Core Viewpoint - The Portnoy Law Firm has initiated an investigation into potential securities fraud involving American Woodmark Corporation and may file a class action on behalf of affected investors [1][4]. Group 1: Investigation and Legal Actions - The investigation focuses on whether the American Woodmark Board of Directors breached its fiduciary duties by not conducting a fair process regarding the merger with MasterBrand, Inc. [4] - Investors who have incurred losses are encouraged to contact the Portnoy Law Firm for a complimentary case evaluation and to discuss their legal rights [2][5]. Group 2: Merger Details - American Woodmark will be acquired by MasterBrand, Inc., with shareholders receiving 5.150 shares of MasterBrand common stock for each share of American Woodmark [3]. - Post-merger, MasterBrand and American Woodmark shareholders are expected to own approximately 63% and 37% of the combined company, respectively [3].

Part I - Financial Information This section presents MasterBrand, Inc.'s unaudited condensed consolidated financial statements and management's analysis [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) MasterBrand, Inc.'s unaudited condensed consolidated financial statements, including income, balance sheets, cash flows, and equity, are presented with detailed notes [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net income decreased for both the 13 and 26 weeks ended June 29, 2025, despite increased net sales, due to higher costs and restructuring charges Condensed Consolidated Statements of Income (Millions USD) | Metric (Millions USD) | 13 Weeks Ended June 29, 2025 | 13 Weeks Ended June 30, 2024 | 26 Weeks Ended June 29, 2025 | 26 Weeks Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Sales | $730.9 | $676.5 | $1,391.2 | $1,314.6 | | Gross Profit | $239.7 | $231.0 | $441.9 | $435.7 | | Operating Income | $67.3 | $77.8 | $104.4 | $140.6 | | Net Income | $37.3 | $45.3 | $50.6 | $82.8 | | Basic EPS | $0.29 | $0.36 | $0.40 | $0.65 | | Diluted EPS | $0.29 | $0.35 | $0.39 | $0.63 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income significantly increased for both the 13 and 26 weeks ended June 29, 2025, driven by positive foreign currency translation and derivative gains Condensed Consolidated Statements of Comprehensive Income (Millions USD) | Metric (Millions USD) | 13 Weeks Ended June 29, 2025 | 13 Weeks Ended June 30, 2024 | 26 Weeks Ended June 29, 2025 | 26 Weeks Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Income | $37.3 | $45.3 | $50.6 | $82.8 | | Foreign currency translation adjustments | $12.5 | $(10.7) | $13.7 | $(11.8) | | Unrealized gains (losses) on derivatives | $5.6 | $(6.5) | $9.5 | $(5.2) | | Defined benefit plans | $0.0 | $0.0 | $5.8 | $0.0 | | Other comprehensive income (loss), net of tax | $18.1 | $(17.2) | $27.6 | $(17.0) | | Comprehensive Income | $55.4 | $28.1 | $78.2 | $65.8 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and equity increased as of June 29, 2025, compared to December 29, 2024, with a slight decrease in total liabilities Condensed Consolidated Balance Sheets (Millions USD) | Metric (Millions USD) | June 29, 2025 | December 29, 2024 | | :-------------------- | :------------ | :---------------- | | Total Current Assets | $689.7 | $650.7 | | Total Assets | $2,957.4 | $2,929.8 | | Total Current Liabilities | $368.6 | $395.4 | | Total Liabilities | $1,596.4 | $1,635.1 | | Total Equity | $1,361.0 | $1,294.7 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased in the first half of 2025 due to lower net income and working capital changes, while investing cash use increased Condensed Consolidated Statements of Cash Flows (Millions USD) | Metric (Millions USD) | 26 Weeks Ended June 29, 2025 | 26 Weeks Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $53.4 | $96.1 | | Net cash used in investing activities | $(24.3) | $(11.9) | | Net cash used in financing activities | $(34.0) | $(40.3) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(0.9) | $40.7 | | Cash, cash equivalents, and restricted cash at end of period | $120.7 | $189.4 | [Condensed Consolidated Statements of Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) Total equity increased from December 29, 2024, to June 29, 2025, driven by net income and other comprehensive income, partially offset by stock repurchases Condensed Consolidated Statements of Equity (Millions USD) | Metric (Millions USD) | Balance at December 29, 2024 | Balance at June 29, 2025 | | :-------------------- | :--------------------------- | :----------------------- | | Total Equity | $1,294.7 | $1,361.0 | | Net Income | $1,330.4 (Retained Earnings) | $1,381.0 (Retained Earnings) | | Other Comprehensive Income | $(32.7) (Accumulated Other Comprehensive Loss) | $(5.1) (Accumulated Other Comprehensive Loss) | - Stock repurchase program activity: - 26 weeks ended June 29, 2025: **$18.1 million** - 26 weeks ended June 30, 2024: **$6.5 million**[16](index=16&type=chunk) [Notes To Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20To%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential context and detail for the unaudited condensed consolidated financial statements, covering accounting policies, acquisitions, revenue, debt, and other disclosures [Note 1. Basis of Presentation and Principles of Consolidation](index=10&type=section&id=Note%201.%20Basis%20of%20Presentation%20and%20Principles%20of%20Consolidation) MasterBrand, Inc. is a leading North American residential cabinet manufacturer, with unaudited financial statements based on a 52- or 53-week fiscal year - MasterBrand, Inc. is a leading manufacturer of residential cabinets in North America[17](index=17&type=chunk) - The financial statements are unaudited and based on a 52- or 53-week fiscal year ending on the last Sunday in December[18](index=18&type=chunk)[19](index=19&type=chunk) [Note 2. Recently Issued Accounting Standards](index=10&type=section&id=Note%202.%20Recently%20Issued%20Accounting%20Standards) No recently adopted accounting pronouncements materially affected financial results, but the company is evaluating ASU 2023-09 and ASU 2024-03 for future adoption - No recently issued accounting pronouncements adopted have had a material effect on results[21](index=21&type=chunk) - The company will adopt ASU 2023-09 (Income Tax Disclosures) in its 2025 Annual Report on Form 10-K[22](index=22&type=chunk) - The company is evaluating the impact of ASU 2024-03 (Disaggregation of Income Statement Expenses), effective for fiscal years beginning after December 15, 2026[23](index=23&type=chunk) [Note 3. Acquisition of Supreme](index=11&type=section&id=Note%203.%20Acquisition%20of%20Supreme) MasterBrand acquired Supreme Cabinetry Brands for **$520.0 million** in cash on July 10, 2024, expanding its premium cabinetry portfolio and dealer networks - Acquired Supreme Cabinetry Brands, Inc. on July 10, 2024, for **$520.0 million** in cash[24](index=24&type=chunk) - Supreme is a domestic manufacturer of residential cabinetry focused on premium products, enhancing MasterBrand's portfolio and distribution[24](index=24&type=chunk) Supreme's Contribution to MasterBrand's Net Sales and Net Income (Millions USD) | Metric (Millions USD) | 13 Weeks Ended June 29, 2025 | 26 Weeks Ended June 29, 2025 | | :-------------------- | :--------------------------- | :--------------------------- | | Net Sales | $70.7 | $131.5 | | Net Income | $5.5 | $9.6 | [Note 4. Revenue from Contracts with Customers](index=11&type=section&id=Note%204.%20Revenue%20from%20Contracts%20with%20Customers) Revenue is recognized upon transfer of control, typically at shipment or delivery, and disaggregated by major sales channels and shipping locations - Revenue is recognized for the sale of goods (cabinets, vanities) when control transfers to customers, generally upon shipment or delivery[28](index=28&type=chunk) Net Sales by Channel (Millions USD) | Channel | 13 Weeks Ended June 29, 2025 | 13 Weeks Ended June 30, 2024 | 26 Weeks Ended June 29, 2025 | 26 Weeks Ended June 30, 2024 | | :-------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Dealers | $410.0 | $352.7 | $763.1 | $667.7 | | Retailers | $223.0 | $231.7 | $446.5 | $474.6 | | Builders | $97.9 | $92.1 | $181.6 | $172.3 | | **Total** | **$730.9** | **$676.5** | **$1,391.2** | **$1,314.6** | Net Sales by Shipping Location (Millions USD) | Location | 13 Weeks Ended June 29, 2025 | 13 Weeks Ended June 30, 2024 | 26 Weeks Ended June 29, 2025 | 26 Weeks Ended June 30, 2024 | | :------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | United States | $700.0 | $643.9 | $1,335.0 | $1,252.1 | | Canada | $27.9 | $28.7 | $49.8 | $53.9 | | Mexico | $3.0 | $3.9 | $6.4 | $8.6 | | **Total** | **$730.9** | **$676.5** | **$1,391.2** | **$1,314.6** | [Note 5. Earnings Per Share](index=14&type=section&id=Note%205.