Fortune Brands Innovations, Inc.

1. Background and Basis of Presentation

The Company is an industry leading home, security and digital products company whose purpose is to elevate every life by transforming spaces into havens that has a portfolio of leading branded products used for residential home repair, remodeling, new construction and security applications. References to “Fortune Brands,” “the Company,” “we,” “our” and “us” refer to Fortune Brands Innovations, Inc. and its consolidated subsidiaries as a whole, unless the context otherwise requires.

Basis of Presentation The consolidated financial statements in this Annual Report on Form 10-K have been derived from our accounts and those of our wholly-owned subsidiaries. These notes contain references to the years 2025, 2024 and 2023, which represents fiscal years ended December 27, 2025, December 28, 2024 and December 30, 2023, respectively.

On February 29, 2024, we acquired 100% of the outstanding equity interests of Wise Water Solutions, LLC, doing business as Springwell Water Filtration Systems ("SpringWell") for a purchase price of $105.6 million, net of cash acquired of $1.4 million. We financed the transaction using cash on hand and borrowings under our existing credit facility. The results of SpringWell are reported as part of the Water Innovations ("Water") segment. We have not included pro forma financial information as the transaction is immaterial to our condensed consolidated statements of comprehensive income. The fair value allocated to assets acquired and liabilities assumed as of February 29, 2024, was $105.6 million, which includes $85.2 million of goodwill. Goodwill includes expected sales and cost synergies and is expected to be deductible for income tax purposes..

In June 2023, we acquired the Emtek and Schaub premium and luxury door and cabinet hardware business (the "Emtek and Schaub Business") and the U.S. and Canadian Yale and August residential smart locks business (the "Yale and August Business", and, collectively with the Emtek and Schaub Business, the "Acquired Businesses") from ASSA ABLOY, Inc. and its affiliates ("ASSA"). The Company completed the acquisition for a total purchase price of approximately $813.9 million, net of cash acquired of $21.9 million. During the second quarter of 2024, legal title to international operations in Vietnam transferred to us, which included a payment of approximately $23.5 million, net of cash of $5.6 million (which amount is already included in the overall purchase price). We financed the transaction with cash on hand. The results of the Emtek and Schaub Business are reported as part of the Water segment, and the results of the Yale and August Business are reported as part of the Security segment.

2. Significant Accounting Policies

Use of Estimates The presentation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires us to make estimates and assumptions that affect reported amounts and related disclosures. Actual results in future periods could differ from those estimates.

Cash and Cash Equivalents Highly liquid investments with an original maturity ofthree months or less are included in cash and cash equivalents.

Allowances for Credit Losses Trade receivables are recorded at the stated amount, less allowances for discounts and credit losses. The allowances represent estimated uncollectible receivables associated with potential customer defaults on contractual obligations (usually due to customers’ potential insolvency) or discounts related to early payment of accounts receivables by our customers. The allowances for credit losses include provisions for certain customers where a risk of default has been specifically identified. 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. In accordance with this policy, our allowance for credit losses was $10.0 million and $7.0 million as of December 27, 2025 and December 28, 2024, respectively.

Inventories We use first-in, first-out inventory method. Inventory provisions are recorded to reduce inventory to the net realizable dollar value for obsolete or slow moving inventory based on assumptions about future demand and marketability of products, the impact of new product introductions, inventory levels and turns, product spoilage and specific identification of items, such as product discontinuance, engineering/material changes, or regulatory-related changes.

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:

Long-lived Assets In accordance with Accounting Standards Codification ("ASC") requirements for Property, Plant and Equipment, 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. 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.

In the third quarter of 2025, we determined that certain assets, with a carrying value of $166.7 million as of December 28, 2024, met the criteria to be classified as held-for-sale and ceased recording depreciation. Management's decision to dispose of the assets was made as a result of refocusing the business on areas with better growth and profitability potential, while utilizing additional capacity at existing manufacturing facilities. In the fourth quarter of 2025, we determined that assets, with a carrying value of $12.9 million as of December 28, 2024, met the criteria to be classified as held-for-sale and ceased recording depreciation. Management’s decision to dispose of the assets was made as a result of the decision to consolidate its U.S. regional offices into one campus headquarters. We concluded the carrying value of these assets exceeded their fair value, less estimated costs to sell, and recorded an impairment charge of $50.1 million within the Outdoors segment and $3.5 million within the Water segment. The estimated fair values were determined using a combination of market and income approaches, which were based on valuation assumptions including certain Level 3 inputs. These assumptions included estimated sublease rental income, discount rates, market sales data and other market participant assumptions. The assets were reclassified from Property, plant and equipment, net to Assets held for sale in our Consolidated Balance Sheets.

No material impairments related to long-lived assets were recordedin 2024 or 2023.

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. As of December 27, 2025, our leases have remaining lease terms of one to 33 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.

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.

Business Combinations We account for business combinations under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, which requires an allocation of the consideration we paid to the identifiable assets, intangible assets and liabilities based on the estimated fair values as of the closing date of the acquisition. The excess of the fair value of the purchase price over the fair values of these identifiable assets, intangible assets and liabilities is recorded as goodwill.

Purchased intangibles other than goodwill are initially recognized at fair value and amortized over their useful lives unless those lives are determined to be indefinite. The valuation of acquired assets will impact future operating results. The fair value of identifiable intangible assets is determined using an income approach on an individual asset basis. Specifically, we use the multi-period excess earnings method to determine the fair value of customer relationships and the relief-from-royalty approach to determine the fair value of the tradename and proprietary technology. Determining the fair value of acquired intangibles involves significant estimates and assumptions, including forecasted revenue growth rates, EBIT margins, percentage of revenue attributable to the tradename, contributory asset charges, customer attrition rate, market-participant discount rates, the assumed royalty rates and income tax rates.

The determination of the useful life of an intangible asset other than goodwill is based on factors including historical tradename performance with respect to consumer name recognition, geographic market presence, market share, plans for ongoing tradename support and promotion, customer attrition rate, and other relevant factors.

Goodwill and Indefinite-lived Intangible Assets In accordance with ASC requirements for Intangibles - Goodwill and Other, management reviews goodwill for impairment annually in the fourth quarter and whenever market or business events indicate there may be a potential impairment of the reporting unit. Impairment losses are recorded to the extent that the carrying value of the reporting unit exceeds its fair value. Our reporting units are operating segments, or one level below operating segments when appropriate.

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 where fair value of each reporting unit is estimated using the income approach using a discounted cash flow model based on estimates of future cash flows combined with the market approach using comparable trading and transaction multiples based on guideline public companies. We may also elect to bypass the qualitative testing and proceed directly to the quantitative testing. For the income approach, using a discounted cash flow model, we estimate the future cash flows of the reporting units to which the goodwill relates and then discount the future cash flows at a market-participant-derived discount rate. 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. Furthermore, 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. new home starts and home repair remodel spending, our annual operating plans finalized in the fourth quarter of each 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, credit availability, new home starts and the rate of home foreclosures. For the market approach, we apply comparable trading and transaction multiples based on guideline public companies to the current operating results of the reporting units to determine each reporting unit’s fair value.

