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Item 2. Management’s Discussion and Analysis

2026-05-07 compared with 2025-10-30 · 91 added, 136 removed, 91 unchanged (71% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto, which are included in this report, as well as our audited consolidated financial statements for the year ended December 27, 2025, which are included in our Annual Report on Form 10-K for the year ended December 27, 2025.

This discussion contains forward-looking statements that are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations for our business, operations, financial performance or financial condition in addition to statements regarding our expectations for the markets in which we operate, general business strategies, expected impacts from recently-announced organizational and leadership changes, the market potential of our brands, trends in the housing market, the potential impact of costs, including material and labor costs, the potential impact of inflation, expected capital spending, expected pension contributions or de-risking initiatives, the expected impact of acquisitions, dispositions and other strategic transactions, the anticipated impact of recently issued accounting standards on our financial statements, and other matters that are not historical in nature.

Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “outlook,” “positioned,” “confident,” “opportunity,” “focus” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may,” and “could” are generally forward-looking in nature and not historical facts.

Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on current expectations, estimates, assumptions and projections of our management about our industry, business and future financial results, available at the time this report is filed with the Securities and Exchange Commission.

This discussion contains forward-looking statements that are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations for our business, operations, financial performance or financial condition, in addition to statements regarding our expectations for the markets in which we operate, general business strategies, expected impacts from recently-announced organizational and leadership changes, the market potential of our brands, trends in the housing market, the potential impact of costs, including material and labor costs, the potential impact of inflation, expected capital spending, expected pension contributions, the expected effects of acquisitions, dispositions and other strategic transactions including the expected benefits and costs of the spin-off of MasterBrand, Inc.

and the tax-free nature of the spin-off transaction, the anticipated effects of recently issued accounting standards on our financial statements, and other matters that are not historical in nature.

Statements that include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “outlook,” “positioned”, “confident,” “opportunity”, “focus” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may”, and “could” are generally forward-looking in nature and not historical facts.

Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on current expectations, plans, estimates, assumptions and projections of our management about our industry, business and future financial results available at the time this report is filed with the SEC.

Although we believe that these statements are based on reasonable assumptions, they are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those indicated in such statements, including but not limited to:

(i) our reliance on the North American and Chinese home improvement, repair and remodel and new home construction activity levels, (ii) the housing market, downward changes in the general economy, unfavorable interest rates or other business conditions, (iii) the competitive nature of consumer and trade brand businesses, (iv) our ability to execute on our strategic plans and the effectiveness of our strategies in the face of business competition, (v) our reliance on key customers and suppliers, including wholesale distributors and dealers and retailers, (vi) risks relating to rapidly evolving technological change, (vii) risks associated with our ability to improve organizational productivity and global supply chain efficiency and flexibility, (viii) risks associated with global commodity and energy availability and price volatility, as well as the possibility of sustained inflation, (ix) delays or outages in our information technology systems or computer networks or breaches of our information technology systems or other cybersecurity incidents, (x) risks associated with doing business globally, including changes in trade-related tariffs (including recent U.S.

tariffs announced or imposed on China, Canada, Mexico and other countries and any reciprocal actions taken by such countries) and risks with uncertain trade environments, (xi) risks associated with the disruption of operations, including as a result of severe weather events, (xii) our inability to obtain raw materials and finished goods in a timely and cost-effective manner, (xiii) risks associated with strategic acquisitions, divestitures and joint ventures, including difficulties integrating acquired companies and the inability to achieve the expected financial results and benefits of transactions, (xiv) impairments in the carrying value of goodwill or other acquired intangible assets, (xv) risks of increases in our defined benefit-related costs and funding requirements, (xvi) our ability to attract and retain qualified personnel and other labor constraints, (xvii) the effect of climate change and the impact of related changes in government regulations and consumer preferences, (xviii) risks associated with environmental, social and governance matters, (xix) potential liabilities and costs from claims and litigation, (xx) changes in government and industry regulatory standards, (xxi) future tax law changes or the interpretation of existing tax laws, (xxii) our ability to secure and protect our intellectual property rights, (xxiii) our ability to achieve the expected benefits of the separation of MasterBrand, Inc.

(“MasterBrand”), the Company’s Cabinets business (the “Separation”) (xxiv) the risk that we may be required to indemnify MasterBrand in connection with the Separation or that MasterBrand’s indemnities to us may not be sufficient to hold us harmless for the full amount of liabilities for which MasterBrand has been allocated responsibility and (xxv) the potential that the Separation fails to qualify as tax-free for U.S.

federal income tax purposes.

These and other factors are discussed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 28, 2024.

We undertake no obligation to, and expressly disclaim any such obligation to, update or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or changes to future results over time or otherwise, except as required by law.

