AWI 10-K & 10-Q changes, risk factors and insider trading

The loss, reduction, or fluctuation of sales to key customers, including independent distributors or national home center customers,customers or independent distributors, or any adverse change in our business relationships with them, whether as a result of changing customer demands and expectations, reducedcompetition, demand,industry consolidation, supply chain constraints, competition, industry consolidationconstraints or otherwise, could have a material adverse effect on our financial condition, liquidity or results of operations.

The availability and cost of raw materials, packaging materials, energy and sourced products are critical to our operations and our results of operations. For example, we use substantial quantities of natural gas and some petroleum-based raw materials in our manufacturing operations. We source some materials from a limitedlimited, or single, number of suppliers, which, among other things, increases the risk of unavailability. Limited availability could require us to reformulate products or limit our production. Supply chain disruptions could decrease access to manufacturing inputs or sourced products or significantly increase the cost to purchase these items. Future input cost volatility could occur because of our suppliers’ exposure to tariffsgovernmental trade policies, including tariffs, or geopolitical events. A decrease in availability or increases in costs of manufacturing inputs or sourced products, and any inability to pass along such costs through price increases, could have a material adverse effect on our financial condition, liquidity or results of operations.

We believe the relationship with our partner, Worthington Enterprises, Inc., is an important element in the success of this joint venture. InIf Decemberthere 2023, Worthington Enterprises, Inc. (formerly known as Worthington Industries, Inc.) separated from Worthington Steel, Inc. intois a separate, independent, publicly traded company (the “Worthington Separation”). Worthington Enterprises, Inc.’s investmentchange in WAVEownership, wasa not includedchange in thecontrol, assetsa andchange in management philosophy, a change in business transferred to Worthington Steel, Inc. If the Worthington Separationstrategy or anyanother other changeevent with respect to our partner that adversely impacts our relationship, WAVE’s performance could be materially and adversely impacted. In addition, our partner may develop economic or business interests or goals that are different from or inconsistent with our interests or goals, which may impact our ability to influence or align WAVE’s strategy and operations with our interests or goals.

We seek ways to make our operations more efficient and effective. We may reduce, move, modify or expand our plants and operations, as well as our sourcing and supply chain arrangements, and invest in technology, as needed, to control costs and improve productivity. Such actions involve substantial planning, often require capital investments and may result in charges for fixed asset impairments or obsolescence and substantial severance costs. Our ability to achieve the cost savings and other benefits within expected time frames is subject to many estimates and assumptions. These estimates and assumptions are subject to significant economic, competitive and other uncertainties, some of which are beyond our control. If these estimates and assumptions are incorrect, if we experience delays resulting from equipment failures or other interruptions in production, or if other unforeseen events occur, our financial condition, liquidity or results of operations could be materially and adversely affected.

We rely on our employees to manufacture and sell our products. Because most of our manufacturing employees are represented by unions and covered by collective bargaining or similar agreements, we often incur costs attributable to periodic renegotiation of those agreements, which may be difficult to project. Collective bargaining agreements covering approximately 180260 employees at threeone U.S. plantsplant will expire during 2025.2026. We are also subject to the risk that strikes or other conflicts with organized personnel may arise or that we may become the subject of union organizing activity at our facilities that do not currently have union representation. Prolonged negotiations, conflicts or related activities could also lead to costly work stoppages, loss of productivity and reduced service levels to our customers.

Evolving and/or conflicting government,governmental regulations, customer and societal views related to climate change, climate transition, responsible sourcing and supply chain transparency, resource stewardship, diversity, human rights, social responsibility and other sustainability matters and our efforts to manage and report on them, as well as accomplish our sustainability goals, present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which could have a material adverse impact.

In May 2024,2025, we published our annual Sustainability Report, which includes certain 2030 sustainability goals and describes our progress towards meeting those goals. We may not achieve the anticipated benefits we expect from these goals, which may damage our reputation, or these efforts may not align with new regulations or expectations of stakeholders. Many factors, including changes in regulations and tax policies, lagging industry innovation in sustainable technologies and unfavorable market conditions for sustainability-related investments may adversely affect the timeline for achievement of our sustainability goals. Efforts to achieve these goals may also result in higher or unforeseen costs. In addition, we may encounter challenges in meeting our sustainability goals by 2030 and/or in measuring our progress towards the achievement of our sustainability goals.

Overall, climate change, its effects, the impacts of government regulation, and consumer, investor and business preferences are inherently difficult to predict and could have a material adverse impact on our business by increasing our energy costs, result in substantial, additional capital expenditures and operating costs in the form of taxes, emissions allowances, carbon offsets, or required equipment upgrades or require that we modify our products or processes in a manner that increases our costs and/or reduces our profitability. Any of the foregoing factors could impair our operating efficiency and productivity and result in higher operating costs.