The significant assumptions that are used to determine the estimated fair value of reporting units for impairment testing are forecasted revenue growth rates, operating income margins, market-participant discount rates and EBITDA multiples.

Certain of our tradenames have been assigned an indefinite life as we currently anticipate that these tradenames will contribute cash flows to us 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.

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 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. The significant assumptions that are used to determine the estimated fair value for indefinite-lived intangible assets upon acquisition and subsequent impairment testing are forecasted revenue growth rates, the assumed royalty rates and the market-participant discount rates. Of our$519.8 million indefinite-lived tradenames, $216.5 million relate to our Water segment, $271.2 million relate to our Outdoors segment and $32.0 million relate to our Security segment as of December 27, 2025. There wereno impairments for the year ended December 27, 2025. See Note 5, "Goodwill and Intangible Assets," for additional information.

Events or circumstances that could have a potential negative effect on the estimated fair value of our reporting units and indefinite-lived tradenames include: lower than forecasted revenues, actual new construction and repair and remodel growth rates that fall below our assumptions, actions of key customers, increases in discount rates, continued economic uncertainty, higher levels of unemployment, weak consumer confidence, lower levels of discretionary consumer spending, a decrease in royalty rates and decline in the trading price of our common stock. We cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of goodwill and indefinite-lived assets.

Investments in Equity Securities In accordance with ASC requirements for investments in equity securities, we utilize the equity method to account for investments when we possess the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when the investor possesses more than 20% of the voting interests of the investee. This presumption may be overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is restricted. In applying the equity method, we record our investment at cost and subsequently increase or decrease the carrying amount of the investment by our proportionate share of the net earnings or losses of the investee. We record dividends or other equity distributions as reductions in the carrying value of our investment.

When we do not have the ability to exercise significant influence over the operating and financial policies of the investee, we account for non-controlling investments in equity securities at fair value, with any gains or losses recognized through other income and expense. Equity securities without readily determinable fair values are recorded at cost minus impairment, plus or minus any changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

Defined Benefit Plans We have a number of pension plans in the United States, covering certain Company’s employees. In addition, the Company provides postretirement health care and life insurance benefits to certain retirees. Except with respect to a group of hourly employees within our Security segment, all benefit accruals under our defined benefit pension plans were frozen as of, or prior to, December 31, 2016.

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, compensation increases, turnover 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 net actuarial gains or losses in other income, net to the extent they exceed 10 percent of the greater of the fair value of pension plan assets or projected benefit obligation for each plan (the “corridor”) in earnings immediately upon remeasurement. The measurement date for all plans was December 31 for the years ended 2025, 2024 and 2023. The Company applies the practical expedient under ASU 2015-04 to measure defined benefit retirement obligations and related plan assets as of the month-end that is closest to the fiscal year-end.

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. Compensation increases reflect expected future compensation trends. For postretirement benefits, our health care trend rate assumption is based on historical cost increases and expectations for long-term increases. The cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost), is deferred and included in expense on a straight-line basis over the average remaining service period of the related employees. We believe that the assumptions utilized in recording obligations under our plans, which are presented in Note 14, “Defined Benefit 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 businesses are subject to risks related to threatened or pending litigation and 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 requirements for 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.

Income Taxes In accordance with ASC requirements for Income Taxes, we establish deferred tax liabilities or assets for temporary differences between financial and tax reporting basis and subsequently adjust them to reflect changes in tax rates expected to be in effect when the temporary differences reverse. We record a valuation allowance reducing deferred tax assets when it is more likely than not that such assets will not be realized.

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% 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% likelihood of being sustained, no tax benefit is recorded. 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. In future periods, changes in facts, circumstances and new information may require us to change the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recorded in the consolidated statement of income and consolidated balance sheet in the period in which such changes occur. As of December 27, 2025, we had liabilities for unrecognized tax benefits pertaining to uncertain tax positions totaling $21.1 million.

Revenue Recognition The Company recognizes revenue for the sale of goods based on its assessment of when control transfers to our customers. See Note 13, “Revenue,” for additional information.

Cost of Products Sold Cost of products sold includes all costs to make products saleable, such 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.

Customer Program Costs Customer programs and incentives are a common practice in our businesses. Our businesses incur customer program costs to obtain favorable product placement, to promote sales of products and to maintain competitive pricing. 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. 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). The costs typically recognized in selling, general and administrative expenses include product displays, point of sale materials and media production costs. The costs included in the selling, general and administrative expenses category were $31.2 million, $31.0 million and $28.1 million in 2025, 2024 and 2023, respectively.

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 to store inventory ready for shipment to a customer; and general and administrative expenses. Shipping and handling costs included in selling, general and administrative expenses were $158.1 million, $160.1 million and $161.3 million in 2025, 2024 and 2023, respectively.

Advertising costs, which amounted to $232.9 million, $235.8 million and $221.5 million in 2025, 2024 and 2023, respectively, are generally 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$51.7 million,$50.9 million and $51.4 million in 2025, 2024 and 2023, respectively. Advertising costs recorded in selling, general and administrative expenses were $181.2 million,$184.9 million and $170.1 million in 2025, 2024 and 2023, respectively.

Research and development expenses include product development, product improvement, product engineering and process improvement costs. Research and development expenses, which were $85.4 million, $69.9 million and $64.6 million in 2025, 2024 and 2023, respectively, are expensed as incurred within selling, general and administrative expenses.

Stock-based Compensation Stock-based compensation expense, measured as the fair value of an award on the date of grant, is recognized in the financial statements over the period that an employee is required to provide services in exchange for the award. Compensation expense is recorded net of forfeitures, which we have elected to record in the period they occur. 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 12, “Stock-Based Compensation,” for additional information.

Earnings Per Share Earnings per common share is calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the year. Diluted earnings per common share include the impact of all potentially dilutive securities outstanding during the year. See Note 19, “Earnings Per Share,” for further discussion.

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 income” (“AOCI”) caption in equity. Transactions denominated in a currency other than the functional currency of a subsidiary are translated into functional currency with resulting transaction gains or losses recorded in other expense, net.

