2015 Q2 Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10-Q
____________________________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 2015
or
¨ 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
(State or other jurisdiction of
incorporation or organization)
 
98-0377314
(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)
____________________________
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 x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
 
Accelerated filer
 
o
 
 
 
 
Non-accelerated filer
 
o (Do not check if a smaller reporting company)
 
Smaller reporting company
 
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
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 30,320,108 shares of Common Stock, no par value, as of August 3, 2015.


MASONITE INTERNATIONAL CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 28, 2015

 
 
PART I
 
 
Page
Item 1
 
 
 
 
 
 
 
 
 
 
 
 
Item 2
 
Item 3
 
Item 4
 
PART II
 
 
 
Item 1
 
Item 1A
 
Item 2
 
Item 3
 
Item 4
 
Item 5
 
Item 6
 


2

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the federal securities laws, including, without limitation, statements concerning the conditions in our industry, our operations, our economic performance and financial condition, including, in particular, statements relating to our business and growth strategy and product development efforts under "Management’s Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as "may," "might," "will," "should," "estimate," "project," "plan," "anticipate," "expect," "intend," "outlook," "believe" and other similar expressions. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. These risks and uncertainties include, without limitation, those identified under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 28, 2014, 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:

•
our ability to successfully implement our business strategy;
•
general economic, market and business conditions;
•
levels of residential new construction; residential repair, renovation and remodeling; and non-residential building construction activity;
•
competition;
•
our ability to manage our operations including integrating our recent acquisitions and companies or assets we acquire in the future;
•
our ability to generate sufficient cash flows to fund our capital expenditure requirements, to meet our pension obligations, and to meet our debt service obligations, including our obligations under our senior notes and our senior secured asset-based credit facility, or our ABL Facility;
•
labor relations (i.e., disruptions, strikes or work stoppages), labor costs and availability of labor;
•
increases in the costs of raw materials or any shortage in supplies;
•
our ability to keep pace with technological developments;
•
the actions taken by, and the continued success of, certain key customers;
•
our ability to maintain relationships with certain customers;
•
new contractual commitments;
•
the ability to generate the benefits of our restructuring activities;
•
retention of key management personnel;
•
environmental and other government regulations;
•
our levels of indebtedness and debt service obligations, including our obligations under our senior notes and our ABL Facility;
•
limitations on operating our business as a result of covenant restrictions under our existing and future indebtedness, including our senior notes and our ABL Facility; and
•
our ability to repurchase our senior notes upon a change of control.

We caution you that the foregoing list of important factors is not exclusive. 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.


3

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

MASONITE INTERNATIONAL CORPORATION
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands of U.S. dollars, except per share amounts)
(Unaudited)

 
Three Months Ended
 
Six Months Ended
 
June 28,
2015
 
June 29,
2014
 
June 28,
2015
 
June 29,
2014
Net sales
$
476,428

 
$
490,176

 
$
910,893

 
$
912,636

Cost of goods sold
381,394

 
411,569

 
742,550

 
781,043

Gross profit
95,034

 
78,607

 
168,343

 
131,593

Selling, general and administration expenses
58,818

 
58,519

 
116,979

 
116,294

Restructuring costs
988

 
560

 
3,344

 
1,281

Operating income (loss)
35,228

 
19,528

 
48,020

 
14,018

Interest expense (income), net
6,787

 
10,594

 
18,540

 
20,587

Loss on extinguishment of debt
—

 
—

 
28,046

 
—

Other expense (income), net
(635
)
 
1,306

 
(1,819
)
 
1,487

Income (loss) from continuing operations before income tax expense (benefit)
29,076

 
7,628

 
3,253

 
(8,056
)
Income tax expense (benefit)
15,013

 
1,379

 
18,277

 
1,398

Income (loss) from continuing operations
14,063

 
6,249

 
(15,024
)
 
(9,454
)
Income (loss) from discontinued operations, net of tax
(240
)
 
(170
)
 
(469
)
 
(312
)
Net income (loss)
13,823

 
6,079

 
(15,493
)
 
(9,766
)
Less: net income (loss) attributable to non-controlling interest
381

 
499

 
2,117

 
1,240

Net income (loss) attributable to Masonite
$
13,442

 
$
5,580

 
$
(17,610
)
 
$
(11,006
)
 
 
 
 
 
 
 
 
Earnings (loss) per common share attributable to Masonite:
 
 
 
 
 
 
 
Basic
$
0.44

 
$
0.19

 
$
(0.58
)
 
$
(0.37
)
Diluted
$
0.42

 
$
0.18

 
$
(0.58
)
 
$
(0.37
)
 
 
 
 
 
 
 
 
Earnings (loss) per common share from continuing operations attributable to Masonite:
 
 
 
 
 
 
 
Basic
$
0.45

 
$
0.20

 
$
(0.57
)
 
$
(0.36
)
Diluted
$
0.43

 
$
0.19

 
$
(0.57
)
 
$
(0.36
)
 
 
 
 
 
 
 
 
Comprehensive income (loss):
 
 
 
 
 
 
 
Net income (loss)
$
13,823

 
$
6,079

 
$
(15,493
)
 
$
(9,766
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign exchange gain (loss)
9,204

 
7,354

 
(25,936
)
 
(131
)
Amortization of actuarial net losses
220

 
—

 
440

 
—

Income tax benefit (expense) related to other comprehensive income (loss)
(87
)
 
(619
)
 
(174
)
 
(619
)
Other comprehensive income (loss), net of tax:
9,337

 
6,735

 
(25,670
)
 
(750
)
Comprehensive income (loss)
23,160

 
12,814

 
(41,163
)
 
(10,516
)
Less: comprehensive income (loss) attributable to non-controlling interest
496

 
862

 
1,547

 
1,132

Comprehensive income (loss) attributable to Masonite
$
22,664

 
$
11,952

 
$
(42,710
)
 
$
(11,648
)

See accompanying notes to the condensed consolidated financial statements.

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Table of Contents

MASONITE INTERNATIONAL CORPORATION
Condensed Consolidated Balance Sheets
(In thousands of U.S. dollars, except share amounts)
(Unaudited)
ASSETS
June 28,
2015
 
December 28,
2014
Current assets:
 
 
 
Cash and cash equivalents
$
136,305

 
$
192,037

Restricted cash
17,045

 
13,187

Accounts receivable, net
247,145

 
241,721

Inventories, net
243,514

 
222,732

Prepaid expenses
26,554

 
21,103

Income taxes receivable
1,936

 
1,796

Current deferred income taxes
23,215

 
20,767

Total current assets
695,714

 
713,343

Property, plant and equipment, net
553,665

 
576,234

Investment in equity investees
7,982

 
8,827

Goodwill
99,217

 
99,199

Intangible assets, net
192,852

 
203,372

Long-term deferred income taxes
15,991

 
20,697

Other assets, net
17,205

 
16,744

Total assets
$
1,582,626

 
$
1,638,416

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
106,686

 
$
98,199

Accrued expenses
137,216

 
137,681

Income taxes payable
2,137

 
1,361

Total current liabilities
246,039

 
237,241

Long-term debt
468,173

 
503,785

Long-term deferred income taxes
118,887

 
107,777

Other liabilities
51,628

 
54,114

Total liabilities
884,727

 
902,917

Commitments and Contingencies (Note 9)


 


Equity:
 
 
 
Share capital: unlimited shares authorized, no par value, 30,318,348 and 30,015,321 shares issued and outstanding as of June 28, 2015, and December 28, 2014, respectively.
661,364

 
657,292

Additional paid-in capital
227,023

 
225,918

Accumulated deficit
(115,127
)
 
(97,517
)
Accumulated other comprehensive income (loss)
(101,359
)
 
(76,259
)
Total equity attributable to Masonite
671,901

 
709,434

Equity attributable to non-controlling interests
25,998

 
26,065

Total equity
697,899

 
735,499

Total liabilities and equity
$
1,582,626

 
$
1,638,416


See accompanying notes to the condensed consolidated financial statements.

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Table of Contents

MASONITE INTERNATIONAL CORPORATION
Condensed Consolidated Statements of Changes in Equity
(In thousands of U.S. dollars, except share amounts)
(Unaudited)
 
Common Shares Outstanding
 
Common Stock Amount
 
Additional Paid-In Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Income (Loss)
 
Total Equity Attributable to Masonite
 
Equity Attributable to Non-controlling Interests
 
Total Equity
Balances as of December 29, 2013
29,085,021

 
$
646,196

 
$
230,306

 
$
(60,177
)
 
$
(19,601
)
 
$
796,724

 
$
28,838

 
$
825,562

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
 
 
 
(37,340
)
 
 
 
(37,340
)
 
3,222

 
(34,118
)
Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
(56,658
)
 
(56,658
)
 
(978
)
 
(57,636
)
Dividends to non-controlling interests
 
 
 
 
 
 
 
 
 
 
—

 
(5,017
)
 
(5,017
)
Share based compensation expense
 
 
 
 
9,605

 
 
 
 
 
9,605

 
 
 
9,605

Common shares issued for delivery of share based awards
650,892

 
6,996

 
(6,996
)
 
 
 
 
 
—

 
 
 
—

Common shares issued for exercise of warrants
279,408

 
4,100

 
(3,837
)
 
 
 
 
 
263

 
 
 
263

Common shares withheld to cover income taxes payable due to delivery of share based awards
 
 
 
 
(3,160
)
 
 
 
 
 
(3,160
)
 
 
 
(3,160
)
Balances as of December 28, 2014
30,015,321

 
$
657,292

 
$
225,918

 
$
(97,517
)
 
$
(76,259
)
 
$
709,434

 
$
26,065

 
$
735,499

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
 
 
 
(17,610
)
 
 
 
(17,610
)
 
2,117

 
(15,493
)
Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
(25,100
)
 
(25,100
)
 
(570
)
 
(25,670
)
Dividends to non-controlling interests
 
 
 
 
 
 
 
 
 
 
—

 
(1,614
)
 
(1,614
)
Share based compensation expense
 
 
 
 
5,485

 
 
 
 
 
5,485

 
 
 
5,485

Common shares issued for delivery of share based awards
295,847

 
3,622

 
(3,622
)
 
 
 
 
 
—

 
 
 
—

Common shares withheld to cover income taxes payable due to delivery of share based awards
 
 
 
 
(609
)
 
 
 
 
 
(609
)
 
 
 
(609
)
Common shares issued under employee stock purchase plan
7,180

 
450

 
(149
)
 
 
 
 
 
301

 
 
 
301

Balances as of June 28, 2015
30,318,348

 
$
661,364

 
$
227,023

 
$
(115,127
)
 
$
(101,359
)
 
$
671,901

 
$
25,998

 
$
697,899


See accompanying notes to the condensed consolidated financial statements.

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Table of Contents

MASONITE INTERNATIONAL CORPORATION
Condensed Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
(Unaudited)
 
Six Months Ended
Cash flows from operating activities:
June 28,
2015
 
June 29,
2014
Net income (loss)
$
(15,493
)
 
$
(9,766
)
Adjustments to reconcile net income (loss) to net cash flow provided by (used in) operating activities, net of acquisitions:
 
 
 
Loss (income) from discontinued operations, net of tax
469

 
312

Loss on extinguishment of debt
28,046

 
—

Depreciation
29,716

 
29,982

Amortization
9,986

 
11,284

Share based compensation expense
5,485

 
5,080

Deferred income taxes
14,540

 
(982
)
Unrealized foreign exchange loss (gain)
(1,220
)
 
1,611

Share of loss (income) from equity investees, net of tax
(595
)
 
(574
)
Dividend from equity investee
1,440

 
—

Pension and post-retirement expense (funding), net
(2,778
)
 
(2,887
)
Non-cash accruals and interest
658

 
(1,424
)
Loss (gain) on sale of property, plant and equipment
294

 
2,123

Changes in assets and liabilities:
 
 
 
Accounts receivable
(9,276
)
 
(38,491
)
Inventories
(25,636
)
 
(22,911
)
Prepaid expenses
(6,281
)
 
(305
)
Accounts payable and accrued expenses
13,062

 
50,900

Other assets and liabilities
(2,220
)
 
1,745

Net cash flow provided by (used in) operating activities
40,197

 
25,697

Cash flows from investing activities:
 
 
 
Proceeds from sale of property, plant and equipment
324

 
533

Additions to property, plant and equipment
(17,918
)
 
(19,962
)
Cash used in acquisitions, net of cash acquired
—

 
(50,355
)
Restricted cash
(3,866
)
 
526

Other investing activities
(1,376
)
 
(2,168
)
Net cash flow provided by (used in) investing activities
(22,836
)
 
(71,426
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of long-term debt
475,000

 
138,688

Repayments of long-term debt
(500,000
)
 
—

Payments of long-term debt extinguishment costs
(31,691
)
 
—

Payment of financing costs
(7,159
)
 
(1,925
)
Minimum tax withholding on share based awards
(609
)
 
(1,054
)
Distributions to non-controlling interests
(1,614
)
 
(1,144
)
Proceeds from exercise of common stock warrants
—

 
262

Net cash flow provided by (used in) financing activities
(66,073
)
 
134,827

Net foreign currency translation adjustment on cash
(7,020
)
 
(2,438
)
Increase (decrease) in cash and cash equivalents
(55,732
)
 
86,660

Cash and cash equivalents, beginning of period
192,037

 
100,873

Cash and cash equivalents, at end of period
$
136,305

 
$
187,533


See accompanying notes to the condensed consolidated financial statements.

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Table of Contents
MASONITE INTERNATIONAL CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



1. Business Overview and Significant Accounting Policies

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

Description of Business

Masonite International Corporation is one of the largest manufacturers of doors in the world, with significant market share in both interior and exterior door products. Masonite operates 62 manufacturing locations in 10 countries and sells doors to customers throughout the world, including the United States, Canada, the United Kingdom and France.

Basis of Presentation

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

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2014, as filed with the SEC. There have been no changes in the significant accounting policies from those that were disclosed in the 2014 audited consolidated financial statements, other than as noted below. Certain prior year amounts have been reclassified to conform to the current basis of presentation.

Our fiscal year is the 52- or 53-week period ending on the Sunday closest to December 31. In a 52-week year, each fiscal quarter consists of 13 weeks. For ease of disclosure, the 13-week periods are referred to as three-month periods. Our 2015 fiscal year, which ends on January 3, 2016, will contain 53 weeks of operating results, with the additional week occurring in the fourth quarter.

Changes in Accounting Standards and Policies
Adoption of Recent Accounting Pronouncements
In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” This ASU requires capitalized debt issuance costs to be presented as a reduction to the carrying value of debt instead of being classified as a deferred charge, as previously required. This ASU is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2015, and interim periods within those annual periods; early adoption is permitted and retroactive application is required. We have adopted this guidance as of June 28, 2015, and as a result have recast the December 28, 2014, condensed consolidated balance sheet to conform to the current period presentation. The adoption of this standard reduced previously-presented other assets, net, and long-term debt by $8.1 million each, based upon the balance of unamortized debt issuance costs relating to our senior unsecured notes recorded as of December 28, 2014.

In April 2014, the FASB issued ASU 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity," which amends the definition of a discontinued operation in ASC 205-20 and requires entities to provide additional disclosures about discontinued operations as well as disposal transactions that do

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


not meet the discontinued operations criteria. The FASB issued the ASU to provide more decision-useful information and to make it more difficult for a disposal transaction to qualify as a discontinued operation. This ASU is effective for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods; early application is permitted. The adoption of this standard did not have a material impact on the presentation of our financial statements.     
Other Recent Accounting Pronouncements not yet Adopted

In April 2015, the FASB issued ASU 2015-04, “Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets.” This ASU provides a practical expedient option to entities that have defined benefit plans and have a fiscal year end that does not coincide with a calendar month end. This ASU allows an entity to elect to measure defined benefit plan assets and obligations using the calendar month-end that is closest to its fiscal year end. This ASU is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2015, and interim periods within those annual periods; early adoption is permitted. The adoption of this standard is not expected to have an impact on the presentation of our financial statements.

In February 2015, the FASB issued ASU 2015-02, “Amendments to the Consolidation Analysis,” which amended ASC 810, “Consolidation.” This ASU modifies the evaluation of whether limited partnerships are variable interest entities (“VIEs”) and affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. This ASU is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2015, and interim periods within those annual periods; early adoption is permitted. The adoption of this standard is not expected to have an impact on the presentation of our financial statements.     

In August 2014, the FASB issued ASU 2014-15, "Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern," which amended ASC 205-40, "Presentation of Financial Statements - Going Concern". This ASU requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements and to provide related footnote disclosures. This ASU is effective for annual reporting periods ending after December 15, 2016, and interim periods thereafter; early adoption is permitted. We are in the process of evaluating this guidance to determine the impact it will have on our financial statements.

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers," which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB voted for a one year deferral of the effective date of ASU 2014-09 and the guidance will now be effective for annual and interim periods beginning on or after December 15, 2017; early application is not permitted. We are in the process of evaluating this guidance to determine the impact it will have on our financial statements.
2. Acquisitions

2014 Acquisitions

On December 1, 2014, we completed the acquisition of Harring Doors Corporation (“Harring”), headquartered in London, Ontario, for total consideration of $3.9 million, net of cash acquired. We acquired 100% of the equity interests in Harring through the purchase of all of the outstanding shares of common stock at the acquisition date. Harring manufactures interior and exterior stile and rail wood doors for architectural door applications at its facility in London, Ontario. The excess purchase price over the fair value of net assets acquired of $2.0 million was allocated to goodwill. The goodwill principally represents anticipated synergies to be gained from the integration into our North American architectural wood door business. This goodwill is not deductible for tax purposes and relates to the North America segment. The acquisition of Harring complements our architectural wood door business.

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


On February 24, 2014, we completed the acquisition of Door-Stop International Limited ("Door-Stop") for total consideration of $50.4 million, net of cash acquired. We acquired 100% of the equity interests in Door-Stop through the purchase of all outstanding shares of common stock on the acquisition date. Door-Stop is based in Nottinghamshire, United Kingdom, utilizes an internet-based ordering process and manufactures exterior door sets for the residential repair and renovation markets. The excess purchase price over the fair value of net tangible and intangible assets acquired of $20.4 million was allocated to goodwill. The goodwill principally represents the future expected value of the operations of the business. This goodwill is not deductible for tax purposes and relates to the Europe, Asia and Latin America segment. The Door-Stop acquisition complements our existing global fiberglass business.
        
The aggregate consideration paid for acquisitions during 2014 was as follows:
(In thousands)
Harring Acquisition
 
Door-Stop Acquisition
 
Total 2014 Acquisitions
Accounts receivable
$
1,180

 
$
2,648

 
$
3,828

Inventory
443

 
2,665

 
3,108

Property, plant and equipment
1,167

 
4,303

 
5,470

Goodwill
1,951

 
20,359

 
22,310

Intangible assets
—

 
28,776

 
28,776

Accounts payable and accrued expenses
(731
)
 
(3,492
)
 
(4,223
)
Other assets and liabilities, net
(109
)
 
(4,904
)
 
(5,013
)
Cash consideration, net of cash acquired
$
3,901

 
$
50,355

 
$
54,256


The fair values of tangible assets acquired and liabilities assumed from the Harring acquisition were based upon preliminary calculations and valuations and the estimates and assumptions for the acquisition are subject to change as we obtain additional information during the measurement period (up to one year from the acquisition date). The primary areas of the preliminary estimates which are not yet finalized relate to certain tangible assets acquired and liabilities assumed, including goodwill. The fair values of intangible assets acquired are based on management’s estimates and assumptions including variations of the income approach, the cost approach and the market approach. Intangible assets acquired from Door-Stop consist of customer relationships and are being amortized over the weighted average amortization period of 9.9 years. The intangible assets are not expected to have any residual value. The gross contractual value of acquired trade receivables was $1.2 million and $2.8 million for the Harring and Door-Stop acquisitions, respectively.
    
The following schedule represents the amount of net sales and net income (loss) attributable to Masonite from the Door-Stop acquisition which have been included in the condensed consolidated statements of comprehensive income (loss) for the periods indicated subsequent to the acquisition date. Amounts of revenue and earnings included in the condensed consolidated statements of comprehensive income (loss) for Harring were not material for the three and six months ended June 28, 2015.    
 
Three Months Ended
 
Six Months Ended
(In thousands)
June 28, 2015
 
June 29, 2014
 
June 28, 2015
 
June 29, 2014
Net sales
$
13,197

 
$
11,865

 
$
25,063

 
$
16,874

Net income (loss) attributable to Masonite
1,538

 
786

 
2,664

 
1,440


Pro Forma Information

The following unaudited pro forma financial information represents the condensed consolidated financial information as if the acquisitions had been included in our condensed consolidated results beginning on the first day of the fiscal year prior to their respective acquisition dates. Pro forma information relating to the Harring acquisition has been excluded as it is not materially different from amounts reported. The pro forma results have been calculated after adjusting the results of the acquired entity to remove intercompany transactions and transaction costs incurred and to

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


reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied on the first day of the fiscal year prior to acquisition, 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 may achieve as a result of the acquisition; the costs to combine the companies' operations; or the costs necessary to achieve these costs savings, operating synergies and revenue enhancements. The pro forma results do not necessarily reflect the actual results of operations of the combined companies' under our ownership and operation.
 
Six Months Ended June 29, 2014
(In thousands, except per share amounts)
Masonite
 
Door-Stop
 
Pro Forma
Net sales
$
912,636

 
$
6,659

 
$
919,295

Net income (loss) attributable to Masonite
(11,006
)
 
624

 
(10,382
)
 
 
 
 
 
 
Basic earnings (loss) per common share
$
(0.37
)
 
 
 
$
(0.35
)
Diluted earnings (loss) per common share
$
(0.37
)
 
 
 
$
(0.35
)

In the table above, amounts under the Door-Stop heading reflect pro forma results for the period prior to acquisition through the acquisition date of February 24, 2014. All actual results from Door-Stop subsequent to the acquisition date are reflected under the Masonite heading above.

3. Goodwill and Intangible Assets

Changes in the carrying amount of goodwill were as follows as of the dates indicated:
(In thousands)
North America Segment
 
Europe, Asia and Latin America Segment
 
Total
December 28, 2014
$
79,818

 
$
19,381

 
$
99,199

Foreign exchange fluctuations
(186
)
 
204

 
18

June 28, 2015
$
79,632

 
$
19,585

 
$
99,217


The cost and accumulated amortization values of our intangible assets were as follows for the periods indicated:
 
June 28, 2015
(In thousands)
 Cost
 
Accumulated Amortization
 
Translation Adjustment
 
 Net Book Value
Definite life intangible assets:
 
 
 
 
 
 
 
Customer relationships
$
107,381

 
$
(39,067
)
 
$
(2,233
)
 
$
66,081

Patents
29,417

 
(15,987
)
 
(579
)
 
12,851

Software
29,424

 
(21,214
)
 
(42
)
 
8,168

Other
9,457

 
(7,132
)
 
(1,441
)
 
884

 
175,679

 
(83,400
)
 
(4,295
)
 
87,984

Indefinite life intangible assets:
 
 
 
 
 
 
 
Trademarks and tradenames
111,053

 
—

 
(6,185
)
 
104,868

Total intangible assets
$
286,732

 
$
(83,400
)
 
$
(10,480
)
 
$
192,852


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


 
December 28, 2014
(In thousands)
 Cost
 
 Accumulated Amortization
 
 Translation Adjustment
 
 Net Book Value
Definite life intangible assets:
 
 
 
 
 
 
 
Customer relationships
$
107,381

 
$
(33,181
)
 
$
(2,360
)
 
$
71,840

Patents
28,630

 
(14,696
)
 
(308
)
 
13,626

Software
28,832

 
(19,322
)
 
63

 
9,573

Other
9,457

 
(6,810
)
 
(1,426
)
 
1,221

 
174,300

 
(74,009
)
 
(4,031
)
 
96,260

Indefinite life intangible assets:
 
 
 
 
 
 
 
Trademarks and tradenames
111,053

 
—

 
(3,941
)
 
107,112

Total intangible assets
$
285,353

 
$
(74,009
)
 
$
(7,972
)
 
$
203,372


Amortization of intangible assets was $4.7 million and $9.4 million for the three and six months ended June 28, 2015, respectively, and was $5.3 million and $9.7 million for the three and six months ended June 29, 2014, respectively. Amortization expense is classified within selling, general and administration expenses in the condensed consolidated statements of comprehensive income (loss).
    
The estimated future amortization of intangible assets with definite lives as of June 28, 2015, is as follows:
(In thousands)
 
Fiscal year:
 
2015 (remaining six months)
$
9,533

2016
17,568

2017
15,433

2018
12,048

2019
11,664


4. Accounts Receivable

Our customers consist mainly of wholesale distributors, dealers, and retail home centers. Our ten largest customers accounted for 50.6% and 48.8% of total accounts receivable as of June 28, 2015, and December 28, 2014, respectively. Our largest customer, The Home Depot, Inc., accounted for more than 10% of the consolidated gross accounts receivable balance as of June 28, 2015, and December 28, 2014. No other individual customer accounted for greater than 10% of the consolidated gross accounts receivable balance at either June 28, 2015, or December 28, 2014. The allowance for doubtful accounts balance was $1.9 million and $2.6 million as of June 28, 2015, and December 28, 2014, respectively.

We maintain accounts receivable sales programs with third parties (the "AR Sales Programs"). Under the AR Sales Programs, we can transfer ownership of eligible trade accounts receivable of certain customers. Receivables are sold outright to third parties who assume the full risk of collection, without recourse to us in the event of a loss. Transfers of receivables under these programs 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 Programs 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 under the AR Sales Programs were not material for any of the periods presented and were recorded to selling, general and administration expense within the condensed consolidated statements of comprehensive income (loss).


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(Unaudited)


5. Inventories

The amounts of inventory on hand were as follows as of the dates indicated:
(In thousands)
June 28,
2015
 
December 28,
2014
Raw materials
$
174,713

 
$
159,763

Finished goods
75,441

 
69,517

Provision for obsolete or aged inventory
(6,640
)
 
(6,548
)
Inventories, net
$
243,514

 
$
222,732


6. Property, Plant and Equipment

The carrying amounts of our property, plant and equipment and accumulated depreciation were as follows as of the dates indicated:
(In thousands)
June 28,
2015
 
December 28,
2014
Land
$
43,418

 
$
44,971

Buildings
166,778

 
170,344

Machinery and equipment
530,448

 
530,599

Property, plant and equipment, gross
740,644

 
745,914

Accumulated depreciation
(186,979
)
 
(169,680
)
Property, plant and equipment, net
$
553,665

 
$
576,234


Total depreciation expense was $14.4 million and $29.7 million in the three and six months ended June 28, 2015, respectively, and $14.5 million and $30.0 million in the three and six months ended June 29, 2014, respectively. Depreciation expense is included primarily within cost of goods sold in the condensed consolidated statements of comprehensive income (loss).

On June 6, 2014, an explosion occurred in the power plant of our Estcourt mill in South Africa which reduced the site’s ability to generate steam and heat the kilns which, in turn, required the production lines to cease operating for several weeks. We are insured against property loss and business interruption, and we recognized partial payments of $1.2 million in business interruption insurance proceeds during the three and six months ended June 28, 2015. These proceeds were recorded as a reduction to selling, general and administration expense in the condensed consolidated statements of comprehensive income (loss).

7. Long-Term Debt
(In thousands)
June 28,
2015
 
December 28,
2014
5.625% senior unsecured notes due 2023
$
475,000

 
$
—

Debt issuance costs for 2023 Notes
(6,827
)
 
—

8.25% senior unsecured notes due 2021
—

 
500,000

Unamortized premium on 2021 Notes
—

 
11,920

Debt issuance costs for 2021 Notes
—

 
(8,135
)
Total long-term debt
$
468,173

 
$
503,785


Interest expense related to our consolidated indebtedness under senior unsecured notes was $6.7 million and $17.8 million for the three and six months ended June 28, 2015, respectively, and $10.1 million and $19.6 million for the three and six months ended June 29, 2014, respectively.

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(Unaudited)


5.625% Senior Notes due 2023

On March 23, 2015, we issued $475.0 million aggregate principal senior unsecured notes (the “2023 Notes”). The 2023 Notes were issued in a private placement for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to buyers outside the United States pursuant to Regulation S under the Securities Act. The 2023 Notes were issued without registration rights and are not listed on any securities exchange. The 2023 Notes were issued at par and bear interest at 5.625% per annum, payable in cash semiannually in arrears on March 15 and September 15 of each year and are due March 15, 2023. We received net proceeds of $467.9 million after deducting $7.1 million of transaction issuance costs. The transaction costs were capitalized as a reduction to the carrying value of debt and are being amortized to interest expense over the term of the 2023 Notes using the effective interest method. The net proceeds from the 2023 Notes, together with available cash balances, were used to redeem the $500.0 million aggregate principal of 2021 Notes (as described below) and to pay related premiums, fees and expenses.

We may redeem the 2023 Notes, in whole or in part, at any time prior to March 15, 2018, at a price equal to 100% of the principal amount plus the applicable premium, plus accrued and unpaid interest, if any, to the date of redemption. The applicable premium means, with respect to a note at any date of redemption, the greater of (i) 1.00% of the then-outstanding principal amount of such note and (ii) the excess of (a) the present value at such date of redemption of (1) the redemption price of such note at March 15, 2018, plus (2) all remaining required interest payments due on such note through such date (excluding accrued but unpaid interest to the date of redemption), computed using a discount rate equal to the Treasury Rate, as described in the indenture, plus 50 basis points, over (b) the principal amount of such note on such redemption date. We may also redeem the 2023 Notes, in whole or in part, at any time on or after March 15, 2018, at the applicable redemption prices specified under the indenture governing the 2023 Notes, plus accrued and unpaid interest, if any, to the date of redemption. If we experience certain changes of control or consummate certain asset sales and do not reinvest the net proceeds, we must offer to repurchase all of the 2023 Notes at a purchase price of 101.00% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date.

Obligations under the 2023 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, by certain of our directly or indirectly wholly-owned subsidiaries.

The indenture governing the 2023 Notes contains restrictive covenants that, among other things, limit our ability and the ability of our subsidiaries to: (i) incur additional debt and issue disqualified or preferred stock, (ii) make restricted payments, (iii) sell assets, (iv) create or permit restrictions on the ability of our restricted subsidiaries to pay dividends or make other distributions to the parent company, (v) create or incur certain liens, (vi) enter into sale and leaseback transactions, (vii) merge or consolidate with other entities and (viii) enter into transactions with affiliates. The foregoing limitations are subject to exceptions as set forth in the indenture governing the 2023 Notes. In addition, if in the future the 2023 Notes have an investment grade rating from at least two nationally recognized statistical rating organizations, certain of these covenants will be replaced with a less restrictive covenant.

The indenture governing the 2023 Notes contains customary events of default (subject in certain cases to customary grace and cure periods). As of June 28, 2015, we were in compliance with all covenants under the indenture governing the 2023 Notes.

8.25% Senior Notes due 2021

On January 21, 2014, March 9, 2012, and April 15, 2011, we issued $125.0 million, $100.0 million and $275.0 million aggregate principal senior unsecured notes, respectively (the "2021 Notes"). All issuances of the 2021 Notes had the same terms, rights and obligations, and were issued in the same series. The 2021 Notes were issued in three private placements for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to buyers outside the United States pursuant to Regulation S under the Securities Act. The 2021 Notes were issued without registration rights and were not listed on any securities exchange. The 2021 Notes bore interest at 8.25% per annum, payable in cash semiannually in arrears on April 15 and October 15 of each year and were due April 15, 2021. We received net proceeds of $136.8 million, $101.5 million and $265.5 million in 2014, 2012 and 2011, respectively, after deducting $1.9 million, $2.0 million and $9.5 million of transaction issuance costs. The transaction costs were

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


capitalized as deferred financing costs (included in other assets) and were being amortized to interest expense over the term of the 2021 Notes using the effective interest method. The 2021 Notes were issued at 108.75%, 103.50% and par in 2014, 2012 and 2011, respectively. The resulting premiums of $10.9 million and $3.5 million in 2014 and 2012, respectively, were being amortized to interest expense over the term of the 2021 Notes using the effective interest method. The net proceeds from the 2021 Notes were used to fund a $124.9 million return of capital to shareholders in 2011, in the amount of $4.54 per share; as well as the acquisitions of eight companies since 2011 for aggregate consideration of $297.5 million. The remaining proceeds from the 2021 Notes were used for general corporate purposes.

