10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

¨ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission file number: 333-114924

Norcraft Companies, L.P.

(Exact name of registrant as specified in its charter)

Delaware	36-4231718
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

3020 Denmark Avenue, Suite 100

Eagan, MN 55121

(Address of Principal Executive Offices)

(800) 297-0661

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨    No  x.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨.

Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, non-accelerated filer or smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	¨	Accelerated Filer	¨
Non-Accelerated Filer	x	Smaller Reporting Company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨    No  x.

Norcraft Companies, L.P.

Table of Contents

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Unaudited Condensed Consolidated Financial Statements
	Consolidated Balance Sheet at September 30, 2011 and December 31, 2010		3
	Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and 2010		4
	Consolidated Statement of Changes in Member’s Equity and Comprehensive Income for the nine months ended September 30, 2011		5
	Consolidated Statement of Cash Flows for the nine months ended September 30, 2011 and 2010		6
	Notes to Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3.	Quantitative and Qualitative Disclosures of Market Risk		21
Item 4.	Controls and Procedures		21
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		22
Item 1A.	Risk Factors		22
Item 6.	Exhibits		22
SIGNATURES			23

PART I. FINANCIAL INFORMATION

Item 1.

Norcraft Companies, L.P.

Consolidated Balance Sheet

(dollar amounts in thousands)

	September  30, 2011 (unaudited)		December 31, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	29,975	$	28,657
Trade accounts receivable, net		23,928		17,982
Inventories		18,729		17,363
Prepaid and other current assets		1,193		1,558
Total current assets		73,825		65,560
Property, plant and equipment, net		27,691		30,199
Other assets:
Goodwill		88,475		88,483
Intangible assets, net		79,522		76,379
Display cabinets, net		5,835		5,016
Other		587		754
Total other assets		174,419		170,632
Total assets	$	275,935	$	266,391
LIABILITIES AND MEMBER’S EQUITY
Current liabilities:
Accounts payable	$	8,582	$	7,678
Accrued expenses		20,704		16,200
Total current liabilities		29,286		23,878
Long-term debt		240,000		180,000
Unamortized premium (discount) on bonds payable		176		(2,414	)
Other liabilities		169		153
Commitments and contingencies		—		—
Member’s equity		6,304		64,774
Total liabilities and member’s equity	$	275,935	$	266,391

See notes to consolidated financial statements.

3

Norcraft Companies, L.P.

Consolidated Statements of Operations

(dollar amounts in thousands)

(unaudited)

	Three Months Ended September 30,
	2011			2010
Net sales	$	67,718		$	65,937
Cost of sales		48,815			46,531
Gross profit		18,903			19,406
Selling, general and administrative expenses		12,313			12,278
Income from operations		6,590			7,128
Other expense:
Interest expense, net		6,451			5,026
Amortization of deferred financing costs		795			374
Other, net		51			18
Total other expense		7,297			5,418
Net income (loss)	$	(707	)	$	1,710
	Nine Months Ended September 30,
	2011			2010
Net sales	$	206,943		$	201,877
Cost of sales		150,223			142,469
Gross profit		56,720			59,408
Selling, general and administrative expenses		38,143			38,468
Income from operations		18,577			20,940
Other expense:
Interest expense, net		17,106			15,077
Amortization of deferred financing costs		1,666			1,028
Other, net		103			91
Total other expense		18,875			16,196
Net income (loss)	$	(298	)	$	4,744

See notes to consolidated financial statements.

4

Norcraft Companies, L.P.

Consolidated Statement of Changes in Member’s Equity and Comprehensive Loss

(dollar amounts in thousands)

(unaudited)

	Member’s Equity			Total Comprehensive Loss
Member’s equity at January 1, 2011	$	64,774
Issuance of members’ interest		89
Stock compensation expense		136
Distributions to member		(58,015	)
Foreign currency translation adjustment		(382	)		(382	)
Net loss		(298	)		(298	)
Total comprehensive loss				$	(680	)
Member’s equity at September 30, 2011	$	6,304

See notes to consolidated financial statements.

5

Norcraft Companies, L.P.

Consolidated Statement of Cash Flows

(dollar amounts in thousands)

(unaudited)

	Nine Months Ended
	September 30,
	2011			2010
Cash flows from operating activities:
Net income (loss)	$	(298	)	$	4,744
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of property, plant and equipment		3,774			4,417
Amortization:
Customer relationships		3,350			3,351
Deferred financing costs		1,666			1,028
Display cabinets		2,888			3,210
Discount amortization/accreted interest		190			367
Provision for uncollectible accounts receivable		69			140
Provision for obsolete and excess inventories		32			77
Provision for warranty claims		2,284			2,058
Stock compensation expense		136			138
Gain on disposal of assets		—			(43	)
Change in operating assets and liabilities:
Trade accounts receivable		(6,113	)		(3,586	)
Inventories		(1,444	)		(3,010	)
Prepaid expenses		369			648
Other assets		162			20
Accounts payable and accrued expenses		3,471			6,310
Net cash provided by operating activities		10,536			19,869
Cash flows from investing activities:
Proceeds from sale of property and equipment		6			47
Purchase of property, plant and equipment		(1,720	)		(1,965	)
Additions to display cabinets		(3,707	)		(3,034	)
Net cash used in investing activities		(5,421	)		(4,952	)
Cash flows from financing activities:
Borrowings on senior secured second lien notes payable		62,400			—
Payment of financing costs		(8,159	)		(837	)
Proceeds from issuance of member interests		89			125
Distributions to member		(58,015	)		(1,104	)
Net cash used in financing activities		(3,685	)		(1,816	)
Effect of exchange rates on cash and cash equivalents		(112	)		2
Net increase in cash and cash equivalents		1,318			13,103
Cash and cash equivalents, beginning of the period		28,657			16,731
Cash and cash equivalents, end of period	$	29,975		$	29,834

See notes to consolidated financial statements.

6

Norcraft Companies, L.P.

Notes to Consolidated Financial Statements

(in thousands)

(unaudited)

1. Basis of Presentation

The accompanying financial statements are those of Norcraft Companies, L.P. (“Norcraft”). Norcraft and its subsidiaries are collectively referred to as the “Company.” Norcraft Holdings, L.P (“Holdings”) is the parent company Norcraft.

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the interim consolidated financial statements and accompanying notes included herein should be read in conjunction with the more detailed information contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission. The unaudited interim consolidated financial statements as of September 30, 2011 and 2010 and for the three and nine months ended September 30, 2011 and 2010 include all normal recurring adjustments which management considers necessary for the fair presentation of financial position, results of operations and cash flows for the interim periods.

2. Trade Accounts Receivable

Trade accounts receivable consists of the following:

	September 30,			December 31,
	2011			2010
Trade accounts receivable	$	24,804		$	19,108
Less: Allowance for uncollectible accounts		(876	)		(1,126	)
Trade accounts receivable, net	$	23,928		$	17,982

3. Inventories

Inventories consist of the following:

	September 30,		December 31,
	2011		2010
Raw materials and supplies	$	11,747	$	12,312
Work in process		2,553		2,186
Finished goods		4,429		2,865
	$	18,729	$	17,363

4. Intangible Assets

Intangible assets consist of the following:

	September 30, 2011
			Subject to Amortization
	Not Subject to Amortization		Gross Carrying Amount		Accumulated Amortization			Total
Goodwill	$	88,475						$	88,475
Brand names	$	35,100						$	35,100
Customer relationships				67,000		(35,485	)		31,515
Deferred financing costs				16,005		(3,098	)		12,907
	$	35,100	$	83,005	$	(38,583	)	$	79,522

7

	December 31, 2010
			Subject to Amortization
	Not Subject to Amortization		Gross Carrying Amount		Accumulated Amortization			Total
Goodwill	$	88,483						$	88,483
Brand names	$	35,100						$	35,100
Customer relationships				67,000		(32,135	)		34,865
Deferred financing costs				7,864		(1,450	)		6,414
	$	35,100	$	74,864	$	(33,585	)	$	76,379

There were no events or circumstances during the three or nine months ended September 30, 2011 to indicate that the assets not subject to amortization should be evaluated for potential impairment.

5. Accrued Expenses

Accrued expenses consist of the following:

	September 30,		December 31,
	2011		2010
Interest	$	7,479	$	948
Salaries, wages and employee benefits		5,339		8,012
Commissions, rebates and marketing programs		2,642		2,497
Workers’ compensation		1,941		1,875
Other, including product warranty accruals		3,303		2,868
	$	20,704	$	16,200

Product warranty accrual activity is as follows:

	September 30,			September 30,
	2011			2010
Beginning balance – December 31	$	781		$	494
Accruals for warranties		2,284			2,058
Claims paid		(2,309	)		(1,813	)
Ending balance – September 30	$	756		$	739

6. Stock-Based Compensation

The Company has a management incentive plan, (the “Plan”) which provides for the grants of incentive Class D limited partnership units in Holdings to selected employees of the Company.

