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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549



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FORM 10-Q



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



For the quarterly period ended June 30, 2005



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 numbers: 333-119696 and 333-114924



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Norcraft Holdings, L.P.

Norcraft Companies, L.P.

(Exact name
of registrants as specified in their charters)



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|                                                               |  |           |  |                                     
|-------------------------------------------------------------- |  | --------- |  | ------------------------------------
|Delaware Delaware                                              |  | 2434 2434 |  | 75-3132727 36-4231718               
|(State or other jurisdiction of incorporation or organization) |  |           |  | (I.R.S. Employer Identification No.)



3020 Denmark Avenue,
Suite 100

Eagan, MN 55121

(800) 297-0661

(Address of Principal Executive Offices)



(800) 297-0661

(Registrants Telephone Number, Including Area Code)



Not Applicable

(Former name, former address and former fiscal year, if changed since last report)



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Indicate by check mark whether the registrants (1) have 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, and (2) have been subject to such filing requirements for the past 90 days.    Yes ̈No  x.



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x.



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



This Form 10-Q is a combined quarterly report being filed separately by two
registrants: Norcraft Holdings, L.P. and Norcraft Companies, L.P. Unless the context indicates otherwise, any reference in this report to Holdings refers to Norcraft Holdings, L.P. and any reference to Norcraft refers to
Norcraft Companies, L.P., the wholly-owned operating subsidiary of Holdings. The Company, we, us, and our refer to Norcraft Holdings, L.P., together with Norcraft Companies, L.P.



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##### Table of Contents

Norcraft Holdings,
L.P.                                    Norcraft Companies, L.P.



Table of Contents



|           |  |                                                                                                                                                       |  |     
|---------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                                                                       |  | Page
|PART I     |  | FINANCIAL INFORMATION                                                                                                                                 |  |     
|           |  |                                                                                                                                                      
|Item 1.    |  | Unaudited Consolidated Financial Statements                                                                                                           |  |     
|           |  | Consolidated Balance Sheets at June 30, 2005 and December 31, 2004                                                                                    |  | 3   
|           |  | Consolidated Statements of Income for the three months ended June 30, 2005 and 2004; Six months ended June 30, 2005 and 2004                          |  | 5   
|           |  | Consolidated Statements of Members Equity and Comprehensive Income for the three months ended June 30, 2005; Six months ended June 30, 2005 and 2004 |  | 7   
|           |  | Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004                                                                 |  | 9   
|           |  | Notes to Consolidated Financial Statements                                                                                                            |  | 10  
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                 |  | 21  
|Item 3.    |  | Quantitative and Qualitative Disclosures of Market Risk                                                                                               |  | 27  
|Item 4.    |  | Disclosure Controls and Procedures                                                                                                                    |  | 27  
|           |  |                                                                                                                                                      
|PART II    |  | OTHER INFORMATION                                                                                                                                     |  |     
|           |  |                                                                                                                                                      
|Item 1.    |  | Legal Proceedings                                                                                                                                     |  | 29  
|Item 6.    |  | Exhibits                                                                                                                                              |  | 29  
|           | 
|SIGNATURES |  | 30                                                                                                                                                   



This combined Form 10-Q is separately
filed by Norcraft Holdings, L.P., and Norcraft Companies, L.P. Each Registrant hereto is filing on its own behalf all of the information contained in this quarterly report that relates to such Registrant. Each Registrant hereto is not filing any
information that does not relate to such Registrant, and therefore makes no representation as to any such information.



2



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##### Table of Contents

PART I. FINANCIAL INFORMATION



Item 1.



Consolidated Balance Sheets

(dollar amounts in thousands)

(unaudited)



|                                       |  |                         |         |                        |   |                         |  |   |        
|-------------------------------------- |  | ----------------------- | ------- | ---------------------- | - | ----------------------- |  | - | -------
|                                       |  | Norcraft Holdings, L.P.
|                                       |  | June 30, 2005           |         | December 31, 2004      |   | June 30, 2004          
|                                       |  |                         |         | (Restated.See note 11) |   | (Restated. See note 11)
|ASSETS                                 |  |                         |         |                        |   |                         |  |   |        
|Current assets:                        |  |                         |         |                        |   |                         |  |   |        
|Cash                                   |  | $                       | 357     |                        | $ | 823                     |  | $ | 321    
|Trade accounts receivable, net         |  |                         | 37,672  |                        |   | 33,056                  |  |   | 35,459 
|Inventories                            |  |                         | 24,515  |                        |   | 21,886                  |  |   | 22,361 
|Prepaid expenses                       |  |                         | 1,264   |                        |   | 1,497                   |  |   | 1,831  
|                                       |  |                         |         |                        |   |                         |  |   |        
|Total current assets                   |  |                         | 63,808  |                        |   | 57,262                  |  |   | 59,972 
|                                       |  |                         |        
|Property, plant and equipment, net     |  |                         | 35,762  |                        |   | 34,959                  |  |   | 33,597 
|                                       |  |                         |        
|Other assets:                          |  |                         |         |                        |   |                         |  |   |        
|Goodwill                               |  |                         | 148,459 |                        |   | 148,459                 |  |   | 148,459
|Customer relationships, net            |  |                         | 59,431  |                        |   | 61,664                  |  |   | 63,898 
|Brand names                            |  |                         | 49,000  |                        |   | 49,000                  |  |   | 49,000 
|Deferred financing costs, net          |  |                         | 11,162  |                        |   | 12,523                  |  |   | 10,265 
|Display cabinets, net                  |  |                         | 7,160   |                        |   | 6,034                   |  |   | 5,740  
|Deposits                               |  |                         | 91      |                        |   | 91                      |  |   | 109    
|                                       |  |                         |         |                        |   |                         |  |   |        
|Total other assets                     |  |                         | 275,303 |                        |   | 277,771                 |  |   | 277,471
|                                       |  |                         |         |                        |   |                         |  |   |        
|Total assets                           |  | $                       | 374,873 |                        | $ | 369,992                 |  | $ | 371,040
|                                       |  |                         |         |                        |   |                         |  |   |        
|LIABILITIES AND MEMBERS EQUITY        |  |                         |         |                        |   |                         |  |   |        
|Current liabilities:                   |  |                         |         |                        |   |                         |  |   |        
|Current portion of long-term debt      |  | $                       |        |                        | $ |                        |  | $ | 5,000  
|Book overdrafts payable                |  |                         | 1,525   |                        |   |                        |  |   | 1,254  
|Accounts payable                       |  |                         | 11,306  |                        |   | 7,299                   |  |   | 9,533  
|Accrued expenses                       |  |                         | 20,393  |                        |   | 19,888                  |  |   | 18,802 
|Members distribution payable          |  |                         | 330     |                        |   |                        |  |   | 580    
|                                       |  |                         |         |                        |   |                         |  |   |        
|Total current liabilities              |  |                         | 33,554  |                        |   | 27,187                  |  |   | 35,169 
|                                       |  |                         |        
|Long-term debt                         |  |                         | 253,311 |                        |   | 263,752                 |  |   | 187,500
|                                       |  |                         |         |                        |   |                         |  |   |        
|Commitments and contingencies          |  |                         |         |                        |   |                         |  |   |        
|                                       |  |                         |        
|Members equity subject to put request |  |                         | 33,487  |                        |   | 26,377                  |  |   | 34,910 
|                                       |  |                         |        
|Members equity                        |  |                         | 54,521  |                        |   | 52,676                  |  |   | 113,461
|                                       |  |                         |         |                        |   |                         |  |   |        
|Total liabilities and members equity  |  | $                       | 374,873 |                        | $ | 369,992                 |  | $ | 371,040
|                                       |  |                         |         |                        |   |                         |  |   |        



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##### Table of Contents

Consolidated Balance Sheets

(dollar amounts in thousands)

(unaudited)



|                                      |  |                          |         |                   |   |        
|------------------------------------- |  | ------------------------ | ------- | ----------------- | - | -------
|                                      |  | Norcraft Companies, L.P.
|                                      |  | June 30, 2005            |         | December 31, 2004
|ASSETS                                |  |                          |         |                   |   |        
|Current assets:                       |  |                          |         |                   |   |        
|Cash                                  |  | $                        | 357     |                   | $ | 823    
|Trade accounts receivable, net        |  |                          | 37,672  |                   |   | 33,056 
|Inventories                           |  |                          | 24,515  |                   |   | 21,886 
|Prepaid expenses                      |  |                          | 1,264   |                   |   | 1,497  
|                                      |  |                          |         |                   |   |        
|Total current assets                  |  |                          | 63,808  |                   |   | 57,262 
|                                      |  |                         
|Property, plant and equipment, net    |  |                          | 35,762  |                   |   | 34,959 
|                                      |  |                         
|Other assets:                         |  |                          |         |                   |   |        
|Goodwill                              |  |                          | 148,459 |                   |   | 148,459
|Customer relationships, net           |  |                          | 59,431  |                   |   | 61,664 
|Brand names                           |  |                          | 49,000  |                   |   | 49,000 
|Deferred financing costs, net         |  |                          | 7,929   |                   |   | 9,116  
|Display cabinets, net                 |  |                          | 7,160   |                   |   | 6,034  
|Deposits                              |  |                          | 91      |                   |   | 91     
|                                      |  |                          |         |                   |   |        
|Total other assets                    |  |                          | 272,070 |                   |   | 274,364
|                                      |  |                          |         |                   |   |        
|Total assets                          |  | $                        | 371,640 |                   | $ | 366,585
|                                      |  |                          |         |                   |   |        
|LIABILITIES AND MEMBERS EQUITY       |  |                          |         |                   |   |        
|Current liabilities:                  |  |                          |         |                   |   |        
|Current portion of long-term debt     |  | $                        |        |                   | $ |       
|Book overdrafts payable               |  |                          | 1,525   |                   |   |       
|Accounts payable                      |  |                          | 11,306  |                   |   | 7,299  
|Accrued expenses                      |  |                          | 20,393  |                   |   | 19,888 
|Members distribution payable         |  |                          | 330     |                   |   |       
|                                      |  |                          |         |                   |   |        
|Total current liabilities             |  |                          | 33,554  |                   |   | 27,187 
|Long-term debt                        |  |                          | 166,000 |                   |   | 180,500
|                                      |  |                          |         |                   |   |        
|Total liabilities                     |  |                          | 199,554 |                   |   | 207,687
|Commitments and contingencies         |  |                          |         |                   |   |        
|Members equity                       |  |                          | 172,086 |                   |   | 158,898
|                                      |  |                          |         |                   |   |        
|Total liabilities and members equity |  | $                        | 371,640 |                   | $ | 366,585
|                                      |  |                          |         |                   |   |        



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##### Table of Contents

Consolidated Statements of Income

(dollar amounts in thousands)

(unaudited)



|                                             |  |                             |         |      |                           |        |      |  |      |         |  |   |         |  
|-------------------------------------------- |  | --------------------------- | ------- | ---- | ------------------------- | ------ | ---- |  | ---- | ------- |  | - | ------- | -
|                                             |  | Norcraft Holdings, L.P.     |        
|                                             |  | Three Months Ended June 30, |         |      | Six Months Ended June 30, |       
|                                             |  | 2005                        |         | 2004 |                           |        | 2005 |  | 2004 |        
|Net sales                                    |  | $                           | 104,087 |      | $                         | 88,090 |      |  | $    | 196,041 |  | $ | 156,683 |  
|                                             |  |                             |         |     
|Cost of sales                                |  |                             | 72,840  |      |                           | 58,832 |      |  |      | 135,942 |  |   | 104,626 |  
|                                             |  |                             |         |      |                           |        |      |  |      |         |  |   |         |  
|Gross profit                                 |  |                             | 31,247  |      |                           | 29,258 |      |  |      | 60,099  |  |   | 52,057  |  
|                                             |  |                             |         |     
|Selling, general and administrative expenses |  |                             | 16,685  |      |                           | 15,189 |      |  |      | 31,719  |  |   | 28,511  |  
|                                             |  |                             |         |      |                           |        |      |  |      |         |  |   |         |  
|Income from operations                       |  |                             | 14,562  |      |                           | 14,069 |      |  |      | 28,380  |  |   | 23,546  |  
|                                             |  |                             |         |     
|Other expense (income):                      |  |                             |         |      |                           |        |      |  |      |         |  |   |         |  
|Interest expense                             |  |                             | 5,893   |      |                           | 4,039  |      |  |      | 11,784  |  |   | 7,977   |  
|Amortization of deferred financing costs     |  |                             | 673     |      |                           | 616    |      |  |      | 1,361   |  |   | 1,244   |  
|Other, net                                   |  |                             | 112     |      |                           | (85    | )    |  |      | 112     |  |   | (89     | )
|                                             |  |                             |         |      |                           |        |      |  |      |         |  |   |         |  
|                                             |  |                             | 6,678   |      |                           | 4,570  |      |  |      | 13,257  |  |   | 9,132   |  
|                                             |  |                             |         |      |                           |        |      |  |      |         |  |   |         |  
|Net income                                   |  | $                           | 7,884   |      | $                         | 9,499  |      |  | $    | 15,123  |  | $ | 14,414  |  
|                                             |  |                             |         |      |                           |        |      |  |      |         |  |   |         |  



See notes to
consolidated financial statements.



