MasterBrand, Inc. 10-K

Item 8. Financial Statements and Supplementary Data MasterBrand, Inc. CONSOLIDATED STATEMENTS OF INCOME For years ended (U.S. Dollars presented in millions, except per share amounts) 2024 2023 2022 NET SALES $ 2,700.4 $ 2,726.2 $ 3,275.5 Cost of products sold 1,823.4 1,824.8 2,335.0 GROSS PROFIT 877.0 901.4 940.5 Selling, general and administrative expenses 603.1 569.7 648.5 Amortization of intangible assets 20.2 15.3 17.2 Asset impairment charges — — 46.4 Restructuring charges 18.0 10.1 25.1 OPERATING INCOME 235.7 306.3 203.3 Related party interest income, net — — ( 12.9 ) Interest expense 74.0 65.2 2.2 Gain on sale of asset ( 4.3 ) — — Other (income) expense, net ( 2.3 ) 2.4 0.6 INCOME BEFORE TAXES 168.3 238.7 213.4 Income tax expense 42.4 56.7 58.0 NET INCOME $ 125.9 $ 182.0 $ 155.4 Average Number of Shares of Common Stock Outstanding Basic 127.1 127.8 128.0 Diluted 130.9 129.9 129.1 Earnings Per Common Share Basic $ 0.99 $ 1.42 $ 1.21 Diluted $ 0.96 $ 1.40 $ 1.20 See Notes to Consolidated Financial Statements. 44 Table of Contents MasterBrand, Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For years ended (U.S. Dollars presented in millions) 2024 2023 2022 NET INCOME $ 125.9 $ 182.0 $ 155.4 Other comprehensive (loss) income, before tax: Foreign currency translation adjustments ( 27.7 ) 12.1 ( 9.9 ) Unrealized (losses) gains on derivatives: Unrealized holding (losses) gains arising during period ( 10.1 ) 9.6 7.2 Less: reclassification adjustment for losses (gains) included in net income 2.9 ( 10.2 ) ( 4.5 ) Unrealized (losses) gains on derivatives ( 7.2 ) ( 0.6 ) 2.7 Defined benefit plans: Net actuarial gains (losses) arising during period 5.3 ( 4.1 ) ( 6.1 ) Less: Amortization of net actuarial loss and curtailment 2.6 3.2 1.7 Defined benefit plans 7.9 ( 0.9 ) ( 4.4 ) Other comprehensive (loss) income, before tax ( 27.0 ) 10.6 ( 11.6 ) Income tax (expense) benefit related to items of other comprehensive income ( 2.0 ) 0.2 1.0 Other comprehensive (loss) income, net of tax ( 29.0 ) 10.8 ( 10.6 ) COMPREHENSIVE INCOME $ 96.9 $ 192.8 $ 144.8 See Notes to Consolidated Financial Statements. 45 Table of Contents MasterBrand, Inc. CONSOLIDATED BALANCE SHEETS (U.S. Dollars presented in millions) December 29, 2024 December 31, 2023 ASSETS Current assets Cash and cash equivalents $ 120.6 $ 148.7 Accounts receivable, net 191.0 203.0 Inventories 276.4 249.8 Other current assets 62.7 75.7 TOTAL CURRENT ASSETS 650.7 677.2 Property, plant and equipment, net of accumulated depreciation 481.5 356.6 Operating lease right-of-use assets, net of accumulated amortization 66.4 60.1 Goodwill 1,125.8 925.1 Other intangible assets, net of accumulated amortization 571.3 335.5 Other assets 34.1 27.2 TOTAL ASSETS $ 2,929.8 $ 2,381.7 LIABILITIES AND EQUITY Current liabilities Accounts payable 180.7 151.4 Current portion of long-term debt — 17.6 Current operating lease liabilities 19.5 16.1 Other current liabilities 195.2 164.3 TOTAL CURRENT LIABILITIES 395.4 349.4 Long-term debt 1,007.8 690.2 Deferred income taxes 158.7 83.6 Pension and other postretirement plan liabilities 3.2 7.9 Operating lease liabilities 55.0 46.3 Other non-current liabilities 15.0 10.5 TOTAL LIABILITIES 1,635.1 1,187.9 Commitments (Note 16) and Contingencies and Accrued Losses (Note 17) Equity Common stock (par value $ 0.01 per share; authorized 750.0 million shares; 130.9 million shares issued and 127.6 million outstanding as of December 29, 2024; 129.1 million shares issued and 126.8 million outstanding as of December 31, 2023) 1.3 1.3 Paid-in capital 39.7 17.8 Treasury stock, at cost ( 44.0 ) ( 26.1 ) Accumulated other comprehensive loss ( 32.7 ) ( 3.7 ) Retained earnings 1,330.4 1,204.5 TOTAL EQUITY 1,294.7 1,193.8 TOTAL LIABILITIES AND EQUITY $ 2,929.8 $ 2,381.7 See Notes to Consolidated Financial Statements. 46 Table of Contents MasterBrand, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS For years ended (U.S. Dollars presented in millions) 2024 2023 2022 OPERATING ACTIVITIES Net income $ 125.9 $ 182.0 $ 155.4 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 57.1 49.0 47.3 Amortization of intangibles 20.2 15.3 17.2 Restructuring charges, net of cash payments 10.5 ( 9.4 ) 13.0 Write-off and amortization of finance fees 8.9 2.2 — Stock-based compensation 21.9 17.8 10.9 Asset impairment charges — — 46.4 Recognition of actuarial losses and settlement charges 2.7 2.9 0.9 Deferred taxes 4.6 ( 5.7 ) 2.3 Changes in operating assets and liabilities: Accounts receivable 21.7 88.1 13.5 Inventories ( 10.7 ) 123.6 ( 70.1 ) Other current assets ( 5.7 ) 2.1 ( 5.3 ) Accounts payable 23.8 ( 69.4 ) 18.3 Accrued expenses and other current liabilities 3.4 17.2 1.8 Other items 7.7 ( 10.1 ) ( 16.0 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 292.0 405.6 235.6 INVESTING ACTIVITIES Capital expenditures (a) ( 80.9 ) ( 57.3 ) ( 55.9 ) Proceeds from the disposition of assets 14.6 0.4 — Acquisition of business, net of cash acquired ( 514.5 ) — — NET CASH USED IN INVESTING ACTIVITIES ( 580.8 ) ( 56.9 ) ( 55.9 ) FINANCING ACTIVITIES Proceeds from revolving credit facility borrowings 470.0 255.0 235.0 Issuance of long-term debt 700.0 — 750.0 Repayment of revolving credit facility borrowings ( 150.0 ) ( 490.0 ) — Repayment of term loan ( 712.5 ) ( 37.5 ) — Payment of financing fees ( 17.8 ) — ( 10.1 ) Repurchase of common stock ( 6.5 ) ( 22.0 ) — Payments of employee taxes withheld from share-based awards ( 11.4 ) ( 4.0 ) ( 0.1 ) Related party borrowings — — 2,754.5 Related party repayments — — ( 3,009.4 ) Net contributions from Fortune Brands — — 5.3 Dividend to Fortune Brands — — ( 940.0 ) Other items ( 2.2 ) ( 1.4 ) ( 0.5 ) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 269.6 ( 299.9 ) ( 215.3 ) Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash ( 7.9 ) ( 1.2 ) ( 4.7 ) NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH $ ( 27.1 ) $ 47.6 $ ( 40.3 ) Cash, cash equivalents, and restricted cash at beginning of period $ 148.7 $ 101.1 $ 141.4 Cash, cash equivalents, and restricted cash at end of period $ 121.6 $ 148.7 $ 101.1 Cash and cash equivalents $ 120.6 $ 148.7 $ 101.1 Restricted cash included in other assets 1.0 — — Total cash, cash equivalents and restricted cash $ 121.6 $ 148.7 $ 101.1 a) Capital expenditures of $ 3.4 million, $ 2.3 million and $ 1.6 million that have not been paid as of December 29, 2024, December 31, 2023 and December 25, 2022, respectively, were excluded from the Consolidated Statements of Cash Flows. See Notes to Consolidated Financial Statements. 47 Table of Contents MasterBrand, Inc. CONSOLIDATED STATEMENTS OF EQUITY Common Stock (U.S. Dollars and shares presented in millions) Shares Amount Paid-In Capital Treasury stock, at cost Accumulated Other Comprehensive (Loss) Income Retained Earnings Total Equity Balance at December 26, 2021 — $ — $ 272.2 $ — $ ( 3.9 ) $ 2,185.5 $ 2,453.8 Distribution of MasterBrand, Inc. stock to Fortune Brands shareholders 128.0 1.3 — — — — 1.3 Comprehensive income: Net income — — — — — 155.4 155.4 Other comprehensive loss — — — — ( 10.6 ) — ( 10.6 ) Stock-based compensation — — 10.9 ( 0.1 ) — — 10.8 Dividend to Fortune Brand — — — — — ( 940.0 ) ( 940.0 ) Net contributions from (distributions to) Fortune Brands — — 110.6 — — ( 105.3 ) 5.3 Return of capital to Fortune Brands — — ( 393.7 ) — — ( 273.1 ) ( 666.8 ) 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 Comprehensive income: Net income — — — — — 125.9 125.9 Other comprehensive loss — — — — ( 29.0 ) — ( 29.0 ) Stock-based compensation 1.2 — 21.9 ( 11.4 ) — — 10.5 Stock repurchase program ( 0.4 ) — — ( 6.5 ) — — ( 6.5 ) Balance at December 29, 2024 127.6 $ 1.3 $ 39.7 $ ( 44.0 ) $ ( 32.7 ) $ 1,330.4 $ 1,294.7 See Notes to Consolidated Financial Statements. 48 Table of Contents Notes to Consolidated Financial Statements 1. Background and Basis of Presentation Background MasterBrand, Inc. is a leading manufacturer of residential cabinets in North America with a portfolio of leading residential cabinetry products for the kitchen, bathroom and other parts of the home. References to “MasterBrand,” “the Company,” “we,” “our” and “us” refer to MasterBrand, 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. 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. through a transaction between entities under common control; 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 via the Distribution. On December 14, 2022, the date of Separation, 128.0 million shares of MasterBrand, Inc. common stock were issued. Fortune Brand shareholders received one share of MasterBrand, Inc. common stock for each share of Fortune Brands common stock held on the record date. Following the Distribution, Fortune Brands stockholders owned 100 percent of the shares of MasterBrand, Inc. common stock and MasterBrand, Inc. 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 the prior period presented in the consolidated financial statements, including Note 6, "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. The Company’s equity structure prior to the Separation and Distribution included 5,000 shares of MasterBrand, Inc. common stock authorized and 100 shares issued. Prior to the incorporation of MasterBrand, Inc. in July 2022, the equity structure of MBCI included 1,000 authorized and issued shares of common stock. MasterBrand, Inc. is the registrant and the financial reporting entity following the consummation of the Separation and Distribution. In order to govern the ongoing relationships between MasterBrand, Inc. and Fortune Brands after the Separation and to facilitate an orderly transition, the parties entered into a series of agreements including the following: • Separation and Distribution Agreement - sets forth the principal actions to be taken in connection with the Separation, including the transfer of assets and assumption of liabilities, among others, and sets forth other agreements governing aspects of the relationship between MasterBrand, Inc. and Fortune Brands. • Tax Allocation Agreement – governs the respective rights, responsibilities and obligations of MasterBrand and Fortune Brands with respect to tax liabilities and benefits, tax attributes, tax contests and other matters regarding income taxes, non-income taxes and related tax returns. • Employee Matters Agreement – addresses certain employment, compensation and benefits matters, including the allocation and treatment of certain assets and liabilities relating to MasterBrand associates. 49 Table of Contents Basis of Presentation The accompanying financial statements are presented on a consolidated basis as the Company is a standalone public company. We had 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 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 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. Our consolidated financial statements are based on a 52- or 53-week fiscal year ending on the last Sunday in December in each calendar year. Fiscal 2024 and 2022 both consisted of 52 weeks ended on December 29, 2024 and December 25, 2022, respectively. Fiscal 2023 consisted of 53 weeks ending on December 31, 2023. References herein to years are to our fiscal years. The consolidated financial statements have been prepared in accordance with GAAP. The consolidated statements of income include all revenues and costs directly attributable to our business, including costs for facilities, functions and services we utilize. 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, associate headcount, or number of facilities, as applicable. Prior to the Separation, total expenses allocated for the 2022 year were $ 92.5 million, of which $ 72.4 million 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; 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 period 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 $ 2.4 million of costs related to the separation from Fortune Brands for the year ended December 31, 2023. The Separation-related costs include advisory fees, professional fees and other transaction related costs incurred directly by us. These costs are included within selling, general and administrative expenses. 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 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 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 continued to be provided for a period of time under a transition services agreement. Subsequent to the Separation, 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. 50 Table of Contents 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. 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 12, "Debt," for additional information. For more information regarding related party transactions with Fortune Brands, see Note 21, "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. This adjustment was to correct errors for expenses that should have been recognized of $ 5.1 million , $ 1.6 million and $ 2.0 million in the thirteen weeks ended March 27, 2022, June 26, 2022 and September 25, 2022, respectively. The adjustment did not have any impact on our annual consolidated financial statements for the year ended December 25, 2022. Tornado at Jackson, Georgia 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 provided business interruption coverage, including lost profits, and reimbursement for other expenses and costs that were incurred relating to the damages and losses suffered. For the thirteen weeks ended March 26, 2023, the Company incurred expenses of $ 9.4 million solely related to damages caused by the tornado, and no additional expenses were incurred throughout the remainder of fiscal 2023. 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. During fiscal 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 were recorded as a component of cost of products sold in the Consolidated Statements of Income. Upon receipt of the final insurance proceeds in our fourth quarter of fiscal 2023, we considered this claim to be closed. Gain on sale of asset On December 12, 2024, the Company sold a warehouse and land located in Weslaco, Texas. The location was previously closed in conjunction with the consolidation of our warehouse facilities to enable efficiencies and increase annual savings. This facility sold for a purchase price of $ 6.6 million, resulting in a $ 4.3 million gain recognized as a separate component of non-operating income in the Consolidated Statements of Income. 2. Significant Accounting Policies 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, which generally occurs upon shipment or delivery of the products. See Note 4, "Revenue from Contracts with Customers," for additional information. Customer Program Costs Customer programs and incentives are a common practice in our business. Our business incurs customer program costs to obtain favorable product placement, to promote sales of products and to maintain competitive pricing. These costs are recognized as either a reduction of revenue or within the selling, general and administrative expenses category, depending on the underlying nature of the cost. 51 Table of Contents 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. These estimates are based on historical and projected experience for each type of customer. Volume allowances are accrued based on management’s estimates of customer volume achievement and other factors incorporated into customer agreements, such as new products, store sell-through, merchandising support, levels of returns and customer training. Management periodically reviews accruals for these rebates and allowances, and adjusts accruals when circumstances indicate, typically as a result of a change in volume expectations. Cost of Products Sold Cost of products sold includes all costs to make products saleable, including the cost of materials, as well as labor costs, inbound freight, purchasing and receiving costs, inspection costs and internal transfer costs. In addition, all depreciation expense associated with assets used to manufacture products and make them saleable is included in cost of products sold. Selling, General and Administrative Expenses Selling, general and administrative expenses include advertising costs; marketing costs; selling costs, including commissions; research and development costs; shipping and handling costs, including warehousing costs; and general and administrative expenses. Shipping and handling costs included in selling, general and administrative expenses wer e $ 164.4 million, $ 169.4 million and $ 209.9 million in 2024, 2023 and 2022, respectively . Advertising costs, which amounted to $ 54.5 million, $ 65.0 million and $ 69.1 million in 2024, 2023 and 2022, respectively, are principally expensed as incurred. Advertising costs paid to customers as pricing rebates include product displays, marketing administration costs, media production costs and point of sale materials. Advertising costs recorded as a reduction to net sales, primarily cooperative advertising, were $ 18.5 million, $ 27.6 million and $ 29.4 million in 2024, 2023 and 2022, respectively. Advertising costs recorded in selling, general and administrative expenses were $ 36.0 million, $ 37.4 million and $ 39.7 million in 2024, 2023 and 2022, respectively. 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 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. The fair value of each performance share award is based on the average of the high and low share prices on the date of grant and the probability of meeting performance targets. The fair value of each restricted stock unit granted is equal to the average of the high and low share prices on the date of grant. See Note 18, "Stock-Based Compensation," for additional information. Foreign Currency Translation Foreign currency balance sheet accounts are translated into U.S. dollars at the actual rates of exchange at the balance sheet date. 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 loss 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. Income Taxes The income tax expense in our Consolidated Financial Statements has been determined on a stand-alone return basis in accordance with ASC Topic 740, Income Taxes, which requires the recognition of income taxes using the liability method. The tax provision and current and deferred tax balances have been prepared on a separate-return basis as if the Company were a separate filer. The income taxes of the Company, as presented in the consolidated financial statements, may not be indicative of the income taxes that the Company will incur in the future. 52 Table of Contents For taxable periods prior to and including the Separation, our operations were included in the consolidated U.S. federal and certain state and local income tax returns of Fortune Brands, as applicable. The Company filed separate foreign income tax returns. Post-Separation, our income tax provisions are calculated based on the Company’s operating footprint, as well as our tax return elections and assertions. Income tax liabilities related to unrecognized tax benefits (“UTBs”), including interest and penalties, are reported as a liability within the Consolidated Balance Sheets based upon tax authorities’ ability to assert the Company may be legally liable for UTBs. For taxable periods ended after the Separation, the Company filed consolidated U.S. federal income tax returns and various state and local income tax returns. The Company’s foreign income tax returns continue to be filed on a full-year basis. The Company is subject to income taxes in the U.S. and various foreign jurisdictions. The determination of the Company’s income tax positions involves consideration of uncertainties, changing fiscal policies, tax laws, court rulings, regulations and related legislation. 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. Deferred tax assets and liabilities are determined based on the differences between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The recognition and measurement of deferred tax asset and liability balances, and the corresponding deferred tax expense or benefit, are determined for each tax-paying component in each relevant jurisdiction. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period the new tax rate is enacted. The Company recognizes liabilities for unrecognized tax benefits which are recognized if the weight of available evidence indicates that it is not more-likely-than-not that the positions will be sustained on examination, including resolution of the related appeals or litigation processes, if any. We record liabilities for uncertain income tax positions based on a two-step process. The first step is recognition, where we evaluate whether an individual tax position has a likelihood of greater than 50 percent of being sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation processes. For tax positions that are currently estimated to have a less than 50 percent likelihood of being sustained, no tax benefit is recorded. Considerable management judgment is necessary to assess the inherent uncertainties related to the interpretations of complex tax laws, regulations and taxing authority rulings. For tax positions that have met the recognition threshold in the first step, we perform the second step of measuring the benefit to be recorded. 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 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. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. 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. 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 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. Cash and Cash Equivalents We consider all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. We do not believe we are exposed to any significant credit risk on cash and cash equivalents. The carrying amounts of cash and cash equivalents approximate fair value. 53 Table of Contents 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 receivable by our customers. The allowances for credit losses include provisions for certain customers where a risk of default has been specifically identified. In addition, the allowances include a provision for expected customer defaults on a general formula basis when it cannot yet be associated with specific customers. 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. 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 and 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 products sold may be required. Property, Plant and Equipment Property, plant and equipment are carried at cost. Depreciation is provided, principally on a straight-line basis, over the estimated useful lives of the assets. Gains or losses resulting from dispositions are included in operating income. Betterments and renewals, which improve and extend the life of an asset, are capitalized; maintenance and repair costs are expensed as incurred. Assets held for use to be disposed of at a future date are depreciated over the remaining useful life. Assets to be sold are written down to fair value less costs to sell at the time the assets are being actively marketed for sale. Estimated useful lives of the related assets are as follows: Buildings and improvements to leaseholds 1 to 40 years 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. The gain or loss on the sale of assets held for sale are included in non-operating expenses. 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. Examples of events or circumstances indicating that its carrying amount may not be recoverable include changes in volume, margin, customers and the industry. When such events occur, we compare the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of a long-lived asset or asset group. The cash flows are based on our best estimate of future cash flows derived from the most recent business projections. If this comparison indicates that there is an impairment, the amount of the impairment is calculated based on fair value. Fair value is estimated primarily using discounted expected future cash flows on a market-participant basis. Leases Operating lease assets and operating lease liabilities are recognized based on the present value of the future lease payments over the lease term at commencement date. As most of our lease contracts do not provide an explicit interest rate, we use our incremental borrowing rate in determining the present value of future lease payments. Our incremental borrowing rates include estimates related to the impact of collateralization and the economic environment where the leased asset is located. The operating lease assets also include any prepaid lease payments and initial direct costs incurred, but exclude lease incentives received at lease commencement. Our lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Our leases have remaining lease terms of 1 to 10 years, some of which may include options to extend or terminate the lease. Operating lease expense is recognized on a straight-line basis over the lease term. 54 Table of Contents We do not recognize leases with an initial term of twelve months or less on the balance sheet and instead recognize the related lease payments as expense in the consolidated statements of income on a straight-line basis over the lease term. We account for lease and non-lease components as a single lease component for all asset classes. Additionally, for certain equipment leases, we apply a portfolio approach and account for multiple lease components as a single lease component. Certain lease agreements include variable rental payments, including rental payments adjusted periodically for inflation. Variable rental payments are expensed during the period they are incurred and therefore are excluded from our lease assets and liabilities. 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 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 Goodwill is tested for impairment at least annually in the fourth quarter and written down when impaired. An interim impairment test is performed if an event occurs or conditions change that would more likely than not reduce the fair value of the reporting unit below the carrying value. To evaluate the recoverability of goodwill, we first assess qualitative factors to determine whether it is more likely than not that goodwill is impaired. Qualitative factors include changes in volume, margin, customers and the industry. If it is deemed more likely than not that goodwill for a reporting unit is impaired, we will perform a quantitative impairment test using a weighting of the income and market approaches. We may also elect to bypass the qualitative testing and proceed directly to the quantitative testing. Assessing qualitative factors during 2024, 2023 and 2022 would not have resulted in us performing a quantitative impairment test. In 2024, 2023 and 2022, we elected to bypass the qualitative testing and performed quantitative tests for all goodwill. 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 based on the weighted-average cost of capital. In determining the estimated future cash flows, we consider current and projected future levels of income based on management’s plans for that business; business trends, prospects and market and economic conditions; and market-participant considerations. 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. 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. The significant assumptions that are used to determine the estimated fair value for goodwill impairment testing include the following: third-party market forecasts of U.S. new home starts and home repair and remodel spending; management’s sales, operating income and cash flow forecasts; peer company EBITDA earnings multiples; the market-participant-based discount rate; and the perpetuity growth rate. Our estimates of reporting unit fair values are based on certain assumptions that may differ from our historical and future actual operating performance. Specifically, assumptions related to growth in the new construction and repair and remodel segments of the U.S. home products markets drive our forecasted sales growth. The market forecasts are developed using independent third-party forecasts from multiple sources. In addition, estimated future operating income and cash flow consider our historical performance at similar levels of sales volume and management’s future operating plans as reflected in annual and long-term plans that are reviewed and approved by management. As a result of the annual impairment assessments performed for 2024, 2023 and 2022, there were no goodwill impairments. 55 Table of Contents Indefinite-Lived Intangible Assets Certain of our tradenames have been assigned an indefinite life as we currently anticipate that these tradenames will contribute cash flows to the Company indefinitely. Indefinite-lived intangible assets are not amortized, but are evaluated at least annually to determine whether the indefinite useful life is appropriate. We measure the fair value of identifiable intangible assets upon acquisition and we review for impairment annually in the fourth quarter and whenever market or business events indicate there may be a potential impairment of that intangible. 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 the market-participant discount rates based on the weighted-average cost of capital; 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. home products market, our annual operating plans finalized in the fourth quarter of each fiscal year, and our ability to execute on various planned cost reduction initiatives supporting operating income improvements. Our projection for the U.S. home products market is inherently uncertain and is subject to a number of factors, such as employment, home prices, interest rates, credit availability, new home starts and the rate of home foreclosures. We first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. Qualitative factors include changes in volume, customers and the industry. If it is deemed more likely than not that an intangible asset is impaired, we will perform a quantitative impairment test. We may also elect to bypass the qualitative testing and proceed directly to the quantitative testing. In both 2024 and 2023, 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. Events or circumstances that could have a potential negative effect on the estimated fair value of our reporting units and indefinite-lived tradenames include: increases in market-participant discount rates, lower than forecasted revenue growth rates, 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 assumed royalty rates and a 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. Business Combinations From time to time, the Company acquires businesses and/or assets that augment and complement our operations. In accordance with ASC 805, “Business Combinations,” these acquisitions are accounted for under the purchase method of accounting. Under this method, the Company allocates the fair value of purchase consideration transferred to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the date of the acquisition. The excess purchase consideration over the aggregate fair value of tangible and intangible assets, net of liabilities assumed, is recorded as goodwill. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related to facts and circumstances that existed as of the acquisition date. After the measurement period, any subsequent adjustments are reflected in the consolidated statements of income. Acquisition costs, such as legal and consulting fees, are expensed as incurred. The Company classifies costs incurred in connection with acquisitions and their integration as acquisition-related costs. These costs are expensed as incurred and consist primarily of transaction costs, legal and consulting fees, and integration costs and are recorded within selling, general and administrative expenses in the consolidated statements of income . 56 Table of Contents The consolidated financial statements include the results of operations from these business combinations from the date of acquisition. 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. 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 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. 57 Table of Contents 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. 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 the plan’s projected benefit obligation (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. The discount rate used to measure obligations is based on a spot-rate yield curve on a plan-by-plan basis that matches projected future benefit payments with the appropriate interest rate applicable to the timing of the projected future benefit payments. The expected rate of return on plan assets is determined based on the nature of the plans’ investments, our current asset allocation and our expectations for long-term rates of return. 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 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 15, "Pension and Other Postretirement Plans," are reasonable based on our experience and on advice from our independent actuaries; however, differences in actual experience or changes in the assumptions may materially affect our financial position and results of operations. We will continue to monitor these assumptions as market conditions warrant. Insurance Reserves We provide for expenses associated with workers’ compensation and product liability obligations when such amounts are probable and can be reasonably estimated. The accruals are adjusted as new information develops or circumstances change that would affect the estimated liability. Litigation Contingencies Our business is subject to risks related to threatened or pending litigation and we are routinely defendants in lawsuits associated with the normal conduct of business. Liabilities and costs associated with litigation-related loss contingencies require estimates and judgments based on our knowledge of the facts and circumstances surrounding each matter and the advice of our legal counsel. We record liabilities for litigation-related losses when a loss is probable and we can reasonably estimate the amount of the loss in accordance with ASC Topic 450, Contingencies. We evaluate the measurement of recorded liabilities each reporting period based on the then-current facts and circumstances specific to each matter. The ultimate losses incurred upon final resolution of litigation-related loss contingencies may differ materially from the estimated liability recorded at any particular balance sheet date. Changes in estimates are recorded in earnings in the period in which such changes occur. Accumulated Other Comprehensive Loss Accumulated Other Comprehensive Loss refers to gains and losses that under GAAP are included in comprehensive income but are excluded from net earnings as these amounts are recorded directly as an adjustment to equity. Recently Issued Accounting Standards Accounting Standards Issued and Adopted 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. Refer to Note 22, "Segment Information," for our implementation of ASU 2023-07. The adoption of ASU 2023-07 did not have an impact on our consolidated financial position, results of operations or cash flows. 58 Table of Contents Accounting Standards Issued, But Not Yet Adopted 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. Disaggregation of Income Statement Expenses In November 2024, the FASB issued ASU 2024-03 to require more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization and depletion) included in certain expense captions presented on the face of the income statement. This ASU is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this guidance on the consolidated financial statements. 3. Acquisition of Supreme On July 10, 2024, we acquired all of the issued and outstanding limited liability interests of Dura Investment Holdings LLC, the parent company of Supreme Cabinetry Brands, Inc. (“Supreme”), a cabinetry company, from GHK Capital Partners LP for $ 520.0 million in cash, subject to customary purchase price adjustments set forth in the Merger Agreement. Supreme is a domestic manufacturer of residential cabinetry with a portfolio of product lines significantly focused on premium products. Supreme, with manufacturing facilities located in Minnesota, Iowa and North Carolina, and its two brands, Dura Supreme and Bertch cabinetry, crafts framed and frameless cabinetry for a nationwide network of dealers. The combined company is reaching more customers, through its highly complementary dealer networks, with greater efficiency and effectiveness. Through this transaction, MasterBrand broadened its portfolio of premium cabinetry in the resilient and attractive kitchen and bath categories, further diversifying its channel distribution and adding to its strategically located facility footprint. The acquisition was funded with a combination of cash on hand and proceeds from our revolving credit facility. The purchase consideration was $ 527.3 million , which was determined as follows: (U.S. Dollars presented in millions) Cash considerations paid to Supreme shareholders $ 336.4 Cash paid for transaction costs of Supreme 13.9 Repayment of Supreme existing indebtedness and accrued interest 178.2 Total Cash Consideration $ 528.5 Purchase price adjustments ( 1.2 ) Total Purchase Consideration $ 527.3 The purchase price of Supreme was allocated on a preliminary basis as of the closing date of July 10, 2024. Assets acquired and liabilities assumed were recorded at estimated fair values based on management’s estimates, available information and supportable assumptions that management considered reasonable. Under the acquisition method of accounting, the identifiable assets acquired and liabilities assumed of Supreme are recognized and measured at fair value. Due to the timing of acquisition close, the preliminary fair value estimates and assumptions are subject to change as we obtain additional information over the measurement period. Since the initial measurement of the identified assets acquired and liabilities assumed, progress was made in completing certain of our additional valuations and analyses. As such, we updated our initial allocation of the Merger Consideration that was completed during the third quarter of 2024. 59 Table of Contents The following table sets forth the allocation of the purchase consideration to the assets acquired and liabilities assumed of Supreme, with the excess recorded to goodwill: (U.S. Dollars presented in millions) Preliminary Net Assets Acquired Initial Purchase Price Allocation Measurement Period Changes Updated Purchase Price Allocation Cash and cash equivalents $ 11.8 $ — $ 11.8 Accounts receivable 11.5 — 11.5 Inventories 17.3 ( 0.3 ) 17.0 Other current assets 2.1 ( 0.1 ) 2.0 Property, plant and equipment 115.9 ( 0.5 ) 115.4 Operating lease right-of-use assets 17.6 — 17.6 Other intangible assets 256.9 2.3 259.2 Other assets 1.9 — 1.9 $ 435.0 $ 1.4 $ 436.4 Accounts payable $ 7.2 $ — $ 7.2 Current operating lease liabilities 2.4 — 2.4 Other current liabilities 18.0 — 18.0 Deferred income taxes 69.8 ( 0.6 ) 69.2 Operating lease liabilities 15.1 — 15.1 Other non-current liabilities 0.3 0.3 0.6 $ 112.8 $ ( 0.3 ) $ 112.5 Net Assets Acquired $ 322.2 $ 1.7 $ 323.9 Goodwill 204.9 ( 1.5 ) 203.4 Purchase Consideration $ 527.1 $ 0.2 $ 527.3 The estimated value of Property, Plant and Equipment includes adjustments totaling $ 73.2 million to increase the net book value of $ 42.2 million to the preliminary fair value estimate of $ 115.4 million . This estimate is based on other comparable acquisitions and historical experience, and preliminary expectations as to the duration of time we expect to realize benefits from those assets. The estimated fair values of identifiable intangible assets acquired were prepared using an income valuation approach, which requires a forecast of expected future cash flows either through the use of the relief-from-royalty method or the multi-period excess earnings method. The estimated useful lives are based on our historical experience and expectations as to the duration of time we expect to realize benefits from those assets. We applied significant judgment in determining the fair value of the intangible assets, which involved the use of Level 3 inputs, including estimates and assumptions of forecasted revenue growth rates, estimated earnings, customer attrition rates, assumed royalty rates and market-participant discount rates, as applicable. The estimated fair values of the identifiable intangible assets acquired, their estimated useful lives and the related valuation methodology are as follows: (U.S. Dollars presented in millions) Asset Type Fair Value Useful Life Valuation Methodology Customer relationships $ 174.1 17.5 years Multi-period excess earnings Tradenames 85.1 Indefinite Relief from royalty method Total other intangible assets $ 259.2 The Company recognized $ 203.4 million of goodwill , of which $ 180.8 million is tax deductible. The $ 203.4 million of goodwill recognized is attributable to synergies that are expected to enhance and expand the Company’s overall product portfolio and opportunities in new and existing markets, future products that have yet to be determined and Supreme’s assembled workforce. The Company incurred $ 25.4 million of acquisition-related costs associated with the acquisition for the year ended December 29, 2024 , which are recorded within selling, general and administrative expenses in the consolidated statements of income. 60 Table of Contents Pro forma financial information Net sales and earnings related to the operations of Supreme that have been included in our consolidated statements of income for the period from July 10, 2024 to December 29, 2024 are as follows: (U.S. Dollars presented in millions) Net Sales $ 121.2 Net Income $ 1.2 The following table summarizes, on a pro forma basis, the combined results of operations of Supreme and MasterBrand as though the acquisition and the related financing had occurred as of December 26, 2022. The pro forma results are not necessarily indicative of either the actual consolidated results had the acquisition of Supreme occurred on December 26, 2022, nor are they indicative of future consolidated operating results. (U.S. Dollars presented in millions) 2024 2023 Net Sales $ 2,836.4 $ 2,979.6 Net Income $ 140.0 $ 151.8 These pro forma amounts have been calculated after applying our accounting policies and making certain adjustments, which primarily include: (i) depreciation adjustments relating to fair value step-ups to property, plant and equipment; (ii) amortization adjustments relating to fair value estimates of acquired intangible assets; (iii) incremental interest expense associated with the revolving credit facility used, in part, to fund the acquisition, and related debt issuance costs; (iv) cost of products sold adjustments relating to fair value step-ups to inventory; and (v) transaction related costs of both MasterBrand and Supreme. 4. 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, 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. Payment terms on our product sales normally range from 30 to 90 days. Taxes assessed by a governmental authority that we collect are excluded from revenue. The expected costs associated with our contractual warranties are recognized as expense when the products are sold. See Note 17, "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. These estimates are based on historical and projected experience for each type of customer. In addition, for certain customer program incentives, we receive an identifiable benefit (goods or services) in exchange for the consideration given and record the associated expenditure in selling, general and administrative expenses. We account for shipping and handling costs that occur after the customer has obtained control of a product as a fulfillment activity (i.e., as an expense) rather than as a promised service (i.e., as a revenue element). These costs are classified within selling, general and administrative expenses. 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 $ 1.9 million and $ 2.1 million as of December 29, 2024 and December 31, 2023, respectively. Refund obligations are classified within other current liabilities in our consolidated balance sheets. 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 and The Home Depot, each accounted for greater than 10 percent of the Company’s net sales in 2024, 2023 and 2022. Net sales to Lowe’s were 22 percent, 21 percent and 20 percent of net sales in 2024, 2023 and 2022, respectively. Net sales to The Home Depot were 15 percent, 16 percent and 17 percent of net sales in 2024, 2023 and 2022, respectively. 61 Table of Contents 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 2024, 2023 and 2022. (U.S. Dollars presented in millions) 2024 2023 2022 Net Sales by Channel Dealers (a) $ 1,421.3 $ 1,446.5 $ 1,771.8 Retailers (b) 927.6 967.0 1,173.9 Builders (c) 351.5 312.7 329.8 Net sales $ 2,700.4 $ 2,726.2 $ 3,275.5 Net Sales by Shipping Location United States $ 2,575.5 $ 2,584.4 $ 3,086.8 Canada 106.4 125.7 172.5 Mexico 18.5 16.1 16.2 Net sales $ 2,700.4 $ 2,726.2 $ 3,275.5 (a) Represents sales to dealers whose end customers include builders, professional trades and home remodelers, inclusive of sales through our dealers’ respective internet website portals. (b) Represents sales to “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. (c) Represents sales directly to builders. Practical Expedients Incremental costs of obtaining a contract include only those costs the Company incurs that would not have been incurred if the contract had not been obtained. These costs are required to be recognized as assets and amortized over the period that the related goods or services transfer to the customer. As a practical expedient, we expense as incurred costs to obtain a contract when the expected amortization period is one year or less. These costs are recorded within selling, general and administrative expenses in the accompanying consolidated statements of income. Allowance for Credit Losses 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 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. Trade accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. All provisions for allowances for doubtful collection of accounts are included in selling, general and administrative expenses. The following table summarizes the activity for the allowance for the years ended December 29, 2024 and December 31, 2023 : (U.S. Dollars presented in millions) 2024 2023 Beginning balance $ 4.6 $ 11.6 Bad debt provision 0.4 1.9 Uncollectible accounts written off, net of recoveries ( 2.0 ) ( 8.9 ) Ending balance $ 3.0 $ 4.6 62 Table of Contents 5. Other (Income) Expense, Net The components of other (income) expense, net for the years ended December 29, 2024, December 31, 2023 and December 25, 2022 were as follows: (U.S. Dollars presented in millions) 2024 2023 2022 Pension and postretirement benefits other than pensions $ 4.1 $ 2.9 $ ( 1.3 ) Foreign currency (gains) losses ( 2.0 ) 3.2 1.1 Other items, net ( 4.4 ) ( 3.7 ) 0.8 Total other (income) expense, net $ ( 2.3 ) $ 2.4 $ 0.6 6. Earnings Per Share On December 14, 2022, 128.0 million MasterBrand common shares were distributed to Fortune Brands’ shareholders in conjunction with the Separation. For the fiscal years ended December 29, 2024, 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. 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 29, 2024 , December 31, 2023 and December 25, 2022 : (U.S. Dollars presented in millions, except per share amounts) 2024 2023 2022 Numerator: Numerator for basic and diluted earnings per share - Net income $ 125.9 $ 182.0 $ 155.4 Denominator: Denominator for basic earnings per share - weighted average shares outstanding 127.1 127.8 128.0 Effect of dilutive securities - stock-based awards 3.8 2.1 1.1 Denominator for diluted earnings per share - weighted average shares outstanding $ 130.9 $ 129.9 $ 129.1 Earnings per share: Basic $ 0.99 $ 1.42 $ 1.21 Diluted $ 0.96 $ 1.40 $ 1.20 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. 63 Table of Contents 7. Balance Sheet Information Supplemental information on our year-end consolidated balance sheets is as follows: (U.S. Dollars presented in millions) December 29, 2024 December 31, 2023 Inventories: Raw materials and supplies $ 197.2 $ 175.1 Work in process 25.7 25.1 Finished products 53.5 49.6 Total inventories $ 276.4 $ 249.8 Property, plant and equipment: Land and improvements $ 37.4 $ 31.8 Buildings and improvements to leaseholds 360.1 304.0 Machinery and equipment 648.8 551.9 Construction in progress 41.4 36.6 Property, plant and equipment, gross 1,087.7 924.3 Less: accumulated depreciation 606.2 567.7 Property, plant and equipment, net of accumulated depreciation $ 481.5 $ 356.6 Other current liabilities: Accrued salaries, wages and other compensation $ 54.9 $ 67.6 Interest payable 25.5 1.3 Accrued income and other taxes 14.2 18.5 Accrued product warranties 9.3 12.9 Derivative payable 5.7 0.1 Accrued restructuring 4.9 1.4 Other accrued expenses 80.7 62.5 Total other current liabilities $ 195.2 $ 164.3 8. Leases We have operating and finance leases for buildings and certain machinery and equipment. Operating leases are included in operating lease right-of-use assets, other current liabilities and operating lease liabilities in our consolidated balance sheets. Amounts recognized for finance leases as of and for the years ended December 29, 2024 and December 31, 2023 were immaterial. Operating lease expense recognized in the consolidated statements of income for 2024, 2023 and 2022 were $ 29.4 million , $ 26.9 million and $ 27.4 million , respectively, including approximately $ 9.6 million, $ 9.4 million and $ 11.7 million of short-term and variable lease costs for 2024, 2023 and 2022, respectively. Other information related to leases was as follows for the fiscal years ending: (U.S. Dollars presented in millions, except lease term and discount rate) December 29, 2024 December 31, 2023 December 25, 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 21.0 $ 17.3 $ 15.4 Right-of-use assets obtained in exchange for operating lease obligations $ 16.8 $ 23.9 $ 5.2 Right-of-use assets obtained upon Supreme acquisition - July 10, 2024 $ 18.3 $ — $ — Weighted average remaining lease term—operating leases 5.8 years 5.4 years 5.1 years Weighted average discount rate—operating leases 5.4 % 4.5 % 3.0 % 64 Table of Contents Total lease payments under non-cancellable operating leases as of December 29, 2024 are expected to be: (U.S. Dollars presented in millions) Fiscal Years Ending: 2025 $ 21.9 2026 15.4 2027 12.7 2028 10.3 2029 6.7 Thereafter 21.0 Total lease payments 88.0 Less imputed interest ( 13.5 ) Total $ 74.5 Reported as of December 29, 2024 Current operating lease liabilities $ 19.5 Operating lease liabilities (non-current) 55.0 Total $ 74.5 9. Goodwill and Identifiable Intangible Assets We had goodwill of $ 1,125.8 million and $ 925.1 million as of December 29, 2024 and December 31, 2023, respectively. The change in the net carrying amount of goodwill was as follows: (U.S. Dollars presented in millions) Total Goodwill Balance at December 25, 2022 $ 924.2 2023 translation adjustments 0.9 Balance at December 31, 2023 $ 925.1 Supreme acquisition 203.4 2024 translation adjustments ( 2.7 ) Balance at December 29, 2024 $ 1,125.8 The gross carrying value and accumulated amortization by class of intangible assets as of December 29, 2024 and December 31, 2023 were as follows: As of December 29, 2024 As of December 31, 2023 (U.S. Dollars presented in millions) Gross Carrying Amounts Accumulated Amortization Net Book Value Gross Carrying Amounts Accumulated Amortization Net Book Value Indefinite-lived tradenames (a) $ 266.1 $ — $ 266.1 $ 184.2 $ — $ 184.2 Amortizable intangible assets Tradenames 10.0 ( 10.0 ) — 10.4 ( 10.4 ) — Customer and contractual relationships (a) 535.4 ( 230.2 ) 305.2 363.6 ( 212.3 ) 151.3 Patents/proprietary technology 11.0 ( 11.0 ) — 11.0 ( 11.0 ) — Total 556.4 ( 251.2 ) 305.2 385.0 ( 233.7 ) 151.3 Total identifiable intangibles $ 822.5 $ ( 251.2 ) $ 571.3 $ 569.2 $ ( 233.7 ) $ 335.5 (a) During the third quarter of 2024, we completed our acquisition of Supreme, acquiring Indefinite-lived tradenames of $ 85.1 million and Customer relationships of $ 174.1 million. 65 Table of Contents Amortizable intangible assets, principally customer relationships, are subject to amortization on a straight-line basis over their estimated useful life, ranging from 16 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 $ 25.6 million annually from 2025 through 2029. 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. In the fourth quarter of 2022, we recognized an impairment charge of $ 12.8 million related to the same indefinite-lived tradename as a result of further shifts within our product portfolio to better align with forecasted future customer demand as a result of a significant decrease in sales during the fourth quarter of 2022, driven by continued and persistent inflation, as well as elevated interest rates and economic uncertainty. These downward revisions to forecasted revenue growth rates were not known when recording the impairment charge during the second quarter of 2022. As of both December 29, 2024 and December 31, 2023, 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 both December 29, 2024 and December 31, 2023 , the carrying value of this tradename was $ 19.1 million . The fair values of the impaired tradenames were measured using the relief-from-royalty approach, 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 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. These assumptions represent Level 3 inputs of the fair value hierarchy (refer to Note 11, “Fair Value Measurements”). A reduction in the estimated fair value of any of our tradenames could trigger impairment charges in future periods. Events or circumstances that could have a potential negative effect on the estimated fair value of our reporting units and indefinite-lived tradenames include: increases in market-participant discount rates, lower than forecasted revenue growth rates, 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 assumed 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 was no impairment of goodwill for any period presented. There were no impairments of indefinite-lived assets for the years ended December 29, 2024 or December 31, 2023. The significant assumptions used to estimate the fair values of the tradenames impaired during the year ended December 25, 2022 were as follows: 2022 Unobservable Input Min Max Wtd Avg (a) Discount rate 11.6 % 12.6 % 12.1 % Royalty rate (b) 2.5 % 3.0 % 2.8 % Long-term revenue growth rate (c) 1.0 % 1.0 % 1.0 % (a) Weighted by relative fair value of the impaired tradenames. (b) Represents estimated percentage of sales a market-participant would pay to license the impaired tradenames. (c) Selected long-term revenue growth rate within 10-year projection period of the impaired tradenames. 66 Table of Contents 10. Financial Instruments We do not enter into financial instruments for trading or speculative purposes. 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. Derivative financial instruments are recorded at fair value. The counterparties to derivative contracts are major financial institutions. We are subject to credit risk on these contracts equal to the fair value of these instruments. 