What changed in this filing

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Item 1A. Risk Factors

2025-02-19 compared with 2024-02-27 · 75 added, 87 removed, 350 unchanged (32% of the section changed)

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or making it more difficult to secure loans for renovations.

Economic conditions, including as a result of inflation and increased interest rates, may adversely impact our business by causing softer end-market demand for our products, decreased customer orders, delays in decisions to purchase our products and price-consciousness and “trade-downs” to lower priced products by consumers.

Economic conditions, including as a result of inflation and increased interest rates, has and may continue to adversely impact our business by causing softer end-market demand for our products, decreased customer orders, delays in decisions to purchase our products and price-consciousness and “trade-downs” to lower priced products by consumers.

The cabinet industry is highly competitive with relatively low barriers to entry and market share losses could occur.

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Our ten largest customers generated approximately 55 percent, 55 percent and 52 percent of our net sales for our 2024, 2023 and 2022 fiscal years, respectively.

Lowe’s and The Home Depot comprised approximately 37 percent, 37 percent and 36 percent of our net sales for our 2023, 2022 and 2021 fiscal years.

Lowe’s and The Home Depot comprised approximately 37 percent of our net sales for our 2024, 2023 and 2022 fiscal years.

We cannot guarantee that we will maintain or improve our relationships with these customers or that we will supply these customers at historical levels.

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Our success depends in part on refining our cost structure and supply chains to promote consistently flexible and low-cost supply chains that can respond to market changes to protect profitability and cash flow or ramp up quickly and effectively to meet demand.

Global supply chain disruptions could continue to impact our ability to timely source necessary components and inputs.

Global supply chain disruptions could continue, including as a result of the changing political landscape, to impact our ability to timely source necessary components and inputs.

Import tariffs or other adverse trade actions could potentially lead to increases in prices of raw materials or components which are critical to our business.

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Because our component products have few distinguishing properties from producer to producer, competition for these products is based primarily on price, which is determined by supply relative to demand.

Prices for our products are also affected by many other factors outside of our control.

Prices for our products are also affected by many other factors outside of our control, such as import tariffs.

As a result, we have less influence or control over timing and price changes, which often are volatile in our industry.

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While in the past we have been able to mitigate the impact of these cost increases through productivity improvements and passing on increasing costs to our customers over time, there is no assurance that we will be able to offset such cost increases in the future, and the risk of potentially sustained high levels of inflation could adversely impact our results of operations.

During 2021 and 2022, we experienced price increases in nearly all raw materials due to inflation and continued global supply chain issues.

In 2023, we experienced cost deflation in certain raw materials and transportation costs.

Failure to attract and retain qualified personnel and other labor constraints, including increases in labor costs, potential labor disputes and work stoppages, could adversely affect our results of operations.

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Low unemployment rates in the U.S., rising wages, competition for qualified talent and attracting and retaining personnel in remote locations could result in the failure to attract, motivate and retain personnel.

This has resulted in higher associate costs, increased attrition and significant shifts in the labor market and associate expectations and we may continue to face challenges in finding and retaining qualified personnel, particularly at the production level, which could have an adverse effect on our results of operations.

This can result in higher associate costs, higher attrition rates and significant shifts in the labor market and associate expectations and we may face challenges in finding and retaining qualified personnel, particularly at the production level, which could have an adverse effect on our results of operations.

As of December 29, 2024, approximately 32 percent of our associates worked under collective bargaining agreements.

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In addition, our non-unionized labor force may become subject to labor union organizing efforts, which could cause us to incur additional labor costs and increase the related risks that we now face.

COVID-19 impacted our business in the past and future global pandemics would likely cause disruptions to our business and results of operations.

Future global pandemics would likely cause disruptions to our business and results of operations.