5



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##### Table of Contents

Consolidated Statements of Income

(dollar amounts in thousands)

(unaudited)



|                                             |  |                             |         |      |                           |        |      |  |      |         |  |   |         |  
|-------------------------------------------- |  | --------------------------- | ------- | ---- | ------------------------- | ------ | ---- |  | ---- | ------- |  | - | ------- | -
|                                             |  | Norcraft Companies, L.P.    |        
|                                             |  | Three Months Ended June 30, |         |      | Six Months Ended June 30, |       
|                                             |  | 2005                        |         | 2004 |                           |        | 2005 |  | 2004 |        
|Net sales                                    |  | $                           | 104,087 |      | $                         | 88,090 |      |  | $    | 196,041 |  | $ | 156,683 |  
|                                             |  |                             |         |     
|Cost of sales                                |  |                             | 72,840  |      |                           | 58,832 |      |  |      | 135,942 |  |   | 104,626 |  
|                                             |  |                             |         |      |                           |        |      |  |      |         |  |   |         |  
|Gross profit                                 |  |                             | 31,247  |      |                           | 29,258 |      |  |      | 60,099  |  |   | 52,057  |  
|                                             |  |                             |         |     
|Selling, general and administrative expenses |  |                             | 16,685  |      |                           | 15,189 |      |  |      | 31,719  |  |   | 28,511  |  
|                                             |  |                             |         |      |                           |        |      |  |      |         |  |   |         |  
|Income from operations                       |  |                             | 14,562  |      |                           | 14,069 |      |  |      | 28,380  |  |   | 23,546  |  
|                                             |  |                             |         |     
|Other expense (income):                      |  |                             |         |      |                           |        |      |  |      |         |  |   |         |  
|Interest expense                             |  |                             | 3,832   |      |                           | 4,039  |      |  |      | 7,725   |  |   | 7,977   |  
|Amortization of deferred financing costs     |  |                             | 585     |      |                           | 616    |      |  |      | 1,187   |  |   | 1,244   |  
|Other, net                                   |  |                             | 112     |      |                           | (85    | )    |  |      | 112     |  |   | (89     | )
|                                             |  |                             |         |      |                           |        |      |  |      |         |  |   |         |  
|                                             |  |                             | 4,529   |      |                           | 4,570  |      |  |      | 9,024   |  |   | 9,132   |  
|                                             |  |                             |         |      |                           |        |      |  |      |         |  |   |         |  
|Net income                                   |  | $                           | 10,033  |      | $                         | 9,499  |      |  | $    | 19,356  |  | $ | 14,414  |  
|                                             |  |                             |         |      |                           |        |      |  |      |         |  |   |         |  



See notes to
consolidated financial statements.



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##### Table of Contents

Consolidated Statements of Members Equity and Comprehensive Income

(dollar amounts in thousands)

(unaudited)



|                                                      |  |                         |         |   |                                               |   |      |                                   |  |   |        |  
|----------------------------------------------------- |  | ----------------------- | ------- | - | --------------------------------------------- | - | ---- | --------------------------------- |  | - | ------ | -
|                                                      |  | Norcraft Holdings, L.P. |        
|                                                      |  | MembersEquity          |         |   | Accumulated other comprehensive income (loss) |   |      | Total comprehensive income (loss) | 
|Balance, December 31, 2003, as previously reported    |  | $                       | 131,763 |   |                                               | $ | 55   |                                   |  | $ | 2,105  |  
|Restatement adjustment (See note 11.)                 |  |                         | (22,354 | ) |                                               |   |     |                                   |  |   |       |  
|                                                      |  |                         |         |   |                                               |   |      |                                   |  |   |        |  
|Balance, December 31, 2003 (Restated. See note 11.)   |  |                         | 109,409 |   |                                               |   | 55   |                                   |  |   | 2,105  |  
|Issuance of Holdings members interest                |  |                         | 3,028   |   |                                               |   |     |                                   |  |   |       |  
|Accretion on members interest subject to put request |  |                         | (12,556 | ) |                                               |   |     |                                   |  |   |       |  
|Holdings Member tax distributions declared            |  |                         | (580    | ) |                                               |   |     |                                   |  |   |       |  
|Cumulative translation adjustment                     |  |                         | (254    | ) |                                               |   | (254 | )                                 |  |   | (254   | )
|Net income                                            |  |                         | 14,414  |   |                                               |   |     |                                   |  |   | 14,414 |  
|                                                      |  |                         |         |   |                                               |   |      |                                   |  |   |        |  
|Balance, June 30, 2004 (Restated. See note 11.)       |  | $                       | 113,461 |   |                                               | $ | (199 | )                                 |  | $ | 16,265 |  
|                                                      |  |                         |         |   |                                               |   |      |                                   |  |   |        |  
|Balance, December 31, 2004 (Restated. See note 11.)   |  | $                       | 52,676  |   |                                               | $ | (23  | )                                 |  | $ | 25,154 |  
|Issuance of Holdings members interest                |  |                         | 162     |   |                                               |   |     |                                   |  |   |       |  
|Accretion on members interest subject to put request |  |                         | (7,110  | ) |                                               |   |     |                                   |  |   |       |  
|Repurchase of Holdings members interest              |  |                         | (1,888  | ) |                                               |   |     |                                   |  |   |       |  
|Holdings Member tax distributions declared            |  |                         | (4,398  | ) |                                               |   |     |                                   |  |   |       |  
|Cumulative translation adjustment                     |  |                         | (44     | ) |                                               |   | (44  | )                                 |  |   | (44    | )
|Net income                                            |  |                         | 15,123  |   |                                               |   |     |                                   |  |   | 15,123 |  
|                                                      |  |                         |         |   |                                               |   |      |                                   |  |   |        |  
|Balance, June 30, 2005                                |  | $                       | 54,521  |   |                                               | $ | (67  | )                                 |  | $ | 40,233 |  
|                                                      |  |                         |         |   |                                               |   |      |                                   |  |   |        |  



See notes to
consolidated financial statements.



7



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##### Table of Contents

Consolidated Statements of Members Equity and Comprehensive Income

(dollar amounts in thousands)

(unaudited)



|                                           |  |                          |         |   |                                               |   |     |                                   |  |   |        |  
|------------------------------------------ |  | ------------------------ | ------- | - | --------------------------------------------- | - | --- | --------------------------------- |  | - | ------ | -
|                                           |  | Norcraft Companies, L.P. |        
|                                           |  | MembersEquity           |         |   | Accumulated other comprehensive income (loss) |   |     | Total comprehensive income (loss) | 
|Balance, December 31, 2004                 |  | $                        | 158,898 |   |                                               | $ | (23 | )                                 |  | $ | 28,197 |  
|Issuance of Holdings members interest     |  |                          | 162     |   |                                               |   |    |                                   |  |   |       |  
|Repurchase of Holdings members interest   |  |                          | (1,888  | ) |                                               |   |    |                                   |  |   |       |  
|Holdings Member tax distributions declared |  |                          | (4,398  | ) |                                               |   |    |                                   |  |   |       |  
|Cumulative translation adjustment          |  |                          | (44     | ) |                                               |   | (44 | )                                 |  |   | (44    | )
|Net income                                 |  |                          | 19,356  |   |                                               |   |    |                                   |  |   | 19,356 |  
|                                           |  |                          |         |   |                                               |   |     |                                   |  |   |        |  
|Balance, June 30, 2005                     |  | $                        | 172,086 |   |                                               | $ | (67 | )                                 |  | $ | 47,509 |  
|                                           |  |                          |         |   |                                               |   |     |                                   |  |   |        |  



8



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##### Table of Contents

Consolidated Statements of Cash Flows

(dollar amounts in thousands)

(unaudited)



|                                                                                  |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                  |  | Norcraft Holdings, L.P.   |         |   | Norcraft Companies L.P.   |  
|                                                                                  |  | Six Months Ended June 30, |         |   | Six Months Ended June 30, |  
|                                                                                  |  | 2005                      |         |   | 2004                      |   |         | 2005 |  |   | 2004    |  
|Cash flows from operating activities:                                             |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Net income                                                                        |  | $                         | 15,123  |   |                           | $ | 14,414  |      |  | $ | 19,356  |   |  | $ | 14,414  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Depreciation and amortization of property, plant and equipment:                   |  |                           | 2,430   |   |                           |   | 2,012   |      |  |   | 2,430   |   |  |   | 2,012   |  
|Amortization:                                                                     |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Customer relationships                                                            |  |                           | 2,233   |   |                           |   | 2,233   |      |  |   | 2,233   |   |  |   | 2,233   |  
|Deferred financing costs                                                          |  |                           | 1,361   |   |                           |   | 1,244   |      |  |   | 1,187   |   |  |   | 1,244   |  
|Display cabinets                                                                  |  |                           | 1,945   |   |                           |   | 1,359   |      |  |   | 1,945   |   |  |   | 1,359   |  
|Provision for uncollectible accounts receivable                                   |  |                           | 298     |   |                           |   | 381     |      |  |   | 298     |   |  |   | 381     |  
|Provision for obsolete and excess inventory                                       |  |                           | 132     |   |                           |   | (10     | )    |  |   | 132     |   |  |   | (10     | )
|Provision for warranty claims                                                     |  |                           | 2,102   |   |                           |   | 1,373   |      |  |   | 2,102   |   |  |   | 1,373   |  
|Accreted interest borrowings on senior notes                                      |  |                           | 4,059   |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Stock compensation expense                                                        |  |                           | 127     |   |                           |   |        |      |  |   | 127     |   |  |   |        |  
|Loss (gain) on sale of equipment                                                  |  |                           | 81      |   |                           |   | (3      | )    |  |   | 81      |   |  |   | (3      | )
|Change in operating assets and liabilities:                                       |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Accounts receivable                                                               |  |                           | (4,916  | ) |                           |   | (11,789 | )    |  |   | (4,916  | ) |  |   | (11,789 | )
|Inventories                                                                       |  |                           | (2,455  | ) |                           |   | (5,422  | )    |  |   | (2,455  | ) |  |   | (5,422  | )
|Prepaid expenses                                                                  |  |                           | (9      | ) |                           |   | 169     |      |  |   | (9      | ) |  |   | 169     |  
|Other assets                                                                      |  |                           | 1       |   |                           |   | 4       |      |  |   | 1       |   |  |   | 4       |  
|Accounts payable and accrued liabilities                                          |  |                           | 822     |   |                           |   | (238    | )    |  |   | 822     |   |  |   | (238    | )
|                                                                                  |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Net cash provided by operating activities                                         |  |                           | 23,334  |   |                           |   | 5,727   |      |  |   | 23,334  |   |  |   | 5,727   |  
|                                                                                  |  |                           |         |  
|Cash flows from investing activities:                                             |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Proceeds from sale of property and equipment                                      |  |                           | 16      |   |                           |   | 13      |      |  |   | 16      |   |  |   | 13      |  
|Purchase of property, plant and equipment                                         |  |                           | (3,330  | ) |                           |   | (3,647  | )    |  |   | (3,330  | ) |  |   | (3,647  | )
|Purchase of display cabinets                                                      |  |                           | (3,071  | ) |                           |   | (3,231  | )    |  |   | (3,071  | ) |  |   | (3,231  | )
|                                                                                  |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Net cash used in investing activities                                             |  |                           | (6,385  | ) |                           |   | (6,865  | )    |  |   | (6,385  | ) |  |   | (6,865  | )
|                                                                                  |  |                           |         |  
|Cash flows from financing activities:                                             |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Payments on term loan                                                             |  |                           | (14,500 | ) |                           |   | (2,500  | )    |  |   | (14,500 | ) |  |   | (2,500  | )
|Book overdrafts payable                                                           |  |                           | 1,525   |   |                           |   | 1,254   |      |  |   | 1,525   |   |  |   | 1,254   |  
|Payments on bank revolving loan                                                   |  |                           |        |   |                           |   | (3,500  | )    |  |   |        |   |  |   | (3,500  | )
|Borrowings on bank revolving loan                                                 |  |                           |        |   |                           |   | 3,500   |      |  |   |        |   |  |   | 3,500   |  
|Proceeds from issuance of member interests                                        |  |                           | 35      |   |                           |   | 153     |      |  |   | 35      |   |  |   | 153     |  
|Repurchase of members interests                                                  |  |                           | (290    | ) |                           |   |        |      |  |   | (290    | ) |  |   |         |  
|Tax distributions to members                                                      |  |                           | (4,068  | ) |                           |   |        |      |  |   | (4,068  | ) |  |   |        |  
|                                                                                  |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Net cash (used in) provided by financing activities                               |  |                           | (17,298 | ) |                           |   | (1,093  | )    |  |   | (17,298 | ) |  |   | (1,093  | )
|                                                                                  |  |                           |         |  
|Effect of exchange rates on cash                                                  |  |                           | (117    | ) |                           |   | (31     | )    |  |   | (117    | ) |  |   | (31     | )
|                                                                                  |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Net decrease in cash                                                              |  |                           | (466    | ) |                           |   | (2,262  | )    |  |   | (466    | ) |  |   | (2,262  | )
|                                                                                  |  |                           |         |  
|Cash, beginning of the period                                                     |  |                           | 823     |   |                           |   | 2,583   |      |  |   | 823     |   |  |   | 2,583   |  
|                                                                                  |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Cash, end of period                                                               |  | $                         | 357     |   |                           | $ | 321     |      |  | $ | 357     |   |  | $ | 321     |  
|                                                                                  |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Supplemental disclosure of cash flow information:                                 |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Cash paid during the period for interest                                          |  | $                         | 7,675   |   |                           | $ | 8,297   |      |  | $ | 7,675   |   |  | $ | 8,297   |  
|                                                                                  |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Supplemental disclosure of non-cash transactions:                                 |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Tax distributions declared but not paid                                           |  | $                         | 330     |   |                           | $ | 580     |      |  | $ | 330     |   |  | $ | 580     |  
|                                                                                  |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Member interest repurchase declared but not paid                                  |  | $                         | 1,598   |   |                           | $ |        |      |  | $ | 1,598   |   |  | $ |        |  
|                                                                                  |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Members interest issued for consideration other than cash                        |  | $                         |        |   |                           | $ | 2,874   |      |  | $ |        |   |  | $ | 2,874   |  
|                                                                                  |  |                           |         |   |                           |   |         |      |  |   |         |   |  |   |         |  