Derivative Financial Instruments In accordance with ASC requirements for Derivatives and Hedging, we recognize all derivative contracts as either assets or liabilities on the balance sheet, and the measurement of those instruments is at fair value. If the derivative is designated as a fair value hedge and is effective, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings in the same period. If the derivative is designated as a cash flow hedge, the changes in the fair value of the derivative are recorded in other comprehensive income (“OCI”) and are recognized in the consolidated statement of income when the hedged item affects earnings. If the derivative is designated as an effective economic hedge of the net investment in a foreign operation, the changes in the fair value of the derivative is reported in the cumulative translation adjustment section of OCI. Similar to foreign currency translation adjustments, these changes in fair value are recognized in earnings only when realized upon sale or upon complete or substantially complete liquidation of the investment in the foreign entity.

Deferred currency gains (losses) of $1.3 million, $(0.4) million and $5.2 million (before tax impact) were reclassified into earnings for 2025, 2024 and 2023, respectively. Based on foreign exchange rates as of December 27, 2025, we estimate that $11.3 million of net derivative gains included in AOCI as of December 27, 2025, will be reclassified to earnings within the next twelve months.

New Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09 which requires expanded disclosure of the effective tax rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. We have adopted this ASU prospectively for the period ending December 27, 2025.

In November 2024, the FASB issued ASU 2024-03 which requires an entity to disclose the amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization included in each relevant expense caption. It also requires an entity to include certain amounts that are required to be disclosed under current GAAP in the same disclosure. Additionally, it requires an entity to disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, and to disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. The amendments in the ASU are effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. An entity may apply the amendments prospectively for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. While this ASU will impact only our disclosures and not our financial statements and results of operations, we are currently evaluating when we will adopt the ASU.

In September 2025, the FASB issued ASU 2025-06 which amends guidance related to the accounting for internal-use software development costs. The amendments are intended to modernize the recognition and capitalization framework to reflect current software development practices, including iterative and agile methodologies, by removing references to "development stages" and clarifying the threshold to begin capitalizing costs. The ASU is effective for fiscal years beginning after December 15, 2027 and interim periods within those fiscal years, with early adoption permitted. An entity may apply the amendments prospectively, retrospectively, or utilizing a modified transition approach. We are in the process of evaluating the impact of the ASU on our consolidated financial statements and related disclosures.

3. Balance Sheet Information

Supplemental information on our year-end Consolidated Balance Sheets is as follows:

4. Acquisitions

SpringWell

On February 29, 2024, we acquired 100% of the outstanding equity of Springwell for a purchase price of $105.6 million, net of cash acquired of $1.4 million. We financed the transaction using cash on hand and borrowings under our existing credit facility. The results of SpringWell are reported as part of the Water segment. We have not included pro forma financial information as the transaction is immaterial to our condensed consolidated statements of comprehensive income. The fair value allocated to assets acquired and liabilities assumed as of February 29, 2024, was $105.6 million, which includes $85.2 million of goodwill. Goodwill includes expected sales and cost synergies and is expected to be deductible for income tax purposes.

Acquired Businesses

In June 2023, we acquired the Acquired Businesses from ASSA. The Company completed the acquisition for a total purchase price of approximately $813.9 million, net of cash acquired of $21.9 million. During the second quarter of 2024, legal title to international operations in Vietnam transferred to us, which included a payment of approximately $23.5 million, net of cash of $5.6 million (which amount is already included in the overall purchase price). We financed the transaction with cash on hand. The results of the Emtek and Schaub Business are reported as part of the Water segment, and the results of the Yale and August Business are reported as part of the Security segment. We incurred $19.7 million of ASSA acquisition-related transaction costs in the year ended December 30, 2023.

The following unaudited pro forma summary presents consolidated financial information as if the Acquired Businesses had been acquired on January 1, 2022. The unaudited pro forma financial information is based on historical results of operations and financial position of the Company and the Acquired Businesses. The pro forma results include:

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estimated amortization of finite-lived intangible assets, including customer relationships and proprietary technology,

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the estimated cost of the inventory adjustment to fair value,

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the reclassification of Acquired Businesses transaction costs from 2023 to the first quarter of 2022,

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the removal of certain transactions recorded in the historical financial statements of the Acquired Businesses related to assets and activities which were retained by the seller, and

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adjustments to conform accounting policies.

The unaudited pro forma financial information does not necessarily represent the results that would have occurred had the acquisition occurred on January 1, 2022. In addition, the unaudited pro forma information should not be deemed to be indicative of future results.

5. Goodwill and Identifiable Intangible Assets

The following table summarizes the changes in the carry value of goodwill by segment:

(a)

Net of accumulated impairment losses of $399.5 million in the Outdoors segment.

The gross carrying value and accumulated amortization for each major category of intangible asset are as follows:

Amortizable intangible assets, principally customer relationships, are subject to amortization on a straight-line basis over their estimated useful life, ranging from 4 to 30 years, based on the assessment of a number of factors that may impact useful life, which include customer attrition rates and other relevant factors. We expect to record intangible amortization of approximately $74.0 million in 2026, $71.0 million in 2027, $64.0 million in 2028, $63.0 million in 2029 and $63.0 million in 2030.

During the fourth quarter of 2023, a reduction of revenue growth expectations, which were finalized during our annual planning process, led us to conclude that it was more likely than not that two indefinite-lived tradenames within our Outdoors segment were impaired. As a result of impairment tests performed, we recorded animpairment charge of $33.5 million related to the two indefinite-lived tradenames. As of December 30, 2023, the carrying value of these tradenames was $95.5 million.

No impairments to identifiable intangible assets were recognized in 2025 or 2024.

The fair values of the impaired tradenames were measured using the relief-from-royalty approach, which estimates the present value of royalty income that could be hypothetically earned by licensing the tradename to a third party over its remaining useful life. Some of the more significant assumptions inherent in estimating the fair values include forecasted revenue growth rates, assumed royalty rates, and market-participant discount rates that reflect the level of risk associated with the tradenames’ future revenues and profitability. 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 9, "Fair Value Measurements").

The significant assumptions used to estimate the fair value of the tradenames impaired during the year ended December 30, 2023 were as follows:

(a)

Weighted by the relative fair value of the tradenames that were tested quantitatively.

(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.

6. Leases

We have operating and finance leases for buildings and certain machinery and equipment. Operating leases are included in Operating lease 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 27, 2025 and December 28, 2024 were immaterial.

Operating lease expense recognized in the Consolidated Statement of Comprehensive Income for 2025, 2024 and 2023 were $61.8 million, $46.1 million and $42.1 million, respectively.

Other information related to leases was as follows:

Future lease payments under non-cancelable operating leases as of December 27, 2025 were as follows:

7. External Debt and Financing Arrangements

Long-term Debt

The following table summarizes the carrying value of the Company's long-term debt, net of underwriting commissions, price discounts and debt issuance costs:

Debt payments due during the next five years as of December 27, 2025 arezero in 2026, $370 million in 2027, zero in 2028, $700 million in 2029, zero in 2030, and$1,500 million in 2031 and beyond. Interest payments due during the next five years as of December 27, 2025 are $96.3 million in 2026, $192.5 million in 2027 through 2028, $169.8 million in 2029 through 2030 and $550.5 million in 2031 and beyond.

Credit Facilities

In August 2022, the Company entered into a third amended and restated $1.25 billion revolving credit facility (the “2022 Revolving Credit Agreement”), and borrowings thereunder will be used for general corporate purposes. The maturity date of the facility is August 2027. Interest rates under the 2022 Revolving Credit Agreement are variable based on the Secured Overnight Financing Rate (“SOFR”) at the time of the borrowing and the Company’s long-term credit rating and can range from SOFR +1.02% to SOFR +1.525%. Under the 2022 Revolving Credit Agreement, the Company is required to maintain a minimum ratio of consolidated EBITDA to consolidated interest expense of 3.0 to 1.0. Consolidated EBITDA is 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. In addition, the Company's ratio of consolidated debt minus certain cash and cash equivalents to consolidated EBITDA generally may not exceed 3.5 to 1.0. There wereno outstanding borrowings under this facility as of December 27, 2025 or December 28, 2024. As of December 27, 2025, we were in compliance with all covenants under this facility.

In January 2026, the Company entered into a fourth amended and restated $1.25 billion revolving credit facility (the “2026 Revolving Credit Agreement”). The 2026 Revolving Credit Agreement extends the 2022 Revolving Credit Agreement for a five-year term maturing in January 2031. Borrowings under the 2026 Revolving Credit Agreement will bear interest at variable rates equal to, at the Company’s election, the term SOFR rate applicable for an interest period selected by the Company. The applicable term SOFR rate margin will be determined based on the ratings of the Company’s senior unsecured long-term debt securities. The daily simple SOFR rate margins range from 0.80% to 1.30%. The required ratio of consolidated EBITDA to consolidated interest expense and the ratio of consolidated debt minus certain cash and cash equivalents to consolidated EBITDA under the 2026 Revolving Credit Agreement remained unchanged from the 2022 Revolving Credit Agreement.

We currently have uncommitted bank lines of credit in China, which provide for unsecured borrowings for working capital of up $30.5 million in aggregate as of December 27, 2025 and December 28, 2024, of which there wereno outstanding balances as of December 27, 2025 and December 28, 2024. The weighted-average interest rates on these borrowings were zero in 2025 and 2024.

Commercial Paper

The Company operates a commercial paper program (the “Commercial Paper Program”) pursuant to which the Company may issue unsecured commercial paper notes. The Company’s 2022 Revolving Credit Agreement, as amended, is the liquidity backstop for the repayment of any notes issued under the Commercial Paper Program, and as such, borrowings under the Commercial Paper Program are included in Long-term debt in the condensed consolidated balance sheets. Amounts available under the Commercial Paper Program may be borrowed, repaid and re-borrowed, with the aggregate principal amount outstanding at any time, including borrowings under the 2022 Revolving Credit Agreement, as amended, not to exceed $1.25 billion. The Company expects to use any issuances under the Commercial Paper Program for general corporate purposes. Outstanding borrowings under the Commercial Paper Program as of December 27, 2025 and December 28, 2024 were $368.8 million andzero, respectively.

In our debt and credit agreements, there are normal and customary events of default which would permit the lenders to accelerate the debt if not cured within applicable grace periods, such as failure to pay principal or interest when due or a change in control of the Company. There were no events of default as of December 27, 2025.

8. 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 and commodities used as raw materials in our products. 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.

Raw materials used by the Company are subject to price volatility caused by weather, supply conditions, geopolitical and economic variables, and other unpredictable external factors. As a result, from time to time, we enter into commodity swaps to manage the price risk associated with forecasted purchases of materials used in our operations. We account for these commodity derivatives as economic hedges or cash flow hedges. Changes in the fair value of economic hedges are recorded directly into current period earnings. Commodity derivatives outstanding at December 27, 2025 and December 28, 2024 werenot material to the Consolidated Balance Sheet or Consolidated Statement of Income.

We may be exposed to interest rate risk on existing debt or forecasted debt issuance. To mitigate this risk, we may enter into interest rate hedge contracts. There wereno outstanding interest rate hedges as of December 27, 2025.

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 British pound, the Canadian dollar, the Mexican peso and the Chinese yuan. The gross U.S. dollar equivalent notional amount of all foreign currency derivative hedges outstanding at December 27, 2025 was $581.9 million, representing a net settlement liability of $0.5 million. Based on foreign exchange rates as of December 27, 2025, we estimate that $11.3 million of net derivative gains included in accumulated other comprehensive income as of December 27, 2025 will be reclassified to earnings within the next twelve months.

We have entered into cross-currency swap contracts to hedge both our Canadian dollar and Chinese Yuan exposures of the Company's net investments in certain foreign subsidiaries. As of December 27, 2025, the notional value of the cross-currency swap contracts was $141.0 million and expire at various dates through November 2026. The cross-currency swaps were designated as net investment hedges, with the amount of gain or loss associated with the change in fair value of these instruments included within accumulated other comprehensive income and recognized upon termination of the respective net investment.

For derivative instruments that are designated as fair value hedges, the gain or loss on the derivative instrument, as well as the offsetting loss or gain on the hedged item, are recognized on the same line of the consolidated statements of income. The changes in the fair value of cash flow hedges are reported in other comprehensive income and are recognized in the Consolidated Statements of Income when the hedged item affects earnings.

The fair values of derivative financial instruments on the Consolidated Balance Sheets as of December 27, 2025 and December 28, 2024 were:

The effects of derivative financial instruments on the Consolidated Statements of Income in 2025, 2024 and 2023 were:

The cash flow hedges from continuing operations recognized in other comprehensive income were net gains of $0.2 million, $2.1 million and $4.1 million in 2025, 2024 and 2023 respectively.

9. 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 orno market activity for the asset or liability, such as internally developed valuation models. We do not have any assets or liabilities measured at fair value on a recurring basis that are level 3, except for pension assets discussed in Note 14, "Defined Benefit Plans."

The carrying value and fair value of debt as of December 27, 2025 and December 28, 2024 were as follows:

The estimated fair value of our 2022 Revolving Credit Agreement is determined primarily using broker quotes, which are level 2 inputs. The estimated fair value of our Notes is determined by using quoted market prices of our debt securities, which are level 1 inputs.

Assets and liabilities measured at fair value on a recurring basis as of December 27, 2025 and December 28, 2024 were as follows:

The principal derivative financial instruments we enter into on a routine basis are foreign exchange contracts. In addition, from time to time, we enter into commodity swaps. Derivative financial instruments are recorded at fair value.

10. Common Stock

The Company has 750 million authorized shares of common stock, par value $0.01 per share and 60 million authorized shares of preferred stock, par value $0.01 per share. The number of shares of common stock and treasury stock and the share activity for 2025 and 2024 were as follows:

At December 27, 2025, no shares of our preferred stock were outstanding. Our Board of Directors has the authority, without action by the Company’s stockholders, to designate and issue our preferred stock in one or more series and to designate the rights, preferences, limitations and privileges of each series of preferred stock, which may be greater than the rights of the Company’s common stock.

In 2025, we repurchased 4.0 million shares of outstanding common stock under the Company’s share repurchase program for $247.8 million. As of December 27, 2025, the Company’s total remaining share repurchase authorization under the then current program was approximately $827.2 million. Theshare repurchase program does not obligate the Company to repurchase any specific dollar amount or number of shares and may be suspended or discontinued at any time.

11. Accumulated Other Comprehensive Income (Loss)

The reclassifications out of accumulated other comprehensive income (loss) for the years ended December 27, 2025 and December 28, 2024 were as follows:

(a) These accumulated other comprehensive (loss) income components are included in the computation of net periodic benefit cost. Refer to Note 14, “Defined Benefit Plans,” for additional information.

Total accumulated other comprehensive income (loss) consists of net income and other changes in business equity from transactions and other events from sources other than stockholders. It includes currency translation gains and losses, unrealized gains and losses from derivative instruments designated as cash flow hedges, and defined benefit plan adjustments. The after-tax components of and changes in accumulated other comprehensive (loss) income were as follows:

12. Stock-Based Compensation

As of December 27, 2025, we had awards outstanding under the Fortune Brands Home & Security, Inc. 2022 Long-Term Incentive Plan (the "2022 Plan") and the Fortune Brands Home & Security, Inc. 2013 Long-Term Incentive Plan (the “2013 Plan”) (collectively, the "Plans"). In 2022, stockholders approved the 2022 Plan, which provides for the granting of stock options, performance share awards ("PSAs"), restricted stock units ("RSUs") and other equity-based awards to employees, directors and consultants. No new stock-based awards can be made under the 2013 Plan, but there are outstanding unvested RSUs and stock options that continue to be exercisable. 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 awards under the 2013 Plan, may be recycled back into the total numbers of shares available for issuance under the 2022 Plan. Upon the exercise or payment of stock-based awards, shares of common stock are issued from authorized common shares. As of December 27, 2025, approximately 3.2 million shares of common stock remained authorized for issuance under the 2022 Plan.

Stock-based compensation expense was as follows:

Included in compensation costs are cash-settled RSUs of $0.8 million, $2.0 million and $1.3 million that are classified as a liability as of December 27, 2025, December 28, 2024 and December 30, 2023, respectively. Compensation costs that were capitalized in inventory were not material.

Restricted Stock Units

RSUs have been granted to officers and certain employees of the Company and represent the right to receive shares of Company common stock subject to continued employment through each vesting date. RSUs generally vest ratably over a three-year period, with the exception of the RSUs that were converted from PSAs, which vest at the end of the original three year performance cycles. In addition, certain employees 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 share prices on the date of grant.

A summary of activity with respect to RSUs outstanding under the Plans for the year ended December 27, 2025 was as follows:

The remaining unrecognized pre-tax compensation cost related to RSUs at December 27, 2025 was approximately $19.4 million, and the weighted-average period of time over which this cost will be recognized is 1.9 years. The fair value of RSUs that vested during 2025, 2024 and 2023 was $22.3 million, $34.1 million and $35.8 million, respectively.

Stock Option Awards

Stock options were granted to officers and certain employees of the Company and represent the right to purchase shares of Company common stock subject to continued employment through each vesting date. Stock options granted under the Plans generally vest over a three-year period and generally expire ten years from the grant date.

All stock-based compensation to employees is required to be measured at fair value and expensed over the requisite service period. We recognize compensation expense on awards on a straight-line basis over the requisite service period for the entire award.

The fair value of Fortune Brands options was estimated at the date of grant using a Black-Scholes option pricing model with the assumptions shown in the following table:

In 2025 and 2024, the determination of expected volatility is based on the volatility of Fortune Brands common stock. In 2023, the determination of expected volatility is based on the volatility of Fortune Brands common stock and a blended peer group volatility for companies in similar industries, at a similar stage of life and with similar market capitalization. The risk-free interest rate is based on U.S. government issues with a remaining term equal to the expected life of the stock options. The expected term is the period over which our employees are expected to hold their options. The expected term was determined based on the historical employee exercise behavior and the contractual term of the options. The dividend yield is based on the Company’s estimated dividend over the expected term. The weighted-average grant date fair value of stock options granted under the Plans during the years ended December 27, 2025, December 28, 2024 and December 30, 2023 was $21.38, $26.13 and $20.39, respectively.

A summary of stock option activity for the year ended December 27, 2025 was as follows:

Options outstanding and exercisable at December 27, 2025 were as follows:

(a)

At December 27, 2025, the aggregate intrinsic value of options outstanding was $2.6 million.

(b)

At December 27, 2025, the weighted-average remaining contractual life of options exercisable was 4.2 years and the aggregate intrinsic value of options exercisable was $2.6 million.

The remaining unrecognized compensation cost related to unvested awards at December 27, 2025 was $5.2 million, and the weighted-average period of time over which this cost will be recognized is 1.7 years. The fair value of options that vested during 2025, 2024 and 2023 was $6.3 million, $5.5 million and $6.3 million, respectively. The intrinsic value of Fortune Brands stock options exercised in 2025, 2024 and 2023 was $1.3 million, $9.1 million and $8.5 million, respectively.

Performance Share Awards

PSAs were granted to officers and certain employees of the Company and represent the right to earn shares of Company common stock based on the achievement of company-wide non-GAAP performance conditions, including cumulative EBITDA margin, cumulative EBITDA margin percent and cumulative return on invested capital during thethree-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 PSA is based on the average of the high and low stock prices on the date of grant.

The following table summarizes information about PSAs as of December 27, 2025, as well as activity during the fiscal year then ended. The number of performance share awards granted are shown below at the target award amounts:

The remaining unrecognized pre-tax compensation cost related to PSAs at December 27, 2025 was approximately $3.7 million, and the weighted-average period of time over which this cost will be recognized is 1.0 years. The fair value of PSAs that vested during 2025 was $0.1 million.

Director Awards

Stock awards are used as part of the compensation provided to outside directors under the Plans. Awards are issued annually in the second quarter. In addition, outside directors can elect to have director cash compensation paid in stock and can elect to defer payment of stock. Compensation cost is expensed at the time of an award based on the fair value of a share at the date of the award. In 2025, 2024 and 2023, we awarded 27,994,19,148 and 27,094 shares of Company common stock to outside directors with a weighted-average fair value on the date of the award of $54.77, $73.10 and $64.13, respectively.

13. Revenue

Our principal performance obligations are the sale of faucets, accessories, kitchen sinks, waste disposals, fiberglass and steel entry-door systems, storm, screen and security doors, composite decking and railing, urethane millwork, wide-opening exterior door systems and outdoor enclosures, locks, safes, safety and security devices, connected and mechanical lock out tag out solutions, electronic security products, commercial cabinets, and kitchen and bath cabinets (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 will continue to be recognized as expense when the products are sold. See Note 17, "Commitments," 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. In addition, we make upfront payments to customers related to certain revenue contracts. We recognize these payments in Other current assets and Other assets in our Consolidated Balance Sheets and amortize them over the contract term as a reduction of the transaction price.

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 is normally within 30 to 90 days of the original sale transaction date. Obligations arise for us from customer rights to return our goods for any reason, including among others, product obsolescence, stock rotations, trade-in agreements for newer products and upon termination of a customer contract. We estimate future product returns at the time of sale based on historical experience and record a corresponding refund obligation, which amounted to$30.4 million and$28.8 million as of December 27, 2025 and December 28, 2024, 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. Return assets are classified within Other current assets in our Consolidated Balance Sheets and were approximately $3.8 million and $4.3 million as of December 27, 2025 and December 28, 2024, respectively.

As part of our contracts with customers, we recognize contract liabilities, principally deferred revenue. Deferred revenue liabilities represents advanced payments and billings in excess of revenue recognized. Changes in the deferred revenue liabilities are as follows:

Deferred revenue liabilities of $20.1 million, $24.4 million and $32.3 million as of December 27, 2025, December 28, 2024 and December 30, 2023, respectively were included in Other current liabilities. In our Consolidated Balance Sheets, $14.7 million, $11.9 million and $7.9 million as of December 27, 2025, December 28, 2024 and December 30, 2023, respectively were included in Other noncurrent liabilities in our Consolidated Balance Sheets.

The Company disaggregates revenue from contracts with customers into (i) major sales distribution channels in the U.S. and (ii) total sales to customers outside the U.S. market as these categories depict the nature, amount, timing and uncertainty of revenues and cash flows that are affected by economic factors. The following table disaggregates our consolidated revenue by major sales distribution channels for the years ended December 27, 2025, December 28, 2024 and December 30, 2023.

(a)

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

(b)

Represents sales to the three largest “Do-It-Yourself” retailers: The Home Depot, Inc., Lowe's Companies, Inc. and Menards, Inc., inclusive of sales through their respective internet website portals.

(c)

Represents sales principally to our mass merchant and standalone, independent e-commerce customers.

(d)

Represents sales in markets outside the United States, principally in China, Canada, Europe and Mexico.

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.

14. Defined Benefit Plans

We have a number of pension plans in the United States, covering certain of the Company’s employees; however, the majority of these plans have been frozen to new participants, and benefit accruals were frozen for active participants on December 31, 2016. The plans provide for payment of retirement benefits, mainly commencing between the ages of 55 and 65. After meeting certain qualifications, an employee acquires a vested right to future benefits. The benefits payable under the plans are generally determined on the basis of an employee’s length of service and/or earnings. 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. Service cost for 2025 relates to benefit accruals for a group of hourly employees within the defined benefit plan for our Security segment. All other benefit accruals under our defined benefit pension plans were frozen as of, or prior to, December 31, 2016.

The Company offered a lump sum program during the fourth quarter of 2023 in which certain terminated vested participants in the Moen Qualified Plan and Master Lock Qualified Plan could elect to take a one-time voluntary lump sum payment equal to the present value of future benefits. Approximately 700 participants elected to accept the lump sum option. During the fourth quarter of 2023, benefit payments of $27.0 million were made and a settlement expense of $2.0 million was recognized.

During the fourth quarter of 2024, the Company entered into two agreements with an insurance company to purchase group annuity contracts and transferred $266.6 million of pension plan obligations and related assets of two of its defined benefit pension plans, the MasterLock Pension Plan and Moen Incorporated Pension Plan (collectively, the "Pension Plans"). The partial plan settlements resulted in a loss of $19.0 million, which is included in Other (expense) income, net on the Consolidated Statements of Income. The agreements cover approximately 4,100 retirees and other beneficiaries (the "Transferred Participants"). All Transferred Participants continued to receive their benefits from the Pension Plans until January 1, 2025, at which time the insurance company began paying and administering the retirement benefits of the Transferred Participants. The transactions resulted in no changes to the amount of the benefits payable to the Transferred Participants.

During the fourth quarter of 2025, the Company entered into a buy-in annuity agreement with an insurance provider. The agreement features a buy-in of the plan assets with an option to elect a future buy-out conversion. As part of the buy-in, a majority of the assets of the Pension Plans were transferred to the insurance company in exchange for an annuity contract to further reduce the risk of plan asset value volatility. The Company retains the primary benefit obligation until the buy-out conversion is completed. Upon election of the buy-out conversion, we will transfer full responsibility of the obligations of the Pension Plans to the insurance company, at which time we will derecognize the assets and liabilities of the Pension Plans and realize a settlement loss as a component of net periodic pension cost.

Net actuarial gains and losses occur when actual experience differs from any of the assumptions used to value defined benefit plans or when assumptions change as they may each year. The primary factors contributing to actuarial gains and losses are changes in the discount rate used to value obligations as of the measurement date and the differences between expected and actual returns on pension plan assets.

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

The accumulated benefit obligation exceeds the fair value of assets for all pension plans.

Amounts recognized in the Consolidated Balance Sheets consist of:

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:

Components of net periodic benefit cost were as follows:

(a)

The pre-65 initial health care cost trend rate is shown first / followed by the post-65 rate.

Plan Assets

The fair value of the pension assets by major category of plan assets as of December 27, 2025 and December 28, 2024 were as follows:

(a) - Other investments consist of buy-in annuity contract assets.

(a) - Other investments consist of future contracts on U.S. Treasury notes and bonds primarily used to hedge interest rate exposures.

A reconciliation of Level 3 measurements was as follows:

Our defined benefit plans Master Trust own a variety of investment assets. Certain investment assets are measured using net asset value per share as a practical expedient per ASC 820. Investments measured using net asset value per share totaled$14.9 million and $150.7 million as of December 27, 2025 and December 28, 2024, respectively.

The terms and conditions for redemptions vary for each class of the investment assets valued at net asset value per share as a practical expedient. Real estate assets may be redeemed quarterly with a 45 day redemption notice period. Investment assets in multi-strategy hedge funds may be redeemed semi-annually with a 95 day redemption notice period. Equity, fixed income and cash and cash equivalents have no specified redemption frequency and notice period and may be redeemed daily. As of December 27, 2025, we do not have an intent to sell or otherwise dispose of these investment assets at prices different than the net asset value per share.

For the Pension Plans, our assets have been exchanged for buy-in annuity contracts to cover all plan liabilities. For our remaining plans, our investment strategy is to optimize investment returns through a diversified portfolio of investments, taking into consideration underlying plan liabilities and asset volatility. The defined benefit asset allocation policy of the plans allows for a return-seeking portfolio allocation of 0% to 50% and liability-hedging portfolio allocation of 50% to 100%. Asset allocations are based on the underlying liability structure. All retirement asset allocations are reviewed periodically to ensure the allocations meets the needs of the liability structure.

Our 2026 expected blended long-term rate of return on plan assets of 4.2%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.

Estimated Future Retirement Benefit Payments

The following retirement benefit payments are expected to be paid:

Estimated future retirement benefit payments above 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 participants in certain plans.

Defined Contribution Plan Contributions

We sponsor a number of defined contribution plans for the benefit of eligible employees. Contributions are determined under various formulas. Cash contributions by the Company related to these plans amounted to$38.5 million, $35.5 million and $28.7 million in 2025, 2024 and 2023, respectively.

15. Income Taxes

The components of Income before income taxes was as follows:

Income tax expense in the Consolidated Statement of Income consisted of the following:

The Company adopted ASU 2023-09 “Income Taxes: Improvement to Income Tax Disclosures” on a prospective basis beginning with the year ended December 27, 2025. The following table is the required disclosure pursuant to ASU 2023-09 and is a reconciliation between the federal statutory tax rate and the effective tax rate.

(1)State taxes in California, Pennsylvania, Florida, Texas, and Wisconsin made up the majority (greater than 50%) of the Company’s State and local income taxes.

The following table is the required reconciliation between the federal statutory tax rate and the effective tax rate prior to the adoption of ASU 2023-09.

The 2025 effective income tax rate was unfavorably impacted by state and local income taxes and dividend withholding tax, partially offset by decreases in uncertain tax positions.

The 2024 effective income tax rate was unfavorably impacted by state and local income taxes, foreign income taxed at higher rates, as well as non-deductible executive compensation, partially offset by favorable benefits related to a valuation allowance release and decreases in uncertain tax positions and tax credits.

The 2023 effective income tax rate was unfavorably impacted by state and local income taxes and foreign income taxed at higher rates. This expense was offset by favorable benefits for the release of uncertain tax positions due to statute of limitations lapses and federal tax credits.

A reconciliation of the beginning and ending amount of unrecognized tax benefits (“UTBs”) is as follows:

The amount of UTBs that, if recognized as of December 27, 2025, would affect the Company’s effective tax rate is $21.1 million.

The Company classifies interest and penalty accruals related to UTBs as income tax expense. In 2025, the Company recognized an interest and penalty benefit of $1.9 million. In 2024 and 2023, the Company recognized an interest and penalty benefit of approximately $1.6 million and a $1.2 million expense, respectively.

The Company files income tax returns in the U.S., various state, and foreign jurisdictions. The Company is currently under audit by the U.S. Internal Revenue Service (IRS) for 2022 and 2023 and is generally subject to examination by the IRS for years 2022 and later. 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 2020, Mexico for years after 2019, and China for years after 2019.

The components of net deferred tax assets (liabilities) as of December 27, 2025 and December 28, 2024 were as follows:

In accordance with ASC requirements for Income Taxes, deferred taxes were classified in the Consolidated Balance Sheets as of December 27, 2025 and December 28, 2024 as follows:

As of December 27, 2025 and December 28, 2024, the Company had deferred tax assets related to net operating losses and other tax carryforwards of $33.6 million and $29.1 million, respectively. Approximately $4.6 million expires between 2026 and 2030, and the remainder will expire in 2031 and thereafter.

The Company has provided a valuation allowance to reduce the carrying value of certain deferred tax assets. The valuation allowance is $9.6 million in 2025 and $8.0 million in 2024. Management has concluded that, based on the available evidence, it is more likely than not that the deferred tax assets will not be fully realized.

Accumulated foreign earnings and profits of the Company’s foreign subsidiaries as of December 31, 2017 were subject to the deemed repatriation tax and therefore should not be subject to additional U.S. federal income tax upon an actual repatriation of these earnings. As of December 27, 2025, the Company has recorded an estimated deferred tax liability of $1.0 million, primarily related to taxes that will be payable upon distribution of these earnings. The liability also reflects the reversal of a prior indefinite reinvestment assertion with respect to one of the Company’s foreign subsidiaries.

Subsequent to December 31, 2017, we consider the unremitted earnings of certain foreign subsidiaries that impose local country taxes on dividends to be indefinitely reinvested. The amount of unrecognized deferred tax liabilities associated with local country withholding taxes on the unremitted earnings of these indefinitely reinvested foreign subsidiaries is $6.4 million.

ASU 2023-09, which the Company adopted prospectively for the year ended December 27, 2025, requires the disclosure of income taxes paid (net of refunds received) as follows:

16. Restructuring and Other Charges

On January 18, 2025, we announced the decision to consolidate U.S. regional offices into one campus headquarters in Deerfield, Illinois. In connection with these consolidation activities and related organizational and personnel changes, the Company currently expects to incur certain cash and non-cash restructuring and other charges related to employee relocation, severance, retention, non-cash asset related costs, lease exit costs, and other transition activities estimated in the range of approximately $90 million to $105 million in the aggregate. For the fifty-two weeks ended December 27, 2025, we incurred total charges of $89.6 million, including cash charges of $71.6 million primarily related to severance and other exit costs, and non-cash charges of $18.0 million primarily related to acceleration of property, plant and equipment depreciation. The estimated ranges of restructuring and other charges are provisional and include management judgments and assumptions that could change as we execute our plans. Actual results may differ from these estimates, and the execution of our plan could result in additional charges.

Restructuring and other charges for the year ended December 27, 2025 were as follows:

(a)

“Other Charges” represent charges or gains directly related to restructuring initiatives that cannot be reported as restructuring under GAAP. Such charges or gains may include losses on disposal of inventories, trade receivables allowances from exiting product lines, write-off of displays from exiting a customer relationship, accelerated depreciation or impairment resulting from the closure of facilities, and gains and losses on the sale of previously closed facilities.

(b)

Restructuring and other charges in 2025 are primarily due to $89.6 million of costs incurred in connection with the Company's headquarters consolidation and its related organizational changes, a product line rationalization in our Outdoors segment and plant closures in all of our segments.

Restructuring and other charges for the year ended December 28, 2024 were as follows:

(a)

“Other Charges” represent charges or gains directly related to restructuring initiatives that cannot be reported as restructuring under GAAP. Such charges or gains may include losses on disposal of inventories, trade receivables allowances from exiting product lines, write-off of displays from exiting a customer relationship, accelerated depreciation or impairment resulting from the closure of facilities, and gains and losses on the sale of previously closed facilities.

