DOOR - Earnings call transcript Q1 2018 | Masonite International Corp

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Operator

Welcome to Masonite's First Quarter Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. After management's prepared remarks, investors are invited to participate in a question-and-answer session. Please note that this conference call is being recorded. I would now like to turn the call over to Joanne Freiberger, Vice president and Treasurer.

Joanne M. Freiberger

good and David, you, morning everyone. Thank you appreciate joining us today. We Vice the With and Fred Executive Financial call Lynch, on Russ and Officer. Masonite's Masonite's Officer; are Executive today me Chief Chief President Tiejema, President and issued release our first We earnings yesterday. quarter information the webcast the website and on presentation masonite.com. release available our for The are at

subject include XXXX. begin, statements is about including such I remind risks Each Before this statements statement to like we in you that projected statements. that actual outlook in uncertainties forward-looking to would this forward-looking contained materially in call could will to results and our from call cause those differ

information release found heading and Risk Additional Form entitled press we section issued recently the Factors in yesterday. XX-Q. on under the Masonite's about appears Annual XX-K these be Form regarding most Report More on in can subsequent the Forward-Looking Statements filed reports in information quarterly factors risks

available in SEC speak at any statements or of forward-looking sec.gov are our revise of these masonite.com. obligation The on and today to undertake and this update Our no filings we website call statements. as only at

then call our an quarter over and Fred, with financial conclude quarter first on of I'll from appendix comments overview turn Our results with tables first release discussion and agenda certain appear non-GAAP a from earnings call of measures. review refer of to that, the the the to will reconciliation, which and The release the session we'll Please in the of WebEx a Fred. closing Russ, press this include question-and-answer for from the Fred. financial today's the presentation. include And

Frederick J. Lynch

had morning in first Good quarter solid and a Thanks, welcome, everyone. We Joanne. XXXX.

the EBITDA adjusted in price X% importantly and half margin three sales second in with gross margin increase with in in of The positive continued XX% grew all profit net momentum year, continued adjusted and to and gross the first consolidated QX both the XXXX average quarter. of compared prior demonstrated unit EBITDA in improvement XX% expanded reportable segments. growth growth in a QX Our

this teams lost relative of while our in in conditions we production to winter In America, we lost the shifts last approximately accomplished that harsher plant Our focused earlier due plants. weather, in keenly the year the spite operations early North part shifts. XX quarter, the challenged productivity continue in of quarter. challenges inclement We're Despite to metrics production UK the in to improving principles, XX through pillars; we as operating see initiatives. measured improvements. reducing improving direct MVantage lean labor improving the engagement, labor hours the dollars productivity across and best-in-class unit is and backbone is achieving the Productivity key automation of system material The time. organization. of MVantage cycle per employee driving flows and unit direct by operating three key our on operating are productivity tenets system, lean using per faced we By

hard company. and are we Our in and which system. and in working to the that Masonite employees success. communities the employees success are work in and the ensure competitive our community an benefits, invested that their of choice is development educational of opportunities, pay Masonite in and and plant outreach that employer to make the the that on key is focused We the plant being best critical to That's why engaged, committed our know ingredient operating offers the is MVantage sure workforce we're our

make even in our availability, will remain initiatives we operations that discuss automation on which believe growth, minutes. quality and further support and low pillars targeted through rising productivity, to in increase that constrain safer. Given consistency, Improving future labor focused productivity we unemployment designed these improve metrics detail a a the for environment, I manage our recipe is success we through three few as will cost

a be results, our influenced continue to Masonite. advantage competitive New product positively also introductions we for and they believe

rate new product XXXX, our Series interior XX% index exterior our by Series trends was further contributing the of a that of VistaGrande and role of can is first doors of Our to recognizing doors play the and of in to in styles the new led confidence vitality Heritage new that in and market adoption exterior gives quarter close new us products design The doors. home.

the Our of our previously channel as the UK deployment returns our of welcome a DWX, market-leading, tech-enabled with strategy to position delivering a the excited manufacturer for we're which new completed and Masonite, premium and In composite business DWX for the disciplined capital bolsters is we great This acquisition January, best on focused announced, our business shareholders. in doors. is remodel employees.

own of our We also nearly far initial million investment, repurchase currently of so the outstanding were To-date, XX% part we bought of great have in $XXX when as representing that shares XXXX February Masonite repurchase the I is believe program XXXX. approved $XX stock over million share company back a of our and of our in that purchased board our shares authorization.

