MASONITE INTERNATIONAL CORPORATION
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is based upon accounting principles generally
accepted in the United States of America and discusses the financial condition
and results of operations for Masonite International Corporation for the three
months ended April 4, 2021 , and March 29, 2020 . In this MD&A, "Masonite," "we,"
"us," "our" and the "Company" refer to Masonite International Corporation and
its subsidiaries.
This discussion should be read in conjunction with (i) the unaudited condensed
consolidated financial statements and related notes included elsewhere in this
Quarterly Report on Form 10-Q and (ii) the annual audited consolidated financial
statements, including the accompanying notes and MD&A, which are included in our
Annual Report on Form 10-K for the year ended January 3, 2021 . The following
discussion should also be read in conjunction with the disclosure under "Special
Note Regarding Forward Looking Statements" elsewhere in this Quarterly Report on
Form 10-Q. Our actual results could differ materially from the forward-looking
statements as a result of these risks and uncertainties.
Overview
We are a leading global designer, manufacturer, marketer and distributor of
interior and exterior doors for the new construction and repair, renovation and
remodeling sectors of the residential and the non-residential building
construction markets. Since 1925, we have provided our customers with innovative
products and superior service at compelling values. In order to better serve our
customers and create sustainable competitive advantages, we focus on developing
innovative products, advanced manufacturing capabilities and technology-driven
sales and service solutions.
We market and sell our products to remodeling contractors, builders, homeowners,
retailers, dealers, lumberyards, commercial and general contractors and
architects through well-established wholesale, retail and direct distribution
channels as part of our cross-merchandising strategy. Customers are provided a
broad product offering of interior and exterior doors and entry systems at
various price points. We manufacture a broad line of interior doors, including
residential molded, flush, stile and rail, louver and specially-ordered
commercial and architectural doors; door components for internal use and sale to
other door manufacturers; and exterior residential steel, fiberglass and wood
doors and entry systems.
We operate 61 manufacturing and distribution facilities in eight countries in
North America , South America , Europe and Asia , which are strategically located
to serve our customers through multiple distribution channels. These
distribution channels include: (i) direct distribution to retail home center
customers; (ii) one-step distribution that sells directly to homebuilders and
contractors; and (iii) two-step distribution through wholesale distributors. For
retail home center customers, numerous door fabrication facilities provide
value-added fabrication and logistical services, including pre-finishing and
store delivery of pre-hung interior and exterior doors. We believe our ability
to provide: (i) a broad product range; (ii) frequent, rapid, on-time and
complete delivery; (iii) consistency in products and merchandising; (iv)
national service; and (v) special order programs enables retail customers to
increase comparable store sales and helps to differentiate us from our
competitors. We believe investments in innovative new product manufacturing and
distribution capabilities, coupled with an ongoing commitment to operational
excellence, provide a strong platform for future growth.
Our reportable segments are organized and managed principally by end market:
North American Residential, Europe and Architectural. In the three months ended
April 4, 2021 , we generated net sales of $476.5 million or 73.7%, $88.5 million
or 13.7% and $75.0 million or 11.6% in our North American Residential, Europe
and Architectural segments, respectively.
