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TMCNet:  NCI BUILDING SYSTEMS INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

[June 11, 2014]

NCI BUILDING SYSTEMS INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

(Edgar Glimpses Via Acquire Media NewsEdge) The following information should be read in conjunction with the unaudited consolidated financial statements included herein under "Item 1. Unaudited Consolidated Financial Statements" and the audited consolidated financial statements and the notes thereto and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended November 3, 2013.


FORWARD LOOKING STATEMENTS This Quarterly Report includes statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied by these statements. In some cases, our forward-looking statements can be identified by the words "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "goal," "intend," "may," "objective," "plan," "potential," "predict," "projection," "should," "will" or other similar words. We have based our forward-looking statements on our management's beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on any forward-looking information, including any earnings guidance, if applicable. Although we believe that the expectations reflected in the forward-looking statements are reasonable, these expectations and the related statements are subject to risks, uncertainties, and other factors that could cause the actual results to differ materially from those projected. These risks, uncertainties, and other factors include, butare not limited to: • industry cyclicality and seasonality and adverse weather conditions; • challenging economic conditions affecting the nonresidential construction industry; • volatility in the U.S. economy and abroad, generally, and in the credit markets; • ability to service or refinance our debt and obtain future financing; • the Company's ability to comply with the financial tests and covenants in its existing and future debt obligations; • operational limitations or restrictions in connection with our debt; • recognition of asset impairment charges; 17 • commodity price increases and/or limited availability of raw materials, including steel; • the ability to make strategic acquisitions accretive to earnings; • retention and replacement of key personnel; • enforcement and obsolescence of intellectual property rights; • fluctuations in customer demand; • costs related to environmental clean-ups and liabilities; • competitive activity and pricing pressure; • increases in energy prices; • the volatility of the Company's stock price; • the dilutive effect on the Company's common stockholders of potential future sales of the Company's Common Stock held by the selling stockholders; • substantial governance and other rights held by the selling stockholders; • breaches of our information system security measures and damage to our major information management systems; • hazards that may cause personal injury or property damage, thereby subjecting us to liabilities and possible losses, which may not be covered by insurance; • changes in laws or regulations, including the Dodd - Frank Act; • costs and other effects of legal and administrative proceedings, settlements, investigations, claims and other matters; and • other risks detailed under the caption "Risk Factors" in our most recent Annual Report on Form 10-K as filed with the SEC.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. However, we caution you that assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending on the circumstances. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this report, including those described under the caption "Risk Factors" in our most recent Annual Report on Form 10-K as filed with the SEC. We expressly disclaim any obligations to release publicly any updates or revisions to these forward-looking statements to reflect any changes in our expectations unless the securities laws require us to do so.

OVERVIEW NCI Building Systems, Inc. (together with its subsidiaries, unless the context requires otherwise, the "Company," "NCI," "we," "us" or "our") is one of North America's largest integrated manufacturers and marketers of metal products for the nonresidential construction industry. We provide metal coil coating services and design, engineer, manufacture and market metal components and engineered building systems primarily for nonresidential construction use. We manufacture and distribute extensive lines of metal products for the nonresidential construction market under multiple brand names through a nationwide network of plants and distribution centers. We sell our products for both new construction and repair and retrofit applications.

Metal components offer builders, designers, architects and end-users several advantages, including lower long-term costs, longer life, attractive aesthetics and design flexibility. Similarly, engineered building systems offer a number of advantages over traditional construction alternatives, including shorter construction time, more efficient use of materials, lower construction costs, greater ease of expansion and lower maintenance costs.

We use a 52/53 week year with our fiscal year end on the Sunday closest to October 31. In fiscal 2014, our year end will be November 2, 2014 which is the Sunday closest to October 31.

We assess performance across our operating segments by analyzing and evaluating, among other indicators, gross profit, operating income and whether or not each segment has achieved its projected sales goals. In assessing our overall financial performance, we regard return on adjusted operating assets, as well as growth in earnings, as key indicators of shareholder value.

Second Fiscal Quarter The metal coil coating segment's third party sales increased 16.5% in the three months ended May 4, 2014 compared to the same period in the prior year as coating and tolling sales increased for both light gauge and heavy gauge product lines. Volume improvement was enhanced by favorable mix but the gain was offset by elevated steel costs associated with supply chain disruptions and increased marketing expenditures. Higher utility expenses in the current period related to inclement weather and cold temperatures also contributed to lower earnings.

The metal components segment achieved a 5.1% increase in third-party sales in the three months ended May 4, 2014 compared to the same period in the prior year driven by growth in the legacy single skin products. Pricing was favorable in the current period compared to the same period in the prior year but operating income of $4.6 million declined 11.3% in the current period compared to the same period in the prior year as a result of increased costs over the prior year due to investments in growth initiatives and the weather related decline in commercial and industrial insulated panel volumes.

The engineered building systems segment's third party sales increased 1.6% in the three months ended May 4, 2014 compared to the same period in the prior year. We began to benefit from value pricing during the current period and achieved improvement in sales margin and product mix. However, this gain was offset by weather induced lower volumes and increased freight expenses.

Industry Conditions Our sales and earnings are subject to both seasonal and cyclical trends and are influenced by general economic conditions, interest rates, the price of steel relative to other building materials, the level of nonresidential construction activity, roof repair and retrofit demand and the availability and cost of financing for construction projects. Our sales normally are lower in the first half of each fiscal year compared to the second half because of unfavorable weather conditions for construction and typical business planning cycles affecting construction.

18 The nonresidential construction industry is highly sensitive to national and regional macroeconomic conditions. One of the primary challenges we face is that the United States economy is slowly recovering from a recession and historically low nonresidential construction activity, which began in the third quarter of 2008 and reduced demand for our products and adversely affected our business. In addition, the tightening of credit in financial markets over the same period adversely affected the ability of our customers to obtain financing for construction projects. As a result, we have experienced a decrease in orders and cancellations of orders for our products in previous fiscal quarters, and the ability of our customers to make payments has been adversely affected. Similar factors could cause our suppliers to experience financial distress or bankruptcy, resulting in temporary raw material shortages. While economic growth has either resumed or remains flat, the nonresidential construction industry continues to face significant challenges. The graph below shows the annual nonresidential new construction starts, measured in square feet, since 1967 as compiled and reported by McGraw-Hill: [[Image Removed]] Source: McGraw-Hill When assessing the state of the metal construction market, we review information from various industry associations, third-party research, and various government reports such as industrial production and capacity utilization. One such industry association is the Metal Building Manufacturers Association ("MBMA"), which provides summary member sales information and promotes the design and construction of metal buildings and metal roofing systems. Another is McGraw-Hill Construction Information Group ("McGraw-Hill Construction"), which we review for information regarding actual and forecasted growth in various construction related industries, including the overall nonresidential construction market. McGraw-Hill Construction's nonresidential construction forecast for calendar 2014, published in April 2014, indicates an expected increase of 10% in square footage and an increase of 10% in dollar value as compared to the prior calendar year. This represented a upward revision of the 2014 forecast published in January, which indicated an expected increase of 12% in square footage and an increase of 9% in dollar value as compared to 2013.

