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NYSE: DOOR
Deutsche Bank Leveraged Finance Conference September 2014
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
4
Net Sales of $1.7 billion and approximately 32 million doors sold in 2013.
An extensive global footprint with 62 manufacturing facilities spread across 10 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 North America.
Established leadership positions in all targeted product categories in North America.
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%
Manufacturing Headquarters
North America
CANADA
UNITED STATES
MEXICO
S. America
CHILE
Europe
FRANCE
UK
CZECH REPUBLIC
IRELAND
Southeast Asia
MALAYSIA
South Africa
SOUTH AFRICA
-
10
20
30
40
50
60
70
2006 2007 2008 2009 2010 2011 2012 2013 Q2'14
5
Company / Industry Overview
Masonite Has Transformed Itself in Recent Years
-
5,000
10,000
15,000
20,000
2006 2013 Q2'14
Pre-Acquisitions Acquisitions
Cumulative Global Plant Closures
Warehouses Manufacturing
Strengthened the Core Business:
• Lean sigma deployed and $100+
million of benefits since 2006
• 60 manufacturing/distribution facilities
closed since 2006
• Reduced total headcount by
approximately 35% 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 Headcount Actions Taken
Company / Industry Overview
Residential Int. Molded Facings & Assembly Consolidation
6
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
7
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:
8
Company / Industry Overview
Masonite Has Established Leadership Positions
Baillargeon
Birchwood Marshfield
Algoma
Ledco
Lifetime
India
Lemieux
Algoma
Marshfield
Door Components
Residential Doors
Steel Stile & Rail Molded
Non-Residential
Fiberglass
Exterior Interior Door Core
Veneers / Facings
Interior Wood
Steel & Glass
Lea
de
rsh
ip
Po
sitio
n
Lea
de
rsh
ip
Po
sitio
n
Lea
de
rsh
ip
Po
sitio
n
Lea
de
rsh
ip
Po
sitio
n
Lea
de
rsh
ip
Po
sitio
n
Lea
de
rsh
ip
Po
sitio
n
Lea
de
rsh
ip
Po
sitio
n
2010-2014 acquisitions. Limited Masonite presence. Defined as #1 or #2 (based on internal estimates).
Chile
Door-Stop
9
Q4’13 Q1’13
North America Retail & U.S. Wholesale Customers
Mid-High Single Digit Increase
Q1’14
25% 15%
2013 Price Increases Targeted to Wholesale
Customers in U.S.^
55%
2014 Price Increases Targeted to Wholesale and
Retail Customers in North America^
U.S. Wholesale Mid Single Digit Increase on Molded
& Flush Interior Doors
U.S. Wholesale Mid Single Digit Increase on Interior
& Exterior Doors
(^) – Percentages of net sales are approximate and based on management estimates of global net sales
2014 North America Price Increases Affected A Higher Percentage of Global Business
Q3’14
Company / Industry Overview
Price Environment Has Been Improving
Low Single Digit to High Single Digit Increase on Targeted Products in NA
35%
(AU
P G
row
th %
, year
ov
er
ye
ar)
10
North American AUP Has Been Positive For Five Consecutive Quarters
NA Average Unit Price is Increasing
Company / Industry Overview
North American Average Unit Price Has Been Improving
-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
Q2
'14
11
Company / Industry Overview
Significant Barriers to Entry Exist Within Residential Doors
Each Step of Production Poses Unique Challenges
Die Plates
Slab Assembly
Facing Plant
Pre-Finishing Pre-Hanging
Full
Product
Line &
Distribution
~$100 - $150 million per line
~$75 million investment*
~$20 - $25 million per plant
~$9 - $10 million per
plant
Note: $ are approximate management estimates. (*) – Masonite has >1,000 dies with approximate value of $75 million. Includes interior and exterior molded dies.