We continue to evaluate and may pursue strategic initiatives involving the development or use of new or innovative products, solutions and tools, including those related to Templok® energy saving ceiling tiles, as well as the expansion of our ecommerce platform, Kanopi™®, and our automated design service, ProjectWorks®. These initiatives are designed to grow revenue, improve profitability and increase shareholder value. Our results of operations and financial position could be materially and adversely affected if we are unable to successfully execute these initiatives or if we are unable to achieve the investment cases or realize expected competitive advantages from the initiatives in a timely and efficient manner.

We mayare likely to pursue strategic transactions, including mergers, acquisitions, joint ventures, strategic alliances or other investments, which could create risks and present unforeseen integration obstacles or costs, any of which could have a material adverse effect on our financial condition, liquidity or results of operations.

We regularly evaluate potential mergers, acquisitions, joint ventures, strategic alliances or other investments that we believe could complement, enhance or expand our current businesses or product lines or that might otherwise offer us growth opportunities, particularly in our Architectural Specialties segment for which we have completed sevennine acquisitions sincefrom July 2020.2020 through December 31, 2025. Any such strategic transaction involves a number of risks, including potential disruption of our ongoing business and distraction of management, difficulty with integrating or separating personnel and business operations and infrastructure, increasing or decreasing the scope, geographic diversity and complexity of our operations and markets,markets andas expandingwe expand into new ceiling and wall adjacencies and exterior metal architectural applications, offering products with new attributes and/or offeringincreasing the size and scope of solutions offered, including design offerings and the installation of products. Strategic transactions could involve payment by us of a substantial amount of cash, assumption of liabilities and indemnification obligations, subjecting us to new regulatory requirements, incurrence of a substantial amount of debt or issuance of a substantial amount of equity. Certain strategic opportunities may not result in the consummation of a transaction or may fail to realize the intended benefits and synergies. If we fail to identify, consummate and integrate our strategic transactions in a timely and cost-effective manner, our financial condition, liquidity or results of operations could be materially and adversely affected.

Additionally, the agreements that govern our indebtedness include covenants that impose significant operating and financial restrictions, including restrictions on our ability to engage in activities that may be in our best long-term interests. Under the terms of our amended senior secured credit facility, we are required to maintain specified leverage and interest coverage ratios. Our ability to meet these ratios could be affected by events beyond our control, and we cannot ensure that we will continue to meet them. A breach of any of the restrictive covenants or ratios would result in a default under the senior secured credit facility. If any such default occurs, the lenders under the senior secured credit facility may be able to elect to declare all outstanding borrowings under our facility, together with accrued interest and other fees, to be immediately due and payable, or enforce their security interest. The lenders may also have the right in these circumstances to terminate commitments to provide further borrowings.

In July 2016, our BoardAs of DirectorsDecember approved31, a2025, sharewe repurchasewere program authorizing usauthorized to repurchase up to $150.0$532.8 million of our outstanding shares of common stock under a share repurchase program first adopted in July 2016 and authorized through December 31, 2026 (the “Program”). Since inception of the Program, we have been authorized to repurchase up to an aggregate of $1,700.0 million of our outstanding shares of common stock through December 31, 2026. Repurchases under the Program may be made through open market, block and privately negotiated transactions, including Rule 10b5-1 plans, at such times and in such amounts as management deems appropriate, subject to market and business conditions, regulatory requirements and other factors. The Program does not obligate us to repurchase any particular amount of common stock and may be suspended or discontinued at any time without notice. Furthermore, there can be no assurance that we will be able to repurchase our common stock, and we may discontinue plans to repurchase common stock at any time.

We are subject to the tax laws of the various jurisdictions in which we operate. The tax laws are complex, and the manner in which they apply to our operations, results and tax planning strategies is sometimes open to interpretation. Our income tax expense (benefit) and reported net earnings may fluctuate significantly and may be materially different than forecasted or experienced in the past. Our financial condition, liquidity or results of operations could be materially and adversely affected by changes in effective tax rates, changes in our overall profitability, changes in tax legislation, the results of examinations of previously filed tax returns, and ongoing assessments of our tax exposures.

In addition, claims and investigations may arise related to patent infringement, distributorcustomer relationships, commercial contracts, antitrust or competition law requirements, employment matters, employee benefits issues, and other compliance and regulatory matters, including anti-corruption and anti-bribery matters. While we have processes and policies designed to mitigate these risks and to investigate and address such claims as they arise, we cannot predict or, in some cases, control the costs to defend or resolve such claims.

A portion of our net sales are generated in Canada and Latin America. While these sales are minor in comparison to our total consolidated net sales, they are subject to currency exchange fluctuations, trade regulations, import duties, logistics costs, delays and other related risks. Our Canadian and Latin American operations are also subject to various tax rates, tariffs, credit risks in emerging markets, political risks, uncertain legal systems, and loss of sales to local competitors following currency devaluations in countries where we import products for sale. In addition, a part of our growth strategy depends on our ability to expand our operations in Canada and Latin America, including emerging markets that have greater political and economic volatility and greater vulnerability to infrastructure and labor disruptions than established markets.

