UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended ~~March~~June 3130, 2010

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

Commission file number: ~~333-115490~~

333-115490

WII COMPONENTS, INC.

(Exact name of registrant as specified in its charter)

Delaware		No. 73-1662631
(State of Incorporation)		(I.R.S. Employer Identification No.)

525 Lincoln Avenue SE, St. Cloud, Minnesota 56304

(Address of principal executive offices) (Zip Code)

(320) 252-1503

(Registrant’s telephone number, Including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o.

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

Large Accelerated Filer o		Accelerated Filer o

Non-accelerated Filer x		Smaller Reporting Company o.

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

As of ~~May~~August 109, 2010, 100 shares of common stock, $.01 par value per share, were outstanding (all of which are owned by WII Holding, Inc.).

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WII COMPONENTS, INC.

FORM 10-Q

Quarter Ended

~~March~~June 3130, 2010

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Part I—Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (unaudited) as of March 31, 2010 and December 31, 2009	1
Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2010 and December 31, 2009	1
Condensed Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2010 and 2009	2
Condensed Consolidated Statements of Operations (unaudited) for the Three Months Ended June 30, 2010 and 2009	2
Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2010 and 2009	3
Condensed Consolidated Statements of Operations (unaudited) for the Six Months Ended June 30, 2010 and 2009	3
Notes to Condensed Consolidated Financial Statements (unaudited)	4
Condensed Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2010 and 2009	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 3. Quantitative and Qualitative Disclosures About Market Risk	14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 4T. Controls and Procedures	14
Item 3. Quantitative and Qualitative Disclosures About Market Risk	16
Item 4T. Controls and Procedures	17
Part II-Other Information
Item 1. Legal Proceedings	1618
Item 1A. Risk Factors	1618
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	1618
Item 3. Defaults Upon Senior Securities	1618
Item 4. Reserved	16
Item 4. Removed and Reserved	18
Item 5. Other Information	1618
Item 6. Exhibits	1618
Signatures	1719

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WII COMPONENTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands)

	March 31, 2010			December 31, 2009
	June 30, 2010			December 31, 2009
ASSETS
Current Assets:
Cash	$	3,~~132~~641		$	13,102
Accounts receivable, net	1921,~~231~~232			10,754
Inventories	1417,~~453~~355			14,407
Other current assets	32,~~008~~823			2,662
Total current assets	3945,~~824~~051			40,925
Property, plant, and equipment, net	4948,~~892~~570			51,279
Goodwill	99,152			99,152
Customer relationship	7,~~852~~437			8,266
Noncompete agreements	2213			31
Other assets	32,~~093~~718			3,424
TOTAL	$	~~199~~202,~~835~~941		$	203,077
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt	$	—		$	—
Accounts payable	$	4,259		$	3,990
Accounts payable	3,850			3,990
Accrued payroll	4,060			2,713
Accrued payroll	3,750			2,713
Due to Parent	4,535			4,578
Other current liabilities	58,~~806~~255			8,648
Total current liabilities	1721,~~941~~109			19,929
Long-term debt, net of current maturities	108,350			108,350
Long-term debt	108,350			108,350
Deferred income tax liability	2,~~664~~602			3,174
Other long-term liabilities	2,~~459~~594			2,324
Stockholders’ Equity:
Common stock	—			—
Additional paid-in capital	71,~~354~~366			71,341
Accumulated deficit	(23,~~933~~080		)	(2,041		)
Total stockholders’ equity	68,~~421~~286			69,300
TOTAL	$	~~199~~202,~~835~~941		$	203,077

See notes to condensed consolidated financial statements (unaudited).

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WII COMPONENTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(In thousands)

	Three Months Ended March 31, 2010			Three Months Ended March 31, 2009
	Three Months Ended June 30, 2010			Three Months Ended June 30, 2009
NET SALES	$	3440,~~643~~183		$	3234,~~805~~346
COST OF SALES	2934,~~862~~277			28,~~338~~469
Gross profit	45,~~781~~906			45,~~467~~877
OPERATING EXPENSES:
General and administrative	2,~~365~~195			2,~~300~~331
Selling and marketing	~~763~~775			~~733~~782
Loss on sale of assets	1			11
Total operating expenses	2,970			3,113
Total operating expenses	3,129			3,044
OPERATING INCOME	2,936			2,764
OPERATING INCOME	1,652			1,423
OTHER INCOME (EXPENSE):
Interest income	—4			4—
Interest expense	(3,~~056~~151		)	(3,~~026~~151		)
Other income/expense	2			12
Total other income (expense)	(3,~~054~~145		)	(3,~~021~~149		)
LOSS BEFORE BENEFIT FOR INCOME TAXES	(~~1,402~~209		)	(~~1,598~~385		)
INCOME TAX BENEFIT	(~~510~~62		)	(~~593~~140		)
NET LOSS	$	(~~892~~147	)	$	(~~1,005~~245	)

See notes to condensed consolidated financial statements (unaudited).

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WII COMPONENTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~OPERATIONS

(UNAUDITED)

(In thousands)

	Three Months Ended March 31, 2010			Three Months Ended March 31, 2009
	Six Months Ended June 30, 2010			Six Months Ended June 30, 2009
OPERATING ACTIVITIES:
NET SALES	$	74,825		$	67,151
Net loss	$	(892	)	$	(1,005	)
COST OF SALES	64,139			56,806
Adjustments to reconcile net loss to net cash used in operating activities:
Gross profit	10,686			10,345
Depreciation and amortization	2,042			2,144
OPERATING EXPENSES:
General and administrative	4,559			4,631
Selling and marketing	1,538			1,516
Loss on sale of assets	1			11
Amortization of debt issuance costs	375			369
Total operating expenses	6,098			6,158
Deferred income tax benefit	(510		)	—
OPERATING INCOME	4,588			4,187
Stock compensation expense	12			13
OTHER INCOME (EXPENSE):
Change in operating assets and liabilities:
Interest income	3			4
Accounts receivable	(8,477		)	(4,185		)
Interest expense	(6,206		)	(6,177		)
Inventories	(46		)	(2,549		)
Other income/expense	4			3
Other current assets	(346		)	(1,339		)
Total other income (expense)	(6,199		)	(6,170		)
Accounts payable	(140		)	2,137
LOSS BEFORE BENEFIT FOR INCOME TAXES	(1,611		)	(1,983		)
Accrued payroll and other current liabilities	(1,805		)	(3,140		)
INCOME TAX BENEFIT	(572		)	(733		)
Other long term liabilities	135			—
NET LOSS	$	(1,039	)	$	(1,250	)
Net cash used in operating activities	(9,651		)	(7,544		)
INVESTING ACTIVITIES:
Purchases of property, plant, and equipment	(235		)	(244		)
Proceeds from sale of property, plant and equipment	3			10
Net cash used in investing activities	(232		)	(234		)
FINANCING ACTIVITIES:
Principal payments under long-term financing agreements	—			(3,597		)
Debt issuance costs	(44		)	(136		)
Due to Parent	(43		)	(26		)
Net cash used in financing activities	(87		)	(3,759		)
NET DECREASE IN CASH	(9,970		)	(11,537		)
CASH—Beginning of period	13,102			14,721
CASH—End of period	$	3,132		$	3,184
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	5,449		$	5,486
Cash paid for income taxes	$	49		$	69

See notes to condensed consolidated financial statements (unaudited).

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WII COMPONENTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

	Six Months Ended June 30, 2010			Six Months Ended June 30, 2009
OPERATING ACTIVITIES:
Net loss	$	(1,039	)	$	(1,250	)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	4,045			4,269
Loss on sale of assets	1			11
Amortization of debt issuance costs	756			750
Deferred income tax benefit	(572		)	(733		)
Stock compensation expense	25			25

Change in operating assets and liabilities:
Accounts receivable	(10,478		)	(3,946		)
Inventories	(2,948		)	(1,009		)
Other current assets	(161		)	(412		)
Accounts payable	269			2,681
Accrued payroll and other current liabilities	954			738
Other long term liabilities	270			—
Net cash provided by (used in) operating activities	(8,878		)	1,124

INVESTING ACTIVITIES:
Purchases of property, plant, and equipment	(493		)	(522		)
Proceeds from sale of property, plant and equipment	3			10
Net cash used in investing activities	(490		)	(512		)

FINANCING ACTIVITIES:
Principal payments under long-term financing agreements	—			(3,597		)
Debt issuance costs	(50		)	(136		)
Due to Parent	(43		)	(55		)
Net cash used in financing activities	(93		)	(3,788		)

NET DECREASE IN CASH	(9,461		)	(3,176		)
CASH—Beginning of period	13,102			14,721

CASH—End of period	$	3,641		$	11,545

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	5,480		$	5,518

Cash paid for income taxes	$	90		$	112

See notes to condensed consolidated financial statements (unaudited).

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WII COMPONENTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION

Company Background— On January 9, 2007, WII Components, Inc. (the “Company”) was acquired by WII Holding, Inc. (“Parent”), a newly formed investment entity controlled by two investment funds managed by Olympus Partners. For ease of reference, these funds are sometimes collectively referred to herein as the “Olympus Funds.” The acquisition was consummated through a merger of WII Merger Corporation (“MergerCo”), a wholly owned subsidiary of Parent, with and into the Company with the Company being the surviving corporation in the transaction (the “Transaction”). The aggregate purchase price paid by Parent for all of the shares of capital stock of the Company and options to purchase shares of capital stock of the Company in the Transaction was approximately $293.1 million, less indebtedness and certain expenses. The aggregate purchase price and related fees and expenses were funded by borrowings under new credit facilities by the Company and private offerings of debt and equity securities by Parent. The Transaction has been accounted for as a recapitalization in the Company’s financial statements, with no adjustments to the historical basis of the Company’s assets and liabilities. The Company did not push down the new accounting basis because of the significance of the publicly traded debt outstanding, which hinders Parent’s ability to control the form of ownership of the Company.

The Company prepared the accompanying unaudited condensed consolidated financial statements following the requirements of the Securities and Exchange Commission for interim reporting. As permitted under those rules, certain notes or other financial information normally required by accounting principles generally accepted in the United States of America have been condensed or omitted. Therefore, the Company suggests that these financial statements be read in conjunction with the consolidated financial statements and accompanying notes for the year ended December 31, 2009 included in its Form 10-K as filed with the Securities and Exchange Commission on March 31, 2010. The condensed consolidated balance sheet as of December 31, 2009 was derived from the audited consolidated financial statements at that date, but does not include all the information and notes required by accounting principles generally accepted in the United States of America for complete presentation.

In management’s opinion, the accompanying unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring items) considered necessary to present fairly, when read in conjunction with the consolidated financial statements and accompanying notes for the period ended December 31, 2009 included in our Form 10-K as filed with the Securities and Exchange Commission on March 31, 2010, our financial position, results of operations and cash flows for the periods presented.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in the preparation of the consolidated financial statements.

2. SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition—Sales are recognized when revenue is realized or realizable and has been earned. The Company’s policy is to recognize revenue and the related cost of sales when risk and title passes to the customer. This is generally on the date of shipment, however, certain sales are shipped FOB destination and revenue is recognized when received by the customer. Freight billed to customers is included in sales and shipping costs are included in cost of sales. The Company records an estimate for anticipated sales returns and customer discounts at the time revenue is recognized based on historical experience and current trends. These estimates have been consistent with the Company’s actual experiences. Provisions for estimated sales returns and customer discounts are recorded as a reduction of net sales. For the three ~~months~~month ~~ended~~and ~~March~~six month periods ended June 3130, 2010 and 2009, the provision for estimated sales returns and customer discounts as a percentage of net sales was approximately 2% and 3%, respectively.

Concentration of Credit Risk—The Company receives a significant portion of its revenue from two customers. For the ~~three~~six months ended ~~March~~June 3130, 2010 and 2009, the Company’s two largest customers accounted for approximately 5756% and 55 57%, respectively, of its net sales. As of ~~March~~June 3130, 2010 and December 31, 2009, these two largest customers accounted for approximately 75% and 73%, respectively, of the Company’s consolidated accounts receivables balance. The permanent loss of, or a significant decrease in the level of purchases by, one or more of our major customers ~~could~~ would have a material adverse effect on our results of operations and future cash flows.

Inventories—Inventories consisted of the following (in thousands):

	March 31, 2010		December 31, 2009
	June 30, 2010		December 31, 2009
Raw materials	$	79,~~530~~582	$	7,338
Work in process	3,~~165~~587		3,213
Finished goods	2,~~481~~915		2,322
LIFO adjustment	1,~~277~~271		1,534
	$	1417,~~453~~355	$	14,407

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The majority of inventory is is valued at the lower of last-in, first-out (“LIFO”) cost or market. The remainder of the inventory is valued at the lower of first-in, first-out method (“FIFO”) cost or market. As of ~~March~~June 3130, 2010 and December 31, 2009, inventory on the LIFO method represented 6569% and 62%, respectively, of consolidated inventories.

If LIFO inventories had been valued at current costs determined on a FIFO basis the effect on costs of sales would be a decrease of $0.3 million for the ~~three~~ six months ended ~~March~~June 3130, 2010, and an increase of $0.5 million for the ~~three~~ six months ended ~~March~~June 3130, 2009.

Goodwill—The Company evaluates goodwill for impairment at least annually or when events or changes in circumstances ~~indicate~~ indicate impairment. The Company has elected to perform its annual tests for goodwill impairment as of December 31 of each year. Since December 31, 2009, the Company concluded there were no events or changes in circumstances requiring an interim goodwill impairment analysis to be completed as of ~~March~~June 3130, 2010. Fair value is measured using a market multiple valuation method. The carrying amount of goodwill was $99.2 million at ~~March~~June 3130, 2010 and December 31, 2009.

Customer ~~Relationship~~Relationships—Customer relationships relate to intangible assets recorded through previous acquisitions for relationships with significant customers. The original cost of these customer relationships was $16.6 million, and the related accumulated amortization as of ~~March~~ June 3130, 2010 is $89.71 million. The intangible assets are being amortized over the estimated life of 10 years. Amortization was $0.48 million for the ~~three~~ six-month periods ended ~~March~~June 3130, 2010 and 2009. Expected annual amortization is as follows for the years ending December 31 (in thousands):

2010	$	1,657
2011	1,658
2012	1,657
2013	1,658
2014	1,636
Thereafter	—

Noncompete ~~Agreement~~Agreements—Noncompete agreements primarily relate to agreements with the former owners of Brentwood, Grand Valley, and Dimension Moldings, Inc. (DMI). The original cost of these noncompete agreements was $2.4 million, and the related ~~accumulated~~ accumulated amortization as of ~~March~~June 3130, 2010 is $2.3 million. Noncompete rights are being amortized over the applicable terms of the agreements (5 years, 7 years, and 5 years, respectively). The noncompete agreement with the former owner of Brentwood was fully amortized in July 2007. The noncompete agreement with the former owners of Grand Valley and DMI are expected to be fully amortized by April 2011 and July 2010, respectively. Amortization was $917,000 for the ~~three~~six-month periods ended ~~March~~June 3130, 2010 and 2009. Expected annual amortization is as follows for the years ending December 31 (in thousands):

2010		$	26
2011		5

New Accounting Pronouncements— In January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820)—Improving Disclosures about Fair Value Measurements”. This guidance requires reporting entities to provide information about movements of assets among Levels 1 and 2 of the three-tier fair value hierarchy established by ASC 820 and provide a reconciliation of purchases, sales, issuance, and settlements of financial instruments valued with a Level 3 method, which is used to price the hardest to value instruments. Entities must provide fair value measurement disclosures for each class of financial assets and liabilities. The guidance iswas effective for interim and annual periods that begin after December 15, 2009 except for certain Level 3 activity disclosure requirements that are effective for fiscal years beginning after December 15, 2010 and interim periods within those fiscal years. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

3. RECAPITALIZATION

On January 9, 2007, the Company was acquired by Parent, a newly formed investment entity controlled by the Olympus Funds. The aggregate purchase price paid by Parent for all of the shares of capital stock of the Company and options to purchase shares of capital stock of the Company in the Transaction was approximately $293.1 million, less indebtedness and certain expenses. The aggregate purchase price and related fees and expenses were funded by borrowings under new credit facilities by the Company and private offerings of debt and equity securities by Parent. The Transaction has been accounted for as a recapitalization in the Company’s consolidated financial statements, with no adjustments to the historical basis of the Company’s assets and liabilities.

In conjunction with the Transaction, the Company entered into a senior credit facility (the “Senior Credit Facility”), with Credit Suisse, Cayman Islands Branch, which provided for (i) a senior secured first lien term loan facility in an aggregate principal amount of $150.0 million (the “First Lien Term Facility”) and (ii) a senior secured first lien revolving credit facility in an aggregate

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principal amount up to $25.0 million, subject to certain conditions (the “Revolving Facility” and, together with the First Lien Term Facility, the “First Lien Facilities”), of which $10.0 million is available through a sub facility in the form of letters of credit. Please see Note 4 below regarding recent amendments to the Company’s Senior Credit Facility.

In conjunction with the Transaction, Parent entered into note purchase agreements with OCM Mezzanine Fund II, L.P. and Olympus Growth Fund IV, L.P (the “Note Purchase Agreements”). The Note Purchase Agreement with OCM Mezzanine Fund II, L.P. consisted of $43.0 million senior payment-in-kind notes with no required principal amortization. The Note Purchase Agreement with Olympus Growth Fund IV, L.P. consisted of $43.0 million junior payment-in-kind notes with no required principal amortization. These notes (the “Parent Notes”) are scheduled to mature in April 2012. During the term of the Parent Notes, Parent is able at its option to pay interest on the Parent Notes through the issuance of additional notes. The Company is not liable for, and has not otherwise guaranteed, any of the obligations of Parent with respect to the Parent Notes. Parent and its Subsidiaries (including the Company) are, however, subject to a number of restrictive covenants under the Note Purchase Agreements. Parent and its Subsidiaries (including the Company) were in compliance with all covenants as of ~~March~~June 3130, 2010. In addition, the Company is limited in its ability to pay dividends or otherwise make distributions to Parent under the Senior Credit Facility and the indenture governing the 10% Senior Notes due 2012 (the “Senior Notes”). The Parent Notes are not reflected in the Company’s consolidated balance sheet as the Company did not push down the new accounting basis because of the significance of the public debt holders’ influence on the Company’s ability to control the form of ownership.

Effective as of June 13, 2007, Parent issued an additional $20.0 million of Parent Notes to Olympus Growth Fund IV, L.P., and repurchased $20.0 million of Parent Notes from OCM Mezzanine Fund II, L.P. During the twelve month periods ended December 31, 2009 and December 31, 2008, the Company had no distributions and distributions totaling $4.5 million, respectively. The 2008 distribution to Parent was recorded as a reduction in retained earnings.

In conjunction with the Transaction, Parent issued equity securities of approximately $86.2 million (including rollover equity from management) to fund the equity necessary for the acquisition, consisting of $81.0 million of preferred equity securities and $5.2 million of common equity securities. Preferred dividends accrue and accumulate on the outstanding preferred equity securities at the rate of 10% per annum, compounding quarterly, on the sum of its liquidation value per share ($1,000) plus all accumulated and unpaid dividends thereon. Dividends are payable as and when declared by Parent’s board of directors out of funds legally available for the payment of dividends. Such dividends accrue, whether or not they have been declared and whether or not there are profits, surplus or other funds of Parent legally available for the payment of dividends, until such time as such dividends are actually paid by Parent. The holders of a majority of the outstanding preferred equity securities at any time and from time to time may demand that Parent redeem all or any portion of the outstanding preferred equity securities by delivering to the holder(s) thereof (i) an amount of cash per share equal to the sum of its liquidation value per share ($1,000) plus all accumulated and unpaid dividends thereon and (ii) a number of shares of Parent’s common equity securities as determined in accordance with the redemption procedures contained in Parent’s certificate of incorporation. If Parent does not have funds legally available for any particular redemption, Parent is obligated to use those funds that are legally available for the redemption of such securities to redeem the maximum possible number of preferred equity securities which would otherwise be redeemed in connection with such redemption. Thereafter, when additional funds of Parent are legally available for redemption of such securities, Parent is obligated to redeem the balance of such securities. Parent is prohibited from redeeming any preferred equity securities if any such redemption is prohibited under any credit facility or indenture to which Parent or any of its subsidiaries is a party or is otherwise bound. The Company is not liable for, and has not otherwise guaranteed, any of these obligations of Parent with respect to the equity securities issued by Parent. These equity securities are not reflected in the Company’s consolidated balance sheet due to the significance of the public debt holders’ influence on the Company’s ability to control the form of ownership.

In ~~conjunction~~ conjunction with the Transaction, the previous stockholders of the Company will receive the benefit of certain negotiated transaction related tax deductions whenever such deductions are realized. As of ~~March~~June 3130, 2010, the entire liability for the agreement is $1.8 million and is included in Other Long-Term Liabilities.

4. FINANCING ARRANGEMENTS

Senior Notes The Company has outstanding 10% Senior Notes due in 2012. Each of the Company’s subsidiaries, which are all 100% owned subsidiaries of the Company, have fully and unconditionally guaranteed the Senior Notes on a joint and several basis. The Company has no assets or operations independent of its subsidiaries. As a result, the Company has not presented separate financial statements of the subsidiary guarantors.

Credit Facility In conjunction with the Transaction, the Company entered into the Senior Credit Facility, with Credit Suisse, Cayman Islands Branch, which provided for (i) the First Lien Term Facility in an aggregate principal amount of $150.0 million and (ii) the Revolving Facility in an aggregate principal amount up to $25.0 million, subject to certain conditions, of which $10.0 million is available through a sub facility in the form of letters of credit. On March 31, 2009, the Company repaid all amounts outstanding under the First Lien Term Facility, and no additional borrowings were available thereunder. As of ~~March~~June 3130, 2010, the maximum amount of borrowings available to the Company under the Revolving Facility was $12.5 million. As of ~~March~~June 3130, 2010, the Company had no outstanding borrowings under the Revolving Facility. Borrowings under the Revolving Facility bear interest at a fluctuating

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rate equal to either the base rate plus 4.75% per annum or LIBOR plus 5.75% per annum (effective rate of 8.00% and 6.206% at ~~March 31~~June 30, 2010 and ~~2009~~June 30, 2009, respectively).

On March 26, 2010, the Company entered into an amendment to its Senior Credit Facility, which among other things: (i) extended the date by which the Company must amend the indenture governing the Senior Notes to eliminate certain of the restrictive covenants contained therein (including covenants related to the incurrence of indebtedness and liens) or redeem the Senior Notes to March 31, 2011; (ii) increased the maximum total leverage ratio the Company may have at the end of each quarterly period from March 31, 2010 through December 31, 2010; (iii) added an asset-based borrowing base as a condition to borrowing under the Senior Credit Facility; (iv) extended the Company’s ability to continue to pay cash dividends to enable Parent to make cash interest payments on the Parent Notes to March 31, 2011; and (v) decreased the minimum interest coverage ratio the Company is required to maintain at the end of each quarterly period from March 31, 2010 through December 31, 2010. The Company must comply with certain financial covenants under its Senior Credit Facility, including maintenance of an interest coverage ratio and a total leverage ratio. The Company was in compliance with such covenants as of ~~March~~June 3130, 2010.

The Senior Credit Facility is collateralized by substantially all assets of the Company including real and personal property, inventory, accounts receivable, intellectual property and other intangibles. The Senior Credit Facility is scheduled to mature January 2013.

Restrictions on Indebtedness Our ~~Senior~~ Senior Credit Facility and the indenture for the Senior Notes impose certain restrictions on the Company’s ability to incur indebtedness, pay dividends, make investments, grant liens, sell assets and engage in certain other activities. The subsidiary guarantors are generally not restricted in ~~their~~ their ability to dividend or otherwise distribute funds to the Company except for restrictions imposed under applicable state corporate law. The Company is limited in its ability to pay dividends or otherwise make other distributions to Parent under the Senior Credit Facility and the indenture governing the Senior Notes. Specifically, the Senior Credit Facility, as amended, prohibits the Company from making any distributions to Parent except for limited purposes, including, but not limited to: (i) prior to March 31, 2011, the Company may pay cash dividends and distributions to Parent to enable Parent to make cash interest payments on the acquisition loan, provided that (x) after giving pro forma effect to such dividend or distribution, the consolidated first lien leverage ratio does not exceed 1.0 to 1.0, and (y) the amount of such dividends and distributions shall not exceed $3,225,000 in any calendar quarter, (ii) customary and reasonable out-of-pocket expenses, legal and accounting fees and expenses and overhead of Parent incurred in the ordinary course of business to the extent attributable to the business of the Company and its subsidiaries and in the aggregate not to exceed $500,000 in any fiscal year, and (iii) the Company may pay management fees of Parent not to exceed $750,000 in any fiscal year, as well as any previously accrued but unpaid management fees for any previous fiscal years without regard to this $750,000 limitation, so long as the amount accrued in any such previous fiscal year did not exceed $750,000, in each case, so long as no default has occurred. The indenture provides that the Company can generally pay dividends and make other distributions to Parent in an amount not to exceed (i) 50% of the Company’s consolidated net income for the period beginning April 1, 2004 and ending as of the end of the last fiscal quarter before the proposed payment, plus (ii) 100% of the net cash proceeds received by the Company from the issuance and sale of capital stock, plus (iii) the net return of certain investments, provided that certain conditions are satisfied, including that the Company has a consolidated interest coverage ratio of greater than 2.0 to 1.0. For the period ended ~~March~~June 3130, 2010, the Company’s consolidated interest coverage ratio was less than 2.0 to 1.0.

5. RELATED-PARTY TRANSACTIONS

The Company has noncompete agreements with the former owners of Grand Valley and Dimension Moldings, Inc.

Parent has a management services agreement with an affiliate of Olympus Growth Fund IV, L.P., Parent’s largest stockholder. Parent is obligated to pay a transaction fee to the affiliate for services provided to Parent and its subsidiaries, including the Company, for each financing, refinancing, acquisition, or similar nonrecurring transaction. Under this agreement, the Parent paid approximately $3.0 million for services related to the Transaction, of which, $0.7 million was recorded as deferred financing fees on the Company’s consolidated financial statements, while the remaining $2.3 million was recorded on Parent’s financial statements. In addition, the affiliate will be paid a $150,000 quarterly advisory fee by Parent, unless lowered by the affiliate, for ongoing services provided to Parent and its subsidiaries, including the Company. Effective July 1, 2008, the quarterly advisory fee was reduced to $135,000. In 2009 and for the ~~first~~six-month ~~quarter~~period ~~2010~~ended June 30, 2010, the quarterly advisory fee was not paid but continued to be accrued at the reduced amount of $135,000 per quarter. In connection with the March 30, 2009 amendments to the Note Purchase Agreements related to the Parent Notes, the quarterly fee payment was deferred for 2009, and will be payable in 2010 or thereafter. Currently, the Company is continuing to accrue but not pay the quarterly advisory fee. Although neither the Company nor any of its subsidiaries is party to this Agreement, the Company has recorded this expense in its statement of operations because most of the services relate to its operations.

The Company and Parent ~~file~~ file a consolidated federal income tax return, and federal income taxes are allocated to the Company based upon the respective taxable earnings or loss. The Company records income tax liabilities as an amount due to Parent. As of ~~March~~June 3130, 2010 and December 31, 2009, the Company included a total of $4.5 million and $4.6 million, respectively as an amount ~~due~~ due to Parent for these income tax liabilities.

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6. BUSINESS SEGMENTS

The Company conducts 93% of its business within one reportable market segment: the wood kitchen and bath products segment. The Company has two primary product categories: hardwood products and engineered wood products. Hardwood products produce a comprehensive line of hardwood doors and components. Engineered wood products includes rigid thermofoil doors and components, veneer raised panels, and wrapped profiles.

The Company’s sales by product category are as follows (in thousands):

	Three Months Ended March 31,
	Six Months Ended June 30,				Three Months Ended June 30,
	2010		2009		2010		2009
Hardwood products	$	2760,~~681~~147	$	2652,~~112~~926	$	32,466	$	26,814
Engineered wood products	614,~~962~~678		614,~~693~~225		7,717		7,532
Total	$	3474,~~643~~825	$	3267,~~805~~151	$	40,183	$	34,346

Substantially all assets are located and sales are made within North America.

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

As used in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form 10-Q, the terms “we,” “us” or “our” refer to WII Components, Inc. and its consolidated subsidiaries and their respective predecessors.

Forward-Looking Statements

Certain statements in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include words such as “believe,” “anticipate,” “expect,” “estimate,” “may,” “will,” “should,” “continue,” “plans,” “intends,” “likely” or other similar expressions are forward-looking statements. We caution you that forward-looking statements involve unknown risks, uncertainties and other factors that may cause our actual results and performance to differ materially from any future results or performance expressed or implied by these forward-looking statements. Please also see our discussion of risk factors contained in Item 1A. Part II of this Report on Form 10-Q.

Without limiting the generality of the preceding statement, all statements in this report providing estimates and projections concerning or relating to the following matters are forward-looking statements:

· financial results and conditions;

· margins, costs and expenditures;

· cash flows and growth rates;

· demand for our products;

· industry trends;

· new product and customer initiatives;

· our current plans for capital expenditures;

· manufacturing and other cost-saving initiatives; and

· our liquidity and capital resources.

In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations, performance and other developments. Such forward-looking statements are necessarily estimates reflecting our judgment based upon current information and involve a number of risks and uncertainties. There can be no assurance that other factors will not affect the accuracy of these forward-looking statements or that our actual results will not differ materially from the results anticipated in such forward-looking statements. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements. Those factors include, among other things:

· our high degree of leverage and significant debt service obligations;

· our ability to integrate acquired businesses;

· our need for additional manufacturing capacity;

· restrictions under the indenture governing the notes and our senior secured credit facility;

· changes in interest rates and general economic conditions;

· a downturn in the homebuilding or home repair and remodeling industry;

· changes in the price of raw materials;

· interruptions in deliveries of raw materials or finished goods;

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· the highly competitive nature of our industry; and

· changes in the cost of labor.

Overview

We are one of the leading manufacturers of hardwood cabinet doors, hardwood components and engineered wood products in the United States. Our products include (1) hardwood cabinet door components, face frames and drawer fronts, (2) fully assembled hardwood cabinet doors, (3) rigid thermofoil, or RTF, cabinet doors and components, (4) veneer raised panels, or VRPs, and (5) a variety of laminated and profile-wrapped components. We generate approximately 93% of our sales from the kitchen and bath cabinet manufacturing industry. Our customers, in turn, distribute their products through various sales channels, including specialty kitchen and bath cabinet dealers, home center retailers and homebuilders. We conduct all of our operations through our Woodcraft, PrimeWood and Brentwood subsidiaries and we operate twelve manufacturing facilities located in Minnesota, North Dakota, Oregon, Ohio, Kansas, Pennsylvania, North Carolina, West Virginia, and Kentucky that allow us to distribute our products nationwide.

In the past twelve years, we have consummated four strategic acquisitions that have enhanced our market position, product breadth and geographic reach. In June 1998, we acquired PrimeWood, a manufacturer of RTF, VRP and profile-wrapped engineered wood products based in North Dakota. In July 2002, we acquired Brentwood, a manufacturer of solid wood and RTF cabinet doors located in Oregon. In April 2004, we acquired Grand Valley, a manufacturer of solid wood cabinet doors located in Ohio. In July 2005, we acquired substantially all of the assets of Dimension Moldings, Inc. (DMI), an Ohio corporation, which was in the business of manufacturing hardwood component moldings at a facility located in Middlefield, Ohio. Following the acquisition, our Woodcraft subsidiary manufactures hardwood component moldings at the Middlefield facility.

On January 9, 2007, WII Components, Inc. (the “Company”) was acquired by WII Holding, Inc. (“Parent”), a newly formed investment entity controlled by two investment funds managed by Olympus Partners. For ease of reference, these funds are sometimes collectively referred to herein as the “Olympus Funds.” The acquisition was consummated through a merger of WII Merger Corporation (“MergerCo”), a wholly owned subsidiary of Parent, with and into the Company with the Company being the surviving corporation in the transaction (the “Transaction”). The aggregate purchase price paid by Parent for all of the shares of capital stock of the Company and options to purchase shares of capital stock of the Company in the Transaction was approximately $293.1 million, less indebtedness and certain expenses. The Transaction has been accounted for as a recapitalization in the Company’s financial statements, with no adjustments to the historical basis of the Company’s assets and liabilities. The Company did not push down the new accounting basis because of the significance of the publicly traded debt outstanding, which hinders the Parent’s ability to control the form of ownership of the Company.

Results of Operations

As discussed below, we continued to experience the slowdown in net sales for the ~~three~~six months ended ~~March~~June 3130, 2010 that began in the second half of 2006. While sales for the ~~three~~six months ended ~~March~~June 3130, 2010 are much lower than sales for the same period of 2006, 2007 and 2008, they are modestly higher than sales for the ~~three~~six months ended ~~March~~June 3130, 2009. We believe this is a short-term impact due to the personal income tax incentives related to either acquiring a new or existing home in the first half of 2010. The kitchen and bath industry-wide slowdown had a negative impact on our gross profit and operating income margin percentages due to fixed costs becoming a higher percentage of sales. In addition, we ~~have~~ continued to experience decreases in hardwood material prices, from the fourth quarter of 2006 through the second quarter of 2009, which generally ~~are~~were passed on to our customers. We ~~through~~have ~~lower~~agreements ~~selling~~with most customers that reset prices in ~~accordance~~the ~~with~~future ~~indexing~~period ~~agreements~~based ~~that~~on ~~reset~~the ~~approximately~~movement ~~every~~of hardwood lumber costs in the prior period. The length of the period varies by customer from three to ~~nine~~twelve months. While the prices we ~~pay~~paid for hardwood materials continued to decline through April 2009, they then stabilized by mid -year 2009 and began to increase in December 2009 through ~~March~~June 2010. The declines in our material costs through April 2009 resulted in lower selling prices in the second half of 2009 and into the first half ~~quarter~~of 2010 due to our indexing agreements with our customers. Our ability to pass through these price changes to our customers is dependent on prevailing economic and competitive conditions.

Three Months Ended ~~March~~June 3130, 2010 Compared to the Three ~~Months~~ Months Ended ~~March~~June 3130, 2009

The following table includes, for the three months ended ~~March~~June 3130, 2010 and 2009, selected operating data derived from our condensed consolidated statements of ~~earnings~~operations and presents this information as a percentage of net sales:

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	Three Months Ended March 31, 2010			Three Months Ended March 31, 2009
	Three Months Ended June 30, 2010			Three Months Ended June 30, 2009
	(dollars in thousands)
Net sales	$	3440,~~643~~183		$	3234,~~805~~346
% of net sales	100.0		%	100.0		%
Cost of sales	2934,~~862~~277			28,~~338~~469
% of net sales	8685.23		%	8682.49		%
Gross profit	45,~~781~~906			45,~~467~~877
% of net sales	1314.87		%	1317.61		%
Operating expenses	32,~~129~~970			3,~~044~~113
% of net sales	97.04		%	9.31		%
Operating income	12,~~652~~936			12,~~423~~764
% of net sales	47.83		%	48.30		%
Other expenses (income):
Interest expense	3,~~056~~151			3,~~026~~151
% of net sales	87.8		%	9.2		%
Other income, net	(26		)	(52		)
% of net sales	-0.0		%	-0.0		%
Income tax benefit	(~~510~~62		)	(~~593~~140		)
% of net sales	-10.52		%	-10.84		%
Net loss	(~~892~~147		)	(~~1,005~~245		)
% of net sales	-20.64		%	-30.17		%

Net sales. Net sales increased $15.89 million, or 517.52%, from $3234.83 million for the three months ended ~~March~~June 3130, 2009 to $3440.62 million for the three months ended ~~March~~June 3130, 2010. Sales in our hardwood and engineered wood product line increased $15.67 million and $0.2 million, respectively. These increases are mainly attributable to (i) an overall modest increase in the market and ~~certain~~(ii) market ~~successful~~share ~~promotions~~gain by ~~a few of~~ our ~~customers~~ Company. These increases were partially offset with an approximately 4% decline in our overall selling prices, mainly due to ~~lower~~the decline of hardwood ~~material~~lumber costs during 2009. We have indexing agreements with a majority of our customers, whereby selling prices to customers ~~are~~in the future period are increased or decreased asbased ~~our~~on ~~material~~hardwood ~~costs~~lumber ~~increase~~cost orchanges ~~decrease~~in the prior period.

Cost of sales. Cost of sales increased $1.5 .8 million, or 5 20.34%, from $28.35 million for the three months ended ~~March~~June 3130, 2009 to $2934.83 million for the three months ended ~~March~~June 3130, 2010. This increase in cost of sales is primarily attributable to higher material, labor and overhead costs as a result of higher volume of sales.

Gross profit. Gross profit ~~increased~~was $05.39 million~~, or 6.7%,~~ ~~from $4.5 million~~ for the three months ended ~~March~~June 3130, 2009 toand ~~$4.8 million~~ for the three months ended ~~March 31~~June 30, 2010. As a percentage of net sales, our gross profit ~~increased~~decreased 20240 basis points from 1317.61% for the three months ended ~~March~~June 3130, 2009 to 1314.87% for the ~~same~~three ~~period~~months inended ~~2010.~~June 30, 2010. This ~~increase~~decrease is related to (i) ~~improved~~lower selling ~~operating~~prices ~~efficiencies~~ in 2010 ~~and~~related to lower hardwood lumber costs during 2009, (ii) ~~spreading~~higher lumber ~~fixed~~ costs ~~over~~in 2010, and (iii) higher ~~sales~~premiums ~~volume~~for purchases of kiln dried lumber in 2010. This ~~increase~~decrease was partially offset with ~~lower selling~~(i) improved ~~prices~~operating efficiencies in 2010 ~~related~~and to(ii) absorbing fixed ~~lower~~costs ~~hardwood~~over ~~lumber~~higher ~~costs~~sales ~~during 2009~~volume.

Operating expenses. Operating expenses ~~increased~~ decreased $0.1 million, or 3.32%, from $3.01 million for the three months ended ~~March 31~~June 30, 2009 to $3.10 million for the three months ended ~~March~~June 3130, 2010. The ~~increase~~decrease primarily consists of ~~higher~~ ~~incentive~~lower ~~compensation~~professional fees and lower bad debt expense in 2010.

Operating income. Operating income increased by $0.21 million, or ~~14.~~3.6%, from $12.48 million for the three months ended ~~March 31,~~June 30, 2009 to $12.69 million for the three months ended ~~March~~June 3130, 2010 as a result of the net effect of the factors described above.

Interest expense. Interest expense was $3.02 million for each of the three month periods ended ~~March~~June 3130, 2009 and ~~March~~June 3130, 2010.

Other income. Other income was $52,000 and $26,000 for each of the three months ended ~~March~~June 3130, 2009 and ~~March~~June 3130, 2010, respectively. ~~This income mainly represents interest received from our interest bearing accounts.~~

Income ~~tax~~ tax benefit. Income tax benefit ~~decreased~~was $0.1 million, ~~or 16.7%, from $0.6 million~~ for the three months ended ~~March~~June 3130, 2009 toand ~~$0.5 million~~ for the three months ended ~~March~~June 3130, 2010 ~~due to decreased net losses before income taxes in 2010~~. The effective tax rate decreased from 3736.14% in 2009 to 3629.47% in 2010 due to permanent differences.

Net loss. Net loss decreased $0.1 million, or 1050.0%, from $1.0.2 million for the three months ended ~~March~~June 3130, 2009 to $0.~~9 million~~1 million for the three months ended ~~March~~June 3130, 2010 as a result of the ~~factors~~ factors described above.

Results of Operations

Six Months Ended June 30, 2010 Compared to the Six Months Ended June 30, 2009

The following table includes, for the six months ended June 30, 2010 and 2009, selected operating data derived from our condensed consolidated statements of earnings and presents this information as a percentage of net sales:

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	Six Months Ended June 30, 2010			Six Months Ended June 30, 2009
	(dollars in thousands)
Net sales	$	74,825		$	67,151
% of net sales	100.0		%	100.0		%
Cost of sales	64,139			56,806
% of net sales	85.7		%	84.6		%

Gross profit	10,686			10,345
% of net sales	14.3		%	15.4		%
Operating expenses	6,098			6,158
% of net sales	8.2		%	9.2		%

Operating income	4,588			4,187
% of net sales	6.1		%	6.2		%
Other expenses (income):
Interest expense	6,206			6,177
% of net sales	8.3		%	9.2		%
Other income, net	(7		)	(7		)
% of net sales	-0.0		%	-0.0		%
Income tax benefit	(572		)	(733		)
% of net sales	-0.8		%	-1.1		%

Net loss	(1,039		)	(1,250		)
% of net sales	-1.4		%	-1.9		%

Net sales. Net sales increased $7.6 million, or 11.3%, from $67.2 million for the six months ended June 30, 2009 to $74.8 million for the six months ended June 30, 2010. Sales in our hardwood and engineered wood product line increased $7.2 million and $0.4 million, respectively. These increases are mainly attributable to (i) an overall modest increase in the market, (ii) market share gain by our Company, and (iii) certain successful promotions by a few of our customers. These increases were partially offset with an approximately 4% decline in our overall selling prices mainly due to the decline of hardwood lumber costs during 2009. We have indexing agreements with a majority of our customers, whereby selling prices to customers in the future period are increased or decreased based on hardwood lumber cost changes in the prior period.

Cost of sales. Cost of sales increased $7.3 million, or 12.9%, from $56.8 million for the six months ended June 30, 2009 to $64.1 million for the six months ended June 30, 2010. This increase in cost of sales is primarily attributable to higher material, labor and overhead costs as a result of higher volume of sales.

Gross profit. Gross profit increased $0.4 million, or 3.9%, from $10.3 million for the six months ended June 30, 2009 to $10.7 million for the six months ended June 30, 2010. As a percentage of net sales, our gross profit decreased 110 basis points from 15.4% for the six months ended June 30, 2009 to 14.3% for the six months ended June 30, 2010. This decrease is related to (i) lower selling prices in 2010 related to lower hardwood lumber costs during 2009, (ii) higher lumber costs in 2010, and (iii) higher premiums for purchases of kiln dried lumber in 2010. This decrease was partially offset with (i) improved operating efficiencies in 2010 and (ii) absorbing fixed costs over higher sales volume.

Operating expenses. Operating expenses decreased $0.1 million, or 1.6%, from $6.2 million for the six months ended June 30, 2009 to $6.1 million for the six months ended June 30, 2010. The decrease primarily consists of lower professional fee expense and bad debt expense in 2010, offset partially with higher incentive compensation expense in 2010.

Operating income. Operating income increased by $0.4 million, or 9.5%, from $4.2 million for the six months ended June 30, 2009 to $4.6 million for the six months ended June 30, 2010 as a result of the net effect of the factors described above.

Interest expense. Interest expense was $6.2 million for each of the six month periods ended June 30, 2009 and June 30, 2010.

Other income. Other income was $7,000 for each of the six months ended June 30, 2009 and June 30, 2010.

Income tax benefit. Income tax benefit decreased $0.1 million, or 14.3%, from $0.7 million for the six months ended June 30, 2009 to $0.6 million for the six months ended June 30, 2010 due to decreased net losses before income taxes in 2010. The effective tax rate decreased from 37.0% in 2009 to 35.5% in 2010 due to permanent differences.

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Net loss. Net loss decreased $0.3 million, or 23.1%, from $1.3 million for the six months ended June 30, 2009 to $1.0 million for the six months ended June 30, 2010 as a result of the factors described above.

Liquidity and Capital Resources

Our primary cash needs are for working capital, capital expenditures and debt service. We have historically financed these cash requirements through internally generated cash flow and funds borrowed under our prior and existing senior secured credit facilities.

In conjunction with the Transaction on January 9, 2007, the Company entered into the senior credit facility (as amended from time to time, the “Senior Credit Facility”), which provided for (i) a senior secured first lien term loan facility in the initial aggregate principal amount of $150.0 million (the “First Lien Term Facility”) and (ii) a senior secured first lien revolving credit facility in an aggregate principal amount up to $25.0 million, subject to certain conditions, (the “Revolving Facility” and, together with the First Lien Term Facility, the “First Lien Facilities”) of which $10.0 million is available through a subfacility in the form of letters of credit. As of March 30, 2009, the Company repaid all amounts outstanding under the First Lien Term Facility and no additional borrowings were available thereunder. As of June 30, 2010, the maximum amount of borrowings available to the Company under the Revolving Facility was $12.5 million, of which no borrowings were outstanding as of this date. Borrowings under the Revolving Facility bear interest at a fluctuating rate equal to either the base rate plus 4.75% per annum or LIBOR plus 5.75% per annum (effective rate of 8.00% at June 30, 2010). The Company must comply with certain financial covenants under the Senior Credit Facility, including maintenance of an interest coverage ratio and a total leverage ratio. The Company was in compliance with such covenants as of June 30, 2010.

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time to time, the “Senior Credit Facility”), which provided for (i) a senior secured first lien term loan facility in the initial aggregate principal amount of $150.0 million (the “First Lien Term Facility”) and (ii) a senior secured first lien revolving credit facility in an aggregate principal amount up to $25.0 million, subject to certain conditions, (the “Revolving Facility” and, together with the First Lien Term Facility, the “First Lien Facilities”) of which $10.0 million is available through a subfacility in the form of letters of credit. As of March 30, 2009, the Company repaid all amounts outstanding under the First Lien Term Facility and no additional borrowings were available thereunder. As of March 31, 2010, the maximum amount of borrowings available to the Company under the Revolving Facility was $12.5 million, of which no borrowings were outstanding as of this date. Borrowings under the Revolving Facility bear interest at a fluctuating rate equal to either the base rate plus 4.75% per annum or LIBOR plus 5.75% per annum (effective rate of 8.00% at March 31, 2010). The Company must comply with certain financial covenants under the Senior Credit Facility, including maintenance of an interest coverage ratio and a total leverage ratio. The Company was in compliance with such covenants as of March 31, 2010.

Indebtedness for borrowed money incurred under our Senior Credit Facility is secured by substantially all of our assets, including our real and personal property, inventory, accounts receivable, intellectual property and other intangibles. The Senior Credit Facility is scheduled to mature in January 2013.

As of ~~March~~June 3130, 2010, the weighted average interest rate for the Company’s outstanding debt was 10.1%.

Our Senior Credit ~~Facility~~ Facility and the indenture for the Senior Notes impose certain restrictions on ~~our~~ our ability to incur indebtedness, pay dividends, make investments, grant liens, sell our assets and engage in certain other activities. The ~~subsidiary~~ subsidiary guarantors are generally not restricted in their ability to dividend or or otherwise distribute funds to the Company except for restrictions imposed ~~under~~ under applicable state corporate law. The Company is limited in its ability to pay dividends or otherwise make other distributions to Parent under the Senior Credit Facility and the indenture governing the Senior Notes. Specifically, as amended, the Senior Credit Facility prohibits the Company from making any distributions to Parent except for limited purposes, including, but not limited to: (i) prior to March 31, 2011, the Company may pay cash dividends and distributions to Parent to enable Parent to make cash interest payments on the Parent Notes, provided that (x) after giving pro forma effect to such dividend or distribution, the consolidated first lien leverage ratio does not exceed 1.0 to 1.0, and (y) the amount of such dividends and distributions shall not exceed $3,225,000 in any calendar quarter, (ii) customary and reasonable out-of-pocket expenses, legal and accounting fees and expenses and overhead of Parent incurred in the ordinary course of business to the extent attributable to the business of the Company and its subsidiaries and in the aggregate not to exceed $500,000 in any fiscal year, and (iii) the Company may pay management fees of Parent not to exceed $750,000 in any fiscal year, as well as any previously accrued but unpaid management fees for any previous fiscal years without regard to this $750,000 limitation, so long as the amount accrued in any such previous fiscal year did not exceed $750,000, in each case, so long as no default has occurred. The indenture provides that the Company can generally pay dividends and make other distributions to Parent in an amount not to exceed (i) 50% of the Company’s consolidated net income for the period beginning April 1, 2004 and ending as of the end of the last fiscal quarter before the proposed payment, plus (ii) 100% of the net cash proceeds received by the Company from the issuance and sale of capital stock, plus (iii) the net return of certain investments, provided that certain conditions are satisfied, including that the Company has a consolidated interest coverage ratio of greater than 2.0 to 1.0. For the period ended ~~March~~June 3130, 2010, the Company’s consolidated interest coverage ratio was less than 2.0 to 1.0.

