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MasterBrand, Inc.

MasterBrand, Inc.MBCEarnings & Financial Report

NYSE · Consumer Discretionary · Wood Household Furniture, (No Upholstered)

Master Lock is an American company that sells padlocks, combination locks, safes, and related security products. Now a subsidiary of Fortune Brands Innovations, Master Lock Company LLC was formed in 1921 by locksmith-inventor Harry Soref and is headquartered in Oak Creek, Wisconsin. In 1970, the company was purchased by American Brands from Soref's heirs. American Brands was later renamed to Fortune Brands, which then split on October 3, 2011, to create the Fortune Brands Home & Security comp...

What changed in MasterBrand, Inc.'s 10-K — 2023 vs 2024

Top changes in MasterBrand, Inc.'s 2024 10-K

290 paragraphs added · 258 removed · 190 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Talent Development and Succession Our talent philosophy guides our talent management approach from hiring to talent development and succession planning. We believe that it is about the team, and individual success cannot be achieved without exceptional team performance.
Talent Development and Succession Our talent philosophy guides our talent management approach from hiring practices to talent development and succession planning. We believe that it is about the team, and individual success cannot be achieved without exceptional team performance.
Intellectual Property In addition to the brand protection offered by our trademarks, patent protection helps distinguish our unique product features in the market by preventing others from making, using, importing, and selling our innovations in markets in which we have patent protection. We hold U.S. and foreign patents covering various features used in products we sell.
In addition to the brand protection offered by our trademarks, patent protection helps distinguish our unique product features in the market by preventing others from making, using, importing and selling our innovations in markets in which we have patent protection. We hold U.S. and foreign patents covering various features used in products we sell.
The importance of human capital, specifically the ability to attract, retain and develop associates, has become more apparent in a post-pandemic world. Through weekly kaizen events across our manufacturing facilities and offices, we provide the individuals closest to our business problems with the training and tools required to fix these issues.
The importance of human capital, specifically the ability to attract, retain and develop associates, has become more apparent in a post-pandemic world. Through weekly continuous improvement events across our manufacturing facilities and offices, we provide the individuals closest to our business problems with the training and tools required to fix these issues.
As a result of our scale, our streamlined product offerings and our existing relationships, we believe we are uniquely positioned to win in the e-commerce space, and we plan to be the market leader in this high-potential channel. Execute strategic acquisitions that broaden our platform and capitalize on our proven strengths.
As a result of our scale, our streamlined product offerings and our existing relationships, we believe we are uniquely positioned to win in the e-commerce space, and we plan to be the market leader in this high-potential channel. 3 Table of Contents Execute strategic acquisitions that broaden our platform and capitalize on our proven strengths.
We believe these factors will allow us to deliver on the unique needs of each customer and in the most efficient way possible. 3 Table of Contents Lead Through Lean – Engage teams and foster problem-solving The MasterBrand Way and the associated lean tools not only drive efficiencies, but engage our associates in the process.
We believe these factors will allow us to deliver on the unique needs of each customer and in the most efficient way possible. Lead Through Lean – Engage teams and foster problem-solving The MasterBrand Way and the associated lean tools not only drive efficiencies, but engage our associates in the process.
Item 1. Business MasterBrand, Inc. (“we,” “us,” “our,” “MasterBrand” or the “Company”) was founded nearly 70 years ago in 1954 under the name United Cabinet Incorporated. We are the largest manufacturer of residential cabinets in North America, based on 2022 reported net sales.
Item 1. Business MasterBrand, Inc. (“we,” “us,” “our,” “MasterBrand” or the “Company”) was founded over 70 years ago in 1954 under the name United Cabinet Incorporated. We are the largest manufacturer of residential cabinets in North America, based on 2023 reported net sales.
Our principal operating subsidiaries include MasterBrand Cabinets, LLC (“MBC LLC”), Norcraft Companies, L.P., Kitchen Craft of Canada and Woodcrafters Home Products, S. de R.L. de C.V. As a holding company, we are a legal entity separate and distinct from our subsidiaries.
Our principal operating subsidiaries include MasterBrand Cabinets, LLC (“MBC LLC”), Bertch Cabinet, LLC, Dura-Supreme, LLC, Kitchen Craft of Canada, Norcraft Companies, L.P., and Woodcrafters Home Products, S. de R.L. de C.V. As a holding company, we are a legal entity separate and distinct from our subsidiaries.
These obligations include debt service and obligations to trade creditors, among others. 7 Table of Contents Available Information The Company makes available free of charge, on or through its website, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the U.S.
Available Information The Company makes available free of charge, on or through its website, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the U.S.
Our culture of making the team better, being bold and championing improvement is embedded in our performance management programs to drive alignment across teams. Finally, we know that we grow through transparency and have courageous conversations about expectations and development to ensure that we are helping each other be better every day.
Behaviors are foundational, and our culture of making the team better, being bold and championing improvement is embedded in our performance management programs to drive focus on how the work is accomplished. Finally, we know that we grow through transparency and have courageous conversations about expectations and development to ensure that we are helping each other be better every day.
For our 2023 fiscal year, our TRIR was 0.84, compared to 1.04 for our 2022 fiscal year, and our LTR was 0.18 for our 2023 fiscal year, compared to 0.26 for our 2022 fiscal year. Our safety focus is also demonstrated by comparing our TRIR and LTR to the Bureau of Labor Statistics (“BLS”) industry averages.
For our 2024 fiscal year, our TRIR was 0.64, compared to 0.84 for our 2023 fiscal year, and our LTR was 0.18 for both our 2024 and 2023 fiscal years. Our safety focus is also demonstrated by comparing our TRIR and LTR to the Bureau of Labor Statistics (“BLS”) industry averages.
In addition, as a holding company, the source of our unconsolidated revenues and funds is dividends and other payments from subsidiaries. Our subsidiaries have financial obligations that must be satisfied before funding us.
In addition, as a holding company, the source of our unconsolidated revenues and funds is dividends and other payments from subsidiaries. Our subsidiaries have financial obligations that must be satisfied before funding us. These obligations include debt service and obligations to trade creditors, among others.
Approximately 82 percent of our workforce is composed of hourly production and distribution associates and the remaining population is comprised of associates in administrative roles. As of December 31, 2023, approximately 37 percent of our associates worked under collective bargaining agreements.
Approximately 81 percent of our workforce is composed of hourly production and distribution associates and the remaining population is comprised of associates in administrative roles. As of December 29, 2024, approximately 32 percent of our associates worked under collective bargaining agreements.
Below is a summary of the number of associates by role as of December 31, 2023: Production and Distribution Office Total 10,055 2,252 12,307 We are a values-based organization and believe our strong culture is a true differentiator. We are guided by our purpose of building great experiences together.
Below is a summary of the number of associates by role as of December 29, 2024: Production and Distribution Office Total 10,813 2,503 13,316 We are a values-based organization and believe our strong culture is a true differentiator. We are guided by our purpose of building great experiences together.
During 2023, compliance with the applicable regulations did not have a material effect on our capital expenditures, earnings, or competitive position. Human Capital Resources As of December 31, 2023, we had more than 12,000 full-time and part-time associates (excluding contract workers).
These laws and regulations often require the dedication of time and effort of associates, as well as financial resources. During 2024, compliance with the applicable regulations did not have a material effect on our capital expenditures, earnings, or competitive position. Human Capital Resources As of December 29, 2024, we had more than 13,000 full-time and part-time associates (excluding contract workers).
The Separation was completed through a series of transactions ending with a pro rata distribution of all of the shares of MasterBrand, Inc. common stock owned by Fortune Brands to Fortune Brands stockholders (the “Distribution”). After the Distribution, we became an independent, publicly-traded company. Strategy Our superior product quality, innovative design and service excellence drives a compelling value proposition.
The Separation was completed through a series of transactions ending with a pro rata distribution of all of the shares of MasterBrand, Inc. common stock owned by Fortune Brands to Fortune Brands stockholders (the “Distribution”). After the Distribution, we became an independent, publicly-traded company.
We believe that the cost of complying with the present environmental protection laws, before considering estimated recoveries either from other potentially responsible parties under Superfund or similar state laws or from insurance, will not have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
We believe that the cost of complying with the present environmental protection laws, before considering estimated recoveries either from other potentially responsible parties under Superfund or similar state laws or from insurance, will not have a material adverse effect on our competitive position, results of operations, cash flows or financial condition. 5 Table of Contents Governmental Regulations We are subject to a wide variety of local, state and federal laws and regulations in the countries where we conduct business.
We also offer a range of benefits including retirement savings plans, comprehensive healthcare and mental-health benefits, including medical, dental and vision coverage, health savings and spending accounts, wellness and associate assistance services. In 2023, we strengthened inclusivity in our benefit offerings by providing enhanced parental support from fertility through post-partum for our U.S. associates.
We also offer a range of benefits including retirement savings plans, comprehensive healthcare and mental-health benefits, including medical, dental and vision coverage, health savings and spending accounts, wellness and associate assistance services. In 2024, we strengthened our benefit offerings by providing a comprehensive mental health benefit.
For our 2023 fiscal year, our TRIR and LTR were below the 2022 BLS industry averages of 3.3 and 1.3, respectively. 6 Table of Contents Attracting and Retaining Superior Talent To attract and retain superior talent at all levels of our Company, we have designed our offerings to be competitive and are seen as a leader in the communities where our associates live and work.
Attracting and Retaining Superior Talent To attract and retain superior talent at all levels of our Company, we have designed our offerings to be competitive and are seen as a leader in the communities where our associates live and work.
The information contained on or accessible through the Company’s website is not incorporated by reference in this Annual Report on Form 10-K and should not be considered a part of this report. 8 Table of Contents
You may automatically receive email alerts and other information about the Company by signing up for email alerts at masterbrand.com/investors. The information contained on or accessible through the Company’s website is not incorporated by reference in this Annual Report on Form 10-K and should not be considered a part of this report. 7 Table of Contents
We are focused on reducing complexity that consumers do not notice or value, without reducing the variety of choices available. Our ability to reduce complexity in our product offering, and move to common platforms, enables us to simplify our manufacturing processes as well. Common platforms across plants and standard work allow us to drive supply chain efficiencies.
Our ability to reduce complexity in our product offering, and move to common platforms, enables us to simplify our manufacturing processes as well. Common platforms across plants and standard work allow us to drive supply chain efficiencies.
In addition, we are actively growing our presence in the emerging cabinets e-commerce channel, including through our retail channel partners’ online presence, and are actively partnering with leading players to develop continuing opportunities to penetrate and innovate in this exciting category.
In addition, we are actively growing our presence in the emerging cabinets e-commerce channel, including through our retail channel partners’ online presence, and are actively partnering with leading players to develop continuing opportunities to penetrate and innovate in this exciting category. 4 Table of Contents Customers Our business competes based on quality, price, service and responsiveness to dealer, retailer and builder needs, as well as end-user consumer preferences.
We support NFF’s campaign to plant 50 million trees across national forests by the end of 2025, of which, the NFF has planted 32.9 million trees as of December 31, 2023. 5 Table of Contents We reserve for remediation activities to clean up potential environmental liabilities as required by federal and state laws based on our best estimate of undiscounted future costs, excluding possible insurance recoveries or recoveries from other third parties.
We reserve for remediation activities to clean up potential environmental liabilities as required by federal and state laws based on our best estimate of undiscounted future costs, excluding possible insurance recoveries or recoveries from other third parties. There were no material environmental accruals for the years ended December 29, 2024 and December 31, 2023.
Channels Our products are sold primarily throughout the United States and Canada to the remodeling and new construction markets through three primary channels: Dealers, Retailers and Builders. 1.
Channels Our products are sold primarily throughout the United States and Canada to the remodeling and new construction markets through three primary channels: Dealers, Retailers and Builders. 1. Dealers : We built the industry’s largest and, we believe, strongest network, with well-established relationships with over 7,700 cabinet dealers across the United States and Canada, inclusive of those acquired with Supreme.
Our extensive dealer network allows us to have exceptional market reach and the ability to target key growth markets . 2. Retailers : We serve a variety of retailers, including the top continental retailers in North America, and have developed strong and lasting partnerships with them as a result of our deliberate category management and commitment to best-in-class execution.
Retailers : We serve a variety of retailers, including the top continental retailers in North America, and have developed strong and lasting partnerships with them as a result of our deliberate category management and commitment to best-in-class execution. Retail sales occur in-store and through various emerging and established e-commerce channels, including our retail channel partners’ online presence . 3.
(“The Home Depot”) comprised approximately 16 percent and 17 percent of our net sales for our 2023 and 2022 fiscal years, respectively. Net sales to international markets represented approximately 5 percent and 6 percent for our 2023 and 2022 fiscal years, respectively.
Our markets are very competitive. Lowe’s Companies, Inc. (“Lowe’s”) comprised approximately 22 percent, 21 percent and 20 percent of our net sales for our 2024, 2023 and 2022 fiscal years, respectively. The Home Depot, Inc. (“The Home Depot”) comprised approximately 15 percent, 16 percent and 17 percent of our net sales for our 2024, 2023 and 2022 fiscal years, respectively.
Our unique product portfolio allows homeowners to create the living spaces of their dreams, tailored to their price point and personalized for their individual style.
Our products are available in a wide variety of designs, finishes and styles and span the most attractive categories of the cabinets market: stock, semi-custom and premium cabinetry. Our unique product portfolio allows homeowners to create the living spaces of their dreams, tailored to their price point and personalized for their individual style.
Align to Grow – Deliver on the unique needs of each customer As an organization that historically grew through acquisitions, processes across the disparate acquired companies were inherently different. We believe we have further opportunities to both commercially and operationally align our business to reduce complexity in our product offering to customers.
To derive further efficiencies, we added three incremental initiatives to The MasterBrand Way: Align to Grow, Lead Through Lean and Tech Enabled. 2 Table of Contents Align to Grow – Deliver on the unique needs of each customer As an organization that historically grew through acquisitions, processes across the disparate acquired companies were inherently different.
Dealers : We built the industry’s largest and, we believe, strongest network, with well-established relationships with over 4,400 cabinet dealers across the United States and Canada, many of whom have been partners for decades. Our dealers cover a wide spectrum of the market. Some specialize in remodeling, while others provide regional service to a variety of new construction home builders.
Many of these dealers have been partners for decades and cover a wide spectrum of the market. Some specialize in remodeling, while others provide regional service to a variety of new construction home builders. Our extensive dealer network allows us to have exceptional market reach and the ability to target key growth markets . 2.
Our disciplined deployment of these tools in recent years has driven our strategic transformation and improvements in commercial and operational efficiency. To derive further efficiencies, we added three incremental initiatives to The MasterBrand Way: Align to Grow, Lead Through Lean and Tech Enabled.
Our disciplined deployment of these tools in recent years has driven our strategic transformation and improvements in commercial and operational efficiency.
Our Company was built in part through strategic, well-executed acquisitions, and we have proven to be a highly effective consolidation platform. We believe we will have opportunities to drive future value creation through thoughtful and strategic acquisitions.
Our Company was built in part through strategic, well-executed acquisitions, and we have proven to be a highly effective consolidation platform. In July 2024, we acquired Supreme, a domestic manufacturer of residential cabinetry with a portfolio of product lines significantly focused on premium products.
Creating an Inclusive, Team-Based Culture We value fostering an inclusive, team-based culture and celebrate our diverse team of associates and experiences. We believe attracting and engaging talented and diverse associates enables us to be more innovative, responsive to consumer needs and deliver strong performance and growth.
We believe attracting and engaging talented associates with diverse perspectives enables us to be more innovative, responsive to consumer needs and deliver strong performance and growth. We support our communities through outreach and investment. Our engagement pulse survey fosters our associate listening strategy, providing routine feedback and meaningful action to drive improvement in our culture.
Products We offer a comprehensive portfolio of leading residential cabinetry products for the kitchen, bathroom and other parts of the home. Our products are available in a wide variety of designs, finishes and styles and span the most attractive categories of the cabinets market: stock, semi-custom and premium cabinetry.
Net sales to international markets represented approximately 5 percent, 5 percent and 6 percent for our 2024, 2023 and 2022 fiscal years, respectively. Products We offer a comprehensive portfolio of leading residential cabinetry products for the kitchen, bathroom and other parts of the home.
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Retail sales occur in-store and through various emerging and established e-commerce channels, including our retail channel partners’ online presence . 4 Table of Contents 3.
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On July 10, 2024, we acquired all of the issued and outstanding limited liability interests of Dura Investment Holdings LLC, the parent company of Supreme Cabinetry Brands, Inc. (“Supreme”), a cabinetry company. Supreme is a domestic manufacturer of residential cabinetry with a portfolio of product lines significantly focused on premium products.
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Customers Our business competes based on quality, price, service and responsiveness to dealer, retailer and builder needs, as well as end-user consumer preferences. Our markets are very competitive. Lowe’s Companies, Inc. (“Lowe’s”) comprised approximately 21 percent and 20 percent of our net sales for our 2023 and 2022 fiscal years, respectively. The Home Depot, Inc.
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Supreme, with manufacturing facilities located in Minnesota, Iowa and North Carolina, and its two brands, Dura Supreme and Bertch cabinetry, crafts framed and frameless cabinetry for a nationwide network of dealers. The combined company is reaching more customers, through its highly complementary dealer networks, with greater efficiency and effectiveness.
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There were no material environmental accruals for the years ended December 31, 2023 and December 25, 2022.
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Through this transaction, MasterBrand broadened its portfolio of premium cabinetry in the resilient and attractive kitchen and bath categories, further diversifying its channel distribution and adding to its strategically located facility footprint. Strategy Our superior product quality, innovative design and service excellence drives a compelling value proposition.
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Governmental Regulations We are subject to a wide variety of local, state, and federal laws and regulations in the countries where we conduct business. These laws and regulations often require the dedication of time and effort of associates, as well as financial resources.
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We believe we have further opportunities to both commercially and operationally align our business to reduce complexity in our product offering to customers. We are focused on reducing complexity that consumers do not notice or value, without reducing the variety of choices available.
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We are committed to increasing the representation of professionals of color and women through building and developing robust talent pools, ensuring an inclusive, team-based culture through proactive programs, business practices and education, and by demonstrating support for equality in our communities through outreach and investment.
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This acquisition allows us to reach more customers, through highly complementary dealer networks, with greater efficiency and effectiveness, and has broadened our portfolio of premium cabinetry in the resilient and attractive kitchen and bath categories. We believe we will have opportunities to drive future value creation through additional thoughtful and strategic acquisitions.
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As of December 31, 2023, our worldwide workforce was composed of approximately 35 percent women, while our workforce in the U.S. and Canada was composed of approximately 34 percent people of color. Our engagement pulse survey fosters our associate listening strategy, providing routine feedback and meaningful action to drive improvement in our culture and awareness of diversity, equity, and inclusion.
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Intellectual Property We actively maintain and protect our trademarks, copyrights and trade secrets. Our products are marketed under a range of registered and unregistered trademarks that are widely recognized within our industry. To safeguard these assets, we continue to monitor for unauthorized use and take appropriate measures to prevent infringement.
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We support NFF’s campaign to plant 50 million trees across national forests by the end of 2025, of which, the NFF has planted 38.2 million trees as of December 29, 2024.
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For our 2024 fiscal year, our TRIR and LTR were below the 2023 BLS industry averages of 3.1 and 1.1, respectively.
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This benefit offers individualized care that integrates into our medical plan for our associates and their families, critical incident response, leader empowerment and support. 6 Table of Contents Creating a Team-Based Culture We value fostering a team-based culture and celebrate our team’s wide range of perspectives and experiences.
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The use of our website serves as a channel of distribution of the Company’s information and the information we post through our website may be deemed material. Investors and others should monitor this channel, as well as our earnings and press releases, SEC filings, and webcasts.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

63 edited+23 added−24 removed144 unchanged
Our historical consolidated financial statements included in this Annual Report on Form 10-K do not necessarily reflect the results of operations that we would have achieved as an independent, publicly-traded company during the periods presented or those that we will achieve in the future, including as a result of the following factors: ▪ Historically, prior to Separation, our working capital requirements and capital for our general corporate purposes, including acquisitions and capital expenditures, were financed by Fortune Brands.
Our historical consolidated financial statements included in this Annual Report on Form 10-K do not necessarily reflect the results of operations that we would have achieved as an independent, publicly-traded company during the periods presented or those that we will achieve in the future, including as a result of the following factors: ▪ Historically, prior to the Separation, our working capital requirements and capital for our general corporate purposes, including acquisitions and capital expenditures, were financed by Fortune Brands.
The operations of the third parties we depend on could be impacted by changing laws, regulations and policies, including those related to climate change, labor availability, cybersecurity attacks and by adverse weather conditions, pandemics, and other force majeure events, any of which could result in disruptions to their operations and result in shortages of supply, assertion of force majeure contract provisions and increases in the prices they charge for the raw materials, components and products they produce.
The operations of the third parties we depend on could be impacted by changing laws, regulations and policies, including those related to climate, labor availability, cybersecurity attacks and by adverse weather conditions, pandemics and other force majeure events, any of which could result in disruptions to their operations and result in shortages of supply, assertion of force majeure contract provisions and increases in the prices they charge for the raw materials, components and products they produce.
Risks Related to the Separation and Distribution We have a very short operating history as an independent, publicly-traded company, and our historical consolidated financial statements are not necessarily representative of the results we would have achieved as an independent, publicly-traded company and may not be reliable indicators of our future results.
Risks Related to the Separation and Distribution We have a short operating history as an independent, publicly-traded company, and our historical consolidated financial statements are not necessarily representative of the results we would have achieved as an independent, publicly-traded company and may not be reliable indicators of our future results.
Government regulations and policies pertaining to trade agreements, health and safety (including protection of associates as well as consumers), taxes and environment (including those specific to climate change and the reduction of air and energy emissions) may continue to emerge in the U.S., as well as internationally.
Government regulations and policies pertaining to trade agreements, health and safety (including protection of associates as well as consumers), taxes and environment (including those specific to the climate and the reduction of air and energy emissions) may continue to emerge in the U.S., as well as internationally.
We may face challenges in: (1) maintaining, developing or expanding our customer relationships; (2) sourcing raw materials on a timely basis or for a cost-effective price due to ongoing global supply chain issues and elevated inflation; and (3) attracting and retaining qualified personnel at all levels, including our senior management team and other key associates. 9 Table of Contents We face competition with respect to some of our products from competitors who operate in countries with lower labor and compliance costs.
We may face challenges in: (1) maintaining, developing or expanding our customer relationships; (2) sourcing raw materials on a timely basis or for a cost-effective price due to ongoing global supply chain issues and elevated inflation; and (3) attracting and retaining qualified personnel at all levels, including our senior management team and other key associates. 8 Table of Contents We face competition with respect to some of our products from competitors who operate in countries with lower labor and compliance costs.
These provisions include but are not limited to: a classified board of directors with three-year staggered terms (however, beginning with our 2030 annual meeting, all directors will be elected annually); the right of our Board of Directors to issue preferred stock without stockholder approval; no stockholder ability to fill director vacancies; elimination of the rights of our stockholders to act by written consent and call special stockholder meetings; until our Board of Directors is no longer classified, prohibiting stockholders from removing directors other than “for cause”; and rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings.
These provisions include but are not limited to: a classified board of directors with three-year staggered terms (however, beginning with our 2030 annual meeting, all directors will be elected annually); the right of our Board of Directors to issue preferred stock without stockholder approval; no stockholder ability to fill director vacancies; elimination of the rights of our stockholders to act by written consent and call special stockholder meetings; until our Board of Directors is no longer classified, prohibiting stockholders 21 Table of Contents from removing directors other than “for cause”; and rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings.
In addition, following the Separation, we are subject to Section 203 of the Delaware General Corporation Law (the “DGCL”), which may have an anti-takeover effect with respect to transactions not approved in advance by our Board of Directors, including discouraging takeover attempts that might result in a premium over the market price for shares of our common stock.
In addition, we are subject to Section 203 of the Delaware General Corporation Law (the “DGCL”), which may have an anti-takeover effect with respect to transactions not approved in advance by our Board of Directors, including discouraging takeover attempts that might result in a premium over the market price for shares of our common stock.
Economic conditions, including as a result of inflation and increased interest rates, may adversely impact our business by causing softer end-market demand for our products, decreased customer orders, delays in decisions to purchase our products and price-consciousness and “trade-downs” to lower priced products by consumers.
Economic conditions, including as a result of inflation and increased interest rates, has and may continue to adversely impact our business by causing softer end-market demand for our products, decreased customer orders, delays in decisions to purchase our products and price-consciousness and “trade-downs” to lower priced products by consumers.
The agreements we entered into with Fortune Brands in connection with the Separation, including the Separation and Distribution Agreement, a tax allocation agreement (the “Tax Allocation Agreement”), Transition Services Agreement and an associate matters agreement (the “Employee Matters Agreement,”) that are still in effect, were prepared in the context of the Separation while we were still a wholly-owned subsidiary of Fortune Brands.
The agreements we entered into with Fortune Brands in connection with the Separation, including the Separation and Distribution Agreement, a tax allocation agreement (the “Tax Allocation Agreement”) and an associate matters agreement (the “Employee Matters Agreement,”) that are still in effect, were prepared in the context of the Separation while we were still a wholly-owned subsidiary of Fortune Brands.
Accordingly, the increased size of our customers may further limit our ability to maintain or raise prices in the future. 10 Table of Contents Failure to maintain the performance, reliability and quality of our products, or to timely deliver our products, could have an adverse effect on our results of operations.
Accordingly, the increased size of our customers may further limit our ability to maintain or raise prices in the future. 9 Table of Contents Failure to maintain the performance, reliability and quality of our products, or to timely deliver our products, could have an adverse effect on our results of operations.
Our common stock has been listed and is being traded on the NYSE under the trading symbol “MBC.” Many factors could cause the market price of our common stock to rise and fall, including the following: ▪ a shift in our investor base; • our quarterly or annual earnings, or those of other companies in our industry or in similar industries; • actual or anticipated fluctuations in our operating results; • success or failure of our business strategy; • our ability to obtain financing as needed; 21 Table of Contents • changes in accounting standards, policies, guidance, interpretations or principles; • changes in laws and regulations affecting our business; • announcements by us or our competitors of significant acquisitions or dispositions; • the failure of securities analysts to cover our common stock after the Distribution; • changes in earnings estimates by securities analysts or our ability to meet our earnings guidance; • the operating and stock price performance of other comparable companies; and • overall market fluctuations and general economic and geopolitical conditions.
Our common stock has been listed and is being traded on the NYSE under the trading symbol “MBC.” Many factors could cause the market price of our common stock to rise and fall, including the following: ▪ a shift in our investor base; • our quarterly or annual earnings, or those of other companies in our industry or in similar industries; • actual or anticipated fluctuations in our operating results; • success or failure of our business strategy; • our ability to obtain financing as needed; • changes in accounting standards, policies, guidance, interpretations or principles; • changes in laws and regulations affecting our business; • announcements by us or our competitors of significant acquisitions or dispositions; • the failure of securities analysts to cover our common stock; • changes in earnings estimates by securities analysts or our ability to meet our earnings guidance; • the operating and stock price performance of other comparable companies; and • overall market fluctuations and general economic and geopolitical conditions.
In 2023, certain jurisdictions in which we operate enacted, or announced their intention to enact, legislation consistent with one or more Organization for Economic Co-operation and Development Global Anti-Base Erosion Model Rules (Pillar Two).
In 2024, certain jurisdictions in which we operate enacted, or announced their intention to enact, legislation consistent with one or more Organization for Economic Co-operation and Development Global Anti-Base Erosion Model Rules (Pillar Two).
The model rules include minimum domestic top up taxes, income inclusion rules, and undertaxed profit rules all aimed to ensure that multinationals pay a minimum effective corporate tax rate of 15 percent in each jurisdiction in which they operate, with some rules becoming effective in 2024.
The model rules include minimum domestic top up taxes, income inclusion rules, and undertaxed profit rules all aimed to ensure that multinationals pay a minimum effective corporate tax rate of 15 percent in each jurisdiction in which they operate, with some rules effective in 2024 or others becoming effective in 2025.
In connection with the Separation and prior to the Distribution, we and Fortune Brands entered into the Separation and Distribution Agreement and also entered into various other agreements, including a Tax Allocation Agreement, a Transition Services Agreement and an Employee Matters Agreement.
In connection with the Separation and prior to the Distribution, we and Fortune Brands entered into the Separation and Distribution Agreement and also entered into various other agreements, including a Tax Allocation Agreement and an Employee Matters Agreement.
Accordingly, we are subject to risks associated with potential disruption caused by changes in political, economic and social environments, including civil and political unrest, illnesses declared as a public health emergency (including global pandemics such as the COVID-19 pandemic), terrorism, expropriation, local labor conditions, changes in laws, regulations and policies of foreign governments and trade disputes with the U.S., and U.S. laws affecting activities of U.S. companies abroad.
Accordingly, we are subject to risks associated with potential disruption caused by changes in political, economic and social environments, including civil and political unrest, illnesses declared as a public health emergency (including global pandemics), terrorism, expropriation, local labor conditions, changes in laws, regulations and policies of foreign governments and trade disputes with the U.S., and U.S. laws affecting activities of U.S. companies abroad.
The loss of any of our significant customers or a reduction in the quantity of products they purchase could affect our financial health. Our ten largest customers generated approximately 55 percent, 52 percent and 50 percent of our net sales for our 2023, 2022 and 2021 fiscal years, respectively.
The loss of any of our significant customers or a reduction in the quantity of products they purchase could affect our financial health. Our ten largest customers generated approximately 55 percent, 55 percent and 52 percent of our net sales for our 2024, 2023 and 2022 fiscal years, respectively.
Lowe’s and The Home Depot comprised approximately 37 percent, 37 percent and 36 percent of our net sales for our 2023, 2022 and 2021 fiscal years. We cannot guarantee that we will maintain or improve our relationships with these customers or that we will supply these customers at historical levels.
