Masonite International Inc. Announces Second Quarter 2007 Results



    MISSISSAUGA, ONTARIO, August 9 /CNW/ - Masonite International Inc.:

    Second Quarter Highlights

    --  Net sales declined 10.4% to $588.9 million from $657.5 million in the
second quarter of 2006

    --  Operating EBITDA increased 11.0% to $88.6 million from $79.9 million

    --  Adjusted EBITDA declined 3.3% to $91.9 million from $95.0 million

    --  Adjusted EBITDA margin increased to 15.6% from 14.4%

    --  Net debt decreased $9.1 million to $1,937.2 million on June 30, 2007
from $1,946.3 million on March 31, 2007

    Six Month Highlights

    --  Net sales declined 7.9% to $1,158.3 million from $1,257.1 million in
the first half of 2006

    --  Operating EBITDA increased 14.3% to $162.2 million from $141.9
million

    --  Adjusted EBITDA increased 3.6% to $169.3 million from $163.3 million

    --  Adjusted EBITDA margin increased to 14.6% from 13.0%

    --  Net debt decreased $31.6 million to $1,937.2 million on June 30, 2007
from $1,968.8 million on December 31, 2006

    Masonite International Inc. today announced second quarter 2007 net sales
of $588.9 million, a decline of 10.4% compared to net sales of $657.5 million
in the second quarter of 2006. Operating EBITDA increased 11.0% to $88.6
million from $79.9 million in the second quarter of 2006. Adjusted EBITDA,
calculated pursuant to the Company's credit agreement, declined 3.3% to $91.9
million in the second quarter of 2007, compared to $95.0 million in the prior
year period. As described in the attached reconciliation, second quarter 2007
Adjusted EBITDA includes $3.3 million of net adjustments, while Adjusted
EBITDA in the second quarter of 2006 includes $15.1 million of such
adjustments, including a $9.0 million non-cash inventory write down that
reduced Operating EBITDA.

    "Ongoing operational improvements and reductions in spending and
manufacturing capacity yielded solid margins and cash flow during the second
quarter," said Frederick Lynch, President and Chief Executive Officer of
Masonite. "We are successfully addressing the challenges created by
increasingly difficult market conditions in North America, and the loss of
significant business with The Home Depot."

    The previously announced transition of business from Masonite by The Home
Depot in the Midwest and Northeast regions was substantially concluded during
the second quarter of 2007. "We responded aggressively to reduce costs
associated with this loss of business by implementing a plan to close five
manufacturing facilities dedicated to The Home Depot and one multi-purpose
interior door manufacturing facility," said Mr. Lynch. The business not
related to The Home Depot at the multi-purpose facility was transferred to
other facilities within Masonite. The Company recorded a restructuring charge
of $8.9 million in the second quarter of 2007 in connection with this
transition as well as a non-cash asset impairment charge of $2.6 million
associated with redundant assets scheduled for disposal as part of the
transition. Other restructuring actions resulted in an additional charge of
$1.7 million in the quarter.

    In the second quarter of 2007, Masonite reduced net debt (consolidated
debt net of cash and cash equivalents) by $9.1 million to $1,937.2 million on
June 30, 2007 from $1,946.3 million on March 31, 2007. Excluded from the net
debt balances is $93.3 million outstanding on the Company's accounts
receivable sales facility.

    Sales in the North American segment decreased 17.7% to $424.7 million in
the second quarter of 2007 from $515.9 million in the second quarter of 2006.
Sales to customers from facilities outside of North America, primarily in
Western Europe, increased approximately 16.0% to $164.2 million in the second
quarter of 2007 from $141.7 million in the prior year period. Favorable
foreign currency movements provided a $12.1 million positive impact on
comparative consolidated sales and also had a favorable impact on margins in
the period.

    Other expense of $10.5 million in the second quarter of 2007 included the
restructuring charges noted above offset by favorable non-cash foreign
currency adjustments. This compares to $5.0 million of Other expense in the
second quarter of 2006, which reflected the closure of two manufacturing sites
and charges for changes in senior management during that period.

    For the six months ended June 30, 2007 net sales were $1,158.3 million, a
decline of 7.9% compared to net sales of $1,257.1 million in the first half of
2006. Operating EBITDA increased 14.3% to $162.2 million from $141.9 million
(net of the above noted $9 million inventory write down) in the first six
months of 2006. Adjusted EBITDA, calculated pursuant to the Company's credit
agreement, increased 3.6% to $169.3 million in the first six months of 2007,
compared to $163.3 million in the prior year period. First half 2007 Adjusted
EBITDA includes $7.1 million of net adjustments, while Adjusted EBITDA in the
first half of 2006 includes $21.4 million of such adjustments, as described in
the attached reconciliation.

    During the first six months of 2007, Masonite reduced net debt
(consolidated debt net of cash and cash equivalents) by $31.6 million to
$1,937.2 million on June 30, 2007 from $1,968.8 million on December 31, 2006.
This compares to a decrease of net debt of $42.7 million in the first six
months of 2006.

    Sales in the North American segment decreased 14.9% to $836.5 million in
the first six months of 2007 from $983.3 million in the first six months of
2006. Sales to customers from facilities outside of North America, primarily
in Western Europe, increased approximately 17.5% to $321.8 million in the
first half of 2007 from $273.8 million in the prior year period. Favorable
foreign currency movements provided a $21.7 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 $12.3 million, including
restructuring charges related to the transition of business of approximately
$9.4 million, charges for other restructuring actions of $2.2 million and
non-cash asset impairment of $2.6 million, offset by favorable non-cash
foreign currency adjustments. This compares to $7.1 million of Other expense
in the first half of 2006, composed primarily of charges for the closure of
two manufacturing sites, changes in senior management and losses on disposal
of fixed assets during that period.

    In addition to the $9.4 million restructuring charge already recorded in
2007 in connection with the site closures related to business lost with The
Home Depot, the Company expects to record an additional charge in the range of
$7 million to $8.5 million in the third quarter associated with the completion
of this transition.

    For the latest twelve months ended June 30, 2007, Adjusted EBITDA
declined to $338.5 million from $341.7 million for the twelve months ended
March 31, 2007. The Company's net debt to Adjusted EBITDA ratio was 5.76x at
June 30, 2007 compared to 5.74x at March 31, 2007, versus a covenant maximum
of 7.40x. (As at June 30, 2007, $14.1 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 June 30, 2007 was $172.0 million, and the Company's
cash interest coverage ratio (Adjusted EBITDA divided by cash interest
expense) was 1.97x at June 30, 2007 compared to 1.97x at March 31, 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 June 30, 2007
are presented in the following unaudited financial statements net of
unamortized deferred financing costs of $66.2 million at June 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 Daylight Time today. Dial in information is as follows:

    
    USA Toll Free Number: (888-455-3751)
    USA Toll Number: (+1-773-681-5784)
    Passcode: MASONITE
    

    A replay of the call will be available through September 9, 2007 by
calling:

    
    USA Toll Free Number: (800) 231-7809
    USA Toll Number: (+1-402-220-9686)
    Passcode: (1809)
    

    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
    Three Month Period Ended June 30, 2007
    (In millions of U.S. dollars)

                                                             2007   2006
    ----------------------------------------------------------------------


    Sales                                                   $588.9 $657.5

    Cost of sales                                            447.1  523.7
    ----------------------------------------------------------------------

                                                             141.9  133.9

    Selling, general and administration expenses (1)          53.2   54.0
    ----------------------------------------------------------------------

                                                              88.6   79.9

    Depreciation and amortization                             32.9   31.0
    ----------------------------------------------------------------------

    Income before other expense, interest and income taxes    55.8   48.9

    Other expense, net                                        10.5    5.0

    Interest (1)                                              45.0   46.1
    ----------------------------------------------------------------------

                                                               0.3   (2.2)

    Income taxes (recovery)                                   (7.3)  (3.6)
    ----------------------------------------------------------------------

                                                               7.6    1.3

    Non-controlling interest                                   2.1    2.2
    ----------------------------------------------------------------------

    Net income (loss)                                       $  5.4 $ (0.8)
    ----------------------------------------------------------------------


    Adjusted EBITDA Reconciliation:                          2007   2006
    ----------------------------------------------------------------------

    Net income (loss)                                       $  5.4 $ (0.8)
    Interest                                                  45.0   46.1
    Income taxes (recovery)                                   (7.3)  (3.6)
    Depreciation and amortization                             32.9   31.0
    Other expense, net                                        10.5    5.0
    Non-controlling interest                                   2.1    2.2
    ----------------------------------------------------------------------
       Operating EBITDA                                       88.6   79.9

    Inventory write-down                                         -    9.0
    Receivables transaction charges                            1.8    2.0
    Stock based compensation                                   0.5    0.9
    Franchise and capital taxes                                0.7    0.5
    Foreign exchange (gains)                                  (1.2)   0.6
    Employee future benefits                                     -    0.2
    Other                                                      1.4    1.8
    ----------------------------------------------------------------------
       Adjusted EBITDA                                      $ 91.9 $ 95.0
    ----------------------------------------------------------------------

       Adjusted EBITDA Margin (2)                             15.6%  14.4%


    (1) Receivables transactions charges were reclassified from Interest
     expense to Selling, general and administration expenses.
    (2) Calculated by dividing Adjusted EBITDA by Sales
    

    
    UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
    Six Month Period Ended June 30, 2007
    (In millions of U.S. dollars)

                                                          2007     2006
    ----------------------------------------------------------------------


    Sales                                               $1,158.3 $1,257.1

    Cost of sales                                          889.5  1,005.6
    ----------------------------------------------------------------------

                                                           268.8    251.6

    Selling, general and administration expenses (1)       106.7    109.7
    ----------------------------------------------------------------------

                                                           162.2    141.9

    Depreciation and amortization                           64.4     61.2
    ----------------------------------------------------------------------

    Income before other expense, interest and income
     taxes                                                  97.8     80.7

    Other expense, net                                      12.3      7.1

    Interest (1)                                            89.8     90.9
    ----------------------------------------------------------------------

                                                            (4.4)   (17.2)

    Income taxes (recovery)                                (10.0)    (9.7)
    ----------------------------------------------------------------------

                                                             5.7     (7.6)

    Non-controlling interest                                 3.3      4.0
    ----------------------------------------------------------------------

    Net income (loss)                                   $    2.4 $  (11.5)
    ----------------------------------------------------------------------


    Adjusted EBITDA Reconciliation:                       2007     2006
    ----------------------------------------------------------------------

    Net income (loss)                                   $    2.4 $  (11.5)
    Interest                                                89.8     90.9
    Income taxes (recovery)                                (10.0)    (9.7)
    Depreciation and amortization                           64.4     61.2
    Other expense, net                                      12.3      7.1
    Non-controlling interest                                 3.3      4.0
    ----------------------------------------------------------------------
                   Operating EBITDA                        162.2    141.9

    Inventory write-down                                       -      9.0
    Receivables transaction charges                          3.4      4.0
    Facility closures / realignments                           -      1.9
    Stock based compensation                                 1.3      1.9
    Franchise and capital taxes                              1.4      1.2
    Foreign exchange (gains)                                (1.7)     0.1
    Employee future benefits                                 0.3      0.4
    Other                                                    2.4      3.0
    ----------------------------------------------------------------------
                   Adjusted EBITDA                      $  169.3 $  163.3
    ----------------------------------------------------------------------

                   Adjusted EBITDA Margin (2)               14.6%    13.0%
                   LTM Adjusted EBITDA (3)              $  338.5 $  310.4
    ----------------------------------------------------------------------

    (1) Receivables transactions charges were reclassified from Interest
     expense to Selling, general and administration expenses.
    (2) Calculated by dividing Adjusted EBITDA by Sales
    (3) Calculated by adding $169.3 million Adjusted EBITDA for first six
     months of 2007 to $332.6 million Adjusted EBITDA for full year 2006
     and subtracting $163.3 million Adjusted EBITDA for first six months
     of 2006
    

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

                                                    June 30   December 31
                                                      2007       2006
    ----------------------------------------------------------------------

    ASSETS
          Cash and cash equivalents                     $77.1        $47.4
          Accounts receivable                           284.9        247.7
          Inventories                                   327.0        351.5
          Prepaid expenses                               22.3         19.1
          Current future income taxes                    41.7         38.9
    ----------------------------------------------------------------------
                                                        753.0        704.6
    ----------------------------------------------------------------------

          Property, plant and equipment                 842.0        873.6
          Goodwill and other intangible assets        1,462.2      1,478.4
          Other assets                                   36.2         89.3
          Long-term future income taxes                  16.7         18.5
    ----------------------------------------------------------------------
                                                      2,357.1      2,459.9
    ----------------------------------------------------------------------

                                                     $3,110.1     $3,164.5
    ----------------------------------------------------------------------




    LIABILITIES AND SHAREHOLDER'S EQUITY
          Bank indebtedness                             $67.2        $60.4
          Accounts payable and accrued liabilities      348.4        343.7
          Income taxes payable                           29.9         26.9
          Current future income taxes                     1.3          1.6
          Current portion of long-term debt              31.8         32.2
    ----------------------------------------------------------------------
                                                        478.7        464.8

          Long-term debt (1)                          1,849.0      1,923.6
          Long-term future income taxes                 204.7        214.2
          Other long-term liabilities                    38.7         41.1
    ----------------------------------------------------------------------
                                                      2,571.1      2,643.7
    ----------------------------------------------------------------------

          Non-controlling interest                       39.5         36.8
    ----------------------------------------------------------------------

          Share capital                                 567.2        567.2
          Contributed surplus                             6.3          5.0
          Deficit                                     (101.7)      (104.1)
          Accumulated other comprehensive income         27.7         16.0
    ----------------------------------------------------------------------
                                                        499.4        484.0
    ----------------------------------------------------------------------

                                                     $3,110.1     $3,164.5
    ----------------------------------------------------------------------

    (1) Long-term debt is net of unamortized deferred financing fees of
     $66.2 million as at June 30, 2007
    

    
    UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
    Three Month Period Ended June 30, 2007
    (In millions of U.S. dollars)

                                                             2007   2006
    ----------------------------------------------------------------------


    Cash provided by (used in) operating activities
     Net income (loss) for the period                       $  5.4 $ (0.8)
     Non-cash items                                           27.1   31.9
     Accounts receivable                                      (3.1) (23.6)
     Inventories                                              10.7   10.5
     Income taxes payable                                     (0.5)  (2.1)
     Prepaid expenses                                          0.7   (2.1)
     Accounts payable and accrued liabilities                (22.6)  39.5
    ----------------------------------------------------------------------
                                                              17.6   53.2
    ----------------------------------------------------------------------

    Cash provided by (used in) financing activities
     Increase (decrease) in bank and other indebtedness       29.3  (37.3)
     Net repayment of long-term debt                          (4.5) (10.3)
     Other                                                       -   (0.5)
    ----------------------------------------------------------------------
                                                              24.8  (48.1)
    ----------------------------------------------------------------------

    Cash provided by (used in) investing activities
     Proceeds from sale of assets                              0.1    9.7
     Additions to property, plant and equipment               (7.3) (10.9)
     Other investing activities                               (3.9)  (1.1)
    ----------------------------------------------------------------------
                                                             (11.1)  (2.2)
    ----------------------------------------------------------------------
    Net foreign currency translation adjustment                2.7    6.7
    ----------------------------------------------------------------------
    Increase in cash                                          33.9    9.6

    Cash, beginning of period                                 43.2   38.7
    ----------------------------------------------------------------------

    Cash, end of period                                     $ 77.1 $ 48.3
    ----------------------------------------------------------------------
    

    
    UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
    Six Month Period Ended June 30, 2007
    (In millions of U.S. dollars)

                                                             2007   2006
    ----------------------------------------------------------------------


    Cash provided by (used in) operating activities
     Net income (loss) for the period                       $  2.4 $(11.5)
     Non-cash items                                           58.7   60.4
     Accounts receivable                                     (32.0) (53.0)
     Inventories                                              26.5   18.1
     Income taxes payable                                      0.7   (3.3)
     Prepaid expenses                                         (3.1)  (3.4)
     Accounts payable and accrued liabilities                 (0.4)  45.1
    ----------------------------------------------------------------------
                                                              52.8   52.4
    ----------------------------------------------------------------------

    Cash provided by (used in) financing activities
     Increase (decrease) in bank and other indebtedness        6.8  (24.3)
     Net repayment of long-term debt                          (8.7) (18.0)
     Other                                                       -   (0.1)
    ----------------------------------------------------------------------
                                                              (1.9) (42.5)
    ----------------------------------------------------------------------

    Cash provided by (used in) investing activities
     Proceeds from sale of assets                              0.2   13.8
     Additions to property, plant and equipment              (16.2) (22.2)
     Other investing activities                               (6.9)  (4.1)
    ----------------------------------------------------------------------
                                                             (23.0) (12.5)
    ----------------------------------------------------------------------
    Net foreign currency translation adjustment                1.8    3.4
    ----------------------------------------------------------------------
    Increase in cash                                          29.7    0.8

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

    Cash, end of period                                     $ 77.1 $ 48.3
    ----------------------------------------------------------------------
    




For further information:

For further information: Masonite International Inc., Mississauga
Frederick Arnold, 813-739-3000

Organization Profile

MASONITE INTERNATIONAL INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890