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 ~~April~~July 2, 2023

☐ 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 ~~22,112,520~~22,003,429 shares of Common Stock, no par value, as of ~~May 5,~~August 7, 2023.

MASONITE INTERNATIONAL CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

~~April~~July 2, 2023

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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 January 1, 2023, 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;

•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 customer concentration and consolidation;

•our ability to accurately anticipate demand for our products;

•impacts on our business from weather and climate change;

•our ability to successfully consummate and integrate ~~acquisitions;~~acquisitions and effectuate dispositions;

•changes 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 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 potential disruptions, manufacturing realignments (including related restructuring charges) and customer credit risk;

•product liability claims and product recalls;

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

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

•fluctuating foreign exchange and interest rates;

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

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

•retention of key management personnel;

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

•the scale and scope of public health issues and their impact on our operations, customer demand and supply chain; and

•our ability to replace our expiring patents and to innovate and keep pace with technological developments.

We caution you that the foregoing list of important factors is not 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 Income and Comprehensive Income

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

(Unaudited)


		Three Months Ended				Three Months Ended				Six Months Ended
		April 2, 2023		April 3, 2022				July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Net sales	Net sales	$	725,984	$	726,217		Net sales	$	741,884	$	761,874	$	1,467,868	$	1,488,091
Cost of goods sold	Cost of goods sold	555,493		541,968			Cost of goods sold	563,517		582,389		1,119,010		1,124,357
Gross profit	Gross profit	170,491		184,249			Gross profit	178,367		179,485		348,858		363,734
Selling, general and administration expenses	Selling, general and administration expenses	101,705		83,246			Selling, general and administration expenses	98,746		90,330		200,451		173,576
Restructuring costs (benefit)	Restructuring costs (benefit)	3,678		(19)			Restructuring costs (benefit)	3,065		(61)		6,743		(80)

Operating income	Operating income	65,108		101,022			Operating income	76,556		89,216		141,664		190,238
Interest expense, net	Interest expense, net	14,252		10,239			Interest expense, net	13,488		10,593		27,740		20,832

Other expense (income), net		52		(1,415)
Other (income) expense, net							Other (income) expense, net	(550)		(400)		(498)		(1,815)
Income before income tax expense	Income before income tax expense	50,804		92,198			Income before income tax expense	63,618		79,023		114,422		171,221
Income tax expense	Income tax expense	11,360		23,477			Income tax expense	14,673		19,649		26,033		43,126
Net income	Net income	39,444		68,721			Net income	48,945		59,374		88,389		128,095
Less: net income attributable to non-controlling interests	Less: net income attributable to non-controlling interests	953		1,139			Less: net income attributable to non-controlling interests	700		859		1,653		1,998
Net income attributable to Masonite	Net income attributable to Masonite	$	38,491	$	67,582		Net income attributable to Masonite	$	48,245	$	58,515	$	86,736	$	126,097

Basic earnings per common share attributable to Masonite	Basic earnings per common share attributable to Masonite	$	1.74	$	2.93		Basic earnings per common share attributable to Masonite	$	2.19	$	2.60	$	3.92	$	5.53
Diluted earnings per common share attributable to Masonite	Diluted earnings per common share attributable to Masonite	$	1.71	$	2.89		Diluted earnings per common share attributable to Masonite	$	2.16	$	2.58	$	3.87	$	5.47

Comprehensive income:	Comprehensive income:						Comprehensive income:
Net income	Net income	$	39,444	$	68,721		Net income	$	48,945	$	59,374	$	88,389	$	128,095
Other comprehensive income (loss):	Other comprehensive income (loss):						Other comprehensive income (loss):
Foreign currency translation gain (loss)	Foreign currency translation gain (loss)	8,949		(2,105)			Foreign currency translation gain (loss)	8,541		(28,392)		17,490		(30,497)

Amortization of actuarial net losses	Amortization of actuarial net losses	191		6			Amortization of actuarial net losses	192		6		383		12
Income tax (expense) benefit related to other comprehensive income (loss)	Income tax (expense) benefit related to other comprehensive income (loss)	(45)		10			Income tax (expense) benefit related to other comprehensive income (loss)	(29)		(23)		(74)		(13)
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:	9,095		(2,089)			Other comprehensive income (loss), net of tax:	8,704		(28,409)		17,799		(30,498)
Comprehensive income	Comprehensive income	48,539		66,632			Comprehensive income	57,649		30,965		106,188		97,597
Less: comprehensive income attributable to non-controlling interests	Less: comprehensive income attributable to non-controlling interests	945		1,281			Less: comprehensive income attributable to non-controlling interests	864		1,358		1,809		2,639
Comprehensive income attributable to Masonite	Comprehensive income attributable to Masonite	$	47,594	$	65,351		Comprehensive income attributable to Masonite	$	56,785	$	29,607	$	104,379	$	94,958

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	April 2, 2023		January 1, 2023		ASSETS	July 2, 2023		January 1, 2023
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	210,725	$	296,922	Cash and cash equivalents	$	317,157	$	296,922
Restricted cash	Restricted cash	11,587		11,999		Restricted cash	11,587		11,999
Accounts receivable, net	Accounts receivable, net	391,559		375,918		Accounts receivable, net	374,794		375,918
Inventories, net	Inventories, net	418,581		406,828		Inventories, net	378,705		406,828
Prepaid expenses and other assets	Prepaid expenses and other assets	52,280		55,051		Prepaid expenses and other assets	66,982		55,051
Income taxes receivable	Income taxes receivable	18,433		16,922		Income taxes receivable	21,266		16,922
Total current assets	Total current assets	1,103,165		1,163,640		Total current assets	1,170,491		1,163,640
Property, plant and equipment, net	Property, plant and equipment, net	714,259		652,329		Property, plant and equipment, net	735,932		652,329
Operating lease right-of-use assets	Operating lease right-of-use assets	165,869		160,695		Operating lease right-of-use assets	191,190		160,695
Investment in equity investees	Investment in equity investees	19,924		16,111		Investment in equity investees	18,058		16,111
Goodwill	Goodwill	257,977		69,868		Goodwill	257,527		69,868
Intangible assets, net	Intangible assets, net	266,658		136,056		Intangible assets, net	254,156		136,056
Deferred income taxes	Deferred income taxes	19,156		16,133		Deferred income taxes	21,400		16,133
Other assets	Other assets	34,049		33,346		Other assets	34,191		33,346
Total assets	Total assets	$	2,581,057	$	2,248,178	Total assets	$	2,682,945	$	2,248,178

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	123,768	$	111,526	Accounts payable	$	137,895	$	111,526
Accrued expenses	Accrued expenses	193,642		223,046		Accrued expenses	227,833		223,046
Income taxes payable	Income taxes payable	8,329		14,361		Income taxes payable	6,520		14,361
Current portion of long-term debt						Current portion of long-term debt	37,500		—
Total current liabilities	Total current liabilities	325,739		348,933		Total current liabilities	409,748		348,933
Long-term debt	Long-term debt	1,113,880		866,116		Long-term debt	1,067,183		866,116

Long-term operating lease liabilities	Long-term operating lease liabilities	155,993		151,242		Long-term operating lease liabilities	178,820		151,242
Deferred income taxes	Deferred income taxes	128,292		79,590		Deferred income taxes	120,963		79,590
Other liabilities	Other liabilities	76,429		59,515		Other liabilities	76,406		59,515
Total liabilities	Total liabilities	1,800,333		1,505,396		Total liabilities	1,853,120		1,505,396
Commitments and Contingencies (Note 7)	Commitments and Contingencies (Note 7)					Commitments and Contingencies (Note 7)
Equity:	Equity:					Equity:
Share capital: unlimited shares authorized, no par value, 22,138,282 and 22,155,035 shares issued and outstanding as of April 2, 2023, and January 1, 2023, respectively		529,156		520,003
Share capital: unlimited shares authorized, no par value, 21,995,420 and 22,155,035 shares issued and outstanding as of July 2, 2023, and January 1, 2023, respectively						Share capital: unlimited shares authorized, no par value, 21,995,420 and 22,155,035 shares issued and outstanding as of July 2, 2023, and January 1, 2023, respectively	526,816		520,003
Additional paid-in capital	Additional paid-in capital	218,010		226,514		Additional paid-in capital	223,540		226,514
Retained earnings	Retained earnings	155,625		127,826		Retained earnings	193,262		127,826
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(133,121)		(142,224)		Accumulated other comprehensive loss	(124,581)		(142,224)
Total equity attributable to Masonite	Total equity attributable to Masonite	769,670		732,119		Total equity attributable to Masonite	819,037		732,119
Equity attributable to non-controlling interests	Equity attributable to non-controlling interests	11,054		10,663		Equity attributable to non-controlling interests	10,788		10,663
Total equity	Total equity	780,724		742,782		Total equity	829,825		742,782
Total liabilities and equity	Total liabilities and equity	$	2,581,057	$	2,248,178	Total liabilities and equity	$	2,682,945	$	2,248,178

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				Three Months Ended				Six Months Ended
		April 2, 2023		April 3, 2022				July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Total equity, beginning of period	Total equity, beginning of period	$	742,782	$	699,778		Total equity, beginning of period	$	780,724	$	626,447	$	742,782	$	699,778
Share capital:	Share capital:						Share capital:
Beginning of period	Beginning of period	520,003		543,400			Beginning of period	529,156		527,386		520,003		543,400
Common shares issued for delivery of share based awards	Common shares issued for delivery of share based awards	12,372		11,630			Common shares issued for delivery of share based awards	1,468		1,346		13,840		12,976
Common shares issued under employee stock purchase plan	Common shares issued under employee stock purchase plan	806		797			Common shares issued under employee stock purchase plan	—		—		806		797
Common shares repurchased	Common shares repurchased	(4,025)		(28,441)			Common shares repurchased	(3,808)		(7,489)		(7,833)		(35,930)
End of period	End of period	529,156		527,386			End of period	526,816		521,243		526,816		521,243
Additional paid-in capital:	Additional paid-in capital:						Additional paid-in capital:
Beginning of period	Beginning of period	226,514		222,177			Beginning of period	218,010		194,459		226,514		222,177
Share based compensation expense	Share based compensation expense	6,054		4,719			Share based compensation expense	7,103		5,976		13,157		10,695
Common shares issued for delivery of share based awards	Common shares issued for delivery of share based awards	(12,372)		(11,630)			Common shares issued for delivery of share based awards	(1,468)		(1,346)		(13,840)		(12,976)
Common shares withheld to cover income taxes payable due to delivery of share based awards	Common shares withheld to cover income taxes payable due to delivery of share based awards	(1,960)		(2,963)			Common shares withheld to cover income taxes payable due to delivery of share based awards	(105)		(146)		(2,065)		(3,109)
Common shares issued under employee stock purchase plan	Common shares issued under employee stock purchase plan	(226)		(134)			Common shares issued under employee stock purchase plan	—		—		(226)		(134)
Common shares repurchased	Common shares repurchased	—		(17,710)			Common shares repurchased	—		17,710		—		—
End of period	End of period	218,010		194,459			End of period	223,540		216,653		223,540		216,653
Retained earnings (deficit):	Retained earnings (deficit):						Retained earnings (deficit):
Beginning of period	Beginning of period	127,826		24,244			Beginning of period	155,625		(2,023)		127,826		24,244
Net income attributable to Masonite	Net income attributable to Masonite	38,491		67,582			Net income attributable to Masonite	48,245		58,515		86,736		126,097
Common shares repurchased	Common shares repurchased	(10,692)		(93,849)			Common shares repurchased	(10,608)		(10,221)		(21,300)		(104,070)
End of period	End of period	155,625		(2,023)			End of period	193,262		46,271		193,262		46,271
Accumulated other comprehensive loss:	Accumulated other comprehensive loss:						Accumulated other comprehensive loss:
Beginning of period	Beginning of period	(142,224)		(101,582)			Beginning of period	(133,121)		(104,810)		(142,224)		(101,582)
Other comprehensive income (loss) attributable to Masonite, net of tax	Other comprehensive income (loss) attributable to Masonite, net of tax	9,103		(3,228)			Other comprehensive income (loss) attributable to Masonite, net of tax	8,540		(27,911)		17,643		(31,139)
End of period	End of period	(133,121)		(104,810)			End of period	(124,581)		(132,721)		(124,581)		(132,721)
Equity attributable to non-controlling interests:	Equity attributable to non-controlling interests:						Equity attributable to non-controlling interests:
Beginning of period	Beginning of period	10,663		11,539			Beginning of period	11,054		11,435		10,663		11,539
Net income attributable to non-controlling interests	Net income attributable to non-controlling interests	953		1,139			Net income attributable to non-controlling interests	700		859		1,653		1,998
Other comprehensive (loss) income attributable to non-controlling interests, net of tax	Other comprehensive (loss) income attributable to non-controlling interests, net of tax	(8)		142			Other comprehensive (loss) income attributable to non-controlling interests, net of tax	164		499		156		641
Dividends to non-controlling interests	Dividends to non-controlling interests	(554)		(1,385)			Dividends to non-controlling interests	(1,130)		(1,174)		(1,684)		(2,559)
End of period	End of period	11,054		11,435			End of period	10,788		11,619		10,788		11,619
Total equity, end of period	Total equity, end of period	$	780,724	$	626,447		Total equity, end of period	$	829,825	$	663,065	$	829,825	$	663,065

Common shares outstanding:	Common shares outstanding:						Common shares outstanding:
Beginning of period	Beginning of period	22,155,035		23,623,887			Beginning of period	22,138,282		22,564,956		22,155,035		23,623,887
Common shares issued for delivery of share based awards	Common shares issued for delivery of share based awards	142,943		169,370			Common shares issued for delivery of share based awards	16,177		14,078		159,120		183,448
Common shares issued under employee stock purchase plan	Common shares issued under employee stock purchase plan	8,827		8,029			Common shares issued under employee stock purchase plan	106		—		8,933		8,029
Common shares repurchased	Common shares repurchased	(168,523)		(1,236,330)			Common shares repurchased	(159,145)		(319,678)		(327,668)		(1,556,008)
End of period	End of period	22,138,282		22,564,956			End of period	21,995,420		22,259,356		21,995,420		22,259,356

See accompanying notes to the condensed consolidated financial statements.