Company / Industry Overview
Five Focus Areas Designed to Create Shareholder Value
Automation
Product Line Leadership
Electronic Enablement
Sales and Marketing Excellence
Strategic Tuck-In Acquisitions
12
Goal: Grow Share & Expand Margins Beyond Macro Economic Recovery
0
50
100
150
200
250
300
350
400
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E
Company / Industry Overview
Positive Construction Indicators in 2014 & 2015
13
Single Family vs. Multi-Family Splits* U.S. New Housing Starts
U.S. Non-Residential Construction U.S. Repair, Renovation & Remodel
Source: NAHB (Aug 2014), U.S. Census Bureau
Source: HIRI (Aug 2014) Source: Reed (3Q14)
Macroeconomic Recovery in Our End Markets Still in Early Innings
0
50
100
150
200
250
300
350
400
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E2015E
0
500
1000
1500
2000
2500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E2015E
(in 000s)
($ bn) ($ bn)
Multi-family Single Family
50-year average
Door Type
Exterior
Interior
Total:
Multi-Family
1
11
12
Single Family
3
21
24
* Company Estimates
① Company / Industry Overview
② Financial Review
③ Summary / Q&A
$33.5
$44.1
$25.0
$30.0
$35.0
$40.0
$45.0
$50.0
Q2'13 Q2'14
$453.1
$490.2
$300.0
$400.0
$500.0
$600.0
Q2'13 Q2'14
8.0
8.5
5.0
6.0
7.0
8.0
9.0
10.0
Q2'13 Q2'14
Net Sales Adjusted EBITDA* Door Volume^
(in millions) (millions of USD) (millions of USD)
Q2’13 Q2’14 Q2’13 Q2’14 Q2’13 Q2’14
(^) – Does not include South Africa segment. (*) – See appendix for non-GAAP reconciliations.
2014 Second Quarter Financial Results
Door Volume, Net Sales and Adjusted EBITDA
15
Door Volume, Net Sales & Adjusted EBITDA Reflect Improving Fundamentals
9.0% 7.4%
+160 Basis Points
(*) – See appendix for non-GAAP reconciliations
Net Sales
Gross Profit
Gross Profit %
SG&A
SG&A %
Adj. EBITDA*
Adj. EBITDA %
Q2’14
$490.2
$78.6
16.0%
$58.5
11.9%
$44.1
9.0%
Q2’13
$453.1
$64.7
14.3%
$56.0
12.4%
$33.5
7.4%
Change
+8.2%
+21.5%
+170 bps.
+4.5%
-50 bps.
+31.6%
+160 bps.
2014 Second Quarter Financial Results
Consolidated P&L Information
16
Improving Margins from Higher Pricing and Increased Volume
(Millions of USD)
17
Highest Adjusted EBITDA in 5 Years
2014 Second Quarter Financial Results
Adjusted EBITDA Improvement
Adjusted EBITDA Benefitted from Pricing and an Improving U.S. Housing Market
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
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 Q2'14
Adj. EBITDA (in 000s)
Financial Policy & Coverage Ratios
Selected Cash Flow Data YTD 2014 YTD 2013
Cash flow from operations* $25.7 $2.5
Additions to property, plant & equipment ($20.0) ($16.3)
Cash used in acquisitions ($50.4) $0.0
Gross Proceeds from issuance of LT debt $138.7 $0.0
Payment of financing costs ($1.9) $0.0
Increase (decrease) in cash & cash
equivalents
$86.7 ($29.4)
Target
financial
leverage
range
Unrestricted Cash $187.5
ABL Borrowing Base $122.9
AR Purchase Agreement $14.3
Total Available Liquidity $324.7
Liquidity at June 29, 2014 (millions of USD)
LTM Adj. EBITDA^ $110.0
LTM Interest Expense $37.4
Total Debt $514.1
Net Debt $326.6
2014 Second Quarter Financial Results
Liquidity, Credit and Debt Profile
Debt Issuance History
8.25% Senior Unsecured Notes due 2021
$0
$100
$200
$300
$400
$500
2011 2012 2013 2014
18
(*) – Cash flow from continuing operations was $25.7 million during the six months ending June 29, 2014 compared to $2.5 million last year due largely to the implementation of a new accounts payable processing system which has, temporarily, extended payments beyond our normal trade terms. (^) – See appendix for non-GAAP reconciliations.