Our business is influenced by market and economic conditions, including inflation, deflation, interest rates, tariffs, availability and cost of capital, consumer spending rates, energy availability, the effects of governmentgovernmental trade policies or spending programs and the impacts of geopolitical events. Volatility in financial markets and softness or deterioration of national and global economic conditions could have a material adverse effect on our financial condition, liquidity or results of operations, including as follows:

In the conduct of our business, we collect, use, transmit and store data on information systems, which are vulnerable to disruption and an increasing threat of continually evolving cybersecurity risks. These information systems may be disrupted or fail as a result of events that are wholly or partially beyond our control, including events such as power loss, software or hardware defects, hacking, computer viruses,ransomware, malware, ransomwarephishing, social engineering attacks, supply chain attacks or other cyber-attacks. All of these risks are also applicable where we rely on outside vendors to provide services, which may operate in a cloud environment. We are dependent on third-party vendors tofor operatecritical secureservices, and reliableany compromise of their systems whichcould mayresult includein dataa transfersservice overinterruption theor internet.loss of our data. Any events which deny us use of vital operating or information systems may seriously disrupt our normal business operations.

We,Finally, we, along with third parties, may use data from our information systems and publicly available sources within a manner that incorporates artificial intelligence (“AI”) technologies and tools. The use of AI may increase risks, including flawed algorithms, hallucinations, and biased outputs. Other risks ofinclude data exposure,exposure and misuse, including unauthorized access, misuse,access or unintentional disclosure of proprietary manufacturing processes, product designs, pricing data, or other sensitive information. TheOutput evolvinggenerated andby broaderAI technologies could result in inaccurate solutions that adversely affect operational decisions, customer relationships, or product quality. As the use of AI tools and technologies maycontinues alsoto impactevolve, including by competitors, the effectiveness of our cybersecurity, regulatory compliance and intellectual property protection programs.programs may be impacted. In addition, faster or more advanced use of AI by competitors, customers, or other third parties could create competitive or operational disruptions to our business. Failure to successfully govern, integrate, or safeguard the use of AI could subject us to enhanced regulatory scrutiny, litigation, reputational harm, or competitive disadvantage.

We primarily operate in the U.S., Canada and Latin America. Our concentrated operations in the Americas could subject us to a greater degree of risk relative to our global, diversified competitors. We are particularly vulnerable to adverse events (including geopolitical events, acts of terrorism, natural disasters, weather conditions, labor market disruptions and government actions) and economic conditions in the U.S., Canada and Latin America. While our operations are primarily in the U.S., Canada and Latin America, we are exposed to downstream risks from global events. Adverse events or conditions in these geographic areas could have a material adverse effect on our financial condition, liquidity or results of operations.

AWI is an Americas leader in the design, innovationdesign and manufacture of innovative interior and exterior architectural applications including ceilings, specialty walls and exterior metal solutions. OurWe manufacture and source products primarilymade includeof numerous materials, including mineral fiber, fiberglass, metal, felt, architectural resin and glass, wood, resin, 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”).

In December 2024,2025, we acquired all of the issued and outstanding stock of A.FGM-Parallel Zahner CompanyLLC (“ZahnerParallel”), based in KansasEnglewood, City,Colorado. Missouri. ZahnerParallel is a designer and manufacturer of extruded aluminum products primarily used in exterior metal architectural solutions.applications. The operations, assets and liabilities of ZahnerParallel are included in our Architectural Specialties segment.

In AprilSeptember 2024,2025, we acquired all of the issued and outstanding membershipstock interestsof inGeometrik 3form,Manufacturing, LLCInc. (“3formGeometrik”), based in SaltKelowna, LakeBritish City,Columbia, UtahCanada. from Hunter Douglas, Inc. 3formGeometrik is a designer and manufacturer of architecturalwood resinacoustical ceiling and glasswall products used for specialty walls, partitions and ceilings.systems. The operations, assets and liabilities of 3formGeometrik 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 contributed $5.5 million in exchange for aan initial 19.5% ownership interest in Overcast,Overcast with(currently future rights to increase our ownership interest.19.2%). 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.

In July 2023, we acquired all of the issued and outstanding stock of BOK Modern, LLC (“BOK”), based in San Rafael, California. BOK is a designer of exterior metal architectural solutions. The operations, assets and liabilities of BOK are included in our Architectural Specialties segment.

As of December 31, 2024,2025, we operated 2022 manufacturing plants, including 1819 plants located within the U.S. and twothree plants in Canada.

