Masonite International Corporation (NYSE: DOOR) today announced
business updates related to novel coronavirus (COVID-19).
In recent weeks we have seen the impacts of COVID-19 grow both
domestically and abroad. Accordingly, the company has taken actions
to both protect its employees and focus on business continuity.
While our top priority is the health and welfare of our employees,
we take seriously our commitment to serve our customers. We are
endeavoring to maintain operations to continue supplying the
industry during this uncertain time, recognizing the important role
our customers and our products play in construction related to
providing residential shelter and health care services.
In early March, we formed a cross-functional COVID-19 Response
Team to assess potential business impacts and implement mitigation
strategies. Since then, we have expanded this team to include
sub-teams focused on critical workstreams, including: Employee
Welfare, Supply Chain and Operations, Customer Engagement,
Financial Stability, and Communications. The following are updates
with respect to impacts and our actions in some of these areas.
Employee Welfare
To reduce the potential spread of COVID-19 and maintain a safe
work environment, we have implemented an increasing list of actions
since early March. Beyond following and providing employees with
the Centers for Disease Control’s (CDC) recommended guidelines to
decrease the spread of the virus, we have taken additional steps to
reduce our employees’ potential exposure.
Where possible, we have instructed employees to work from home
and today all customer interaction including order entry and
receivables are being effectively handled remotely. Where remote
work is not possible, we have taken steps to restrict visitor
access to facilities, adjust break times and create additional
break areas to help reduce employee density, and manage shift
schedules to reduce employee contact during shift changes to
facilitate proper social distancing.
Masonite realizes the current situation has also caused some
employees personal challenges outside of work and we have modified
employee policies related to attendance and the availability of
paid and unpaid time off. Further, attendance is voluntary at
locations where Masonite’s operations are exempt from applicable
stay-at-home orders and continue to operate.
Supply Chain and
Operations
Our Supply Chain and Operations workstream is focused on
business continuity and ensuring our facilities remain operating
where safe to do so. Our Global Sourcing team has taken steps to
engage with our suppliers and assess risks related to component
availability and has confirmed that our sourced supply is secure at
this time. We believe that the early steps we took to qualify and
procure components from alternative sources and markets has
contributed to our ability to avoid any supply chain disruption to
date.
Due to the impact of the COVID-19 virus in the UK and the recent
country-wide stay-at-home order, we decided to temporarily close
all of Masonite’s UK facilities. This process of ceasing operations
began Tuesday, March 24, with all facilities being closed by
Friday, March 27. At this time, we expect to begin reopening these
operations upon expiration of the UK order, which is currently
scheduled to run through April 14. Meanwhile, a small team of
employees will remain active on a remote work basis in order to
meet administrative needs. Additional governmental stay-at-home
orders have impacted some other operations as well, specifically in
Canada.
Financial Stability
We believe we have a strong balance sheet and solid capital
structure that positions us well during this time of uncertainty.
Our debt includes covenant lite unsecured bonds due in 2026 and
2028 and an undrawn asset-based revolving credit facility (the “ABL
Facility”) with a $250 million commitment and a $150 million
accordion that matures in 2024. Our net debt* to trailing twelve
months Adjusted EBITDA* was 2.2 times at December 29, 2019. As of
March 26, 2020, our total available liquidity was approximately
$325 million, inclusive of unrestricted cash, an accounts
receivable purchase agreement and our ABL Facility.
We recently implemented several actions to reduce our spending
and more closely manage cash during this uncertain period,
including prioritizing capital spending for critical maintenance,
safety and regulatory projects, and temporarily suspending our
share repurchase program. We believe that we are also well
positioned to manage expenses in the face of potential demand
impacts from COVID-19 given that a significant majority of our cost
of goods sold is variable in nature.
Given the rapidly evolving nature of the COVID-19 situation, we
plan to revisit our 2020 Annual Outlook, announced on February 18,
2020, on our next earnings call, along with a further update on the
impact of COVID-19 on our company.
* See "Non-GAAP Financial Measures and Related Information" for
definition and reconciliation of non-GAAP measures.
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 business update
regarding COVID-19, our ability to reduce spending, mitigate the
impacts of the coronavirus, and fund our obligations. 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, the
ultimate geographic spread of the coronavirus, the duration of the
coronavirus outbreak and actions that may be taken by governmental
authorities to contain the outbreak or treat its impact; downward
trends in our end markets and in economic conditions; reduced
levels of residential new construction; residential repair,
renovation and remodeling; and non-residential building
construction activity due to increases in mortgage rates, changes
in mortgage interest deductions and related tax changes and reduced
availability of financing; competition; the continued success of,
and our ability to maintain relationships with, certain key
customers in light of price increases and customer concentration
and consolidation; tariffs and evolving trade policy and friction
between the United States and other countries, including China; the
impact of anti-dumping and countervailing trade cases; increases in
prices of raw materials and fuel; increases in labor costs, the
availability of labor, or labor relations (i.e., disruptions,
strikes or work stoppages); our ability to manage our operations
including anticipating demand for our products, managing
disruptions in our operations, managing manufacturing realignments
(including related restructuring charges), managing customer credit
risk and successful integration of acquisitions; the continuous
operation of our information technology and enterprise resource
planning systems and management of potential cyber security threats
and attacks; 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;
political, economic and other risks that arise from operating a
multinational business; uncertainty relating to the United
Kingdom's exit from the European Union; fluctuating exchange and
interest rates; our ability to innovate and keep pace with
technological developments; product liability claims and product
recalls; retention of key management personnel; 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; and environmental and other government
regulations, including the FCPA, and any changes in such
regulations.
Non-GAAP Financial Measures and Related
Information
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. Adjusted EBITDA is defined
as net income 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 indentures governing the 2026 and 2028 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. Adjusted EBITDA is used
to evaluate and compare the performance of the segments and it is
one of the primary measures used to determine employee incentive
compensation. Intersegment sales are recorded using market prices.
We believe that Adjusted EBITDA, from an operations standpoint,
provides an appropriate way to measure and assess segment
performance. Our management team has established the practice of
reviewing the performance of each segment based on the measures of
net sales and Adjusted EBITDA. We believe that Adjusted EBITDA is
useful to users of the consolidated financial statements because it
provides the same information that we use internally to evaluate
and compare the performance of the segments and it is one of the
primary measures used to determine employee incentive
compensation.
Net debt equals total debt less unrestricted cash.
The tables below set forth a reconciliation of net income (loss)
attributable to Masonite to Adjusted EBITDA and net debt for the
periods indicated.
MASONITE INTERNATIONAL
CORPORATION
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
TO GAAP FINANCIAL
MEASURES
(In thousands of U.S.
dollars)
(Unaudited)
Year Ended December 29,
2019
North American
Residential
Europe
Architectural
Corporate & Other
Total
Net income (loss) attributable to
Masonite
$
167,097
$
2,664
$
19,928
$
(145,087)
$
44,602
Plus:
Depreciation
35,992
11,604
11,343
11,797
70,736
Amortization
1,697
14,653
8,362
4,401
29,113
Share based compensation expense
—
—
—
10,023
10,023
Loss on disposal of property, plant and
equipment
3,934
2,109
331
22
6,396
Restructuring costs
6,929
1,322
506
1,019
9,776
Asset impairment
13,767
—
—
—
13,767
Loss on disposal of subsidiaries
—
14,260
—
—
14,260
Interest expense, net
—
—
—
46,489
46,489
Loss on extinguishment of debt
—
—
—
14,523
14,523
Other expense (income), net
—
(393)
—
2,346
1,953
Income tax expense
—
—
—
17,309
17,309
Net income attributable to non-controlling
interest
3,096
—
—
1,341
4,437
Adjusted EBITDA
$
232,512
$
46,219
$
40,470
$
(35,817)
$
283,384
December 29, 2019
Total debt
$
790,984
Unrestricted cash
166,964
Net debt
$
624,020
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200327005561/en/
Joanne Freiberger, CPA, CTP, IRC VP, TREASURER
jfreiberger@masonite.com 813.739.1808
Farand Pawlak, CPA DIRECTOR, INVESTOR RELATIONS
fpawlak@masonite.com 813.371.5839
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