(i) our reliance on the North American and Chinese home improvement, repair and remodel and new home construction activity levels, (ii) the housing market, downward changes in the general economy, unfavorable interest rates or other business conditions, (iii) the competitive nature of consumer and trade brand businesses, (iv) our ability to execute on our strategic plans and the effectiveness of our strategies in the face of business competition, (v) our reliance on key customers and suppliers, including wholesale distributors and dealers and retailers, (vi) risks associated with our recent leadership changes and our search process to identify our next CEO and CFO, (vii) risks relating to rapidly evolving technological change, (viii) risks associated with our ability to improve organizational productivity and global supply chain efficiency and flexibility, (ix) risks associated with global commodity and energy availability and price volatility, as well as the possibility of sustained inflation, (x) delays or outages in our information technology systems or computer networks or breaches of our information technology systems or other cybersecurity incidents, (xi) risks associated with doing business globally, including changes in trade-related tariffs (including recent U.S.

tariffs announced or imposed on China, Canada, Mexico and other countries and any reciprocal actions taken by such countries) and risks with uncertain trade environments, (xii) risks associated with the disruption of operations, including as a result of severe weather events, (xiii) our inability to obtain raw materials and finished goods in a timely and cost-effective manner, (xiv) risks associated with strategic acquisitions, divestitures and joint ventures, including difficulties integrating acquired companies and the inability to achieve the expected financial results and benefits of transactions, (xv) impairments in the carrying value of goodwill or other acquired intangible assets, (xvi) risks of increases in our defined benefit-related costs and funding requirements, (xvii) our ability to attract and retain qualified personnel and other labor constraints, (xviii) the effect of climate change and the impact of related changes in government regulations and consumer preferences, (xix) risks associated with environmental, social and governance matters, (xx) potential liabilities and costs from claims and litigation, (xxi) changes in government and industry regulatory standards, (xxii) future tax law changes or the interpretation of existing tax laws, and (xxiii) our ability to secure and protect our intellectual property rights, as well as those described in the section of our Annual Report on Form 10-K for the year ended December 27, 2025 entitled Item 1A.

“Risk Factors”.

We undertake no obligation to, and expressly disclaim any such obligation to, update, amend, clarify or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or changes to future results over time or otherwise, except as required by law.

References to “Fortune Brands,” “the Company,” “we,” “our” and “us” refer to Fortune Brands Innovations, Inc.

and its consolidated subsidiaries as a whole, unless the context otherwise requires.

The Company is a leading home, security and digital company whose purpose is to elevate every life by transforming spaces into havens.

The Company makes innovative products for residential and commercial environments, with a growing focus on digital solutions and products that add luxury, contribute to safety and enhance sustainability.

The Company is a leading home, security and digital products company whose purpose is to elevate every life by transforming spaces into havens.

We sell our products through a wide array of sales channels, including kitchen and bath dealers, wholesalers oriented toward builders or professional remodelers, industrial and locksmith distributors, “do-it-yourself” remodeling-oriented home centers, showrooms, direct to consumer, e-commerce and other retail outlets.

We believe that the Company has certain competitive advantages including market-leading brands, a diversified mix of channels, lean and flexible supply chains, a strong capital structure, as well as a tradition of strong innovation and customer service.

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We believe the Company’s track record reflects the long-term attractiveness and potential of the categories we serve and our leading brands.

We believe the long-term outlook for our products remains favorable, and our strategic advantages, including the set of capabilities we refer to as the Fortune Brands Advantage, will help us to continue to achieve profitable organic growth over time.

We continue to believe our most attractive opportunities are to invest in profitable organic growth initiatives, pursue accretive strategic acquisitions, non-controlling equity investments, and joint ventures, and return cash to stockholders through a combination of dividends and repurchases of shares of our common stock under our share repurchase program as explained in further detail under “Liquidity and Capital Resources” below.

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However, we believe we are well positioned to manage the continued slow-down in the housing market as we believe the fundamental drivers of the housing market remain intact.

We have been and may continue to be impacted by near-term supply, labor and freight constraints, a volatile geopolitical environment, as well as increased rates of inflation, increased interest rates, unfavorable fluctuations in foreign exchange rates and the ongoing and worsening costs of tariffs (including U.S.

tariffs announced or imposed on China, Canada, Mexico and other countries and any reciprocal actions taken by such countries).

We anticipate that, absent any mitigation efforts, our costs of goods sold would increase based on the tariffs that have been announced or imposed (either by the United States or by other countries, including China) as of the date of this report.

The Company is actively working to mitigate the anticipated impacts of tariffs through a combination of supply chain actions, cost-out activities and strategic pricing actions across all of our channels and brands.

However, this is a rapidly evolving landscape, and the Company’s ability to mitigate the anticipated impacts of tariffs could be affected by a number of factors, including additional tariffs or trade-related sanctions imposed by the U.S.

We have been and may continue to be impacted by near-term supply, labor and freight constraints, a volatile geopolitical environment, as well as increased rates of inflation, increased interest rates and unfavorable fluctuations in foreign exchange rates.

In addition, we have been adversely impacted and may in the future be impacted by tariff-related costs.

On February 20, 2026, the U.S.

Supreme court invalidated the U.S.

tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") on goods imported into the U.S.

The ultimate availability, timing, and amount of any potential refunds remain highly uncertain and are subject to further legal, regulatory, and administrative developments.

In addition, the U.S.

Administration imposed new tariffs and may impose additional tariffs.

We will continue to monitor changes to import and export policies of the U.S.

and other countries that could impact our financial position, results of operations and cash flows.

As of March 28, 2026, the Company has not recognized any amounts associated with potential refunds related to these tariffs.

The Company continues to actively work to mitigate the anticipated impacts of tariffs through a combination of supply chain actions, cost-out activities and strategic pricing actions across all of our channels and brands.

However, this remains a rapidly evolving landscape, and the Company's ability to mitigate the anticipated impacts of tariffs could be affected by a number of factors, including additional tariffs or trade-related sanctions imposed by the U.S.

or other countries, and if the Company is ultimately not able to substantially mitigate the impacts of tariffs, there would be negative impacts to the Company's results of operations.

We are also unable, at this time, to determine any future negative impacts from reduced consumer spending as a result of inflationary or other macroeconomic pressures or uncertainty that may result from the imposition of current or future tariffs.

We are currently monitoring, and will continue to monitor, potential changes to these tariffs or the imposition of reciprocal or other tariffs or trade restrictions by other countries.

RESULTS OF OPERATIONS

Thirty-Nine Weeks Ended September 27, 2025 Compared To Thirty-Nine Weeks Ended September 28, 2024

Fortune Brands delivered net income of $222.4 million, or $1.83 per diluted common share for the thirty-nine weeks ended September 27, 2025 compared to net income of $366.8 million, or $2.91 per diluted common share in the prior year.

Net income for the thirty-nine weeks ended September 27, 2025 was negatively impacted by lower sales unit volume, asset impairment charges of $50.1 million and restructuring and restructuring-related expenses in connection with our headquarters consolidation of $69.2 million.

We delivered cash provided by operating activities of $270.4 million of the thirty-nine weeks ended September 27, 2025, compared to $395.5 million in the same prior year period.

Thirteen Weeks Ended March 28, 2026 Compared to Thirteen Weeks Ended March 29, 2025

Fortune Brands delivered net income of $24.2 million, or $0.20 per diluted common share for the thirteen weeks ended March 28, 2026 compared to net income of $51.4 million, or $0.42 per diluted common share in the prior year.

Net income for the thirteen weeks ended March 28, 2026 was negatively impacted by lower sales unit volume and $42.4 million due to costs associated with governance advisory services and leadership changes.

We delivered cash used in operating activities of $(119.2) million of the thirteen weeks ended March 28, 2026, compared to $(83.4) million in the same prior year period.

(In millions)

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Operating income

The following discussion of consolidated results of operations and segment results refers to the thirty-nine weeks ended September 27, 2025 compared to the thirty-nine weeks ended September 28, 2024.

The following discussion of consolidated results of operations and segment results refers to the thirteen weeks ended March 28, 2026 compared to the thirteen weeks ended March 29, 2025.

Consolidated results of operations should be read in conjunction with segment results of operations.

Net sales decreased by $119.1 million, or 3.4%, primarily due to sales volume decreases in China of $59.0 million.

The remaining decreases were due to lower sales volume, partially offset by disciplined pricing actions, including strategic adjustments to mitigate tariff-related costs and lower customer sales incentives.

Net sales were unfavorably impacted by foreign exchange of $5.4 million.

Net sales decreased by $21.8 million, or 2.1%, primarily due to lower sales volume across all operating segments, primarily driven by demand softness.

Volume declines were offset by year over price increases, including tariff and commodity mitigating actions.

Net sales within our China business decreased by $9.1 million, or 25%, due to volume declines.

These declines were partially offset by the favorable impact of foreign exchange of $10.1 million.

Cost of products sold

Cost of products sold decreased by $77.9 million, or 4.0%, primarily due to the lower sales volume, lower restructuring-related charges of $10.5 million and continued productivity gains across the segments, supported by strategic sourcing initiatives and manufacturing efficiencies, partially offset by tariff and cost inflation.

Cost of products sold also includes a loss, net of insurance recovery, of $3.0 million relating to a fire in a portion of a manufacturing facility within the Outdoors segment.