Previously, under the terms of the Plan, the Class D units generally began to vest on December 31 of the first full year following the date of grant, with 50% of the units typically vesting over a five year period (time based vesting) and 50% vesting over a five year period subject to the Company meeting certain performance based criteria in each of those years (probability based vesting).

During the first quarter of 2010, the vesting terms for the outstanding Class D units were modified. The outstanding units, along with the newly issued units, now vest with time-based vesting over a three year period. In addition, certain units’ exercise prices were reduced to the fair market value of a Class A unit of Holdings. This modification was treated as forfeitures of the original units and new grants of the modified units. No compensation expense was recorded as a result of this modification.

8

Upon vesting, each Class D unit entitles the unit holder the option to purchase one Class A unit in Holdings. All Class D units are issued with an exercise price equal to the then fair value of Holdings’ Class A units as determined by the Company.

The fair value of the Class D units granted is based on the Black-Scholes option-pricing model. In accordance with Accounting Standards Codification (“ASC”) Topic 718, the Company is required to incorporate a volatility factor in the fair value calculation. The volatility factor is developed through the use of a sample of peer group companies consisting of publicly-traded companies that operate in the Company’s same industry. The Company did not grant any incentive Class D units during the three and nine months ended September 30, 2011.

Compensation expense related to Class D units was $0.05 million and $0.14 million for the three and nine months ended September 30, 2010 and 2011, respectively. Because individuals receiving these Class D unit awards are employees of Norcraft, the compensation expense is recorded at the Norcraft level.

A summary of Class D Unit activity under the Plan is as follows:

	Nine Months Ended September 30, 2011
	Units			Weighted-Average Exercise Price
Beginning balance		6,811,577		$	0.26
Granted		—
Forfeited/expired		(230,000	)	$	0.26
Ending balance		6,581,577		$	0.26
Exercisable balance		4,359,154		$	0.20

The intrinsic values of the issued Class D units and exercisable Class D units at September 30, 2011 were $1.2 million and $1.0 million, respectively.

The Plan will terminate in December 2015.

7. Long-term Debt

Long-term debt consists of the following:

	September 30,		December 31,
	2011		2010
Senior secured second lien notes payable (due in 2015 with semi-annual interest payments at 10.5%)	$	240,000	$	180,000
Long term debt	$	240,000	$	180,000

ABL Facility

In December 2009, in connection with the issuance of the senior secured second lien notes, Norcraft entered into a senior secured first-lien asset-based revolving credit facility (the “ABL Facility”) pursuant to a credit agreement dated as of December 9, 2009 (the “ABL Credit Agreement”) by and among Norcraft, as borrower, Norcraft Intermediate Holdings, L.P. and other guarantors party thereto, as guarantors, the lenders party thereto and UBS Securities LLC, as arranger, bookmanager, documentation agent and syndication agent, and UBS AG, Stamford Branch, as issuing bank, administrative agent and collateral agent and UBS Loan Finance LLC, as swingline lender. The ABL Facility provides for aggregate commitments of up to $25.0 million, including a letter of credit sub-facility and a swingline loan sub-facility, subject to a borrowing base, and has a maturity date of December 9, 2013. As of September 30, 2011, the borrowing base was approximately $19.3 million.

In May, 2011, the ABL Credit Agreement was modified and now has a maturity of September, 2015.

9

The ABL Credit Agreement contains negative covenants that restrict or limit the ability of Norcraft Intermediate Holdings, L.P. and its subsidiaries from, among other things, (1) selling assets, (2) altering the business that Norcraft currently conducts, (3) engaging in mergers, acquisitions and other business combinations, (4) declaring dividends or redeeming or repurchasing the Company’s equity interests, (5) incurring additional debt or guarantees, (6) making loans and investments, (7) incurring liens, (8) entering into transactions with affiliates, (9) engaging in sale and leaseback transactions and (10) prepaying the senior secured second lien notes, the senior discount notes and any subordinated debt. As of September 30, 2011, the Company was in compliance with these provisions.

Indebtedness under the ABL Facility is guaranteed, on a joint and several basis, by Norcraft Intermediate Holdings, L.P., Norcraft Finance Corp., Norcraft Canada Corporation and all of Norcraft’s current and future subsidiaries, subject to exceptions for foreign subsidiaries to the extent of adverse tax consequences, and is secured by a first priority security interest in substantially all of Norcraft’s and the guarantor’s existing and future property and assets, including accounts receivable, inventory, equipment, general intangibles, intellectual property, investment property, other personal property, owned real property, cash and proceeds of the foregoing.

As of September 30, 2011, there were no borrowings outstanding, approximately $4.9 million of a letter of credit outstanding and unused commitments of $14.4 million under the ABL Facility.

The Company has no unused letters of credit.

Senior Secured Second Lien Notes

In December 2009, Norcraft and Norcraft Finance Corp., a 100% owned finance subsidiary of Norcraft, issued, on a joint and several basis, $180.0 million aggregate principal amount of 10 ¹/2% senior secured second lien notes (the “senior secured second lien notes”). Interest accrues on the senior secured second lien notes and is payable semiannually on June 15 and December 15 of each year at a rate of 10 ¹/2% per annum, which commenced on June 15, 2010. Proceeds from the issuance of the senior secured second lien notes were used to redeem the 9% senior subordinated notes due 2011 and to make a distribution to Holdings to allow Holdings to repurchase a portion of the 9 ³/4% senior discount notes due 2012.

In May 2011, Norcraft and Norcraft Finance Corp. issued, on a joint and several basis, an additional $60.0 million aggregate principal amount of these senior secured second lien notes at a 1.04 premium, for total gross proceeds of $62.4 million. Proceeds from this issuance of the senior secured second lien notes were used to make a distribution to Holdings to allow Holdings to retire the remainder of its 9 ³/4% senior discount notes due 2012 and pay related transaction and financing costs.

At any time before December 15, 2012, Norcraft may redeem up to 35% of the aggregate principal amount of the senior secured second lien notes issued under the indenture with the proceeds of qualified equity offerings at a redemption price equal to 110.5% of the principal amount, plus accrued interest.

Prior to December 15, 2012, Norcraft may redeem the senior secured second lien notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium plus accrued interest.

Norcraft may redeem the senior secured second lien notes, in whole or in part, at any time on or after December 15, 2012, at a redemption price equal to 100% of the principal amount of the senior secured second lien notes plus a premium declining ratably to par plus accrued interest.

If Norcraft experiences a change of control, Norcraft may be required to offer to purchase the senior secured second lien notes at a purchase price equal to 101% of the principal amount, plus accrued interest.

Additionally, the terms of the indenture governing the senior secured second lien notes limit Norcraft’s ability to, among other things, incur additional indebtedness, dispose of assets, make acquisitions, make other investments, pay dividends and make various other payments. The terms also include cross-default provisions. As of September 30, 2011, Norcraft was in compliance with these provisions.

10

The following represents certain condensed consolidating financial information as of September 30, 2011 and December 31, 2010 and for the periods ended September 30, 2011 and 2010 for the issuers and for Norcraft Canada Corporation, a wholly-owned subsidiary of Norcraft, which fully and unconditionally guarantees the senior secured second lien notes.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2011 (unaudited)

	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Current assets	$	68,802		$	—	$	5,023		$	—		$	73,825
Property, plant & equipment, net		21,596			—		6,095			—			27,691
Investments in subsidiary		(1,243	)		—		—			1,243			—
Other assets		184,896			—		288			(10,765	)		174,419
Total assets	$	274,051		$	—	$	11,406		$	(9,522	)	$	275,935
Current liabilities	$	27,402		$	—	$	1,884		$	—		$	29,286
Long-term debt		240,000			—		10,765			(10,765	)		240,000
Unamortized premium on bonds payable		176			—		—			—			176
Other liabilities		169			—		—			—			169
Member’s equity (deficit)		6,304			—		(1,243	)		1,243			6,304
Total liabilities & member’s equity (deficit)	$	274,051		$	—	$	11,406		$	(9,522	)	$	275,935

