UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20212022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-33100
Owens Corning
(Exact name of registrant as specified in its charter)
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| Delaware | 43-2109021 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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| One Owens Corning Parkway, | Toledo, | OH | | 43659 |
| (Address of principal executive offices) | | (Zip Code) |
(419) 248-8000
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
| Title of each class | Trading SymbolSymbol(s) | Name of each exchange on which registered |
| Common Stock, par value $0.01 per share | OC | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act: | | | | | | | | | | | |
| Large Accelerated Filer | þ | Accelerated filer | ¨ |
| Non-accelerated filer | ¨ | Smaller reporting company | ☐¨ |
| | Emerging growth company | ☐¨ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No þ
As of OctoberJuly 22, 2021, 100,486,6522022, 96,238,504 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.
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| Item 1. | | |
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| Item 1A. | | |
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| Item 2. | | |
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PART I
ITEM 1. FINANCIAL STATEMENTS
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(unaudited)
(in millions, except per share amounts)
| | | Three Months Ended
September 30, | Nine Months Ended
September 30, | | Three Months Ended
June 30, | Six Months Ended
June 30, |
| | |
| | 2021 | 2020 | 2021 | 2020 | | 2022 | 2021 | 2022 | 2021 |
| NET SALES | NET SALES | $ | 2,213 | | $ | 1,904 | | $ | 6,367 | | $ | 5,130 | | NET SALES | $ | 2,601 | | $ | 2,239 | | $ | 4,947 | | $ | 4,154 | |
| COST OF SALES | COST OF SALES | 1,617 | | 1,427 | | 4,709 | | 4,004 | | COST OF SALES | 1,867 | | 1,621 | | 3,594 | | 3,092 | |
| Gross margin | Gross margin | 596 | | 477 | | 1,658 | | 1,126 | | Gross margin | 734 | | 618 | | 1,353 | | 1,062 | |
| OPERATING EXPENSES | OPERATING EXPENSES | | OPERATING EXPENSES | |
| Marketing and administrative expenses | Marketing and administrative expenses | 186 | | 163 | | 548 | | 493 | | Marketing and administrative expenses | 201 | | 188 | | 385 | | 362 | |
| Science and technology expenses | Science and technology expenses | 21 | | 20 | | 63 | | 59 | | Science and technology expenses | 24 | | 22 | | 47 | | 42 | |
| | Goodwill impairment charge | — | | — | | — | | 944 | | |
| Other (income) expenses, net | (3) | | 2 | | (68) | | 40 | | |
| | Other expense (income), net | | Other expense (income), net | 22 | | (17) | | (6) | | (65) | |
| Total operating expenses | Total operating expenses | 204 | | 185 | | 543 | | 1,536 | | Total operating expenses | 247 | | 193 | | 426 | | 339 | |
| OPERATING INCOME (LOSS) | 392 | | 292 | | 1,115 | | (410) | | |
| OPERATING INCOME | | OPERATING INCOME | 487 | | 425 | | 927 | | 723 | |
| Non-operating income | Non-operating income | (2) | | (4) | | (8) | | (11) | | Non-operating income | (2) | | (3) | | (4) | | (6) | |
| EARNINGS (LOSS) BEFORE INTEREST AND TAXES | 394 | | 296 | | 1,123 | | (399) | | |
| EARNINGS BEFORE INTEREST AND TAXES | | EARNINGS BEFORE INTEREST AND TAXES | 489 | | 428 | | 931 | | 729 | |
| Interest expense, net | Interest expense, net | 31 | | 35 | | 97 | | 98 | | Interest expense, net | 26 | | 33 | | 54 | | 66 | |
| Loss on extinguishment of debt | 9 | | — | | 9 | | — | | |
| EARNINGS (LOSS) BEFORE TAXES | 354 | | 261 | | 1,017 | | (497) | | |
| | EARNINGS BEFORE TAXES | | EARNINGS BEFORE TAXES | 463 | | 395 | | 877 | | 663 | |
| Income tax expense | Income tax expense | 94 | | 56 | | 250 | | 119 | | Income tax expense | 119 | | 97 | | 226 | | 156 | |
| Equity in net (loss) earnings of affiliates | Equity in net (loss) earnings of affiliates | (1) | | 1 | | — | | 1 | | Equity in net (loss) earnings of affiliates | (1) | | — | | (1) | | 1 | |
| NET EARNINGS (LOSS) | 259 | | 206 | | 767 | | (615) | | |
| Net loss attributable to noncontrolling interests | (1) | | — | | (1) | | — | | |
| NET EARNINGS (LOSS) ATTRIBUTABLE TO OWENS CORNING | $ | 260 | | $ | 206 | | $ | 768 | | $ | (615) | | |
| EARNINGS (LOSS) PER COMMON SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS | | |
| NET EARNINGS | | NET EARNINGS | 343 | | 298 | | 650 | | 508 | |
| Net earnings attributable to non-redeemable and redeemable noncontrolling interests | | Net earnings attributable to non-redeemable and redeemable noncontrolling interests | — | | — | | 3 | | — | |
| | NET EARNINGS ATTRIBUTABLE TO OWENS CORNING | | NET EARNINGS ATTRIBUTABLE TO OWENS CORNING | $ | 343 | | $ | 298 | | $ | 647 | | $ | 508 | |
| EARNINGS PER COMMON SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS | | EARNINGS PER COMMON SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS | |
| Basic | Basic | $ | 2.52 | | $ | 1.89 | | $ | 7.36 | | $ | (5.66) | | Basic | $ | 3.51 | | $ | 2.85 | | $ | 6.56 | | $ | 4.84 | |
| Diluted | Diluted | $ | 2.50 | | $ | 1.88 | | $ | 7.30 | | $ | (5.66) | | Diluted | $ | 3.49 | | $ | 2.82 | | $ | 6.52 | | $ | 4.80 | |
| | WEIGHTED AVERAGE COMMON SHARES | WEIGHTED AVERAGE COMMON SHARES | | WEIGHTED AVERAGE COMMON SHARES | |
| Basic | Basic | 103.1 | | 108.8 | | 104.4 | | 108.7 | | Basic | 97.6 | | 104.6 | | 98.6 | | 105.0 | |
| Diluted | Diluted | 103.9 | | 109.5 | | 105.2 | | 108.7 | | Diluted | 98.4 | | 105.5 | | 99.3 | | 105.9 | |
The accompanying Notes to the Consolidated Financial Statements are an integral part of this Statement.
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)
(unaudited)
(in millions)
| | | | | | | | | | | | | | |
| Three Months Ended
September 30, | Nine Months Ended
September 30, |
| 2021 | 2020 | 2021 | 2020 |
| NET EARNINGS (LOSS) | $ | 259 | | $ | 206 | | $ | 767 | | $ | (615) | |
| Currency translation adjustment (net of tax of $(1) and $3 for the three months ended September 30, 2021 and 2020, respectively, and $(2) and $(7) for the nine months ended September 30, 2021 and 2020, respectively) | (35) | | 37 | | (48) | | (32) | |
| Pension and other postretirement adjustment (net of tax of $(10) and $0 for the three months ended September 30, 2021 and 2020, respectively, and $(10) and $0 for the nine months ended September 30, 2021 and 2020, respectively) | 33 | | (3) | | 31 | | 2 | |
| Hedging adjustment (net of tax of $(5) and $(1) for the three months ended September 30, 2021 and 2020, respectively, and $(8) and $(1) for the nine months ended September 30, 2021 and 2020, respectively) | 12 | | 3 | | 22 | | 2 | |
| COMPREHENSIVE EARNINGS (LOSS) | 269 | | 243 | | 772 | | (643) | |
| Comprehensive loss attributable to noncontrolling interests | (1) | | — | | (1) | | — | |
| COMPREHENSIVE EARNINGS (LOSS) ATTRIBUTABLE TO OWENS CORNING | $ | 270 | | $ | 243 | | $ | 773 | | $ | (643) | |
| | | | | | | | | | | | | | | | | |
| | Three Months Ended
June 30, | Six Months Ended
June 30, |
| | 2022 | 2021 | 2022 | 2021 |
| NET EARNINGS | $ | 343 | | $ | 298 | | $ | 650 | | $ | 508 | |
| Other comprehensive income (loss), net of tax: | | | | |
| Currency translation adjustment (net of tax of $(1) and $0 for the three months ended June 30, 2022 and 2021, respectively, and $(1) and $(1) for the six months ended June 30, 2022 and 2021, respectively) | (54) | | 32 | | (82) | | (13) | |
| Pension and other postretirement adjustment (net of tax of $0 and $0 for the three months ended June 30, 2022 and 2021, and $(1) and $0 for the six months ended June 30, 2022 and 2021, respectively) | 6 | | (3) | | 9 | | (2) | |
| Hedging adjustment (net of tax of $1 and $1 for the three months ended June 30, 2022 and 2021, respectively, and $(7) and $(3) for the six months ended June 30, 2022 and 2021, respectively) | (1) | | (2) | | 23 | | 10 | |
| Total other comprehensive income (loss), net of tax | (49) | | 27 | | (50) | | (5) | |
| COMPREHENSIVE EARNINGS | 294 | | 325 | | 600 | | 503 | |
| Comprehensive (loss) attributable to non-redeemable and redeemable noncontrolling interests | (2) | | — | | — | | — | |
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| COMPREHENSIVE EARNINGS ATTRIBUTABLE TO OWENS CORNING | $ | 296 | | $ | 325 | | $ | 600 | | $ | 503 | |
The accompanying Notes to the Consolidated Financial Statements are an integral part of this Statement.
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in millions, except per share amounts) | | | | | | | | |
| ASSETS | September 30,
2021 | December 31,
2020 |
| CURRENT ASSETS | | |
| Cash and cash equivalents | $ | 920 | | $ | 717 | |
| Receivables, less allowance of $9 and $10 at September 30, 2021 and December 31, 2020, respectively | 1,141 | | 919 | |
| Inventories | 949 | | 855 | |
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| Other current assets | 133 | | 115 | |
| Total current assets | 3,143 | | 2,606 | |
| Property, plant and equipment, net | 3,767 | | 3,809 | |
| Operating lease right-of-use assets | 145 | | 154 | |
| Goodwill | 995 | | 989 | |
| Intangible assets | 1,629 | | 1,667 | |
| Deferred income taxes | 39 | | 28 | |
| Other non-current assets | 263 | | 228 | |
| TOTAL ASSETS | $ | 9,981 | | $ | 9,481 | |
| LIABILITIES AND EQUITY | | |
| CURRENT LIABILITIES | | |
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| Current operating lease liabilities | $ | 52 | | $ | 55 | |
| | |
| Other current liabilities | 1,634 | | 1,385 | |
| Total current liabilities | 1,686 | | 1,440 | |
| Long-term debt, net of current portion | 2,958 | | 3,126 | |
| Pension plan liability | 109 | | 159 | |
| Other employee benefits liability | 167 | | 171 | |
| Non-current operating lease liabilities | 93 | | 99 | |
| Deferred income taxes | 397 | | 332 | |
| Other liabilities | 322 | | 213 | |
| | |
| OWENS CORNING STOCKHOLDERS’ EQUITY | | |
| Preferred stock, par value $0.01 per share (a) | — | | — | |
| Common stock, par value $0.01 per share (b) | 1 | | 1 | |
| Additional paid in capital | 4,076 | | 4,059 | |
| Accumulated earnings | 2,515 | | 1,829 | |
| Accumulated other comprehensive deficit | (583) | | (588) | |
| Cost of common stock in treasury (c) | (1,799) | | (1,400) | |
| Total Owens Corning stockholders’ equity | 4,210 | | 3,901 | |
| Noncontrolling interests | 39 | | 40 | |
| Total equity | 4,249 | | 3,941 | |
| TOTAL LIABILITIES AND EQUITY | $ | 9,981 | | $ | 9,481 | |
| | | | | | | | |
| ASSETS | June 30,
2022 | December 31,
2021 |
| CURRENT ASSETS | | |
| Cash and cash equivalents | $ | 810 | | $ | 959 | |
| Receivables, less allowance of $10 at June 30, 2022 and $9 at December 31, 2021, respectively | 1,358 | | 939 | |
| Inventories | 1,254 | | 1,078 | |
| Assets held for sale | 81 | | — | |
| Other current assets | 186 | | 121 | |
| Total current assets | 3,689 | | 3,097 | |
| Property, plant and equipment, net | 3,684 | | 3,873 | |
| Operating lease right-of-use assets | 189 | | 158 | |
| Goodwill | 1,079 | | 990 | |
| Intangible assets | 1,614 | | 1,617 | |
| Deferred income taxes | 21 | | 31 | |
| Other non-current assets | 267 | | 249 | |
| TOTAL ASSETS | $ | 10,543 | | $ | 10,015 | |
| LIABILITIES AND EQUITY | | |
| CURRENT LIABILITIES | | |
| Accounts payable | $ | 1,327 | | $ | 1,095 | |
| Current operating lease liabilities | 54 | | 49 | |
| Other current liabilities | 593 | | 553 | |
| Total current liabilities | 1,974 | | 1,697 | |
| Long-term debt, net of current portion | 2,989 | | 2,960 | |
| Pension plan liability | 62 | | 77 | |
| Other employee benefits liability | 154 | | 157 | |
| Non-current operating lease liabilities | 135 | | 109 | |
| Deferred income taxes | 376 | | 376 | |
| Other liabilities | 266 | | 304 | |
| Total liabilities | 5,956 | | 5,680 | |
| Redeemable noncontrolling interest | 25 | | — | |
| OWENS CORNING STOCKHOLDERS’ EQUITY | | |
| Preferred stock, par value $0.01 per share (a) | — | | — | |
| Common stock, par value $0.01 per share (b) | 1 | | 1 | |
| Additional paid in capital | 4,107 | | 4,092 | |
| Accumulated earnings | 3,282 | | 2,706 | |
| Accumulated other comprehensive deficit | (628) | | (581) | |
| Cost of common stock in treasury (c) | (2,222) | | (1,922) | |
| Total Owens Corning stockholders’ equity | 4,540 | | 4,296 | |
| Noncontrolling interests | 22 | | 39 | |
| Total equity | 4,562 | | 4,335 | |
| TOTAL LIABILITIES AND EQUITY | $ | 10,543 | | $ | 10,015 | |
(a)10 shares authorized; none issued or outstanding at SeptemberJune 30, 20212022 and December 31, 20202021
(b)400 shares authorized; 135.5 issued and 101.697.2 outstanding at SeptemberJune 30, 2021;2022; 135.5 issued and 105.6100.4 outstanding at December 31, 20202021
(c)33.938.3 shares at SeptemberJune 30, 20212022 and 29.935.1 shares at December 31, 20202021
The accompanying Notes to the Consolidated Financial Statements are an integral part of this Statement.
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in millions)
| | | | | | | | |
| Six Months Ended
June 30, |
| 2022 | 2021 |
| NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES | | |
| Net earnings | $ | 650 | | $ | 508 | |
| Adjustments to reconcile net earnings to cash provided by operating activities: | | |
| Depreciation and amortization | 270 | | 241 | |
| | |
| | |
| Deferred income taxes | 16 | | 35 | |
| Provision for pension and other employee benefits liabilities | 1 | | — | |
| Stock-based compensation expense | 25 | | 24 | |
| | |
| | |
| Gains on sale of certain precious metals | (11) | | (41) | |
| Other adjustments to reconcile net earnings to cash provided by operating activities | 22 | | 9 | |
| | |
| Changes in operating assets and liabilities | (330) | | (62) | |
| Pension fund contribution | (2) | | (3) | |
| Payments for other employee benefits liabilities | (5) | | (6) | |
| Other | (12) | | (3) | |
| Net cash flow provided by operating activities | 624 | | 702 | |
| NET CASH FLOW USED FOR INVESTING ACTIVITIES | | |
| Cash paid for property, plant, and equipment | (212) | | (177) | |
| | |
| Proceeds from the sale of assets or affiliates | 27 | | 1 | |
| Investment in subsidiaries and affiliates, net of cash acquired | (173) | | — | |
| | |
| Derivative settlements | 20 | | (32) | |
| | |
| | |
| Other | (2) | | (5) | |
| Net cash flow used for investing activities | (340) | | (213) | |
| NET CASH FLOW USED FOR FINANCING ACTIVITIES | | |
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| Purchases of noncontrolling interest | (9) | | — | |
| Net decrease in short-term debt | (5) | | — | |
| Dividends paid | (70) | | (55) | |
| Purchases of treasury stock | (330) | | (263) | |
| Other | (15) | | (2) | |
| Net cash flow used for financing activities | (429) | | (320) | |
| Effect of exchange rate changes on cash | (4) | | 2 | |
| Net (decrease) increase in cash, cash equivalents, and restricted cash | (149) | | 171 | |
| Cash, cash equivalents and restricted cash at beginning of period | 966 | | 724 | |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ | 817 | | $ | 895 | |
The accompanying Notes to the Consolidated Financial Statements are an integral part of this Statement.
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)
(in millions)
| | | | Common Stock
Outstanding | | Treasury
Stock | | APIC (a) | | Accumulated
Earnings | | AOCI (b) | | NCI (c) | | Total | | Common Stock
Outstanding | | Treasury
Stock | | APIC (a) | | Accumulated
Earnings | | AOCI (b) | | NCI (c) | | Total |
| | | Shares | | Par Value | | Shares | | Cost | | | Shares | | Par Value | | Shares | | Cost | |
| Balance at December 31, 2020 | 105.6 | | | $ | 1 | | | 29.9 | | | $ | (1,400) | | | $ | 4,059 | | | $ | 1,829 | | | $ | (588) | | | $ | 40 | | | $ | 3,941 | | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | 100.4 | | | $ | 1 | | | 35.1 | | | $ | (1,922) | | | $ | 4,092 | | | $ | 2,706 | | | $ | (581) | | | $ | 39 | | | $ | 4,335 | |
| Net earnings attributable to Owens Corning | Net earnings attributable to Owens Corning | — | | | — | | | — | | | — | | | — | | | 210 | | | — | | | — | | | 210 | | Net earnings attributable to Owens Corning | — | | | — | | | — | | | — | | | — | | | 304 | | | — | | | — | | | 304 | |
| | Net earnings attributable to noncontrolling interests | | Net earnings attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3 | | | 3 | |
| Currency translation adjustment | Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | (45) | | | (1) | | | (46) | | Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | (27) | | | (1) | | | (28) | |
| Pension and other postretirement adjustment (net of tax) | Pension and other postretirement adjustment (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | | — | | | 1 | | Pension and other postretirement adjustment (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | 3 | | | — | | | 3 | |
| Deferred gain on hedging transactions (net of tax) | Deferred gain on hedging transactions (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | 12 | | | — | | | 12 | | Deferred gain on hedging transactions (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | 24 | | | — | | | 24 | |
| | Purchases of noncontrolling interest | | Purchases of noncontrolling interest | — | | | — | | | — | | | — | | | 8 | | | — | | | — | | | (17) | | | (9) | |
| Issuance of common stock under share-based payment plans | Issuance of common stock under share-based payment plans | 0.5 | | | — | | | (0.5) | | | 22 | | | (15) | | | — | | | — | | | — | | | 7 | | Issuance of common stock under share-based payment plans | 0.4 | | | — | | | (0.4) | | | 21 | | | (21) | | | — | | | — | | | — | | | — | |
| Purchases of treasury stock | Purchases of treasury stock | (1.8) | | | — | | | 1.8 | | | (142) | | | — | | | — | | | — | | | — | | | (142) | | Purchases of treasury stock | (2.7) | | | — | | | 2.7 | | | (243) | | | — | | | — | | | — | | | — | | | (243) | |
| Stock-based compensation expense | Stock-based compensation expense | — | | | — | | | — | | | — | | | 12 | | | — | | | — | | | — | | | 12 | | Stock-based compensation expense | — | | | — | | | — | | | — | | | 12 | | | — | | | — | | | — | | | 12 | |
| | Dividends declared (d) | Dividends declared (d) | — | | | — | | | — | | | — | | | — | | | (28) | | | — | | | — | | | (28) | | Dividends declared (d) | — | | | — | | | — | | | — | | | — | | | (36) | | | — | | | — | | | (36) | |
| Balance at March 31, 2021 | 104.3 | | | $ | 1 | | | 31.2 | | | $ | (1,520) | | | $ | 4,056 | | | $ | 2,011 | | | $ | (620) | | | $ | 39 | | | $ | 3,967 | | |
| Balance at March 31, 2022 | | Balance at March 31, 2022 | 98.1 | | | $ | 1 | | | 37.4 | | | $ | (2,144) | | | $ | 4,091 | | | $ | 2,974 | | | $ | (581) | | | $ | 24 | | | $ | 4,365 | |
| Net earnings attributable to Owens Corning | Net earnings attributable to Owens Corning | — | | | — | | | — | | | — | | | — | | | 298 | | | — | | | — | | | 298 | | Net earnings attributable to Owens Corning | — | | | — | | | — | | | — | | | — | | | 343 | | | — | | | — | | | 343 | |
| | Net earnings attributable to noncontrolling interests | | Net earnings attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Net earnings attributable to redeemable noncontrolling interest | | Net earnings attributable to redeemable noncontrolling interest | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Currency translation adjustment | Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | 32 | | | — | | | 32 | | Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | (52) | | | (2) | | | (54) | |
| Pension and other postretirement adjustment (net of tax) | Pension and other postretirement adjustment (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | (3) | | | — | | | (3) | | Pension and other postretirement adjustment (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | 6 | | | — | | | 6 | |
| Deferred loss on hedging transactions (net of tax) | Deferred loss on hedging transactions (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | (2) | | | — | | | (2) | | Deferred loss on hedging transactions (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | — | | | (1) | |
| | Issuance of common stock under share-based payment plans | Issuance of common stock under share-based payment plans | 0.3 | | | — | | | (0.3) | | | 14 | | | (4) | | | — | | | — | | | — | | | 10 | | Issuance of common stock under share-based payment plans | 0.1 | | | — | | | (0.1) | | | 9 | | | 3 | | | — | | | — | | | — | | | 12 | |
| Purchases of treasury stock | Purchases of treasury stock | (1.3) | | | — | | | 1.3 | | | (131) | | | — | | | — | | | — | | | — | | | (131) | | Purchases of treasury stock | (1.0) | | | — | | | 1.0 | | | (87) | | | — | | | — | | | — | | | — | | | (87) | |
| Stock-based compensation expense | Stock-based compensation expense | — | | | — | | | — | | | — | | | 12 | | | — | | | — | | | — | | | 12 | | Stock-based compensation expense | — | | | — | | | — | | | — | | | 13 | | | — | | | — | | | — | | | 13 | |
| | Dividends declared (d) | Dividends declared (d) | — | | | — | | | — | | | — | | | — | | | (27) | | | — | | | — | | | (27) | | Dividends declared (d) | — | | | — | | | — | | | — | | | — | | | (35) | | | — | | | — | | | (35) | |
| Balance at June 30, 2021 | 103.3 | | | $ | 1 | | | 32.2 | | | $ | (1,637) | | | $ | 4,064 | | | $ | 2,282 | | | $ | (593) | | | $ | 39 | | | $ | 4,156 | | |
| Net earnings attributable to Owens Corning | — | | | — | | | — | | | — | | | — | | | 260 | | | — | | | — | | | 260 | | |
| Net loss attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | | |
| Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | (35) | | | 1 | | | (34) | | |
| Pension and other postretirement adjustment (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | 33 | | | — | | | 33 | | |
| Deferred loss on hedging transactions (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | 12 | | | — | | | 12 | | |
| Balance at June 30, 2022 | | Balance at June 30, 2022 | 97.2 | | | $ | 1 | | | 38.3 | | | $ | (2,222) | | | $ | 4,107 | | | $ | 3,282 | | | $ | (628) | | | $ | 22 | | | $ | 4,562 | |
| | Purchases of treasury stock | (1.7) | | | — | | | 1.7 | | | (162) | | | — | | | — | | | — | | | — | | | (162) | | |
| Stock-based compensation expense | — | | | — | | | — | | | — | | | 12 | | | — | | | — | | | — | | | 12 | | |
| | Dividends declared (d) | — | | | — | | | — | | | — | | | — | | | (27) | | | — | | | — | | | (27) | | |
| Balance at September 30, 2021 | 101.6 | | | $ | 1 | | | 33.9 | | | $ | (1,799) | | | $ | 4,076 | | | $ | 2,515 | | | $ | (583) | | | $ | 39 | | | $ | 4,249 | | |
|
(a)Additional Paid in Capital (APIC)("APIC")
(b)Accumulated Other Comprehensive Earnings (Deficit) (“AOCI”)
(c)Noncontrolling Interest (“NCI”)
(d)Quarterly dividend declarations of $0.35 per share as of June 30, 2022 and March 31, 2022
The accompanying Notes to the Consolidated Financial Statements are an integral part of this Statement.