Cost of products sold decreased by $2.8 million, or 0.5%, primarily due to lower sales volume, partially offset by material cost inflation and tariffs.

Cost of products sold was also impacted by lower restructuring-related charges of $8.4 million.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $37.5 million, or 4.0%, primarily due to higher restructuring-related charges of $27.8 million, distribution costs, and higher professional fees, partially offset by reductions to incentive compensation.

Asset impairment charges

During the thirty-nine weeks ended September 27, 2025, we determined one of our assets within the Outdoors segment met the criteria to be classified as held-for-sale criteria.

An impairment charge of $49.7 million was recorded to reduce the carrying value of the asset to equal fair value, less estimated costs to sell.

Selling, general and administrative expenses increased by $37.8 million, or 12.0%, primarily due to costs associated with governance advisory services and leadership changes of $42.4 million.

Restructuring charges

Restructuring charges of $49.3 million in the thirty-nine weeks ended September 27, 2025 are primarily due to $43.3 million of costs incurred in connection with the Company's headquarters consolidation and its related organizational changes, as well as a product-line rationalization within our Outdoors segment and plant and distribution center closures in our Water and Security segments.

Restructuring charges of $4.3 million are primarily due to costs incurred in connection with the Company's headquarters consolidation and its related organizational changes.

RESULTS OF OPERATIONS (Continued)

Operating income

Operating income decreased by $165.2 million, or 29.5%, primarily due to lower sales volume, material cost inflation, asset impairment charges of $50.1 million, higher distribution costs, and higher restructuring and restructuring-related charges of $52.5 million, partially offset by continued productivity gains across the segments supported by strategic sourcing initiatives and manufacturing efficiencies as well as reductions to incentive compensation.

Operating income decreased by $36.8 million, or 37.9%, primarily due to lower sales volume, costs associated with governance advisory services and leadership changes of $42.4 million, higher commodity and tariff costs, higher freight costs, partially offset by lower restructuring and restructuring-related charges of $32.8 million.

Interest expense

Interest expense decreased by $4.2 million, or 4.5%, primarily due to lower interest rates on current-period commercial paper borrowings and lower senior unsecured notes outstanding, partially offset by higher commercial paper borrowings net of repayments during the thirty-nine weeks ended September 27, 2025, as compared to the thirty-nine weeks ended September 28, 2024 ($479.1 million in 2025 versus $104.7 million in 2024).

Interest expense decreased by $2.1 million, or 7.3% to $26.5 million primarily due to lower commercial paper borrowings net of repayments during the thirteen weeks ended March 28, 2026 of $168.3 million, as compared to the thirteen weeks ended March 29, 2025 of $280.0 million.

Other (income) expense, net

Other (income) expense, net, was $(5.8) million in the thirty-nine weeks ended September 27, 2025, compared to $(5.2) million in the thirty-nine weeks ended September 28, 2024.

The increase of $(0.6) million in other (income) expense, net is primarily due to an increase in interest and investment income of $4.8 million and a decrease in foreign currency transaction expense of $1.9 million, partially offset by an increase in net periodic benefit expense of $6.5 million.

The effective income tax rates for the thirty-nine weeks ended September 27, 2025 and thirty-nine weeks ended September 28, 2024 were 28.7% and 22.3%, respectively.

The difference between the Company’s effective income tax rate for the thirty-nine weeks ended September 27, 2025, and the U.S.

statutory rate of 21% primarily relates to state income taxes, including the state income tax impacts of legal entity restructuring, dividend withholding tax and foreign income taxed at higher rates, partially offset by decreases in uncertain tax positions.

The difference between the Company’s effective income tax rate for the thirty-nine weeks ended September 28, 2024, and the U.S.

statutory rate of 21% primarily relates to state income taxes and foreign income taxed at higher rates, partially offset by favorable benefits related to a valuation allowance release, provision to return adjustments, decreases in uncertain tax positions, and tax credits.

Net income was $222.4 million in the thirty-nine weeks ended September 27, 2025, compared to $366.8 million in the thirty-nine weeks ended September 28, 2024.

Other income, net, was $(0.1) million in the thirteen weeks ended March 28, 2026, compared to other income, net of $(1.0) million in the thirteen weeks ended March 29, 2025.

The decrease in other income, net is primarily due to a decrease in interest income, and increases in foreign currency transaction expense.

The effective income tax rates for the thirteen weeks ended March 28, 2026 and thirteen weeks ended March 29, 2025 were 28.4% and 25.9%, respectively.

The difference between the Company’s effective income tax rate for the thirteen weeks ended March 28, 2026 and the U.S.

statutory rate of 21% primarily relates to state income taxes and equity compensation.

The difference between the Company’s effective income tax rate for the thirteen weeks ended March 29, 2025 and the U.S.

statutory rate of 21% primarily relates to state income taxes and foreign income taxed at higher rates.

