Winter 2014 Investor Presentation 20/26/2014

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Winter 2014 Investor Presentation 20/26/2014

  1. 1. Investor Presentation February 2014
  2. 2. 2 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 that involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Masonite International Company (the “Company”), 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. When used in this Investor Presentation, such statements may contain 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 information in this Investor Presentation may include, without limitation, statements regarding intentions, goals, targets, preliminary results, performance, goals, achievements, operations, acquisitions and integration of acquired businesses, plans and objectives, strategies, business and economic conditions, and projected costs. These statements reflect the Company’s current expectations regarding future events and operating performance are based on information currently available to the Company and speak only as of the date of this Investor Presentation. All forward-looking statements in this Investor Presentation are qualified by these cautionary statements. Forward-looking statements involve significant risks and uncertainties, 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. Forward-looking information is based on various material factors or assumptions, which are based on information currently available to the Company. Material factors or assumptions that were applied in drawing a conclusion or making a target, objectives or goal set out in the following forward-looking information are as set out within this Investor Presentation. Readers are cautioned that the preceding and enclosed list of material factors or assumptions is not exhaustive. Although the forward-looking statements contained in this Investor Presentation are based upon what the Company believes are reasonable assumptions, the Company cannot assure readers that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this Presentation, and should not be relied upon as presenting the Company’s views on any date subsequent to such date. The Company assumes no obligation to update or revise these forward-looking statements to reflect new information, events, and circumstances or otherwise, except in such circumstances as may be required by applicable law.
  3. 3. 3 Non-GAAP Financial Measure Adjusted EBITDA is a measure used by management to measure operating performance. Beginning in the fourth quarter of 2013, we revised our calculation of Adjusted EBITDA to exclude costs related to the registration and listing of Masonite’s common shares. Management believes that the revised definition of Adjusted EBITDA better reflects the underlying performance of our reportable segments. The revision to this definition had no impact on our reported Adjusted EBITDA for the three months or year ended December 30, 2012, or January 1, 2012. As revised, Adjusted EBITDA 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 table below sets forth a reconciliation of Adjusted EBITDA to net income (loss) attributable to Masonite for the periods indicated.
  4. 4. 1. Company & Industry Overview 2. Financial Results 3. Summary
  5. 5. 5 Company & Industry Overview Masonite is a Global Building Products Company  Established leadership positions in all targeted product categories in our largest market (United States).  Net Sales of $1.7 billion; approximately 32 million doors sold annually.  An extensive global footprint with 65 manufacturing facilities spread across 11 countries.  Serves more than 7,000 customers worldwide in 80 countries.  One of only two vertically integrated residential door manufacturers and the only vertically integrated commercial door manufacturer in NA. Manufacturing Headquarters North America CANADA UNITED STATES MEXICO S. America CHILE Europe FRANCE UK ISRAEL CZECH REPUBLIC IRELAND Southeast Asia MALAYSIA South Africa SOUTH AFRICA NA End-Markets Sales by Reportable Segment North America, 76% Europe, Asia & Latin America, 20% S. Africa, 4% Residential RRR, 43% Residential new construction, 35% Non- residential building constrcution, 21%
  6. 6. 6 Company & Industry Overview Masonite Has Transformed Itself Over the Past Several Years Actions Taken - 5,000 10,000 15,000 20,000 2006 2013 Pre-Acquisitions Acquisitions Total Headcount Cumulative Global Plant Closures - 10 20 30 40 50 60 2006 2007 2008 2009 2010 2011 2012 2013 ROW North America  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 product categories
  7. 7. 7 Company & Industry Overview Residential Interior Molded Facings and Interior Door Consolidation 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