Masonite’s Balance Sheet Remains Strong with Ample Liquidity Available
8.25% Senior Unsecured Notes due 2021
3.4
3.3
3.6
5.2
4.7
2.6 2.3
2.6
3.5
3.0 3.3
3.6
3.2
2.8 2.9
2.0 2.1 1.8
1.5 1.6
0.0
1.0
2.0
3.0
4.0
5.0
6.0
6/30/13 9/29/13 12/29/2013 3/30/2014 6/29/2014
Total Debt / Adj. EBITDA Net Debt / Adj. EBITDA
Adj. EBITDA / Interest (Adj. EBITDA - Capex) / Interest
① Company / Industry Overview
② Financial Review
③ Summary / Q&A
Advantageous Market Position One of only two vertically integrated residential molded door manufactures in North America
Only vertically integrated commercial door manufacturer in North America
Established leadership positions in all targeted North American product categories
Significant barriers to entry
Fundamentals Continue to Improve U.S. new housing starts and completions both continue to grow
North American pricing strengthened during the second quarter
Increased Q2’14 Adjusted EBITDA 31.6% vs. Q2’13
Expanded Q2’14 Adjusted EBITDA margin to 9.0%--the highest level in five years
Key Focus Areas Designed to Accelerate Growth Automation
Product Line Leadership
Electronic Enablement
Sales & Marketing Excellence
Portfolio Optimization: Strategic Tuck-in Acquisitions & Market Exits
20
Summary
Masonite’s Balanced Growth Strategy Is Working
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)
+$25.2MM (9.5% CAGR)
In millions millions of USD
SG&A
SG&A as a % of Sales Down 70bp since 2010
millions of USD
(*) - See appendix for non-GAAP reconciliations.
11.6%
11.8%
12.0%
12.2%
12.4%
12.6%
12.8%
13.0%
2010 2013
Reconciliation of Adjusted EBITDA to Net Income
(loss) Attributable to Masonite
24
(In thousands)
June 29
2014
June 30
2013
June 29
2014
June 30
2013
June 29,
2014
March 30,
2014
December 29,
2013
September 29,
2013
June 30,
2013
January 2,
2011
Adjusted EBITDA 44,050$ 33,461$ 63,768$ 59,638$ 110,007$ 99,418$ 105,877$ 113,687$ 110,240$ 80,678$
Less (plus):
Depreciation 14,536 15,651 29,982 32,177 59,885 61,000 62,080 63,544 63,898 58,633
Amortization 5,593 4,336 11,284 8,606 19,736 18,479 17,058 16,889 16,968 8,092
Share based compensation expense 2,797 2,081 5,080 3,911 8,921 8,205 7,752 7,664 7,609 9,626
Loss (gain) on disposal of property, plant and
equipment 1,036 852 2,123 962 (614) (797) (1,775) 231 3,203 1,301
Impairment — 1,904 — 1,904 — 1,903 1,904 3,254 1,350 —
Registration and listing fees — — — — 2,421 2,421 2,421 1,998 — —
Restructuring costs 560 1,762 1,281 3,202 8,709 9,911 10,630 10,847 13,411 7,000
Interest expense (income), net 10,594 8,208 20,587 16,458 37,359 34,973 33,230 33,169 32,808 245
Other expense (income), net 1,306 (363) 1,487 (521) 4,324 (949) 2,316 (1,445) (1,110) 1,030
Income tax expense (benefit) 1,379 (408) 1,398 (1,444) (18,535) (22,308) (21,377) (14,743) (8,612) (11,396)
Loss (income) from discontinued operations, net
of tax 170 44 312 134 776 649 598 236 224 1,718
Net income (loss) attributable to non-controlling
interest 499 605 1,240 1,285 2,005 2,166 2,050 2,915 2,990 1,390
Net income (loss) attributable to Masonite 5,580$ (1,211)$ (11,006)$ (7,036)$ (14,980)$ (16,235)$ (11,010)$ (10,872)$ (22,499)$ 3,039$
Twelve Months EndedThree Months Ended Six Months Ended