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Wider-Than-Expected Loss at NCI Building – Analyst Blog
NCI Building Systems Inc. (NCS) reported a loss per share of 28 cents in the second quarter of 2013, ending Apr 28, 2013, compared with the prior-year loss of 44 cents a share. The loss per share was wider than the Zacks Consensus Estimate of a loss per share of 23 cents.
Including on time items, on a GAAP basis, net loss per share 86 cents in the year ago quarter. NCI Building did not incur any special charges during the reported quarter.
Operational Update
Sales increased 17% year over year to $293.4 million in the quarter, missing the Zacks Consensus Estimate of $306 million. The year-over-year growth was driven mainly by contribution from the Metl-Span acquisition and the success of its cross-selling initiatives.
Cost of sales during the quarter increased 21% to $232 million. Gross profit increased 4.9% to $60.8 million. However, gross margin contracted 250 basis points to 20.7% in the quarter. This was due to the escalated costs related to investments, integration costs associated with the conversion of some of NCI's existing plants and additional costs related to the ramp-up of its refurbished coating facility and insulated metal panel facility.
Engineering, selling, general and administrative expenses increased 21.7% to $62.8 million, mainly due to the additional cost related to the acquisition of Metl-Span and higher non-cash stock compensation expense. Operating loss was $1.9 million in the second quarter compared with an adjusted operating profit of $5 million in the prior-year quarter.
Segment Performance
Revenue at Engineered Building Systems remained flat year over year at $148 million. The segment reported an operating income of $4.2 million in the quarter, down 38% from the year-ago quarter’s income of $6.7 million, mainly due to investments made in additional manufacturing personnel.
Revenue from the Metal Coil Coating segment increased 2% year over year to $49.8 million. Operating profit was $4.8 million in the quarter, down 3% from the prior-year quarter, due to start-up costs related to the new plant.
The Metal Component segment generated revenues of $147 million, up 38% year over year. The segment benefited from the contribution from the company's recent Metl-Span acquisition. Operating profit for the segment decreased 27.5% to $5.1 million in the quarter due to increased pricing pressure, integration costs, ramp-up cost and investments for acquisition.
Financial Update
As of Apr 28, 2013, NCI Building Systems had cash and cash equivalents of $27.5 million, down from $55 million as of Oct 28, 2012. Long-term debt decreased to $227 million as of Apr 28, 2013 from $236 million as of Oct 28, 2012. Cash used in operating activities was $4.4 million in the quarter compared with cash provided by operating activities of $9.9 million in the prior-year quarter.
Outlook
Management did not provide any specific guidance for fiscal 2013. However, the company expects the second half of 2013 to benefit from strong backlog, current demand and shipping schedules. The company also expects to grow based on improving market conditions, strong operating leverage and anticipated recovery in nonresidential construction.
Our Take
NCI Building Systems has acquired Metl-Span LLC for $145 million. The acquisition will position NCI Building as a leader in the insulated metal panel business by diversifying and expanding its existing product range. In addition, NCI Building will also be benefited by a growing customer base as well as a distribution network in North America.
In the second quarter, low-rise non-residential construction activity, measured in square feet, increased 1.6% from the comparable period in fiscal 2012. The American Institute of Architect's Architectural Billing Index published for April 2013 was 49 and the commercial and industrial component of the Index remained above 50 for the six consecutive month.
According to the current forecast, McGraw-Hill (MHFI) nonresidential construction activity measured in square feet will be 8% higher in calendar 2013 compared with calendar 2012. The non-residential construction is showing signs of a turnaround, which will benefit NCI Building Systems.
Based in Texas, NCI Building Systems is one of the largest integrated manufacturers of metal products for the North American non-residential construction industry. It competes with privately held companies like American Buildings Company, Butler Manufacturing Company and Varco Pruden Buildings.
Currently, the shares of NCI Building Systems retain a short-term Zacks Rank #5 (Strong Sell). Other companies in the building and construction industry with favorable Zacks Ranks are Owens Corning (OC) and PGT, Inc. (PGTI). Each of them holds a Zacks Rank #2 (Buy).
MCGRAW HILL FIN (MHFI): Free Stock Analysis Report
NCI BLDG SYSTEM (NCS): Free Stock Analysis Report
OWENS CORNING (OC): Free Stock Analysis Report
PGT INC (PGTI): Free Stock Analysis Report
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Zacks Investment Research
Source: http://www.zacks.com/stock/news/100857/wider-than-expected-loss-at-nci-building
