masonite 2015 investor day final
TRANSCRIPT
2015 Investor DayNYSE: DOOR
June 19, 2015
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.
Certain historical and forecast market and industry data used this investor presentation are based upon publications, studies and surveys conducted by third parties. Industry publications,
studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.
While we believe that each of these publications, studies and surveys is reliable, we have not independently verified market and industry data from third party sources.
NON-GAAP FINANCIAL MEASURE
Adjusted EBITDA is a measure used by management to measure operating performance. Beginning in the first quarter of 2015, we revised our calculation of Adjusted EBITDA to
separately exclude loss on extinguishment of debt, which would be a component of other expense (income), net, but is separately stated due to its magnitude. The revision to this
definition had no impact on our reported Adjusted EBITDA for the three months ended March 30, 2014. As revised, 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, asset impairment, registration and listing fees, interest expense, net,
loss from extinguishment of debt, 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.
3
Investor Day Agenda
Investor Day Agenda
CEO Overview Fred Lynch
President & Chief Executive Officer
Portfolio Optimization Chris Virostek
SVP - Strategy Implementation &
Corporate Development
Residential Business Tony Hair
VP & Business Leader - Residential
Business
Architectural Business Mike Nelson
VP & Business Leader -
Architectural Business
Automation Mike Fout
VP - Operations
Sales & Marketing Excellence Larry Repar
EVP Global Sales & Marketing &
Chief Operating Officer
Financial Update Joanne Freiberger
VP - Treasurer
Summary Fred Lynch
President & Chief Executive Officer
Q&A Session
Coffee Break (15 min)
① Introductions
② CEO Overview
③ Portfolio Optimization
④ Residential Business
⑤ Architectural Business
⑥ Automation
⑦ Sales & Marketing Excellence
⑧ Financial Update
⑨ Summary & Q&A
5
CEO OverviewTalented Management Team With Diverse Industry Backgrounds
Fred LynchPresident & Chief Executive Officer
OPENEVP & Chief Financial Officer
Larry ReparEVP Global Sales & Marketing &
Chief Operating Officer
John PrzedpelskiSVP & Chief Information Officer
Chris VirostekSVP Strategy Implementation &
Corporate Development
Gail AuerbachSVP Human Resources
Bob LewisSVP General Counsel &
Corporate Secretary
Elias BarriosSVP Global Operations &
Supply Chain
Steve SwartzmillerSVP & Chief Technology Officer
Tony HairVP & Business Leader - Residential
Mike NelsonVP & Business Leader - Architectural
Graham ThayerVP & Business Leader - Components
Year started at Masonite
‘06
‘89
‘95
‘13
‘11
‘13
‘12
‘02
‘07
‘15
‘15
Executive Profile
Fred Lynch Masonite Since: 2006
President & CEO Prior Experience: Alpharma/Actavis, Honeywell / AlliedSignal
Chris Virostek Masonite Since: 2002
Senior VP Strategy Implementation &
Corporate DevelopmentPrior Experience: Arthur Andersen
Tony Hair Masonite Since: 2013
VP & Business Leader, Residential Business Prior Experience: Newell Rubbermaid, Maytag
Mike Nelson Masonite Since: 2013
VP & Business Leader, Architectural
BusinessPrior Experience: 3M, Mead Westvaco, Wausau Paper
Mike Fout Masonite Since: 2008
VP, Operations Prior Experience: General Electric, Crystaloid Technologies
Larry Repar Masonite Since: 1995
EVP Global Sales & Marketing & COO Prior Experience: Sanwa McCarthy Securities Limited and Twin Windows
Joanne Freiberger Masonite Since: 2008
VP & TreasurerPrior Experience: Catalina Marketing, PriceWaterhouseCoopers, PepsiCo /
Tropicana / Seagram and Arthur Andersen6
CEO OverviewPresenter Profiles
Today’s Presenters Highlight Masonite’s Deep Management Bench
7
CEO OverviewA Global Building Products Company
Masonite Has Transformed Itself in Recent Years
Company Overview 2014 Net Sales
Net Sales of $1.8 billion and approximately
33 million doors sold in 2014.