(b)

Restructuring and other charges in 2024 are largely related to a product-line rationalization within our Outdoors segment, the closure of a manufacturing facility within our Security segment and headcount-reduction actions across all segments.

Restructuring and other charges for the year ended December 30, 2023 were as follows:

(a)

“Other Charges” represent charges or gains directly related to restructuring initiatives that cannot be reported as restructuring under GAAP. Such charges or gains may include losses on disposal of inventories, trade receivables allowances from exiting product lines, write-off of displays from exiting a customer relationship, accelerated depreciation or impairment resulting from the closure of facilities, and gains and losses on the sale of previously closed facilities.

(b)

Restructuring and other charges in 2023 were primarily attributable to costs associated with the closure of a manufacturing facility within our Security segment and headcount-reduction actions across all segments.

Reconciliation of Restructuring Liability

(a)

Cash expenditures primarily related to severance charges.

(a)

Cash expenditures primarily related to severance charges.

17. Commitments

Purchase Obligations

Purchase obligations of the Company as of December 27, 2025 were $456.1 million, of which $429.9 million is due within one year. Purchase obligations include contracts for raw materials and finished goods purchases, selling and administrative services, and capital expenditures.

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 2025, 2024, and 2023.

18. Information on Business Segments

The Company’s operations are structured into three segments, Water, Outdoors and Security. The chief operating decision maker (“CODM”), our Chief Executive Officer, uses operating income to evaluate the performance of our segments and to make resource allocation decisions. Segment operating income excludes unallocated corporate costs. Operating income is the primary measure of segment profitability used in internal management reporting to the CODM. This measure is used to view operating trends, perform analytical comparisons and benchmark performance between periods, and to evaluate historical and forecasted financial performance as well as performance relative to our competitors. The monthly and quarterly results provided to the CODM include the net sales and operating income or loss of the consolidated Company and each segment. These financial results are reviewed against budget and the prior year in evaluating the performance of the segment. The CODM is also regularly provided qualitative and quantitative metrics to establish an understanding of drivers to the overall performance. The metrics provided include information at a functional level for the Company's operations and supply chain in addition to each segment. These metrics also include service and quality ratings, brand awareness, market performance and outlook, working capital efficiency, operational plant efficiency, commodity pricing, capital spending and an overview of transformation initiatives.

The significant expense categories and amounts shown below align with the segment level information that is regularly provided to the CODM. Intersegment expenses are included within the amounts below. Other operating expenses principally consist of cost of sales and selling, general and administrative expenses, which are not provided to the CODM in managing performance of the operating segments.

The Water segment manufactures or assembles and sells faucets, accessories, luxury hardware, kitchen sinks and waste disposals, predominantly under the Moen, ROHL, Riobel, Victoria+Albert, Perrin & Rowe, Aqualisa, Shaws, Emtek, Schaub and SpringWell brands. The Outdoors segment includes fiberglass and steel entry door systems under the Therma-Tru brand name, storm, screen and security doors under the Larson brand name, composite decking and railing under the Fiberon brand name, urethane millwork under the Fypon brand name and wide-opening exterior door systems and outdoor enclosures under the Solar Innovations brand. The Security segment includes locks, safety and security devices, connected and mechanical lock out tag out solutions and electronic security products under the Master Lock, American Lock, Yale and August brands, and fire-resistant safes, security containers and commercial cabinets under the SentrySafe brand. Corporate expenses consist primarily of headquarters administrative expenses. Corporate assets consist primarily of cash.

The Company’s subsidiaries operate principally in the United States, Canada, Mexico, the United Kingdom, China, South Africa, Vietnam and France.

(1) Other segment items recognized during the year ended December 27, 2025 include cost of products sold and selling, general, and administrative expenses.

(1)Other segment items recognized during the year ended December 28, 2024 include cost of products sold and selling, general, and administrative expenses.

(1)Other segment items recognized during the year ended December 30, 2023 include cost of products sold and selling, general, and administrative expenses.

Net sales totwo of the Company’s customers, The Home Depot, Inc. (“The Home Depot”) and Lowe’s Companies, Inc. (“Lowe’s”) each accounted for greater than 10% of the Company’s net sales in 2025, 2024 and 2023. All of our business segments sell to The Home Depot and Lowe’s. Net sales to The Home Depot were 11%,10% and 10% of net sales in 2025, 2024 and 2023, respectively. Net sales to Lowe’s were 11%,11% and 11% of net sales in 2025, 2024 and 2023, respectively.

(a)

Based on country of destination.

19. Earnings Per Share

The computations of earnings per common share were as follows:

(a)

Reflects the impact of share repurchases during the years ended December 27,2025, and December 28, 2024 and December 30, 2023, respectively.

20. Other (Income) Expense, Net

The components of other (income) expense, net, for 2025, 2024 and 2023 were as follows:

21. Contingencies

Litigation

We are a defendant in lawsuits that are ordinary, routine litigation matters incidental to our businesses. It is not possible to predict the outcome of the pending actions, and, as with any litigation, it is possible that these actions could be decided unfavorably. We believe that there are meritorious defenses to these actions and that these actions will not have a material adverse effect upon our results of operations, cash flows or financial condition, and, where appropriate, these actions are being vigorously contested. Accordingly, we believe the likelihood of material loss is remote.

Environmental

We are involved in remediation activities to clean up impacted sites as required by federal and state laws, certain of which may contain hazardous wastes. Liabilities for remediation costs of each site are based on our best estimate of undiscounted future costs, excluding possible insurance recoveries or recoveries from other third parties. Uncertainties about the status of laws, regulations, technology and information related to individual sites make it difficult to develop estimates of future environmental remediation exposures. Some of the potential liabilities relate to sites we own, and some relate to sites we no longer own or never owned. Several of our subsidiaries have been designated as potentially responsible parties (“PRP”) under Superfund or similar state laws. In most instances where our subsidiaries are named as a PRP, we enter into cost-sharing arrangements with other PRPs. We give notice to insurance carriers of potential PRP liability, but very rarely, if ever, receive reimbursement from insurance for PRP costs. We believe compliance with current environmental protection laws (before taking into account estimated recoveries from third parties) will not have a material adverse effect upon our results of operations, cash flows or financial condition.

Other

On September 12, 2025, the Company experienced a fire within a portion of one of its manufacturing facilities within the Outdoors segment. The fire primarily caused damage to owned property and equipment. Net sales were not impacted as a result of the fire, due to existing inventory levels and increased output at other manufacturing facilities. In 2025, expenses of $21.1 million, related to clean-up costs, damage to assets and fixed operating costs, less probable insurance recoveries, were recorded within the Cost of products sold caption in the Consolidated Statement of Income.