Attached files
| file | filename |
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| 8-K - FORM 8-K - NORCRAFT COMPANIES LP | d8k.htm |
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NEWS RELEASE | |||
| FOR IMMEDIATE RELEASE | ||||
|
Contact: |
Leigh E. Ginter | |||
| Chief Financial Officer | ||||
| leigh.ginter@norcraftcompanies.com | ||||
| (651) 234-3315 |
NORCRAFT HOLDINGS, L.P. AND NORCRAFT COMPANIES, L.P.
REPORT FIRST QUARTER 2011 RESULTS
May 13, 2011 – Eagan, Minnesota — Norcraft Holdings, L.P. (Holdings) and Norcraft Companies, L.P. (Norcraft) today reported financial results for the first quarter ended March 31, 2011. The financial results for Holdings include the accounts of its wholly-owned subsidiary, Norcraft. Holdings reflects the obligations under its $53.7 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. Other than the remaining $53.7 million of the 9 3/4% senior discount notes, related deferred issuance costs, related interest and amortization expense, all other assets, liabilities, income, expenses and cash flows presented for all periods represent those of Norcraft.
FINANCIAL RESULTS
First Quarter of Fiscal 2011 Compared with First Quarter of Fiscal 2010
Net sales increased $2.4 million, or 3.8%, from $61.8 million for the first quarter of 2010 to $64.2 million for the same quarter of 2011. Income from operations decreased $0.3 million, or 6.6%, from $4.5 million for the first quarter of 2010 to $4.2 million for the same quarter of 2011. Net loss for Holdings increased $0.3 million, from $2.2 million for the first quarter of 2010 to $2.5 million in the same quarter of 2011. Net loss for Norcraft increased $0.4 million, from $0.8 million for the first quarter of 2010 to $1.2 million for the same quarter of 2011.
Adjusted EBITDA (a non-GAAP measure and defined in the attached table) was $7.6 million for the first quarter of 2011 compared to $8.2 million for the same quarter of 2010.
“As expected, the difficult economic and industry conditions we experienced in the last half of 2010 have continued into 2011. While we have seen some relative stability in the demand for our products in recent weeks, we anticipate the second quarter of 2011 to be challenging as we will be comparing against sales growth in excess of 20 percent for the year ago quarter caused largely by the expiration of the first-time home-buyer’s tax credit. As a result, we will persist in efforts to maintain costs while continuing to introduce new products and sales programs,” commented President and CEO, Mark Buller.
GENERAL
Norcraft Companies is a leader in manufacturing, assembling and finishing kitchen and bathroom cabinetry in the U.S. 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 six main brands: Mid Continent Cabinetry, Norcraft Cabinetry, UltraCraft, StarMark Cabinetry, Fieldstone Cabinetry and Brookwood.
-Selected Financial Data Tables Follow-
Consolidated Balance Sheets
(dollar amounts in thousands)
| Norcraft Holdings, L.P. | Norcraft Companies, L.P. | |||||||||||||||
| March 31, 2011 (unaudited) |
December 31, 2010 |
March 31, 2011 (unaudited) |
December 31, 2010 |
|||||||||||||
| ASSETS | ||||||||||||||||
| Current assets: |
||||||||||||||||
| Cash and cash equivalents |
$ | 24,544 | $ | 28,657 | $ | 24,544 | $ | 28,657 | ||||||||
| Trade accounts receivable, net |
22,027 | 17,982 | 22,027 | 17,982 | ||||||||||||
| Inventories |
19,583 | 17,363 | 19,583 | 17,363 | ||||||||||||
| Prepaid expenses |
1,506 | 1,558 | 1,506 | 1,558 | ||||||||||||
| Total current assets |
67,660 | 65,560 | 67,660 | 65,560 | ||||||||||||
| Property, plant and equipment, net |
29,596 | 30,199 | 29,596 | 30,199 | ||||||||||||
| Other assets: |
||||||||||||||||
| Goodwill |
88,492 | 88,483 | 88,492 | 88,483 | ||||||||||||
| Brand names |
