MasterBrand(MBC) - 2024 Q3 - Quarterly Report

Financial Performance - Net sales for the thirteen weeks ended September 29, 2024, were $718.1 million, an increase of$40.8 million or 6.0% compared to $677.3 million for the same period in 2023, primarily driven by the acquisition of Supreme, which contributed$60.8 million in incremental net sales [111]. - Net income for the thirteen weeks ended September 29, 2024, was $29.1 million, a decrease of$30.6 million or 51.3% compared to $59.7 million in the prior year [111]. - Net sales for the thirty-nine weeks ended September 29, 2024, were$2,032.7 million, a decrease of $16.4 million, or 0.8$2,049.1 million for the same period in 2023 [126]. - Net income for the thirty-nine weeks ended September 29, 2024, was $111.9 million, a decrease of$34.0 million, or 23.3%, from $145.9 million in the previous year [124]. Costs and Expenses - Cost of products sold increased by$40.3 million or 9.2% to $480.1 million, representing 66.9$439.8 million or 64.9% of net sales in the prior year [115]. - Selling, general and administrative expenses rose by $26.0 million or 18.5$166.3 million, accounting for 23.2% of net sales, compared to 20.7% in the previous year [116]. - Selling, general and administrative expenses increased by $33.5 million, or 8.0$450.8 million, representing 22.2% of net sales, compared to 20.4% in the previous year [130]. - Cost of products sold decreased by $11.8 million, or 0.9$1,359.0 million, representing 66.9% of net sales, compared to $1,370.8 million in the previous year [129]. Operating Income - Operating income decreased by$34.6 million or 37.5% to $57.6 million, down from$92.2 million in the same quarter last year [111]. - Operating income decreased by $47.1 million, or 19.2$198.2 million compared to $245.3 million for the same period in 2023 [124]. Interest and Debt - Interest expense increased to$20.0 million from $15.3 million, primarily due to higher outstanding debt related to the funding of the Supreme acquisition [118]. - Interest expense rose to$54.7 million, an increase of $4.8 million, or 9.6$49.9 million in the previous year [132]. - The company completed a refinancing transaction on June 27, 2024, raising $700.0 million in Senior Notes to fund the acquisition of Supreme and refinance existing debt [140]. - As of September 29, 2024, the company had$1,062.3 million in outstanding third-party borrowings, net of deferred financing fees [147]. Restructuring and Charges - Restructuring charges were $7.8 million, significantly higher than$1.4 million in the same quarter last year, reflecting costs associated with aligning workforce with forecasted demand [117]. - Restructuring charges increased to $11.0 million in the thirty-nine weeks ended September 29, 2024, compared to$4.1 million in the same period in 2023 [131]. Cash Flow - Net cash provided by operating activities was $176.9 million for the first three quarters of 2024, down from$336.5 million in the same period of 2023, reflecting unfavorable movements in accounts receivable and inventory [150]. - Net cash used in investing activities increased to $541.9 million in the first three quarters of 2024, primarily due to the acquisition of Supreme for$515.7 million [151]. - Net cash provided by financing activities was $331.3 million in the first three quarters of 2024, compared to a net cash used of$292.1 million in the same period of 2023 [152]. - The company reported a net decrease in cash, cash equivalents, and restricted cash of $39.3 million for the first three quarters of 2024 [150]. Acquisition and Integration - The acquisition of Supreme broadened the company's portfolio of premium cabinetry and was funded with cash on hand and proceeds from a revolving credit facility [109]. - The company completed the acquisition of Supreme on July 10, 2024, and is currently integrating its processes and internal controls [166]. Market Conditions - Overall end-market demand was softer in the repair and remodel markets, while single-family new construction showed strength compared to the previous year [112]. - Foreign currency impact was unfavorable by$0.4 million during the thirteen weeks ended September 29, 2024, compared to the same period in 2023 [114]. Compliance and Ratios - The company is required to maintain a minimum interest coverage ratio of 3.00 to 1.00 and a net leverage ratio not exceeding 3.50 to 1.00 for fiscal quarters ending on or prior to December 31, 2024 [146]. - The company was in compliance with all debt covenants under the 2024 Credit Agreement as of September 29, 2024 [146]. Taxation - Effective tax rate for the thirty-nine weeks ended September 29, 2024, was 24.6%, down from 25.4% in the prior year [135].