EAGAN, Minn., Nov. 2 /PRNewswire/ -- Norcraft Holdings, L.P. (Holdings) and Norcraft Companies, L.P. (Norcraft) today reported financial results for the third quarter ended September 30, 2009. 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. On April 3, 2009, Norcraft distributed $10.0 million to Holdings to enable it to make future cash interest payments on these notes. On September 1, 2009, a cash interest payment of approximately $5.7 million was made for these notes out of the $10.0 million. Other than these debt obligations, cash, related deferred issuance costs, debt issuance amortization, and related interest expense, all other assets, liabilities, income, expenses, and cash flows presented for all periods represent those of Norcraft.
FINANCIAL RESULTS
Third Quarter of Fiscal 2009 Compared with Third Quarter of Fiscal 2008
Net sales decreased $19.3 million, or 23.0%, from $84.0 million for the third quarter of 2008 to $64.7 million for the same quarter of 2009. Income from operations decreased $1.7 million, or 17.0%, from $10.0 million for the third quarter of 2008 to $8.3 million for the same quarter of 2009. Net income for Holdings decreased $1.8 million, from net income of $3.5 million for the third quarter of 2008 to $1.7 million in the same quarter of 2009. Net income for Norcraft decreased $1.8 million, from net income of $6.5 million for the third quarter of 2008 to $4.7 million for the same quarter of 2009.
Adjusted EBITDA (a non-GAAP measure and defined in the attached table) was $11.1 million for the third quarter of 2009 compared to $14.5 million for the same quarter of 2008.
President and CEO, Mark Buller commented, "While the general economy and housing industry appear to have stabilized in recent months, market conditions remain challenging and continue to inhibit our sales and overall results. We continue to focus on new product introductions, sales programs and cost reduction initiatives. Our expectation is that these difficult market conditions will continue to impact results for the remainder of 2009 and into 2010."
CONFERENCE CALL
Norcraft has scheduled a conference call on Tuesday, November 3, 2009 at 10:00 a.m. Eastern Time. To participate, dial 888-419-5570 and use the pass code 82692457. A telephonic replay will be available by calling 888-286-8010 and using pass code 50187678.
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.
Contact: Leigh E. Ginter
Chief Financial Officer
leigh.ginter@norcraftcompanies.com
(651) 234-3315
-Selected Financial Data Tables Follow-
Consolidated Balance Sheets
(dollar amounts in thousands)
(unaudited)
Norcraft Holdings, L.P. Norcraft Companies, L.P.
---------------------- ------------------------
September 30, December 31, September 30, December 31,
ASSETS 2009 2008 2009 2008
---- ---- ---- ----
Current assets:
Cash and cash
equivalents $59,356 $59,406 $55,108 $59,406
Restricted cash 5,618 - 5,618 -
Trade accounts
receivable, net 20,825 18,535 20,825 18,535
Inventories 18,248 20,599 18,248 20,599
Prepaid expenses 995 1,810 995 1,810
--- ----- --- -----
Total current assets 105,042 100,350 100,794 100,350
Property, plant and
equipment, net 32,839 35,629 32,839 35,629
Other assets:
Goodwill 88,421 88,421 88,421 88,421
Customer
relationships, net 40,448 43,798 40,448 43,798
Brand names 35,100 35,100 35,100 35,100
Deferred financing
costs, net 2,823 4,584 1,418 2,820
Display cabinets, net 5,785 7,069 5,785 7,069
Other 66 62 66 62
--- --- --- ---
Total other assets 172,643 179,034 171,238 177,270
------- ------- ------- -------
Total assets $310,524 $315,013 $304,871 $313,249
======== ======== ======== ========
LIABILITIES AND
MEMBERS' EQUITY
(DEFICIT)
Current liabilities:
Current portion of
long-term debt $- $459 $- $-
Accounts payable 7,036 6,688 7,036 6,688
Accrued expenses 19,778 20,268 18,819 16,433
------ ------ ------ ------
Total current
liabilities 26,814 27,415 25,855 23,121
Long-term debt 266,000 266,000 148,000 148,000
Other liabilities 496 459 496 459
Commitments and
contingencies - - - -
Members' equity
subject to put
request 9,637 25,305 - -
Members' equity
(deficit) 7,577 (4,166) 130,520 141,669
----- ------ ------- -------
Total liabilities
and members'
equity (deficit) $310,524 $315,013 $304,871 $313,249
======== ======== ======== ========
Consolidated Statements of Operations
(dollar amounts in thousands)
(unaudited)
Norcraft Holdings, L.P.
