The following information should be read in conjunction with the unaudited condensed consolidated financial statements included herein under "Item 1. 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 year ended November 2, 2008.

OVERVIEW

NCI Building Systems, Inc. (the "Company", "we" 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 offers 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 assess performance across our business segments by analyzing and evaluating
(i) gross profit, operating income and whether or not each segment has achieved its projected sales goals, and (ii) non-financial efficiency indicators such as revenue per employee, man hours per ton of steel produced and shipped tons per employee. In assessing our overall financial performance, we regard return on adjusted operating assets, as well as growth in earnings per share, as key indicators of shareholder value.

Third Fiscal Quarter

While the commercial and industrial markets for the engineered building systems segment remained depressed during the third quarter of fiscal 2009, there was a noticeable increase in the small building market, as individual end users took advantage of reduced steel costs. International projects continue to offer opportunities for the engineered building systems segment, as well as government and military projects. We have committed significant resources to identifying and qualifying opportunities in this government and military arena, as projects funded by stimulus dollars begin to move forward.

The metal components segment also benefited from cost reductions and efficiencies. The broader market for the metal components segment is not as depressed as for the engineered building systems segment. Specifically, the agricultural related portion of their market continued to show improvement, increasing 74% in tons per day sequentially and is expected to remain strong through the end of the fiscal year. Additionally, the metal components segment serves a large repair and retrofit segment of the industry.

The metal coaters segment continues to increase market share, including both package and toll sales, outside of the metal building construction market. External volume processed in the third quarter of fiscal 2009 was up 32% compared to the second quarter of fiscal 2009. The metal coaters segment also benefited from efficiencies during the third quarter of fiscal 2009.

The total tonnage shipped by our metal components and engineered building systems segments in the third quarter of fiscal 2009 was up 18.7% compared with the previous quarter of fiscal 2009 but 45.6% below last year's third quarter. Our utilization rate moved up to 51% in the third quarter of fiscal 2009 from 40% in the second quarter of fiscal 2009. The backlog in the engineered building systems segment was $285 million at the end of the third quarter of fiscal 2009 which was higher than the prior quarter of the current year on a steel price-adjusted basis.

We are facing continued weakness in non-residential construction activity, and industry forecasts do not indicate any meaningful improvement in the next two fiscal years.

Pending Preferred Stock Investment and Restructuring Transactions

On August 14, 2009, we entered into an investment agreement (the "Investment Agreement") with Clayton, Dubilier & Rice Fund VIII, L.P. ("CD&R"), pursuant to which we agreed to issue and sell to CD&R 250,000 shares of a newly created series of preferred stock to be designated the Series B Cumulative Convertible Participating Preferred Stock, par value $1.00 per share for an aggregate purchase price of $250.0 million less reimbursement to CD&R of up to $9.5 million of expenses (in addition to amounts previously reimbursed) and a transaction fee of $8.25 million (the "Preferred Stock Investment"). The Preferred Stock is convertible into approximately 196 million shares of our common stock. Our Board of Directors has approved the transaction.

Upon the closing of the Preferred Stock Investment, CD&R is expected to have an approximately 68.5% ownership position in our Company on an as-converted basis. The closing of the Preferred Stock Investment is subject to the satisfaction or waiver of a number of closing conditions set forth in the related agreement, including, among others:

• refinancing of our existing senior secured credit facility, including the repayment of approximately $143 million in principal amount of the existing $293 million in principal amount of outstanding term loans thereunder and a modification of the terms and an extension of the maturity of the remaining $150 million outstanding balance of the term loans;

• entry into a new $125 million asset-based revolving credit facility;

• consummation of an exchange offer by the Company to acquire all of our existing 2.125% convertible notes due 2024 ("Convertible Notes") in exchange for a combination of $500 in cash and 390 shares of

• the sufficiency of the cash proceeds from the Preferred Stock Investment, together with the Company's cash on hand at the closing of the Preferred Stock Investment, to consummate the refinancing of the existing senior secured credit facility and the Convertible Notes exchange offer described above, and to pay fees and expenses in connection therewith and the transactions contemplated by the Investment Agreement;

• the Company having at the closing of the Preferred Stock Investment, on a pro forma basis, not less than $90 million in the aggregate of unutilized and immediately available credit under the asset backed loan facility and unrestricted cash on hand; and

• other customary closing conditions, including, among others, the expiration or termination of any waiting period required to consummate the Preferred Stock Investment under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and accuracy of each party's representations and warranties in the Investment Agreement, subject to the applicable materiality standards set forth therein.

