Mail Stop 7010
February 23, 2006
Ms. Frances R. Powell
Executive VP, CFO and Treasurer
NCI Building Systems, Inc.
10943 N. Sam Houston Parkway West
Houston, TX 77064
RE: Form 10-K for the fiscal year ended October 29, 2005
File No. 1-14315
Dear Ms. Powell:
We have reviewed these filings and have the following
comments.
If you disagree with a comment, we will consider your explanation
as
to why our comment is inapplicable or a revision is unnecessary.
Please be as detailed as necessary in your explanation. In some
of
our comments, we may ask you to provide us with information so we
may
better understand your disclosure. After reviewing this
information,
we may or may not raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
FORM 10-K FOR THE YEAR ENDED OCTOBER 29, 2005
General
1. Where a comment below requests additional disclosures or other
revisions to be made, please show us in your supplemental response
what the revisions will look like. These revisions should be
included in your future filings.
Item 3 - Legal Proceedings, page 21
2. Regarding the lawsuits filed by Bethlehem and National, please
include the name of the court in which the proceeding is pending
and
the date instituted. See Item 103 of Regulation S-K.
Financial Statements
Consolidated Statements of Stockholders` Equity, page 6
3. Please include a column showing the changes in the number of
common shares issued, as well as a column showing the changes in
the
number of shares held as treasury stock.
Note 1 - Nature of Business and Principles of Consolidation, page
7
4. You state that for investments in joint ventures and other
entities that do not meet the criteria of a variable interest
entity
you use the equity method of accounting where your ownership is
between 20 percent and 50 percent or where your ownership is more
than 50 percent and you do not have significant influence or
control
over the consolidated entity. For each entity for which you own
more
than 50 percent and do not consolidate, tell us how you determined
you were not required to consolidate. Please refer to the
applicable
accounting literature in your explanation.
Note 2 - Summary of Significant Accounting Policies, page 7
5. Please disclose the types of expenses that you include in the
cost
of sales line item and the types of expenses that you include in
the
selling, general and administrative expenses line item. Please
also
disclose whether you include inbound freight charges, purchasing
and
receiving costs, inspection costs, warehousing costs, internal
transfer costs, and the other costs of your distribution network
in
the cost of sales line item. With the exception of warehousing
costs, if you currently exclude a portion of these costs from cost
of
sales, please disclose:
* in a footnote the line items that these excluded costs are
included
in and the amounts included in each line item for each period
presented, and
* in MD&A that your gross margins may not be comparable to those
of
other entities, since some entities include all of the costs
related
to their distribution network in cost of sales and others like you
exclude a portion of them from gross margin, including them
instead
in a line item, such as selling, general and administrative
expenses.
(g) Revenue Recognition, page 9
6. Please provide us with additional information regarding the
change
in your revenue recognition policy related to steel coils.
Specifically, address the following:
* Tell us how your revenue recognition policy prior to the third
quarter of fiscal 2004 complied with Topic 13A of SAB No. 104;
* Tell us whether any raw materials were consigned to you
subsequent
to the third quarter of fiscal 2004 and how you recognized revenue
related to these raw materials; and
* Tell us how your revised revenue recognition policy beginning in
the third quarter of fiscal 2004 complies with Topic 13A of SAB
No.
104.
(h) Warranty, page 9
7. Please include a reconciliation of the changes in your warranty
liability. See paragraph 14(b) of FIN 45.
(i) Self Insurance, page 9
8. Please disclose the extent of your self-insurance in each area
that you are self-insured. Please also disclose whether or not
you
have excess loss insurance and, if so, the amounts at which this
insurance coverage begins in each area.
Note 6 - Long-Term Debt, page 13
9. Please tell us how you accounted for the 2.125% convertible
senior
subordinated notes, including what consideration was given to the
contingent conversion features and whether any beneficial
conversion
features existed. Your explanation should refer to the accounting
literature considered and relied upon to determine the appropriate
accounting.
Note 9 - Operating Lease Commitments, page 17
10. Please disclose how you account for (a) step rent provisions
and
escalation clauses and (b) capital improvement funding and other
lease concessions, which may be present in your leases. Paragraph
5.n. of SFAS 13, as amended by SFAS 29, discusses how lease
payments
that depend on an existing index or rate, such as the consumer
price
index or the prime interest rate, should also be included in your
minimum lease payments. If, as we assume, they are taken into
account in computing your minimum lease payments and the minimum
lease payments are recognized on a straight-line basis over the
minimum lease term, the note should so state. If our assumption
is
incorrect, please tell us how your accounting complies with SFAS
13
and FTB 88-1.
11. Please include the disclosures required by paragraphs 16.c.
and
d. of SFAS 13 regarding your operating leases.
Note 13 - Net Income Per Share, page 20
12. Please tell us how your current treatment of the 2.125%
convertible senior subordinated notes in arriving at your net
income
per share amounts complies with EITF 04-08. Your explanation
should
refer to the specific paragraphs of the EITF that led you to
determine that your treatment is appropriate.
Note 18 - Business Segments, page 21
13. Please disclose the types of amounts included within corporate
assets for each period presented, and disclose why these amounts
were
not allocated to the other reportable segments. See paragraphs 31
and 32 of SFAS 131.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 27
Results of Operations for Fiscal 2005 Compared to Fiscal 2004,
page
30
14. Please discuss the business reasons for the changes between
periods in cost of sales. In doing so, please disclose the amount
of
each significant change in line items between periods and the
business reasons for it. In circumstances where there is more
than
one business reason for the change, attempt to quantify the
incremental impact of each individual business reason discussed on
the overall change in the line item. Please show us what your
revised MD&A for 2005 as compared to 2004 will look like. See
Item
303(a)(3) of Regulation S-K and Financial Reporting Codification
501.04.
Contractual Obligations, page 35
15. Please revise your table of contractual cash obligations to
include the estimated interest payments on your debt. Because the
table is aimed at increasing transparency of cash flow, we believe
these payments should be included in the table. Please also
disclose
any assumptions you made to derive these amounts.
* * * *
Please respond to these comments within 10 business days, or
tell us when you will provide us with a response. Please provide
us
with a response letter that keys your responses to our comments
and
provides any requested information. Detailed letters greatly
facilitate our review. Please file your supplemental response on
EDGAR as a correspondence file. Please understand that we may
have
additional comments after reviewing your responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information required under the
Securities Exchange Act of 1934 and that they have provided all
information investors require for an informed decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
If you have any questions regarding these comments, please
direct them to Jeffrey Gordon, Staff Accountant, at (202) 551-3866
or, in his absence, Nudrat Salik, Staff Accountant, at (202) 551-
3692.
Sincerely,
Rufus Decker
Accounting Branch Chief
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Ms. Frances R. Powell
NCI Building Systems, Inc.
February 23, 2006
Page 1 of 6
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE