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☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30,
2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number:
1-2116
ARMSTRONG WORLD INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania
23-0366390
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2500 Columbia Avenue
,
Lancaster
,
Pennsylvania
17603
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (
717
)
397-0611
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
AWI
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
☒
Number of shares of Armstrong World Industries, Inc.’s common stock outstanding as of October 23, 2025 –
43,128,042
.
Certain statements in this Quarterly Report on Form 10-Q and the documents incorporated by reference herein may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements are subject to various risks and uncertainties and include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, our expectations concerning our markets and demand for our products, tariffs, broader economic conditions and their effect on our operating results; our expectations regarding the payment of dividends and stock repurchases; and our ability to increase revenues, earnings and earnings before interest, taxes, depreciation and amortization. Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “outlook,” “target,” “predict,” “may,” “will,” “would,” “could,” “should,” “seek,” and similar expressions are intended to identify such forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors that could have a material adverse effect on our financial condition, liquidity, results of operations or future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to:
Risks Related to Our Operations
•
changes in key customer relationships;
•
availability and costs of manufacturing inputs or sourced products, which may be impacted by tariffs, geopolitical events, and other supply chain disruptions or inflationary pressures;
•
financial contribution of Worthington Armstrong Venture (“WAVE”), our joint venture with Worthington Enterprises, Inc.;
•
productivity and cost savings initiatives;
•
labor costs and relations;
•
progress towards meeting objectives and related compliance for climate and other sustainability matters;
Risks Related to Our Strategy
•
benefits from strategic initiatives, including investments in product innovation and digitalization;
•
identification, completion and successful integration of strategic transactions;
Risks Related to Financial Matters
•
liquidity needs and indebtedness;
•
ability to make dividend payments and stock repurchases;
•
unanticipated negative tax consequences;
•
defined benefit plan obligations;
Risks Related to Legal and Regulatory Matters
•
claims, litigation and regulatory actions;
•
environmental liability exposure;
•
effectiveness of intellectual property rights protection;
•
operations in Canada and Latin America;
Risks Related to General Economic and Other Factors
•
economic conditions;
•
construction activity;
•
market competition;
•
customer consolidation;
3
•
information technology disruptions and cybersecurity breaches;
•
dependence on third-party vendors and suppliers;
•
geographic concentration;
•
public health epidemics or pandemics; and
•
other risks detailed from time to time in our filings with the Securities and Exchange Commission (the “SEC”), press releases and other communications, including those set forth under “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2024.
Such forward-looking statements speak only as of the date they are made. We expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
4
PART I - FINANC
IAL INFORMATION
ITEM 1. FINANC
IAL STATEMENTS
Armstrong World Industries, Inc., and Subsidiaries
Condensed Consolidated Statements of Earnings and Comprehensive Income
(amounts in millions, except per share data)
Unaudited
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
Net sales
$
425.2
$
386.6
$
1,232.5
$
1,078.0
Cost of goods sold
246.7
222.5
728.3
640.3
Gross profit
178.5
164.1
504.2
437.7
Selling, general and administrative expenses
90.1
77.6
252.1
223.1
Loss related to change in fair value of contingent consideration
0.1
0.2
0.5
0.6
(Gain) loss on sales and impairment of fixed assets, net
(
0.9
)
0.2
(
0.8
)
0.3
Equity (earnings) from unconsolidated affiliates, net
(
28.0
)
(
25.2
)
(
86.5
)
(
78.7
)
Operating income
117.2
111.3
338.9
292.4
Interest expense
8.2
10.5
25.3
30.6
Other non-operating (income), net
(
0.5
)
(
3.0
)
(
1.9
)
(
9.3
)
Earnings before income taxes
109.5
103.8
315.5
271.1
Income tax expense
23.2
26.9
72.3
68.4
Net earnings
$
86.3
$
76.9
$
243.2
$
202.7
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments
(
0.9
)
0.3
0.9
(
0.9
)
Derivative (loss), net
-
(
5.7
)
(
1.8
)
(
5.0
)
Pension and postretirement adjustments
0.6
(
1.0
)
1.9
(
2.3
)
Total other comprehensive (loss) income, net of tax
(
0.3
)
(
6.4
)
1.0
(
8.2
)
Total comprehensive income
$
86.0
$
70.5
$
244.2
$
194.5
Net earnings per share of common stock:
Basic
$
2.00
$
1.76
$
5.60
$
4.63
Diluted
$
1.98
$
1.75
$
5.56
$
4.61
Average number of common shares outstanding:
Basic
43.2
43.7
43.4
43.8
Diluted
43.6
43.9
43.7
44.0
See accompanying notes to Condensed Consolidated Financial Statements beginning on page 9.
5
Armstrong World Industries, Inc., and Subsidiaries
Condensed Consolidated Balance Sheets
(amounts in millions, except share and per share data)
Unaudited
September 30, 2025
December 31, 2024
Assets
Current assets:
Cash and cash equivalents
$
90.1
$
79.3
Accounts and notes receivable, net
157.8
134.4
Inventories, net
123.5
109.8
Income taxes receivable
4.0
3.9
Other current assets
20.3
21.5
Total current assets
395.7
348.9
Property, plant, and equipment, less accumulated depreciation and amortization of
$
720.2
and $
659.4
, respectively
598.7
598.8
Operating lease assets
48.2
36.6
Finance lease assets
35.3
34.6
Prepaid pension costs
92.0
88.3
Investments in unconsolidated affiliates
31.3
27.2
Goodwill
214.4
203.2
Intangible assets, net
429.6
455.0
Other non-current assets
48.2
50.1
Total assets
$
1,893.4
$
1,842.7
Liabilities and Shareholders’ Equity
Current liabilities:
Current installments of long-term debt
$
22.5
$
22.5
Accounts payable and accrued expenses
218.7
215.3
Operating lease liabilities
9.9
8.1
Finance lease liabilities
6.1
3.8
Income taxes payable
3.9
-
Total current liabilities
261.1
249.7
Long-term debt, less current installments
386.4
502.6
Operating lease liabilities
39.9
29.7
Finance lease liabilities
31.5
33.2
Postretirement benefit liabilities
32.2
35.3
Pension benefit liabilities
23.3
24.6
Other long-term liabilities
32.6
28.4
Income taxes payable
10.0
15.0
Deferred income taxes
187.2
167.1
Total non-current liabilities
743.1
835.9
Shareholders’ equity:
Common stock, $
0.01
par value per share,
200
million shares authorized,
63,293,119
shares issued and
43,172,826
shares outstanding as of September 30, 2025 and
63,176,007
shares issued and
43,561,649
shares outstanding as of
December 31, 2024
0.6
0.6
Capital in excess of par value
612.2
604.0
Retained earnings
1,763.3
1,560.7
Treasury stock, at cost,
20,120,293
shares as of September 30, 2025 and
19,614,358
shares as of December 31, 2024
(
1,377.7
)
(
1,298.0
)
Accumulated other comprehensive (loss)
(
109.2
)
(
110.2
)
Total shareholders’ equity
889.2
757.1
Total liabilities and shareholders’ equity
$
1,893.4
$
1,842.7
See accompanying notes to Condensed Consolidated Financial Statements beginning on page 9.
6
Armstrong World Industries, Inc., and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Equity
(dollar amounts in millions, except share and per share data)
Unaudited
Three Months Ended September 30, 2025
Accumulated
Capital in
Other
Total
Common Stock
Excess of
Retained
Treasury Stock
Comprehensive
Shareholders'
Shares
Amount
Par Value
Earnings
Shares
Amount
(Loss)
Equity
Balance, June 30, 2025
43,319,850
$
0.6
$
605.9
$
1,690.6
19,971,063
$
(
1,350.4
)
$
(
108.9
)
$
837.8
Stock issuance, net
2,206
-
-
-
-
-
-
-
Cash dividends - $
0.308
per common share
-
-
-
(
13.6
)
-
-
-
(
13.6
)
Share-based employee compensation
-
-
6.3
-
-
-
-
6.3
Net earnings
-
-
-
86.3
-
-
-
86.3
Other comprehensive (loss)
-
-
-
-
-
-
(
0.3
)
(
0.3
)
Acquisition of treasury stock
(
149,230
)
-
-
-
149,230
(
27.3
)
-
(
27.3
)
Balance, September 30, 2025
43,172,826
$
0.6
$
612.2
$
1,763.3
20,120,293
$
(
1,377.7
)
$
(
109.2
)
$
889.2
Nine Months Ended September 30, 2025
Accumulated
Capital in
Other
Total
Common Stock
Excess of
Retained
Treasury Stock
Comprehensive
Shareholders'
Shares
Amount
Par Value
Earnings
Shares
Amount
(Loss)
Equity
Balance, December 31, 2024
43,561,649
$
0.6
$
604.0
$
1,560.7
19,614,358
$
(
1,298.0
)
$
(
110.2
)
$
757.1
Stock issuance, net
117,112
-
-
-
-
-
-
-
Cash dividends - $
0.924
per common share
-
-
-
(
40.6
)
-
-
-
(
40.6
)
Share-based employee compensation
-
-
8.2
-
-
-
-
8.2
Net earnings
-
-
-
243.2
-
-
-
243.2
Other comprehensive income
-
-
-
-
-
-
1.0
1.0
Acquisition of treasury stock
(
505,935
)
-
-
-
505,935
(
79.7
)
-
(
79.7
)
Balance, September 30, 2025
43,172,826
$
0.6
$
612.2
$
1,763.3
20,120,293
$
(
1,377.7
)
$
(
109.2
)
$
889.2
Three Months Ended September 30, 2024
Accumulated
Capital in
Other
Total
Common Stock
Excess of
Retained
Treasury Stock
Comprehensive
Shareholders'
Shares
Amount
Par Value
Earnings
Shares
Amount
(Loss)
Equity
Balance, June 30, 2024
43,787,757
$
0.6
$
595.1
$
1,447.5
19,378,672
$
(
1,267.7
)
$
(
106.5
)
$
669.0
Stock issuance, net
2,912
-
-
-
-
-
-
-
Cash dividends - $
0.28
per common share
-
-
-
(
12.3
)
-
-
-
(
12.3
)
Share-based employee compensation
-
-
4.9
-
-
-
-
4.9
Net earnings
-
-
-
76.9
-
-
-
76.9
Other comprehensive (loss)
-
-
-
-
-
-
(
6.4
)
(
6.4
)
Acquisition of treasury stock
(
125,992
)
-
-
-
125,992
(
15.1
)
-
(
15.1
)
Balance, September 30, 2024
43,664,677
$
0.6
$
600.0
$
1,512.1
19,504,664
$
(
1,282.8
)
$
(
112.9
)
$
717.0
Nine Months Ended September 30, 2024
Accumulated
Capital in
Other
Total
Common Stock
Excess of
Retained
Treasury Stock
Comprehensive
Shareholders'
Shares
Amount
Par Value
Earnings
Shares
Amount
(Loss)
Equity
Balance, December 31, 2023
43,902,061
$
0.6
$
591.7
$
1,346.6
19,152,279
$
(
1,242.4
)
$
(
104.7
)
$
591.8
Stock issuance, net
115,001
-
-
-
-
-
-
-
Cash dividends - $
0.84
per common share
-
-
-
(
37.2
)
-
-
-
(
37.2
)
Share-based employee compensation
-
-
8.3
-
-
-
-
8.3
Net earnings
-
-
-
202.7
-
-
-
202.7
Other comprehensive (loss)
-
-
-
-
-
-
(
8.2
)
(
8.2
)
Acquisition of treasury stock
(
352,385
)
-
-
-
352,385
(
40.4
)
-
(
40.4
)
Balance, September 30, 2024
43,664,677
$
0.6
$
600.0
$
1,512.1
19,504,664
$
(
1,282.8
)
$
(
112.9
)
$
717.0
See accompanying notes to Condensed Consolidated Financial Statements beginning on page 9.