The terms of the amended credit facility are to be on the terms set forth in a Form of Amended Credit Agreement, attached as an exhibit to the Investment Agreement, and the terms of the new asset-backed revolving credit facility are to be on the terms set forth in an ABL Term Sheet, attached as an exhibit to the Investment Agreement, or on such other terms as may be acceptable to CD&R as and to the extent provided for in the Investment Agreement. The Investment Agreement contemplates that, if we do not receive consents from 100% of our senior secured credit facility lenders for the refinancing of our existing credit facility or do not receive tenders from holders of 95% or more of the outstanding principal amount of our Convertible Notes in the exchange offer by the expiration date of the exchange offer, holders of Convertible Notes or obligations under our credit agreement holding, in either case, at least two-thirds ( 2/3) in amount and more than one-half ( 1/2) in number of the claims in the applicable class who actually cast ballots vote to accept the prepackaged plan, we will seek to accomplish the restructuring contemplated by the Investment Agreement will occur on the same terms through a "prepackaged" Chapter 11 bankruptcy proceeding. If the Preferred Stock Investment and related transactions are accomplished through a "prepackaged" bankruptcy proceeding, CD&R will have a number of additional termination rights relating to the occurrence or non-occurrence of certain procedural events in the course of the bankruptcy proceeding. The terms of the "prepackaged" bankruptcy proceeding are to be on the terms set forth in the Prepackaged Plan Term Sheet, attached as an exhibit to the Investment Agreement, and otherwise as provided in the Investment Agreement.

Under the Investment Agreement, we provided pre- and post-closing indemnities. We agreed to indemnify CD&R and its affiliates after the date of the Investment Agreement from losses arising out of, or resulting from, our authorization and approval and the Company's and/or CD&R's execution, delivery, performance or termination of the Investment Agreement or the transactions in connection with the Investment Agreement (other than any losses attributable to the economic risks of CD&R's investment decision). This indemnity will apply in the event that CD&R indemnified persons are named in a lawsuit by persons other than the Company. In addition, we agreed that, after the closing, we will indemnify CD&R and its affiliates for any breaches of our representations and warranties and violations of our covenants. This post-closing indemnity is subject to certain limitations, including a cap of $75 million in the aggregate for indemnifiable losses under some of the representations. Losses under other specified fundamental representations are uncapped, except as provided in the

next sentence. Our monetary liabilities under the Investment Agreement to CD&R, including, without limitation, any termination fees and expenses payable as described in the succeeding paragraph and pursuant to the indemnity, are also capped at an amount equal to the Cash Proceeds.

The Investment Agreement contains termination rights for both the Company and CD&R and provides that (1) if the Investment Agreement is terminated under specified circumstances (including (a) if our board of directors elects to enter into an agreement involving a Superior Proposal (as defined in the Investment Agreement) or (b) if the Investment Agreement is terminated under certain circumstances and we enter into a Qualified Transaction (as defined in the Investment Agreement) within twelve months of such termination), we may be required to pay CD&R a termination fee of $8.25 million and reimburse up to $9.5 million of CD&R's expenses in addition to amounts previously reimbursed and
(2) if the Investment Agreement is terminated under other specified circumstances where CD&R has not taken any action, or failed to take any action, in breach of the Investment Agreement which proximately caused the termination of the Investment Agreement, we may be required to reimburse up to $4.5 million of CD&R's expenses in addition to amounts previously reimbursed. Concurrently with the execution of the Investment Agreement, we agreed to reimburse CD&R for up to $5 million of documented out-of-pocket expenses incurred by CD&R through August 14, 2009. If the Preferred Stock Investment is completed, we will reduce the $250.0 million proceeds to reimburse CD&R up to $9.5 million of expenses (in addition to amounts previously reimbursed) and will pay to CD&R a transaction fee of $8.25 million.

