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What changed in ARMSTRONG WORLD INDUSTRIES INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ARMSTRONG WORLD INDUSTRIES INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+290 added−260 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-20)

Top changes in ARMSTRONG WORLD INDUSTRIES INC's 2024 10-K

290 paragraphs added · 260 removed · 236 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

58 edited+11 added−4 removed22 unchanged
Biggest changeOur primary focus is on growth initiatives that further leverage innovation and digitalization (including the movement toward healthier and sustainable indoor environments in order to accelerate renovation), expansion of our Architectural Specialties segment through acquisitions, and strong cash flow generation. 5 Acquisitions In October 2023, we acquired a portion of the business and certain assets of Insolcorp, LLC (“Insolcorp”), based in Albemarle, NC, used to develop, test and manufacture energy saving products deployed in building and roofing installations.
Biggest changeIn October 2023, we acquired a portion of the business and certain assets of Insolcorp, LLC (“Insolcorp”), based in Albemarle, North Carolina. Insolcorp develops, tests and manufactures energy saving products deployed in building and roofing installations. The acquired operations, assets and liabilities of Insolcorp are included in our Mineral Fiber segment.
Further, in 2022, as part of the AFI bankruptcy and with AWI consent, all rights, obligations and protections that existed as part of the arrangement with AFI were transferred to AHF Products in North America, Zhejiang GIMIG Tech Co., Ltd. in China, and to Braeside Mills Investments Pty Ltd in Australia/New Zealand.
Further, in 2022, as part of the AFI bankruptcy and with AWI consent, all rights, obligations and protections that existed as part of the arrangement with AFI were transferred to AHF Products in North America, Zhejiang GIMIG Tech Co., Ltd. in China, and to Braeside Mills Investments Pty Ltd in Australia and New Zealand.
Our People pillar broadly focuses on creating a safe working environment for our employees, increasing our engagement in the communities where we operate, evaluating our benefits and compensation structure for all levels of the organization, promoting and maintaining a diverse, inclusive, talented and thriving workforce, and encouraging and protecting human rights.
Our Thriving People and Communities pillar broadly focuses on creating a safe working environment for our employees, increasing our engagement in the communities where we operate, evaluating our benefits and compensation structure for all levels of the organization, promoting and maintaining a diverse, inclusive, talented and thriving workforce, and encouraging and protecting human rights.
Compensation, Benefits and Wellness . Employee compensation is based on defined job descriptions and position grades that are evaluated against external market data that we believe is competitive and fair. We offer competitive health and wellness benefits to eligible employees and periodically conduct analyses of plan utilization to further tailor our employee benefits to meet their ongoing needs.
Employee compensation is based on defined job descriptions and position grades that are evaluated against external market data that we believe is competitive and fair. We offer competitive health and wellness benefits to eligible employees and periodically conduct analyses of plan utilization to further tailor our employee benefits to meet their ongoing needs.
Annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, all amendments to those reports and other information about us are available free of charge through this website. Documents filed with the SEC are available on our website as soon as reasonably practicable after the reports are electronically filed with the SEC.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports and other information about us are available free of charge through this website. Documents filed with the SEC are available on our website as soon as reasonably practicable after the reports are electronically filed with the SEC.
Reference in this Form 10-K to our website and the SEC’s website is an inactive text reference only.
Reference in this Form 10-K to our website and the SEC’s website is an inactive text reference only. 10
Legal and Regulatory Proceedings Regulatory activities of particular importance to our operations include proceedings under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), and state Superfund and similar type environmental laws governing existing 9 or potential environmental contamination at two domestically owned locations allegedly resulting from past industrial activity.
Legal and Regulatory Proceedings Regulatory activities of particular importance to our operations include proceedings under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), and state Superfund and similar type environmental laws governing existing or potential environmental contamination at two domestically owned locations allegedly resulting from past industrial activity.
Raw Materials We purchase raw materials from numerous suppliers worldwide in the ordinary course of business. Our principal raw materials are fiberglass, perlite, recycled paper and starch. Other raw materials we purchase include clays, felt, pigment, wood and wood fiber. We manufacture most of our mineral wool needs at one of our facilities.
Raw Materials We purchase raw materials from numerous suppliers worldwide in the ordinary course of business. Our principal raw materials are fiberglass, perlite, recycled paper and starch. Other raw materials we purchase include clays, felt, pigment, resin, wood and wood fiber. We manufacture most of our mineral wool needs at one of our facilities.
The following companies are our primary competitors: CertainTeed Corporation (a subsidiary of Saint-Gobain), Chicago Metallic Corporation (owned by Rockwool International A/S), Georgia-Pacific Corporation, Rockfon A/S (owned by Rockwool International A/S), USG Corporation (owned by Gebr. Knauf KG), Ceilings Plus (owned by USG Corporation), Rulon International, and 9Wood.
The following companies are our primary competitors: CertainTeed Corporation (a subsidiary of Saint-Gobain), Chicago Metallic Corporation (owned by Rockwool International A/S), Georgia-Pacific Corporation, Rockfon A/S (owned by Rockwool International A/S), USG Corporation (owned by Gebr. Knauf KG), Ceilings Plus (owned by USG Corporation), Rulon International, SAS International, and 9Wood.
See Note 27 to the Consolidated Financial Statements and Risk Factors in Item 1A of this Form 10-K, for information regarding the possible effects that compliance with environmental laws and regulations may have on our businesses and operating results. Website We maintain a website at https://www.armstrongceilings.com. Information contained on our website is not incorporated into this document.
See Note 27 to the Consolidated Financial Statements and Risk Factors in Item 1A of this Form 10-K, for information regarding the possible effects that compliance with environmental laws and regulations may have on our businesses and operating results. Website We maintain a website at https://www.armstrongworldindustries.com. Information contained on our website is not incorporated into this document.
The actual protection afforded by a patent, which can vary from country to country, 7 depends upon the type of patent, the scope of its coverage and the availability of legal remedies.
The actual protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage and the availability of legal remedies.
These efforts also include our mineral fiber ceilings recycling program, which aims to divert reclaimed ceiling tiles from landfills. We expect that there will be increased demand over time for products, systems and services that meet evolving regulatory and customer sustainability standards and preferences and decreased demand for products that produce significant greenhouse gas emissions.
These efforts also include our mineral fiber ceilings recycling program, which aims to divert reclaimed ceiling tiles from landfills. We expect that there will be increased demand over time for products, systems and services that meet evolving regulatory and customer sustainability standards and preferences and decreased demand for products that generate significant greenhouse gas emissions.
Sales to these distributors are included in both our Mineral Fiber and Architectural Specialties segment net sales. 6 Working Capital We produce goods for inventory and sell on credit to our customers. Generally, we believe our distributors and home center customers carry inventory as needed to meet local or rapid delivery requirements.
Sales to these distributors are included in both our Mineral Fiber and Architectural Specialties segment net sales. Working Capital We primarily produce goods for inventory and sell on credit to our customers. Generally, we believe our distributors and home center customers carry inventory as needed to meet local or rapid delivery requirements.
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, PA headquarters.
The Mineral Fiber segment also includes all assets and liabilities not specifically allocated to our Architectural Specialties or Unallocated Corporate segment, including all property and related depreciation associated with our Lancaster, Pennsylvania headquarters.
Mineral Fiber – produces suspended mineral fiber and soft fiber 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).
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).
These agreements include a Trademark License Agreement and a Transition Trademark License Agreement. Pursuant to the Trademark License Agreement, AWI provided AFI with a perpetual, royalty-free license to utilize the “Armstrong” trade name and logo.
These agreements include a Trademark License Agreement and a Transition Trademark License Agreement. Pursuant to the Trademark License Agreement, AWI provided AFI with a perpetual, royalty-free license to use the “Armstrong” trade name and logo.
We have important relationships with national home centers such as Lowe’s Companies, Inc. and The Home Depot, Inc., with wholesalers who re-sell our products to dealers who service builders, and direct customers, which include sales to contractors, architects and designers who specify products. In 2023, nearly 70% of our consolidated net sales were to distributors.
We have important relationships with national home centers such as Lowe’s Companies, Inc. and The Home Depot, Inc., with wholesalers who re-sell our products to dealers who service builders, and with direct customers, which include sales to contractors, architects and designers who specify products. In 2024, nearly 65% of our consolidated net sales were to distributors.
The end-use of our products is based on management estimates as such information is not easily determinable. Residential Construction. While a smaller portion of our business, we also sell products for use in single and multi-family housing. We estimate that existing home renovation work represents the majority of the residential construction market opportunity.
The end-use of our products is based on management estimates as such information is not easily determinable. Residential Construction. We also sell a small portion of our products for use in single and multi-family housing. We estimate that existing home renovation work represents the majority of the residential construction market opportunity.
Through this strategy, we have delivered consistent growth in mineral fiber sales dollars per unit sold through product innovation, including our Healthy Spaces products, Total Acoustics® solutions and Sustain® family of products, and we have built a broad portfolio of architectural specialties products for ceilings, specialty walls and exterior applications in our markets.
Through this strategy, we have delivered consistent growth in mineral fiber sales dollars per unit sold through product innovation, including our Total Acoustics® solutions and Sustain® family of products, and we have built a broad portfolio of architectural specialties products for ceilings, specialty walls and exterior metal architectural applications.
Sustainability and Environmental Matters As a leading building products manufacturer, we are committed to operating sustainably across all areas of our business. This commitment is reflected in our ongoing initiatives to design and develop sustainable ceiling and wall solutions for every indoor space.
Sustainability and Environmental Matters As a leading building products manufacturer, we are committed to operating sustainably across all areas of our business. This commitment is reflected in our ongoing initiatives to design and develop sustainable ceiling and wall solutions.
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 – produces, designs and sources ceilings, walls and facades primarily for use in commercial settings.
Operating results for the Mineral Fiber segment include a significant majority of allocated Corporate administrative expenses that represent a reasonable allocation of general services to support its operations. Architectural Specialties – designs, produces and sources specialty ceilings, walls, and other interior and exterior architectural applications primarily for use in commercial settings.
In recent years we added parental leave and adoption benefits for all employees and launched a wellness program to promote physical, mental, and financial well-being. In addition, we offer on-site wellness screenings at our manufacturing facilities in partnership with our medical provider. Finally, we offer mental well-being support and nutrition and financial wellness education to all employees. Diversity and Inclusion.
In recent years we added parental leave and adoption benefits for all employees and launched a wellness program to promote physical, mental and financial well-being. In addition, we offer on-site wellness screenings at our manufacturing facilities in partnership with our medical provider.
Key U.S. statistics that indicate market opportunity include existing home sales (a key indicator for renovation opportunity), housing starts, housing completions, home prices, interest rates and consumer confidence. Customers We use our reputation, capabilities, service, innovation and brand recognition to develop long-standing relationships with our customers.
Key U.S. statistics that indicate market opportunity include existing home sales (a key indicator for renovation opportunity), housing starts, housing completions, home prices, interest rates and consumer confidence. 6 Customers We use our product quality, broad product portfolio, design capabilities, service, innovation and brand recognition to develop long-standing relationships with our customers.
Liabilities for environmental matters that we consider probable and for which a reasonable estimate of the probable liability could be made were $0.5 million as of December 31, 2023 and 2022.
Liabilities for environmental matters that we consider probable and for which a reasonable estimate of the probable liability could be made were $4.6 million and $0.5 million as of December 31, 2024 and 2023, respectively.
Registrations are generally for fixed, but renewable, terms. In connection with the separation and distribution of our former flooring business into a separate publicly-traded company, Armstrong Flooring, Inc. (“AFI”), in 2016, we entered into several agreements with AFI that, together with a plan of division, provided for the separation and allocation of assets between AWI and AFI.
In connection with the separation and distribution of our former flooring business into a separate publicly traded company, Armstrong Flooring, Inc. (“AFI”), in 2016, we entered into several agreements with AFI that, together with a plan of division, provided for the separation and allocation of assets between AWI and AFI.
Our sustainability focus reflects our mission to make a positive difference in the lives of people where they live, work, learn, heal and play. Our approach to sustainability is designed to support our strategic priorities, align with stakeholder interests, and be visible and measurable. Our sustainability program is organized around three program pillars: People, Planet and Product.
Our sustainability focus reflects our mission to make a positive difference in the lives of people where they live, work, learn, heal and play. Our approach to sustainability is designed to support our strategic priorities, align with stakeholder interests, and be visible and measurable.
We differentiate renovation opportunities between major renovation projects, which tend to be larger in scope, versus repair projects that generally involve the replacement of old products with new products. In our Architectural Specialties segment, we estimate that a majority of our commercial market sales are used for new building construction by end-users of our products.
We classify our renovation opportunities as major renovation projects, which tend to be larger in scope, or repair and remodel projects, which generally involve the replacement of old products with new products. In our Architectural Specialties segment, we estimate that a majority of our commercial construction market sales are used for new building construction by end-users of our products.
The acquired operations, assets and liabilities of Insolcorp are included in our Mineral Fiber segment. In July 2023, we acquired all of the issued and outstanding stock of BOK Modern, LLC (“BOK”), based in San Rafael, CA. BOK is a designer of metal facade architectural solutions. In November 2022, we acquired the business of GC Products, Inc.
In July 2023, we acquired all the issued and outstanding stock of BOK Modern, LLC (“BOK”), based in San Rafael, California. BOK is a designer of exterior metal architectural solutions. The operations, assets and liabilities of BOK are included in our Architectural Specialties segment. In November 2022, we acquired the business of GC Products, Inc.
We believe we are well positioned in the industry sectors and categories in which we operate, often holding a leadership position. Our products compete against mineral fiber and fiberglass ceiling products from other manufacturers, as well as drywall and a wide range of specialty ceiling products. We compete directly with other domestic and international suppliers of these products.
We believe we are well positioned in the industry sectors and categories in which we operate, often holding a leadership position. Our products compete against mineral fiber and fiberglass ceiling products from other manufacturers, as well as drywall and a wide range of specialty ceiling and exterior metal products.
(“GC Products”), based in Lincoln, CA. GC Products is a designer and manufacturer of glass-reinforced-gypsum, glass-reinforced-cement, molded ceiling and specialty wall products with one manufacturing facility. The operations, assets and liabilities of BOK and GC Products are included in our Architectural Specialties segment. Markets We primarily operate in the United States, Canada and Latin America.
(“GC Products”), based in Lincoln, California. GC Products is a designer and manufacturer of glass-reinforced-gypsum, glass-reinforced-cement, molded ceiling and specialty wall products. The operations, assets and liabilities of GC Products are included in our Architectural Specialties segment. Markets We primarily serve markets in the United States, Canada and Latin America.
