EAGAN, Minn. - Norcraft Companies, L.P. (Norcraft) today reports financial results for the third quarter ended September 30, 2013.

FINANCIAL RESULTS

Third Quarter of Fiscal 2013 Compared with Third Quarter of Fiscal 2012

Net sales increased $17.7 million, or 24.0%, from $73.9 million for the third quarter of 2012 to $91.6 million for the same quarter of 2013. Income from operations increased $2.3 million, or 50.8%, from $4.7 million for the third quarter of 2012 to $7.0 million for the same quarter of 2013. Net loss decreased $2.3 million from $2.6 million for the third quarter of 2012 to $0.3 million for the same quarter of 2013.

Adjusted EBITDA (a non-GAAP measure defined in the attached table) was $11.3 million for the third quarter of 2013 compared to $8.0 million for the same quarter of 2012.

GENERAL

Norcraft Companies is a leading manufacturer of kitchen and bathroom cabinetry in the U.S. and Canada. We provide our customers with a single source for a broad range of high-quality cabinetry, including stock, semi-custom and custom cabinets manufactured in both framed and frameless, or full access construction. We market our products through seven main brands: Mid Continent Cabinetry, Norcraft Cabinetry, UltraCraft, StarMark Cabinetry, Fieldstone Cabinetry, Brookwood and Urban Effects.

Norcraft Companies, L.P.

Consolidated Balance Sheets

(dollar amounts in thousands)

         
September 30, December 31,
2013 2012
(unaudited)  
ASSETS
Current assets:
Cash and cash equivalents $ 38,205 $ 23,019
Trade accounts receivable, net 26,379 20,264
Inventories 23,647 19,760
Prepaid and other current assets   2,340     2,220  
Total current assets 90,571 65,263
Non-current assets:
Property, plant and equipment, net 25,377 25,961
Goodwill 88,476 88,484
Intangible assets, net 64,458 70,148
Display cabinets, net 5,779 6,019
Other assets   68     268  
Total non-current assets   184,158     190,880  
Total assets $ 274,729   $ 256,143  
LIABILITIES AND MEMBER’S EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 14,274 $ 7,133
Accrued expenses   26,460     14,893  
Total current liabilities 40,734 22,026
Non-current liabilities:
Long-term debt 240,000 240,000
Unamortized premium on bonds payable 97 127
Other liabilities   57     48  
Total non-current liabilities   240,154     240,175  
Total liabilities 280,888 262,201
Commitments and contingencies
Member’s equity (deficit):
Member’s equity (deficit) (7,478 ) (7,686 )
Accumulated other comprehensive income   1,319     1,628  
Total member’s equity (deficit)   (6,159 )   (6,058 )
Total liabilities and member’s equity (deficit) $ 274,729   $ 256,143  
 
 

Norcraft Companies, L.P.

Consolidated Statements of Comprehensive Loss

(dollar amounts in thousands)

(unaudited)

       
Three Months Ended Nine Months Ended
September 30, September 30,
2013   2012 2013   2012
Net sales $ 91,570 $ 73,863 $ 259,202 $ 217,550
Cost of sales   67,708     55,360     191,340     160,679  
Gross profit 23,862 18,503 67,862 56,871
Selling, general and administrative expenses   16,844     13,849     45,875     40,729  
Income from operations 7,018 4,654 21,987 16,142
Other expense:
Interest expense, net 6,478 6,461 19,395 19,372
Amortization of deferred financing costs 780 780 2,340 2,340
Other expense, net   17     10     29     61  
Total other expense   7,275     7,251     21,764     21,773  
Net income (loss) (257 ) (2,597 ) 223 (5,631 )
 
Other comprehensive income (loss):
Foreign currency translation adjustment   198     500     (309 )   440  
Total other comprehensive income (loss)   198     500     (309 )   440  
Comprehensive loss $ (59 ) $ (2,097 ) $ (86 ) $ (5,191 )
 
 

Norcraft Companies, L.P.

Consolidated Statement of Cash Flows

(dollar amounts in thousands)

(unaudited)

     
Nine Months Ended
September 30,
2013   2012
Cash flows from operating activities:
Net income (loss) $ 223 $ (5,631 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of property, plant and equipment 3,302 3,562
Amortization:
Customer relationships 3,350 3,350
Deferred financing costs 2,340 2,340
Display cabinets 3,159 3,053
Discount amortization/accreted interest (30 ) (29 )
Provision for uncollectible accounts receivable 75 186
Provision for obsolete and excess inventories 552 (47 )
Provision for warranty claims 3,285 2,419
Stock compensation expense 12 141
Gain on disposal of assets (2 ) (3 )
Change in operating assets and liabilities:
Trade accounts receivable (6,279 ) (3,766 )
Inventories (4,495 ) (2,722 )
Prepaid expenses (55 ) 363
Other assets 198 268
Accounts payable and accrued expenses   15,484     6,796  
Net cash provided by operating activities 21,119 10,280
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 3 5
Purchase of property, plant and equipment (2,894 ) (2,387 )
Additions to display cabinets   (2,919 )   (3,399 )
Net cash used in investing activities (5,810 ) (5,781 )
Cash flows from financing activities:
Payment of financing costs (67 ) (3 )
Proceeds from issuance of member interests 3 50
Repurchase of member's interests (30 )
Distributions to member       (10 )
Net cash provided by (used in) financing activities (94 ) 37
Effect of exchange rates on cash and cash equivalents   (29 )   26  
Net increase in cash and cash equivalents 15,186 4,562
Cash and cash equivalents, beginning of the period   23,019     24,185  
Cash and cash equivalents, end of period $ 38,205   $ 28,747  
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 12,770 $ 12,776
Supplemental schedule of non-cash investing and financing activities:
Deferred costs associated with contemplated initial public offering $ 927 $
 
 

Norcraft Companies, L.P.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

(dollar amounts in thousands)

 
EBITDA is net income (loss) before interest expense, income tax expense, depreciation and amortization. Adjusted EBITDA is EBITDA before the effect of restructuring costs associated with contemplated initial public offering in the third quarter of 2013. 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, as these 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. 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 operation statement or cash flow statement data prepared in accordance with U.S. GAAP. Our 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

September 30,

Nine Months Ended

September 30,

Twelve

Months Ended

September 30,

2013   2012 2013   2012 2013
Net income (loss) $ (257 )

(1)

$ (2,597 ) $ 223

(1)

$ (5,631 ) $ (3,705 )

(1)

Interest expense, net 6,478 6,461 19,395 19,372 25,842
Depreciation 1,084 1,195 3,302 3,562 4,463
Amortization of deferred financing costs 780 780 2,340 2,340 3,120
Amortization of customer relationships 1,117 1,117 3,350 3,350 4,467
Display cabinet amortization 987 994 3,159 3,053 4,219
State taxes   12     5     37   53     (42 )
Non-GAAP EBITDA $ 10,201 $ 7,955 $ 31,806 $ 26,099 $ 38,364
Restructuring costs associated with contemplated initial public offering   1,055  

(1)

      1,055

(1)

      1,055  

(1)

Non-GAAP adjusted EBITDA $ 11,256   $ 7,955   $ 32,861 $ 26,099   $ 39,419  
(1) Net income (loss) during the three, nine and twelve months ended September 30, 2013 included the effect of the restructuring costs associated with contemplated initial public offering in the amount of $1.1 million which decreased net income (loss) and correspondingly decreased EBITDA, but the effect has been backed out for Adjusted EBITDA.
 

Source: Norcraft Companies, L.P.

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