Investor Presentation

Transcription

1 Investor Presentation Fall 2016 the beautiful door NYSE: DOOR

2 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 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 referendum to exit 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 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 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. The revision to this definition had no impact on our reported Adjusted EBITDA for the three months ended March 29, Adjusted EBITDA (as revised) is defined as net income (loss) attributable to Masonite adjusted to exclude the following items: depreciation; amortization; share based compensation expense; loss (gain) on disposal of property, plant and equipment; registration and listing fees; restructuring costs; asset impairment; loss (gain) on disposal of subsidiaries; interest expense (income), net; loss on extinguishment of debt; other expense (income), net; income tax expense (benefit); loss (income) from discontinued operations, net of tax; and net income (loss) attributable to non-controlling interest. 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. 2

3 Company & Industry Update the beautiful door 3

4 Company & Industry Update Masonite Is a Leading Building Products Company Company Overview Net Sales of $1.9 billion and approximately 33 million doors sold in Served more than 8,000 customers in 73 countries. One of only two vertically integrated residential molded door manufacturers and the only vertically integrated architectural door manufacturer in North America. Established leadership positions in all targeted product categories in North America. Leading value proposition, acquisition activity and Lean Sigma efforts have transformed Masonite into a better positioned, more efficient operating company 4

5 Company & Industry Update Diversified End Markets Masonite s diverse customer base and end markets provide multiple growth avenues Corp & Other; 4% Serves the North American commercial construction market Architectural; 16% Tied substantially to the UK new residential construction and RRR market. Europe; 17% North American Residential; 64% Primarily serves new residential construction and residential repair, renovation and remodel (RRR) market 2015 Net Sales 5

6 Company & Industry Update Segment Overview North American Residential $1.2 billion in net sales $166 million in adjusted EBITDA 1 of 2 vertically integrated residential interior door manufacturers in North America Established leadership positions* in interior molded, steel, fiberglass and stile & rail doors 2015 Net Sales New Residential Construction; 45% RRR; 55% Retail; 35% Wholesale; 65% * Defined as #1 or #2 position (based on internal estimates). 6

7 Company & Industry Update Segment Overview Europe $312 million in net sales $31 million in adjusted EBITDA Recent acquisitions have expanded UK product offering across interior and exterior doors Innovative Go-to-Market business model with Door-Stop International 2015 Pro forma Other; 10% UK; 90% Comm/Mixed Use; 9% RRR; 31% New Residential; 60% 7

8 Company & Industry Update Segment Overview Architectural 2015 Net Sales $292 million in net sales Other Health Care $23 million in adjusted EBITDA Institutional ONLY vertically integrated Architectural door manufacturer in North America Established leadership positions* in interior wood doors, door core and veneers * Defined as #1 or #2 position (based on internal estimates). Commercial Lodging Education Stock Office 8

9 Company & Industry Update Significant Barriers to Entry ~$100 - $150 million per line^ Facing Plant ~$9 - $10 million per plant Pre-Finishing Pre-Hanging Full Product Line & Distribution Die Plates ~$80 million investment* Slab Assembly ~$20 - $25 million per plant Note: $ are approximate management estimates. (^) Masonite s facings facilities have an insured replacement value in excess of $1 billion (*) Masonite has >1,000 dies with approximate value of $80 million. Includes interior and exterior molded dies. 9

10 Company & Industry Update Innovative Products to Drive Mix Shift Higher Mix Shift Trade Up New Products Hollow core to solid core Steel to fiberglass/wood Old styles to new styles Average unit price increases through a combination of price and mix 10

11 Company & Industry Update Driving Operational Efficiencies Innovative products, services & processes Cutting edge digital interactions Automation, efficiency, simplicity & speed Continuous Improvement / Lean Enterprise 11

12 Company & Industry Update Acquisition Strategy Is a Key Growth Initiative Components Niche Products Value Added Services 12

13 Company & Industry Update Recent Market Growth, Below Historical Average U.S. Housing Starts U.S. Home Ownership 70% 2,500 69% 68% 2,000 67% 66% 1,500 65% 64% 1,000 63% 62% % 60% 0 (In 000s) Source: U.S. Census Bureau Source: U.S. Census Bureau U.S. New Home Sales 1,400 Positive demographic trends (MBA Study) The Mortgage Bankers Association (MBA) suggests that demographic trends alone should create an additional 13.9 million households over the next 10 years Demographic trends plus an improving economy beget 1.6 million additional households per year According to the MBA, homeownership follows economic trends and should settle between 64 66% 1,200 1, (In 000s) Source: U.S. Census Bureau 13

14 Financial Overview the beautiful door 14

15 Financial Overview Leveraging Growth Into Free Cash Flow Net Sales $1,838 Gross Profit $1,872 $351 $1,731 $265 $226 $1,964.9# Year CAGR % Year CAGR +25% Free Cash Flow^ Adjusted EBITDA* $153 $204 $137 $87 $106 $ Year CAGR (*) See appendix for non-gaap reconciliations. (^) Defined as Adjusted EBITDA less Capex. +39% Year CAGR +60% 15