Mineral Fiber – produces suspended mineral fiber and fiberglass ceiling systems. Our mineral fiber products offer various performance attributes such as acoustical control, rated fire protection, and energy efficiency, along with other health and sustainability features and aesthetic appeal. Ceiling products are primarily sold to resale distributors, ceiling systems contractors and wholesalers, and retailers (including large home centers). The Mineral Fiber segment also includes the results of WAVE, which manufactures and sells suspension system (grid) products and ceiling component products that are invoiced by both AWI and WAVE. 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, structural and walkable grid systems. For some customers, WAVE sells its suspension system products to AWI for resale to customers. Mineral Fiber segment results reflect those sales transactions. The Mineral Fiber segment also includes all assets and liabilities not specifically allocated to our Architectural Specialties or Unallocated Corporate segment, including all property and related depreciation associated with our Lancaster, 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.

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, resin, 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.contractors, and resale distributors. This segment’s revenues are primarily project driven, which can lead to more variability in sales patterns. Operating results for the Architectural Specialties segment include a portion of allocated Corporate administrative expenses that represent a reasonable allocation of general services to support its operations.

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/ 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.

Markets. 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, GDP, office vacancy rates, the Architecture Billings Index, new commercial construction starts, state and local government spending, corporate profits,profits and retail sales. The Company continues to monitor the impacts of tariffs and other governmental trade policies and geopolitical events, including but not limited to, conflicts in Ukraine and the Middle East; noneneither of which had a material direct impact on our financial condition, liquidity or results of operations during 20242025 or 2023.2024. In September 2025, GMS, Inc., one of our largest distributor customers, was acquired by The Home Depot, Inc. In addition, in October 2025, Foundation Building Materials, Inc., another one of our largest distributor customers, was acquired by Lowe's Companies, Inc. These acquisitions had no material impact on our financial condition, liquidity or results of operations during 2025. Additionally, in the fourth quarter of 2025, the U.S. federal government experienced a six‑week shutdown of non‑essential operations. While the shutdown contributed to certain short‑term indirect headwinds that impacted our results for the fourth quarter of 2025, these disruptions were temporary in nature and did not have a material impact on our financial condition, liquidity or results of operations for the full year ended December 31, 2025.

Favorable AUV contributed approximately $62 million toincreased our total consolidated net sales for the year ended December 31, 20242025 by approximately $58 million compared to the same period in 2023.2024. Our Architectural Specialties segment revenues are primarily generated byfrom individual contracts that include aproject-specific mixmixes of products, both manufactured by us and sourced from third parties, that varies by project.products. 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 quarters of 2024,2025, we implemented price increases on Mineral Fiber ceiling products. During the first and second quarters of 2024,2025, WAVE implemented price increases on grid products. In the fourth quarter of 2024,2025, we announced price increases on Mineral Fiber ceiling products and WAVE announced price increases on grid products that became effective in the first quarter of 2025.2026. We may implement futureFuture pricing actions for Mineral Fiber, Architectural Specialties and WAVE products may be implemented based on numerous factors, namelyincluding the impact of tariffs, the rate and pace of inflation and its impact on our business.

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

Our largest raw material expenditures are primarily for fiberglass, perlite, recycled paper, and starch. Other raw materials include clays, felt, pigment, resin,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. Fluctuations in the prices of these inputs impact our financial results. In 2024,2025, lowerhigher energy and freightraw material costs were partially offset by higherlower raw materialfreight costs, resulting in a $6$5 million benefitnegative impact to operating income compared to 2023.2024.

In connection with our acquisitions of Zahner,Parallel 3form,in Insolcorp,December 2025, Geometrik in September 2025, Zahner in December 2024, 3form in April 2024, Insolcorp in October 2023, BOK in July 2023 and Arktura LLC (“Arktura”) acquired in December 2020, we recorded certain acquisition-related expenses and losses to operating income for the years ended December 31, 2025, 2024, 2023, and 2022,2023, summarized as follows (dollar amounts in millions):

The inventory amounts above reflect the post-acquisition expenses associated with recording inventory at fair value as part of purchase accounting for the Geometrik and 3form acquisition.acquisitions. Acquisition costs above reflect certain contingent third-party professional fees incurred due to the Parallel, Geometrik, Zahner and 3form acquisitions. Expenses related to the deferred cash and restricted stock awards were for Arktura’s former owners and employees that were recorded over their respective service periods, as such payments were subject to the awardees’ continued employment with AWI. The change in fair value of contingent consideration iswas related to our BOKGeometrik, Insolcorp and InsolcorpBOK acquisitions and wasis remeasured quarterly during each acquisition's respective earn-out periods. See Note 1918 to the Consolidated Financial Statements for further information.

The following discussion includes year-to-year comparisons between 20242025 and 2023.2024. Discussions of year-to-year comparisons between 20232024 and 20222023 that are not included in this Form 10-K can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.2024. Please refer to NotesNote 3 and 6 to the Consolidated Financial Statements for a reconciliation of segment operating income to consolidated earnings from continuing operations before income taxes and additional financial information related to discontinued operations.taxes.

