Earnings Presentation May 9, 2013 Safe Harbor/Forward Looking - - PowerPoint PPT Presentation

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Earnings Presentation May 9, 2013 Safe Harbor/Forward Looking - - PowerPoint PPT Presentation

First Quarter Earnings Presentation May 9, 2013 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.


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First Quarter Earnings Presentation

May 9, 2013

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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

  • ther 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

  • nly as of the date of this 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

  • perations 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. For those who listen to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, and have not been updated subsequent to the initial earnings call. This investor Presentation does not constitute an offer of securities or solicitation of an offer to purchase securities.

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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, interest expense, net, other expense (income), net, income tax (benefit) expense, 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 prospectus is appropriate to provide additional information to investors about our operating performance. Because not all companies use identical calculations, this presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other

  • companies. Moreover, Adjusted EBITDA as presented for the 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 charge, 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 net income (loss) to Adjusted EBITDA for the periods indicated.
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  • 1. Market Update
  • 2. Financial Results
  • 3. Summary / Q&A
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Inventory Months of Supply Average Sales Price

  • 1

2 3 4 5 6 7 8 9 10 2010 2011 2012 Mar-13 $200 $210 $220 $230 $240 2010 2011 2012 Mar-13 1 2 3 4 2010 2011 2012 Mar-13

Up ~10% vs. 2011 Down 1.1MM vs. 2010 Half 2010 Levels

Market Update: Existing Home Sales

Higher average selling prices are driving a slight increase in existing homes available for sale, while strong demand has resulted in a sharp drop in months supply of existing homes.

Source: National Association of REALTORS

(in thousands) (in millions)

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20 40 60 80 100 120 140 160 180 200 2010 2011 2012 Mar-13 1 2 3 4 5 6 7 8 9 10 2010 2011 2012 Mar-13

The inventory level of new homes is also very low with less than 160,000 units available (slightly more than four months of supply), leaving builders hustling to catch-up with demand.

Source: U.S. Census Bureau

Market Update: New Home Sales

100 200 300 400 500 2010 2011 2012 Mar-13

Inventory Months of Supply New Home Sales

(in thousands) (in thousands)

Up 38% vs. 2010 Down 35K vs. 2010 Half 2010 Levels

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Source: U.S. Census Bureau

Q1’13 Avg. = 628 +29% vs. YA Q4’12 Avg. = 592 Q3’12 Avg. = 545 Q2’12 Avg. = 516 Q1’12 Avg. = 487 511 470 481 504 513 531 506 538 590 589 570 617 616 650 619 100 200 300 400 500 600 700 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

U.S. New Housing Starts - Single Family

Market Update: U.S. New Single Family Housing Starts Show Strength

(in thousands)

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Source: U.S. Census Bureau

Q1’13 Avg. = 340 +55% vs. YA Q4’12 Avg. = 312 Q3’12 Avg. = 229 Q2’12 Avg. = 220 Q1’12 Avg. = 227 209 248 225 243 193 223 222 212 253 300 271 365 286 318 417 50 100 150 200 250 300 350 400 450 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

U.S. New Housing Starts - Multi Family

Market Update: U.S. New Multi-Family Housing Starts Have Accelerated

(in thousands)

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

% of New Housing Starts: Single vs. Multi-Family

Single Family Multi Family

Tightest spread since December 1985

Market Update: And Represent a Larger Percentage of Total Housing Starts

Historical Average 72% SF/ 28% MF

Multi-family new housing starts are worth less than half the value of single family new housing starts due to half the number of doors and a preference for lower price, lower margin doors.

Source: U.S. Census Bureau

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616 594 594 626 610 643 617 644 717 739 706 800 759 809 828 100 200 300 400 500 600 700 800 900 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

U.S. New Housing Start Equivalents*

(*) - Equivalent starts: Single Family Starts + ½ Multi-Family Starts.