  8. 8. 8 NA Non-Residential Interior Wood 7 Players^ 4 Players NA Residential Specialty (Stile & Rail) 4 Players* 2 Players (^) – 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. Company & Industry Overview Non-Residential and Specialty Door Consolidation 2012 2012 2011 2012 2013
  9. 9. 9 • Based in Nottingham, United Kingdom • Specializes in fiberglass exterior doors • Leading e-commerce platform with 3-day delivery • High average unit prices, double-digit margins and strong EBITDA to cash conversion • United Kingdom housing starts accelerating Pre Acquisition $7.6M TTM Adjusted EBITDA ~6.5x Pre Synergy Adjusted EBITDA Acquisition Details ~$50 mm net purchase price* UK Housing Market is Accelerating (in 000s) Source: UK Office of National Statistics (Autumn 2013) 100 110 120 130 140 2011 2012 2013 2014 (*) – Net of cash acquired Company & Industry Overview Tuck-In Acquisitions: Door-Stop International
  10. 10. 10 Baillargeon BirchwoodMarshfield Algoma Ledco India Lifetime 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 2010-2013 acquisitions. Limited Masonite presence. Defined as #1 or #2 (based on internal estimates). Company & Industry Overview Tuck-In Acquisitions Have Created Leadership Positions Chile Door-Stop
  11. 11. 11 Q4’13Q1’13 Masonite Is Committed To Capturing an Appropriate Value For the Products & Services We Provide 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. Company & Industry Overview Residential Pricing Environment Improving
  12. 12. 12 Retailers have put in place what appears to be a more logical pricing progression across the product category Retailer BRetailer A Recent U.S. Retail Price Shops Suggest Consumer Prices Have Increased (*) - Prices are for 6-panel, hollow core slab and bi-fold doors. Prices shown are based upon retail price shops conducted by Masonite in Oct. 2013 and Jan. 2014 across various markets with in the U.S. $22-$30 1/14 $19-$26 10/13 $44-$49 1/14 $41 10/13 $29 1/14 $19-$26 10/13 $49 1/14 $41 10/13 Company & Industry Overview Recent Retail Price Shops
  13. 13. 13 $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. Company & Industry Overview Improved Pricing Environment & Core Focus Areas Automation Product Line Leadership Electronic Enablement Sales and Marketing Excellence Industry Structure The Combination of These Items is Expected to Grow Share and Expand Margins Beyond Macro Economic Recovery
  14. 14. 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 Outlook Is Positive for U.S. Building Activity 2014 Building Expectations Are PositiveU.S. New Housing Starts & Completions • National Association of Homebuilders forecasts New Housing Starts of 1,055,000 in 2014  14% year over year growth • Home Improvement Research Institute (HIRI) forecasts Home Improvement spend of $313 billion in 2014  6.8% year over year growth • McGraw Hill Construction estimates 900K square feet of non-residential construction in 2014  11.4% year over year growth U.S. Non-Residential ConstructionU.S. Repair, Renovation & Remodel Source: U.S. Census Bureau (Feb 2014) Source: HIRI (Sep 2013) Source: McGraw-Hill (4Q13) Company & Industry Overview Positive Construction Indicators Heading into 2014
  15. 15. 2. Financial Results 1. Company & Industry Overview 3. Summary
  16. 16. 16 $97.3 $105.9 $60 $70 $80 $90 $100 $110 $120 2012 2013 $1,676.0 $1,731.1 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 $1,600 $1,700 $1,800 $1,900 $2,000 2012 2013 30.9 31.6 20.0 25.0 30.0 35.0 40.0 2012 2013 Fiscal 2013 Full Year Financial Results Door Volume, Net Sales and Adjusted EBITDA Net Sales Adj. EBITDA*Door Volume^ (in millions) (millions of USD) (millions of USD) 2012 2013 2012 2013 2012 2013 Door Volume up 2.3%, Net Sales up 3.3%, Adjusted EBITDA up 8.8% (^) - Does not include South Africa business (*) - See appendix for non-GAAP reconciliations.
  17. 17. 17 7.1 6.9 0 5 10 15 20 2012 2013 8.4 6.8 0 5 10 15 20 2012 2013 Fiscal 2013 Full Year Financial Results Wholesale Volume Pacing Market, Retail Down Behind Lowe’s Loss Wholesale Customer Unit Volume Increased Double Digits in 2013 15.3 17.9 0 5 10 15 20 2012 2013 (in millions) 2012 2013 2012 NA Retail Non-Residential & ROWNA Wholesale (in millions) (in millions) 2012 20132013 +17.0% -19.0% -2.8%
  18. 18. 18 Fiscal 2013 Full Year Financial Results Consolidated P&L Information SG&A as a Percent of Sales -30 bps; Adjusted EBITDA Margin +30 bps Net Sales Gross Profit Gross Profit % SG&A SG&A % Adj EBITDA* Adj EBITDA % 2013 $1,731.1 $225.5 13.0% $209.1 12.1% $105.9 6.1% 2012 $1,676.0 $216.3 12.9% $208.1 12.4% $97.3 5.8% Change +3.3% +4.3% +10 bps. +0.5% -30 bps. +8.8% +30 bps. (*) - See appendix for non-GAAP reconciliations.