As of December 31, 2010 (unaudited)
	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Current assets	$	61,246		$	—	$	4,314		$	—		$	65,560
Property, plant & equipment, net		23,535			—		6,664			—			30,199
Investments in subsidiary		(302	)		—		—			302			—
Other assets		180,225			—		304			(9,897	)		170,632
Total assets	$	264,704		$	—	$	11,282		$	(9,595	)	$	266,391
Current liabilities	$	22,191		$	—	$	1,687		$	—		$	23,878
Long-term debt		180,000			—		9,897			(9,897	)		180,000
Unamortized discount on bonds payable		(2,414	)		—		—			—			(2,414	)
Other liabilities		153			—		—			—			153
Member’s equity (deficit)		64,774			—		(302	)		302			64,774
Total liabilities & member’s equity (deficit)	$	264,704		$	—	$	11,282		$	(9,595	)	$	266,391

(1) Co-issuers

11

CONDENSED CONSOLIDATED OPERATIONS STATEMENTS

For the Three Months Ended September 30, 2011 (unaudited)

	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Net sales	$	62,735		$	—	$	6,102		$	(1,119	)	$	67,718
Cost of sales		44,808			—		5,126			(1,119	)		48,815
Gross profit		17,927			—		976			—			18,903
Equity in earnings (losses) of subsidiary		116			—		—			(116	)		—
Selling, general and administrative expenses		11,470			—		843			—			12,313
Income (loss) from operations		6,573			—		133			(116	)		6,590
Other expense:
Interest expense, net		6,429			—		22			—			6,451
Amortization of deferred financing costs		795			—		—			—			795
Other, net		56			—		(5	)		—			51
Total other expense, net		7,280			—		17			—			7,297
Net income (loss)	$	(707	)	$	—	$	116		$	(116	)	$	(707	)
For the Three Months Ended September 30, 2010 (unaudited)
	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Net sales	$	61,563		$	—	$	4,967		$	(593	)	$	65,937
Cost of sales		42,834			—		4,290			(593	)		46,531
Gross profit		18,729			—		677			—			19,406
Equity in earnings (losses) of subsidiary		(75	)		—		—			75			—
Selling, general and administrative expenses		11,548			—		730			—			12,278
Income (loss) from operations		7,106			—		(53	)		75			7,128
Other expense:
Interest expense, net		5,006			—		20			—			5,026
Amortization of deferred financing costs		374			—		—			—			374
Other, net		16			—		2			—			18
Total other expense, net		5,396			—		22			—			5,418
Net income (loss)	$	1,710		$	—	$	(75	)	$	75		$	1,710

12

CONDENSED CONSOLIDATED OPERATIONS STATEMENTS

For the Nine Months Ended September 30, 2011 (unaudited)

	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Net sales	$	194,224		$	—	$	15,713		$	(2,994	)	$	206,943
Cost of sales		139,636			—		13,581			(2,994	)		150,223
Gross profit		54,588			—		2,132			—			56,720
Equity in earnings (losses) of subsidiary		(559	)		—		—			559			—
Selling, general and administrative expenses		35,501			—		2,642			—			38,143
Income (loss) from operations		18,528			—		(510	)		559			18,577
Other expense:
Interest expense, net		17,056			—		50			—			17,106
Amortization of deferred financing costs		1,666			—		—			—			1,666
Other, net		104			—		(1	)		—			103
Total other expense, net		18,826			—		49			—			18,875
Net income (loss)	$	(298	)	$	—	$	(559	)	$	559		$	(298	)
For the Nine Months Ended September 30, 2010 (unaudited)
	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Net sales	$	189,161		$	—	$	14,817		$	(2,101	)	$	201,877
Cost of sales		131,679			—		12,891			(2,101	)		142,469
Gross profit		57,482			—		1,926			—			59,408
Equity in earnings (losses) of subsidiary		(31	)		—		—			31			—
Selling, general and administrative expenses		36,549			—		1,919			—			38,468
Income (loss) from operations		20,902			—		7			31			20,940
Other expense:
Interest expense, net		15,038			—		39			—			15,077
Amortization of deferred financing costs		1,028			—		—			—			1,028
Other, net		92			—		(1	)		—			91
Total other expense, net		16,158			—		38			—			16,196
Net income (loss)	$	4,744		$	—	$	(31	)	$	31		$	4,744

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30, 2011 (unaudited)

	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Cash flows provided by (used in) operating activities	$	10,370		$	—	$	166		$	—		$	10,536
Cash flows provided by (used in) investing activities		(5,933	)		—		(356	)		868			(5,421	)
Cash flows provided by (used in) financing activities		(3,685	)		—		868			(868	)		(3,685	)
Effect of exchange rates on cash and cash equivalents		—			—		(112	)		—			(112	)
Net increase (decrease) in cash and cash equivalents		752			—		566			—			1,318
Cash and cash equivalents, beginning of period		28,705			—		(48	)		—			28,657
Cash and cash equivalents, end of period	$	29,457		$	—	$	518		$	—		$	29,975
For the Nine Months Ended September 30, 2010 (unaudited)
	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Cash flows provided by (used in) operating activities	$	20,268		$	—	$	(399	)	$	—		$	19,869
Cash flows provided by (used in) investing activities		(4,962	)		—		(902	)		912			(4,952	)
Cash flows provided by (used in) financing activities		(1,816	)		—		912			(912	)		(1,816	)
Effect of exchange rates on cash and cash equivalents		—			—		2			—			2
Net increase (decrease) in cash and cash equivalents		13,490			—		(387	)		—			13,103
Cash and cash equivalents, beginning of period		15,791			—		940			—			16,731
Cash and cash equivalents, end of period	$	29,281		$	—	$	553		$	—		$	29,834

(1) Co-issuers

We generally anticipate that the funds generated by operations and current available cash balances will be sufficient to meet working capital requirements, make required member tax distributions and to finance capital expenditures over the next 12 to 18 months. There can be no assurance, however, that our business will generate sufficient cash flow from operations, that anticipated net sales growth and operating improvements will be realized or that future equity or debt financing will be sufficient to enable us to service our indebtedness or to fund our other liquidity needs.

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8. Recently Issued Accounting Pronouncements

In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and International Financial Reporting Standards (“IFRS”), which amends ASC 820, Fair Value Measurement. This ASU modifies the existing standard to include disclosure of all transfers between Level 1 and Level 2 asset and liability fair value categories. In addition, the ASU provides guidance on measuring the fair value of financial instruments managed within a portfolio and the application of premiums and discounts on fair value measurements. The ASU requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. This guidance is effective for interim and annual reporting periods beginning after December 15, 2011, with early adoption prohibited. The Company does not expect such adoption will have a material impact on the Company’s consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income. This standard eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. Under this new ASU, an entity can elect to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive, statements. This guidance is effective for publicly traded companies as of the beginning of a fiscal year that begins after December 15, 2011 and interim and annual periods thereafter. Early adoption is permitted, but full retrospective application is required. The Company does not expect such adoption will have a material impact on the Company’s consolidated financial statements.

In September 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for Impairment. ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under ASU 2011-08, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. ASU 2011-08 is effective for annual periods beginning after December 15, 2011. The Company does not expect such adoption will have a material impact on the Company’s consolidated financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Uncertainty of Forward Looking Statements and Information

This report contains “forward looking statements.” All statements other than statements of historical facts included in this report that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward looking statements. Forward looking statements give our current expectations and projections relating to the financial condition, results of operations, plans, objectives, future performance and business of our company. 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 our expectations and beliefs concerning future events affecting us. They are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Although we believe that the expectations reflected in our forward looking statements are reasonable, we do not know whether our expectations will prove correct. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties.

Because of these factors, we caution that investors should not place undue reliance on any of our 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 we 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.

Overview

The following discussion of our financial condition and results of operations should be read together with the consolidated financial statements and the accompanying notes included elsewhere in this quarterly report. Additionally, the following discussion should be read together with the Selected Financial Data and our consolidated financial statements and the accompanying notes included in our 2010 Annual Report on Form 10-K. All of our operations are conducted through Norcraft Companies, L.P. (“Norcraft”) and its subsidiaries. Norcraft is an indirect wholly-owned subsidiary of Norcraft Holdings, L.P. (“Holdings”). The words “Company”, “we”, “us” and “our” refer to Norcraft and its subsidiaries.

We are 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^®. The Mid Continent and Norcraft brands correspond to the Mid Continent division, while the UltraCraft brand corresponds to that division and the StarMark, Fieldstone and Brookwood brands correspond to the StarMark division. Additionally, our Winnipeg, Canada facility sells cabinets into the Canadian market under the Norcraft Canada brand.

During the three and nine months ended September 30, 2011, the number of incoming orders was relatively stable, but did not show much indication of growth or recovery in overall demand. Margins were negatively impacted by various promotional sales programs intended to generate sales.

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Results of Operations

The following table outlines for the periods indicated, selected operating data as a percentage of net sales.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		72.1	%		70.6	%		72.6	%		70.6	%
Gross profit		27.9	%		29.4	%		27.4	%		29.4	%
Selling, general and administrative expenses		18.2	%		18.6	%		18.4	%		19.1	%
Income from operations		9.7	%		10.8	%		9.0	%		10.3	%
Interest expense, net		9.5	%		7.6	%		8.3	%		7.5	%
Amortization of deferred financing costs		1.2	%		0.6	%		0.8	%		0.5	%
Other, net		0.1	%		0.0	%		0.0	%		0.0	%
Net income (loss)		(1.1	%)		2.6	%		(0.1	%)		2.3	%

Three Months Ended September 30, 2011 Compared with Three Months Ended September 30, 2010

Net Sales. Net sales increased by $1.8 million, or 2.7%, from $65.9 million for the three months ended September 30, 2010 to $67.7 million for the same period of 2011. This growth was attributable to the Mid Continent division and the Winnipeg, Canada facility while there were decreases in net sales in the StarMark and UltraCraft divisions. The overall increase in sales was generally driven by an increase in the Company’s market share.

Cost of Sales. Cost of sales increased by $2.3 million, or 4.9%, from $46.5 million for the three months ended September 30, 2010 to $48.8 million for same period of 2011. The increase was attributable to the increased sales volume along with promotional sales programs for the three months ended September 30, 2011. Cost of sales as a percentage of net sales increased from 70.6% for the three months ended September 30, 2010 to 72.1% for the same period of 2011.

Gross Profit. Gross profit decreased by $0.5 million, or 2.6%, from $19.4 million for the three months ended September 30, 2010 to $18.9 million for the same period of 2011. The decrease in gross profit was due to the increased cost of sales described above. Gross profit as a percentage of net sales decreased from 29.4% for the three months ended September 30, 2010 to 27.9% for the same period of 2011. This decrease was largely the result of the costs associated with the promotional sales programs intended to generate additional sales.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were flat at $12.3 million for the three months ended September 30, 2010 and 2011. Selling, general and administrative expenses as a percentage of net sales decreased from 18.6% for the three months ended September 30, 2010 to 18.2% for the same period of 2011.

Income from Operations. Income from operations decreased by $0.5 million, or 7.5%, from $7.1 million for the three months ended September 30, 2010 compared to $6.6 million for the same period of 2011. The decrease in income from operations was a result of factors described above. Income from operations as a percentage of net sales decreased from 10.8% for the three months ended September 30, 2010 to 9.7% for the same period of 2011.

Interest, Amortization of Deferred Financing Fees and Other Expenses. Interest, amortization of deferred financing fees and other expenses increased by $1.9 million, or 34.7%, from $5.4 million for the three months ended September 30, 2010 to $7.3 million for the same period of 2011. Interest expense increased $1.5 million mainly due to new debt financing. Interest, amortization of deferred financing fees and other expenses as a percentage of net sales increased from 8.2% for the three months ended September 30, 2010 to 10.8% for the same period of 2011.

Net Income (Loss). Net income (loss) decreased $2.4 million from net income of $1.7 million for the three months ended September 30, 2010 compared to a net loss of $0.7 million for the same period of 2011, for the reasons described above. Net income (loss) as a percentage of net sales decreased from 2.6% for the three months ended September 30, 2010 to (1.1%) for the same period of 2011.

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Nine Months Ended September 30, 2011 Compared with Nine Months Ended September 30, 2010

Net Sales. Net sales increased by $5.0 million, or 2.5%, from $201.9 million for the nine months ended September 30, 2010 to $206.9 million for the same period of 2011. This growth was mostly attributable to the StarMark division while there were modest increases in net sales in the Mid Continent division and the Winnipeg, Canada facility. These increases were partially offset by a decrease in net sales in the UltraCraft division. The overall increase in sales was generally driven by an increase in the Company’s market share.

Cost of Sales. Cost of sales increased by $7.7 million, or 5.4%, from $142.5 million for the nine months ended September 30, 2010 to $150.2 million for same period of 2011. Cost of sales in the prior year period included a sales and use tax refund of $1.0 million. The remaining increase was attributable to the increased sales volume along with promotional sales programs for the nine months ended September 30, 2011. Cost of sales as a percentage of net sales increased from 70.6% for the nine months ended September 30, 2010 to 72.6% for the same period of 2011.

Gross Profit. Gross profit decreased by $2.7 million, or 4.5%, from $59.4 million for the nine months ended September 30, 2010 to $56.7 million for the same period of 2011. The decrease in gross profit was due to the increased cost of sales described above. Gross profit as a percentage of net sales decreased from 29.4% for the nine months ended September 30, 2010 to 27.4% for the same period of 2011. This decrease was largely the result of the costs associated with the promotional sales programs intended to generate additional sales.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by $0.4 million, or 0.8%, from $38.5 million for the nine months ended September 30, 2010 to $38.1 million for the same period of 2011. Selling, general and administrative expenses were lower than the prior-year period because of lower corporate overhead expenses. Selling, general and administrative expenses as a percentage of net sales decreased from 19.1% for the nine months ended September 30, 2010 to 18.4% for the same period of 2011.

Income from Operations. Income from operations decreased by $2.3 million, or 11.3%, from $20.9 million for the nine months ended September 30, 2010 compared to $18.6 million for the same period of 2011. The decrease in income from operations was a result of factors described above. Income from operations as a percentage of net sales decreased from 10.3% for the nine months ended September 30, 2010 to 90% for the same period of 2011.

Interest, Amortization of Deferred Financing Fees and Other Expenses. Interest, amortization of deferred financing fees and other expenses increased by $2.7 million, or 16.5%, from $16.2 million for the nine months ended September 30, 2010 to $18.9 million for the same period of 2011. Interest expense increased $2.0 million mainly due to new debt financing. Interest, amortization of deferred financing fees and other expenses as a percentage of net sales increased from 8.0% for the nine months ended September 30, 2010 to 9.1% for the same period of 2011.

Net Income (loss). Net income (loss) decreased $5.0 million from net income of $4.7 million for the nine months ended September 30, 2010 compared to a net loss of $0.3 million for the same period of 2011, for the reasons described above. Net income (loss) as a percentage of net sales decreased from 2.3% for the nine months ended September 30, 2010 to (0.1%) for the same period of 2011.

Liquidity and Capital Resources

Cash Flows

Our primary cash needs are working capital, capital expenditures, display cabinets, member’s tax distributions and debt service. We finance these cash requirements through internally-generated cash flow and, if necessary, funds borrowed under credit facilities.

Cash provided by operating activities was $10.5 million for the nine months ended September 30, 2011, compared with $19.9 million for the same period of 2010, a decrease in cash provided of $9.4 million. The decrease was primarily due to a decrease in net income (loss) of $5.0 million as discussed above, a change in operating liabilities of $2.8 million and a change in operating assets of $1.1 million.

Cash used in investing activities was $5.4 million for the nine months ended September 30, 2011, compared with $5.0 million for the same period of 2010, an increase in cash used of $0.4 million. Capital expenditures were $1.7 million for the nine months ended September 30, 2011, compared with $2.0 million for the same period of 2010, a decrease of $0.3 million. Additions to display cabinets were $3.7 million for the nine months ended September 30, 2011, compared with $3.0 million for the same period of 2010, an increase of $0.7 million.

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Cash used in financing activities was $3.7 million for the nine months ended September 30, 2011, compared with $1.8 million in the same period of 2010, an increase in cash used of $1.9 million. This increase was due to $58.0 million of distributions to member and payment in financing costs of $8.2 million during the nine months ended September 30, 2011 compared to $1.1 million of distributions to members and payment in financing costs of $0.8 million during the nine months ended September 30, 2010. This was all offset by $62.4 million in additional borrowings of senior secured second lien notes during the nine months ended September 30, 2011.

We generally anticipate that the funds generated by operations and current available cash balances will be sufficient to meet working capital requirements, make required member tax distributions and to finance capital expenditures over the next 12 to 18 months. There can be no assurance, however, that our business will generate sufficient cash flow from operations, that anticipated net sales growth and operating improvements will be realized or that future equity or debt financing will be sufficient to enable us to service our indebtedness or to fund our other liquidity needs.