In conjunction with the closing of the 2023 Notes offering, the 2021 Notes were fully redeemed and considered extinguished as of March 23, 2015. Under the terms of the indenture governing the 2021 Notes, we paid the applicable premium, as described in the indenture, of $31.7 million. Additionally, the unamortized premium of $11.5 million and unamortized transaction costs of $7.8 million relating to the 2021 Notes were written off in conjunction with the extinguishment of the 2021 Notes. The resulting loss on extinguishment of debt was $28.0 million and is recorded as part of income (loss) from continuing operations before income tax expense (benefit) in the condensed consolidated statements of comprehensive income (loss). Additionally, the cash payment of interest accrued to, but not including, the redemption date was accelerated to the redemption date.

ABL Facility

On April 9, 2015, we and certain of our subsidiaries amended and restated our asset-based revolving credit facility (the "ABL Facility") in order to extend the maturity date of the ABL Facility and amend certain other provisions. The amended and restated ABL Facility increased the revolving commitments to $150.0 million from $125.0 million and extended the final maturity date to April 9, 2020, from May 17, 2016. The borrowing base is calculated based on a percentage of the value of selected U.S. and Canadian accounts receivable and inventory, less certain intangible amounts.

Obligations under the ABL Facility are secured by a first priority security interest in substantially all of the current assets of Masonite and our subsidiaries. In addition, obligations under the ABL Facility are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, by certain of our directly or indirectly wholly-owned subsidiaries.    

Borrowings under the ABL Facility will bear interest at a rate equal to, at our option, (i) the Base Rate, Canadian Prime Rate or Canadian Base Rate (each as defined in the Amended and Restated Credit Agreement) plus a margin ranging from 0.25% to 0.75% per annum, or (ii) the Eurodollar Base Rate or BA Rate (each as defined in the Amended and Restated Credit Agreement), plus a margin ranging from 1.25% to 1.75% per annum.

In addition to paying interest on any outstanding principal under the ABL Facility a commitment fee is payable on the undrawn portion of the ABL Facility in an amount equal to 0.25% per annum of the average daily balance of unused commitments during each calendar quarter.

The ABL Facility contains various customary representations, warranties and covenants by us that, among other things, and subject to certain exceptions, restrict Masonite's ability and the ability of our subsidiaries to: (i) pay dividends on our common shares and make other restricted payments, (ii) make investments and acquisitions, (iii) engage in transactions with our affiliates, (iv) sell assets, (v) merge and (vi) create liens.
    
The Amended and Restated Credit Agreement amends the ABL Facility to, among other things, (i) permit us to incur unlimited unsecured debt as long as such debt does not contain covenants or default provisions that are more restrictive than those contained in the ABL Facility, (ii) permit us to incur debt as long as the pro forma secured leverage ratio is less than 4.5 to 1.0, and (iii) add certain additional exceptions and exemptions under the restricted payment, investment and indebtedness covenants (including increasing the amount of certain debt permitted to be incurred under an existing exception). As of June 28, 2015, and December 28, 2014, we were in compliance with all covenants under the credit agreement governing the ABL Facility and there were no amounts outstanding under the ABL Facility.

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(Unaudited)


8. Share Based Compensation Plans
    
Share-based compensation expense was $3.1 million and $5.5 million for the three and six months ended June 28, 2015, respectively, and $2.8 million and $5.1 million for the three and six months ended June 29, 2014, respectively. As of June 28, 2015, the total remaining unrecognized compensation expense related to share based compensation amounted to $16.5 million, which will be amortized over the weighted average remaining requisite service period of 2.3 years. Share based compensation expense is recognized using a graded-method approach, or to a lesser extent a cliff-vesting approach, depending on the terms of the individual award and is classified within selling, general and administration expenses in the condensed consolidated statements of comprehensive income (loss). All share based awards are settled through issuance of new shares of our common stock. The share based award agreements contain restrictions on sale or transfer other than in limited circumstances. All other transfers would cause the share based awards to become null and void.

Equity Incentive Plan

Prior to July 9, 2012, we had a management equity incentive plan (the "2009 Plan"). The 2009 Plan required granting by June 9, 2012, equity instruments which upon exercise would result in management (excluding directors) owning 9.55% of our common equity (3,554,811 shares) on a fully diluted basis, after giving consideration to the potential exercise of warrants and the equity instruments granted to directors. Under the 2009 Plan, we were required to issue equity instruments to directors that represented 0.90% (335,004 shares) of the common equity on a fully diluted basis. The requirement for issuance to employees was satisfied in June 2012, and the requirement for issuance to directors was satisfied in July 2009. No awards have been granted under the 2009 Plan since May 30, 2012, and no future awards will be granted under the 2009 Plan; however, all outstanding awards under the 2009 Plan will continue to be governed by their existing terms. Aside from shares issuable for outstanding awards, there are no further shares of common stock available for future issuance under the 2009 Plan.

On July 12, 2012, the Board of Directors adopted the Masonite International Corporation 2012 Equity Incentive Plan (as amended and restated, the "2012 Plan"). The 2012 Plan was adopted because the Board believes awards granted will help to attract, motivate and retain employees and non-employee directors, align employee and stockholder interests and encourage a performance-based culture built on employee stock ownership. The 2012 Plan permits us to offer eligible directors, employees and consultants cash and share-based incentives, including stock options, stock appreciation rights, restricted stock, other share-based awards (including restricted stock units) and cash-based awards. The 2012 Plan is effective for 10 years from the date of its adoption. Awards granted under the 2012 Plan are at the discretion of the Human Resources and Compensation Committee of the Board of Directors. The Human Resources and Compensation Committee may grant any award under the 2012 Plan in the form of a performance award. The 2012 Plan may be amended, suspended or terminated by the Board at any time; provided, that any amendment, suspension or termination which impairs the rights of a participant is subject to such participant's consent and; provided further, that certain material amendments are subject to shareholder approval. Prior to June 21, 2013, the aggregate number of common shares that could be issued with respect to equity awards under the 2012 Plan could not exceed 1,500,000 shares plus the number of shares subject to existing grants under the 2009 Plan that may expire or be forfeited or cancelled. On June 21, 2013, the Board of Directors approved an increase of 500,000 common shares issuable under the 2012 Plan, bringing the total number of shares issuable under the 2012 Plan to 2,000,000 plus the number of shares subject to existing grants under the 2009 plan that may expire or be forfeited or cancelled. On May 12, 2015, our shareholders approved the Masonite International Corporation Amended and Restated 2012 Equity Incentive Plan, which amended and restated the 2012 Plan in its entirety in order to further enable the Human Resources and Compensation Committee to grant awards thereunder that are intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended. The Amended and Restated 2012 Plan also made certain changes to the performance criteria on which performance goals may be based and the adjustments to such performance criteria for such awards. As of June 28, 2015, there were 1,824,500 shares of common stock available for future issuance under the 2012 Plan.


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(Unaudited)


Deferred Compensation Plan

We offer to certain of our employees and directors a Deferred Compensation Plan ("DCP"). The DCP is an unfunded non-qualified deferred compensation plan that permits those certain employees and directors to defer a portion of their compensation to a future time. Eligible employees may elect to defer a portion of their base salary, bonus and/or restricted stock units and eligible directors may defer a portion of their director fees or restricted stock units. All contributions to the DCP on behalf of the participant are fully vested (other than restricted stock unit deferrals which remain subject to the vesting terms of the applicable equity incentive plan) and placed into a grantor trust, commonly referred to as a "rabbi trust." Although we are permitted to make matching contributions under the terms of the DCP, we have not elected to do so. The DCP invests the contributions in diversified securities from a selection of investments and the participants choose their investments and may periodically reallocate the assets in their respective accounts. Participants are entitled to receive the benefits in their accounts upon separation of service or upon a specified date, with benefits payable as a single lump sum or in annual installments. All plan investments are categorized as having Level 1 valuation inputs as established by the FASB’s Fair Value Framework.

Assets of the rabbi trust, other than Company stock, are recorded at fair value and included in other assets in the condensed consolidated balance sheets. These assets in the rabbi trust are classified as trading securities and changes in their fair values are recorded in other income (loss) in the condensed consolidated statements of comprehensive income (loss). The liability relating to deferred compensation represents our obligation to distribute funds to the participants in the future and is included in other liabilities in the condensed consolidated balance sheets. As of June 28, 2015, the liability and asset relating to deferred compensation each had a fair value of $2.0 million. Any unfunded gain or loss relating to changes in the fair value of the deferred compensation liability is recognized in selling, general and administration expense in the condensed consolidated statements of comprehensive income (loss).

As of June 28, 2015, participation in the deferred compensation plan is limited and no restricted stock awards have been deferred into the deferred compensation plan.

Stock Appreciation Rights

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

The total fair value of SARs vested was $0.4 million in the six months ended June 28, 2015, and was $0.2 million and $0.6 million in the three and six months ended June 29, 2014, respectively.
Six months ended June 28, 2015
Stock Appreciation Rights
 
Aggregate Intrinsic Value (in thousands)
 
 Weighted Average Exercise Price
 
 Average Remaining Contractual Life (Years)
Outstanding, beginning of period
1,231,468

 
$
48,516

 
$
19.59

 
5.9
Exercised
(308,770
)
 
15,205

 
16.82

 
 
Cancelled
(4,584
)
 
 
 
32.26

 
 
Outstanding, end of period
918,114

 
$
46,400

 
$
20.26

 
5.5
 
 
 
 
 
 
 
 
Exercisable, end of period
697,577

 
$
37,727

 
$
16.72

 
4.8

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(Unaudited)


Six months ended June 29, 2014
Stock Appreciation Rights
 
Aggregate Intrinsic Value (in thousands)
 
 Weighted Average Exercise Price
 
 Average Remaining Contractual Life (Years)
Outstanding, beginning of period
1,812,658

 
$
59,525

 
$
18.16

 
6.4
Exercised
(262,074
)
 
10,758

 
14.48

 
 
Cancelled
(23,172
)
 
 
 
34.51

 
 
Outstanding, end of period
1,527,412

 
$
55,850

 
$
18.49

 
6.1
 
 
 
 
 
 
 
 
Exercisable, end of period
1,183,138

 
$
46,595

 
$
15.68

 
5.5

Restricted Stock Units

We have granted Restricted Stock Units ("RSUs") to directors and certain employees under both the 2009 Plan and the 2012 Plan. The RSUs confer the right to receive shares of our common stock at a specified future date or when certain conditions are met. The compensation expense for the RSUs awarded is based on the fair value of the RSUs at the date of grant and is recognized over the requisite service period. The RSUs vest over a maximum of three years and call for the underlying shares to be delivered no later than 30 days following the vesting date unless the participant is subject to a blackout period. In such case, the shares are to be delivered once the blackout restriction has been lifted. It is assumed that all time-based RSUs will vest.
 
Six Months Ended
 
June 28, 2015
 
June 29, 2014
 
Total Restricted Stock Units Outstanding
 
Weighted Average Grant Date Fair Value
 
Total Restricted Stock Units Outstanding
 
Weighted Average Grant Date Fair Value
Outstanding, beginning of period
543,373

 
$
34.56

 
618,963

 
$
22.09

Granted
192,653

 
61.38

 
193,940

 
54.65

Delivered
(70,557
)
 
 
 
(94,009
)
 
 
Withheld to cover (1)
(9,128
)
 
 
 
(21,159
)
 
 
Cancelled
(49,482
)
 
 
 
(1,709
)
 
 
Outstanding, end of period
606,859

 
$
42.75

 
696,026

 
$
30.60

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

Approximately one-half of the RSUs granted during the six months ended June 28, 2015, vest at specified future dates with only service requirements, while the remaining portion of the RSUs vest based on both performance and service requirements. The value of RSUs granted in the six months ended June 28, 2015, was $11.8 million and is being recognized over the weighted average requisite service period of 1.7 years. During the six months ended June 28, 2015, there were 79,685 RSUs vested at a fair value of $2.7 million.

Warrants

On June 9, 2009, we issued 5,833,335 warrants, representing the right to purchase our common shares for $55.31 per share, subsequently adjusted to $50.77 per share for the $4.54 per share return of capital in 2011. Of these, 3,333,334 had an expiration date of June 9, 2014 (the "2014 Warrants"), and 2,500,001 are scheduled to expire on June 9, 2016 (the "2016 Warrants"). During the six months prior to their respective expiration dates, the warrants provide the

18

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


holders with a cashless exercise option. We have accounted for these warrants as equity instruments. Future exercises will increase the amount of common shares outstanding and reduce additional paid-in capital.

Activity relating to the warrants was as followed for the periods presented:
 
Three Months Ended
 
June 28, 2015
 
June 29, 2014
 
2016 Warrants
 
2014 Warrants
 
2016 Warrants
 
Total Warrants
Outstanding, beginning of period
2,500,001

 
2,453,653

 
2,500,001

 
4,953,654

Exercised
—

 
(2,409,465
)
 
—

 
(2,409,465
)
Forfeited
—

 
(44,188
)
 
—

 
(44,188
)
Outstanding, end of period
2,500,001

 
—

 
2,500,001

 
2,500,001

 
 
 
 
 
 
 
 
Cash received for exercise (in thousands)
$
—

 
$
263

 
$
—

 
$
263

Common shares issued
—

 
180,489

 
—

 
180,489

 
Six Months Ended
 
June 28, 2015
 
June 29, 2014
 
2016 Warrants
 
2014 Warrants
 
2016 Warrants
 
Total Warrants
Outstanding, beginning of period
2,500,001

 
3,333,334

 
2,500,001

 
5,833,335

Exercised
—

 
(3,289,146
)
 
—

 
(3,289,146
)
Forfeited
—

 
(44,188
)
 
—

 
(44,188
)
Outstanding, end of period
2,500,001

 
—

 
2,500,001

 
2,500,001

 
 
 
 
 
 
 
 
Cash received for exercise (in thousands)
$
—

 
$
263

 
$
—

 
$
263

Common shares issued
—

 
279,228

 
—

 
279,228


9. Commitments and Contingencies

For lease agreements that provide for escalating rent payments or rent-free occupancy periods, we recognize rent expense on a straight line basis over the non-cancelable lease term and any option renewal period where failure to exercise such option would result in an economic penalty in such amount that renewal appears, at the inception of the lease, to be reasonably assured. The lease term commences on the date when all conditions precedent to our obligation to pay rent are satisfied. The leases contain provisions for renewal ranging from zero to three options of generally five years each. Minimum payments, for the following future periods, under non-cancelable operating leases and service agreements with initial or remaining terms of one year or more consist of the following:
(In thousands)
 
Fiscal year:
 
2015 (remaining six months)
$
9,057

2016
15,528

2017
13,206

2018
12,074

2019
11,274

Thereafter
67,613

Total future minimum lease payments
$
128,752



19

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


Total rent expense, including non-cancelable operating leases and month-to-month leases, was $6.0 million and $11.7 million for the three and six months ended June 28, 2015, respectively, and was $5.8 million and $12.0 million for the three and six months ended June 29, 2014, respectively.

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

From time to time, we are involved in various claims and legal actions. In the opinion of management, the ultimate disposition of these matters, individually and in the aggregate, will not have a material effect on our condensed consolidated financial statements, results of operations or liquidity.

10. Restructuring Costs

The following table summarizes the restructuring charges recorded for the periods indicated:
 
Three Months Ended
 
June 28, 2015
 
June 29, 2014
(In thousands)
North America
 
Europe, Asia and Latin America
 
Total
 
North America
 
Europe, Asia and Latin America
 
Africa
 
Total
2015 Plan
$
519

 
$
415

 
$
934

 
$
—

 
$
—

 
$
—

 
$
—

2013 Plan
2

 
52

 
54

 
348

 
35

 
6

 
389

2012 and Prior Plans
—

 
—

 
—

 
22

 
149

 
—

 
171

Total Restructuring Costs
$
521

 
$
467

 
$
988

 
$
370

 
$
184

 
$
6

 
$
560

 
Six Months Ended
 
June 28, 2015
 
June 29, 2014
(In thousands)
North America
 
Europe, Asia and Latin America
 
Total
 
North America
 
Europe, Asia and Latin America
 
Africa
 
Total
2015 Plan
$
1,143

 
$
2,102

 
$
3,245

 
$
—

 
$
—

 
$
—

 
$
—

2013 Plan
6

 
93

 
99

 
363

 
709

 
6

 
1,078

2012 and Prior Plans
—

 
—

 
—

 
39

 
164

 
—

 
203

Total Restructuring Costs
$
1,149

 
$
2,195

 
$
3,344

 
$
402

 
$
873

 
$
6

 
$
1,281


20

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


 
Cumulative Amount Incurred Through
 
June 28, 2015
(In thousands)
North America
 
Europe, Asia and Latin America
 
Africa
 
Total
2015 Plan
$
1,143

 
$
2,102

 
$
—

 
$
3,245

2014 Plan
—

 
9,503

 
—

 
9,503

2013 Plan
2,955

 
3,757

 
1,149

 
7,861

2012 and Prior Plans
10,396

 
20,202

 
—

 
30,598

Total Restructuring Costs
$
14,494

 
$
35,564

 
$
1,149

 
$
51,207


During 2015, we began implementing a multi-year plan to reorganize and consolidate certain aspects of our global head office (the "2015 Plan"). The 2015 Plan includes the creation of a new shared services function, the rationalization of certain of our European facilities and related headcount reductions. The 2015 Plan was implemented in response to the need for more effective business processes enabled by the planned implementation of our new enterprise resource planning system as well as ongoing weak market conditions in Europe outside of the United Kingdom. Costs associated with the 2015 Plan include severance and closure charges and are expected to be completed by the first quarter of 2016. As of June 28, 2015, we expect to incur approximately $1 million of future charges relating to the 2015 Plan.