Sales to large home centers accounted for nearly 10% of our consolidated net sales. Our remaining sales were primarily to direct customers and retailers. Gross sales to Foundation Building Materials, Inc. and GMS, Inc. totaled $631.9 million and individually exceeded 10% of our consolidated gross sales in 2023.
Sales to large home centers accounted for nearly 10% of our consolidated net sales. Our remaining sales were primarily to direct customers. Gross sales to Foundation Building Materials, Inc. and GMS, Inc. totaled $735.6 million and individually exceeded 10% of our consolidated gross sales in 2024.
The major markets in which we compete are: Commercial Construction. Our revenue opportunities come from new construction as well as renovation of existing buildings. Most of our revenue comes from the following sectors of commercial construction – office, education, healthcare, transportation and retail.
We compete directly with other domestic and international suppliers of these products. The major markets in which we compete are: Commercial Construction. Our revenue opportunities come from new construction as well as renovation of existing buildings. Most of our revenue comes from the following sectors of commercial construction – office, education, healthcare, transportation and retail.
ITEM 1. BUSINESS Armstrong World Industries, Inc. (“AWI” or the “Company”) is a Pennsylvania corporation incorporated in 1891. When we refer to “we,” “our” and “us” in this report, we are referring to AWI and its subsidiaries. AWI is a leader in the design, innovation and manufacture of ceiling and wall solutions in the Americas.
ITEM 1. BUSINESS Armstrong World Industries, Inc. (“AWI” or the “Company”) is a Pennsylvania corporation incorporated in 1891. When we refer to “we,” “our” and “us” in this report, we are referring to AWI and its subsidiaries.
Finally, we use aluminum and steel in the production of metal ceilings by us and by WAVE, our joint venture that manufactures grid products. We also purchase significant amounts of packaging materials and consume substantial amounts of energy, such as electricity and natural gas, and water. In general, adequate supplies of raw materials are available to all of our operations.
Finally, we use aluminum and steel in the production of metal products by us and by WAVE, our joint venture that manufactures ceiling and wall grid products. We also purchase significant amounts of packaging materials and consume substantial amounts of energy, such as electricity and natural gas, and water.
Certain of our trademarks, including without limitation, , Armstrong®, 24/7 Defend™, ACOUSTIBuilt®, AirAssure®, Airtite®, Arktura®, BŌK Modern®, Calla®, Cirrus®, Cortega®, DESIGNFlex®, Dune™, Feltworks®, Humiguard®, Infusions®, InvisAcoustics™, Kanopi™, Lyra®, MetalWorks™, Móz™, Optima®, Plasterform™, ProjectWorks®, Soundscapes®, Sustain®, Tectum®, Templok®, Total Acoustics®, Turf®, Ultima®, and WoodWorks®, are important to our business because of their significant brand name recognition.
Certain of our trademarks, including without limitation, , Armstrong®, 3form®, ACOUSTIBuilt®, Arktura®, BŌK Modern®, Calla®, Cirrus®, Cortega®, DESIGNFlex®, Dune™, Feltworks®, Infusions®, Kanopi™, Lyra®, MetalWorks™, Móz™, Optima®, ProjectWorks®, Soundscapes®, Sustain®, Tectum®, Templok®, Total Acoustics®, Turf®, Ultima®, WoodWorks® and Zahner®, are important to our business because of their significant brand name recognition. Registrations are generally for fixed, but renewable, terms.
However, availability can change for a number of reasons, including environmental conditions, laws and regulations, shifts in demand by other industries competing for the same materials, transportation disruptions and/or business decisions made by, or events that affect, our suppliers. There is no assurance that these raw materials will remain in adequate supply to us.
In general, adequate supplies of raw materials are available to all of our operations. However, availability can change for a number of reasons, including environmental conditions, laws and regulations, shifts in demand by other industries competing for the same materials, transportation disruptions and/or business decisions made by, or events that affect, our suppliers.
Our Product pillar broadly focuses on ensuring our products are free of chemicals of concern, reducing our products’ water and greenhouse gas footprint, improving the circularity of our products so they can be recycled, reused or repurposed, and continuing to invest in solutions that meet customer demand for building products that align with their sustainability goals.
Our sustainability program is organized around three program pillars: Healthy and Circular Products, Healthy Planet and Thriving People and Communities. 8 Our Healthy and Circular Products pillar broadly focuses on ensuring our products are free of chemicals of concern, reducing our products’ water intensity and carbon footprint, improving the circularity of our products so they can be recycled, reused or repurposed, and continuing to invest in solutions that meet customer demand for building products that align with their sustainability goals.
We manufacture and source products made of numerous materials, including mineral fiber, fiberglass wool, metal, wood, felt, 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”). Reportable Segments Our operating segments are as follows: Mineral Fiber, Architectural Specialties and Unallocated Corporate.
We also manufacture ceiling suspension system (grid) products through a joint venture with Worthington Enterprises, Inc. called Worthington Armstrong Venture (“WAVE”). 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.
Architectural Specialties products are sold primarily to resale distributors and direct customers, primarily ceiling systems contractors. The majority of this segment’s revenues are project driven, which can lead to more variability in sales patterns.
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.
We engage our employees on safety with a focus on risk identification and elimination and through tracking various leading indicators. We track Occupational Safety and Health Administration (“OSHA”) recordable injuries and lost time rates by location monthly. We establish safety targets annually, which are tracked and reported to leadership monthly and reviewed with our Board of Directors.
We track Occupational Safety and Health Administration (“OSHA”) recordable injuries and lost time rates by location monthly. We establish safety targets annually, which are tracked and reported to leadership monthly and reviewed with our Board of Directors. Compensation, Benefits and Wellness .
As part of our commitment to diversity and inclusion, in our merit-based selection process we strive to hire qualified candidates from a diverse talent pool reflective of the communities in which we have operations.
As part of our commitment to diversity and inclusion, through our merit-based selection process, we strive to hire qualified candidates from a talent pool reflective of the communities in which we have operations. In addition, we are committed to engaging in events and outreach and providing employee resources to our entire workforce that support diversity and inclusion.
In 2023, we published our third Sustainability Report, which refines and measures our progress towards achieving our 2030 sustainability goals. We expect to update our progress regularly. The report is available in the "Sustainability" section of our website, which is listed below. Information in the 2023 Sustainability Report or the Company's website is not incorporated herein by reference.
In 2024, we published our fourth Sustainability Report which measures our progress towards achieving our 2030 sustainability goals and provides insights into our sustainability efforts. We expect to update our progress regularly. The report is available in the "Sustainability" section of our website, which is listed below.
This includes patents, trademarks, designs, copyrights, trade secrets and other forms of intellectual property rights in the U.S. and various foreign countries. Patent protection extends for varying periods according to the date of patent filing or grant and the legal term of a patent in the various countries where patent protection is obtained.
Patent protection extends for varying periods according to the date of patent filing or grant and the legal term of a patent in the various countries where patent protection is obtained.
In general, we believe we have adequate supplies of sourced products. However, we cannot guarantee that the supply will remain adequate. 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 activity.
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 activity. Patent and Intellectual Property Rights Patent protection is important to our business.
None of these transactions had or are expected to have any material impact on the integrity of the Armstrong trademark.
During 2024, AWI terminated the license with AHF Products and sold the flooring specific trademarks previously licensed to AHF Products. None of these transactions had or are expected to have any material impact on the integrity of the Armstrong trademark.
Patent and Intellectual Property Rights Patent protection is important to our business. We hold a broad collection of intellectual property rights relating to certain aspects of our products and processes developed or perfected within AWI or obtained through acquisitions and licenses.
We hold a broad collection of intellectual property rights relating to certain aspects of our products and processes developed or perfected within AWI or obtained through acquisitions and licenses. This includes patents, trademarks, designs, copyrights, trade secrets and other forms of intellectual property rights in the U.S. and various foreign countries.
We continue to value diversity and inclusion within our organization, as we believe it is important to our success. This commitment is reflected in the aspirational goals of the People Pillar of our Sustainability program, which is led by our Vice President of Talent Sustainability and Talent Acquisition.
This commitment is reflected in the Thriving People and Communities Pillar of our Sustainability program, which is led by our Vice President of Talent Sustainability and Talent Acquisition.
Safety is a core value at AWI and our culture is committed to making safety a personal core value for every employee. Our overall goal is to eliminate workplace injuries. We promote and foster an environment of empowerment and sharing throughout the company at all levels and in all locations.
Our overall goal is to eliminate workplace injuries. We promote and foster an environment of empowerment and sharing throughout the company at all levels and in all locations. We engage our employees on safety with a focus on risk identification and elimination and through tracking various leading indicators.
Products are available in numerous materials, such as metal, wood and felt, in addition to various colors, shapes and designs. These products offer various performance attributes such as acoustical control, rated fire protection and aesthetic appeal. We sell standard, premium and customized products, a portion of which are sourced from third-party producers.
Products are available in numerous materials, such as metal, felt, wood, resin, wood fiber and glass-reinforced-gypsum in various colors, shapes and designs. These products offer a range of design options and performance attributes such as acoustical control, rated fire protection, light, aesthetic appeal, energy conservation and building performance.
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, 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.
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 Innovations LLC investment and related equity earnings/losses, the net funded status of our U.S.
Sourced Products Some of the products we sell are sourced from third parties. Our primary sourced products include specialty ceiling products. A portion of our sourced products are from suppliers located outside of the U.S., primarily from Europe and the Pacific Rim. Sales of sourced products represented approximately 10% of our total consolidated revenue in 2023.
A portion of our sourced products are from suppliers located outside of the U.S., primarily from Europe and the Pacific Rim. Sales of sourced products represented less than 10% of our total consolidated revenue in 2024. 7 In general, we believe we have adequate supplies of sourced products. However, we cannot guarantee that the supply will remain adequate.
Overview Our business has been built on providing high-quality, innovative products through a highly focused service model as well as by maintaining strong brand awareness and trust. We are committed to delivering profitable topline growth and sustainable shareholder value by strengthening our core Mineral Fiber segment and expanding our Architectural Specialties segment into new, adjacent business categories and sectors.
We are committed to delivering profitable revenue growth, strong cash flow generation and sustainable shareholder value by strengthening our core Mineral Fiber segment and expanding our Architectural Specialties segment into new, adjacent business categories and sectors.
We also believe that our ability to continue to provide these products, systems and services to our customers, including through our Sustain® portfolio, is aligned with our growth strategy. 8 The adoption of environmentally responsible building codes and standards such as the Leadership in Energy and Environmental Design (“LEED”) rating system established by the U.S.
The adoption of environmentally responsible building codes and standards such as the Leadership in Energy and Environmental Design (“LEED”) rating system established by the U.S. Green Building Council, has the potential to increase demand for products, systems and services that contribute to sustainable buildings.
Additionally, we are committed to complying with all environmental laws and regulations that are applicable to our operations.
These efforts include achieving emissions reductions through operational efficiency and product design improvements and exploring renewable electricity options where we operate. Additionally, we are committed to complying with all environmental laws and regulations that are applicable to our operations.
Prices for certain high usage raw materials can fluctuate dramatically. Cost increases for these materials can have a significant adverse impact on our manufacturing costs. Given the competitiveness of our markets, we may not be able to recover the increased manufacturing costs through increasing selling prices to our customers.
There is no assurance that these raw materials will remain in adequate supply to us. Prices for certain high usage raw materials can fluctuate dramatically. Cost increases for these materials can have a significant adverse impact on our manufacturing costs.
As of December 31, 2023, approximately 56% of our approximately 1,500 production employees in the U.S. were represented by labor unions. Collective bargaining agreements covering approximately 470 employees at two U.S. plants will expire during 2024. We believe that our relations with our employees are constructive and positive. Employee Health and Safety.
Collective bargaining agreements covering approximately 180 employees at three U.S. plants will expire during 2025. We believe that our relations with our employees are constructive and positive. Employee Health and Safety. Safety is a core value at AWI and our culture is committed to making safety a personal core value for every employee.
Human Capital Workforce Demographics. As of December 31, 2023 and 2022, we had approximately 3,100 and 3,000 full time and part time employees, respectively. During 2023, our total voluntary and involuntary turnover rates were approximately 8% and 4%, respectively, for non-production employees and 11% and 6%, respectively, for production employees.
During 2024, our total voluntary and involuntary turnover rates were approximately 7% and 4%, respectively, for non-production employees and 13% and 8%, respectively, for production employees. As of December 31, 2024, approximately 52% of our approximately 1,700 production employees in the U.S. were represented by labor unions.
Our Planet pillar broadly focuses on reducing our greenhouse gas footprint, reducing or reclaiming water in our operations, and reducing waste in our operations. These efforts include achieving emissions reductions through operational efficiency and product design improvements and exploring renewable electricity options where we operate.
We also believe that our ability to continue to provide these products, systems and services to our customers, including through our Sustain® portfolio, is aligned with our growth strategy. Our Healthy Planet pillar broadly focuses on reducing our greenhouse gas footprint, reducing or reclaiming water in our operations, and reducing waste in our operations.
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Green Building Council, has the potential to increase demand for products, systems and services that contribute to sustainable buildings.
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AWI is an Americas leader in the design, innovation and manufacture of interior and exterior architectural applications including ceilings, specialty walls and exterior metal solutions. We manufacture and source products made of numerous materials, including mineral fiber, fiberglass, metal, felt, wood, resin, wood fiber and glass-reinforced-gypsum.
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In addition, we are committed to engaging in events and outreach that support enhanced diversity and inclusion, including providing training to employees on diversity and inclusion topics that matter to them.
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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. Overview Our business has been built on providing high-quality, innovative products through a highly effective service model as well as by maintaining strong brand awareness and trust.
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To support this strategy, we also take an active approach to attracting, retaining, and engaging diverse talent through internships, employee resource groups, professional development and apprenticeship programs, and employee feedback.
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Our growth initiatives continue to focus on market-driven innovation and digital tools to accelerate renovation and further differentiate our products and solutions, including our development of Templok® energy saving ceiling tiles.
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As of December 31, 2023, our executive leadership team, defined as the chief executive officer and direct reports to the chief executive officer, included 33% gender diversity and 33% racial/ethnic diversity. As of December 31, 2022, our executive leadership team included 43% gender diversity and 14% racial/ethnic diversity.
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In addition, we continue to invest in expanding our Architectural Specialties market and reach capabilities into new adjacencies through both organic investment and acquisitions. 5 Acquisitions and Investments in Unconsolidated Affiliates In December 2024, we acquired all the issued and outstanding stock of A. Zahner Company (“Zahner”), based in Kansas City, Missouri.