The COVID-19 pandemic had, and future global pandemics would likely have, an adverse impact on many aspects of our business and operations, including impacting our ability to efficiently operate our facilities, manufacture and distribute our products, the ability of our suppliers to supply and manufacture key inputs, availability and cost of transportation and logistics, the operation of domestic and international supply chains, raw materials and commodity costs and competition, customer behaviors, our associates, the dealers and retailers who sell our products, and the market generally.

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Global pandemics may also exacerbate certain of the other risks described in this “Risk Factors” section.

We may experience delays or outages in our information technology systems and computer networks.

We may experience delays or outages in our information technology systems and computer networks, and our information technology or enterprise resource planning systems may fail to perform adequately.

We may be subject to breaches of our information technology systems, which could damage our reputation and consumer relationships.

Such breaches could subject us to significant financial, legal and operational consequences.

We, or third-party systems that we rely upon, may be subject to information technology system failures and network disruptions caused by delays or disruptions due to system updates, natural disasters, malicious attacks and threats, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, or similar events or disruptions.

We rely on information technology systems and infrastructure, including support provided by third parties.

In particular, we rely on such systems for manufacturing, customer orders, shipping, regulatory compliance and various other matters, as well as information technology systems and infrastructure to aid us in the collection, use, storage and transfer and other processing of data including confidential, business, financial and personal information such as customer buying preferences and marketing profiles.

Our businesses may implement digital systems or technologies, enterprise resource planning systems or add applications to replace outdated systems and to operate more efficiently.

We may not be able to successfully implement these projects without experiencing difficulties.

In addition, our businesses have implemented and may implement in the future, digital systems or technologies, enterprise resource planning systems or additional applications to replace outdated systems and to operate more efficiently.

We may not be able to successfully implement these projects without experiencing difficulties, which could require significant financial and human resources and may impact our ability to efficiently service our customers.

Any expected benefits of implementing projects might not be realized or the costs of implementation might outweigh the benefits realized.

If our information technology and other digital systems are damaged or fail to function properly or reliably, we may incur substantial remediation costs and experience data loss or theft, disruptions in our business operations and the impairment of our ability to maintain adequate internal controls and financial reporting.

Moreover, we have acquired and may acquire in the future, businesses and subsidiaries that operate information technology systems that are distinct from our operating environment, which may result in significant integration or replacement issues or expenses.

We may be subject to security threats, including cyber and other attacks, which are becoming increasingly sophisticated, frequent and adaptive.

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We manufacture, source or sell our products in a number of locations throughout the world, predominantly in the U.S., Mexico, Canada and Southeast Asia.

Accordingly, we are subject to risks associated with potential disruption caused by changes in political, economic and social environments, including civil and political unrest, illnesses declared as a public health emergency (including global pandemics such as the COVID-19 pandemic), terrorism, expropriation, local labor conditions, changes in laws, regulations and policies of foreign governments and trade disputes with the U.S., and U.S.

Accordingly, we are subject to risks associated with potential disruption caused by changes in political, economic and social environments, including civil and political unrest, illnesses declared as a public health emergency (including global pandemics), terrorism, expropriation, local labor conditions, changes in laws, regulations and policies of foreign governments and trade disputes with the U.S., and U.S.

laws affecting activities of U.S.

companies abroad.

We could be adversely affected by international trade regulations, including duties, tariffs and anti-dumping penalties.

We could be adversely affected by international trade regulations, including the imposition of sanctions, duties, new or increased tariffs and anti-dumping penalties.

Risks inherent to international operations include:

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In addition, we source certain raw materials, components and finished goods from Southeast Asia where we have experienced higher manufacturing costs and longer lead times due to higher tariffs, currency fluctuations, higher wage rates, labor shortages and higher raw material costs.

There is currently uncertainty about the future relationship between the U.S.

and various other countries with respect to trade practices.

administration has proposed the implementation of a number of tariffs, including a 25 percent tariff on imports from Mexico, Canada and other countries, which could, if enacted into law, likely significantly increase the cost of certain raw materials imported into the U.S.

There can be no assurance that we will not experience a disruption in our business or harm to our financial condition related to changes in trade practices, and any changes to our operations or our sourcing strategy in order to mitigate any such tariff costs could be complicated, time-consuming and costly.

Disruption of operations could adversely affect our profitability and competitive position.

We manufacture a significant portion of the products we sell.

Any prolonged disruption in our manufacturing operations, whether due to technical or labor difficulties, continued labor shortages, transportation-related shortages, supply chain constraints, global pandemics such as COVID-19, weather conditions (including due to the impacts of climate change, particularly for those facilities near any shorelines or in any other area traditionally impacted by extreme weather), lack of raw material or component availability, startup inefficiencies for new operations, destruction of or damage to any facility (as a result of natural disasters, fires and explosions, use and storage of hazardous materials or other events) or other reasons, could negatively impact our profitability and competitive position.

Any prolonged disruption in our manufacturing operations, whether due to technical or labor difficulties, continued labor shortages, transportation-related shortages, supply chain constraints, global pandemics, weather conditions, including the impact of extreme weather, lack of raw material or component availability, startup inefficiencies for new operations, destruction of or damage to any facility (as a result of natural disasters, fires and explosions, use and storage of hazardous materials or other events) or other reasons, could negatively impact our profitability and competitive position.

Inability to obtain raw materials and finished goods in a timely and cost-effective manner from suppliers could adversely affect our ability to manufacture and market our products.

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Failure of our suppliers to timely provide us quality products or services on commercially reasonable terms or to comply with applicable legal and regulatory requirements, could have an adverse effect on our results of operations or could damage our reputation.

The operations of the third parties we depend on could be impacted by changing laws, regulations and policies, including those related to climate change, labor availability, cybersecurity attacks and by adverse weather conditions, pandemics, and other force majeure events, any of which could result in disruptions to their operations and result in shortages of supply, assertion of force majeure contract provisions and increases in the prices they charge for the raw materials, components and products they produce.

The operations of the third parties we depend on could be impacted by changing laws, regulations and policies, including those related to climate, labor availability, cybersecurity attacks and by adverse weather conditions, pandemics and other force majeure events, any of which could result in disruptions to their operations and result in shortages of supply, assertion of force majeure contract provisions and increases in the prices they charge for the raw materials, components and products they produce.

Sourcing these products and components from alternate suppliers, including suppliers from new geographic regions, or re-engineering our products as a result of supplier disruptions, is time-consuming and costly and could result in inefficiencies or delays in our business operations or could negatively impact the quality of our products.

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If we are unable to effectively manage our supply chain or if we experience transportation constraints, disruptions and higher costs for timely delivery of our products or components, our results of operations could be adversely affected.

We may not be successful in identifying and executing potential business development transactions, such as our acquisition of Supreme, or realizing the financial and strategic goals that were contemplated at the time of any historical or potential business development transaction, which could have an adverse impact on our ability to meet our growth objectives.

We may seek to accelerate our growth by not only advancing our own product pipelines and maximizing the value of our existing products, but also through various forms of business development activities, which include our acquisition of Supreme and any alliances, licenses, joint ventures, collaborations, equity- or debt-based investments, dispositions, divestments, mergers and acquisitions.

The success of our business development activities is dependent on the availability and accurate evaluation of appropriate opportunities, competition from others that are seeking similar opportunities and our ability to successfully identify, structure and execute transactions, including the ability to satisfy or waive closing conditions in the anticipated timeframes, or at all, and our ability to successfully integrate acquired businesses and develop and commercialize acquired products.

Pursuing, executing and consummating these transactions may require substantial investment, which may require us to obtain additional equity or debt financing, which could result in increased leverage and/or a downgrade of our credit ratings or limit our operating or financial flexibility relative to our current position.

The success of our business development transactions depends on our ability to realize the anticipated benefits of these transactions and is subject to numerous risks and uncertainties, many of which are outside of our control, including the possibility that the anticipated benefits from such transactions, including synergies and cost savings, will not be realized or will not be realized within the anticipated time period.

With respect of the Supreme acquisition, the assumptions and estimates underlying the estimated synergies are inherently uncertain and, although considered reasonable by the Company’s management as of the date of the acquisition, are subject to significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from expectations.

The anticipated synergies are based upon assumptions about our ability to implement integration measures in a timely fashion and within certain cost parameters.

Our ability to achieve the planned cost synergies is dependent upon a significant number of factors, many of which are beyond our control.

No assurances can be made that the costs of achieving the synergies will not rise materially, or that such synergies will be realized in the amounts expected, in the timeframes we currently anticipate, or at all.

In addition, regulatory hurdles and commercialization challenges may adversely impact revenue and income contribution from acquired products and businesses.

We may fail to generate anticipated revenue growth for our existing products, product pipeline and acquired products or businesses or we may fail to achieve anticipated cost savings, such as those anticipated with respect to Supreme, within anticipated time frames or at all, which may impact our ability to meet our growth objectives.

Our business development activities may divert our focus and resources that would otherwise be invested into maintaining or growing our business.

Similarly, the accretive impact anticipated from transactions may not be realized or may be delayed.

Integration of these products or businesses may result in the loss of key employees, the disruption of ongoing business, including third-party relationships, or inconsistencies in standards, controls, procedures and policies.

Further, while we seek to mitigate risks and liabilities through, among other things, due diligence, we may be exposed to risks and liabilities as a result of business development transactions.

There is no assurance that we will be able to acquire attractive businesses or enter into strategic business relationships on favorable terms ahead of our competitors, or that such acquisitions or strategic business development relationships will be accretive to earnings or improve our competitive position.

Risks associated with strategic acquisitions and joint ventures could adversely affect our results of operations.

We will consider acquisitions and joint ventures as a means of enhancing stockholder value.

In addition to the acquisition of Supreme, we will continue to consider acquisitions and joint ventures as a means of enhancing stockholder value.

Acquisitions and joint ventures involve risks and uncertainties, including:

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If the carrying value of an indefinite-lived intangible asset is greater than its fair value, the intangible asset is considered impaired and is reduced to fair value via a non-cash charge to earnings.

In 2022, we recognized impairment charges of $46.4 million, consisting of $38.8 million related to an indefinite-lived tradename, and $7.6 million related to another indefinite-lived tradename.

No intangible asset impairments were recorded during 2023.

Future events may occur that would adversely affect the fair value of our goodwill or other acquired intangible assets and require impairment charges.

Such events may include, but are not limited to, lower than forecasted revenues, actual new construction and R&R growth rates that fall below our assumptions, actions of key customers, increases in discount rates, continued economic uncertainty, higher levels of unemployment, weak consumer confidence, lower levels of discretionary consumer spending, a decrease in royalty rates and a decline in the trading price of our common stock.

Such events may include, but are not limited to, lower than forecasted revenue growth rates, actual new construction and R&R growth rates that fall below our assumptions, actions of key customers, increases in market-participant discount rates, continued economic uncertainty, higher levels of unemployment, weak consumer confidence, lower levels of discretionary consumer spending, a decrease in assumed royalty rates and a decline in the trading price of our common stock.

We continue to evaluate the impact of economic and other developments to assess whether impairment indicators are present.

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Our accounting policy for defined benefit plans may subject earnings to volatility due to the recognition of actuarial gains and losses, particularly due to the change in the fair value of pension assets and interest rates.

Funding requirements for our U.S.

pension plan may become more significant.

However, the ultimate amounts to be contributed are dependent upon, among other things, interest rates, underlying asset returns and the impact of legislative or regulatory changes related to pension funding obligations.

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

approved a plan to terminate the defined benefit pension plan.

The termination and settlement process preserves retirement benefits due to participants but changes the ultimate payor of such benefits.

