UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________

FORM 10-Q

____________________________

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 29, 2020~~April 4, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 001-11796

____________________________

Masonite International Corporation

(Exact name of registrant as specified in its charter)

____________________________


British Columbia, Canada						98-0377314
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2771 Rutherford Road

Concord, Ontario L4K 2N6 Canada

(Address of principal executive offices)

(800) 895-2723

(Registrant's telephone number, including area code)

____________________________

Securities registered pursuant to Section 12(b) of the Act:

Common Stock (no par value)

DOOR

New York Stock Exchange

(Title of class)

(Trading symbol)

(Name of exchange on which registered)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

The registrant had outstanding ~~24,449,287~~24,500,806 shares of Common Stock, no par value, as of ~~May 1, 2020.~~April 30, 2021.

MASONITE INTERNATIONAL CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

~~March 29, 2020~~April 4, 2021

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the federal securities laws, including, without limitation, statements concerning the conditions in our industry, our operations, our economic performance and financial condition, including, in particular, statements relating to our business and growth strategy and product development efforts under "Management's Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as "may," "might," "could," "will," "would," "should," "expect," "believes," "outlook," "predict," "forecast," "objective," "remain," "anticipate," "estimate," "potential," "continue," "plan," "project," "targeting," and other similar expressions. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. These risks and uncertainties include, without limitation, those identified under "Risk Factors" in our Annual Report on Form 10-K for the year ended ~~December 29, 2019,~~January 3, 2021, subsequent reports on Form 10-Q, and elsewhere in this Quarterly Report.

The following list represents some, but not necessarily all, of the factors that could cause actual results to differ from historical results or those anticipated or predicted by these forward-looking statements:

•downward trends in our end markets and in economic conditions;

•~~scale and scope of the current coronavirus ("COVID-19") pandemic on our operations, customer demand and supply chain;~~

•reduced levels of residential new construction; residential repair, renovation and remodeling; and non-residential building construction activity due to increases in mortgage rates, changes in mortgage interest deductions and related tax changes and reduced availability of financing;

•competition;

•the continued success of, and our ability to maintain relationships with, certain key customers in light of ~~price increases and~~ customer concentration and consolidation;

•our ability to accurately anticipate demand for our products including seasonality;

•scale and scope of the coronavirus ("COVID-19") pandemic and its impact on our operations, customer demand and supply chain;

•increases in prices of raw materials and fuel;

•tariffs and evolving trade policy and friction between the United States and other countries, including China, and the impact of anti-dumping and countervailing ~~trade cases;~~

•~~increases in prices of raw materials and fuel;~~duties;

•increases in labor costs, the availability of labor or labor relations (i.e., disruptions, strikes or work stoppages);

•our ability to manage our operations including ~~anticipating demand for our products, managing~~potential disruptions, ~~in our operations, managing~~ manufacturing realignments (including related restructuring charges)~~, managing~~ and customer credit ~~risk and successful integration of acquisitions;~~risk;

•~~the continuous operation of our information technology~~product liability claims and ~~enterprise resource planning systems and management of potential cyber security threats and attacks;~~product recalls;

•our ability to generate sufficient cash flows to fund our capital expenditure requirements, to meet our pension obligations and to meet our debt service obligations, including our obligations under our senior notes and our asset-based revolving credit facility ("ABL Facility");

•limitations on operating our business as a result of covenant restrictions under our existing and future indebtedness, including our senior notes and ABL Facility;

•fluctuating foreign exchange and interest rates;

•our ability to replace our expiring patents and to innovate, keep pace with technological developments and successfully integrate acquisitions;

•the continuous operation of our information technology and enterprise resource planning systems and management of potential cyber security threats and attacks;

•political, economic and other risks that arise from operating a multinational business;

•uncertainty relating to the United Kingdom's exit from the European Union;

•~~fluctuating exchange and interest rates;~~

•~~our ability to innovate and keep pace with technological developments;~~

•~~product liability claims and product recalls;~~

•retention of key management personnel;

•~~limitations on operating our business as a result of covenant restrictions under our existing and future indebtedness, including our senior notes and our ABL Facility;~~ and

•environmental and other government regulations, including the United States Foreign Corrupt Practices Act ("FCPA"), and any changes in such regulations.

We caution you that the foregoing list of important factors is not ~~exclusive.~~all-inclusive. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Quarterly Report may not in fact occur. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Table of Contents

The Company may use its website and/or social media outlets, such as LinkedIn, as distribution channels of material company information. Financial and other important information regarding the Company is routinely posted on and accessible through the Company’s website at http://investor.masonite.com and its LinkedIn page at https://www.linkedin.com/company/masonitedoors/mycompany/. In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Email Alerts” section at http://investor.masonite.com.

iii

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

MASONITE INTERNATIONAL CORPORATION

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands of U.S. dollars, except per share amounts)

(Unaudited)


		Three Months Ended					Three Months Ended
		March 29, 2020		March 31, 2019			April 4, 2021		March 29, 2020
Net sales	Net sales	$	551,228	$	530,311	Net sales	$	646,337	$	551,228
Cost of goods sold	Cost of goods sold	416,947		418,207		Cost of goods sold	487,699		416,947
Gross profit	Gross profit	134,281		112,104		Gross profit	158,638		134,281
Selling, general and administration expenses	Selling, general and administration expenses	80,333		78,100		Selling, general and administration expenses	83,631		80,333
Restructuring costs	Restructuring costs	1,941		3,740		Restructuring costs	1,643		1,941
Asset impairment		—		10,625
Loss on disposal of subsidiaries		—		4,605

Operating income	Operating income	52,007		15,034		Operating income	73,364		52,007
Interest expense, net	Interest expense, net	11,282		11,127		Interest expense, net	11,946		11,282

Other expense (income), net		49		(1,130)
Other (income) expense, net						Other (income) expense, net	(1,343)		49
Income before income tax expense	Income before income tax expense	40,676		5,037		Income before income tax expense	62,761		40,676
Income tax expense	Income tax expense	9,639		58		Income tax expense	14,613		9,639
Net income	Net income	31,037		4,979		Net income	48,148		31,037
Less: net income attributable to non-controlling interests	Less: net income attributable to non-controlling interests	1,152		1,190		Less: net income attributable to non-controlling interests	1,167		1,152
Net income attributable to Masonite	Net income attributable to Masonite	$	29,885	$	3,789	Net income attributable to Masonite	$	46,981	$	29,885

Basic earnings per common share attributable to Masonite	Basic earnings per common share attributable to Masonite	$	1.20	$	0.15	Basic earnings per common share attributable to Masonite	$	1.92	$	1.20
Diluted earnings per common share attributable to Masonite	Diluted earnings per common share attributable to Masonite	$	1.19	$	0.15	Diluted earnings per common share attributable to Masonite	$	1.89	$	1.19

Comprehensive income (loss):	Comprehensive income (loss):					Comprehensive income (loss):
Net income	Net income	$	31,037	$	4,979	Net income	$	48,148	$	31,037
Other comprehensive income (loss):	Other comprehensive income (loss):					Other comprehensive income (loss):
Foreign currency translation gain (loss)	Foreign currency translation gain (loss)	(38,687)		13,991		Foreign currency translation gain (loss)	2,228		(38,687)

Amortization of actuarial net losses	Amortization of actuarial net losses	173		404		Amortization of actuarial net losses	334		173
Income tax expense related to other comprehensive income		(89)		(93)
Income tax expense related to other comprehensive income (loss)						Income tax expense related to other comprehensive income (loss)	(54)		(89)
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:	(38,603)		14,302		Other comprehensive income (loss), net of tax:	2,508		(38,603)
Comprehensive income (loss)	Comprehensive income (loss)	(7,566)		19,281		Comprehensive income (loss)	50,656		(7,566)
Less: comprehensive income attributable to non-controlling interests	Less: comprehensive income attributable to non-controlling interests	573		1,406		Less: comprehensive income attributable to non-controlling interests	1,338		573
Comprehensive income (loss) attributable to Masonite	Comprehensive income (loss) attributable to Masonite	$	(8,139)	$	17,875	Comprehensive income (loss) attributable to Masonite	$	49,318	$	(8,139)

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

MASONITE INTERNATIONAL CORPORATION

Condensed Consolidated Balance Sheets

(In thousands of U.S. dollars, except share amounts)

(Unaudited)


ASSETS	ASSETS	March 29, 2020		December 29, 2019		ASSETS	April 4, 2021		January 3, 2021
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	114,375	$	166,964	Cash and cash equivalents	$	323,198	$	364,674
Restricted cash	Restricted cash	10,644		10,644		Restricted cash	10,560		10,560
Accounts receivable, net	Accounts receivable, net	303,111		276,208		Accounts receivable, net	365,396		290,508
Inventories, net	Inventories, net	240,975		242,230		Inventories, net	267,230		260,962
Prepaid expenses		33,137		33,190
Prepaid expenses and other assets						Prepaid expenses and other assets	37,497		42,538
Income taxes receivable	Income taxes receivable	3,492		4,819		Income taxes receivable	5,498		1,124
Total current assets	Total current assets	705,734		734,055		Total current assets	1,009,379		970,366
Property, plant and equipment, net	Property, plant and equipment, net	612,304		625,585		Property, plant and equipment, net	616,872		625,126
Operating lease right-of-use assets	Operating lease right-of-use assets	123,925		121,367		Operating lease right-of-use assets	152,881		146,806
Investment in equity investees	Investment in equity investees	17,011		16,100		Investment in equity investees	14,923		14,636
Goodwill	Goodwill	179,386		184,192		Goodwill	139,728		138,692
Intangible assets, net	Intangible assets, net	171,684		184,532		Intangible assets, net	165,620		169,392
Deferred income taxes	Deferred income taxes	24,355		25,945		Deferred income taxes	20,448		25,331
Other assets	Other assets	43,650		44,808		Other assets	50,801		47,411
Total assets	Total assets	$	1,878,049	$	1,936,584	Total assets	$	2,170,652	$	2,137,760

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	97,501	$	84,912	Accounts payable	$	114,259	$	97,211
Accrued expenses	Accrued expenses	145,342		180,405		Accrued expenses	250,058		277,716
Income taxes payable	Income taxes payable	1,537		2,350		Income taxes payable	4,395		11,086
Total current liabilities	Total current liabilities	244,380		267,667		Total current liabilities	368,712		386,013
Long-term debt	Long-term debt	791,190		790,984		Long-term debt	791,628		792,242

Long-term operating lease liabilities	Long-term operating lease liabilities	112,691		110,497		Long-term operating lease liabilities	140,642		136,235
Deferred income taxes	Deferred income taxes	88,504		83,465		Deferred income taxes	77,967		73,073
Other liabilities	Other liabilities	45,028		47,109		Other liabilities	54,550		55,080
Total liabilities	Total liabilities	1,281,793		1,299,722		Total liabilities	1,433,499		1,442,643
Commitments and Contingencies (Note 7)	Commitments and Contingencies (Note 7)					Commitments and Contingencies (Note 7)	0		0
Equity:	Equity:					Equity:
Share capital: unlimited shares authorized, no par value, 24,446,987 and 24,869,921 shares issued and outstanding as of March 29, 2020, and December 29, 2019, respectively		551,983		558,514
Share capital: unlimited shares authorized, no par value, 24,500,706 and 24,422,934 shares issued and outstanding as of April 4, 2021, and January 3, 2021, respectively						Share capital: unlimited shares authorized, no par value, 24,500,706 and 24,422,934 shares issued and outstanding as of April 4, 2021, and January 3, 2021, respectively	561,776		552,969
Additional paid-in capital	Additional paid-in capital	212,826		216,584		Additional paid-in capital	214,689		223,666
Accumulated deficit		(12,203)		(20,047)
Accumulated earnings						Accumulated earnings	59,712		20,385
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(168,193)		(130,169)		Accumulated other comprehensive loss	(109,726)		(112,063)
Total equity attributable to Masonite	Total equity attributable to Masonite	584,413		624,882		Total equity attributable to Masonite	726,451		684,957
Equity attributable to non-controlling interests	Equity attributable to non-controlling interests	11,843		11,980		Equity attributable to non-controlling interests	10,702		10,160
Total equity	Total equity	596,256		636,862		Total equity	737,153		695,117
Total liabilities and equity	Total liabilities and equity	$	1,878,049	$	1,936,584	Total liabilities and equity	$	2,170,652	$	2,137,760

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

MASONITE INTERNATIONAL CORPORATION

Condensed Consolidated Statements of Changes in Equity

(In thousands of U.S. dollars, except share amounts)

(Unaudited)

Three Months Ended
March 29, 2020 March 31, 2019
Total equity, beginning of period $ 636,862 $ 622,305
Share capital:
Beginning of period 558,514 575,207
Common shares issued for delivery of share based awards 5,490 6,152
Common shares issued under employee stock purchase plan 708 517
Common shares repurchased and retired (12,729) (14,386)
End of period 551,983 567,490
Additional paid-in capital:
Beginning of period 216,584 218,988
Share based compensation expense 3,470 2,680
Common shares issued for delivery of share based awards (5,490) (6,152)
Common shares withheld to cover income taxes payable due to delivery of share based awards (1,427) (1,090)
Common shares issued under employee stock purchase plan (311) (132)
End of period 212,826 214,294
Accumulated deficit:
Beginning of period (20,047) (30,836)
Net income attributable to Masonite 29,885 3,789
Common shares repurchased and retired (22,041) (18,805)
End of period (12,203) (45,852)
Accumulated other comprehensive loss:
Beginning of period (130,169) (152,919)
Other comprehensive income (loss) attributable to Masonite, net of tax (38,024) 14,086
End of period (168,193) (138,833)
Equity attributable to non-controlling interests:
Beginning of period 11,980 11,865
Net income attributable to non-controlling interests 1,152 1,190
Other comprehensive income (loss) attributable to non-controlling interests, net of tax (579) 216
Dividends to non-controlling interests (710) —
End of period 11,843 13,271
Total equity, end of period $ 596,256 $ 610,370
Common shares outstanding:
Beginning of period 24,869,921 25,835,664
Common shares issued for delivery of share based awards 134,911 116,252
Common shares issued under employee stock purchase plan 9,426 9,036
Common shares repurchased and retired (567,271) (646,102)
End of period 24,446,987 25,314,850


	Three Months Ended
		April 4, 2021		March 29, 2020
Total equity, beginning of period		$	695,117	$	636,862
Share capital:
Beginning of period		552,969		558,514
Common shares issued for delivery of share based awards		9,931		5,490
Common shares issued under employee stock purchase plan		824		708
Common shares repurchased and retired		(1,948)		(12,729)
End of period		561,776		551,983
Additional paid-in capital:
Beginning of period		223,666		216,584
Share based compensation expense		4,418		3,470
Common shares issued for delivery of share based awards		(9,931)		(5,490)
Common shares withheld to cover income taxes payable due to delivery of share based awards		(3,281)		(1,427)
Common shares issued under employee stock purchase plan		(183)		(311)
End of period		214,689		212,826
Accumulated earnings (deficit):
Beginning of period		20,385		(20,047)
Net income attributable to Masonite		46,981		29,885
Common shares repurchased and retired		(7,654)		(22,041)
End of period		59,712		(12,203)
Accumulated other comprehensive loss:
Beginning of period		(112,063)		(130,169)
Other comprehensive income (loss) attributable to Masonite, net of tax		2,337		(38,024)
End of period		(109,726)		(168,193)
Equity attributable to non-controlling interests:
Beginning of period		10,160		11,980
Net income attributable to non-controlling interests		1,167		1,152
Other comprehensive income (loss) attributable to non-controlling interests, net of tax		171		(579)
Dividends to non-controlling interests		(796)		(710)
End of period		10,702		11,843
Total equity, end of period		$	737,153	$	596,256

Common shares outstanding:
Beginning of period		24,422,934		24,869,921
Common shares issued for delivery of share based awards		154,458		134,911
Common shares issued under employee stock purchase plan		8,297		9,426
Common shares repurchased and retired		(84,983)		(567,271)
End of period		24,500,706		24,446,987

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

MASONITE INTERNATIONAL CORPORATION

Condensed Consolidated Statements of Cash Flows

(In thousands of U.S. dollars)

(Unaudited)


		Three Months Ended							Three Months Ended
Cash flows from operating activities:	Cash flows from operating activities:	March 29, 2020		March 31, 2019		Cash flows from operating activities:	April 4, 2021		March 29, 2020
Net income	Net income	$	31,037	$	4,979	Net income	$	48,148	$	31,037
Adjustments to reconcile net income to net cash flow provided by operating activities:	Adjustments to reconcile net income to net cash flow provided by operating activities:					Adjustments to reconcile net income to net cash flow provided by operating activities:
Loss on disposal of subsidiaries		—		4,605

Depreciation	Depreciation	16,018		18,285		Depreciation	18,279		16,018
Amortization	Amortization	6,459		7,597		Amortization	4,918		6,459
Share based compensation expense	Share based compensation expense	3,470		2,680		Share based compensation expense	4,418		3,470
Deferred income taxes	Deferred income taxes	6,160		(3,708)		Deferred income taxes	10,143		6,160
Unrealized foreign exchange loss (gain)		94		272
Unrealized foreign exchange (gain) loss						Unrealized foreign exchange (gain) loss	(253)		94
Share of income from equity investees, net of tax	Share of income from equity investees, net of tax	(911)		(898)		Share of income from equity investees, net of tax	(287)		(911)

Pension and post-retirement funding, net of expense	Pension and post-retirement funding, net of expense	(1,900)		(1,661)		Pension and post-retirement funding, net of expense	(1,631)		(1,900)
Non-cash accruals and interest	Non-cash accruals and interest	427		(562)		Non-cash accruals and interest	421		427
Loss on sale of property, plant and equipment		1,622		2,913
Asset impairment		—		10,625
(Gain) loss on sale of property, plant and equipment						(Gain) loss on sale of property, plant and equipment	(597)		1,622

Changes in assets and liabilities, net of acquisitions:	Changes in assets and liabilities, net of acquisitions:					Changes in assets and liabilities, net of acquisitions:
Accounts receivable	Accounts receivable	(37,990)		(6,587)		Accounts receivable	(74,132)		(37,990)
Inventories	Inventories	(5,388)		(5,902)		Inventories	(5,681)		(5,388)
Prepaid expenses		(491)		1,986
Prepaid expenses and other assets						Prepaid expenses and other assets	5,130		(491)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(15,163)		(16,193)		Accounts payable and accrued expenses	(9,838)		(15,163)
Other assets and liabilities	Other assets and liabilities	2,602		80		Other assets and liabilities	(13,363)		2,602
Net cash flow provided by operating activities		6,046		18,511
Net cash flow (used in) provided by operating activities						Net cash flow (used in) provided by operating activities	(14,325)		6,046
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Additions to property, plant and equipment	Additions to property, plant and equipment	(17,246)		(20,422)		Additions to property, plant and equipment	(13,930)		(17,246)
Acquisition of businesses, net of cash acquired	Acquisition of businesses, net of cash acquired	—		(219)		Acquisition of businesses, net of cash acquired	(160)		0
Proceeds from sale of subsidiaries, net of cash disposed		—		(230)

Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	15		88		Proceeds from sale of property, plant and equipment	2,335		15
Other investing activities	Other investing activities	(587)		(418)		Other investing activities	(559)		(587)
Net cash flow used in investing activities	Net cash flow used in investing activities	(17,818)		(21,201)		Net cash flow used in investing activities	(12,314)		(17,818)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Repayments of long-term debt	Repayments of long-term debt	(57)		(6)		Repayments of long-term debt	(945)		(57)

Tax withholding on share based awards	Tax withholding on share based awards	(1,427)		(1,090)		Tax withholding on share based awards	(3,281)		(1,427)
Distributions to non-controlling interests	Distributions to non-controlling interests	(710)		—		Distributions to non-controlling interests	(796)		(710)
Repurchases of common shares	Repurchases of common shares	(34,770)		(33,191)		Repurchases of common shares	(9,602)		(34,770)
Net cash flow used in financing activities	Net cash flow used in financing activities	(36,964)		(34,287)		Net cash flow used in financing activities	(14,624)		(36,964)
Net foreign currency translation adjustment on cash	Net foreign currency translation adjustment on cash	(3,853)		1,463		Net foreign currency translation adjustment on cash	(213)		(3,853)
Decrease in cash, cash equivalents and restricted cash	Decrease in cash, cash equivalents and restricted cash	(52,589)		(35,514)		Decrease in cash, cash equivalents and restricted cash	(41,476)		(52,589)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	177,608		126,141		Cash, cash equivalents and restricted cash, beginning of period	375,234		177,608
Cash, cash equivalents and restricted cash, at end of period	Cash, cash equivalents and restricted cash, at end of period	$	125,019	$	90,627	Cash, cash equivalents and restricted cash, at end of period	$	333,758	$	125,019

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

MASONITE INTERNATIONAL CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Business Overview and Significant Accounting Policies

Unless we state otherwise or the context otherwise requires, references to "Masonite," "we," "our," "us" and the "Company" in these notes to the condensed consolidated financial statements refer to Masonite International Corporation and its subsidiaries.

Description of Business

Masonite International Corporation is one of the largest manufacturers of doors in the world, with significant market share in both interior and exterior door products. Masonite operates 6361 manufacturing and distribution facilities in 8 countries and sells doors to customers throughout the world with our largest markets being the United States, Canada and the United Kingdom.

Basis of Presentation

We prepare these unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") and applicable rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments consisting of normal and recurring entries considered necessary for a fair presentation of the results for the interim periods presented have been included. All significant intercompany balances and transactions have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. These estimates are based on information available as of the date of the unaudited condensed consolidated financial statements; therefore, actual results could differ from those estimates. Interim results are not necessarily indicative of the results for a full year.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended ~~December 29, 2019,~~January 3, 2021, as filed with the SEC. Our fiscal year is the 52- or 53-week period ending on the Sunday closest to December 31. In a 52-week year, each fiscal quarter consists of 13 weeks. For ease of disclosure, the 13-week periods are referred to as three-month ~~periods. Our 2020 fiscal year, which ends on January 3, 2021, will contain 53 weeks of operating results, with~~periods and the ~~additional week occurring in the fourth quarter.~~52- or 53-week periods are referred to as year.

Changes in Accounting Standards and Policies

There have been no changes in the significant accounting policies from those that were disclosed in the fiscal year ~~2019~~2020 audited consolidated financial statements, other than as noted below.

Adoption of Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)”, which replaced the incurred loss methodology for recognizing credit losses with a current expected credit losses model. This standard applied to most financial assets, including trade receivables. Our prior accounts receivable policy is described in detail in our Annual Report on Form 10-K for the year ended December 29, 2019. We have adopted the new guidance using a modified retrospective approach as of December 30, 2019, the beginning of fiscal year 2020, and the adoption did not have a material impact on our financial statements and no adjustment was necessary to retained earnings on December 30, 2019.

~~The adoption of the standard resulted in a change in accounting policy for accounts receivable. Our new accounting policy for accounts receivable is presented below.~~

~~Accounts Receivable~~

We record accounts receivable as our products are received by our customers. Our customers are primarily retailers, distributors and contractors. We record an allowance for credit losses at the time that accounts receivable are initially recorded based on our historical write-off experience and the current economic environment as well as our

~~Table of Contents~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Unaudited)~~

expectations of future economic conditions. We reassess the allowance at each reporting date. When it becomes apparent, based on age or customer circumstances, that such amounts will not be collected, they are charged to the allowance. Payments subsequently received are credited to the credit loss expense account included within selling, general and administration expenses in the consolidated statements of comprehensive income. Generally, we do not require collateral for our accounts receivable.

~~Other Recent Accounting Pronouncements not yet Adopted~~

In December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes," as part of its Simplification Initiative to reduce the cost and complexity in accounting for income taxes. This standard removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. ~~The~~We have adopted the new guidance ~~is effective for interim~~prospectively as of January 4, 2021, the beginning of fiscal year 2021, and ~~annual periods beginning after December 15, 2020, with early~~the adoption ~~permitted. We are in the process of evaluating this guidance to determine the~~did not have a material impact ~~it may have~~ on our financial statements.

In August 2018, the FASB issued ASU 2018-14, "Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans," which amended ASC 715, "Compensation—Retirement Benefits." This standard is applicable for employers that sponsor defined benefit pension or other postretirement plans, and eliminates disclosures no longer considered cost beneficial, clarifies specific disclosure requirements for entities that provide aggregate disclosures for two or more plans and adds requirements for explanations for significant gains and losses related to changes in benefit obligations. ~~The~~We adopted the new guidance ~~will be effective for annual periods ending after December 15, 2020; early~~using a retrospective approach as of January 3, 2021, the end of fiscal year 2020, and the adoption ~~is permitted and retrospective application is required. We are in the process of evaluating this guidance to determine the~~did not have a material impact ~~it may have~~ on our financial ~~statements.~~

~~2. Acquisitions and Divestitures~~

~~Acquisitions~~

~~Top Doors~~

On August 29, 2019, we completed the acquisition of TOPDOORS, s.r.o. ("Top Doors") based in the Czech Republic for cash consideration of $1.8 million, net of cash acquired. Top Doors is a specialist manufacturer of door frames. The excess purchase price over the fair value of net assets acquired of $1.1 million was allocated to goodwill in our Europe segment. The purchase price allocation, net sales, net income (loss) attributable to Masonite and pro forma information for Top Doors are not presented as they were not material for any period presented.

~~Divestitures~~

~~Window Widgets~~

On December 13, 2019, we completed the sale of all of the capital stock of Window Widgets Limited ("WW") for consideration of $1.2 million, net of cash disposed. We have had no continuing involvement with WW subsequent to the sale. The divestiture of this business resulted in a loss on disposal of subsidiaries of $9.7 million, which was recognized in the fourth quarter of 2019 in the Europe segment. The total charge consists of $8.3 million relating to the write-off of the assets sold and other professional fees and $1.4 million relating to the recognition of the cumulative translation adjustment out of accumulated other comprehensive loss.

~~Performance Doorset Solutions Limited~~

On March 21, 2019, we completed the sale of all of the capital stock of Performance Doorset Solutions Limited ("PDS") for nominal consideration. We have had no continuing involvement with PDS subsequent to the sale, and the purchasers are not considered to be a related party. The divestiture of this business resulted in a loss on disposal of subsidiaries of $4.6 million, which was recognized in the first quarter of 2019 in the Europe segment. The total charge consists of $3.6 million relating to the write-off of the net assets sold and other professional fees and $1.0 million relating to the recognition of the cumulative translation adjustment out of accumulated other comprehensive loss.statements or disclosures.

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)”, which replaced the incurred loss methodology for recognizing credit losses with a current expected credit losses model. This standard applied to most financial assets, including trade receivables. Our prior accounts receivable policy is described in detail in our Annual Report on Form 10-K for the year ended January 3, 2021. We adopted the new guidance using a modified retrospective approach as of December 30, 2019, the beginning of fiscal year 2020, and the adoption did not have a material impact on our financial statements and no adjustment was necessary to retained earnings on December 30, 2019.

2. Acquisitions and Divestitures

Acquisitions

On December 4, 2020, we completed the acquisition of a Lowe's Companies, Inc. door fabrication facility in the United States for cash consideration of $3.9 million. During the first quarter of 2021, as a result of working capital adjustments we paid an additional $0.2 million. The purchase price allocation, net sales, net income (loss) attributable to Masonite and pro forma information for the acquisition are not presented as they were not material for any period presented.

On August 31, 2020, we acquired intellectual property and other assets related to an interior door technology for cash consideration of $1.9 million. The purchase price allocation, net sales, net income (loss) attributable to Masonite and pro forma information for the acquisition are not presented as they were not material for any period presented.

Divestitures

During the second quarter of 2020, we completed the liquidation of our legal entity in India. As a result, we recognized $2.1 million in loss on disposal of subsidiaries. The total charge consists of $2.3 million relating to the recognition of cumulative translation adjustment out of accumulated other comprehensive loss and $0.2 million relating to the write-off of net assets and other professional fees.

3. Accounts Receivable

Our customers consist mainly of ~~wholesale~~retailers, distributors ~~dealers~~ and ~~retail home centers.~~contractors. Our 10 largest customers accounted for ~~53.7%~~61.3% and ~~44.9%~~53.1% of total accounts receivable as of ~~March 29, 2020,~~April 4, 2021, and ~~December 29, 2019,~~January 3, 2021, respectively. Our largest customer, The Home Depot, Inc., accounted for more than 10% of the consolidated gross accounts receivable balance as of ~~March 29, 2020,~~April 4, 2021 and ~~December 29, 2019.~~January 3, 2021. In addition, we had one other retail customer that accounted for more than 10% of the consolidated gross accounts receivable balance as of April 4, 2021. The allowance for doubtful accounts balance was ~~$2.2~~$2.6 million and ~~$1.8~~$2.8 million as of ~~March 29, 2020,~~April 4, 2021, and ~~December 29, 2019,~~January 3, 2021, respectively.

We maintain an accounts receivable sales program with a third party (the "AR Sales Program"). Under the AR Sales Program, we can transfer ownership of eligible trade accounts receivable of certain customers. Receivables are sold outright to a third party who assumes the full risk of collection, without recourse to us in the event of a loss. Transfers of receivables under this program are accounted for as sales. Proceeds from the transfers reflect the face value of the accounts receivable less a discount. Receivables sold under the AR Sales Program are excluded from trade accounts receivable in the condensed consolidated balance sheets and are included in cash flows from operating activities in the condensed consolidated statements of cash flows. The discounts on the sales of trade accounts receivable sold, if any, under the AR Sales Program were not material for any of the periods presented and were recorded in selling, general and administration ~~expense~~expenses within the condensed consolidated statements of comprehensive ~~income.~~

~~4. Inventories~~

~~The amounts of inventory on hand were as follows as of the dates indicated:~~

(In thousands) March 29, 2020 December 29, 2019
Raw materials $ 175,775 $ 179,155
Finished goods 72,693 70,211
Provision for obsolete or aged inventory (7,493) (7,136)
Inventories, net $ 240,975 $ 242,230

~~5. Accrued Expenses~~

~~The details of our accrued expenses were as follows as of the dates indicated:~~

(In thousands) March 29, 2020 December 29, 2019
Accrued payroll $ 43,864 $ 60,876
Accrued rebates 30,971 33,556
Current portion of operating lease liabilities 21,559 20,980
Accrued interest 5,420 16,913
Other accruals 43,528 48,080
Total accrued expenses $ 145,342 $ 180,405

~~6. Long-Term Debt~~

(In thousands) March 29, 2020 December 29, 2019
5.375% senior unsecured notes due 2028 $ 500,000 $ 500,000
5.750% senior unsecured notes due 2026 300,000 300,000
Debt issuance costs (9,662) (9,985)
Other long-term debt 852 969
Total long-term debt $ 791,190 $ 790,984
income (loss).

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

4. Inventories

The amounts of inventory on hand were as follows as of the dates indicated:


(In thousands)	April 4, 2021		January 3, 2021
Raw materials	$	195,119	$	191,784
Finished goods	78,795		75,483
Provision for obsolete or aged inventory	(6,684)		(6,305)
Inventories, net	$	267,230	$	260,962

5. Accrued Expenses

The details of our accrued expenses were as follows as of the dates indicated:


(In thousands)	April 4, 2021		January 3, 2021
Accrued payroll	$	58,604	$	86,517
Accrued rebates	54,384		49,531
Current portion of operating lease liabilities	24,876		22,667
Accrued interest	5,410		16,435
Accrued legal settlement	40,000		40,000
Other accruals	66,784		62,566
Total accrued expenses	$	250,058	$	277,716

6. Long-Term Debt


(In thousands)	April 4, 2021		January 3, 2021
5.375% senior unsecured notes due 2028	$	500,000	$	500,000
5.750% senior unsecured notes due 2026	300,000		300,000
Debt issuance costs	(8,372)		(8,694)

Other long-term debt	0		936
Total long-term debt	$	791,628	$	792,242

Interest expense related to our consolidated indebtedness under senior unsecured notes was $11.4 million and $11.3 million for ~~both~~ the three months ended April 4, 2021 and March 29, 2020, ~~and March 31, 2019.~~respectively.

5.375% Senior Notes due 2028

On July 25, 2019, we issued $500.0 million aggregate principal senior unsecured notes (the "2028 Notes"). The 2028 Notes bear interest at 5.375%, payable in cash semiannually in arrears on February 1 and August 1 of each year and are due February 1, 2028. The 2028 Notes were issued at par. The net proceeds from issuance of the 2028 Notes, together with available cash balances, were used to redeem the remaining $500.0 million aggregate principal amount of similar senior unsecured notes, including the payment of related premiums, fees and expenses.

Information concerning obligations under the 2028 Notes and the indenture governing them are described in detail in our Annual Report on Form 10-K for the year ended ~~December 29, 2019.~~January 3, 2021. As of ~~March 29, 2020,~~April 4, 2021, we were in compliance with all covenants under the indenture governing the 2028 Notes.

5.750% Senior Notes due 2026

On August 27, 2018, we issued $300.0 million aggregate principal senior unsecured notes (the "2026 Notes"). The 2026 Notes bear interest at 5.750% per annum, payable in cash semiannually in arrears on March 15 and September 15 of each year and are due September 15, 2026. The 2026 Notes were issued at par.

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Information concerning obligations under the 2026 Notes and the indenture governing them are described in detail in our Annual Report on Form 10-K for the year ended ~~December 29, 2019.~~January 3, 2021. As of ~~March 29, 2020,~~April 4, 2021, we were in compliance with all covenants under the indenture governing the 2026 Notes.

ABL Facility

On January 31, 2019, we and certain of our subsidiaries entered into a $250.0 million asset-based revolving credit facility (the "ABL Facility") maturing on January 31, 2024, which replaced the previous facility. Borrowings under the ABL Facility bear interest at a rate equal to, at our option, (i) the United States, Canadian or United Kingdom Base Rate (each as defined in the credit agreement relating to the ABL Facility, the "Amended and Restated Credit Agreement") plus a margin ranging from 0.25% to 0.50% per annum, or (ii) the Adjusted LIBO Rate or BA Rate (each as defined in the Amended and Restated Credit Agreement), plus a margin ranging from 1.25% to 1.50% per annum. In addition to paying interest on any outstanding principal under the ABL Facility, a commitment fee is payable on the undrawn portion of the ABL Facility in an amount equal to 0.25% per annum of the average daily balance of unused commitments during each calendar quarter.

The ABL Facility contains various customary representations, warranties by us and covenants that are described in detail in our Annual Report on Form 10-K for the year ended ~~December 29, 2019.~~January 3, 2021. As of ~~March 29, 2020,~~April 4, 2021, we were in compliance with all covenants under the credit agreement governing the ABL Facility. We had availability of ~~$185.3~~$220.5 million under our ABL Facility and there were 0 amounts outstanding as of ~~March 29, 2020.~~April 4, 2021.

7. Commitments and Contingencies

The following discussion describes material developments in previously disclosed legal proceedings that occurred since January 3, 2021. Refer to Note 10. Commitments and Contingencies in the consolidated financial statements in our Annual Report on Form 10-K for the year ended January 3, 2021, for a full description of the previously disclosed legal proceedings.

Indemnifications

We have provided customary indemnifications to our landlords under certain property lease agreements for claims by third parties in connection with their use of the premises. We also have provided routine indemnifications against adverse effects related to changes in tax laws and patent infringements by third parties. The maximum amount of these indemnifications cannot be reasonably estimated due to their nature. In some cases, we have recourse against other parties to mitigate the risk of loss from these indemnifications. Historically, we have not made any significant payments relating to such indemnifications.

Antitrust Class Action Proceedings- United States

With respect to the putative class action antitrust cases pending in the Eastern District of Virginia, the final Court approval hearing date for the direct purchaser settlement has been set for June 1, 2021, and the final approval hearing date for the indirect purchaser settlement has been set for July 13, 2021.

Class Action Proceedings - Canada

With respect to the putative class action antitrust case pending in Quebec, Canada, all parties in the Quebec proceeding filed a motion with the Quebec court seeking to stay the proceeding on December 22, 2020. The Quebec Court has not yet released its decision regarding this motion.

With respect to the putative class action antitrust case pending in the Federal Court of Canada, the plaintiff served its certification record on March 31, 2021. The parties will confer to prepare a mutually agreeable timeline for the steps leading up to the plaintiff's certification motion and will update the Federal Court by way of a case conference on or before May 31, 2021. We have not recognized an expense related to damages in connection with this matter because,

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

~~7. Commitments and Contingencies~~although an adverse outcome is reasonably possible, the amount or range of any potential loss cannot be reasonably estimated.

~~The following discussion describes~~While we intend to defend against these claims vigorously, there can be no assurance that the ultimate resolution of this litigation will not have a material, ~~developments in previously disclosed legal proceedings that occurred since December 29, 2019. Refer to Note 10. Commitments and Contingencies in the~~adverse effect on our consolidated financial ~~statements in our Annual Report on Form 10-K for the year ended December 29, 2019, for a full description~~condition or results of ~~the previously disclosed legal proceedings.~~operations.

~~Class Action Proceedings~~General

~~With respect~~In addition to the putative antitrust class action cases pending in the Eastern District of Virginia, the parties are in the midst of class certification briefing and expert discovery. Due to the ongoing coronavirus pandemic, on March 17, 2020, the Court extended all case deadlines by 60 days at the parties’ request. Expert discovery is now expected to close in June 2020. Briefing on class certification discovery is expected to be completed by June 9, 2020. Briefing on dispositive motions is expected to be completed by September 7, 2020. The Court has reset the presumptive trial date as January 11, 2021. On May 4, 2020, the Court ruled on Defendants’ December 16, 2019, partial motion to dismiss plaintiffs’ reinstated claims, granting it in part and denying it in part. By granting the motion in part, the Court dismissed the indirect purchasers' claims under Kansas, Utah and Virginia consumer protection laws and it also limited the time period during which indirect purchasers from Hawaii, Kansas, Maine, New Hampshire, North Dakota, Utah, Virginia, West Virginia and Wisconsin could claim damages.

~~In addition,~~above, from time to time, we are involved in various claims and legal ~~actions.~~actions, including but not limited to wage and hour and labor lawsuits. In the opinion of management, the ultimate disposition of these matters, individually and in the aggregate, will not have a material adverse effect on our financial condition, results of operations or cash flows.

8. Share Based Compensation Plans

Share based compensation expense was ~~$3.5~~$4.4 million and ~~$2.7~~$3.5 million for the three months ended April 4, 2021 and March 29, 2020, ~~and March 31, 2019,~~ respectively. As of ~~March 29, 2020,~~April 4, 2021, the total remaining unrecognized compensation expense related to share based compensation amounted to ~~$24.5~~$29.6 million, which will be amortized over the weighted average remaining requisite service period of 1.9 years.

Equity Incentive Plans

Our equity incentive plans under the 2009 Plan and the 2012 Plan are described in detail and defined in our Annual Report on Form 10-K for the year ended ~~December 29, 2019.~~January 3, 2021. The aggregate number of common shares that can be issued with respect to equity awards under the 2012 Plan cannot exceed 2,000,000 shares plus the number of shares subject to existing grants under the 2009 Plan that may expire or be forfeited or canceled. As of ~~March 29, 2020,~~April 4, 2021, there were ~~675,354~~614,231 shares of common stock available for future issuance under the 2012 Plan.

On March 10, 2021, the Board of Directors adopted the Masonite International Corporation 2021 Omnibus Incentive Equity Plan (the "2021 Plan"), subject to approval by our shareholders at the Annual General Meeting of Shareholders on May 13, 2021. The 2021 Plan is effective for ten years from the date of adoption. The aggregate number of common shares that can be issued with respect to equity awards under the 2021 Plan cannot exceed 880,000 shares plus the number of shares reserved for the 2012 Plan that is in excess of the number of shares outstanding plus the number of shares subject to existing grants under the 2012 Plan that may expire or be forfeited or cancelled.

Deferred Compensation Plan

We offer to certain of our employees and directors a Deferred Compensation Plan, which is further described in our Annual Report on Form 10-K for the year ended ~~December 29, 2019.~~January 3, 2021. As of ~~March 29, 2020,~~April 4, 2021, the liability and asset relating to deferred compensation had a fair value of ~~$5.1~~$8.0 million and ~~$4.9~~$8.3 million, respectively. As of ~~March 29, 2020,~~April 4, 2021, participation in the deferred compensation plan is limited and no restricted stock awards have been deferred into the deferred compensation plan. All plan investments are categorized as having Level 1 valuation inputs as established by the FASB’s Fair Value Framework.

Stock Appreciation Rights

We have granted Stock Appreciation Rights ("SARs") to certain employees under both the 2009 Plan and the 2012 Plan, which entitle the recipient to the appreciation in value of a number of common shares over the exercise price over a period of time, each as specified in the applicable award agreement. The exercise price of any SAR granted may not be less than the fair market value of our common shares on the date of grant. The compensation expense for the SARs is measured based on the fair value of the SARs at the date of grant and is recognized over the requisite service period. The SARs vest over a maximum of three years, have a life of ten years and settle in common shares. It is assumed that all time-based SARs will vest. We recognize forfeitures of SARs in the period in which they occur.

The total fair value of SARs vested was $0.7 million during the three months ended April 4, 2021.

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

~~The total fair value of SARs vested was $0.9 million and $1.1 million during the three months ended March 29, 2020, and March 31, 2019, respectively.~~


Three Months Ended March 29, 2020		Stock Appreciation Rights	Aggregate Intrinsic Value (in thousands)		Weighted Average Exercise Price		Average Remaining Contractual Life (Years)
Three Months Ended April 4, 2021								Three Months Ended April 4, 2021	Stock Appreciation Rights	Aggregate Intrinsic Value (in thousands)		Weighted Average Exercise Price		Average Remaining Contractual Life (Years)
Outstanding, beginning of period	Outstanding, beginning of period	404,447	$	7,615	$	53.62	4.7	Outstanding, beginning of period	207,094	$	7,409	$	62.56	7.5
Granted	Granted	29,522			87.18			Granted	28,707			107.68
Exercised	Exercised	(44,850)	2,155		31.82			Exercised	(11,240)	664		52.32
Forfeited		(4,613)			57.52

Outstanding, end of period	Outstanding, end of period	384,506	$	986	$	58.70	5.2	Outstanding, end of period	224,561	$	11,469	$	68.84	7.7

Exercisable, end of period	Exercisable, end of period	241,134	$	986	$	55.14	3.3	Exercisable, end of period	120,764	$	6,978	$	62.14	6.7

The value of SARs granted is determined using the Black-Scholes-Merton valuation model, and the corresponding expense is expected to be recognized over the average requisite service period of 2.0 ~~years for all periods presented.~~years. Expected volatility is based upon the historical volatility of our common shares amongst other considerations. The expected term is calculated using the simplified method, due to insufficient exercise activity during recent years as a basis from which to estimate future exercise patterns. The weighted average grant date assumptions used for the SARs granted were as follows for the periods indicated:


	~~2020 Grants~~
~~SAR value (model conclusion)~~	$	~~21.51~~
~~Risk-free rate~~	~~1.3~~		%
~~Expected dividend yield~~	~~0.0~~		%
~~Expected volatility~~	~~22.4~~		%
~~Expected term (years)~~	~~6.0~~


	2021 Grants
SAR value (model conclusion)	$	28.08
Risk-free rate	0.8		%
Expected dividend yield	0.0		%
Expected volatility	25.2		%
Expected term (years)	6.0

Restricted Stock Units

We have granted Restricted Stock Units ("RSUs") to directors and certain employees under ~~both the 2009 Plan and~~ the 2012 Plan. The RSUs confer the right to receive shares of our common stock at a specified future date or when certain conditions are met. The compensation expense for the RSUs awarded is based on the fair value of the RSUs at the date of grant, which is equal to the stock price on the date of grant, and is recognized over the requisite service period. The RSUs vest over a maximum of three years and call for the underlying shares to be delivered no later than 30 days following the vesting date unless the participant is subject to a blackout period. In such case, the shares are to be delivered once the blackout restriction has been lifted. It is assumed that all time-based RSUs will vest. We recognize forfeitures of RSUs in the period in which they occur.

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)


		Three Months Ended
		March 29, 2020
		Total Restricted Stock Units Outstanding	Weighted Average Grant Date Fair Value
Three Months Ended April 4, 2021					Three Months Ended April 4, 2021	Total Restricted Stock Units Outstanding	Weighted Average Grant Date Fair Value
Outstanding, beginning of period	Outstanding, beginning of period	523,207	$	59.58	Outstanding, beginning of period	488,057	$	68.15
Granted	Granted	177,866	81.91		Granted	169,790	108.99
Performance adjustment⁽¹⁾	Performance adjustment⁽¹⁾	(59,936)	67.50		Performance adjustment (1)	14,474	63.05
Delivered	Delivered	(79,449)			Delivered	(149,818)	67.62
Withheld to cover⁽²⁾	Withheld to cover⁽²⁾	(8,235)			Withheld to cover (2)	(30,177)
Forfeited	Forfeited	(17,572)			Forfeited	(2,932)	70.47
Outstanding, end of period	Outstanding, end of period	535,881	$	65.46	Outstanding, end of period	489,394	$	83.00

____________

(1) Performance-based RSUs are presented as outstanding, granted and forfeited in the table above assuming targets are met and the awards pay out at 100%. These awards are settled with payouts ranging from zero to 200% of the target award value depending on achievement. The performance adjustment represents the difference in shares ultimately awarded due to performance attainment above or below target.

(2) A portion of the vested RSUs delivered were net share settled to cover statutory requirements for income and other employment taxes. We remit the equivalent cash to the appropriate taxing authorities. These net share settlements had the effect of share repurchases by us as we reduced and retired the number of shares that would have otherwise been issued as a result of the vesting.

Approximately two-thirds of the RSUs granted during the three months ended ~~March 29, 2020,~~April 4, 2021, vest at specified future dates with only service requirements, while the remaining portion of the RSUs vest based on both performance and service requirements. The ~~expense for~~value of RSUs granted ~~during~~in the three months ended ~~March 29, 2020,~~April 4, 2021, is being recognized over the weighted average requisite service period of ~~2.5~~2.4 years. ~~87,684 RSUs vested during~~During the three months ended ~~March 29, 2020,~~April 4, 2021, there were 179,995 RSUs vested at a fair value of ~~$5.6~~$11.9 million.

9. Restructuring Costs

In November 2020, we began implementing a plan to improve overall business performance that includes the reorganization of our manufacturing capacity and a reduction of our overhead and selling, general and administration workforce primarily in our Architectural reportable segment as well as limited actions in the North American Residential reportable segment. The reorganization of our manufacturing capacity involves specific facilities in the Architectural segment and costs associated with the closure of these facilities and related headcount reductions began taking place in the fourth quarter of 2020 (collectively, the "2020 Plan"). Costs associated with the 2020 Plan include severance and closure charges and will continue through 2021. As of April 4, 2021, we expect to incur approximately $3 million to $4 million of additional charges related to the 2020 Plan.