-----------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Net sales $64,672 $84,020 $186,877 $264,869
Cost of sales 44,387 58,884 133,155 186,732
------ ------ ------- -------
Gross profit 20,285 25,136 53,722 78,137
Selling, general and
administrative expenses 11,940 15,076 37,105 49,254
------ ------ ------ ------
Income from operations 8,345 10,060 16,617 28,883
Other expense:
Interest expense, net 6,315 6,097 18,977 18,384
Amortization of
deferred financing costs 289 385 1,761 1,147
Other, net 28 63 96 123
--- --- --- ---
Total other expense 6,632 6,545 20,834 19,654
----- ----- ------ ------
Net income (loss) $1,713 $3,515 $(4,217) $9,229
====== ====== ======= ======
Norcraft Companies, L.P.
------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Net sales $64,672 $84,020 $186,877 $264,869
Cost of sales 44,387 58,884 133,155 186,732
------ ------ ------- -------
Gross profit 20,285 25,136 53,722 78,137
Selling, general and
administrative expenses 11,940 15,076 37,105 49,254
------ ------ ------ ------
Income from operations 8,345 10,060 16,617 28,883
Other expense:
Interest expense, net 3,429 3,227 10,319 9,949
Amortization of
deferred financing costs 169 266 1,402 797
Other, net 28 63 96 123
--- --- --- ---
Total other expense 3,626 3,556 11,817 10,869
----- ----- ------ ------
Net income $4,719 $6,504 $4,800 $18,014
====== ====== ====== =======
Consolidated Statements of Cash Flows
(dollar amounts in thousands)
(unaudited)
Norcraft Holdings, L.P. Norcraft Companies, L.P.
----------------------- ------------------------
Nine Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Cash flows from operating
activities:
Net income (loss) $(4,217) $9,229 $4,800 $18,014
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Depreciation and
amortization of
property, plant
and equipment 4,330 4,714 4,330 4,714
Amortization:
Customer relationships 3,350 3,350 3,350 3,350
Deferred financing
costs 1,761 1,147 1,402 797
Display cabinets 4,136 5,192 4,136 5,192
Provision for
uncollectible accounts
receivable 685 965 685 965
Provision for obsolete
and excess inventory 878 234 878 234
Provision for warranty
claims 1,567 2,604 1,567 2,604
Accreted interest on
senior notes - 7,228 - -
Stock compensation
expense 117 166 117 166
Loss on disposal of
assets 118 14 118 14
Change in operating
assets and liabilities:
Trade accounts
receivable (2,778) (83) (2,778) (83)
Inventories 1,530 1,011 1,530 1,011
Prepaid expenses 819 491 819 491
Other assets (4) (118) (4) (118)
Accounts payable and
accrued expenses (1,642) 753 1,234 (206)
------ --- ----- ----
Net cash provided by
operating activities 10,650 36,897 22,184 37,145
Cash flows from investing
activities:
Proceeds from sale of
property and equipment 9 5 9 5
Purchase of property,
plant and equipment (1,810) (2,421) (1,810) (2,421)
Additions to display
cabinets (2,852) (3,382) (2,852) (3,382)
------ ------ ------ ------
Net cash used in
investing activities (4,653) (5,798) (4,653) (5,798)
Cash flows from financing
activities:
Transfer to restricted
cash (5,618) - (5,618) -
Payments on term loans to
former equity holders (459) (1,959) - -
Repurchase of members'
interests - (68) - (68)
Contributions from
(distributions to)
members (1) 4 (2,336) (16,237) (4,543)
--- ------ - -------- ------
Net cash used in
