Norcraft Holdings, L.P. and Norcraft Companies, L.P. Report Fourth Quarter and Fiscal 2010 Results

Mar 29, 2011, 07:00 ET from Norcraft Holdings, L.P. from ,Norcraft Companies, L.P.

EAGAN, Minn., March 29, 2011 /PRNewswire/ -- Norcraft Holdings, L.P. (Holdings) and Norcraft Companies, L.P. (Norcraft) today reported financial results for the fourth quarter and fiscal year ended December 31, 2010. The financial results for Holdings include the accounts of its wholly-owned subsidiary, Norcraft. Holdings reflects the obligations under its $118.0 million 9 3/4% senior discount notes due 2012. In December 2009, Norcraft and its wholly-owned subsidiary, Norcraft Finance Corp., issued $180.0 million principal amount of 10 1/2% senior secured second lien notes that are due in December 2015. The proceeds of these senior secured second lien notes were used to redeem $148.0 million principal amount of outstanding 9% senior subordinated notes that were due in 2011 issued by Norcraft and Norcraft Finance Corp. A portion of the proceeds, together with cash on hand, was distributed by Norcraft to Holdings and used to repurchase $64.3 million principal amount of the 9 3/4% senior discount notes due 2012. This repurchase of the 9 3/4% senior discount notes resulted in a loss from debt extinguishment of $1.6 million. Other than the remaining $53.7 million of the 9 3/4% senior discount notes, cash, related deferred issuance costs, related interest and amortization expense and related debt extinguishment loss, all other assets, liabilities, income, expenses and cash flows presented for all periods represent those of Norcraft.

FINANCIAL RESULTS

Fourth Quarter of Fiscal 2010 Compared with Fourth Quarter of Fiscal 2009

Net sales increased $0.8 million, or 1.3%, from $59.9 million for the fourth quarter of 2009 compared to $60.7 million for the same quarter of 2010. Income from operations decreased by $0.2 million, or 5.7%, from $4.0 million for the fourth quarter of 2009 compared to $3.8 million for the same quarter of 2010. Net loss for Holdings decreased $4.4 million, or 60.1%, from $7.3 million for the fourth quarter of 2009 to $2.9 million in the same quarter of 2010, and net loss for Norcraft decreased $0.7 million, or 29.2%, from $2.2 million for the fourth quarter of 2009 to $1.5 million for the same quarter of 2010.

Adjusted EBITDA (as defined in the attached table) was $7.8 million for the fourth quarter of 2009 compared to $7.1 million for the same quarter of 2010.

Fiscal 2010 Compared with Fiscal 2009

Net sales increased $15.8 million, or 6.4%, from $246.8 million for fiscal 2009 compared to $262.6 million for fiscal 2010. Income from operations increased by $4.1 million, or 19.9%, from $20.6 million for fiscal 2009 compared to $24.7 million for fiscal 2010. Net loss for Holdings decreased $9.3 million, or 80.4%, from $11.5 million for fiscal 2009 to $2.2 million in fiscal 2010, and net income for Norcraft increased $0.6 million, or 22.5%, from $2.6 million for fiscal 2009 to $3.2 million for fiscal 2010.

Adjusted EBITDA (as defined in the attached table) was $35.1 million for fiscal 2009 compared to $38.0 million for fiscal 2010.

"While 2010 started out strong, the expiration of the first-time home-buyer's tax credit and other factors led to disappointing incoming orders during the last half of the year, and we expect these challenging conditions to persist into 2011.  Our efforts to maintain or cut costs and to introduce new products and sales programs will continue as a result of these market conditions," commented President and CEO, Mark Buller.

CONFERENCE CALL

Norcraft has scheduled a conference call on Thursday, March 31, 2011 at 10:00 a.m. Eastern Time.  To participate, dial 866-831-6247 and use the pass code 38811722.  A telephonic replay will be available by calling 888-286-8010 and using pass code 21003714.

