MasterBrand Overview - MasterBrand is the 1 North American residential cabinet manufacturer with $2.7 billion in 2024 net sales[6,7] - Approximately 60% of net sales are attributed to R&R (Repair and Remodel)[7] - The company has a dealer network of over 7,700 and employs over 13,000 people across 20+ manufacturing facilities[7] - The company's 2024 Adjusted EBITDA was $364 million[7] Q3 2025 Financial Performance - Net sales for Q3 2025 were $698.9 million, a decrease of 2.7% compared to $718.1 million in Q3 2024[30] - Gross profit decreased by 8.3% from $238.0 million in Q3 2024 to $218.2 million in Q3 2025[30] - Net income decreased by 37.8% from $29.1 million in Q3 2024 to $18.1 million in Q3 2025[30] - Adjusted EBITDA decreased by 13.3% from $104.5 million in Q3 2024 to $90.6 million in Q3 2025[30] - Diluted EPS (GAAP) decreased by 36.4% from $0.22 in Q3 2024 to $0.14 in Q3 2025[30] - Free cash flow (YTD) decreased by 54.3% from $142.3 million in 2024 to $65.0 million in 2025[30] Full Year 2025 Outlook - The company anticipates a high to mid-single-digit percentage decline in the North American cabinets market[31] - The company expects net sales to be approximately flat[31] - The company projects adjusted EBITDA to be between $315 million and $335 million, with an adjusted EBITDA margin of approximately 11.5%-12.0%[31] - The company forecasts adjusted diluted EPS to be between $1.01 and $1.13[31] Long-Term Financial Targets - The company aims for a 3-5% CAGR in the North American Cabinets Market[36] - The company targets a 4-6% CAGR in Net Sales[36] - The company aims for an adjusted EBITDA margin of approximately 16%-18%[36] Additional Information - Strategic transformation initiatives have created >$180 million of cumulative annual savings since 2019, with another $50 million of incremental savings anticipated in 2025[27] - The company expects annual run-rate cost synergies of $90 million by the end of year three, following the close of the American Woodmark merger[29]

Financial Performance - Net sales for Q3 2025 were $698.9 million, a decrease of 2.7% compared to Q3 2024, attributed to a mid- to high single-digit market decline[4] - Gross profit was $218.2 million, with a gross profit margin of 31.2%, down 190 basis points year-over-year due to lower volume and unfavorable fixed cost leverage[5] - Net income was $18.1 million, resulting in a net income margin of 2.6%, a decrease of 150 basis points from the prior year[6] - Adjusted EBITDA was $90.6 million, with an adjusted EBITDA margin of 13.0%, down 160 basis points year-over-year[7] - Diluted earnings per share were $0.14, compared to $0.22 in Q3 2024; adjusted diluted earnings per share were $0.33, down from $0.40[8] - Operating income for the 13 weeks ended September 28, 2025, was $41.7 million, a decline of 27.7% from $57.6 million in 2024[29] - Net income for the 39 weeks ended September 28, 2025, was $68.7 million, down 38.5% from $111.9 million in 2024[35] - Adjusted EBITDA for the 39 weeks ended September 28, 2025, was $263.1 million, compared to $289.0 million in 2024, reflecting a margin of 12.6% versus 14.2%[35] - Diluted earnings per share (EPS) for the 13 weeks ended September 28, 2025, was $0.14, down from $0.22 in 2024[32] - The company reported a net income margin of 3.3% for the 39 weeks ended September 28, 2025, down from 5.5% in 2024[35] Debt and Cash Flow - As of September 28, 2025, total debt was $954.1 million, with a net debt to adjusted EBITDA ratio of 2.5x[9] - Free cash flow for the thirty-nine weeks ended September 28, 2025, was $65.0 million, down from $142.3 million in the prior year[9] - Long-term debt decreased to $954.1 million from $1,062.3 million, a reduction of 10.2%[47] - Net debt to adjusted EBITDA ratio remained stable at 2.5x for both periods reported[47] - Cash and cash equivalents at the end of the period were $114.8 million, up from $108.4 million year-over-year[49] - The company reported a net cash provided by operating activities of $108.8 million, down from $176.9 million in the prior year[49] Future Outlook - The company expects organic net sales performance to outperform the underlying market, driven by new products and previously implemented price actions[10] - The financial outlook for 2025 includes adjusted EBITDA in the range of $315 to $335 million, with an adjusted EBITDA margin of approximately 11.5% to 12.0%[13] - The anticipated benefits of the pending acquisition may be affected by competition and the ability to integrate operations successfully[25] Mergers and Acquisitions - The company is focused on closing the merger with American Woodmark to drive growth and innovation[3] - Acquisition-related costs for the 39 weeks ended September 28, 2025, totaled $18.7 million, associated with the pending acquisition of American Woodmark[36] Restructuring and Capital Expenditures - The company incurred restructuring charges of $2.6 million for the 13 weeks ended September 28, 2025, compared to $7.8 million in 2024[32] - Capital expenditures for the 39 weeks ended September 28, 2025, were $43.8 million, an increase from $34.6 million in the previous year[49] Asset Management - Total assets increased to $3,001.9 million as of September 28, 2025, compared to $2,960.2 million a year earlier, representing a growth of 1.4%[47] - Total current liabilities decreased slightly to $369.9 million from $378.4 million[47]

