- Net Sales Increase 13.0% to $80.5 Million in Fourth Quarter 2013
- Adjusted EBITDA Increases 30.0% to $8.9 Million in Fourth Quarter 2013
- Completes Initial Public Offering in November 2013 Raising Net Proceeds of $107.3 Million
- Reduces and Refinances Long-term Debt; Expected Annualized Interest Savings of $17.3 Million
EAGAN, MN - Norcraft Companies, Inc. (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 fourth quarter and full year ended December 31, 2013.
“We are pleased to announce a fourth consecutive year of accelerating growth with sales up 17.6% to $339.7 million in 2013 from $288.8 million in 2012,” stated Mark Buller, Chairman and Chief Executive Officer of the Company. “The continued expansion of our operations reflects improving industry demand for quality cabinetry and continued execution on our strategy to expand our presence in our core dealer channel, deliver new products and realize price/mix gains across all our divisions.”
Mark Buller continued, “During the fourth quarter, we successfully completed our IPO, eliminated $17.3 million of annualized interest expense and grew our business. Our adjusted EBITDA increased 30.0% on net sales up 13.0% in the fourth quarter as we leveraged our cost base and implemented additional productivity enhancements. Furthermore, we are encouraged by our team’s ability to increase profitability amid modest material cost inflation and some competitiveness within the industry that persisted through the fourth quarter. As we move forward in 2014, we are closely managing our pricing, promotional activities and costs and expect to continue building on the progress we have been making.”
FINANCIAL RESULTS
Fourth Quarter of 2013 Compared with Fourth Quarter of 2012
In the fourth quarter of 2013, net sales increased $9.3 million, or 13.0%, to $80.5 million as compared to $71.2 million in the fourth quarter of 2012. Sales increased in nearly all of the Company’s divisions, driven largely by industry growth, mix/price gains and promotional activity during the quarter.
Income from operations in the fourth quarter of 2013 increased $1.4 million, or 42.0%, to $4.6 million from $3.2 million for the fourth quarter of 2012. The increase was mainly attributable to higher sales on the Company’s fixed manufacturing costs, lower freight costs and labor efficiencies associated with increased production. These positive factors were partly offset by moderately higher material costs and $0.5 million of additional corporate expenses related to the Company’s recently completed initial public offering as compared to the comparable quarter in 2012.
The net loss of $15.4 million in the fourth quarter of 2013 represented an increase of $11.5 million from the $3.9 million net loss in the fourth quarter of 2012. The net loss in the fourth quarter of 2013 included a $12.5 million loss on debt extinguishment related to the Company's previously announced redemption of senior notes.
Adjusted EBITDA in the fourth quarter of 2013 increased $2.1 million, or 30.0%, to $8.9 million as compared to $6.8 million for the same quarter of 2012 (Adjusted EBITDA is a non-GAAP measure defined in the table below).
At December 31, 2013, the Company had cash of $39.1 million and total long-term debt of $150.0 million, as compared to cash of $23.0 million and total long-term debt of $240.0 million at December 31, 2012. In November 2013, the Company completed its initial public offering, raising net proceeds of approximately $107.3 million. In connection with the offering, the Company entered into a new $150.0 million senior secured term loan facility, which matures in 2020. In December 2013, the Company completed the redemption of $240.0 million of outstanding senior secured notes, funded in part with a full draw of the senior term loan facility and the remainder funded with proceeds from the Company's initial public offering. The Company expects these transactions to lower cash interest expense by approximately $17.3 million annually.
Full Year of 2013 Compared with Full Year of 2012
For the full year of 2013, net sales increased $50.9 million, or 17.6%, to $339.7 million from $288.8 million for the full year of 2012. Income from operations of $26.6 million in the full year of 2013 increased by $7.3 million, or 37.2%, from $19.3 million in the full year of 2012. The net loss of $15.2 million in the full year of 2013 increased $5.6 million from $9.6 million in the full year of 2012.