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MASONITE INTERNATIONAL CORPORATION

Condensed Consolidated Statements of Cash Flows

(In thousands of U.S. dollars)

(Unaudited)


		Three Months Ended					Six Months Ended
Cash flows from operating activities:	Cash flows from operating activities:	April 2, 2023		April 3, 2022		Cash flows from operating activities:	July 2, 2023		July 3, 2022
Net income	Net income	$	39,444	$	68,721	Net income	$	88,389	$	128,095
Adjustments to reconcile net income to net cash flow provided by (used in) 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:

Depreciation	Depreciation	21,485		17,272		Depreciation	44,466		34,516
Amortization	Amortization	7,421		4,612		Amortization	14,463		8,908
Share based compensation expense	Share based compensation expense	6,054		4,719		Share based compensation expense	13,157		10,695
Deferred income taxes	Deferred income taxes	885		7,027		Deferred income taxes	(9,457)		1,042
Unrealized foreign exchange (gain) loss	Unrealized foreign exchange (gain) loss	(97)		594		Unrealized foreign exchange (gain) loss	(146)		356
Share of income from equity investees, net of tax	Share of income from equity investees, net of tax	(748)		(1,687)		Share of income from equity investees, net of tax	(1,990)		(2,610)

Dividend from equity investee						Dividend from equity investee	3,150		—
Pension and post-retirement funding, net of expense	Pension and post-retirement funding, net of expense	(509)		(114)		Pension and post-retirement funding, net of expense	(956)		—
Non-cash accruals and interest	Non-cash accruals and interest	1,445		(304)		Non-cash accruals and interest	1,861		(114)
Loss (gain) on sale of property, plant and equipment	Loss (gain) on sale of property, plant and equipment	1,038		(2,854)		Loss (gain) on sale of property, plant and equipment	1,540		(1,400)

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	(5,457)		(64,948)		Accounts receivable	13,474		(67,611)
Inventories	Inventories	34,024		(58,106)		Inventories	75,709		(89,508)
Prepaid expenses and other assets	Prepaid expenses and other assets	(7,730)		(387)		Prepaid expenses and other assets	(22,152)		(4,821)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(33,223)		(11,294)		Accounts payable and accrued expenses	9,918		23,302
Other assets and liabilities	Other assets and liabilities	(7,685)		(1,100)		Other assets and liabilities	(13,614)		(6,736)
Net cash flow provided by (used in) operating activities		56,347		(37,849)
Net cash flow provided by operating activities						Net cash flow provided by operating activities	217,812		34,114
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	(27,827)		(19,095)		Additions to property, plant and equipment	(58,056)		(39,955)
Acquisition of businesses, net of cash acquired	Acquisition of businesses, net of cash acquired	(353,618)		—		Acquisition of businesses, net of cash acquired	(354,419)		—

Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	4		6,393		Proceeds from sale of property, plant and equipment	13		6,394
Proceeds from repayment of note receivable	Proceeds from repayment of note receivable	12,000		—		Proceeds from repayment of note receivable	12,000		—
Other investing activities	Other investing activities	(3,511)		(588)		Other investing activities	(3,834)		(1,152)
Net cash flow used in investing activities	Net cash flow used in investing activities	(372,952)		(13,290)		Net cash flow used in investing activities	(404,296)		(34,713)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from issuance of long-term debt	Proceeds from issuance of long-term debt	250,000		—		Proceeds from issuance of long-term debt	250,000		—

Repayments of long-term debt						Repayments of long-term debt	(9,375)		—

Payment of debt issuance costs	Payment of debt issuance costs	(3,628)		—		Payment of debt issuance costs	(3,628)		—
Proceeds from borrowings on revolving credit facilities	Proceeds from borrowings on revolving credit facilities	100,000		—		Proceeds from borrowings on revolving credit facilities	100,000		—
Repayments of borrowings on revolving credit facilities	Repayments of borrowings on revolving credit facilities	(100,000)		—		Repayments of borrowings on revolving credit facilities	(100,000)		—
Tax withholding on share based awards	Tax withholding on share based awards	(1,960)		(2,963)		Tax withholding on share based awards	(2,065)		(3,109)
Distributions to non-controlling interests	Distributions to non-controlling interests	(554)		(1,385)		Distributions to non-controlling interests	(1,684)		(2,559)
Repurchases of common shares	Repurchases of common shares	(14,717)		(140,000)		Repurchases of common shares	(29,133)		(140,000)
Net cash flow provided by (used in) financing activities	Net cash flow provided by (used in) financing activities	229,141		(144,348)		Net cash flow provided by (used in) financing activities	204,115		(145,668)
Net foreign currency translation adjustment on cash	Net foreign currency translation adjustment on cash	855		(1,394)		Net foreign currency translation adjustment on cash	2,192		(2,598)
Decrease in cash, cash equivalents and restricted cash		(86,609)		(196,881)
Increase (decrease) in cash, cash equivalents and restricted cash						Increase (decrease) in cash, cash equivalents and restricted cash	19,823		(148,865)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	308,921		391,505		Cash, cash equivalents and restricted cash, beginning of period	308,921		391,505
Cash, cash equivalents and restricted cash, at end of period	Cash, cash equivalents and restricted cash, at end of period	$	222,312	$	194,624	Cash, cash equivalents and restricted cash, at end of period	$	328,744	$	242,640

See accompanying notes to the condensed consolidated financial statements.

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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~~a leading global designer, manufacturer, marketer and distributor of ~~the largest manufacturers of doors in the world, with significant market share in both~~ interior and exterior doors, door ~~products.~~system components and door systems for the new construction and repair, renovation and remodeling sectors of the residential and non-residential building construction markets. Masonite operates 63 manufacturing locations in seven 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 January 1, 2023, as filed with the SEC (the "Annual Report"). 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 and the 52- or 53-week periods are referred to as a 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 2022 audited consolidated financial statements, other than as noted below.

Adoption of Recent Accounting Pronouncements

In December 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-10, "Government Assistance," which requires annual disclosures that increase the transparency of transactions involving government grants, including (1) the types of transactions, (2) the accounting for those transactions and (3) the effect of those transactions on an entity's financial statements. The guidance is effective for annual periods beginning after December 15, 2021, with early adoption permitted. We adopted the new guidance as of January 3, 2022, the beginning of fiscal year 2022, and the adoption did not have a material impact on our financial statements.

In October 2021, the FASB issued ASU 2021-08, "Accounting for Contract Assets and Contract Liabilities from Contracts with Customers," which clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASU 2014-09, "Revenue from Contracts with Customers" as if the entity had originated the contracts. We adopted the new guidance as of January 1, 2023, the beginning of fiscal year 2023, and the adoption did not have a material impact on our financial statements.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

2. Acquisitions and Divestitures

Acquisitions

On January 3, 2023, we completed the acquisition of 100% of the outstanding equity of EPI Holdings, Inc. ("Endura"), for total consideration of approximately $408.1 million, including an $18.0 million holdback which is payable 24 months after the acquisition ~~date.~~date and was recorded in the consolidated balance sheets as a component of other liabilities. Endura is a leading innovator and manufacturer of high-performance door frames and door system components in the United States. Endura’s product offerings include engineered frames, self-adjusting sill systems, weather sealing, multi-point locks and installation accessories used by builders and contractors in residential new construction as well as repair and remodeling applications. The acquisition is intended to accelerate our Doors That Do MoreTM strategy and maximize our growth potential. The ~~$189.9~~$187.7 million excess purchase price over the fair value of tangible and intangible assets acquired was allocated to goodwill. The goodwill principally represents anticipated synergies to be gained from the integration into our existing business and acquisition of the assembled workforce. This goodwill is not deductible for tax purposes and relates to the North American Residential segment.

The Company has accounted for the acquisition as a business combination and allocated the preliminary estimated purchase price to the estimated fair values of assets acquired and liabilities assumed utilizing various valuation methods including replacement cost, market values and the income approach. The Company has not yet completed its evaluation and determination of certain assets acquired and liabilities assumed, primarily (i) the final valuation of intangible assets related to customers relationships, patents and trade names, and (ii) the final assessment and valuation of certain other assets acquired and liabilities assumed, including inventory, property, plant and equipment, leases, and deferred income taxes, which could also impact goodwill during the measurement period.

The allocation of the purchase price to assets acquired and liabilities assumed is as follows:


~~(In thousands)~~	~~Endura~~
~~Cash acquired~~	$	~~32,501~~
~~Accounts receivable, net~~	~~7,871~~
~~Inventories, net~~	~~44,183~~
~~Property, plant and equipment, net~~	~~54,373~~
~~Goodwill~~	~~189,938~~
~~Intangible assets~~	~~135,800~~
~~Accounts payable and accrued expenses~~	~~(15,088)~~
~~Deferred income taxes~~	~~(44,345)~~
~~Other assets and liabilities, net~~	~~2,868~~
~~Total purchase price~~	$	~~408,101~~


(In thousands)	Initial Purchase Price Allocation		Measurement Period Adjustments		Preliminary Purchase Price Allocation
Cash acquired	$	32,501	$	—	$	32,501
Accounts receivable, net	7,871		—		7,871
Inventories, net	44,183		35		44,218
Property, plant and equipment, net	54,373		10,576		64,949
Goodwill	189,938		(2,230)		187,708
Intangible assets	135,800		(7,400)		128,400
Accounts payable and accrued expenses	(15,088)		—		(15,088)
Deferred income taxes	(44,345)		(946)		(45,291)
Other assets and liabilities, net	2,868		(35)		2,833
Total purchase price	$	408,101	$	—	$	408,101

The fair values of intangible assets acquired are based on management's estimates and assumptions including the income approach, the cost approach and the market approach. The intangible assets acquired are not expected to have any residual value. The gross contractual value of acquired trade receivables was $8.3 million.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Intangible assets acquired from the Endura acquisition consist of the following:


		Fair Value (in thousands)		Expected Useful Life (Years)		Fair Value (in thousands)		Expected Useful Life (Years)
Customer relationships	Customer relationships	$	116,000	10	Customer relationships	$	108,600	10
Trademarks and trade names	Trademarks and trade names	6,600		10	Trademarks and trade names	6,600		10
Patents	Patents	13,200		12	Patents	13,200		12

Total intangible assets acquired	Total intangible assets acquired	$	135,800		Total intangible assets acquired	$	128,400

Endura's results of operations were included in the condensed consolidated statements of income and comprehensive income for the period subsequent to the acquisition date. For the three and six months ended ~~April~~July 2, 2023, Endura had ~~$59.8~~net sales of $59.4 million and $119.2 million, respectively. For the three and six months ended July 2, 2023, Endura had $1.3 million in net ~~sales~~income attributable to Masonite and ~~$4.5~~$3.2 million in net loss attributable to ~~Masonite.~~Masonite, respectively.

Pro Forma Information

The following unaudited pro forma financial information represents the consolidated financial information as if the Endura acquisition had been included in our consolidated results beginning on January 2, 2022, the first day of the fiscal year prior to the respective acquisition date. The pro forma results have been calculated after adjusting the results of the acquired entities to remove intercompany transactions and to reflect the additional depreciation, amortization and interest expense that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets and the additional debt incurred to fund the acquisition had been applied on the first day of the fiscal year prior to the respective acquisition date, together with the consequential tax effects. The pro forma results do not reflect any cost savings, operating synergies or revenue enhancements that the combined ~~company~~companies may achieve as a result of the ~~acquisitions;~~acquisition; the costs to combine the companies' operations; or the costs necessary to achieve these costs savings, operating synergies and revenue enhancements. As a result, the pro forma information below does not purport to ~~present what~~represent actual results ~~would have been~~ had the acquisition been consummated on the date indicated and it is not necessarily indicative of future results of operations.


		Three Months Ended April 3, 2022									Three Months Ended July 3, 2022
(In thousands)	(In thousands)	Masonite		Endura		Pro Forma Adjustments		Pro Forma		(In thousands)	Masonite		Endura		Pro Forma Adjustments		Pro Forma
Net sales	Net sales	$	726,217	$	72,716	$	(2,604)	$	796,329	Net sales	$	761,874	$	73,479	$	(3,216)	$	832,137
Net income attributable to Masonite	Net income attributable to Masonite	67,582		3,353		(5,881)		65,054		Net income attributable to Masonite	58,515		4,097		(7,850)		54,762

Basic earnings per common share	Basic earnings per common share	$	2.93					$	2.82	Basic earnings per common share	$	2.60					$	2.43
Diluted earnings per common share	Diluted earnings per common share	$	2.89					$	2.78	Diluted earnings per common share	$	2.58					$	2.41


	Six Months Ended July 3, 2022
(In thousands)	Masonite		Endura		Pro Forma Adjustments		Pro Forma
Net sales	$	1,488,091	$	146,195	$	(5,820)	$	1,628,466
Net income attributable to Masonite	126,097		7,450		(13,731)		119,816

Basic earnings per common share	$	5.53					$	5.25
Diluted earnings per common share	$	5.47					$	5.20

As previously disclosed, we are actively reviewing strategic alternatives for our Architectural segment, including a potential sale of the business. There can be no assurance that a potential transaction will be consummated or

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

on what terms. If a transaction is consummated, depending on the sale price, we could incur an impairment charge related to the book value of the segment's assets. This charge could be material.

3. Accounts Receivable

Our customers consist mainly of retailers, distributors and contractors. Our ten largest customers accounted for ~~59.3%~~57.8% and 62.3% of total accounts receivable as of ~~April~~July 2, 2023, and January 1, 2023, respectively. Our largest customer, The Home Depot, Inc., accounted for more than 10% of the consolidated gross accounts receivable balance as of ~~April~~July 2, 2023, and January 1, 2023. The allowance for doubtful accounts balance was ~~$2.9~~$2.6 million and $2.5 million as of ~~April~~July 2, 2023, and January 1, 2023, 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~~AR Sales 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,

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

~~(Unaudited)~~

under the AR Sales Program were not material for any of the periods presented and were recorded in selling, general and administration expenses within the condensed consolidated statements of income and comprehensive income.