Lowe’s and The Home Depot comprised approximately 37 percent of our net sales for our 2024, 2023 and 2022 fiscal years. We cannot guarantee that we will maintain or improve our relationships with these customers or that we will supply these customers at historical levels.
Such determinations and additional costs relating to reviews of our practices as a result of such audits may adversely impact future period results of operations. Our inability to secure and protect our intellectual property rights could negatively impact revenues and brand reputation.
Such determinations and additional costs relating to reviews of our practices as a result of such audits may adversely impact future period results of operations. 18 Table of Contents Our inability to secure and protect our intellectual property rights could negatively impact revenues and brand reputation.
We may experience decreased capital allocation efficiency and flexibility because we can no longer use cash flow from Fortune Brands to fund our business. The terms we received in our agreements with Fortune Brands could be less beneficial than the terms we may have otherwise received from unaffiliated third parties, and Fortune Brands may fail to perform under such agreements.
We may experience decreased capital allocation efficiency and flexibility because we can no longer use cash flow from Fortune Brands to fund our business. 19 Table of Contents The terms we received in our agreements with Fortune Brands could be less beneficial than the terms we may have otherwise received from unaffiliated third parties, and Fortune Brands may fail to perform under such agreements.
Overall, climate change, its effects and the resulting, unknown impact on government regulation, consumer, investor and business preferences could have a long-term adverse effect on our business. ESG matters may adversely impact our business and reputation and we may be required to make material expenditures to respond to customer needs and investor expectations regarding ESG matters.
Overall, climate change, its effects and the resulting, unknown impact on government regulation, consumer, investor and business preferences could have a long-term adverse effect on our business. 17 Table of Contents ESG matters may adversely impact our business and reputation and we may be required to make material expenditures to respond to customer needs and investor expectations regarding ESG matters.
Such events may include, but are not limited to, lower than forecasted revenues, actual new construction and R&R growth rates that fall below our assumptions, actions of key customers, increases in discount rates, continued economic uncertainty, higher levels of unemployment, weak consumer confidence, lower levels of discretionary consumer spending, a decrease in royalty rates and a decline in the trading price of our common stock.
Such events may include, but are not limited to, lower than forecasted revenue growth rates, actual new construction and R&R growth rates that fall below our assumptions, actions of key customers, increases in market-participant discount rates, continued economic uncertainty, higher levels of unemployment, weak consumer confidence, lower levels of discretionary consumer spending, a decrease in assumed royalty rates and a decline in the trading price of our common stock.
Compliance with new or changed laws, regulations and other requirements, including as a part of government or industry response to climate change, may require us to alter our product designs, our manufacturing processes, our packaging or our sourcing. Existing and new compliance activities are or may be costly and require significant management attention and resources.
Compliance with new or changed laws, regulations and other requirements, including as a part of government or industry response to environmental impacts, may require us to alter our product designs, our manufacturing processes, our packaging or our sourcing. Existing and new compliance activities are or may be costly and require significant management attention and resources.
The Separation and Distribution Agreement, the Tax Allocation Agreement and the Employee Matters Agreement determined the allocation of assets and liabilities between the 19 Table of Contents companies following the Separation for those respective areas and includes any necessary indemnifications related to liabilities and obligations.
The Separation and Distribution Agreement, the Tax Allocation Agreement and the Employee Matters Agreement determined the allocation of assets and liabilities between the companies following the Separation for those respective areas and includes any necessary indemnifications related to liabilities and obligations.
The current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations with respect to ESG matters, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.
Government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations with respect to ESG matters, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.
We will rely on Fortune Brands to satisfy its performance and payment obligations under these agreements. If Fortune Brands is unable or unwilling to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses. In connection with the Separation, each of Fortune Brands and MasterBrand are indemnifying each other for certain liabilities.
If Fortune Brands is unable or unwilling to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses. In connection with the Separation, each of Fortune Brands and MasterBrand are indemnifying each other for certain liabilities.
Additionally, Fortune Brands historically managed and retained cash we generated prior to Separation. Following completion of the Separation 18 Table of Contents as of December 14, 2022, Fortune Brands no longer provides us with funds to finance our working capital or other cash requirements.
Additionally, Fortune Brands historically managed and retained cash we generated prior to the Separation. Following completion of the Separation as of December 14, 2022, Fortune Brands no longer provided us with funds to finance our working capital or other cash requirements.
In addition, if we are unable to make repurchases in accordance with our repurchase program, then we would not be able to reduce the effects of dilution experienced when we issue stock under our equity incentive programs, and we would not receive other benefits contemplated by the repurchase program. Item 1B. Unresolved Staff Comments None.
In addition, if we are unable to make repurchases in accordance with our repurchase program, then we would not be able to reduce the effects of dilution experienced when we issue stock under our equity incentive programs, and we would not receive other benefits contemplated by the repurchase program.
This debt could potentially have important consequences to us and our debt and equity investors, including: ▪ requiring a substantial portion of our cash flow from operations to make interest and principal payments, which could reduce our profitability; ▪ making it more difficult to satisfy debt service and other obligations; ▪ if we have a credit rating, increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing; ▪ increasing our vulnerability to adverse economic and industry conditions, such as adverse interest rates; ▪ reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business; ▪ limiting our flexibility in planning for, or reacting to, changes in our business and the industry; ▪ placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt; and ▪ limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase shares of our common stock.
This debt could potentially have important consequences to us and our debt and equity investors, including: ▪ require a substantial portion of our cash flow from operations to make interest and principal payments, which could reduce our profitability; ▪ make it more difficult to satisfy debt service and other obligations; ▪ increase the risk of a future downgrade of our credit ratings, which could increase our future debt costs and limit the future availability of debt financing; ▪ increase our vulnerability to adverse economic and industry conditions, such as adverse interest rates; ▪ reduce the cash flow available to fund capital expenditures and other corporate purposes and to grow our business; ▪ limit our flexibility in planning for, or reacting to, changes in our business and the industry; ▪ place us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt; and ▪ limit our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase shares of our common stock. 15 Table of Contents To the extent that we incur additional indebtedness, the foregoing risks could increase.
Our charter provides that unless we consent in writing to the selection of an alternative forum, the state courts within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for (1) any state derivative action or proceeding brought or purporting to be brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any current or former director or officer of ours to us or our stockholders, (3) any action asserting a claim against us arising pursuant to any provision of the DGCL, our charter or our bylaws, (4) any action asserting a claim relating to or involving us governed by the internal affairs doctrine or (5) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL. 22 Table of Contents Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
Our charter provides that unless we consent in writing to the selection of an alternative forum, the state courts within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for (1) any state derivative action or proceeding brought or purporting to be brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any current or former director or officer of ours to us or our stockholders, (3) any action asserting a claim against us arising pursuant to any provision of the DGCL, our charter or our bylaws, (4) any action asserting a claim relating to or involving us governed by the internal affairs doctrine or (5) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL.
This has resulted in higher associate costs, increased attrition and significant shifts in the labor market and associate expectations and we may continue to face challenges in finding and retaining qualified personnel, particularly at the production level, which could have an adverse effect on our results of operations.
This can result in higher associate costs, higher attrition rates and significant shifts in the labor market and associate expectations and we may face challenges in finding and retaining qualified personnel, particularly at the production level, which could have an adverse effect on our results of operations.
Our historical consolidated financial statements reflect allocations of corporate expenses from Fortune Brands for these and similar functions.
Our historical consolidated financial statements prior to the Separation reflect allocations of corporate expenses from Fortune Brands for these and similar functions.
Any prolonged disruption in our manufacturing operations, whether due to technical or labor difficulties, continued labor shortages, transportation-related shortages, supply chain constraints, global pandemics such as COVID-19, weather conditions (including due to the impacts of climate change, particularly for those facilities near any shorelines or in any other area traditionally impacted by extreme weather), lack of raw material or component availability, startup inefficiencies for new operations, destruction of or damage to any facility (as a result of natural disasters, fires and explosions, use and storage of hazardous materials or other events) or other reasons, could negatively impact our profitability and competitive position.
Any prolonged disruption in our manufacturing operations, whether due to technical or labor difficulties, continued labor shortages, transportation-related shortages, supply chain constraints, global pandemics, weather conditions, including the impact of extreme weather, lack of raw material or component availability, startup inefficiencies for new operations, destruction of or damage to any facility (as a result of natural disasters, fires and explosions, use and storage of hazardous materials or other events) or other reasons, could negatively impact our profitability and competitive position.
If the Distribution were determined not to qualify for non-recognition of gain or loss under Section 355 and related provisions of the Code, each stockholder that is subject to U.S. federal income tax who received our common stock in the Distribution would generally be treated as having received a distribution in an amount equal to the fair market value of our common stock received, which would generally result in: (1) a taxable dividend to such stockholder to the extent of that such stockholder’s pro rata share of Fortune Brand’s current or accumulated earnings and profits; (2) a reduction in such stockholder’s basis (but not below zero) in Fortune Brand common stock to the extent the amount received exceeds the stockholder’s share of Fortune Brand’s earnings and profits; and (3) taxable gain from the exchange of Fortune Brand common stock to the extent the amount received exceeded the sum of such stockholder’s share of Fortune Brand’s earnings and profits and such stockholder’s basis in its Fortune Brand common stock. 20 Table of Contents We might not be able to engage in desirable strategic transactions and equity issuances following the Distribution because of certain restrictions relating to requirements for tax-free distributions.
If the Distribution were determined not to qualify for non-recognition of gain or loss under Section 355 and related provisions of the Code, each stockholder that is subject to U.S. federal income tax who received our common stock in the Distribution would generally be treated as having received a distribution in an amount equal to the fair market value of our common stock received, which would generally result in: (1) a taxable dividend to such stockholder to the extent of that such stockholder’s pro rata share of Fortune Brand’s current or accumulated earnings and profits; (2) a reduction in such stockholder’s basis (but not below zero) in Fortune Brand common stock to the extent the amount received exceeds the stockholder’s share of Fortune Brand’s earnings and profits; and (3) taxable gain from the exchange of Fortune Brand common stock to the extent the amount received exceeded the sum of such stockholder’s share of Fortune Brand’s earnings and profits and such stockholder’s basis in its Fortune Brand common stock.
Prior to the Separation, Fortune Brands received a private letter ruling from the Internal Revenue Service (“IRS”) together with a written opinion of counsel to the effect that, among other things, the Distribution will qualify as a transaction that is tax-free for U.S. federal income tax purposes under the Internal Revenue Code of 1986 (the “Code”).
Prior to the Separation, Fortune Brands received a private letter ruling from the Internal Revenue Service (“IRS”) together with a written opinion of counsel to the effect that, among other things, the Distribution will qualify as a transaction that is tax-free for U.S. federal income tax purposes under the Internal Revenue Code of 1986 (the “Code”). 20 Table of Contents The opinion of counsel does not address any U.S. state or local or foreign tax consequences of the Separation.
We are subject to a wide variety of federal, state, local and foreign laws and regulations pertaining to: ▪ securities matters; ▪ taxation (including import and export related taxes); ▪ anti-bribery/anti-corruption; ▪ employment and labor matters; ▪ wage and hour matters; ▪ environment, health and safety matters; ▪ the protection of associates and consumers; • unclaimed property (i.e., aged outstanding checks to vendors & associates, aged unused credits issued to customers, etc.) ▪ product safety and performance; ▪ competition practices; ▪ trade, including duties and tariffs; ▪ data privacy and the collection and storage of information; and ▪ climate change and protection of the environment.
We are subject to a wide variety of federal, state, local and foreign laws and regulations pertaining to: ▪ securities matters; ▪ taxation (including import and export related taxes); ▪ anti-bribery/anti-corruption; ▪ employment and labor matters; ▪ wage and hour matters; ▪ environment, health and safety matters; ▪ the protection of associates and consumers; • unclaimed property (i.e., aged outstanding checks to vendors & associates, aged unused credits issued to customers, etc.) ▪ product safety and performance; ▪ competition practices; ▪ trade, including duties and tariffs; ▪ data privacy and the collection and storage of information; and ▪ climate and protection of the environment. 16 Table of Contents In addition to complying with current requirements and known future requirements, we may be subject to new or more stringent requirements in the future.
As of December 31, 2023, approximately 37 percent of our associates worked under collective bargaining agreements. These collective bargaining agreements are subject to periodic negotiation and renewal.
As of December 29, 2024, approximately 32 percent of our associates worked under collective bargaining agreements. These collective bargaining agreements are subject to periodic negotiation and renewal.
We are subject to income taxes in the U.S. and various foreign jurisdictions. The determination of our income tax positions involves consideration of uncertainties, changing fiscal policies, tax laws, court rulings, regulations, and related legislation.
Changes in tax laws or regulations may have a negative impact on our results of operations. We are subject to income taxes in the U.S. and various foreign jurisdictions. The determination of our income tax positions involves consideration of uncertainties, changing fiscal policies, tax laws, court rulings, regulations, and related legislation.
While in the past we have been able to mitigate the impact of these cost increases through productivity improvements and passing on increasing costs to our customers over time, there is no assurance that we will be able to offset such cost increases in the future, and the risk of potentially sustained high levels of inflation could adversely impact our results of operations.
While in the past we have been able to mitigate the impact of these cost increases through productivity improvements and passing on increasing costs to our customers over time, there is no assurance that we will be able to offset such cost increases in the future, and the risk of potentially sustained high levels of inflation could adversely impact our results of operations. 10 Table of Contents Failure to attract and retain qualified personnel and other labor constraints, including increases in labor costs, potential labor disputes and work stoppages, could adversely affect our results of operations.
Our success depends in part on refining our cost structure and supply chains to promote consistently flexible and low-cost supply chains that can respond to market changes to protect profitability and cash flow or ramp up quickly and effectively to meet demand. Global supply chain disruptions could continue to impact our ability to timely source necessary components and inputs.
Our success depends in part on refining our cost structure and supply chains to promote consistently flexible and low-cost supply chains that can respond to market changes to protect profitability and cash flow or ramp up quickly and effectively to meet demand.
In addition, we source certain raw materials, components and finished goods from Southeast Asia where we have experienced higher manufacturing costs and longer lead times due to higher tariffs, currency fluctuations, higher wage rates, labor shortages and higher raw material costs. 13 Table of Contents Disruption of operations could adversely affect our profitability and competitive position.
In addition, we source certain raw materials, components and finished goods from Southeast Asia where we have experienced higher manufacturing costs and longer lead times due to higher tariffs, currency fluctuations, higher wage rates, labor shortages and higher raw material costs.
Fortune Brands may fail to perform under various transaction agreements that were executed as part of the Separation, which could cause us to incur expenses or losses we would not otherwise incur.
If Fortune Brands is unable or unwilling to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses. Fortune Brands may fail to perform under various transaction agreements that were executed as part of the Separation, which could cause us to incur expenses or losses we would not otherwise incur.
COVID-19 impacted our business in the past and future global pandemics would likely cause disruptions to our business and results of operations.
Future global pandemics would likely cause disruptions to our business and results of operations.
We could be adversely affected by international trade regulations, including duties, tariffs and anti-dumping penalties.
We could be adversely affected by international trade regulations, including the imposition of sanctions, duties, new or increased tariffs and anti-dumping penalties.
