What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-29 compared with 2024-07-30 · 94 added, 90 removed, 166 unchanged (53% of the section changed)

19 unchanged sentences

Manufacturing Plants

As of June 30, 2024, we operated 19 manufacturing plants, including 17 plants located within the U.S.

As of September 30, 2024, we operated 19 manufacturing plants, including 17 plants located within the U.S.

and two plants in Canada.

This excludes our St.

Helens, Oregon mineral fiber manufacturing plant, which was closed in the second quarter of 2018 and was classified as an asset held for sale as of June 30, 2024.

WAVE operates seven additional plants in the U.S.

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Mineral Fiber segment results reflect those sales transactions.

The Mineral Fiber segment also includes all assets and liabilities not specifically allocated to our Architectural Specialties or Unallocated Corporate segment, including all property and related depreciation associated with our Lancaster, PA headquarters.

Operating results for the Mineral Fiber segment include a significant majority of allocated Corporate administrative expenses that represent a reasonable allocation of general services to support its operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Architectural Specialties – produces, designs and sources ceilings, walls and facades primarily for use in commercial settings.

Products are available in numerous materials, such as metal, wood and felt, in addition to various colors, shapes and designs.

These products offer various performance attributes such as acoustical control, rated fire protection, light and aesthetic appeal.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

products offer various performance attributes such as acoustical control, rated fire protection, light and aesthetic appeal.

We sell standard, premium and customized products, a portion of which are sourced from third-party producers.

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We closely monitor publicly available macroeconomic data and trends that provide insight into commercial construction market activity, including, but not limited to, gross domestic product, office vacancy rates, the Architecture Billings Index, new commercial construction starts, state and local government spending, corporate profits, and retail sales.

The Company also continues to monitor the impacts of geopolitical events, none of which had a material direct impact on our financial condition, liquidity or results of operations in the first six months of 2024 or 2023.

Several factors and trends within our markets affected our business performance during the three and six months ended June 30, 2024 compared to the same periods in 2023, most notably an increase in net sales due to our April 2024 acquisition of 3form and our October 2023 acquisition of BOK.

For the three months ended June 30, 2024, sales volumes increased $27 million compared to the same period in 2023, with the 3form and BOK acquisitions contributing $20 million to net sales and the remaining increase driven by stabilizing Mineral Fiber demand and favorable custom project timing in Architectural Specialties.

For the six months ended June 30, 2024, sales volumes increased $23 million compared to the same period in 2023, driven by a $23 million contribution from the 3form and BOK acquisitions.

Several factors and trends within our markets affected our business performance during the three and nine months ended September 30, 2024 compared to the same periods in 2023, most notably an increase in net sales due to our April 2024 acquisition of 3form and our July 2023 acquisition of BOK.

For the three months ended September 30, 2024, sales volumes increased $30 million compared to the same period in 2023, with the 3form and BOK acquisitions contributing $25 million to net sales.

For the nine months ended September 30, 2024, sales volumes increased $53 million compared to the same period in 2023 driven primarily by a $48 million increase in net sales from the 3form and BOK acquisitions.

Average Unit Value .

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Within our Mineral Fiber segment, we focus on improving sales dollars per unit sold, or average unit value (“AUV”), as a measure that accounts for the varying assortment of products and like-for-like pricing impacting our revenues.

Favorable AUV increased our total consolidated net sales for the three and six months ended June 30, 2024 by approximately $13 million and $33 million, respectively, compared to the same periods in 2023.

Favorable AUV increased our total consolidated net sales for the three and nine months ended September 30, 2024 by approximately $9 million and $42 million, respectively, compared to the same periods in 2023.

Our Architectural Specialties segment revenues are primarily generated by individual contracts that include a mix of products, both manufactured by us and sourced from third parties, that varies by project.

As such, we do not track AUV performance for this segment, but rather attribute most changes in net sales to volume.

During the first quarter of 2024, we implemented price increases on Mineral Fiber ceiling products and WAVE implemented price increases on grid products.

In the second quarter of 2024, WAVE announced and implemented price increases on certain grid products, while we announced price increases on Mineral Fiber products that will become effective in the third quarter of 2024.