We and our subsidiaries have from time to time repurchased certain of our debt obligations and may in the future, as part of various financing and investment strategies we may elect to pursue, purchase additional outstanding indebtedness of ours, in tender offers, open market purchases, privately negotiated transactions or otherwise. We may also sell certain assets or properties and use the proceeds to reduce our indebtedness or the indebtedness. These purchases or sales, if any, could have a material positive or negative impact on our liquidity available to repay outstanding debt obligations or on our consolidated results of operations. These transactions could also require or result in amendments to the agreements governing outstanding debt obligations or changes in our leverage or other financial ratios, which could have a material positive or negative impact on our ability to comply with the covenants contained in our debt agreements. These transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Debt Structure

ABL Facility. In December 2009, in connection with issuance of the senior secured second lien notes, Norcraft entered into a senior secured first-lien asset-based revolving credit facility, or the ABL facility pursuant to a Credit Agreement dated as of December 9, 2009, or the ABL credit agreement, by and among Norcraft, as borrower, Norcraft Intermediate Holdings, L.P. and other guarantors party thereto, as guarantors, the lenders party thereto and UBS Securities LLC, as arranger, bookmanager, documentation agent and syndication agent, and UBS AG, Stamford Branch, as issuing bank, administrative agent and collateral agent and UBS Loan Finance LLC, as swingline lender. The ABL facility provides for aggregate commitments of up to $25.0 million, including a letter of credit sub-facility and a swingline loan sub-facility, subject to a borrowing base, and has a maturity date of December 9, 2013. As of September 30, 2011, the borrowing base was approximately $19.3 million.

In May, 2011, the ABL Credit Agreement was modified and now has a maturity of September, 2015.

The ABL credit agreement contains negative covenants that restrict or limit the ability of Norcraft Intermediate Holdings, L.P. and its subsidiaries from, among other things, (1) selling assets, (2) altering the business that Norcraft currently conducts, (3) engaging in mergers, acquisitions and other business combinations, (4) declaring dividends or redeeming or repurchasing our equity interests, (5) incurring additional debt or guarantees, (6) making loans and investments, (7) incurring liens, (8) entering into transactions with affiliates, (9) engaging in sale and leaseback transactions and (10) prepaying the senior secured second lien notes, the senior discount notes and any subordinated debt. As of September 30, 2011, the Company was in compliance with these provisions.

Indebtedness under the ABL facility is guaranteed, on a joint and several basis, by Norcraft Intermediate Holdings, L.P., Norcraft Finance Corp., Norcraft Canada Corporation and all of Norcraft’s current and future subsidiaries, subject to exceptions for foreign subsidiaries to the extent of adverse tax consequences, and is secured by a first priority security interest in substantially all of Norcraft’s and the guarantor’s existing and future property and assets, including accounts receivable, inventory, equipment, general intangibles, intellectual property, investment property, other personal property, owned real property, cash and proceeds of the foregoing.

As of September 30, 2011, there were no borrowings outstanding, approximately $4.9 million in a letter of credit outstanding and unused commitments of $14.4 million under the ABL facility.

The Company has no unused letters of credit.

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Senior Secured Second Lien Notes. In December 2009, Norcraft and Norcraft Finance Corp., a 100% owned finance subsidiary of Norcraft, issued, on a joint and several basis, $180.0 million aggregate principal amount of 10 ¹/2% senior secured second lien notes (the “senior secured second lien notes”). Interest accrues on the senior secured second lien notes and is payable semiannually on June 15 and December 15 of each year at a rate of 10 ¹/2% per annum, which commenced on June 15, 2010. Proceeds from the issuance of the senior secured second lien notes were used to redeem the 9% senior subordinated notes due 2011 and to make a distribution to Norcraft Holdings, L.P. (“Holdings”) which allowed Holdings to repurchase a portion of its 9 ³/4% senior discount notes due 2012.

In May 2011, Norcraft and Norcraft Finance Corp. issued, on a joint and several basis, an additional $60.0 million aggregate principal amount of these senior secured second lien notes at a 1.04 premium, for total gross proceeds of $62.4 million. Proceeds from this issuance of the senior secured second lien notes were used to make a distribution to Holdings to allow Holdings to retire the remainder of its 9 ³/4% senior discount notes due 2012 and pay related transaction and financing costs. In July, 2011, Norcraft and Norcraft Finance Corp. filed a registration statement on Form S-4 and subsequently commenced the exchange of the senior secured second lien notes for new, registered senior secured second lien notes that otherwise have the same terms and conditions. The foregoing exchange offer was consummated in August, 2011. All holders participated in such exchange.

Prior to December 15, 2012, Norcraft may redeem the notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium plus accrued interest.

At any time before December 15, 2012, Norcraft may redeem up to 35% of the aggregate principal amount of the senior secured second lien notes issued under the indenture with the offerings of proceeds of qualified equity offerings at a redemption price equal to 110.5% of the principal amount, plus accrued interest.

Norcraft may redeem the senior secured second lien notes, in whole or in part, at any time on or after December 15, 2012, at a redemption price equal to 100% of the principal amount of the senior secured second lien notes plus a premium declining ratably to par plus accrued interest.

If Norcraft experiences a change of control, Norcraft may be required to offer to purchase the senior secured second lien notes at a purchase price equal to 101% of the principal amount, plus accrued interest.

Additionally, the terms of the indenture governing the senior secured second lien notes limit Norcraft’s ability to, among other things, incur additional indebtedness, dispose of assets, make acquisitions, make other investments, pay dividends and make various other payments. The terms also include cross-default provisions. As of September 30, 2011, Norcraft was in compliance with these provisions.

Off balance sheet arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, capital expenditures or capital resources that are material to investors.

Taxes; Distributions to our Limited Partners

Norcraft Holdings, L.P (“Holdings”), our parent company, and Norcraft Companies, L.P. (“Norcraft”) are limited partnerships. Accordingly, no liability or provision for federal income taxes and deferred income taxes attributable to our operations are included in our financial statements. We are subject to various state and local taxes.

The indenture governing our senior secured second lien notes significantly restricts Norcraft and its subsidiaries from paying dividends and otherwise transferring assets to Holdings. Norcraft expects to make regular distributions to Holdings, subject to certain limitations, to permit Holdings to make further distributions to its equity holders to pay taxes on our net income allocated to them. There was no tax distribution during the nine months ended September 30, 2011.

Inflation; Seasonality

Our cost of sales is subject to inflationary pressures and price fluctuations of the raw materials we use. We have generally been able over time to recover the effects of inflation and price fluctuations through sales price increases.

Our sales have historically been moderately seasonal and have been strongest in April through October which coincides with construction seasonality.

20

Critical Accounting Polices

In our Annual Report on Form 10-K for the year ended December 31, 2010, we identified the critical accounting policies which affect our more significant estimates and assumptions used in preparing our consolidated financial statements. The basis for developing the estimates and assumptions within our critical accounting policies is based on historical information and known current trends and factors. The estimates and assumptions are evaluated on an ongoing basis and actual results have been within the Company’s expectations. We have not changed these policies from those previously disclosed in our annual report.

Item 3. Quantitative and Qualitative Disclosures of Market Risk

We currently do not hedge against interest rate movements or foreign currency fluctuations. The risk inherent in our market-sensitive instruments and positions is the potential loss arising from adverse changes to interest rates as discussed below.

Variable Interest Rates

Our earnings could be affected by changes in interest rates due to the impact those changes would have on interest expense from variable rate debt instruments and on interest income generated from our cash and investment balances. At September 30, 2011, the Company had no borrowings on our variable rate ABL facility; however future earnings could be affected by changes in interest rates.

Foreign Currency

We have minimal exposure to market risk from changes in foreign currency exchange rates and interest rates that could affect our results of operations and financial condition. Our largest exposure comes from the Canadian dollar, where approximately 7% of our sales during the nine months ended September 30, 2011 were derived from Norcraft Canada and our revenues from such sales were denominated in Canadian dollar.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2011.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.

Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2011 the Company’s disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to our management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

During the ordinary course of business, we have become and may in the future become subject to pending and threatened legal actions and proceedings. All of the current legal actions and proceedings that we are a party to are of an ordinary or routine nature incidental to our operations, the resolution of which should not have a material adverse effect on our financial condition, results of operations or cash flows. We are not currently a party to any product liability claims. The majority of the pending legal proceedings involve claims for workers compensation. These claims are generally covered by insurance, but there can be no assurance that our insurance coverage will be adequate to cover any such liability.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. The materialization of any risks and uncertainties identified in Part I, Item 2, “Uncertainty of Forward Looking Statements and Information” contained in this report together with those previously disclosed in the Form 10-K or those that are presently unforeseen could result in material adverse effects on our financial condition, results of operations and cash flows.

