What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-07-28 compared with 2026-04-28 · 136 added, 79 removed, 145 unchanged (60% of the section changed)

19 unchanged sentences

Manufacturing Plants

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

As of June 30, 2026, we operated 24 manufacturing plants, including 20 plants located within the U.S.

and four plants in Canada.

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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.

These products offer a range of design options and performance attributes such as acoustical control, rated fire protection, light, aesthetic appeal, energy efficiency 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 direct customers, primarily ceiling systems contractors, and resale

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

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

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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.

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

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

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.

The Company continues to monitor the impacts of governmental trade policies, including tariffs, and geopolitical events, including the ongoing conflict in Iran.

These matters did not have a material direct impact on our financial condition, liquidity or results of operations in the first six months of 2026 or 2025.

Sales Volumes.

For the three months ended June 30, 2026, sales volumes increased $31 million compared to the prior-year period, due primarily to a $15 million increase in organic Architectural Specialties net sales and an $11 million inorganic increase resulting from 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 $5 million increase from higher sales volumes in our Mineral Fiber segment.

For the six months ended June 30, 2026, sales volumes increased $47 million compared to the prior-year period, due primarily to a $24 million increase in organic Architectural Specialties net sales and a $17 million inorganic increase due to our 2026 and 2025 acquisitions.

Also contributing to the increase in net sales was a $6 million increase driven by 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 by $10 million for the three months ended March 31, 2026 compared to the same period in 2025.

Favorable AUV increased our total consolidated net sales for the three and six months ended June 30, 2026 by $16 million and $27 million, respectively, compared to the same periods in 2025.

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

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During the first quarter of 2026, we implemented price increases on Mineral Fiber ceiling products and WAVE implemented price increases on grid products.

In the second quarter of 2026, we announced and implemented price increases on certain Architectural Specialties products, and WAVE announced and implemented price increases on grid products.

Also in the second quarter of 2026, we announced price increases on Mineral Fiber products and WAVE announced price increases on grid products, both of which will become effective in the third quarter of 2026.

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

1 unchanged sentence

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.

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

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.

In the second quarter and first half of 2026, higher freight, raw material and energy costs negatively impacted operating income by $4 million and $6 million, respectively, compared to the same periods in 2025.

Acquisition-Related Expenses and Losses

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):

In connection with our acquisitions of Eventscape in February 2026, Geometrik in September 2025, 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, 2026 and 2025, summarized as follows (dollar amounts in millions):

Three Months Ended

Six Months Ended

Affected Line Item in the Condensed

3 unchanged sentences

SG&A expenses

Loss related to change in fair value of contingent consideration

SG&A expenses

Loss related to change in fair value of contingent consideration, net

Negative impact to operating income

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.

The change in fair value of contingent consideration was related to our Eventscape, Geometrik, Insolcorp and BOK 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 March 31, 2026 and December 31, 2025, we had approximately 4,000 and 3,800 full-time and part-time employees, respectively.

As of June 30, 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 (Unfavorable)

Three Months Ended March 31,

Change is Favorable

Three Months Ended June 30,

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.

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.

Six Months Ended June 30,

Consolidated net sales

Consolidated operating income

Consolidated net sales for the second quarter of 2026 increased 11.2% from the prior-year quarter due to higher volumes of $31 million and favorable AUV of $16 million.

Architectural Specialties net sales increased $26 million and Mineral Fiber net sales

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

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.

increased $21 million from the prior-year quarter.

Architectural Specialties segment net sales improved due to a $15 million increase in organic net sales and an $11 million inorganic contribution.

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

Consolidated net sales for the first six months of 2026 increased 9.2% over the prior-year period due to higher volumes of $47 million and favorable AUV of $27 million.

Architectural Specialties net sales increased $41 million and Mineral Fiber net sales increased $33 million over the prior-year period.

Architectural Specialties segment net sales improved due to a $24 million increase in organic net sales and a $17 million inorganic contribution.

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

Cost of goods sold in the second quarter of 2026 were $277.0 million, or 58.7% of net sales, compared to $248.8 million, or 58.6% of net sales, for the same period in 2025.

The slight increase in cost of goods sold as a percent of net sales was primarily driven by our 2026 and 2025 acquisitions.

This increase was partially offset by favorable AUV benefits and ongoing manufacturing productivity.

Cost of goods sold was also impacted by the net benefit from tariff-related items, including $2 million of International Emergency Economic Powers Act (“IEEPA”) tariff refunds recognized during the second quarter of 2026, largely offset by the ongoing impact of tariffs on our Canadian imports.

Cost of goods sold in the first six months of 2026 were $531.6 million, or 60.3% of net sales, compared to $481.6 million, or 59.7% of net sales, for the same period in 2025.

The year-over-year increase in cost of goods sold as a percent of net sales for the first six months of 2026 was primarily driven by our 2026 and 2025 acquisitions and a $2 million negative net impact from tariffs, including a tariff adjustment recorded in the first quarter of 2026 and the ongoing impact of tariffs on our Canadian imports, partially offset by IEEPA refunds recognized during the second quarter of 2026.

These increases in cost of goods sold as a percent of net sales were partially offset by favorable AUV benefits and ongoing manufacturing productivity.

SG&A expenses in the second quarter of 2026 were $93.7 million, or 19.9% of net sales, compared to $84.4 million, or 19.9% of net sales, in the prior-year quarter.

The increase in SG&A expenses was primarily driven by investments to support growth, most notably a $3 million increase in people costs, including incentive compensation, and a $2 million increase in selling expenses.

Also contributing to the increase was a $2 million inorganic increase due to our 2025 and 2026 acquisitions.

SG&A expenses in the first six months of 2026 were $182.1 million, or 20.6% of net sales, compared to $162.1 million, or 20.1% of net sales, for the same period in 2025.

The increase in SG&A expenses was primarily driven by investments to support growth, most notably a $5 million increase in people costs, including incentive compensation, and a $2 million increase in organic Architectural Specialties selling expenses.

Also contributing to the increase was a $5 million inorganic increase, including Eventscape acquisition costs, and a $3 million increase in severance expenses.

Losses related to changes in the fair value of contingent consideration were $0.9 million in the second quarter of 2025, compared to $0.1 million for the second quarter of 2025, and $0.9 million in the first six months of 2026, compared to $0.4 million for the same period in 2025.

Changes in the fair value of contingent consideration were related to our Insolcorp, Geometrik and Eventscape acquisitions.

See Note 15 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.

Equity earnings from unconsolidated affiliates were $33.4 million in the second quarter of 2026, compared to $31.9 million in the second quarter of 2025.

WAVE equity earnings were $33.6 million in the second quarter of 2026, compared to $32.1 million in the second quarter of 2025.

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

Equity earnings from unconsolidated affiliates were $60.7 million in the first six months of 2026, compared to $58.5 million in the same period of 2025.

WAVE equity earnings were $61.0 million in the first six months of 2026, compared to $58.9 million in the same period of 2025.

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

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

Interest expense was $7.8 million in the second quarter of 2026, compared to $8.6 million in the second quarter of 2025.

Interest expense was $15.1 million in the first six months of 2026 compared to $17.1 million in the first six months of 2025.

The decreases in interest expense were due to a decrease in effective interest rates and lower average debt balances.

Other non-operating income, net, was $0.9 million in the second quarter of 2026 compared to $0.7 million in the second quarter of 2025, and $2.4 million in the first six months of 2026 compared to $1.4 million in the same period of 2025.

The increases in other non-operating income, net, were primarily driven by the non-service cost components of pension and postretirement net periodic benefits.

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

Income tax expense was $30.2 million in the second quarter of 2026 compared to $27.5 million in the second quarter of 2025.

The effective tax rate was 23.8% for the second quarter of 2026 compared to 23.9% in the second quarter of 2025.

The slight decline in the effective tax rate was due to favorable impacts from executive compensation limitations and excess tax benefits related to stock-based compensation, largely offset by the absence of an investment tax credit recognized in the second quarter of 2025.

Income tax expense was $51.8 million in the first six months of 2026 compared to $49.1 million in the first six months of 2025.

The effective tax rate for the first six months of 2026 was 24.1% compared to 23.8% for the same period of 2025.

