Metal products manufacturer NCI Building Systems Inc. (NCS) reported third-quarter fiscal 2010 operating loss of 64 cents per share compared to operating earnings of 95 cents per share in the year-ago quarter. The results of the company were in line with the Zacks Consensus Estimate.
 
GAAP net loss of NCI Buildings, for the quarter under review, was 90 cents a share versus earnings of 65 cents a share in the year-ago quarter. The difference between operating and GAAP loss, during the third quarter, was owing to the following one-time items: an impact of 25 cents relating to the conversion of the preference shares of the company and 1 cent for restructuring charges.
 
Total Revenue
 
NCI Buildings reported total revenue of $245.3 million in the third quarter 2010 versus $237.9 million in the year-ago quarter, reflecting a growth of 3.1%. The results of the company outpaced the Zacks Consensus Estimate of $230 million.
 
The year-over-year increase in total revenue was driven by healthy contributions from all the three revenue segments – Metal coil coating, Metal components and Engineered building systems. However, Inter-segment sales marginally diluted the results.
 
Operational Update
 
During the reported quarter, the gross profit decreased to $50.4 million from the year-ago level of $61.3 million owing to higher input costs. The cost of goods sold during the quarter increased by 522 basis points year over year.

 
Selling, general and administrative (SG&A) expenses of the company, as a percentage of total revenue, decreased 100 basis points over the year-ago quarter. The decline in SG&A reflects benefits from cost savings.

 
Interest expense of the company at the end of the third quarter was $4.4 million, down from $6.6 million a year ago.
 
Backlog during the third quarter decreased $36 million from the sequentially preceding quarter to $223 million. This decline in backlog was due to slower bookings in the quarter resulting from the recent economic pullback combined with improved pricing discipline on incoming orders and re-pricing of the existing projects to accommodate an increase in steel costs.
 
Financial Update

Cash and cash equivalents for the nine-month period ending on August 1, 2010, were $53.6 million versus $105.4 million at the end of the comparable period a year ago. The year-over-year decline in cash can be attributed to increased usage in operating activities.
 
NCI Buildings invested $7.3 million in capital expenditure during the third quarter of fiscal 2010, which included $4.9 million for the recently acquired Middletown coating facility. The full year capital expenditure of the company is expected in the range of $11 million to $13 million.
 
Guidance
 
NCI Buildings did not provide any specific earnings guidance for the fourth quarter of fiscal 2010. Taking into consideration the current shipping schedule, the company expects that there will be a seasonal pick-up in results during the fourth quarter, resulting in a modest sequential improvement in operating income.
 
Our Take
 
Although NCI Buildings is still in the red, the extent of the loss narrowed sequentially, proving that the initiatives undertaken by the company to reduce conversion costs, improve supply chain management and streamline production processes are taking root. We expect these initiatives would further improve performance in future quarters.
 
Based in Houston, Texas, NCI Buildings manufactures and markets metal products primarily for the nonresidential construction industry in North America.
 

 
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