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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.
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In April 2024, we acquired all 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.
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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, with future rights to increase our ownership interest.
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Overcast is a solutions company offering prefabricated ceiling cloud systems, modular grid platforms and engineering design services to reduce waste and inefficiencies in the built environment. Our investment and equity earnings in Overcast are included in our Unallocated Corporate segment.
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Given the competitiveness of our markets, we may not be able to recover the increased manufacturing costs through increasing selling prices to our customers. Sourced Products Some of the products we sell are sourced from third parties. Our primary sourced products include specialty ceiling and external metal products.
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Information in the 2024 Sustainability Report or the Company's website is not incorporated herein by reference. Human Capital Workforce Demographics. As of December 31, 2024 and 2023, we had approximately 3,600 and 3,100 full time and part time employees, respectively.
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Finally, we offer mental well-being support and nutrition and financial wellness education to all employees. 9 Diversity and Inclusion. We value diversity and inclusion within our organization, as we believe it is important to our success.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

63 edited+9 added−4 removed62 unchanged
Biggest changeIncreased labor costs, labor disputes, work stoppages or union organizing activity, as well as increased labor shortages, or an inability to attract and retain talented employees could delay or impede production and could have an adverse effect on our financial condition, liquidity or results of operations. We rely on our employees to manufacture and sell our products.
Biggest changeIf these estimates and assumptions are incorrect, if we experience delays resulting from equipment failures or other interruptions in production, or if other unforeseen events occur, our financial condition, liquidity or results of operations could be materially and adversely affected. 11 Increased labor costs, labor disputes, work stoppages or union organizing activity, as well as increased labor shortages, or an inability to attract and retain talented employees could delay or impede production and could have a material adverse effect on our financial condition, liquidity or results of operations.
Volatility in financial markets and softness or deterioration of national and global economic conditions could have a material adverse effect on our financial condition, liquidity or results of operations, including as follows: • the financial stability of our customers or suppliers may be compromised, which could result in additional bad debts for us or non-performance by suppliers; 15 • consumers of our products may postpone spending in response to tighter credit, negative financial news and/or stagnation or further declines in income or asset values, which could have a material adverse impact on the demand for our products; • the value of investments underlying our defined benefit pension plan may decline, which could result in significant cash contributions to the plan in order to meet obligations or regulatory requirements; and • our asset impairment assessments and underlying valuation assumptions may change, which could result from changes to estimates of future sales and cash flows that may lead to substantial impairment charges.
Volatility in financial markets and softness or deterioration of national and global economic conditions could have a material adverse effect on our financial condition, liquidity or results of operations, including as follows: • the financial stability of our customers or suppliers may be compromised, which could result in additional bad debts for us or non-performance by suppliers; • consumers of our products may postpone spending in response to tighter credit, negative financial news and/or stagnation or further declines in income or asset values, which could have a material adverse impact on the demand for our products; • the value of investments underlying our defined benefit pension plan may decline, which could result in significant cash contributions to the plan in order to meet obligations or regulatory requirements; and • our asset impairment assessments and underlying valuation assumptions may change, which could result from changes to estimates of future sales and cash flows that may lead to substantial impairment charges.
Our level of indebtedness and degree of leverage could: • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; 12 • make us more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; • place us at a competitive disadvantage compared to our competitors that are less leveraged and, therefore, more able to take advantage of opportunities that our leverage prevents us from pursuing; • limit our ability to refinance existing indebtedness or borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other purposes; • restrict our ability to pay dividends on or repurchase our capital stock; and • make it more difficult for us to satisfy our obligations with respect to our indebtedness.
Our level of indebtedness and degree of leverage could: • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • make us more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; • place us at a competitive disadvantage compared to our competitors that are less leveraged and, therefore, more able to take advantage of opportunities that our leverage prevents us from pursuing; • limit our ability to refinance existing indebtedness or borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other purposes; • restrict our ability to pay dividends on or repurchase our capital stock; and • make it more difficult for us to satisfy our obligations with respect to our indebtedness.
Existing trade secret, patent, design, trademark and copyright laws offer only limited protection. Our patents could be invalidated or circumvented. In addition, others may develop substantially equivalent or superseding proprietary technology, or competitors may offer similar competing products that do not infringe on our intellectual property rights, thereby substantially reducing the value of our intellectual property rights.
Existing trade secret, patent, design, trademark and copyright laws offer only limited protection. Our patents could be invalidated or circumvented. In addition, others may develop substantially equivalent or superseding proprietary technology, or competitors may offer similar competing products that do not infringe on our intellectual property rights, thereby substantially 15 reducing the value of our intellectual property rights.
The security measures we have implemented to protect against unauthorized access to our information systems and data may not be sufficient to prevent breaches. The regulatory environment related to information security, data collection and privacy is evolving, with new and constantly changing requirements applicable to our business, and compliance with those requirements could result in additional costs.
The security measures we have implemented to protect against unauthorized access to our information systems and data may not be sufficient to prevent breaches. 17 The regulatory environment related to information security, data collection and privacy is evolving, with new and constantly changing requirements applicable to our business, and compliance with those requirements could result in additional costs.
A decrease in availability or increases in costs of manufacturing inputs or sourced products, and any inability to pass along such costs through price increases, could have a material adverse effect on our financial condition, liquidity or results of operations. 10 The performance of our WAVE joint venture is important to our financial results.
A decrease in availability or increases in costs of manufacturing inputs or sourced products, and any inability to pass along such costs through price increases, could have a material adverse effect on our financial condition, liquidity or results of operations. The performance of our WAVE joint venture is important to our financial results.
If the availability of our manufacturing inputs or sourced products decreases, or the cost of those inputs or sourced products increases and we are unable to pass along increased costs resulting from supply chain or inflationary pressures, our financial condition, liquidity or results of operations could be adversely affected.
If the availability of our manufacturing inputs or sourced products decreases, or the cost of those inputs or sourced products increases and we are unable to pass along increased costs resulting from supply chain or inflationary pressures, our financial condition, liquidity or results of operations could be materially and adversely affected.
While we have processes and policies designed to mitigate these risks and 14 to investigate and address such claims as they arise, we cannot predict or, in some cases, control the costs to defend or resolve such claims. We currently maintain insurance against some, but not all, of these potential claims.
While we have processes and policies designed to mitigate these risks and to investigate and address such claims as they arise, we cannot predict or, in some cases, control the costs to defend or resolve such claims. We currently maintain insurance against some, but not all, of these potential claims.
While we have a comprehensive sustainability strategy, including, greenhouse gas reduction targets, transparent disclosures related to our ESG impacts and product innovation to respond to these evolving codes, standards and customer preferences, there is no certainty we will be successful in our approach.
While we have a comprehensive sustainability strategy, including, greenhouse gas reduction targets, transparent disclosures related to our sustainability impacts and product innovation to respond to these evolving codes, standards and customer preferences, there is no certainty we will be successful in our approach.
Our Canadian and Latin American operations are also subject to various tax rates, credit risks in emerging markets, political risks, uncertain legal systems, and loss of sales to local competitors following currency devaluations in countries where we import products for sale.
Our Canadian and Latin American operations are also subject to various tax rates, tariffs, credit risks in emerging markets, political risks, uncertain legal systems, and loss of sales to local competitors following currency devaluations in countries where we import products for sale.
All of these risks are also applicable where we rely on outside vendors to provide services, which may operate in a cloud environment. We are dependent on third-party vendors to operate secure and 16 reliable systems which may include data transfers over the internet.
All of these risks are also applicable where we rely on outside vendors to provide services, which may operate in a cloud environment. We are dependent on third-party vendors to operate secure and reliable systems which may include data transfers over the internet.
The loss, reduction, or fluctuation of sales to key customers, including independent distributors or national home center customers, or any adverse change in our business relationship with them, whether as a result of changing customer demands and expectations, reduced demand, supply chain constraints, competition, industry consolidation or otherwise, could have a material adverse effect on our financial condition, liquidity or results of operations.
The loss, reduction, or fluctuation of sales to key customers, including independent distributors or national home center customers, or any adverse change in our business relationships with them, whether as a result of changing customer demands and expectations, reduced demand, supply chain constraints, competition, industry consolidation or otherwise, could have a material adverse effect on our financial condition, liquidity or results of operations.
Efforts to achieve these goals may result in higher or unforeseen costs. In addition, we may encounter challenges measuring our progress towards the achievement of our ESG goals. Further, concerns related to climate change have resulted in domestic and foreign legislative or regulatory actions as well as changing customer preferences and policies, such as environmentally responsible building codes and standards.
Efforts to achieve these goals may result in higher or unforeseen costs. In addition, we may encounter challenges measuring our progress towards the achievement of our sustainability goals. Further, concerns related to climate change have resulted in domestic and foreign legislative or regulatory actions as well as changing customer preferences and policies, such as environmentally responsible building codes and standards.
We regularly evaluate potential mergers, acquisitions, joint ventures, strategic alliances or other investments that we believe could complement, enhance or expand our current businesses or product lines or that might otherwise offer us growth opportunities, particularly in our Architectural Specialties segment for which we have completed five acquisitions since July 2020.
We regularly evaluate potential mergers, acquisitions, joint ventures, strategic alliances or other investments that we believe could complement, enhance or expand our current businesses or product lines or that might otherwise offer us growth opportunities, particularly in our Architectural Specialties segment for which we have completed seven acquisitions since July 2020.
Litigation may be necessary to defend and enforce our intellectual property rights. Engaging in litigation may incur substantial costs and divert resources, which could harm our business regardless of the outcome. Despite our efforts to protect and maintain our intellectual property rights, both in the U.S. and abroad, we may be unsuccessful in some matters.
Litigation may be necessary to defend and enforce our intellectual property rights. Engaging in litigation may cause us to incur substantial costs and divert resources, which could harm our business regardless of the outcome. Despite our efforts to protect and maintain our intellectual property rights, both in the U.S. and abroad, we may be unsuccessful in some matters.
Legislative, political, regulatory and economic volatility, as well as vulnerability to infrastructure and labor disruptions, could have an adverse effect on our financial condition, liquidity or results of operations. A portion of our net sales are generated in Canada and Latin America.
Legislative, political, regulatory and economic volatility, as well as vulnerability to infrastructure and labor disruptions, could have a material adverse effect on our financial condition, liquidity or results of operations. A portion of our net sales are generated in Canada and Latin America.
Similarly, if there is a change with respect to our joint venture partner that adversely impacts its relationship with us, WAVE’s performance could be adversely impacted. Our equity investment in our WAVE joint venture remains important to our financial results.
Similarly, if there is a change with respect to our joint venture partner that adversely impacts its relationship with us, WAVE’s performance could be materially and adversely impacted. Our equity investment in our WAVE joint venture remains important to our financial results.
The geographic concentration of our business could subject us to risks, including those associated with climate change, which may be greater than our competitors and could have an adverse effect on our financial condition, liquidity or results of operations. We primarily operate in the U.S., Canada and Latin America.
The geographic concentration of our business could subject us to risks, including those associated with climate change, which may be greater than our competitors and could have a material adverse effect on our financial condition, liquidity or results of operations. We primarily operate in the U.S., Canada and Latin America.
Failure to meet shifting consumer preferences in our highly competitive markets, whether for product performance attributes, such as acoustics, energy efficiency, sustainability, health attributes, or styling preferences, or our inability to develop and offer new competitive performance features could have an adverse effect on our sales.
Failure to meet shifting consumer preferences in our highly competitive markets, whether for product performance attributes, such as acoustics, energy efficiency, sustainability, health attributes, or styling preferences, or our inability to develop and offer new competitive performance features could have a material adverse effect on our sales.
Our ability to meet these ratios could be affected by events beyond our control, and we cannot assure that we will meet them. A breach of any of the restrictive covenants or ratios would result in a default under the senior secured credit facility.
Our ability to meet these ratios could be affected by events beyond our control, and we cannot ensure that we will continue to meet them. A breach of any of the restrictive covenants or ratios would result in a default under the senior secured credit facility.
Continued or sustained deterioration of economic conditions would likely exacerbate and prolong these adverse effects. Our business is dependent on construction activity in North America. Downturns or delays in construction activity could have an adverse effect on our financial condition, liquidity or results of operations.
Continued or sustained deterioration of economic conditions would likely exacerbate and prolong these adverse effects. Our business is dependent on construction activity in North America. Downturns or delays in construction activity could have a material adverse effect on our financial condition, liquidity or results of operations.
Any of the foregoing factors could impair our operating efficiency and productivity and result in higher operating costs. Risks Related to Our Strategy We may not experience the anticipated benefits from our strategic initiatives, including investments in digitalization, Healthy Spaces and innovation.
Any of the foregoing factors could impair our operating efficiency and productivity and result in higher operating costs. Risks Related to Our Strategy We may not experience the anticipated benefits from our strategic initiatives, including investments in product innovation and digitalization.
However, our ability to utilize the current carrying value of these deferred tax assets may be impacted by certain future events, such as changes in tax legislation and insufficient future taxable income prior to expiration of the capital loss carryforwards and NOLs.
However, our ability to utilize the current carrying value of these deferred tax assets may be impacted by certain future events, such as changes in tax legislation and insufficient future taxable income prior to expiration of the NOLs.
The above factors could have a material adverse effect on our financial condition, liquidity or results of operations. We cannot provide any guarantees of future cash dividend payments or future repurchases of our common stock pursuant to a share repurchase program. Since December 2018, our Board of Directors has declared a quarterly dividend on our common stock.
Any of the above factors could have a material adverse effect on our financial condition, liquidity or results of operations. 13 We cannot guarantee future cash dividend payments or future repurchases of our common stock pursuant to a share repurchase program. Since December 2018, our Board of Directors has declared a quarterly dividend on our common stock.
ITEM 1A. RI SK FACTORS Risks Related to Our Operations Sales fluctuations and changes in our relationships with key customers could have an adverse effect on our financial condition, liquidity or results of operations.
ITEM 1A. RI SK FACTORS Risks Related to Our Operations Sales fluctuations and changes in our relationships with key customers could have a material adverse effect on our financial condition, liquidity or results of operations.
The building materials industry has been subject to claims relating to raw materials such as silicates, polychlorinated biphenyl (“PCB”), polyvinyl chloride (“PVC”), formaldehyde, fire-retardants and claims relating to other issues such as mold and toxic fumes, as well as claims for incidents of catastrophic loss, such as building fires.
The building materials industry has been subject to claims relating to raw materials such as silicates, polychlorinated biphenyl (“PCB”), polyvinyl chloride (“PVC”), formaldehyde, per- and polyfluoroalkyl substances (“PFAS”), fire-retardants and claims relating to other issues such as mold and toxic fumes, as well as claims for incidents of catastrophic loss, such as building fires.
Overall, climate change, its effects and impacts of government regulation, consumer, investor and business preferences are inherently difficult to predict and could adversely impact our business by increasing our energy costs and/or result in substantial, additional capital expenditures and operating costs in the form of taxes, emissions allowances, or required equipment upgrades or require that we modify our products or processes in a manner that increases our costs and/or reduces our profitability.
Overall, climate change, its effects, the impacts of government regulation, and consumer, investor and business preferences are inherently difficult to predict and could have a material adverse impact our business by increasing our energy costs, result in substantial, additional capital expenditures and operating costs in the form of taxes, emissions allowances, carbon offsets, or required equipment upgrades or require that we modify our products or processes in a manner that increases our costs and/or reduces our profitability.
The cyclical nature of construction activity, including construction activity funded by the public sector, tends to be influenced by prevailing economic conditions, including the rate of growth in gross domestic product, financing availability, prevailing interest rates, government spending patterns, business, investor and consumer confidence, inflation, availability of labor, adequately functioning supply chains and other factors beyond our control.
The cyclical nature of construction 16 activity, including construction activity funded by the public sector, tends to be influenced by prevailing economic conditions, including the rate of growth in GDP, financing availability, prevailing interest rates, government spending patterns, business, investor and consumer confidence, inflation, availability of labor, adequately functioning supply chains and other factors beyond our control.
Changes in the demand for, or quality of, WAVE products, or in the operational or financial performance of the WAVE joint venture, could have an adverse effect on our financial condition, liquidity or results of operations.
Changes in the demand for, or quality of, WAVE products, or in the operational or financial performance of the WAVE joint venture, could have a material adverse effect on our financial condition, liquidity or results of operations.
Prolonged negotiations, conflicts or related activities could also lead to costly work stoppages and loss of productivity. Our success is also dependent upon attracting and retaining a qualified and diverse workforce. In many cases, we rely upon our employees’ high degree of technical knowledge and industry experience.
Prolonged negotiations, conflicts or related activities could also lead to costly work stoppages, loss of productivity and reduced service levels to our customers. Our success is also dependent upon attracting and retaining a qualified workforce. In many cases, we rely upon our employees’ high degree of technical knowledge and industry experience.
Collective bargaining agreements covering approximately 470 employees at two U.S. plants will expire during 2024. We are also subject to the risk that strikes or other conflicts with organized personnel may arise or that we may become the subject of union organizing activity at our facilities that do not currently have union representation.
Collective bargaining agreements covering approximately 180 employees at three U.S. plants will expire during 2025. We are also subject to the risk that strikes or other conflicts with organized personnel may arise or that we may become the subject of union organizing activity at our facilities that do not currently have union representation.
Any such strategic transaction involves a number of risks, including potential disruption of our ongoing business and distraction of management, difficulty with integrating or separating personnel and business operations and infrastructure, increasing or decreasing the scope, geographic diversity and complexity of our operations, and potentially expanding into new ceiling and wall adjacencies and/or offering products with new attributes.
Any such strategic transaction involves a number of risks, including potential disruption of our ongoing business and distraction of management, difficulty with integrating or separating personnel and business operations and infrastructure, increasing or decreasing the scope, geographic diversity and complexity of our operations and markets, and expanding into new ceiling and wall adjacencies and exterior metal architectural applications, offering products with new attributes and/or offering installation of products.
Climate change and related extreme weather events in these geographic areas could impact: • our manufacturing capability if one of our facilities is affected by such an event; • demand from our customers through changes in construction activity in the markets in which we operate; • availability or increased costs of manufacturing inputs or sourced products from our vendors and suppliers; and • our broader supply chain through inability to ship and receive goods. 17 We may not be able to forecast the likelihood or severity of any of these impacts.
Climate change and related extreme weather events in these geographic areas could impact: • our manufacturing capability if one of our facilities is affected by such an event; • demand from our customers through changes in construction activity in the markets in which we operate; • availability or increased costs of manufacturing inputs or sourced products from our vendors and suppliers; and • our broader supply chain through inability to ship and receive goods.
In July 2023, we published our third Sustainability Report, which includes certain 2030 ESG and sustainability goals and describes our progress towards meeting those goals. We may not achieve the anticipated benefits we expect from these or other ESG and sustainability goals, which may damage our reputation, or these efforts may not align with new regulations or expectations of stakeholders.
In May 2024, we published our annual Sustainability Report, which includes certain 2030 sustainability goals and describes our progress towards meeting those goals. We may not achieve the anticipated benefits we expect from these goals, which may damage our reputation, or these efforts may not align with new regulations or expectations of stakeholders.
We continuously pursue productivity initiatives and periodically engage in cost-saving initiatives. Execution of these initiatives may result in interruptions in production and/or may result in lower-than-expected savings in our operating cost structure or may not improve our operating results. We seek ways to make our operations more efficient and effective.
Execution of these initiatives may result in interruptions in production and/or may result in lower-than-expected savings in our operating cost structure or may not improve our operating results. We seek ways to make our operations more efficient and effective.
As we continue to expand our business, we may have difficulty anticipating and effectively managing these and other risks that our operations may face, which may adversely affect our business outside the U.S. and our financial condition, liquidity or results of operations.
As we continue to expand our business, we may have difficulty anticipating and effectively managing these and other risks that our operations may face, which may have a material adverse effect our business outside the U.S. and our financial condition, liquidity or results of operations.
Risks Related to Financial Matters We require a significant amount of liquidity to fund our operations and our indebtedness may adversely affect our ability to operate and invest in our business, execute on our strategic initiatives, and return cash to shareholders.
Risks Related to Financial Matters We require a significant amount of liquidity to fund our operations, and our indebtedness may have a material adverse effect on our ability to operate and invest in our business, execute on our strategic initiatives, and return cash to shareholders.
Our financial condition, liquidity or results of operations could also be adversely affected by changes in the valuation of deferred tax assets and liabilities. We have substantial deferred tax assets related to capital loss carryforwards and state net operating losses 13 (“NOLs”), which are available to reduce our U.S. income tax liability and to offset future state taxable income.
Our financial condition, liquidity or results of operations could also be materially and adversely affected by changes in the valuation of deferred tax assets and liabilities. We have substantial deferred tax assets related to state net operating losses (“NOLs”), which are available to offset future state taxable income.
These factors could have a material adverse impact on our financial condition, liquidity or results of operations. Our operating and information systems may experience a failure, a compromise of security, or a violation of data privacy laws or regulations, which could interrupt or damage our operations.
We rely on operating and information systems that may experience a failure, a compromise of security, or a violation of data privacy laws or regulations, which could interrupt or damage our operations and have a material adverse effect on our financial condition, liquidity or results of operations.
We are subject to certain regulatory, financial and other risks related to climate change, climate transition, and other sustainability matters, broadly known as ESG.
We are subject to certain regulatory, financial and other risks related to climate change, climate transition, and other sustainability matters.
We continue to evaluate and may pursue strategic initiatives involving the development or utilization of new or innovative products, solutions and tools, including those related to Healthy Spaces, as well as the expansion of our ecommerce platform, Kanopi by Armstrong, and our automated design service, ProjectWorks. These initiatives are designed to grow revenue, improve profitability and increase shareholder value.
We continue to evaluate and may pursue strategic initiatives involving the development or use of new or innovative products, solutions and tools, including those related to Templok® energy saving ceiling tiles, as well as the expansion of our ecommerce platform, Kanopi™, and our automated design service, ProjectWorks®. These initiatives are designed to grow revenue, improve profitability and increase shareholder value.
Risks Related to Legal and Regulatory Matters We may be subject to liability under, and may make substantial future expenditures to comply with, environmental laws and regulations, which could have an adverse effect on our financial condition, liquidity or results of operations.
We may be subject to liability under, and may make substantial future expenditures to comply with, environmental laws and regulations, which could have a material adverse effect on our financial condition, liquidity or results of operations.
Should our efforts to address these risks fail to align with new regulations or stakeholder expectations, fail to achieve the anticipated benefits, or result in unanticipated costs, our corporate reputation, financial condition, liquidity or results of operations could be adversely impacted. In recent years, governmental and societal attention on ESG topics has increased.
Should our efforts to address these risks fail to align with new regulations or stakeholder expectations, fail to achieve the anticipated benefits, or result in unanticipated costs, our corporate reputation, financial condition, liquidity or results of operations could be materially and adversely impacted.
In addition, our partner may develop economic or business interests or goals that are different from or inconsistent with our interests or goals, which may impact our ability to influence or align WAVE’s strategy and operations with our interests or goals.
In addition, our partner may develop economic or business interests or goals that are different from or inconsistent with our interests or goals, which may impact our ability to influence or align WAVE’s strategy and operations with our interests or goals. We continuously pursue productivity initiatives and periodically engage in cost-saving initiatives.
(formally known as Worthington Industries, Inc.) completed its previously announced separation of Worthington Steel, Inc. into a separate independent, publicly-traded company (the “Worthington Separation”). Worthington Enterprises, Inc.’s investment in WAVE was not included in the assets and business transferred to Worthington Steel, Inc.
(formerly known as Worthington Industries, Inc.) separated from Worthington Steel, Inc. into a separate, independent, publicly traded company (the “Worthington Separation”). Worthington Enterprises, Inc.’s investment in WAVE was not included in the assets and business transferred to Worthington Steel, Inc.
Our ability to select and retain reliable vendors and suppliers who provide timely deliveries of quality raw materials and sourced products will impact our success in meeting customer demand for timely delivery of quality products.
We source a significant portion of raw materials and sourced products from third parties, including international suppliers. Our ability to select and retain reliable vendors and suppliers who provide timely deliveries of quality raw materials and sourced products will impact our success in meeting customer demand for timely delivery of quality products.
New legislation and regulations in the U.S. and in the foreign countries in which we operate could impose restrictions, caps, taxes, or other controls on emissions of greenhouse gases, which could adversely affect our operations and financial results.
New legislation and regulations in local, state and federal jurisdictions in the U.S. and in the foreign countries in which we operate could impose restrictions, caps, taxes, or other controls on emissions of greenhouse gases, which could have a material adverse effect on our operations and financial results.
Competition could reduce demand for our products or impact our profitability. Failure to compete effectively by meeting consumer preferences, developing and marketing innovative solutions, maintaining strong customer service and distribution relationships, and expanding our solutions capabilities and reach could adversely affect our results.
Competition could reduce demand for our products or impact our profitability. Failure to compete effectively by meeting consumer preferences, developing and marketing innovative solutions, maintaining strong customer service and distribution relationships, and expanding our solutions capabilities and reach could have a material adverse effect on our financial condition, liquidity or results of operations.
If we fail to identify, consummate and integrate our strategic transactions in a timely and cost-effective manner, our financial condition, liquidity or results of operations could be materially and adversely affected.
Certain strategic opportunities may not result in the consummation of a transaction or may fail to realize the intended benefits and synergies. If we fail to identify, consummate and integrate our strategic transactions in a timely and cost-effective manner, our financial condition, liquidity or results of operations could be materially and adversely affected.
If any significant judgment or claim is not fully insured or indemnified against, it could have a material adverse effect on our financial condition, liquidity or results of operations. Our intellectual property rights may be infringed, misappropriated, invalidated or otherwise circumvented, which could adversely impact our financial condition, liquidity or results of operations.
If any significant judgment or claim is not fully insured or indemnified against, it could have a material adverse effect on our financial condition, liquidity or results of operations.
If the Worthington Separation or any other change in ownership, change of control, change in management or management philosophy, change in business strategy or another change with respect to our partner adversely impacts our relationship, WAVE’s performance could be adversely impacted.
If the Worthington Separation or any other change with respect to our partner adversely impacts our relationship, WAVE’s performance could be materially and adversely impacted.
In the aggregate, our U.S. pension plans were overfunded by $56.9 million as of December 31, 2023. Our unfunded postretirement plan liabilities were $47.6 million as of December 31, 2023.
In the aggregate, our U.S. defined benefit pension plans were overfunded by $62.7 million as of December 31, 2024. Our unfunded postretirement plan liabilities were $39.4 million as of December 31, 2024.
Our costs to comply with these laws and regulations may increase as these requirements become more stringent in the future. Potential regulatory actions, product and service claims, environmental claims and other litigation could be costly and have an adverse effect on our financial condition, liquidity or results of operations. Insurance coverage may not be available or adequate in all circumstances.
Risks Related to Legal and Regulatory Matters Potential regulatory actions, product and service claims, environmental claims and other litigation could be costly and have a material adverse effect on our financial condition, liquidity or results of operations. Insurance coverage may not be available or adequate in all circumstances.
Strategic transactions could involve payment by us of a substantial amount of cash, assumption of liabilities and indemnification obligations, regulatory requirements, incurrence of a substantial amount of debt or issuance of a substantial amount of equity. Certain strategic opportunities may not result in the consummation of a transaction or may fail to realize the intended benefits and synergies.
Strategic transactions could involve payment by us of a substantial amount of cash, assumption of liabilities and indemnification obligations, subjecting us to new regulatory requirements, incurrence of a substantial amount of debt or issuance of a substantial amount of equity.
Any of the above factors could have a material adverse impact on our financial condition, liquidity or results of operations. Customer consolidation, and competitive, economic and other pressures facing our customers, and our potential failure to attract new customers in our markets, may negatively impact our net sales, operating margins and profitability.
Customer consolidation, and competitive, economic and other pressures facing our customers, and our potential failure to attract new customers in our markets, may negatively impact our net sales, operating margins and profitability.
Limited availability could require us to reformulate products or limit our production. Supply chain disruptions could decrease access to manufacturing inputs or sourced products or significantly increase the cost to purchase these items. The cost of some inputs has been volatile in recent years and availability has been limited at times.
Limited availability could require us to reformulate products or limit our production. Supply chain disruptions could decrease access to manufacturing inputs or sourced products or significantly increase the cost to purchase these items. Future input cost volatility could occur because of our suppliers’ exposure to tariffs or geopolitical events.
Any of these could have a material adverse effect on our financial condition, liquidity or results of operations. Public health epidemics or pandemics could have an adverse effect on our financial condition, liquidity or results of operations. Public health epidemics or pandemics may impact our employees, operations, customers, suppliers and financial results.
We may not be able to forecast the likelihood or severity of any of these impacts. Any of these could have a material adverse effect on our financial condition, liquidity or results of operations. 18 Public health epidemics or pandemics could have a material adverse effect on our financial condition, liquidity or results of operations.