The opinion of counsel does not address any U.S. state or local or foreign tax consequences of the Separation. The opinion of counsel and the private letter ruling rely on certain facts, assumptions, representations and undertakings from Fortune Brands and us regarding the past and future conduct of the companies’ respective businesses and other matters.
The opinion of counsel and the private letter ruling rely on certain facts, assumptions, representations and undertakings from Fortune Brands and us regarding the past and future conduct of the companies’ respective businesses and other matters.
We will consider acquisitions and joint ventures as a means of enhancing stockholder value.
In addition to the acquisition of Supreme, we will continue to consider acquisitions and joint ventures as a means of enhancing stockholder value.
Global pandemics may also exacerbate certain of the other risks described in this “Risk Factors” section. We may experience delays or outages in our information technology systems and computer networks. We may be subject to breaches of our information technology systems, which could damage our reputation and consumer relationships.
Global pandemics may also exacerbate certain of the other risks described in this “Risk Factors” section. We may experience delays or outages in our information technology systems and computer networks, and our information technology or enterprise resource planning systems may fail to perform adequately.
Prices for our products are also affected by many other factors outside of our control. As a result, we have less influence or control over timing and price changes, which often are volatile in our industry.
As a result, we have less influence or control over timing and price changes, which often are volatile in our industry.
Our accounting policy for defined benefit plans may subject earnings to volatility due to the recognition of actuarial gains and losses, particularly due to the change in the fair value of pension assets and interest rates. Funding requirements for our U.S. pension plan may become more significant.
Our accounting policy for defined benefit plans may subject earnings to volatility due to the recognition of actuarial gains and losses, particularly due to the change in the fair value of pension assets and interest rates. During 2023, the Board of Directors of MasterBrand, Inc. approved a plan to terminate the defined benefit pension plan.
In addition, customers have, and are likely to continue to, require us and our products to comply with their internal ESG-related standards, such as wood-sourcing policies.
In addition, customers have, and are likely to continue to, require us and our products to comply with their internal ESG-related standards, such as wood-sourcing policies. Complying with such standards may impose significant additional costs on us, and we may no longer be able to do business with customers with whose standards we are unable to comply with.
In addition to complying with current requirements and known future requirements, we may be subject to new or more stringent requirements in the future. 16 Table of Contents As we sell new types of products or existing products in new geographic areas or channels, we are subject to the requirements applicable to those sales.
As we sell new types of products or existing products in new geographic areas or channels, we are subject to the requirements applicable to those sales.
The Pillar Two legislation does not impact our 2023 annual effective tax rate, nor do we expect it to materially impact our annual effective rate in 2024. However, further changes to our entity structure or changes in jurisdictions in which we operate could adversely impact our results of operations.
The Pillar Two legislation, as enacted in certain jurisdictions in which we operate, does not materially impact our 2024 annual effective tax rate, nor do we expect it to materially impact our annual effective rate in 2025.
Our cash flow from operations may not be sufficient to repay all of the outstanding debt as it becomes due, and we may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to refinance our debt. 15 Table of Contents Additionally, our access to, and the availability of, financing on acceptable terms and conditions in the future will be impacted by many factors, including, but not limited to: (1) our financial performance; (2) our credit ratings or absence of a credit rating; (3) the liquidity of the overall capital markets; and (4) the state of the economy, including the housing market.
Additionally, our access to, and the availability of, financing on acceptable terms and conditions in the future will be impacted by many factors, including, but not limited to: (1) our financial performance; (2) our credit ratings; (3) the liquidity of the overall capital markets; and (4) the state of the economy, including the housing market.
Our businesses may implement digital systems or technologies, enterprise resource planning systems or add applications to replace outdated systems and to operate more efficiently. We may not be able to successfully implement these projects without experiencing difficulties.
In addition, our businesses have implemented and may implement in the future, digital systems or technologies, enterprise resource planning systems or additional applications to replace outdated systems and to operate more efficiently.
No intangible asset impairments were recorded during 2023. Future events may occur that would adversely affect the fair value of our goodwill or other acquired intangible assets and require impairment charges.
If the carrying value of an indefinite-lived intangible asset is greater than its fair value, the intangible asset is considered impaired and is reduced to fair value via a non-cash charge to earnings. Future events may occur that would adversely affect the fair value of our goodwill or other acquired intangible assets and require impairment charges.
However, the ultimate amounts to be contributed are dependent upon, among other things, interest rates, underlying asset returns and the impact of legislative or regulatory changes related to pension funding obligations. We have debt obligations, and may in the future incur additional debt obligations, that could adversely affect our business and profitability and our ability to meet our other obligations.
We have debt obligations, and may in the future incur additional debt obligations, that could adversely affect our business and profitability and our ability to meet our other obligations.
Risks associated with global commodity and energy availability and price volatility, as well as the possibility of sustained inflation, could adversely affect our results of operations. Because our component products have few distinguishing properties from producer to producer, competition for these products is based primarily on price, which is determined by supply relative to demand.
Because our component products have few distinguishing properties from producer to producer, competition for these products is based primarily on price, which is determined by supply relative to demand. Prices for our products are also affected by many other factors outside of our control, such as import tariffs.
The Employee Matters Agreement also provides for the establishment or amendment of certain associate benefit arrangements and the conversion or adjustment of equity incentive awards. The Transition Services Agreement provides for the performance of certain services by each company for the benefit of the other generally for a term of up to 24 months after the Separation.
The Employee Matters Agreement also provides for the establishment or amendment of certain associate benefit arrangements and the conversion or adjustment of equity incentive awards. We will rely on Fortune Brands to satisfy its performance and payment obligations under these agreements.
The Employee Matters Agreement also provides for the establishment or amendment of certain employee benefit arrangements and the conversion or adjustment of equity incentive awards. The Transition Services Agreement provides for the performance of certain services by each company for the benefit of the other generally for a term of up to 24 months after the Separation.
The Employee Matters Agreement also provides for the establishment or amendment of certain employee benefit arrangements and the conversion or adjustment of equity incentive awards. We will rely on Fortune Brands to satisfy its performance and payment obligations under these agreements.
Import tariffs or other adverse trade actions could potentially lead to increases in prices of raw materials or components which are critical to our business. Failure to achieve the desired level of quality, capacity or cost reductions could impair our results of operations.
Global supply chain disruptions could continue, including as a result of the changing political landscape, to impact our ability to timely source necessary components and inputs. Import tariffs or other adverse trade actions could potentially lead to increases in prices of raw materials or components which are critical to our business.
Whether a transaction is a fraudulent conveyance or transfer under applicable state law may vary depending upon the jurisdiction whose law is being applied. Risks Related to Our Common Stock The market price of our shares of common stock may fluctuate significantly.
Risks Related to Our Common Stock The market price of our shares of common stock may fluctuate significantly.
We rely on information technology systems and infrastructure, including support provided by third parties.
We may be subject to breaches of our information technology systems, which could damage our reputation and consumer relationships. Such breaches could subject us to significant financial, legal and operational consequences. We rely on information technology systems and infrastructure, including support provided by third parties.
If we are unable to effectively manage our supply chain or if we experience transportation constraints, disruptions and higher costs for timely delivery of our products or components, our results of operations could be adversely affected. Risks associated with strategic acquisitions and joint ventures could adversely affect our results of operations.
If we are unable to effectively manage our supply chain or if we experience transportation constraints, disruptions and higher costs for timely delivery of our products or components, our results of operations could be adversely affected. 13 Table of Contents We may not be successful in identifying and executing potential business development transactions, such as our acquisition of Supreme, or realizing the financial and strategic goals that were contemplated at the time of any historical or potential business development transaction, which could have an adverse impact on our ability to meet our growth objectives.
Any expected benefits of implementing projects might not be realized or the costs of implementation might outweigh the benefits realized. 12 Table of Contents We may be subject to security threats, including cyber and other attacks, which are becoming increasingly sophisticated, frequent and adaptive.
Moreover, we have acquired and may acquire in the future, businesses and subsidiaries that operate information technology systems that are distinct from our operating environment, which may result in significant integration or replacement issues or expenses. 11 Table of Contents We may be subject to security threats, including cyber and other attacks, which are becoming increasingly sophisticated, frequent and adaptive.
Removed
During 2021 and 2022, we experienced price increases in nearly all raw materials due to inflation and continued global supply chain issues.
Added
Failure to achieve the desired level of quality, capacity or cost reductions could impair our results of operations. Risks associated with global commodity and energy availability and price volatility, as well as the possibility of sustained inflation, could adversely affect our results of operations.
Removed
In 2023, we experienced cost deflation in certain raw materials and transportation costs. 11 Table of Contents Failure to attract and retain qualified personnel and other labor constraints, including increases in labor costs, potential labor disputes and work stoppages, could adversely affect our results of operations.
Added
We may not be able to successfully implement these projects without experiencing difficulties, which could require significant financial and human resources and may impact our ability to efficiently service our customers. Any expected benefits of implementing projects might not be realized or the costs of implementation might outweigh the benefits realized.
Removed
Such breaches could subject us to significant financial, legal and operational consequences.
Added
If our information technology and other digital systems are damaged or fail to function properly or reliably, we may incur substantial remediation costs and experience data loss or theft, disruptions in our business operations and the impairment of our ability to maintain adequate internal controls and financial reporting.
Removed
If the carrying value of an indefinite-lived intangible asset is greater than its fair value, the intangible asset is considered impaired and is reduced to fair value via a non-cash charge to earnings. In 2022, we recognized impairment charges of $46.4 million, consisting of $38.8 million related to an indefinite-lived tradename, and $7.6 million related to another indefinite-lived tradename.
Added
There is currently uncertainty about the future relationship between the U.S. and various other countries with respect to trade practices.
Removed
Our total debt was approximately $712.5 million at December 31, 2023.
Added
The new U.S. administration has proposed the implementation of a number of tariffs, including a 25 percent tariff on imports from Mexico, Canada and other countries, which could, if enacted into law, likely significantly increase the cost of certain raw materials imported into the U.S.
Removed
To the extent that we incur additional indebtedness, the foregoing risks could increase. In addition, our actual cash requirements in the future may be greater than expected.
Added
There can be no assurance that we will not experience a disruption in our business or harm to our financial condition related to changes in trade practices, and any changes to our operations or our sourcing strategy in order to mitigate any such tariff costs could be complicated, time-consuming and costly. 12 Table of Contents Disruption of operations could adversely affect our profitability and competitive position.
Removed
Complying with such standards may impose significant 17 Table of Contents additional costs on us, and we may no longer be able to do business with customers with whose standards we are unable to comply with. Changes in tax laws or regulations may have a negative impact on our results of operations.
Added
We may seek to accelerate our growth by not only advancing our own product pipelines and maximizing the value of our existing products, but also through various forms of business development activities, which include our acquisition of Supreme and any alliances, licenses, joint ventures, collaborations, equity- or debt-based investments, dispositions, divestments, mergers and acquisitions.
Removed
We will rely on Fortune Brands to satisfy its performance and payment obligations under these agreements. If Fortune Brands is unable or unwilling to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses.
Added
The success of our business development activities is dependent on the availability and accurate evaluation of appropriate opportunities, competition from others that are seeking similar opportunities and our ability to successfully identify, structure and execute transactions, including the ability to satisfy or waive closing conditions in the anticipated timeframes, or at all, and our ability to successfully integrate acquired businesses and develop and commercialize acquired products.
Removed
Our ability to engage in significant equity transactions could be limited or restricted after the Distribution in order to preserve, for U.S. federal income tax purposes, the tax-free nature of the Distribution by Fortune Brands.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Item 1C. Cybersecurity We are committed to protecting the confidentiality and integrity of our data, as well as the data of our associates and customers. The mission of our cybersecurity program is to protect the assets used to create products, generate revenue, and service customers while complying with industry frameworks.
Item 1C. Cybersecurity We have developed our cybersecurity program to protect the assets used to create products, generate revenue, and service customers while complying with industry frameworks. We are also committed to protecting the confidentiality and integrity of our data, as well as the data of our associates and customers.
We have operationalized a written incident response plan designed to assess, identify, address, and manage risks from cybersecurity threats that may result in material adverse effects on the confidentiality, integrity and availability of our business and information systems.
We have operationalized a written incident response plan designed to assess, identify, address and manage risks from cybersecurity threats that may result in material adverse effects on the confidentiality, integrity and availability of our business and information systems. We use a threat intelligence platform to routinely monitor risks specific to both our organization and third parties.
The Audit Committee reviews and discusses with Company management key process and risk indicators, progress on plans to address keys risks, and any material changes in threat landscapes or risk posture which could negatively affect our business. Risk Management and Strategy Cybersecurity risk management is a critical component of our overall enterprise risk management program.
The Audit Committee reviews and discusses with our management key process and risk indicators, progress on plans to address keys risks, and any material changes in threat landscapes or risk posture which could negatively affect our business.
We consider cybersecurity to be a key risk, and we prioritize mitigating those risks. Our cyber defense practices prioritize protection against cyber threats.
We consider cybersecurity to be a key risk, and we prioritize risks related to cybersecurity matters. Risk Assessment and Identification Our cyber defense practices prioritize protection against cybersecurity threats.
Any security breach or other significant disruption involving our computer networks and related systems could cause substantial costs and other negative effects, including litigation, remediation costs, costs to deploy additional protection strategies, compromising of confidential information, and reputational damage adversely affecting investor confidence.
We cannot assure you that we will not experience any such threats or incidents in the future. Any security breach or other significant disruption involving our computer networks and related systems could cause substantial costs and other negative effects, including litigation, remediation costs, costs to deploy additional protection strategies, compromising of confidential information and reputational damage adversely affecting investor confidence.
Training and Awareness Our associates are a critical part of our defense against potential cybersecurity incident exposure. All of our associates and contractors have a responsibility and a role to play by complying with our cybersecurity operational practices and reporting any potential cybersecurity incidents or exposures to our cybersecurity team.
All of our associates have a responsibility and a role to play by complying with our cybersecurity operational practices and reporting any potential cybersecurity incidents or exposures to our cybersecurity team.
Our cybersecurity program consists of three key pillars: cyber defense, governance and compliance, and risk management. Each of these pillars consists of controls and processes that are aligned with the National Institute of Standards and Technology Cyber Security Framework. Managing cybersecurity risk and maintaining a secure, reliable, and functional corporate network and data systems are among our highest priorities.
Our cybersecurity program consists of key pillars focused on: risk management and cyber defense, as well as governance and compliance. Each of these pillars consists of controls and processes that are aligned with the National Institute of Standards and Technology (“NIST”) Cyber Security Framework.
Our VP, Cyber Security and Risk reports to both the Audit Committee and the Board at least once a year, or more frequently as needed.
Our Vice President, Cyber Security and Risk regularly provides updates on material cybersecurity risks to our CDTO and other members of senior management and provides reports to both the Audit Committee and the Board at least once a year, or more frequently as needed.
We perform periodic cybersecurity assessments, including with the assistance of external third parties, to identify, assess, and prioritize potential risks that could affect our information and data assets and infrastructure. In addition, we use a threat intelligence platform to routinely monitor risks specific to both our organization and third parties.
