What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-29 compared with 2025-04-29 · 128 added, 70 removed, 136 unchanged (59% of the section changed)

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AWI is an Americas leader in the design, innovation and manufacture of interior and exterior architectural applications including ceilings, specialty walls and exterior metal solutions.

We manufacture and source products made of numerous materials, including mineral fiber, fiberglass, metal, felt, wood, resin, wood fiber and glass-reinforced-gypsum.

We manufacture and source products made of numerous materials, including mineral fiber, fiberglass, metal, felt, wood, resin and glass, wood fiber and glass-reinforced-gypsum.

We also manufacture ceiling suspension system (grid) products through a joint venture with Worthington Enterprises, Inc.

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Overcast is a solutions company offering prefabricated ceiling cloud systems, modular grid platforms and engineering design services to reduce waste and inefficiencies in the built environment.

Our investment and equity earnings in Overcast are included in our Unallocated Corporate segment.

Our investment and equity earnings and losses in Overcast are included in our Unallocated Corporate segment.

Manufacturing Plants

As of March 31, 2025, we operated 20 manufacturing plants, including 18 plants located within the U.S.

As of June 30, 2025, we operated 20 manufacturing plants, including 18 plants located within the U.S.

and two plants in Canada.

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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, including all property and related depreciation associated with our Lancaster, Pennsylvania headquarters.

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, Pennsylvania 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.

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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 continues to monitor the impacts of recent tariff announcements and geopolitical events, including but not limited to, conflicts in Ukraine and the Middle East, none of which had a material direct impact on our financial condition, liquidity or results of operations in the first three months of 2025 or 2024.

Several factors and trends within our markets affected our business performance during the first quarter of 2025 compared to the first quarter of 2024, most notably a $41 million increase in net sales due to our December 2024 acquisition of Zahner and April 2024 acquisition of 3form.

Also contributing to the increase in net sales was a $10 million increase in organic Architectural Specialties net sales, driven primarily by increased custom project revenues, offset by a $10 million decrease in net sales due to lower sales volumes in our Mineral Fiber segment.

The Company continues to monitor the impacts of recently implemented and announced tariffs and geopolitical events, including but not limited to, conflicts in Ukraine and the Middle East, neither of which had a material direct impact on our financial condition, liquidity or results of operations in the first six months of 2025 or 2024.

Several factors and trends within our markets affected our business performance during the three and six months ended June 30, 2025 compared to the same periods in 2024, most notably an increase in net sales due to our December 2024 acquisition of Zahner and April 2024 acquisition of 3form.

For the three months ended June 30, 2025, sales volumes increased $46 million compared to the same period in 2024, with the Zahner and 3form acquisitions contributing $28 million to net sales.

Also contributing to the increase in net sales was a $15 million increase in organic Architectural Specialties net sales and a $3 million increase in net sales due to higher sales volumes in our Mineral Fiber segment.

For the six months ended June 30, 2025, sales volumes increased $87 million compared to the same period in 2024 driven primarily by a $69 million increase in net sales from the Zahner and 3form acquisitions.

Also contributing to the increase in net sales for the six months ended June 30, 2025 was a $24 million increase in organic Architectural Specialties sales, partially offset by a $7 million decrease in net sales due to lower sales volumes in our Mineral Fiber segment.

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 contributed approximately $16 million to our total consolidated net sales for the three months ended March 31, 2025 compared to the same period in 2024.

Favorable AUV increased our total consolidated net sales for the three and six months ended June 30, 2025 by approximately $14 million and $29 million, respectively, compared to the same periods in 2024.

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, which varies by project.

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During the first quarter of 2025, we implemented price increases on Mineral Fiber ceiling products and WAVE implemented price increases on grid products.

Future pricing actions for Mineral Fiber, Architectural Specialties and WAVE products may be implemented based on numerous factors, including the impact of announced tariffs and the rate and pace of inflation and its impact on our business.

In the second quarter of 2025, we announced price increases on Mineral Fiber products that will become effective in the third quarter of 2025.

Future pricing actions for Mineral Fiber, Architectural Specialties and WAVE products may be implemented based on numerous factors, including the impact of recently implemented or announced tariffs and the rate and pace of inflation and its impact on our business.

Seasonality .

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

In the first quarter of 2025, higher energy and raw material costs negatively impacted operating income by $1 million compared to the same period in 2024.

As of March 31, 2025 and December 31, 2024, we had approximately 3,600 full-time and part-time employees.

In the second quarter and first half of 2025, higher energy and raw material costs negatively impacted operating income by $1 million and $2 million, respectively, compared to the same periods in 2024.

Acquisition-Related Expenses and Losses

In connection with our acquisitions of 3form in April 2024, Insolcorp, LLC (“Insolcorp”) in October 2023 and BOK Modern, LLC (“BOK”) in July 2023, we recorded certain acquisition-related expenses and losses to operating income during the three and six months ended June 30, 2025 and 2024, summarized as follows (dollar amounts in millions):

Three Months Ended

Six Months Ended

Affected Line Item in the Condensed

Consolidated Statements of Earnings and

Comprehensive Income

Cost of goods sold

Acquisition costs

SG&A expenses

Loss related to change in fair value of contingent consideration

SG&A expenses

Net negative impact to operating income

The inventory amounts above reflect the post-acquisition expenses associated with recording inventory at fair value as part of purchase accounting for the 3form acquisition.

Acquisition costs above reflect certain contingent third-party professional fees incurred due to the 3form acquisition.

The change in fair value of contingent consideration was related to our BOK and Insolcorp acquisitions and is remeasured quarterly during each acquisition's earn-out periods.

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

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

As of June 30, 2025 and December 31, 2024, we had approximately 3,700 and 3,600 full-time and part-time employees, respectively.

RESULTS OF OPERATIONS

Please refer to Note 2 to the Condensed Consolidated Financial Statements for a reconciliation of operating income to consolidated net earnings before income taxes.

See Note 2 to the Condensed Consolidated Financial Statements for a reconciliation of operating income to consolidated net earnings before income taxes.

CONSOLIDATED RESULTS

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Change is Favorable

Three Months Ended March 31,

Three Months Ended June 30,

Total consolidated net sales

Operating income

Consolidated net sales for the first quarter of 2025 increased 17.3% over the prior-year period due to higher volumes of $41 million and favorable AUV of $16 million.

Six Months Ended June 30,

Total consolidated net sales

Operating income

Consolidated net sales for the second quarter of 2025 increased 16.3% from the prior-year period due to higher volumes of $46 million and favorable AUV of $14 million.

Architectural Specialties net sales increased $43 million and Mineral Fiber net sales increased $17 million from the prior-year period.

Architectural Specialties segment net sales improved primarily due to a $28 million contribution from the acquisitions of Zahner and 3form and increased organic net sales driven by strengthening broad-based penetration throughout our specialty product categories.

The increase in Mineral Fiber net sales was primarily driven by favorable AUV and modestly improved sales volumes.

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

Consolidated net sales for the first six months of 2025 increased 16.8% over the prior-year period due to higher volumes of $87 million and favorable AUV of $29 million.

Architectural Specialties net sales increased $94 million and Mineral Fiber net sales increased $22 million over the prior-year period.

Architectural Specialties segment net sales improved primarily due to a $41 million contribution from the acquisitions of Zahner and 3form and increased organic custom project net sales.

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 first quarter of 2025 was 60.8% of net sales, compared to 61.9% for the same period in 2024.

The year-over-year decrease in cost of goods sold as a percent of net sales was driven primarily by favorable AUV margin benefit, favorable inventory valuation impacts, improved manufacturing productivity and favorable margin benefits from the acquisition of Zahner and 3form.

SG&A expenses in the first quarter of 2025 were $78.0 million, or 20.4% of net sales, compared to $65.4 million, or 20.0% of net sales, for the same period in 2024.

The increase in SG&A expenses was primarily driven by a $14 million increase related to the acquisitions of Zahner and 3form and a $2 million increase in selling expenses.

These increases were partially offset by a $4 million increase in company-owned officer life insurance gains related to deferred compensation plans.

Equity earnings from unconsolidated subsidiaries were $26.6 million in the first quarter of 2025, compared to $27.2 million in the first quarter of 2024.

WAVE equity earnings were $26.8 million in the first quarter of 2025, compared to $27.4 million in the first quarter of 2024.

The decrease in WAVE equity earnings was primarily driven by the negative impact of lower sales volumes, partially offset by favorable AUV.

Architectural Specialties segment net sales improved primarily due to a $69 million contribution from the acquisitions of Zahner and 3form and increased organic net sales driven by strengthening broad-based penetration throughout our specialty product categories.

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

Cost of goods sold in the second quarter of 2025 was 58.6% of net sales, compared to 59.1% for the same period in 2024.

Cost of goods sold in the first six months of 2025 was 59.7% of net sales, compared to 60.4% for the same period in 2024.

The year-over-year decreases in cost of goods sold as a percent of net sales for the second quarter and first six months of 2025 were primarily driven by favorable AUV benefits and improved manufacturing productivity.

Also contributing to the decrease in cost of goods sold as a percent of net sales for the first six months of 2025 compared to the same period in 2024 were favorable inventory valuation impacts.

SG&A expenses in the second quarter of 2025 were $84.5 million, or 19.9% of net sales, compared to $80.6 million, or 22.1% of net sales, for the same period in 2024.

The increase in SG&A expenses was primarily driven by a $7 million increase related to the acquisitions of Zahner and 3form, partially offset by a $2 million decrease in acquisition-related expenses and a prior-period increase in reserves for environmental remediation matters of $1 million that did not recur in the current period.

SG&A expenses in the first six months of 2025 were $162.5 million, or 20.1% of net sales, compared to $146.0 million, or 21.1% of net sales, for the same period in 2024.

The year-over-year increase in SG&A expenses was primarily driven by a $21 million increase related to the acquisitions of Zahner and 3form and a $2 million increase in selling expenses.

These increases were partially offset by a $3 million increase in company-owned officer life insurance gains related to deferred compensation plans, a $1 million decrease in acquisition-related expenses and a prior-period increase in reserves for environmental remediation matters of $1 million that did not recur in the current period.

Equity earnings from unconsolidated subsidiaries were $31.9 million in the second quarter of 2025, compared to $26.3 million in the second quarter of 2024, and were $58.5 million in the first six months of 2025, compared to $53.5 million in the same period in 2024.

WAVE equity earnings were $32.1 million in the second quarter of 2025, compared to $26.5 million in the second quarter of 2024, and $58.9 million in the first six months of 2025, compared to $53.9 million in the same period of 2024.

The year-over-year increase in WAVE equity earnings for the second quarter of 2025 was primarily driven by the benefit from favorable AUV, higher sales volumes and lower steel costs.

The increase in WAVE equity earnings for the first six months of 2025 compared to the same period in 2024 was driven by the benefit from favorable AUV, partially offset by the negative impact of lower sales volumes.

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

Interest expense was $8.5 million in the first quarter of 2025 compared to $9.0 million in the first quarter of 2024.

The decrease in interest expense for the first quarter of 2025 in comparison to the same period in 2024 was primarily due to lower average debt balances, partially offset by higher average effective interest rates.

Other non-operating income, net, was $0.7 million in the first quarter of 2025 compared to $3.1 million in the first quarter of 2024.

The decrease in other non-operating income, net, for the first quarter 2025 in comparison to the same period in 2024 was primarily driven by the non-service cost components of pension and postretirement net periodic benefit costs.

Income tax expense was $21.6 million in the first quarter of 2025 compared to $20.3 million in the first quarter of 2024.

The effective tax rate for the first quarter of 2025 was 23.8% compared to 25.3% for the same period of 2024.

The decrease in the effective tax rate was primarily due to the benefit of federal investment tax credits, a reduction in our valuation allowance for capital loss carryforwards and other favorable permanent adjustments.

Total Other Comprehensive Loss (“OCL”) was $0.6 million in the first quarter of 2025 compared to $0.9 million in the first quarter of 2024.

The change in OCL in the first quarter of 2025 compared to the first quarter of 2024 was due to pension and postretirement adjustments and foreign currency translation adjustments, partially offset by lower interest rate swap derivative losses in 2025.

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

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

Interest expense was $8.6 million in the second quarter of 2025 compared to $11.1 million in the second quarter of 2024.

Interest expense was $17.1 million in the first six months of 2025 compared to $20.1 million in the first six months of 2024.

The decrease in interest expense was primarily due to lower average debt balances.

Other non-operating income, net, was $0.7 million in the second quarter of 2025 compared to $3.2 million in the second quarter of 2024, and $1.4 million in the first six months of 2025 compared to $6.3 million in the first six months of 2024.

The decreases in other non-operating income, net, for the three and six months ended June 30, 2025 in comparison to the same periods in 2024 were primarily driven by the non-service cost components of pension and postretirement net periodic benefit costs.

Income tax expense was $27.5 million in the second quarter of 2025 compared to $21.2 million in the second quarter of 2024.

The effective tax rate for the second quarter of 2025 was 23.9% compared to 24.3% for the same period of 2024.

Income tax expense was $49.1 million in the first six months of 2025 compared to $41.5 million in the first six months of 2024.

The effective tax rate for the first six months of 2025 was 23.8% compared to 24.8% for the same period of 2024.

The decrease in the effective tax rate for the second quarter and first six months of 2025, in comparison to the same periods in 2024, was primarily due to the benefit of federal investment tax credits.

Total Other Comprehensive Income (“OCI”) was $1.9 million in the second quarter of 2025 compared to Total Other Comprehensive Loss (“OCL”) of $0.9 million in the second quarter of 2024.

OCI was $1.3 million in the first six months of 2025 compared to OCL of $1.8 million in the first six months of 2024.

The changes from OCL to OCI in the second quarter and first six months of 2025 compared to the same periods in 2024 were due to increases in income from foreign currency translation adjustments and favorable pension and postretirement adjustments, partially offset by interest rate swap derivative losses in 2025.

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

dollar value of assets and liabilities denominated in foreign currencies.

Foreign currency translation adjustments in 2025 and 2024 were driven primarily by changes in the Canadian dollar.

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.

Foreign currency translation adjustments in 2025 and 2024 were driven primarily by changes in the Canadian dollar relative to the U.S.

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

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

REPORTABLE SEGMENT RESULTS

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Change is Favorable

Three Months Ended March 31,

Three Months Ended June 30,

Total segment net sales

Operating income

Net sales increased $6 million in the first quarter of 2025 compared to the prior-year quarter due to $16 million of favorable AUV, partially offset by $10 million of lower sales volumes.

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

The decrease in volumes was primarily driven by softer demand from our home center customers, and the impact of one less shipping day compared to the prior year period.

Costs of goods sold during the first quarter of 2025 was $148 million, or 60.4% of net sales, compared to $146 million, or 60.8% of net sales, in the prior year period.

Gross profit increased $3 million, or 3.4%, compared to the prior year period.

The year-over-year increase in gross profit was driven primarily by an $8 million benefit from favorable AUV and a $2 million decrease in manufacturing costs driven primarily by improved productivity, partially offset by higher input costs.

These increases were partially offset by a $7 million negative impact from lower sales volumes.

SG&A expenses during the first quarter of 2025 were $39 million, or 16.1% of net sales, compared to $42 million, or 17.6% of net sales, in the prior year period.

The year-over-year decrease in SG&A expenses was primarily driven by a $4 million increase in company-owned officer life insurance gains related to deferred compensation plans, partially offset by an increase in selling expenses.

Equity earnings from our WAVE joint venture were $26.8 million in the first quarter of 2025, compared to $27.4 million in the prior year period.

The decrease in WAVE earnings was primarily driven by the negative impact of lower sales volumes, partially offset by the benefits of favorable AUV.

Six Months Ended June 30,

Total segment net sales

Operating income

Mineral Fiber net sales increased $17 million in the second quarter of 2025 compared to the prior-year quarter due to $14 million of favorable AUV and $3 million of higher sales volumes, both of which were primarily driven by strong commercial execution and benefits from growth initiatives.

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

For the first six months of 2025, net sales increased $22 million from the prior-year period, primarily due to $29 million of favorable AUV, partially offset by lower sales volumes of $7 million.

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

The decrease in volumes for the first six months of 2025 was primarily driven by declines from our home center customers, partially offset by strong commercial execution and benefits from growth initiatives.

Costs of goods sold during the three months ended June 30, 2025 was $157 million, or 58.7% of net sales, compared to $148 million, or 59.0% of net sales, in the prior-year period.

Gross profit increased $8 million, or 7.4%, compared to the prior-year period due primarily to an $8 million benefit from favorable AUV.

Costs of goods sold during the six months ended June 30, 2025 was $305 million, or 59.5% of net sales, compared to $293 million, or 59.9% of net sales, in the prior-year period.

Gross profit increased $11 million, or 5.5%, compared to the prior-year period due to a $16 million benefit from favorable AUV, partially offset by a $5 million negative impact from lower sales volumes.

SG&A expenses during the three months ended June 30, 2025 were $44 million, or 16.5% of net sales, compared to $48 million, or 19.0% of net sales, in the prior-year period.

The year-over-year decrease in SG&A expenses was primarily driven by a $2 million decrease in acquisition-related expenses and a prior-period increase in reserves for environmental remediation matters of $1 million that did not recur in the current period.

SG&A expenses during the six months ended June 30, 2025 were $83 million, or 16.3% of net sales, compared to $90 million, or 18.3% of net sales, in the prior-year period.

The year-over-year decrease in SG&A expenses was primarily driven by a $3 million increase in company-owned officer life insurance gains related to deferred compensation plans, a $1 million decrease in acquisition-related expenses and a prior-period increase in reserves for environmental remediation matters of $1 million that did not recur in the current period.

Equity earnings from our WAVE joint venture were $32.1 million in the three months ended June 30, 2025, compared to $26.5 million in the prior-year period.

The year-over-year increase in WAVE earnings was primarily driven by the benefit from favorable AUV, higher sales volumes and lower steel costs.

Equity earnings from our WAVE joint venture were $58.9 million in the first six months of 2025, compared to $53.9 million in the prior-year period.

The year-over-year increase in WAVE earnings was primarily driven by the benefit from favorable AUV, partially offset by the negative impact of lower sales volumes.

Architectural Specialties

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Change is Favorable

Three Months Ended March 31,

Three Months Ended June 30,

Total segment net sales

Operating income

Net sales increased $51 million in the first quarter of 2025, driven primarily by a $41 million increase from the acquisitions of Zahner and 3form, in addition to increased organic custom project net sales.

Costs of goods sold during the first quarter of 2025 was $84 million, or 61.3% of net sales, compared to $56 million, or 64.5% of net sales, in the prior year period.

Gross profit increased $22 million, or 72.7%, compared to the prior year period due to a $27 million benefit from the higher net sales, partially offset by a $5 million increase in manufacturing costs.

Six Months Ended June 30,

Total segment net sales

Operating income

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

Net sales increased $43 million in the second quarter of 2025 compared to the same period in 2024, driven primarily by a $28 million increase from the acquisitions of Zahner and 3form, in addition to increased organic net sales driven by strengthening broad-based penetration throughout our specialty product categories.

For the first six months of 2025, net sales improved by $94 million from the prior-year period, primarily due to a $69 million increase from the acquisitions of Zahner and 3form, in addition to increased organic net sales driven by strengthening broad-based penetration throughout our specialty product categories.

Costs of goods sold during the three months ended June 30, 2025 was $92 million, or 58.2% of net sales, compared to $68 million, or 59.2% of net sales, in the prior-year period.

Gross profit increased $19 million, or 40.3%, compared to the prior-year period due to a $23 million benefit from higher net sales, partially offset by a $4 million increase in manufacturing costs.

The acquisitions of Zahner and 3form contributed a $12 million benefit to gross profit, with the remaining increase driven by improved operating leverage and custom project margins.

SG&A expenses in the first quarter of 2025 were $38 million, or 27.9% of net sales, compared to $23 million, or 26.6% of net sales, in the prior year period.

Costs of goods sold during the six months ended June 30, 2025 was $176 million, or 59.7% of net sales, compared to $124 million, or 61.5% of net sales, in the prior-year period.

Gross profit increased $41 million, or 53.2%, compared to the prior-year period due to a $50 million benefit from higher net sales, partially offset by a $9 million increase in manufacturing costs.

The acquisitions of Zahner and 3form contributed a $29 million benefit to gross profit, with the remaining increase driven by improved operating leverage and custom project margins.

SG&A expenses in the three months ended June 30, 2025 were $40 million, or 25.5% of net sales, compared to $33 million, or 28.5% of net sales, in the prior-year period.

The increase in SG&A expenses was primarily driven by a $7 million increase related to the acquisitions of Zahner and 3form.

SG&A expenses in the first six months of 2025 were $79 million, or 26.6% of net sales, compared to $56 million, or 27.7% of net sales, in the prior-year period.

The increase in SG&A expenses was primarily driven by a $21 million increase related to the acquisitions of Zahner and 3form.

Unallocated Corporate

Unallocated Corporate operating loss was $1 million in the first quarter of 2025 and 2024.

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

Unallocated Corporate operating loss was $1 million in the second quarter of 2025 and 2024.

Unallocated Corporate operating loss was $2 million in the first six months of 2025 and 2024.

FINANCIAL CONDITION AND LIQUIDITY

Operating activities for the first three months of 2025 provided $41.0 million, compared to $26.4 million for the first three months of 2024.

The favorable change in cash from operating activities was primarily due to higher cash earnings, partially offset by unfavorable timing related working capital changes in inventories, accounts payable and accrued expenses.

Net cash provided by investing activities was $6.0 million in the first three months of 2025, compared to $5.9 million in the first three months of 2024.

The change in cash in the first three months of 2025 compared to the same period in 2024 was primarily due to the prior-year first quarter investment in Overcast that did not recur in the current-year period, mostly offset by increased purchases of property, plant and equipment.

Net cash used for financing activities was $43.6 million in the first three months of 2025, compared to $33.1 million in the first three months of 2024.

The unfavorable change in cash was primarily due to an increase in repurchases of outstanding common stock.

Operating activities for the first six months of 2025 provided $122.6 million, compared to $83.7 million for the first six months of 2024.

The favorable change in cash from operating activities was primarily due to higher cash earnings compared to the prior-year period and an increase in income taxes payable, partially offset by unfavorable timing related changes in accounts payable and accrued expenses.

Net cash provided by investing activities was $13.2 million in the first six months of 2025, compared to $81.4 million used for investing activities in the first six months of 2024.

The favorable change in cash from investing activities in the first six months of 2025 compared to the same period in 2024 was primarily due to $94 million of cash paid for the 3form acquisition in 2024.

Net cash used for financing activities was $134.7 million in the first six months of 2025, compared to $1.1 million cash provided in the first six months of 2024.

The unfavorable change in cash used for financing activities was primarily due to decreased net borrowings under our credit facility, primarily due to the prior year 3form acquisition, and an increase in repurchases of our outstanding common stock.

Our liquidity needs for operations vary throughout the year.

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We have a $950.0 million variable rate senior credit facility, which is comprised of a $500.0 million revolving credit facility (with a $150.0 million sublimit for letters of credit) and a $450.0 million Term Loan A.

As of March 31, 2025, the revolving credit facility and Term Loan A were priced at 1.375% over the Secured Overnight Financing Rate (“SOFR”), plus a 10-basis point adjustment.

As of June 30, 2025, the revolving credit facility and Term Loan A were priced at 1.375% over the Secured Overnight Financing Rate (“SOFR”), plus a 10-basis point adjustment.

The revolving credit facility and Term Loan A mature in December 2027.

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

As of March 31, 2025, the total principal balances outstanding under our senior credit facility were $421.9 million under Term Loan A and $100.0 million under the revolving credit facility.

As of June 30, 2025, the total principal balances outstanding under our senior credit facility were $416.2 million under Term Loan A and $70.0 million under the revolving credit facility.

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

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 March 31, 2025, we were in compliance with all covenants of the senior credit facility.

As of June 30, 2025, we were in compliance with all covenants of the senior credit facility.

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

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June 26, 2024

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

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

These swaps are designated as cash flow hedges against changes in SOFR for a portion of our variable rate debt.

3 unchanged sentences

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

March 31, 2025

June 30, 2025

Financing Arrangements

1 unchanged sentence

Revolving credit facility

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

As of March 31, 2025, we had $82.8 million of cash and cash equivalents, $68.5 million in the U.S.

As of June 30, 2025, we had $81.1 million of cash and cash equivalents, $66.9 million in the U.S.

and $14.2 million in foreign jurisdictions, primarily Canada.

As of March 31, 2025, we also had $400 million available under our revolving credit facility.

As of June 30, 2025, we also had $430 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.

4 unchanged sentences

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