Net income was $24.2 million in the thirteen weeks ended March 28, 2026, compared to $51.4 million in the thirteen weeks ended March 29, 2025.

The decrease in net income was due to lower operating income of $36.8 million and lower other income of $0.9 million, partly offset by lower income tax expense and interest expense of $8.4 million and $2.1 million, respectively.

Results By Segment

Net sales decreased by $89.2 million, or 4.6%, primarily due to sales volume decreases in China of $59.0 million.

The remaining decreases were due to lower sales unit volume, partially offset by disciplined pricing actions across our portfolio, including strategic adjustments to mitigate tariff-related costs.

Net sales was unfavorably impacted by foreign exchange of $5.7 million.

Operating income decreased by $38.5 million, or 8.7%, primarily due to lower sales volume, material cost inflation, including tariff costs, higher restructuring and restructuring-related charges of $17.5 million, partially offset by manufacturing efficiencies and lower selling, general and administrative expenses, including reductions to incentive compensation.

Net sales decreased by $19.0 million, or 1.8%, primarily due to lower sales unit volume, partially offset by disciplined pricing actions, including strategic adjustments to mitigate tariff-related costs, and lower customer sales incentives.

Operating income decreased by $84.2 million, or 58.5%, due to lower sales unit volume, material cost inflation, including tariff costs, higher restructuring and restructuring-related charges of $2.2 million, partially offset by manufacturing efficiencies.

Operating income was also unfavorably impacted by asset impairment charges of $50.1 million and by losses, net of insurance recovery, relating to a fire in a portion of a manufacturing facility of $3.0 million.

Net sales decreased by $10.9 million, or 2.0%, primarily due to lower sales unit volume, partially offset by disciplined pricing actions, including strategic adjustments to mitigate tariff-related costs, and lower customer sales incentives.

Operating income decreased by $20.1 million, or 23.2%, primarily due to lower sales unit volume, material cost inflation, including tariff costs, and higher restructuring and restructuring-related charges of $5.5 million, partially offset by manufacturing efficiencies.

Corporate expenses increased by $22.4 million, or 19.6%, primarily due to higher restructuring and restructuring-related charges of $27.3 million and higher professional fees, partially offset by reductions to incentive compensation.

Thirteen Weeks Ended September 27, 2025 Compared To Thirteen Weeks Ended September 28, 2024

Fortune Brands delivered net income of $70.8 million, or $0.59 per diluted common share for the thirteen weeks ended September 27, 2025 compared to net income of $136.6 million, or $1.09 per diluted common share in the prior year.

Net income for the thirteen weeks ended September 27, 2025 was negatively impacted by lower sales unit volume, asset impairment charges of $50.1 million and restructuring and restructuring-related expenses in connection with our headquarters consolidation of $20.5 million.

(In millions)

Operating Income (Loss)

Net sales decreased by $1.7 million, or 0.3%, primarily due to lower sales unit volume due to market softness.

Volume declines were offset by year over price increases, including tariff-mitigating actions.

Net sales within our China business decreased by $9.1 million, or 25%, due to volume decline.

These declines were partially offset by the favorable impact of foreign exchange of $7.5 million.

Operating income increased by $0.5 million, or 0.5%, primarily due to lower restructuring and restructuring-related charges of $7.6 million, partially offset by the impact of lower sales volume, higher tariff costs net of price mitigating actions and higher freight costs of $6.3 million.

Net sales decreased by $10.3 million, or 3.4%, primarily due to lower sales unit volume due to market softness, channel inventory decreases, partially offset by strategic price actions primarily to mitigate commodity and tariff-related cost inflation.

Operating income decreased by $5.2 million, or 23.0%, primarily due to higher commodity and tariff costs, lower sales unit volume and $3.5 million net costs incurred related to the fire that occurred at a manufacturing facility, partially offset by lower restructuring and restructuring-related charges of $8.2 million and by the impact of price mitigating actions.

Net sales decreased by $9.8 million, or 6.0%, primarily due to lower sales unit volume, partially offset by pricing actions to mitigate commodity and tariff-related cost inflation and the favorable impact of foreign exchange of $2.6 million.

Operating income increased by $5.7 million, or 35.6%, primarily due to lower restructuring and restructuring-related charges of $7.2 million, partially offset by lower sales unit volume and higher tariff costs net of price mitigating actions.

Corporate expenses

Operating income

The following discussion of consolidated results of operations and segment results refers to the thirteen weeks ended September 27, 2025 compared to the thirteen weeks ended September 28, 2024.

Consolidated results of operations should be read in conjunction with segment results of operations.

Net sales decreased by $6.1 million, or 0.5%, primarily due to sales volume decreases in China of $14.5 million.