We perform periodic cybersecurity assessments, including with the assistance of external third parties, to identify, assess and prioritize potential risks that could affect our information and data assets and infrastructure. Risks we identify are assessed based on severity and are addressed as appropriate through both tactical and strategic plans.
Risks we identify are assessed based on severity and are addressed as appropriate through both tactical and strategic plans. Our governance and compliance practice focuses on cybersecurity and data privacy policy taxonomy and policy compliance. We have implemented a number of measures to enhance the security and resiliency of our network and information and data systems.
We have implemented a number of measures to enhance the security and resiliency of our network and information and data systems.
As a result, we have implemented practices, procedures, processes, and management mechanisms to help us achieve a robust cybersecurity environment. Governance Our Board delegates to the Audit Committee the oversight of our programs, policies, and procedures related to cybersecurity, information asset security, network security, and data privacy and protection.
Managing cybersecurity risk and maintaining a secure, reliable and functional corporate network and data systems are among our highest priorities. As a result, we have implemented practices, procedures, processes and governance mechanisms to help us achieve a robust cybersecurity environment. Risk Management and Strategy Cybersecurity risk management is a critical component of our overall enterprise risk management program.
Risk Factors for further details on risks related to potential breaches of our information technology systems.
Risk Factors for further details on risks related to potential breaches of our information technology systems. Governance The Audit Committee assists the Board in its oversight of our enterprise risk management program. The Audit Committee reviews our strategies, policies and internal controls relating to information technology, data privacy, data protection and cybersecurity.
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Broad oversight is maintained by our full Board, which receives a report from the Audit Committee at least annually. 23 Table of Contents Our VP, Cyber Security and Risk oversees our cybersecurity matters and has over 20 years of experience in cybersecurity and is a Certified Information Security Services Professional (CISSP).
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Our incident response playbook and processes are maintained within the cyber defense program and used to keep personnel trained. Penetration tests are conducted periodically to validate cyber defense control effectiveness. We have also established cybersecurity taxonomy and operational parameters for our company. These parameters include acceptable technology and data use, data privacy, access controls, third-party governance and disaster recovery.
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To ensure that associates can play their part in protecting our networks and data from cybersecurity incident exposure, all of our associates receive cybersecurity training in the form of online modules on an annual basis, routine simulations, and newsletters.
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Vulnerability management is also a key focus of our cybersecurity program, which consists of identifying and assessing vulnerabilities and taking appropriate action to manage risk. We routinely review our controls and technology use against our policies and assess our cybersecurity program against the NIST Cyber Security Framework.
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Material Cybersecurity Risks, Threats & Incidents We are not aware of any cyber event that has had a material effect on our business. However, we cannot assure that we will not experience any such event in the future.
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Risk and security maturity assessments, as well as penetration assessments, are performed as part of our cybersecurity program. Third Party Risk Management We have a process in place to oversee our third-party vendors who have access to our information systems or who hold or store personal information on our behalf.
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We use a variety of methods and tools to assess such third-party vendors’ controls related to cybersecurity threats, including obtaining proof of a vendor’s testing of data protection controls, imposition of contractual obligations and reviews of data protection controls such as backups, encryption standards and disaster recovery.
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Our information technology and vendor risk management functions assess such third-party vendors as part of the initial determination process and then periodically thereafter. Training and Awareness Our associates are a critical part of our defense against potential cybersecurity incident exposure.
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All applicable associates receive cybersecurity training in the form of online modules on an annual basis, routine simulations and newsletters. 23 Table of Contents Material Cybersecurity Risks, Threats & Incidents As of the date of this Annual Report on Form 10-K, we have not identified any risks from cybersecurity threats, including as a result of previous cybersecurity incidents, that we believe have materially affected, or are reasonably likely to materially affect, us, including our business strategy, results of operations, or financial condition.
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The Audit Committee’s review includes our plans to mitigate cybersecurity risks and to respond to data breaches. Broad oversight is maintained by our full Board. Our Executive Vice President and Chief Digital and Technology Officer (“CDTO”) is responsible for the oversight of our information security strategy and cybersecurity program.
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Our CDTO has over 20 years of information technology experience, leading the development of a multi-year information technology strategy, including cross-functional information technology transformation and digital innovation initiatives.
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Our Vice President, Cyber Security and Risk, who reports directly to the CDTO, is responsible for day-to-day assessment and management of our cybersecurity matters and has over 20 years of experience in enterprise risk management, governance and compliance, defending against cyber threats and is a Certified Information Security Services Professional (“CISSP”).
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Our Vice President, Cyber Security and Risk oversees a cybersecurity team that focuses on the execution of our cybersecurity program, including cyber defense, as well as risk and compliance matters. The cybersecurity team receives timely notifications about cybersecurity threats via the threat intelligence platform used by the company.
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In addition, this team leverages third-party security service and threat intelligence partners to operate and maintain our cyber defense program, to stay current on cybersecurity risks and to assess various areas of our operations.

Item 2. Properties

Properties — owned and leased real estate

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We believe these principal properties have been adequately maintained, generally are in good condition and are suitable to meet the demands and production capacities required of our business.
We believe these principal properties have been adequately maintained, generally are in good condition and are suitable to meet the demands and production capacities required of our business. 24 Table of Contents
Item 2. Properties As of December 31, 2023, our principal executive office was located at One MasterBrand Cabinets Drive, Jasper, Indiana, 47546. In February 2024, we relocated our corporate headquarters to Beachwood, Ohio. While our new corporate headquarters will be in Beachwood, Ohio, our operations headquarters will remain in Jasper, Indiana.
Item 2. Properties Our corporate headquarters is located at 3300 Enterprise Parkway, Suite 300, Beachwood, Ohio, 44122. Prior to February 2024, our principal executive office was located at One MasterBrand Cabinets Drive, Jasper, Indiana, 47546. While our corporate headquarters is now in Beachwood, Ohio, our operations headquarters remains in Jasper, Indiana.
As of December 31, 2023, we principally operated 41 manufacturing facilities, distribution centers and warehouses throughout North America. 24 Table of Contents Type of Facility United States Mexico Canada Total Manufacturing facilities* ............................... 15 4 1 20 Distribution centers and warehouses** ......... 14 6 1 21 Total .............................................................. 29 10 2 41 * Manufacturing facilities include 15 which are owned and 5 which are leased. ** Distribution centers and warehouses include 4 which are owned and 17 which are leased.
Type of Facility United States Mexico Canada Total Manufacturing facilities* ............................... 21 4 1 26 Distribution centers and warehouses** ......... 15 5 1 21 Total .............................................................. 36 9 2 47 * Manufacturing facilities include 20 which are owned and 6 which are leased. ** Distribution centers and warehouses include 5 which are owned and 16 which are leased.
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As of December 29, 2024, we principally operated 47 manufacturing facilities, distribution centers and warehouses throughout North America.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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However, such matters are subject to inherent uncertainties and unfavorable rulings or other events could occur. The Company regularly undergoes tax audits in various jurisdictions in which our products are sold or manufactured. In the future, such costs or an unfavorable outcome could have a material impact on our consolidated results of operations.
However, such matters are subject to inherent uncertainties and unfavorable rulings or other events could occur. The Company regularly undergoes tax audits in various jurisdictions in which our products are sold or manufactured. In the future, such costs or an unfavorable outcome could have a material impact on our consolidated results of operations, cash flows and financial condition.
We believe that there are meritorious defenses to these actions and that these actions will not have a material adverse effect on our results of operations, and, where appropriate, these actions are being vigorously contested. Accordingly, we believe the likelihood of material loss is remote.
We believe that there are meritorious defenses to these actions and that these actions will not have a material adverse effect on our results of operations, cash flows or financial condition, and, where appropriate, these actions are being vigorously contested. Accordingly, we believe the likelihood of material loss is remote.
We have reserved an immaterial amount related to the 2018 tax year audit as our best estimate of our probable liability.
We reserved an immaterial amount related to the 2018 tax year audit as our best estimate of our probable liability as of December 29, 2024 and December 31, 2023.
For additional information regarding our legal proceedings, refer to Note 16, "Contingencies and Accrued Losses," of our audited consolidated financial statements within this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 25 Table of Contents PART II
For additional information regarding our legal proceedings, refer to Note 17, "Contingencies and Accrued Losses," of our audited consolidated financial statements within this Annual Report on Form 10-K.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Our subsidiaries are not limited by long-term debt or other agreements in their abilities to pay cash dividends or to make other distributions with respect to their capital stock or other payments to the Company. Holders On February 23, 2024, there were 8,574 record holders of our common stock, par value $0.01 per share.
Our subsidiaries are not limited by long-term debt or other agreements in their abilities to pay cash dividends or to make other distributions with respect to their capital stock or other payments to the Company. Holders On February 14, 2025, there were 7,413 record holders of our common stock, par value $0.01 per share.
Stockholder Return Comparison We include in our Annual Report a line graph presentation comparing the relative performance of our stock compared with the S&P SmallCap 600 Index and the S&P 600 Building Products Industry Index from the date we became publicly traded, December 15, 2022, through December 31, 2023.
Stockholder Return Comparison We include in our Annual Report on Form 10-K a line graph presentation comparing the relative performance of our stock compared with the S&P SmallCap 600 Index and the S&P 600 Building Products Industry Index from the date we became publicly traded, December 15, 2022, through December 29, 2024 .
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The following chart assumes a hypothetical $100 investment on December 15, 2022 and shows the cumulative value at the end of each succeeding year. 26 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table presents information with respect to purchases of common stock of the Company made during the fourteen week period that ended on December 31, 2023 by the Company or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended: Period Total number of shares purchased Average price paid per share (2) Total number of shares purchased as part of publicly announced plans or programs Maximum dollar amount that may yet be purchased under the plans or programs (1) September 25, 2023 through October 22, 2023 298,742 $ 11.59 298,742 $ 30,597,909 October 23, 2023 through November 19, 2023 228,288 $ 11.36 228,288 $ 28,003,421 November 20, 2023 through December 31, 2023 — $ — — $ 28,003,421 Q4 Total 527,030 $ 11.49 527,030 (1) On May 9, 2023, we announced our authorization of a stock repurchase program under which we may repurchase up to $50.0 million of MasterBrand common stock over a twenty-four month period at management’s discretion for general corporate purposes.
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The following chart assumes a hypothetical $100 investment on December 15, 2022 and shows the cumulative value at the end of each succeeding year. 26 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
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(2) Average price paid per share excludes commissions paid.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

70 edited+54 added−32 removed68 unchanged
We are now incurring certain costs as a standalone public company, including services provided by our own resources or through third-party service providers relating to corporate functions, including information technology, finance, executive, human resources, supply chain, internal audit, governance and legal services, as well as ongoing additional costs associated with operating as an independent, publicly-traded company. 31 Table of Contents All transactions between us and Fortune Brands previously resulting in related party balances were settled in our consolidated financial statements immediately prior to the Distribution, or were settled shortly thereafter, including by making a distribution of capital by us to Fortune Brands of any remaining related party receivable owed by Fortune Brands to us.
We are now incurring certain costs as a standalone public company, including services provided by our own resources or through third-party service providers relating to corporate functions, including information technology, finance, executive, human resources, supply chain, internal audit, governance and legal services, as well as ongoing additional costs associated with operating as an independent, publicly-traded company. 32 Table of Contents All transactions between us and Fortune Brands previously resulting in related party balances were settled in our consolidated financial statements immediately prior to the Distribution, or were settled shortly thereafter, including by making a distribution of capital by us to Fortune Brands of any remaining related party receivable owed by Fortune Brands to us.
A dedicated management team and board of directors streamlines operational and strategic decision-making, and ensures management incentives are optimized and aligned with our strategic priorities and financial objectives are in line with our industry. 30 Table of Contents • Resource Allocation and Capital Deployment : The Separation provides us with an opportunity to implement a tailored capital structure that ties specifically to our industry and business that provides greater financial and operational flexibility and increased agility.
A dedicated management team and board of directors streamlines operational and strategic decision-making, and ensures management incentives are optimized and aligned with our strategic priorities and financial objectives are in line with our industry. 31 Table of Contents • Resource Allocation and Capital Deployment : The Separation provides us with an opportunity to implement a tailored capital structure that ties specifically to our industry and business that provides greater financial and operational flexibility and increased agility.
MD&A is organized as follows: • Overview : This section provides a general description of our business, as well as recent developments we believe are important in understanding our results of operations and financial condition or in understanding anticipated future trends. • Separation from Fortune Brands : This section provides a general discussion of our Separation from Fortune Brands. 28 Table of Contents • Basis of Presentation : This section provides a discussion of the basis on which our consolidated financial statements were prepared, including our historical results of operations and adjustments thereto, primarily allocations of general corporate expenses from Fortune Brands. • Results of Operations : Our consolidated financial statements are based on a 52- or 53-week fiscal year ending on the last Sunday in December in each calendar year.
MD&A is organized as follows: • Overview : This section provides a general description of our business, as well as recent developments we believe are important in understanding our results of operations and financial condition or in understanding anticipated future trends. • Separation from Fortune Brands : This section provides a general discussion of our Separation from Fortune Brands. • Basis of Presentation : This section provides a discussion of the basis on which our consolidated financial statements were prepared, including our historical results of operations and adjustments thereto, primarily allocations of general corporate expenses from Fortune Brands. • Results of Operations : Our consolidated financial statements are based on a 52- or 53-week fiscal year ending on the last Sunday in December in each calendar year.
For more information regarding related party transactions with Fortune Brands, see Note 20, "Related Party Transactions," of our audited consolidated financial statements within this Annual Report on Form 10-K. Fortune Brands utilized a central approach to treasury management, and we historically participated in related cash pooling arrangements prior to the Separation.
For more information regarding related party transactions with Fortune Brands, see Note 21, "Related Party Transactions," of our audited consolidated financial statements within this Annual Report on Form 10-K. Fortune Brands utilized a central approach to treasury management, and we historically participated in related cash pooling arrangements prior to the Separation.
Actual costs that we may have incurred had we been a standalone company during all periods presented would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by our associates and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology and infrastructure.
Actual costs that we may have incurred had we been a standalone company during the period presented would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by our associates and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology and infrastructure.
Our projection for the U.S. home products market is inherently uncertain and is subject to a number of factors, such as employment rates, home prices, interest rates, credit availability, new home starts and the rate of home foreclosures. 39 Table of Contents We first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired.
Our projection for the U.S. home products market is inherently uncertain and is subject to a number of factors, such as employment rates, home prices, interest rates, credit availability, new home starts and the rate of home foreclosures. We first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired.
Some of the more significant assumptions inherent in estimating the fair values include forecasted revenue growth rates, assumed royalty rates, and market-participant discount rates that reflect the level of risk associated with the tradenames’ future revenues and profitability.
Some of the more significant assumptions inherent in estimating the fair values include forecasted revenue growth rates, assumed royalty rates and market-participant discount rates that reflect the level of risk associated with the tradenames’ forecasted revenue growth rates and profitability.