35,100 | 35,100 | 35,100 | 35,100 | ||||||||||||
| Customer relationships, net |
33,748 | 34,865 | 33,748 | 34,865 | ||||||||||||
| Deferred financing costs, net |
6,353 | 6,776 | 6,044 | 6,414 | ||||||||||||
| Display cabinets, net |
5,357 | 5,016 | 5,357 | 5,016 | ||||||||||||
| Other |
676 | 754 | 676 | 754 | ||||||||||||
| Total other assets |
169,726 | 170,994 | 169,417 | 170,632 | ||||||||||||
| Total assets |
$ | 266,982 | $ | 266,753 | $ | 266,673 | $ | 266,391 | ||||||||
| LIABILITIES AND MEMBERS’ EQUITY (DEFICIT) |
||||||||||||||||
| Current liabilities: |
||||||||||||||||
| Accounts payable |
$ | 10,310 | $ | 7,678 | $ | 10,310 | $ | 7,678 | ||||||||
| Accrued expenses |
17,653 | 17,945 | 17,217 | 16,200 | ||||||||||||
| Total current liabilities |
27,963 | 25,623 | 27,527 | 23,878 | ||||||||||||
| Long-term debt |
233,700 | 233,700 | 180,000 | 180,000 | ||||||||||||
| Unamortized discount on bonds payable |
(2,292 | ) | (2,414 | ) | (2,292 | ) | (2,414 | ) | ||||||||
| Other liabilities |
153 | 153 | 153 | 153 | ||||||||||||
| Commitments and contingencies |
— | — | — | — | ||||||||||||
| Members’ equity subject to put request |
10,302 | 12,139 | — | — | ||||||||||||
| Members’ equity (deficit) |
(2,844 | ) | (2,448 | ) | 61,285 | 64,774 | ||||||||||
| Total liabilities and members’ equity (deficit) |
$ | 266,982 | $ | 266,753 | $ | 266,673 | $ | 266,391 | ||||||||
Consolidated Statements of Operations
(dollar amounts in thousands)
(unaudited)
| Norcraft Holdings, L.P. | Norcraft Companies, L.P. | |||||||||||||||
| Three Months
Ended March 31, |
Three Months
Ended March 31, |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Net sales |
$ | 64,188 | $ | 61,833 | $ | 64,188 | $ | 61,833 | ||||||||
| Cost of sales |
47,585 | 44,617 | 47,585 | 44,617 | ||||||||||||
| Gross profit |
16,603 | 17,216 | 16,603 | 17,216 | ||||||||||||
| Selling, general and administrative expenses |
12,360 | 12,671 | 12,360 | 12,671 | ||||||||||||
| Income from operations |
4,243 | 4,545 | 4,243 | 4,545 | ||||||||||||
| Other expense: |
||||||||||||||||
| Interest expense, net |
6,336 | 6,354 | 5,027 | 5,045 | ||||||||||||
| Amortization of deferred financing costs |
423 | 367 | 370 | 313 | ||||||||||||
| Other, net |
24 | 30 | 24 | 30 | ||||||||||||
| Total other expense |
6,783 | 6,751 | 5,421 | 5,388 | ||||||||||||
| Net loss |
$ | (2,540 | ) | $ | (2,206 | ) | $ | (1,178 | ) | $ | (843 | ) | ||||
Consolidated Statements of Cash Flows
(dollar amounts in thousands)
(unaudited)
| Norcraft Holdings, L.P. | Norcraft Companies, L.P. | |||||||||||||||
| Three Months
Ended March 31, |
Three Months
Ended March 31, |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Cash flows from operating activities: |
||||||||||||||||
| Net loss |
$ | (2,540 | ) | $ | (2,206 | ) | $ | (1,178 | ) | $ | (843 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||||||||||
| Depreciation and amortization of property, plant and equipment |
1,286 | 1,457 | 1,286 | 1,457 | ||||||||||||
| Amortization: |
||||||||||||||||
| Customer relationships |
1,117 | 1,117 | 1,117 | 1,117 | ||||||||||||
| Deferred financing costs |
423 | 367 | 370 | 313 | ||||||||||||
| Display cabinets |
948 | 1,088 | 948 | 1,088 | ||||||||||||
| Discount amortization/accreted interest |
122 | 122 | 122 | 122 | ||||||||||||
| Provision for uncollectible accounts receivable |
11 | (26 | ) | 11 | (26 | ) | ||||||||||
| Provision for obsolete and excess inventories |
(96 | ) | 354 | (96 | ) | 354 | ||||||||||
| Provision for warranty claims |
666 | 641 | 666 | 641 | ||||||||||||
| Stock compensation expense |
45 | 45 | 45 | 45 | ||||||||||||
| Gain on disposal of assets |
— | (1 | ) | — | (1 | ) | ||||||||||
| Change in operating assets and liabilities: |
||||||||||||||||
| Trade accounts receivable |