Extensive global footprint with 62
manufacturing facilities spread across 10
countries.
More than 7,000 customers in 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.
Industry consolidation and Lean Sigma
efforts have transformed Masonite into a
better positioned, more efficient company
2014 North American End Markets
North America, 76%
Europe / ROW, 21%
S. Africa, 3%
Residential repair &
remodel, 44%
Residential new
construction, 37%
Architectural construction,
19%
8
Maintain focus on core capabilities & operational excellence through all strategic phases
CEO OverviewMasonite’s Strategic Phases
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Surviving the Downturn
Consolidation
Strengthen/Optimize Portfolio
Accelerate
Performance
9
CEO OverviewMasonite Has Created Leadership Positions in Targeted Product Categories
Door
Components
Residential
Doors
SteelStile & RailMolded
Architectural
Fiberglass
ExteriorInterior Door CoreVeneers /
Facings
Interior
Wood
Steel &
Glass
Chile
Baillargeon
BirchwoodMarshfield
Algoma
Ledco
Lifetime
Door-StopLemieux
Algoma
Marshfield
Harring
Lea
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ip
Po
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Lea
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Lea
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Lea
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Leaders
hip
Po
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2010-2014 acquisitions. Limited Masonite presence. Defined as #1 or #2 (based on internal estimates).
10
Demonstrated improvement through strategic focus
CEO OverviewOur Strategy Is Working
Masonite’s Trailing Twelve Month Adjusted EBITDA (2010 – Present)
(in 000s)
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
2010 2011 2012 2013 2014 Q1'14 Q1'15
+2% +19% +9% +30% +56%
11
U.S. housing starts remain far below historic averages
CEO OverviewEven With Our Primary Market Still Far Below Historic Averages
U.S. Housing Starts 1960 - Present
Source: U.S. Census Bureau
(in 000s)
0
500
1,000
1,500
2,000
2,500Average annual
housing starts =
1.448 mm
12
CEO OverviewFive Focus Areas Designed to Accelerate Growth
Product Line Leadership
Electronic Enablement
Sales & Marketing Excellence
Automation
Portfolio Optimization
Goal: Grow share & expand margins beyond macroeconomic recovery
① Introductions
② CEO Overview
③ Portfolio Optimization
④ Residential Business
⑤ Architectural Business
⑥ Automation
⑦ Sales & Marketing Excellence
⑧ Financial Update
⑨ Summary & Q&A
14
Portfolio OptimizationIndustry Consolidation of Residential Interior Molded Door Business
NA Residential Interior Molded FacingsNA Residential Interior Doors
2010
2010
2012
2012
2010
Residential Interior Molded Facings & Assembly Consolidation
There are only two vertically integrated interior molded door manufacturers in NA
NA Architectural Interior Wood
Do
or
Fa
cin
gs
NA Architectural Components
Min
era
l C
ore
15
Portfolio OptimizationIndustry Consolidation of Architectural Door Business
Masonite is the ONLY vertically integrated architectural wood door manufacturer in NA
2011
2012
2012
2014
2011
2012
2011
16
Portfolio OptimizationA Strong Track Record of Successful Acquisitions…
Average* multiple paid was 7.4x trailing twelve months EBITDA, pre-synergy, pre-recovery
Select assets of:
Residential Interior Architectural
Specialty Stile & Rail International
Date Paid Mult.Company
Chile
LEDCO Mar 2010 $12.8 NA
Lifetime Doors Oct 2010 $28.0 NA
Marshfield Aug 2011 $102.4 7.9x
Birchwood Nov 2011 $41.0 7.3x
Baillargeon Mar 2012 $9.9 8.0x
Algoma Apr 2012 $55.6 8.0x
Lemieux Aug 2012 $22.1 6.3x
Chile Jul 2013 $12.2 6.1x
Door-Stop Feb 2014 $50.4 6.6x
Harring Doors Dec 2014 $3.9 7.0x
*Calculated on a weighted average method.