In February 2019, we began implementing a plan to improve overall business performance that includes the reorganization of our manufacturing capacity and a reduction of our overhead and selling, general and administration workforce across all of our reportable segments and in our head offices. The reorganization of our manufacturing capacity involves specific plants in the North American Residential and Architectural segments and costs associated with the closure of these plants and related headcount reductions began taking place in the first quarter of 2019 (collectively, the "2019 Plan"). Costs associated with the 2019 Plan include severance, retention and closure charges and will continue through 2020. Additionally, the plan to divest non-core assets was determined to be a triggering event requiring a test of the carrying value of the definite-lived assets relating to the divestitures, as further described in Note 10.2021. As of ~~March 29, 2020,~~April 4, 2021, we expect to incur approximately $5$1 million to $6$2 million of additional charges related to the 2019 Plan.

During the fourth quarter of 2018, we began implementing a plan to reorganize and consolidate certain aspects of our United Kingdom head office function and optimize our portfolio by divesting non-core assets to enable more effective and consistent business processes in the Europe segment. In addition, in the North American Residential segment we announced a new facility that will optimize and expand capacity through increased automation, which resulted in the closure of one existing facility and related headcount reductions beginning in the second quarter of 2019 (collectively, the ~~"2018 Plan"~~“2018 Plan”). Costs associated with the 2018 Plan ~~include~~included severance, retention and closure charges ~~and continued throughout 2019. As of March 29, 2020, we do not expect to incur any material future charges related to the 2018 Plan.~~

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

and continued throughout 2019. As of April 4, 2021, we do not expect to incur any material future charges related to the 2018 Plan.

The following ~~table summarizes~~tables summarize the restructuring charges recorded for the periods indicated:


		Three Months Ended March 29, 2020																	Three Months Ended April 4, 2021
(In thousands)	(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total		(In thousands)	North American Residential		Architectural		Corporate & Other		Total
2020 Plan												2020 Plan	$	0	$	1,514	$	0	$	1,514
2019 Plan	2019 Plan	$	728	$	(37)	$	862	$	267	$	1,820	2019 Plan	(361)		339		151		129
2018 Plan		121		—		—		—		121

Total Restructuring Costs	Total Restructuring Costs	$	849	$	(37)	$	862	$	267	$	1,941	Total Restructuring Costs	$	(361)	$	1,853	$	151	$	1,643


		Three Months Ended March 31, 2019																			Three Months Ended March 29, 2020
(In thousands)	(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total		(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total
2019 Plan	2019 Plan	$	1,459	$	331	$	604	$	394	$	2,788	2019 Plan	$	728	$	(37)	$	862	$	267	$	1,820
2018 Plan	2018 Plan	421		531		—		—		952		2018 Plan	121		0		0		0		121
Total Restructuring Costs	Total Restructuring Costs	$	1,880	$	862	$	604	$	394	$	3,740	Total Restructuring Costs	$	849	$	(37)	$	862	$	267	$	1,941

Cumulative Amount Incurred Through March 29, 2020
(In thousands) North American Residential Europe Architectural Corporate & Other Total
2019 Plan $ 6,187 $ 359 $ 1,368 $ 1,286 $ 9,200
2018 Plan 1,866 2,275 — — 4,141
Total Restructuring Costs $ 8,053 $ 2,634 $ 1,368 $ 1,286 $ 13,341


	Cumulative Amount Incurred Through April 4, 2021
(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total
2020 Plan	$	29	$	0	$	3,247	$	0	$	3,276
2019 Plan	8,961		359		2,010		2,218		13,548
2018 Plan	2,180		2,275		0		0		4,455
Total Restructuring Costs	$	11,170	$	2,634	$	5,257	$	2,218	$	21,279

The changes in the accrual for restructuring by activity were as follows for the periods indicated:


(In thousands)	(In thousands)	December 29, 2019		Severance		Closure Costs		Cash Payments		March 29, 2020		(In thousands)	January 3, 2021		Severance		Closure Costs		Cash Payments		April 4, 2021
2020 Plan												2020 Plan	$	1,492	$	149	$	1,365	$	(2,296)	$	710
2019 Plan	2019 Plan	$	1,535	$	187	$	1,633	$	(2,769)	$	586	2019 Plan	291		85		44		(294)		126
2018 Plan		—		103		18		(121)		—

Total	Total	$	1,535	$	290	$	1,651	$	(2,890)	$	586	Total	$	1,783	$	234	$	1,409	$	(2,590)	$	836

(In thousands) December 30, 2018 Severance Closure Costs Cash Payments March 31, 2019
2019 Plan $ — $ 2,770 $ 18 $ (1,035) $ 1,753
2018 Plan 596 983 (31) (546) 1,002
Other 58 — — (17) 41
Total $ 654 $ 3,753 $ (13) $ (1,598) $ 2,796


(In thousands)	December 29, 2019		Severance		Closure Costs		Cash Payments		March 29, 2020
2019 Plan	$	1,535	$	187	$	1,633	$	(2,769)	$	586
2018 Plan	0		103		18		(121)		0
Total	$	1,535	$	290	$	1,651	$	(2,890)	$	586

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

10. ~~Asset Impairment~~

During the three months ended March 31, 2019, we recognized asset impairment charges of $10.6 million related to two asset groups in the North American Residential segment, as a result of announced plant closures under the 2019 Plan. This amount was determined based upon the excess of the asset groups' carrying values of property, plant and equipment and operating lease right-of-use assets over the respective fair values of such assets, determined using a discounted cash flows approach for each asset group. Each of these valuations was performed on a non-recurring basis and is categorized as having Level 3 valuation inputs as established by the FASB's Fair Value Framework. The Level 3 unobservable inputs include an estimate of future cash flows and the salvage value for each of the asset groups. The fair value of the asset groups was determined to be $11.3 million, compared to a book value of $21.9 million, with the difference representing the asset impairment charges recorded in the condensed consolidated statements of comprehensive income.

~~11.~~ Income Taxes

The effective tax rate differs from the Canadian statutory rate of ~~26.7%~~26.5% primarily due to mix of earnings in foreign jurisdictions that are subject to tax rates which differ from the Canadian statutory ~~rate and changes in our valuation allowances.~~rate. In addition, we recognized ~~$0.7~~$2.0 million of income tax benefit due to the exercise and delivery of share-based awards during the three months ended ~~March 29, 2020,~~April 4, 2021, compared to ~~$0.1~~$0.7 million of income tax benefit during the three months ended March ~~31, 2019.~~

We have historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. Due to the uncertainties stemming from the impact of the COVID-19 pandemic on our operations, we have used a discrete effective tax rate method to calculate taxes for the three months ended March 29, 2020.

On March 27, 2020, President Trump signed into U.S. federal law the CARES Act, which is aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. We are analyzing the different aspects of the CARES Act and other governmental programs to determine whether any specific provisions may impact us.

~~12.~~11. Earnings Per Share

Basic earnings per share ("EPS") is calculated by dividing earnings attributable to Masonite by the weighted average number of our common shares outstanding during the period. Diluted EPS is calculated by dividing earnings attributable to Masonite by the weighted average number of common shares plus the incremental number of shares issuable from non-vested and vested RSUs and SARs outstanding during the period.

~~Table of Contents~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Unaudited)~~


(In thousands, except share and per share information)	(In thousands, except share and per share information)	Three Months Ended								(In thousands, except share and per share information)			Three Months Ended
				March 29, 2020			March 31, 2019		(In thousands, except share and per share information)					April 4, 2021				March 29, 2020
Net income attributable to Masonite	Net income attributable to Masonite	$	29,885		$	3,789		Net income attributable to Masonite			$	46,981			$	29,885

Shares used in computing basic earnings per share	Shares used in computing basic earnings per share	24,861,442			25,574,910			Shares used in computing basic earnings per share					24,469,653				24,861,442
Effect of dilutive securities:	Effect of dilutive securities:							Effect of dilutive securities:
Incremental shares issuable under share compensation plans	Incremental shares issuable under share compensation plans	353,322			376,574			Incremental shares issuable under share compensation plans					448,856				353,322
Shares used in computing diluted earnings per share	Shares used in computing diluted earnings per share	25,214,764			25,951,484			Shares used in computing diluted earnings per share					24,918,509				25,214,764

Basic earnings per common share attributable to Masonite	Basic earnings per common share attributable to Masonite	$	1.20		$	0.15		Basic earnings per common share attributable to Masonite					$	1.92			$	1.20
Diluted earnings per common share attributable to Masonite	Diluted earnings per common share attributable to Masonite	$	1.19		$	0.15		Diluted earnings per common share attributable to Masonite					$	1.89			$	1.19

Anti-dilutive instruments excluded from diluted earnings per common share	Anti-dilutive instruments excluded from diluted earnings per common share	258,773			235,650			Anti-dilutive instruments excluded from diluted earnings per common share					28,707				258,773

The weighted average number of shares outstanding utilized for the diluted EPS calculation contemplates the exercise of all currently outstanding SARs and the conversion of all RSUs. The dilutive effect of such equity awards is calculated based on the weighted average share price for each fiscal period using the treasury stock method.

~~13.~~12. Segment Information

Our reportable segments are organized and managed principally by end market: North American Residential, Europe and Architectural. The North American Residential reportable segment is the aggregation of the Wholesale and Retail operating segments. The Europe reportable segment is the aggregation of the Europe Interior and Europe Exterior operating segments. The Architectural reportable segment consists solely of the Architectural operating segment. The Corporate & Other category includes unallocated corporate costs and the results of immaterial operating segments which were not aggregated into any reportable segment. ~~Operating segments are aggregated into reportable segments only if they exhibit similar economic characteristics.~~ In addition to similar economic characteristics we also consider the following factors in determining the reportable segments: the nature of business activities, the management structure directly accountable to our chief operating decision maker for operating and administrative activities, availability of discrete financial information and information presented to the Board of Directors and investors.

Our management reviews net sales and Adjusted EBITDA (as defined below) to evaluate segment performance and allocate resources. Net assets are not allocated to the reportable segments. Adjusted EBITDA is a non-GAAP financial measure which does not have a standardized meaning under GAAP and is unlikely to be comparable to similar measures used by other companies. Adjusted EBITDA should not be considered as an alternative to either net income or operating cash flows determined in accordance with GAAP. Adjusted EBITDA is defined as net income (loss) attributable to Masonite adjusted to exclude the following items:

• depreciation;

• amortization;

• share based compensation expense;

• loss (gain) on disposal of property, plant and equipment;

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

• registration and listing fees;

• restructuring costs;

• asset impairment;

• loss (gain) on disposal of subsidiaries;

• interest expense (income), net;

• loss on extinguishment of debt;

• other expense (income), net;

• income tax expense (benefit);

• other items;

• loss (income) from discontinued operations, net of tax; and

• net income (loss) attributable to non-controlling interest.

~~Table~~This definition of ~~Contents~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Unaudited)~~

Adjusted EBITDA was updated in the third quarter of 2020 to exclude other items as these charges are not part of our underlying business performance. This change had no impact to Adjusted EBITDA for the three months ended March 29, 2020. This definition of Adjusted EBITDA differs from the definitions of EBITDA contained in the indentures governing the 2028 Notes and 2026 Notes and the credit agreement governing the ABL Facility. Although Adjusted EBITDA is not a measure of financial condition or performance determined in accordance with GAAP, it is used to evaluate and compare the operating performance of the segments and it is one of the primary measures used to determine employee incentive compensation. Intersegment sales are recorded using market prices.

Certain information with respect to reportable segments is as follows for the periods indicated:


		Three Months Ended March 29, 2020																			Three Months Ended April 4, 2021
(In thousands)	(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total		(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total
Net sales	Net sales	$	384,445	$	71,156	$	94,555	$	5,427	$	555,583	Net sales	$	477,229	$	90,206	$	78,074	$	6,343	$	651,852
Intersegment sales	Intersegment sales	(588)		(430)		(3,337)		—		(4,355)		Intersegment sales	(765)		(1,667)		(3,083)		0		(5,515)
Net sales to external customers	Net sales to external customers	$	383,857	$	70,726	$	91,218	$	5,427	$	551,228	Net sales to external customers	$	476,464	$	88,539	$	74,991	$	6,343	$	646,337

Adjusted EBITDA	Adjusted EBITDA	$	71,696	$	9,679	$	10,582	$	(10,440)	$	81,517	Adjusted EBITDA	$	94,482	$	16,755	$	1,994	$	(11,206)	$	102,025

Three Months Ended March 31, 2019
(In thousands) North American Residential Europe Architectural Corporate & Other Total
Net sales $ 354,802 $ 84,739 $ 88,353 $ 6,728 $ 534,622
Intersegment sales (1,077) (472) (2,762) — (4,311)
Net sales to external customers $ 353,725 $ 84,267 $ 85,591 $ 6,728 $ 530,311
Adjusted EBITDA $ 53,621 $ 9,997 $ 7,614 $ (5,753) $ 65,479


	Three Months Ended March 29, 2020
(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total
Net sales	$	384,445	$	71,156	$	94,555	$	5,427	$	555,583
Intersegment sales	(588)		(430)		(3,337)		0		(4,355)
Net sales to external customers	$	383,857	$	70,726	$	91,218	$	5,427	$	551,228

Adjusted EBITDA	$	71,696	$	9,679	$	10,582	$	(10,440)	$	81,517

1514

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

A reconciliation of our net income ~~(loss)~~ attributable to Masonite to consolidated Adjusted EBITDA is set forth as follows for the periods indicated:


		Three Months Ended					Three Months Ended
(In thousands)	(In thousands)	March 29, 2020		March 31, 2019		(In thousands)	April 4, 2021		March 29, 2020
Net income attributable to Masonite	Net income attributable to Masonite	$	29,885	$	3,789	Net income attributable to Masonite	$	46,981	$	29,885
Plus:	Plus:					Plus:
Depreciation	Depreciation	16,018		18,285		Depreciation	18,279		16,018
Amortization	Amortization	6,459		7,597		Amortization	4,918		6,459
Share based compensation expense	Share based compensation expense	3,470		2,680		Share based compensation expense	4,418		3,470
Loss on disposal of property, plant and equipment		1,622		2,913
(Gain) loss on disposal of property, plant and equipment						(Gain) loss on disposal of property, plant and equipment	(597)		1,622
Restructuring costs	Restructuring costs	1,941		3,740		Restructuring costs	1,643		1,941
Asset impairment		—		10,625
Loss on disposal of subsidiaries		—		4,605

Interest expense, net	Interest expense, net	11,282		11,127		Interest expense, net	11,946		11,282

Other expense (income), net		49		(1,130)
Other (income) expense, net						Other (income) expense, net	(1,343)		49
Income tax expense	Income tax expense	9,639		58		Income tax expense	14,613		9,639

Net income attributable to non-controlling interest	Net income attributable to non-controlling interest	1,152		1,190		Net income attributable to non-controlling interest	1,167		1,152
Adjusted EBITDA	Adjusted EBITDA	$	81,517	$	65,479	Adjusted EBITDA	$	102,025	$	81,517

~~Table of Contents~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Unaudited)~~

~~14.~~13. Accumulated Other Comprehensive Loss and Other Comprehensive Income (Loss)

A rollforward of the components of accumulated other comprehensive loss is as follows for the periods indicated:


		Three Months Ended					Three Months Ended
(In thousands)	(In thousands)	March 29, 2020		March 31, 2019		(In thousands)	April 4, 2021		March 29, 2020
Accumulated foreign currency translation losses, beginning of period	Accumulated foreign currency translation losses, beginning of period	$	(113,336)	$	(129,930)	Accumulated foreign currency translation losses, beginning of period	$	(93,684)	$	(113,336)
Foreign currency translation gain (loss)	Foreign currency translation gain (loss)	(38,687)		12,990		Foreign currency translation gain (loss)	2,228		(38,687)
Income tax benefit (expense) on foreign currency translation gain		(44)		12
Cumulative translation adjustment recognized upon deconsolidation of subsidiary		—		1,001
Income tax benefit (expense) on foreign currency translation gain (loss)						Income tax benefit (expense) on foreign currency translation gain (loss)	14		(44)

Less: foreign currency translation gain (loss) attributable to non-controlling interest	Less: foreign currency translation gain (loss) attributable to non-controlling interest	(579)		216		Less: foreign currency translation gain (loss) attributable to non-controlling interest	171		(579)
Accumulated foreign currency translation losses, end of period	Accumulated foreign currency translation losses, end of period	(151,488)		(116,143)		Accumulated foreign currency translation losses, end of period	(91,613)		(151,488)

Accumulated pension and other post-retirement adjustments, beginning of period	Accumulated pension and other post-retirement adjustments, beginning of period	(16,833)		(22,989)		Accumulated pension and other post-retirement adjustments, beginning of period	(18,379)		(16,833)

Amortization of actuarial net losses	Amortization of actuarial net losses	173		404		Amortization of actuarial net losses	334		173
Income tax expense on amortization of actuarial net losses	Income tax expense on amortization of actuarial net losses	(45)		(105)		Income tax expense on amortization of actuarial net losses	(68)		(45)

Accumulated pension and other post-retirement adjustments	Accumulated pension and other post-retirement adjustments	(16,705)		(22,690)		Accumulated pension and other post-retirement adjustments	(18,113)		(16,705)

Accumulated other comprehensive loss	Accumulated other comprehensive loss	$	(168,193)	$	(138,833)	Accumulated other comprehensive loss	$	(109,726)	$	(168,193)

Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	$	(38,603)	$	14,302	Other comprehensive income (loss), net of tax	$	2,508	$	(38,603)
Less: other comprehensive income (loss) attributable to non-controlling interest	Less: other comprehensive income (loss) attributable to non-controlling interest	(579)		216		Less: other comprehensive income (loss) attributable to non-controlling interest	171		(579)
Other comprehensive income (loss) attributable to Masonite	Other comprehensive income (loss) attributable to Masonite	$	(38,024)	$	14,086	Other comprehensive income (loss) attributable to Masonite	$	2,337	$	(38,024)

Cumulative translation adjustments are reclassified out of accumulated other comprehensive loss into loss on disposal of subsidiaries in the condensed consolidated statements of comprehensive ~~income.~~income (loss). Actuarial net losses ~~are reclassified out of accumulated other comprehensive loss into cost of goods sold in the condensed consolidated statements of comprehensive income.~~

Foreign currency translation losses as a result of translating our foreign assets and liabilities into U.S. dollars during the three months ended March 29, 2020, were $38.7 million primarily driven by the weakening of the Pound Sterling, the Canadian Dollar and the Mexican Peso in comparison to the U.S. Dollar.