See notes to
consolidated financial statements.



9



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##### Table of Contents

Norcraft Holdings, L.P. Norcraft Companies L.P.

Notes to Consolidated Financial Statements

(in thousands)

(unaudited)



|1. | Basis of Presentation
|-- | ---------------------



As more fully discussed in Note 11, Norcraft Holdings, L.P. restated its consolidated balance sheets as of December 31, 2003, June 30, 2004, September 30,
2004, December 31, 2004, and March 31, 2005 and statements of members equity and comprehensive income for the periods ended December 31, 2003, June 30, 2004, September 30, 2004, December 31, 2004, and March 31, 2005 included in the
accompanying consolidated audited financial statements to correct a classification error related to outstanding limited partnership units held by certain members of management.



Norcraft Holdings L.L.C. was formed on August 21, 2003, as a Delaware limited liability company to acquire all the
outstanding membership units of Norcraft Companies LLC. On October 10, 2003, Norcraft Holdings L.L.C. converted to a Delaware Limited Partnership and is now Norcraft Holdings L.P. (Holdings). Holdings had no activity prior to its
acquisition of Norcraft Companies LLC on October 21, 2003. Concurrent with the acquisition, Norcraft Companies LLC converted to a Delaware Limited Partnership and is now Norcraft Companies, L.P. Norcraft Companies, L.P. (Norcraft,), a
separate public reporting company, is a 100% owned indirect subsidiary of Holdings. Holdings and Norcraft are also collectively referred to as the Company.



The consolidated financial statements of Holdings include the accounts of its 100% owned subsidiary, Norcraft Intermediate
Holdings, L.P., whose sole asset is Norcraft. In August 2004, Holdings and Norcraft Capital Corp., Holdings wholly owned subsidiary, issued $118.0 million of 93/4% senior discount notes generating gross proceeds of $80.3 million. Holdings and Norcraft Capital Corp. are the sole obligors of these notes. The net proceeds of this offering
were used to make a distribution to Holdings limited partners. Other than this debt obligation, related deferred issuance costs, and related interest and amortization expense, all other assets, liabilities, income, expenses and cash flows of
Holdings presented for all periods represent those of its wholly owned subsidiary Norcraft.



Norcraft GP, L.L.C. (Norcraft GP), a Delaware limited liability company, is the general partner of Holdings and Norcraft. Norcraft GP does not
hold any equity interest in Holdings or Norcraft, but as a general partner of each entity, it controls both entities. The members of Norcraft GP are SKM Norcraft Corp., Trimaran Cabinet Corp. and Buller Norcraft Holdings, L.L.C. Norcraft GP has not
been capitalized and has no assets or liabilities as of June 30, 2005, December 31, 2004 or December 31, 2003. Furthermore, Norcraft GP has no commitment to fund cash flow deficits or furnish direct or indirect financial assistance to the Company.



Unless separately stated, the notes herein relate to both
Holdings and 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 2004, as filed with the commission. The interim consolidated financial statements as
of June 30, 2005 and for the three and six months ended June 30, 2005 include all normal recurring adjustments which management considers necessary for fair presentation.



|2. | Stock-Based Compensation
|-- | ------------------------



The Company accounts for stock-based compensation using the fair value method prescribed in Statement of Accounting Standards No. 123, Accounting
for Stock-Based Compensation. Compensation for stock awards, if any, is measured at the fair value of the reward less any consideration received in exchange for the award. Compensation expense related to stock options was $0.08 and $0.13
million for the three and six months ended June 30, 2005, respectively, with no such expense for the three or six months ended June 30, 2004.



The Company granted 147,434 additional options during the six months ended June 30, 2005.



10



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##### Table of Contents

|3. | Trade Accounts Receivable
|-- | -------------------------



Trade accounts receivable consists of the following:



|                                           |  |               |        |   |                   |   |        |  
|------------------------------------------ |  | ------------- | ------ | - | ----------------- | - | ------ | -
|                                           |  | June 30, 2005 |        |   | December 31, 2004 |  
|Trade accounts receivable, gross           |  | $             | 38,832 |   |                   | $ | 34,306 |  
|Less: Allowance for uncollectible accounts |  |               | (1,160 | ) |                   |   | (1,250 | )
|                                           |  |               |        |   |                   |   |        |  
|                                           |  | $             | 37,672 |   |                   | $ | 33,056 |  
|                                           |  |               |        |   |                   |   |        |  



|4. | Inventories
|-- | -----------



Inventories consist of the following:



|                           |  |               |        |                   |   |       
|-------------------------- |  | ------------- | ------ | ----------------- | - | ------
|                           |  | June 30, 2005 |        | December 31, 2004
|Raw materials and supplies |  | $             | 12,290 |                   | $ | 10,692
|Work in process            |  |               | 7,332  |                   |   | 6,060 
|Finished goods             |  |               | 4,893  |                   |   | 5,134 
|                           |  |               |        |                   |   |       
|                           |  | $             | 24,515 |                   | $ | 21,886
|                           |  |               |        |                   |   |       



|5. | Intangible assets
|-- | -----------------



Amortizable intangible assets consist of the following:



|                                  |  |                          |        |                         |                   |         |                      |  |                         |        |  |   |        |  
|--------------------------------- |  | ------------------------ | ------ | ----------------------- | ----------------- | ------- | -------------------- |  | ----------------------- | ------ |  | - | ------ | -
|                                  |  | Norcraft Holdings, L.P.  |       
|                                  |  | June 30, 2005            |        |                         | December 31, 2004 |        
|                                  |  | Gross CarryingAmount     |        | AccumulatedAmortization |                   |         | Gross CarryingAmount |  | AccumulatedAmortization |       
|Customer relationships            |  | $                        | 67,000 |                         | $                 | (7,569  | )                    |  | $                       | 67,000 |  | $ | (5,336 | )
|Deferred financing costs          |  |                          | 15,628 |                         |                   | (4,466  | )                    |  |                         | 15,628 |  |   | (3,105 | )
|                                  |  |                          |        |                         |                   |         |                      |  |                         |        |  |   |        |  
|Total                             |  | $                        | 82,628 |                         | $                 | (12,035 | )                    |  | $                       | 82,628 |  | $ | (8,441 | )
|                                  |  |                          |        |                         |                   |         |                      |  |                         |        |  |   |        |  
|Net amortizable intangible assets |  | $                        | 70,593 |                         |                   |         |                      |  | $                       | 74,187 |  |   |        |  
|                                  |  |                          |        |                         |                   |         |                      |  |                         |        |  |   |        |  
|                                  | 
|                                  |  | Norcraft Companies, L.P. |       
|                                  |  | Gross CarryingAmount     |        | AccumulatedAmortization |                   |         | Gross CarryingAmount |  | AccumulatedAmortization |       
|Customer relationships            |  | $                        | 67,000 |                         | $                 | (7,569  | )                    |  | $                       | 67,000 |  | $ | (5,336 | )
|Deferred financing costs          |  |                          | 12,095 |                         |                   | (4,166  | )                    |  |                         | 12,095 |  |   | (2,979 | )
|                                  |  |                          |        |                         |                   |         |                      |  |                         |        |  |   |        |  
|Total                             |  | $                        | 79,095 |                         | $                 | (11,735 | )                    |  | $                       | 79,095 |  | $ | (8,315 | )
|                                  |  |                          |        |                         |                   |         |                      |  |                         |        |  |   |        |  
|Net amortizable intangible assets |  | $                        | 67,360 |                         |                   |         |                      |  | $                       | 70,780 |  |   |        |  
|                                  |  |                          |        |                         |                   |         |                      |  |                         |        |  |   |        |  



Intangible assets not
subject to amortization consist of the following:



|            |  |               |         |                   |   |        
|----------- |  | ------------- | ------- | ----------------- | - | -------
|            |  | June 30, 2005 |         | December 31, 2004
|Goodwill    |  | $             | 148,459 |                   | $ | 148,459
|Brand names |  |               | 49,000  |                   |   | 49,000 
|            |  |               |         |                   |   |        
|Total       |  | $             | 197,459 |                   | $ | 197,459
|            |  |               |         |                   |   |        





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##### Table of Contents

There were no impairment losses or other gains and losses on disposal of intangible assets for the six
months ended June 30, 2005 and 2004.



|6. | Accrued expenses
|-- | ----------------



Accrued expenses consist of the following:



|                                            |  |               |        |                   |   |       
|------------------------------------------- |  | ------------- | ------ | ----------------- | - | ------
|                                            |  | June 30, 2005 |        | December 31, 2004
|Salaries, wages and employee benefits       |  | $             | 6,881  |                   | $ | 9,957 
|Commissions, rebates and marketing programs |  |               | 4,922  |                   |   | 4,111 
|Interest                                    |  |               | 2,393  |                   |   | 2,343 
|Other                                       |  |               | 6,197  |                   |   | 3,477 
|                                            |  |               |        |                   |   |       
|                                            |  | $             | 20,393 |                   | $ | 19,888
|                                            |  |               |        |                   |   |       



|7. | Warranty reserves
|-- | -----------------



Warranty reserve activity consists of the following:



|                  |  |               |        |   |               |   |        |  
|----------------- |  | ------------- | ------ | - | ------------- | - | ------ | -
|                  |  | June 30, 2005 |        |   | June 30, 2004 |  
|Beginning balance |  | $             | 520    |   |               | $ | 372    |  
|Additions         |  |               | 2,102  |   |               |   | 1,373  |  
|Deductions        |  |               | (2,017 | ) |               |   | (1,273 | )
|                  |  |               |        |   |               |   |        |  
|Ending balance    |  | $             | 605    |   |               | $ | 472    |  
|                  |  |               |        |   |               |   |        |  



|8. | Long-term debt
|-- | --------------



Long-term debt consists of the following:



|                                                                                                                                                                                                                                  |  |                         |         |                          |   |               |  |                   |         |  |   |        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | ------------------------ | - | ------------- |  | ----------------- | ------- |  | - | -------
|                                                                                                                                                                                                                                  |  | Norcraft Holdings, L.P. |         | Norcraft Companies, L.P.
|                                                                                                                                                                                                                                  |  | June 30, 2005           |         | December 31, 2004        |   | June 30, 2005 |  | December 31, 2004
|Senior subordinated notes payable (due in 2011 with semi-annual interest payments at 9%)                                                                                                                                          |  | $                       | 150,000 |                          | $ | 150,000       |  | $                 | 150,000 |  | $ | 150,000
|                                                                                                                                                                                                                                  |  |                         |         |                         
|Senior discount notes payable (due in 2012 with interest accreting at 9.75%)                                                                                                                                                      |  |                         | 87,311  |                          |   | 83,252        |  |                   |        |  |   |       
|                                                                                                                                                                                                                                  |  |                         |         |                         
|Term note payable to the agent bank, UBS (interest at the LIBOR plus 3.00% at June 30, 2005 and December 31, 2004, due in ascending quarterly
installments with final payment of the outstanding balance due on October 20, 2010) |  |                         | 16,000  |                          |   | 30,500        |  |                   | 16,000  |  |   | 30,500 
|                                                                                                                                                                                                                                  |  |                         |         |                          |   |               |  |                   |         |  |   |        
|Total debt                                                                                                                                                                                                                        |  |                         | 253,311 |                          |   | 263,752       |  |                   | 166,000 |  |   | 180,500
|Less - current portion                                                                                                                                                                                                            |  |                         |        |                          |   |              |  |                   |        |  |   |       
|                                                                                                                                                                                                                                  |  |                         |         |                          |   |               |  |                   |         |  |   |        
|Long-term debt                                                                                                                                                                                                                    |  | $                       | 253,311 |                          | $ | 263,752       |  | $                 | 166,000 |  | $ | 180,500
|                                                                                                                                                                                                                                  |  |                         |         |                          |   |               |  |                   |         |  |   |        



