##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended August 1, 2010
 or
 o
    
    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
(State or other jurisdiction of 
incorporation or organization)
    
    76-0127701
(I.R.S. Employer
Identification No.)10943 N. Sam Houston Parkway W. 
Houston, TX
(Address of principal executive offices)
    
    77064
(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)
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   Common Stock, $.01 par value19,566,547 shares as of September 3, 2010




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##### 



TABLE OF CONTENTS
  
 PAGEPart I  Financial InformationItem 1. Unaudited Consolidated Financial Statements
    
    
    3Consolidated Balance Sheets August 1, 2010 and November 1, 2009
    
    
    3Consolidated Statements of Operations Fiscal Three and Nine Month Periods Ended August 1, 2010
and August 2, 2009
    
    
    4Consolidated Statements of Cash Flows Fiscal Nine Months Ended August 1, 2010 and August 2, 2009
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    30Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    47Item 4. Controls and Procedures
    
    
    50Part II  Other InformationItem 1. Legal Proceedings
    
    
    51Item 1A. Risk Factors
    
    
    51Item 6. Exhibits
    
    
    51EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    Unaudited Consolidated Financial Statements.
 NCI BUILDING SYSTEMS, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except share data)
(2009 As Adjusted (Note 2))
 August 1,
    
    
    November 1,2010
    
    
    2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    53,643
    
    
    $
    90,419Restricted cash, current
    
    
    2,838
    
    
    
    5,154Accounts receivable, net
    
    
    81,834
    
    
    
    82,889Inventories, net
    
    
    105,311
    
    
    
    71,537Deferred income taxes
    
    
    19,428
    
    
    
    18,787Income tax receivable
    
    
    13,523
    
    
    
    27,622Investments in debt and equity securities, at market
    
    
    3,500
    
    
    
    3,359Prepaid expenses and other
    
    
    13,550
    
    
    
    14,494Assets held for sale
    
    
    6,304
    
    
    
    4,963Total current assets
    
    
    299,931
    
    
    
    319,224Property, plant and equipment, net
    
    
    219,202
    
    
    
    232,510Goodwill
    
    
    5,200
    
    
    
    5,200Intangible assets, net
    
    
    26,827
    
    
    
    28,370Restricted cash, net of current portion
    
    
    
    
    
    
    7,825Other assets
    
    
    17,420
    
    
    
    21,389Total assets
    
    $
    568,580
    
    
    $
    614,518LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    14,164Note payable
    
    
    723
    
    
    
    481Accounts payable
    
    
    71,728
    
    
    
    71,252Accrued compensation and benefits
    
    
    30,917
    
    
    
    37,215Accrued interest
    
    
    1,621
    
    
    
    776Other accrued expenses
    
    
    46,397
    
    
    
    54,797Total current liabilities
    
    
    151,386
    
    
    
    178,685Long-term debt
    
    
    136,301
    
    
    
    136,085Deferred income taxes
    
    
    18,749
    
    
    
    18,848Other long-term liabilities
    
    
    7,077
    
    
    
    8,007Total long-term liabilities
    
    
    162,127
    
    
    
    162,940Series B cumulative convertible participating preferred stock
    
    
    247,993
    
    
    
    222,815Stockholders equity:Common stock, $.01 par value, 100,000,000 shares
authorized; 19,566,547 and 18,082,029 issued and
outstanding
    
    
    909
    
    
    
    904Additional paid-in capital
    
    
    266,326
    
    
    
    288,093Accumulated deficit
    
    
    (251,501
    )
    
    
    (230,060
    )Accumulated other comprehensive loss
    
    
    (8,660
    )
    
    
    (8,859
    )Total stockholders equity
    
    
    7,074
    
    
    
    50,078Total liabilities and stockholders equity
    
    $
    568,580
    
    
    $
    614,518
 See accompanying notes to consolidated financial statements.
 3




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##### Table of Contents



NCI BUILDING SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
(Unaudited)
(2009 As Adjusted (Note 2))
 Fiscal Three Months Ended
    
    
    Fiscal Nine Months EndedAugust 1,
    
    
    August 2,
    
    
    August 1,
    
    
    August 2,2010
    
    
    2009
    
    
    2010
    
    
    2009Sales
    
    $
    245,292
    
    
    $
    237,860
    
    
    $
    629,072
    
    
    $
    721,944Cost of sales, excluding lower of cost or market
adjustment and asset impairments (recovery)
    
    
    194,999
    
    
    
    176,565
    
    
    
    504,765
    
    
    
    566,053Lower of cost or market adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,986Asset impairments (recovery)
    
    
    (64
    )
    
    
    26
    
    
    
    849
    
    
    
    5,944Gross profit
    
    
    50,357
    
    
    
    61,269
    
    
    
    123,458
    
    
    
    109,961Selling, general and administrative expenses
    
    
    48,730
    
    
    
    49,829
    
    
    
    142,367
    
    
    
    159,533Goodwill and other intangible asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    622,564Restructuring charge
    
    
    551
    
    
    
    1,213
    
    
    
    1,904
    
    
    
    7,488Income (loss) from operations
    
    
    1,076
    
    
    
    10,227
    
    
    
    (20,813
    )
    
    
    (679,624
    )Interest income
    
    
    32
    
    
    
    81
    
    
    
    69
    
    
    
    360Interest expense
    
    
    (4,424
    )
    
    
    (6,568
    )
    
    
    (13,638
    )
    
    
    (19,638
    )Debt extinguishment and refinancing costs
    
    
    
    
    
    
    (401
    )
    
    
    (174
    )
    
    
    (1,030
    )Other income (expense), net
    
    
    (204
    )
    
    
    1,093
    
    
    
    1,579
    
    
    
    1,569Income (loss) before income taxes
    
    
    (3,520
    )
    
    
    4,432
    
    
    
    (32,977
    )
    
    
    (698,363
    )Provision (benefit) for income taxes
    
    
    (221
    )
    
    
    1,825
    
    
    
    (11,536
    )
    
    
    (49,418
    )Net income (loss)
    
    $
    (3,299
    )
    
    $
    2,607
    
    
    $
    (21,441
    )
    
    $
    (648,945
    )Convertible preferred stock dividends and accretion
    
    
    8,637
    
    
    
    
    
    
    
    25,178
    
    
    
    Convertible preferred stock beneficial conversion feature
    
    
    4,583
    
    
    
    
    
    
    
    246,052
    
    
    
    Net income (loss) applicable to common shares
    
    $
    (16,519
    )
    
    $
    2,607
    
    
    $
    (292,671
    )
    
    $
    (648,945
    )Earnings (loss) per share:Basic
    
    $
    (0.90
    )
    
    $
    0.65
    
    
    $
    (16.10
    )
    
    $
    (166.67
    )Diluted
    
    $
    (0.90
    )
    
    $
    0.65
    
    
    $
    (16.10
    )
    
    $
    (166.67
    )Weighted average number of common shares outstanding:Basic
    
    
    18,274
    
    
    
    3,899
    
    
    
    18,184
    
    
    
    3,894Diluted
    
    
    18,274
    
    
    
    3,899
    
    
    
    18,184
    
    
    
    3,894
 See accompanying notes to consolidated financial statements.
 4




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NCI BUILDING SYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
(Unaudited)
(2009 As Adjusted (Note 2))
 Fiscal Nine Months EndedAugust 1,
    
    
    August 2,2010
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (21,441
    )
    
    $
    (648,945
    )Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:Depreciation and amortization
    
    
    26,017
    
    
    
    25,298Non-cash interest expense on Convertible Notes
    
    
    
    
    
    
    6,297Share-based compensation expense
    
    
    3,578
    
    
    
    3,789Debt extinguishment and refinancing costs
    
    
    174
    
    
    
    1,030Gain on embedded derivative
    
    
    (930
    )
    
    
    (Gain) loss on sale of property, plant and equipment
    
    
    138
    
    
    
    (771
    )Lower of cost or market reserve
    
    
    
    
    
    
    39,986Provision for doubtful accounts
    
    
    131
    
    
    
    1,224Benefit for deferred income taxes
    
    
    (580
    )
    
    
    (24,576
    )Asset impairments, net
    
    
    849
    
    
    
    5,944Impairment of goodwill and intangible assets
    
    
    
    
    
    
    622,564Changes in operating assets and liabilities, net of effect of acquisitions:Accounts receivable
    
