0001941365-25-000080
SEC filingMasterBrand's second quarter revenue grew 8% driven by the Supreme acquisition, but operating income declined 13.5% due to restructuring costs and unfavorable manufacturing leverage.
MasterBrand delivered net sales of $730.9 million in the second quarter of fiscal 2025, an 8.0% increase from $676.5 million in the prior-year period. The growth was primarily attributable to the inclusion of $70.7 million from the Supreme acquisition, which closed in July 2024. Excluding Supreme, organic sales declined approximately $16.3 million due to lower sales unit volume, partially offset by favorable price/mix. Cost of products sold rose 10.3% to $491.2 million, outpacing revenue growth, leading to gross profit of $239.7 million, up only 3.8%. Gross margin contracted to 32.8% from 34.1% in the prior year, driven by unfavorable fixed cost leverage and higher manufacturing costs.
Operating income decreased 13.5% to $67.3 million from $77.8 million, as higher SG&A expenses ($159.4 million vs. $146.7 million) and increased restructuring charges ($6.6 million vs. $2.8 million) more than offset the gross profit gain. Net income fell 17.7% to $37.3 million, while diluted EPS declined to $0.29 from $0.35.
For the first half of 2025, net sales rose 5.8% to $1.39 billion, but operating income dropped 25.7% to $104.4 million, and net income fell 38.9% to $50.6 million.
Total assets increased to $2.96 billion as of June 29, 2025, from $2.93 billion at December 29, 2024. Cash and cash equivalents remained nearly flat at $120.1 million. Long-term debt, net of issuance costs, stood at $998.7 million, down slightly from $1,007.8 million, reflecting a $10 million net paydown on the revolving credit facility. The company had $418.6 million of availability under its $750 million revolver. Goodwill rose to $1.13 billion due to foreign currency translation adjustments. Total equity grew to $1.36 billion from $1.29 billion, driven by net income and other comprehensive income.
Net cash provided by operating activities in the first half totaled $53.4 million, a sharp decline from $96.1 million in the prior-year period. The decrease was largely due to lower net income ($50.6 million vs. $82.8 million) and unfavorable working capital changes, particularly a $26.9 million increase in accounts receivable (vs. $11.2 million increase in the prior period) and a $5.5 million decrease in accounts payable (vs. a $21.8 million increase). Capital expenditures increased to $27.9 million from $18.3 million, reflecting higher investment. Free cash flow (operating cash flow minus capex) declined to $25.5 million from $77.8 million. During the period, the company also used $18.1 million for stock repurchases and paid down $10 million of revolver borrowings.
Management attributed the organic sales decline to weaker end-market demand in the repair and remodel and single-family new construction sectors. The company highlighted that realized savings from cost reduction actions were more than offset by higher manufacturing costs. Restructuring charges of $11.3 million in the first half were largely related to workforce reduction to align with forecasted demand. The company did not provide specific forward guidance but noted ongoing efforts to improve efficiency.
On August 6, 2025, MasterBrand announced a definitive agreement to merge with American Woodmark in an all-stock transaction, with American Woodmark shareholders receiving 5.15 shares of MasterBrand common stock per share. The merger, expected to close in early 2026, is subject to shareholder and regulatory approvals and is intended to create significant value through synergies. The company also disclosed that the recently enacted One Big Beautiful Bill Act (OBBBA) is being assessed, while Pillar Two tax rules are expected to unfavorably impact the 2026 effective tax rate.
MasterBrand operates as a single reportable segment: residential cabinets. Revenue by channel: Dealers (56% of Q2 sales) grew 16.2%, Retailers (30%) declined 3.8%, and Builders (13%) increased 6.3%. Geographically, 95.8% of sales were in the United States. The Supreme acquisition contributed $70.7 million in quarterly revenue and $5.5 million in net income. The company incurred $3.5 million of acquisition-related costs in the first half (down from $4.4 million in the prior year). Restructuring charges included $9.1 million in workforce reduction costs. The company also recognized a $0.2 million pension settlement charge upon completion of plan termination. Goodwill and indefinite-lived intangible assets were tested and no impairment was required. The company had $1.3 million in allowance for doubtful accounts. Debt consists of $700 million in 7.00% Senior Notes due 2032 and $310 million drawn on the revolver, with net leverage covenants at 3.25x. Stock repurchases during Q2 totaled 576,445 shares at an average price of $11.69.