7
Armstrong World Industries, Inc., and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(amounts in millions)
Unaudited
Nine Months Ended
September 30,
2025
2024
Cash flows from operating activities:
Net earnings
$
243.2
$
202.7
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
89.9
75.9
Deferred income taxes
20.1
0.9
Share-based compensation
16.3
13.9
Equity earnings from unconsolidated affiliates, net
(
86.5
)
(
78.7
)
Loss related to change in fair value of contingent consideration
0.5
0.6
(Gain) loss on sales and impairment of fixed assets, net
(
0.8
)
0.3
Payment of contingent consideration in excess of acquisition-date fair value
(
0.7
)
-
Other non-cash adjustments, net
1.2
(
0.1
)
Changes in operating assets and liabilities:
Receivables
(
31.5
)
(
29.5
)
Inventories
(
13.2
)
(
4.2
)
Accounts payable and accrued expenses
12.4
14.4
Income taxes receivable and payable, net
(
1.2
)
1.5
Other assets and liabilities
(
4.2
)
(
17.5
)
Net cash provided by operating activities
245.5
180.2
Cash flows from investing activities:
Purchases of property, plant and equipment
(
61.6
)
(
54.0
)
Return of investment from joint venture
82.5
72.7
Acquisitions, net of cash acquired
(
6.7
)
(
93.5
)
Investment in unconsolidated affiliate
-
(
5.5
)
Proceeds from the sale of fixed assets
1.0
11.5
Proceeds from company owned life insurance, net
1.6
7.6
Net cash provided by (used for) investing activities
16.8
(
61.2
)
Cash flows from financing activities:
Proceeds from revolving credit facility
10.0
138.0
Payments of revolving credit facility
(
110.0
)
(
153.0
)
Payments of long-term debt
(
16.9
)
(
16.9
)
Payments for finance leases
(
6.2
)
(
2.3
)
Dividends paid
(
40.6
)
(
37.1
)
Payments of tax withholdings for share-based compensation plans, net of issuances
(
8.1
)
(
4.4
)
Payments of acquisition-related contingent consideration
(
0.8
)
-
Payments for treasury stock acquired
(
79.4
)
(
40.0
)
Net cash (used for) financing activities
(
252.0
)
(
115.7
)
Effect of exchange rate changes on cash and cash equivalents
0.5
(
0.4
)
Net increase in cash and cash equivalents
10.8
2.9
Cash and cash equivalents at beginning of year
79.3
70.8
Cash and cash equivalents at end of period
$
90.1
$
73.7
Supplemental cash flow disclosures:
Interest paid
$
22.9
$
28.8
Income tax payments, net
53.4
66.0
Amounts in accounts payable for capital expenditures
4.6
1.1
Purchases of property, plant and equipment through vendor financing
1.6
-
See accompanying notes to Condensed Consolidated Financial Statements beginning on page 9.
8
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
NOTE 1. BUSINESS AND BASIS OF PRESENTATION
Armstrong World Industries, Inc. (“AWI”) is a Pennsylvania corporation incorporated in 1891. When we refer to “AWI,” the “Company,” “we,” “our” or “us” in these notes, we are referring to AWI and its subsidiaries.
Except as disclosed in this note, the accounting policies used in preparing the Condensed Consolidated Financial Statements in this Form 10-Q are the same as those used in preparing the Consolidated Financial Statements for the year ended December 31, 2024. These statements should therefore be read in conjunction with the Consolidated Financial Statements and notes that are included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024. In the opinion of management, all adjustments of a normal recurring nature have been included to provide a fair statement of the results for the reporting periods presented. Operating results for the third quarter and first nine months of 2025 and 2024 included in this report are unaudited. Quarterly results are not necessarily indicative of annual earnings, primarily due to the different level of sales in each quarter of the year and the possibility of changes in general economic conditions.
These Condensed Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles. The statements include management estimates and judgments, where appropriate. Management utilizes estimates to record many items, including certain asset values, contingent purchase price liabilities, allowances for bad debts, inventory obsolescence and lower of cost and net realizable value charges, warranty reserves, workers’ compensation, general liability and environmental claims, and income taxes. When preparing an estimate, management determines the amount based upon the consideration of relevant information and may confer with outside parties, including external counsel. Actual results may differ from these estimates.
Certain prior year amounts have been reclassified in the Condensed Consolidated Financial Statements to conform to the 2025 presentation, most notably disaggregated expenditures for our operating segments related to our December 31, 2024 adoption of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) 2023-07, “Improvements to Reportable Segment Disclosures.” See Note 2 for additional details.
Acquisitions and Investments in Unconsolidated Affiliates
In September 2025, we acquired all of the issued and outstanding stock of Geometrik Manufacturing, Inc. (“Geometrik”), based in Kelowna, British Columbia, Canada. Geometrik is a leading Canadian designer and manufacturer of wood acoustical ceiling and wall systems. The operations, assets and liabilities of Geometrik are included in our Architectural Specialties segment.
In December 2024, we acquired all of the issued and outstanding stock of A. Zahner Company (“Zahner”), based in Kansas City, Missouri. Zahner is a designer and manufacturer of exterior metal architectural solutions. The operations, assets and liabilities of Zahner are included in our Architectural Specialties segment.
In April 2024, we acquired all of the issued and outstanding membership interests in 3form, LLC (“3form”) based in Salt Lake City, Utah, from Hunter Douglas, Inc. 3form is a designer and manufacturer of architectural resin and glass products used for specialty walls, partitions and ceilings. The operations, assets and liabilities of 3form are included in our Architectural Specialties segment.
In January 2024, we entered into a strategic partnership and equity investment in Overcast Innovations LLC (“Overcast”) with McKinstry Essention, LLC whereby we contributed $
5.5
million in exchange for a
19.5
% ownership interest in Overcast (currently
19.2
%), with future rights to increase our ownership interest. Overcast is a solutions company offering prefabricated ceiling cloud systems, modular grid platforms and engineering design services to reduce waste and inefficiencies in the built environment. Our investment and equity earnings and losses in Overcast are included in our Unallocated Corporate segment.
Recently Issued Accounting Standards
In December 2023, the FASB issued ASU 2023-09, “
Improvements to Income Tax Disclosures,
”
which modifies the disclosure requirements for income taxes. This ASU requires disclosure of tabular statutory to effective tax rate reconciliation in both percentages and dollars, additional disaggregated rate reconciliation categories and disaggregation of both income taxes paid and income tax expense by jurisdiction. This guidance is effective for annual periods beginning after December 15, 2024. We expect this ASU to impact only our disclosures, with no impact to our results of operations, cash flows and financial condition.
In November 2024, the FASB issued ASU 2024-03, “
Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures,
” which expands disclosure of significant costs and expenses. This ASU requires expanded disclosures of significant costs and expenditures within cost of goods sold and selling, general and administrative (“SG&A”) expenses, including amounts of inventory purchased, employee compensation, depreciation, amortization and selling expenses. This ASU also requires expanded qualitative disclosures, including a description of selling expenses and a description of non-disaggregated expenses. This guidance is effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. We expect this ASU to impact only our disclosures, with no impact to our results of operations, cash flows and financial condition.
9
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
In July 2025, the FASB issued ASU 2025-05, “
Financial Instruments - Credit Losses
,” which simplifies the application of the current expected credit loss model by providing a practical expedient and accounting policy election permitting entities to assume that conditions as of the balance sheet date remain unchanged over the life of the asset when measuring credit losses on current accounts receivable and current contract assets. If elected, entities are required to apply the guidance on a prospective basis. The update is effective for interim and annual reporting periods beginning after December 15, 2025. Early adoption is permitted. We are evaluating the impact the adoption of this ASU will have to our results of operations, cash flows and financial condition.
In September 2025, the FASB issued ASU 2025-06, “
Intangibles - Goodwill and Other - Internal-Use Software,
” which modernizes and clarifies the threshold entities apply to begin capitalizing development costs for internal-use software. This guidance is effective for interim and annual periods beginning after December 15, 2027. Early adoption is permitted. We are evaluating the impact the adoption of this ASU will have to our results of operations, cash flows and financial condition.
NOTE 2. SEGMENT RESULTS
Our operating segments are as follows: Mineral Fiber, Architectural Specialties and Unallocated Corporate. Our Mineral Fiber and Architectural Specialties segment net sales represent the product-based group offerings we sell to external customers.
Our Chief Operating Decision Maker (“CODM”) is our
President and Chief Executive Officer
.
Segment operating income (loss) is the measure of segment profit or loss reviewed by the CODM.
The following tables are presented at the level of disaggregation regularly reviewed by the CODM to evaluate operating performance and allocate resources to operating segments:
For the three months ended September 30, 2025
Mineral Fiber
Architectural Specialties
Unallocated
Corporate
Total
Net sales to external customers
$
274.0
$
151.2
$
-
$
425.2
Cost of goods sold
155.3
91.1
0.3
246.7
Gross profit (loss)
118.7
60.1
(
0.3
)
178.5
SG&A expenses
49.1
40.7
0.3
90.1
Loss related to change in fair value of contingent consideration
-
0.1
-
0.1
(Gain) on sales of fixed assets, net
(
0.9
)
-
-
(
0.9
)
Equity (earnings) loss from unconsolidated affiliates, net
(
28.2
)
-
0.2
(
28.0
)
Segment operating income (loss)
$
98.7
$
19.3
$
(
0.8
)
$
117.2
Depreciation and amortization
$
21.6
$
8.5
$
-
$
30.1
Purchases of property, plant and equipment
18.5
4.1
-
22.6
For the three months ended September 30, 2024
Mineral Fiber
Architectural Specialties
Unallocated
Corporate
Total
Net sales to external customers
$
258.0
$
128.6
$
-
$
386.6
Cost of goods sold
146.5
75.5
0.5
222.5
Gross profit (loss)
111.5
53.1
(
0.5
)
164.1
SG&A expenses
43.6
33.9
0.1
77.6
Loss related to change in fair value of contingent consideration
0.1
0.1
-
0.2
Loss (gain) on sales and impairment of fixed assets, net
0.3
(
0.1
)
-
0.2
Equity (earnings) loss from unconsolidated affiliates, net
(
25.5
)
-
0.3
(
25.2
)
Segment operating income (loss)
$
93.0
$
19.2
$
(
0.9
)
$
111.3
Depreciation and amortization
$
19.7
$
6.4
$
-
$
26.1
Purchases of property, plant and equipment
15.9
3.5
-
19.4
10
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
For the nine months ended September 30, 2025
Mineral Fiber
Architectural Specialties
Unallocated
Corporate
Total
Net sales to external customers
$
786.1
$
446.4
$
-
$
1,232.5
Cost of goods sold
460.0
267.3
1.0
728.3
Gross profit (loss)
326.1
179.1
(
1.0
)
504.2
SG&A expenses
132.3
119.0
0.8
252.1
Loss related to change in fair value of contingent consideration
0.2
0.3
-
0.5
(Gain) loss on sales of fixed assets, net
(
0.9
)
0.1
-
(
0.8
)
Equity (earnings) loss from unconsolidated affiliates, net
(
87.1
)
-
0.6
(
86.5
)
Segment operating income (loss)
$
281.6
$
59.7
$
(
2.4
)
$
338.9
Depreciation and amortization
$
64.5
$
25.4
$
-
$
89.9
Purchases of property, plant and equipment
49.9
11.7
-
61.6
For the nine months ended September 30, 2024
Mineral Fiber
Architectural Specialties
Unallocated
Corporate
Total
Net sales to external customers
$
747.8
$
330.2
$
-
$
1,078.0
Cost of goods sold
439.7
199.4
1.2
640.3
Gross profit (loss)
308.1
130.8
(
1.2
)
437.7
SG&A expenses
132.8
89.6
0.7
223.1
Loss related to change in fair value of contingent consideration
0.5
0.1
-
0.6
Loss on sales and impairment of fixed assets, net
0.3
-
-
0.3
Equity (earnings) loss from unconsolidated affiliates, net
(
79.4
)
-
0.7
(
78.7
)
Segment operating income (loss)
$
253.9
$
41.1
$
(
2.6
)
$
292.4
Depreciation and amortization
$
59.3
$
16.6
$
-
$
75.9
Purchases of property, plant and equipment
43.5
10.5
-
54.0
During the third quarter of 2025, we sold a parcel of land at a Mineral Fiber plant for total proceeds of $
1.0
million, with a $
0.9
million gain recorded upon sale.
During the third quarter of 2024, we sold our idled Mineral Fiber plant in St. Helens, Oregon for total proceeds of $
9.4
million, with a $
4.6
million gain recorded upon sale, and we recorded an impairment loss of $
4.9
million within our Mineral Fiber segment upon classification of a parcel of undeveloped land adjacent to our corporate campus in Lancaster, Pennsylvania to assets held for sale. During the second quarter of 2024 we sold a building and related land of an Architectural Specialties design center in Chicago, Illinois for total proceeds of $
2.1
million, with
no
gain or loss recorded upon sale.
The impact of these transactions was recorded within (gain) loss on sales and impairment of fixed assets, net on our Condensed Consolidated Statements of Earnings and Comprehensive Income.
The following table reconciles our total segment operating income to earnings before income taxes. These items are measured and managed only on a consolidated basis.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
Total segment operating income
$
117.2
$
111.3
$
338.9
$
292.4
Interest expense
8.2
10.5
25.3
30.6
Other non-operating (income), net
(
0.5
)
(
3.0
)
(
1.9
)
(
9.3
)
Earnings before income taxes
$
109.5
$
103.8
$
315.5
$
271.1
11
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
The following tables present balance sheet information by operating segment:
As of September 30, 2025
Mineral Fiber
Architectural Specialties
Unallocated
Corporate
Total
Segment assets
$
1,082.1
$
621.1
$
190.2
$
1,893.4
Investments in unconsolidated affiliates
27.3
-
4.0
31.3
As of December 31, 2024
Mineral Fiber
Architectural Specialties
Unallocated
Corporate
Total
Segment assets
$
1,063.8
$
602.2
$
176.7
$
1,842.7
Investments in unconsolidated affiliates
22.6
-
4.6
27.2
NOTE 3. REVENUE
Disaggregation of Revenues
Our Mineral Fiber and Architectural Specialties operating segments both manufacture and sell interior and exterior architectural applications including ceilings, specialty walls and exterior metal solutions (primarily mineral fiber, fiberglass, metal, felt, wood, architectural resin and glass, wood fiber, and glass-reinforced-gypsum) throughout the Americas. We disaggregate revenue based on our product-based segments and major customer channels, as they represent the most appropriate depiction of how the nature, amount and timing of revenues and cash flows are affected by economic factors. Net sales by major customer channel are as follows:
Distributors
– represents net sales to commercial building materials distributors who re-sell our products to contractors, subcontractors’ alliances, large architect and design firms, and major facility owners. Geographically, this category includes sales throughout the U.S., Canada, and Latin America.
Home centers
– represents net sales to home center customers who re-sell our products through retail outlets. This category includes sales primarily to U.S. customers.
Direct customers
– represents net sales to contractors, subcontractors, and large architect and design firms. This category includes sales primarily to U.S. customers.
Other
– represents net sales to independent retailers and certain national account customers, including wholesalers who re-sell our products to dealers who service builders, contractors, online customers, major facility owners, group purchasing organizations and maintenance, repair and operating entities, and original product manufacturers. Geographically, this category includes sales throughout the U.S., Canada, and Latin America.
The following tables present net sales by major customer channel within our Mineral Fiber and Architectural Specialties segments for the
three and nine months ended September 30, 2025 and 2024:
Three Months Ended
Nine Months Ended
September 30,
September 30,
Mineral Fiber
2025
2024
2025
2024
Distributors
$
205.0
$
188.7
$
585.2
$
542.9
Home centers
26.6
26.7
78.6
82.2
Direct customers
15.6
15.7
47.6
45.4
Other
26.8
26.9
74.7
77.3
Total
$
274.0
$
258.0
$
786.1
$
747.8
Three Months Ended
Nine Months Ended
September 30,
September 30,
Architectural Specialties
2025
2024
2025
2024
Distributors
$
67.3
$
59.5
$
191.6
$
168.8
Direct customers
76.7
63.1
235.0
146.8
Other
7.2
6.0
19.8
14.6
Total
$
151.2
$
128.6
$
446.4
$
330.2
12
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
NOTE 4. ACQUISITIONS
Geometrik
In September 2025, we acquired the issued and outstanding shares of Geometrik for a purchase price of $
7.5
million, plus additional contingent consideration payable upon the achievement of certain future performance obligations in 2027 and 2028 not to exceed $
1.5
million. The purchase price is subject to customary post-closing adjustments for working capital. We, with the assistance of an independent, third-party valuation specialist, utilized a Monte Carlo simulation and determined the estimated fair value of the contingent consideration was $
0.3
million at the acquisition date, resulting in an initial purchase price of $
7.8
million. The total fair value of cash and other tangible assets acquired, less liabilities assumed, was $
1.7
million, resulting in $
6.1
million of goodwill. Included in net tangible assets acquired were operating right of use (“ROU”) assets and lease liabilities with a fair value of $
3.8
million. Valuations for assets acquired and liabilities assumed are based on preliminary estimates that are subject to revisions and may result in adjustments to preliminary amounts as valuations are finalized.
Zahner
In December 2024, we acquired the issued and outstanding shares of Zahner for $
30.0
million, net of $
16.0
million of cash acquired. During the second quarter of 2025, the purchase price for Zahner was reduced by $
0.8
million based on customary net working capital adjustments. The total fair value of cash and other tangible assets acquired, less liabilities assumed, was $
17.9
million. The fair value of significant classes of non-cash tangible assets acquired and liabilities assumed included accounts receivable of $
10.9
million, property, plant and equipment of $
10.4
million, operating ROU assets and lease liabilities of $
2.9
million, finance ROU assets and lease liabilities of $
8.9
million and accounts payable and accrued liabilities of $
19.7
million. The total fair value of identifiable intangible assets acquired was $
16.1
million, resulting in $
11.2
million of goodwill.
The following table summarizes the fair values of identifiable intangible assets acquired, and their estimated useful lives:
Fair Value at Acquisition Date
Estimated Useful Life
Trademarks and brand names
$
5.8
15 years
Customer relationships
4.4
5 years
Backlog
4.3
2 years
Non-compete agreements
1.6
3 years
Total identifiable intangible assets
$
16.1
3form
In April 2024, we acquired the issued and outstanding membership interests in 3form for $
93.5
million, net of $
0.5
million of cash acquired. The total fair value of cash and other tangible assets acquired, less liabilities assumed, was $
34.5
million. The fair value of significant classes of non-cash tangible assets acquired and liabilities assumed included accounts receivable of $
6.6
million, inventory of $
7.9
million, property, plant and equipment of $
35.0
million, operating ROU assets of $
10.1
million, operating lease liabilities of $
10.0
million and accounts payable and accrued liabilities of $
16.3
million. The total fair value of identifiable intangible assets acquired was $
37.6
million, resulting in $
21.9
million of goodwill.
Consolidated Financial Information
Goodwill from the Geometrik, Zahner and 3form acquisitions relates to many factors, including the technical competencies and capabilities of the acquired workforce and our strategic intent to integrate and leverage those competencies and capabilities to advance and expand our portfolio of solutions and offerings. The acquired goodwill associated with the Zahner and 3form acquisitions are deductible for tax purposes.
The following table summarizes the Geometrik, Zahner and 3form results included in our Condensed Consolidated Statements of Earnings and Comprehensive Income for the
three and nine months ended September 30, 2025 and 2024:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
Net sales
$
39.3
$
23.2
$
125.4
$
39.9
Operating income
(1)
2.3
0.5
10.5
0.6
(1)
For the
three and nine months ended September 30, 2025, operating income included depreciation and amortization of $
3.8
million and $
12.0
million, respectively. For the three and nine months ended September 30, 2024
, operating income included depreciation and amortization of $
2.5
million and $
4.4
million, respectively.
13
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
Pro forma Financial Information
The following table summarizes aggregate unaudited as reported and pro forma information assuming the acquisitions of
Geometrik, Zahner and 3form had occurred on January 1, 2024. The unaudited pro forma results include the depreciation and amortization associated with the acquired assets. The unaudited pro forma results do not include any expected benefits from the Geometrik, Zahner and 3form acquisitions. Accordingly, the unaudited pro forma results are not necessarily indicative of either future results of operations or results that might have been achieved had the acquisitions been consummated as of January 1, 2024.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
Net sales, pro forma
$
426.5
$
423.8
$
1,235.7
$
1,199.9
Net sales, as reported
425.2
386.6
1,232.5
1,078.0
Earnings before income taxes, pro forma
109.9
104.3
316.3
275.3
Earnings before income taxes, as reported
109.5
103.8
315.5
271.1
NOTE 5. ACCOUNTS AND NOTES RECEIVABLE
September 30, 2025
December 31, 2024
Customer receivables
$
155.5
$
133.0
Miscellaneous receivables
7.2
4.9
Less allowance for warranties, discounts and losses
(
4.9
)
(
3.5
)
Accounts and notes receivable, net
$
157.8
$
134.4
We sell our products to select, pre-approved customers whose businesses are affected by changes in economic and market conditions. We consider these factors and the financial condition of each customer when establishing our allowance for losses from doubtful accounts.
NOTE 6. INVENTORIES
September 30, 2025
December 31, 2024
Finished goods
$
66.1
$
60.4
Goods in process
11.4
7.4
Raw materials and supplies
72.4
68.5
Less LIFO reserves
(
26.4
)
(
26.5
)
Total inventories, net
$
123.5
$
109.8
NOTE 7. OTHER CURRENT ASSETS
September 30, 2025
December 31, 2024
Prepaid expenses
$
19.8
$
19.8
Fair value of derivative assets
-
0.3
Other
0.5
1.4
Total other current assets
$
20.3
$
21.5
NOTE 8. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
Investments in unconsolidated affiliates include our
50
%
equity interest in Worthington Armstrong Venture (“
WAVE”), our joint venture with Worthington Enterprises, Inc., and our
19.2
% equity interest in Overcast. Both the WAVE joint venture and Overcast investment are reflected within our Condensed Consolidated Financial Statements using the equity method of accounting. WAVE is reflected as a component of our Mineral Fiber segment while Overcast is included as a component of our Unallocated Corporate segment.
14
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
The following table presents equity (earnings) losses from our unconsolidated affiliates for the
three and nine months ended September 30, 2025 and 2024:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
WAVE
$
(
28.2
)
$
(
25.5
)
$
(
87.1
)
$
(
79.4
)
Overcast
0.2
0.3
0.6
0.7
Equity (earnings) from unconsolidated affiliates, net
$
(
28.0
)
$
(
25.2
)
$
(
86.5
)
$
(
78.7
)
The following table presents condensed financial statement data for WAVE:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
Net sales
$
125.9
$
122.6
$
390.0
$
374.5
Gross profit
76.6
72.5
238.4
225.3
Net earnings
57.9
52.9
179.6
165.1
NOTE 9. GOODWILL AND INTANGIBLE ASSETS
The following table presents amounts related to our goodwill and intangible assets as of
September 30, 2025 and December 31, 2024:
September 30, 2025
December 31, 2024
Estimated
Useful Life
Gross
Carrying
Amount
Accumulated Amortization
Gross
Carrying
Amount
Accumulated Amortization
Amortizing intangible assets
Customer relationships
5
-
20
years
$
192.9
$
169.1
$
194.7
$
163.9
Developed technology
10
-
20
years
110.0
87.4
114.8
85.9
Trademarks and brand names
3
-
20
years
23.6
5.4
23.6
4.3
Software
5
-
7
years
19.7
10.3
19.7
7.8
Non-compete agreements
3
-
5
years
12.6
7.6
15.9
5.6
Other
Various
7.1
2.1
9.0
0.5
Total
$
365.9
$
281.9
$
377.7
$
268.0
Non-amortizing intangible assets
Trademarks and brand names
Indefinite
345.6
345.3
Total intangible assets
$
711.5
$
723.0
Goodwill
Indefinite
$
214.4
$
203.2
The increase in goodwill as of September 30, 2025 compared to December 31, 2024 was due to changes in the purchase price allocation for Zahner, and the acquisition of Geometrik, net of foreign exchange movements.
The following table presents the amortization expense related to our intangible assets for the three and nine months ended September 30, 2025 and 2024:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
Amortization expense
$
6.1
$
5.2
$
19.3
$
14.6
15
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
NOTE 10. OTHER NON-CURRENT ASSETS
September 30, 2025
December 31, 2024
Cash surrender value of company-owned life insurance policies
$
36.0
$
37.6
Investment in employee deferred compensation plans
11.9
11.0
Other
0.3
1.5
Total other non-current assets
$
48.2
$
50.1
NOTE 11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
September 30, 2025
December 31, 2024
Payables, trade and other
$
107.0
$
105.8
Deferred revenue
37.0
26.6
Employment costs
33.9
42.4
Current portion of pension and postretirement liabilities
7.2
7.2
Acquisition-related contingent consideration
1.1
1.5
Other
32.5
31.8
Total accounts payable and accrued expenses
$
218.7
$
215.3
NOTE 12. INCOME TAX EXPENSE
On July 4, 2025, the U.S. federal government enacted the “One Big Beautiful Bill Act” (“OBBBA”), resulting in significant changes to the federal tax code, most notably the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act of 2017 and the restoration of favorable tax treatment for certain business provisions. Our federal income tax expense for the third quarter and nine months ended September 30, 2025 reflects the impact of the OBBBA, which resulted in an immaterial impact to our effective tax rate and a reduction in our federal cash taxes paid.
The following table presents our effective tax rate for the
three and nine months ended September 30, 2025 and 2024:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
Earnings before income taxes
$
109.5
$
103.8
$
315.5
$
271.1
Income tax expense
23.2
26.9
72.3
68.4
Effective tax rate
21.2
%
25.9
%
22.9
%
25.2
%
The decrease in the effective tax rate for the third quarter and first nine months of 2025, in comparison to the same periods in 2024, was primarily due to the benefits recognized from statute closures and federal investment tax credits.