    
    924
    
    
    
    81,080Inventories
    
    
    (33,774
    )
    
    
    75,321Income tax receivable
    
    
    15,016
    
    
    
    (26,590
    )Prepaid expenses and other
    
    
    1,424
    
    
    
    (1,662
    )Accounts payable
    
    
    649
    
    
    
    (35,036
    )Accrued expenses
    
    
    (13,868
    )
    
    
    (48,550
    )Other, net
    
    
    948
    
    
    
    (803
    )Net cash (used in) provided by operating activities
    
    
    (20,745
    )
    
    
    75,600Cash flows from investing activities:Capital expenditures
    
    
    (11,258
    )
    
    
    (17,877
    )Proceeds from sale of property, plant and equipment
    
    
    760
    
    
    
    537Net cash used in investing activities
    
    
    (10,498
    )
    
    
    (17,340
    )Cash flows from financing activities:Decrease (increase) in restricted cash
    
    
    10,141
    
    
    
    (13,224
    )Proceeds from ABL Facility
    
    
    241
    
    
    
    Payments on ABL Facility
    
    
    (246
    )
    
    
    Payment of convertible notes
    
    
    (59
    )
    
    
    Payments on long-term debt
    
    
    (13,885
    )
    
    
    (690
    )Payment of refinancing costs
    
    
    (50
    )
    
    
    (5,513
    )Payments on note payable
    
    
    (1,289
    )
    
    
    (1,213
    )Proceeds from stock options exercised
    
    
    
    
    
    
    12Purchase of treasury stock
    
    
    (381
    )
    
    
    (451
    )Net cash (used in) provided by financing activities
    
    
    (5,528
    )
    
    
    (21,079
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (5
    )
    
    
    (6
    )Net (decrease) increase in cash and cash equivalents
    
    
    (36,776
    )
    
    
    37,175Cash and cash equivalents at beginning of period
    
    
    90,419
    
    
    
    68,201Cash and cash equivalents at end of period
    
    $
    53,643
    
    
    $
    105,376
 See accompanying notes to consolidated financial statements.
 5




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##### Table of Contents



NCI BUILDING SYSTEMS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 1, 2010
(Unaudited)
(2009 As Adjusted (Note 2))
 NOTE 1  BASIS OF PRESENTATION
      NOTE 2  ACCOUNTING PRONOUNCEMENTS
 Adopted Accounting Pronouncements
 Debt with Conversion and Other Options and Earnings per Share Adoption
 Debt with Conversion and Other Options
  6




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Interest Debt with Conversion and Other Options
 Earnings
per Share
   Fiscal Three Months Ended
    
    
    Fiscal Nine Months EndedAugust 2, 2009
    
    
    August 2, 2009Originally
    
    
    As
    
    
    Originally
    
    
    AsReported
    
    
    Adjusted
    
    
    Reported
    
    
    AdjustedCost of sales, excluding lower of cost or
market adjustment and asset impairments
    
    $
    177,333
    
    
    $
    176,565
    
    
    $
    568,773
    
    
    $
    566,053Gross profit
    
    
    61,080
    
    
    
    61,269
    
    
    
    108,819
    
    
    
    109,961Selling, general and administrative expenses
    
    
    49,603
    
    
    
    49,829
    
    
    
    158,564
    
    
    
    159,533Income (loss) from operations
    
    
    10,264
    
    
    
    10,227
    
    
    
    (679,797
    )
    
    
    (679,624
    )Interest expense
    
    
    (4,369
    )
    
    
    (6,568
    )
    
    
    (13,029
    )
    
    
    (19,638
    )Income (loss) before income taxes
    
    
    6,646
    
    
    
    4,432
    
    
    
    (691,709
    )
    
    
    (698,363
    )Provision (benefit) for income taxes
    
    
    2,675
    
    
    
    1,825
    
    
    
    (46,863
    )
    
    
    (49,418
    )Net income (loss)
    
    
    3,971
    
    
    
    2,607
    
    
    
    (644,846
    )
    
    
    (648,945
    )Net income (loss) applicable to common shares
    
    $
    3,971
    
    
    $
    2,607
    
    
    $
    (644,846
    )
    
    $
    (648,945
    )Earnings (loss) per share:Basic
    
    
    1.02
    
    
    
    0.65
    
    
    
    (165.62
    )
    
    
    (166.67
    )Diluted
    
    
    1.02
    
    
    
    0.65
    
    
    
    (165.62
    )
    
    
    (166.67
    )Weighted average number of common shares outstanding:Basic
    
    
    3,899
    
    
    
    3,899
    
    
    
    3,894
    
    
    
    3,894Diluted
    
    
    3,899
    
    
    
    3,899
    
    
    
    3,894
    
    
    
    3,894
  November 1, 2009Originally
    
    
    AsReported
    
    
    AdjustedProperty, plant and equipment, net
    
    $
    231,840
    
    
    $
    232,510Total assets
    
    
    613,848
    
    
    
    614,518Deferred income tax liability
    
    
    18,591
    
    
    
    18,848Total long-term liabilities
    
    
    162,683
    
    
    
    162,940Additional paid-in capital
    
    
    263,620
    
    
    
    288,093Retained earnings
    
    
    (206,000
    )
    
    
    (230,060
    )Total stockholders equity
    
    
    49,665
    
    
    
    50,078Total liabilities and stockholders equity
    
    
    613,848
    
    
    
    614,518
 7




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Fair Value Measurements and Disclosures Adoption
 Fair
Value Measurements and Disclosures
  Multiple-Deliverable Revenue Arrangements Adoption
 Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements  a consensus of the FASB Emerging Issues Task Force
 Improving Disclosures about Fair Value Measurements Adoption
 Improving Disclosures about Fair Value
Measurements
 Recent Accounting Pronouncements
 Defined Benefit Plans  General
 NOTE 3  PLANT RESTRUCTURING AND ASSET IMPAIRMENT
  8




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Fiscal Three Months EndedCost
    
    
    Remaining
    
    
    TotalIncurred
    
    
    Anticipated
    
    
    AnticipatedFiscal 2008
    
    
    Fiscal 2009
    
    
    January 31, 2010
    
    
    May 2, 2010
    
    
    August 1, 2010
    
    
    to Date
    
    
    Cost
    
    
    CostGeneralSeverance
    
    $
    87
    
    
    $
    2,987
    
    
    $
    2
    
    
    $
    16
    
    
    $
    
    
    
    $
    3,092
    
    
    $
    
    
    
    $
    3,092Asset Relocation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Cash Costs
    
    
    
    
    
    
    57
    
    
    
    23
    
    
    
    50
    
    
    
    15
    
    
    
    145
    
    
    
    
    
    
    
    145Asset Impairments (Recovery)
    
    
    
    
    
    
    1,234
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    1,238
    
    
    
    
    
    
    
    1,238Total General Program
    
    
    87
    
    
    
    4,278
    
    
    
    25
    
    
    
    70
    
    
    
    15
    
    
    
    4,475
    
    
    
    
    
    
    
    4,475Repurposing and Plant Closing Phase ISeverance
    
    $
    106
    
    
    $
    1,016
    
    
    $
    58
    
    
    $
    
    
    
    $
    44
    
    
    $
    1,224
    
    
    $
    
    
    
    $
    1,224Asset Relocation
    
    
    
    
    
    
    303
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    303
    
    
    
    
    
    
    
    303Other Cash Costs
    
    
    
    
    
    
    199
    
    
    
    122
    
    
    
    80
    
    
    
    83
    
    
    
    484
    
    
    
    47
    
    
    
    531Asset Impairments (Recovery)
    
    
    157
    
    
    
    1,634
    
    
    
    1,029
    
    
    
    
    
    
    
    (58
    )
    
    
    2,762
    
    
    
    
    
    
    
    2,762Total Repurposing and Plant Closing
Phase I
    
    
    263
    
    
    
    3,152
    
    
    
    1,209
    
    
    
    80
    
    
    
    69
    
    
    
    4,773
    
    
    
    47
    
    
    
    4,820Plant Closing Phase IISeverance
    
    $
    
    
    
    $
    399
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    399
    
    
    $
    
    
    
    $
    399Asset Relocation
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    22Other Cash Costs
    
    
    
    
    
    
    442
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    442
    
    
    
    
    
    
    
