##### 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 May 2, 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(Do not check if a smaller reporting company)
Smaller reporting company o o þ
 
 o o
   Common Stock, $.01 par value19,570,503 shares as of June 4, 2010




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##### 



TABLE OF CONTENTS
 PAGEPart I  Financial InformationItem 1.
    
    Unaudited Consolidated Financial Statements
    
    
    2Consolidated Balance Sheets May 2, 2010 and November 1, 2009.
    
    
    2Consolidated Statements of Operations Fiscal Three and Six Month Periods Ended May 2, 2010 and May 3, 2009.
    
    
    3Consolidated Statements of Cash Flows Fiscal Six Months Ended May 2, 2010 and May 3, 2009.
    
    
    4Notes to Consolidated Financial Statements.
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    
    28Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
    
    
    44Item 4.
    
    Controls and Procedures.
    
    
    47
 PAGEPart II  Other InformationItem 1.
    
    Legal Proceedings.
    
    
    48Item 1A.
    
    Risk Factors.
    
    
    48Item 6.
    
    Exhibits.
    
    
    49Signatures
    
    
    50EX-31.1EX-31.2EX-32.1EX-32.2




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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))
 May 2,
    
    
    November 1,2010
    
    
    2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    51,273
    
    
    $
    90,419Restricted cash, current
    
    
    2,836
    
    
    
    5,154Accounts receivable, net
    
    
    73,166
    
    
    
    82,889Inventories, net
    
    
    100,568
    
    
    
    71,537Deferred income taxes
    
    
    19,428
    
    
    
    18,787Income tax receivable
    
    
    39,307
    
    
    
    27,622Investments in debt and equity securities, at market
    
    
    3,539
    
    
    
    3,359Prepaid expenses and other
    
    
    15,595
    
    
    
    14,494Assets held for sale
    
    
    3,930
    
    
    
    4,963Total current assets
    
    
    309,642
    
    
    
    319,224Property, plant and equipment, net
    
    
    221,254
    
    
    
    232,510Goodwill
    
    
    5,200
    
    
    
    5,200Intangible assets, net
    
    
    27,341
    
    
    
    28,370Restricted cash, net of current portion
    
    
    
    
    
    
    7,825Other assets
    
    
    18,642
    
    
    
    21,389Total assets
    
    $
    582,079
    
    
    $
    614,518LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    14,663
    
    
    $
    14,164Note payable
    
    
    1,157
    
    
    
    481Accounts payable
    
    
    70,365
    
    
    
    73,594Accrued compensation and benefits
    
    
    30,821
    
    
    
    37,215Accrued interest
    
    
    1,774
    
    
    
    776Other accrued expenses
    
    
    45,420
    
    
    
    52,455Total current liabilities
    
    
    164,200
    
    
    
    178,685Long-term debt
    
    
    135,153
    
    
    
    136,085Deferred income taxes
    
    
    18,661
    
    
    
    18,848Other long-term liabilities
    
    
    7,084
    
    
    
    8,007Total long-term liabilities
    
    
    160,898
    
    
    
    162,940Series B cumulative convertible participating preferred stock
    
    
    239,357
    
    
    
    222,815Stockholders equity:Common stock, $.01 par value, 100,000,000 shares
authorized; 18,086,162 and 18,082,029 issued and
outstanding
    
    
    909
    
    
    
    904Additional paid-in capital
    
    
    273,587
    
    
    
    288,093Accumulated deficit
    
    
    (248,202
    )
    
    
    (230,060
    )Accumulated other comprehensive loss
    
    
    (8,670
    )
    
    
    (8,859
    )Total stockholders equity
    
    
    17,624
    
    
    
    50,078Total liabilities and stockholders equity
    
    $
    582,079
    
    
    $
    614,518
 See accompanying notes to consolidated financial statements.
 2




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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 Six Months EndedMay 2,
    
    
    May 3,
    
    
    May 2,
    
    
    May 3,2010
    
    
    2009
    
    
    2010
    
    
    2009Sales
    
    $
    202,358
    
    
    $
    224,719
    
    
    $
    385,245
    
    
    $
    485,083Cost of sales, excluding lower of cost or market
adjustment and asset impairments (recovery)
    
    
    162,458
    
    
    
    177,466
    
    
    
    312,127
    
    
    
    391,308Lower of cost or market adjustment
    
    
    
    
    
    
    10,608
    
    
    
    
    
    
    
    39,986Asset impairments (recovery)
    
    
    (116
    )
    
    
    5,295
    
    
    
    913
    
    
    
    5,918Gross profit
    
    
    40,016
    
    
    
    31,350
    
    
    
    72,205
    
    
    
    47,871Selling, general and administrative expenses
    
    
    48,357
    
    
    
    54,662
    
    
    
    92,765
    
    
    
    108,978Goodwill and other intangible asset impairment
    
    
    
    
    
    
    104,936
    
    
    
    
    
    
    
    622,564Restructuring charge
    
    
    829
    
    
    
    3,796
    
    
    
    1,353
    
    
    
    6,275Loss from operations
    
    
    (9,170
    )
    
    
    (132,044
    )
    
    
    (21,913
    )
    
    
    (689,946
    )Interest income
    
    
    12
    
    
    
    84
    
    
    
    37
    
    
    
    279Interest expense
    
    
    (4,682
    )
    
    
    (6,252
    )
    
    
    (9,214
    )
    
    
    (13,070
    )Debt extinguishment and refinancing costs
    
    
    
    
    
    
    (629
    )
    
    
    (174
    )
    
    
    (629
    )Other income (expense), net
    
    
    648
    
    
    
    888
    
    
    
    1,807
    
    
    
    571Loss before income taxes
    
    
    (13,192
    )
    
    
    (137,953
    )
    
    
    (29,457
    )
    
    
    (702,795
    )Benefit for income taxes
    
    
    (5,536
    )
    
    
    (16,382
    )
    
    
    (11,315
    )
    
    
    (51,243
    )Net loss
    
    $
    (7,656
    )
    
    $
    (121,571
    )
    
    $
    (18,142
    )
    
    $
    (651,552
    )Convertible preferred stock dividends and accretion
    
    
    8,407
    
    
    
    
    
    
    
    16,541
    
    
    
    Convertible preferred stock beneficial conversion
feature
    
    
    241,282
    
    
    
    
    
    
    
    241,469
    
    
    
    Net loss applicable to common shares
    
    $
    (257,345
    )
    
    $
    (121,571
    )
    
    $
    (276,152
    )
    
    $
    (651,552
    )Loss per share:Basic
    
    $
    (14.15
    )
    
    $
    (31.22
    )
    
    $
    (15.22
    )
    
    $
    (167.46
    )Diluted
    
    $
    (14.15
    )
    
    $
    (31.22
    )
    
    $
    (15.22
    )
    
    $
    (167.46
    )Weighted average number of common shares
outstanding:Basic
    
    
    18,184
    
    
    