  19. 19. 19 $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 Historic Financial Results Volume Recovery is Expected to Accelerate Top & Bottom Line Growth
  20. 20. 20 Financial Policy & Coverage Ratios Selected Cash Flow Data 2013 2012 Cash flow from continuing operations $46.1 $55.7 Additions to property, plant & equipment ($46.0) ($48.4) Cash used in acquisitions ($15.4) ($88.4) Gross Proceeds from issuance of long-term debt $0 $103.5 Payment of financing costs $0 ($2.0) Increase (decrease) in cash & cash equivalents ($21.4) $13.1 Fiscal 2013 Financial Results Liquidity, Credit and Debt Profile Target financial leverage range Unrestricted Cash $100.9 ABL Borrowing Base $108.2 AR Purchase Agreement $13.0 Total Available Liquidity $222.1 Liquidity at Dec 29, 2013 (millions of USD) LTM Adj. EBITDA $105.9 LTM Adj. EBITDA Margin 6.1% Total Debt $378.2 Net Debt $277.3 3.9 3.7 3.4 3.3 3.6 2.6 2.6 2.6 2.3 2.6 3.1 3.1 3.3 3.6 3.2 1.6 1.9 2.0 2.1 1.8 1.0 2.0 3.0 4.0 5.0 12/30/12 3/31/13 6/30/13 9/29/13 12/29/2013 Total Debt / Adjusted EBITDA Net Debt / Adjusted EBITDA Adj. EBITDA/Interest (Adj. EBITDA - Capex) / Interest Debt Maturity Schedule $125 $500 0 100 200 300 400 500 600 2013 2014 2015 2016 2017 2018 2019 2020 2021 8.25% Senior Unsecured Notes $125mm add-on Jan. 2014 $125 mm Asset Backed Loan
  21. 21. 1. Company & Industry Overview 3. Summary 2. Financial Results
  22. 22. 22  North American Pricing Trends Improving  Mid-single digit U.S. Wholesale price increases took effect on March 18, 2013 and September 30, 2013  Average unit price increased Q2-Q4 (3 consecutive quarters)  U.S. Wholesale & NA Retail prices increases in Q1 2014  Strategic Tuck-In Acquisition Program  ~$125 million^ add-on bond offering successfully completed  Completed acquisition of UK based Door-Stop  Expanded our leadership position  #1 or #2 in all seven targeted product categories  Market Indicators Remain Favorable  New housing expected to experience robust 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 and Marketing Excellence  Strategic Tuck-In Acquisitions (^) – Net of expenses ~$137 million dollars was raised (bonds priced at 108.75). Summary Positioning the Company for a Sustained Recovery
  23. 23. Appendix Non-GAAP Financial Measure
  24. 24. 24 Reconciliation of Adjusted EBITDA to Net Income (Loss) Attributable to Masonite: (In thousands) December 29, 2013 December 30, 2012 January 1, 2012 January 2, 2011 Adjusted EBITDA 105,877$ 97,261$ 81,994$ 80,678$ Less (plus): Depreciation 62,080 63,348 60,784 58,633 Amortization of intangible assets 17,058 15,076 10,569 8,092 Share based compensation expense 7,752 6,517 5,888 9,626 Loss (gain) on disposal of property, plant and equipment (1,774) 2,724 3,654 1,301 Impairment of property, plant and equipment 1,903 1,350 2,516 - Registration and listing fees 2,421 - - - Restructuring costs 10,630 11,431 5,116 7,000 Interest expense (income), net 33,230 31,454 18,068 245 Other expense (income), net (1,288) 528 1,111 1,030 Income taxexpense (benefit) (23,363) (13,365) (21,560) (11,396) Loss (income) fromdiscontinued operations, net of tax 597 (1,480) 303 1,718 Net income (loss) attributable to noncontrolling interest 2,105 2,923 2,079 1,390 Net income (loss) attributable to Masonite (5,474)$ (23,245)$ (6,534)$ 3,039$ Year Ended

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