Investor Presentation - Barclays - February 2015 - NYSE: DOOR
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Investor Presentation - Barclays February 2015 NYSE: DOOR
Safe Harbor / Non-GAAP Financial Measure
SAFE HARBOR / FORWARD LOOKING STATEMENTS
This investor presentation contains forward-looking information and other forward-looking statements within the meaning of applicable Canadian and/or U.S. securities laws,
including our discussion of improvements in the housing market and related markets and the effects of our pricing and other strategies. When used in this Investor Presentation,
such forward-looking statements may be identified by the use of such words as “may,” might, “could,” “will,” would,” “should,” “expect,” “believes,” “outlook,” “predict,” “forecast,”
“objective,” “remain,” “anticipate,” “estimate,” “potential,” “continue,” “plan,” “project,” “targeting,” or the negative of these terms or other similar terminology.
Forward-looking statements involve significant known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of
Masonite, or industry results, to be materially different from any future plans, goals, targets, objectives, results, performance or achievements expressed or implied by such forward-
looking statements. As a result, such forward-looking statements should not be read as guarantees of future performance or results, should not be unduly relied upon, and will not
necessarily be accurate indications of whether or not such results will be achieved. Factors that could cause actual results to differ materially from the results discussed in the
forward-looking statements include, but are not limited to, general economic, market and business conditions; levels of residential new construction, residential repair, renovation
and remodeling and non-residential building construction activity; competition; our ability to successfully implement our business strategy; our ability to manage our operations
including integrating our recent acquisitions and companies or assets we acquire in the future; our ability to generate sufficient cash flows to fund our capital expenditure
requirements and to meet our debt service obligations, including our obligations under our senior notes and our senior secured asset-backed credit facility; labor relations (i.e.,
disruptions, strikes or work stoppages), labor costs, and availability of labor; increases in the costs of raw materials or any shortage in supplies; our ability to keep pace with
technological developments; the actions by, and the continued success of, certain key customers; our ability to maintain relationships with certain customers; new contractual
commitments; our ability to generate the benefits of our restructuring activities; retention of key management personnel; environmental and other government regulations;
limitations on operating our business as a result of covenant restrictions under our existing and future indebtedness, including our senior notes and senior secured asset-based credit
facility; and other factors publicly disclosed by the company from time to time.
NON-GAAP FINANCIAL MEASURE
Adjusted EBITDA is a measure used by management to measure operating performance. Adjusted EBITDA is defined as net income (loss) attributable to Masonite plus depreciation,
amortization, restructuring costs, loss (gain) on sale of property, plant and equipment, impairment, registration and listing fees, interest expense, net, other expense (income), net,
income tax expense (benefit), loss (income) from discontinued operations, net of tax, net income attributable to non-controlling interest and share based compensation expense.
Adjusted EBITDA is not a measure of financial condition or profitability under GAAP, and should not be considered as an alternative to (i) net income (loss) or net income (loss)
attributable to Masonite determined in accordance with GAAP or (ii) operating cash flow determined in accordance with GAAP. Additionally, Adjusted EBITDA is not intended to be a
measure of free cash flow for management's discretionary use, as it does not include certain cash requirements such as interest payments, tax payments and debt service
requirements. We believe that the inclusion of Adjusted EBITDA in this presentation is appropriate to provide additional information to investors about our operating performance.
Not all companies use identical calculations, and as a result, this presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.
Moreover, Adjusted EBITDA as presented for financial reporting purposes herein, although similar, is not the same as similar terms in the applicable covenants in our ABL Facility or
our senior notes. Adjusted EBITDA, as calculated under our ABL Facility or senior notes would also include, among other things, additional add-backs for amounts related to: cost
savings projected by us in good faith to be realized as a result of actions taken or expected to be taken prior to or during the relevant period; fees and expenses in connection with
certain plant closures and layoffs; and the amount of any restructuring charges, integration costs or other business optimization expenses or reserve deducted in the relevant period
in computing consolidated net income, including any one-time costs incurred in connection with acquisitions. The table in the appendix sets forth a reconciliation of Adjusted EBITDA
to net income (loss) attributable to Masonite for the periods indicated.
2
① Company / Industry Overview ② Financial Review ③ Summary / Q&A
Company / Industry Overview
Masonite is a Global Building Products Company
Net Sales of $1.8 billion and approximately 33 million 2014 Sales by Segment
doors sold in 2014.