    3,894
    
    
    
    18,138
    
    
    
    3,891Diluted
    
    
    18,184
    
    
    
    3,894
    
    
    
    18,138
    
    
    
    3,891
 See accompanying notes to consolidated financial statements.
 3




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NCI BUILDING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
(2009 As Adjusted (Note 2))
 Fiscal Six Months EndedMay 2,
    
    
    May 3,2010
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (18,142
    )
    
    $
    (651,552
    )Adjustments to reconcile net loss to net cash (used in) provided by operating activities:Depreciation and amortization
    
    
    17,360
    
    
    
    17,399Non-cash interest expense on Convertible Notes
    
    
    
    
    
    
    4,198Share-based compensation expense
    
    
    2,204
    
    
    
    2,548Debt extinguishment and refinancing costs
    
    
    174
    
    
    
    629(Gain) loss on sale of property, plant and equipment
    
    
    112
    
    
    
    (195
    )Lower of cost or market reserve
    
    
    
    
    
    
    39,986Provision for doubtful accounts
    
    
    (267
    )
    
    
    1,671Gain on embedded derivative
    
    
    (923
    )
    
    
    Benefit for deferred income taxes
    
    
    (668
    )
    
    
    (25,407
    )Asset impairments, net
    
    
    913
    
    
    
    5,918Impairment of goodwill and intangible assets
    
    
    
    
    
    
    622,564Changes in operating assets and liabilities, net of effect of acquisitions:Accounts receivable
    
    
    9,990
    
    
    
    88,987Inventories
    
    
    (29,031
    )
    
    
    54,677Income tax receivable
    
    
    (9,653
    )
    
    
    (26,625
    )Prepaid expenses and other
    
    
    (1,065
    )
    
    
    (7,943
    )Accounts payable
    
    
    (3,056
    )
    
    
    (45,387
    )Accrued expenses
    
    
    (12,446
    )
    
    
    (42,006
    )Other, net
    
    
    747
    
    
    
    740Net cash (used in) provided by operating activities:
    
    
    (43,751
    )
    
    
    40,202Cash flows from investing activities:Capital expenditures
    
    
    (3,868
    )
    
    
    (14,219
    )Proceeds from sale of property, plant and equipment
    
    
    65
    
    
    
    473Net cash used in investing activities:
    
    
    (3,803
    )
    
    
    (13,746
    )Cash flows from financing activities:Decrease in restricted cash
    
    
    10,143
    
    
    
    Proceeds from ABL Facility
    
    
    235
    
    
    
    Payments on ABL Facility
    
    
    (44
    )
    
    
    Payment of convertible notes
    
    
    (59
    )
    
    
    Payments on long-term debt
    
    
    (565
    )
    
    
    (460
    )Payment of refinancing costs
    
    
    (50
    )
    
    
    (1,796
    )Payments on note payable
    
    
    (855
    )
    
    
    (245
    )Proceeds from stock options exercised
    
    
    
    
    
    
    12Purchase of treasury stock
    
    
    (381
    )
    
    
    (446
    )Net cash (used in) provided by financing activities:
    
    
    8,424
    
    
    
    (2,935
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (16
    )
    
    
    (1
    )Net (decrease) increase in cash and cash equivalents
    
    
    (39,146
    )
    
    
    23,520Cash and cash equivalents at beginning of period
    
    
    90,419
    
    
    
    68,201Cash and cash equivalents at end of period
    
    $
    51,273
    
    
    $
    91,721
 See
accompanying notes to consolidated financial statements.
 4




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##### Table of Contents



NCI BUILDING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 2, 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
  5




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Interest
 Earnings
per Share
   Fiscal Three Months Ended
    
    Fiscal Six Months EndedMay 3, 2009
    
    May 3, 2009Originally
    
    As
    
    Originally
    
    AsReported
    
    Adjusted
    
    Reported
    
    AdjustedCost of sales, excluding lower of cost
or market adjustment and asset impairments
    
    $
    177,604
    
    
    $
    177,466
    
    
    $
    391,440
    
    
    $
    391,308Gross profit
    
    
    31,212
    
    
    
    31,350
    
    
    
    47,739
    
    
    
    47,871Selling, general and administrative expenses
    
    
    54,654
    
    
    
    54,662
    
    
    
    108,961
    
    
    
    108,978Loss from operations
    
    
    (132,174
    )
    
    
    (132,044
    )
    
    
    (690,061
    )
    
    
    (689,946
    )Interest expense
    
    
    (4,052
    )
    
    
    (6,252
    )
    
    
    (8,660
    )
    
    
    (13,070
    )Loss before income taxes
    
    
    (135,738
    )
    
    
    (137,953
    )
    
    
    (698,355
    )
    
    
    (702,795
    )Benefit for income taxes
    
    
    (15,531
    )
    
    
    (16,382
    )
    
    
    (49,538
    )
    
    
    (51,243
    )Net loss
    
    
    (120,207
    )
    
    
    (121,571
    )
    
    
    (648,817
    )
    
    
    (651,552
    )Net loss applicable to common shares
    
    $
    (120,207
    )
    
    $
    (121,571
    )
    
    $
    (648,817
    )
    
    $
    (651.552
    )Loss per share:Basic
    
    
    (30.87
    )
    
    
    (31.22
    )
    
    
    (166.76
    )
    
    
    (167.46
    )Diluted
    
    
    (30.87
    )
    
    
    (31.22
    )
    
    
    (166.76
    )
    
    
    (167.46
    )Weighted average number of common shares
outstanding:Basic
    
    
    3,894
    
    
    
    3,894
    
    
    
    3,891
    
    
    
    3,891Diluted
    
    
    3,894
    
    
    
    3,894
    
    
    
    3,891
    
    
    
    3,891
  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
 6




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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
   7




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##### Table of Contents



Fiscal Three Months EndedCost
    
    
    Remaining
    
    
    TotalIncurred
    
    
    Anticipated
    
    
    AnticipatedFiscal 2008
    
    
    Fiscal 2009
    
    
    January 31, 2010
    
    
    May 2, 2010
    
    
    to Date
    
    
    Cost
    
    
    CostGeneralSeverance
    
    $
    87
    
    
    $
    2,987
    
    
    $
    2
    
    
    $
    16
    
    
    $
    3,092
    
    
    $
    
    
    
    $
    3,092Asset Relocation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Cash Costs
    
    
    
    
    
    
    57
    
    
    
    23
    
    
    
    50
    
    
    
    130
    
    
    
    
    
    
    
    130Asset Impairment
(Recovery)
    
    
    
    
    
    
    1,234
    
    
    
    
    
    
    
    4
    
    
    
    1,238
    
    
    
    
    
    
    
    1,238Total General Program
    
    
    87
    
    
    
    4,278
    
    
    
    25
    
    
    
    70
    
    
    
