MasterBrand Inc

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 and in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 within Part II, 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 our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 within Part II, Item 1A.

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 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.

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 thirty-nine weeks ended September 29, 2024 as compared to September 24, 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 third quarter of 2024” refers to the thirteen week period that ended on September 29, 2024; (2) “the third quarter of 2023” refers to the thirteen week period that ended on September 24, 2023; (3) “the first three quarters of 2024” refers to thethirty-nine weeks ended September 29, 2024; and (4) “the first three quarters of 2023” refers to the thirty-nine weeks ended September 24, 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 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.

Current wording

•Liquidity and Capital Resources: This section provides a discussion of our financial condition and an analysis of our cash flows for our thirty-nine week period that ended on September 29, 2024 as compared to our thirty-nine week period that ended on September 24, 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

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 wording

Net sales were $718.1 million for the thirteen weeks ended September 29, 2024 compared to $677.3 million for the thirteen weeks ended September 24, 2023, an increase of $40.8 million, or 6.0 percent. The higher net sales, compared to the thirteen weeks ended September 24, 2023, were primarily driven by the acquisition of Supreme, which contributed $60.8 million of incremental net sales. Excluding the impact of Supreme, the $20.0 million decrease in net sales from the third quarter of 2023 was driven primarily by the combined net impact of price and mix on our overall average selling price, which accounted for 14.0 percent of the $20.0 million decrease. Sales unit volume was essentially flat year over year. Overall end-market demand was softer in the third quarter of 2024 as compared to the third quarter of 2023 in the repair and remodel markets, while single-family new construction was stronger in the third quarter of 2024 as compared to the third quarter of 2023.

Previous wording

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 wording

Compared to the thirteen weeks ended September 24, 2023, net sales to dealers, whose end customers include builders, professional trades and home remodelers, increased $25.1 million, or 6.8 percent, net sales to retailers, including through their respective retail internet website portals, increased $0.8 million, or 0.3 percent, and net sales directly to builders increased $14.9 million, or 18.9 percent.

Previous 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.

Current wording

Selling, general and administrative expenses increased by $26.0 million, or 18.5 percent, to $166.3 million (23.2 percent of net sales) in the thirteen weeks ended September 29, 2024 compared to $140.3 million (20.7 percent of net sales) in the thirteen weeks ended September 24, 2023. The increase in the third quarter of 2024 is primarily due to acquisition-related costs ($15.0 million) associated with the acquisition of Supreme, the inclusion of Supreme ($12.1 million) and increased associate-related costs, net of lower variable compensation ($2.4 million).

Previous wording

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 wording

Restructuring charges were $7.8 million in the thirteen weeks ended September 29, 2024, compared to restructuring charges of $1.4 million in the thirteen weeks ended September 24, 2023. Charges in the third quarter of 2024 include severance costs, facility closure costs and other employee-related costs in order to better align our workforce with our forecasted demand within our manufacturing footprint.

Previous 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.

Current wording

Other income, net was $1.8 million in the thirteen weeks ended September 29, 2024, an increase of $0.8 million as compared to other expense, net of $1.0 million in the thirteen weeks ended September 24, 2023. This increase was due primarily to transactional foreign currency gains in the third quarter of 2024.

Previous 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.

Current wording

The effective income tax rates for thethirteen weeks ended September 29, 2024 and September 24, 2023, were 26.1 percent and 23.4 percent, respectively. The net increase in the effective tax rate between the periods is primarily due to nondeductible acquisition-related transaction costs, an increase in nondeductible stock compensation and changes in foreign income inclusions with offsetting foreign tax credits, partially offset by favorable return-to-provision adjustments and a decrease in the deferred tax liability for foreign earnings.

Previous wording

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 wording

The difference between our effective income tax rate for thethirteen weeks ended September 29, 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, nondeductible acquisition-related transaction costs and foreign income inclusions with offsetting tax credits, partially offset by favorable return-to-provision adjustments and the mix of earnings in jurisdictions with differing tax rates.

Previous wording

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 wording

The following discussion of condensed consolidated results of operations refers to the thirty-nine weeks ended September 29, 2024 compared to the thirty-nine weeks ended September 24, 2023.

Previous wording

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 wording

Net sales were $2,032.7 million for the thirty-nine weeks ended September 29, 2024 compared to $2,049.1 million for the thirty-nine weeks ended September 24, 2023, a decrease of $16.4 million, or 0.8 percent. The lower net sales, compared to the thirty-nine weeks ended September 24, 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. Excluding the $60.8 million of incremental sales in the third quarter of 2024 related to the Supreme acquisition, the increased sales unit volume offset 9.0 percent of the gross year over year decrease in net sales. Overall end-market demand was softer in the first three quarters of 2024 as compared to the first three quarters of 2023 in the repair and remodel markets, while single-family new construction strengthened in the first three quarters of 2024.

Previous wording

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 wording

Compared to the thirty-nine weeks ended September 24, 2023, net sales to dealers, whose end customers include builders, professional trades and home remodelers, declined $32.7 million, or 3.0 percent, and net sales to retailers, including through their respective retail internet website portals, declined $21.1 million, or 2.9 percent. Net sales directly to builders increased $37.4 million, or 16.4 percent.

Previous wording

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 wording

Foreign currency impact was unfavorable by $0.7 million during the thirty-nine weeks ended September 29, 2024 as compared to the thirty-nine weeks ended September 24, 2023.

Previous wording

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 wording

Cost of products sold decreased by $11.8 million, or 0.9 percent, to $1,359.0 million (66.9 percent of net sales) in the thirty-nine weeks ended September 29, 2024 as compared to $1,370.8 million (66.9 percent of net sales) in the thirty-nine weeks ended September 24, 2023. The $11.8 million decrease in cost of products sold in the first three quarters 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 $5.2 million of netincremental costs in the first three quarters of 2023 ($9.4 million of gross costs, less $4.2 million of insurance recoveries) related to the tornado at the Jackson, Georgia 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 8.9 percent of the gross year-over-year decrease in cost of products sold, the acquisition of Supreme, which contributed to $40.6 million of cost of products sold and $3.0 million of accumulated medical rebates in 2023 related to the favorable renegotiation of our health insurance program that did not recur in the current year.

Previous wording

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 wording

Selling, general and administrative expenses increased by $33.5 million, or 8.0 percent, to $450.8 million (22.2 percent of net sales) in the thirty-nine weeks ended September 29, 2024 compared to $417.3 million (20.4 percent of net sales) in the thirty-nine weeks ended September 24, 2023. The increase in the first three quarters of 2024 is primarily due to increased acquisition-related costs ($19.4 million) associated with the acquisition of Supreme, the inclusion of Supreme ($12.1 million) and associate-related costs ($12.8 million), including salaries and incentive compensation, and professional support fees ($5.8 million). These increases are partially offset by lower distribution and commission costs ($9.5 million), as a result of the decrease in net sales. The first three quarters of 2023 included $2.3 million of costs directly related to the separation from Fortune Brands, which did not recur in 2024.

Previous wording

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 wording

Restructuring charges were $11.0 million in the thirty-nine weeks ended September 29, 2024, as compared to restructuring charges of $4.1 million in the thirty-nine weeks ended September 24, 2023. Charges in the thirty-nine weeks ended September 29, 2024 are largely related to severance costs, facility closure costs and other employee-related costs in order to better align our workforce with our forecasted demand within our manufacturing footprint.

Previous wording

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 wording

Interest expense was $54.7 million in the thirty-nine weeks ended September 29, 2024 as compared to $49.9 million in the thirty-nine weeks ended September 24, 2023. The first three quarters of 2024 include $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 average 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.

Previous wording

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 wording

Other income, net was $5.0 million in the thirty-nine weeks ended September 29, 2024, an increase of $4.9 million as compared to other expense, net of $0.1 million in the thirty-nine weeks ended September 24, 2023. This increase was due primarily to transactional foreign currency gains recorded in the first three quarters of 2024.

Previous 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:

Current wording

Our condensed consolidated income before taxes, income tax expense, and effective tax rate for the thirty-nine week periods ended September 29, 2024 and September 24, 2023 were as follows:

Previous wording

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 wording

The effective income tax rates for thethirty-nine weeks ended September 29, 2024 and September 24, 2023, were 24.6 percent and 25.4 percent, respectively. The net decrease in the effective tax rate between the periods is primarily related to favorable return-to-provision adjustments, the stock compensation windfall benefit for shares which vested and a decrease in the deferred tax liability for foreign earnings, partially offset by nondeductible acquisition-related transaction costs and nondeductible compensation.

Previous 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.

Current wording

The difference between our effective income tax rate for thethirty-nine weeks ended September 29, 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, nondeductible compensation and nondeductible acquisition-related transaction costs, partially offset by favorable return-to-provision adjustments, 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 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.

Current wording

The difference between our effective income tax rate for the thirty-nine weeks ended September 24, 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 and in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 within Part II, Item 1A.

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 the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 within Part II, Item 1A.

Previous wording

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 wording

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 10, "Debt," for further details).

Previous wording

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 wording

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 0.20 percent to 0.30 percent per annum, depending on its net leverage ratio.

Previous 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.

Current wording

As of September 29, 2024, we had $1,062.3 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 twenty-six weeks ended June 30, 2024 and June 25, 2023.

Current wording

Below is a summary of cash flows for the thirty-nine weeks ended September 29, 2024 and September 24, 2023.

Previous 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.

Current wording

Net cash provided by operating activities was $176.9 million in the first three quarters of 2024 as compared to $336.5 million in the first three quarters of 2023. In the first three quarters of 2024, the movement in accounts receivable was $2.3 million unfavorable. In the first three quarters of 2023, our accounts receivable decreased $60.1 million as a result of improvements in our collection processes throughout 2023. In the first three quarters of 2024, the movement in inventory was $32.5 million unfavorable, reflective of the normal seasonal build in inventory from year-end. The first three quarters of 2023 had favorable movement in inventory of $103.9 million. In 2022, we executed an intentional build in inventory in the first three quarters 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 three quarters of 2023 reflected our efforts to more efficiently manage our inventory levels in the supply chain environment, which have continued through the first three quarters of 2024. Accounts payable was $18.0 million favorable in the first three quarters of 2024, reflective of the increased purchasing associated with the higher inventory balance from year-end, as compared to unfavorable accounts payable movement of $42.8 million in the first three quarters of 2023 as a result of decreased purchasing levels aligned with our inventory management. Restructuring charges, net of cash payments, was $4.3 million favorable in the first three quarters of 2024 as compared to $13.9 million unfavorable in the first three quarters of 2023.

Previous 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.

Current wording

Net cash used in investing activities was $541.9 million in the first three quarters of 2024, compared to net cash used in investing activities of $21.1 million in first three quarters of 2023. The year-over-year increase is due to the acquisition of Supreme, net of cash acquired, of $515.7 million and increased capital expenditures as compared to the prior year. These increases were partially offset by the proceeds from the sale of a former manufacturing facility site in the second quarter of 2024.

Previous wording

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.

Current wording

Net cash provided by financing activities was $331.3 million in the thirty-nine weeks ended September 29, 2024 as compared to net cash used of $292.1 million in the thirty-nine weeks ended September 24, 2023. In the first three quarters of 2023, we used strong cash flows from operations to pay down $272.5 million of debt. In the first three quarters of 2024, our $712.5 million term loan was repaid, and replaced with $700.0 million of Senior Notes as a result of the refinancing transaction completed in the second quarter. In the first three quarters of 2024, we used$430.0 million of proceeds from the revolving credit facility provided for by the 2024 Credit Agreement to fund the Supreme acquisition. We have subsequently paid down $55.0 million on the revolving credit facility through the usage of cash flow from operations. The first three quarters of 2024 also included the payment of $17.8 million of financing fees.

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, including the acquisition of Supreme, which was completed on July 10, 2024.

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.

Previous wording

We prepare our condensed consolidated financial statements in conformity with GAAP. This requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. Our critical accounting estimates requiring significant judgement that could materially impact our results of operations, financial position and cash flows are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Since the date of the Company’s most recent Annual Report, there have been no material changes in our critical accounting estimates or assumptions.

Current wording

Our critical accounting estimates requiring significant judgement that could materially impact our results of operations, financial position and cash flows are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Since the date of the Company’s most recent Annual Report, there have been no material changes in our critical accounting estimates or assumptions, except as set forth below.