Adjusted EBITDA of $42.5 million in the full year of 2013 increased $8.8 million, or 26.2%, compared to $33.7 million for the full year of 2012.
| Norcraft Companies, Inc. | ||||||||
| Consolidated Balance Sheets | ||||||||
| (dollar amounts in thousands, except share and per share data) | ||||||||
| December 31, | ||||||||
| 2013 | 2012 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 39,106 | $ | 23,019 | ||||
| Trade accounts receivable, net | 21,449 | 20,264 | ||||||
| Inventories | 22,591 | 19,760 | ||||||
| Prepaid and other current assets | 2,590 | 2,220 | ||||||
| Total current assets | 85,736 | 65,263 | ||||||
| Non-current assets: | ||||||||
| Property, plant and equipment, net | 25,208 | 25,961 | ||||||
| Goodwill | 88,466 | 88,484 | ||||||
| Intangible assets, net | 60,108 | 70,148 | ||||||
| Display cabinets, net | 5,864 | 6,019 | ||||||
| Other assets | 84 | 268 | ||||||
| Total non-current assets | 179,730 | 190,880 | ||||||
| Total assets | $ | 265,466 | $ | 256,143 | ||||
| LIABILITIES AND MEMBERS' / STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term debt | $ | 1,500 | $ |
- |
||||
| Accounts payable | 8,523 | 7,133 | ||||||
| Accrued expenses | 21,203 | 14,893 | ||||||
| Total current liabilities | 31,226 | 22,026 | ||||||
| Non-current liabilities: | ||||||||
| Long-term debt | 148,500 | 240,000 | ||||||
| Unamortized premium (discount) on long-term debt | (746 | ) | 127 | |||||
| Deferred tax liabilities and other liabilities | 36,560 | 48 | ||||||
| Total non-current liabilities | 184,314 | 240,175 | ||||||
| Total liabilities | 216,540 | 262,201 | ||||||
| Commitments and contingencies |
- |
- |
||||||
| Members' equity subject to put request |
- |
6,926 | ||||||
| Equity (deficit): | ||||||||
| Common stock, $0.01 par value; 100,000,000 shares authorized, 17,311,573 issued and outstanding at December 31, 2013 | 173 |
- |
||||||
| Additional paid-in capital | 51,795 |
- |
||||||
| Accumulated deficit | (13,703 | ) |
- |
|||||
| Accumulated other comprehensive income | 845 | 1,628 | ||||||
| Members' deficit |
- |
(14,612 | ) | |||||
| Total Norcraft Companies, Inc. equity (deficit) | 39,233 | (12,984 | ) | |||||
| Noncontrolling interests | 10,816 |
- |
||||||
| Total equity (deficit) | 50,049 | (12,984 | ) | |||||
| Total liabilities and equity (deficit) | $ | 265,466 | $ | 256,143 | ||||
| Norcraft Companies, Inc. | ||||||||||||||||
| Consolidated Statements of Comprehensive Loss | ||||||||||||||||
| (dollar amounts in thousands, except share and per share data) | ||||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Net sales | $ | 80,493 | $ | 71,232 | $ | 339,695 | $ | 288,782 | ||||||||
| Cost of sales | 59,404 | 54,595 | 250,744 | 215,274 | ||||||||||||
| Gross profit | 21,089 | 16,637 | 88,951 | 73,508 | ||||||||||||
| Selling, general and administrative expenses | 16,514 | 13,415 | 62,389 | 54,144 | ||||||||||||
| Income from operations | 4,575 | 3,222 | 26,562 | 19,364 | ||||||||||||
| Other expense: | ||||||||||||||||
| Interest expense, net | 5,868 | 6,447 | 25,263 | 25,819 | ||||||||||||
| Amortization of deferred financing costs | 659 | 780 | 2,999 | 3,120 | ||||||||||||
| Other expense, net | 12,565 | (77 | ) | 12,594 | (16 | ) | ||||||||||
| Total other expense | 19,092 | 7,150 | 40,856 | 28,923 | ||||||||||||
| Loss before income taxes | (14,517 | ) | (3,928 | ) | (14,294 | ) | (9,559 | ) | ||||||||
| Income tax expense | 879 |
- |
879 |
- |
||||||||||||
| Net loss | (15,396 | ) | (3,928 | ) | (15,173 | ) | (9,559 | ) | ||||||||
| Less: net loss attributable to noncontrolling interests | (1,798 | ) |
- |
(1,798 | ) |
- |
||||||||||
| Net loss attributable to Norcraft Companies, Inc. | (13,598 | ) | (3,928 | ) | (13,375 | ) | (9,559 | ) | ||||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Foreign currency translation adjustment | (375 | ) | (221 | ) | (684 | ) | 219 | |||||||||
| Less: other comprehensive income (loss) attributable to noncontrolling interests | (44 | ) |
- |
(44 | ) |
