Masonite International Corp. issued a statement regarding its response to COVID-19:
In recent weeks we have seen the impacts of COVID-19 grow both domestically and abroad. Accordingly, the company has taken actions to both protect its employees and focus on business continuity. While our top priority is the health and welfare of our employees, we take seriously our commitment to serve our customers. We are endeavoring to maintain operations to continue supplying the industry during this uncertain time, recognizing the important role our customers and our products play in construction related to providing residential shelter and health care services.
In early March, we formed a cross-functional COVID-19 Response Team to assess potential business impacts and implement mitigation strategies. Since then, we have expanded this team to include sub-teams focused on critical workstreams, including: Employee Welfare, Supply Chain and Operations, Customer Engagement, Financial Stability, and Communications. The following are updates with respect to impacts and our actions in some of these areas.
Employee Welfare
To reduce the potential spread of COVID-19 and maintain a safe work environment, we have implemented an increasing list of actions since early March. Beyond following and providing employees with the Centers for Disease Control’s recommended guidelines to decrease the spread of the virus, we have taken additional steps to reduce our employees’ potential exposure.
Where possible, we have instructed employees to work from home and today all customer interaction including order entry and receivables are being effectively handled remotely. Where remote work is not possible, we have taken steps to restrict visitor access to facilities, adjust break times and create additional break areas to help reduce employee density, and manage shift schedules to reduce employee contact during shift changes to facilitate proper social distancing.
Masonite realizes the current situation has also caused some employees personal challenges outside of work and we have modified employee policies related to attendance and the availability of paid and unpaid time off. Further, attendance is voluntary at locations where Masonite’s operations are exempt from applicable stay-at-home orders and continue to operate.
Supply Chain and Operations
Our Supply Chain and Operations workstream is focused on business continuity and ensuring our facilities remain operating where safe to do so. Our Global Sourcing team has taken steps to engage with our suppliers and assess risks related to component availability and has confirmed that our sourced supply is secure at this time. We believe that the early steps we took to qualify and procure components from alternative sources and markets has contributed to our ability to avoid any supply chain disruption to date.
Due to the impact of the COVID-19 virus in the UK and the recent country-wide stay-at-home order, we decided to temporarily close all of Masonite’s UK facilities. This process of ceasing operations began Tuesday, March 24, with all facilities being closed by Friday, March 27. At this time, we expect to begin reopening these operations upon expiration of the UK order, which is currently scheduled to run through April 14. Meanwhile, a small team of employees will remain active on a remote work basis in order to meet administrative needs. Additional governmental stay-at-home orders have impacted some other operations as well, specifically in Canada.
Financial Stability
We believe we have a strong balance sheet and solid capital structure that positions us well during this time of uncertainty. Our debt includes covenant lite unsecured bonds due in 2026 and 2028 and an undrawn asset-based revolving credit facility (the “ABL Facility”) with a $250 million commitment and a $150 million accordion that matures in 2024. Our net debt* to trailing twelve months Adjusted EBITDA* was 2.2 times at December 29, 2019. As of March 26, 2020, our total available liquidity was approximately $325 million, inclusive of unrestricted cash, an accounts receivable purchase agreement and our ABL Facility.
We recently implemented several actions to reduce our spending and more closely manage cash during this uncertain period, including prioritizing capital spending for critical maintenance, safety and regulatory projects, and temporarily suspending our share repurchase program. We believe that we are also well positioned to manage expenses in the face of potential demand impacts from COVID-19 given that a significant majority of our cost of goods sold is variable in nature.
Given the rapidly evolving nature of the COVID-19 situation, we plan to revisit our 2020 Annual Outlook, announced on February 18, 2020, on our next earnings call, along with a further update on the impact of COVID-19 on our company.
