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Item 8. Financial Statements and Supplementary Data

2024-02-27 compared with 2023-03-10 · 476 added, 436 removed, 862 unchanged (51% of the section changed)

Financial Statements and Supplementary Data

Consolidated Statements of Income

MasterBrand, Inc.

CONSOLIDATED STATEMENTS OF INCOME

For years ended

(In millions, except per share amounts) 2022 2021 2020

Dollars presented in millions, except per share amounts)

2023 2022 2021

NET SALES $ 2,726.2 $ 3,275.5 $ 2,855.3

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INCOME BEFORE TAXES

238.7 213.4 238.3

Income tax expense 56.7 58.0 55.7

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See Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income MasterBrand, Inc.

MasterBrand, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For years ended

(In millions) 2022 2021 2020

Dollars presented in millions)

2023 2022 2021

NET INCOME $ 182.0 $ 155.4 $ 182.6

Other comprehensive (loss) income, before tax:

Other comprehensive income (loss), before tax:

Foreign currency translation adjustments 12.1 ( 9.9 ) ( 0.9 )

Unrealized gains (losses) on derivatives:

Unrealized holding gains (losses) arising during period 7.2 0.5 (1.4)

reclassification adjustment for (gains) losses included in net income (4.5) (2.9) 2.3

Unrealized gains (losses) on derivatives 2.7 (2.4) 0.9

Unrealized (losses) gains on derivatives:

Unrealized holding gains arising during period

reclassification adjustment for gains included in net income

( 10.2 ) ( 4.5 ) ( 2.9 )

Unrealized (losses) gains on derivatives

( 0.6 ) 2.7 ( 2.4 )

Defined benefit plans:

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Defined benefit plans ( 0.9 ) ( 4.4 ) 9.4

Other comprehensive (loss) income, before tax (11.6) 6.1 5.3

Other comprehensive income (loss), before tax

10.6 ( 11.6 ) 6.1

Income tax benefit (expense) related to items of other comprehensive income 0.2 1.0 ( 2.3 )

Other comprehensive (loss) income, net of tax (10.6) 3.8 5.0

Other comprehensive income (loss), net of tax

10.8 ( 10.6 ) 3.8

COMPREHENSIVE INCOME $ 192.8 $ 144.8 $ 186.4

See Notes to Consolidated Financial Statements.

Consolidated Balance Sheets MasterBrand, Inc.

(In millions) December 25,

MasterBrand, Inc.

CONSOLIDATED BALANCE SHEETS

Dollars presented in millions)

2023 December 25,

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Cash and cash equivalents $ 148.7 $ 101.1

Accounts receivable (net of allowances for credit losses of $11.6 million in 2022 and $2.5 million in 2021) 289.6 305.3

Accounts receivable, net

Inventories 249.8 373.1

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Other intangible assets, net of accumulated amortization 335.5 349.8

Related party receivable — 419.7

Other assets 27.2 20.5

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Operating lease liabilities 46.3 40.7

Related party payable — 9.1

Other non-current liabilities 10.5 7.4

TOTAL LIABILITIES 1,187.9 1,520.2

Commitments (Note 15) and Contingencies (Note 16)

Commitments (Note 15) and Contingencies and Accrued Losses (Note 16)

Common stock (par value $ 0.01 per share;

authorized 750.0 million shares, issued and outstanding 128.0 million shares as of December 25, 2022) 1.3 —

authorized 750.0 million shares;

129.1 million shares issued and 126.8 million outstanding as of December 31, 2023;

128.0 shares issued and outstanding as of December 25, 2022 )

Paid-in capital 17.8 —

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See Notes to Consolidated Financial Statements.

Consolidated Statements of Cash Flows MasterBrand, Inc.

MasterBrand, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For years ended

(In millions) 2022 2021 2020

Dollars presented in millions) 2023 2022 2021

OPERATING ACTIVITIES

Net income $ 182.0 $ 155.4 $ 182.6

Non-cash expense (income):

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 49.0 47.3 44.4

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Restructuring charges, net of cash payments ( 9.4 ) 13.0 ( 0.4 )

Amortization of finance fees 2.2 — —

Stock-based compensation 17.8 10.9 9.3

Asset impairment charges — 46.4 —

Recognition of actuarial losses 2.9 0.9 0.2

Deferred taxes ( 5.7 ) 2.3 ( 7.7 )

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Issuance of long-term and short-term debt 255.0 985.0 —

Repayments of long-term and short-term debt ( 527.5 ) — —

Repurchase of common stock ( 22.0 ) — —

Payments of employee taxes withheld from share-based awards ( 4.0 ) ( 0.1 ) —

Related party borrowings — 2,754.5 2,614.2

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Payment of financing fees — ( 10.1 ) —

Payments of employee taxes withheld from share-based awards (0.1) — —

Shares of common stock returned for taxes 0.2 — —

Repayment of finance lease facilities (0.7) (0.5) (0.3)

( 1.4 ) ( 0.5 ) ( 0.5 )

NET CASH USED IN FINANCING ACTIVITIES ( 299.9 ) ( 215.3 ) ( 109.7 )

Effect of foreign exchange rate changes on cash (4.7) 0.1 0.8

NET DECREASE IN CASH AND CASH EQUIVALENTS $ (40.3) $ (12.9) $ (0.5)

Cash and cash equivalents at beginning of year $ 141.4 $ 154.3 $ 154.8

Cash and cash equivalents at end of year $ 101.1 $ 141.4 $ 154.3

a) Capital expenditures of $1.6 million, $4.1 million and $1.1 million that have not been paid as of December 25, 2022, December 26, 2021 and December 27, 2020, respectively, were excluded from the Consolidated Statement of Cash Flows.

b) Income taxes paid directly to taxing authorities, net of refunds received, were $10.3 million, $15.3 million, and $5.8 million during the years ended December 25, 2022, December 26, 2021 and December 27, 2020, respectively.

Prior to the Separation in 2022, federal and state income tax payments and refunds were paid and received by Fortune Brands on our behalf.

Effect of foreign exchange rate changes on cash and cash equivalents ( 1.2 ) ( 4.7 ) 0.1

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 47.6 $ ( 40.3 ) $ ( 12.9 )

Cash and cash equivalents at beginning of period $ 101.1 $ 141.4 $ 154.3

Cash and cash equivalents at end of period $ 148.7 $ 101.1 $ 141.4

a) Capital expenditures of $ 2.3 million, $ 1.6 million and $ 4.1 million that have not been paid as of December 31, 2023, December 25, 2022 and December 26, 2021, respectively, were excluded from the Consolidated Statements of Cash Flows.

See Notes to Consolidated Financial Statements.

Consolidated Statements of Equity

MasterBrand, Inc.

(In millions)

CONSOLIDATED STATEMENTS OF EQUITY

Dollars and shares presented in millions)

Shares Amount Paid-In

Treasury stock, at cost

Treasury stock, at cost Accumulated

Comprehensive

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Balance at December 26, 2021 — $ — $ 272.2 $ — $ ( 3.9 ) $ 2,185.5 $ 2,453.8

Comprehensive income:

Net income — — — — — 182.6 182.6

Other comprehensive income — — — — 3.8 — 3.8

Stock-based compensation — — 9.3 — — — 9.3

Net contributions from Fortune Brands — — 43.7 — — — 43.7

Balance at December 26, 2021 — $ — $ 272.2 $ — $ (3.9) $ 2,185.5 $ 2,453.8

Distribution of MasterBrand, Inc.

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Stock-based compensation — — 10.9 ( 0.1 ) — — 10.8

Dividend to Fortune Brands — — — — — (940.0) (940.0)

Dividend to Fortune Brand — — — — — ( 940.0 ) ( 940.0 )

Net contributions from (distributions to) Fortune Brands — — 110.6 — — ( 105.3 ) 5.3

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Balance at December 25, 2022 128.0 $ 1.3 $ — $ ( 0.1 ) $ ( 14.5 ) $ 1,022.5 $ 1,009.2

Comprehensive income:

Net income — — — — — 182.0 182.0

Other comprehensive income — — — — 10.8 — 10.8

Stock-based compensation 0.7 — 17.8 ( 4.0 ) — — 13.8

Stock repurchase program ( 1.9 ) — — ( 22.0 ) — — ( 22.0 )

Balance at December 31, 2023 126.8 $ 1.3 $ 17.8 $ ( 26.1 ) $ ( 3.7 ) $ 1,204.5 $ 1,193.8

See Notes to Consolidated Financial Statements.

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References to “Cabinets,” “MasterBrand,” “the Company,” “we,” “our” and “us” refer to MasterBrand, Inc.

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

On April 28, 2022, Fortune Brands announced that its Board of Directors approved in principle a separation of its Cabinets segment into a standalone publicly-traded company (the “Separation”).

The Cabinets segment of Fortune Brands Home & Security, Inc.

(“Fortune Brands” or the “Parent”) had historically been operated by MasterBrand Cabinets, Inc.

and its consolidated subsidiaries, unless the context otherwise requires.

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 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.

Following the incorporation of MasterBrand, Inc., the following occurred:

After the incorporation of MasterBrand, Inc., the following occurred:

(1) Fortune Brands contributed all of the issued and outstanding shares of capital stock of MBCI to MasterBrand, Inc., resulting in MBCI becoming a wholly-owned subsidiary of MasterBrand, Inc.

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and (2) MBCI was converted into a Delaware limited liability company, MasterBrand Cabinets LLC (collectively, the “Reorganization”).

On December 14, 2022, the Separation was completed by way of a pro rata dividend of our common stock to stockholders of Fortune Brands common stock (the “Distribution”).

On December 14, 2022, the Separation was completed via the Distribution.

On December 14, 2022, the date of Separation, 128.0 million shares of MasterBrand, Inc.

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became an independent, publicly-traded company, listed under the symbol “MBC” on the New York Stock Exchange, beginning December 15, 2022.

All share and per share amounts for all periods presented in the consolidated financial statements, including Note 19, “Common Stock” and Note 5, “Earnings Per Share,” 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 all prior periods presented in the consolidated financial statements, including Note 5, "Earnings Per Share," have been retroactively recast to reflect the effects of the changes in equity structure resulting from the Reorganization, Separation and Distribution.

The historical activity of the Company is that of MBCI prior to the Reorganization.

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• 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, Inc.

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, Inc.

Basis of Presentation The accompanying financial statements are now presented on a consolidated basis as the company is a standalone public company.

• 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.

Basis of Presentation The accompanying financial statements are presented on a consolidated basis as the Company is a standalone public company.

We have historically existed and functioned as a reporting segment of the consolidated business of Fortune Brands up until the Separation on December 14, 2022, at which time we became a standalone public company.

Certain information from prior to the Separation on December 14, 2022 was derived from Fortune Brands consolidated financial statements and accounting records.

Certain information from prior to the Separation was derived from Fortune Brands’ consolidated financial statements and accounting records.

The consolidated f inancial statements and notes to consolidated financial statements as of and subsequent to December 14, 2022, the date of the Separation, reflect the consolidated financial position, results of operations and cash flows for MasterBrand as an independent company.

Prior to the Separation, the consolidated financial statements and notes to consolidated financial statements were prepared on a carve-out basis using the financial statements and accounting records of Fortune Brands.

The carve-out basis financial statements represent the historical financial position, results of operations, and cash flows of MasterBrand as they were historically managed in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and

reflect significant assumptions and allocations.

The carve-out basis financial statements represent the historical financial position, results of operations, and cash flows of MasterBrand as they were historically managed in accordance with GAAP and reflect significant assumptions and allocations.

The carve-out financial statements may not include all expenses that would have been incurred had MasterBrand existed as a standalone entity.

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Fiscal 2023 consisted of 53 weeks ended on December 31, 2023 .

Fiscal 2021 consisted of 52 weeks ending on December 26, 2021.

Fiscal 2020 consisted of 52 weeks ending on December 27, 2020.

Fiscal 2022 and 2021 both consisted of 52 weeks ending on December 25, 2022 and December 26, 2021, respectively.

References herein to years are to our fiscal years.

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The consolidated statements of income also include an allocation of expenses related to certain Fortune Brands corporate functions through the Separation, including information technology, finance, executive, human resources, supply chain, internal audit, governance and legal services.

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, employee headcount, or number of facilities, as applicable.

Prior to the Separation, total expenses allocated for the 2022, 2021 and 2020 years were $92.5 million, $62.0 million and $61.6 million, respectively, of which $72.4 million, $42.3 million and $42.4 million, respectively, were not previously allocated to us.

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 the 2022 and 2021 years were $ 92.5 million and $ 62.0 million respectively, of which $ 72.4 million and $ 42.3 million, respectively, was not previously allocated to us.

Such amounts are primarily included within selling, general and administrative expenses in the consolidated statements of income.

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 for all of the periods presented.

Actual costs that we may have incurred during the time periods we were not a standalone company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by our employees and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology and infrastructure.

We consider the expense methodology and resulting allocation to be reasonable;

however, the allocations may not be indicative of actual expenses that would have been incurred had we operated as an independent, publicly-traded company in the prior year periods presented.