Item 6. Exhibits

31.1	Certification by Mark Buller pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by Leigh Ginter pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by Mark Buller pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification by Leigh Ginter pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, filed on November 14, 2011, formatted in XBRL: (i) Consolidated Balance Sheet, (ii) Consolidated Statements of Operations, (iii) Consolidated Statement of Changes in Member’s Equity and Comprehensive Income, (iv) Consolidated Statement of Cash Flows, (v) the Notes to the Consolidated Financial Statements, tagged as blocks of text.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NORCRAFT COMPANIES, L.P. (Registrant)
/s/ Mark Buller	/s/ Leigh Ginter
Mark Buller	Leigh Ginter
Chief Executive Officer	Chief Financial Officer
Date: November 14, 2011 Signing on behalf of the Registrant and as Principal Executive Officer	Date: November 14, 2011 Signing on behalf of the Registrant and as Principal Accounting Officer

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EX-31.1

Exhibit 31.1

Section 302 Certification

I, Mark Buller, certify that:

1. I have reviewed this Form 10-Q of Norcraft Companies, L.P.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrants and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant’s, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2011	/s/ Mark Buller
	Mark Buller – Chief Executive Officer

EX-31.2

Exhibit 31.2

Section 302 Certification

I, Leigh Ginter, certify that:

1. I have reviewed this Form 10-Q of Norcraft Companies, L.P.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrants and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant’s, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2011	/s/ Leigh Ginter
	Leigh Ginter – Chief Financial Officer (Chief Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Chief Executive Officer of Norcraft Companies, L.P. (the “Company”), does hereby certify that to the undersigned’s knowledge:

1) the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2011 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) the information contained in the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2011 fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2011	/s/ Mark Buller
	Mark Buller – Chief Executive Officer

A signed original of this written statement, required by Section 906, has been provided to Norcraft Companies, L.P. and will be retained by Norcraft Companies, L.P. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Chief Financial Officer of Norcraft Companies, L.P. (the “Company”), does hereby certify that to the undersigned’s knowledge:

1) the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2011 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) the information contained in the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2011 fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2011	/s/ Leigh Ginter
	Leigh Ginter – Chief Financial Officer
	(Chief Accounting Officer)

A signed original of this written statement, required by Section 906, has been provided to Norcraft Companies, L.P. and will be retained by Norcraft Companies, L.P. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Consolidated Statements Of Operations (USD $) In Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Consolidated Statements Of Operations [Abstract]
Net sales	$ 67,718	$ 65,937	$ 206,943	$ 201,877
Cost of sales	48,815	46,531	150,223	142,469
Gross profit	18,903	19,406	56,720	59,408
Selling, general and administrative expenses	12,313	12,278	38,143	38,468
Income from operations	6,590	7,128	18,577	20,940
Other expense:
Interest expense, net	6,451	5,026	17,106	15,077
Amortization of deferred financing costs	795	374	1,666	1,028
Other, net	51	18	103	91
Total other expense	7,297	5,418	18,875	16,196
Net income (loss)	$ (707)	$ 1,710	$ (298)	$ 4,744

XML

Consolidated Statement Of Changes In Member's Equity And Comprehensive Loss (USD $) In Thousands	Member's Equity [Member]	Total Comprehensive Loss [Member]	Total
Member's equity at Dec. 31, 2010	$ 64,774		$ 64,774
Issuance of members' interest	89
Stock compensation expense	136		(136)
Distributions to member	(58,015)
Foreign currency translation adjustment	(382)	(382)
Net loss	(298)	(298)	(298)
Total comprehensive loss		(680)
Member's equity at Sep. 30, 2011	$ 6,304		$ 6,304

XML

Document And Entity Information	9 Months Ended
	Sep. 30, 2011
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Entity Registrant Name	NORCRAFT COMPANIES LP
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Central Index Key	0001288248
Entity Common Stock, Shares Outstanding	0

XML

Long-Term Debt

9 Months Ended

Sep. 30, 2011

Long-Term Debt [Abstract]

Long-Term Debt

7. Long-term Debt

Long-term debt consists of the following:

	September 30,		December 31,
	2011		2010
Senior secured second lien notes payable (due in 2015 with semi-annual interest payments at 10.5%)	$	240,000	$	180,000
Long term debt	$	240,000	$	180,000

ABL Facility

In December 2009, in connection with the issuance of the senior secured second lien notes, Norcraft entered into a senior secured first-lien asset-based revolving credit facility (the "ABL Facility") pursuant to a credit agreement dated as of December 9, 2009 (the "ABL Credit Agreement") by and among Norcraft, as borrower, Norcraft Intermediate Holdings, L.P. and other guarantors party thereto, as guarantors, the lenders party thereto and UBS Securities LLC, as arranger, bookmanager, documentation agent and syndication agent, and UBS AG, Stamford Branch, as issuing bank, administrative agent and collateral agent and UBS Loan Finance LLC, as swingline lender. The ABL Facility provides for aggregate commitments of up to $25.0 million, including a letter of credit sub-facility and a swingline loan sub-facility, subject to a borrowing base, and has a maturity date of December 9, 2013. As of September 30, 2011, the borrowing base was approximately $19.3 million.

In May, 2011, the ABL Credit Agreement was modified and now has a maturity of September, 2015.

The ABL Credit Agreement contains negative covenants that restrict or limit the ability of Norcraft Intermediate Holdings, L.P. and its subsidiaries from, among other things, (1) selling assets, (2) altering the business that Norcraft currently conducts, (3) engaging in mergers, acquisitions and other business combinations, (4) declaring dividends or redeeming or repurchasing the Company's equity interests, (5) incurring additional debt or guarantees, (6) making loans and investments, (7) incurring liens, (8) entering into transactions with affiliates, (9) engaging in sale and leaseback transactions and (10) prepaying the senior secured second lien notes, the senior discount notes and any subordinated debt. As of September 30, 2011, the Company was in compliance with these provisions.

Indebtedness under the ABL Facility is guaranteed, on a joint and several basis, by Norcraft Intermediate Holdings, L.P., Norcraft Finance Corp., Norcraft Canada Corporation and all of Norcraft's current and future subsidiaries, subject to exceptions for foreign subsidiaries to the extent of adverse tax consequences, and is secured by a first priority security interest in substantially all of Norcraft's and the guarantor's existing and future property and assets, including accounts receivable, inventory, equipment, general intangibles, intellectual property, investment property, other personal property, owned real property, cash and proceeds of the foregoing.

As of September 30, 2011, there were no borrowings outstanding, approximately $4.9 million of a letter of credit outstanding and unused commitments of $14.4 million under the ABL Facility.

The Company has no unused letters of credit.

Senior Secured Second Lien Notes

In December 2009, Norcraft and Norcraft Finance Corp., a 100% owned finance subsidiary of Norcraft, issued, on a joint and several basis, $180.0 million aggregate principal amount of 10 ¹/2% senior secured second lien notes (the "senior secured second lien notes"). Interest accrues on the senior secured second lien notes and is payable semiannually on June 15 and December 15 of each year at a rate of 10 ¹/2% per annum, which commenced on June 15, 2010. Proceeds from the issuance of the senior secured second lien notes were used to redeem the 9% senior subordinated notes due 2011 and to make a distribution to Holdings to allow Holdings to repurchase a portion of the 9 ³/4% senior discount notes due 2012.

In May 2011, Norcraft and Norcraft Finance Corp. issued, on a joint and several basis, an additional $60.0 million aggregate principal amount of these senior secured second lien notes at a 1.04 premium, for total gross proceeds of $62.4 million. Proceeds from this issuance of the senior secured second lien notes were used to make a distribution to Holdings to allow Holdings to retire the remainder of its 9 ³/4% senior discount notes due 2012 and pay related transaction and financing costs.

At any time before December 15, 2012, Norcraft may redeem up to 35% of the aggregate principal amount of the senior secured second lien notes issued under the indenture with the proceeds of qualified equity offerings at a redemption price equal to 110.5% of the principal amount, plus accrued interest.

Prior to December 15, 2012, Norcraft may redeem the senior secured second lien notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium plus accrued interest.

Norcraft may redeem the senior secured second lien notes, in whole or in part, at any time on or after December 15, 2012, at a redemption price equal to 100% of the principal amount of the senior secured second lien notes plus a premium declining ratably to par plus accrued interest.

If Norcraft experiences a change of control, Norcraft may be required to offer to purchase the senior secured second lien notes at a purchase price equal to 101% of the principal amount, plus accrued interest.