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)
(in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock
Outstanding | | Treasury
Stock | | APIC (a) | | Accumulated
Earnings | | AOCI (b) | | NCI (c) | | Total |
| | Shares | | Par Value | | Shares | | Cost | |
| Balance at December 31, 2020 | 105.6 | | | $ | 1 | | | 29.9 | | | $ | (1,400) | | | $ | 4,059 | | | $ | 1,829 | | | $ | (588) | | | $ | 40 | | | $ | 3,941 | |
| Net earnings attributable to Owens Corning | — | | | — | | | — | | | — | | | — | | | 210 | | | — | | | — | | | 210 | |
| | | | | | | | | | | | | | | | | |
| Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | (45) | | | (1) | | | (46) | |
| Pension and other postretirement adjustment (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | | — | | | 1 | |
| Deferred gain on hedging transactions (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | 12 | | | — | | | 12 | |
| | | | | | | | | | | | | | | | | |
| Issuance of common stock under share-based payment plans | 0.5 | | | — | | | (0.5) | | | 22 | | | (15) | | | — | | | — | | | — | | | 7 | |
| Purchases of treasury stock | (1.8) | | | — | | | 1.8 | | | (142) | | | — | | | — | | | — | | | — | | | (142) | |
| Stock-based compensation expense | — | | | — | | | — | | | — | | | 12 | | | — | | | — | | | — | | | 12 | |
| | | | | | | | | | | | | | | | | |
| Dividends declared (d) | — | | | — | | | — | | | — | | | — | | | (28) | | | — | | | — | | | (28) | |
| Balance at March 31, 2021 | 104.3 | | | $ | 1 | | | 31.2 | | | $ | (1,520) | | | $ | 4,056 | | | $ | 2,011 | | | $ | (620) | | | $ | 39 | | | $ | 3,967 | |
| Net earnings attributable to Owens Corning | — | | | — | | | — | | | — | | | — | | | 298 | | | — | | | — | | | 298 | |
| | | | | | | | | | | | | | | | | |
| Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | 32 | | | — | | | 32 | |
| Pension and other postretirement adjustment (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | (3) | | | — | | | (3) | |
| Deferred loss on hedging transactions (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | (2) | | | — | | | (2) | |
| | | | | | | | | | | | | | | | | |
| Issuance of common stock under share-based payment plans | 0.3 | | | — | | | (0.3) | | | 14 | | | (4) | | | — | | | — | | | — | | | 10 | |
| Purchases of treasury stock | (1.3) | | | — | | | 1.3 | | | (131) | | | — | | | — | | | — | | | — | | | (131) | |
| Stock-based compensation expense | — | | | — | | | — | | | — | | | 12 | | | — | | | — | | | — | | | 12 | |
| | | | | | | | | | | | | | | | | |
| Dividends declared (d) | — | | | — | | | — | | | — | | | — | | | (27) | | | — | | | — | | | (27) | |
| Balance at June 30, 2021 | 103.3 | | | $ | 1 | | | 32.2 | | | $ | (1,637) | | | $ | 4,064 | | | $ | 2,282 | | | $ | (593) | | | $ | 39 | | | $ | 4,156 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
(a)Additional Paid in Capital ("APIC")
(b)Accumulated Other Comprehensive Earnings (Deficit) (“AOCI”)
(c)Noncontrolling Interest (“NCI”)
(d)Quarterly dividend declarations of $0.26 per share as of September 30, 2021, June 30, 2021 and March 31, 2021
The accompanying Notes to the Consolidated Financial Statements are an integral part of this Statement.
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)
(in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock
Outstanding | | Treasury
Stock | | APIC (a) | | Accumulated
Earnings | | AOCI (b) | | NCI (c) | | Total |
| | Shares | | Par Value | | Shares | | Cost | |
| Balance at December 31, 2019 | 109.0 | | | $ | 1 | | | 26.5 | | | $ | (1,130) | | | $ | 4,051 | | | $ | 2,319 | | | $ | (610) | | | $ | 40 | | | $ | 4,671 | |
| Net loss attributable to Owens Corning | — | | | — | | | — | | | — | | | — | | | (917) | | | — | | | — | | | (917) | |
| Net earnings attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | | 1 | |
| Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | (122) | | | (2) | | | (124) | |
| Pension and other postretirement adjustment (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | 7 | | | — | | | 7 | |
| Deferred loss on hedging transactions (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | — | | | (1) | |
| | | | | | | | | | | | | | | | | |
| Issuance of common stock under share-based payment plans | 0.4 | | | — | | | (0.4) | | | 16 | | | (16) | | | — | | | — | | | — | | | — | |
| Purchases of treasury stock | (1.6) | | | — | | | 1.6 | | | (96) | | | — | | | — | | | — | | | — | | | (96) | |
| Stock-based compensation expense | — | | | — | | | — | | | — | | | 11 | | | — | | | — | | | — | | | 11 | |
| | | | | | | | | | | | | | | | | |
| Dividends declared (d) | — | | | — | | | — | | | — | | | — | | | (26) | | | — | | | — | | | (26) | |
| Balance at March 31, 2020 | 107.8 | | | $ | 1 | | | 27.7 | | | $ | (1,210) | | | $ | 4,046 | | | $ | 1,376 | | | $ | (726) | | | $ | 39 | | | $ | 3,526 | |
| Net earnings attributable to Owens Corning | — | | | — | | | — | | | — | | | — | | | 96 | | | — | | | — | | | 96 | |
| Net loss attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
| Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | 53 | | | 1 | | | 54 | |
| Pension and other postretirement adjustment (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | (2) | | | — | | | (2) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Issuance of common stock under share-based payment plans | 0.2 | | | — | | | (0.2) | | | 9 | | | (1) | | | — | | | — | | | — | | | 8 | |
| | | | | | | | | | | | | | | | | |
| Stock-based compensation expense | — | | | — | | | — | | | — | | | 9 | | | — | | | — | | | — | | | 9 | |
| | | | | | | | | | | | | | | | | |
| Dividends declared (d) | — | | | — | | | — | | | — | | | — | | | (27) | | | — | | | — | | | (27) | |
| Balance at June 30, 2020 | 108.0 | | | $ | 1 | | | 27.5 | | | $ | (1,201) | | | $ | 4,054 | | | $ | 1,445 | | | $ | (675) | | | $ | 39 | | | $ | 3,663 | |
| Net earnings attributable to Owens Corning | — | | | — | | | — | | | — | | | — | | | 206 | | | — | | | — | | | 206 | |
| | | | | | | | | | | | | | | | | |
| Currency translation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | 37 | | | 1 | | | 38 | |
| Pension and other postretirement adjustment (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | (3) | | | — | | | (3) | |
| Deferred loss on hedging transactions (net of tax) | — | | | — | | | — | | | — | | | — | | | — | | | 3 | | | — | | | 3 | |
| | | | | | | | | | | | | | | | | |
| Issuance of common stock under share-based payment plans | — | | | — | | | — | | | 1 | | | (1) | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | |
| Stock-based compensation expense | — | | | — | | | — | | | — | | | 11 | | | — | | | — | | | — | | | 11 | |
| | | | | | | | | | | | | | | | | |
| Dividends declared (d) | — | | | — | | | — | | | — | | | — | | | (26) | | | — | | | | | (26) | |
| Balance at September 30, 2020 | 108.0 | | | $ | 1 | | | 27.5 | | | $ | (1,200) | | | $ | 4,064 | | | $ | 1,625 | | | $ | (638) | | | $ | 40 | | | $ | 3,892 | |
(a)Additional Paid in Capital (APIC)
(b)Accumulated Other Comprehensive Earnings (Deficit) (“AOCI”)
(c)Noncontrolling Interest (“NCI”)
(d)Quarterly dividend declarations of $0.24 per share as of September 30, 2020, June 30, 2020 and March 31, 2020
The accompanying Notes to the Consolidated Financial Statements are an integral part of this Statement.
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in millions)
| | | | | | | | |
| Nine Months Ended
September 30, |
| 2021 | 2020 |
| NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES | | |
| Net earnings (loss) | $ | 767 | | $ | (615) | |
| Adjustments to reconcile net earnings (loss) to cash provided by operating activities: | | |
| Depreciation and amortization | 370 | | 352 | |
| | |
| | |
| Deferred income taxes | 54 | | 95 | |
| Provision for pension and other employee benefits liabilities | 2 | | (2) | |
| Stock-based compensation expense | 36 | | 31 | |
| Goodwill impairment charge | — | | 944 | |
| Intangible assets impairment charge | — | | 43 | |
| Other adjustments to reconcile net earnings (loss) to cash provided by operating activities | (27) | | (41) | |
| Loss on extinguishment of debt | 9 | | — | |
| Changes in operating assets and liabilities | (26) | | (53) | |
| Pension fund contribution | (5) | | (20) | |
| Payments for other employee benefits liabilities | (9) | | (10) | |
| Other | (3) | | (7) | |
| Net cash flow provided by operating activities | 1,168 | | 717 | |
| NET CASH FLOW USED FOR INVESTING ACTIVITIES | | |
| Cash paid for property, plant, and equipment | (243) | | (203) | |
| | |
| Proceeds from the sale of assets or affiliates | 70 | | 50 | |
| Investment in subsidiaries and affiliates, net of cash acquired | (42) | | — | |
| | |
| Derivative settlements | (23) | | 49 | |
| | |
| | |
| Other | (4) | | — | |
| Net cash flow used for investing activities | (242) | | (104) | |
| NET CASH FLOW USED FOR FINANCING ACTIVITIES | | |
| Proceeds from long-term debt | — | | 297 | |
| Payments on long-term debt | (193) | | — | |
| Proceeds from senior revolving credit and receivables securitization facilities | — | | 876 | |
| Payments on senior revolving credit and receivables securitization facilities | — | | (876) | |
| | |
| Payments on term loan borrowing | — | | (200) | |
| Net increase (decrease) in short-term debt | 1 | | (20) | |
| Dividends paid | (81) | | (78) | |
| Purchases of treasury stock | (435) | | (96) | |
| Other | (8) | | (9) | |
| Net cash flow used for financing activities | (716) | | (106) | |
| Effect of exchange rate changes on cash | (7) | | (32) | |
| Net increase in cash, cash equivalents, and restricted cash | 203 | | 475 | |
| Cash, cash equivalents and restricted cash at beginning of period | 724 | | 179 | |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ | 927 | | $ | 654 | |
The accompanying Notes to the Consolidated Financial Statements are an integral part of this Statement.
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. GENERAL
Unless the context requires otherwise, the terms “Owens Corning,” “Company,” “we” and “our” in this report refer to Owens Corning, a Delaware corporation, and its subsidiaries.
The Consolidated Financial Statements included in this report are unaudited, pursuant to certain rules and regulations of the Securities and Exchange Commission, and include, in the opinion of the Company, normal recurring adjustments necessary for a fair statement of the results for the periods indicated, which, however, are not necessarily indicative of results which may be expected for the full year. The December 31, 20202021 balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States ("U.S."). In connection with the Consolidated Financial Statements and Notes included in this report, reference is made to the Consolidated Financial Statements and Notes contained in the Company’s Form 10-K for the year ended December 31, 20202021 (the "2020"2021 Form 10-K"). Certain reclassifications have been made to the periods presented for 20202021 to conform to the classifications used in the periods presented for 2021.2022.
Revenue Recognition
As of December 31, 2020,2021, our contract liability balances (for extended warranties, down payments and deposits, collectively) totaled $66$76 million, of which $15 million was recognized as revenue in the first ninesix months of 2021.2022. As of SeptemberJune 30, 2021,2022, our contract liability balances totaled $78$82 million.
Cash, Cash Equivalents and Restricted Cash
On the Consolidated Statements of Cash Flows, the total of Cash, cash equivalents and restricted cash includes restricted cash of $7 million as of SeptemberJune 30, 2021,2022, December 31, 2020, September2021, June 30, 20202021 and December 31, 2019.2020. Restricted cash primarily represents amounts received from a counterparty related to its performance assurance on an executory contract, which is included in Other current assets on the Consolidated Balance Sheets. These amounts are contractually required to be set aside, and the counterparty can exchange the cash for another form of performance assurance at its discretion.
Related Party Transactions
In the first quarter of 2021, a related party relationship was established as a result of a member of the Company’s Board of Directors being named an executive officer of one of the Company’s preexisting suppliers. The related party transactions with this supplier consist of the purchase of raw materials. Purchases from the related party supplier were $23$39 million and $70$60 million for the three and ninesix months ended SeptemberJune 30, 2022, respectively, and $27 million and $47 million for the three and six months ended June 30, 2021, respectively.respectively.. As of SeptemberJune 30, 2022 and December 31, 2021, amounts due to the related party supplier were $4 million.$10 million and $1 million, respectively.
Leases
During the first quarter of 2021, the Company entered into a lease for a to-be-constructed warehouse located near our manufacturing facility in Fort Smith, Arkansas that is expected to commenceArkansas. During the second quarter of 2022, construction was completed, and the lease period commenced, resulting in 2022. Thea finance lease is for a to-be-constructed warehouse where the Company will serve as the construction agent for the landlord.right-of-use asset and corresponding lease liability of $35 million being recognized. At no point during the construction period willdid the Company control the underlying asset as defined in Accounting Standards Codification (ASC) 842 (Leases). This lease will result in finance lease right-of-use assets and corresponding lease liabilities
- 11 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
1. GENERAL (continued)
Accounting Pronouncements
The following table summarizes recent Accounting Standards Updates (ASU's) issued by the Financial Accounting Standards Board (FASB) that had an impact on the Company's Consolidated Financial Statements:
| | | | | | | | | | | |
| Standard | Description | Effective Date for Company | Effect on the
Consolidated Financial Statements |
Recently adopted standards: | | | |
| | | |
| | | |
| | | |
| Recently issued standards: | | | |
ASU 2019-12 "Income Taxes2021-10 "Government Assistance (Topic 740)832)" | This standard simplifiesmodifies the annual disclosure requirements for business entities that receive government assistance and use a grant or contribution accounting for income taxes including such topics as intraperiod tax allocations, franchise taxes and separate company financial statements.model by analogy to other account guidance. | January 1, 20212022 | The adoption ofWe are currently assessing the impact adopting this standard did notwill have a material effect on our consolidated financial statements.Consolidated Financial Statements. The Company will adopt ASU 2021-10 for the year ending December 31, 2022 and will provide the required disclosures, if material. |
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Table of Contents
- 1112 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
2. SEGMENT INFORMATION
The Company has 3 reportable segments: Composites, Insulation and Roofing. Accounting policies for the segments are the same as those for the Company. The Company’s 3 reportable segments are defined as follows:
Composites – The Company manufactures, fabricates and sells glass reinforcements in the form of fiber. Glass reinforcement materials are also used downstream by the Composites segment to manufacture and sell glass fiber productshigh value applications in the form of fabrics, nonwovensnon-wovens and other specialized products.
Insulation – Within our Insulation segment, the Company manufactures and sells fiberglass insulation into residential, commercial, industrial and other markets for both thermal and acoustical applications.batts, loosefill insulation, foam sheathing and accessories. It also manufactures and sells glass fiber pipe insulation, energy efficient flexible duct media, bonded and granulated mineral wool insulation, cellular glass insulation and foam insulation used in above- and below-grade construction applications.
Roofing – Within our Roofing segment, the Company manufactures and sells residential roofing shingles, oxidized asphalt materials, roofing components used in residential and commercial construction and specialty applications, and synthetic packaging materials.
NET SALES
The following table summarizestables show a disaggregation of our Net sales by segment and geographic region (in millions). Corporate eliminations (shown below) largely reflect intercompany sales from Composites to Roofing. External customer sales are attributed to geographic region based upon the location from which the product is sold to the external customer.
| | | For the three months ended September 30, 2021 | | For the three months ended June 30, 2022 |
| Reportable Segments | Reportable Segments | Composites | Insulation | Roofing | Eliminations | Consolidated | Reportable Segments | Composites | Insulation | Roofing | Eliminations | Consolidated |
| Disaggregation Categories | Disaggregation Categories | | Disaggregation Categories | |
| U.S. residential | U.S. residential | $ | 83 | | $ | 312 | | $ | 796 | | $ | (60) | | $ | 1,131 | | U.S. residential | $ | 94 | | $ | 374 | | $ | 932 | | $ | (69) | | $ | 1,331 | |
| U.S. commercial and industrial | U.S. commercial and industrial | 163 | | 181 | | 38 | | — | | 382 | | U.S. commercial and industrial | 225 | | 202 | | 44 | | — | | 471 | |
| Total United States | Total United States | 246 | | 493 | | 834 | | (60) | | 1,513 | | Total United States | 319 | | 576 | | 976 | | (69) | | 1,802 | |
| Europe | Europe | 161 | | 179 | | 5 | | (2) | | 343 | | Europe | 197 | | 213 | | 5 | | (1) | | 414 | |
| Asia-Pacific | Asia-Pacific | 136 | | 48 | | 1 | | — | | 185 | | Asia-Pacific | 145 | | 41 | | 2 | | — | | 188 | |
| Rest of world | Rest of world | 48 | | 95 | | 29 | | — | | 172 | | Rest of world | 58 | | 104 | | 35 | | — | | 197 | |
| NET SALES | NET SALES | $ | 591 | | $ | 815 | | $ | 869 | | $ | (62) | | $ | 2,213 | | NET SALES | $ | 719 | | $ | 934 | | $ | 1,018 | | $ | (70) | | $ | 2,601 | |
| | | | | | | | | | | | | | | | | |
| For the three months ended September 30, 2020 |
| Reportable Segments | Composites | Insulation | Roofing | Eliminations | Consolidated |
| Disaggregation Categories | | | | | |
| U.S. residential | $ | 76 | | $ | 257 | | $ | 691 | | $ | (56) | | $ | 968 | |
| U.S. commercial and industrial | 136 | | 150 | | 43 | | (3) | | 326 | |
| Total United States | 212 | | 407 | | 734 | | (59) | | 1,294 | |
| Europe | 131 | | 155 | | 3 | | — | | 289 | |
| Asia-Pacific | 141 | | 43 | | 3 | | — | | 187 | |
| Rest of world | 37 | | 76 | | 21 | | — | | 134 | |
| NET SALES | $ | 521 | | $ | 681 | | $ | 761 | | $ | (59) | | $ | 1,904 | |
- 12 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
2. SEGMENT INFORMATION (continued)
| | | | | | | | | | | | | | | | | |
| For the nine months ended September 30, 2021 |
| Reportable Segments | Composites | Insulation | Roofing | Eliminations | Consolidated |
| Disaggregation Categories | | | | | |
| U.S. residential | $ | 241 | | $ | 860 | | $ | 2,302 | | $ | (181) | | $ | 3,222 | |
| U.S. commercial and industrial | 471 | | 520 | | 93 | | — | | 1,084 | |
| Total United States | 712 | | 1,380 | | 2,395 | | (181) | | 4,306 | |
| Europe | 484 | | 526 | | 13 | | (3) | | 1,020 | |
| Asia-Pacific | 403 | | 137 | | 6 | | — | | 546 | |
| Rest of world | 134 | | 278 | | 83 | | — | | 495 | |
| NET SALES | $ | 1,733 | | $ | 2,321 | | $ | 2,497 | | $ | (184) | | $ | 6,367 | |
| | | | | | | | | | | | | | | | | |
| For the nine months ended September 30, 2020 |
| Reportable Segments | Composites | Insulation | Roofing | Eliminations | Consolidated |
| Disaggregation Categories | | | | | |
| U.S. residential | $ | 200 | | $ | 683 | | $ | 1,798 | | $ | (151) | | $ | 2,530 | |
| U.S. commercial and industrial | 397 | | 448 | | 110 | | (3) | | 952 | |
| Total United States | 597 | | 1,131 | | 1,908 | | (154) | | 3,482 | |
| Europe | 379 | | 444 | | 10 | | (1) | | 832 | |
| Asia-Pacific | 346 | | 107 | | 8 | | — | | 461 | |
| Rest of world | 91 | | 197 | | 67 | | — | | 355 | |
| NET SALES | $ | 1,413 | | $ | 1,879 | | $ | 1,993 | | $ | (155) | | $ | 5,130 | |
| | | | | | | | | | | | | | | | | |
| For the three months ended June 30, 2021 |
| Reportable Segments | Composites | Insulation | Roofing | Eliminations | Consolidated |
| Disaggregation Categories | | | | | |
| U.S. residential | $ | 83 | | $ | 285 | | $ | 847 | | $ | (66) | | $ | 1,149 | |
| U.S. commercial and industrial | 162 | | 177 | | 33 | | — | | 372 | |
| Total United States | 245 | | 462 | | 880 | | (66) | | 1,521 | |
| Europe | 164 | | 194 | | 5 | | (1) | | 362 | |
| Asia-Pacific | 129 | | 53 | | 2 | | — | | 184 | |
| Rest of world | 45 | | 97 | | 30 | | — | | 172 | |
| NET SALES | $ | 583 | | $ | 806 | | $ | 917 | | $ | (67) | | $ | 2,239 | |
- 13 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
2. SEGMENT INFORMATION (continued)
| | | | | | | | | | | | | | | | | |
| For the six months ended June 30, 2022 |
| Reportable Segments | Composites | Insulation | Roofing | Eliminations | Consolidated |
| Disaggregation Categories | | | | | |
| U.S. residential | $ | 181 | | $ | 725 | | $ | 1,708 | | $ | (129) | | $ | 2,485 | |
| U.S. commercial and industrial | 435 | | 381 | | 71 | | (3) | | 884 | |
| Total United States | 616 | | 1,106 | | 1,779 | | (132) | | 3,369 | |
| Europe | 402 | | 410 | | 11 | | (3) | | 820 | |
| Asia-Pacific | 296 | | 76 | | 4 | | — | | 376 | |
| Rest of world | 119 | | 201 | | 62 | | — | | 382 | |
| NET SALES | $ | 1,433 | | $ | 1,793 | | $ | 1,856 | | $ | (135) | | $ | 4,947 | |
| | | | | | | | | | | | | | | | | | | | |
| For the six months ended June 30, 2021 | |
| Reportable Segments | Composites | Insulation | Roofing | Eliminations | Consolidated | |
| Disaggregation Categories | | | | | | |
| U.S. residential | $ | 158 | | $ | 548 | | $ | 1,506 | | $ | (121) | | $ | 2,091 | | |
| U.S. commercial and industrial | 308 | | 339 | | 55 | | — | | 702 | | |
| Total United States | 466 | | 887 | | 1,561 | | (121) | | 2,793 | | |
| Europe | 323 | | 347 | | 8 | | (1) | | 677 | | |
| Asia-Pacific | 267 | | 89 | | 5 | | — | | 361 | | |
| Rest of world | 86 | | 183 | | 54 | | — | | 323 | | |
| NET SALES | $ | 1,142 | | $ | 1,506 | | $ | 1,628 | | $ | (122) | | $ | 4,154 | | |
EARNINGS BEFORE INTEREST AND TAXES
Earnings before interest and taxes (EBIT) by segment consist of net sales less related costs and expenses and are presented on a basis that is used internally for evaluating segment performance. Certain items, such as general corporate expenses or income and certain other expense or income items, are excluded from the internal evaluation of segment performance. Accordingly, these items are not reflected in EBIT for our reportable segments and are included within Corporate, Other and Eliminations.