Actual costs that we may have incurred during the time period when we were not a standalone company 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.

Accordingly, historical allocations may not be indicative of future costs we incur operating as an independent, publicly-traded company.

The consolidated statements of income also include $15.4 million of costs related to the separation from Fortune Brands for the year ended December 25, 2022.

The consolidated statements of income also include $ 2.4 million and $ 15.4 million of costs related to the separation from Fortune Brands for the years ended December 31, 2023 and December 25, 2022, respectively.

The Separation-related costs include advisory fees, professional fees and other transaction related costs incurred directly by us.

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The income tax amounts in the consolidated financial statements have been calculated on a separate-return method and presented as if our operations were separate taxpayers in the respective jurisdictions.

For the pre-Separation period in 2022, including the Separation, federal and state income tax payments and refunds were paid and received by Fortune Brands on our behalf.

The net taxes paid on our behalf are payable to Fortune Brands, as provided in the indemnification provisions of the Tax Allocation Agreement.

Accordingly, the net tax payable of $32.6 million to Fortune Brands as of December 25, 2022, is recorded in accounts payable on the Consolidated Balance Sheets.

Following the Separation, a limited number of services that Fortune Brands provided to us, or we provided to them, prior to the Separation are continuing to be provided for a period of time under a Transition Services Agreement.

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 and legal services, as well as ongoing additional costs associated with operating as an independent, publicly-traded company.

For more information regarding related party transactions with Fortune Brands, see Note 20, “Related Party Transactions,” of our audited consolidated financial statements.

Fortune Brands utilized a central approach to treasury management, and we historically participated in related cash pooling arrangements.

For the period prior to the Separation in 2022, including the Separation, federal and state income tax payments, withholding taxes, and refunds were paid and received by Fortune Brands on our behalf.

The net income taxes paid on our behalf are payable to Fortune Brands, as provided in the indemnification provisions of the Tax Allocation Agreement.

Accordingly, the net income 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.

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.

Throughout fiscal 2023, we have incurred 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.

Fortune Brands utilized a central approach to treasury management, and prior to the Separation, we historically participated in related cash pooling arrangements.

Our cash and cash equivalents on our consolidated balance sheets represent cash balances held in bank accounts owned by the Company and its subsidiaries.

Prior to the Separation, we had no third-party borrowings, and all borrowings attributable to our business and due to Fortune Brands were recorded as “related party payable” in our consolidated balance sheets and classified as current or noncurrent based on loan maturity dates.

Fortune Brands’ third-party debt and related interest expense were not attributed to us as we were not

the legal obligor of the debt, and the borrowings were not specifically identifiable to us.

Fortune Brands’ third-party debt and related interest expense were not attributed to us as we were not the legal obligor of the debt, and the borrowings were not specifically identifiable to us.

However, in connection with the Separation, we completed a financing transaction, which resulted in additional interest expense beginning in the fourth quarter of 2022.

See Note 11, "Debt," for additional information.

For more information regarding related party transactions with Fortune Brands, see Note 20, "Related Party Transactions."

During the fourth quarter of 2022, we recognized $ 8.7 million of additional expense in cost of goods sold as an out-of-period adjustment.

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The adjustment did not have any impact on our annual consolidated financial statements for the year ended December 25, 2022.

Tornado at Jackson, GA Production Facility On January 12, 2023, a tornado hit the Company’s leased Jackson, Georgia production facility, causing damage to the Company’s assets and disrupting certain operations.

Insurance, less applicable deductibles, covered the repair or replacement of the Company’s assets that suffered loss or damage, and the Company worked closely with its insurance carriers and claims adjusters to ascertain the full amount of insurance proceeds due to the Company as a result of the damages and the losses the Company suffered.

The Company’s insurance policies also provide business interruption coverage, including lost profits, and reimbursement for other expenses and costs that have been incurred relating to the damages and losses suffered.

In the first quarter of 2023, the Company incurred expenses of $ 9.4 million solely related to damages caused by the tornado.

These expenses included compensation costs that we continued to pay skilled labor at the Jackson facility to enable a timely ramp up of production upon re-opening the facility on March 27, 2023, the first day of our fiscal second quarter of 2023, as well as the write-off of damaged inventory, freight costs to move product to other warehouses and professional fees to secure and maintain the site.

No expenses related to the tornado were incurred during our second, third, or fourth quarters of 2023, and we do not expect to incur any additional costs related to this matter.

During 2023, we received $ 7.4 million of insurance proceeds for direct costs caused by the tornado, consisting of $ 2.2 million, $ 2.0 million, and $ 3.2 million received during our second, third, and fourth quarters, respectively.

Both the expenses and insurance recoveries are recorded as a component of cost of products sold in the consolidated statements of income.

Upon receipt of the final insurance payment in the fourth quarter, we consider this claim to be closed.

Significant Accounting Policies

Use of Estimates The preparation of financial statements in conformity with U.S.

GAAP requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period.

Use of Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Revenue Recognition In accordance with ASC 606, Revenue from Contracts with Customers, the Company recognizes revenue for the sale of goods based on its assessment of when control transfers to our customers.

See Note 3, "Revenue from Contracts with Customers," for additional information.

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Advertising costs recorded in selling, general and administrative expenses were $ 37.4 million, $ 39.7 million and $ 41.2 million in 2023, 2022 and 2021, respectively.

Stock-based Compensation Some of our employees participate in stock-based compensation plans sponsored by the Company.

Stock-based Compensation Some of our associates participate in stock-based compensation plans sponsored by the Company.

Stock based compensation plans may include stock options, restricted stock, restricted stock units, performance shares, performance units, other types of stock-based awards, and other cash-based compensation.

Stock-based compensation expense, measured as the fair value of an award on the date of grant, is recognized in the financial statements over the period that an employee is required to provide services in exchange for the award.

Compensation expense is

recorded net of estimated forfeitures.

Stock-based compensation expense, measured as the fair value of an award on the date of grant, is recognized in the financial statements over the period that an associate is required to provide services in exchange for the award.

Stock-based compensation expense is recorded net of estimated forfeitures.

The fair value of each option award is measured on the date of grant using the Black-Scholes option-pricing model.

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Income and expenses are translated at the average rates of exchange in effect during the period for the foreign subsidiaries where the local currency is the functional currency.

The related translation adjustments are made directly to a separate component of the “accumulated other comprehensive income (loss)” (“AOCI”) caption in equity.

The related translation adjustments are made directly to a separate component of the AOCI caption in equity.

Transactions denominated in a currency other than the functional currency of a subsidiary are translated into the functional currency with resulting transaction gains or losses recorded in other expense, net.

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The Company filed separate foreign income tax returns.

Indemnification related tax balances, including allocated amounts of estimated income taxes for the year ended December 25, 2022, will be settled with Fortune Brands pursuant to their filing of relevant income tax returns, including operations of the Company for taxable periods prior to and including the Separation.

Post-Separation, our income tax provisions are calculated based on the Company’s operating footprint, as well as our tax return elections and assertions.

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The determination of the Company’s income tax positions involves consideration of uncertainties, changing fiscal policies, tax laws, court rulings, regulations, and related legislation.

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.

Accordingly, significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities, unrecognized tax benefits and the valuation allowance recorded against deferred tax assets.

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The actual benefits ultimately realized may differ from our estimates.

As of each balance sheet date, unrecognized tax benefits are reassessed and adjusted if the Company’s judgment changes as a result of new information, and changes in facts or circumstances Changes in recognition and measurement estimates are recorded in the Consolidated Statement of Income and Consolidated Balance Sheet in the period in which such changes occur.

As of each balance sheet date, unrecognized tax benefits are reassessed and adjusted if the Company’s judgment changes as a result of new information, and changes in facts or circumstances.

Changes in recognition and measurement estimates are recorded in the Consolidated Statements of Income and Consolidated Balance Sheets in the period in which such changes occur.

We reduce our deferred tax assets by a valuation allowance if it is more likely than not that we will not realize some portion or all of the deferred tax assets.

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In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance in the period in which such changes occur, which would reduce the provision for income taxes.

Tax Act introduced Global Intangible Low-Taxed Income (“GILTI”), which subjects a U.S.

shareholder to current tax on income earned by certain foreign subsidiaries.

GAAP allows companies to either (i) recognize deferred taxes for temporary differences that are expected to reverse as GILTI in future years or (ii) account for taxes on GILTI as period costs in the year the tax is incurred.

The Company has elected to recognize GILTI tax as a period cost.

The Company recognizes Global Intangible Low-Taxed Income (“GILTI”) tax as a period cost.

The Company recognizes tax-related interest and penalties as a component of income tax expense.

Earnings Per Share Earnings per common share is calculated by dividing net income attributable to MasterBrand, Inc.

by the weighted-average number of shares of common stock outstanding during the period.

Earnings Per Share Earnings per common share is calculated by dividing net income attributable to MasterBrand by the weighted-average number of shares of common stock outstanding during the period.

Diluted earnings per common share include the impact of all potentially dilutive securities outstanding during the year.

For comparative purposes, 2021 and 2020 have been retroactively recast to reflect the effects of the changes in equity structure resulting from the Reorganization, Separation and Distribution and assume the same basic weighted average shares.

For comparative purposes, 2021 has been retroactively recast to reflect the effects of the changes in equity structure resulting from the Reorganization, Separation and Distribution and assumes the same basic weighted average shares.

For years prior to the Separation, it is assumed that there are no dilutive securities as there were no stock-based awards of MasterBrand outstanding.

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Allowances for Credit Losses Trade receivables are recorded at the stated amount, less allowances for discounts and credit losses.

The allowances represent estimated uncollectible receivables associated with potential customer defaults on contractual obligations (usually due to customers’ potential insolvency) or discounts related to early payment of accounts receivables by our customers.

The allowances for credit losses include provisions for certain customers where a risk of default has been specifically identified.

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Expected credit losses are estimated using various factors, including the length of time the receivables are past due, historical collection experience and existing economic conditions.

In accordance with this policy, our allowance for credit losses was $11.6 million and $2.5 million as of December 25, 2022 and December 26, 2021, respectively.

Inventories Inventories are stated at the lower of cost or net realizable value, cost being determined on a first-in, first-out (FIFO) basis and net realizable value being determined on the basis of replacement cost.

Inventories Inventories are stated at the lower of cost or net realizable value, cost being determined on a first-in, first-out basis and net realizable value being determined on the basis of replacement cost.

Inventory costs include direct materials, including freight, labor and manufacturing overhead.

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.

If actual market conditions differ from our projections, and our estimates prove to be inaccurate, write-downs of inventory values and adjustments to cost of sales may be required.

If actual market conditions differ from our projections, and our estimates prove to be inaccurate, write-downs of inventory values and adjustments to cost of products sold may be required.

Property, Plant and Equipment Property, plant and equipment are carried at cost.

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Machinery and equipment 1 to 20 years

Held for Sale Assets and liabilities to be disposed of by sale ("disposal groups") are reclassified into other current assets and other current liabilities on our consolidated balance sheets.

The reclassification occurs when all the held for sale criteria have been met, including when management, having the requisite authority, have committed to a plan to sell the assets within one year.

Disposal groups are measured at the lower of carrying value or fair value less costs to sell and are not depreciated or amortized.

The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value.

Long-lived Assets A long-lived asset (including amortizable identifiable intangible assets) or asset group held for use is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.

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Fair value is estimated primarily using discounted expected future cash flows on a market-participant basis.

In 2023, no triggering events were noted related to our goodwill or indefinite-lived tradenames.

However, we did note a triggering event requiring assessment of impairment for certain of our long-lived assets due to a restructuring action, resulting in a $ 4.6 million impairment charge included within restructuring charges.

See Note 12, "Restructuring Charges," for additional information.

In 2022, we concluded we had triggering events requiring assessment of impairment for certain of our long-lived assets due to the impairment of certain indefinite-lived tradenames, as well as specific restructuring actions announced in 2022.

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Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Goodwill and Indefinite-lived Intangible Assets We account for goodwill and other intangible assets in accordance with the provisions of Accounting Standards Codification (“ASC”) 350, Intangibles-Goodwill and Other, and account for business combinations using the acquisition method of accounting and, accordingly, the assets and liabilities of the entities acquired are recorded at their estimated fair values at the acquisition date.

Goodwill and Indefinite-lived Intangible Assets We account for goodwill and other intangible assets in accordance with the provisions of ASC 350, Intangibles-Goodwill and Other, and account for business combinations using the acquisition method of accounting and, accordingly, the assets and liabilities of the entities acquired are recorded at their estimated fair values at the acquisition date.

Goodwill is tested for impairment at least annually in the fourth quarter and written down when impaired.

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We may also elect to bypass the qualitative testing and proceed directly to the quantitative testing.

Assessing qualitative factors during 2022 would not have resulted in us performing a quantitative impairment test.

In 2022, we elected to bypass the qualitative testing and performed quantitative tests for all goodwill given the Separation from Fortune Brands.

For the income approach, we use a discounted cash flow model, estimating the future cash flows of the reporting units to which the goodwill relates and then discounting the future cash flows at a market-participant-derived discount rate.

Assessing qualitative factors during both 2023 and 2022 would not have resulted in us performing a quantitative impairment test.

In both 2023 and 2022, we elected to bypass the qualitative testing and performed quantitative tests for all goodwill.

In determining the estimated future cash flows, we consider current and projected future levels of income based on management’s plans for that business;

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For the market approach, we apply market multiples for peer groups to the current operating results of the reporting units to determine the reporting unit’s fair value.

The Company’s reporting units are operating

segments, or one level below operating segments when appropriate.

The Company’s reporting units are operating segments, or one level below operating segments when appropriate.

When the estimated fair value of a reporting unit is less than its carrying value, we measure and recognize the amount of the goodwill impairment loss based on that difference.

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Impairment losses are recorded to the extent that the carrying value of the indefinite-lived intangible asset exceeds its fair value.

The significant assumptions that are used to determine the estimated fair value for indefinite-lived intangible assets upon acquisition and subsequent impairment testing are forecasted revenue growth rates;

the assumed royalty rates;

and the market-participant discount rates.

forecasted revenue growth rates;

and the assumed royalty rates.

The market-participant discount rate used in estimating the fair value of future cash flows is dependent on comparable company prices and other relevant information generated by market transactions, as well as broader market assumptions, such as U.S.

treasury rates.

Our cash flow projections used to assess impairment of our goodwill and other intangible assets are significantly influenced by our projection for the U.S.

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We may also elect to bypass the qualitative testing and proceed directly to the quantitative testing.

Utilizing this historical approach during fiscal 2022 would have required us to perform qualitative impairment tests over certain indefinite-lived tradenames.

However, we elected to bypass the qualitative testing given the Separation from Fortune Brands and tested all of our indefinite-lived tradenames quantitatively during 2022.

In both 2023 and 2022, we elected to bypass the qualitative testing and tested all of our indefinite-lived tradenames quantitatively.

We measure fair value of our indefinite-lived tradenames using the relief-from-royalty approach which estimates the present value of royalty income that could be hypothetically earned by licensing the brand name to a third party over the remaining useful life.

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.

During our 2022 annual impairment test, we elected to quantitatively test the entire $183.1 million of indefinite-lived tradenames.

In future years, we would expect to first assess qualitative factors prior to determining the need to perform a quantitative impairment test.

During both our 2023 and 2022 annual impairment tests, we elected to quantitatively test all of our indefinite-lived tradenames.

During our 2021 annual impairment test, of our $ 231.8 million indefinite lived tradenames, we tested $ 180.7 million quantitatively, and the remainder was assessed using qualitative factors.

We recognized impairment charges, which are classified as “Asset impairment charges” on our consolidated statements of income, related to certain indefinite-lived tradenames of $46.4 million and $9.5 million in 2022 and 2020, respectively.

We did not recognize an impairment charge in 2021.

We did not recognize any impairment charges related to indefinite-lived intangible assets in either fiscal 2023 or 2021.

See Note 8, "Goodwill and Identifiable Intangible Assets," for additional information.

Events or circumstances that could have a potential negative effect on the estimated fair value of our reporting units and indefinite-lived tradenames include:

lower than forecasted revenues, actual new construction and repair and remodel 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 decline in the trading price of our common stock.

We cannot predict the occurrence of

certain events or changes in circumstances that might adversely affect the carrying value of goodwill and indefinite-lived assets.

increases in discount rates, lower than forecasted revenues, actual new construction and repair and remodel growth rates that fall below our assumptions, actions of key customers, continued economic uncertainty, higher levels of unemployment, weak consumer confidence, lower levels of discretionary consumer spending, a decrease in royalty rates and decline in the trading price of our common stock.

We cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of goodwill and indefinite-lived assets.

Derivative Financial Instruments In accordance with 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.

If the derivative is designated as a fair value hedge and is effective, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings in the same period.

If the derivative is designated as a cash flow hedge, the changes in the fair value of the derivative are recorded in other comprehensive income (loss) (“OCI”) and are recognized in the consolidated statement of income when the hedged item affects earnings.

If the derivative is designated as an effective economic hedge of the net investment in a foreign operation, the changes in the fair value of the derivative is reported in the cumulative translation adjustment section of OCI.

Similar to foreign currency translation adjustments, these changes in fair value are recognized in earnings only when realized upon sale or upon complete or substantially complete liquidation of the investment in the foreign entity.

Deferred currency gains (losses) o f $4.5 million, $2.9 million and $(2.3) million (before tax impact) were reclassified into earnings for the years ended 2022, 2021 and 2020, respectively.

Pension and Postretirement Benefits Other than Pensions We have a pension plan in the United States covering many of the Company’s employees.

We account for derivative instruments as follows:

• Derivative instruments that are designated as cash flow hedges - The changes in the fair value of the derivative instrument are reported in other comprehensive income and are recognized in the consolidated statements of income when the hedged item affects earnings.

In all periods presented, the recognized gain or loss on the derivative instrument, as well as the offsetting loss or gain on the hedged item, are recognized in cost of products sold on the consolidated statements of income.

• Derivative instruments that are designated as fair value hedges - The gain or loss on the derivative instrument, as well as the offsetting loss or gain on the hedged item, are recognized in other expense, net on the consolidated statements of income.

• Derivative instruments that are designated as net investment hedges - The changes in fair value of the derivative instrument are recognized in the consolidated statements of income when realized upon sale or upon complete or substantially complete liquidation of the investment in the foreign entity.

Restructuring Actions Restructuring actions generally include significant actions involving employee-related severance charges, contract termination costs, and impairment or accelerated depreciation or amortization of assets associated with such actions.

Employee-related severance charges are largely based upon distributed employment policies and substantive severance plans.

These charges are reflected in the quarter when the actions are probable and the amounts are estimable, which typically is when management approves the associated actions.

Severance amounts for which affected employees in certain circumstances are required to render service in order to receive benefits at their termination dates are measured at the date such benefits are communicated to the applicable employees and recognized as expense over the employees’ remaining service periods.

Contract termination and other charges primarily reflect costs to terminate a contract before the end of its term (measured at fair value at the time the Company provided notice to the counterparty) or costs that will continue to be incurred under the contract for its remaining term without economic benefit to the Company.

Pension and Postretirement Benefits Other than Pensions We have a pension plan in the United States covering many of the Company’s associates.

However, the plan has been frozen to new participants and benefit accruals were frozen for active participants on or before December 31, 2016.

During 2023, the Board of Directors of MasterBrand, Inc.

approved a plan to terminate the defined benefit pension plan.

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.

During 2025, we expect to complete the purchase of group annuity contracts that will transfer any remaining pension benefit obligation to an insurance company.

In addition, the Company provides postretirement health care and life insurance benefits to certain retirees.

We record amounts relating to these plans based on calculations in accordance with ASC requirements for Compensation—Retirement Benefits, which include various actuarial assumptions, including discount rates, assumed rates of return, turnover and mortality rates and health care cost trend rates.

We recognize changes in the fair value of pension plan assets and net actuarial gains or losses in excess of 10 percent of the greater of the fair value of pension plan assets and each plan’s projected benefit obligation (the “corridor”) in earnings immediately upon remeasurement, which is at least annually in the fourth quarter of each year.

Actuarial gains or losses related to these assumptions represent the difference between actual and actuarially assumed experience.

We recognize changes in the fair value of pension plan assets and net actuarial gains or losses in other expense, net to the extent they are in excess of 10 percent of the greater of the fair value of pension plan assets or each plan’s projected benefit obligation for each plan (the “corridor”) in earnings immediately upon remeasurement, which is at least annually in the fourth quarter of each fiscal year.

We review our actuarial assumptions on an annual basis and make modifications to the assumptions based on current economic conditions and trends.

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For postretirement benefits, our health care trend rate assumptions are based on historical cost increases and expectations for long-term increases.

The cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost), is deferred and included in expense on a straight-line basis over the average remaining service period of the related employees.

The cost or benefit of plan changes, such as increasing or decreasing benefits for prior associate service (prior service cost), is deferred and included in expense on a straight-line basis over the average remaining service period of the related associates.

We believe that the assumptions utilized in recording obligations under our plans, which are presented in Note 14, "Pension and Other Postretirement Plans," are reasonable based on our experience and on advice from our independent actuaries;

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Accounting Standards Issued and Adopted

Disclosures by Business Entities About Government Assistance

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-10, Government Assistance (Topic 832).

The new guidance, codified in ASC 832, requires business entities that account for transactions with a government by applying a grant or contribution model by analogy to disclose information about government assistance recorded during the period.

ASU 2021-10 is effective for all entities for annual reporting periods beginning after December 15, 2021.

The adoption of this guidance did not have a material effect on our financial statements.

Simplifying the Accounting for Income Taxes

In December 2020, the FASB issued ASU 2019-12, which intended to simplify accounting for income taxes and improve consistency in application.

ASU 2019-12 amended certain elements of income tax accounting, including but not limited to intraperiod tax allocations, step-ups in tax basis of goodwill, and calculating taxes on year-to-date losses in interim periods.

The guidance was effective for the Company’s fiscal year beginning December 28, 2020.

The adoption of this guidance did not have a material effect on our financial statements.

There are no recently issued accounting pronouncements that we have adopted that had a material impact on our financial position, results of operations or cash flows.

Accounting Standards Issued, But Not Yet Adopted

There are no recently issued accounting pronouncements that we have not yet adopted that are expected to have a material effect on our financial position, results of operations or cash flows.

Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures," which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, allowing financial statement users to better understand the components of a segment's profit or loss to assess potential future cash flows for each reportable segment and the entity as a whole.

The amendments expand a public entity's segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"), clarifying when an entity may report one or more additional measures to assess segment performance, requiring enhanced interim disclosures, providing new disclosure requirements for entities with a single reportable segment, and requiring other new disclosures.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted.

The Company is currently evaluating the impact of adopting this guidance on the consolidated financial statements.

Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740):

Improvements to Income Tax Disclosures," which is intended to enhance the transparency, decision usefulness and effectiveness of income tax disclosures.

The amendments in this ASU require a public entity to disclose a tabular tax rate reconciliation, using both percentages and currency, with specific categories.

A public entity is also required to provide a qualitative description of the states and local jurisdictions that make up the majority of the effect of the state and local income tax category and the net amount of income taxes paid, disaggregated by federal, state and foreign taxes and also disaggregated by individual jurisdictions.

The amendments also remove certain disclosures that are no longer considered cost beneficial.

The amendments are effective prospectively for annual periods beginning after December 15, 2024, and early adoption and retrospective application are permitted.

The Company is currently evaluating the impact of adopting this guidance on the consolidated financial statements.

Revenue from Contracts with Customers

Our principal performance obligations are the sale of high quality stock, semi-custom and premium cabinetry, as well as vanities, for the kitchen, bath and other parts of the home (collectively, “goods” or “products”).

We recognize revenue for the sale of goods based on our assessment of when control transfers to our customers.

We recognize revenue for the sale of goods based on our assessment of when control transfers to our customers, which generally occurs upon shipment or delivery of the products.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods to our customers.

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The expected costs associated with our contractual warranties are recognized as expense when the products are sold.

See Note 16, “Contingencies and Accrued Product Warranties” for further discussion.

See Note 16, "Contingencies and Accrued Losses," for further discussion.

We record estimates to reduce revenue for customer programs and incentives, which are considered variable consideration, and include price discounts, volume-based incentives, promotions and cooperative advertising when revenue is recognized in order to determine the amount of consideration the Company will ultimately be entitled to receive.

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These costs are classified within selling, general and administrative expenses.

Settlement of our outstanding accounts receivable balances is normally within 30 to 90 days of the original sale transaction date.

Obligations arise for us from customer rights to return our goods for any reason, including among others, product obsolescence, stock rotations, trade-in agreements for newer products and upon termination of a customer contract.

Settlement of our outstanding accounts receivable balances normally occurs within 30 to 90 days of the original sale transaction date.

Obligations arise for us from customer rights to return our goods, including among others, product obsolescence, stock rotations, trade-in agreements for newer products and upon termination of a customer contract.

We estimate future product returns at the time of sale based on historical experience and record a corresponding refund obligation, which amounted to $ 2.1 million and $ 3.0 million as of December 31, 2023 and December 25, 2022, respectively.

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Return assets related to the refund obligation are measured at the carrying amount of the goods at the time of sale, less any expected costs to recover the goods and any expected reduction in value.

Net sales to two of the Company’s customers, Lowe’s Companies, Inc.

(“Lowe’s”) and The Home Depot, Inc.

(“The Home Depot”) each accounted for greater than 10 percent of the Company’s net sales in 2022, 2021 and 2020.

Both of these customers have sales included in both the domestic “Retailers” and “International” categories in the disaggregated revenue table below.

Net sales to Lowe’s were 20 percent, 18 percent and 21 percent of net sales in 2022, 2021 and 2020,

respectively.