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: • 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. As of and during the fiscal years ended December 29, 2024 and December 31, 2023 , 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. Our primary foreign currency hedge contracts pertain to the Mexican peso and the Canadian dollar. The gross U.S. dollar equivalent notional amount of all foreign currency derivative hedges outstanding at December 29, 2024 was $ 88.1 million, representing a net settlement liability of $ 5.7 million. Based on foreign exchange rates as of December 29, 2024, we estimate that $ 5.0 million of net derivative losses associated with cash flow hedges and included in accumulated other comprehensive income as of December 29, 2024 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 29, 2024 and December 31, 2023 were: (U.S. Dollars presented in millions) Location December 29, 2024 December 31, 2023 Assets: Foreign exchange contracts Other current assets $ — $ 3.0 Total assets $ — $ 3.0 Liabilities: Foreign exchange contracts Other current liabilities $ 5.7 $ 0.1 Total liabilities $ 5.7 $ 0.1 67 Table of Contents The effects of cash flow hedging financial instruments included within the consolidated statements of comprehensive income in 2024, 2023 and 2022 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 (U.S. Dollars presented in millions) 2024 2023 2022 Foreign exchange contracts: Unrealized holding (losses) gains arising during period $ ( 10.1 ) $ 9.6 $ 7.2 Less: reclassification adjustment for losses (gains) included in net income 2.9 ( 10.2 ) ( 4.5 ) Unrealized (losses) gains on derivatives $ ( 7.2 ) $ ( 0.6 ) $ 2.7 The effects of fair value hedging financial instruments included in other expense, net on the consolidated statements of income in 2024, 2023 and 2022 were: Amount of Gain (Loss) Recognized in Earnings on Fair Value Hedging Relationships (U.S. Dollars presented in millions) 2024 2023 2022 Foreign exchange contracts: Hedged items $ 0.1 $ ( 1.3 ) $ — Derivatives designated as hedging instruments ( 0.1 ) 5.9 ( 7.2 ) Net gains (losses) recognized in earnings $ — $ 4.6 $ ( 7.2 ) 11. Fair Value Measurements ASC requirements for Fair Value Measurements and Disclosures establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels. Level 1 inputs, the highest priority, are quoted prices in active markets for identical assets or liabilities. Level 2 inputs reflect other than quoted prices included in Level 1 that are either observable directly or through corroboration with observable market data. 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 certain assumptions in estimating the fair value of indefinite-lived tradenames, as discussed in Note 3, "Acquisition of Supreme," and Note 9, "Goodwill and Identifiable Intangible Assets." Assets and liabilities measured at fair value on a recurring basis as of December 29, 2024 and December 31, 2023 were as follows: (U.S. Dollars presented in millions) Fair Value 2024 2023 Assets: Derivative asset financial instruments (Level 2) $ — $ 3.0 Deferred compensation program assets (Level 2) 9.6 5.5 Total assets $ 9.6 $ 8.5 Liabilities: Derivative liability financial instruments (Level 2) $ 5.7 $ 0.1 68 Table of Contents The principal derivative financial instruments we enter into on a routine basis are foreign exchange contracts. Derivative financial instruments are recorded at fair value. The estimated fair value of the Company's debt, including current maturities, was based on Level 2 inputs, being market quotes or values for similar instruments, and interest rates currently available to the Company for the issuance of debt with similar terms and remaining maturities, at a discount rate for the remaining principal payments. As of December 29, 2024, the fair value of total debt was $ 1,025.3 million compared to the carrying value of $ 1,020.0 million, excluding deferred financing costs. As of December 31, 2023, the fair value of total debt was equal to the carrying value of $ 712.5 million, excluding deferred financing costs. 12. Debt The following table provides a summary of the Company’s debt as of December 29, 2024 and December 31, 2023 , including the carrying value of the debt less debt issuance costs: (U.S. Dollars presented in millions) December 29, 2024 December 31, 2023 Current Long-term Current Long-term Revolving credit facility due November 2027 $ — $ — $ — $ — Term loan due November 2027 — — 18.8 693.7 Revolving credit facility due June 2029 — 320.0 — — 7.00 % Senior Notes due 2032 — 700.0 — — — 1,020.0 18.8 693.7 Less: Unamortized debt issuance costs — ( 12.2 ) ( 1.2 ) ( 3.5 ) Total $ — $ 1,007.8 $ 17.6 $ 690.2 2022 Credit Agreement On November 18, 2022, the Company entered into a 5-year , $ 1.25 billion credit agreement, consisting of a $ 750.0 million term loan and a $ 500.0 million revolving credit facility (the “2022 Credit Agreement”). The 2022 Credit Agreement was secured by certain assets as well as the guarantee of certain of our subsidiaries. The $ 750.0 million term loan had quarterly required amortization payments that began in March 2023. T he revolving credit facility was paid in full during the third quarter of fiscal 2023. During the thirteen weeks ended September 24, 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. As such, we were not required to make, nor did we make, any required amortization payments associated with the term loan during the fourth quarter of fiscal 2023 or in the first two quarters of fiscal 2024. In June 2024, the Company refinanced the 2022 Credit Agreement, including extinguishing and repaying all amounts outstanding under the existing term loan facility, inclusive of accrued and unpaid interest. Interest rates under the 2022 Credit Agreement were variable based on the Secured Overnight Financing Rate (“SOFR”) at the time of the borrowing and the Company’s net leverage ratio, as measured by net leverage to our consolidated earnings before interest, taxes, depreciation and amortization (“Consolidated EBITDA”). Interest rates could range from SOFR plus 1.85 percent to SOFR plus 2.60 percent. Net leverage was defined as consolidated total indebtedness minus certain cash and cash equivalents. Consolidated EBITDA was defined as consolidated net income before interest expense, income taxes, depreciation, amortization of intangible assets, losses from asset impairments and certain other one-time adjustments. The net leverage ratio was not permitted to exceed 3.875 to 1.00 at the initial borrowing through the second fiscal quarter of 2023, adjusting downward in various future quarters before settling at 3.25 to 1.00 in January 2025. The Company was also required to maintain a minimum interest coverage ratio, defined as Consolidated EBITDA compared to consolidated interest expense, of 3.0 to 1.0. The Company was in compliance with all debt covenants under the 2022 Credit Agreement through the date of the June 2024 refinancing transaction. 69 Table of Contents 2024 Refinancing Transaction On June 27, 2024, the Company completed a private offering (the “Offering”) of $ 700.0 million aggregate principal amount of 7.00 percent Senior Notes due 2032 (the “Senior Notes”) and entered into an amended and restated credit agreement (the “2024 Credit Agreement”), which amended and restated the 2022 Credit Agreement. The Company used the funds from the refinancing transaction, and cash on-hand to: 1) refinance the 2022 Credit Agreement (including repaying all amounts outstanding under the existing term loan, inclusive of accrued and unpaid interest), 2) fund the acquisition of Supreme on July 10, 2024, and 3) pay all fees and expenses related to the foregoing transactions. The Senior Notes were issued under the Indenture dated as of June 27, 2024 (the “Indenture”) at par. The Senior Notes are the Company’s unsecured and unsubordinated debt obligations and are guaranteed, on a senior unsecured basis, by each of the Company’s existing and future subsidiaries that are borrowers under or guarantors of the 2024 Credit Agreement. The Senior Notes will mature on July 15, 2032. Interest on the Senior Notes accrues at a rate of 7.00 percent per annum and is payable semi-annually in arrears on January 15 and July 15, beginning on January 15, 2025. The Senior Notes had an outstanding balance of $ 700.0 million as of December 29, 2024. As of December 29, 2024, prepaid debt issuance costs related to the Notes were $ 12.2 million and are being amortized over the term of the debt. These costs are included in long-term debt in our consolidated balance sheets. The Company may redeem the Senior Notes, in whole or in part, at any time and from time to time prior to July 15, 2027 at a redemption price equal to 100 percent of the principal amount of the Senior Notes redeemed plus a premium and accrued and unpaid interest. At any time and from time to time on or after July 15, 2027, the Company may, at its option, redeem the Senior Notes, in whole or in part, at the applicable redemption price set forth in the Indenture plus, in each case, accrued and unpaid interest. In addition, at any time and from time to time prior to July 15, 2027, the Company may, at its option, redeem up to 40 percent of the aggregate principal amount of the Senior Notes with the proceeds from certain equity offerings at the applicable redemption price set forth in the Indenture. The Indenture contains certain covenants, including, but not limited to, limitations and restrictions on the ability of the Company and its restricted subsidiaries (as defined in the Indenture) to (i) incur additional indebtedness and guarantee indebtedness, (ii) make restricted payments, (iii) create, incur or assume liens or use assets as security in other transactions, (iv) merge, consolidate, or sell, transfer, lease or dispose of substantially all of their assets, (v) sell or transfer certain assets, (vi) enter into or conduct transactions with affiliates of the Company and (vii) agree to certain restrictions or encumbrances on the ability of restricted subsidiaries to pay dividends, make loans or advances, or to otherwise transfer property or assets to the Company or other restricted subsidiaries. These covenants are subject to a number of important conditions, qualifications, exceptions and limitations. The Indenture also includes customary events of default. Certain of the foregoing covenants will be suspended in the event that (i) the Senior Notes receive investment grade ratings from any two of Fitch Ratings Inc., Moody’s Investors Service, Inc. or S&P Global Ratings and (ii) no default or event of default has occurred and is continuing under the Indenture. The Company was in compliance with all of its debt covenants under the Indenture as of December 29, 2024. The 2024 Credit Agreement provides for a 5 -year , $ 750.0 million revolving credit facility. The revolving credit facility is not subject to amortization and will mature in June 2029. The 2024 Credit Agreement is secured by certain assets as well as the guarantee of certain of our subsidiaries. Interest rates under the revolving credit facility are variable based on the SOFR, or, at the Company’s option, at a base reference rate equal to the highest of (i) the federal funds rate plus 0.50 percent, (ii) the rate of interest last quoted by JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”) as its “prime rate” and (iii) the one-month SOFR rate plus 1.00 percent (the “Base Rate”), plus, as applicable, a margin ranging from 1.625 percent to 2.25 percent per annum for SOFR-based loans and ranging from 0.625 percent to 1.25 percent per annum for Base Rate-based loans, in each case, depending on the Company’s net leverage ratio. The Company will also pay customary agency fees and a commitment fee based on the daily unused portion of the revolving credit facility ranging from 0.20 percent to 0.30 percent per annum, depending on its net leverage ratio. The 2024 Credit Agreement contains customary representations and warranties, affirmative covenants and restrictive covenants. The restrictive covenants limit the Company and its subsidiaries’ ability to, among other things, (i) incur indebtedness, (ii) create liens on the Company’s or such subsidiaries’ assets, (iii) engage in fundamental changes, (iv) make investments, (v) sell or otherwise dispose of assets, (vi) engage in sale-leaseback transactions, (vii) make restricted payments, (viii) engage in certain transactions with affiliates and (ix) enter into agreements restricting the ability of the Company’s subsidiaries to make distributions to the Company or incur liens on their assets. 70 Table of Contents The 2024 Credit Agreement also contains a financial covenant that does not permit the Company to allow its net leverage ratio to exceed (i) in the case of any fiscal quarter ending on or prior to December 31, 2024, 3.50 to 1:00 and (ii) in the case of any fiscal quarter ending on or following March 31, 2025, 3.25 to 1:00 or, if the Company consummates any material acquisition, then the Company’s net leverage ratio shall not exceed 3.75 to 1.00 for the applicable fiscal quarter in which such acquisition is consummated and the three consecutive fiscal quarters thereafter. The Company is also required to maintain a minimum interest coverage ratio of 3.00 to 1.00. The 2024 Credit Agreement also contains customary events of default. The occurrence of an event of default could result in the termination of commitments under the revolving credit facility, the acceleration of all outstanding amounts thereunder and the requirement to cash collateralize outstanding letters of credit. The Company was in compliance with all of its debt covenants under the 2024 Credit Agreement as of December 29, 2024. The revolving credit facility had an outstanding balance of $ 320.0 million as of December 29, 2024 and had $ 405.4 million of availability. Availability under the $ 750.0 million revolving credit facility is reduced by the outstanding balance under the revolving credit facility and outstanding letters of credit. As of December 29, 2024, prepaid debt issuance costs related to the 2024 Credit Agreement were $ 4.6 million and are being amortized over the term of the debt. At December 29, 2024, these costs are included in other assets in our consolidated balance sheets. Over the next five years, debt due to be paid by the Company is as follows: (U.S. Dollars presented in millions) Future Debt Payments 2025 $ — 2026 $ — 2027 $ — 2028 $ — 2029 $ 320.0 Thereafter $ 700.0 Interest paid on debt was $ 41.7 million, $ 64.0 million and $ 0.3 million in 2024, 2023 and 2022, respectively. We did not recor d any material capitalized interest during 2024, 2023 or 2022. 13. Restructuring Charges Restructuring charges of $ 18.0 million in 2024 are largely related to severance costs and other associate-related costs in order to better align our workforce with our forecasted demand within our manufacturing footprint. 2024 restructuring charges also include an asset impairment charge associated with the decision to exit a leased manufacturing facility. Reconciliation of Restructuring Liability (U.S. Dollars presented in millions) Balance at December 31, 2023 2024 Provision Cash Expenditures (a) Non-cash Writeoffs Balance at December 29, 2024 Workforce reduction costs $ 1.3 $ 8.7 $ ( 5.2 ) $ — $ 4.8 Facility Closure Costs — 7.0 — ( 7.0 ) — Other 0.1 2.3 ( 2.3 ) — 0.1 $ 1.4 $ 18.0 $ ( 7.5 ) $ ( 7.0 ) $ 4.9 (a) Cash expenditures primarily related to severance charges. 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. 71 Table of Contents Reconciliation of Restructuring Liability (U.S. Dollars presented in millions) Balance at December 25, 2022 2023 Provision 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 $ 15.4 $ 10.1 $ ( 19.5 ) $ ( 4.6 ) $ 1.4 (a) Cash expenditures primarily related to severance charges. 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. 14. Income Taxes For taxable periods prior to and including the Separation in 2022, our operations were included in the consolidated U.S. federal and certain state and local income tax returns of Fortune Brands, as applicable. The Company filed separate foreign income tax returns. 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. The Company’s foreign income tax returns continue to be filed on a full-year basis. The Company’s deferred taxes and effective tax rate may differ from those in the pre-Separation taxable periods. The components of income from continuing operations before income taxes were as follows: (U.S. Dollars presented in millions) 2024 2023 2022 Domestic operations $ 136.2 $ 213.2 $ 162.2 Foreign operations 32.1 25.5 51.2 Income before income taxes $ 168.3 $ 238.7 $ 213.4 Income tax expense in the consolidated statements of income consisted of the following: (U.S. Dollars presented in millions) 2024 2023 2022 Current Federal $ 26.8 $ 44.2 $ 30.9 State 5.0 9.3 14.2 Foreign 6.0 8.9 10.6 Deferred Federal 4.7 1.2 3.7 State ( 0.4 ) ( 2.1 ) ( 2.3 ) Foreign 0.3 ( 4.8 ) 0.9 Total income tax expense $ 42.4 $ 56.7 $ 58.0 72 Table of Contents A reconciliation of the U.S. federal statutory tax rate to the Company’s effective income tax rate is as follows: (in percentages) 2024 2023 2022 Income tax expense at U.S. federal statutory income tax rate 21.0 % 21.0 % 21.0 % State and local income taxes, net of federal tax benefit 2.3 2.2 4.3 Foreign taxes at a different rate than U.S. federal statutory income tax rate 0.9 0.6 ( 0.4 ) Valuation allowance 1.6 ( 0.1 ) — Unrecognized tax benefits ( 0.4 ) — ( 6.6 ) IRS audit adjustments — — 8.1 Foreign legislative exclusion ( 1.1 ) — — Miscellaneous other, net 0.9 0.1 0.8 Effective income tax rate 25.2 % 23.8 % 27.2 % For 2024, the Company’s effective tax rate was 25.2 percent, compared to an effective tax rate of 23.8 percent for 2023. The increase in effective tax rate was primarily the result of an increase in the valuation allowance, nondeductible transaction costs related to the Supreme acquisition and foreign income inclusions net of foreign tax credits, partially offset by foreign exclusions, return-to-provision adjustments and the release of specific uncertain tax positions. The 2024 effective income tax rate of 25.2 percent compared to the U.S. federal statutory rate of 21.0 percent was unfavorably impacted by net changes in state and local income taxes, foreign income taxed at higher rates, an increase in the valuation allowance, nondeductible transaction costs related to the Supreme acquisition and executive compensation. These were partially offset by favorable benefits for the partial release of uncertain tax positions, return-to-provision adjustments, tax credits and foreign exclusions. The 23.8 percent effective income tax rate for 2023 was unfavorably impacted by net changes in state and local income taxes and foreign income taxed at higher rates. 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 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 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. Deferred income tax assets and liabilities are provided for the impact of temporary differences between amounts of assets and liabilities recognized for financial reporting purposes and the bases of such assets and liabilities as measured by tax laws. These temporary differences result in taxable or deductible amounts in future years. As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view regarding the future realization of deferred tax assets. 73 Table of Contents The components of net deferred tax assets (liabilities) as of December 29, 2024 and December 31, 2023 were as follows: (U.S. Dollars presented in millions) 2024 2023 Deferred tax assets: Other accrued expenses $ 14.4 $ 14.7 Operating lease liabilities 14.3 11.0 Net operating loss and other tax carryforwards 11.2 3.2 Accounts receivable 11.1 12.5 R&D capitalization 10.2 7.9 Interest carryforward 9.6 — Compensation and benefits 8.1 15.9 Capitalized inventories 4.8 4.2 Defined benefit plans 0.2 1.1 Other 0.4 0.8 Valuation allowance ( 3.7 ) ( 1.0 ) Total deferred tax assets 80.6 70.3 Deferred tax liabilities: Intangible assets ( 176.7 ) ( 114.3 ) Fixed assets ( 44.0 ) ( 22.0 ) Operating lease assets ( 12.5 ) ( 10.5 ) Prepaid marketing ( 3.0 ) ( 3.0 ) Other ( 0.2 ) ( 0.4 ) Total deferred tax liabilities ( 236.4 ) ( 150.2 ) Net deferred tax liability $ ( 155.8 ) $ ( 79.9 ) Deferred taxes were classified in the Consolidated Balance Sheets as of December 29, 2024 and December 31, 2023 as follows: (U.S. Dollars presented in millions) 2024 2023 Other assets $ 2.9 $ 3.7 Deferred income taxes ( 158.7 ) ( 83.6 ) Net deferred tax liability $ ( 155.8 ) $ ( 79.9 ) As of December 29, 2024 and December 31, 2023 , the Company had deferred tax assets related to net operating losses and other tax credit carryforwards of $ 11.2 million and $ 3.2 million , respectively, including foreign tax credit carryforwards of $ 8.7 million and $ 2.0 million, respectively. The net operating losses expire between 2024 and 2043, foreign tax credits expire between 2029 and 2034 and the other tax credit carryforwards expire between 2033 and 2034. R&D capitalization commenced in 2022 and pertains to the 2017 Tax Cuts and Jobs Act eliminating the immediate expensing of research and experimental expenditures and requiring taxpayers to capitalize their expenditures over a period of years. 74 Table of Contents 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 $ 3.7 million and $ 1.0 million as of December 29, 2024 and December 31, 2023, 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: (U.S. Dollars presented in millions) 2024 2023 2022 Unrecognized tax benefits—beginning of year $ 0.9 $ 1.2 $ 20.2 Gross additions—current year tax positions — — 0.1 Gross additions—prior year tax positions — — — Gross reductions—prior year tax positions ( 0.4 ) ( 0.3 ) ( 17.8 ) Gross reductions—settlements with taxing authorities — — ( 1.3 ) Unrecognized tax benefits—end of year $ 0.5 $ 0.9 $ 1.2 Unrecognized tax benefits—accrued interest and penalties 0.5 0.7 0.5 Gross unrecognized tax benefits $ 1.0 $ 1.6 $ 1.7 In 2024 and 2023, the Company released $ 0.4 million and $ 0.3 million of prior year tax positions due to the expiration of the statute of limitations, respectively. In 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. As a result of the IRS audit, the Company is now recognizing a deferred tax liability for various foreign entities whose income is currently includable for U.S. federal income tax purposes. Post-Separation, liabilities related to UTBs, including interest and penalties, are reported as a liability within the Consolidated Balance Sheet based upon tax authorities’ ability to assert the Company may be legally liable for UTBs. The Company regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves. The Company classifies interest and penalty accruals related to UTBs as income tax expense. In 2024, the Company recognized interest and penalty benefit of approximately $ 0.2 million. In 2023 and 2022, the Company recognized interest and penalty expenses of approximately $ 0.2 million and $ 0.1 million, respectively. The amount of UTBs that, if recognized as of December 29, 2024, would affect the Company’s effective tax rate is $ 0.5 million. It is reasonably possible that, within the next twelve months, total UTBs may decrease in the range of $ 0.1 million to $ 0.5 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. As of December 29, 2024, the Company believed that it is more-likely-than-not that the tax positions it has taken would be sustained upon the resolution of its audits resulting in no material impact on its consolidated financial position, results of operations and cash flows. However, the final determination with respect to any tax audits, and any related litigation, could be materially different from the Company’s estimates and/or from its historical income tax provisions and accruals and could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, interest and/or penalty assessments. For pre-Separation periods, the Company’s federal income tax returns, and various state income tax returns that included operations of the Company, were filed by Fortune Brands and remain open and subject to examination for tax years after 2019. In addition to the U.S., the Company has tax years that remain open and subject to examination by tax authorities in the following major taxing jurisdictions: Canada for years after 2019 and Mexico for years after 2018. As of December 29, 2024, 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. 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. 75 Table of Contents Income taxes paid directly to taxing authorities, net of refunds received, were $ 40.7 million, $ 68.5 million and $ 10.3 million during the years ended December 29, 2024, December 31, 2023 and December 25, 2022, 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. 15. Pension and Other Postretirement Plans 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 associates in Mexico. Service cost for 2024 and 2023 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 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. 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 offered a lump-sum benefit payout option to certain plan participants, resulting in $ 41.9 million of payments to participants who elected this option, equivalent to approximately 34 percent of the Company’s benefit obligation for the plan. Due to the size of the lump-sum distribution, in accordance with U.S. GAAP, the Company was required to recognize a non-cash settlement charge of $ 2.9 million in the fourth quarter of 2024. During 2025, we expect to complete the purchase of group annuity contracts that will transfer any remaining pension benefit obligation to an insurance company. Net 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. 76 Table of Contents (U.S. Dollars presented in millions) Pension Benefits Postretirement Benefits Obligations and Funded Status December 29, 2024 December 31, 2023 December 29, 2024 December 31, 2023 Change in the Projected Benefit Obligation (PBO): Projected benefit obligation at beginning of year $ 135.6 $ 128.9 $ 4.1 $ 3.2 Service cost — — 0.5 0.5 Interest cost 5.4 6.5 0.3 0.3 Actuarial (gain) loss ( 10.7 ) 7.9 0.2 0.5 Benefits paid ( 6.2 ) ( 7.7 ) ( 0.1 ) ( 0.2 ) Lump sum benefits paid ( 41.9 ) — — — Settlements/Curtailments gain — — ( 1.3 ) ( 0.2 ) Projected benefit obligation at end of year $ 82.2 $ 135.6 $ 3.7 $ 4.1 Accumulated benefit obligation at end of year (excludes the impact of future compensation increases) $ 82.2 $ 135.6 $ 2.6 $ 2.9 Change in Plan Assets Fair value of plan assets at beginning of year $ 131.1 $ 119.4 $ — $ — Actual return on plan assets ( 1.5 ) 11.3 — — Employer contributions — 8.1 0.1 1.0 Benefits paid ( 6.2 ) ( 7.7 ) ( 0.1 ) ( 1.0 ) Lump sum benefits paid ( 41.9 ) — — — Fair value of plan assets at end of year $ 81.5 $ 131.1 $ — $ — Funded status (Fair value of plan assets less PBO) $ ( 0.7 ) $ ( 4.5 ) $ ( 3.7 ) $ ( 4.1 ) For the year ended December 29, 2024, the gain on the pension obligation is primarily due to a combination of increasing discount rates and the actuarial gains from lump sum payments made from the plan during the year. 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 resulted in an increase to the liability. These liability losses were offset slightly by asset returns greater than expected. The accumulated benefit obligation exceeds the fair value of the pension plan assets. Amounts recognized in the consolidated balance sheets consist of: Pension Benefits Postretirement Benefits (U.S. Dollars presented in millions) December 29, 2024 December 31, 2023 December 29, 2024 December 31, 2023 Current liabilities $ ( 0.1 ) $ ( 0.1 ) $ ( 1.1 ) $ ( 0.6 ) Noncurrent liabilities ( 0.6 ) ( 4.4 ) ( 2.6 ) ( 3.5 ) Net amount recognized $ ( 0.7 ) $ ( 4.5 ) $ ( 3.7 ) $ ( 4.1 ) As of December 29, 2024 and December 31, 2023, we utilized the Society of Actuaries’ base MP-2021 mortality projection scale without adjustment. 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. 77 Table of Contents 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 U.S. Dollars in millions) Pension Benefits Postretirement Benefits 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 Net actuarial loss at December 31, 2023 $ 13.5 $ 0.2 Recognition of actuarial (loss) gain ( 2.8 ) 0.2 Current year actuarial gain ( 5.0 ) ( 0.3 ) Net actuarial loss at December 29, 2024 $ 5.7 $ 0.1 Components of net periodic cost (benefit) were as follows: Components of Net Periodic Cost (Benefit) Pension Benefits Postretirement Benefits (U.S. Dollars presented in millions) 2024 2023 2022 2024 2023 2022 Service cost $ — $ — $ — $ 0.5 $ 0.5 $ 0.5 Interest cost 5.4 6.5 5.1 0.3 0.3 0.3 Expected return on plan assets ( 4.1 ) ( 7.1 ) ( 7.3 ) — — — Recognition of actuarial (gains) losses ( 0.2 ) 2.9 0.2 — — 0.7 Settlement/Curtailment loss/(gain) 2.9 — — ( 0.2 ) 0.3 ( 0.3 ) Net periodic cost (benefit) $ 4.0 $ 2.3 $ ( 2.0 ) $ 0.6 $ 1.1 $ 1.2 Assumptions Pension Benefits Postretirement Benefits 2024 2023 2022 2024 2023 2022 Weighted-average assumptions used to determine benefit obligations at balance sheet date: Discount rate 5.5 % 4.8 % 5.2 % 10.7 % 9.2 % 9.5 % Weighted-average assumptions used to determine net cost (benefit) for years ended: Discount rate 4.8 % 5.2 % 3.0 % 9.9 % 9.4 % 8.9 % Expected long-term rate of return on plan assets 4.5 % 3.8 % 6.2 % — % — % — % Plan Assets The fair value of the pension assets by major category of plan assets as of December 29, 2024 and December 31, 2023 were as follows: (U.S. Dollars presented in millions) Total as of balance sheet date 2024 2023 Collective trusts: Cash and cash equivalents $ 9.7 $ 23.2 Equity — 28.5 Fixed income 71.8 73.6 Multi-strategy hedge funds — 3.0 Real estate — 2.8 Total $ 81.5 $ 131.1 78 Table of Contents Our defined benefit plan Master Trust owns a variety of investment assets. All of these investment assets 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): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share) we excluded all investments measured using net asset value per share in the amount of $ 81.5 million and $ 131.1 million as of December 29, 2024 and December 31, 2023, respectively, from the tabular fair value hierarchy disclosure. Investment assets as of December 29, 2024, consisting of fixed income funds and cash and cash equivalents, have no specified redemption frequency and notice period, and may be redeemed daily. As of December 29, 2024, we did not have an intent to sell or otherwise dispose of these investment assets at prices different than the net asset value per share. Our investment strategy is to protect the funded status of the defined benefit plan with a portfolio of fixed income investments and cash which is designed to offset changes in the plan’s liabilities related to changes in the discount rate. The asset allocation policy of the plan allows for liability-hedging assets, including fixed income funds and cash. Asset allocations are reviewed periodically to ensure the allocation meets the needs of the liability structure. Our 2025 expected blended long-term rate of return on plan assets of 4.5 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 by the respective plans: (U.S. Dollars presented in millions) Pension Benefits Postretirement Benefits 2025 $ 6.0 $ 0.6 2026 $ 5.8 $ 0.5 2027 $ 5.7 $ 0.5 2028 $ 5.5 $ 0.5 2029 $ 5.4 $ 0.5 Years 2030-2034 $ 24.0 $ 3.4 Estimated future retirement benefit payments listed are estimates and could change significantly based on differences between actuarial assumptions and actual events and decisions related to lump sum distribution options that are available to certain participants. Defined Contribution Plan Contributions We sponsor a number of defined contribution plans. Contributions are determined under various formulas. Cash contributions by the Company related to these plans amounted to $ 19.9 million, $ 18.2 million and $ 14.0 million in 2024, 2023 and 2022, respectively. 16. Commitments Purchase Obligations Purchase obligations of the Company as of December 29, 2024 were $ 37.0 million, of which $ 26.5 million is due within one year. Purchase obligations include contracts for selling and administrative services and capital expenditures. 79 Table of Contents 17. Contingencies and Accrued Losses Product Warranties We generally record warranty expense related to contractual warranty terms at the time of sale. We may also provide customer concessions for claims made outside of the contractual warranty terms and those expenses are recorded in the period in which the concession is made. We offer our customers various warranty terms based on the type of product that is sold. Warranty expense is determined based on historic claim experience and the nature of the product category. The following table summarizes activity related to our product warranty liability for the years ended 2024, 2023 and 2022. (U.S. Dollars presented in millions) 2024 2023 2022 Reserve balance at the beginning of the year $ 12.9 $ 11.2 $ 7.0 Provision for warranties issued 21.4 32.7 39.6 Settlements made (in cash or in kind) ( 25.0 ) ( 31.0 ) ( 35.4 ) Reserve balance at end of year $ 9.3 $ 12.9 $ 11.2 Litigation The Company is a defendant in lawsuits that are ordinary routine litigation matters incidental to our business and operations. 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, cash flows or financial condition, 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, costs related to such audits or an unfavorable outcome could have a material impact on our consolidated results of operations, cash flows and financial condition. 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 R.L. 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 reserved an immaterial amount related to the 2018 tax year audit as our best estimate of our probable liability as of December 29, 2024 and December 31, 2023. 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 as of December 29, 2024 and December 31, 2023. 18. Stock-Based Compensation 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: • Vested and unvested stock options were adjusted so that the grantee holds options to purchase MasterBrand, Inc. common shares. 80 Table of Contents • The adjustment to the stock options was intended to generally preserve the intrinsic value of each original option grant and the ratio of the exercise price to the fair market value of Fortune Brands’ common shares on December 14, 2022 . • For unvested performance share awards, progress against the targets was projected as of the conclusion of our fiscal third quarter of 2022. The unvested performance share awards were then converted into awards of restricted stock units. • Unvested restricted stock awards were replaced with adjusted, substitute awards for restricted shares or units, as applicable, of MasterBrand, Inc. common shares. The new awards of restricted stock were intended to generally preserve the intrinsic value of the original award determined as of December 14, 2022. • Vesting periods of all awards described above were unaffected by the adjustment and substitution. 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. 2022 Long-Term Incentive Plan (the “Plan”), includes stock options, restricted stock, restricted stock units, performance shares, performance units, other types of stock-based awards, and other cash-based compensation. As of December 29, 2024, approximately 8.5 million shares of common stock remained authorized for issuance under the Plan. In addition, shares of common stock that were granted and subsequently expired, terminated, cancelled or forfeited, or were used to satisfy the required withholding taxes with respect to existing awards under the Plan may be recycled back into the total numbers of shares available for issuance under the Plan. Upon the exercise or payment of stock-based awards, shares of common stock are issued from authorized common shares of MasterBrand, Inc. Stock-based compensation expense, including expense recognized under both the Fortune Brands’ Long-Term Incentive Plans and the MasterBrand, Inc. 2022 Long-Term Incentive Plan, was as follows: (U.S. Dollars presented in millions) 2024 2023 2022 Performance awards $ 5.7 $ 1.2 $ 3.2 Restricted stock units 15.8 15.6 6.2 Stock option awards 0.4 1.0 1.5 Total pre-tax expense 21.9 17.8 10.9 Tax benefit 5.4 4.2 3.0 Total after tax expense $ 16.5 $ 13.6 $ 7.9 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. stock. Performance Share Awards Performance share awards (“PSAs”) have been 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. Compensation cost is amortized into expense over the performance period, which is generally three years , and is based on the probability of meeting performance targets. The fair value of each performance share award is based on the average of the high and low stock price on the date of grant. Upon Separation, the progress against the targets for all outstanding performance share awards was projected as of the conclusion of our fiscal third quarter of 2022, and were converted into awards of Restricted Stock Units, and the v esting periods of the performance share awards were unaffected by the adjustment and substitution. The fair value of performance share awards that vested during 2022 was $ 1.5 million ( 245,111 shares, as converted to MasterBrand, Inc. common stock). 81 Table of Contents 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 2024, we granted 562,587 PSAs. During 2023, we granted 411,647 performance share awards. The following table summarizes activity with respect to performance share awards outstanding under the MasterBrand, Inc. Plan: Number of Performance Share Awards Weighted- Average Grant- Date Fair Value Non-vested at December 31, 2023 402,315 $ 9.92 Granted 562,587 $ 17.05 Vested ( 10,070 ) $ 9.92 Forfeited ( 4,593 ) $ 16.33 Non-vested at December 29, 2024 950,239 $ 14.11 The remaining unrecognized pre-tax compensation cost related to PSAs at December 29, 2024 was approximately $ 9.9 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 2.15 years. The fair value of PSAs that vested during 2024, 2023 and 2022 were $ 0.1 million, $ 0.1 million and $ 1.5 million, respectively. The weighted-average grant date fair value of PSAs that were granted during 2024 and 2023 were $ 17.05 and $ 9.91 , respectively. There were no PSAs granted in 2022. Restricted Stock Units 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 associates can elect to defer receipt of a portion of their RSU awards upon vesting. Compensation cost is recognized over the service period. We calculate the fair value of each RSU granted by using the average of the high and low stock price on the date of grant. The following table summarizes activity with respect to RSUs outstanding under the MasterBrand, Inc. Plan: Number of Restricted Stock Units Weighted- Average Grant- Date Fair Value Non-vested at December 31, 2023 3,999,319 $ 9.32 Granted 914,332 $ 17.58 Vested ( 1,831,099 ) $ 9.42 Forfeited ( 125,804 ) $ 11.93 Non-vested at December 29, 2024 2,956,748 $ 11.70 The remaining unrecognized pre-tax compensation cost related to RSUs at December 29, 2024 was approximately $ 18.2 million, and the weighted-average period of time over which this cost will be recognized is 1.74 years. 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 2024, 2023 and 2022 was $ 29.5 million, $ 10.6 million and $ 6.1 million, respectively. The weighted-average grant date fair value of RSUs that were granted during 2024, 2023 and 2022 were $ 17.58 , $ 10.28 and $ 7.88 , respectively. Stock Option Awards 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. 82 Table of Contents 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 2024, 2023 or 2022 subsequent to the Separation. The fair value of MasterBrand, Inc. options granted in future periods will be estimated at the date of grant using a Black-Scholes option pricing model with assumptions for current expected dividend yield, expected volatility, risk-free interest rate and an expected term. A summary of MasterBrand, Inc. stock option activity for the year ended December 29, 2024 was as follows: Options Weighted- Average Exercise Price Outstanding at December 31, 2023 1,334,292 $ 9.36 Granted — $ — Exercised — $ — Expired/forfeited — $ — Outstanding at December 29, 2024 1,334,292 $ 9.36 Options outstanding and exercisable at December 29, 2024 were as follows: Options Outstanding (a) Options Exercisable (b) Range Of Exercise Prices Options Outstanding Weighted- Average Remaining Contractual Life Weighted- Average Exercise Price Options Exercisable Weighted- Average Exercise Price $ 5.92 to $ 10.76 1,334,292 5.61 $ 9.36 1,228,153 $ 9.25 (a) At December 29, 2024, the aggregate intrinsic value of options outstanding was $ 6.8 million (as compared to $ 7.3 million at December 31, 2023). (b) At December 29, 2024 the weighted-average remaining contractual life of options exercisable was 5.5 years (as compared to 6.2 years at December 31, 2023) and the aggregate intrinsic value of options exercisable was $ 6.4 million (as compared to $ 6.0 million at December 31, 2023). The remaining unrecognized compensation cost related to unvested awards at December 29, 2024 was immaterial , and the weighted-average period of time over which this cost will be recognized is 0.17 years. 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 2024, 2023 and 2022 was $ 0.8 million , $ 1.4 million and $ 0.8 million , respectively. No options were exercised in 2024, 2023 or 2022. 