    4,460
    
    
    
    
    
    
    
    4,460Repurposing and Plant
Closing Phase ISeverance
    
    $
    106
    
    
    $
    1,016
    
    
    $
    58
    
    
    $
    
    
    
    $
    1,180
    
    
    $
    
    
    
    $
    1,180Asset Relocation
    
    
    
    
    
    
    303
    
    
    
    
    
    
    
    
    
    
    
    303
    
    
    
    
    
    
    
    303Other Cash Costs
    
    
    
    
    
    
    199
    
    
    
    122
    
    
    
    80
    
    
    
    401
    
    
    
    91
    
    
    
    492Asset Impairment
(Recovery)
    
    
    157
    
    
    
    1,634
    
    
    
    1,029
    
    
    
    
    
    
    
    2,820
    
    
    
    
    
    
    
    2,820Total Repurposing and Plant
Closing Phase I
    
    
    263
    
    
    
    3,152
    
    
    
    1,209
    
    
    
    80
    
    
    
    4,704
    
    
    
    91
    
    
    
    4,795Plant Closing Phase IISeverance
    
    $
    
    
    
    $
    399
    
    
    $
    
    
    
    $
    
    
    
    $
    399
    
    
    $
    
    
    
    $
    399Asset Relocation
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    22Other Cash Costs
    
    
    
    
    
    
    442
    
    
    
    
    
    
    
    
    
    
    
    442
    
    
    
    
    
    
    
    442Asset Impairment
(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
    
    
    
    2,031
    
    
    
    721
    
    
    
    2,752Asset Impairment
(Recovery)
    
    
    
    
    
    
    3,393
    
    
    
    
    
    
    
    (120
    )
    
    
    3,273
    
    
    
    
    
    
    
    3,273Total Plant Closing Phase
III
    
    
    
    
    
    
    7,021
    
    
    
    319
    
    
    
    568
    
    
    
    7,908
    
    
    
    843
    
    
    
    8,751Total All Programs
    
    $
    350
    
    
    $
    15,344
    
    
    $
    1,553
    
    
    $
    718
    
    
    $
    17,965
    
    
    $
    934
    
    
    $
    18,899Restructuring by SegmentEngineered Building
Systems
    
    
    61
    
    
    
    7,522
    
    
    
    415
    
    
    
    673
    
    
    
    8,671
    
    
    
    751
    
    
    
    9,422Metal Components
    
    
    106
    
    
    
    1,216
    
    
    
    109
    
    
    
    156
    
    
    
    1,587
    
    
    
    183
    
    
    
    1,770Metal Coil Coating
    
    
    
    
    
    
    103
    
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    
    
    
    
    103Corporate
    
    
    27
    
    
    
    211
    
    
    
    
    
    
    
    
    
    
    
    238
    
    
    
    
    
    
    
    238Total
    
    $
    194
    
    
    $
    9,052
    
    
    $
    524
    
    
    $
    829
    
    
    $
    10,599
    
    
    $
    934
    
    
    $
    11,533Asset Impairments
(Recovery) by Segment(1)Engineered Building
Systems
    
    
    157
    
    
    
    4,316
    
    
    
    1,029
    
    
    
    (120
    )
    
    
    5,382
    
    
    
    
    
    
    
    5,382Metal Components
    
    
    
    
    
    
    766
    
    
    
    
    
    
    
    4
    
    
    
    770
    
    
    
    
    
    
    
    770Metal Coil Coating
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    
    
    
    
    
    1,209
    
    
    
    
    
    
    
    
    
    
    
    1,209
    
    
    
    
    
    
    
    1,209Total
    
    $
    157
    
    
    $
    6,291
    
    
    $
    1,029
    
    
    $
    (116
    )
    
    $
    7,361
    
    
    $
    
    
    
    $
    7,361
 8




---



##### 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
    
    
    86
    
    
    
    1,267
    
    
    
    1,353Cash payments
    
    
    (1,297
    )
    
    
    (1,267
    )
    
    
    (2,564
    )Other adjustments (1)
    
    
    13
    
    
    
    
    
    
    
    13Balance at May 2, 2010
    
    $
    189
    
    
    $
    
    
    
    $
    189
 
 (1)
    
    Relates to the foreign currency translation.  NOTE 4  RESTRICTED CASH
  NOTE 5  INVENTORIES
  May 2, 2010
    
    
    November 1, 2009Raw materials
    
    $
    73,721
    
    
    $
    48,081Work in process and finished goods
    
    
    26,847
    
    
    
    23,456$
    100,568
    
    
    $
    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 May 2, 2010, November 1, 2009 and May 3, 2009
    
    $
    
    
    
    $
    
    
    
    $
    5,200
    
    
    $
    5,200
 9




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##### Table of Contents



NOTE 7  SHARE-BASED COMPENSATION
  10




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##### Table of Contents



Fiscal Three and Six MonthPeriods Ended May 2, 2010Expected volatility
    
    
    46.05
    %Expected term (in years)
    
    
    5.75Risk-free interest rate
    
    
    2.44
    %
  Fiscal Three and Six MonthPeriods Ended May 2, 2010Expected volatility
    
    
    47.01
    %Expected term (in years)
    
    
    5.52Risk-free interest rate
    
    
    2.49
    %
  11




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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
    
    
    (9
    )
    
    
    (109.84
    )Exercised
    
    
    
    
    
    
    Balance May 2, 2010
    
    
    1.903
    
    
    $
    17.38
    
    
    3.8 years
    
    $
    8,784Exercisable at May 2, 2010
    
    
    121
    
    
    $
    143.07
    
    
    9.3 years
    
    
    
  Options OutstandingWeighted Average
    
    
    Weighted AverageNumber of Options
    
    Remaining Life
    
    
    Exercise Price1,804
    
    
    9.5 years
    
    
    $
    9.7743
    
    
    3.8 years
    
    
    
    136.3448
    
    
    4.3 years
    
    
    
    161.758
    
    
    5.6 years
    
    
    
    225.151,903
    
    
    9.3 years
    
    
    $
    17.38
  Options ExercisableWeighted AverageNumber of Options
    
    Exercise Price22
    
    $
    84.5743
    
    
    136.3448
    
    
    161.758
    
    
    225.14121
    
    $
    143.07
  Weighted AverageNumber of Shares
    
    
    Grant PriceBalance November 1, 2009
    
    
    204
    
    
    $
    80.57Granted
    
    
    1,499
    
    
    
    9.10Distributed
    
    
    
    
    
    
    Balance May 2, 2010
    
    
    1,703
    
    
    $
    17.67
  12




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##### Table of Contents



NOTE 8  EARNINGS PER COMMON SHARE
  Fiscal Three Months Ended
    
    
    Fiscal Six Months EndedMay 2, 2010
    
    
    May 3, 2009
    
    
    May 2, 2010
    
    
    May 3, 2009Numerator for Basic and Diluted Loss
Per ShareNet loss allocated to common shares (1)
    
    $
    (257,345
    )
    
    $
    (121,571
    )
    
    $
    (276,152
    )
    
    $
    (651,552
    )Denominator for Diluted Loss Per ShareWeighted average common shares outstanding
for basic loss per share
    
    
    18,184
    
    
    
    3,894
    
    
    
    18,138
    
    
    
    3,891Common stock equivalents:Employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unvested restricted stock awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adjusted weighted average shares and
assumed conversions for diluted loss per
share assuming dilution
    
    
    18,184
    
    
    
    3,894
    
    
    
    18,138
    
    
    
    3,891Loss per share:Basic
    
    $
    (14.15
    )
    
    $
    (31.22
    )
    
    $
    (15.22
    )
    
    $
    (167.46
    )Diluted
    
    $
    (14.15
    )
    
    $
    (31.22
    )
    
    $
    (15.22
    )
    
    $
    (167.46
    )
 
 (1)
    
    Participating securities consist of the holders of the Convertible Preferred Stock, as
defined further 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
   13




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##### Table of Contents



NOTE 9  WARRANTY
   Fiscal Six Months EndedMay 2, 2010
    
    
    May 3, 2009Beginning balance
    
    $
    16,116
    
    
    $
    16,485Warranties sold
    
    
    1,248
    
    
    
    1,349Revenue recognized
    
    
    (671
    )
    
    
    (599
    )Costs incurred
    
    
    (309
    )
    
    
    (1,485
    )Adjustment (1)
    
    
    
    
    
    
    (1,313
    )Other
    
    
    (62
    )
    
    
    1,193Ending balance
    
    $
    16,322
    
    
    $
    15,630
 
 (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
  May 2, 2010
    
    
    November 1, 2009Amended and Restated Term Loan Credit Agreement (due April 2014, interest
at 8.0% at both May 2, 2010 and November 1, 2009)
    
    $
    149,625
    
    
    $
    150,000Asset-Based Lending Facility (due April 2014, interest at 6.75% at May 2, 2010)
    
    
    191
    
    
    
    2.125% Convertible Senior Subordinated Notes, due November 2024
    
    
    
    
    
    
    59Industrial Revenue Bond
    
    
    
    
    
    
    190149,816
    
    
    
    150,249Current portion of long-term debt
    
    
    (14,663
    )
    
    
    (14,164
    )Long-term debt, less current portion
    
    $
    135,153
    
    
    $
    $136,085
 14




---



##### Table of Contents



May 2, 2010 to October 31, 2010
    
    $
    14,000Fiscal 2010
    
    
    1,351Fiscal 2011
    
    
    1,338Fiscal 2012
    
    
    1,324Fiscal 2013 and thereafter
    
    
    131,803$
    149,816
 Amended Credit Agreement
       15




---



##### Table of Contents




    
    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 tax refunds received by the Company resulting
from the carry back of the 2009 net operating loss received by the Company.
   ABL Facility
     16




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##### Table of Contents



Convertible Notes
  May 2, 2010
    
    November 1, 2009Principal amount of Convertible Notes
    
    $
    
    
    
    $
    59Unamortized discount
    
    
    
    
    
    
    Net carrying amount
    
    
    
    
    
    
    59Additional paid-in capital
    
    
    24,473
    
    
    
    24,473
  17




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##### Table of Contents



Fiscal Three Months Ended
    
    
    Fiscal Six Months EndedMay 2, 2010
    
    
    May 3, 2009
    
    
    May 2, 2010
    
    
    May 3, 2009Contractual coupon interest
    
    $
    0.2
    
    
    $
    967
    
    
    $
    0.2
    
    
    $
    2,083Amortization of discount on Convertible Notes
    
    
    
    
    
    
    2,099
    
    
    
    
    
    
    
    4,198Interest expense
    
    $
    0.2
    
    
    $
    3,066
    
    
    $
    0.2
    
    
    $
    6,281Effective 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.
 18




---



##### Table of Contents



Rank.
 Dividends.
     Convertibility and Anti-Dilution Adjustments.
  Milestone Redemption Right.
 19




---



##### Table of Contents



Change of Control Redemption Right.
  Vote.
   Restriction on Dividends on Junior Securities.
 20




---



##### Table of Contents



Accounting for Convertible Preferred Stock
 Derivatives and Hedging Distinguishing Liabilities from Equity,
    Debt with Conversion
and Other Options
  21




---



##### Table of Contents



NOTE 12  DERIVATIVE INSTRUMENTS AND HEDGING STRATEGY
 Interest Rate Risk
   Embedded Derivative Bifurcated From Convertible Preferred Stock (See Note 11)
   22




---



##### Table of Contents



Liability DerivativesMay 2, 2010
    
    
    November 1, 2009Balance Sheet Location
    
    
    Fair Value
    
    
    Fair ValueDerivatives not designated as hedging instruments under
ASC 815:Interest rate contract
    
    Other accrued expenses
    
    $
    413
    
    
    $
    2,208Embedded derivative
    
    Other accrued expenses
    
    
    118
    
    
    
    1,041Total derivatives
    
    
    
    
    
    $
    531
    
    
    $
    3,249
  Amount of Loss Reclassified fromOCI into Loss (Effective Portion)Derivative in ASC 815 Cash
    
    Location of Loss Reclassified from Accumulated
    
    Fiscal Three Months Ended
    
    Fiscal Six Months EndedFlow Hedging Relationship
    
    OCI into Loss (Effective Portion)
    
    May 2, 2010
    
    May 3, 2009
    
    May 2, 2010
    
    May 3, 2009Interest rate contract
    
    Interest expense
    
    $
    
    
    
    $
    (878
    )
    
    $
    
    
    
    $
    (878
    )
  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 Six Months Ended
    
    Recognized in IncomeInstruments Under ASC 815
    
    May 2, 2010
    
    May 3, 2009
    
    May 2, 2010
    
    May 3, 2009
    
    (Loss) on  DerivativesInterest rate contract
    
    $
    836
    
    
    $
    
    
    
    $
    1,787
    
    
    $
    
    
    
    Interest expenseEmbedded derivative
    
    $
    4
    
    
    $
    
    
    
    $
    923
    
    
    $
    
    
    
    Other income, net
 NOTE 13  FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
 Fair Value of Financial Instruments
  May 2, 2010
    
    November 1, 2009Carrying
    
    
    
    
    
    CarryingAmount
    
    Fair Value
    
    Amount
    
    Fair Value(in thousands)
    
    (in thousands)2.125% Convertible Senior Subordinated Notes
    
    $
    
    
    
    $
    
    
    
    $
    59
    
    
    $
    97Amended Credit Agreement
    
    $
    149,625
    
    
    $
    148,129
    
    
    $
    150,000
    
    
    $
    138,000
  23




---



##### Table of Contents



Fair Value Measurements
      Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssets:Short-term investments in deferred compensation plan(1)
    