    442Asset Impairments (Recovery)
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    30Total Plant Closing Phase II
    
    
    
    
    
    
    893
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    893
    
    
    
    
    
    
    
    893Plant Closing Phase IIISeverance
    
    $
    
    
    
    $
    2,349
    
    
    $
    10
    
    
    $
    
    
    
    $
    
    
    
    $
    2,359
    
    
    $
    
    
    
    $
    2,359Asset Relocation
    
    
    
    
    
    
    219
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    245
    
    
    
    122
    
    
    
    367Other Cash Costs
    
    
    
    
    
    
    1,060
    
    
    
    309
    
    
    
    662
    
    
    
    409
    
    
    
    2,440
    
    
    
    301
    
    
    
    2,741Asset Impairments (Recovery)
    
    
    
    
    
    
    3,393
    
    
    
    
    
    
    
    (120
    )
    
    
    (5
    )
    
    
    3,268
    
    
    
    
    
    
    
    3,268Total Plant Closing Phase III
    
    
    
    
    
    
    7,021
    
    
    
    319
    
    
    
    568
    
    
    
    404
    
    
    
    8,312
    
    
    
    423
    
    
    
    8,735Total All Programs
    
    $
    350
    
    
    $
    15,344
    
    
    $
    1,553
    
    
    $
    718
    
    
    $
    488
    
    
    $
    18,453
    
    
    $
    470
    
    
    $
    18,923Restructuring by SegmentEngineered Building Systems
    
    
    61
    
    
    
    7,522
    
    
    
    415
    
    
    
    673
    
    
    
    401
    
    
    
    9,072
    
    
    
    317
    
    
    
    9,389Metal Components
    
    
    106
    
    
    
    1,216
    
    
    
    109
    
    
    
    156
    
    
    
    150
    
    
    
    1,737
    
    
    
    153
    
    
    
    1,890Metal Coil Coating
    
    
    
    
    
    
    103
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    
    
    
    
    103Corporate
    
    
    27
    
    
    
    211
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    238
    
    
    
    
    
    
    
    238Total
    
    $
    194
    
    
    $
    9,052
    
    
    $
    524
    
    
    $
    829
    
    
    $
    551
    
    
    $
    11,150
    
    
    $
    470
    
    
    $
    11,620Asset Impairments (Recovery) by
Segment(1)Engineered Building Systems
    
    
    157
    
    
    
    4,316
    
    
    
    1,029
    
    
    
    (120
    )
    
    
    15
    
    
    
    5,397
    
    
    
    
    
    
    
    5,397Metal Components
    
    
    
    
    
    
    766
    
    
    
    
    
    
    
    4
    
    
    
    (78
    )
    
    
    692
    
    
    
    
    
    
    
    692Metal Coil Coating
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    
    
    
    
    
    1,209
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,209
    
    
    
    
    
    
    
    1,209Total
    
    $
    157
    
    
    $
    6,291
    
    
    $
    1,029
    
    
    $
    (116
    )
    
    $
    (63
    )
    
    $
    7,298
    
    
    $
    
    
    
    $
    7,298
 9




---



##### Table of Contents



(1)
    
    The fair value of assets was determined based on prices of similar assets in similar
condition, adjusted for their remaining useful life.  Employee orseverancecosts
    
    
    Other costs
    
    
    TotalBalance at November 1, 2009
    
    $
    1,387
    
    
    $
    
    
    
    $
    1,387Costs incurred
    
    
    130
    
    
    
    1,774
    
    
    
    1,904Cash payments
    
    
    (1,406
    )
    
    
    (1,774
    )
    
    
    (3,180
    )Other adjustments (1)
    
    
    17
    
    
    
    
    
    
    
    17Balance at August 1, 2010
    
    $
    128
    
    
    $
    
    
    
    $
    128
 
 (1)
    
    Relates to the foreign currency translation.  NOTE 4  RESTRICTED CASH
  NOTE 5  INVENTORIES
  August 1, 2010
    
    
    November 1, 2009Raw materials
    
    $
    74,839
    
    
    $
    48,081Work in process and finished goods
    
    
    30,472
    
    
    
    23,456$
    105,311
    
    
    $
    71,537
  NOTE 6  GOODWILL AND OTHER INTANGIBLE ASSETS
  Metal
    
    
    
    
    
    
    EngineeredCoil
    
    
    Metal
    
    
    BuildingCoating
    
    
    Components
    
    
    Systems
    
    
    TotalBalance as of November 2, 2008
    
    $
    98,959
    
    
    $
    147,240
    
    
    $
    370,427
    
    
    $
    616,626Impairments
    
    
    (59,854
    )
    
    
    (116,132
    )
    
    
    (332,904
    )
    
    
    (508,890
    )Balance as of February 1, 2009
    
    $
    39,105
    
    
    $
    31,108
    
    
    $
    37,523
    
    
    $
    107,736Impairments
    
    
    (39,105
    )
    
    
    (31,108
    )
    
    
    (32,323
    )
    
    
    (102,536
    )Balance as of August 1, 2010,
November 1, 2009 and August 2,
2009
    
    $
    
    
    
    $
    
    
    
    $
    5,200
    
    
    $
    5,200
 10




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##### Table of Contents



NOTE 7  SHARE-BASED COMPENSATION
  11




---



##### Table of Contents



Expected volatility
    
    
    46.05
    %Expected term (in years)
    
    
    5.75Risk-free interest rate
    
    
    2.44
    %
  December 11, 2009
    
    
    March 5, 2010Expected volatility
    
    
    46.05
    %
    
    
    47.01
    %Expected term (in years)
    
    
    5.75
    
    
    
    5.52Risk-free interest rate
    
    
    2.44
    %
    
    
    2.49
    %
   12




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##### Table of Contents



Weighted
    
    
    WeightedAverage
    
    
    Average
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Remaining
    
    
    IntrinsicShares
    
    
    Price
    
    
    Life
    
    
    ValueBalance November 1, 2009
    
    
    130
    
    
    $
    140.65Granted
    
    
    1,782
    
    
    
    8.85Cancelled
    
    
    (10
    )
    
    
    (113.26
    )Exercised
    
    
    
    
    
    
    Balance August 1, 2010
    
    
    1,902
    
    
    $
    17.33
    
    
    9.0 years
    
    $
    1,105Exercisable at August 1, 2010
    
    
    120
    
    
    $
    142.96
    
    
    3.6 years
    
    
    
  Options OutstandingWeighted Average
    
    
    Weighted AverageNumber of Options
    
    
    Remaining Life
    
    
    Exercise Price1,803
    
    
    9.3 years
    
    
    $
    9.7643
    
    
    3.6 years
    
    
    
    136.3248
    
    
    4.1 years
    
    
    
    161.688
    
    
    5.4 years
    
    
    
    225.211,902
    
    
    9.0 years
    
    
    $
    17.33
  Options ExercisableWeighted AverageNumber of Options
    
    
    Exercise Price22
    
    
    $
    84.5543
    
    
    
    136.3248
    
    
    
    161.677
    
    
    
    225.22120
    
    
    $
    142.96
 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. The fair value of restricted stock awards previously
classified as liability awards on March 5, 2010 is based on the Companys stock price as of March
5, 2010, the date the contingency was resolved. In addition, certain of our December 11, 2009
restricted stock grants contain restrictions on the employees ability to sell their shares prior
to January 1, 2013, or if earlier, the employees death, disability, or qualifying termination (as
defined in the Incentive Plan), or upon a change in control of the Company. Restricted stock
transactions during the nine months ended August 1, 2010 were as follows (in thousands, except
weighted average grant prices):Weighted AverageNumber of Shares
    
    
    Grant PriceBalance November 1, 2009
    
    
    204
    
    
    $
    80.57Granted
    
    
    1,499
    
    
    
    9.10Distributed
    
    
    
    
    
    
    Forfeited
    
    
    (4
    )
    
    
    9.10Balance August 1, 2010
    
    
    1,699
    
    
    $
    17.69
  13




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##### Table of Contents



NOTE 8  EARNINGS (LOSS) PER COMMON SHARE
  Fiscal Three Months Ended
    
    
    Fiscal Nine Months EndedAugust 1, 2010
    
    
    August 2, 2009
    
    
    August 1, 2010
    
    
    August 2, 2009Numerator for Basic and Diluted Earnings
(Loss) Per ShareNet income (loss) allocated to common shares (1)
    
