MasterBrand(MBC) - 2025 Q2 - Quarterly Report

Part I - Financial Information This section presents MasterBrand, Inc.'s unaudited condensed consolidated financial statements and management's analysis Item 1. Financial Statements (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 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 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 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 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 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] Notes To Unaudited Condensed Consolidated Financial Statements 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 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] - The financial statements are unaudited and based on a 52- or 53-week fiscal year ending on the last Sunday in December[18][19] Note 2. Recently Issued Accounting Standards 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] - The company will adopt ASU 2023-09 (Income Tax Disclosures) in its 2025 Annual Report on Form 10-K[22] - 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] Note 3. Acquisition of Supreme 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] - Supreme is a domestic manufacturer of residential cabinetry focused on premium products, enhancing MasterBrand's portfolio and distribution[24] 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 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] 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 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] Note 6. Balance Sheet Information 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 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] Note 8. Financial Instruments 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][42] - 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] 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 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][49] 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] Note 10. Debt 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] - 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][59] Note 11. Restructuring Charges 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] Note 12. Income Taxes 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][66] - 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][70] Note 13. Pension and Other Postretirement Plans 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] - A non-cash settlement charge of $0.2 million was recognized for the 26 weeks ended June 29, 2025[73] - The termination resulted in a $5.2 million surplus in plan assets, recorded as other current assets[74] Note 14. Contingencies and Accrued Losses 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] - No material environmental accruals were reported as of June 29, 2025, and December 29, 2024[81] Note 15. Accumulated Other Comprehensive Loss 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 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] 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] Note 17. Segment Information 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][89] - The CODM uses net income for annual budgeting, forecasting, and evaluating segment performance[89] 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 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] - 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] - 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][96] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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] - 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] 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] 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] - Acquired Supreme Cabinetry Brands on July 10, 2024, to expand its premium cabinetry portfolio and diversify channel distribution[102] - 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] Basis of Presentation 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] - Fiscal 2025 ends on December 28, 2025, and fiscal 2024 ended on December 29, 2024[106] Results of Operations 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 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] - 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] - Selling, general and administrative expenses increased by $12.7 million (8.7%), primarily due to Supreme's inclusion ($13.2 million)[112] - Restructuring charges increased to $6.6 million from $2.8 million, mainly due to severance costs[113] Twenty-six Weeks Ended June 29, 2025 Compared to the Twenty-six Weeks Ended June 30, 2024 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] - 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] - 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] - Restructuring charges increased significantly to $11.3 million from $3.2 million, mainly due to severance costs[125] LIQUIDITY AND CAPITAL RESOURCES 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] - 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] 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] RECENTLY ISSUED ACCOUNTING STANDARDS 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] CRITICAL ACCOUNTING ESTIMATES 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 29, 2025[148] 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 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] - 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] Item 1A. Risk Factors 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] - Failure to consummate the merger could result in significant costs, including termination fees, and diversion of management attention[155] - Even if completed, there is no assurance of realizing anticipated benefits and synergies, and integration may be difficult[156] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults Upon Senior Securities No defaults upon senior securities occurred during the reported period - No defaults upon senior securities[159] Item 4. Mine Safety Disclosures No mine safety disclosures are reported - No mine safety disclosures[160] Item 5. Other Information 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] Item 6. Exhibits 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] - Financial statements are formatted in Inline eXtensible Business Reporting Language (iXBRL) (101*)[163] 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]