What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-04-28 compared with 2025-10-28 · 116 added, 183 removed, 108 unchanged (73% of the section changed)

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AWI is an Americas leader in the design and manufacture of innovative 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, architectural resin and glass, wood fiber and glass-reinforced-gypsum.

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

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

called Worthington Armstrong Venture (“WAVE”).

Acquisitions and Investments in Unconsolidated Affiliates

In September 2025, we acquired all of the issued and outstanding stock of Geometrik Manufacturing, Inc.

In February 2026, we acquired all of the issued and outstanding shares of Event Scape Inc.

and Eventscape U.S.

Holdings Inc.

(collectively, “Eventscape”), headquartered in Toronto, Ontario, Canada.

Eventscape is a designer, manufacturer and installer of ceilings, walls and facades made of a broad range of materials.

The operations, assets and liabilities of Eventscape are included in our Architectural Specialties segment.

In December 2025, we acquired all of the issued and outstanding stock of FGM-Parallel LLC (“Parallel”), based in Englewood, Colorado.

Parallel is a designer and manufacturer of extruded aluminum products primarily used in exterior architectural applications.

The operations, assets and liabilities of Parallel are included in our Architectural Specialties segment.

In September 2025, we acquired all of the issued and outstanding shares of Geometrik Manufacturing, Inc.

(“Geometrik”), based in Kelowna, British Columbia, Canada.

Geometrik is a leading Canadian designer and manufacturer of wood acoustical ceiling and wall systems.

Geometrik is a designer and manufacturer of wood acoustical ceiling and wall systems.

The operations, assets and liabilities of Geometrik are included in our Architectural Specialties segment.

In December 2024, we acquired all of the issued and outstanding stock of A.

Zahner Company (“Zahner”), based in Kansas City, Missouri.

Zahner is a designer and manufacturer of exterior metal architectural solutions.

The operations, assets and liabilities of Zahner are included in our Architectural Specialties segment.

In April 2024, we acquired all of the issued and outstanding membership interests in 3form, LLC (“3form”) based in Salt Lake City, Utah, from Hunter Douglas, Inc.

3form is a designer and manufacturer of architectural resin and glass products used for specialty walls, partitions and ceilings.

The operations, assets and liabilities of 3form are included in our Architectural Specialties segment.

In January 2024, we entered into a strategic partnership and equity investment in Overcast Innovations LLC (“Overcast”) with McKinstry Essention, LLC whereby we acquired a 19.5% ownership interest in Overcast (currently 19.2%), with future rights to increase our ownership interest.

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 and losses in Overcast are included in our Unallocated Corporate segment.

Manufacturing Plants

As of September 30, 2025, we operated 21 manufacturing plants, including 18 plants located within the U.S.

and three plants in Canada.

As of March 31, 2026, we operated 24 manufacturing plants, including 20 plants located within the U.S.

and four plants in Canada.

WAVE operates seven additional plants in the U.S.

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Segment results relating to WAVE consist primarily of equity earnings and reflect our 50% equity interest in the joint venture.

Ceiling component products consist of ceiling perimeters and trim, in addition to grid products that support drywall ceiling systems.

Ceiling component products consist of ceiling perimeters and trim, in addition to grid products that support drywall ceiling systems, structural and walkable grid systems.

For some customers, WAVE sells its suspension system products to AWI for resale to customers.

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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.

Architectural Specialties – designs, produces and sources specialty ceilings, walls, and other interior and exterior architectural applications including ceilings, specialty walls and exterior metal solutions primarily for use in commercial settings.

Products are available in numerous materials, such as metal, felt, wood, architectural resin and glass, wood fiber and glass-reinforced-gypsum in

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

various colors, shapes and designs.

Architectural Specialties – designs, produces and sources specialty ceilings, walls, and other interior and exterior architectural applications primarily for use in commercial settings.

Products are available in numerous materials, such as metal, felt, architectural resin and glass, wood, wood fiber and glass-reinforced-gypsum in various colors, shapes and designs.

These products offer a range of design options and performance attributes such as acoustical control, rated fire protection, light, aesthetic appeal, energy conservation and building performance.

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

Architectural Specialties products are sold primarily to resale distributors and direct customers, primarily ceiling systems contractors.