The modest increase in the effective tax rate was due to the absence of an investment tax credit recognized in the prior year, partially offset by benefits from lower executive compensation limitations and higher excess tax benefits related to stock-based compensation.

Total Other Comprehensive Loss (“OCL”) was $0.5 million in the second quarter of 2026 compared to total Other Comprehensive Income (“OCI”) of $1.9 million in the second quarter of 2025.

The change from OCI to OCL was due to unfavorable Canadian dollar foreign currency translation adjustments, partially offset by interest rate swap derivative gains.

OCI was $0.5 million in the first six months of 2026 compared to OCI of $1.3 million in the first six months of 2025.

The decrease in OCI was due to unfavorable Canadian dollar foreign currency translation adjustments, partially offset by interest rate swap derivative gains.

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).

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Change is Favorable

Three Months Ended March 31,

Total segment net sales

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.

Three Months Ended June 30,

Segment net sales

Segment operating income

Six Months Ended June 30,

Segment net sales

Segment operating income

Mineral Fiber net sales increased $21 million in the second quarter of 2026 compared to the prior-year quarter due to $16 million of favorable AUV, including like-for-like price and mix driven by continued demand at the high-end of our product portfolio, and $5 million of higher sales volumes, primarily due to strong commercial execution and benefits from growth initiatives, in addition to slightly improved market conditions.

For the first six months of 2026, Mineral Fiber net sales increased $33 million from the prior-year period, primarily due to $27 million of favorable AUV, driven by favorable like-for-like price and, to a lesser extent, favorable mix, and $6 million of higher sales volumes, primarily due to strong commercial execution and benefits from growth initiatives.

Cost of goods sold during the three months ended June 30, 2026 was $166.8 million, or 57.9% of net sales, compared to $156.7 million, or 58.7% of net sales, in the prior-year period.

Gross profit increased $11 million, or 10.1%, compared to the prior-year quarter due to a $12 million benefit from favorable AUV and a $3 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.

These benefits were partially offset by a $4 million increase in manufacturing costs, including freight, raw material and energy inflation, partially offset by ongoing manufacturing productivity.

Cost of goods sold during the six months ended June 30, 2026 was $322.1 million, or 59.1% of net sales, compared to $304.7 million, or 59.5% of net sales, in the prior-year period.

Gross profit increased $16 million, or 7.7%, compared to the prior-year period due to a $21 million benefit from favorable AUV and a $4 million benefit from higher sales volumes.

These benefits were partially offset by a $9 million increase in manufacturing costs, including freight, raw material and energy inflation, partially offset by ongoing manufacturing productivity.

SG&A expenses during the three months ended June 30, 2026 were $48.7 million, or 16.9% of net sales, compared to $43.8 million, or 16.4% of net sales, in the prior-year quarter.

The increase in SG&A expenses was primarily driven by investments to support growth, most notably a $2 million increase in people costs, including incentive compensation, and a $1 million increase in selling expenses.

Also contributing to the increase was a $1 million increase in accruals for environmental remediation matters.

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

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.

SG&A expenses during the six months ended June 30, 2026 were $92.5 million, or 17.0% of net sales, compared to $83.2 million, or 16.2% of net sales, in the prior-year period.

The increase in SG&A expenses was primarily driven by a $3 million increase in people costs, including incentive compensation, a $2 million increase in severance expenses, a $1 million decrease in company-owned officer life insurance gains related to deferred compensation plans and a $1 million increase in accruals for environmental remediation matters.

Equity earnings from our WAVE joint venture were $33.6 million in the three months ended June 30, 2026, compared to $32.1 million in the prior-year period.

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

Equity earnings from our WAVE joint venture were $61.0 million in the first six months of 2026, compared to $58.9 million in the prior-year period.

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

Architectural Specialties

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Change is Favorable (Unfavorable)

Three Months Ended March 31,

Total segment net sales

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.

Three Months Ended June 30,

Segment net sales

Segment operating income

Six Months Ended June 30,

Segment net sales

Segment operating income

Architectural Specialties net sales increased $26 million in the second quarter of 2026 compared to the prior-year quarter due to a $15 million increase in organic net sales driven by strong growth across most of our specialty product categories and an $11 million inorganic contribution.