Additionally, the terms of the indenture governing the senior secured second lien notes limit Norcraft's ability to, among other things, incur additional indebtedness, dispose of assets, make acquisitions, make other investments, pay dividends and make various other payments. The terms also include cross-default provisions. As of September 30, 2011, Norcraft was in compliance with these provisions.

The following represents certain condensed consolidating financial information as of September 30, 2011 and December 31, 2010 and for the periods ended September 30, 2011 and 2010 for the issuers and for Norcraft Canada Corporation, a wholly-owned subsidiary of Norcraft, which fully and unconditionally guarantees the senior secured second lien notes.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2011 (unaudited)

	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Current assets	$	68,802		$	—	$	5,023		$	—		$	73,825
Property, plant & equipment, net		21,596			—		6,095			—			27,691
Investments in subsidiary		(1,243	)		—		—			1,243			—
Other assets		184,896			—		288			(10,765	)		174,419
Total assets	$	274,051		$	—	$	11,406		$	(9,522	)	$	275,935
Current liabilities	$	27,402		$	—	$	1,884		$	—		$	29,286
Long-term debt		240,000			—		10,765			(10,765	)		240,000
Unamortized premium on bonds payable		176			—		—			—			176
Other liabilities		169			—		—			—			169
Member's equity (deficit)		6,304			—		(1,243	)		1,243			6,304
Total liabilities & member's equity (deficit)	$	274,051		$	—	$	11,406		$	(9,522	)	$	275,935

As of December 31, 2010 (unaudited)
	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Current assets	$	61,246		$	—	$	4,314		$	—		$	65,560
Property, plant & equipment, net		23,535			—		6,664			—			30,199
Investments in subsidiary		(302	)		—		—			302			—
Other assets		180,225			—		304			(9,897	)		170,632
Total assets	$	264,704		$	—	$	11,282		$	(9,595	)	$	266,391
Current liabilities	$	22,191		$	—	$	1,687		$	—		$	23,878
Long-term debt		180,000			—		9,897			(9,897	)		180,000
Unamortized discount on bonds payable		(2,414	)		—		—			—			(2,414	)
Other liabilities		153			—		—			—			153
Member's equity (deficit)		64,774			—		(302	)		302			64,774
Total liabilities & member's equity (deficit)	$	264,704		$	—	$	11,282		$	(9,595	)	$	266,391

(1) Co-issuers

CONDENSED CONSOLIDATED OPERATIONS STATEMENTS

For the Three Months Ended September 30, 2011 (unaudited)

	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Net sales	$	62,735		$	—	$	6,102		$	(1,119	)	$	67,718
Cost of sales		44,808			—		5,126			(1,119	)		48,815
Gross profit		17,927			—		976			—			18,903
Equity in earnings (losses) of subsidiary		116			—		—			(116	)		—
Selling, general and administrative expenses		11,470			—		843			—			12,313
Income (loss) from operations		6,573			—		133			(116	)		6,590
Other expense:
Interest expense, net		6,429			—		22			—			6,451
Amortization of deferred financing costs		795			—		—			—			795
Other, net		56			—		(5	)		—			51
Total other expense, net		7,280			—		17			—			7,297
Net income (loss)	$	(707	)	$	—	$	116		$	(116	)	$	(707	)
For the Three Months Ended September 30, 2010 (unaudited)
	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Net sales	$	61,563		$	—	$	4,967		$	(593	)	$	65,937
Cost of sales		42,834			—		4,290			(593	)		46,531
Gross profit		18,729			—		677			—			19,406
Equity in earnings (losses) of subsidiary		(75	)		—		—			75			—
Selling, general and administrative expenses		11,548			—		730			—			12,278
Income (loss) from operations		7,106			—		(53	)		75			7,128
Other expense:
Interest expense, net		5,006			—		20			—			5,026
Amortization of deferred financing costs		374			—		—			—			374
Other, net		16			—		2			—			18
Total other expense, net		5,396			—		22			—			5,418
Net income (loss)	$	1,710		$	—	$	(75	)	$	75		$	1,710

CONDENSED CONSOLIDATED OPERATIONS STATEMENTS

For the Nine Months Ended September 30, 2011 (unaudited)

	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Net sales	$	194,224		$	—	$	15,713		$	(2,994	)	$	206,943
Cost of sales		139,636			—		13,581			(2,994	)		150,223
Gross profit		54,588			—		2,132			—			56,720
Equity in earnings (losses) of subsidiary		(559	)		—		—			559			—
Selling, general and administrative expenses		35,501			—		2,642			—			38,143
Income (loss) from operations		18,528			—		(510	)		559			18,577
Other expense:
Interest expense, net		17,056			—		50			—			17,106
Amortization of deferred financing costs		1,666			—		—			—			1,666
Other, net		104			—		(1	)		—			103
Total other expense, net		18,826			—		49			—			18,875
Net income (loss)	$	(298	)	$	—	$	(559	)	$	559		$	(298	)
For the Nine Months Ended September 30, 2010 (unaudited)
	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Net sales	$	189,161		$	—	$	14,817		$	(2,101	)	$	201,877
Cost of sales		131,679			—		12,891			(2,101	)		142,469
Gross profit		57,482			—		1,926			—			59,408
Equity in earnings (losses) of subsidiary		(31	)		—		—			31			—
Selling, general and administrative expenses		36,549			—		1,919			—			38,468
Income (loss) from operations		20,902			—		7			31			20,940
Other expense:
Interest expense, net		15,038			—		39			—			15,077
Amortization of deferred financing costs		1,028			—		—			—			1,028
Other, net		92			—		(1	)		—			91
Total other expense, net		16,158			—		38			—			16,196
Net income (loss)	$	4,744		$	—	$	(31	)	$	31		$	4,744

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30, 2011 (unaudited)

	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Cash flows provided by (used in) operating activities	$	10,370		$	—	$	166		$	—		$	10,536
Cash flows provided by (used in) investing activities		(5,933	)		—		(356	)		868			(5,421	)
Cash flows provided by (used in) financing activities		(3,685	)		—		868			(868	)		(3,685	)
Effect of exchange rates on cash and cash equivalents		—			—		(112	)		—			(112	)
Net increase (decrease) in cash and cash equivalents		752			—		566			—			1,318
Cash and cash equivalents, beginning of period		28,705			—		(48	)		—			28,657
Cash and cash equivalents, end of period	$	29,457		$	—	$	518		$	—		$	29,975
For the Nine Months Ended September 30, 2010 (unaudited)
	Norcraft Companies, L.P. (1)			Norcraft Finance Corp. (1)		Norcraft Canada			Eliminations			Consolidated Norcraft Companies, L.P.
Cash flows provided by (used in) operating activities	$	20,268		$	—	$	(399	)	$	—		$	19,869
Cash flows provided by (used in) investing activities		(4,962	)		—		(902	)		912			(4,952	)
Cash flows provided by (used in) financing activities		(1,816	)		—		912			(912	)		(1,816	)
Effect of exchange rates on cash and cash equivalents		—			—		2			—			2
Net increase (decrease) in cash and cash equivalents		13,490			—		(387	)		—			13,103
Cash and cash equivalents, beginning of period		15,791			—		940			—			16,731
Cash and cash equivalents, end of period	$	29,281		$	—	$	553		$	—		$	29,834

(1) Co-issuers

We generally anticipate that the funds generated by operations and current available cash balances will be sufficient to meet working capital requirements, make required member tax distributions and to finance capital expenditures over the next 12 to 18 months. There can be no assurance, however, that our business will generate sufficient cash flow from operations, that anticipated net sales growth and operating improvements will be realized or that future equity or debt financing will be sufficient to enable us to service our indebtedness or to fund our other liquidity needs.

XML

Inventories

9 Months Ended

Sep. 30, 2011

Inventories [Abstract]

Inventories

3. Inventories

Inventories consist of the following:

	September 30,		December 31,
	2011		2010
Raw materials and supplies	$	11,747	$	12,312
Work in process		2,553		2,186
Finished goods		4,429		2,865
	$	18,729	$	17,363

XML

Recently Issued Accounting Pronouncements

9 Months Ended

Sep. 30, 2011

Recently Issued Accounting Pronouncements [Abstract]

Recently Issued Accounting Pronouncements

8. Recently Issued Accounting Pronouncements

In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and International Financial Reporting Standards ("IFRS"), which amends ASC 820, Fair Value Measurement. This ASU modifies the existing standard to include disclosure of all transfers between Level 1 and Level 2 asset and liability fair value categories. In addition, the ASU provides guidance on measuring the fair value of financial instruments managed within a portfolio and the application of premiums and discounts on fair value measurements. The ASU requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. This guidance is effective for interim and annual reporting periods beginning after December 15, 2011, with early adoption prohibited. The Company does not expect such adoption will have a material impact on the Company's consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income. This standard eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. Under this new ASU, an entity can elect to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive, statements. This guidance is effective for publicly traded companies as of the beginning of a fiscal year that begins after December 15, 2011 and interim and annual periods thereafter. Early adoption is permitted, but full retrospective application is required. The Company does not expect such adoption will have a material impact on the Company's consolidated financial statements.

