MasterBrand(MBC) - 2024 Q2 - Quarterly Report

Financial Performance - Net sales for the thirteen weeks ended June 30, 2024, were $676.5 million, a decrease of$18.6 million or 2.7% compared to $695.1 million for the same period in 2023[93] - Gross profit for the period was$231.0 million, down $5.2 million or 2.2$236.2 million in the previous year[93] - Operating income decreased by $9.6 million or 11.0$77.8 million compared to $87.4 million in the prior year[93] - Net income for the period was$45.3 million, down $5.9 million or 11.5$51.2 million in the previous year[93] - Net sales for the twenty-six weeks ended June 30, 2024, were $1,314.6 million, a decrease of$57.2 million or 4.2% compared to $1,371.8 million for the same period in 2023[107] - Gross profit for the twenty-six weeks ended June 30, 2024, was$435.7 million, a decrease of $5.1 million or 1.2$440.8 million in the previous year[105] - Operating income for the period was $140.6 million, down$12.5 million or 8.2% from $153.1 million in the same period last year[105] - Net income for the twenty-six weeks ended June 30, 2024, was$82.8 million, a decrease of $3.4 million or 3.9$86.2 million in the previous year[105] Cost and Expenses - Cost of products sold decreased by $13.4 million or 2.9$445.5 million, representing 65.9% of net sales, compared to 66.0% in the prior year[97] - Selling, general and administrative expenses increased by $5.0 million or 3.5$146.7 million, accounting for 21.7% of net sales, up from 20.4%[98] - Cost of products sold decreased by $52.1 million or 5.6$878.9 million, representing 66.9% of net sales, compared to 67.9% in the prior year[109] - Selling, general and administrative expenses increased by $7.5 million or 2.7$284.5 million, which is 21.6% of net sales, compared to 20.2% in the prior year[110] Sales Performance - Net sales to dealers declined by $26.0 million or 6.9$13.7 million or 17.5%[96] - Net sales to dealers declined by $57.8 million or 8.0$22.5 million or 15.0%[108] Debt and Financing - The company refinanced its debt by completing the offering of $700.0 million aggregate principal amount of Senior Notes on June 27, 2024[119] - The company plans to use proceeds from the refinancing to fund the acquisition of Supreme, which is expected to close in July 2024[119] - As of June 30, 2024, the company had$688.9 million in outstanding third-party borrowings, net of deferred financing fees[127] - The company repaid a $712.5 million term loan and replaced it with$700.0 million of Senior Notes in a refinancing transaction completed in the second quarter of 2024[131] - The company was in compliance with all debt covenants under the 2024 Credit Agreement as of June 30, 2024[126] Cash Flow - Net cash provided by operating activities decreased to $96.1 million in the first half of 2024 from$194.0 million in the first half of 2023, reflecting a decline of approximately 50.5%[129][130] - Net cash used in investing activities was $11.9 million in the first half of 2024, slightly up from$11.2 million in the same period of 2023[131] - Net cash used in financing activities significantly decreased to $40.3 million in the first half of 2024 from$172.0 million in the first half of 2023[131] Taxation - The effective tax rate decreased to 24.6% from 26.5% in the prior year[102] - The effective income tax rate decreased to 24.1% for the twenty-six weeks ended June 30, 2024, from 26.7% in the prior year[115] Strategic Initiatives - The company expects to leverage technology and data to enhance consumer experience and further extend competitive advantages[91] - The company completed the acquisition of Supreme on July 10, 2024, indicating ongoing market expansion efforts[132] - The financial covenant requires the company to maintain a net leverage ratio not exceeding 3.50 to 1.00 for fiscal quarters ending on or prior to December 31, 2024[126] - The company believes its cash and cash equivalents, along with operating cash flows and credit facilities, will be adequate to fund typical needs and projected capital expenditures[132] Inventory Management - The company experienced an unfavorable movement in inventory of $20.7 million in the first half of 2024, compared to a favorable movement of$54.0 million in the first half of 2023[129]