    $
    3,539
    
    
    $
    
    
    
    $
    
    
    
    $
    3,539Assets held for sale
    
    
    
    
    
    
    3,930
    
    
    
    
    
    
    
    3,930Total assets
    
    $
    3,539
    
    
    $
    3,930
    
    
    $
    
    
    
    $
    7,469Liabilities:Deferred compensation plan liability
    
    $
    3,657
    
    
    $
    
    
    
    $
    
    
    
    $
    3,657Interest rate contract
    
    
    
    
    
    
    413
    
    
    
    
    
    
    
    413Embedded derivative
    
    
    
    
    
    
    
    
    
    
    118
    
    
    
    118Total liabilities
    
    $
    3,657
    
    
    $
    413
    
    
    $
    118
    
    
    $
    4,188
 
 (1)
    
    Unrealized holding gains for the three and six month periods ended May 2, 2010 were
$0.2 million and $0.3 million, respectively. Unrealized holding gains (losses) for the three
months ended May 3, 2009 were $(0.3) million and was insignificant for the six months ended
May 3, 2009. These unrealized holding gains (losses) are primarily offset by changes in the
deferred compensation plan liability.  May 2,2010Beginning balance
    
    $
    (1,041
    )Realized gains (losses) (1)
    
    
    923Ending balance
    
    $
    (118
    )
 
 (1)
    
    Realized gains (losses) on the embedded derivative are recorded in other income
(expense), net in the Consolidated Statement of Operations during the six months ended May 2,
2010.  May 2, 2010
    
    November 1, 2009Risk-free interest rate
    
    
    0.7% - 3.6
    %
    
    
    0.3% - 3.6
    %Discount rate
    
    
    6.2% - 9.8
    %
    
    
    6.1% - 9.8
    %Credit spread
    
    
    5.1% - 6.2
    %
    
    
    5.1% - 6.2
    %Probability of failure to
have common shares
authorized by June 30, 2010
    
    
    
    
    
    
    1.0
    %
 24




---



##### Table of Contents



NOTE 14  INCOME TAXES
  Fiscal Three Months Ended
    
    Fiscal Six Months EndedMay 2, 2010
    
    May 3, 2009
    
    May 2, 2010
    
    May 3, 2009Statutory federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income taxes
    
    
    3.4
    %
    
    
    3.4
    %
    
    
    3.4
    %
    
    
    3.4
    %Non-deductible goodwill impairment
    
    
    
    
    
    
    (26.1
    )%
    
    
    
    
    
    
    (31.0
    )%Canada valuation allowance
    
    
    
    
    
    
    (0.2
    )%
    
    
    
    
    
    
    (0.1
    )%Non-deductible expenses
    
    
    (2.5
    )%
    
    
    
    
    
    
    (2.5
    )%
    
    
    Recognition of tax benefit previously
deemed to be uncertain
    
    
    7.8
    %
    
    
    
    
    
    
    3.5
    %
    
    
    Other
    
    
    (1.7
    )%
    
    
    (0.2
    )%
    
    
    (1.0
    )%
    
    
    Effective tax rate
    
    
    42.0
    %
    
    
    11.9
    %
    
    
    38.4
    %
    
    
    7.3
    %
 Goodwill and Other Intangible Assets
  NOTE 15  COMPREHENSIVE LOSS
  Fiscal Three Months Ended
    
    
    Fiscal Six Months EndedMay 2, 2010
    
    
    May 3, 2009
    
    
    May 2, 2010
    
    
    May 3, 2009Net loss
    
    $
    (7,656
    )
    
    $
    (121,571
    )
    
    $
    (18,142
    )
    
    $
    (651,552
    )Foreign exchange translation gain (loss) and other,
net of tax
    
    
    (8
    )
    
    
    (9
    )
    
    
    189
    
    
    
    (2
    )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
    
    
    
    
    
    
    
    541Comprehensive loss
    
    $
    (7,664
    )
    
    $
    (121,039
    )
    
    $
    (17,953
    )
    
    $
    (651,567
    )
  May 2, 2010
    
    
    November 1, 2009Foreign exchange translation adjustments
    
    $
    580
    
    
    $
    391Defined benefit pension plan
    
    
    (9,250
    )
    
    
    (9,250
    )Accumulated other comprehensive loss
    
    $
    (8,670
    )
    
    $
    (8,859
    )
  Fiscal Three Months Ended May 2, 2010
    
    
    Fiscal Three Months Ended May 3, 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
    
    $
    (12
    )
    
    $
    4
    
    
    $
    (8
    )
    
    $
    (15
    )
    
    $
    6
    
    
    $
    (9
    )Reclassification adjustment for
losses on derivative instruments
recognized during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    878
    
    
    
    (337
    )
    
    
    541Other Comprehensive income (loss)
    
    $
    (12
    )
    
    $
    4
    
    
    $
    (8
    )
    
    $
    863
    
    
    $
    (331
    )
    
    $
    532
 25




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##### Table of Contents



Fiscal Six Months Ended May 2, 2010
    
    
    Fiscal Six Months Ended May 3, 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
    
    $
    182
    
    
    $
    7
    
    
    $
    189
    
    
    $
    (2
    )
    
    $
    
    
    
    $
    (2
    )Loss in fair value of interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (900
    )
    
    
    346
    
    
    
    (554
    )Reclassification adjustment for losses
on derivative instruments recognized
during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    878
    
    
    
    (337
    )
    
    
    541Other Comprehensive income (loss)
    
    $
    182
    
    
    $
    7
    
    
    $
    189
    
    
    $
    (24
    )
    
    $
    9
    
    
    $
    (15
    )
 NOTE 16  BUSINESS SEGMENTS
 ®
    Fiscal Three Months Ended
    
    
    Fiscal Six Months EndedMay 2, 2010
    
    
    May 3, 2009
    
    
    May 2, 2010
    
    
    May 3, 2009Total sales:Metal coil coating
    
    $
    44,759
    
    
    $
    39,526
    
    
    $
    83,790
    
    
    $
    81,027Metal components
    
    
    95,069
    
    
    
    101,554
    
    
    
    181,875
    
    
    
    223,034Engineered building systems
    
    
    114,188
    
    
    
    129,233
    
    
    
    216,806
    
    
    
    281,642Intersegment sales
    
    
    (51,658
    )
    
    
    (45,594
    )
    
    
    (97,226
    )
    
    
    (100,620
    )Total sales
    
    $
    202,358
    
    
    $
    224,719
    
    
    $
    385,245
    
    
    $
    485,083External sales:Metal coil coating
    
    $
    17,096
    
    
    $
    12,213
    
    
    $
    29,904
    
    
    $
    23,637Metal components
    
    
    74,376
    
    
    
    86,680
    
    
    
    144,514
    
    
    
