1Q17 EARNINGS PRESENTATION
NYSE: DOOR
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Safe Harbor / Non-GAAP Financial Measures
SAFE HARBOR / FORWARD LOOKING STATEMENT
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
our 2017 outlook or long term growth framework, housing and other markets, and the effects of our strategic initiatives. 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,” “framework,” “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, our ability to successfully
implement our business strategy; general economic, market and business conditions; levels of residential new construction; residential repair, renovation and remodeling; and non-residential building
construction activity; the United Kingdom passage of legislation authorizing its exit from the European Union; competition; 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, to meet our pension obligations, and to meet our
debt service obligations, including our obligations under our senior notes and our ABL 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 taken by, and the continued success of, certain key customers; our ability
to maintain relationships with certain customers; the ability to generate the benefits of our restructuring activities; retention of key management personnel; environmental and other government
regulations; and limitations on operating our business as a result of covenant restrictions under our existing and future indebtedness, including our senior notes and our ABL Facility.
NON-GAAP FINANCIAL MEASURES
Our management reviews net sales and Adjusted EBITDA (as defined below) to evaluate segment performance and allocate resources. Net assets are not allocated to the reportable segments.
Adjusted EBITDA is a non-GAAP financial measure which does not have a standardized meaning under GAAP and is unlikely to be comparable to similar measures used by other companies. Adjusted
EBITDA should not be considered as an alternative to either net income or operating cash flows 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. Beginning with the third
quarter of 2015, we revised our calculation of Adjusted EBITDA to separately exclude loss (gain) on disposal of subsidiaries. This definition of Adjusted EBITDA differs from the definitions of EBITDA
contained in the indenture governing the 2023 Notes and the credit agreement governing the ABL Facility. 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 tables in the appendix to this presentation
reconcile Adjusted EBITDA to net income (loss) attributable to Masonite for the periods indicated. We are not providing a quantitative reconciliation of our Adjusted EBITDA outlook to the corresponding
GAAP information because the GAAP measures that we exclude from our Adjusted EBITDA outlook are difficult to predict and are primarily dependent on future uncertainties.
Adjusted EBITDA margin is defined as Adjusted EBITDA divided by Net Sales. Management believes this measure provides supplemental information on how successfully we operate our business.
Adjusted EPS for the quarter ended April 2, 2017 and April 3, 2016 is diluted earnings per common share attributable to Masonite (EPS) less asset impairment charges, loss (gain) on disposal of
subsidiaries and loss on extinguishment of debt, net of related tax expense (benefit). Management uses this measure to evaluate the overall performance of the Company and believes this measure
provides investors with helpful supplemental information regarding the underlying performance of the Company from period to period. This measure may be inconsistent with similar measures
presented by other companies.
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Agenda
• First Quarter Highlights
• Financial Review
• Summary / Q&A
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COMPANY OVERVIEW
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1Q17 Highlights
Sales volume down on very strong
comps across business in Q1 2016
Average Unit Price (AUP) increase
in all three reportable segments
Europe business impacted by Fx
Price increases implemented
Continued progress in Architectural
integration and financial results
Plant rationalization
Pricing traction via 2016 increases
Challenging quarter in NA
Residential due largely to
operational inefficiencies
New Masonite Brand Introduction
New logo, brand statement and
marketing campaign
Website re-design
Home Depot Florida rollout began
near end of quarter
New digital initiatives to improve
the customer experience and test
new routes to market
Repurchased 144k shares for
approximately $11 million
Key Initiatives Business Performance
6 6
Business Trends
Home Depot Florida