Q1’13 Avg. = 799 +28% vs. YA Q4’12 Avg. = 748 Q3’12 Avg. = 659 Q2’12 Avg. = 626 Q1’12 Avg. = 601

Market Update: U.S. New Housing Start Equivalents Steadily Increasing

(in thousands)

There is typically a six to twelve month lag between new housing starts and completions and doors are usually one of the last items installed in a new home.

Source: U.S. Census Bureau

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New Home sales are up ~50% from recent low in February 2011, but still well below the historical average—leaving room for potential growth.

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 March '13: 417,000

Market Update: New Home Sales – 10 Year Trend

(in millions)

New Home Sales: 2003 to 2013

Source: U.S. Census Bureau

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Market Update: Remodeling Activity Remains Strong

Source: HIRI (March 2013)

Total U.S. Home Improvement Product Sales Improving trends in the repair, renovation and remodeling market are expected to slightly lag the recovery in the U.S. new housing market.

Source: Home Improvement Research Institute

($ in billions)

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50 100 150 200 250

Commercial & Industrial Square Feet Construction

Source: McGraw-Hill Construction

Market Update: U.S. Commercial Market Continues Choppy Recovery

(in millions)

Commercial construction has begun to recovery from historic lows, but consistent with past recoveries, we expect a full recovery to lag new housing and RRR by a year or two.

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Full scale production is scheduled to begin soon.

Higher quality interior doors are being manufactured and shipped from our new fully automated line.

Market Update: Automated Interior Door Plant Operational

Currently evaluating locations for two additional fully automated interior door plants.

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40% 50% 60% 70% 80%

Market Update: Masonite’s Global Facing Capacity Utilization is Increasing

Interior Molded Door Facing Capacity Utilization Trend – 7d x 24h

Capacity for Q2 2012 normalized

An improving housing market has increased door facing capacity utilization

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Market Update: Increased Utilization of MAX - Masonite Xpress Configurator

  • Online Leads increased 21%
  • Dealership Quotes increased 22%
  • Total Value of Quotes increased 47%
  • Number of dealers trained increased 148%

Quarter-to-Quarter Comparison

(Q1 2013 vs. Q4 2012)

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  • 2. Financial Results
  • 1. Market Update
  • 3. Summary / Q&A
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(*) - See appendix for reconciliation of Adjusted EBITDA to Net income (loss) attributable to Masonite. (^) - Includes $4.5 million net recovery related to the final resolution of the Marshfield 2011 business interruption insurance claim.

$400.1 $424.5 $250 $300 $350 $400 $450 $500 Q1 12 Q1 13 $19.7 $26.2 $10 $15 $20 $25 $30 Q1 12 Q1 13

7.9 8.1

7.5 7.6 7.7 7.8 7.9 8.0 8.1 8.2 8.3 8.4 8.5 Q1 12 Q1 13

Financial Results: Fiscal 2013 First Quarter Door Volume, Net Sales & Adj. EBITDA

Net Sales

  • Adj. EBITDA*

Door Volume

^

(in millions)

Unit volume +2.5%, Net Sales +6.1%, Adjusted EBITDA +33.0%

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Financial Results: Fiscal 2013 First Quarter Consolidated P&L Information

* See appendix for reconciliation of Adjusted EBITDA to Net income (loss) attributable to Masonite. ^ Includes $4.5 million net recovery related to the final resolution of the Marshfield 2011 business interruption insurance claim.

Net Sales Gross Profit Gross Profit % SG&A SG&A % Adj EBITDA* Adj EBITDA %

1Q13

$424.5 $50.4 11.9% $47.0 11.1%^ $26.2 6.2%^

1Q12

$400.1 $47.4 11.8% $48.4 12.1% $19.7 4.9%

Change

+6.1% +6.3% +10 bps.

  • 2.9%
  • 100 bps.

+33.0% +130 bps.