    187,722Engineered building systems
    
    
    110,886
    
    
    
    125,826
    
    
    
    210,827
    
    
    
    273,724Total sales
    
    $
    202,358
    
    
    $
    224,719
    
    
    $
    385,245
    
    
    $
    485,083Operating income (loss):Metal coil coating
    
    $
    4,092
    
    
    $
    (42,982
    )
    
    $
    7,211
    
    
    $
    (106,742
    )Metal components
    
    
    5,613
    
    
    
    (28,117
    )
    
    
    7,404
    
    
    
    (156,724
    )Engineered building systems
    
    
    (5,662
    )
    
    
    (46,376
    )
    
    
    (11,491
    )
    
    
    (398,659
    )Corporate
    
    
    (13,213
    )
    
    
    (14,569
    )
    
    
    (25,037
    )
    
    
    (27,821
    )Total operating loss
    
    $
    (9,170
    )
    
    $
    (132,044
    )
    
    $
    (21,913
    )
    
    $
    (689,946
    )Unallocated other expense
    
    
    (4,022
    )
    
    
    (5,909
    )
    
    
    (7,544
    )
    
    
    (12,849
    )Loss before income taxes
    
    $
    (13,192
    )
    
    $
    (137,953
    )
    
    $
    (29,457
    )
    
    $
    (702,795
    )
 26




---



##### Table of Contents



Fiscal Three Months EndedMay 2, 2010
    
    
    November 1, 2009Total assets:Metal coil coating
    
    $
    60,266
    
    
    $
    57,254Metal components
    
    
    175,800
    
    
    
    160,123Engineered building systems
    
    
    243,161
    
    
    
    241,396Corporate
    
    
    102,852
    
    
    
    155,745Total assets
    
    $
    582,079
    
    
    $
    614,518
 NOTE 17  CONTINGENCIES
  27




---



##### 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
year ended November 1, 2009.
 OVERVIEW
    Second Fiscal Quarter
    Industry Conditions
   28




---



##### Table of Contents



RESULTS OF OPERATIONS
 Debt with Conversion and Other Options
 29




---



##### Table of Contents



®
   Fiscal Three Months Ended
    
    
    Fiscal Six Months EndedMay 2, 2010
    
    
    May 3, 2009
    
    
    May 2, 2010
    
    
    May 3, 2009%
    
    
    
    
    
    
    %
    
    
    
    
    
    
    %
    
    
    
    
    
    
    %Sales:Metal coil coating
    
    $
    44,759
    
    
    
    22
    
    
    $
    39,526
    
    
    
    18
    
    
    $
    83,790
    
    
    
    22
    
    
    $
    81,027
    
    
    
    17Metal components
    
    
    95,069
    
    
    
    47
    
    
    
    101,554
    
    
    
    45
    
    
    
    181,875
    
    
    
    47
    
    
    
    223,034
    
    
    
    46Engineered building systems
    
    
    114,188
    
    
    
    57
    
    
    
    129,233
    
    
    
    57
    
    
    
    216,806
    
    
    
    56
    
    
    
    281,642
    
    
    
    58Intersegment sales
    
    
    (51,658
    )
    
    
    (26
    )
    
    
    (45,594
    )
    
    
    (20
    )
    
    
    (97,226
    )
    
    
    (25
    )
    
    
    (100,620
    )
    
    
    (21
    )Total sales
    
    $
    202,358
    
    
    
    100
    
    
    $
    224,719
    
    
    
    100
    
    
    $
    385,245
    
    
    
    100
    
    
    $
    485,083
    
    
    
    100Operating income (loss):Metal coil coating
    
    $
    4,092
    
    
    
    
    
    
    $
    (42,982
    )
    
    
    
    
    
    $
    7,211
    
    
    
    
    
    
    $
    (106,742
    )Metal components
    
    
    5,613
    
    
    
    
    
    
    
    (28,117
    )
    
    
    
    
    
    
    7,404
    
    
    
    
    
    
    
    (156,724
    )Engineered building systems
    
    
    (5,662
    )
    
    
    
    
    
    
    (46,376
    )
    
    
    
    
    
    
    (11,491
    )
    
    
    
    
    
    
    (398,659
    )Corporate
    
    
    (13,213
    )
    
    
    
    
    
    
    (14,569
    )
    
    
    
    
    
    
    (25,037
    )
    
    
    
    
    
    
    (27,821
    )Total operating loss
    
    $
    (9,170
    )
    
    
    
    
    
    $
    (132,044
    )
    
    
    
    
    
    $
    (21,913
    )
    
    
    
    
    
    $
    (689,946
    )Unallocated other expense
    
    
    (4,022
    )
    
    
    
    
    
    
    (5,909
    )
    
    
    
    
    
    
    (7,544
    )
    
    
    
    
    
    
    (12,849
    )Loss before income taxes
    
    $
    (13,192
    )
    
    
    
    
    
    $
    (137,953
    )
    
    
    
    
    
    $
    (29,457
    )
    
    
    
    
    
    $
    (702,795
    )
 FISCAL THREE MONTHS ENDED MAY 2, 2010 COMPARED TO FISCAL THREE MONTHS ENDED MAY 3, 2009
 Consolidated sales
 Consolidated cost of sales
 30




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##### Table of Contents



Metal coil coating sales
  Metal components sales
  Engineered building systems sales
  31




---



##### Table of Contents



Consolidated selling, general and administrative expenses,
 Consolidated goodwill and other intangible asset impairment
 Consolidated restructuring charge
 Consolidated interest expense
 Consolidated benefit for income taxes
 Consolidated Convertible Preferred Stock dividends and accretion
 Consolidated Convertible Preferred Stock beneficial conversion feature
 32




---



##### Table of Contents



Diluted loss per share
 FISCAL SIX MONTHS ENDED MAY 2, 2010 COMPARED TO FISCAL SIX MONTHS ENDED MAY 3, 2009
 Consolidated sales
 Consolidated cost of sales
 Metal coil coating sales
  Metal components sales
 33




---



##### Table of Contents



Engineered
building systems sales
  Consolidated selling, general and administrative expenses,
 Consolidated goodwill and other intangible asset impairment
 Consolidated restructuring charge
 34




---



##### Table of Contents



Consolidated interest expense
 Other income (expense), net
 Consolidated benefit for income taxes
 Consolidated Convertible Preferred Stock dividends and accretion
 Consolidated Convertible Preferred Stock beneficial conversion feature
 Diluted loss per share
 LIQUIDITY AND CAPITAL RESOURCES
 General
  35




---



##### Table of Contents



Convertible Preferred Stock
     Debt
  
    
    we entered into the Amended Credit Agreement, an amendment to our credit agreement as in
effect prior to such date (the 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 Amended
Credit Agreement, our amended term loan, requires quarterly principal payments in an amount
equal to 0.25% of the principal amount of the term loan
 36