Evolving government and societal expectations around these issues and our efforts to manage and report on them, as well as accomplish our ESG goals present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which could have a material adverse impact.
Evolving and/or conflicting government, customer and societal views related to climate change, climate transition, responsible sourcing and supply chain transparency, resource stewardship, diversity, human rights, social responsibility and other sustainability matters and our efforts to manage and report on them, as well as accomplish our sustainability goals, present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which could have a material adverse impact.
Labor disputes, which may result in work stoppages or union organizing activities, can directly impact production levels. As the majority of our manufacturing employees are represented by unions and covered by collective bargaining or similar agreements, we often incur costs attributable to periodic renegotiation of those agreements, which may be difficult to project.
We rely on our employees to manufacture and sell our products. Because most of our manufacturing employees are represented by unions and covered by collective bargaining or similar agreements, we often incur costs attributable to periodic renegotiation of those agreements, which may be difficult to project.
We may pursue strategic transactions, including mergers, acquisitions, joint ventures, strategic alliances or other investments, which could create risks and present unforeseen integration obstacles or costs, any of which could have an adverse effect on our financial condition, liquidity or results of operations.
Our results of operations and financial position could be materially and adversely affected if we are unable to successfully execute these initiatives or if we are unable to achieve the investment cases or realize expected competitive advantages from the initiatives in a timely and efficient manner. 12 We may pursue strategic transactions, including mergers, acquisitions, joint ventures, strategic alliances or other investments, which could create risks and present unforeseen integration obstacles or costs, any of which could have a material adverse effect on our financial condition, liquidity or results of operations.
Risks Related to General Economic and Other Factors Unstable market and economic conditions could have an adverse impact on our financial condition, liquidity or results of operations. Our business is influenced by market and economic conditions, including inflation, deflation, interest rates, availability and cost of capital, consumer spending rates, energy availability and the effects of government stimulus.
Risks Related to General Economic and Other Factors Unstable market and economic conditions could have a material adverse impact on our financial condition, liquidity or results of operations.
Similarly, our ability to identify, protect and market new and innovative solutions is critical to our long-term growth strategy, namely, to sell into more spaces and sell more solutions in every space. If our competitors offer discounts on certain products or provide new or alternative offerings that the marketplace perceives as more cost-effective, it could adversely affect our price realization.
Similarly, our ability to identify, protect and market new and innovative solutions is critical to our long-term growth strategy, namely, to sell into more spaces and sell more solutions in every space.
Our business is dependent upon third-party vendors and suppliers whose failure to perform adequately could have an adverse effect on our financial condition, liquidity or results of operations. We source a significant portion of raw materials and sourced products from third parties, including international suppliers.
The evolving and broader use of AI tools and technologies may also impact the effectiveness of our cybersecurity, regulatory compliance and intellectual property protection programs. Our business is dependent upon third-party vendors and suppliers whose failure to perform adequately could have a material adverse effect on our financial condition, liquidity or results of operations.
Removed
Future input cost volatility could occur because of our suppliers’ exposure to geopolitical events.
Added
As a result of our acquisition of Zahner, we contribute to a multi-employer defined benefit pension plan (“Multi-Employer Plan”) under the terms of collective bargaining agreements that cover its union-represented employees. Assets contributed to the Multi-Employer Plan may be used to provide benefits to employees of other participating employers.
Removed
If these estimates and assumptions are incorrect, if we experience delays resulting from equipment failures or other interruptions in production, or if other unforeseen events occur, our financial condition, liquidity or results of operations could be materially and adversely affected.
Added
If a participating employer stops contributing to the Multi-Employer Plan, the unfunded obligations of the plan may be borne by the remaining participating employers. In the event we choose to stop participating in the Multi-Employer Plan, we may be required to pay a withdrawal liability based on the underfunded status of the plan.
Removed
These ESG topics include greenhouse gas emissions and climate-related risks, renewable energy, water stewardship, waste management, diversity, equity and inclusion, responsible 11 sourcing and supply chain transparency, human rights, and social responsibility.
Added
Because we believe the Multi-Employer Plan is adequately funded at this time, and we have no current 14 intention of withdrawing from the Multi-Employer Plan, we have not recorded a liability associated with this plan on our Consolidated Balance Sheets.
Removed
Our results of operations and financial position could be materially and adversely affected if we are unable to successfully identify, execute and integrate these initiatives or if we are unable to complete these initiatives in a timely and efficient manner to realize competitive advantages and opportunities.
Added
Our costs to comply with these laws and regulations may increase as these requirements become more stringent in the future. Our intellectual property rights may be infringed, misappropriated, invalidated or otherwise circumvented, which could have a material adverse impact on our financial condition, liquidity or results of operations.
Added
Our business is influenced by market and economic conditions, including inflation, deflation, interest rates, tariffs, availability and cost of capital, consumer spending rates, energy availability, the effects of government spending programs and the impacts of geopolitical events.
Added
If our competitors offer discounts on certain products or provide new or alternative offerings that the marketplace perceives as more cost-effective, it could have a material adverse effect on our price realization. Any of the above factors could have a material adverse impact on our financial condition, liquidity or results of operations.
Added
These factors could have a material adverse impact on our financial condition, liquidity or results of operations.
Added
We, along with third parties, may use data from our information systems and publicly available sources with artificial intelligence (“AI”) technologies and tools. The use of AI may increase risks of data exposure, including unauthorized access, misuse, or unintentional disclosure of sensitive information.
Added
Public health epidemics or pandemics may impact our employees, operations, customers, suppliers and financial results.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe regularly engage third parties in order to help conduct these evaluations, assessments and audits, advise us on the effectiveness of our cybersecurity processes and assist the Company in remediating any identified vulnerabilities.
Biggest changeWe regularly engage third parties to help conduct these evaluations, assessments and audits, advise us on the effectiveness of our cybersecurity processes and assist the Company in remediating any identified vulnerabilities. 19 We do not believe that risks from cybersecurity threats, individually or in the aggregate, including any previous cybersecurity incidents, have materially affected, or are reasonably likely to materially affect, our strategy, financial condition, liquidity or results of operations.
These updates, provided on a semi-annual basis, cover a range of topics, including the performance of our 18 cybersecurity program against established goals and external standards, insights into the evolving cybersecurity landscape, current events and recent cybersecurity threats, and progress in enhancing the Company’s cybersecurity posture.
These updates, provided on a semi-annual basis, cover a range of topics, including the performance of our cybersecurity program against established goals and external standards, insights into the evolving cybersecurity landscape, current events and recent cybersecurity threats, and progress in enhancing the Company’s cybersecurity posture.
Our cybersecurity program’s effectiveness is periodically evaluated against established quantifiable goals and other external benchmarks, including the National Institute of Standards and Technology security framework. This evaluation is carried out through periodic internal and external risk assessments and compliance audits.
Our cybersecurity program’s effectiveness is periodically evaluated against established quantifiable goals and other external benchmarks, including the National Institute of Standards and Technology security framework. This evaluation is carried out through internal and external risk assessments and compliance audits.
The Vice President and Chief Information Officer (“CIO”), who also serves as a member of the Company’s enterprise risk counsel, works closely with key business leaders and functions to develop and enhance the Company’s cybersecurity strategy. Our cybersecurity program is designed to safeguard against an evolving threat landscape through effective prevention, detection, response and recovery processes.
The Vice President and Chief Information Officer (“CIO”), who also serves as a member of the Company’s enterprise risk council, works closely with key business leaders and functions to develop and enhance the Company’s cybersecurity strategy. Our cybersecurity program is designed to safeguard against an evolving threat landscape through effective prevention, detection, response and recovery processes.
The Company actively maintains an enterprise risk management program. Management’s role is to identify, mitigate, guide and review the efforts of our business units, consider whether the residual risks are acceptable, and approve plans to deal with potentially material risks. Cybersecurity is a key risk management category within our enterprise risk management program.
The Company actively maintains an enterprise risk management program. Management’s role is to identify, mitigate, guide and review the efforts of our business units, consider whether the residual risks are acceptable, and approve plans to deal with serious risks. Cybersecurity is a key risk management category within our enterprise risk management program.
Our CIO holds an advanced degree in Information Technology with over 20 years of experience, including senior leadership roles in technology at various companies.
Our CIO holds an advanced degree in Information Technology with over 20 years of experience, including senior leadership roles in technology at various companies. The CIO oversees a cybersecurity team, comprised of internal and external subject matter experts who work collaboratively to achieve our cybersecurity objectives.
To date, the risks from cybersecurity threats, including as a result of any previous immaterial cybersecurity incidents, have not materially affected, or are reasonably likely to materially affect, our strategy, financial condition, liquidity or results of operations. Governance. Our Board of Directors has responsibility for oversight of management’s cybersecurity risk program and receives regular updates from our CIO.
Our Board of Directors has responsibility for oversight of management’s cybersecurity risk program and receives regular updates from our CIO.
In addition, we perform user access reviews for third-party applications, and for certain applications, obtain and review System and Organization Controls reports to assess our critical vendors’ cybersecurity preparedness both at inception and on an ongoing basis.
Recognizing the importance of third-party relationships, we maintain a vendor risk management program that includes monitoring the cybersecurity practices of our vendors, and if applicable, performing user access reviews and evaluating System and Organization Controls reports at both inception and on an ongoing basis.
Removed
Our cybersecurity risk management processes include frequent assessment of our top cyber risks and mitigations. Our approach encompasses several key areas consisting of threat and vulnerability management that help to identify, prioritize and reduce cybersecurity gaps or weaknesses. Identity and access management serves as an integral part of our strategy and involves access controls and authentication methods.
Added
Our cybersecurity risk management processes include frequent assessment of our top cyber risks and mitigations. Our cybersecurity risk program is a comprehensive framework designed to safeguard our organization and stakeholders from evolving threats.
Removed
Data protection and privacy practices, including data loss prevention, safeguards sensitive information. We also deploy cybersecurity systems, such as firewalls, intrusion detection systems and continuous monitoring, to provide defenses against unauthorized access. Incident response exercises are regularly performed to ensure readiness for potential cybersecurity incidents.
Added
Central to this approach is our commitment to threat and vulnerability management, where we proactively identify, prioritize, and address potential cybersecurity gaps to strengthen our overall security posture. We emphasize identity and access management by implementing access controls and robust authentication methods to protect user identities and secure information technology systems.
Removed
Employee training and awareness programs are conducted to minimize risks associated with human error and foster a culture of security consciousness. Finally, vendor risk management practices are employed and focus on monitoring the posture of our third-party vendors to mitigate risks from external sources.
Added
Data protection and privacy is in place to ensure sensitive information is protected from exfiltration. Our cybersecurity defenses leverage systems and technologies, including firewalls, network access, endpoint protection, privileged access management, user behavior analytics, multi-factor authentication, intrusion detection systems and continuous monitoring. The purpose of these systems and technologies is to stay ahead of potential threats.
Added
To prepare for and respond to potential cybersecurity events, we conduct regular incident response exercises, ensuring our readiness and resilience. Additionally, we invest in employee training and awareness programs to promote a culture of security mindfulness and reduce risks associated with human error.
Added
Together, these efforts reflect our dedication to building a secure and compliant environment that protects our operations, data, and the trust of our stakeholders. Our program incorporates an Incident Response Plan to guide the evaluation, response, and escalation of cybersecurity incidents. This plan is overseen by our CIO and executed by a cross-functional Cybersecurity Incident Response Team.
Added
The incident response plan establishes clear protocols for incident identification, impact assessment, containment and resolution, with defined escalation paths based on incident severity. Cybersecurity incidents above a defined threshold of criticality are evaluated for materiality to determine reporting and disclosure requirements. To enhance our response capabilities, we conduct periodic assessments, including third-party reviews, and simulate incidents through regular tabletop exercises.
Added
For additional information on how cybersecurity risk may affect our business, refer to Item 1A.
Added
Risk Factors of this Form 10-K under the heading “We rely on operating and information systems that may experience a failure, a compromise of security, or a violation of data privacy laws or regulations, which could interrupt or damage our operations and have a material adverse effect on our financial condition, liquidity or results of operations.” Governance.
Added
Pursuant to its charter, the Audit Committee of our Board of Directors is responsible for reviewing management’s cybersecurity incident reporting process, methodology and tools. In addition, the Audit Committee is responsible for reviewing management's materiality assessments of cybersecurity incidents identified as significant by management.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeNine of our plants are leased and the remaining seven are owned. Operating Segment Number of Plants Location of Principal Facilities Mineral Fiber 5 U.S. (Florida, Georgia, Ohio, Pennsylvania and West Virginia) Architectural Specialties 11 U.S.
Biggest changeWAVE operates seven additional plants in the U.S. to produce suspension system (grid) products, which we use and sell in our ceiling systems. Twelve of our plants are leased and the remaining eight are owned. Operating Segment Number of Plants Location of Principal Facilities Mineral Fiber 5 U.S. (Florida, Georgia, Ohio, Pennsylvania and West Virginia) Architectural Specialties 15 U.S.
(California (3), Illinois (2), Missouri and Ohio (3)), Canada (Quebec and Ontario) Sales and administrative offices are leased and/or owned, and leased facilities are utilized to supplement our owned warehousing facilities. Production capacity and the extent of utilization of our facilities are difficult to quantify with certainty.
(California (3), Illinois (2), Missouri (2), Ohio (3), North Carolina, Texas, Utah), and Canada (Quebec and Ontario) Sales and administrative offices are leased and/or owned, and leased facilities are used to supplement our owned warehousing facilities. Production capacity and the extent of utilization of our facilities are difficult to quantify with certainty.
ITEM 2. P ROPERTIES We own a 100-acre, multi-building campus in Lancaster, Pennsylvania comprising the site of our corporate headquarters and most of our non-manufacturing operations. As of December 31, 2023, we operated 16 manufacturing plants, including 14 plants located within the U.S. and two plants in Canada. This excludes our St.
ITEM 2. P ROPERTIES We own a 100-acre, multi-building campus in Lancaster, Pennsylvania comprising the site of our corporate headquarters and most of our non-manufacturing operations. As of December 31, 2024, we operated 20 manufacturing plants, including 18 plants located within the U.S. and two plants in Canada.