17
Portfolio Optimization
…And Exiting Markets Where Warranted
Optimizing the portfolio includes exiting businesses that aren’t strategic focus areas
Market Exits 2010 - Present
Non-Strategic
Poor macroeconomic outlook
Outdated facilities or equipment
Poor cash conversion metrics
Exited 6 markets since 2010:
Ukraine 2010
Turkey 2010
Romania 2012
Hungary 2012
Poland 2014
Israel 2014
Potential Sale of France 2015
Value Added
Services
Niche Products
Components
18
Portfolio OptimizationAcquisition Opportunities Remain Available
Acquisitions enhance the Masonite value proposition
19
Portfolio OptimizationMasonite’s Acquisition Criteria
Acquisitions should have attractive valuation and meet all five criteria
Similar
Technology
Distribution
Synergy
Brand
Positioning
Geographically
Appropriate
Actionable
① Introductions
② CEO Overview
③ Portfolio Optimization
④ Residential Business
⑤ Architectural Business
⑥ Automation
⑦ Sales & Marketing Excellence
⑧ Financial Update
⑨ Summary & Q&A
21
Residential BusinessResidential Door Opportunity – United States
The highest growth is expected from new construction and interior doors
U.S. residential door sales are forecast to grow significantly through 2018
Source: Freedonia Group
72%
21%
7%
Interior Entry Patio
2013 Residential Door Sales
New construction doors (’13-’18)
Annual growth in interior doors (’13-’18)
(in millions of doors sold)
Forecast 11% CAGR from 2013-2018
83.6
60.1
45.2
76.5
0
10
20
30
40
50
60
70
80
90
2003 2008 2013 2018F
Annual growth replacement doors (’13-’18)
+ 13%
+ 12%
+ 5%
22
Residential BusinessResidential Door Opportunity – United Kingdom
Many construction indices have positive 2015 forecasts
UK Housing Dynamics Steadily Improving
Source: NHBC Housing Tracker; UK Office of National Statistics
Private housing 2015 forecast: starts +4%,
completions +9%
Remodel index 2015 forecast: +2%
0
5,000
10,000
15,000
20,000
25,000
Starts Completions Starts Forecast Completions Forecast
Door Stop Composite Entry Doors
Premdor Interior Doors
2015
23
Residential BusinessStrategic Focus Areas
PRODUCT LINE LEADERSHIP Leverage insights from users and influencers
Accelerate introductions toward double digit vitality rating
Drive differentiation with new products
Drive value improvements (pricing) with new product introductions
MARKETING EXCELLENCE Influencer segmentation and communication methods
Blend of strategic brand and trade marketing – reach the Pro User
Agency selection and relationship
SALES EXCELLENCE Staff to build links between distributors, dealers, users
Focus on expanding entry door penetration
Margin improvement through mix enhancement
Build Max to be THE configuration tool for users, dealers, distributors
SERVICE EXCELLENCE Drive superior product quality
Responsiveness to customer needs
Irreplaceable customer service
Right product, right price, right location, right time
We believe having the broadest product offering will be critical to long term success24
Residential BusinessDoor Styles Continue to Evolve
Evolving Door StylesMasonite’s Wholesale Business
As door sales are forecast to increase, so will design variety
Sales of six panel doors are down to ~30% compared to ~50% in January 2011
Two panel doors now make up over 50% of interior door sales in wholesale
Creating new demand should positively effect mix
Mix Is Changing
25
Residential BusinessConsumers Are Demanding New, Innovative Designs
Eclectic Style + Craftsman / Mission
Individuality indécor & themes
Homeowners decorate & remodeltheir homes thinking more about personal happiness
Coordinates with a wide variety of styles
Continued rise in Craftsman popularity
Bringing the Outdoors In
Light, open spaces
Indoor spaces blending with outdoor living areas
Provides the senseof retreat and of‘getting away’
Modern & Contemporary
Trends towards rectilinear glass designs
Urban living designs capturing larger market segments
Clean, simple,de-cluttered
European Design Influence
Technology Influence
Gen X & Gen Y Are Main Drivers
Color & Texture
Natural finishes & colors – more complex but softened
Textures range between sophisticated & simple to those inspired by natural materials
26
Residential BusinessInnovation Across All Platforms
Entry Doors Interior Doors
Torrefied real wood design
Fiberglass durability with authentic