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

The final pension settlement charges and the actual amount we will be required to contribute to the plan to fund benefit distributions in excess of plan assets are dependent on various factors, including the value of plan assets, the amount of lump-sum benefit distributions paid to participants, and the cost to purchase annuity contracts to settle the pension obligation.

We have debt obligations, and may in the future incur additional debt obligations, that could adversely affect our business and profitability and our ability to meet our other obligations.

Our total debt was approximately $712.5 million at December 31, 2023.

On June 27, 2024, the Company completed a private offering of $700.0 million aggregate principal amount of 7.00 percent Senior Notes due 2032 and entered into an amended and restated credit agreement.

This debt could potentially have important consequences to us and our debt and equity investors, including:

▪ requiring a substantial portion of our cash flow from operations to make interest and principal payments, which could reduce our profitability;

▪ making it more difficult to satisfy debt service and other obligations;

▪ if we have a credit rating, increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing;

▪ increasing our vulnerability to adverse economic and industry conditions, such as adverse interest rates;

▪ reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business;

▪ limiting our flexibility in planning for, or reacting to, changes in our business and the industry;

▪ placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt;

▪ limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase shares of our common stock.

▪ require a substantial portion of our cash flow from operations to make interest and principal payments, which could reduce our profitability;

▪ make it more difficult to satisfy debt service and other obligations;

▪ increase the risk of a future downgrade of our credit ratings, which could increase our future debt costs and limit the future availability of debt financing;

▪ increase our vulnerability to adverse economic and industry conditions, such as adverse interest rates;

▪ reduce the cash flow available to fund capital expenditures and other corporate purposes and to grow our business;

▪ limit our flexibility in planning for, or reacting to, changes in our business and the industry;

▪ place us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt;

▪ limit our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase shares of our common stock.

To the extent that we incur additional indebtedness, the foregoing risks could increase.

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(1) our financial performance;

(2) our credit ratings or absence of a credit rating;

(2) our credit ratings;

(3) the liquidity of the overall capital markets;

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Changes in government and industry regulatory standards could adversely affect our results of operations.

Government regulations and policies pertaining to trade agreements, health and safety (including protection of associates as well as consumers), taxes and environment (including those specific to climate change and the reduction of air and energy emissions) may continue to emerge in the U.S., as well as internationally.

Government regulations and policies pertaining to trade agreements, health and safety (including protection of associates as well as consumers), taxes and environment (including those specific to the climate and the reduction of air and energy emissions) may continue to emerge in the U.S., as well as internationally.

There are many government and industry regulatory standards focused on wood, including the Toxic Substances Control Act and the Lacey Act.

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▪ data privacy and the collection and storage of information;

▪ climate change and protection of the environment.

▪ climate and protection of the environment.

In addition to complying with current requirements and known future requirements, we may be subject to new or more stringent requirements in the future.

As we sell new types of products or existing products in new geographic areas or channels, we are subject to the requirements applicable to those sales.

Compliance with new or changed laws, regulations and other requirements, including as a part of government or industry response to climate change, may require us to alter our product designs, our manufacturing processes, our packaging or our sourcing.

Compliance with new or changed laws, regulations and other requirements, including as a part of government or industry response to environmental impacts, may require us to alter our product designs, our manufacturing processes, our packaging or our sourcing.

Existing and new compliance activities are or may be costly and require significant management attention and resources.

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Any failure or perceived failure by us in this regard could adversely impact our business and reputation, including reducing our profitability and stock price.

The current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations with respect to ESG matters, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.

Government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations with respect to ESG matters, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.

In addition, customers have, and are likely to continue to, require us and our products to comply with their internal ESG-related standards, such as wood-sourcing policies.

Complying with such standards may impose significant

additional costs on us, and we may no longer be able to do business with customers with whose standards we are unable to comply with.