16 Financial Overview Our Strategy Is Working Adjusted EBITDA growth is significantly outpacing net sales growth ($ in millions) $250 $3, Growth $204.2 $2,500 $200 $1,964.9 $1,964.9## $1,837.7 $150 $2,000 $137.1 $1,500 $105.9 $ % $1,872.0 $1,383.3 $ % $1,731.1 $1,676.0 $1,489.2 $ % $82.0 $1,000 $50 $500 $0 $ Adj. EBITDA (*) See appendix for non-gaap reconciliations (#) Excluding $92.9 million of negative foreign exchange in Net sales Net sales (ex forex) 16

17 Financial Overview 2016 Viewpoints Tailwinds Continued U.S. housing market growth Expect mid to high-single digit growth in U.S. housing completions Expect mid-single digit growth in the U.S. RRR market New products driving higher AUP Favorable commodities market Headwinds Tightening labor market in U.S. Increased hiring costs Lower productivity from recent employee hires Brexit causing uncertainty in UK housing market Weak currencies including GBP and MXP negatively impacting input costs 17

18 Financial Overview Long Term Growth Framework^ Net Sales Adjusted EBITDA* Margin ($ in billions) $3.0 25% 7% - 10% CAGR $2.5 20% $2.0 14% - 15% 15% $1.9 $1.5 10% 10.9% $1.0 YTD +8% YTD 12.9% 5% $0.5 $0.0 0% (^) - 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 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. 18

19 Financial Overview Cash Flow Deployment Cash Priorities 1) Fund working capital 2) Invest in growth initiatives 3) Strategic acquisitions 4) Return cash to shareholders Continue to target Net Working Capital of 12-15% of net sales Investment in new products and technology enablers (~3% of Net Sales) Acquisitions to enhance portfolio and value-added service offerings Opportunistic share repurchases Strong liquidity allows simultaneous execution across all layers 19

20 Financial Overview Liquidity, Credit and Debt Profile Liquidity at October 2, 2016 (millions of USD) Unrestricted Cash Free Cash Flow* $48.4 Total Available Liquidity $212.9 TTM Adj. EBITDA $248.7 TTM Interest Expense $28.3 ($ in millions) $200 $153.1 $160 $120 $86.9 $80 Total Debt $470.7 $40 Net Debt $422.3 $0 $59.9 $ Leverage Ratios Coverage Ratios Target total debt leverage 3.0 ratio <3x Q3'15 Q4'15 Q1'16 Total Debt Net Debt (*) Free cash flow defined as Adjusted EBITDA less capex Q2'16 Q3'16 Q3'15 Q4'15 Adj. EBITDA / Interest Q1'16 Q2'16 Q3'16 (Adj. EBITDA - Capex) / Interest 20

21 Summary / Q&A the beautiful door 21

22 Summary What s Expected Deliver an unparalleled customer experience Deliver product, service and design innovations that enhance beauty and functionality Expansion of MVantage and our lean operating environment Continued growth across end markets 22

23 Appendix the beautiful door

24 Reconciliation of Adjusted EBITDA to Net Income (loss) Attributable to Masonite Year Ended (In thousands) Adjusted EBITDA January 3, December 28, $ 204,197 $ 137,087 December 29, December 30, January 1, 2012 $ $ 105,877 $ 97,261 81,994 Less (plus): Depreciation 59,160 60,622 62,080 63,348 60,784 Amortization 23,725 21,722 17,058 15,076 10,569 Share based compensation expense Loss (gain) on disposal of property, plant and equipment 13,236 9,605 7,752 6,517 5,888 1,371 3,816 (1,775) 2,724 3,654 Registration and listing fees 2,421 Restructuring costs 5,678 11,137 10,630 11,431 5,116 Asset impairment 9,439 18,202 1,904 1,350 2,516 Loss (gain) on disposal of subsidiaries 59,984 Interest expense (income), net 32,884 Loss on extinguishment of debt 28,046 41,525 33,230 31,454 18,068 Other expense (income), net (1,757) (587) 2, ,111 Income tax expense (benefit) Loss (income) from discontinued operations, net of tax Net income (loss) attributable to non-controlling interest 15,168 4,533 (21,377) (13,365) (21,560) (1,480) 303 3,222 2,050 2,923 2,079 Net income (loss) attributable to Masonite (48,107) (37,340) (11,010) (23,245) (6,534) 908 4,462 24

25 Reconciliation of Adjusted EBITDA to Net Income (loss) Attributable to Masonite Year Ended January 3, 2016 (In thousands) Adjusted EBITDA North Corporate American Europe Architectural & Other Residential $ 165,560 $ 30,468 $ 23,281 $ (15,112) $ Total 204,197 Less (plus): Depreciation 31,456 8,105 8,223 11,376 59,160 Amortization 4,954 6,860 8,428 3,483 23,725 13,236 13, Restructuring costs 10 2,501 3,167 5,678 Asset impairment 9,439 9,439 Loss (gain) on disposal of subsidiaries 29,721 30,263 59,984 Interest expense (income), net 32,884 32,884 Share based compensation expense Loss (gain) on disposal of property, plant and equipment Loss on extinguishment of debt 28,046 28,046 (2,794) (1,757) 14,172 14, (50) Income tax expense (benefit) Loss (income) from discontinued operations, net of tax 3,323 $ 1,371 1,087 Other expense (income), net Net income (loss) attributable to noncontrolling interest Net income (loss) attributable to Masonite (298) 125,071 $ (27,570) $ 1,139 4,462 6,082 $ (150,694) $ (47,111) 25

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