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Wells fargo conference presentation final Wells fargo conference presentation final Presentation Transcript

  • NYSE: DOOR 2014 Spring Investor Presentation
  • 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. It is defined as net income (loss) attributable to Masonite plus depreciation, amortization of intangible assets, restructuring costs, loss (gain) on sale of property, plant and equipment, impairment of property, plant and equipment, 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 press release 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 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
  • 4  Established leadership positions in all targeted product categories in our largest market (United States).  Net Sales of $1.7 billion and approximately 32 million doors sold in 2013.  An extensive global footprint with 65 manufacturing facilities spread across 11 countries.  Serve more than 7,000 customers in over 80 countries.  One of only two vertically integrated residential molded door manufacturers and the only vertically integrated commercial door manufacturer in NA. Manufacturing Headquarters Company / Industry Overview Masonite is a Global Building Products Company 2013 Sales by Segment 2013 NA End-Markets North America, 76% Europe, Asia & Latin America, 20% S. Africa, 4% Residential RRR, 44% Residential new const., 35% Non-residential building const., 21%
  • - 10 20 30 40 50 60 2006 2007 2008 2009 2010 2011 2012 2013 Q1'14 5 Company / Industry Overview Masonite Has Transformed Itself in Recent Years - 5,000 10,000 15,000 20,000 2006 2013 Q1'14 Pre-Acquisitions Acquisitions Cumulative Global Plant Closures Warehouses Manufacturing  Strengthened the Core Business: • Lean sigma deployed and $100+ million of benefits since 2006 • 57 manufacturing/distribution facilities closed since 2006 • Reduced total headcount by approximately 40% since 2006 • Automation: Residential interior door plant in Denmark, South Carolina  Drive Organic Growth: • Product Line Leadership • Electronic Enablement  Strategic Tuck-in Acquisitions: • Acquisitions: Twelve strategic tuck-ins since March 2010, designed to build leadership positions and strengthen vertical integration across all targeted North American door markets Total HeadcountActions Taken
  • Company / Industry Overview Interior Molded Doors – A New Normal Has Emerged        AssemblyFacings Prior to 2001 Market Reality 2002 – 2012 The New Normal Since Oct. 2012 AssemblyFacings AssemblyFacings (^) – Premdor purchased Masonite from International Paper in 2001. Premdor converted to the Masonite brand across all geographies except for France. (#) – The Towanda PA facing plant was divested as part of a government imposed condition for completing the sale of Masonite by International Paper to Premdor. Through this divestiture CMI (as a stand alone business) was first formed. (*) – ONEX acquired Jeld-Wen in October 2011 & Jeld-Wen acquired CMI in October 2012. Including what would become        Market Expectations AssemblyFacings     * # 6
  • Company / Industry Overview Residential Int. Molded Facings & Assembly Consolidation 7 NA Residential Interior Molded Facings* 3 Players 2 Players # (^) – There are only two residential molded interior wood door manufacturers with a full North American footprint / distribution capability. Both have been actively consolidating smaller, regional players. (#) – ONEX acquired JW in October 2011 & JW acquired CMI in October 2012. CMI previously acquired Illinois Flush Door in February 2010. (*) – Full vertically integrated operations. NA Residential Interior Doors 6 Players 2 Players^ # 2010 2010 2012 2012 2010
  • Company / Industry Overview Non-Residential & Specialty Door Consolidation 8 NA Residential Specialty (Stile & Rail) 4 Players* 2 Players NA Non-Residential Interior Wood 7 Players^ 4 Players 2012 2012 2011 2012 2013 (^) – Management estimate of seven largest North American Commercial & Architectural interior wood door manufacturers. (*) – Management estimate of the four largest Residential Stile & Rail door manufacturers serving the North American market. Select assets of:
  • 9 Company / Industry Overview Established Leadership Positions Baillargeon BirchwoodMarshfield Algoma Ledco Lifetime India Lemieux Algoma Marshfield Door Components Residential Doors SteelStile & RailMolded Non-Residential Fiberglass ExteriorInterior Door Core Veneers / Facings Interior Wood Steel & Glass Leadership Position Leadership Position Leadership Position Leadership Position Leadership Position Leadership Position Leadership Position 2010-2014 acquisitions. Limited Masonite presence. Defined as #1 or #2 (based on internal estimates). Chile Door-Stop
  • Company / Industry Overview Creating a Business Not Easy to Replicate New Products AutomationE-Commerce Vertical Integration Masonite’s replacement insurance value on our facing production facilities alone is in excess of $1.0 billion. Die Fabrication Facings Production Slab Assembly Pre-Hanging Pre-Finishing 10
  • Company / Industry Overview Residential Pricing Environment Improving 11 Q4’13Q1’13 North America Retail & U.S. Wholesale Mid-High Single Digit* Increase Across Interior & Exterior Doors Q1’14 25% 15% 2013 NA Price Increases Affected a Limited Percentage of Masonite’s Total Global Business^ 55% 2014 NA Price Increases Have Been Broader Based^ U.S. Wholesale Mid Single Digit Increase on Molded & Flush Interior Doors U.S. Wholesale Mid Single Digit Increase on Certain Interior & Exterior Doors, Door Lites & Components (^) – Percentages of net sales are approximate and based on management estimates of net sales. (*) – The 2014 impact of North American retail pricing is expected to be up low-mid single digits once prior year price concessions are taken into account. Masonite is Committed to Capturing Value for the Products & Services We Provide
  • Company / Industry Overview North American Average Unit Price Has Been Improving North American Average Unit Price Increasing U.S. Wholesale Price Increases* • Mid single digit price increases in Q1’13 & Q4’13. • Mid to high single digit price increases in Q1’14. NA Retail Price Increases* Mid to high single digit price increases in Q1 2014. Product Mix More specialized products with higher average unit prices, like Stile & Rail, are helping increase average unit price. Key Drivers (AUPGrowth%,yearoveryear) 12 NA Average Unit Price Has Increased for 4 Consecutive Quarters -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 (*) – Net of 2013 retail price concessions, the 2014 net impact of NA pricing is estimated at mid single digits across ~55% of global revenue for the remaining three quarters in 2014.
  • Company / Industry Overview Improved Pricing Environment & Core Focus Areas 13 Goal: Grow Share & Expand Margins Beyond Macro Economic Recovery $2 / Door +~$60 MM $3 / Door +~$90 MM $1 / Door +~$30 MM Hypothetical increase in Adjusted EBITDA per $1/door increase^ Masonite sold approx. 32 million doors globally in 2013 with an AUP of ~$55/door (^) – Assuming no change in mix, input costs, etc. Automation Product Line Leadership Electronic Enablement Sales and Marketing Excellence Industry Structure
  • Company / Industry Overview Positive Construction Indicators in 2014 14 0 200 400 600 800 1000 2009 2010 2011 2012 2013 0 100 200 300 400 500 600 700 800 900 1000 2009 2010 2011 2012 2013 0 50 100 150 200 250 300 350 2009 2010 2011 2012 2013 2014 Building Expectations Are PositiveU.S. New Housing Starts • National Association of Homebuilders forecasts New Housing Starts of 1,038,000 in 2014  12% year over year growth • Home Improvement Research Institute (HIRI) forecasts Home Improvement spend of $308 billion in 2014  6.5% year over year growth • McGraw Hill Construction estimates 943K square feet of non-residential construction in 2014  11.6% year over year growth U.S. Non-Residential ConstructionU.S. Repair, Renovation & Remodel Source: U.S. Census Bureau (Mar 2014) Source: HIRI (Mar 2014) Source: McGraw-Hill (1Q14) 2014 Outlook is Positive for Building Activity
  • ① Company / Industry Overview ② Financial Review ③ Summary / Q&A
  • $21.7 $19.7 $15.0 $20.0 $25.0 $30.0 Q1'13 Q1'14 $424.5 $422.5 $250.0 $300.0 $350.0 $400.0 $450.0 $500.0 Q1'13 Q1'14 8.1 7.8 5.0 6.0 7.0 8.0 9.0 10.0 Q1'13 Q1'14 Net Sales Adj. EBITDA*Door Volume^ (in millions) (millions of USD) (millions of USD) Q1’13 Q1’14 Q1’13 Q1’14 Q1’13 Q1’14 (^) – Does not include South Africa segment. (*) – See appendix for non-GAAP reconciliations. (#) – Including $4.5 million net recovery related to the final resolution of the Marshfield business interruption insurance claim, Q1’13 Adj. EBITDA was $26.2mm. 2014 First Quarter Financial Results Door Volume, Net Sales and Adjusted EBITDA 16 Harsh Winter Impacted Door Volume, Net Sales & Adjusted EBITDA #
  • (*) – See appendix for non-GAAP reconciliations (^) – Excluding the $4.5 million net recovery related to the final resolution of the Marshfield business interruption insurance claim, SG&A and SG&A%, were up 12.1% and 160 bps., respectively; and Adj. EBITDA and Adj. EBITDA % were down 9.2% and 40 bps., respectively. (#) – SG&A increase includes increases of $1.5mm salaries & benefits, $1.1mm professional fees, $1.0mm loss on disposals of PP&E, $0.8mm SG&A costs related to Door Stop and $0.6mm bad debt expense. Net Sales Gross Profit Gross Profit % SG&A# SG&A % Adj EBITDA* Adj EBITDA % Q1’14 $422.5 $53.0 12.5% $57.8 13.7% $19.7 4.7% Q1’13 $424.5 $50.4 11.9% $47.0^ 11.1%^ $26.2^ 6.2%^ Change -0.5% +5.2% +60 bps. +23.0% +260 bps. -24.8% -150 bps. 2014 First Quarter Financial Results Consolidated P&L Information 17 Improving Gross Margin Despite Lower Net Sales (Millions of USD)
  • Q1’13 Net Sales Volume* Avg. Unit Price Other FX Q1’14 Net Sales North America $319.3 ($14.2) $17.9 ($2.2) ($6.4) $314.4 Europe/ROW $88.7 ($0.9) $2.4 $1.6 $2.8 $94.6 South Africa $16.5 ($4.0) $3.8 $0.0 ($2.9) $13.4 Total $424.5 ($19.1) $24.1 ($0.6) ($6.4) $422.5 (4.5%) 5.7% (0.1%) (1.5%) (0.5%) (*) - Includes the incremental impact of our 2013 & 2014 acquisitions and the loss of Lowe’s business announced in 4Q12. (Millions of USD) -1.5% +6.7% -18.8% % Change 2014 First Quarter Financial Results Net Sales Reconciliation by Reportable Segment Average Unit Price Increased in All 3 Reportable Segments 18
  • 3.7 3.4 3.3 3.6 5.2 2.6 2.6 2.3 2.6 3.5 3.1 3.3 3.6 3.2 2.8 1.9 2.0 2.1 1.8 1.5 1.0 2.0 3.0 4.0 5.0 6.0 3/31/13 6/30/13 9/29/13 12/29/2013 3/30/2014 Total Debt / Adj. EBITDA Net Debt / Adj. EBITDA Adj. EBITDA / Interest (Adj. EBITDA - Capex) / Interest Financial Policy & Coverage Ratios Selected Cash Flow Data Q1’14 Q1’13 Cash flow from continuing operations ($10.6) ($4.0) Additions to property, plant & equipment ($8.4) ($6.4) Cash used in acquisitions ($50.3) $0.0 Gross Proceeds from issuance of long- term debt $138.7 $0.0 Payment of financing costs ($1.9) $0.0 Increase (decrease) in cash & cash