Segment Information

12 Months Ended

Dec. 29, 2019

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

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

• depreciation;

• amortization;

• share based compensation expense;

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

• registration and listing fees;

• restructuring costs;

• asset impairment;

• loss (gain) on disposal of subsidiaries;

• interest expense (income), net;

• loss on extinguishment of debt;

• other expense (income), net;

• income tax expense (benefit);

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

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

This definition of Adjusted EBITDA differs from the definitions of EBITDA contained in the indenture governing the 2028 and 2026 Notes and the credit agreement governing the ABL Facility. Although Adjusted EBITDA is not a measure of financial condition or performance determined in accordance with GAAP, it is used to evaluate and compare the operating performance of the segments and it is one of the primary measures used to determine employee incentive compensation. Intersegment sales are recorded using market prices.

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



	Year Ended December 29, 2019
(In thousands)	North American Residential			Europe			Architectural			Corporate & Other			Total
Sales	$	1,469,194		$	323,137		$	380,300		$	23,941		$	2,196,572
Intersegment sales	(3,386		)	(1,506		)	(14,997		)	—			(19,889		)
Net sales to external customers	$	1,465,808		$	321,631		$	365,303		$	23,941		$	2,176,683

Adjusted EBITDA	$	232,512		$	46,219		$	40,470		$	(35,817	)	$	283,384
Depreciation and amortization	37,689			26,257			19,705			16,198			99,849
Interest expense, net	—			—			—			46,489			46,489
Income tax expense	—			—			—			17,309			17,309



	Year Ended December 30, 2018
(In thousands)	North American Residential			Europe			Architectural			Corporate & Other			Total
Sales	$	1,458,957		$	371,069		$	340,609		$	22,869		$	2,193,504
Intersegment sales	(4,198		)	(2,066		)	(17,137		)	—			(23,401		)
Net sales to external customers	$	1,454,759		$	369,003		$	323,472		$	22,869		$	2,170,103

Adjusted EBITDA	$	202,465		$	44,985		$	37,742		$	(17,256	)	$	267,936
Depreciation and amortization	31,425			24,638			19,667			11,942			87,672
Interest expense, net	—			—			—			39,008			39,008
Income tax expense	—			—			—			23,813			23,813



	Year Ended December 31, 2017
(In thousands)	North American Residential			Europe			Architectural			Corporate & Other			Total
Sales	$	1,433,268		$	295,862		$	307,237		$	23,605		$	2,059,972
Intersegment sales	(4,338		)	(3,936		)	(18,773		)	—			(27,047		)
Net sales to external customers	$	1,428,930		$	291,926		$	288,464		$	23,605		$	2,032,925

Adjusted EBITDA	$	200,179		$	33,820		$	30,050		$	(9,543	)	$	254,506
Depreciation and amortization	33,167			17,455			17,774			13,507			81,903
Interest expense, net	—			—			—			30,153			30,153
Income tax benefit	—			—			—			(27,560		)	(27,560		)

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



	Year Ended
(In thousands)	December 29, 2019		December 30, 2018			December 31, 2017
Net income attributable to Masonite	$	44,602	$	92,710		$	151,739
Plus:
Depreciation	70,736		59,089			57,528
Amortization	29,113		28,583			24,375
Share based compensation expense	10,023		7,681			11,644
Loss on disposal of property, plant and equipment	6,396		3,470			1,893
Restructuring costs	9,776		1,624			850
Asset impairment	13,767		5,243			—
Loss on disposal of subsidiaries	14,260		—			212
Interest expense, net	46,489		39,008			30,153
Loss on extinguishment of debt	14,523		5,414			—
Other expense (income), net	1,953		(2,533		)	(1,570		)
Income tax expense	17,309		23,813			(27,560		)
Net income attributable to non-controlling interest	4,437		3,834			5,242
Adjusted EBITDA	$	283,384	$	267,936		$	254,506

We derive revenues from two major product lines: interior and exterior products. We do not review or analyze our two major product lines below net sales. Additionally, we sell door components to external customers which are not otherwise consumed in our vertical operations. Sales for the product lines are summarized as follows for the periods indicated:



	Year Ended
(In thousands)	December 29, 2019		December 30, 2018		December 31, 2017
Net sales to external customers:
Interior products ⁽¹⁾	$	1,427,459	$	1,429,532	$	1,366,871
Exterior products ⁽¹⁾	628,301		612,888		557,808
Components ⁽¹⁾	120,923		127,683		108,246
Total	$	2,176,683	$	2,170,103	$	2,032,925

____________

(1) Prior year amounts have been reclassified to conform to the current year presentation. There were no impacts at the reportable segment level.

Net sales information with respect to geographic areas exceeding 10% of consolidated net sales is as follows for the periods indicated:



	Year Ended
(In thousands)	December 29, 2019		December 30, 2018		December 31, 2017
Net sales to external customers from facilities in:
United States	$	1,483,697	$	1,388,680	$	1,333,223
Canada	304,497		329,292		327,644
United Kingdom	281,888		328,669		253,564
Other	106,601		123,462		118,494
Total	$	2,176,683	$	2,170,103	$	2,032,925

In the years ended December 29, 2019, December 30, 2018, and December 31, 2017, net sales to The Home Depot, Inc., were $372.4 million, $385.3 million and $356.5 million, respectively, which are included in the North American Residential segment. No other individual customer's net sales exceeded 10% of consolidated net sales for any of the periods presented.

Geographic information regarding property, plant and equipment which exceed 10% of consolidated property, plant and equipment is as follows as of the dates indicated:



(In thousands)	December 29, 2019		December 30, 2018
United States	$	396,914	$	412,072
Canada	63,786		62,626
Other	164,885		135,055
Total	$	625,585	$	609,753