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NCI Building Systems Inc. Message Board

  • s451w s451w Jan 26, 1998 11:29 AM Flag

    Anyone out there?

    Anyone following this stock and have comments regarding their "dormant" status?

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    • A bank loan would fetch a higher rate, I agree.
      As for corporate bonds, I've read that low-grade
      bonds (aka junk) are issued to more risky
      (small,tech,etc) ventures. BLDG, w the acq, moves up to something
      like $800M in sales, which I guess is at the top of
      the smallcap/bottom of the midcap range. I don't
      personally know what "size" a company has to be to issue
      low-grade bonds, but Barron's has indicated that there is
      much corporate paper being issued w todays more
      favorable (for the borrower) interest rate environment. The
      low-grade bonds usually have higher rates associated with
      them though. Rerunning the calc w 8% produces 1st year
      interest of $43.8M and $4.6M in prn reduction. Rerunning w
      10% gets us to $54.9M in interest, and $3.1M in prn
      reduction. This (10%) seems the upper end of the comfort
      zone (especially if $66M is a reasonable estimate of
      EBIT). I read, in one of BLDG's releases, that they're
      comfortable w $5.00/share in 1999. How they'll pull that off,
      in the face of these pmts, is beyond me. Thanks for
      your post; I'm still trying to get the "parameters of
      this space" down..

    • I thought the release said that they borrowed the
      money from the bank? I don't think that gets 6.5%
      interest. Is it normal for companies of this size to issue
      corporate bonds? I thought that was for larger size
      companies? I would think that even with corporate bonds,
      because of the size of the company and the leverage the
      market would demand a higher rate that 6.5%. It is a
      good company, but it still doesn't have the
      wherewithal to demand such low interest, IMO.

    • I suspect the debt will be financed w corporate
      bonds, where corp bonds might fetch 6.5% (a bit above
      treasuries).. anyway, assume a 30 year note, w 6.5% interest,
      principal of $550M.

      PV = -$550,000,000
      I =
      6.5%
      FV = $0.00
      N = 12*30
      PMT = $3.476M/mo or
      $41.716M/year

      In the 1st yr that works out to $35.57M in interest,
      $6.147M to
      princ.

      ________________1997_________1998 (est)
      Operat Inc____44.163M________66.00M
      <- (BLDG+Q3&Q4 w MBCI.)
      Int
      Exp________0.163M________35.57M <- 1st years interest
      pmts
      PreTaxInc_____44.000M________31.00M
      _Income Tax___15.840M________11.16M
      Net
      Income____28.160M________19.84M

      Saving the best for last, the debt is reduced to
      $543.853M. If they throw in a few prepayments now and then
      it will vanish in a jiffy #%^)

    • Well, I hope you get an answer to your letter
      before I have to sell the stock. This is actually the
      first stock I ever bought, and I bought it back in
      March, so boy I'm a genius :-) Anyway
      If the stock
      goes too much in either direction I'm thinking of
      unloading it.

      I would like to preserve my 55%+
      profit, and also the US economy, and the fundamentals of
      the stock worry me. Here's hoping.

    • I would worry also if the p/e expanded to 20. If
      you use 1999's EPS of (approx.) $5.00 times an p/e of
      15, you get $75, which is close to $80.

      I also
      worry about how in the world NCI plans to pay off the
      debt. I agree that there has to be some significant
      cost-cutting to pay off the debt.

      Out of my concerns
      regarding the debt, I've written a letter to Johnie Shulte
      asking for an explanation as to how he will pay it off.
      I'll let everyone know what he has to say.

    • I would be scared if the PE expanded to 20, that
      is quite a bit of expansion. I don't think I would
      hold on to the stock then.

      "assuming a 6.5%
      interest rate"

      I think that is a pretty low
      assumption. That is 2 points below prime and I don't know of
      any company that gets that. I would think it would be
      in the 8.5% to 9.5% range. That extra couple of
      percent adds a few million to expenses, so they better be
      able to get some cost cutting out of it.

    • ... if they can handle the debt. I was doing some
      quick and dirty calculations last night. I think there
      is an outside chance that BLDG can handle the debt
      created from their recent acquisition.

      Think of
      if. $550 million borrowed, assuming a 6.5% interest
      rate = approx. $36 million per year in interest
      payments, which is pretty close to what NCI will earn this
      year. I don't know the financials of MBCI but their
      sales last year were about the same as NCI, so I'm
      guessing MBCI will barely generate enough $ to allow NCI
      to pay for it. Still, if sales continue to increase,
      and if ther is some room for cost-cutting to reduce
      overhead, then I think NCI may be able to handle the
      debt.

      I sure hope Shulte doesn't go out and buy anything
      else for a few years!

    • "AT CURRENT EARNINGS WERE LOOKING FOR AN $80 PLUS STOCK PRICE/// PRE-SPLIT."

      Just wondering how you arrived at that price?

    • They've already announced a stock split for
      sometime in July. However, some are of the opinion this is
      just a prelude to capitalizing their debt and diluting
      shareholder equity. So things are changing, so you better
      keep a close eye on this one now.

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