S. Africa, 3%
An extensive global footprint with 63 manufacturing Eur / ROW,
facilities spread across 10 countries. 21%
Serve more than 7,000 customers in 80 countries.
One of only two vertically integrated residential molded
door manufacturers and the only vertically integrated
architectural door manufacturer in North America.
Established leadership positions in all targeted product
North
categories in North America. America, 76%
2014 NA End-Markets
North America S. America Europe
IRELAND
CHILE Architectural,
UK 19%
CANADA FRANCE CZECH REPUBLIC
Residential
repair &
remodel, 44%
UNITED STATES South Africa Southeast Asia
MALAYSIA
MEXICO
SOUTH AFRICA
Residential
new
construction,
Manufacturing Headquarters 37%
4
Company / Industry Overview
Residential Int. Molded Facings & Assembly Consolidation
NA Residential Interior Doors NA Residential Interior Molded Facings*
6 Players 2 Players^ 3 Players 2 Players
2010
2010
2012
#
2012
#
2010
(^) – There are only two residential molded interior wood door manufacturers with a (*) – Full vertically integrated operations.
full North American footprint / distribution capability. Both have been actively (#) – ONEX acquired JW in October 2011 & JW acquired CMI in October
consolidating smaller, regional players. 2012. CMI previously acquired Illinois Flush Door in February 2010.
5
Company / Industry Overview
Architectural & Specialty Door Consolidation
NA Architectural Interior Wood NA Residential Specialty (Stile & Rail)
7 Players^ 4 Players 4 Players* 2 Players
2011
2012
2012
Select assets of:
2013
2012
2014
(^) – Management estimate of seven largest North American Commercial
& Architectural interior wood door manufacturers.
(*) – Management estimate of the largest Residential Stile & Rail door
manufacturers serving the North American market.
6
Company / Industry Overview
Masonite Has Established Leadership Positions
Residential Door
Architectural
Doors Components
Steel & Interior Veneers /
Interior Exterior Door Core
Glass Wood Facings
Molded Stile & Rail Fiberglass Steel
Ledco Lemieux Door-Stop Marshfield Marshfield Birchwood
Lifetime Chile Algoma Algoma
India Harring Baillargeon
Leadership
Leadership
Leadership
Leadership
Leadership
Leadership
Leadership
Position
Position
Position
Position
Position
Position
Position
2010-2014 acquisitions. Limited Masonite presence. Defined as #1 or #2 (based on internal estimates).
7
Company / Industry Overview
Significant Barriers to Entry Exist Within Residential Doors
~$100 - $150 million per line
Facing
Plant
Full
Pre-Finishing Product
~$9 - $10 million per Die Plates ~$75 million investment*
plant
Pre-Hanging Line &
Distribution
Slab
Assembly
~$20 - $25 million per plant
Each Step of Production Poses Unique Challenges
Note: $ are approximate management estimates.
(*) – Masonite has >1,000 dies with approximate value of $75 million. Includes interior and exterior molded dies. 8
Company / Industry Overview
Drivers of Continued Expansion
Recent Pricing Actions
Incremental Benefits from 2014 Pricing Actions 2015 Pricing Actions
Expected
2015 Q1 Wholesale Pricing Action
Benefits
Q1’15 Q2’15 Q3’15 Q4’15
• Wholesale increase to be effective in March across
interior and exterior products in the U.S. & Canada
Q1’14
• Benefits expected to begin hitting P&L in Q2
Q3’14
Higher Pricing Enables More Re-Investment with our Channel Partners
9
Company / Industry Overview
Five Focus Areas Designed to Accelerate Growth
Product Line Leadership
Sales and Marketing Excellence
Electronic Enablement
Automation
Portfolio Optimization: Strategic Tuck-ins & Market Exits
Goal: Grow Share & Expand Margins Beyond Macroeconomic Recovery
10① Company / Industry Overview ② Financial Review ③ Summary / Q&A
2014 Full Year Financial Results
Door Volume, Net Sales and Adjusted EBITDA
Door Volume^ Net Sales Adjusted EBITDA*
(in millions) (millions of USD) (millions of USD)
40.0 $2,000 $150.0
$1,837.7 $137.1
$1,800 $1,731.1
35.0 $1,676.0
32.7 $125.0
30.9 31.6 $1,600
30.0 $105.9
$1,400 $97.3
$100.0
25.0
$1,200
20.0 $1,000 $75.0
2012
2012 2013
2013 2014
2014 2012
2012 2013
2013 2014
2014 2012
2012 2013
2013 2014
2014
2 Year CAGR +2.9% 2 Year CAGR +4.7% 2 Year CAGR +18.7%
Door Volume, Net Sales & Adjusted EBITDA Reflect Improving Fundamentals
(^) – Does not include Africa segment.
