Press Release Details

TAMPA, Fla.--(BUSINESS WIRE)-- Masonite International Corporation ("Masonite") (NYSE: DOOR) today announced results for the three and nine months ended September 28, 2014.

Executive Summary

• Net sales increased $43.0 million or 9.9% to $476.1 million in the third quarter of 2014 compared with the third quarter of 2013 primarily due to increases of 6.6% in unit volumes and 4.4% in average unit price, which were partially offset by a 0.6% foreign exchange headwind.
• Net income (loss) attributable to Masonite decreased $13.6 million to $(10.0) million, or $(0.34) per diluted share, in the third quarter of 2014 from $3.6 million, or $0.12 per diluted share, in the third quarter of 2013.
• Adjusted EBITDA¹ increased $7.2 million or 25.4% to $35.6 million in the third quarter of 2014 from the third quarter of 2013. Excluding a $3.0 million charge related to quality and inventory obsolescence issues taken in the Europe, Asia and Latin America segment, Adjusted EBITDA would have increased $10.2 million or 35.9% to $38.6 million in the third quarter of 2014.

“Higher unit volumes, an increase in average unit price and tight cost control all contributed meaningfully to our strong third quarter results,” said Fred Lynch , President and CEO. “We are encouraged by the improving construction industry fundamentals and believe our focus on automation, product line leadership, electronic enablement, sales and marketing excellence and portfolio optimization positions us well for the future.”

¹ See "Non-GAAP Financial Measure and Related Information" for definition and reconciliation to net income (loss) attributable to Masonite.

Third Quarter 2014 Discussion

Net sales increased 9.9% to $476.1 million in the three months ended September 28, 2014, from $433.1 million in the comparable period of 2013. Excluding the unfavorable impact of foreign exchange, net sales would have increased by 10.5% to $478.6 million. The increase was primarily due to $28.7 million of higher unit volumes and a $19.0 million improvement in average unit price. These increases were partially offset by $2.5 million of negative foreign exchange impact and a $2.2 million decrease in net sales of other products.

Total company gross profit increased to $66.2 million in the three months ended September 28, 2014, from $59.0 million in the three months ended September 29, 2013. Gross profit margin increased 30 basis points to 13.9% of net sales in the third quarter of 2014, from 13.6% of net sales in the third quarter of 2013, primarily due to price increases at North American residential customers, partly offset by a 50 basis point charge related to quality and inventory obsolescence issues in the Europe, Asia and Latin America segment.

Selling, general and administrative expenses (SG&A) as a percentage of net sales decreased 60 basis points in the third quarter of 2014 to 11.3%, from 11.9% in the third quarter of 2013. SG&A expenses increased $2.5 million to $53.9 million in the third quarter of 2014, from $51.4 million in the third quarter of 2013, driven by $2.4 million of additional SG&A incurred in connection with the Company's Door-Stop operations which were acquired during the first quarter of 2014 and an additional $3.1 million in losses on disposals of property, plant and equipment in the third quarter of 2014 compared to the same period in 2013. These increases were partially offset by $1.9 million of personnel cost reductions, $0.8 million of business interruption insurance proceeds related to the explosion at the Estcourt Mill in South Africa and other decreases of $0.3 million.

Net income (loss) attributable to Masonite decreased $13.6 million to $(10.0) million, or $(0.34) per diluted share, in the third quarter of 2014 from $3.6 million, or $0.12 per diluted share, in the third quarter of 2013. Net income (loss) attributable to Masonite was impacted by an increase of $8.6 million of restructuring charges primarily related to the Israel Stay of Proceedings and a $3.0 million charge related to quality and inventory obsolescence issues in the Europe, Asia and Latin America segment.

Adjusted EBITDA increased 25.4% to $35.6 million for the three months ended September 28, 2014, from $28.4 million in the comparable period of 2013. Excluding a $3.0 million charge related to quality and inventory obsolescence issues taken in the Europe, Asia and Latin America segment, Adjusted EBITDA would have increased $10.2 million or 35.9% to $38.6 million in the third quarter of 2014.

On June 6, 2014, an explosion occurred in the power plant of our Estcourt Mill in South Africa which significantly impacted third quarter results. Despite a $0.8 million interim partial business interruption insurance payment being recorded in the third quarter, Adjusted EBITDA results in the Africa Segment were negative $2.6 million versus positive $1.8 million a year ago. As of September 28, 2014 the mill was running at approximately 80% of pre-incident levels with the balance expected to be restored during the fourth quarter of 2014. Masonite Africa Limited is insured against property loss and business interruption.

On August 20, 2014, the Board of Directors of Masonite Israel Ltd., one of our wholly-owned subsidiaries, decided to voluntarily seek a Stay of Proceedings from the Israeli courts. Consistent with that action, results from the Israel business were de-consolidated beginning August 21, 2014. As of September 28, 2014, pending the ultimate resolution of the Stay of Proceedings, we do not anticipate any material future charges related to Israel. Restructuring costs of $9.7 million were included in net income in the third quarter.

Year to Date 2014 Discussion

Net sales increased 6.0% to $1,388.8 million in the nine months ended September 28, 2014, from $1,310.7 million in the comparable period of 2013. Excluding the unfavorable impact of foreign exchange, net sales would have increased by 6.8% to $1,400.2 million. The increase was primarily due to a $68.2 million improvement in average unit prices and a $25.1 million increase in unit volumes. These increases were partially offset by $11.4 million of negative foreign exchange impact and a $3.8 million decrease in net sales of other products.

Total company gross profit increased to $197.8 million in the nine months ended September 28, 2014, from $174.0 million in the nine months ended September 29, 2013. Gross profit margin increased 90 basis points to 14.2% of net sales in the nine months ended September 28, 2014, from 13.3% of net sales in the nine months ended September 29, 2013, primarily due to price increases at North American residential customers.

Selling, general and administrative expenses increased $15.7 million to $170.1 million, from $154.4 million in the nine months ended September 29, 2013. The increase was partially driven by a $4.5 million benefit in the first quarter of 2013 related to a business interruption insurance claim associated with the company's Marshfield acquisition subsequent to acquisition and $5.7 million of SG&A incurred in connection with the company's Door-Stop operations during the nine month period ended September 28, 2014. Also contributing to the increase were an additional $2.4 million in losses on disposals of property, plant and equipment, an additional $1.6 million of share based compensation expense, $1.7 million in professional fees, $1.0 million of bad debt expense and other increases of $0.1 million. These increases were partially offset by $0.8 million of business interruption insurance proceeds related to the explosion at the Estcourt Mill in South Africa. Overall selling, general and administrative expenses as a percentage of net sales increased 50 basis points in the nine months ended September 28, 2014 to 12.3%, from 11.8% in 2013.

Net income (loss) attributable to Masonite decreased $17.6 million to $(21.0) million, or $(0.70) per diluted share, in the nine months ended September 28, 2014, from $(3.4) million, or $(0.12) per diluted share, in the nine months ended September 29, 2013. Net income (loss) attributable to Masonite was impacted by an increase of $6.7 million of restructuring charges and a $3.0 million charge related to quality and inventory obsolescence issues in the Europe, Asia and Latin America segment.

Adjusted EBITDA increased 12.8% to $99.4 million for the nine months ended September 28, 2014, from $88.1 million in the comparable period of 2013. Excluding a $3.0 million charge related to quality and inventory obsolescence issues taken in the Europe, Asia and Latin America segment, Adjusted EBITDA would have increased $14.3 million or 16.2% to $102.4 million for the nine months ended September 28, 2014.

Masonite Earnings Conference Call

The Company will hold a live conference call and webcast on November 6, 2014. Access to the live audio webcast beginning at 10:00 a.m. ET can be obtained on the Masonite website under Investors > Events & Presentations. The webcast can be accessed at: Q3'14 Webcast. The earnings presentation relating to the call and webcast will also be available on the Masonite website in the same location.

Telephone access to the live call will be available at 877-407-3980(in the U.S.) or by dialing 201-689-8475 (outside U.S.).

A telephone replay will be available approximately one hour following completion of the call through November 20, 2014. To access the replay, please dial 877-660-6853 (in the U.S.) or 201-612-7415 (outside U.S.). Enter Conference ID #13593160.

About Masonite

Masonite International Corporation is a leading global designer and manufacturer of interior and exterior doors for the residential new construction; the residential repair, renovation and remodeling; and the non-residential building construction markets. Since 1925, Masonite has provided its customers with innovative products and superior service at compelling values. Masonite currently serves more than 7,000 customers in over 80 countries. Additional information about Masonite can be found at www.masonite.com.

Forward-looking Statements

This press release 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 Estcourt Mill in South Africa. When used in this press release, 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 and Related Information

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 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 table below sets forth a reconciliation of Adjusted EBITDA to net income (loss) attributable to Masonite for the periods indicated.

(*) Includes the incremental impact of 2014 acquisitions.

Source: Masonite International Corporation