is based on the Company’s stock price as of the date of grant. Compensation cost is recorded based on the probable outcome of the performance conditions associated with the respective shares, as determined by management. During the three months ended February 2, 2014, we granted Performance Share Awards with a fair value of $2.2 million.

NOTE 6 — LOSS PER COMMON SHARE

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

9

	Fiscal Three Months Ended
	February 2,		January 27,
	2014		2013
Numerator for Basic and Diluted Loss Per Common Share
Net loss allocated to common shares(1)	$	(4,258)	$	(3,627)
Denominator for Basic and Diluted Loss Per Common Share
Weighted average common shares outstanding for basic and diluted loss per share		73,515		19,237
Basic and Diluted loss per common share	$	(0.06)	$	(0.19)

____________________________________________________________ 

(1) Participating securities consist of the Convertible Preferred Stock, as defined below, for the period prior to its conversion to Common Stock of the Company and the unvested restricted Common Stock related to our Incentive Plan. These participating securities do not have a contractual obligation to share in losses; therefore, no losses were allocated in any periods presented above. The Convertible Preferred Stock was converted into shares of our Common Stock in the third quarter of fiscal 2013. The Unvested Common Stock related to our Incentive Plan will be allocated earnings when applicable.

On May 14, 2013, the Clayton, Dubilier & Rice Fund VIII, L.P. (“CD&R Fund VIII”) and Clayton, Dubilier & Rice Friends & Family Fund VIII, L.P. (collectively, the “CD&R Funds”), the holders of 339,293 Preferred Shares, as defined below, delivered a formal notice requesting the conversion of all of their Preferred Shares into shares of our Common Stock (the “Conversion”). In connection with the Conversion request, we issued the CD&R Funds 54,136,817 shares of our Common Stock. The Conversion eliminated all the outstanding Convertible Preferred Stock during our third quarter of fiscal 2013.

We calculate earnings (loss) per share using the “two-class” method, whereby unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are “participating securities” and, therefore, these participating securities are treated as a separate class in computing earnings (loss) per share. The calculation of earnings (loss) per share for Common Stock presented here excludes the income, if any, attributable to Series B Cumulative Convertible Participating Preferred Stock (the “Convertible Preferred Stock,” and shares thereof, “Preferred Shares”) for the period prior to their Conversion to Common Stock of the Company and the unvested restricted stock awards from the numerator and excludes the dilutive impact of those shares from the denominator. The Convertible Preferred Stock was converted into shares of our Common Stock in the third quarter of fiscal 2013. There was no income amount attributable to unvested restricted stock for the three month period ended February 2, 2014 and no income amount attributable to Preferred Shares or unvested restricted stock for the three month period ended January 27, 2013 as the Preferred Shares and unvested restricted stock do not share in the net losses. However, in periods of net income allocated to common shares, a portion of this income will be allocable to the unvested restricted stock.

For both the three month periods ended February 2, 2014 and January 27, 2013, all options, unvested restricted shares and PSUs were anti-dilutive and, therefore, not included in the diluted loss per common share calculation.

NOTE 7 — WARRANTY

We sell weathertightness warranties to our customers for protection from leaks in our roofing systems related to weather. These warranties range from two years to 20 years. We sell two types of warranties, standard and Single Source™, and three grades of coverage for each. The type and grade of coverage determines the price to the customer. For standard warranties, our responsibility for leaks in a roofing system begins after 24 consecutive leak-free months. For Single Source™ warranties, the roofing system must pass our inspection before warranty coverage will be issued. Inspections are typically performed at three stages of the roofing project: (i) at the project start-up; (ii) at the project mid-point; and (iii) at the project completion. These inspections are included in the cost of the warranty. If the project requires or the customer requests additional inspections, those inspections are billed to the customer. Upon the sale of a warranty, we record the resulting revenue as deferred warranty revenue, which is included in other accrued expenses in our consolidated balance sheets. We recognize deferred warranty revenue over the warranty coverage period in a manner that matches our estimated expenses relating to the warranty.

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

	Fiscal Three Months Ended
	February 2, 2014		January 27, 2013
Beginning balance	$	22,673	$	23,236
Warranties sold		871		646
Revenue recognized		(471)		(490)
Costs incurred and other		––		––
Ending balance	$	23,073	$	23,392

10

   

NOTE 8 — LONG-TERM DEBT AND NOTE PAYABLE

Debt is comprised of the following (in thousands):

	February 2,		November 3,
	2014		2013
Credit Agreement, due June 2019 (variable interest, at 4.25% on February 2, 2014 and November 3, 2013)	$	237,175	$	237,775
Current portion of long-term debt		(2,384)		(2,384)
Total long-term debt, less current portion	$	234,791	$	235,391

Credit Agreement

On June 24, 2013, the Company entered into Amendment No. 1 (the “Amendment”) to its existing Credit Agreement (the “Credit Agreement”), dated as of June 22, 2012, between NCI, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent and the other financial institutions party thereto from time to time (the “Term Loan Facility”), primarily to extend the maturity date and reduce the interest rate applicable to all of the outstanding term loans under the Term Loan Facility.

Pursuant to the Amendment, the maturity date of $238 million of outstanding term loans (the “Initial Term Loans”) was extended and such loans were converted into a new tranche of term loans (the “Tranche B Term Loans”) that will mature on June 24, 2019 and, prior to such date, will amortize in nominal quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum. Pursuant to the Amendment, the Tranche B Term Loans will bear interest at a floating rate measured by reference to, at NCI’s option, either (i) an adjusted LIBOR not less than 1.00% plus a borrowing margin of 3.25% per annum or (ii) an alternate base rate plus a borrowing margin of 2.25% per annum. At both February 2, 2014 and November 3, 2013, the interest rate on the term loan under our Credit Agreement was 4.25%. Overdue amounts will bear interest at a rate that is 2% higher than the rate otherwise applicable.

The Tranche B Term Loans are secured by the same collateral and guaranteed by the same guarantors as the Initial Term Loans under the Term Loan Facility. Voluntary prepayments of the Tranche B Term Loans are permitted at any time, in minimum principal amounts, without premium or penalty, subject to a 1.00% premium payable in connection with certain repricing transactions within the first six months.

Pursuant to the Amendment, NCI will no longer be subject to a financial covenant requiring NCI to maintain a specified consolidated secured debt to EBITDA leverage ratio for specified periods. The Amendment also includes certain other changes to the Term Loan Facility.

Subject to certain exceptions, the term loan under the Amendment will be subject to mandatory prepayment in an amount equal to:

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

• 50% of annual excess cash flow (as defined in the Amendment), subject to reduction to 0% if specified leverage ratio targets are met.

On June 22, 2012, in connection with the acquisition of Metl-Span LLC, a Texas limited liability company (the “Acquisition”), the Company entered into a Credit Agreement among the Company, as Borrower, Credit Suisse AG, Cayman Islands Branch, as Administrative Agent and Collateral Agent (the “Term Agent”), and the lenders party thereto. The Credit Agreement provided for a term loan credit facility in an aggregate principal amount of $250.0 million. Proceeds from borrowings under the Credit Agreement were used, together with cash on hand, (i) to finance the Acquisition, (ii) to extinguish the existing amended and restated credit agreement, due April 2014 (the “Refinancing”), and (iii) to pay fees and expenses incurred in connection with the Acquisition and the Refinancing.

The Credit Agreement contains a number of covenants that, among other things, will limit or restrict the ability of the Company and its subsidiaries to dispose of assets, incur additional indebtedness, make dividends and other restricted payments, create liens securing indebtedness, engage in mergers and other fundamental transactions, enter into restrictive agreements, amend certain documents in respect of other indebtedness, change the nature of their business and engage in certain transactions with affiliates.

11

Amended ABL Facility

On May 2, 2012, we entered into an Amended Asset-Based Lending Facility (“Amended ABL Facility”) to (i) permit the Acquisition, the entry by the Company into the Credit Agreement and the incurrence of debt thereunder and the repayment of existing indebtedness under NCI’s existing term loan, (ii) increase the amount available for borrowing thereunder to $150 million (subject to a borrowing base), (iii) increase the amount available for letters of credit thereunder to $30 million, and (iv) extend the final maturity thereunder to May 2, 2017.

Borrowing availability under the Amended ABL Facility is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of qualified cash, eligible inventory and eligible accounts receivable, less certain reserves and subject to certain other adjustments. At February 2, 2014 and November 3, 2013, our excess availability under the Amended ABL Facility was $102.5 million and $123.2 million, respectively. At both February 2, 2014 and November 3, 2013, we had no revolving loans outstanding under the Amended ABL Facility. In addition, at February 2, 2014 and November 3, 2013, standby letters of credit related to certain insurance policies totaling approximately $11.2 million and $10.2 million, respectively, were outstanding but undrawn under the Amended ABL Facility.

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

The Amended ABL Facility includes a minimum fixed charge coverage ratio of one to one, which will apply if we fail to maintain a specified minimum borrowing capacity. The minimum level of borrowing capacity as of February 2, 2014 and November 3, 2013 was $15.4 million and $18.5 million, respectively. Although our Amended ABL Facility did not require any financial covenant compliance, at February 2, 2014 and November 3, 2013, our fixed charge coverage ratio as of those dates, which is calculated on a trailing twelve month basis, was 1.31:1.00 and 2.29:1.00, respectively.

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

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

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

At both February 2, 2014 and November 3, 2013, the interest rate on our Amended ABL Facility was 4.75%. During an event of default, loans under the Amended ABL Facility will bear interest at a rate that is 2% higher than the rate otherwise applicable. “Base Rate” is defined as the higher of the Wells Fargo Bank, N.A. prime rate and the overnight Federal Funds rate plus 0.5% and “LIBOR” is defined as the applicable London Interbank Offered Rate adjusted for reserves.

Deferred Financing Costs

At February 2, 2014 and November 3, 2013, the unamortized balance in deferred financing costs related to both the Credit Agreement and the Amended ABL Facility was $4.1 million and $4.3 million, respectively.

Insurance Note Payable

As of February 2, 2014 and November 3, 2013, we had outstanding a note payable in the amount of $0.1 million and $0.6 million, respectively, related to financed insurance premiums. Insurance premium financings are generally secured by the unearned premiums under such policies.

NOTE 9 — EQUITY INVESTMENT

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

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

On May 14, 2013, the CD&R Funds, the holders of 339,293 Preferred Shares, delivered a formal notice requesting the conversion (“Conversion”) of all of their Preferred Shares into shares of our Common Stock. In connection with the Conversion request, we issued the CD&R Funds 54,136,817 shares of our Common Stock, representing 72.4% of the Common Stock of the Company then outstanding. Under the terms of the Preferred Shares, no consideration was required to be paid by the CD&R Funds to the Company in connection with the Conversion of the Preferred Shares. As a result of the Conversion, the CD&R Funds no longer have rights to default dividends as specified in the Certificate of Designations. The Conversion on May 14, 2013 eliminated all the outstanding Convertible Preferred Stock and increased stockholders’ equity by nearly $620.0 million, returning our stockholders’ equity to a positive balance during our third quarter of fiscal 2013.

On January 15, 2014, the CD&R Funds completed a registered underwritten offering, in which the CD&R Funds offered 8.5 million shares of Common Stock at a price to the public of $18.00 per share (the “Secondary Offering”). The underwriters also exercised their option to purchase 1.275 million additional shares of Common Stock. The aggregate offering price for the 9.775 million shares sold in the Secondary Offering was approximately $167.6 million, net of underwriting discounts and commissions. The CD&R Funds received all of the proceeds from the Secondary Offering and no shares in the Secondary Offering were sold by NCI or any of its officers or directors (although certain of our directors are affiliated with the CD&R Funds). In connection with this Secondary Offering, we incurred approximately $0.7 million in expenses, which were included in engineering, selling, general and administrative expenses in the consolidated statement of operations for the three months ended February 2, 2014. At February 2, 2014 and November 3, 2013, the CD&R Funds owned 58.6% and 72.4%, respectively, of the voting power and Common Stock of the Company.

On January 6, 2014, NCI entered into an agreement with the CD&R Funds to repurchase 1.15 million shares of its Common Stock at the price per share equal to the price per share paid by the underwriters to the CD&R Funds in the underwritten offering (the “Stock Repurchase”). The Stock Repurchase, which was completed at the same time as the Secondary Offering, represented a private, non-underwritten transaction between NCI and the CD&R Funds that was approved and recommended by the Affiliate Transactions Committee of NCI’s board of directors. Following completion of the Stock Repurchase, NCI canceled the shares repurchased from the CD&R Funds, resulting in a $19.7 million decrease in both additional paid in capital and treasury stock.

     

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

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, restricted cash, trade accounts receivable and accounts payable approximate fair value as of February 2, 2014 and November 3, 2013 because of the relatively short maturity of these instruments. The fair values of the remaining financial instruments not currently recognized at fair value on our consolidated balance sheets at the respective fiscal period ends were (in thousands):

	February 2, 2014				November 3, 2013
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
Credit Agreement, due June 2019	$	237,175	$	237,175	$	237,775	$	237,775

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

Fair Value Measurements

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

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

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

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

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The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. There have been no changes in the methodologies used at February 2, 2014 and November 3, 2013.

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

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

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

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

The following table summarizes information regarding our financial assets and liabilities that are measured at fair value on a recurring basis as of February 2, 2014, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments in deferred compensation plan(1) :
Money market	$	530	$	—	$	—	$	530
Mutual funds — Growth		763		—		—		763
Mutual funds — Blend		2,387		—		—		2,387
Mutual funds — Foreign blend		697		—		—		697
Mutual funds — Fixed income		—		547		—		547
Total short-term investments in deferred compensation     plan		4,377		547		—		4,924
Total assets	$	4,377	$	547	$	—	$	4,924
Liabilities:
Deferred compensation plan liability	$	—	$	(5,493)	$	—	$	(5,493)
Total liabilities	$	—	$	(5,493)	$	—	$	(5,493)

___________________________________________________________________________________________________________________________________

(1) Unrealized holding gains (losses) for the three months ended February 2, 2014 was insignificant and was $0.7 million for the three months ended November 3, 2013. These unrealized holding gains (losses) are primarily offset by changes in the deferred compensation plan liability.

The following table summarizes information regarding our financial assets that are measured at fair value on a nonrecurring basis as of February 2, 2014, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Assets held for sale(2)	$	—	$	—	$	2,397	$	2,397
Total assets	$	—	$	—	$	2,397	$	2,397

________________________________________________________

(2) Certain assets held for sale are valued at fair value and are measured at fair value on a nonrecurring basis. Assets held for sale are reported at fair value, if, on an individual basis, the fair value of the asset is less than cost. The fair value of assets held for sale is estimated using level 3 inputs, such as broker quotes for like-kind assets or other market indications of a potential selling value which approximates fair value.

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The following table summarizes information regarding our financial assets and liabilities that are measured at fair value on a recurring basis as of November 3, 2013, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments in deferred compensation plan(1) :
Money market	$	580	$	—	$	—	$	580
Mutual funds — Growth		725		—		—		725
Mutual funds — Blend		2,348		—		—		2,348
Mutual funds — Foreign blend		695		—		—		695
Mutual funds — Fixed income		—		544		—		544
Total short-term investments in deferred compensation     plan	$	4,348	$	544	$	—	$	4,892
Total assets	$	4,348	$	544	$	—	$	4,892
Liabilities:
Deferred compensation plan liability	$	—	$	(5,036)	$	—	$	(5,036)
Total liabilities	$	—	$	(5,036)	$	—	$	(5,036)

The following table summarizes information regarding our financial assets that are measured at fair value on a nonrecurring basis as of November 3, 2013, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Assets held for sale(3)	$	—	$	—	$	2,397	$	2,397
Total assets	$	—	$	—	$	2,397	$	2,397

________________________________________________________

(3) Certain assets held for sale are valued at fair value and are measured at fair value on a nonrecurring basis. Assets held for sale are reported at fair value, if, on an individual basis, the fair value of the asset is less than cost. The fair value of assets held for sale is estimated using level 3 inputs, such as broker quotes for like-kind assets or other market indications of a potential selling value which approximates fair value.

NOTE 11 — INCOME TAXES

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

	Fiscal Three Months Ended
	February 2,			January 27,
	2014			2013
Statutory federal income tax rate		35.0	%		35.0	%
State income taxes		3.8	%		3.7	%
Domestic production activities deduction		(1.5)	%		(2.5)	%
Canada valuation allowance		(2.1)	%		(3.3)	%
Non-deductible expenses		2.3	%		1.3	%
Other		(0.4)	%		(0.7)	%
Effective tax rate		37.1	%		33.5	%

The total amount of unrecognized tax benefit at both February 2, 2014 and November 3, 2013 was $0.4 million, all of which would impact our effective tax rate, if recognized. We do not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months.

NOTE 12 — OPERATING SEGMENTS

Operating segments are defined as components of an enterprise that engage in business activities and by which discrete financial information is available that is evaluated on a regular basis by the chief operating decision maker to make decisions about how to allocate resources to the segment and assess the performance of the segment. We have three operating segments: metal coil coating; metal components; and engineered building systems. All operating segments operate primarily in the nonresidential construction market. Sales and earnings are influenced by general economic conditions, the level of nonresidential construction activity, metal roof repair and retrofit demand and the availability and terms of financing available for construction. Products of our operating segments use similar basic raw materials. The metal coil coating segment consists of cleaning, treating, painting and slitting continuous steel coils before the steel is fabricated for use by construction and industrial users. The metal components segment products include metal roof and wall panels, doors, metal partitions, metal trim, insulated panels and other related accessories. The engineered building systems segment includes the manufacturing of main frames, Long Bay ^® Systems and value-added engineering and drafting, which are typically not part of metal components or metal coil coating products or services. The operating segments follow the same accounting policies used for our consolidated financial statements.

