Norcraft Holdings, L.P. and Norcraft Companies, L.P. Report First Quarter 2008 Results

EAGAN, Minn., May. 09 /PRNewswire/ --

EAGAN, Minn., May 9 /PRNewswire/ -- Norcraft Holdings, L.P. (Holdings) and Norcraft Companies, L.P. (Norcraft) today reported financial results for the first quarter ended March 31, 2008. 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 and $3.9 million of unsecured notes payable to former employees. Other than these debt obligations, related deferred issuance costs, debt issuance amortization, and related interest expense, all other assets, liabilities, income, expenses, and cash flows presented for all periods represent those of Norcraft.

FINANCIAL RESULTS

First Quarter of Fiscal 2008 Compared with First Quarter of Fiscal 2007

Net sales decreased $6.3 million, or 6.7%, from $93.9 million for the first quarter of 2007 compared to $87.6 million for the same quarter of 2008. Income from operations decreased by $5.3 million, or 42.0%, from $12.6 million for the first quarter of 2007 compared to $7.3 million for the same quarter of 2008. Net income for Holdings decreased $5.4 million, from $6.3 million for the first quarter of 2007 to $0.9 million in the same quarter of 2008. Net income for Norcraft decreased $5.2 million, from $8.9 million for the first quarter of 2007 to $3.7 million for the same quarter of 2008.

EBITDA (as defined in the attached table) was $16.4 million for the first quarter of 2007 compared to $11.7 million for the same quarter of 2008.

"Our sales continue to be negatively impacted by the slow-down in the housing industry. Additionally, our overall performance and profitability have been affected by general economic conditions and our efforts to aggressively compete in the marketplace. We expect these conditions to persist and affect future periods as well. We are actively introducing new products and programs to stimulate sales and are working to adjust cost structures to improve profitability," commented President and CEO, Mark Buller.

CONFERENCE CALL

Norcraft has scheduled a conference call on Tuesday, May 13, 2008 at 10:00 a.m. Eastern Time. To participate, dial 877-718-5108 and use the pass code 3598470. A telephonic replay will be available by calling 888-203-1112 and using pass code 3598470.

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 five brands: Mid Continent Cabinetry, UltraCraft, StarMark, Fieldstone and Brookwood.