grain texture
Increased glass openings with
modern design
Authenticity and Performance
Classic customer wood doors
New molded designs
Fire rated performance
Style and Performance
27
Residential BusinessInvesting in Innovation
INNOVATION
Investments fell following housing decline
Innovation lagged
Re-focus on investment initiative
Engineers & Scientists
Dedicated product
development teams
Lab equipment & die machining
COST, QUALITY & COMPLIANCE INITIATIVES
MATERIAL SCIENCE
NEW PRODUCTS & TECHNOLOGY
28
Residential BusinessThe Most Robust New Product Introduction in Nine Years
① Introductions
② CEO Overview
③ Portfolio Optimization
④ Residential Business
⑤ Architectural Business
⑥ Automation
⑦ Sales & Marketing Excellence
⑧ Financial Update
⑨ Summary & Q&A
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2003 2008 2013 2018F
30
Architectural BusinessArchitectural Door Opportunity
Architectural business experiences 18-24 month lag from quote to delivery
U.S. nonresidential door spending forecast to grow significantly through 2018
Source: Freedonia Group
(in billions of $ spent on doors)
Annual growth in new nonresidential door
spend (’13-’18)
Office & Commercial +8%
Institutional +6%
Industrial +5%
Other nonresidential +5%
Forecast Sector CAGR from 2013-2018
Masonite’s Architectural Sales (2014)
$3.6
$5.4
$4.5
$6.5
Forecast 8% CAGR from 2013-2018
Health Care
Education
Office
Stock
Lodging
Other
Commercial
Institutional
Annual growth in replacement nonresidential
door spend (’13-’18)
+ 10%
+ 5%
Architectural BusinessAnalysis of Verticals
Improving vertical trends provide attractive top and bottom line growth
Healthcare
Hospitality
Education
Public/Gov’t
Office
• Improving balance sheets and favorable interest rates
• Growing endowments due to positive investment returns
Margin Profile
• Increase in spending – Federal, state, and local levels
• Favorable interest rates and growing tax revenue
• Positive corporate profits and employment trends
• Increase in rental income driven by reduction in vacancy
rates
• Improving healthcare sector financials
• Expanding demographic trends - aging population
• Improving business fundamentals / low financing costs
• Positive leisure travel driven by favorable labor market
and low energy costs
HIGH
Demand Drivers
MED-HIGH
MED-HIGH
LOW-HIGH
MED-HIGH
31
32
Architectural BusinessProduct Line Leadership
Comprehensive product offering to provide Life Safety, Security, and Design solutions
Macro Trends
Life Safety
Security
Design
• Higher performance standards and expectations
• Increase in regulation and compliance
enforcement
• Innovations in controlled access technology
• Growing demand for sound dampening / noise
reduction
• Trend to premium design aesthetics to support
brand image and positioning
• Increasing need to enhance design elements
while increasing performance
PERFORMANCE STANDARDS
PREMIUM DESIGN
ACCESS CONTROLACCESS CONTROL
• Electronic access control
• Concealed hardware / wiring
• High performance and clean design
• Stringent building code requirements
• Impact resistant faces & edges
• Industry standards: WDMA, AWI
• Exotic wood veneers
• Custom finishing options
• Premium design aesthetics
Architectural BusinessHighly Customized Solutions
Highly Engineered and Specified
Performance ComponentsSophisticated Machining Customizable Design Options
Solutions driven by exacting performance, machining, and design requirements
33
34
Architectural BusinessSales & Marketing Excellence
Providing engineered solutions and expanded product range
• High margin specialty
Stile & Rail category
• Extends product offering
in the premium space
• Strong brand equity
• Full product spectrum to
meet the needs of target
vertical brand owners
Premium Design
Hospitality - SubverticalsStrategic Rationale
Burj Khalifa, Dubai - World’s tallest building
Engineered Performance
• Unique design and performance challenges
• Embedded lighting, 90 minute UL fire rated
• Collaborative sales, engineering, and design solution to project owner
Luxury
Full Service
Budget
Architectural BusinessSummary
Improving Demand Forecast Sales & Marketing Excellence Product Line Leadership
• Strong brand leadership
• Full product spectrum
• Complemented by component
integration
• Strong vertical market orientation
