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NCS Declares Underwritten Offering

Zacks Equity Research

NCI Building Systems Inc. (NCS) has declared an underwritten public offering of 8,500,000 shares to enhance its liquidity. The offering has been made by investment funds associated with Clayton, Dubilier & Rice, LLC (CD&R).

The underwriters will have an option to purchase up to 1,275,000 additional shares from CD&R. CD&R will receive all of the proceeds from the underwritten offering.

In addition, NCI entered into a separate agreement with CD&R to repurchase 1,150,000 shares at same price per share to be paid by underwriters to CD&R in the underwritten offering. This buyback is non-underwritten.

The closing of stock repurchase is contingent with the closing of the underwritten offering and subject to other conditions. Following the completion of the underwritten offering and the stock repurchase, NCI intends to cancel the shares repurchased from CD&R.

Credit Suisse, Citigroup, RBC Capital Markets and UBS Investment Bank are serving as joint book-running managers, while BB&T Capital Markets, Stephens Inc. and Sidoti & Company, LLC are acting as co-managers for the underwritten offering.

NCI Building reported a 25% year over year increase in adjusted earnings per share to 10 cents in fourth-quarter fiscal 2013 (ended Nov 3, 2013). Sales also climbed 11% year over year to $400 million, driven by higher volumes in each of the operating segments, as well as the contribution from an extra week in the quarter.

As of Nov 3, 2013, the company had cash and cash equivalents of $77.4 million, up from $55.1 million as of Oct 28, 2012. Cash flow from operating activities was $64 million in fiscal 2013 compared with $47.7 million in the prior year.

However, management did not provide any specific guidance for fiscal 2014. Business conditions at architectural firms have steadily improved in the past several quarters, which point toward an upper single-digit year-over-year growth in non-residential new construction in 2014.

Headquartered in Texas, NCI Building is one of the leading integrated manufacturers of metal products for the North American non-residential construction industry. Currently, NCI Building carry a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector are James Hardie Industries plc (JHX), Masco Corp. (MAS) and United Rentals, Inc. (URI). While James Hardie Industries sports a Zacks Rank #1 (Strong Buy), Masco and United Rentals hold a Zacks Rank #2 (Buy).

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Read the Full Research Report on MAS
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Read the Full Research Report on JHX

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