Covenant Non-Compliance and Waiver

As of August 2, 2009, we were not in compliance with our leverage, senior leverage and interest coverage ratio covenants in our senior secured credit facility. We have obtained a waiver from our senior credit facility lenders of our non-compliance with the financial maintenance covenants and a consent to our entering into the Investment Agreement. The waiver will remain in effect through November 6, 2009. Please read "Liquidity and Capital Resources" for a more detailed description of the waiver, our upcoming debt maturities and the consequences that would likely result should we fail to close the Preferred Stock Investment and related transactions by such extended deadline. If all debt outstanding were to become due, which could occur as early as November 6, 2009, this would result in a material adverse effect on our financial condition, operations, debt service capabilities and our ability to continue as a going concern.

Industry Conditions

Our sales and earnings 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.

The overall decline in economic conditions beginning in the third quarter of 2008 has reduced demand for our products and adversely affected our business. In addition, the tightening of credit in financial markets over the same period has adversely affected the ability of our customers to obtain financing for construction projects. As a result, we have experienced decreases in and cancellations of orders for our products, 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.

Over the same period, there has been significant volatility in the price of steel, the primary raw material in our production process. In the first nine months of fiscal 2009, steel prices decreased at a precipitous rate until July 2009 when steel prices began to increase. According to the CRU North American steel price index, steel prices were 51% lower in July 2009 compared with July 2008. This unusual level of volatility has negatively impacted our business. First, in the first two quarters of fiscal 2009, we have written down inventory to net realizable value given these declines because our sales volume was significantly lower than previously anticipated while raw material prices have declined more rapidly than anticipated. Second, some customers have delayed projects, waiting to see where steel prices will bottom out.

The uncertainty surrounding future economic activity levels and the tightening of credit availability have resulted in significantly decreased activity levels for our business. During the first nine months of fiscal 2009, our sales volumes were significantly below our expectations, primarily in our engineered buildings and components

segments. The corresponding decrease in our operating results has resulted in us violating certain debt covenants for which we have obtained a waiver from our lenders. See "Liquidity and Capital Resources - Debt." When we began fiscal 2009, McGraw-Hill was predicting a 12% decline in nonresidential construction in 2009 compared to 2008. Subsequently, McGraw-Hill revised its forecast further downward and, as of July 2009, was predicting a 35% decline in nonresidential construction activity in 2009 compared to 2008. McGraw-Hill has also reported a 41.8% reduction in low-rise nonresidential (less than 5 stories) square-footage starts during the first nine months of fiscal 2009 compared with the same period in fiscal 2008.

As a result of the current market downturn, we began a phased process to resize and realign our manufacturing operations. The purpose of these closures is to rationalize our least efficient facilities and to retool certain of these facilities to allow us to better utilize our assets and expand into new markets or better provide products to our customers, such as insulated panel systems. As a result of the restructuring, we expect to realize an annualized cost savings in the amount of approximately $120 million.

In November 2008, we approved the Phase I plan to close three of our engineered building systems manufacturing plants located in Lockeford, California, Mattoon, Illinois and Hernando, Mississippi. In addition, as part of the restructuring, we implemented a general employee reduction program. We expected to incur facility closure costs of approximately $3.6 million related to these Phase I facility closures. Of this amount, $1.1 million relates to employee or severance costs, $0.6 million relates to asset relocation costs, $1.8 million relates to asset impairment costs and $0.1 million relates to other costs.

In February 2009, we approved the Phase II plan to close our Tallapoosa, Georgia facility in a continuing effort to rationalize our least efficient facilities. We expected to incur facility closure costs of $0.9 million related to this facility. Of this amount, $0.4 million relates to employee or severance costs and $0.5 million relates to other costs. Most of these expenses were recorded during the second quarter of fiscal 2009.

In April 2009, we approved the Phase III plan to close or idle our Rocky Mount, North Carolina, Columbus, Mississippi and Mount Pleasant, Iowa manufacturing facilities within the engineered building systems segment and the Big Rapids, Michigan facility within the metal components segment in a continuing effort to rationalize our least efficient facilities. In addition, as part of the restructuring, we added to the general employee reduction program. We expect to incur facility closure costs of $7.0 million related to these facilities. Of this amount, $2.2 million relates to employee or severance costs, $0.7 million relates to asset relocation costs, $3.0 million relates to asset impairment costs and $1.1 million relates to other costs.