Additionally, we review the American Institute of Architects' ("AIA") survey for inquiry and billing activity for the industrial, commercial and institutional sectors. The AIA's architecture billings index ("ABI") is a closely watched metric, as billings growth for architecture services generally leads to construction spending growth 9 to 12 months forward. We have historically experienced a shorter lag period of 6 to 9 months when comparing the commercial and industrial ABI trends to our volume trends. An ABI reading above 50 indicates an increase in month-to-month seasonally adjusted billings and a reading below 50 indicates a decrease in month-to-month seasonally adjusted billings. AIA's ABI published for April 2014 was below 50 at 49.6 and the commercial and industrial component of the index was above 50 at 50.2 for April 2014. This represents a decline over those indices for January 2014, when AIA's ABI was above 50 at 50.4 and the commercial and industrial component of the index was at 51.0 for January 2014.

19 Another challenge we face both short and long term is the volatility in the price of steel. Our business is heavily dependent on the supply of steel and is significantly impacted by steel prices. For the fiscal six months ended May 4, 2014, steel represented approximately 69% of our cost of goods sold. The steel industry is highly cyclical in nature, and steel prices have been volatile in recent years and may remain volatile in the future. Historically, we have been able to adjust our sales prices in response to increases in steel prices. Steel prices are influenced by numerous factors beyond our control, including general economic conditions domestically and internationally, the availability of raw materials, competition, labor costs, freight and transportation costs, production costs, import duties and other trade restrictions.

The monthly CRU North American Steel Price Index, published by the CRU Group, has increased from October 2013 to April 2014 and is higher in April 2014 compared to April 2013. The index represents purchases for forward delivery, according to a lead time, which will vary.

We normally do not maintain an inventory of steel in excess of our current production requirements. However, from time to time, we may purchase steel in advance of announced steel price increases. We can give no assurance that steel will be readily available or that prices will not continue to be volatile. While most of our sales contracts have escalation clauses that allow us, under certain circumstances, to pass along all or a portion of increases in the price of steel after the date of the contract but prior to delivery, for competitive or other reasons we may not be able to pass such price increases along. If the available supply of steel declines, we could experience price increases that we are not able to pass on to the end users, a deterioration of service from our suppliers or interruptions or delays that may cause us not to meet delivery schedules to our customers. Any of these problems could adversely affect our results of operations and financial condition. For additional discussion please see "Item 3. Quantitative and Qualitative Disclosures About Market Risk - Steel Prices." RESULTS OF OPERATIONS Operating segments are defined as components of an enterprise that engage in business activities and by which discrete financial information is available that is evaluated on a regular basis by the chief operating decision maker to make decisions about how to allocate resources to the segment and assess the performance of the segment. We have three operating segments: metal coil coating; metal components; and engineered building systems. All operating segments operate primarily in the nonresidential construction market. Sales and earnings are influenced by general economic conditions, the level of nonresidential construction activity, metal roof repair and retrofit demand and the availability and terms of financing available for construction. Our operating segments are vertically integrated and benefit from similar basic raw materials. The metal coil coating segment consists of cleaning, treating, painting and slitting continuous steel coils before the steel is fabricated for use by construction and industrial users. The metal components segment products include metal roof and wall panels, doors, metal partitions, metal trim, insulated panels and other related accessories. The engineered building systems segment includes the manufacturing of main frames, Long Bay® Systems and value-added engineering and drafting, which are typically not part of metal components or metal coil coating products or services. The manufacturing and distribution activities of our segments are effectively coupled through the use of our nationwide hub-and-spoke manufacturing and distribution system, which supports and enhances our vertical integration. The operating segments follow the same accounting policies used for our consolidated financial statements.

We evaluate a segment's performance based primarily upon operating income before corporate expenses. Intersegment sales are recorded based on standard material costs plus a standard markup to cover labor and overhead and consist of: (i) hot-rolled, light gauge painted, and slit material and other services provided by the metal coil coating segment to both the metal components and engineered building systems segments; (ii) building components provided by the metal components segment to the engineered building systems segment; and (iii) structural framing provided by the engineered building systems segment to the metal components segment.

Corporate assets consist primarily of cash but also include deferred financing costs, deferred taxes and property, plant and equipment associated with our headquarters in Houston, Texas. These items (and income and expenses related to these items) are not allocated to the operating segments. Corporate unallocated expenses include share-based compensation expenses, and executive, legal, finance, tax, treasury, human resources, information technology, purchasing, marketing and corporate travel expenses. Additional unallocated expenses include interest income, interest expense, debt extinguishment costs and other (expense) income. See Note 13 - Operating Segments to the consolidated financial statements for more information on our segments.

20 The following table represents sales and operating income attributable to these operating segments for the periods indicated (in thousands, except percentages): Fiscal Three Months Ended Fiscal Six Months Ended May 4, April 28, May 4, April 28, 2014 % 2013 % 2014 % 2013 % Total sales: Metal coil coating $ 54,307 17 $ 49,790 17 $ 108,574 17 $ 99,061 17 Metal components 155,085 51 147,163 50 313,278 51 301,067 51 Engineered building systems 149,411 49 148,095 50 301,648 49 295,661 50 Intersegment sales (53,003 ) (17 ) (51,649 ) (17 ) (107,034 ) (17 ) (104,806 ) (18 ) Total net sales $ 305,800 100 $ 293,399 100 $ 616,466 100 $ 590,983 100 External sales: Metal coil coating $ 25,508 8 $ 21,887 7 $ 50,098 8 $ 41,108 7 Metal components 135,734 45 129,181 44 275,080 45 265,709 45 Engineered building systems 144,558 47 142,331 49 291,288 47 284,166 48 Total net sales $ 305,800 100 $ 293,399 100 $ 616,466 100 $ 590,983 100 Operating income (loss): Metal coil coating $ 3,893 $ 4,755 $ 10,388 $ 10,297 Metal components 4,559 5,137 8,670 11,209 Engineered building systems 36 4,196 1,676 8,237 Corporate (14,001 ) (16,033 ) (29,415 ) (31,290 ) Total operating loss $ (5,513 ) $ (1,945 ) $ (8,681 ) $ (1,547 ) Unallocated other expense (2,449 ) (5,903 ) (6,045 ) (11,753 ) Loss before income taxes $ (7,962 ) $ (7,848 ) $ (14,726 ) $ (13,300 ) FISCAL THREE MONTHS ENDED MAY 4, 2014 COMPARED TO FISCAL THREE MONTHS ENDED APRIL 28, 2013 Consolidated sales increased by 4.2%, or $12.4 million for the three months ended May 4, 2014, compared to the three months ended April 28, 2013. This increase resulted from higher tonnage volumes in our metal coil coating and metal components segments for the three months ended May 4, 2014 compared to the same period in 2013 which was driven primarily by improved demand in the end use sectors we serve compared to the prior year. These increases were partially offset by lower tonnage volumes in our engineered building systems segment primarily due to the impact of unfavorable weather conditions during the current period.