During the first and third quarters of 2024, we implemented price increases on Mineral Fiber ceiling products.

During the first and second quarters of 2024, WAVE implemented price increases on grid products.

Future pricing actions may be implemented based on numerous factors, including the rate and pace of inflation and its impact on our business.

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Operating Expenses.

Our operating expenses are comprised of direct production costs (principally raw materials, labor, and energy), manufacturing overhead costs, freight, costs to purchase sourced products and selling, general and administrative (“SG&A”) expenses.

Our operating expenses are composed of direct production costs (principally raw materials, labor, and energy), manufacturing overhead costs, freight, costs to purchase sourced products and selling, general and administrative (“SG&A”) expenses.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Fluctuations in the prices of these inputs impact our financial results.

In the second quarter and first half of 2024, lower energy and freight costs positively impacted operating income by $1 million and $4 million, respectively, compared to the same periods in 2023.

During the three and nine months ended September 30, 2024, lower energy and freight costs were partially offset by higher raw material costs, resulting in a $1 million and $5 million benefit to operating income, respectively, compared to the prior year periods.

Acquisition-Related Expenses and Losses

In connection with our acquisitions of 3form in April 2024, Insolcorp in October 2023, BOK in July 2023 and Arktura LLC (“Arktura”) in December 2020, we recorded certain acquisition-related expenses and losses to operating income during the three and six months ended June 30, 2024 and 2023, summarized as follows (dollar amounts in millions):

In connection with our acquisitions of 3form in April 2024, Insolcorp in October 2023, BOK in July 2023 and Arktura LLC (“Arktura”) in December 2020, we recorded certain acquisition-related expenses and losses to operating income during the three and nine months ended September 30, 2024 and 2023, summarized as follows (dollar amounts in millions):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Affected Line Item in the Condensed Consolidated Statements of Earnings and Comprehensive Income

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Depreciation of fixed assets acquired and amortization of intangible assets acquired have been excluded from the table above.

As of June 30, 2024 we had approximately 3,500 full-time and part-time employees, compared to 3,100 full-time and part-time employees as of December 31, 2023.

As of September 30, 2024 we had approximately 3,500 full-time and part-time employees, compared to 3,100 full-time and part-time employees as of December 31, 2023.

The increase in employees since December 31, 2023 was primarily driven by our April 2024 acquisition of 3form.

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Change is Favorable

Three Months Ended June 30,

Three Months Ended September 30,

Total consolidated net sales

Operating income

Six Months Ended June 30,

Nine Months Ended September 30,

Total consolidated net sales

1 unchanged sentence

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Consolidated net sales for the second quarter of 2024 increased 12.2% over the prior-year period primarily due to higher volumes of $27 million and favorable AUV of $13 million.

Consolidated net sales for the third quarter of 2024 increased 11.3% over the prior-year period primarily due to higher volumes of $30 million and favorable AUV of $9 million.

Architectural Specialties net sales increased $31 million and Mineral Fiber net sales increased $8 million over the prior-year period.

Architectural Specialties segment net sales improved primarily from a $20 million contribution from the acquisitions of 3form and BOK.

The increase in Mineral Fiber net sales was primarily driven by favorable AUV and, to a lesser extent, higher sales volumes.

Consolidated net sales for the first six months of 2024 increased 8.8% compared to the prior-year period primarily due to favorable AUV of $33 million and higher volumes of $23 million.

Architectural Specialties segment net sales improved primarily due to contributions from the acquisitions of 3form and BOK.

The increase in Mineral Fiber net sales was primarily driven by favorable AUV.

Consolidated net sales for the first nine months of 2024 increased 9.7% compared to the prior-year period primarily due to higher volumes of $53 million and favorable AUV of $42 million.

Architectural Specialties net sales increased $59 million and Mineral Fiber net sales increased $36 million over the prior-year period.

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The increase in Mineral Fiber net sales was primarily driven by favorable AUV, partially offset by lower sales volumes.

Cost of goods sold in the second quarter of 2024 was 59.1% of net sales, compared to 61.9% for the same period in 2023.

Cost of goods sold in the first six months of 2024 was 60.4% of sales, compared to 62.9% for the same period in 2023.

The decreases in cost of goods sold as a percent of net sales for the second quarter and first six months of 2024 compared to the same periods in 2023 were driven primarily by favorable AUV performance, improved manufacturing productivity and lower input costs.

SG&A expenses in the second quarter of 2024 were $79.9 million, or 21.9% of net sales, compared to $61.9 million, or 19.0% of net sales, for the same period in 2023.

The year-over-year increase in SG&A expenses was primarily driven by an $8 million increase related to the acquisitions of 3form and BOK, a $3 million increase in incentive compensation, a $2 million increase in depreciation and amortization expense, a $2 million increase in business development expenses and a $1 million increase in reserves for environmental remediation matters.

SG&A expenses in the first six months of 2024 were $145.6 million, or 21.1% of net sales, compared to $124.6 million, or 19.6% of net sales, for the same period in 2023.

The year-over-year increase in SG&A expenses was primarily driven by a $10 million increase related to the acquisitions of 3form and BOK, a $4 million increase in incentive compensation, a $2 million increase in selling expenses and a $2 million increase in business development expenses, as well as an increase in deferred compensation related charges.

Equity earnings from unconsolidated subsidiaries were $26.3 million in the second quarter of 2024, compared to $24.9 million in the second quarter of 2023, and were $53.5 million in the first six months of 2024 compared to $45.7 million in the same period in 2023.

WAVE equity earnings were $26.5 million in the second quarter of 2024, while Overcast equity losses were $0.2 million.

WAVE equity earnings were $53.9 million in the first six months of 2024, while Overcast equity losses were $0.4 million.

The increases in WAVE equity earnings for both the second quarter and first six months of 2024 compared to the same periods in 2023 were primarily driven by the benefit from favorable AUV and higher sales volumes, partially offset by increased employee compensation and benefits.

Cost of goods sold in the third quarter of 2024 was 57.6% of net sales, compared to 59.3% for the same period in 2023.

Cost of goods sold in the first nine months of 2024 was 59.4% of sales, compared to 61.6% for the same period in 2023.

The decreases in cost of goods sold as a percent of net sales for the third quarter and first nine months of 2024 compared to the same periods in 2023 were driven primarily by favorable AUV margin benefit, improved manufacturing productivity and lower input costs.

SG&A expenses in the third quarter of 2024 were $77.6 million, or 20.1% of net sales, compared to $64.6 million, or 18.6% of net sales, for the same period in 2023.

The year-over-year increase in SG&A expenses was primarily driven by an $11 million increase related to the acquisitions of 3form and BOK and a $3 million increase in incentive compensation.

SG&A expenses in the first nine months of 2024 were $223.1 million, or 20.7% of net sales, compared to $189.2 million, or 19.2% of net sales, for the same period in 2023.

The year-over-year increase in SG&A expenses was primarily driven by a $20 million increase related to the acquisitions of 3form and BOK, a $6 million increase in incentive compensation, a $3 million increase in deferred compensation related charges, a $2 million increase in selling expenses, as well as a $2 million increase in business development expenses.

Remeasurement losses for changes in the fair value of contingent consideration were $0.2 million and $0.6 million for the three and nine months ended September 30, 2024 and related to our BOK and Insolcorp acquisitions.

See Note 15 to the Condensed Consolidated Financial Statements for further information.

Interest expense was $11.1 million in the second quarter of 2024 compared to $9.2 million in the second quarter of 2023.

Interest expense was $20.1 million in the first six months of 2024 compared to $17.9 million in the first six months of 2023.

The increases for the second quarter and first six months of 2024 in comparison to the same periods in 2023 were primarily due to higher average effective interest rates, partially offset by lower average debt balances.

Other non-operating income, net, was $3.2 million in the second quarter of 2024 compared to $2.2 million in the second quarter of 2023.

Other non-operating income, net, was $6.3 million in the first six months of 2024 compared to $4.6 million in the first six months of 2023.

The increases in other non-operating income, net, for the second quarter and first six months of 2024 in comparison to the same periods in 2023 were primarily driven by the non-service cost components of pension and postretirement net periodic benefit costs.

Income tax expense was $21.2 million in the second quarter of 2024 compared to $19.8 million in the second quarter of 2023.

The effective tax rate for the second quarter of 2024 was 24.3% compared to 24.8% for the same period of 2023.

Income tax expense was $41.5 million in the first six months of 2024 compared to $36.4 million in the first six months of 2023.

The effective tax rate was 24.8% in the first six months of 2024 compared to 25.3% in the same period of 2023.

The effective tax rates for the second quarter and first six months of 2024 were lower compared to the same periods in 2023 primarily due to increased excess tax benefits from stock-based compensation deductions.

Total Other Comprehensive Loss (“OCL”) was $0.9 million in the second quarter of 2024 compared to Other Comprehensive Income ("OCI") of $0.4 million in the second quarter of 2023.

OCL was $1.8 million in the first six months of 2024 compared to $1.7 million in the first six months of 2023.

The change in OCL in the second quarter and first six months of 2024 compared to the same periods in 2023 were primarily driven by foreign currency translation adjustments and pension and postretirement adjustments.

Impairment and gain on sales of fixed assets, net were $0.2 million and $0.3 million for the three and nine months ended September 30, 2024.

During the third quarter of 2024, we recorded a $4.6 million gain on the sale of our idled Mineral Fiber plant in St.

Helens, Oregon.

Also in the third quarter of 2024, we recorded a $4.9 million impairment charge for undeveloped land adjacent to our Corporate headquarters, which represented the expected loss on sale of the property based on an agreement we entered into with a buyer that we anticipate closing within the next twelve months.

Equity earnings from unconsolidated subsidiaries were $25.2 million in the third quarter of 2024, compared to $23.4 million in the third quarter of 2023, and were $78.7 million in the first nine months of 2024 compared to $69.1 million in the same period in 2023.

WAVE equity earnings were $25.5 million in the third quarter of 2024, while Overcast equity losses were $0.3 million.

WAVE equity earnings were $79.4 million in the first nine months of 2024, while Overcast equity losses were $0.7 million.

The year-over-year increase in WAVE equity earnings for the third quarter of 2024 was primarily driven by the benefit from favorable AUV, partially offset by lower sales volumes.

The year-over-year increase in WAVE equity earnings for the first nine months of 2024 was primarily driven by the benefit from favorable AUV and higher sales volumes, partially offset by increased employee compensation and benefits.

See Note 8 to the Condensed Consolidated Financial Statements for further information.

Interest expense was $10.5 million in the third quarter of 2024 compared to $8.8 million in the third quarter of 2023.

Interest expense was $30.6 million in the first nine months of 2024 compared to $26.7 million in the first nine months of 2023.

The increases for the third quarter and first nine months of 2024 in comparison to the same periods in 2023 were primarily due to higher average effective interest rates, partially offset by lower average debt balances.

Other non-operating income, net, was $3.0 million in the third quarter of 2024 compared to $2.3 million in the third quarter of 2023.

Other non-operating income, net, was $9.3 million in the first nine months of 2024 compared to $6.9 million in the first nine months of 2023.

The increases in other non-operating income, net, for the third quarter and first nine months of 2024 in comparison to the same periods in 2023 were primarily driven by the non-service cost components of pension and postretirement net periodic benefit costs.

Income tax expense was $26.9 million in the third quarter of 2024 compared to $24.2 million in the third quarter of 2023.

The effective tax rate for the third quarter of 2024 was 25.9% compared to 25.8% for the same period of 2023.

Income tax expense was $68.4 million in the first nine months of 2024 compared to $60.6 million in the first nine months of 2023.

The effective tax rate was 25.2% in the first nine months of 2024 compared to 25.5% in the same period of 2023.

The effective tax rate for the third quarter of 2024 was essentially unchanged from the same period in 2023.

The decrease in the effective tax rate for the first nine months of 2024 in comparison to the same period in 2023 was primarily due to an increase in discrete tax benefits recognized, partially offset by less favorable permanent adjustments.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Total Other Comprehensive Loss (“OCL”) was $6.4 million in the third quarter of 2024 compared to $2.6 million in the third quarter of 2023.