• Delivering highly engineered
performance and design solutions
• Early stages of post recession
recovery in non-residential
• Positive macro and micro industry
trends
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2003 2008 2013 2018F
Masonite is well positioned to drive value and sustainable advantage in Architectural
35
Billions of $ spent on doors
① Introductions
② CEO Overview
③ Portfolio Optimization
④ Residential Business
⑤ Architectural Business
⑥ Automation
⑦ Sales & Marketing Excellence
⑧ Financial Update
⑨ Summary & Q&A
37
AutomationAutomating the Door Manufacturing Process is Critical to Future Success
Automated routing for Safe ‘n Sound interior doors
Automated Router - Wahpeton, ND
• Fully automated line
• 1 operator versus 6 on current equipment
• Estimated annual savings of > $400k
• Line designed to recycle core material
estimated savings of $100k+ per year
38
AutomationAutomating the Door Manufacturing Process is Critical to Future Success
Automated facilities improve production capability and lower costs
Flow
Machining Center - Northumberland, PA
• State of the art machining center
• 3 robot work cells
• Increases machining capacity by ~20%
• Similar technology used in automotive
dashboard manufacturing
Paint Line - Mesquite, TX
• Produces over 50,000 stock stained slabs
annually – shipped to Home Depot in U.S. and
Canada
• Line designed to accommodate next level of
automation by installing reciprocators
• Installed 2013
39
AutomationAutomating the Door Manufacturing Process is Critical to Future Success
Automation is a key component of being the best provider of building products
Edge Banding Line – Marshfield, WI
• Full implementation completed in fourth quarter of 2014
• Reduction to 1 operator from 2 operators per shift
• Fully automated entry and selection via barcode and
interface panel
• Increased throughput by 20%+
Productivity Implications for Automation
• Lowers costs on a per door basis
• Alleviates capacity constraints & bottlenecks
• Improves finished product quality
• Reduces lead times
① Introductions
② CEO Overview
③ Portfolio Optimization
④ Residential Business
⑤ Architectural Business
⑥ Automation
⑦ Sales & Marketing Excellence
⑧ Financial Update
⑨ Summary & Q&A
41
Sales & Marketing ExcellenceNA Residential Doors – Multi-Channel Strategy
Current channel strategy provides opportunity to capture incremental value through the chain
Residential Interior Doors
Wholesale Distributors Independent & Dealers
Finished door slabs shipped directly to
one or two step distribution customers
Finished Door Slabs Additional Value Added Services Masonite Customers
Pre-Hanging Pre-Finishing Retail Customers
42
Sales & Marketing ExcellenceMarketing To the Influencers
Capturing the hearts and minds of influencers is our challenge and opportunity
INFLUENCERS
43
Sales & Marketing ExcellenceDriving Greater Value
VALUE GENERATING
CUSTOMER SERVICE
OPTIMIZING CHANNEL
STRATEGY
TECHNOLOGY
PRODUCT, PRICE &
CUSTOMER MIX
Centralized call centers standardize
procedures & proactively solicit optimal
order quantities and upgraded products
Latest software rollout focuses on
accelerated product selection and
upgraded choices throughout the channel
Brand and product strategies designed to
make doors more relevant
Balancing the right mix of customer
type, geography and product focus
drives conversion and value
44
Sales & Marketing ExcellenceBranding Strategy – Making Doors More Relevant
Marketing to the Influencer
Leverage Digital
Marketing PlatformsSocial Media Presence
Vision
Making doors more relevant creates new demand and influences the mix
45
Sales & Marketing ExcellenceBranding Strategy – Executed in Retail Chanel
Expanding the Masonite brand at Lowe’s is an exciting opportunity
Improving the in-aisle experience with our retail partners
• Eliminate keying orders
with POS integration
• Error free order entry &
pricing
• Accurate takeoffs
produced on site and
priced utilizing mobile
devices –COMPLETE
TRIM PACKAGES
• Online leads
46
Sales & Marketing ExcellenceMax Configurator – Channel Embracing Technology
• Eliminate keying
orders with ERP
integration
• Accurate & error free
order entry & pricing
• ERP price
maintenance on
components from
supplier
• Non door products –
mouldings &
hardware
What’s in it for me and for my customer?