Net sales to The Home Depot were 17 percent in 2022, and 18 percent of net sales in each of our 2021 and 2020 fiscal years.

The Company disaggregates revenue from contracts with customers into (i) major sales distribution channels in the U.S.

and (ii) total sales to customers outside the U.S.

market, as these categories depict the nature, amount, timing and uncertainty of revenues and cash flows that are affected by economic factors.

The following table disaggregates our consolidated revenue by major sales distribution channels for 2022, 2021 and 2020.

(In millions) December 25,

2022 December 26,

2021 December 27,

Net sales to two of the Company’s customers, Lowe’s and The Home Depot each accounted for greater than 10 percent of the Company’s net sales in 2023, 2022 and 2021.

Net sales to Lowe’s were 21 percent, 20 percent and 18 percent of net sales in 2023, 2022 and 2021, respectively.

Net sales to The Home Depot were 16 percent, 17 percent, and 18 percent of net sales in 2023, 2022 and 2021, respectively.

The Company disaggregates revenue from contracts with customers into (i) major sales distribution channels and (ii) total sales to customers by shipping location, as these categories depict the nature, amount, timing and uncertainty of revenues and cash flows that are affected by economic factors.

The following table disaggregates our consolidated revenue by major sales distribution channels and by shipping location for 2023, 2022 and 2021.

Dollars presented in millions) 2023

Net Sales by Channel (a)

$ 1,446.5 $ 1,771.8 $ 1,583.4

Retailers (b)

Retailers (c)

967.0 1,173.9 1,012.4

312.7 329.8 259.5

Net sales $ 2,726.2 $ 3,275.5 $ 2,855.3

Net Sales by Shipping Location

United States

$ 2,584.4 $ 3,086.8 $ 2,680.5

International (c)

125.7 172.5 158.4

16.1 16.2 16.4

Net sales $ 2,726.2 $ 3,275.5 $ 2,855.3

a) Represents sales to customers whose business is oriented towards builders, professional trades and home remodelers, inclusive of sales through our customers’ respective internet website portals.

b) Represents sales to domestic “Do-It-Yourself” retailers, including our two largest customers:

1) The Home Depot, Inc., and 2) Lowe’s Companies, Inc., inclusive of sales through their respective internet website portals.

c) Represents sales in markets outside the United States, principally in Canada and Mexico.

a) Net sales by channel presented in fiscal 2022 and 2021 have been reclassified to conform with the new format of this table, which is intended to provide a consolidated view of our net sales by channel and shipping location.

Prior to this Annual Report on Form 10-K, net sales by channel was presented for our domestic sales only.

b) Represents sales to domestic dealers whose end customers include builders, professional trades and home remodelers, inclusive of sales through our dealers’ respective internet website portals.

c) Represents sales to domestic “Do-It-Yourself” retailers, including our two largest customers:

1) Lowe’s and 2) The Home Depot, inclusive of sales through their respective internet website portals.

d) Represents sales directly to builders.

Practical Expedients

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Our primary allowance for credit losses is the allowance for doubtful accounts.

The allowance for doubtful accounts reduces the trade accounts receivable balance to the estimated net realizable value equal to the amount that is expected to be collected.

The allowance for doubtful accounts reduces the trade accounts receivable balance to the estimated net realizable value that is expected to be collected.

The allowance is based on assessments of current creditworthiness of customers, historical collection experience, the aging of receivables and other currently available evidence.

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The following table summarizes the activity for the allowance for the years ended December 31, 2023 and December 25, 2022 :

(In millions)

Dollars presented in millions) 2023 2022

Beginning balance $ 11.6 $ 2.5

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The components of other expense, net for the years ended December 31, 2023, December 25, 2022 and December 26, 2021 were as follows:

(In millions) 2022 2021 2020

Dollars presented in millions) 2023 2022 2021

Pension and postretirement benefits other than pensions $ 2.9 $ ( 1.3 ) $ ( 2.0 )

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On December 14, 2022, 128.0 million MasterBrand common shares were distributed to Fortune Brands’ shareholders in conjunction with the Separation.

In addition, for the fiscal year ended December 25, 2022, diluted earnings per share is computed by giving effect to all potentially dilutive stock awards that are outstanding.

For comparative purposes, fiscal 2021 has been retroactively recast to reflect the effects of the changes in equity structure resulting from the Reorganization, Separation and Distribution and assume the same basic weighted average shares.

For the fiscal years ended December 31, 2023 and December 25, 2022 , diluted earnings per share was computed by giving effect to all potentially dilutive stock awards that are outstanding.

For years prior to the Separation, it is assumed that there are no dilutive securities as there were no stock-based awards of MasterBrand outstanding.

The following table sets forth the reconciliation of the numerator and the denominator of basic earnings per share and diluted earnings per share for the fiscal years ended December 31, 2023 , December 25, 2022 , and December 26, 2021 :

(in millions, except per share amounts) 2022 2021 2020

Dollars presented in millions, except per share amounts) 2023 2022 2021

Numerator for basic and diluted earnings per share - Net income $ 182.0 $ 155.4 $ 182.6

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Diluted $ 1.40 $ 1.20 $ 1.43

Approximately 1.3 million shares are excluded from the calculation of diluted earnings per share for the year ended December 25, 2022, because their inclusion would have been anti-dilutive.

Approximately 0.7 million shares and 1.3 million shares were excluded from the calculation of diluted earnings per share for the years ended December 31, 2023 and December 25, 2022 , respectively, because their inclusion would have been anti-dilutive.

Balance Sheet Information

Supplemental information on our year-end consolidated balance sheets is as follows:

(In millions) 2022 2021

Dollars presented in millions)

December 31, 2023 December 25, 2022

Raw materials and supplies $ 175.1 $ 292.1

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Accrued restructuring 1.4 15.4

Accrued taxes 14.3 24.9

Accrued income and other taxes

Accrued product warranties 12.9 11.2

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Total other current liabilities $ 164.3 $ 160.5

(a) The $44.1 million payable to Fortune Brands represents various items Fortune Brands paid on our behalf, for which we owe reimbursement, including income taxes incurred prior to the Separation of $32.6 million.

(a) The payable to Fortune Brands of $ 44.1 million as of December 25, 2022, included various items Fortune Brands paid on our behalf, for which we owed reimbursement, including income taxes incurred prior to the Separation of $ 32.6 million.

The payable to Fortune Brands is $ 1.7 million at December 31, 2023.

We have operating and finance leases for buildings and certain machinery and equipment.

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Operating lease expense recognized in the consolidated statement of income for the years ended 2023, 2022 and 2021 were $ 26.9 million , $ 27.4 million and $ 24.7 million , respectively, including approximately $ 9.4 million, $ 11.7 million and $ 9.4 million of short-term and variable lease costs for the years ended 2023, 2022 and 2021, respectively.

Other information related to leases was as follows:

(In millions, except lease term and discount rate) December 25,

Other information related to leases was as follows for the fiscal years ending:

Dollars presented in millions, except lease term and discount rate) December 31,

2023 December 25,

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Total lease payments under non-cancellable operating leases as of December 31, 2023 are expected to be:

(In millions)

Dollars presented in millions)

Fiscal Years Ending:

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The change in the net carrying amount of goodwill was as follows:

(In millions)

Dollars presented in millions) Total

Balance at December 26, 2021

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The gross carrying value and accumulated amortization by class of intangible assets as of December 31, 2023 and December 25, 2022 were as follows:

As of December 25, 2022 As of December 26, 2021

(In millions) Gross

As of December 31, 2023

As of December 25, 2022

Dollars presented in millions) Gross

Amounts Accumulated

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Total identifiable intangibles $ 569.2 $ ( 233.7 ) $ 335.5 $ 567.3 $ ( 217.5 ) $ 349.8

Amortizable intangible assets, principally customer relationships, are subject to amortization on a straight-line basis over their estimated useful life, ranging from 10 to 20 years, based on the assessment of a number of factors that may impact useful life which include customer attrition rates and other relevant factors.

We expect to record annual intangible amortization of $15.3 million in 2023, and $14.7 million annually in 2024, 2025, 2026, and 2027.

In the first quarter of 2020, we recognized an impairment charge of $9.5 million related to an indefinite-lived tradename.

This charge was primarily the result of lower expected sales of custom cabinetry products related to the impact of COVID-19.

At both December 25, 2022 and December 26, 2021, the carrying value of this tradename was $29.1 million.

In the second quarter of 2022, subsequent to the balance sheet date, we recognized an impairment charge of $26.0 million related to a second indefinite-lived tradename.

Amortizable intangible assets, principally customer relationships, are subject to amortization on a straight-line basis over their estimated useful life, ranging from 18 to 20 years, based on the assessment of a number of factors that may impact useful life, including customer attrition rates and other relevant factors.

We expect to record intangible amortization of $ 14.7 million annually from 2024 through 2028.

In the second quarter of 2022, subsequent to the balance sheet date, we recognized an impairment charge of $ 26.0 million related to an indefinite-lived tradename.

During the second quarter of 2022, 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.

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These downward revisions to forecasted revenue growth were not known when recording the impairment charge during the second quarter of 2022.

As of December 25, 2022 and December 26, 2021, the carrying value of this tradename was $46.2 million and $85.0 million, respectively.

In the fourth quarter of 2022, we recognized an impairment charge of $7.6 million to a third indefinite-lived tradename.

As of both December 31, 2023 and December 25, 2022, the carrying value of this tradename was $ 46.2 million.

In the fourth quarter of 2022, we recognized an impairment charge of $ 7.6 million to a second indefinite-lived tradename.

This was primarily due to a shift in customer demand from this tradename to a lower price point product, as a result of continued and persistent inflation, as well as elevated interest rates and economic uncertainty.

As of December 25, 2022 and December 26, 2021, the carrying value of this tradename was $19.1 million and $26.7 million, respectively.

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, which estimates the present value of royalty income that could be hypothetically earned by licensing the tradename to a third party over its remaining useful life.

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 market-participant discount rates based on the weighted-average cost of capital, which is dependent on comparable company prices and other relevant information generated by market transactions, as well as broader market assumptions, such as U.S.

treasury rates, forecasted revenue growth rates and assumed royalty rates.

We selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated growth rates, and management plans.

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Events or circumstances that could have a potential negative effect on the estimated fair value of our reporting units and indefinite-lived tradenames include:

lower than forecasted revenues, more severe impacts of the COVID-19 pandemic than currently expected, actual new construction and repair and remodel 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, higher interest rates, lower levels of discretionary consumer spending, a decrease in royalty rates and a decline in the trading price of our common stock.

increases in discount rates, lower than forecasted revenues, actual new construction and repair and remodel growth rates that fall below our assumptions, actions of key customers,continued economic uncertainty, higher levels of unemployment, weak consumer confidence, higher interest rates, lower levels of discretionary consumer spending, a decrease in royalty rates and a decline in the trading price of our common stock.

We cannot predict with certainty the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of goodwill and indefinite-lived assets.

There were no impairments of goodwill or indefinite-lived assets for the year ended December 26, 2021.

The significant assumptions used to estimate the fair values of the tradenames impaired during the years ended December 25, 2022, and December 27, 2020 were as follows:

There were no impairments of goodwill for any periods presented.

There were no impairments of indefinite-lived assets for the years ended December 31, 2023 or December 26, 2021.

The significant assumptions used to estimate the fair values of the tradenames impaired during the year ended December 25, 2022 were as follows:

Unobservable Input Min Max Wtd

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We principally use financial instruments to reduce the impact of changes in foreign currency exchange rates.

The principal derivative financial instruments we enter

into on a routine basis are foreign exchange contracts.

The principal derivative financial instruments we enter into on a routine basis are foreign exchange contracts.

Derivative financial instruments are recorded at fair value.

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Management currently believes that the risk of incurring material losses is unlikely and that the losses, if any, would be immaterial to the Company.

We account for derivative instruments as follows:

As of and during the fiscal years ended December 31, 2023 and December 25, 2022, we have only entered into foreign currency forward contracts, some of which have been designated as fair value hedges and some of which have been designated as cash flow hedges.

We may enter into foreign currency forward contracts to protect against foreign exchange risks associated with certain existing assets and liabilities, forecasted future cash flows, and net investments in foreign subsidiaries.

Foreign exchange contracts related to forecasted future cash flows correspond to the periods of the forecasted transactions, which generally do not exceed 12 to 15 months subsequent to the latest balance sheet date.

For derivative instruments that are designated as fair value hedges, the gain or loss on the derivative instrument, as well as the offsetting loss or gain on the hedged item, are recognized on the same line of the consolidated statements of income.

The changes in the fair value of cash flow hedges are reported in OCI and are recognized in the consolidated statements of income when the hedged item affects earnings.

The changes in fair value for net investment hedges are recognized in the consolidated statements of income when realized upon sale or upon complete or substantially complete liquidation of the investment in the foreign entity.

In addition, changes in the fair value of all economic hedge transactions are immediately recognized in current period earnings.

Our primary foreign currency hedge contracts pertain to the Mexican peso and the Canadian dollar.

