MasterBrand Inc
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
MBC$6.72-5.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0001941365-24-000071
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001941365-24-000098
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 73 previous paragraphs and 106 current paragraphs.
46 unchanged; 19 reworded; 35 added; 8 removed; 0 previous and 6 current paragraphs rearranged.
Tables are not compared: 3 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (35)
Current report
◦The inability to recognize, or delays in obtaining, anticipated benefits of the acquisition of Supreme Cabinetry Brands, Inc. (the “Acquisition”), including synergies, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth profitably, maintain relationships with customers and suppliers and retain key employees;
Current report
◦The impact of our current and any additional future debt obligations on our business, current and future operations, profitability and our ability to meet other obligations;
Current report
◦Business disruption following the Acquisition;
Current report
◦Diversion of management time on Acquisition-related issues;
Current report
◦The reaction of customers and other persons to the Acquisition; and
Current report
Net sales were $676.5 million for the thirteen weeks ended June 30, 2024 compared to $695.1 million for the thirteen weeks ended June 25, 2023, a decrease of $18.6 million, or 2.7 percent. The lower net sales, compared to the thirteen weeks ended June 25, 2023, were driven by the combined net impact of price and mix on our overall average selling price, partially offset by an increase in sales unit volume. The increased sales unit volume offset 40.0 percent of the gross year-over-year decrease in net sales. Overall end-market demand was softer in the second quarter of 2024 as compared to the second quarter of 2023 in the repair and remodel markets, while single-family new construction strengthened in the second quarter of 2024.
Current report
Compared to the thirteen weeks ended June 25, 2023, net sales to dealers, whose end customers include builders, professional trades and home remodelers, declined $26.0 million, or 6.9 percent, and net sales to retailers, including through their respective retail internet website portals, declined $6.3 million, or 2.6 percent. Net sales directly to builders was up $13.7 million, or 17.5 percent.
Current report
Foreign currency impact was unfavorable by $0.4 million during the thirteen weeks ended June 30, 2024 as compared to the thirteen weeks ended June 25, 2023.
Current report
Cost of products sold decreased by $13.4 million, or 2.9 percent, to $445.5 million (65.9 percent of net sales) in the thirteen weeks ended June 30, 2024 as compared to $458.9 million (66.0 percent of net sales) in the thirteen weeks ended June 25, 2023. The $13.4 million decrease in cost of products sold, as well as the improvement in cost of products sold as a percentage of net sales, is due primarily to the combined net impact of price and mix compared to the thirteen weeks ended June 25, 2023. This overall decrease was also a function of a year-over-year increase in realized savings from various cost reduction actions and carry over deflation in commodity costs and inbound transportation. The overall decrease was partially offset by $2.2 million of insurance recoveries in the second quarter of 2023 related to the tornado at our Jackson, GA facility, which did not recur in the current year, and the impact of increased sales unit volume, which offset 37.9 percent of the gross year-over-year decrease in cost of products sold.
Current report
Restructuring charges
Current report
Restructuring charges were $2.8 million in the thirteen weeks ended June 30, 2024, which was comparable to restructuring charges of $3.1 million in the thirteen weeks ended June 25, 2023. Charges in both periods are largely related to severance costs and other employee-related costs in order to better align our workforce with our forecasted demand within our manufacturing footprint.
Current report
Twenty-six Weeks Ended June 30, 2024 Compared to the Twenty-six Weeks Ended June 25, 2023
Current report
(1)Not meaningful.
Current report
Net sales
Current report
Net sales were $1,314.6 million for the twenty-six weeks ended June 30, 2024 compared to $1,371.8 million for the twenty-six weeks ended June 25, 2023, a decrease of $57.2 million, or 4.2 percent. The lower net sales, compared to the twenty-six weeks ended June 25, 2023, were driven by the combined net impact of price and mix on our overall average selling price, partially offset by an increase in sales unit volume. The increased sales unit volume offset 15.5 percent of the gross year over year decrease in net sales. Overall end-market demand was softer in the first half of 2024 as compared to the first half of 2023 in the repair and remodel markets, while single-family new construction strengthened in the first half of 2024.