---



##### Table of Contents



outstanding as of the last day of each calendar quarter and a final payment of approximately
$131.1 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.
 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
 37




---



##### Table of Contents




    
    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.
      ABL Facility.
    38




---



##### Table of Contents



Cash Flow
      39




---



##### Table of Contents



NON-GAAP MEASURES
   For the Three Months Ended May 2, 2010EngineeredMetal Coil
    
    
    Metal
    
    
    BuildingCoating
    
    
    Components
    
    
    Systems
    
    
    Corporate
    
    
    ConsolidatedOperating income (loss), GAAP basis
    
    $
    4,092
    
    
    $
    5,613
    
    
    $
    (5,662
    )
    
    $
    (13,213
    )
    
    $
    (9,170
    )Goodwill and other intangible asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lower of cost or market charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Asset impairment (recovery)
    
    
    
    
    
    
    4
    
    
    
    (120
    )
    
    
    
    
    
    
    (116
    )Restructuring charges
    
    
    
    
    
    
    156
    
    
    
    673
    
    
    
    
    
    
    
    829Adjusted operating income (loss)
    
    $
    4,092
    
    
    $
    5,773
    
    
    $
    (5,109
    )
    
    $
    (13,213
    )
    
    $
    (8,457
    )
 For the Three Months Ended May 3, 2009EngineeredMetal Coil
    
    
    Metal
    
    
    BuildingCoating
    
    
    Components
    
    
    Systems
    
    
    Corporate
    
    
    ConsolidatedOperating income (loss), GAAP basis (1)
    
    $
    (42,982
    )
    
    $
    (28,117
    )
    
    $
    (46,376
    )
    
    $
    (14,569
    )
    
    $
    (132,044
    )Goodwill and other intangible asset impairment
    
    
    39,105
    
    
    
    31,108
    
    
    
    34,723
    
    
    
    
    
    
    
    104,936Lower of cost or market charge
    
    
    2,445
    
    
    
    2,668
    
    
    
    5,495
    
    
    
    
    
    
    
    10,608Asset impairment (recovery)
    
    
    
    
    
    
    714
    
    
    
    3,372
    
    
    
    1,209
    
    
    
    5,295Restructuring charges
    
    
    29
    
    
    
    580
    
    
    
    3,027
    
    
    
    160
    
    
    
    3,796Adjusted operating income (loss)
    
    $
    (1,403
    )
    
    $
    6,953
    
    
    $
    241
    
    
    $
    (13,200
    )
    
    $
    (7,409
    )
 For the Six Months Ended May 2, 2010EngineeredMetal Coil
    
    
    Metal
    
    
    BuildingCoating
    
    
    Components
    
    
    Systems
    
    
    Corporate
    
    
    ConsolidatedOperating income (loss), GAAP basis
    
    $
    7,211
    
    
    $
    7,404
    
    
    $
    (11,461
    )
    
    $
    (25,037
    )
    
    $
    (21,913
    )Goodwill and other intangible asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lower of cost or market charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Asset impairment (recovery)
    
    
    
    
    
    
    4
    
    
    
    909
    
    
    
    
    
    
    
    913Restructuring charges
    
    
    
    
    
    
    265
    
    
    
    1,088
    
    
    
    
    
    
    
    1,353Adjusted operating income (loss)
    
    $
    7,211
    
    
    $
    7,673
    
    
    $
    (9,464
    )
    
    $
    (25,037
    )
    
    $
    (19,647
    )
 For the Six Months Ended May 3, 2009EngineeredMetal Coil
    
    
    Metal
    
    
    BuildingCoating
    
    
    Components
    
    
    Systems
    
    
    Corporate
    
    
    ConsolidatedOperating income (loss), GAAP basis (1)
    
    $
    (106,742
    )
    
    $
    (156,724
    )
    
    $
    (398,659
    )
    
    $
    (27,821
    )
    
    $
    (689,946
    )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 impairment (recovery)
    
    
    
    
    
    
    714
    
    
    
    3,995
    
    
    
    1,209
    
    
    
    5,918Restructuring charges
    
    
    73
    
    
    
    1,162
    
    
    
    4,862
    
    
    
    178
    
    
    
    6,275Adjusted operating income (loss)
    
    $
    392
    
    
    $
    9,543
    
    
    $
    1,296
    
    
    $
    (26,434
    )
    
    $
    (15,203
    )
 40




---



##### 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 Six Months EndedMay 2,
    
    
    May 3,
    
    
    May 2,
    
    
    May 3,2010
    
    
    2009
    
    
    2010
    
    
    2009Loss per diluted common share, GAAP basis (1)
    
    $
    (14.15
    )
    
    $
    (31.22
    )
    
    $
    (15.22
    )
    
    $
    (167.46
    )Goodwill and other intangible asset impairment
    
    
    
    
    
    
    25.70
    
    
    
    
    
    
    
    154.20Debt extinguishment and refinancing costs
    
    
    
    
    
    
    0.10
    
    
    
    0.01
    
    
    
    0.10Lower of cost or market adjustment
    
    
    
    
    
    
    1.81
    
    
    
    
    
    
    
    6.63Convertible preferred stock beneficial conversion
feature
    
    
    13.27
    
    
    
    
    
    
    
    13.31
    
    
    
    Restructuring charge
    
    
    0.03
    
    
    
    0.63
    
    
    
    0.05
    
    
    
    1.04Asset impairment (recovery)
    
    
    (0.01
    )
    
    
    0.88
    
    
    
    0.03
    
    
    
    0.98Gain on embedded derivative
    
    
    
    
    
    
    
    
    
    
    (0.03
    )
    
    
    Adjusted diluted loss per common share
    
    $
    (0.86
    )
    
    $
    (2.10
    )
    
    $
    (1.85
    )
    
    $
    (4.51
    )
 Fiscal Three Months Ended
    
    
    Fiscal Six Months EndedMay 2,
    
    
    May 3,
    
    
    May 2,
    
    
    May 3,2010
    
    
    2009
    
    
    2010
    
    
    2009Net loss applicable to common shares, GAAP basis (1)
    
    $
    (257,345
    )
    
    $
    (121,571
    )
    
    $
    (276,152
    )
    
    $
    (651,552
    )Goodwill and other intangible asset impairment
    
    
    
    
    
    
    100,084
    
    
    
    
    
    
    
    599,966Debt extinguishment and refinancing costs
    
    
    
    
    
    
    409
    
    
    
    113
    
    
    
    409Lower of cost or market adjustment
    
    
    
    
    
    
    7,033
    
    
    
    
    
    
    
    25,773Convertible preferred stock beneficial conversion feature
    
    
    241,282
    
    
    
    
    
    
    
    241,469
    
    
    
    Restructuring charge
    
    
    539
    
    
    
    2,463
    
    
    
    879
    
    
    
    4,045Asset impairment (recovery)
    