12



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##### Table of Contents

Senior Discount Notes



On August 17, 2004 Holdings and Norcraft Capital Corp., a 100% owned finance subsidiary of Holdings issued, on a joint and
several basis, $118.0 million aggregate principal amount at maturity ($80.3 million gross proceeds) of 93⁄4% Senior Discount Notes due 2012 (the Senior Notes). The net proceeds of this offering were used to make a distribution to
Holdings limited partners. Norcraft Capital Corp. was formed on August 12, 2004 and has no operations. Holdings has no independent operating assets, liabilities or activities other than its investment in Norcraft, the Senior Discount Notes and
related interest and deferred financing costs.



At any time on
or after September 1, 2008, Holdings may redeem the Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a premium, declining ratably to par, plus accrued and unpaid interest. At any time on or prior to
September 1, 2007, Holdings may redeem up to 35% of the aggregate accreted value of the Senior Notes with the proceeds of qualified equity offerings at a redemption price equal to 109.75% of the accreted value.



If Holdings experiences a change in control prior to September 1, 2008, it
may redeem all, but not less than all, of the Senior Notes at a purchase price equal to 100% of the accreted value plus a make-whole premium as defined.



If Holdings experiences a change in control prior to September 1, 2008, it may be required to offer to purchase the Senior Notes at a purchase price equal
to 101% of the accreted value plus accrued and unpaid interest.



The terms of the indenture governing the Senior Notes limit Holdings ability to, among other things, incur additional indebtedness, dispose of assets, make acquisitions, make other investments, pay dividends and make various other
payments.



Senior Subordinated Notes



On October 21, 2003, Holdings acquired all issued and outstanding membership
units of Norcraft Companies LLC The total purchase price was $335.0 million including related acquisition costs of $15.5 million. The acquisition was funded through $150.0 million in senior subordinated notes, $50.0 million from a senior credit
facility and $135.0 million in equity investor cash, in-kind contributions and rollover of management equity (Acquisition).



On October 21, 2003, concurrent with the Acquisition, an offering of $150.0 million, 9% senior subordinated notes due 2011 (the Senior Subordinated
Notes) was completed by Norcraft Companies, L.P. and its wholly-owned finance subsidiary, Norcraft Finance Corporation.



Subsequent to November 1, 2007, the Company has the option to redeem the Senior Subordinated Notes, in whole or part, at a redemption price equal to 100%
of the principal amount plus a premium declining ratably to par, plus accrued and unpaid interest. At any time prior to November 1, 2006, the Company may redeem up to 35% of the aggregate principal amount of the notes with the proceeds of qualified
equity offerings at a redemption price equal to 109% of the principal amount, plus accrued and unpaid interest.



If the Company experiences a change of control prior to November 1, 2007, they may redeem all, but not less than all, of the Senior Subordinated Notes at
a redemption price equal to 100% of the principal amount plus a make-whole premium as defined.



If the Company experiences a change of control subsequent to November 1, 2007, it may be required to offer to purchase the Senior Subordinated Notes at a
purchase price equal to 101% of the principal amount, plus accrued and unpaid interest.



Additionally, the terms of the indenture governing the Senior Subordinated Notes limit the Company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.



|9. | Condensed Consolidating Financial Statements
|-- | --------------------------------------------



The following represents certain condensed consolidating financial information of Norcraft Companies, L.P. as of June 30, 2005 and December 31, 2004 and
for the periods ended June 30, 2005 and 2004 for Norcraft and for Norcraft Canada Corporation, a 100% owned subsidiary of Norcraft, which fully and unconditionally guarantees the Senior Subordinated Notes on a joint and several basis.



13



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##### Table of Contents

CONDENSED CONSOLIDATING BALANCE SHEETS

As of June 30, 2005



|                                      |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|------------------------------------- |  | ------------------------- | ------- | ------------------------- | - | -------------- |  | ------------ | ----- |  | ----- | ------ | - |  | - | -------
|                                      |  | (1) Norcraft Companies LP |         | (1) NorcraftFinance Corp. |   | NorcraftCanada |  | Eliminations |       |  | Total
|Current assets:                       |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|Cash                                  |  | $                         | 240     |                           | $ |               |  | $            | 117   |  | $     |       |   |  | $ | 357    
|Trade accounts receivable, net        |  |                           | 37,540  |                           |   |               |  |              | 132   |  |       |       |   |  |   | 37,672 
|Inventories                           |  |                           | 23,195  |                           |   |               |  |              | 1,320 |  |       |       |   |  |   | 24,515 
|Prepaid expenses                      |  |                           | 1,258   |                           |   |               |  |              | 6     |  |       |       |   |  |   | 1,264  
|                                      |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|Total current assets                  |  |                           | 62,233  |                           |   |               |  |              | 1,575 |  |       |       |   |  |   | 63,808 
|                                      |  |                           |         |                           |  
|Property, plant and equipment         |  |                           | 31,562  |                           |   |               |  |              | 4,200 |  |       |       |   |  |   | 35,762 
|Investments in Norcraft Canada        |  |                           | 2,140   |                           |   |               |  |              |      |  |       | (2,140 | ) |  |   |       
|Other assets                          |  |                           | 275,245 |                           |   |               |  |              | 213   |  |       | (3,388 | ) |  |   | 272,070
|                                      |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|Total assets                          |  | $                         | 371,180 |                           | $ |               |  | $            | 5,988 |  | $     | (5,528 | ) |  | $ | 371,640
|                                      |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|                                      |  |                           |         |                           |  
|Current liabilities:                  |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|Current portion of long-term debt     |  | $                         |        |                           | $ |               |  | $            |      |  | $     |       |   |  | $ |       
|Book overdrafts payable               |  |                           | 1,525   |                           |   |               |  |              |      |  |       |       |   |  |   | 1,525  
|Accounts payable                      |  |                           | 11,150  |                           |   |               |  |              | 156   |  |       |       |   |  |   | 11,306 
|Accrued expenses                      |  |                           | 20,419  |                           |   |               |  |              | 304   |  |       |       |   |  |   | 20,723 
|                                      |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|Total current liabilities             |  |                           | 33,094  |                           |   |               |  |              | 460   |  |       |       |   |  |   | 33,554 
|                                      |  |                           |         |                           |  
|Long-term debt                        |  |                           | 166,000 |                           |   |               |  |              | 3,388 |  |       | (3,388 | ) |  |   | 166,000
|Members equity                       |  |                           | 172,086 |                           |   |               |  |              | 2,140 |  |       | (2,140 | ) |  |   | 172,086
|                                      |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|Total liabilities and members equity |  | $                         | 371,180 |                           | $ |               |  | $            | 5,988 |  | $     | (5,528 | ) |  | $ | 371,640
|                                      |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|                                     
|As of December 31, 2004              
|                                      |  |                           |         |                           |  
|                                      |  | (1) NorcraftCompanies LP  |         | (1) NorcraftFinance Corp. |   | NorcraftCanada |  | Eliminations |       |  | Total
|Current assets:                       |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|Cash                                  |  | $                         | 664     |                           | $ |               |  | $            | 159   |  | $     |       |   |  | $ | 823    
|Trade accounts receivable, net        |  |                           | 32,961  |                           |   |               |  |              | 95    |  |       |       |   |  |   | 33,056 
|Inventories                           |  |                           | 21,055  |                           |   |               |  |              | 831   |  |       |       |   |  |   | 21,886 
|Prepaid expenses                      |  |                           | 1,476   |                           |   |               |  |              | 21    |  |       |       |   |  |   | 1,497  
|                                      |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|Total current assets                  |  |                           | 56,156  |                           |   |               |  |              | 1,106 |  |       |       |   |  |   | 57,262 
|                                      |  |                           |         |                           |  
|Property, plant and equipment         |  |                           | 30,829  |                           |   |               |  |              | 4,130 |  |       |       |   |  |   | 34,959 
|Investments in Norcraft Canada        |  |                           | 2,016   |                           |   |               |  |              |      |  |       | (2,016 | ) |  |   |       
|Other assets                          |  |                           | 277,259 |                           |   |               |  |              | 213   |  |       | (3,108 | ) |  |   | 274,364
|                                      |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|Total assets                          |  | $                         | 366,260 |                           | $ |               |  | $            | 5,449 |  | $     | (5,124 | ) |  | $ | 366,585
|                                      |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|Current liabilities:                  |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|Accounts payable                      |  | $                         | 7,162   |                           | $ |               |  | $            | 137   |  | $     |       |   |  | $ | 7,299  
|Accrued expenses                      |  |                           | 19,700  |                           |   |                |  |              | 188   |  |       |       |   |  |   | 19,888 
|                                      |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|Total current liabilities             |  |                           | 26,862  |                           |   |               |  |              | 325   |  |       |       |   |  |   | 27,187 
|                                      |  |                           |         |                           |  
|Long-term debt                        |  |                           | 180,500 |                           |   |               |  |              | 3,108 |  |       | (3,108 | ) |  |   | 180,500
|Members equity                       |  |                           | 158,898 |                           |   |               |  |              | 2,016 |  |       | (2,016 | ) |  |   | 158,898
|                                      |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        
|Total liabilities and members equity |  | $                         | 366,260 |                           | $ |               |  | $            | 5,449 |  | $     | (5,124 | ) |  | $ | 366,585
|                                      |  |                           |         |                           |   |                |  |              |       |  |       |        |   |  |   |        

