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As filed with the Securities and Exchange Commission on April 17, 2007

No. 333-139791



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Amendment No. 1
to
Form F-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933


Masonite International Inc.
(Exact name of registrant as specified in its charter)

Canada
(State or other jurisdiction of
incorporation or organization)
  2431
(Primary Standard Industrial
Classification Code Number)
  Not Applicable
(I.R.S. Employer
Identification No.)

1600 Britannia Road East
Mississauga, Ontario L4W 1J2 Canada
(905) 670-6500
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Masonite Corporation
(Exact name of registrant as specified in its charter)
  Masonite International Corporation
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation
or organization)

 

2431
(Primary Standard
Industrial Classification
Code Number)

 

64-0198020
(I.R.S. Employer
Identification No.)

 

Ontario, Canada
(State or other jurisdiction
of incorporation
or organization)

 

2431
(Primary Standard
Industrial Classification
Code Number)

 

98-0377314
(I.R.S. Employer
Identification No.)

One North Dale Mabry Highway, Suite 950
Tampa, Florida 33609
(813) 877-2726
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

 

1600 Britannia Road East
Mississauga, Ontario L4W 1J2 Canada

(905) 670-6500
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Frederick Arnold
One North Dale Mabry Highway, Suite 950
Tampa, Florida 33609
(813) 739-3000
(Name, address, including zip code, and telephone number, including area code, of agent for service)


Copies:
Joseph H. Kaufman, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017-3954
Tel: (212) 455-2000
Fax: (212) 455-2502


Approximate date of commencement of proposed sale of the securities to the public: The exchange will occur as soon as practicable after the effective date of this Registration Statement.

       If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.   o

       If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o

       If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o



Title of Each Class Of
Securities to be Registered


 

Amount to Be
Registered


 

Proposed
Maximum
Offering Price
Per Unit


 

Proposed
Maximum
Aggregate
Offering Price


 

Amount Of
Registration
Fee


Senior Subordinated Notes due 2015 issued by Masonite Corporation   $412,000,000      100%(1)   $412,000,000(1)   $44,084(2)

Guarantees of Senior Subordinated Notes due 2015 issued by Masonite Corporation(3)    (4)       (4)    (4)    (4)

Senior Subordinated Notes due 2015 issued by
Masonite International Corporation
  $358,000,000      100%(1)   $358,000,000(1)   $38,306(2)

Guarantees of Senior Subordinated Notes due 2015 issued by Masonite International Corporation(3)    (4)       (4)    (4)    (4)

(1)
Estimated solely for the purpose of calculating the registration fee under Rule 457 of the Securities Act of 1933, as amended.
(2)
Previously paid.
(3)
See inside facing page for table of additional registrant guarantors.
(4)
Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no separate fee for the guarantees is payable.


       The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.





TABLE OF ADDITIONAL REGISTRANT GUARANTORS

Exact Name of Registrant
As Specified In Its Charter

  State or other
Jurisdiction of
Incorporation
or Organization

  IRS
Employer
Identification
Number

  Address, Including
Zip Code, of
Registrant's Principal
Executive Offices

  Phone Number
3061275 Nova Scotia Company   Nova Scotia   Not Applicable   1600 Britannia Road East
Mississauga, Ontario
L4W 1J2
Canada
  (905) 670-6500

Bonlea Limited

 

United Kingdom

 

Not Applicable

 

Birthwaite Business Park
Huddersfield Road
Darton, Barnsley S75 5JS
United Kingdom

 

+44-1226-383434

Castlegate Entry Systems, Inc.

 

Canada

 

Not Applicable

 

1600 Britannia Road East
Mississauga, Ontario
L4W 1J2
Canada

 

(905) 670-6500

Crown Door Corporation

 

Canada

 

Not Applicable

 

1600 Britannia Road East
Mississauga, Ontario
L4W 1J2
Canada

 

(905) 670-6500

Cutting Edge Tooling, Inc.

 

Florida

 

83-0338818

 

One North Dale Mabry Highway, Suite 950
Tampa, Florida 33609

 

(813) 877-2726

Door Installation Specialists Corporation

 

Florida

 

20-1562354

 

One North Dale Mabry Highway, Suite 950
Tampa, Florida 33609

 

(813) 877-2726

Eger Properties

 

California

 

68-0316847

 

One North Dale Mabry Highway, Suite 950
Tampa, Florida 33609

 

(813) 877-2726

Florida Made Door Co.

 

Florida

 

59-0737960

 

One North Dale Mabry Highway, Suite 950
Tampa, Florida 33609

 

(813) 877-2726

Masonite Chile Holdings S.A.

 

Chile

 

Not Applicable

 

Ruta Q-50, Km. 1,5
Cabrero, Chile
447000

 

+56-43-404402

Masonite Components

 

Ireland

 

Not Applicable

 

Derryoughter
Drumsna
Carrick on Shannon
Co. Leitrim
Republic of Ireland

 

+353-71-9659500

Masonite Europe

 

Ireland

 

Not Applicable

 

Derryoughter
Drumsna
Carrick on Shannon
Co. Leitrim
Republic of Ireland

 

+353-71-9659500

Masonite Europe Limited

 

United Kingdom

 

Not Applicable

 

Birthwaite Business Park
Huddersfield Road,
Darton, Barnsley, S75 5JS
United Kingdom

 

+44-1226-383434

Masonite Ireland

 

Ireland

 

Not Applicable

 

Derryoughter
Drumsna
Carrick on Shannon
Co. Leitrim
Republic of Ireland

 

+353-71-9659500

Masonite Mexico, S.A. de C.V.

 

Mexico

 

Not Applicable

 

Carretera Laredo Km. 23
Cienega de Flores, Estado
Nuevo Leon 65550
Mexico

 

+5281-8220-8900

Masonite PrimeBoard, Inc.

 

North Dakota

 

20-2765752

 

One North Dale Mabry Highway, Suite 950
Tampa, Florida 33609

 

(813) 877-2726

Pintu Acquisition Company, Inc.

 

Delaware

 

62-1647932

 

One North Dale Mabry Highway, Suite 950
Tampa, Florida 33609

 

(813) 877-2726

Premdor Crosby Limited

 

United Kingdom

 

Not Applicable

 

Birthwaite Business Park
Huddersfield Road,
Darton, Barnsley, S75 5JS
United Kingdom

 

+44-1226-383434

Premdor Finance LLC

 

Delaware

 

51-0404966

 

Nemours Building, Suite 1414
1007 Orange Street
Wilmington, Delaware 19801

 

(302) 652-5200
                 


Premdor U.K. Holdings Limited

 

United Kingdom

 

Not Applicable

 

Birthwaite Business Park
Huddersfield Road,
Darton, Barnsley S75 5JS
United Kingdom

 

+44-1226-383434

WMW, Inc.

 

Delaware

 

76-0533326

 

One North Dale Mabry Highway, Suite 950
Tampa, Florida 33609

 

(813) 877-2726

Woodlands Millwork I, Ltd.

 

Texas

 

76-0285989

 

One North Dale Mabry Highway, Suite 950
Tampa, Florida 33609

 

(813) 877-2726

Information contained herein is subject to completion or amendment. A registration statement relating to those securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy.

Subject to Completion, dated April 16, 2007

PRELIMINARY PROSPECTUS

LOGO

Masonite International Inc.

Masonite Corporation          Masonite International Corporation


OFFER TO EXCHANGE

        Up to $412,000,000 aggregate principal amount of Senior Subordinated Notes due 2015 issued by Masonite Corporation, which have been registered under the Securities Act of 1933, for any and all outstanding Senior Subordinated Notes due 2015 issued by Masonite Corporation.

        Up to $358,000,000 aggregate principal amount of Senior Subordinated Notes due 2015 issued by Masonite International Corporation, which have been registered under the Securities Act of 1933, for any and all outstanding Senior Subordinated Notes due 2015 issued by Masonite International Corporation.

        The exchange notes will be fully and unconditionally guaranteed on an unsecured basis by our parent company, Masonite International Inc., and certain of our domestic and foreign subsidiaries.


        We are conducting the exchange offer in order to provide you with an opportunity to exchange your unregistered outstanding notes for freely tradeable exchange notes that have been registered under the Securities Act of 1933.

The Exchange Offer

        All untendered outstanding notes will continue to be subject to the restrictions on transfer set forth in the outstanding notes and in the indentures. In general, the outstanding notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, we do not currently anticipate that we will register the outstanding notes under the Securities Act.

        You should carefully consider the "Risk Factors" beginning on page 18 of this prospectus before participating in the exchange offer.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the exchange notes to be distributed in the exchange offer or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.


The date of this prospectus is            , 2007.



TABLE OF CONTENTS

 
  Page
Presentation of Financial and Other Information   i
Enforceability of Civil Liabilities   ii
Exchange Rate Information   ii
Industry Data   ii
Prospectus Summary   1
Risk Factors   18
Forward-looking Statements   36
Use of Proceeds   37
Capitalization   38
The Transaction   39
Selected Historical Consolidated Financial Data   41
Management's Discussion and Analysis of Financial Condition and Results of Operations   45
Industry Overview   74
Business   76
Directors and Senior Management   88
Major Shareholders and Related Party Transactions   91
Description of Certain Indebtedness   94
The Exchange Offer   97
Description of Notes   107
U.S. Federal Income Tax Consequences   166
Canadian Federal Income Tax Considerations   167
ERISA Considerations   168
Book-Entry, Settlement and Clearance   169
Plan of Distribution   172
Legal Matters   173
Experts   173
Available Information   173
Index to Consolidated Financial Statements   F-1

        We have not authorized any dealer, salesperson or other person to give any information or represent anything to you other than the information contained in this prospectus. You must not rely on unauthorized information or representations.

        This prospectus does not offer to sell nor ask for offers to buy any of the securities in any jurisdiction where it is unlawful, where the person making the offer is not qualified to do so, or to any person who cannot legally be offered the securities. The information in this prospectus is current only as of the date on its cover, and may change after that date.

        Following the date of this prospectus we will be subject to reporting obligations and any filings we make will be available via the website of the United States Securities and Exchange Commission, or SEC, at www.sec.gov. You can also obtain any filed documents regarding us without charge by written or oral request to:

Masonite International Inc.
One North Dale Mabry Highway, Suite 950
Tampa, Florida 33609
Attn. Frederick Arnold
Telephone: (813) 739-3000

        Please note that copies of documents provided to you will not include exhibits.

        In order to receive timely delivery of requested documents in advance of the expiration date of the exchange offer, you should make your request no later than                 , 2007, which is five business days before you must make a decision regarding the exchange offer.

        See "Available Information".


PRESENTATION OF FINANCIAL AND OTHER INFORMATION

        Unless we indicate otherwise, financial information in this preliminary prospectus has been prepared in accordance with Canadian GAAP. Canadian GAAP differs in some respects from U.S. GAAP, and thus our financial statements may not be comparable to the financial statements of U.S. companies. Certain differences as they apply to us are summarized in note 25 to the annual consolidated financial statements included elsewhere in this prospectus.

i




ENFORCEABILITY OF CIVIL LIABILITIES

        Masonite International Inc. is incorporated under the Canada Business Corporations Act and Masonite International Corporation, a subsidiary of Masonite International Inc., is incorporated under the Ontario Business Corporations Act. Certain of our guarantors are also incorporated in jurisdictions outside of the United States. Each of Masonite International Inc. and Masonite International Corporation has its principal executive office in Ontario, Canada. Certain of the directors, officers and experts named in this prospectus are not residents of the United States, and all or a substantial portion of their assets and a substantial portion of the assets of Masonite International Inc., Masonite International Corporation and our non-U.S. guarantors are located outside of the United States. It may be difficult for you to effect service of process within the United States upon us or our directors, officers and experts who are not residents of the United States or to realize in the United States upon judgments of U.S. courts based upon the civil liability under the federal securities laws of the United States. We have been advised by Davies Ward Phillips & Vineberg LLP, our Canadian counsel, that there is doubt as to the enforceability in Canada against us or against our directors, officers or experts who are not residents of the United States, in original actions or in actions for enforcement of judgments of U.S. courts, of liabilities based solely upon the federal securities laws of the United States.


EXCHANGE RATE INFORMATION

        The following table sets forth, for the periods indicated, translations of Canadian dollars into U.S. dollars at specified rates. These translations have been made at the indicated noon-buying rate in New York City for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York. These rates are provided solely for your convenience. They are not necessarily the rates used by us in the preparation of our financial statements.

Year Ended December 31

  Average
2002   0.6368
2003   0.7186
2004   0.7702
2005   0.8269
2006   0.8821
Recent Monthly Data

  Average
  Low
  High
October 2006   0.8861   0.8784   0.8965
November 2006   0.8804   0.8715   0.8869
December 2006   0.8672   0.8582   0.8760
January 2007   0.8502   0.8457   0.8586
February 2007   0.8540   0.8437   0.8631
March 2007   0.8561   0.8467   0.8673


INDUSTRY DATA

        We obtained the industry, market and competitive position data referenced throughout this prospectus from our own internal estimates and research as well as from industry and general publications and research, and surveys and studies conducted by third parties. Industry publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that each of these publications, studies and surveys is reliable, we have not independently verified market and industry data from third party sources. While we believe our internal company research is reliable, such research has not been verified by any independent source.

ii



PROSPECTUS SUMMARY

        This summary highlights information appearing elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before participating in the exchange offer. You should read the entire prospectus carefully.

        Unless the context otherwise requires, in this prospectus "Masonite", the "company", "we", "us" and "our" refer to Masonite International Inc. ("Masonite International") and its subsidiaries; and references to the "Issuers" mean Masonite Corporation ("Masonite U.S.") and Masonite International Corporation ("Masonite Canada"), the issuers of the notes. Masonite U.S., a direct wholly owned subsidiary of Masonite International, operates Masonite International's U.S. subsidiaries. Masonite Canada, also a direct wholly owned subsidiary of Masonite International, operates Masonite International's Canadian subsidiaries as well as certain other non-U.S. subsidiaries. All amounts are in U.S. dollars unless specified otherwise.


Our Company

        We are one of the largest manufacturers of doors in the world based on the number of doors sold, with a significant market share in both interior and exterior door products. We sell approximately 50 million doors per year. Our products are sold in over 70 countries, including the United States, Canada, the United Kingdom, France and throughout Central and Eastern Europe. For the year ended December 31, 2006 our sales were $2.5 billion.

        Our products are marketed under well-recognized brand names throughout the world. In North America, we market our doors primarily under the Masonite brand, which is a leading brand in the door industry according to published industry sources. Our sales are derived from the two primary sources of door demand: residential repair, renovation and remodeling of existing homes, and the construction of new homes. We believe that sales to the less cyclical residential repair, renovation and remodeling sector represents the larger component of our business in North America. Approximately 77% of our 2006 sales were generated in North America, where we believe we have a leading market share in both interior and exterior doors, 19% in Europe, and the remainder in South America, Asia, Africa and the Middle East.

        We have over 80 manufacturing and distribution facilities in 18 countries, primarily in North America and Europe. We are a vertically integrated producer, manufacturing key components of doors, including composite molded and veneer door facings, glass door lites and cut stock. In order to realize cost advantages and efficiencies provided by vertical integration, we have integrated the various operations in our North American segment as well as our Europe and Other segment to the point where we share common systems, financing and infrastructure. We believe that our high level of vertical integration provides us with competitive and cost advantages over competitors not as vertically integrated, and enhances our ability to develop new and proprietary products.

        As part of our "all products" cross-merchandising strategy, we provide our customers with 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, louvre and specially-ordered commercial and architectural doors. We also manufacture exterior residential steel and fiberglass doors and entry systems. In 2006, sales of interior and exterior products accounted for approximately 66% and 34% of our revenue, respectively. In addition, we also sell certain door components to other door manufacturers.

        We sell doors through multiple distribution channels, including: (i) retail home center customers; (ii) one-step distributors that sell directly to homebuilders and contractors; and (iii) two-step wholesale distributors that resell to other distributors. For North American retail home center customers, our numerous door fabrication facilities provide value-added fabrication and logistical services, including 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 differentiate us from our competitors.

1




Post-Transaction Initiatives

        We were acquired on April 6, 2005 by an affiliate of Kohlberg Kravis Roberts & Co. L.P., or KKR. Since this acquisition, which we refer to as the Transaction, we have implemented a strategic focus designed to enhance the operating performance of our business and deliver increased value to our customers.

        Our "Blueprint for Profitable Growth" focuses employees at all levels on achieving key customer and manufacturing metrics, including targets for customer service, product profitability and manufacturing efficiencies. To accomplish these goals we have deployed an intensive program based upon "Lean Sigma" methodologies, along with a comprehensive review of product pricing. In addition, we have introduced a detailed set of operational metrics which are used to assess facility performance and to benchmark best practices across the company. These metrics measure key processes and controllable costs, including fill rates, lead times, direct labor, overhead, cost of quality, distribution and inventory levels. In 2007, we plan to train approximately 200 of our employees in the disciplines of Lean Sigma, and hire additional Lean Sigma experts from outside our company in order to effect these process-improvement initiatives. We believe that these initiatives will provide us with a strong platform for future profitability and growth.


Business Strengths

        We believe that we are distinguished by the following business strengths:

        Leading Global Manufacturer.    With operations in 18 countries and customers in over 70 countries, we are a leading manufacturer of doors in the United States, Canada, the United Kingdom and France.

        Diversified Business.    Our business is diversified by geography and distribution channel, with a broad product offering of doors. We sell products through multiple distribution channels, including one- and two-step distributors, retail home centers and wholesale building supply dealers, thereby reducing our reliance on any one channel.

        Focus on Stable End Market.    We generate the majority of our revenue from residential repair, renovation and remodeling spending, which has historically been less cyclical than new construction spending.

        Strong Brand Recognition.    Our brands are well recognized throughout the building products industry for their design, innovation, reliability and quality according to published industry sources. We market our doors globally, primarily under the Masonite® and Premdor® brands, as well as other well-recognized names.

        Strong Customer Relationships with Well-Established Multi-Channel Distribution.    We have well-established relationships within all door distribution channels. Our top ten customers have been purchasing doors from us for more than 11 years on average and we believe that in most cases we are their leading door supplier.

        Low Cost Producer with Leading Technology and Infrastructure.    We have numerous design, process and product patents developed primarily at our 141,000 square foot research facility in West Chicago.

        Vertically Integrated Operations.    We are one of the few vertically integrated manufacturers of doors in the world, enabling us to control the many facets of production, decrease lead times and enhance customer service.


Business Strategy

        We intend to build upon our leading position in the door market worldwide through the following key elements of our business strategy:

        Implement the Blueprint for Profitable Growth.    Our Blueprint for Profitable Growth was introduced during the fourth quarter of 2005 and distributed to employees around the world and to many of our customers, suppliers and investors. The Blueprint provides direction for all employees with clear,

2



distinct and common goals and actions that we believe will enable us to improve operations across our business.

        We identified three priorities which we believe will improve our performance:


        Enhance Value Proposition for Our Customers.    Through the implementation of Lean Sigma, we intend to further enhance the value we provide to our customers by decreasing our lead times and focusing on other key customer service metrics.

        Continue Leadership in New Product Design and Technology.    We consider our strong focus on research and development to be one of our major strengths and intend to capitalize on our leadership in this area through the development of new and innovative products and improved manufacturing processes.

        There are a variety of risks inherent in the execution of our business strategy and the maintenance of our business strengths. For example, we must continually improve our door designs so that our doors remain among the most attractive available. In addition, we must continue to deliver quality products free of defects at competitive prices on a timely basis to our customers.


Recent Developments

        In the first quarter of 2007, we were notified by our largest customer, The Home Depot, that they would be moving substantially all of their business with us in certain geographic regions to a competitor later in 2007. This decision by The Home Depot was the result of price increases we put in place during 2006. Our sales to The Home Depot in the regions affected are approximately $250-300 million on an annualized basis. Subsequent to The Home Depot notification, we announced the permanent closure of facilities dedicated to The Home Depot in Toledo, Ohio, Logan Township, New Jersey and Frederick, Maryland. We expect to incur a charge in 2007 in connection with the transition of this business.


Issuer Information

        Masonite International Inc., the parent company of Masonite Corporation and Masonite International Corporation, was incorporated under the Canada Business Corporations Act on February 2, 2005. Masonite Corporation is a Delaware corporation incorporated on September 1, 1925. Masonite International Corporation and Specialty Buildings Products Ltd. amalgamated on May 30, 2005 to form Masonite International Corporation under the Ontario Business Corporations Act.

        Our principal executive offices are located at 1600 Britannia Road East, Mississauga, Ontario, Canada L4W 1J2 and One North Dale Mabry Highway, Suite 950, Tampa, Florida 33609. Our telephone number is (905) 670-6500 and (813) 877-2726, respectively. Our web site is located at www.masonite.com. Information on our web site does not constitute part of this prospectus and is not incorporated by reference herein.

3



Summary of the Terms of the Exchange Offer

        On April 6, 2005, in connection with the closing of the Transaction, we entered into a $770.0 million senior subordinated loan agreement. The proceeds of the loan were used to partially fund the Transaction. See "The Transaction". The senior subordinated loan initially carried an interest rate of LIBOR plus 6.00%, which increased over time to a maximum interest rate of 11% per annum. On October 6, 2006, the senior subordinated loan was repaid in full with the automatic issuance of a new debt obligation comprised of a senior subordinated term loan bearing an interest rate of 11% and maturing on April 6, 2015. Certain lenders exercised their option on and after October 6, 2006 to receive Senior Subordinated Notes due 2015 for all or a part of the principal amount of the senior subordinated term loan of such lender then outstanding (the "private placement").

        In this prospectus, the terms "outstanding notes" refers to the Senior Subordinated Notes due 2015 issued by Masonite Corporation (the "outstanding U.S. notes") and the Senior Subordinated Notes due 2015 issued by Masonite International Corporation (the "outstanding Canada notes") issued in the private placement; the term "exchange notes" refers to Senior Subordinated Notes due 2015 issued by Masonite Corporation and the Senior Subordinated Notes due 2015 issued by Masonite International Corporation, as registered under the Securities Act of 1933, as amended (the "Securities Act"); and the term "notes" refers to both the outstanding notes and the exchange notes.

General   In connection with the private placement, we entered into a registration rights agreement with The Bank of New York, as Trustee, for the holders of the outstanding notes (the "Trustee"), in which we and the guarantors agreed, among other things, to use our commercially reasonable efforts to file a registration statement within 90 days (January 4, 2007) after the date on which the outstanding notes were first issued and to consummate the exchange offer by the date that is 180 days (April 4, 2007) from the date outstanding notes were first issued.
    You are entitled to exchange in the exchange offer your outstanding notes for exchange notes representing the same underlying indebtedness, which are identical in all material respects to the outstanding notes except:
      the exchange notes have been registered under the Securities Act;
      the exchange notes are not entitled to certain registration rights which are applicable to the outstanding notes under the registration rights agreement; and
      certain additional interest rate provisions of the registration rights agreement are no longer applicable.
The Exchange Offer   We are offering to exchange up to:
      $412,000,000 aggregate principal amount of Senior Subordinated Notes due 2015 issued by Masonite Corporation, which have been registered under the Securities Act, for any and all outstanding Senior Subordinated Notes due 2015 issued by Masonite Corporation; and
      $358,000,000 aggregate principal amount of Senior Subordinated Notes due 2015 issued by Masonite International Corporation, which have been registered under the Securities Act, for any and all outstanding Senior Subordinated Notes due 2015 issued by Masonite International Corporation.
         

4


    Subject to the satisfaction or waiver of specified conditions, we will exchange, as evidence of the same underlying indebtedness, the exchange notes for all outstanding notes that are validly tendered and not validly withdrawn prior to the expiration of the applicable exchange offer. We will cause the exchange to be effected promptly after the expiration of the exchange offer.
    Upon completion of the exchange offer, there may be no market for the outstanding notes and you may have difficulty selling them.
Resales   Based on interpretations by the staff of the Securities and Exchange Commission, or the "SEC", set forth in no-action letters issued to third parties referred to below, we believe that you may resell or otherwise transfer exchange notes issued in the exchange offer without complying with the registration and prospectus delivery requirements of the Securities Act, if:
    1.   you are acquiring the exchange notes in the ordinary course of your business;
    2.   you do not have an arrangement or understanding with any person to participate in a distribution of the exchange notes;
    3.   you are not an "affiliate" of either of the Issuers within the meaning of Rule 405 under the Securities Act; and
    4.   you are not engaged in, and do not intend to engage in, a distribution of the exchange notes.
    If you are not acquiring the exchange notes in the ordinary course of your business, or if you are engaging in, intend to engage in, or have any arrangement or understanding with any person to participate in, a distribution of the exchange notes, or if you are an affiliate of the Issuers, then:
    1.   you cannot rely on the position of the staff of the SEC enunciated in Morgan Stanley & Co., Inc. (available June 5, 1991), Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SEC's letter to Shearman & Sterling dated July 2, 1993, or similar no- action letters; and
    2.   in the absence of an exception from the position of the SEC stated in (1) above, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale or other transfer of the exchange notes.
    If you are a broker-dealer and receive exchange notes for your own account in exchange for outstanding notes that you acquired as a result of market-making or other trading activities, you must acknowledge that you will deliver a prospectus, as required by law, in connection with any resale or other transfer of the exchange notes that you receive in the exchange offer. See "Plan of Distribution."
Expiration Date   The exchange offer will expire at 12:00 midnight, New York City time, on            , 2007, which is the 30th day after the date of this prospectus, unless extended by us. We do not currently intend to extend the expiration date of the exchange offer.
         

5


Withdrawal   You may withdraw the tender of your outstanding notes at any time prior to the expiration date of the exchange offer. We will return to you any of your outstanding notes that are not accepted for any reason for exchange, without expense to you, promptly after the expiration or termination of the exchange offer.
Interest on the Exchange Notes and the Outstanding Notes   Each exchange note will bear interest at the rate per annum set forth on the cover page of this prospectus from the most recent date to which interest has been paid on the outstanding notes. The interest on the notes will be payable on each April 15 and October 15. No interest will be paid on outstanding notes following their acceptance for exchange. Pursuant to the Exchange and Registration Rights Agreement, as the exchange offer was not consummated by April 4, 2007, additional interest began to accrue as of April 5, 2007 in an amount equal to $.05 per week per $1,000 principal amount of outstanding notes for a period of 90 days. The amount of additional interest shall increase by an additional $.05 per week per $1,000 principal amount of outstanding notes with respect to each subsequent 90-day period for which the exchange offer is not consummated, provided that the additional interest in the aggregate shall not exceed $.20 per week per $1,000 principal amount of outstanding notes. Notwithstanding the foregoing, the interest rate borne by the Notes shall not exceed 11.0% per annum, except as otherwise specified in the indentures governing the notes. To the extent the interest rate borne by the outstanding notes exceeds 11.0% per annum, we may elect to pay such excess interest through the issuance of additional notes, as provided in the Indentures. Additional interest will cease to accrue once the exchange offer is consummated.
Conditions to the Exchange Offer   The exchange offer is subject to customary conditions, which we may assert or waive. See "The Exchange Offer—Conditions to the Exchange Offer."
Procedures for Tendering Outstanding Notes   If you wish to participate in the exchange offer, you must complete, sign and date the accompanying letter of transmittal, or a facsimile of the letter of transmittal, according to the instructions contained in this prospectus and the letter of transmittal. You must then mail or otherwise deliver the letter of transmittal, or a facsimile of the letter of transmittal, together with the outstanding notes and any other required documents, to the exchange agent at the address set forth on the cover page of the letter of transmittal. If you hold outstanding notes through The Depository Trust Company, or "DTC", and wish to participate in the exchange offer for the outstanding notes, you must comply with the Automated Tender Offer Program procedures of DTC. By signing, or agreeing to be bound by, the letter of transmittal, you will represent to us that, among other things:
         

6


    1.   you are acquiring the exchange notes in the ordinary course of your business;
    2.   you do not have an arrangement or understanding with any person to participate in a distribution of the exchange notes;
    3.   you are not an "affiliate" of any of the Issuers within the meaning of Rule 405 under the Securities Act; and
    4.   you are not engaged in, and do not intend to engage in, a distribution of the exchange notes.
    If you are a broker-dealer and receive exchange notes for your own account in exchange for outstanding notes that you acquired as a result of market-making or other trading activities, you must represent to us that you will deliver a prospectus, as required by law, in connection with any resale or other transfer of such exchange notes.
    If you are not acquiring the exchange notes in the ordinary course of your business, or if you are engaged in, or intend to engage in, or have an arrangement or understanding with any person to participate in, a distribution of the exchange notes, or if you are an affiliate of any of the Issuers, then you cannot rely on the positions and interpretations of the staff of the SEC and you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale or other transfer of the exchange notes.
Special Procedures for Beneficial Owners   If you are a beneficial owner of outstanding notes that are held in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender those outstanding notes in the exchange offer, you should contact such person promptly and instruct such person to tender those outstanding notes on your behalf.
Guaranteed Delivery Procedures   If you wish to tender your outstanding notes and your outstanding notes are not immediately available or you cannot deliver your outstanding notes, the letter of transmittal and any other documents required by the letter of transmittal or you cannot comply with the DTC procedures for book-entry transfer prior to the expiration date, then you must tender your outstanding notes according to the guaranteed delivery procedures set forth in this prospectus under "The Exchange Offer—Guaranteed Delivery Procedures."
Effect on Holders of Outstanding Notes   In connection with the issuance of the outstanding notes, we entered into a registration rights agreement with the Trustee for the holders of the outstanding notes that grants the holders of outstanding notes registration rights. By making the exchange offer, we will have fulfilled most of our obligations under the registration rights agreement. Accordingly, we will not be obligated to pay additional interest as described in the registration rights agreement. If you do not tender your outstanding notes in the exchange offer, you will continue to be entitled to all the rights and limitations applicable to the outstanding notes as set forth in the applicable indenture, except we will not have any further obligation to you to provide for the registration of the outstanding notes under the registration rights agreement and we will not be obligated to pay additional interest as described in the registration rights agreement, except in certain limited circumstances.
         

7


    To the extent that outstanding notes are tendered and accepted in the exchange offer, the trading market for outstanding notes could be adversely affected.
Consequences of Failure to Exchange   All untendered outstanding notes will continue to be subject to the restrictions on transfer set forth in the outstanding notes and in the indenture. In general, the outstanding notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, we do not currently anticipate that we will register the outstanding notes under the Securities Act.
U.S. Federal Income Tax Consequences   The exchange of outstanding notes for exchange notes in the exchange offer will not be a taxable event for United States or Canadian federal income tax purposes. See "U.S. Federal Income Tax Consequences" and "Canadian Federal Income Tax Considerations."
Use of Proceeds   We will not receive any cash proceeds from the issuance of exchange notes in the exchange offer.
Exchange Agent   The Bank of New York, whose address and telephone number are set forth in the section captioned "The Exchange Offer—Exchange Agent" of this prospectus, is the exchange agent for the exchange offer.

8



Summary of the Terms of the Exchange Notes

        The terms of the exchange notes are identical in all material respects to the terms of the outstanding notes, except that the exchange notes will not contain terms with respect to transfer restrictions or additional interest upon a failure to fulfill certain of our obligations under the registration rights agreement. The exchange notes will evidence the same debt as the outstanding notes. The exchange notes will be governed by the same indentures under which the outstanding notes were issued, and each series of the exchange notes and the outstanding notes will constitute a single class and series of notes for all purposes under the respective indenture. The following summary is not intended to be a complete description of the terms of the notes. For a more detailed description of the notes, see "Description of Notes." The outstanding notes and the exchange notes are collectively referred to herein as the "notes" unless the context otherwise requires.


Issuers

 

Masonite U.S. and Masonite Canada.

Securities

 

Up to $412,000,000 aggregate principal amount of 11% Senior Subordinated Notes due 2015 issued by Masonite U.S.; and

 

 

Up to $358,000,000 aggregate principal amount of 11% Senior Subordinated Notes due 2015 issued by Masonite Canada.

Maturity Date

 

The notes will mature on April 6, 2015.

Interest Payment Dates

 

We will pay interest on the notes on each April 15 and October 15. Pursuant to the Exchange and Registration Rights Agreement, as the exchange offer was not consummated by April 4, 2007, additional interest began to accrue as of April 5, 2007 in an amount equal to $.05 per week per $1,000 principal amount of outstanding notes for a period of 90 days. The amount of additional interest shall increase by an additional $.05 per week per $1,000 principal amount of outstanding notes with respect to each subsequent 90-day period for which the exchange offer is not consummated, provided that the additional interest in the aggregate shall not exceed $.20 per week per $1,000 principal amount of outstanding notes. Notwithstanding the foregoing, the interest rate borne by the Notes shall not exceed 11.0% per annum, except as otherwise specified in the indentures governing the notes. To the extent the interest rate borne by the outstanding notes exceeds 11.0% per annum, we may elect to pay such excess interest through the issuance of additional notes, as provided in the Indentures. Additional interest will cease to accrue once the exchange offer is consummated.

Additional Amounts

 

If Masonite Canada is required to withhold or deduct any Canadian taxes from any payment under or with respect to its notes, it will pay such additional amounts as may be necessary so that the net amount received by each holder after such withholding or deduction will not be less than the amount such holder would have received if such taxes had not been withheld or deducted, subject to the exceptions described under the heading "Description of Notes—Additional Amounts."
         

9



Guarantees

 

All payments with respect to the notes, including principal and interest, are fully and unconditionally guaranteed on an unsecured senior basis by Masonite International, the Issuers' direct parent company, by the other Issuer, and by each of the Issuers' existing and future U.S. restricted subsidiaries and by certain of the Issuers' non-U.S. restricted subsidiaries.

Ranking

 

The outstanding notes are, and the exchange notes will be, our unsecured senior subordinated obligations and:

 

 


 

are subordinated in right of payment to our existing and future senior debt, including our senior secured credit facilities;

 

 


 

rank equally in right of payment to all of our future senior subordinated debt;

 

 


 

are effectively subordinated in right of payment to all of our existing and future secured debt (including our senior secured credit facilities), to the extent of the value of the assets securing such debt, and are structurally subordinated to all obligations of any of our subsidiaries that is not a guarantor of the notes; and

 

 


 

rank senior in right of payment to all of our future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the notes.

 

 

Similarly, the note guarantees with respect to the outstanding notes are, and the note guarantees with respect to the exchange notes will be, unsecured senior subordinated obligations of the guarantors and:

 

 


 

are subordinated in right of payment to all of the applicable guarantor's existing and future senior debt, including such guarantor's guarantee under our senior secured credit facilities;

 

 


 

rank equally in right of payment to all of the applicable guarantor's future senior subordinated debt;

 

 


 

are effectively subordinated in right of payment to all of the applicable guarantor's existing and future secured debt (including such guarantor's guarantee under our senior secured credit facilities), to the extent of the value of the assets securing such debt, and be structurally subordinated to all obligations of any subsidiary of a guarantor if that subsidiary is not also a guarantor of the notes; and

 

 


 

rank senior in right of payment to all of the applicable guarantor's future subordinated debt and other obligations that are, by their terms, expressly subordinated in right of payment to the notes.

 

 

As of December 31, 2006, (1) the notes and related guarantees ranked junior to approximately $1,197.4 million of senior indebtedness under our senior secured credit facilities, and (2) we had an additional $307.0 million of unutilized capacity under our senior secured revolving credit facility (excluding $8.2 million of outstanding undrawn letters of credit). In addition, the notes were structurally subordinated to $48.9 million of senior indebtedness incurred by our non-guarantor subsidiaries.
         