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dollar equivalent notional amount of all foreign currency derivative hedges outstanding at December 31, 2023 was $ 61.3 million, representing a net settlement asset of $ 2.9 million.

Based on foreign exchange rates as of December 25, 2022, we estimate that $2.8 million of net derivative gains associated with cash flow hedges and included in accumulated other comprehensive inco me as of December 25, 2022 will be reclassified to earnings within the next twelve months.

Based on foreign exchange rates as of December 31, 2023, we estimate that $ 2.2 million of net derivative gains associated with cash flow hedges and included in accumulated other comprehensive income as of December 31, 2023 will be reclassified to earnings within the next twelve months.

The fair values of foreign exchange derivative instruments on the consolidated balance sheets as of December 31, 2023 and December 25, 2022 were:

(In millions) Location 2022 2021

Dollars presented in millions) Location December 31, 2023 December 25, 2022

Foreign exchange contracts Other current assets $ 3.0 $ 3.7

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Total liabilities $ 0.1 $ 0.5

The effects of derivative financial instruments on the consolidated statements of income in 2022, 2021 and 2020 were:

Classification and Amount of Gain (Loss)

Recognized in Income on Fair Value and

Cash Flow Hedging Relationships

(In millions) Cost of

products sold

Related party

interest income,

Other expense,

Total amounts per Consolidated Statements of Income $ 2,335.0 $ (12.9) $ 0.6

The effects of fair value and cash flow hedging:

Gain (loss) on fair value hedging relationships

Foreign exchange contracts:

Derivative designated as hedging instruments — — (7.2)

Gain (loss) on cash flow hedging relationships

Foreign exchange contracts:

Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income 4.5 — —

Classification and Amount of Gain (Loss)

Recognized in Income on Fair Value and

Cash Flow Hedging Relationships

(In millions) Cost of

products sold

Related party

interest income,

Other income,

Total amounts per Consolidated Statements of Income $ 2,071.4 $ 4.6 $ 0.6

The effects of fair value and cash flow hedging:

Gain (loss) on fair value hedging relationships

Foreign exchange contracts:

Derivative designated as hedging instruments — — (0.5)

Gain (loss) on cash flow hedging relationships

The effects of cash flow hedging financial instruments included within the consolidated statements of comprehensive income in 2023, 2022 and 2021 were as presented in the table below.

When the hedged item affects earnings, amounts are reclassed out of accumulated other comprehensive loss and recognized as a component of cost of products sold.

Amount Recognized in Statement of Comprehensive

Income for Cash Flow Hedging Relationships

Dollars presented in millions) 2023 2022 2021

Foreign exchange contracts:

Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income 2.9 — —

Classification and Amount of Gain (Loss)

Recognized in Income on Fair Value and Cash Flow Hedging Relationships

(In millions) Cost of

Related party

interest income,

Other expense,

Total amounts per Consolidated Statements of Income $ 1,766.3 $ 2.4 $ 2.2

The effects of fair value and cash flow hedging:

Gain (loss) on fair value hedging relationships

Unrealized holding gains arising during period

$ 9.6 $ 7.2 $ 0.5

reclassification adjustment for gains included in net income

( 10.2 ) ( 4.5 ) ( 2.9 )

Unrealized (losses) gains on derivatives $ ( 0.6 ) $ 2.7 $ ( 2.4 )

The effects of fair value hedging financial instruments included in other expense, net on the consolidated statements of income in 2023, 2022 and 2021 were:

Amount of Gain (Loss) Recognized in Earnings

on Fair Value Hedging Relationships

Dollars presented in millions) 2023 2022 2021

Foreign exchange contracts:

Hedged items $ ( 1.3 ) $ — $ —

Derivative designated as hedging instruments — — 1.0

Gain (loss) on cash flow hedging relationships

Foreign exchange contracts:

Amount of gain or (loss) reclassified from accumulated other comprehensive (loss) income into income (2.3) — —

The cash flow hedges recognized in other comprehensive income during the period were net gains (losses) of $7.2 million, $0.5 million and $(1.4) million in 2022, 2021 and 2020 respectively.

Derivatives designated as hedging instruments 5.9 ( 7.2 ) ( 0.5 )

Net gains (losses) recognized in earnings $ 4.6 $ ( 7.2 ) $ ( 0.5 )

Fair Value Measurements

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Level 3 inputs are unobservable inputs due to little or no market activity for the asset or liability, such as internally-developed valuation models.

We do not have any assets or liabilities measured at fair value on a recurring basis that are Level 3, except for pension assets discussed in Note 14, “Pension and Other Postretirement Plans” and certain assumptions in estimating the fair value of indefinite-lived tradenames, as discussed in Note 8, “Goodwill and Identifiable Intangible Assets.”

We do not have any assets or liabilities measured at fair value on a recurring basis that are Level 3, except for certain assumptions in estimating the fair value of indefinite-lived tradenames, as discussed in Note 8, "Goodwill and Identifiable Intangible Assets."

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and December 25, 2022 were as follows:

(In millions) Fair Value

Dollars presented in millions) Fair Value

Derivative asset financial instruments (Level 2) $ 3.0 $ 3.7

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Derivative financial instruments are recorded at fair value.

The following table provides a summary of the Company’s debt as of December 25, 2022, including the carrying value of the debt less debt issuance costs:

(In millions) 2022

Current Long-term

The following table provides a summary of the Company’s debt as of December 31, 2023 and December 25, 2022 , including the carrying value of the debt less debt issuance costs:

Dollars presented in millions) December 31, 2023 December 25, 2022

Current Long-term Current Long-term

Revolving credit facility due November 2027 $ — $ — $ — $ 235.0

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The 2022 Credit Agreement is secured by certain assets as well as the guarantee of certain of our subsidiaries.

Total amounts outstanding under the Term Loan and Revolving Credit Facility as of December 25, 2022 were $750.0 million and $235.0 million, respectively.

The $750.0 million Term Loan has quarterly required amortization payments beginning in March 2023.

Debt issuance costs related to the 2022 Credit Agreement were $10.1 million and will be amortized over the term of the debt.

At December 25, 2022, $0.8 million is included in other current assets, $3.2 million is included in other assets, $1.3 million is included in the current portion of long-term debt and $4.8 million is included in long-term debt in our Consolidated Balance Sheets.

Interest rates under these facilities are variable based on SOFR at the time of the borrowing, and the Company’s net leverage ratio as measured by Net Leverage to Consolidated EBITDA.

The $ 750.0 million Term Loan has quarterly required amortization payments that began in March 2023.

As of December 31, 2023, the Company had $ 480.2 million of availability under its revolving credit facility.

Debt issuance costs related to the 2022 Credit Agreement were $ 10.1 million upon inception of the agreement and are being amortized over the term of the debt.

At December 25, 2022 , $ 0.8 million was included in other current assets, $ 3.2 million is included in other assets, $ 1.3 million is included in the current portion of long-term debt and $ 4.8 million is included in long-term debt in our Consolidated Balance Sheets.

At December 31, 2023 , unamortized debt issuance costs totaled $ 8.0 million of which $ 0.9 million was included in other current assets, $ 2.4 million was included in other assets, $ 1.2 million was included in the current portion of long-term debt and $ 3.5 million was included in long-term debt in our Consolidated Balance Sheets.

During the third quarter of fiscal 2023 , the Company made total payments of $ 28.1 million on the term loan, consisting of a $ 4.7 million required payment due September 2023, and $ 23.4 million of required amortization payments due during each of the next three quarters.

We did not make any additional term loan payments during the fourth quarter of fiscal 2023, and as of December 31, 2023 we are paid in advance for our next two scheduled quarterly payments due during the first and second quarters of 2024.

Total amounts outstanding under the term loan as of December 31, 2023 and December 25, 2022 were $ 712.5 million and $ 750.0 million, respectively .

Additionally, the revolving credit facility was paid in full during the third quarter of fiscal 2023 .

The revolving credit facility did not have an outstanding balance as of December 31, 2023, as compared to a balance of $ 235.0 million at December 25, 2022.

Interest rates under these facilities are variable based on the SOFR at the time of the borrowing, and the Company’s net leverage ratio as measured by net leverage to our Consolidated EBITDA.

Interest rates can range from SOFR plus 1.85 percent to SOFR plus 2.60 percent.

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The net leverage ratio may not exceed 3.875 to 1.0 at the initial borrowing through the second fiscal quarter of 2023, adjusting downward in various future quarters before settling at 3.25 to 1.0 in January 2025.

The Company also is required

to maintain a minimum Interest Coverage Ratio, defined as Consolidated EBITDA to consolidated interest expense, of 3.0 to 1.0.

As of December 31, 2023, the net leverage ratio may not exceed 3.75 to 1.0.

The Company also is required to maintain a minimum interest coverage ratio, defined as Consolidated EBITDA to consolidated interest expense, of 3.0 to 1.0.

The Company’s 2022 Credit Agreement contains additional covenants which limit or preclude certain corporate actions based upon the measurement of certain financial covenant metrics.

The Company was in compliance with all of its debt covenants as of December 25, 2022.

The Company was in compliance with all of its debt covenants as of December 31, 2023 and December 25, 2022 .

Over the next five years, debt due to be paid by the Company is as follows:

(In millions) Future Debt Payments

Interest paid on debt was $0.3 million in 2022.

We did not record any material capitalized interest during 2022, 2021 and 2020.

Dollars presented in millions) Future Debt Payments

Interest paid on debt was $ 64.0 million and $ 0.3 million in 2023 and 2022, respectively.

During the fourth quarter of 2022, we incurred indebtedness in connection with the Separation and Distribution, which resulted in the recognition of interest expense.

Prior to the Separation, we had no third-party borrowings.

We did not recor d any material capitalized interest during 2023, 2022, or 2021.

Restructuring Charges

Restructuring charges of $25.1 million in 2022 are largely related to severance costs and other employee-related costs associated with the relocation and closure of certain production facilities within our manufacturing footprint, resulting in a more flexible facility footprint.

These actions included the consolidation of two manufacturing facilities in Winnipeg, Canada into one facility, the idling a manufacturing facility in Newton, Kansas, and the closure of our Lynchburg, Virginia manufacturing facility.

Restructuring charges of $ 10.1 million in 2023 are primarily related to severance costs and other associate-related costs in order to better align our workforce with our forecasted demand within our manufacturing footprint, and an asset impairment charge associated with a decision to permanently close our Newton, Kansas manufacturing facility, which had previously been idled.

Restructuring charges of $ 25.1 million in 2022 are largely related to severance costs and other associate-related costs associated with the relocation and closure of certain production facilities within our manufacturing footprint, resulting in a more flexible facility footprint.

These actions included the consolidation of two manufacturing facilities in Winnipeg, Canada into one facility, the idling of a manufacturing facility in Newton, Kansas, and the closure of our Lynchburg, Virginia manufacturing facility.

Restructuring charges of $ 4.2 million in 2021 are largely related to severance costs and costs associated with closing a facility.

Restructuring charges of $6.1 million in 2020 are largely related to headcount actions associated with COVID-19 .

Reconciliation of Restructuring Liability

(In millions) Balance at

December 26, 2021 2022

Provision Cash Expenditures (a)

Dollars presented in millions) Balance at December 25, 2022 2023

Cash Expenditures (a)

Non-cash Writeoffs

Balance at December 31, 2023

Workforce reduction costs $ 15.3 $ 3.6 $ ( 17.6 ) $ — $ 1.3

Facility Closure Costs

— 4.6 — ( 4.6 ) —

Other 0.1 1.9 ( 1.9 ) — 0.1

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(a) Cash expenditures primarily related to severance charges.

(In millions) Balance at

December 27, 2020 2021

Provision Cash Expenditures (a)

December 26, 2021

Dollars presented in millions) Balance at December 26, 2021 2022

Cash Expenditures (a)

Balance at December 25, 2022

Workforce reduction costs $ 2.2 $ 24.5 $ ( 11.4 ) $ 15.3

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(a) Cash expenditures primarily related to severance charges.

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.

As a result of the Tax Act and global tax policy initiatives, additional legislative and regulatory guidance has been and may continue to be issued, including final regulations that could impact the Company’s effective tax rate in future periods.

For taxable periods prior to and including the Separation, our operations were included in the consolidated U.S.

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The Company filed separate foreign income tax returns.

The tax provisions have been prepared on a separate return basis as if the Company was a separate group of companies under common ownership.

The operations have been combined as if the Company was filing on a combined basis for U.S.

federal and state income tax purposes, as allowable by law and relevant tax elections.

Post-Separation, as a stand-alone entity, we will file consolidated U.S.

Subsequent to the Separation, as a stand-alone entity, we file consolidated U.S.

federal income tax returns and various state and local income tax returns.

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The components of income from continuing operations before income taxes were as follows:

(In millions) 2022 2021 2020

Dollars presented in millions) 2023 2022 2021

Domestic operations $ 213.2 $ 162.2 $ 204.0

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Income tax expense in the consolidated statement of income consisted of the following:

(In millions) 2022 2021 2020

Dollars presented in millions) 2023 2022 2021

Federal $ 44.2 $ 30.9 $ 43.7

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For 2023, the Company’s effective tax rate was 23.8 percent, compared to an effective tax rate of 27.2 percent for 2022.

The increase in effective tax rate was primarily the result of state and local income taxes and IRS audit adjustments

including recognition of a deferred tax liability for earnings of various foreign entities, partially offset by increased benefits for the release of uncertain tax positions and foreign income taxed at lower rates.

The 2022 effective income tax rate of 27.2 percent was unfavorably impacted by IRS audit adjustments including recognition of a deferred tax liability for earnings of various foreign entities, and state and local income taxes, partially offset by favorable benefits for the release of uncertain tax positions and foreign income taxed at lower rates.

The 23.4 percent effective income tax rate for 2021 was unfavorably impacted by state and local income taxes, partially offset by a favorable benefit for the release of uncertain tax positions and foreign income taxed at lower rates.

For 2021, our effective tax rate was 23.4 percent, compared to an effective tax rate of 25.7 percent for 2020.

The decrease in effective tax rate was primarily the result of a favorable benefit for the release of uncertain tax positions, partially offset by higher state and local income taxes and reduction in the benefit for foreign income taxed at lower rates .

The decrease in effective tax rate in 2023 was primarily the result of changes in state and local income taxes and the nonrecurrence of IRS audit adjustments in 2022, including recognition of a deferred tax liability for earnings of various foreign entities, partially offset by benefits for the release of uncertain tax positions in 2022 and foreign income taxed at higher rates.

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.

The 27.2 percent effective income tax rate for 2022 was unfavorably impacted by IRS audit adjustments, including recognition of a deferred tax liability for earnings of various foreign entities, and state and local income taxes, partially offset by favorable benefits for the release of uncertain tax positions and foreign income taxed at lower rates.

For 2022, the Company’s effective tax rate was 27.2 percent, compared to an effective tax rate of 23.4 percent for 2021.

The increase in effective tax rate was primarily the result of state and local income taxes and IRS audit adjustments, including recognition of a deferred tax liability for earnings of various foreign entities, partially offset by increased benefits for the release of uncertain tax positions and foreign income taxed at lower rates.

The 23.4 percent effective income tax rate for 2021 was unfavorably impacted by state and local income taxes and increases in uncertain tax positions that were partially offset by a favorable benefit for foreign income taxed at lower rates.

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The components of net deferred tax assets (liabilities) as of December 31, 2023 and December 25, 2022 were as follows:

(In millions) 2022 2021

Dollars presented in millions) 2023 2022

Deferred tax assets:

Compensation and benefits $ 15.9 $ 14.6

Defined benefit plans 2.4 1.0

Capitalized inventories 6.0 7.5

Other accrued expenses 14.7 15.9

Accounts receivable 12.5 18.8

Operating lease liabilities 11.0 14.6

Other accrued expenses 15.9 17.6

Capitalized inventories 4.2 6.0

Net operating loss and other tax carryforwards 3.2 2.4

Defined benefit plans 1.1 2.4

Valuation allowance ( 1.0 ) ( 1.2 )

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Deferred tax liabilities:

Fixed assets (25.3) (25.2)

Intangible assets ( 114.3 ) ( 118.0 )

Fixed assets ( 22.0 ) ( 25.3 )

Operating lease assets ( 10.5 ) ( 14.0 )

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Deferred taxes were classified in the Consolidated Balance Sheets as of December 31, 2023 and December 25, 2022 as follows:

(In millions) 2022 2021

Dollars presented in millions) 2023 2022

Other assets $ 3.7 $ 1.6

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The Company evaluated its ability to realize tax benefits associated with deferred tax assets and concluded, based on all available positive and negative evidence, that it is more likely than not that a portion of the deferred tax assets are not expected to be realized.

Accordingly, a valuation allowance of $1.2 million as of both December 25, 2022 and December 26, 2021 was recorded to reduce the deferred tax assets related to the net operating losses and tax credit carryforwards.

The Company did not make any income tax payments for the post-Separation period of 2022.

For the pre-Separation period in 2022, including the Separation, federal and state income tax payments and refunds were paid and received by Fortune Brands on our behalf.

The net taxes paid on our behalf are payable to Fortune Brands, as provided in the indemnification provisions of the Tax Allocation Agreement.

Included in our $44.1 million payable to Fortune Brands at December 25, 2022, within accounts payable on our Consolidated Balance Sheets, are income taxes incurred prior to the Separation of $17.6 million and $15.0 million, for federal income taxes and state income taxes, respectively.

A reconciliation of the Company’s gross change in unrecognized tax benefits (“UTBs”), including accrued interest and penalties, is as follows:

(In millions) 2022 2021 2020

Accordingly, a valuation allowance of $ 1.0 million and $ 1.2 million as of December 31, 2023 and December 25, 2022, respectively, was recorded to reduce the deferred tax assets related to the net operating losses and tax credit carryforwards.

A reconciliation of the Company’s gross change in UTBs, including accrued interest and penalties, is as follows:

Dollars presented in millions) 2023 2022 2021

Unrecognized tax benefits—beginning of year $ 1.2 $ 20.2 $ 21.5

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Gross unrecognized tax benefits $ 1.6 $ 1.7 $ 23.2

The Internal Revenue Service (“IRS”) completed its examination of the Company’s tax filings for 2017 and 2018 in the third quarter of 2022.

In the fourth quarter of 2023, the Company released $ 0.3 million of prior year tax positions due to statute of limitations.

In the third quarter of 2022, the IRS completed its examination of the Company’s tax filings for 2017 and 2018.

As a result of closing the IRS examination and other changes to UTBs, the Company realized a $ 19.0 million net reduction in UTBs, which was partially offset by related tax expenses to adjust current and deferred income tax liabilities.

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In 2023, the Company recognized interest and penalty expense of approximately $ 0.2 million.

In 2021 and 2020, the Company recognized interest and penalty expenses of approximately $0.1 million and $0.4 million, respectively.

In both 2022 and 2021, the Company recognized interest and penalty expenses of approximately $ 0.1 million.

The amount of UTBs that, if recognized as of December 31, 2023, would affect the Company’s effective tax rate is $ 0.9 million.

It is reasonably possible that, within the next twelve months, total UTBs may decrease in the range of $0.3 million

to $1.2 million primarily as a result of the conclusion of U.S.

It is reasonably possible that, within the next twelve months, total UTBs may decrease in the range of $ 0.4 million to $ 0.9 million primarily as a result of the conclusion of U.S.

federal, state, and foreign income tax proceedings or expiration of the relevant statute of limitations.

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Canada for years after 2018 and Mexico for years after 2017.

Accumulated foreign earnings and profits of the Company’s foreign subsidiaries as of December 31, 2017 were subject to a deemed repatriation tax and should not be subject to additional U.S.

federal income tax upon an actual repatriation of these earnings.

As of December 31, 2023, the Company is not permanently reinvested with respect to all earnings generated by foreign operations.

There was no material deferred tax expense recorded for foreign and state tax costs associated with the future remittance of these undistributed earnings.

The change in presumption for post-2017 earnings is primarily due to the Company entering into relevant credit obligations post-Separation, for which foreign earnings may be used tax efficiently to partially prepay such obligations.

This assertion will be evaluated as warranted based on facts and circumstances.

Accordingly, the Company’s foreign earnings are subject to the general presumption of APB 23, including the 100 percent dividends-received deduction and previously taxed income components, or includable in U.S.

federal taxable income as a result of closing the 2017-2018 IRS examination.

Accordingly, the Company’s foreign earnings are subject to the general presumption of APB 23, including the 100 percent dividends-received deduction and previously taxed income components.

Income taxes paid directly to taxing authorities, net of refunds received, were $ 68.5 million, $ 10.3 million, and $ 15.3 million during the years ended December 31, 2023, December 25, 2022 and December 26, 2021, respectively.

Prior to the Separation in 2022, federal and state income tax payments and refunds were paid and received by Fortune Brands on our behalf.

Pension and Other Postretirement Plans

We have a pension plan in the United States covering many of the Company’s employees.

We have a defined benefit pension plan in the United States covering many of the Company’s associates.

However, the plan has been frozen to new participants and benefit accruals were frozen for active participants on or before December 31, 2016.

In addition, the Company provides postretirement health care and life insurance benefits to certain retirees.

Service cost for 2022 relates to benefit accruals for an employee group in Mexico who receive statutorily-mandated retiree health and welfare benefits.

Service cost for 2023 and 2022 relates to benefit accruals for an associate group in Mexico who receive statutorily-mandated retiree health and welfare benefits.

The plans provide for payment of retirement benefits, mainly commencing between the ages of 55 and 65.

After meeting certain qualifications, an employee acquires a vested right to future benefits.

The benefits payable under the plans are generally determined on the basis of an employee’s length of service and/or earnings.

After meeting certain qualifications, an associate acquires a vested right to future benefits.

The benefits payable under the plans are generally determined on the basis of an associate’s length of service and/or earnings.

Employer contributions to the plans are made, as necessary, to ensure legal funding requirements are satisfied.

Also, from time to time, we may make contributions in excess of the legal funding requirements.

During 2023, the Board of Directors of MasterBrand, Inc.

approved a plan to terminate the defined benefit pension plan.

During 2024, the Company expects to offer a lump-sum benefit payout option to certain plan participants.

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 actuarial gains and losses occur when actual experience differs from any of the assumptions used to value the plans or when assumptions change as they may each year.

The primary factors contributing to actuarial gains and losses are changes in the discount rate used to value obligations as of the measurement date and the differences between expected and actual returns on pension plan assets.

(In millions) Pension Benefits Postretirement Benefits

Obligations and Funded Status December 25,

2022 December 26,

2021 December 25,

2022 December 26,

Dollars presented in millions) Pension Benefits Postretirement Benefits

Obligations and Funded Status December 31, 2023 December 25, 2022 December 31, 2023 December 25, 2022

Change in the Projected Benefit Obligation (PBO):

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Actuarial loss (gain)

7.9 ( 41.1 ) 0.5 0.4

Benefits paid ( 7.7 ) ( 8.4 ) ( 0.2 ) ( 0.9 )

Settlements/Curtailments $ — $ — $ (0.6) $ —

Settlements/Curtailments gain

— — ( 0.2 ) ( 0.6 )

Projected benefit obligation at end of year $ 135.6 $ 128.9 $ 4.1 $ 3.2

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Funded status (Fair value of plan assets less PBO) $ ( 4.5 ) $ ( 9.5 ) $ ( 4.1 ) $ ( 3.2 )

The actuarial loss is primarily a result of the difference in the expected long-term rate of return compared to the actual return on plan assets for the year ended December 25, 2022.

The actuarial loss is primarily a result of changes in discount rates from year to year for the year ended December 26, 2021.

For the year ended December 31, 2023, the actuarial loss is primarily due to declining discount rates and the decision to terminate the plan, which resulted in the adoption of plan termination assumptions that results in an increase to the liability.

These liability losses were offset slightly by asset returns greater than expected.

For the year ended December 25, 2022, the actuarial gain is primarily a result of the difference in the expected long-term rate of return compared to the actual return on plan assets.

The accumulated benefit obligation exceeds the fair value of the pension plan assets.

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Pension Benefits Postretirement Benefits

(In millions) December 25,

2022 December 26,

2021 December 25,

2022 December 26,

Dollars presented in millions) December 31, 2023 December 25, 2022 December 31, 2023 December 25, 2022

Current liabilities $ ( 0.1 ) $ ( 0.1 ) $ ( 0.6 ) $ ( 0.4 )

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Net amount recognized $ ( 4.5 ) $ ( 9.5 ) $ ( 4.1 ) $ ( 3.2 )

As of December 31, 2023, we utilized the Society of Actuaries’ base MP-2021 mortality projection scale without adjustment, resulting in an immaterial increase in plan benefit obligation and ongoing expenses.

As of December 25, 2022, we utilized an aggregate Pri-2012 mortality table with the Society of Actuaries’ MP-2021 projection scale and an adjustment to reflect increased rates of mortality subsequent to the Society of Actuaries’ MP-2021 projection scale, resulting in an immaterial decrease in plan benefit obligation and ongoing expenses.

As of December 26, 2021, we adopted the new Society of Actuaries MP-2021 mortality tables resulting in an immaterial decrease in plan benefit obligation and ongoing expenses.