It is reasonably possible that the amount of unrecognized tax benefits could significantly increase or decrease within the next twelve months. However, an estimate of the range of reasonably possible outcomes cannot be reliably made at this time. Changes to unrecognized tax benefits could result from the expiration of statutes of limitations, the completion of ongoing examinations, or other unforeseen circumstances.
NOTE 13. DEBT
Our long-term debt is comprised of borrowings outstanding under our $
950.0
million variable rate senior secured credit facility, which is comprised of a $
500.0
million revolving credit facility (with a $
150.0
million sublimit for letters of credit) and a $
450.0
million Term Loan A. As of September 30, 2025 and December 31, 2024, the principal balance of our Term Loan A was $
410.6
million and $
427.5
million, respectively. As of September 30, 2025
, we had
no
borrowings outstanding under our revolving credit facility. As of
December 31, 2024, borrowings outstanding under our revolving credit facility were $
100.0
million. We also have a $
25.0
million bi-lateral letter of credit facility.
16
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
We utilize lines of credit and other commercial commitments to ensure that adequate funds are available to meet operating requirements. Letters of credit are currently arranged through our revolving credit facility and our bi-lateral facility. Letters of credit may be issued to third party suppliers, insurance companies and financial institutions and typically can only be drawn upon in the event of AWI’s failure to pay its obligations to the beneficiary.
The following table presents details related to our letters of credit facilities:
September 30, 2025
Financing Arrangements
Limit
Used
Available
Bi-lateral facility
$
25.0
$
7.7
$
17.3
Revolving credit facility
150.0
-
150.0
Total
$
175.0
$
7.7
$
167.3
Other Commitments
In the ordinary course of business, and primarily due to our December 2024 acquisition of Zahner, we provide corporate guarantees and obtain surety bonds in support of underlying contractual commitments to our customers. As of September 30, 2025 and December 31, 2024, there were $
32.1
million and $
21.9
million, respectively, of outstanding surety bonds associated with custom manufacturing projects that were issued by reputable surety providers. In the event of our non-performance, we may be required to reimburse surety providers to cover qualifying financial loss up to the bond amounts. We believe the risk of financial loss associated with our outstanding guarantees and surety bonds is remote and as such, have recorded no liability associated with such commitments on our Condensed Consolidated Balance Sheets.
NOTE 14. PENSIONS AND OTHER BENEFIT PROGRAMS
T
he components of net periodic benefit costs (credits) are as follows:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
U.S. defined benefit plans:
Pension benefits
Service cost of benefits earned during the period
$
0.5
$
0.6
$
1.7
$
1.8
Interest cost on projected benefit obligation
4.1
4.2
12.4
12.6
Expected return on plan assets
(
5.6
)
(
6.0
)
(
16.8
)
(
18.2
)
Amortization of net actuarial loss
1.4
1.3
4.1
3.9
Net periodic pension cost
$
0.4
$
0.1
$
1.4
$
0.1
Retiree health and life insurance benefits
Interest cost on projected benefit obligation
$
0.5
$
0.6
$
1.5
$
1.6
Amortization of prior service credit
-
(
0.1
)
(
0.1
)
(
0.2
)
Amortization of net actuarial gain
(
0.5
)
(
2.2
)
(
1.3
)
(
6.4
)
Net periodic postretirement (credit) cost
$
-
$
(
1.7
)
$
0.1
$
(
5.0
)
Excluded from the table above is the net periodic pension cost associated with an unfunded defined benefit pension plan in Germany that was not included as part of prior dispositions. This plan is reported as a component of our Unallocated Corporate segment. Net periodic pension cost for this plan was immaterial for the three and nine months ended September 30, 2025 and 2024.
The service cost component of net benefit cost has been presented in the Condensed Consolidated Statements of Earnings and Comprehensive Income within cost of goods sold and SG&A expenses for all periods presented, which are the same line items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are presented in the Condensed Consolidated Statements of Earnings and Comprehensive Income separately from the service cost component within other non-operating income, net.
17
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
NOTE 15. FINANCIAL INSTRUMENTS AND CONTINGENT CONSIDERATION
We do not hold or issue financial instruments for trading purposes.
The estimated fair values of our financial instruments and contingent consideration are as follows:
September 30, 2025
December 31, 2024
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
Liabilities, net:
Total long-term debt, including current portion
$
(
408.9
)
$
(
408.9
)
$
(
525.1
)
$
(
525.1
)
Interest rate swap contracts
(
3.8
)
(
3.8
)
(
1.5
)
(
1.5
)
Acquisition-related contingent consideration
(
2.5
)
(
2.5
)
(
3.2
)
(
3.2
)
The carrying amounts of cash and cash equivalents, receivables and accounts payable approximate fair value because of the short-term maturity of these instruments. The fair value estimates of long-term debt were based on data for our Term Loan A debt provided by a major financial institution. The fair value estimates for interest rate swap contracts were estimated with the assistance of an independent, third-party valuation expert and verified by obtaining quotes from major financial institutions. The fair value estimates for acquisition-related contingent consideration liabilities that are payable based on performance were measured primarily through the use of a Monte Carlo simulation by an independent, third-party specialist.
As of September 30, 2025 and December 31, 2024, acquisition-related contingent consideration liabilities represented additional cash consideration payable related to the September 2025 acquisition of Geometrik, the October 2023 acquisition of Insolcorp, LLC (“Insolcorp”) and the July 2023 acquisition of BOK Modern, LLC (“BOK”) that will be paid upon the final achievement of certain financial and performance milestones. As of September 30, 2025 and December 31, 2024
, acquisition-related contingent consideration liabilities of $
1.1
million and $
1.5
million, respectively, related to the financial and performance milestones for the BOK acquisition and were classified as accounts payable and other accrued expenses on our Condensed Consolidated Balance Sheets. As of
September 30, 2025
, acquisition-related contingent consideration liabilities of $
1.4
million related to the future financial and performance milestones for the Geometrik and Insolcorp acquisitions were classified as long-term liabilities on our Condensed Consolidated Balance Sheets. As of
December 31, 2024
, acquisition-related contingent consideration liabilities of $
1.7
million related to financial and performance milestones for the Insolcorp and BOK acquisitions were classified as long-term liabilities on our Condensed Consolidated Balance Sheets.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Three levels of inputs may be used to measure fair value:
Level 1 — Quoted prices in active markets for identical assets or liabilities;
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; or
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The liabilities measured at fair value on a recurring basis and reported on the Condensed Consolidated Balance Sheets are summarized below:
September 30, 2025
December 31, 2024
Fair value based on
Fair value based on
Other
observable
inputs
Other
unobservable
inputs
Other
observable
inputs
Other
unobservable
inputs
Level 2
Level 3
Level 2
Level 3
Liabilities, net:
Interest rate swap contracts
$
(
3.8
)
$
-
$
(
1.5
)
$
-
Acquisition-related contingent consideration
-
(
2.5
)
-
(
1.7
)
18
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
Acquisition-related contingent considerati
on of $
2.5
million and $
1.7
million as of
September 30, 2025 and December 31, 2024, respectively, was measured with the use of significant unobservable inputs, which included financial proj
ections over respective earn-out periods, the volatility of the underlying financial metrics and estimated discount rates. Excluded from the above table were $
1.5
million of acquisition-related contingent consideration liabilities outstanding as of
December 31, 2024 related to the final achievement of certain financial and performance milestones through December 31, 2024 for the BOK acquisition.
The following table summarizes the weighted average of the significant unobservable inputs as o
f September 30, 2025:
Geometrik
Insolcorp
BOK
Unobservable input
Volatility
23.3
%
25.0
%
29.4
%
Discount rates
3.5
%
3.8
%
3.8
%
The changes in fair value of the acquisition-related contingent consideration liabilities for the
three and nine months ended September 30, 2025 and 2024 were as follows:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
Fair value of contingent consideration as of beginning of period
$
2.1
$
2.0
$
3.2
$
1.6
Cash consideration paid
-
-
(
1.5
)
-
Acquisition date fair value of contingent consideration
0.3
-
0.3
-
Loss related to change in fair value of contingent consideration
0.1
0.2
0.5
0.6
Fair value of contingent consideration as of end of period
$
2.5
$
2.2
$
2.5
$
2.2
During the nine months ended September 30, 2025
, we paid $
1.5
million of additional cash consideration, which represented the achievement of certain financial and performance milestones through
December 31, 2024 for the BOK acquisition. The additional cash consideration paid was classified as cash flows from financing activities in our Condensed Consolidated Statements of Cash Flows, up to the acquisition date fair value. The portion of additional cash consideration paid in excess of the acquisition date fair value was classified as cash flows from operating activities in our Condensed Consolidated Statements of Cash Flows.
During the three and nine months ended September 30, 2025 and 2024, changes in fair value were primarily due to changes in financial projections over each entity’s earn-out periods, changes in valuation inputs and the impact of foreign exchange movements.
All changes in acquisition-related contingent consideration liabilities subsequent to the initial acquisition-date measurements and excluding foreign exchange movements were recorded as a component of SG&A expenses in our Condensed Consolidated Statements of Earnings and Comprehensive Income.
NOTE 16. DERIVATIVE FINANCIAL INSTRUMENTS
We are exposed to market risk from changes in foreign exchange rates, interest rates and commodity prices that could impact our results of operations, cash flows and financial condition. We use interest rate derivatives to manage our exposure to interest rates. At inception, interest rate swap derivatives that we designate as hedging instruments are formally documented as a hedge of a forecasted transaction or cash flow hedge. We also formally assess, both at inception and at least quarterly thereafter, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the cash flows of the hedged item. If it is determined that a derivative ceases to be a highly effective hedge, or if the anticipated transaction is no longer probable of occurring, we discontinue hedge accounting, and any future mark-to-market adjustments are recognized in earnings. We use derivative financial instruments as risk management tools and not for speculative trading purposes.
Counterparty Risk
We enter into derivative transactions only with established financial institution counterparties having an investment-grade credit rating. We monitor counterparty credit ratings on a regular basis. All of our derivative transactions with counterparties are governed by master International Swap and Derivatives Association agreements (“ISDAs”) with netting arrangements. These agreements can limit our exposure in situations where we have gain and loss positions outstanding with a single counterparty. We do not post nor do we receive cash collateral with any counterparty for our derivative transactions. These ISDAs do not have any credit contingent features; however, a default under our bank credit facility would trigger a default under these agreements. Exposure to individual counterparties is controlled and we consider the risk of counterparty default to be negligible.
19
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
Interest Rate Risk
We utilize interest rate swaps to minimize the fluctuations in earnings caused by interest rate volatility. These swaps are designated as cash flow hedges against changes in Secured Overnight Financing Rate (“SOFR
”) for a portion of our variable rate debt.
The following table summarizes our interest rate swaps as of
September 30, 2025:
Coverage Period
Notional
Amount
Risk Coverage
Trade Date
November 2023 to December 2025
$
50.0
USD-SOFR
October 23, 2023
March 2025 to March 2026
$
50.0
USD-SOFR
March 27, 2025
March 2024 to June 2026
$
50.0
USD-SOFR
March 25, 2024
March 2025 to September 2026
$
25.0
USD-SOFR
March 27, 2025
November 2023 to December 2026
$
50.0
USD-SOFR
October 10, 2023
March 2024 to June 2027
$
50.0
USD-SOFR
March 27, 2024
November 2023 to November 2027
$
50.0
USD-SOFR
September 29, 2023
June 2024 to June 2028
$
50.0
USD-SOFR
June 26, 2024
Under the terms of the interest rate swaps above, we pay a fixed rate monthly and receive a floating rate based on the SOFR.
Financial Statement Impacts
The following tables detail amounts related to our derivatives as of September 30, 2025 and December 31, 2024. We did not have any derivative assets or liabilities not designated as hedging instruments as of September 30, 2025 or December 31, 2024. The derivative asset amounts below are shown gross and have not been netted.
Derivative Assets
Derivative Liabilities
Fair Value
Fair Value
Balance Sheet
Location
September 30,
2025
December 31,
2024
Balance Sheet
Location
September 30,
2025
December 31,
2024
Interest rate swap contracts
Other current assets
$
-
$
0.3
Accounts payable and accrued expenses
$
0.5
$
0.3
Other long-term liabilities
3.3
1.5
Amount of (Loss)
Recognized in AOCL
Location of Gain
Gain Reclassified
from AOCL into Net Earnings
Nine Months Ended
Reclassified from
Three Months Ended
Nine Months Ended
September 30,
AOCL into
September 30,
September 30,
2025
2024
Net Earnings
2025
2024
2025
2024
Derivatives in cash flow hedging relationships:
Interest rate swap contracts
$
(
1.7
)
$
(
1.9
)
Interest expense
$
0.1
$
1.4
$
0.5
$
4.7
As of September 30, 2025
, the amount of existing net losses in Accumulated Other Comprehensive Loss (“AOCL”) expected to be recognized in net earnings over the next twelve months was $
1.8
million.