Consolidated cost of sales, excluding gain on insurance recovery increased by 6.0%, or $14.0 million for the three months ended May 4, 2014, compared to the three months ended April 28, 2013. This increase resulted from higher tonnage volumes in our metal coil coating and metal components segments as noted above.

Consolidated gain on insurance recovery for the three months ended May 4, 2014 was $0.3 million. On August 6, 2013, our metal coil coating segment facility in Jackson, Mississippi experienced a fire caused by an exhaust fan failure that damaged the roof and walls of two curing ovens. During the fourth quarter of fiscal 2013, the ovens were repaired. We received insurance proceeds of approximately $0.3 million during the three months ended May 4, 2014 from claims submitted. These insurance proceeds have been classified as a "gain on insurance recovery" in the consolidated statement of operations. There was no corresponding amount recorded for the three months ended April 28, 2013. See Note 3 -- Gain on Insurance Recovery to the consolidated financial statements for more information.

Gross profit, including the gain on insurance recovery, was 19.5% for the three months ended May 4, 2014 compared to 20.7% for the same period in the prior year. The decrease in gross margins was the result of an unfavorable product mix and higher transportation and manufacturing costs due to the impact of unfavorable weather conditions which were partially offset by the gain on insurance recovery as noted above.

Metal coil coating sales increased by 9.1%, or $4.5 million to $54.3 million in the three months ended May 4, 2014, compared to $49.8 million in the same period in the prior year. Sales to third parties for the three months ended May 4, 2014 increased $3.6 million to $25.5 million from $21.9 million in the same period in the prior year, primarily as a result of a 15.0% increase in external tons shipped due to the continued ramping up of our new facility in Middletown, Ohio and higher package sales mix compared to toll processing sales mix. Package sales include both the painting services and the sale of the steel coil while toll processing services include only the painting service performed on the steel coil already in the customer's ownership. The remaining $0.9 million represents an increase in intersegment sales for the three months ended May 4, 2014 compared to the same period in the prior year. Metal coil coating third-party sales accounted for 8.3% of total consolidated third-party sales in the three months ended May 4, 2014 compared to 7.5% in the three months ended April 28, 2013.

Operating income of the metal coil coating segment decreased to $3.9 million in the three months ended May 4, 2014, compared to $4.8 million in the same period in the prior year. The $0.9 million decrease resulted primarily from the additional cost associated with the ramp up of the new Middletown facility and margin compression resulting from higher underlying steel costs, partially offset by external volume and the gain on insurance recovery as noted above.

Metal components sales increased 5.4%, or $7.9 million to $155.1 million in the three months ended May 4, 2014, compared to $147.2 million in the same period in the prior year. This increase was primarily due to a 7.0% increase in external tons shipped, partially offset by unfavorable product mix. The external volume increase was driven by improved demand in the end use sectors we serve compared to the prior year but was partially offset by unfavorable weather conditions during the period. Sales to third parties for the three months ended May 4, 2014 increased $6.6 million to $135.7 million from $129.2 million in the same period in the prior year. The remaining $1.4 million represents an increase in intersegment sales. Metal components third-party sales accounted for 44.4% of total consolidated third-party sales in the three months ended May 4, 2014 compared to 44.0% in the three months ended April 28, 2013.

21 Operating income of the metal components segment decreased to $4.6 million in the three months ended May 4, 2014, compared to $5.1 million in the same period in the prior year. The $0.6 million decrease was driven by unfavorable product mix and investments in certain growth initiatives.

Engineered building systems sales increased 0.9%, or $1.3 million to $149.4 million in the three months ended May 4, 2014, compared to $148.1 million in the same period in the prior year. This increase in the three months ended May 4, 2014 compared to the same period in the prior year resulted from higher sales prices, partially offset by a 1.3% decrease in external tons shipped. Sales to third parties for the three months ended May 4, 2014 increased $2.2 million to $144.6 million from $142.3 million in the same period in the prior year.

The increase was partially offset by a decrease of $0.9 million in intersegment sales. Engineered building systems third-party sales accounted for 47.3% of total consolidated third-party sales in the three months ended May 4, 2014 compared to 48.5% in the three months ended April 28, 2013.

Operating income of the engineered building systems segment decreased to $0.04 million in the three months ended May 4, 2014 compared to $4.2 million in the same period in the prior year. This $4.2 million decline resulted from higher transportation and manufacturing costs which were due to weather disruptions, offset by higher sales prices as noted above.

Consolidated engineering, selling, general and administrative expenses, consisting of engineering, drafting, selling and administrative costs, increased to $65.1 million in the three months ended May 4, 2014, compared to $62.8 million in the same period in the prior year. As a percentage of sales, engineering, selling, general and administrative expenses were 21.3% for the three months ended May 4, 2014 as compared to 21.4% for the three months ended April 28, 2013. The $2.3 million increase in engineering, selling and administrative expenses was primarily due to an increase in wages, commissions and benefits as a result of higher volumes and certain growth initiatives and investments in our sales force during the three months ended May 4, 2014.

Consolidated interest expense decreased to $3.1 million for the three months ended May 4, 2014, compared to $6.2 million for the same period of the prior year. Interest rates on the Credit Agreement decreased on June 24, 2013 from 8% to 4.25%.

Consolidated other income, net improved to $0.6 million for the three months ended May 4, 2014, compared to $0.2 million for the same period of the prior year primarily due to Canadian foreign currency gains in the current period.

Consolidated benefit for income taxes was a $3.1 million benefit for the three months ended May 4, 2014, compared to a $2.5 million benefit for the same period in the prior year. The effective tax rate for the three months ended May 4, 2014 was 38.4% compared to 31.9% for the same period in the prior year. The increase in the income tax benefit was primarily the result of lower utilization of certain Canadian net operating loss carry forwards which have been previously reserved and lower utilization of the domestic production activities deduction and an increase in non-deductible expenses for the three months ended May 4, 2014 compared to the same period in the prior year.

Diluted loss per common share improved to a loss of $(0.07) per diluted common share for the three months ended May 4, 2014, compared to a loss of $(0.28) per diluted common share for the same period in the prior year. The change in the diluted loss per common share was primarily due to the conversion of our Convertible Preferred Stock into shares of our common stock in the third quarter of fiscal 2013, which increased the weighted average number of shares outstanding in the current period, and the $0.4 million decrease in net loss applicable to shares of our common stock resulting from the factors described above in this section. The Convertible Preferred Stock prior to its conversion and the unvested restricted common stock related to our Incentive Plan do not have a contractual obligation to share in losses; therefore, no losses were allocated to these shares in the periods presented.

FISCAL SIX MONTHS ENDED MAY 4, 2014 COMPARED TO FISCAL SIX MONTHS ENDED APRIL 28, 2013 Consolidated salesincreased by 4.3%, or $25.5 million for the six months ended May 4, 2014, compared to the six months ended April 28, 2013. This increase resulted from higher tonnage volumes in our metal coil coating and metal components segments for the six months ended May 4, 2014 compared to the same period in 2013 which was driven primarily by improved demand in the end use sectors we serve compared to the prior year. These increases were partially offset by unfavorable weather conditions during the current period.

Consolidated cost of sales, excluding gain on insurance recovery increased by 6.3%, or $29.7 million for the six months ended May 4, 2014, compared to the six months ended April 28, 2013. This increase resulted from higher tonnage volumes in our metal coil coating and metal components segments as noted above.

22 Consolidated gain on insurance recovery for the six months ended May 4, 2014 was $1.3 million. On August 6, 2013, our metal coil coating segment facility in Jackson, Mississippi experienced a fire caused by an exhaust fan failure that damaged the roof and walls of two curing ovens. During the fourth quarter of fiscal 2013, the ovens were repaired. We received insurance proceeds of approximately $1.3 million during the six months ended May 4, 2014 from claims submitted. These insurance proceeds have been classified as a "gain on insurance recovery" in the consolidated statement of operations. There was no corresponding amount recorded for the six months ended April 28, 2013. See Note 3 -- Gain on Insurance Recovery to the consolidated financial statements for more information.

Gross profit, including the gain on insurance recovery, was 19.3% for the six months ended May 4, 2014 compared to 20.6% for the same period in the prior year. The decrease in gross margins was the result of an unfavorable product mix and higher transportation and manufacturing costs due to the impact of unfavorable weather conditions which were partially offset by the gain on insurance recovery as noted above.

Metal coil coating sales increased by 9.6%, or $9.5 million to $108.6 million in the six months ended May 4, 2014, compared to $99.1 million in the same period in the prior year. Sales to third parties for the six months ended May 4, 2014 increased $9.0 million to $50.1 million from $41.1 million in the same period in the prior year, primarily as a result of a 18.1% increase in external tons shipped due to the continued ramping up of our new facility in Middletown, Ohio and higher package sales mix compared to toll processing sales mix. Package sales include both the toll processing services and the sale of the steel coil while toll processing services include only the toll processing service performed on the steel coil already in the customer's ownership. The remaining $0.5 million represents an increase in intersegment sales for the six months ended May 4, 2014 compared to the same period in the prior year. Metal coil coating third-party sales accounted for 8.1% of total consolidated third-party sales in the six months ended May 4, 2014 compared to 7.0% in the six months ended April 28, 2013.

Operating income of the metal coil coating segment increased to $10.4 million in the six months ended May 4, 2014, compared to $10.3 million in the same period in the prior year. The $0.1 million increase resulted primarily from the gain on insurance recovery and external volume as noted above, partially offset by the additional cost associated with the ramp up of the new Middletown facility.

Metal components sales increased 4.1%, or $12.2 million to $313.3 million in the six months ended May 4, 2014, compared to $301.1 million in the same period in the prior year. This increase was primarily due to a 3.8% increase in external tons shipped, partially offset by unfavorable product mix. The external volume increase was driven by improved demand in the end use sectors we serve compared to the prior year but was partially offset by unfavorable weather conditions during the period. Sales to third parties for the six months ended May 4, 2014 increased $9.4 million to $275.1 million from $265.7 million in the same period in the prior year. The remaining $2.8 million represents an increase in intersegment sales. Metal components third-party sales accounted for 44.6% of total consolidated third-party sales in the six months ended May 4, 2014 compared to 45.0% in the six months ended April 28, 2013.

Operating income of the metal components segment decreased to $8.7 million in the six months ended May 4, 2014, compared to $11.2 million in the same period in the prior year. The $2.5 million decrease was driven by investments in certain growth initiatives, unfavorable weather conditions and unfavorable product mix.

Engineered building systems sales increased 2.0%, or $6.0 million to $301.6 million in the six months ended May 4, 2014, compared to $295.7 million in the same period in the prior year. This increase in the six months ended May 4, 2014 compared to the same period in the prior year resulted from higher sales prices.

Sales to third parties for the six months ended May 4, 2014 increased $7.1 million to $291.3 million from $284.2 million in the same period in the prior year. The increase was partially offset by a decrease of $1.1 million in intersegment sales. Engineered building systems third-party sales accounted for 47.3% of total consolidated third-party sales in the six months ended May 4, 2014 compared to 48.1% in the six months ended April 28, 2013.

Operating income of the engineered building systems segment decreased to $1.7 million in the six months ended May 4, 2014 compared to $8.2 million in the same period in the prior year. This $6.6 million decline resulted from higher transportation and manufacturing costs which were due to weather and supply chain disruptions, partially offset by higher sales prices as noted above.

Consolidated engineering, selling, general and administrative expenses, consisting of engineering, drafting, selling and administrative costs, increased to $127.5 million in the six months ended May 4, 2014, compared to $123.3 million in the same period in the prior year. As a percentage of sales, engineering, selling, general and administrative expenses were 20.7% for the six months ended May 4, 2014 as compared to 20.9% for the six months ended April 28, 2013. The $4.3 million increase in engineering, selling and administrative expenses was primarily due to an increase in wages, commissions and benefits as a result of higher volumes and certain growth initiatives and investments in our sales force as well as $0.8 million of expenses relating to the secondary offering by the CD&R Funds during the six months ended May 4, 2014.

23 Consolidated interest expense decreased to $6.2 million for the six months ended May 4, 2014, compared to $12.5 million for the same period of the prior year.

Interest rates on the Credit Agreement decreased on June 24, 2013 from 8% to 4.25%.

Consolidated other income, net decreased to $0.1 million for the six months ended May 4, 2014, compared to $0.6 million for the same period of the prior year primarily due to Canadian foreign currency losses in the current period.