In most countries we pay and collect Value Added Tax ("VAT") when procuring goods and services within the normal course of business. VAT receivables are established in jurisdictions where VAT paid exceeds VAT collected and are recoverable through the filing of refund claims.

Certain wood moldings and millwork products being imported into the U.S. are subject to import tariffs. Tariff deposits are paid to the government and are recoverable through an assessment process.

4. Inventories

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


(In thousands)	(In thousands)	April 2, 2023		January 1, 2023		(In thousands)	July 2, 2023		January 1, 2023
Raw materials	Raw materials	$	288,385	$	320,553	Raw materials	$	256,799	$	320,553
Finished goods	Finished goods	143,322		95,005		Finished goods	137,115		95,005
Provision for obsolete or aged inventory	Provision for obsolete or aged inventory	(13,126)		(8,730)		Provision for obsolete or aged inventory	(15,209)		(8,730)
Inventories, net	Inventories, net	$	418,581	$	406,828	Inventories, net	$	378,705	$	406,828

5. Accrued Expenses

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


(In thousands)	(In thousands)	April 2, 2023		January 1, 2023		(In thousands)	July 2, 2023		January 1, 2023
Accrued payroll	Accrued payroll	$	57,084	$	69,224	Accrued payroll	$	71,462	$	69,224
Accrued rebates	Accrued rebates	49,410		50,200		Accrued rebates	56,660		50,200
Current portion of operating lease liabilities	Current portion of operating lease liabilities	24,492		24,372		Current portion of operating lease liabilities	26,397		24,372
Accrued interest	Accrued interest	8,142		16,480		Accrued interest	19,765		16,480

Other accruals	Other accruals	54,514		62,770		Other accruals	53,549		62,770
Total accrued expenses	Total accrued expenses	$	193,642	$	223,046	Total accrued expenses	$	227,833	$	223,046

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

6. Long-Term Debt


(In thousands)	(In thousands)	April 2, 2023		January 1, 2023		(In thousands)	July 2, 2023		January 1, 2023
Senior unsecured notes, interest rate of 3.50%, due 2030	Senior unsecured notes, interest rate of 3.50%, due 2030	$	375,000	$	375,000	Senior unsecured notes, interest rate of 3.50%, due 2030	$	375,000	$	375,000
Senior unsecured notes, interest rate of 5.375%, due 2028	Senior unsecured notes, interest rate of 5.375%, due 2028	500,000		500,000		Senior unsecured notes, interest rate of 5.375%, due 2028	500,000		500,000
Term Loan Facility, interest rate of SOFR plus 2.25%, due 2027	Term Loan Facility, interest rate of SOFR plus 2.25%, due 2027	250,000		—		Term Loan Facility, interest rate of SOFR plus 2.25%, due 2027	240,625		—

Debt issuance costs	Debt issuance costs	(11,120)		(8,884)		Debt issuance costs	(10,942)		(8,884)
Total long-term debt		$	1,113,880	$	866,116
Total debt (including current portion)						Total debt (including current portion)	1,104,683		866,116
Less: debt due within one year						Less: debt due within one year	(37,500)		—
Total long-term debt (excluding current portion)						Total long-term debt (excluding current portion)	$	1,067,183	$	866,116

Interest expense related to our consolidated indebtedness under our senior unsecured notes, Term Loan Facility and ABL Facility was ~~$15.4~~$14.1 million and ~~$10.3~~$29.5 million for the three and six months ended ~~April~~July 2, 2023, respectively, and ~~April~~$10.4 million and $20.7 million for the three and six months ended July 3, 2022, respectively.

3.50% Senior Notes due 2030

On July 26, 2021, we issued $375.0 million aggregate principal senior unsecured notes (the "2030 Notes"). The 2030 Notes bear interest at 3.50% per annum, payable in cash semiannually in arrears on February 15 and August 15 of each year and are due February 15, 2030. The 2030 Notes were issued at par.

Information concerning obligations under the 2030 Notes and the indenture governing them are described in detail in our Annual Report. As of ~~April~~July 2, 2023, we were in compliance with all covenants under the indenture governing the 2030 Notes.

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~~(Unaudited)~~

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.

Information concerning obligations under the 2028 Notes and the indenture governing them are described in detail in our Annual Report. As of ~~April~~July 2, 2023, we were in compliance with all covenants under the indenture governing the 2028 Notes.

Term Loan Facility

On December 13, 2022, we and certain of our subsidiaries entered into a new delayed-draw term loan credit agreement (the "Term Loan Credit Agreement") maturing on December 12, 2027 (the "Term Loan Maturity Date"). The Term Loan Credit Agreement provides for a senior secured five-year delayed-draw term loan facility of $250.0 million (the "Term Loan Facility"). Loans under the Term Loan Facility (the "Term Loans") will bear interest at a rate equal to, at our option, (1) the Adjusted Term SOFR Rate (as defined in the Term Loan Credit Agreement) plus an applicable margin of 2.25% or (2) an alternate base rate equal to the greatest of (i) the "Prime Rate" in the U.S. last quoted by The Wall Street Journal, (ii) 0.50% above the greater of the federal funds rate and the rate comprised of both overnight federal funds and overnight eurodollar transactions denominated in U.S. dollars, (iii) 1.00% above the Adjusted Term SOFR Rate for a one month interest period and (iv) 1.00%, plus, in each case, an applicable margin of 1.25%, subject to, in each of cases (1) and (2), an agreed interest rate floor. The Term Loans are repayable in equal quarterly installments for an annual aggregate amortization payment equal to 15% of the aggregate principal amount of the Term Loans, with the balance of the principal being due on the Term Loan Maturity Date.

The Term Loan Credit Agreement also includes a quarterly ticking fee of 25 basis points per annum payable to the lenders under the Term Loan Facility beginning on January 3, 2023 (the "Closing Date") in respect of the unutilized commitments thereunder. As a result of the incurrence of the Term Loans on the Closing Date such ticking fees were not (and shall not be) payable to the Lenders.

~~The~~ Borrower also pays customary agency fees.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Obligations under the Term Loan Credit Agreement are fully and unconditionally guaranteed, jointly and severally, by us and by certain of our directly or indirectly wholly-owned subsidiaries organized in the ~~United States~~U.S. and are secured by the equity in, and substantially all the assets of, such subsidiaries. The Term Loans were funded in an amount of $250.0 million and applied to finance a portion of the consideration payable in connection with the consummation of the Endura acquisition on January 3, 2023. We received net proceeds of $246.4 million after deducting $3.6 million of debt issuance costs. The debt issuance costs were capitalized as a reduction to the carrying value of debt and are being accreted to interest expense over the term of the ~~loan~~Term Loan using the effective interest method.

The Term Loan Credit Agreement contains various customary representations, warranties by us and covenants that are described in detail in our Annual Report. As of ~~April~~July 2, 2023, we were in compliance with all covenants under the indenture governing the Term Loan Credit Agreement.

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. On October 28, 2022, we and certain of our subsidiaries entered into an amendment which, among other things, (i) increased the revolving credit commitments available thereunder by $100.0 million to an aggregate amount of $350.0 million and (ii) replaced the LIBOR-based interest rate applicable to borrowings thereunder in U.S. dollars with an interest rate based on the sum of (x) a "Term SOFR" rate published by the CME Group Benchmark Administration Limited (CBA) plus (y) 10 basis points ("Adjusted Term SOFR"). Additionally, on December 12, 2022, we entered into an amendment to the ABL Facility, which, among other things, extended the maturity of the ABL Facility from January 31, 2024 to December 12, 2027. The terms of the ABL Facility remained otherwise substantially unchanged and are described in detail in our Annual Report. On January 3, 2023, we borrowed $100.0 million under our ABL Facility in order to fund a portion of

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

~~(Unaudited)~~

the cash consideration paid for the acquisition of Endura. During the first quarter of 2023, we repaid all amounts outstanding under the ABL Facility.

The ABL Facility contains various customary representations, warranties by us and covenants that are described in detail in our Annual Report. As of ~~April~~July 2, 2023, we were in compliance with all covenants under the credit agreement governing the ABL Facility. We had availability of ~~$313.4~~$300.6 million under our ABL Facility, and there were no amounts outstanding as of ~~April~~July 2, 2023.

7. Commitments and Contingencies

We may become involved from time-to-time in litigation and regulatory compliance matters incidental to our business, including employment and wage and hour claims, antitrust, tax, product liability, environmental, health and safety, commercial disputes, intellectual property, contracts and other matters arising out of the normal conduct of our business. Since litigation is inherently unpredictable and unfavorable resolutions can occur, assessing contingencies is highly subjective and requires judgments about future events. We regularly review and accrue for contingencies related to litigation and regulatory compliance matters, if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on current information, in the opinion of management, the ultimate resolution of these matters, individually or in the aggregate, will not have a material adverse effect on our financial condition, results of operations or cash flows.

Antitrust Class Action Proceedings - Canada

On May 19, 2020, an intended class proceeding was commenced in the Province of Québec, Canada naming as defendants Masonite Corporation, Corporation Internationale Masonite, JELD-WEN, Inc., JELD-WEN Holding, Inc. and JELD-WEN of Canada, Ltd. The plaintiff alleges that the Masonite and JELD-WEN defendants engaged in anticompetitive conduct, including price-fixing involving interior molded doors. The intended class proceeding seeks damages, punitive damages, and other relief. On December 22, 2020, the parties filed a motion with the court seeking to stay the proceeding.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

On October 2, 2020, an intended class proceeding was commenced in the Federal Court of Canada naming as defendants Masonite International Corporation, Masonite Corporation, JELD-WEN, Inc., JELD-WEN Holding, Inc. and JELD-WEN of Canada, Ltd. The plaintiff alleges that the Masonite and JELD-WEN defendants engaged in anticompetitive conduct, including price-fixing involving interior molded doors. The intended class proceeding seeks damages, punitive damages, and other relief. The plaintiff served its certification record on March 31, 2021. The Federal Court has scheduled a hearing on certification for October 12-13, 2023.

As of ~~April~~July 2, 2023, we have not accrued an expense in connection with this matter because, although an adverse outcome is reasonably possible, the amount or range of any potential loss cannot be reasonably estimated. This proceeding is at an early stage. 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, adverse effect on our consolidated financial condition, results of operations or cash flow.

8. Share Based Compensation Plans

Share based compensation expense was ~~$6.1~~$7.1 million and ~~$4.7~~$13.2 million for the three and six months ended ~~April~~July 2, 2023, respectively, and ~~April~~$6.0 million and $10.7 million for the three and six months ended July 3, 2022, respectively. As of ~~April~~July 2, 2023, the total remaining unrecognized compensation expense related to share based compensation amounted to ~~$47.0~~$40.2 million, which will be amortized over the weighted average remaining requisite service period of ~~2.1~~1.9 years.

Equity Incentive Plans

Our equity incentive plans under the 2021 Equity Plan and 2012 Plan are described in detail and defined in our Annual Report. The aggregate number of common shares that can be issued with respect to equity awards under the 2021 Equity 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 related to outstanding grants; plus the number of shares subject to existing grants under the 2012 Plan that may expire or be forfeited or cancelled. As of ~~April~~July 2, 2023, there were ~~583,445~~703,883 shares of common stock available for future issuance under the 2021 Equity Plan.

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~~(Unaudited)~~

Deferred Compensation Plan

We offer to certain of our employees and directors a Deferred Compensation Plan, which is further described and defined in our Annual Report. As of ~~April~~July 2, 2023, the liability and asset relating to deferred compensation had a fair value of ~~$7.1~~$7.5 million and ~~$7.0~~$7.1 million, respectively. As of ~~April~~July 2, 2023, 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, which entitle the recipient to the appreciation in value of granted 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.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The total fair value of SARs vested was $0.7 million during the ~~three~~six months ended ~~April~~July 2, 2023.


Three Months Ended April 2, 2023		Stock Appreciation Rights	Aggregate Intrinsic Value (in thousands)		Weighted Average Exercise Price		Average Remaining Contractual Life (Years)
Six Months Ended July 2, 2023								Six Months Ended July 2, 2023	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	184,205	$	2,153	$	74.75	7.0	Outstanding, beginning of period	184,205	$	2,153	$	74.75	7.0
Granted	Granted	30,946			88.99			Granted	30,946			88.99
Exercised	Exercised	—	—		—			Exercised	—	—		—
Cancelled and forfeited	Cancelled and forfeited	—			—			Cancelled and forfeited	—			—
Outstanding, end of period	Outstanding, end of period	215,151	$	3,420	$	76.79	7.2	Outstanding, end of period	215,151	$	5,646	$	76.79	7.0

Exercisable, end of period	Exercisable, end of period	152,717	$	3,309	$	70.89	6.4	Exercisable, end of period	153,236	$	4,912	$	70.93	6.1

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. Expected volatility is based upon the historical volatility of our common shares amongst other considerations. The expected term is calculated based upon historical employee exercise behavior and the contractual term of the SAR amongst other considerations. The weighted average grant date assumptions used for the SARs granted were as follows for the periods indicated:


	2023 Grants
SAR value (model conclusion)	$	32.63
Risk-free rate	4.1		%
Expected dividend yield	0.0		%
Expected volatility	28.4		%
Expected term (years)	6.0

Restricted Stock Units

We have granted Restricted Stock Units ("RSUs") to directors and certain employees under the 2021 Equity 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 granted 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

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~~(Unaudited)~~

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.

Three Months Ended April 2, 2023 Total Restricted Stock Units Outstanding Weighted Average Grant Date Fair Value
Outstanding, beginning of period 313,753 $ 92.85
Granted 192,847 89.15
Delivered (79,511) 92.31
Withheld to cover (1)
(17,434)
Forfeited (17,131) 90.13
Outstanding, end of period 392,524 $ 91.28

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(Unaudited)


Six Months Ended July 2, 2023	Total Restricted Stock Units Outstanding	Weighted Average Grant Date Fair Value
Outstanding, beginning of period	313,753	$	92.85
Granted	203,445	89.37

Delivered	(96,879)	91.05
Withheld to cover (1)	(18,620)
Forfeited	(23,629)	90.99
Outstanding, end of period	378,070	$	91.64

___________

(1) A portion of the vested RSUs delivered were net shares 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.