CONSOLIDATED RESULTS FROM CONTINUING OPERATIONS

Cost of goods sold during 20242025 was 59.8%59.4% of net sales, compared to 61.6%59.8% for 2023.2024. The year-over-year decrease in cost of goods sold as a percentagepercent of net sales was primarily driven primarily by favorable AUV margin benefit,benefits, improved manufacturing productivity and lowerfavorable inputinventory valuation impacts. These benefits were partially offset by an increase in manufacturing costs.

SG&A expenses in 20242025 were $339.5 million, or 20.9% of net sales, compared to $308.5 million, or 21.3% of net sales, comparedin to2024. $262.5The million,reduction orin 20.3%SG&A expenses as a percent of net sales,sales inwas 2023.due to disciplined cost control, partially offset by inflation. The year-over-year increase in SG&A expenses compared to the prior year was primarily driven by a $32$27 million increase related to the acquisitions2024 of Zahner, 3form and BOK, an $8 million increase in selling expenses, primarily due to higher employee costs,Acquisitions, a $7$4 million increase in incentive compensation and a $6$3 million decreaseincrease in Architectural Specialties selling and advertising expenses, driven primarily by higher net sales as well as additional investments in selling capabilities. These increases were partially offset by a $2 million increase in company-owned officer life insurance gains related to deferred compensation plans.plans These increases were partially offset byand a $9prior-period increase in reserves for environmental remediation matters of $2 million decreasethat did not recur in acquisition-relatedthe expenses.current period.

In 2025, we recorded $1.4 million of remeasurement losses for changes in the fair value of contingent consideration related to the acquisitions of Geometrik, BOK and Insolcorp. In the same period in 2024, we recorded $1.6 million of remeasurement losses for changes in the fair value of contingent consideration related to the acquisitions of BOK and Insolcorp. In the same period in 2023, we recorded $0.1 million of remeasurement losses for changes in the fair value of contingent consideration related to the acquisition of BOK. See Note 1918 to the Consolidated Financial Statements for further information.

LossesIn 2025, we recorded $0.8 million of net gains on sales of fixed assets, netwhich were primarily comprised of a $0.9 million gain on the sale of a parcel of land at a Mineral Fiber plant. In 2024, we recorded $0.6 million inof 2024,net losses on sales of fixed assets, which waswere comprised of a $5.2 million loss on the sale forof undeveloped land adjacent to our Corporate headquarters, partially offset by a $4.6 million gain on the sale of our idled Mineral Fiber plant in St. Helens, Oregon.

Equity earnings from unconsolidated subsidiariesaffiliates were $112.3 million in 2025, compared to $103.4 million in 2024, compared to $89.3 million in 2023. In 2024,2024. WAVE equity earnings were $113.2 million in 2025 compared to $104.3 million,million whilein Overcast equity losses were $0.9 million.2024. The increase in WAVE equity earnings was primarily driven by the benefitsbenefit offrom favorable AUV, higher volumes and lower steel costs, partially offset by higherthe employeenegative costs.impact of lower sales volumes. See Note 1110 to the Consolidated Financial Statements for further information.

Interest expense was $33.0 million in 2025 compared to $39.8 million in 2024 compared to $35.3 million in 2023.2024. The increasedecrease in interest expense was primarily due to lower average debt balances, partially offset by higher average effective interest rates, partially offset by lower average debt balances.rates.

Other non-operating income, net was $2.4 million during 2025 compared to $12.6 million during 20242024. comparedThe todecrease $9.9in million during 2023. Otherother non-operating income, net, iswas primarily compriseddriven ofby the non-service cost components of pension and postretirement net periodic benefit costs and a decrease in interest income. The increase in other non-operating income was primarily due to an increase in amortization of pension and postretirement credits.

Income tax expense was $91.6 million in 2025 compared to $82.2 million in 2024 compared to $74.5 million in 2023.2024. The effective tax rate was 23.7%22.9% in 20242025 compared to 25.0%23.7% in 2023.2024. The effective tax rate for 20242025 was lower compared to 20232024 primarily due to thea benefitsgreater benefit recognized in the current year from astatute reductionclosures as well as the benefit from an investment tax credit generated in the current year, offset partially by unfavorable adjustments related to our valuation allowance for capital loss carryforwards,carryforwards in additioncompared to statute closures.2024.