%20Earnings%20Per%20Share) Basic and diluted earnings per share decreased for both the 13 and 26 weeks ended June 29, 2025, reflecting lower net income and dilutive stock awards Earnings Per Common Share | Metric | 13 Weeks Ended June 29, 2025 | 13 Weeks Ended June 30, 2024 | 26 Weeks Ended June 29, 2025 | 26 Weeks Ended June 30, 2024 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic | $0.29 | $0.36 | $0.40 | $0.65 | | Diluted | $0.29 | $0.35 | $0.39 | $0.63 | - Approximately **2.2 million** and **0.7 million** shares were excluded from diluted EPS calculation for the 13 and 26 weeks ended June 29, 2025, respectively, due to being anti-dilutive[38](index=38&type=chunk) [Note 6. Balance Sheet Information](index=15&type=section&id=Note%206.%20Balance%20Sheet%20Information) This note details inventories, property, plant and equipment, and other current liabilities, showing stable inventories, slightly decreased PPE, and reduced other current liabilities Inventories (Millions USD) | Category | June 29, 2025 | December 29, 2024 | | :---------------------- | :------------ | :---------------- | | Raw materials and supplies | $191.8 | $197.2 | | Work in process | $24.2 | $25.7 | | Finished products | $61.0 | $53.5 | | **Total Inventories** | **$277.0** | **$276.4** | Property, Plant and Equipment, Net (Millions USD) | Category | June 29, 2025 | December 29, 2024 | | :---------------------- | :------------ | :---------------- | | Property, plant and equipment, gross | $1,113.8 | $1,087.7 |\n| Less: accumulated depreciation | $635.4 | $606.2 | | **Net Property, plant and equipment** | **$478.4** | **$481.5** | Other Current Liabilities (Millions USD) | Category | June 29, 2025 | December 29, 2024 | | :---------------------- | :------------ | :---------------- | | Accrued salaries, wages and other compensation | $48.4 | $54.9 | | Interest payable | $23.0 | $25.5 | | Other accrued expenses | $68.7 | $80.7 | | **Total Other Current Liabilities** | **$172.6** | **$195.2** | [Note 7. Goodwill and Identifiable Intangible Assets](index=16&type=section&id=Note%207.%20Goodwill%20and%20Identifiable%20Intangible%20Assets) Goodwill slightly increased due to translation adjustments; identifiable intangible assets include tradenames and customer relationships, with no impairment charges Goodwill (Millions USD) | Metric | December 29, 2024 | June 29, 2025 | | :-------------------- | :---------------- | :------------ | | Balance | $1,125.8 | $1,127.6 | | 2025 translation adjustments | - | $1.8 | Identifiable Intangible Assets, Net (Millions USD) | Category | June 29, 2025 | December 29, 2024 | | :---------------------- | :------------ | :---------------- | | Indefinite-lived tradenames | $268.0 | $266.1 | | Amortizable intangible assets | $292.5 | $305.2 | | **Total identifiable intangibles** | **$560.5** | **$571.3** | - No impairments of goodwill or indefinite-lived assets were recorded for the thirteen and twenty-six weeks ended June 29, 2025[40](index=40&type=chunk) [Note 8. Financial Instruments](index=17&type=section&id=Note%208.%20Financial%20Instruments) MasterBrand uses foreign exchange forward contracts to mitigate currency risks, not for speculation, with derivatives recorded at fair value and impacting comprehensive income or earnings - The company uses foreign exchange contracts to reduce the impact of foreign currency exchange rate changes, not for trading or speculative purposes[41](index=41&type=chunk)[42](index=42&type=chunk) - Gross U.S. dollar equivalent notional amount of foreign currency derivative hedges outstanding at June 29, 2025, was **$85.4 million**, representing a net settlement asset of **$4.9 million**[43](index=43&type=chunk) Fair Values of Foreign Exchange Derivative Instruments (Millions USD) | Category | June 29, 2025 | December 29, 2024 | | :---------------------- | :------------ | :---------------- | | Assets: Foreign exchange contracts | $5.0 | $0.0 | | Liabilities: Foreign exchange contracts | $0.1 | $5.7 | [Note 9. Fair Value Measurements](index=19&type=section&id=Note%209.%20Fair%20Value%20Measurements) The company measures certain assets and liabilities, including derivatives and deferred compensation assets, at fair value using Level 2 inputs, with total debt also valued similarly - Assets and liabilities measured at fair value on a recurring basis primarily use Level 2 inputs[47](index=47&type=chunk)[49](index=49&type=chunk) Assets and Liabilities Measured at Fair Value (Millions USD) | Category | June 29, 2025 | December 29, 2024 | | :---------------------- | :------------ | :---------------- | | Assets: Derivative asset financial instruments (Level 2) | $5.0 | $0.0 | | Assets: Deferred compensation program assets (Level 2) | $9.3 | $9.6 | | Liabilities: Derivative liability financial instruments (Level 2) | $0.1 | $5.7 | - As of June 29, 2025, the fair value of total debt was **$1,024.1 million** compared to a carrying value of **$1,010.0 million**[51](index=51&type=chunk) [Note 10. Debt](index=20&type=section&id=Note%2010.%20Debt) MasterBrand's debt includes **$700.0 million** Senior Notes and a **$750.0 million** revolving credit facility, refinanced in 2024, with all debt covenants in compliance Summary of Debt (Millions USD) | Debt Instrument | June 29, 2025 | December 29, 2024 | | :-------------------------- | :------------ | :---------------- | | Revolving credit facility due June 2029 | $310.0 | $320.0 | | 7.00% Senior Notes due 2032 | $700.0 | $700.0 | | Less: Unamortized debt issuance costs | $(11.3) | $(12.2) | | **Total** | **$998.7** | **$1,007.8** | - The company completed a private offering of **$700.0 million** Senior Notes and entered into a new credit agreement on June 27, 2024, to refinance debt and fund the Supreme acquisition[53](index=53&type=chunk) - The revolving credit facility has **$418.6 million** of availability as of June 29, 2025, and the company was in compliance with all debt covenants[58](index=58&type=chunk)[59](index=59&type=chunk) [Note 11. Restructuring Charges](index=22&type=section&id=Note%2011.%20Restructuring%20Charges) Restructuring charges significantly increased in the first half of 2025 due to severance and employee-related costs to align the workforce with forecasted demand Restructuring Charges (Millions USD) | Period | 13 Weeks Ended June 29, 2025 | 13 Weeks Ended June 30, 2024 | 26 Weeks Ended June 29, 2025 | 26 Weeks Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Restructuring charges | $6.6 | $2.8 | $11.3 | $3.2 | - Charges are largely related to severance costs and other associate-related costs to better align the workforce with forecasted demand[61](index=61&type=chunk) [Note 12. Income Taxes](index=23&type=section&id=Note%2012.%20Income%20Taxes) Effective income tax rates slightly decreased in 2025 due to lower state and local taxes and foreign exclusions, with Pillar Two legislation expected to unfavorably impact 2026 rates Effective Income Tax Rates | Period | 13 Weeks Ended June 29, 2025 | 13 Weeks Ended June 30, 2024 | 26 Weeks Ended June 29, 2025 | 26 Weeks Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Effective tax rate | 23.9% | 24.6% | 23.7% | 24.1% | - The decrease in effective tax rate is primarily due to lower state and local income taxes and changes in foreign exclusions[63](index=63&type=chunk)[66](index=66&type=chunk) - The "One Big Beautiful Bill Act" was enacted on July 4, 2025, and the company is assessing its impact. Pillar Two legislation is expected to unfavorably impact the 2026 annual effective tax rate[69](index=69&type=chunk)[70](index=70&type=chunk) [Note 13. Pension and Other Postretirement Plans](index=24&type=section&id=Note%2013.%20Pension%20and%20Other%20Postretirement%20Plans) MasterBrand terminated its defined benefit pension plan in February 2025, resulting in a **$0.2 million** non-cash settlement charge and a **$5.2 million** plan asset surplus - The defined benefit pension plan was terminated on February 18, 2025, by purchasing group annuity contracts[73](index=73&type=chunk) - A non-cash settlement charge of **$0.2 million** was recognized for the 26 weeks ended June 29, 2025[73](index=73&type=chunk) - The termination resulted in a **$5.2 million** surplus in plan assets, recorded as other current assets[74](index=74&type=chunk) [Note 14. Contingencies and Accrued Losses](index=25&type=section&id=Note%2014.