    $
    (16,519
    )
    
    $
    2,607
    
    
    $
    (292,671
    )
    
    $
    (648,945
    )Denominator for Diluted Earnings (Loss) Per ShareWeighted average common shares outstanding for
basic earnings (loss) per share
    
    
    18,274
    
    
    
    3,899
    
    
    
    18,184
    
    
    
    3,894Common stock equivalents:Employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unvested restricted stock awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adjusted weighted average shares and assumed
conversions for diluted earnings (loss) per
share assuming dilution
    
    
    18,274
    
    
    
    3,899
    
    
    
    18,184
    
    
    
    3,894Earnings (loss) per share:Basic
    
    $
    (0.90
    )
    
    $
    0.65
    
    
    $
    (16.10
    )
    
    $
    (166.67
    )Diluted
    
    $
    (0.90
    )
    
    $
    0.65
    
    
    $
    (16.10
    )
    
    $
    (166.67
    )
 
 (1)
    
    Participating securities consist of the holders of the Convertible Preferred Stock, as
defined below, and the unvested restricted Common Stock related to our Incentive Plan.
Participating securities do not have a contractual obligation to share in losses; therefore,
no losses were allocated in both periods presented above. These participating securities will
be allocated earnings when applicable. Earnings Per Share
   14




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NOTE 9  WARRANTY
   Fiscal Nine Months EndedAugust 1, 2010
    
    
    August 2, 2009Beginning balance
    
    $
    16,116
    
    
    $
    16,485Warranties sold
    
    
    2,028
    
    
    
    1,894Revenue recognized
    
    
    (1,024
    )
    
    
    (904
    )Costs incurred
    
    
    (313
    )
    
    
    (233
    )Adjustment (1)
    
    
    
    
    
    
    (1,313
    )Other
    
    
    (119
    )
    
    
    (117
    )Ending balance
    
    $
    16,688
    
    
    $
    15,812
 
 (1)
    
    This adjustment relates to certain of the RCC warranty claims liabilities that were updated
based on a change in our claims processing procedures and revised analysis. This change was
recorded as a reduction of cost of sales in our Consolidated Statement of Operations during
the first quarter of fiscal 2009. NOTE 10  DEBT AND NOTE PAYABLE
  August 1, 2010
    
    
    November 1, 2009Amended and Restated Term Loan Credit Agreement (due April 2014, interest at
8.0% at both August 1, 2010 and November 1, 2009)
    
    $
    136,301
    
    
    $
    150,000Asset-Based Lending Facility (due April 2014, interest at 6.75% at August 1, 2010)
    
    
    
    
    
    
    2.125% Convertible Senior Subordinated Notes, due November 2024
    
    
    
    
    
    
    59Industrial Revenue Bond
    
    
    
    
    
    
    190136,301
    
    
    
    150,249Current portion of long-term debt
    
    
    
    
    
    
    (14,164
    )Long-term debt, less current portion
    
    $
    136,301
    
    
    $
    $136,085
  August 2, 2010 to October 31, 2010
    
    $
    Fiscal 2010
    
    
    Fiscal 2011
    
    
    Fiscal 2012
    
    
    Fiscal 2013 and thereafter
    
    
    136,301$
    136,301
 15




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Amended Credit Agreement
       
    
    the net cash proceeds of (1) certain asset sales, (2) certain debt offerings and (3) certain
insurance recovery and condemnation events;
 16




---



##### Table of Contents




    
    50% of annual excess cash flow (as defined in the Amended Credit Agreement) for any fiscal
year ending on or after October 31, 2010, unless a specified leverage ratio target is met; and
    
    the greater of $10.0 million and 50% of certain tax refunds received by the Company resulting
from the carry back of the 2009 net operating loss received by the Company.
   ABL Facility
      17




---



##### Table of Contents



Convertible Notes
  August 1, 2010
    
    
    November 1, 2009Principal amount of Convertible Notes
    
    $
    
    
    
    $
    59Unamortized discount
    
    
    
    
    
    
    Net carrying amount
    
    
    
    
    
    
    59Additional paid-in capital
    
    
    24,473
    
    
    
    24,473
   18




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##### Table of Contents



Fiscal Three Months Ended
    
    
    Fiscal Nine Months EndedAugust 1, 2010
    
    
    August 2, 2009
    
    
    August 1, 2010
    
    
    August 2, 2009Contractual coupon interest
    
    $
    
    
    
    $
    967
    
    
    $
    0.2
    
    
    $
    3,049Amortization of discount on Convertible Notes
    
    
    
    
    
    
    2,099
    
    
    
    
    
    
    
    6,297Interest expense
    
    $
    
    
    
    $
    3,066
    
    
    $
    0.2
    
    
    $
    9,346Effective interest rate
    
    
    7.5
    %
    
    
    7.5
    %
    
    
    7.5
    %
    
    
    7.5
    %
 Embedded Derivatives Debt with Conversion and
Other Options (ASC 470-20),
 Insurance Note payable
  NOTE 11  SERIES B CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK
 The CD&R Equity Investment
  Certain Terms of the Convertible Preferred Stock
  Liquidation Value.
 19




---



##### Table of Contents



Rank.
 Dividends.
      20




---



##### Table of Contents



Convertibility and Anti-Dilution Adjustments.
  Milestone Redemption Right.
 Change of Control Redemption Right.
  Vote.
 21




---



##### Table of Contents



Restriction on Dividends on Junior Securities.
 Accounting for Convertible Preferred Stock
 Derivatives and Hedging Distinguishing Liabilities from Equity,
    22




---



##### Table of Contents



Debt with Conversion
and Other Options
    NOTE 12  DERIVATIVE INSTRUMENTS AND HEDGING STRATEGY
 Interest Rate Risk
   23




---



##### Table of Contents



Embedded Derivative Bifurcated From Convertible Preferred Stock (See Note 11)
    Liability DerivativesAugust 1, 2010
    
    
    November 1, 2009Balance Sheet Location
    
    
    Fair Value
    
    
    Fair ValueDerivatives not
designated as hedging
instruments under ASC
815:Interest rate contract
    
    Other accrued expenses
    
    
    $
    
    
    
    $
    2,208Embedded derivative
    
    Other accrued expenses
    
    
    
    111
    
    
    
    1,041Total derivatives
    
    
    
    
    
    $
    111
    
    
    $
    3,249
  Location of Loss
    
    
    
    
    
    
    Amount of Loss Reclassified fromReclassified from Accumulated
    
    
    OCI into Loss (Effective Portion)Derivative in ASC 815 Cash
    
    OCI into Loss
    
    
    Fiscal Three Months Ended
    
    
    Fiscal Nine Months EndedFlow Hedging Relationship
    
    (Effective Portion)
    
    
    August 1, 2010
    
    
    August 2, 2009
    
    
    August 1, 2010
    
    
    August 2, 2009Interest rate contract
    
    Interest expense
    
    $
    
    
    
    $
    (878
    )
    
    $
    
    
    
    $
    (1,756
    )
  24




---



##### Table of Contents



Amount of Income Recognized
    
    
    Amount of Income Recognizedin Income (Loss) on Derivatives
    
    
    in Income (Loss) on Derivatives
    
    
    Location of IncomeDerivatives Not Designated as Hedging
    
    Fiscal Three Months Ended
    
    
    Fiscal Nine Months Ended
    
    
    Recognized in IncomeInstruments Under ASC 815
    
    August 1, 2010
    
    
    August 2, 2009
    
    
    August 1, 2010
    
    
    August 2, 2009
    
    
    (Loss) on DerivativesInterest rate contract
    
    $
    413
    
    
    $
    
    
    
    $
    1,248
    
    
    $
    
    
    
    Interest expenseEmbedded derivative
    
    $
    7
    
    
    $
    
    
    
    $
    930
    
    
    $
    
    
    
    Other income, net
 NOTE 13  FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
 Fair Value of Financial Instruments
  August 1, 2010
    
    
    November 1, 2009Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair Value(in thousands)
    
    
    (in thousands)2.125% Convertible Senior Subordinated Notes
    
    $
    
    
    
    $
    
    
    
    $
    59
    
    
    $
    97Amended Credit Agreement
    
    $
    136,301
    
    
    $
    132,898
    
    
    $
    150,000
    
    
    $
    138,000
  Fair Value Measurements
      Assets and Liabilities Measured at Fair Value as ofAugust 1, 2010Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssets:Short-term investments in deferred compensation plan(1)
    