The remaining decreases were due to lower sales volume, partially offset by disciplined pricing actions, including strategic adjustments to mitigate tariff-related costs.

Net sales were favorably impacted by foreign exchange of $1.2 million.

Cost of products sold

Cost of products sold increased by $4.3 million, or 0.7%, primarily due to material cost inflation, including tariff costs, higher transportation costs, partially offset by the lower sales volume and continued productivity gains across the segments, supported by strategic sourcing initiatives and manufacturing efficiencies.

Cost of products sold also includes a loss, net of insurance recovery, of $3.0 million relating to a fire in a portion of a manufacturing facility in the Outdoors segment.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $15.0 million, or 5.0%, primarily due to higher restructuring-related charges of $12.3 million, distribution costs, and professional fees, partially offset by reductions to incentive compensation.

Asset impairment charges

During the thirteen weeks ended September 27, 2025, we determined one of our assets within the Outdoors segment, met the criteria to be classified as held-for-sale.

An impairment charge of $49.7 million was recorded to reduce the carrying value of the asset to equal fair value, less estimated costs to sell.

Restructuring charges

Restructuring charges of $10.8 million in the thirteen weeks ended September 27, 2025 are primarily due to costs incurred in connection within the Company's headquarters consolidation and its related organizational changes.

Operating income

Operating income decreased by $79.2 million, or 38.6%, primarily due to lower sales volume, material cost inflation, asset impairment charges of $50.1 million, higher restructuring and restructuring-related charges of $15.6 million, and higher distribution costs, partially offset by continued productivity gains across the segments, supported by strategic sourcing initiatives and manufacturing efficiencies, as well as reductions to incentive compensation.

Interest expense

Interest expense decreased by $1.6 million, or 5.3%, primarily due to lower interest rates on current-period commercial paper borrowings and lower unsecured senior notes outstanding.

Other (income) expense, net

Other (income) expense, net, was $2.6 million in the thirteen weeks ended September 27, 2025, compared to $(1.6) million in the thirteen weeks ended September 28, 2024.

The decrease of $4.2 million in other (income) expense, net is primarily due to an increase in net periodic benefit expense of $2.0 million, and increase in foreign currency transaction expense of $1.0 million and a decrease in interest and investment income of $0.5 million.

The effective income tax rates for the thirteen weeks ended September 27, 2025 and thirteen weeks ended September 28, 2024 were 25.3% and 22.6%, respectively.

The difference between the Company’s effective income tax rate for the thirteen weeks ended September 27, 2025, and the U.S.

statutory rate of 21% primarily relates to state income taxes and foreign income taxed at higher rates, partially offset by provision to return adjustments.

The difference between the Company’s effective income tax rate for the thirteen weeks ended September 28, 2024, and the U.S.

statutory rate of 21% primarily relates to state income taxes and foreign income taxed at higher rates, partially offset by favorable benefits related to provision to return adjustments and tax credits.

Net income was $70.8 million in the thirteen weeks ended September 27, 2025, compared to $136.6 million in the thirteen weeks ended September 28, 2024.

Results By Segment

Net sales decreased by $16.6 million, or 2.6%, primarily due to sales volume decreases in China of $14.5 million.

The remaining decreases were due to lower sales unit volume, partially offset by disciplined pricing actions across our portfolio, including strategic adjustments to mitigate tariff-related costs.

Operating income decreased by $5.5 million, or 3.6%, primarily due to lower sales volume, material cost inflation, including tariff costs, partially offset by manufacturing efficiencies and lower selling, general and administrative expenses, including reductions to incentive compensation.

Net sales increased by $1.8 million, or 0.5%, primarily due to disciplined pricing actions, including strategic adjustments to mitigate tariff-related costs, partially offset by lower sales unit volume.

Operating income decreased by $62.8 million, or 108.7%, due to higher material costs, including tariff costs, lower sales unit volume, product mix and higher restructuring and restructuring-related charges of $1.5 million, partially offset by manufacturing efficiencies.

Net sales increased by $8.7 million, or 4.9%, primarily due to disciplined pricing actions, including strategic adjustments to mitigate tariff-related costs, partially offset by lower sales unit volume.

Net sales was favorably impacted by foreign exchange of $0.9 million.

Operating income decreased by $5.3 million, or 16.1%, primarily due to lower sales unit volume, product mix and higher restructuring and restructuring-related charges of $4.2 million.

Corporate expenses increased by $5.6 million, or 15.1%, primarily due to higher restructuring and restructuring-related charges of $9.7 million, and higher professional fees, partially offset by reductions to incentive compensation.

Corporate expenses increased by $37.8 million, or 84.4% primarily due to costs associated with governance advisory services and leadership changes of $42.4 million, partially offset by lower restructuring and restructuring-related charges of $9.8 million.