- 14 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
2. SEGMENT INFORMATION (continued)
The following table summarizes EBIT by segment (in millions):
| | | Three Months Ended
September 30, | Nine Months Ended
September 30, | | Three Months Ended
June 30, | Six Months Ended
June 30, |
| | 2021 | 2020 | 2021 | 2020 | | 2022 | 2021 | 2022 | 2021 |
| Reportable Segments | Reportable Segments | | Reportable Segments | |
| Composites | Composites | $ | 101 | | $ | 55 | | $ | 278 | | $ | 105 | | Composites | $ | 154 | | $ | 98 | | $ | 308 | | $ | 177 | |
| Insulation | Insulation | 124 | | 73 | | 318 | | 144 | | Insulation | 157 | | 112 | | 286 | | 194 | |
| Roofing | Roofing | 212 | | 196 | | 602 | | 408 | | Roofing | 258 | | 234 | | 434 | | 390 | |
| Total reportable segments | Total reportable segments | 437 | | 324 | | 1,198 | | 657 | | Total reportable segments | 569 | | 444 | | 1,028 | | 761 | |
| Restructuring costs | Restructuring costs | (20) | | — | | (22) | | (10) | | Restructuring costs | (11) | | (1) | | (17) | | (2) | |
| Gain on sale of land in India | 15 | | — | | 15 | | — | | |
| Gain on sale of Shanghai, China facility | | Gain on sale of Shanghai, China facility | — | | — | | 27 | | — | |
| | Gains on sale of certain precious metals | Gains on sale of certain precious metals | — | | 7 | | 41 | | 26 | | Gains on sale of certain precious metals | 7 | | 21 | | 11 | | 41 | |
| Goodwill impairment charge | — | | — | | — | | (944) | | |
| Intangible assets impairment charge | — | | — | | — | | (43) | | |
| Recognition of acquisition inventory fair value step-up | (1) | | — | | (1) | | — | | |
| | | Acquisition-related costs | | Acquisition-related costs | (3) | | — | | (3) | | — | |
| Impairment loss on Chambery, France assets held for sale | | Impairment loss on Chambery, France assets held for sale | (29) | | — | | (29) | | — | |
| General corporate expense and other | General corporate expense and other | (37) | | (35) | | (108) | | (85) | | General corporate expense and other | (44) | | (36) | | (86) | | (71) | |
| Total corporate, other and eliminations | Total corporate, other and eliminations | (43) | | (28) | | (75) | | (1,056) | | Total corporate, other and eliminations | (80) | | (16) | | (97) | | (32) | |
| EBIT | EBIT | $ | 394 | | $ | 296 | | $ | 1,123 | | $ | (399) | | EBIT | $ | 489 | | $ | 428 | | $ | 931 | | $ | 729 | |
3. INVENTORIES
Inventories consist of the following (in millions): | | | September 30, 2021 | December 31, 2020 | | June 30, 2022 | December 31, 2021 |
| Finished goods | Finished goods | $ | 559 | | $ | 532 | | Finished goods | $ | 779 | | $ | 672 | |
| Materials and supplies | Materials and supplies | 390 | | 323 | | Materials and supplies | 475 | | 406 | |
| Total inventories | Total inventories | $ | 949 | | $ | 855 | | Total inventories | $ | 1,254 | | $ | 1,078 | |
- 1415 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
4. DERIVATIVE FINANCIAL INSTRUMENTS
The Company is exposed to, among other risks, the impact of changes in commodity prices, foreign currency exchange rates, and interest rates in the normal course of business. The Company’s risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes derivative financial instruments to offset a portion of these risks. The Company uses derivative financial instruments only to the extent necessary to hedge identified business risks, and does not enter into such transactions for trading purposes.
The Company generally does not require collateral or other security with counterparties to these financial instruments and is therefore subject to credit risk in the event of nonperformance; however, the Company monitors credit risk and currently does not anticipate nonperformance by other parties. Contracts with counterparties generally contain right of offset provisions. These provisions effectively reduce the Company’s exposure to credit risk in situations where the Company has gain and loss positions outstanding with a single counterparty. It is the Company’s policy to offset on the Consolidated Balance Sheets the amounts recognized for derivative instruments with any cash collateral arising from derivative instruments executed with the same counterparty under a master netting agreement. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company did not have any amounts on deposit with any of its counterparties, nor did any of its counterparties have any amounts on deposit with the Company.
Derivative Fair Values
Our derivatives consist of natural gas forward swaps, cross-currency swaps, foreign exchange forward contracts and U.S. treasury rate lock agreements, all of which are over-the-counter and not traded through an exchange. The Company uses widely accepted valuation tools to determine fair value, such as discounting cash flows to calculate a present value for the derivatives. The models use Level 2 inputs, such as forward curves and other commonly quoted observable transactions and prices. The fair value of our derivatives and hedging instruments are all classified as Level 2 investments within the three-tier hierarchy.
The following table presents the fair value of derivatives and hedging instruments and the respective location on the Consolidated Balance Sheets (in millions):
| | | | | | | | | | | | | | | | | |
| | | | Fair Value at |
| | Location | | September 30, 2021 | | December 31, 2020 |
| Derivative assets designated as hedging instruments: | | | | | |
| Net investment hedges: | | | | | |
| Cross-currency swaps | Other current assets | | $ | 5 | | | $ | 5 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Cash flow hedges: | | | | | |
| Natural gas forward swaps | Other current assets | | $ | 25 | | | $ | 2 | |
| | | | | |
| Treasury interest rate lock | Other non-current assets | | $ | 12 | | | $ | 4 | |
| Derivative liabilities designated as hedging instruments: | | | | | |
| Net investment hedges: | | | | | |
| | | | | |
| Cross-currency swaps | Other liabilities | | $ | 2 | | | $ | 11 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Cash flow hedges: | | | | | |
| | | | | |
| | | | | |
| Foreign exchange forward contracts | Other current liabilities | | $ | 1 | | | $ | — | |
| Derivative assets not designated as hedging instruments: | | | | | |
| | | | | |
| Foreign exchange forward contracts | Other current assets | | $ | 13 | | | $ | 2 | |
| Derivative liabilities not designated as hedging instruments: | | | | | |
| | | | | |
| Foreign exchange forward contracts | Other current liabilities | | $ | 1 | | | $ | 45 | |
| | | | | | | | | | | | | | | | | |
| | | | Fair Value at |
| | Location | | June 30, 2022 | | December 31, 2021 |
| Derivative assets designated as hedging instruments: | | | | | |
| Net investment hedges: | | | | | |
| Cross-currency swaps | Other current assets | | $ | — | | | $ | 5 | |
| Cross-currency swaps | Other non-current assets | | $ | — | | | $ | 1 | |
| | | | | |
| | | | | |
| | | | | |
| Cash flow hedges: | | | | | |
| Natural gas forward swaps | Other current assets | | $ | 30 | | | $ | 16 | |
| | | | | |
| Treasury interest rate lock | Other current assets | | $ | 29 | | | $ | 11 | |
| Derivative liabilities designated as hedging instruments: | | | | | |
| Net investment hedges: | | | | | |
| | | | | |
| Cross-currency swaps | Other liabilities | | $ | — | | | $ | 1 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Cash flow hedges: | | | | | |
| Natural gas forward swaps | Other current liabilities | | $ | 6 | | | $ | 5 | |
| | | | | |
| Foreign exchange forward contracts | Other current liabilities | | $ | 1 | | | $ | 2 | |
| Derivative assets not designated as hedging instruments: | | | | | |
| | | | | |
| Foreign exchange forward contracts | Other current assets | | $ | 21 | | | $ | 1 | |
| Derivative liabilities not designated as hedging instruments: | | | | | |
| | | | | |
| Foreign exchange forward contracts | Other current liabilities | | $ | — | | | $ | 6 | |
- 1516 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
4. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Consolidated Statements of Earnings (Loss) Activity
The following table presents the impact and respective location of derivative activities on the Consolidated Statements of Earnings (Loss) (in millions):
| | | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | Nine Months Ended
September 30, |
| Location | 2021 | 2020 | 2021 | 2020 |
| Derivative activity designated as hedging instruments: | | | | | |
| Natural gas cash flow hedges: | | | | | |
| Amount of (gain)/loss reclassified from AOCI (as defined below) into earnings (a) | Cost of sales | $ | (4) | | $ | 1 | | $ | (6) | | $ | 5 | |
| | | | | |
| | | | | |
| Cross-currency swap net investment hedges: | | | | | |
| Amount of gain recognized in earnings on derivative amounts excluded from effectiveness testing | Interest expense, net | $ | (1) | | $ | (1) | | $ | (4) | | $ | (6) | |
| | | | | |
| | | | | |
| Derivative activity not designated as hedging instruments: | | | | | |
| | | | | |
| | | | | |
| Foreign currency: | | | | | |
| Amount of (gain)/loss recognized in earnings (b) | Other (income) expenses, net | $ | (14) | | $ | 29 | | $ | (30) | | $ | 20 | |
| | | | | | | | | | | | | | | | | |
| | Three Months Ended
June 30, | Six Months Ended
June 30, |
| Location | 2022 | 2021 | 2022 | 2021 |
| Derivative activity designated as hedging instruments: | | | | | |
| Natural gas cash flow hedges: | | | | | |
| Amount of gain reclassified from AOCI (as defined below) into earnings (a) | Cost of sales | $ | (16) | | $ | (1) | | $ | (26) | | $ | (2) | |
| | | | | |
| | | | | |
| Cross-currency swap net investment hedges: | | | | | |
| Amount of gain recognized in earnings on derivative amounts excluded from effectiveness testing | Interest expense, net | $ | — | | $ | (2) | | $ | (1) | | $ | (3) | |
| | | | | |
| | | | | |
| Derivative activity not designated as hedging instruments: | | | | | |
| | | | | |
| | | | | |
| Foreign currency: | | | | | |
| Amount of gain recognized in earnings (b) | Other expense (income), net | $ | (23) | | $ | 4 | | $ | (28) | | $ | (16) | |
(a)Accumulated Other Comprehensive Earnings (Deficit) ("AOCI")
(b)Gains related to foreign currency derivatives were substantially offset by net revaluation impacts on foreign currency denominated balance sheet exposures, which were also recorded in Other expense (income) expenses,, net. Please refer to the "Other Derivatives" section below for additional detail.
Consolidated Statements of Comprehensive Earnings (Loss) Activity
The following table presents the impact of derivative activities on the Consolidated Statements of Comprehensive Earnings (Loss) (in millions):
| | | Amount of (Gain) Loss Recognized in Comprehensive Earnings (Loss) | | Amount of (Gain) Loss Recognized in Comprehensive Earnings |
| | Three Months Ended
September 30, | Nine Months Ended
September 30, | | Three Months Ended
June 30, | Six Months Ended
June 30, |
| Hedging Type | Hedging Type | Derivative Financial Instrument | 2021 | 2020 | 2021 | 2020 | Hedging Type | Derivative Financial Instrument | 2022 | 2021 | 2022 | 2021 |
| Net investment hedge | Net investment hedge | Cross-currency swaps | $ | (5) | | $ | 11 | | $ | (9) | | $ | (27) | | Net investment hedge | Cross-currency swaps | $ | (3) | | $ | 1 | | $ | (5) | | $ | (4) | |
| Cash flow hedge | Cash flow hedge | Natural gas forward swaps | $ | (17) | | $ | (3) | | $ | (23) | | $ | (3) | | Cash flow hedge | Natural gas forward swaps | $ | 10 | | $ | (2) | | $ | (13) | | $ | (6) | |
| Cash flow hedge | Cash flow hedge | Treasury interest rate lock | $ | — | | $ | (1) | | $ | (8) | | $ | 1 | | Cash flow hedge | Treasury interest rate lock | $ | (9) | | $ | 7 | | $ | (19) | | $ | (8) | |
| Cash flow hedge | Cash flow hedge | Foreign exchange forward contracts | $ | — | | $ | — | | $ | 1 | | $ | — | | Cash flow hedge | Foreign exchange forward contracts | $ | — | | $ | 1 | | $ | — | | $ | 1 | |
Cash Flow Hedges
The Company uses a combination of derivative financial instruments, which qualify as cash flow hedges, and physical contracts to manage forecasted exposure to electricity and natural gas prices. As of SeptemberJune 30, 2021,2022, the notional amounts of these natural gas forward swaps was 29 million MMBtu (or MMBtu equivalent) based on U.S. and European indices.
- 1617 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
4. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
In March 2020, the Company entered into a $175 million forward U.S. Treasury rate lock agreement to manage the U.S. Treasury portion of its interest rate risk associated with the anticipated issuance of certain 10-year fixed rate senior notes before the end of 2022. The Company intends to cash settle this agreement upon a future issuance of certain senior notes thereby effectively locking in the U.S. Treasury fixed interest rate in effect at the time the agreement was initiated. The locked fixed rate of this agreement is 0.994%. The Company has designated this outstanding forward U.S. Treasury rate lock agreement, which expires on December 15, 2022, as a cash flow hedge.
In June 2021, the Company entered into five currency forward contracts with unrelated counterparties totaling $26$23 million to mitigate against unwanted or anticipated moves in the European Euro exchange rate against the U.S. Dollar, pertaining to forecasted Euro denominated invoices for capital expenditures. The Company has designated each of the individual contracts as cash flow hedges, with the last hedge maturing no later than December 2023.
Net Investment Hedges
The Company has translation exposure resulting from translating the financial statements of foreign subsidiaries into U.S. Dollars, which is recognized in Currency translation adjustment (a component of AOCI). TheIn the second quarter of 2022, the Company usesterminated the remaining cross-currency forward contracts related to hedgethe hedged portions of the net investment in foreign subsidiaries, against fluctuations in foreign exchange rates. As of September 30, 2021, the notional amount of these derivative financial instruments was $218 million related to the U.S. Dollar and European Euro. In the second quarter of 2020, the Company unwound certain net investment hedge contracts, resulting in cash proceeds of $30$11 million.
Other Derivatives
The Company uses forward currency exchange contracts to manage existing exposures to foreign exchange risk related to assets and liabilities recorded on the Consolidated Balance Sheets. As of SeptemberJune 30, 2021,2022, the Company had notional amounts of $706$705 million for non-designated derivative financial instruments related to foreign currency exposures in U.S. Dollars primarily related to Brazilian Real, Chinese Yuan, European Euro, Hong Kong Dollar, Indian Rupee, and South Korean Won. In addition, the Company had notional amounts of $91$7 million for non-designated derivative financial instruments related to foreign currency exposures in European Euro primarily related to the Russian Ruble.Norwegian Krone and Polish Złoty.
- 1718 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The Company tests goodwill and indefinite-lived intangible assets for impairment during the fourth quarter of each year, or more frequently should circumstances change or events occur that would more likely than not reduce the fair value of a reporting unit below its carrying value.
No testing was deemed necessary in the first ninesix months of 2021.2022. The changes in the net carrying value of goodwill by segment are as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| Composites | | Insulation | | Roofing | | Total |
| Balance at December 31, 2020 | $ | 57 | | | $ | 532 | | | $ | 400 | | | $ | 989 | |
| | | | | | | |
| | | | | | | |
| Acquisitions (see Note 7) | 16 | | | — | | | — | | | 16 | |
| Additions | 3 | | | — | | | — | | | 3 | |
| Foreign Currency Translation | (1) | | | (10) | | | (2) | | | (13) | |
| Balance at September 30, 2021 | $ | 75 | | | $ | 522 | | | $ | 398 | | | $ | 995 | |
During the first quarter of 2020, the Company’s significant share price reduction during the COVID-19 pandemic was determined to be an indicator of impairment under ASC 350. The COVID-19 pandemic was expected to have a negative impact on results for the remainder of 2020 and create uncertainty in our markets. The narrow cushion on the Insulation reporting unit and the high level of macroeconomic uncertainty caused the Company to perform an interim goodwill impairment test as of March 31, 2020 over the Insulation reporting unit. After evaluating and weighing all relevant events and circumstances, and considering the substantial excess fair values for the Roofing and Composites reporting units, we concluded that it was not more likely than not that the fair values of these reporting units were less than their carrying values. Consequently, we determined that it was not necessary to perform an interim impairment test for the Roofing and Composites reporting units.
Based on the results of this interim testing over the Insulation reporting unit, the Company recorded a $944 million pre-tax non-cash impairment charge in the first quarter of 2020. This charge was recorded in Goodwill impairment charge on the Consolidated Statements of Earnings (Loss), and was included in the Corporate, Other and Eliminations reporting category. | | | | | | | | | | | | | | | | | | | | | | | |
| Composites | | Insulation | | Roofing | | Total |
| Gross carrying amount at December 31, 2021 | $ | 75 | | | $ | 1,481 | | | $ | 397 | | | $ | 1,953 | |
| | | | | | | |
| | | | | | | |
| Acquisitions (see Note 7) | 112 | | | — | | | — | | | 112 | |
| | | | | | | |
| Foreign Currency Translation | (3) | | | (47) | | | (4) | | | (54) | |
| Gross carrying amount at June 30, 2022 | 184 | | | 1,434 | | | 393 | | | 2,011 | |
| | | | | | | |
| Accumulated impairment losses at December 31, 2021 | — | | | (963) | | | — | | | (963) | |
| Foreign Currency Translation | — | | | 31 | | | — | | | 31 | |
| Accumulated impairment losses at June 30, 2022 | — | | | (932) | | | — | | | (932) | |
| | | | | | | |
| Balance, net of impairment, at June 30, 2022 | $ | 184 | | | $ | 502 | | | $ | 393 | | | $ | 1,079 | |
Other Intangible Assets
The Company amortizes the cost of other intangible assets over their estimated useful lives which, individually, range up to 45 years. The Company's future cash flows are not materially impacted by its ability to extend or renew agreements related to its amortizable intangible assets.
Other intangible assets consist of the following (in millions):
| | | September 30, 2021 | | December 31, 2020 | | June 30, 2022 | | December 31, 2021 |
| | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount |
| Trademarks | $ | 1,102 | | | $ | — | | | $ | 1,102 | | | $ | 1,109 | | | $ | — | | | $ | 1,109 | | |
| Trademarks and trade names | | Trademarks and trade names | $ | 1,090 | | | $ | — | | | $ | 1,090 | | | $ | 1,096 | | | $ | — | | | $ | 1,096 | |
| Customer relationships | Customer relationships | 567 | | | (215) | | | 352 | | | 570 | | | (200) | | | 370 | | Customer relationships | 560 | | | (226) | | | 334 | | | 559 | | | (218) | | | 341 | |
| Technology | Technology | 321 | | | (185) | | | 136 | | | 327 | | | (172) | | | 155 | | Technology | 316 | | | (175) | | | 141 | | | 298 | | | (168) | | | 130 | |
| Other (a) | Other (a) | 43 | | | (4) | | | 39 | | | 36 | | | (3) | | | 33 | | Other (a) | 54 | | | (5) | | | 49 | | | 53 | | | (3) | | | 50 | |
| Total other intangible assets | Total other intangible assets | $ | 2,033 | | | $ | (404) | | | $ | 1,629 | | | $ | 2,042 | | | $ | (375) | | | $ | 1,667 | | Total other intangible assets | $ | 2,020 | | | $ | (406) | | | $ | 1,614 | | | $ | 2,006 | | | $ | (389) | | | $ | 1,617 | |
(a)Other primarily includes emissions and quarry rights.
- 1819 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
5. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
In the first quarter of 2020, we performed an interim impairment test of certain indefinite-lived trademarks and trade names used by our Insulation segment, based on the macroeconomic conditions that precipitated the interim goodwill impairment test described above.
Based on the results of this testing, the Company recorded pre-tax non-cash impairment charges totaling $43 million in the first quarter of 2020 related to 2 of the Insulation trademarks and trade names. These charges were recorded in Other (income) expenses, net on the Consolidated Statements of Earnings (Loss), and were included in the Corporate, Other and Eliminations reporting category.
Non-cash impairment charges included a pre-tax impairment charge of $34 million for a trade name used by our European building and technical insulation business, and a pre-tax impairment charge of $9 million related to a trademark used on global cellular glass insulation products.
There is one trade name used by our European building and technical insulation business within our Insulation segment that is at an increased risk of impairment. A change in the estimated long-term revenue growth rate or increase in the discount rate assumption could increase the likelihood of a future impairment for this asset. The affected asset had a carrying value of $164 million as of September 30, 2021.
The estimated amortization expense for intangible assets for the next five fiscal years ended December 31 is as follows (in millions):
| | Period | Period | Amortization | Period | Amortization |
| 2022 | $ | 45 | | |
| 2023 | 2023 | $ | 43 | | 2023 | $ | 45 | |
| 2024 | 2024 | $ | 39 | | 2024 | $ | 42 | |
| 2025 | 2025 | $ | 38 | | 2025 | $ | 42 | |
| 2026 | 2026 | $ | 38 | | 2026 | $ | 40 | |
| 2027 | | 2027 | $ | 31 | |
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in millions):
| | | September 30,
2021 | December 31, 2020 | | June 30,
2022 | December 31, 2021 |
| Land | Land | $ | 222 | | $ | 222 | | Land | $ | 211 | | $ | 219 | |
| Buildings and leasehold improvements | Buildings and leasehold improvements | 1,255 | | 1,241 | | Buildings and leasehold improvements | 1,231 | | 1,265 | |
| Machinery and equipment | Machinery and equipment | 5,277 | | 5,155 | | Machinery and equipment | 5,259 | | 5,343 | |
| Construction in progress | Construction in progress | 270 | | 292 | | Construction in progress | 356 | | 387 | |
| | 7,024 | | 6,910 | | | 7,057 | | 7,214 | |
| Accumulated depreciation | Accumulated depreciation | (3,257) | | (3,101) | | Accumulated depreciation | (3,373) | | (3,341) | |
| Property, plant and equipment, net | Property, plant and equipment, net | $ | 3,767 | | $ | 3,809 | | Property, plant and equipment, net | $ | 3,684 | | $ | 3,873 | |
Machinery and equipment includes certain precious metals used in our production tooling, which comprise approximately 10% of total machinery and equipment as of both SeptemberJune 30, 20212022 and December 31, 2020.2021. Precious metals used in our production tooling are depleted as they are consumed during the production process, which typically represents an annual expense of about 3% of the outstanding carrying value.