In September 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for Impairment. ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under ASU 2011-08, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. ASU 2011-08 is effective for annual periods beginning after December 15, 2011. The Company does not expect such adoption will have a material impact on the Company's consolidated financial statements.

XML

Basis Of Presentation

9 Months Ended

Sep. 30, 2011

Basis Of Presentation [Abstract]

Basis Of Presentation

1. Basis of Presentation

The accompanying financial statements are those of Norcraft Companies, L.P. ("Norcraft"). Norcraft and its subsidiaries are collectively referred to as the "Company." Norcraft Holdings, L.P ("Holdings") is the parent company Norcraft.

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the interim consolidated financial statements and accompanying notes included herein should be read in conjunction with the more detailed information contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission. The unaudited interim consolidated financial statements as of September 30, 2011 and 2010 and for the three and nine months ended September 30, 2011 and 2010 include all normal recurring adjustments which management considers necessary for the fair presentation of financial position, results of operations and cash flows for the interim periods.

XML

Intangible Assets

9 Months Ended

Sep. 30, 2011

Intangible Assets [Abstract]

Intangible Assets

4. Intangible Assets

Intangible assets consist of the following:

	September 30, 2011
			Subject to Amortization
	Not Subject to Amortization		Gross Carrying Amount		Accumulated Amortization			Total
Goodwill	$	88,475						$	88,475
Brand names	$	35,100						$	35,100
Customer relationships				67,000		(35,485	)		31,515
Deferred financing costs				16,005		(3,098	)		12,907
	$	35,100	$	83,005	$	(38,583	)	$	79,522

	December 31, 2010
			Subject to Amortization
	Not Subject to Amortization		Gross Carrying Amount		Accumulated Amortization			Total
Goodwill	$	88,483						$	88,483
Brand names	$	35,100						$	35,100
Customer relationships				67,000		(32,135	)		34,865
Deferred financing costs				7,864		(1,450	)		6,414
	$	35,100	$	74,864	$	(33,585	)	$	76,379

There were no events or circumstances during the three or nine months ended September 30, 2011 to indicate that the assets not subject to amortization should be evaluated for potential impairment.

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Accrued Expenses

9 Months Ended

Sep. 30, 2011

Accrued Expenses [Abstract]

Accrued Expenses

5. Accrued Expenses

Accrued expenses consist of the following:

	September 30,		December 31,
	2011		2010
Interest	$	7,479	$	948
Salaries, wages and employee benefits		5,339		8,012
Commissions, rebates and marketing programs		2,642		2,497
Workers' compensation		1,941		1,875
Other, including product warranty accruals		3,303		2,868
	$	20,704	$	16,200

Product warranty accrual activity is as follows:

	September 30,			September 30,
	2011			2010
Beginning balance – December 31	$	781		$	494
Accruals for warranties		2,284			2,058
Claims paid		(2,309	)		(1,813	)
Ending balance – September 30	$	756		$	739

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

6. Stock-Based Compensation

The Company has a management incentive plan, (the "Plan") which provides for the grants of incentive Class D limited partnership units in Holdings to selected employees of the Company.

Previously, under the terms of the Plan, the Class D units generally began to vest on December 31 of the first full year following the date of grant, with 50% of the units typically vesting over a five year period (time based vesting) and 50% vesting over a five year period subject to the Company meeting certain performance based criteria in each of those years (probability based vesting).

During the first quarter of 2010, the vesting terms for the outstanding Class D units were modified. The outstanding units, along with the newly issued units, now vest with time-based vesting over a three year period. In addition, certain units' exercise prices were reduced to the fair market value of a Class A unit of Holdings. This modification was treated as forfeitures of the original units and new grants of the modified units. No compensation expense was recorded as a result of this modification.

Upon vesting, each Class D unit entitles the unit holder the option to purchase one Class A unit in Holdings. All Class D units are issued with an exercise price equal to the then fair value of Holdings' Class A units as determined by the Company.

The fair value of the Class D units granted is based on the Black-Scholes option-pricing model. In accordance with Accounting Standards Codification ("ASC") Topic 718, the Company is required to incorporate a volatility factor in the fair value calculation. The volatility factor is developed through the use of a sample of peer group companies consisting of publicly-traded companies that operate in the Company's same industry. The Company did not grant any incentive Class D units during the three and nine months ended September 30, 2011.

Compensation expense related to Class D units was $0.05 million and $0.14 million for the three and nine months ended September 30, 2010 and 2011, respectively. Because individuals receiving these Class D unit awards are employees of Norcraft, the compensation expense is recorded at the Norcraft level.

A summary of Class D Unit activity under the Plan is as follows:

	Nine Months Ended September 30, 2011
	Units			Weighted-Average Exercise Price
Beginning balance		6,811,577		$	0.26
Granted		—
Forfeited/expired		(230,000	)	$	0.26
Ending balance		6,581,577		$	0.26
Exercisable balance		4,359,154		$	0.20

The intrinsic values of the issued Class D units and exercisable Class D units at September 30, 2011 were $1.2 million and $1.0 million, respectively.

The Plan will terminate in December 2015.

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Consolidated Statement Of Cash Flows (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Cash flows from operating activities:
Net income (loss)	$ (298)	$ 4,744
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of property, plant and equipment	3,774	4,417
Amortization:
Customer relationships	3,350	3,351
Deferred financing costs	1,666	1,028
Display cabinets	2,888	3,210
Discount amortization/accreted interest	190	367
Provision for uncollectible accounts receivable	69	140
Provision for obsolete and excess inventories	32	77
Provision for warranty claims	2,284	2,058
Stock compensation expense	136	138
Gain on disposal of assets		(43)
Change in operating assets and liabilities:
Trade accounts receivable	(6,113)	(3,586)
Inventories	(1,444)	(3,010)
Prepaid expenses	369	648
Other assets	162	20
Accounts payable and accrued expenses	3,471	6,310
Net cash provided by operating activities	10,536	19,869
Cash flows from investing activities:
Proceeds from sale of property and equipment	6	47
Purchase of property, plant and equipment	(1,720)	(1,965)
Additions to display cabinets	(3,707)	(3,034)
Net cash used in investing activities	(5,421)	(4,952)
Cash flows from financing activities:
Borrowings on senior secured second lien notes payable	62,400
Payment of financing costs	(8,159)	(837)
Proceeds from issuance of member interests	89	125
Distributions to member	(58,015)	(1,104)
Net cash used in financing activities	(3,685)	(1,816)
Effect of exchange rates on cash and cash equivalents	(112)	2
Net increase in cash and cash equivalents	1,318	13,103
Cash and cash equivalents, beginning of the period	28,657	16,731
Cash and cash equivalents, end of period	$ 29,975	$ 29,834

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Trade Accounts Receivable

9 Months Ended

Sep. 30, 2011

Trade Accounts Receivable [Abstract]

Trade Accounts Receivable

2. Trade Accounts Receivable

Trade accounts receivable consists of the following:

	September 30,			December 31,
	2011			2010
Trade accounts receivable	$	24,804		$	19,108
Less: Allowance for uncollectible accounts		(876	)		(1,126	)
Trade accounts receivable, net	$	23,928		$	17,982

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Consolidated Balance Sheet (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
ASSETS
Cash and cash equivalents	$ 29,975	$ 28,657
Trade accounts receivable, net	23,928	17,982
Inventories	18,729	17,363
Prepaid and other current assets	1,193	1,558
Total current assets	73,825	65,560
Property, plant and equipment, net	27,691	30,199
Other assets:
Goodwill	88,475	88,483
Intangible assets, net	79,522	76,379
Display cabinets, net	5,835	5,016
Other	587	754
Total other assets	174,419	170,632
Total assets	275,935	266,391
LIABILITIES AND MEMBER'S EQUITY
Accounts payable	8,582	7,678
Accrued expenses	20,704	16,200
Total current liabilities	29,286	23,878
Long-term debt	240,000	180,000
Unamortized premium (discount) on bonds payable	176	(2,414)
Other liabilities	169	153
Commitments and contingencies
Member's equity	6,304	64,774
Total liabilities and member's equity	$ 275,935	$ 266,391