10



Optional Redemption

 

Prior to April 6, 2010, the Issuers may redeem all or a part of the notes at a redemption price equal to 100% of the principal amount of notes redeemed plus an applicable make-whole premium (as described in "Description of Notes—Optional Redemption") plus accrued and unpaid interest to the redemption date.

 

 

After April 6, 2010, the Issuers may redeem some or all of the notes at par plus accrued interest plus a premium equal to one half of the coupon on such notes, which premium shall decline ratably on each subsequent anniversary of April 6 to zero on April 6, 2014.

Optional Redemption After Certain Equity Offerings

 

In addition, before April 6, 2008, the Issuers may, at their option, redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 111% of the face amount thereof with the proceeds of equity offerings;
provided that at least 65% of the notes originally issued under the applicable Indenture remain outstanding.

Change of Control Offer

 

Upon the occurrence of a change of control, the Issuers will be required, subject to certain conditions, to offer to repurchase the notes at a price equal to 101% of their principal amount plus accrued and unpaid interest and additional interest, if any, to the date of repurchase. See "Description of Notes—Offer to Purchase—Change of Control."

Asset Sale Proceeds

 

If we or our subsidiaries engage in asset sales, we generally must either invest the net cash proceeds from such sales in our business within a period of time, prepay senior indebtedness or make an offer to purchase a principal amount of the notes equal to the excess net cash proceeds. The purchase price of the notes will be 100% of their principal amount, plus accrued interest.

Certain Indenture Provisions

 

The Issuers issued the notes under indentures among the Issuers, Masonite International, the other guarantors and the trustee. The indentures limit the ability of the Issuers, Masonite International and their restricted subsidiaries to, among other things:

 

 


 

incur additional indebtedness and issue preferred stock;

 

 


 

make restricted payments;
         

11



 

 


 

place restrictions on the Issuers, Masonite International and their restricted subsidiaries to pay dividends or make other distributions;

 

 


 

make investments;

 

 


 

sell assets;

 

 


 

enter into transactions with affiliates;

 

 


 

merge or consolidate with other entities; and

 

 


 

create or incur liens.

 

 

Each of the covenants is subject to a number of important exceptions and qualifications. See "Description of Notes—Certain Covenants."

No Prior Market; Listing

 

The exchange notes will generally be freely transferable but will be a new issue of securities for which there will not initially be a market. Accordingly, there can be no assurance as to the development or liquidity of any market for the exchange notes.

ERISA Considerations

 

The notes may, subject to certain restrictions described in "ERISA Considerations" herein, be sold and transferred to ERISA plans.

Use of Proceeds

 

We will not receive any cash proceeds from the exchange offer.


Risk Factors

        See "Risk Factors" for a description of some of the risks you should consider before deciding to participate in the exchange offer.

12



Summary Consolidated Financial Data

        Set forth below is summary historical consolidated financial data of Masonite International Corporation, the entity acquired pursuant to the Transaction (the "Predecessor"), and summary historical consolidated financial data of Masonite International Inc. (the "Successor") at the dates and for the periods indicated. The historical data for the periods presented has been prepared in accordance with Canadian GAAP. The historical data of the Predecessor for the fiscal year ended December 31, 2004 and the period from January 1, 2005 to April 6, 2005 have been derived from the Predecessor's historical consolidated financial statements included elsewhere in this prospectus, which has been audited by KPMG LLP. The historical data of the Successor presented as at December 31, 2005 and for the period from February 2, 2005 to December 31, 2005 has been derived from the Successor's historical consolidated financial statements included elsewhere in this prospectus which has been audited by KPMG LLP. The historical data of the Successor presented as at and for the year ended December 31, 2006 has been derived from the Successor's historical consolidated financial statements included elsewhere in this prospectus which have been audited by Deloitte & Touche LLP.

        The summary historical consolidated financial data should be read in conjunction with and is qualified by reference to, "Selected Historical Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the consolidated financial statements and accompanying notes thereto included elsewhere in this prospectus.

 
  Predecessor
  Successor
 
 
  Fiscal Year
Ended
December 31,

  Period from
January 1 to
April 6,

  Period from
February 2 to
December 31,

  Fiscal Year
Ended
December 31,

 
 
  2004
  2005
  2005(1)
  2006
 
Statement of Operations Data:                          
Sales   $ 2,199.9   $ 600.1   $ 1,828.4   $ 2,464.5  
Cost of sales     1,722.7     486.7     1,497.9     1,950.2  
   
 
 
 
 
Gross profit     477.2     113.4     330.4     514.2  
   
 
 
 
 

Selling, general and administration expenses

 

 

189.9

 

 

54.4

 

 

161.3

 

 

211.8

 
Depreciation     58.5     17.9     60.3     89.0  
Amortization     4.1     1.1     29.9     35.6  
Interest     39.5     11.2     137.1     182.6  
Other expense, net     7.7     66.4     22.6     39.0  
   
 
 
 
 
Income (loss) before income taxes and non-controlling interest     177.4     (37.7 )   (80.8 )   (43.8 )
Income taxes     42.7     (8.3 )   (16.3 )   (15.7 )
Non-controlling interest     6.8     1.3     5.3     6.2  
   
 
 
 
 
Net income (loss)(2)   $ 128.0   $ (30.7 ) $ (69.8 ) $ (34.3 )
   
 
 
 
 

13


 
  Successor
 
  As at
December 31,

  As at
December 31,

 
  2005
  2006
 
  (in millions of U.S. dollars)

Balance Sheet Data:            
Cash and cash equivalents   $ 47.5   $ 47.4
Working capital     211.2     239.9
Total assets     3,297.3     3,164.5
Total debt     2,105.2     2,016.2
Total shareholder's equity(2)     492.3     484.0
 
  Predecessor
  Successor
 
  Fiscal Year
Ended
December 31,

  Period from
January 1 to
April 6,

  Period from
February 2 to
December 31,

  Fiscal Year
Ended
December 31,

 
  2004
  2005
  2005
  2006

Other Financial Data:

 

 

 

 

 

 

 

 

 

 

 

 
Capital expenditures   $ 70.2   $ 12.4   $ 69.8   $ 49.6
Adjusted EBITDA(3)             228.8     332.6

(1)
The only activity of the Successor in the February 2, 2005 to April 6, 2005 period is a realized exchange loss of $5.3 million to hedge the Canadian dollars required to close the Transaction. See note 1 of our consolidated financial statements contained elsewhere in this prospectus.

(2)
Reconciliation of certain financial data from Canadian GAAP to U.S. GAAP:

 
  Predecessor
  Successor
 
 
  Fiscal Year
Ended
December 31, 2004

  Period from
January 1 to
April 6, 2005

  Period from
February 2 to
December 31, 2005

  Fiscal Year
Ended
December 31, 2006

 
Reconciliation of net income (loss)—Canadian GAAP to U.S. GAAP                          
Net income (loss)—Canadian GAAP   $ 128.0   $ (30.7 ) $ (69.8 ) $ (34.3 )
Effect of SFAS 133(a)     6.6     1.4          
Effect of EITF 88-16(b)             0.3      
Tax effect of U.S. GAAP adjustments     (1.9 )   (0.5 )   (0.2 )    
   
 
 
 
 
Net income (loss)—U.S. GAAP   $ 132.7   $ (29.7 ) $ (69.6 ) $ (34.3 )
   
 
 
 
 
 
  Successor
 
 
  As at December 31,
  As at December 31,
 
 
  2005
  2006
 
Reconciliation of shareholder's equity—Canadian GAAP to U.S. GAAP        
Shareholder's equity—Canadian GAAP   $ 492.3   $ 484.0  
Effect of SFAS 133(a)     9.9     12.2  
Effect of EITF 88-16(b)     (5.8 )   (1.5 )
Effect of SFAS 158(c)         2.3  
   
 
 
Shareholder's equity—U.S. GAAP   $ 496.4   $ 496.9  
   
 
 

14


15


(3)
Adjusted EBITDA is defined as net income (loss) plus interest, income taxes, depreciation and amortization, other expense (income), net, (gain) loss on refinancing, net and non-controlling interest further adjusted to give effect to adjustments required in calculating covenant ratios and compliance under the indentures governing the notes and our senior secured credit facilities. 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 (1) net income (loss) determined in accordance with GAAP or (2) operating cash flows determined in accordance with GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management's discretionary use, as it does not include certain cash requirements such as interest payments, tax payments and debt service requirements. We believe that the inclusion of Adjusted EBITDA in this prospectus is appropriate to provide additional information to investors about the calculation of certain financial covenants in the indentures governing the notes and our senior secured credit facilities. Adjusted EBITDA is a material component of these covenants. For instance, both the indentures governing the notes and the senior secured credit facilities contain financial ratios that are calculated by reference to Adjusted EBITDA. Non-compliance with the financial ratio maintenance covenants contained in our senior secured credit facilities could result in the requirement to immediately repay all amounts outstanding under such facilities, while non-compliance with the debt incurrence ratio contained in the indentures governing the notes would prohibit us from being able to incur additional indebtedness other than pursuant to specified exceptions. We also believe that the inclusion of Adjusted EBITDA in this prospectus is appropriate because management uses it to evaluate and monitor the performance of each of our geographic segments. Because not all companies use identical calculations, this presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of

16


 
  Successor
 
 
  Period from
February 2 to
December 31,
2005

  Fiscal Year
Ended
December 31,
2006

 
Reconciliation of net income (loss) to Adjusted EBITDA:              

Net loss

 

$

(69.8

)

$

(34.3

)
Interest     137.1     182.6  
Income taxes     (16.3 )   (15.7 )
Depreciation and amortization     90.3     124.6  
Other expense     22.6     39.0  
Non-controlling interest     5.3     6.2  
 
Receivables transaction charges(a)

 

 

5.3

 

 

7.9

 
  Inventory purchase accounting adjustment(b)     21.8      
  Facility closures and realignments(c)         1.9  
  Hurricanes impact(d)     7.9     (0.7 )
  United Kingdom fire(e)     1.6      
  Inventory losses(f)     8.4     11.5  
  Acquisitions impact (including synergies)(g)     7.3      
  Stock-based awards(h)     3.0     2.0  
  Franchise and capital taxes     2.7     2.2  
  Foreign exchange gains     (2.9 )   (1.0 )
  Other(i)     4.6     6.5  
   
 
 
Adjusted EBITDA:   $ 228.8   $ 332.6  
   
 
 

17



RISK FACTORS

        You should consider carefully the following information about these risks, together with the other information contained in this prospectus, before participating in the exchange offer.

Risks Related to Our Indebtedness and the Notes

We have a substantial amount of indebtedness, which may adversely affect our cash flow and our ability to operate our business, remain in compliance with debt covenants and make payments on our indebtedness, including the notes.

        As of December 31, 2006, we had outstanding indebtedness of approximately $2,016.2 million, and availability of $298.8 million under our revolving credit facility after giving effect to outstanding letters of credit. Our outstanding indebtedness represented approximately 82% of our total capitalization (based on total capitalization of $2,452.8 million).

        Our substantial indebtedness could have important consequences to you. For example, it could:

        Any of the above listed factors could materially adversely affect our business and results of operations. Furthermore, our interest expense could increase if interest rates increase because our senior secured credit facilities does bear interest at floating rates. See "Description of Notes—Interest" and "Description of Certain Indebtedness—Senior Secured Credit Facilities."

We and our subsidiaries will be able to incur more debt, which could further exacerbate the risks associated with our substantial anticipated leverage.

        We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indentures and our senior secured credit facilities do not fully prohibit us or our subsidiaries from doing so. To the extent new debt is added to our and our subsidiaries' currently anticipated debt levels, the substantial leverage risks would increase. Specifically, our senior secured credit facilities allow us, subject to certain conditions, to incur additional term loans in an aggregate principal amount of up to $300.0 million, which additional term loans would have the same security and guarantees as under the senior secured credit facilities.

18



To service our indebtedness, we require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control, and any failure to meet our debt service obligations could harm our business, financial condition and results of operations.

        Our ability to pay interest on and principal of the notes at maturity and to satisfy our other debt obligations principally will depend upon our future operating performance. As a result, prevailing economic conditions and financial, business and other factors, many of which are beyond our control, will affect our ability to make these payments.

        If we do not generate sufficient cash flow from operations to satisfy our debt service obligations, including payments on the notes, we may have to undertake alternative financing plans, such as refinancing or restructuring our indebtedness, selling assets, reducing or delaying capital investments or seeking to raise additional capital. Our ability to restructure or refinance our debt will depend on the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. In addition, the terms of existing or future debt instruments, including the senior secured credit facilities and the indentures governing the notes may restrict us from adopting some of these alternatives. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance our obligations on commercially reasonable terms, would have an adverse effect, which could be material, on our business, financial condition and results of operations, as well as on our ability to satisfy our obligations in respect of the notes.

Repayment of our debt, including the notes, is dependent on cash flow generated by our subsidiaries.

        A substantial portion of our assets are owned by subsidiaries. Repayment of our indebtedness, including the notes, is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Although certain of our subsidiaries are guarantors of the notes, our subsidiaries do not have any obligation to pay amounts due on the notes or to make funds available for that purpose. Our subsidiaries may not be able to, or be permitted to, make distributions to enable us to make payments in respect of our indebtedness, including the notes. Each of our subsidiaries is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While the indentures governing the notes limit the ability of our subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to us, these limitations are subject to certain qualifications and exceptions. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness, including the notes.

The assets of our non-guarantor subsidiaries may not be available to make payments on the notes.

        Your claims in respect of the notes will be effectively subordinated to all of the liabilities of our non-guarantor subsidiaries, including trade payables, and the claims (if any) of third party holders of preferred equity interests in our non-guarantor subsidiaries.

The notes are not secured by the Issuers' assets, and the lenders under the Issuers' senior secured credit facilities are entitled to remedies available to a secured lender, which gives them priority over you to collect amounts due to them.

        In addition to being contractually subordinated to all existing and future senior indebtedness, the notes and the guarantees thereof are not secured by any of the Issuers' assets. In contrast, the Issuers' obligations under the senior secured credit facilities are secured by substantially all of the Issuers' assets and substantially all of the assets of Masonite International and of each guarantor including a perfected first-priority pledge of all the capital stock held by either Issuer or any guarantor (which will be limited in the case of any foreign subsidiary of a U.S. entity to 65% of the voting stock of such

19



foreign subsidiary, and, in the case of other subsidiaries other than U.S. subsidiaries, as the Issuers and The Bank of Nova Scotia agree). In addition, we may incur other senior indebtedness, which may be substantial in amount, and which may, in certain circumstances, be secured. As of December 31, 2006, we had $1,197.4 million of senior secured indebtedness. The Issuers' senior secured credit facilities allow us, subject to certain conditions, to incur additional term loans under the term facility in an aggregate principal amount of up to $300.0 million, which additional term loans would have the same security and guarantees as the senior secured credit facilities.

        In addition, we established receivables sales arrangements with a maximum amount of $135.0 million pursuant to which we from time to time are permitted to sell non-interest bearing trade accounts receivable. We do not have a retained interest in the receivables sold under these sales arrangements. Accordingly, any receivables sold pursuant to these facilities do not constitute assets of ours and will not be available to satisfy payment obligations on the notes.

Because the notes and the guarantees will be unsecured obligations, your right of repayment may be compromised if any of the following situations occur:

        If any of these events occurs, the secured lenders could sell those of our assets in which they have been granted a security interest, to your exclusion, even if an event of default exists under the indentures at such time. As a result, upon the occurrence of any of these events, there may not be sufficient funds to pay amounts due on the notes and the guarantees.

U.S. federal and state and Canadian federal and provincial laws allow courts, under specific circumstances, to void the guarantees, subordinate claims in respect of the guarantees and require note holders to return payments received from the guarantors.

        Masonite International and the guarantors guarantee and the Issuers cross-guarantee the Issuers' obligations under the notes. The issuance of the guarantees by the guarantors may be subject to review under U.S. federal or state or Canadian federal or provincial laws if a bankruptcy, liquidation or reorganization case or a lawsuit, including in circumstances in which bankruptcy is not involved, were commenced at some future date any Issuer or guarantor, by or on behalf of, the Issuers' unpaid creditors or the unpaid creditors of Masonite International or of the other guarantors. Under the federal U.S. and Canadian bankruptcy laws and comparable provisions of state and provincial fraudulent transfer laws, a court may, among other things, void or otherwise decline to enforce a guarantor's guaranty, or subordinate such guaranty to the applicable guarantor's existing and future indebtedness. While the relevant laws may vary from jurisdiction to jurisdiction, a court might do so if it found that when the applicable guarantor entered into its guaranty or when the guaranty became effective (including following the suspension thereof) or, in some jurisdictions, when payments became due under such guaranty, the applicable guarantor received less than reasonably equivalent value or fair consideration and either:

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        The court might also void a guaranty, without regard to the above factors, if the court found that the applicable guarantor entered into its guaranty with actual intent to hinder, delay or defraud its creditors. In addition, any payment by a guarantor pursuant to its guarantees could be voided and required to be returned to such guarantor or to a fund for the benefit of such guarantor's creditors.

        A court would likely find that a guarantor did not receive reasonably equivalent value or fair consideration for such guaranty if such guarantor did not substantially benefit directly or indirectly from the issuance of the notes. In addition, upon certain circumstances specified in "Description of Notes," a guaranty that had previously been suspended by virtue of the notes having received investment grade ratings will be required to be reinstated. A court might void a guaranty if it found that the applicable guarantor was insolvent when it reinstated its guaranty.

        If a court were to void a guaranty, you would no longer have a claim against the applicable guarantor. Sufficient funds to repay the notes may not be available from other sources, including the remaining guarantors, if any. In addition, the court might direct you to repay any amounts that you already received from any guarantor.

        The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if:

        To the extent a court voids any of the guarantees as fraudulent transfers or holds any of the guarantees unenforceable for any other reason, holders of notes would cease to have any direct claim against the applicable guarantor. If a court were to take this action, the applicable guarantor's assets may be applied first to satisfy the applicable guarantor's liabilities, if any, before any portion of its assets could be applied to the payment of the notes.

        Each guaranty will contain a provision intended to limit the guarantor's liability to the maximum amount that it could incur without causing the incurrence of obligations under its guaranty to be a fraudulent transfer. This provision may not protect the guarantees from being voided under fraudulent transfer law, or may reduce the guarantor's obligation to an amount that effectively makes the guaranty worthless.

Canadian bankruptcy and insolvency laws may impair the enforcement of remedies under the notes and guarantees.

        The rights of trustees who represent the holders of the notes issued by Masonite Canada and the guarantees issued by Masonite Canada, Masonite International and the Canadian subsidiary guarantors to enforce remedies are likely to be significantly impaired by the restructuring provisions of applicable Canadian federal bankruptcy, insolvency and other restructuring legislation if the benefit of such legislation is sought with respect to any of such entities. For example, both the Bankruptcy and Insolvency Act (Canada) and the Companies' Creditors Arrangement Act (Canada) contain provisions enabling an insolvent person to obtain a stay of proceedings against its creditors and others and to prepare and file a proposal or plan of arrangement for consideration by all or some of its creditors to be voted on by the various classes of its creditors affected thereby. Such a restructuring proposal, if

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accepted by the requisite majorities of each affected class of creditors and if approved by the relevant Canadian court, would be binding on all creditors within the affected class of creditors, who may not otherwise be willing to accept it. Moreover, this legislation permits the insolvent debtor to retain possession and administration of its property, subject to court oversight, even though it may be in default under applicable debt instruments and the stay against proceedings remains in place.

        The powers of Canadian courts under the Bankruptcy and Insolvency Act and particularly under the Companies' Creditors Arrangements Act have been exercised broadly to protect a restructuring entity from actions taken by creditors and other parties. Accordingly, we cannot predict if payments under the notes issued by Masonite Canada or the guarantees issued by Masonite Canada, Masonite International or the Canadian subsidiary guarantors would be made following commencement of or during such proceeding, whether or when the trustee could exercise its rights under the indentures governing the notes or guarantees or whether and to what extent holders of the notes issued by Masonite Canada or the notes guaranteed by Masonite Canada, Masonite International or the Canadian subsidiary guarantors would be compensated for any delays in payment, if any, of principal, interest and costs, including the fees and disbursements of the trustee.

The terms of our senior secured credit facilities and the indentures governing the notes may restrict our current and future operations, particularly our ability to respond to changes in our business or to take certain actions.

        Our senior secured credit facilities and the indentures governing the notes contain, and any future indebtedness of ours would likely contain, a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to engage in acts that may be in our best long-term interests. Our senior secured credit facilities include financial covenants, including requirements that we:

        The financial covenants contained in our senior secured credit facilities will become more restrictive over time. In addition, our senior secured credit facilities require that we use a portion of excess cash flow and proceeds of certain asset sales that are not reinvested in our business to repay indebtedness under those facilities.

        Our senior secured credit facilities also include covenants restricting, among other things, our ability to:

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        The indentures relating to the notes also contain numerous covenants including, among other things, restrictions on our ability to:

        The operating and financial restrictions and covenants in our existing debt agreements and any future financing agreements may adversely affect our ability to finance future operations or capital needs or to engage in other business activities. A breach of any of the restrictive covenants in the senior secured credit facilities would result in a default under the senior secured credit facilities. If any such default occurs, the lenders under the senior secured credit facilities may elect to declare all outstanding borrowings, together with accrued interest and other fees, to be immediately due and payable, enforce their security interest or require us to apply all of our available cash to repay these borrowings, any of which would result in an event of default under the notes. The lenders will also have the right in these circumstances to terminate any commitments they have to provide further borrowings.

We may not be able to repurchase notes upon a change of control.

        Certain events constitute a change of control under the indentures governing the notes. Upon the occurrence of such events, we will be required to offer to repurchase your notes at a purchase price in cash equal to 101% of the principal amount of the notes plus accrued and unpaid interest, if any, to the extent applicable. The senior secured credit facilities provide that certain change of control events (including a change of control as defined in the indentures relating to the notes) constitute a default. Any future credit agreement or other agreements relating to senior indebtedness to which we become a party may contain similar provisions. If we experience a change of control that triggers a default under our senior secured credit facilities, we could seek a waiver of such default or seek to refinance our senior secured credit facilities. In the event we do not obtain such a waiver or do not refinance the senior secured credit facilities, such default could result in amounts outstanding under our senior secured credit facilities being declared due and payable. In the event we experience a change of control that results in our having to offer to repurchase your notes, we may not have sufficient financial resources to satisfy all of our obligations under our senior secured credit facilities. A failure to make the applicable change-of-control offer or to pay the applicable change-of-control purchase price when due would result in a default under the indentures governing the notes. In addition, the change-of-control covenant in the indentures governing the notes does not cover all corporate reorganizations, mergers or similar transactions and may not provide you with protection in a highly leveraged transaction. See "Description of Notes—Certain Covenants."

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Cross-default and cross-acceleration provisions in our outstanding indebtedness may result in substantially all of our debt obligations coming due at the same time, and in such event we may not have available liquidity to satisfy all of those obligations.

        Our senior secured credit facilities contain cross-default and cross-acceleration provisions, and the indentures governing the notes also provide for cross-acceleration. These provisions could result in substantially all of our debt obligations coming due at the same time if an event of default under any of our indebtedness were to occur, and in such event we may not have available liquidity to satisfy all of those obligations, including the notes. For example, to the extent that we failed to pay interest on the notes when due and an event of default were to result following the applicable 30-day grace period, the cross-default provisions under our senior secured credit facilities would be triggered, in which case our obligations under both the notes and the senior secured credit facility could become immediately due and payable.

Your right to receive payments on the notes and the guarantees will be junior to the rights of the lenders under our senior secured credit facilities and to all of our other senior indebtedness, including any of our future senior debt.

        The notes and the guarantees thereof will rank in right of payment behind all of the Issuers' and the guarantors' existing senior indebtedness, including borrowings under our senior secured credit facilities and the guarantees thereof, and will rank in right of payment behind all of the Issuers' and the guarantors' future borrowings, except for any future indebtedness that expressly provides that it ranks equal or junior in right of payment to the notes and the related guarantees. See "Description of Notes—Subordination of the Notes." As of December 31, 2006, we had approximately $1,197.4 million of senior indebtedness, and the revolving credit portion of our senior secured credit facilities would have provided for additional borrowings of up to $298.8 million after giving effect to outstanding letters of credit, all of which would be senior indebtedness when drawn. Our senior secured credit facilities allow us, subject to certain conditions, to incur additional term loans under the term facility in an aggregate principal amount of up to $300.0 million. As of December 31, 2006, the guarantors had approximately $1,197.4 million of senior indebtedness which represented guarantees of borrowings under our senior secured credit facilities and the notes. We will also be permitted to incur substantial additional indebtedness, including senior indebtedness, in the future.

        We may not pay principal, premium, if any, interest or other amounts on account of the notes or the guarantees in the event of a payment default or certain other defaults in respect of certain of our senior indebtedness, including debt under the senior secured credit facilities and the notes, unless the senior indebtedness has been paid in full or the default has been cured or waived. In addition, in the event of certain other defaults with respect to the senior indebtedness, we may not be permitted to pay any amount on account of the notes or the guarantees for a designated period of time. See "Description of Notes—Ranking."

        Because of the subordination provisions in the notes and the guarantees, in the event of a bankruptcy, liquidation, reorganization or similar proceeding relating to us or a guarantor, the Issuers' or the guarantor's assets will not be available to pay obligations under the notes or the applicable guarantee until the applicable Issuer or guarantor has made all payments in cash on its senior indebtedness. Sufficient assets may not remain after all these payments have been made to make any payments on the notes or the applicable guarantee, including payments of principal or interest when due. In addition, in the event of a bankruptcy, liquidation or reorganization or similar proceeding relating to either Issuer or the guarantors, holders of the notes will participate with trade creditors and all other holders of the Issuers' and the guarantors' senior subordinated indebtedness, as the case may be, in the assets remaining after the Issuers and the guarantors have paid all of the senior indebtedness. However, because the indentures require that amounts otherwise payable to holders of the notes in a bankruptcy or similar proceeding be paid to holders of senior indebtedness instead, holders of the notes may receive less, ratably, than holders of trade payables or other unsecured,

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unsubordinated creditors in any such proceeding. In any of these cases, the Issuers and the guarantors may not have sufficient funds to pay all of our creditors, and holders of the notes may receive less, ratably, than the holders of senior indebtedness or other unsecured debt. See "Description of Notes—Ranking."

If you choose not to exchange your outstanding notes in the exchange offer, the transfer restrictions currently applicable to your outstanding notes will remain in force and the market price of your outstanding notes could decline.

        If you do not exchange your outstanding notes for exchange notes representing the same underlying indebtedness in the exchange offer, then you will continue to be subject to the transfer restrictions on the outstanding notes as set forth in the notes. In general, the outstanding notes may not be offered or sold unless they are registered or exempt from registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the outstanding notes under the Securities Act. You should refer to "Prospectus summary—Summary of the terms of the exchange offer" and "Description of Notes—The Exchange Offer; Registration Rights" for information about how to tender your outstanding notes.

        The tender of outstanding notes under the exchange offer will reduce the principal amount of the outstanding notes outstanding, which may have an adverse effect upon and increase the volatility of, the market price of the outstanding notes due to reduction in liquidity.

Your ability to transfer the notes may be limited by the absence of an active trading market, and there is no assurance that any active trading market will develop for the notes.

        An active market for any of the exchange notes may not develop or, if developed, it may not continue. Historically, the market for non investment-grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the exchange notes. The market, if any, for any of the exchange notes may not be free from similar disruptions and any such disruptions may adversely affect the prices at which you may sell your exchange notes. In addition, subsequent to their initial issuance, the exchange notes may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar notes, our performance and other factors.

Your ability to sell the notes may be limited by the absence of an active trading market, and if one develops, it may not be liquid.

        We do not intend to apply for the notes or any exchange notes to be listed on any securities exchange or to arrange for quotation. As a result, any trading market for the notes or the exchange notes or, in the case of any holders of notes that do not exchange them, the trading market for the notes following the offer to exchange the notes for exchange notes evidencing the same underlying indebtedness may not be liquid. You may not be able to sell your notes or exchange notes at a particular time or at favorable prices or at all.

        The liquidity of any market for the notes and the future trading prices of the notes will depend on many factors, including:

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Risks Related to Our Business

We operate in a competitive business environment. If we are unable to compete successfully, we could lose customers and our sales could decline.

        The building products industry is highly competitive. We compete against international, national and regional manufacturers of doors. Some of our principal competitors may be less highly leveraged than we are and may have greater financial, marketing and distribution resources than we do. Accordingly, these competitors may be better able to withstand changes in conditions within the industry in which we operate and may have significantly greater operating and financial flexibility than we do. Also, certain of our competitors may have excess production capacity, which could lead to pressure to decrease prices in order to remain competitive. For these and other reasons, these competitors could take a greater share of sales and cause us to lose business from our customers, resulting in potential facility closures and related writedowns and impairments.

        As a result of this competitive environment, we face and will continue to face pressure on selling prices of our products from competitors and from large customers. Because of these pricing pressures, we may in the future experience reduced sales and lower margins. In addition, overcapacity in the door industry could limit our ability to pass on future raw material price or labor cost increases to our customers which would also reduce profit margins.

Downward trends in repair, renovation and remodeling and new home construction or in general economic conditions could negatively impact our financial performance.

        Trends in repair, renovation and remodeling and new home construction directly impact our financial performance because demand for doors is influenced by the level of repair, renovation and remodeling activity in existing homes and new home construction activity. Accordingly, the following trends have a direct impact on our business in the countries in which our products are sold:


        The new home construction sector has historically been cyclical. During 2006, a major downturn began in the United States and December 2006 annualized seasonally adjusted housing starts were 18% below the December 2005 rate as reported by the U.S. Census Bureau. In addition, the repair, renovation and remodeling has recently experienced weakening year-over-year sales in the United States. Our relatively narrow focus within the building products industry amplifies the risks inherent in such a market downturn. The impact of this weakness on our revenues, profits and profit margin will be determined by many factors, including industry capacity, industry pricing discipline, and our ability to implement the series of initiatives encompassed in our Blueprint for Profitable Growth.

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Increases in interest rates and the reduced availability of financing for home improvements and the purchase of new homes could have a material adverse impact on us.

        In general, demand for home improvement products and new homes may be adversely affected by increases in interest rates and the reduced availability of financing. If interest rates increase and, consequently, the ability of prospective buyers to finance purchases of home improvement products or new homes is adversely affected, our business, financial condition and results of operations may also be adversely impacted and the impact may be material.

Because we depend on a core group of significant customers, our sales, cash flows from operations and results of operations may be negatively affected if our key customers reduce the amount of products they purchase from us.

        Our customers consist mainly of wholesalers and retail home centers. Our top 10 major customers together accounted for approximately 49% of our gross sales in fiscal year 2006, while our largest customer accounted for approximately 25% of our gross sales in fiscal year 2006. We expect that a small number of customers will continue to account for a substantial portion of our gross sales for the foreseeable future. In addition, we generally do not enter into contracts with our customers and they generally do not have an obligation to purchase products from us. The loss of, or a diminution in, our relationship with our largest customer or any other major customer could have a material adverse effect on us. Our competitors may adopt more aggressive pricing and 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. This risk is particularly high in periods of excess industry capacity or lower economic activity. The loss of, or a reduction in orders from, any significant customers, losses arising from customer disputes regarding shipments, fees, merchandise condition or related matters, or our inability to collect accounts receivable from any major customer, could have a material adverse effect on us. Also, revenue from customers that have accounted for significant revenue 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. Also, we have no operational or financial control over these customers and have limited influence over how they conduct their businesses. If any of these customers fails to remain competitive in their respective markets or encounters financial or operational problems, our revenue and profitability may decline, which could make it difficult for us to make some or all of the payments due on the notes. In the first quarter of 2007, we were notified by our largest customer, The Home Depot, that they would be moving substantially all of their business with us in certain geographic regions to a competitor later in 2007. As a result, we announced the permanent closure of three facilities dedicated to The Home Depot.

Consolidation of our customers and their increasing size could adversely affect our results of operations.

        In many of the countries in which we operate, an increasing share of sales of building products are sold through large home centers and other large retailers. In addition, consolidation among businesses operating in different geographic regions has increased in recent years, resulting in more customers operating nationally and internationally. We believe that these trends will continue in the future. As a result, our customers will increase in size and purchasing power. As our customers grow, we will be challenged to continue to provide consistently high customer service levels for increasing sales volumes, while offering a broad mix of innovative products and on-time and complete deliveries. If we fail to provide high levels of service, broad product offerings, competitive prices and timely and complete deliveries, we could lose a substantial portion of our customer base and our profitability, margins and revenues could decrease.

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Changes in consumer preferences could adversely affect our business.

        Our business in general is subject to changing consumer and industry trends, demands and preferences. Our continued success depends largely on the introduction and acceptance by our customers of new products and improvements to existing product lines that respond to such trends, demands and preferences. Trends within the industry change often and our failure to anticipate, identify or 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, the writedown of obsolete or excess inventory or the impairment of intangibles or fixed assets, each of which could materially adversely affect us. In addition, we are subject to the risk that new technologies could be introduced that would replace or reduce demand for our products. We may not have sufficient resources to make necessary investments or we may be unable to make the investments necessary to develop new products or improve our existing products.

Our business is subject to some seasonality and weather may impact our sales, cash flows from operations and results of operations.

        Our business experiences seasonal business swings, which correspond primarily to the North American seasons, particularly in the Northeastern and Midwestern United States and in most regions of Canada. In addition to expected seasonal weather changes, unusually prolonged periods of cold, rain, blizzards, hurricanes or other severe weather patterns could delay or halt renovation and construction activity. For example, unusually severe weather can lead to reduced construction activity and magnify the seasonal decline in our sales, cash flows from operations and results of operations during the winter months. Negative cash flows typically occur in the first quarter and also, to a certain extent, in the second quarter of each year. This seasonality requires that we manage our cash flows over the course of the year. If sales were to fall substantially below what we would normally expect during certain periods, our annual financial results would be adversely impacted and our ability to service our debt may also be adversely affected.

        Severe weather may also have a negative impact on our operations. For instance, our ten facilities in the Southeastern United States lost a number of production and shipping days as a result of the four hurricanes experienced by that region in 2004. In 2005, two hurricanes struck the Southern United States and caused the temporary curtailment of operations at our Laurel, Mississippi facility, and other facilities in the area.

A disruption in our operations could materially affect our operating results.

        We operate over 80 facilities worldwide. Many of our facilities are located in areas that are vulnerable to hurricanes, earthquakes and other natural disasters. In the event that a hurricane, earthquake, natural disaster, fire or other catastrophic event were to interrupt our operations for any extended period of time, it could delay shipment of merchandise to our customers, damage our reputation or otherwise have a material adverse effect on our financial condition and results of operations. For example, during the first quarter of 2005, prior to the Transaction, we experienced an equipment electrical fire at our facility located in Laurel, Mississippi. The cost to repair the plant's equipment was immaterial, but two of the three production lines were inoperative for approximately three weeks. The lost production had a significant impact on our consolidated margins during that period.