The COVID-19 pandemic impacted our business operations and financial results
beginning in the second quarter of fiscal year 2020 and continues to impact us
in fiscal year 2021. The extent to which the COVID-19 pandemic impacts our
business, results of operations and financial condition will depend on future
developments, which are highly uncertain and cannot be predicted. These impacts
include, but are not limited to, the duration, spread, severity and impact of
the COVID-19 pandemic, the effects of the COVID-19 pandemic on our employees,
operations, customers, suppliers and supply chain, the remedial actions and
stimulus measures adopted by federal, state and local governments and the extent
to which normal economic and operating conditions can resume. Uncertainty
associated with future forecasts, demand in the Architectural market and the
duration of impacts from COVID-19 may impact our judgments and estimates and
affect, among other things, our goodwill, long-lived assets and indefinite-lived
intangible asset valuation,
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MASONITE INTERNATIONAL CORPORATION annual effective tax rate and inventory valuation, and may result in the need to write down goodwill in the Architectural reporting unit to its fair value in the future. For discussion regarding the impact of COVID-19 and related economic conditions on our results for the year endedJanuary 3, 2021 , see Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in in our Annual Report on Form 10-K for the year endedJanuary 3, 2021 . For further discussion regarding the potential future impacts of COVID-19 and related economic conditions on the Company, see "Risks Related to COVID-19" included in Part I, Item 1A, "Risk Factors" in our 2020 Annual Report. Key Factors Affecting Our Results of Operations 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 inUnited 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; •non-residential building occupancy rates; •increases in the cost of raw materials or wages or any shortage in supplies or labor; •the availability and cost of credit; •employment rates and consumer confidence; and •demographic factors such as immigration and migration of the population and trends in household formation. Product Pricing and Mix The building products industry is highly competitive and we therefore face pressure on sales prices of our products. In addition, our competitors may adopt more aggressive sales policies and devote greater resources to the development, promotion and sale of their products than we do, which could result in a loss of customers. Our business in general is subject to changing consumer and industry trends, demands and preferences. Trends within the industry change often and our failure to anticipate, identify or quickly react to changes in these trends could lead to, among other things, rejection of a new product line and reduced demand and price reductions for our products, which could materially adversely affect us. Changes in consumer preferences may also lead to increased demand for our lower margin products relative to our higher margin products, which could reduce our future profitability. Business Wins and Losses Our customers consist mainly of wholesalers and retail home centers. In fiscal year 2020, our top ten customers together accounted for approximately 46% of our net sales and our top customer, The Home Depot, Inc. accounted for approximately 18% of our net sales. Net sales from customers that have accounted for a significant portion of our net sales in past periods, individually or as a group, may not continue in future periods, or if continued, may not reach or exceed historical levels in any period. Certain customers perform periodic product line reviews to assess their product offerings, which have, on past occasions, led to business wins and losses. In addition, as a result of competitive bidding processes, we may not be able to increase or maintain the margins at which we sell our products to our customers. Organizational Restructuring Over the past several years, we have engaged in a series of restructuring programs related to exiting certain geographies and non-core businesses, consolidating certain internal support functions and engaging in other actions 19 --------------------------------------------------------------------------------
