Armstrong World Industries(US:AWI)2025-04-29 11:00Cautionary Note Regarding Forward-Looking Statements This section outlines risks related to operations, strategy, finance, and economic factors that could affect future results - The company identifies key risk categories that could impact future performance, including operational risks, strategic risks, financial risks, and general economic conditions101112 PART I - FINANCIAL INFORMATION Item 1. Financial Statements The company reported increased net sales, net earnings, and operating cash flow for the first quarter of 2025 Q1 2025 vs Q1 2024 Consolidated Earnings | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $382.7M | $326.3M | | Gross profit | $149.9M | $124.3M | | Operating income | $98.5M | $86.1M | | Net earnings | $69.1M | $59.9M | | Diluted EPS | $1.58 | $1.36 | Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $371.5M | $348.9M | | Total assets | $1,854.4M | $1,842.7M | | Total current liabilities | $231.6M | $249.7M | | Total liabilities | $1,061.0M | $1,085.6M | | Total shareholders' equity | $793.4M | $757.1M | Q1 2025 vs Q1 2024 Consolidated Cash Flows | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $41.0M | $26.4M | | Net cash provided by investing activities | $6.0M | $5.9M | | Net cash (used for) financing activities | ($43.6M) | ($33.1M) | Note 1. Business and Basis of Presentation This note details the basis of financial statements and highlights recent acquisitions and strategic investments - Acquired A. Zahner Company (exterior metal solutions) in December 2024 and 3form, LLC (architectural resin and glass) in April 2024, with both operations included in the Architectural Specialties segment3031 - In January 2024, the company invested $5.5 million for a 19.5% ownership interest in Overcast Innovations LLC, a company specializing in prefabricated ceiling systems32 Note 2. Segment Results Both Mineral Fiber and Architectural Specialties segments reported year-over-year growth in net sales and operating income Segment Performance (Q1 2025 vs Q1 2024) | Segment | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | :--- | | Mineral Fiber | Net Sales | $245.1M | $239.6M | | | Operating Income | $84.5M | $79.2M | | Architectural Specialties | Net Sales | $137.6M | $86.7M | | | Operating Income | $14.8M | $7.7M | Note 3. Revenue Revenue is disaggregated by segment and channel, with strong distributor sales for Mineral Fiber and direct sales for Architectural Specialties Net Sales by Segment and Channel (Q1 2025 vs Q1 2024) | Segment / Channel | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Mineral Fiber | | | | Distributors | $180.0M | $169.3M | | Home centers | $27.0M | $31.0M | | Architectural Specialties | | | | Distributors | $54.3M | $53.8M | | Direct customers | $77.4M | $30.0M | Note 4. Acquisitions Recent acquisitions contributed $41.1 million in net sales and $3.1 million in operating income during the quarter - The acquisitions of Zahner and 3form contributed $41.1 million in net sales and $3.1 million in operating income for the three months ended March 31, 202549 Note 8. Investments in Unconsolidated Affiliates Equity earnings from the WAVE joint venture were $26.8 million, a slight decrease from the prior-year period WAVE Joint Venture Financial Data | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $124.1M | $125.8M | | Net earnings | $55.3M | $57.0M | - AWI's equity earnings from the WAVE joint venture were $26.8 million in Q1 2025, compared to $27.4 million in Q1 202455 Note 13. Debt The company's long-term debt primarily consists of a senior secured credit facility with $521.9 million outstanding - As of March 31, 2025, the principal balance of the Term Loan A was $421.9 million, and borrowings outstanding under the revolving credit facility were $100.0 million65 Note 17. Shareholders' Equity The company repurchased $22.0 million of its shares and paid a quarterly dividend of $0.308 per share in Q1 2025 - During Q1 2025, the company repurchased 0.1 million shares for $22.0 million, with $639.8 million remaining available under the share repurchase authorization8789 - In February 2025, the Board of Directors declared a quarterly dividend of $0.308 per share, which was paid in March 202590 Note 18. Litigation and Related Matters The company holds a $4.1 million liability for environmental remediation activities at two domestic sites - The company is actively involved in investigation and remediation at two Superfund sites: Macon, Georgia and Elizabeth City, North Carolina97102110 - Total recorded liabilities for environmental matters were $4.1 million as of March 31, 2025, a decrease from $4.6 million as of December 31, 2024111 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 17.3% increase in net sales, driven by acquisitions and favorable Average Unit Value (AUV) Overview The company highlights recent acquisitions and its manufacturing footprint of 20 plants plus 7 WAVE JV plants - Recent strategic activities include the acquisitions of Zahner (exterior metal solutions) and 3form (architectural resin/glass), and an investment in Overcast (prefabricated ceiling systems)121122123 - As of March 31, 2025, the company operated 20 manufacturing plants (18 in the U.S, 2 in Canada), and its WAVE joint venture operated an additional 7 plants for suspension systems124 Results of Operations Consolidated net sales rose 17.3% and operating income grew 14.4%, led by strong performance in the Architectural Specialties segment Consolidated Results Summary (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Total consolidated net sales | $382.7M | $326.3M | 17.3% | | Operating income | $98.5M | $86.1M | 14.4% | - The Mineral Fiber segment's net sales increased by $6 million, driven by $16 million in favorable AUV, partially offset by a $10 million decrease in sales volumes150 - The Architectural Specialties segment's net sales increased by $51 million, primarily driven by a $41 million contribution from the acquisitions of Zahner and 3form154 Financial Condition and Liquidity The company maintains a strong liquidity position with increased operating cash flow and $400 million available credit - Net cash provided by operating activities increased to $41.0 million in Q1 2025 from $26.4 million in Q1 2024, primarily due to higher cash earnings158 - Net cash used for financing activities was $43.6 million in Q1 2025, an increase from $33.1 million in Q1 2024, mainly due to higher stock repurchases160 - As of March 31, 2025, the company had $82.8 million of cash and cash equivalents and $400 million available under its revolving credit facility167 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures have occurred since the last Annual Report on Form 10-K - The company's disclosures about market risk have not materially changed from those presented in its Annual Report on Form 10-K for the year ended December 31, 2024169 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes in internal control - The principal executive officer and chief financial officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2025170 - No material changes occurred in the company's internal control over financial reporting during the fiscal quarter ended March 31, 2025170 PART II - OTHER INFORMATION Item 1. Legal Proceedings Information on legal matters is detailed in Note 18 of the financial statements - Information regarding legal proceedings is provided in Note 18 to the Condensed Consolidated Financial Statements172 Item 1A. Risk Factors No material changes to risk factors have occurred since the last Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024173 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased approximately 0.1 million shares for a total cost of $22.0 million during the quarter Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | Jan 2025 | 75,686 | $146.31 | 73,603 | | Feb 2025 | 32,698 | $151.29 | 27,869 | | Mar 2025 | 48,480 | $144.62 | 48,404 | | Total | 156,864 | | 149,876 | - During the three months ended March 31, 2025, the company repurchased 0.1 million shares for a total cost of $22.0 million, at an average price of $146.79 per share177 Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the first quarter - No director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended March 31, 2025180 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including required certifications and XBRL data