- |
||||||||||
| Other comprehensive loss attributable to Norcraft Companies, Inc. | (331 | ) | (221 | ) | (640 | ) | 219 | |||||||||
| Comprehensive loss | (15,771 | ) | (4,149 | ) | (15,857 | ) | (9,340 | ) | ||||||||
| Less: comprehensive loss attributable to noncontrolling interests | (1,842 | ) |
- |
(1,842 | ) |
- |
||||||||||
| Comprehensive loss attributable to Norcraft Companies, Inc. | $ | (13,929 | ) | $ | (4,149 | ) | $ | (14,015 | ) | $ | (9,340 | ) | ||||
|
November 13, |
||||||||||||||||
| Net loss attributable to controlling and noncontrolling interests | $ | (15,501 | ) | |||||||||||||
| Less: net loss attributable to noncontrolling interests | $ | (1,798 | ) | |||||||||||||
| Net loss attributable to Norcraft Companies, Inc. | $ | (13,703 | ) | |||||||||||||
| Net loss per share attributable to Norcraft Companies, Inc. | ||||||||||||||||
| Basic and diluted | $ | (0.80 | ) | |||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic and diluted | 17,194,076 | |||||||||||||||
| Norcraft Companies, Inc. | ||||||||
| Consolidated Statement of Cash Flows | ||||||||
| (dollar amounts in thousands) | ||||||||
| Year Ended December 31, | ||||||||
| 2013 | 2012 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (15,173 | ) | $ | (9,559 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization of property, plant and equipment | 4,338 | 4,723 | ||||||
| Amortization: | ||||||||
| Customer relationships | 4,466 | 4,467 | ||||||
| Deferred financing costs | 2,999 | 3,120 | ||||||
| Display cabinets | 4,330 | 4,113 | ||||||
| Discount amortization/accreted interest | (34 | ) | (39 | ) | ||||
| Provision for uncollectible accounts receivable | 65 | 168 | ||||||
| Provision for obsolete and excess inventory | 555 | 377 | ||||||
| Provision for warranty claims | 4,441 | 3,071 | ||||||
| Stock compensation expense | 364 | 187 | ||||||
| Deferred income tax expense | 879 |
- |
||||||
| Loss on debt extinguishment | 12,499 |
- |
||||||
| Gain on disposal of assets | (7 | ) | (2 | ) | ||||
| Change in operating assets and liabilities: | ||||||||
| Trade accounts receivable | (1,421 | ) | (257 | ) | ||||
| Inventories | (3,504 | ) | (2,597 | ) | ||||
| Prepaid expenses | (376 | ) | (385 | ) | ||||
| Other assets | 182 | 301 | ||||||
| Accounts payable and accrued expenses | 3,244 | (1,482 | ) | |||||
| Net cash provided by operating activities | 17,847 | 6,206 | ||||||
| Cash flows from investing activities: | ||||||||
| Proceeds from sale of property, plant and equipment | 8 | 13 | ||||||
| Purchase of property, plant and equipment | (3,963 | ) | (3,135 | ) | ||||
| Additions to display cabinets | (4,175 | ) | (4,290 | ) | ||||
| Net cash used in investing activities | (8,130 | ) | (7,412 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Borrowings on long-term debt | 149,250 |
- |
||||||
| Payment of financing costs | (3,800 | ) | (3 | ) | ||||
| Payment of premium paid on early redemption | (6,300 | ) |
- |
|||||
| Repurchase of notes payable | (240,000 | ) |
- |
|||||
| Proceeds from initial public offering, net of related expenses | 107,324 |
- |
||||||
| Proceeds from issuance of members' interests | 3 | 50 | ||||||
| Repurchase of members' interests | (31 | ) |
- |
|||||
| Distributions to members |
- |
(10 | ) | |||||
| Net cash provided by financing activities | 6,446 | 37 | ||||||
| Effect of exchange rates on cash and cash equivalents | (76 | ) | 3 | |||||
| Net increase (decrease) in cash and cash equivalents | 16,087 | (1,166 | ) | |||||
| Cash and cash equivalents, beginning of the period | 23,019 | 24,185 | ||||||
| Cash and cash equivalents, end of period | $ | 39,106 | $ | 23,019 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for interest | $ | 25,526 | $ | 25,433 | ||||
| Supplemental disclosure of non-cash transactions: | ||||||||
| Change in equity subject to put request | $ | (6,926 | ) | $ | (1,383 | ) | ||
| Recognition of opening deferred tax liability | $ | 35,621 | $ |
- |
||||
Norcraft Companies, Inc.