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
6. PROPERTY, PLANT AND EQUIPMENT (continued)
Our production tooling needs in our Composites segment are changing in response to economic and technological factors. As a result, we exchanged certain precious metals used in production tooling for certain other precious metals to be used in production tooling. During the three and nine months ended September 30, 2021, these non-cash exchanges resulted in a net increase to Machinery and equipment of less than $1 million and $41 million, respectively, and gains totaling less than $1 million and $41 million, respectively, which are included in Other (income) expenses, net on the Consolidated Statements of Earnings (Loss) and are reflected in the Corporate, Other and Eliminations reporting category. These non-cash investing activities are not included in Net cash flow used for investing activities in the Consolidated Statements of Cash Flows. During the three and six months ended June 30, 2022, these non-cash exchanges resulted in a net increase to Machinery and equipment of $7 million and $11 million, respectively, and gains totaling $7 million and $11 million, respectively. During the three and six months ended June 30, 2021, these non-cash exchanges resulted in a net increase to Machinery and equipment of $21 million and $41 million, respectively, and gains totaling $21 million and $41 million, respectively. The gains are included in Other expense (income), net on the Consolidated Statements of Earnings and are reflected in the Corporate, Other and Eliminations reporting category. We do not expect these exchanges to materially impact our current or future capital expenditure requirements or rate of depletion.
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
7. ACQUISITIONS
On May 23, 2022, Owens Corning and Pultron Composites ("Pultron") formed a joint venture ("JV") to manufacture and sell fiberglass rebar. The Company contributed approximately $47 million to acquire a 65.5% controlling interest and has established a redeemable noncontrolling interest related to Pultron, the minority holder. The JV expands Owens Corning’s capability to produce high-value material solutions by combining the Company’s glass-fiber material technology, channel access and extensive industry experience with Pultron’s manufacturing expertise and process efficiency. The fully consolidated operating results and a preliminary purchase price allocation for the JV have been included in the Company’s Composites segment within the Consolidated Financial Statements since the date of the formation of the JV. Subsequent to the JV formation, the JV acquired assets and technology from Pultron for approximately $65 million. The purchase price allocation is preliminary and resulted in the recognition of $15 million in intangible assets, consisting of technology, with an estimated weighted average life of 15 years and $42 million in goodwill. The pro-forma effect of this acquisition on revenues and earnings was not material.
On July 13, 2021,June 1, 2022, the Company acquired vliepa GmbH ("vliepa")all of the outstanding assets of WearDeck®, which specializes in the coating, printing,a premium producer of composite weather-resistant decking for commercial and finishing of nonwovens, paper, and filmresidential applications, for the building materials industry in Europe, for $42approximately $133 million, net of cash acquired. The acquisition broadensadvances the Company’s global nonwovens portfolioComposites business growth strategy to better serve European customers and accelerate growth offocus on high-value material solutions within the building and construction market applications in the region.industry. The operating results and a preliminary purchase price allocation for vliepaWearDeck® have been included in the Company’s Composites segment within the Consolidated Financial Statements since the date of the acquisition. The purchase price allocation is preliminary until the Company obtains final information regarding fair values. The acquisitionand resulted in the recognition of $13$38 million in intangible assets and $16$70 million in goodwill. The intangible assets consist of indefinite-lived trademarks of $7 million, technology of $10 million with an estimated weighted average life of 11 years and customer relationships of $21 million with an estimated weighted average life of 15 years. The pro-forma effect of this acquisition on revenues and earnings was not material.
On June 15, 2022, Owens Corning signed an agreement to acquire Natural Polymers, LLC, an innovative manufacturer of spray polyurethane foam insulation for building and construction applications. The transaction has cleared regulatory approvals and other customary conditions and is anticipated to close in the third quarter of 2022.
On July 15, 2022, Owens Corning entered into a legally binding agreement to acquire the remaining 50% interest in Fiberteq, LLC. The acquisition is anticipated to close in the third quarter of 2022, subject to customary closing conditions.
8. ASSETS HELD FOR SALE
On May 16, 2022, the Company exercised the put option for the sale of the European portion of the dry-use chopped strands ("DUCS") product line located in Chambéry, France, within the Composite's segment. The Company recorded a pre-tax charge of $29 million in Other expense (income), net on the Consolidated Statements of Earnings to reflect fair value less cost to sell of these assets. Assets held for sale as of June 30, 2022 were $81 million and primarily consisted of property, plant and equipment.
On July 1, 2022, the Company closed on the sale of the European portion of the DUCS product line located in Chambéry, France.
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
9. WARRANTIES
The Company records a liability for warranty obligations at the date the related products are sold. Adjustments are made as new information becomes available. Please refer to Note 1 of our 20202021 Form 10-K for information about our separately-priced extended warranty contracts. A reconciliation of the warranty liability is as follows (in millions):
| | | Nine Months Ended September 30, | | Six Months Ended June 30, |
| | 2021 | 2020 | | 2022 | 2021 |
| Beginning balance | Beginning balance | $ | 72 | | $ | 64 | | Beginning balance | $ | 81 | | $ | 72 | |
| Amounts accrued for current year | Amounts accrued for current year | 17 | | 16 | | Amounts accrued for current year | 10 | | 11 | |
| Settlements of warranty claims | Settlements of warranty claims | (10) | | (10) | | Settlements of warranty claims | (5) | | (7) | |
| Ending balance | Ending balance | $ | 79 | | $ | 70 | | Ending balance | $ | 86 | | $ | 76 | |
9.10. RESTRUCTURING, ACQUISITION AND ACQUISITION-RELATEDDIVESTITURE-RELATED COSTS
The Company may incur restructuring, transaction and integration costs related to acquisitions and divestitures, and may incur restructuring and other exit costs in connection with its global cost reduction, productivity initiatives and productivity initiatives.the Company's growth strategy.
ACQUISTION-RELATED COSTS
In the second quarter of 2022, the Company incurred $3 million of transaction costs related to its announced acquisitions. Please refer to Note 7 of the Consolidated Financial Statements for further information regarding these acquisitions.
RESTRUCTURING RELATED-COSTS
Exit of DUCS Product Line
In May 2022, the Company exercised the put option for the sale of the European portion of the DUCS product line located in Chambéry, France, within the Composite's segment. As a result, the Company recorded a pre-tax charge of $29 million in Other expense (income), net on the Consolidated Statements of Earnings to reflect the fair value less cost to sell of the assets. Please refer to Note 8 of the Consolidated Financial Statements for further information. The Company also took decisions to convert the DUCS manufacturing facilities located in Anderson, South Carolina and Kimchon, Korea to produce other glass fiber products needed to support our growth strategy in building and construction applications. As a result, the Company recorded $2 million of non-cash charges in the second quarter, primarily related to accelerated depreciation for equipment at the Anderson, South Carolina facility and $1 million of cash charges primarily related to retention.The Company does not expect to recognize significant incremental costs related to these actions.
Roofing Restructuring Actions
In December 2021, the Company took actions to restructure operations within the Roofing segment's components product line by relocating production assets from China to India which will allow the business to optimize its manufacturing network and support a tariff mitigation strategy. During the first six months of 2022, the Company recorded less than $1 million of charges primarily related to accelerated depreciation and severance. The Company expects to recognize $7 million of incremental charges related to these actions in 2022.
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
10. RESTRUCTURING, ACQUISITION AND DIVESTITURE-RELATED COSTS (continued)
Santa Clara Insulation Site
During the third quarter of 2021, the Company entered into a purchase and sale agreement for the Company's Insulation site in Santa Clara, California. The Company expects to continue operations at this facility through the thirdearly fourth quarter of 2022 and complete the transaction in the first quarter of 2023. This action is part of the Company's on-going strategy to operate a flexible, cost-efficient manufacturing network and geographically locate its assets to better service its customers. Cumulative cash pre-tax charges associated with the transaction are expected to be in the range of $30 million to $40 million, primarily related to severance and one-time employee termination benefits, demolition costs, and other closing costs. In addition, cumulative non-cash charges are expected to be in the range of $75 million to $85 million, primarily consisting of accelerated depreciation of property, plant and equipment and derecognition of the carrying value of land, which will offset the gross proceeds at closing.
- 20 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
9. RESTRUCTURING AND ACQUISITION-RELATED COSTS (continued)
In the third quarter,2022, the Company recorded $19$13 million of charges, comprised of $12 million of severance, $5 million ofprimarily related to accelerated depreciation, and $2 million of pension related charges in the quarter, associated with this agreement.
2020 Insulation Restructuring Actions
During the fourth quarter of 2020, the Company took actions to avoid future capital outlays and reduce costs in its global Insulation segment, mainly through decisions to close certain manufacturing facilities in Shanghai, China and Fresno, Texas, and optimize a facility in Parainen, Finland. During the first ninesix months of 2021,2022, the Company recorded $3$1 million of charges primarily related to accelerated depreciation. The Company expects to recognize approximately $1 million of incremental charges in 2021 related to these actions.
2020 Composites Restructuring Actions
During 2020, the Company took actions to reduce costs throughout its global Composites segment primarily through global workforce reductions, closure of manufacturing lines and other asset write-offs. The Company does not expect to recognize significant incremental costs related to these actions.
In the first quarter of 2022, the Company recognized a gain of $27 million in Other expense (income), net on the Consolidated Statements of Earnings, associated with the sale of the manufacturing facility in Shanghai, China.
Acquisition-Related Restructuring
Following the acquisitions of Paroc Group Oy ("Paroc") and Pittsburgh Corning Corporation and Pittsburgh Corning Europe NV (collectively, "Pittsburgh Corning") into the Company's Insulation segment, the Company took actions to realize expected synergies from the newly acquired operations. The Company does not expect to recognize significant incremental costs related to these actions.
Consolidated Statements of Earnings (Loss) Classification
The following table presents the impact and respective location of total restructuring, acquisition and divestiture-related costs on the Consolidated Statements of Earnings, (Loss), which are included within Corporate, Other and Eliminations (in millions):
| | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | Nine Months Ended
September 30, |
| Type of cost | Location | 2021 | 2020 | 2021 | 2020 |
| Accelerated depreciation | Cost of sales | $ | 6 | | $ | — | | $ | 8 | | $ | 1 | |
| Other exit costs | Cost of sales | — | | — | | — | | 3 | |
| Other exit costs | Marketing and administrative expenses | — | | — | | 1 | | — | |
| Severance | Other (income) expenses, net | 12 | | — | | 10 | | 5 | |
| Other exit (gains)/costs (a) | Other (income) expenses, net | (15) | | — | | (14) | | 1 | |
| Other exit costs | Non-operating income | 2 | | — | | 2 | | — | |
| Total restructuring costs | | $ | 5 | | $ | — | | $ | 7 | | $ | 10 | |
(a) Other exit (gains)/costs in the third quarter of 2021 includes a $15 million gain related to the sale of land in Thimmapur, India. Please refer to Note 11 of our 2017 Form 10-K for more information about the 2017 Cost Reduction actions. | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | Six Months Ended June 30, |
| Type of cost | Location | 2022 | 2021 | 2022 | 2021 |
| Accelerated depreciation | Cost of sales | $ | 7 | | 1 | | $ | 13 | | $ | 2 | |
| | | | | |
| Other exit costs | Marketing and administrative expenses | 3 | | 1 | | 3 | | 1 | |
| Severance | Other expense (income), net | 1 | | (2) | | 1 | | (2) | |
| Other exit gains/costs | Other expense (income), net | 29 | | 1 | | 2 | | 1 | |
| Acquisition-related costs | Marketing and administrative expenses | 3 | | — | | 3 | | — | |
| | | | | |
| Total restructuring, acquisition and divestiture-related costs | | $ | 43 | | $ | 1 | | $ | 22 | | $ | 2 | |
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
9.10. RESTRUCTURING, ACQUISITION AND ACQUISITION-RELATEDDIVESTITURE-RELATED COSTS (continued)
Summary of Unpaid Liabilities
The following table summarizes the status of the unpaid liabilities from the Company's restructuring activities (in millions):
| | | Santa Clara Insulation Site | 2020 Insulation Restructuring Actions | 2020 Composites Restructuring Actions | Acquisition-Related Restructuring | | | Exit of DUCS Product Line | Roofing Components Restructuring Actions | Santa Clara Insulation Site | 2020 Insulation Restructuring Actions | | Acquisition Related Restructuring | |
| Balance at December 31, 2020 | $ | — | | $ | 2 | | $ | 2 | | $ | 9 | | | |
| Restructuring costs/(gains) | 19 | | 3 | | — | | (1) | | | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | $ | — | | $ | 1 | | $ | 13 | | $ | 1 | | | $ | 5 | | |
| Restructuring costs | | Restructuring costs | 3 | | — | | 13 | | 1 | | | — | | |
| Payments | Payments | — | | (2) | | (2) | | (2) | | | Payments | — | | — | | (4) | | (1) | | | (2) | | |
| Accelerated depreciation and other non-cash items | Accelerated depreciation and other non-cash items | (7) | | (2) | | — | | — | | | Accelerated depreciation and other non-cash items | (2) | | — | | (10) | | (1) | | | — | | |
| | Balance at September 30, 2021 | $ | 12 | | $ | 1 | | $ | — | | $ | 6 | | | |
| Balance at June 30, 2022 | | Balance at June 30, 2022 | $ | 1 | | $ | 1 | | $ | 12 | | $ | — | | | 3 | |
| Cumulative charges incurred | Cumulative charges incurred | $ | 19 | | $ | 26 | | $ | 13 | | $ | 28 | | | Cumulative charges incurred | $ | 3 | | $ | 5 | | $ | 38 | | $ | 28 | | | $ | 27 | | |
As of SeptemberJune 30, 2021,2022, the remaining liability balance is comprised of $19$17 million of severance, inclusive of $14$1 million of non-current severance and $5$16 million of severance the Company expects to pay over the next twelve months.
- 2224 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
10.11. DEBT
Details of the Company’s outstanding long-term debt, as well as the fair values, are as follows (in millions):
| | | September 30, 2021 | | December 31, 2020 | | June 30, 2022 | | December 31, 2021 |
| | Carrying Value | Fair Value | | Carrying Value | Fair Value | | | Carrying Value | Fair Value | | Carrying Value | Fair Value | |
| | 4.200% senior notes, net of discount and financing fees, due 2022 | $ | — | | n/a | | $ | 184 | | 106 | % | | |
| 4.200% senior notes, net of discount and financing fees, due 2024 | 4.200% senior notes, net of discount and financing fees, due 2024 | 396 | | 109 | % | | 396 | | 111 | % | | 4.200% senior notes, net of discount and financing fees, due 2024 | $ | 397 | | 100 | % | | $ | 397 | | 107 | % | |
| 3.400% senior notes, net of discount and financing fees, due 2026 | 3.400% senior notes, net of discount and financing fees, due 2026 | 397 | | 108 | % | | 397 | | 111 | % | | 3.400% senior notes, net of discount and financing fees, due 2026 | 397 | | 96 | % | | 397 | | 106 | % | |
| 3.950% senior notes, net of discount and financing fees, due 2029 | 3.950% senior notes, net of discount and financing fees, due 2029 | 446 | | 112 | % | | 445 | | 115 | % | | 3.950% senior notes, net of discount and financing fees, due 2029 | 446 | | 93 | % | | 446 | | 110 | % | |
| 3.875% senior notes, net of discount and financing fees, due 2030 | 3.875% senior notes, net of discount and financing fees, due 2030 | 297 | | 111 | % | | 297 | | 115 | % | | 3.875% senior notes, net of discount and financing fees, due 2030 | 298 | | 92 | % | | 297 | | 109 | % | |
| 7.000% senior notes, net of discount and financing fees, due 2036 | 7.000% senior notes, net of discount and financing fees, due 2036 | 368 | | 144 | % | | 368 | | 142 | % | | 7.000% senior notes, net of discount and financing fees, due 2036 | 368 | | 110 | % | | 368 | | 141 | % | |
| 4.300% senior notes, net of discount and financing fees, due 2047 | 4.300% senior notes, net of discount and financing fees, due 2047 | 589 | | 116 | % | | 588 | | 120 | % | | 4.300% senior notes, net of discount and financing fees, due 2047 | 589 | | 82 | % | | 589 | | 115 | % | |
| 4.400% senior notes, net of discount and financing fees, due 2048 | 4.400% senior notes, net of discount and financing fees, due 2048 | 390 | | 118 | % | | 390 | | 121 | % | | 4.400% senior notes, net of discount and financing fees, due 2048 | 390 | | 83 | % | | 390 | | 118 | % | |
| | Various finance leases, due through 2036 (a) | 97 | | 100 | % | | 78 | | 100 | % | | |
| Various finance leases, due through 2050 (a) | | Various finance leases, due through 2050 (a) | 127 | | 100 | % | | 99 | | 100 | % | |
| Other | Other | 2 | | n/a | | 2 | | n/a | | Other | 2 | | N/A | | 2 | | N/A | |
| Total long-term debt | Total long-term debt | 2,982 | | n/a | | 3,145 | | n/a | | Total long-term debt | 3,014 | | N/A | | 2,985 | | N/A | |
| Less – current portion (a) | Less – current portion (a) | 24 | | 100 | % | | 19 | | 100 | % | | Less – current portion (a) | 25 | | 100 | % | | 25 | | 100 | % | |
| Long-term debt, net of current portion | Long-term debt, net of current portion | $ | 2,958 | | n/a | | $ | 3,126 | | n/a | | Long-term debt, net of current portion | $ | 2,989 | | N/A | | $ | 2,960 | | N/A | |
(a) The Company determined that the book value of the above noted long-term debt instruments approximates fair value.
The fair values of the Company's outstanding long-term debt instruments were estimated using market observable inputs, including quoted prices in active markets, market indices and interest rate measurements. Within the hierarchy of fair value measurements, these are Level 2 fair values.
Senior Notes
The Company issued $300 million of 2030 senior notes on May 12, 2020. Interest on the notes is payable semiannually in arrears on June 1 and December 1 each year, beginning on December 1, 2020. The proceeds from these notes were used for general corporate purposes.
The Company issued $450 million of 2029 senior notes on August 12, 2019. Interest on the notes is payable semiannually in arrears on February 15 and August 15 each year, beginning on February 15, 2020. The proceeds from these notes were used to repay $416 million of our 2022 senior notes and $34 million of our 2036 senior notes.
The Company issued $400 million of 2048 senior notes on January 25, 2018. Interest on the notes is payable semiannually in arrears on January 30 and July 30 each year, beginning on July 30, 2018. The proceeds from these notes were used, along with borrowings on a $600 million term loan commitment and borrowings on the Receivables Securitization Facility (as defined below), to fund the purchase of Paroc in the first quarter of 2018.
The Company issued $600 million of 2047 senior notes on June 26, 2017. Interest on the notes is payable semiannually in arrears on January 15 and July 15 each year, beginning on January 15, 2018. A portion of the proceeds from these notes was used to fund the purchase of Pittsburgh Corning in 2017 and for general corporate purposes. The remaining proceeds were used to repay $144 million of our 2019 senior notes and $140 million of our 2036 senior notes.
The Company issued $400 million of 2026 senior notes on August 8, 2016. Interest on the notes is payable semiannually in arrears on February 15 and August 15 each year, beginning on February 15, 2017. A portion of the proceeds from these notes was used to repay $158 million of our 2016 senior notes. The remaining proceeds were used to pay down portions of our Receivables Securitization Facility and for general corporate purposes.
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
10.11. DEBT (continued)
The Company issued $400 million of 2024 senior notes on November 12, 2014. Interest on the notes is payable semiannually in arrears on June 1 and December 1 each year, beginning on June 1, 2015. A portion of the proceeds from these notes was used to repay $242 million of our 2016 senior notes and $105 million of our 2019 senior notes. The remaining proceeds were used to pay down our Senior Revolving Credit Facility (as defined below), finance general working capital needs, and for general corporate purposes.
The Company issued $600 million of 2022 senior notes on October 17, 2012. Interest on the notes is payable semiannually in arrears on June 15 and December 15 each year, beginning on June 15, 2013. The proceeds of these notes were used to repay $250 million of our 2016 senior notes and $100 million of our 2019 senior notes and pay down our Senior Revolving Credit Facility. On August 19, 2021, the Company issued a make-whole call to repay the remaining portion of its outstanding 2022 senior notes, and the redemption was completed in the third quarter of 2021. The Company recognized approximately $9 million of loss on extinguishment of debt in the third quarter of 2021 associated with these actions.
On October 31, 2006, the Company issued $550 million of 2036 senior notes. The proceeds of these notes were used to pay certain unsecured and administrative claims, finance general working capital needs and for general corporate purposes.
Collectively, the senior notes above are referred to as the “Senior Notes.” The Senior Notes are general unsecured obligations of the Company and rank pari passu with all existing and future senior unsecured indebtedness of the Company.
The Company has the option to redeem all or part of the Senior Notes at any time at a “make-whole” redemption price. The Company is subject to certain covenants in connection with the issuance of the Senior Notes that it believes are usual and customary. The Company was in compliance with these covenants as of SeptemberJune 30, 2021.2022.
Senior Revolving Credit Facility
The Company has an $800 million senior revolving credit facility (the "Senior Revolving Credit Facility") with a maturity date in July 2026 that includes both borrowings and letters of credit. Borrowings under the Senior Revolving Credit Facility may be used for general corporate purposes and working capital. The Company has the discretion to borrow under multiple options, which provide for varying terms and interest rates including the United States prime rate, federal funds rate plus a spread or LIBOR plus a spread.
In July 2021, the Senior Revolving Credit Facility was amended to extend the maturity date to July 2026. The newcurrent agreement also includes fallback language related to a benchmark reference rate replacement, when a LIBOR transition occurs, and eliminatedoccurs.
In June 2022, the minimum required interest expense coverage ratio covenant.Senior Revolving Credit Facility was amended to allow the Company to continue to operate in comprehensively sanctioned countries so long as it is not violating any sanctions.
The Senior Revolving Credit Facility contains various covenants, including a maximum allowed leverage ratio, that the Company believes are usual and customary for a senior unsecured credit agreement. The Company was in compliance with these covenants as of SeptemberJune 30, 2021.2022. Please refer to the Credit Facility Utilization section below for liquidity information as of SeptemberJune 30, 2021.2022.
Receivables Securitization Facility
The Company has a Receivables Purchase Agreement (RPA) that is accounted for as secured borrowings in accordance with ASC 860, "Accounting for Transfers and Servicing." Owens Corning Sales, LLC and Owens Corning Receivables LLC, each a subsidiary of the Company, have a $280 million RPA with certain financial institutions. The Company has the ability to borrow at the lenders' cost of funds, which approximates A-1/P-1 commercial paper rates vs. LIBOR, plus a fixed spread. In April 2021, the securitization facility (the "Receivables Securitization Facility") was amended to extend the maturity date to April 2024. The newcurrent agreement also includes fallback language related to a benchmark reference rate replacement, when a LIBOR transition occurs. The RPA has been amended from time to time, with a maturity date in April 2024.
The RPA contains various covenants, including a maximum allowed leverage ratio that the Company believes are usual and customary for a securitization facility. The Company was in compliance with these covenants as of SeptemberJune 30, 2021.2022. Please refer to the Credit Facility Utilization section below for liquidity information as of SeptemberJune 30, 2021.2022.