financing activities (6,073) (4,363) (21,855) (4,611)
Effect of exchange rates
on cash 26 (26) 26 (26)
--- --- --- ---
Net increase (decrease)
in cash and cash
equivalents (50) 26,710 (4,298) 26,710
Cash and cash
equivalents, beginning
of the period 59,406 28,409 59,406 28,409
------ ------ ------ ------
Cash and cash
equivalents, end of
period $59,356 $55,119 $55,108 $55,119
======= ======= ======= =======
(1) Distributions to members for the nine months ended September 30, 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 the charge for impairment of goodwill and other intangible assetsincurred in the fourth quarter of the fiscal year ended December 31, 2008 and more specifically described in our Annual Report on Form 10-K for that year along with a one time-sales tax refund in the third 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 Nine Months Ended Twelve
September 30, September 30, Months Ended
------------- ------------- September 30,
2009 2008 2009 2008 2009
---- ---- ---- ---- ----
Net income (loss) $1,713(1) $3,515 $(4,217)(1) $9,229 $(81,429)(1)
Interest expense,
net 6,315 6,097 18,977 18,384 25,287
Depreciation 1,452 1,587 4,330 4,714 5,907
Amortization of
deferred
financing costs 289 385 1,761 1,147 2,146
Amortization of
customer
relationships 1,117 1,116 3,350 3,350 4,467
Display cabinet
amortization 1,316 1,701 4,136 5,192 6,040
State taxes 30 60 100 120 129
--- --- --- --- ---
Non-GAAP EBITDA $12,232 $14,461 $28,437 $42,136 $(37,453)
Impairment of
goodwill and
other intangible
assets - - - - 73,938 (2)
Sales tax refund (1,105)(1) - (1,105)(1) - (1,105)(1)
------ --- ------- --- ------
Non-GAAP Adjusted
EBITDA $11,127 $14,461 $27,332 $42,136 $35,380
======= ======= ======= ======= =======
Norcraft Companies, L.P.
(unaudited)
-----------
Three Months Ended Nine Months Ended Twelve
September 30, September 30, Months Ended
------------- ------------- September 30,
2009 2008 2009 2008 2009
---- ---- ---- ---- ----
Net income (loss) $4,719(1) $6,504 $4,800(1) $18,014 $(69,375)(1)
Interest expense,
net 3,429 3,227 10,319 9,949 13,711
Depreciation 1,452 1,587 4,330 4,714 5,907
Amortization of
deferred financing
costs 169 266 1,402 797 1,668
Amortization of
customer
relationships 1,117 1,116 3,350 3,350 4,467
Display cabinet
amortization 1,316 1,701 4,136 5,192 6,040
State taxes 30 60 100 120 129
--- --- --- --- ---
Non-GAAP EBITDA $12,232 $14,461 $28,437 $42,136 $(37,453)
Impairment of
goodwill and other
intangible assets - - - - 73,938 (2)
Sales tax refund (1,105)(1) - (1,105)(1) - (1,105)(1)
------ --- ------ --- ------
Non-GAAP Adjusted
EBITDA $11,127 $14,461 $27,332 $42,136 $35,380
======= ======= ======= ======= =======
(1) Net income during the three, nine and twelve months ended September
30, 2009 includes a one-time 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.
(2) During the fourth quarter of 2008, our actual earnings and expected
future earnings decreased to a level that required us to perform
additional analysis under SFAS 142 to test for impairment of goodwill and
brand names. This analysis resulted in a total impairment charge of $73.9
million, of which, $60.0 million was attributable to goodwill and $13.9
million was attributable to brand names.
Norcraft Holdings, L.P.; Norcraft Companies, L.P.