RSUs granted during the ~~three~~six months ended ~~April~~July 2, 2023, vest at specified future dates with only service requirements. The value of RSUs granted in the ~~three~~six months ended ~~April~~July 2, 2023, was ~~$17.2~~$18.2 million and is being recognized over the weighted average requisite service period of 2.0 years. During the ~~three~~six months ended ~~April~~July 2, 2023, ~~96,945~~115,499 RSUs vested at a fair value of ~~$8.9~~$10.5 million.

Performance-based Restricted Stock Units

We have granted certain Performance-based Restricted Stock Units ("PRSUs") under the 2021 Equity Plan and the 2012 Plan. These PRSUs are settled with payouts ranging from zero to 200% of the target award value depending on performance goal achievement. The compensation expense for the PRSUs awarded is based on the fair value of the PRSUs 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 compensation expense for certain PRSUs is determined using the Monte Carlo simulation method. The PRSUs 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.


Three Months Ended April 2, 2023		Total Performance Restricted Stock Units Outstanding	Weighted Average Grant Date Fair Value
Six Months Ended July 2, 2023					Six Months Ended July 2, 2023	Total Performance Restricted Stock Units Outstanding	Weighted Average Grant Date Fair Value
Outstanding, beginning of period	Outstanding, beginning of period	310,678	$	90.15	Outstanding, beginning of period	310,678	$	90.15
Granted	Granted	91,631	104.24		Granted	91,631	104.24
Performance adjustment (1)	Performance adjustment (1)	17,139	79.25		Performance adjustment (1)	17,139	79.25
Delivered	Delivered	(63,432)	79.25		Delivered	(63,432)	79.25
Withheld to cover (2)	Withheld to cover (2)	(5,224)			Withheld to cover (2)	(5,224)
Forfeited	Forfeited	(3,782)	94.72		Forfeited	(5,434)	96.37
Outstanding, end of period	Outstanding, end of period	347,010	$	95.44	Outstanding, end of period	345,358	$	95.41

___________

(1) PRSUs are presented as outstanding, granted and forfeited in the table above assuming targets are met and the awards pay out at 100%. Certain 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 PRSUs delivered were net shares 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.

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(Unaudited)

PRSUs granted during the ~~three~~six months ended ~~April~~July 2, 2023, vest at specified future dates based on both performance and service requirements. The value of PRSUs granted in the ~~three~~six months ended ~~April~~July 2, 2023, was $9.6 million and is being recognized over the weighted average requisite service period of 3.0 years. During the ~~three~~six months ended ~~April~~July 2, 2023, 68,656 PRSUs vested at a fair value of $5.4 million.

9. Restructuring Costs

In December 2022, we began implementing a plan intended to improve overall business performance that includes the optimization of our manufacturing capacity and reduction of our overhead and selling, general and administration workforce primarily in our North American Residential reportable segment as well as actions in the Architectural reportable segment and in our head offices (collectively, the "2022 Plan"). The optimization of our manufacturing capacity involves specific plants in the North American Residential segment and costs associated with the closure of these plants and related headcount reductions. Costs associated with the 2022 Plan include severance and closure charges which continue throughout 2023. As of ~~April~~July 2, 2023, we expect to incur approximately $9$6 million to ~~$14~~$11 million of additional charges related to the 2022 Plan.

The following tables summarize the restructuring (benefit) costs recorded for the periods indicated:


		Three Months Ended April 2, 2023						Three Months Ended July 2, 2023
(In thousands)	(In thousands)	North American Residential		Architectural		Corporate & Other			Total		(In thousands)	North American Residential		Architectural		Corporate & Other		Total
2022 Plan	2022 Plan	$	2,380	$	684	$	614		$	3,678	2022 Plan	$	2,875	$	179	$	11	$	3,065

Total Restructuring Costs	Total Restructuring Costs	$	2,380	$	684	$	614		$	3,678	Total Restructuring Costs	$	2,875	$	179	$	11	$	3,065


		Three Months Ended April 3, 2022						Three Months Ended July 3, 2022
(In thousands)	(In thousands)	North American Residential		Architectural		Corporate & Other			Total		(In thousands)	North American Residential		Architectural		Corporate & Other		Total

Other	Other	$	(91)	$	47	$	25		$	(19)	Other	$	(90)	$	1	$	28	$	(61)
Total Restructuring (Benefit) Costs	Total Restructuring (Benefit) Costs	$	(91)	$	47	$	25		$	(19)	Total Restructuring (Benefit) Costs	$	(90)	$	1	$	28	$	(61)


		Cumulative Amount Incurred Through April 2, 2023											Six Months Ended July 2, 2023
(In thousands)	(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total		(In thousands)	North American Residential		Architectural		Corporate & Other		Total
2022 Plan	2022 Plan	$	4,511	$	—	$	684	$	614	$	5,809	2022 Plan	$	5,255	$	863	$	625	$	6,743

Total Restructuring Costs		$	4,511	$	—	$	684	$	614	$	5,809
Total Restructuring (Benefit) Costs												Total Restructuring (Benefit) Costs	$	5,255	$	863	$	625	$	6,743


	Six Months Ended July 3, 2022
(In thousands)	North American Residential		Architectural		Corporate & Other		Total
Other	$	(181)	$	48	$	53	$	(80)



Total Restructuring (Benefit) Costs	$	(181)	$	48	$	53	$	(80)


	Cumulative Amount Incurred Through July 2, 2023
(In thousands)	North American Residential		Architectural		Corporate & Other		Total
2022 Plan	$	7,386	$	863	$	625	$	8,874




Total Restructuring Costs	$	7,386	$	863	$	625	$	8,874

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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


(In thousands)	(In thousands)	January 1, 2023		Severance		Closure Costs		Cash Payments		April 2, 2023		(In thousands)	January 1, 2023		Severance		Closure Costs		Cash Payments		July 2, 2023
2022 Plan	2022 Plan	$	—	$	3,583	$	95	$	(2,897)	$	781	2022 Plan	$	—	$	5,852	$	891	$	(6,473)	$	270

Total	Total	$	—	$	3,583	$	95	$	(2,897)	$	781	Total	$	—	$	5,852	$	891	$	(6,473)	$	270

10. Income Taxes

The effective tax rate differs from the Canadian statutory rate of 26.13% primarily due to mix of earnings in foreign jurisdictions that are subject to tax rates which differ from the Canadian statutory rate. In addition, we recognized zero income tax benefit due to the exercise and delivery of share based awards during both the three and six months ended ~~April~~July 2, 2023, compared to zero and $1.1 million of income tax benefit during the three and six months ended ~~April~~July 3, ~~2022.~~2022, respectively.

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~~(Unaudited)~~

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 ("IRA") into law. The IRA includes several changes to existing tax law, including a minimum tax on adjusted financial statement income of applicable corporations and an excise tax on certain corporate stock buybacks. The tax provisions included in the IRA were generally effective beginning January 1, 2023, and no significant impact to the consolidated financial statements resulted from their adoption as of ~~April~~July 2, 2023.

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.


(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								Six Months Ended
		April 2, 2023		April 3, 2022				(In thousands, except share and per share information)	July 2, 2023				July 3, 2022				July 2, 2023				July 3, 2022
Net income attributable to Masonite	Net income attributable to Masonite	$	38,491	$	67,582				$	48,245			$	58,515			$	86,736			$	126,097

Shares used in computing basic earnings per share	Shares used in computing basic earnings per share	22,183,068		23,081,474					Shares used in computing basic earnings per share		22,071,667				22,525,333				22,127,368				22,803,403
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	297,165		296,880					Incremental shares issuable under share compensation plans		277,525				179,620				292,667				254,628
Shares used in computing diluted earnings per share	Shares used in computing diluted earnings per share	22,480,233		23,378,354					Shares used in computing diluted earnings per share		22,349,192				22,704,953				22,420,035				23,058,031

Basic earnings per common share attributable to Masonite	Basic earnings per common share attributable to Masonite	$	1.74	$	2.93				Basic earnings per common share attributable to Masonite		$	2.19			$	2.60			$	3.92			$	5.53
Diluted earnings per common share attributable to Masonite	Diluted earnings per common share attributable to Masonite	$	1.71	$	2.89				Diluted earnings per common share attributable to Masonite		$	2.16			$	2.58			$	3.87			$	5.47

Anti-dilutive instruments excluded from diluted earnings per common share	Anti-dilutive instruments excluded from diluted earnings per common share	191,385		72,954					Anti-dilutive instruments excluded from diluted earnings per common share		180,819				104,332				180,819				79,764

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.

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(Unaudited)

actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and alternate uses of capital. The share repurchase program may be effected through Rule 10b5-1 plans, open market purchases, each in compliance with Rule 10b-18 under the Exchange Act, or privately negotiated transactions. The program may be suspended or discontinued at any time and does not have an expiration date. In addition, the Company announced that its Board of Directors authorized it to enter into an accelerated share repurchase ("ASR") transaction as part of the new share repurchase program. The Company entered into an ASR transaction during the first quarter of 2022 with a third-party financial institution for the repurchase of $100.0 million of its outstanding common shares. At inception, pursuant to the agreement, the Company paid $100.0 million to the financial institution using cash on hand and received an initial delivery of 848,087 common shares on the same day. The final delivery of 319,678 common shares occurred in the second quarter. The $100.0 million ASR transaction was therefore completed in the second quarter of 2022 with a total delivery of 1,167,765 common shares at a volume-weighted average price ("VWAP") per share minus an agreed upon discount totaling $85.63 per share. The cash paid was reflected as a reduction of equity at the initial delivery of shares and the number of common shares outstanding were reduced at the dates of physical delivery.

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~~(Unaudited)~~

12. Segment Information

Our reportable segments are organized and managed principally by end market: North American Residential, Europe and Architectural. The Corporate & Other category includes unallocated corporate costs and the results of immaterial operating segments which were not aggregated into any reportable segment. 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:~~items, as applicable:

• depreciation;

• amortization;

• share based compensation expense;

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

• registration and listing fees;

• restructuring costs (benefit);

• 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.

This definition of Adjusted EBITDA differs from the definitions of EBITDA contained in the indentures governing the 2030 Notes and the 2028 Notes and the credit agreements governing the Term Loan Facility and 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 our reportable 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 April 2, 2023
(In thousands) North American Residential Europe Architectural Corporate & Other Total
Net sales $ 569,429 $ 63,716 $ 92,861 $ 5,349 $ 731,355
Intersegment sales (390) (22) (4,959) — (5,371)
Net sales to external customers $ 569,039 $ 63,694 $ 87,902 $ 5,349 $ 725,984
Adjusted EBITDA $ 107,881 $ 5,151 $ 5,350 $ (12,217) $ 106,165

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(Unaudited)

Three Months Ended April 3, 2022
(In thousands) North American Residential Europe Architectural Corporate & Other Total
Net sales $ 569,429 $ 81,839 $ 74,659 $ 6,196 $ 732,123
Intersegment sales (865) (1,371) (3,670) — (5,906)
Net sales to external customers $ 568,564 $ 80,468 $ 70,989 $ 6,196 $ 726,217
Adjusted EBITDA $ 127,667 $ 11,843 $ (2,898) $ (11,860) $ 124,752
Certain information with respect to reportable segments is as follows for the periods indicated:


	Three Months Ended July 2, 2023
(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total
Net sales	$	585,422	$	66,232	$	92,332	$	3,087	$	747,073
Intersegment sales	(453)		(222)		(4,514)		—		(5,189)
Net sales to external customers	$	584,969	$	66,010	$	87,818	$	3,087	$	741,884

Adjusted EBITDA	$	117,571	$	2,691	$	7,286	$	(9,091)	$	118,457


	Three Months Ended July 3, 2022
(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total
Net sales	$	608,483	$	74,172	$	79,894	$	4,820	$	767,369
Intersegment sales	(707)		(319)		(4,469)		—		(5,495)
Net sales to external customers	$	607,776	$	73,853	$	75,425	$	4,820	$	761,874

Adjusted EBITDA	$	124,974	$	8,566	$	78	$	(15,493)	$	118,125


	Six Months Ended July 2, 2023
(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total
Net sales	$	1,154,851	$	129,948	$	185,193	$	8,436	$	1,478,428
Intersegment sales	(843)		(244)		(9,473)		—		(10,560)
Net sales to external customers	$	1,154,008	$	129,704	$	175,720	$	8,436	$	1,467,868

Adjusted EBITDA	$	225,452	$	7,842	$	12,636	$	(21,308)	$	224,622


	Six Months Ended July 3, 2022
(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total
Net sales	$	1,177,912	$	156,011	$	154,553	$	11,016	$	1,499,492
Intersegment sales	(1,572)		(1,690)		(8,139)		—		(11,401)
Net sales to external customers	$	1,176,340	$	154,321	$	146,414	$	11,016	$	1,488,091

Adjusted EBITDA	$	252,641	$	20,409	$	(2,820)	$	(27,353)	$	242,877

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(Unaudited)

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


		Three Months Ended				Three Months Ended				Six Months Ended
(In thousands)	(In thousands)	April 2, 2023		April 3, 2022			(In thousands)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Net income attributable to Masonite	Net income attributable to Masonite	$	38,491	$	67,582		Net income attributable to Masonite	$	48,245	$	58,515	$	86,736	$	126,097
Plus:	Plus:						Plus:
Depreciation	Depreciation	21,485		17,272			Depreciation	22,981		17,244		44,466		34,516
Amortization	Amortization	7,421		4,612			Amortization	7,042		4,296		14,463		8,908
Share based compensation expense	Share based compensation expense	6,054		4,719			Share based compensation expense	7,103		5,976		13,157		10,695
Loss (gain) on disposal of property, plant and equipment	Loss (gain) on disposal of property, plant and equipment	1,038		(2,854)			Loss (gain) on disposal of property, plant and equipment	502		1,454		1,540		(1,400)
Restructuring costs (benefit)	Restructuring costs (benefit)	3,678		(19)			Restructuring costs (benefit)	3,065		(61)		6,743		(80)

Interest expense, net	Interest expense, net	14,252		10,239			Interest expense, net	13,488		10,593		27,740		20,832

Other (income) expense, net	Other (income) expense, net	52		(1,415)			Other (income) expense, net	(550)		(400)		(498)		(1,815)
Income tax expense	Income tax expense	11,360		23,477			Income tax expense	14,673		19,649		26,033		43,126
Other items (1)	Other items (1)	1,381		—			Other items (1)	1,208		—		2,589		—
Net income attributable to non-controlling interest	Net income attributable to non-controlling interest	953		1,139			Net income attributable to non-controlling interest	700		859		1,653		1,998
Adjusted EBITDA	Adjusted EBITDA	$	106,165	$	124,752		Adjusted EBITDA	$	118,457	$	118,125	$	224,622	$	242,877

(1) Other items include ~~$1,381~~$1,208 and $2,589 in acquisition and due diligence related costs in the three and six months ended ~~April~~July 2, 2023, and were recorded in selling, general and administration expenses within the condensed consolidated statements of comprehensive income.