(*) – See appendix for non-GAAP reconciliations. 122014 Full Year Financial Results
Consolidated P&L Information
(Millions of USD) 2014 2013 Change
Net Sales $1,837.7 $1,731.1 +6.2%
Gross Profit $265.4 $225.5 +17.7%
Gross Profit % 14.4% 13.0% +140 bps.
SG&A^ $224.1 $207.2 +8.2%
SG&A % 12.2% 12.0% +20 bps.
Adj. EBITDA* $137.1 $105.9 +29.5%
Adj. EBITDA % 7.5% 6.1% +140 bps.
(^) – Lower personnel costs of $4.2MM was more than offset by (among other things) a $7.4MM increase due to Door Stop, $5.7MM of
non-cash losses on disposals of PP&E and a $3.1MM increase in professional fees driven (primarily) by SOX compliance costs.
(*) – See appendix for non-GAAP reconciliations
Improving Margins from Higher Average Unit Pricing and Increased Volume
132014 Full Year Financial Results
Net Sales Reconciliation by Reportable Business Segment
(Millions of USD) North America Europe/ROW Africa Total % Change
2013 Net Sales $1,321.6 $339.9 $69.6 $1,731.1
Volume* $37.8 $17.8 ($22.9) $32.7 1.9%
Avg. Unit Price $65.6 $20.6 $17.1 $103.3 6.0%
Other ($7.3) $1.5 $0.0 ($5.8) (0.3%)
FX ($21.7) $5.3 ($7.2) ($23.6) (1.4%)
2014 Net Sales $1,396.0 $385.1 $56.6 $1,837.7 6.2%
+5.6% +13.3% -18.7%
(*) - Includes the incremental impact of our 2014 acquisitions.
Average Unit Price Increased in all Three Reportable Business Segments
142014 Full Year Financial Results
Adjusted EBITDA Quarterly Progression
Adjusted EBITDA* Continues to Grow after a Slow First Quarter
(in millions)
$50.0
$45.0 +31.6%
$40.0 +111.8%
+25.4%
$35.0
$30.0
$25.0
-24.8%
$20.0
$15.0
$10.0
$5.0
$0.0
Q1'13 Q1'14 Q2'13 Q2'14 Q3'13 Q3'14 Q4'13 Q4'14
2015 Full Year Adjusted EBITDA Increased Nearly 30% vs. 2014
(*) – See appendix for non-GAAP reconciliations.
152014 Full Year Financial Results
Liquidity, Credit and Debt Profile
Liquidity at December 28, 2014 (millions of USD) Financial Policy1 & Coverage Ratios
6.0
Unrestricted Cash $192.0 5.2
5.0 4.7
ABL Borrowing Base $121.8 4.4
3.7
AR Purchase Agreement $13.9 4.0 3.6 3.5
3.2 3.0 3.0
Total Available Liquidity $327.7 3.0
2.6
3.3
2.8 2.9 2.3
2.6
2014 Adj. EBITDA^ $137.1 2.0
1.5 1.5 2.1
1.8 1.6
2014 Interest Expense $41.5 1.0
Total Debt $511.9*
0.0
Net Debt $319.9 Dec-13 Mar-14
Total Debt / Adj. EBITDA
Jun-14 Sep-14
Net Debt / Adj. EBITDA
Dec-14
Adj. EBITDA / Interest (Adj. EBITDA - Capex) / Interest
1 - Targeted Total Debt/Adj. EBITDA ratio of < or equal to 4.0x
Selected Cash Flow Data 2014 2013 Debt Maturity Schedule
600
Cash flow from operations $77.4 $47.5
$500
500
Additions to property, plant & equipment ($50.1) ($46.0)
400
Cash used in acquisitions ($54.3) ($15.4)
300
Gross Proceeds from issuance of LT debt $138.7 $0.0
200
Payment of financing costs ($1.9) $0.0 $125
100
Increase (decrease) in cash & cash $91.2 ($21.4)
0
equivalents 2013 2014 2015 2016 2017 2018 2019 2020 2021
$125 mm Asset Backed Loan 8.25% Senior Unsecured Notes~
8.25% Senior Unsecured Notes due 2021
Strong Company Performance and Successful Acquisitions Have Improved Financial Ratios
(*) – Includes $11.9 million unamortized premium
(^) – See appendix for non-GAAP reconciliations.