Total Other Comprehensive Income (“OCI”) was $7.1 million in 2025 compared to Total Other Comprehensive Loss (“OCL”) wasof $5.5 million in 2024 compared to $4.6 million in 2023.2024. The change infrom OCL to OCI was primarily driven by changes infavorable pension and postretirement actuarial adjustments and higher foreign currency translation adjustments,gains, partiallydriven offsetprimarily by the Canadian dollar. To a lesser extent, the change was also driven by lower interest rate swap derivative losses in 20242025 compared to 2023.2024. Pension and postretirement adjustments represent the actuarial gains and losses related to our defined benefit pension and postretirement plans. 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 during 2024 and 2023 were driven primarily by changes in the Canadian dollar. Derivative gain/losslosses representsrepresent the mark-to-market value adjustments of our derivative assets and liabilities, and the recognition of gains and losses previously deferred in accumulated OCI.OCL.

Mineral Fiber costCost of goods sold during 20242025 was $586$603 million, 59.5%or 58.5% of net sales, compared to $574$586 million, 61.6%or 59.5% of net sales, for 2023.2024. Gross profit increased $42$28 million, or 11.6%,6.9%, compared to 2023.2024 Thedue year-over-year increase in gross profit was driven primarily byto a $39$38 million benefit from favorable AUV benefit and an $8 million decrease in manufacturing costs due to improved manufacturing productivity and input costs,AUV, partially offset by a $5$9 million negative impact from lower sales volumes and a $3$2 million increase in depreciationmanufacturing andcosts. amortizationThe expense.increase in manufacturing costs was primarily due to higher input costs, net of a $7 million benefit from favorable inventory valuations.

Architectural Specialties SG&A expenses were $127$179 million, or 27.6%17.4% of net sales in 20242025, compared to $99$181 million, or 27.4%18.3% of net salessales, for 2023.2024. The year-over-year increasedecrease in SG&A expenses was primarily driven by a $32 million increase related to the acquisitions of Zahner, 3form and BOK, as well as a $4$2 million increase in sellingcompany-owned expenses,officer duelife insurance gains related to higherdeferred employeecompensation costs.plans and a prior period increase in reserves for environmental matters of $2 million that did not recur in the current period. These increasesdecreases were partially offset by a $9$3 million decreaseincrease in acquisition-relatedincentive costs.compensation.

Net cash used for investing activities was $79.3$3.6 million for 2024,2025, compared to $10.4$79.3 million in 2023.2024. The unfavorablefavorable change in cash used in investing activities in 2024 compared to 2023 was primarily due to $124.0a $110 million ofreduction in cash paid for the 3formacquisitions and Zahneran acquisitions,increase in dividends from WAVE, partially offset by an increase in purchases of property, plant and equipment and a decrease in proceeds from the sale of fixed assets, due primarily to 2024 cash proceeds received from the sales of our idled St. Helens manufacturing plant and undeveloped land adjacent to our corporate headquarters in 2024 and an increase in proceeds received from company-owned life insurance policies.headquarters.

As of December 31, 2024,2025, total borrowings outstanding under our senior credit facility were $427.5$410.6 million under Term Loan AA, and $100.0 million under the revolving credit facility.facility was undrawn.

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 consolidated cash 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 EBITDAEBITDA, to be less than or equal to 3.75 to 1.0 (subject to certain exceptions for certain acquisitions). As of December 31, 2024,2025, 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. We use interest rate swaps to minimize the fluctuations in earnings caused by interest rate volatility associated with our senior credit facility.

As of MarchJune 31,30, 2026, we operated 24 manufacturing plants, including 20 plants located within the U.S. and four plants in Canada.

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 conservationefficiency 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 primarilymostly to direct customers, primarily ceiling systems contractors, and resale distributors. This segment’s revenues are primarily project driven, which can lead to more variability in sales patterns. Operating results for the Architectural Specialties segment include a portion of allocated Corporate administrative expenses that represent a reasonable allocation of general services to support its operations.

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 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 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 as inorganic consolidated and/or Architectural Specialties results.Geometrik.

Markets. 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 policiespolicies, including tariffs, and geopolitical events, including the ongoing conflict in Iran,Iran. noneThese ofmatters whichdid hadnot have a material direct impact on our financial condition, liquidity or results of operations in the first threesix months of 2026 or 2025.

SeveralSales factors and trends within our markets affected our business performance during the first quarter of 2026 compared to the first quarter of 2025.Volumes. For the three months ended MarchJune 31,30, 2026, sales volumes increased $17$31 million compared to the prior-year period, due primarily to a $10$15 million increase in organic Architectural Specialties net sales and aan $5$11 million inorganic increase dueresulting tofrom 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$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.

Favorable AUV increased our total consolidated net sales by $10 million for the three and six months ended MarchJune 31,30, 2026 by $16 million and $27 million, respectively, compared to the same periodperiods 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. 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.

Our largest raw material expenditures are primarily for fiberglass, perlite, recycled paper, and starch. 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, 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. In the second quarter and first quarterhalf of 2026, higher freight, raw material and energy costs negatively impacted operating income by $2$4 million and $6 million, respectively, compared to the same periodperiods in 2025.