LIQUIDITY AND CAPITAL RESOURCES

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Our operating income is generated by our subsidiaries.

We believe our operating cash flows, including funds available under the credit facility and access to capital markets, provide sufficient liquidity to support the Company’s working capital requirements, capital expenditures and service of indebtedness, as well as to finance acquisitions, repurchase shares of our common stock and pay dividends to stockholders, as the Board of Directors deems appropriate both for the 12-month period following September 27, 2025, and in the long-term.

Our cash flows from operations, borrowing availability and overall liquidity are subject to certain risks and uncertainties, including those described in the section of our Annual Report on Form 10-K for the year ended December 27, 2025 entitled “Item 1A.

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Long-Term Debt

In June 2025, we repaid our 4.000% senior unsecured notes issued in June 2015 at their maturity date using a combination of cash on hand and commercial paper borrowings.

At September 27, 2025, the Company had aggregate outstanding notes in the principal amount of $2.2 billion, with varying maturities (the “Notes”).

As of March 28, 2026, the Company had aggregate outstanding notes in the principal amount of $2.2 billion, with varying maturities (the “Notes”).

The Notes are unsecured senior obligations of the Company.

In addition, we believe that we have the ability to obtain alternative sources of financing if required.

The following table provides a summary of the Company’s outstanding Notes, including the net carrying value of the Notes, net of underwriting commissions, price discounts and debt issuance costs as of September 27, 2025 and December 28, 2024:

Net Carrying Value

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Maturity Date

September 27, 2025

March 28, 2026

December 27, 2025

3.250% Senior Notes

September 2019

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5.875% Senior Notes

Total Senior Notes

current portion

Total Senior Notes long-term

Credit Facilities

In August 2022, the Company entered into a third amended and restated $1.25 billion revolving credit facility (the “Revolving Credit Agreement”), and borrowings thereunder will be used for general corporate purposes.

The maturity date of the facility is August 2027.

Interest rates under the Revolving Credit Agreement are variable based on the Secured Overnight Financing Rate ("SOFR") at the time of the borrowing and the Company’s long-term credit rating and can range from SOFR + 1.02% to SOFR + 1.525%.

In January 2026, the Company entered into a fourth amended and restated $1.25 billion revolving credit facility (the “Revolving Credit Agreement”), and borrowings thereunder will be used for general corporate purposes.

The maturity date of the facility is January 2031.

Borrowings under the Revolving Credit Agreement will bear interest at variable rates equal to, at the Company’s election, the term Secured Overnight Financing Rate ("SOFR") plus an applicable term SOFR margin for an interest period selected by the Company.

The applicable term SOFR rate margin will be determined based on the ratings of the Company’s senior unsecured long-term debt securities.

The daily simple SOFR rate margins range from 0.80% to 1.30%.

Under the Revolving Credit Agreement, the Company is required to maintain a minimum ratio of consolidated EBITDA to consolidated interest expense of 3.0 to 1.0.

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In addition, the Company's ratio of consolidated debt minus certain cash and cash equivalents to consolidated EBITDA generally may not exceed 3.5 to 1.0.

There were no outstanding borrowings under this facility as of September 27, 2025 and December 28, 2024.

As of September 27, 2025, we were in compliance with all covenants under this facility.

We currently have uncommitted bank lines of credit in China, which provide for unsecured borrowings for working capital of up to $30.5 million in aggregate as of September 27, 2025 and December 28, 2024, respectively.

There were no outstanding balances as of September 27, 2025 and December 28, 2024.

On March 28, 2026 and December 27, 2025, there were no outstanding borrowings under this facility.

As of March 28, 2026, we were in compliance with all covenants under this facility.

We currently have uncommitted bank lines of credit in China, which provide for unsecured borrowings for working capital of up to $30.5 million in aggregate as of March 28, 2026 and December 27, 2025, respectively.

There were no outstanding balances as of March 28, 2026 and December 27, 2025.

Commercial Paper

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The Company expects to use any issuances under the Commercial Paper Program for general corporate purposes.

Outstanding borrowings under the Commercial Paper Program as of September 27, 2025 was $479.0 million.

No amounts were outstanding as of December 28, 2024.

Outstanding borrowings under the Commercial Paper Program as of March 28, 2026 and December 27, 2025 were $537.0 million and $368.8 million, respectively.

Cash and Seasonality

On September 27, 2025, we had non-restricted cash and cash equivalents of $227.4 million, of which $191.1 million was held at non-U.S.

On March 28, 2026, we had non-restricted cash and cash equivalents of $223.1 million, of which $206.4 million was held at non-U.S.

subsidiaries.

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Share Repurchases and Dividends

In the thirty-nine weeks ended September 27, 2025, we repurchased 3.8 million shares of our outstanding common stock under the Company’s share repurchase program for $237.8 million.