Reconciliation of Net Loss to Adjusted EBITDA
(dollar amounts in thousands)
EBITDA is net loss before interest expense, income tax expense, depreciation and amortization. Adjusted EBITDA is EBITDA before the effect of the footnoted items in the table below. The Company believes EBITDA and Adjusted EBITDA are useful to investors in evaluating the Company's operating performance compared to that of other companies in the industry, as their calculation eliminates the effects of financing, income taxes and the accounting effects of capital spending, as these items may vary for different companies for reasons unrelated to overall operating performance. The Company also believes these financial metrics provide information relevant to investors regarding the Company's ability to service and/or incur debt. EBITDA nor Adjusted EBITDA is a presentation made in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Accordingly, when analyzing the Company's operating performance, investors should not consider EBITDA or Adjusted EBITDA in isolation or as substitutes for net loss, cash flows from operating activities or other operation statement or cash flow statement data prepared in accordance with U.S. GAAP. The Company's calculation 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:
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Net loss | $ | (15,396 | ) | $ | (3,928 | ) | $ | (15,173 | ) | $ | (9,559 | ) | ||||
| Interest expense, net | 5,868 | 6,447 | 25,263 | 25,819 | ||||||||||||
| Depreciation | 1,036 | 1,161 | 4,338 | 4,723 | ||||||||||||
| Amortization of deferred financing costs | 659 | 780 | 2,999 | 3,120 | ||||||||||||
| Amortization of customer relationships | 1,116 | 1,117 | 4,466 | 4,467 | ||||||||||||
| Display cabinet amortization | 1,171 | 1,060 | 4,330 | 4,113 | ||||||||||||
| Income tax expense | 879 |
- |
879 |
- |
||||||||||||
| State taxes | 71 | (79 | ) | 108 | (26 | ) | ||||||||||
| Non-GAAP EBITDA | $ | (4,596 | ) | $ | 6,558 | $ | 27,210 | $ | 32,657 | |||||||
| Stock compensation expense | 346 | (1) |
- |
346 |
(1) |
- |
||||||||||
| Management fees | 119 | (2) | 250 | 869 |
(2) |
1,000 | ||||||||||
| Restructuring costs associated with initial public offering | 485 | (3) |
- |
1,540 |
(3) |
- |
||||||||||
| Loss on debt extinguishment | 12,499 | (4) |
- |
12,499 |
(4) |
- |
||||||||||
| Non-GAAP adjusted EBITDA | $ | 8,853 | $ | 6,808 | $ | 42,464 | $ | 33,657 | ||||||||
(1) Prior to completion of the offering, the Company's board of directors adopted the Norcraft Companies, Inc. 2013 Incentive Plan. Stock compensation expense related to this plan was $0.3 million during the three months and full year ended December 31, 2013.
(2) In connection with the offering, the Company terminated the Management and Monitoring Agreement, which included a $1.0 million annual management fee. Certain expense reimbursement and indemnification obligations survived the termination of the Management and Monitoring Agreement. See the "Certain Relationships and Related Party Transactions-Management and Monitoring Agreement, section of the Company's prospectus filed with the Securities and Exchange Commission on November 7, 2013.
(3) Net loss during the three months and full year ended December 31, 2013 included the effect of the restructuring costs associated with the initial public offering in the amount of $0.5 million and $1.5 million, respectively, which increased net loss and correspondingly decreased EBITDA, but the effect has been backed out for Adjusted EBITDA.
(4) Net loss during the three months and year ended December 31, 2013 included the effect of a loss on debt extinguishment in the amount of $12.5 million which increased net loss and correspondingly decreased EBITDA, but the effect has been backed out for Adjusted EBITDA.
Source: Norcraft Companies, Inc.
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