Press Releases

11.08.11Masonite International Corporation Reports Third Quarter and Year To Date Results

Tampa, FL, November 11, 2011 – Masonite International Corporation today announced results for the third quarter and nine months ended September 30, 2011

Net sales increased approximately 12.3% to $376.0 million in the third quarter of 2011, from $334.9 million in the third quarter of 2010. Excluding the favorable impact of foreign exchange, net sales were up 9.2%. Operating EBITDA¹ increased to $19.3 million in the third quarter of 2011 from $12.0 million in the third quarter of 2010. Adjusted EBITDA¹ for the third quarter, which excludes share based compensation expense, increased to $20.7 million from $13.9 million in the third quarter of 2010.

For the nine months ended September 30, 2011, net sales increased approximately 5.7% from the prior year period to $1,105.4 million. Excluding the favorable impact of foreign exchange, net sales increased approximately 2.6% compared with the prior year. Operating EBITDA¹ decreased to $55.1 million in 2011, from $56.3 million in 2010. Adjusted EBITDA¹ for the nine months ended September 30, 2011, which excludes share based compensation expense, decreased to $59.7 million from $64.1 million in the nine months ended 2010.

"A great deal of uncertainty remains across the global macroeconomic landscape and several unique challenges continue to plague the housing market, but we successfully grew both net sales and Operating EBITDA during the third quarter behind the integration of Marshfield Door Systems, several key pricing actions implemented in response to escalating commodity costs and by reducing our global salaried workforce by nearly five percent in late September," said Fred Lynch, President and Chief Executive Officer. Mr. Lynch continued, "We are excited about the recently announced acquisition of Birchwood Best which positions Masonite as one of the largest vertically integrated commercial and architectural wood door manufacturers and provider of door components to other industry participants in North America."

Executive Summary

• Acquired Marshfield DoorSystems, a leading provider of doors and door components for commercial and architectural applications, in August 2011 with annual ongoing synergies expected at the high-end of the $3 to $5 million range previously communicated.
• Announced the November acquisition of Birchwood Best, the largest producer of commercial and architectural door veneers in the United States.
• Net sales increased 12.3% and 5.7% for third quarter and nine months ended, respectively, with help from the weakening U.S. dollar and acquisitions.
• Operating EBITDA1 was down 2.1% year-to-date and up 60.8% in the third quarter. Adjusted EBITDA1 was down 6.9% year-to-date and up 48.9% in the third quarter.
• Maintained a strong balance sheet with only $103.5 million of net debt as of September 30, 2011 and available liquidity of $286.1 million.
• Re-affirmed prior guidance indicating second half operating EBITDA should closely mirror first half results.
• Reduced global salaried workforce late in the third quarter by nearly five percent in anticipation of prolonged weakness in the global housing market.

Third Quarter Discussion
Net sales in North America increased 13.0% to $261.5 million in the third quarter of 2011, from $231.5 million in the third quarter of 2010. Excluding the impact of favorable foreign exchange, net sales in North America increased 11.2%. Results were primarily driven by incremental sales from acquisitions, as well as, favorable product pricing and mix in the third quarter of 2011, partially offset by lower unit volumes.

Net sales in Europe, Asia and Latin America increased 11.0% to $93.1 million in the third quarter of 2011, from $83.9 million in the third quarter of 2010. Excluding the $5.8 million impact of favorable foreign exchange, net sales increased 4.1%. The increase in net sales was the result of price increases, particularly in the United Kingdom, sales from component products, and incremental sales from last year's expansion into India, which were partially offset by lower unit volumes.

Total company gross profit increased to $45.1 million in the third quarter of 2011, from $39.3 million in the third quarter of 2010. Gross profit margin increased 30 basis points to 12.0% in the third quarter of 2011, from 11.7% in the third quarter of 2010, due primarily to previously announced pricing actions.