OCL was $8.2 million in the first nine months of 2024 compared to $4.3 million in the first nine months of 2023.

The change in OCL in the third quarter and first nine months of 2024 compared to the same periods in 2023 were primarily driven by derivative losses, pension and postretirement adjustments and foreign currency translation adjustments.

Derivative losses represent the mark-to-market value fair adjustments for our derivative assets and liabilities, and the recognition of gains and losses previously deferred in Accumulated Other Comprehensive Income.

Pension and postretirement adjustments represent the amortization of actuarial gains and losses related to our defined benefit pension and postretirement plans.

Foreign currency translation adjustments represent the change in the U.S.

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Foreign currency translation adjustments in 2024 and 2023 were driven primarily by changes in the Canadian dollar.

Pension and postretirement adjustments represent the amortization of actuarial gains and losses related to our defined benefit pension and postretirement plans.

Partially offsetting OCL in the second quarter and first six months of 2024 compared to the same periods in 2023

Management’s Discussion and Analysis of Financial Condition and Results of Operations

was OCI from derivative gains/losses.

Derivative gain/loss represents the mark-to-market value adjustments of our derivative assets and liabilities, and the recognition of gains and losses previously deferred in Accumulated Other Comprehensive Income.

REPORTABLE SEGMENT RESULTS

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Change is Favorable

Three Months Ended June 30,

Three Months Ended September 30,

Total segment net sales

Operating income

Six Months Ended June 30,

Nine Months Ended September 30,

Total segment net sales

Operating income

Net sales increased $16 million in the second quarter of 2024 as compared to the prior-year quarter due to $13 million of favorable AUV and $3 million of higher sales volumes.

The improvement in AUV was driven primarily by favorable like-for-like price, with a modest contribution from favorable mix.

The second quarter increase in volumes was primarily driven by stabilizing demand and the impact from our growth initiatives compared to the prior-year period.

For the first six months of 2024, net sales improved by $27 million from the prior-year period, primarily due to $32 million of favorable AUV, partially offset by lower sales volumes of $5 million.

Net sales increased 3.3% in the third quarter of 2024 as compared to the prior-year quarter due to $10 million of favorable AUV, partially offset by $1 million of lower sales volumes.

The improvement in AUV was driven by favorable like-for-like price.

For the first nine months of 2024, net sales improved by 5.0% from the prior-year period, primarily due to $42 million of favorable AUV, partially offset by lower sales volumes of $6 million.

The favorable AUV was driven primarily by positive like-for-like pricing, and to a lesser extent, favorable mix.

The decrease in volumes for the first six months of 2024 was driven primarily by prior-year first quarter inventory level increases at our home center customers that did not repeat in the first half of 2024, partially offset by stabilizing demand and the impact from our growth initiatives compared to the prior-year period.

Second-quarter 2024 operating income increased primarily due to a $9 million benefit from favorable AUV, a $3 million decrease in manufacturing and input costs, a $2 million increase from higher sales volumes and a $2 million increase in WAVE equity earnings.

These benefits were partially offset by a $9 million increase in SG&A expenses, driven by $3 million of higher incentive compensation, an increase in employee costs due to inflationary pressures, accruals for environmental remediation matters and higher depreciation and amortization.

Operating income for the first six months of 2024 increased primarily due to a $22 million benefit from favorable AUV, an $8 million increase in WAVE equity earnings and a $6 million decrease in manufacturing and input costs, partially offset by a $3 million decrease from lower sales volumes.

Operating income was also negatively impacted by an $11 million increase in SG&A expenses, that resulted from increases in deferred compensation related charges, an increase in incentive compensation, an increase in employee costs due to inflationary pressures, higher depreciation and amortization expense and an increase in accruals for environmental remediation matters.

The decrease in volumes for the first nine months of 2024 was driven primarily within our home center customer channel, most notably prior-year first quarter inventory level increases that did not repeat in the current year period, partially offset by the positive contribution from our growth initiatives compared to the prior-year period.

Third-quarter 2024 operating income increased primarily due to a $6 million benefit from favorable AUV, a $3 million decrease in manufacturing and input costs and a $2 million increase in WAVE equity earnings.

These benefits were partially offset by a $3 million increase in SG&A expenses, primarily driven by higher incentive compensation.

Operating income for the first nine months of 2024 increased primarily due to a $28 million benefit from favorable AUV, a $10 million increase in WAVE equity earnings and a $9 million decrease in manufacturing and input costs, partially offset by a $4 million decrease from lower sales volumes.

Operating income was also negatively impacted by a $15 million increase in SG&A expenses, which was primarily due to increases in incentive compensation, an increase in deferred compensation related charges, an increase in employee costs due to inflationary pressures, higher depreciation and amortization expense and an increase in accruals for environmental remediation matters.

Architectural Specialties

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Change is Favorable

Three Months Ended June 30,

Three Months Ended September 30,

Total segment net sales

Operating income

Six Months Ended June 30,

Nine Months Ended September 30,

Total segment net sales

Operating income

Net sales increased $24 million in the second quarter of 2024 compared to the same period in 2023 primarily due to a $20 million contribution from the acquisitions of 3form and BOK, and to a lesser extent, increased custom project net sales.

For the first six months of 2024 net sales improved by $28 million from the prior-year period primarily due to a $23 million contribution from the acquisitions of 3form and BOK.

Increased custom metal project net sales also contributed to these results.

Operating income increased in the second quarter of 2024 primarily due to a $14 million margin benefit from increased sales, driven primarily by the acquisitions of 3form and BOK, and partially due to improved project margins.

This increase was partially offset by a $9 million increase in SG&A expenses primarily due to the acquisitions of 3form and BOK, as well as a $3 million increase in manufacturing costs.

Net sales increased $31 million in the third quarter of 2024 compared to the same period in 2023 primarily due to a $25 million increase from the acquisitions of 3form and BOK, in addition to increased custom metal project net sales.

For the first nine months of 2024, net sales improved by $59 million from the prior-year period primarily due to a $48 million contribution from the acquisitions of 3form and BOK, in addition to increased custom metal project net sales.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Operating income for the first six months of 2024 compared to the same period in 2023 was positively impacted by an $18 million margin benefit from increased sales, driven by the acquisitions of 3form and BOK and improved project margins.

This increase was partially offset by a $10 million increase in SG&A expenses due to the acquisitions of 3form and BOK and a $5 million increase in manufacturing costs.

Operating income increased in the third quarter of 2024 primarily due to an $18 million margin benefit from increased sales, driven primarily by the acquisitions of 3form and BOK, and partially due to improved custom project margins.

This increase was partially offset by a $10 million increase in SG&A expenses and a $3 million increase in manufacturing costs, both of which were primarily due to the acquisitions of 3form and BOK.

Operating income for the first nine months of 2024 compared to the same period in 2023 was positively impacted by a $36 million margin benefit from increased sales, driven primarily by the acquisitions of 3form and BOK, and partially due to improved custom project margins.

This increase was largely offset by a $20 million increase in SG&A expenses primarily due to the acquisitions of 3form and BOK and a $9 million increase in manufacturing costs, driven by inflationary pressures and the acquisitions of 3form and BOK.

Unallocated Corporate

Unallocated Corporate operating loss was $1 million in the second quarter of 2024 and 2023.

Unallocated Corporate operating loss was $2 million in the first six months of 2024 and 2023.

Unallocated Corporate operating loss was $1 million in the third quarter of 2024 and 2023.

Unallocated Corporate operating loss was $3 million in the first nine months of 2024 and $2 million in the first nine months of 2023.

FINANCIAL CONDITION AND LIQUIDITY

Operating activities for the first six months of 2024 provided $83.7 million, compared to $93.9 million for the first six months of 2023.

Higher cash earnings for the first six months of 2024 in comparison to the prior-year period were offset by unfavorable timing-related working capital changes, most notably in accounts receivables, and an increase in cash paid for income taxes.

Net cash used in investing activities was $81.4 million in the first six months of 2024, compared to $6.0 million in the first six months of 2023.

The unfavorable change in cash was primarily due to $94 million of cash paid for the 3form acquisition, partially offset by decreased purchases of property, plant and equipment in comparison to the prior year period.

Net cash provided by financing activities was $1.1 million in the first six months of 2024, compared to $92.6 million cash used in the first six months of 2023.

The favorable change in cash was primarily due to increased net borrowings under our credit facility due primarily to the 3form acquisition, a decrease in repurchases of outstanding common stock, and lower payments of acquisition-related contingent consideration.

Operating activities for the first nine months of 2024 provided $180.2 million, compared to $176.4 million for the first nine months of 2023.

The favorable change in cash from operating activities was driven by higher cash earnings for the first nine months of 2024 in comparison to the prior-year period and a favorable timing-related change in accounts payable and accrued expenses was partially offset by an unfavorable timing-related change in accounts receivables and an increase in cash paid for income taxes.

Net cash used for investing activities was $61.2 million in the first nine months of 2024, compared to $10.6 million in the first nine months of 2023.

The unfavorable change in cash in the first nine months of 2024 compared to the same period in 2023 was primarily due to $94 million of cash paid for the 3form acquisition, partially offset by proceeds received from the sale of fixed assets, an increase in proceeds received from company-owned life insurance policies, and lower purchases of property, plant and equipment.

Net cash used for financing activities was $115.7 million in the first nine months of 2024, compared to $175.1 million cash in the first nine months of 2023.

The favorable change in cash was primarily due to a decrease in repurchases of outstanding common stock and lower payments of acquisition-related contingent consideration.

Our liquidity needs for operations vary throughout the year.

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We also have a $25.0 million bi-lateral letter of credit facility.

As of June 30, 2024, the total principal balances outstanding under our senior credit facility were $438.7 million under Term Loan A and $208.0 million under the revolving credit facility.

As of September 30, 2024, the total principal balances outstanding under our senior credit facility were $433.1 million under Term Loan A and $125.0 million under the revolving credit facility.

The senior credit facility includes two financial covenants that require the ratio of consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) to consolidated cash interest expense minus cash consolidated interest income to be greater than or equal to 3.0 to 1.0, and requires the ratio of consolidated funded indebtedness, minus AWI and domestic subsidiary unrestricted cash and cash equivalents up to $100 million, to EBITDA to be less than or equal to 3.75 to 1.0 (subject to certain exceptions for certain acquisitions).

As of June 30, 2024, we were in compliance with all covenants of the senior credit facility.

As of September 30, 2024, we were in compliance with all covenants of the senior credit facility.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Term Loan A is currently priced on a variable interest rate basis.

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June 26, 2024

Under the terms of the interest rate swap with a November 28, 2018 trade date above, we pay a fixed rate monthly and receive a floating rate based on the Secured Overnight Financing Rate (“SOFR”), inclusive of a 0% floor.

Under the terms of the interest rate swap with a November 28, 2018 trade date above, we pay a fixed rate monthly and receive a floating rate based on SOFR, inclusive of a 0% floor.

Under the terms of all remaining interest rate swaps above, we pay a fixed rate monthly and receive a floating rate based on SOFR.

As of June 30, 2024, these swaps are designated as cash flow hedges against changes in SOFR for a portion of our variable rate debt.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

As of September 30, 2024, these swaps are designated as cash flow hedges against changes in SOFR for a portion of our variable rate debt.

We utilize lines of credit and other commercial commitments to ensure that adequate funds are available to meet operating requirements.

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The following table presents details related to our letters of credit facilities (dollar amounts in millions):

June 30, 2024

September 30, 2024

Financing Arrangements

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Revolving credit facility

As of June 30, 2024, we had $73.6 million of cash and cash equivalents, $60.3 million in the U.S.

As of September 30, 2024, we had $73.7 million of cash and cash equivalents, $56.9 million in the U.S.

and $16.8 million in foreign jurisdictions, primarily Canada.

As of June 30, 2024, we also had $292.0 million available under our revolving credit facility.

As of September 30, 2024, we also had $375 million available under our revolving credit facility.

We believe cash on hand and cash generated from operations, together with borrowing capacity under our credit facility, will be adequate to address our near-term liquidity needs based on current expectations of our business operations, capital expenditures, acquisitions and scheduled payments of debt obligations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis