Masonite International Inc. Announces Third Quarter 2007 Results



    MISSISSAUGA, ONTARIO, November 8 /CNW/ - Masonite International Inc.:

    Third Quarter Highlights

    --  Net sales declined 15.0% to $529.3 million from $622.4 million in the
third quarter of 2006

    --  Operating EBITDA decreased 22.6% to $70.8 million from $91.5 million

    --  Adjusted EBITDA decreased 14.2% to $80.1 million from $93.4 million

    --  Adjusted EBITDA margin increased to 15.1% from 15.0%

    --  Net debt decreased $41.8 million to $1,895.4 million on September 30,
2007 from $1,937.2 million on June 30, 2007

    Nine Month Highlights

    --  Net sales declined 10.2% to $1,687.7 million from $1,879.5 million in
the first nine months of 2006

    --  Operating EBITDA decreased 0.2% to $233.0 million from $233.4 million

    --  Adjusted EBITDA decreased 2.9% to $249.4 million from $256.8 million

    --  Adjusted EBITDA margin increased to 14.8% from 13.7%

    --  Net debt decreased $73.4 million to $1,895.4 million on September 30,
2007 from $1,968.8 million on December 31, 2006

    Masonite International Inc. today announced third quarter 2007 net sales
of $529.3 million, a decline of 15.0% compared to net sales of $622.4 million
in the third quarter of 2006. Operating EBITDA decreased 22.6% to $70.8
million from $91.5 million in the third quarter of 2006. Adjusted EBITDA,
calculated pursuant to the Company's credit agreement, declined 14.2% to $80.1
million in the third quarter of 2007, compared to $93.4 million in the prior
year period. As described in the attached reconciliation, third quarter 2007
Adjusted EBITDA includes $9.3 million of net adjustments, while Adjusted
EBITDA in the third quarter of 2006 includes $1.9 million of such adjustments.

    "While our sales were negatively impacted by continuing deterioration in
the North American housing market, our aggressive actions to reduce costs,
including the closure of six facilities, resulted in strong margins and
healthy cash flow during the third quarter," said Frederick Lynch, President
and Chief Executive Officer of Masonite. "Our Lean Sigma initiatives and
supply chain efforts, along with continued growth outside North America, all
contributed to respectable third quarter results."

    The previously announced transition of business from Masonite by The Home
Depot in the Midwest and Northeast regions was concluded during the third
quarter of 2007. In the third quarter, the Company also completed the closure
of the six facilities announced earlier this year. The Company also announced
the consolidation of its interior door manufacturing operations in Florida,
which will result in the closure of its Tampa, Florida facility. The Company
recorded a restructuring charge of $7.4 million in the third quarter of 2007
in connection with the completion of these closures as well as a non-cash
asset impairment charge of $3.6 million associated with redundant assets
scheduled for disposal. Other restructuring actions resulted in an additional
charge of $0.4 million in the quarter.

    In the third quarter of 2007, Masonite reduced net debt (consolidated
debt net of cash and cash equivalents) by $41.8 million to $1,895.4 million on
September 30, 2007 from $1,937.2 million on June 30, 2007. Excluded from the
net debt balances is $61.1 million outstanding on the Company's accounts
receivable sales facility.

    Sales in the North American segment decreased 23.6% to $367.0 million in
the third quarter of 2007 from $480.5 million in the third quarter of 2006.
Sales to customers from facilities outside of North America, primarily in
Western Europe, increased approximately 14.4% to $162.3 million in the third
quarter of 2007 from $141.9 million in the prior year period. Favorable
foreign currency movements provided a $13.9 million positive impact on
comparative consolidated sales and also had a favorable impact on margins in
the period.

    Other expense of $9.2 million in the third quarter of 2007 included the
restructuring charges noted above, offset by favorable non-cash foreign
currency adjustments. This compares to $9.5 million of Other expense in the
third quarter of 2006, which reflected the closure of two manufacturing sites
and charges for changes in senior management during that period.

    For the nine months ended September 30, 2007 net sales were $1,687.7
million, a decline of 10.2% compared to net sales of $1,879.5 million in the
first nine months of 2006. Operating EBITDA decreased 0.2% to $233.0 million
from $233.4 million (net of a $9 million non-cash inventory write down) in the
first nine months of 2006. Adjusted EBITDA, calculated pursuant to the
Company's credit agreement, decreased 2.9% to $249.4 million in the first nine
months of 2007, compared to $256.8 million in the prior year period. First
nine months 2007 Adjusted EBITDA includes $16.4 million of net adjustments,
while Adjusted EBITDA in the first nine months of 2006 includes $23.4 million
of such adjustments, as described in the attached reconciliation.

    During the first nine months of 2007, Masonite reduced net debt
(consolidated debt net of cash and cash equivalents) by $73.4 million to
$1,895.4 million on September 30, 2007 from $1,968.8 million on December 31,
2006. This compares to a decrease of net debt of $88.9 million in the first
nine months of 2006.

    Sales in the North American segment decreased 17.8% to $1,203.5 million
in the first nine months of 2007 from $1,463.7 million in the first nine
months of 2006. Sales to customers from facilities outside of North America,
primarily in Western Europe, increased approximately 16.4% to $484.1 million
in the first nine months of 2007 from $415.8 million in the prior year period.
Favorable foreign currency movements provided a $34.0 million positive impact
on comparative consolidated sales and also had a favorable impact on margins
in the period.

    Other expense year to date in 2007 was $21.6 million, including
restructuring charges of approximately $19.4 million (including the third
quarter restructuring charges noted above) and non-cash asset impairment of
$6.2 million, offset by favorable non-cash foreign currency adjustments. This
compares to $16.6 million of Other expense in the first nine months of 2006,
composed primarily of charges for the closure of four manufacturing sites,
changes in senior management and losses on disposal of fixed assets during
that period.

    For the latest twelve months ended September 30, 2007, Adjusted EBITDA
declined to $325.2 million from $338.5 million for the twelve months ended
June 30, 2007. The Company's net debt to Adjusted EBITDA ratio was 5.87x at
September 30, 2007 compared to 5.76x at June 30, 2007, versus a covenant
maximum of 7.30x. (As at September 30, 2007, $14.3 million of outstanding
letters of credit and other notes payable not reflected in net debt presented
above were included as net debt for covenant calculation purposes only.)
Trailing twelve month cash interest at September 30, 2007 was $169.0 million,
and the Company's cash interest coverage ratio (Adjusted EBITDA divided by
cash interest expense) was 1.92x at September 30, 2007 compared to 1.97x at
June 30, 2007 and to a covenant minimum of 1.60x.

    In the first quarter of 2007, the Company adopted the new accounting
standards issued by the Canadian Institute of Chartered Accountants with
respect to Comprehensive Income, Hedges and Financial Instruments. The impact
of this was to record the fair value of the Company's interest rate swaps on
the balance sheet in Other assets, and to reclassify the unamortized deferred
financing costs from Other assets to a reduction of debt incurred that gave
rise to such financing costs. As a result, debt balances as of September 30,
2007 are presented in the following unaudited financial statements net of
unamortized deferred financing costs of $63.7 million at September 30, 2007,
whereas debt is presented at face value as at December 31, 2006. Net debt and
covenant calculations described above also present the debt at face value.

    This press release is also available within the "Corporate Information"
section of the Company's website at www.masonite.com.

    A Conference Call with Masonite management will take place at 11:00 a.m.
Eastern Standard Time today. Dial in information is as follows:

    USA Toll Free Number: 888-282-0173

    USA Toll Number: +1-210-234-0021

    Passcode: MASONITE

    A replay of the call will be available through December 8, 2007 by
calling:

    USA Toll Free Number: 800-695-0673

    USA Toll Number: +1-402-220-0304

    Passcode: 3626

    Masonite International is a leading global manufacturer of residential
and commercial doors. Our employees are a dedicated team committed to
providing the highest value door products to our customers in more than 70
countries around the world.

    This press release and other written reports and oral statements made by
the Company may include forward-looking statements, all of which are subject
to risks and uncertainties. One can identify these forward-looking statements
by their use of words such as "may", "might", "expects", "plans", "would",
"estimates", "intends", "forecasts", "projects" and other words of similar
meaning, or by the fact that they do not relate strictly to historical or
current facts. These statements are likely to address, but may not be limited
to, the Company's growth strategy and financial results, the Company's
operations and the conditions in its industry. Readers must carefully consider
any such statements and should understand that many factors could cause actual
results and developments to differ materially from the Company's
forward-looking statements. These factors may include inaccurate assumptions
and a broad variety of other known and unknown risks and uncertainties,
including: general economic, market and business conditions; levels of
construction and renovation activity; competition; financing risks; ability to
manage expanding operations; commitments; new services; retention of key
management personnel; environmental and other government regulation; and other
factors disclosed by the Company in its filings from time to time with the
United States Securities and Exchange Commission. No forward-looking statement
can be guaranteed and actual future results may vary materially. Therefore, we
caution you not to place undue reliance on our forward-looking statements. The
Company disclaims any responsibility to update these forward-looking
statements, whether as a result of new information, future events or
otherwise.

    This press release contains non-GAAP measures. In this press release
Operating EBITDA is defined as earnings before depreciation and amortization;
other expense; interest; income taxes; and non-controlling interest. Adjusted
EBITDA is defined as Operating EBITDA further adjusted pursuant to the terms
of the Company's credit agreement. Adjusted EBITDA margin is defined as
Adjusted EBITDA divided by net sales. Net debt is defined as the sum of
long-term debt, current portion of long-term debt and bank indebtedness, less
cash and cash equivalents. These terms are not presentations made under GAAP
and are not measures of financial condition or profitability, should not be
considered as an alternative to GAAP financial measures, and are unlikely to
be comparable to similar measures used by other companies.

    Certain figures have been reclassified to conform to the current period
basis of presentation.

    
    UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
    For the Period Ended September 30
    (In millions of U.S. dollars)

                                          Three Month      Nine Month
                                             Period           Period
                                         -------------- ------------------
                                          2007   2006      2007     2006
    ----------------------------------------------------------------------


    Sales                                $529.3 $622.4  $1,687.7 $1,879.5

    Cost of sales                         408.1  481.4   1,297.6  1,486.9
    ----------------------------------------------------------------------

                                          121.2  141.0     390.1    392.6

    Selling, general and administration
     expenses (1)                          50.4   49.6     157.1    159.2
    ----------------------------------------------------------------------

                                           70.8   91.5     233.0    233.4

    Depreciation and amortization          30.4   30.8      94.8     92.0
    ----------------------------------------------------------------------

    Income before other expense,
     interest and income taxes             40.4   60.7     138.2    141.4

    Other expense, net                      9.2    9.5      21.6     16.6

    Interest                               44.3   46.4     134.1    137.2
    ----------------------------------------------------------------------

                                          (13.1)   4.8     (17.5)   (12.5)

    Income taxes (recovery)                (2.4)   4.9     (12.4)    (4.8)
    ----------------------------------------------------------------------

                                          (10.8)  (0.1)     (5.1)    (7.7)

    Non-controlling interest                2.0    1.6       5.3      5.6
    ----------------------------------------------------------------------

    Net income (loss)                    $(12.8)$ (1.7) $  (10.4)$  (13.2)
    ----------------------------------------------------------------------


    Adjusted EBITDA Reconciliation:
    ----------------------------------------------------------------------

    Net income (loss)                    $(12.8)$ (1.7) $  (10.4)$  (13.2)
    Interest                               44.3   46.4     134.1    137.2
    Income taxes (recovery)                (2.4)   4.9     (12.4)    (4.8)
    Depreciation and amortization          30.4   30.8      94.8     92.0
    Other expense, net                      9.3    9.5      21.6     16.6
    Non-controlling interest                2.0    1.6       5.3      5.6
    ----------------------------------------------------------------------
         Operating EBITDA                  70.8   91.5     233.0    233.4

    Inventory write-down                    0.6      -       0.6      9.0
    Receivables transaction charges         1.0    1.9       4.4      5.9
    Facility closures / realignments          -      -         -      1.9
    Stock based compensation                0.5   (0.7)      1.8      1.2
    Franchise and capital taxes             1.2    0.7       2.6      1.9
    Foreign exchange (gains)               (0.8)  (0.6)     (2.5)    (0.6)
    Employee future benefits                0.5    0.2       0.8      0.5
    Recruiting and relocation               1.4      -       1.4        -
    Unusual and non-recurring               4.0      -       4.0        -
    Other                                   1.0    0.5       3.4      3.5
    ----------------------------------------------------------------------
         Adjusted EBITDA                 $ 80.1 $ 93.4  $  249.4 $  256.8
    ----------------------------------------------------------------------

         Adjusted EBITDA Margin (1)        15.1%  15.0%     14.8%    13.7%
         LTM Adjusted EBITDA (2)                        $  325.2 $  326.2
    ----------------------------------------------------------------------

    (1) Calculated by dividing Adjusted EBITDA by Sales
    (2) Calculated by adding $249.4 million Adjusted EBITDA for first nine
     months of 2007 to $332.6 million Adjusted EBITDA for full year 2006
     and subtracting $256.8 million Adjusted EBITDA for first nine months
     of 2006
    

    
    UNAUDITED CONSOLIDATED BALANCE SHEETS
    (In millions of U.S. dollars)

                                                  September 30 December 31
                                                      2007        2006
    ----------------------------------------------------------------------

    ASSETS
       Cash and cash equivalents                    $   59.0     $   47.4
       Accounts receivable                             291.2        247.7
       Inventories                                     330.5        351.5
       Prepaid expenses                                 19.6         19.1
       Asset held for sale                               7.2            -
       Current future income taxes                      42.5         38.9
    ----------------------------------------------------------------------
                                                       750.0        704.6
    ---------------------------------------------------------- -----------

       Property, plant and equipment                   823.4        873.6
       Goodwill and other intangible assets          1,457.2      1,478.4
       Other assets                                     24.1         89.3
       Long-term future income taxes                    17.9         18.5
    ----------------------------------------------------------------------
                                                     2,322.6      2,459.9
    ----------------------------------------------------------------------

                                                    $3,072.6     $3,164.5
    ----------------------------------------------------------------------


    LIABILITIES AND SHAREHOLDER'S EQUITY
       Bank indebtedness                            $   16.6     $   60.4
       Accounts payable and accrued liabilities        378.8        343.7
       Income taxes payable                             25.8         26.9
       Current future income taxes                       1.2          1.6
       Current portion of long-term debt                22.2         32.2
    ----------------------------------------------------------------------
                                                       444.6        464.8

       Long-term debt (1)                            1,851.9      1,923.6
       Long-term future income taxes                   201.8        214.2
       Other long-term liabilities                      41.4         41.1
    ----------------------------------------------------------------------
                                                     2,539.6      2,643.7
    ----------------------------------------------------------------------

       Non-controlling interest                         40.6         36.8
    ----------------------------------------------------------------------

       Share capital                                   567.2        567.2
       Contributed surplus                               6.7          5.0
       Deficit                                        (114.5)      (104.1)
       Accumulated other comprehensive income           32.9         16.0
    ----------------------------------------------------------------------
                                                       492.3        484.0
    ----------------------------------------------------------------------

                                                    $3,072.6     $3,164.5
    ----------------------------------------------------------------------
    (1) Long-term debt is net of unamortized deferred financing fees of
     $63.7 million as at September 30, 2007
    

    
    UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
    For the Period Ended September 30
    (In millions of U.S. dollars)


                                              Three Month    Nine Month
                                                 Period         Period
                                             -------------- --------------
                                              2007   2006    2007   2006
    ----------------------------------------------------------------------


    Cash provided by (used in) operating
     activities
       Net income (loss) for the period      $(12.8)$ (1.7) $(10.4)$(13.2)
       Non-cash items                          35.2   40.9    93.9  101.3
       Accounts receivable                      1.6   28.8   (30.4) (24.2)
       Inventories                             (0.5) (11.2)   26.0    6.9
       Income taxes payable                    (4.4)   0.1    (3.7)  (3.2)
       Prepaid expenses                         2.8    1.6    (0.3)  (1.8)
       Accounts payable and accrued
        liabilities                            27.2   (1.9)   26.8   43.2
    ----------------------------------------------------------------------
                                               49.2   56.5   102.0  108.9
    ----------------------------------------------------------------------

    Cash provided by (used in) financing
     activities
       Increase (decrease) in bank and other
        indebtedness                          (50.6) (19.3)  (43.8) (43.6)
       Net repayment of long-term debt         (9.9) (13.9)  (18.6) (31.9)
       Other                                      -    0.3       -    0.2
    ----------------------------------------------------------------------
                                              (60.5) (32.9)  (62.4) (75.4)
    ----------------------------------------------------------------------

    Cash provided by (used in) investing
     activities
       Proceeds from sale of assets             0.6    6.4     0.8   20.2
       Additions to property, plant and
        equipment                              (6.5) (13.1)  (22.7) (35.3)
       Other investing activities              (3.8)  (5.1)  (10.7)  (9.3)
    ----------------------------------------------------------------------
                                               (9.6) (11.8)  (32.6) (24.4)
    ----------------------------------------------------------------------
    Net foreign currency translation
     adjustment                                 2.7    1.3     4.5    4.7
    ----------------------------------------------------------------------
    Increase in cash                          (18.1)  13.0    11.6   13.8

    Cash, beginning of period                  77.1   48.3    47.4   47.5
    ----------------------------------------------------------------------

    Cash, end of period                      $ 59.0 $ 61.3  $ 59.0 $ 61.3
    ----------------------------------------------------------------------
    




For further information:

For further information: Masonite International Inc., Mississauga Chris
Virostek, 905-670-6567

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