Owens Corning Receivables LLC’s sole business consists of the purchase or acceptance through capital contributions of trade receivables and related rights from Owens Corning Sales, LLC and the subsequent retransfer of or granting of a security interest in such trade receivables and related rights to certain purchasers who are party to the RPA. Owens Corning Receivables LLC is
- 24 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
10. DEBT (continued)
a separate legal entity with its own separate creditors who will be entitled, upon its liquidation, to be satisfied out of Owens Corning Receivables LLC’s assets prior to any assets or value in Owens Corning Receivables LLC becoming available to Owens Corning Receivables LLC’s equity holders. The assets of Owens Corning Receivables LLC are not available to pay creditors of the Company or any other affiliates of the Company or Owens Corning Sales, LLC.
- 26 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
11. DEBT (continued)
Credit Facility Utilization
The following table shows how the Company utilized its primary sources of liquidity (in millions):
| | | | Balance at September 30, 2021 | | Balance at June 30, 2022 |
| | | Senior Revolving Credit Facility | Receivables Securitization Facility | | Senior Revolving Credit Facility | Receivables Securitization Facility |
| Facility size or borrowing limit | Facility size or borrowing limit | | $ | 800 | | $ | 280 | | Facility size or borrowing limit | $ | 800 | | $ | 280 | |
| Collateral capacity limitation on availability | Collateral capacity limitation on availability | | n/a | — | | Collateral capacity limitation on availability | N/A | — | |
| Outstanding borrowings | Outstanding borrowings | | — | | — | | Outstanding borrowings | — | | — | |
| Outstanding letters of credit | Outstanding letters of credit | | 4 | | 1 | | Outstanding letters of credit | 4 | | 1 | |
| Availability on facility | Availability on facility | | $ | 796 | | $ | 279 | | Availability on facility | $ | 796 | | $ | 279 | |
Short-Term Debt
Short-term borrowings were $2$1 million and $1$6 million as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. The short-term borrowings consisted of various operating lines of credit. The weighted average interest rate on all short-term borrowings was approximately 1.4%5.7% and 1.1%1.5% as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively.
- 2527 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
11.12. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Pension Plans
The Company sponsors defined benefit pension plans. Under the plans, pension benefits are based on an employee’semployees' years of service and, for certain categories of employees, qualifying compensation. Company contributions to these pension plans are determined by an independent actuary to meet or exceed minimum funding requirements. In our non-U.S. plans, the unrecognized cost of any retroactive amendments and actuarial gains and losses are amortized over the average future service period of plan participants expected to receive benefits. In our U.S. plans, the unrecognized cost of any retroactive amendments and actuarial gains and losses are amortized over the average remaining life expectancy of the inactive participants as substantially all of the plan participants are inactive. In our non-U.S. plans, the unrecognized cost of any retroactive amendments and actuarial gains and losses are amortized over the average future service period of plan participants expected to receive benefits.
The following table provides information regarding pension expense recognized (in millions): | | | Three Months Ended September 30, | | Three Months Ended June 30, |
| | 2021 | 2020 | | 2022 | 2021 |
| | U.S. | Non-U.S. | Total | U.S. | Non-U.S. | Total | | U.S. | Non-U.S. | Total | U.S. | Non-U.S. | Total |
| Components of Net Periodic Pension Cost | Components of Net Periodic Pension Cost | | Components of Net Periodic Pension Cost | |
| Service cost | Service cost | $ | 1 | | $ | 1 | | $ | 2 | | $ | 1 | | $ | 1 | | $ | 2 | | Service cost | $ | 1 | | $ | 1 | | $ | 2 | | $ | 2 | | $ | 1 | | $ | 3 | |
| Interest cost | Interest cost | 6 | | 3 | | 9 | | 7 | | 2 | | 9 | | Interest cost | 6 | | 2 | | 8 | | 5 | | 2 | | 7 | |
| Expected return on plan assets | Expected return on plan assets | (9) | | (5) | | (14) | | (11) | | (4) | | (15) | | Expected return on plan assets | (9) | | (4) | | (13) | | (9) | | (4) | | (13) | |
| | Amortization of actuarial loss | Amortization of actuarial loss | 3 | | 1 | | 4 | | 3 | | 1 | | 4 | | Amortization of actuarial loss | 3 | | 1 | | 4 | | 3 | | 1 | | 4 | |
| | Contractual termination benefit | 2 | | — | | 2 | | — | | — | | — | | |
| | | Net periodic pension cost | Net periodic pension cost | $ | 3 | | $ | — | | $ | 3 | | $ | — | | $ | — | | $ | — | | Net periodic pension cost | $ | 1 | | $ | — | | $ | 1 | | $ | 1 | | $ | — | | $ | 1 | |
| | | Nine Months Ended September 30, | | Six Months Ended June 30, | |
| | 2021 | 2020 | | 2022 | 2021 | |
| | U.S. | Non-U.S. | Total | U.S. | Non-U.S. | Total | | U.S. | Non-U.S. | Total | U.S. | Non-U.S. | Total | |
| Components of Net Periodic Pension Cost | Components of Net Periodic Pension Cost | | Components of Net Periodic Pension Cost | | |
| Service cost | Service cost | $ | 4 | | $ | 4 | | $ | 8 | | $ | 4 | | $ | 3 | | $ | 7 | | Service cost | $ | 2 | | $ | 2 | | $ | 4 | | $ | 3 | | $ | 3 | | $ | 6 | | |
| Interest cost | Interest cost | 17 | | 7 | | 24 | | 21 | | 7 | | 28 | | Interest cost | 12 | | 5 | | 17 | | 11 | | 4 | | 15 | | |
| Expected return on plan assets | Expected return on plan assets | (27) | | (14) | | (41) | | (34) | | (12) | | (46) | | Expected return on plan assets | (18) | | (8) | | (26) | | (18) | | (9) | | (27) | | |
| | Amortization of actuarial loss | Amortization of actuarial loss | 9 | | 3 | | 12 | | 9 | | 3 | | 12 | | Amortization of actuarial loss | 6 | | 1 | | 7 | | 6 | | 2 | | 8 | | |
| | Contractual termination benefit | 2 | | — | | 2 | | — | | — | | — | | |
| | | Net periodic pension cost | Net periodic pension cost | $ | 5 | | $ | — | | $ | 5 | | $ | — | | $ | 1 | | $ | 1 | | Net periodic pension cost | $ | 2 | | $ | — | | $ | 2 | | $ | 2 | | $ | — | | $ | 2 | | |
The Company does not expect to contribute to the U.S. pension plans during 2021.2022. The Company expects to contribute $25 million in cash to non-U.S. plans during 2021.2022. The Company made cash contributions of $3$2 million to the non-U.S. plans during the ninesix months ended SeptemberJune 30, 2021.2022.
Postemployment and Postretirement Benefits Other than Pensions ("OPEB")
The Company maintains healthcare and life insurance benefit plans for certain retired employees and their dependents. The health care plans in the United States are non-funded and pay either (1) stated percentages of covered medically necessary expenses, after subtracting payments by Medicare or other providers and after stated deductibles have been met, or (2) fixed amounts of medical expense reimbursement.
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
11.12. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS (continued)
The following table provides the components of net periodic benefit cost for aggregated U.S. and non-U.S. plans for the periods indicated (in millions):
| | | Three Months Ended
September 30, | Nine Months Ended
September 30, | | Three Months Ended
June 30, | Six Months Ended
June 30, |
| | 2021 | 2020 | 2021 | 2020 | | 2022 | 2021 | 2022 | 2021 |
| Components of Net Periodic Benefit Cost | Components of Net Periodic Benefit Cost | | Components of Net Periodic Benefit Cost | |
| Service cost | Service cost | $ | — | | $ | — | | $ | 1 | | $ | 1 | | Service cost | $ | — | | $ | 1 | | $ | 1 | | $ | 1 | |
| Interest cost | Interest cost | 1 | | 1 | | 3 | | 4 | | Interest cost | 1 | | 1 | | 2 | | 2 | |
| Amortization of prior service credit | Amortization of prior service credit | — | | — | | (1) | | (2) | | Amortization of prior service credit | — | | (1) | | — | | (1) | |
| Amortization of actuarial gain | Amortization of actuarial gain | (2) | | (2) | | (6) | | (6) | | Amortization of actuarial gain | (2) | | (2) | | (4) | | (4) | |
| Net periodic benefit income | Net periodic benefit income | $ | (1) | | $ | (1) | | $ | (3) | | $ | (3) | | Net periodic benefit income | $ | (1) | | $ | (1) | | $ | (1) | | $ | (2) | |
12.
- 29 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
13. CONTINGENT LIABILITIES AND OTHER MATTERS
The Company may be involved in various legal and regulatory proceedings relating to employment, antitrust, tax, product liability, environmental, contracts, intellectual property and other matters (collectively, “Proceedings”). The Company regularly reviews the status of such Proceedings along with legal counsel. Liabilities for such Proceedings are recorded when it is probable that the liability has been incurred and when the amount of the liability can be reasonably estimated. Liabilities are adjusted when additional information becomes available. Management believes that the amount of any reasonably possible losses in excess of any amounts accrued, if any, with respect to such Proceedings or any other known claim, including the matters described below under the caption Environmental Matters (the “Environmental Matters”), are not material to the Company’s financial statements. Management believes that the ultimate disposition of the Proceedings and the Environmental Matters will not have a material adverse effect on the Company’s financial condition. While the likelihood is remote, the disposition of the Proceedings and Environmental Matters could have a material impact on the results of operations, cash flows or liquidity in any given reporting period.
Litigation and Regulatory Proceedings
The Company is involved in litigation and regulatory proceedings from time to time in the regular course of its business. The Company believes that adequate provisions for resolution of all contingencies, claims and pending matters have been made for probable losses that are reasonably estimable.
Environmental Matters
The Company has established policies and procedures designed to ensure that its operations are conducted in compliance with all relevant laws and regulations and that enable the Company to meet its high standards for corporate sustainability and environmental stewardship. Our manufacturing facilities are subject to numerous foreign, federal, state and local laws and regulations relating to the presence of hazardous materials, pollution and protection of the environment, including emissions to air, reductions of greenhouse gases, discharges to water, management of hazardous materials, handling and disposal of solid wastes, use of chemicals in our manufacturing processes, and remediation of contaminated sites. All Company manufacturing facilities operate using an ISO 14001 or equivalent environmental management system. The Company’s 2030 Sustainability Goals include significant global reductions in energy use, water consumption, waste to landfill, and emissions of greenhouse gases, fine particulate matter, and volatile organic air emissions, and protection of biodiversity.
- 27 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
12. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)
Owens Corning is involved in remedial response activities and is responsible for environmental remediation at a number of sites, including certain of its currently owned or formerly owned plants. These responsibilities arise under a number of laws, including, but not limited to, the Federal Resource Conservation and Recovery Act, and similar state or local laws pertaining to the management and remediation of hazardous materials and petroleum. The Company has also been named a potentially responsible party under the U.S. Federal Superfund law, or state equivalents, at a number of disposal sites. The Company became involved in these sites as a result of government action or in connection with business acquisitions. As of SeptemberJune 30, 2021,2022, the Company was involved with a total of 2223 sites worldwide, including 910 Superfund and state equivalent sites and 13 owned or formerly owned sites. None of the liabilities for these sites are individually significant to the Company.
Remediation activities generally involve a potential range of activities and costs related to soil, groundwater, and sediment contamination. This can include pre-cleanup activities such as fact-finding and investigation, risk assessment, feasibility studies, remedial action design and implementation (where actions may range from monitoring to removal of contaminants, to installation of longer-term remediation systems). A number of factors affect the cost of environmental remediation, including the number of parties involved in a particular site, the determination of the extent of contamination, the length of time the remediation may require, the complexity of environmental regulations, variability in clean-up standards, the need for legal action, and changes in remediation technology. Taking these factors into account, Owens Corning has predictedreasonably estimates the costs of remediation reasonably estimated to be paid over a period of years. The Company accrues an amount on an undiscounted basis, consistent with the reasonable estimates of these costs when ita liability is probable that a liability has been incurred.and reasonably estimable. Actual cost may differ from these estimates for the reasons mentioned above. At SeptemberJune 30, 2021,2022, the Company had an accrual totaling $4$6 million for these costs, of which the current portion is $1 million. Changes in required remediation procedures or timing of those procedures, or discovery of contamination at additional sites, could result in material increases to the Company’s environmental obligations.
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
13.14. STOCK COMPENSATION
Description of the Plan
On April 18, 2019, the Company’s stockholders approved the Owens Corning 2019 Stock Plan (the “2019 Stock Plan”) which authorizes grants of stock options, stock appreciation rights, restricted stock awards, restricted stock units, bonus stock awards and performance share awards. At SeptemberJune 30, 2021,2022, the number of shares remaining available under the 2019 Stock Plan for all stock awards was approximately 3.12.7 million.
Prior to 2019, employees were eligible to receive stock awards under the Owens Corning 2016 Stock Plan and the Owens Corning 2013 Stock Plan.
Total Stock-Based Compensation Expense
Stock-based compensation expense included in Marketing and administrative expenses in the accompanying Consolidated Statements of Earnings (Loss) is as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| Total stock-based compensation expense | $ | 12 | | | $ | 11 | | | $ | 36 | | | $ | 31 | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Total stock-based compensation expense | $ | 13 | | | $ | 12 | | | $ | 25 | | | $ | 24 | |
| | | | | | | |
Stock Options
The Company has granted stock options under its stockholder approved stock plans. The Company calculates a weighted-average grant-date fair value using a Black-Scholes valuation model for options granted. Compensation expense for options is measured based on the fair market value of the option on the date of grant, and is recognized on a straight-line basis over a four year vesting period. In general, the exercise price of each option awarded was equal to the closing market price of the Company’s common stock on the date of grant and an option’s maximum term is 10 years. The volatility assumption was based on a benchmark study of our peers prior to 2014. Starting with the options granted in 2014, the volatility was based on the Company’s historic volatility.
The Company has not granted stock options since the year ended December 31, 2014. As of SeptemberJune 30, 2021,2022, there was no unrecognized compensation cost related to stock options and the range of exercise prices on outstanding stock options was $37.65 - $42.16.
The following table summarizes the Company’s stock option activity:
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Weighted-Average | | |
| | Number of Options | | Exercise Price | | Remaining
Contractual Life
(in years) | | Intrinsic Value (in millions) |
| Outstanding, December 31, 2020 | 361,775 | | | $ | 37.77 | | | 1.50 | | $ | 14 | |
| | | | | | | |
| Exercised | (215,875) | | | 37.42 | | | | | |
| | | | | | | |
| | | | | | | |
| Outstanding, September 30, 2021 | 145,900 | | | $ | 38.30 | | | 1.09 | | $ | 7 | |
| Exercisable, September 30, 2021 | 145,900 | | | $ | 38.30 | | | 1.09 | | $ | 7 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Weighted-Average | | |
| | Number of Options | | Exercise Price | | Remaining
Contractual Life
(in years) | | Intrinsic Value (in millions) |
| Outstanding, December 31, 2021 | 55,900 | | | $ | 39.34 | | | 1.71 | | $ | 3 | |
| | | | | | | |
| Exercised | (4,800) | | | 41.03 | | | | | |
| | | | | | | |
| | | | | | | |
| Outstanding, June 30, 2022 | 51,100 | | | $ | 39.19 | | | 1.26 | | $ | 2 | |
| Exercisable, June 30, 2022 | 51,100 | | | $ | 39.19 | | | 1.26 | | $ | 2 | |
- 2931 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
13.14. STOCK COMPENSATION (continued)
Restricted Stock Awards and Restricted Stock Units
The Company has granted restricted stock awards and restricted stock units (collectively referred to as “RSUs”)(RSUs) under its stockholder approved stock plans. Compensation expense for RSUs is measured based on the closing market price of the stock at date of grant and is recognized on a straight-line basis over the vesting period, which is typically three or four years. The Stock Plan allows alternate vesting schedules for death, disability, and retirement. The weighted average grant date fair value of RSUs granted in 20212022 was $83.72.$91.12.
The following table summarizes the Company’s RSU plans:
| | | | Number of RSUs | Weighted-Average
Fair Value | | Number of RSUs | Weighted-Average
Fair Value |
| Balance at December 31, 2020 | 1,419,454 | | $ | 54.99 | | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | 1,268,993 | | $ | 62.25 | |
| Granted | Granted | 352,126 | | 83.72 | | Granted | 340,927 | | 91.12 | |
| Vested | Vested | (449,207) | | 56.51 | | Vested | (299,440) | | 67.70 | |
| Forfeited | Forfeited | (46,074) | | 66.15 | | Forfeited | (35,582) | | 74.48 | |
| Balance at September 30, 2021 | 1,276,299 | | $ | 61.83 | | |
| Balance at June 30, 2022 | | Balance at June 30, 2022 | 1,274,898 | | $ | 68.23 | |
As of SeptemberJune 30, 2021,2022, there was $37$45 million of total unrecognized compensation cost related to RSUs. That cost is expected to be recognized over a weighted-average period of 2.442.52 years. The total grant date fair value of shares vested during the ninesix months ended SeptemberJune 30, 2022 and 2021 and 2020 was $25$20 million and $22$24 million, respectively.
Performance Share Awards and Performance Share Units
The Company has granted performance share awards and performance share units (collectively referred to as “PSUs”)(PSUs) as a part of its long-term incentive plan. All outstanding performance grants will fully settle in stock. The amount of stock ultimately distributed from all performance shares is contingent on meeting internal company-based metrics or an external-based stock performance metric.
In the ninesix months ended SeptemberJune 30, 2021,2022, the Company granted both internal company-based and external-based metric PSUs.
Internal Company-based metrics
The internal company-based metrics are based on various Company metrics and typically vest over a three-year period. The amount of stock distributed will vary from 0% to 300% of PSUs awarded depending on each award's design and performance versus the internal Company-based metrics.
The initial fair value for all internal Company-based metric PSUs assumes that the performance goals will be achieved and is based on the grant date stock price. This assumption is monitored quarterly and if it becomes probable that such goals will not be achieved or will be exceeded, compensation expense recognized will be adjusted and previous surplus compensation expense recognized will be reversed or additional expense will be recognized. The expected term represents the period from the grant date to the end of the vesting period. Pro-rata vesting may be utilized in the case of death, disability or approved retirement and awards, if earned, will be paid at the end of the vesting period.
External-based metrics
The external-based metrics vest after a three-yearthree-year period. Outstanding grants are based on the Company's total stockholder return relative to the performance of the Dow Jones U.S. Construction & Materials Index. The amount of stock distributed will vary from 0% to 200% of PSUs awarded depending on the relative stockholder return performance. The fair value of external-based metric PSUs has been estimated at the grant date using a Monte Carlo simulation that uses various assumptions.
- 3032 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
13.14. STOCK COMPENSATION (continued)
In the nine months ended September 30, 2021, the Company granted separate tranches of external-based metric PSU's subject to a Monte Carlo simulation. The following table provides a rangesummary of the assumptions for sharesunits granted in 2021:2022:
| | | | | | | | | |
| |
| | | | | |
Expected volatility | 42.74% — 43.67% | | | | |
Risk free interest rate | 0.18% — 0.24% | | | | |
Expected term (in years) | 2.56 — 2.90 | | | | |
Grant date fair value of units granted | $99.19 — $127.37 | | | | |
| | | | | | | | | |
| |
| | | | | |
| Expected volatility | 41.65% | | | | |
| Risk free interest rate | 1.36% | | | | |
| Expected term (in years) | 2.91 | | | | |
| Grant date fair value of units granted | $ | 122.69 | | | | |
The risk-free interest rate was based on zero couponzero-coupon United States Treasury bills at the grant date. The expected term represents the period from the grant date to the end of the three-year performance period.
PSU Summary
As of SeptemberJune 30, 2021,2022, there was $21$27 million total unrecognized compensation cost related to PSUs. That cost is expected to be recognized over a weighted-average period of 1.841.90 years. There were no shares vested during the nine months ended September 30, 2021. The total grant date fair value of shares vested during the nine months ended September 30, 2020 was $1 million.
The following table summarizes the Company’s PSU activity: | | | | Number
of PSUs | Weighted-Average
Grant-Date
Fair Value | | Number
of PSUs | Weighted-Average
Grant-Date
Fair Value |
| Balance at December 31, 2020 | 323,361 | | $ | 61.78 | | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | 309,971 | | $ | 74.78 | |
| Granted | Granted | 153,858 | | 85.81 | | Granted | 146,784 | | 98.94 | |
| | Forfeited | Forfeited | (23,130) | | 65.59 | | Forfeited | (7,459) | | 80.43 | |
| Balance at September 30, 2021 | 454,089 | | $ | 69.63 | | |
| Balance at June 30, 2022 | | Balance at June 30, 2022 | 449,296 | | $ | 82.56 | |
|
Employee Stock Purchase Plan
The Owens Corning Employee Stock Purchase Plan (ESPP)("ESPP") is a tax-qualified plan under Section 423 of the Internal Revenue Code. The purchase price of shares purchased under the ESPP is equal to 85% of the lower of the fair market value of shares of Owens Corning common stock at the beginning or ending of the offering period, which is a six-month period ending on May 31 and November 30 of each year. On April 16, 2020, the Company's stockholders approved the Amended and Restated Owens Corning Employee Stock Purchase Plan which increased the number of shares available for issuance under the plan by 4.2 million shares. As of SeptemberJune 30, 2021, 4.02022, 3.7 million shares remain available for purchase.
Included in total stock-based compensation expense is $1$2 million and $4$3 million of expense related to the Company's ESPP recognized during the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively. During the three and ninesix months ended SeptemberJune 30, 2020,2021, the Company recognized expense of $1$2 million and $4$3 million, respectively, related to the Company's ESPP. As of SeptemberJune 30, 2021,2022, there was $1$2 million of total unrecognized compensation cost related to the ESPP.
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
14.15. EARNINGS PER SHARE
The following table is a reconciliation of weighted-average shares for calculating basic and diluted earnings (loss) per-shareper share (in millions, except per share amounts):
| | | Three Months Ended
September 30, | Nine Months Ended
September 30, | | Three Months Ended
June 30, | Six Months Ended
June 30, |
| | 2021 | 2020 | 2021 | 2020 | | 2022 | 2021 | 2022 | 2021 |
| Net earnings (loss) attributable to Owens Corning | $ | 260 | | $ | 206 | | $ | 768 | | $ | (615) | | |
| Weighted-average number of shares outstanding used for basic earnings (loss) per share | 103.1 | | 108.8 | | 104.4 | | 108.7 | | |
| Net earnings attributable to Owens Corning | | Net earnings attributable to Owens Corning | $ | 343 | | $ | 298 | | $ | 647 | | $ | 508 | |
| Weighted-average number of shares outstanding used for basic earnings per share | | Weighted-average number of shares outstanding used for basic earnings per share | 97.6 | | 104.6 | | 98.6 | | 105.0 | |
| Non-vested restricted and performance shares | Non-vested restricted and performance shares | 0.7 | | 0.6 | | 0.7 | | — | | Non-vested restricted and performance shares | 0.8 | | 0.8 | | 0.7 | | 0.8 | |
| Options to purchase common stock | Options to purchase common stock | 0.1 | | 0.1 | | 0.1 | | — | | Options to purchase common stock | — | | 0.1 | | — | | 0.1 | |
| Weighted-average number of shares outstanding and common equivalent shares used for diluted earnings (loss) per share | 103.9 | | 109.5 | | 105.2 | | 108.7 | | |
| Earnings (loss) per common share attributable to Owens Corning common stockholders: | | |
| Weighted-average number of shares outstanding and common equivalent shares used for diluted earnings per share | | Weighted-average number of shares outstanding and common equivalent shares used for diluted earnings per share | 98.4 | | 105.5 | | 99.3 | | 105.9 | |
| Earnings per common share attributable to Owens Corning common stockholders: | | Earnings per common share attributable to Owens Corning common stockholders: | |
| Basic | Basic | $ | 2.52 | | $ | 1.89 | | $ | 7.36 | | $ | (5.66) | | Basic | $ | 3.51 | | $ | 2.85 | | $ | 6.56 | | $ | 4.84 | |
| Diluted | Diluted | $ | 2.50 | | $ | 1.88 | | $ | 7.30 | | $ | (5.66) | | Diluted | $ | 3.49 | | $ | 2.82 | | $ | 6.52 | | $ | 4.80 | |
For the three and ninesix months ended SeptemberJune 30, 2022 and June 30, 2021, there were no non-vested restricted or performance shares that had an anti-dilutive effect on earnings per share. For the three months ended September 30, 2020, there were no non-vested restricted or performance shares that had an anti-dilutive effect on earnings per share. For the nine months ended September 30, 2020, diluted earnings per share was equal to basic earnings per share due to the net loss attributable to Owens Corning.