The amounts in accumulated other comprehensive loss on the Consolidated Balance Sheets that have not yet been recognized as components of net periodic benefit cost were as follows:

(In millions) Pension Benefits Postretirement Benefits

Dollars in millions)

Pension Benefits Postretirement Benefits

Net actuarial loss at December 26, 2021 $ 7.2 $ 0.4

Recognition of actuarial loss

Current year actuarial gain (9.2) —

( 0.2 ) ( 0.4 )

Current year actuarial loss

Current year net actuarial gain due to curtailment

Net actuarial loss at December 25, 2022 $ 12.8 $ —

Recognition of actuarial loss

( 2.9 ) ( 0.3 )

Current year actuarial loss 3.6 0.5

Current year net actuarial gain due to curtailment $ — $ (0.3)

Net actuarial loss at December 31, 2023 $ 13.5 $ 0.2

Components of net periodic cost (benefit) were as follows:

Components of Net Periodic Cost (Benefit) Pension Benefits Postretirement Benefits

(In millions) 2022 2021 2020 2022 2021 2020

Components of Net Periodic Cost (Benefit)

Pension Benefits Postretirement Benefits

Dollars presented in millions) 2023 2022 2021 2023 2022 2021

Service cost $ — $ — $ — $ 0.5 $ 0.5 $ 0.4

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Recognition of actuarial losses 2.9 0.2 — — 0.7 0.2

Settlement/Curtailment losses / (gains) — — 0.6 (0.3) — —

Net periodic (benefit) cost $ (2.0) $ (2.8) $ (0.2) $ 1.2 $ 0.8 $ 0.8

Settlement/Curtailment loss/(gain)

— — — 0.3 ( 0.3 ) —

Net periodic cost (benefit)

$ 2.3 $ ( 2.0 ) $ ( 2.8 ) $ 1.1 $ 1.2 $ 0.8

Assumptions Pension Benefits Postretirement Benefits

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The fair value of the pension assets by major category of plan assets as of December 31, 2023 and December 25, 2022 were as follows:

(In millions) Total as of

Dollars presented in millions) Total as of

balance sheet date

Group annuity/insurance contracts (level 3) $ — $ 4.8

Collective trusts:

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Group annuity/

(In millions) 2022 2021

Dollars presented in millions) 2023 2022

Beginning of year $ — $ 4.8

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Our defined benefit plan Master Trust owns a variety of investment assets.

All of these investment assets, except for group annuity/insurance contracts, are measured using net asset value per share as a practical expedient per ASC 820.

All of these investment assets, except for group annuity/insurance contracts which were liquidated during our 2022 fiscal year as shown in the table above, are measured using net asset value per share as a practical expedient per ASC 820.

Following the retrospective adoption of ASU 2015-07 (Fair Value Measurement (Topic 820):

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Our 2024 expected blended long-term rate of return on plan assets of 3.8 percent was determined based on the nature of the plans’ investments, our current asset allocation and projected long-term rates of return from pension investment consultants.

The asset allocation for plan investments has shifted to mirror the revised expected timing of the disbursement of plan assets in conjunction with the plan termination.

Estimated Future Retirement Benefit Payments

The following retirement benefit payments are expected to be paid:

(In millions) Pension

The following retirement benefit payments are expected to be paid by the respective plans:

Dollars presented in millions) Pension

Benefits Postretirement

2024 $ 47.6 $ 0.5

2025 $ 7.2 $ 0.5

2026 $ 7.2 $ 0.4

2027 $ 7.2 $ 0.4

2028 $ 7.1 $ 0.4

Years 2029-2033 $ 33.7 $ 2.5

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Purchase obligations of the Company as of December 31, 2023 were $ 38.3 million, of which $ 25.6 million is due within one year.

Purchase obligations include contracts for raw materials and finished goods purchases, selling and administrative services, and capital expenditures.

Contingencies and Accrued Product Warranties

Purchase obligations include contracts for selling and administrative services and capital expenditures.

Contingencies and Accrued Losses

Product Warranties

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The following table summarizes activity related to our product warranty liability for the years ended 2023, 2022 and 2021.

(In millions) 2022 2021 2020

Dollars presented in millions) 2023 2022 2021

Reserve balance at the beginning of the year $ 11.2 $ 7.0 $ 5.5

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The Company is a defendant in lawsuits that are ordinary routine litigation matters incidental to our business and operations.

It is not possible to predict the outcome of the pending actions, and, as with any litigation, it is possible that these actions could be decided unfavorably to the Company.

The Company believes that there are meritorious defenses to these actions and that these actions will not have a material adverse effect upon the Company’s results of operations, cash flows or financial condition, and where appropriate, these actions are being vigorously contested.

In addition, other matters, including tax assessments, audits, claims and governmental investigations and proceedings covering a wide range of matters are pending against us.

It is not possible to predict the outcome of the pending actions, and, as with any such matters, it is possible that these actions could be decided unfavorably to the Company.

The Company believes that there are meritorious defenses to these actions and that these actions will not have a material adverse effect upon the Company’s results of operations, and where appropriate, these actions are being vigorously contested.

Accordingly, the Company believes the likelihood of material loss is remote.

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.

Following an audit for the 2018 tax year, the Mexican tax administration service, the Servicio de Administración Tributaria, (the “SAT”), issued a tax assessment in the amount of approximately $ 54.9 million to our subsidiary, Woodcrafters Home Products, S.

de C.V., for allegedly failing to make certain tax payments and to export timely certain merchandise.

The Company disputed these findings and the SAT annulled their decision on January 11, 2024.

In order to prevent the 2018 tax year from further audit by the SAT, the Company has filed an action to declare this annulment final in the specialized court of trade and customs in Monterrey, Nuevo Leon, Sala Especializada en Materia de Comercio Exterior y Auxiliar – Noreste, Tribunal Federal de Justicia Administrativa.

We have reserved an immaterial amount related to the 2018 tax year audit as our best estimate of our probable liability.

While we cannot predict with certainty the outcome of any future review relating to the 2018 tax year or other open tax years, based on currently known information, we believe our risk of additional loss is remote and not estimable.

Environmental

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 25, 2022, December 26, 2021 and December 27, 2020.

There were no material environmental accruals as of December 31, 2023 and December 25, 2022.

Stock-Based Compensation

Prior to the Separation, certain of Cabinets’ employees participated in stock-based compensation plans sponsored by Fortune Brands.

Prior to the Separation, certain of Cabinets’ associates participated in stock-based compensation plans sponsored by Fortune Brands.

In connection with the Separation, stock compensation awards granted under the Fortune Brands’ Long-Term Incentive Plans were adjusted as follows:

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• Vesting periods of all awards described above were unaffected by the adjustment and substitution.

Subsequent to the Separation, certain of the Company’s employees participate in a stock-based compensation plan sponsored by MasterBrand, Inc.

Subsequent to the Separation, certain of the Company’s associates participate in a stock-based compensation plan sponsored by MasterBrand, Inc.

Our stock-based compensation plan, the MasterBrand, Inc.

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2022 Long-Term Incentive Plan, was as follows:

(In millions) 2022 2021 2020

Dollars presented in millions) 2023 2022 2021

Performance awards $ 1.2 $ 3.2 $ 2.3

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Total after tax expense $ 13.6 $ 7.9 $ 7.3

Compensation expense for 2022 includes the recognition of $0.7 million of incremental compensation expense in the fourth quarter of 2022 resulting from the adjustment and substitution of awards settled in MasterBrand, Inc.

Compensation expense for 2022 included the recognition of $ 0.7 million of incremental compensation expense in the fourth quarter of 2022 resulting from the adjustment and substitution of Fortune Brands awards settled in MasterBrand, Inc.

Performance Share Awards

Performance share awards were granted to officers and certain employees of the Company and represent the right to earn shares of MasterBrand, Inc.

Performance share awards were granted to officers and certain associates of the Company and represent the right to earn shares of MasterBrand, Inc.

common stock based on the achievement of their company-wide non-GAAP performance conditions, including average adjusted return on net tangible assets and cumulative adjusted EBITDA during the three-year performance period.

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common stock).

As of December 25, 2022, there were no unvested performance share awards outstanding.

As of December 25, 2022, there were no unvested performance share awards outstanding that had been awarded under the Fortune Brands’ Long-Term Incentive Plans.

During the first quarter of fiscal 2023, we granted 411,647 performance share awards.

The following table summarizes activity with respect to performance share awards outstanding under the MasterBrand, Inc.

Performance Share Awards

Average Grant-

Date Fair Value

Non-vested at December 25, 2022

Granted 411,647 $ 9.91

Vested ( 9,332 ) $ 10.71

Forfeited — $ —

Non-vested at December 31, 2023

402,315 $ 9.92

The remaining unrecognized pre-tax compensation cost related to PSAs at December 31, 2023 was approximately $ 2.8 million (based on the current estimated probability of meeting performance targets), and the weighted-average period of time over which this cost will be recognized is 2.09 years.

The fair value of PSAs that vested during 2023 was $ 0.1 million.

Restricted Stock Units

Restricted stock units (“RSUs”) have been granted to officers and certain employees of the Company and represent the right to receive shares of MasterBrand, Inc.

Restricted stock units (“RSUs”) have been granted to officers and certain associates of the Company and represent the right to receive shares of MasterBrand, Inc.

common stock subject to continued employment through each vesting date.

RSUs generally vest ratably over a three-year period (i.e., 1/3 vests on the 1st anniversary of the grant date, 1/3 vests on the 2nd anniversary of the grant date, and 1/3 vests on the 3rd anniversary of the grant date).

In addition, certain employees can elect to defer receipt of a portion of their RSU awards upon vesting.

In addition, certain associates can elect to defer receipt of a portion of their RSU awards upon vesting.

Compensation cost is recognized over the service period.

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Non-vested at December 25, 2022

Awards converted from Fortune Brands 2,133,999 $ 9.92

3,924,976 $ 8.98

Granted 1,254,704 $ 10.28

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Non-vested at December 31, 2023

3,999,319 $ 9.32

The remaining unrecognized pre-tax compensation cost related to RSUs at December 31, 2023 was approximately $ 19.3 million, and the weighted-average period of time over which this cost will be recognized is 1.78 years.

The fair value of RSUs that vested (including Fortune Brand’s RSUs that vested prior to the Separation) during 2022, 2021 and 2020 was $6.1 million, $6.6 million and $6.9 million, respectively.

The fair value of RSUs that vested (including RSUs that had been awarded under the Fortune Brands’ Long-Term Incentive Plans that vested prior to the Separation) during 2023, 2022 and 2021 was $ 10.6 million, $ 6.1 million and $ 6.6 million, respectively.

Stock Option Awards

Stock options were granted to officers and certain employees of the Company and represent the right to purchase shares of MasterBrand, Inc.

Stock options have been granted to officers and certain associates of the Company and represent the right to purchase shares of MasterBrand, Inc.

common stock subject to continued employment through each vesting date.

Stock options granted under the Plan generally vest over a three-year period and generally have a maturity of ten years from the grant date.

All stock-based compensation to employees is required to be measured at fair value and expensed over the requisite service period.

All stock-based compensation to associates is required to be measured at fair value and expensed over the requisite service period.

We recognize compensation expense on awards on a straight-line basis over the requisite service period for the entire award.

MasterBrand, Inc.

did not grant any stock options in fiscal 2022 subsequent to the Separation.

did not grant any stock options in fiscal 2023 or 2022, subsequent to the Separation.

The fair value of MasterBrand, Inc.

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Outstanding at December 25, 2022

Awards converted from Fortune Brands 1,334,292 $ 9.36

1,334,292 $ 9.36

Granted — $ —

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Outstanding at December 31, 2023

1,334,292 $ 9.36

Options outstanding and exercisable at December 31, 2023 were as follows:

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1,334,292 6.60 $ 9.36 1,022,298 $ 8.94

a) At December 25, 2022, the aggregate intrinsic value of options outstanding was $0.2 million .

b) At December 25, 2022 the weighted-average remaining contractual life of options exercisable was 6 .7 years and the aggregate intrinsic value of options exercisable was $0.2 million.

(a) At December 31, 2023, the aggregate intrinsic value of options outstanding was $ 7.3 million (as compared to $ 0.2 million at December 25, 2022 ) .

(b) At December 31, 2023 the weighted-average remaining contractual life of options exercisable was 6.2 years (as compared to 6.7 years at December 25, 2022 ) and the aggregate intrinsic value of options exercisable was $ 6.0 million (as compared to $ 0.2 million at December 25, 2022 .

The remaining unrecognized compensation cost related to unvested awards at December 31, 2023 was $ 0.4 million , and the weighted-average period of time over which this cost will be recognized is 0.74 years.

The fair value of options that vested (including Fortune Brand’s stock options that vested prior to the Separation) during the years ended 2022, 2021 and 2020 was $0.8 million, $0.7 million and $1.4 million, respectively.

No options were exercised in 2022.

The intrinsic value of stock options exercised in 2021 and 2020, was $2.6 million and $9.8 million, respectively.

The fair value of options that vested (including stock options that had been awarded under the Fortune Brands’ Long-Term Incentive Plans that vested prior to the Separation) during the years ended 2023, 2022 and 2021 was $ 1.4 million , $ 0.8 million and $ 0.7 million , respectively.

No options were exercised in 2023 or 2022.

The intrinsic value of stock options exercised in 2021 was $ 2.6 million .

Accumulated Other Comprehensive Loss

The reclassifications out of accumulated other comprehensive income (loss) for the years ended December 25, 2022 and December 26, 2021 were as follows:

(In millions) Affected Line Item in the

Consolidated Statements of Income

Details about Accumulated Other

Comprehensive Loss Components 2022 2021

Gains (losses) on cash flow hedges

Foreign exchange contracts

$ 4.5 $ 2.9 Cost of products sold

— — Tax expense

$ 4.5 $ 2.9 Net of tax

Pension and Other Postretirement Plans items

Recognition of actuarial losses

$ (1.7) $ — (a)

0.6 — Tax benefit

$ (1.1) $ — Net of tax

Total reclassifications for the period $ 3.4 $ 2.9 Net of tax

a) These accumulated other comprehensive (loss) income components are included in the computation of net periodic benefit cost.

Refer to Note 14, “Pension and Other Postretirement Plans,” for additional information.

Total accumulated other comprehensive income (loss) consists of net income and other changes in business equity from transactions and other events from sources other than stockholders.

Total accumulated other comprehensive loss consists of net income and other changes in business equity from transactions and other events from sources other than stockholders.

It includes currency translation gains and losses, realized gains and losses from derivative instruments designated as cash flow hedges, and defined benefit plan adjustments.

The after-tax components of and changes in accumulated other comprehensive (loss) income were as follows:

(In millions) Foreign

The after-tax components of and changes in accumulated other comprehensive loss were as follows:

Dollars presented in millions) Foreign

Adjustments Derivative

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Amounts reclassified into earnings — ( 2.9 ) — ( 2.9 )

Net current period other comprehensive loss 4.2 0.9 (0.1) 5.0

Net current period other comprehensive (loss) income

( 0.9 ) ( 2.4 ) 7.1 3.8

Balance at December 26, 2021 $ 1.9 $ 0.1 $ ( 5.9 ) $ ( 3.9 )

Amounts classified into accumulated other comprehensive (loss) income ( 9.9 ) 7.2 ( 4.5 ) ( 7.2 )

(0.9) 0.5 7.1 6.7

Amounts reclassified into earnings — ( 4.5 ) 1.1 ( 3.4 )

Net current period other comprehensive loss (0.9) (2.4) 7.1 3.8

Net current period other comprehensive (loss) income

( 9.9 ) 2.7 ( 3.4 ) ( 10.6 )

Balance at December 25, 2022 $ ( 8.0 ) $ 2.8 $ ( 9.3 ) $ ( 14.5 )

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Amounts reclassified into earnings — ( 10.2 ) 2.4 ( 7.8 )

Net current period other comprehensive loss (9.9) 2.7 (3.4) (10.6)

Balance at December 25, 2022 $ (8.0) $ 2.8 $ (9.3) $ (14.5)

Prior to the Separation, the Company had 5,000 authorized shares of common stock, par value $1.00 per share, of which 100 shares of common stock were issued.

On December 14, 2022, the Separation was completed by way of a pro rata dividend of our common stock to stockholders of Fortune Brands common stock.

Fortune Brand shareholders received one share of MasterBrand, Inc.

common stock for each share of Fortune Brands common stock held on the record date.

Upon Separation, the Company has authorized 750 million shares of common stock, par value of $0.01 per share, and 128.0 million MasterBrand common shares were distributed to Fortune Brands stockholders.

A rollforward of the activity impacting the number of shares of common stock during the fiscal year ended December 25, 2022 is as follows:

(In thousands) Common Shares

Balance at December 26, 2021 —

Incorporation of MasterBrand, Inc.

Distribution of MasterBrand, Inc.

stock to Fortune Brands stockholders 128,028.6

Vesting of restricted stock unit awards 21.2

Shares returned for taxes upon vesting of restricted stock unit awards (8.1)

Net current period other comprehensive (loss) income

12.1 ( 0.6 ) ( 0.7 ) 10.8

Balance at December 31, 2023 $ 4.1 $ 2.2 $ ( 10.0 ) $ ( 3.7 )

The amounts recorded in accumulated other comprehensive loss for the years ended December 31, 2023, December 25, 2022, and December 26, 2021 were as follows:

Dollars presented in millions)

Details about Accumulated Other

Comprehensive Loss Components 2023 2022 2021

Foreign currency translation adjustments

$ 12.1 $ ( 9.9 ) $ ( 0.9 )

— — — Tax expense

$ 12.1 $ ( 9.9 ) $ ( 0.9 ) Net of tax

Cash flow hedges

Unrealized holding gains arising during period

$ 9.6 $ 7.2 $ 0.5

— — — Tax expense

$ 9.6 $ 7.2 $ 0.5 Net of tax

Pension and Other Postretirement Plans items

Net actuarial (losses) gains arising during period

$ ( 4.1 ) $ ( 6.1 ) $ 9.4

1.0 1.6 ( 2.3 ) Tax benefit (expense)

$ ( 3.1 ) $ ( 4.5 ) $ 7.1 Net of tax

Total amounts recorded in accumulated other comprehensive loss for the period

$ 18.6 $ ( 7.2 ) $ 6.7 Net of tax

The reclassifications out of accumulated other comprehensive loss for the years ended December 31, 2023, December 25, 2022, and December 26, 2021 were as follows:

Dollars presented in millions)

Details about Accumulated Other

Comprehensive Loss Components 2023 2022 2021 Affected Line Item in the Consolidated Statements of Income

Cash flow hedges

Reclassification adjustment for gains included in net income

$ ( 10.2 ) $ ( 4.5 ) $ ( 2.9 ) Cost of products sold

— — — Tax expense

$ ( 10.2 ) $ ( 4.5 ) $ ( 2.9 ) Net of tax

Pension and Other Postretirement Plans items

Amortization of net actuarial loss and curtailment

$ 3.2 $ 1.7 $ — Other expense, net

( 0.8 ) ( 0.6 ) — Tax benefit

$ 2.4 $ 1.1 $ — Net of tax

Total reclassifications for the period $ ( 7.8 ) $ ( 3.4 ) $ ( 2.9 ) Net of tax

Stock Repurchase Program

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.

As a result of this authorization, we may repurchase shares from time to time through open market purchases, privately-negotiated transactions, block trades or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Securities Exchange Act of 1934, as amended.

The timing and amount of our purchases will depend upon prevailing market conditions, our available capital resources, our financial and operational performance, alternative uses of capital and other factors.

We may limit or terminate the repurchase program at any time.

During fiscal 2023 we repurchased 1,874,806 shares of our common stock under this program at a cost of approximately $ 22.0 million, or an average of $ 11.73 per share.

As of December 31, 2023, $ 28.0 million remained authorized for purchase under our stock repurchase program.

Related Party Transactions

The accompanying financial statements are now presented on a consolidated basis as the company is a standalone public company.

The accompanying financial statements are presented on a consolidated basis as the company is a standalone public company.

Certain information from prior to the Separation on December 14, 2022 was derived from Fortune Brands consolidated financial statements and accounting records.

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Fortune Brands performed, and continues to perform in some areas as part of a transitional services agreement, certain corporate functions, including information technology, finance, executive, human resources, supply chain, internal audit, governance and legal services on behalf of the Company.

The expenses associated with these functions 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, employee headcount, or number of facilities, as applicable.

Prior to the Separation, total expenses allocated for the 2022, 2021 and 2020 years were $92.5 million, $62.0 million and $61.6 million, respectively, and such amounts are primarily included within selling, general and administrative expenses in the Consolidated Statements of Income.

These amounts include costs of $72.4 million, $42.3 million and $42.4 million for the 2022, 2021 and 2020 years, respectively, that were not historically allocated to us as part of Fortune Brands’ normal periodic management reporting process.

The expenses associated with these functions 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 the 2022 and 2021 years were $ 92.5 million and $ 62.0 million, respectively, and such amounts are primarily included within selling, general and administrative expenses in the Consolidated Statements of Income.

These amounts include costs of $ 72.4 million and $ 42.3 million for the 2022 and 2021 years, respectively, that were not historically allocated to us as part of Fortune Brands’ normal periodic management reporting process.

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 for the periods presented.

Actual costs that we may have incurred had we been a standalone company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by our employees 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 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.

Cash Management

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Stock-Based Compensation

Prior to the Separation, our employees participated in Fortune Brands stock-based compensation plans, the costs of which have been allocated and recorded in cost of products sold, and selling, general and administrative expenses in the consolidated statements of income.

Stock-based compensation costs related to our employees for 2022, 2021 and 2020 were $10.9 million, $9.3 million and $9.7 million, respectively.

All of these amounts, except for $0.7 million of

incremental compensation expense recognized in the fourth quarter of 2022, as described in Note 17, “Stock-based Compensation,” are included within the total expenses allocated, as noted above.

Prior to the Separation, our associates participated in Fortune Brands stock-based compensation plans, the costs of which have been allocated and recorded in cost of products sold, and selling, general and administrative expenses in the consolidated statements of income.

Prior to the Separation, stock-based compensation costs related to our associates for 2022 and 2021 were $ 10.9 million and $ 9.3 million, respectively.

All of these amounts, except for $ 0.7 million of incremental compensation expense recognized in the fourth quarter of 2022, as described in Note 17, "Stock-Based Compensation," are included within the total expenses allocated, as noted above.

Related Party Sales

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Balances Due to and From Related Parties

Related party balances consist of the following:

For the Years Ended

Related party receivable - Noncurrent — 419.7

Related party payable - Noncurrent — 9.1

Prior to Separation, the related party note receivable balance was the amount owed to the Company and its subsidiaries from Fortune Brands.

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The loan agreements were to mature on April 14, 2026, but all amounts under these agreements were settled prior to the Separation.

The receivable balance earned interest at a rate in-line with the Fortune Brands’ short-term borrowing rate, which was between 0.95 percent and 4.80 percent during 2022 and 2021.

The receivable balance earned interest at a rate in-line with the Fortune Brands’ short-term borrowing rate, which was between 0.95 percent and 4.80 percent during 2022.

Prior to Separation, the related party note payable balance was a note payable between a subsidiary of the Company and Fortune Brands.

The balance comprised of a revolving loan that was due at the maturity of the agreement on April 15, 2026, but was settled prior to the Separation.

The note bore interest at rates ranging between 1.20 percent and 5.05 percent during 2022, and at a rate of 1.65 percent during 2021.

The Company received interest income on related party receivables o f $14.4 million, $5.2 million and $3.3 million for 2022, 2021 and 2020, respectively.

Additionally, the Company incurred interest expense on intercompany payables and notes of $1.5 million, $0.6 million and $0.9 million for 2022, 2021 a nd 2020, respectively.

Subsequent Events

Subsequent to the balance sheet date, on January 12, 2023, a tornado hit our leased operating facility in Jackson, Georgia, causing damage to the Company’s assets and disrupting operations.

Our insurance policy, less applicable deductibles, is expected to cover the repair or replacement of the Company's assets that suffered loss or damage.

The Company is working closely with its insurance carrier and claims adjusters to ascertain the full amount of insurance proceeds due to us as a result of the damages and the losses the Company suffered.

The Company’s insurance policy also provides coverage for interruption to our business, including lost profits, and reimbursement for other expenses and costs that are incurred relating to the damages and losses suffered.

We continue to evaluate the impact this event has had on our operations.

At this point, the potential loss and related insurance recoveries are not known.

The note bore interest at rates ranging between 1.20 percent and 5.05 percent during 2022.

The Company received interest income on related party receivables of $ 14.4 million and $ 5.2 million for 2022 and 2021 , respectively.

Additionally, the Company incurred interest expense on intercompany payables and notes of $ 1.5 million and $ 0.6 million for 2022 and 2021, respectively.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of MasterBrand, Inc.

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of MasterBrand, Inc.

and its subsidiaries (the “Company”) as of December 25, 2022 and December 26, 2021, and the related consolidated statements of income, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 25, 2022, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 25, 2022 appearing under Item 15(a)2 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 25, 2022 and December 26, 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 25, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

and its subsidiaries (the “Company”) as of December 31, 2023 and December 25, 2022, and the related consolidated statements of income, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2023 appearing after Item 16 and the signatures, (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and December 25, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable

basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

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The principal considerations for our determination that performing procedures relating to the quantitative impairment test for certain tradenames is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the tradenames;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to forecasted revenue growth rates and market-participant discount rates, and for the tradename with a carrying value of $46.2 million, the assumed royalty rate;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to forecasted revenue growth rates, market-participant discount rates and assumed royalty rates;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

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(iii) testing the completeness and accuracy of underlying data used in the relief-from-royalty approach;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to forecasted revenue growth rates, market-participant discount rates, and assumed royalty rate.

Evaluating management’s significant assumptions related to forecasted revenue growth rates and assumed royalty rate involved evaluating whether the significant assumptions used by management were reasonable considering, (i) the current and past performance of the business associated with the tradenames;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to forecasted revenue growth rates, market-participant discount rates, and assumed royalty rates.

Evaluating management’s significant assumptions related to forecasted revenue growth rates and assumed royalty rates involved evaluating whether the significant assumptions used by management were reasonable considering, (i) the current and past performance of the business associated with the tradenames;

(ii) the consistency with external market and industry data;

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Milwaukee, Wisconsin

March 10, 2023

February 27, 2024

We have served as the Company's auditor since 2021.

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data