---

|(1) | Co-issuers.
|--- | -----------



14



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##### Table of Contents

CONDENSED CONSOLIDATING INCOME STATEMENTS

For the Three Months Ended June 30, 2005



|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|-------------------------------------------- |  | ------------------------ | ------- | - | ------------------------- | - | -------------- |  | - | ------------ | - |  | ----- | ------ | - |  | - | ------- | -
|                                             |  | (1) NorcraftCompanies LP |         |   | (1) NorcraftFinance Corp. |   | NorcraftCanada |  |   | Eliminations |   |  | Total |       
|Net sales                                    |  | $                        | 104,087 |   |                           | $ |               |  | $ | 3,606        |   |  | $     | (3,606 | ) |  | $ | 104,087 |  
|Cost of sales                                |  |                          | 73,121  |   |                           |   |               |  |   | 3,325        |   |  |       | (3,606 | ) |  |   | 72,840  |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Gross profit                                 |  |                          | 30,966  |   |                           |   |               |  |   | 281          |   |  |       |       |   |  |   | 31,247  |  
|Equity in earnings of Canadian Subsidiary    |  |                          | 191     |   |                           |   |               |  |   |             |   |  |       | (191   | ) |  |   |        |  
|Selling, general and administrative expenses |  |                          | 16,595  |   |                           |   |               |  |   | 90           |   |  |       |       |   |  |   | 16,685  |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Income (loss) from operations                |  |                          | 14,562  |   |                           |   |               |  |   | 191          |   |  |       | (191   | ) |  |   | 14,562  |  
|Other expense:                               |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Interest expense                             |  |                          | 3,832   |   |                           |   |               |  |   |             |   |  |       |       |   |  |   | 3,832   |  
|Amortization of deferred financing Costs     |  |                          | 585     |   |                           |   |               |  |   |             |   |  |       |       |   |  |   | 585     |  
|Other, net                                   |  |                          | 112     |   |                           |   |               |  |   |             |   |  |       |       |   |  |   | 112     |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|                                             |  |                          | 4,529   |   |                           |   |               |  |   |             |   |  |       |       |   |  |   | 4,529   |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Net income                                   |  | $                        | 10,033  |   |                           | $ |               |  | $ | 191          |   |  | $     | (191   | ) |  | $ | 10,033  |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|                                            
|For the Three Months Ended June 30, 2004     | 
|                                             |  |                          |         |   |                          
|                                             |  | (1) NorcraftCompanies LP |         |   | (1) NorcraftFinance Corp. |   | NorcraftCanada |  |   | Eliminations |   |  | Total |       
|Net sales                                    |  | $                        | 88,090  |   |                           | $ |               |  | $ | 1,260        |   |  | $     | (1,260 | ) |  | $ | 88,090  |  
|Cost of sales                                |  |                          | 58,577  |   |                           |   |               |  |   | 1,515        |   |  |       | (1,260 | ) |  |   | 58,832  |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Gross profit                                 |  |                          | 29,513  |   |                           |   |               |  |   | (255         | ) |  |       |       |   |  |   | 29,258  |  
|Equity in loss of Canadian Subsidiary        |  |                          | (317    | ) |                           |   |               |  |   |             |   |  |       | 317    |   |  |   |        |  
|Selling, general and administrative expenses |  |                          | 15,129  |   |                           |   |               |  |   | 60           |   |  |       |       |   |  |   | 15,189  |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Income (loss) from operations                |  |                          | 14,067  |   |                           |   |               |  |   | (315         | ) |  |       | 317    |   |  |   | 14,069  |  
|Other expense (income):                      |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Interest expense                             |  |                          | 4,041   |   |                           |   |               |  |   | (2           | ) |  |       |       |   |  |   | 4,039   |  
|Amortization of deferred financing costs     |  |                          | 616     |   |                           |   |               |  |   |             |   |  |       |       |   |  |   | 616     |  
|Other, net                                   |  |                          | (89     | ) |                           |   |               |  |   | 4            |   |  |       |       |   |  |   | (85     | )
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|                                             |  |                          | 4,568   |   |                           |   |               |  |   | 2            |   |  |       |       |   |  |   | 4,570   |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Net income                                   |  | $                        | 9,499   |   |                           | $ |               |  | $ | (317         | ) |  | $     | 317    |   |  | $ | 9,499   |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  

---

|(1) | Co-issuers.
|--- | -----------



15



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##### Table of Contents

CONDENSED CONSOLIDATING INCOME STATEMENTS

For the Six Months Ended June 30, 2005



|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|-------------------------------------------- |  | ------------------------ | ------- | - | ------------------------- | - | -------------- |  | - | ------------ | - |  | ----- | ------ | - |  | - | ------- | -
|                                             |  | (1) NorcraftCompanies LP |         |   | (1) NorcraftFinance Corp. |   | NorcraftCanada |  |   | Eliminations |   |  | Total |       
|Net sales                                    |  | $                        | 196,041 |   |                           | $ |               |  | $ | 5,794        |   |  | $     | (5,794 | ) |  | $ | 196,041 |  
|Cost of sales                                |  |                          | 136,277 |   |                           |   |               |  |   | 5,459        |   |  |       | (5,794 | ) |  |   | 135,942 |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Gross profit                                 |  |                          | 59,764  |   |                           |   |               |  |   | 335          |   |  |       |       |   |  |   | 60,099  |  
|Equity in earnings of Canadian Subsidiary    |  |                          | 167     |   |                           |   |               |  |   |             |   |  |       | (167   | ) |  |   |        |  
|Selling, general and administrative expenses |  |                          | 31,551  |   |                           |   |               |  |   | 168          |   |  |       |       |   |  |   | 31,719  |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Income (loss) from operations                |  |                          | 28,380  |   |                           |   |               |  |   | 167          |   |  |       | (167   | ) |  |   | 28,380  |  
|Other expense:                               |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Interest expense                             |  |                          | 7,725   |   |                           |   |               |  |   |             |   |  |       |       |   |  |   | 7,725   |  
|Amortization of deferred financing Costs     |  |                          | 1,187   |   |                           |   |               |  |   |             |   |  |       |       |   |  |   | 1,187   |  
|Other, net                                   |  |                          | 112     |   |                           |   |               |  |   |             |   |  |       |       |   |  |   | 112     |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|                                             |  |                          | 9,024   |   |                           |   |               |  |   |             |   |  |       |       |   |  |   | 9,024   |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Net income                                   |  | $                        | 19,356  |   |                           | $ |               |  | $ | 167          |   |  | $     | (167   | ) |  | $ | 19,356  |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|                                            
|For the Six Months Ended June 30, 2004       | 
|                                             |  |                          |         |   |                          
|                                             |  | (1) NorcraftCompanies LP |         |   | (1) NorcraftFinance Corp. |   | NorcraftCanada |  |   | Eliminations |   |  | Total |       
|Net sales                                    |  | $                        | 156,683 |   |                           | $ |               |  | $ | 1,781        |   |  | $     | (1,781 | ) |  | $ | 156,683 |  
|Cost of sales                                |  |                          | 104,143 |   |                           |   |               |  |   | 2,264        |   |  |       | (1,781 | ) |  |   | 104,626 |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Gross profit                                 |  |                          | 52,540  |   |                           |   |               |  |   | (483         | ) |  |       |       |   |  |   | 52,057  |  
|Equity in loss of Canadian Subsidiary        |  |                          | (604    | ) |                           |   |               |  |   |             |   |  |       | 604    |   |  |   |        |  
|Selling, general and administrative expenses |  |                          | 28,390  |   |                           |   |               |  |   | 121          |   |  |       |       |   |  |   | 28,511  |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Income (loss) from operations                |  |                          | 23,546  |   |                           |   |               |  |   | (604         | ) |  |       | 604    |   |  |   | 23,546  |  
|Other expense (income):                      |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Interest expense                             |  |                          | 7,979   |   |                           |   |               |  |   | (2           | ) |  |       |       |   |  |   | 7,977   |  
|Amortization of deferred financing costs     |  |                          | 1,244   |   |                           |   |               |  |   |             |   |  |       |       |   |  |   | 1,244   |  
|Other, net                                   |  |                          | (91     | ) |                           |   |               |  |   | 2            |   |  |       |       |   |  |   | (89     | )
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|                                             |  |                          | 9,132   |   |                           |   |               |  |   |             |   |  |       |       |   |  |   | 9,132   |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Net income                                   |  | $                        | 14,414  |   |                           | $ |               |  | $ | (604         | ) |  | $     | 604    |   |  | $ | 14,414  |  
|                                             |  |                          |         |   |                           |   |                |  |   |              |   |  |       |        |   |  |   |         |  

---

|(1) | Co-issuers.
|--- | -----------



16



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##### Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2005



|                                             |  |                                        |         |   |                          |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|-------------------------------------------- |  | -------------------------------------- | ------- | - | ------------------------ | - | -------------- |  | - | ------------ | - |  | ----- | ------ | - |  | - | ------- | -
|                                             |  | (1) NorcraftCompaniesLP                |         |   | (1) NorcraftFinanceCorp. |   | NorcraftCanada |  |   | Eliminations |   |  | Total |       
|Cash flows from operating activities         |  | $                                      | 23,272  |   |                          | $ |               |  | $ | 62           |   |  | $     |       |   |  | $ | 23,334  |  
|Cash flows from investing activities:        |  |                                        |         |   |                          |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Proceeds from sale of property and equipment |  |                                        | 16      |   |                          |   |               |  |   |             |   |  |       |       |   |  |   | 16      |  
|Purchase of property, plant and equipment    |  |                                        | (3,063  | ) |                          |   |               |  |   | (267         | ) |  |       |       |   |  |   | (3,330  | )
|Purchase of display cabinets                 |  |                                        | (3,071  | ) |                          |   |               |  |   |             |   |  |       |       |   |  |   | (3,071  | )
|Net borrowing to Norcraft Canada             |  |                                        | (280    | ) |                          |   |               |  |   |             |   |  |       | 280    |   |  |   |        |  
|                                             |  |                                        |         |   |                          |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Total cash flows from investing activities   |  |                                        | (6,398  | ) |                          |   |               |  |   | (267         | ) |  |       | 280    |   |  |   | (6,385  | )
|                                             |  |                                        |         |   |                         
|Cash flows from financing activities:        |  |                                        |         |   |                          |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Payments on term loan                        |  |                                        | (14,500 | ) |                          |   |               |  |   |             |   |  |       |       |   |  |   | (14,500 | )
|Book overdrafts payable                      |  |                                        | 1,525   |   |                          |   |               |  |   |             |   |  |       |       |   |  |   | 1,525   |  
|Proceeds from issuance of member interests   |  |                                        | 35      |   |                          |   |               |  |   |             |   |  |       |       |   |  |   | 35      |  
|Repurchase of members interests             |  |                                        | (290    | ) |                          |   |               |  |   |             |   |  |       |       |   |  |   | (290    | )
|Tax distributions to members                 |  |                                        | (4,068  | ) |                          |   |               |  |   |             |   |  |       |       |   |  |   | (4,068  | )
|Net borrowings from Norcraft                 |  |                                        |        |   |                          |   |               |  |   | 280          |   |  |       | (280   | ) |  |   |        |  
|                                             |  |                                        |         |   |                          |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Total cash flows from financing activities   |  |                                        | (17,298 | ) |                          |   |               |  |   | 280          |   |  |       | (280   | ) |  |   | (17,298 | )
|                                             |  |                                        |         |   |                         
|Effect of exchange rates on cash             |  |                                        |        |   |                          |   |               |  |   | (117         | ) |  |       |       |   |  |   | (117    | )
|                                             |  |                                        |         |   |                          |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Net increase/(decrease) in cash              |  |                                        | (424    | ) |                          |   |               |  |   | (42          | ) |  |       |       |   |  |   | (466    | )
|Cash, beginning of period                    |  |                                        | 664     |   |                          |   |               |  |   | 159          |   |  |       |       |   |  |   | 823     |  
|                                             |  |                                        |         |   |                          |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Cash, end of period                          |  | $                                      | 240     |   |                          | $ |               |  | $ | 117          |   |  | $     |       |   |  | $ | 357     |  
|                                             |  |                                        |         |   |                          |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|                                             | 
|                                             |  | For the Six Months Ended June 30, 2004 |        
|                                             |  | (1) NorcraftCompaniesLP                |         |   | (1) NorcraftFinanceCorp. |   | NorcraftCanada |  |   | Eliminations |   |  | Total |       
|Cash flows from operating activities         |  | $                                      | 6,723   |   |                          | $ |               |  | $ | (996         | ) |  | $     |       |   |  | $ | 5,727   |  
|Cash flows from investing activities:        |  |                                        |         |   |                          |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Proceeds from sale of property and equipment |  |                                        | 13      |   |                          |   |               |  |   |             |   |  |       |       |   |  |   | 13      |  
|Purchase of property, plant and equipment    |  |                                        | (3,058  | ) |                          |   |               |  |   | (589         | ) |  |       |       |   |  |   | (3,647  | )
|Purchase of display cabinets                 |  |                                        | (3,231  | ) |                          |   |               |  |   |             |   |  |       |       |   |  |   | (3,231  | )
|Net borrowing to Norcraft Canada             |  |                                        | (1,666  | ) |                          |   |               |  |   |             |   |  |       | 1,666  |   |  |   |        |  
|                                             |  |                                        |         |   |                          |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Total cash flows from investing activities   |  |                                        | (7,942  | ) |                          |   |               |  |   | (589         | ) |  |       | 1,666  |   |  |   | (6,865  | )
|                                             |  |                                        |         |   |                         
|Cash flows from financing activities         |  |                                        | (1,093  | ) |                          |   |               |  |   | 1,666        |   |  |       | (1,666 | ) |  |   | (1,093  | )
|Effect of exchange rates on cash             |  |                                        |        |   |                          |   |               |  |   | (31          | ) |  |       |       |   |  |   | (31     | )
|                                             |  |                                        |         |   |                          |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Net increase/(decrease) in cash              |  |                                        | (2,312  | ) |                          |   |               |  |   | 50           |   |  |       |       |   |  |   | (2,262  | )
|Cash, beginning of period                    |  |                                        | 2,533   |   |                          |   |               |  |   | 50           |   |  |       |       |   |  |   | 2,583   |  
|                                             |  |                                        |         |   |                          |   |                |  |   |              |   |  |       |        |   |  |   |         |  
|Cash, end of period                          |  | $                                      | 221     |   |                          | $ |               |  | $ | 100          |   |  | $     |       |   |  | $ | 321     |  
|                                             |  |                                        |         |   |                          |   |                |  |   |              |   |  |       |        |   |  |   |         |  

---

|(1) | Co-issuers.
|--- | -----------



Senior Credit Facility



On October 21, 2003, concurrent with the acquisition of Norcraft Companies LLC by Holdings, Norcraft entered into a $70.0 million senior credit facility with a third party for up to $25.0 million in available revolver funds and a $45.0
million term loan maturing on October 21, 2008. The senior credit facility allows for up to $10.0 million in authorized letters of credit. The interest rates on these facilities are based on LIBOR or prime, plus a premium. The premium is based on
the leverage ratio of the Company. At June 30, 2005, the revolver had an interest rate of LIBOR plus 2.00% and the term loan had a rate of LIBOR plus 3.00%. Borrowings under the senior credit facility are collateralized by substantially all of the
Companys assets. Approximately $3.5 million of letters of credit were outstanding at June 30, 2005 and December 31, 2004. The total available credit under the revolver at June 30, 2005 and December 31, 2004 was $21.6 million.