As of September 27, 2025, the Company’s total remaining share repurchase authorization under its share repurchase program was approximately $837.2 million.

In the thirteen weeks ended March 28, 2026, we repurchased 0.9 million shares of our outstanding common stock under the Company’s share repurchase program for $43.5 million.

As of March 28, 2026, the Company’s total remaining share repurchase authorization under its share repurchase program was approximately $783.8 million.

The share repurchase program does not obligate the Company to repurchase any specific dollar amount or number of shares and may be suspended or discontinued at any time.

In the thirty-nine weeks ended September 27, 2025, we paid dividends in the amount of $90.6 million to the Company’s stockholders.

In the thirteen weeks ended March 28, 2026, we paid dividends in the amount of $31.2 million to the Company’s stockholders.

Our Board of Directors will continue to evaluate dividend payment opportunities on a quarterly basis.

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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.

On February 29, 2024, we acquired 100% of the outstanding equity interests of Wise Water Solutions, LLC, doing business as Springwell Water Filtration Systems ("SpringWell") for a purchase price of $105.6 million, net of cash acquired of $1.4 million.

We financed the transaction using cash on hand and borrowings under our existing credit facility.

The results of SpringWell are reported as part of the Water Innovations ("Water") segment.

We periodically review our portfolio of brands and evaluate potential strategic transactions and other capital initiatives to increase stockholder value.

Below is a summary of cash flows for the thirty-nine weeks ended September 27, 2025 and September 28, 2024.

Below is a summary of cash flows for the thirteen weeks ended March 28, 2026 and the thirteen weeks ended March 29, 2025.

'(In millions)

Thirty-Nine Weeks Ended

September 27, 2025

Thirty-Nine Weeks Ended September 28, 2024

Net cash provided by operating activities

Thirteen Weeks Period

March 28, 2026

Thirteen Weeks Ended March 29, 2025

Net cash used in operating activities

Net cash used in investing activities

Net cash used in financing activities

Net cash provided by financing activities

Effect of foreign exchange rate changes on cash

Net decrease in cash and cash equivalents

Net cash provided by operating activities was $270.4 million in the thirty-nine weeks ended September 27, 2025, compared to net cash provided by operating activities of $395.5 million in the thirty-nine weeks ended September 28, 2024.

The decrease in cash provided of $125.1 million was primarily due to lower net income in 2025 and an increase in accounts receivable and inventory balances compared to the prior period, partially offset by an increase in accounts payable and accrued expenses and other liabilities.

Net cash used in investing activities was $84.4 million in the thirty-nine weeks ended September 27, 2025, compared to net cash used in investing activities of $258.7 million in the thirty-nine weeks ended September 28, 2024.

The decrease in cash used of $174.3 million primarily relates to the absence of acquisition-related outflows in 2025 and lower capital expenditures in 2025 as compared to 2024.

Net cash used in financing activities was $352.6 million in the thirty-nine weeks ended September 27, 2025, compared to net cash used in financing activities of $183.1 million in the thirty-nine weeks ended September 28, 2024.

The increase in cash used of $169.5 million was primarily due to higher net debt repayments in 2025 as compared to 2024 of $125.0 million and higher share repurchases in 2025 compared to 2024 of $47.4 million.

Net cash used in operating activities was $119.2 million in the thirteen weeks ended March 28, 2026, compared to net cash used in operating activities of $83.4 million in the thirteen weeks ended March 29, 2025.

The increase in cash used of $35.8 million was primarily due to lower net income and changes in working capital items (primarily accounts receivable, inventories and accounts payable), as well as changes in accrued expenses and accrued taxes.

Net cash used in investing activities was $10.5 million in the thirteen weeks ended March 28, 2026, compared to net cash used in investing activities of $29.2 million in the thirteen weeks ended March 29, 2025.

The decrease in cash used of $18.7 million is primarily due to a decrease in capital expenditures, partially offset by proceeds from the disposition of assets.

Net cash provided by financing activities was $90.4 million in the thirteen weeks ended March 28, 2026, compared to net cash provided by financing activities of $68.0 million in the thirteen weeks ended March 29, 2025.

The increase in cash provided of $22.4 million was primarily due to lower treasury stock purchases offset by lower net borrowings under our commercial paper program.

Pension Plans

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As of December 27, 2025, the fair value of our total pension plan assets was $188.3 million, representing funding of approximately 95% of the accumulated qualified benefit obligation liability.

During the thirty-nine weeks ended September 27, 2025, we made no pension contributions.

During the thirteen weeks ended March 28, 2026, we made no pension contributions.

For the foreseeable future, we believe that we have sufficient liquidity to meet the minimum funding that may be required by the Pension Protection Act of 2006.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis