Norcraft Holdings, L.P. and Norcraft Companies, L.P. Report Fourth Quarter and Fiscal 2009 Results

EAGAN, Minn., March 23 /PRNewswire/ -- Norcraft Holdings, L.P. (Holdings) and Norcraft Companies, L.P. (Norcraft) today reported financial results for the fourth quarter and fiscal year ended December 31, 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 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. This repurchase of the 9 3/4% senior discount notes resulted in a loss from debt extinguishment of $1.6 million. Other than the remaining $53.7 million of the 9 3/4% senior discount notes, cash, related deferred issuance costs, related interest and amortization expense and related debt extinguishment loss, all other assets, liabilities, income, expenses and cash flows presented for all periods represent those of Norcraft.

FINANCIAL RESULTS

Fourth Quarter of Fiscal 2009 Compared with Fourth Quarter of Fiscal 2008

Net sales decreased $6.8 million, or 10.1%, from $66.7 million for the fourth quarter of 2008 compared to $59.9 million for the same quarter of 2009. Income (loss) from operations increased by $74.5 million, from a loss from operations of $70.5 million for the fourth quarter of 2008 compared to income from operations of $4.0 million for the same quarter of 2009. Excluding the effect of the 2008 impairment charge described below, income from operations increased by $0.6 million, or 15.1%, from $3.4 million for the fourth quarter of 2008 compared to $4.0 million for the same quarter of 2009. Net loss for Holdings decreased $69.9 million, from $77.2 million for the fourth quarter of 2008 to $7.3 million in the same quarter of 2009, and net loss for Norcraft decreased $72.0 million, from $74.2 million for the fourth quarter of 2008 to $2.2 million for the same quarter of 2009. Excluding the effect of the 2008 impairment charge, net loss for Holdings increased $4.0 million, from $3.3 million for the fourth quarter of 2008 to $7.3 million in the same quarter of 2009, and net loss for Norcraft increased $1.9 million, from $0.3 million for the fourth quarter of 2008 to $2.2 million for the same quarter of 2009.

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 ASC 350 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. No such impairment was identified in 2009.

Adjusted EBITDA (as defined in the attached table), which is EBITDA excluding the effect of the 2008 impairment charge described above was $8.0 million for the fourth quarter of 2008 compared to $7.8 million for the same quarter of 2009.

Fiscal 2009 Compared with Fiscal 2008

Net sales decreased $84.7 million, or 25.6%, from $331.5 million for fiscal 2008 compared to $246.8 million for fiscal 2009. Income (loss) from operations increased by $62.2 million, from a loss from operations of $41.6 million for fiscal 2008 compared to income from operations of $20.6 million for fiscal 2009. Excluding the effect of the 2008 impairment charge described above, income from operations decreased by $11.7 million, or 36.3%, from $32.3 million for fiscal 2008 compared to $20.6 million for fiscal 2009. Net loss for Holdings decreased $56.5 million, from $68.0 million for fiscal 2008 to $11.5 million in fiscal 2009, and net income (loss) for Norcraft increased $58.8 million, from a net loss of $56.2 million for fiscal 2008 to net income of $2.6 million for fiscal 2009. Excluding the effect of the 2008 impairment charge, net income (loss) for Holdings decreased $17.4 million, from net income of $5.9 million for fiscal 2008 to a net loss of $11.5 million in fiscal 2009, and net income for Norcraft decreased $15.1 million, from $17.7 million for fiscal 2008 to $2.6 million for fiscal 2009.

Adjusted EBITDA (as defined in the attached table), which is EBITDA excluding the effect of the 2008 impairment charge described above was $50.2 million for fiscal 2008 compared to $35.1 million for fiscal 2009.

"2009 was an extremely challenging year with the continued slow-down in the general economy and the housing industry.  However, we did start to see some stabilization in the 4th quarter of 2009 and are cautiously optimistic that conditions will continue to improve in 2010. We reacted aggressively in 2008 and 2009 to these challenging market conditions with cost reduction initiatives, new product introductions and sales programs. We will continue to monitor market and industry conditions in 2010 and adjust our response as needed," commented President and CEO, Mark Buller.

CONFERENCE CALL

Norcraft has scheduled a conference call on Thursday, March 25, 2010 at 10:00 a.m. Eastern Time.  To participate, dial 866-800-8648 and use the pass code 82381934.  A telephonic replay will be available by calling 888-286-8010 and using pass code 23873554.

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.

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 assets incurred 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 and a loss on debt extinguishment in the fourth 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:

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.  

SOURCE Norcraft Holdings, L.P.; Norcraft Companies, L.P.