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MASONITE INTERNATIONAL CORPORATION designed to reduce our cost structure and improve productivity. These initiatives primarily consist of severance actions and lease termination costs. Management continues to evaluate our business; therefore, in future years, there may be additional provisions for new plan initiatives, as well as changes in previously recorded estimates, as payments are made or actions are completed. Asset impairment charges were also incurred in connection with these restructuring actions for those assets sold, abandoned or made obsolete as a result of these programs. InNovember 2020 , we began implementing a plan to improve overall business performance that includes the reorganization of our manufacturing capacity and a reduction of our overhead and selling, general and administration workforce primarily in our Architectural reportable segment as well as limited actions in the North American Residential reportable segment. The reorganization of our manufacturing capacity involves specific facilities in the Architectural segment and costs associated with the closure of these facilities and related headcount reductions began taking place in the fourth quarter of 2020 (collectively, the "2020 Plan"). Costs associated with the 2020 Plan include severance and closure charges and will continue through 2021. As ofApril 4, 2021 , we expect to incur approximately$3 million to$4 million of additional charges related to the 2019 Plan. Once fully implemented, the actions taken as part of the 2020 Plan are expected to increase our annual earnings and cash flows by approximately$2 million . InFebruary 2019 , we began implementing a plan to improve overall business performance that includes the reorganization of our manufacturing capacity and a reduction of our overhead and selling, general and administration workforce across all of our reportable segments and in our head offices. The reorganization of our manufacturing capacity involves specific plants in the North American Residential and Architectural segments and costs associated with the closure of these plants and related headcount reductions began taking place in the first quarter of 2019 (collectively, the "2019 Plan"). Costs associated with the 2019 Plan include severance, retention and closure charges and will continue through 2020. As ofApril 4, 2021 , we expect to incur approximately$1 million to$2 million of additional charges related to the 2019 Plan. Once fully implemented, the actions taken as part of the 2019 Plan are expected to increase our annual earnings and cash flows by approximately$17 million to$21 million . During the fourth quarter of 2018, we began implementing a plan to reorganize and consolidate certain aspects of ourUnited Kingdom head office function and optimize our portfolio by divesting non-core assets to enable more effective and consistent business processes in theEurope segment. In addition, in the North American Residential segment we announced a new facility that will optimize and expand capacity through increased automation, which resulted in the closure of one existing facility and related headcount reductions beginning in the second quarter of 2019 (collectively, the "2018 Plan"). Costs associated with the 2018 Plan included severance, retention and closure charges and continued throughout 2019. As ofApril 4, 2021 , we do not expect to incur any material future charges related to the 2018 Plan. Inflation In the first quarter of 2021, we realized higher costs in the wood product category as a result of macroeconomic factors as well as increased freight costs and wages. Additionally, we continued to recognize higher costs from previously disclosed anti-dumping and countervailing duties. We expect the macroeconomic pressures on wood, resins and other certain key product categories will continue throughout the remainder of fiscal year 2021. Our profitability, margins and net sales could be adversely affected if we are not able to pass these costs on to our customers or mitigate the impact of these inflationary pressures. Seasonality Our business is moderately seasonal and our net sales vary from quarter to quarter based upon the timing of the building season in our markets. Severe weather conditions in any quarter, such as unusually prolonged warm or cold conditions, rain, blizzards or hurricanes, could accelerate, delay or halt construction and renovation activity. Acquisitions and Divestitures We are pursuing a strategic initiative of optimizing our global business portfolio. As part of this strategy, in the last several years we have pursued strategic acquisitions targeting companies who produce components for our existing operations, manufacture niche products and provide value-added services. Additionally, we target companies with strong brands, complementary technologies, attractive geographic footprints and opportunities for cost and distribution synergies. We also continuously analyze our operations to determine which businesses, market channels and products create the most value for our customers and acceptable returns for our shareholders. 20 --------------------------------------------------------------------------------
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MASONITE INTERNATIONAL CORPORATION
Acquisitions
•On December 4, 2020 , we completed the acquisition of a Lowe's Companies, Inc.
door fabrication facility in the United States for cash consideration of $3.9
million . During the first quarter of 2021, as a result of working capital
adjustments we paid an additional $0.2 million .
•On August 31, 2020 , we acquired intellectual property and other assets related