Complying with such standards may impose significant additional costs on us, and we may no longer be able to do business with customers with whose standards we are unable to comply with.

Changes in tax laws or regulations may have a negative impact on our results of operations.

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In 2024, certain jurisdictions in which we operate enacted, or announced their intention to enact, legislation consistent with one or more Organization for Economic Co-operation and Development Global Anti-Base Erosion Model Rules (Pillar Two).

The model rules include minimum domestic top up taxes, income inclusion rules, and undertaxed profit rules all aimed to ensure that multinationals pay a minimum effective corporate tax rate of 15 percent in each jurisdiction in which they operate, with some rules becoming effective in 2024.

The Pillar Two legislation does not impact our 2023 annual effective tax rate, nor do we expect it to materially impact our annual effective rate in 2024.

However, further changes to our entity structure or changes in jurisdictions in which we operate could adversely impact our results of operations.

The Pillar Two legislation, as enacted in certain jurisdictions in which we operate, does not materially impact our 2024 annual effective tax rate, nor do we expect it to materially impact our annual effective rate in 2025.

However, further changes to our entity structure, enacted local legislation, or changes in jurisdictions in which we operate could adversely impact our results of operations.

In addition, the new U.S.

administration could modify key aspects of the tax code, which could materially affect our tax obligations and effective tax rate.

Tax audits may result in findings that have a negative impact on our results of operations.

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Risks Related to the Separation and Distribution

We have a very short operating history as an independent, publicly-traded company, and our historical consolidated financial statements are not necessarily representative of the results we would have achieved as an independent, publicly-traded company and may not be reliable indicators of our future results.

We have a short operating history as an independent, publicly-traded company, and our historical consolidated financial statements are not necessarily representative of the results we would have achieved as an independent, publicly-traded company and may not be reliable indicators of our future results.

Our historical consolidated financial statements included in this Annual Report on Form 10-K do not necessarily reflect the results of operations that we would have achieved as an independent, publicly-traded company during the periods presented or those that we will achieve in the future, including as a result of the following factors:

▪ Historically, prior to Separation, our working capital requirements and capital for our general corporate purposes, including acquisitions and capital expenditures, were financed by Fortune Brands.

Additionally, Fortune Brands historically managed and retained cash we generated prior to Separation.

Following completion of the Separation

as of December 14, 2022, Fortune Brands no longer provides us with funds to finance our working capital or other cash requirements.

▪ Historically, prior to the Separation, our working capital requirements and capital for our general corporate purposes, including acquisitions and capital expenditures, were financed by Fortune Brands.

Additionally, Fortune Brands historically managed and retained cash we generated prior to the Separation.

Following completion of the Separation as of December 14, 2022, Fortune Brands no longer provided us with funds to finance our working capital or other cash requirements.

Without the opportunity to obtain financing from Fortune Brands, we have obtained and may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements, and such arrangements may not be available to us or available on terms that are as favorable as those we could have obtained when we were part of Fortune Brands.

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Fortune Brands historically performed various corporate functions for us, including, but not limited to, tax administration, treasury activities, accounting, legal, ethics and compliance program administration, investor and public relations, certain governance functions, including the board of directors and related committees, internal audit and external reporting.

Our historical consolidated financial statements reflect allocations of corporate expenses from Fortune Brands for these and similar functions.

Our historical consolidated financial statements prior to the Separation reflect allocations of corporate expenses from Fortune Brands for these and similar functions.

These allocations may be more or less than the comparable expenses we would have incurred had we operated as an independent, publicly-traded company.

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The terms we received in our agreements with Fortune Brands could be less beneficial than the terms we may have otherwise received from unaffiliated third parties, and Fortune Brands may fail to perform under such agreements.

The agreements we entered into with Fortune Brands in connection with the Separation, including the Separation and Distribution Agreement, a tax allocation agreement (the “Tax Allocation Agreement”), Transition Services Agreement and an associate matters agreement (the “Employee Matters Agreement,”) that are still in effect, were prepared in the context of the Separation while we were still a wholly-owned subsidiary of Fortune Brands.