1715

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

~~15.~~are reclassified out of accumulated other comprehensive loss into cost of goods sold in the condensed consolidated statements of comprehensive income (loss).

Foreign currency translation gains as a result of translating our foreign assets and liabilities into U.S. dollars during the three months ended April 4, 2021, were $2.2 million, primarily driven by strengthening of the Pound Sterling and the Canadian Dollar, partially offset by weakening of the Euro in comparison to the U.S. Dollar during the period.

14. Supplemental Cash Flow Information

Certain cash and non-cash transactions were as follows for the periods indicated:


		Three Months Ended							Three Months Ended
(In thousands)	(In thousands)	March 29, 2020		March 31, 2019		(In thousands)	April 4, 2021		March 29, 2020
Transactions involving cash:	Transactions involving cash:					Transactions involving cash:
Interest paid	Interest paid	$	22,662	$	23,785	Interest paid	$	22,247	$	22,662
Interest received	Interest received	641		672		Interest received	25		641
Income taxes paid	Income taxes paid	3,030		1,308		Income taxes paid	16,076		3,030
Income tax refunds	Income tax refunds	392		—		Income tax refunds	438		392
Cash paid for operating lease liabilities	Cash paid for operating lease liabilities	6,835		6,290		Cash paid for operating lease liabilities	7,345		6,835
Cash paid for finance lease liabilities	Cash paid for finance lease liabilities	317		—		Cash paid for finance lease liabilities	327		317
Non-cash transactions from operating activities:	Non-cash transactions from operating activities:					Non-cash transactions from operating activities:
Right-of-use assets acquired under operating leases	Right-of-use assets acquired under operating leases	3,863		20,289		Right-of-use assets acquired under operating leases	4,662		3,863

The following reconciles total cash, cash equivalents and restricted cash as of the dates indicated:


		March 29, 2020		December 29, 2019			April 4, 2021		January 3, 2021
Cash and cash equivalents	Cash and cash equivalents	$	114,375	$	166,964	Cash and cash equivalents	$	323,198	$	364,674
Restricted cash	Restricted cash	10,644		10,644		Restricted cash	10,560		10,560
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	125,019	$	177,608	Total cash, cash equivalents and restricted cash	$	333,758	$	375,234

Property, plant and equipment additions in accounts payable were ~~$4.6~~$2.7 million and ~~$6.3~~$5.6 million as of ~~March 29, 2020,~~April 4, 2021, and ~~December 29, 2019,~~January 3, 2021, respectively.

~~16.~~15. Fair Value of Financial Instruments

The carrying amounts of our cash and cash equivalents, restricted cash, accounts receivable, income taxes receivable, accounts payable, accrued expenses and income taxes payable approximate fair value because of the short-term maturity of those instruments. The estimated fair values and carrying values of our long-term debt instruments were as follows for the periods indicated:


		March 29, 2020						December 29, 2019							April 4, 2021				January 3, 2021
(In thousands)	(In thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value		(In thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value
5.375% senior unsecured notes due 2028	5.375% senior unsecured notes due 2028	$	487,668	$	493,835	$	529,105	$	493,648	5.375% senior unsecured notes due 2028	$	530,575	$	494,579	$	535,580	$	494,393
5.750% senior unsecured notes due 2026	5.750% senior unsecured notes due 2026	$	293,249	$	296,503	318,846		296,367		5.750% senior unsecured notes due 2026	$	313,098	$	297,049	$	315,972	$	296,913

These estimates are based on market quotes and calculations based on current market rates available to us and are categorized as having Level 2 valuation inputs as established by the FASB's Fair Value Framework. Market quotes used in these calculations are based on bid prices for our debt instruments and are obtained from and corroborated with multiple independent sources. The market quotes obtained from independent sources are within the range of management's expectations.

1816

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

16. Subsequent Event

In May 2021, we initiated further actions to improve overall business performance that includes the reorganization of our manufacturing capacity in our Architectural reportable segment. The reorganization of our manufacturing capacity involves specific facilities in the Architectural segment and costs associated with the reorganization of these facilities and related headcount reductions began taking place in the second quarter of 2021 (collectively, the "2021 Plan").

Table of Contents

MASONITE INTERNATIONAL CORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is based upon accounting principles generally accepted in the United States of America and discusses the financial condition and results of operations for Masonite International Corporation for the three months ended April 4, 2021, and March 29, ~~2020, and March 31, 2019.~~2020. In this MD&A, "Masonite," "we," "us," "our" and the "Company" refer to Masonite International Corporation and its subsidiaries.

This discussion should be read in conjunction with (i) the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and (ii) the annual audited consolidated financial statements, including the accompanying notes and MD&A, which are included in our Annual Report on Form 10-K for the year ended ~~December 29, 2019.~~January 3, 2021. The following discussion should also be read in conjunction with the disclosure under "Special Note Regarding Forward Looking Statements" ~~and "Item 1A. Risk Factors"~~ elsewhere in this Quarterly Report on Form 10-Q. Our actual results could differ materially from the forward-looking statements as a result of these risks and uncertainties.

Overview

We are a leading global designer, manufacturer, marketer and distributor of interior and exterior doors for the new construction and repair, renovation and remodeling sectors of the residential and the non-residential building construction markets. Since 1925, we have provided our customers with innovative products and superior service at compelling values. In order to better serve our customers and create sustainable competitive advantages, we focus on developing innovative products, advanced manufacturing capabilities and technology-driven sales and service solutions.

We market and sell our products to remodeling contractors, builders, homeowners, retailers, dealers, lumberyards, commercial and general contractors and architects through well-established wholesale, retail and direct distribution channels as part of our cross-merchandising strategy. Customers are provided a broad product offering of interior and exterior doors and entry systems at various price points. We manufacture a broad line of interior doors, including residential molded, flush, stile and rail, louver and specially-ordered commercial and architectural doors; door components for internal use and sale to other door manufacturers; and exterior residential steel, fiberglass and wood doors and entry systems.

We operate 6361 manufacturing and distribution facilities in eight countries in North America, South America, Europe and Asia, which are strategically located to serve our customers through multiple distribution channels. These distribution channels include: (i) direct distribution to retail home center ~~customers and homebuilders;~~customers; (ii) one-step distribution that sells directly to homebuilders and contractors; and (iii) two-step distribution through wholesale distributors. For retail home center customers, numerous door fabrication facilities provide value-added fabrication and logistical services, including pre-finishing and store delivery of pre-hung interior and exterior doors. We believe our ability to provide: (i) a broad product range; (ii) frequent, rapid, on-time and complete delivery; (iii) consistency in products and merchandising; (iv) national service; and (v) special order programs enables retail customers to increase comparable store sales and helps to differentiate us from our competitors. We believe investments in innovative new product manufacturing and distribution capabilities, coupled with an ongoing commitment to operational excellence, provide a strong platform for future growth.

Our reportable segments are organized and managed principally by end market: North American Residential, Europe and Architectural. In the three months ended ~~March 29, 2020,~~April 4, 2021, we generated net sales of ~~$383.9~~$476.5 million or ~~69.6%~~73.7%, ~~$70.7~~$88.5 million or ~~12.8%~~13.7% and ~~$91.2~~$75.0 million or ~~16.5%~~11.6% in our North American Residential, Europe and Architectural segments, respectively.

~~Key Factors Affecting Our Results of Operations~~

~~COVID-19~~

~~A novel strain of coronavirus (COVID-19) was first identified in Wuhan, China in December 2019, and in March 2020 was declared a pandemic by the World Health Organization. To date,~~The COVID-19 ~~has surfaced in nearly all regions around the world and resulted in business slowdowns or shutdowns in affected areas. As a result, COVID-19 has~~pandemic impacted our business ~~globally. Our first priority with regard~~operations and financial results beginning in the second quarter of fiscal year 2020 and continues to impact us in fiscal year 2021. The extent to which the COVID-19 pandemic isimpacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted. These impacts include, but are not limited to, ~~do everything we can to ensure~~ the ~~safety, health~~duration, spread, severity and ~~welfare~~impact of the COVID-19 pandemic, the effects of the COVID-19 pandemic on our employees, operations, customers, suppliers and ~~others~~supply chain, the remedial actions and stimulus measures adopted by federal, state and local governments and the extent to which normal economic and operating conditions can resume. Uncertainty associated with ~~whom we partner~~future forecasts, demand in the Architectural market and the duration of impacts from COVID-19 may impact our judgments and estimates and affect, among other things, our goodwill, long-lived assets and indefinite-lived intangible asset valuation,

1918

Table of Contents

MASONITE INTERNATIONAL CORPORATION

~~business activities. Through~~annual effective tax rate and inventory valuation, and may result in the ~~use of appropriate risk mitigation and safety practices at our facilities, we are endeavoring~~need to ~~maintain operations~~write down goodwill in the Architectural reporting unit to ~~continue supplying~~its fair value in 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.~~future.

A number of countries, provinces, states, and municipalities have issued orders temporarily requiring persons who were not engaged in essential activities and businesses to remain at home. Other jurisdictions without stay-at-home orders have required non-essential businesses to close. In certain jurisdictions, residential and commercial construction have been designated as an essential business activity. Some of our facilities were temporarily shut down and some remain shut down resulting fromFor discussion regarding the impact of ~~these government orders. For example, our United Kingdom facilities have been closed since March 27, 2020~~COVID-19 and other locations could be temporarily idled due to the impacts of COVID-19. Where possible, we have instructed employees to work from home and currently, most 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, manage shift schedules to reduce employee contact during shift changes to facilitate proper social distancing and eliminated overtime in many locations, all of which have resulted in decreased production levels. Further, we have modified employee policies related ~~to attendance and the availability of paid and unpaid time off and attendance is voluntary at locations where our operations are exempt from applicable stay-at-home orders and continue to operate.~~

While we believe we have a strong balance sheet and solid capital structure, we are taking steps to manage our cash flow. During the first quarter, we took 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, placing restrictions on travel and temporarily suspending our share repurchase program and discretionary pension contributions. Although we are aggressively managing our response to the recent COVID-19 pandemic, given the fluid nature of the situation, its impact on our full year fiscal 2020 results and beyond is uncertain. We believe that the most significant elements of uncertainty are the intensity and duration of the impact on construction, renovation and consumer spending, tightening of consumer credit requirements, as well as the ability of our sales channels, supply chain, manufacturing and distribution to continue to operate with minimal disruption for the remainder of fiscal 2020. We believe that COVID-19 will have a material adverse impact on our revenue growth, overall profitability and cash flows in the near term and may lead to higher than normal inventory levels, higher sales-related reserves, potential impairment of goodwill and other long-lived assets, a volatile effective tax rate driven by changes in the mix of earnings across our jurisdictions and an impact on the effectiveness our internal controls over financial reporting. While COVID-19 did not begin to affect our financial results until late in the first quarter of 2020, its impact on our results in the first quarter of 2020 is not indicative of its impacteconomic conditions on our results for the ~~remainder~~year ended January 3, 2021, see Part II, Item 7, "Management's Discussion and Analysis of ~~2020, as evidenced by the decline~~Financial Condition and Results of Operations” in in our ~~net sales~~Annual Report on Form 10-K for the year ended January 3, 2021. For further discussion regarding the potential future impacts of COVID-19 and ~~results~~related economic conditions on the Company, see “Risks Related to COVID-19” included in Part I, Item 1A, "Risk Factors” in our 2020 Annual Report.

Key Factors Affecting Our Results of operations in the month of April. As a result, we have taken further actions in April such as the deferral of merit and the implementation of temporary reductions in base pay for all salaried personnel in Canada and the United States not directly involved in plant operations and in cash retainers for our Board of Directors to manage cash flow and reduce spending.

On March 27, 2020, President Trump signed into U.S. federal law the CARES Act, which is aimed at providing emergency assistance and health care for individuals, families and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to the tax depreciation methods for qualified improvement property. We are analyzing the different aspects of the CARES Act and other similar governmental programs to determine whether any specific provisions may impact us. While we may determine to apply for such programs, there is no guarantee that we will meet any eligibility requirements to participate in such programs, or even if we are able to participate, that such programs will provide meaningful benefit to our business.Operations

Product Demand

There are numerous factors that influence overall market demand for our products. Demand for new homes, home improvement products and other building construction products have a direct impact on our financial condition and results of operations. Demand for our products may be impacted by changes in United States, Canadian, European, Asian or other global economic conditions, including inflation, deflation, interest rates, availability of capital, consumer spending rates, energy availability and costs, and the effects of governmental initiatives to manage economic conditions.

~~Table of Contents~~

~~MASONITE INTERNATIONAL CORPORATION~~

Additionally, trends in residential new construction, repair, renovation and remodeling and architectural building construction may directly impact our financial performance. Accordingly, the following factors may have a direct impact on our business in the countries and regions in which our products are sold:

•the strength of the economy;

•~~employment rates and consumer confidence;~~

•the amount and type of residential and commercial construction;

•housing sales and home values;

•the age of existing home stock, home vacancy rates and foreclosures;

•non-residential building occupancy rates;

•increases in the cost of raw materials or wages or any shortage in supplies or labor;

•the availability and cost of credit;

•employment rates and consumer confidence; and

•demographic factors such as immigration and migration of the population and trends in household formation.

Product Pricing and Mix

The building products industry is highly competitive and we therefore face pressure on sales prices of our products. In addition, our competitors may adopt more aggressive sales policies and devote greater resources to the development, promotion and sale of their products than we do, which could result in a loss of customers. Our business in general is subject to changing consumer and industry trends, demands and preferences. Trends within the industry change often and our failure to anticipate, identify or quickly react to changes in these trends could lead to, among other things, rejection of a new product line and reduced demand and price reductions for our products, which could materially adversely affect us. Changes in consumer preferences may also lead to increased demand for our lower margin products relative to our higher margin products, which could reduce our future profitability.

In the fourth quarter of 2019, we communicated price increases that became effective on February 3, 2020, to our North American Residential customers that, for certain products, were significantly greater than our typical annual increases. We also communicated our intent to incrementally invest $100 million over the next five years in the areas of service and quality improvements, product innovation and end user marketing. While we believe that these initiatives are necessary in order to increase the profile of, and demand for, our products and that they will benefit both us and our customers, we cannot predict whether our efforts will ultimately be successful or how our customers will react to these initiatives which could have a material impact on our results of operations for future periods.

Business Wins and Losses

Our customers consist mainly of wholesalers and retail home centers. In fiscal year ~~2019,~~2020, our top ten customers together accounted for approximately ~~43%~~46% of our net sales and our top customer, The Home Depot, Inc. accounted for approximately ~~17%~~18% of our net sales. Net sales from customers that have accounted for a significant portion of our net sales in past periods, individually or as a group, may not continue in future periods, or if continued, may not reach or exceed historical levels in any period. Certain customers perform periodic product line reviews to assess their product offerings, which have, on past occasions, led to business wins and losses. In addition, as a result of competitive bidding processes, we may not be able to increase or maintain the margins at which we sell our products to our customers.

Organizational Restructuring

Over the past several years, we have engaged in a series of restructuring programs related to exiting certain geographies and non-core businesses, consolidating certain internal support functions and engaging in other actions

Table of Contents

MASONITE INTERNATIONAL CORPORATION

designed to reduce our cost structure and improve productivity. These initiatives primarily consist of severance actions and lease termination costs. Management continues to evaluate our business; therefore, in future years, there may be additional provisions for new plan initiatives, as well as changes in previously recorded estimates, as payments are made or actions are completed. Asset impairment charges were also incurred in connection with these restructuring actions for those assets sold, abandoned or made obsolete as a result of these programs.

~~Table~~In November 2020, we began implementing a plan to improve overall business performance that includes the reorganization of ~~Contents~~

~~MASONITE INTERNATIONAL CORPORATION~~

our manufacturing capacity and a reduction of our overhead and selling, general and administration workforce primarily in our Architectural reportable segment as well as limited actions in the North American Residential reportable segment. The reorganization of our manufacturing capacity involves specific facilities in the Architectural segment and costs associated with the closure of these facilities and related headcount reductions began taking place in the fourth quarter of 2020 (collectively, the "2020 Plan"). Costs associated with the 2020 Plan include severance and closure charges and will continue through 2021. As of April 4, 2021, we expect to incur approximately $3 million to $4 million of additional charges related to the 2019 Plan. Once fully implemented, the actions taken as part of the 2020 Plan are expected to increase our annual earnings and cash flows by approximately $2 million.

In February 2019, we began implementing a plan to improve overall business performance that includes the reorganization of our manufacturing capacity and a reduction of our overhead and selling, general and administration workforce across all of our reportable segments and in our head offices. The reorganization of our manufacturing capacity involves specific plants in the North American Residential and Architectural segments and costs associated with the closure of these plants and related headcount reductions began taking place in the first quarter of 2019 (collectively, the "2019 Plan"). Costs associated with the 2019 Plan include severance, retention and closure charges and will continue through 2020. Additionally, the plan to divest non-core assets was determined to be a triggering event requiring a test of the carrying value of the definite-lived assets relating to the divestitures, as further described in Note 9. As of ~~March 29, 2020,~~April 4, 2021, we expect to incur approximately $5$1 million to $6$2 million of additional charges related to the 2019 Plan. Once fully implemented, the actions taken as part of the 2019 Plan are expected to increase our annual earnings and cash flows by approximately $17 million to $21 million.

During the fourth quarter of 2018, we began implementing a plan to reorganize and consolidate certain aspects of our United Kingdom head office function and optimize our portfolio by divesting non-core assets to enable more effective and consistent business processes in the Europe segment. In addition, in the North American Residential segment we announced a new facility that will optimize and expand capacity through increased automation, which resulted in the closure of one existing facility and related headcount reductions beginning in the second quarter of 2019 (collectively, the ~~"2018 Plan"~~“2018 Plan”). Costs associated with the 2018 Plan ~~include~~included severance, retention and closure charges and continued throughout 2019. ~~Additionally, the plan~~As of April 4, 2021, we do not expect to ~~divest non-core assets was determined to be a triggering event requiring a test of the carrying value of the definite-lived assets relating~~incur any material future charges related to the ~~divestitures,~~2018 Plan.

Inflation

In the first quarter of 2021, we realized higher costs in the wood product category as ~~further described in Note 9. The actions taken~~a result of macroeconomic factors as ~~part~~well as increased freight costs and wages. Additionally, we continued to recognize higher costs from previously disclosed anti-dumping and countervailing duties. We expect the macroeconomic pressures on wood, resins and other certain key product categories will continue throughout the remainder of fiscal year 2021. Our profitability, margins and net sales could be adversely affected if we are not able to pass these costs on to our customers or mitigate the ~~2018 Plan are expected to increase our annual earnings and cash flows by approximately $6 million.~~impact of these inflationary pressures.

Seasonality

Our business is moderately seasonal and our net sales vary from quarter to quarter based upon the timing of the building season in our markets. Severe weather conditions in any quarter, such as unusually prolonged warm or cold conditions, rain, blizzards or hurricanes, could accelerate, delay or halt construction and renovation activity.

Acquisitions and Divestitures

We are pursuing a strategic initiative of optimizing our global business portfolio. As part of this strategy, in the last several years we have pursued strategic acquisitions targeting companies who produce components for our existing operations, manufacture niche products and provide value-added services. Additionally, we target companies with strong brands, complementary technologies, attractive geographic footprints and opportunities for cost and distribution synergies. We also continuously analyze our operations to determine which businesses, market channels and products create the most value for our customers and acceptable returns for our shareholders.

~~Acquisitions~~

•~~Top Doors~~: On August 29, 2019, we completed the acquisition of TOPDOORS, s.r.o. ("Top Doors") based in the Czech Republic for cash consideration of $1.8 million, net of cash acquired, following a post-closing adjustment. Top Doors is a specialist manufacturer of door frames.

~~Divestitures~~

•~~Window Widgets~~: On December 13, 2019, we completed the sale of all the capital stock of Window Widgets Limited ("WW"), a leading United Kingdom provider of high quality window systems, for consideration of $1.2 million, net of cash disposed.

•~~PDS:~~ On March 21, 2019, we completed the sale of all of the capital stock of Performance Doorset Solutions Limited ("PDS"), a leading supplier of custom doors and millwork in the United Kingdom, for nominal consideration. The divestiture of this business resulted in a loss on deconsolidation of $4.6 million, which was recognized during the first quarter of 2019 in the Europe segment.

2220

Table of Contents

MASONITE INTERNATIONAL CORPORATION

Acquisitions

•OnDecember 4, 2020, we completed the acquisition of a Lowe's Companies, Inc. door fabrication facility in the United States for cash consideration of $3.9 million. During the first quarter of 2021, as a result of working capital adjustments we paid an additional $0.2 million.

•On August 31, 2020, we acquired intellectual property and other assets related to an interior door technology for cash consideration of $1.9 million.

Divestitures

•During the second quarter of 2020, we completed the liquidation of our legal entity in India. As a result, we recognized $2.1 million in loss on disposal of subsidiaries.

Results of Operations


		Three Months Ended										Three Months Ended
(In thousands)	(In thousands)	March 29, 2020			March 31, 2019			(In thousands)	April 4, 2021			March 29, 2020
Net sales	Net sales	$	551,228		$	530,311		Net sales	$	646,337		$	551,228
Cost of goods sold	Cost of goods sold	416,947			418,207			Cost of goods sold	487,699			416,947
Gross profit	Gross profit	134,281			112,104			Gross profit	158,638			134,281
Gross profit as a % of net sales	Gross profit as a % of net sales	24.4		%	21.1		%	Gross profit as a % of net sales	24.5		%	24.4		%
Selling, general and administration expenses	Selling, general and administration expenses	80,333			78,100			Selling, general and administration expenses	83,631			80,333
Selling, general and administration expenses as a % of net sales	Selling, general and administration expenses as a % of net sales	14.6		%	14.7		%	Selling, general and administration expenses as a % of net sales	12.9		%	14.6		%
Restructuring costs	Restructuring costs	1,941			3,740			Restructuring costs	1,643			1,941
Asset impairment		—			10,625
Loss on disposal of subsidiaries		—			4,605

Operating income	Operating income	52,007			15,034			Operating income	73,364			52,007
Interest expense, net	Interest expense, net	11,282			11,127			Interest expense, net	11,946			11,282

Other expense (income), net		49			(1,130)
Other (income) expense, net								Other (income) expense, net	(1,343)			49
Income before income tax expense	Income before income tax expense	40,676			5,037			Income before income tax expense	62,761			40,676
Income tax expense	Income tax expense	9,639			58			Income tax expense	14,613			9,639
Net income	Net income	31,037			4,979			Net income	48,148			31,037
Less: net income attributable to non-controlling interests	Less: net income attributable to non-controlling interests	1,152			1,190			Less: net income attributable to non-controlling interests	1,167			1,152
Net income attributable to Masonite	Net income attributable to Masonite	$	29,885		$	3,789		Net income attributable to Masonite	$	46,981		$	29,885

Three Months Ended ~~March 29, 2020,~~April 4, 2021, Compared with Three Months Ended March ~~31, 2019~~29, 2020

Net Sales

Net sales in the three months ended ~~March 29, 2020,~~April 4, 2021, were ~~$551.2~~$646.3 million, an increase of ~~$20.9~~$95.1 million or ~~3.9%~~17.3% from ~~$530.3~~$551.2 million in the three months ended March ~~31, 2019.~~29, 2020. Net sales in the first quarter of ~~2020~~2021 were ~~negatively~~positively impacted by ~~$2.1~~$11.3 million as a result of foreign exchange rate fluctuations. Excluding this exchange rate impact, net sales would have increased by ~~$23.0 million.~~$83.8 million or 15.2% due to changes in volume, average unit price and sales of components and other products. Average unit price increased net sales in the first quarter of ~~2020~~2021 by ~~$20.9~~$76.3 million or ~~3.9%~~13.8% compared to the ~~2019~~2020 period. Net sales of components and other products to external customers increased $5.6 million or 1.0% in the first quarter of 2021 compared to the 2020 period. Higher volumes excluding the incremental impact of acquisitions and divestitures ("base volume") increased net sales by ~~$9.4~~$1.9 million or ~~1.8%~~0.3% in the first quarter of ~~2020~~2021 compared to the 2019 period. Our 2019 divestitures, net of acquisition, decreased sales by $7.3 million or 1.4% in the first quarter of 2020. Net sales of components and other products to external customers were flat in the first quarter of 2020 ~~compared to the 2019~~ period.

~~Net Sales and Percentage of Net Sales by Reportable Segment~~

Three Months Ended March 29, 2020
(In thousands) North American Residential Europe Architectural Corporate & Other Total
Sales $ 384,445 $ 71,156 $ 94,555 $ 5,427 $ 555,583
Intersegment sales (588) (430) (3,337) — (4,355)
Net sales to external customers $ 383,857 $ 70,726 $ 91,218 $ 5,427 $ 551,228
Percentage of consolidated external net sales 69.6 % 12.8 % 16.5 %

2321

Table of Contents

MASONITE INTERNATIONAL CORPORATION

Three Months Ended March 31, 2019
(In thousands) North American Residential Europe Architectural Corporate & Other Total
Sales $ 354,802 $ 84,739 $ 88,353 $ 6,728 $ 534,622
Intersegment sales (1,077) (472) (2,762) — (4,311)
Net sales to external customers $ 353,725 $ 84,267 $ 85,591 $ 6,728 $ 530,311
Percentage of consolidated external net sales 66.7 % 15.9 % 16.1 %
Net Sales and Percentage of Net Sales by Reportable Segment


	Three Months Ended April 4, 2021
(In thousands)	North American Residential			Europe			Architectural			Corporate & Other		Total
Sales	$	477,229		$	90,206		$	78,074		$	6,343	$	651,852
Intersegment sales	(765)			(1,667)			(3,083)			—		(5,515)
Net sales to external customers	$	476,464		$	88,539		$	74,991		$	6,343	$	646,337
Percentage of consolidated external net sales	73.7		%	13.7		%	11.6		%


	Three Months Ended March 29, 2020
(In thousands)	North American Residential			Europe			Architectural			Corporate & Other		Total
Sales	$	384,445		$	71,156		$	94,555		$	5,427	$	555,583
Intersegment sales	(588)			(430)			(3,337)			—		(4,355)
Net sales to external customers	$	383,857		$	70,726		$	91,218		$	5,427	$	551,228
Percentage of consolidated external net sales	69.6		%	12.8		%	16.5		%

North American Residential

Net sales to external customers from facilities in the North American Residential segment in the three months ended ~~March 29, 2020,~~April 4, 2021, were ~~$383.9~~$476.5 million, an increase of ~~$30.2~~$92.6 million or ~~8.5%~~24.1% from ~~$353.7~~$383.9 million in the three months ended March ~~31, 2019.~~29, 2020. Net sales in the first quarter of ~~2020~~2021 were ~~negatively~~positively impacted by ~~$0.7~~$4.4 million as a result of foreign exchange rate fluctuations. Excluding this exchange rate impact, net sales would have increased by ~~$30.9~~$88.2 million or ~~8.7%~~23.0% due to changes in volume, average unit price and sales of components and other products. Average unit price increased net sales in the first quarter of 2021 by $66.9 million or 17.4% compared to the 2020 period. Higher base volume increased net sales in the first quarter of ~~2020~~2021 by ~~$18.2~~$17.3 million or ~~5.1%~~4.5% compared to the ~~2019 period, primarily due to strong end market demand. Average unit price increased net sales in the first quarter of~~ 2020 ~~by $12.3 million or 3.5% compared to the 2019 period primarily as a result of our previously communicated price increases that became effective on February 3, 2020.~~period. Net sales of components and other products to external customers were ~~$0.4~~$4.0 million higher in the first quarter of ~~2020~~2021 compared to the ~~2019~~2020 period.

Europe

Net sales to external customers from facilities in the Europe segment in the three months ended ~~March 29, 2020,~~April 4, 2021, were ~~$70.7~~$88.5 million, ~~a decrease~~an increase of ~~$13.6~~$17.8 million or ~~16.1%~~25.2% from ~~$84.3~~$70.7 million in the three months ended March ~~31, 2019.~~29, 2020. Net sales in the first quarter of ~~2020~~2021 were ~~negatively~~positively impacted by ~~$1.3~~$6.4 million as a result of foreign exchange fluctuations. Excluding this exchange rate impact, net sales would have increased by $11.4 million or 16.1% due to changes in volume, average unit price and sales of components and other products. Average unit price increased net sales in the first quarter of 2021 by $5.0 million or 7.1% compared to the 2020 period. Higher base volume increased net sales by $4.9 million or 6.9% in the first quarter of 2021 compared to the 2020 period. Net sales of components and other products to external customers were $1.5 million higher in the first quarter of 2021 compared to the 2020 period.