    $
    3,500
    
    
    $
    
    
    
    $
    
    
    
    $
    3,500Assets held for sale
    
    
    
    
    
    
    6,304
    
    
    
    
    
    
    
    6,304Total assets
    
    $
    3,500
    
    
    $
    6,304
    
    
    $
    
    
    
    $
    9,804Liabilities:Deferred compensation plan liability
    
    $
    3,688
    
    
    $
    
    
    
    $
    
    
    
    $
    3,688Interest rate contract
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Embedded derivative
    
    
    
    
    
    
    
    
    
    
    111
    
    
    
    111Total liabilities
    
    $
    3,688
    
    
    $
    
    
    
    $
    111
    
    
    $
    3,799
 25




---



##### Table of Contents



Assets and Liabilities Measured at Fair Value asof November 1, 2009Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssets:Short-term investments in deferred compensation plan(1)
    
    $
    3,359
    
    
    $
    
    
    
    $
    
    
    
    $
    3,359Assets held for sale
    
    
    
    
    
    
    4,963
    
    
    
    
    
    
    
    4,963Total assets
    
    $
    3,359
    
    
    $
    4,963
    
    
    $
    
    
    
    $
    8,322Liabilities:Deferred compensation plan liability
    
    $
    (3,480
    )
    
    $
    
    
    
    $
    
    
    
    $
    (3,480
    )Interest rate contract
    
    
    
    
    
    
    (2,208
    )
    
    
    
    
    
    
    (2,208
    )Embedded derivative
    
    
    
    
    
    
    
    
    
    
    (1,041
    )
    
    
    (1,041
    )Total liabilities
    
    $
    (3,480
    )
    
    $
    (2,208
    )
    
    $
    (1,041
    )
    
    $
    (6,729
    )
 
 (1)
    
    Unrealized holding gains (losses) for the three and nine month periods ended August 1,
2010 were $(0.1) million and $0.2 million, respectively. Unrealized holding gains (losses)
for both the three and nine month periods ended August 2, 2009 was $0.5 million. These
unrealized holding gains (losses) are primarily offset by changes in the deferred
compensation plan liability.  August 1,2010Beginning balance
    
    $
    (1,041
    )Realized gains (losses) (1)
    
    
    930Ending balance
    
    $
    (111
    )
  August 1, 2010
    
    
    November 1, 2009Risk-free interest rate
    
    
    1.1% - 3.6
    %
    
    
    0.3% - 3.6
    %Discount rate
    
    
    6.2% - 9.8
    %
    
    
    6.1% - 9.8
    %Credit spread
    
    
    5.1% - 6.3
    %
    
    
    5.1% - 6.2
    %Probability of failure to have common shares authorized by June 30, 2010
    
    
    
    
    
    
    1.0
    %
 NOTE 14  INCOME TAXES
  Fiscal Three Months Ended
    
    
    Fiscal Nine Months EndedAugust 1, 2010
    
    
    August 2, 2009
    
    
    August 1, 2010
    
    
    August 2, 2009Statutory federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income taxes
    
    
    (35.3
    )%
    
    
    3.4
    %
    
    
    (2.0
    )%
    
    
    3.4
    %Non-deductible goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31.3
    )%Canada valuation allowance
    
    
    3.9
    %
    
    
    (0.7
    )%
    
    
    0.4
    %
    
    
    (0.1
    )%Non-deductible expenses
    
    
    (2.9
    )%
    
    
    7.0
    %
    
    
    (1.2
    )%
    
    
    (0.3
    )%Statutory expiration of FIN
48 liability
    
    
    6.3
    %
    
    
    
    
    
    
    0.7
    %
    
    
    Other
    
    
    (0.7
    )%
    
    
    (3.5
    )%
    
    
    2.1
    %
    
    
    0.4
    %Effective tax rate
    
    
    6.3
    %
    
    
    41.2
    %
    
    
    35.0
    %
    
    
    7.1
    %
 26




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##### Table of Contents



Goodwill and Other
Intangible Assets
  NOTE 15  COMPREHENSIVE LOSS
  Fiscal Three Months Ended
    
    
    Fiscal Nine Months EndedAugust 1, 2010
    
    
    August 2, 2009
    
    
    August 1, 2010
    
    
    August 2, 2009Net income (loss)
    
    $
    (3,299
    )
    
    $
    2,607
    
    
    $
    (21,441
    )
    
    $
    (648,945
    )Foreign exchange translation gain (loss) and other, net of tax
    
    
    10
    
    
    
    (3
    )
    
    
    199
    
    
    
    (5
    )Loss in fair value of interest rate swap, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (554
    )Reclassification adjustment for losses on derivative
instruments recognized during the period, net of tax
    
    
    
    
    
    
    541
    
    
    
    
    
    
    
    1,082Comprehensive loss
    
    $
    (3,289
    )
    
    $
    3,145
    
    
    $
    (21,242
    )
    
    $
    (648,422
    )
  August 1, 2010
    
    
    November 1, 2009Foreign exchange translation adjustments
    
    $
    590
    
    
    $
    391Defined benefit pension plan
    
    
    (9,250
    )
    
    
    (9,250
    )Accumulated other comprehensive loss
    
    $
    (8,660
    )
    
    $
    (8,859
    )
  Fiscal Three Months Ended August 1, 2010
    
    
    Fiscal Three Months Ended August 2, 2009Before-Tax
    
    
    Tax (Expense)
    
    
    Net-of-Tax
    
    
    Before-Tax
    
    
    Tax (Expense)
    
    
    Net-of-TaxAmount
    
    
    or Benefit
    
    
    Amount
    
    
    Amount
    
    
    or Benefit
    
    
    AmountForeign exchange translation gain (loss) and other
    
    $
    15
    
    
    $
    (5
    )
    
    $
    10
    
    
    $
    (5
    )
    
    $
    2
    
    
    $
    (3
    )Reclassification adjustment for losses on derivative
instruments recognized during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    878
    
    
    
    (337
    )
    
    
    541Other Comprehensive income (loss)
    
    $
    15
    
    
    $
    (5
    )
    
    $
    10
    
    
    $
    873
    
    
    $
    (335
    )
    
    $
    538
 Fiscal Nine Months Ended August 1, 2010
    
    
    Fiscal Nine Months Ended August 2, 2009Before-Tax
    
    
    Tax (Expense)
    
    
    Net-of-Tax
    
    
    Before-Tax
    
    
    Tax (Expense)
    
    
    Net-of-TaxAmount
    
    
    or Benefit
    
    
    Amount
    
    
    Amount
    
    
    or Benefit
    
    
    AmountForeign exchange translation gain (loss) and other
    
    $
    197
    
    
    $
    2
    
    
    $
    199
    
    
    $
    (6
    )
    
    $
    1
    
    
    $
    (5
    )Loss in fair value of interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (900
    )
    
    
    346
    
    
    
    (554
    )Reclassification adjustment for losses on derivative
instruments recognized during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,756
    
    
    
    (674
    )
    
    
    1,082Other Comprehensive income (loss)
    
    $
    197
    
    
    $
    2
    
    
    $
    199
    
    
    $
    850
    
    
    $
    (327
    )
    
    $
    523
 27




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##### Table of Contents



NOTE 16  BUSINESS SEGMENTS
 ®
    Fiscal Three Months Ended
    
    
    Fiscal Nine Months EndedAugust 1, 2010
    
    
    August 2, 2009
    
    
    August 1, 2010
    
    
    August 2, 2009Total sales:Metal coil coating
    
    $
    51,200
    
    
    $
    44,256
    
    
    $
    134,990
    
    
    $
    125,283Metal components
    
    
    115,507
    
    
    
    113,216
    
    
    
    297,382
    
    
    
    336,250Engineered building systems
    
    
    141,446
    
    
    
    129,819
    
    
    
    356,787
    
    
    
    410,462Intersegment sales
    
    
    (62,861
    )
    
    
    (49,431
    )
    
    
    (160,087
    )
    
    
    (150,051
    )Total sales
    
    $
    245,292
    
    
    $
    237,860
    
    
    $
    629,072
    
    
    $
    721,944External sales:Metal coil coating
    
    $
    17,885
    
    
    $
    16,060
    
    
    $
    47,789
    
    
    $
    39,697Metal components
    
    
    89,417
    
    
    