Let's turn approximately housing in by steady multifamily continued few starts. a minutes was U.S. market Overall, U.S. saw steady anticipate largely for starts. starts that a home in single-family been we growth has will in at and continue QX, Growth major XXXX. We than market the and growth single trajectory housing and overall XX% the gradual grew family housing of to during total which X looking a and the throughout faster markets in driven slide it to in starts increased housing geographies. that spend housing our XXXX

and basis in years Growth has reminder, also housing in increased was a of twice Housing in XXXX. a take had an to in the consideration. XXXX as starts number multifamily into single-family market starts so As at equivalent X% X%. several XXXX growth we towards more a has experiencing a after double-digits that weighted heavily been this has in that mixed. trend historically Growth region, between of and unit, on doors continued starts Canadian into about house completions the look multifamily

Extremely by while single-family X% first the total this which was quarter cold XXXX, starts XX% homebuilding During negatively and snowfall, driven quarter. unusual multifamily almost down growth, down were weather were starts impacted UK, the In of region, market. the first for in starts XX%. the X% growth in is the actually

However, positive remain for growth market provides that for business. XXXX long-term this and housing for ample think we opportunities starts our the outlook the

Let's early Steel experience significantly and and environment in show on change oil began and have gears left companies year-end. where since turn input the we charts building other cost X prices that second commodity crude product increased The to the half detail we the XXXX. further in it particular inflation rising that to increasing in slide accelerated and XXXX are facing. we'll

no working our these mitigate suppliers such base costs is continually team sourcing on diversify aggressively then managing as in global to to initiatives and purchases supply with supplier companies our achieve Our is lowest order our rising and globally the new qualifying Masonite that are across quality. Freight combination something best cost base of also dealing landed inflation many to different. and is

team new is logistics contracts Our freight through costs as carrier as working possible lane to optimizing and higher these establishing where lane well strategic bidding mitigate patterns.

performance challenges X, year. to pursue the inflation, launch improving past offsetting trailing were quarter new XXXX of the demonstrated the basis, results. and a more we While of Russ? part XXXX reflected is several first plants, quarter delivered financial we increase adjusted almost in to call the the line XXXX. manage discuss Since inflation to year. and we the in quarters first in second logistic in detail. mitigate bottom in as have of quarters, made throughout likely I'm over XX-month in our we early and headwind of And X% we going remain Russ our slide quarter time, actions that, faced last a have with trend can see you our to pricing On higher than steady first believe it's progress to in profitability. in products, we over On costs, improve the particular first some in EBITDA productivity the that Operational improvements this our turn

Russell E. Tiejema

basis consolidated the XX, in Positive the contributed represented sales XXXX. sales everyone. were to and of exchange and increased Good Residential XXX million AUP to of basis to net XXXX and million adjusted the we EBITDA improvements base of volume On businesses increase and results versus slide first to markets the quarter Net for we Europe due segment by principally project timing XXXX. margin Architectural, $XXX productivity. XX AUP, business over morning, an continue points gross unit segment. X% summarize offset first of factory in foreign XX% quarter increased X% expanded $XXX achieve price, our growth America acquired increase. Architectural financial or points. and sales, in Adjusted essentially quarter North Fred. to weakness conditions increased recently and and of make Average to first Thanks, the higher from extreme in margin as volume each XX% of EBITDA XX.X% approximately both the Gross profit in weather