Contact: Leigh E. Ginter Chief Financial Officer leigh.ginter@norcraftcompanies.com (651) 234-3315 -Selected Financial Data Tables Follow- Consolidated Balance Sheets (dollar amounts in thousands) (unaudited) Norcraft Norcraft Holdings, L.P. Companies, L.P. March 31, December 31, March 31, December 31, ASSETS 2008 2007 2008 2007 Current assets: Cash $35,526 $28,409 $35,526 $28,409 Trade accounts receivable, net 30,130 26,822 30,130 26,822 Inventories 24,565 24,088 24,565 24,088 Prepaid expenses 2,113 2,139 2,113 2,139 Total current assets 92,334 81,458 92,334 81,458 Property, plant and equipment, net 38,494 39,478 38,494 39,478 Other assets: Goodwill 148,459 148,459 148,459 148,459 Customer relationships, net 47,148 48,265 47,148 48,265 Brand names 49,000 49,000 49,000 49,000 Deferred financing costs, net 5,736 6,116 3,617 3,883 Display cabinets, net 9,695 10,074 9,695 10,074 Other 79 227 79 227 Total other assets 260,117 262,141 257,998 259,908 Total assets $390,945 $383,077 $388,826 $380,844 LIABILITIES AND MEMBERS' EQUITY Current liabilities: Current portion of long-term debt $1,959 $1,959 $- $- Accounts payable 11,354 9,786 11,354 9,786 Accrued expenses 22,805 20,279 22,805 20,279 Total current liabilities 36,118 32,024 34,159 30,065 Long-term debt 263,388 260,731 148,000 148,000 Other liabilities 470 453 470 453 Commitments and contingencies - - - - Members' equity subject to put request 37,462 42,331 - - Members' equity 53,507 47,538 206,197 202,326 Total liabilities and members' equity $390,945 $383,077 $388,826 $380,844 Consolidated Statements of Income (dollar amounts in thousands) (unaudited) Norcraft Holdings, L.P. Norcraft Companies, L.P. Three Months Ended Three Months Ended March 31, March 31, 2008 2007 2008 2007 Net sales $87,631 $93,907 $87,631 $93,907 Cost of sales 62,985 63,656 62,985 63,656 Gross profit 24,646 30,251 24,646 30,251 Selling, general and administrative expenses 17,347 17,668 17,347 17,668 Income from operations 7,299 12,583 7,299 12,583 Other expense (income): Interest expense, net 6,015 5,920 3,275 3,382 Amortization of deferred financing costs 380 373 266 269 Other, net 30 32 30 32 Total other expense (income) 6,425 6,325 3,571 3,683 Net income $874 $6,258 $3,728 $8,900 Consolidated Statements of Cash Flows (dollar amounts in thousands) (unaudited) Norcraft Holdings, L.P. Norcraft Companies, L.P. Three Months Ended Three Months Ended March 31, March 31, 2008 2007 2008 2007 Cash flows from operating activities: Net income $874 $6,258 $3,728 $8,900 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment: 1,551 1,243 1,551 1,243 Amortization: Customer relationships 1,117 1,116 1,117 1,116 Deferred financing costs 380 373 266 269 Display cabinets 1,717 1,472 1,717 1,472 Provision for uncollectible accounts receivable 1,101 1,043 1,101 1,043 Provision for obsolete and excess inventory 152 106 152 106 Provision for warranty claims 900 807 900 807 Accreted interest on senior notes 2,657 2,416 - - Stock compensation expense 298 187 298 187 Loss (gain) on disposal of assets - 10 - 10 Change in operating assets and liabilities: Trade accounts receivable (4,417) 1,496 (4,417) 1,496 Inventories (630) (1,121) (630) (1,121) Prepaid expenses 25 676 25 676 Other assets 148 30 148 30 Accounts payable and accrued liabilities 3,870 3,913 3,870 3,913 Net cash provided by operating activities 9,743 20,025 9,826 20,147 Cash flows from investing activities: Purchase of property, plant and equipment (1,219) (1,970) (1,219) (1,970) Additions to display cabinets (1,338) (1,448) (1,338) (1,448) Net cash used in investing activities (2,557) (3,418) (2,557) (3,418) Cash flows from financing activities: Repurchase of members' interests (68) (312) (68) (312) Distributions to members - - (83) (232) Net cash used in financing activities (68) (312) (151) (544) Effect of exchange rates on cash (1) 23 (1) 23 Net increase in cash 7,117 16,318 7,117 16,208 Cash, beginning of the period 28,409 3,928 28,409 4,038 Cash, end of period $35,526 $20,246 $35,526 $20,246 Reconciliation of Net Income to EBITDA (dollar amounts in thousands) EBITDA is net income before income tax expense, interest expense, depreciation and amortization. We believe EBITDA is useful to investors in evaluating our operating performance compared to that of other companies in our industry, as the calculation of EBITDA 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 EBITDA provides information relevant to investors regarding our ability to service and/or incur debt. EBITDA is not 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 in isolation or as a substitute for net income, 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 are not necessarily comparable to those of other similarly titled measures reported by other companies. The calculations of EBITDA are shown below: Norcraft Holdings, L.P. (unaudited) Three Months Ended Twelve Months Ended March 31, March 31, 2008 2007 2008 Net income $874 $6,258 $23,788(1) Interest expense, net 6,015 5,920 23,713 Depreciation 1,551 1,243 5,769 Amortization of deferred financing costs 380 373 1,547 Amortization of customer relationships 1,117 1,116 4,467 Display cabinet amortization 1,717 1,472 6,948 State Taxes 30 30 153 EBITDA $11,684 $16,412 $66,385 Norcraft Companies, L.P. (unaudited) Three Months Ended Twelve Months Ended March 31, March 31, 2008 2007 2008 Net income $3,728 $8,900 $34,943(1) Interest expense, net 3,275 3,382 12,997 Depreciation 1,551 1,243 5,769 Amortization of deferred financing costs 266 269 1,108 Amortization of customer relationships 1,117 1,116 4,467 Display cabinet amortization 1,717 1,472 6,948 State Taxes 30 30 153 EBITDA $11,684 $16,412 $66,385 (1) Net income during the twelve months ended March 31, 2008 includes $0.4 million from insurance proceeds due to a fire in the Newton, Kansas facility which increased net income and correspondingly increased EBITDA.