Acquisitions

2018 Acquisition

On January 29, 2018, we completed the acquisition of DW3 Products Holdings Limited (“DW3”), a leading UK provider of high quality premium door solutions and window systems, supplying products under brand names such as Solidor, Residor, Nicedor and Residence. We acquired 100% of the equity interests in DW3 for cash consideration of $96.3 million, net of cash acquired. DW3 is based in Stoke-on-Trent and Gloucester, England, and their products and service model are a natural addition to our existing UK business. DW3’s online quick ship capabilities and product portfolio both complement and expand the strategies we are pursuing with our business. The excess purchase price over the fair value of net assets acquired of $36.5 million was allocated to goodwill. The goodwill principally represents anticipated synergies to be gained from the integration into our existing United Kingdom business. This goodwill is not deductible for tax purposes and relates to the Europe segment.

The fair value of assets acquired and liabilities assumed in the DW3 acquisition are as follows:



(In thousands)	DW3
Accounts receivable	$	8,590
Inventory	5,059
Property, plant and equipment	8,196
Goodwill	36,503
Intangible assets	60,743
Accounts payable and accrued expenses	(10,418		)
Deferred income taxes	(12,296		)
Other assets and liabilities, net	(68		)
Cash consideration, net of cash acquired	$	96,309

The fair values of tangible assets acquired and liabilities assumed from the DW3 acquisition were based upon preliminary calculations and valuations and the estimates and assumptions 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 estimate which are not yet finalized relate to customer relationships, income tax liabilities and goodwill. The gross contractual value of acquired trade receivables was $9.1 million for the DW3 acquisition. 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. The intangible assets acquired are not expected to have any residual value. Intangible assets acquired from the DW3 acquisition consist of the following:



	Fair Value (in thousands)		Expected Useful Life (Years)
Customer relationships	$	47,282	10.0
Trademarks and trade names	12,069		10.0
Patents	1,278		10.0
Other	114		3.0
Total intangible assets acquired	$	60,743

The following schedule represents the amounts of net sales and net income (loss) attributable to Masonite from the DW3 acquisition which have been included in the consolidated statements of comprehensive income (loss) for the periods indicated subsequent to the acquisition date.



	Three Months Ended April 1, 2018
(In thousands)	Three Months Ended April 1, 2018
Net sales	$	11,198
Net income (loss) attributable to Masonite	948

2017 Acquisition

On October 2, 2017, we completed the acquisition of A&F Wood Products, Inc. (“A&F”), through the purchase of 100% of the equity interests in A&F and certain assets of affiliates of A&F for cash consideration of $13.8 million, net of cash acquired. A&F is based in Howell, Michigan, and is a wholesaler and fabricator of architectural and commercial doors in the Midwest United States. The excess purchase price over the fair value of net assets acquired of $5.9 million was allocated to goodwill. The goodwill principally represents anticipated synergies from A&F's integration into our existing Architectural door business. This goodwill is not deductible for tax purposes and relates to the Architectural segment.

The aggregate consideration paid for the A&F acquisition was as follows:



(In thousands)	A&F
Accounts receivable	$	2,169
Inventory	1,230
Property, plant and equipment	2,716
Goodwill	5,895
Intangible assets	4,400
Accounts payable and accrued expenses	(694		)
Other assets and liabilities, net	(1,903		)
Cash consideration, net of cash acquired	$	13,813

The fair values of intangible assets acquired are based on management’s estimates and assumptions including variations of the income approach. The intangible asset acquired from A&F consists solely of customer relationships and is being amortized over the weighted average amortization period of 10.0 years. The intangible asset is not expected to have any residual value. The gross contractual value of acquired trade receivables was $2.2 million for the A&F acquisition.

Pro Forma Information

The following unaudited pro forma financial information represents the consolidated financial information as if the acquisitions had been included in our consolidated results beginning on the first day of the fiscal year prior to their respective acquisition dates. The pro forma results have been calculated after adjusting the results of the acquired entities to remove intercompany transactions and transaction costs incurred and to 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 the respective acquisitions, 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 acquisitions; 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.



	Three Months Ended April 1, 2018
(In thousands, except per share amounts)	Masonite		DW3		Pro Forma
Net sales	$	517,879	$	4,918	$	522,797
Net income (loss) attributable to Masonite	20,826		81		20,907

Basic earnings (loss) per common share	$	0.74			$	0.74
Diluted earnings (loss) per common share	0.73				0.73



	Three Months Ended April 2, 2017
(In thousands, except per share amounts)	Masonite		DW3			A&F		Historical Sales to A&F			Pro Forma
Net sales	$	487,181	$	12,694		$	3,140	$	(381	)	$	502,634
Net income (loss) attributable to Masonite	23,565		(133		)	193		(14		)	23,611

Basic earnings (loss) per common share	$	0.79									$	0.79
Diluted earnings (loss) per common share	0.77										0.78