Masonite International Corporation (B):

Will KKR Slam the Door?

Team 3
Group Members:
1. Adhisya Venkateswaran
2. Damien Forde
3. Michael Falatyn
4. Vidit Shah
Masonite International Corporation
USD Millions

Historical Projected Ann

Particulars
2001 2002 2003 2004 2005
Sales (1) 1,421.6 1,619.5 1,777.2 2,199.9 2,444.1
% Growth 13.9% 9.7% 23.8% 11.1%

EBITDA 143.5 209.8 234.9 289.0 332.4

% Margin 10.1% 13.0% 13.2% 13.1% 13.6%

EBIT 108.1 164.9 186.3 225.1 261.5

% Margin 7.6% 10.2% 10.5% 10.2% 10.7%

Effective Tax Rate 22.4% 22.3% 23.3% 24.0% 23.0%

Less: Taxes 24.2 36.8 43.4 54.0 60.1
Tax-effected EBIT 83.9 128.1 142.9 171.1 201.4
Add: Depreciation & Amortization 35.4 44.9 48.6 63.9 70.9
Expense
Less: Capital Expenditures (30.5) (43.5) (49.5) (59.5) (70.0)
(Increase)/decrease in working capital (23.1) (6.3) (14.7) (76.8) (13.8)
Unlevered Free Cash Flow 65.7 123.2 127.3 98.7 188.5

Discount period 1
WACC 9.34%
Discount factor 0.915
Present value of each Unlevered Free Cash Flow 172.4

Perpetuity Growth Method EBITDA Multiple Method

Weighted Average Cost Of Capital 9.34% Weighted Average Cost Of Capital

Net Present Value Of Free Cash Flow $891.9 Net Present Value Of Free Cash Flow

Terminal Growth Rate 2% Terminal multiple

Terminal Value $3,879.6 Terminal value
Present Value Of The Terminal Value $2,483.0 Present value of the terminal value

Enterprise Value $3,374.9 Enterprise Value

Less: Net Debt (2) $550.8 Less: Net Debt (1)
Equity Value $2,824.1 Equity Value

Shares Outstanding 57.5 Shares Outstanding

Equity Value Per Share $49.1 Equity Value Per Share

Notes:
(1)
We have taken the Sales figures from Appendix 3. Masonite's Historical and Projected Financials 2005-2009
(2)
Net debt represents total debt plus noncontrolling interest plus preferred stock, less cash & short term investments
 DCF Analysis

Projected Annual Forecast

2006 2007 2008 2009
2,544.3 2,709.6 2,902.0 3,119.7
4.1% 6.5% 7.1% 7.5%

358.7 395.6 438.2 486.7

14.1% 14.6% 15.1% 15.6%

262.1 311.6 345.3 390.0

10.3% 11.5% 11.9% 12.5%

23.0% 23.0% 23.0% 23.0%

60.3 71.7 79.4 89.7
201.8 239.9 265.9 300.3
96.7 84.0 92.9 96.7
(80.0) (90.0) (100.0) (110.0)
3.5 (1.2) (5.6) (8.0)
222.0 232.7 253.2 279.0

2 3 4 5
9.34% 9.34% 9.34% 9.34%
0.837 0.765 0.700 0.640
185.7 178.1 177.2 178.6

BITDA Multiple Method

erage Cost Of Capital 9.34%

Value Of Free Cash Flow $891.9 Current
TEV / EBITDA
6.5x 6.9x
$3,163.6
e of the terminal value $2,024.8

$2,916.6
$550.8
$2,365.9

57.5
$41.1

ancials 2005-2009
& short term investments
Masonite International Corporation WACC Analysis
USD Millions

Share Price $32.4 Sources of Funds - Appendix 6

Total Number of Shares 57.54 Amount Weights Interest
Outstanding (in Millions)
$1,175 0.3701 6.01%
Cost of debt: $350 0.1102 6.01%
Cost Of Debt (1) 7.83% $300 0.0945 9.51%
Effective Tax Rate 23% $525 0.1654 9.51%
After-Tax Cost Of Debt 6.03% $825 0.2598 9.51%
$3,175 1
Cost Of Equity:
Risk Free Rate (2) 4.14% $1,910.0
Beta (3) 1.15 $1,825.0
Market Risk Premium 5.50% $85.0
Cost Of Equity 10.47%

Percentage Of Capital:
Total Debt $637.3 25.46%
Market Value Of Equity $1,865.6 74.54%
Total Capital $2,502.9 100.00%

Weighted Average Cost Of 9.34%

Capital (WACC)

Notes:
(1)
Cost of Debt is calculated as the weighted average rate of 1-year LIBOR + 250bp (refer to Appendix 6)
(2)
Average monthly yield for the last 10 years for the 10 year U.S. Government Bond
(3)
Beta value assumed to be the levered beta
f Funds - Appendix 6
Weighted Average
Cost of Debt
2.22%
0.66%
0.90%
1.57%
2.47%
7.83%