For the first six months of 2026, Architectural Specialties net sales increased $41 million from the prior-year period due to a $24 million increase in organic net sales driven by strong growth across most of our specialty product categories and a $17 million inorganic contribution.

Cost of goods sold during the three months ended June 30, 2026 was $109.8 million, or 59.7% of net sales, compared to $91.8 million, or 58.2% of net sales, in the prior-year period, with the increase in cost of goods sold as a percent of net sales primarily driven by the inorganic impact from our 2026 and 2025 acquisitions.

Gross profit increased $8 million, or 12.5%, compared to the prior-year quarter due to a $5 million benefit from higher organic net sales and a $4 million inorganic benefit.

Cost of goods sold was also impacted by the net benefit from tariff-related items, which included $2 million of IEEPA tariff refunds recognized in the second quarter of 2026, largely offset by the ongoing impact of tariffs on our Canadian imports.

Cost of goods sold during the six months ended June 30, 2026 was $208.8 million, or 62.1% of net sales, compared to $176.2 million, or 59.7% of net sales, in the prior-year period, with the increase in cost of goods sold as a percent of net sales primarily driven by the inorganic impact and a net increase in impacts from tariff-related items.

Gross profit increased $9 million, or 7.3%, compared to the prior-year period due to an $11 million benefit from higher organic net sales and a $6 million inorganic benefit.

Partially offsetting these benefits was an $8 million increase in manufacturing costs, driven by a $4 million inorganic increase and a $4 million organic increase.

The increase in organic manufacturing costs was also impacted by a $2 million negative net impact from tariffs, including a tariff adjustment recorded in the first quarter of 2026.

SG&A expenses during the three months ended June 30, 2026 were $44.7 million, or 24.3% of net sales, compared to $40.3 million, or 25.6% of net sales, in the prior-year quarter.

The increase in SG&A expenses was primarily driven by investments to support growth, including a $1 million increase in organic selling expenses and a $1 million increase in people costs, including incentive compensation.

Also contributing to the increase was a $2 million inorganic increase.

SG&A expenses during the six months ended June 30, 2026 were $89.1 million, or 26.5% of net sales, compared to $78.4 million, or 26.6% of net sales, in the prior-year period.

The increase in SG&A expenses was primarily driven by investments to support growth, including a $2 million increase in organic selling expenses and a $2 million increase in people costs, including incentive

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

compensation.

Also contributing to the increase was a $5 million inorganic increase, including Eventscape acquisition costs, and a $1 million increase in severance expenses.

Unallocated Corporate

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

Unallocated Corporate operating loss was $1 million in the second quarter of 2026 and 2025, and $2 million in the first six months of 2026 and 2025.

FINANCIAL CONDITION AND LIQUIDITY

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.

Net cash provided by operating activities for the first six months of 2026 was $125.9 million, compared to $122.6 million for the first six months of 2025.

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

Net cash used for investing activities was $44.9 million in the first six months of 2026, compared to $13.2 million of cash provided by investing activities in the first six 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.

Net cash used for financing activities was $114.2 million in the first six months of 2026, compared to $134.7 million for the first six months of 2025.

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 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.

As of June 30, 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 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.

As of June 30, 2026, the total principal balances outstanding under our senior credit facility included $405.5 million under Term Loan A and $90.0 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 March 31, 2026, we were in compliance with all covenants of the senior credit facility.

As of June 30, 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.

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Risk Coverage

March 2024 to June 2026

March 25, 2024

March 2025 to September 2026

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March 19, 2026

June 2026 to June 2029

June 22, 2026

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

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

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

March 31, 2026

June 30, 2026

Financing Arrangements

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Revolving credit facility

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

As of June 30, 2026, we had $78.6 million of cash and cash equivalents, $54.4 million in the U.S.

and $24.2 million in foreign jurisdictions, primarily Canada.

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

As of June 30, 2026, we also had $410 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 and scheduled payments of debt obligations.

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QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK

For information regarding our exposure to certain market risks, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended December 31, 2025.

For more information regarding our exposure to certain market risks, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended December 31, 2025.

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