On August 20, 2014, the Board of Directors of Masonite Israel Ltd. (“Israel”), one of our wholly-owned subsidiaries, decided to voluntarily seek a Stay of Proceedings from the Israeli courts in an attempt to restructure the business (the “2014 Plan”). The court filing was made on August 21, 2014, and the court appointed a trustee to oversee the operation of the business and to attempt to restructure it. The action to seek court protection followed a comprehensive evaluation of the alternatives for the business, including an organized sale process that was ultimately unsuccessful. We determined that the subsidiary should be deconsolidated at that time, as it had become subject to the control of a court. We have had and will continue to have no continuing involvement with Israel subsequent to August 21, 2014, and Israel will not be considered a related party. As of June 28, 2015, pending the ultimate resolution of the Stay of Proceedings, we do not anticipate any material future charges related to the 2014 Plan.

During 2013, we began implementing plans to rationalize certain of our facilities, including related headcount reductions, in Canada due to synergy opportunities related to recent acquisitions in the residential interior wood door markets. We have also rationalized certain of our operations, including related headcount reductions, in Ireland, South Africa and Israel in order to respond to declines in demand in international markets. Additionally, the decision was made to discontinue sales into the Polish market subsequent to the decision to cease manufacturing operations in 2012 (collectively, the "2013 Plan"). Costs associated with the 2013 Plan include severance and closure charges, including impairment of certain property, plant and equipment, and are substantially completed. As of June 28, 2015, we do not expect to incur any material future charges for the 2013 Plan.

Prior years’ restructuring costs relate to the closure of certain of our U.S. manufacturing facilities due to the start-up of our highly automated interior door slab assembly plant in Denmark, South Carolina, synergy opportunities related to acquisitions in the architectural interior wood door market and footprint optimization efforts resulting from declines in demand in specific markets, primarily in Europe. In response to the decline in demand, we reviewed the required levels of production and reduced the workforce and plant capacity accordingly, resulting in severance and closure charges. These actions were taken in order to rationalize capacity with existing and forecasted market demand conditions. The restructuring plans initiated in 2012 and prior years (the "2012 and Prior Plans") are substantially completed, although cash payments are expected to continue through 2019, primarily related to lease payments at closed facilities. As of June 28, 2015, we do not expect to incur any future charges for the 2012 and Prior Plans.


21

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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)
December 28,
2014
 
Severance
 
Closure Costs
 
Cash Payments
 
June 28,
2015
2015 Plan
$
—

 
$
1,911

 
$
1,334

 
$
2,485

 
$
760

2014 Plan
839

 
—

 
—

 
319

 
520

2013 Plan
341

 
—

 
99

 
118

 
322

2012 and Prior Plans
1,153

 
—

 
—

 
326

 
827

Total
$
2,333

 
$
1,911

 
$
1,433

 
$
3,248

 
$
2,429

(In thousands)
December 29,
2013
 
Severance
 
Closure Costs
 
Cash Payments
 
June 29,
2014
2013 Plan
$
2,348

 
$
67

 
$
1,011

 
$
3,070

 
$
356

2012 and Prior Plans
2,061

 
141

 
62

 
450

 
1,814

Total
$
4,409

 
$
208

 
$
1,073

 
$
3,520

 
$
2,170


11. Income Taxes

Income tax expense (benefit) for income taxes consists of the following:
 
Three Months Ended
 
Six Months Ended
(In thousands)
June 28, 2015
 
June 29, 2014
 
June 28, 2015
 
June 29, 2014
Current
$
2,238

 
$
1,311

 
$
3,737

 
$
2,380

Deferred
12,775

 
68

 
14,540

 
(982
)
Income tax expense (benefit)
$
15,013

 
$
1,379

 
$
18,277

 
$
1,398


The effective tax rate differs from the Canadian federal statutory rate of 26.6% primarily due to changes in our valuation allowances, tax exempt income, and earnings in foreign jurisdictions which are subject to lower tax rates.

We currently have deferred tax assets in certain jurisdictions resulting from net operating losses and other deductible temporary differences, which will reduce taxable income in these jurisdictions in future periods. We have determined that a valuation allowance of $47.2 million and $35.8 million was required for our deferred income tax assets as of June 28, 2015, and December 28, 2014, respectively. A valuation allowance has been established on deferred tax assets resulting from net operating loss carry forwards and other carry forward attributes primarily in Canada, Chile, France, India, Mexico and Luxembourg. We expect to record valuation allowances on deferred tax assets arising in these jurisdictions until a sustained level of income is reached.


22

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


12. Supplemental Cash Flow Information

Certain cash and non-cash transactions were as follows for the periods indicated:
 
Six Months Ended
(In thousands)
June 28, 2015
 
June 29, 2014
Transactions involving cash:
 
 
 
Interest paid
$
19,951

 
$
20,837

Interest received
340

 
317

Income taxes paid
3,538

 
3,107

Income tax refunds
9

 
455

Non-cash transactions:
 
 
 
Property, plant and equipment additions in accounts payable
3,864

 
6,240


13. Segment Information

Our reportable segments are organized and managed principally by geographic region: North America; Europe, Asia and Latin America; and Africa. 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 geographic 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. Beginning in the first quarter of 2015, we revised our calculation of Adjusted EBITDA to separately exclude loss on extinguishment of debt, which would be a component of other expense (income), net, but is separately stated due to its magnitude. The revision to this definition had no impact on our reported Adjusted EBITDA for the three months ended June 28, 2015, or the three and six months ended June 29, 2014. Adjusted EBITDA (as revised) is defined as net income (loss) attributable to Masonite adjusted to exclude the following items:
 
• depreciation;
• amortization;
• share based compensation expense;
• loss (gain) on disposal of property, plant and equipment;
• registration and listing fees;
• restructuring costs;
• asset impairment;
• interest expense (income), net;
• loss from extinguishment of debt;
• other expense (income), net;
• income tax expense (benefit);
• loss (income) from discontinued operations, net of tax; and
• net income (loss) attributable to non-controlling interest.


23

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


This definition of Adjusted EBITDA differs from the definitions of EBITDA contained in the indenture governing the 2023 Notes and the credit agreement governing the ABL Facility. Although Adjusted EBITDA is not a measure of financial condition or performance determined in accordance with GAAP, it is used to evaluate and compare the operating performance of the segments and it is one of the primary measures used to determine employee incentive compensation. Intersegment transfers are negotiated on an arm’s length basis, using market prices.    Certain information with respect to geographic segments is as follows for the periods indicated:
(In thousands)
Three Months Ended June 28, 2015
(In thousands)
North America
 
Europe, Asia and Latin America
 
Africa
 
Total
Sales
$
376,336

 
$
94,246

 
$
12,641

 
$
483,223

Intersegment sales
(92
)
 
(6,703
)
 
—

 
(6,795
)
Net sales to external customers
$
376,244

 
$
87,543

 
$
12,641

 
$
476,428

 
 
 
 
 
 
 
 
Adjusted EBITDA
$
48,146

 
$
11,359

 
$
(448
)
 
$
59,057

(In thousands)
Three Months Ended June 29, 2014
(In thousands)
North America
 
Europe, Asia and Latin America
 
Africa
 
Total
Sales
$
372,875

 
$
110,715

 
$
13,971

 
$
497,561

Intersegment sales
(190
)
 
(7,195
)
 
—

 
(7,385
)
Net sales to external customers
$
372,685

 
$
103,520

 
$
13,971

 
$
490,176

 
 
 
 
 
 
 
 
Adjusted EBITDA
$
39,685

 
$
5,028

 
$
(663
)
 
$
44,050

(In thousands)
Six Months Ended June 28, 2015
(In thousands)
North America
 
Europe, Asia and Latin America
 
Africa
 
Total
Sales
$
712,624

 
$
187,262

 
$
23,921

 
$
923,807

Intersegment sales
(424
)
 
(12,490
)
 
—

 
(12,914
)
Net sales to external customers
$
712,200

 
$
174,772

 
$
23,921

 
$
910,893

 
 
 
 
 
 
 
 
Adjusted EBITDA
$
77,784

 
$
20,130

 
$
(1,069
)
 
$
96,845

(In thousands)
Six Months Ended June 29, 2014
(In thousands)
North America
 
Europe, Asia and Latin America
 
Africa
 
Total
Sales
$
687,642

 
$
211,279

 
$
27,363

 
$
926,284

Intersegment sales
(516
)
 
(13,132
)
 
—

 
(13,648
)
Net sales to external customers
$
687,126

 
$
198,147

 
$
27,363

 
$
912,636

 
 
 
 
 
 
 
 
Adjusted EBITDA
$
55,688

 
$
8,062

 
$
18

 
$
63,768



24

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


A reconciliation of our consolidated Adjusted EBITDA to net income (loss) attributable to Masonite is set forth as follows for the periods indicated:
 
Three Months Ended
 
Six Months Ended
(In thousands)
June 28, 2015
 
June 29, 2014
 
June 28, 2015
 
June 29, 2014
Adjusted EBITDA
$
59,057

 
$
44,050

 
$
96,845

 
$
63,768

Less (plus):
 
 
 
 
 
 
 
Depreciation
14,410

 
14,536

 
29,716

 
29,982

Amortization
4,975

 
5,593

 
9,986

 
11,284

Share based compensation expense
3,106

 
2,797

 
5,485

 
5,080

Loss (gain) on disposal of property, plant and equipment
350

 
1,036

 
294

 
2,123

Restructuring costs
988

 
560

 
3,344

 
1,281

Interest expense (income), net
6,787

 
10,594

 
18,540

 
20,587

Loss on extinguishment of debt
—

 
—

 
28,046

 
—

Other expense (income), net
(635
)
 
1,306

 
(1,819
)
 
1,487

Income tax expense (benefit)
15,013

 
1,379

 
18,277

 
1,398

Loss (income) from discontinued operations, net of tax
240

 
170

 
469

 
312

Net income (loss) attributable to non-controlling interest
381

 
499

 
2,117

 
1,240

Net income (loss) attributable to Masonite
$
13,442

 
$
5,580

 
$
(17,610
)
 
$
(11,006
)

14. Fair Value of Financial Instruments

The carrying amounts of our cash and cash equivalents, restricted cash, accounts receivable, income taxes receivable, accounts payable, accrued expenses and income taxes payable approximate fair value because of the short-term maturity of those instruments. The estimated fair value of the 2023 Notes as of June 28, 2015, was $476.9 million, compared to a carrying value of $468.2 million, and the estimated fair value of the 2021 Notes as of December 28, 2014, was $524.4 million, compared to a carrying value of $503.8 million. This estimate is based on market quotes and calculations based on current market rates available to us and is 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.

25

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


15. 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, SARs and warrants outstanding during the period.
(In thousands, except share and per share information)
Three Months Ended
 
Six Months Ended
June 28, 2015
 
June 29, 2014
 
June 28, 2015
 
June 29, 2014
Net income (loss) attributable to Masonite
$
13,442

 
$
5,580

 
$
(17,610
)
 
$
(11,006
)
Income (loss) from discontinued operations, net of tax
(240
)
 
(170
)
 
(469
)
 
(312
)
Income (loss) from continuing operations attributable to Masonite
$
13,682

 
$
5,750

 
$
(17,141
)
 
$
(10,694
)
 
 
 
 
 
 
 
 
Shares used in computing basic earnings per share
30,244,869

 
29,511,693

 
30,151,182

 
29,350,936

Effect of dilutive securities:
 
 
 
 
 
 
 
Incremental shares issuable under share compensation plans and warrants
1,448,955

 
1,336,940

 
—

 
—

Shares used in computing diluted earnings per share
31,693,824

 
30,848,633

 
30,151,182

 
29,350,936

 
 
 
 
 
 
 
 
Basic earnings (loss) per common share attributable to Masonite:
 
 
 
 
 
 
 
Continuing operations attributable to Masonite
$
0.45

 
$
0.20

 
$
(0.57
)
 
$
(0.36
)
Discontinued operations attributable to Masonite, net of tax
(0.01
)
 
(0.01
)
 
(0.01
)
 
(0.01
)
Total Basic earnings per common share attributable to Masonite
$
0.44

 
$
0.19

 
$
(0.58
)
 
$
(0.37
)
 
 
 
 
 
 
 
 
Diluted earnings (loss) per common share attributable to Masonite:
 
 
 
 
 
 
 
Continuing operations attributable to Masonite
$
0.43

 
$
0.19

 
$
(0.57
)
 
$
(0.36
)
Discontinued operations attributable to Masonite, net of tax
(0.01
)
 
(0.01
)
 
(0.01
)
 
(0.01
)
Total Diluted earnings per common share attributable to Masonite
$
0.42

 
$
0.18

 
$
(0.58
)
 
$
(0.37
)
 
 
 
 
 
 
 
 
Incremental shares issuable from anti-dilutive instruments excluded from diluted earnings per common share:
 
 
 
 
 
 
 
Warrants
—

 
—

 
2,500,001

 
2,500,001

Stock appreciation rights
—

 
—

 
420,137

 
733,722

Restricted stock units
—

 
—

 
415,113

 
512,012

    
The weighted average number of shares outstanding utilized for the diluted EPS calculation contemplates the exercise of all currently outstanding SARs and warrants 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. For the six months ended June 28, 2015, and June 29, 2014, no potential common shares relating to our equity awards were included in the computation of diluted loss per share, as their effect would have been anti-dilutive given our net loss position for those periods.

26

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


16. Other Comprehensive Income and Accumulated Other Comprehensive Income

A rollforward of the components of accumulated other comprehensive income (loss) is as follows for the periods indicated:
 
Three Months Ended
 
Six Months Ended
(In thousands)
June 28, 2015
 
June 29, 2014
 
June 28, 2015
 
June 29, 2014
Accumulated foreign exchange gains (losses), beginning of period
$
(91,928
)
 
$
(15,811
)
 
$
(57,473
)
 
$
(8,797
)
Foreign exchange gain (loss)
9,204

 
7,354

 
(25,936
)
 
(131
)
Income tax benefit (expense) on foreign exchange gain (loss)
—

 
(619
)
 
—

 
(619
)
Less: foreign exchange gain (loss) attributable to non-controlling interest
115

 
363

 
(570
)
 
(108
)
Accumulated foreign exchange gains (losses), end of period
(82,839
)
 
(9,439
)
 
(82,839
)
 
(9,439
)
 
 
 
 
 
 
 
 
Accumulated amortization of actuarial net losses, beginning of period
2,023

 
1,890

 
1,890

 
1,890

Amortization of actuarial net losses
220

 
—

 
440

 
—

Income tax benefit (expense) on amortization of actuarial net losses
(87
)
 
—

 
(174
)
 
—

Accumulated amortization of actuarial net losses, end of period
2,156

 
1,890

 
2,156

 
1,890

 
 
 
 
 
 
 
 
Accumulated pension and other post-retirement adjustments
(20,676
)
 
(12,694
)
 
(20,676
)
 
(12,694
)
 
 
 
 
 
 
 
 
Accumulated other comprehensive income (loss)
$
(101,359
)
 
$
(20,243
)
 
$
(101,359
)
 
$
(20,243
)
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
$
9,337

 
$
6,735

 
$
(25,670
)
 
$
(750
)
Less: other comprehensive income (loss) attributable to non-controlling interest
115

 
363

 
(570
)
 
(108
)
Other comprehensive income (loss) attributable to Masonite
$
9,222

 
$
6,372

 
$
(25,100
)
 
$
(642
)

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


27

Table of Contents

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


17. Variable Interest Entity

As of June 28, 2015, and December 28, 2014, we held an interest in one variable interest entity ("VIE"), Magna Foremost Sdn Bhd, which is located in Kuala Lumpur, Malaysia. The VIE is integrated into our supply chain and manufactures door facings. We are the primary beneficiary of the VIE via the terms of the existing supply agreement with the VIE. As primary beneficiary via the supply agreement, we receive a disproportionate amount of earnings on sales to third parties in relation to our voting interest, and as a result, receive a majority of the VIE’s residual returns. Sales to third parties did not have a material impact on our condensed consolidated financial statements. We also have the power to direct activities of the VIE that most significantly impact the entity’s economic performance. As its primary beneficiary, we have consolidated the results of the VIE. Our net cumulative investment in the VIE was comprised of the following as of the dates indicated:
(In thousands)
June 28,
2015
 
December 28,
2014
Current assets
$
12,341

 
$
8,346

Property, plant and equipment, net
16,695

 
17,788

Long-term deferred income taxes
11,086

 
12,321

Other assets, net
1,923

 
2,234

Current liabilities
(2,224
)
 
(2,496
)
Other long-term liabilities
(4,155
)
 
(4,479
)
Non-controlling interest
(6,375
)
 
(7,785
)
Net assets of the VIE consolidated by Masonite
$
29,291

 
$
25,929


Current assets include $5.6 million and $3.1 million of cash and cash equivalents as of June 28, 2015, and December 28, 2014, respectively. Assets recognized as a result of consolidating this VIE do not represent additional assets that could be used to satisfy claims against our general assets. Conversely, liabilities recognized as a result of consolidating these entities do not represent additional claims on our general assets; rather, they represent claims against the specific assets of the consolidated VIE.