On December 3, 2020,February 14, 2022, the Board of Directors approved a new share buy-back program under which the Company is authorized to repurchase up to 10 million shares of the Company’s outstanding common stock (the “Repurchase Authorization”"Repurchase Authorization"). The Repurchase Authorization enables the Company to repurchase shares through the open market, privately negotiated, or other transactions. The actual number of shares repurchased will depend on timing, market conditions and other factors and iswill be at the Company’sCompany's discretion. The Company repurchased 4.63.5 million shares of its common stock for $422$315 million during the ninesix months ended SeptemberJune 30, 2021,2022, under the Repurchase Authorization. As of SeptemberJune 30, 2021, 4.92022, 9.9 million shares remain available for repurchase under the Repurchase Authorization.
- 3234 -
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
15.16. INCOME TAXES
The following table provides the Income tax expense (in millions) and effective tax rate for the periods indicated:
| | | Three Months Ended September 30, | Nine Months Ended September 30, | | Three Months Ended June 30, | Six Months Ended June 30, |
| | 2021 | 2020 | 2021 | 2020 | | 2022 | 2021 | 2022 | 2021 |
| Income tax expense | Income tax expense | $ | 94 | | $ | 56 | | $ | 250 | | $ | 119 | | Income tax expense | $ | 119 | | $ | 97 | | $ | 226 | | $ | 156 | |
| Effective tax rate | Effective tax rate | 27 | % | 21 | % | 25 | % | (24) | % | Effective tax rate | 26 | % | 25 | % | 26 | % | 24 | % |
The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the three months ended SeptemberJune 30, 20212022 is primarily due to U.S. state and local income tax expense, U.S. federal taxes on foreign earnings, foreign rate differential and other discrete adjustments. The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the ninesix months ended SeptemberJune 30, 2022 is primarily due to U.S. state and local income tax expense, U.S. federal taxes on foreign earnings, adjustments to valuation allowances against certain deferred tax assets, excess tax benefits related to stock compensation, and other discrete adjustments.
The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the three months ended June 30, 2021 is primarily due to U.S. state and local income tax expense, U.S. federal taxes on foreign earnings, excess tax benefits related to stock compensation, and other discrete adjustments. The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the six months ended June 30, 2021 is primarily due to U.S. state and local income tax expense, U.S. federal taxes on foreign earnings, adjustments to valuation allowances against certain deferred tax assets, excess tax benefits related to stock compensation, and other discrete adjustments.
The effective tax rate and the U.S. federal statutory tax rate for the three months ended September 30, 2020 is 21%. The effective tax rate was positively impacted by final regulations on global intangible low-taxed income (GILTI), offset by the impact of taxes on foreign earnings, U.S. state and local income tax expense, and other discrete adjustments. The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the nine months ended September 30, 2020 is primarily a result of charges related to the impairment of goodwill and certain other indefinite-lived intangible assets recorded in the first quarter of 2020, which were mostly non-deductible. In addition, non-cash charges of $15 million were recorded related to adjustments to valuation allowances against certain deferred tax assets. The remaining difference between the statutory rate of 21% and the effective rate was driven by the impact of recording U.S. state and local income tax expense and U.S. federal taxes on foreign earnings.
On July 20, 2020, the Internal Revenue Service (IRS) issued final regulations under IRC Section 951A permitting a taxpayer to elect to exclude from its inclusion of GILTI items of income subject to a high effective rate of foreign tax. As a result of the final regulations, the Company recorded a net non-cash income tax benefit of $13 million in the third quarter of 2020 relating to the 2018 and 2019 tax years and an increase in the valuation allowance.
The Company continues its current practice of asserting indefinite reinvestment in accordance with ASC 740 based on the laws as of enactment of theby applying current U.S. and foreign tax legislation commonly known as the U.S. Tax Cuts and Jobs Act of 2017.legislation.
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OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
16.17. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table summarizes the changes in accumulated other comprehensive income (deficit) (in millions):
| | | Three Months Ended
September 30, | Nine Months Ended
September 30, | | | Three Months Ended
June 30, | Six Months Ended
June 30, | |
| | | | |
| | 2021 | 2020 | 2021 | 2020 | | | 2022 | 2021 | 2022 | 2021 | |
| Currency Translation Adjustment | Currency Translation Adjustment | | | Currency Translation Adjustment | | |
| Beginning balance | Beginning balance | $ | (233) | | $ | (351) | | $ | (220) | | $ | (282) | | | Beginning balance | $ | (306) | | $ | (265) | | $ | (279) | | $ | (220) | | |
| Net investment hedge amounts classified into AOCI, net of tax | Net investment hedge amounts classified into AOCI, net of tax | 4 | | (9) | | 7 | | 20 | | | Net investment hedge amounts classified into AOCI, net of tax | 2 | | (1) | | 4 | | 3 | | |
| | Gain/(loss) on foreign currency translation | (39) | | 46 | | (55) | | (52) | | | |
| Other comprehensive income/(loss), net of tax | (35) | | 37 | | (48) | | (32) | | | |
| Loss on foreign currency translation | | Loss on foreign currency translation | (54) | | 33 | | (83) | | (16) | | |
| Other comprehensive income (loss), net of tax | | Other comprehensive income (loss), net of tax | (52) | | 32 | | (79) | | (13) | | |
| Ending balance | Ending balance | $ | (268) | | $ | (314) | | $ | (268) | | $ | (314) | | | Ending balance | $ | (358) | | $ | (233) | | $ | (358) | | $ | (233) | | |
| Pension and Other Postretirement Adjustment | Pension and Other Postretirement Adjustment | | | Pension and Other Postretirement Adjustment | | |
| Beginning balance | Beginning balance | $ | (374) | | $ | (321) | | $ | (372) | | $ | (326) | | | Beginning balance | $ | (315) | | $ | (371) | | $ | (318) | | $ | (372) | | |
| Amounts reclassified from AOCI to net earnings, net of tax (a) | Amounts reclassified from AOCI to net earnings, net of tax (a) | 2 | | (3) | | 4 | | 4 | | | Amounts reclassified from AOCI to net earnings, net of tax (a) | 2 | | — | | 2 | | 2 | | |
Amounts classified into AOCI, net of tax (b) | Amounts classified into AOCI, net of tax (b) | 31 | | — | | 27 | | (2) | | | Amounts classified into AOCI, net of tax (b) | 4 | | (3) | | 7 | | (4) | | |
| | Other comprehensive income/(loss), net of tax | 33 | | (3) | | 31 | | 2 | | | |
| Other comprehensive income (loss), net of tax | | Other comprehensive income (loss), net of tax | 6 | | (3) | | 9 | | (2) | | |
| Ending balance | Ending balance | $ | (341) | | $ | (324) | | $ | (341) | | $ | (324) | | | Ending balance | $ | (309) | | $ | (374) | | $ | (309) | | $ | (374) | | |
| Hedging Adjustment | Hedging Adjustment | | | Hedging Adjustment | | |
| Beginning balance | Beginning balance | $ | 14 | | $ | (3) | | $ | 4 | | $ | (2) | | | Beginning balance | $ | 40 | | $ | 16 | | $ | 16 | | $ | 4 | | |
| Amounts reclassified from AOCI to net earnings, net of tax (c)(b) | Amounts reclassified from AOCI to net earnings, net of tax (c)(b) | (3) | | 2 | | (5) | | (2) | | | Amounts reclassified from AOCI to net earnings, net of tax (c)(b) | (12) | | (1) | | (20) | | (2) | | |
| Amounts classified into AOCI, net of tax | Amounts classified into AOCI, net of tax | 15 | | 1 | | 27 | | 4 | | | Amounts classified into AOCI, net of tax | 11 | | (1) | | 43 | | 12 | | |
| | Other comprehensive income, net of tax | 12 | | 3 | | 22 | | 2 | | | |
| Other comprehensive income (loss), net of tax | | Other comprehensive income (loss), net of tax | (1) | | (2) | | 23 | | 10 | | |
| Ending balance | Ending balance | $ | 26 | | $ | — | | $ | 26 | | $ | — | | | Ending balance | $ | 39 | | $ | 14 | | $ | 39 | | $ | 14 | | |
| Total AOCI ending balance | Total AOCI ending balance | $ | (583) | | $ | (638) | | $ | (583) | | $ | (638) | | | Total AOCI ending balance | $ | (628) | | $ | (593) | | $ | (628) | | $ | (593) | | |
(a)These AOCI components are included in the computation of total Pension and Other postretirement expense and are recorded in Non-operating income. See Note 1112 for additional information.
(b)Amounts classified into AOCI, net of tax includes the impact of a pension plan remeasurement that occurred in the third quarter of 2021 related to the purchase and sale agreement for the Company's Insulation site in Santa Clara, California. See Note 9 for additional information.
(c)Amounts reclassified from (loss)/gain on cash flow hedges are reclassified from AOCI to income when the hedged item affects earnings and is recognized in Cost of sales or Interest expense, net depending on the hedged item. See Note 4 for additional information.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis (MD&A)("MD&A") is intended to help investors understand Owens Corning, our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes thereto contained in this report. Unless the context requires otherwise, the terms “Owens Corning,” “Company,” “we” and “our” in this report refer to Owens Corning and its subsidiaries.
GENERAL
Owens Corning is a leading global producer of residentialbuilding and commercial buildingconstruction materials leader helping customers win in the market by providing innovative and of glass fiber reinforcements and other materials for composites.sustainable solutions. The Company has three reportablereporting segments: Composites, Insulation and Roofing. Through these lines of business, we manufacturethe Company manufactures and sellsells products worldwide. We maintain leading market positions in many of our major product categories.
EXECUTIVE OVERVIEW
Throughout the first nine months of 2021, the impact of the COVID-19 pandemic on our operations continued to wane due to the resumption of widespread economic activity and ensuing recovery in many of the markets we serve globally. Despite this lessening impact throughout 2021, we continue to monitor the COVID-19 pandemic for potential impacts on our business and take precautions to provide a safe environment for our employees and customers. The spread of the COVID-19 pandemic in 2020 caused an economic downturn on a global scale, the impact of which was felt across the markets served by our three segments. Our financial results in the three and nine months ended September 30, 2020, which serve as the basis for comparison in the paragraphs below, reflect the impact of the COVID-19 pandemic.
Net earnings attributable to Owens Corning were $260$343 million in the thirdsecond quarter of 2021,2022, compared to $206$298 million in the same period of 2020.2021. The Company reported $394$489 million in earnings before interest and taxes (EBIT)("EBIT") for the thirdsecond quarter of 20212022 compared to $296$428 million in the same period of 2020.2021. The Company generated $400$525 million in adjusted earnings before interest and taxes (“Adjusted EBIT”) for the thirdsecond quarter of 20212022 compared to $289$408 million in the same period of 2020.2021. See the Adjusted Earnings Before Interest and Taxes paragraph of the MD&A for further information regarding EBIT and Adjusted EBIT, including the reconciliation to net earnings (loss) attributable to Owens Corning. ThirdSecond quarter of 20212022 EBIT performance compared to the same period of 20202021 increased $51$56 million, $46$45 million, and $16$24 million in our Composites, Insulation, Composites, and Roofing segments, respectively. Within our Corporate, Other and Eliminations category, General corporate expense and other was relatively flat.increased by $8 million.
Cash and cash equivalents were $920$810 million as of SeptemberJune 30, 2021,2022, compared to $647$888 million as of SeptemberJune 30, 2020,2021 as a result of strongincreased cash flow providedoutflows from investing and financing activities, partially offset by operating activities.higher earnings. In the ninesix months ended SeptemberJune 30, 2021,2022, the Company's operating activities provided $1,168$624 million of cash flow, compared to $717$702 million in the same period in 2020. The change was primarily driven by higher earnings.2021 due to an increase in operating assets, specifically receivables and inventory, in 2022 compared to the same period of 2021.
As the Russian invasion of Ukraine evolves, we continue to closely monitor the potential impact on our businesses and our people. We believe that we have taken the necessary steps to ensure compliance with applicable regulatory restrictions on international trade and financial transactions associated with our Russian businesses. In late March, we announced our intent to exit Russia through a transfer or sale of our facilities. We are working to expedite our exit, while remaining committed to the safety and security of our employees in the region. Net sales from our Russian operations and its associated assets represent approximately 1% of annual consolidated net sales and consolidated assets, respectively.
On August 19, 2021, the Company issuedJuly 15, 2022, Owens Corning entered into a make-whole calllegally binding agreement to repayacquire the remaining portion of its outstanding 2022 senior notes, and the redemption was completed50% interest in Fiberteq. The acquisition is anticipated to close in the third quarter of 2021.2022.
On June 15, 2022, Owens Corning signed an agreement to acquire Natural Polymers, LLC, an innovative manufacturer of spray polyurethane foam insulation for building and construction applications. The Company recognized $9 million of loss on extinguishment of debttransaction has cleared regulatory approvals and other customary conditions and is anticipated to close in the third quarter of 2021 associated with these actions.
The Company repurchased 1.7 million shares of its common stock for $160 million in the third quarter of 2021 under a previously announced repurchase authorization (the "Share Repurchase Authorization"). As of September 30, 2021, 4.9 million shares remained available for repurchase under the Share Repurchase Authorization.2022.
On July 13, 2021,June 1, 2022, the Company acquired vliepa GmbH ("vliepa")all of the outstanding assets of WearDeck®, which specializes in the coating, printing,a premium producer of composite weather-resistant decking for commercial and finishing of nonwovens, paper, and filmresidential applications, for the building materials industry in Europe, for $42approximately $133 million, net of cash acquired. The acquisition broadensadvances the Company’s global nonwovens portfolioComposites business growth strategy to better serve European customers and accelerate growth offocus on high-value material solutions within the building and construction market applications in the region. Operatingindustry. The operating results of the acquisition and a preliminary purchase price allocation for WearDeck® have been included in the Company’s Composites segment within the Consolidated Financial Statements beginning July 13, 2021.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
On July 28, 2021,May 23, 2022, Owens Corning and Pultron formed a JV to manufacture and sell fiberglass rebar. The Company contributed approximately $47 million to acquire a 65.5% controlling interest and has established a redeemable noncontrolling interest related to Pultron, the minority holder. The JV expands Owens Corning’s capability to produce high-value material solutions by combining the Company’s glass-fiber material technology, channel access and extensive industry experience with Pultron’s manufacturing expertise and process efficiency. The fully consolidated operating results and a preliminary purchase price allocation for the JV have been included in the Company’s Composites segment within the Consolidated Financial Statements since the date of the formation of the JV. Subsequent to the JV formation, the JV acquired assets and technology from Pultron for approximately $65 million. The purchase price allocation is preliminary and resulted in the recognition of $15 million in intangible assets, consisting of technology, with an estimated weighted average life of 15 years and $42 million in goodwill.
On May 16, 2022, the Company entered into a purchase and sale agreementexercised the put option for the Company’s Insulation sitesale of the European portion of the DUCS product line located in Santa Clara, California to commercial real estate developer Panattoni for expected gross proceeds of approximately $240 million, including a non-refundable deposit of $50 million received at signing.Chambéry, France, within the Composite's segment. The Company expectsrecorded a pre-tax charge of $29 million in Other expense (income), net on the Consolidated Statements of Earnings to continue operations at this facility through third-quarterreflect fair value less cost to sell of these assets. Assets held for sale as of June 30, 2022 were $81 million and complete the transaction in first-quarter 2023. This action is part of the Company’s on-going strategy to operate a flexible, cost-efficient manufacturing network and geographically locate its assets to better service its customers. Cumulative cash pre-tax charges associated with the transaction are expected to be in the range of $30 million to $40 million, primarily related to severance and one-time employee termination benefits, demolition costs, and other closing costs. In addition, cumulative non-cash charges are expected to be in the range of $75 million to $85 million, primarily consisting of accelerated depreciationconsisted of property, plant and equipment and derecognitionequipment. On July 1, 2022, the Company closed on the sale of the carrying valueEuropean portion of land,the DUCS product line located in Chambéry, France.
On February 14, 2022, the Board of Directors approved a new share buy-back program under which will offset the gross proceeds at closing.Company is authorized to repurchase up to 10 million shares of the Company’s outstanding common stock (the "Repurchase Authorization"). The Company repurchased 1.0 million shares of its common stock for $86 million in the second quarter of 2022 under the Repurchase Authorization. As of June 30, 2022, 9.9 million shares remained available for repurchase under the Repurchase Authorization.
RESULTS OF OPERATIONS
Consolidated Results (in millions) | | | Three Months Ended
September 30, | Nine Months Ended
September 30, | | Three Months Ended
June 30, | Six Months Ended
June 30, |
| | 2021 | 2020 | 2021 | 2020 | | 2022 | 2021 | 2022 | 2021 |
| Net sales | Net sales | $ | 2,213 | | $ | 1,904 | | $ | 6,367 | | $ | 5,130 | | Net sales | $ | 2,601 | | $ | 2,239 | | $ | 4,947 | | $ | 4,154 | |
| Gross margin | Gross margin | $ | 596 | | $ | 477 | | $ | 1,658 | | $ | 1,126 | | Gross margin | $ | 734 | | $ | 618 | | $ | 1,353 | | $ | 1,062 | |
| % of net sales | % of net sales | 27 | % | 25 | % | 26 | % | 22 | % | % of net sales | 28 | % | 28 | % | 27 | % | 26 | % |
| Marketing and administrative expenses | Marketing and administrative expenses | $ | 186 | | $ | 163 | | $ | 548 | | $ | 493 | | Marketing and administrative expenses | $ | 201 | | $ | 188 | | $ | 385 | | $ | 362 | |
| Goodwill impairment charge | $ | — | | $ | — | | $ | — | | $ | 944 | | |
| Other (income) expenses, net | $ | (3) | | $ | 2 | | $ | (68) | | $ | 40 | | |
| Earnings (loss) before interest and taxes | $ | 394 | | $ | 296 | | $ | 1,123 | | $ | (399) | | |
| | Other expense (income), net | | Other expense (income), net | $ | 22 | | $ | (17) | | $ | (6) | | $ | (65) | |
| Earnings before interest and taxes | | Earnings before interest and taxes | $ | 489 | | $ | 428 | | $ | 931 | | $ | 729 | |
| Interest expense, net | Interest expense, net | $ | 31 | | $ | 35 | | $ | 97 | | $ | 98 | | Interest expense, net | $ | 26 | | $ | 33 | | $ | 54 | | $ | 66 | |
| Loss on extinguishment of debt | $ | 9 | | $ | — | | $ | 9 | | $ | — | | |
| | Income tax expense | Income tax expense | $ | 94 | | $ | 56 | | $ | 250 | | $ | 119 | | Income tax expense | $ | 119 | | $ | 97 | | $ | 226 | | $ | 156 | |
| Net earnings (loss) attributable to Owens Corning | $ | 260 | | $ | 206 | | $ | 768 | | $ | (615) | | |
| Net earnings attributable to Owens Corning | | Net earnings attributable to Owens Corning | $ | 343 | | $ | 298 | | $ | 647 | | $ | 508 | |
The Consolidated Results discussion below provides a summary of our results and the trends affecting our business, and should be read in conjunction with the more detailed Segment Results discussion that follows.
NET SALES
In the thirdsecond quarter and year-to-date 2021,2022, net sales increased $309$362 million and $1,237increased $793 million, respectively, compared to the same periods in 2020.2021. For the thirdsecond quarter and year-to-date, the increase in net sales was driven by the impact of higher selling prices in all three segments and higher sales volumes in Insulation and Roofing. For the year-to-date comparison, the increase in net sales was drivenfavorable customer mix which were partially offset by the impact of higherlower sales volumes and higher selling prices in all three segments, and the positiveunfavorable impact of translating sales denominated in foreign currencies into United States dollars.
GROSS MARGIN
In the thirdsecond quarter and year-to-date 2021,2022, gross margin increased $119$116 million and $532increased $291 million, respectively, compared to the same periods in 2020. For the third quarter, the increase in gross margin was2021 driven by higher selling prices, partially offset by higher input cost inflation and transportation costs in all three segments. For the year-to-date comparison, the increase in gross margin was driven by the impact of higher sales volumes and higher selling prices in all three segments, partially offset by higher input cost inflation in all three segments. The favorable comparison year-over-year to curtailment costs in our Composites and Insulation segments in 2020 provided additional benefit.
MARKETING AND ADMINISTRATIVE EXPENSES
In the third quarter and year-to-date 2021, marketing and administrative expenses increased $23 million and $55 million, respectively, compared to the same periods in 2020. For the third quarter and year-to-date, the increase in marketing and
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
MARKETING AND ADMINISTRATIVE EXPENSES
In the second quarter and year-to-date 2022, marketing and administrative expenses wasincreased $13 million and increased $23 million, respectively, compared to the same periods in 2021 driven primarily by higher performance-based compensation associated with an improved outlook for 2021 and higher general corporate expenses as business activities return to a more typical, post-pandemic level.
GOODWILL IMPAIRMENT CHARGE
The Company recorded a pre-tax non-cash impairment charge of $944 million in the first quarter of 2020 related to the Insulation reporting unit, which was equal to the excess of the reporting unit's carrying value over its fair value.
OTHER EXPENSE (INCOME) EXPENSES,, NET
In the thirdsecond quarter and year-to-date 2021,2022, other (income) expenses net decreased $5increased $39 million and $108increased $59 million, respectively, compared to the same periodperiods in 2020.2021. For the thirdsecond quarter, the decreaseincrease was driven primarily by the $15$29 million impairment loss on the Chambéry, France assets held for sale. For year-to-date, the increase was primarily driven by the $29 million impairment loss on the Chambéry, France assets held for sale and lower gains on sale of certain precious metals of $30 million. The $27 million gain on the sale of land in India partiallythe Shanghai, China facility was offset by $12 million of severance charges. For the year-to-date comparison, the decrease was driven by the favorable comparison year-over-year to intangible asset impairment charges of $43 million recognized in 2020. The remaining difference was driven by $25the $27 million of gains on settlements from contracts to purchase and sell wind-generated electricity $15 million of higher gains on sale of precious metals andin the $15 million gain on the sale of landsame period in India.2021.
INTEREST EXPENSE, NET
In the thirdsecond quarter and year-to-date 2021,2022, interest expense, net, was relatively flatdecreased $7 million and decreased $12 million, respectively, compared to the same periods in 2020.