In the third quarter of 2011, selling, general and administrative expenses increased $0.9 million to $45.9 million, from $45.0 million in 2010. The increase included additional expenses of $1.4 million due to the consolidation of Marshfield. Net of Marshfield, the overall decrease in selling, general and administrative expenses was primarily driven by decreases of $1.4 million in professional fees. The decreases were partially offset by increases in losses on disposals of property, plant and equipment of $0.8 million and other miscellaneous increases of $0.1 million. Additionally within selling, general and administrative expenses, share based compensation expense decreased $0.5 million to $1.4 million in 2011 from $1.9 million in the third quarter of 2010, primarily as a result of the graded vesting of our outstanding equity awards.

Cash provided by operating activities in the third quarter of 2011 was $15.8 million, compared to $22.5 million, during the same period a year ago. The decrease in cash provided by operating activities was primarily due to changes in working capital, including accounts payable, inventory and accounts receivable. Cash used in investing activities increased to $113.5 million primarily due to the acquisition of Marshfield DoorSystems. Cash used in financing activities decreased to $1.3 million primarily due to decrease in distributions to non-controlling interests.

Acquisition of Birchwood Best
On November 1, 2011, Masonite completed the acquisition of Birchwood Best ("Birchwood"), paying $41.5 million for 100% of the capital stock, subject to customary working capital adjustments and indemnifications. Birchwood was founded in 1904 and is a leading provider of commercial and architectural wood flush door veneers; as well as a significant producer of hardwood plywood. Birchwood's 2010 revenue exceeded $40 million and they operate two facilities in Wisconsin that employ approximately 240 people.

Masonite Earnings Conference Call
Wednesday, November 9, 2011 Access the live audio webcast beginning at 10:00 a.m. ET at https://services.choruscall.com/links/masonite111109.html

A replay of the call will also be available through November 23, 2011 by dialing 1-877-344- 7529 or 1-412-317-0088 and entering passcode 10006118.

Masonite Financial Statements
The quarterly financial statements and management's discussion and analysis are located on the Masonite website under "About Masonite" then "Financials" or http://www.masonite.com/masonite_financial.php.

Forward-looking Statements

Masonite International Corporation is a leading global manufacturer of residential and commercial doors, committed to providing the highest value building products to customers in approximately 70 countries around the world. Additional information about Masonite can be found at www.masonite.com.

Forward-looking Statements

This document 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," "targets," "projects," and other words of similar meaning, or by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. All forward-looking statements in this document are qualified by these cautionary statements. These forward-looking statements are likely to address, but may not be limited to, the Company's 2011 financial results; the Company's 2011 financial targets and guidance; the Company's strategies relating to growth and cost containment; the Company's future operations; the Company's ability to effectively integrate Marshfield DoorSystems and Birchwood Best and achieve the intended benefits and synergies of the acquisition; political and economic stability especially in the geographic areas where the Company manufactures or sells its product; and improving global conditions in the door manufacturing and housing industries consistent with the Company's assumed levels of housing starts and RRR. Readers must carefully consider any such statements and should understand that such statements are based on management's current estimates and assumptions and are subject to many factors, risks and uncertainties which 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 publicly disclosed by the Company from time to time. 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, including its 2011 financial targets, whether as a result of new information, future events or otherwise unless required by applicable law.

Non-GAAP Financial Measures and Related Information

The Company reports its financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). The Company supplements its GAAP financial reporting with non-GAAP financial measures including Operating EBITDA and Adjusted EBITDA. The Company believes that these non-GAAP financial measures better enable management and investors to understand and analyze the Company’s performance by providing them with meaningful information relevant to events of unusual nature or frequency. However, this supplemental information should not be considered in isolation or as a substitute for the related GAAP measures and as this supplemental information does not have a standardized definition prescribed by GAAP it may, therefore, not be comparable to similar measures presented by other companies or competitors.

Operating EBITDA is defined as earnings before interest expense, net, income tax (benefit) expense, depreciation, amortization of intangible assets, bankruptcy reorganization costs, restructuring costs, loss (gain) on sale of fixed assets, impairment of fixed assets, impairment of goodwill and intangible assets, other (income) expense, net, share of (income) loss from equity investees, net of tax, loss from discontinued operations, net of tax, and net income attributable to non controlling interest. Adjusted EBITDA is defined as Operating EBITDA less share based compensation expense. The definitions of Operating EBITDA and Adjusted EBITDA reported herein may also differ from the definitions of similar terms under the Company’s outstanding debt instruments.