        In addition, our operations may be interrupted by terrorist attacks or other acts of violence or war. These attacks may directly impact our suppliers' or customers' physical facilities. For example, earlier in 2006, operations at our plant in Karmiel, Israel, were interrupted for eight weeks due to its proximity to the Lebanese border and the recent conflict occurring there. Furthermore, these attacks may make travel and the transportation of our supplies and products more difficult and more expensive and

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ultimately affect our operating results. The United States has entered into, and may enter into additional, armed conflicts which could have a further impact on our sales and our ability to deliver product to our customers in the United States and elsewhere. Political and economic instability in some regions of the world may also result and could negatively impact our business. The consequences of any of these armed conflicts are unpredictable, and we may not be able to foresee events that could have an adverse effect on our business or your investment. More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the U.S. and worldwide financial markets and economy. They could also result in economic recession in the United States or abroad. Any of these occurrences could have a significant impact on our operating results.

We are subject to the credit risk of our customers.

        We provide credit to our customers in the normal course of business. We generally do not require collateral in extending such credit. Although we purchase worldwide credit insurance, obtain letters of credit from our customers in appropriate circumstances and reserve for this exposure, we cannot assure you that the exposure will not be greater than we anticipate. An increase in the exposure, coupled with material instances of default, could have an adverse effect on our business, financial condition, results of operations and cash flow.

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 revenues.

        Our profitability is affected by the prices of the raw materials and finished goods used in the manufacture of our products. These prices have fluctuated and may continue to fluctuate based on a number of factors beyond our control, including world oil prices, changes in supply and demand, general economic or environmental conditions, labor costs, competition, import duties, tariffs, currency exchange rates, mergers and acquisitions, weather, and, in some cases, government regulation. The commodities we use may undergo major price fluctuations and there is no certainty that we will be able to pass these costs through to our customers. Significant increases in the prices of raw materials or finished goods are more difficult to pass through to customers in periods of housing market weakness and excess door industry capacity, and may negatively impact our revenues, profitability and margins. We also purchase raw materials and manufactured items from suppliers located in non-U.S. Dollar based economies in North America, Asia, Europe, South America and Africa. In most cases, purchases from those suppliers are priced in U.S. dollars or euros. However, fluctuations in currency exchange rates may also affect us.

        We require a regular supply of steel, fiberglass, wood, wood composites, door facings, cut stock, core material and other raw materials as well as petroleum-based products such as resins and foam. In certain instances, we depend upon single or limited source suppliers for these supplies. Our dependency upon regular deliveries from particular suppliers means that interruptions or stoppages in such deliveries could adversely affect our operations until arrangements with alternate suppliers could be made.

        If any of our suppliers were unable to deliver materials to us for an extended period of time (including as a result of delays in land or sea shipping), or if we were unable to negotiate acceptable terms for the supply of materials with these or alternative suppliers, our business could suffer. For example, in 2006 we experienced a short term disruption in the supply of methanol, a key ingredient in resins used in the production of door skins. In the future, we may not be able to find acceptable supply alternatives, and any such alternatives could result in increased costs for us. Even if acceptable alternatives are found, the process of locating and securing such alternatives might be disruptive to our business.

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Increases in labor costs, potential labor disputes and work stoppages at our facilities or the facilities of our suppliers could materially adversely affect our financial performance.

        Our financial performance is affected by the availability of qualified personnel and the cost of labor. We have approximately 12,800 employees and contract laborers. Approximately 3,700, or 29%, of our employees are unionized. Employees represented by these unions are subject to 24 collective bargaining agreements, six of which are with local unions in the United States. Four of our North American collective bargaining agreements are subject to renewal in 2007, and our collective bargaining agreements in France, United Kingdom and South Africa are subject to annual renewal. If we are unable to enter into new, satisfactory labor agreements with our unionized employees upon expiration of their collective bargaining agreements, we could experience a significant disruption of our operations, which could cause us to be unable to deliver products to customers on a timely basis. In 2004, our results were negatively affected by a 25-day strike at an interior door manufacturing facility, which contract is subject to renewal in 2007. If our workers were to engage in a strike, a work stoppage or other slowdowns, we could experience disruptions of our operations. Such disruptions could result in a loss of business and an increase in our operating expenses, which could reduce our profit margins. In addition, our non-unionized labor force may become subject to labor union organizing efforts, which could cause us to incur additional labor costs and increase the related risks that we now face.

        Many of our direct and indirect suppliers and customers also have unionized workforces. Strikes, work stoppages or slowdowns experienced by these suppliers and customers could result in slowdowns or closures of facilities where components of our products are manufactured or delivered. Any interruption in the production or delivery of these components could reduce sales, increase costs and have a material adverse affect on us.

Our recent acquisitions and any future acquisitions could be difficult to integrate and could adversely affect our operating results.

        Historically, a substantial part of our growth has come from acquisitions. Our recent and any future acquisitions involve a number of risks, including:

        For example, in 2005 we completed a series of acquisitions in Central and Eastern Europe, and we are still in the process of integrating these businesses into Masonite. The integration of these and any future material acquisition into our business will require substantial time, effort, attention and

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dedication of management resources and may distract our management in unpredictable ways from our ordinary operations. We may not be able to effectively manage recent or future acquisitions or realize their anticipated benefits, which could harm our results of operations and our ability to make some or all of the payments due on the notes.

If our leases terminate or are not renewed upon expiration, we could be required to make significant capital expenditures to relocate our facilities.

        A significant number of our manufacturing facilities and warehouses are leased. There can be no assurance that upon termination or expiration of these leases we will be able to renew them on acceptable terms or at all. If we are unable to renew such leases, we could be required to make significant capital expenditures to relocate our facilities.

We are exposed to political, economic and other risks that arise from operating a multinational business.

        We have operations in the United States, Canada, Europe and, to a lesser extent, other foreign jurisdictions. Approximately 77% of our sales are generated in North America and approximately 19% in Europe, with the remainder in South America, Asia and Africa. Further, certain of our businesses obtain raw materials and finished goods from foreign suppliers. Accordingly, our business is subject to political, economic and other risks that are inherent in operating in numerous countries. These risks include:


        Our business success depends in part on our ability to anticipate and effectively manage these and other risks. We cannot assure you that these and other factors will not have a material adverse effect on our international operations or on our business as a whole.

Environmental requirements may impose significant environmental compliance costs and liabilities on us.

        Our operations are subject to numerous U.S. (federal, state and local), Canadian (federal, provincial and local), European (European Union, country and local) and other laws and regulations relating to pollution and the protection of the environment, including, without limitation, those governing emissions to air, discharges to water, storage, treatment and disposal of waste, releases of contaminants or hazardous or toxic substances, remediation of contaminated sites and protection of worker health and safety. From time to time, our facilities are subject to investigation by governmental regulators. Despite our best efforts to comply with environmental requirements, we are at risk of being subject to civil, administrative or criminal enforcement actions, of being held liable, of being subject to an order or of incurring costs, fines or penalties for, among other things, releases of contaminants or hazardous or toxic substances occurring on or emanating from currently or formerly owned or operated properties or any associated offsite disposal location, or for contamination discovered at any of our properties from activities conducted by us or by previous occupants.

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        In addition, the requirements of such laws and enforcement policies have generally become more stringent over time. Changes in environmental laws and regulations or in their enforcement or the discovery of previously unknown or unanticipated contamination or non-compliance with environmental laws or regulations relating to our properties or operations could result in significant environmental liabilities or costs which could adversely affect our business. In addition, we might incur increased operating and maintenance costs and capital expenditures and other costs to comply with increasingly stringent air emission, wastewater discharge or waste disposal management laws or other future requirements. Typically under ten percent of our capital is spent to comply with our environmental, health and safety requirements. In addition, we will spend approximately $8.3 million over 2006 and 2007 to comply with the U.S. Maximum Achievable Control Technology requirements under the Clean Air Act. Also, discovery of currently unknown or unanticipated conditions could require responses that would result in significant liabilities and costs. Accordingly, we are unable to predict the ultimate costs of compliance with or liability under environmental laws, which may be larger than current projections.

        Further, as we consider acquisitions and divestitures of sites or change locations or rented facilities, a Phase 1 Environmental Assessment is conducted to assess and determine the current environmental condition of the site. This is completed by either utilizing in-house staff or by specialized environmental consultants.

Fluctuating exchange and interest rates could adversely affect our financial results.

        Our financial results may be adversely affected by fluctuating exchange rates. In the year ended December 31, 2006, approximately 34% of our net sales were generated outside of the United States although a large portion of these sales are denominated in U.S. dollars. We believe that the percentage of our costs denominated in currencies other than the U.S. dollar is greater than the percentage of our sales in those other currencies. For example, at most of our manufacturing 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. We are subject to currency exchange rate risk to the extent that some of our costs are denominated in currencies other than those in which we earn revenues. 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. As our borrowings under these notes and under our senior secured credit facilities are denominated in a currency (U.S. dollars) that is different from the currencies in which we derive a significant portion of our net sales, we are also exposed to currency exchange rate risk with respect to those financial obligations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures About Market Risk—Currency Risk."

        Some of our borrowings, including those under our revolving credit facility and the unhedged portion of our term loan facility, are at variable rates of interest. This exposes us to interest rate risk. If interest rates increase, the payments we are required to make on our variable portion of our indebtedness will increase, and cash available for servicing our other indebtedness would decrease. To the extent we are unable to repay our term loan facility at the same rate at which our interest rate hedges expire, our exposure to variable rates of interest would increase. In addition, when the debt represented by Masonite Canada's notes is repaid, Masonite Canada may be subject to taxes on any corresponding foreign currency gain, if the exchange rate of the Canadian dollar is different than the rate at the time of the Transaction.

32



We may fail to continue to innovate, face claims that we infringe third party intellectual property rights, or be unable to protect our intellectual property from infringement by others except by incurring substantial costs as a result of litigation or other proceedings relating to patent or trademark rights, any of which could cause our revenue or profitability to decline. In addition our innovations may fail to realize commercial success.

        Our continued success depends on our ability to develop and introduce new or improved products, to improve our manufacturing and product service processes, and to protect our proprietary rights to the technologies used in our products. If we fail to do so, or if existing or future competitors achieve greater success than we do in these areas, our results of operations may decline and we may not be able to make some or all of the payments due on the notes.

        We rely on a combination of U.S., Canadian and, to a lesser extent, European patent, trademark, copyright and trade secret laws as well as licenses, nondisclosure, confidentiality and other contractual restrictions to protect certain aspects of our business. We have registered trademarks and patents, and have pending trademark and patent applications in the United States, Canada and abroad. However, our pending patent and trademark applications may not be allowed by the applicable governmental authorities to issue as patents or register as trademarks at all, or in a form that will be advantageous to us. In addition, we have selectively pursued patent and trademark protection, and in some instances we may not have registered important patent and trademark rights in these and other countries. Furthermore, the laws of foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States. The failure to obtain worldwide patent and trademark protection may result in other companies copying and marketing products based upon our technologies or under our brand or trade names outside the jurisdictions in which we are protected. This could impede our growth in existing regions and expansion into new regions, create confusion among consumers and result in a greater supply of similar products that could erode prices for our protected products.

        Our success depends in part on our ability to protect our patents, trademarks, copyrights, trade secrets and licensed intellectual property from unauthorized use by others. We cannot be sure that the patents we have obtained, or other protections such as confidentiality, trade secrets and copyrights, will be adequate to prevent imitation of our products by others. If we are unable to protect our products through the enforcement of intellectual property rights, our ability to compete based on our current advantages may be harmed. If we fail to prevent substantial unauthorized use of our trade secrets, we risk the loss of those intellectual property rights and whatever competitive advantage they embody.

        Although we are not aware that any of our products or intellectual property rights materially infringe upon the proprietary rights of third parties, third parties may accuse us of infringing or misappropriating their patents, trademarks, copyrights or trade secrets. Third parties may also challenge our trademark rights and branding practices in the future. We may be required to institute or defend litigation to defend ourselves from such accusations or to enforce our patent, trademark and copyright rights from unauthorized use by others, which, regardless of the outcome, could result in substantial costs and diversion of resources and could negatively affect our competitive position, sales, profitability and reputation. If we lose a patent infringement suit, we may be liable for money damages and be enjoined from selling the infringing product unless we can obtain a license or are able to redesign our product to avoid infringement. A license may not be available at all or on terms acceptable to us, and we may not be able to redesign our products to avoid any infringement, which could negatively affect our profitability. In addition, our patents, trademarks and other proprietary rights may be subject to various attacks claiming they are invalid or unenforceable. These attacks might invalidate, render unenforceable or otherwise limit the scope of the protection that our patents and trademarks afford. If we lose the use of a product name, our efforts spent building that brand may be lost and we will have to rebuild a brand for that product, which we may or may not be able to do. Even if we prevail in a patent infringement suit, there is no assurance that third parties will not be able to design around our patents, which could harm our competitive position.

33



Our business will suffer if certain key officers or employees discontinue employment with us.

        The success of our business is materially dependent upon the skills, experience and efforts of certain of our key officers and employees. The loss of key personnel could have a material adverse effect on our business, operating results or financial condition. We may not succeed in attracting and retaining the personnel we need to generate sales and to expand our operations successfully, and, in such event, our business could be materially and adversely affected. The loss of the services of any key personnel, or our inability to hire new personnel with the requisite skills, could impair our ability to develop new products or enhance existing products, sell products to our customers or manage our business effectively.

Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business or operating results.

        Maintaining effective internal controls over financial reporting is necessary for us to produce reliable financial reports and is important in helping to prevent financial fraud. In addition, we are in the process of integrating the financial reporting processes of those Central and Eastern European entities we acquired in 2005 with our reporting processes. We are not currently required to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules of the SEC, which, beginning with our annual report for fiscal year 2007, will require, among other things, our management to assess and report on annually the effectiveness of our internal controls and, beginning with our annual report for fiscal year 2008, our independent registered public accounting firm to issue a report on our assessment and the effectiveness of our internal controls.

        Any failure to maintain adequate internal controls over financial reporting or to implement required, new or improved controls, or difficulties encountered in their implementation could cause us to report deficiencies in our internal controls over financial reporting. If we are unable to maintain adequate internal controls, our business and operating results could be adversely affected, or if we or our independent registered public accounting firm were to conclude that our internal controls over financial reporting were not effective, investors could lose confidence in our reported financial information and the market value of our notes could decline.

Financial reporting requires us to make judgments and estimates about matters that are inherently uncertain, which affects the balances reported in our financial statements and has caused us to restate our financial statements.

        Our accounting policies require us to make judgments and estimates that affect the amounts of assets, liabilities, revenues and expenses and related disclosures of contingent items that we report. Actual results could differ significantly from those estimates, and such differences have required and could in the future require us to restate our financial statements.

        We restated our consolidated financial statements for the period from February 2, 2005 to December 31, 2005 after we determined that our income tax accounting surrounding certain income tax valuation allowances and other carryforward attributes required revision. As a result and as more fully described in note 2 to our consolidated financial statements contained elsewhere in this prospectus, we reduced our net future income tax liability by an aggregate amount of $33,790, reduced our net loss for the period and our accumulated deficit by $20,890 and recharacterized $12,900 of goodwill as future tax assets.

        Any future restatement may adversely impact our business and operating results, and may also cause investors to lose confidence in our reported information.

34



If the reorganization of Masonite in connection with the Transaction does not meet the requirements of Canadian tax law, the reorganization could result in Canadian tax liability to us.

        Certain restructuring transactions were effected following the Transaction. These transactions are dependent, under Canadian tax law, upon certain relevant facts relating to the ownership of shares of the entity acquired pursuant to the Transaction of our debt and equity. If the facts provided to us in respect of such ownership are subsequently proven to be incorrect, we could incur a tax liability that may result in a material adverse effect on our liquidity and results of operations and may impair our ability to make payments on the notes.

Our controlling shareholder may have interests that conflict with yours.

        We are controlled by KKR. In conjunction with our management, KKR oversees our affairs and policies. Circumstances may occur in which the interests of KKR could be in conflict with the interests of the holders of the notes. In addition, KKR may have an interest in pursuing acquisitions, divestitures or other transactions that, in its judgment, could enhance its equity investment, even though such transactions might involve risks to the holders of the notes if the transactions resulted in our being more leveraged or significantly change the nature of our business operations or strategy. In addition, if we encounter financial difficulties, or we are unable to pay our debts as they mature, the interests of KKR might conflict with those of the holders of the notes. In that situation, for example, the holders of the notes might want us to raise additional equity from KKR or other investors to reduce our leverage and pay our debts, while KKR might not want to increase their investment in us or have their ownership diluted and instead choose to take other actions, such as selling our assets. Additionally, KKR and certain of their affiliates are in the business of making investments in companies and currently hold, and may from time to time in the future acquire, interests in businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours. Further, if it pursues such acquisitions or makes further investments in our industry, those acquisition and investment opportunities may not be available to us. While KKR is permitted under the indentures relating to the notes to sell a portion of its equity in us, so long as KKR continues to indirectly own a significant amount of our equity, even if such amount is less than 50%, it will continue to be able to influence or effectively control our decisions.

35



FORWARD-LOOKING STATEMENTS

        This prospectus contains certain forward-looking statements, including, without limitation, statements concerning the conditions in our industry, expected cost savings, our operations, our economic performance and financial condition, including, in particular, statements relating to our business and growth strategy and product development efforts. The words "may," "might," "should," "estimate," "project," "plan," "anticipate," "expect," "intend," "outlook," "believe" and other similar expressions are intended to identify forward-looking statements and information. 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 them 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" and elsewhere in this prospectus.

        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:

        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 prospectus 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.

36



USE OF PROCEEDS

        The exchange offer is intended to satisfy our obligations under the registration rights agreement that we entered into in connection with the private placement. We will not receive any cash proceeds from the issuance of the exchange notes in the exchange offer. As consideration for issuing the exchange notes as contemplated in this prospectus, we will receive in exchange a like principal amount of outstanding notes, the terms of which are identical in all material respects to the exchange notes and represent the same underlying indebtedness, except that the exchange notes will not contain terms with respect to transfer restrictions or additional interest upon a failure to fulfill certain of our obligations under the registration rights agreement. The outstanding notes that are surrendered in exchange for the exchange notes will be retired and cancelled and cannot be reissued. As a result, the issuance of the exchange notes will not result in any increase or decrease in our capitalization.

37



CAPITALIZATION

        The following table sets forth cash and cash equivalents and consolidated capitalization as of December 31, 2006.

        This table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the historical consolidated financial statements and accompanying notes thereto appearing elsewhere in this prospectus.

 
  As at December 31, 2006
 
  (in millions of U.S. dollars)

Cash and cash equivalents   $ 47.4
   

Debt (including current maturities):

 

 

 
  Revolving credit facility(1)     43.0
  Other bank loans     17.4
  Term loan(2)     1,154.4
  Senior subordinated loan(3)    
  Senior subordinated term loan(3)     22.6
  Senior subordinated notes due 2015 issued by Masonite U.S.(3)     393.0
  Senior subordinated notes due 2015 issued by Masonite Canada(3)     354.2
  Other subsidiary long-term debt     31.5
   
  Total debt     2,016.2

Total shareholder's equity

 

 

484.0
   

Total capitalization

 

$

2,452.8
   

(1)
Consists of a six-year senior secured $350.0 million revolving credit facility.

(2)
Consists of an eight-year senior secured $1,175.0 million term loan facility.

(3)
In connection with the Transaction, we entered into a $770.0 million senior subordinated loan facility, the proceeds of which were used to partially fund the Transaction. On October 6, 2006, the senior subordinated loan facility was repaid in full by the automatic issuance of the debt comprising the new senior subordinated term loan facility. On and after October 6, 2006, certain senior subordinated term loan lenders opted to receive an aggregate of $397.5 million of senior subordinated notes due 2015 issued by Masonite U.S. and an aggregate of $355.8 million of senior subordinated notes due 2015 issued by Masonite Canada as evidence of the respective principal amounts of their term loans. As of the date hereof, certain senior subordinated term loan lenders were eligible to convert $14.5 million of senior subordinated term loans under which Masonite U.S. is the borrower and $2.0 million of senior subordinated term loans under which Masonite Canada is the borrower into the equivalent amounts of Senior Subordinated Notes due 2015 issued by Masonite U.S. or Masonite Canada, respectively.

38



THE TRANSACTION

        On December 22, 2004, Masonite International Corporation entered into a combination agreement with Stile Canada, an entity controlled by affiliates of KKR, which was amended and restated on January 16, 2005 and was further amended and restated on February 17, 2005, pursuant to which on April 6, 2005, Stile Canada acquired all of the common shares of Masonite International Corporation (other than certain shares held by certain officers and employees of Masonite International Corporation which were later exchanged for shares of Masonite Holding Corporation) at a purchase price of C$42.25 per share in cash (the "Transaction").

        Following the Transaction, Masonite International Corporation was amalgamated with Stile Canada to form Masonite Canada Corporation, which then transferred all of the common shares of Masonite Holdings, Inc., which is the parent company of Masonite International Corporation's U.S. subsidiaries, to Stile U.S. Following such transfer, Masonite Holdings, Inc. was merged with and into Stile U.S., and the surviving corporation was renamed Masonite Corporation. Masonite Canada Corporation was subsequently renamed Masonite International Corporation.

        The aggregate value of the Transaction, including the assumption of indebtedness, premiums, fees and expenses, was approximately $2.7 billion, including approximately $551.5 million of new equity provided by KKR and $24.3 million of equity invested by certain members of management at the closing. On June 30, 2005, members of our management and certain other employees invested an additional $22.6 million in the capital stock of Masonite Holding Corporation, with the proceeds used to repurchase shares held by KKR.

        In connection with the Acquisition:

39


Ownership and Corporate Structure

        The chart below illustrates our ownership and corporate structure as of the date hereof.

CHART



(1)
Investment funds affiliated with KKR own 80.8% of Masonite Holding Corporation's outstanding common stock, with the remainder held by certain members of management. See "Major Shareholders and Related Party Transactions."

(2)
Masonite International guarantees on a senior basis the senior secured credit facilities and guarantees the notes on a senior basis.

(3)
Masonite U.S. guarantees on a senior basis the obligations of Masonite Canada under the senior secured credit facilities and guarantees the notes issued by Masonite Canada on a senior subordinated basis.

(4)
Consists of a six-year $350.0 million revolving credit facility and an eight-year $1,175.0 million term loan facility, of which $43.0 million and $1,154.4 million, respectively, were outstanding as of December 31, 2006. The senior secured credit facilities are (i) guaranteed on a senior basis by Masonite International and each subsidiary that guarantees the notes and (ii) secured by a pledge of substantially all of our assets, including the common stock of certain subsidiaries.

(5)
In connection with the Transaction, we entered into a $770.0 million senior subordinated loan facility, the proceeds of which were used to partially fund the Transaction. On October 6, 2006, the senior subordinated loan facility was repaid in full by the automatic issuance of the debt comprising the new senior subordinated term loan facility. On and after October 6, 2006, certain senior subordinated term loan lenders opted to receive the an aggregate of $397.5 million of senior subordinated notes due 2015 issued by Masonite U.S. and an aggregate of $355.8 million of senior subordinated notes due 2015 issued by Masonite Canada as evidence of the respective principal amounts of their term loans. As of the date hereof, certain senior subordinated term loan lenders were eligible to convert $14.5 million of senior subordinated term loans under which Masonite U.S. is the borrower and $2.0 million of senior subordinated term loans under which Masonite Canada is the borrower into the equivalent amounts of senior subordinated notes due 2015 issued by Masonite U.S. or Masonite Canada, respectively.

(6)
Masonite Canada guarantees on a senior basis the obligations of Masonite U.S. under the senior secured credit facilities and guarantees the notes issued by Masonite U.S. on a senior subordinated basis.

(7)
Each of our existing and future U.S. restricted subsidiaries guarantees (or will guarantee, in the case of future subsidiaries) on a senior basis the senior secured credit facilities and guarantees the notes on a senior subordinated basis.

(8)
Certain of our non-U.S. subsidiaries guarantee on a senior basis the senior secured credit facilities and guarantee the notes on a senior subordinated basis.

40



SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

        The following table sets forth selected historical consolidated financial data of the Predecessor and the Successor as of the dates and for the periods indicated. The historical data for the periods presented has been prepared in accordance with Canadian GAAP. The selected historical consolidated financial data of the Predecessor for the year ended December 31, 2004 and for the period from January 1, 2005 to April 6, 2005 have been derived from the audited consolidated financial statements and related notes appearing elsewhere in this prospectus, which have been audited by KPMG LLP. The selected historical consolidated financial data of the Predecessor as at December 31, 2002, 2003 and 2004 and for the years ended December 31, 2002 and December 31, 2003 presented in this table have been derived from the Predecessor's audited consolidated financial statements not included in this prospectus. The selected historical consolidated financial data of the Successor as at December 31, 2005 and for the period from February 2, 2005 to December 31, 2005 have been derived from the Successor's audited consolidated financial statements appearing elsewhere in this prospectus, which have been audited by KPMG LLP. The historical consolidated financial data of the Successor presented as at and for the year ended December 31, 2006 has been derived from the Successor's historical consolidated financial statements included elsewhere in this prospectus which has been audited by Deloitte & Touche LLP.

        The results of operations for any period are not necessarily indicative of the results to be expected for any future period. The selected historical consolidated financial data set forth below should be read in conjunction with, and are qualified by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes thereto appearing elsewhere in this prospectus.

 
  Predecessor
  Successor
 
 
  Fiscal Years Ended
December 31,

  Period From
January 1 to
April 6,

  Period From
February 2, to
December 31,

  Fiscal Year Ended
December 31,

 
 
  2002
  2003
  2004
  2005
  2005(1)
  2006
 
 
  (in millions of U.S. dollars)

 
Statement of Operations Data:                          
Sales   $ 1,619.5   $ 1,777.2   $ 2,199.9   $ 600.1   $ 1,828.4   $ 2,464.5  
Cost of sales     1,254.2     1,380.2     1,722.7     486.7     1,497.9     1,950.2  
   
 
 
 
 
 
 
Gross profit     365.3     397.1     477.2     113.4     330.4     514.2  
Selling, general and administration expenses     155.1     162.2     189.9     54.4     161.3     211.8  
Depreciation     40.7     47.5     58.5     17.9     60.3     89.0  
Amortization     2.5     0.2     4.1     1.1     29.9     35.6  
Interest     45.4     36.4     39.5     11.2     137.1     182.6  
Other (income) expense, net     (0.6 )   3.1     7.7     66.4     22.6     39.0  
Gain on refinancing, net     (3.0 )                    
   
 
 
 
 
 
 
Income (loss) before income taxes and non-controlling interest     125.2     147.7     177.4     (37.7 )   (80.8 )   (43.8 )
Income taxes     28.0     34.5     42.7     (8.3 )   (16.3 )   (15.7 )
Non-controlling interest     7.7     5.5     6.8     1.3     5.3     6.2  
   
 
 
 
 
 
 
Net income (loss)(3)   $ 89.5   $ 107.7   $ 128.0   $ (30.7 ) $ (69.8 ) $ (34.3 )
   
 
 
 
 
 
 

41


 
  Predecessor
  Successor
 
  As at December 31,
  As At
December 31,

 
  2002
  2003
  2004
  2005
  2006
 
  (in millions of U.S. dollars)

Balance Sheet Data:                              
Cash and cash equivalents   $ 47.6   $ 129.7   $ 86.5   $ 47.5   $ 47.4
Working capital     298.1     385.0     430.3     211.2     239.9
Total assets     1,462.8     1,693.2     2,108.5     3,297.3     3,164.5
Total debt     537.4     489.4     637.3     2,105.2     2,016.2
Total shareholder's equity(3)     552.4     732.6     916.9     492.3     484.0

Other Financial Data:

 

 

 

 

 

 

 

 

 

 

 

 
Capital expenditures   $ 43.5   $ 49.5   $ 70.2   $ 69.8   $ 49.6
Ratio of earnings to fixed charges(2)     3.4 x   4.3 x   4.6 x      

(1)
The only activity of the Successor in the February 2 to April 6, 2005 period is the realized exchange loss of $5.3 million to hedge the Canadian dollars required to close the Transaction. See note 1 of our consolidated financial statements contained elsewhere in this prospectus.

(2)
Earnings to fixed charges ratio calculated as earnings (defined as pre-tax income before equity income or loss plus fixed charges) divided by fixed charges (defined as interest plus amortization of deferred financing plus rent expense). Under Canadian GAAP earnings were insufficient to cover fixed charges for the period from January 1 to April 6, 2005, the period from February 2 to December 31, 2005, and the fiscal year ended December 31, 2006 by $37.9 million, $80.8 million and $43.8 million, respectively.

(3)
Reconciliation of certain financial data from Canadian GAAP to U.S. GAAP:

 
  Predecessor
  Successor
 
 
  Fiscal Year Ended
December 31,

  Period From
January 1, 2005 to
April 6,

  Period From
February 2, 2005
to December 31,

  Fiscal Year Ended
December 31,

 
 
  2002
  2003
  2004
  2005
  2005
  2006
 
Reconciliation of net income (loss)—Canadian GAAP to U.S. GAAP                                      
Net income (loss)—Canadian GAAP   $ 89.5   $ 107.7   $ 128.0   $ (30.7 ) $ (69.8 ) $ (34.3 )
Effect of SFAS 133(a)     (22.1 )   3.3     6.6     1.4          
Effect of EITF 88-16(b)                     0.3      
Tax effect of U.S. GAAP adjustments     8.4     (1.0 )   (1.9 )   (0.5 )   (0.2 )    
   
 
 
 
 
 
 
Net income (loss)—U.S. GAAP   $ 75.7   $ 110.0   $ 132.7   $ (29.7 ) $ (69.6 ) $ (34.3 )
   
 
 
 
 
 
 

42


 
  Successor
 
 
  As at December 31,
  As at December 31,
 
 
  2005
  2006
 
Reconciliation of shareholder's equity—Canadian GAAP to U.S. GAAP              
Shareholder's equity—Canadian GAAP   $ 492.3   $ 484.0  
Effect of SFAS 133(a)     9.9     12.2  
Effect of EITF 88-16(b)     (5.8 )   (1.5 )
Effect of SFAS 158(c)         2.3  
   
 
 
Shareholder's equity—U.S. GAAP   $ 496.4   $ 496.9  
   
 
 
(a)
SFAS No. 133: Accounting for derivative instruments and hedging activities ("SFAS 133"):


SFAS 133 and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities—an Amendment of SFAS 133", ("SFAS 138") requires that all derivative instruments be reported on the balance sheet at fair value and establishes criteria for designation and effectiveness of hedging relationships.


Forward exchange contracts:


The Company enters into forward exchange contracts to hedge certain forecasted cash flows. The contracts are for periods consistent with the forecasted transactions. All relationships between hedging instruments and hedged items, as well as risk management objectives and strategies are documented. Changes in the spot value of the foreign currency contracts that are designated, effective and qualified as cash flow hedges of forecasted transactions are reported in accumulated other comprehensive income and are reclassified into the same component of earnings and in the same period as the hedged transaction is recognized. Under Canadian GAAP, the derivative instruments are not marked to market and the related off balance sheet gains and losses are recognized in earnings in the same period as the hedged transactions.


Interest rate swap agreements:


We have entered into interest rate swap agreements to convert a portion of its floating rate debt into fixed rate debt in accordance with our risk management objective of mitigating the variability and uncertainty in its cash flows due to variable interest rates. At the inception of these hedges, Masonite had met the criteria for designation and assessing the effectiveness of hedging relationships, thus these interest rate swaps were designated as cash flow hedges.


For the Predecessor, the criteria under SFAS 133 were not met prior to the establishment of its interest rate swap agreements. Accordingly, any change in the fair value of the interest rate swaps was reported in income from inception to December 31, 2003. As of January 1, 2004, we had met the criteria for designation and assessing the effectiveness of hedging relationships, thus the interest rate swaps were designated as cash flow hedges. Under U.S. GAAP, changes in fair value of these financial instruments that are designated as effective and qualify as cash flow hedges are reported in accumulated other comprehensive income and are reclassified into income in the same period as the hedged transaction is reported.

(b)
EITF 88-16: Basis in leveraged buyout transactions:


Under Canadian GAAP, the Transaction was accounted for using the purchase method with a 100% change in basis. Under U.S. GAAP, a portion of the purchase cost (representing approximately 1% of the purchase price) of the Transaction is accounted for at the carrying value of management's continuing equity interests. The termination of a former senior executive resulted in a step acquisition, as the percentage of the Company owned by management decreased. The results of this step acquisition are reflected in the operations of the Company in the Successor Period. As at December 31, 2006, approximately 0.1% (December 31, 2005, approximately 0.4%)

43


(c)
SFAS No. 158: Employer's Accounting for Defined Benefit Pension and Other Post-Retirement Plans:


This standard requires the full recognition of the funded status of an entity's defined benefit and other post-retirement plans either as an asset or a liability on its year-end balance sheet. As a result, this standard eliminates the recognition of an Additional Minimum Pension Liability ("AML") as well as other previously unreported pension adjustments for defined benefit and other post-retirement plans that were not previously required under SFAS 87 "Employer's Accounting for Pensions". As a result of early adopting the provisions of SFAS 158 in 2006, the Company reduced its long-term pension liability by $2.3 million, with an offset to accumulated other comprehensive income.

44



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        The following Management Discussion and Analysis ("MD&A") is a review of our financial condition and results of operations, is based upon Canadian Generally Accepted Accounting Principles ("GAAP") and covers periods prior and subsequent to the acquisition by Masonite International Inc. of Masonite International Corporation on April 6, 2005 (the "Transaction"). More specifically, the financial condition and results of operations for the year ended December 31, 2006 are for Masonite International Inc. and represents the first full year of operations following the Transaction. The results of operations from February 2, 2005 (date of Incorporation) to December 31, 2005 are for Masonite International Inc. ("Successor 2005"), and the results of operations from January 1, 2005 to April 6, 2005 ("Predecessor 2005") and January 1, 2004 to December 31, 2004 ("Predecessor 2004") are for Masonite International Corporation. "Predecessor" refers to Masonite International Corporation and its subsidiaries on a consolidated basis, "Masonite" or the "Successor" refers to Masonite International Inc. and its subsidiaries on a consolidated basis, and unless the context otherwise requires, the "Company", "we", "us" and "our" refer to the Predecessor for periods prior to the Transaction and to the Successor for periods thereafter, unless the context otherwise requires or it is otherwise indicated. All amounts are in United States dollars unless specified otherwise. The Successor financial information may not be comparable to the Predecessor financial information as a result of the effect of the revaluation of assets and liabilities to their estimated fair market values in accordance with the application of purchase accounting pursuant to Canadian GAAP.

        This discussion should be read in conjunction with the annual audited consolidated financial statements and the related notes appearing elsewhere herein. The following discussion also contains forward-looking statements that involve numerous risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements as a result of these risks and uncertainties.

Overview of the Business

        We are one of the largest manufacturers of doors in the world based on the number of doors sold, with a significant market share in both interior and exterior doors products. We sell approximately 50 million doors per year. Our products are sold in over 70 countries including the United States, Canada, the United Kingdom, France and throughout Central and Eastern Europe. For the year ended December 31, 2006 our sales were $2.5 billion.

        Our products are marketed under well-recognized brand names throughout the world. In North America, we market our doors primarily under the Masonite brand, which is a leading brand in the door industry according to published industry sources. Our sales are derived from the two primary sources of door demand: residential repair, renovation and remodeling of existing homes, and the construction of new homes. We believe that sales to the less cyclical residential repair, renovation and remodeling sector represents the larger component of our business in North America. Approximately 77% of our 2006 sales were generated in North America, where we believe we have a leading market share in both interior and exterior doors, 19% in Europe, and the remainder in South America, Asia, Africa and the Middle East.

        We have over 80 manufacturing and distribution facilities in 18 countries, primarily in North America and Europe. We are a vertically integrated producer, manufacturing key components of doors, including composite molded and veneer door facings, glass door lites and cut stock. We have integrated the various operations in our North American segment as well as our Europe and Other segment to the point where we share common systems, financing and infrastructure. We believe that our high level of vertical integration provides us with competitive and cost advantages over competitors not as vertically integrated, and enhances our ability to develop new and proprietary products.

        We sell doors through multiple distribution channels, including: (i) retail home center customers; (ii) one-step distributors that sell directly to homebuilders and contractors; and (iii) two-step wholesale

45



distributors that resell to other distributors. For North American retail home center customers, our numerous door fabrication facilities provide value-added fabrication and logistical services, including 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 differentiate us from our competitors.

        The demand for doors is influenced by various macroeconomic factors, including general economic conditions, interest rates, levels of unemployment, consumer confidence and the availability of credit. During periods when these macroeconomic factors are favorable, home prices typically rise, the volume of existing home sales increases and consumers tend to be more willing and able to undertake renovation, remodeling and repair projects for their homes. As a result, the demand for our products rises.

        The new home construction sector has historically been cyclical, and during 2006, a major downturn began in the United States. December 2006 annualized seasonally adjusted housing starts were 18% below the December 2005 rate as reported by the U.S. Census Bureau. In addition, the repair, renovation and remodeling has recently experienced weakening year-over-year sales in the United States. Our relatively narrow focus within the building products industry amplifies the risks inherent in such a market downturn. The impact of this weakness on our revenues, profits and profit margin will be determined by many factors, including industry capacity, industry pricing discipline, and our ability to implement the series of initiatives encompassed in our Blueprint for Profitable Growth.

        In many of the countries where we operate, an increasing share of door sales is made through large home center and other large retailers. In addition, consolidation among companies operating in different geographic regions has increased in recent years, resulting in more customers operating nationally and internationally. Although these trends are present to a lesser extent outside North America, we expect consolidation to continue in future years. We believe we are well-positioned to succeed with these large customers, as we offer a comprehensive, high quality product line, a focus on on-time and complete deliveries, and consistency in products and merchandising. We also provide value-added fabrication and logistical services, including store delivery of pre-hung interior and exterior doors to home centers and to large retail customers. We offer a broad range of interior and exterior doors in the form of stock products, custom-designed doors and special order doors. This extensive product and service offering allows us to offer an "all products" strategy which provides our customers one-stop shopping and reduces our reliance on any one type or style of door.

Critical Accounting Policies and Estimates

        Our significant accounting policies are disclosed in note 1 to the annual audited consolidated financial statements. The preparation of these financial statements requires us to make estimates that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosures of contingent items. Actual results could differ significantly from those estimates. The following discussion addresses our more critical accounting policies. These policies are important to the presentation of our operating results and financial position and require significant judgment or the use of estimates.

Inventory

        We value inventories on a first-in, first-out basis at the lower of cost and replacement cost for raw materials, and the lower of cost and net realizable value for finished goods. In determining net realizable value, we consider such factors as yield, turnover and aging, expected future demand and past experience. A change in the underlying assumptions related to these factors could affect the valuation of inventory and have a corresponding effect on cost of sales.

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Goodwill

        We use the purchase method of accounting for all business combinations. Use of the purchase method for acquisitions frequently results in the recording of goodwill as part of the purchase price. Goodwill is not amortized but instead is tested for impairment each year or more frequently if events or changes in circumstances indicate that an impairment loss may have been incurred. Goodwill impairment analysis is performed at the reporting unit level by comparing the reporting unit's carrying amount to its fair value. Fair values of reporting units are estimated using an income approach. In making this fair value assessment, we rely on a number of factors including operating results, business plans, economic projections and anticipated future cash flows. There are inherent uncertainties related to these factors and to our judgment in applying them to the analysis of goodwill impairment. Since judgment is involved in performing goodwill valuation analyses, any change in estimates can affect the valuation of goodwill.

Intangible Assets

        We assign value to intangible assets acquired in business combinations or other forms of acquisitions. The value assigned to intangible assets such as customer relationships, non-compete agreements and order backlogs is determined by estimating future cash flows, discount rates, rates of attrition and useful lives of acquired intangible assets. As needed, independent external appraisers are engaged in assisting management to determine the appropriate fair values to be assigned to the intangible assets.

        An impairment test is performed at least annually which compares the carrying value of intangible assets not subject to amortization to fair value. A similar impairment test is performed for intangible assets which are subject to amortization when events or conditions indicate that the carrying value may be impaired by comparing the carrying value to future undiscounted cash flows. An impairment loss is recognized when the carrying amount of the intangible asset exceeds the fair value or is less than future undiscounted cash flows as appropriate. Fair values are based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates that reflect varying amounts of perceived risk. As the estimates of future cash flows, discount rates and attrition rates used to value and test the intangible assets for impairment are based on future events, any changes from the estimated amounts could have an impact on the annual impairment test and carrying value of the intangible assets.

Income Taxes

        Our consolidated income tax provision is calculated by determining taxable income and then applying varying rates of income tax that are appropriate in the numerous taxing jurisdictions in which we conduct business. In the ordinary course of conducting business internationally, there can be numerous transactions and calculations where the ultimate tax outcome is uncertain. The final result of these matters may be different from the estimates that have been made in determining income tax provisions and accruals. If these estimates and assumptions are determined to be inaccurate, there could be a material effect on our income tax provision and net income in the period in which the determination is made.

        We have recorded approximately $57 million of future income tax assets as of December 31, 2006. Future tax assets are calculated based on tax rates to be applied in future periods. Previously recorded tax assets and liabilities need to be adjusted when the expected date of the future event is revised based on current information. A valuation allowance has been recorded to reduce future tax assets to the amount of the future tax benefit that is likely to be realized. In determining the need for the valuation allowance, we considered such factors as projected future taxable income, available tax planning strategies, the character of the income tax asset and the reversal of future income tax

47



liabilities. If assumptions related to these factors change significantly, then the valuation allowance, income tax expense and net income may change materially in the period for which the determination is made.

Long-lived Assets

        We periodically evaluate the recoverability of long-lived assets, including property, plant and equipment and amortizable intangible assets based on a two-step impairment analysis when events or conditions indicate that the carrying value may not be recoverable. In performing this evaluation, reliance is placed upon a number of factors which include operating results, business plans, economic projections and anticipated cash flows. An impairment loss is recognized when the carrying amount of the asset to be held and used exceeds the sum of the undiscounted cash flows expected from use. Impairment is measured as the amount by which the carrying value of the asset exceeds its fair value. Fair values are based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates that reflect varying degrees of perceived risk. Since fair value is based on estimates of future events, changes in estimates could result in write downs.

Employee Future Benefit Plans

        We maintain defined benefit plans and other postretirement benefits covering certain employees. Earnings are charged with the cost of benefits earned by employees as services are rendered. The cost reflects our best estimates of the pension plans' expected investment yields, wage and salary escalation, expected health care costs, mortality of members, terminations and the ages at which members will retire. Changes in these assumptions could impact future pension expense. The excess of the net actuarial gain (loss) over 10% of the greater of the benefit obligation and the fair value of plan assets at the beginning of the year is amortized over the average remaining service lives of its members. These estimates may differ from actual results that will occur over an extended period of time. Any significant differences may have an effect on the recorded pension expense and carrying value of the plans' net assets or net liabilities. Benefits under our defined benefit pension plans were largely curtailed in 2003.

Stock-based Awards

        Effective January 1, 2003, we adopted the revised guidance for stock-based awards, which requires that a fair value method of accounting, as outlined above, be applied to all stock-based award grants to both employees and non-employees, and included in income. We have prospectively applied the fair value method of accounting for stock option awards granted to employees after January 1, 2003, and accordingly, have recorded the compensation expense for such awards.

        The determination of obligations and compensation expense for the plans noted above use several mathematical and judgment factors that include expected volatility, the anticipated life of the option, an estimated risk free rate, and the number of options expected to vest. Any difference in the number of options that actually vest can affect future compensation expense. Other assumptions are not revised after the original estimate.

        In 2003 we implemented a Restricted Shares Unit and Deferred Share Unit incentive plan. This incentive plan was terminated on April 6, 2005, and was settled as part of the Transaction.

Variable Interest Entities

        In 2004, we began consolidating variable interest entities ("VIE's"). Consolidation of VIE's is required for entities which we are determined to be the primary beneficiary. The determination of whether we are the primary beneficiary involves judgements and estimates by management. These judgements involve determining the expected loss and expected returns from the variable interest entity

48



and a discount rate to determine the present value of the expected cash flows. Changes in assumptions used may affect the variability of the expected cash flows and potentially our conclusion of whether we are or are not the primary beneficiary.

Impact of the Transaction

        We entered into a combination agreement on December 22, 2004, which was amended and restated on January 16, 2005 and February 17, 2005, with Stile Acquisition Corp., a wholly owned subsidiary of Masonite and an affiliate of KKR whereby all of the issued and outstanding common shares of the Predecessor would be indirectly acquired by KKR for Cdn$42.25 per share in cash. The Transaction was approved by shareholders at a special meeting of shareholders held on March 31, 2005 and closed on April 6, 2005. Subsequently, the Predecessor's common shares were de-listed from the New York Stock Exchange and the Toronto Stock Exchange. In connection with the Transaction, we incurred certain transaction costs, in 2004 and 2005, which were not capitalized as part of the purchase price, and have been included in other expense.

        We accounted for the Transaction using the purchase method of accounting and, accordingly, the Transaction resulted in a new basis of accounting for us. We have allocated the purchase price on the basis of our estimate of the fair value of the underlying assets acquired and liabilities assumed. We retained third party professionals to assist in the determination of the fair value of the underlying assets acquired and liabilities assumed. We also engaged independent appraisers to assist in determining the fair values of property, plant and equipment and intangible assets acquired, including trade names, trademarks, and customer relationships. Certain transaction costs may be deductible for income tax purposes and others will form the basis of Masonite's investment in the Predecessor. These valuations and cost allocations may be subject to review and challenge by income tax authorities in the countries to which they relate. The excess of the total purchase price over the estimated fair value of the net identifiable assets acquired at closing has been allocated to goodwill, which is subject to an annual impairment review. Goodwill in the Transaction, based on the allocation of the purchase price, totaled approximately $950 million.

        As a result of the purchase accounting associated with the Transaction, the assets and liabilities of the Predecessor are recorded by the Successor at their fair value. Certain of the fair value assigned to the assets (including inventory; property, plant and equipment; customer lists; order backlogs; patents; trademarks and tradenames) is amortized to income over their estimated useful lives.

Recent Developments

        In the first quarter of 2007 we were notified by our largest customer, The Home Depot, that they would be moving substantially all of their business with us in certain geographic regions to a competitor later in 2007. This decision by The Home Depot was the result of price increases we put in place during 2006. Our sales to The Home Depot in the regions affected are approximately $250-300 million on an annualized basis. Subsequent to The Home Depot notification, we announced the permanent closure of facilities dedicated to The Home Depot in Toledo, Ohio, Logan Township, New Jersey and Frederick, Maryland. We expect to incur a charge in 2007 in connection with the transition of this business.

        During the fourth quarter of 2006, we incurred an impairment charge of $16.9 million related to several discontinued product lines and manufacturing realignments.

        During the third quarter of 2006 we implemented a company-wide reduction in employment levels, impacting approximately eight percent of the global salaried and indirect hourly workforce. In connection with the reduction in employment levels, we incurred a charge of approximately $8.5 million.

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        During 2006, we announced the closure of four manufacturing facilities in North America. The first closure, announced in January 2006, was a distribution facility located in Dickson, Tennessee. The second closure, also announced in January 2006, was an interior door manufacturing facility located in Mobile, Alabama. In the second quarter of 2006, we announced the closure of an entry door manufacturing facility in Woodbridge, Ontario, and a component manufacturing facility in Corning, California. These closures are consistent with our goals to improve manufacturing efficiencies, consolidate production and reallocate capacity among locations, as we strive to better balance supply and demand. All employees at these affected locations were offered severance, extended benefits and outplacement assistance.

Acquisitions

        Subsequent to the Transaction described under "Impact of the Transaction" above, we completed six acquisitions during 2005.

        Three acquisitions were of interests in less than wholly-owned subsidiaries previously consolidated in our financial results. In May 2005, we purchased the remaining interest in a door component manufacturing facility with operations in Canada and the United States for cash consideration of approximately $36 million (plus approximately $18 million of cash paid to the minority partner in the form of a dividend prior to closing). Also in May 2005, we purchased the remaining ownership interest of less than wholly-owned investments located in Israel and Turkey for cash consideration of approximately $8 million. In October 2005, we purchased the remaining ownership interest of a less than wholly-owned distribution subsidiary with operations in Canada and the United States for total consideration of approximately $9 million, including cash on closing of approximately $5 million, and notes payable of approximately $4 million, which are payable over a three year period.

        Three other acquisitions completed during 2005 expanded our geographic reach and furthered our vertical integration. In July 2005, we purchased a 50% interest in a molded door and stile and rail door manufacturer in Malaysia for approximately $3 million. In October 2005, we acquired an 80% interest in a door manufacturer located in Hungary for total consideration of $8.5 million, including cash consideration of approximately $5 million on closing, with the balance, subject to certain post-closing adjustments, paid in 2006 and to be paid in 2007. In December 2005, we completed the acquisition of a door core manufacturing facility in the United States for cash consideration of approximately $7 million.

        While historically a substantial part of our growth has come from acquisitions, our current strategy emphasizes improving the operations of our existing business. We did not complete any acquisitions in 2006.

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Results of Operations for the Year Ended December 31, 2006 compared to the Period from February 2, 2005 to December 31, 2005 and the Period from January 1, 2005 to April 6, 2005

 
  2006
  Successor
2005

  Predecessor
2005

 
 
  (in millions of U.S. dollars)

 
Sales   $ 2,464.5   $ 1,828.4   $ 600.1  
Cost of sales     1,950.2     1,497.9     486.7  
Gross margin     514.2     330.4     113.4  
Selling, general and administration expenses     211.8     161.3     54.4  
Depreciation     89.0     60.3     17.9  
Amortization of intangible assets     35.6     29.9     1.1  
Interest     182.6     137.1     11.2  
Other expense, net     39.0     22.6     66.4  
(Loss) income before income taxes and non-controlling interest     (43.8 )   (80.8 )   (37.7 )
Income taxes     (15.7 )   (16.3 )   (8.3 )
Non-controlling interest     6.2     5.3     1.3  
   
 
 
 
Net loss   $ (34.3 ) $ (69.8 ) $ (30.7 )
   
 
 
 

Consolidated Sales

 
  2006
  Successor
2005

  Predecessor
2005

 
  (in millions of U.S. dollars)

Sales   $ 2,464.5   $ 1,828.4   $ 600.1

        Consolidated sales for 2006 were $2,464 million. Sales in 2006 were positively impacted by businesses acquired in 2005 after the Transaction which contributed $21 million of additional sales. Several new interior and exterior products also positively affected sales in 2006. An additional factor impacting 2006 consolidated sales is foreign exchange. If currencies were held constant from 2005, 2006 sales would have been reduced by $18 million.

        Sales in the 2005 Successor period were $1,828 million and include the results of the business of the Predecessor acquired on April 6, 2005. Sales in the 2005 Predecessor period were $600.1 million. Sales in both periods were positively impacted by the continued growth in sales of several new interior and exterior products as well as acquisitions completed in 2004.

Sales and Percentage of Sales by Principal Geographic Region

 
  2006
  Successor
2005

  Predecessor
2005

 
 
  (in millions of U.S. dollars)

 
North America   $ 1,899.4   $ 1,445.3   $ 473.4  
      77 %   79 %   79 %
Europe and Other   $ 644.2   $ 458.0   $ 144.0  
      26 %   25 %   24 %
Intersegment   $ (79.2 ) $ (74.9 ) $ (17.3 )
      (3 )%   (4 )%   (3 )%

        Sales in our principal segment, North America, were $1,899 million in 2006. Sales in the North American segment contributed 77% of consolidated sales and were impacted by softening market conditions in North America. Sales in the North American segment were $1,445.3 million and $473.4 million for the 2005 Successor and 2005 Predecessor periods, respectively.

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        Sales outside of North America, net of intersegment sales, were $565.0 million in 2006. European sales were impacted by acquisitions completed in 2005 and appreciation of European currencies. Sales in the Europe and Other segment were $458.0 million and $144.0 million for the 2005 Successor and 2005 Predecessor periods, respectively. Both periods were impacted by our expanded presence as a door manufacturer in several Eastern European countries.

        Intersegment sales consist primarily of sales of door components from our Europe and Other segment to the North American segment and these sales were impacted by softening market conditions in North America in 2006. In addition, the fire in our Laurel, Mississippi manufacturing facility and the 2005 hurricanes caused certain of our international manufacturing facilities to ship more components to North America to ensure continuity of supply for production throughout 2005.

Sales and Percentage of Sales by Product Line

 
  2006
  Successor
2005

  Predecessor
2005

 
 
  (in millions of U.S. dollars)

 
Interior   $ 1,625.0   $ 1,149.6   $ 409.4  
      66 %   63 %   68 %
Exterior   $ 839.4   $ 678.8   $ 190.7  
      34 %   37 %   32 %

        The proportion of revenues from interior and exterior products was approximately 66% and 34%, respectively, for 2006. For the 2005 Successor period, the proportion was 63% and 37%, respectively while the 2005 Predecessor period was 68% and 32%, respectively. Our sales of interior doors in 2006 were affected by our relative strength in the interior door market price increases as well as the acquisitions of interior door manufacturing facilities in 2005.

Cost of Sales

 
  2006
  Percentage of
Sales

  Successor
2005

  Percentage of
Sales

  Predecessor
2005

  Percentage of
Sales

 
 
  (in millions of U.S. dollars)

 
Cost of sales   $ 1,950.2   79.1 % $ 1,497.9   81.9 % $ 486.7   81.1 %

        The significant components of cost of sales are materials, direct labor, factory overheads and distribution costs. Cost of sales, expressed as a percentage of sales, was 79.1% for 2006, 81.9% for the 2005 Successor period and 81.1% for the 2005 Predecessor period. In 2006, we completed a comprehensive review of future market conditions for certain inventories that resulted in an $11.5 million charge to cost of sales. This was partially offset by insurance proceeds of $0.7 million related to hurricane damage incurred in 2005. Our supply chain initiatives, facility rationalization and rigorous cost management helped affect the cost of sales percentage in 2006.

        Margins in the 2005 Successor period were impacted in part by the amortization of fair value adjustments that increase the value of inventory acquired as part of business combinations. This adjustment increased cost of sales by approximately $22 million.

        In December 2005, we wrote-off approximately $2 million in inventory to cost of sales, as a result of a fire set by arsonists at a leased warehouse facility near a manufacturing plant in the United Kingdom. We also took a charge against cost of sales in December of 2005 of approximately $7 million relating to inventory in the United States. We had evaluated the future market conditions

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for this inventory and determined that it was appropriate to record the charge based on the age of the inventory, and expected future demand.

        Also negatively impacting cost of sales in the 2005 Successor period were the hurricanes that occurred in the southeastern United States. The estimated impact of these hurricanes was approximately $8 million representing direct costs, property losses and lost profit margin on sales.

        The 2005 Successor period was also negatively impacted by a significant rationalization and standardization initiative in the production of residential entry doors. One exterior door manufacturing facility was closed during the period and several of the other locations were re-aligned to a common product specification. The costs associated with the rationalization and standardization of approximately $2 million are included in cost of sales.

        During the 2005 Predecessor period, prior to the Transaction, we experienced an equipment electrical fire at our facility located in Laurel, Mississippi. The cost to repair the plant's equipment was immaterial, but two of the three production lines were inoperative for approximately three weeks. The lost production impacted our consolidated margins during the period.

Selling, General and Administration Expenses

 
  2006
  Percentage of
Sales

  Successor
2005

  Percentage of
Sales

  Predecessor
2005

  Percentage of
Sales

 
  (in millions of U.S. dollars)

Selling, general and administration expenses   $ 211.8   8.6%   $ 161.3   8.8%   $ 54.4   9.1%

        SG&A primarily includes personnel costs, marketing and advertising, sales commissions, information technology costs, receivables sales program costs, professional fees and management travel. SG&A costs were 8.6% of sales in 2006 and were affected by our discontinued use of our corporate airplanes, and the reduction in staffing levels.

        For the 2005 Successor period, total SG&A costs were $161.3 million or 8.8% of sales while for the 2005 Predecessor period, total SG&A costs were 9.1% of sales. These costs reflect the fixed costs incurred during a period of generally lower seasonal sales during the 2005 Predecessor period.

Depreciation

 
  2006
  Successor
2005

  Predecessor
2005

 
  (in millions of U.S. dollars)

Depreciation   $ 89.0   $ 60.3   $ 17.9

        Depreciation expense was $89 million in 2006, $60 million in the 2005 Successor period and $18 million in the 2005 Predecessor period. In conjunction with the Transaction, we applied purchase accounting and recorded the fair value of assets acquired and liabilities assumed as of April 6, 2005 thereby increasing the historical carrying amounts of property, plant and equipment by $23 million. Also impacting the level of depreciation in 2006 were business acquisitions in 2005, as well as 2005 Successor and Predecessor capital expenditures of $70 million and $12 million, respectively.

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Amortization of Intangible Assets

 
  2006
  Successor
2005

  Predecessor
2005

 
  (in millions of U.S. dollars)

Amortization of intangible assets   $ 35.6   $ 29.9   $ 1.1

        Amortization of intangible assets was $36 million in 2006, $30 million in the 2005 Successor period and $1 million in the 2005 Predecessor period. In conjunction with the Transaction, we applied purchase accounting and recorded the fair value of assets acquired and liabilities assumed as of April 6, 2005. The historical carrying amounts of intangible assets with definite lives were increased by $518 million representing an increase of $264 million for customer lists, $165 million for trademarks and tradenames, $85 million for patents and $4 million for order backlogs at the time of acquisition.

Other Expense

 
  2006
  Successor
2005

  Predecessor
2005

 
 
  (in millions of U.S. dollars)

 
Transaction costs   $   $ 6.8   $ 7.2  
Equity compensation settlement             57.7  
Restructuring and severance expense     14.4     7.5     1.6  
Hedging transaction loss         5.3      
Loss (gain) on disposal of property, plant and equipment     6.8     2.4     0.1  
Asset impairment     16.9          
Other     0.9     0.6     (0.3 )
   
 
 
 
Other expense   $ 39.0   $ 22.6   $ 66.4  
   
 
 
 

        Other expense was $39.0 million in 2006, including asset impairments of $16.9 million to reduce the carrying value of certain assets to their net realizable value. In addition, we incurred restructuring and severance costs of $14.4 million related to the closure of four manufacturing facilities in North America as well as reductions in staffing levels that occurred primarily in September. A loss on disposal of idle property, plant and equipment also added $6.8 million to other expense in 2006.

        Approximately $6.8 million in transaction fees, including legal, accounting and other costs related to the Transaction which were not eligible to be capitalized are included in other expense for the 2005 Successor period. In addition, we recognized approximately $7.5 million in severance costs related to the resignation of our former Chief Executive Officer and the termination of other employees.

        Included in other expense for the 2005 Predecessor period are approximately $58 million in costs related to equity compensation settlements. These stock based compensation costs were for the value of vested and unvested stock options accounted for using the settlement basis of accounting, as well as previously unvested Restricted Share Units and Deferred Share Units. As a result of the affirmative shareholder vote authorizing the sale of the Predecessor in the Transaction, these stock based instruments were accelerated, vested and became payable in cash. The cash settlement of these instruments was recorded with a charge to the Predecessor's audited statement of operations. Also included in other expense for the 2005 Predecessor period are $7.2 million in transaction fees related to the Transaction and $2 million of costs associated with the completion of the shutdown of our Richmond, Indiana exterior steel door plant and our Seoul, South Korea production facility.

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Interest Expense

 
  2006
  Successor
2005

  Predecessor
2005

 
  (in millions of U.S. dollars)

Interest   $ 182.6   $ 137.1   $ 11.2

        Interest expense was $182.6 million in 2006, $137.1 million in the 2005 Successor period, and $11.2 million in the 2005 Predecessor period. Information about the debt facilities are discussed in greater detail in the "Liquidity and Capital Resources" section below.

        We incurred additional deferred financing fees of $18.3 million in the fourth quarter of 2006 related to the conversion of the senior subordinated term loan into senior subordinated notes due 2015. These costs were capitalized and will be amortized over the life of the senior subordinated notes.

        Approximately $17 million of deferred financing amortization is included in interest expense for the 2005 Successor period. The majority of the deferred financing costs incurred are related to the senior secured credit facilities and the senior subordinated loan and are being amortized over the life of these facilities.

Income Tax Rates

 
  2006
  Successor
2005

  Predecessor
2005

Combined effective rate   35.7%   20.1%   22.1%

        Our 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, France, the United Kingdom and Ireland.

        Our income tax rate is also affected by estimates of realizability of tax assets, changes in tax laws and the timing of the expected reversal of temporary differences. We have established a valuation allowance on a portion of tax losses and other carryforward attributes in Canada, the United States and other jurisdictions until the realization of these tax assets becomes more likely than not during the carryforward period.

Net loss

 
  2006
  Successor
2005

  Predecessor
2005

 
 
  (in millions of U.S. dollars)

 
Net loss   $ (34.3 ) $ (69.8 ) $ (30.7 )

        The net loss of $34.3 million in 2006 reflects our cost management and supply chain initiatives as well as price increase implemented during 2006. Difficult market conditions in North America during the fourth quarter, restructuring and severance charges, asset impairments and inventory losses also are reflected in the 2006 net loss. The 2005 Successor period net loss of $69.8 million includes significant unexpected events such as hurricane damage and inventory losses. Significant equity compensation costs, financing charges and professional fees largely impacted the 2005 Predecessor period net loss of $30.7 million.

55



Segment Information

 
  2006
  Percentage of
Sales

  Successor 2005
  Percentage of
Sales

  Predecessor 2005
  Percentage of
Sales

 
  (in millions of U.S. dollars)

Adjusted EBITDA                              
  —North America   $ 236.1   12.4%   $ 156.8   10.8%   $ 44.7   9.4%
Adjusted EBITDA                              
  —Europe and Other   $ 96.5   15.0%   $ 72.0   15.7%   $ 25.0   17.3%

        The performance measurement of each of our geographic segments is based on Adjusted EBITDA. See "—Liquidity and Capital Resources."

        Set forth below is a reconciliation of Adjusted EBITDA, by segment, from net income as reported in the consolidated statement of operations.

 
  North
America
2006

  Percentage
of Sales

  Successor
North
America
2005

  Percentage
of Sales

  Predecessor
North
America
2005

  Percentage
of Sales

 
  (in millions of U.S. dollars)

Net (loss) income   $ (77.1 ) (4.1)%   $ (93.0 ) (6.4)%   $ (49.4 ) (10.4)%
  Interest     179.1         134.7         10.6    
  Income taxes     (28.0 )       (31.0 )       (6.7 )  
  Depreciation and amortization     92.4         66.2         13.0    
  Other expense     34.4         28.9         65.2    
  Non-controlling interest     5.0         2.2         1.1    
  Inventory purchase accounting adjustment             15.1            
  Acquisitions impact (including synergies)             6.0         1.1    
  Hurricanes impact     (0.7 )       7.9            
  Inventory losses     10.1         7.9            
  Receivables transaction charges     7.9         5.3         1.2    
  United States fire                     5.0    
  Franchise and capital taxes     2.2         2.7         0.3    
  Stock-based awards     1.9         2.8            
  Sponsor fees     2.1         1.5            
  Facility closures and realignments     1.8                 1.8    
  Craftmaster contract termination                     1.3    
  Pension and postretirement expense (income) and funding, net     0.9         0.7         0.2    
  Other     4.1         (1.1 )          
   
     
     
   
Adjusted EBITDA   $ 236.1   12.4%   $ 156.8   10.8%   $ 44.7   9.4%
   
     
     
   

        Our 2006 Adjusted EBITDA margin of 12.4% in the North American segment was impacted by pricing actions taken mid-year, our supply chain initiatives, facilities closures, headcount reductions and overall cost management.

56


 
  Successor
Europe and
Other
2006

  Percentage
of Sales

  Successor
Europe and
Other
2005

  Percentage
of Sales

  Predecessor
Europe
and Other
2005

  Percentage
of Sales

 
  (in millions of U.S. dollars)

Net income   $ 42.8   6.4%   $ 23.2   5.1%   $ 18.8   13.0%
  Interest     3.5         2.4         0.6    
  Income taxes     12.3         14.7         (1.6 )  
  Depreciation and amortization     32.2         24.0         6.0    
  Other expense     4.6         (6.3 )       1.2    
  Non-controlling interest     (1.2 )       3.1         0.2    
  Inventory purchase accounting adjustment             6.6            
  Acqusitions impact (including synergies)             1.3         1.1    
  United Kingdom fire             1.6            
  Inventory losses     1.4         0.5            
  Pension and postretirement (income) expense and funding, net     (0.3 )       0.2            
  Stock-based awards     0.1         0.1            
  Other     (1.1 )       0.7         (1.3 )  
   
     
     
   
Adjusted EBITDA   $ 96.5   15.0%   $ 72.0   15.7%   $ 25.0   17.4%
   
     
     
   

        Our Adjusted EBITDA margin in the Europe and Other segment of 15.0% in 2006 reflected weakness in certain markets at the start of the year and the impact of expansion in Eastern Europe, where the benefits are not yet fully realized. The expansion also includes the construction of 2 new facilities in the Ukraine and Czech Republic in addition to the integration of acquisitions. Our 2006 results were also negatively impacted due to a one month closure of our Israel facility during the Israel and Lebanon conflict in July 2006.

Results of Operations for the Period from February 2, 2005 to December 31, 2005 and the Period from January 1, 2005 to April 6, 2005 compared to the Year Ended December 31, 2004

 
  Successor
2005

  Predecessor
2005

  Predecessor
2004

 
  (in millions of U.S. dollars)

Sales   $ 1,828.4   $ 600.1   $ 2,199.9
Cost of sales     1,497.9     486.7     1,722.7
Gross margin     330.4     113.4     477.2
Selling, general and administration expenses     161.3     54.4     189.9
Depreciation     60.3     17.9     58.5
Amortization of intangible assets     29.9     1.1     4.1
Interest     137.1     11.2     39.5
Other expense, net     22.6     66.4     7.7
(Loss) income before income taxes and non-controlling interest     (80.8 )   (37.7 )   177.4
Income taxes     (16.3 )   (8.3 )   42.7
Non-controlling interest     5.3     1.3     6.8
   
 
 
Net (loss) income   $ (69.8 ) $ (30.7 ) $ 128.0
   
 
 

57


Consolidated Sales

 
  Successor
2005

  Predecessor
2005

  Predecessor
2004

   
 
  (in millions of U.S. dollars)

Sales   $ 1,828.4   $ 600.1   $ 2,199.9    

        Consolidated sales in the 2005 Successor period and the 2005 Predecessor period were $1,828 million and $600 million, respectively. Sales in both periods were positively impacted by the continued growth in sales of several new interior and exterior products as well as acquisitions completed in 2004.

        An additional factor impacting consolidated sales is foreign exchange. For the year ended December 31, 2005 compared to the year ended December 31, 2004, foreign currencies such as the EURO and the Canadian dollar strengthened versus the U.S. dollar, while the British Pound weakened versus the U.S. dollar.

Sales and Percentage of Sales by Principal Geographic Region

 
  Successor
2005

  Predecessor
2005

  Predecessor
2004

 
 
  (in millions of U.S. dollars)

 
North America   $ 1,445.3   $ 473.4   $ 1,760.3  
      79 %   79 %   80 %
Europe and Other   $ 458.0   $ 144.0   $ 487.6  
      25 %   24 %   22 %
Intersegment   $ (74.9 ) $ (17.3 ) $ (48.0 )
      (4 )%   (3 )%   (2 )%

        Sales in our principal segment, North America, contributed 79% of consolidated sales in the 2005 Successor period and 79% of consolidated sales in the 2005 Predecessor period. Sales outside of North America, net of intersegment sales, were 25% and 24% of consolidated sales for the 2005 Successor period and 2005 Predecessor period, respectively. In the 2004 Predecessor period, 80% of consolidated sales were in the North American segment and 22% were in the Europe and Other segment.

        Demand in the new construction and home renovation sectors was stronger in 2005 than in 2004 in the regions where our products are sold. During 2004 and 2005, we expanded our presence as a door manufacturer in Europe to include several Eastern European countries. Reported net sales of existing operations for both periods were negatively impacted by the weakening Pound Sterling against the U.S. dollar, which was more than offset by a stronger EURO and other Eastern European currencies.

        Intersegment sales consist primarily of sales of door components from the Europe and Other segment to the North American segment. These sales increased in both the Successor and Predecessor 2005 periods due to businesses acquired in 2004 and higher demand for interior doors in our North American segment. Also, the impact of the fire in our Laurel, Mississippi manufacturing facility and the 2005 hurricanes resulted in certain of our international manufacturing facilities shipping components to North America to ensure continuity of supply for production.

58



Sales and Percentage of Sales by Product Line

 
  Successor
2005

  Predecessor
2005

  Predecessor
2004

 
 
  (in millions of U.S. dollars)

 
Interior   $ 1,149.6   $ 409.4   $ 1,364.7  
      63 %   68 %   62 %
Exterior   $ 678.8   $ 190.7   $ 835.2  
      37 %   32 %   38 %

        The proportion of revenues from interior and exterior products was approximately 63% and 37%, respectively, in the 2005 Successor period. The percentage of interior doors sold in that period is the result of our relative strength in the interior door market, as well as the acquisitions of interior door manufacturing facilities in both the Successor and Predecessor periods.

Cost of Sales

 
  Successor
February 2, 2005
to
December 31, 2005

  Percentage
of Sales

  Predecessor
January 1, 2005
to
April 6, 2005

  Percentage
of Sales

  Predecessor
January 1, 2004
to
December 31, 2004

  Percentage
of Sales

 
  (in millions of U.S. dollars)

Cost of sales   $ 1,497.9   81.9%   $ 468.7   81.1%   $ 1,722.7   78.3%

        The significant components of cost of sales are materials, direct labor, factory overheads and distribution costs. Cost of sales, expressed as a percentage of sales, was 81.9% for the 2005 Successor period. Margins in the 2005 Successor period were impacted in part by the amortization of fair value adjustments that increase the value of inventory acquired as part of business combinations. This adjustment increased cost of sales by approximately $22 million in the year-to-date period (see note 3 of the annual audited consolidated financial statements included elsewhere herein).

        In December 2005, we wrote-off approximately $2 million in inventory to cost of sales as a result of a fire set by arsonists at a leased warehouse facility near a manufacturing plant in the United Kingdom. We also took a charge against cost of sales in December of 2005 of approximately $7 million relating to inventory at a facility in the United States. We had evaluated the future market conditions for this inventory and determined that it was appropriate to record the charge based on the age of the inventory, and expected future demand.

        Also negatively impacting cost of sales in the 2005 Successor period were the hurricanes that occurred in the southeastern United States. The estimated impact of these hurricanes was approximately $8 million representing direct costs, property losses and lost profit margin on sales.

        We also experienced increased costs and, in some cases, shortages of supply, particularly in relation to petroleum-based products, transportation, and steel. These cost increases were partially offset by operating leverage from higher sales volume during the 2005 Successor period and the use of alternative components and sources of supply. We were not able to offset the full impact of the material cost increases due to competitive conditions. In addition, we incurred additional costs at certain plants we acquired during 2004 associated with integration of operations and startup costs associated with the introduction of a new door finishing process. The continuing impact of these and other measures is difficult to estimate due to the potential timing difference between input cost changes, ongoing availability of material and our ability to mitigate these effects.

        The 2005 Successor period was also negatively impacted by a significant rationalization and standardization initiative in the production of residential entry doors. One exterior door manufacturing facility was closed during the period and several other locations were re-aligned to a common product

59



specification. The costs associated with the rationalization and standardization of approximately $2 million are included in cost of sales.

        During the 2005 Predecessor period, prior to the Transaction, we experienced an equipment electrical fire at our facility located in Laurel, Mississippi. The cost to repair the plant's equipment was immaterial, but two of the three production lines were inoperative for approximately three weeks. The lost production had a significant impact on our consolidated margins during the period.

Selling, General and Administration Expenses

 
  Successor
2005

  Percentage
of Sales

  Predecessor
2005

  Percentage
of Sales

  Predecessor
2004

  Percentage
of Sales

 
  (in millions of U.S. dollars)

Selling, general and administration expenses   $ 161.3   8.8%   $ 54.4   9.1%   $ 189.9   8.6%

        SG&A primarily includes personnel costs, marketing and advertising, sales commissions, information technology costs, receivables sales program costs, professional fees and management travel. For the 2005 Successor period, total SG&A costs were $161.3 million or 8.8% while for the 2005 Predecessor period, total SG&A costs were 9.1%. These costs reflect the fixed costs incurred during a period of generally lower seasonal sales during the 2005 Predecessor period.

        In the 2005 Predecessor period, total SG&A costs were 9.1%, expressed as a percentage of sales. These costs reflect the fixed costs incurred during a period of generally lower seasonal sales.

        For the year ended 2004, total SG&A costs were 8.6% of sales.

Depreciation

 
  Successor
2005

  Predecessor
2005

  Predecessor
2004

 
  (in millions of U.S. dollars)

Depreciation   $ 60.3   $ 17.9   $ 58.5

        Depreciation expense was $60.3 million in the 2005 Successor period, $17.9 million for in 2005 Predecessor period, and $58.5 million in the 2004 Predecessor period. In conjunction with the Transaction, we applied purchase accounting and recorded the fair value of assets acquired and liabilities assumed as of April 6, 2005. The historical carrying amounts of property, plant and equipment were increased by $23 million. Also affecting depreciation in the 2005 Successor period were business acquisitions during the Successor 2005 period, as well as prior year capital expenditures of $70 million.

Amortization of Intangible Assets

 
  Successor
2005

  Predecessor
2005

  Predecessor
2004

 
  (in millions of U.S. dollars)

Amortization of intangible assets   $ 29.9   $ 1.1   $ 4.1

        Amortization of intangible assets was $30 million in the 2005 Successor period, $1.1 million in the 2005 Predecessor period, and $4.1 million in the 2004 Predecessor period. In conjunction with the Transaction, we applied purchase accounting and recorded the fair value of assets acquired and liabilities assumed as of April 6, 2005. The historical carrying amounts of intangible assets with definite lives were increased by $518 million representing an increase of $264 million for customer lists, $165 million for trademarks and tradenames, $85 million for patents and $4 million for order backlogs at the time of acquisition.

60



Other Expense

 
  Successor
2005

  Predecessor
2005

  Predecessor
2004

 
 
  (in millions of U.S. dollars)

 
Transaction costs   $ 6.8   $ 7.2   $ 2.5  
Equity compensation settlement         57.7      
Restructuring and severance expense     7.5     1.6     7.5  
Hedging transaction loss     5.3          
Loss (gain) on disposal of property, plant and equipment     2.4     0.1     (5.1 )
Asset impairment             2.9  
Other     0.6     (0.3 )   (0.1 )
   
 
 
 
Other expense   $ 22.6   $ 66.4   $ 7.7  
   
 
 
 

        Approximately $6.8 million in transaction fees, including legal, accounting and other costs related to the Transaction which were not eligible to be capitalized. In addition, we recognized approximately $7.5 million in severance costs related to the resignation of our former Chief Executive Officer and the termination of other employees.

        Included in other expense in the 2005 Predecessor period are approximately $58 million in costs related to equity compensation settlements. These stock based compensation costs were for the value of vested and unvested stock options accounted for using the settlement basis of accounting, as well as previously unvested Restricted Share Units and Deferred Share Units. As a result of the affirmative shareholder vote authorizing the sale of the Predecessor in the Transaction, these stock based instruments were accelerated, vested and became payable in cash. The cash settlement of these instruments was recorded with a charge to the Predecessor's audited statement of operations. Also included in other expense in the 2005 Predecessor period are $7.2 million in transaction fees related to the Transaction and $2 million of costs associated with the completion of the shutdown of our Richmond, Indiana exterior steel door plant and our Seoul, South Korea production facility.

        Included in other expense in the 2004 Predecessor period are $10.4 million in restructuring and severance costs related to the Predecessor's program to standardize its entry door product offering and $2.5 in transactions fees, partially offset by $5.1 million in net gains on disposals of idle property, plant and equipment.

Interest Expense

 
  Successor
2005

  Predecessor
2005

  Predecessor
2004

 
  (in millions of U.S. dollars)

Interest   $ 137.1   $ 11.2   $ 39.5

        Interest expense was $137 million in the 2005 Successor period, $11.2 million in the 2005 Predecessor period, and $39.5 million in the 2004 Predecessor period. Information regarding the new debt facilities are discussed in greater detail in the "Liquidity and Capital Resources" section below.

        Included in interest expense in the 2005 Successor period is approximately $17 million of deferred financing amortization. The majority of the deferred financing costs incurred are related to the senior secured credit facilities and the senior subordinated loan and are being amortized over the life of these facilities. The deferred financing costs in the 2004 Predecessor period were related to pre-Transaction debt, and were being amortized over the term of that debt, now discharged.

61



Income Tax Rates

 
  Successor 2005
  Predecessor 2005
  Predecessor 2004
 
Combined effective rate   20.1 % 22.1 % 24.0 %

        Our 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, France, the United Kingdom and Ireland.

        Our income tax rate is also affected by estimates of realizability of tax assets, changes in tax laws and the timing of the expected reversal of temporary differences. We have established a valuation allowance on a portion of tax losses and other carryforward attributes in Canada, the United States and other jurisdictions until the realization of these tax assets becomes more likely than not during the carryforward period.

Net (Loss) Income

 
  Successor
2005

  Predecessor
2005

  Predecessor
2004

 
  (in millions of U.S. dollars)

Net (loss) income   $ (69.8 ) $ (30.7 ) $ 128.0

        The 2005 Successor period net loss of $69.8 million includes significant unexpected events such as hurricane damage and inventory losses. Significant equity compensation costs, financing charges and professional fees largely impacted the 2005 Predecessor period net loss of $30.7 million.

Segment Information

 
  Successor
2005

  Percentage
of Sales

  Predecessor
2005

  Percentage
of Sales

  Predecessor
2004

  Percentage
of Sales

 
  (in millions of U.S. dollars)

Adjusted EBITDA
—North America
  $ 156.8   10.8%   $ 44.7   9.4%   $ 240.1   13.6%
Adjusted EBITDA
—Europe and Other
  $ 72.0   15.7%   $ 25.0   17.3%   $ 79.3   16.3%

        The performance measurement of each of our geographic segments is based on Adjusted EBITDA. See "—Liquidity and Capital Resources."

62



        Set forth below is a reconciliation of Adjusted EBITDA, by segment, from net income as reported in the consolidated statement of operations.

 
  Successor
North America
2005

  Percentage
of Sales

  Predecessor
North America
2005

  Percentage
of Sales

  Predecessor
North America
2004

  Percentage
of Sales

 
   
  (in millions of U.S. dollars)

   
Net (loss) income   $ (93.0 ) (6.4 )% $ (49.4 ) (10.4 )% $ 82.4   4.7%
  Interest     134.7         10.6         38.0    
  Income taxes     (31.0 )       (6.7 )       34.9    
  Depreciation and amortization     66.2         13.0         43.9    
  Other expense     28.9         65.2         7.1    
  Non-controlling interest     2.2         1.1         5.2    
  Inventory purchase accounting adjustment     15.1                    
  Acquisitions impact (including synergies)     6.0         1.1         8.6    
  Hurricanes impact     7.9                 1.8    
  Inventory losses     7.9                    
  Receivables transaction charges     5.3         1.2         1.8    
  United States fire             5.0            
  Franchise and capital taxes     2.7         0.3         1.6    
  Stock-based awards     2.8                 5.9    
  Sponsor fees     1.5                    
  Facility closures and realignments             1.8            
  Craftmaster contract termination             1.3         10.2    
  Pension and postretirement expense (income) and funding, net     0.7         0.2         (2.6 )  
  Other     (1.1 )               1.3    
   
     
     
   
Adjusted EBITDA   $ 156.8   10.8 % $ 44.7   9.4 % $ 240.1   13.6%
   
     
     
   

        Adjusted EBITDA margin in the North American segment was 10.8% in the 2005 Successor period, 9.4% in the 2005 Predecessor period and 13.6% in the 2004 Predecessor period. Our cost reduction efforts and pricing strategies during the periods were unable to fully offset the impact of

63


inflation and other cost increases, and along with the items outlined above combined to reduce Adjusted EBITDA margins for this segment.

 
  Successor
Europe and
Other
2005

  Percentage
of Sales

  Predecessor
Europe and
Other
2005

  Percentage
of Sales

  Predecessor
Europe and
Other
2004

  Percentage
of Sales

 
  (in millions of U.S. dollars)

   
Net income   $ 23.2   5.1%   $ 18.8   13.0%   $ 45.5   9.3%
  Interest     2.4         0.6         1.5    
  Income taxes     14.7         (1.6 )       7.8    
  Depreciation and amortization     24.0         6.0         18.7    
  Other (income) expense, net     (6.3 )       1.2         0.6    
  Non-controlling interest     3.1         0.2         1.7    
  Inventory purchase accounting adjustment     6.6                    
  Acquisitions impact     1.3         1.1         4.5    
  United Kingdom fire     1.6                    
  Inventory losses     0.5                    
  Pension and postretirement expense (income) and funding, net     0.2                    
  Stock-based awards     0.1                    
  Other     0.7         (1.3 )       (1.0 )  
   
     
     
   
Adjusted EBITDA   $ 72.0   15.7%   $ 25.0   17.4%   $ 79.3   16.3%
   
     
     
   

        Adjusted EBITDA margin in the Europe and Other segment was 15.7% in the 2005 Successor period, 17.4% in the 2005 Predecessor period and 16.3% in the 2004 Predecessor period. Acquisitions completed in 2005, including start-ups, had a negative impact on Adjusted EBITDA in the 2005 periods.

Liquidity and Capital Resources

Net Debt

 
  As at
 
  December 31, 2006
  Successor
December 31, 2005

 
  (in millions of U.S. dollars)

Revolving credit facility outstanding   $ 43.0   $ 110.0
Other bank loans outstanding     17.4     18.8
Senior secured credit facility term loan outstanding     1,154.4     1,166.2
Senior subordinated loan outstanding         770.0
Senior subordinated notes     747.2    
Senior subordinated term loan     22.6    
Other subsidiary long-term debt outstanding     31.6     40.2
   
 
Total debt outstanding   $ 2,016.2   $ 2,105.1
Plus: Notes payable and letters of credit outstanding     12.4     16.9
Less: Cash on hand     47.4     47.5
   
 
Net debt outstanding(1)   $ 1,981.2   $ 2,074.6
   
 

(1)
Net debt is as defined in the credit agreement, dated as of April 6, 2005 (the "credit agreement").

64


        To fund the Transaction we entered into senior secured credit facilities totalling approximately $2 billion dollars on April 6, 2005.

        As of December 31, 2006, the balance outstanding on our revolving credit facility was reduced by $67 million from December 31, 2005 through the use of cash flow generated from operations, asset sales offset by capital expenditures. Subsidiary long-term debt was reduced by $9 million from December 31, 2005.

Debt Facilities

 
  As at
 
  December 31, 2006
  Successor
December 31, 2005

 
  (in millions of U.S. dollars)

Revolving credit facility capacity   $ 350.0   $ 350.0
Revolving credit facility outstanding     43.0     110.0
Subsidiaries' bank loan capacity     14.0     20.0
Subsidiaries' bank loan and overdrafts outstanding     17.4     18.8
Other subsidiary long-term debt outstanding     31.6     40.2
Senior secured credit facility term loan outstanding     1,154.4     1,166.2
Senior subordinated loan facility outstanding         770.0
Senior subordinated notes     747.2    
Senior subordinated term loan     22.6    

        The aggregate amount of long-term debt repayments required during the next five years ending December 31 is approximately $90 million at December 31, 2006, compared to approximately $99 million at December 31, 2005. Future principal debt payments are expected to be paid out of cash flows from operations, borrowings on our revolving credit facility and future refinancing of our debt.

        To mitigate interest risk, in April 2005, we entered into a five year interest rate swap agreement converting a notional $1.15 billion of floating-rate debt into fixed rate debt that currently bears interest at 4.22% plus an applicable credit spread of 2.00%. On April 26, 2006, $100 million of the interest rate swaps amortized, leaving $1.05 billion at a fixed rate as of December 31, 2006. After giving effect to the interest rate swap, approximately 93% of outstanding interest-bearing debt carries a fixed interest rate and the other 7% carries a floating rate at December 31, 2006. The three month LIBOR rate at December 31, 2006 was 5.36%.

        Our ability to make scheduled payments of principal, or to pay interest or additional amounts if any, or to refinance indebtedness, or to fund planned capital expenditures or payments required pursuant to our shareholder agreements relating to our less than wholly-owned subsidiaries, will depend on future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We believe that cash flow from operations and available cash, together with borrowings available under our senior secured credit facility and senior subordinated loan, will be adequate to meet our future liquidity needs throughout the term of the loans. There can be no assurance that we will generate sufficient cash flow from operations, that anticipated revenue growth and operating improvements will be realized or that future borrowings will be available under the senior secured credit facility in an amount sufficient to enable us to service our indebtedness or to fund other liquidity needs. In addition, there can be no assurance that we will be able to affect any future refinancing of our debt on commercially reasonable terms or at all.

        We expect our current cash balance plus cash flows from operations and availability under our revolving credit facility to be sufficient to fund near-term working capital and other investment needs.

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Senior Secured Credit Facility

        On April 6, 2005, we entered into senior secured credit facilities which included an eight year $1.175 billion term loan with an original interest rate of LIBOR plus 2.00% that amortizes at 1% per year. The proceeds from the senior secured credit facilities were used to fund the Transaction.

        We also entered into a $350 million revolving credit facility which is available for general corporate purposes. The revolving credit facility interest rate is subject to a pricing grid ranging from LIBOR plus 1.75% to LIBOR plus 2.50%. As of December 31, 2006, the revolving credit facility interest rate was LIBOR plus 2.50%. In addition to the senior secured credit facilities noted above, we have funded operations through cash generated from operations.

        The senior secured credit facilities provide for the payment to the lenders of a commitment fee on the average daily undrawn commitments under the revolving credit facility at a range from 0.375% to 0.50% per annum, a fronting fee on letters of credit of 0.125%, and a letter of credit fee ranging from 1.75% to 2.50% (less the 0.125% fronting fee).

        The net debt to Adjusted EBITDA calculation measures the debt we have on our balance sheet against our Adjusted EBITDA over the last twelve months. This ratio improved from 6.95:1.0 at December 31, 2005 to 5.96:1.0 at December 31, 2006.

        Our cash interest coverage ratio measures our Adjusted EBITDA as a multiple of our cash interest expense over the last twelve months. This ratio improved from 1.74:1.0 at December 31, 2005 to 1.91:1.0 at December 31, 2006.

        Our senior secured credit facilities require us to meet a minimum interest coverage ratio of 1.6 times Adjusted EBITDA and a maximum leverage ratio of 7.4 times Adjusted EBITDA as of December 31, 2006, as defined in the credit agreements (see discussion on non-GAAP measures below). These ratios will be adjusted over the passage of time, ultimately reaching a minimum interest coverage ratio of 2.2 times Adjusted EBITDA, and a maximum leverage ratio of 4.75 times Adjusted EBITDA. In addition, the senior secured credit facilities contain certain restrictive covenants which, among other things, limit the incurrence of additional indebtedness, investments, dividends, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, prepayments of other indebtedness, liens and encumbrances and other matters customarily restricted in such agreements. They also contain certain customary events of default, subject to grace periods, as appropriate.

        We are permitted to incur up to an additional $300 million of senior secured term debt under the senior secured credit facilities so long as no default or event of default under the new senior secured credit facilities has occurred or would occur after giving effect to such incurrence, and certain other conditions are satisfied.

Senior Subordinated Loan

        On April 6, 2005, we entered into a senior subordinated loan agreement for a $770 million senior subordinated loan, the proceeds of which were also used to fund the Transaction. The senior subordinated loan initially carried an interest rate of LIBOR plus 6.00% and increased over time to a maximum interest rate of 11% per annum which was reached in the second quarter of 2006. On October 6, 2006, the senior subordinated loan was repaid in full by the automatic issuance of a new debt obligation comprising a senior subordinated term loan. On and after October 6, 2006 the majority of the lenders elected to convert their holdings of the senior subordinated term loan to the senior subordinated notes due 2015, which bear interest 11%, and are subject to registration rights.

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Notes

        The indentures governing the notes limit our ability to:

        Subject to certain exceptions, the indentures governing the notes permit us and our restricted subsidiaries to incur additional indebtedness, including secured indebtedness.

Non-GAAP measures

        Under the indentures governing the notes, our ability to engage in certain activities such as incurring certain additional indebtedness, making certain investments and paying certain dividends is tied to ratios based on Adjusted EBITDA.

        Adjusted EBITDA is defined as net income (loss) plus interest, income taxes, depreciation and amortization, other expense (income), net, (gain) loss on refinancing, net and non-controlling interest further adjusted to give effect to adjustments required in calculating covenant ratios and compliance under the indentures governing the notes and our senior secured credit facilities. 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 (1) net income (loss) determined in accordance with GAAP or (2) operating cash flows determined in accordance with GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management's discretionary use, as it does not include certain cash requirements such as interest payments, tax payments and debt service requirements. We believe that the inclusion of Adjusted EBITDA in this prospectus is appropriate to provide additional information to investors about the calculation of certain financial covenants in the indentures governing the notes and our senior secured credit facilities. Adjusted EBITDA is a material component of these covenants. For instance, both the indentures governing the notes and the senior secured credit facilities contain financial ratios that are calculated by reference to Adjusted EBITDA. Non-compliance with the financial ratio maintenance covenants contained in our senior secured credit facilities could result in the requirement to immediately repay all amounts outstanding under such facilities, while non-compliance with the debt incurrence ratio contained in the indentures governing the notes would prohibit us from being able to incur additional indebtedness other than pursuant to specified exceptions. Because not all companies use identical calculations, this presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. We also believe that the inclusion of Adjusted EBITDA in this prospectus is appropriate because management uses it to evaluate and monitor the performance of each of our geographic segments. We believe that the disclosure of the calculation of Adjusted EBITDA provides information that is useful to an investor's understanding of our liquidity and financial flexibility.

        The following is a reconciliation of net loss, which is a GAAP measure of our operating results, to Adjusted EBITDA as defined in our debt agreements, and the calculation of the fixed charge coverage

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ratio, net debt and net debt to Adjusted EBITDA ratio under the indentures governing the notes. The terms and related calculations are defined in the indentures governing the notes.

 
  Successor
2005

  Predecessor
2005

  Last Twelve Months
Ended
December 31, 2005

  Last Twelve Months
Ended
December 31, 2006

 
 
  (in millions of United States dollars)

 
Net loss   $ (69.8 ) $ (30.7 ) $ (100.5 ) $ (34.3 )
Interest     137.1     11.2     148.3     182.6  
Income taxes     (16.3 )   (8.3 )   (24.6 )   (15.7 )
Depreciation and amortization     90.3     19.0     109.3     124.6  
Other expense     22.6     66.4     89.0     39.0  
Non-controlling interest     5.3     1.3     6.6     6.2  
Receivables transaction charges(a)     5.3     1.2     6.5     7.9  
Inventory purchase accounting adjustment(b)     21.8         21.8      
U.S. fire(c)         5.0     5.0      
Facility closures and realignments(d)         1.8     1.8     1.9  
Hurricanes impact(e)     7.9         7.9     (0.7 )
United Kingdom fire(f)     1.6         1.6      
Inventory losses(g)     8.4         8.4     11.5  
Acquisitions impact (including synergies)(h)     7.3     2.2     9.5      
Stock-based awards(i)     3.0         3.0     2.0  
Franchise and capital taxes     2.7     0.3     3.0     2.2  
Foreign exchange gains     (2.9 )   (1.3 )   (4.2 )   (1.1 )
Craftmaster contract termination(j)         1.3     1.3      
Other(k)     4.5     0.2     4.8     6.3  
   
 
 
 
 
Adjusted EBITDA   $ 228.8   $ 69.6   $ 298.4   $ 332.6  
   
 
 
 
 

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Net Debt   1,981.2
Last Twelve Months Adjusted EBITDA   332.6
   
Ratio of Net Debt to Adjusted EBITDA   5.96

Last Twelve Months Adjusted EBITDA

 

332.6
Total Interest Expense   174.0
   
Ratio of Adjusted EBITDA to Interest Expense   1.91
   

Current—December 31, 2006

Cash flows from Operating Activities

 
  2006
  Successor
2005

  Predecessor
2005

  Predecessor
2004

 
  (in millions of U.S. dollars)

Cash generated from (used in) operating activities   $ 146.2   $ (28.2 ) $ 126.8   $ 146.9

        In 2006, $146 million was generated through operations. Of the total, approximately $104 million of the operating cash flow came from operations and $42 million was generated through changes in working capital. Funds generated from working capital were principally the result of the Company's inventory reduction measures partially offset by a contraction in accounts payable due to slowing business activity. Receivables did not significantly impact cash flow in the year as contraction in North America from slowing business conditions was offset by higher receivables associated with more robust sales in the Company's Europe and Other segment.

        In the 2005 Successor period approximately $19 million of cash flow was generated from operations and working capital was a use of $48 million. Cash flow from operations was impacted by the hurricanes and other business events during the later part of 2005 as discussed previously. The use of cash for working capital was principally to pay down Transaction related liabilities, most significantly to settle the $57 million of stock compensation liabilities as part of the Transaction.

        In the 2005 Predecessor period, cash flow from operations was a use of $24 million while working capital generated $150 million. Both of these measures were significantly impacted by costs charged to expense in connection with the Transaction in the 2005 Predecessor period which were paid in cash in the 2005 Successor period. The Company completed an amendment to its accounts receivable sales facility in the 2005 Predecessor period resulting in the sale of an additional $34 million of accounts receivable immediately prior to the Transaction.

        In 2004, cash flow from operations was $224 million and working capital was a use of $77 million. Accounts receivable were a source of $29 million due in part to the initiation of the Company's accounts receivable sale program. Inventories increased by $75 million in 2004 partially as a result of the arrival close to year end of foreign materials in North America that were delayed earlier in the year due to difficulties in obtaining transportation.

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Cash flows from Financing Activities

 
  2006
  Successor 2005
  Predecessor 2005
  Predecessor 2004
 
  (in millions of U.S. dollars)

Cash (used in) generated from financing activities   $ (112.5 ) $ 2,094.7   $ (145.0 ) $ 107.9

        Cash used in financing activities in 2006 was $112.5 million. The principal components of this were net repayment of debt of $90 million, payment of the conversion fee on the senior subordinated bridge loan (and associated fees) of $18.3 million and payments related to 2005 acquisitions of $3.9 million.

        Cash provided by financing activities in the 2005 Successor period was related to the issuance of common shares of $567 million and debt of $1,945 million to fund the Transaction, and the incurrence of an additional $110 million of debt following the Transaction to complete acquisitions and fund capital expenditure and working capital. We also repaid $449 million of debt including debt that was assumed as part of the Transaction and paid $78 million in financing fees associated with the funding of the senior secured credit facility and the senior subordinated bridge loan.

        In the 2005 Predecessor period, financing activities consumed $145 million of cash which was principally used to repay long term debt immediately prior to the Transaction.

        In the 2004 Predecessor period, we incurred an additional $200 million of long term debt in order to fund acquisitions, pay $3 million of fees upon issuance and repay $104 million of long term debt using cash flow from operations. Issuances of common shares on the exercise of options contributed $5 million of cash flow and repurchases under the Company's Normal Course Issuer bid used $2 million of cash.

Cash flows from Investing Activities

 
  2006
  Successor
2005

  Predecessor
2005

  Predecessor
2004

 
 
  (in millions of U.S. dollars)

 
Cash used in investing activities   $ (39.5 ) $ (2,019.9 ) $ (13.6 ) $ (317.8 )

        Cash flows used for investing activities in 2006 was $39.5 million. Proceeds on disposal of surplus real estate and fixed assets of $21 million helped to fund capital expenditures of $50 million for the year. Capital expenditures in 2006 were lower due to stricter project reviews. We also made distributions to shareholders of its less than wholly owned subsidiaries in the amount of $4 million. Other investing activities consist principally of advances made to our parent company to fund the net redemption of shares held by members of management who have departed the Company.

        In the 2005 Successor period, $1,932 million was spent on acquisitions, including $1,869 million paid for the acquisition of the Predecessor. The balance of the acquisitions were for businesses in Central and Eastern Europe and for the purchase of the remaining interest of a number of less than wholly owned subsidiaries. Immediately prior to the purchase of one of these subsidiaries, a distribution to the minority shareholder was made in the amount of $18 million. Distributions to other minority interest shareholders in the period were $4 million. Capital expenditures were $70 million in the Successor period as we invested in new manufacturing capabilities. This was offset by proceeds of $9 million on the sale of surplus real estate and fixed assets. Other investing activities of $5 million consists principally of advances made to the parent company to fund the redemption of management shareholders.

        In the 2005 Predecessor period, the uses of cash for investing was principally $12 million for capital expenditures.

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        In the 2004 Predecessor year, acquisitions consumed $255 million of cash as we completed the acquisition of the residential entry door business of The Stanley Works as well as other smaller North American acquisitions and expanded our geographic reach through acquisitions in Eastern Europe and Asia. Capital expenditures for the year were $70 million offset by proceeds of $10 million on the sale of assets, principally the sale of an idle manufacturing site.

Contractual Obligations

 
  Total
  Less Than
1 Year

  1-3 Years
  4-5 Years
  After 5 Years
 
  (in millions of U.S. dollars)

Bank indebtedness(1)   $ 60.3   $ 60.3   $   $   $
Long-term debt     1,955.8     32.2     33.2     24.5     1,865.9
Interest payments(2)     896.9     149.5     247.5     182.2     317.6
Operating leases     114.5     24.9     31.7     21.1     36.8
Commerical commitments(3)     241.0     48.0     92.0     52.0     49.0
Other liabilities(4)     42.5     17.6     16.7     8.2    
   
 
 
 
 
    $ 3,311.0   $ 332.5   $ 421.1   $ 288.0   $ 2,269.3
   
 
 
 
 

(1)
Assumes the outstanding balance on the revolving credit facility, and other borrowings and overdrafts are repaid in full by December 31, 2007.

(2)
The interest payments gives effect to the interest rate swap that we have entered into that matures in 2010, and assumes that the interest rate swaps are held to maturity.

(3)
Commercial commitments represent our estimate of the minimum obligations under the commitments which consist of agreements to purchase goods and services that are enforceable and legally binding. In addition, the purchase commitments specify all significant terms including fixed or minimum quantities to be purchased, and the timing of the transaction. Commercial commitments exclude normal course purchase orders for raw materials or other goods and services as they represent authorizations to purchase rather than binding contracts.

(4)
Includes contractual severance payments to our employees, repayment of minority interest loans, annual management fees payable to KKR, acquisition related notes payable, and our expected minimum funding of our defined benefit plan in the United Kingdom. The minimum pension funding is defined by the current law in place.

        We believe that our current cash balance plus cash flows from operations and the availability under our revolving credit facility will be sufficient to fund near-term working capital and other investment needs.

Off-Balance Sheet Arrangements

        Our off-balance sheet arrangements include a "Facilities Agreement" to sell up to $135 million of non-interest bearing trade accounts receivable, an "Acquired Facilities Agreement" whereby we can sell receivables of a specific customer, interest rate swap agreements to convert $1.05 billion floating rate debt into fixed rate debt and forward foreign currency contracts to hedge foreign currency risk.

        We do not have any material off-balance sheet arrangements other than those described above, which are more fully discussed in notes 1, 4, 10, 14, and 16 in the annual audited financial statements contained elsewhere herein.

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Related Party Transactions

        We paid KKR a $30 million fee for services provided in completing the Transaction, plus approximately $1 million of out-of-pocket costs both of which were capitalized as part of the Transaction. We have also entered into an agreement to pay KKR annual management fees of $2 million for services provided during the year, payable quarterly in advance, with the amount increasing by 5% per year. In 2006, we paid KKR $2.1 million (2005 Successor Period—$1.57 million, 2005 Predecessor Period—$nil; 2004 Predecessor Period—$nil) for services rendered.

        In addition, we paid approximately $1 million of fees to Capstone for services provided during the Transaction, and we have engaged Capstone on a per-diem basis for management consulting services. Although neither KKR nor any entity affiliated with KKR owns any of the equity of Capstone, KKR has provided financing to Capstone. In 2006, we paid Capstone $2.9 million (2005 Successor Period—$0.7 million, 2005 Predecessor Period—$nil; 2004 Predecessor Period—$nil) for services rendered.

        In 2005, Capstone invested $2.5 million in our parent company, Masonite Holding Corporation.

Quantitative and Qualitative Disclosures About Market Risk

        We are exposed to various market risks, which are potential losses arising from adverse changes in market rates and prices, such as currency and interest rate fluctuations.

Currency Risk

        Outside of the United States, we maintain assets and operations in Canada, Mexico, Europe, South America, Asia and Africa. The results of operations and the financial position of our foreign operations are principally measured in their respective currency and translated into U.S. dollars. As a result, exposure to foreign currency gains and losses exists. The reported income of these subsidiaries will be higher or lower depending on the depreciation or appreciation of the U.S. dollar against the respective foreign currency. Our subsidiaries also obtain labor and certain raw materials locally, denominated primarily in their respective domestic currencies. Other raw materials are imported and prices are often quoted in U.S. dollars or in the domestic currency in the country where the facility operates. Most of our subsidiaries sell a significant portion of their products within their respective domestic markets at domestic selling prices. In situations where import or export commitments are undertaken, the subsidiaries may periodically enter into foreign exchange contracts to manage and reduce the risk associated with foreign currency fluctuations. Gains and losses on such contracts offset losses and gains on transactions being hedged. The amount of foreign exchange contracts matches estimated foreign currency risks over a specified period of time. Our policy is not to utilize foreign exchange contracts for trading or speculative purposes. The amount of foreign exchange contracts outstanding at December 31, 2006 are described in note 16 of the audited consolidated financial statements.

Interest Rate Risk

        We are subject to market risk associated with interest rate changes in connection with our senior secured credit facility. Therefore, in the normal course of business we are exposed to changes in short-term interest rates that can create uncertainty and variability in cash flows. To mitigate this exposure, in April 2005, we entered into a 5 year interest rate swap agreement converting a notional $1.15 billion of floating-rate debt into fixed rate debt that currently bears interest at 4.22% plus an applicable credit spread of 2.00%. In April 2006, $100 million of the interest rate swaps amortized, leaving $1.05 billion of long-term debt at a fixed interest rate as at December 31, 2006. After giving effect to the interest rate swap, approximately 90% or $1.82 billion of our outstanding interest-bearing debt carries a fixed interest rate and 10% or $136 million carries a floating interest rate as at December 31, 2006. The Predecessor also had entered into interest rate swap agreements to convert floating rate debt into fixed rate debt. As at the

72



closing date of the Transaction, the Predecessor's interest rate swaps were settled. We believe that these interest rate swaps are highly effective in achieving their economic purpose.

        The table below provides information about the Company's derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations. The information is presented in U.S. dollar equivalents, which is the Company's reporting currency.

 
  December 31, 2006
 
  December 31,
2007

  December 31,
2008

  December 31,
2009

  December 31,
2010

  December 31,
2011

  Thereafter
  Total
  Fair
Value

 
   
   
   
   
   
   
   
  (including
notional
amount)

Liabilities                                                
Long-term Debt:                                                
Fixed Rate(1)   $   $   $   $   $   $ 769,856   $ 769,856   $ 704,418
  Average Interest Rate                         11%            

Variable Rate

 

 

32,221

 

 

16,880

 

 

16,285

 

 

12,666

 

 

11,836

 

 

1,096,035

 

 

1,185,923

 

 

1,165,720
  Average interest rate     6.41%     6.48%     6.61%     6.89%     7.00%     7.10%        

Off-Balance Sheet Financial Instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Interest Rate Swaps:                                                
  Variable to Fixed     150,000     300,000     300,000     300,000               1,050,000     1,068,956
    Average pay rate     4.22%     4.22%     4.22%     4.22%     4.22%            
    Average receive rate     4.95%     4.55%     4.75%     4.88%     5.00%     5.10%        

        The table summarizes information on instruments that are sensitive to foreign currency exchange rates. For foreign currency forward exchange agreements, the table represents the notional amounts and weighted average exchange rates by expected (contractual) maturity dates.

 
  December 31, 2006
 
  Actual
  Fair Value
 
   
  (including
notional
amount)

Forward Exchange Agreements:        
(US$ equivalent in thousands)        
Receive CAD$/Pay US$   4,205   4,115
Average Contractual Exchange Rate   1.1415    
Receive ZAR/Pay US$   2,839   2,927
Average Contractual Exchange Rate   0.1394    
Receive EUR/Pay ZAR   874   893
Average Contractual Exchange Rate   0.1053    

(1)
On October 6, 2006 the senior subordinated loan in the amount of $770 million was repaid in full with the automatic issuance of a new debt obligation comprised of a senior subordinated term loan bearing a fixed interest rate of 11% and maturing on April 6, 2015. Subsequent to the automatic issuance of the senior subordinated term loan, the holders of the senior subordinated term loan elected to convert an aggregate total of $753.3 million into senior subordinated notes bearing a fixed interest rate of 11% maturing on October 6, 2015.

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INDUSTRY OVERVIEW

Overview

        We compete in the multi-billion dollar global door market. We believe that over 75 million interior doors and approximately 18 million exterior doors were purchased in North America during 2005. Residential volumes represent nearly 88% of the total doors purchased in North America, or approximately 82 million units. Non-residential volumes represent the remaining 12%, or approximately 11 million units. Demand for residential doors is driven by residential repair, renovation and remodeling and the construction of new housing.

Interior Doors

        Interior doors are typically manufactured with wood or wood composite materials. There are three primary types of interior doors: (i) molded panel (molded hardboard facings covering a wood or wood composite frame), (ii) stile and rail (traditional construction of stiles, rails and panels with wood, veneered or wood composite/engineered substrates) and (iii) flush (veneers, plywood or hardboard facings covering a wood or wood composite frame). Molded door construction allows for improved cost and design over traditional stile and rail doors. As a result, since the early 1990s, consumer preference has shifted to molded doors with significant growth worldwide. We believe the market for molded door products has been the fastest growing interior door segment, which in the United States is estimated to have grown from approximately 40% of residential interior door category share in 1990 to approximately 68% in 2005. This significant growth and acceptance of molded interior doors has been driven by the value proposition of this product.

Exterior Doors

        There are also three major categories of residential entry doors: (i) steel (steel facings positioned on a wood or metal frame with an insulated core), (ii) fiberglass (fiberglass facings positioned on a wood or composite frame with an insulated core) and (iii) stile and rail (traditional construction of stiles, rails and panels with wood, veneered or composite/engineered substrates). For many years, the residential entry door market has been dominated by the steel door category, which currently represents 66% of the total U.S. market. However, in recent years, fiberglass entry doors have seen substantial growth, primarily impacting the steel category share across all distribution channels. In 2005, industry sources estimated the fiberglass entry door category share at 23%. Fiberglass market share growth of up to 3% annually is projected through 2008 and beyond.

Distribution

        Doors are sold through two main distribution channels: retail and wholesale. The retail channel includes retail home centers, as well as smaller specialty retailers, and primarily targets consumers and small remodeling contractors. Specialty retailers are niche players that generally do not maintain an inventory and do not hang doors. Retail home centers, by contrast, offer large, warehouse size retail space for the widest product offering in the sector.

        Retail home centers continue to gain market share in residential repair, renovation and remodeling relative to more traditional wholesale channels such as lumberyards and millwork distributors. With the addition of pre-hanging and installation services, retail home centers have further solidified their position. The home center retail channel is expected to continue its growth by increasing the number of stores and geographic presence.

        The wholesale channel includes both one-step and two-step distributors through which door manufacturers sell indirectly to homebuilders and regional retailers. Two-step distributors have traditionally been the main channel for residential entry door distribution. Two-step distributors are

74



large millwork or building products distributors that sell doors and door units to building products retailers. Typically, two-step distributors purchase doors or door units from the manufacturer in bulk and customize the units, installing windows (or "lites") and pre-hanging the doors.

        One-step distributors sell doors and door units directly to homebuilders and remodeling contractors who install the doors. Over the past five years this channel segment has seen significant consolidation and has become an increasingly important and growing method of door distribution. One-step distributors base their business proposition on shortening the supply chain thus reducing cost and delivery time.

Long-Term Demand Drivers

        The two primary demand drivers for doors and door-related products are the residential repair, renovation and remodeling of existing homes and new home construction.

Residential Repair, Renovation and Remodeling

        Despite the recent weakening in year over year retail home center sales, demand for residential repair, renovation and remodeling has historically demonstrated relatively stable and consistent growth. According to the U.S. Census Bureau, residential repair, renovation and remodeling expenditures in the United States grew during 36 of the 40 years ending in 2005, with 7.8% compounded annual growth over that 40-year period. Residential repair, renovation and remodeling expenditures increased from $125 billion in 1995 to $215 billion in 2005, representing a ten-year compounded annual growth rate of 5.6%. Leading drivers of residential repair, renovation and remodeling expenditures include the age and size of the housing stock, home size, the rate of existing home sales and home ownership rates.

New Home Construction

        In 2006, a major downturn began in new home construction in the United States. For example, seasonally adjusted housing starts in December 2006 reflected an 18% decrease from the December 2005 rate. Despite this downturn in new home construction in the United States, industry sources suggest that new home construction in the United States will be supported by a favorable interest rate environment and strong demographic trends, as increasing immigration drives demand for starter homes, and maturing baby boomers seek second homes and trade-up properties. According to the Joint Center for Housing Studies of Harvard University, total new home construction in the United States between 2006 and 2016 is expected to exceed 2.0 million units annually, as compared to the 1.8 million units added annually from 1995 to 2004.

        See also "Management's Discussion and Analysis of Financial Condition and Results of Operations—Overview of the Business."

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BUSINESS

Our Company

        We are one of the largest manufacturers of doors in the world based on the number of doors sold, with a significant market share in both interior and exterior door products. We sell approximately 50 million doors per year. Our products are sold in over 70 countries, including the United States, Canada, the United Kingdom, France and throughout Central and Eastern Europe. For the year ended December 31, 2006 our sales were $2.5 billion.

        Our products are marketed under well-recognized brand names throughout the world. In North America, we market our doors primarily under the Masonite brand, which is a leading brand in the door industry according to published industry sources. Our sales are derived from the two primary sources of door demand: residential repair, renovation and remodeling of existing homes, and the construction of new homes. We believe that sales to the less cyclical residential repair, renovation and remodeling sector represents the larger component of our business in North America. Approximately 77% of our 2006 sales were generated in North America, where we believe we have a leading market share in both interior and exterior doors, 19% in Europe, and the remainder in South America, Asia, Africa and the Middle East.

        We have over 80 manufacturing and distribution facilities in 18 countries, primarily in North America and Europe. We are a vertically integrated producer, manufacturing key components of doors, including composite molded and veneer door facings, glass door lites and cut stock. In order to realize cost advantages and efficiencies provided by vertical integration, we have integrated the various operations in our North American segment as well as our Europe and Other segment to the point where we share common systems, financing and infrastructure. We believe that our high level of vertical integration provides us with competitive and cost advantages over competitors not as vertically integrated, and enhances our ability to develop new and proprietary products.

        As part of our "all products" cross-merchandising strategy, we provide our customers with 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, louvre and specially-ordered commercial and architectural doors. We also manufacture exterior residential steel and fiberglass doors and entry systems. In 2006, sales of interior and exterior products accounted for approximately 66% and 34% of our revenue, respectively. In addition, we also sell certain door components to other door manufacturers.

        We sell doors through multiple distribution channels, including: (i) retail home center customers; (ii) one-step distributors that sell directly to homebuilders and contractors; and (iii) two-step wholesale distributors that resell to other distributors. For North American retail home center customers, our numerous door fabrication facilities provide value-added fabrication and logistical services, including 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 differentiate us from our competitors.

Post-Transaction Initiatives

        We were acquired on April 6, 2005 by an affiliate of KKR. Since the Transaction we have implemented a strategic focus designed to enhance the operating performance of our business and deliver increased value to our customers.

        Our Blueprint for Profitable Growth focuses employees at all levels on achieving key customer and manufacturing metrics, including targets for customer service, product profitability and manufacturing efficiencies. To accomplish these goals we have deployed an intensive program based upon Lean Sigma methodologies, along with a comprehensive review of product pricing. In addition, we have introduced

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a detailed set of operational metrics which are used to assess facility performance and to benchmark best practices across the company. These metrics measure key processes and controllable costs, including fill rates, lead times, direct labor, overhead, cost of quality, distribution and inventory levels. In 2007, we plan to train approximately 200 of our employees in the disciplines of Lean Sigma, and hire additional Lean Sigma experts from outside our company in order to effect these process-improvement initiatives. We believe that these initiatives will provide us with a strong platform for future profitability and growth.

Business Strengths

        We believe that we are distinguished by the following business strengths:

        Leading Global Manufacturer.    With operations in 18 countries and customers in over 70 countries, we are a leading manufacturer of doors in the United States, Canada, the United Kingdom and France.

        Diversified Business.    Our business is diversified by geography and distribution channel, with a broad product offering of doors. We sell products through multiple distribution channels, including one- and two-step distributors, retail home centers and wholesale building supply dealers, thereby reducing our reliance on any one channel.

        Focus on Stable End Market.    We generate the majority of our revenue from residential repair, renovation and remodeling spending, which has historically been less cyclical than new construction spending.

        Strong Brand Recognition.    Our brands are well recognized throughout the building products industry for their design, innovation, reliability and quality according to published industry sources. We market our doors globally, primarily under the Masonite® and Premdor® brands, as well as other well-recognized names.

        Strong Customer Relationships with Well-Established Multi-Channel Distribution.    We have well-established relationships within all door distribution channels. Our top ten customers have been purchasing doors from us for more than 11 years on average and we believe that in most cases we are their leading door supplier.

        Low Cost Producer with Leading Technology and Infrastructure.    We have numerous design, process and product patents developed primarily at our 141,000 square foot research facility in West Chicago.

        Vertically Integrated Operations.    We are one of the few vertically integrated manufacturers of doors in the world, enabling us to control the many facets of production, decrease lead times and enhance customer service.

Business Strategy

        We intend to build upon our leading position in the door market worldwide through the following key elements of our business strategy:

        Implement the Blueprint for Profitable Growth.    Our Blueprint for Profitable Growth was introduced during the fourth quarter of 2005 and distributed to employees around the world and to many of our customers, suppliers and investors. The Blueprint provides direction for all employees with clear, distinct and common goals and actions that we believe will enable us to improve operations across our business.

        We identified three priorities which we believe will improve our performance:

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        Enhance Value Proposition for Our Customers.    Through the implementation of Lean Sigma, we intend to further enhance the value we provide to our customers by decreasing our lead times and focusing on other key customer service metrics.

        Continue Leadership in New Product Design and Technology.    We consider our strong focus on research and development to be one of our major strengths and intend to capitalize on our leadership in this area through the development of new and innovative products and improved manufacturing processes.

        There are a variety of risks inherent in the execution of our business strategy and the maintenance of our business strengths. For example, we must continually improve our door design so that our doors remain among the most attractive available. In addition, we must continue to deliver quality products free of defects at competitive prices on a timely basis to our customers.

Recent Developments

        In the first quarter of 2007, we were notified by our largest customer, The Home Depot, that they would be moving substantially all of their business with us in certain geographic regions to a competitor later in 2007. This decision by The Home Depot was the result of price increases we put in place during 2006. Our sales to The Home Depot in the regions affected are approximately $250-300 million on an annualized basis. Subsequent to The Home Depot notification, we announced the permanent closure of facilities dedicated to The Home Depot in Toledo, Ohio, Logan Township, New Jersey and Frederick, Maryland. We expect to incur a charge in 2007 in connection with the transition of this business.

History

        We commenced business in 1955 in Toronto, Ontario, as the purchasing division of a retail lumberyard. We began manufacturing doors in 1961 with a full line of flush doors. Expansion initially was through our product line with the introduction of wood doors, such as louvre, stile and rail, plastic laminate, fire doors and pre-hung units, and eventually including architectural doors and steel and fiberglass exterior doors and entry systems. We also expanded geographically, establishing and acquiring door manufacturers in Canada, the United States, the United Kingdom and France and in Central and Eastern Europe. In addition, we made numerous acquisitions of door component manufacturers, as well as logistical and fabrication centers.

        On August 31, 2001, we acquired Masonite Corporation, a leading manufacturer composite of molded door facings, from International Paper Company for approximately $427.3 million, forming the newly integrated company Masonite International Corporation. In 2004, we acquired the residential entry door business of The Stanley Works, a manufacturer and pre-hanger of steel and fiberglass residential entry doors sold primarily for use in residential repair, renovation and remodeling in the United States.

        On April 6, 2005, we were acquired by an entity controlled by affiliates of KKR.

Product Lines

        We sell interior and exterior doors, with interior products accounting for approximately 66% of our total sales revenue in 2006 and exterior products accounting for the balance of our revenue during 2006. We offer an extensive range of interior and exterior doors, which are available in a wide variety of sizes, styles and types. Substantially all interior doors are made with wood and related materials such as hardboard (including composite molded and flat door facings). Exterior doors are made primarily of steel or fiberglass, as sales of wood exterior doors have declined in use over the last decade.

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        The following is a description of the principal types of doors and other products that we sell and manufacture worldwide:


Molded Flush

 

Doors made by sandwiching a wood or MDF frame and a hollow or solid core between two molded hardboard facings. These doors are used for closets, bedrooms, bathrooms and hallways.

Flush

 

Doors made by sandwiching a wood or MDF frame and a hollow or solid core between two facings made of plywood or hardboard (flat or embossed). These doors are used for closets, bedrooms, bathrooms and hallways.

Stile and Rail

 

Doors made from solid wood with vertical stiles, horizontal rails and wood panels, which have been cut, milled and assembled from lumber such as clear pine, knotty pine, oak and mahogany. Where glass panels are inserted between stiles and rails, the resulting door when used for interior purposes is referred to as a French door. For interior purposes these doors are primarily used for hallways, room dividers, closets and bathrooms. For exterior purposes these doors are used as entry doors and decorative glass inserts (lites) are often inserted into these doors.

Louvre

 

Doors with sloping horizontal slats that admit light and air. These doors are used for hallways, closets, and cabinets and as interior and exterior decorative shutters.

Bifold

 

Hinged folding doors (typically molded flush, flush or louvre doors) used in closets or as room dividers.

Pre-hung

 

Interior and exterior doors sold together with door frames as units.

Plastic Laminate

 

Flush doors with a plastic veneer facing, generally for commercial use.

Architectural

 

Doors custom-designed to architectural specifications generally for commercial uses such as in office buildings, hotels, schools and hospitals.

Steel

 

Exterior doors made by assembling two interlocking steel facings (paneled or flat) or attaching two steel facings to a wood or steel frame and injecting the core with polyurethane insulation.

Fiberglass

 

Exterior doors made by assembling two fiberglass facings to a wood frame or composite material and injecting the core with polyurethane insulation.

Entry Systems

 

Exterior doors sold pre-assembled in a door frame, with or without lites and transoms.

Molded Door Facings

 

Thin sheets of molded hardboard produced by grinding or defibrating wood chips, adding resin and other ingredients, creating a thick fibrous mat composed of dry wood fibers and pressing the mat between two steel dies to form a molded sheet, the surface of which may be smooth or textured with a wood grain pattern.

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Door Framing Material   Commonly referred to as cut stock. Wood or MDF components that constitute the frame on which interior and exterior door facings are attached.

Door Lites

 

Decorative and non-decorative insulated glass inserts primarily used in exterior doors.

Door Core

 

A molded fiber mat or particle board used in the construction of solid core doors.

New Products

        Within the past three years, we have launched several new products containing patentable or patented features, including Palazzo™ and Cheyenne™ interior molded panel doors and new Barrington® Mahogany, Craftsman and Sierra™ textured exterior fiberglass doors. The Cheyenne is our first design in a new premium series of molded panel doors that are being marketed as Masonite's Anniversary Collection. The new Barrington products address the growing market needs for specific architectural designs and alternative wood grains. In addition, we modify our product offerings to keep pace with changing consumer preferences.

        Two Palazzo Series designs, Bellagio® and Capri®, are offered in all sizes and configurations. This door features raised moulding and recessed panels resembling authentic stile and rail doors. Palazzo provides these features with the added benefits of a single piece facing and composite wood technology.

        The Masonite® Anniversary Collection includes designs with unique architectural features. The Cheyenne door is a two-panel plank interior door for consumers who are looking for a rustic, country or western style. This door has beaded planks, a custom panel profile and feature lines distinguishing the stiles from the rails. We intend to add two more designs to the Anniversary Collection in 2007.

        The Barrington Mahogany, Craftsman and Sierra exterior fiberglass doors are extensions of the Barrington line. Barrington Mahogany features a mahogany wood-grain texture that, after staining, looks like an authentic mahogany hardwood door. This product was made to be compatible with the full array of Barrington decorative glass. Barrington Craftsman addresses the craftsman, mission or shaker design trends occurring today in building products, furniture and cabinetry. This door has custom glazing, recessed flat panels and straight-grain hardwood texture. The Barrington Sierra is designed for rustic, southwest or Mediterranean style homes. It is offered with or without planks, mahogany grain and in many configurations, including an over-sized 3'6" × 8'0" door.

        During the past three years, we have also launched our Belleville® and Barrington (oak) Series of exterior fiberglass doors. We have added several new additions to our exterior Royal Mahogany™ and interior wood panel and French stile and rail door lines. Many updates were also made to our steel door offerings, including: high-definition panel profiles on all 24-gauge steel doors, prefinished white (Sta-Tru® HD) and two new panel designs (one-panel arch and two-panel camber-top). The Specialty™ Glass line was enhanced with many new decorative glass families, Hurricane-Lites™ and a wrought iron collection.

Sales and Marketing

        In North America, we sell doors through our own dedicated commissioned sales force organized on a geographic basis. Our sales force is also responsible for customer service in the field, enabling us to respond rapidly to our customers and to end user needs.

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        We have become a leader in merchandising and advertising through point of sale displays, in-store merchandising and training programs, trade advertisements, regional flyer programs and do-it-yourself videos for doors distributed through home centers. In addition, we advertise our products at numerous events, including trade shows in North America, Europe, Asia and the Middle East. We have also developed consumer brochures, including a planning guide and do-it-yourself products to assist the consumer in the purchase and installation of doors, as well as training programs designed to assist home center sales personnel with product knowledge and sales strategies.

        In 2003, we established our "all products" cross-merchandising strategy, which provides retail and wholesale customers a broad range of innovative doors and door products, frequent, on-time and complete delivery, consistency across our product lines, and merchandising expertise. This strategy has allowed our customers to consolidate their door purchasing with us and has translated into higher customer sales and satisfaction, greater efficiencies and lower costs for the customer.

Customers and Distribution

        We sell our products worldwide to more than 3,500 customers. Our top ten customers have been purchasing doors from us for more than 11 years on average, and we believe that in most cases we are their leading door supplier. Although we have a large number of customers worldwide, our largest customer accounted for approximately 25% of our sales in 2006.

        We sell doors through multiple distribution channels, including: (i) directly to retail home center customers; (ii) one-step distributors that sell directly to homebuilders and contractors; and (iii) two-step wholesale distributors that resell to other distributors. For our North American retail home center customers we provide value-added fabrication and logistical services, including store delivery of pre-hung interior and exterior doors. These services are provided from our door fabrication facilities, which are strategically located to optimize our ability to service our retail home center customers. These prehanging operations utilize interior flush doors, stile and rail and louvre doors, and exterior doors from our manufacturing operations. The value added door fabrication products include interior doors which are machined for hinges, passage and lock sets and then incorporated in a frame, and framed exterior doors with decorative glass lites (inserts).

Research and Development

        Research and development activities are concentrated in our 141,000 sq. ft. research center in West Chicago, Illinois. During 2006, the center employed approximately 67 people engaged in various forms of research and product development.

        We believe we are a leader in technological innovation and development in doors, door components and door entry systems and the manufacturing processes involved in making such products. We believe that research and development is a major competitive advantage for us, and we intend to capitalize on our leadership in this area through the development of more new and innovative products. Our research and development capability enables us to develop and implement product and process improvements relating to the manufacturing of our products that enhance manufacturing efficiency and reduce costs.

        As an integrated manufacturer, we believe that we are well positioned to take advantage of the growing global demand for a variety of molded door facing designs. This capability is particularly important outside North America where newer molded door designs are rapidly replacing traditional wood doors. We have an internal capability to create new molded door facing designs and manufacture our own molds for use in our own facilities. This provides us with the ability to develop proprietary designs that enjoy a strong identity in the marketplace; more flexibility in meeting customer demand;

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quicker reaction time in the production of new designs or design changes; and greater responsiveness to customer needs.

Intellectual Property

        In North America, our doors are marketed primarily under the Masonite® brand. Other North American brands include: Premdor®, Belleville®, Barrington®, Oakcraft®, Sta-Tru® HD, ArTek®, Premvu®, Royal Mahogany™, Cavalier™, Fast-Frame™, Safe'N Sound®, Premcor™, Crown™, Miami™, Palazzo Series®, Bellagio®, Capri®, Cheyenne™, Savannah™ and Mohawk®.

        In Europe, doors are marketed under the Premdor®, Ekem™, Fonmarty™, Magri™, Monnerie™, Batimetal™ and Crosby™ brands, among others. We consider the use of trademarks and trade names to be important in the development of product awareness, and for differentiating our products from those of our competitors.

        Many of our products contain patented features or were manufactured using patented processes owned by us. We believe these patents provide us with an advantage over our competitors and are a valuable benefit to our customers.

Manufacturing Process and Raw Materials

        The manufacture of wood doors is primarily an assembly operation. Cut-stock is either acquired from suppliers or cut by the door manufacturer. If necessary, the cut-stock is milled into the various dimensions required for different door styles and sizes. The assembly process varies by type of door, from a relatively simple process for flush doors, where the door facings are glued to a wood frame, to more complex procedures for the many pieces of a louvre or stile and rail door. Following assembly, doors are trimmed to their final specifications. Short set-up times, proper production scheduling and coordinated material movement are essential to achieve a flexible process capable of producing a wide range of door types, sizes, materials and styles.

        The manufacture of insulated steel and fiberglass doors consists primarily of the fabrication of steel sheets embossed into panel or flush door facings and fiberglass door facings which are then assembled onto a wood or steel framing system. The doors are then injected with polyurethane insulation.

        Raw materials usually comprise more than 50% of the total cost of a finished door slab. The primary raw materials used in the manufacture of our interior and exterior doors are wood, steel, fiberglass, petroleum-based products including resins and plastics, paints, adhesives and door core material. The North American manufacturing operations primarily purchase production materials from sources in North America, South America and Asia, while our European operations primarily purchase materials from European suppliers.

        Cut-stock is purchased from suppliers located on the west coast of the United States and Western Canada, the southern United States, Europe, eastern Canada, southern Africa and South America. Plywood door facings are imported principally from Asia, although certain types of hardwood veneer door facings are sourced in North America. Hardboard door facings are purchased from suppliers in Canada, the United States, South America and Africa. Molded hardboard door facings are produced at our facilities in the United States, Ireland, Chile, Canada and Malaysia. Subject to seasonal fluctuations, the lead time required for shipments of plywood is approximately three months and ranges from two to eight weeks for cut-stock and hardboard (molded and flat).

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Competition

        We believe we are well-positioned to compete successfully because we offer comprehensive product lines, a focus on on-time and complete deliveries, and consistency in products and merchandising. We believe that over time factors such as reduced lead time and accurate and complete deliveries will become more important than price as a competitive differentiator.

        Our competitors include many regional and local door manufacturers around the world, and several large door manufacturers, some with multi-national presence. Competition in the door industry is based on quality, price, product design, logistics and customer service.

Geographic Information

        The following geographic segment financial information summarizes our sales and Adjusted EBITDA for the Predecessor year ended December 31, 2004, the Predecessor period from January 1, 2005 to April 6, 2005; the Successor period from February 2, 2005 to December 31, 2005; and the year ended December 31, 2006, each of the years in the three-year period ended December 31, 2006.

 
  Predecessor
  Successor
 
 
  Fiscal Year Ended
December 31, 2004

  Period from January 1 to
April 6, 2005

  Period from February 2 to
December 31, 2005

  Fiscal Year Ended
December 31, 2006

 
Sales:                          
North America   $ 1,760.3   $ 473.4   $ 1,445.3   $ 1,899.4  
Europe and Other     487.6     144.0     458.0     644.2  
Intersegment     (48.0 )   (17.3 )   (74.9 )   (79.2 )
   
 
 
 
 
    $ 2,199.9   $ 600.1   $ 1,828.4   $ 2,464.4  
   
 
 
 
 

Segment Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 
North America   $ 240.1   $ 44.7   $ 156.8   $ 236.1  
Europe and Other     79.3     25.0     72.0     96.5  
   
 
 
 
 
    $ 319.4   $ 69.7   $ 228.8   $ 332.6  
   
 
 
 
 

Seasonality

        The building products industry in North America is seasonal, particularly in the northeast and midwest regions of the United States and in most regions of Canada, where inclement winter weather generally reduces building activity, particularly in the new construction sector. As such, we typically experience a decrease in sales in the first quarter of each year and also, to a lesser extent, in the fourth quarter of each year. However, our expansion into areas of more moderate climate (e.g., the southeast, southern and western part of the United States, France, the United Kingdom and Mexico) and our focus on the residential repair, renovation and remodeling segment, which is less seasonal than new construction, has helped to mitigate this seasonality.

Properties

        Our principal executive offices are located in Mississauga, Ontario and Tampa, Florida. We own 58 manufacturing, warehouse and office facilities worldwide. We also lease space for our manufacturing and warehouse operations and administrative offices, in many locations worldwide. We believe that our leased and owned facilities are adequate for our present operations. We believe that we generally have sufficient capacity to satisfy the demand for our products in the foreseeable future, and there are no environmental issues materially constraining the utilization of our facilities.

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        The following table provides certain information regarding our properties of 5,000 square feet and more as of December 31, 2006.

Country

  Facility Location
  Principal Purpose
  Square Footage
  Status
Canada   Yarrow, BC   Manufacturing, Warehouse   182,000   Owned
    Berthierville, QC   Manufacturing, Warehouse   157,000   Owned
    Lac Megantic, QC   Manufacturing   151,000   Owned
    Mississauga, ON   Manufacturing, Warehouse   116,000   Owned
    St-Hyacinthe, QC   Manufacturing, Warehouse   112,000   Owned
    Lac Megantic, QC   Manufacturing, Warehouse   112,000   Owned
    Sacre-Coeur, QC   Manufacturing   100,000   Owned
    Lac Megantic, QC   Manufacturing, Warehouse   43,000   Owned
    St-Romuald, QC   Manufacturing Warehouse   39,000   Owned
    Lac Megantic, QC   Warehouse   18,000   Owned
    Mississauga, ON   Office   15,000   Owned
    Lac Megantic, QC   Manufacturing   15,000   Owned
    Lac Megantic, QC   Warehouse   15,000   Owned
    Berthierville, QC   Warehouse   8,000   Owned
    Lac Megantic, QC   Warehouse   6,000   Owned
    Surrey, BC   Manufacturing, Warehouse   189,700   Leased
    Concord, ON   Warehouse   170,000   Leased
    Brampton, ON   Manufacturing, Warehouse   122,000   Leased
    New Westminster, BC   Manufacturing   104,000   Leased
    Langley, BC   Manufacturing, Warehouse   100,000   Leased
    Granby, QC   Manufacturing, Warehouse   75,000   Leased
    Delta, BC   Warehouse   30,000   Leased
    Berthierville, QC   Warehouse   26,000   Leased
    Lac Megantic, QC   Warehouse   20,000   Leased
    Calgary, AB   Warehouse   16,000   Leased
    St-Romuald, QC   Warehouse   13,000   Leased
    Lac Megantic, QC   Warehouse   12,000   Leased
United States   Laurel, MS   Manufacturing   1,913,000   Owned
    Pittsburg, KS   Manufacturing, Warehouse   300,000   Owned
    Walkerton, IN   Manufacturing, Warehouse   220,000   Owned
    Northumberland, PA   Manufacturing, Warehouse   220,000   Owned
    Dickson, TN   Manufacturing, Warehouse   211,000   Owned
    Greenville, TX   Manufacturing, Warehouse   161,000   Owned
    West Chicago, IL   Die Manufacturing, R&D   141,000   Owned
    Astatula, FL   Manufacturing, Warehouse   125,000   Owned
    Stanley, VA   Manufacturing, Warehouse   118,000   Owned
    South Bend, IN   Manufacturing, Warehouse   117,000   Owned
    Greenville, TX   Warehouse   102,000   Owned
    Haleyville, AL   Manufacturing   94,000   Owned
    North Platte, NE   Manufacturing, Warehouse   92,000   Owned
    Stockton, CA   Manufacturing   92,000   Owned
    Haleyville, AL   Warehouse   85,000   Owned
    Tampa, FL   Manufacturing   75,000   Owned
    Stockton, CA   Warehouse   67,000   Owned
    Stockton, CA   Manufacturing   65,000   Owned
    Stockton, CA   Manufacturing, Warehouse   47,000   Owned
    Stockton, CA   Warehouse   15,000   Owned
                 

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    Charlotte, NC   Manufacturing   334,000   Leased
    Moreno Valley, CA   Manufacturing, Warehouse   334,000   Leased
    Bridgeport, NJ   Manufacturing, Warehouse   231,000   Leased
    Lawrenceville, GA   Manufacturing, Warehouse   220,100   Leased
    Toledo, OH   Manufacturing, Warehouse   186,000   Leased
    Leominster, MA   Warehouse   157,000   Leased
    Dickson, TN   Manufacturing, Warehouse   150,000   Leased
    Kirkwood, NY   Manufacturing, Warehouse   138,000   Leased
    Goshen, IN   Manufacturing, Warehouse   132,000   Leased
    Duluth, GA   Manufacturing, Warehouse   130,000   Leased
    Stockton, CA   Manufacturing, Warehouse   125,000   Leased
    Frederick, MD   Manufacturing, Warehouse   125,000   Leased
    Yulee, FL   Manufacturing, Warehouse   123,000   Leased
    Mobile, AL   Manufacturing, Warehouse   112,000   Leased
    Winchester, VA   Manufacturing, Warehouse   109,000   Leased
    Westminster, MA   Manufacturing, Warehouse   100,000   Leased
    Lake Charles, LA   Warehouse   100,000   Leased
    Vandalia, OH   Manufacturing, Warehouse   96,000   Leased
    Garland, TX   Manufacturing, Warehouse   84,000   Leased
    Mobile, AL   Manufacturing, Warehouse   80,000   Leased
    Mobile, AL   Manufacturing   80,000   Leased
    Pittsburg, KS   Warehouse   77,000   Leased
    Kansas City, MO   Manufacturing, Warehouse   74,000   Leased
    Tampa, FL   Warehouse   72,000   Leased
    Goshen, IN   Manufacturing, Warehouse   63,000   Leased
    Garland, TX   Warehouse   57,000   Leased
    Mt. Dora, FL   Manufacturing   57,000   Leased
    Charleston, SC   Warehouse   50,000   Leased
    Danville, VA   Warehouse   49,000   Leased
    Luray, VA   Warehouse   43,000   Leased
    Plymouth, IN   Warehouse   42,000   Leased
    Tampa, FL   Warehouse   37,000   Leased
    Kirkwood, NY   Warehouse   29,000   Leased
    Haleyville, AL   Warehouse   28,000   Leased
    Tampa, FL   Office   24,000   Leased
    Pittsburg, KS   Warehouse   19,000   Leased
    Pittsburg, KS   Warehouse   15,000   Leased
    Sunbury, PA   Warehouse   15,000   Leased
    North Platte, NE   Warehouse   14,400   Leased
    South Bend, IN   Warehouse   14,000   Leased
    Mobile, AL   Office   10,000   Leased
    White Bluff, TN   Warehouse   10,000   Leased
    Lake Charles, LA   Warehouse   7,000   Leased
    Tavares, FL   Manufacturing   6,000   Leased
    Pittsburg, KS   Warehouse   5,000   Leased
    Lake Charles, LA   Office   5,000   Leased
    Sidney, NE   Warehouse   Variable   Leased
    Cumberland Caves, TN   Warehouse   Variable   Leased
United Kingdom   Hedingham   Manufacturing, Warehouse   358,000   Owned
                 

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    Barnsley   Manufacturing, Warehouse   338,000   Owned
    Bridgwater   Manufacturing, Warehouse   108,000   Owned
    Barnsley   Warehouse   97,000   Owned
    Stockton-on-Tees   Manufacturing, Warehouse   40,000   Leased
    Middlesbrough   Manufacturing   25,000   Leased
    Swindon   Office   20,000   Leased
France   Bazas   Manufacturing, Warehouse   374,000   Owned
    Douvres   Manufacturing, Warehouse   183,000   Owned
    Orange   Manufacturing   171,000   Owned
    Bordeaux   Manufacturing, Warehouse   165,000   Owned
    Thignonville   Manufacturing, Warehouse   115,000   Owned
    Tillieres   Manufacturing, Warehouse   72,000   Owned
    Bazas   Warehouse   25,000   Owned
    Mereville   Manufacturing   15,000   Owned
    Giberville   Manufacturing   52,000   Leased
    Rungis   Office   6,000   Leased
Ireland   Carrick-on-Shannon   Manufacturing   576,000   Owned
Chile   Cabrero   Manufacturing   110,000   Owned
China   Shanghai   Warehouse, Office   16,000   Leased
South Africa   Kwa-Zulu Natal   Land, Forests       Owned
    Estcourt   Manufacturing, Warehouse   1,000,000   Owned
    Durban   Office   15,000   Leased
    Pietermaritzburg   Office   5,000   Leased
Mexico   Nuevo-Leon   Manufacturing   188,000   Leased
    Nuevo-Leon   Manufacturing, Warehouse   13,000   Leased
Costa Rica   Heredia   Manufacturing   135,000   Owned
    Guapiles   Manufacturing   57,000   Owned
Czech Republic   Jihlava   Manufacturing   239,000   Leased
Poland   Jaslo   Manufacturing   212,000   Leased
Romania   Brasov   Warehouse   13,000   Leased
Ukraine   Berdychiv   Manufacturing   454,000   Owned
Hungary   Banhalma   Manufacturing   107,600   Owned
    Budapest   Warehouse   45,200   Owned
Turkey   Istanbul   Manufacturing   25,000   Owned
    Istanbul   Warehouse   15,000   Leased
Israel   Karmiel   Manufacturing   105,000   Owned
    Ben Zvi   Warehouse   19,000   Leased
Malaysia   Bintulu   Manufacturing   127,000   Owned
    Kuala Lumpur   Manufacturing   215,000   Leased

Employees

        We employ approximately 12,800 employees and contract laborers of which approximately 3,700 were covered by collective bargaining agreements. During the third quarter of 2006 we implemented a company-wide reduction in employment levels, impacting approximately eight percent of the global salaried and indirect hourly workforce. Approximately 3,700, or 28%, of our employees are unionized. Employees represented by these unions are subject to 24 collective bargaining agreements, six of which are with local unions in the United States. There are seven contracts subject to renewal in 2007. Four of our North American collective bargaining agreements are subject to renewal in 2007, and our collective bargaining agreements in France, United Kingdom and South Africa are subject to annual

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renewal. In 2004, our results were negatively affected by a 25-day strike at an interior door manufacturing facility, which contract is subject to renewal in 2007. We have not since experienced any material interruptions of operations due to disputes with our employees and consider our relations with our employees to be satisfactory.

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 or results of our operations.

Environmental

        The geographic breadth of our facilities subjects us to environmental laws, regulations and guidelines in a number of jurisdictions, including, among others, Canada, the United States, the United Kingdom, the Republic of Ireland, France, the Czech Republic, Hungary, Poland, Ukraine, Israel, Mexico, Chile, Costa Rica, South Africa, and Malaysia. Such laws, regulations and guidelines relate to, among other things, the discharge of contaminants into water and air and onto land, the storage and handling of certain regulated materials used in the manufacturing process, the disposal of wastes and the remediation of contaminated sites.

        Typically under ten percent of our capital is spent to comply with our environmental, health and safety requirements. In addition, we will spend approximately $8.3 million over 2006 and 2007 to comply with the U.S. Maximum Achievable Control Technology requirements under the Clean Air Act. Based on recent experience and current projections, environmental protection requirements and liabilities are not expected to have a material effect on our business, operations or financial position.

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DIRECTORS AND SENIOR MANAGEMENT

Directors and Senior Management

        The individuals serving as our senior managers and directors are as follows:

Name

  Age
  Positions
Kenneth W. Freeman   56   Chief Executive Officer and Director
Frederick J. Lynch   42   President
Frederick Arnold   53   Executive Vice President, Finance
James U. Morrison   61   Executive Vice President and Group Chief Operating Officer
Lawrence P. Repar   45   Executive Vice President and Group Chief Operating Officer
Paul E. Raether   60   Director
Scott C. Nuttall   34   Director
Tagar C. Olson   29   Director
Robert V. Tubbesing   60   Director

        The present principal occupations and recent employment history of each of the senior managers and directors listed above are as follows:

        Mr. Freeman has served as our Chief Executive Officer and as a Director of Masonite U.S. since October 2005. Mr. Freeman is a Managing Director of Kohlberg Kravis Roberts & Co. L.P., where he has held such position since May 2005. Prior to joining Kohlberg Kravis Roberts & Co. L.P., Mr. Freeman served as Chairman and Chief Executive Officer of Quest Diagnostics Incorporated from its inception in January 1997 through May 2004. Mr. Freeman retired from his role as Chairman of the Board of Directors of Quest Diagnostics in December 2004. Between 1995 and 1997, Mr. Freeman served as Chief Executive Officer of Corning Clinical Laboratories, the predecessor company to Quest. Prior to 1995, Mr. Freeman served in a variety of financial and general management positions at Corning Incorporated, which he joined in 1972. Mr. Freeman is also a director and Executive Chairman of Accellent Inc. and a director of Alliance Imaging.

        Mr. Lynch has served as our President since August 2006. Prior to joining us, Mr. Lynch served in a variety of senior positions at Alpharma, Inc. including as President, Generic Pharmaceuticals from June 2003 until December 2005. Prior to joining Alpharma, Mr. Lynch served in a variety of senior positions over the course of eighteen years at AlliedSignal and its successor, Honeywell International, including Vice President and General Manager of Specialty Chemicals, from 1999 to March 2003 and General Manager, High Purity Chemicals, from 1997 to 1999.

        Mr. Arnold has served as our Executive Vice President, Finance since February 2006. Prior to joining us, Mr. Arnold served in a series of senior management positions from March 2000 until September 2003 at Willis Group Holdings Ltd., including as Executive Vice President, Strategic Development and Group Chief Administrative Officer. Mr. Arnold formerly worked for 20 years as an investment banker, primarily at Lehman Brothers and Smith Barney, specializing in mergers and acquisitions and equity capital markets.

        Mr. Morrison was appointed Executive Vice President and Group Chief Operating Officer of Masonite in 2002 and continued in that role after the Transaction. Mr. Morrison is a 38-year veteran of Masonite U.S. He was appointed as a Vice President of Masonite U.S. in 1981 and continued to serve in that capacity until 2001. He joined Masonite U.S. as a Process Engineer in 1968 and has had various operations, sales, marketing and executive assignments.

        Mr. Repar was appointed as Executive Vice President and Group Chief Operating Officer of Masonite International upon the closing of the Transaction. He served in a similar position for our

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predecessor companies since 2001, and he has held a variety of senior positions with us since 1994. Mr. Repar formerly worked as an equity financial analyst and director of institutional sales and trading for Sanwa McCarthy Securities Limited in Toronto for 3 years prior to joining us in 1994.

        Mr. Raether serves as a Director of Masonite Holdings Corporation, Masonite International and Masonite U.S. He has been a member of KKR & Co. L.L.C., a limited liability company that is the general partner of Kohlberg Kravis Roberts & Co. L.P., since 1996. Prior to that, he was a general partner of Kohlberg Kravis Roberts & Co. L.P.

        Mr. Nuttall was appointed as a Director of Masonite Holding Corporation, Masonite International and Masonite U.S. upon the closing of the Transaction. He has been a member of KKR & Co. since 2005, having been continuously employed by KKR since 1996. Mr. Nuttall is also a director of Alea Group Holdings (Bermuda) Ltd., and KKR Financial Corp.

        Mr. Olson was appointed as a Director of Masonite Holding Corporation, Masonite International and Masonite U.S. upon the closing of the Transaction. He has been an executive of Kohlberg Kravis Roberts & Co. L.P. since 2002. From 1999 until 2002, Mr. Olson was an executive with Evercore Partners Inc., a private investment firm. Mr. Olson is also a director of Visant Corp.

        Mr. Tubbesing was appointed as a Director of Masonite Holding Corporation, Masonite International and Masonite Canada in April 2006. Mr. Tubbesing served as Vice President and Chief Financial Officer of Masonite from 1989 until 2004 and as Executive Vice President from 2004 until his retirement in September 2006.

Executive Compensation

        The aggregate salary and benefits paid to our senior managers for the year ended December 31, 2006 amounted to approximately $4,029,329. In addition, former senior managers, whose employment terminated in 2005 and 2006, are entitled to receive severance pay payable over periods from twelve to thirty-six months from the date of termination. Total severance paid in 2006 on account of former senior managers terminated in 2005 and 2006 amounted to $2,712,500.

        An aggregate of 2,850,000 time, performance and other options to purchase our common stock were also granted to our senior managers under the 2005 Stock Purchase and Option Plan for Key Employees of Masonite Holding Corporation and its subsidiaries in 2006. In 2006, 1,856,347 shares underlying options granted in 2005 have been redeemed in connection with the termination of employment of certain of our former senior managers and key employees.

        For details on the equity participation of our senior managers, please see "Major Shareholders and Related Party Transactions", note 14 to our historical consolidated financial statements and note 10 to our unaudited consolidated financial statements.

        In 2005, Masonite Holding Corporation adopted a Directors' Deferred Compensation Plan pursuant to which, for 2005, in lieu of receiving cash remuneration, non-employee directors received a credit under their stock accounts under the plan valued at $50,000 (10,000 shares based on fair market valuation of $5.00 per share in 2006).

        We also maintain a directors' and officers' insurance policy with respect to our senior managers and board of directors.

Stock Purchase and Option Plan

        We have adopted the 2005 Stock Purchase and Option Plan for Key Employees of Masonite Holding Corporation and its subsidiaries (the "Stock Plan"), which provides for the grant of incentive stock options (within the meaning of Section 422 of the Internal Revenue Code), options that are not incentive stock options, and various other stock-based grants, including the shares of common stock of

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Masonite Holding Corporation ("Holdings Stock") sold to, and options granted to the executive officers and other key employees, as described below. We have granted under the Stock Plan certain options as non-incentive stock options. The options are generally granted as follows: 50% vest and become exercisable over the passage of time, which we refer to as "time options," assuming the optionee continues to be employed by us, and 50% vest and become exercisable over time based upon the achievement of certain performance targets, which we refer to as "performance options."

        Exercise Price.    The exercise price of the options is the fair market value of the shares underlying the options on the date of the grant of the option.

        Vesting of Time Options.    Time options granted in 2006 generally become exercisable by the holder of the option in installments of 20% on each of the first five anniversaries of the grant date.

        Vesting of Performance Options.    Performance options granted in 2006 generally become exercisable over a specified time in specified percentages upon the achievement of certain EBITDA performance targets. In the event that performance targets are not achieved in any given fiscal year but are achieved in a subsequent year, the performance option will become exercisable as to the previously unexercisable percentage of the performance options from the missed years, as well as with respect to the percentage of the performance options in respect of the fiscal year in which the performance targets are achieved.

        Effect of Change in Control of Masonite Holding Corporation.    In addition, immediately prior to a change in control of Masonite Holding, as defined in the Stock Plan, (i) the exercisability of the time options will automatically accelerate with respect to 100% of the shares of common stock of Masonite Holding Corporation subject to the time options and (ii) up to 100% of the unvested performance options will automatically vest if certain EBITDA performance targets have been achieved for the fiscal year ending immediately prior to such change in control. Otherwise, the acceleration of vesting of performance options depends upon whether KKR has achieved a specified internal rate of return.

        Miscellaneous.    The options are only be transferable by will or pursuant to applicable laws of descent and distribution upon the death of the optionee. The Stock Plan may be amended or terminated by Masonite Holding's Corporation's board of directors at any time.

        These options generally expire on the tenth anniversary of the grant date, subject to earlier termination, in the case of termination of employment.

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MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

        Masonite International owns 100% of the issued and outstanding common stock of Masonite U.S. and Masonite Canada. Masonite Holding Corporation ("Masonite Holdings"), a Cayman entity, owns 100% of the issued and outstanding common stock of Masonite International.

        The following table and accompanying footnotes show information regarding the beneficial ownership of the common stock of Masonite Holdings by (i) each person known to us to beneficially own more than 5% of the issued and outstanding common stock of Masonite Holdings, (ii) each of our directors, (iii) each of our senior managers and (iv) all of the directors and senior managers as a group.

Name of beneficial owner

  Number(1)
  Percentage
 
KKR(2)   91,032,161   80.82 %
Sculptor Investments, S.à. r.l.(3)   9,519,276   8.45 %
Alpinvest(4)   5,711,565   5.07 %
Kenneth W. Freeman   *   * %
Frederick J. Lynch   *   * %
Frederick Arnold   *   * %
James U. Morrison   *   * %
Lawrence P. Repar   *   * %
Paul E. Raether(2)   91,032,161   80.82 %
Scott C. Nuttall(2)   91,032,161   80.82 %
Tagar C. Olson(2)   91,032,161   80.82 %
All senior managers and directors as a group (8 persons)   93,440,161   82.96 %

*
Less than 1%.

(1)
Applicable percentage of ownership includes 112,631,002 shares of common stock outstanding as of December 31, 2006. The amounts and percentages of our common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a "beneficial owner" of a security if that person has or shares "voting power," which includes the power to vote or to direct the voting of such security, or "investment power," which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed to be a beneficial owner of such securities as to which such person has an economic interest.

(2)
KKR affiliates currently beneficially own 91,032,161 shares of Masonite Holdings common stock as follows:

85,714,451 shares are beneficially owned by KKR Millennium Fund (Overseas), Limited Partnership, for which KKR Associates Millenium (Overseas), Limited Partnership is the general partner for which KKR Millennium Limited, a Cayman limited company, is the general partner and exercises sole voting and investment power with respect to such shares;

1,510,000 shares are beneficially owned by KKR Partners (International), Limited Partnership, for which KKR 1996 Overseas Limited, a Cayman limited company, is the general partner and exercises sole voting and investment power with respect to such shares; and

3,807,710 shares are beneficially owned by KKR Financial Corporation.

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(3)
Sculptor Investments, S.à. r.l. beneficially own 9,519,276 shares of Masonite Holdings common stock. The address of Sculptor Investments, S.a. r.l. is c/o Manacor (Luxembourg) SA 46A Avenue J.F. Kennedy Kirchberg, Luxembourg L-1855.

(4)
Alpinvest Partners N.V. affiliates current beneficially own 5,711,565 shares of Masonite Holdings common stock as follows:

5,649,309 shares are beneficially owned by Alpinvest Partners CS Investments 2005 C.V.

62,256 shares are beneficially owned by Alpinvest Partners Later Stage Co Investments.

Related Party Transactions

Management Stockholder's Agreement

        In connection with the subscription for the purchase of common shares of Masonite Holdings, the sale of shares of Masonite in consideration of the issuance of shares of Masonite Holdings, the exchange of options to purchase shares of Masonite for options to purchase shares of Masonite Holdings and the grant of options under the Stock Plan, as applicable, the senior managers and other employees and officers of Masonite each became party to a management stockholder's agreement with Masonite Holdings. The management stockholder's agreement generally restricts the ability of the stockholders to transfer shares held by them for five years after the closing of the Transaction in case of the agreements entered into around the time of the closing of the Transaction.

        In general, in the case of the agreements entered into around the time of the closing of the Transaction, if a management stockholder's employment is terminated prior to the fifth anniversary of the closing of the Transaction, Masonite Holdings has the right to purchase the shares and options held by such person on terms specified in the management stockholder's agreement. If a management stockholder's employment is terminated as a result of death or disability prior to the later of the fifth anniversary of the closing of the Transaction and the date of a public offering meeting certain criteria, such stockholder or, in the event of such stockholder's death, the estate of such stockholder, has the right to force Masonite Holdings to issue him shares of Masonite Holdings in exchange for certain exercisable options and to purchase all his shares, on terms specified in the management stockholder's agreement in the case of the agreements entered into around the time of the closing of the Transaction.

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        The management stockholder's agreement also permits such stockholder under certain circumstances to participate in registrations by Masonite Holdings of its equity securities. If certain investment funds affiliated with KKR that are stockholders of Masonite Holdings also sell shares in such registration, such registration rights are subject to customary limitations specified in the registration rights agreement between Masonite Holdings and such investment funds.

Sale Participation Agreement

        Each management stockholder entered into a sale participation agreement granting the management stockholder the right to participate in any sale of shares of Masonite Holdings by certain investment funds affiliated with KKR that are shareholders of Masonite Holdings occurring prior to the fifth anniversary of the first public offering of Masonite Holdings on the same terms as such investment funds. In order to participate in such sale, the management stockholder may be required, among other things, to become a party to any agreement under which the shares of Masonite Holdings are to be sold, and to grant certain powers with respect to the proposed sale of shares of Masonite Holdings to custodians and attorneys-in-fact.

Registration Rights Agreement

        In connection with the Transaction, we entered into a registration rights agreement with certain investment funds affiliated with KKR that are stockholders of Masonite Holdings, pursuant to which such investment funds are entitled to certain demand and piggyback rights with respect to the registration and sale of the shares of Masonite Holdings held by them.

Management Services Agreement

        In connection with the Transaction, we entered into a management services agreement with KKR pursuant to which KKR provided certain structuring, consulting and management advisory services to us. Pursuant to this agreement, KKR received a transaction fee of $30.0 million, payable upon the closing of the Transaction, plus approximately $0.6 million of out-of-pocket costs and will receive an annual advisory fee of $2.0 million, payable quarterly in advance, such amount to increase by 5% per year. We indemnified KKR and its affiliates, directors, officers and representatives for losses relating to the services contemplated by the management services agreement and the engagement of KKR pursuant to, and the performance by KKR of the services contemplated by, the management services agreement.

Consulting Agreement

        Following completion of the Transaction, we retained Capstone Consulting to provide us with consulting services, primarily to identify and advise on potential opportunities to reduce our costs and identify other potential opportunities to grow our business. Although neither KKR nor any entity affiliated with KKR owns any of the equity of Capstone, KKR has provided financing to Capstone. We paid approximately $0.3 million of fees to Capstone for services provided in connection with the Transaction. In the fourth quarter of 2005, Capstone invested $2.5 million in Masonite Holdings.

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DESCRIPTION OF CERTAIN INDEBTEDNESS

Senior Secured Credit Facilities

        Concurrently with the closing of the Transaction we entered into new senior credit facilities with The Bank of Nova Scotia and Deutsche Bank Securities Inc., as co-lead arrangers, The Bank of Nova Scotia, Deutsche Bank Securities Inc. and UBS Securities LLC, as co-bookrunners, the lenders signatory thereto, The Bank of Nova Scotia, as administrative agent and collateral agent, Deutsche Bank Securities Inc. and UBS Loan Finance LLC, as co-syndication agents, and Bank of Montreal and SunTrust Bank, as co-documentation agents.

        Our senior secured credit facilities consist of:


        Our senior secured credit facilities allow us, subject to certain conditions, to incur additional term loans under the term loan facility, or under a new term facility, in either case in an aggregate principal amount of up to $300.0 million, which additional term loans will have the same security and guarantees as the term loan facility.

Security and guarantees

        The obligations under the senior secured credit facilities are unconditionally and irrevocably guaranteed by Masonite International, Masonite U.S. (as to the obligations of Masonite Canada), Masonite Canada (as to the obligations of Masonite U.S.) and each of our Canadian and U.S. 100% owned subsidiaries as well as certain other material non-U.S. wholly-owned subsidiaries (but in any event excluding any non-U.S. subsidiaries of Masonite U.S. and their subsidiaries). All such obligations and the obligations under such guarantees are secured by substantially all of our assets and the assets of each guarantor, including but not limited to:

Interest rates and fees

        Borrowings under the senior secured credit facilities bear interest as follows:

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        The senior secured credit facilities also provide for the payment to the lenders of a commitment fee on the average daily undrawn commitments under the revolving credit facility at a rate equal to 0.50% per annum, and a letter of credit fee at a rate equal to 2.50% per annum (in each case subject to reduction based on our leverage ratio).

Scheduled amortization payments and mandatory prepayments

        The term loan facility provides for quarterly amortization payments in an aggregate annual amount equal to 1% of the original principal amount thereof during the first 73/4 years, with the balance of the facility to be repaid at final maturity.

        In addition, the senior secured credit facilities require us to prepay outstanding term loans, subject to certain exceptions, with:

        Such requirements are subject to the limitation that no more than 25% of the principal amount of an outstanding term loan made to Masonite Canada is required to be repaid within 5 years from the date of issue of the loan if additional repayments would preclude the availability of the Canadian withholding tax exemption in respect of interest payments made on the loan.

Voluntary prepayments and commitment reductions

        The senior secured credit facilities permit voluntary prepayments of the loans and voluntary reductions of the unutilized portion of the commitments thereunder, without premium or penalty, subject to certain conditions pertaining to minimum notice and minimum payment/reduction amounts and to customary breakage costs with respect to LIBOR loans.

Covenants

        Our senior secured credit facilities contain financial, affirmative and negative covenants that we believe are usual and customary for a senior secured credit agreement. The negative covenants in the senior secured credit facilities include limitations (each of which is subject to customary exceptions) on our ability and each of our current and future restricted subsidiaries to:

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        In addition, the senior secured credit facilities contain customary financial covenants including maximum total leverage and minimum interest coverage ratios.

Events of default

        Our senior secured credit facilities contain certain customary events of default, including:

Senior Subordinated Term Loan

        Concurrently with the closing of the Transaction we entered into a $770.0 million senior subordinated loan agreement with The Bank of Nova Scotia, as U.S. administrative agent and Canadian administrative agent, joint lead arranger and joint bookrunner, Deutsche Bank Securities Inc., as joint lead arranger, joint bookrunner and co-syndication agent, UBS Securities LLC, as joint bookrunner and co-syndication agent, and Bank of Montreal and Suntrust Bank as co-documentation agents. The proceeds of the loan were also used to fund the Transaction.

        The senior subordinated loan initially carried an interest rate of LIBOR plus 6.00% which increased over time to a maximum interest rate of 11% per annum. On October 6, the senior subordinated loan was repaid in full by the issuance of a new debt obligation comprising a senior subordinated term loan with an interest rate of 11% and maturing on April 6, 2015. Certain lenders exercised their option on and after October 6, 2006 to receive the outstanding notes for all or a part of the principal amount of the senior subordinated loan then outstanding, which notes bear interest at the rate applicable to the senior subordinated loan and are subject to registration rights. The senior subordinated term loan agreement contains financial, affirmative and negative covenants and events of default that correspond to those of the notes.

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THE EXCHANGE OFFER

General

        The Issuers hereby offer to exchange a like principal amount of exchange notes representing the same underlying indebtedness as the outstanding notes for any or all outstanding notes on the terms and subject to the conditions set forth in this prospectus and accompanying letter of transmittal. We refer to the offer as the "exchange offer." You may tender some or all of your outstanding notes pursuant to the exchange offer.

        As of the date of this prospectus, $397.5 million aggregate principal amount of the outstanding U.S. notes is outstanding and $355.8 million aggregate principal amount of the outstanding Canadian notes is outstanding. As of the date hereof, certain senior subordinated term loan lenders were eligible to receive an equivalent principal amount of senior subordinated notes due 2015, representing the same underlying indebtedness, issued by Masonite US or Masonite Canada, as applicable, in respect of $14.5 million of senior subordinated term loans under which Masonite U.S. is the borrower and $2.0 million of senior subordinated term loans under which Masonite Canada is the borrower. This prospectus, together with the letter of transmittal, is first being sent to all holders of outstanding notes known to us on or about            , 2007. The Issuers' obligation to accept outstanding notes for exchange notes pursuant to the exchange offer is subject to certain conditions set forth under "Conditions to the exchange offer" below. The Issuers currently expect that each of the conditions will be satisfied and that no waivers will be necessary.

Purpose and Effect of the Exchange Offer

        In connection with the private placement, we entered into a registration rights agreement with The Bank of New York, as Trustee, for the holders of the outstanding notes (the "Trustee"), in which we and the guarantors agreed, among other things, to use our commercially reasonable efforts to file a registration statement within 90 days (January 4, 2007) after the date on which the outstanding notes were first issued and to consummate the exchange offer by the date that is 180 days (April 4, 2007) from the date outstanding notes were first issued. The exchange notes will have terms substantially identical to the terms of the outstanding notes and represent the same underlying indebtedness as the outstanding notes, except that the exchange notes will not contain terms with respect to transfer restrictions or additional interest upon a failure to fulfill certain of our obligations under the registration rights agreement.

        Under the circumstances set forth below, we will use our commercially reasonable efforts to cause the SEC to declare effective a shelf registration statement with respect to the resale of the outstanding notes within the time periods specified in the registration rights agreement and to keep the shelf registration statement effective for two years or such shorter period ending when all outstanding notes or exchange notes covered by the statement have been sold in the manner set forth and as contemplated in the statement or to the extent that the applicable provisions of Rule 144(k) under the Securities Act are amended or revised. These circumstances include:

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        If we fail to comply with certain obligations under the registration rights agreement, we will be required to pay additional interest to holders of the outstanding notes and the exchange notes required to be registered on a shelf registration statement. Please read the section "Exchange offer; registration rights" for more details regarding the registration rights agreement.

        Each holder of outstanding notes that wishes to exchange their outstanding notes for exchange notes representing the same underlying indebtedness in the exchange offer will be required to make the following written representations:

        Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes, where the broker-dealer acquired the outstanding notes as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. Please see "Plan of Distribution."

Resale of Exchange Notes

        Based on interpretations by the staff of the SEC as set forth in no-action letters issued to third parties referred to below, we believe that you may resell or otherwise transfer exchange notes issued in the exchange offer without complying with the registration and prospectus delivery provisions of the Securities Act, if:

        If you are an affiliate of the Issuers, or are engaging in, or intend to engage in, or have any arrangement or understanding with any person to participate in, a distribution of the exchange notes, or are not acquiring the exchange notes in the ordinary course of your business, then:

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        This prospectus may be used for an offer to resell, for the resale or for other retransfer of exchange notes only as specifically set forth in this prospectus. With regard to broker-dealers, only broker-dealers that acquired the outstanding notes as a result of market-making activities or other trading activities may participate in the exchange offer. Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. Please read "Plan of Distribution" for more details regarding the transfer of exchange notes.

Terms of the Exchange Offer

        On the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal, we will accept for exchange in the exchange offer outstanding notes that are validly tendered and not validly withdrawn prior to the expiration date. We will issue exchange notes in exchange for a corresponding principal amount of outstanding notes surrendered in the exchange offer.

        The form and terms of the exchange notes will be substantially identical to the form and terms of the outstanding notes, except that the exchange notes will not contain terms with respect to transfer restrictions or additional interest upon a failure to fulfill certain of our obligations under the registration rights agreement. The exchange notes will evidence the same debt as the outstanding notes. The exchange notes will be issued under and entitled to the benefits of the same indentures under which the outstanding notes were issued, and the exchange notes and the outstanding notes will constitute a single class and series of notes for all purposes under the indentures. For a description of the indentures, please see "Description of Notes".

        The exchange offer is not conditioned upon any minimum aggregate principal amount of outstanding notes being tendered for exchange.

        There will be no fixed record date for determining registered holders of outstanding notes entitled to participate in the exchange offer.

        We intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement, the applicable requirements of the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the SEC. Outstanding notes that are not tendered for exchange in the exchange offer will remain outstanding and continue to accrue interest and will be entitled to the rights and benefits that such holders have under the indenture relating to such holders' outstanding notes, except for any rights under the registration rights agreement that by their terms terminate upon the consummation of the exchange offer.

        We will be deemed to have accepted for exchange properly tendered outstanding notes when we have given oral or written notice of the acceptance to the exchange agent. The exchange agent will act as agent for the tendering holders for the purposes of receiving the exchange notes from us and delivering exchange notes to holders. Subject to the terms of the registration rights agreement, we expressly reserve the right to amend or terminate the exchange offer and to refuse to accept the occurrence of any of the conditions specified below under "Conditions to the exchange offer".

        Holders who tender outstanding notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of outstanding notes. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the exchange offer. It is important that you read

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"—Fees and expenses" below for more details regarding fees and expenses incurred in the exchange offer.

Expiration Date; Extensions, Amendments

        As used in this prospectus, the term "expiration date" means 12:00 midnight, New York City time, on            , 2007 which is the 30th business day after the date of this prospectus. However, if we, in our sole discretion, extend the period of time for which the exchange offer is open, the term "expiration date" will mean the latest time and date to which we shall have extended the expiration of the exchange offer.

        To extend the period of time during which the exchange offer is open, we will notify the exchange agent of any extension by oral or written notice, followed by notification to the registered holders of the outstanding notes no later than 9:00 a.m., New York City time, on the business day after the previously scheduled expiration date.

        We reserve the right, in our sole discretion:

        Any delay in acceptance, extension, termination or amendment will be followed promptly by oral or written notice to the registered holders of the outstanding notes, and, to the extent the exchange offer is terminated, any outstanding notes accepted will be promptly returned after the termination of the exchange offer. If we amend the exchange offer in a manner that we determine to constitute a material change, including the waiver of a material condition or if we terminate the offer, we will notify the exchange agent by oral or written notice, followed by notification to the registered holders of the outstanding notes no later than 9:00 a.m., New York City time, on the business day after the amendment or termination has been determined and will extend the offer period if necessary so that at least five business days remain in the offer following notice of the material change.

Conditions to the Exchange Offer

        Despite any other term of the exchange offer, we will not be required to accept for exchange, or to issue exchange notes in exchange for, any outstanding notes, and we may terminate or amend the exchange offer as provided in this prospectus before accepting any outstanding notes for exchange, if:

        If the exchange offer is terminated, outstanding notes will be returned to their registered holders.

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        In addition, we will not be obligated to accept for exchange the outstanding notes of any holder that has not made to us:

        All conditions to the exchange offer must be satisfied or waived prior to the expiration of the exchange offer.

        We expressly reserve the right at any time or at various times to extend the period of time during which the exchange offer is open. Consequently, we may delay acceptance of any outstanding notes due to our extension of the exchange offer by notice by press release or other public announcement as required by Rule 14e-1(d) of the Act of such extension to their holders. During any such extensions, all outstanding notes previously tendered will remain subject to the exchange offer, and we may accept them for exchange. We will return any outstanding notes that we do not accept for exchange for any reason without expense to their tendering holder promptly after the expiration or termination of the exchange offer. We will issue new notes promptly after the expiration of the exchange offer.

        We expressly reserve the right to amend or terminate the exchange offer and to reject for exchange any outstanding notes not previously accepted for exchange upon the occurrence of any of the conditions of the exchange offer specified above. We will give notice by press release or other public announcement of any extension, amendment, non-acceptance or termination to the holders of the outstanding notes no later than 9:00 a.m., New York City time, on the business day after the previously scheduled expiration date.

        These conditions are for our sole benefit, and we may assert them regardless of the circumstances that may give rise to them so long as such circumstances do not arise due to our action or inaction or waive them in whole or in part at any or at various times in our sole discretion. If we fail at any time to exercise any of the foregoing rights, this failure will not constitute a waiver of such right. Each such right will be deemed an ongoing right that we may assert at any time or at various times.

Procedures for Tendering Outstanding Notes

        Only a holder of outstanding notes may tender their outstanding notes in the exchange offer. To tender in the exchange offer, a holder must comply with either of the following:

        In addition, either:

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        To be tendered effectively, the exchange agent must receive any physical delivery of the letter of transmittal and other required documents at the address set forth below under "—Exchange agent" prior to the expiration date.

        A tender to us that is not withdrawn prior to the expiration date constitutes an agreement between us and the tendering holder upon the terms and subject to the conditions described in this prospectus and in the letter of transmittal.

        The method of delivery of outstanding notes, letter of transmittal and all other required documents to the exchange agent is at the holder's election and risk. Rather than mail these items, we recommend that holders use an overnight or hand delivery service. In all cases, holders should allow sufficient time to assure timely delivery to the exchange agent before the expiration date. Holders should not send letters of transmittal or certificates representing outstanding notes to us. Holders may request that their respective brokers, dealers, commercial banks, trust companies or other nominees effect the above transactions for them.

        If you are a beneficial owner whose outstanding notes are held in the name of a broker, dealer, commercial bank, trust company, or other nominee who wishes to participate in the exchange offer, you should promptly contact such party and instruct such person to tender outstanding notes on your behalf.

        You must make these arrangements or follow these procedures before completing and executing the letter of transmittal and delivering the outstanding notes.

        Signatures on the letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the U.S. or another "Eligible Guarantor Institution" within the meaning of Rule 17A(d)-15 under the Exchange Act unless the outstanding notes surrendered for exchange are tendered:

        If the letter of transmittal is signed by a person other than the registered holder of any outstanding notes listed on the outstanding notes, such outstanding notes must be endorsed or accompanied by a properly completed bond power. The bond power must be signed by the registered holder as the registered holder's name appears on the outstanding notes and an Eligible Guarantor Institution must guarantee the signature on the bond power.

        If the letter of transmittal or any certificates representing outstanding notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, those persons should also indicate when signing and, unless waived by us, they should also submit evidence satisfactory to us of their authority to so act.

        The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC's system may use DTC's Automated Tender Offer Program to tender. Participants in the program may, instead of physically completing and signing the letter of transmittal and delivering it to the exchange, electronically transmit their acceptance of the exchange by causing DTC to transfer the outstanding notes to the exchange agent in accordance with DTC's Automated Tender Offer Program procedures for transfer. DTC will then send an agent's message to the exchange agent. The term

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"agent's message" means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, that states that:

Book-entry Delivery Procedures

        Promptly after the date of this prospectus, the exchange agent will establish an account with respect to the outstanding notes at DTC as the book-entry transfer facility, for purposes of the exchange offer. Any financial institution that is a participant in the book-entry transfer facility's system may make book-entry delivery of the outstanding notes by causing the book-entry transfer facility to transfer those outstanding notes into the exchange agent's account at the facility in accordance with the facility's procedures for such transfer. To be timely, book-entry delivery of outstanding notes requires receipt of a confirmation of a book-entry transfer, a "book-entry confirmation," prior to the expiration date. In addition, although delivery of outstanding notes may be effected through book-entry transfer into the exchange agent's account at the applicable book-entry transfer facility, the applicable letter of transmittal or a manually signed facsimile thereof, together with any required signature guarantees and any other required documents, or an "agent's message," as defined above, in connection with a book-entry transfer, must, in any case, be delivered or transmitted to and received by the exchange agent at its address set forth on the cover page of the applicable letter of transmittal prior to the expiration date to receive exchange notes for tendered outstanding notes, or the guaranteed delivery procedure described below must be complied with. Tender will not be deemed made until such documents are received by the exchange agent. Delivery of documents to the applicable book-entry transfer facility does not constitute delivery to the exchange agent.

Guaranteed Delivery Procedures

        If you wish to tender your outstanding notes but your outstanding notes are not immediately available or you cannot deliver your outstanding notes, the letter of transmittal or any other required documents to the exchange agent or comply with the applicable procedures under DTC's Automatic Tender Offer Program prior to the expiration date, you may still tender if:

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        Upon request, the exchange agent will send to you a notice of guaranteed delivery if you wish to tender your notes according to the guaranteed delivery procedures.

Withdrawal Rights

        Except as otherwise provided in this prospectus, you may withdraw your tender of outstanding notes at any time prior to 12:00 a.m. midnight, New York City time, on the expiration date.

        For a withdrawal to be effective:

        Any notice of withdrawal must:

        If certificates for outstanding notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of such certificates, you must also submit:

        If outstanding notes have been tendered pursuant to the procedures for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn outstanding notes and otherwise comply with the procedures of the facility. We will determine all questions as to the validity, form, and eligibility, including time of receipt of notices of withdrawal and our determination will be final and binding on all parties. Any outstanding notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any outstanding notes that have been tendered for exchange but that are not exchanged for any reason will be returned to their holder, without cost to the holder, or, in the case of book-entry transfer, the outstanding notes will be credited to an account at the book-entry transfer facility, promptly after withdrawal, rejection of tender or termination of the applicable exchange offer. Properly withdrawn outstanding notes may be retendered by following the procedures described under "—Procedures for Tendering Outstanding Notes" above at any time on or prior to the expiration date.

Exchange Agent

        The Bank of New York has been appointed as the exchange agent for the exchange offer. The Bank of New York also acts as trustee under the indentures governing the notes. You should direct all executed letters of transmittal and all questions and requests for assistance, requests for additional

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copies of this prospectus or of the letters of transmittal, and requests for notices of guaranteed delivery to the exchange agent addressed as follows:

By Registered or Certified Mail:   By Facsimile Transmission:   By Overnight Courier or Hand Delivery:
The Bank of New York
101 Barclay Street
Reorganization Unit—Floor 7E
(                                                 )
New York, NY 10286
Telephone: 212-815-6331
  212-298-1915

To Confirm by Telephone:
212-815-6331
  The Bank of New York
101 Barclay Street
Reorganization Unit—Floor 7E
(                                                 )
New York, NY 10286
Telephone: 212-815-6331

        If you deliver the letter of transmittal to an address other than the one set forth above or transmit instructions via facsimile other than the one set forth above, that delivery or those instructions will not be effective.

Fees and Expenses

        The registration rights agreement provides that we will bear all expenses in connection with the performance of our obligations relating to the registration of the exchange notes and the conduct of the exchange offer. These expenses include registration and filing fees, accounting and legal fees and printing costs, among others. We will pay the exchange agent reasonable and customary fees for its services and reasonable out-of-pocket expenses. We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for customary mailing and handling expenses incurred by them in forwarding this prospectus and related documents to their clients that are holders of outstanding notes and for handling or tendering for such clients.

        We have not retained any dealer-manager in connection with the exchange offer and will not pay any fee or commission to any broker, dealer, nominee or other person, other than the exchange agent, for soliciting tenders of outstanding notes pursuant to the exchange offer.

Accounting Treatment

        We will record the exchange notes in our accounting records at the same carrying value as the outstanding notes, which is the aggregate principal amount as reflected in our accounting records on the date of exchanges. Accordingly, we will not recognize any gain or loss for accounting purposes upon the consummation of the exchange offer. We will record the expenses of the exchange offer as incurred.

Transfer Taxes

        We will pay all transfer taxes, if any, applicable to the exchanges of outstanding notes under the exchange offer. The tendering holder, however, will be required to pay any transfer taxes, whether imposed on the registered holder or any other person, if:

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        If satisfactory evidence of payment of such taxes is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed to that tendering holder.

        Holders who tender their outstanding notes for exchange will not be required to pay any transfer taxes. However, holders who instruct us to register exchange notes in the name of, or request that outstanding notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder will be required to pay any applicable transfer tax.

Consequences of Failure to Exchange

        If you do not exchange your outstanding notes for exchange notes under the exchange offer, your outstanding notes will remain subject to the restrictions on transfer of such outstanding notes as set forth in the legend printed on the outstanding notes as a consequence of the issuance of the outstanding notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws.

        In general, you may not offer or sell your outstanding notes unless they are registered under the Securities Act or if the offer or sale is exempt from registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the outstanding notes under the Securities Act.

Other

        Participating in the exchange offer is voluntary, and you should carefully consider whether to accept. You are urged to consult your financial and tax advisors in making your own decision on what action to take.

        We may in the future seek to acquire untendered outstanding notes in open market or privately negotiated transactions, through subsequent exchange offer or otherwise. We have no present plans to acquire any outstanding notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any untendered outstanding notes.

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DESCRIPTION OF NOTES

General

        Certain terms used in this description are defined under the subheading "—Certain Definitions." In this description, (i) the term "Masonite International", the "Company", "we", "our" and "us" refer to Masonite International Inc. and its consolidated Subsidiaries; (ii) the term "Parent" refers only to Masonite International Inc. and not any of its Subsidiaries nor its parent company, (iii) the term "Masonite U.S." refers only to Masonite U.S. Corporation and not any of its Subsidiaries nor its parent company, (iv) the term "Masonite Canada" refers only to Masonite International Corporation and not any of its Subsidiaries nor its parent company and (v) the term "Issuer" and "Issuers" refers only to Masonite U.S. and/or Masonite Canada, as the case may be, and not any of their respective Subsidiaries nor their parent company. Each Issuer is a direct Wholly-Owned Subsidiary of Parent.

        Each Issuer issued outstanding Notes and will issue the exchange notes (collectively, the "Notes") under separate indentures each dated October 6, 2006 (the "Indentures") among the applicable Issuer, Parent, the Guarantors and The Bank of New York, as trustee (the "Trustee"). Except as set forth herein, the terms of each series of the Notes will be substantially identical and include those stated in the applicable Indenture and those made part of the applicable Indenture by reference to the Trust Indenture Act. The term "Guarantor" refers to any guarantor of the Notes, except for Parent and the non-issuing Issuer. The term "Securities" refers to both series of the Notes.

        Masonite U.S. will exchange up to $412.0 million of Notes in this prospectus. Masonite Canada will exchange up to $358.0 million of Notes in this prospectus. Each series of notes will mature on April 6, 2015. Subject to compliance with the covenant described below under the caption "Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock", each Issuer may issue additional Notes of its respective series from time to time after this exchange offer under the applicable Indenture ("Additional Notes"). The series of Notes offered by each Issuer and any Additional Notes of the same series subsequently issued under the applicable Indenture will be treated as a single class for all purposes under such Indenture, including waivers, amendments, redemptions and offers to purchase. Unless the context requires otherwise, references to "Notes" for all purposes of the Indentures and this "Description of Notes" include any Additional Notes that are actually issued.

        The following description is only a summary of the material provisions of the Indentures, does not purport to be complete and is qualified in its entirety by reference to the provisions of those agreements, including the definitions therein of certain terms used below. We urge you to read the Indentures because they, not this description, define your rights as holders of these Notes. You may request copies of these agreements at our address set forth under the heading "Prospectus Summary."

Brief Description of Notes

        The Notes:

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Guarantees

        Parent, the non-issuing Issuer and the Guarantors, as primary obligors and not merely as sureties, will jointly and severally, irrevocably and unconditionally guarantee, on an unsecured senior subordinated basis, the performance and full and punctual payment when due, whether at maturity, by acceleration or otherwise, of all obligations of the issuing Issuer under its respective Indenture and the series of Notes issued by that Issuer, whether for payment of principal of or interest on or Additional Interest in respect of the Securities, expenses, indemnification or otherwise, on the terms set forth in the Indentures.

        With respect to each series of Notes, as of the date of the Indentures, Parent, the non-issuing Issuer and the Restricted Subsidiaries (other than as detailed below) will guarantee the Notes. Each of the Guarantees of the Notes will be a general unsecured obligation of each of Parent, the non-issuing Issuer and each Guarantor and will be subordinated in right of payment to all existing and future Senior Indebtedness of each such entity. The Notes will be structurally subordinated to Indebtedness of Subsidiaries of each Issuer that do not Guarantee the Notes.

        Not all of the Issuers' Subsidiaries will guarantee the Notes. In the event of a bankruptcy, liquidation or reorganization of any of these non-guarantor Subsidiaries, the non-guarantor Subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to the Issuers.

        The obligations of each of Parent, the non-issuing Issuer and each Guarantor under their respective Guarantees will be limited as necessary to prevent that Guarantee from constituting a fraudulent conveyance under applicable law. See "Risk Factors—Risks Relating to Our Indebtedness and the Notes—U.S. federal and state and Canadian federal and provincial laws allow courts, under specific circumstances, to void the guarantees, subordinate claims in respect of the guarantees and require note holders to return payments received from guarantors".

        Any entity that makes a payment under its Guarantee will be entitled upon payment in full of all guaranteed obligations under the applicable Indenture to a contribution from each other guarantor in an amount equal to such other guarantor's pro rata portion of such payment based on the respective net assets of all the guarantors at the time of such payment.

        If a Guarantee was rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the guarantor, and, depending on the amount of such indebtedness, a guarantor's liability on its Guarantee could be reduced to zero. See "Risk Factors—Risks Relating to Our Indebtedness and the Notes—U.S. federal and state and Canadian federal and provincial laws allow courts, under specific circumstances, to void the guarantees, subordinate claims in respect of the guarantees and require note holders to return payments received from guarantors."

        Any Guarantee will be automatically and unconditionally released and discharged upon:

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Ranking

Senior Indebtedness versus Notes

        The payment of the principal of, premium, if any, and interest on the Notes and the payment of any related Guarantee will be subordinate in right of payment to the prior payment in cash in full of all Senior Indebtedness of the applicable Issuer or the relevant guarantor, as the case may be, including the obligations of such Issuer and such guarantor under the Senior Credit Facilities.

        As of December 31, 2006, (1) the Notes and related Guarantees ranked junior to approximately $1,197.4 million of senior indebtedness under our Senior Credit Facilities, and (2) we had an additional $307.0 million of unutilized capacity under our senior revolving credit facility (excluding $8.2 million of outstanding undrawn letters of credit). In addition, the Notes were structurally subordinated to $48.9 million of senior indebtedness incurred by our non-guarantor subsidiaries.

        Although the Indentures contain limitations on the amount of additional Indebtedness that the Parent, the Issuers and the Guarantors may incur, under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Senior Indebtedness. See "—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock."

Liabilities of Subsidiaries versus Notes

        A substantial portion of our operations are conducted through our Subsidiaries. Some of our Subsidiaries are not Guaranteeing the Notes, and, as described above under "Guarantees", Guarantees may be released under certain circumstances. In addition, our future Subsidiaries may not be required to Guarantee the Notes. Claims of creditors of any non-guarantor Subsidiaries, including trade creditors and creditors holding indebtedness or Guarantees issued by such non-guarantor Subsidiaries, and claims of preferred stockholders of such non-guarantor Subsidiaries generally will have priority with respect to the assets and earnings of such non-guarantor Subsidiaries over the claims of our creditors, including holders of the Notes. Accordingly, the Notes will be effectively subordinated to creditors (including trade creditors) and preferred stockholders, if any, of such non-guarantor Subsidiaries.

        Although the Indentures limit the incurrence of Indebtedness and preferred stock by certain of our Subsidiaries, such limitation is subject to a number of significant exceptions and qualifications and the Indebtedness incurred in compliance with the covenants could be substantial. Moreover, the Indentures do not impose any limitation on the incurrence by such Subsidiaries of liabilities that are not considered Indebtedness under the Indentures. See "—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock."

Subordination of the Notes

        Only Indebtedness of Parent, an Issuer or a Guarantor that is Senior Indebtedness will rank senior to the Notes and the relevant Guarantee in accordance with the provisions of the applicable Indentures. Each series of Notes and each applicable Guarantee will in all respects rank pari passu with

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all other Senior Subordinated Indebtedness of Parent, the Issuers and the relevant Guarantor, respectively.

        We have agreed in the Indentures that Parent, the Issuers and the Guarantors will not incur any Indebtedness that is subordinate or junior in right of payment to the Senior Indebtedness of such Person, unless such Indebtedness is Senior Subordinated Indebtedness of the applicable Person or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Person. The Indentures do not treat (i) unsecured Indebtedness as subordinated or junior to Secured Indebtedness merely because it is unsecured or (ii) Senior Indebtedness as subordinated or junior to any other Senior Indebtedness merely because it has a junior priority with respect to the same collateral.

        Neither Issuer nor Parent nor any Guarantor is permitted to pay principal of, premium, if any, or interest on the Notes (or pay any other obligations relating to the Notes, including Additional Interest, fees, costs, expenses, indemnities and rescission or damage claims) or make any deposit pursuant to the provisions described under "Legal Defeasance and Covenant Defeasance" or "Satisfaction and Discharge" below and may not purchase, redeem or otherwise retire any Notes (collectively, "pay the notes") (except in the form of Permitted Junior Securities) if either of the following occurs (a "Payment Default"):

unless, in either case, the Payment Default has been cured or waived and any such acceleration has been rescinded or such Designated Senior Indebtedness has been paid in full in cash. Regardless of the foregoing, the applicable Issuer is permitted to pay the Notes if the applicable Issuer and the Trustee receive written notice approving such payment from the Representatives of all Designated Senior Indebtedness with respect to which the Payment Default has occurred and is continuing.

        During the continuance of any default (other than a Payment Default) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the applicable Issuer is not permitted to pay the Notes (except in the form of Permitted Junior Securities) for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to the applicable Issuer) of written notice (a "Blockage Notice") of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter. The Payment Blockage Period will end earlier if such Payment Blockage Period is terminated:

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        Notwithstanding the provisions described above, unless the holders of such Designated Senior Indebtedness or the Representative of such Designated Senior Indebtedness have accelerated the maturity of such Designated Senior Indebtedness, the applicable Issuer and related guarantors are permitted to resume paying the Notes after the end of such Payment Blockage Period. The Notes shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period; provided that if any Payment Blockage Notice is delivered to the Trustee by or on behalf of the holders of Designated Senior Indebtedness of the applicable Issuer (other than the holders of Indebtedness under the Senior Credit Facilities), a Representative of holders of Indebtedness under the Senior Credit Facilities may give another Payment Blockage Notice within such period. However, in no event may the total number of days during which any Payment Blockage Period or Periods on the Notes is in effect exceed 179 days in the aggregate during any consecutive 360-day period, and there must be at least 181 days during any consecutive 360-day period during which no Payment Blockage Period is in effect. Notwithstanding the foregoing, however, no Default that existed or was continuing on the date of delivery of any Blockage Notice to the Trustee will be, or be made, the basis for a subsequent Blockage Notice unless such default has been waived for a period of not less than 90 days (it being acknowledged that any subsequent action, or any breach of any financial covenants during the period after the date of delivery of a Payment Blockage Notice, that, in either case, would give rise to a Non-Payment Default pursuant to any provisions under which a Non-Payment Default previously existed or was continuing shall constitute a new Non-Payment Default for this purpose).

        In connection with the Notes, any payment or distribution of the assets of the Issuer upon a total or partial liquidation or dissolution or reorganization of or similar proceeding relating to the Issuer or its property:

        The subordination and payment blockage provisions described above will not prevent a Default from occurring under the Indentures upon the failure of an Issuer to pay interest or principal with respect to the Notes when due by their terms. If payment of the Notes is accelerated because of an Event of Default, the applicable Issuer or the Trustee must promptly notify the holders of Designated Senior Indebtedness or the Representative of such Designated Senior Indebtedness of the acceleration. So long as there shall remain outstanding any Senior Indebtedness under the Senior Credit Facilities, a Blockage Notice may be given only by the administrative agent thereunder unless otherwise agreed to in writing by the requisite lenders named therein. If any Designated Senior Indebtedness of the Issuers is outstanding, none of the Issuers or any guarantor may pay the Notes until two Business Days after the Representatives of all the issuers of such Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Notes only if the Indentures otherwise permit payment at that time.

        Each guarantor's obligations under its Guarantee relating to the Notes are senior subordinated obligations of that guarantor. As such, the rights of holders to receive payment pursuant to such Guarantee will be subordinated in right of payment to the rights of holders of Senior Indebtedness of

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such guarantor. The terms of the subordination and payment blockage provisions described above with respect to the Issuers' obligations under the Notes apply equally to the obligations of such guarantor under its Guarantee.

        A holder by its acceptance of Notes agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on its behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indentures and appoints the Trustee its attorney-in-fact for such purpose.

        By reason of the subordination provisions contained in the Indentures, in the event of a liquidation or insolvency proceeding, creditors of Parent, the Issuers or a Guarantor who are holders of Senior Indebtedness of Parent, the Issuers or such Guarantor, as the case may be, may recover more, ratably, than the holders of the Notes, and creditors who are not holders of Senior Indebtedness may recover less, ratably, than holders of Senior Indebtedness and may recover more, ratably, than the holders of the Notes.

        The terms of the subordination provisions described above will not apply to payments from money or the proceeds of U.S. government obligations held in trust by the Trustee for the payment of principal of and interest on the Notes pursuant to the provisions described under "Legal Defeasance and Covenant Defeasance" or "Satisfaction and Discharge", if the foregoing subordination provisions were not violated at the time the applicable amounts were deposited in trust pursuant to such provisions.

Interest

        Interest on each series of Notes will accrue at the rate of 11% per annum and will be payable semi-annually in arrears on April 15 and October 15 to Holders of record on the immediately preceding April 1 and October 1. Interest on each series of Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance of the Notes. Interest on each series of Notes will be computed on the basis of a 360-day year comprised of twelve 30-day months.

        Pursuant to the Exchange and Registration Rights Agreement, as the exchange offer was not consummated by April 4, 2007, additional interest began to accrue as of April 5, 2007 in an amount equal to $.05 per week per $1,000 principal amount of outstanding notes for a period of 90 days. The amount of additional interest shall increase by an additional $.05 per week per $1,000 principal amount of outstanding notes with respect to each subsequent 90-day period for which the exchange offer is not consummated, provided that the additional interest in the aggregate shall not exceed $.20 per week per $1,000 principal amount of outstanding notes. Notwithstanding the foregoing, the interest rate borne by the Notes shall not exceed 11.0% per annum, except as otherwise specified in the indentures governing the notes. To the extent the interest rate borne by the outstanding notes exceeds 11.0% per annum, we may elect to pay such excess interest through the issuance of additional notes, as provided in the Indentures. Additional interest will cease to accrue once the exchange offer is consummated.

        All references in the Indentures, in any context, to any interest or other amount payable on or with respect to the Securities shall be deemed to include any Additional Interest pursuant to the Registration Rights Agreement. Principal of, premium, if any, and interest on each series of Notes will be payable at the office or agency of the Issuers maintained for such purpose within the City and State of New York or, at the option of the Issuers, payment of interest may be made by check mailed to the holders of each series of Notes at their respective addresses set forth in the register of holders; provided that all payments of principal, premium, if any, and interest with respect to each series of Notes represented by one or more global notes registered in the name of or held by DTC or its nominee will be made by wire transfer of immediately available funds to the accounts specified by the Holder or Holders thereof. Until otherwise designated by the Issuers, the Issuers' office or agency in New York will be the office of the Trustee maintained for such purpose.

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Mandatory Redemption; Offers to Purchase; Open Market Purchases

        The Issuers are not required to make any mandatory redemption or sinking fund payments with respect to the Notes. However, under certain circumstances, the Issuers may be required to offer to purchase Notes as described under the caption "Offer to Purchase." We may at any time and from time to time purchase Notes in the open market or otherwise.

Optional Redemption

        Except as set forth below or under "—Redemption for Changes in Withholding Taxes", the applicable Issuer will not be entitled to redeem the Notes issued by it. The Issuer shall not offer to redeem the Notes unless the Non-Issuing Issuer concurrently offers to redeem a pro rata amount of its Notes and unless the Issuer and the Non-Issuing Issuer concurrently offers to prepay a pro rata amount of its then outstanding Senior Subordinated Term Loans.

        At any time prior to April 6, 2010, we may redeem all or a part of the Notes, upon not less than 30 nor more than 60 days' prior notice mailed by first-class mail to each Holder's registered address, at a redemption price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to the redemption date, subject to the rights of Holders on the relevant record date to receive interest due on the relevant Interest Payment Date.

        On and after April 6, 2010, we may redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' prior notice by first class mail, postage prepaid, with a copy to the Trustee, to each Holder of Notes to the address of such Holder appearing in the note register at par plus accrued interest plus a premium equal to one half of the coupon on such Notes, which premium shall decline ratably on each subsequent April 6 of a calendar year to zero on April 6, 2014.

        In addition, until April 6, 2008, we may, at our option, redeem up to 35% of the aggregate principal amount of the Notes issued at a redemption price equal to par plus the coupon on such Notes, subject to the right of holders of record on the relevant record date to receive interest due on the relevant Interest Payment Date, with the net cash proceeds of one or more Equity Offerings of the Issuer or any direct or indirect parent of the Issuer to the extent such net cash proceeds are contributed to the Issuer; provided that at least 65% of the sum of the aggregate principal amount of Notes originally issued and any Additional Notes remains outstanding immediately after the occurrence of each such redemption, provided further that each such redemption occurs within 90 days of the date of closing of each Equity Offering.

        The Trustee shall select the Notes to be purchased in the manner described under "Offer to Purchase—Asset Sales—Selection and Notice."

Additional Amounts

        The Indentures provide that if Masonite Canada is required to make any withholding or deduction for or on account of any Canadian taxes from any payment made under or with respect to its Notes, Masonite Canada will pay such additional amounts ("Additional Amounts") as may be necessary so that the net amount received by each Holder of such Notes (including Additional Amounts) will not be less than the amount the Holder would have received had such Canadian taxes not been withheld or deducted; provided that no Additional Amounts will be payable with respect to a payment made to a Holder or beneficial owner of such Notes to the extent that Canadian taxes are imposed or levied in respect of the payment: (a) due to the fact that Masonite Canada does not deal at arm's length (within the meaning set out in the Income Tax Act (Canada)) with the Holder or beneficial owner at the time of making such payment; (b) by reason of the Holder or beneficial owner being a citizen or resident of Canada, carrying on business (or having a permanent establishment) in Canada, or otherwise having a present or former connection with Canada otherwise than by the mere holding of such Notes or the receipt of payments thereunder; or (c) because the Holder or beneficial owner failed to duly and timely

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comply with a reasonable request by Masonite Canada to provide accurate information, documents or other evidence concerning such Holder or beneficial owner's nationality, residence, identity or connection with Canada if and to the extent that due and timely compliance with the request would have reduced or eliminated any Canadian taxes as to which Additional Amounts would have otherwise been payable to such Holder or beneficial owner but for this paragraph.

        In addition, Masonite Canada's obligation to pay Additional Amounts will not apply with respect to,

(a)
any estate, inheritance, gift, sales, transfer, personal property or similar Canadian taxes,

(b)
any Canadian tax which is payable otherwise than by deduction or withholding from payments made under or with respect to its Notes,

(c)
Canadian taxes imposed on or with respect to any payment by Masonite Canada to the Holder if such Holder is a fiduciary or partnership or person other than the sole beneficial owner of such payment to the extent that Canadian taxes would not have been imposed on such Holder had such Holder been the sole beneficial owner of such Notes, or

(d)
any combination of the above.

        Such Additional Amounts will also not be payable where, had the beneficial owner of the Note been the Holder, it would not have been entitled to payment of Additional Amounts by reason of clauses (a) through (d) above.

Redemption for Changes in Withholding Taxes

        Each Issuer (including any successor entity to our obligations under the Notes) is entitled to redeem Notes issued by it, at its option, at any time as a whole but not in part, upon not less than 30 nor more than 60 days' notice, at 100% of the principal amount thereof, plus accrued and unpaid interest (if any) to the date of redemption (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), in the event that Masonite Canada or any successor entity has become or would become obligated to pay, on the next date on which any amount would be payable with respect to such Notes issued by it, any Additional Amounts with respect to such Notes as a result of:

        Such redemption shall also be permitted if we determine that, as a result of any action taken by any legislative body of, taxing authority of, or any action brought in a court of competent jurisdiction, in a Relevant Taxing Jurisdiction, which action is taken or brought on or after April 6, 2005 (or, in the case of a successor entity, after the date of the entity's assumption of our obligations), there is a substantial probability that we would be required to pay Additional Amounts.

        Before any Issuer (or the successor entity) publishes or mails notice of redemption of any Notes issued by it as described above, such Issuer (or the successor entity) will deliver to the Trustee an Officers' Certificate to the effect that such Issuer (or the successor entity) cannot avoid its obligation to pay Additional Amounts by taking reasonable measures available to it. Such Issuer (or the successor entity) will also deliver an opinion of independent legal counsel or auditors of recognized standing stating that such Issuer (or the successor entity) would be entitled to exercise its right of redemption hereunder.

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Offer to Purchase

        Each series of Notes provides that if a Change of Control occurs, the Issuer of such series of Notes will make an offer to purchase all of the Notes of such series pursuant to the offer described below (the "Change of Control Offer") at a price in cash (the "Change of Control Payment") equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date. Within 30 days following any Change of Control, the applicable Issuer will send notice of such Change of Control Offer by first class mail, with a copy to the Trustee, to each Holder of Notes to the address of such Holder appearing in the security register with a copy to the Trustee, with the following information:

        While the Notes are in global form and an Issuer makes an offer to purchase all of the Notes pursuant to the Change of Control Offer, a Holder may exercise its option to elect for the purchase of the Notes through the facilities of DTC, subject to its rules and regulations.

        The Issuers will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indentures, the

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Issuers will comply with the applicable securities laws and regulations and shall not be deemed to have breached their obligations described in the Indentures by virtue thereof.

        On the Change of Control Payment Date, the applicable Issuer will, to the extent permitted by law,

        The Senior Credit Facilities limit, and future credit agreements or other agreements relating to Senior Indebtedness to which the Issuers become a party may prohibit or limit, the Issuers from purchasing any Notes as a result of a Change of Control. In the event a Change of Control occurs at a time when an Issuer is prohibited from purchasing the Notes, the applicable Issuer could seek the consent of its lenders and the Holders of the Notes to permit the purchase of the Notes or could attempt to refinance the borrowings that contain such prohibition. If the applicable Issuer does not obtain such consent or repay such borrowings, such Issuer will remain prohibited from purchasing the Notes. In such case, such Issuer's failure to purchase tendered Notes would constitute an Event of Default under the relevant Indenture. If, as a result thereof, a default occurs with respect to any Senior Indebtedness, the subordination provisions in the relevant Indenture would restrict payments to the Holders under certain circumstances.

        The Senior Credit Facilities provide that certain change of control events with respect to the Issuers would constitute a default thereunder (including a Change of Control under the Indentures). If we experience a change of control that triggers a default under our Senior Credit Facilities, we could seek a waiver of such default or seek to refinance our Senior Credit Facilities. In the event we do not obtain such a waiver or refinance the Senior Credit Facilities, such default could result in amounts outstanding under our Senior Credit Facilities being declared due and payable. Our ability to pay cash to the Holders of Notes following the occurrence of a Change of Control may be limited by our then existing financial resources. Therefore, sufficient funds may not be available when necessary to make any required repurchases.

        The paying agent will promptly mail to each Holder of the Notes the Change of Control Payment for the Notes, and the Trustee will promptly authenticate and deposit with DTC a new Global Note adjusted to reflect the unpurchased portion of the Notes surrendered, if any. The applicable Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

        The Change of Control purchase feature of the Notes may in certain circumstances make more difficult or discourage a sale or takeover of us and, thus, the removal of incumbent management. We have no present intention to engage in a transaction involving a Change of Control, although it is possible that we could decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indentures, but that could increase the amount of indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to incur additional Indebtedness are contained in the covenants described under "Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock" and "Liens." Such restrictions can be waived only with the consent of the Holders of a majority in principal amount of the applicable series of Notes then outstanding.

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Except for the limitations contained in such covenants, however, the Indentures will not contain any covenants or provisions that may afford Holders of the Notes protection in the event of a highly leveraged transaction.

        We will not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indentures applicable to a Change of Control Offer made by us and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. Notwithstanding anything to the contrary herein, a Change of Control Offer may be made in advance of a Change of Control, conditional upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.

        The definition of "Change of Control" includes a disposition of all or substantially all of the assets of an Issuer to any Person. Although there is a limited body of case law interpreting the phrase "substantially all", there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of "all or substantially all" of the assets of the Issuer. As a result, it may be unclear as to whether a Change of Control has occurred and whether a Holder of Notes may require the Issuer to make an offer to repurchase the Notes as described above.

        The provisions under the Indentures relative to the Issuers' obligation to make an offer to repurchase the Notes as a result of a Change of Control may be waived or modified with the written consent of the Holders of a majority in principal amount of the applicable series of Notes.

        The Indentures provide that the Parent and each Issuer will not, and will not permit any Restricted Subsidiary controlled by it to, cause, make or suffer to exist an Asset Sale, unless

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        shall be deemed to be cash for purposes of this provision and for no other purpose.

        Within 365 days after the receipt of any Net Proceeds of any Asset Sale, Parent, such Issuer or such Restricted Subsidiary, at its option, may apply the Net Proceeds from such Asset Sale.

provided, that in the case of clauses (2) and (3) above, a binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment so long as the Parent or applicable Issuer or such other Restricted Subsidiary enters into such commitment with the good faith expectation that such Net Proceeds will be applied to satisfy such commitment (an "Acceptable Commitment") and, in the event any Acceptable Commitment is later canceled or terminated for any reason before such Net Proceeds are so applied, the applicable Issuer or such other Restricted Subsidiary enters into another Acceptable Commitment within nine months of such cancellation or termination.

        Any Net Proceeds from the Asset Sale that are not invested or applied as provided and within the time period set forth in the preceding paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $20.0 million, the applicable Issuer (or, in the case of an Asset Sale by Parent, the Issuer designated by Parent) shall make an offer to all Holders of the Notes issued by it and the Notes of the other Issuer, and, if required by the terms of any Indebtedness that is pari passu with the Notes ("Pari Passu Indebtedness"), to the holders of such Pari Passu Indebtedness (an "Asset Sale Offer"), to purchase the maximum aggregate principal amount of Notes issued by it, the Notes of the other Issuer and such Pari Passu Indebtedness, that is an integral multiple of $1,000 that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional

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Interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indentures. The applicable Issuer will commence an Asset Sale Offer with respect to Excess Proceeds within ten business days after the date that Excess Proceeds exceeds $20.0 million by mailing the notice required pursuant to the terms of the Indentures, with a copy to the Trustee.

        To the extent that the aggregate amount of Notes and such Pari Passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the applicable Issuer may use any remaining Excess Proceeds for general corporate purposes, subject to other covenants contained in the applicable Indenture. If the aggregate principal amount of Notes or the Pari Passu Indebtedness surrendered by such holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such Pari Passu Indebtedness to be purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Pari Passu Indebtedness tendered. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.

        Pending the final application of any Net Proceeds pursuant to this covenant, the holder of such Net Proceeds may apply such Net Proceeds temporarily to reduce Indebtedness outstanding under a revolving credit facility or otherwise invest such Net Proceeds in any manner not prohibited by the Indentures.

        The Issuers will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indentures, the Issuers will comply with the applicable securities laws and regulations and shall not be deemed to have breached their obligations described in the Indentures by virtue thereof.

        The Senior Credit Facilities limit, and future credit agreements or other agreements relating to Senior Indebtedness to which either Issuer becomes a party may prohibit or limit, the Issuers from purchasing any Notes pursuant to this Asset Sales covenant. In the event either Issuer is prohibited from purchasing the Notes, the Issuer could seek the consent of its lenders or could attempt to refinance the borrowings that contain such prohibition. If such Issuer does not obtain such consent or repay such borrowings, it will remain prohibited from purchasing the Notes. In such case, such Issuer's failure to purchase tendered Notes would constitute an Event of Default under the Indentures. If, as a result thereof, a default occurs with respect to any Senior Indebtedness, the subordination provisions in the Indentures would restrict payments to the Holders of the Notes under certain circumstances.

        If any Issuer is redeeming less than all of the Notes or such Senior Subordinated Indebtedness of the Issuer are to be redeemed at any time, the Trustee will select the Notes to be redeemed on a pro rata basis to the extent practicable, provided that no Notes of $1,000 or less shall be purchased or redeemed in part.

        Notices of purchase or redemption shall be mailed by first class mail, postage prepaid, at least 30 but not more than 60 days before the purchase or redemption date to each Holder of Notes to be purchased or redeemed at such Holder's registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of the Indentures. If any Note is to be purchased or redeemed in part only, any notice of purchase or redemption that relates to such Note shall state the portion of the principal amount thereof that has been or is to be purchased or redeemed.

        A new Note in principal amount equal to be unredeemed portion of any Note redeemed in part will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the redemption date, interest ceases to accrue on Notes or portions thereof called for redemption.

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Certain Covenants

        Set forth below are summaries of certain covenants contained in the Indentures. During any period of time that: (i) the series of Notes have Investment Grade Ratings from both Rating Agencies and (ii) no Default or Event of Default has occurred and is continuing (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a "Covenant Suspension Event"), Parent and its Restricted Subsidiaries will not be subject to the following provisions of the applicable Indenture:

(collectively, the "Suspended Covenants"). Upon the occurrence of a Covenant Suspension Event, the amount of Excess Proceeds from Net Proceeds shall be set at zero. In addition, the guarantees will also be suspended as of such date (the "Suspension Date"). In the event that Parent and its Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the foregoing, and on any subsequent date (the "Reversion Date") one or both of the Rating Agencies withdraws its Investment Grade Rating or downgrades the rating assigned to the Notes below an Investment Grade Rating or a Default or Event of Default occurs and is continuing, then Parent and its Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants with respect to future events and the Guarantees will be reinstated. The period of time between the Suspension Date and the Reversion Date is referred to in this description as the "Suspension Period." Notwithstanding that the Suspended Covenants may be reinstated, no Default or Event of Default will be deemed to have occurred as a result of a failure to comply with the Suspended Covenants during the Suspension Period (or upon termination of the Suspension Period or after that time based solely on events that occurred during the Suspension Period).

        On the Reversion Date, all Indebtedness incurred, or Disqualified Stock issued, during the Suspension Period will be classified to have been incurred or issued pursuant to the first paragraph of "—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock" below or one of the clauses set forth in the second paragraph of "—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock" below (in each case, to the extent such Indebtedness or Disqualified Stock would be permitted to be incurred or issued thereunder as of the Reversion Date and after giving effect to Indebtedness incurred or issued prior to the Suspension Period and outstanding on the Reversion Date). To the extent such Indebtedness or Disqualified Stock would not be so permitted to be incurred or issued pursuant to the first or second paragraph of "—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock", such Indebtedness or Disqualified Stock will be deemed to have been outstanding on the Issue Date, so that it is classified as permitted under clause (3) of the second paragraph of "—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock." Calculations made after the Reversion Date of the amount available to be made as Restricted Payments under "—Limitation on Restricted Payments" will be made as though the covenant described under "—Limitation on Restricted Payments" had been in effect since April 6, 2005 and throughout the Suspension Period. Accordingly, Restricted Payments made during the Suspension Period will

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reduce the amount available to be made as Restricted Payments under the first paragraph of "—Limitation on Restricted Payments."

        Parent will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:

(all such payments and other actions set forth in clauses (1) through (4) above being collectively referred to as "Restricted Payments"), unless, at the time of such Restricted Payment:

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The foregoing provisions will not prohibit:

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124


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        As of the time of issuance of the Notes, all of Parent's Subsidiaries will be Restricted Subsidiaries. Parent will not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the last sentence of the definition of "Unrestricted Subsidiary." For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by Parent and its Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated will be deemed to be Restricted Payments in an amount determined as set forth in the last sentence of the definition of "Investment." Such designation will be permitted only if a Restricted Payment in such amount would be permitted at such time, whether pursuant to the first paragraph of this covenant or under clauses (7), (10) or (11) of the second paragraph of this covenant, or pursuant to the definition of "Permitted Investments," and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries will not be subject to any of the restrictive covenants set forth in the Indentures.

        Parent will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise (collectively, "incur" and collectively, an "incurrence") with respect to any Indebtedness (including Acquired Indebtedness, which Parent or the Restricted Subsidiaries can elect to be incurred as additional Indebtedness under the Senior Credit Facilities) and Parent will not issue any shares of Disqualified Stock and will not permit any Restricted Subsidiary to issue any shares of Disqualified Stock or preferred stock; provided, however, that Parent may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock, and any Restricted Subsidiary may incur Indebtedness (including Acquired Indebtedness), issue shares of Disqualified Stock and issue shares of preferred stock, if the Fixed Charge Coverage Ratio on a consolidated basis for Parent's and the Restricted Subsidiaries' most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or preferred stock is issued would have been at least 2.00 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or preferred stock had been issued, as the case may be, and the application of proceeds therefrom had occurred at the beginning of such four-quarter period; provided that the amount of Indebtedness (other than Acquired Indebtedness), Disqualified Stock and preferred stock that may be incurred pursuant to the foregoing by Restricted Subsidiaries that are not Issuers or Guarantors of the Notes shall not exceed $150 million at any one time outstanding.

        The foregoing limitations will not apply to:

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128


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        For purposes of determining compliance with this covenant:

Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness, Disqualified Stock or preferred stock will not be deemed to be an incurrence of Indebtedness, Disqualified Stock or preferred stock for purposes of this covenant.

        For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt; provided that if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced.

        The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such refinancing.

        Parent will not, and will not permit any Issuer or Guarantor to, directly or indirectly, create, incur, assume or suffer to exist any Lien (except Permitted Liens) that secures obligations under any Indebtedness ranking pari passu with or subordinated to the applicable Notes or, if applicable, any related Guarantee on any asset or property of Parent or such Issuer or Guarantor, or any income or profits therefrom, or assign or convey any right to receive income therefrom, unless

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        Neither Parent nor either Issuer may consolidate, merge or amalgamate with or into or wind up into (whether or not Parent or such Issuer is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless

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        The Successor Company will succeed to, and be substituted for the Issuer or Parent, as the case may be, under the Indentures, the Guarantees and the Notes, as applicable. Notwithstanding the foregoing clauses (3) and (4),

        Subject to certain limitations described in the Indentures governing release of a Guarantee upon the sale, disposition or transfer of a guarantor, no Guarantor will, and the Parent and the Issuers will not permit any Guarantor to, consolidate or merge with or into or wind up into (whether or not such Issuer or Guarantor is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless

        Subject to certain limitations described in the Indentures, the Successor Person will succeed to, and be substituted for, such Guarantor under the Indentures such Guarantor's Guarantee. Notwithstanding the foregoing, any Guarantor may merge into or transfer all or part of its properties and assets to another Guarantor, either Issuer or Parent.

        Parent will not, and will not permit any Restricted Subsidiary to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of Parent (each of the foregoing, an "Affiliate Transaction") involving aggregate payments or consideration in excess of $5.0 million, unless:

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        The foregoing provisions will not apply to the following:

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        Parent will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any such Restricted Subsidiary to:

        except (in each case) for such encumbrances or restrictions existing under or by reason of:

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