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, and the expected impact of the explosion at
our Escourt Mill in South Africa. 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
3. ① Company / Industry Update
② Financial Review
③ Summary / Q&A
4. Company / Industry Update
U.S. Housing Completions
4
Multi Family Continues to Drive Growth in the U.S. Housing Market
Source: U.S. Census Bureau
9.4%
36.7%
15.4%
12.8%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Single Family Multi Family Total Equivalent Units
U.S. New Housing Completions U.S. New Housing Completion Growth YTD
0
200
400
600
800
1,000
1,200
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
2012 2013 2014
(in 000s)
5. Company / Industry Update
Masonite Second Quarter 2014 Volume Growth
5
NA Wholesale & Retail are Tracking the U.S. New Housing & RRR Market
4.6
5.3
0
2
4
6
Q2'13 Q2'14
(in millions) (in millions)
NA Wholesale Customers* NA Retail Customers^
Q2 2014 Volume Growth: +5%Q2 2014 Volume Growth: +15%
(*) – Management believes that 70% / 30% of NA Wholesale customer volume is driven by new housing construction & residential RRR spending, respectively.
(^) – Management believes that 10% / 90% of NA Retail customer volume is driven by new housing construction & residential RRR spending, respectively.
1.6 1.7
0
2
4
6
Q2'13 Q2'14
6. Company / Industry Update
U.S. Housing Starts
6
U.S. New Housing Starts Remain Choppy with Equivalent Starts Up Slightly
U.S. New Housing Starts
Source: U.S. Census Bureau
0
200
400
600
800
1,000
1,200
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
2012 2013 2014
U.S. New Housing Start Growth YTD
0.0%
19.8%
5.6%
3.3%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Single Family Multi Family Total Equivalent Units
(in 000s)
7. (AUPGrowth%,yearoveryear)
7
NA Average Unit Price Has Increased for Five Consecutive Quarters
NA Pricing Environment is ImprovingNA Average Unit Price is Increasing
~$10 Million of Pricing Expected Q3’14 – Q1’15^Pricing Environment Helping Drive Positive NA AUP
$-
$5
$10
$15
Q3 '14 Q4 '14 Q1 '15
Impact of Previously Disclosed Pricing
Company / Industry Update
North American Average Unit Price Has Been Improving
• Q1’14 pricing actions of mid-high single
digit* increase across interior & exterior NA
retail & U.S. wholesale doors were fully
realized:
• ~$10 million of net pricing benefits
were captured during Q2’14
• Additional North American pricing actions
are expected over time as we seek fair
value for our high quality products and
services.
(*) – The 2014 impact of North American retail pricing is expected to be up low-mid single digits once prior year price concessions are taken into account.
(^) – Management believes the majority, but not all, of this incremental pricing versus year-ago will be accretive.
-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
8. Company / Industry Update
Portfolio Optimization: Tuck In Acquisitions
8
Tuck-in Acquisitions Have Helped Create Leadership Positions for Masonite
Acquisitions are a Key Part of Masonite’s Balanced Growth Strategy
Similar
Technology
Distribution
Synergy
Brand
Positioning
Geographically
Translatable
Actionable
Value
Creation
Select assets of:
9. Company / Industry Update
Portfolio Optimization: Market Exits
9
Masonite is Focused on Markets & Products with High Return Potential
Recent Geographic Exits:
• Poland 2014
• Hungary 2012
• Romania 2012
• Ukraine 2010
• Turkey 2010
Non-Strategic Markets:
• Limited growth potential
• Highly fragmented markets
• Poor cash flow characteristics
• Low margins
• Antiquated equipment
• Extended payment terms
• High bad debt expense
– Existing Masonite Markets
Masonite has Exited Several Underperforming Markets Since 2010
Masonite Israel:
• Represents ~1.0% net sales
10. Company / Industry Update
Five Focus Areas Designed to Accelerate Growth
Automation
Product Line Leadership
Electronic Enablement
Sales and Marketing Excellence
Portfolio Optimization: Strategic Tuck-ins & Market Exits
10
Goal: Grow Share & Expand Margins Beyond Macro Economic Recovery
11. ① Company / Industry Update
② Financial Review
③ Summary / Q&A
13. (*) – 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
13
Improving Margins from Higher Pricing and Increased Volume
(Millions of USD)
14. 14
Highest Adjusted EBITDA Margin in 5 Years
2014 Second Quarter Financial Results
Adjusted EBITDA Margin Progression
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
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
Adjusted EBITDA Margin Benefitted from Pricing and an Improving U.S. Housing Market
15. Q2’13 Net Sales
Volume*
Avg. Unit Price
Other
FX
Q2’14 Net Sales
North America
$346.7
$18.5
$13.7
($0.7)
($5.5)
$372.7
Europe/ROW
$87.6
$6.1
$5.7
($0.3)
$4.4
$103.5
South Africa
$18.8
($9.1)
$5.7
$0.0
($1.4)
$14.0
Total
$453.1
$15.5
$25.1
($1.0)
($2.5)
$490.2
3.4%
5.5%
(0.2%)
(0.6%)
8.2%
(*) - Includes the incremental impact of our 2013 & 2014 acquisitions.
(Millions of USD)
+7.5% +18.2% -25.5%
% Change
2014 Second Quarter Financial Results
Net Sales Reconciliation by Reportable Segment
Average Unit Price Increased in All 3 Reportable Segments
15
16. 16
Masonite Africa is Insured Against Property Loss & Business Interruption
Masonite Africa Business Interruption:
• Explosion occurred June 6, 2014.
• Reduced site’s ability to generate steam & heat
the kilns which required the production lines to
cease operations for several weeks.
• Mill currently running at ~50% capacity.
• Expect ~75% pre-incident capacity by end of
August & 100% by the fourth quarter of 2014.
• Expect $6.0 - $7.0MM* Adj. EBITDA impact,
before any potential insurance recovery, with
the vast majority hitting the third quarter of 2014.
• Monitoring situation closely.
2014 Second Quarter Financial Results
Masonite Africa - Business Interruption
Masonite Africa
(*) – Assumes 65-75 million South African Rand with a conversion ratio of ~10.7 Rand to 1.0 USD.
17. 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
17
(*) – 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
18. $-
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
$50.0
2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2
18
Historically, 3Q Adj. EBITDA is Flat to Slightly Down vs. Q2 Due to Seasonality*
2014 Second Quarter Financial Results
Adjusted EBITDA Has Historically Peaked During Q2
($ in millions)
(*) – In addition, Masonite Africa expects a $6.0 - $7.0MM Adjusted EBITDA impact, before any potential insurance recovery, with the vast majority of the impact hitting Q3’14.
19. ① Company / Industry Update
② Financial Review
③ Summary / Q&A
20. 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% and expanded Adjusted EBITDA margin to 9.0%--the
highest level in five years
Advantageous Market Position
One of only two vertically integrated residential molded door manufacturers in North America
Only vertically integrated commercial door manufacturer in North America
Established leadership positions in all targeted North American product categories
Five 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