to an interior door technology for cash consideration of $1.9 million .
Divestitures
•During the second quarter of 2020, we completed the liquidation of our legal
entity in India . As a result, we recognized $2.1 million in loss on disposal of
subsidiaries.
Results of Operations
Three Months Ended
(In thousands) April 4, 2021 March 29, 2020
Net sales $ 646,337 $ 551,228
Cost of goods sold 487,699 416,947
Gross profit 158,638 134,281
Gross profit as a % of net sales 24.5 % 24.4 %
Selling, general and administration expenses 83,631 80,333
Selling, general and administration expenses as a % of net sales 12.9 % 14.6 %
Restructuring costs 1,643 1,941
Operating income 73,364 52,007
Interest expense, net 11,946 11,282
Other (income) expense, net (1,343) 49
Income before income tax expense 62,761 40,676
Income tax expense 14,613 9,639
Net income 48,148 31,037
Less: net income attributable to non-controlling interests 1,167 1,152
Net income attributable to Masonite $
46,981
Three Months EndedApril 4, 2021 , Compared with Three Months EndedMarch 29, 2020 Net Sales Net sales in the three months endedApril 4, 2021 , were$646.3 million , an increase of$95.1 million or 17.3% from$551.2 million in the three months endedMarch 29, 2020 . Net sales in the first quarter of 2021 were positively impacted by$11.3 million as a result of foreign exchange rate fluctuations. Excluding this exchange rate impact, net sales would have increased by$83.8 million or 15.2% due to changes in volume, average unit price and sales of components and other products. Average unit price increased net sales in the first quarter of 2021 by$76.3 million or 13.8% compared to the 2020 period. Net sales of components and other products to external customers increased$5.6 million or 1.0% in the first quarter of 2021 compared to the 2020 period. Higher volumes excluding the incremental impact of acquisitions and divestitures ("base volume") increased net sales by$1.9 million or 0.3% in the first quarter of 2021 compared to the 2020 period. 21 --------------------------------------------------------------------------------
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MASONITE INTERNATIONAL CORPORATION
Three
Months Ended
North American Corporate &
(In thousands) Residential Europe Architectural Other Total
Sales $ 477,229 $ 90,206 $ 78,074 $ 6,343 $ 651,852
Intersegment sales (765) (1,667) (3,083) - (5,515)
Net sales to external customers $ 476,464 $ 88,539 $ 74,991 $ 6,343 $ 646,337
Percentage of consolidated
external net sales 73.7 % 13.7 % 11.6 %
Three Months Ended March 29, 2020
North American Corporate &
(In thousands) Residential Europe Architectural Other Total
Sales $ 384,445 $ 71,156 $ 94,555 $ 5,427 $ 555,583
Intersegment sales (588) (430) (3,337) - (4,355)
Net sales to external customers $ 383,857 $ 70,726 $ 91,218 $ 5,427 $ 551,228
Percentage of consolidated
external net sales 69.6 % 12.8 % 16.5 %
North American Residential
Net sales to external customers from facilities in the North American
Residential segment in the three months ended April 4, 2021 , were $476.5
million , an increase of $92.6 million or 24.1% from $383.9 million in the three
months ended March 29, 2020 . Net sales in the first quarter of 2021 were
positively impacted by $4.4 million as a result of foreign exchange rate
fluctuations. Excluding this exchange rate impact, net sales would have
increased by $88.2 million or 23.0% due to changes in volume, average unit price
and sales of components and other products. Average unit price increased net
sales in the first quarter of 2021 by $66.9 million or 17.4% compared to the
2020 period. Higher base volume increased net sales in the first quarter of 2021
by $17.3 million or 4.5% compared to the 2020 period. Net sales of components
and other products to external customers were $4.0 million higher in the first
quarter of 2021 compared to the 2020 period.
Europe
Net sales to external customers from facilities in the Europe segment in the
three months ended April 4, 2021 , were $88.5 million , an increase of $17.8
million or 25.2% from $70.7 million in the three months ended March 29, 2020 .
Net sales in the first quarter of 2021 were positively impacted by $6.4 million
as a result of foreign exchange fluctuations. Excluding this exchange rate
impact, net sales would have increased by $11.4 million or 16.1% due to changes
in volume, average unit price and sales of components and other products.
Average unit price increased net sales in the first quarter of 2021 by $5.0
million or 7.1% compared to the 2020 period. Higher base volume increased net
sales by $4.9 million or 6.9% in the first quarter of 2021 compared to the 2020
period. Net sales of components and other products to external customers were
$1.5 million higher in the first quarter of 2021 compared to the 2020 period.
Architectural
Net sales to external customers from facilities in the Architectural segment in
the three months ended April 4, 2021 , were $75.0 million , a decrease of $16.2
million or 17.8% from $91.2 million in the three months ended March 29, 2020 .
Net sales in the first quarter of 2021 were positively impacted by $0.5 million
as a result of foreign exchange fluctuations. Excluding this exchange rate
impact, net sales would have decreased by $16.7 million or 18.3% due to changes
in volume, average unit price and sales of components and other products. Lower
base volume decreased net sales in the first quarter of 2021 by $19.7 million or
21.6% compared to the 2020 period due to weakness in commercial end markets. Net
sales of components and other products to external customers were $1.4 million
lower in the first
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MASONITE INTERNATIONAL CORPORATION quarter of 2021 compared to the 2020 period. Average unit price increased net sales in the first quarter of 2021 by$4.4 million or 4.8% compared to the 2020 period. Cost of Goods Sold Cost of goods sold as a percentage of net sales was 75.5% and 75.6% for the three months endedApril 4, 2021 , andMarch 29, 2020 , respectively. Direct labor and depreciation as a percentage of sales in the first quarter of 2021 decreased by 0.7% and 0.5% compared to the first quarter of 2020. Distribution, overhead and material cost of sales as a percentage of net sales increased by 0.6%, 0.4%, 0.1% respectively, compared to the 2020 period. Direct labor as a percentage of net sales decreased due to higher average unit prices, partially offset by manufacturing wage inflation. The decrease in depreciation as a percentage of net sales was driven by higher average unit prices as compared to the 2020 period. Distribution as a percentage of net sales increased due to higher freight costs and higher personnel costs including wage inflation. Overhead as a percentage of net sales increased due to wage inflation and increased plant maintenance, partially offset by higher average unit prices as compared to the 2020 period. The increase in material cost of sales as a percentage of net sales was driven by commodity inflation and an increase in tariffs and freight costs, largely offset by higher average unit prices and material cost savings projects. Selling, General and Administration Expenses In the three months endedApril 4, 2021 , selling, general and administration ("SG&A") expenses, as a percentage of net sales, were 12.9%, as compared to 14.6% in the three months endedMarch 29, 2020 , a decrease of 170 basis points. SG&A expenses in the three months endedApril 4, 2021 , were$83.6 million , an increase of$3.3 million from$80.3 million in the three months endedMarch 29, 2020 . The overall increase was driven by a$6.8 million increase in personnel costs primarily due to$3.9 million of resource investments to support growth,$1.5 million of payroll taxes due to timing of prior year incentive compensation and$1.4 million of incentive compensation, as well as unfavorable foreign exchange impacts of$1.2 million . These increases were partially offset by a$2.3 million decrease in professional and other fees, a$2.1 million decrease in travel expense and a$0.3 million decrease in non-cash items in SG&A expenses, including loss (gain) on disposal of property, plant and equipment, depreciation and amortization, deferred compensation and share based compensation. Restructuring Costs Restructuring costs in the three months endedApril 4, 2021 , andMarch 29, 2020 , were$1.6 million and$1.9 million , respectively. Restructuring costs in the current year related primarily to the 2020 and 2019 Plans. Restructuring costs in the prior year period related primarily to the 2019 Plan. Interest Expense, Net Interest expense, net, in the three months endedApril 4, 2021 , was$11.9 million , compared to$11.3 million in the three months endedMarch 29, 2020 , remaining relatively flat as compared to the 2020 period. Other (Income) Expense, Net Other (income) expense, net includes profits and losses related to our non-majority owned unconsolidated subsidiaries that we recognize under the equity method of accounting, unrealized gains and losses on foreign currency remeasurements, pension settlement charges and other miscellaneous non-operating expenses. Other (income) expense, net, in the three months endedApril 4, 2021 , was$1.3 million of income, compared to minimal expense in the three months endedMarch 29, 2020 . The change in other (income) expense, net is primarily due to a change in the fair value of plan assets in the deferred compensation rabbi trust, partially offset by a change in our portion of the net gains and losses related to our non-majority owned unconsolidated subsidiaries that are recognized under the equity method of accounting. Income Tax Expense Income tax expense in the three months endedApril 4, 2021 , was$14.6 million , compared to$9.6 million of income tax expense in the three months endedMarch 29, 2020 . The increase in income tax expense is primarily due to the mix of income or losses within the tax jurisdictions with various tax rates in which we operate. We recognized 23 --------------------------------------------------------------------------------
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MASONITE INTERNATIONAL CORPORATION discrete items resulting in$0.5 million of income tax benefit in the three months endedApril 4, 2021 , compared to$0.4 million of income tax benefit in the three months endedMarch 29, 2020 . Segment Information Three
Months Ended
North American Corporate &
(In thousands) Residential Europe Architectural Other Total
Adjusted EBITDA $ 94,482 $ 16,755 $ 1,994 $ (11,206) $ 102,025
Adjusted EBITDA as a percentage
of segment net sales 19.8 % 18.9 % 2.7 % 15.8 %
Three Months Ended March 29, 2020
North American Corporate &
(In thousands) Residential Europe Architectural Other Total
Adjusted EBITDA $ 71,696 $ 9,679
18.7 % 13.7 % 11.6 % 14.8 %
The following reconciles net income (loss) attributable to Masonite to Adjusted
EBITDA:
Three Months Ended April 4, 2021
North American Corporate &
(In thousands) Residential Europe Architectural Other Total
Net income (loss) attributable to
Masonite $ 83,973 $ 11,408 $ (3,813) $ (44,587) $ 46,981
Plus:
Depreciation 9,511 2,585 2,663 3,520 18,279
Amortization 415 2,885 1,142 476 4,918
Share based compensation expense - - - 4,418 4,418
Loss (gain) on disposal of
property, plant and equipment 88 (4) 149 (830) (597)
Restructuring costs (361) - 1,853 151 1,643
Interest expense, net - - - 11,946 11,946
Other (income) expense, net - (119) - (1,224) (1,343)
Income tax expense - - - 14,613 14,613
Net income attributable to
non-controlling interest 856 - - 311 1,167
Adjusted EBITDA $ 94,482 $ 16,755 $ 1,994 $ (11,206) $ 102,025
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MASONITE INTERNATIONAL CORPORATION
Three
Months Ended
North American Corporate &
(In thousands) Residential Europe Architectural Other Total
Net income (loss) attributable to
Masonite $ 58,811 $ 3,483 $ 4,580 $ (36,989) $ 29,885
Plus:
Depreciation 9,364 2,457 2,822 1,375 16,018
Amortization 595 3,562 1,922 380 6,459
Share based compensation expense - - - 3,470 3,470
Loss on disposal of property,
plant and equipment 1,204 3 396 19 1,622
Restructuring costs 849 (37) 862 267 1,941
Interest expense, net - - - 11,282 11,282
Other expense (income), net - 211 - (162) 49
Income tax expense - - - 9,639 9,639
Net income attributable to
non-controlling interest 873 - - 279 1,152
Adjusted EBITDA $ 71,696 $ 9,679 $ 10,582 $ (10,440) $ 81,517
Adjusted EBITDA in our North American Residential segment increased $22.8
million , or 31.8%, to $94.5 million in the three months ended April 4, 2021 ,
from $71.7 million in the three months ended March 29, 2020 . Adjusted EBITDA in
the North American Residential segment included corporate allocations of shared
costs of $19.2 million and $16.3 million , in the first quarter of 2021 and 2020,
respectively. The allocations generally consist of certain costs of human
resources, legal, finance, information technology, research and development,
marketing and share based compensation.
Adjusted EBITDA in our Europe segment increased $7.1 million , or 73.2%, to $16.8
million in the three months ended April 4, 2021 , from $9.7 million in the three
months ended March 29, 2020 . Adjusted EBITDA in the Europe segment included
corporate allocations of shared costs of $1.0 million and $0.3 million , in the
first quarter of 2021 and 2020, respectively. The allocations generally consist
of certain costs of human resources, legal, finance, information technology,
marketing and share based compensation.
Adjusted EBITDA in our Architectural segment decreased $8.6 million , or 81.1%,
to $2.0 million in the three months ended April 4, 2021 , from $10.6 million in
the three months ended March 29, 2020 . Adjusted EBITDA in the Architectural
segment also included corporate allocations of shared costs of $2.8 million and
$2.7 million , in the first quarter of 2021 and 2020, respectively. The
allocations generally consist of certain costs of human resources, legal,
finance, information technology, research and development, marketing and share
based compensation.
Liquidity and Capital Resources
Our liquidity needs for operations vary throughout the year. Our principal
sources of liquidity are cash flows from operating activities, the borrowings
under our ABL Facility and an accounts receivable sales program with a third
party ("AR Sales Program") and our existing cash balance. Our anticipated uses
of cash in the near term include working capital needs, capital expenditures for
critical maintenance, safety and regulatory projects, and share repurchases. On
a continual basis, we evaluate and consider strategic acquisitions,
divestitures, and joint ventures to create shareholder value and enhance
financial performance.
