NCI Building Systems Inc. (NCS) reported adjusted loss for the second quarter of fiscal 2012 ending April 29, 2012, of 45 cents per share; being more than the Zacks Consensus Estimate of a loss of 39 cents, but narrower than the year-ago quarter’s loss of 48 cents.
Including the effect of the convertible preferred stock's beneficial conversion feature and other one-time items, the company reported a net loss per share of 86 cents in the reported quarter, deteriorating from a loss of 51 cents in the second quarter of fiscal 2012.
Operational Update
Sales increased 11% year over year to $250.2 million in the quarter, surpassing the Zacks Consensus Estimate of $243 million. This outperformance was aided by better performance in the Coatings and buildings segment, favorable business mix and development in the manufacturing, engineering and supply chain operations.
Cost of sales during the quarter increased 10% to $192 million. Gross margin expanded 70 basis points to 23.2% in the quarter.
Selling, general and administrative (SG&A) expenses decreased 2% to $51.6 million. Adjusted operating income of $5.0 million in the reported quarter substantially improved from the year-ago quarter’s operating loss of $547 million.
Segment Performance
Revenue at Engineered Building Systems increased 14.6% year over year to $149 million in the quarter. Improvement stemmed from the increase in demand in manufacturing, warehousing and retail sectors.
The segment reported an operating income of $6.7 million in the quarter compared to the loss of $154 million a year ago. Operating income benefited from an improved mix of higher and lower complexity projects.
Revenue from the Metal Coil Coating segment increased 1.9% year over year to $48.8 million. Operating profit was $4.9 million in the quarter, up 11.7% from the prior-year quarter.
The Metal Component segment generated revenues of $106.7 million, up 3.3% year over year. The segment benefited from robust demand for insulated metal panes, better manufacturing and agricultural market conditions offsetting the negative impact of commercial and industrial market conditions. Operating profit for the segment improved substantially to $7.1 million in the quarter from $8.7 million in the prior year quarter, driven by recovery in self-insured general liability costs.
Financial Update
At the quarter end, NCI Building Systems had cash and cash equivalents of $74 million, down from $79 million as of October 30, 2011. Long-term debt decreased marginally to $128.5 million at the end of the quarter from $130.7 million as of October 30, 2011. Net cash used in operating activities was $9.9 million in the quarter compared with $4.5 million in the prior year quarter.
Our Take
The slow recovery in nonresidential construction market remains a concern for NCI Building Systems. The company has incurred losses for ten straight quarters. According to a report by McGraw Hill, low-rise nonresidential construction starts (in square feet) decreased by 13.5% from the comparable period in fiscal 2011.
According to the American Institute of Architects, the architecture billings index, a predictor of construction spending 9 to 12 months in the future, was 48.4 in April, following 50.4 in March, reflecting a decrease in demand for design services. Any score above 50 indicates an increase in billing. However, the commercial and industrial component of the Index was 53.8, which has increased for the last eight quarters.
NCI Building Systems has entered into a deal to acquire a leader in the advancement of insulated panel technology, 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 distribution network in North America. The company expects the acquisition to be accretive to its earnings in fiscal 2012.
For 2012, McGraw Hill predicts that nonresidential construction activity will be 2% higher than the levels in 2011. According to the report, activities will ramp in the second half of 2012.
Currently, the share retains a short-term Zacks #3 Rank (Hold). We have a long-term Neutral recommendation on NCI Building Systems.
NCI BLDG SYSTEM (NCS): Free Stock Analysis Report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment