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EXHIBIT 99.1
[NCI Letterhead]
June 7, 2001
To the shareholders of
NCI Building Systems, Inc.:
On April 12, 2001, we announced that NCI would have to lower its
previously reported financial results for fiscal 2000, the first quarter of
fiscal 2001, and possibly the last two quarters of fiscal 1999.
We have now confirmed that our reported net income for fiscal 1999 and
2000 and the first quarter of fiscal 2001 aggregated $91.8 million instead of
the previously reported $101.8 million. As we suggested we may do in our April
12 press release, NCI has restated its results for fiscal 1999 as well as fiscal
2000 and the first quarter of fiscal 2001. The effects of the restatement on net
income and earnings per share for each of those periods are as follows (in
thousands, except per share data):
FY ENDED 10-31-99 FY ENDED 10-31-00 FISCAL QTR. ENDED 1-31-01
AS REPORTED AS RESTATED AS REPORTED AS RESTATED AS REPORTED AS RESTATED
----------- ----------- ----------- ----------- ----------- -----------
Net income: $ 45,873 $ 44,577 $ 51,939 $ 44,407 $ 4,000 $ 2,842
EPS--Basic: $ 2.50 $ 2.43 $ 2.90 $ 2.48 $ .23 $ .16
EPS--Diluted: $ 2.41 $ 2.34 $ 2.84 $ 2.43 $ .22 $ .16
The shortfall in net income occurred principally due to errors in the
way a new management information system, installed in May 1999, handled scrap
steel and accrued for liabilities related to inventories. This shortfall went
undetected in part because error checking and control functions in the new MIS
system did not operate correctly. We also discovered that some employees made
unauthorized journal entries to correct what they recognized to be inaccurate
account balances. These entries prevented senior management from recognizing
these problems with the new MIS system, and the effect they were having on cost
of sales, until April 2001.
We have now closed the books on the shortfall; we know why it happened;
and our focus is on ensuring that it does not happen again. We also conducted a
thorough analysis of all corporate banking records and have found no evidence of
employee theft or embezzlement. We have identified the MIS system issues that
must be corrected and will be implementing the appropriate programming changes
as quickly as possible. Until these changes are completed and tested, we will be
taking a monthly physical inventory at all of our facilities to ensure that our
financial reports are correct. NCI's Audit Committee and independent accountants
are closely monitoring our implementation of these actions.
NCI has filed with the Securities and Exchange Commission a Form 10-K/A
containing the restated financial statements for fiscal 1999 and 2000, including
quarterly financial information for those periods, and a Form 10-Q/A containing
the restated financial statements for the first quarter of fiscal 2001. You may
request a free copy of these documents by contacting Robert J. Medlock at the
NCI's executive offices or you can obtain a free copy of these documents from
our website at www.ncilp.com.
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A number of you have expressed concern about sales of common stock made
by us and other officers of NCI in January and February, before NCI's April
disclosure of the need to restate the financial statements. We assure you that
neither we nor any of these officers knew of the need to restate NCI's earnings
at the time of those sales. The sales were not initiated by these officers but
were the result of a solicitation made on behalf of an institution that wanted
to accumulate ownership of a large block of shares. The shares sold in response
to this solicitation were a small proportion of the total ownership of NCI stock
by these officers, and was consistent with their individual goals to diversify
their holdings. We ask each of you to understand that, because of the large
holdings retained, these officers personally have been adversely affected, as
have our other long-term stockholders, by the drop in NCI's stock price since
April 12.
Despite the restatement, NCI remains one of the most profitable
companies in our industry. We remain committed to our goals of increasing
shareholder value and making NCI a stronger company in the future.
Very truly yours,
/s/ A.R. Ginn /s/ Johnie Schulte
A.R. Ginn Johnie Schulte
Chairman of the Board President and Chief Executive Officer
Some statements contained in this letter are "forward-looking"
statements, as defined in the Private Securities Litigation Reform Act of 1995.
Actual performance of NCI may differ from that projected in such statements as a
result of factors such as industry cyclicality and seasonality, adverse weather
conditions, fluctuations in customer demand and order patterns, raw material
pricing, competitive activity and pricing pressure and general economic
conditions affecting the construction industry. Investors should refer to
statements regularly filed by NCI in its annual report to the Securities and
Exchange Commission on Form 10-K, its Quarterly Reports to the SEC on Form 10-Q
and its current reports to the SEC on Form 8-K and other filings with the SEC
for a discussion of factors which could affect NCI's operations and
forward-looking statements made in this communication. NCI expressly disclaims
any obligation to release publicly any updates or revisions to these
forward-looking statements to reflect any changes in expectations.