In connection with our acquisitions of Eventscape in February 20262026, 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 induring the three and six months ended MarchJune 31,30, 2026 and 2025, summarized as follows (dollar amounts in millions):

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 Eventscape, Geometrik, Insolcorp and BOK acquisitionacquisitions and is remeasured quarterly during theeach 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 MarchJune 31,30, 2026 and December 31, 2025, we had approximately 4,000 and 3,800 full-time and part-time employees, respectively.

Consolidated net sales for the firstsecond quarter of 2026 increased 7.1%11.2% from the prior-year quarter due to higher volumes of $17$31 million and favorable AUV of $10$16 million. Architectural Specialties net sales increased $15$26 million and Mineral Fiber net sales increased $12$21 million from the prior-year quarter. Architectural Specialties segment net sales improved due to a $10$15 million increase in organic net sales and aan $5$11 million inorganic contribution from Eventscape, Parallel and Geometrik.contribution. 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 quartersix months of 2026 waswere $254.6$531.6 million, or 62.1%60.3% of net sales, compared to $232.8$481.6 million, or 60.8%59.7% of net sales, infor the prior-yearsame quarter.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 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.acquisitions Also contributing to the increase in cost of goods sold wasand a $2 million negative net impact from tariffs, including a tariff adjustment that was 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 improvedongoing manufacturing productivity.

SG&A expenses in the firstsecond quarter of 2026 were $88.4$93.7 million, or 21.6%19.9% of net sales, compared to $78.0$84.4 million, or 20.4%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 severance expenses, a $2 million inorganic increase related to our 2026 and 2025 acquisitions, due to an increase in acquisitionpeople costs, including incentive compensation, and a $2 million increase in Architectural Specialties organic selling expenses,expenses. drivenAlso primarilycontributing byto higherthe netincrease saleswas a $2 million inorganic increase due to our 2025 and increased2026 investments in selling resources to support growth across the segment.acquisitions.

Equity earnings from unconsolidated subsidiariesaffiliates were $27.3$33.4 million in the firstsecond quarter of 2026, compared to $26.6$31.9 million in the firstsecond quarter of 2025. WAVE equity earnings were $27.4$33.6 million in the firstsecond quarter of 2026, compared to $26.8$32.1 million in the firstsecond quarter of 2025. The increase in WAVE equity earnings was primarily driven by the impact of higher sales volumes and the benefit fromof 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$7.8 million in the firstsecond quarter of 2026, compared to $8.5$8.6 million in the second quarter of 2025. Interest expense was $15.1 million in the first quartersix months of 2026 compared to $17.1 million in the first six months of 2025. The decreasedecreases in interest expense was primarilywere due to a decrease in effective interest rates and lower average debt balances.

Other non-operating income, net, was $1.5$0.9 million in the firstsecond quarter of 2026 compared to $0.7 million in the second quarter of 2025, and $2.4 million in the first quartersix months of 2026 compared to $1.4 million in the same period of 2025. The increaseincreases in other non-operating income, net, for the first quarter of 2026 in comparison to the prior-year quarter waswere primarily driven by the non-service cost components of pension and postretirement net periodic benefit costs.benefits.

Income tax expense was $21.6$30.2 million in the firstsecond quarter of both 2026 andcompared to $27.5 million in the second quarter of 2025. The effective tax rate was 23.8% for the firstsecond quarter of 2026 was 24.4% compared to 23.8%23.9% in the prior-yearsecond quarter.quarter of 2025. The increaseslight decline in the effective tax rate for the first quarter of 2026 in comparison to the same period in 2025 was primarily due to federalfavorable impacts from executive compensation limitations and excess tax benefits related to stock-based compensation, largely offset by the absence of an investment tax credit benefits recognized in the prior-yearsecond quarter thatof did not recur in the current-year quarter.2025.

Total Other Comprehensive IncomeLoss (“OCIOCL”) was $1.0$0.5 million in the firstsecond quarter of 2026 compared to total Other Comprehensive LossIncome (“OCLOCI”) of $0.6$1.9 million in the firstsecond quarter of 2025. The change from OCLOCI to OCL was due to unfavorable Canadian dollar foreign currency translation adjustments, partially offset by interest rate swap derivative gains. OCI forwas $0.5 million in the first quartersix months of 2026 compared to OCI of $1.3 million in the prior-yearfirst quartersix months of 2025. The decrease in OCI was primarily due to unfavorable Canadian dollar foreign currency translation adjustments, partially offset by interest rate swap derivative gains, partially offset by unfavorable foreign currency translation adjustments, driven primarily by the Canadian dollar.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). Foreign currency translation adjustments represent the change in the U.S. dollar value of assets and liabilities denominated in foreign currencies.