• Onine pricing
available for builder
to share with buyer
(design centers to
kitchen table)
• In home tablet
selling for
remodelers
• Instant quotes from
dealers on mutiple
design options
• Professional copies
of takeoffs
completed
• Online access to
products for
selection and
pricing
• Door maintenance
alerts
• After-sale follow-up
Distributors Dealers Trade Pros Home Owners
Simplifying the process = increasing demand, improving productivity and influencing the mix
47
Sales & Marketing ExcellenceUsing Technology to Drive Value
Max configurator technology continues to gain traction and drive value
Max 3.0
Channel integrating platform – Max 3.0
extends channel integration by automating
the Builder Request for Quote process with
our Dealers.
Increases Productivity – Max 3.0 digitally
analyzes house plans and highlights every
door on the blueprint for easy visual
inspection.
Auto-Quotes – Max 3.0 uses the door
information discovered from the blueprint to
generate a complete quote that can be
immediately submitted to fulfill the Builder
RFQ.
Mobile-Ready – Max 3.0 is now also
available on an iPad to record any
discrepancy between the blueprints and the
actual construction.
Max 3.0 Simplifies and Accelerates the Specification & Upgrading Process
48
Sales & Marketing ExcellenceMax Configurator 3.0
49
Sales & Marketing ExcellenceArchitectural Specifying & Quoting Extremely Complex and Inefficient
Architectural configurator technology continues to gain traction and drive value
Current State
Design & Specification Bidding Process Construction
Spec Approval Add to facility database
Drawings Spec Review Deliver
Drawings
Door Spec
Approve
Costing
Approve
Submittal
Est. Project Quote Req. Final
CostingSelect
Winner
Del.
Submittal
Approve
Submittal
Quote Req. Deliver
Estimate
Develop
SubmittalOrder Doors Install Doors
Deliver Estimate Deliver Doors
50
Sales & Marketing ExcellenceElectronic Configurator Improves Architectural Demand Fulfillment Process
Enabled through the Door Builder interface / configurator
Future State
Design & Specification Bidding Process Construction
Spec Approval Add to facility database
Drawings Spec Review Deliver
Drawings
Door Spec
Approve
Costing
Approve
Submittal
Est. Project Quote Req. Final
CostingSelect
Winner
Del.
Submittal
Approve
Submittal
Quote Req. Develop
SubmittalOrder Doors Install Doors
Deliver Estimate Deliver Doors
Deliver
Estimate
① Introductions
② CEO Overview
③ Portfolio Optimization
④ Residential Business
⑤ Architectural Business
⑥ Automation
⑦ Sales & Marketing Excellence
⑧ Financial Update
⑨ Summary & Q&A
30.9 31.632.7 33.0
25.026.2
27.5 27.7
15.0
20.0
25.0
30.0
35.0
40.0
45.0
2012 2013 2014 Q1'15
Total Doors NA Doors
52
Financial UpdateConsolidated Financial Information
Improving margins from higher pricing and increased volume
Door Volume^ Net Sales
Adjusted EBITDA* Free Cash Flow^^
+3%(total doors) 2 Year CAGR +5%2 Year CAGR
+19%2 Year CAGR +33%2 Year CAGR
(^) – Excludes S. Africa
(*) – See appendix for non-GAAP reconciliations.
(^^) – Defined as Adjusted EBITDA less Capex. Capex was $48, $46 and $50 million in 2012, 2013 and 2014, respectively. Q1’15 TTM Capex was $52 million.
