Masonite International Corporation Reports 2020 Third Quarter Financial Results

Masonite International Corporation (“Masonite” or “the Company”) announced results for the three and nine months ended September 27, 2020.

Executive Summary – 3Q20 versus 3Q19

– Net sales increased 6% to $588 million versus $552 million.

– Net income (loss) attributable to Masonite decreased to a $22 million loss from $15 million of income. The decrease was due to pre-tax charges of $52 million related to goodwill impairment and $38 million for the previously disclosed settlement of U.S. class action litigation.

– Diluted earnings fell to a loss of $0.89 per share compared to earnings of $0.59 per share. Adjusted earnings per share* on a fully diluted basis increased to $2.16 from $1.08.

– Adjusted EBITDA* increased to $109 million from $76 million.

“Our ability to successfully operate in this environment, coupled with strong average unit pricing and solid demand in our key end markets, allowed us to meaningfully grow net sales and Adjusted EBITDA* in the quarter,” said Howard Heckes, President and CEO. “Despite contending with continued uncertainty related to COVID-19, we experienced no significant operational shutdowns in the third quarter, allowing us to shift our focus to reinvesting in the business to better serve our customers.”

Third Quarter 2020 Discussion

Net sales increased 6% to $588 million in the third quarter of 2020, from $552 million in the comparable period of 2019. The increase in net sales was the result of a 9% increase in average unit price (AUP) and a 1% increase from the combined impact of the sale of components and other products and favorable foreign exchange, partially offset by a 3% decrease in base volume and a 1% decrease from the net impact of a divestiture and an acquisition.

– North American Residential net sales were $421 million, a 12% increase compared to the third quarter of 2019, driven by a 12% increase in AUP. An additional 1% increase from base volumes and the sale of components and other products was offset by a 1% decrease in foreign exchange.

– Europe net sales were $74 million, a 2% decrease compared to the third quarter of 2019, driven by a 6% decrease in sales volume from the net impact of a divestiture and an acquisition and a 2% decrease in base volume, partially offset by a 4% increase due to foreign exchange, a 1% increase in AUP and a 1% increase in the sale of components and other products.

– Architectural net sales were $87 million, a 10% decrease compared to the third quarter of 2019, driven by a 14% decrease in base volume, partially offset by a 4% increase in AUP.

Total company gross profit increased 28% to $160 million in the third quarter of 2020 compared to $126 million in the third quarter of 2019. Gross profit margin increased 460 basis points to 27.3%, driven by higher AUP and prior year restructuring actions, partially offset by the impact of lower volume and increased investment in the business, primarily related to our North American Investment Plan. Increased savings from material sourcing projects offset the impact of inflation in the quarter.

Selling, general and administration (SG&A) expenses of $118 million increased $41 million, or 53%, compared to the third quarter of 2019. The increase in SG&A was primarily due to charges related to the previously disclosed settlement of U.S. class action litigation. Excluding the charges related to the settlement, SG&A as a percentage of net sales was 13.7%, a 30 basis point decrease compared to the third quarter of 2019.

Net income (loss) attributable to Masonite decreased $37 million to a loss of $22 million in the third quarter of 2020, due to charges related to goodwill impairment in the Architectural segment and higher SG&A expenses, as discussed above. Adjusted EBITDA*, which excludes the settlement litigation charge, increased to $109 million in the third quarter of 2020 from $76 million in the third quarter of 2019.

Diluted earnings (loss) per share were $0.89 of loss in the third quarter of 2020 compared to $0.59 of earnings in the comparable 2019 period. Diluted adjusted earnings per share* were $2.16 in the third quarter of 2020 compared to $1.08 in the comparable 2019 period. Diluted adjusted earnings per share* excludes $76 million in charges related to goodwill impairment in the Architectural segment, the previously disclosed settlement of U.S. class action litigation and our previously announced restructuring plans incurred in the third quarter of 2020, and the impact of $12 million in charges related to extinguishment of debt and restructuring in the third quarter of 2019.

Year to Date 2020 Discussion

Net sales decreased less than 1% to $1,639 million in the first nine months of 2020, from $1,645 million in the comparable period of 2019. The decrease in net sales was a result of a 6% decrease in base volume due to the impact of COVID-19, a 1% decrease from the net impact of divestitures and an acquisition and a less than 1% decrease due to foreign exchange, partially offset by a 7% increase in AUP.

– North American Residential net sales were $1,186 million, a 7% increase compared to the first nine months of 2019, driven by a 9% increase in AUP partially offset by a 1% decrease in base volume and a 1% decrease due to foreign exchange.

– Europe net sales were $175 million, a 27% decrease compared to the first nine months of 2019, driven by a 22% decrease in base volume and a 7% decrease in sales volume from the net impact of divestitures and an acquisition, partially offset by a 1% increase due to favorable foreign exchange and a 1% increase from the combined impact of higher AUP and the sale of components and other products.

– Architectural net sales were $264 million, a 6% decrease compared to the first nine months of 2019, driven by a 10% decrease in base volumes, a 1% decrease in the sale of components and other products and a less than 1% decrease due to foreign exchange, partially offset by a 6% increase in AUP.
Total company gross profit increased 18% to $431 million in the first nine months of 2020, compared to $367 million in the comparable period of 2019. Gross profit margin increased 400 basis points to 26.3%, due to higher AUP, increased savings from material sourcing projects and prior year restructuring actions, partially offset by the impact of lower volume, higher inflation and tariffs on raw materials, higher manufacturing wages and benefits and increased investment in the business.

Selling, general and administration (SG&A) expenses of $272 million increased $38 million compared to the first nine months of 2019. The increase was due to higher legal expenses and charges related to the previously disclosed settlement of U.S. class action litigation, partially offset by COVID-19 related cost reductions. Excluding the charges related to the settlement, SG&A as a percentage of net sales was 14.3%, a 10 basis point decrease compared to the first nine months of 2019.

Net income attributable to Masonite decreased $1 million to $42 million in the first nine months of 2020 primarily due to charges related to goodwill impairment in the Architectural segment and higher SG&A expenses, as discussed above, and the impact of lower volume, partially offset by higher AUP and the absence of charges related to debt extinguishment costs, restructuring and divestiture of non-core businesses. Adjusted EBITDA*, which excludes the settlement litigation charge, increased $61 million to $282 million in the first nine months of 2020.

Diluted earnings per share were $1.69 in the first nine months of 2020 compared to $1.68 in the comparable 2019 period. Diluted adjusted earnings per share* were $4.89 in the first nine months of 2020 compared to $2.97 in the comparable 2019 period. Diluted adjusted earnings per share* excludes $80 million in charges related to goodwill impairment in the Architectural segment, the previously disclosed settlement of U.S. class action litigation, the loss on disposal of our India subsidiary and our previously announced restructuring plans incurred in the first nine months of 2020, and the impact of $33 million in charges related to debt extinguishment costs, restructuring and divestiture of non-core businesses in the first nine months of 2019.

Masonite repurchased 567,271 shares of stock in the first nine months of 2020 for $35 million, at an average price of $61.29.

For the full third quarter results, click here.

* See “Non-GAAP Financial Measures and Related Information” for definition and reconciliation of non-GAAP measures.

About Masonite

Masonite International Corporation is a leading global designer, manufacturer 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 8,500 customers in 60 countries. Additional information about Masonite can be found at www.masonite.com.

Contact:

Joanne Freiberger – Vice President Treasurer – jfreiberger@masonite.com – (813) 739-1808

Source: Masonite International Corporation