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(Unaudited)

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				Six Months Ended
(In thousands)	(In thousands)	April 2, 2023		April 3, 2022			(In thousands)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Accumulated foreign currency translation losses, beginning of period	Accumulated foreign currency translation losses, beginning of period	$	(132,001)	$	(96,919)		Accumulated foreign currency translation losses, beginning of period	$	(123,044)	$	(100,152)	$	(132,001)	$	(96,919)
Foreign currency translation gain (loss)	Foreign currency translation gain (loss)	8,949		(2,105)			Foreign currency translation gain (loss)	8,541		(28,392)		17,490		(30,497)
Income tax expense (benefit) on foreign currency translation loss	Income tax expense (benefit) on foreign currency translation loss	—		11			Income tax expense (benefit) on foreign currency translation loss	10		(24)		10		(13)

Less: foreign currency translation (loss) gain attributable to non-controlling interest	Less: foreign currency translation (loss) gain attributable to non-controlling interest	(8)		1,139			Less: foreign currency translation (loss) gain attributable to non-controlling interest	164		(498)		156		641
Accumulated foreign currency translation losses, end of period	Accumulated foreign currency translation losses, end of period	(123,044)		(100,152)			Accumulated foreign currency translation losses, end of period	(114,657)		(128,070)		(114,657)		(128,070)

Accumulated pension and other post-retirement adjustments, beginning of period	Accumulated pension and other post-retirement adjustments, beginning of period	(10,223)		(4,663)			Accumulated pension and other post-retirement adjustments, beginning of period	(10,077)		(4,658)		(10,223)		(4,663)

Amortization of actuarial net losses	Amortization of actuarial net losses	191		6			Amortization of actuarial net losses	192		6		383		12
Income tax expense on amortization of actuarial net losses	Income tax expense on amortization of actuarial net losses	(45)		(1)			Income tax expense on amortization of actuarial net losses	(39)		1		(84)		—

Accumulated pension and other post-retirement adjustments	Accumulated pension and other post-retirement adjustments	(10,077)		(4,658)			Accumulated pension and other post-retirement adjustments	(9,924)		(4,651)		(9,924)		(4,651)

Accumulated other comprehensive loss	Accumulated other comprehensive loss	$	(133,121)	$	(104,810)		Accumulated other comprehensive loss	$	(124,581)	$	(132,721)	$	(124,581)	$	(132,721)

Other comprehensive gain (loss), net of tax		$	9,095	$	(2,089)
Less: other comprehensive (loss) income attributable to non-controlling interest		(8)		1,139
Other comprehensive income (loss), net of tax							Other comprehensive income (loss), net of tax	$	8,704	$	(28,409)	$	17,799	$	(30,498)
Less: other comprehensive income (loss) attributable to non-controlling interest							Less: other comprehensive income (loss) attributable to non-controlling interest	164		(498)		156		641
Other comprehensive income (loss) attributable to Masonite	Other comprehensive income (loss) attributable to Masonite	$	9,103	$	(3,228)		Other comprehensive income (loss) attributable to Masonite	$	8,540	$	(27,911)	$	17,643	$	(31,139)

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

Foreign currency translation gains as a result of translating our foreign assets and liabilities into U.S. dollars during the three months ended ~~April~~July 2, 2023, were ~~$8.9 million. These foreign~~$8.5 million, primarily driven by the strengthening of the British pound sterling, and the Canadian dollar, partially offset by weakening of the Malaysian ringgit in comparison to the U.S. dollar during the period. Foreign currency translation gains as a result of translating our foreign assets and liabilities into U.S. dollars during the six months ended July 2, 2023, were $17.5 million, primarily driven by the strengthening of the ~~Pound Sterling,~~British pound sterling, the Canadian dollar and the Mexican ~~Peso and the Euro~~peso in comparison to the U.S. dollar during the period.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

14. Supplemental Cash Flow Information

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


		Three Months Ended					Six Months Ended
(In thousands)	(In thousands)	April 2, 2023		April 3, 2022		(In thousands)	July 2, 2023		July 3, 2022
Transactions involving cash:	Transactions involving cash:					Transactions involving cash:
Interest paid	Interest paid	$	23,872	$	20,341	Interest paid	$	26,855	$	20,500
Interest received	Interest received	2,210		166		Interest received	4,281		404
Income taxes paid	Income taxes paid	16,267		16,735		Income taxes paid	49,551		47,453
Income tax refunds	Income tax refunds	41		8		Income tax refunds	3,569		919
Cash paid for operating lease liabilities	Cash paid for operating lease liabilities	9,095		8,372		Cash paid for operating lease liabilities	19,189		16,430
Cash paid for finance lease liabilities	Cash paid for finance lease liabilities	358		366		Cash paid for finance lease liabilities	709		654
Non-cash transactions:	Non-cash transactions:					Non-cash transactions:
Right-of-use assets acquired under operating leases	Right-of-use assets acquired under operating leases	11,374		1,434		Right-of-use assets acquired under operating leases	48,425		2,931
Holdback of portion of Endura purchase payable	Holdback of portion of Endura purchase payable	18,000		—		Holdback of portion of Endura purchase payable	18,000		—

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


		April 2, 2023		January 1, 2023			July 2, 2023		January 1, 2023
Cash and cash equivalents	Cash and cash equivalents	$	210,725	$	296,922	Cash and cash equivalents	$	317,157	$	296,922
Restricted cash	Restricted cash	11,587		11,999		Restricted cash	11,587		11,999
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	222,312	$	308,921	Total cash, cash equivalents and restricted cash	$	328,744	$	308,921

Property, plant and equipment additions in accounts payable were ~~$9.9~~$11.3 million and $10.4 million as of ~~April~~July 2, 2023, and January 1, 2023, respectively.

During the fourth quarter of 2018, we provided debt financing to a distribution company via an interest-bearing note that was scheduled to mature in 2028. The interest-bearing note receivable was carried at amortized cost, with the interest payable in kind at the election of the borrower. The note receivable balance was $12.6 million as of January 1, 2023, and was recorded in the consolidated balance sheets as a component of prepaid expenses and other assets. On January 26, 2023, the note receivable was redeemed and fully repaid.

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 carrying amount of our Term Loan Facility approximates fair value as the interest rates are variable and reflective of market rates. The estimated fair values and carrying values of our long-term senior note debt instruments were as follows for the periods indicated:


		April 2, 2023				January 1, 2023					July 2, 2023				January 1, 2023
(In thousands)	(In thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value		(In thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value
3.50% senior unsecured notes due 2030	3.50% senior unsecured notes due 2030	$	313,781	$	371,271	$	303,870	$	371,136	3.50% senior unsecured notes due 2030	$	315,874	$	371,407	$	303,870	$	371,136
5.375% senior unsecured notes due 2028	5.375% senior unsecured notes due 2028	$	478,530	$	496,053	$	462,495	$	495,868	5.375% senior unsecured notes due 2028	$	475,735	$	496,238	$	462,495	$	495,868

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.

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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 and six months ended ~~April~~July 2, 2023, and ~~April~~July 3, 2022. 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 January 1, 2023 (the "Annual Report"). The following discussion should also be read in conjunction with the disclosure under "Special Note Regarding Forward-Looking Statements" 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, door system components and door systems for the new construction and repair, renovation and remodeling sectors of the residential and non-residential building construction markets. Since 1925, we have provided our customers with innovative products and superior service at compelling values. Through innovative door solutions, a better door buying experience for our customers and partners and advanced manufacturing and service delivery, we deliver a commitment of Doors That Do MoreTM.

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 an extensive range of interior and exterior doors in a wide array of designs, materials and sizes. Our interior doors are made with wood and related materials such as hardboard (including wood composite molded and flat door facings). Our exterior doors are made primarily of steel, fiberglass or composite materials. Our residential doors are molded panel, flush, stile and rail, steel or fiberglass.

We operate 63 manufacturing and distribution facilities in seven 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; (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~~six months ended ~~April~~July 2, 2023, we generated net sales of ~~$569.0~~$1,154.0 million or ~~78.4%~~78.6%, ~~$63.7~~$129.7 million or 8.8% and ~~$87.9~~$175.7 million or ~~12.1%~~12.0% in our North American Residential, Europe and Architectural segments, respectively.

During the ~~first~~second quarter, we experienced lower end market demand and continued negative impacts from macro-economic conditions such as rising interest rates and unfavorable consumer sentiment. Base volumes, excluding the acquisition of Endura on January 3, 2023, decreased in our North American Residential segment due to expected new housing softness and declines in the residential repair, renovation and remodeling channel compared to the prior year period, partially offset by increases in average unit price. Net sales, net income attributable to Masonite, Adjusted EBITDA and Adjusted EBITDA margin in our Europe segment declined as compared to the ~~first~~second quarter of 2022 due to the aforementioned macro-economic ~~factors, while Adjusted EBITDA margins improved compared to the fourth quarter of 2022 due to operational improvements and price-cost management.~~factors. Net sales growth in the Architectural segment was largely driven by increases in average unit price. The extent to which changes in interest rates, rising energy and fuel costs, and consumer

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~~in average unit price. The extent to which changes in interest rates, rising energy and fuel costs, and consumer~~ sentiment impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted.

Key Factors Affecting Our Results of 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 global economic conditions, including inflation, deflation, interest rates, availability of capital, supply chain constraints, consumer spending rates, energy availability and costs, and the effects of governmental initiatives to manage economic conditions. 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;

•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.

Business Wins and Losses

Our customers consist mainly of wholesalers and retail home centers. Net sales from customers that represent 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, optimizing our manufacturing capacity, consolidating certain internal support functions and engaging in other actions 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.

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~~connection with these restructuring actions for those assets sold, abandoned or made obsolete as a result of these programs.~~

In December 2022, we began implementing a plan intended to improve overall business performance that includes the optimization of our manufacturing capacity and reduction of our overhead and selling, general and administration workforce primarily in our North American Residential reportable segment as well as actions in the Architectural reportable segment and in our head offices (collectively, the "2022 Plan"). The optimization of our manufacturing capacity involves specific plants in the North American Residential segment and costs associated with the closure of these plants and related headcount reductions. Costs associated with the 2022 Plan also include severance and closure charges which will continue throughout 2023.

Inflation

In 2022, we realized higher costs across the various materials we purchase as a result of macroeconomic factors as well as increased logistics costs, wages, anti-dumping and countervailing duties and energy and fuel costs, and these higher costs not previously recognized ~~will be~~were realized in the first half of 2023. We expect the macroeconomic pressures on wood, resins and other certain key product categories and supply chain costs will moderate throughout 2023. Rising interest rates may impact the ability of our end consumers to purchase our products. Our profitability, margins and net sales could be adversely affected if inflationary trends do not moderate as expected and if interest rates continue to rise.

Acquisitions and Divestitures

We are pursuing a strategic initiative of optimizing our global business portfolio. On a continual basis, we evaluate and consider strategic acquisitions, divestitures and joint ventures to create shareholder value and enhance financial performance.

On January 3, 2023, we completed the acquisition of 100% of the outstanding equity of EPI Holdings, Inc. ("Endura"), for total consideration of approximately $408.1 million. Endura is a leading innovator and manufacturer of high-performance door frames and door system components in the United States. Endura’s product offerings include engineered frames, self-adjusting sill systems, weather sealing, multi-point locks and installation accessories used by builders and contractors in residential new construction as well as repair and remodeling applications. The acquisition is intended to accelerate our Doors That Do MoreTM strategy and maximize our growth potential.

~~Results~~As previously disclosed, we are actively reviewing strategic alternatives for our Architectural segment, including a potential sale of ~~Operations~~
Three Months Ended
(In thousands) April 2, 2023 April 3, 2022
Net sales $ 725,984 $ 726,217
Cost of goods sold 555,493 541,968
Gross profit 170,491 184,249
Gross profit as a % of net sales 23.5 % 25.4 %
Selling, general and administration expenses 101,705 83,246
Selling, general and administration expenses as a % of net sales 14.0 % 11.5 %
Restructuring costs (benefit) 3,678 (19)
Operating income 65,108 101,022
Interest expense, net 14,252 10,239
Other expense (income), net 52 (1,415)
Income before income tax expense 50,804 92,198
Income tax expense 11,360 23,477
Net income 39,444 68,721
Less: net income attributable to non-controlling interests 953 1,139
Net income attributable to Masonite $ 38,491 $ 67,582

the business. There can be no assurance that a potential transaction will be consummated or on what terms. If a transaction is consummated, depending on the sale price, we could incur an impairment charge related to the book value of the segment's assets. This charge could be material.