The significant assumptions used to estimate the fair values of the tradenames tested quantitatively during the fiscal years ended December 31, 2023, December 25, 2022 and December 26, 2021 were as follows: 2023 2022 2021 Unobservable Input Min Max Wtd Avg (a) Min Max Wtd Avg (a) Min Max Wtd Avg (a) Discount rate 10.5 % 11.0 % 10.8 % 11.9 % 12.6 % 12.2 % 10.9 % 11.5 % 11.2 % Royalty rate (b) 3.0 % 4.0 % 3.6 % 2.5 % 4.0 % 3.5 % 2.4 % 4.0 % 3.4 % Long-term revenue growth rate (c) 2.0 % 2.5 % 2.3 % 1.0 % 3.0 % 2.0 % 1.0 % 3.0 % 2.6 % (a) Weighted by the relative fair value of the tradenames that were tested quantitatively.
The significant assumptions used to estimate the fair values of the tradenames tested quantitatively during the fiscal years ended December 29, 2024, December 31, 2023 and December 25, 2022 were as follows: 2024 2023 2022 Unobservable Input Min Max Wtd Avg (a) Min Max Wtd Avg (a) Min Max Wtd Avg (a) Discount rate 12.0 % 12.0 % 12.0 % 10.5 % 11.0 % 10.8 % 11.9 % 12.6 % 12.2 % Royalty rate (b) 3.0 % 4.0 % 3.6 % 3.0 % 4.0 % 3.6 % 2.5 % 4.0 % 3.5 % Long-term revenue growth rate (c) 2.0 % 2.5 % 2.3 % 2.0 % 2.5 % 2.3 % 1.0 % 3.0 % 2.0 % (a) Weighted by the relative fair value of the tradenames that were tested quantitatively.
The determination of fair value using this technique requires the use of estimates and assumptions related to forecasted revenue growth rates, the assumed royalty rates and the market-participant discount rates. In the second quarter ended June 26, 2022, we recognized an impairment charge of $26.0 million related to an indefinite-lived tradename.
The determination of fair value using this technique requires the use of estimates and assumptions related to forecasted revenue growth rates, the assumed royalty rates and the market-participant discount rates. 41 Table of Contents In the second quarter ended June 26, 2022, we recognized an impairment charge of $26.0 million related to an indefinite-lived tradename.
While we believe current allowances for credit losses are adequate, it is possible that continued weak economic conditions may cause significantly higher levels of customer defaults and bad debt expense in future periods. 36 Table of Contents Pension Plan We sponsor a defined benefit pension plan.
While we believe current allowances for credit losses are adequate, it is possible that continued weak economic conditions may cause significantly higher levels of customer defaults and bad debt expense in future periods. Pension Plan We sponsor a defined benefit pension plan.
Following the Separation, a limited number of services that Fortune Brands provided to us, or we provided to them, prior to the Separation continue to be provided for a period of time under a Transition Services Agreement.
Following the Separation, a limited number of services that Fortune Brands provided to us, or we provided to them, prior to the Separation continued to be provided for a period of time under a transition services agreement.
We consider the expense methodology and resulting allocation to be reasonable for all periods presented; however, the allocations may not be indicative of actual expenses that would have been incurred had we operated as an independent, publicly-traded company during all periods presented.
We consider the expense methodology and resulting allocation to be reasonable for the period presented; however, the allocations may not be indicative of actual expenses that would have been incurred had we operated as an independent, publicly-traded company during the period presented.
These downward revisions to forecasted revenue growth were not known when recording the impairment charge during the second quarter of 2022. In 2023, we did not recognize any impairment charges related to this indefinite-lived tradename. As of both December 31, 2023 and December 25, 2022, the carrying value of this tradename was $46.2 million .
These downward revisions to forecasted revenue growth rates were not known when recording the impairment charge during the second quarter of 2022. In 2023 and 2024, we did not recognize any impairment charges related to this indefinite-lived tradename. As of both December 29, 2024 and December 31, 2023, the carrying value of this tradename was $46.2 million .
This section provides an analysis of our results of operations for the 53-week period that ended on December 31, 2023 as compared to the 52-week period that ended on December 25, 2022. Unless the context otherwise requires, references to years and quarters contained in this Annual Report on Form 10-K pertain to our fiscal years and fiscal quarters.
This section provides an analysis of our results of operations for the 52-week period that ended on December 29, 2024 as compared to the 53-week period that ended on December 31, 2023. Unless the context otherwise requires, references to years and quarters contained in this Annual Report on Form 10-K pertain to our fiscal years and fiscal quarters.
In 2023, we did not recognize any impairment charges related to this indefinite-lived tradename. As of both December 31, 2023 and December 25, 2022, the carrying value of this tradename was $19.1 million . The fair values of the impaired tradenames were measured using the relief-from-royalty approach.
In 2023 and 2024, we did not recognize any impairment charges related to this indefinite-lived tradename. As of both December 29, 2024 and December 31, 2023, the carrying value of this tradename was $19.1 million . The fair values of the impaired tradenames were measured using the relief-from-royalty approach.
All share and per share amounts for all prior periods presented in the consolidated financial statements, as discussed in further detail in Note 5, "Earnings Per Share," of our audited consolidated financial statements within this Annual Report on Form 10-K have been retroactively recast to reflect the effects of the changes in equity structure resulting from the Reorganization, Separation and Distribution.
All share and per share amounts for the period presented in the consolidated financial statements, as discussed in further detail in Note 6, "Earnings Per Share," of our audited consolidated financial statements within this Annual Report on Form 10-K have been retroactively recast to reflect the effects of the changes in equity structure resulting from the Reorganization, Separation and Distribution.
For comparisons of our 2022 fiscal year compared to our 2021 fiscal year, please refer to the heading “Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 25, 2022, as filed with the SEC. Fiscal 2023 compared to Fiscal 2022 (U.S.
For comparisons of our 2023 fiscal year compared to our 2022 fiscal year, please refer to the heading “Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC. Fiscal 2024 compared to Fiscal 2023 (U.S.
Additionally, unless the context otherwise requires, references in this Annual Report on Form 10-K to: (1) “2023,” “fiscal 2023” or our “2023 fiscal year” refers to our 2023 fiscal year that is a 53-week period that ended on December 31, 2023; (2)“2022,” “fiscal 2022” or our “2022 fiscal year” refers to our 2022 fiscal year that was a 52-week period that ended on December 25, 2022; and (3) “2021,” “fiscal 2021” or our “2021 fiscal year” refers to our 2021 fiscal year that was a 52-week period that ended on December 26, 2021. • Liquidity and Capital Resources : This section provides a discussion of our financial condition and an analysis of our cash flows for our 2023 fiscal year as compared to our 2022 fiscal year.
Additionally, unless the context otherwise requires, references in this Annual Report on Form 10-K to: (1) “2024,” “fiscal 2024” or our “2024 fiscal year” refers to our 2024 fiscal year that is a 52-week period that ended on December 29, 2024; (2)“2023,” “fiscal 2023” or our “2023 fiscal year” refers to our 2023 fiscal year that was a 53-week period that ended on December 31, 2023; and (3) “2022,” “fiscal 2022” or our “2022 fiscal year” refers to our 2022 fiscal year that was a 52-week period that ended on December 25, 2022. • Liquidity and Capital Resources : This section provides a discussion of our financial condition and an analysis of our cash flows for our 2024 fiscal year as compared to our 2023 fiscal year.
In order to govern the ongoing relationships between MasterBrand, Inc. and Fortune Brands after the Separation and to facilitate an orderly transition, the parties entered into a series of agreements including the following: • Separation and Distribution Agreement – sets forth the principal actions to be taken in connection with the Separation, including the transfer of assets and assumption of liabilities, among others, and sets forth other agreements governing aspects of the relationship between MasterBrand and Fortune Brands. • Transition Services Agreement – allows for Fortune Brands and MasterBrand to provide certain transition services to each other for a limited time, up to 24 months following the Separation. • Tax Allocation Agreement – governs the respective rights, responsibilities and obligations of MasterBrand and Fortune Brands with respect to tax liabilities and benefits, tax attributes, tax contests and other matters regarding income taxes, non-income taxes and related tax returns. • Employee Matters Agreement – addresses certain employment, compensation and benefits matters, including the allocation and treatment of certain assets and liabilities relating to MasterBrand associates.
In order to govern the ongoing relationships between MasterBrand, Inc. and Fortune Brands after the Separation and to facilitate an orderly transition, the parties entered into a series of agreements including the following: • Separation and Distribution Agreement – sets forth the principal actions to be taken in connection with the Separation, including the transfer of assets and assumption of liabilities, among others, and sets forth other agreements governing aspects of the relationship between MasterBrand and Fortune Brands. • Tax Allocation Agreement – governs the respective rights, responsibilities and obligations of MasterBrand and Fortune Brands with respect to tax liabilities and benefits, tax attributes, tax contests and other matters regarding income taxes, non-income taxes and related tax returns. • Employee Matters Agreement – addresses certain employment, compensation and benefits matters, including the allocation and treatment of certain assets and liabilities relating to MasterBrand associates.
See Note 8, "Goodwill and Identifiable Intangible Assets," and Note 10, "Fair Value Measurements," of our audited consolidated financial statements within this Annual Report on Form 10-K, for additional information. During our 2023 impairment test, we elected to bypass the qualitative test and tested all of our indefinite lived tradenames quantitatively.
See Note 9, "Goodwill and Identifiable Intangible Assets," and Note 11, "Fair Value Measurements," of our audited consolidated financial statements within this Annual Report on Form 10-K, for additional information. During our 2024, 2023 and 2022 impairment tests, we elected to bypass the qualitative test and tested all of our indefinite lived tradenames quantitatively.
Accordingly, the net tax payable of $32.6 million to Fortune Brands as of December 25, 2022, was recorded in accounts payable on the Consolidated Balance Sheets and settled in 2023.
Accordingly, the net tax payable of $32.6 million to Fortune Brands as of December 25, 2022, was recorded in accounts payable and settled in 2023.
Results of Operations The following discussion includes a comparison of results of operations for the fifty-three weeks ended December 31, 2023 compared to the fifty-two weeks ended December 25, 2022.
Results of Operations The following discussion includes a comparison of results of operations for the fifty-two weeks ended December 29, 2024 compared to the fifty-three weeks ended December 31, 2023.
These expenses have been allocated based on direct usage or benefit where specifically identifiable, with the remainder allocated on a proportional cost allocation method based primarily on net sales, associate headcount or number of facilities, as applicable. Prior to the Separation, total expenses allocated for our 2022 and 2021 fiscal years were $92.5 million and $62.0 million, respectively.
These expenses have been allocated based on direct usage or benefit where specifically identifiable, with the remainder allocated on a proportional cost allocation method based primarily on net sales, associate headcount or number of facilities, as applicable. Prior to the Separation, total expenses allocated for our 2022 fiscal year was $92.5 million.
In accordance with this policy, our inventory provision was $15.9 million and $19.6 million as of December 31, 2023 and December 25, 2022 , respectively. Goodwill and Indefinite-lived Intangible Assets Goodwill In accordance with ASC Topic 350, Intangibles—Goodwill and Other , goodwill is tested for impairment at least annually in the fourth quarter and written down when impaired.
In accordance with this policy, our inventory provision was $17.0 million and $15.9 million as of December 29, 2024 and December 31, 2023 , respectively. 40 Table of Contents Goodwill and Indefinite-lived Intangible Assets Goodwill In accordance with ASC Topic 350, Intangibles—Goodwill and Other , goodwill is tested for impairment at least annually in the fourth quarter and written down when impaired.
Of these allocations, $72.4 million and $42.3 million, respectively, were not previously allocated to us for our 2022 and 2021 fiscal years. Such amounts are primarily included within selling, general and administrative expenses in our consolidated statements of income.
Of these allocations, $72.4 million was not previously allocated to us for our 2022 fiscal year. Such amounts are primarily included within selling, general and administrative expenses in our consolidated statements of income.
We believe that our cash and cash equivalent balances, along with available cash from operating cash flows and credit facilities, will be adequate to fund our typical needs, including working capital requirements and projected capital expenditures. We also believe we have access to additional funds from capital markets to fund strategic initiatives.
We believe that our cash and cash equivalent balances, along with available cash from operating cash flows and credit facilities, will be adequate to fund our typical needs, including working capital requirements and projected capital expenditures.
This section also provides a discussion of our contractual obligations, other purchase commitments and customer credit risk that existed at December 31, 2023 and December 25, 2022, as well as a discussion of our ability to fund our future commitments and ongoing operating activities through internal and external sources of capital. • Recently Issued Accounting Standards : This section identifies our adoption of recently issued accounting standards. • Critical Accounting Estimates : This section identifies and summarizes those accounting policies that significantly impact our reported results of operations and financial condition and require significant judgment or estimates on the part of management in their application.
This section also provides a discussion of our contractual obligations, other purchase commitments and customer credit risk that existed at December 29, 2024 and December 31, 2023, as well as a discussion of our ability to fund our future commitments and ongoing operating activities through internal and external sources of capital. • Recently Issued Accounting Standards : This section identifies our adoption of recently issued accounting standards. • Critical Accounting Estimates : This section identifies and summarizes those accounting policies that significantly impact our reported results of operations and financial condition and require significant judgment or estimates on the part of management in their application. 29 Table of Contents Overview Founded over 70 years ago, we are the largest manufacturer of residential cabinets in North America.
Based on foreign exchange rates as of December 31, 2023 , we estimate that $2.2 million of net derivative gain included in other comprehensive income (“AOCI”) as of December 31, 2023 , will be reclassified to earnings within the next twelve months. Foreign Currency Risk We have operations in various foreign countries, principally Canada and Mexico.
Based on foreign exchange rates as of December 29, 2024 , we estimate that $5.0 million of net derivative loss included in accumulated other comprehensive loss as of December 29, 2024 , will be reclassified to earnings within the next twelve months. Foreign Currency Risk We have operations in various foreign countries, principally Canada and Mexico.
Deferred currency gains of $10.2 million, $4.5 million, and $2.9 million (before tax impact) were reclassified into earnings for the 2023, 2022, and 2021 fiscal years, respectively.
Deferred currency losses of $2.9 million were reclassified into earnings for the 2024 fiscal year. Deferred currency gains of $10.2 million and $4.5 million were reclassified into earnings for the 2023 and 2022 fiscal years, respectively.
Liquidity and Capital Resources Our primary liquidity needs have historically been to support working capital requirements and fund capital expenditures. Subsequent to the Separation, we may have liquidity needs to finance acquisitions and return cash to stockholders, if and when appropriate.
Liquidity and Capital Resources Our primary liquidity needs have historically been to support working capital requirements and fund capital expenditures. Subsequent to the Separation, we may have liquidity needs to finance acquisitions and return cash to stockholders, such as the 2024 acquisition of Supreme.
The Cabinets segment of Fortune Brands had historically been operated by MasterBrand Cabinets, Inc. (“MBCI”). In July 2022, Fortune Brands incorporated MasterBrand, Inc. in the State of Delaware and subscribed to all of the shares of MasterBrand, Inc.’s common stock upon its incorporation.
In July 2022, Fortune Brands incorporated MasterBrand, Inc. in the State of Delaware and subscribed to all of the shares of MasterBrand, Inc.’s common stock upon its incorporation.
In accordance with our policy, our allowance for credit losses was $4.6 million and $11.6 million as of December 31, 2023 and December 25, 2022 , respectively.