store roll out began
in March 2017
New branding
New kiosks
New packaging
Home Depot (FL) Ramp New Products
Heritage Series Exterior Doors
Style matches our successful
Craftsmen-style interior doors
Relevant industry trend
Introduced new fir-grain texture
7 7
Branding / Marketing
13.1 million media impressions
Paid media drove 28,000 website
page views
>50% of website visitors identifying
as “Professionals”
8 8
Growing the Business
Location: Central Florida
Timing: Anticipated Q2 2017
Online direct order platform for select
offering of premium door systems,
delivered right to jobsite within 5 days
Test program in Florida market
Delivering an Extraordinary Customer Experience
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FINANCIAL REVIEW
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1Q17 Consolidated P&L Metrics
(*) – See safe harbor/non-GAAP financial measures on page 2 for definitions and other information and appendix for non-GAAP reconciliations
(^) – Diluted EPS and diluted Adj. EPS were the same in the first quarter of 2016 and 2017
+1% ex-Fx
Brand launch costs
offset by other
SG&A reductions
($ in millions) 1Q17 1Q16 +/-
Net Sales $487.2 $489.3 -0.4%
Gross Profit $95.6 $98.2 -2.6%
Gross Profit % 19.6% 20.1% -50 bps
SG&A $64.8 $64.9 0.2%
SG&A % 13.3% 13.3% -
Adj. EBITDA* $52.9 $58.2 -9.1%
Adj. EBITDA %* 10.9% 11.9% -100 bps
Adj. EPS^ $0.77 $0.57 35.1%
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North American Residential
Volume down from very strong prior year quarter
Strong AUP trends in wholesale and retail from
combination of price and mix improvements
Adjusted EBITDA decline driven by volume
decline, brand launch costs and inflationary
pressures
AUP improvement offset by operational
inefficiencies
(*) – See safe harbor/non-GAAP financial measures on page 2 for definitions and other information and appendix for non-GAAP reconciliations
($ in millions) 2017 2016 Diff
Net Sales $338.0 $328.7 +3%
Adj. EBITDA* $44.9 $51.4 -13%
Adj. EBITDA Margin* 13.3% 15.6% -230bps
First Quarter
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Europe
Weakness in GBP negatively impacted Net Sales
and Adj. EBITDA* by approximately $10 million
and $2 million, respectively
Mid single digit AUP increase in UK
UK sales volume flat as continued strong demand
at DSI offset modest weakness in builder business
Viewpoint unchanged on growth potential of UK
housing market
(*) – See safe harbor/non-GAAP financial measures on page 2 for definitions and other information and appendix for non-GAAP reconciliations
($ in millions) 2017 2016 Diff
Net Sales $70.0 $80.6 -13%
Net sales ex-Fx -1%
Adj. EBITDA* $7.7 $10.1 -24%
Adj. EBITDA Margin* 11.0% 12.6% -160bps
First Quarter
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Architectural
Strong 1Q16 led to lower 1Q17 volume
comparison
Pricing and mix driving strong AUP growth
2016 price increase benefitting 2017 sales
Continued strong demand in higher end products
Execution of Architectural transformation
projects remains on track
Algoma plant closure
Product optimization / simplification
Brand integration
(*) – See safe harbor/non-GAAP financial measures on page 2 for definitions and other information and appendix for non-GAAP reconciliations
($ in millions) 2017 2016 Diff
Net Sales $71.8 $73.5 -2%
Adj. EBITDA* $5.2 $4.4 +18%
Adj. EBITDA Margin* 7.3% 6.0% +130bps
First Quarter
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Liquidity, Credit & Debt Profile
Credit & Debt (millions of USD)
TTM Adj. EBITDA* $247.1 $224.7
TTM Interest Expense $28.0 $28.4
Total Debt $471.2 $469.0
Net Debt^ $436.7 $419.0
1Q17 1Q16
3 months ended
4/2/2017
3 months ended
4/3/2016
Unrestricted cash $34.5 $50.0
Total available liquidity $187.5 $206.6
Cash flow from operations ($2.5) $3.2
Capital expenditures $14.7 $23.8
Share repurchases $11.3 $16.0
Liquidity & Cash Flow (millions of USD)
(*) – See safe harbor/non-GAAP financial measures on page 2 for definitions and other information and appendix for non-GAAP reconciliations
(^) – Net debt equals total debt less unrestricted cash
15 15
12.8%
2016 2019
$2.0
2016 2019
Long-Term Growth Framework
7% - 9%
CAGR
16% - 17%
Adjusted EBITDA* Margin
Net Sales
( )̂ - Company long term growth framework is a forward-looking statement and subject to risks and uncertainties. See "Safe Harbor/Forward Looking Statement”
(*) – See definition of Adjusted EBITDA on page 2. We are not providing a quantitative reconciliation of our Adjusted EBITDA or Adjusted EPS outlook to the corresponding GAAP information because the GAAP
measures that we exclude from our Adjusted EBITDA and Adjusted EPS outlook are difficult to predict and are primarily dependent on future uncertainties.