Consolidated benefit from income taxes was a $5.6 million benefit for the six months ended May 4, 2014, compared to a $4.3 million benefit for the same period in the prior year. The effective tax rate for the six months ended May 4, 2014 was 37.8% compared to 32.6% for the same period in the prior year. The increase in the income tax benefit was primarily the result of lower utilization of certain Canadian net operating loss carry forwards which have been previously reserved and lower utilization of the domestic production activities deduction and an increase in non-deductible expenses for the six months ended May 4, 2014 compared to the same period in the prior year.

Diluted loss per common share improved to a loss of $(0.13) per diluted common share for the six months ended May 4, 2014, compared to a loss of $(0.46) per diluted common share for the same period in the prior year. The change in the diluted loss per common share was primarily due to the conversion of our Convertible Preferred Stock into shares of our common stock in the third quarter of fiscal 2013, which increased the weighted average number of shares outstanding, partially offset by the $0.2 million increase in net loss applicable to shares of our common stock resulting from the factors described above in this section. The Convertible Preferred Stock prior to its conversion and the unvested restricted common stock related to our Incentive Plan do not have a contractual obligation to share in losses; therefore, no losses were allocated to these shares in the periods presented.

LIQUIDITY AND CAPITAL RESOURCES General Our cash and cash equivalents declined from $77.4 million to $12.5 million during the six months ended May 4, 2014. The following table summarizes our consolidated cash flows for the six months then ended May 4, 2014 and April 28, 2013 (dollars in thousands): Fiscal Six Months Ended May 4, April 28, 2014 2013Net cash used in operating activities (30,508 ) (3,790 ) Net cash used in investing activities (8,693 ) (12,715 ) Net cash used in financing activities (25,546 ) (11,070 ) Effect of exchange rate changes on cash and cash equivalents (221 ) (45 ) Net decrease in cash and cash equivalents (64,968 ) (27,620 ) Cash and cash equivalents at beginning of period 77,436 55,158 Cash and cash equivalents at end of period $ 12,468 $ 27,538 Operating Activities Our business is both seasonal and cyclical and cash flows from operating activities may fluctuate during the year and from year to year due to economic conditions. We rely on cash and short-term borrowings to meet cyclical and seasonal increases in working capital needs. These needs generally rise during periods of increased economic activity or increasing raw material prices due to higher levels of inventory and accounts receivable. During economic slowdowns, or periods of decreasing raw material costs, working capital needs generally decrease as a result of the reduction of inventories and accounts receivable.

Net cash used in operating activities was $30.5 million during the six months ended May 4, 2014 compared to $3.8 million of net cash used in operating activities in the comparable period of fiscal 2013. This difference was largely driven by changes in working capital and the decrease in earnings over the comparable period of the prior year.

The primary driver for our increased use of cash for working capital needs was a $28.2 million increase in our cash used for accounts payable over the comparable period of the prior year. Our vendor payments during the current period were significantly higher due to the fact that the fourth quarter of the prior year had shown significant year-over-year revenue growth requiring an increase in raw material used. Our days payable outstanding ("DPO") as of May 4, 2014 was unchanged at 33.3 days compared to 33.3 days in the prior year.

24 Cash generated from accounts receivable was $5.3 million higher in the current six month period than the comparable period of the prior year. This increase was driven by the significant year-over-year revenue growth in the fourth fiscal quarter of 2013 and a decrease in days sales outstanding ("DSO") to 33.2 days as of May 4, 2014 from 35.7 days at April 28, 2013. We experienced improved customer payments and increased use of faster electronic payment methods during the current six month period.

Cash used during the period to invest in inventory was $14.1 million for the six months ended May 4, 2014 which was lower than the $19.8 million invested in the comparable period of the prior year. The decrease was driven by lower than anticipated volumes but was partially offset by an increase in our days inventory on-hand ("DIO"), as our DIO was 51.3 days as of May 4, 2014 as compared to 48.8 days at April 28, 2013 due to the anticipation of higher volumes as we move into our seasonally higher demand periods.

Investing Activities Cash used in investing activities of $8.7 million during the six months ended May 4, 2014 was lower than the $12.7 million invested in the comparable period of the prior year and related predominantly to capital expenditures for a new insulated panel system line, machinery and equipment and computer software in the current period. In the six months ended April 28, 2013, $12.7 million was used for capital expenditures predominantly related to the new metal coil coating facility, computer software and a new insulated panel system line.

Financing Activities Cash used in financing activities increased to $25.5 million of cash used in financing activities from $11.1 million of cash used in financing activities in the comparable prior year period. The $25.5 million used in financing activities during the six months ended May 4, 2014 was primarily attributable to the purchase of treasury stock in the amount of $23.7 million paid primarily to the CD&R Funds in connection with the Stock Repurchase (as defined below) and $1.2 million of payments made to reduce our outstanding term loan, partially offset by $0.8 million of excess tax benefits from share-based compensation arrangements during the six months ended May 4, 2014. The $11.1 million of cash used in financing activities during the six months ended April 28, 2013 was primarily attributable to $10.4 million of payments made to reduce our outstanding term loan and $2.4 million of treasury stock purchases during the six months ended April 28, 2013.

We invest our excess cash in various overnight investments which are issued or guaranteed by the federal government.

Equity Investment On August 14, 2009, the Company entered into an Investment Agreement (as amended, the "Investment Agreement"), by and between the Company and CD&R Fund VIII, pursuant to which the Company agreed to issue and sell to CD&R Fund VIII, and CD&R Fund VIII agreed to purchase from the Company, for an aggregate purchase price of $250 million (less reimbursement to CD&R Fund VIII or direct payment to its service providers of up to $14.5 million in the aggregate of transaction expenses and a deal fee, paid to Clayton, Dubilier & Rice, Inc., the manager of CD&R Fund VIII, of $8.25 million), 250,000 shares of Convertible Preferred Stock. Pursuant to the Investment Agreement, on October 20, 2009 (the "Closing Date"), the Company issued and sold to the CD&R Funds, and the CD&R Funds purchased from the Company, an aggregate of 250,000 Preferred Shares, representing approximately 39.2 million shares of Common Stock or 68.4% of the voting power and Common Stock of the Company on an as-converted basis as of the Closing Date (such purchase and sale, the "CD&R Equity Investment").

On May 14, 2013, the CD&R Funds, the holders of 339,293 Preferred Shares, delivered a formal notice requesting the Conversion of all of their Preferred Shares into shares of our Common Stock. In connection with the Conversion request, we issued the CD&R Funds 54,136,817 shares of our Common Stock, representing 72.4% of the Common Stock of the Company then outstanding. Under the terms of the Preferred Shares, no consideration was required to be paid by the CD&R Funds to the Company in connection with the Conversion of the Preferred Shares. As a result of the Conversion, the CD&R Funds no longer have rights to dividends or default dividends as specified in the Certificate of Designations.