17



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##### Table of Contents

The senior credit facility contains covenants which, among other things, limit: (i) additional
indebtedness; (ii) dividends; (iii) capital expenditures and (iv) acquisitions, mergers and consolidations. The senior credit facility also contains certain financial covenants, including maximum leverage ratio, minimum interest coverage ratio and
minimum fixed charge coverage ratio.



Norcrafts senior
credit facility and the indenture governing the Senior Subordinated Notes each contain restrictions on Norcrafts ability to pay dividends and make certain other payments to Holdings. Pursuant to each arrangement, Norcraft may be subject to
certain limitations, including with respect to its ability to pay dividends or make such payments in connection with (i) repurchases of certain interests of Holdings, (ii) the payment by Holdings of taxes, costs and other expenses required to
maintain its legal existence and legal, accounting and other overhead costs in the ordinary course of business and (iii) permitted income tax distributions by Holdings to its limited partners.



During 2005, Norcraft has made advance debt payments on the term loan
facility totaling $14.5 million.



|10. | Members Equity Subject to Put Request
|--- | --------------------------------------



The limited partnership agreement of Holdings provides that certain employee equity holders may request that Holdings repurchase limited partnership units
upon their death or disability at the then fair market value. Following such a request, Holdings must use its commercially reasonable efforts to repurchase such units, subject to limitations on the repurchase of equity contained in the senior credit
facility and the indentures governing the Senior Discount Notes and Senior Subordinated Notes, respectively. The fair market value of these units is recorded outside of permanent equity. Any changes in the fair market value of these units are
reported as changes in members equity subject to put request in the statement of members equity and comprehensive income.



|11. | Restatement of Holdings Financial Statements
|--- | --------------------------------------------



Holdings has restated its consolidated balance sheets as of December 31, 2003, June 30, 2004, September 30, 2004, December 31, 2004, and March 31, 2005
and the related consolidated statements of changes in members equity and comprehensive income for the periods ended December 31, 2003, June 30, 2004, September 30, 2004, December 31, 2004, and March 31, 2005 because it had incorrectly
accounted for a portion of its outstanding limited partnership units subject to put request held by certain members of management that should have been classified as members equity subject to put request. Specifically, the limited partnership
agreement of Holdings provides that certain employee equity holders may request that Holdings repurchase limited partnership units upon their death or disability at the then fair market value. Following such a request, Holdings must use commercially
reasonable efforts to repurchase such units, subject to limitations on the repurchase of equity contained in the senior credit facility and the indentures governing the Senior Discount Notes and Senior Subordinated Notes, respectively. Any changes
in the fair market value of these units are reported as changes in members equity subject to put request in the statement of members equity and comprehensive income.



These restatements do not impact amounts already reported as net sales, net income, nor will they result in a default under
any provisions in our credit agreement or indentures. In addition, these restatements do not impact the financial statements of the operating company, Norcraft Companies, L.P.



Summarized below are the significant effects of the restatement:



18



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##### Table of Contents

Consolidated Balance Sheets

(dollar amounts in thousands)



|                                       |  |                         |         |                        |   |         |          |  |   |        
|-------------------------------------- |  | ----------------------- | ------- | ---------------------- | - | ------- | -------- |  | - | -------
|                                       |  | Norcraft Holdings, L.P.
|                                       |  | June 30, 2004          
|                                       |  | As PreviouslyReported   |         | RestatementAdjustments |   |         | Restated
|ASSETS                                 |  |                         |         |                        |   |         |          |  |   |        
|Current assets:                        |  |                         |         |                        |   |         |          |  |   |        
|Cash                                   |  | $                       | 321     |                        | $ |        |          |  | $ | 321    
|Trade accounts receivable, net         |  |                         | 35,459  |                        |   |        |          |  |   | 35,459 
|Inventories                            |  |                         | 22,361  |                        |   |        |          |  |   | 22,361 
|Prepaid expenses                       |  |                         | 1,831   |                        |   |        |          |  |   | 1,831  
|                                       |  |                         |         |                        |   |         |          |  |   |        
|Total current assets                   |  |                         | 59,972  |                        |   |        |          |  |   | 59,972 
|                                       |  |                         |        
|Property, plant and equipment, net     |  |                         | 33,597  |                        |   |        |          |  |   | 33,597 
|                                       |  |                         |        
|Other assets:                          |  |                         |         |                        |   |         |          |  |   |        
|Goodwill                               |  |                         | 148,459 |                        |   |        |          |  |   | 148,459
|Customer relationships, net            |  |                         | 63,898  |                        |   |        |          |  |   | 63,898 
|Brand names                            |  |                         | 49,000  |                        |   |        |          |  |   | 49,000 
|Deferred financing costs, net          |  |                         | 10,265  |                        |   |        |          |  |   | 10,265 
|Display cabinets, net                  |  |                         | 5,740   |                        |   |        |          |  |   | 5,740  
|Deposits                               |  |                         | 109     |                        |   |        |          |  |   | 109    
|                                       |  |                         |         |                        |   |         |          |  |   |        
|Total other assets                     |  |                         | 277,471 |                        |   |        |          |  |   | 277,471
|                                       |  |                         |         |                        |   |         |          |  |   |        
|Total assets                           |  | $                       | 371,040 |                        | $ |        |          |  | $ | 371,040
|                                       |  |                         |         |                        |   |         |          |  |   |        
|LIABILITIES AND MEMBERS EQUITY        |  |                         |         |                        |   |         |          |  |   |        
|Current liabilities:                   |  |                         |         |                        |   |         |          |  |   |        
|Current portion of long-term debt      |  | $                       | 5,000   |                        | $ |        |          |  | $ | 5,000  
|Book overdrafts payable                |  |                         | 1,254   |                        |   |        |          |  |   | 1,254  
|Accounts payable                       |  |                         | 9,533   |                        |   |        |          |  |   | 9,533  
|Accrued expenses                       |  |                         | 18,802  |                        |   |        |          |  |   | 18,802 
|Members distribution payable          |  |                         | 580     |                        |   |        |          |  |   | 580    
|                                       |  |                         |         |                        |   |         |          |  |   |        
|Total current liabilities              |  |                         | 35,169  |                        |   |        |          |  |   | 35,169 
|                                       |  |                         |        
|Long-term debt                         |  |                         | 187,500 |                        |   |        |          |  |   | 187,500
|                                       |  |                         |         |                        |   |         |          |  |   |        
|Commitments and contingencies          |  |                         |         |                        |   |         |          |  |   |        
|                                       |  |                         |        
|Members equity subject to put request |  |                         |        |                        |   | 34,910  |          |  |   | 34,910 
|                                       |  |                         |        
|Members equity                        |  |                         | 148,371 |                        |   | (34,910 | )        |  |   | 113,461
|                                       |  |                         |         |                        |   |         |          |  |   |        
|Total liabilities and members equity  |  | $                       | 371,040 |                        | $ |        |          |  | $ | 371,040
|                                       |  |                         |         |                        |   |         |          |  |   |        



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##### Table of Contents

Consolidated Statements of Changes in Members Equity and Comprehensive Income

(dollar amounts in thousands)



|                                                      |  |                         |         |   |                        |   |         |          |  |   |         |  
|----------------------------------------------------- |  | ----------------------- | ------- | - | ---------------------- | - | ------- | -------- |  | - | ------- | -
|                                                      |  | Norcraft Holdings, L.P. |        
|                                                      |  | Members Equity         |        
|                                                      |  | As PreviouslyReported   |         |   | RestatementAdjustments |   |         | Restated | 
|Balance, December 31, 2003                            |  | $                       | 131,763 |   |                        | $ | (22,354 | )        |  | $ | 109,409 |  
|                                                      |  |                         |        
|Issuance of Holdings members interest                |  |                         | 3,028   |   |                        |   |        |          |  |   | 3,028   |  
|                                                      |  |                         |        
|Accretion on members interest subject to put request |  |                         |        |   |                        |   | (12,556 | )        |  |   | (12,556 | )
|                                                      |  |                         |        
|Holdings Member tax distributions declared            |  |                         | (580    | ) |                        |   |        |          |  |   | (580    | )
|                                                      |  |                         |        
|Cumulative translation adjustment                     |  |                         | (254    | ) |                        |   |        |          |  |   | (254    | )
|                                                      |  |                         |        
|Net income                                            |  |                         | 14,414  |   |                        |   |        |          |  |   | 14,414  |  
|                                                      |  |                         |         |   |                        |   |         |          |  |   |         |  
|                                                      |  |                         |        
|Balance, June 30, 2004                                |  | $                       | 148,371 |   |                        | $ | (34,910 | )        |  | $ | 113,461 |  
|                                                      |  |                         |         |   |                        |   |         |          |  |   |         |  



20



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##### Table of Contents

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 acts 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.



Company 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 2004 annual report on Forms 10-K and 10-K/A.



All of our operations are conducted through Norcraft Companies, L.P. (Norcraft). Norcraft is an indirect wholly-owned subsidiary of Norcraft Holdings, L.P.,
(Holdings). The words Company, we, us, and our refer to Holdings together with Norcraft.



We continue to experience significant organic sales growth due to industry growth and increased market share. Our profitability at the gross margin level has also grown,
but at a lesser pace than sales due to material price increases in our industry and production inefficiencies in our plants. Profitability levels for Holdings at the net income level have also been reduced relative to prior-year periods by
additional interest and increased amortization of deferred financing costs as a result of increased indebtedness. Profitability levels for Norcraft at the net income level have improved slightly relative to prior-year periods because of the increase
in gross margin and stable interest and amortization of deferred financing costs.



General



We are a leader in manufacturing, assembling and
finishing kitchen and bathroom cabinetry in the United States. We provide our customers with a single source for a broad range of high-quality cabinetry, including stock, semi-custom and custom cabinets. Our cabinets are manufactured in both framed
and full access construction. We market our products through four brands: Mid Continent Cabinetry, UltraCraft, StarMark and Fieldstone. The Mid Continent and Ultracraft brands correspond to those divisions, while both the StarMark and Fieldstone
brands correspond to the StarMark division.



We were founded as Marshall
Millworks, Inc. in 1966 as a single millwork manufacturing facility located in Marshall, Minnesota. For the next 32 years, Marshall Millworks sold its products under the Mid Continent brand and grew organically, adding capacity as needed to support
growth. Marshall Millworks subsequently changed its name to Norcraft Companies, Inc. and, in 1998, Norcraft Companies, L.L.C. was formed and acquired the operating business of Norcraft Companies, Inc. In June 2000, we acquired the assets of The
UltraCraft Company, located in Liberty, North Carolina, in order to expand our product offering and customer base through the addition of a semi-custom full access cabinetry line. To further expand the breadth of our product offering, market
presence, and manufacturing capabilities, we acquired the StarMark and Fieldstone brands through the acquisition of the assets of StarMark, Inc., located in Sioux Falls, South Dakota, in March 2002.



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##### Table of Contents

On October 21, 2003, 100% of the outstanding membership units of Norcraft Companies, L.L.C. were acquired by Holdings, a
new entity formed at the direction of funds associated with Saunders Karp & Megrue L.L.C. and Trimaran Fund Management, L.L.C and our new chief executive officer, Mark Buller, and his relatives.