    96,082
    
    
    
    233,931
    
    
    
    283,804Engineered building systems
    
    
    137,990
    
    
    
    125,718
    
    
    
    347,352
    
    
    
    398,443Total sales
    
    $
    245,292
    
    
    $
    237,860
    
    
    $
    629,072
    
    
    $
    721,944Operating income (loss):Metal coil coating
    
    $
    5,201
    
    
    $
    1,016
    
    
    $
    12,412
    
    
    $
    (105,726
    )Metal components
    
    
    10,567
    
    
    
    13,128
    
    
    
    17,971
    
    
    
    (143,596
    )Engineered building systems
    
    
    (3,112
    )
    
    
    9,042
    
    
    
    (14,579
    )
    
    
    (389,522
    )Corporate
    
    
    (11,580
    )
    
    
    (12,959
    )
    
    
    (36,617
    )
    
    
    (40,780
    )Total operating income (loss)
    
    $
    1,076
    
    
    $
    10,227
    
    
    $
    (20,813
    )
    
    $
    (679,624
    )Unallocated other expense
    
    
    (4,596
    )
    
    
    (5,795
    )
    
    
    (12,164
    )
    
    
    (18,739
    )Income (loss) before income taxes
    
    $
    (3,520
    )
    
    $
    4,432
    
    
    $
    (32,977
    )
    
    $
    (698,363
    )
 August 1, 2010
    
    
    November 1, 2009Total assets:Metal coil coating
    
    $
    64,924
    
    
    $
    57,254Metal components
    
    
    180,064
    
    
    
    160,123Engineered building systems
    
    
    220,580
    
    
    
    241,396Corporate
    
    
    103,012
    
    
    
    155,745Total assets
    
    $
    568,580
    
    
    $
    614,518
 28




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##### Table of Contents



NOTE 17  CONTINGENCIES
  29




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##### Table of Contents



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. 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 1, 2009.
 FORWARD LOOKING STATEMENTS
  
    
    industry cyclicality and seasonality and adverse weather conditions;
    
    general economic conditions affecting the construction industry;
    
    the current financial crisis and U.S. recession;
    
    the current challenges in the credit market;
    
    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 in connection with our debt;
    
    the current economic and credit conditions severely affecting the Companys operations;
    
    recognition of asset impairment charges;
    
    raw material pricing and supply;
    
    the ability to make strategic acquisitions accretive to earnings;
    
    the fluctuations in customer demand and other patterns;
    
    environmental cleanups, investigations, claims and liabilities;
    
    competitive activity and pricing pressure;
 30




---



##### Table of Contents




    
    the volatility of the Companys stock price;
    
    the substantial rights, seniority and dilutive effect on our common stockholders of the
Convertible Preferred Stock issued to the CD&R Funds;
    
    increases in energy costs;
    
    breaches of our information security system security measures;
    
    hazards that may cause personal injury or property damage, thereby subjecting us to
liabilities and possible losses, which may not be covered by insurance;
    
    changes in laws or regulations;
    
    costs and other effects of legal and administrative proceedings, settlements,
investigations, claims and other matters; and
    
    other risks detailed under the caption Risk Factors in Part II, Item 1A of this report
and in our Annual Report on Form 10-K as filed with the SEC.
  OVERVIEW
    Third Fiscal Quarter
   31




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##### Table of Contents



®
   Industry Conditions
      32




---



##### Table of Contents



RESULTS OF OPERATIONS
 Debt with Conversion and Other Options
  ®
   33




---



##### Table of Contents



Fiscal Three Months Ended
    
    
    Fiscal Nine Months EndedAugust 1, 2010
    
    
    August 2, 2009
    
    
    August 1, 2010
    
    
    August 2, 2009%
    
    
    
    
    
    
    %
    
    
    
    
    
    
    %
    
    
    
    
    
    
    %Sales:Metal coil coating
    
    $
    51,200
    
    
    
    21
    
    
    $
    44,256
    
    
    
    19
    
    
    $
    134,990
    
    
    
    21
    
    
    $
    125,283
    
    
    
    17Metal components
    
    
    115,507
    
    
    
    47
    
    
    
    113,216
    
    
    
    48
    
    
    
    297,382
    
    
    
    47
    
    
    
    336,250
    
    
    
    47Engineered building systems
    
    
    141,446
    
    
    
    58
    
    
    
    129,819
    
    
    
    54
    
    
    
    356,787
    
    
    
    57
    
    
    
    410,462
    
    
    
    57Intersegment sales
    
    
    (62,861
    )
    
    
    (26
    )
    
    
    (49,431
    )
    
    
    (21
    )
    
    
    (160,087
    )
    
    
    (25
    )
    
    
    (150,051
    )
    
    
    (21
    )Total sales
    
    $
    245,292
    
    
    
    100
    
    
    $
    237,860
    
    
    
    100
    
    
    $
    629,072
    
    
    
    100
    
    
    $
    721,944
    
    
    
    100Operating income (loss):Metal coil coating
    
    $
    5,201
    
    
    
    
    
    
    $
    1,016
    
    
    
    
    
    
    $
    12,412
    
    
    
    
    
    
    $
    (105,726
    )Metal components
    
    
    10,567
    
    
    
    
    
    
    
    13,128
    
    
    
    
    
    
    
    17,971
    
    
    
    
    
    
    
    (143,596
    )Engineered building systems
    
    
    (3,112
    )
    
    
    
    
    
    
    9,042
    
    
    
    
    
    
    
    (14,579
    )
    
    
    
    
    
    
    (389,522
    )Corporate
    
    
    (11,580
    )
    
    
    
    
    
    
    (12,959
    )
    
    
    
    
    
    
    (36,617
    )
    
    
    
    
    
    
    (40,780
    )Total operating income (loss)
    
    $
    1,076
    
    
    
    
    
    
    $
    10,227
    
    
    
    
    
    
    $
    (20,813
    )
    
    
    
    
    
    $
    (679,624
    )Unallocated other expense
    
    
    (4,596
    )
    
    
    
    
    
    
    (5,795
    )
    
    
    
    
    
    
    (12,164
    )
    
    
    
    
    
    
    (18,739
    )Income (loss) before income taxes
    
    $
    (3,520
    )
    
    
    
    
    
    $
    4,432
    
    
    
    
    
    
    $
    (32,977
    )
    
    
    
    
    
    $
    (698,363
    )
 FISCAL THREE MONTHS ENDED AUGUST 1, 2010 COMPARED TO FISCAL THREE MONTHS ENDED AUGUST 2, 2009
 Consolidated sales
 Consolidated cost of sales
 Metal coil coating sales
  Metal components sales
 34




---



##### Table of Contents



Engineered building systems sales
  Consolidated selling, general and administrative expenses,
 Consolidated restructuring charge
 Consolidated interest expense
 Other income (expense), net
 Consolidated provision (benefit) for income taxes
 35




---



##### Table of Contents



Consolidated Convertible Preferred Stock dividends and accretion
 Consolidated Convertible Preferred Stock beneficial conversion feature
 Diluted income ( loss) per share
 FISCAL NINE MONTHS ENDED AUGUST 1, 2010 COMPARED TO FISCAL NINE MONTHS ENDED AUGUST 2, 2009
 Consolidated sales
 Consolidated cost of sales
 36




---



##### Table of Contents



Metal coil coating sales
  Metal components sales
  Engineered building systems sales
  37




---



##### Table of Contents



Consolidated selling, general and administrative expenses,
 Consolidated goodwill and other intangible asset impairment
 Consolidated restructuring charge
 Consolidated interest expense
 Consolidated debt extinguishment and refinancing costs
 Consolidated benefit for income taxes
 Consolidated Convertible Preferred Stock dividends and accretion
 38




---



##### Table of Contents



Consolidated Convertible Preferred Stock beneficial conversion feature
 Diluted loss per share
 LIQUIDITY AND CAPITAL RESOURCES
 General
  Convertible Preferred Stock
   39




---



##### Table of Contents



Debt
  
    
    we entered into the Amended Credit Agreement (the Amended Credit Agreement), which was
due to mature on June 18, 2010, by repaying approximately $143 million in principal amount
of the approximately $293 million in principal amount of the term loans then outstanding and
amending the terms and extending the maturity of the remaining $150 million balance of the
term loans. The term loan requires quarterly principal payments in an amount equal to 0.25%
of the principal amount of the term loan outstanding as of the last day of each calendar
quarter and a final payment of approximately $136.3 million in principal at maturity on
April 20, 2014.
    
    we entered into the ABL Facility pursuant to a loan and security agreement, with a
maximum available amount of up to $125 million which has an additional $50 million
incremental credit facility. The ABL Facility replaces the revolving credit facility and
letters of credit sub-facility under our Credit Agreement, which expired on June 18, 2009.
The ABL Facility has a maturity of April 20, 2014 and includes borrowing capacity of up to
$25 million for letters of credit and up to $10 million for swingline borrowings.
    
    we completed the Exchange Offer to acquire the $180 million of our then-outstanding
Convertible Notes for an aggregate combination of $90.0 million
in cash and 14.0 million shares of Common Stock.
 40




---



##### Table of Contents



Amended Credit Agreement.
     
    
    the net cash proceeds of (1) certain asset sales, (2) certain debt offerings and (3)
certain insurance recovery and condemnation events;
    
    50% of annual excess cash flow (as defined in the Amended Credit Agreement) for any
fiscal year ending on or after October 31, 2010, unless a specified leverage ratio target is
met; and
    
    the greater of $10.0 million and 50% of certain 2009 tax refunds received by the Company
resulting from the carry back of the 2009 net operating loss received by the Company.
  41




---



##### Table of Contents



ABL Facility.
     42




---



##### Table of Contents



Cash Flow
      43




---



##### Table of Contents



NON-GAAP MEASURES
   For the Three Months Ended August 1, 2010EngineeredMetal Coil
    
    
    Metal
    
    
    BuildingCoating
    
    
    Components
    
    
    Systems
    
    
    Corporate
    
    
    ConsolidatedOperating income (loss), GAAP basis
    
    $
    5,201
    
    
    $
    10,567
    
    
    $
    (3,112
    )
    
    $
    (11,580
    )
    
    $
    1,076Goodwill and other intangible asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lower of cost or market charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Asset impairments (recovery)
    
    
    
    
    
    
    (78
    )
    
    
    14
    
    
    
    
    
    
    
    (64
    )Restructuring charges
    
    
    
    
    
    
    150
    
    
    
    401
    
    
    
    
    
    
    
    551Adjusted operating income (loss)
    
    $
    5,201
    
    
    $
    10,639
    
    
    $
    (2,697
    )
    
    $
    (11,580
    )
    
    $
    1,563
 For the Three Months Ended August 2, 2009EngineeredMetal Coil
    
    
    Metal
    
    
    BuildingCoating
    
    
    Components
    
    
    Systems
    
    
    Corporate
    
    
    ConsolidatedOperating income (loss), GAAP basis (1)
    
    $
    1,016
    
    
    $
    13,128
    
    
    $
    9,042
    
    
    $
    (12,959
    )
    
    $
    10,227Goodwill and other intangible asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lower of cost or market charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Asset impairments (recovery)
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    26Restructuring charges
    
    
    30
    
    
    
    70
    
    
    
    1,109
    
    
    
    4
    
    
    
    1,213Adjusted operating income (loss)
    
    $
    1,046
    
    
    $
    13,198
    
    
    $
    10,177
    
    
    $
    (12,955
    )
    
    $
    11,466
 For the Nine Months Ended August 1, 2010EngineeredMetal Coil
    
    
    Metal
    
    
    BuildingCoating
    
    
    Components
    
    
    Systems
    
    
    Corporate
    
    
    ConsolidatedOperating income (loss), GAAP basis
    
    $
    12,412
    
    
    $
    17,971
    
    
    $
    (14,579
    )
    
    $
    (36,617
    )
    
    $
    (20,813
    )Goodwill and other intangible asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lower of cost or market charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Asset impairments (recovery)
    
    
    
    
    
    
    (74
    )
    
    
    923
    
    
    
    
    
    
    
    849Restructuring charges
    
    
    
    
    
    
    415
    
    
    
    1,489
    
    
    
    
    
    
    
    1,904Adjusted operating income (loss)
    
    $
    12,412
    
    
    $
    18,312
    
    
    $
    (12,167
    )
    
    $
    (36,617
    )
    
    $
    (18,060
    )
 For the Nine Months Ended August 2, 2009EngineeredMetal Coil
    
    
    Metal
    
    
    BuildingCoating
    
    
    Components
    
    
    Systems
    
    
    Corporate
    
    
    ConsolidatedOperating income (loss), GAAP basis (1)
    
    $
    (105,726
    )
    
    $
    (143,596
    )
    
    $
    (389,522
    )
    
    $
    (40,780
    )
    
    $
    (679,624
    )Goodwill and other intangible asset impairment
    
    
    98,959
    
    
    
    147,239
    
    
    
    376,366
    
    
    
    
    
    
    
    622,564Lower of cost or market charge
    
    
    8,102
    
    
    
    17,152
    
    
    
    14,732
    
    
    
    
    
    
    
    39,986Asset impairments (recovery)
    
    
    
    
    
    
    714
    
    
    
    4,021
    
    
    
    1,209
    
    
    
    5,944Restructuring charges
    
    
    103
    
    
    
    1,232
    
    
    
    5,971
    
    
    
    182
    
    
    
    7,488Adjusted operating income (loss)
    
    $
    1,438
    
    
    $
    22,741
    
    
    $
    11,568
    
    
    $
    (39,389
    )
    
    $
    (3,642
    )
 44




---



##### Table of Contents



(1)
    
    Amounts have been retrospectively adjusted as a result of the adoption, effective November 2,
2009, of ASC Subtopic 470-20, Debt with Conversion and Other Options.  Fiscal Three Months Ended
    
    
    Fiscal Nine Months EndedAugust 1,
    
    
    August 2,
    
    
    August 1,
    
    
    August 2,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss) per diluted common share, GAAP
basis (1)
    
    $
    (0.90
    )
    
    $
    0.65
    
    
    $
    (16.10
    )
    
    $
    (166.67
    )Goodwill and other intangible asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154.07Debt extinguishment and refinancing costs
    
    
    
    
    
    
    0.07
    
    
    
    0.01
    
    
    
    0.17Lower of cost or market adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.63Convertible preferred stock beneficial conversion feature
    
    
    0.25
    
    
    
    
    
    
    
    13.53
    
    
    
    Restructuring charge
    
    
    0.01
    
    
    
    0.22
    
    
    
    0.07
    
    
    
    1.26Asset impairments (recovery)
    
    
    
    
    
    
    0.01
    
    
    
    0.03
    
    
    
    0.99Gain on embedded derivative
    
    
    
    
    
    
    
    
    
    
    (0.03
    )
    
    
    Adjusted diluted earnings (loss) per common share
    
    $
    (0.64
    )
    
    $
    0.95
    
    
    $
    (2.49
    )
    
    $
    (3.55
    )
 Fiscal Three Months Ended
    
    
    Fiscal Nine Months EndedAugust 1,
    
    
    August 2,
    
    
    August 1,
    
    
    August 2,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss) applicable to common shares, GAAP
basis (1)
    
    $
    (16,519
    )
    
    $
    2,607
    
    
    $
    (292,671
    )
    
    $
    (648,945
    )Goodwill and other intangible asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    599,966Debt extinguishment and refinancing costs
    
    
    
    
    
    
    260
    
    
    
    113
    
    
    
    669Lower of cost or market adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,773Convertible preferred stock beneficial conversion feature
    
    
    4,583
    
    
    
    
    
    
    
    246,052
    
    
    
    Restructuring charge
    
    
    358
    
    
    
    816
    
    
    
    1,237
    
    
    
    4,861Asset impairments (recovery)
    
    
    (42
    )
    
    
    26
    
    
    
    552
    
    
    
    3,840Gain on embedded derivative
    
    
    (5
    )
    
    
    
    
    
    
    (605
    )
    
    
    Adjusted net income (loss) applicable to common shares
    
    $
    (11,625
    )
    
    $
    3,709
    
    
    $
    (45,322
    )
    
    $
    (13,836
    )
 
 (1)
    
    2009 amounts have been retrospectively adjusted as a result of the adoption, effective
November 2, 2009, of ASC Subtopic 470-20, Debt with Conversion and Other Options,and ASC
Subtopic 260-10, Earnings per Share.  Trailing 124th Quarter
    