The Conversion eliminated all the outstanding Convertible Preferred Stock and increased stockholders' equity by nearly $620.0 million, returning our stockholders' equity to a positive balance during our third quarter of fiscal 2013.

The Company filed, pursuant to the Registration Rights Agreement dated as of October 20, 2009 among the Company and the CD&R Funds, a registration statement on Form S-3 for the offer and sale of Common Stock from time to time by the CD&R Funds of their common stock. The registration statement became effective on March 28, 2013.

On January 15, 2014, the CD&R Funds completed a registered underwritten offering, in which the CD&R Funds offered 8.5 million shares of Common Stock at a price to the public of $18.00 per share (the "Secondary Offering"). The underwriters also exercised their option to purchase 1.275 million additional shares of Common Stock. The aggregate offering price for the 9.775 million shares sold in the Secondary Offering was approximately $167.6 million, net of underwriting discounts and commissions. The CD&R Funds received all of the proceeds from the Secondary Offering and no shares in the Secondary Offering were sold by NCI or any of its officers or directors (although certain of our directors are affiliated with the CD&R Funds). In connection with this Secondary Offering, we incurred approximately $0.8 million in expenses, which were included in engineering, selling, general and administrative expenses in the consolidated statement of operations for the six months ended May 4, 2014. At May 4, 2014 and November 3, 2013, the CD&R Funds owned 58.6% and 72.4%, respectively, of the voting power and Common Stock of the Company.

25 On January 6, 2014, NCI entered into an agreement with the CD&R Funds to repurchase 1.15 million shares of its Common Stock at the price per share equal to the price per share paid by the underwriters to the CD&R Funds in the underwritten offering (the "Stock Repurchase"). The Stock Repurchase, which was completed at the same time as the Secondary Offering, represented a private, non-underwritten transaction between NCI and the CD&R Funds that was approved and recommended by the Affiliate Transactions Committee of NCI's board of directors. Following completion of the Stock Repurchase, NCI canceled the shares repurchased from the CD&R Funds, resulting in a $19.7 million decrease in both additional paid in capital and treasury stock.

Debt On June 24, 2013, the Company entered into Amendment No. 1 (the "Amendment") to its existing Credit Agreement (the "Credit Agreement"), dated as of June 22, 2012, between NCI, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent and the other financial institutions party thereto from time to time (the "Term Loan Facility"), primarily to extend the maturity date and reduce the interest rate applicable to all of the outstanding term loans under the Term Loan Facility. At May 4, 2014 and November 3, 2013, amounts outstanding under the Credit Agreement were $236.6 million and $237.8 million, respectively.

Pursuant to the Amendment, the maturity date of the $238 million of outstanding term loans (the "Initial Term Loans") was extended and such loans were converted into a new tranche of term loans (the "Tranche B Term Loans") that will mature on June 24, 2019 and, prior to such date, will amortize in nominal quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum. At both May 4, 2014 and November 3, 2013, the interest rate on the term loan under our Credit Agreement was 4.25%.

In addition to our Credit Agreement, we have entered into the Amended ABL Facility which allows aggregate maximum borrowings of up to $150.0 million.

Borrowing availability on the Amended ABL Facility is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of qualified cash, eligible inventory and eligible accounts receivable, less certain reserves and subject to certain other adjustments. The Amended ABL Facility has a maturity of May 2, 2017 and includes borrowing capacity of up to $30 million for letters of credit and up to $10 million for swingline borrowings.

Credit Agreement. On June 24, 2013, the Company entered into the Amendment to the Credit Agreement, dated as of June 22, 2012, between NCI, as borrower, and Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent and the other financial institutions party thereto from time to time (the "Term Loan Facility"), primarily to extend the maturity date and reduce the interest rate applicable to all of the outstanding term loans under the Term Loan Facility. At May 4, 2014 and November 3, 2013, amounts outstanding under the Credit Agreement were $236.6 million and $237.8 million, respectively.

Pursuant to the Amendment, the maturity date of the $238 million of outstanding Initial Term Loans was extended and such loans were converted into the Tranche B Term Loans that will mature on June 24, 2019 and, prior to such date, will amortize in nominal quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum. Pursuant to the Amendment, the Tranche B Term Loans will bear interest at a floating rate measured by reference to, at the Company's option, either (i) an adjusted LIBOR not less than 1.00% plus a borrowing margin of 3.25% per annum or (ii) an alternate base rate plus a borrowing margin of 2.25% per annum. At both May 4, 2014 and November 3, 2013, the interest rate on the term loan under our Credit Agreement was 4.25%. Overdue amounts will bear interest at a rate that is 2% higher than the rate otherwise applicable.

The Tranche B Term Loans are secured by the same collateral and guaranteed by the same guarantors as the Initial Term Loans under the Term Loan Facility.

Voluntary prepayments of the Tranche B Term Loans are permitted at any time, in minimum principal amounts, without premium or penalty, subject to a 1.00% premium payable in connection with certain repricing transactions within the first six months.

Pursuant to the Amendment, the Company will no longer be subject to a financial covenant requiring us to maintain a specified consolidated secured debt to EBITDA leverage ratio for specified periods. The Amendment also includes certain other changes to the Term Loan Facility.

26 Subject to certain exceptions, the term loan under the Amendment will be subject to mandatory prepayment in an amount equal to: • the net cash proceeds of (1) certain asset sales, (2) certain debt offerings, and (3) certain insurance recovery and condemnation events; and • 50% of annual excess cash flow (as defined in the Amendment), subject to reduction to 0% if specified leverage ratio targets are met.

On June 22, 2012, in connection with the acquisition of Metl-Span LLC, a Texas limited liability company (the "Acquisition"), the Company entered into a Credit Agreement among the Company, as Borrower, Credit Suisse AG, Cayman Islands Branch, as Administrative Agent and Collateral Agent (the "Term Agent"), and the lenders party thereto. The Credit Agreement provided for a term loan credit facility in an aggregate principal amount of $250.0 million. The Credit Agreement was issued at 95% of face value, which resulted in a note discount of $12.5 million. Prior to the Amendment, the note discount was amortized over the life of the loan through May 2, 2018 using the effective interest method.

The Company's obligations under the Credit Agreement and designated cash management arrangements and hedging agreements, if any, will be irrevocably and unconditionally guaranteed on a joint and several basis by each direct and indirect wholly owned domestic subsidiary of the Company (other than any domestic subsidiary that is a foreign subsidiary holding company or a subsidiary of a foreign subsidiary and certain other excluded subsidiaries).