Removed
Helens, Oregon mineral fiber manufacturing plant, which was closed in the second quarter of 2018 and was classified as an asset held for sale as of December 31, 2023. WAVE operates seven additional plants in the U.S. to produce suspension system (grid) products, which we use and sell in our ceiling systems.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed3 unchanged
Biggest changeHowever, regardless of outcome, litigation and related matters can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors. ITEM 4. MINE SAF ETY DISCLOSURES Not applicable. 19 PART II
Biggest changeHowever, regardless of 20 outcome, litigation and related matters can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors. ITEM 4. MINE SAF ETY DISCLOSURES Not applicable. 21 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer 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 October 1 – 31, 2023 169,782 $ 71.74 167,321 $ 739,794,146 November 1 – 30, 2023 167,252 $ 77.76 167,175 $ 726,794,463 December 1 – 31, 2023 108,233 $ 94.45 105,948 $ 716,794,487 Total 445,267 440,444 (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.
Biggest changeIssuer 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 October 1 – 31, 2024 112,929 $ 136.73 109,694 $ 661,795,002 November 1 – 30, 2024 56 $ 140.59 - $ 661,795,002 December 1 – 31, 2024 - $ - - $ 661,795,002 Total 112,985 109,694 (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.
Since inception of the Program we have been authorized to repurchase up to an aggregate of $1,700.0 million of our outstanding shares of common stock through December 31, 2026. We had $716.8 million remaining under the Board ’ s repurchase authorization as of December 31, 2023.
Since inception of the Program, we have been authorized to repurchase up to an aggregate of $1,700.0 million of our outstanding shares of common stock through December 31, 2026. We had $661.8 million remaining under the Board ’ s repurchase authorization as of December 31, 2024.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED S TOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES AWI’s common shares trade on the New York Stock Exchange under the ticker symbol “AWI.” As of February 14, 2024, there were 174 holders of record of AWI’s common stock.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED S TOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES AWI’s common shares trade on the New York Stock Exchange under the ticker symbol “AWI.” As of February 19, 2025, there were 159 holders of record of AWI’s common stock.
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 2023, we repurchased 1.8 million shares under the Program for a total cost of $132.0 million, excluding commissions and taxes, or an average price of $73.91 per share.
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 2024, we repurchased 0.5 million shares under the Program for a total cost of $55.0 million, excluding commissions and taxes, or an average price of $119.03 per share.
We declared dividends on a quarterly basis, totaling $1.042 per share in 2023. On February 14, 2024, our Board of Directors declared a dividend of $0.28 per common share outstanding. The dividend will be paid on March 14, 2024, to shareholders of record as of the close of business on February 29, 2024.
We declared dividends on a quarterly basis, totaling $1.148 per share in 2024. On February 19, 2025, our Board of Directors declared a dividend of $0.308 per common share outstanding. The dividend will be paid on March 20, 2025, to shareholders of record as of the close of business on March 6, 2025.
Since inception, through December 31, 2023, we have repurchased 14.2 million shares under the Program for a total cost of $983.2 million, excluding commissions and taxes, or an average price of $69.32 per share. ITEM 6. [RESERVED] 20
Since inception through December 31, 2024, we have repurchased 14.6 million shares under the Program for a total cost of $1,038.2 million, excluding commissions and taxes, or an average price of $70.89 per share.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest change(“Moz”) in October 2020, Arktura LLC (“Arktura”) in December 2020 and BOK in July 2023, we recorded certain acquisition-related expenses and losses (gains) to operating income for the years ended December 31, 2023, 2022, and 2021, summarized as follows (dollar amounts in millions): 2023 2022 2021 Affected Line Item in the Consolidated Statements of Earnings and Comprehensive Income Deferred revenue $ - $ - $ 0.7 Net sales Loss (gain) related to change in fair value of contingent consideration 0.1 11.0 (4.1 ) Loss (gain) related to change in fair value of contingent consideration Deferred cash and restricted stock expenses 10.7 7.9 12.8 SG&A expenses Inventory - - 0.3 Cost of goods sold Net negative impact to operating income $ 10.8 $ 18.9 $ 9.7 The deferred revenue and inventory amounts above reflect the post-acquisition expenses associated with recording acquired liabilities and assets at fair value as part of purchase accounting.
Biggest changeAcquisition-Related Expenses and Losses In connection with our acquisitions of Zahner, 3form, Insolcorp, BOK and Arktura LLC (“Arktura”) acquired in December 2020, we recorded certain acquisition-related expenses and losses to operating income for the years ended December 31, 2024, 2023, and 2022, summarized as follows (dollar amounts in millions): 2024 2023 2022 Affected Line Item in the Consolidated Statements of Earnings and Comprehensive Income Inventory $ 0.3 $ - $ - Cost of goods sold Acquisition costs 1.8 - - SG&A expenses Deferred cash and restricted stock expenses - 10.7 7.9 SG&A expenses Loss related to change in fair value of contingent consideration 1.6 0.1 11.0 Loss related to change in fair value of contingent consideration Net negative impact to operating income $ 3.7 $ 10.8 $ 18.9 The inventory amounts above reflect the post-acquisition expenses associated with recording inventory at fair value as part of purchase accounting for the 3form acquisition.
Some of these differences are permanent, such as expenses that are not deductible in our tax returns, and some differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred income tax assets and liabilities. Deferred income tax assets are also recorded for state net operating losses (“NOL”) and capital loss carryforwards.
Some of these differences are permanent, such as expenses that are not deductible in our tax returns, and some of these differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred income tax assets and liabilities. Deferred income tax assets are also recorded for state net operating losses (“NOL”) and capital loss carryforwards.
Business Combinations and Contingent Consideration – Acquired businesses are accounted for using the acquisition method of accounting, which requires that the purchase price be allocated to the assets acquired and liabilities assumed at their respective fair values. Any excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed is recorded as goodwill.
Business Combinations and Contingent Consideration – Acquired businesses are accounted for using the acquisition method of accounting, which requires that the purchase price be allocated to the assets acquired and liabilities assumed at their respective fair 31 values. Any excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed is recorded as goodwill.
Both the BOK and Insolcorp acquisitions in 2023 include the potential for contingent earn-out payments based on the financial or operational performance of the acquired companies.
Both the BOK and Insolcorp acquisitions in 2023 include the potential for future contingent earn-out payments based on the financial or operational performance of the acquired companies.
As of December 31, 2023, 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 December 31, 2024, 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.
Discussions of year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022.
Discussions of year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.
Absent any other changes, a one-quarter percentage point increase or decrease in the discount rates for the U.S. pension and postretirement plans would impact 2024 non-operating income by $0.3 million. 26 We manage two U.S. defined benefit pension plans, our RIP, which is a qualified funded plan, and a nonqualified unfunded plan.
Absent any other changes, a one-quarter percentage point increase or decrease in the discount rates for the U.S. pension and postretirement plans would impact 2025 non-operating income by $0.3 million. We manage two U.S. defined benefit pension plans, our RIP, which is a qualified funded plan, and a nonqualified unfunded plan.
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 upon the validity of the claim.
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 both our October 2006 Chapter 11 reorganization and separation with AFI upon the validity of the claim.
As of December 31, 2023, health care cost increases are estimated to decrease ratably until 2033, after which they are estimated to be constant at 4.50%. See Note 18 to the Consolidated Financial Statements for more information. Actual results that differ from our various pension and postretirement plan estimates are captured as actuarial gains/losses.
As of December 31, 2024, health care cost increases are estimated to decrease ratably until 2034, after which they are estimated to be constant at 4.50%. See Note 18 to the Consolidated Financial Statements for more information. Actual results that differ from our various pension and postretirement plan estimates are captured as actuarial gains/losses.
Management utilizes the Aon Hewitt AA only above median yield curve, which is a hypothetical AA yield curve comprised of a series of annualized individual discount rates, as the primary basis for determining discount rates. As of December 31, 2023 and 2022, we assumed discount rates of 5.01% and 5.21%, respectively, for our U.S. defined benefit pension plans.
Management utilizes the Aon Hewitt AA only above median yield curve, which is a hypothetical AA yield curve comprised of a series of annualized individual discount rates, as the primary basis for determining discount rates. As of December 31, 2024 and 2023, we assumed discount rates of 5.68% and 5.01%, respectively, for our U.S. defined benefit pension plans.
The expected long-term return on plan assets used in determining our 2023 U.S. pension cost was 6.50%. We have assumed a return on plan assets for 2024 of 6.00%. The 2024 expected return on assets was calculated in a manner consistent with 2023.
The expected long-term return on plan assets used in determining our 2024 U.S. pension cost was 6.00%. We have assumed a return on plan assets for 2025 of 6.00%. The 2025 expected return on assets was calculated in a manner consistent with 2024.
Since inception of the Program we have been authorized to repurchase up to an aggregate of $1,700.0 million of our outstanding shares of common stock through December 31, 2026. We had $716.8 million remaining under the Board’s repurchase authorization as of December 31, 2023.
Since inception of the Program, we have been authorized to repurchase up to an aggregate of $1,700.0 million of our outstanding shares of common stock through December 31, 2026. We had $661.8 million remaining under the Board’s repurchase authorization as of December 31, 2024.
ACCOUNTING PRONOUNCEMENTS EFFECTIVE IN FUTURE PERIODS See Note 2 to the Consolidated Financial Statements for further information. 29
ACCOUNTING PRONOUNCEMENTS EFFECTIVE IN FUTURE PERIODS See Note 2 to the Consolidated Financial Statements for further information. 32
As of December 31, 2023 and 2022, we assumed discount rates of 4.96% and 5.12%, respectively, for our U.S. postretirement plan. The effects of the change in discount rate will be amortized into earnings as described below.
As of December 31, 2024 and 2023, we assumed discount rates of 5.61% and 4.96%, respectively, for our U.S. postretirement plan. The effects of the change in discount rate will be amortized into earnings as described below.
The $0.5 million actuarial loss impacting our U.S. pension plans is reflected as a component of other comprehensive income in our Consolidated Statements of Earnings and Comprehensive Income along with actuarial gains and losses from our foreign pension plan and our postretirement benefit plans.
The $3.7 million change in actuarial loss impacting our U.S. pension plans is reflected as a component of other comprehensive income in our Consolidated Statements of Earnings and Comprehensive Income along with actuarial gains and losses from our foreign pension plan and our postretirement benefit plans.
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 – produces, designs and sources ceilings, walls and facades primarily for use in commercial settings.
Operating results for the Mineral Fiber segment include a significant majority of allocated Corporate administrative expenses that represent a reasonable allocation of general services to support its operations. Architectural Specialties – designs, produces and sources specialty ceilings, walls, and other interior and exterior architectural applications primarily for use in commercial settings.
Absent any other changes, a one-quarter percentage point increase or decrease in this assumption would impact 2024 non-operating income by $1.0 million. Contributions to the unfunded pension plan were $2.8 million in 2023 and were made on a monthly basis to fund benefit payments. We estimate the 2024 contributions will be approximately $2.7 million.
Absent any other changes, a one-quarter percentage point increase or decrease in this assumption would impact 2025 non-operating income by $0.9 million. Contributions to the unfunded pension plan were $2.5 million in 2024 and were made on a monthly basis to fund benefit payments. We estimate the 2025 contributions will be approximately $2.9 million.
We separately estimate expected health care cost increases for pre-65 retirees and post-65 retirees due to the influence of Medicare coverage at age 65, as illustrated below: Assumptions Actual Post-65 Pre-65 Post-65 Pre-65 2022 7.1 % 6.6 % 7.4 % 22.7 % 2023 7.8 % 7.3 % 19.9 % 23.6 % 2024 10.5 % 7.8 % The difference between the actual and expected health care costs is amortized into earnings as described below.
We separately estimate expected health care cost increases for pre-65 retirees and post-65 retirees due to the influence of Medicare coverage at age 65, as illustrated below: Assumptions Actual Post-65 Pre-65 Post-65 Pre-65 2023 7.8 % 7.3 % 19.9 % 23.6 % 2024 10.5 % 7.8 % 11.8 % 12.0 % 2025 12.0 % 8.6 % The difference between the actual and expected health care costs is amortized into earnings as described below.
These judgments include the amount and 27 geographic mix of future taxable income, limitations on usage of NOL carryforwards, the impact of ongoing or potential tax audits, and other future tax consequences. As of December 31, 2023 and 2022, we had $646.7 million and $675.5 million, respectively, of gross state NOL carryforwards expiring between 2024 and 2043.
These judgments include the amount and geographic mix of future taxable income, limitations on usage of NOL carryforwards, the impact of ongoing or potential tax audits, and other future tax consequences. As of December 31, 2024, and 2023, we had $622.9 million and $646.7 million, respectively, of gross state NOL carryforwards expiring between 2025 and 2043.
In 2024, we expect to spend approximately $80 million to $90 million on capital expenditures and approximately $50 million on dividends. In July 2016, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $150.0 million of our outstanding shares of common stock (the “Program”).
In 2025, we expect to spend approximately $90 million to $100 million on capital expenditures and approximately $54 million on dividends. In July 2016, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $150.0 million of our outstanding shares of common stock (the “Program”).
We compete in the building product markets of the Americas. We closely monitor publicly available macroeconomic data and trends that provide insight into commercial construction market activity, including, but not limited to, GDP, office vacancy rates, the Architecture Billings Index, new commercial construction starts, state and local government spending, corporate profits, and retail sales.
We closely monitor publicly available macroeconomic data and trends that provide insight into commercial construction market activity, including, but not limited to, GDP, office vacancy rates, the Architecture Billings Index, new commercial construction starts, state and local government spending, corporate profits, and retail sales.
Favorable AUV contributed approximately $43 million to our total consolidated net sales for the year ended December 31, 2023 compared to the same period in 2022. Our Architectural Specialties segment revenues are primarily earned based on individual contracts that include a mix of products, both manufactured by us and sourced from third parties, which varies by project.
Favorable AUV contributed approximately $62 million to our total consolidated net sales for the year ended December 31, 2024 compared to the same period in 2023. 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, that varies by project.
The following tables summarize our interest rate swaps, including forward interest rate swaps (dollar amounts in millions): Coverage Period Notional Amount Risk Coverage Trade Date March 2021 to March 2024 $ 50.0 USD-SOFR March 10, 2020 March 2021 to March 2024 $ 50.0 USD-SOFR March 11, 2020 November 2023 to June 2024 $ 50.0 USD-SOFR September 18, 2023 March 2021 to March 2025 $ 100.0 USD-SOFR November 28, 2018 November 2023 to December 2025 $ 50.0 USD-SOFR October 23, 2023 November 2023 to December 2026 $ 50.0 USD-SOFR October 10, 2023 November 2023 to November 2027 $ 50.0 USD-SOFR September 29, 2023 Under the terms of our interest rate swaps above, on a monthly basis, we pay a fixed rate and receive a floating rate based on SOFR.
