The document summarizes Masonite's 2014 first quarter earnings presentation. It discusses the company's financial results for Q1 2014 including net sales of $422.5 million, adjusted EBITDA of $19.7 million, and door volume of 7.8 million units. Harsh winter conditions negatively impacted door volume, net sales and adjusted EBITDA compared to Q1 2013. Average unit prices increased in North America and Europe/ROW. Liquidity remains strong with $286.6 million in total available liquidity as of March 30, 2014.
Shutterfly Earnings for 1Q 2014 released after market close today. Released in tandem with their conference call - which starts in about 20 minutes: http://www.media-server.com/m/p/o42tycb9
Looks like they beat by $0.05 and gave updated guidance more or less in-line with consensus. Note that Goldman upgraded the stock 2 weeks ago...
2. 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
3. ① Company / Industry Update
② Financial Review
③ Summary / Q&A
4. 0
5
10
15
20
25
30
2011 2012 2013 Q1'13 Q1'14
Company / Industry Update
North American Door Volume Growth
Masonite’s North American Door Volume
4
Key Drivers
Acquisition volume
Unit Volume Has Trended Up
Acquisitions and a recovering U.S.
housing market has been driving North
American unit volume
Volume Softness in Q1’14
Harsh winter conditions and Lowe’s*
business loss led to a decline in unit
volume versus Q1’13
Macro Factors Remain Positive
• New housing inventory remains low
• Interest rates remain low
• NAHB estimates 1,055,000 new U.S.
housing starts in 2014 (+14%)
• Non-residential construction
recovery expected to follow
residential
(in millions)
NA Volume in Q1’14 Was Impacted By Harsh Winter Conditions
+8.3%
vs. YA
+5.3%
vs. YA
-3.0%
vs. YA
(*) Previously announced partial business loss in the Northeast U.S. and Texas related to Lowe’s Q4 2012 PLR.
5. Company / Industry Update
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)
5
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.
6. Company / Industry Update
North American Product Mix Is Benefiting From Stile & Rail
Q1'12 Q1'13 Q1'14
6
+39% vs.
Q1’12
Stile & Rail Doors: Anatomy 101
Stile & Rail Unit Volume Progression
Rails
Top, cross, lock and
bottom horizontal rail
sections
Stiles
Edge and center
vertical stile sections
Wood Panels
Wood sections that
fit within the stile &
rail section
Muntin Bars
Vertical and horizontal
wood bars separating
the glass panels
Lemieux & Chile Acquisitions Created A Leadership Position in Stile & Rail
Stile & Rail: Good / Better / Best
Retail price
~$114
Retail price
~$285
Retail price
~$549
Glass Panels
Glass sections that fit
within the stile & rail
sections and/or the
wood muntin bars
7. Company / Industry Update
Five Focus Areas Designed to Create Shareholder Value
Automation
Product Line Leadership
Electronic Enablement
Sales and Marketing Excellence
Strategic Tuck-In Acquisitions
7
Goal: Grow Share & Expand Margins Beyond Macro Economic Recovery
8. ① Company / Industry Update
② Financial Review
③ Summary / Q&A
9. $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.
(#) – Q1’13 Adj. EBITDA (as reported) was $26.2mm. However, this included a $4.5 million net recovery related to the final resolution of the Marshfield business
interruption insurance claim.
2014 First Quarter Financial Results
Door Volume, Net Sales and Adjusted EBITDA
9
Harsh Winter Impacted Door Volume, Net Sales & Adjusted EBITDA
#
10. 2014 First Quarter Financial Results
Q1’14 Year Over Year Reconciliation Items
≤1 lost shift
>1-2 lost shifts
3 or more lost shifts
Winter 2014
• Volume impacted by harsh winter conditions
• Higher utilities and labor costs due to lost shifts
Business and Macro-Economic Factors
• Lowe’s business loss not fully annualized
• 2013 mid-year retail price concessions
• Weakness in France & negative FX impacts
Business Interruption Insurance Claim*
$4.5 million net recovery in Q1’13
Continuing Costs
• Increased salary and benefit costs
• Investment in growth initiatives / Sales &
Marketing excellence
Other Q1 Costs
• Expenses related to Door-Stop acquisition
• Higher international bad debt expense
• Property, plant & equipment disposal
(*) – The BI claim was recorded as a $4.5 million benefit to SG&A in Q1’13.
10
Q1’14 SG&A IncreasesQ1’14 Headwinds
Masonite Experienced 39 Lost Production Shifts During Q1’14
11. (*) – 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
11
Improving Gross Margin Despite Lower Net Sales
(Millions of USD)
12. 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
12
13. 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*
13(^) – See appendix for non-GAAP reconciliations.
2.6*
14. ① Company / Industry Update
② Financial Review
③ Summary / Q&A
15. Challenging First Quarter Dynamics
Unusually harsh winter conditions in North America affected homebuilding and home
improvement and increased costs
Residual effects from highly competitive North American retail environment
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
15
Summary
Growth Expected to Accelerate After Tough First Quarter