Architectural

Net sales to external customers from facilities in the Architectural segment in the three months ended April 4, 2021, were $75.0 million, a decrease of $16.2 million or 17.8% from $91.2 million in the three months ended March 29, 2020. Net sales in the first quarter of 2021 were positively impacted by $0.5 million as a result of foreign exchange fluctuations. Excluding this exchange rate impact, net sales would have decreased by ~~$12.3~~$16.7 million or ~~14.6%~~18.3% due to changes in volume, average unit price and sales of components and other products. ~~Net~~Lower base volume decreased net sales in the first quarter of ~~2020 were reduced~~2021 by ~~$7.3~~$19.7 million or 8.7% due to the net impact of divestitures and an acquisition, including lost sales due to the divestitures of three non-core businesses in 2019, partially offset by incremental sales from the Top Doors acquisition. Lower base volume decreased net sales by $7.0 million or 8.3% in the first quarter of 202021.6% compared to the ~~2019~~2020 period ~~partially~~ due to ~~share declines~~weakness in ~~the builder channel and all of our United Kingdom manufacturing facilities closing the last week of the quarter as a result of COVID-19.~~commercial end markets. Net sales of components and other products to external customers were ~~$0.3~~$1.4 million lower in the first ~~quarter of 2020 compared to the 2019 period. Average unit price increased net sales in the first quarter of 2020 by $2.3 million or 2.7% compared to the 2019 period.~~

~~Architectural~~

Net sales to external customers from facilities in the Architectural segment in the three months ended March 29, 2020, were $91.2 million, an increase of $5.6 million or 6.5% from $85.6 million in the three months ended March 31, 2019. Net sales in the first quarter of 2020 were negatively impacted by $0.1 million as a result of foreign exchange fluctuations. Excluding this exchange rate impact, net sales would have increased by $5.7 million or 6.7%. Average unit price increased net sales in the first quarter of 2020 by $6.3 million or 7.4% compared to the 2019 period primarily due to delivery of projects at higher prices along with improved mix. Net sales of components and other products to external customers were $0.7 million higher in the first quarter of 2020 compared to the 2019 period. Lower base volume decreased net sales in the first quarter of 2020 by $1.3 million or 1.5% compared to the 2019 period primarily due to our focus on more complex projects involving lower volumes but a higher-value mix of products.

2422

Table of Contents

MASONITE INTERNATIONAL CORPORATION

quarter of 2021 compared to the 2020 period. Average unit price increased net sales in the first quarter of 2021 by $4.4 million or 4.8% compared to the 2020 period.

Cost of Goods Sold

Cost of goods sold as a percentage of net sales was ~~75.6%~~75.5% and ~~78.9%~~75.6% for the three months ended April 4, 2021, and March 29, 2020, respectively. Direct labor and ~~March 31, 2019, respectively. Material~~depreciation as a percentage of sales in the first quarter of 2021 decreased by 0.7% and 0.5% compared to the first quarter of 2020. Distribution, overhead and material cost of sales ~~direct~~as a percentage of net sales increased by 0.6%, 0.4%, 0.1% respectively, compared to the 2020 period. Direct labor ~~costs and overhead~~ as a percentage of net sales decreased due to higher average unit prices, partially offset by ~~2.8%, 0.4% and 0.2%, respectively, compared to the 2019 period. Partly offsetting these decreases, distribution costs~~manufacturing wage inflation. The decrease in ~~the first quarter of 2020 increased by 0.1%~~depreciation as a percentage of net sales was driven by higher average unit prices as compared to the ~~first quarter of 2019. Depreciation~~2020 period. Distribution as a percentage of net sales ~~remained flat~~increased due to higher freight costs and higher personnel costs including wage inflation. Overhead as a percentage of net sales increased due to wage inflation and increased plant maintenance, partially offset by higher average unit prices as compared to the ~~2019~~2020 period. The ~~decrease~~increase in material cost of sales as a percentage of net sales was driven by ~~higher average unit prices and net deflation as a result of material cost savings projects that more than offset~~ commodity inflation and an increase in ~~tariffs. Direct labor as a percentage of net sales decreased due to factory productivity initiatives. Overhead as a percentage of net sales decreased due to increased volumes.~~tariffs and freight costs, largely offset by higher average unit prices and material cost savings projects.

Selling, General and Administration Expenses

In the three months ended ~~March 29, 2020,~~April 4, 2021, selling, general and administration ("SG&A") expenses, as a percentage of net sales, were ~~14.6%~~12.9%, as compared to ~~14.7%~~14.6% in the three months ended March ~~31, 2019,~~29, 2020, a decrease of 10170 basis points.

SG&A expenses in the three months ended ~~March 29, 2020,~~April 4, 2021, were ~~$80.3~~$83.6 million, an increase of ~~$2.2~~$3.3 million from ~~$78.1~~$80.3 million in the three months ended March ~~31, 2019.~~29, 2020. The overall increase was driven by ana $6.8 million increase in personnel costs ~~of $3.5 million,~~ primarily due to $3.9 million of resource investments to support growth, ~~costs related~~$1.5 million of payroll taxes due to ~~employee benefits and~~timing of prior year incentive compensation ~~along with a $3.4~~and $1.4 million ~~increase in legal costs related to a previously disclosed lawsuit.~~of incentive compensation, as well as unfavorable foreign exchange impacts of $1.2 million. These increases were partially offset by a ~~net $3.8~~$2.3 million decrease in professional and other fees, a $2.1 million decrease in travel expense and a $0.3 million decrease in non-cash items in SG&A expenses, including ~~depreciation and amortization,~~ loss (gain) on disposal of property, plant and equipment, depreciation and amortization, deferred compensation and share based ~~compensation, incremental SG&A savings from our 2019 divestitures (net of acquisition) of $0.7 million and favorable foreign exchange impacts of $0.2 million.~~compensation.

Restructuring Costs

Restructuring costs in the three months ended April 4, 2021, and March 29, 2020, ~~and March 31, 2019,~~ were ~~$1.9~~$1.6 million and ~~$3.7~~$1.9 million, respectively. Restructuring costs in the current year related primarily to the 2020 and 2019 ~~Plan.~~Plans. Restructuring costs in the prior year period related primarily to the 2019 ~~and 2018 Plans.~~

~~Asset Impairment~~

There were no asset impairment charges in the three months ended March 29, 2020. Asset impairment charges in the three months ended March 31, 2019, were $10.6 million and resulted from actions associated with the 2019 Plan.

~~Loss on Disposal of Subsidiaries~~

There was no loss on disposal of subsidiaries in the three months ended March 29, 2020. Loss on disposal of subsidiaries in the three months ended March 31, 2019, was $4.6 million. The loss in the prior year related to the sale of PDS for nominal consideration during the first quarter of 2019. The total charge consisted of $3.6 million relating to the write-off of the net assets sold and other professional fees and $1.0 million relating to the recognition of the cumulative translation adjustment out of accumulated other comprehensive loss.

Interest Expense, Net

Interest expense, net, in the three months ended ~~March 29, 2020,~~April 4, 2021, was ~~$11.3~~$11.9 million, compared to ~~$11.1~~$11.3 million ~~in the three months ended March 31, 2019, remaining relatively flat as compared to the 2019 period.~~

~~Other Expense (Income), Net~~

~~Other expense (income), net,~~ in the three months ended March 29, 2020, ~~was minimal~~remaining relatively flat as compared to ~~$1.1~~the 2020 period.

Other (Income) Expense, Net

Other (income) expense, net includes profits and losses related to our non-majority owned unconsolidated subsidiaries that we recognize under the equity method of accounting, unrealized gains and losses on foreign currency remeasurements, pension settlement charges and other miscellaneous non-operating expenses. Other (income) expense, net, in the three months ended April 4, 2021, was $1.3 million of income, compared to minimal expense in the three months ended March ~~31, 2019,~~29, 2020. The change in other (income) expense, net is primarily due to a change in the fair value of plan assets in the deferred compensation rabbi ~~trust.~~

~~Table~~trust, partially offset by a change in our portion of ~~Contents~~

~~MASONITE INTERNATIONAL CORPORATION~~

the net gains and losses related to our non-majority owned unconsolidated subsidiaries that are recognized under the equity method of accounting.

Income Tax Expense

~~Our income~~Income tax expense in the three months ended ~~March 29, 2020,~~April 4, 2021, was ~~$9.6~~$14.6 million, compared to ~~$0.1~~$9.6 million of income tax expense in the three months ended March ~~31, 2019.~~29, 2020. The increase in income tax expense is primarily due to the mix of income or losses within the tax jurisdictions with various tax rates in which we ~~operate, as well as a decrease in discrete income tax benefits.~~operate. We recognized discrete items resulting in income tax benefit of $0.4 million in the three months ended March 29, 2020, compared to $1.0 million of income tax benefit recorded in the three months ended March 31, 2019.

~~Segment Information~~

Three Months Ended March 29, 2020
(In thousands) North American Residential Europe Architectural Corporate & Other Total
Adjusted EBITDA $ 71,696 $ 9,679 $ 10,582 $ (10,440) $ 81,517
Adjusted EBITDA as a percentage of segment net sales 18.7 % 13.7 % 11.6 % 14.8 %

Three Months Ended March 31, 2019
(In thousands) North American Residential Europe Architectural Corporate & Other Total
Adjusted EBITDA $ 53,621 $ 9,997 $ 7,614 $ (5,753) $ 65,479
Adjusted EBITDA as a percentage of segment net sales 15.2 % 11.9 % 8.9 % 12.3 %

~~The following reconciles net income (loss) attributable to Masonite to Adjusted EBITDA:~~

Three Months Ended March 29, 2020
(In thousands) North American Residential Europe Architectural Corporate & Other Total
Net income (loss) attributable to Masonite $ 58,811 $ 3,483 $ 4,580 $ (36,989) $ 29,885
Plus:
Depreciation 9,364 2,457 2,822 1,375 16,018
Amortization 595 3,562 1,922 380 6,459
Share based compensation expense — — — 3,470 3,470
Loss on disposal of property, plant and equipment 1,204 3 396 19 1,622
Restructuring costs 849 (37) 862 267 1,941
Interest expense, net — — — 11,282 11,282
Other expense (income), net — 211 — (162) 49
Income tax expense — — — 9,639 9,639
Net income attributable to non-controlling interest 873 — — 279 1,152
Adjusted EBITDA $ 71,696 $ 9,679 $ 10,582 $ (10,440) $ 81,517

2623

Table of Contents

MASONITE INTERNATIONAL CORPORATION

Three Months Ended March 31, 2019
(In thousands) North American Residential Europe Architectural Corporate & Other Total
Net income (loss) attributable to Masonite $ 30,261 $ (4,147) $ 2,079 $ (24,404) $ 3,789
Plus:
Depreciation 9,079 2,382 2,741 4,083 18,285
Amortization 449 3,965 2,093 1,090 7,597
Share based compensation expense — — — 2,680 2,680
Loss on disposal of property, plant and equipment 341 2,469 97 6 2,913
Restructuring costs 1,880 862 604 394 3,740
Asset impairment 10,625 — — — 10,625
Loss on disposal of subsidiaries — 4,605 — — 4,605
Interest expense, net — — — 11,127 11,127
Other expense (income), net — (139) — (991) (1,130)
Income tax expense — — — 58 58
Net income attributable to non-controlling interest 986 — — 204 1,190
Adjusted EBITDA $ 53,621 $ 9,997 $ 7,614 $ (5,753) $ 65,479
discrete items resulting in $0.5 million of income tax benefit in the three months ended April 4, 2021, compared to $0.4 million of income tax benefit in the three months ended March 29, 2020.

Segment Information


	Three Months Ended April 4, 2021
(In thousands)	North American Residential			Europe			Architectural			Corporate & Other		Total
Adjusted EBITDA	$	94,482		$	16,755		$	1,994		$	(11,206)	$	102,025
Adjusted EBITDA as a percentage of segment net sales	19.8		%	18.9		%	2.7		%			15.8		%


	Three Months Ended March 29, 2020
(In thousands)	North American Residential			Europe			Architectural			Corporate & Other		Total
Adjusted EBITDA	$	71,696		$	9,679		$	10,582		$	(10,440)	$	81,517
Adjusted EBITDA as a percentage of segment net sales	18.7		%	13.7		%	11.6		%			14.8		%

The following reconciles net income (loss) attributable to Masonite to Adjusted EBITDA:


	Three Months Ended April 4, 2021
(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total
Net income (loss) attributable to Masonite	$	83,973	$	11,408	$	(3,813)	$	(44,587)	$	46,981
Plus:
Depreciation	9,511		2,585		2,663		3,520		18,279
Amortization	415		2,885		1,142		476		4,918
Share based compensation expense	—		—		—		4,418		4,418
Loss (gain) on disposal of property, plant and equipment	88		(4)		149		(830)		(597)
Restructuring costs	(361)		—		1,853		151		1,643


Interest expense, net	—		—		—		11,946		11,946

Other (income) expense, net	—		(119)		—		(1,224)		(1,343)
Income tax expense	—		—		—		14,613		14,613

Net income attributable to non-controlling interest	856		—		—		311		1,167
Adjusted EBITDA	$	94,482	$	16,755	$	1,994	$	(11,206)	$	102,025

Table of Contents

MASONITE INTERNATIONAL CORPORATION


	Three Months Ended March 29, 2020
(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total
Net income (loss) attributable to Masonite	$	58,811	$	3,483	$	4,580	$	(36,989)	$	29,885
Plus:
Depreciation	9,364		2,457		2,822		1,375		16,018
Amortization	595		3,562		1,922		380		6,459
Share based compensation expense	—		—		—		3,470		3,470
Loss on disposal of property, plant and equipment	1,204		3		396		19		1,622
Restructuring costs	849		(37)		862		267		1,941


Interest expense, net	—		—		—		11,282		11,282

Other expense (income), net	—		211		—		(162)		49
Income tax expense	—		—		—		9,639		9,639
Net income attributable to non-controlling interest	873		—		—		279		1,152
Adjusted EBITDA	$	71,696	$	9,679	$	10,582	$	(10,440)	$	81,517

Adjusted EBITDA in our North American Residential segment increased ~~$18.1~~$22.8 million, or ~~33.8%~~31.8%, to $94.5 million in the three months ended April 4, 2021, from $71.7 million in the three months ended March 29, ~~2020, from $53.6 million in the three months ended March 31, 2019.~~2020. Adjusted EBITDA in the North American Residential segment included corporate allocations of shared costs of ~~$16.3~~$19.2 million and ~~$14.0~~$16.3 million, in the first quarter of ~~2020~~2021 and ~~2019,~~2020, respectively. The allocations generally consist of certain costs of human resources, legal, finance, information technology, research and development, marketing and share based compensation.

Adjusted EBITDA in our Europe segment ~~decreased $0.3~~increased $7.1 million, or ~~3.0%~~73.2%, to $16.8 million in the three months ended April 4, 2021, from $9.7 million in the three months ended March 29, ~~2020, from $10.0 million in the three months ended March 31, 2019.~~2020. Adjusted EBITDA in the Europe segment included corporate allocations of shared costs of $1.0 million and $0.3 million, in ~~both~~ the first quarter of 2021 and 2020, ~~and 2019.~~respectively. The allocations generally consist of certain costs of human resources, legal, finance, information technology, marketing and ~~information technology.~~share based compensation.

Adjusted EBITDA in our Architectural segment ~~increased $3.0~~decreased $8.6 million, or ~~39.5%~~81.1%, to $2.0 million in the three months ended April 4, 2021, from $10.6 million in the three months ended March 29, ~~2020, from $7.6 million in the three months ended March 31, 2019.~~2020. Adjusted EBITDA in the Architectural segment also included corporate allocations of shared costs of $2.8 million and $2.7 million, in ~~both~~ the first quarter of 2021 and 2020, ~~and 2019.~~respectively. The allocations generally consist of certain costs of human resources, legal, finance, information technology, ~~and~~ research and ~~development.~~development, marketing and share based compensation.

Liquidity and Capital Resources

Our liquidity needs for operations vary throughout the year. Our principal sources of liquidity are cash flows from operating activities, the borrowings under our ABL Facility and an accounts receivable sales program with a third party ("AR Sales Program") and our existing cash balance. Our anticipated uses of cash in the near term include working capital needs, capital expenditures for critical maintenance, safety and regulatory projects, and share repurchases. On a continual basis, we evaluate and consider strategic acquisitions, divestitures, and joint ventures to create shareholder value and enhance financial performance.