%20Contingencies%20and%20Accrued%20Losses) Product warranty liability decreased, and MasterBrand is involved in routine litigation and tax audits, including a **$54.9 million** annulled Mexican tax assessment, with material loss deemed remote Product Warranty Liability (Millions USD) | Metric | 26 Weeks Ended June 29, 2025 | 26 Weeks Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | | Reserve balance at the beginning of the period | $9.3 | $12.9 | | Provision for warranties issued | $11.4 | $10.9 | | Settlements made | $(12.8) | $(13.2) | | Reserve balance at the end of the period | $7.9 | $10.6 | - A **$54.9 million** Mexican tax assessment from 2018 was annulled on January 11, 2024, and the company believes the risk of additional loss is remote[80](index=80&type=chunk) - No material environmental accruals were reported as of June 29, 2025, and December 29, 2024[81](index=81&type=chunk) [Note 15. Accumulated Other Comprehensive Loss](index=27&type=section&id=Note%2015.%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated other comprehensive loss significantly improved from **$(32.7) million** to **$(5.1) million**, driven by positive foreign currency translation and derivative hedging gains Accumulated Other Comprehensive Loss (Millions USD) | Component | Balance at December 29, 2024 | Net current period other comprehensive income (26 Weeks Ended June 29, 2025) | Balance at June 29, 2025 | | :-------------------- | :--------------------------- | :--------------------------------------------------------------------------- | :----------------------- | | Foreign Currency Adjustments | $(23.6) | $13.7 | $(9.9) | | Derivative Hedging (Loss) Gain | $(5.0) | $9.5 | $4.5 | | Pension and Other Postretirement Plans Adjustments | $(4.1) | $4.4 | $0.3 | | **Total Accumulated Other Comprehensive Loss** | **$(32.7)** | **$27.6** | **$(5.1)** | [Note 16. Stock Repurchase Programs](index=27&type=section&id=Note%2016.%20Stock%20Repurchase%20Programs) MasterBrand repurchased **1,415,429 shares** for **$18.1 million** in the first half of 2025, with a new **$50.0 million** repurchase program authorized in March 2025 - A new **$50.0 million** stock repurchase program (2025 Share Repurchase Authorization) was authorized on March 13, 2025, expiring March 13, 2028[83](index=83&type=chunk) Stock Repurchase Activity | Period | Shares Repurchased | Cost (Millions USD) | Average Price Per Share | | :-------------------- | :----------------- | :------------------ | :---------------------- | | 13 Weeks Ended June 29, 2025 | 576,445 | $6.7 | $11.69 | | 26 Weeks Ended June 29, 2025 | 1,415,429 | $18.1 | $12.82 | | 13 Weeks Ended June 30, 2024 | 267,499 | $4.6 | $17.30 | | 26 Weeks Ended June 30, 2024 | 371,499 | $6.5 | $17.58 | - As of June 29, 2025, **$47.4 million** remained authorized for repurchase under the 2025 Share Repurchase Authorization[87](index=87&type=chunk) [Note 17. Segment Information](index=29&type=section&id=Note%2017.%20Segment%20Information) MasterBrand operates as a single segment in North American residential cabinet manufacturing, with the CODM using net income to assess performance and allocate resources - The company has one operating and reportable segment: residential cabinet manufacturing in North America[88](index=88&type=chunk)[89](index=89&type=chunk) - The CODM uses net income for annual budgeting, forecasting, and evaluating segment performance[89](index=89&type=chunk) Key Operating Expenses (Millions USD) | Expense Category | 13 Weeks Ended June 29, 2025 | 13 Weeks Ended June 30, 2024 | 26 Weeks Ended June 29, 2025 | 26 Weeks Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Raw materials | $252.4 | $240.2 | $485.1 | $462.3 | | Production labor and overhead | $238.8 | $205.3 | $464.2 | $416.6 | | Distribution costs | $42.0 | $40.3 | $78.7 | $77.8 | [Note 18. Subsequent Events](index=31&type=section&id=Note%2018.%20Subsequent%20Events) MasterBrand announced an all-stock transaction to combine with American Woodmark Corporation on August 6, 2025, expected to close in early 2026, subject to approvals - On August 6, 2025, MasterBrand announced an all-stock transaction to combine with American Woodmark Corporation[93](index=93&type=chunk) - American Woodmark shareholders will receive **5.15 shares** of MasterBrand common stock for each of their shares, representing approximately **37%** of the combined company's fully diluted shares[94](index=94&type=chunk) - The merger is expected to close in early 2026, subject to shareholder and regulatory approvals, and includes potential termination fees of **$30 million** or **$35 million** for MasterBrand and **$25 million** for American Woodmark[95](index=95&type=chunk)[96](index=96&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on MasterBrand's financial condition, liquidity, and results of operations, highlighting strategic overview, acquisitions, and performance drivers [Forward-Looking Statements](index=32&type=section&id=Forward-Looking%20Statements) This section cautions that forward-looking statements are subject to risks and uncertainties, including business development, market conditions, and the proposed merger with American Woodmark - Statements in the report that are not purely historical are forward-looking and subject to risks and uncertainties[97](index=97&type=chunk) - Key factors that could cause actual results to differ include the ability to develop and expand business, manage costs, respond to consumer preferences, and conditions in the housing market[99](index=99&type=chunk) - Risks related to the proposed merger with American Woodmark, such as delays, inability to obtain approvals, or failure to realize anticipated benefits, are also highlighted[99](index=99&type=chunk) [Introduction](index=33&type=section&id=Introduction) This section introduces the MD&A, supplementing financial statements with information on MasterBrand's business, financial condition, liquidity, capital resources, cash flows, and operations - MD&A supplements condensed consolidated financial statements, offering additional information on business, developments, financial condition, liquidity, capital resources, cash flows, and results of operations[100](index=100&type=chunk) [Overview](index=33&type=section&id=Overview) MasterBrand, North America's largest residential cabinet manufacturer, recently acquired Supreme Cabinetry Brands and announced a merger with American Woodmark, expected in early 2026 - MasterBrand is the largest manufacturer of residential cabinets in North America, known for product quality, innovative design, and service excellence[101](index=101&type=chunk) - Acquired Supreme Cabinetry Brands on July 10, 2024, to expand its premium cabinetry portfolio and diversify channel distribution[102](index=102&type=chunk) - Announced a definitive agreement on August 6, 2025, to combine with American Woodmark in an all-stock transaction, expected to close in early 2026[103](index=103&type=chunk) [Basis of Presentation](index=34&type=section&id=Basis%20of%20Presentation) Consolidated financial statements are prepared under GAAP, based on a 52- or 53-week fiscal year ending the last Sunday in December, with specific fiscal year definitions - Consolidated financial statements are prepared in accordance with GAAP, based on a 52- or 53-week fiscal year[105](index=105&type=chunk) - Fiscal 2025 ends on December 28, 2025, and fiscal 2024 ended on December 29, 2024[106](index=106&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Net sales increased due to the Supreme acquisition, but operating and net income declined for both periods ended June 29, 2025, due to higher costs and restructuring charges [Thirteen Weeks Ended June 29, 2025 Compared to the Thirteen Weeks Ended June 30, 2024](index=34&type=section&id=Thirteen%20Weeks%20Ended%20June%2029%2C%202025%20Compared%20to%20the%20Thirteen%20Weeks%20Ended%20June%2030%2C%202024) Net sales increased by **8.0%** to **$730.9 million** due to the Supreme acquisition, but net income decreased by **17.7%** to **$37.3 million** due to higher costs Financial Performance (13 Weeks Ended) | Metric (Millions USD) | June 29, 2025 | June 30, 2024 | $ Change | % Change | | :-------------------- | :------------ | :------------ | :------- | :------- | | NET SALES | $730.9 | $676.5 | $54.4 | 8.0% | | GROSS PROFIT | $239.7 | $231.0 | $8.7 | 3.8% | | OPERATING INCOME | $67.3 | $77.8 | $(10.5) | (13.5)% | | NET INCOME | $37.3 | $45.3 | $(8.0) | (17.7)% | - Net sales increased by **$54.4 million** (**8.0%**), with **$70.7 million** from the Supreme acquisition. Excluding Supreme, net sales decreased by **$16.3 million** due to lower sales unit volume[109](index=109&type=chunk) - Cost of products sold increased by **$45.7 million** (**10.3%**), with Supreme contributing **$47.0 million**. Excluding Supreme, costs decreased by **$1.3 million** due to lower volume, but were offset by higher manufacturing costs[111](index=111&type=chunk) - Selling, general and administrative expenses increased by **$12.7 million** (**8.7%**), primarily due to Supreme's inclusion (**$13.2 million**)[112](index=112&type=chunk) - Restructuring charges increased to **$6.6 million** from **$2.8 million**, mainly due to severance costs[113](index=113&type=chunk) [Twenty-six Weeks Ended June 29, 2025 Compared to the Twenty-six Weeks Ended June 30, 2024](index=38&type=section&id=Twenty-six%20Weeks%20Ended%20June%2029%2C%202025%20Compared%20to%20the%20Twenty-six%20Weeks%20Ended%20June%2030%2C%202024) Net sales increased by **5.8%** to **$1,391.2 million** due to the Supreme acquisition, but net income decreased by **38.9%** to **$50.6 million** due to higher costs and restructuring Financial Performance (26 Weeks Ended) | Metric (Millions USD) | June 29, 2025 | June 30, 2024 | $ Change | % Change | | :-------------------- | :------------ | :------------ | :------- | :------- | | NET SALES | $1,391.2 | $1,314.6 | $76.6 | 5.8% | | GROSS PROFIT | $441.9 | $435.7 | $6.2 | 1.4% | | OPERATING INCOME | $104.4 | $140.6 | $(36.2) | (25.7)% | | NET INCOME | $50.6 | $82.8 | $(32.2) | (38.9)% | - Net sales increased by **$76.6 million** (**5.8%**), with **$131.5 million** from the Supreme acquisition. Excluding Supreme, net sales decreased by **$54.9 million** due to lower sales unit volume[121](index=121&type=chunk) - Cost of products sold increased by **$70.4 million** (**8.0%**), with Supreme contributing **$86.4 million**. Excluding Supreme, costs decreased by **$16.0 million** due to lower volume, but were offset by higher manufacturing costs[123](index=123&type=chunk) - Selling, general and administrative expenses increased by **$28.9 million** (**10.2%**), primarily due to Supreme's inclusion (**$26.1 million**), increased associate-related costs, and advertising costs[124](index=124&type=chunk) - Restructuring charges increased significantly to **$11.3 million** from **$3.2 million**, mainly due to severance costs[125](index=125&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=40&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) MasterBrand's liquidity is supported by operating cash flows and credit facilities, with debt refinanced in 2024; operating cash decreased, while investing cash increased in the first half of 2025 - Liquidity is primarily generated from operating cash flows and available credit facilities[133](index=133&type=chunk) - Refinanced debt in June 2024 with **$700.0 million** Senior Notes and a **$750.0 million** revolving credit facility to fund the Supreme acquisition and repay previous term loans[134](index=134&type=chunk) Cash Flow Summary (26 Weeks Ended) | Metric (Millions USD) | June 29, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Net cash provided by operating activities | $53.4 | $96.1 | | Net cash used in investing activities | $(24.3) | $(11.9) | | Net cash used in financing activities | $(34.0) | $(40.3) | - The company was in compliance with all debt covenants under the 2024 Credit Agreement as of June 29, 2025[137](index=137&type=chunk) [RECENTLY ISSUED ACCOUNTING STANDARDS](index=42&type=section&id=RECENTLY%20ISSUED%20ACCOUNTING%20STANDARDS) No recently adopted accounting pronouncements have had a material effect on MasterBrand's results of operations, cash flows, or financial condition - No recently adopted accounting pronouncements have had a material effect on the company's financial results[144](index=144&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=42&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) No material changes occurred in MasterBrand's critical accounting estimates or assumptions since the fiscal year ended December 29, 2024 - No material changes in critical accounting estimates or assumptions since the fiscal year ended December 29, 2024[145](index=145&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes occurred in market risk disclosures since the Annual Report on Form 10-K for the fiscal year ended December 29, 2024 - No material changes to market risk disclosures since the Annual Report on Form 10-K for fiscal year ended December 29, 2024[146](index=146&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) MasterBrand's disclosure controls and procedures were effective as of June 29, 2025, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were effective as of June 29, 2025[147](index=147&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 29, 2025[148](index=148&type=chunk) Part II - Other Information This section provides other information, including legal proceedings, risk factors, equity security sales, and controls and procedures [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) MasterBrand is involved in routine litigation and tax audits, including a **$54.9 million** annulled Mexican tax assessment, with material loss deemed remote - The company is a defendant in routine litigation and subject to tax assessments and audits[150](index=150&type=chunk) - A **$54.9 million** Mexican tax assessment for 2018 was annulled on January 11, 2024, and the company believes the risk of additional loss is remote[151](index=151&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors, except for new risks related to the proposed merger with American Woodmark, including potential delays, costs, and integration challenges - New risk factors relate to the proposed merger with American Woodmark, including potential delays or failure to occur[153](index=153&type=chunk) - Failure to consummate the merger could result in significant costs, including termination fees, and diversion of management attention[155](index=155&type=chunk) - Even if completed, there is no assurance of realizing anticipated benefits and synergies, and integration may be difficult[156](index=156&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) MasterBrand repurchased **576,445 shares** for **$6.7 million** in Q2 2025, with a new **$50.0 million** repurchase program authorized in March 2025 Common Stock Purchases (13 Weeks Ended June 29, 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | | :----------------------------------- | :--------------------- | :--------------------------- | | March 31, 2025 through April 27, 2025 | 401,518 | $11.73 | | April 28, 2025 through May 25, 2025 | 174,927 | $11.57 | | May 26, 2025 through June 29, 2025 | — | $— | | **Q2 2025 Total** | **576,445** | **$11.69** | - The 2023 Share Repurchase Authorization expired on April 23, 2025. A new 2025 Share Repurchase Authorization for up to **$50.0 million** was authorized on March 13, 2025, expiring March 13, 2028[158](index=158&type=chunk) [Item 3. Defaults Upon Senior Securities](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the reported period - No defaults upon senior securities[159](index=159&type=chunk) [Item 4. Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No mine safety disclosures are reported - No mine safety disclosures[160](index=160&type=chunk) [Item 5. Other Information](index=45&type=section&id=Item%205.%20Other%20Information) No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or executive officers during the quarter - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or executive officers during the quarter[161](index=161&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, Sarbanes-Oxley certifications, and iXBRL financial statements - Includes certifications of principal executive and financial officers (31.1*, 31.2*, 32.1*, 32.2*)[163](index=163&type=chunk) - Financial statements are formatted in Inline eXtensible Business Reporting Language (iXBRL) (101*)[163](index=163&type=chunk) [Signatures](index=47&type=section&id=Signatures) The report was signed by MasterBrand, Inc.'s President and CEO, and EVP and CFO on August 6, 2025 - Report signed by R. David Banyard, Jr., President and CEO, and Andrea H. Simon, EVP and CFO, on August 6, 2025[167](index=167&type=chunk)