(Millions of USD)

^ ^

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1Q12 Net Sales Volume* Price / Mix Components FX 1Q13 Net Sales

North America

$281.6 $40.3 ($0.9) ($1.7) $0.0 $319.3

Europe/ROW

$98.7 ($9.3) $0.1 ($0.9) $0.1 $88.7

South Africa

$19.8 $3.3 ($4.0) $0.0 ($2.6) $16.5

Total

$400.1 $34.3 ($4.8) ($2.6) ($2.5) $424.5 8.6% (1.2%) (0.6%) (0.6%) 6.1%

* Includes the incremental impact of our 2012 acquisitions

Financial Results: Fiscal 2013 First Quarter Net Sales Reconciliation by Reportable Business Segment

(Millions of USD) +13.4%

  • 10.1%
  • 16.7%
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Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13

Financial Results: Fiscal 2013 First Quarter North American Price / Mix Trends

Positive Price / Mix Negative Price / Mix

Molded vs. Flush Solid vs. Hollow Core Pre-Finishing 2011 2012 2013

  • Recent Pricing Actions
  • Product Mix Historically

Improves with Housing Recovery

An improving housing market should result in a better (more profitable) mix of products North American price / mix has been negative the past seven quarters

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Unrestricted Cash $109.7 ABL Borrowing Base 101.8 AR Purchase Agreement 18.1 Total Available Liquidity $229.6 Liquidity at March 31, 2013 ($millions) Financial Policy & Coverage Ratios

4.2 4.0 3.9 3.7 3.0 2.8 2.6 2.6 3.3 3.2 3.1 3.1 1.5 1.4 1.6 1.9

1.0 2.0 3.0 4.0 5.0 6/30/12 9/30/12 12/31/12 3/31/13

Leverage & Interest Coverage

Total Debt / Adjusted EBITDA Net Debt / Adjusted EBITDA

  • Adj. EBITDA/Interest

(Adj. EBITDA - Capex) / Interest

Selected Cash Flow Data Q1 2013 Q1 2012 Cash flow from continuing operations ($4.0) ($16.2) Additions to property, plant & equipment ($6.4) ($15.5) Cash used in acquisitions $0 ($10.8) Gross Proceeds from issuance of long-term debt $0 $103.5 Payment of financing costs $0 ($1.7) Increase (decrease) in cash and cash equivalents ($12.7) ($60.5) LTM Adj. EBITDA $103.7 LTM Adj. EBITDA Margin 6.1% Total Debt $379.1 Net Debt $269.4

Financial Results: Fiscal 2013 First Quarter Liquidity, Credit & Debt Profile

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  • 3. Summary / Q&A
  • 2. Financial Results
  • 1. Market Update
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Summary: Positioning the Company for a Sustained Recovery

Profitable Revenue & Adjusted EBITDA Growth

STRENGTHENING THE CORE TUCK-IN ACQUISITIONS LEADER IN DEVELOPMENT & ADOPTION OF INNOVATION / TECHNOLOGY STRONG CONTINUOUS IMPROVEMENT / LEAN SIGMA CULTURE SETTING THE STANDARD IN MARKETING & SELLING STRATEGIES FOR THE INDUSTRY ORGANIC GROWTH

(*) - See appendix for reconciliation of adjusted EBITDA to Net income (loss) attributable to Masonite. (^) - Includes $4.5 million net recovery related to the final resolution of the Marshfield 2011 business interruption insurance claim.

  • Macroeconomic Factors Remain Positive

 Mortgage interest rates remain attractive  Home prices are rising  Inventory of existing and new homes for sale is low  Housing starts are accelerating

  • Top & Bottom Line Growth

 Q1 2013 Net Sales increased +6.1%  Q1 2013 Adjusted EBITDA* grew +33.0%^  Net of BI claim, Adjusted EBITDA* grew 10.2%

  • Continued Investment in Innovation

 First automated interior door plant operational  Site selection for next two automated plants has begun  Adoption of proprietary e-commerce tools is growing

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Questions & Answers

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Appendix Non-GAAP Financial Measure

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Reconciliation of Adjusted EBITDA to Net Income (Loss) Attributable to Masonite:

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