Cash Flow Deployment
CapEx to Support Growth
Opportunistic Share
Repurchase
Strategic Acquisitions
Fund Working Capital
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SUMMARY
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SUMMARY
(*) – See safe harbor/non-GAAP financial measures on page 2 for definitions and other information and appendix for non-GAAP reconciliations
Architectural Business continues to improve
European business impacted by Fx
NA Residential faced challenges in 1Q17
Actions being taken to address manufacturing and
distribution inefficiencies
Average Unit Price (AUP) increased in all three
reportable segments
Sequential sales and operating improvement from
January through March
Continued progress on key strategic initiatives
Brand launch
Advisar test program
Making doors more relevant
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APPENDIX
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Segment Sales Walks
($ in millions) NA Residential Europe Architectural C&O
1Q16 Net Sales $328.7 $80.6 $73.5 $6.5
Foreign Exchange $0.9 ($9.8) $0.2 $0.0
Volume ($3.5) ($2.4) ($7.8) $0.3
AUP $12.2 $2.9 $5.6 $0.0
Other ($0.3) ($1.3) $0.3 $0.5
1Q17 Net Sales $338.0 $70.0 $71.8 $7.3
20 20
Reconciliation of Adj. EBITDA to net income
(loss) attributable to Masonite Three Months Ended April 2, 2017
(In thousands)
North American
Residential Europe Architectural Corporate &
Other Total
Adjusted EBITDA $ 44,937 $ 7,674 $ 5,214 $ (4,966 ) $ 52,859
Less (plus):
Depreciation 7,484 1,810 2,370 2,360 14,024
Amortization 993 1,667 2,161 1,149 5,970
Share based compensation expense — — — 2,427 2,427
Loss (gain) on disposal of property, plant and equipment (399 ) 140
(27 ) 12
(274 )
Restructuring costs — — 271 22 293
Interest expense (income), net — — — 7,024 7,024
Other expense (income), net — 93 — (342 ) (249 )
Income tax expense (benefit) — — — (1,679 ) (1,679 )
Loss (income) from discontinued operations, net of tax —
—
—
245
245
Net income (loss) attributable to non-controlling interest 917
—
—
596
1,513
Net income (loss) attributable to Masonite $ 35,942 $ 3,964 $ 439 $ (16,780 ) $ 23,565
Three Months Ended April 3, 2016
(In thousands)
North American
Residential Europe Architectural Corporate &
Other Total
Adjusted EBITDA $ 51,375 $ 10,118 $ 4,431 $ (7,683 ) $ 58,241
Less (plus):
Depreciation 7,920 2,076 2,507 2,067 14,570
Amortization 1,158 2,396 2,147 763 6,464
Share based compensation expense — — — 3,728 3,728
Loss (gain) on disposal of property, plant and equipment 91
31
41
(31 ) 132
Restructuring costs — 21 — (2 ) 19
Interest expense (income), net — — — 7,232 7,232
Other expense (income), net — 71 — 715 786
Income tax expense (benefit) — — — 6,210 6,210
Loss (income) from discontinued operations, net of tax —
—
—
188
188
Net income (loss) attributable to non-controlling interest 838
—
—
246
1,084
Net income (loss) attributable to Masonite $ 41,368 $ 5,523 $ (264 ) $ (28,799 ) $ 17,828
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