the driven the earnings Fred continue experience steel. million fourth share the first quarter In and was in last earlier, was first notably $XX which, anticipation gains, productivity with Net wood, As resins along diluted most inflation, approximately detailed gross for quarter. higher factory increases and have commodities margins in per we initiated of income inflation, quarter we price the higher in for to quarter $X.XX. year

benefits explained share-based impact this is lower million of first of delivery the last in discrete awards. EPS year, prior and tax While $X that's from quarter in recognized year the the the $X.XX of than of than quarter more by exercise

the respectively. adopted quarter you'll the year revised costs of In increased to to that tax and periods standard, pension other $X.XX year-over-year the required classification net housekeeping income also. would SG&A change a There's be by see in Excluding are which EPS Prior accounting diluted expense. first one first accounting new our changes quarter, XX% that for XX-Q. have item non-service benefit, from also we prior and pension

in just financial change in essentially While is impact EBITDA a geography can the statements, metric. historical change this the SG&A GAAP the

the $XXX,XXX lowered and of the in For by in by Masonite, XXXX this adjusted year $X.X million XXXX. EBITDA year full our full of

to comparisons. adjusted $XXX,XXX each quarter approximately in year-over-year of in see XXXX EBITDA You'll reduction the

American of aided beginning X% North business with our sales the XX%. incremental EBITDA in turning by Now, increased to Volume over increased in retail quarter, first of each net first segments, increased quarter adjusted where Florida. XXXX, the Residential while X% reportable

year. benefit Net We steady a continue also were in improvement also foreign sales included to which X% compared last average exchange. from up see prices, X% unit to

While points XX and productivity in above North to and the inclement factory the in year. combination were headwinds increase last much helped adjusted average the first cost provided challenge, a the quarter segment also the business to XX%, Residential weather this unit distribution basis we incurred higher margin related and quarter EBITDA material prices first American of of

was the price quarter as helped actions, Strong Compared market in noted lower driven by explained and slide the Europe than to earlier. EBITDA approximately the segment average the offset was sales increased Europe impacting segment. and a XX exchange first the conditions the lift and compared first from quarter, by XX% Net DWX. growth this from volume. pricing Fred of Turning higher adjusted XX% quarter plagued in EBITDA to acquisition adjusted first the points benefit. XX% due prior to our the XXXX, of quarter unit margin adjusted DWX EBITDA basis over increased to XX% adverse year housing in in base which in XX in our that Volume the the XX% driven weather AUP by and first UK, foreign the down business higher, Europe contribution to was more quarter largely

unit to of Turning margin increased and points in XX% to due footprint. XX, quarter partially as volume increase of declines the our and [XX%] (sic) and average first of profitability continues segment X% of XXX to (XX:XX:XX) as segment line quarter its increases compared Architectural AUP rationalized decreased Adjusted for the prices sales compared the EBITDA largely slide margins. Net increased XXXX X% higher basis EBITDA XX%. a to the XXXX, first business of to the adjusted offset bottom benefits

and transition Our experience the strategy XXXX on for the year customer volume XXXX improving growth. a resuming as and to focus architectural treat business was

to continuing commercial meet on are growth negatively ability across improve the second quarter of impacted sales we our in quarter. monthly encouraged While level sales, levels part architectural performance team the to sequential service and up remains demand, as in customer focused saw we quarter. building the weather net season The higher ramps early construction confidence the in by conditions the the of

cash quarter, net the debt activity $XX adjusted to times acquisition and forma DWX of be as the unrestricted our we at repurchase acquisition repurchases end Moving respectively. share million and now purchase net liquidity And first and total call during cash the slide our I'll EBITDA XX% net summarize used to million XX, quarter, mentioned, and would first Total debt to we the debt subsequent million. including facility, respectively. of to At discussion. times undrawn totaled In Pro our X.X X.X sales taking have including our was the in X.X DWX million first our fund trailing our profile. we ABL $XX $XXX and into were debt liquidity, or the quarter, agreement and the receivable With months' to account, to of accounts approximately Fred X.X back summarize ratios quarter. trailing approximately repurchased the turn of XX first X, April the available XXXX. and Fred end $XX XX-month year-to-date total of stock January, that, of