In accordance with our policy, our allowance for credit losses was $3.0 million and $4.6 million as of December 29, 2024 and December 31, 2023 , respectively.
In 2022, we executed an intentional build in inventory in the first three quarters of the year in order to mitigate the impact of an uncertain and volatile global supply chain environment. The favorable inventory movement in 2023 reflects our efforts to more efficiently manage our inventory levels in the current supply chain environment and in alignment with sales volume.
In 2022, we executed an intentional build in inventory in order to mitigate the impact of an uncertain and volatile global supply chain environment. The favorable inventory movement in 2023 reflected our efforts to more efficiently manage our inventory levels in the supply chain environment.
Post-Separation, our income tax provisions are calculated based on our operating footprint, as well as our tax return elections and assertions. For taxable periods ended after the Separation, we file a consolidated U.S. federal income tax return and various state and local income tax returns. Our foreign income tax returns will continue to be filed on a full-year basis.
For taxable periods ended after the Separation, we file a consolidated U.S. federal income tax return and various state and local income tax returns. Our foreign income tax returns continue to be filed on a full-year basis.
Other corporate commercial commitments as of December 31, 2023 include standby letters of credit of $19.8 million and surety bonds outstanding of $3.6 million , of which $3.4 million are due in the next 12 months.
Other corporate commercial commitments as of December 29, 2024 include standby letters of credit of $24.6 million and surety bonds outstanding of $3.7 million , of which $3.5 million are due in the next 12 months.
Dollars presented in millions) December 31, 2023 December 25, 2022 Income before taxes $ 238.7 $ 213.4 Income tax expense 56.7 58.0 Effective tax rate 23.8 % 27.2 % For 2023, the Company’s effective tax rate was 23.8 percent, compared to an effective tax rate of 27.2 percent for 2022.
Dollars presented in millions) December 29, 2024 December 31, 2023 Income before taxes $ 168.3 $ 238.7 Income tax expense 42.4 56.7 Effective tax rate 25.2 % 23.8 % 34 Table of Contents For 2024, the Company’s effective tax rate was 25.2 percent, compared to an effective tax rate of 23.8 percent for 2023.
The income tax expense in our Consolidated Financial Statements has been determined on a stand-alone return basis in accordance with ASC Topic 740, Income Taxes, which requires the recognition of income taxes using the liability method. The tax provision and current and deferred tax balances have been prepared on a separate-return basis as if we were a separate filer.
We filed separate foreign income tax returns. The income tax expense in our Consolidated Financial Statements has been determined on a stand-alone return basis in accordance with ASC Topic 740, Income Taxes, which requires the recognition of income taxes using the liability method.
The termination and settlement process, which preserves retirement benefits due to participants but changes the ultimate payor of such benefits, is expected to take up to 24 months to complete, subject to receipt of customary regulatory approvals. During 2024, the Company expects to offer a lump-sum benefit payout option to certain plan participants.
The termination and settlement process, which preserves retirement benefits due to participants but changes the ultimate payor of such benefits, is expected to take up to 24 months to complete, subject to receipt of customary regulatory approvals.
We believe that of our accounting estimates and assumptions, those described in the following sections involve a high degree of judgment and complexity. 38 Table of Contents Inventories Inventory provisions are recorded to reduce inventory to the net realizable dollar value for obsolete or slow moving inventory based on assumptions about future demand and marketability of products, the impact of new product introductions, inventory levels and turns, product spoilage and specific identification of items, such as product discontinuance, engineering/material changes, or regulatory-related changes.
Inventories Inventory provisions are recorded to reduce inventory to the net realizable dollar value for obsolete or slow moving inventory based on assumptions about future demand and marketability of products, the impact of new product introductions, inventory levels and turns, product spoilage and specific identification of items, such as product discontinuance, engineering and material changes, or regulatory-related changes.
Dollars presented in millions) 2023 2022 Net cash provided by operating activities $ 405.6 $ 235.6 Net cash used in investing activities (56.9) (55.9) Net cash used in financing activities (299.9) (215.3) Effect of foreign exchange rate changes on cash (1.2) (4.7) Net increase (decrease) in cash and cash equivalents $ 47.6 $ (40.3) 35 Table of Contents Fiscal 2023 as compared to Fiscal 2022 Net cash provided by operating activities increased to $405.6 million in 2023 as compared to $235.6 million in 2022.
Dollars presented in millions) 2024 2023 Net cash provided by operating activities $ 292.0 $ 405.6 Net cash used in investing activities (580.8) (56.9) Net cash used in (provided by) financing activities 269.6 (299.9) Effect of foreign exchange rate changes on cash (7.9) (1.2) Net (decrease) increase in cash, cash equivalents and restricted cash $ (27.1) $ 47.6 Fiscal 2024 as compared to Fiscal 2023 Net cash provided by operating activities decreased to $292.0 million in 2024 as compared to $405.6 million in 2023.
Dollars presented in millions) Payment Due by Period Total 2024 2025 2026 2027 2028 Thereafter Contractual Obligations Purchase obligations (a) $ 38.3 $ 25.6 $ 7.3 $ 2.7 $ 2.7 $ — $ — Non-cancellable operating leases 71.1 18.1 13.5 10.5 8.7 7.0 13.3 Non-cancellable financing leases 4.2 1.9 1.4 0.8 0.1 — — Other Corporate Commercial Commitments Debt payments (b) 712.5 18.8 37.5 37.5 618.7 — — Interest payments 192.7 53.5 51.1 48.3 39.8 — — Total contractual cash obligations $ 1,018.8 $ 117.9 $ 110.8 $ 99.8 $ 670.0 $ 7.0 $ 13.3 (a) Purchase obligations related to operating activities include agreements and contracts that give the supplier recourse to us for cancellation or nonperformance under the contract or contain terms that would subject us to liquidated damages.
Dollars presented in millions) Payment Due by Period Total 2025 2026 2027 2028 2029 Thereafter Contractual Obligations Purchase obligations (a) $ 37.0 $ 26.5 $ 5.8 $ 3.8 $ 0.9 $ — $ — Non-cancellable operating leases 88.0 21.9 15.4 12.7 10.3 6.7 21.0 Non-cancellable financing leases 5.1 2.4 1.6 0.7 0.2 0.2 — Other Corporate Commercial Commitments Debt payments (b) 1,020.0 — — — — 320.0 700.0 Interest payments 486.8 72.0 69.5 69.5 69.5 59.3 147.0 Total contractual cash obligations $ 1,636.9 $ 122.8 $ 92.3 $ 86.7 $ 80.9 $ 386.2 $ 868.0 (a) Purchase obligations related to operating activities include agreements and contracts that give the supplier recourse to us for cancellation or nonperformance under the contract or contain terms that would subject us to liquidated damages.
(c) Selected long-term revenue growth rate within 10-year projection period of the tradenames that were tested quantitatively. 40 Table of Contents A 50 basis point change in any of the significant assumptions used during the fiscal year ended December 31, 2023 would not have resulted in an impairment being recognized when estimating the fair value of our indefinite-lived tradenames.
A 50 basis point change in any of the significant assumptions used during the fiscal year ended December 29, 2024 or December 31, 2023 would not have resulted in an impairment being recognized when estimating the fair value of our indefinite-lived tradenames.
We do not curren tly have any off-balance sheet arrangements that are material or reasonably likely to be material to our financial condition or results of operations. 37 Table of Contents Derivative Financial Instruments In accordance with Accounting Standards Codification (“ASC”) requirements for derivatives and hedging, we recognize all derivative contracts as either assets or liabilities on the balance sheet, and the measurement of those instruments is at fair value.
Derivative Financial Instruments In accordance with Accounting Standards Codification (“ASC”) requirements for derivatives and hedging, we recognize all derivative contracts as either assets or liabilities on the balance sheet, and the measurement of those instruments is at fair value.
(b) Represents estimated percentage of sales a market-participant would pay to license the tradenames that were tested quantitatively.
(b) Represents estimated percentage of sales a market-participant would pay to license the tradenames that were tested quantitatively. (c) Selected long-term revenue growth rate within 10-year projection period of the tradenames that were tested quantitatively.
Recently Issued Accounting Standards The adoption of recent accounting standards, as discussed in Note 2, "Significant Accounting Policies," of our audited consolidated financial statements within this Annual Report on Form 10-K, has not had and is not expected to have a significant impact on our revenue, earnings or liquidity.
Recently Issued Accounting Standards The adoption of recent accounting standards, as discussed in Note 2, "Significant Accounting Policies," of our audited consolidated financial statements within this Annual Report on Form 10-K, has not had and is not expected to have a significant impact on our revenue, earnings or liquidity. 39 Table of Contents Critical Accounting Estimates The consolidated financial statements are prepared in accordance with GAAP, which require us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses for the reporting period.
The 2023 effective income tax rate of 23.8 percent was unfavorably impacted by net changes in state and local income taxes, and foreign income taxed at higher rates.
These were partially offset by favorable benefits for the partial release of uncertain tax positions, return-to-provision adjustments, tax credits and foreign exclusions. The 23.8 percent effective income tax rate for 2023 was unfavorably impacted by net changes in state and local income taxes and foreign income taxed at higher rates.
The cash flows presented in our consolidated statement of cash flows may not be indicative of the cash flows we would have recognized had we operated as a standalone publicly-traded company for the periods presented prior to the Separation. 34 Table of Contents After the Separation, we no longer have financial support from Fortune Brands.
The cash flows presented in our consolidated statement of cash flows may not be indicative of the cash flows we would have recognized had we operated as a standalone publicly-traded company for the period presented prior to the Separation. Our operating income is generated by our subsidiaries.
Relating to the impaired indefinite-lived tradenames in the fourth quarter of 2022, a 50 basis point change in the discount rate, royalty rate or long-term revenue growth rate at December 25, 2022 would have resulted in an incremental impairment of $2.8 million, $12.2 million and $1.5 million, respectively.
Relating to the impaired indefinite-lived tradenames in the fourth quarter of 2022, a 50 basis point change in the discount rate, royalty rate or long-term revenue growth rate at December 25, 2022 would have resulted in an incremental impairment of $2.8 million, $12.2 million and $1.5 million, respectively. 42 Table of Contents Income Taxes For taxable periods prior to and including the Separation, our operations were included in the consolidated U.S. federal and certain state and local income tax returns of Fortune Brands, as applicable.
Overview Founded nearly 70 years ago, we are the largest manufacturer of residential cabinets in North America based on 2022 reported net sales. Our superior product quality, innovative design and service excellence drives a compelling value proposition. We have insight into the fashion and features consumers desire, which we use to tailor our product lines across price points.
Our superior product quality, innovative design and service excellence drives a compelling value proposition. We have insight into the fashion and features consumers desire, which we use to tailor our product lines across price points.
Other expense, net Other expense, net of $2.4 million in 2023 was comparable to other expense, net of $0.6 million in 2022. Income taxes Our consolidated income tax expense, income before taxes, and effective tax rate for the fiscal years ended December 31, 2023 and December 25, 2022 were as follows: (U.S.
Income taxes Our consolidated income tax expense, income before taxes, and effective tax rate for the fiscal years ended December 29, 2024 and December 31, 2023 were as follows: (U.S.
As of December 31, 2023 , the aggregate fair value of our pension plan assets was $131.1 million, representing 96.7 percent of the accumulated benefit obligation liability. During fiscal 2023, we made pension contributions of $8.1 million.
As of December 29, 2024 , the aggregate fair value of our pension plan assets was $81.5 million, representing 99.1 percent of the accumulated benefit obligation liability. During fiscal 2024, we did not make any pension contributions to the plan.
On November 18, 2022, we entered into a 5-year, $1.25 billion credit agreement, consisting of a $750.0 million term loan and a $500.0 million revolving credit facility (the “2022 Credit Agreement”). Initial proceeds of $955.0 million from the credit agreement were received at the time of Separation from Fortune Brands.
On November 18, 2022, we entered into a 5-year, $1.25 billion credit agreement, consisting of a $750.0 million term loan and a $500.0 million revolving credit facility (the “2022 Credit Agreement”). The 2022 Credit Agreement was secured by certain assets as well as the guarantee of certain of our subsidiaries.
However, we cannot predict whether or when we may enter into acquisitions, joint ventures or dispositions, or what impact any such transactions could have on our results of operations.
We periodically review our portfolio of brands, manufacturing and supply chain footprint, and evaluate potential strategic transactions to increase stockholder value. However, we cannot predict whether or when we may enter into acquisitions, joint ventures or dispositions, or what impact any such transactions could have on our results of operations, cash flows or financial condition.
Customer Credit Risk We routinely grant unsecured credit to customers in the normal course of business. Accounts receivable, net, were $203.0 million and $289.6 million as of December 31, 2023 and December 25, 2022, respectively, and are recorded at their stated amount less allowances for discounts and credit losses.
Accounts receivable, net, were $191.0 million and $203.0 million as of December 29, 2024 and December 31, 2023, respectively, and are recorded at their stated amount less allowances for discounts and credit losses.
The purchase obligations in the table above include contracts for raw materials and finished goods purchases, selling and administrative services and capital expenditures. (b) Debt payments include our $750.0 million term loan and $500.0 revolving credit facility under the 2022 Credit Agreement.
The purchase obligations in the table above include contracts for raw materials and finished goods purchases, selling and administrative services and capital expenditures.
Fiscal 2023 was also favorably impacted by deflation in commodity costs and inbound transportation. These factors were partially offset by labor inflation. Additionally, 2023 included $9.4 million of incremental costs, less $7.4 million of insurance recoveries, related to the tornado that occurred during the first quarter at our Jackson, GA facility.
Additionally, 2023 included $9.4 million of incremental costs, less $7.4 million of insurance recoveries, related to the tornado that occurred during the first quarter of 2023 at our Jackson, Georgia facility.
Dollars presented in millions) December 31, 2023 $ change % change December 25, 2022 NET SALES $ 2,726.2 $ (549.3) (16.8 %) $ 3,275.5 Cost of products sold 1,824.8 (510.2) (21.9 %) 2,335.0 GROSS PROFIT 901.4 (39.1) (4.2 %) 940.5 Selling, general and administrative expenses 569.7 (78.8) (12.2 %) 648.5 Amortization of intangible assets 15.3 (1.9) (11.0) % 17.2 Asset impairment charges — (46.4) n/m (1) 46.4 Restructuring charges 10.1 (15.0) (59.8 %) 25.1 OPERATING INCOME 306.3 103.0 50.7 % 203.3 Related party interest income, net — 12.9 n/m (1) (12.9) Interest expense 65.2 63.0 n/m (1) 2.2 Other expense, net 2.4 1.8 300.0 % 0.6 INCOME BEFORE TAXES 238.7 25.3 11.9 % 213.4 Income tax expense 56.7 (1.3) (2.2 %) 58.0 NET INCOME $ 182.0 $ 26.6 17.1 % $ 155.4 __________ (1) Not meaningful.