NOTE 17. SHAREHOLDERS’ EQUITY
Common Stock Repurchase Plan
On July 29, 2016, our Board of Directors approved our share repurchase program authorizing us to repurchase up to $
150.0
million of our outstanding shares of common stock (the “Program”). Since inception of the Program, this authorization has been increased to permit repurchase up to an aggregate of $
1,700.0
million of our outstanding shares of common stock through
December 31, 2026
. We had $
582.8
million remaining under the Board’s repurchase authorization as of
September 30, 2025.
Repurchases of our common stock 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 AWI to repurchase any particular amount of common stock and may be suspended or discontinued at any time without notice.
20
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
During the three months ended September 30, 2025, we repurchased
0.1
million shares under the Program for a total cost of $
27.0
million, excluding commissions and taxes, or an average price of $
181.19
per share. During the nine months ended September 30, 2025, we repurchased
0.5
million shares under the Program for a total cost of $
79.0
million, excluding commissions and taxes, or an average price of $
156.22
per share. Since inception and through September 30, 2025, we have repurchased
15.1
million shares under the Program for a total cost of $
1,117.2
million, excluding commissions and taxes, or an average price of $
73.74
per share.
Dividends
I
n February, April and July 2025, our Board of Directors declared $
0.308
per share quarterly dividends, which were paid to shareholders in
March
,
May
and
August 2025
, respectively.
On October 22, 2025, our Board of Directors declared a $
0.339
per share quarterly dividend to be paid in
November 2025
.
Accumulated Other Comprehensive (Loss)
Foreign
Currency
Translation Adjustments
(1)
Derivative
(Loss) Gain
(1) (2)
Pension and Postretirement Adjustments
(1)
Total
Accumulated
Other
Comprehensive
(Loss)
(1) (2)
Balance, June 30, 2025
$
(
0.4
)
$
(
2.9
)
$
(
105.6
)
$
(
108.9
)
Other comprehensive (loss) income before reclassifications,
net of tax benefit (expense) of $
0.2
, $(
0.1
), $
-
and $
0.1
(
0.9
)
0.1
-
(
0.8
)
Amounts reclassified from accumulated other
comprehensive (loss)
-
(
0.1
)
0.6
0.5
Net current period other comprehensive (loss) income
(
0.9
)
-
0.6
(
0.3
)
Balance, September 30, 2025
$
(
1.3
)
$
(
2.9
)
$
(
105.0
)
$
(
109.2
)
Foreign
Currency
Translation Adjustments
(1)
Derivative
(Loss)
(1) (2)
Pension and Postretirement Adjustments
(1)
Total
Accumulated
Other
Comprehensive
(Loss)
(1) (2)
Balance, December 31, 2024
$
(
2.2
)
$
(
1.1
)
$
(
106.9
)
$
(
110.2
)
Other comprehensive income (loss) before reclassifications,
net of tax (expense) benefit of $(
0.2
), $
0.3
, $
-
and $
0.1
0.9
(
1.4
)
-
(
0.5
)
Amounts reclassified from accumulated other
comprehensive (loss)
-
(
0.4
)
1.9
1.5
Net current period other comprehensive income (loss)
0.9
(
1.8
)
1.9
1.0
Balance, September 30, 2025
$
(
1.3
)
$
(
2.9
)
$
(
105.0
)
$
(
109.2
)
Foreign
Currency
Translation Adjustments
(1)
Derivative
Gain (Loss)
(1) (2)
Pension and Postretirement Adjustments
(1) (2)
Total
Accumulated
Other
Comprehensive
(Loss)
(1) (2)
Balance, June 30, 2024
$
(
0.2
)
$
1.2
$
(
107.5
)
$
(
106.5
)
Other comprehensive income (loss) before reclassifications,
net of tax benefit of $
-
, $
1.5
, $
0.2
and $
1.7
0.3
(
4.7
)
(
0.4
)
(
4.8
)
Amounts reclassified from accumulated other
comprehensive (loss)
-
(
1.0
)
(
0.6
)
(
1.6
)
Net current period other comprehensive income (loss)
0.3
(
5.7
)
(
1.0
)
(
6.4
)
Balance, September 30, 2024
$
0.1
$
(
4.5
)
$
(
108.5
)
$
(
112.9
)
21
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
Foreign
Currency
Translation Adjustments
(1)
Derivative
Gain (Loss)
(1) (2)
Pension and Postretirement Adjustments
(1) (2)
Total
Accumulated
Other
Comprehensive
(Loss)
(1) (2)
Balance, December 31, 2023
$
1.0
$
0.5
$
(
106.2
)
$
(
104.7
)
Other comprehensive (loss) before reclassifications,
net of tax benefit of $
0.1
, $
0.5
, $
0.2
and $
0.8
(
0.9
)
(
1.4
)
(
0.4
)
(
2.7
)
Amounts reclassified from accumulated other
comprehensive (loss)
-
(
3.6
)
(
1.9
)
(
5.5
)
Net current period other comprehensive (loss)
(
0.9
)
(
5.0
)
(
2.3
)
(
8.2
)
Balance, September 30, 2024
$
0.1
$
(
4.5
)
$
(
108.5
)
$
(
112.9
)
(1)
Amounts are net of tax
.
(2)
Amounts include our
50
% share of
AOCL components from our WAVE joint venture.
Amounts Reclassified from Accumulated Other Comprehensive (Loss)
Affected
Line Item in the
Condensed Consolidated
Statements of Earnings
Three Months Ended September 30,
Nine Months Ended September 30,
and Comprehensive
2025
2024
2025
2024
Income
Derivative Adjustments:
Interest rate swap contracts, before tax
$
(
0.1
)
$
(
1.4
)
$
(
0.5
)
$
(
4.7
)
Interest expense
Tax impact
-
0.4
0.1
1.1
Income tax expense
Total (income), net of tax
(
0.1
)
(
1.0
)
(
0.4
)
(
3.6
)
Pension and Postretirement Adjustments:
Amortization of prior service credit
-
(
0.1
)
(
0.1
)
(
0.2
)
Other non-operating (income), net
Amortization of net actuarial loss (gain)
0.9
(
0.9
)
2.8
(
2.5
)
Other non-operating (income), net
Total loss (income), before tax
0.9
(
1.0
)
2.7
(
2.7
)
Tax impact
(
0.3
)
0.4
(
0.8
)
0.8
Income tax expense
Total loss (income), net of tax
0.6
(
0.6
)
1.9
(
1.9
)
Total reclassifications for the period
$
0.5
$
(
1.6
)
$
1.5
$
(
5.5
)
NOTE 18. LITIGATION AND RELATED MATTERS
ENVIRONMENTAL MATTERS
Environmental Compliance
Our manufacturing and research facilities are affected by various federal, state and local requirements relating to the discharge of materials and the protection of the environment. We make expenditures necessary for compliance with applicable environmental requirements at each of our operating facilities. While these expenditures are not typically material, the applicable regulatory requirements continually change and, as a result, we cannot predict with certainty the amount, nature or timing of future expenditures associated with environmental compliance.
Environmental Sites
Summary
We are actively involved in the investigation and remediation of existing or potential environmental contamination under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and state Superfund and similar environmental laws at two domestically owned locations allegedly resulting from past industrial activity.
In each location, we are one of multiple potentially responsible parties and have agreed to jointly fund the required investigation and remediation, while preserving our defenses to the liability. We may also have rights of contribution or reimbursement from other parties or coverage under applicable insurance policies. We have pursued coverage and recoveries under those applicable insurance policies with respect to certain of the sites, including the Macon, Georgia site and the Elizabeth City, North Carolina site, each of
22
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
which is summarized below. Other than disclosed below, we are unable to predict the outcome of these matters or the timing of any future recoveries, whether through settlement or otherwise. We are also unable to predict the extent to which any recoveries might cover our final share of investigation and remediation costs for these sites. Our final share of investigation and remediation costs may exceed any such recoveries, and such amounts net of insurance recoveries may be material.
Between 2017 and 2021, we entered into settlement agreements totaling $
53.0
million with certain legacy insurance carriers to resolve ongoing litigation and recover fees and costs previously incurred by us in connection with certain environmental sites. These settlements were recorded as reductions to cost of goods sold and SG&A expenses, reflecting the same income statement categories where environmental expenditures were historically recorded. From 2020 through the third quarter of 2024, cumulative insurance recoveries exceeded cumulative expenses to date related to the respective environmental sites and the excess was recorded within long-term liabilities on our Condensed Consolidated Balance Sheets. These excess recoveries were released to offset additional reserves for potential liabilities incurred on the respective environmental sites. We may enter into additional settlement agreements in the future, which may or may not be material, with other legacy insurers to obtain reimbursement or contribution for environmental site expenses.
Estimates of our future liability at the environmental sites are based on evaluations of currently available facts regarding each individual site. We consider factors such as our activities associated with the site, existing technology, presently enacted laws and regulations and prior company experience in remediating contaminated sites. Although current law imposes joint and several liability on all parties at Superfund sites, our contribution to the remediation of these sites is expected to be limited by the number of other companies potentially liable for site remediation. As a result, our estimated liability reflects only our expected share. In determining the probability of contribution, we consider the solvency of other parties, the site activities of other parties, whether liability is being disputed, the terms of any existing agreements and experience with similar matters, and the effect of our October 2006 Chapter 11 reorganization and separation with Armstrong Flooring, Inc. upon the validity of the claim, if any.
Specific Material Events
Macon, Georgia
The U.S. Environmental Protection Agency (the “EPA”) has listed
two
landfills located on a portion of our facility in Macon, Georgia, along with the former Macon Naval Ordnance Plant landfill adjacent to our property, portions of Rocky Creek, and certain tributaries leading to Rocky Creek (collectively, the “Macon Site”) as a Superfund site on the National Priorities List due to the presence of contaminants, most notably polychlorinated biphenyls (“PCBs”).
In September 2010, we entered into an Administrative Order on Consent for a Removal Action (the “Removal Action”) with the EPA to investigate PCB contamination in
one
of the landfills on our property, the Wastewater Treatment Plant Landfill (“Operable Unit 1”). After completing an investigation of Operable Unit 1 and submitting our final Engineering Evaluation/Cost Analysis, the EPA issued an Action Memorandum in July 2013 selecting our recommended remedy for the Removal Action. The Operable Unit 1 final report was submitted to the EPA in
October 2016
, the EPA approved the final report in November 2016 and a Post-Removal Control Plan was submitted to the EPA in March 2017. AWI has been conducting operation and maintenance activities of the completed remedy since 2017 consistent with the approved Post-Removal Control Plan.
In September 2015, AWI and other Potential Responsible Parties (“PRPs”) received a Special Notice Letter from the EPA under CERCLA inviting AWI and the PRPs to enter into the negotiation of a Remedial Investigation and Feasibility Study (“RI/FS”) with respect to the remainder of the Superfund site, which included the other landfill on our property, as well as areas on and adjacent to our property and Rocky Creek (“Operable Unit 2”). We and the other PRPs entered into a settlement agreement with the EPA effective September 2018, in response to the Special Notice Letter to conduct the RI/FS. The PRPs submitted an RI/FS work plan, which was approved by the EPA in September 2019. Investigative work on this portion of the site commenced in December 2019.
In June 2021, the PRPs submitted a Site Characterization Summary Report (“SCSR”) for Operable Unit 2 to the EPA. The purpose of the SCSR was to demonstrate that the available data for Operable Unit 2 was adequate for the risk assessment and for the development of remedial action objectives. In the second half of 2022, the EPA and the PRPs agreed to separate all non-groundwater aspects of the site, and the groundwater investigation is ongoing. In August 2022, the PRPs submitted a Human Health Baseline Risk Assessment to the EPA, and in December 2022, the PRPs submitted a final Baseline Ecological Risk Assessment for all non-groundwater aspects of Operable Unit 2 to the EPA. Both risk assessments served as exhibits to the Remedial Investigation Report (“RIR”), which the EPA approved in July 2023.