~~Table of Contents~~

~~MASONITE INTERNATIONAL CORPORATION~~

Due to the rapidly evolving and highly uncertain nature and duration of the COVID-10 pandemic and its impact on our customers, suppliers and employees, we are unable to fully estimate the extent of the impact it may have on our future financial condition and liquidity. Accordingly, we have taken actions to reduce spending and manage cash flow, such as reducing our capital spend below the anticipated amount of $70 million to $75 million, as previously noted in Key Factors Affecting Our Results of Operations. We believe that our cash balance on hand, future cash generated from operations, the use of our AR Sales Program, our ABL Facility, and ability to access the capital markets will provide adequate liquidity for the foreseeable future. As of ~~March 29, 2020,~~April 4, 2021, we had ~~$114.4~~$323.2 million of cash and cash equivalents, availability under our ABL Facility of ~~$185.3~~$220.5 million and availability under our AR Sales Program of ~~$14.8~~$30.0 million.

Table of Contents

MASONITE INTERNATIONAL CORPORATION

Cash Flows

Cash ~~provided by~~used in operating activities was ~~$6.0~~$14.3 million during the three months ended ~~March 29, 2020,~~April 4, 2021, compared to ~~$18.5~~$6.0 million of cash provided by operating activities in the three months ended March ~~31, 2019.~~29, 2020. This ~~$12.5~~$20.4 million decrease in cash provided by operating activities was due to changes in net working capital and a $16.0 million decrease in ~~the first three months of 2020 compared with the same period in 2019,~~other assets and liabilities, partially offset by a ~~$17.4~~$21.1 million increase in net income attributable to Masonite, adjusted for non-cash and non-operating ~~items.~~items in the first three months of 2021 compared to the same period in 2020.

Cash used in investing activities was ~~$17.8~~$12.3 million during the three months ended ~~March 29, 2020,~~April 4, 2021, compared to ~~$21.2~~$17.8 million in the three months ended March ~~31, 2019.~~29, 2020. This ~~$3.4~~$5.5 million decrease in cash used in investing activities was driven by a ~~$3.2~~$3.3 million decrease in cash additions to property, plant and equipment and a $2.3 million increase in proceeds from the sale of property, plant and equipment, partially offset by a $0.1 million increase in cash used in acquisitions, net ~~decrease in~~of cash acquired and other investing ~~outflows of $0.2 million~~activities in the first three months of ~~2020~~2021 compared to the same period in ~~2019.~~2020.

Cash used in financing activities was $14.6 million during the three months ended April 4, 2021, compared to $37.0 million during the three months ended March 29, ~~2020, compared to $34.3~~2020. This $22.3 million ~~during the three months ended March 31, 2019. This $2.7 million increase~~decrease in cash used in financing activities was driven by a ~~$1.6~~$25.2 million ~~increase~~decrease in cash used for repurchases of common shares, partially offset by a ~~$0.7~~$1.9 million increase in cash used for tax withholding on share based awards, a $0.9 million increase in cash used for repayments of long-term debt and a $0.1 million increase in distributions to non-controlling interests ~~and an increase in other financing outflows of $0.4 million~~ in the first three months of ~~2020~~2021 compared to the same period in ~~2019.~~2020.

Share Repurchases

We currently have in place a $600.0 million share repurchase authorization, stemming from three separate authorizations by our Board of Directors. During the three months ended April 4, 2021, we repurchased and retired 84,983 of our common shares in the open market at an aggregate cost of $9.6 million as part of the share repurchase programs. During the three months ended March 29, 2020, we repurchased ~~and retired~~ 567,271 of our common shares in the open market at an aggregate cost of $34.8 million, ~~as part of the share repurchase programs,~~ prior to temporarily suspending our repurchase program on March 18, 2020. ~~During the three months ended March 31, 2019, we repurchased 646,102 of our common shares in the open market at an aggregate cost of $33.2 million.~~ As of ~~March 29, 2020,~~April 4, 2021, there was ~~$109.3~~$90.7 million available for repurchase in accordance with the share repurchase programs.

Other Liquidity Matters

Our cash and cash equivalents balance includes cash held in foreign countries in which we operate. Cash held outside Canada, in which we are incorporated, is free from significant restrictions that would prevent the cash from being accessed to meet our liquidity needs including, if necessary, to fund operations and service debt obligations in Canada. However, earnings from certain jurisdictions are indefinitely reinvested in those jurisdictions. Upon the repatriation of any earnings to Canada, in the form of dividends or otherwise, we may be subject to Canadian income taxes and withholding taxes payable to the various foreign countries. As of ~~March 29, 2020,~~April 4, 2021, we do not believe adverse tax consequences exist that restrict our use of cash or cash equivalents in a material manner.

We also routinely monitor the changes in the financial condition of our customers and the potential impact on our results of operations. There has not been a change in the financial condition of aany customer that has had a material adverse effect on our results of ~~operations in the first quarter of 2020.~~operations. However, ~~in light of COVID-19,~~if economic conditions were to deteriorate, it is possible there could be an impact on our results of operations in a future period and this impact could be material.

Accounts Receivable Sales Program

Under the AR Sales Program, we can transfer ownership of eligible trade accounts receivable of certain customers. Receivables are sold outright to a third party who assumes the full risk of collection, without recourse to us in the event of a loss. Transfers of receivables under this program are accounted for as sales. Proceeds from the transfers

~~Table of Contents~~

~~MASONITE INTERNATIONAL CORPORATION~~

reflect the face value of the accounts receivable less a discount. Receivables sold under the AR Sales Program are excluded from trade accounts receivable in the condensed consolidated balance sheets and are included in cash flows from operating activities in the condensed consolidated statements of cash flows. The discounts on the sales of trade accounts receivable sold, if any, under the AR Sales Program were not material for any of the periods presented and were recorded in selling, general and administration ~~expense~~expenses within the condensed consolidated statements of comprehensive ~~income.~~income (loss).

Table of Contents

MASONITE INTERNATIONAL CORPORATION

5.375% Senior Notes due 2028

On July 25, 2019, we issued $500.0 million aggregate principal senior unsecured notes (the "2028 Notes"), all of which was outstanding as of ~~March 29, 2020.~~April 4, 2021. The 2028 Notes bear interest at 5.375% per annum. The net proceeds from issuance of the 2028 Notes, together with available cash balances, were used to redeem the remaining $500.0 million aggregate principal amount of similar senior unsecured notes, including the payment of related premiums, fees and expenses. The 2028 Notes were issued under an indenture which contains restrictive covenants that are described in detail in our Annual Report on Form 10-K for the year ended ~~December 29, 2019.~~January 3, 2021. As of ~~March 29, 2020,~~April 4, 2021, we were in compliance with all covenants under the indenture governing the 2028 Notes.

5.750% Senior Notes due 2026

On August 27, 2018, we issued $300.0 million aggregate principal senior unsecured notes (the "2026 Notes"), all of which were outstanding as of ~~March 29, 2020.~~April 4, 2021. The 2026 Notes bear interest at 5.750% per annum. The 2026 Notes were issued under an indenture which contains restrictive covenants that are described in detail in our Annual Report on Form 10-K for the year ended ~~December 29, 2019.~~January 3, 2021. As of ~~March 29, 2020,~~April 4, 2021, we were in compliance with all covenants under the indenture governing the 2026 Notes.

ABL Facility

On January 31, 2019, we and certain of our subsidiaries entered into a $250.0 million asset-based revolving credit facility (the "ABL Facility") maturing on January 31, 2024, which replaced the previous facility. Borrowings under the ABL Facility bear interest at a rate which is described in more detail in Note 6. The ABL Facility contains various customary representations, warranties by us and covenants that are described in detail in our Annual Report on Form 10-K for the year ended ~~December 29, 2019.~~January 3, 2021. As of ~~March 29, 2020,~~April 4, 2021, we were in compliance with all covenants under the credit agreement governing the ABL Facility. We had availability of ~~$185.3~~$220.5 million under our ABL Facility and there were no amounts outstanding as of ~~March 29, 2020.~~April 4, 2021.

Supplemental Guarantor Financial Information

Our obligations under the 2028 Notes and 2026 Notes and the ABL Facility are fully and unconditionally guaranteed, jointly and severally, by certain of our directly or indirectly wholly-owned subsidiaries. The following unaudited supplemental financial information for our non-guarantor subsidiaries is presented:

Our non-guarantor subsidiaries generated external net sales of ~~$491.9~~$569.2 million and ~~$472.9~~$491.9 million for the three months ended April 4, 2021, and March 29, 2020, ~~and March 31, 2019,~~ respectively. Our non-guarantor subsidiaries generated Adjusted EBITDA of ~~$68.4~~$77.0 million and ~~$57.1~~$68.4 million for the three months ended April 4, 2021, and March 29, 2020, ~~and March 31, 2019,~~ respectively. Our non-guarantor subsidiaries had total assets of ~~$1.9~~$2.2 billion as of April 4, 2021, and ~~$2.0 billion~~January 3, 2021, and total liabilities of ~~$816.0~~$943.8 million and ~~$834.5~~$935.3 million as of ~~March 29, 2020,~~April 4, 2021, and ~~December 29, 2019,~~January 3, 2021, respectively.

Changes in Accounting Standards and Policies

Changes in accounting standards and policies are discussed in Note 1. Business Overview and Significant Accounting Policies in the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

For our disclosures about market risk, please see Part II, Item 7A., "Quantitative and Qualitative Disclosures about Market Risk," in our Annual Report on Form 10-K for the year ended ~~December 29, 2019.~~January 3, 2021. We believe there have been no material changes to the information provided therein.

~~Table of Contents~~

~~MASONITE INTERNATIONAL CORPORATION~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to

Table of Contents

MASONITE INTERNATIONAL CORPORATION

management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the fiscal quarter covered by this ~~Quarterly Report~~report that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

3028

Table of Contents

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The information required with respect to this item can be found in Note 7. Commitments and Contingencies in the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report and is incorporated by reference into this Part II, Item 1. Such information should be read in conjunction with the information contained under Part I, Item 3 "Legal Proceedings" included in our Annual Report on Form 10-K for the year ended ~~December 29, 2019.~~January 3, 2021.

Item 1A. Risk Factors

You should carefully review and consider the information regarding certain factors which could materially affect our business, financial condition or future results as set forth under Item 1A "Risk Factors" in our Annual Report on Form 10-K filed for the year ended ~~December 29, 2019. In light of developments relating to~~January 3, 2021. There have been no material changes from the ~~coronavirus ("COVID-19") pandemic occurring subsequent to the filing of our~~risk factors disclosed in such Annual Report on Form ~~10-K, we are supplementing the risk factors discussed in our Annual Report with the following risk factor, which should be read in conjunction with the risk factors contained in our Annual Report.~~

The scale and scope of the recent coronavirus ("COVID-19") outbreak and resulting pandemic is unknown and is expected to adversely impact our business at least for the near term. The overall impact on our business, operating results, cash flows and/or financial condition will likely be material.

Demand for our product is dependent on a variety of macroeconomic factors, such as employment levels, interest rates, changes in stock market valuations, consumer confidence, housing demand and availability of financing for home buyers. These factors, in particular consumer confidence, can be significantly adversely affected by a variety of factors beyond our control. The outbreak of COVID-19 has caused the shutdown of large portions of the international economy. The spread of COVID-19 has also caused significant volatility in U.S. and international debt and equity markets, which can negatively impact consumer confidence. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the global economy and consumer confidence. The extent to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions taken to contain it or treat its impact. As a result of COVID-19, we have closed certain locations as a result of government orders and furloughed employees, as well as significantly altered our operations, thereby reducing production. If the virus continues to cause significant negative impacts to economic conditions or consumer confidence, our results of operations, financial condition and cash flows may be materially adversely impacted and it may lead to higher than normal inventory levels, higher sales-related reserves, potential impairment of goodwill and other long-lived assets, a volatile effective tax rate driven by changes in the mix and earnings across our jurisdictions and an impact on the effectiveness of our internal controls over financial reporting.

The impact of the COVID-19 pandemic is rapidly evolving, and the continuation or a future resurgence of the pandemic could precipitate or aggravate the other risk factors that we identified in our 2019 Annual Report on Form 10-K, which in turn could further materially adversely affect our business, financial condition, liquidity, results of operations and profitability, including in ways that are not currently known to us or that we do not currently consider to present significant risks.10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Unregistered Sale of Equity Securities.

None.

(b) Use of Proceeds.

Not applicable.

During the three months ended ~~March 29, 2020,~~April 4, 2021, we repurchased ~~567,271~~84,983 of our common shares in the open market.

~~Table of Contents~~

Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
December 30, 2019, through January 26, 2020 700 $ 70.98 700 $ 143,995,757
January 27, 2020, through February 23, 2020 — — — 143,995,757
February 24, 2020, through March 29, 2020 566,571 61.28 566,571 109,276,756
Total 567,271 $ 61.29 567,271


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
January 4, 2021, through January 31, 2021	200	$	92.99	200	$	100,304,106
February 1, 2021, through February 28, 2021	—	—		—	100,304,106
March 1, 2021, through April 4, 2021	84,783	113.03		84,783	90,720,911
Total	84,983	$	112.98	84,983

We currently have in place a $600.0 million share repurchase authorization, stemming from three separate authorizations by our Board of Directors. The share repurchase programs have no specified end date and the timing and amount of any share repurchases will be determined by management based on our evaluation of market conditions and other factors. During Q1 2020, we implemented several actions to reduce our spending and more closely manage cash during this uncertain period relating to the COVID-19 pandemic, including temporarily suspending our share repurchase programs. As of ~~March 29, 2020, $109.3~~April 4, 2021, $90.7 million was available for repurchase in accordance with the share repurchase programs.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

3229

Table of Contents

Item 6. Exhibits

The following is a list of all exhibits filed or furnished as part of this report:


Exhibit No.			Description
10.5(a)*10.1 #			~~Waiver~~Amended and Restated Employment Agreement, dated as of ~~April 8, 2020, by and between Masonite International Corporation and Howard C. Heckes~~
~~10.5(b)*#~~		~~Waiver Agreement, dated as of April 8, 2020, by and between Masonite International Corporation and Russell T. Tiejema~~
~~10.5(c)*#~~		~~Waiver Agreement, dated as of April 8, 2020, by and between Masonite International Corporation and James A. Hair~~
~~10.5(d)*#~~		~~Waiver Agreement, dated as of April 8, 2020, by and between Masonite International Corporation and Randal A. White~~
~~10.5(e)*#~~		~~Waiver Agreement, dated as of April 8, 2020,~~December 31, 2018, by and between Masonite International Corporation and Robert ~~A. Paxton~~E. Lewis (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K (File No. 011-11796) filed with the Securities and Exchange Commission on December 31, 2018
31.1*			Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
31.2*			Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32.1*			Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*			Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*			Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language ("Inline XBRL"): (i) the Registrant's Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended April 4, 2021, and March 29, ~~2020, and March 31, 2019;~~2020; (ii) the Registrant's Condensed Consolidated Balance Sheets as of ~~March 29, 2020,~~April 4, 2021, and ~~December 29, 2019;~~January 3, 2021; (iii) the Registrant's Condensed Consolidated Statements of Changes in Equity for the three months ended April 4, 2021, and March 29, ~~2020, and March 31, 2019;~~2020; (iv) the Registrant's Condensed Consolidated Statements of Cash Flows for the three months ended April 4, 2021, and March 29, ~~2020, and March 31, 2019;~~2020; and (v) the notes to the Registrant's Condensed Consolidated Financial Statements
104*			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed or furnished herewith.
#	Denotes management contract or compensatory plan.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MASONITE INTERNATIONAL CORPORATION

(Registrant)

Date:

May ~~6, 2020~~5, 2021

/s/ Russell T. Tiejema

Russell T. Tiejema

Executive Vice President and Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

3330


(In thousands)	December 30, 2018		Severance		Closure Costs		Cash Payments		March 31, 2019
2019 Plan	$	—	$	2,770	$	18	$	(1,035)	$	1,753
2018 Plan	596		983		(31)		(546)		1,002
Other	58		—		—		(17)		41
Total	$	654	$	3,753	$	(13)	$	(1,598)	$	2,796