Results of Operations



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



|                                             |  |                            |   |  |                          |   |  |       |   |  |       |  
|-------------------------------------------- |  | -------------------------- | - |  | ------------------------ | - |  | ----- | - |  | ----- | -
|                                             |  | Norcraft Holdings, L.P.    |  
|                                             |  | Three Months EndedJune 30, |   |  | Six Months EndedJune 30, |  
|                                             |  | 2005                       |   |  | 2004                     |   |  | 2005  |   |  | 2004  |  
|Net sales                                    |  | 100.0                      | % |  | 100.0                    | % |  | 100.0 | % |  | 100.0 | %
|Cost of sales                                |  | 70.0                       | % |  | 66.8                     | % |  | 69.3  | % |  | 66.8. | %
|                                             |  |                            |   |  |                          |   |  |       |   |  |       |  
|Gross profit                                 |  | 30.0                       | % |  | 33.2                     | % |  | 30.7  | % |  | 33.2  | %
|Selling, general and administrative expenses |  | 16.0                       | % |  | 17.2                     | % |  | 16.2  | % |  | 18.2  | %
|                                             |  |                            |   |  |                          |   |  |       |   |  |       |  
|Income from operations                       |  | 14.0                       | % |  | 16.0                     | % |  | 14.5  | % |  | 15.0  | %
|Interest expense                             |  | 5.7                        | % |  | 4.6                      | % |  | 6.0   | % |  | 5.1   | %
|Amortization of deferred financing costs     |  | 0.6                        | % |  | 0.7                      | % |  | 0.7   | % |  | 0.8   | %
|Other, net                                   |  | 0.1                        | % |  | 0.0                      | % |  | 0.1   | % |  | 0.0   | %
|                                             |  |                            |   |  |                          |   |  |       |   |  |       |  
|Net income                                   |  | 7.6                        | % |  | 10.8                     | % |  | 7.7   | % |  | 9.2   | %
|                                             |  |                            |   |  |                          |   |  |       |   |  |       |  
|                                             | 
|                                             |  | Norcraft Companies, L.P.   |  
|                                             |  | Three Months EndedJune 30, |   |  | Six Months EndedJune 30, |  
|                                             |  | 2005                       |   |  | 2004                     |   |  | 2005  |   |  | 2004  |  
|Net sales                                    |  | 100.0                      | % |  | 100.0                    | % |  | 100.0 | % |  | 100.0 | %
|Cost of sales                                |  | 70.0                       | % |  | 66.8                     | % |  | 69.3  | % |  | 66.8  | %
|                                             |  |                            |   |  |                          |   |  |       |   |  |       |  
|Gross profit                                 |  | 30.0                       | % |  | 33.2                     | % |  | 30.7  | % |  | 33.2  | %
|Selling, general and administrative expenses |  | 16.0                       | % |  | 17.2                     | % |  | 16.2  | % |  | 18.2  | %
|                                             |  |                            |   |  |                          |   |  |       |   |  |       |  
|Income from operations                       |  | 14.0                       | % |  | 16.0                     | % |  | 14.5  | % |  | 15.0  | %
|Interest expense                             |  | 3.7                        | % |  | 4.6                      | % |  | 3.9   | % |  | 5.1   | %
|Amortization of deferred financing costs     |  | 0.6                        | % |  | 0.7                      | % |  | 0.6   | % |  | 0.8   | %
|Other, net                                   |  | 0.1                        | % |  | 0.0                      | % |  | 0.1   | % |  | 0.0   | %
|                                             |  |                            |   |  |                          |   |  |       |   |  |       |  
|Net income                                   |  | 9.6                        | % |  | 10.8                     | % |  | 9.9   | % |  | 9.2   | %
|                                             |  |                            |   |  |                          |   |  |       |   |  |       |  



22



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##### Table of Contents

Three Months Ended June 30, 2005 Compared with Three Months Ended June 30, 2004



Net Sales. Net sales increased by $16.0 million, or 18.2%, from $88.1 million for the
three months ended June 30, 2004 to $104.1 million for the same period of 2005. Each division contributed to the strong growth in sales with Mid Continent representing just under half of the overall increase in net sales, StarMark representing one
fourth of the increase and UltraCraft making up the remainder. In each case, the increases are due to the Companys ability to deliver innovative, quality products on time.



Cost of Sales. Cost of sales increased by $14.0 million, or 23.8%, from $58.8 million for the three months ended June 30, 2004 to
$72.8 million for same period of 2005. The increase was primarily attributable to our increased sales volume. Cost of sales as a percentage of net sales increased from 66.8% for the three months ended June 30, 2004 to 70.0% for the same period of
2005.



Gross Profit. Gross profit increased by $1.9 million, or 6.8%,
from $29.3 million for the three months ended June 30, 2004 to $31.2 million for the same period of 2005. Gross profit as a percentage of net sales decreased from 33.2% for the three months ended June 30, 2004 to 30.0% for the same period of 2005.
Gross profit was impacted by two primary factors. First, gross profit was negatively impacted by continuing production inefficiencies. We continue to adjust our production schedule to work to improve these production inefficiencies. Finally, the
material price increases experienced during the last half of 2004 were partially offset by our own price increases, the last of which were implemented during the first quarter of 2005 and will have a full impact as the year progresses.



Selling, General and Administrative Expenses. Selling, general and administrative
expenses increased by $1.5 million, or 9.8%, from $15.2 million for the three months ended June 30, 2004 to $16.7 million for the same period of 2005. Selling, general and administrative expenses were $0.9 million higher than the prior-year period
because of increased sales and marketing expense to generate new customers, market our new products, and support our increased sales volume. The remaining increase in selling, general and administrative expenses was in administrative costs that
indirectly support our increased sales volume. Selling, general and administrative expenses as a percentage of net sales decreased from 17.2% for the three months ended June 30, 2004 to 16.0% for the same period of 2005. We expect selling, general
and administrative expenses as a percentage of net sales to continue to be lower than prior year periods during the remainder of 2005.



Income from Operations. Income from operations increased by $0.5 million, or 3.5%, from $14.1 million for the three months ended June 30, 2004 compared to $14.6
million for the same period of 2005. The increase in income from operations was a result of factors described above. Income from operations as a percentage of net sales decreased from 16.0% for the three months ended June 30, 2004 to 14.0% for the
same period of 2005.



Interest, Amortization of Deferred Financing fees, and
Other Expenses. Holdings consolidated interest, amortization of deferred financing fees, and other expenses increased by $2.1 million, or 46.1%, from $4.6 million for the three months ended June 30, 2004 to $6.7 million for the same period
of 2005. The increase was attributable to an increase in interest expense of $1.9 million from increased indebtedness, and increased amortization of deferred financing charges as a result of the 9 3⁄4% Senior Discount Notes due 2012 (the
Senior Notes) issued in August of 2004 by Holdings and its wholly-owned finance subsidiary, Norcraft Capital Corp. The average debt balance was $256.5 million and $193.1 during the three months ended June 30, 2005 and 2004, respectively.
The average borrowing rate on the term note payable to the agent bank was 6.0% and 4.4% during the three months ended June 30, 2005 and 2004, respectively. The borrowing rates on the senior subordinated notes and senior discount notes are fixed at
9.0% and 9.75%, respectively. Interest, amortization of deferred financing fees, and other expenses for Holdings as a percentage of net sales increased from 5.2% for the three months ended June 30, 2004 to 6.4% for the same period of 2005.



Interest, amortization of deferred financing fees, and other expenses
decreased for Norcraft by $0.04 million, or 0.9%, from $4.6 million for the three months ended June 30, 2004 to $4.5 million for the same period of 2005. Interest, amortization of deferred financing fees, and other expenses for Norcraft as a
percentage of net sales decreased from 5.2% for the three months ended June 30, 2004 to 4.4% for the same period of 2005.



We expect interest and amortization of deferred financing fees to begin to decrease in future periods as debt balances continue to be paid down.



Net Income. Holdings net income decreased $1.6 million from $9.5 million for the
three months ended June 30, 2004 to $7.9 million for the same period of 2005, for the reasons described above. Net income as a percentage of net sales for Holdings decreased from 10.8% for the three months ended June 30, 2004 to 7.6% for the same
period of 2005.



23



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##### Table of Contents

Norcrafts net income increased $0.5 million from $9.5 million for the three months ended June 30, 2004 to $10.0
million for the same period of 2005, for the reasons described above. Net income as a percentage of net sales for Norcraft decreased from 10.8% for the three months ended June 30, 2004 to 9.6% for the same period of 2005.



Six Months Ended June 30, 2005 Compared with Six Months Ended June 30, 2004



Net Sales. Net sales increased by $39.4 million, or 25.1%, from
$156.7 million for the six months ended June 30, 2004 to $196.0 million for the same period of 2005. Each division contributed to the strong growth in sales with Mid Continent representing over half of the overall increase in net sales, StarMark
representing over one fourth of the increase and UltraCraft making up the remainder. In each case, the increases are due to the Companys ability to deliver innovative, quality products on time.



Cost of Sales. Cost of sales increased by $31.3 million, or 29.9%, from $104.6 million
for the six months ended June 30, 2004 to $135.9 million for same period of 2005. The increase was primarily attributable to our increased sales volume. Cost of sales as a percentage of net sales increased from 66.8% for the six months ended June
30, 2004 to 69.3% for the same period of 2005.



Gross Profit. Gross
profit increased by $8.0 million, or 15.4%, from $52.1 million for the six months ended June 30, 2004 to $60.1 million for the same period of 2005. Gross profit as a percentage of net sales decreased from 33.2% for the six months ended June 30, 2004
to 30.7% for the same period of 2005. Gross profit was impacted by a number of offsetting factors. First, effective on January 1, 2005, Norcraft changed its vacation policy. This change resulted in adjustments which increased gross profit by
approximately $1.3 million. Second, gross profit was negatively impacted by continuing production inefficiencies. Finally, the material price increases experienced during the last half of 2004 were partially offset by our own price increases, the
last of which were implemented during the first quarter of 2005 and will have a full impact as the year progresses. We continue to adjust our production schedule to improve the production inefficiencies.



Selling, General and Administrative Expenses. Selling, general and administrative
expenses increased by $3.2 million, or 11.3%, from $28.5 million for the six months ended June 30, 2004 to $31.7 million for the same period of 2005. Selling, general and administrative expenses were impacted by a number of offsetting factors.
First, effective on January 1, 2005, Norcraft changed its vacation policy. This change resulted in adjustments which decreased selling, general and administrative expenses by approximately $0.4 million. Selling, general and administrative expenses
were $2.2 million higher than the prior-year period because of increased sales and marketing expense to generate new customers, market our new products, and support our increased sales volume. The remaining increase in selling, general and
administrative expenses was in administrative costs that indirectly support our increased sales volume. Selling, general and administrative expenses as a percentage of net sales decreased from 18.2% for the six months ended June 30, 2004 to 16.2%
for the same period of 2005. We expect selling, general and administrative expenses as a percentage of net sales to continue to be lower than prior year periods during the remainder of 2005.



Income from Operations. Income from operations increased by $4.8 million, or 20.5%,
from $23.5 million for the six months ended June 30, 2004 compared to $28.4 million for the same period of 2005. The increase in income from operations was a result of factors described above, including the change in vacation policy. Income from
operations as a percentage of net sales decreased from 15.0% for the six months ended June 30, 2004 to 14.5% for the same period of 2005.



Interest, Amortization of Deferred Financing fees, and Other Expenses. Holdings consolidated interest, amortization of deferred financing fees, and other
expenses increased by $4.1 million, or 45.2%, from $9.1 million for the six months ended June 30, 2004 to $13.3 million for the same period of 2005. The increase was attributable to an increase in interest expense of $3.8 million from increased
indebtedness, and increased amortization of deferred financing charges as a result of the 9 3⁄4% Senior Discount Notes due 2012 (the Senior Notes) issued in August of 2004 by Holdings and its wholly-owned finance subsidiary, Norcraft
Capital Corp. The average debt balance was $258.5 million and $193.8 during the six months ended June 30, 2005 and 2004, respectively. The average borrowing rate on the term note payable to the agent bank was 5.8% and 4.4% during the six months
ended June 30, 2005 and 2004, respectively. The borrowing rates on the senior subordinated notes and senior discount notes are fixed at 9.0% and 9.75%, respectively. Interest, amortization of deferred financing fees, and other expenses for Holdings
as a percentage of net sales increased from 5.8% for the six months ended June 30, 2004 to 6.8% for the same period of 2005.



Interest, amortization of deferred financing fees, and other expenses decreased for Norcraft by $0.1 million, or 1.2%, from $9.1 million for the six months ended June 30,
2004 to $9.0 million for the same period of 2005. Interest, amortization of deferred financing fees, and other expenses for Norcraft as a percentage of net sales decreased from 5.8% for the six months ended June 30, 2004 to 4.6% for the same period
of 2005.



24



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##### Table of Contents

We expect interest and amortization of deferred financing fees to begin to decrease in future periods as debt balances
continue to be paid down.



Net Income. Holdings net income
increased $0.7 million from $14.4 million for the six months ended June 30, 2004 to $15.1 million for the same period of 2005, for the reasons described above. Net income as a percentage of net sales for Holdings decreased from 9.2% for the six
months ended June 30, 2004 to 7.7% for the same period of 2005.