(3,980 | ) | (3,935 | ) | (3,980 | ) | (3,935 | ) | ||||||||
| Inventories |
(2,073 | ) | (1,591 | ) | (2,073 | ) | (1,591 | ) | ||||||||
| Prepaid expenses |
57 | 173 | 57 | 173 | ||||||||||||
| Other assets |
77 | 21 | 77 | 21 | ||||||||||||
| Accounts payable and accrued expenses |
1,902 | 4,482 | 3,211 | 5,791 | ||||||||||||
| Net cash provided by (used in) operating activities |
(2,035 | ) | 2,108 | 583 | 4,726 | |||||||||||
| Cash flows from investing activities: |
||||||||||||||||
| Proceeds from sale of property and equipment |
4 | 1 | 4 | 1 | ||||||||||||
| Purchase of property, plant and equipment |
(755 | ) | (595 | ) | (755 | ) | (595 | ) | ||||||||
| Additions to display cabinets |
(1,289 | ) | (1,237 | ) | (1,289 | ) | (1,237 | ) | ||||||||
| Net cash used in investing activities |
(2,040 | ) | (1,831 | ) | (2,040 | ) | (1,831 | ) | ||||||||
| Cash flows from financing activities: |
||||||||||||||||
| Payment in financing costs |
— | (326 | ) | — | (326 | ) | ||||||||||
| Distributions to members |
— | — | (2,618 | ) | — | |||||||||||
| Net cash used in financing activities |
— | (326 | ) | (2,618 | ) | (326 | ) | |||||||||
| Effect of exchange rates on cash and cash equivalents |
(38 | ) | 2 | (38 | ) | 2 | ||||||||||
| Net increase (decrease) in cash and cash equivalents |
(4,113 | ) | (47 | ) | (4,113 | ) | 2,571 | |||||||||
| Cash and cash equivalents, beginning of the period |
28,657 | 20,863 | 28,657 | 16,731 | ||||||||||||
| Cash and cash equivalents, end of period |
$ | 24,544 | $ | 20,816 | $ | 24,544 | $ | 19,302 | ||||||||
| Supplemental disclosure of non-cash transactions: |
||||||||||||||||
| Change in equity subject to put request |
$ | (1,837 | ) | $ | 530 | $ | — | $ | — | |||||||
| Purchase of property, plant and equipment with consideration other than cash |
$ | — | $ | 201 | $ | — | $ | 201 | ||||||||
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 a sales tax refund during the second quarter of 2010. 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. 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 March 31, |
Twelve March 31, |
|||||||||||
| 2011 | 2010 | 2011 | ||||||||||
| Net loss |
$ | (2,540 | ) | $ | (2,206 | ) | $ | (2,592 | ) (1) | |||
| Interest expense, net |
6,336 | 6,354 | 25,309 | |||||||||
| Depreciation |
1,286 | 1,457 | 5,549 | |||||||||
| Amortization of deferred financing costs |
423 | 367 | 1,645 | |||||||||
| Amortization of customer relationships |
1,117 | 1,117 | 4,467 | |||||||||
| Display cabinet amortization |
948 | 1,088 | 4,002 | |||||||||
| State taxes |
24 | 30 | 19 | |||||||||
| Non-GAAP EBITDA |
$ | 7,594 | $ | 8,207 | $ | 38,399 | ||||||
| Sales tax refund |
— | — | (1,010 | ) (1) | ||||||||
| Non-GAAP Adjusted EBITDA |
$ | 7,594 | $ | 8,207 | $ | 37,389 | ||||||
| Norcraft Companies,
L.P. (unaudited) |
||||||||||||
| Three Months
Ended March 31, |
Twelve March 31, |
|||||||||||
| 2011 | 2010 | 2011 | ||||||||||
| Net income (loss) |
$ | (1,178 | ) | $ | (843 | ) | $ | 2,856 | (1) | |||
| Interest expense, net |
5,027 | 5,045 | 20,073 | |||||||||
| Depreciation |
1,286 | 1,457 | 5,549 | |||||||||
| Amortization of deferred financing costs |
370 | 313 | 1,433 | |||||||||
| Amortization of customer relationships |
1,117 | 1,117 | 4,467 | |||||||||
| Display cabinet amortization |
948 | 1,088 | 4,002 | |||||||||
| State taxes |
24 | 30 | 19 | |||||||||
| Non-GAAP EBITDA |
$ | 7,594 | $ | 8,207 | $ | 38,399 | ||||||
| Sales tax refund |
— | — | (1,010 | ) (1) | ||||||||
| Non-GAAP Adjusted EBITDA |
$ | 7,594 | $ | 8,207 | $ | 37,389 | ||||||
| 1) | Net loss during the twelve months ended March 31, 2011 included a sales tax refund in the amount of $1.0 million which decreased net loss 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.