The obligations under the Credit Agreement and the designated cash management arrangements and hedging agreements, if any, and the guarantees thereof are secured pursuant to a guarantee and collateral agreement, dated as of June 22, 2012 (the "Guarantee and Collateral Agreement"), made by the Company and other Grantors (as defined therein), in favor of the Term Agent, by (i) all of the capital stock of all direct domestic subsidiaries owned by the Company and the guarantors, (ii) up to 65% of the capital stock of certain direct foreign subsidiaries owned by the Company or any guarantor (it being understood that a foreign subsidiary holding company or a domestic subsidiary of a foreign subsidiary will be deemed a foreign subsidiary), and (iii) substantially all other tangible and intangible assets owned by the Company and each guarantor, in each case to the extent permitted by applicable law and subject to certain exceptions.

The Credit Agreement contains a number of covenants that, among other things, will limit or restrict the ability of the Company and its subsidiaries to dispose of assets, incur additional indebtedness, make dividends and other restricted payments, create liens securing indebtedness, engage in mergers and other fundamental transactions, enter into restrictive agreements, amend certain documents in respect of other indebtedness, change the nature of their business and engage in certain transactions with affiliates.

The Credit Agreement contains customary events of default, including non-payment of principal, interest or fees, violation of covenants, material inaccuracy of representations or warranties, cross default and cross acceleration to certain other material indebtedness, certain bankruptcy events, certain ERISA events, material invalidity of security interest, material judgments, and change of control.

The Credit Agreement also provides that the Company has the right at any time to request incremental commitments under one or more incremental term loan facilities or incremental revolving loan facilities, subject to compliance with a pro forma consolidated secured net debt to EBITDA leverage ratio. The lenders under the Credit Agreement will not be under any obligation to provide any such incremental commitments, and any such addition of or increase in commitments will be subject to pro forma compliance with customary conditions.

In connection with the execution of the Credit Agreement the Company, certain of the Company's subsidiaries, Wells Fargo Capital Finance, LLC, as administrative agent (the "ABL Agent") under the Company's Amended ABL Facility (as defined below), and the Term Agent entered into an amendment (the "Intercreditor Agreement Amendment") to the Company's existing Intercreditor Agreement, dated as of October 20, 2009, providing for, among other things, the obligations under the Credit Agreement to become subject to the provisions of the Intercreditor Agreement.

Amended ABL Facility.On May 2, 2012, we entered into the Amended Asset-Based Lending Facility (the "Amended ABL Facility") to (i) permit the acquisition, the entry by the Company into the Credit Agreement and the incurrence of debt thereunder and the repayment of existing indebtedness under NCI's existing Term Loan, (ii) increase the amount available for borrowing thereunder to $150 million (subject to a borrowing base), (iii) increase the amount available for letters of credit thereunder to $30 million, and (iv) extend the final maturity thereunder to May 2, 2017.

The Amended ABL Facility provides for an asset-based revolving credit facility which allows aggregate maximum borrowings by NCI Group, Inc. and Robertson-Ceco II Corporation of up to $150.0 million. Borrowing availability under the Amended ABL Facility is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of qualified cash, eligible inventory and eligible accounts receivable, less certain reserves and subject to certain other adjustments. At May 4, 2014 and November 3, 2013, our excess availability under the Amended ABL Facility was $115.5 million and $123.2 million, respectively. At both May 4, 2014 and November 3, 2013, we had no revolving loans outstanding under the Amended ABL Facility. In addition, at May 4, 2014 and November 3, 2013, standby letters of credit related to certain insurance policies totaling approximately $12.4 million and $10.2 million, respectively, were outstanding but undrawn under the Amended ABL Facility.

27 An unused commitment fee is paid monthly on the Amended ABL Facility at an annual rate of 0.50% based on the amount by which the maximum credit exceeds the average daily principal balance of outstanding loans and letter of credit obligations. Additional customary fees in connection with the Amended ABL Facility also apply.

The obligations of the borrowers under the Amended ABL Facility are guaranteed by the Company and each direct and indirect domestic subsidiary of the Company (other than any domestic subsidiary that is a foreign subsidiary holding company or a subsidiary of a foreign subsidiary that is insignificant) that is not a borrower under the Amended ABL Facility. The obligations of the Company under certain specified bank products agreements are guaranteed by each borrower and each other direct and indirect domestic subsidiary of the Company and the other guarantors. These guarantees are made pursuant to a guarantee agreement, dated as of October 20, 2009, entered into by the Company and each other guarantor with Wells Fargo Capital Finance, LLC (formerly known as Wells Fargo Foothill, LLC), as administrative agent. In connection with the Acquisition, Metl-Span became a borrower under the ABL Facility, and the Company, certain subsidiaries of the Company, and the ABL Agent entered into an amendment (the "ABL Guaranty Amendment") to the Company's existing Guaranty Agreement, dated as of October 20, 2009, providing for, among other things, the guarantee of the obligations of Metl-Span under the Amended ABL Facility.

The obligations under the Amended ABL Facility, and the guarantees thereof, are secured by a first priority lien on our accounts receivable, inventory, certain deposit accounts, associated intangibles and certain other specified assets of the Company and a second priority lien on the assets securing the term loan under the Credit Agreement on a first-lien basis, in each case subject to certain exceptions.

The Amended ABL Facility contains a number of covenants that, among other things, limit or restrict our ability to dispose of assets, incur additional indebtedness, incur guarantee obligations, engage in sale and leaseback transactions, prepay other indebtedness, modify organizational documents and certain other agreements, create restrictions affecting subsidiaries, make dividends and other restricted payments, create liens, make investments, make acquisitions, engage in mergers, change the nature of our business and engage in certain transactions with affiliates.

Under the Amended ABL Facility, a "Dominion Event" occurs if either an event of default is continuing or excess availability falls below certain levels, during which period, and for certain periods thereafter, the administrative agent may apply all amounts in the Company's, the borrowers' and the other guarantors' concentration accounts to the repayment of the loans outstanding under the Amended ABL Facility, subject to the Intercreditor Agreement and certain specified exceptions. In addition, during such Dominion Event, we are required to make mandatory payments on our Amended ABL Facility upon the occurrence of certain events, including the sale of assets and the issuance of debt, in each case subject to certain limitations and conditions set forth in the AmendedABL Facility.

The Amended ABL Facility includes a minimum fixed charge coverage ratio of one to one, which will apply if we fail to maintain a specified minimum borrowing capacity. The minimum level of borrowing capacity as of May 4, 2014 and November 3, 2013 was $17.3 million and $18.5 million, respectively. Although our Amended ABL Facility did not require any financial covenant compliance, at May 4, 2014 and November 3, 2013, our fixed charge coverage ratio as of those dates, which is calculated on a trailing twelve month basis, was 1.31:1.00 and 2.29:1.00, respectively.

Loans under the Amended ABL Facility bear interest, at our option, as follows: (1) Base Rate loans at the Base Rate plus a margin. "Base Rate" is defined as the higher of the Wells Fargo Bank, N.A. prime rate and the overnight Federal Funds rate plus 0.5% and "LIBOR" is defined as the applicable London Interbank Offered Rate adjusted for reserves. The margin ranges from 1.50% to 2.00% depending on the quarterly average excess availability under such facility, and (2) LIBOR loans at LIBOR plus a margin. The margin ranges from 2.50% to 3.00% depending on the quarterly average excess availability under such facility.

At both May 4, 2014 and November 3, 2013, the interest rate on our Amended ABL Facility was 4.75%. During an event of default, loans under the Amended ABL Facility will bear interest at a rate that is 2% higher than the rate otherwise applicable.

Cash Flow We periodically evaluate our liquidity requirements, capital needs and availability of resources in view of inventory levels, expansion plans, debt service requirements and other operating cash needs. To meet our short- and long-term liquidity requirements, including payment of operating expenses and repaying debt, we rely primarily on cash from operations. Beyond cash generated from operations, most of our Amended ABL Facility is undrawn with $115.5 million available at May 4, 2014 and $12.5 million of cash at May 4, 2014. However, we have in the past, sought to raise additional capital.

28 We expect that, for the next 12 months, cash generated from operations and our Amended ABL Facility will be sufficient to provide us the ability to fund our operations, provide the increased working capital necessary to support our strategy and fund planned capital expenditures of between approximately $15 million and $18 million for the remainder of fiscal 2014 and expansion when needed.

In the past, we have used available funds to repurchase shares of our Common Stock under our stock repurchase program. Although we did not purchase any Common Stock during the second quarter of fiscal 2014 under our stock repurchase program, we did withhold shares of restricted stock to satisfy minimum tax withholding obligations arising in connection with the vesting of awards of restricted stock related to our 2003 Long-Term Stock Incentive Plan.

On January 6, 2014, NCI entered into an agreement with the CD&R Funds to repurchase 1.15 million shares of its Common Stock at the price per share equal to the price per share paid by the underwriters to the CD&R Funds in the underwritten offering (the "Stock Repurchase"). The Stock Repurchase, which was completed at the same time as the Secondary Offering, represented a private, non-underwritten transaction between NCI and the CD&R Funds that was approved and recommended by the Affiliate Transactions Committee of NCI's board of directors. Following completion of the Stock Repurchase, NCI canceled the shares repurchased from the CD&R Funds.

Our corporate strategy seeks potential acquisitions that would provide additional synergies in our metal coil coating, metal components and engineered building systems segments. From time to time, we may enter into letters of intent or agreements to acquire assets or companies in these business lines. The consummation of these transactions could require substantial cash payments and/or issuance of additional debt.

The Company may repurchase or otherwise retire the Company's debt and take other steps to reduce the Company's debt or otherwise improve the Company's financial position. These actions could include open market debt repurchases, negotiated repurchases, other retirements of outstanding debt and opportunistic refinancing of debt. The amount of debt that may be repurchased or otherwise retired, if any, will depend on market conditions, trading levels of the Company's debt, the Company's cash position, compliance with debt covenants and other considerations. Affiliates of the Company may also purchase the Company's debt from time to time, through open market purchases or other transactions. In such cases, the Company's debt may not be retired, in which case the Company would continue to pay interest in accordance with the terms of the debt, and the Company would continue to reflect the debt as outstanding in its consolidated balance sheets.

NON-GAAP MEASURES Set forth below are certain non-GAAP measures which include "adjusted" operating income (loss), adjusted EBITDA, "adjusted" net income (loss) per diluted common share and "adjusted" net income (loss) applicable to common shares. We define adjusted EBITDA as net income (loss) before interest expense, income tax expense (benefit) and depreciation and amortization, adjusted for items broadly consisting of selected items which management does not consider representative of our ongoing operations and certain non-cash items of the Company. Such measurements are not prepared in accordance with U.S. GAAP and should not be construed as an alternative to reported results determined in accordance with U.S. GAAP. Management believes the use of such non-GAAP measures, on a consolidated and operating segment basis, assists investors in understanding the ongoing operating performance by presenting the financial results between periods on a more comparable basis. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating these measures, you should be aware that in the future we may incur expenses that are the same as, or similar to, some of the adjustments in these non-GAAP measures. In addition, certain financial covenants related to our Credit Agreement and Amended ABL Facility are based on similar non-GAAP measures. The non-GAAP information provided is unique to the Company and may not be consistent with the methodologies used by other companies.

The following tables reconcile adjusted operating income (loss) to operating income (loss) for the periods indicated (in thousands): For the Three Months Ended May 4, 2014 Engineered Metal Coil Metal Building Coating Components Systems Corporate ConsolidatedOperating income (loss), GAAP basis $ 3,893 $ 4,559 $ 36 $ (14,001 ) $ (5,513 ) Gain on insurance recovery (324 ) -- -- -- (324 ) Secondary offering costs -- -- -- 50 50 Adjusted operating income (loss) $ 3,569 $ 4,559 $ 36 $ (13,951 ) $ (5,787 ) 29 For the Three Months Ended April 28, 2013 Engineered Metal Coil Metal Building Coating Components Systems Corporate Consolidated Operating income (loss), GAAP basis(1) $ 4,755 $ 5,137 $ 4,196 $ (16,033 ) $ (1,945 ) For the Six Months Ended May 4, 2014 Engineered Metal Coil Metal Building Coating Components Systems Corporate Consolidated Operating income (loss), GAAP basis $ 10,388 $ 8,670 $ 1,676 $ (29,415 ) $ (8,681 ) Gain on insurance recovery (1,311 ) -- -- -- (1,311 ) Secondary offering costs -- -- -- 754 754 Adjusted operating income (loss) $ 9,077 $ 8,670 $ 1,676 $ (28,661 ) $ (9,238 ) For the Six Months Ended April 28, 2013 Engineered Metal Coil Metal Building Coating Components Systems Corporate Consolidated Operating income (loss), GAAP basis(1) $ 10,297 $ 11,209 $ 8,237 $ (31,290 ) $ (1,547 ) (1) The Company did not incur any special charges during the three and six months ended April 28, 2013.

The following tables reconcile adjusted EBITDA to Net Income (Loss) for the periods indicated (in thousands):

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