Based on findings in the RIR, the PRPs developed and submitted to the EPA a draft Feasibility Study (“FS”) to identify and evaluate potential remedial alternatives for all non-groundwater elements of Operable Unit 2. Following review and comment by the EPA and the State of Georgia and revisions to the FS to address those comments, the EPA conditionally approved the FS in April 2024 and issued a Proposed Remedial Action Plan (“Proposed Plan”) for the non-groundwater elements at the site in May 2024, which included a total cost estimate for the non-groundwater elements at the site of approximately $
8
million. In August 2024, the EPA signed the Record of Decision, selecting the remedy outlined in the Proposed Plan. The portion of these remediation costs that AWI will bear for all non-groundwater elements of Operable Unit 2 will not be known until the PRPs resolve the final allocation of costs.
23
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
In March 2025, AWI and the other PRPs requested to the EPA that the groundwater investigation for Operable Unit 3 (the groundwater elements of Operable Unit 2), be completed in conjunction with the groundwater investigation at the adjacent former Macon Naval Ordnance Plant landfill, however, the EPA rejected this request and required two separate remedial investigation reports.
It is probable that we will incur field investigation, engineering and oversight costs associated with designing and implementing the remedy for all non-groundwater elements of Operable Unit 2 and for completing an RI/FS of Operable Unit 3. We may also ultimately incur costs in remediating contamination discovered during the RI/FS for Operable Unit 3 and we are unable to reasonably estimate our final share of the total costs associated with the investigation work or any resulting remediation therefrom, although such amounts may be material to any one quarter’s or year’s results of operations in the future. We do not expect the total future costs to have a material adverse effect on our liquidity or financial condition as the cash payments may be made over many years.
Elizabeth City, North Carolina
This site is a former cabinet manufacturing facility that from 1977 until 1996 was operated by Triangle Pacific Corporation, which became Armstrong Wood Products, Inc. (“AWP”), and is now known as AHF Products, LLC. The site was formerly owned by the U.S. Navy (“Navy”) and Westinghouse, which was purchased by Paramount, a Skydance Corporation (“Paramount”) (then known as CBS Corporation). We assumed ownership of the site when we acquired the stock of AWP in 1998. Prior to our acquisition, the North Carolina Department of Environment and Natural Resources listed the site as a hazardous waste site. In 1997, AWP entered into a cost sharing agreement with Westinghouse whereby the parties agreed to share equally in costs associated with investigation and potential remediation. In 2000, AWP and Paramount entered into an Administrative Order on Consent to conduct an RI/FS with the EPA for the site.
In 2007, we and Paramount entered into an agreement with the Navy whereby the Navy agreed to pay one third of defined past and future investigative costs up to a certain amount, which has now been exhausted. The EPA approved an RI/FS work plan for the site in August 2011. In January 2014, we submitted draft RI and Risk Assessment reports and conducted supplemental investigative work based upon agency comments to those reports. In connection with the separation of Armstrong Flooring, Inc. in 2016, we agreed to retain any legacy environmental liabilities associated with the AWP site.
The EPA published an Interim Action Proposed Plan for the site in April 2018 seeking public comment until June 2018. The EPA evaluated comments, including ours, and has published its Interim Record Of Decision (“IROD”) selecting an interim cleanup approach. In September 2018, AWI and Paramount received a Special Notice Letter from the EPA under CERCLA inviting AWI and Paramount to enter into the negotiation of a settlement agreement to conduct or finance the response action at the site. In response to the September 2018 Special Notice Letter, we and Paramount submitted a good faith offer to the EPA in May 2019. In June 2021, we entered into a negotiated Partial Consent Decree and Site Participation Agreement with the EPA, Paramount and the U.S. on behalf of the Navy for the remedial design and remedial action for the interim remedy. Because the U.S. does not conduct work as a PRP at Superfund sites, similar to the 2007 agreement, the U.S. agreed to pay its share of the estimated costs of performing the work. The Partial Consent Decree was entered by the U.S. District Court for the Eastern District of North Carolina in January 2022. A Remedial Design Work Plan (“RDWP”) for the site was submitted to the EPA in June 2022, and AWI and Paramount responded in November 2022 to comments received from the EPA in September 2022. The EPA approved the revised RDWP in February 2023 and in June 2023, the parties submitted a Pre-Design Investigation Work Plan. Following review and comment by the EPA and revisions to the Pre-Design Investigation Work Plan to address the EPA comments, the EPA approved the Pre-Design Investigation Work Plan and related Quality Assurance Project Plan in December 2024, allowing the Pre-Design investigation work to start in March 2025.
The current estimate of future liability at this site includes only our estimated share of the costs of implementing the interim remedial action under the IROD. We are unable to reasonably estimate our final share of the total costs associated with the interim or final remediation at the site, although such amounts may be material to any one quarter's or one year’s results of operations in the future. We do not expect the total future costs to have a material adverse effect on our liquidity or financial condition as the cash payments may be made over many years.
Summary of Financial Position
Total liabilities
of $
4.1
million and $
4.6
million as of September 30, 2025 and December 31, 2024, respectively, were recorded for environmental matters that we consider probable and for which a reasonable estimate of the probable liability could be made. As of September 30, 2025 and December 31, 2024, $
4.1
million and $
4.2
million, respectively, of environmental liabilities were reflected within other long-term liabilities on the Condensed Consolidated Balance Sheets. As of December 31, 2024, $
0.4
million of environmental liabilities was reflected within accounts payable and accrued expenses on the Condensed Consolidated Balance Sheets. During the three and nine months ended September 30, 2025
, we recorded additional reserves for potential environmental liabilities of $
0.1
million.
During the three and nine months ended September 30, 2024
, we recorded $
0.1
million and $
4.1
million of additional reserves for potential environmental liabilities, of which $
2.5
million
was offset through a release of our remaining environmental
24
Armstrong World Industries, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(dollar amounts in millions, except per share data)
insurance
recoveries in excess of cumulative expenses and $
1.6
million was recorded as a component of SG&A expenses on our Condensed Consolidated Statements of Earnings and Comprehensive Income.
Where existing data is sufficient to estimate the liability, that estimate has been used; where only a range of probable liabilities is available and no amount within that range is more likely than any other, the lower end of the range has been used. As assessments and remediation activities progress at each site, these liabilities are reviewed to reflect new information as it becomes available and adjusted to reflect amounts actually incurred and paid. These liabilities are undiscounted.
The estimated environmental liabilities above do not take into account any claims for additional recoveries from insurance or third parties. It is our policy to record insurance recoveries as assets on the Condensed Consolidated Balance Sheets when realizable. We incur costs to pursue environmental insurance recoveries, which are expensed as incurred.
Actual costs to be incurred at identified sites may vary from our estimates. Based on our knowledge of the identified sites, it is not possible to reasonably estimate future costs in excess of amounts already recognized.
OTHER CLAIMS
From time to time, we are involved in other various lawsuits, claims, investigations and other legal matters that arise in the ordinary course of business, including matters involving our products, intellectual property, relationships with suppliers, relationships with distributors, other customers or end users, relationships with competitors, employees and other matters. In connection with those matters, we may have rights of indemnity, contribution or reimbursement from other parties or coverage under applicable insurance policies. When applicable and appropriate, we will seek indemnity, contribution or reimbursement from other parties and pursue coverage and recoveries under those policies, but we are unable to predict the outcome of those demands. While complete assurance cannot be given to the outcome of any proceedings relating to these matters, we do not believe that any current claims, individually or in the aggregate, will have a material adverse effect on our financial condition, liquidity or results of operations.
NOTE 19. NET EARNINGS PER SHARE
Net earnings attributable to common shares used in our basic and diluted net Earnings Per Share (“EPS”) calculations for the three and nine months ended September 30, 2025 and 2024, were equal to net earnings on our Condensed Consolidated Statements of Earnings and Comprehensive Income. EPS components may not add due to rounding.
The following table is a reconciliation of basic shares outstanding to diluted shares outstanding for the
three and nine months ended September 30, 2025 and 2024 (shares in millions):
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
Basic shares outstanding
43.2
43.7
43.4
43.8
Dilutive effect of common stock equivalents
0.4
0.2
0.3
0.2
Diluted shares outstanding
43.6
43.9
43.7
44.0
Anti-dilutive stock awards excluded from the computation of dilutive EPS for the three and nine months ended September 30, 2025 were
261
and
19,439
, respectively. Anti-dilutive stock awards excluded from the computation of dilutive EPS for the three and nine months ended September 30, 2024
were
128
and
11,660
, respectively.
25
Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS O
F FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion should be read in conjunction with the financial statements, the accompanying notes, the cautionary note regarding forward-looking statements and risk factors included in this report and our Annual Report on Form 10-K for the year ended December 31, 2024.
OVERVIEW
AWI is an Americas leader in the design and manufacture of innovative interior and exterior architectural applications including ceilings, specialty walls and exterior metal solutions. We manufacture and source products made of numerous materials, including mineral fiber, fiberglass, metal, felt, wood, architectural resin and glass, wood fiber and glass-reinforced-gypsum. We also manufacture ceiling suspension system (grid) products through a joint venture with Worthington Enterprises, Inc. called Worthington Armstrong Venture (“WAVE”).
Acquisitions and Investments in Unconsolidated Affiliates
In September 2025, we acquired all of the issued and outstanding stock of Geometrik Manufacturing, Inc. (“Geometrik”), based in Kelowna, British Columbia, Canada. Geometrik is a leading Canadian designer and manufacturer of wood acoustical ceiling and wall systems. The operations, assets and liabilities of Geometrik are included in our Architectural Specialties segment.
In December 2024, we acquired all of the issued and outstanding stock of A. Zahner Company (“Zahner”), based in Kansas City, Missouri. Zahner is a designer and manufacturer of exterior metal architectural solutions. The operations, assets and liabilities of Zahner are included in our Architectural Specialties segment.
In April 2024, we acquired all of the issued and outstanding membership interests in 3form, LLC (“3form”) based in Salt Lake City, Utah, from Hunter Douglas, Inc. 3form is a designer and manufacturer of architectural resin and glass products used for specialty walls, partitions and ceilings. The operations, assets and liabilities of 3form are included in our Architectural Specialties segment.
In January 2024, we entered into a strategic partnership and equity investment in Overcast Innovations LLC (“Overcast”) with McKinstry Essention, LLC whereby we acquired a 19.5% ownership interest in Overcast (currently 19.2%), with future rights to increase our ownership interest. Overcast is a solutions company offering prefabricated ceiling cloud systems, modular grid platforms and engineering design services to reduce waste and inefficiencies in the built environment. Our investment and equity earnings and losses in Overcast are included in our Unallocated Corporate segment.
Manufacturing Plants
As of September 30, 2025, we operated 21 manufacturing plants, including 18 plants located within the U.S. and three plants in Canada.
WAVE operates seven additional plants in the U.S. to produce suspension system (grid) products, which we use and sell in our ceiling systems.
Reportable Segments
Our operating segments are as follows: Mineral Fiber, Architectural Specialties and Unallocated Corporate.
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. 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 including ceilings, specialty walls and exterior metal solutions primarily for use in commercial settings. Products are available in numerous materials, such as metal, felt, wood, architectural resin and glass, wood fiber and glass-reinforced-gypsum in
26
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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. 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/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.
Factors Affecting Revenues
For information on our 2025 and 2024 net sales and disaggregated expenses by segment, see Note 2 to the Condensed Consolidated Financial Statements. For information on our segments’ 2025 and 2024 net sales disaggregated by major customer groups, see Note 3 to the Condensed Consolidated Financial Statements.
Markets.
We compete in the building products markets of the Americas. We closely monitor publicly available macroeconomic data and trends that provide insight into commercial construction market activity, including, but not limited to, gross domestic product, office vacancy rates, the Architecture Billings Index, new commercial construction starts, state and local government spending, corporate profits, and retail sales. The Company continues to monitor the impacts of recently implemented and announced tariffs and geopolitical events, including but not limited to, conflicts in Ukraine and the Middle East, neither of which had a material direct impact on our financial condition, liquidity or results of operations in the first nine months of 2025 or 2024. In September 2025, GMS, Inc., one of our largest distributor customers, was acquired by The Home Depot, Inc. In August 2025, Lowe’s Companies, Inc., announced that it had entered into a definitive agreement to acquire Foundation Building Materials, Inc., another one of our largest distributor customers. This acquisition activity continues a trend of customer consolidation within the building products markets of the Americas referenced in the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2024 and had no impact on our financial condition, liquidity or results of operations in the first nine months of 2025.