Core Points - MasterBrand, Inc. continues its partnership with Habitat for Humanity International as a Platinum Sponsor for the 2025 Jimmy & Rosalynn Carter Work Project, which will take place from October 26-31 in Austin, Texas [1][2] - The project aims to build 25 affordable energy-efficient homes in Whisper Valley, emphasizing environmental responsibility and long-term affordability [2][3] - MasterBrand's involvement includes providing cabinetry and design services, with a focus on creating functional and stylish kitchen and bath layouts for the homes [3][4] Company Overview - MasterBrand, Inc. is the largest residential cabinet manufacturer in North America, offering a wide range of cabinetry products for kitchens, bathrooms, and other areas of the home [5] - The company has over 13,000 employees and operates more than 20 manufacturing facilities and offices, supported by a distribution network of over 7,700 dealers and retailers [5]

Core Insights - StarMark Cabinetry, a brand under MasterBrand, Inc., is launching a significant product line expansion with 15 new door styles and eight finishes to cater to evolving homeowner and designer preferences [1][2][3] - This launch is part of a two-year initiative aimed at refreshing the StarMark brand and product offerings, emphasizing craftsmanship and modern design trends [1][2] Product Offerings - The new product line includes various door styles such as slab, shaker, and French-cut miter doors, blending traditional craftsmanship with contemporary aesthetics [3] - Notable new door styles include Colville, Emmerson, Francis, Ozark, Shoshone, and Kobuck, each designed to appeal to modern design sensibilities while maintaining a sense of heritage [3] Finish Options - Eight new finish options are introduced, inspired by natural elements, including warm light stains and soft off-white hues, enhancing the wood grain's beauty and evoking tranquility [4][8] - Specific finishes include Whisper, Tea Chest, Sandhill Crane, Nova, Lush Forest, Raindrop, Tideway, and Night Currents, each offering unique color characteristics [8] Customization Features - The product line expansion includes new features such as curved end panels, a modern arch valance, and new island end options, providing homeowners and designers with enhanced customization opportunities [4] Brand Identity - StarMark Cabinetry has unveiled a refreshed brand identity, which includes an updated logo and cohesive visual language that reflects its commitment to quality and craftsmanship [5]

Core Insights - Shareholders of MasterBrand, Inc. (NYSE: MBC) are expected to benefit significantly from the deal with American Woodmark Corporation (AMWD) due to AMWD's recent investments in a new ERP cloud solution [1] Group 1: Company Overview - MasterBrand, Inc. is positioned to gain from strategic partnerships and technological advancements in the industry [1] - American Woodmark Corporation has made recent investments aimed at enhancing operational efficiency through a new ERP cloud solution [1] Group 2: Financial Analysis - The analysis includes a focus on cash flow statements and unlevered free cash flow figures, which are critical for assessing the financial health of companies [1] - Financial models may incorporate various metrics such as cost of capital, cost of debt, WACC, share count, and net debt to evaluate investment opportunities [1]

Group 1 - Shareholders of MasterBrand, Inc. (NYSE: MBC) are expected to benefit significantly from the deal with American Woodmark Corporation (AMWD) due to AMWD's recent investments in a new ERP cloud solution [1] - The article emphasizes the importance of cash flow statements and unlevered free cash flow figures in evaluating companies [1] - The author mentions a focus on companies with a long history of financial reporting, avoiding growth stocks in favor of established firms [1] Group 2 - The analysis includes various financial metrics such as cost of capital, cost of debt, WACC, share count, and net debt to assess company performance [1] - Trading multiples studied include EV/FCF, net income, and EV/EBITDA, which are crucial for valuation [1] - The author provides access to a database with over 15,000 DCF models ranked by margin of safety and upside potential, indicating a comprehensive approach to investment analysis [1]

Group 1 - President Trump announced a 50% tariff on kitchen cabinets and bathroom vanities, and a 30% tariff on upholstered furniture, effective October 1, 2025, citing a "large scale FLOODING" of these products into the U.S. as a national security threat [2][6] - The U.S. imported $44.4 billion in furniture and fixtures in 2024, including $6.4 billion in upholstered household furniture and at least $8.2 billion in wood cabinets [3] - Furniture stocks reacted to the tariff announcement, with companies that have significant domestic manufacturing, like MasterBrand and MillerKnoll, seeing their shares rise, while high-end retailers like RH and Williams-Sonoma experienced declines [1][9] Group 2 - MasterBrand's stock rose almost 6% following the tariff announcement, as the company operates 15 manufacturing facilities in the U.S. [5] - MillerKnoll's shares increased by 3%, with 75% of its square footage located in the U.S., and the company had already raised prices to offset tariff costs [8] - RH and Williams-Sonoma saw their shares drop by about 3% and less than 1%, respectively, as they both engage in some domestic upholstery work [9][10]

Core Insights - The article highlights a significant shift in kitchen design trends, moving away from the all-white kitchen to more personalized and layered aesthetics, with a focus on individuality and rich color stories [1][2][3] Design Trends - The report indicates that soft modern, transitional, and modern traditional styles are the top three kitchen styles, with transitional design declining in popularity as homeowners prefer more distinct styles [2][3] - Coastal design has surged into the top five styles, while farmhouse design has decreased by 14% this year, often blended with other aesthetics [3] - Homeowners are increasingly favoring light-toned stains, off-whites, and beiges over white finishes, which have dropped to third place in preferences for the first time in nearly a decade [4] Color Preferences - Greens, particularly muted and sage tones, have overtaken gray in popularity, with the 2026 Impactful Finish of the Year, Lush Forest, being a deep green that offers versatility and richness [5] - Earthy tones like terracotta are emerging, indicating a broader trend towards nature-inspired palettes [6] Kitchen Layouts - There is a growing interest in creative kitchen storage solutions, such as freestanding pantry furniture and multifunctional butler's pantries, reflecting a desire for efficiency and uncluttered spaces [7][8] - Homeowners are sacrificing traditional storage areas to create dedicated pantry spaces, showcasing a shift towards thoughtful use of square footage [8] Evolving Definitions - The term "modern" has evolved to include clean, minimal aesthetics that are layered with character and warmth, making modern styles more accessible to a wider range of homeowners [9] - Cabinet door preferences are shifting, with Shaker doors remaining popular while flat panels and subtle raised details are on the rise, allowing for personal expression [9]

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)