Mineral Fiber net sales increased $12$21 million in the firstsecond quarter of 2026 compared to the prior-year quarter due to $10$16 million of favorable AUV, whichincluding waslike-for-like price and mix driven primarily by favorablecontinued like-for-likedemand price,at the high-end of our product portfolio, and $2$5 million of higher sales volumes drivenvolumes, primarily bydue solidto strong commercial execution and benefits from growth initiatives, in anaddition unevento market.slightly improved market conditions.

Cost of goods sold during the firstthree quartermonths ofended June 30, 2026 was $155.3$166.8 million, or 60.4%57.9% of net sales, compared to $148.0$156.7 million, or 60.4%58.7% of net sales, in the prior-year quarter.period. Gross profit increased $5$11 million, or 4.9%,10.1%, compared to the prior-year quarter due to a $9$12 million benefit from favorable AUV and a $1$3 million benefit from higher sales volumes. These benefits were partially offset by a $5$4 million increase in manufacturing costs, including freight, raw material and energy inflation and unfavorable inventory valuation impacts,inflation, partially offset by improvedongoing manufacturing productivity.

SG&A expenses during the firstthree quartermonths ofended June 30, 2026 were $43.8$48.7 million, or 17.0%16.9% of net sales, compared to $39.4$43.8 million, or 16.1%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 severancepeople expensescosts, including incentive compensation, and a $1 million decreaseincrease in company-ownedselling officerexpenses. lifeAlso insurance gains relatedcontributing to deferredthe compensationincrease plans.was a $1 million increase in accruals for environmental remediation matters.

Equity earnings from our WAVE joint venture were $27.4$33.6 million in the firstthree quartermonths ofended June 30, 2026, compared to $26.8$32.1 million in the prior-year quarter.period. The slight increase in WAVE equity earnings was primarily driven by the impact of higher sales volumes and the benefit fromof favorable AUV, partially offset by the negative impact of lower sales volumes and higher steel costs.

Architectural Specialties net sales increased $15$26 million in the firstsecond quarter of 2026 compared to the prior-year quarter due to a $10$15 million increase in organic net sales driven by strong growth withinacross most of our metalspecialty and woodproduct categories and aan $5$11 million inorganic contribution from our 2026 and 2025 acquisitions.contribution.

Cost of goods sold during the firstthree quartermonths ofended June 30, 2026 was $99.0$109.8 million, or 64.8%59.7% of net sales, compared to $84.4$91.8 million, or 61.3%58.2% of net sales, in the prior-year quarter.period, Thewith the increase in cost of goods sold as a percentagepercent of net sales was primarily driven by athe $5inorganic millionimpact increase in costs related tofrom our 2026 and 2025 acquisitionsacquisitions. 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 $3$4 million increaseinorganic inbenefit. 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 costCost of goods sold was aalso impacted by the net benefit from tariff-related items, which included $2 million of IEEPA tariff adjustmentrefunds that was recordedrecognized in the firstsecond quarter of 2026.2026, largely offset by the ongoing impact of tariffs on our Canadian imports.

SG&A expenses induring the firstthree quartermonths ofended June 30, 2026 were $44.4$44.7 million, or 29.1%24.3% of net sales, compared to $38.4$40.3 million, or 27.9%25.6% of net sales, in the prior-year quarter. The increase in SG&A expenses was primarily driven by a $2 million inorganic increase relatedinvestments to thesupport 2026growth, and 2025 acquisitions, due to an increase in acquisition costs,including a $2$1 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 severancepeople expenses.costs, including incentive compensation. Also contributing to the increase was a $2 million inorganic increase.

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

Net cash provided by operating activities for the first threesix months of 2026 was $32.1$125.9 million, compared to $41.0$122.6 million for the first threesix months of 2025. The unfavorablefavorable change in operating activities is primarily due to an unfavorable timing related changeincrease in receivables,cash partiallyearnings offset by aand favorable timing related changechanges in accounts payable and accrued expenses.expenses, Alsopartially contributingoffset toby theunfavorable decreasetiming related changes in operating activities was an unfavorable change in net income tax payables.receivables.

Net cash used for investing activities was $51.4$44.9 million in the first threesix months of 2026, compared to $6.0$13.2 million of cash provided by investing activities in the first threesix 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$114.2 million in the first threesix months of 2026, compared to $43.6$134.7 million for the first threesix 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.stock and an increase in payments of tax withholdings for share-based compensation plans.

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 MarchJune 31,30, 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 MarchJune 31,30, 2026, the total principal balances outstanding under our senior credit facility included $408.0$405.5 million under Term Loan A and $75.0$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 MarchJune 31,30, 2026, we were in compliance with all covenants of the senior credit facility.

As of MarchJune 31,30, 2026, we had $79.8$78.6 million of cash and cash equivalents, $55.7$54.4 million in the U.S. and $24.1$24.2 million in foreign jurisdictions, primarily Canada. As of MarchJune 31,30, 2026, we also had $425$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.