    
    1st Quarter
    
    
    2nd Quarter
    
    
    3rd Quarter
    
    
    MonthsNovember 1, 2009
    
    
    January 31, 2010
    
    
    May 2, 2010
    
    
    August 1, 2010
    
    
    August 1, 2010Net Income (Loss) (1)
    
    $
    (101,851
    )
    
    $
    (10,486
    )
    
    $
    (7,656
    )
    
    $
    (3,299
    )
    
    $
    (123,292
    )Add:Depreciation and amortization
    
    
    7,640
    
    
    
    7,521
    
    
    
    7,480
    
    
    
    7,457
    
    
    
    30,098Consolidated interest expense, net
    
    
    9,578
    
    
    
    4,507
    
    
    
    4,670
    
    
    
    4,392
    
    
    
    23,147Provision for taxes
    
    
    (7,495
    )
    
    
    (5,779
    )
    
    
    (5,536
    )
    
    
    (221
    )
    
    
    (19,031
    )Non-cash charges:Stock-based compensation
    
    
    1,045
    
    
    
    801
    
    
    
    1,403
    
    
    
    1,374
    
    
    
    4,623Goodwill and intangible impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Asset impairments (recovery)
    
    
    347
    
    
    
    1,029
    
    
    
    (116
    )
    
    
    (64
    )
    
    
    1,196Lower of cost or market charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Embedded derivative
    
    
    
    
    
    
    (919
    )
    
    
    (4
    )
    
    
    (7
    )
    
    
    (930
    )Cash restructuring charges
    
    
    1,564
    
    
    
    524
    
    
    
    829
    
    
    
    551
    
    
    
    3,468Transaction costs
    
    
    107,718
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    107,892Adjusted EBITDA
    
    $
    18,546
    
    
    $
    (2,628
    )
    
    $
    1,070
    
    
    $
    10,183
    
    
    $
    27,171
 45




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Trailing 124th Quarter
    
    
    1st Quarter
    
    
    2nd Quarter
    
    
    3rd Quarter
    
    
    MonthsNovember 2, 2008
    
    
    February 1, 2009
    
    
    May 3, 2009
    
    
    August 2, 2009
    
    
    August 2, 2009Net Income (Loss) (1)
    
    $
    23,218
    
    
    $
    (529,981
    )
    
    $
    (121,571
    )
    
    $
    2,607
    
    
    $
    (625,727
    )Add:Depreciation and amortization
    
    
    8,334
    
    
    
    8,324
    
    
    
    8,436
    
    
    
    7,586
    
    
    
    32,680Consolidated interest expense, net
    
    
    7,761
    
    
    
    6,623
    
    
    
    6,168
    
    
    
    6,487
    
    
    
    27,039Provision for taxes
    
    
    17,092
    
    
    
    (34,861
    )
    
    
    (16,382
    )
    
    
    1,825
    
    
    
    (32,326
    )Non-cash charges:Stock-based compensation
    
    
    1,628
    
    
    
    1,372
    
    
    
    1,177
    
    
    
    1,241
    
    
    
    5,418Goodwill and intangible impairment
    
    
    
    
    
    
    517,628
    
    
    
    104,936
    
    
    
    
    
    
    
    622,564Asset impairments (recovery)
    
    
    157
    
    
    
    623
    
    
    
    5,295
    
    
    
    26
    
    
    
    6,101Lower of cost or market charges
    
    
    2,739
    
    
    
    29,378
    
    
    
    10,608
    
    
    
    
    
    
    
    42,725Embedded derivative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash restructuring charges
    
    
    150
    
    
    
    2,479
    
    
    
    3,796
    
    
    
    1,213
    
    
    
    7,638Transaction costs
    
    
    
    
    
    
    
    
    
    
    629
    
    
    
    401
    
    
    
    1,030Adjusted EBITDA
    
    $
    61,079
    
    
    $
    1,585
    
    
    $
    3,092
    
    
    $
    21,386
    
    
    $
    87,142
 
 (1)
    
    Amounts have been retrospectively adjusted as a result of the adoption, effective November 2,
2009, of ASC Subtopic 470-20, Debt with Conversion and Other Options,and ASC Subtopic 260-10,
Earnings per Share. OFF-BALANCE SHEET ARRANGEMENTS
  CONTRACTUAL OBLIGATIONS
   CRITICAL ACCOUNTING POLICIES
  Property, plant and equipment valuation
 46




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##### Table of Contents



Beneficial conversion features and dividend policy.
  RECENT ACCOUNTING PRONOUNCEMENTS
 Defined Benefit Plans  General
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 Steel Prices
  47




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48




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Interest Rates
    Foreign Currency Exchange Rates
   49




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Item 4. Controls and Procedures.
 Disclosure Controls and Procedures.
  Internal Control over Financial Reporting
  50




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NCI BUILDING SYSTEMS, INC.
 
 PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
  
 Item 1A.
    
    Risk Factors.
  Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
  ISSUER PURCHASES OF EQUITY SECURITIES
 (c) Total
    
    
    (d) MaximumNumber of Shares
    
    
    Number ofPurchased as Part
    
    
    Shares that May(b) Average
    
    
    of Publicly
    
    
    Yet be Purchased(a) Total Number of
    
    
    Price Paid per
    
    
    Announced Plans
    
    
    Under the Plans orPeriod
    
    Shares Purchased(1)
    
    
    Share (or Unit)
    
    
    or Programs
    
    
    Programs(2)May 3, 2010 to May 30, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    129,218May 31, 2010 to June 27, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129,218June 28, 2010 to August 1, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129,218Total
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    129,218
 
 (1)
    
    These shares were shares of restricted stock that were withheld to satisfy tax-withholding
obligations arising in connection with the vesting of awards of restricted stock. The required
withholding is calculated using the closing sales price reported by the NYSE as of the vesting
date.(2)
    
    Our board of directors has authorized a stock repurchase program. Subject to applicable
federal securities law, such purchases occur at times and in amounts that we deem appropriate.
Shares repurchased are used primarily for later re-issuance in connection with our equity
incentive and 401(k) profit sharing plans. On February 28, 2007, we publicly announced that
our board of directors authorized the repurchase of an additional 0.2 million shares of our
Common Stock. There is no time limit on the duration of the program. During the first nine
months of fiscal 2010, we did not repurchase any shares of Common Stock. At August 1, 2010,
there were 0.1 million shares of Common Stock remaining authorized for repurchase under the
program. 
 Item 6.
    
    Exhibits.
   51




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SIGNATURES
  NCI BUILDING SYSTEMS, INC.
(Registrant)Date: September 8, 2010
    By:
    /s/ Mark E. JohnsonMark E. JohnsonExecutive Vice President,Chief Financial Officer and Treasurer 52




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##### Table of Contents



Index to Exhibits
 2.2
    
    Lock-Up and Voting Agreement, dated as of August 31, 2009, by and among NCI Building Systems,
Inc. and the signatories thereto (incorporated by reference to exhibit 2.2 to Form 8-K filed
with the SEC on September 1, 2009)2.3
    
    Amendment No. 1 to Lock-Up and Voting Agreement, dated as of October 8, 2009, by and among
NCI Building Systems, Inc. and the signatories thereto (incorporated by reference to exhibit
2.3 to Form 8-K filed with the SEC on October 8, 2009)2.4
    
    Lock-Up and Voting Agreement, dated as of October 8, 2009, by and among NCI Building Systems,
Inc. and the signatories thereto (incorporated by reference to exhibit 2.2 to Form 8-K filed
with the SEC on October 8, 2009)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
    
    Second Amended and Restated By-Laws, effective as of October 20, 2009 (filed as Exhibit 3.4
to NCIs Current Report on Form 8-K dated October 26, 2009 and incorporated by reference
herein)*31.1
    
    Rule 13a-14(a)/15d-14(a) Certifications (Section 302 of the Sarbanes-Oxley Act of 2002)*31.2
    
    Rule 13a-14(a)/15d-14(a) Certifications (Section 302 of the Sarbanes-Oxley Act of 2002)**32.1
    
    Certifications pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
(Section 906 of the Sarbanes-Oxley Act of 2002)**32.2
    
    Certifications pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
(Section 906 of the Sarbanes-Oxley Act of 2002)
 
 *
    
    Filed herewith**
    
    Furnished herewith 53