GENERAL

Norcraft Companies is a leader in manufacturing, assembling and finishing kitchen and bathroom cabinetry in the United States. We provide our customers with a single source for a broad range of high-quality cabinetry, including stock, semi-custom and custom cabinets. Our cabinets are manufactured in both framed and full access construction. We market our products through six brands: Mid Continent Cabinetry, Norcraft Cabinetry, UltraCraft, StarMark, Fieldstone and Brookwood.

-Selected Financial Data Tables Follow-


Consolidated Balance Sheets

(dollar amounts in thousands)

(unaudited)



Norcraft Holdings, L.P.



Norcraft Companies, L.P.

ASSETS

December 31,

2010


December 31,

2009



December 31,

2010


December 31,

2009

Current assets:









Cash and cash equivalents

$      28,657


$     20,863



$      28,657


$      16,731

Trade accounts receivable, net

17,982


17,987



17,982


17,987

Inventories

17,363


16,380



17,363


16,380

Prepaid expenses

1,558


1,629



1,558


1,629










Total current assets

65,560


56,859



65,560


52,727










Property, plant and equipment, net

30,199


31,925



30,199


31,925










Other assets:









Goodwill

88,483


88,421



88,483


88,421

Brand names

35,100


35,100



35,100


35,100

Customer relationships, net

34,865


39,332



34,865


39,332

Deferred financing costs, net

6,776


7,483



6,414


6,908

Display cabinets, net

5,016


5,394



5,016


5,394

Other

754


70



754


70










Total other assets

170,994


175,800



170,632


175,225










Total assets

$    266,753


$   264,584



$    266,391


$    259,877










LIABILITIES AND MEMBERS' EQUITY (DEFICIT)


















Current liabilities:









Accounts payable

$         7,678


$        6,626



$         7,678


$        6,626

Accrued expenses

17,945


16,841



16,200


15,096










Total current liabilities

25,623


23,467



23,878


21,722










Long-term debt

233,700


233,700



180,000


180,000

Unamortized discount on bonds payable

(2,414)


(2,903)



(2,414)


(2,903)

Other liabilities

153


287



153


287










        Commitments and contingencies

-


-



-


-










Members' equity subject to put request

12,139


7,546



-


-










Members' equity (deficit)

(2,448)


2,487



64,774


60,771










Total liabilities and members' equity (deficit)

$    266,753


$   264,584



$    266,391


$    259,877













Consolidated Statements of Operations

(dollar amounts in thousands)

(unaudited)



Norcraft Holdings, L.P.


Three Months Ended

December 31,


Year Ended

December 31,


2010


2009


2010


2009









Net sales

$      60,691


$      59,927


$    262,568


$    246,804









Cost of sales

45,013


43,357


187,482


176,512









Gross profit

15,678


16,570


75,086


70,292









Selling, general and








administrative expenses

11,934


12,601


50,402


49,706









Income from operations

3,744


3,969


24,684


20,586









Other expense:








Interest expense, net

6,323


7,363


25,327


26,340

Amortization of deferred








financing costs

401


2,323


1,589


4,084

Other, net

(65)


1,582


26


1,678









Total other expense

6,659


11,268


26,942


32,102









Net loss

$      (2,915)


$      (7,299)


$     (2,258)


$    (11,516)












Consolidated Statements of Operations

(dollar amounts in thousands)

(unaudited)



Norcraft Companies, L.P.


Three Months Ended

December 31,


Year Ended

December 31,


2010


2009


2010


2009









Net sales

$      60,691


$      59,927


$    262,568


$    246,804









Cost of sales

45,013


43,357


187,482


176,512









Gross profit

15,678


16,570


75,086


70,292









Selling, general and








administrative expenses

11,934


12,601


50,402


49,706









Income from operations

3,744


3,969


24,684


20,586









Other expense:








Interest expense, net

5,014


4,731


20,091


15,050

Amortization of deferred








financing costs

348


1,493


1,376


2,895

Other, net

(65)


(60)


26


36









Total other expense

5,297


6,164


21,493


17,981









Net income (loss)

$     (1,553)


$     (2,195)


$       3,191


$      2,605












Consolidated Statements of Cash Flows

(dollar amounts in thousands)

(unaudited)



Norcraft Holdings, L.P.



Norcraft Companies, L.P.


Year Ended



Year Ended


December 31,



December 31,


2010


2009



2010


2009

Cash flows from operating activities:









Net income (loss)

$      (2,258)


$    (11,516)



$         3,191


$         2,605

Adjustments to reconcile net income (loss) to net cash provided by operating activities:









Depreciation and amortization of property, plant and equipment

5,720


5,794



5,720


5,794

Amortization:









Customer relationships

4,467


4,466



4,467


4,466

Deferred financing costs

1,589


4,084



1,376


2,895

Display cabinets

4,142


5,348



4,142


5,348

Discount amortization/accreted interest

489


30



489


30

Provision for uncollectible accounts receivable

589


1,121



589


1,121

Provision for obsolete and excess inventory

(115)


1,412



(115)


1,412

Provision for warranty claims

2,771


2,001



2,771


2,001

Stock compensation expense

181


155



181


155

Loss on debt extinguishment

-


1,642



-


-

(Gain) loss on disposal of assets

(33)


189



(33)


189

Change in operating assets and liabilities:









Trade accounts receivable

(450)


(344)



(450)


(344)

Inventories

(804)


2,912



(804)


2,912

Prepaid expenses

48


191



48


191

Other assets

(655)


(8)



(655)


(8)

Accounts payable and accrued expenses

(727)


(6,056)



(727)


(3,966)










Net cash provided by operating activities

14,954


11,421



20,190


24,801










Cash flows from investing activities:









Proceeds from sale of property and equipment

49


5



49


5

Purchase of property, plant and equipment

(2,705)


(2,034)



(2,705)


(2,034)

Additions to display cabinets

(3,764)


(3,673)



(3,764)


(3,673)










Net cash used in investing activities

( 6,420)


( 5,702)



( 6,420)


( 5,702)










Cash flows from financing activities:









Borrowings on senior secured second lien notes payable

-


177,067



-


177,067

Payment of financing costs

(882)


(7,122)



(882)


(6,983)

Payment on term loans to former equity holders

-


(459)



-


-

Repurchase of notes payable

-


(213,803)



-


(148,000)

Proceeds from issuance of member interests

124


-



124


-

Contributions from (distributions to) members (1)

-


4



(1,104)


(83,909)










Net cash used in financing activities

( 758)


( 44,313)



( 1,862)


( 61,825)










Effect of exchange rates on cash and cash equivalents

18


51



18


51










Net  increase (decrease) in cash and cash equivalents

7,794


(38,543)



11,926


(42,675)










Cash and cash equivalents, beginning of the period

20,863


59,406



16,731


59,406










Cash and cash equivalents , end of period

$       28,657


$       20,863



$       28,657


$       16,731













(1)

Distributions to members for the year ended December 31, 2009 include $10.0 million that Norcraft distributed to Holdings to enable it to make future cash interest payments on the Senior Discount Notes.



Reconciliation of Net Income (Loss) to Adjusted EBITDA

(dollar amounts in thousands)


EBITDA is net income (loss) before income tax expense, interest expense, depreciation and amortization. Adjusted EBITDA is EBITDA before the effect of a tax refund in the third quarter of 2009 and a loss on debt extinguishment in the fourth quarter of 2009. We believe EBITDA and Adjusted EBITDA are useful to investors in evaluating our operating performance compared to that of other companies in our industry, as their calculation eliminates the effects of financing, income taxes and the accounting effects of capital spending, which items may vary for different companies for reasons unrelated to overall operating performance. We also believe these financial metrics provide information relevant to investors regarding our ability to service and/or incur debt. Neither EBITDA nor Adjusted EBITDA is a presentation made in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). Accordingly, when analyzing our operating performance, investors should not consider EBITDA or Adjusted EBITDA in isolation or as substitutes for net income (loss), cash flows from operating activities or other income statement or cash flow statement data prepared in accordance with U.S. GAAP. Our calculations of EBITDA and Adjusted EBITDA are not necessarily comparable to those of other similarly titled measures reported by other companies. The calculations of EBITDA and Adjusted EBITDA are shown below:





Norcraft Holdings, L.P.

(unaudited)


Three Months Ended

December 31,


Year Ended

December 31,



2010


2009


2010


2009











Net loss

$     (2,915)


$     (7,299)

(1)

$     (2,258)

(2)

$    (11,516)

(1&3)

Interest expense, net

6,323


7,363


25,327


26,340


Depreciation

1,303


1,464


5,720


5,794


Amortization of deferred financing costs

401


2,323


1,589


4,084


Amortization of customer relationships

1,116


1,116


4,467


4,466


Display cabinet amortization

932


1,212


4,142


5,348


State taxes

(67)


(60)


25


40











EBITDA

$       7,093


$       6,119


$      39,012


$      34,556











Loss on debt extinguishment

-


1,642

(1)

-


1,642

(1)

Sales tax refund

-


-


(1,010)

(2)

(1,105)

(3)










Adjusted EBITDA

$        7,093


$        7,761


$      38,002


$      35,093







Norcraft Companies, L.P.

(unaudited)


Three Months Ended

December 31,


Year Ended

December 31,



2010


2009


2010


2009











Net income (loss)

$      (1,553)


$      (2,195)


$         3,191

(2)

$         2,605

(3)

Interest expense, net

5,014


4,731


20,091


15,050


Depreciation

1,303


1,464


5,720


5,794


Amortization of deferred financing costs

348


1,493


1,376


2,895


Amortization of customer relationships

1,116


1,116


4,467


4,466


Display cabinet amortization

932


1,212


4,142


5,348


State taxes

(67)


(60)


25


40











EBITDA

$        7,093


$        7,761


$      39,012


$      36,198











Loss on debt extinguishment

-


-


-


-


Sales tax refund

-


-


(1,010)

(2)

(1,105)

(3)










Adjusted EBITDA

$        7,093


$        7,761


$      38,002


$      35,093





1)

Net loss for Norcraft Holding, L.P. during the three months and year ended December 31, 2009 included a $1.6 million loss on debt extinguishment due to the repurchase of the 9 3/4% senior subordinated notes which increased net loss and correspondingly decreased EBITDA, but the effect has been backed out for adjusted EBITDA.


2)

Net income (loss) during the year ended December 31, 2010 included a sales tax refund in the amount of $1.0 million which increased net income and correspondingly increased EBITDA, but the effect has been backed out for adjusted EBITDA.


3)

Net income (loss) during the year ended December 31, 2009 included a sales tax refund in the amount of $1.1 million which increased net income and correspondingly increased EBITDA, but the effect has been backed out for adjusted EBITDA.



FORWARD LOOKING STATEMENTS AND INFORMATION

Statements in this press release regarding activities, events or developments that management expects, believes or anticipates will or may occur in the future are forward looking statements. Forward looking statements may give management's current expectations and projections relating to the financial condition, results of operations, plans, objectives, future performance and business of the companies.  You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as ''anticipate,'' ''estimate,'' ''expect,'' ''project,'' ''intend,'' ''plan,'' ''believe'' and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

These forward looking statements are based on management's expectations and beliefs concerning future events affecting the companies. They are subject to uncertainties and factors relating to the companies' operations and business environment, all of which are difficult to predict and many of which are beyond the companies' control. Although management believes that the expectations reflected in its forward looking statements are reasonable, management does not know whether its expectations will prove correct. They can be affected by inaccurate assumptions that management might make or by known or unknown risks and uncertainties. Many factors that could cause actual results to differ materially from these forward looking statements include, but are not limited to, the risks outlined under Part I, Item 1A, "Risk Factors,'' in the Annual Report on Form 10-K filed by the companies with the Securities and Exchange Commission.

Because of these factors, investors should not place undue reliance on any of these forward looking statements. Further, any forward looking statement speaks only as of the date on which it is made and except as required by law the companies undertake no obligation to update any forward looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.  

Contact:

Leigh E. Ginter


Chief Financial Officer


leigh.ginter@norcraftcompanies.com


(651) 234-3315



SOURCE Norcraft Holdings, L.P.; Norcraft Companies, L.P.