Architectural Specialties products are sold primarily to direct customers, primarily ceiling systems contractors, and resale

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

distributors.

This segment’s revenues are primarily project driven, which can lead to more variability in sales patterns.

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Unallocated Corporate – includes certain assets, liabilities, income and expenses that have not been allocated to our other business segments and consists of:

cash and cash equivalents, our Overcast investment and related equity earnings/losses, the net funded status of our U.S.

cash and cash equivalents, our Overcast Innovations LLC (“Overcast”) investment and related equity earnings and losses, the net funded status of our U.S.

Retirement Income Plan (“RIP”), the estimated fair value of interest rate swap contracts, outstanding borrowings under our senior secured credit facility and income tax balances.

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For information on our 2026 and 2025 net sales and disaggregated expenses by segment, see Note 2 to the Condensed Consolidated Financial Statements.

For information on our segments’ 2025 and 2024 net sales disaggregated by major customer groups, see Note 3 to the Condensed Consolidated Financial Statements.

We compete in the building products markets of the Americas.

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 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 nine months of 2025 or 2024.

In September 2025, GMS, Inc., one of our largest distributor customers, was acquired by The Home Depot, Inc.

In August 2025, Lowe’s Companies, Inc., announced that it had entered into a definitive agreement to acquire Foundation Building Materials, Inc., another one of our largest distributor customers.

This acquisition activity continues a trend of customer consolidation within the building products markets of the Americas referenced in the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2024 and had no impact on our financial condition, liquidity or results of operations in the first nine months of 2025.

Several factors and trends within our markets affected our business performance during the three and nine months ended September 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.

The increase in net sales attributable to the Geometrik acquisition was not material.

For the three months ended September 30, 2025, sales volumes increased $24 million compared to the same period in 2024, with the Zahner and 3form acquisitions contributing $16 million to net sales.

Also contributing to the increase in net sales was a $7 million increase in organic Architectural Specialties net sales and a $2 million increase in net sales due to higher sales volumes in our Mineral Fiber segment.

For the nine months ended September 30, 2025, sales volumes increased $111 million compared to the same period in 2024 driven primarily by an $86 million increase in net sales from the Zahner and 3form acquisitions.

Also contributing to the increase in net sales for the nine months ended September 30, 2025 was a $30 million increase in organic Architectural Specialties net sales, partially offset by a $5 million decrease in net sales due to lower sales volumes in our Mineral Fiber segment.

For information on our 2026 and 2025 net sales disaggregated by major customer groups, see Note 3 to the Condensed Consolidated Financial Statements.

Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we define organic as consolidated and/or Architectural Specialties results excluding the impacts of the Eventscape, Parallel and Geometrik acquisitions.

We define the impacts of Eventscape, Parallel and Geometrik as inorganic consolidated and/or Architectural Specialties results.

We compete in the building product markets of the Americas.

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 (“GDP”), 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 governmental trade policies and geopolitical events, including the conflict in Iran, none of which had a material direct impact on our financial condition, liquidity or results of operations in the first three months of 2026 or 2025.

Several factors and trends within our markets affected our business performance during the first quarter of 2026 compared to the first quarter of 2025.

For the three months ended March 31, 2026, sales volumes increased $17 million compared to the prior-year period, due primarily to a $10 million increase in organic Architectural Specialties net sales and a $5 million inorganic increase due to our February 2026 acquisition of Eventscape, our December 2025 acquisition of Parallel and our September 2025 acquisition of Geometrik.

Also contributing to the increase in net sales was a $2 million increase from higher 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 increased our total consolidated net sales for the three and nine months ended September 30, 2025 by approximately $14 million and $43 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.

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

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

During the first and second quarters of 2025, WAVE implemented price increases on grid products.

Favorable AUV increased our total consolidated net sales by $10 million for the three months ended March 31, 2026 compared to the same period in 2025.

Our Architectural Specialties segment revenues are primarily generated from individual contracts that include project-specific mixes of manufactured and sourced products.

As such, we do not manage or evaluate performance using AUV for this segment but rather attribute all changes in net sales to volume, including gross to net sales adjustments.