We believe that our cash balance on hand, future cash generated from operations,
the use of our AR Sales Program, our ABL Facility, and ability to access the
capital markets will provide adequate liquidity for the foreseeable future. As
of April 4, 2021 , we had $323.2 million of cash and cash equivalents,
availability under our ABL Facility of $220.5 million and availability under our
AR Sales Program of $30.0 million .
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MASONITE INTERNATIONAL CORPORATION
Cash Flows
Cash used in operating activities was $14.3 million during the three months
ended April 4, 2021 , compared to $6.0 million of cash provided by operating
activities in the three months ended March 29, 2020 . This $20.4 million decrease
in cash provided by operating activities was due to changes in net working
capital and a $16.0 million decrease in other assets and liabilities, partially
offset by a $21.1 million increase in net income attributable to Masonite,
adjusted for non-cash and non-operating items in the first three months of 2021
compared to the same period in 2020.
Cash used in investing activities was $12.3 million during the three months
ended April 4, 2021 , compared to $17.8 million in the three months ended
March 29, 2020 . This $5.5 million decrease in cash used in investing activities
was driven by a $3.3 million decrease in cash additions to property, plant and
equipment and a $2.3 million increase in proceeds from the sale of property,
plant and equipment, partially offset by a $0.1 million increase in cash used in
acquisitions, net of cash acquired and other investing activities in the first
three months of 2021 compared to the same period in 2020.
Cash used in financing activities was $14.6 million during the three months
ended April 4, 2021 , compared to $37.0 million during the three months ended
March 29, 2020 . This $22.3 million decrease in cash used in financing activities
was driven by a $25.2 million decrease in cash used for repurchases of common
shares, partially offset by a $1.9 million increase in cash used for tax
withholding on share based awards, a $0.9 million increase in cash used for
repayments of long-term debt and a $0.1 million increase in distributions to
non-controlling interests in the first three months of 2021 compared to the same
period in 2020.
Share Repurchases
We currently have in place a $600.0 million share repurchase authorization,
stemming from three separate authorizations by our Board of Directors. During
the three months ended April 4, 2021 , we repurchased and retired 84,983 of our
common shares in the open market at an aggregate cost of $9.6 million as part of
the share repurchase programs. During the three months ended March 29, 2020 , we
repurchased 567,271 of our common shares in the open market at an aggregate cost
of $34.8 million , prior to temporarily suspending our repurchase program on
March 18, 2020 . As of April 4, 2021 , there was $90.7 million available for
repurchase in accordance with the share repurchase programs.
Other Liquidity Matters
Our cash and cash equivalents balance includes cash held in foreign countries in
which we operate. Cash held outside Canada , in which we are incorporated, is
free from significant restrictions that would prevent the cash from being
accessed to meet our liquidity needs including, if necessary, to fund operations
and service debt obligations in Canada . However, earnings from certain
jurisdictions are indefinitely reinvested in those jurisdictions. Upon the
repatriation of any earnings to Canada , in the form of dividends or otherwise,
we may be subject to Canadian income taxes and withholding taxes payable to the
various foreign countries. As of April 4, 2021 , we do not believe adverse tax
consequences exist that restrict our use of cash or cash equivalents in a
material manner.
We also routinely monitor the changes in the financial condition of our
customers and the potential impact on our results of operations. There has not
been a change in the financial condition of any customer that has had a material
adverse effect on our results of operations. However, if economic conditions
were to deteriorate, it is possible there could be an impact on our results of
operations in a future period and this impact could be material.
Accounts Receivable Sales Program
Under the AR Sales Program, we can transfer ownership of eligible trade accounts
receivable of certain customers. Receivables are sold outright to a third party
who assumes the full risk of collection, without recourse to us in the event of
a loss. Transfers of receivables under this program are accounted for as sales.
Proceeds from the transfers reflect the face value of the accounts receivable
less a discount. Receivables sold under the AR Sales Program are excluded from
trade accounts receivable in the condensed consolidated balance sheets and are
included in cash flows from operating activities in the condensed consolidated
statements of cash flows. The discounts on the sales of trade accounts
receivable sold, if any, under the AR Sales Program were not material for any of
the periods presented and were recorded in selling, general and administration
expenses within the condensed consolidated statements of comprehensive income
(loss).
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MASONITE INTERNATIONAL CORPORATION 5.375% Senior Notes due 2028 OnJuly 25, 2019 , we issued$500.0 million aggregate principal senior unsecured notes (the "2028 Notes"), all of which was outstanding as ofApril 4, 2021 . The 2028 Notes bear interest at 5.375% per annum. The net proceeds from issuance of the 2028 Notes, together with available cash balances, were used to redeem the remaining$500.0 million aggregate principal amount of similar senior unsecured notes, including the payment of related premiums, fees and expenses. The 2028 Notes were issued under an indenture which contains restrictive covenants that are described in detail in our Annual Report on Form 10-K for the year endedJanuary 3, 2021 . As ofApril 4, 2021 , we were in compliance with all covenants under the indenture governing the 2028 Notes. 5.750% Senior Notes due 2026 OnAugust 27, 2018 , we issued$300.0 million aggregate principal senior unsecured notes (the "2026 Notes"), all of which were outstanding as ofApril 4, 2021 . The 2026 Notes bear interest at 5.750% per annum. The 2026 Notes were issued under an indenture which contains restrictive covenants that are described in detail in our Annual Report on Form 10-K for the year endedJanuary 3, 2021 . As ofApril 4, 2021 , we were in compliance with all covenants under the indenture governing the 2026 Notes. ABL Facility OnJanuary 31, 2019 , we and certain of our subsidiaries entered into a$250.0 million asset-based revolving credit facility (the "ABL Facility") maturing onJanuary 31, 2024 , which replaced the previous facility. Borrowings under the ABL Facility bear interest at a rate which is described in more detail in Note 6. The ABL Facility contains various customary representations, warranties by us and covenants that are described in detail in our Annual Report on Form 10-K for the year endedJanuary 3, 2021 . As ofApril 4, 2021 , we were in compliance with all covenants under the credit agreement governing the ABL Facility. We had availability of$220.5 million under our ABL Facility and there were no amounts outstanding as ofApril 4, 2021 . Supplemental Guarantor Financial Information Our obligations under the 2028 Notes and 2026 Notes and the ABL Facility are fully and unconditionally guaranteed, jointly and severally, by certain of our directly or indirectly wholly-owned subsidiaries. The following unaudited supplemental financial information for our non-guarantor subsidiaries is presented: Our non-guarantor subsidiaries generated external net sales of$569.2 million and$491.9 million for the three months endedApril 4, 2021 , andMarch 29, 2020 , respectively. Our non-guarantor subsidiaries generated Adjusted EBITDA of$77.0 million and$68.4 million for the three months endedApril 4, 2021 , andMarch 29, 2020 , respectively. Our non-guarantor subsidiaries had total assets of$2.2 billion as ofApril 4, 2021 , andJanuary 3, 2021 , and total liabilities of$943.8 million and$935.3 million as ofApril 4, 2021 , andJanuary 3, 2021 , respectively. Changes in Accounting Standards and Policies Changes in accounting standards and policies are discussed in Note 1. Business Overview and Significant Accounting Policies in the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report. Item 3. Quantitative and Qualitative Disclosures about Market Risk For our disclosures about market risk, please see Part II, Item 7A. "Quantitative and Qualitative Disclosures about Market Risk," in our Annual Report on Form 10-K for the year endedJanuary 3, 2021 . We believe there have been no material changes to the information provided therein. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in theSEC's rules and forms and that such information is accumulated and communicated to 27 --------------------------------------------------------------------------------
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MASONITE INTERNATIONAL CORPORATION management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting during the fiscal quarter covered by this report that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. 28 --------------------------------------------------------------------------------
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