The agreements we entered into with Fortune Brands in connection with the Separation, including the Separation and Distribution Agreement, a tax allocation agreement (the “Tax Allocation Agreement”) and an associate matters agreement (the “Employee Matters Agreement,”) that are still in effect, were prepared in the context of the Separation while we were still a wholly-owned subsidiary of Fortune Brands.

Accordingly, during the period in which the terms of those agreements were prepared, we did not have an independent Board of Directors or a management team that was independent of Fortune Brands.

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The Employee Matters Agreement also provides for the establishment or amendment of certain associate benefit arrangements and the conversion or adjustment of equity incentive awards.

The Transition Services Agreement provides for the performance of certain services by each company for the benefit of the other generally for a term of up to 24 months after the Separation.

We will rely on Fortune Brands to satisfy its performance and payment obligations under these agreements.

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Fortune Brands may fail to perform under various transaction agreements that were executed as part of the Separation, which could cause us to incur expenses or losses we would not otherwise incur.

In connection with the Separation and prior to the Distribution, we and Fortune Brands entered into the Separation and Distribution Agreement and also entered into various other agreements, including a Tax Allocation Agreement, a Transition Services Agreement and an Employee Matters Agreement.

The Separation and Distribution Agreement, the Tax Allocation Agreement and the Employee Matters Agreement determined the allocation of assets and liabilities between the

companies following the Separation for those respective areas and includes any necessary indemnifications related to liabilities and obligations.

The Separation and Distribution Agreement, the Tax Allocation Agreement and the Employee Matters Agreement determined the allocation of assets and liabilities between the companies following the Separation for those respective areas and includes any necessary indemnifications related to liabilities and obligations.

The Employee Matters Agreement also provides for the establishment or amendment of certain employee benefit arrangements and the conversion or adjustment of equity incentive awards.

The Transition Services Agreement provides for the performance of certain services by each company for the benefit of the other generally for a term of up to 24 months after the Separation.

We will rely on Fortune Brands to satisfy its performance and payment obligations under these agreements.

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and (3) taxable gain from the exchange of Fortune Brand common stock to the extent the amount received exceeded the sum of such stockholder’s share of Fortune Brand’s earnings and profits and such stockholder’s basis in its Fortune Brand common stock.

We might not be able to engage in desirable strategic transactions and equity issuances following the Distribution because of certain restrictions relating to requirements for tax-free distributions.

Our ability to engage in significant equity transactions could be limited or restricted after the Distribution in order to preserve, for U.S.

federal income tax purposes, the tax-free nature of the Distribution by Fortune Brands.

Even if the Distribution otherwise qualifies for tax-free treatment under Section 355 of the Code, it may result in a corporate level taxable gain to Fortune Brands under Section 355(e) of the Code if 50 percent or more, by vote or value, of shares of our stock or Fortune Brands’ stock are acquired or issued as part of a plan or series of related transactions that includes the Separation.

Any acquisitions or issuances of our stock or Fortune Brands’ stock within two years after the Distribution are generally presumed to be part of such a plan, although we or Fortune Brands may be able to rebut that presumption.

To preserve the tax-free treatment to Fortune Brands of the Distribution, under the Tax Allocation Agreement that we entered into with Fortune Brands, we are prohibited from taking or failing to take any action that prevents the Distribution and related transactions from being tax-free for U.S.

federal income tax purposes.

Further, for the two-year period following the Distribution, without a private letter ruling from the IRS or an unqualified opinion of a nationally recognized law or accounting firm that is acceptable to Fortune Brands acting reasonably and in good faith, we may be prohibited from:

▪ approving or allowing any transaction that results in a change in ownership of more than a specified percentage of our common stock;

• a redemption of equity securities;

• a sale or other disposition of a specified percentage of our assets;

• an acquisition of a business or assets with equity securities to the extent one or more persons would acquire in excess of a specified percentage of our common stock;

• engaging in certain internal transactions.

These restrictions may limit our ability to pursue strategic transactions or engage in new business or other transactions that may maximize the value of our business.

Moreover, the Tax Allocation Agreement also provides that we are responsible for any taxes imposed on Fortune Brands or any of its affiliates as a result of the failure of the Distribution to qualify for favorable treatment under the Code if such failure is attributable to certain actions taken after the Distribution by or in respect of us, any of our affiliates or our stockholders.

Any such indemnification obligation could adversely affect our results of operations.

A court could deem the Distribution to be a fraudulent conveyance and void the transaction or impose substantial liabilities upon us.

A court could deem the Distribution or certain internal restructuring transactions undertaken by Fortune Brands in connection with the Separation to be a fraudulent conveyance or transfer.

Fraudulent conveyances or transfers are defined to include transfers made or obligations incurred with the actual intent to hinder, delay or defraud current or future creditors or transfers made or obligations incurred for less than reasonably equivalent value when the debtor was insolvent, or that rendered the debtor insolvent, inadequately capitalized or unable to pay its debts as they become due.

A court could void the transactions or impose substantial liabilities upon us, which could adversely affect our results of operations.

Among other things, the court could require our stockholders to return to Fortune Brands, for the benefit of its creditors, some or all of the shares of our common stock issued in the Distribution, or require us to fund liabilities of other companies involved in the restructuring transaction.

Whether a transaction is a fraudulent conveyance or transfer under applicable state law may vary depending upon the jurisdiction whose law is being applied.

Risks Related to Our Common Stock

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• announcements by us or our competitors of significant acquisitions or dispositions;

• the failure of securities analysts to cover our common stock after the Distribution;

• the failure of securities analysts to cover our common stock;

• changes in earnings estimates by securities analysts or our ability to meet our earnings guidance;

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Additionally, if any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if successfully defended, could be costly to defend and a distraction to management.

We rely on dividends, distributions, and transfers of funds from our subsidiaries, and we could be harmed if such distributions were not made in the future, because we are a holding company with no operations of our own.

We are a holding company that conducts all of our operations through subsidiaries and our operating income is derived from our subsidiaries.

Consequently, we rely on dividends or advances from our subsidiaries.

We presently intend to retain future earnings, if any, to finance our business or reduce debt.

As a result, we do not currently expect to pay any cash dividends, although we may do so in the future.

To the extent that we determine in the future to pay cash dividends on our common stock, none of our subsidiaries will be obligated to make funds available to us for the payment of dividends.

The ability of such subsidiaries to pay dividends to us is subject to applicable local law and may be limited due to terms of other contractual arrangements, including our indebtedness.

Such laws and restrictions would restrict our ability to continue operations.

Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws and provisions of Delaware law may prevent or delay an acquisition of us, even if that change may be considered beneficial by some of our stockholders.

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elimination of the rights of our stockholders to act by written consent and call special stockholder meetings;

until our Board of Directors is no longer classified, prohibiting stockholders from removing directors other than “for cause”;

until our Board of Directors is no longer classified, prohibiting stockholders

from removing directors other than “for cause”;

and rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings.

In addition, following the Separation, we are subject to Section 203 of the Delaware General Corporation Law (the “DGCL”), which may have an anti-takeover effect with respect to transactions not approved in advance by our Board of Directors, including discouraging takeover attempts that might result in a premium over the market price for shares of our common stock.

In addition, we are subject to Section 203 of the Delaware General Corporation Law (the “DGCL”), which may have an anti-takeover effect with respect to transactions not approved in advance by our Board of Directors, including discouraging takeover attempts that might result in a premium over the market price for shares of our common stock.

These provisions apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our Board of Directors determines is not in our best interests or the best interests of our stockholders.

15 unchanged sentences

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 1A. Risk Factors