On March 3026, ~~2009~~2010, Parent amended ~~and obtained a waiver to~~ the Note Purchase Agreements related to the Parent Notes to ~~waive the total leverage ratio that Parent and its~~, ~~Subsidiaries~~among ~~(including~~other ~~the Company) were required to maintain as of December 31~~things, ~~2008~~ ~~and to~~ adjust the total leverage ratio that Parent and its ~~Subsidiaries~~ Subsidiaries (including the Company) are required to maintain as of the end of ~~each~~ each quarterly period through December 31, ~~2009~~2010. The toParent ~~reflect~~was ~~current~~in ~~economic~~compliance with all ~~conditions~~covenants as of June 30, 2010.

On March 26, 2010, Parent also amended the Parent Notes to, among other things, adjust the total leverage ratio that Parent and its Subsidiaries (including the Company) are required to maintain as of the end of each quarterly period through December 31, 2010. The Parent was in compliance with all covenants as of March 31, 2010.14

As of March 31, 2010 and December 31, 2009, we had no capital lease obligations.

Each of the Company’s subsidiaries, which are all 100% owned subsidiaries of the Company, have fully and unconditionally guaranteed the Senior Notes on a joint and several basis. The Company has no assets or operations independent of its subsidiaries. As a result, the Company has not presented separate financial statements of the subsidiary guarantors.

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As of ~~March~~June 3130, 2010, weand ~~had~~December 31, ~~$3.1 million of cash available for any corporate purposes~~2009, ~~compared~~we tohad ~~$13.1~~no ~~million~~capital ~~as of December 31,~~lease ~~2009~~obligations.

~~Cash flow~~Each ~~from~~of ~~operating activities. Cash used in operating activities was $9.7 million for~~ the ~~three months ended March 31,~~Company’s ~~2010~~subsidiaries, ~~while~~which ~~cash~~are ~~used~~all in100% ~~operating~~owned ~~activities~~subsidiaries ~~for~~of the ~~three months ended March 31~~Company, ~~2009~~ ~~was~~have ~~$7.5 million. The $2.2 million~~fully ~~increase~~and inunconditionally ~~cash~~guaranteed ~~used in operating activities for~~ the ~~three~~Senior ~~month~~Notes ~~period~~on ~~ended~~a ~~March 31, 2010~~joint ~~versus~~and ~~the three month period ended March 31, 2009 was primarily due~~several ~~to: (i) an increase in cash used for accounts payable for 2010 versus 2009 of $2~~basis.3 The ~~million,~~Company ~~and~~has ~~(ii) an~~no ~~increase~~assets ~~in cash used for accounts receivable~~or inoperations ~~2010~~independent ~~versus 2009~~ of ~~$4.3~~its ~~million~~subsidiaries. ~~Days~~As ofa ~~receivables outstanding increased by approximately nineteen days as of March 31~~result, ~~2010 versus March 31, 2009 mainly due to certain customer payment terms being modified over~~ the ~~past~~Company ~~year. These~~has ~~were~~not ~~offset~~presented ~~partially~~separate byfinancial ~~(i) a~~statements ~~decrease in cash used for inventory for 2010 versus 2009~~ of ~~approximately~~the ~~$2.5 million,~~subsidiary ~~and (ii) a decrease in cash used for other current assets, accrued payroll and other current liabilities for 2010 versus 2009 of approximately $2~~guarantors.~~3 million.~~

~~Cash~~As ~~flow~~of ~~from~~June 30, ~~investing~~2010, ~~activities. Net~~we ~~cash~~had ~~used in investing activities was~~ $03.26 million ~~for~~of ~~the~~cash ~~three~~available ~~months~~for ~~ended~~any ~~March 31,~~corporate ~~2010~~purposes, ~~and~~compared ~~2009~~to $13. ~~Capital~~1 ~~expenditures~~million ~~in the~~as ~~three~~of ~~months ended March~~December 31, ~~2010 and March 31,~~ 2009 ~~were $0~~.~~2 million.~~

Cash ~~flow~~ flow from ~~financing~~operating activities. ~~Net~~Cash ~~cash~~ used in ~~financing~~operating activities was $8.9 million for the ~~three~~six months ended ~~March~~June 3130, 2010, ~~totaled~~while cash provided by operating activities for the six months ended June 30, 2009 was $01.1 million. The $10.0 million increase in cash used in operating activities for the six month period ended June 30, 2010 versus the six month period ended June 30, 2009 was primarily due to: (i) an ~~debt~~increase ~~issue~~in ~~costs~~cash ~~and~~used ~~amount~~for ~~Due~~inventories tofor ~~Parent~~2010 versus 2009 of $1. ~~Net~~9 million and (ii),an increase in cash used for accounts receivable in ~~financing~~2010 ~~activities~~versus ~~for~~2009 ~~the~~of ~~three~~$6.5 ~~months~~million. These ~~ended~~were offset ~~March 31,~~partially by a decrease in cash provided by accounts payable for 2010 versus 2009 ~~totaled~~of approximately $32.84 million. ~~primarily~~Days of receivables outstanding increased by approximately twenty-one days as of June 30, 2010 versus June 30, 2009 mainly due to ~~principal~~certain ~~payments~~customer onpayment terms being modified over the ~~Senior~~past ~~Credit~~year. These ~~Facility~~were offset partially by a decrease in cash used for other current assets, and an increase in cash provided by other long term liabilities, accrued payroll and other current liabilities for 2010 versus 2009 of approximately $0.7 million.

~~For~~Cash ~~the three month~~flow ~~periods~~from ~~ended~~investing ~~March 31,~~activities. Net ~~2010~~cash ~~and~~used ~~March 31,~~in ~~2009,~~investing ~~our~~activities ~~two largest~~was ~~customers~~$0.5 ~~accounted~~million for ~~approximately~~the ~~57%~~six ~~and~~months ~~55%~~ended ~~of our net sales, respectively. As of March~~June 3130, 2010 and ~~December~~June 3130, ~~2009, our two largest customers accounted for~~ ~~approximately 75% and 73%, respectively, of our consolidated accounts receivables balance~~2009. ~~The~~Capital ~~permanent~~expenditures ~~loss of, or a significant decrease~~ in the ~~level~~six months ofended ~~purchases by~~June 30, ~~one~~2010 orand ~~more~~June 30, of2009 ~~our major~~were ~~customers~~$0.5 ~~could have a material adverse effect on our results of operations and future cash flows~~million.

Cash flow from financing activities. Net cash used in financing activities for the six months ended June 30, 2010 totaled $0.1 million primarily due to debt issue costs. Net cash used in financing activities for the six months ended June 30, 2009 totaled $3.8 million primarily due to principal payments on the Senior Credit Facility.

For the six month periods ended June 30, 2010 and June 30, 2009, our two largest customers accounted for approximately 56% and 57% of our net sales, respectively. As of June 30, 2010 and December 31, 2009, our two largest customers accounted for approximately 75% and 73%, respectively, of our consolidated accounts receivables balance. The permanent loss of, or a significant decrease in the level of purchases by, one or more of our major customers would have a material adverse effect on our results of operations and future cash flows.

Accounts receivable increased $10.4 million, from a balance of $10.8 million as of December 31, 2009 to $21.2 million as of June 30, 2010. This increase was primarily due to (i) the number of days of receivables outstanding increasing by approximately eighteen days as of June 30, 2010 versus December 31, 2009 mainly due to certain customer payment terms being modified over the past year and (ii) the average daily sales rate was higher in June 2010 versus December 2009 due to a number of reasons, including seasonality and increased market share by the Company

We cannot provide assurances 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, including the Senior Notes, or to fund our other liquidity needs. In addition, we cannot provide assurances that we will be able to refinance any of our indebtedness, including our Senior Credit Facility and the Senior Notes, on commercially reasonable terms, if at all.

We derive a significant portion of our revenue as a result of demand for our products created by the building of new homes, and repair and remodeling of existing homes. During the second half of 2006, the home building, and repair and remodeling industry experienced a slowdown as a result of general economic conditions. This slowdown worsened into 2009 and then stabilized into the first ~~quarter~~half of 2010, and has had a negative impact on our results of operations for the ~~three~~six months ended ~~March~~June 3130, 2010. If this slowdown were to continue or worsen over an extended period of time, it could have a material adverse effect on our business, financial condition or results of operations which may include impairment charges of goodwill and other long-term assets.

Recently, the financial markets experienced a period of unprecedented turmoil, including the bankruptcy, restructuring or sale of certain financial institutions and the intervention of the U.S. federal government. While the ultimate outcome of these events cannot be predicted, they may have a material adverse effect on our liquidity and financial condition if our ability to borrow money from our existing lenders under our Senior Credit Facility to finance our operations were to be impaired. The crisis in the financial markets may also have a material adverse impact on the availability and cost of credit in the future. Our ability to pay our debt or refinance our obligations under our Senior Credit Facility or our Senior Notes will depend on our future performance, which will be affected by, among other things, prevailing economic conditions. The recent financial crisis may also have an adverse effect on the U.S., which would have a negative impact on demand for our products. In addition, tightening of credit markets may have an adverse impact on our customers’ ability to finance the purchase of our products or our suppliers’ ability to provide us with raw materials, either of which could adversely affect our business and results of operations.

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We intend to continue to manage the business in this slower economy and its effect on our industry by diligently reviewing our costs of doing business on a routine basis, controlling working capital in a slower business climate, and minimizing our capital expenditure needs.

We anticipate, but cannot provide assurance, that the funds generated by operations and funds available under the Senior Credit Facility will be sufficient to meet working capital requirements and to finance capital expenditures for the foreseeable future, including the next twelve months. We intend to incur additional capital expenditures in the ordinary course of doing business.

Inflation

In general, our cost of sales is subject to inflationary pressures on labor costs, prices of the raw materials we use and various overhead costs. We generally have been able over time to offset the effects of inflation and price fluctuations through a combination of sales price increases and operational efficiencies. We currently believe that raw material cost pressure has increased beginning in the fourth quarter 2009 and continuing into the first half of 2010. We continue to attempt to pass along these costs to our customers, but such efforts typically lag three to twelve months behind material cost changes and we cannot guarantee a full offset. Our ability to pass through these price changes to our customers is dependent on prevailing economic and competitive conditions.

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overhead costs. We generally have been able over time to offset the effects of inflation and price fluctuations through a combination of sales price increases and operational efficiencies. We currently believe that raw material cost pressure has increased beginning in the fourth quarter 2009 and continuing into the first quarter 2010. We continue to attempt to pass along these costs to our customers, but such efforts typically lag three to nine months behind material cost changes and we can not guarantee a full offset. Our ability to pass through these price changes to our customers is dependent on prevailing economic and competitive conditions.

Seasonality

Our sales historically have been moderately seasonal, reflecting the temporary slow down in consumer purchasing activity during the winter holiday season and the summer months.

Critical Accounting Policies

In our Annual Report on Form 10-K for the year ended December 31, 2009, we identified the critical accounting policies, which affect our more significant estimates and assumptions used in preparing our consolidated financial statements. The basis for developing the estimates and assumptions within our critical accounting policies is based on historical information and known current trends and factors. The estimates and assumptions are evaluated on an ongoing basis and actual results have been within the Company’s expectations. We have not changed these policies from those previously disclosed in our annual report.

The Company performed its goodwill impairment (ASC 350, “Intangibles-Goodwill and Other”) analysis as of December 31, 2009. To establish fair market value, items considered were: (1) comparable public company trading multiples, (2) other comparable transaction multiples and (3) the Woodcraft transaction multiple resulting from a competitive auction process. Based on the fair market value methodology and the assumptions above, as compared to the Company’s December 31, 2009 net worth and interest-bearing indebtedness, it was concluded that there was a goodwill impairment of $13.6 million, which was recorded during the fourth quarter of 2009. The Company determined there were no events that would require an ASC 350 analysis to be completed as of ~~March~~June 3130, 2010.

New Accounting Standards

See Note 2 of the Condensed Consolidated Financial Statements for information pertaining to recently adopted accounting standards or accounting standards to be adopted in the future.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to various market risks such as fluctuating lumber prices and interest rates.

Commodity price risk. Hardwood lumber accounts for the largest portion of our material costs. Our profitability is therefore affected by the prices of lumber which may fluctuate based on a number of factors beyond our control, including, among others, changes in supply and demand, general economic conditions, labor costs, competition and, in some cases, government regulation. Though we are not dependent on any single supplier for our raw materials, we have no long-term supply contracts and thus, are subject to changes in the prices charged by our suppliers. The prices for the primary hardwood species we use in the production of our hardwood doors and components are subject to some volatility. We generally pass through cost increases to our customers, but such efforts typically lag three to ~~nine~~twelve months behind material cost changes and we can not guarantee a full offset. Our ability to pass through these price changes to our customers is dependent on prevailing economic and competitive conditions.

Interest rate risk. We are exposed to market risk relating to changes in interest rates in respect to our Revolving Facility. As of ~~March~~June 3130, 2010, we had no outstanding indebtedness which bears interest at a variable rate. We believe that a one percent (1%) ~~increase~~ increase in the interest rates currently in effect would not have a material ~~adverse~~ adverse effect on our financial condition or results of operations.

~~Item 4T. Controls and Procedures~~16

~~(a) Evaluation~~Table of ~~disclosure controls and procedures.~~Contents

AsItem required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of March 31, 20104T. ~~For~~ ~~purposes~~Controls ~~of the foregoing, the term disclosure controls~~ and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. 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 Exchange Act is accumulated and communicated to the issuer’s management, including its principal Procedures

14(a) Evaluation of disclosure controls and procedures.

~~Table~~As required by Rule 13a-15 under the Securities Exchange Act of ~~Contents~~1934 (the “Exchange Act”), we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of June 30, 2010. For purposes of the foregoing, the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. 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 Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide us with a reasonable level of assurance of achieving their objectives as outlined above. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that they believe that, as of June 30, 2010, our disclosure controls and procedures were effective at a reasonable level of assurance.

~~executive~~(b) Changes ~~and principal~~in ~~financial~~internal ~~officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure~~ controls ~~and~~over ~~procedures~~financial ~~are designed to provide us with a reasonable level of assurance of achieving their objectives as outlined above~~reporting. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that they believe that, as of March 31, 2010, our disclosure controls and procedures were effective at a reasonable level of assurance.

~~(b) Changes~~There were no changes in our internal controls over financial reporting during our second fiscal quarter of 2010 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

There were no changes in our internal controls over financial reporting during our first fiscal quarter of 2010 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.17

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~~Table~~PART II—OTHER ~~of Contents~~INFORMATION

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

No pending material legal proceedings.

Item 1A. Risk Factors

The Company has included in its Annual Report on Form 10-K for the year ended December 31, 2009, a description of certain risks and uncertainties that could affect the Company’s business, future performance or financial condition (the “Risk Factors”). The Risk Factors are hereby incorporated in Part II, Item 1A of this Form 10-Q. Investors should consider the Risk Factors prior to making an investment decision with respect to the Company’s securities.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Removed and Reserved

Item 5. Other Information

None.

Item 6. Exhibits

31.1	Certification of Vice President, Treasurer and Secretary of WII Components, Inc., pursuant to Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Executive Officer of WII Components, Inc., pursuant to Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Vice President, Treasurer and Secretary of WII Components, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Executive Officer of WII Components, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

31.1 Certification of Vice President, Treasurer and Secretary of WII Components, Inc., pursuant to Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Chief Executive Officer of WII Components, Inc., pursuant to Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1* Certification of Vice President, Treasurer and Secretary of WII Components, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2* Certification of Chief Executive Officer of WII Components, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

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SIGNATURES

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

	WII COMPONENTS, INC.
Dated: May 13, 2010	By:
Dated: August 12, 2010	By:
		/s/ John Fitzpatrick
		John Fitzpatrick
		President and Chief Executive Officer
		(Principal Executive Officer)
Dated: May 13, 2010
Dated: August 12, 2010
		/s/ Dale B. Herbst
		Dale B. Herbst
		Chief Financial Officer, Treasurer and Secretary
		(Principal Financial and Accounting Officer)

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