EAGAN, MN.-- Norcraft Companies, Inc. ("we", the “Company” or “Norcraft”) (NYSE:NCFT), a leading manufacturer of kitchen and bathroom cabinetry in the United States and Canada, today reported financial results for the second quarter ended June 30, 2014.
“We are encouraged by our continued improvement on multiple fronts with growth in our net sales, net income and cash flow providing momentum into the back half of 2014,” stated Mark Buller, Chairman and Chief Executive Officer of the Company. “Our ongoing shift in product mix towards higher end products remains on track for all our divisions as a result of our strategic growth initiatives. Our improved Adjusted EBITDA reflects our vigilant focus on costs, with our net income further benefiting from this focus and our dramatic reduction in interest expense. We are pleased with our progress during the quarter and excited to continue leveraging our well-positioned platform to further drive profits and cash flow.”
FINANCIAL RESULTS
Second Quarter of 2014 Compared with Second Quarter of 2013
In the second quarter of 2014, net sales increased $7.3 million, or 8.1%, to $97.6 million, as compared to $90.3 million in the second quarter of 2013. Sales increased in nearly all the Company’s divisions, driven largely by mix/price gains and promotional activity during the quarter.
Income from operations in the second quarter of 2014 increased $2.1 million, or 23.1%, to $11.2 million from $9.1 million for the second quarter of 2013. The increase was mainly attributable to higher sales and improvement in labor efficiency and leverage of fixed manufacturing costs. These positive factors were partly offset by moderately higher material costs and increased incentive stock compensation expense from stock options issued in connection with the Company’s recently completed initial public offering.
Net income of $4.8 million, or $0.23 per diluted share, in the second quarter of 2014 represented an increase of $3.0 million compared to $1.8 million in the second quarter of 2013.
Adjusted EBITDA in the second quarter of 2014 increased $2.3 million, or 18.2%, to $14.9 million, as compared to $12.6 million for the same quarter of 2013 (Adjusted EBITDA is a non-GAAP measure defined in the table below).
At June 30, 2014, the Company had cash of $46.5 million and total long-term debt of $149.6 million, as compared to cash of $39.1 million and total long-term debt of $150.0 million at December 31, 2013.
CONFERENCE CALL AND WEBCAST
The Company will host a conference call and webcast to discuss its results for the second quarter of 2014 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on August 13, 2014. Investors who wish to participate in the call should dial 1-877-705-6003 (inside the U.S.) or 1-201-493-6725 (outside the U.S.) at least 5 minutes prior to the start of the call. The live webcast will be available on the Investors section of the Company’s website at www.norcraftcompanies.com. Replays of the call will be available through September 13, 2014 and can be accessed at 1-877-870-5176 (U.S. callers) or 1-858-384-5517 (outside the U.S.) and entering the pass code 13587066.
ABOUT NORCRAFT COMPANIES
Norcraft is a leading manufacturer of kitchen and bathroom cabinetry in the United States and Canada. Norcraft provides its customers with a single source for a broad range of high-quality cabinetry, including stock and semi-custom cabinets manufactured in both framed and frameless (full access) construction. Norcraft markets its products through seven main brands: Mid Continent Cabinetry, Norcraft Cabinetry, UltraCraft, StarMark Cabinetry, Fieldstone Cabinetry, Brookwood and Urban Effects.
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 Company. 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 Company. They are subject to uncertainties and factors relating to the Company’s operations and business environment, all of which are difficult to predict and many of which are beyond the Company’s 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. Such expectations 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 including, but not limited to, the risks outlined under the “Risk Factors’’ section of the Company's 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2014.
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 Company undertakes no obligation to update any forward looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.
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Norcraft Companies, Inc. Consolidated Balance Sheets (dollar amounts in thousands, except share and per share data) |
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June 30, |
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December 31, |
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2014 |
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2013 |
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(unaudited) |
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(audited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
46,468 |
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$ |
39,106 |
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Trade accounts receivable, net |
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28,957 |
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21,449 |
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Inventories |
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24,649 |
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22,591 |
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Prepaid and other current assets |
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2,074 |
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2,590 |
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Total current assets |
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102,148 |
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85,736 |
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Non-current assets: |
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Property, plant and equipment, net |
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24,953 |
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25,208 |
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Goodwill |
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88,462 |
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88,466 |
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Intangible assets, net |
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57,767 |
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60,108 |
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Display cabinets, net |
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6,321 |
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5,864 |
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Other assets |
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118 |
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84 |
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Total non-current assets |
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177,621 |
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179,730 |
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Total assets |
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$ |
279,769 |
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$ |
265,466 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Current portion of long-term debt |
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$ |
1,875 |
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$ |
1,500 |
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Accounts payable |
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12,543 |
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8,523 |
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Accrued tax distributions |
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1,007 |
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— |
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Accrued expenses |
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22,367 |
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21,203 |
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Total current liabilities |
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37,792 |
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31,226 |
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Non-current liabilities: |
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Long-term debt |
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147,750 |
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148,500 |
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Unamortized discount on long-term debt |
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(692 |
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(746 |
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Deferred tax liabilities and other liabilities |
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37,991 |
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36,560 |
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Total non-current liabilities |
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185,049 |
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184,314 |
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Total liabilities |
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222,841 |
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215,540 |
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Commitments and contingencies |
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— |
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— |
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Equity: |
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Common stock, $0.01 par value; 100,000,000 shares authorized; 17,311,573 issued and outstanding at June 30, 2014 and December 31, 2013 |
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173 |
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173 |
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Additional paid-in capital |
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52,846 |
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51,795 |
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Accumulated deficit |
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(7,658 |
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(13,703 |
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Accumulated other comprehensive income |
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709 |
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845 |
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Total Norcraft Companies, Inc. equity |
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46,070 |
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39,110 |
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Noncontrolling interests |
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10,858 |
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10,816 |
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Total equity |
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56,928 |
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49,926 |
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Total liabilities and equity |
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$ |
279,769 |
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$ |
265,466 |
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Norcraft Companies, Inc. Consolidated Statements of Comprehensive Income (Loss) (dollar amounts in thousands, except share and per share data) (unaudited) |
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2014 |
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2013 |
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2014 |
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2013 |
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Net sales |
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$ |
97,601 |
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$ |
90,284 |
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$ |
181,631 |
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$ |
167,632 |
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Cost of sales |
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70,582 |
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66,054 |
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133,124 |
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123,632 |
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Gross profit |
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27,019 |
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24,230 |
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48,507 |
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44,000 |
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Selling, general and administrative expenses |
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15,868 |
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15,175 |
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30,542 |
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29,031 |
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Income from operations |
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11,151 |
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9,055 |
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17,965 |
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14,969 |
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Other expense: |
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Interest expense, net |
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2,226 |
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6,470 |
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4,402 |
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12,917 |
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Amortization of deferred financing costs |
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163 |
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780 |
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305 |
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1,560 |
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Expense related to tax receivable agreements |
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2,832 |
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— |
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4,475 |
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— |
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Other expense, net |
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41 |
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2 |
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100 |
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12 |
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Total other expense |
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5,262 |
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7,252 |
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9,282 |
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14,489 |
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Income before income taxes |
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5,889 |
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1,803 |
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8,683 |
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480 |
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Income tax expense |
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1,133 |
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