LOSS ON EXTINGUISHMENT OF DEBT
During2021. The decrease was driven by lower long-term debt balances year over year due to the third quarterrepayment of 2021, the Company recognized a $9 million loss on extinguishment of debtsenior notes due in connection with the make-whole call to repay the remaining portion of its outstanding 2022 senior notes.and higher interest income.
INCOME TAX EXPENSE
Income tax expense for the three and ninesix months ended SeptemberJune 30, 20212022 was $94$119 million and $250$226 million, respectively. For the thirdsecond quarter of 2021,2022, the Company's effective tax rate was 27%26% and for the ninesix months ended SeptemberJune 30, 2021,2022, the Company's effective tax rate was 25%26%. The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the three months ended SeptemberJune 30, 20212022 is primarily due to U.S. state and local income tax expense, U.S. federal taxes on foreign earnings, foreign rate differential and other discrete adjustments. The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the ninesix months ended SeptemberJune 30, 2022 is primarily due to U.S. state and local income tax expense, U.S. federal taxes on foreign earnings, foreign rate differential and other discrete adjustments.
The realization of deferred tax assets depends on achieving a certain minimum level of future taxable income. Management currently believes that it is not reasonably possible that the minimum level of taxable income will be met within the next 12 months to reduce the valuation allowances of certain foreign jurisdictions.
Income tax expense for the three and six months ended June 30, 2021 was $97 million and $156 million. For the second quarter of 2021, the Company's effective tax rate was 25% and for the six months ended June 30, 2021 the Company's effective tax rate was 24%. The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the three months ended June 30, 2021 is primarily due to U.S. state and local income tax expense, U.S. federal taxes on foreign earnings, excess tax benefits related to stock compensation, and other discrete adjustments. The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the six months ended June 30, 2021 is primarily due to U.S. state and local income tax expense, U.S. federal taxes on foreign earnings, adjustments to valuation allowances against certain deferred tax assets, excess tax benefits related to stock compensation, and other discrete adjustments.
The realization of deferred tax assets depends on achieving a certain minimum level of future taxable income. Management currently believes that it is at least reasonably possible that the minimum level of taxable income will be met within the next 12 months to reduce the valuation allowances of certain foreign jurisdictions by a range of zero to $5 million.
Income tax expense for the threeRestructuring, Acquisition and nine months ended September 30, 2020 was $56 millionDivestiture-Related Costs
The Company has incurred restructuring, transaction and $119 million, respectively. For the third quarter of 2020, the Company's effective tax rate was 21%integration costs related to acquisitions and for the nine months ended September 30, 2020, the Company's effective tax rate was (24)%. The effective tax rate and the U.S. federal statutory tax rate for the three months ended September 30, 2020 is 21%. The effective tax rate was positively impacted by final regulations on global intangible low-taxed income (GILTI), offset by the impact of taxes on foreign earnings, U.S. state and local income tax expense,divestitures, along with restructuring and other discrete adjustments. The difference between the effective tax rateexit costs in connection with its global cost reduction and the U.S. federal statutory tax rate of 21% for the nine months ended September 30, 2020 is primarily a result of charges relatedproductivity initiatives and Company's growth strategy. These costs are recorded within Corporate, Other and Eliminations. Please refer to the impairment of goodwill and certain other indefinite-lived intangible assets recorded in the first quarter of 2020, which were mostly non-deductible. Non-cash charges of $15 million were recorded related to adjustments to valuation allowances against certain deferred tax assets. The remaining difference between the statutory rate of 21% and the effective rate was driven by the impact of recording U.S. state and local income tax expense and U.S. federal taxes on foreign earnings.
On July 20, 2020 the Internal Revenue Service (IRS) issued final regulations under IRC Section 951A permitting a taxpayer to elect to exclude from its inclusion of GILTI items of income subject to a high effective rate of foreign tax. As a resultNote 10 of the final regulations,Consolidated Financial Statements for further information on the Company recorded a net non-cash income tax benefitnature of $13 million in the third quarter of 2020 relating to the 2018 and 2019 tax years and an increase in the valuation allowance.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Restructuring and Acquisition-Related Costs
The Company has incurred restructuring, transaction and integration costs related to acquisitions, along with restructuring costs in connection with its global cost reduction and productivity initiatives. These costs are recorded within Corporate, Other and Eliminations. Please refer to Notes 7 and 9 of the Consolidated Financial Statements for further information on the nature of these costs.
The following table presents the impact and respective location of these income (expense) items on the Consolidated Statements of Earnings (Loss) (in millions):
| | | | Three Months Ended September 30, | Nine Months Ended September 30, | | | Three Months Ended June 30, | Six Months Ended June 30, |
| | Location | 2021 | 2020 | 2021 | 2020 | | Location | 2022 | 2021 | 2022 | 2021 |
| Restructuring costs | Restructuring costs | Cost of sales | $ | (6) | | $ | — | | $ | (8) | | $ | (4) | | Restructuring costs | Cost of sales | $ | (7) | | $ | (1) | | $ | (13) | | $ | (2) | |
| Restructuring costs | Restructuring costs | Marketing and administrative expenses | — | | — | | (1) | | — | | Restructuring costs | Marketing and administrative expenses | (3) | | (1) | | (3) | | (1) | |
| Severance | Severance | Other (income) expenses, net | (12) | | — | | (10) | | (5) | | Severance | Other expense (income), net | (1) | | 2 | | (1) | | 2 | |
| Other exit costs | Other exit costs | Other (income) expenses, net | — | | — | | (1) | | (1) | | Other exit costs | Other expense (income), net | (29) | | 1 | | (29) | | 1 | |
| Gain on sale of land in India | Other (income) expenses, net | 15 | | — | | 15 | | — | | |
| Restructuring costs | Non-operating income | (2) | | — | | (2) | | — | | |
| | Recognition of acquisition inventory fair value step-up | Cost of sales | (1) | | — | | (1) | | — | | |
| Total restructuring, acquisition and integration-related costs | | $ | (6) | | $ | — | | $ | (8) | | $ | (10) | | |
| Acquisition-related costs | | Acquisition-related costs | Marketing and administrative expenses | (3) | | — | | (3) | | — | |
| Gain on sale of Shanghai, China facility | | Gain on sale of Shanghai, China facility | Other expense (income), net | — | | — | | 27 | | — | |
| | Total restructuring, acquisition and divestiture-related costs | | Total restructuring, acquisition and divestiture-related costs | | $ | (43) | | $ | (1) | | $ | (22) | | $ | (2) | |
Adjusted Earnings Before Interest and Taxes
Adjusted EBIT is a non-GAAP measure that excludes certain items that management does not allocate to our segment results because it believes they are not representative of the Company's ongoing operations. Adjusted EBIT is used internally by the Company for various purposes, including reporting results of operations to the Board of Directors of the Company, analysis of performance and related employee compensation measures. Although management believes that these adjustments result in a measure that provides a useful representation of our operational performance, the adjusted measure should not be considered in isolation or as a substitute for Net earnings (loss) attributable to Owens Corning as prepared in accordance with accounting principles generally accepted in the United States.
Adjusting income (expense) items to EBIT are shown in the table below (in millions):
| | | | | | | | | | | | | | |
| Three Months Ended
September 30, | Nine Months Ended
September 30, |
| | 2021 | 2020 | 2021 | 2020 |
| Restructuring costs | $ | (20) | | $ | — | | $ | (22) | | $ | (10) | |
| Gain on sale of land in India | 15 | | — | | 15 | | — | |
| Gains on sale of certain precious metals | — | | 7 | | 41 | | 26 | |
| Goodwill impairment charge | — | | — | | — | | (944) | |
| Intangible assets impairment charge | — | | — | | — | | (43) | |
| | | | |
| Recognition of acquisition inventory fair value step-up | (1) | | — | | (1) | | — | |
| | | | |
| | | | |
| Total adjusting items | $ | (6) | | $ | 7 | | $ | 33 | | $ | (971) | |
| | | | | | | | | | | | | | |
| Three Months Ended
June 30, | Six Months Ended
June 30, |
| | 2022 | 2021 | 2022 | 2021 |
| Restructuring costs | $ | (11) | | $ | (1) | | $ | (17) | | $ | (2) | |
| Gain on sale of Shanghai, China facility | — | | — | | 27 | | — | |
| | | | |
| Gains on sale of certain precious metals | 7 | | 21 | | 11 | | 41 | |
| | | | |
| | | | |
| Acquisition-related costs | (3) | | — | | (3) | | — | |
| Impairment loss on Chambery, France assets held for sale | (29) | | — | | (29) | | — | |
| | | | |
| | | | |
| | | | |
| Total adjusting items | $ | (36) | | $ | 20 | | $ | (11) | | $ | 39 | |
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The reconciliation from Net earnings (loss) attributable to Owens Corning to EBIT and to Adjusted EBIT is shown in the table below (in millions):
| | | | | | | | | | | | | | |
| Three Months Ended
September 30, | Nine Months Ended September 30, |
| 2021 | 2020 | 2021 | 2020 |
| NET EARNINGS (LOSS) ATTRIBUTABLE TO OWENS CORNING | $ | 260 | | $ | 206 | | $ | 768 | | $ | (615) | |
| Net loss attributable to noncontrolling interests | (1) | | — | | (1) | | — | |
| NET EARNINGS (LOSS) | 259 | | 206 | | 767 | | (615) | |
| Equity in net (loss) earnings of affiliates | (1) | | 1 | | — | | 1 | |
| Income tax expense | 94 | | 56 | | 250 | | 119 | |
| EARNINGS (LOSS) BEFORE TAXES | 354 | | 261 | | 1,017 | | (497) | |
| Interest expense, net | 31 | | 35 | | 97 | | 98 | |
| Loss on extinguishment of debt | 9 | | — | | 9 | | — | |
| EARNINGS (LOSS) BEFORE INTEREST AND TAXES | 394 | | 296 | | 1,123 | | (399) | |
| Adjusting items from above | (6) | | 7 | | 33 | | (971) | |
| ADJUSTED EBIT | $ | 400 | | $ | 289 | | $ | 1,090 | | $ | 572 | |
| | | | | | | | | | | | | | |
| Three Months Ended
June 30, | Six Months Ended June 30, |
| 2022 | 2021 | 2022 | 2021 |
| NET EARNINGS ATTRIBUTABLE TO OWENS CORNING | $ | 343 | | $ | 298 | | $ | 647 | | $ | 508 | |
| Net earnings attributable to non-redeemable and redeemable noncontrolling interests | — | | — | | 3 | | — | |
| | | | |
| NET EARNINGS | 343 | | 298 | | 650 | | 508 | |
| Equity in net (loss) earnings of affiliates | (1) | | — | | (1) | | 1 | |
| Income tax expense | 119 | | 97 | | 226 | | 156 | |
| EARNINGS BEFORE TAXES | 463 | | 395 | | 877 | | 663 | |
| Interest expense, net | 26 | | 33 | | 54 | | 66 | |
| | | | |
| EARNINGS BEFORE INTEREST AND TAXES | 489 | | 428 | | 931 | | 729 | |
| Less: Adjusting items from above | (36) | | 20 | | (11) | | 39 | |
| ADJUSTED EBIT | $ | 525 | | $ | 408 | | $ | 942 | | $ | 690 | |
Segment Results
EBIT by segment consists of net sales less related costs and expenses and is presented on a basis that is used internally for evaluating segment performance. Certain items, such as general corporate expenses or income and certain other expense or income items, are excluded from the internal evaluation of segment performance. Accordingly, these items are not reflected in EBIT for our reportable segments and are included in the Corporate, Other and Eliminations category, which is presented following the discussion of our reportable segments.
Composites
The table below provides a summary of net sales, EBIT and depreciation and amortization expense for the Composites segment (in millions):
| | | Three Months Ended
September 30, | Nine Months Ended
September 30, | | Three Months Ended
June 30, | Six Months Ended
June 30, |
| | 2021 | 2020 | 2021 | 2020 | | 2022 | 2021 | 2022 | 2021 |
| Net sales | Net sales | $ | 591 | | $ | 521 | | $ | 1,733 | | $ | 1,413 | | Net sales | $ | 719 | | $ | 583 | | $ | 1,433 | | $ | 1,142 | |
| % change from prior year | % change from prior year | 13 | % | -2 | % | 23 | % | -11 | % | % change from prior year | 23 | % | 46 | % | 25 | % | 28 | % |
| EBIT | EBIT | $ | 101 | | $ | 55 | | $ | 278 | | $ | 105 | | EBIT | $ | 154 | | $ | 98 | | $ | 308 | | $ | 177 | |
| EBIT as a % of net sales | EBIT as a % of net sales | 17 | % | 11 | % | 16 | % | 7 | % | EBIT as a % of net sales | 21 | % | 17 | % | 21 | % | 15 | % |
| Depreciation and amortization expense | Depreciation and amortization expense | $ | 42 | | $ | 40 | | $ | 119 | | $ | 117 | | Depreciation and amortization expense | $ | 48 | | $ | 39 | | $ | 91 | | $ | 77 | |
NET SALES
In our Composites segment, net sales in the thirdsecond quarter of 20212022 increased $70$136 million compared to the same period in 2020.2021. The increase was primarily driven by higher selling prices of $131 million. Favorable customer mix of $14 million and $35the $13 million of higher selling prices drove the increase. The impact of slightly lower volumes of 4% was largely offset by the acquisition of vliepa andGmbH in July 2021 were partially offset by the favorable$18 million unfavorable impact of translating sales denominated in foreign currencies into United States dollars.
For the year-to-date 2021,2022, net sales in our Composites segment increased $320$291 million compared to the same period in 2020.2021. The increase was primarily driven by higher sales volumes of approximately 10%. The remaining variance was driven by favorable customer and product mix, higher selling prices of $60$261 million. Favorable customer mix of $42 million and the acquisition of vliepa GmbH in July 2021 were partially offset by the $34 million from the favorableunfavorable impact of translating sales denominated in foreign currencies into United States dollars.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
EBIT
In our Composites segment, EBIT in the thirdsecond quarter of 20212022 increased $46$56 million compared to the same period in 2020.2021. Higher selling prices of $35$131 million and favorable customer mix more than offset $23$50 million of input cost inflation and $9$14 million in higher transportation costs. The favorable comparison quarter-over-quarter to curtailment costs in 2020 contributed to $29 million of the improvement. The remaining variance was driven by favorable customer mix.unfavorable manufacturing performance and other one-time charges.
For the year-to-date 2021,2022, EBIT in our Composites segment increased $173$131 million compared to the same period in 2020.2021. Higher selling prices of $60$261 million and favorable customer mix more than offset $39$103 million of input cost inflation and $19$24 million ofin higher transportation costs.The benefit from lower curtailment costs in 2021 compared to 2020 of $66 million and higher sales volumes contributed to the increase. The remaining variance was driven about equally by favorable customer mix and the favorable impact of improvedunfavorable manufacturing performance year-over-year.and other one-time charges.
OUTLOOK
Global glass reinforcements market demand has historically been correlated withseveral economic indicators including residential, non-residential construction and manufacturing production indices, as well as global industrial production, and we believe this relationship will continue.wind installations. The Company expectsanticipates relatively stable market conditions, with continued strengthinput cost inflation, supply chain uncertainties and primary labor availability. The Russian invasion of Ukraine is creating uncertainty in global industrial production formarkets and putting further pressure on already-fragile global supply chains. The Company is closely monitoring the remainder of 2021. Uncertainties that may impact our Composites financial results include the cost of input materialsevolving situation and the potential for continuing supply chain challenges.remains focused on managing costs, capital expenditures, and working capital.
Insulation
The table below provides a summary of net sales, EBIT and depreciation and amortization expense for the Insulation segment (in millions):
| | | | Three Months Ended
September 30, | Nine Months Ended
September 30, | | Three Months Ended
June 30, | Six Months Ended
June 30, |
| | | 2021 | 2020 | 2021 | 2020 | | 2022 | 2021 | 2022 | 2021 |
| Net sales | Net sales | $ | 815 | | $ | 681 | | $ | 2,321 | | $ | 1,879 | | Net sales | $ | 934 | | $ | 806 | | $ | 1,793 | | $ | 1,506 | |
| % change from prior year | % change from prior year | 20 | % | -2 | % | 24 | % | -3 | % | % change from prior year | 16 | % | 35 | % | 19 | % | 26 | % |
| EBIT | EBIT | $ | 124 | | $ | 73 | | $ | 318 | | $ | 144 | | EBIT | $ | 157 | | $ | 112 | | $ | 286 | | $ | 194 | |
| EBIT as a % of net sales | EBIT as a % of net sales | 15 | % | 11 | % | 14 | % | 8 | % | EBIT as a % of net sales | 17 | % | 14 | % | 16 | % | 13 | % |
| Depreciation and amortization expense | Depreciation and amortization expense | $ | 52 | | $ | 51 | | $ | 156 | | $ | 149 | | Depreciation and amortization expense | $ | 51 | | $ | 53 | | $ | 104 | | $ | 104 | |
NET SALES
In our Insulation segment, net sales in the thirdsecond quarter of 20212022 increased $134$128 million compared to the same period in 2020.2021. The increase was due todriven by higher selling prices of $65$142 million higherpartially offset by slightly lower sales volumes of about 8%volumes. Favorable customer and favorable customer mix. The remaining variance was drivenproduct mix were offset by the favorable$31 million unfavorable impact of translating sales denominated in foreign currencies into United States dollars of $11 million.
For the year-to-date 2021,2022, net sales in our Insulation segment increased $442$287 million compared to the same period in 2020.2021. The majority of the increase was due to higher sales volumes of about 15% anddriven by higher selling prices of $113 million. The $66$259 million favorableand slightly higher sales volumes. Favorable customer and product mix were offset by the $46 million unfavorable impact of translating sales denominated in foreign currencies into United States dollars was slightlydollars.
EBIT
In our Insulation segment, EBIT in the second quarter of 2022 increased $45 million compared to the same period in 2021. Higher selling prices of $142 million and favorable customer mix more than offset by unfavorable product mix.$82 million of input cost inflation, $15 million in higher transportation costs and higher selling, general and administrative expenses.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
EBIT
InFor the year-to-date 2022, EBIT in our Insulation segment EBIT in the third quarter of 2021 increased $51$92 million compared to the same period in 2020.2021. Higher selling prices of $65$259 million, higher sales volumes and favorable customer mix more than offset $37$157 million of input cost inflation, and $10$29 million in higher transportation costs. The remaining improvement was driven by the $18 million benefit of fixed cost absorption oncosts and higher production volumesselling, general and the impact of higher sales volumes.
For the year-to-date 2021, EBIT in our Insulation segment increased $174 million compared to the same period in 2020. Higher selling prices of $113 million more than offset $67 million of input cost inflation and $32 million in higher transportation costs. The remaining improvement was driven by the impact of higher sales volumes, the $67 million benefit of fixed cost absorption on higher production volumes and $15 million of favorable manufacturing performance.administrative expenses.
OUTLOOK
The outlook for Insulation demand is driven by North American new residential construction, remodeling and repair activity, as well as commercial and industrial construction activity in the United States, Canada, Europe, Asia-Pacific and Asia-Pacific.Latin America. Demand in commercial and industrial insulation markets is most closely correlated to industrial production growth and overall economic activity in the global markets we serve. Demand for residential insulation is most closely correlated to lagged U.S. housing starts.
During the thirdsecond quarter of 2021,2022, the average Seasonally Adjusted Annual Rate (SAAR) of U.S. housing starts was approximately 1.566approximately 1.652 million, up from an annual average of approximately 1.4301.568 million starts in the thirdsecond quarter of 2020. 2021.
The Company expects both the North American new residential construction market and global commercial and industrial construction markets to remain positive, with continued strength in the SAAR of U.S. housing starts for the remainder of 2021. Uncertainties that may impact our Insulation financial results include theinput cost of input materials and the potential for continuinginflation, supply chain challenges.uncertainties and primary labor availability. The Russian invasion of Ukraine is creating uncertainty in global markets and putting further pressure on already-fragile global supply chains. The Company is closely monitoring the evolving situation and remains focused on managing costs, capital expenditures, and working capital.
Roofing
The table below provides a summary of net sales, EBIT and depreciation and amortization expense for the Roofing segment (in millions): | | | | Three Months Ended
September 30, | Nine Months Ended
September 30, | | Three Months Ended
June 30, | Six Months Ended
June 30, |
| | | 2021 | 2020 | 2021 | 2020 | | 2022 | 2021 | 2022 | 2021 |
| Net sales | Net sales | $ | 869 | | $ | 761 | | $ | 2,497 | | $ | 1,993 | | Net sales | $ | 1,018 | | $ | 917 | | $ | 1,856 | | $ | 1,628 | |
| % change from prior year | % change from prior year | 14 | % | 7 | % | 25 | % | -5 | % | % change from prior year | 11 | % | 35 | % | 14 | % | 32 | % |
| EBIT | EBIT | $ | 212 | | $ | 196 | | $ | 602 | | $ | 408 | | EBIT | $ | 258 | | $ | 234 | | $ | 434 | | $ | 390 | |
| EBIT as a % of net sales | EBIT as a % of net sales | 24 | % | 26 | % | 24 | % | 20 | % | EBIT as a % of net sales | 25 | % | 26 | % | 23 | % | 24 | % |
| Depreciation and amortization expense | Depreciation and amortization expense | $ | 15 | | $ | 15 | | $ | 44 | | $ | 44 | | Depreciation and amortization expense | $ | 17 | | $ | 14 | | $ | 31 | | $ | 29 | |
NET SALES
In our Roofing segment, net sales in the thirdsecond quarter of 20212022 increased $108$101 million compared to the same period in 2020. The increase was driven by higher2021. Higher selling prices of $114 million. Slightly higher$153 million and higher-third party asphalt sales of $18 million were partially offset by lower sales volumes of 2% were more than offset byapproximately 6% and unfavorable product mix.
For the year-to-date 2021,year to date 2022, net sales in our Roofing segment increased $504$228 million compared to the same period in 2020. The increase was primarily driven2021. Higher selling prices of $273 million and higher-third party asphalt sales of $25 million were partially offset by higherlower sales volumes of 14%approximately 3% and higher selling prices of $239 million, slightly offset by unfavorable product and customer mix.
EBIT
In our Roofing segment, EBIT in the thirdsecond quarter of 20212022 increased $16$24 million compared to the same period in 2020.2021. Higher selling pricesprices of $114$153 million more than offset input cost inflation, primarily asphalt, and other petroleum-based products, of $70$92 million, and $13$11 million of higher transportation costs. Unfavorable customercosts and product mix more than offset the impact of slightly higherlower sales volumes.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
For the year-to-date 2021,2022, EBIT in our Roofing segment increased $194$44 million compared to the same period in 2020.2021. Higher selling pricesprices of $239$273 million more than offset input cost inflation, primarily asphalt, and other petroleum-based products, of $115$161 million and $37$19 million of higher transportation costs. The impact of selling higher cost inventory, resulting from planned maintenance downtime taken in the fourth quarter of 2021, negatively impacted EBIT by approximately $17 million compared to the same period last year, as significantly less downtime was taken in the fourth quarter of 2020. The remaining variance was driven by the impact of lower sales volumes and favorable manufacturing performance were partially offset by unfavorable customerhigher selling, general and product mix.administrative expenses, as the business returns to more normal post-COVID activities.
OUTLOOK
In our Roofing segment, we expect the factors that have driven strong margins in recent years, such as growth from remodeling demand, along with higher sales of roofing components, to continue to deliver profitability. Uncertainties that may impact our Roofing margins include demand from storm and other weather events, demand from new construction, competitive pricing pressure and the cost and availability of input materials and the potential for continuing supply chain challenges.raw materials.