$97$106
$137
$155
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
$60
$80
$100
$120
$140
$160
$180
2012 2013 2014 Q1'15
$49
$60
$87
$103
$40
$60
$80
$100
$120
2012 2013 2014 Q1'15
TTM TTM
TTM TTM
$1,676$1,731
$1,838 $1,850
$700
$900
$1,100
$1,300
$1,500
$1,700
$1,900
$2,100
2012 2013 2014 Q1'15
Adj. EBITDA margin
+5%(NA doors) 2 Year CAGR
Improving Ratios
Favorable Debt Maturity
Total Available Liquidity^ $225.7
Total Debt^ $475.0
53
Financial UpdateStrong Balance Sheet
8.25% Senior Unsecured Notes due 2021
(^) – As of Q1 2015 (Consists of unrestricted cash, ABL revolver availability and AR facilities)
(*) – Net debt (Total debt less cash on balance sheet) increase due primarily to cash used for make whole provision & early interest payment on bond redemption of approx. $52M.
(^^) – See appendix for non-GAAP reconciliations.
Strong company performance & successful acquisitions have improved financial ratios
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
Total Debt Net Debt
Recently Refinanced Debt
Replaced $500 million senior unsecured 8.25%
2021 notes with $475 million of senior unsecured
5.625% 2023 notes creating $14.5 million of
expected annual cash interest savings
($0.48/share).
Increased the size of the ABL to $150 million from
$125 million, lowered interest rate 75bps and
extended the maturity date to 2020 from 2016.
$150
$475
0
100
200
300
400
500
2015 2016 2017 2018 2019 2020 2021 2022 2023
($ in millions)
*
Coverage Ratios^^
0.0
1.0
2.0
3.0
4.0
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
Adj. EBITDA / Interest (Adj. EBITDA - Capex) / Interest
TTM Adj. EBITDA
ABL
Senior Unsecured Notes
54
Financial UpdateMasonite’s Operational Leverage Opportunities
Minor incremental improvements can have substantial impact on per share calculations
Average Unit Price* Cost Structure**
Free Cash Flow Per Share Generation^ Attractive Leverage Opportunities
Approximately 30 million shares outstanding
Cash taxes unlikely to materially change through 2016
Frozen pension funding unlikely to change, absent
significant regulatory or interest rate changes
Recent refinancing lowered interest expense
(*) – Consolidated Net Sales divided by doors sold. Note that this is not reflective of an actual door price as Net Sales also includes proceeds from component non door sales.
(^) - Defined as Adjusted EBITDA less Capex. Capex was $48, $46 and $50 million in 2012, 2013 and 2014, respectively. 2015 estimate based on 30% estimated growth in Adj. EBITDA
versus 2014 and $65mm of capex. 2015E based on share count as of Q1’15.
.
COSTS FIXED VARIABLE
Materials 0% 100%
Direct Labor 10% 90%
Overhead 60% 40%
Distribution 20% 80%
SG&A 70% 30%
$1.75
$2.12
$2.94
$3.77
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
2012 2013 2014 2015E
(**) – Company estimates
$48.03
$51.35
$54.24$54.78
$56.20
$42.00
$44.00
$46.00
$48.00
$50.00
$52.00
$54.00
$56.00
$58.00
2010 2011 2012 2013 2014
55
Financial UpdateImproving Incremental Adjusted EBITDA Margin
Incremental Adj. EBITDA margin has increased through productivity gains and higher prices
January 2010 – Dec 2012 January 2013 - Present
Adj. EBITDA (in millions of $) Adj. EBITDA (in millions of $)
Net Sales (in millions of $) Net Sales (in millions of $)
Monthly Net Sales and Adjusted EBITDA (North America)
0
2
4
6
8
10
12
14
16
18
50 70 90 110 130 150
0
2
4
6
8
10
12
14
16
18
50 70 90 110 130 150
① Introductions
② CEO Overview
③ Portfolio Optimization
④ Residential Business
⑤ Architectural Business
⑥ Automation
⑦ Sales & Marketing Excellence
⑧ Financial Update
⑨ Summary & Q&A
SummaryPositioning the Company for a Sustained Recovery
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 product categories in our largest markets (North America & UK)
A Business Footprint Not Easy to Replicate Replacement value of residential interior molded door facings facilities in excess of $1 billion
Strategic footprint of assembly facilities to service large geographic area
Market Opportunity for Continued Growth U.S. new housing expected to experience double digit growth in 2015+ (Freedonia)
Repair, Renovation and Remodeling expected to increase mid-single digits (Freedonia)
Commercial & Architectural door activity expected to increase high-single digits (Freedonia)
UK housing dynamics steadily improving
Long-term, demographically driven demand characteristics remain strong
Key Focus Areas: Investing to Accelerate Growth Product Line Leadership
Electronic Enablement
Sales & Marketing Excellence
Automation
Portfolio Optimization
57
SummaryCreating a Business Not Easy to Replicate
New Products
AutomationE-Commerce
Vertical Integration
Masonite’s replacement insurance value on our facing
production facilities alone is in excess of $1.0 billion.