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Results of Operations


	Three Months Ended						Six Months Ended
(In thousands)	July 2, 2023			July 3, 2022			July 2, 2023			July 3, 2022
Net sales	$	741,884		$	761,874		$	1,467,868		$	1,488,091
Cost of goods sold	563,517			582,389			1,119,010			1,124,357
Gross profit	178,367			179,485			348,858			363,734
Gross profit as a % of net sales	24.0		%	23.6		%	23.8		%	24.4		%
Selling, general and administration expenses	98,746			90,330			200,451			173,576
Selling, general and administration expenses as a % of net sales	13.3		%	11.9		%	13.7		%	11.7		%
Restructuring costs (benefit)	3,065			(61)			6,743			(80)


Operating income	76,556			89,216			141,664			190,238
Interest expense, net	13,488			10,593			27,740			20,832

Other (income) expense, net	(550)			(400)			(498)			(1,815)
Income before income tax expense	63,618			79,023			114,422			171,221
Income tax expense	14,673			19,649			26,033			43,126
Net income	48,945			59,374			88,389			128,095
Less: net income attributable to non-controlling interests	700			859			1,653			1,998
Net income attributable to Masonite	$	48,245		$	58,515		$	86,736		$	126,097

Three Months Ended ~~April~~July 2, 2023, Compared with Three Months Ended ~~April~~July 3, 2022

Net Sales

Net sales in the three months ended ~~April~~July 2, 2023, were ~~$726.0~~$741.9 million, a decrease of ~~$0.2~~$20.0 million from ~~$726.2~~$761.9 million in the three months ended ~~April~~July 3, 2022. Foreign exchange rate fluctuations negatively impacted net sales in the ~~first~~second quarter of 2023 by ~~$11.2~~$3.8 million. The acquisition of Endura increased net sales by ~~$59.8~~$59.4 million or ~~8.2%~~7.8%. Excluding the impact of foreign currency and our 2023 acquisition of Endura, net sales would have decreased by ~~$48.6~~$75.6 million or ~~6.7%~~9.9% due to changes in volume, sales of components and average unit ~~price and sales of components.~~price. Lower volumes excluding the incremental impact of acquisitions or divestitures ("base volume") decreased net sales by ~~$113.0~~$116.4 million or ~~15.6%~~15.3% in the ~~first~~second quarter of 2023 compared to the 2022 period. Net sales of components to external customers decreased ~~$6.9~~$7.4 million or 1.0% in the ~~first~~second quarter of 2023 compared to the 2022 period. Average unit price increased net sales in the ~~first~~second quarter of 2023 by ~~$71.1~~$48.2 million or ~~9.8%~~6.3% compared to the 2022 period.

Net Sales and Percentage of Net Sales by Reportable Segment


		Three Months Ended April 2, 2023														Three Months Ended July 2, 2023
(In thousands)	(In thousands)	North American Residential			Europe			Architectural			Corporate & Other		Total		(In thousands)	North American Residential			Europe			Architectural			Corporate & Other		Total
Sales		$	569,429		$	63,716		$	92,861		$	5,349	$	731,355
Net sales															Net sales	$	585,422		$	66,232		$	92,332		$	3,087	$	747,073
Intersegment sales	Intersegment sales	(390)			(22)			(4,959)			—		(5,371)		Intersegment sales	(453)			(222)			(4,514)			—		(5,189)
Net sales to external customers	Net sales to external customers	$	569,039		$	63,694		$	87,902		$	5,349	$	725,984	Net sales to external customers	$	584,969		$	66,010		$	87,818		$	3,087	$	741,884
Percentage of consolidated external net sales	Percentage of consolidated external net sales	78.4		%	8.8		%	12.1		%					Percentage of consolidated external net sales	78.8		%	8.9		%	11.8		%

Three Months Ended April 3, 2022
(In thousands) North American Residential Europe Architectural Corporate & Other Total
Sales $ 569,429 $ 81,839 $ 74,659 $ 6,196 $ 732,123
Intersegment sales (865) (1,371) (3,670) — (5,906)
Net sales to external customers $ 568,564 $ 80,468 $ 70,989 $ 6,196 $ 726,217
Percentage of consolidated external net sales 78.3 % 11.1 % 9.8 %

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	Three Months Ended July 3, 2022
(In thousands)	North American Residential			Europe			Architectural			Corporate & Other		Total
Net sales	$	608,483		$	74,172		$	79,894		$	4,820	$	767,369
Intersegment sales	(707)			(319)			(4,469)			—		(5,495)
Net sales to external customers	$	607,776		$	73,853		$	75,425		$	4,820	$	761,874
Percentage of consolidated external net sales	79.8		%	9.7		%	9.9		%

North American Residential

Net sales to external customers from facilities in the North American Residential segment in the three months ended ~~April~~July 2, 2023, were ~~$569.0~~$585.0 million, ~~an increase~~a decrease of ~~$0.4~~$22.8 million or ~~0.1%~~3.8% from ~~$568.6~~$607.8 million in the three months ended ~~April~~July 3, 2022. Foreign exchange rate fluctuations negatively impacted net sales in the ~~first~~second quarter of 2023 by ~~$4.2~~$3.2 million. ~~Excluding this exchange rate impact, net sales would have increased by $4.6 million or 0.8% due to changes in volume, average unit price, acquisitions and sales of components.~~ Our 2023 acquisition increased net sales by ~~$59.8~~$59.4 million or ~~10.5%~~9.8% in the ~~first~~second quarter of 2023. ~~Average unit price increased~~Excluding the impact of foreign currency and our 2023 acquisition of Endura, net sales ~~in the first quarter of 2023~~would have decreased by ~~$46.7~~$79.0 million or ~~8.2% compared~~13.0% due to ~~the 2022 period.~~changes in volume, sales of components and average unit price. Lower base volume decreased net sales in the ~~first~~second quarter of 2023 by ~~$99.4~~$107.4 million or ~~17.5%~~17.7% compared to the 2022 period due to softening end market demand in new construction and residential repair, renovation and remodeling channels. Net sales of components to external customers were ~~$2.5~~$0.8 million lower in the ~~first~~second quarter of 2023 compared to the 2022 period. Average unit price increased net sales in the second quarter of 2023 by $29.2 million or 4.8% compared to the 2022 period.

Europe

Net sales to external customers from facilities in the Europe segment in the three months ended ~~April~~July 2, 2023, were ~~$63.7~~$66.0 million, a decrease of ~~$16.8~~$7.9 million or ~~20.9%~~10.7% from ~~$80.5~~$73.9 million in the three months ended ~~April~~July 3, 2022. Foreign exchange rate fluctuations negatively impacted net sales in the ~~first~~second quarter of 2023 by ~~$6.2~~$0.1 million. Excluding this exchange rate impact, net sales would have decreased by ~~$10.6~~$7.8 million or ~~13.2%~~10.6% due to changes in volume, sales of components and average unit ~~price and sales of components.~~price. Lower base volume decreased net sales by ~~$12.4~~$7.0 million or ~~15.4%~~9.5% in the ~~first~~second quarter

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of 2023 compared to the 2022 period due to overall economic trends in the United Kingdom. Net sales of components to external customers were ~~$1.2~~$1.1 million lower in the ~~first~~second quarter of 2023 compared to the 2022 period. Average unit price increased net sales in the ~~first~~second quarter of 2023 by ~~$3.0~~$0.3 million or ~~3.7%~~0.4% compared to the 2022 period.

Architectural

Net sales to external customers from facilities in the Architectural segment in the three months ended ~~April~~July 2, 2023, were ~~$87.9~~$87.8 million, an increase of ~~$16.9~~$12.4 million or ~~23.8%~~16.4% from ~~$71.0~~$75.4 million in the three months ended ~~April~~July 3, 2022. Foreign exchange rate fluctuations negatively impacted net sales in the ~~first~~second quarter of 2023 by ~~$0.8~~$0.5 million. Excluding this exchange rate impact, net sales would have increased by ~~$17.7~~$12.9 million or ~~24.9%~~17.1% due to changes in ~~volume,~~ average unit price, ~~and~~ sales of ~~components.~~components and volume. Average unit price increased net sales in the ~~first~~second quarter of 2023 by ~~$19.7~~$18.4 million or ~~27.7%~~24.4% compared to the 2022 period. Net sales of components to external customers were $3.5 million lower in the second quarter of 2023 compared to the 2022 period. Lower base volume decreased net sales in the ~~first~~second quarter of 2023 by ~~$1.2~~$2.0 million or ~~1.7% compared to the 2022 period. Net sales of components to external customers were $0.8 million lower in the first quarter of 2023~~2.7% compared to the 2022 period.

Cost of Goods Sold

Cost of goods sold as a percentage of net sales was ~~76.5%~~76.0% and ~~74.6%~~76.4% for the three months ended ~~April~~July 2, 2023, and ~~April~~July 3, 2022, respectively. ~~Overhead, direct labor and depreciation as a percentage of net sales increased by 2.3%, 0.6% and 0.3%, respectively, compared to the 2022 period.~~ Material cost of sales and distribution as a percentage of net sales decreased by ~~0.8%~~2.4% and ~~0.5%~~0.4%, respectively, compared to the ~~first~~second quarter of 2022. Overhead and depreciation as a percentage of net sales increased ~~due to lower volumes, wage inflation~~by 1.8% and ~~higher factory costs, partially offset by higher average unit prices as~~0.6%, respectively, compared to the 2022 period. Direct labor as a percentage of net sales had no change compared to the second quarter of 2022. The decrease in material cost of sales as a percentage of net sales was driven by lower inbound freight, material cost savings projects and higher average unit prices. Distribution as a percentage of net sales decreased due to higher average unit prices and lower outbound freight, partially offset by lower volumes. Overhead as a percentage of net sales increased due to ~~higher manufacturing~~lower volumes and wage ~~and benefit~~ inflation, partially offset by

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higher average unit ~~prices.~~prices as compared to the 2022 period. The increase in depreciation as a percentage of net sales was driven by the acquisition of Endura fixed assets as compared to the 2022 period. The decrease in material cost of sales as a percentage of net sales was driven by higher average unit prices and material cost savings projects, partially offset by commodity inflation. Distribution as a percentage of net sales decreased due to higher average unit prices, partially offset by lower volumes.

Selling, General and Administration Expenses

In the three months ended ~~April~~July 2, 2023, selling, general and administration ("SG&A") expenses, as a percentage of net sales, were ~~14.0%~~13.3%, as compared to ~~11.5%~~11.9% in the three months ended ~~April~~July 3, 2022, an increase of ~~250~~140 basis points.

SG&A expenses in the three months ended ~~April~~July 2, 2023, were ~~$101.7~~$98.7 million, an increase of ~~$18.5~~$8.4 million from ~~$83.2~~$90.3 million in the three months ended ~~April~~July 3, 2022. The overall increase was driven by incremental SG&A from the acquisition of Endura of ~~$9.8~~$9.1 million; a ~~$6.2~~$1.6 million increase in non-cash items including share based compensation, depreciation and amortization, deferred compensation and loss (gain) on disposal of property, plant and ~~equipment, share based compensation~~equipment; a $1.2 million increase in acquisition and ~~depreciation~~due diligence related costs; and ~~amortization;~~ a ~~$2.9~~$1.0 million increase in professional and other fees to support ~~growth; and a $1.4 million increase in acquisition and due diligence related costs.~~growth. These increases were partially offset by a ~~$0.9~~$4.3 million decrease in personnel costs primarily driven by ~~lower incentive compensation and~~ savings from our 2022 Plan ~~partially offset by wage~~ and ~~benefit inflation~~lower incentive compensation and $0.2 million of favorable foreign exchange ~~impacts of $0.9 million.~~impacts.

Restructuring Costs (Benefit)

Restructuring costs (benefit) in the three months ended ~~April~~July 2, 2023, was ~~$3.7~~$3.1 million of costs, compared to minimal benefit in the three months ended ~~April~~July 3, 2022. Restructuring costs in the current year period related primarily to the 2022 Plan.

Interest Expense, Net

Interest expense, net, in the three months ended ~~April~~July 2, 2023, was ~~$14.3~~$13.5 million, compared to ~~$10.2~~$10.6 million in the three months ended ~~April~~July 3, 2022. The increase in interest expense, net, is primarily due to the incremental borrowings under the Term Loan Facility and ABL Facility.

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Other (Income) Expense, ~~(Income),~~ Net

Other (income) expense, ~~(income),~~ 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 and other miscellaneous non-operating expenses. Other (income) expense, ~~(income),~~ net, in the three months ended ~~April~~July 2, 2023, was ~~$0.1~~$0.6 million of ~~expense,~~income, compared to ~~$1.4~~$0.4 million of income in the three months ended ~~April~~July 3, ~~2022. The change in other expense (income), net is primarily due~~2022, remaining relatively flat as compared to ~~a change in our portion of~~ the net gains and losses related to our non-majority owned unconsolidated subsidiaries that are recognized under the equity method of accounting, a change in hedging gains and losses and a change in the fair value of plan assets in the deferred compensation rabbi trust, partially offset by unrealized gains and losses on foreign currency remeasurements.2022 period.

Income Tax Expense

Income tax expense in the three months ended ~~April~~July 2, 2023, was ~~$11.4~~$14.7 million, compared to ~~$23.5~~$19.6 million in the three months ended ~~April~~July 3, 2022. The decrease 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.