    
    (75
    )
    
    
    3,417
    
    
    
    594
    
    
    
    3,814Gain on embedded derivative
    
    
    (3
    )
    
    
    
    
    
    
    (600
    )
    
    
    Adjusted net loss applicable to common shares
    
    $
    (15,602
    )
    
    $
    (8,165
    )
    
    $
    (33,697
    )
    
    $
    (17,545
    )
 
 (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 123rdQuarter
    
    
    4thQuarter
    
    
    1stQuarter
    
    
    2ndQuarter
    
    
    MonthsAugust 2, 2009
    
    
    November 1, 2009
    
    
    January 31, 2010
    
    
    May 2, 2010
    
    
    May 2, 2010Net Income (Loss) (1)
    
    $
    2,607
    
    
    $
    (101,851
    )
    
    $
    (10,486
    )
    
    $
    (7,656
    )
    
    $
    (117,386
    )Add:Depreciation and amortization
    
    
    7,586
    
    
    
    7,640
    
    
    
    7,522
    
    
    
    7,479
    
    
    
    30,227Consolidated interest expense, net
    
    
    6,487
    
    
    
    9,578
    
    
    
    4,507
    
    
    
    4,670
    
    
    
    25,242Provision for taxes
    
    
    1,825
    
    
    
    (7,495
    )
    
    
    (5,779
    )
    
    
    (5,536
    )
    
    
    (16,985
    )Non-cash charges:Stock-based compensation
    
    
    1,241
    
    
    
    1,045
    
    
    
    801
    
    
    
    1,403
    
    
    
    4,490Goodwill and intangible
impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Asset impairment (recovery)
    
    
    26
    
    
    
    347
    
    
    
    1,029
    
    
    
    (116
    )
    
    
    1,286Lower of cost or market charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Embedded derivative
    
    
    
    
    
    
    
    
    
    
    (919
    )
    
    
    (4
    )
    
    
    (923
    )Cash restructuring charges
    
    
    1,213
    
    
    
    1,564
    
    
    
    524
    
    
    
    829
    
    
    
    4,130Transaction costs
    
    
    401
    
    
    
    107,718
    
    
    
    174
    
    
    
    
    
    
    
    108,293Adjusted EBITDA
    
    $
    21,386
    
    
    $
    18,546
    
    
    $
    (2,627
    )
    
    $
    1,069
    
    
    $
    38,374
 41




---



##### Table of Contents



Trailing 123rdQuarter
    
    
    4thQuarter
    
    
    1stQuarter
    
    
    2ndQuarter
    
    
    MonthsJuly 27, 2008
    
    
    November 2, 2008
    
    
    February 1, 2009
    
    
    May 3, 2009
    
    
    May 3, 2009Net Income (Loss) (1)
    
    $
    30,494
    
    
    $
    23,218
    
    
    $
    (529,981
    )
    
    $
    (121,571
    )
    
    $
    (597,840
    )Add:Depreciation and amortization
    
    
    8,665
    
    
    
    8,334
    
    
    
    8,324
    
    
    
    8,436
    
    
    
    33,759Consolidated interest expense, net
    
    
    7,463
    
    
    
    7,761
    
    
    
    6,623
    
    
    
    6,168
    
    
    
    28,015Provision for taxes
    
    
    18,554
    
    
    
    17,092
    
    
    
    (34,861
    )
    
    
    (16,382
    )
    
    
    (15,597
    )Non-cash charges:Stock-based compensation
    
    
    1,563
    
    
    
    1,628
    
    
    
    1,372
    
    
    
    1,177
    
    
    
    5,740Goodwill and intangible impairment
    
    
    
    
    
    
    
    
    
    
    517,628
    
    
    
    104,936
    
    
    
    622,564Asset impairment (recovery)
    
    
    
    
    
    
    157
    
    
    
    623
    
    
    
    5,295
    
    
    
    6,075Lower of cost or market charges
    
    
    
    
    
    
    2,739
    
    
    
    29,378
    
    
    
    10,608
    
    
    
    42,725Embedded derivative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash restructuring charges
    
    
    43
    
    
    
    150
    
    
    
    2,479
    
    
    
    3,796
    
    
    
    6,468Transaction costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    629
    
    
    
    629Adjusted EBITDA
    
    $
    66,782
    
    
    $
    61,079
    
    
    $
    1,585
    
    
    $
    3,092
    
    
    $
    132,538
 
 (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
 42




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##### Table of Contents



Beneficial conversion features and dividend policy.
  RECENT ACCOUNTING PRONOUNCEMENTS
 Defined Benefit Plans  General
 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;
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##### Table of Contents




    
    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;
    
    the volatility of the Companys stock price;
    
    the substantial rights, seniority and potentially 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.
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
 Steel Prices
  44




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45




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Interest Rates
    Foreign Currency Exchange Rates
   46




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Item 4.
    
    Controls and Procedures.
 Disclosure Controls and Procedures.
  Internal Control over Financial Reporting
  47




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##### Table of Contents



NCI BUILDING SYSTEMS, INC.
 
 PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
  
 Item 1A.
    
    Risk Factors.
  The Convertible Preferred Stock will be dilutive to our stockholders. The Convertible Preferred
Stock accrues dividends, which may be paid in cash or in-kind. To the extent that dividends on the
Convertible Preferred Stock are paid in-kind, they will dilute the ownership interest of our
stockholders. In addition, the dividend rate of the Convertible Preferred Stock will increase upon
the occurrence of certain events which constitute defaults under the terms of the Convertible
Preferred Stock, which may cause further dilution. Furthermore, the Convertible Preferred Stock
also provides for anti-dilution rights, which may dilute the ownership interest of stockholders in
the future.
   
    
    6.00% per annum, if the default is the result of a failure by us after June 30, 2011 to
reserve and keep available for issuance a number of shares of Common Stock equal to 110% of
the number of shares of Common Stock issuable upon conversion of all outstanding shares of
Convertible Preferred Stock; or
    
    3.00% per annum for any other specified default.
    48




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##### Table of Contents



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)February 1, 2010 to February 28, 2010
    
    
    228
    
    
    $
    9.95
    
    
    
    
    
    
    
    129,218March 1, 2010 to March 28, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129,218March 29, 2010 to May 2, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129,218Total
    
    
    228
    
    
    $
    9.95
    
    
    
    
    
    
    
    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 three
months of fiscal 2010, we did not repurchase any shares of Common Stock. At May 2, 2010, there
were 0.1 million shares of Common Stock remaining authorized for repurchase under the program. 
 Item 6.
    
    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
  NCI BUILDING SYSTEMS, INC.
(Registrant)Date: June 9, 2010
    By:
    /s/ Mark E. JohnsonMark E. JohnsonExecutive Vice President,
Chief Financial Officer and Treasurer 50




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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 8K 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 8K filed
with the SEC on October 8, 2009)*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 51