MasterBrand, Inc. 10-Q

Item 1A. RISK FACTORS. There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 25, 2022 in the section entitled “Risk Factors” within Part I, Item 1A, other than those noted below: We cannot guarantee that our stock repurchase program will be fully consummated or will enhance long-term stockholder value, and stock repurchases could increase the volatility of our stock prices and could diminish our cash reserves. Our Board of Directors has adopted a stock repurchase program, and we may make repurchases under such program. The actual manner, timing, amount and value of repurchases under our repurchase program or any future repurchase programs will be determined by management at its discretion and will depend on a number of factors, including the market price of our common stock, trading volume, other capital management objectives and opportunities, applicable legal requirements, applicable tax effects and general market and economic conditions. Any stock repurchases could affect our share trading price, increase volatility and reduce our cash reserves, which may result in a decrease in the trading price of our common stock. 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 program. The excise tax included in the Inflation Reduction Act of 2022 may hinder our ability to repurchase common stock or decrease the value of our securities following a business combination. The Inflation Reduction Act of 2022 provides for, among other things, a new U.S. federal one percent excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. While we cannot predict the full impact that the excise tax will have on our operations, it may decrease the value of any repurchases of our common stock we elect to make. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally one percent of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury has been authorized to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. Any share redemption or other share repurchase that occurs after December 31, 2022, in connection with a business combination, extension vote or otherwise, may be subject to the excise tax. The effects of the Inflation Reduction Act on our business are unknown at this time. 31 Table of Contents Changes in tax laws or regulations may have a negative impact on our results of operations, cash flows and financial condition. The Company is subject to income taxes in the U.S. and various foreign jurisdictions. The determination of the Company’s income tax positions involves consideration of uncertainties, changing fiscal policies, tax laws, court rulings, regulations, and related legislation. New income, sales, use, or other tax laws, treaties, statutes, rules, regulations, or court rulings could be enacted at any time, which could adversely affect our business operations and financial performance. Additionally, existing tax laws, treaties, statutes, rules, regulations, or court rulings could be interpreted, changed, modified, or applied adversely to us. The U.S. Tax Cuts and Jobs Act (“Tax Act”), enacted on December 22, 2017, made broad and complex changes to the U.S. tax code that are subject to continuous guidance and interpretation. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020, and includes several measures intended to assist companies during the COVID-19 pandemic, including temporary changes to income and non-income-based laws. The Organization for Economic Cooperation and Development (“OECD”) initiatives, including the Global Anti-Base Erosion proposal envisaging global minimum taxation known as Pillar Two, represent significant changes that could have a material effect upon our effective tax rate, future earnings, and cash flows. The United Nations (“UN”) initiatives could affect global tax policy and related tax conventions. The European Union maintains a focus on the taxation of multinational companies, including an agreement to adopt the OECD’s Pillar Two reform of international taxation for its member states. With continuous changes in the U.S. Government and legislatures in various states corresponding with the respective election cycles, there is an increased likelihood of additional tax legislation being passed in the near future, which could also have an adverse impact on our effective tax rate, future earnings, and cash flows. We regularly undergo tax audits in various jurisdictions in which our products are sold, including audits of indirect taxes, including value-added tax, customs and duties in certain jurisdictions. Although we believe that our tax estimates are reasonable and that we prepare our tax filings in accordance with all applicable tax laws, the final determination, including related litigation, penalties and interest, with respect to any tax, customs and duty audits, could be materially different from our estimates or from our historical results in the periods for which that determination is made. Such determinations may adversely impact future period results of operations, cash flows and financial condition.