Merger Details - The merger between MasterBrand, Inc. and American Woodmark Corporation is set to occur, with the latter continuing as the surviving corporation[21] - The merger is intended to qualify as a "reorganization" for U.S. federal income tax purposes under Section 368(a) of the Code[23] - The Company Board has unanimously approved the merger agreement and recommended it to the Company stockholders[23] - The Parent Board has also unanimously approved the merger and directed that the Parent Stock Issuance be submitted for approval[23] - The merger will be consummated remotely via electronic exchange of documents and signature pages[25] - The effective time of the merger will result in Merger Sub ceasing to exist, with the Company becoming a wholly owned subsidiary of Parent[27] - The merger will become effective within 15 days following the filing of the Articles of Merger with the SCC[28] - Each share of Company Common Stock will be converted into the right to receive shares of Parent Common Stock based on the Exchange Ratio, which may be adjusted[41] - The Parent Board will consist of eleven directors, with eight designated by Parent and three by the Company[35] - R. David Banyard, Jr. will continue as the Chief Executive Officer and President of Parent after the Effective Time[38] - The articles of incorporation and bylaws of the Company will be amended to reflect the name "American Woodmark Corporation" for the Surviving Corporation[31] - No appraisal rights will be available to holders of Company Common Stock in connection with the merger[46] - The Exchange Agent will handle the exchange of Company Common Stock for Parent Common Stock and any cash distributions[47] - Holders of Converted Shares will receive cash in lieu of fractional shares based on the proceeds from the sale of such fractional shares[45] - The merger will not affect the name and NYSE ticker symbol of Parent, which will remain "MasterBrand, Inc." and "MBC" respectively[33] - The merger will have effects as outlined in Section 13.1-721 of the VSCA, impacting the capital stock of both the Company and Merger Sub[29] - No dividends or distributions on shares of Parent Common Stock will be paid to holders of Company Common Stock until the surrender of their Certificates[53] - The Merger Consideration issued will satisfy all rights pertaining to Converted Shares of Company Common Stock, except for the right to receive dividends[55] - Any undistributed portion of the Exchange Fund after 12 months will be delivered to Parent, and former holders of Company Common Stock will look only to Parent for payment[57] - The Exchange Agent will invest cash in the Exchange Fund in short-term obligations, and any investment income will belong solely to Parent[60] - Company Stock Options will be assumed by Parent and converted into Assumed Stock Options based on the Exchange Ratio[64] - Company RSUs will convert into the right to receive shares of Parent Common Stock based on the Exchange Ratio, with cash for fractional shares[66] - Company PSUs will convert into Assumed PSUs with the same terms, adjusted for performance metrics and the Exchange Ratio[68] - Company RSTUs will be converted into cash-settled restricted stock tracking units based on the Exchange Ratio[70] - The Company Board will take necessary actions to approve and effectuate the transactions contemplated in the agreement[71] Company Financials - The Company has 40,000,000 authorized shares of Common Stock, with 14,558,035 shares issued and outstanding as of August 1, 2025[81] - There are no shares of Preferred Stock issued or outstanding, and 551,531 shares of Common Stock are reserved for issuance under outstanding awards[82] - The Company has not granted or issued any Equity Awards since the Capitalization Date, except for those related to the vesting or exercise of existing awards[82] - All issued shares of Common Stock are fully paid, non-assessable, and free of preemptive rights[82] - The Company Board unanimously approved the Agreement and the Plan of Merger, recommending adoption to the Company Stockholders[89] - The Company is not subject to any anti-takeover provisions or rights plans that would affect the Merger[90] - The Company has all necessary corporate power to execute and deliver the Agreement and consummate the transactions contemplated[87] - The Company has no outstanding subscriptions, options, or warrants requiring the purchase or issuance of any Equity Securities[85] - The Company is in good standing in all jurisdictions where it operates, with no material adverse effects expected from its current operations[77] - The Company has filed a registration statement for shares subject to Assumed Equity Awards post-Merger[72] - The Company has filed all required SEC documents since April 30, 2023, ensuring compliance with the Securities Act and the Exchange Act[97] - The consolidated financial statements were prepared in accordance with GAAP and present fairly the Company's consolidated financial position and results of operations[99] - The Company has not made any material changes in its accounting methods since April 30, 2023, and there are no unresolved comments from the SEC[99] - The Company is in compliance with the Sarbanes-Oxley Act and NASDAQ corporate governance rules[100] - The Company maintains an effective system of internal control over financial reporting, ensuring reliability in financial statements[101] - No material liabilities have been identified that are not reflected in the most recent audited balance sheet[107] - The Company has conducted its business in the ordinary course since the last balance sheet date, with no adverse effects expected[110] - There are no pending or threatened actions that would materially affect the Company[111] - The Company holds all necessary permits for lawful business conduct, which are valid and in full force[113] Compliance and Legal Matters - The Company has implemented policies to ensure compliance with Anti-Corruption Laws and has not faced any violations since December 31, 2019[116] - Each Company Benefit Plan complies with applicable laws and has been administered in accordance with its terms, with no adverse effects expected[121] - No Company Entity has maintained or contributed to any multiemployer plan or multiple employer plan[122] - There are no pending or threatened actions against any Company Benefit Plan that could result in material liability[125] - No Company Benefit Plan provides retiree or post-employment medical or other welfare benefits[127] - Each Company Entity is in material compliance with all applicable employment laws and practices[135] - Since December 31, 2022, there have been no labor union organizing activities or material labor disputes affecting any Company Entity[133][134] - Each Company Entity holds all necessary Environmental Permits and is in compliance with Environmental Laws[140] - Each Company Entity has timely filed all required tax returns and paid all material taxes in full[148] - There are no claims or investigations pending regarding material taxes of any Company Entity[150] - No Company Entity has been a member of any affiliated group for tax purposes since January 1, 2020[151] - Each Company Entity has timely paid all material amounts required for taxes and complied with applicable laws[153] - No Company Entity has waived or extended any statute of limitations regarding the collection of material taxes since 2020[154] - There are no material actions pending against any Company Entity alleging infringement of intellectual property[167] IT and Security - The Company IT Assets are sufficient for the conduct of the businesses and have maintained a reasonable security program[170] - No Company Entity has distributed stock of another person in a transaction intended to be governed by specific sections of the Code since December 31, 2022[152] - Each Company Material Contract is valid and binding, with no breaches or defaults reported since the Company Balance Sheet Date[165] - The Company Entities have not been subject to tax in any country other than their country of incorporation[155] - The Company has not received any written notice of significant concerns from Material Customers or Suppliers regarding their relationships[165] - The Company has implemented disaster recovery and incident response plans to protect its IT assets and confidential information[170] - Since December 31, 2022, the Company has been in compliance with all applicable Privacy Requirements, with no claims or investigations reported[172] - There have been no breaches of information security or unauthorized access to Company IT Assets since December 31, 2022[173] - All Company insurance policies are in full force, with premiums paid and no breaches or defaults reported[176] - Since December 31, 2022, there have been no material product recalls or significant warranty claims against the Company[178] Financial Advisory - The Company has not engaged any financial advisor or incurred liabilities for financial advisory fees in connection with the transactions contemplated[181] - The Company Board has received a fairness opinion from its financial advisor regarding the Exchange Ratio[182] Parent Company Information - As of the close of business on the Capitalization Date, there were 131,829,964 shares of Parent Common Stock issued and outstanding[193] - Parent has not granted or issued any Parent Equity Awards since the close of business on the Capitalization Date[193] - Parent owns all outstanding Equity Securities in each Parent Subsidiary, free and clear of any liens[197] - Merger Sub has not conducted any business or operations other than in connection with the Agreement and the contemplated transactions[198] - Parent, Merger Sub, and their subsidiaries do not own any equity securities of the Company or hold rights to acquire or vote any equity securities[199] - None of Parent, Merger Sub, or their affiliates have been an "interested shareholder" of the Company in the last three years[199]

Financial Data and Key Metrics Changes - Masterbrand's second quarter net sales were $730.9 million, an 8% increase compared to $676.5 million in the same period last year [26] - Gross profit was $239.7 million, up 3.8% year over year, with a gross profit margin of 32.8%, down 130 basis points from last year [28] - Net income for the second quarter was $37.3 million, down from $45.3 million in the same period last year [29] - Adjusted EBITDA was $105.4 million, relatively flat compared to $105.1 million in the same period last year [30] - Diluted earnings per share were $0.29, compared to $0.35 in the prior year [31] Business Line Data and Key Metrics Changes - Builder direct sales increased by 5% year over year, outperforming the broader single-family new construction market, which declined low single digits [22] - The legacy repair and remodel business, excluding Supreme, declined approximately mid single digits year over year, aligning with broader market trends [23] - Semi-custom products showed growth as consumers shifted towards mid-tier options, indicating a positive trend within the product offering [24] Market Data and Key Metrics Changes - The broader single-family new construction market is expected to decline mid single digits for the full year 2025 [22] - The repair and remodel market is anticipated to be down high to mid single digits for the full year 2025, reflecting ongoing consumer sentiment challenges [24] Company Strategy and Development Direction - The merger with American Woodmark aims to create the industry's most comprehensive portfolio of cabinet brands, enhancing customer choice and operational efficiency [7][8] - The combined entity expects to realize approximately $90 million in run-rate cost synergies by the end of year three, with a focus on procurement and overhead optimization [9][18] - The strategic focus includes investing in next-generation automation and enhancing customer experience through operational flexibility and marketing capabilities [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing market softness and a challenging external environment but expressed confidence in the company's strategic priorities and execution capabilities [22][39] - The expectation is for overall new construction and market demand to decline mid single digits for 2025, with a cautious but optimistic outlook for long-term growth [23][36] Other Important Information - The merger is expected to close in early 2026, pending shareholder and regulatory approvals, with Masterbrand shareholders owning approximately 63% of the combined company [10] - The combined company will maintain a significant presence in both Beachwood, Ohio, and Winchester, Virginia [10] Q&A Session Summary Question: Why is the merger happening now given the market conditions? - Management highlighted the compelling combination of two strong U.S. companies that can generate value through an expanded product portfolio and operational efficiencies [42][44] Question: Can you provide more detail on the cost synergies? - Management indicated that synergies would be approximately 40% from G&A and indirect costs and under 60% from COGS, with a detailed analysis already conducted [47][48] Question: How will the combined entity address potential regulatory hurdles? - Management expressed confidence in navigating regulatory processes and emphasized the compelling value proposition for customers and consumers [49][50] Question: What is the expected phasing of the $90 million in synergies? - Management indicated that synergies would phase in similarly to previous acquisitions, with some easier initiatives implemented first [54][55] Question: How will the merger impact market share and channel exposure? - Management noted that the merger would enhance value across all channels and provide opportunities for cross-selling, with a focus on maintaining and expanding customer relationships [64][66]

Financial Performance - Q2 2025 - Net sales increased to $730.9 million, an 8% increase compared to $676.5 million in Q2 2024 [33] - Gross profit reached $239.7 million, a 3.8% increase from $231.0 million in Q2 2024, but gross profit margin decreased by 130 bps to 32.8% [33] - Net income decreased by 17.7% to $37.3 million, compared to $45.3 million in Q2 2024, with net income margin declining by 160 bps to 5.1% [33] - Adjusted EBITDA increased slightly by 0.3% to $105.4 million, compared to $105.1 million in Q2 2024, but adjusted EBITDA margin decreased by 110 bps to 14.4% [33] Full Year 2025 Outlook - The company anticipates a low single-digit percentage decline in net sales for the full year 2025 [35] - Adjusted EBITDA is projected to be between $315 million and $365 million [35] - Adjusted EBITDA margin is expected to be approximately 12.0%-13.5% [35] - Adjusted diluted EPS is forecasted to be between $1.03 and $1.32 [35] Long-Term Financial Targets - The company aims for a 4-6% CAGR in net sales [40] - The company targets an adjusted EBITDA margin of approximately 16%-18% [40]

Group 1 - MasterBrand's stock price has decreased by over 36% due to a combination of factors, including a historically weak housing environment [1] - The company is facing challenges following its acquisition of Supreme Cabinetry Brands [1] Group 2 - Spencer Chrisman, a Certified Public Accountant, follows a value-oriented investment approach focusing on long-term success criteria [1] - Chrisman is concentrating on micro-cap and small-cap investment opportunities across various sectors [1] - He has recently begun writing for Seeking Alpha and plans to create an investment series on a $1M portfolio of dividend stocks [1]

Core Insights - Astellas Pharma U.S. Inc. and MBC BioLabs announced DeepSeq.AI, Inc. and Serna Bio as winners of the Future Innovator Prize, which provides access to advanced lab facilities and Astellas' R&D capabilities [1][2][3] Group 1: Prize Overview - The Astellas Future Innovator Prize is awarded to pioneering scientists with innovative research that aligns with Astellas' Focus Area Approach, including Genetic Regulation, Immuno-Oncology, Targeted Protein Degradation, and Blindness & Regeneration [5] - This year, Astellas received over 50 applications, with the winners selected based on the strength of their innovation and therapeutic potential [2][5] Group 2: Company Profiles - DeepSeq.AI focuses on AI-driven large molecule discovery, utilizing high-throughput wet lab assays and generative models to optimize biologics, claiming to accelerate IND timelines by 10x and reduce costs by 50% [9] - Serna Bio is developing small molecules to upregulate protein translation by targeting functional RNA structures, leveraging a comprehensive platform for target discovery and chemical optimization [10] Group 3: Statements from Leadership - Issei Tsukamoto from Astellas emphasized the importance of supporting startups that have the potential to transform patient care globally [3] - Doug Crawford from MBC BioLabs highlighted the role of the Future Innovator Prize in providing access to a community of entrepreneurs and expert mentorship to accelerate early-stage breakthroughs [4]

Part I - Financial Information [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements detail the company's performance for Q1 2025 [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q1 2025 saw higher sales but significantly lower operating and net income compared to the prior year Q1 2025 vs Q1 2024 Income Statement Highlights | Metric | Q1 2025 (13 Weeks Ended Mar 30) | Q1 2024 (13 Weeks Ended Mar 31) | Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $660.3 million | $638.1 million | +3.5% | | **Gross Profit** | $202.2 million | $204.7 million | -1.2% | | **Operating Income** | $37.1 million | $62.8 million | -40.9% | | **Net Income** | $13.3 million | $37.5 million | -64.5% | | **Diluted EPS** | $0.10 | $0.29 | -65.5% | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and liabilities increased slightly as of March 30, 2025, driven by a rise in long-term debt Balance Sheet Summary | Metric | March 30, 2025 | December 29, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $689.1 million | $650.7 million | | **Total Assets** | $2,955.8 million | $2,929.8 million | | **Total Current Liabilities** | $362.5 million | $395.4 million | | **Long-term Debt** | $1,058.2 million | $1,007.8 million | | **Total Liabilities** | $1,649.1 million | $1,635.1 million | | **Total Equity** | $1,306.7 million | $1,294.7 million | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company experienced a net cash outflow from operations in Q1 2025, a reversal from the prior year's inflow Cash Flow Summary (13 Weeks Ended) | Activity | March 30, 2025 | March 31, 2024 | | :--- | :--- | :--- | | **Net Cash (Used in) Provided by Operating Activities** | $(31.4) million | $18.7 million | | **Net Cash Used in Investing Activities** | $(9.8) million | $(7.0) million | | **Net Cash Provided by (Used in) Financing Activities** | $33.5 million | $(7.1) million | | **Net (Decrease) Increase in Cash** | $(7.5) million | $5.0 million | [Notes To Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20To%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the Supreme acquisition's impact, revenue disaggregation, debt refinancing, and share repurchases - On July 10, 2024, the company acquired Supreme Cabinetry Brands for **$527.3 million**, funded by cash and revolving credit[26](index=26&type=chunk)[29](index=29&type=chunk) - For the 13 weeks ended March 30, 2025, Supreme contributed **$60.8 million in Net Sales** and **$4.1 million in Net Income**[26](index=26&type=chunk)[29](index=29&type=chunk) Net Sales by Channel (13 Weeks Ended) | Channel | March 30, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Dealers | $353.1 million | $315.0 million | | Retailers | $223.5 million | $242.9 million | | Builders | $83.7 million | $80.2 million | | **Total** | **$660.3 million** | **$638.1 million** | - In June 2024, the company completed a refinancing transaction, issuing **$700.0 million of 7.00% Senior Notes** due 2032 and entering a new credit agreement with a **$750.0 million revolving credit facility**[54](index=54&type=chunk)[55](index=55&type=chunk)[57](index=57&type=chunk) - The company recorded restructuring charges of **$4.7 million in Q1 2025**, primarily for severance costs to align its workforce with demand[61](index=61&type=chunk) - During Q1 2025, the company repurchased **838,984 shares for approximately $11.4 million**[79](index=79&type=chunk)[82](index=82&type=chunk) - A new **$50.0 million share repurchase program** was authorized in March 2025[79](index=79&type=chunk)[82](index=82&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes sales growth to the Supreme acquisition, which offset declines in the legacy business [Results of Operations](index=30&type=section&id=Results%20of%20Operations) The Supreme acquisition drove a 3.5% net sales increase, but higher costs eroded gross and operating margins - Net sales increased **$22.2 million (3.5%) YoY**, with the Supreme acquisition contributing **$60.8 million**[99](index=99&type=chunk) - Legacy business sales **declined by $38.6 million** due to lower volume in repair/remodel and single-family new construction markets[99](index=99&type=chunk) - Cost of products sold as a percentage of net sales **increased to 69.4% from 67.9% YoY**, driven by higher manufacturing costs and unfavorable fixed cost leverage[101](index=101&type=chunk) - SG&A expenses **rose by $16.2 million (11.8%)**, primarily due to the inclusion of Supreme ($13.0 million), increased associate-related costs ($2.7 million), and acquisition-related costs ($1.6 million)[102](index=102&type=chunk) - Interest expense **increased to $19.4 million from $14.1 million** due to a higher outstanding debt balance following the refinancing transaction for the Supreme acquisition[104](index=104&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is supported by a revolving credit facility, with total debt standing at $1,058.2 million - The company completed a major debt refinancing in June 2024, issuing **$700 million in Senior Notes** and establishing a new **$750 million revolving credit facility**[111](index=111&type=chunk) - As of March 30, 2025, the company had **$1,058.2 million in outstanding debt** and was in compliance with all debt covenants[114](index=114&type=chunk)[115](index=115&type=chunk) - Net cash used by operating activities was **$31.4 million in Q1 2025**, compared to **$18.7 million provided in Q1 2024**, primarily due to a larger increase in accounts receivable and inventory[117](index=117&type=chunk) - Net cash from financing activities was **$33.5 million**, reflecting **$50 million in net borrowings** to fund working capital needs and **$11.4 million used for stock repurchases**[119](index=119&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk disclosures remain materially unchanged from the 2024 Annual Report on Form 10-K - There have been **no material changes in market risk** since the last Annual Report on Form 10-K[123](index=123&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the evaluation date, March 30, 2025[124](index=124&type=chunk) - **No changes in internal control over financial reporting** occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[125](index=125&type=chunk) Part II - Other Information [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine litigation and is addressing a now-annulled tax assessment in Mexico - The company is a defendant in ordinary routine litigation and does not consider any pending action to be **material**[127](index=127&type=chunk) - A Mexican tax authority (SAT) issued a **~$54.9 million tax assessment** for the 2018 tax year, which the SAT later annulled[128](index=128&type=chunk) - The company is taking legal action to make the annulment final and believes the risk of additional loss is **remote**[128](index=128&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) Key risks include supply chain efficiency, third-party supplier dependence, and changing government regulations - Risks related to improving organizational productivity and global supply chain efficiency, including **potential interruptions in raw material supply**, could adversely affect operations[131](index=131&type=chunk)[132](index=132&type=chunk) - The company is exposed to global business risks, including **uncertain trade environments, tariffs, and political changes** in countries where it manufactures or sources materials[133](index=133&type=chunk) - Dependence on third-party suppliers presents risks of **supply disruption, quality issues, and cost increases**[135](index=135&type=chunk) - Changes in government and industry regulations related to trade, health, safety, taxes, and the environment could **increase costs and impact results**[137](index=137&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 838,984 shares for $11.4 million in Q1 2025 under its authorized programs Share Repurchases in Q1 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Maximum Amount Remaining for Purchase | | :--- | :--- | :--- | :--- | | **Feb 24 - Mar 30, 2025** | 838,984 | $13.60 | $60,015,416 | | **Q1 2025 Total** | **838,984** | **$13.60** | | - As of March 30, 2025, **$10.0 million remained** under the 2023 Share Repurchase Authorization and **$50.0 million remained** under the new 2025 Share Repurchase Authorization[139](index=139&type=chunk) [Other Information](index=39&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted, modified, or terminated Rule 10b5-1 trading plans during the quarter - **No directors or executive officers** adopted, modified, or terminated any Rule 10b5-1 trading plans during the quarter[142](index=142&type=chunk)

Financial Data and Key Metrics Changes - The company reported net sales of $660 million for the first quarter of 2025, representing a 3% increase compared to the same period last year [6] - Adjusted EBITDA was $67 million, with an adjusted EBITDA margin of 10.2%, which is 220 basis points lower than the same period last year [8][30] - Free cash flow was negative $41 million, a decline from positive $12 million in the same period last year [9][33] - Net income decreased to $13.3 million from $37.5 million year-over-year, primarily due to higher selling, general, and administrative expenses [28] Business Line Data and Key Metrics Changes - The Supreme acquisition contributed to a 10% growth, while legacy business saw a 2% increase in net average selling prices (ASP) [7] - Market volume declines of 9% were noted in the base business, particularly affecting customers in the repair and remodel market [7] - Builder Direct sales increased by over 4% compared to the prior year, despite declines in the new construction market [8] Market Data and Key Metrics Changes - Year-over-year market volume declines were observed across all channels and end markets in the first quarter [10] - The new construction market is expected to decline by mid-single digits for the full year 2025, influenced by lower foot traffic and builder commentary [12] - The repair and remodel market is anticipated to decline by high to mid-single digits for 2025, with fluctuations in order patterns noted [14][16] Company Strategy and Development Direction - The company is focusing on cost preservation and maintaining a strong balance sheet while investing in targeted growth areas [17] - Facility consolidations are underway to reduce costs and improve service, with expected financial benefits materializing in the third quarter [19] - Strategic initiatives include "Align to Grow," "Lead through Lean," and "Tech Enabled," aimed at positioning the company for future growth [20][25] Management's Comments on Operating Environment and Future Outlook - Management noted that the current demand environment is choppy, with expectations of continued weakness in the second half of 2025 [10][12] - Tariffs are impacting consumer confidence and large ticket purchases, contributing to a more cautious outlook for the year [16][39] - The company anticipates adjusted EBITDA for 2025 to be in the range of $315 million to $365 million, with a focus on balancing near-term performance and long-term growth [41][42] Other Important Information - The company ended the quarter with $113.5 million in cash and $358.6 million in liquidity available [30] - A new share repurchase program was authorized, allowing for the repurchase of up to $50 million of common stock [33] Q&A Session Summary Question: How is the company thinking about pricing in relation to tariffs? - Management indicated that additional pricing actions are necessary to counteract tariff impacts, using a surcharge methodology [46][48] Question: What is the expected demand cadence for Q2? - Management expects to see normal seasonality in Q2, but acknowledges challenges due to tariff costs and inefficiencies in certain factories [53][66] Question: How will margin progression look in Q2? - Margins are expected to improve from Q1, but not to the company's standards due to fixed cost pressures and tariff impacts [64][66] Question: What factors will influence the EBITDA guidance range? - The range is primarily dictated by market demand and the company's ability to gain market share amidst tariff uncertainties [69][70] Question: How does the company view its position relative to tariffs? - The company believes it is better insulated from tariffs due to its production being predominantly in the U.S., allowing it to absorb volume changes more effectively [75][78]

Financial Data and Key Metrics Changes - The company reported net sales of $660 million for the first quarter of 2025, representing a 3% increase compared to the same period last year [6][24] - Adjusted EBITDA was $67 million, with an adjusted EBITDA margin of 10.2%, which is 220 basis points lower than the same period last year [7][28] - Net income decreased to $13.3 million from $37.5 million year-over-year, primarily due to higher selling, general, and administrative expenses [26][30] - Free cash flow was negative $41 million, compared to positive $12 million in the same period last year [9][30] Business Line Data and Key Metrics Changes - The Supreme acquisition contributed to a 10% growth, while the legacy business saw a 2% increase in net average selling prices (ASP) [6][7] - Builder Direct sales increased by over 4% year-over-year, despite declines in the new construction market [7] - The repair and remodel market experienced mid-single-digit declines, particularly in lower-priced products [13][14] Market Data and Key Metrics Changes - Year-over-year market volume declines were observed across all channels and end markets, with the new construction market down low single digits [10][12] - The Canadian market saw high single-digit declines in both new construction and repair and remodel markets [15] - Overall end market demand is now expected to decline by high to mid-single digits in 2025, revised from previous expectations [16] Company Strategy and Development Direction - The company is focusing on cost preservation and maintaining a strong balance sheet while investing in targeted growth areas [16][19] - Facility consolidations are underway to improve efficiency and reduce costs, with expected benefits materializing in the third quarter [17][18] - Strategic initiatives include Align to Grow, Lead through Lean, and Tech Enabled, aimed at positioning the company for future growth [19][20][22] Management's Comments on Operating Environment and Future Outlook - Management noted that the current demand environment is choppy, with expectations for continued weakness in the second half of 2025 [10][12] - Tariffs are impacting consumer confidence and purchasing behavior, leading to a cautious outlook for large-ticket items [15][36] - The company anticipates adjusted EBITDA for 2025 to be in the range of $315 million to $365 million, with a wider range due to tariff uncertainties [38] Other Important Information - The company authorized a new share repurchase program of up to $50 million [30] - Capital expenditures for 2025 are expected to be between $75 million and $85 million, down from previous estimates [39] Q&A Session Summary Question: Thoughts on pricing and demand impacts - Management indicated that additional pricing actions are needed to counteract tariff impacts, with a focus on timing and customer negotiations [43][44] Question: Demand cadence and seasonality - Management expects a normal seasonal pattern in Q2, but acknowledges challenges due to tariffs and operational adjustments [49][50] Question: Margin progression in Q2 - Margins are expected to improve from Q1, but not to desired levels due to inefficiencies and tariff costs [58][61] Question: Factors affecting EBITDA guidance - The wide range in EBITDA guidance is primarily driven by market demand and the company's ability to gain market share [63][65] Question: Positioning relative to tariffs - The company is better insulated from tariffs due to its U.S.-based production, allowing it to absorb volume changes if necessary [70][72] Question: ASP trends and inventory growth - Management noted that inventory growth is partly due to safety stock and not a significant pre-buy, with plans to adjust inventory levels as demand stabilizes [78]