Current report
Compared to the twenty-six weeks ended June 25, 2023, net sales to dealers, whose end customers include builders, professional trades and home remodelers, declined $57.8 million, or 8.0 percent, and net sales to retailers, including through their respective retail internet website portals, declined $21.9 million, or 4.4 percent. Net sales directly to builders increased $22.5 million, or 15.0 percent.
Current report
Foreign currency impact was unfavorable by $0.3 million during the twenty-six weeks ended June 30, 2024 as compared to the twenty-six weeks ended June 25, 2023.
Current report
Cost of products sold
Current report
Cost of products sold decreased by $52.1 million, or 5.6 percent, to $878.9 million (66.9 percent of net sales) in the twenty-six weeks ended June 30, 2024 as compared to $931.0 million (67.9 percent of net sales) in the twenty-six weeks ended June 25, 2023. The $52.1 million decrease in cost of products sold, as well as the improvement in cost of products sold as a percentage of net sales in the first half of 2024, is due primarily to the combined net impact of price and mix. This overall decrease was also a function of a year-over-year increase in realized savings from various cost reduction actions, carry over deflation in commodity costs and inbound transportation, and $7.2 million of netincremental costs in the first half of 2023 ($9.4 million of gross costs, less $2.2 million of insurance recoveries) related to the tornado at the Jackson, GA facility that did not recur in the current year. This overall decrease was partially offset by the impact of increased sales unit volume, which offset 12.0 percent of the gross year-over-year decrease in cost of products sold.
Current report
Selling, general and administrative expenses
Current report
Selling, general and administrative expenses increased by $7.5 million, or 2.7 percent, to $284.5 million (21.6 percent of net sales) in the twenty-six weeks ended June 30, 2024 compared to $277.0 million (20.2 percent of net sales) in the twenty-six weeks ended June 25, 2023. The increase in the first half of 2024 is primarily due to increased associate-related costs ($10.4 million), including salaries and incentive compensation, professional support fees ($5.9 million), and acquisition-related costs ($4.4 million). These increases are partially offset by lower distribution and commission costs ($10.7 million), as a result of the decrease in net sales. The first half of 2023 included $2.2 million of costs directly related to the separation from Fortune Brands, which did not recur in 2024.
Current report
Restructuring charges
Current report
Restructuring charges were $3.2 million in the twenty-six weeks ended June 30, 2024, which was comparable to restructuring charges of $2.7 million in the twenty-six weeks ended June 25, 2023. Charges in both periods are largely related to severance costs and other employee-related costs in order to better align our workforce with our forecasted demand within our manufacturing footprint.
Current report
Interest expense
Current report
Interest expense was $34.7 million in the twenty-six weeks ended June 30, 2024 as compared to $34.6 million in the twenty-six weeks ended June 25, 2023. The first half of 2024 includes $6.5 million of nonrecurring interest expense incurred in connection with the debt refinancing transaction, including the write-off of deferred financing fees. This increase was partially offset by the favorable impact of lower outstanding debt in the first half of 2024 as compared to the first half of 2023, as strong cash from operations throughout fiscal 2023 was used, in part, to pay down our revolving credit facility and term loan included as part of the 2022 Credit Agreement.
Current report
Other (income) expense, net
Current report
Other income, net was $3.2 million in the twenty-six weeks ended June 30, 2024, an increase of $4.1 million as compared to other expense, net of $0.9 million in the twenty-six weeks ended June 25, 2023. This increase was due primarily to transactional foreign currency gains recorded in the first half of 2024.
Current report
Income taxes
Current report
On June 27, 2024, the Company refinanced this debt by completing the Offering of $700.0 million aggregate principal amount of the Senior Notes and entered into the 2024 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 previously announced acquisition of Supreme on July 10, 2024, and 3) to pay all fees and expenses related to the foregoing transactions. In July 2024, upon closing, we funded the acquisition with a combination of cash on hand and $430.0 million of proceeds from the revolving credit facility provided for by the 2024 Credit Agreement (see Note 9, “Debt” and Note 16, “Subsequent Events” for further details).
Current report
The Senior Notes will mature on July 15, 2032. Interest on the Senior Notes will accrue at a rate of 7.00 percent per annum and will be payable semi-annually in arrears on January 15 and July 15, beginning on January 15, 2025.
Current report
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 June 30, 2024.
Current report
Interest rates on 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 the Administrative Agent (as defined in the 2024 Credit Agreement) 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 0.200 percent to 0.300 percent per annum, depending on its net leverage ratio.
Current report
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.
Current report
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 June 30, 2024.
Current report
Net cash used in financing activities was $40.3 million in the twenty-six weeks ended June 30, 2024 as compared to cash used of $172.0 million in the twenty-six weeks ended June 25, 2023. In the first half of 2023, we used strong cash flows from operations to pay down $164.4 million of debt. In the first half of 2024, our $712.5 million term loan was repaid, and replaced with $700.0 of Senior Notes as a result of the refinancing transaction completed in the second quarter. The first half of 2024 also included the payment of $15.2 million of financing fees.
Removed paragraphs (8)
Previous report
Net sales were $638.1 million for the thirteen weeks ended March 31, 2024 compared to $676.7 million for the thirteen weeks ended March 26, 2023, a decrease of $38.6 million, or 5.7 percent. The lower net sales, compared to the thirteen weeks ended March 26, 2023, were driven by lower average selling prices due primarily to trade down and promotional activity on flat year-over-year sales unit volume. The change in foreign currency during the thirteen weeks ended March 31, 2024 was comparable to the thirteen weeks ended March 26, 2023.
Previous report
Cost of products sold decreased by $38.7 million, or 8.2 percent, to $433.4 million (67.9 percent of net sales) in the thirteen weeks ended March 31, 2024 as compared to $472.1 million (69.8 percent of net sales) in the thirteen weeks ended March 26, 2023. The lower cost of products sold was driven by realized savings from various cost reduction actions taken in the fourth quarter of 2022 and throughout 2023 and deflation in commodity costs and inbound transportation compared to the thirteen weeks ended March 26, 2023. Additionally, thethirteen weeks ended March 26, 2023 included$9.4 million of incremental costs related to the tornado that occurred at our Jackson, GA facility.
Previous report
Restructuring charges (adjustments)
Previous report
Restructuring charges were $0.4 million in the thirteen weeks ended March 31, 2024, which was comparable to restructuring (adjustments) of $0.4 million in the thirteen weeks ended March 26, 2023.
Previous report
Interest rates under these facilities are variable based on the SOFR at the time of the borrowing and our net leverage ratio, as measured by our Net Leverage to our Consolidated EBITDA. Net Leverage is defined as consolidated total indebtedness minus certain cash and cash equivalents. 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. The Net Leverage Ratio could not exceed 3.875 to 1.0 at the initial borrowing through the second fiscal quarter of 2023, adjusting downward in various future quarters before settling at 3.25 to 1.0 in January 2025. As of March 31, 2024, the net leverage ratio may not exceed 3.5 to 1.0. Interest rates can range from SOFR plus 1.85 percent to SOFR plus 2.60 percent. We also are required to maintain a minimum Interest Coverage Ratio of 3.0 to 1.0. The Interest Coverage Ratio is defined as Consolidated EBITDA compared to consolidated interest expense.
Previous report
Our 2022 Credit Agreement contains additional covenants which limit or preclude certain corporate actions based upon the measurement of certain financial covenant metrics. The $750.0 million Term Loan has quarterly required amortization payments, which began in March 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. We did not make any additional term loan payments during the fourth quarter of fiscal 2023 or the first quarter of fiscal 2024, and as of March 31, 2024 we are paid in advance for our next scheduled quarterly payment due during the second quarter of 2024. These additional amortization payments, made possible due to the generation of strong operating cash flow, were made to reduce future interest expense and provide financial flexibility. The revolving credit facility was paid in full during the third quarter of fiscal 2023. The revolving credit facility did not have an outstanding balance as of March 31, 2024 and December 31, 2023.
Previous report
As of March 31, 2024, the Company was in compliance with all financial covenants set forth in the 2022 Credit Agreement, and expects to remain in compliance for the foreseeable future.
Previous report
Net cash used in financing activities was $7.1 million in the thirteen weeks ended March 31, 2024, as compared to cash used of $42.7 million in the thirteen weeks ended March 26, 2023. The first quarter of 2023 included net payments on external debt of $39.6 million, as we used excess cash to pay down our revolving credit facility. No debt payments were made during the first quarter of 2024. The first quarter of 2024 also includes $1.6 million of stock repurchases made under the $50.0 million stock repurchase program authorized in the second quarter of 2023.
Reworded paragraphs (19)
Previous wording
Certain statements contained in this Quarterly Report on Form 10-Q, other than purely historical information, including, but not limited to, estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are forward-looking statements. Statements preceded by, followed by or that otherwise include the word “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “may increase,” “may fluctuate,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may,” and “could,” are generally forward-looking in nature and not historical facts. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of our management. Although we believe that these statements are based on reasonable assumptions, they are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those indicated in such statements. These factors include those listed under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 within Part I, Item 1A.
Current wording
Certain statements contained in this Quarterly Report on Form 10-Q, other than purely historical information, including, but not limited to, estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are forward-looking statements. Statements preceded by, followed by or that otherwise include the word “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “may increase,” “may fluctuate,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may,” and “could” are generally forward-looking in nature and not historical facts. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of our management. Although we believe that these statements are based on reasonable assumptions, they are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those indicated in such statements. These factors include those listed under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 within Part I, Item 1A and in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 within Part II, Item 1A.
Previous wording
◦The effects of a public health crisis or other unexpected event; and
Current wording
◦The effects of a public health crisis or other unexpected event;
Previous wording
•Results of Operations: 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. This section provides an analysis of our results of operations for the thirteen weeks ended March 31, 2024 as compared to March 26, 2023. Unless the context otherwise requires, references to years and quarters contained in this Quarterly Report on Form 10-Q pertain to our fiscal years and fiscal quarters. Additionally, unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to: (1) “2024,” or “fiscal 2024” refers to our 2024 fiscal year that is a 52-week period that will end on December 29, 2024; and (2) “2023,” or “fiscal 2023” refers to our 2023 fiscal year that was a 53-week period that ended on December 31, 2023. Furthermore, unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to: (1) “the first quarter of 2024” refers to the thirteen week period that ended on March 31, 2024; and (2) “the first quarter of 2023” refers to the thirteen week period that ended on March 26, 2023.
Current wording
•Results of Operations: 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. This section provides an analysis of our results of operations for the thirteen and twenty-six weeks ended June 30, 2024 as compared to June 25, 2023. Unless the context otherwise requires, references to years and quarters contained in this Quarterly Report on Form 10-Q pertain to our fiscal years and fiscal quarters. Additionally, unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to: (1) “2024,” or “fiscal 2024” refers to our 2024 fiscal year that is a 52-week period that will end on December 29, 2024; and (2) “2023,” or “fiscal 2023” refers to our 2023 fiscal year that was a 53-week period that ended on December 31, 2023. Furthermore, unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to: (1) “the second quarter of 2024” refers to the thirteen week period that ended on June 30, 2024; (2) “the second quarter of 2023” refers to the thirteen week period that ended on June 25, 2023; (3) “the first half of 2024” refers to thetwenty-six weeks ended June 30, 2024; and (4) “the first half of 2023” refers to the twenty-six weeks ended June 25, 2023.
Previous wording
•Liquidity and Capital Resources: This section provides a discussion of our financial condition and an analysis of our cash flows for our thirteen week period that ended on March 31, 2024 as compared to our thirteen week period that ended on March 26, 2023. This section also provides a discussion of our ability to fund our future commitments and ongoing operating activities through internal and external sources of capital.
Current wording
•Liquidity and Capital Resources: This section provides a discussion of our financial condition and an analysis of our cash flows for our twenty-six week period that ended on June 30, 2024 as compared to our twenty-six week period that ended on June 25, 2023. This section also provides a discussion of our ability to fund our future commitments and ongoing operating activities through internal and external sources of capital.
Previous wording
Founded nearly 70 years ago, we are the largest manufacturer of residential cabinets in North America. Our superior product quality, innovative design and service excellence drives a compelling value proposition. We have insight into the fashion and features consumers desire, which we use to tailor our product lines across price points. Our volume leadership allows us to achieve an advantaged cost structure and service platform by standardizing product platforms and components to the greatest extent possible—resulting in an improved facility footprint and an efficient supply chain. Further, our decades of experience have informed how we use global geographies to optimize procurement and manufacturing costs. Finally, with the most extensive dealer network throughout the United States and Canada, we have an advantaged distribution model that cannot be easily replicated. We expect to further extend our competitive advantages by using technology and data to enhance the consumer’s experience from visualization to ordering to delivery and installation.
Current wording
Founded ~ 70 years ago, we are the largest manufacturer of residential cabinets in North America. Our superior product quality, innovative design and service excellence drives a compelling value proposition. We have insight into the fashion and features consumers desire, which we use to tailor our product lines across price points. Our volume leadership allows us to achieve an advantaged cost structure and service platform by standardizing product platforms and components to the greatest extent possible—resulting in an improved facility footprint and an efficient supply chain. Further, our decades of experience have informed how we use global geographies to optimize procurement and manufacturing costs. Finally, with the most extensive dealer network throughout the United States and Canada, we have an advantaged distribution model that cannot be easily replicated. We expect to further extend our competitive advantages by using technology and data to enhance the consumer’s experience from visualization to ordering to delivery and installation.
Previous wording
Selling, general and administrative expenses increased by $2.5 million, or 1.8 percent, to $137.8 million (21.6 percent of net sales) in the thirteen weeks ended March 31, 2024 compared to $135.3 million (20.0 percent of net sales) in the thirteen weeks ended March 26, 2023. The increase in the thirteen weeks ended March 31, 2024 is primarily due to increased associate-related costs ($6.2 million), including salaries and incentive compensation. These increases are partially offset by lower distribution and commission costs ($3.9 million), as well as lower restructuring-related costs ($1.7 million), as we took actions in fiscal 2022 and 2023 to rightsize our manufacturing footprint to satisfy forecasted customer demand.
Current wording
Selling, general and administrative expenses increased by $5.0 million, or 3.5 percent, to $146.7 million (21.7 percent of net sales) in the thirteen weeks ended June 30, 2024 compared to $141.7 million (20.4 percent of net sales) in the thirteen weeks ended June 25, 2023. The increase in the second quarter of 2024 is primarily due to acquisition-related costs ($4.4 million) associated with the acquisition of Supreme, increased professional support fees ($4.3 million), and increased associate-related costs ($4.1 million), including salaries and incentive compensation. These increases are partially offset by lower distribution and commission costs ($6.8 million), as a result of the decrease in net sales.
Previous wording
Interest expense was $14.1 million in the thirteen weeks ended March 31, 2024 as compared to $17.4 million in the thirteen weeks ended March 26, 2023, as strong cash from operations throughout fiscal 2023 was used, in part, to pay down our revolving credit facility and term loan.
Current wording
Interest expense was $20.6 million in the thirteen weeks ended June 30, 2024 as compared to $17.2 million in the thirteen weeks ended June 25, 2023. The increase in the second quarter of 2024 is due primarily to $6.5 million of nonrecurring interest expense incurred in the second quarter of fiscal 2024 in connection with the debt refinancing transaction, including the write-off of deferred financing fees. This increase was partially offset by the favorable impact of lower outstanding debt in the second quarter of 2024 as compared to the second quarter of 2023, as strong cash from operations throughout fiscal 2023 was used, in part, to pay down our revolving credit facility and term loan included as part of the 2022 Credit Agreement.
Previous wording
Other income, net was $0.3 million in the thirteen weeks ended March 31, 2024, which was comparable to other expense, net of $0.4 million in the thirteen weeks ended March 26, 2023.
Current wording
Other income, net was $2.9 million in the thirteen weeks ended June 30, 2024, an increase of $3.4 million as compared to other expense, net of $0.5 million in the thirteen weeks ended June 25, 2023. This increase was due primarily to transactional foreign currency gains in the second quarter of 2024.
Previous wording
The effective income tax rates for thethirteen weeks ended March 31, 2024, and March 26, 2023, were 23.5 percent and 26.9 percent, respectively. The net decrease in the effective tax rate between the periods is primarily due to the mix of earnings in jurisdictions with differing tax rates, the stock compensation windfall benefit for shares which vested, state and local income taxes and deferred tax liability for foreign earnings, partially offset by changes in foreign income inclusions with offsetting foreign tax credits.
Current wording
The effective income tax rates for thethirteen weeks ended June 30, 2024 and June 25, 2023, were 24.6 percent and 26.5 percent, respectively. The net decrease in the effective tax rate between the periods is primarily due to the mix of earnings in jurisdictions with differing tax rates, discrete adjustments, including the stock compensation windfall benefit for shares which vested and changes due to final tax return filings, state and local income taxes and deferred tax liability for foreign earnings, partially offset by changes in foreign income inclusions with offsetting foreign tax credits.
Previous wording
Our condensed consolidated income before taxes, income tax expense, and effective tax rate for the thirteen week periods ended March 31, 2024 and March 26, 2023 were as follows:
Current wording
Our condensed consolidated income before taxes, income tax expense, and effective tax rate for the twenty-six week periods ended June 30, 2024 and June 25, 2023 were as follows:
Previous wording
The difference between our effective income tax rate for thethirteen weeks ended March 31, 2024, and the U.S. statutory rate of 21.0 percent is due to the unfavorable impact of state and local income taxes, foreign income inclusions with offsetting tax credits and nondeductible compensation partially offset by thestock compensation windfall benefitfor shares which vested and the mix of earnings in jurisdictions with differing tax rates.
Current wording
The difference between our effective income tax rate for thetwenty-six weeks ended June 30, 2024, and the U.S. statutory rate of 21.0 percent is due to the unfavorable impact of state and local income taxes, foreign income inclusions with offsetting tax credits and nondeductible compensation, partially offset by thestock compensation windfall benefitfor shares which vested and the mix of earnings in jurisdictions with differing tax rates.
Previous wording
The difference between our effective income tax rate for the thirteen weeks ended March 26, 2023, and the U.S. statutory rate of 21.0 percent primarily relates to unfavorable changes in state and local income taxes, nondeductible compensation, foreign income inclusions with offsetting foreign tax credits, changes due to foreign tax return filings, recognition of a deferred tax liability for foreign earnings and the mix of earnings in jurisdictions with differing tax rates.
Current wording
The difference between our effective income tax rate for the twenty-six weeks ended June 25, 2023, and the U.S. statutory rate of 21.0 percent is due to unfavorable changes in state and local income taxes, nondeductible compensation, foreign income inclusions with offsetting foreign tax credits, recognition of a deferred tax liability for foreign earnings and changes due to foreign tax return filings, partially offset by the mix of earnings in jurisdictions with differing tax rates.
Previous wording
Our operating income is generated by our subsidiaries. There are generally no restrictions on the ability of our subsidiaries to pay dividends or make other distributions to MasterBrand, other than the fact our subsidiaries have financial obligations that must be satisfied before funding us and such dividends are subject to applicable local law and may be limited due to terms of other contractual arrangements, including our indebtedness. We periodic ally review our portfolio of brands, manufacturing and supply chain footprint, and evaluate potential strategic transactions to increase stockholder value. However, we cannot predict whether or when we may enter into acquisitions, joint ventures or dispositions, or what impact any such transactions could have on our results of operations, cash flows or financial condition. Our cash flows from operations, borrowing availability and overall liquidity are subject to certain risks and uncertainties, including those described in the section entitled “Risk Factors” within Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Current wording
Our operating income is generated by our subsidiaries. There are generally no restrictions on the ability of our subsidiaries to pay dividends or make other distributions to MasterBrand, other than the fact our subsidiaries have financial obligations that must be satisfied before funding us and such dividends are subject to applicable local law and may be limited due to terms of other contractual arrangements, including our indebtedness. We periodic ally review our portfolio of brands, manufacturing and supply chain footprint, and evaluate potential strategic transactions to increase stockholder value. However, we cannot predict whether or when we may enter into acquisitions, joint ventures or dispositions, or what impact any such transactions could have on our results of operations, cash flows or financial condition. Our cash flows from operations, borrowing availability and overall liquidity are subject to certain risks and uncertainties, including those described in the section entitled “Risk Factors” within Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 within Part II, Item 1A.
Previous wording
On November 18, 2022, we 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 is secured by certain assets as well as the guarantee of certain of our subsidiaries.
Current wording
On November 18, 2022, we 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 was secured by certain assets as well as the guarantee of certain of our subsidiaries.
Previous wording
As of March 31, 2024, we had $708.0 million outstanding in third-party borrowings, net of deferred financing fees. We may also incur additional indebtedness in the future.
Current wording
As of June 30, 2024, we had $688.9 million outstanding in third-party borrowings, net of deferred financing fees. We may also incur additional indebtedness in the future.
Previous wording
Below is a summary of cash flows for the thirteen weeks ended March 31, 2024 and March 26, 2023.
Current wording
Below is a summary of cash flows for the twenty-six weeks ended June 30, 2024 and June 25, 2023.
Previous wording
Net cash provided by operating activities was $18.7 million in the first quarter of 2024 as compared to $62.1 million in the first quarter of 2023. Net cash provided by operating activities included net income of $37.5 million in the thirteen weeks ended March 31, 2024, as compared to net income of $35.0 million in the thirteen weeks ended March 26, 2023. In the first quarter of 2024, accounts receivable increased $21.7 million from the low fiscal 2023 ending balance resulting from strong cash collection efforts. In the first quarter of 2023, our accounts receivable decreased $14.1 million, as a result of improvements in our collection processes throughout 2023. In the first quarter of 2024, the movement in inventory was $1.6 million favorable, as compared to the first quarter of 2023, which had favorable movement in inventory of $23.3 million. In 2022, we executed an intentional build in inventory in the first half of the year in order to mitigate the impact of an uncertain and volatile global supply chain environment. The favorable inventory movement in the first quarter of 2023 reflects our efforts to more efficiently manage our inventory levels in the current supply chain environment, which have continued through the first quarter of 2024. Accounts payable was $10.2 million favorable in the thirteen weeks ended March 31, 2024 as compared to unfavorable accounts payable movement of $16.9 million in the thirteen weeks ended March 26, 2023 as a result of decreased purchasing levels aligned with our lower inventory levels. Accrued expenses and other current liabilities had an unfavorable impact of $29.6 million in the first quarter of 2024 compared to an unfavorable impact of $14.6 million in the first quarter of 2023. Both unfavorable impacts were primarily driven by the annual incentive compensation payouts related to the prior fiscal year.
Current wording
Net cash provided by operating activities was $96.1 million in the first half of 2024 as compared to $194.0 million in the first half of 2023. In the first half of 2024, accounts receivable increased $10.5 million from the low fiscal 2023 ending balance resulting from strong cash collection efforts. In the first half of 2023, our accounts receivable decreased $53.9 million as a result of improvements in our collection processes throughout 2023. In the first half of 2024, the movement in inventory was $20.7 million unfavorable, reflective of the normal seasonal build in inventory from year-end. The first half of 2023 had favorable movement in inventory of $54.0 million. In 2022, we executed an intentional build in inventory in the first half of the year in order to mitigate the impact of an uncertain and volatile global supply chain environment. The favorable inventory movement in the first half of 2023 reflected our efforts to more efficiently manage our inventory levels in the supply chain environment, which have continued through the first half of 2024. Accounts payable was $21.8 million favorable in the first half of 2024, reflective of the increased purchasing associated with the higher inventory balance from year-end, as compared to unfavorable accounts payable movement of $39.6 million in the first half of 2023 as a result of decreased purchasing levels aligned with our inventory management.
Previous wording
Net cash used in investing activities was $7.0 million in the first quarter of 2024, compared to net cash used in investing activities of $2.7 million in the first quarter of 2023. The year-over-year increase is due to increased capital expenditures as compared to the prior year.
Current wording
Net cash used in investing activities was $11.9 million in the first half of 2024, compared to net cash used in investing activities of $11.2 million in first half of 2023. The year-over-year increase is due to increased capital expenditures as compared to the prior year, offset by the proceeds from the sale of a former manufacturing facility site in the second quarter of 2024.
Previous wording
We believe that our cash and cash equivalent balances, along with available cash from operating cash flows and credit facilities, will be adequate to fund our typical needs, including working capital requirements and projected capital expenditures. We also believe we have access to additional funds from capital markets to fund strategic initiatives.
Current wording
We believe that our cash and cash equivalent balances, along with available cash from operating cash flows and credit facilities, will be adequate to fund our typical needs, including working capital requirements and projected capital expenditures. We also believe we have access to additional funds from capital markets to fund strategic initiatives, including the acquisition of Supreme, which was completed on July 10, 2024.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
Our condensed consolidated income before taxes, income tax expense, and effective tax rate for thethirteen weeks ended June 30, 2024 and June 25, 2023 were as follows:
Current report — wording carried from elsewhere
The difference between our effective income tax rate for thethirteen weeks ended June 30, 2024, and the U.S. statutory rate of 21.0 percent is due to the unfavorable impact of state and local income taxes, nondeductible compensation and foreign income inclusions with offsetting tax credits, partially offset by the stock compensation windfall benefit for shares which vested and the mix of earnings in jurisdictions with differing tax rates.
Current report — wording carried from elsewhere
The difference between our effective income tax rate for the thirteen weeks ended June 25, 2023, and the U.S. statutory rate of 21.0 percent is due to the unfavorable changes in state and local income taxes, nondeductible compensation, foreign income inclusions with offsetting foreign tax credits and recognition of a deferred tax liability for foreign earnings, partially offset by the mix of earnings in jurisdictions with differing tax rates.
Current report — wording carried from elsewhere
The following discussion of condensed consolidated results of operations refers to the twenty-six weeks ended June 30, 2024 compared to the twenty-six weeks ended June 25, 2023.
Current report — wording carried from elsewhere
The effective income tax rates for thetwenty-six weeks ended June 30, 2024 and June 25, 2023, were 24.1 percent and 26.7 percent, respectively. The net decrease in the effective tax rate between the periods is primarily due to the mix of earnings in jurisdictions with differing tax rates, discrete adjustments, including the stock compensation windfall benefit for shares which vested and changes due to final tax return filings, state and local income taxes and deferred tax liability for foreign earnings, partially offset by changes in foreign income inclusions with offsetting foreign tax credits.
Current report — wording carried from elsewhere
The revolving credit facility under the 2024 Credit Agreement 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.