Frederick J. Lynch

Russ. you, Thank Great.

quarter we've with by resume of positive EBITDA to adjusted momentum actions margins sales seeing XX%. We're which basis in and EBITDA to adjusted XXX by and points. of to summarize, pleased growth margin we're the performance delivered by across we the encouraged in also increase margin in X% taken and basis we net So, response all productivity first in in to business XX our improvements three helped growth gross are AUP plants segments Improvements points the growth.

real improved productivity the Our delivering plants. MVantage system with results operating is in

returns. to repurchase on profile. in buy on capital are shares pursue enterprise that investing further and productivity share that believe our return improvements value M&A performance business we we prices and continue on productivity, is cost our disciplined offer operational the support Our program opportunities we core our at to will add focus to renewed execute to strategy internally showing Further, metrics. believe and continue strategies good our strategic we pursuing, is lean to opportunistic on focused and improving plant allocation up we processes We're

in the outlook on the back in the that and we three April XXXX outlook of calls quarter overall February. our we results segments, and quarter, earning discussed see Given the to track first we year-ending on macroeconomic have fourth our believe momentum business are continued to for achieve our

And open your questions. Operator? so we'd that, to the to call with like

Operator

you, Thank Lynch. Mr.

with from is question proceed Michael question. first Our Nomura from Wood Instinet. Please your

Michael Wood

Hi. Good morning.

Frederick J. Lynch

Mike. morning, Good

Michael Wood

cost spot The fact some you you've seen the that charts on in given XXXX, ease? materials or that there was kind to directionally you give wondering a some inflation second in inflation, if of purchase go you here could of happened had the become as color in cost if price greater in just quarter does terms headwind or it market year does you as and begin through the that

Russell E. Tiejema

Russ. Yeah, Mike, it's

to an year. exited inflationary such largely across would be we came Let X% accelerating we half is to context, out inflation that through of in that last our of I case of XXXX year the increased we in recall historical XXXX. the back ramp the the say for saw me top as to we expect end that playing to that. that the ramp respond inflation And a gradually And It right environment XXXX just that continue anticipated. We range. commodity range. expecting into X% at in

Now, in inflationary specifically in code, still year anticipating X.X% the range inflation to given X% saw full QX, but that X.X% the we commodity zip that trajectory. across we're

Michael Wood

issues volume and the how the sales for talked targeted you've within curious Got in year-to-date momentum it. now weather-related tracking in growth you've recovered if you're if range? quarter first your April, And about the full

Frederick J. Lynch

is Yeah. Mike. That's question, a Fred. great This

year-over-year get through sales we in quarter, better. basis months on progress our to first continued As a the the

year month April. strongest Our far this actually been has so

we've the anticipate part this early year. we said we initial the mess the then, to the our So, the of that been much And able in out recover we in at remainder will of occurred of year that that point feel play outlook. as

Michael Wood

much. very Okay. Thank you

Operator

next Our from JPMorgan. Michael from question is Rehaut

Michael Jason Rehaut

Good everyone. Thanks. morning,

all far. First investors and question, obviously so up backdrop a among the on price detail just guess interest material I of appreciate following raw point big and the

the overall far inflation a in pricing From with are in guidance. X% guess, with so confirmed – what's to tracking line is, net into also is guidance implemented extent plan there to You your all baked to that increases in guidance, expectations, to have pricing expected inflation the is any that so any I that that or line year? future market offset your for the has been this continue perspective, inflation on your X.X% the you dependent

Frederick J. Lynch

increases. This is prospective prospective of We're price on the specifics always Fred. careful about commenting –

the quarter the aware, call marketplace or in price inflationary that between in the to quarter's of – As increase. third to additional in take into call you're communicate some expect we of channels. end in that we continuing that fourth at effect had increases response said recently see price we the in all pressure the taken this the last increases we quarter did of We will that

