NCI Building Systems Inc.’s (NCS) adjusted loss for the third quarter of fiscal 2011 ending July 31 of 38 cents was narrower than the Zacks Consensus Estimate of a loss of 46 cents. Results also compare favorably with the loss of 64 cents incurred in the year-ago quarter. Adjusted net loss in the quarter was $6.9 million, narrower than the loss of $11.6 million in the year-ago quarter.
Strong performance across all the segments coupled with cost containment measures helped the company post a lower loss in the quarter.
Including the unfavorable 35-cent effect of the convertible preferred stock's beneficial conversion feature and restructuring recovery of 2 cents, the company reported a net loss of 71 cents in the quarter under review, an improvement from a loss of 90 cents incurred in the third quarter of fiscal 2010. Net loss was $13.1 million, compared with a loss of $16.5 million in the year-ago quarter.
Operational Update
The company’s sales improved 6.9% year over year to $262 million in the quarter. Results also surpassed the Zacks Consensus Estimate of $254 million. This outperformance came on the back of strong performance across all the segments.
Cost of sales sold during the quarter increased 5.3% to $205.3 million. Selling, general and administrative (SG&A) expenses also increased 4.4% to $50.9 million
Adjusted operating income of $5.9 million in the reported quarter was nearly a fourfold increase from the year-ago level. Including an asset recovery of $0.1 million and restructuring recovery of $0.6 million, the company reported operating income of $6.6 million, a substantial improvement from $1.1 million in the year-ago quarter.
Segment Performance
The Engineered Building segment’s revenue increased 9.6% year over year to $155 million in the quarter. The segment reported an operating income of $7.3 million in the quarter reversing the loss of $2.7 million a year ago. The improvement was largely attributable to cost containment measures.
Revenue from the Metal Coil Coating segment increased 6.4% year over year to $54.5 million. Operating profit was $5.2 million in the quarter, a trifle higher than the prior-year quarter.
The Metal Component segment generated revenues of $116.1 million, up 0.5% year over year. Higher shipments of its insulated metal panels and roofing products contributed to the improvement in sales. Operating profit for the segment declined 39% year over year to $6.5 million.
Financial Update
As on July 31, 2011, NCI Building Systems had cash and cash equivalents of $49.7 million, down from $77.4 million as of October 31, 2010.
Long-term debt as on July 31, 2011 was $131.1 million, lower than $136.5 million as on October 30, 2010.
The company generated cash flows of $5.4 million from operating activities during the first nine months of fiscal 2011 versus a cash outflow of $20.7 million during the same period in 2010.
NCI Building Systems incurred $14.7 million of capital expenditure during the first nine months of 2011 compared with $11.3 million in the corresponding year-ago period.
Guidance
NCI Building did not provide any specific earnings guidance for fiscal 2011. The company, however, anticipates operating profitability in the fourth quarter to surpass that of the third quarter.
We retain our Neutral recommendation on NCI Building. The quantitative Zacks #2 Rank (short-term Strong Buy rating) for the company indicates upward pressure on the stock over the near term.
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