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

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

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

	Fiscal Three Months Ended
	February 2,		January 27,
	2014		2013
Total sales:
Metal coil coating	$	54,267	$	49,271
Metal components		158,193		153,904
Engineered building systems		152,237		147,566
Intersegment sales		(54,031)		(53,157)
Total net sales	$	310,666	$	297,584
External sales:
Metal coil coating	$	24,590	$	19,221
Metal components		139,346		136,528
Engineered building systems		146,730		141,835
Total net sales	$	310,666	$	297,584
Operating income (loss):
Metal coil coating	$	6,495	$	5,542
Metal components		4,111		6,072
Engineered building systems		1,640		4,041
Corporate		(15,414)		(15,257)
Total operating income (loss)	$	(3,168)	$	398
Unallocated other expense		(3,596)		(5,850)
Loss before income taxes	$	(6,764)	$	(5,452)

	February 2,		November 3,
	2014		2013
Total assets:
Metal coil coating	$	80,974	$	71,118
Metal components		373,025		380,488
Engineered building systems		195,102		199,551
Corporate		60,545		129,106
Total assets	$	709,646	$	780,263

NOTE 13 — CONTINGENCIES

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

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NCI BUILDING SYSTEMS, INC.

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

The following information should be read in conjunction with the unaudited consolidated financial statements included herein under “Item 1. Unaudited Consolidated Financial Statements” and the audited consolidated financial statements and the notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended November 3, 2013.

FORWARD LOOKING STATEMENTS

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

• industry cyclicality and seasonality and adverse weather conditions;

• challenging economic conditions affecting the nonresidential construction industry;

• volatility in the U.S. economy and abroad, generally, and in the credit markets;

• ability to service or refinance our debt and obtain future financing;

• the Company’s ability to comply with the financial tests and covenants in its existing and future debt obligations;

• operational limitations or restrictions in connection with our debt;

• recognition of asset impairment charges;

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

• the ability to make strategic acquisitions accretive to earnings;

• retention and replacement of key personnel;

• enforcement and obsolescence of intellectual property rights;

• fluctuations in customer demand;

• costs related to environmental clean-ups and liabilities;

• competitive activity and pricing pressure;

•  increases in energy prices;

• the volatility of the Company’s stock price;

• the dilutive effect on the Company’s common stockholders of potential future sales of the Company’s Common Stock held by the selling stockholders;

• substantial governance and other rights held by the selling stockholders;

• breaches of our information system security measures and damage to our major information management systems;

• hazards that may cause personal injury or property damage, thereby subjecting us to liabilities and possible losses, which may not be covered by insurance;

• changes in laws or regulations, including the Dodd - Frank Act;

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

• other risks detailed under the caption “Risk Factors” in Part II, Item 1A of this report and in our most recent Annual Report on Form 10-K as filed with the SEC.

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

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OVERVIEW

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

Metal components offer builders, designers, architects and end-users several advantages, including lower long-term costs, longer life, attractive aesthetics and design flexibility. Similarly, engineered building systems offer a number of advantages over traditional construction alternatives, including shorter construction time, more efficient use of materials, lower construction costs, greater ease of expansion and lower maintenance costs.

We use a 52/53 week year with our fiscal year end on the Sunday closest to October 31. In fiscal 2014, our year end will be November 2, 2014 which is the Sunday closest to October 31.

We assess performance across our operating segments by analyzing and evaluating, among other indicators, gross profit, operating income and whether or not each segment has achieved its projected sales goals. In assessing our overall financial performance, we regard return on adjusted operating assets, as well as growth in earnings, as key indicators of shareholder value.

First Fiscal Quarter

Early reports for new low-rise nonresidential construction starts during our first quarter of fiscal 2014 indicate a year over year decline of 5.5%, which we attribute primarily to the severity and extended nature of the winter weather slowing construction site activity. Despite market declines, our revenue in all three of our segments grew as we continue to pursue growth initiatives. Nevertheless, our operating results were lower than the first quarter of fiscal 2013 primarily due to lower gross margins from weather related disruptions and the resulting unfavorable product mix variations, combined with incremental spending for growth initiatives and costs in connection with the completion of the secondary stock offering of our majority shareholder.

Industry Conditions

Our sales and earnings are subject to both seasonal and cyclical trends and are influenced by general economic conditions, interest rates, the price of steel relative to other building materials, the level of nonresidential construction activity, roof repair and retrofit demand and the availability and cost of financing for construction projects. Our sales normally are lower in the first half of each fiscal year compared to the second half because of unfavorable weather conditions for construction and typical business planning cycles affecting construction.

The nonresidential construction industry is highly sensitive to national and regional macroeconomic conditions. One of the primary challenges we face is that the United States economy is slowly recovering from a recession and historically low nonresidential construction activity, which began in the third quarter of 2008 and reduced demand for our products and adversely affected our business. In addition, the tightening of credit in financial markets over the same period adversely affected the ability of our customers to obtain financing for construction projects. As a result, we have experienced a decrease in orders and cancellations of orders for our products in previous fiscal quarters, and the ability of our customers to make payments has been adversely affected. Similar factors could cause our suppliers to experience financial distress or bankruptcy, resulting in temporary raw material shortages. While economic growth has either resumed or remains flat, the nonresidential construction industry continues to face significant challenges. The graph below shows the annual nonresidential new construction starts, measured in square feet, since 1967 as compiled and reported by McGraw-Hill:

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Source: McGraw-Hill

When assessing the state of the metal construction market, we review information from various industry associations, third-party research, and various government reports such as industrial production and capacity utilization. One such industry association is the Metal Building Manufacturers Association (“MBMA”), which provides summary member sales information and promotes the design and construction of metal buildings and metal roofing systems. Another is McGraw-Hill Construction Information Group (“McGraw-Hill Construction”), which we review for information regarding actual and forecasted growth in various construction related industries, including the overall nonresidential construction market. McGraw-Hill Construction’s nonresidential construction forecast for calendar 2014, published in January 2014, indicates an expected increase of 12% in square footage and an increase of 9% in dollar value as compared to the prior calendar year. This represented a upward revision of the 2014 forecast published in October, which indicated an expected increase of 11% in square footage and an increase of 8% in dollar value as compared to 2013. Additionally, we review the American Institute of Architects’ (“AIA”) survey for inquiry and billing activity for the industrial, commercial and institutional sectors. The AIA’s architecture billings index (“ABI”) is a closely watched metric, as billings growth for architecture services generally leads to construction spending growth 9 to 12 months forward. We have historically experienced a shorter lag period of 6 – 9 months when comparing the commercial and industrial ABI trends to our volume trends. An ABI reading above 50 indicates an increase in month-to-month seasonally adjusted billings and a reading below 50 indicates a decrease in month-to-month seasonally adjusted billings. AIA’s ABI published for January 2014 was above 50 at 50.4 and the commercial and industrial component of the index was at 50.9 for January 2014. This represents a decline over those indices for October 2013, when AIA’s ABI was above 50 at 51.6 and the commercial and industrial component of the index was at 51.5 for October 2013.

Another challenge we face both short and long term is the volatility in the price of steel. Our business is heavily dependent on the supply of steel and is significantly impacted by steel prices. For the fiscal three months ended February 2, 2014, steel represented approximately 68% of our cost of goods sold. The steel industry is highly cyclical in nature, and steel prices have been volatile in recent years and may remain volatile in the future. Historically, we have been able to adjust our sales prices in response to increases in steel prices. Steel prices are influenced by numerous factors beyond our control, including general economic conditions domestically and internationally, the availability of raw materials, competition, labor costs, freight and transportation costs, production costs, import duties and other trade restrictions.

The monthly CRU North American Steel Price Index, published by the CRU Group, has increased 5.5% from October 2013 to January 2014 and was 6.1% higher in January 2014 compared to January 2013 and represents purchases for forward delivery, according to a lead time, which will vary. For example, the January index would likely approximate our March steel purchase deliveries based on current lead times.

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

RESULTS OF OPERATIONS

Operating segments are defined as components of an enterprise that engage in business activities and by which discrete financial information is available that is evaluated on a regular basis by the chief operating decision maker to make decisions about how to allocate resources to the segment and assess the performance of the segment. We have three operating segments: metal coil coating; metal components; and engineered building systems. All operating segments operate primarily in the nonresidential construction market. Sales and earnings are influenced by general economic conditions, the level of nonresidential construction activity, metal roof repair and retrofit demand and the availability and terms of financing available for construction. Our operating segments are vertically integrated and benefit from similar basic raw materials. The metal coil coating segment consists of cleaning, treating, painting and slitting continuous steel coils before the steel is fabricated for use by construction and industrial users. The metal components segment products include metal roof and wall panels, doors, metal partitions, metal trim, insulated panels and other related accessories. The engineered building systems segment includes the manufacturing of main frames, Long Bay^® Systems and value-added engineering and drafting, which are typically not part of metal components or metal coil coating products or services. The manufacturing and distribution activities of our segments are effectively coupled through the use of our nationwide hub-and-spoke manufacturing and distribution system, which supports and enhanced our vertical integration. The operating segments follow the same accounting policies used for our consolidated financial statements.

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

Corporate assets consist primarily of cash but also include deferred financing costs, deferred taxes and property, plant and equipment associated with our headquarters in Houston, Texas. These items (and income and expenses related to these items) are not allocated to the operating segments. Corporate unallocated expenses include share-based compensation expenses, and executive, legal, finance, tax, treasury, human resources, information technology, purchasing, marketing and corporate travel expenses. Additional unallocated expenses include interest income, interest expense, debt extinguishment costs and other (expense) income. See Note 12 — Operating Segments to the consolidated financial statements for more information on our segments.

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

	Fiscal Three Months Ended
	February 2, 2014		January 27, 2013
Total sales:
Metal coil coating	$	54,267	$	49,271
Metal components		158,193		153,904
Engineered building systems		152,237		147,566
Intersegment sales		(54,031)		(53,157)
Total sales	$	310,666	$	297,584
External sales:
Metal coil coating	$	24,590	$	19,221
Metal components		139,346		136,528
Engineered building systems		146,730		141,835
Total sales	$	310,666	$	297,584
Operating income (loss):
Metal coil coating	$	6,495	$	5,542
Metal components		4,111		6,072
Engineered building systems		1,640		4,041
Corporate		(15,414)		(15,257)
Total operating income (loss)	$	(3,168)	$	398
Unallocated other expense		(3,596)		(5,850)
Loss before income taxes	$	(6,764)	$	(5,452)

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FISCAL THREE MONTHS ENDED FEBRUARY 2, 2014 COMPARED TO FISCAL THREE MONTHS ENDED JANUARY 27, 2013

Consolidated sales increased by 4.4%, or $13.1 million for the three months ended February 2, 2014, compared to the three months ended January 27, 2013. This increase resulted from higher tonnage volumes in each of our operating segments for the three months ended February 2, 2014 compared to the same period in 2013 which was driven primarily by improved demand in the end use sectors we serve compared to the prior year. These increases were partially offset by unfavorable weather conditions during the current period.

Consolidated cost of sales, excluding gain on insurance recovery increased by 6.6%, or $15.7 million for the three months ended February 2, 2014, compared to the three months ended January 27, 2013.

Consolidated gain on insurance recovery for the three months ended February 2, 2014 was $1.0 million. On August 6, 2013, our metal coil coating segment facility in Jackson, Mississippi experienced a fire caused by an exhaust fan failure that damaged the roof and walls of two curing ovens. During the fourth quarter of fiscal 2013, the ovens were repaired. We received insurance proceeds of approximately $1.0 million during the three months ended February 2, 2014 from claims submitted. These insurance proceeds have been classified as a “gain on insurance recovery” in the consolidated statement of operations. There was no corresponding amount recorded for the three months ended January 27, 2013. See Note 3 –– Gain on Insurance Recovery to the consolidated financial statements for more information.

Gross margins, including the gain on insurance recovery, were 19.1% for the three months ended February 2, 2014 compared to 20.5% for the same period in the prior year. The decrease in gross margins was the result of our product mix and efficiency being significantly impacted by weather related disruptions to our manufacturing processes and our supply chain. In addition, our material costs were impacted by weather related transportation disruptions, causing us to utilize a higher percentage of spot price steel. This decrease was partially offset by the gain on insurance recovery as noted above.

Metal coil coating sales increased by 10.1%, or $5.0 million to $54.3 million in the three months ended February 2, 2014, compared to $49.3 million in the same period in the prior year. Sales to third parties for the three months ended February 2, 2014 increased $5.4 million to $24.6 million from $19.2 million in the same period in the prior year, primarily as a result of a 21.8% increase in external tons shipped due to the continued ramping up of our new facility in Middletown, Ohio and higher package sales mix compared to toll processing sales mix. Package sales include both the toll processing services and the sale of the steel coil while toll processing services include only the toll processing service performed on the steel coil already in the customer’s ownership. The increase was partially offset by a decrease of $0.4 million in intersegment sales for the three months ended February 2, 2014 compared to the same period in the prior year. Metal coil coating third-party sales accounted for 7.9% of total consolidated third-party sales in the three months ended February 2, 2014 compared to 6.5% in the three months ended January 27, 2013.

Operating income of the metal coil coating segment increased to $6.5 million in the three months ended February 2, 2014, compared to $5.5 million in the same period in the prior year. The $1.0 million increase resulted primarily from the gain on insurance recovery and external volume as noted above, partially offset by the additional cost associated with the ramp up of the new Middletown facility.

Metal components sales increased 2.8%, or $4.3 million to $158.2 million in the three months ended February 2, 2014, compared to $153.9 million in the same period in the prior year. This increase was primarily due to a 0.8% increase in external tons shipped, partially offset by unfavorable product mix. The external volume increase was driven by improved demand in the end use sectors we serve compared to the prior year but was partially offset by unfavorable weather conditions during the period. Sales to third parties for the three months ended February 2, 2014 increased $2.8 million to $139.3 million from $136.5 million in the same period in the prior year. The remaining $1.5 million represents an increase in intersegment sales. Metal components third-party sales accounted for 44.9% of total consolidated third-party sales in the three months ended February 2, 2014 compared to 45.9% in the three months ended January 27, 2013.

Operating income of the metal components segment decreased to $4.1 million in the three months ended February 2, 2014, compared to $6.1 million in the same period in the prior year. The $2.0 million decrease was driven by investments in certain growth initiations, unfavorable weather conditions and unfavorable product mix.

Engineered building systems sales increased 3.2%, or $4.7 million to $152.2 million in the three months ended February 2, 2014, compared to $147.6 million in the same period in the prior year. This increase in the three months ended February 2, 2014 compared to the same period in the prior year resulted from a 1.3% increase in external tons shipped and higher sales prices. Sales to third parties for the three months ended February 2, 2014 increased $4.9 million to $146.7 million from $141.8 million in the same period in the prior year. The increase was partially offset by a decrease of $0.4 million in intersegment sales. Engineered building systems third-party sales accounted for 47.2% of total consolidated third-party sales in the three months ended February 2, 2014 compared to 47.7% in the three months ended January 27, 2013.

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Operating income of the engineered building systems segment decreased to $1.6 million in the three months ended February 2, 2014 compared to $4.0 million in the same period in the prior year. This $2.4 million decline resulted from higher transportation and manufacturing costs which was partially due to weather disruptions, as well as supply chain disruptions and the carryover of lower prices in backlog from earlier in fiscal 2013. The decline was partially offset by an increase in external tons shipped as noted above.

Consolidated engineering, selling, general and administrative expenses, consisting of engineering, drafting, selling and administrative costs, increased to $62.4 million in the three months ended February 2, 2014, compared to $60.5 million in the same period in the prior year. As a percentage of sales, engineering, selling, general and administrative expenses were 20.1% for the three months ended February 2, 2014 as compared to 20.3% for the three months ended January 27, 2013. The $1.9 million increase in engineering, selling and administrative expenses was primarily due to an increase in wages, commissions and benefits as a result of higher volumes and certain growth initiatives and investments in our sales force as well as $0.7 million of expenses relating to the secondary offering by the CD&R Funds during the three months ended February 2, 2014.

Consolidated interest expense decreased to $3.1 million for the three months ended February 2, 2014, compared to $6.3 million for the same period of the prior year. Interest rates on the Credit Agreement decreased on June 24, 2013 from 8% to 4.25%.

Consolidated other income (expense), net decreased to $0.5 million expense for the three months ended February 2, 2014, compared to $0.4 million income for the same period of the prior year primarily due to Canadian foreign currency losses in the current period. 

Consolidated benefit for income taxes was a $2.5 million benefit for the three months ended February 2, 2014, compared to a $1.8 million benefit for the same period in the prior year. The effective tax rate for the three months ended February 2, 2014 was 37.1% compared to 33.5% for the same period in the prior year. The increase in the income tax benefit was primarily the result of lower utilization of certain Canadian net operating loss carry forwards which have been previously reserved and lower utilization of the domestic production activities deduction and an increase in non-deductible expenses for the three months ended February 2, 2014 compared to the same period in the prior year.

Diluted loss per common share improved to a loss of $(0.06) per diluted common share for the three months ended February 2, 2014, compared to a loss of $(0.19) per diluted common share for the same period in the prior year. The change in the diluted loss per common share was primarily due to the conversion of our Convertible Preferred Stock into shares of our common stock in the third quarter of fiscal 2013, which increased the weighted average number of shares outstanding, partially offset by the $0.6 million increase in net loss applicable to shares of our common stock resulting from the factors described above in this section. The Convertible Preferred Stock prior to its conversion and the unvested restricted common stock related to our Incentive Plan do not have a contractual obligation to share in losses; therefore, no losses were allocated to these shares in the periods presented.