18. Subsequent Events

We have evaluated events and transactions occurring subsequent to June 28, 2015, through the date the financial statements were issued.

On August 5, 2015, we completed the acquisition of National Hickman (“Hickman”), a leading supplier of doorkits (similar to fully finished prehung door units) and other millwork in the United Kingdom. We acquired 100% of the equity interests in Hickman for consideration of approximately $82 million, net of cash acquired. Hickman is based in Wolverhampton, England, and Glenrothes, Scotland, and their leadership in providing doorkit solutions to the homebuilder market in the UK is a natural extension of our UK business. Hickman’s deployment of automation and product line leadership complements the strategies we are pursuing with our business. Due to the timing of the completion of the acquisition, the purchase price allocation was not complete as of the date the financial statements were issued.

On July 31, 2015, we completed the sale of all of the capital stock of Premdor, S.A.S. ("Premdor"), Masonite’s French door business, to an investment fund managed by Perceva S.A.S., a Paris-based independent investment firm (the "Buyer"). Pursuant to a stock purchase agreement dated July 16, 2015, the Buyer acquired all of Masonite's French door manufacturing and distribution business, which had net sales of $127.5 million for the year ended December 28, 2014, and over 680 employees, for nominal consideration. Masonite will continue to sell door facings to Premdor and will provide certain transition services to the business after the closing.


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


On July 23, 2015, we completed the acquisition of Performance Doorset Solutions (“PDS”), a leading supplier of custom doors and millwork in the United Kingdom that specializes in non-standard product specifications, manufacturing both wood and composite solutions. We acquired 100% of the equity interests in PDS for consideration of approximately $15 million, net of cash acquired. PDS is based in Lancashire, UK, and is a producer of high quality niche product lines that complement our existing UK business. Due to the timing of the completion of the acquisition, the purchase price allocation was not complete as of the date the financial statements were issued.

    


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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 June 28, 2015, and June 29, 2014. In this MD&A, "Masonite," "we," "us," "our" and the "Company" refer to Masonite International Corporation and its subsidiaries.
This discussion should be read in conjunction with (i) the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and (ii) the annual audited consolidated financial statements, including the accompanying notes and MD&A, which are included in our Annual Report on Form 10-K for the year ended December 28, 2014. 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. Certain prior year amounts have been reclassified to conform to the current basis of presentation.

Overview
We are a leading global designer and manufacturer of interior and exterior doors for the residential new construction; the residential repair, renovation and remodeling; and the non-residential building construction markets. Since 1925, we have provided our customers with innovative products and superior service at compelling values. In order to better serve our customers and create sustainable competitive advantages, we focus on developing innovative products, advanced manufacturing capabilities and technology-driven sales and service solutions.
We market and sell our products to remodeling contractors, builders, homeowners, retailers, dealers, lumberyards, commercial and general contractors and architects through well-established wholesale and retail distribution channels as part of our cross-merchandising strategy. Customers are provided a broad product offering of interior and exterior doors and entry systems at various price points. We manufacture a broad line of interior doors, including residential molded, flush, stile and rail, louver and specially-ordered commercial and architectural doors; door components for internal use and sale to other door manufacturers; and exterior residential steel, fiberglass and wood doors and entry systems. In the six months ended June 28, 2015, sales of interior and exterior products accounted for 72.1% and 27.9% of net sales, respectively.
We operate 62 manufacturing and distribution facilities in 10 countries in North America, South America, Europe, Africa 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 Dorfab 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 geographic region: North America; Europe, Asia and Latin America; and Africa. In the six months ended June 28, 2015, we generated net sales of $712.2 million or 78.2%, $174.8 million or 19.2% and $23.9 million or 2.6% in our North America; Europe, Asia and Latin America; and Africa segments, respectively.

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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 United States, Canadian, European, Asian or other global economic conditions, including inflation, deflation, interest rates, availability of capital, consumer spending rates, energy availability and costs, and the effects of governmental initiatives to manage economic conditions. 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;
•
commercial building occupancy rates;
•
increases in the cost of raw materials or any shortage in supplies;
•
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. In fiscal year 2014, our top ten customers together accounted for approximately 38% of our net sales and our top customer, The Home Depot, Inc. accounted for approximately 17% of our net sales in fiscal year 2014. Net sales from customers that have accounted for a significant portion of our net sales in past periods, individually or as a group, may not continue in future periods, or if continued, may not reach or exceed historical levels in any period. Certain customers perform periodic product line reviews to assess their product offerings, which have, on past occasions, led to business wins and losses. In addition, as a result of competitive bidding processes, we may not be able to increase or maintain the margins at which we sell our products to our customers.
Organizational Restructuring
Over the past several years we have initiated, and in the future we plan to initiate, restructuring plans designed to eliminate excess capacity in order to align our manufacturing capabilities with reductions in demand, as well as to streamline our organizational structure and reposition our business for improved long-term profitability.
During 2015, we began implementing a multi-year plan to reorganize and consolidate certain aspects of our global head office (the "2015 Plan"). The 2015 Plan includes the creation of a new shared services function, the rationalization of certain of our European facilities and related headcount reductions. The 2015 Plan was implemented in

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response to the need for more effective business processes enabled by the planned implementation of our new enterprise resource planning system as well as ongoing weak market conditions in Europe outside of the United Kingdom. Costs associated with the 2015 Plan include severance and closure charges and are expected to be completed by the first quarter of 2016. As of June 28, 2015, we expect to incur approximately $1 million of future charges relating to the 2015 Plan. Once completed, the 2015 Plan is estimated to increase our annual earnings and cash flows by approximately $5 million.

On August 20, 2014, the Board of Directors of Masonite Israel Ltd. (“Israel”), one of our wholly-owned subsidiaries, decided to voluntarily seek a Stay of Proceedings from the Israeli courts in an attempt to restructure the business (the “2014 Plan”). The court filing was made on August 21, 2014, and the court appointed a trustee to oversee the operation of the business and to attempt to restructure it. The action to seek court protection followed a comprehensive evaluation of the alternatives for the business, including an organized sale process that was ultimately unsuccessful. We determined that the subsidiary should be deconsolidated at that time, as it had become subject to the control of a court. We have had and will continue to have no continuing involvement with Israel subsequent to August 21, 2014, and Israel will not be considered a related party. As of June 28, 2015, pending the ultimate resolution of the Stay of Proceedings, we do not anticipate any material future charges related to the 2014 Plan. The 2014 Plan is estimated to increase our annual earnings and cash flows by approximately $4 million.
    
Foreign Exchange Rate Fluctuation
Our financial results may be adversely affected by fluctuating exchange rates. In the six months ended June 28, 2015, and June 29, 2014, approximately 39% and 42% of our net sales were generated outside of the United States, respectively. In addition, a significant percentage of our costs during the same period were not denominated in U.S. dollars. For example, for most of our manufacturing and distribution facilities, the prices for a significant portion of our raw materials are quoted in the domestic currency of the country where the facility is located or other currencies that are not U.S. dollars. We also have substantial assets outside the United States. As a result, the volatility in the price of the U.S. dollar has exposed, and in the future may continue to expose, us to currency exchange risks. Also, since our financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on many aspects of our financial results. Changes in currency exchange rates for any country in which we operate may require us to raise the prices of our products in that country or allow our competitors to sell their products at lower prices in that country. Unrealized exchange gains and losses arising from the translation of the financial statements of our non-U.S. functional currency operations are accumulated in the cumulative translation adjustments account in accumulated other comprehensive income (loss). Losses from currency translation adjustments during the six months ended June 28, 2015, were $25.9 million, which were primarily driven by the weakening of the Canadian Dollar and the Euro against the U.S. Dollar.
Inflation
An increase in inflation could have a significant impact on the cost of our raw material inputs. Increased prices for raw materials or finished goods used in our products and/or interruptions in deliveries of raw materials or finished goods could adversely affect our profitability, margins and net sales, particularly if we are not able to pass these incurred costs on to our customers. In addition, interest rates normally increase during periods of rising inflation. Historically, as interest rates increase, demand for new homes and home improvement products decreases. An environment of gradual interest rate increases may, however, signify an improving economy or increasing real estate values, which in turn may stimulate increased home buying activity.
Seasonality
Our business is moderately seasonal and our net sales vary from quarter to quarter based upon the timing of the building season in our markets. Severe weather conditions in any quarter, such as unusually prolonged warm or cold conditions, rain, blizzards or hurricanes, could accelerate, delay or halt construction and renovation activity.


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Acquisitions and Disposition
We are pursuing a strategic initiative of optimizing our global business portfolio. As part of this strategy, in the last several years we have pursued strategic acquisitions targeting companies with differentiated businesses, strong brands, complementary technologies, attractive geographic footprints and opportunities for cost and distribution synergies. We also continuously analyze our operations to determine which businesses, geographies and products create the most value for our customers and acceptable returns for our shareholders.
Acquisitions

•
Hickman: On August 5, 2015, we completed the acquisition of National Hickman (“Hickman”), a leading supplier of doorkits (similar to fully finished prehung door units) and other millwork in the United Kingdom. We acquired 100% of the equity interests in Hickman for consideration of approximately $82 million, net of cash acquired. Hickman is based in Wolverhampton, England, and Glenrothes, Scotland, and their leadership in providing doorkit solutions to the homebuilder market in the UK is a natural extension of our UK business. Hickman’s deployment of automation and product line leadership complements the strategies we are pursuing with our business.

•
PDS: On July 23, 2015, we completed the acquisition of Performance Doorset Solutions (“PDS”), a leading supplier of custom doors and millwork in the United Kingdom that specializes in non-standard product specifications, manufacturing both wood and composite solutions. We acquired 100% of the equity interests in PDS for consideration of approximately $15 million, net of cash acquired. PDS is based in Lancashire, UK, and is a producer of high quality niche product lines that complement our existing UK business.

•
Harring: On December 1, 2014, we completed the acquisition of Harring for net consideration of $3.9 million. Harring manufactures interior and exterior stile and rail wood doors for architectural door applications at its facility in London, Ontario. The acquisition of Harring complements our architectural wood door business.

•
Door-Stop: On February 24, 2014, we completed the acquisition of Door-Stop for total consideration of approximately $50.4 million, net of cash acquired. We acquired 100% of the equity interests in Door-Stop through the purchase of all outstanding shares of common stock on the acquisition date. Door-Stop is based in Nottinghamshire, United Kingdom, utilizes an internet-based ordering process and manufactures exterior door sets for the residential repair and renovation markets. The Door-Stop acquisition complements our existing exterior fiberglass business.

•
Chile: In July 2013, we acquired assets of a door manufacturing operation located in Chile for servicing the North American market for total consideration of $12.2 million. The transaction includes the door component operations in Cabrero, Chile, and a door assembly factory in Chillan, Chile. The operations acquired primarily manufacture high quality stile and rail panel and French wood doors for the North American market. The Chile acquisition acts as a natural complement to Lemieux and our existing residential wood door offering.

Disposition
•
France: On July 31, 2015, we completed the sale of all of the capital stock of Premdor, S.A.S. ("Premdor"), Masonite’s French door business, to an investment fund managed by Perceva S.A.S., a Paris-based independent investment firm (the "Buyer"). Pursuant to a stock purchase agreement dated July 16, 2015, the Buyer acquired all of Masonite's French door manufacturing and distribution business, which had net sales of $127.5 million for the year ended December 28, 2014, and over 680 employees, for nominal consideration. Masonite will continue to sell door facings to Premdor and will provide certain transition services to the business after the closing.



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Components of Results of Operations
Net Sales
Net sales are derived from the sale of products to our customers. We recognize sales of our products when an agreement with the customer in the form of a sales order is in place, the sales price is fixed or determinable, collection is reasonably assured and the customer has taken ownership and assumes risk of loss. Certain customers are eligible to participate in various incentive and rebate programs considered as a reduction of the sales price of our products. Accordingly, net sales are reported net of such incentives and rebates. Additionally, shipping and other transportation costs charged to customers are recorded in net sales in the condensed consolidated statements of comprehensive income (loss).
Cost of Goods Sold
Our cost of goods sold is comprised of the cost to manufacture products for our customers. Cost of goods sold includes all of the direct materials and direct labor used to produce our products. Included in our cost of goods sold is also a systematic allocation of fixed and variable production overhead incurred in converting raw materials into finished goods. Fixed production overhead reflects those indirect costs of production that remain relatively constant regardless of the volume of production, such as depreciation and maintenance of factory buildings and equipment, and the cost of factory management and administration. Variable production overhead consists of those indirect costs of production that vary directly, or nearly directly, with the volume of production, such as indirect materials and indirect labor. Research and development costs are primarily included within cost of goods sold. Finally, cost of goods sold also includes the distribution and transportation costs to deliver products to our customers.

Selling, General and Administration Expenses
Selling, general and administration expenses primarily include the costs for our sales organization and support staff at various plants and corporate offices. These costs include personnel costs for payroll, related benefits and stock based compensation expense; professional fees including legal, accounting and consulting fees; depreciation and amortization of our non-manufacturing equipment and assets; travel and entertainment expenses; director, officer and other insurance policies; environmental, health and safety costs; advertising expenses and rent and utilities related to administrative office facilities. Certain charges that are also incurred less frequently and are included in selling, general and administration costs include restructuring charges, gain or loss on disposal of property, plant and equipment and bad debt expense.
Restructuring Costs
Restructuring costs include all salary-related severance benefits that are accrued and expensed when a restructuring plan has been put into place, the plan has received approval from the appropriate level of management and the benefit is probable and reasonably estimable. In addition to salary-related costs, we incur other restructuring costs when facilities are closed or capacity is realigned within the organization. Upon termination of a contract we record liabilities and expenses pursuant to the terms of the relevant agreement. For non-contractual restructuring activities, liabilities and expenses are measured and recorded at fair value in the period in which they are incurred.
Asset Impairment
Asset impairment includes charges that are taken when impairment testing indicates that the carrying values of our long-lived assets or asset groups exceed their respective fair values. Definite-lived assets are tested for impairment when events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. Indefinite-lived intangible assets and goodwill are tested annually for impairment on the last day of fiscal November, or more frequently if events or changes in circumstances indicate the carrying value may not be recoverable. An impairment loss is recognized when the carrying value of the asset or asset group being tested exceeds its fair value, except in the case of goodwill, which is tested based on the fair value of the reporting unit where the goodwill is recorded.

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Interest Expense, Net
Interest expense, net relates primarily to our consolidated senior unsecured indebtedness. Subsequent to March 23, 2015, interest expense, net relates to our $475.0 million aggregate principal amount of 5.625% senior unsecured notes due March 15, 2023. Prior to March 23, 2015, interest expense related to our $500.0 million aggregate principal amount of 8.25% senior unsecured notes due April 15, 2021. The debt issuance costs were capitalized as a reduction to the carrying value of debt and are being amortized to interest expense over their respective terms. Certain issuances of our 8.25% senior unsecured notes due 2021 resulted in premiums that were amortized to interest expense over their respective terms. Unamortized premiums and unamortized transaction issuance costs relating to the notes redeemed were written off upon redemption. Additionally, we pay interest on any outstanding principal under our ABL Facility and we are required to pay a commitment fee for unutilized commitments under the ABL Facility, both of which are recorded in interest expense as incurred.

Loss on Extinguishment of Debt
Loss on extinguishment of debt represents the difference between the reacquisition price of debt and the net carrying amount of the extinguished debt. The net carrying amount includes the principal, unamortized premium and unamortized debt issuance costs.

Other Expense (Income), Net

Other 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.

Income Tax Expense (Benefit)

Income taxes are recorded using the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the deferred tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income in the period that includes the date of enactment. A valuation allowance is recorded to reduce deferred tax assets to an amount that is anticipated to be realized on a more likely than not basis. Our combined effective income tax rate is primarily the weighted average of federal, state and provincial rates in various countries where we have operations, including the United States, Canada, the United Kingdom and Ireland. Our income tax rate is also affected by estimates of our ability to realize tax assets and changes in tax laws.


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Segment Information

Our reportable segments are organized and managed principally by geographic region: North America; Europe, Asia and Latin America; and Africa. 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 geographic segments. Our segment information that follows contains a discussion surrounding "Adjusted EBITDA," a non-GAAP financial measure. Adjusted EBITDA does not have a standardized meaning under GAAP and is unlikely to be comparable to similar measure used by other companies. Beginning in the first quarter of 2015, we revised our calculation of Adjusted EBITDA to separately exclude loss on extinguishment of debt, which would be a component of other expense (income), net, but is separately stated due to its magnitude. The revision to this definition had no impact on our reported Adjusted EBITDA for the three months ended June 28, 2015, or the three and six months ended June 29, 2014. Adjusted EBITDA (as revised) is defined as net income (loss) attributable to Masonite adjusted to exclude the following items:
 
• depreciation;
• amortization;
• share based compensation expense;
• loss (gain) on disposal of property, plant and equipment;
• registration and listing fees;
• restructuring costs;
• asset impairment;
• interest expense (income), net;
• loss from extinguishment of debt;
• other expense (income), net;
• income tax expense (benefit);
• loss (income) from discontinued operations, net of tax; and
• net income (loss) attributable to non-controlling interest.

We believe that Adjusted EBITDA, from an operations standpoint, provides an appropriate way to measure and assess operating performance. Although Adjusted EBITDA is not a measure of financial condition or performance determined in accordance with GAAP, it is used by management to evaluate and compare the operating performance of the segments and it is one of the primary measures used to determine employee incentive compensation. Our management team has established the practice of reviewing the performance of each geographic segment based on the measures of net sales and Adjusted EBITDA. Intersegment transfers are negotiated on an arm’s length basis, using market prices.
We believe that Adjusted EBITDA is useful to users of the condensed consolidated financial statements because it provides the same information that we use internally for purposes of assessing our operating performance and making compensation decisions. This definition of Adjusted EBITDA differs from the definitions of EBITDA contained in the indenture governing the senior notes and the credit agreement governing the ABL facility.
Adjusted EBITDA is not a presentation made in accordance with GAAP, is not a measure of financial condition or profitability, and should not be considered as an alternative to either net income or operating cash flows determined in accordance with GAAP.

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Results of Operations
 
Three Months Ended
 
Six Months Ended
(In thousands)
June 28, 2015
 
June 29, 2014
 
June 28, 2015
 
June 29, 2014
Net sales
$
476,428

 
$
490,176

 
$
910,893

 
$
912,636

Cost of goods sold
381,394

 
411,569

 
742,550

 
781,043

Gross profit
95,034

 
78,607

 
168,343

 
131,593

Gross profit as a % of net sales
19.9
%
 
16.0
%
 
18.5
%
 
14.4
%
Selling, general and administration expenses
58,818

 
58,519

 
116,979

 
116,294

Selling, general and administration expenses as a % of net sales
12.3
%
 
11.9
%
 
12.8
%
 
12.7
%
Restructuring costs
988

 
560

 
3,344

 
1,281

Operating income (loss)
35,228

 
19,528

 
48,020

 
14,018

Interest expense (income), net
6,787

 
10,594

 
18,540

 
20,587

Loss on extinguishment of debt
—

 
—

 
28,046

 
—

Other expense (income), net
(635
)
 
1,306

 
(1,819
)
 
1,487

Income (loss) from continuing operations before income tax expense (benefit)
29,076

 
7,628

 
3,253

 
(8,056
)
Income tax expense (benefit)
15,013

 
1,379

 
18,277

 
1,398

Income (loss) from continuing operations
14,063

 
6,249

 
(15,024
)
 
(9,454
)
Income (loss) from discontinued operations, net of tax
(240
)
 
(170
)
 
(469
)
 
(312
)
Net income (loss)
13,823

 
6,079

 
(15,493
)
 
(9,766
)
Less: net income (loss) attributable to non-controlling interest
381

 
499

 
2,117

 
1,240

Net income (loss) attributable to Masonite
$
13,442

 
$
5,580

 
$
(17,610
)
 
$
(11,006
)
Three Months Ended June 28, 2015, Compared with Three Months Ended June 29, 2014
Net Sales
Net sales in the three months ended June 28, 2015, were $476.4 million, a decrease of $13.8 million or 2.8% from $490.2 million in the three months ended June 29, 2014. Net sales in the second quarter of 2015 were negatively impacted by $25.7 million as a result of foreign exchange rate fluctuations. Excluding this exchange rate impact, net sales would have increased by $11.9 million or 2.4% due to changes in unit volume, average unit price and sales of other products. Average unit price increased net sales in in the second quarter of 2015 by $24.5 million or 5.0% compared to the 2014 period. Partially offsetting this increase were lower unit volumes in the second quarter of 2015, which decreased net sales by $10.3 million or 2.1% compared to the 2014 period, and lower net sales of other products to external customers, which decreased net sales by $2.3 million in the second quarter of 2015 compared to the 2014 period.
The proportion of net sales from interior and exterior products in the three months ended June 28, 2015, was 71.3% and 28.7%, respectively, compared to 69.3% and 30.7% in the three months ended June 29, 2014. The increased proportion of net sales of our interior products was primarily driven by increased average unit prices in North America that impacted interior products at a higher rate than exterior products and an overall reduction in the volume of exterior products sold in North America.

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Net Sales and Percentage of Net Sales by Principal Geographic Region
 
Three Months Ended
(In thousands)
June 28, 2015
 
June 29, 2014
North America
$
376,336

 
$
372,875

North America intersegment
(92
)
 
(190
)
North America net sales to external customers
$
376,244

 
$
372,685

Percentage of net sales
79.0
%
 
76.0
%
 
 
 
 
Europe, Asia and Latin America
$
94,246

 
$
110,715

Europe, Asia and Latin America intersegment
(6,703
)
 
(7,195
)
Europe, Asia and Latin America net sales to external customers
$
87,543

 
$
103,520

Percentage of net sales
18.3
%
 
21.1
%
 
 
 
 
Africa
$
12,641

 
$
13,971

Africa intersegment
—

 
—

Africa net sales to external customers
$
12,641

 
$
13,971

Percentage of net sales
2.7
%
 
2.9
%
 
 
 
 
Net sales to external customers
$
476,428

 
$
490,176


North America
Net sales to external customers from facilities in the North America segment in the three months ended June 28, 2015, were $376.2 million, an increase of $3.5 million or 0.9% from $372.7 million in the three months ended June 29, 2014. Net sales in 2015 were negatively impacted by $11.1 million as a result of foreign exchange rate fluctuations. Excluding this exchange rate impact, net sales would have increased by $14.6 million or 3.9% due to changes in unit volume, average unit price and sales of other products. Average unit price increased net sales in the second quarter of 2015 by $19.5 million or 5.2% compared to the 2014 period. Partially offsetting this increase were lower unit volumes in the second quarter of 2015, which decreased net sales by $4.7 million or 1.3%, and net sales of other products to external customers, which were $0.2 million or 0.1% lower in the second quarter of 2015 compared to the 2014 period.
The proportion of net sales from interior and exterior products in the three months ended June 28, 2015, was 68.9% and 31.1%, respectively, compared to 65.6% and 34.4% in the three months ended June 29, 2014. The increased proportion of net sales of our interior products was primarily driven by increased average unit prices in the second quarter of 2015 compared to the 2014 period that impacted interior products at a higher rate than exterior products and an overall reduction in the volume of exterior products sold.
Europe, Asia and Latin America
Net sales to external customers from facilities in the Europe, Asia and Latin America segment in the three months ended June 28, 2015, were $87.5 million, a decrease of $16.0 million or 15.5% from $103.5 million in the three months ended June 29, 2014. Net sales in the second quarter of 2015 were negatively impacted by $12.8 million as a result of foreign exchange fluctuations. Excluding this exchange rate impact, net sales would have decreased by $3.2 million or 3.1% due to changes in unit volume, average unit price and sales of other products. Average unit price increased net sales in the second quarter of 2015 by $4.4 million or 4.3% compared to the 2014 period. Partially offsetting this increase were lower unit volumes in 2015, which decreased net sales by $5.5 million or 5.3%, and net sales of other products to external customers, which were $2.1 million or 2.0% lower in the second quarter of 2015 compared to the 2014 period.

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The proportion of net sales from interior and exterior products for the three months ended June 28, 2015, was 77.4% and 22.6%, respectively, compared to 78.5% and 21.5% in the three months ended June 29, 2014. The decreased proportion of net sales of our interior products was primarily driven by a reduction in volume in France, which impacted interior sales at a higher rate than exterior sales.
Africa
Net sales to external customers from facilities in the Africa segment in the three months ended June 28, 2015, were $12.6 million, a decrease of $1.4 million or 10.0% from $14.0 million in the three months ended June 29, 2014. Net sales in the second quarter of 2015 were negatively impacted by $1.9 million as a result of foreign exchange rate fluctuations. Excluding this exchange rate impact, net sales would have increased by $0.5 million or 3.6% due to changes in unit volume and average unit price. Changes in average unit price in the second quarter of 2015 increased net sales by $0.6 million or 4.3% compared to the 2014 period. Partially offsetting this increase were lower unit volumes in 2015, which decreased net sales by $0.1 million.
Cost of Goods Sold
Cost of goods sold as a percentage of net sales was 80.1% and 84.0% for the three months ended June 28, 2015, and June 29, 2014, respectively. The primary reason for the decrease in cost of goods sold as a percentage of net sales was the favorable impact of average unit price on our net sales. Material cost of sales, direct labor, and distribution as a percentage of net sales in 2015 decreased by 3.0%, 0.7%, and 0.6%, respectively and overhead as a percentage of net sales increased by 0.4% over the 2014 period. Depreciation as a percentage of net sales was flat.
Selling, General and Administration Expenses
In the three months ended June 28, 2015, selling, general and administration expenses, as a percentage of net sales, were 12.3% compared to 11.9% in the three months ended June 29, 2014, an increase of 40 basis points.
Selling, general and administration expenses in the three months ended June 28, 2015, were $58.8 million, an increase of $0.3 million from $58.5 million in the three months ended June 29, 2014. The increase was driven by a $4.7 million increase in personnel costs, $0.2 million of incremental selling, general and administration expenses incurred in 2015 in connection with the operations of Harring Doors and other increases of $0.5 million. This increase was partially offset by favorable foreign exchange impacts of $2.2 million, incremental comparative benefit from the 2014 deconsolidation of Israel of $1.7 million and the receipt of $1.2 million of business interruption insurance proceeds in Africa as partial settlement. The increased personnel costs were driven by a combination of wage inflation, investments in personnel and an increase in the bonus accrual compared to the prior year.

Restructuring Costs
Restructuring costs in the three months ended June 28, 2015, were $1.0 million, compared to $0.6 million in the three months ended June 29, 2014. Restructuring costs in 2015 were related primarily to expenses incurred as part of the 2015 Plan. Costs incurred in 2014 were related primarily to the 2013 Restructuring Plan.
Interest Expense, Net
Interest expense, net, in the three months ended June 28, 2015, was $6.8 million, compared to $10.6 million in the three months ended June 29, 2014. This decease primarily relates to the refinancing of $500.0 million of 8.25% senior unsecured notes for $475.0 million of 5.625% senior unsecured notes issued on March 23, 2015.
Other Expense (Income), Net
Other expense (income), net, in the three months ended June 28, 2015, was $(0.6) million, compared to $1.3 million in the three months ended June 29, 2014. The change in other expense (income), net, is primarily due to unrealized gains and losses on foreign currency remeasurements. Also contributing to the change were our portion of dividends and the net gains and losses related to our non-majority owned unconsolidated subsidiaries that are recognized under the equity method of accounting and other miscellaneous non-operating expenses.

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Income Tax Expense (Benefit)
Our income tax expense in the three months ended June 28, 2015, increased by $13.6 million compared to the three months ended June 29, 2014. The change in our income tax expense (benefit) is primarily due to the mix of income or losses within the tax jurisdictions with various tax rates in which we operate, income and losses in tax jurisdictions with existing valuation allowances, income tax benefits related to tax-exempt income and discrete income tax expenses of $3.2 million in the three months ended June 28, 2015, compared to $2.5 million of income tax benefits recorded in the three months ended June 29, 2014, resulting primarily from recording a valuation allowance on $2.5 million of deferred tax assets. Discrete items may occur in any given year, but are not consistent from period to period. Our combined effective income tax rate is primarily the weighted average of federal, state and provincial rates in various countries in which we have operations, including the United States, Canada, the United Kingdom and Ireland and is affected by our ability to realize tax assets in certain jurisdictions.

Segment Information
 
Three Months Ended June 28, 2015
(In thousands)
North America
 
Europe, Asia and Latin America
 
Africa
 
Total
Adjusted EBITDA
$
48,146

 
$
11,359

 
$
(448
)
 
$
59,057

Percentage of segment net sales
12.8
%
 
13.0
%
 
(3.5
)%
 
12.4
%
 
Three Months Ended June 29, 2014
(In thousands)
North America
 
Europe, Asia and Latin America
 
Africa
 
Total
Adjusted EBITDA
$
39,685

 
$
5,028

 
$
(663
)
 
$
44,050

Percentage of segment net sales
10.6
%
 
4.9
%
 
(4.7
)%
 
9.0
%
    

The following reconciles Adjusted EBITDA to net income (loss) attributable to Masonite:    
 
Three Months Ended June 28, 2015
(In thousands)
North America
 
Europe, Asia and Latin America
 
Africa
 
Total
Adjusted EBITDA
$
48,146

 
$
11,359

 
$
(448
)
 
$
59,057

Less (plus):
 
 
 
 
 
 
 
Depreciation
10,501

 
3,175

 
734

 
14,410

Amortization
4,053

 
910

 
12

 
4,975

Share based compensation expense
3,106

 
—

 
—

 
3,106

Loss (gain) on disposal of property, plant and equipment
308

 
5

 
37

 
350

Restructuring costs
521

 
467

 
—

 
988

Interest expense (income), net
13,724

 
(6,998
)
 
61

 
6,787

Other expense (income), net
(451
)
 
(184
)
 
—

 
(635
)
Income tax expense (benefit)
14,164

 
1,222

 
(373
)
 
15,013

Loss (income) from discontinued operations, net of tax
88

 
152

 
—

 
240

Net income (loss) attributable to non-controlling interest
381

 
—

 
—

 
381

Net income (loss) attributable to Masonite
$
1,751

 
$
12,610

 
$
(919
)
 
$
13,442


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Three Months Ended June 29, 2014
(In thousands)
North America
 
Europe, Asia and Latin America
 
Africa
 
Total
Adjusted EBITDA
$
39,685

 
$
5,028

 
$
(663
)
 
$
44,050

Less (plus):
 
 
 
 
 
 
 
Depreciation
9,549

 
4,083

 
904

 
14,536

Amortization
3,800

 
1,793

 
—

 
5,593

Share based compensation expense
2,797

 
—

 
—

 
2,797

Loss (gain) on disposal of property, plant and equipment
750

 
286

 
—

 
1,036

Restructuring costs
370

 
184

 
6

 
560

Interest expense (income), net
17,651

 
(7,089
)
 
32

 
10,594

Other expense (income), net
(17
)
 
1,323

 
—

 
1,306

Income tax expense (benefit)
1,647

 
(124
)
 
(144
)
 
1,379

Loss (income) from discontinued operations, net of tax
170

 
—

 
—

 
170

Net income (loss) attributable to non-controlling interest
499

 
—

 
—

 
499

Net income (loss) attributable to Masonite
$
2,469

 
$
4,572

 
$
(1,461
)
 
$
5,580

Adjusted EBITDA in our North America segment increased $8.4 million, or 21.2%, to $48.1 million in the three months ended June 28, 2015, from $39.7 million in the three months ended June 29, 2014. Adjusted EBITDA in the North America segment included corporate allocations of shared costs of $15.7 million and $12.6 million in the second quarter of 2015 and 2014, respectively. The allocations generally consist of certain costs of human resources, legal, finance, information technology, research and development and share based compensation.
Adjusted EBITDA in our Europe, Asia and Latin America segment increased $6.4 million, or 128.0%, to $11.4 million in the three months ended June 28, 2015, from $5.0 million in the three months ended June 29, 2014. Adjusted EBITDA in the Europe, Asia and Latin America segment included an incremental comparative benefit from the 2014 deconsolidation of Israel of $2.6 million. Adjusted EBITDA in the Europe, Asia and Latin America segment also included corporate allocations of shared costs of $0.4 million and $0.6 million in the second quarter of 2015 and 2014, respectively. The allocations generally consist of certain costs of human resources, legal, finance and information technology.
Adjusted EBITDA in our Africa segment increased $0.3 million to $(0.4) million in the three months ended June 28, 2015, from $(0.7) million in the three months ended June 29, 2014. Adjusted EBITDA in the Africa segment included $1.2 million of proceeds from business interruption insurance as partial settlement related to the 2014 explosion at the Estcourt Mill in South Africa. Adjusted EBITDA in the Africa segment also included corporate allocations of shared costs of $0.9 million and $0.7 million in second quarter of 2015 and 2014, respectively. The allocations generally consist of certain costs of human resources, legal, finance and information technology.


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Six Months Ended June 28, 2015, Compared with Six Months Ended June 29, 2014
Net Sales
Net sales in the six months ended June 28, 2015, were $910.9 million, a decrease of $1.7 million or 0.2% from $912.6 million in the six months ended June 29, 2014. Net sales in 2015 were negatively impacted by $46.5 million as a result of foreign exchange rate fluctuations. Excluding this exchange rate impact, net sales would have increased by $44.8 million or 4.9% due to changes in unit volume, average unit price and sales of other products. Average unit price increased net sales in 2015 by $48.5 million or 5.3% compared to 2014. Partially offsetting this increase were lower unit volumes in 2015, which decreased net sales by $1.2 million or 0.1% compared to 2014 and net sales of other products to external customers were $2.5 million lower in 2015 compared to 2014.
The proportion of net sales from interior and exterior products in the six months ended June 28, 2015, was 72.1% and 27.9%, respectively, compared to 71.4% and 28.6% in the six months ended June 29, 2014.
Net Sales and Percentage of Net Sales by Principal Geographic Region
 
Six Months Ended
(In thousands)
June 28, 2015
 
June 29, 2014
North America
$
712,624

 
$
687,642

North America intersegment
(424
)
 
(516
)
North America net sales to external customers
$
712,200

 
$
687,126

Percentage of net sales
78.2
%
 
75.3
%
 
 
 
 
Europe, Asia and Latin America
$
187,262

 
$
211,279

Europe, Asia and Latin America intersegment
(12,490
)
 
(13,132
)
Europe, Asia and Latin America net sales to external customers
$
174,772

 
$
198,147

Percentage of net sales
19.2
%
 
21.7
%
 
 
 
 
Africa
$
23,921

 
$
27,363

Africa intersegment
—

 
—

Africa net sales to external customers
$
23,921

 
$
27,363

Percentage of net sales
2.6
%
 
3.0
%
 
 
 
 
Net sales to external customers
$
910,893

 
$
912,636


North America

Net sales to external customers from facilities in the North America segment in the six months ended June 28, 2015, were $712.2 million, an increase of $25.1 million or 3.7% from $687.1 million in the six months ended June 29, 2014. Net sales in 2015 were negatively impacted by $20.0 million as a result of foreign exchange rate fluctuations. Excluding this exchange rate impact, net sales would have increased by $45.1 million or 6.6% due to changes in unit volume, average unit price and sales of other products. Average unit price increased net sales in 2015 by $38.0 million or 5.5% compared to 2014. Also contributing to this increase were higher unit volumes in 2015, which increased net sales by $6.8 million or 1.0%, and net sales of other products to external customers, which were $0.3 million higher in 2015 compared to 2014.

The proportion of net sales from interior and exterior products in the six months ended June 28, 2015, was 69.8% and 30.2%, respectively, compared to 67.5% and 32.5% in the six months ended June 29, 2014. The increased proportion of net sales of our interior products was primarily driven by increased average unit prices in 2015 compared to 2014 that impacted interior products at a higher rate than exterior products.

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Europe, Asia and Latin America
Net sales to external customers from facilities in the Europe, Asia and Latin America segment in the six months ended June 28, 2015, were $174.8 million, a decrease of $23.3 million or 11.8% from $198.1 million in the six months ended June 29, 2014. Net sales in 2015 were negatively impacted by $23.7 million as a result of foreign exchange fluctuations. Excluding this exchange rate impact, net sales would have increased by $0.4 million or 0.2% due to changes in unit volume, average unit price and sales of other products. Average unit price increased net sales in 2015 by $10.4 million or 5.2% compared to 2014. Partially offsetting this increase were lower unit volumes in 2015, which decreased net sales by $7.2 million or 3.6%, and net sales of other products to external customers, which were $2.8 million or 1.4% lower in 2015 compared to 2014.
The proportion of net sales from interior and exterior products for the six months ended June 28, 2015, was 77.7% and 22.3%, respectively, compared to 81.1% and 18.9% in the six months ended June 29, 2014. The increased proportion of net sales of our exterior products was primarily driven by a reduction in volume in France, which impacted interior sales at a higher rate than exterior sales and incremental sales from the acquisition of Door-Stop, which only produces exterior products.
Africa
Net sales to external customers from facilities in the Africa segment in the six months ended June 28, 2015, were $23.9 million, a decrease of $3.5 million or 12.8% from $27.4 million in the six months ended June 29, 2014. Net sales in 2015 were negatively impacted by $2.8 million as a result of foreign exchange rate fluctuations. Excluding this exchange rate impact, net sales would have decreased by $0.7 million or 2.6% due to changes in unit volume and average unit price. Net sales decreased by $0.8 million or 2.9% due to lower unit volumes, which was partially offset by a $0.1 million increase due to changes in average unit price in 2015 compared to 2014.
Cost of Goods Sold
Cost of goods sold as a percentage of net sales was 81.5% and 85.6% for the six months ended June 28, 2015, and June 29, 2014, respectively. The primary reason for the decrease in cost of goods sold as a percentage of net sales was the favorable impact of average unit price on our net sales. Material cost of sales, direct labor, overhead, depreciation, and distribution as a percentage of net sales in 2015 decreased 2.6%, 0.6%, 0.2%, 0.2% and 0.5%, respectively, over the 2014 period.
Selling, General and Administration Expenses
In the six months ended June 28, 2015, selling, general and administration expenses, as a percentage of net sales, were 12.8% compared to 12.7% in the six months ended June 29, 2014, an increase of 10 basis points.
Selling, general and administration expenses in the six months ended June 28, 2015, were $117.0 million, an increase of $0.7 million from $116.3 million in the six months ended June 29, 2014. The increase was driven by a $7.0 million increase in personnel costs, $1.6 million of incremental selling, general and administration expenses incurred in 2015 in connection with the operations of our 2014 acquisitions, an increase of depreciation and amortization of $1.0 million, increased advertising costs of $0.5 million, an increase in stock compensation expense of $0.4 million and other increases of $1.3 million. These increases were partially offset by favorable foreign exchange impacts of $4.4 million, incremental comparative benefit from the 2014 deconsolidation of Israel of $3.7 million, a reduction in losses on disposal of property, plant and equipment of $1.8 million and the receipt of $1.2 million of business interruption insurance proceeds in Africa as partial settlement. The increased personnel costs were driven by a combination of wage inflation, investments in personnel and an increase in the bonus accrual compared to the prior year.

Restructuring Costs
Restructuring costs in the six months ended June 28, 2015, were $3.3 million, compared to $1.3 million in the six months ended June 29, 2014. Restructuring costs in 2015 were related primarily to expenses incurred as part of the 2015 Plan. Costs incurred in 2014 were related primarily to the 2013 Restructuring Plan.

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Interest Expense, Net
Interest expense, net, in the six months ended June 28, 2015, was $18.5 million, compared to $20.6 million in the six months ended June 29, 2014. This decrease primarily relates to the refinancing of $500.0 million of 8.25% senior unsecured notes for $475.0 million of 5.625% senior unsecured notes issued on March 23, 2015.
Loss on Extinguishment of Debt
Loss on extinguishment of debt was $28.0 million in the six months ended June 28, 2015. This charge represents the difference between the redemption price of our senior unsecured notes due 2021 of $531.7 million and the net carrying amount of such notes of $503.7 million. In addition to the $500.0 million of principal, the redemption price included a make-whole premium of $31.7 million and the net carrying amount included unamortized premiums of $11.5 million, partially offset by unamortized debt issuance costs of $7.8 million.

Other Expense (Income), Net
Other expense (income), net, in the six months ended June 28, 2015, was $(1.8) million, compared to $1.5 million in the six months ended June 29, 2014. The change in other expense (income), net, is primarily due to unrealized gains and losses on foreign currency remeasurements. Also contributing to the change were our portion of dividends and the net gains and losses related to our non-majority owned unconsolidated subsidiaries that are recognized under the equity method of accounting and other miscellaneous non-operating expenses.
Income Tax Expense (Benefit)
Our income tax expense in the six months ended June 28, 2015, increased by $16.9 million compared to the six months ended June 29, 2014. The change in our income tax expense (benefit) is primarily due to the mix of income or losses within the tax jurisdictions with various tax rates in which we operate, income and losses in tax jurisdictions with existing valuation allowances, income tax benefits related to tax-exempt income and discrete income tax expenses of $3.2 million in the six months ended June 28, 2015, compared to $2.8 million of income tax benefits recorded in the six months ended June 29, 2014, resulting primarily from recording a valuation allowance on $2.5 million of deferred tax assets. Discrete items may occur in any given year, but are not consistent from period to period. Our combined effective income tax rate is primarily the weighted average of federal, state and provincial rates in various countries in which we have operations, including the United States, Canada, the United Kingdom and Ireland and is affected by our ability to realize tax assets in certain jurisdictions.

Segment Information
 
Six Months Ended June 28, 2015
(In thousands)
North America
 
Europe, Asia and Latin America
 
Africa
 
Total
Adjusted EBITDA
$
77,784

 
$
20,130

 
$
(1,069
)
 
$
96,845

Percentage of segment net sales
10.9
%
 
11.5
%
 
(4.5
)%
 
10.6
%
 
Six Months Ended June 29, 2014
(In thousands)
North America
 
Europe, Asia and Latin America
 
Africa
 
Total
Adjusted EBITDA
$
55,688

 
$
8,062

 
$
18

 
$
63,768

Percentage of segment net sales
8.1
%
 
4.1
%
 
0.1
%
 
7.0
%
    

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The following reconciles Adjusted EBITDA to net income (loss) attributable to Masonite:    
 
Six Months Ended June 28, 2015
(In thousands)
North America
 
Europe, Asia and Latin America
 
Africa
 
Total
Adjusted EBITDA
$
77,784

 
$
20,130

 
$
(1,069
)
 
$
96,845

Less (plus):
 
 
 
 
 
 
 
Depreciation
21,815

 
6,419

 
1,482

 
29,716

Amortization
8,158

 
1,828

 
—

 
9,986

Share based compensation expense
5,485

 
—

 
—

 
5,485

Loss (gain) on disposal of property, plant and equipment
555

 
19

 
(280
)
 
294

Restructuring costs
1,149

 
2,195

 
—

 
3,344

Interest expense (income), net
32,229

 
(13,789
)
 
100

 
18,540

Loss on extinguishment of debt
28,046

 
—

 
—

 
28,046

Other expense (income), net
(645
)
 
(1,174
)
 
—

 
(1,819
)
Income tax expense (benefit)
16,342

 
2,632

 
(697
)
 
18,277

Loss (income) from discontinued operations, net of tax
317

 
152

 
—

 
469

Net income (loss) attributable to non-controlling interest
2,117

 
—

 
—

 
2,117

Net income (loss) attributable to Masonite
$
(37,784
)
 
$
21,848

 
$
(1,674
)
 
$
(17,610
)
 
Six Months Ended June 29, 2014
(In thousands)
North America
 
Europe, Asia and Latin America
 
Africa
 
Total
Adjusted EBITDA
$
55,688

 
$
8,062

 
$
18

 
$
63,768

Less (plus):
 
 
 
 
 
 
 
Depreciation
19,481

 
8,705

 
1,796

 
29,982

Amortization
9,165

 
2,119

 
—

 
11,284

Share based compensation expense
5,080

 
—

 
—

 
5,080

Loss (gain) on disposal of property, plant and equipment
1,524

 
599

 
—

 
2,123

Restructuring costs
402

 
873

 
6

 
1,281

Interest expense (income), net
34,898

 
(14,391
)
 
80

 
20,587

Other expense (income), net
(158
)
 
1,645

 
—

 
1,487

Income tax expense (benefit)
1,440

 
211

 
(253
)
 
1,398

Loss (income) from discontinued operations, net of tax
312

 
—

 
—

 
312

Net income (loss) attributable to non-controlling interest
1,240

 
—

 
—

 
1,240

Net income (loss) attributable to Masonite
$
(17,696
)
 
$
8,301

 
$
(1,611
)
 
$
(11,006
)
Adjusted EBITDA in our North America segment increased $22.1 million, or 39.7%, to $77.8 million in the six months ended June 28, 2015, from $55.7 million in the six months ended June 29, 2014. Adjusted EBITDA in the North America segment included corporate allocations of shared costs of $28.7 million and $26.1 million in 2015 and 2014, respectively. The allocations generally consist of certain costs of human resources, legal, finance, information technology, research and development and share based compensation.

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Adjusted EBITDA in our Europe, Asia and Latin America segment increased $12.0 million, or 148.1%, to $20.1 million in the six months ended June 28, 2015, from $8.1 million in the six months ended June 29, 2014. Adjusted EBITDA in the Europe, Asia and Latin America segment included an incremental comparative benefit from the 2014 deconsolidation of Israel of $4.5 million. Adjusted EBITDA in the Europe, Asia and Latin America segment also included corporate allocations of shared costs of $1.0 million and $1.3 million in 2015 and 2014, respectively. The allocations generally consist of certain costs of human resources, legal, finance and information technology.
Adjusted EBITDA in our Africa segment decreased $1.1 million to $(1.1) million in the six months ended June 28, 2015, from zero in the six months ended June 29, 2014. Adjusted EBITDA in the Africa segment included $1.2 million of proceeds from business interruption insurance as partial settlement related to the 2014 explosion at the Estcourt Mill in South Africa. Adjusted EBITDA in the Africa segment also included corporate allocations of shared costs of $1.7 million and $1.3 million in 2015 and 2014, respectively. The allocations generally consist of certain costs of human resources, legal, finance and information technology.

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 accounts receivable sales programs ("AR Sales Programs") and our existing cash balance.
We believe that our cash balance on hand, future cash generated from operations, the use of our AR Sales Programs, our ABL Facility, and ability to access the capital markets will provide adequate liquidity for the foreseeable future. As of June 28, 2015, we had $136.3 million of cash and cash equivalents, availability under our ABL Facility of $126.6 million and availability under our AR Sales Programs of $15.4 million.
Cash Flows
Cash flows from Operating Activities
            Cash provided by operating activities was $40.2 million during the six months ended June 28, 2015. This amount is primarily driven by certain noncash items in net income (loss) including depreciation and amortization of $39.7 million, loss on extinguishment of debt of $28.0 million, deferred income tax expense of $14.5 million and share based compensation expense of $5.5 million. Additionally, cash inflows were generated by an increase in accounts payable and accrued expenses of $13.1 million during the first half of 2015. These inflows were partially offset by our net loss of $15.5 million, pension and post-retirement funding (net of expenses) of $2.8 million, an increase in inventories of $25.6 million, an increase in accounts receivable of $9.3 million, an increase in prepaid expenses of $6.3 million and other operating outflows of $1.1 million. Increases in our net working capital accounts were primarily related to seasonal activity.
    
Cash provided by operating activities was $25.7 million during the six months ended June 29, 2014. This amount is primarily driven by certain noncash items in net income (loss) including depreciation and amortization of $41.3 million and share based compensation expense of $5.1 million. Additionally, cash inflows were generated by an increase in accounts payable and accrued expenses of $50.9 million primarily due to operational issues encountered during the implementation of a new accounts payable processing system which had temporarily extended payments beyond our normal trade terms. These inflows were partially offset by our net loss of $9.8 million, an increase in accounts receivable of $38.5 million, an increase in inventories of $22.9 million and other operating outflows of $0.4 million.

Cash flows from Investing Activities
Cash used in investing activities was $22.8 million during the six months ended June 28, 2015. The primary uses of cash in investing activities were additions to property, plant and equipment of $17.9 million, a $3.9 million increase in restricted cash and other investing outflows of $1.0 million.

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Cash used in investing activities was $71.4 million during the six months ended June 29, 2014. The primary uses of cash in investing activities were cash used in the acquisition of Door-Stop of $50.4 million, additions to property, plant and equipment of $20.0 million and other investing outflows of $1.0 million.
Cash flows from Financing Activities

Cash used in financing activities was $66.1 million during the six months ended June 28, 2015. The primary uses of cash in financing activities were the redemption of the 2021 Notes for the aggregate principal amount of $500.0 million, the applicable premium, as described in the indenture, of $31.7 million, payment of debt issuance costs of $7.2 million, distributions to non-controlling interests of $1.6 million and other financing outflows of $0.6 million. These outflows were partially offset by cash generated by the issuance of the 2023 Notes for the aggregate principal amount of $475.0 million.
Cash provided by financing activities was $134.8 million during the six months ended June 29, 2014. The primary source of cash provided by financing activities was the proceeds from the January 2014 issuance of additional 2021 Notes for $138.7 million. This cash inflow was partially offset by the payment of financing costs relating to these additional 2021 Notes of $1.9 million and other financing outflows of $2.0 million.    
Other Liquidity Matters
Our anticipated uses of cash in the near term include working capital needs, especially in the case of a market recovery, and capital expenditures. On a continual basis, we evaluate and consider strategic acquisitions, divestitures, and joint ventures to create shareholder value and enhance financial performance.
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 June 28, 2015, we do not believe adverse tax consequences exist that restrict our use of cash or cash equivalents in a material manner.
We also routinely monitor the changes in the financial condition of our customers and the potential impact on our results of operations. There has not been a change in the financial condition of a customer that has had a material adverse effect on our results of operations. However, if economic conditions were to deteriorate, it is possible that there could be an impact on our results of operations in a future period and this impact could be material.

Accounts Receivable Sales Program
We maintain accounts receivable sales programs with third parties. Under the AR Sales Programs, we can transfer ownership of eligible trade accounts receivable of certain customers. Receivables are sold outright to third parties who assume the full risk of collection, without recourse to us in the event of a loss. Transfers of receivables under these programs 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 Programs 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 under the AR Sales Programs were not material for any of the periods presented and were recorded to selling, general and administration expense within the condensed consolidated statements of comprehensive income (loss).
Senior Notes
On March 23, 2015, we issued $475.0 million aggregate principal senior unsecured notes (the “2023 Notes”). The 2023 Notes were issued in a private placement for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to buyers outside the United States pursuant to Regulation S under the Securities Act. The 2023 Notes were issued without registration rights and are not listed on any securities exchange. The 2023 Notes were issued at par and bear interest at 5.625% per annum, payable in cash

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semiannually in arrears on March 15 and September 15 of each year and are due March 15, 2023. We received net proceeds of $467.9 million after deducting $7.1 million of transaction issuance costs. The transaction costs were capitalized as deferred financing costs (included in other assets) and are being amortized to interest expense over the term of the 2023 Notes using the effective interest method. The net proceeds from the 2023 Notes, together with existing cash balances, were used to redeem the $500.0 million aggregate principal of 2021 Notes (as described in the footnotes to the condensed consolidated financial statements) and to pay related premiums, fees and expenses.

Obligations under the 2023 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, by certain of our directly or indirectly wholly-owned subsidiaries. We may redeem the 2023 Notes under certain circumstances specified therein. The indenture governing the 2023 Notes contains restrictive covenants that, among other things, limit our ability and our subsidiaries’ ability to: (i) incur additional debt and issue disqualified or preferred stock, (ii) make restricted payments, (iii) sell assets, (iv) create or permit restrictions on the ability of our restricted subsidiaries to pay dividends or make other distributions to us, (v) create or incur certain liens, (vi) enter into sale and leaseback transactions, (vii) merge or consolidate with other entities and (viii) enter into transactions with affiliates. The foregoing limitations are subject to exceptions as set forth in the indenture governing the 2023 Notes. In addition, if in the future the 2023 Notes have an investment grade rating from at least two nationally recognized statistical rating organizations, certain of these covenants will be replaced with a less restrictive covenant. The indenture governing the 2023 Notes contains customary events of default (subject in certain cases to customary grace and cure periods). As of June 28, 2015, we were in compliance with all covenants under the indenture governing the 2023 Notes.

ABL Facility
On April 9, 2015, we and certain of our subsidiaries amended and restated our asset-based revolving credit facility (the "ABL Facility") in order to extend the maturity date of the ABL Facility and amend certain other provisions. The amended and restated ABL Facility increased the revolving commitments to $150.0 million from $125.0 million and extended the final maturity date to April 9, 2020, from May 17, 2016. The borrowing base is calculated based on a percentage of the value of selected U.S. and Canadian accounts receivable and inventory, less certain intangible amounts.

Obligations under the ABL Facility are secured by a first priority security interest in substantially all of the current assets of Masonite and our subsidiaries. In addition, obligations under the ABL Facility are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, by certain of our directly or indirectly wholly-owned subsidiaries.    

Borrowings under the ABL Facility will bear interest at a rate equal to, at our option, (i) the Base Rate, Canadian Prime Rate or Canadian Base Rate (each as defined in the Amended and Restated Credit Agreement) plus a margin ranging from 0.25% to 0.75% per annum, or (ii) the Eurodollar Base Rate or BA Rate (each as defined in the Amended and Restated Credit Agreement), plus a margin ranging from 1.25% to 1.75% per annum.

In addition to paying interest on any outstanding principal under the ABL Facility a commitment fee is payable on the undrawn portion of the ABL Facility in an amount equal to 0.25% per annum of the average daily balance of unused commitments during each calendar quarter.

The ABL Facility contains various customary representations, warranties and covenants by us that, among other things, and subject to certain exceptions, restrict Masonite's ability and the ability of our subsidiaries to: (i) pay dividends on our common shares and make other restricted payments, (ii) make investments and acquisitions, (iii) engage in transactions with our affiliates, (iv) sell assets, (v) merge and (vi) create liens.
    
The Amended and Restated Credit Agreement amends the ABL Facility to, among other things, (i) permit us to incur unlimited unsecured debt as long as such debt does not contain covenants or default provisions that are more restrictive than those contained in the ABL Facility, (ii) permit us to incur debt as long as the pro forma secured leverage ratio is less than 4.5 to 1.0, and (iii) add certain additional exceptions and exemptions under the restricted payment, investment and indebtedness covenants (including increasing the amount of certain debt permitted to be incurred under an existing exception). As of June 28, 2015, and December 28, 2014, we were in compliance with all covenants under the credit agreement governing the ABL Facility and there were no amounts outstanding under the ABL Facility.


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Supplemental Guarantor Financial Information

Our obligations under the 2023 Notes and the ABL Facility are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by certain of our directly or indirectly wholly-owned subsidiaries. The following unaudited supplemental financial information for our non-guarantor subsidiaries is presented:
Our non-guarantor subsidiaries generated external net sales of $388.6 million and $751.4 million for the three and six months ended June 28, 2015, respectively and $409.8 million and $759.9 million for the three and six months ended June 29, 2014, respectively.
Our non-guarantor subsidiaries generated Adjusted EBITDA of $51.6 million and $81.1 million for the three and six months ended June 28, 2015, respectively and $37.5 million and $52.2 million for the three and six months ended June 29, 2014, respectively.
Our non-guarantor subsidiaries had total assets of $1.4 billion as of both June 28, 2015, and December 28, 2014; and total liabilities of $825.7 million and $791.2 million as of June 28, 2015, and December 28, 2014, respectively.

Changes in Accounting Standards and Policies
Adoption of Recent Accounting Pronouncements
In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” This ASU requires capitalized debt issuance costs to be presented as a reduction to the carrying value of debt instead of being classified as a deferred charge, as previously required. This ASU is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2015, and interim periods within those annual periods; early adoption is permitted and retroactive application is required. We have adopted this guidance as of June 28, 2015, and as a result have recast the December 28, 2014, condensed consolidated balance sheet to conform to the current period presentation. The adoption of this standard reduced previously-presented other assets, net, and long-term debt by $8.1 million each, based upon the balance of unamortized debt issuance costs relating to our senior unsecured notes recorded as of December 28, 2014.
    
In April 2014, the FASB issued ASU 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity," which amends the definition of a discontinued operation in ASC 205-20 and requires entities to provide additional disclosures about discontinued operations as well as disposal transactions that do not meet the discontinued operations criteria. The FASB issued the ASU to provide more decision-useful information and to make it more difficult for a disposal transaction to qualify as a discontinued operation. This ASU is effective for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods; early application is permitted. The adoption of this standard did not have a material impact on the presentation of our financial statements.
Other Recent Accounting Pronouncements not yet Adopted

In April 2015, the FASB issued ASU 2015-04, “Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets.” This ASU provides a practical expedient option to entities that have defined benefit plans and have a fiscal year end that does not coincide with a calendar month end. This ASU allows an entity to elect to measure defined benefit plan assets and obligations using the calendar month-end that is closest to its fiscal year end. This ASU is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2015, and interim periods within those annual periods; early adoption is permitted. The adoption of this standard is not expected to have an impact on the presentation of our financial statements.    


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In February 2015, the FASB issued ASU 2015-02, “Amendments to the Consolidation Analysis,” which amended ASC 810, “Consolidation.” This ASU modifies the evaluation of whether limited partnerships are variable interest entities (“VIEs”) and affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. This ASU is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2015, and interim periods within those annual periods; early adoption is permitted. The adoption of this standard is not expected to have an impact on the presentation of our financial statements.

In August 2014, the FASB issued ASU 2014-15, "Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern," which amended ASC 205-40, "Presentation of Financial Statements - Going Concern". This ASU requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements and to provide related footnote disclosures. This ASU is effective for annual reporting periods ending after December 15, 2016, and interim periods thereafter; early adoption is permitted. We are in the process of evaluating this guidance to determine the impact it will have on our financial statements.

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers," which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB voted for a one year deferral of the effective date of ASU 2014-09 and the guidance will now be effective for annual and interim periods beginning on or after December 15, 2017; early application is not permitted. We are in the process of evaluating this guidance to determine the impact it will have on our financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk from changes in foreign currency exchange rates, interest rates and commodity prices, which can affect our operating results and overall financial condition. We manage exposure to these risks through our operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. Derivative financial instruments are viewed as risk management tools and are not used for speculation or for trading purposes. Derivative financial instruments are generally contracted with a diversified group of investment grade counterparties to reduce exposure to nonperformance on such instruments. We held no such material derivative financial instruments as of June 28, 2015, or December 28, 2014.
We have in place an enterprise risk management process that involves systematic risk identification and mitigation covering the categories of enterprise, strategic, financial, operation and compliance and reporting risk. The enterprise risk management process receives Board of Directors and Management oversight, drives risk mitigation decision-making and is fully integrated into our internal audit planning and execution cycle.
Foreign Exchange Rate Risk
We have foreign currency exposures related to buying, selling, and financing in currencies other than the local currencies in which we operate. When deemed appropriate, we enter into various derivative financial instruments to preserve the carrying amount of foreign currency-denominated assets, liabilities, commitments, and certain anticipated foreign currency transactions. We held no such material derivative financial instruments as of June 28, 2015, or December 28, 2014.
Interest Rate Risk
We are subject to market risk from exposure to changes in interest rates with respect to borrowings under our ABL Facility to the extent it is drawn on and due to our other financing, investing and cash management activities. As of June 28, 2015, or December 28, 2014, there were no outstanding borrowings under our ABL Facility.

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Impact of Inflation, Deflation and Changing Prices
We have experienced inflation and deflation related to our purchase of certain commodity products. We believe that volatile prices for commodities have impacted our net sales and results of operations. We maintain strategies to mitigate the impact of higher raw material, energy and commodity costs, which include cost reduction, sourcing and other actions, which typically offset only a portion of the adverse impact. Inflation and deflation related to our purchases of certain commodity products could have an adverse impact on our operating results in the future.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e) and Rule 15d-15(e) that are designed to ensure that information required to be disclosed under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) in our reports that we file or submit under the Exchange Act 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 principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our principal executive officer and principal financial officer have concluded, based on the evaluation of the effectiveness of the disclosure controls and procedures by our management as of the end of the fiscal quarter covered by this Quarterly Report, that our disclosure controls and procedures were effective to accomplish their objectives at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the fiscal quarter covered by this Quarterly Report 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
We are involved in various legal proceedings, claims and governmental audits in the ordinary course of business. In the opinion of management, the ultimate disposition of these proceedings, claims and audits will not have a material adverse effect on the financial position, results of our operations, or cash flows.
Item 1A. Risk Factors
You should carefully review and consider the information regarding certain factors which could materially affect our business, financial condition or future results as set forth under Item 1A "Risk Factors" in our Annual Report on Form 10-K filed for the year ended December 28, 2014. 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
(a) Unregistered Sale of Equity Securities.
None.
(b) Use of Proceeds.
Not applicable.
(c) Repurchases of Our Equity Securities.
None.

Item 3. Defaults Upon Senior Securities
None.

Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information
On July 31, 2015, we disposed of all of the capital stock of Premdor, S.A.S. (“Premdor”), Masonite’s French door business, to an investment fund managed by Perceva S.A.S., a Paris-based independent investment firm (the “Buyer”). Pursuant to a stock purchase agreement dated July 16, 2015, the Buyer acquired all of Masonite’s French door manufacturing and distribution business, which had net sales of $127.5 million for the year ended December 28, 2014, and over 680 employees, for nominal consideration. Immediately prior to the sale, Masonite contributed to the capital of Premdor $14.3 million of an inter-company loan owed by Premdor to Masonite. The remaining $16.4 million of the inter-company loan was acquired by the Buyer as part of the transaction and is now owed to the Buyer by Premdor. Masonite will continue to sell door facings to Premdor and will provide certain transition services to the business after the closing. In connection with the disposition, Masonite expects to incur a non-cash charge of approximately $36 to $41 million, net of tax, in the third quarter of 2015.

Pro forma financial information giving effect to the disposition is furnished as Exhibit 99.1 to this Quarterly Report on Form 10-Q.


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Item 6. Exhibits
The exhibits required by Item 601 of Regulation S-K are included with this Form 10-Q and are listed on the “Index to Exhibits” immediately following the Signatures.

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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:
August 6, 2015
By
/s/ Robert E. Lewis
 
 
 
Robert E. Lewis
 
 
 
Senior Vice President, General Counsel and Secretary
 
 
 
(Duly authorized officer and principal financial officer of the Registrant)
 


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INDEX TO EXHIBITS
The following is a list of all exhibits filed or furnished as part of this report:
Exhibit No.
Description
10.1^
Masonite International Corporation Amended and Restated 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K (File No. 001-11796) filed with the Securities and Exchange Commission on May 18, 2015)
10.2^
Offer Letter to Elias Barrios dated April 23, 2015 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-11796) filed with the Securities and Exchange Commission on May 12, 2015)
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
99.1*
Unaudited pro forma condensed consolidated financial statements of Masonite International Corporation giving effect to the sale of Premdor S.A.S.
101.INS*
XBRL Instance Document
101.SCH*
XBRL Taxonomy Extension Schema Document
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
*
Filed herewith.
^
Denotes management contract or compensatory plan.

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