One of the primary challenges we face both short and long term is the volatility in the price of steel. Our business is heavily dependent on the price and supply of steel. For the fiscal nine months ended August 2, 2009, steel represented approximately 72% of our costs 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. Steel prices are influenced by numerous factors beyond our control, including general economic conditions domestically and internationally, competition, labor costs, production costs, import duties and other trade restrictions. See additional discussion of steel prices in "Item 3. Quantitative and Qualitative Disclosures About Market Risk."

Steel prices increased rapidly and steeply during the first half of 2008, and then began a rapid and precipitous decline in the fall of 2008. Steel prices have continued to fall from November 2008 to June 2009 due to the overall further deepening of the economic recession, and as expected, customers have continued to hold off making purchasing decisions in anticipation of further reduction in steel prices. However, steel prices started to increase in July 2009. The monthly CRU index data for the North American Steel Price Index, published by the CRU Group, has decreased 46.0% from October 2008 to July 2009. During the first nine months of fiscal 2009, we recorded a $40.0 million charge to cost of sales to adjust certain raw material inventory to the lower of cost or market because this inventory exceeded our current estimates of net realizable value less normal profit margins.

We do not have any long-term contracts for the purchase of steel and 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 remain available or that prices will not continue to be volatile. While most of our 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, we may, for competitive or other reasons, 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 "-Liquidity and Capital Resources -Steel Prices" and "Item 3. Quantitative and Qualitative Disclosures About Market Risk -Steel Prices."

In assessing the state of the metal construction market, we rely upon 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, which we look to for reports of actual and forecasted growth in various construction related industries, including the overall nonresidential construction market. McGraw-Hill Construction's nonresidential construction forecast for calendar 2009 published in July 2009 indicates an expected reduction of 35% in square footage and a decrease of 21% in dollar value as compared to the prior calendar year. In 2010, a further decrease of 3% in square footage compared to 2009 is expected before increasing in 2011, with an increase of 11% in dollar value in 2010 compared to 2009. Additionally, we review the American Institute of Architects' survey for inquiry and billing activity for the industrial, commercial and institutional sectors.

RESULTS OF OPERATIONS

We have aggregated our operations into three reportable segments based upon similarities in product lines, manufacturing processes, marketing and management of our businesses: metal coil coating; metal components; and engineered building systems. All business 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. Products of all business segments use 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 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 reporting segments follow the same accounting policies used for our condensed 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. Segment information is included in Note 7 of our condensed consolidated financial statements.

The following table represents sales, operating income and total assets attributable to these business segments for the periods indicated (in thousands, except percentages):

                                               Fiscal Three Months Ended                         Fiscal Nine Months Ended
                                        August 2, 2009           July 27, 2008           August 2, 2009            July 27, 2008
                                                      %                        %                        %                         %
Sales:
Metal coil coating                    $  44,256       19      $   90,732       19      $  125,283       17      $   233,178       19
Metal components                        113,216       47         202,826       43         336,250       47          513,377       41
Engineered building systems             130,398       55         292,715       61         412,040       57          778,767       62
Intersegment sales                      (49,431 )    (21 )      (108,677 )    (23 )      (150,051 )    (21 )       (270,094 )    (22 )

Total sales                           $ 238,439      100      $  477,596      100      $  723,522      100      $ 1,255,228      100


Operating income:
Metal coil coating                    $   1,023        2      $   11,360       13      $ (105,675 )    (84 )    $    20,760        9
Metal components                         13,162       12          32,174       16        (143,536 )    (43 )         56,867       11
Engineered building systems               9,038        7          28,514       10        (389,806 )    (95 )         74,244       10
Corporate                               (12,959 )     -          (16,333 )     -          (40,780 )     -           (48,148 )     -

Total operating income (% of sales)   $  10,264        4      $   55,715       12      $ (679,797 )    (94 )    $   103,723        8
Unallocated other expense                (3,618 )                 (4,399 )                (11,912 )                 (15,920 )

Income before income taxes            $   6,646               $   51,316               $ (691,709 )             $    87,803


                                                                                         August 2, 2009           November 2, 2008
                                                                                                        %                         %
Total assets:
Metal coil coating                                                                     $   64,059       10      $   196,615       14
Metal components                                                                          157,764       25          371,464       27
. . .