Despite strength in the U.S. asphalt shingle market, the Company will continue to evaluate economic factors such as input cost inflation, supply chain uncertainties and primary labor availability. The Company will continue to focus on managing costs, capital expenditures, and working capital.
Corporate, Other and Eliminations
The table below provides a summary of EBIT and depreciation and amortization expense for the Corporate, Other and Eliminations category (in millions):
| | | Three Months Ended
September 30, | Nine Months Ended
September 30, | | Three Months Ended
June 30, | Six Months Ended
June 30, |
| | | 2021 | 2020 | 2021 | 2020 | | 2022 | 2021 | 2022 | 2021 |
| Restructuring costs | Restructuring costs | $ | (20) | | $ | — | | $ | (22) | | $ | (10) | | Restructuring costs | $ | (11) | | $ | (1) | | $ | (17) | | $ | (2) | |
| Gain on sale of land in India | 15 | | — | | 15 | | — | | |
| | Gain on sale of Shanghai, China facility | | Gain on sale of Shanghai, China facility | — | | — | | 27 | | — | |
| Gains on sale of certain precious metals | Gains on sale of certain precious metals | — | | 7 | | 41 | | 26 | | Gains on sale of certain precious metals | 7 | | 21 | | 11 | | 41 | |
| Goodwill impairment charge | — | | — | | — | | (944) | | |
| Intangible assets impairment charge | — | | — | | — | | (43) | | |
| | Recognition of acquisition inventory fair value step-up | (1) | | — | | (1) | | — | | |
| | Acquisition-related costs | | Acquisition-related costs | (3) | | — | | (3) | | — | |
| Impairment loss on Chambery, France assets held for sale | | Impairment loss on Chambery, France assets held for sale | (29) | | — | | (29) | | — | |
| | | General corporate expense and other | General corporate expense and other | (37) | | (35) | | (108) | | (85) | | General corporate expense and other | (44) | | (36) | | (86) | | (71) | |
| EBIT | EBIT | $ | (43) | | $ | (28) | | $ | (75) | | $ | (1,056) | | EBIT | $ | (80) | | $ | (16) | | $ | (97) | | $ | (32) | |
| Depreciation and amortization | Depreciation and amortization | $ | 20 | | $ | 14 | | $ | 51 | | $ | 42 | | Depreciation and amortization | $ | 22 | | $ | 16 | | $ | 44 | | $ | 31 | |
EBIT
In Corporate, Other and Eliminations, EBIT expenses for the thirdsecond quarter of 2022 were higher by $64 million compared to the same period in 2021, primarily driven by the impairment loss on Chambéry, France assets held for sale, higher restructuring charges and lower gains on sale of certain precious metals. For the year-to-date 2022, EBIT expenses in Corporate, Other and Eliminations were higher by $65 million, primarily driven by the impairment loss on Chambéry, France assets held for sale, higher restructuring charges and lower gains on sale of certain precious metals offset by the gain on the sale of the Shanghai, China facility.
General corporate expense and other for the second quarter 2022 were higher by $8 million compared to the same period in 2021. For year-to-date, general corporate expense and other were higher by $15 million compared to the same period in 2020.2021. For the year-to-date 2021, EBIT expenses in Corporate, Other and Eliminations were lower by $981 million primarily driven by the favorable comparison year-over-year to the goodwill impairment charge of $944 million and intangible asset charges of $43 million recorded in the first quarter of 2020. Additional details of these charges are further explained in Note 5 of the Consolidated Financial Statements. The remaining difference was driven by $15 million of higher gains on sale of certain precious metals.
General corporate expense and other for the third quarter and year-to-date, 2021 were higherthe increase was primarily driven by $2 million and $23 million compared to the same periods in 2020, driven primarily by higher performance-based compensation associated with an improved outlook for 2021 and higher general corporate expenses as business activities return to a more typical, post-pandemic level.
OUTLOOK
In 2021,2022, we estimate general corporate expenses to be in the range of $150$170 million and $155$180 million.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS
Liquidity
The Company's primary external sources of liquidity are its balance of Cash and cash equivalents of $810 million as of June 30, 2022, its Senior Revolving Credit Facility and its Receivables Securitization Facility (each as defined below).
The Company has an $800 million senior revolving credit facility (the "Senior Revolving Credit Facility") that has been amended from time to time. In July 2021, the Senior Revolving Credit Facility was amended to extend the maturity date totime, which matures in July 2026.
The Company has a $280 million receivables securitization facility (the "Receivables Securitization Facility") that has been amended from time to time. In April 2021, the Receivables Securitization Facility was amended to extend the maturity date totime, which matures in April 2024.
The following table shows how the Company utilized its primary sources of liquidity (in millions):
| | | | | | | | | |
| | Balance at September 30, 2021 |
| | Senior Revolving Credit Facility | Receivables Securitization Facility |
| Facility size or borrowing limit | | $ | 800 | | $ | 280 | |
| Collateral capacity limitation on availability | | n/a | — | |
| Outstanding borrowings | | — | | — | |
| Outstanding letters of credit | | 4 | | 1 | |
| Availability on facility | | $ | 796 | | $ | 279 | |
On August 19, 2021, the Company issued a make-whole call to repay the remaining portion of its outstanding 2022 senior notes, and the redemption was completed in the third quarter of 2021. The Company recognized approximately $9 million of loss on extinguishment of debt in the third quarter of 2021 associated with these actions.
The Company issued $300 million of 2030 senior notes on May 12, 2020 subject to $3 million of discounts and issuance costs. Interest on the notes is payable semiannually in arrears on June 1 and December 1 each year, beginning on December 1, 2020. The proceeds from these notes were used for general corporate purposes. | | | | | | | | |
| Balance at June 30, 2022 |
| Senior Revolving Credit Facility | Receivables Securitization Facility |
| Facility size or borrowing limit | $ | 800 | | $ | 280 | |
| Collateral capacity limitation on availability | N/A | — | |
| Outstanding borrowings | — | | — | |
| Outstanding letters of credit | 4 | | 1 | |
| Availability on facility | $ | 796 | | $ | 279 | |
The Receivables Securitization Facility and Senior Revolving Credit Facility mature in 2024 and 2026, respectively. The Company has no significant debt maturities of senior notes before the fourth quarter of 2024. As of SeptemberJune 30, 2021,2022, the Company had $3.0 billion of total debt and cash and cash equivalents of $920$810 million. The agreements governing our Senior Revolving Credit Facility and Receivables Securitization Facility contain various covenants that we believe are usual and customary. These covenants include a maximum allowed leverage ratio. We were in compliance with these covenants as of June 30, 2022.
In June 2022, the Senior Revolving Credit Facility was amended to allow the Company to continue to operate in comprehensively sanctioned countries so long as it is not violating any sanctions.
Cash and cash equivalents held by foreign subsidiaries may be subject to foreign withholding taxes upon repatriation to the U.S. As of SeptemberJune 30, 2021,2022, and December 31, 2020,2021, the Company had $159$227 million and $71$156 million, respectively, in cash and cash equivalents in certain of our foreign subsidiaries. The Company continues to assert indefinite reinvestment in accordance with ASCAccounting Standards Codification (ASC) 740 based on the laws as of enactment of the tax legislation commonly known as the U.S. Tax Cuts and Jobs Act of 2017.
As a holding company, we have no operations of our own and most of our assets are held by our direct and indirect subsidiaries. Dividends and other payments or distributions from our subsidiaries will be used to meet our debt service and other obligations and to enable us to pay dividends to our stockholders. Please refer to page 1516 of the Risk Factors disclosed in Item 1A of the Company's Form 10-K for the year ended December 31, 20202021 (the "2020"2021 Form 10-K") for details on the factors that could inhibit our subsidiaries' ability to pay dividends or make other distributions to the parent company.
Material Cash Requirements
Our anticipated uses of cash include capital expenditures, working capital needs, share repurchases, meeting financial obligations, payments of any dividends authorized by our Board of Directors, acquisitions, restructuring actions and pension contributions. We expect that our cash on hand, coupled with future cash flows from operations and other available sources of liquidity, including our Senior Revolving Credit Facility and our Receivables Securitization Facility, will provide ample liquidity to enable us to meet our cash requirements.
Please refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our 2021 Form 10-K for more details on these material cash requirements. During the second quarter of 2022, there have been no material changes to our expected uses of cash and contractual obligations.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The agreements governing our Senior Revolving Credit Facility and Receivables Securitization Facility contain various covenants that we believe are usual and customary. These covenants include a maximum allowed leverage ratio. We were in compliance with these covenants as of September 30, 2021. In July 2021, the Senior Revolving Credit Facility was amended to eliminate the minimum required interest expense coverage ratio covenant.
Supplier Finance Programs
We review supplier terms and conditions on an ongoing basis, and have negotiated payment terms extensions in recent years in connection with our efforts to reduce working capital and improve cash flow.Separate from those terms extension actions, certain of our subsidiaries have entered into paying agency agreements with third-party administrators. These voluntary supply chain finance programs (collectively, the “Programs”) generally give participating suppliers the ability to sell, or otherwise pledge as collateral, their receivables from the Company to the participating financial institutions, at the sole discretion of both the suppliers and financial institutions. The Company is not a party to the arrangements between the suppliers and the financial institutions. The Company’s obligations to its suppliers, including amounts due and scheduled payment dates, are not impacted by the suppliers’ decisions to sell, or otherwise pledge as collateral, amounts under these arrangements. One of our programsPrograms includes a parent guarantee to the participating financial institution for a certain U.S. subsidiary that, at the time of the respective program’sProgram’s inception in 2015, was a guarantor subsidiary of the Company’s Senior Revolving Credit Facility.
The payables associated with suppliers choosing to voluntarily participate in the Programs were presented as accountswithin Accounts payable within Total current liabilities on the Consolidated Balance Sheets, and totaled $215$258 million and $170$226 million as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. The amounts paid thatwhich are associated with suppliers once they chose to voluntarily participate in the Programs for the ninesix months ended SeptemberJune 30, 2022 and 2021 and 2020 were $373$304 million and $277$235 million, respectively, with all activity related to the obligations presented within operating activities on the Consolidated Statements of Cash Flows.
The desire of suppliers and financial institutions to participate in the Programs could be negatively impacted by, among other factors, the availability of capital committed by the participating financial institutions, the cost and availability of our suppliers’ capital, a credit rating downgrade or deteriorating financial performance of the Company or its participating subsidiaries, or other changes in financial markets beyond our control. We do not expect these risks, or potential long-term growth of our programs,Programs, to materially affect our overall financial condition, as we expect a significant portion of our payments to continue to be made outside of the Programs. Accordingly, we do not believe the programsPrograms have materially impacted our current period liquidity, and do not believe that the programsPrograms are reasonably likely to materially affect liquidity in the future.
Cash Flows
The following table presents a summary of our cash balance, cash flows, and availability on credit facilities (in millions): | | | | Nine Months Ended
September 30, | | | Six Months Ended
June 30, |
| | | 2021 | 2020 | | | 2022 | 2021 |
| Cash and cash equivalents | Cash and cash equivalents | | $ | 920 | | $ | 647 | | Cash and cash equivalents | | $ | 810 | | $ | 888 | |
| Net cash flow provided by operating activities | Net cash flow provided by operating activities | | $ | 1,168 | | $ | 717 | | Net cash flow provided by operating activities | | $ | 624 | | $ | 702 | |
| Net cash flow used for investing activities | Net cash flow used for investing activities | | $ | (242) | | $ | (104) | | Net cash flow used for investing activities | | $ | (340) | | $ | (213) | |
| Net cash flow used for financing activities | Net cash flow used for financing activities | | $ | (716) | | $ | (106) | | Net cash flow used for financing activities | | $ | (429) | | $ | (320) | |
| Availability on the Senior Revolving Credit Facility | Availability on the Senior Revolving Credit Facility | | $ | 796 | | $ | 796 | | Availability on the Senior Revolving Credit Facility | | $ | 796 | | $ | 796 | |
| Availability on the Receivables Securitization Facility | Availability on the Receivables Securitization Facility | | $ | 279 | | $ | 279 | | Availability on the Receivables Securitization Facility | | $ | 279 | | $ | 279 | |
|
Cash and cash equivalents: Cash and cash equivalents as of SeptemberJune 30, 2021 increased $2732022 decreased $78 million compared to SeptemberJune 30, 20202021 primarily due todriven by increased cash outflows from investing and financing activities, offset by higher cash flow provided by operating activities.earnings.
Operating activities: For the ninesix months ended SeptemberJune 30, 2021,2022, the Company's operating activities provided $1,168$624 million of cash compared to $717$702 million provided in the same period in 2020.2021. The change in cash provided by operating activities was due to higher earningsan increase in operating assets, specifically receivables and inventory, in 2022 compared to the same period of 2021.
Investing activities: Net cash flow used for investing activities increased $127 million for the six months ended June 30, 2022 compared to the same period of 2021, primarily driven by higher year-over-year spending on acquisitions.
Financing activities: Net cash used for financing activities was $429 million for the six months ended June 30, 2022, compared to net cash used for financing activities of $320 million in 2020.the same period in 2021. The change was primarily due to higher purchases of treasury stock and increase in dividends paid.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Investing activities: Net cash flow used for investing activities increased $138 million for the nine months ended September 30, 2021 compared to the same period of 2020, primarily driven by cash outflows from derivative settlements, higher spending on acquisitions, and higher cash paid for property, plant and equipment.
Financing activities: Net cash used for financing activities was $716 million for the nine months ended September 30, 2021, compared to net cash used for financing activities of $106 million in the same period in 2020. The change was primarily due to higher purchases of treasury stock and repayment of the remaining portion of outstanding 2022 senior notes.
2021 Investments
Capital Expenditures: The Company will continue a balanced approach to the use of its cash flows. Operational cash flow will be used to fund the Company’s growth and innovation. Capital expenditures in 2021 are expected to be approximately $460 million.
Tax Net Operating Losses and U.S. Foreign Tax Credits
There have been no material changes to the disclosure in our 2020 Form 10-K.
Pension Contributions
Please refer to Note 11 of the Consolidated Financial Statements. The Company expects to contribute $25 million in cash to its global pension plans during 2021. Actual contributions to the plans may change as a result of several factors, including changes in laws that impact funding requirements. The ultimate cash flow impact to the Company, if any, of the pension plan liability and the timing of any such impact will depend on numerous variables, including future changes in actuarial assumptions, legislative changes to pension funding laws, and market conditions.
Derivatives
Please refer to Note 4 of the Consolidated Financial Statements.
Fair Value Measurement
Please refer to Notes 4, 11, and 1012 of the Consolidated Financial Statements.
Contractual Obligations
In the normal course of business, we enter into contractual obligations to make payments to third parties. During the nine months ended September 30, 2021, there were no material changes to such contractual obligations outside the ordinary course of our business.
SAFETY
Working safely is a condition of employment at Owens Corning. We believe this organization-wide expectation provides for a safer work environment for employees, improves our manufacturing processes, reduces our costs and enhances our reputation. Furthermore, striving to be a world-class leader in safety provides a platform for all employees to understand and apply the resolve necessary to be a high-performing global organization. We measure our progress on safety based on Recordable IncidenceIncident Rate (“RIR”) as defined by the United States Department of Labor, Bureau of Labor Statistics. For the three months ended SeptemberJune 30, 2021,2022, our RIR was 0.640.81 as compared to 0.750.51 in the same period a year ago. For the ninesix months ended SeptemberJune 30, 2021,2022, our RIR was 0.61 as0.70 compared to 0.700.58 in the same period a year ago.
ACCOUNTING PRONOUNCEMENTS
Please refer to Note 1 of the Consolidated Financial Statements.
ENVIRONMENTAL MATTERS
Please refer to Note 1213 of the Consolidated Financial Statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Our disclosures and analysis in this report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). Forward-looking statements present our current forecasts and estimates of future events. These statements do not strictly relate to historical or current results and can be identified by words such as “anticipate,” "appear," "assume," “believe,” “estimate,” “expect,” "forecast," “intend,” “likely,” “may,” “plan,” “project,” "seek," "should," “strategy,” "will" and other terms of similar meaning or import in connection with any discussion of future operating, financial or other performance. These forward-looking statements are subject to risks, uncertainties and other factors and actual results may differ materially from those results projected in the statements. These risks, uncertainties and other factors include, without limitation:
•industry and economic conditions including but not limited to, supply chain disruptions, recessionary conditions, inflationary pressures and interest rate volatility, that affect the severitymarket and durationoperating conditions of the current COVID-19 pandemic on our operations, customers, suppliers or lenders;
•availability and suppliers, as well as related actions taken by governmental authoritiescost of energy and other third parties in response, each of which is uncertain, rapidly changing and difficult to predict;raw materials;
•levels of residential and commercial or industrial construction activity;
•levels of global industrial production;
•availability and cost of energy and raw materials;
•issues related to acquisitions, divestitures and joint ventures or expansions;
•competitive and pricing factors;
•demand for our products;
•relationships with key customers and customer concentration in certain areas;
•regional impact of the COVID-19 pandemic on our operations, customers and suppliers, as well as related actions taken by governmental authorities and other third parties in response, each of which is uncertain, frequently changing and difficult to predict;
•issues related to acquisitions, divestitures and joint ventures or expansions, including our proposed exit from operations in Russia;
•climate change, weather conditions and storm activity;
•legislation and related regulations or interpretations, in the United States or elsewhere;
•industry and economic conditions that affect the market and operating conditions of our customers, suppliers or lenders;
•domestic and international economic and political conditions, policies or other governmental actions;actions, as well as war and civil disturbance (such as Russia's invasion of Ukraine);
•climate change, weather conditions and storm activity;changes to tariff, trade or investment policies or laws;
•uninsured losses, including those from natural disasters, catastrophes, pandemics, theft or sabotage;
•environmental, product-related or other legal and regulatory liabilities, proceedings or, actions;
•changes to tariff, trade or investment policies or laws;
•research and development activities and intellectual property protection;
•issues involving implementation and protection of information technology systems;
•our level of indebtedness;
•our liquidity and the availability and cost of credit;
•achievement of expected synergies, cost reductions and/or productivity improvements;
•the level of fixed costs required to run our business;
•foreign exchange and commodity price fluctuations;
•our level of indebtedness;
•our liquidity and the availability and cost of credit;
•levels of goodwill or other indefinite-lived intangible assets;
•price volatility in certain wind energy markets in the U.S;U.S.;
•loss of key employees, labor disputes or shortages; and
•defined benefit plan funding obligations.
All forward-looking statements in this report should be considered in the context of the risks and other factors described herein, and in Item 1A - Risk factorsFactors in Part I of our 20202021 Form 10-K. Users of this report should not interpret the disclosure of any risk factor to imply that the risk has not already materialized. Any forward-looking statements speak only as of the date the statement is made and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by federal securities laws. It is not possible to identify all of the risks, uncertainties and other factors that may affect future results. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this report may not occur and actual results may differ materially from those anticipated or implied in the forward-looking statements. Accordingly, users of this report are cautioned not to place undue reliance on the forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in our exposure to market risk during the ninesix months ended SeptemberJune 30, 2021.2022. Please refer to "Quantitative and Qualitative Disclosures about Market Risk" contained in Part II, Item 7A of our 20202021 Form 10-K for a discussion of our exposure to market risk.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains (a) disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), and (b) internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.
There has been no change in the Company's internal control over financial reporting during the quarter ended SeptemberJune 30, 20212022 that materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II
ITEM 1. LEGAL PROCEEDINGS
Information required by this item is incorporated by reference to Note 1213 of the Consolidated Financial Statements, Contingent Liabilities and Other Matters.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors disclosed in Item 1A of the Company’s 20202021 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
None.
Issuer Purchases of Equity Securities
The following table provides information about Owens Corning’s purchases of its common stock for each month during the quarterly period covered by this report:
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| Period | Total Number of
Shares (or
Units)
Purchased | | Average
Price Paid
per Share
(or Unit) | Total Number of
Shares (or
Units)
Purchased as
Part of Publicly
Announced
Plans or
Programs** | Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs** |
| July 1-31, 2021 | 209,313 | | | $ | 98.03 | | 200,000 | | 6,390,255 | |
| August 1-31, 2021 | 650,000 | | | 95.34 | | 650,000 | | 5,740,255 | |
| September 1-30, 2021 | 853,827 | | | 92.85 | | 850,000 | | 4,890,255 | |
| Total | 1,713,140 | | * | $ | 94.43 | | 1,700,000 | | 4,890,255 | |
| | | | | | | | | | | | | | | | | |
| Period | Total Number of
Shares (or
Units)
Purchased | | Average
Price Paid
per Share
(or Unit) | Total Number of
Shares (or
Units)
Purchased as
Part of Publicly
Announced
Plans or
Programs** | Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs** |
| April 1-30, 2022 | 1,000,795 | | | $ | 86.31 | | 1,000,000 | | 9,897,220 | |
| May 1-31, 2022 | 1,981 | | | 93.34 | | — | | 9,897,220 | |
| June 1-30, 2022 | — | | | — | | — | | 9,897,220 | |
| Total | 1,002,776 | | * | $ | 86.32 | | 1,000,000 | | 9,897,220 | |
* The Company retained an aggregate of 13,1402,776 shares surrendered to satisfy tax withholding obligations in connection with the vesting of restricted shares granted to our employees.
** On December 3, 2020,February 14, 2022, the Board of Directors approved a new share buy-back program under which the Company is authorized to repurchase up to 10 million shares of the Company’s outstanding common stock (the “Repurchase Authorization”"Repurchase Authorization"). The Repurchase Authorization enables the Company to repurchase shares through the open market, privately negotiated, transactions, or other transactions. The actual number of shares repurchased will depend on timing, market conditions and other factors and iswill be at the Company’sCompany's discretion. The Company repurchased 1.71.0 million shares of its common stock for $160$86 million during the three months ended SeptemberJune 30, 20212022 under the Repurchase Authorization. As of SeptemberJune 30, 2021, 4.92022, 9.9 million shares remain available for repurchase under the Repurchase Authorization.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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| 101 | The following materials from the Quarterly Report on Form 10-Q for Owens Corning for the period ended SeptemberJune 30, 2021,2022, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Statements of Earnings, (Loss), (ii) Consolidated Statements of Comprehensive Earnings (Loss);Earnings; (iii) Consolidated Balance Sheets (iv) Consolidated Statements of Stockholders' Equity, (v) Consolidated Statements of Cash Flows, (vi) related notes to these financial statements and (vii) document and entity information. |
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| 104 | The cover page from this Quarterly Report on Form 10-Q, formatted as Inline XBRL. |
Owens Corning agrees to furnish to the U.S. Securities and Exchange Commission, upon request, copies of all instruments defining the rights of holders of long-term debt of Owens Corning where the total amount of securities authorized under each issue does not exceed 10% of the total assets of Owens Corning and its subsidiaries on a consolidated basis.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Owens Corning has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| | | | | | OWENS CORNING |
| | | | | |
| | | | | Registrant |
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| Date: | | OctoberJuly 27, 20212022 | By: | | /s/ Kenneth S. Parks |
| | | | | Kenneth S. Parks |
| | | | | Chief Financial Officer |
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| Date: | | OctoberJuly 27, 20212022 | By: | | /s/ Kelly J. Schmidt |
| | | | | Kelly J. Schmidt |
| | | | | Vice President and |
| | | | | Controller |