Masonite International Corporation Reports 2021 First Quarter Financial Results and Raises Annual Outlook

Rhea-AI Summary

Masonite International Corporation (NYSE: DOOR) reported impressive 1Q21 results with net sales rising by 17% to $646 million, up from $551 million in 1Q20. Net income surged to $47 million, compared to $30 million the previous year, leading to diluted earnings per share of $1.89, up from $1.19. Adjusted EBITDA also increased to $102 million from $82 million. The company repurchased 84,983 shares for approximately $10 million. CEO Howard Heckes credited strong residential demand and strategic pricing actions for exceeding financial expectations amidst inflationary pressures.

Positive

• Net sales increased 17% to $646 million.
• Net income rose to $47 million from $30 million.
• Diluted EPS improved to $1.89 from $1.19.
• Adjusted EPS increased to $1.93 from $1.24.
• Adjusted EBITDA grew to $102 million from $82 million.
• Repurchased 84,983 shares for approximately $10 million.

Negative

• Mounting inflationary pressure on material costs and logistics.

Masonite International Corporation ("Masonite" or "the Company") (NYSE: DOOR) today announced results for the three months ended April 4, 2021.

Executive Summary - 1Q21 versus 1Q20

• Net sales increased 17% to $646 million versus $551 million.
• Net income attributable to Masonite increased to $47 million from $30 million.
• Diluted earnings per share increased to $1.89 from $1.19 per share and adjusted earnings per share* increased to $1.93 from $1.24.
• Adjusted EBITDA* increased to $102 million from $82 million.
• Repurchased 84,983 shares of Masonite stock in the first quarter for approximately $10 million.

“Strong residential end market demand set the backdrop for another exceptional quarter of financial performance,” said Howard Heckes, President and CEO. “These favorable market conditions, coupled with our previously implemented pricing actions, allowed us to exceed both our Net Sales and Adj. EBITDA* expectations. We achieved these results despite mounting inflationary pressure on both material costs and logistics. Our delivery of consistent financial results in this environment reinforces our belief in the organization’s ability to safely service customers and deliver our ambitious 2025 Centennial Plan^.”

*	See "Non-GAAP Financial Measures and Related Information" for definition and reconciliation of non-GAAP measures.
^	The Company’s 2025 Centennial Plan is a forward-looking statement and subject to risks and uncertainties. See "Forward-looking Statements”

First Quarter 2021 Discussion
Net sales were $646 million in the first quarter of 2021, a 17% increase from $551 million in the comparable period of 2020. The increase in net sales was the result of a 14% increase in average unit price (AUP), a 2% increase due to favorable foreign exchange and a 1% increase in the sale of components and other products.

• North American Residential net sales were $477 million, a 24% increase compared to the first quarter of 2020, driven by a 17% increase in AUP, a 5% increase in base volume, a 1% increase due to favorable foreign exchange and a 1% increase in the sale of components and other products.
• Europe net sales were $89 million, a 25% increase compared to the first quarter of 2020, driven by a 9% increase due to favorable foreign exchange, a 7% increase in AUP, a 7% increase in base volume and a 2% increase in the sale of components and other products.
• Architectural net sales were $75 million, an 18% decrease compared to the first quarter of 2020, driven by a 22% decrease in base volume and a 2% decrease in the sale of components and other products, partially offset by a 5% increase in AUP and a 1% increase due to favorable foreign exchange.

Total company gross profit was $159 million in the first quarter of 2021, an increase of 18% compared to $134 million in the first quarter of 2020. Gross profit margin increased 10 basis points to 24.5%, due to higher AUP, partially offset by the impact of higher inflation and tariffs on raw materials, rising logistics costs, higher manufacturing wages and benefits and increased investment in the business.

Selling, general and administration (SG&A) expenses were $84 million in the first quarter of 2021, an increase of 4% compared to $80 million in the first quarter of 2020. The increase in SG&A was primarily due to higher personnel costs, which includes resources to support growth and incentive compensation. SG&A as a percentage of net sales was 12.9%, a 170 basis point decrease compared to the first quarter of 2020.

Net income attributable to Masonite was $47 million in the first quarter of 2021, an increase of 57% compared to $30 million in the first quarter of 2020, The increase was primarily driven by higher gross profit, partially offset by higher SG&A expenses, each as discussed above. Adjusted EBITDA* of $102 million in the first quarter of 2021 increased 25% from $82 million in the first quarter of 2020.

Diluted earnings per share were $1.89 in the first quarter of 2021 compared to $1.19 in the comparable 2020 period. Diluted adjusted earnings per share* were $1.93 in the first quarter of 2021 compared to $1.24 in the comparable 2020 period. Diluted adjusted earnings per share* excludes $1 million in charges related to our previously announced restructuring plans incurred in the first quarter of 2021, and the impact of $1 million in charges related to restructuring in the first quarter of 2020.

Updated 2021 Outlook
The Company now expects full-year 2021 net sales growth in the range of 12 to 15 percent, reflecting both robust residential demand and the expectation that current foreign exchange tailwinds may continue throughout the year.

The Company now expects 2021 Adjusted EBITDA* to be in the range of $435 million to $455 million and diluted adjusted earnings per share* of $8.00 to $8.60.

“Based on the continued strength of our residential end markets, favorable foreign exchange, and actions we are taking to offset inflation, we have raised our outlook accordingly," Mr. Heckes continued. "While inflation presents a near term challenge, we continue to expect strong full year margin growth and we believe 2021 will be an exceptional year overall for Masonite's growth and our commitment of delivering Doors That Do More^TM."

A quantitative reconciliation of Adjusted EBITDA* and diluted adjusted earnings per share* to the corresponding GAAP information is not provided for the 2021 outlook because it is difficult to predict the GAAP measures that are excluded from Adjusted EBITDA* such as restructuring costs, asset impairments, share based compensation expense and gains/losses on sales of subsidiaries and PP&E.

Masonite Earnings Conference Call
The Company will hold a live conference call and webcast on May 5, 2021. The live audio webcast will begin at 9:00 a.m. EDT and can be accessed, together with the presentation, on the Masonite website www.masonite.com. The webcast can be directly accessed at: Q1'21 Earnings Webcast.

Telephone access to the live call will be available at 877-407-8289 (in the U.S.) or by dialing 201-689-8341 (outside the U.S.).

A telephone replay will be available approximately one hour following completion of the call through May 19, 2021. To access the replay, please dial 877-660-6853 (in the U.S.) or 201-612-7415 (outside U.S.). Enter Conference ID #13718196.

About Masonite
Masonite International Corporation is a leading global designer, manufacturer, marketer and distributor of interior and exterior doors for the new construction and repair, renovation and remodeling sectors of the residential and 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 7,600 customers in 60 countries. Additional information about Masonite can be found at www.masonite.com.

* 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 discussion of our 2021 outlook and 2025 Centennial Plan, the housing and other markets and future demand, the effects of our strategic and restructuring initiatives, new products, impact of the COVID-19 pandemic, and the impact from foreign exchange on net sales. 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, 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 customer concentration and consolidation; our ability to accurately anticipate demand for our products including seasonality; scale and scope of the coronavirus ("COVID-19") pandemic and its impact on our operations, customer demand and supply chain; increases in prices of raw materials and fuel; tariffs and evolving trade policy and friction between the United States and other countries, including China, and the impact of anti-dumping and countervailing duties; 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 potential disruptions, manufacturing realignments (including related restructuring charges) and customer credit risk; product liability claims and product recalls; 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 asset-based revolving credit facility (ABL Facility); 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; fluctuating foreign exchange and interest rates; our ability to replace expiring patents and to innovate, keep pace with technological developments and successfully integrate acquisitions; the continuous operation of our information technology and enterprise resource planning systems and management of potential cyber security threats and attacks; political, economic and other risks that arise from operating a multinational business; uncertainty relating to the United Kingdom's exit from the European Union; retention of key management personnel; and environmental and other government regulations, including the United States Foreign Corrupt Practices Act ("FCPA"), and any changes in such regulations. For a more detailed discussion of these factors, see the information under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Forward Looking Statements” in our most recent annual report on Form 10-K filed with the SEC on February 25, 2021, in each case as updated by our subsequent filings with the SEC.

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); other items; loss (income) from discontinued operations, net of tax; and net income (loss) attributable to non-controlling interest. The definition of Adjusted EBITDA was updated in the third quarter of 2020 to exclude other items as these charges are not part of our underlying business performance. This change had no impact to Adjusted EBITDA for the three months ended March 29, 2020. 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.

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

Adjusted EBITDA margin is defined as Adjusted EBITDA divided by Net Sales. Management believes this measure provides supplemental information on how successfully we operate our business.