During the first quarter of 2026, 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 tariffs, the rate and pace of inflation and its impact on our business and the competitive environment.

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Historically, our sales tend to be stronger in the second and third quarters of our fiscal year due to more favorable weather conditions, customer business cycles and the timing of renovation and new construction projects.

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

Factors Affecting Operating Costs

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

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

Our largest raw material expenditures are primarily for fiberglass, perlite, recycled paper, and starch.

Other raw materials include clays, felt, pigment, resin and glass, wood and wood fiber.

Other raw materials include clays, felt, pigment, architectural resin and glass, wood and wood fiber.

We manufacture substantially all of our mineral wool at one of our manufacturing facilities.

We use aluminum and steel in the production of metal building products by us and by WAVE.

Finally, natural gas and packaging materials also represent significant input costs.

Finally, we also purchase significant amounts of packaging materials and consume substantial amounts of energy, such as electricity and natural gas, and water.

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

During the three and nine months ended September 30, 2025, higher energy and raw material costs negatively impacted operating income by $1 million and $3 million, respectively, compared to the same periods in 2024.

In the first quarter of 2026, higher raw material and energy costs negatively impacted operating income by $2 million compared to the same period in 2025.

Acquisition-Related Expenses and Losses

In connection with our acquisitions of Geometrik in September 2025, 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 nine months ended September 30, 2025 and 2024, summarized as follows (dollar amounts in millions):

In connection with our acquisitions of Eventscape in February 2026 and BOK Modern, LLC (“BOK”) in July 2023, we recorded certain acquisition-related expenses and losses to operating income in the three months ended March 31, 2026 and 2025, summarized as follows (dollar amounts in millions):

Three Months Ended

Nine Months Ended

Affected Line Item in the Condensed

September 30,

Consolidated Statements of Earnings and

Comprehensive Income

Cost of goods sold

Acquisition costs

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Loss related to change in fair value of contingent consideration

SG&A expenses

Negative impact to operating income

The inventory amount above reflects 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 Geometrik and 3form acquisitions.

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

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

The change in fair value of contingent consideration was related to our BOK acquisition and is remeasured quarterly during the 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 September 30, 2025 and December 31, 2024, we had approximately 3,800 and 3,600 full-time and part-time employees, respectively.

As of March 31, 2026 and December 31, 2025, we had approximately 4,000 and 3,800 full-time and part-time employees, respectively.

RESULTS OF OPERATIONS

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(dollar amounts in millions)

Change is Favorable

Three Months Ended September 30,

Total consolidated net sales

Operating income

Nine Months Ended September 30,

Total consolidated net sales

Operating income

Consolidated net sales for the third quarter of 2025 increased 10.0% from the prior-year period due to higher volumes of $24 million and favorable AUV of $14 million.

Architectural Specialties net sales increased $23 million and Mineral Fiber net sales increased $16

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

million from the prior-year period.

Architectural Specialties segment net sales improved due to a $16 million contribution from the acquisitions of Zahner and 3form and a $7 million increase in organic net sales.

Change is Favorable (Unfavorable)

Three Months Ended March 31,

Consolidated net sales

Consolidated operating income

Consolidated net sales for the first quarter of 2026 increased 7.1% from the prior-year quarter due to higher volumes of $17 million and favorable AUV of $10 million.

Architectural Specialties net sales increased $15 million and Mineral Fiber net sales increased $12 million from the prior-year quarter.

Architectural Specialties segment net sales improved due to a $10 million increase in organic net sales and a $5 million inorganic contribution from Eventscape, Parallel and Geometrik.

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

Consolidated net sales for the first nine months of 2025 increased 14.3% over the prior-year period due to higher volumes of $111 million and favorable AUV of $43 million.

Architectural Specialties net sales increased $116 million and Mineral Fiber net sales increased $38 million over the prior-year period.

Architectural Specialties segment net sales improved primarily due to an $86 million contribution from the acquisitions of Zahner and 3form and a $30 million increase in organic net sales.

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

Cost of goods sold in the third quarter of 2025 was 58.0% of net sales, compared to 57.6% for the same period in 2024.

Cost of goods sold in the first nine months of 2025 was 59.1% of net sales, compared to 59.4% for the same period in 2024.

The year-over-year increase in cost of goods sold as a percent of net sales for the third quarter of 2025 was primarily driven by increased manufacturing costs, partially offset by favorable AUV benefits and improved manufacturing productivity.

The year-over-year decrease in cost of goods sold as a percent of net sales for the first nine months of 2025 was primarily driven by favorable AUV benefits and improved manufacturing productivity, partially offset by increased manufacturing costs.

To a lesser extent, favorable inventory valuation impacts also contributed to the year-over-year decrease in cost of goods sold as a percent of net sales for the first nine months of 2025 compared to the same period in 2024.

SG&A expenses in the third quarter of 2025 were $90.1 million, or 21.2% of net sales, compared to $77.6 million, or 20.1% of net sales, for the same period in 2024.

The increase in SG&A expenses was primarily driven by a $4 million increase related to the acquisitions of Zahner and 3form, a $3 million increase in incentive compensation, a $2 million increase in Architectural Specialties selling expenses driven primarily by higher net sales as well as additional investments in selling capabilities, a $1 million increase in depreciation and amortization expense and a $1 million decrease in company-owned officer life insurance gains related to deferred compensation plans.

SG&A expenses in the first nine months of 2025 were $252.1 million, or 20.5% of net sales, compared to $223.1 million, or 20.7% of net sales, for the same period in 2024.

The year-over-year increase in SG&A expenses was primarily driven by a $24 million increase related to the acquisitions of Zahner and 3form, a $4 million increase in Architectural Specialties selling expenses driven primarily by higher net sales as well as additional investments in selling capabilities and a $3 million increase in incentive compensation.

These increases were partially offset by a $2 million increase in company-owned officer life insurance gains related to deferred compensation plans and a prior-period increase in reserves for environmental remediation matters of $2 million that did not recur in the current period.

Losses related to changes in the fair value of contingent consideration were $0.1 million in the third quarter of 2025, compared to $0.2 million for the third quarter of 2024, and $0.5 million in the first nine months of 2025, compared to $0.6 million for the same period in 2024.

Losses were related to our Insolcorp and BOK acquisitions.

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

During the three and nine months ended September 30, 2025, we recorded $0.9 million and $0.8 million, respectively, of net gains on sales of fixed assets.

During the same periods in 2024, we recorded $0.2 million and $0.3 million, respectively, of net losses on sales and impairment of fixed assets.

During the third quarter of 2025, we recorded a $0.9 million gain on the sale of a parcel of land at a Mineral Fiber plant.

During the third quarter of 2024, we recorded a $4.9 million impairment charge for undeveloped land adjacent to our Corporate headquarters.

Also in 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.

Equity earnings from unconsolidated subsidiaries were $28.0 million in the third quarter of 2025, compared to $25.2 million in the third quarter of 2024, and were $86.5 million in the first nine months of 2025, compared to $78.7 million in the same period in 2024.

WAVE equity earnings were $28.2 million in the third quarter of 2025, compared to $25.5 million in the third quarter of 2024, and $87.1 million in the first nine months of 2025, compared to $79.4 million in the same period of 2024.

The year-over-year increases in WAVE equity earnings for the third quarter and first nine months of 2025 were primarily 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 $8.2 million in the third quarter of 2025, compared to $10.5 million in the third quarter of 2024, and $25.3 million in the first nine months of 2025, compared to $30.6 million in the first nine months of 2024.

The decreases in interest expense for the third quarter and first nine months of 2025, in comparison to the same periods in 2024, were primarily due to lower average debt balances.

Other non-operating income, net, was $0.5 million in the third quarter of 2025 compared to $3.0 million in the third quarter of 2024, and $1.9 million in the first nine months of 2025 compared to $9.3 million in the first nine months of 2024.

The decreases in other non-operating income, net, for the third quarter and first nine months of 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.

Cost of goods sold in the first quarter of 2026 was $254.6 million, or 62.1% of net sales, compared to $232.8 million, or 60.8% of net sales, in the prior-year quarter.

The increase in cost of goods sold as a percent of net sales was primarily driven by higher organic manufacturing costs, including raw material and energy inflation and unfavorable inventory valuation impacts, as well as an increase in inorganic costs related to our 2026 and 2025 acquisitions.

Also contributing to the increase in cost of goods sold was a $2 million tariff adjustment that was recorded in the first quarter of 2026.

These increases were partially offset by favorable AUV benefits and improved manufacturing productivity.

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

Income tax expense was $23.2 million in the third quarter of 2025 compared to $26.9 million in the third quarter of 2024.

The effective tax rate for the third quarter of 2025 was 21.2% compared to 25.9% for the same period of 2024.

Income tax expense was $72.3 million in the first nine months of 2025 compared to $68.4 million in the first nine months of 2024.

The effective tax rate for the first nine months of 2025 was 22.9% compared to 25.2% for the same period of 2024.

The decreases in the effective tax rates for the third quarter and first nine months of 2025, in comparison to the same periods in 2024, were primarily due to the benefits recognized from statute closures and federal investment tax credits.

Total Other Comprehensive Loss (“OCL”) was $0.3 million in the third quarter of 2025 compared to total OCL of $6.4 million in the third quarter of 2024.

Total Other Comprehensive Income (“OCI”) was $1.0 million in the first nine months of 2025 compared to OCL of $8.2 million in the first nine months of 2024.

The decrease in OCL for the third quarter of 2025 compared to the same period in 2024 was due to a decrease in interest rate swap derivative losses and favorable pension and postretirement adjustments, partially offset by unfavorable foreign currency translation adjustments.

The change from OCL to OCI for the first nine months of 2025 compared to the same period for 2024 was due to favorable pension and postretirement adjustments, a decrease in interest rate swap derivative losses, and an increase in income from foreign currency translation adjustments.

SG&A expenses in the first quarter of 2026 were $88.4 million, or 21.6% of net sales, compared to $78.0 million, or 20.4% of net sales, in the prior-year quarter.

The increase in SG&A expenses was primarily driven by a $3 million increase in severance expenses, a $2 million inorganic increase related to our 2026 and 2025 acquisitions, due to an increase in acquisition costs, and a $2 million increase in Architectural Specialties organic selling expenses, driven primarily by higher net sales and increased investments in selling resources to support growth across the segment.

Equity earnings from unconsolidated subsidiaries were $27.3 million in the first quarter of 2026, compared to $26.6 million in the first quarter of 2025.

WAVE equity earnings were $27.4 million in the first quarter of 2026, compared to $26.8 million in the first quarter of 2025.

The increase in WAVE equity earnings was primarily driven by the benefit from favorable AUV, partially offset by the negative impact of lower sales volumes and higher steel costs.

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

Interest expense was $7.3 million in the first quarter of 2026, compared to $8.5 million in the first quarter of 2025.

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

Other non-operating income, net, was $1.5 million in the first quarter of 2026 compared to $0.7 million in the first quarter of 2025.

The increase in other non-operating income, net, for the first quarter of 2026 in comparison to the prior-year quarter 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 both 2026 and 2025.

The effective tax rate for the first quarter of 2026 was 24.4% compared to 23.8% in the prior-year quarter.

The increase in the effective tax rate for the first quarter of 2026 in comparison to the same period in 2025 was primarily due to federal investment tax credit benefits recognized in the prior-year quarter that did not recur in the current-year quarter.

Total Other Comprehensive Income (“OCI”) was $1.0 million in the first quarter of 2026 compared to total Other Comprehensive Loss (“OCL”) of $0.6 million in the first quarter of 2025.

The change from OCL to OCI for the first quarter of 2026 compared to the prior-year quarter was primarily due to interest rate swap derivative gains, partially offset by unfavorable foreign currency translation adjustments, driven primarily by the Canadian dollar.

Derivative gains and 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 (Loss).

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 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.

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 (Loss).

REPORTABLE SEGMENT RESULTS

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Change is Favorable

Three Months Ended September 30,

Total segment net sales

Operating income

Nine Months Ended September 30,

Three Months Ended March 31,

Total segment net sales

Operating income

Mineral Fiber net sales increased $16 million in the third quarter of 2025 compared to the prior-year quarter due to $14 million of favorable AUV and $2 million of higher sales volumes.

The improvement in AUV was due to favorable like-for-like price, with a modest contribution from mix.

The increased volumes and favorable mix were driven by our strong execution, along with benefits from our growth initiatives.

For the first nine months of 2025, net sales increased $38 million from the prior-year period, primarily due to $43 million of favorable AUV, partially offset by lower sales volumes of $5 million.

The improvement in AUV was due to favorable like-for-like price and, to a lesser extent, favorable mix.

Our strong execution and benefits from growth initiatives contributed to positive volume and mix growth, partially offset by a decrease in volumes driven by home centers and Latin America.

Cost of goods sold during the three months ended September 30, 2025 was $155 million, or 56.7% of net sales, compared to $147 million, or 56.8% of net sales, in the prior-year period.

Gross profit increased $7 million, or 6.5%, compared to the prior-year period due to a $9 million benefit from favorable AUV and a $1 million benefit from higher sales volumes, partially offset by a $3 million increase in manufacturing costs.

Cost of goods sold during the nine months ended September 30, 2025 was $460 million, or 58.5% of net sales, compared to $440 million, or 58.8% of net sales, in the prior-year period.

Gross profit increased $18 million, or 5.8%, compared to the prior-year period due to a $25 million benefit from favorable AUV, partially offset by a $3 million negative impact from lower sales volumes and a $4 million increase in manufacturing costs.

SG&A expenses during the three months ended September 30, 2025 were $49 million, or 17.9% of net sales, compared to $44 million, or 16.9% of net sales, in the prior-year period.

The year-over-year increase in SG&A expenses was primarily driven by a $2 million increase in incentive compensation, a $1 million increase in depreciation and amortization expense and a $1 million decrease in company-owned officer life insurance gains related to deferred compensation plans.

SG&A expenses during the nine months ended September 30, 2025 were $132 million, or 16.8% of net sales, compared to $133 million, or 17.8% of net sales, in the prior-year period.

The year-over-year decrease in SG&A expenses was primarily driven by a $2

Total segment operating income

Mineral Fiber net sales increased $12 million in the first quarter of 2026 compared to the prior-year quarter due to $10 million of favorable AUV, which was driven primarily by favorable like-for-like price, and $2 million of higher sales volumes driven primarily by solid commercial execution in an uneven market.

Cost of goods sold during the first quarter of 2026 was $155.3 million, or 60.4% of net sales, compared to $148.0 million, or 60.4% of net sales, in the prior-year quarter.

Gross profit increased $5 million, or 4.9%, compared to the prior-year quarter due to a $9 million benefit from favorable AUV and a $1 million benefit from higher sales volumes.

These benefits were partially offset by a $5 million increase in manufacturing costs, including raw material and energy inflation and unfavorable inventory valuation impacts, partially offset by improved manufacturing productivity.

SG&A expenses during the first quarter of 2026 were $43.8 million, or 17.0% of net sales, compared to $39.4 million, or 16.1% of net sales, in the prior-year quarter.

The increase in SG&A expenses was primarily driven by a $2 million increase in severance expenses and a $1 million decrease in company-owned officer life insurance gains related to deferred compensation plans.

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

million increase in company-owned officer life insurance gains related to deferred compensation plans and a prior period increase in reserves for environmental remediation matters of $2 million that did not recur in the current period.

These decreases were partially offset by a $3 million increase in incentive compensation.

Equity earnings from our WAVE joint venture were $28.2 million in the three months ended September 30, 2025, compared to $25.5 million in the prior-year period.

Equity earnings from our WAVE joint venture were $87.1 million in the first nine months of 2025, compared to $79.4 million in the prior-year period.

The year-over-year increases in WAVE earnings for the third quarter and first nine months of 2025 were primarily driven by the benefit from favorable AUV, partially offset by the negative impact of lower sales volumes.

Equity earnings from our WAVE joint venture were $27.4 million in the first quarter of 2026, compared to $26.8 million in the prior-year quarter.

The slight increase in WAVE earnings was primarily driven by the benefit from favorable AUV, partially offset by the negative impact of lower sales volumes and higher steel costs.

Architectural Specialties

(dollar amounts in millions)

Change is Favorable

Three Months Ended September 30,

Total segment net sales

Operating income

Nine Months Ended September 30,

Change is Favorable (Unfavorable)

Three Months Ended March 31,

Total segment net sales

Operating income

Net sales increased $23 million in the third quarter of 2025 compared to the same period in 2024, driven primarily by a $16 million increase from the acquisitions of Zahner and 3form, in addition to a $7 million increase in organic net sales driven by strong growth across most of our specialty product categories.

For the first nine months of 2025, net sales improved by $116 million from the prior-year period, primarily due to an $86 million increase from the acquisitions of Zahner and 3form, in addition to a $30 million increase in organic net sales driven by strong growth across most of our specialty product categories.

Cost of goods sold during the three months ended September 30, 2025 was $91 million, or 60.3% of net sales, compared to $76 million, or 58.7% of net sales, in the prior-year period.

The increase in costs of goods sold as a percentage of net sales was driven primarily by an increase in manufacturing costs within our organic business, partially offset by improved custom project margins.

Gross profit increased $7 million, or 13.2%, compared to the prior-year period due primarily to a $6 million benefit from the acquisitions of Zahner and 3form.

Cost of goods sold during the nine months ended September 30, 2025 was $267 million, or 59.9% of net sales, compared to $199 million, or 60.4% of net sales, in the prior-year period.

Gross profit increased $48 million, or 36.9%, compared to the prior-year period.

The acquisitions of Zahner and 3form contributed a $34 million benefit to gross profit, with the remaining increase driven by improved custom project margins and operating leverage.

SG&A expenses in the three months ended September 30, 2025 were $41 million, or 26.9% of net sales, compared to $34 million, or 26.4% of net sales, in the prior-year period.

The increase in SG&A expenses was primarily driven by a $4 million increase related to the acquisitions of Zahner and 3form and a $2 million increase in selling expenses driven primarily by higher net sales as well as additional investments in selling capabilities.

SG&A expenses in the first nine months of 2025 were $119 million, or 26.7% of net sales, compared to $90 million, or 27.1% of net sales, in the prior-year period.

The increase in SG&A expenses was primarily driven by a $24 million increase related to the acquisitions of Zahner and 3form and a $4 million increase in selling expenses driven primarily by higher net sales as well as additional investments in selling capabilities.

Total segment operating income

Architectural Specialties net sales increased $15 million in the first quarter of 2026 compared to the prior-year quarter due to a $10 million increase in organic net sales driven by growth within our metal and wood categories and a $5 million inorganic contribution from our 2026 and 2025 acquisitions.

Cost of goods sold during the first quarter of 2026 was $99.0 million, or 64.8% of net sales, compared to $84.4 million, or 61.3% of net sales, in the prior-year quarter.

The increase in cost of goods sold as a percentage of net sales was primarily driven by a $5 million increase in costs related to our 2026 and 2025 acquisitions and a $3 million increase in manufacturing costs within our organic business, which was primarily driven by higher employee costs and the impact of growth investments.

Also contributing to the increase in cost of goods sold was a $2 million tariff adjustment that was recorded in the first quarter of 2026.

Gross profit increased $1 million, or 0.9%, compared to the prior-year quarter due to a $6 million benefit from higher organic net sales, partially offset by the cost of goods sold impacts discussed above.

SG&A expenses in the first quarter of 2026 were $44.4 million, or 29.1% of net sales, compared to $38.4 million, or 27.9% of net sales, in the prior-year quarter.

The increase in SG&A expenses was primarily driven by a $2 million inorganic increase related to the 2026 and 2025 acquisitions, due to an increase in acquisition costs, a $2 million increase in organic selling expenses driven primarily by higher net sales and increased investments in selling resources to support growth and a $1 million increase in severance expenses.

Unallocated Corporate

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

Unallocated Corporate operating loss was $2 million in the first nine months of 2025 and $3 million in the first nine months of 2024.

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

Unallocated Corporate operating loss was $1 million in the first quarter of 2026 and 2025.

FINANCIAL CONDITION AND LIQUIDITY

Operating activities for the first nine months of 2025 provided $245.5 million, compared to $180.2 million for the first nine months of 2024.

The favorable change in cash from operating activities was primarily due to higher cash earnings compared to the prior-year period, including a benefit from a decrease in income taxes paid due to the impact of 2025 Federal tax reform.

Net cash provided by investing activities was $16.8 million in the first nine months of 2025, compared to $61.2 million used for investing activities in the first nine months of 2024.

The favorable change in cash from investing activities in the first nine 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 and an increase in dividends from WAVE, partially offset by a decrease in proceeds from the sale of fixed assets and an increase in purchases of property, plant and equipment.

Net cash used for financing activities was $252.0 million in the first nine months of 2025, compared to $115.7 million cash used in the first nine months of 2024.

The unfavorable change in cash used for financing activities was primarily due to increased debt repayments, net of borrowings, under our credit facility.

Borrowings were significantly higher in the prior year primarily due to the 3form acquisition.

Also contributing to the increase in cash used for financing activities was an increase in repurchases of our outstanding common stock.

Net cash provided by operating activities for the first three months of 2026 was $32.1 million, compared to $41.0 million for the first three months of 2025.

The unfavorable change in operating activities is primarily due to an unfavorable timing related change in receivables, partially offset by a favorable timing related change in accounts payable and accrued expenses.

Also contributing to the decrease in operating activities was an unfavorable change in net income tax payables.

Net cash used for investing activities was $51.4 million in the first three months of 2026, compared to $6.0 million of cash provided by investing activities in the first three months of 2025.

The unfavorable change in cash used for investing activities was primarily due to the acquisition of Eventscape, partially offset by an increase in dividends from WAVE.

Net cash used for financing activities was $13.2 million in the first three months of 2026, compared to $43.6 million for the first three months of 2025.

The favorable change in cash used for financing activities was primarily due to increased net borrowings due to the Eventscape acquisition, partially offset by 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 $910.6 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 $410.6 million Term Loan A.

As of September 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 September 30, 2025, the total principal balance outstanding under our senior credit facility was $410.6 million under Term Loan A.

We had no balance outstanding under the revolving credit facility as of September 30, 2025.

As of March 31, 2026, the revolving credit facility and Term Loan A were priced at 1.25% over the Secured Overnight Financing Rate (“SOFR”).

The revolving credit facility and Term

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

Loan A mature in December 2030.

We also have a $25.0 million bi-lateral letter of credit facility and a $0.7 million letter of credit facility.

As of March 31, 2026, the total principal balances outstanding under our senior credit facility included $408.0 million under Term Loan A and $75.0 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 September 30, 2025, we were in compliance with all covenants of the senior credit facility.

As of March 31, 2026, 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.

We use interest rate swaps to minimize the fluctuations in earnings caused by interest rate volatility associated with our senior credit facility.

The following table summarizes our interest rate swaps (dollar amounts in millions):

The following table summarizes our interest rate swaps, including forward interest rate swaps (dollar amounts in millions):

Coverage Period

Risk Coverage

November 2023 to December 2025

October 23, 2023

March 2025 to March 2026

March 27, 2025

March 2024 to June 2026

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June 26, 2024

March 2026 to December 2028

March 19, 2026

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.

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

Letters of credit are currently arranged through our revolving credit facility and our bi-lateral facility.

Letters of credit may be issued to third party suppliers, insurance companies and financial institutions and typically can only be drawn upon in the

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

event of AWI’s failure to pay its obligations to the beneficiary.

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

Letters of credit are currently arranged through our revolving credit facility, our bi-lateral facility, and letter of credit facility.

Letters of credit may be issued to third party suppliers, insurance companies and financial institutions and typically can only be drawn upon in the event of AWI’s failure to pay its obligations to the beneficiary.

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

September 30, 2025

March 31, 2026

Financing Arrangements

Bi-lateral facility

Letter of credit facility

Revolving credit facility

As of September 30, 2025, we had $90.1 million of cash and cash equivalents, $71.2 million in the U.S.

As of March 31, 2026, we had $79.8 million of cash and cash equivalents, $55.7 million in the U.S.

and $24.1 million in foreign jurisdictions, primarily Canada.

As of September 30, 2025, we also had $500 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.

As of March 31, 2026, we also had $425 million available under our revolving credit facility.

CRITICAL ACCOUNTING ESTIMATES

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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