83 Table of Contents 19. Accumulated Other Comprehensive Loss 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 were as follows: (U.S. Dollars presented in millions) Foreign Currency Adjustments Derivative Hedging Gain (Loss) Pension and Other Postretirement Plans Adjustments Accumulated Other Comprehensive (Loss) Income 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 ) Amounts reclassified into earnings — ( 4.5 ) 1.1 ( 3.4 ) 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 ) Amounts classified into accumulated other comprehensive income (loss) 12.1 9.6 ( 3.1 ) 18.6 Amounts reclassified into earnings — ( 10.2 ) 2.4 ( 7.8 ) Net current period other comprehensive income (loss) 12.1 ( 0.6 ) ( 0.7 ) 10.8 Balance at December 31, 2023 $ 4.1 $ 2.2 $ ( 10.0 ) $ ( 3.7 ) Amounts classified into accumulated other comprehensive (loss) income ( 27.7 ) ( 10.1 ) 4.0 ( 33.8 ) Amounts reclassified into earnings — 2.9 1.9 4.8 Net current period other comprehensive (loss) income ( 27.7 ) ( 7.2 ) 5.9 ( 29.0 ) Balance at December 29, 2024 $ ( 23.6 ) $ ( 5.0 ) $ ( 4.1 ) $ ( 32.7 ) 20. Stock Repurchase Program On May 9, 2023, we announced our Board of Directors’ authorization of a stock repurchase program under which we may repurchase up to $ 50.0 million of our 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 2024, we repurchased 371,499 shares of our common stock under this program at a cost of approximately $ 6.5 million, or an average of $ 17.58 per share. During 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 29, 2024, $ 21.5 million remained authorized for purchase under our stock repurchase program. 84 Table of Contents 21. Related Party Transactions 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. Transactions between MasterBrand and Fortune Brands prior to the Separation have been presented as related party transactions in the accompanying consolidated financial statements. After the Separation, Fortune Brands is not considered a related party of MasterBrand, Inc. Fortune Brands performed 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, associate headcount, or number of facilities, as applicable. Prior to the Separation, total expenses allocated for 2022 were $ 92.5 million, 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 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 the period presented; however, the allocations may not be indicative of actual expenses that would have been incurred had we operated as an independent, publicly-traded company for the period 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 associates and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology and infrastructure. Cash Management Fortune Brands utilized a central approach to treasury management, and prior to the Separation, we historically participated in related cash pooling arrangements to maximize the availability of cash for general operating and investing purposes. Under these cash pooling arrangements in the United States, cash balances were remitted regularly from our accounts. Our cash and cash equivalents on our consolidated balance sheets represent cash balances held in bank accounts owned by the Company and its subsidiaries. Stock-Based Compensation 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 were $ 10.9 million. All of these amounts, except for $ 0.7 million of incremental compensation expense recognized in the fourth quarter of 2022, as described in Note 18, "Stock-Based Compensation," are included within the total expenses allocated, as noted above. Related Party Sales There were no material sales to or from Fortune Brands or its subsidiaries for any of the periods presented. Balances Due to and From Related Parties Prior to Separation, the amount owed to the Company and its subsidiaries from Fortune Brands was included in the related party note receivable balance. We had written interest-bearing loan agreements in place with Fortune Brands. The receivable balance consisted of excess cash remitted to the Parent’s cash pooling arrangements, net of expenses incurred by us which were paid for by Fortune Brands. 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. 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. The Company received interest income on related party receivables of $ 14.4 million for 2022 . Additionally, the Company incurred interest expense on intercompany payables and notes of $ 1.5 million for 2022. 85 Table of Contents 22. Segment Information The Company has one operating and reportable segment that is organized based on the nature of products the Company sells, its production and distribution mode, the internal management structure and information that is regularly provided to the chief operating decision maker (“CODM”) for the purpose of assessing performance and allocating resources. Products sold from which the Company derives revenue are described within Note 1, "Background and Basis of Presentation." Our production and distribution modes were determined to be a single reportable segment as discrete financial information by sale distribution channel and by customer shipping location is limited to sale-related metrics, as disclosed in Note 4, "Revenue from Contracts with Customers." Our chief executive officer is our CODM. The CODM uses net income predominantly in the annual budget and forecasting process. The CODM considers budget-to-actual variances on a monthly basis from net income when making decisions about allocating capital resources to the operating segment. The CODM also uses net income for evaluating the performance of the operating segment and in determining the compensation of certain employees. The following summarizes the significant and other operating expenses reviewed by the CODM: (U.S. Dollars presented in millions) 2024 2023 2022 Net sales $ 2,700.4 $ 2,726.2 $ 3,275.5 Less: Raw materials 962.3 988.1 1,367.1 Production labor and overhead 861.1 836.7 967.9 Non-production associate-related costs 199.2 196.2 156.3 Distribution costs 161.8 169.4 209.8 Commissions 47.2 48.4 65.7 Amortization of intangibles 20.2 15.3 17.2 Other segment items (a) 212.9 165.8 275.3 Interest expense 74.0 65.2 2.2 Gain on sale of asset ( 4.3 ) — — Other income (expense), net ( 2.3 ) 2.4 0.6 Income tax expense 42.4 56.7 58.0 Consolidated net income $ 125.9 $ 182.0 $ 155.4 (a) Other segment items include outside service costs, acquisition-related costs, restructuring charges and other expenses. The measure of segment assets is reported on the balance sheet as total consolidated assets. The CODM does not review segment assets at a different asset level or category. 86 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of MasterBrand, Inc. 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 29, 2024, and December 31, 2023, 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 29, 2024, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 29, 2024, 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 29, 2024, 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 29, 2024, and December 31, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 29, 2024, 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 29, 2024, 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 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. 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. As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Supreme from its assessment of internal control over financial reporting as of December 29, 2024, because it was acquired by the Company in a purchase business combination during 2024. We have also excluded Supreme from our audit of internal control over financial reporting. Supreme is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent approximately 6% and 4% respectively, of the related consolidated financial statement amounts as of and for the year ended December 29, 2024. 87 Table of Contents 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 The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Quantitative Impairment Tests – Certain Indefinite-Lived Tradenames As described in Notes 2 and 9 to the consolidated financial statements, the Company’s consolidated indefinite-lived tradenames balance was $266.1 million as of December 29, 2024, a portion of which relates to certain tradenames. Management reviews indefinite-lived tradenames for impairment annually in the fourth quarter and whenever market or business events indicate there may be a potential impairment of that intangible. Impairment losses are recorded to the extent that the carrying value of the indefinite-lived tradename exceeds its fair value. Management first assesses qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If it is more likely than not that an intangible asset is impaired, management performs a quantitative impairment test. Management may also elect to bypass the qualitative testing and proceed directly to the quantitative testing. Fair value is measured by management using the relief-from-royalty approach. Significant assumptions inherent in estimating the fair values include forecasted revenue growth rates, assumed royalty rates and market-participant discount rates. The principal considerations for our determination that performing procedures relating to the quantitative impairment tests for certain indefinite-lived tradenames is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of certain 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, market-participant discount rates and assumed royalty rates for certain tradenames; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s quantitative impairment tests for indefinite-lived tradenames, including controls over the valuation of certain indefinite-lived tradenames. These procedures also included, among others, (i) testing management’s process for developing the fair value estimates of certain tradenames; (ii) evaluating the appropriateness of the relief-from-royalty approach used by management; (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 rates for certain tradenames. Evaluating management’s significant assumptions related to forecasted revenue growth rates and assumed royalty rates involved evaluating whether the significant assumptions used by management for certain tradenames were reasonable considering, (i) the current and past performance of the business associated with certain tradenames; (ii) the consistency with external market and industry data; and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Company’s relief-from-royalty approach and (ii) the reasonableness of the assumed market-participant discount rate and assumed royalty rate significant assumptions for certain tradenames. 88 Table of Contents Acquisition of Supreme – Valuation of Customer Relationships and Tradenames As described in Note 3 to the consolidated financial statements, on July 10, 2024, the Company completed the acquisition of Dura Investment Holdings, LLC, the parent company of Supreme Cabinetry Brands, Inc. (“Supreme”) for purchase consideration of $527.3 million. Of the acquired intangible assets, $174.1 million of customer relationships and $85.1 million of tradenames were recorded. Fair value is estimated by management using an income valuation approach, which requires a forecast of future cash flows through the use of the multi-period excess earnings method or the relief-from royalty method. The valuation methodologies used for the customer relationships and tradenames were the multi-period excess earnings method and the relief from royalty method, respectively. Management applied significant judgment in determining the fair value of the customer relationship intangible assets, including estimates and assumptions of forecasted revenue growth rates, estimated earnings, customer attrition rates, and market-participant discount rates. Management applied significant judgment in determining the fair value of the tradename intangible assets, including estimates and assumptions of forecasted revenue growth rates, assumed royalty rates and market-participant discount rates. The principal considerations for our determination that performing procedures relating to the valuation of customer relationships and tradenames acquired in the acquisition of Supreme is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the customer relationships and tradenames acquired; (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, estimated earnings, customer attrition rates, and market-participant discount rates for customer relationships and forecasted revenue growth rates, assumed royalty rates, and market-participant discount rates for tradenames; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the customer relationships and tradenames acquired. These procedures also included, among others (i) reading the purchase agreement; (ii) testing management’s process for developing the fair value estimate of the customer relationships and tradenames acquired; (iii) evaluating the appropriateness of the multi-period excess earnings and relief from royalty methods used by management; (iv) testing the completeness and accuracy of the underlying data used in the multi-period excess earnings and relief from royalty methods; and (v) evaluating the reasonableness of the significant assumptions used by management related to forecasted revenue growth rates, estimated earnings, customer attrition rates, and market-participant discount rates for customer relationships and forecasted revenue growth rates, assumed royalty rates, and market-participant discount rates for tradenames. Evaluating management’s assumptions related to forecasted revenue growth rates for customer relationships and tradenames, assumed royalty rates for tradenames, estimated earnings and customer attrition rates for customer relationships involved considering (i) the current and past performance of the Supreme business; (ii) the consistency with external market and industry data; and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the multi-period excess earnings and relief from royalty methods and (ii) the reasonableness of the market-participant discount rate assumption for customer relationships and the assumed royalty rate and market-participant discount rate assumptions for tradenames. /s/ PricewaterhouseCoopers LLP Milwaukee, Wisconsin February 19, 2025 We have served as the Company's auditor since 2021. 89 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.