NCI Building Systems Inc. NCS posted adjusted loss of 6 cents per share in the second quarter of fiscal 2015 (ended May 3, 2015) compared with a loss of 7 cents in the prior-quarter. Reported loss was much wider than the Zacks Consensus Estimate of a loss of 3 cents per share.
Including restructuring charges of 1 cent per share and 3 cents a share of other adjustments, the company reported a loss of 10 cents in the quarter. The prior-year quarter had no such adjustments.
Operational Update
Sales rose 18% year over year to $360.0 million in the second quarter, primarily driven by the contribution of the CENTRIA business as well as commercial discipline and higher volumes in legacy single skin and insulated metal panel businesses. Revenues marginally lagged the Zacks Consensus Estimate of $360.7 million.
Cost of sales increased to $284 million from $246.5 million in the year-ago quarter. Adjusted gross profit grew 28% year over year to $75.9 million. Consequently, gross margin expanded 170 basis points to 21.1% in the quarter, primarily driven by continued commercial discipline in both segments along with higher margin product mix, improved manufacturing and supply chain efficiencies.
Engineering, selling, general and administrative expenses were $73 million compared with $64 million in the prior-year quarter. The company reported adjusted operating income of $1.6 million for the quarter, as against a loss of $5.8 million the prior-year quarter.
Segment Performance
Revenues at the Engineered Building Systems segment decreased 4% year over year to $138.7 million. The segment reported adjusted operating income of $3.6 million, up significantly from $0.04 million in the year-ago quarter, aided by benefit from strong margins led by improved project mix and commercial discipline, combined with lean manufacturing improvements.
Metal Coil Coating segment’s revenues declined 8% year over year to $50 million. On an adjusted basis, operating profit declined 25.7% year over year to $2.7 million.
The Metal Component segment generated revenues of $221 million, surging 43% year over year. Adjusted operating profit for the segment increased over two-folds to $10.7 million.
Financial Update
At the end of second-quarter fiscal 2015, NCI Building had cash and cash equivalents of $25.3 million versus $66.6 million as of Nov 2, 2014. The company generated $3.3 million in cash from operating activities for the six months period ended May 3, 2015 compared with $31 million in the prior-year comparable period. Long-term debt was $461.8 million as of May 3, 2015, compared with $233 million as of Nov 2, 2014.
NCI Building’s Engineered Building Systems backlog grew 18% year over year and consolidated backlog increased 51% to $504 million during the second quarter of fiscal 2015.
Outlook
Although management did not provide any specific guidance for fiscal 2015, NCI Building is expected to benefit from simplified organizational structure and supply chain management, which will support greater efficiency and improved execution. The company remains focused on margin expansion and increasing levels of profitability to drive revenue growth and operating leverage.
NCI Building remains optimistic about the CENTRIA acquisition. The company’s strategic investments including development of quality process and expansion of product offerings bode well for its future. Additionally, strong margins, backlog growth and commercial discipline will drive growth.
Notably, the main indicators for non-residential construction activity continue to trend positive. Further, declining vacancy rates will maintain new construction starts, especially in the higher volume sectors of warehousing. However, declining steel prices and inclement weather will pose as headwinds for NCI Building.
Headquartered in Texas, NCI Building Systems is a leading integrated manufacturer of metal products in the North American non-residential construction industry.
Currently, NCI Building Systems carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Headwaters Incorporated HW, Aspen Aerogels, Inc. ASPN and Trex Co. Inc. TREX. While Headwaters holds a Zacks Rank #1 (Strong Buy), Aspen Aerogels and Trex carry a Zacks Rank #2 (Buy).
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