The following tables summarize our interest rate swaps, including forward interest rate swaps (dollar amounts in millions): Coverage Period Notional Amount Risk Coverage Trade Date March 2021 to March 2025 $ 100.0 USD-SOFR November 28, 2018 November 2023 to December 2025 $ 50.0 USD-SOFR October 23, 2023 March 2024 to June 2026 $ 50.0 USD-SOFR March 25, 2024 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 swap with a November 28, 2018 trade date above, we pay a fixed rate monthly and receive a floating rate based on SOFR, inclusive of a 0% floor.
Total Other Comprehensive Loss (“OCL”) was $4.6 million in 2023 compared to Other Comprehensive Income (“OCI”) of $9.5 million in 2022. The change in OCL was primarily driven by interest rate swap derivative losses in 2023 compared to gains in 2022, partially offset by changes in pension and postretirement adjustments and foreign currency translation adjustments.
Total Other Comprehensive Loss (“OCL”) was $5.5 million in 2024 compared to $4.6 million in 2023. The change in OCL was primarily driven by changes in pension and postretirement adjustments and foreign currency translation adjustments, partially offset by lower interest rate swap derivative losses in 2024 compared to 2023.
The following table presents details related to our letters of credit facilities (dollar amounts in millions): December 31, 2023 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 The table below reflects scheduled future payments of long-term debt, excluding $3.2 million of unamortized debt financing costs, and the related interest payments, which are projected based on market-based interest rate swap curves (dollar amounts in millions): 2024 2025 2026 2027 2028 Thereafter Total Long-term debt $ 22.5 $ 22.5 $ 22.5 $ 522.5 $ - $ - $ 590.0 Scheduled interest payments 33.3 29.1 26.8 24.2 - - 113.4 As of December 31, 2023, we had $70.8 million of cash and cash equivalents, $53.4 million in the U.S. and $17.4 million in various foreign jurisdictions, primarily Canada.
The following table presents details related to our letters of credit facilities (dollar amounts in millions): December 31, 2024 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 28 The table below reflects scheduled future payments of long-term debt, excluding $2.4 million of unamortized debt financing costs, and the related interest payments, which are projected based on market-based interest rate swap curves (dollar amounts in millions): 2025 2026 2027 2028 2029 Thereafter Total Long-term debt $ 22.5 $ 22.5 $ 482.5 $ - $ - $ - $ 527.5 Scheduled interest payments 31.0 29.3 26.3 - - - 86.6 As of December 31, 2024, we had $79.3 million of cash and cash equivalents, $63.9 million in the U.S. and $15.4 million in various foreign jurisdictions, primarily Canada.
As such, we do not track AUV performance for this segment, but rather attribute most changes in net sales to volume. During the first and third quarters of 2023, we implemented price increases on Mineral Fiber ceiling products. During the first and fourth quarters of 2023, WAVE implemented price increases on grid products.
As such, we do not track AUV performance for this segment but rather attribute all changes in net sales to volume, including gross to net sales adjustments. During the first and third quarters of 2024, we implemented price increases on Mineral Fiber ceiling products. During the first and second quarters of 2024, WAVE implemented price increases on grid products.
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, PA headquarters.
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.
We evaluate the measurement of recorded liabilities each reporting period based on current facts and circumstances specific to each matter. The ultimate losses incurred upon final resolution may materially differ from the estimated liability recorded.
We evaluate the measurement of recorded liabilities each reporting period based on current facts and circumstances specific to each matter. The ultimate losses incurred upon final resolution may materially differ from the estimated liability recorded. Changes in estimates are recorded in earnings in the period in which such changes occur.
If subsequent testing indicates that fair values have declined, the carrying values would be reduced and our future statements of earnings would be affected. We cannot predict the occurrence of certain events that might lead to material impairment charges in the future.
Actual cash flows lower than the estimate could lead to significant future impairments. If subsequent testing indicates that fair values have declined, the carrying values would be reduced and our future statements of earnings would be affected. We cannot predict the occurrence of certain events that might lead to material impairment charges in the future.
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 and selling, general and administrative (“SG&A”) expenses. Our largest raw material expenditures are primarily for fiberglass, perlite, recycled paper, and starch.
Our operating expenses are comprised of direct production costs (principally raw materials, labor, and energy), manufacturing overhead costs, freight, costs to purchase sourced products 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, wood and wood fiber.
As of December 31, 2023, we also had $360.0 million available under our revolving credit facility. We believe cash on hand and cash generated from operations, together with borrowing capacity under our credit facility, will be adequate to address our near-term liquidity needs based on current expectations of our business operations, capital expenditures and scheduled payment of debt obligations.
We believe cash on hand and cash generated from operations, together with borrowing capacity under our credit facility, will be adequate to address our near-term liquidity needs based on current expectations of our business operations, capital expenditures and scheduled payment of debt obligations.
As of December 31, 2023, we have recorded valuation allowances totaling $49.1 million for various federal and state deferred tax assets.
As of December 31, 2024, we have recorded valuation allowances totaling $36.3 million for various federal and state deferred tax assets.
Over the 10-year period ended December 31, 2023, the historical annualized return was approximately 3.48% compared to an average expected return of 5.83%. The actual gain on plan assets incurred for 2023 was 8.73%, net of fees. The difference between the actual and expected rate of return on plan assets will be amortized into earnings as described below.
Over the 10-year period ended December 31, 2024, the historical annualized return was approximately 2.43% compared to an average expected return of 5.73%. The actual loss on plan assets incurred 29 for 2024 was 0.55%, net of fees. The difference between the actual and expected rate of return on plan assets will be amortized into earnings as described below.
As of December 31, 2023, total borrowings outstanding under our senior credit facility were $450.0 million under Term Loan A and $140.0 million under the revolving credit facility.
As of December 31, 2024, total borrowings outstanding under our senior credit facility were $427.5 million under Term Loan A and $100.0 million under the revolving credit facility.
Derivative gain/loss represents the mark-to-market value adjustments of our derivative assets and liabilities, and the recognition of gains and losses previously deferred in accumulated OCI. Pension and postretirement adjustments represent the actuarial gains and losses related to our defined benefit pension and postretirement plans.
Derivative gain/loss represents the mark-to-market value adjustments of our derivative assets and liabilities, and the recognition of gains and losses previously deferred in accumulated OCI.
Acquisitions In October 2023, we acquired a portion of the business and certain assets of Insolcorp, LLC (“Insolcorp”), based in Albemarle, NC, used to develop, test and manufacture energy saving products deployed in building and roofing installations. The acquired operations, assets and liabilities of Insolcorp are included in our Mineral Fiber segment.
In October 2023, we acquired a portion of the business and certain assets of Insolcorp, LLC (“Insolcorp”), based in Albemarle, North Carolina. Insolcorp develops, tests and manufactures energy saving products deployed in building and roofing installations. The acquired operations, assets and liabilities of Insolcorp are included in our Mineral Fiber segment.
GC Products is a designer and manufacturer of glass-reinforced-gypsum, glass-reinforced-cement, molded ceiling and specialty wall products with one manufacturing facility. The operations, assets and liabilities of BOK and GC Products are included in our Architectural Specialties segment.
(“GC Products”), based in Lincoln, California. GC Products is a designer and manufacturer of glass-reinforced-gypsum, glass-reinforced-cement, molded ceiling and specialty wall products. The operations, assets and liabilities of GC Products are included in our Architectural Specialties segment.
As further described in Note 16 to the Consolidated Financial Statements, our Consolidated Balance Sheet as of December 31, 2023 includes deferred income tax liabilities of $166.9 million, which is net of $117.2 million of deferred tax assets.
As further described in Note 16 to the Consolidated Financial Statements, our Consolidated Balance Sheet as of December 31, 2024, includes deferred income tax liabilities of $167.1 million, which is net of $106.8 million of deferred tax assets.
As of December 31, 2023, we were in compliance with all covenants of the senior credit facility. We use interest rate swaps to minimize the fluctuations in earnings caused by interest rate volatility associated with our senior credit facility.
As of December 31, 2024, we were in compliance with all covenants of the senior credit facility. We use interest rate swaps to minimize the fluctuations in earnings caused by interest rate volatility associated with our senior credit facility. The Term Loan A is currently priced on a variable interest rate basis.
The principal assumptions used in valuing certain intangible assets and contingent consideration include future expected cash flows from sales and acquired developed technologies, the acquired company's trade names and customer relationships as well as assumptions about the period of time the acquired trade names and customer relationships will continue to be used in the combined company's portfolio, the probability of meeting the future revenue and EBITDA growth targets and discount rates used to determine the present value of estimated future cash flows.
The principal assumptions used in valuing certain intangible assets include discount rates, royalty rates, future expected cash flows from sales attributed to the acquired company's developed technologies, trade names, trade secrets and customer relationships, as well as assumptions about the period of time such assets will continue to be used in the combined company's portfolio.
We have established $49.1 million of valuation allowances consisting of $31.2 million for state deferred tax assets, primarily operating loss carryforwards, and $17.9 million for federal and state deferred tax assets related to capital loss carryforwards. Inherent in determining our effective tax rate are judgments regarding business plans and expectations about future operations.
We have established $36.3 million of valuation allowances consisting of $30.7 million for state deferred tax assets, primarily net operating loss carryforwards, and $5.6 million for federal and state capital loss carryforwards. Inherent in determining our effective tax rate are judgments regarding business plans and expectations about future operations.
Our final share of investigation and remediation costs may exceed any such recoveries, and such amounts net of insurance recoveries may be material. However, 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.
However, 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.
The change in fair value of contingent consideration is related to our Moz, Turf and BOK acquisitions and was remeasured quarterly during each acquisition's respective earn-out periods. See Note 19 to the Consolidated Financial Statements for further information.
The change in fair value of contingent consideration is related to our BOK and Insolcorp acquisitions and was remeasured quarterly during each acquisition's respective earn-out periods. See Note 19 to the Consolidated Financial Statements for further information. Depreciation and amortization of fixed and intangible assets acquired have been excluded from the table above.
The Company continues to monitor the impacts of geopolitical events, none of which had a material direct impact on our financial condition, liquidity or results of operations during 2023.
The Company continues to monitor the impacts of tariffs and geopolitical events, including but not limited to, conflicts in Ukraine and the Middle East; none of which had a material direct impact on our financial condition, liquidity or results of operations during 2024 or 2023.
Factors Affecting Revenues For information on our segments’ 2023 net sales by geography, see Note 3 to the Consolidated Financial Statements included in this Form 10-K. For information on our segments’ 2023 net sales disaggregated by major customer groups, see Note 4 to the Consolidated Financial Statements included in this Form 10-K. Markets.
For information on our segments’ 2024 net sales disaggregated by major customer groups, see Note 4 to the Consolidated Financial Statements included in this Form 10-K. Markets. We compete in the building product markets of the Americas.
In July 2023, we acquired all of the issued and outstanding stock of BOK Modern, LLC (“BOK”), based in San Rafael, CA. BOK is a designer of metal facade architectural solutions. In November 2022, we acquired the business of GC Products, Inc. (“GC Products”), based in Lincoln, CA.
In July 2023, we acquired all the issued and outstanding stock of BOK Modern, LLC (“BOK”), based in San Rafael, California. BOK is a designer of exterior metal architectural solutions. The operations, assets and liabilities of BOK are included in our Architectural Specialties segment. In November 2022, we acquired the business of GC Products, Inc.
The royalty rate assumption represents the estimated contribution of the intangible assets to the overall profits of the related businesses. Methodologies used for valuing our intangible assets did not change from prior periods. In 2023, indefinite-lived intangibles and goodwill were tested for impairment based on the identified asset (for indefinite-lived intangibles) or on our identified reporting units (for goodwill).
Methodologies used for valuing our intangible assets did not change from prior periods. In 2024, indefinite-lived intangibles and goodwill were tested for impairment based on the identified asset (for indefinite-lived intangibles) or on our identified reporting units (for goodwill). There were no impairment charges recorded in 2024, 2023 or 2022 related to intangible assets.
Other non-operating income, net was $9.9 million during 2023 compared to $6.0 million during 2022. Other non-operating income, net, is primarily comprised of the non-service cost components of pension and postretirement net periodic benefit costs and interest income. Income tax expense was $74.5 million in 2023 compared to $57.7 million in 2022.
Other non-operating income, net, is primarily comprised of the non-service cost components of pension and postretirement net periodic benefit costs and interest income. The increase in other non-operating income was primarily due to an increase in amortization of pension and postretirement credits. Income tax expense was $82.2 million in 2024 compared to $74.5 million in 2023.
Foreign currency translation adjustments represent the change in the U.S. dollar value of assets and liabilities denominated in foreign currencies. Foreign currency translation adjustments during 2023 and 2022 were driven primarily by changes in the Canadian dollar.
Pension and postretirement adjustments represent the actuarial gains and losses related to our defined benefit pension and postretirement plans. Foreign currency translation adjustments represent the change in the U.S. dollar value of assets and liabilities denominated in foreign currencies. Foreign currency translation adjustments during 2024 and 2023 were driven primarily by changes in the Canadian dollar.
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.
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.
Architectural Specialties products are sold primarily to resale distributors and direct customers, primarily ceiling systems contractors. The majority of this segment’s 21 revenues are project driven, which can lead to more variability in sales patterns.
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.
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.
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.
See Note 19 to the Consolidated Financial Statements for further information. 23 Equity earnings from our WAVE joint venture were $89.3 million in 2023, compared to $77.6 million in 2022. The increase in WAVE earnings was primarily driven by the benefits of lower steel costs and higher volumes, partially offset by unfavorable AUV.
Equity earnings from our WAVE joint venture were $104.3 million in 2024, compared to $89.3 million in 2023. The increase in WAVE earnings was primarily driven by the benefits of favorable AUV, higher volumes and lower steel costs, partially offset by higher employee costs.
The effective tax rate was 25.0% in 2023 compared to 22.4% in 2022. The effective tax rate for 2023 was higher compared to 2022 primarily due to the benefits recognized in the prior year from federal and state statute closures and the prior year reduction in our valuation allowance for capital loss carryforwards.
The effective tax rate was 23.7% in 2024 compared to 25.0% in 2023. The effective tax rate for 2024 was lower compared to 2023 primarily due to the benefits recognized from a reduction in our valuation allowance for capital loss carryforwards, in addition to statute closures.
Changes in estimates are recorded in earnings in the period in which such changes occur. 28 We are unable to predict the extent to which any recoveries from other parties or coverage under insurance policies might cover our final share of costs for these sites.
We are unable to predict the extent to which any recoveries from other parties or coverage under insurance policies might cover our final share of 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.
In 2023, we recorded $0.1 million of remeasurement losses for changes in the fair value of contingent consideration related to the acquisition of BOK. In 2022, we recorded $11.0 million of remeasurement losses for changes in the fair value of contingent consideration related to the acquisition of Turf.
In the same period in 2023, we recorded $0.1 million of remeasurement losses for changes in the fair value of contingent consideration related to the acquisition of BOK. See Note 19 to the Consolidated Financial Statements for further information.
Total net actuarial losses related to our U.S. pension benefit plans increased by $0.5 million in 2023 primarily due to changes in actuarial assumptions, including a 20-basis point decrease in the discount rate and demographic changes.
Total net actuarial losses related to our U.S. pension benefit plans decreased by $3.7 million in 2024 primarily due to changes in actuarial assumptions, including a 67-basis point increase in the discount rate, partially offset by the impact of demographic changes.
REPORTABLE SEGMENT RESULTS Mineral Fiber (dollar amounts in millions) 2023 2022 Change is Favorable Total segment net sales $ 932.4 $ 887.4 5.1 % Operating income $ 285.7 $ 260.9 9.5 % Mineral Fiber net sales increased $45 million due to $44 million of favorable AUV and $1 million of higher sales volumes.
REPORTABLE SEGMENT RESULTS Mineral Fiber (dollar amounts in millions) 2024 2023 Change is Favorable Total segment net sales $ 986.0 $ 932.4 5.7 % Operating income $ 322.5 $ 285.7 12.9 % Mineral Fiber net sales increased $54 million due to $62 million of favorable AUV, partially offset by $8 million of lower sales volumes.
We estimate we will need to generate future U.S. taxable income of approximately $240.9 million for state income tax purposes during the respective realization periods (ranging from 2024 to 2043) to be able to fully realize the gross state NOL carryforwards offset by related valuation allowances.
We estimate we will need to generate future U.S. taxable income of approximately $168.8 million for state income tax purposes during the respective realization periods (ranging from 2025 to 2043) to be able to fully realize the gross state NOL carryforwards offset by related valuation allowances. 30 Our ability to utilize deferred tax assets may be impacted by certain future events, such as changes in tax legislation and insufficient future taxable income prior to expiration of certain deferred tax assets.
We may implement future pricing actions based on numerous factors, namely the rate and pace of inflation and its impact on our business. 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.
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. Factors Affecting Operating Costs Operating Expenses.
See Note 5 to the Consolidated Financial Statements for further information. RESULTS OF OPERATIONS This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
See Note 5 to the Consolidated Financial Statements for further information. RESULTS OF OPERATIONS The following discussion includes year-to-year comparisons between 2024 and 2023.
These swaps are designated as cash flow hedges against changes in SOFR for a portion of our variable rate debt. 25 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.
We use lines of credit and other commercial commitments to ensure that adequate funds are available to meet operating requirements. Letters of credit are currently arranged through our revolving credit facility and our bi-lateral facility.
CONSOLIDATED RESULTS FROM CONTINUING OPERATIONS (dollar amounts in millions) 2023 2022 Change is Favorable Total consolidated net sales $ 1,295.2 $ 1,233.1 5.0 % Operating income $ 323.7 $ 278.7 16.1 % Consolidated net sales for 2023 increased 5.0% due to favorable AUV of $43 million and higher sales volumes of $19 million.
CONSOLIDATED RESULTS FROM CONTINUING OPERATIONS (dollar amounts in millions) 2024 2023 Change is Favorable Total consolidated net sales $ 1,445.7 $ 1,295.2 11.6 % Operating income $ 374.3 $ 323.7 15.6 % Consolidated net sales for 2024 increased 11.6% due to higher sales volumes of $89 million and favorable AUV of $62 million. 25 Mineral Fiber net sales increased $54 million, while Architectural Specialties net sales increased $97 million.
The principal assumptions used in our impairment tests for indefinite-lived intangible assets include revenue growth rates, discount rate and royalty rate. The principal assumptions utilized in our impairment tests for goodwill include after-tax cash flows growth rates and discount rate.
The principal assumptions used in our impairment tests for goodwill include after-tax cash flows growth rates and discount rate. Revenue growth rates, after-tax cash flows growth rates and operating profit assumptions are derived from those used in our operating plan and strategic planning processes.
Other raw materials include clays, felt, pigment, wood, and wood fiber. We manufacture most of our mineral wool at one of our manufacturing facilities. We use aluminum and steel in the production of metal ceilings by us and by WAVE. Finally, natural gas and packaging materials are also significant input costs.
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.
Mineral Fiber net sales increased $45 million, while Architectural Specialties net sales increased $17 million. The increase in Mineral Fiber net sales was primarily driven by improved AUV, as a result of increased like-for-like pricing, partially offset by unfavorable mix.
The increase in Mineral Fiber net sales was primarily driven by improved AUV, as a result of increased like-for-like pricing and favorable mix, partially offset by lower sales volumes. Architectural Specialties net sales improved primarily due to contributions from the acquisitions of Zahner, 3form and BOK, in addition to increased custom project net sales.
See Note 11 to the Consolidated Financial Statements for further information. Interest expense was $35.3 million in 2023 compared to $27.1 million in 2022. The increase in interest expense was primarily due to higher interest rates on floating rate debt, partially offset by lower average debt balances and the benefits from our existing interest rate swaps.
See Note 11 to the Consolidated Financial Statements for further information. Interest expense was $39.8 million in 2024 compared to $35.3 million in 2023. The increase in interest expense was primarily due to higher average effective interest rates, partially offset by lower average debt balances. Other non-operating income, net was $12.6 million during 2024 compared to $9.9 million during 2023.
We conduct impairment tests for tangible assets and definite-lived intangible assets when indicators of impairment exist for the asset group, such as operating losses and/or negative cash flows. The principal assumptions used in our impairment tests for definite-lived intangible assets is operating profit adjusted for depreciation and amortization and, if required to estimate the fair value, the discount rate.
The principal assumptions used in our impairment tests for definite-lived intangible assets is operating profit adjusted for depreciation and amortization and, if required to estimate the fair value, the discount rate. The principal assumptions used in our impairment tests for indefinite-lived intangible assets include revenue growth rates, discount rate and royalty rate.
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).
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.
Those trademarks and brand names are integral to our corporate identity and are expected to contribute indefinitely to our corporate cash flows. Accordingly, they have been assigned an indefinite life. We conduct our annual impairment tests for these indefinite-lived intangible assets and goodwill during the fourth quarter. These assets undergo more frequent tests if an indication of possible impairment exists.
Impairments of Tangible Assets, Intangible Assets and Goodwill – Our indefinite-lived assets include goodwill and other intangibles, primarily trademarks and brand names. Those trademarks and brand names are integral to our corporate identity and are expected to contribute indefinitely to our corporate cash flows. Accordingly, they have been assigned an indefinite life.
Expenses related to the deferred cash and restricted stock awards for Arktura’s former owners and employees were recorded over their respective service periods, as such payments were subject to the awardees’ continued employment with AWI. Depreciation of fixed assets acquired, and amortization of intangible assets acquired have been excluded from the table above.
Acquisition costs above reflect certain contingent third-party professional fees incurred due to the Zahner and 3form acquisitions. Expenses related to the deferred cash and restricted stock awards were for Arktura’s former owners and employees that were recorded over their respective service periods, as such payments were subject to the awardees’ continued employment with AWI.
The 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 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 23 manufactures and sells suspension system (grid) products and ceiling component products that are invoiced by both AWI and WAVE.
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, 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.
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.
The revenue and cash flow estimates used in applying our impairment tests are based on management’s analysis of information available at the time of the impairment test and represent a market participant view. Actual cash flows lower than the estimate could lead to significant future impairments.
We did not test tangible assets for impairment in 2024, 2023 or 2022 as no indicators of impairment existed. The revenue and cash flow estimates used in applying our impairment tests are based on management’s analysis of information available at the time of the impairment test and represent a market participant view.
Products are available in numerous materials, such as metal, wood and felt, in addition to various colors, shapes and designs. These products offer various performance attributes such as acoustical control, rated fire protection and aesthetic appeal. We sell standard, premium and customized products, a portion of which are sourced from third-party producers.
Products are available in numerous materials, such as metal, felt, wood, resin, wood fiber and glass-reinforced-gypsum in various colors, shapes and designs. These products offer a range of design options and performance attributes such as acoustical control, rated fire protection, light, aesthetic appeal, energy conservation and building performance.
The unfavorable change was primarily due to higher net repayments of borrowings under our credit facility, partially offset by a decrease in repurchases of outstanding common stock. Liquidity Our liquidity needs for operations vary throughout the year.
The favorable change in cash was primarily due to a decrease in repurchases of outstanding common stock and lower payments of acquisition-related contingent consideration. Liquidity Our liquidity needs for operations vary throughout the year.
Revenue growth rates, after-tax cash flows growth rates and operating profit assumptions are derived from those used in our operating plan and strategic planning processes. The discount rate assumption is calculated based upon an estimated weighted average cost of capital which reflects the overall level of inherent risk and the rate of return a market participant would expect to achieve.
The discount rate assumption is calculated based upon an estimated weighted average cost of capital which reflects the overall level of inherent risk and the rate of return a market participant would expect to achieve. The royalty rate assumption represents the estimated contribution of the intangible assets to the overall profits of the related businesses.
Architectural Specialties (dollar amounts in millions) 2023 2022 Change is Favorable Total segment net sales $ 362.8 $ 345.7 4.9 % Operating income $ 40.9 $ 21.7 88.5 % Architectural Specialties net sales increased $17 million, driven primarily by contributions from the acquisitions of BOK and GC Products as well as growth in metal and felt product sales.
Architectural Specialties (dollar amounts in millions) 2024 2023 Change is Favorable Total segment net sales $ 459.7 $ 362.8 26.7 % Operating income $ 55.3 $ 40.9 35.2 % Architectural Specialties net sales increased $97 million, driven primarily by a $73 million increase from the acquisitions of Zahner, 3form and BOK, in addition to increased custom project net sales.
In the fourth quarter of 2023, we announced price increases on Mineral Fiber ceiling products that became effective in the first quarter of 2024. In the first quarter of 2024, WAVE announced price increases on grid products that will become effective in the first quarter of 2024.
In the fourth quarter of 2024, we announced price increases on Mineral Fiber ceiling products and WAVE announced price increases on grid products that became effective in the first quarter of 2025. We may implement future pricing actions based on numerous factors, namely the rate and pace of inflation and its impact on our business. 24 Seasonality .
The year-over year decrease in cost of goods sold as a percentage of net sales was driven primarily by favorable AUV margin, improved Architectural Specialties project margins and improved Mineral Fiber manufacturing productivity. SG&A expenses in 2023 were $262.5 million, or 20.3% of net sales, compared to $237.0 million, or 19.2% of net sales, in 2022.
Cost of goods sold during 2024 was 59.8% of net sales, compared to 61.6% for 2023. The year-over-year decrease in cost of goods sold as a percentage of net sales was driven primarily by favorable AUV margin benefit, improved manufacturing productivity and lower input costs.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe following table summarizes our interest rate swaps as of December 31, 2023 (dollar amounts in millions): Coverage Period Notional Amount Risk Coverage Trade Date March 2021 to March 2024 $ 50.0 USD-SOFR March 10, 2020 March 2021 to March 2024 $ 50.0 USD-SOFR March 11, 2020 November 2023 to June 2024 $ 50.0 USD-SOFR September 18, 2023 March 2021 to March 2025 $ 100.0 USD-SOFR November 28, 2018 November 2023 to December 2025 $ 50.0 USD-SOFR October 23, 2023 November 2023 to December 2026 $ 50.0 USD-SOFR October 10, 2023 November 2023 to November 2027 $ 50.0 USD-SOFR September 29, 2023 These swaps are designated as cash flow hedges against changes in SOFR for a portion of our variable rate debt.
Biggest changeThe following table summarizes our interest rate swaps as of December 31, 2024 (dollar amounts in millions): Coverage Period Notional Amount Risk Coverage Trade Date March 2021 to March 2025 $ 100.0 USD-SOFR November 28, 2018 November 2023 to December 2025 $ 50.0 USD-SOFR October 23, 2023 March 2024 to June 2026 $ 50.0 USD-SOFR March 25, 2024 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 These swaps are designated as cash flow hedges against changes in SOFR for a portion of our variable rate debt.
As of December 31, 2023, we had interest rate swaps outstanding with notional amounts of $400 million. We use interest rate swaps to minimize the fluctuations in earnings caused by interest rate volatility. Under the terms of these swaps, we receive floating rate SOFR and pay a fixed rate over the hedged period.
As of December 31, 2024, we had interest rate swaps outstanding with notional amounts of $400 million. We use interest rate swaps to minimize the fluctuations in earnings caused by interest rate volatility. Under the terms of these swaps, we receive floating rate SOFR and pay a fixed rate over the hedged period.
A hypothetical increase of one-quarter percentage point in SOFR interest rates from December 31, 2023 levels would increase 2024 interest expense by approximately $0.7 million. We have active interest rate swaps outstanding, which effectively fix the interest rates for a portion of our debt. These interest rate swaps are included in this calculation.
A hypothetical increase of one-quarter percentage point in SOFR interest rates from December 31, 2024 levels would increase 2025 interest expense by approximately $0.5 million. We have active interest rate swaps outstanding, which effectively fix the interest rates for a portion of our debt. These interest rate swaps are included in this calculation.
The net liability measured at fair value was $0.4 million as of December 31, 2023. The table below provides information about our long-term debt obligations as of December 31, 2023, including payment requirements and related weighted-average interest rates by scheduled maturity dates.
The net liability measured at fair value was $1.5 million as of December 31, 2024. The table below provides information about our long-term debt obligations as of December 31, 2024, including payment requirements and related weighted-average interest rates by scheduled maturity dates.
Scheduled maturity date (dollar amounts in millions) 2024 2025 2026 2027 2028 After 2028 Total Variable rate principal payments $ 22.5 $ 22.5 $ 22.5 $ 522.5 $ - $ - $ 590.0 Average interest rate 4.61 % 3.36 % 3.22 % 3.31 % - 3.31 % Variable rate principal payments reflected in the preceding table exclude $3.2 million of unamortized debt financing costs as of December 31, 2023. 30
Scheduled maturity date (dollar amounts in millions) 2025 2026 2027 2028 2029 After 2029 Total Variable rate principal payments $ 22.5 $ 22.5 $ 482.5 $ - $ - $ - $ 527.5 Average interest rate 4.17 % 4.11 % 4.20 % - - - 4.20 % Variable rate principal payments reflected in the preceding table exclude $2.4 million of unamortized debt financing costs as of December 31, 2024. 33

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