Several factors and trends within our markets affected our business performance during the three and nine months ended September 30, 2025 compared to the same periods in 2024, most notably an increase in net sales due to our December 2024 acquisition of Zahner and April 2024 acquisition of 3form. The increase in net sales attributable to the Geometrik acquisition was not material. For the three months ended September 30, 2025, sales volumes increased $24 million compared to the same period in 2024, with the Zahner and 3form acquisitions contributing $16 million to net sales. Also contributing to the increase in net sales was a $7 million increase in organic Architectural Specialties net sales and a $2 million increase in net sales due to higher sales volumes in our Mineral Fiber segment. For the nine months ended September 30, 2025, sales volumes increased $111 million compared to the same period in 2024 driven primarily by an $86 million increase in net sales from the Zahner and 3form acquisitions. Also contributing to the increase in net sales for the nine months ended September 30, 2025 was a $30 million increase in organic Architectural Specialties net sales, partially offset by a $5 million decrease in net sales due to lower sales volumes in our Mineral Fiber segment.
Average Unit Value
. We periodically modify sales prices of our products due to changes in costs for raw materials and energy, market conditions and the competitive environment. Typically, realized price increases are less than announced price increases because of project pricing, competitive adjustments and changing market conditions. We also offer a wide assortment of products that are differentiated by style, design and performance attributes. Pricing and margins for products within the assortment vary. In addition, changes in the relative quantity of products purchased at different price points can impact year-to-year comparisons of net sales and operating income. Within our Mineral Fiber segment, we focus on improving sales dollars per unit sold, or average unit value (“AUV”), as a measure that accounts for the varying assortment of products and like-for-like pricing impacting our revenues.
Favorable AUV increased our total consolidated net sales for the three and nine months ended September 30, 2025 by approximately $14 million and $43 million, respectively, compared to the same periods in 2024. Our Architectural Specialties segment revenues are primarily generated by individual contracts that include a mix of products, both manufactured by us and sourced from third parties, which varies by project. As such, we do not track AUV performance for this segment but rather attribute all changes in net sales to volume, including gross to net sales adjustments.
During the first quarter and third quarter of 2025, we implemented price increases on Mineral Fiber ceiling products. During the first and second quarters of 2025, WAVE implemented price increases on grid products. 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.
Seasonality
. 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.
27
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Factors Affecting Operating Costs
Operating Expenses.
Our operating expenses are comprised of direct production costs (principally raw materials, labor, and energy), manufacturing overhead costs, freight, costs to purchase sourced products, 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 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. During the three and nine months ended September 30, 2025, higher energy and raw material costs negatively impacted operating income by $1 million and $3 million, respectively, compared to the same periods in 2024.
Acquisition-Related Expenses and Losses
In connection with our acquisitions of Geometrik in September 2025, 3form in April 2024, Insolcorp, LLC (“Insolcorp”) in October 2023 and BOK Modern, LLC (“BOK”) in July 2023, we recorded certain acquisition-related expenses and losses to operating income during the three and nine months ended September 30, 2025 and 2024, summarized as follows (dollar amounts in millions):
Three Months Ended
Nine Months Ended
Affected Line Item in the Condensed
September 30,
September 30,
Consolidated Statements of Earnings and
2025
2024
2025
2024
Comprehensive Income
Inventory
$
-
$
-
$
-
$
0.3
Cost of goods sold
Acquisition costs
0.5
-
0.5
1.0
SG&A expenses
Loss related to change in fair value of contingent consideration
0.1
0.2
0.5
0.6
Loss related to change in fair value of contingent consideration
Negative impact to operating income
$
0.6
$
0.2
$
1.0
$
1.9
The inventory amount above reflects the post-acquisition expenses associated with recording inventory at fair value as part of purchase accounting for the 3form acquisition. Acquisition costs above reflect certain contingent third-party professional fees incurred due to the Geometrik and 3form acquisitions. The change in fair value of contingent consideration was related to our Geometrik, Insolcorp and BOK acquisitions and is remeasured quarterly during each acquisition's earn-out periods. 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.
Employees
As of September 30, 2025 and December 31, 2024, we had approximately 3,800 and 3,600 full-time and part-time employees, respectively.
RESULTS OF OPERATIONS
See Note 2 to the Condensed Consolidated Financial Statements for a reconciliation of operating income to consolidated net earnings before income taxes.
CONSOLIDATED RESULTS
(dollar amounts in millions)
2025
2024
Change is Favorable
Three Months Ended September 30,
Total consolidated net sales
$
425.2
$
386.6
10.0
%
Operating income
$
117.2
$
111.3
5.3
%
Nine Months Ended September 30,
Total consolidated net sales
$
1,232.5
$
1,078.0
14.3
%
Operating income
$
338.9
$
292.4
15.9
%
Consolidated net sales for the third quarter of 2025 increased 10.0% from the prior-year period due to higher volumes of $24 million and favorable AUV of $14 million. Architectural Specialties net sales increased $23 million and Mineral Fiber net sales increased $16
28
Management’s Discussion and Analysis of Financial Condition and Results of Operations
million from the prior-year period. Architectural Specialties segment net sales improved due to a $16 million contribution from the acquisitions of Zahner and 3form and a $7 million increase in organic net sales. The increase in Mineral Fiber net sales was primarily driven by favorable AUV and modestly improved sales volumes.
Consolidated net sales for the first nine months of 2025 increased 14.3% over the prior-year period due to higher volumes of $111 million and favorable AUV of $43 million. Architectural Specialties net sales increased $116 million and Mineral Fiber net sales increased $38 million over the prior-year period. Architectural Specialties segment net sales improved primarily due to an $86 million contribution from the acquisitions of Zahner and 3form and a $30 million increase in organic net sales. The increase in Mineral Fiber net sales was driven by favorable AUV, partially offset by lower sales volumes.
Cost of goods sold in the third quarter of 2025 was 58.0% of net sales, compared to 57.6% for the same period in 2024. Cost of goods sold in the first nine months of 2025 was 59.1% of net sales, compared to 59.4% for the same period in 2024. The year-over-year increase in cost of goods sold as a percent of net sales for the third quarter of 2025 was primarily driven by increased manufacturing costs, partially offset by favorable AUV benefits and improved manufacturing productivity. The year-over-year decrease in cost of goods sold as a percent of net sales for the first nine months of 2025 was primarily driven by favorable AUV benefits and improved manufacturing productivity, partially offset by increased manufacturing costs. To a lesser extent, favorable inventory valuation impacts also contributed to the year-over-year decrease in cost of goods sold as a percent of net sales for the first nine months of 2025 compared to the same period in 2024.
SG&A expenses in the third quarter of 2025 were $90.1 million, or 21.2% of net sales, compared to $77.6 million, or 20.1% of net sales, for the same period in 2024. The increase in SG&A expenses was primarily driven by a $4 million increase related to the acquisitions of Zahner and 3form, a $3 million increase in incentive compensation, a $2 million increase in Architectural Specialties selling expenses driven primarily by higher net sales as well as additional investments in selling capabilities, a $1 million increase in depreciation and amortization expense and a $1 million decrease in company-owned officer life insurance gains related to deferred compensation plans.
SG&A expenses in the first nine months of 2025 were $252.1 million, or 20.5% of net sales, compared to $223.1 million, or 20.7% of net sales, for the same period in 2024. The year-over-year increase in SG&A expenses was primarily driven by a $24 million increase related to the acquisitions of Zahner and 3form, a $4 million increase in Architectural Specialties selling expenses driven primarily by higher net sales as well as additional investments in selling capabilities and a $3 million increase in incentive compensation. These increases were partially offset by a $2 million increase in company-owned officer life insurance gains related to deferred compensation plans and a prior-period increase in reserves for environmental remediation matters of $2 million that did not recur in the current period.
Losses related to changes in the fair value of contingent consideration were $0.1 million in the third quarter of 2025, compared to $0.2 million for the third quarter of 2024, and $0.5 million in the first nine months of 2025, compared to $0.6 million for the same period in 2024. Losses were related to our Insolcorp and BOK acquisitions. See Note 15 to the Condensed Consolidated Financial Statements for further information.
During the three and nine months ended September 30, 2025, we recorded $0.9 million and $0.8 million, respectively, of net gains on sales of fixed assets. During the same periods in 2024, we recorded $0.2 million and $0.3 million, respectively, of net losses on sales and impairment of fixed assets. During the third quarter of 2025, we recorded a $0.9 million gain on the sale of a parcel of land at a Mineral Fiber plant. During the third quarter of 2024, we recorded a $4.9 million impairment charge for undeveloped land adjacent to our Corporate headquarters. Also in the third quarter of 2024, we recorded a $4.6 million gain on the sale of our idled Mineral Fiber plant in St. Helens, Oregon.
Equity earnings from unconsolidated subsidiaries were $28.0 million in the third quarter of 2025, compared to $25.2 million in the third quarter of 2024, and were $86.5 million in the first nine months of 2025, compared to $78.7 million in the same period in 2024. WAVE equity earnings were $28.2 million in the third quarter of 2025, compared to $25.5 million in the third quarter of 2024, and $87.1 million in the first nine months of 2025, compared to $79.4 million in the same period of 2024. The year-over-year increases in WAVE equity earnings for the third quarter and first nine months of 2025 were primarily driven by the benefit from favorable AUV, partially offset by the negative impact of lower sales volumes. See Note 8 to the Condensed Consolidated Financial Statements for further information.
Interest expense was $8.2 million in the third quarter of 2025, compared to $10.5 million in the third quarter of 2024, and $25.3 million in the first nine months of 2025, compared to $30.6 million in the first nine months of 2024. The decreases in interest expense for the third quarter and first nine months of 2025, in comparison to the same periods in 2024, were primarily due to lower average debt balances.
Other non-operating income, net, was $0.5 million in the third quarter of 2025 compared to $3.0 million in the third quarter of 2024, and $1.9 million in the first nine months of 2025 compared to $9.3 million in the first nine months of 2024. The decreases in other non-operating income, net, for the third quarter and first nine months of 2025, in comparison to the same periods in 2024, were primarily driven by the non-service cost components of pension and postretirement net periodic benefit costs.
29
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Income tax expense was $23.2 million in the third quarter of 2025 compared to $26.9 million in the third quarter of 2024. The effective tax rate for the third quarter of 2025 was 21.2% compared to 25.9% for the same period of 2024. Income tax expense was $72.3 million in the first nine months of 2025 compared to $68.4 million in the first nine months of 2024. The effective tax rate for the first nine months of 2025 was 22.9% compared to 25.2% for the same period of 2024. The decreases in the effective tax rates for the third quarter and first nine months of 2025, in comparison to the same periods in 2024, were primarily due to the benefits recognized from statute closures and federal investment tax credits.
Total Other Comprehensive Loss (“OCL”) was $0.3 million in the third quarter of 2025 compared to total OCL of $6.4 million in the third quarter of 2024. Total Other Comprehensive Income (“OCI”) was $1.0 million in the first nine months of 2025 compared to OCL of $8.2 million in the first nine months of 2024. The decrease in OCL for the third quarter of 2025 compared to the same period in 2024 was due to a decrease in interest rate swap derivative losses and favorable pension and postretirement adjustments, partially offset by unfavorable foreign currency translation adjustments. The change from OCL to OCI for the first nine months of 2025 compared to the same period for 2024 was due to favorable pension and postretirement adjustments, a decrease in interest rate swap derivative losses, and an increase in income from foreign currency translation adjustments. Foreign currency translation adjustments represent the change in the U.S. dollar value of assets and liabilities denominated in foreign currencies. Foreign currency translation adjustments in 2025 and 2024 were driven primarily by changes in the Canadian dollar relative to the U.S. dollar. Pension and postretirement adjustments represent the amortization of actuarial gains and losses related to our defined benefit pension and postretirement plans. Derivative losses represent the mark-to-market value fair adjustments for our derivative assets and liabilities, and the recognition of gains and losses previously deferred in Accumulated Other Comprehensive (Loss).
REPORTABLE SEGMENT RESULTS
Mineral Fiber
(dollar amounts in millions)
2025
2024
Change is Favorable
Three Months Ended September 30,
Total segment net sales
$
274.0
$
258.0
6.2
%
Operating income
$
98.7
$
93.0
6.1
%
Nine Months Ended September 30,
Total segment net sales
$
786.1
$
747.8
5.1
%
Operating income
$
281.6
$
253.9
10.9
%
Mineral Fiber net sales increased $16 million in the third quarter of 2025 compared to the prior-year quarter due to $14 million of favorable AUV and $2 million of higher sales volumes. The improvement in AUV was due to favorable like-for-like price, with a modest contribution from mix. The increased volumes and favorable mix were driven by our strong execution, along with benefits from our growth initiatives.
For the first nine months of 2025, net sales increased $38 million from the prior-year period, primarily due to $43 million of favorable AUV, partially offset by lower sales volumes of $5 million. The improvement in AUV was due to favorable like-for-like price and, to a lesser extent, favorable mix. Our strong execution and benefits from growth initiatives contributed to positive volume and mix growth, partially offset by a decrease in volumes driven by home centers and Latin America.