LIQUIDITY AND CAPITAL RESOURCES

General

Our cash and cash equivalents declined from $77.4 million to $16.6 million during the three months ended February 2, 2014. The following table summarizes our consolidated cash flows for the three months then ended February 2, 2014 and January 27, 2013 (dollars in thousands):

	Fiscal Three Months Ended
	February 2,		January 27,
	2014		2013
Net cash used in operating activities		(33,975)		(13,172)
Net cash used in investing activities		(3,748)		(6,071)
Net cash used in financing activities		(22,849)		(10,064)
Effect of exchange rate changes on cash and cash equivalents		(265)		(24)
Net decrease in cash and cash equivalents		(60,837)		(29,331)
Cash and cash equivalents at beginning of period		77,436		55,158
Cash and cash equivalents at end of period	$	16,599	$	25,827

Operating Activities

Our business is both seasonal and cyclical and cash flows from operating activities may fluctuate during the year and from year to year due to economic conditions. We rely on cash and short-term borrowings to meet cyclical and seasonal increases in working capital needs. These needs generally rise during periods of increased economic activity or increasing raw material prices due to higher levels of inventory and accounts receivable. During economic slowdowns, or periods of decreasing raw material costs, working capital needs generally decrease as a result of the reduction of inventories and accounts receivable.

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Net cash used in operating activities was $34.0 million during the three months ended February 2, 2014 compared to $13.2 million of net cash used in operating activities in the comparable period of fiscal 2013. This difference was largely driven by changes in working capital and the decrease in earnings over the comparable period of the prior year.

The significant driver for our increased use of cash for working capital needs was a $10.4 million increase in our cash used for accounts payable over the comparable period of the prior year. Our vendor payments during the current quarter were significantly higher due to the fact that the fourth quarter of the prior year had shown significant year-over-year revenue growth requiring an increase in raw material used. Partially offsetting the increase was the change in our days payable outstanding (“DPO”) as of February 2, 2014 which increased to 35.1 days from 32.3 days in the prior year. We reduced the speed with which we paid our suppliers during the current period which decreased the amount of cash used for accounts payable as compared to the prior year period.

Cash used during the period to invest in inventory was $15.5 million for the three months ended February 2, 2014 which was higher than the $7.8 million invested in the comparable period of the prior year. The increase was driven by an increase in our days inventory on-hand (“DIO”), as our DIO was 49.1 days as of February 2, 2014 as compared to 43.1 days at January 27, 2013 due to the anticipation of higher volumes during the current period.

Investing Activities

Cash used in investing activities of $3.7 million during the three months ended February 2, 2014 was lower than the $6.1 million invested in the comparable period of the prior year and relate predominantly to capital expenditures for a new insulated panel system line, machinery and equipment and computer software in the current period. In the three months ended January 27, 2013, $6.1 million was used for capital expenditures predominantly related to the new metal coil coating facility and computer software.

Financing Activities

Cash used in financing activities decreased to $22.8 million of cash used in financing activities from $10.1 million of cash used in financing activities in the comparable prior year period. The $22.8 million used in financing activities during the three months ended February 2, 2014 was primarily attributable to the purchase of treasury stock in the amount of $23.3 million paid primarily to the CD&R Funds in connection with the Stock Repurchase (as defined below) and $0.6 million of payments made to reduce our outstanding term loan, partially offset by $1.6 million of excess tax benefits from share-based compensation arrangements during the three months ended February 2, 2014. The $10.1 million of cash used in financing activities during the three months ended January 27, 2013 was primarily attributable to $8.8 million of payments made to reduce our outstanding term loan during the three months ended January 27, 2013.

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

Equity Investment

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

On May 14, 2013, the CD&R Funds, the holders of 339,293 Preferred Shares, delivered a formal notice requesting the Conversion of all of their Preferred Shares into shares of our Common Stock. In connection with the Conversion request, we issued the CD&R Funds 54,136,817 shares of our Common Stock, representing 72.4% of the Common Stock of the Company then outstanding. Under the terms of the Preferred Shares, no consideration was required to be paid by the CD&R Funds to the Company in connection with the Conversion of the Preferred Shares. As a result of the Conversion, the CD&R Funds no longer have rights to dividends or default dividends as specified in the Certificate of Designations. The Conversion eliminated all the outstanding Convertible Preferred Stock and increased stockholders’ equity by nearly $620.0 million, returning our stockholders’ equity to a positive balance during our third quarter of fiscal 2013.

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The Company filed, pursuant to the Registration Rights Agreement dated as of October 20, 2009 among the Company and the CD&R Funds, a registration statement on Form S-3 for the offer and sale of Common Stock from time to time by the CD&R Funds of their common stock. The registration statement became effective on March 28, 2013.

On January 15, 2014, the CD&R Funds completed a registered underwritten offering, in which the CD&R Funds offered 8.5 million shares of Common Stock at a price to the public of $18.00 per share (the “Secondary Offering”). The underwriters also exercised their option to purchase 1.275 million additional shares of Common Stock. The aggregate offering price for the 9.775 million shares sold in the Secondary Offering was approximately $167.6 million, net of underwriting discounts and commissions. The CD&R Funds received all of the proceeds from the Secondary Offering and no shares in the Secondary Offering were sold by NCI or any of its officers or directors (although certain of our directors are affiliated with the CD&R Funds). In connection with this Secondary Offering, we incurred approximately $0.7 million in expenses, which were included in engineering, selling, general and administrative expenses in the consolidated statement of operations for the three months ended February 2, 2014. At February 2, 2014 and November 3, 2013, the CD&R Funds owned 58.6% and 72.4%, respectively, of the voting power and Common Stock of the Company.

On January 6, 2014, NCI entered into an agreement with the CD&R Funds to repurchase 1.15 million shares of its Common Stock at the price per share equal to the price per share paid by the underwriters to the CD&R Funds in the underwritten offering (the “Stock Repurchase”). The Stock Repurchase, which was completed at the same time as the Secondary Offering, represented a private, non-underwritten transaction between NCI and the CD&R Funds that was approved and recommended by the Affiliate Transactions Committee of NCI’s board of directors. Following completion of the Stock Repurchase, NCI canceled the shares repurchased from the CD&R Funds, resulting in a $19.7 million decrease in both additional paid in capital and treasury stock.

Debt

On June 24, 2013, the Company entered into Amendment No. 1 (the “Amendment”) to its existing Credit Agreement (the “Credit Agreement”), dated as of June 22, 2012, between NCI, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent and the other financial institutions party thereto from time to time (the “Term Loan Facility”), primarily to extend the maturity date and reduce the interest rate applicable to all of the outstanding term loans under the Term Loan Facility. At February 2, 2014 and November 3, 2013, amounts outstanding under the Credit Agreement were $237.2 million and $237.8 million, respectively.

Pursuant to the Amendment, the maturity date of the $238 million of outstanding term loans (the “Initial Term Loans”) was extended and such loans were converted into a new tranche of term loans (the “Tranche B Term Loans”) that will mature on June 24, 2019 and, prior to such date, will amortize in nominal quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum. At both February 2, 2014 and November 3, 2013, the interest rate on the term loan under our Credit Agreement was 4.25%.

In addition to our Credit Agreement, we have entered into the Amended ABL Facility which allows aggregate maximum borrowings of up to $150.0 million. Borrowing availability on the Amended ABL Facility is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of qualified cash, eligible inventory and eligible accounts receivable, less certain reserves and subject to certain other adjustments. The Amended ABL Facility has a maturity of May 2, 2017 and includes borrowing capacity of up to $30 million for letters of credit and up to $10 million for swingline borrowings.

Credit Agreement. On June 24, 2013, the Company entered into the Amendment to the Credit Agreement, dated as of June 22, 2012, between NCI, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent and the other financial institutions party thereto from time to time (the “Term Loan Facility”), primarily to extend the maturity date and reduce the interest rate applicable to all of the outstanding term loans under the Term Loan Facility. At February 2, 2014 and November 3, 2013, amounts outstanding under the Credit Agreement were $237.2 million and $237.8 million, respectively.

Pursuant to the Amendment, the maturity date of the $238 million of outstanding Initial Term Loans was extended and such loans were converted into the Tranche B Term Loans that will mature on June 24, 2019 and, prior to such date, will amortize in nominal quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum. Pursuant to the Amendment, the Tranche B Term Loans will bear interest at a floating rate measured by reference to, at the Company’s option, either (i) an adjusted LIBOR not less than 1.00% plus a borrowing margin of 3.25% per annum or (ii) an alternate base rate plus a borrowing margin of 2.25 percent per annum. At both February 2, 2014 and November 3, 2013, the interest rate on the term loan under our Credit Agreement was 4.25%. Overdue amounts will bear interest at a rate that is 2% higher than the rate otherwise applicable.

The Tranche B Term Loans are secured by the same collateral and guaranteed by the same guarantors as the Initial Term Loans under the Term Loan Facility. Voluntary prepayments of the Tranche B Term Loans are permitted at any time, in minimum principal amounts, without premium or penalty, subject to a 1.00% premium payable in connection with certain repricing transactions within the first six months.

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Pursuant to the Amendment, the Company will no longer be subject to a financial covenant requiring us to maintain a specified consolidated secured debt to EBITDA leverage ratio for specified periods. The Amendment also includes certain other changes to the Term Loan Facility.

Subject to certain exceptions, the term loan under the Amendment will be subject to mandatory prepayment in an amount equal to:

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

• 50% of annual excess cash flow (as defined in the Amendment), subject to reduction to 0% if specified leverage ratio targets are met.

On June 22, 2012, in connection with the acquisition of Metl-Span LLC, a Texas limited liability company (the “Acquisition”), the Company entered into a Credit Agreement among the Company, as Borrower, Credit Suisse AG, Cayman Islands Branch, as Administrative Agent and Collateral Agent (the “Term Agent”), and the lenders party thereto. The Credit Agreement provided for a term loan credit facility in an aggregate principal amount of $250.0 million. Proceeds from borrowings under the Credit Agreement were used, together with cash on hand, (i) to finance the Acquisition, (ii) to extinguish the existing amended and restated credit agreement, due April 2014 (the “Refinancing”), and (iii) to pay fees and expenses incurred in connection with the Acquisition and the Refinancing. The Credit Agreement was issued at 95% of face value, which resulted in a note discount of $12.5 million. Prior to the Amendment, the note discount was amortized over the life of the loan through May 2, 2018 using the effective interest method.

The Company’s obligations under the Credit Agreement and designated cash management arrangements and hedging agreements, if any, will be irrevocably and unconditionally guaranteed on a joint and several basis by each direct and indirect wholly owned domestic subsidiary of the Company (other than any domestic subsidiary that is a foreign subsidiary holding company or a subsidiary of a foreign subsidiary and certain other excluded subsidiaries).

The obligations under the Credit Agreement and the designated cash management arrangements and hedging agreements, if any, and the guarantees thereof are secured pursuant to a guarantee and collateral agreement, dated as of June 22, 2012 (the “Guarantee and Collateral Agreement”), made by the Company and other Grantors (as defined therein), in favor of the Term Agent, by (i) all of the capital stock of all direct domestic subsidiaries owned by the Company and the guarantors, (ii) up to 65% of the capital stock of certain direct foreign subsidiaries owned by the Company or any guarantor (it being understood that a foreign subsidiary holding company or a domestic subsidiary of a foreign subsidiary will be deemed a foreign subsidiary), and (iii) substantially all other tangible and intangible assets owned by the Company and each guarantor, in each case to the extent permitted by applicable law and subject to certain exceptions.

The Credit Agreement contains a number of covenants that, among other things, will limit or restrict the ability of the Company and its subsidiaries to dispose of assets, incur additional indebtedness, make dividends and other restricted payments, create liens securing indebtedness, engage in mergers and other fundamental transactions, enter into restrictive agreements, amend certain documents in respect of other indebtedness, change the nature of their business and engage in certain transactions with affiliates.

The Credit Agreement contains customary events of default, including non-payment of principal, interest or fees, violation of covenants, material inaccuracy of representations or warranties, cross default and cross acceleration to certain other material indebtedness, certain bankruptcy events, certain ERISA events, material invalidity of security interest, material judgments, and change of control.

The Credit Agreement also provides that the Company has the right at any time to request incremental commitments under one or more incremental term loan facilities or incremental revolving loan facilities, subject to compliance with a pro forma consolidated secured net debt to EBITDA leverage ratio. The lenders under the Credit Agreement will not be under any obligation to provide any such incremental commitments, and any such addition of or increase in commitments will be subject to pro forma compliance with customary conditions.

In connection with the execution of the Credit Agreement the Company, certain of the Company’s subsidiaries, Wells Fargo Capital Finance, LLC, as administrative agent (the “ABL Agent”) under the Company’s Amended ABL Facility (as defined below), and the Term Agent entered into an amendment (the “Intercreditor Agreement Amendment”) to the Company’s existing Intercreditor Agreement, dated as of October 20, 2009, providing for, among other things, the obligations under the Credit Agreement to become subject to the provisions of the Intercreditor Agreement.

Amended ABL Facility. On May 2, 2012, we entered into the Amended Asset-Based Lending Facility (the “Amended ABL Facility”) to (i) permit the acquisition, the entry by the Company into the Credit Agreement and the incurrence of debt thereunder and the repayment of existing indebtedness under NCI’s existing Term Loan, (ii) increase the amount available for borrowing thereunder to $150 million (subject to a borrowing base), (iii) increase the amount available for letters of credit thereunder to $30 million, and (iv) extend the final maturity thereunder to May 2, 2017.

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The Amended ABL Facility provides for an asset-based revolving credit facility which allows aggregate maximum borrowings by NCI Group, Inc. and Robertson-Ceco II Corporation of up to $150.0 million. Borrowing availability under the Amended ABL Facility is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of qualified cash, eligible inventory and eligible accounts receivable, less certain reserves and subject to certain other adjustments. At February 2, 2014 and November 3, 2013, our excess availability under the Amended ABL Facility was $102.5 million and $123.2 million, respectively. At both February 2, 2014 and November 3, 2013, we had no revolving loans outstanding under the Amended ABL Facility. In addition, at February 2, 2014 and November 3, 2013, standby letters of credit related to certain insurance policies totaling approximately $11.2 million and $10.2 million, respectively, were outstanding but undrawn under the Amended ABL Facility.

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

The obligations of the borrowers under the Amended ABL Facility are guaranteed by the Company and each direct and indirect domestic subsidiary of the Company (other than any domestic subsidiary that is a foreign subsidiary holding company or a subsidiary of a foreign subsidiary that is insignificant) that is not a borrower under the Amended ABL Facility. The obligations of the Company under certain specified bank products agreements are guaranteed by each borrower and each other direct and indirect domestic subsidiary of the Company and the other guarantors. These guarantees are made pursuant to a guarantee agreement, dated as of October 20, 2009, entered into by the Company and each other guarantor with Wells Fargo Capital Finance, LLC (formerly known as Wells Fargo Foothill, LLC), as administrative agent. In connection with the Acquisition, Metl-Span became a borrower under the ABL Facility, and the Company, certain subsidiaries of the Company, and the ABL Agent entered into an amendment (the “ABL Guaranty Amendment”) to the Company’s existing Guaranty Agreement, dated as of October 20, 2009, providing for, among other things, the guarantee of the obligations of Metl-Span under the Amended ABL Facility.

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

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

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

The Amended ABL Facility includes a minimum fixed charge coverage ratio of one to one, which will apply if we fail to maintain a specified minimum borrowing capacity. The minimum level of borrowing capacity as of February 2, 2014 and November 3, 2013 was $15.4 million and $18.5 million, respectively. Although our Amended ABL Facility did not require any financial covenant compliance, at February 2, 2014 and November 3, 2013, our fixed charge coverage ratio as of those dates, which is calculated on a trailing twelve month basis, was 1.31:1.00 and 2.29:1.00, respectively.

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

(1) Base Rate loans at the Base Rate plus a margin. “Base Rate” is defined as the higher of the Wells Fargo Bank, N.A. prime rate and the overnight Federal Funds rate plus 0.5% and “LIBOR” is defined as the applicable London Interbank Offered Rate adjusted for reserves. The margin ranges from 1.50% to 2.00% depending on the quarterly average excess availability under such facility, and

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

At both February 2, 2014 and November 3, 2013, the interest rate on our Amended ABL Facility was 4.75%. During an event of default, loans under the Amended ABL Facility will bear interest at a rate that is 2% higher than the rate otherwise applicable.

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Cash Flow

We periodically evaluate our liquidity requirements, capital needs and availability of resources in view of inventory levels, expansion plans, debt service requirements and other operating cash needs. To meet our short- and long-term liquidity requirements, including payment of operating expenses and repaying debt, we rely primarily on cash from operations. Beyond cash generated from operations, most of our Amended ABL Facility is undrawn with $102.5 million available at February 2, 2014 and $16.6 million of cash at February 2, 2014. However, we have in the past, sought to raise additional capital.

We expect that, for the next 12 months, cash generated from operations and our Amended ABL Facility will be sufficient to provide us the ability to fund our operations, provide the increased working capital necessary to support our strategy and fund planned capital expenditures of between approximately $20 million and $23 million for the remainder of fiscal 2014 and expansion when needed.

In the past, we have used available funds to repurchase shares of our Common Stock under our stock repurchase program. Although we did not purchase any Common Stock during the first quarter of fiscal 2014 under our stock repurchase program, we did withhold shares of restricted stock to satisfy minimum tax withholding obligations arising in connection with the vesting of awards of restricted stock related to our 2003 Long-Term Stock Incentive Plan.

On January 6, 2014, NCI entered into an agreement with the CD&R Funds to repurchase 1.15 million shares of its Common Stock at the price per share equal to the price per share paid by the underwriters to the CD&R Funds in the underwritten offering (the “Stock Repurchase”). The Stock Repurchase, which was completed at the same time as the Secondary Offering, represented a private, non-underwritten transaction between NCI and the CD&R Funds that was approved and recommended by the Affiliate Transactions Committee of NCI’s board of directors. Following completion of the Stock Repurchase, NCI canceled the shares repurchased from the CD&R Funds.

Our corporate strategy seeks potential acquisitions that would provide additional synergies in our metal coil coating, metal components and engineered building systems segments. From time to time, we may enter into letters of intent or agreements to acquire assets or companies in these business lines. The consummation of these transactions could require substantial cash payments and/or issuance of additional debt.

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

NON-GAAP MEASURES

Set forth below are certain non-GAAP measures which include “adjusted” operating income (loss), adjusted EBITDA, “adjusted” net income (loss) per diluted common share and “adjusted” net income (loss) applicable to common shares. We define adjusted EBITDA as net income (loss) before interest expense, income tax expense (benefit) and depreciation and amortization, adjusted for items broadly consisting of selected items which management does not consider representative of our ongoing operations and certain non-cash items of the Company. Such measurements are not prepared in accordance with U.S. GAAP and should not be construed as an alternative to reported results determined in accordance with U.S. GAAP. Management believes the use of such non-GAAP measures, on a consolidated and operating segment basis, assists investors in understanding the ongoing operating performance by presenting the financial results between periods on a more comparable basis. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating these measures, you should be aware that in the future we may incur expenses that are the same as, or similar to, some of the adjustments in these non-GAAP measures. In addition, certain financial covenants related to our Credit Agreement and Amended ABL Facility are based on similar non-GAAP measures. The non-GAAP information provided is unique to the Company and may not be consistent with the methodologies used by other companies.

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

	For the Three Months Ended February 2, 2014
					Engineered
	Metal Coil		Metal		Building
	Coating		Components		Systems		Corporate		Consolidated
Operating income (loss), GAAP basis	$	6,495	$	4,111	$	1,640	$	(15,414)	$	(3,168)
Gain on insurance recovery		(987)		––		––		––		(987)
Secondary offering costs		––		––		––		704		704
Adjusted operating income (loss)	$	5,508	$	4,111	$	1,640	$	(14,710)	$	(3,451)

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	For the Three Months Ended January 27, 2013
					Engineered
	Metal Coil		Metal		Building
	Coating		Components		Systems		Corporate		Consolidated
Operating income (loss), GAAP basis (1)	$	5,542	$	6,072	$	4,041	$	(15,257)	$	398

(1)The Company did not incur any special charges during the three months ended January 27, 2013.

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

	2nd Quarter		3rd Quarter		4th Quarter		1st Quarter		Trailing
	April 28,		July 28,		November 3,		February 2,		12 Months
	2013		2013		2013		2014		February 2, 2014
Net income (loss)	$	(5,342)	$	(12,192)	$	8,276	$	(4,258)	$	(13,516)
Add:
Depreciation and amortization		8,809		9,066		9,012		8,767		35,654
Consolidated interest expense, net		6,149		5,130		3,334		3,100		17,713
Provision (benefit) for income taxes		(2,506)		(9,933)		5,410		(2,506)		(9,535)
Debt extinguishment costs, net		––		21,491		––		––		21,491
Gain on insurance recovery		––		––		(1,023)		(987)		(2,010)
Unreimbursed business interruption costs		––		––		500		––		500
Secondary offering costs		––		––		––		704		704
Non-cash charges:
Stock-based compensation		3,445		3,448		4,565		3,179		14,637
Embedded derivative		(4)		(50)		––		––		(54)
Adjusted EBITDA	$	10,551	$	16,960	$	30,074	$	7,999	$	65,584

	2nd Quarter		3rd Quarter		4th Quarter		1st Quarter		Trailing
	April 29,		July 29,		October 28,		January 27,		12 Months
	2012			2012	2012		2013		January 27, 2013
Net income (loss)	$	1,321	$	(3,267)	$	6,270	$	(3,627)	$	697
Add:
Depreciation and amortization		5,841		7,248		10,355		9,122		32,566
Consolidated interest expense, net		3,034		4,159		6,226		6,244		19,663
Provision (benefit) for income taxes		942		(663)		3,379		(1,825)		1,833
Acquisition-related costs		1,494		2,946		153		––		4,593
Debt extinguishment costs, net		––		6,437		––		––		6,437
Executive retirement		508		—		—		—		508
Non-cash charges:
Stock-based compensation		2,119		2,090		3,116		3,442		10,767
Asset impairments (recoveries)		––		(22)		13		––		(9)
Embedded derivative		(6)		(5)		(5)		(5)		(21)
Adjusted EBITDA	$	15,253	$	18,923	$	29,507	$	13,351	$	77,034

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

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	Fiscal Three Months Ended
	February 2, 2014		January 27, 2013
Net loss per diluted common share, GAAP basis	$	(0.06)	$	(0.19)
Gain on insurance recovery, net of taxes		(0.01)		––
Secondary offering costs, net of taxes		0.01		––
Foreign exchange loss (gain), net of taxes		0.01		(0.00)
Adjusted net income (loss) per diluted common share	$	(0.05)	$	(0.19)

	Fiscal Three Months Ended
	February 2, 2014		January 27, 2013
Net loss applicable to common shares, GAAP basis	$	(4,258)	$	(3,627)
Gain on insurance recovery, net of taxes		(608)		––
Secondary offering costs, net of taxes		434		––
Foreign exchange loss (gain), net of taxes		442		(39)
Adjusted net income (loss) applicable to common shares	$	(3,990)	$	(3,666)

OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (“SPEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of February 2, 2014, we were not involved in any unconsolidated SPE transactions.

CONTRACTUAL OBLIGATIONS

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

There have been no material changes in our future contractual obligations since the end of fiscal 2013 other than the normal expiration of existing contractual obligations. See Item 7 of our Annual Report on Form 10-K for the fiscal year ended November 3, 2013 for more information on contractual obligations. See Note 8 — Long-Term Debt and Note Payable to the consolidated financial statements for more information on the material terms of our Credit Agreement and Amended ABL Facility.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that are most important to the portrayal of our financial position and results of operations. These policies require our most subjective judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. Our most critical accounting policies include those that pertain to revenue recognition, insurance accruals, share-based compensation, income taxes, accounting for acquisitions, intangible assets and goodwill, allowance for doubtful accounts, inventory valuation, property, plant and equipment valuation, contingencies, beneficial conversion features and dividend policy and convertible preferred stock extinguishment policy, which are described in Item 7 of our Annual Report on Form 10-K for the year ended November 3, 2013.

RECENT ACCOUNTING PRONOUNCEMENTS

None.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Steel Prices

We are subject to market risk exposure related to volatility in the price of steel. For the fiscal three months ended February 2, 2014, steel constituted approximately 68% of our cost of sales. Our business is heavily dependent on the price and supply of steel. Our various products are fabricated from steel produced by mills to forms including bars, plates, structural shapes, sheets, hot-rolled coils and galvanized or Galvalume^® — coated coils. The steel industry is highly cyclical in nature, and steel prices have been volatile in recent years and may remain volatile in the future. Steel prices are influenced by numerous factors beyond our control, including general economic conditions, domestically and internationally, the availability of raw materials, competition, labor costs, freight and transportation costs, production costs, import duties and other trade restrictions. Based on the cyclical nature of the steel industry, we expect steel prices will continue to be volatile.

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

 

Source: www.crugroup.com

We normally do not maintain an inventory of steel in excess of our current production requirements. However, from time to time, we may purchase steel in advance of announced steel price increases. In addition, it is our current practice to purchase all steel consignment inventory that remains in consignment after an agreed term. Therefore, our inventory may increase if demand for our products declines. We can give no assurance that steel will remain available or that prices will not continue to be volatile.

During the first quarter of fiscal 2014, scheduled material deliveries were delayed due to impassable roads and frozen waterways. As a result, we absorbed higher costs to meet customer delivery schedules.

With steel accounting for approximately 68% of our cost of sales for the fiscal three months ended February 2, 2014, a one percent change in the cost of steel would have resulted in a pre-tax impact on cost of sales of approximately $1.7 million for the three months ended February 2, 2014, if such costs were not passed on to our customers. The impact to our financial results of operations would be significantly dependent on the competitive environment and the costs of other alternative building products, which could impact our ability to pass on these higher costs.

Interest Rates

We are subject to market risk exposure related to changes in interest rates on our Credit Agreement and the Amended ABL Facility. These instruments bear interest at an agreed upon percentage point spread from either the prime interest rate or LIBOR. Under our Credit Agreement, we may, at our option, fix the interest rate for certain borrowings based on a spread over LIBOR for 30 days to six months. At February 2, 2014, we had $237.2 million outstanding under our Credit Agreement. Based on this balance, an immediate change of one percent in the interest rate would cause a change in interest expense of approximately $2.4 million on an annual basis. The fair value of our Credit Agreement, due June 2019, at February 2, 2014 was approximately $237.2 million compared to the face value of $237.2 million. The fair value of our Credit Agreement at November 3, 2013 was approximately $237.8 million compared to the face value of $237.8 million.

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

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Foreign Currency Exchange Rates

We are exposed to the effect of exchange rate fluctuations on the U.S. dollar value of foreign currency denominated operating revenue and expenses. The functional currency for our Mexico operations is the U.S. dollar. Adjustments resulting from the re-measurement of the local currency financial statements into the U.S. dollar functional currency, which uses a combination of current and historical exchange rates, are included in net income in the current period. Net foreign currency re-measurement losses for the three month period ended February 2, 2014 was $(0.2) million. Net foreign currency re-measurement gains (losses) for the three month period ended January 27, 2013 were insignificant.

The functional currency for our Canada operations is the Canadian dollar. Translation adjustments resulting from translating the functional currency financial statements into U.S. dollar equivalents are reported separately in accumulated other comprehensive income in stockholders’ equity. The net foreign currency exchange gains (losses) included in net income for the three month periods ended February 2, 2014 and January 27, 2013 was $(0.5) million and insignificant, respectively. The net foreign currency translation adjustment, net of tax, and included in other comprehensive income (loss) for the three month periods ended February 2, 2014 and January 27, 2013 was $0.3 million and insignificant, respectively.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of February 2, 2014. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding the required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management believes that our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and based on the evaluation of our disclosure controls and procedures as of February 2, 2014, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at such reasonable assurance level.

Internal Control over Financial Reporting

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

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NCI BUILDING SYSTEMS, INC.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

See Part I, Item 1, “Unaudited Consolidated Financial Statements”, Note 13, which is incorporated herein by reference.

Item 1A. Risk Factors.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part 1, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended November 3, 2013. The risks disclosed in our Annual Report on Form 10-K and information provided elsewhere in this report, could materially adversely affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known or we currently deem to be immaterial may materially adversely affect our business, financial condition or results of operations. We are providing the following information regarding changes that have occurred to previously disclosed risk factors from our Annual Report on Form 10-K for the year ended November 3, 2013. Except for such additional information, we believe there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended November 3, 2013.

Transactions engaged in by the CD&R Funds or our directors or executives involving our Common Stock may have an adverse effect on the price of our stock.

Our officers, directors and the CD&R Funds collectively control approximately 60% of our issued and outstanding Common Stock.. On March 28, 2013, the SEC declared effective our shelf registration statement on Form S-3 which registered the resale by the CD&R Funds, of up to 54,136,818 shares of our Common Stock then issuable to the CD&R Funds upon conversion of their Convertible Preferred Stock. On May 14, 2013, the CD&R Funds requested conversion of their 339,293 Preferred Shares, and we issued to the CD&R Funds 54,136,817 shares of our Common Stock. On January 15, 2014, the CD&R Funds completed the Secondary Offering of 9,775,000 shares of our Common Stock pursuant to our shelf registration statement. In addition, we completed the Stock Repurchase of 1,150,000 shares of Common Stock from the CD&R Funds. See Note 9 — Equity Investment to the consolidated financial statements for more information on the Secondary Offering and Stock Repurchase. Future sales of our shares by these stockholders could have the effect of lowering our stock price. The perceived risk associated with the possible sale of a large number of shares by these stockholders could cause some of our stockholders to sell their stock, thus causing the price of our stock to decline. In addition, actual or anticipated downward pressure on our stock price due to actual or anticipated sales of stock by our directors or officers could cause other institutions or individuals to engage in short sales of our Common Stock, which may further cause the price of our stock to decline.

From time to time our directors, executive officers, or the CD&R Funds may sell shares of our Common Stock on the open market or otherwise, for a variety of reasons, which may be related or unrelated to the performance of our business. These sales will be publicly disclosed in filings made with the SEC. Our stockholders may perceive these sales as a reflection on management's view of the business which may result in a drop in the price of our stock or cause some stockholders to sell their shares of our Common Stock.

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

The following table shows our purchases of our Common Stock during the first quarter of fiscal 2014:

ISSUER PURCHASES OF EQUITY SECURITIES

Period	(a) Total Number of Shares Purchased(1)	(b) Average Price Paid per Share (or  Unit)		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs(2)
November 4, 2013 to December 1, 2013	—	$	—		—	129,218
December 2, 2013 to December 29, 2013	201,464		17.59		—	129,218
December 30, 2013 to February 2, 2014	1,152,318	$	17.15		—	129,218
Total	1,353,782	$	17.21		—	129,218

____________________

(1) On January 15, 2014, NCI repurchased 1.15 million shares of its Common Stock in the Stock Repurchase. The Stock Repurchase between NCI and CD&R represented a private, non-underwritten transaction that was approved and recommended by the Affiliate Transactions Committee of NCI’s board of directors. Following completion of the Secondary Offering and the concurrent Stock Repurchase, NCI canceled the shares repurchased from the CD&R Funds.In addition, during the first quarter of fiscal 2014, 203,782 shares of restricted stock were withheld primarily to satisfy minimum tax withholding obligations arising in connection with the vesting of awards of restricted stock. The required withholding is calculated using the closing sales price on the previous business day prior to the vesting date as reported by the NYSE.

(2) Our board of directors has authorized a stock repurchase program. Subject to applicable federal securities law and the Certificate of Designations of our Convertible Preferred Stock, such purchases may occur, if at all, at times and in amounts that we deem appropriate. Shares repurchased are usually retired. On February 28, 2007, we publicly announced that our board of directors authorized the repurchase of an additional 0.2 million shares of our Common Stock. There is no time limit on the duration of the program. At February 2, 2014, there were 129,218 shares of Common Stock remaining authorized for repurchase under the program.

Item 6. Exhibits.

Exhibits

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

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NCI BUILDING SYSTEMS, INC.
	(Registrant)
Date: March 12, 2014	By:	/s/ Mark E. Johnson
		Mark E. Johnson
		Executive Vice President,
		Chief Financial Officer and Treasurer

33

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	Certificate of Amendment to Restated Certificate of Incorporation, effective as of March 12, 2007 (filed as Exhibit 3.2 to NCI’s Quarterly Report on Form 10-Q for the quarter ended April 29, 2007 and incorporated by reference herein)
3.3	Certificate of Amendment to the Restated Certificate of Incorporation, effective as of March 4, 2010 (filed as Exhibit 4.3 to NCI’s registration statement on Form S-8 filed with the SEC on April 23, 2010 and incorporated by reference herein)
3.4	Fourth Amended and Restated By-laws, effective as of February 25, 2014 (filed as Exhibit 3.1 to NCI’s Current Report on Form 8-K dated February 26, 2014 and incorporated by reference herein)
10.1	Stock Repurchase Agreement, dated January 6, 2014, among NCI Building Systems, Inc., Clayton, Dubilier & Rice Fund VIII, L.P. and CD&R Friends & Family Fund VIII, L.P. (filed as Exhibit 10.1 to NCI’s Current Report on Form 8-K dated January 10, 2014 and incorporated by reference herein)
†*10.2	Form of Performance Cash and Share Award Agreement
†10.3	NCI Senior Executive Bonus Plan (filed as Exhibit 10.1 to NCI’s Current Report on Form 8-K dated February 26, 2014 and incorporated by reference herein)
*31.1	Rule 13a-14(a)/15d-14(a) Certifications (Section 302 of the Sarbanes-Oxley Act of 2002)
*31.2	Rule 13a-14(a)/15d-14(a) Certifications (Section 302 of the Sarbanes-Oxley Act of 2002)
**32.1	Certifications pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act of 2002)
**32.2	Certifications pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act of 2002)
**101.INS	XBRL Instance Document
**101.SCH	XBRL Taxonomy Extension Schema Document
**101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
**101.DEF	XBRL Taxonomy Definition Linkbase Document
**101.LAB	XBRL Taxonomy Extension Label Linkbase Document
**101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

______________

* Filed herewith

** Furnished herewith

† Management contracts or compensatory plans or arrangements

34

 

EX-10.2

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

PERFORMANCE CASH AND SHARE AWARD AGREEMENT

NCI Building Systems, Inc., a Delaware corporation (the “Company”), hereby grants to Grantee, effective as of the Grant Date, an award (the “Award”) equal to a Target Amount (expressed in Dollars) subject to the terms and conditions set forth in this Performance Cash and Share Award Agreement (this “Agreement”), including Exhibit A hereto (“Exhibit A”) and in the Company’s 2003 Long-Term Stock Incentive Plan (the “Plan”). Unless otherwise defined in this Agreement or in Exhibit A, capitalized terms used in this Agreement shall have the meanings assigned to them in the Plan and in the award letter that relates to this Award (the “Award Letter”). Grantee acknowledges receipt of a copy of the Plan in effect as of the date hereof, the terms and conditions of which are incorporated herein by reference.

1.            Effect of the Plan. The Award granted to Grantee is subject to all of the provisions of the Plan and of this Agreement and the related Award Letter, 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 of Award.

(a)            As set forth in the Award Letter, the Target Amount of the Award is granted effective as of the Grant Date and has been denominated as a hypothetical number of shares of Common Stock and a hypothetical amount of cash. As set forth in the Award Letter and Exhibit A, the percentage of the Target Amount which is earned and becomes vested on the Vesting Date (as defined in Exhibit A) in accordance with the terms of the Award Letter and this Agreement will entitle Grantee to receive from the Company on the Payment Date (as defined in Exhibit A) (x) a number of shares of Common Stock (the “Award Shares”) and a single lump sum cash payment (the “Cash Payment”). The number of the Award Shares and the amount of the Cash Payment shall be determined based on satisfaction of the performance objectives set forth in the Award Letter (the “Performance Objectives”) during the Performance Period.

(b)            Grantee agrees that this Award shall be subject to all of the terms and conditions set forth in this Agreement and the Plan, including, but not limited to, the provisions relating to the earning, vesting and forfeiture of the Award set forth in Section 4 of this Agreement and Exhibit A, and the satisfaction of the Required Withholding as set forth in Section 9 of this Agreement.

3.            Vesting Schedule; Service Requirements. Except as provided otherwise in Section 4 of this Agreement in Exhibit A, the Award shall become earned and vested only 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 on the applicable date on which the earned portion of the Target Amount is certified by the Committee (which is referred to in Exhibit A as the “Vesting Date”). The determination of the portion of the Award, if any, which becomes earned and vested, the Vesting Date and the date on which the earned and vested portion of the Award shall be paid shall each be determined in accordance with Exhibit A.

4.            Conditions of Forfeiture.

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

(i)            by the Company for Cause (as hereinafter defined) or by Grantee’s voluntary resignation before the Vesting Date (other than retirement after reaching Normal Retirement Age), the entire Award as of the Termination Date, whether earned or unearned, shall, without further action of any kind by the Company or Grantee, be forfeited; or

(ii)            due to death or Disability or by the Company without Cause (each a “Qualifying Termination”) or retirement after reaching Normal Retirement Age, in each case before the Vesting Date, the portion of the Award that may or shall become earned and vested, or may or shall be forfeited, shall be determined in accordance with Exhibit A.

(b)            The amount of the Award, if any, that shall become earned and vested upon a Change in Control shall be determined in accordance with Exhibit A, provided, however, that, for the avoidance of doubt, clause (i) of the definition of “Change in Control” set forth in the Plan shall not be deemed to include an acquisition by a person which is inadvertent and/or otherwise not entered into for the purpose of, and does not have the effect of, changing or influencing the control of the Company.

(c)            For purposes of this Agreement, “Cause” shall have the meaning ascribed to such term in Grantee’s current employment agreement with the Company or any of its Subsidiaries (the “Employment Agreement”) or, if no such Employment Agreement exists or if “Cause” is not defined in the Employment Agreement, “Cause” means:

(i)            Grantee’s failure or inability for any reason to devote substantially all of Grantee’s business time and effort to the performance of Grantee’s duties and responsibilities to the Company and its Subsidiaries (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 the Company of the existence of such failure or inability; provided, however, that only one such notice by 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;

2

(iii)            breach or failure by Grantee to perform any of Grantee’s material restrictive covenants (including, by way of example only, prohibiting confidentiality, competition or solicitation of customers or employees) that is not cured within thirty (30) days after written notice by the Company of the breach or failure to perform; provided, however, that only one such notice by the Company need be sent and, if such failure re-occurs thereafter, no further notice and opportunity to cure such failure shall be required;

(iv)            disregard or failure to use commercially reasonable efforts to carry out the reasonable and lawful instructions of any employee to whom Grantee reports or the Board of Directors of the Company, or a material violation of policies established by 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 the Company of the existence of such violation, disregard or failure; provided, however, that only one such notice by 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;

(v)            an act committed by Grantee which (A) brings the Company or any of its Subsidiaries into public disgrace, or (B) harms the business operations of the Company or any of its Subsidiaries; 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 Grantee’s receipt of such notice, to meet in person with the Board of Directors to explain or defend the alleged acts or omissions relied upon by the Board of Directors and, to the extent practicable, to cure such acts or omissions;

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

(vii)            breach or failure by Grantee to comply in any material respect with the Company’s Corporate Governance Guidelines, Code of Business Conduct and Ethics or Employee Policy Manual (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 the Company of the breach or failure to perform; provided, however, that only one such notice by 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.

5.            Restriction of Transferability of Award; Restriction on Transferability of Common Stock Issued under this Award.

(a)            Grantee may not directly or indirectly sell, transfer, pledge, exchange, hypothecate, or otherwise encumber or dispose of the Award or any portion thereof, or any right or interest therein, by operation of law or otherwise (including through hedging transactions). Any transfer of the Award in violation of this Section 5 shall be void and of no force or effect.

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(b)            Except as may otherwise be permitted by the Board of Directors of the Company or a committee thereof, Grantee may not directly or indirectly sell, transfer, pledge, exchange, hypothecate, or otherwise encumber or dispose of any portion of the Award Shares, or any right or interest therein, by operation of law or otherwise (including through hedging transactions), until the earliest of (1) six (6) months from the Vesting Date, (2) the date of Grantee’s Qualifying Termination or retirement after reaching Normal Retirement Age, or (3) the date of a Change in Control.

6.            Rights as a Stockholder. Until such time as Award Shares are issued in payment for an earned and vested Award, Grantee shall not have the rights of a stockholder with respect to the Award Shares, including the right to vote or to receive any dividends, cash or stock (other than stock dividends accounted for as a stock split), paid or delivered thereon, from and after the date hereof; provided, however, that in the event that the Company pays any cash dividend, the share portion of the Target Amount will accumulate cash dividend equivalents. The dividend equivalents shall equal the dividends paid with respect to the Common Stock during the Performance Period. The dividend equivalents shall accumulate, without interest, and be paid in cash at the time the Award Shares are delivered and/or shall be forfeited at the time the share portion of the Target Amount is forfeited. For purposes of determining the amount of dividend equivalents accumulated and to be paid with respect to the Award Shares, the Award Shares which are payable shall be considered to have been outstanding from the Grant Date. In the event of forfeiture of the Target Amount (in whole or in part), Grantee shall have no further rights to dividend equivalents with respect to such forfeited portion.

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 or other non-cash dividends), the Common Stock portion of this Award (including, if applicable, the Award 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 this Award or of the Award Shares hereunder because of a capital adjustment shall be immediately subject to the provisions of this Agreement.

8.            Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Award 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 Award 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 Award Shares.

9.            Tax Matters. The Company’s obligation to pay the Cash Payment and to deliver Award Shares to Grantee on the Payment Date shall be subject to the satisfaction of all applicable federal, state and local income and employment tax withholding requirements (the “Required Withholding”). With respect to the Award Shares, 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 date that the earned Award becomes vested, 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 Company shall first withhold any cash payable for dividend equivalents and then Award Shares payable. The amount of the Required Withholding and the number of Award Shares to be withheld by the Company, if applicable, to satisfy Grantee’s Required Withholding on the Award Shares, as well as the amount reflected on tax reports filed by the Company, shall be based on the value of the 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. The obligations of the Company under this Agreement shall be conditioned on such satisfaction of the Required Withholding.

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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 Grantee’s 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 Grantee’s 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 Grantee’s engagement with the Company or its Subsidiaries or affiliates.

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(c)            Prior to the vesting of any portion of the earned Award, 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 Grantee after being informed of their confidential and secret status by the Company and because of the fiduciary position occupied by Grantee 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 Grantee’s Continuous Service with the Company, or at any time thereafter, except as required in the course of Grantee’s 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 Grantee’s 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 Grantee’s 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, Grantee 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 Grantee’s true and lawful attorney-in-fact, to act in Grantee’s name, place and stead to perform any act that Grantee 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 Award) 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.

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            (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 Company an amount equal to 80% of the total value awarded Grantee under this Award, whether in the form of (A) Common Stock owned by Grantee, (B) cash or other immediately available funds in an amount equal to the Cash Payment and/or the then fair market value of the applicable number of shares of Common Stock received by Grantee under this Agreement 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 Award Shares received under this Agreement, 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 Grantee 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 Award Shares received under this Agreement, if still owned by Grantee, or (ii) reimburse the Company an amount equal to the then fair market value of the Award Shares received under this Agreement 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 Cash Payment and/or Award Shares (excluding for this purpose the provisions of Section 10(a), which is addressed in Section 10(e)) 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.

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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 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 to Grantee 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.

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15.            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.

16.            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 16.

BY ACCEPTING THIS AGREEMENT, GRANTEE ACKNOWLEDGES AND AGREES THAT THE PERFORMANCE SHARE UNITS SUBJECT TO THIS AWARD SHALL BE EARNED, VEST AND AMOUNTS WILL BE PAYABLE 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 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 Grantee is familiar with the terms and provisions thereof, and hereby accepts the 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.

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Exhibit A to Performance Cash and Share Award Agreement

1.            Certification and Earned Amount

(a)            Certification of Achievement Relative to Performance Objectives: Within sixty (60) days following the end of the Performance Period, the Committee will certify the extent to which the Performance Objectives have been achieved. Except as provided in Section 4 of Exhibit A, the date of such certification is the “Vesting Date” for purposes of the Award.

(b)            Earned Portion of the Award. The Award will become earned as to each of the Performance Objectives as follows:

(1) Performance below the “threshold” level of achievement shown in the Award Letter will result in no portion of the Award being earned.

(2) Performance at “threshold” level of achievement shown in the Award Letter will result in the Award becoming earned at the “threshold” payout percentage level.

(3) Performance at “target” level of achievement shown in the Award Letter will result in the Award becoming earned at the “target” payout percentage level.

(4) Performance at or above the “above target” level of achievement shown in the Award Letter will result in the Award becoming earned at the “above target” payout percentage level.

Payout above the “threshold” level but below the “target” level of achievement, and above the “target” level but below the “above target” level of achievement, will be calculated by the Committee by straight line interpolation by reference to the applicable payout percentages. For avoidance of doubt, in no event may the payout exceed the highest percentage specified in the Award Letter.

(c)            Payment Amount: Subject to Sections 2 and 4 of this Exhibit A, the hypothetical share portion and the hypothetical cash portion of the Target Amount shall each be multiplied by the weighted average of the payout percentage levels for the Performance Objectives to determine the number of Award Shares and the Cash Amount.

2.            Effect of Termination of Employment. The following provisions will apply in the event of the termination of employment prior to the Vesting Date.

(a)            Termination for Any Reason Other Than Due to a Qualifying Termination or Retirement after reaching Normal Retirement Age. In the event that Grantee’s Continuous Service terminates for any reason other than a Qualifying Termination or retirement after reaching Normal Retirement Age prior to the Vesting Date, this Award shall terminate and will be forfeited and cancelled without payment.

(b)            Termination Due to Death or Disability. In the event that Grantee’s Continuous Service terminates due to Grantee’s Death or Disability prior to the Vesting Date, the full earned amount of the Award determined in accordance with Section 1(c) shall be paid as if Grantee had remained continuously employed with the Company through the Vesting Date.

A-1

(c)            Termination Without Cause. In the event Grantee’s Continuous Service is terminated by the Company without Cause prior to the Vesting Date, a pro-rated portion of the earned amount of the Award determined in accordance with Section 1(c) shall be paid to Grantee. Such pro-rated portion shall be determined by multiplying the product of (a) the earned amount of the Award determined in accordance with Section 1(c) as if Grantee had remained continuously employed with the Company through the Vesting Date, multiplied by (b) a fraction, the numerator of which is the number of days elapsed in the Performance Period through the Termination Date and the denominator of which is 1,095, provided, that if such fraction is less than ½ (one-half), then, unless the Committee shall determine otherwise in its discretion, the Award shall terminate and will be forfeited and cancelled without payment.

(d)            Termination Due to Retirement after reaching Normal Retirement Age. In the event Grantee’s Continuous Service is terminated by Grantee due to Grantee’s retirement after reaching Normal Retirement Age, in each case prior to the Vesting Date, a pro-rated portion of the earned amount of the Award determined in the same manner as provided in Section 2(c), but without regard to the proviso contained therein.

(e)            Termination on or following the Vesting Date. For avoidance of doubt, the termination of Grantee’s Continuous Service following the Vesting Date and prior to the Payment Date, other than a termination for Cause, shall have no effect on Grantee’s Award.

3.            Payment Date. Except as provided in Section 4, the Cash Amount shall be paid, and the Award Shares shall be delivered, not later than fifteen (15) days following the Vesting Date.

4.            Effect of Change in Control.

(a)            Prior to the Vesting Date; Current Employees. In the event of a Change in Control prior to the Vesting Date (determined without regard to this Section 4) and prior to Grantee’s termination of employment, (i) the Award will be deemed earned at the “above target” payout percentage level, (ii) the Vesting Date will be deemed to be the date of the Change in Control, and (iii) the Payment Date will be not later than five (5) days following the date of the Change in Control.

(b)            Prior to the Vesting Date; Former Employees. In the event of a Change in Control prior to the Vesting Date (determined without regard to this Section 4) and following Grantee’s Qualifying Termination or retirement after reaching Normal Retirement Age, (i) the Award will be deemed earned at the “above target” payout percentage level, (ii) the Vesting Date will be deemed to be the date of the Change in Control, (iii) other than in the case of death or Disability, the earned amount of the Award will be prorated as provided in Section 2(c) (but disregarding the proviso in such Section) and (iv) the Payment Date will be not later than five (5) days following the date of the Change in Control.

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(c)            On or Following the Vesting Date. In the event of a Change in Control on or following the Vesting Date but prior to the Payment Date, the earned amount of the Performance Amount will be determined without regard to this Section 4, but the Payment Date will be not later than five (5) days following the date of the Change in Control.

A-3

EX-31.1

Exhibit 31.1

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

I, Norman C. Chambers, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: March 12, 2014

/s/ Norman C. Chambers

Norman C. Chambers

Chairman of the Board,

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

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

I, Mark E. Johnson, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: March 12, 2014

/s/ Mark E. Johnson

Mark E. Johnson

Executive Vice President,

Chief Financial Officer and Treasurer

(Principal Financial Officer)

 

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT

In connection with the quarterly report of NCI Building Systems, Inc. (the “Company”) for the quarter ended February 2, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Norman C. Chambers, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. I have reviewed this Report of the Company;

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

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

Date: March 12, 2014

/s/ Norman C. Chambers

Norman C. Chambers

Chairman of the Board,

President and Chief Executive Officer

(Principal Executive Officer)

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

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

 

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT

In connection with the quarterly report of NCI Building Systems, Inc. (the “Company”) for the quarter ended February 2, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark E. Johnson, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. I have reviewed this Report of the Company;

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

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

Date: March 12, 2014

/s/ Mark E. Johnson
Mark E. Johnson
Executive Vice President,
	Chief Financial Officer and Treasurer
	(Principal Financial Officer)

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

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

 

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FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Details) (Credit Agreement Due June 2019 [Member], USD $) In Thousands, unless otherwise specified	Feb. 02, 2014	Nov. 03, 2013
Credit Agreement Due June 2019 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long Term Debt, Carrying Amount	$ 237,175	$ 237,775
Long-term Debt, Fair Value	$ 237,175	$ 237,775

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LOSS PER COMMON SHARE (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Feb. 02, 2014		Jan. 27, 2013
Numerator for Basic and Diluted Loss Per Common Share
Net loss allocated to common shares	$ (4,258)	[1]	$ (3,627)	[1]
Denominator for Basic and Diluted Loss Per Common Share
Weighted average common shares outstanding for basic and diluted loss per share (in shares)	73,515		19,237
Basic and Diluted loss per common share (in dollars per share)	$ (0.06)		$ (0.19)

[1] Participating securities consist of the Convertible Preferred Stock, as defined below, for the period prior to its conversion to Common Stock of the Company and the unvested restricted Common Stock related to our Incentive Plan. These participating securities do not have a contractual obligation to share in losses; therefore, no losses were allocated in any periods presented above. The Convertible Preferred Stock was converted into shares of our Common Stock in the third quarter of fiscal 2013. The Unvested Common Stock related to our Incentive Plan will be allocated earnings when applicable.

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WARRANTY (Tables)

3 Months Ended

Feb. 02, 2014

Warranty [Abstract]

Schedule Of Product Warranty Liability [Table Text Block]

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

	Fiscal Three Months Ended
	February 2, 2014		January 27, 2013
Beginning balance	$	22,673	$	23,236
Warranties sold		871		646
Revenue recognized		(471)		(490)
Costs incurred and other		––		––
Ending balance	$	23,073	$	23,392

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FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Feb. 02, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading Securities, Change in Unrealized Holding Gain (Loss)	$ 0.7

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LONG-TERM DEBT AND NOTE PAYABLE (Details Textual) (USD $)	1 Months Ended	3 Months Ended			3 Months Ended	12 Months Ended			3 Months Ended
	Jun. 24, 2013	Feb. 02, 2014	Nov. 03, 2013	Jun. 22, 2012	Feb. 02, 2014 Abl Facility [Member]	Nov. 03, 2013 Abl Facility [Member]	May 02, 2012 Abl Facility [Member]	Nov. 03, 2013 Tranche B Term Loans [Member]	Feb. 02, 2014 Tranche B Term Loans [Member] Long-term Debt [Member]
Line of Credit Facility [Line Items]
Term Loan Principal Amount				$ 250,000,000
Line of Credit Facility, Amount Outstanding					11,200,000	10,200,000	150,000,000
Line of Credit Facility, Remaining Borrowing Capacity					102,500,000	123,200,000
Consolidated Total Net Debt To Ebitda Leverage Ratio					1.31:1.00	2.29:1.00
Line Of Credit Facility Minimum Borrowing Capacity					15,400,000	18,500,000
Line of Credit Facility, Interest Rate Description		Base Rate loans at the Base Rate plus a margin. The margin ranges from 1.50% to 2.00% depending on the quarterly average excess availability under such facility, and LIBOR loans at LIBOR plus a margin. The margin ranges from 2.50% to 3.00% depending on the quarterly average excess availability under such facility.
Line Of Credit Facility Interest Rate Description Under Default Event					During an event of default, loans under the Amended ABL Facility will bear interest at a rate that is 2% higher than the rate otherwise applicable. “Base Rate” is defined as the higher of the Wells Fargo Bank, N.A. prime rate and the overnight Federal Funds rate plus 0.5% and “LIBOR” is defined as the applicable London Interbank Offered Rate adjusted for reserves.
Notes Payable		100,000	600,000
Unamortized Deferred Financing Cost		4,100,000	4,300,000
Increase In Letter Of Credit							30,000,000
Outstanding Initial term loan		238,000,000
Debt Instrument, Interest Rate at Period End		4.25%	2.00%					4.25%	4.25%
Percentage of premium payable for repricing transaction									1.00%
Adjustment Libor Base Rate	1.00%
Borrowing Margin Percentage	3.25%
Alternate Base Rate Percentage	2.25%
Line of Credit Facility, Periodic Payment, Interest					$ 4.75

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BASIS OF PRESENTATION

3 Months Ended

Feb. 02, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

NOTE 1 — BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements for NCI Building Systems, Inc. (together with its subsidiaries, unless otherwise indicated, the “Company,” “NCI,” “we,” “us,” or “our”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements included herein contain all adjustments, which consist of normal recurring adjustments, necessary to fairly present our financial position, results of operations and cash flows for the periods indicated. Operating results for the fiscal three month period ended February 2, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending November 2, 2014. Our sales and earnings are subject to both seasonal and cyclical trends and are influenced by general economic conditions, interest rates, the price of steel relative to other building materials, the level of nonresidential construction activity, roof repair and retrofit demand and the availability and cost of financing for construction projects.

