MasterBrand(US:MBC)2026-02-13 17:48Financial Performance - Net sales for fiscal 2025 were $2,734.7 million, an increase of $34.3 million or 1.3% compared to $2,700.4 million in fiscal 2024[175]. - Gross profit for fiscal 2025 was $827.6 million, a decrease of $49.4 million or 5.6% from $877.0 million in fiscal 2024[175]. - Operating income fell to $119.0 million, down $116.7 million or 49.5% compared to $235.7 million in fiscal 2024[175]. - Net income for fiscal 2025 was $26.7 million, a decline of $99.2 million or 78.8% from $125.9 million in fiscal 2024[175]. - Selling, general and administrative expenses increased by $64.7 million or 10.7% to $667.8 million in fiscal 2025[175]. - Cost of products sold increased by $83.7 million, or 4.6%, to $1,907.1 million in 2025, compared to $1,823.4 million in 2024[178]. Sales and Revenue - The acquisition of Supreme contributed $131.5 million in incremental sales during the first half of 2025, while excluding this impact, net sales decreased by $97.2 million due to lower sales unit volume[176]. - Net sales to dealers increased by $79.1 million or 5.6%, while sales to retailers declined by $49.2 million or 5.3% in fiscal 2025[177]. Expenses and Cost Management - Selling, general and administrative expenses rose by $64.7 million, or 10.7%, to $667.8 million in 2025, up from $603.1 million in 2024[179]. - The company plans to implement $30 million in cost reductions primarily in selling, general, and administrative expenses starting in Q1 2026[169]. - Restructuring charges decreased to $15.2 million in 2025 from $18.0 million in 2024, primarily related to severance and employee-related costs[180]. Cash Flow and Financing - Net cash provided by operating activities decreased to $195.7 million in 2025 from $292.0 million in 2024, with net income contributing $26.7 million[201]. - Net cash used in investing activities was $74.4 million in 2025, significantly lower than $580.8 million in 2024, which included the acquisition of Supreme[202]. - Net cash used in financing activities was $65.7 million in 2025, a decrease from net cash provided of $269.6 million in 2024[203]. - As of December 28, 2025, the company had $974.5 million in outstanding third-party borrowings, net of deferred financing fees[198]. Tax and Regulatory Matters - The effective tax rate increased to 42.3% in 2025 from 25.2% in 2024, mainly due to valuation allowance charges and nondeductible acquisition-related costs[185]. - The merger with American Woodmark is expected to close in early 2026, pending regulatory approvals[168]. Asset Management - Accounts receivable, net, decreased to $150.4 million as of December 28, 2025, from $191.0 million as of December 29, 2024[205]. - The allowance for credit losses increased to $17.4 million in 2025 from $3.0 million in 2024, reflecting a significant assessment of customer collectability[205]. - Total contractual cash obligations amounted to $1,712.4 million as of December 28, 2025, with $985.0 million in debt payments due[206]. - The company has standby letters of credit of $23.1 million and surety bonds outstanding of $13.1 million as of December 28, 2025[208]. - Inventory provision was recorded at $15.7 million in 2025, down from $17.0 million in 2024[222]. Stock and Shareholder Returns - The company repurchased $18.1 million in stock in 2025, compared to $6.5 million in 2024[203]. - The company anticipates that cash and cash equivalents, along with operating cash flows, will be sufficient to meet typical needs and capital expenditures[204]. Currency and Commodity Risks - The company experienced unfavorable foreign currency impacts of $1.4 million in fiscal 2025 compared to fiscal 2024[176]. - The company uses forward foreign exchange contracts to hedge against currency fluctuations, limiting risks from changes in exchange rates[239]. - The estimated potential loss under foreign exchange contracts from currency rate movements is not expected to materially impact the company's results of operations[240]. - The company is exposed to commodity price volatility due to various unpredictable external factors[241]. Impairment and Valuation - The fair values of impaired tradenames were estimated using the relief-from-royalty approach, with significant assumptions including forecasted revenue growth rates and market-participant discount rates[229]. - The discount rates for the fiscal years ended December 28, 2025, December 29, 2024, and December 31, 2023 ranged from 10.0% to 12.0%, while the royalty rates ranged from 3.0% to 4.0%[230]. - A reduction in estimated fair value of reporting units or tradenames could trigger impairment charges due to factors like increased discount rates and lower revenue growth rates[231]. - A 25 basis point change in significant assumptions would not have resulted in impairment recognition for indefinite-lived tradenames during the fiscal years analyzed[232]. - The company incurs customer program costs to promote sales and maintain competitive pricing, recording estimates based on historical and projected experiences[236]. Interest and Debt Management - Interest expense remained stable at $74.1 million in 2025, compared to $74.0 million in 2024, reflecting a higher outstanding debt balance[181]. - The company amended its 2024 Credit Agreement to obtain $375.0 million of delayed draw term loan commitments, contingent on the closing of the merger with American Woodmark[197].