Adjusted EPS is diluted earnings per common share attributable to Masonite (EPS) less restructuring costs, asset impairment charges, loss (gain) on disposal of subsidiaries, loss on extinguishment of debt and other items, if any, that do not relate to Masonite’s underlying business performance (each net of related tax expense (benefit)). Management uses this measure to evaluate the overall performance of the Company and believes this measure provides investors with helpful supplemental information regarding the underlying performance of the Company from period to period. This measure may be inconsistent with similar measures presented by other companies.

Certain amounts in the Condensed Consolidated Financial Statements and associated tables may not foot due to rounding. All percentages have been calculated using unrounded amounts.

MASONITE INTERNATIONAL CORPORATION SALES RECONCILIATION AND ADJUSTED EBITDA BY REPORTABLE SEGMENT (In millions of U.S. dollars) (Unaudited)
	North American Residential				Europe				Architectural				Corporate and Other				Total				% Change
First quarter 2020 net sales	$	383.9			$	70.7			$	91.2			$	5.4			$	551.2
Base volume		17.3				4.9				(19.7	)			(0.6	)			1.9			0.3	%
Average unit price		66.9				5.0				4.4				—				76.3			13.8	%
Other		4.0				1.5				(1.4	)			1.5				5.6			1.0	%
Foreign exchange		4.4				6.4				0.5				—				11.3			2.1	%
First quarter 2021 net sales	$	476.5			$	88.5			$	75.0			$	6.3			$	646.3
Year over year growth, net sales		24.1	%			25.2	%			(17.8	)%			16.7	%			17.3	%
First quarter 2020 Adjusted EBITDA	$	71.7			$	9.7			$	10.6			$	(10.4	)		$	81.5
First quarter 2021 Adjusted EBITDA		94.5				16.8				2.0				(11.2	)			102.0
Year over year growth, Adjusted EBITDA		31.8	%			73.2	%			(81.1	)%			nm				25.2	%

MASONITE INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands of U.S. dollars, except share and per share amounts) (Unaudited)
	Three Months Ended
	April 4, 2021				March 29, 2020
Net sales	$	646,337			$	551,228
Cost of goods sold		487,699				416,947
Gross profit		158,638				134,281
Gross profit as a % of net sales		24.5	%			24.4	%
Selling, general and administration expenses		83,631				80,333
Selling, general and administration expenses as a % of net sales		12.9	%			14.6	%
Restructuring costs		1,643				1,941
Operating income		73,364				52,007
Interest expense, net		11,946				11,282
Other (income) expense, net		(1,343	)			49
Income before income tax expense		62,761				40,676
Income tax expense		14,613				9,639
Net income		48,148				31,037
Less: net income attributable to non-controlling interests		1,167				1,152
Net income attributable to Masonite	$	46,981			$	29,885
Basic earnings per common share attributable to Masonite	$	1.92			$	1.20
Diluted earnings per common share attributable to Masonite	$	1.89			$	1.19
Shares used in computing basic earnings per share		24,469,653				24,861,442
Shares used in computing diluted earnings per share		24,918,509				25,214,764

MASONITE INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of U.S. dollars, except share amounts) (Unaudited)
ASSETS	April 4, 2021				January 3, 2021
Current assets:
Cash and cash equivalents	$	323,198			$	364,674
Restricted cash		10,560				10,560
Accounts receivable, net		365,396				290,508
Inventories, net		267,230				260,962
Prepaid expenses and other assets		37,497				42,538
Income taxes receivable		5,498				1,124
Total current assets		1,009,379				970,366
Property, plant and equipment, net		616,872				625,126
Operating lease right-of-use assets		152,881				146,806
Investment in equity investees		14,923				14,636
Goodwill		139,728				138,692
Intangible assets, net		165,620				169,392
Deferred income taxes		20,448				25,331
Other assets		50,801				47,411
Total assets	$	2,170,652			$	2,137,760
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	114,259			$	97,211
Accrued expenses		250,058				277,716
Income taxes payable		4,395				11,086
Total current liabilities		368,712				386,013
Long-term debt		791,628				792,242
Long-term operating lease liabilities		140,642				136,235
Deferred income taxes		77,967				73,073
Other liabilities		54,550				55,080
Total liabilities		1,433,499				1,442,643
Commitments and Contingencies
Equity:
Share capital: unlimited shares authorized, no par value, 24,500,706 and 24,422,934 shares issued and outstanding as of April 4, 2021, and January 3, 2021, respectively		561,776				552,969
Additional paid-in capital		214,689				223,666
Accumulated earnings		59,712				20,385
Accumulated other comprehensive loss		(109,726	)			(112,063	)
Total equity attributable to Masonite		726,451				684,957
Equity attributable to non-controlling interests		10,702				10,160
Total equity		737,153				695,117
Total liabilities and equity	$	2,170,652			$	2,137,760

MASONITE INTERNATIONAL CORPORATION RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES (In thousands of U.S. dollars, except share and per share amounts) (Unaudited)
	Three Months Ended
(In thousands)	April 4, 2021				March 29, 2020
Net income attributable to Masonite	$	46,981			$	29,885
Add: Adjustments to net income attributable to Masonite:
Restructuring costs		1,643				1,941
Income tax impact of adjustments		(436	)			(508	)
Adjusted net income attributable to Masonite	$	48,188			$	31,318
Diluted earnings per common share attributable to Masonite ("EPS")	$	1.89			$	1.19
Diluted adjusted earnings per common share attributable to Masonite ("Adjusted EPS")	$	1.93			$	1.24
Shares used in computing EPS and Adjusted EPS		24,918,509				25,214,764

The weighted average number of shares outstanding utilized for the diluted EPS and diluted Adjusted EPS calculation contemplates the exercise of all currently outstanding SARs and the conversion of all RSUs. The dilutive effect of such equity awards is calculated based on the weighted average share price for each fiscal period using the treasury stock method. For all periods presented, common shares issuable for stock instruments which would have had an anti-dilutive impact under the treasury stock method have been excluded from the computation of diluted earnings per share.

	Three Months Ended April 4, 2021
(In thousands)	North American Residential				Europe				Architectural				Corporate & Other				Total
Net income (loss) attributable to Masonite	$	83,973			$	11,408			$	(3,813	)		$	(44,587	)		$	46,981
Plus:
Depreciation		9,511				2,585				2,663				3,520				18,279
Amortization		415				2,885				1,142				476				4,918
Share based compensation expense		—				—				—				4,418				4,418
Loss (gain) on disposal of property, plant and equipment		88				(4	)			149				(830	)			(597	)
Restructuring costs		(361	)			—				1,853				151				1,643
Interest expense, net		—				—				—				11,946				11,946
Other (income) expense, net		—				(119	)			—				(1,224	)			(1,343	)
Income tax expense		—				—				—				14,613				14,613
Net income attributable to non-controlling interest		856				—				—				311				1,167
Adjusted EBITDA	$	94,482			$	16,755			$	1,994			$	(11,206	)		$	102,025

	Three Months Ended March 29, 2020
(In thousands)	North American Residential			Europe				Architectural			Corporate & Other				Total
Net income (loss) attributable to Masonite	$	58,811		$	3,483			$	4,580		$	(36,989	)		$	29,885
Plus:
Depreciation		9,364			2,457				2,822			1,375				16,018
Amortization		595			3,562				1,922			380				6,459
Share based compensation expense		—			—				—			3,470				3,470
Loss on disposal of property, plant and equipment		1,204			3				396			19				1,622
Restructuring costs		849			(37	)			862			267				1,941
Interest expense, net		—			—				—			11,282				11,282
Other expense (income), net		—			211				—			(162	)			49
Income tax expense		—			—				—			9,639				9,639
Net income attributable to non-controlling interest		873			—				—			279				1,152
Adjusted EBITDA	$	71,696		$	9,679			$	10,582		$	(10,440	)		$	81,517

 

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FAQ

What were Masonite's earnings for 1Q21?

Masonite reported net sales of $646 million and net income of $47 million for 1Q21.

How did Masonite's earnings per share change in 1Q21?

Diluted earnings per share rose to $1.89 from $1.19 in 1Q20.

What is Masonite's adjusted EBITDA for 1Q21?

Adjusted EBITDA for 1Q21 was $102 million, up from $82 million in the previous year.

Did Masonite repurchase any shares in 1Q21?

Yes, Masonite repurchased 84,983 shares for approximately $10 million during the first quarter.

What market conditions contributed to Masonite's 1Q21 results?

Strong residential end market demand and effective pricing strategies contributed to the positive results in 1Q21.