We use a four-four-five week calendar each quarter with our year end being on the Sunday closest to October 31. The year end for fiscal 2014 is November 2, 2014. 

For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended November 3, 2013 filed with the Securities and Exchange Commission (the “SEC”) on December 23, 2013.

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INCOME TAXES (Details)	3 Months Ended
	Feb. 02, 2014	Jan. 27, 2013
Schedule Of Income Tax [Line Items]
Statutory federal income tax rate	35.00%	35.00%
State income taxes	3.80%	3.70%
Domestic production activities deduction	(1.50%)	(2.50%)
Canada valuation allowance	(2.10%)	(3.30%)
Non-deductible expenses	2.30%	1.30%
Other	(0.40%)	(0.70%)
Effective tax rate	37.10%	33.50%

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OPERATING SEGMENTS (Tables)

3 Months Ended

Feb. 02, 2014

Segment Reporting [Abstract]

Schedule Of Segment Reporting Information, By Segment [Table Text Block]

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

	Fiscal Three Months Ended
	February 2,		January 27,
	2014		2013
Total sales:
Metal coil coating	$	54,267	$	49,271
Metal components		158,193		153,904
Engineered building systems		152,237		147,566
Intersegment sales		(54,031)		(53,157)
Total net sales	$	310,666	$	297,584
External sales:
Metal coil coating	$	24,590	$	19,221
Metal components		139,346		136,528
Engineered building systems		146,730		141,835
Total net sales	$	310,666	$	297,584
Operating income (loss):
Metal coil coating	$	6,495	$	5,542
Metal components		4,111		6,072
Engineered building systems		1,640		4,041
Corporate		(15,414)		(15,257)
Total operating income (loss)	$	(3,168)	$	398
Unallocated other expense		(3,596)		(5,850)
Loss before income taxes	$	(6,764)	$	(5,452)

	February 2,		November 3,
	2014		2013
Total assets:
Metal coil coating	$	80,974	$	71,118
Metal components		373,025		380,488
Engineered building systems		195,102		199,551
Corporate		60,545		129,106
Total assets	$	709,646	$	780,263

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INCOME TAXES (Tables)

3 Months Ended

Feb. 02, 2014

Income Tax Disclosure [Abstract]

Schedule Of Effective Income Tax Rate Reconciliation [Table Text Block]

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

	Fiscal Three Months Ended
	February 2,			January 27,
	2014			2013
Statutory federal income tax rate		35.0	%		35.0	%
State income taxes		3.8	%		3.7	%
Domestic production activities deduction		(1.5)	%		(2.5)	%
Canada valuation allowance		(2.1)	%		(3.3)	%
Non-deductible expenses		2.3	%		1.3	%
Other		(0.4)	%		(0.7)	%
Effective tax rate		37.1	%		33.5	%

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INCOME TAXES (Details Textual) (USD $) In Millions, unless otherwise specified	Feb. 02, 2014	Nov. 03, 2013
Schedule Of Income Tax [Line Items]
Unrecognized Tax Benefits that Would Impact Effective Tax Rate	$ 0.4	$ 0.4

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GAIN ON INSURANCE RECOVERY (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Feb. 02, 2014	Jan. 27, 2013
Business Interruption Loss [Line Items]
Gain On Insurance Recovery	$ 987	$ 0
Finite-Lived Intangible Asset, Useful Life	10 years

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INVENTORIES (Details) (USD $) In Thousands, unless otherwise specified	Feb. 02, 2014	Nov. 03, 2013
Schedule Of Inventory [Line Items]
Raw materials	$ 102,689	$ 87,567
Work in process and finished goods	34,937	34,538
Inventory Net	$ 137,626	$ 122,105

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Feb. 02, 2014	Jan. 27, 2013
Cash flows from operating activities:
Net loss	$ (4,258)	$ (3,627)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	8,767	9,122
Deferred financing cost amortization	288	1,084
Share-based compensation expense	3,179	3,442
Gain on insurance recovery	(987)	0
Provision for doubtful accounts	1,009	1,305
Benefit from deferred income taxes	(2,564)	(1,990)
Excess tax benefits from share-based compensation arrangements	(1,583)	(941)
Changes in operating assets and liabilities:
Accounts receivable	22,713	23,217
Inventories	(15,521)	(7,755)
Income tax receivable	26	(415)
Prepaid expenses and other	(70)	(615)
Accounts payable	(39,345)	(28,969)
Accrued expenses	(5,498)	(7,181)
Other, net	(131)	151
Net cash used in operating activities	(33,975)	(13,172)
Cash flows from investing activities:
Capital expenditures	(4,735)	(6,071)
Proceeds from insurance	987	0
Net cash used in investing activities	(3,748)	(6,071)
Cash flows from financing activities:
Proceeds from stock options exercised	0	674
Increase in restricted cash	0	(1)
Payments on term loan	(600)	(8,750)
Payments on note payable	(482)	(515)
Proceeds from Amended ABL Facility	20,000	5,001
Payments on Amended ABL Facility	(20,000)	(5,000)
Payment of financing costs	(25)	(68)
Excess tax benefits from share-based compensation arrangements	1,583	941
Purchase of treasury stock	(23,325)	(2,346)
Net cash used in financing activities	(22,849)	(10,064)
Effect of exchange rate changes on cash and cash equivalents	(265)	(24)
Net decrease in cash and cash equivalents	(60,837)	(29,331)
Cash and cash equivalents at beginning of period	77,436	55,158
Cash and cash equivalents at end of period	$ 16,599	$ 25,827

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SHARE-BASED COMPENSATION (Details Textual) (USD $)	3 Months Ended
	Feb. 02, 2014	Jan. 27, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures	5,058	2,101
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 9.09	$ 7.22
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures	$ 2,600,000	$ 6,300,000
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures	147,124	442,198
Share Based Compensation Arrangement By Share Based Payment Award Options Grants In Period Fair Value	2,200,000
ShareBased Compensation Arrangement Description	In December 2013, we granted long-term incentive awards with performance conditions that will be paid 50% in cash and 50% in stock.
Proceeds from stock options exercised	0	674,000
Proceeds and Excess Tax Benefit from Share-based Compensation		200,000
Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Proceeds from stock options exercised		$ 700,000

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FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Details 1) (USD $) In Thousands, unless otherwise specified	Feb. 02, 2014		Nov. 03, 2013
Assets
Assets, Fair Value Disclosure, Recurring	$ 4,924	[1]	$ 4,892	[1]
Liabilities
Liabilities, Fair Value Disclosure, Recurring	(5,493)		(5,036)
Fair Value, Inputs, Level 1 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	4,377	[1]	4,348	[1]
Liabilities
Liabilities, Fair Value Disclosure, Recurring	0		0
Fair Value, Inputs, Level 2 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	547	[1]	544	[1]
Liabilities
Liabilities, Fair Value Disclosure, Recurring	(5,493)		(5,036)
Fair Value, Inputs, Level 3 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	0	[1]	0	[1]
Liabilities
Liabilities, Fair Value Disclosure, Recurring	0		0
Deferred Compensation Plan [Member]
Liabilities
Liabilities, Fair Value Disclosure, Recurring	(5,493)		(5,036)
Deferred Compensation Plan [Member] | Fair Value, Inputs, Level 1 [Member]
Liabilities
Liabilities, Fair Value Disclosure, Recurring	0		0
Deferred Compensation Plan [Member] | Fair Value, Inputs, Level 2 [Member]
Liabilities
Liabilities, Fair Value Disclosure, Recurring	(5,493)		(5,036)
Deferred Compensation Plan [Member] | Fair Value, Inputs, Level 3 [Member]
Liabilities
Liabilities, Fair Value Disclosure, Recurring	0		0
Short-term Investments [Member]
Assets
Assets, Fair Value Disclosure, Recurring	4,924	[1]	4,892	[1]
Short-term Investments [Member] | Fair Value, Inputs, Level 1 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	4,377	[1]	4,348	[1]
Short-term Investments [Member] | Fair Value, Inputs, Level 2 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	547	[1]	544	[1]
Short-term Investments [Member] | Fair Value, Inputs, Level 3 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	0	[1]	0	[1]
Money Market Funds [Member]
Assets
Assets, Fair Value Disclosure, Recurring	530	[1]	580	[1]
Money Market Funds [Member] | Fair Value, Inputs, Level 1 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	530	[1]	580	[1]
Money Market Funds [Member] | Fair Value, Inputs, Level 2 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	0	[1]	0	[1]
Money Market Funds [Member] | Fair Value, Inputs, Level 3 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	0	[1]	0	[1]
Mutual Funds - Growth [Member]
Assets
Assets, Fair Value Disclosure, Recurring	763	[1]	725	[1]
Mutual Funds - Growth [Member] | Fair Value, Inputs, Level 1 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	763	[1]	725	[1]
Mutual Funds - Growth [Member] | Fair Value, Inputs, Level 2 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	0	[1]	0	[1]
Mutual Funds - Growth [Member] | Fair Value, Inputs, Level 3 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	0	[1]	0	[1]
Mutual Funds - Blend [Member]
Assets
Assets, Fair Value Disclosure, Recurring	2,387	[1]	2,348	[1]
Mutual Funds - Blend [Member] | Fair Value, Inputs, Level 1 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	2,387	[1]	2,348	[1]
Mutual Funds - Blend [Member] | Fair Value, Inputs, Level 2 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	0	[1]	0	[1]
Mutual Funds - Blend [Member] | Fair Value, Inputs, Level 3 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	0	[1]	0	[1]
Mutual Funds - Foreign Blend [Member]
Assets
Assets, Fair Value Disclosure, Recurring	697	[1]	695	[1]
Mutual Funds - Foreign Blend [Member] | Fair Value, Inputs, Level 1 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	697	[1]	695	[1]
Mutual Funds - Foreign Blend [Member] | Fair Value, Inputs, Level 2 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	0	[1]	0	[1]
Mutual Funds - Foreign Blend [Member] | Fair Value, Inputs, Level 3 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	0	[1]	0	[1]
Mutual Funds - Fixed Income [Member]
Assets
Assets, Fair Value Disclosure, Recurring	547	[1]	544	[1]
Mutual Funds - Fixed Income [Member] | Fair Value, Inputs, Level 1 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	0	[1]	0	[1]
Mutual Funds - Fixed Income [Member] | Fair Value, Inputs, Level 2 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	547	[1]	544	[1]
Mutual Funds - Fixed Income [Member] | Fair Value, Inputs, Level 3 [Member]
Assets
Assets, Fair Value Disclosure, Recurring	$ 0	[1]	$ 0	[1]

[1] Unrealized holding gains (losses) for the three months ended February 2, 2014 was insignificant and was $0.7 million for the three months ended November 3, 2013. These unrealized holding gains (losses) are primarily offset by changes in the deferred compensation plan liability.

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Feb. 02, 2014	Nov. 03, 2013
Current assets:
Cash and cash equivalents	$ 16,599	$ 77,436
Accounts receivable, net	111,646	135,368
Inventories, net	137,626	122,105
Deferred income taxes	30,445	27,736
Income tax receivable	1,065	1,112
Investments in debt and equity securities, at market	4,924	4,892
Prepaid expenses and other	19,334	19,300
Assets held for sale	2,879	2,879
Total current assets	324,518	390,828
Property, plant and equipment, net	257,887	260,918
Goodwill	75,226	75,226
Intangible assets, net	47,962	48,975
Deferred financing costs, net	4,053	4,316
Total assets	709,646	780,263
Current liabilities:
Current portion of long-term debt	2,384	2,384
Note payable	131	613
Accounts payable	105,208	144,553
Accrued compensation and benefits	40,062	40,954
Accrued interest	1,956	1,844
Other accrued expenses	56,548	61,266
Total current liabilities	206,289	251,614
Long-term debt, net	234,791	235,391
Deferred income taxes	30,602	32,185
Other long-term liabilities	8,292	8,315
Total long-term liabilities	273,685	275,891
Stockholders' equity:
Common stock, $.01 par value, 100,000,000 shares authorized; 73,782,566 and 74,793,249 shares issued at February 2, 2014 and November 3, 2013, respectively; 73,571,261 and 74,785,726 shares outstanding at February 2, 2014 and November 3, 2013, respectively	1,460	1,471
Additional paid-in capital	623,630	638,574
Accumulated deficit	(386,993)	(382,735)
Accumulated other comprehensive loss	(4,701)	(4,436)
Treasury stock, at cost (211,305 and 7,523 shares at February 2, 2014 and November 3, 2013, respectively)	(3,724)	(116)
Total stockholders’ equity	229,672	252,758
Total liabilities and stockholders’ equity	$ 709,646	$ 780,263

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OPERATING SEGMENTS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Feb. 02, 2014	Jan. 27, 2013	Nov. 03, 2013
Segment Reporting Information [Line Items]
Total net sales	$ 310,666	$ 297,584
Total External sales	310,666	297,584
Total operating income (loss)	(3,168)	398
Unallocated other expense	(3,596)	(5,850)
Loss before income taxes	(6,764)	(5,452)
Total assets	709,646		780,263
Metal Coil Coating [Member]
Segment Reporting Information [Line Items]
Total net sales	54,267	49,271
Total External sales	24,590	19,221
Total operating income (loss)	6,495	5,542
Total assets	80,974		71,118
Metal Components [Member]
Segment Reporting Information [Line Items]
Total net sales	158,193	153,904
Total External sales	139,346	136,528
Total operating income (loss)	4,111	6,072
Total assets	373,025		380,488
Engineered Building Systems [Member]
Segment Reporting Information [Line Items]
Total net sales	152,237	147,566
Total External sales	146,730	141,835
Total operating income (loss)	1,640	4,041
Total assets	195,102		199,551
Intersegment Sales [Member]
Segment Reporting Information [Line Items]
Total net sales	(54,031)	(53,157)
Corporate Segment [Member]
Segment Reporting Information [Line Items]
Total operating income (loss)	(15,414)	(15,257)
Total assets	$ 60,545		$ 129,106

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) [Parenthetical] (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Feb. 02, 2014	Jan. 27, 2013
Foreign exchange translation gains (losses) and other	$ 0	$ 0

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WARRANTY (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Feb. 02, 2014	Jan. 27, 2013
Warranty [Line Items]
Beginning balance	$ 22,673	$ 23,236
Warranties sold	871	646
Revenue recognized	(471)	(490)
Costs incurred and other	0	0
Ending balance	$ 23,073	$ 23,392

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ACCOUNTING PRONOUNCEMENTS (Policies)

3 Months Ended

Feb. 02, 2014

Accounting Changes and Error Corrections [Abstract]

Adopted Accounting Pronouncements Policy [Policy Text Block]

Adopted Accounting Pronouncements

In February 2013, the FASB issued ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires that companies present, either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. We adopted ASU 2013-02 in our first quarter in fiscal 2014. The adoption of ASU 2013-02 did not have any impact on our consolidated financial statements.

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LONG-TERM DEBT AND NOTE PAYABLE (Details) (USD $) In Thousands, unless otherwise specified	Feb. 02, 2014	Nov. 03, 2013
Debt Instrument [Line Items]
Current portion of long-term debt	$ (2,384)	$ (2,384)
Total long-term debt, less current portion	234,791	235,391
Four Point Two Five Percent Interest Rate On February 2,2014 And November 3, 2013 [Member]
Debt Instrument [Line Items]
Long Term Debt, Carrying Amount	$ 237,175	$ 237,775

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LOSS PER COMMON SHARE (Tables)

3 Months Ended

Feb. 02, 2014

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The reconciliation of the numerator and denominator used for the computation of basic and diluted loss per common share is as follows (in thousands, except per share data):

	Fiscal Three Months Ended
	February 2,		January 27,
	2014		2013
Numerator for Basic and Diluted Loss Per Common Share
Net loss allocated to common shares(1)	$	(4,258)	$	(3,627)
Denominator for Basic and Diluted Loss Per Common Share
Weighted average common shares outstanding for basic and diluted loss per share		73,515		19,237
Basic and Diluted loss per common share	$	(0.06)	$	(0.19)

____________________________________________________________ 

(1) Participating securities consist of the Convertible Preferred Stock, as defined below, for the period prior to its conversion to Common Stock of the Company and the unvested restricted Common Stock related to our Incentive Plan. These participating securities do not have a contractual obligation to share in losses; therefore, no losses were allocated in any periods presented above. The Convertible Preferred Stock was converted into shares of our Common Stock in the third quarter of fiscal 2013. The Unvested Common Stock related to our Incentive Plan will be allocated earnings when applicable.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) In Thousands, except Share data	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]
Balance at Nov. 03, 2013	$ 252,758	$ 1,471	$ 638,574	$ (382,735)	$ (4,436)	$ (116)
Balance (in shares) at Nov. 03, 2013		74,793,249				(7,523)
Treasury stock purchases	(23,325)	0		0	0	(23,325)
Treasury stock purchases (in shares)		0				(1,353,782)
Retirement of treasury shares	0	(12)	(19,705)	0	0	19,717
Retirement of treasury shares (in shares)		(1,150,000)				1,150,000
Issuance of restricted stock	0	1	(1)	0	0	0
Issuance of restricted stock (in shares)		139,317				0
Excess tax benefits from share-based compensation arrangements	1,583	0	1,583	0	0	0
Foreign exchange translation gain (loss) and other	(265)	0	0	0	(265)	0
Share-based compensation	3,179	0	3,179	0	0	0
Net loss	(4,258)	0	0	(4,258)	0	0
Balance at Feb. 02, 2014	$ 229,672	$ 1,460	$ 623,630	$ (386,993)	$ (4,701)	$ (3,724)
Balance (in shares) at Feb. 02, 2014		73,782,566				(211,305)

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CONSOLIDATED BALANCE SHEETS [Parenthetical] (USD $)	Feb. 02, 2014	Nov. 03, 2013
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	73,782,566	74,793,249
Common stock, shares outstanding	73,571,261	74,785,726
Treasury stock, shares	211,305	7,523

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EQUITY INVESTMENT

3 Months Ended

Feb. 02, 2014

Temporary Equity Disclosure [Abstract]

Stockholders Equity Note Disclosure [Text Block]

NOTE 9 — EQUITY INVESTMENT

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

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

On May 14, 2013, the CD&R Funds, the holders of 339,293 Preferred Shares, delivered a formal notice requesting the conversion (“Conversion”) of all of their Preferred Shares into shares of our Common Stock. In connection with the Conversion request, we issued the CD&R Funds 54,136,817 shares of our Common Stock, representing 72.4% of the Common Stock of the Company then outstanding. Under the terms of the Preferred Shares, no consideration was required to be paid by the CD&R Funds to the Company in connection with the Conversion of the Preferred Shares. As a result of the Conversion, the CD&R Funds no longer have rights to default dividends as specified in the Certificate of Designations. The Conversion on May 14, 2013 eliminated all the outstanding Convertible Preferred Stock and increased stockholders’ equity by nearly $620.0 million, returning our stockholders’ equity to a positive balance during our third quarter of fiscal 2013.

On January 15, 2014, the CD&R Funds completed a registered underwritten offering, in which the CD&R Funds offered 8.5 million shares of Common Stock at a price to the public of $18.00 per share (the “Secondary Offering”). The underwriters also exercised their option to purchase 1.275 million additional shares of Common Stock. The aggregate offering price for the 9.775 million shares sold in the Secondary Offering was approximately $167.6 million, net of underwriting discounts and commissions. The CD&R Funds received all of the proceeds from the Secondary Offering and no shares in the Secondary Offering were sold by NCI or any of its officers or directors (although certain of our directors are affiliated with the CD&R Funds). In connection with this Secondary Offering, we incurred approximately $0.7 million in expenses, which were included in engineering, selling, general and administrative expenses in the consolidated statement of operations for the three months ended February 2, 2014. At February 2, 2014 and November 3, 2013, the CD&R Funds owned 58.6% and 72.4%, respectively, of the voting power and Common Stock of the Company.

On January 6, 2014, NCI entered into an agreement with the CD&R Funds to repurchase  1.15 million shares of its Common Stock at the price per share equal to the price per share paid by the underwriters to the CD&R Funds in the underwritten offering (the “Stock Repurchase”). The Stock Repurchase, which was completed at the same time as the Secondary Offering, represented a private, non-underwritten transaction between NCI and the CD&R Funds that was approved and recommended by the Affiliate Transactions Committee of NCI’s board of directors. Following completion of the Stock Repurchase, NCI canceled the shares repurchased from the CD&R Funds, resulting in a $19.7 million decrease in both additional paid in capital and treasury stock.

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Document And Entity Information	3 Months Ended
	Feb. 02, 2014	Mar. 07, 2014
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Feb. 02, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Trading Symbol	NCS
Entity Common Stock, Shares Outstanding		73,570,925
Entity Registrant Name	NCI BUILDING SYSTEMS INC
Entity Central Index Key	0000883902
Current Fiscal Year End Date	--11-03
Entity Filer Category	Accelerated Filer

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FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

3 Months Ended

Feb. 02, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

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

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, restricted cash, trade accounts receivable and accounts payable approximate fair value as of February 2, 2014 and November 3, 2013 because of the relatively short maturity of these instruments. The fair values of the remaining financial instruments not currently recognized at fair value on our consolidated balance sheets at the respective fiscal period ends were (in thousands):

	February 2, 2014				November 3, 2013
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
Credit Agreement, due June 2019	$	237,175	$	237,175	$	237,775	$	237,775

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

Fair Value Measurements

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

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

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

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

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. There have been no changes in the methodologies used at February 2, 2014 and November 3, 2013.

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

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

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

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

The following table summarizes information regarding our financial assets and liabilities that are measured at fair value on a recurring basis as of February 2, 2014, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments in deferred compensation plan(1) :
Money market	$	530	$	—	$	—	$	530
Mutual funds — Growth		763		—		—		763
Mutual funds — Blend		2,387		—		—		2,387
Mutual funds — Foreign blend		697		—		—		697
Mutual funds — Fixed income		—		547		—		547
Total short-term investments in deferred compensation     plan		4,377		547		—		4,924
Total assets	$	4,377	$	547	$	—	$	4,924
Liabilities:
Deferred compensation plan liability	$	—	$	(5,493)	$	—	$	(5,493)
Total liabilities	$	—	$	(5,493)	$	—	$	(5,493)

___________________________________________________________________________________________________________________________________

(1) Unrealized holding gains (losses) for the three months ended February 2, 2014 was insignificant and was $0.7 million for the three months ended November 3, 2013. These unrealized holding gains (losses) are primarily offset by changes in the deferred compensation plan liability.

The following table summarizes information regarding our financial assets that are measured at fair value on a nonrecurring basis as of February 2, 2014, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Assets held for sale(2)	$	—	$	—	$	2,397	$	2,397
Total assets	$	—	$	—	$	2,397	$	2,397

________________________________________________________

(2) Certain assets held for sale are valued at fair value and are measured at fair value on a nonrecurring basis. Assets held for sale are reported at fair value, if, on an individual basis, the fair value of the asset is less than cost. The fair value of assets held for sale is estimated using level 3 inputs, such as broker quotes for like-kind assets or other market indications of a potential selling value which approximates fair value.

The following table summarizes information regarding our financial assets and liabilities that are measured at fair value on a recurring basis as of November 3, 2013, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments in deferred compensation plan(1) :
Money market	$	580	$	—	$	—	$	580
Mutual funds — Growth		725		—		—		725
Mutual funds — Blend		2,348		—		—		2,348
Mutual funds — Foreign blend		695		—		—		695
Mutual funds — Fixed income		—		544		—		544
Total short-term investments in deferred compensation     plan	$	4,348	$	544	$	—	$	4,892
Total assets	$	4,348	$	544	$	—	$	4,892
Liabilities:
Deferred compensation plan liability	$	—	$	(5,036)	$	—	$	(5,036)
Total liabilities	$	—	$	(5,036)	$	—	$	(5,036)

The following table summarizes information regarding our financial assets that are measured at fair value on a nonrecurring basis as of November 3, 2013, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Assets held for sale(3)	$	—	$	—	$	2,397	$	2,397
Total assets	$	—	$	—	$	2,397	$	2,397

________________________________________________________

(3) Certain assets held for sale are valued at fair value and are measured at fair value on a nonrecurring basis. Assets held for sale are reported at fair value, if, on an individual basis, the fair value of the asset is less than cost. The fair value of assets held for sale is estimated using level 3 inputs, such as broker quotes for like-kind assets or other market indications of a potential selling value which approximates fair value.

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Feb. 02, 2014	Jan. 27, 2013
Sales	$ 310,666	$ 297,584
Cost of sales, excluding gain on insurance recovery	252,428	236,715
Gain on insurance recovery	(987)	0
Gross profit	59,225	60,869
Engineering, selling, general and administrative expenses	62,393	60,471
(Loss) income from operations	(3,168)	398
Interest income	26	30
Interest expense	(3,126)	(6,274)
Other income (expense), net	(496)	394
Loss before income taxes	(6,764)	(5,452)
Benefit from income taxes	(2,506)	(1,825)
Net loss	$ (4,258)	$ (3,627)
Loss per common share:
Basic (in dollars per share)	$ (0.06)	$ (0.19)
Diluted (in dollars per share)	$ (0.06)	$ (0.19)
Weighted average number of common shares outstanding:
Basic (in shares)	73,515	19,237
Diluted (in shares)	73,515	19,237

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INVENTORIES

3 Months Ended

Feb. 02, 2014

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

NOTE 4 — INVENTORIES

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

	February 2, 2014		November 3, 2013
Raw materials	$	102,689	$	87,567
Work in process and finished goods		34,937		34,538
	$	137,626	$	122,105

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GAIN ON INSURANCE RECOVERY

3 Months Ended

Feb. 02, 2014

Gain On Insurance Recovery [Abstract]

Gain On Insurance Recovery [Text Block]

NOTE 3 — GAIN ON INSURANCE RECOVERY

On August 6, 2013, our metal coil coating segment facility in Jackson, Mississippi experienced a fire caused by an exhaust fan failure that damaged the roof and walls of two curing ovens. The ovens were repaired and operations resumed in September 2013. In the first quarter of fiscal 2014, we received $1.0 million from insurance proceeds, which have been separately stated as “Gain on insurance recovery” on our consolidated statement of operations. These insurance proceeds were used to purchase assets to rebuild the roof and walls of the affected assets. The new assets were capitalized and depreciated over their estimated useful life of 10 years. Over the next year, we anticipate recouping additional equipment costs from our insurance carriers and will record these amounts when received or assured.

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INVENTORIES (Tables)

3 Months Ended

Feb. 02, 2014

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

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

	February 2, 2014		November 3, 2013
Raw materials	$	102,689	$	87,567
Work in process and finished goods		34,937		34,538
	$	137,626	$	122,105

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INCOME TAXES

3 Months Ended

Feb. 02, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 11 — INCOME TAXES

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

	Fiscal Three Months Ended
	February 2,			January 27,
	2014			2013
Statutory federal income tax rate		35.0	%		35.0	%
State income taxes		3.8	%		3.7	%
Domestic production activities deduction		(1.5)	%		(2.5)	%
Canada valuation allowance		(2.1)	%		(3.3)	%
Non-deductible expenses		2.3	%		1.3	%
Other		(0.4)	%		(0.7)	%
Effective tax rate		37.1	%		33.5	%

The total amount of unrecognized tax benefit at both February 2, 2014 and November 3, 2013 was $0.4 million, all of which would impact our effective tax rate, if recognized. We do not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months.

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WARRANTY

3 Months Ended

Feb. 02, 2014

Warranty [Abstract]

Product Warranty Disclosure [Text Block]

NOTE 7 — WARRANTY

We sell weathertightness warranties to our customers for protection from leaks in our roofing systems related to weather. These warranties range from two years to 20 years. We sell two types of warranties, standard and Single Source™, and three grades of coverage for each. The type and grade of coverage determines the price to the customer. For standard warranties, our responsibility for leaks in a roofing system begins after 24 consecutive leak-free months. For Single Source™ warranties, the roofing system must pass our inspection before warranty coverage will be issued. Inspections are typically performed at three stages of the roofing project: (i) at the project start-up; (ii) at the project mid-point; and (iii) at the project completion. These inspections are included in the cost of the warranty. If the project requires or the customer requests additional inspections, those inspections are billed to the customer. Upon the sale of a warranty, we record the resulting revenue as deferred warranty revenue, which is included in other accrued expenses in our consolidated balance sheets. We recognize deferred warranty revenue over the warranty coverage period in a manner that matches our estimated expenses relating to the warranty.

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

	Fiscal Three Months Ended
	February 2, 2014		January 27, 2013
Beginning balance	$	22,673	$	23,236
Warranties sold		871		646
Revenue recognized		(471)		(490)
Costs incurred and other		––		––
Ending balance	$	23,073	$	23,392

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SHARE-BASED COMPENSATION

3 Months Ended

Feb. 02, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure Of Compensation Related Costs, Share-Based Payments [Text Block]

NOTE 5 — SHARE-BASED COMPENSATION

Our 2003 Long-Term Stock Incentive Plan (“Incentive Plan”) is an equity-based compensation plan that allows us to grant a variety of types of awards, including stock options, restricted stock, restricted stock units, performance share awards, stock appreciation rights, performance share units (“PSUs”), phantom stock awards and cash awards. As of February 2, 2014 and January 27, 2013, and for all periods presented, our share-based awards under this plan have consisted of restricted stock grants, PSUs and stock option grants, none of which can be settled through cash payments. Both our stock options and restricted stock awards are subject only to vesting requirements based on continued employment at the end of a specified time period and typically vest over four years or earlier upon death, disability or a change of control. However, our annual restricted stock awards issued prior to December 15, 2013 also vest upon attainment of age 65 and, only in the case of certain special one-time restricted stock awards, a portion vest on termination without cause or for good reason, as defined by the agreements governing such awards.

Our PSUs vest pro rata if an executive’s employment terminates prior to a three-year performance period ending on June 30, 2015 due to death, disability, or termination by NCI without cause or by the executive with good reason. If the executive’s employment terminates for any other reason prior to the end of the performance period, all PSUs are forfeited. If a change in control of NCI occurs prior to the end of the performance period, the performance period will immediately end at the time of the change in control and an executive will earn a percentage of the target number of PSUs based on the total shareholder return achieved determined by reference to the value of NCI Common Stock at the time of the change in control.

During the three month periods ended February 2, 2014 and January 27, 2013, we granted 5,058 and 2,101 stock options, respectively, and the grant-date fair value of options granted during the three month periods ended February 2, 2014 and January 27, 2013 was $9.09 and $7.22, respectively. There were no options exercised during the three months ended February 2, 2014. Cash received from option exercises from a retired executive due to expiration in accordance with the terms of the agreement was $0.7 million during the three months ended January 27, 2013. The actual tax benefit realized for the tax deductions from option exercises totaled $0.2 million for the three months ended January 27, 2013.

The fair value of restricted stock awards classified as equity awards is based on the Company’s stock price as of the date of grant. During the three months ended February 2, 2014 and January 27, 2013, we granted restricted stock awards with a fair value of $2.6 million or 147,124 shares and $6.3 million or 442,198 shares, respectively.

In December 2013, we granted long-term incentive awards with performance conditions that will be paid 50% in cash and 50% in stock (“Performance Share Awards”). The final number of Performance Share Awards earned for these awards granted in December 2013 will be based on the achievement of free cash flow and earnings per share targets over a three-year period. These Performance Share Awards cliff vest three years from the date of grant and will be earned based on the performance against the pre-established targets for the requisite service period. The Performance Share Awards also vest earlier upon death, disability or a change of control. However, a portion of the awards may vest on termination without cause or after reaching normal retirement age prior to the vesting date, as defined by the agreements governing such awards. The fair value of Performance Share Awards is based on the Company’s stock price as of the date of grant. Compensation cost is recorded based on the probable outcome of the performance conditions associated with the respective shares, as determined by management. During the three months ended February 2, 2014, we granted Performance Share Awards with a fair value of $2.2 million.

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LOSS PER COMMON SHARE

3 Months Ended

Feb. 02, 2014

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

NOTE 6 — LOSS PER COMMON SHARE

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

	Fiscal Three Months Ended
	February 2,		January 27,
	2014		2013
Numerator for Basic and Diluted Loss Per Common Share
Net loss allocated to common shares(1)	$	(4,258)	$	(3,627)
Denominator for Basic and Diluted Loss Per Common Share
Weighted average common shares outstanding for basic and diluted loss per share		73,515		19,237
Basic and Diluted loss per common share	$	(0.06)	$	(0.19)

____________________________________________________________ 

(1) Participating securities consist of the Convertible Preferred Stock, as defined below, for the period prior to its conversion to Common Stock of the Company and the unvested restricted Common Stock related to our Incentive Plan. These participating securities do not have a contractual obligation to share in losses; therefore, no losses were allocated in any periods presented above. The Convertible Preferred Stock was converted into shares of our Common Stock in the third quarter of fiscal 2013. The Unvested Common Stock related to our Incentive Plan will be allocated earnings when applicable.

On May 14, 2013, the Clayton, Dubilier & Rice Fund VIII, L.P. (“CD&R Fund VIII”) and Clayton, Dubilier & Rice Friends & Family Fund VIII, L.P. (collectively, the “CD&R Funds”), the holders of 339,293 Preferred Shares, as defined below, delivered a formal notice requesting the conversion of all of their Preferred Shares into shares of our Common Stock (the “Conversion”). In connection with the Conversion request, we issued the CD&R Funds 54,136,817 shares of our Common Stock. The Conversion eliminated all the outstanding Convertible Preferred Stock during our third quarter of fiscal 2013.

We calculate earnings (loss) per share using the “two-class” method, whereby unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are “participating securities” and, therefore, these participating securities are treated as a separate class in computing earnings (loss) per share. The calculation of earnings (loss) per share for Common Stock presented here excludes the income, if any, attributable to Series B Cumulative Convertible Participating Preferred Stock (the “Convertible Preferred Stock,” and shares thereof, “Preferred Shares”) for the period prior to their Conversion to Common Stock of the Company and the unvested restricted stock awards from the numerator and excludes the dilutive impact of those shares from the denominator. The Convertible Preferred Stock was converted into shares of our Common Stock in the third quarter of fiscal 2013. There was no income amount attributable to unvested restricted stock for the three month period ended February 2, 2014 and no income amount attributable to Preferred Shares or unvested restricted stock for the three month period ended January 27, 2013 as the Preferred Shares and unvested restricted stock do not share in the net losses. However, in periods of net income allocated to common shares, a portion of this income will be allocable to the unvested restricted stock.

For both the three month periods ended February 2, 2014 and January 27, 2013, all options, unvested restricted shares and PSUs were anti-dilutive and, therefore, not included in the diluted loss per common share calculation.

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LONG-TERM DEBT AND NOTE PAYABLE

3 Months Ended

Feb. 02, 2014

Debt Disclosure [Abstract]

Long-Term Debt [Text Block]

NOTE 8 — LONG-TERM DEBT AND NOTE PAYABLE

Debt is comprised of the following (in thousands):

	February 2,		November 3,
	2014		2013
Credit Agreement, due June 2019 (variable interest, at 4.25% on February 2, 2014 and November 3, 2013)	$	237,175	$	237,775
Current portion of long-term debt		(2,384)		(2,384)
Total long-term debt, less current portion	$	234,791	$	235,391

Credit Agreement

On June 24, 2013, the Company entered into Amendment No. 1 (the “Amendment”) to its existing Credit Agreement (the “Credit Agreement”), dated as of June 22, 2012, between NCI, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent and the other financial institutions party thereto from time to time (the “Term Loan Facility”), primarily to extend the maturity date and reduce the interest rate applicable to all of the outstanding term loans under the Term Loan Facility.

Pursuant to the Amendment, the maturity date of $238 million of outstanding term loans (the “Initial Term Loans”) was extended and such loans were converted into a new tranche of term loans (the “Tranche B Term Loans”) that will mature on June 24, 2019 and, prior to such date, will amortize in nominal quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum. Pursuant to the Amendment, the Tranche B Term Loans will bear interest at a floating rate measured by reference to, at NCI’s option, either (i) an adjusted LIBOR not less than 1.00% plus a borrowing margin of 3.25% per annum or (ii) an alternate base rate plus a borrowing margin of 2.25% per annum. At both February 2, 2014 and November 3, 2013, the interest rate on the term loan under our Credit Agreement was 4.25%. Overdue amounts will bear interest at a rate that is 2% higher than the rate otherwise applicable.

The Tranche B Term Loans are secured by the same collateral and guaranteed by the same guarantors as the Initial Term Loans under the Term Loan Facility. Voluntary prepayments of the Tranche B Term Loans are permitted at any time, in minimum principal amounts, without premium or penalty, subject to a 1.00% premium payable in connection with certain repricing transactions within the first six months.

Pursuant to the Amendment, NCI will no longer be subject to a financial covenant requiring NCI to maintain a specified consolidated secured debt to EBITDA leverage ratio for specified periods. The Amendment also includes certain other changes to the Term Loan Facility.

Subject to certain exceptions, the term loan under the Amendment will be subject to mandatory prepayment in an amount equal to:

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

• 50% of annual excess cash flow (as defined in the Amendment), subject to reduction to 0% if specified leverage ratio targets are met.

On June 22, 2012, in connection with the acquisition of Metl-Span LLC, a Texas limited liability company (the “Acquisition”), the Company entered into a Credit Agreement among the Company, as Borrower, Credit Suisse AG, Cayman Islands Branch, as Administrative Agent and Collateral Agent (the “Term Agent”), and the lenders party thereto. The Credit Agreement provided for a term loan credit facility in an aggregate principal amount of $250.0 million. Proceeds from borrowings under the Credit Agreement were used, together with cash on hand, (i) to finance the Acquisition, (ii) to extinguish the existing amended and restated credit agreement, due April 2014 (the “Refinancing”), and (iii) to pay fees and expenses incurred in connection with the Acquisition and the Refinancing.

The Credit Agreement contains a number of covenants that, among other things, will limit or restrict the ability of the Company and its subsidiaries to dispose of assets, incur additional indebtedness, make dividends and other restricted payments, create liens securing indebtedness, engage in mergers and other fundamental transactions, enter into restrictive agreements, amend certain documents in respect of other indebtedness, change the nature of their business and engage in certain transactions with affiliates.

Amended ABL Facility

On May 2, 2012, we entered into an Amended Asset-Based Lending Facility (“Amended ABL Facility”) to (i) permit the Acquisition, the entry by the Company into the Credit Agreement and the incurrence of debt thereunder and the repayment of existing indebtedness under NCI’s existing term loan, (ii) increase the amount available for borrowing thereunder to $150 million (subject to a borrowing base), (iii) increase the amount available for letters of credit thereunder to $30 million, and (iv) extend the final maturity thereunder to May 2, 2017.

Borrowing availability under the Amended ABL Facility is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of qualified cash, eligible inventory and eligible accounts receivable, less certain reserves and subject to certain other adjustments. At February 2, 2014 and November 3, 2013, our excess availability under the Amended ABL Facility was $102.5 million and $123.2 million, respectively. At both February 2, 2014 and November 3, 2013, we had no revolving loans outstanding under the Amended ABL Facility. In addition, at February 2, 2014 and November 3, 2013, standby letters of credit related to certain insurance policies totaling approximately $11.2 million and $10.2 million, respectively, were outstanding but undrawn under the Amended ABL Facility.

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

The Amended ABL Facility includes a minimum fixed charge coverage ratio of one to one, which will apply if we fail to maintain a specified minimum borrowing capacity. The minimum level of borrowing capacity as of February 2, 2014 and November 3, 2013 was $15.4 million and $18.5 million, respectively. Although our Amended ABL Facility did not require any financial covenant compliance, at February 2, 2014 and November 3, 2013, our fixed charge coverage ratio as of those dates, which is calculated on a trailing twelve month basis, was  1.31:1.00 and 2.29:1.00, respectively.

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

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

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

At both February 2, 2014 and November 3, 2013, the interest rate on our Amended ABL Facility was 4.75%. During an event of default, loans under the Amended ABL Facility will bear interest at a rate that is 2% higher than the rate otherwise applicable. “Base Rate” is defined as the higher of the Wells Fargo Bank, N.A. prime rate and the overnight Federal Funds rate plus 0.5% and “LIBOR” is defined as the applicable London Interbank Offered Rate adjusted for reserves.

Deferred Financing Costs

At February 2, 2014 and November 3, 2013, the unamortized balance in deferred financing costs related to both the Credit Agreement and the Amended ABL Facility was $4.1 million and $4.3 million, respectively.

Insurance Note Payable

As of February 2, 2014 and November 3, 2013, we had outstanding a note payable in the amount of $0.1 million and $0.6 million, respectively, related to financed insurance premiums. Insurance premium financings are generally secured by the unearned premiums under such policies.

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LOSS PER COMMON SHARE (Details Textual)	0 Months Ended
	May 14, 2013	Feb. 02, 2014	Nov. 03, 2013
Schedule Of Earning Loss Per Common Share [Line Items]
Common Stock, Shares, Issued		73,782,566	74,793,249
Conversion of Stock, Shares Converted	339,293
CD And R Funds [Member]
Schedule Of Earning Loss Per Common Share [Line Items]
Common Stock, Shares, Issued	54,136,817
Conversion of Stock, Shares Converted	339,293

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CONTINGENCIES

3 Months Ended

Feb. 02, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

NOTE 13 — CONTINGENCIES

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

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LONG-TERM DEBT AND NOTE PAYABLE (Tables)

3 Months Ended

Feb. 02, 2014

Debt Disclosure [Abstract]

Schedule Of Debt [Table Text Block]

Debt is comprised of the following (in thousands):

	February 2,		November 3,
	2014		2013
Credit Agreement, due June 2019 (variable interest, at 4.25% on February 2, 2014 and November 3, 2013)	$	237,175	$	237,775
Current portion of long-term debt		(2,384)		(2,384)
Total long-term debt, less current portion	$	234,791	$	235,391

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FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Details 2) (USD $) In Thousands, unless otherwise specified	Feb. 02, 2014		Nov. 03, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 2,397		$ 2,397	[1]
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0		0	[1]
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0		0	[1]
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	2,397		2,397	[1]
Assets Held-for-sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	2,397	[1]	2,397	[1]
Assets Held-for-sale [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	[1]	0	[1]
Assets Held-for-sale [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	[1]	0	[1]
Assets Held-for-sale [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 2,397	[1]	$ 2,397	[1]

[1] Certain assets held for sale are valued at fair value and are measured at fair value on a nonrecurring basis. Assets held for sale are reported at fair value, if, on an individual basis, the fair value of the asset is less than cost. The fair value of assets held for sale is estimated using level 3 inputs, such as broker quotes for like-kind assets or other market indications of a potential selling value which approximates fair value.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Feb. 02, 2014		Jan. 27, 2013
Comprehensive loss:
Net loss	$ (4,258)		$ (3,627)
Other comprehensive loss, net of tax:
Foreign exchange translation losses and other, net of taxes	(265)	[1]	(24)	[1]
Other comprehensive loss	(265)		(24)
Comprehensive loss	$ (4,523)		$ (3,651)

[1] Foreign exchange translation losses and other are presented net of taxes of $0 in both of the three months ended February 2, 2014 and January 27, 2013.

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ACCOUNTING PRONOUNCEMENTS

3 Months Ended

Feb. 02, 2014

Accounting Changes and Error Corrections [Abstract]

Accounting Changes and Error Corrections [Text Block]

NOTE 2 — ACCOUNTING PRONOUNCEMENTS

Adopted Accounting Pronouncements

In February 2013, the FASB issued ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires that companies present, either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. We adopted ASU 2013-02 in our first quarter in fiscal 2014. The adoption of ASU 2013-02 did not have any impact on our consolidated financial statements.

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FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Feb. 02, 2014

Fair Value Disclosures [Abstract]

Fair Value, by Balance Sheet Grouping [Table Text Block]

The fair values of the remaining financial instruments not currently recognized at fair value on our consolidated balance sheets at the respective fiscal period ends were (in thousands):

	February 2, 2014				November 3, 2013
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
Credit Agreement, due June 2019	$	237,175	$	237,175	$	237,775	$	237,775

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

The following table summarizes information regarding our financial assets and liabilities that are measured at fair value on a recurring basis as of February 2, 2014, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments in deferred compensation plan(1) :
Money market	$	530	$	—	$	—	$	530
Mutual funds — Growth		763		—		—		763
Mutual funds — Blend		2,387		—		—		2,387
Mutual funds — Foreign blend		697		—		—		697
Mutual funds — Fixed income		—		547		—		547
Total short-term investments in deferred compensation     plan		4,377		547		—		4,924
Total assets	$	4,377	$	547	$	—	$	4,924
Liabilities:
Deferred compensation plan liability	$	—	$	(5,493)	$	—	$	(5,493)
Total liabilities	$	—	$	(5,493)	$	—	$	(5,493)

___________________________________________________________________________________________________________________________________

(1) Unrealized holding gains (losses) for the three months ended February 2, 2014 was insignificant and was $0.7 million for the three months ended November 3, 2013. These unrealized holding gains (losses) are primarily offset by changes in the deferred compensation plan liability.

The following table summarizes information regarding our financial assets and liabilities that are measured at fair value on a recurring basis as of November 3, 2013, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Short-term investments in deferred compensation plan(1) :
Money market	$	580	$	—	$	—	$	580
Mutual funds — Growth		725		—		—		725
Mutual funds — Blend		2,348		—		—		2,348
Mutual funds — Foreign blend		695		—		—		695
Mutual funds — Fixed income		—		544		—		544
Total short-term investments in deferred compensation     plan	$	4,348	$	544	$	—	$	4,892
Total assets	$	4,348	$	544	$	—	$	4,892
Liabilities:
Deferred compensation plan liability	$	—	$	(5,036)	$	—	$	(5,036)
Total liabilities	$	—	$	(5,036)	$	—	$	(5,036)

Fair Value Measurements, Nonrecurring [Table Text Block]

The following table summarizes information regarding our financial assets that are measured at fair value on a nonrecurring basis as of February 2, 2014, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Assets held for sale(2)	$	—	$	—	$	2,397	$	2,397
Total assets	$	—	$	—	$	2,397	$	2,397

________________________________________________________

(2) Certain assets held for sale are valued at fair value and are measured at fair value on a nonrecurring basis. Assets held for sale are reported at fair value, if, on an individual basis, the fair value of the asset is less than cost. The fair value of assets held for sale is estimated using level 3 inputs, such as broker quotes for like-kind assets or other market indications of a potential selling value which approximates fair value.

The following table summarizes information regarding our financial assets that are measured at fair value on a nonrecurring basis as of November 3, 2013, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Assets held for sale(3)	$	—	$	—	$	2,397	$	2,397
Total assets	$	—	$	—	$	2,397	$	2,397

________________________________________________________

(3) Certain assets held for sale are valued at fair value and are measured at fair value on a nonrecurring basis. Assets held for sale are reported at fair value, if, on an individual basis, the fair value of the asset is less than cost. The fair value of assets held for sale is estimated using level 3 inputs, such as broker quotes for like-kind assets or other market indications of a potential selling value which approximates fair value.

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EQUITY INVESTMENT (Details Textual) (USD $)	0 Months Ended	3 Months Ended		0 Months Ended					3 Months Ended	12 Months Ended	0 Months Ended
	May 14, 2013	Feb. 02, 2014	Jan. 27, 2013	Jan. 15, 2014 underwriter [Member]	Feb. 02, 2014 Cd and R Fund [Member]	Jan. 06, 2014 Cd and R Fund [Member]	Jan. 15, 2014 Cd and R Fund [Member]	May 14, 2013 Cd and R Fund [Member]	Feb. 02, 2014 Cd and R Fund [Member]	Nov. 03, 2013 Cd and R Fund [Member]	May 14, 2013 Cd and R Fund [Member] Common Stock [Member]	May 14, 2013 Cd and R Fund [Member] Convertible Preferred Stock [Member]	Aug. 14, 2009 Cd and R Fund [Member] Convertible Preferred Stock [Member]	Aug. 14, 2009 Cd and R Fund [Member] Convertible Preferred Stock [Member] Clayton [Member]	Aug. 14, 2009 Cd and R Fund [Member] Convertible Preferred Stock [Member] Dubilier Rice, Inc [Member]
Equity Investment [Line Items]
Transaction Costs Preferred Stock														$ 14,500,000	$ 8,250,000
Selling, General and Administrative Expense, Total		62,393,000	60,471,000						700,000
Stock Repurchased During Period, Value					19,700,000
Stock Issued During Period, Value, New Issues				167,600,000			8,500,000
Stock Repurchased During Period, Shares						1,150,000
Stock Issued During Period, Shares, New Issues				9,775,000								250,000,000	250,000
Approximate Equivalent Number Of Common Stock Reserved for Future Issuance													39.2
Percentage Of Voting Interest Granted													68.40%
Conversion of Stock, Shares Converted	339,293
Conversion of Stock, Shares Issued											54,136,817
Percentage Of Voting Interest Transferred					58.60%			72.40%		72.40%
Stockholders Equity, Period Increase (Decrease)								$ 620.0
Par Value Of Stock Issued							$ 18.00
Additional Number Of Shares Issued							1,275,000

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OPERATING SEGMENTS

3 Months Ended

Feb. 02, 2014

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

NOTE 12 — OPERATING SEGMENTS

Operating segments are defined as components of an enterprise that engage in business activities and by which discrete financial information is available that is evaluated on a regular basis by the chief operating decision maker to make decisions about how to allocate resources to the segment and assess the performance of the segment. We have three operating segments: metal coil coating; metal components; and engineered building systems. All operating segments operate primarily in the nonresidential construction market. Sales and earnings are influenced by general economic conditions, the level of nonresidential construction activity, metal roof repair and retrofit demand and the availability and terms of financing available for construction. Products of our operating segments use similar basic raw materials. The metal coil coating segment consists of cleaning, treating, painting and slitting continuous steel coils before the steel is fabricated for use by construction and industrial users. The metal components segment products include metal roof and wall panels, doors, metal partitions, metal trim, insulated panels and other related accessories. The engineered building systems segment includes the manufacturing of main frames, Long Bay ^® Systems and value-added engineering and drafting, which are typically not part of metal components or metal coil coating products or services. The operating segments follow the same accounting policies used for our consolidated financial statements.

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

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

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

	Fiscal Three Months Ended
	February 2,		January 27,
	2014		2013
Total sales:
Metal coil coating	$	54,267	$	49,271
Metal components		158,193		153,904
Engineered building systems		152,237		147,566
Intersegment sales		(54,031)		(53,157)
Total net sales	$	310,666	$	297,584
External sales:
Metal coil coating	$	24,590	$	19,221
Metal components		139,346		136,528
Engineered building systems		146,730		141,835
Total net sales	$	310,666	$	297,584
Operating income (loss):
Metal coil coating	$	6,495	$	5,542
Metal components		4,111		6,072
Engineered building systems		1,640		4,041
Corporate		(15,414)		(15,257)
Total operating income (loss)	$	(3,168)	$	398
Unallocated other expense		(3,596)		(5,850)
Loss before income taxes	$	(6,764)	$	(5,452)

	February 2,		November 3,
	2014		2013
Total assets:
Metal coil coating	$	80,974	$	71,118
Metal components		373,025		380,488
Engineered building systems		195,102		199,551
Corporate		60,545		129,106
Total assets	$	709,646	$	780,263