~~Segment Information~~
Three Months Ended April 2, 2023
(In thousands) North American Residential Europe Architectural Corporate & Other Total
Adjusted EBITDA $ 107,881 $ 5,151 $ 5,350 $ (12,217) $ 106,165
Adjusted EBITDA as a percentage of segment net sales 19.0 % 8.1 % 6.1 % 14.6 %

Three Months Ended April 3, 2022
(In thousands) North American Residential Europe Architectural Corporate & Other Total
Adjusted EBITDA $ 127,667 $ 11,843 $ (2,898) $ (11,860) $ 124,752
Adjusted EBITDA as a percentage of segment net sales 22.5 % 14.7 % (4.1) % 17.2 %

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Segment Information


	Three Months Ended July 2, 2023
(In thousands)	North American Residential			Europe			Architectural			Corporate & Other		Total
Adjusted EBITDA	$	117,571		$	2,691		$	7,286		$	(9,091)	$	118,457
Adjusted EBITDA as a percentage of segment net sales	20.1		%	4.1		%	8.3		%			16.0		%


	Three Months Ended July 3, 2022
(In thousands)	North American Residential			Europe			Architectural			Corporate & Other		Total
Adjusted EBITDA	$	124,974		$	8,566		$	78		$	(15,493)	$	118,125
Adjusted EBITDA as a percentage of segment net sales	20.6		%	11.6		%	0.1		%			15.5		%

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


		Three Months Ended April 2, 2023											Three Months Ended July 2, 2023
(In thousands)	(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total		(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total
Net income (loss) attributable to Masonite	Net income (loss) attributable to Masonite	$	86,755	$	203	$	1,465	$	(49,932)	$	38,491	Net income (loss) attributable to Masonite	$	96,557	$	(3,230)	$	3,596	$	(48,678)	$	48,245
Plus:	Plus:											Plus:
Depreciation	Depreciation	13,232		2,204		2,957		3,092		21,485		Depreciation	14,304		2,411		3,000		3,266		22,981
Amortization	Amortization	3,790		2,808		252		571		7,421		Amortization	3,264		2,911		221		646		7,042
Share based compensation expense	Share based compensation expense	—		—		—		6,054		6,054		Share based compensation expense	—		—		—		7,103		7,103
Loss (gain) on disposal of property, plant and equipment		1,040		(3)		(13)		14		1,038
Loss on disposal of property, plant and equipment												Loss on disposal of property, plant and equipment	19		58		290		135		502
Restructuring costs	Restructuring costs	2,380		—		684		614		3,678		Restructuring costs	2,875		—		179		11		3,065

Interest expense, net	Interest expense, net	—		—		—		14,252		14,252		Interest expense, net	—		—		—		13,488		13,488

Other (income) expense, net		(28)		(61)		—		141		52
Other expense (income), net												Other expense (income), net	1		541		—		(1,092)		(550)
Income tax expense	Income tax expense	—		—		—		11,360		11,360		Income tax expense	—		—		—		14,673		14,673
Other items (1)	Other items (1)	—		—		5		1,376		1,381		Other items (1)	—		—		—		1,208		1,208
Net income attributable to non-controlling interest	Net income attributable to non-controlling interest	712		—		—		241		953		Net income attributable to non-controlling interest	551		—		—		149		700
Adjusted EBITDA	Adjusted EBITDA	$	107,881	$	5,151	$	5,350	$	(12,217)	$	106,165	Adjusted EBITDA	$	117,571	$	2,691	$	7,286	$	(9,091)	$	118,457

(1) Other items include ~~$1,381~~$1,208 in acquisition and due diligence related costs in the three months ended ~~April~~July 2, 2023, and were recorded in selling, general and administration expenses within the condensed consolidated statements of comprehensive income.

Three Months Ended April 3, 2022
(In thousands) North American Residential Europe Architectural Corporate & Other Total
Net income (loss) attributable to Masonite $ 117,033 $ 5,732 $ (2,826) $ (52,357) $ 67,582
Plus:
Depreciation 9,964 2,341 2,879 2,088 17,272
Amortization 619 3,270 182 541 4,612
Share based compensation expense — — — 4,719 4,719
Loss (gain) on disposal of property, plant and equipment 338 (12) (3,180) — (2,854)
Restructuring (benefit) costs (91) 6 47 19 (19)
Interest expense, net — — — 10,239 10,239
Other (income) expense, net (790) 506 — (1,131) (1,415)
Income tax expense — — — 23,477 23,477
Net income attributable to non-controlling interest 594 — — 545 1,139
Adjusted EBITDA $ 127,667 $ 11,843 $ (2,898) $ (11,860) $ 124,752

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	Three Months Ended July 3, 2022
(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total
Net income (loss) attributable to Masonite	$	112,611	$	3,446	$	(3,042)	$	(54,500)	$	58,515
Plus:
Depreciation	9,987		2,172		2,764		2,321		17,244
Amortization	467		3,059		219		551		4,296
Share based compensation expense	—		—		—		5,976		5,976
Loss (gain) on disposal of property, plant and equipment	1,399		(1)		136		(80)		1,454
Restructuring (benefit) costs	(90)		(6)		1		34		(61)


Interest expense, net	—		—		—		10,593		10,593

Other (income) expense, net	(2)		(104)		—		(294)		(400)
Income tax expense	—		—		—		19,649		19,649

Net income attributable to non-controlling interest	602		—		—		257		859
Adjusted EBITDA	$	124,974	$	8,566	$	78	$	(15,493)	$	118,125

Adjusted EBITDA in our North American Residential segment was ~~$107.9~~$117.6 million in the three months ended ~~April~~July 2, 2023, a decrease of ~~$19.8~~$7.4 million, or ~~15.5%~~5.9%, from ~~$127.7~~$125.0 million in the three months ended ~~April~~July 3, 2022. Adjusted EBITDA in the North American Residential segment included corporate allocations of shared costs of ~~$22.7~~$22.9 million and ~~$22.5~~$21.7 million in the ~~first~~second quarter of 2023 and 2022, respectively. The allocations generally consist of certain costs of human resources, legal, finance, information technology, research and development, marketing and share based compensation.

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Adjusted EBITDA in our Europe segment was ~~$5.2~~$2.7 million in the three months ended ~~April~~July 2, 2023, a decrease of ~~$6.7~~$5.9 million, or ~~56.5%~~68.6%, from ~~$11.8~~$8.6 million in the three months ended ~~April~~July 3, 2022. Adjusted EBITDA in the Europe segment included corporate allocations of shared costs of $1.8 million and $1.7 million in the ~~first~~second quarter of 2023 and 2022, respectively. The allocations generally consist of certain costs of human resources, legal, finance, information technology, marketing and share based compensation.

Adjusted EBITDA in our Architectural segment was ~~$5.4 million of earnings in the three months ended April 2, 2023, an increase of $8.3 million, or 284.7%, from a loss of $2.9~~$7.3 million in the three months ended ~~April~~July 2, 2023, an increase of $7.2 million, or 9,241.0%, from $0.1 million in the three months ended July 3, 2022. Adjusted EBITDA in the Architectural segment also included corporate allocations of shared costs of ~~$2.9~~$2.5 million and $2.9 million in the second quarter of 2023 and 2022, respectively. The allocations generally consist of certain costs of human resources, legal, finance, information technology, research and development, marketing and share based compensation.

Six Months Ended July 2, 2023, Compared with Six Months Ended July 3, 2022

Net Sales

Net sales in the six months ended July 2, 2023, were $1,467.9 million, a decrease of $20.2 million or 1.4% from $1,488.1 million in the six months ended July 3, 2022. Foreign exchange rate fluctuations negatively impacted net sales in the first ~~quarter~~six months of 2023 by $15.0 million. The acquisition of Endura increased net sales by $119.2 million or 8.0%. Excluding the impact of foreign currency and our 2023 acquisition of Endura, net sales would have decreased by $124.4 million or 8.4% due to changes in volume, sales of components and average unit price. Lower base volume decreased net sales by $229.4 million or 15.4% in the first six months of 2023 compared to the same period in 2022. Net sales of components to external customers decreased $14.3 million or 1.0% in the first six months of 2023 compared to the same period in 2022. Average unit price increased net sales in the first six months of 2023 by $119.3 million or 8.0% compared to the same period in 2022.

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Net Sales and Percentage of Net Sales by Reportable Segment


	Six Months Ended July 2, 2023
(In thousands)	North American Residential			Europe			Architectural			Corporate & Other		Total
Net sales	$	1,154,851		$	129,948		$	185,193		$	8,436	$	1,478,428
Intersegment sales	(843)			(244)			(9,473)			—		(10,560)
Net sales to external customers	$	1,154,008		$	129,704		$	175,720		$	8,436	$	1,467,868
Percentage of consolidated external net sales	78.6		%	8.8		%	12.0		%


	Six Months Ended July 3, 2022
(In thousands)	North American Residential			Europe			Architectural			Corporate & Other		Total
Net sales	$	1,177,912		$	156,011		$	154,553		$	11,016	$	1,499,492
Intersegment sales	(1,572)			(1,690)			(8,139)			—		(11,401)
Net sales to external customers	$	1,176,340		$	154,321		$	146,414		$	11,016	$	1,488,091
Percentage of consolidated external net sales	79.1		%	10.4		%	9.8		%

North American Residential

Net sales to external customers from facilities in the North American Residential segment in the six months ended July 2, 2023, were $1,154.0 million, a decrease of $22.3 million or 1.9% from $1,176.3 million in the six months ended July 3, 2022. Foreign exchange rate fluctuations negatively impacted net sales in the first six months of 2023 by $7.4 million. Our 2023 acquisition increased net sales by $119.2 million or 10.1% in the first six months of 2023. Excluding the impact of foreign currency and our 2023 acquisition of Endura, net sales would have decreased by $134.1 million or 11.4% due to changes in volume, sales of components and average unit price. Lower base volume decreased net sales by $206.8 million or 17.6% in the first six months of 2023 compared to the same period in 2022 due to softening end market demand in new construction and residential repair, renovation and remodeling channels. Net sales of components to external customers were $3.3 million lower in the first six months of 2023 compared to the same period in 2022. Average unit price increased net sales in the first six months of 2023 by $76.0 million or 6.5% compared to the 2022 period.

Europe

Net sales to external customers from facilities in the Europe segment in the six months ended July 2, 2023, were $129.7 million, a decrease of $24.6 million or 15.9% from $154.3 million in the six months ended July 3, 2022. Foreign exchange rate fluctuations negatively impacted net sales in the first six months of 2023 by $6.3 million. Excluding this exchange rate impact, net sales would have decreased by $18.3 million or 11.9% due to changes in volume, sales of components and average unit price. Lower base volume decreased net sales in the first six months of 2023 by $19.4 million or 12.6% compared to the same period in 2022 due to overall economic trends in the United Kingdom. Net sales of components to external customers were $2.2 million lower in the first six months of 2023 compared to the same period in 2022. Average unit price increased net sales in the first six months of 2023 by $3.3 million or 2.1% compared to the 2022 period.

Architectural

Net sales to external customers from facilities in the Architectural segment in the six months ended July 2, 2023, were $175.7 million, an increase of $29.3 million or 20.0% from $146.4 million in the six months ended July 3, 2022. Foreign exchange rate fluctuations negatively impacted net sales in the first six months of 2023 by $1.3 million. Excluding this exchange rate impact, net sales would have increased by $30.6 million or 20.9% due to changes in average unit price, sales of components and average unit price. Average unit price increased net sales in the first six months of 2023 by $38.1 million or 26.0% compared to the 2022 period. Net sales of components to external customers

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were $4.3 million lower in the first six months of 2023 compared to the same period in 2022. Lower base volume decreased net sales in the first six months of 2023 by $3.2 million or 2.2% compared to the 2022 period.

Cost of Goods Sold

Cost of goods sold as a percentage of net sales was 76.2% and 75.6% for the six months ended July 2, 2023, and July 3, 2022, respectively. Overhead, depreciation and direct labor as a percentage of net sales increased by 1.9%, 0.5% and 0.3%, respectively, compared to the 2022 period. Material cost of sales and distribution as a percentage of net sales decreased by 1.7% and 0.4%, respectively, compared to the 2022 period. Overhead as a percentage of net sales increased due to lower volumes, wage inflation and higher factory costs, partially offset by higher average unit prices as compared to the 2022 period. The increase in depreciation as a percentage of net sales was driven by the acquisition of Endura fixed assets as compared to the first six months of 2022. Direct labor as a percentage of net sales increased due to manufacturing wage and benefit inflation, partially offset by higher unit prices. The decrease in material cost of sales as a percentage of net sales was driven by higher average unit prices, lower inbound freight and material cost savings projects, partially offset by commodity inflation. Distribution as a percentage of net sales decreased due to higher average unit prices and lower outbound freight, partially offset by lower volumes.

Selling, General and Administration Expenses

In the six months ended July 2, 2023, selling, general and administration ("SG&A") expenses, as a percentage of net sales, were 13.7% compared to 11.7% in the six months ended July 3, 2022, an increase of 200 basis points.

SG&A expenses in the six months ended July 2, 2023, were $200.5 million, an increase of $26.9 million from $173.6 million in the six months ended July 3, 2022. The overall increase was driven by incremental SG&A from the acquisition of Endura of $18.9 million; an $8.1 million increase in non-cash items including (gain) loss on disposal of property, plant and equipment, share based compensation, depreciation and amortization, and deferred compensation; a $3.6 million increase in professional and other fees to support growth; and a $2.6 million increase in acquisition and due diligence related costs. These increases were partially offset by a $5.2 million decrease in personnel costs primarily driven by savings from our 2022 Plan and lower incentive compensation along with favorable foreign exchange impacts of $1.1 million.

Restructuring (Benefit) Costs

Restructuring (benefit) costs in the six months ended July 2, 2023, were $6.7 million of costs, compared to minimal benefit in the six months ended July 3, 2022. Restructuring costs in the current year period related primarily to the 2022 Plan.

Interest Expense, Net

Interest expense, net, in the six months ended July 2, 2023, was $27.7 million, compared to $20.8 million in the six months ended July 3, 2022. The increase in interest expense, net, is primarily due to the incremental borrowings under the Term Loan Facility and ABL Facility.

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 and other miscellaneous non-operating expenses. Other (income) expense, net, in the six months ended July 2, 2023, was $0.5 million, compared to $1.8 million in the six months ended July 3, 2022. The change in other (income) expense, net is primarily due to a change in hedging gains and losses, a change in pension expense and a change in our portion of the net gains and losses related to our non-majority owned unconsolidated subsidiaries that are recognized under the equity method of accounting, partially offset by unrealized gains and losses on foreign currency remeasurements.

Income Tax Expense

Income tax expense in the six months ended July 2, 2023, was $26.0 million, compared to $43.1 million in the six months ended July 3, 2022. The decrease 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.