Dollars presented in millions) December 29, 2024 $ change % change December 31, 2023 NET SALES $ 2,700.4 $ (25.8) (0.9 %) $ 2,726.2 Cost of products sold 1,823.4 (1.4) (0.1 %) 1,824.8 GROSS PROFIT 877.0 (24.4) (2.7 %) 901.4 Selling, general and administrative expenses 603.1 33.4 5.9 % 569.7 Amortization of intangible assets 20.2 4.9 32.0 % 15.3 Restructuring charges 18.0 7.9 78.2 % 10.1 OPERATING INCOME 235.7 (70.6) (23.0) % 306.3 Interest expense 74.0 8.8 13.5 % 65.2 Gain on sale of asset (4.3) (4.3) n/m (1) — Other (income) expense, net (2.3) (4.7) n/m (1) 2.4 INCOME BEFORE TAXES 168.3 (70.4) (29.5 %) 238.7 Income tax expense 42.4 (14.3) (25.2 %) 56.7 NET INCOME $ 125.9 $ (56.1) (30.8) % $ 182.0 __________ (1) Not meaningful.
Finally, with the most extensive dealer network throughout the United States and Canada, we have an advantaged distribution model that cannot be easily replicated.
Finally, with the most extensive dealer network throughout the United States and Canada, we have an advantaged distribution model that cannot be easily replicated. We expect to further extend our competitive advantages by using technology and data to enhance the consumer’s experience from visualization to ordering to delivery and installation.
In 2023, we incurred $2.4 million of additional costs directly related to the Separation from Fortune Brands, as compared to $15.4 million in 2022. Asset impairment charges During 2022, we incurred $46.4 million of asset impairment charges related to indefinite-lived tradenames.
In 2023, we incurred $2.4 million of costs directly related to the separation from Fortune Brands. Restructuring charges Restructuring charges were $18.0 million in 2024 as compared to $10.1 million in 2023.
In addition to the contractual obligations and commitments described above, we also had other corporate commercial commitments for which we are contingently liable as of December 31, 2023.
(b) Debt payments include our $700.0 million term loan and $750.0 million revolving credit facility under the 2024 Credit Agreement. 38 Table of Contents In addition to the contractual obligations and commitments described above, we also had other corporate commercial commitments for which we are contingently liable as of December 29, 2024.
Foreign currency impact was unfavorable by $3.8 million during 2023 as compared to 2022. 32 Table of Contents Cost of products sold Cost of products sold decreased by $510.2 million, or 21.9 percent, to $1,824.8 million (66.9 percent of net sales) in 2023 as compared to $2,335.0 million (71.3 percent of net sales) in 2022.
Net sales directly to builders increased $38.8 million, or 12.4 percent. 33 Table of Contents Cost of products sold Cost of products sold decreased by $1.4 million, or 0.1 percent, to $1,823.4 million (67.5 percent of net sales) in 2024 as compared to $1,824.8 million (66.9 percent of net sales) in 2023.
Some of the important factors that could cause our actual results to differ materially from those projected in any such forward-looking statements include: ◦ Our ability to develop and expand our business; ◦ Our anticipated financial resources and capital spending; ◦ Our ability to manage costs; ◦ The impact of our dependence on third parties with respect to sourcing our raw materials; ◦ Our ability to accurately price our products; ◦ Our anticipated future revenues and expectations of operational performance; ◦ The effects of competition and consolidation of competitors in our industry; ◦ Costs of complying with evolving tax and other regulatory requirements and the effect of actual or alleged violations of tax, environmental or other laws; ◦ The effect of climate change and unpredictable seasonal and weather factors; ◦ Failure to realize the anticipated benefits of the Separation; ◦ Conditions in the housing market in the United States and Canada; ◦ The expected strength of our existing customers and consumers; ◦ Worldwide economic, geopolitical and business conditions and risks associated with doing business on a global basis; ◦ The effects of the COVID-19 pandemic or another public health crisis or other unexpected event; and ◦ Other statements contained in this Annual Report on Form 10-K regarding items that are not historical facts or that involve predictions.
Some of the important factors that could cause our actual results to differ materially from those projected in any such forward-looking statements include: • Our ability to develop and expand our business; • Our ability to develop new products or respond to changing consumer preferences and purchasing practices; • Our anticipated financial resources and capital spending; • Our ability to manage costs; • Our ability to effectively manage manufacturing operations and capacity, or an inability to maintain the quality of our products; • The impact of our dependence on third parties to source raw materials and our ability to obtain raw materials in a timely manner or fluctuations in raw material costs; • Our ability to accurately price our products; • Our projections of future performance, including future revenues, capital expenditures, gross margins, and cash flows; • The effects of competition and consolidation of competitors in our industry; • Costs of complying with evolving tax and other regulatory requirements and the effect of actual or alleged violations of tax, environmental or other laws; • The effect of climate change and unpredictable seasonal and weather factors; • Conditions in the housing market in the United States and Canada; • The expected strength of our existing customers and consumers and any loss or reduction in business from one or more of our key customers or increased buying power of large customers; • Information systems interruptions or intrusions or the unauthorized release of confidential information concerning customers, employees, or other third parties; • Worldwide economic, geopolitical and business conditions and risks associated with doing business on a global basis, including risks associated with uncertain trade environments and changes to the U.S. administration; • The effects of a public health crisis or other unexpected event; • The inability to recognize, or delays in obtaining, anticipated benefits of the acquisition of Supreme, including synergies, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth profitably, maintain relationships with customers and suppliers and retain key employees; • The impact of our current and any additional future debt obligations on our business, current and future operations, profitability and our ability to meet other obligations; • Business disruption following the acquisition of Supreme; • Diversion of management time on acquisition-related issues; • The reaction of customers and other persons to the acquisition of Supreme; and • Other statements contained in this Annual Report on Form 10-K regarding items that are not historical facts or that involve predictions. 28 Table of Contents Introduction Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is a supplement to the accompanying consolidated financial statements of MasterBrand and its consolidated subsidiaries and provides additional information on our business, recent developments, financial condition, liquidity and capital resources, cash flows and results of operations.
Accounts payable was $69.4 million unfavorable in 2023 as a result of decreased purchasing levels aligned with our lower inventory levels, as well as a reduction in the payable to Fortune Brands of $42.4 million, primarily related to income tax related payments.
Accounts payable was $23.8 million favorable in 2024, partially due to the increased purchasing associated with the higher inventory balance from year-end, as compared to unfavorable accounts payable movement of $69.4 million in 2023 as a result of decreased purchasing levels aligned with our inventory management.
In 2023, accounts receivable generated $88.1 million of cash, as a result of improvements in our collection processes and decreased sales. In 2022, our accounts receivable generated $13.5 million. In 2023, the movement in inventory was $123.6 million favorable, as compared to 2022, which had an unfavorable movement in inventory of $70.1 million.
Our increased cash generation in accounts receivable in 2023 was a result of improvements in our collection processes throughout 2023, which we maintained in 2024. In 2024, the movement in inventory was $10.7 million unfavorable, reflective of the normal seasonal build in inventory from year-end. 2023 had favorable movement in inventory of $123.6 million.
As of December 31, 2023 , we had $707.8 million outstanding in third-party borrowings, net of deferred financing fees. We may also incur additional indebtedness in the future. Cash Flows Below is a summary of cash flows for the fiscal years ended December 31, 2023 and December 25, 2022. For years ended (U.S.
Cash Flows Below is a summary of cash flows for the fiscal years ended December 29, 2024 and December 31, 2023. For years ended (U.S.
We did not incur any asset impairment charges in 2023. Restructuring charges Restructuring charges were $10.1 million in 2023 as compared to $25.1 million in 2022. Restructuring charges for all periods presented are largely related to severance costs and other associate-related costs in order to better align our workforce with our forecasted demand within our manufacturing footprint.
Charges in 2024 include severance costs and other associate-related costs in order to better align our workforce with our forecasted demand within our manufacturing footprint. 2024 restructuring charges also include an asset impairment charge associated with the decision to exit a leased manufacturing facility.
During 2025, we expect to complete the purchase of group annuity contracts that will transfer any remaining pension benefit obligation to an insurance company. Contractual Obligations and Other Commercial Commitments The following table summarizes our contractual obligations and commitments as of December 31, 2023: (U.S.
GAAP, the Company was required to recognize a non-cash settlement charge of $2.9 million in the fourth quarter of 2024. During 2025, we expect to complete the purchase of group annuity contracts that will transfer any remaining pension benefit obligation to an insurance company.
Net cash used in investing activities of $56.9 million in 2023 was comparable to net cash used in investing activities of $55.9 million in 2022. Net cash used in financing activities was $299.9 million in 2023 as compared to $215.3 million in 2022.
Restructuring charges, net of cash payments, were $10.5 million favorable in 2024 as compared to $9.4 million unfavorable in 2023 due to the timing of actions and associated cash impact. Net cash used in investing activities was $580.8 million in 2024, compared to net cash used in investing activities of $56.9 million in 2023.
We expect to further extend our competitive advantages by using technology and data to enhance the consumer’s experience from visualization to ordering to delivery and installation. 29 Table of Contents Separation from Fortune Brands On April 28, 2022, Fortune Brands announced that its Board of Directors approved in principle the Separation.
The acquisition was funded with a combination of cash on hand and proceeds from our revolving credit facility. 30 Table of Contents Separation from Fortune Brands On April 28, 2022, Fortune Brands announced that its Board of Directors approved in principle the Separation. The Cabinets segment of Fortune Brands had historically been operated by MasterBrand Cabinets, Inc. (“MBCI”).
Net sales Net sales were $2,726.2 million for 2023 compared to $3,275.5 million for 2022, a decrease of $549.3 million, or 16.8 percent. The lower net sales compared to 2022 was driven mainly by a decrease in sales unit volume, partially offset by favorable price, including the carryover of price increases implemented in the second half of 2022.
Net sales Net sales were $2,700.4 million for 2024 compared to $2,726.2 million for 2023, a decrease of $25.8 million, or 0.9 percent. The second half of 2024 includes $121.2 million of incremental sales related to the Supreme acquisition.
Removed
Introduction Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is a supplement to the accompanying consolidated financial statements of MasterBrand and its consolidated subsidiaries and provides additional information on our business, recent developments, financial condition, liquidity and capital resources, cash flows and results of operations.
Added
On July 10, 2024, we acquired all of the issued and outstanding limited liability interests of Dura Investment Holdings LLC, parent company of Supreme, a cabinetry company, from GHK Capital Partners LP. Supreme is a domestic manufacturer of residential cabinetry with a portfolio of product lines significantly focused on premium products.
Removed
In addition to the impact of decreased sales unit volume, the lower cost of products sold as a percentage of net sales in 2023 is due to the favorable carryover of price increases implemented in the second half of 2022, as well as realized savings from various cost reduction actions taken in the fourth quarter of 2022 and throughout 2023.
Added
Supreme, with manufacturing facilities located in Minnesota, Iowa and North Carolina, and its two brands, Dura Supreme and Bertch cabinetry, crafts framed and frameless cabinetry for a nationwide network of dealers. The combined company is reaching more customers, through its highly complementary dealer networks, with greater efficiency and effectiveness.
Removed
Selling, general and administrative expenses Selling, general and administrative expenses decreased by $78.8 million, or 12.2 percent, to $569.7 million (20.9 percent of net sales) in 2023 compared to $648.5 million (19.8 percent of net sales) in the prior year. 2023 includes lower unit volume related costs, including distribution costs ($40.4 million) and commission costs ($18.1 million), offset by increased associate-related costs ($40.3 million), including salaries, incentive compensation and stock-based compensation, and professional support fees ($37.0 million). 2023 reflects associate-related and professional support fee costs for newly established MasterBrand corporate functions, as compared to 2022, which included $92.5 million of allocated costs from Fortune Brands that did not recur in 2023.
Added
Through this transaction, MasterBrand broadened its portfolio of premium cabinetry in the resilient and attractive kitchen and bath categories, further diversifying its channel distribution and adding to its strategically located facility footprint.
Removed
During the second quarter of 2022, we incurred an asset impairment charge of $26.0 million related to an indefinite-lived tradename, as production was shifted within our manufacturing footprint to enable what we expect to be a higher value purpose and growth opportunity, which led to downward revisions to forecasted revenue growth rates associated with the tradename and the recognition of the corresponding asset impairment charge.
Added
Excluding the impact of Supreme, the $147.0 million decrease in net sales in 2024 compared to 2023 was driven primarily by the combined net impact of price and mix on our overall average selling price, which accounted for 77.0 percent of the decrease, while lower sales unit volume represented 23.0 percent of the decrease from 2023 to 2024.
Removed
In the fourth quarter of 2022, we incurred an additional asset impairment charge of $12.8 million related to the same indefinite-lived tradename as a result of further shifts within our product portfolio to better align with forecasted future customer demand as a result of a significant decrease in sales during the fourth quarter of 2022, driven by continued and persistent inflation, as well as elevated interest rates and economic uncertainty.
Added
Overall end-market demand was softer in 2024 as compared to 2023 in the repair and remodel markets, while single-family new construction strengthened in 2024. Foreign currency impact was unfavorable by $1.2 million during 2024 as compared to 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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We do not enter into derivatives or other financial instruments for trading or speculative purposes. We enter into financial instruments to manage and reduce the impact of changes in foreign currency exchange rates.
We do not enter into derivatives or other financial instruments for trading or speculative purposes. We enter into financial instruments to manage and reduce the impact of changes in foreign currency exchange rates. The counterparties are major financial institutions. Interest Rate Risk We had $320.0 million of external variable rate borrowings as of December 29, 2024 .
The estimated fair value of foreign currency contracts represents the amount required to enter into offsetting contracts with similar remaining maturities based on quoted market prices. The estimated potential loss under foreign exchange contracts from movement in foreign exchange rates would not have a material impact on our results of operations.
The periods of the forward foreign exchange contracts correspond to the periods of the hedged transactions. The estimated fair value of foreign currency contracts represents the amount required to enter into offsetting contracts with similar remaining maturities based on quoted market prices.
Foreign Exchange Rate Risk We enter into forward foreign exchange contracts principally to hedge currency fluctuations in transactions denominated in certain foreign currencies, thereby limiting our risk that would otherwise result from changes in exchange rates. The periods of the forward foreign exchange contracts correspond to the periods of the hedged transactions.
A hypothetical 100 basis point increase in interest rates affecting our external borrowings as of December 29, 2024 would increase our borrowing costs by $3.2 million on a pre-tax basis annually. 43 Table of Contents Foreign Exchange Rate Risk We enter into forward foreign exchange contracts principally to hedge currency fluctuations in transactions denominated in certain foreign currencies, thereby limiting our risk that would otherwise result from changes in exchange rates.
Commodity Price Risk We are subject to commodity price volatility caused by weather, supply conditions, geopolitical and economic variables, and other unpredictable external factors. 42 Table of Contents
The estimated potential loss under foreign exchange contracts from movement in foreign exchange rates would not have a material impact on our results of operations. Commodity Price Risk We are subject to commodity price volatility caused by weather, supply conditions, geopolitical and economic variables and other unpredictable external factors.
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The counterparties are major financial institutions. 41 Table of Contents Interest Rate Risk We had $712.5 million of external variable rate borrowings as of December 31, 2023 . A hypothetical 100 basis point increase in interest rates affecting our external borrowings as of December 31, 2023 would increase our borrowing costs by $7.1 million on a pre-tax basis annually.

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