Cost of goods sold during the three months ended September 30, 2025 was $155 million, or 56.7% of net sales, compared to $147 million, or 56.8% of net sales, in the prior-year period. Gross profit increased $7 million, or 6.5%, compared to the prior-year period due to a $9 million benefit from favorable AUV and a $1 million benefit from higher sales volumes, partially offset by a $3 million increase in manufacturing costs.
Cost of goods sold during the nine months ended September 30, 2025 was $460 million, or 58.5% of net sales, compared to $440 million, or 58.8% of net sales, in the prior-year period. Gross profit increased $18 million, or 5.8%, compared to the prior-year period due to a $25 million benefit from favorable AUV, partially offset by a $3 million negative impact from lower sales volumes and a $4 million increase in manufacturing costs.
SG&A expenses during the three months ended September 30, 2025 were $49 million, or 17.9% of net sales, compared to $44 million, or 16.9% of net sales, in the prior-year period. The year-over-year increase in SG&A expenses was primarily driven by a $2 million increase in incentive compensation, a $1 million increase in depreciation and amortization expense and a $1 million decrease in company-owned officer life insurance gains related to deferred compensation plans.
SG&A expenses during the nine months ended September 30, 2025 were $132 million, or 16.8% of net sales, compared to $133 million, or 17.8% of net sales, in the prior-year period. The year-over-year decrease in SG&A expenses was primarily driven by a $2
30
Management’s Discussion and Analysis of Financial Condition and Results of Operations
million increase in company-owned officer life insurance gains related to deferred compensation plans and a prior period increase in reserves for environmental remediation matters of $2 million that did not recur in the current period. These decreases were partially offset by a $3 million increase in incentive compensation.
Equity earnings from our WAVE joint venture were $28.2 million in the three months ended September 30, 2025, compared to $25.5 million in the prior-year period. Equity earnings from our WAVE joint venture were $87.1 million in the first nine months of 2025, compared to $79.4 million in the prior-year period. The year-over-year increases in WAVE earnings for the third quarter and first nine months of 2025 were primarily driven by the benefit from favorable AUV, partially offset by the negative impact of lower sales volumes.
Architectural Specialties
(dollar amounts in millions)
2025
2024
Change is Favorable
Three Months Ended September 30,
Total segment net sales
$
151.2
$
128.6
17.6
%
Operating income
$
19.3
$
19.2
0.5
%
Nine Months Ended September 30,
Total segment net sales
$
446.4
$
330.2
35.2
%
Operating income
$
59.7
$
41.1
45.3
%
Net sales increased $23 million in the third quarter of 2025 compared to the same period in 2024, driven primarily by a $16 million increase from the acquisitions of Zahner and 3form, in addition to a $7 million increase in organic net sales driven by strong growth across most of our specialty product categories.
For the first nine months of 2025, net sales improved by $116 million from the prior-year period, primarily due to an $86 million increase from the acquisitions of Zahner and 3form, in addition to a $30 million increase in organic net sales driven by strong growth across most of our specialty product categories.
Cost of goods sold during the three months ended September 30, 2025 was $91 million, or 60.3% of net sales, compared to $76 million, or 58.7% of net sales, in the prior-year period. The increase in costs of goods sold as a percentage of net sales was driven primarily by an increase in manufacturing costs within our organic business, partially offset by improved custom project margins. Gross profit increased $7 million, or 13.2%, compared to the prior-year period due primarily to a $6 million benefit from the acquisitions of Zahner and 3form.
Cost of goods sold during the nine months ended September 30, 2025 was $267 million, or 59.9% of net sales, compared to $199 million, or 60.4% of net sales, in the prior-year period. Gross profit increased $48 million, or 36.9%, compared to the prior-year period. The acquisitions of Zahner and 3form contributed a $34 million benefit to gross profit, with the remaining increase driven by improved custom project margins and operating leverage.
SG&A expenses in the three months ended September 30, 2025 were $41 million, or 26.9% of net sales, compared to $34 million, or 26.4% of net sales, in the prior-year period. The increase in SG&A expenses was primarily driven by a $4 million increase related to the acquisitions of Zahner and 3form and a $2 million increase in selling expenses driven primarily by higher net sales as well as additional investments in selling capabilities.
SG&A expenses in the first nine months of 2025 were $119 million, or 26.7% of net sales, compared to $90 million, or 27.1% of net sales, in the prior-year period. The increase in SG&A expenses was primarily driven by a $24 million increase related to the acquisitions of Zahner and 3form and a $4 million increase in selling expenses driven primarily by higher net sales as well as additional investments in selling capabilities.
Unallocated Corporate
Unallocated Corporate operating loss was $1 million in the third quarter of 2025 and 2024. Unallocated Corporate operating loss was $2 million in the first nine months of 2025 and $3 million in the first nine months of 2024.
31
Management’s Discussion and Analysis of Financial Condition and Results of Operations
FINANCIAL CONDITION AND LIQUIDITY
Cash Flow
Operating activities for the first nine months of 2025 provided $245.5 million, compared to $180.2 million for the first nine months of 2024. The favorable change in cash from operating activities was primarily due to higher cash earnings compared to the prior-year period, including a benefit from a decrease in income taxes paid due to the impact of 2025 Federal tax reform.
Net cash provided by investing activities was $16.8 million in the first nine months of 2025, compared to $61.2 million used for investing activities in the first nine months of 2024. The favorable change in cash from investing activities in the first nine months of 2025 compared to the same period in 2024 was primarily due to $94 million of cash paid for the 3form acquisition in 2024 and an increase in dividends from WAVE, partially offset by a decrease in proceeds from the sale of fixed assets and an increase in purchases of property, plant and equipment.
Net cash used for financing activities was $252.0 million in the first nine months of 2025, compared to $115.7 million cash used in the first nine months of 2024. The unfavorable change in cash used for financing activities was primarily due to increased debt repayments, net of borrowings, under our credit facility. Borrowings were significantly higher in the prior year primarily due to the 3form acquisition. Also contributing to the increase in cash used for financing activities was an increase in repurchases of our outstanding common stock.
Liquidity
Our liquidity needs for operations vary throughout the year. We retain lines of credit to facilitate our seasonal cash flow needs, since cash flow is historically lower during the first and fourth quarters of our fiscal year.
We have a $950.0 million variable rate senior credit facility, which is comprised of a $500.0 million revolving credit facility (with a $150.0 million sublimit for letters of credit) and a $450.0 million Term Loan A. As of September 30, 2025, the revolving credit facility and Term Loan A were priced at 1.375% over the Secured Overnight Financing Rate (“SOFR”), plus a 10-basis point adjustment. The revolving credit facility and Term Loan A mature in December 2027. We also have a $25.0 million bi-lateral letter of credit facility.
As of September 30, 2025, the total principal balance outstanding under our senior credit facility was $410.6 million under Term Loan A. We had no balance outstanding under the revolving credit facility as of September 30, 2025.
The senior credit facility includes two financial covenants that require the ratio of consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) to consolidated cash interest expense minus cash consolidated interest income to be greater than or equal to 3.0 to 1.0, and requires the ratio of consolidated funded indebtedness, minus AWI and domestic subsidiary unrestricted cash and cash equivalents up to $100 million, to EBITDA to be less than or equal to 3.75 to 1.0 (subject to certain exceptions for certain acquisitions). As of September 30, 2025, we were in compliance with all covenants of the senior credit facility.
The Term Loan A is currently priced on a variable interest rate basis. We use interest rate swaps to minimize the fluctuations in earnings caused by interest rate volatility associated with our senior credit facility. The following table summarizes our interest rate swaps (dollar amounts in millions):
Coverage Period
Notional
Amount
Risk Coverage
Trade Date
November 2023 to December 2025
$
50.0
USD-SOFR
October 23, 2023
March 2025 to March 2026
$
50.0
USD-SOFR
March 27, 2025
March 2024 to June 2026
$
50.0
USD-SOFR
March 25, 2024
March 2025 to September 2026
$
25.0
USD-SOFR
March 27, 2025
November 2023 to December 2026
$
50.0
USD-SOFR
October 10, 2023
March 2024 to June 2027
$
50.0
USD-SOFR
March 27, 2024
November 2023 to November 2027
$
50.0
USD-SOFR
September 29, 2023
June 2024 to June 2028
$
50.0
USD-SOFR
June 26, 2024
Under the terms of all interest rate swaps, we pay a fixed rate monthly and receive a floating rate based on SOFR. These swaps are designated as cash flow hedges against changes in SOFR for a portion of our variable rate debt.
We utilize lines of credit and other commercial commitments to ensure that adequate funds are available to meet operating requirements. Letters of credit are currently arranged through our revolving credit facility and our bi-lateral facility. Letters of credit may be issued to third party suppliers, insurance companies and financial institutions and typically can only be drawn upon in the
32
Management’s Discussion and Analysis of Financial Condition and Results of Operations
event of AWI’s failure to pay its obligations to the beneficiary. The following table presents details related to our letters of credit facilities (dollar amounts in millions):
September 30, 2025
Financing Arrangements
Limit
Used
Available
Bi-lateral facility
$
25.0
$
7.7
$
17.3
Revolving credit facility
150.0
-
150.0
Total
$
175.0
$
7.7
$
167.3
As of September 30, 2025, we had $90.1 million of cash and cash equivalents, $71.2 million in the U.S. and $18.9 million in foreign jurisdictions, primarily Canada. As of September 30, 2025, we also had $500 million available under our revolving credit facility. We believe cash on hand and cash generated from operations, together with borrowing capacity under our credit facility, will be adequate to address our near-term liquidity needs based on current expectations of our business operations, capital expenditures, acquisitions and scheduled payments of debt obligations.
CRITICAL ACCOUNTING ESTIMATES
There have been no material changes to our critical accounting estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.
33
ITEM 3. 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, 2024.
ITEM 4. CONTROLS
AND PROCEDURES
(a)
Evaluation of Disclosure Controls and Procedures
. The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Based on the evaluation of the effectiveness of our disclosure controls and procedures by our management, with the participation of our principal executive officer and our chief financial officer, as of September 30, 2025, our principal executive officer and our chief financial officer have concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
(b)
Changes in Internal Control Over Financial Reporting
. There have been no material changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Act) during the fiscal quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
34
PART II - OT
HER INFORMATION
ITEM 1. LEGA
L PROCEEDINGS
See Note 18 to the Condensed Consolidated Financial Statements, which is incorporated herein by reference.
ITEM 1A. RI
SK FACTORS
There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.
ITEM 2. UNREGISTERED SALES
OF EQUITY SECURITIES AND USE OF PROCEEDS
(c) Issuer Purchases of Equity Securities
Period
Total Number
of Shares
Purchased
(1)
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Approximate Value
of Shares that may
yet be Purchased
under the Plans or
Programs
July 1-31, 2025
72,210
$
167.40
71,194
$
597,875,051
August 1-31, 2025
73,676
$
193.66
73,676
$
583,606,725
September 1-30, 2025
4,454
$
194.81
4,360
$
582,757,372
Total
150,340
149,230
(1)
Includes shares reacquired through the withholding of shares to pay employee tax obligations upon the exercise of options or vesting of restricted shares previously granted under our long-term incentive plans.
On July 29, 2016, our Board of Directors approved our share repurchase program authorizing us to repurchase up to $150.0 million of our outstanding shares of common stock (the “Program”). Since inception of the Program, this authorization has been increased to permit repurchase up to an aggregate of $1,700.0 million of our outstanding shares of common stock through December 31, 2026.
Repurchases of our common stock 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 AWI to repurchase any particular amount of common stock and may be suspended or discontinued at any time without notice.
During the three months ended September 30, 2025, we repurchased 0.1 million shares under the Program for a total cost of $27.0 million, excluding commissions and taxes, or an average price of $181.19 per share. During the nine months ended September 30, 2025, we repurchased 0.5 million shares under the Program for a total cost of $79.0 million, excluding commissions and taxes, or an average price of $156.22 per share. Since inception and through September 30, 2025, we have repurchased 15.1 million shares under the Program for a total cost of $1,117.2 million, excluding commissions and taxes, or an average price of $73.74 per share.
ITEM 3. DEFAULTS U
PON SENIOR SECURITIES
None.
ITEM 4. MINE S
AFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER I
NFORMATION
Trading Arrangements of Directors and Executive Officers
During the three months ended September 30, 2025
, no director or officer of the Company
adopted
or
terminated
a
“Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
35
ITEM 6.
EXHIBITS
The following exhibits are filed as part of this Quarterly Report on Form 10-Q:
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. †
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents. †
104
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 has been formatted in Inline XBRL.
† Filed herewith.
†† Furnished herewith.
36
SIGNA
TURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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