Michael Jason Rehaut

be be just be you've in your effective clear, to to is part XQ, of potential that upside words, that would does communicated And incorporate guidance guidance? or In that that those guidance? the other overall increases your price that will

Frederick J. Lynch

still think the for we for track Yeah, year. outlook we're on

Michael Jason Rehaut

Okay. in of is to is, XQ But guidance part the or question that guess pricing my guidance? I that incremental

Frederick J. Lynch

with like, what to we're any Yeah. providing careful increasing think environment in want we an Again, be and pricing specifics again that where is we comfortable pricing inflation I on we're but as responding the looks to feel necessary. that about

should assume it's of You part our outlook.

Michael Jason Rehaut

just, appreciate about of, give helpful. thinking I'm here. kind I specifically I the of Residential secondly, American Fred. terms think weather, terms in us you in North could year, as outlook, sales a you Okay. of sense obviously guess full of that, That's maybe the

impacted of full us year also be American weather and volume differences things any Can of in of you're which thinking from retail channels North a that. help kind got a the that some from results in how your which growth, perspective, Obviously, versus just the or You perspective share Residential remind amounts gain new from Florida a be in the there about might are win volume. if would on contributing product perspective any that top market? driving you

Frederick J. Lynch

Yeah.

a from say by I'd vitality index. So our encouraged product we're perspective, new

Now, I some think it's cannibalize to lines. that existing our important recognize does that product of

incremental. detrimental be didn't not it. it's if automatically you it So very would net have But

So that's positive us. think a I for

our year, that one at into grow the levels. market take have of thing expect discussed we one the just last the year effect and the think that it's should at so actually of – to large effect quarters towards latter say, loss three Lowe's I to will account, the We part last of take do year. I retailers, the we taking now, business in of

Michael Jason Rehaut

Thank you. Great. Okay.

Operator

W. next Robert is from Our question with Wojs Baird. Tim

Timothy Ronald Wojs

everybody. Hey, Job. Nice

Frederick J. Lynch

for Thanks Tim. that,

Timothy Ronald Wojs

But to on the the maybe that share on And facilities of you on of of So backlog think my know So coming a Architectural the about is that's a I know there of little just bit a some volume business you is on revenue guess year-over-year the that the any right through in actually restructuring business, because basis backlog now. up I elongated? ceded those market kind numbers what when is orders is timing some way and the looks that so, did like kind they and hit basis? there.

Frederick J. Lynch

Yeah.

about our that at typically projects time, some X large to this flow in our different to so an went that out. of we a of color of I maybe of is business you're residential changes and, the on business, opposed that at when lag XXXX, around business project-based we that help as bidding for which in had because going to the and reset on through architectural can instance, months because just business all XX occur Architectural think the And were retailer. will business a of is product, ongoing than almost So, business provide how number

seeing In And – process, some point put we're have help in we out, a that in perspective, time, that that volumes to so, January on in decline a through basis. year-over-year we at at months this a in on April, we less down basis, on were March, year-over-year that. basis. flat month on year-over-year going in if But to were we and we were high-teens knew we By the basis. nine that would a the of up we we're six look as year-over-year were

feel we're we we what impacts the think at the I quarter. our last some we come first through went and in time is, seeing the good of So backlog the like by we're customers, that through out year there's that largely marketplace, of reset

Timothy Ronald Wojs

Okay.

Great. Okay.

business, Now, relative I I like maybe appreciate to looks for And maybe sense of any seasonality what over the to at on channels in maybe from year? looked then that the color. eyes normal Residential it your helpful. relative inventory or how That's North American the beginning the mean

Frederick J. Lynch

year. we where good little feel with of about that marketplace. Obviously, bit the We our inventories are Yeah. in early view caught got a last

taken a more are focus inventories so they're think understand this normalized in we we've sure and at pretty point on we And of where time. making

Timothy Ronald Wojs

on luck year. of good Well, the Appreciate Great. rest Okay. it.