equivalents $65.4 ($12.7) Target financial leverage range Unrestricted Cash $166.3 ABL Borrowing Base $108.0 AR Purchase Agreement $12.3 Total Available Liquidity $286.6 Liquidity at Mar 30, 2014 (millions of USD) LTM Adj. EBITDA^ $99.4 LTM Interest Expense $35.0 Total Debt $513.6 Net Debt $347.3 2014 First Quarter Financial Results Liquidity, Credit and Debt Profile Debt Issuance History 8.25% Senior Unsecured Notes due 2021 (*) - Adjusted for Door-Stop acquisition and Jan 2014 $125mm debt add-on 4.8 * $0 $100 $200 $300 $400 $500 2011 2012 2013 2014 3.2* 19(^) – See appendix for non-GAAP reconciliations. 2.6*
  • ① Company / Industry Overview ② Financial Review ③ Summary / Q&A
  • 21 Summary Positioning the Company for a Sustained Recovery  Pricing Trends Improving  North America average unit price has increased for 4 consecutive quarters  U.S. Wholesale & NA Retail mid to high single digit price increases  Price increases in U.K. and France helping Europe / ROW pricing trends  Strong Volume Growth and Positive Mix Impact From Stile & Rail  Lemieux and Chile Stile & Rail acquisitions are proceeding according to plan  Footprint optimization and synergy capture for Stile & Rail operations underway  Market Indicators Remain Positive  U.S. new housing expected to experience continued growth in 2014  U.S. Home Improvement market expected to display steady growth in 2014  Long-term, demographically driven demand characteristics remain strong  Key Focus Areas to Accelerate Growth  Automation  Product Line Leadership  Electronic Enablement  Sales & Marketing Excellence  Strategic Tuck-in Acquisitions
  • Questions & Answers
  • Appendix
  • Financial Review Volume Recovery is Expected to Accelerate Growth $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 $1,600 $1,700 $1,800 2010 2013 $60 $70 $80 $90 $100 $110 2010 2013 25 26 27 28 29 30 31 32 33 2010 2013 Net Sales Adj. EBITDA* Door Volume +2.8MM (+3% CAGR) +$348MM (7.8% CAGR) +$25.2MM (9.5% CAGR) In millions millions of USD SG&A SG&A as a % of Sales Down 70bp since 2010 millions of USD (*) - See appendix for non-GAAP reconciliations. 11.6% 11.8% 12.0% 12.2% 12.4% 12.6% 12.8% 13.0% 2010 2013
  • Reconciliation of Adjusted EBITDA to Net Income (loss) Attributable to Masonite 25 (In thousands) March 30 2014 March 31 2013 March 30, 2014 December 29, 2013 September 29, 2013 June 30, 2013 March 31, 2013 Adjusted EBITDA, excluding business interruption insurance 19,718$ 21,677$ 99,418$ 101,377$ 107,189$ 105,740$ 99,219$ Business interruption insurance proceeds, net — 4,500 — 4,500 4,500 4,500 4,500 Adjusted EBITDA 19,718 26,177 99,418 105,877 111,689 110,240 103,719 Less (plus): Depreciation 15,446 16,526 61,000 62,080 63,544 63,898 63,933 Amortization 5,691 4,270 18,479 17,058 16,889 16,968 16,191 Share based compensation expense 2,283 1,830 8,205 7,752 7,664 7,609 6,792 Loss (gain) on disposal of property, plant and equipment 1,087 110 (797) (1,774) 231 3,203 2,750 Impairment — — 1,903 1,903 3,254 1,350 1,350 Registration and listing fees — — 2,421 2,421 — — — Restructuring costs 721 1,440 9,911 10,630 10,847 13,411 12,330 Interest expense (income), net 9,993 8,250 34,973 33,230 33,169 32,808 33,051 Other expense (income), net 181 (158) (949) (1,288) (1,445) (1,110) 512 Income taxexpense (benefit) 19 (1,036) (22,308) (23,363) (14,743) (8,612) (9,385) Loss (income) fromdiscontinued operations, net of tax 142 90 649 597 236 224 206 Net income (loss) attributable to non-controlling interest 741 680 2,166 2,105 2,915 2,990 3,070 Net income (loss) attributable to Masonite (16,586)$ (5,825)$ (16,235)$ (5,474)$ (10,872)$ (22,499)$ (27,081)$ Three Months Ended Twelve Months Ended