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Segment Information


	Six Months Ended July 2, 2023
(In thousands)	North American Residential			Europe			Architectural			Corporate & Other		Total
Adjusted EBITDA	$	225,452		$	7,842		$	12,636		$	(21,308)	$	224,622
Adjusted EBITDA as a percentage of segment net sales	19.5		%	6.0		%	7.2		%			15.3		%


	Six Months Ended July 3, 2022
(In thousands)	North American Residential			Europe			Architectural		Corporate & Other		Total
Adjusted EBITDA	$	252,641		$	20,409		$	(2,820)	$	(27,353)	$	242,877
Adjusted EBITDA as a percentage of segment net sales	21.5		%	13.2		%					16.3		%

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


	Six Months Ended July 2, 2023
(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total
Net income (loss) attributable to Masonite	$	183,312	$	(3,027)	$	5,061	$	(98,610)	$	86,736
Plus:
Depreciation	27,536		4,615		5,957		6,358		44,466
Amortization	7,054		5,719		473		1,217		14,463
Share based compensation expense	—		—		—		13,157		13,157
Loss on disposal of property, plant and equipment	1,059		55		277		149		1,540
Restructuring costs	5,255		—		863		625		6,743


Interest expense, net	—		—		—		27,740		27,740

Other (income) expense, net	(27)		480		—		(951)		(498)
Income tax expense	—		—		—		26,033		26,033
Other items (1)	—		—		5		2,584		2,589
Net income attributable to non-controlling interest	1,263		—		—		390		1,653
Adjusted EBITDA	$	225,452	$	7,842	$	12,636	$	(21,308)	$	224,622

(1) Other items include $2,589 in acquisition and due diligence related costs in the six months ended July 2, 2023, and were recorded in selling, general and administration expenses within the condensed consolidated statements of comprehensive income.

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	Six Months Ended July 3, 2022
(In thousands)	North American Residential		Europe		Architectural		Corporate & Other		Total
Net income (loss) attributable to Masonite	$	229,644	$	9,178	$	(5,868)	$	(106,857)	$	126,097
Plus:
Depreciation	19,951		4,513		5,643		4,409		34,516
Amortization	1,086		6,329		401		1,092		8,908
Share based compensation expense	—		—		—		10,695		10,695
Loss (gain) on disposal of property, plant and equipment	1,737		(13)		(3,044)		(80)		(1,400)
Restructuring (benefit) costs	(181)		—		48		53		(80)


Interest expense, net	—		—		—		20,832		20,832

Other (income) expense, net	(792)		402		—		(1,425)		(1,815)
Income tax expense	—		—		—		43,126		43,126

Net income attributable to non-controlling interest	1,196		—		—		802		1,998
Adjusted EBITDA	$	252,641	$	20,409	$	(2,820)	$	(27,353)	$	242,877

Adjusted EBITDA in our North American Residential segment was $225.5 million in the six months ended July 2, 2023, a decrease of $27.1 million, or 10.7%, from $252.6 million in the six months ended July 3, 2022. Adjusted EBITDA in the North American Residential segment included corporate allocations of shared costs of $45.6 million and $44.2 million in the first six months of 2023 and 2022, 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 was $7.8 million in the six months ended July 2, 2023, a decrease of $12.6 million, or 61.6%, from $20.4 million in the six months ended July 3, 2022. Adjusted EBITDA in the Europe segment included corporate allocations of shared costs of $3.5 million and $3.4 million in the first six months of 2023 and 2022, respectively. The allocations generally consist of certain costs of human resources, legal, finance, information technology, marketing and share based compensation.

Adjusted EBITDA in our Architectural segment was $12.6 million of earnings in the six months ended July 2, 2023, an increase of $15.4 million, or 546.7%, from a loss of $2.8 million in the six months ended July 3, 2022. Adjusted EBITDA in the Architectural segment also included corporate allocations of shared costs of $5.4 million and $5.7 million in the first six months of 2023 and 2022, respectively. The allocations generally consist of certain costs of human resources, legal, finance, information technology, research and 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"), as well as 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. As of ~~April~~July 2, 2023, we do not have any material commitments for capital expenditures.

We believe that our cash balance on hand, future cash generated from operations, the use of our AR Sales Program and our ABL Facility, along with our ability to access the capital markets, will provide adequate liquidity for the foreseeable future. As of ~~April~~July 2, 2023, we had ~~$210.7~~$317.2 million of cash and cash equivalents, $300.6 million of availability under our ABL Facility ~~of $313.4~~and $19.3 million ~~and~~of availability under our AR Sales ~~Program~~Program.

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MASONITE INTERNATIONAL CORPORATION

Cash Flows

Cash provided inby operating activities was ~~$56.3~~$217.8 million during the ~~three~~six months ended ~~April~~July 2, 2023, compared to ~~cash used in operating activities of $37.8~~$34.1 million in the ~~three~~six months ended ~~April~~July 3, 2022. This ~~$94.1~~$183.7 million increase in cash provided by operating activities was due to a ~~$115.7~~$208.7 million increase in working capital and other assets and liabilities, partially offset by a ~~$21.6~~$25.0 million decrease in net income attributable to Masonite, adjusted for non-cash and non-operating items in the first ~~three~~six months of 2023 compared to the same period in 2022.

Cash used in investing activities was ~~$373.0~~$404.3 million during the ~~three~~six months ended ~~April~~July 2, 2023, compared to ~~$13.3~~$34.7 million in the ~~three~~six months ended ~~April~~July 3, 2022. This ~~$359.7~~$369.6 million increase in cash used in investing activities was primarily driven by a ~~$353.6~~$354.4 million increase in cash used in the acquisition of Endura (net of cash acquired), an ~~$8.7~~$18.1 million increase in cash additions to property, plant and equipment, the absence of $6.4 million of proceeds from the sale of property, plant and equipment, and a ~~$3.0~~$2.7 increase in cash used in other investing activities, partially offset by $12.0 million of proceeds from repayment of a note receivable in the first ~~three~~six months of 2023 compared to the same period in 2022.

Cash provided by financing activities was ~~$229.1~~$204.1 million during the ~~three~~six months ended ~~April~~July 2, 2023, compared to ~~$144.3~~$145.7 million of cash used in financing activities during the ~~three~~six months ended ~~April~~July 3, 2022. This ~~$373.4~~$349.8 million increase in cash provided by financing activities was driven by a ~~$246.4~~$237.0 million increase in cash provided by debt-related transactions, a ~~$125.2~~$110.9 million decrease in cash used for repurchases of common shares, a $1.0 million decrease in cash used for tax withholding on share based awards and a ~~$0.8~~$0.9 million decrease in distributions to non-controlling interests in the first ~~three~~six months of 2023 compared to the same period in 2022.

Share Repurchases

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market purchases, each in compliance with Rule 10b-18 under the Exchange Act, or privately negotiated transactions. The program may be suspended or discontinued at any time and does not have an expiration date. In addition, the Company announced that its Board of Directors authorized it to enter into an accelerated share repurchase ("ASR") transaction as part of the new share repurchase program. The Company entered into an ASR transaction during the first quarter of 2022 with a third-party financial institution for the repurchase of $100.0 million of its outstanding common shares. At inception, pursuant to the agreement, the Company paid $100.0 million to the financial institution using cash on hand and received an initial delivery of 848,087 common shares on the same day. The final delivery of 319,678 common shares occurred in the second quarter of 2022. The $100.0 million ASR transaction was therefore completed in the second quarter with a total delivery of 1,167,765 common shares at a volume-weighted average price ("VWAP") per share minus an agreed upon discount totaling $85.63 per share. The cash paid was reflected as a reduction of equity at the initial delivery of shares and the number of common shares outstanding were reduced at the dates of physical delivery. During the ~~three~~six months ended ~~April~~July 2, 2023, we repurchased ~~168,523~~327,668 of our common shares in the open market at an aggregate cost of ~~$14.7~~$29.1 million as part of the share repurchase programs. During the ~~three~~six months ended ~~April~~July 3, 2022, we repurchased and retired ~~1,236,330~~1,556,008 of our common shares in the open market at an aggregate cost of $140.0 million as part of the share repurchase programs and ASR. As of ~~April~~July 2, 2023, there was ~~$232.2~~$217.8 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 ~~April~~July 2, 2023, we do not believe adverse tax consequences exist that restrict our use of cash or cash equivalents in a material manner.

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MASONITE INTERNATIONAL CORPORATION

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 any customer that has had a material adverse effect on our results of operations. However, 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~~AR Sales 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 expenses within the condensed consolidated statements of income and comprehensive income.

3.50% Senior Notes due 2030

On July 26, 2021, we issued $375.0 million aggregate principal senior unsecured notes (the "2030 Notes"), all of which was outstanding as of ~~April~~July 2, 2023. The 2030 Notes bear interest at 3.50% per annum. The 2030 Notes were issued under an indenture which contains limited covenants that are described in detail in our Annual Report. As of ~~April~~July 2, 2023, we were in compliance with all covenants under the indenture governing the 2030 Notes.

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 ~~April~~July 2, 2023. The 2028 Notes bear interest at 5.375% per annum. The 2028 Notes were issued under an indenture which contains restrictive covenants that are described in detail in our Annual Report. As of ~~April~~July 2, 2023, we were in compliance with all covenants under the indenture governing the 2028 Notes.

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Term Loan Facility

~~The~~ Borrower also pays customary agency fees.

Obligations under the Term Loan Credit Agreement are fully and unconditionally guaranteed, jointly and severally, by us and by certain of our directly or indirectly wholly-owned subsidiaries organized in the United States and are secured by the equity in, and substantially all the assets of, such subsidiaries. The Term Loans were funded in an amount of $250.0 million and applied to finance a portion of the consideration payable in connection with the consummation of the Endura acquisition on January 3, 2023. We received net proceeds of $246.4 million after deducting $3.6 million of debt issuance costs. The debt issuance costs were capitalized as a reduction to the carrying value of debt and are being accreted to interest expense over the term of the loan using the effective interest method.

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MASONITE INTERNATIONAL CORPORATION

ABL Facility

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.

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~~MASONITE INTERNATIONAL CORPORATION~~

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reported period.

Please refer to "Critical Accounting Policies and Estimates" described in Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report, from which there have been no material changes.

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. We believe there have been no material changes to the information provided therein.

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

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MASONITE INTERNATIONAL CORPORATION

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 report that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

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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.

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. There have been no material changes from the risk factors disclosed in such Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds and Issuer Purchases of Equity Securities

(a) Unregistered Sale of Equity Securities.

None.

(b) Use of Proceeds.

Not applicable.

During the three months ended ~~April~~July 2, 2023, we repurchased ~~168,523~~159,145 of our common shares in the open market.

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 2, 2023 through January 29, 2023 6,758 $ 82.42 6,758 $ 246,347,299
January 30, 2023 through February 26, 2023 — — — 246,347,299
February 27, 2023 through April 2, 2023 161,765 87.54 161,765 232,186,848
Total 168,523 $ 87.33 168,523


	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
April 3, 2023 through April 30, 2023	23,891	$	88.26	23,891	$	230,078,291
May 1, 2023 through May 28, 2023	56,124	92.17		56,124	224,905,077
May 29, 2023 through July 2, 2023	79,130	90.15		79,130	217,771,210
Total	159,145	$	90.58	159,145

The Company's Board of Directors has approved five share repurchase authorizations, the most recent being an incremental $200.0 million share repurchase program approved on February 21, 2022. Under this program, the Company may repurchase shares from time to time, depending on market conditions and alternate uses of capital. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and alternate uses of capital. The share repurchase program may be effected through Rule 10b5-1 plans, open market purchases, each in compliance with Rule 10b-18 under the Exchange Act, or privately negotiated transactions. The program may be suspended or discontinued at any time and does not have an expiration date. As of ~~April~~July 2, 2023, ~~$232.2~~$217.8 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.

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Item 5. Other Information

~~None.~~(c) Trading Plans

During the three months ended July 2, 2023, no director or Section 16 officer (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements in each case, as defined in Item 408 of Regulation S-K.

Item 6. Exhibits

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


Exhibit No.		Description
2.1		Securities Purchase Agreement, dated as of November 2, 2022, by and among Masonite, Endura, Endura Stockholders, Endura Warrant Holders and Endura’s equityholders’ representative (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K (File No. 011-11796) filed with the Securities and Exchange Commission on November 3, 2022)
~~10.1*#~~	~~Form of Performance Restricted Stock Unit Agreement pursuant to the Masonite International Corporation 2021 Omnibus Incentive Plan (February 2023)~~
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 Income and Comprehensive Income for the three and six months ended ~~April~~July 2, 2023, and ~~April~~July 3, 2022; (ii) the Registrant's Condensed Consolidated Balance Sheets as of ~~April~~July 2, 2023, and January 1, 2023; (iii) the Registrant's Condensed Consolidated Statements of Changes in Equity for the three and six months ended ~~April~~July 2, 2023, and ~~April~~July 3, 2022; (iv) the Registrant's Condensed Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~April~~July 2, 2023, and ~~April~~July 3, 2022; 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.

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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~~August 9, 2023

/s/ Russell T. Tiejema

Russell T. Tiejema

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

/s/ ~~Patrick D. Brisley~~Catherine A. Shellabarger

~~Patrick D. Brisley~~Catherine A. Shellabarger

Vice President, Chief Accounting Officer

(Principal Accounting Officer)

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PART I		Page
Item 1	Unaudited Financial Statements
	Condensed Consolidated Statements of Income and Comprehensive Income	1
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Changes in Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to the Condensed Consolidated Financial Statements	5
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	1921
Item 3	Quantitative and Qualitative Disclosures About Market Risk	2935
Item 4	Controls and Procedures	2935
PART II
Item 1	Legal Proceedings	3037
Item 1A	Risk Factors	3037
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	3037
Item 3	Defaults Upon Senior Securities	3037
Item 4	Mine Safety Disclosures	3037
Item 5	Other Information	3138
Item 6	Exhibits	3138