Norcrafts net income increased $4.9 million from $14.4 million for the six months ended June 30, 2004 to $19.4 million for the same period of 2005, for the reasons described above. Net income as a percentage of net sales for Norcraft
increased from 9.2% for the six months ended June 30, 2004 to 9.9% for the same period of 2005.



Liquidity and Capital Resources



Our
primary cash needs are working capital, capital expenditures, display cabinets, tax distributions, and debt service. We finance these cash requirements through internally-generated cash flow and funds borrowed under our credit facility.



Cash provided by operating activities was $23.3 million for the six months ended June 30,
2005, compared with $5.7 million for the same period of 2004, an increase of $17.6 million. The increase was primarily due to the change in operating assets and liabilities of $10.7 million. This was complimented by the increase in income before
non-cash charges, which provided $6.9 million more cash during the six months ended June 30, 2005, as compared to the same period of 2004.



Cash used in investing activities was $6.4 million for the six months ended June 30, 2005, compared with $6.9 million for the same period of 2004, a decrease of $0.5
million. Capital expenditures were $3.3 million for the six months ended June 30, 2005, compared with $3.6 million for the same period of 2004. Additionally, expenditures for display cabinets were $3.1 million for the six months ended June 30, 2005,
compared with $3.2 million for the same period of 2004 a decrease of $0.1 million. Going forward, we expect cash used in investing activities to primarily consist of capital expenditures and expenditures for display cabinets.



Cash used in financing activities was $17.3 million for the six months ended June 30, 2005,
compared with $1.1 million used in the same period of 2004, an increase of $16.2 million. This increase was primarily due to prepayments of loans, which were $14.5 million for the six months ended June 30, 2005, compared with $2.5 million for the
same period of 2004. Also, estimated tax distributions to members were $4.1 million in the six months ended June 30, 2005, compared with none for the same period of 2004. Cash used in financing activities should continue as the cash generated above
is used to pay down debt and make member estimated tax distributions.



On
October 21, 2003, Norcraft entered into a $70.0 million senior credit facility and issued $150.0 million of 9% senior subordinated notes due 2012 (the Senior Subordinated Notes).



Norcrafts senior credit facility consists of a $25.0 million revolving credit facility
and a $45.0 million term loan facility. Availability under the revolving credit facility has been reduced by $3.5 million as a result of the issuance of a letter of credit. The borrowings under the revolving credit facility are available until its
maturity to fund Norcrafts working capital requirements, capital expenditures and other general corporate needs. The revolving credit facility matures on October 21, 2008 and has no scheduled amortization or commitment reductions. The term
loan facility matures on October 21, 2009 and has quarterly scheduled amortization, which began September 30, 2004. Norcrafts term loan facility currently bears interest at LIBOR plus 3.00%, and its revolving credit facility currently bears
interest at LIBOR plus 2.00%. The applicable margin percentage under the revolving loan facility is subject to adjustments based on the ratio of Norcrafts total indebtedness to our consolidated EBITDA. Additionally, on the last day of each
calendar quarter, Norcraft is required to pay each lender a 0.375% per annum commitment fee in respect of any unused commitments of such lender under the revolving loan facility subject to adjustment in a manner similar to the adjustment for the
applicable margin for the revolving credit facility. In addition, Norcraft is required to make annual mandatory prepayments of the term loan under its senior credit facility in an amount equal to 50% of excess cash flow (as defined in the senior
credit facility). The term loan is also subject to mandatory prepayments in an amount equal to (a) 50% of the net cash proceeds from certain equity issuances; (b) 100% of the net cash proceeds of certain debt and preferred stock issuances; (c) 100%
of the net cash proceeds of certain asset sales or other dispositions of property; and (d) 100% of all casualty and condemnation proceeds, in each case subject to certain exceptions.



Norcraft is required to pay cash interest on the Senior Subordinated Notes semi-annually in arrears on May 1 and November 1 of each year.
The Senior Subordinated Notes have no scheduled amortization and mature on November 1, 2011.



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The senior credit facility contains covenants, which, among other things, limit: (i) additional indebtedness; (ii)
dividends; (iii) capital expenditures and (iv) acquisitions, mergers and consolidations. The facility also contains certain financial covenants, including maximum leverage ratio, minimum interest coverage ratio and minimum fixed charge coverage
ratio. Norcraft was in compliance with these covenants at June 30, 2005. Indebtedness under the senior credit facility is secured by substantially all of Norcrafts assets, including its real and personal property, inventory, accounts
receivable, intellectual property and other intangibles. In addition, the senior credit facility is guaranteed by its parent, Norcraft Intermediate Holdings, L.P., and secured by its assets (including Norcraft equity interests), as well as
guaranteed by and secured by the equity interests and substantially all of the assets of our current and, if any, future subsidiaries, with certain exceptions.



On August 17, 2004 Holdings and Norcraft Capital Corp., a 100% owned finance subsidiary of Holdings issued, on a joint and several basis, $118.0 million aggregate
principal amount at maturity ($80.3 million gross proceeds) of 93⁄4% Senior Discount Notes due 2012 (the Senior Notes). The net proceeds of this offering were used to make a distribution to Holdings limited partners. Norcraft
Capital Corp. was formed on August 12, 2004 and has no operations. Interest is accruing on the Senior Notes in the form of an increase in the accreted value of the Senior Notes prior to September 1, 2008. Thereafter, cash interest on the Senior
Notes accrues and is payable semiannually in arrears on March 1 and September 1 of each year, commencing March 1, 2009 at a rate of 93/4% per annum.



At any time on or after September
1, 2008, Holdings may redeem the Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a premium, declining ratably to par, plus accrued and unpaid interest. At any time on or prior to September 1,
2007, Holdings may redeem up to 35% of the aggregate accreted value of the notes with the proceeds of qualified equity offerings at a redemption price equal to 109.75% of the accreted value.



If Holdings experiences a change in control prior to September 1, 2008, it may redeem all,
but not less than all, of the Senior Notes at a purchase price equal to 100% of the accreted value plus a make-whole premium as defined.



If Holdings experiences a change in control, it may be required to offer to purchase the Senior Notes at a purchase price equal to 101% of the accreted value, plus any
accrued and unpaid interest.



Additionally, the terms of the Senior Notes limit
Holdings 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. Norcraft was
in compliance with these terms at June 30, 2005.



We anticipate that the funds
generated by operations and funds available under the revolving credit facility will be sufficient to meet working capital requirements and to finance capital expenditures over the next several years. 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 borrowings will be available under our senior credit facility in an amount sufficient to enable
us to service our indebtedness or to fund our other liquidity needs.



Taxes;
Distributions to our Limited Partners



We are a limited partnership. As
such, our income is allocated to our limited partners for inclusion in their respective tax returns. 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.



Norcrafts senior credit facility and the indenture governing the Senior Subordinated Notes significantly restrict Norcraft and its subsidiaries from paying dividends and otherwise transferring assets to Holdings. Norcraft may,
however, make distributions to Holdings, subject to certain limitations, to permit it to make further distributions to its equity holders to pay taxes on our net income allocated to them. Tax distributions paid for the six months ended June 30, 2005
were $4.1 million.



Inflation; Seasonality



Our costs of sales are 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.



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Item 3. Quantitative and Qualitative Disclosures of Market Risk



As of June 30, 2005, the Company had a $25.0 million revolving credit facility which has a variable rate of interest and has the potential to expose us to fluctuations in the interest rate market. However, as of June
30, 2005, there were no borrowings under this facility. We have no interest rate swap agreements.



Item 4. Controls and Procedures



Evaluation of
Disclosure Controls and Procedures



Holdings management, under the
supervision of and with the participation of Holdings Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Holdings disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. In connection with the restatement described below and in Note 11 of this
report, management determined that a material weakness existed in Holdings internal control over financial reporting as of June 30, 2005. Because of this material weakness, management determined that Holdings disclosure controls and
procedures were not effective as of June 30, 2005 to ensure that all material information required to be included in Holdings reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in
the reports that it files or submits under the Act is accumulated and communicated to the issuers management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure. To address this material weakness, Holdings management performed additional analysis and other post-closing procedures to ensure that Holdings consolidated financial statements were
prepared in accordance with accounting principles generally accepted in the United States of America. Accordingly, management believes that (i) the consolidated financial statements, as restated, fairly present in all material respects
Holdings financial condition, results of operations and cash flows for the periods presented, and (ii) 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.



Consideration of the Restatement



The restatement corrects an error in Holdings consolidated balance sheets as of December 31, 2003, June 30, 2004, September 30, 2004, December 31, 2004, and March
31, 2005, related to certain limited partnership units held by management and previously classified as permanent equity. The limited partnership agreement of Holdings provides that certain employee equity holders may request Holdings to repurchase
their limited partnership units upon either their death or disability. Following such a request, Holdings must use commercially reasonable efforts to repurchase such units, subject to limitations on the repurchase of equity contained in the senior
credit facility and the indentures governing the Senior Discount Notes and Senior Subordinated Notes, respectively. Holdings has determined the partnership units subject to this put request are contingently redeemable shares and should therefore be
classified as temporary, or members equity subject to put request. Further, to the extent that there is change in the fair value of these partnership units, Holdings will record a corresponding change in the carrying value of the members
equity subject to put request and a change in members equity.



Management
evaluated the materiality of the correction on its consolidated financial statements using the guidelines of Staff Accounting Bulletin No. 99, Materiality and concluded that the effects of the corrections were material to its 2004 annual
consolidated financial statements, as well as its interim consolidated financial statements for the quarters ended September 30, 2004 and March 31, 2005. Accordingly, management concluded that it would restate its previously issued 2004 annual
consolidated financial statements as well as its interim consolidated financial statements for the quarters ended September 30, 2004 and March 31, 2005.



Internal Control over Financial Reporting



A material weakness is a control deficiency or combination of control deficiencies that results in more than a remote likelihood that a material misstatement of the
annual or interim consolidated financial statements will not be prevented or detected. As of June 30, 2005, Holdings did not maintain effective control over financial reporting to ensure members equity was accurately presented for redeemable
units or that the accounting treatment related to redeemable units was appropriately reviewed to ensure compliance with accounting principles generally accepted in the United States of



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America. The transaction related to these redeemable units was non-routine in nature. Specifically, the Company did not have adequate controls over the
classification of certain partnership units subject to put request nor the proper evaluation of the relevant accounting literature related to such units. This control deficiency resulted in a restatement of Holdings 2004 annual consolidated
financial statements, as well as, Holdings interim consolidated financial statements for the quarters ended September 30, 2004 and March 31, 2005. Additionally, this control deficiency could result in a misstatement of members equity
that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, management determined that this control deficiency constitutes a material weakness.



Managements Remediation Plan



We have developed a plan to remediate the identified material weaknesses. Several elements
of our remediation plan, which were initiated in September 2005, can only be accomplished over time. In connection with our remedial efforts to date, both the Chief Financial Officer and the Controller of Holdings have evaluated EITF D-98:
Classification and Measurement of Redeemable Securities and other relevant accounting literature. The purpose of this evaluation was to strengthen managements understanding of the appropriate presentation and disclosure of members equity
in accordance with accounting principles generally accepted in the United States of America, specifically related to non-routine transactions.



Changes in Internal Control over Financial Reporting



There have not been any changes in Holdings internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act during Holdings fiscal quarter ended September 30, 2004 that have materially affected, or are reasonably likely to materially affect, Holdings internal control over financial reporting.



Limitations on the Effectiveness of Controls



Holdings internal control over financial reporting is a process designed 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. Holdings internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of Holdings are
being made only in accordance with authorizations of management and directors and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Holdings assets that could have a
material effect on the financial statements.



Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.



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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. The Company is not a party to any other pending legal proceedings other than ordinary routine litigation incidental to
its business. In managements opinion, adverse decisions on legal proceedings, in the aggregate, would not have a materially adverse impact on the Companys results of operations or financial position. 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 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.



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SIGNATURES



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



NORCRAFT HOLDINGS, L.P.(Registrant)NORCRAFT COMPANIES, L.P.(Registrant)




|                            |  |  |  |                            
|--------------------------- |  |  |  | ---------------------------
|/s/ Mark Buller             |  |  |  | /s/ Leigh Ginter           
|Mark Buller                 |  |  |  | Leigh Ginter               
|Chief Executive Officer     |  |  |  | Chief Financial Officer    
|                            |  | 
|Date: September 20, 2005    |  |  |  | Date: September 20, 2005   
|Signing on behalf of the    |  |  |  | Signing on behalf of the   
|Registrant and as principal |  |  |  | Registrant and as principal
|Officer                     |  |  |  | accounting officer         



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