16
(~) – All-in weighted yield of 7.65%① Company / Industry Overview ② Financial Review ③ Summary / Q&A
Summary
Masonite’s Balanced Growth Strategy is Working
Fundamentals Continue to Improve
2014 full year and 2014 Q4 results were strong:
Net sales increased 6.2% / 6.8%
Adjusted EBITDA increased 29.5% / 111.8%
Adjusted EBITDA margin expanded 140 / 420 basis points to 7.5% / 8.4%
Investing in Five Key Focus Areas Designed to Accelerate Growth
Product Line Leadership
Sales & Marketing Excellence
Electronic Enablement
Automation
Portfolio Optimization
Expect Another Strong Year in 2015 Balancing Growth and Investment
U.S. new housing starts and completions both continue to grow
2014 and 2015 pricing actions and positive mix expected to increase AUP
Areas of potential inflation (materials / labor) and uncertainty (France / FX) exist
Investing across key focus areas to protect and strengthen Masonite’s future
18Questions & Answers
Appendix
Reconciliation of Adjusted EBITDA to Net Income
(loss) Attributable to Masonite
Twelve Months Ended
December 28, September 28, June 29, March 30, December 29,
(In thousands) 2014 2014 2014 2014 2013
Adjusted EBITDA $ 137,087 $ 117,172 $ 110,007 $ 99,418 $ 105,877
Less (plus):
Depreciation 60,622 60,222 59,885 61,000 62,080
Amortization 21,722 20,348 19,736 18,479 17,058
Share based compensation expense 9,605 9,335 8,921 8,205 7,752
Loss (gain) on disposal of property, plant and
equipment 3,816 2,394 (614) (797) (1,775)
Registration and listing fees — 423 2,421 2,421 2,421
Restructuring costs 11,137 17,357 8,709 9,911 10,630
Asset impairment 18,202 — — 1,903 1,904
Interest expense (income), net 41,525 39,476 37,359 34,973 33,230
Other expense (income), net (587) 4,175 4,324 (949) 2,316
Income tax expense (benefit) 4,533 (10,259) (18,535) (22,308) (21,377)
Loss (income) from discontinued operations, net
of tax 630 838 776 649 598
Net income (loss) attributable to non-controlling
interest 3,222 1,425 2,005 2,166 2,050
Net income (loss) attributable to Masonite $ (37,340) $ (28,562) $ (14,980) $ (16,235) $ (11,010)
Three Months Ended
December 28, September 28, June 29, March 30, September 29, June 30, March 31,
(In thousands) 2014 2014 2014 2014 2013 2013 2013
Adjusted EBITDA $ 37,722 $ 35,597 $ 44,050 $ 19,718 $ 28,432 $ 33,461 $ 26,177
Less (plus):
Depreciation 14,798 15,842 14,536 15,446 15,505 15,651 16,526
Amortization 5,549 4,889 5,593 5,691 4,277 4,336 4,270
Share based compensation expense 2,270 2,255 2,797 2,283 1,841 2,081 1,830
Loss (gain) on disposal of property, plant and
equipment 1,457 236 1,036 1,087 (2,772) 852 110
Registration and listing fees — — — — 1,998 — —
Restructuring costs (57) 9,913 560 721 1,265 1,762 1,440
Asset impairment 18,202 — — — — 1,904 —
Interest expense (income), net 10,491 10,447 10,594 9,993 8,330 8,208 8,250
Other expense (income), net (1,670) (404) 1,306 181 (255) (363) (158)
Income tax expense (benefit) 1,131 2,004 1,379 19 (6,272) (408) (1,036)
Loss (income) from discontinued operations, net
of tax 194 124 170 142 62 44 90
Net income (loss) attributable to non-controlling
interest 1,724 258 499 741 838 605 680
Net income (loss) attributable to Masonite $ (16,367) $ (9,967) $ 5,580 $ (16,586) $ 3,615 $ (1,211) $ (5,825)
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