Die Fabrication
Facings
Production
Slab Assembly
Pre-Finishing
Pre-Hanging
58
Questions & Answers
Appendix
61
Reconciliation of Adjusted EBITDA to Net Income
(Loss) Attributable to Masonite
(In thousands)
December 28,
2014
December 29,
2013
December 30,
2012
January 1,
2012
January 2,
2011
Adjusted EBITDA 137,087$ 105,877$ 97,261$ 81,994$ 80,678$
Less (plus):
Depreciation 60,622 62,080 63,348 60,784 58,633
Amortization 21,722 17,058 15,076 10,569 8,092
Share based compensation expense 9,605 7,752 6,517 5,888 9,626
Loss (gain) on disposal of property, plant and
equipment 3,816 (1,775) 2,724 3,654 1,301
Registration and listing fees — 2,421 — — —
Restructuring costs 11,137 10,630 11,431 5,116 7,000
Asset impairment 18,202 1,904 1,350 2,516 —
Interest expense (income), net 41,525 33,230 31,454 18,068 245
Loss on extinguishment of debt — — — — —
Other expense (income), net (587) 2,316 528 1,111 1,030
Income tax expense (benefit) 4,533 (21,377) (13,365) (21,560) (11,396)
Loss (income) from discontinued operations, net
of tax 630 598 (1,480) 303 1,718
Net income (loss) attributable to non-controlling
interest 3,222 2,050 2,923 2,079 1,390
Net income (loss) attributable to Masonite (37,340)$ (11,010)$ (23,245)$ (6,534)$ 3,039$
Year Ended
(In thousands)
March 29,
2015
December 28,
2014
September 28,
2014
June 29,
2014
March 30,
2014
Adjusted EBITDA 155,157$ 137,087$ 117,172$ 110,007$ 99,418$
Less (plus):
Depreciation 60,482 60,622 60,222 59,885 61,000
Amortization 21,042 21,722 20,348 19,736 18,479
Share based compensation expense 9,701 9,605 9,335 8,921 8,205
Loss (gain) on disposal of property, plant and
equipment 2,673 3,816 2,394 (614) (797)
Registration and listing fees — — 423 2,421 2,421
Restructuring costs 12,772 11,137 17,357 8,709 9,911
Asset impairment 18,202 18,202 — — 1,903
Interest expense (income), net 43,285 41,525 39,476 37,359 34,973
Loss on extinguishment of debt 28,046 — — — —
Other expense (income), net (1,952) (587) 4,175 4,324 (949)
Income tax expense (benefit) 7,778 4,533 (10,259) (18,535) (22,308)
Loss (income) from discontinued operations, net
of tax 717 630 838 776 649
Net income (loss) attributable to non-controlling
interest 4,217 3,222 1,425 2,005 2,166
Net income (loss) attributable to Masonite (51,806)$ (37,340)$ (28,562)$ (14,980)$ (16,235)$
Twelve Months Ended