Frederick J. Lynch

Thanks, Tim.

Russell E. Tiejema

Thanks.

Operator

Our next question is with Watt from Stifel. Dillard

Dillard Watt

growth in on side Good Thanks. by the little or brands of Europe? maybe are sure then Well, you pricing impacted not acquisition. what's much other your was the guess bit versus mix the the And of interior pricing. me or morning. exterior maybe quarter like-for-like of how I little first I'm on talk color drivers give ocean. the a us a let of what Can

Russell E. Tiejema

transactional were where FX-related situation they've of to many side. and they of segment. in Europe to had the back market providers a the (XX:XX:XX) back this context Russ. of and last segment I'll the inflation the Again fall that year We and into for materials recall a Yeah, what we've seen on one. business, bit the represents I'll trying revenue of the is which to seen up lot come in UK a was that's take there that losses XX% the specifically little provide starting some from of UK the over

that inflationary market. in comes in of the since basket wood particularly seen outside of that lot a a of we've pressure wood market So into from the lot UK

by the in play our be beginning clearly put which which As is that would of quarter quarter, in business we margins last announced into fourth to year. the inflation, UK year. price place means And last try some against fully increases our the recover to have the also, that in we impacted

So, that support help those or actions market the anticipate in and action are that pricing fully business. would that in we to now pricing place

look that Turning the that's we high-teens acquired at EBITDA the DWX Based the we to that really the disclosures of assume earnings on historical at has at acquisition, trend you time made DWX healthy that numbers we continued. on you business. disclosed, implies a a it can end we business if announced January, and clearly QX margin that margin business, and that

happy to is we're overall very So UK the that far. profile margin contribution with business that making the the thus for

Dillard Watt

volume Okay. snowy past that maybe some the kind if in Great. in could now North give we've And weather color the us got of America gave then on London. similar that you you picture

Russell E. Tiejema

Yeah.

a snowfall, you very by to that order to very we've we've distribution's customer our particular, of were to into clearly accept it some the impacted Fred were Architectural that seen business, the the top talked frankly not if only it we only in operations it. is when particular in inefficiency trends in where back particularly So weather in operations in in in progression because, we the impacted the customers. situations extreme look about the drove seen get had the cases, which, operations, customer twice had at UK, it line but drove due similar product actually available on in volume business frankly our but closed progression saw impact and our not weather, some our to and unusual UK, to they cases, some branches that in case and In UK we also an the ship

XX% in look down And Fred We course UK. that shown if of starts weather. particular, largely As progression April mentioned, the you nice has were quarter, in has But recovery. improved. attribute monthly the the a to over quarter the the it housing in at

we weather unchanged, we the timeframe. for dislocation again, March-April back UK in we in but due we the a at look period quarter we thesis the So, year the now of and is overall did the believe that, have early recovered to step and in that that

Dillard Watt

That's All for all me. right. Great. Thanks.

Operator

is from Our Research next Group. Thompson question with Kathryn Thompson

Steven Ramsey

on to Steven for are lower-priced growing that construction, your to home is trend Ramsay mix shift get the have your seeing to Thinking This morning. you a pricing? Kathryn. impact negative Good North impact homes about ability or does America

Frederick J. Lynch

of more a think impact pricing looking a much the what of from is people around on number Yeah, because design pricing I much doors. Ultimately, don't for perspective. it has that are is it just

those as smaller or lower – they're going homes point, the sorry, those So in beginning or the doors marketplaces fewer to price the get we're see at in homes.

