MasterBrand(MBC) - 2025 Q3 - Quarterly Report

Financial Performance - Net sales for the thirteen weeks ended September 28, 2025, were $698.9 million, a decline of $19.2 million or 2.7% compared to $718.1 million for the same period in 2024[122] - Gross profit decreased by $19.8 million or 8.3%, totaling $218.2 million for the thirteen weeks ended September 28, 2025[122] - Operating income fell to $41.7 million, down $15.9 million or 27.6% from $57.6 million in the prior year[122] - Net income for the period was $18.1 million, a decrease of $11.0 million or 37.8% compared to $29.1 million in the same quarter of 2024[122] - Net sales for the thirty-nine weeks ended September 28, 2025, were $2,090.1 million, an increase of $57.4 million or 2.8% compared to $2,032.7 million for the same period in 2024, driven primarily by the acquisition of Supreme[137] - Gross profit decreased by $13.6 million or 2.0% to $660.1 million, reflecting weaker overall end market demand[136] - Operating income for the thirty-nine weeks ended September 28, 2025, was $146.1 million, a decrease of $52.1 million or 26.3% compared to $198.2 million in 2024[136] - Net income fell to $68.7 million, down $43.2 million or 38.6% from $111.9 million in the prior year[136] Costs and Expenses - Cost of products sold increased by $0.6 million or 0.1% to $480.7 million, representing 68.8% of net sales[125] - Selling, general and administrative expenses rose by $1.2 million or 0.7% to $167.5 million, accounting for 24.0% of net sales[126] - Cost of products sold increased by $71.0 million or 5.2% to $1,430.0 million, representing 68.4% of net sales, compared to 66.9% in the prior year[139] - Selling, general and administrative expenses rose by $30.1 million or 6.7% to $480.9 million, influenced by the inclusion of Supreme and strategic investments[140] - Restructuring charges were $13.9 million, up from $11.0 million in the prior year, primarily related to severance and employee-related costs[141] Debt and Financing - The company refinanced its debt in June 2024, completing the offering of $700.0 million in Senior Notes to fund the acquisition of Supreme and refinance existing debt[148] - As of September 28, 2025, the company had $954.1 million in outstanding third-party borrowings, net of deferred financing fees[152] - Interest expense increased to $56.5 million for the thirty-nine weeks ended September 28, 2025, compared to $54.7 million in the prior year, attributed to a higher average outstanding debt balance[142] - The company is required to maintain a minimum interest coverage ratio of 3.00 to 1.00 and a net leverage ratio not exceeding 3.25 to 1.00 starting March 30, 2025[151] - The company was in compliance with all debt covenants under the 2024 Credit Agreement as of September 28, 2025[151] Cash Flow and Investments - Net cash provided by operating activities was $108.8 million for the first three quarters of 2025, down from $176.9 million in the same period of 2024[154] - Net cash used in investing activities decreased to $40.1 million in the first three quarters of 2025, compared to $541.9 million in the same period of 2024, primarily due to the acquisition of Supreme[155] - Net cash used in financing activities was $79.8 million in the first three quarters of 2025, a significant decrease from net cash provided of $331.3 million in the same period of 2024[156] Strategic Actions - The company acquired Dura Investment Holdings LLC on July 10, 2024, enhancing its portfolio in the premium cabinetry market[112] - A definitive agreement was announced on August 6, 2025, for a merger with American Woodmark, expected to close in early 2026[113] - The company is actively monitoring trade policies and tariffs, which could impact input costs and supply chain dynamics[114] - Restructuring charges decreased to $2.6 million in the latest quarter from $7.8 million in the same quarter of the previous year[129] Tax and Compliance - The effective tax rate for the thirty-nine weeks ended September 28, 2025, was 23.4%, a decrease from 24.6% in the prior year, primarily due to changes in foreign exclusions and lower state and local income taxes[144] Inventory and Receivables - In the first three quarters of 2025, accounts receivable increased by $26.6 million, while inventory declined by $4.4 million, reflecting improved inventory management[154] - Depreciation expense increased to $51.2 million in the first three quarters of 2025, compared to $39.5 million in the same period of 2024, due to the full-year inclusion of Supreme[154] - The company believes its cash and cash equivalents, along with operating cash flows and credit facilities, will be sufficient to meet working capital and capital expenditure needs[157] - The company amended its credit agreement to obtain a $375.0 million term loan to settle American Woodmark's existing indebtedness, contingent on the closing of the Merger[152]