Steven Ramsey

will for then much segment time, And on right. the the sales side, All over more if ambitions any that expanding margin to and get or volume DWX, in is there margin that the require expansion are in pullback term? near

Russell E. Tiejema

we're our over existing about able term think Steven, probably more business the that to with that operations. how in UK integrate The I opportunity there's way it's Russ. is longer

and very, product bread direct product more the portfolio more contractors is the acquired DSI, their and specialty core much of range actually similar foam-filled different They butter of business very little really to DWX although product the in the upmarket. sell that market. is portfolio that So, we it's bit doors Their GRP play a solid the web-enabled remember, doors the configurator, at is whereas a is our very principally like early in middle our XXXX. and Door-Stop to traders timber Door-Stop via the

also again integrate businesses, there's to the can businesses time, customer look the we several starts those the us market, over new very last a both of into to over you at legs not has in Door-Stop years, say plenty it product lines in combine before, seen the for there's aged opportunities that UK cross-sell on better excess in that the we mid growth if you've on the stock And of and in but take of last housing several for how renovation with as at support. as given look our think business, we in the heard the channels considerable construction the level I there's growth. the particular, combination low side those that think that they the we've homes high-teens UK side. of in still opportunity been years, That, fact housing reinvestment that overall market the a only has over

we so there's the market. by their could the indicates businesses served that be on just some there best And and renovation growth expect clearly latent these continued side route-to-market in to market that strategy would because virtue service entry-door demand of are that

Steven Ramsey

Excellent. Thank you.

Frederick J. Lynch

Thank you.

Russell E. Tiejema

Thank you.

Operator

with next Markets. Our question is Capital Michael from RBC Eisen

Michael Eisen

good on and quarter. morning, a congrats Good guys,

Frederick J. Lynch

Good morning. you. Thank

Russell E. Tiejema

Good morning.

Michael Eisen

Just quick the U.S. the question wanted of to – residential on a side business.

You the this to that so I'm your broader in trends you trying guys kind seeing construction you are and housing? stay more of growth expect line rates between comments your to in just we're market market, differences the more the or and business market of volume product to the talking of kind so what made understand,

Frederick J. Lynch

would that think it I we say market. as obviously our product about

number doors homes drive going utilization and the of our in So of business. to doors is what's

Michael Eisen

investments returns guys and that, to of CapEx guidance gears then how kind of things about from projects margin guys expected towards given internal you a can going of thinking is and in you your little And those what that commentary performance of of talk and in have timing increasing bit the that like higher Understood. little, CapEx changing around a is investments much maybe be? automation the

Russell E. Tiejema

that let Russ, take one. Yeah. This me is

continue. in is year projects the significant range. spending for a in remind more to fact that this of the just to plant had is last our we years. in our heavier of timing capital trend we matter that's we our material part that And as our trim and operations to the year to to the with XX% before, now It's had to the our the investments of through we've the and of our underway some plants have year specific little over saw bit the operations. automation some specifically flow. year. first going than our commented flowing we're automation of work and have And $XX of XX% everyone, door door operations we triggered lay-up those those million largely investments as that you've million on this things pressing in $XX First We from around spent guide Historically, of quarter the higher way automation some first well changes, and of the of receiving America improving of digital launched types a North (XX:XX) as interior the include in year early layout all quarter plants. and CapEx material some plants, just order last due this spend where focus programs, late what quality strategic we last levels that that of in the cost consider made movement we initiatives product, some That like on of to of change have would other some capital of mentioned; augmenting initiatives layouts throughput projects couple likely as lines, improve all, paint

more automation how of huge with in that or out that investments we line ensure lay So right places automation, in movement it's for of of significant the these approach not some it's efficiency. improved a material to plants meaningful a surgical change step-up in we're inserting in a necessarily

Michael Eisen

then Understood. And in one That's helpful. could more. if sneak I

very margin the On impressive context Architectural in the in business, was of the quarter, volumes. expansion lower the especially

volume progression we're very quarter targets, first thinking kind to at does continue as towards about in progress saw are there quarter? year-over-year, healthy the a be to timing your As we any or the issues benefited of this pace grow longer-term as returns that positive

Frederick J. Lynch

said Architectural that there is benefited better be that our so to is there. financial expectation than And say framework nothing long-term be as would expect the along, the was our EBITDA should company. we've average high-teens, in our and the quarter, we'd on for get to that the segment, I all Architectural first eventually

Michael Eisen

Understood. Good luck.

Frederick J. Lynch

Thank you.

Russell E. Tiejema

you. Thank

Operator

Our from next Hocevar question with is Northcoast Research. Kevin

Kevin Hocevar

nice Hey. Good morning, the to start everybody, year. and

Frederick J. Lynch

morning, Good Kevin.

Kevin Hocevar

necessarily the according of bridge, was from plan were to like last at plan that actually factory XXXX, could to direct your on seemed this how fine. in weather. then And you your of a managed quarter to levels go And know first time if year, and it quarter you were volumes positive. headwinds you EBITDA there comment that labor. go showed volumes And because because according able just didn't you staffing Wondering I on big didn't year during this the weather

year versus if managed wondering was how what just this different. you last you So, level and this time comment on your staffing quarter

Russell E. Tiejema

the taken reductions over high for volume was the Russ. see we heads Sure. count at from We've that materialized. fourth plants American Obviously, pretty Kevin. year. the release, XXXX count plant the XXXX that earnings did, of beginning Thanks significant head It's North the end. entered indicated We for And to year quarter of actually with out addressed. the of certain remind of question, in over our indeed, that we the head course in seen the course that over too our XXX everyone, we've just to

look a If the in operations across total, take to March and end our of in North year, from XXX order end count both of of across down our the heads total the head residential on American in is this March North you America XXXX architectural.

head demand can So current the light you environment, very in we carefully and continue see metrics. that to manage count efficiency of in

mentioned in hours to closely Fred per productivity the we see our per track plants. we're earlier, and across improvement door dollars of As terms metric that door continuing

Frederick J. Lynch

course. And new decline that acquisitions, to that it's ex our is note important of

Russell E. Tiejema

you. Thank true. That's

Kevin Hocevar

Thank you.

million get costs, $X bridge headwind $X of be distribution freight, magnitude to think any And that headwind, provided a on kind that obviously hearing and to Okay. forward about that million that what on good is a to was per seeing quarterly it a as a there will a basis, the the think going on that then in a or way worse you again quarter? that which talked Is theme follow-up, is common quarter. that or based you we're about EBITDA of for continue about kind good you're way that freight on out

Russell E. Tiejema

So our this Those about an story. it inefficiencies way point. largely at some we think is Last addressed logistics have right now I principally year, distribution operations. is are the in inflationary did and freight

inflation – to saw going we're or see we So in the first quarter.

continue We the to forward rates. go both see inflation fuel expect that on we're on side we carrier as and going to

Fred increases over a think pressure, can deal course the headwind mitigate inflationary during the that remarks that's to we working the in to call, actively but extent his year, that with. it we'll I of ways prepared as have that on mentioned the we're

Kevin Hocevar

Okay. Thank you much. very

Russell E. Tiejema

you. Thank

Operator

have reached closing the end of to session. the gentlemen, like Ladies turn and I'd remarks. Fred question-and-answer Lynch the we call for back to

Frederick J. Lynch

joining And David. all you, of for Thank thank Great. us you today. you

of the I look continued on nearly Operator, we time people work our interest our and performance still well being to We improve forward call. to replay concludes employees, call. products want our significant please every support, segments you. As our as instructions. you of tirelessly of committed XX,XXX continue opportunities that our business, future suppliers, earnings to our quarterly walk the and there provide of walls. we through success take and we to this you our remain shareholders, the to of best the and eyes the think said, believe this will positioned we to our updating targets, the your next of building that help are provider deliver to to team our we're communities. appreciate on employees in your for customers, I our business and Thank Masonite as XXXX each one you

Operator

the outside International been please has earnings The the your access XX. first XXXXXXXX. the joining until you. dial recorded. Thank today's call XXX-XXX-XXXX U.S. replay in concludes conference. conference Masonite or Thank be To ID you May quarter This accessed for This XXX-XXX-XXXX may call. and replay, U.S., conference the

Masonite International (DOOR) 3 May 182018 Q1 Earnings call transcript