Owens Corning (OC)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis (“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 Annual Report on Form 10-K. Unless the context requires otherwise, the terms “Owens Corning,” “Company,” “we,” “its,” and “our” in this Annual Report on Form 10-K refer to Owens Corning and its subsidiaries.

This section of this Annual Report on Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

GENERAL

Owens Corning is a residential and commercial building products leader committed to building a sustainable future through material innovation. The Company has four reportable segments: Roofing, Insulation, Doors and Composites. Through these lines of business, the Company manufactures and sells products worldwide. We are a market leader in many of our major product categories.

EXECUTIVE OVERVIEW

Net earnings attributable to Owens Corning were $647 million in 2024, compared to $1,196 million in 2023. The Company generated $2,038 million in adjusted earnings before interest and taxes (“Adjusted EBIT”) in 2024 compared to $1,805 million in 2023. See the Adjusted Earnings Before Interest and Taxes paragraph of the MD&A for further information regarding Adjusted EBIT, including the reconciliation to net earnings attributable to Owens Corning. Segment earnings before interest and taxes (“EBIT”) performance compared to 2023 increased $124 million in our Roofing segment, increased $63 million in our Insulation segment and decreased $27 million in our Composites segment. The Doors segment contributed revenues of $1,448 million and EBIT of $99 million to the Company for the period from May 15, 2024 to December 31, 2024. Within our Corporate, Other and Eliminations category, General corporate expenses and other increased by $26 million.

Glass Reinforcements Divestiture

On February 13, 2025, the Company entered into a definitive agreement for the sale of our global glass reinforcements (“GR”) business for a purchase price of approximately $436 million, less costs to sell. The GR business, part of the Company’s Composites segment, manufactures, fabricates, and sells glass fiber reinforcements for a wide variety of applications in wind energy, infrastructure, industrial, transportation and consumer markets. In 2024, the GR business generated annual revenues of approximately $1.1 billion. The sale will complete Owens Corning’s review of strategic alternatives for the business, announced on February 9, 2024, and aligns with the strategy to reshape the Company to focus on residential and commercial building products in North America and Europe. During 2024, the Company incurred $46 million of costs related to this review.

The transaction is expected to close in 2025 and is subject to customary regulatory approvals and other conditions. The Company expects to incur a material loss on disposal which cannot be estimated at this time.

The transaction represents a strategic shift that has a major effect on the Company's operations and financial results and therefore, beginning with the quarterly report on Form 10-Q for the period ending March 31, 2025, the GR business’ financial results will be reflected in the Company’s consolidated financial statements as discontinued operations for all periods presented. The Company intends to reorganize its operations and reporting structure and begin to manage its operations under three reporting segments.

During the fourth quarter of 2024, the Company determined that certain asset groups should be tested for recoverability, primarily as a result of the progression of the strategic review of the GR business. The comparison indicated that the GR asset group was not recoverable. As a result of the analysis performed, the Company recorded pre-tax asset impairment charges for the amount by which the carrying value exceeds its fair value of $483 million for the year ended December 31, 2024, which is included in Impairment due to strategic review on the Consolidated Statements of Earnings. These charges include $439 million related to property, plant and equipment, $30 million related to operating lease right-of-use assets and $14 million related to definite-lived intangible assets.

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Assets Held for Sale

On November 4, 2024, the Company entered into a related party agreement to sell its building materials business in China and Korea to a member of the business’ management team, meeting the assets held for sale criteria. The transaction includes six insulation manufacturing facilities in China and a roofing manufacturing facility in Korea. The building materials business, within the Insulation segment, represents annual revenues of approximately $130 million. The Company reclassified $2 million as held for sale within Other current liabilities on the Consolidated Balance Sheets. The Company recorded the assets at the fair value less cost to sell, which was less than the carrying value and resulted in an impairment of $91 million related primarily to Property, Plant and Equipment and Goodwill. The transaction is expected to close mid-2025, and any additional loss on disposal is expected to be immaterial.

Masonite Acquisition

On May 15, 2024, the Company acquired all of the outstanding shares of Masonite International Corporation (“Masonite”), a leading global designer, manufacturer, marketer and distributor of interior and exterior doors and door systems, for $3.2 billion primarily funded with debt proceeds and cash on hand. The acquisition of Masonite's market-leading doors business creates a new growth platform for the Company, strengthening the Company's position in building and construction and expanding the Company's offering of branded residential building products. Masonite's operating results and preliminary purchase price allocation have been included in the Company's newly established Doors reportable segment from May 15, 2024, within the Consolidated Financial Statements. The Company issued $2.0 billion of senior notes, the proceeds of which were used to repay a portion of the outstanding borrowings under the 364-Day Credit Facility, which was used to fund a portion of the acquisition, and to pay related fees and expenses. Refer to Liquidity, Capital Resources and Other Related Matters for further discussions on the current year debt instruments.

Paroc Recall

During the second quarter of 2023, the Company’s subsidiary, Paroc Group OY (“Paroc”), which the Company acquired in 2018, notified the appropriate European maritime regulatory authorities that specific products in its marine insulation product line may not meet certain fire safety requirements in accordance with their certifications. Paroc voluntarily withdrew these specific products from the market, issued recalls and suspended distribution and sales of these products (the “Recalled Products”). Paroc continues to cooperate with the applicable regulatory and government authorities and work with its customers and end-users to assist with remediation for the recall. The Company has included an estimated liability for expected future costs related to the Recalled Products on its Consolidated Balance Sheets as of December 31, 2024 and December 31, 2023.

Due to these nonconformances, the Company reviewed the Paroc insulation product portfolio. The review has concluded. In addition to addressing the Recalled Products, the Company continues to assess potential nonconformances related to certain ventilation duct and steel beam insulation products. Paroc suspended sales of these affected insulation products as a precautionary measure while it reviews the potential nonconformances, but has not issued recalls. We expect to incur costs associated with the resolution of this matter. The amount or range of any potential loss cannot be reasonably estimated at this time.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

RESULTS OF OPERATIONS

Consolidated Results

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

Net sales increased $1,298 million in 2024 compared to 2023. The increase in net sales was primarily driven by the revenues from our Doors segment as a result of the Masonite acquisition, which was partially offset by lower sales volumes.

GROSS MARGIN

Gross margin increased $571 million in 2024 compared to 2023. The increase was primarily driven by the margins from our Doors segment as a result of the Masonite acquisition. Also contributing to the increase were higher selling prices, slightly offset by lower sales volumes.

MARKETING AND ADMINISTRATIVE EXPENSES

Marketing and administrative expenses increased $213 million in 2024 compared to 2023. The increase was primarily driven by the addition of the Doors segment selling, general and administrative expenses and ongoing inflationary pressures throughout the organization.

LOSS ON SALE OF BUSINESS

In 2024, the Company entered into a related party agreement to sell its building materials business in China and Korea. As a result of classifying the business as held for sale at December 31, 2024, we recorded a loss of $91 million included in Loss on sale of business on the Consolidated Statements of Earnings.

IMPAIRMENT DUE TO STRATEGIC REVIEW

As a result of the ongoing strategic review of the glass reinforcements business, in 2024 the Company recorded a $483 million impairment charge included in Impairment due to strategic review on the Consolidated Statements of Earnings, and was included in the Corporate, Other and Eliminations reporting category.

GAIN ON SALE OF SITE

In 2023, the Company finalized the sale of the Company's Insulation site in Santa Clara, California resulting in the recognition of a pre-tax gain of $189 million.

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OTHER EXPENSE, NET

Other expense, net increased $259 million in 2024 compared to 2023. The increase was primarily driven by higher acquisition and strategic review-related costs.

NON-OPERATING (INCOME) EXPENSE, NET

Non-operating (income) expense, net was income of $1 million in 2024 compared to $145 million of expense in 2023. The decrease is due to the pension settlement loss in the fourth quarter of 2023.

INTEREST EXPENSE, NET

Interest expense, net increased $136 million in 2024 compared to 2023. The increase was driven by higher interest on the 364-Day Credit Facility and higher long-term debt balances in connection with the Masonite acquisition.

INCOME TAX EXPENSE

Income tax expense for 2024 was $275 million compared to $401 million in 2023. The Company’s effective tax rate for 2024 was 30% on pre-tax income of $916 million. The difference between the 30% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily due to U.S. state and local income tax expense, valuation allowances and uncertain tax positions.

The Company’s effective tax rate for 2023 was 25% on pre-tax income of $1,591 million. The difference between the 25% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily attributable to U.S. state and local income tax expense.

See Note 21 for additional information.

Restructuring, Acquisition and Divestiture-Related Costs

The Company has incurred restructuring, transaction and integration costs related to acquisitions and divestitures, along with restructuring and other exit costs in connection with our global cost reduction, product line and productivity initiatives and growth strategy. These costs are recorded within Corporate, Other and Eliminations. Please refer to Note 13 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:

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Adjusted Earnings Before Interest and Taxes (“Adjusted EBIT”)

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 (expense) income items to EBIT are shown in the table below:

The reconciliation from Net earnings attributable to Owens Corning to EBIT and Adjusted EBIT is shown in the table below:

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.

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Earnings before interest, taxes, depreciation and amortization (“EBITDA”) by segment is a non-GAAP measure that consists of EBIT plus depreciation and amortization. Segment EBITDA is used internally by the Company for analysis of our performance. However, segment EBIT is the principal measure used by the chief operating decision maker ("CODM") to assess segment performance and make decisions on the allocation of resources.

Roofing

The table below provides a summary of net sales, EBIT, depreciation and amortization expense, and EBITDA for the Roofing segment:

NET SALES

In our Roofing segment, net sales increased $22 million in 2024 compared to 2023 due to higher selling prices of $165 million and favorable product mix, mostly offset by lower volumes of approximately 6%.

EBIT

In our Roofing segment, EBIT increased $124 million in 2024 compared to 2023 driven primarily by higher selling prices of $165 million, favorable product mix and favorable delivery of $22 million, slightly offset by lower sales volumes and input cost inflation.

OUTLOOK

In our Roofing segment, the Company expects residential repair and remodeling activity to remain solid. Other uncertainties that may impact Roofing demand include demand from storms and other weather-related events, competitive pricing pressure and the cost and availability of raw materials, particularly asphalt. The Company will continue to focus on managing costs, capital expenditures and working capital to best service the market demand.

Insulation

The table below provides a summary of net sales, EBIT, depreciation and amortization expense and EBITDA for the Insulation segment:

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NET SALES

In our Insulation segment, 2024 net sales increased $24 million compared to 2023. The increase was driven primarily by higher selling prices of $81 million and favorable product mix, partially offset by lower sales volumes of approximately 2% and unfavorable customer mix.

EBIT

In our Insulation segment, EBIT increased $63 million in 2024 compared to 2023. The increase was driven by higher selling prices of $81 million, favorable delivery of $34 million, lower start-up costs and favorable product mix, which more than offset higher manufacturing costs of $35 million, higher operating expenses, inclusive of incremental costs associated with evaluating manufacturing investments, lower sales volumes and unfavorable customer mix.

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 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 U.S. housing starts.

During the fourth quarter of 2024, the average Seasonally Adjusted Annual Rate (“SAAR”) of U.S. housing starts was approximately 1.379 million starts, which is down from 1.454 million starts in the fourth quarter of 2023.

The Company expects the new residential construction market in North America to be temporarily challenged as the market starts to return to a more normal seasonal pattern, while the North America commercial and industrial construction markets are expected to remain stable. However, due to a period of slow economic growth, the global commercial and industrial construction markets are expected to remain soft temporarily. The Company continues to concentrate on managing costs, capital expenditures and working capital as we position ourselves to expand capacity within our existing manufacturing network.

Doors

The table below provides a summary of net sales, EBIT, depreciation and amortization expense and EBITDA for the Doors segment:

NET SALES

In our new Doors segment, 2024 net sales were $1,448 million due to the acquisition of Masonite, which was completed on May 15, 2024.

EBIT

In our newly acquired Doors segment, EBIT was $99 million in 2024 due to the acquisition of Masonite, which was completed on May 15, 2024.

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OUTLOOK

The outlook for the Doors segment is driven by the residential new construction and residential repair and remodeling markets in North America and Europe. The Company expects the North America residential new construction market to be temporarily challenged, with discretionary residential repair and remodeling activity in North America to remain soft. Due to a weaker macroeconomic outlook and higher interest rates in Europe, the Company expects these markets to remain challenged. The Company will concentrate on managing costs, capital expenditures and working capital.

Composites

The table below provides a summary of net sales, EBIT, depreciation and amortization expense and EBITDA for the Composites segment:

NET SALES

Net sales in our Composites segment decreased $168 million in 2024 compared to 2023. The decrease was primarily driven by lower selling prices of $83 million, lower sales volumes of approximately 1%, unfavorable customer mix and $11 million of unfavorable impact of translating sales denominated in foreign currencies into United States dollars.

EBIT

EBIT in our Composites segment decreased $27 million in 2024 compared to 2023. Lower selling prices of $83 million, unfavorable customer mix, higher start-up costs of $18 million, higher production downtime of $13 million and $7 million of unfavorable impact of translating sales denominated in foreign currencies into United States dollars, which more than offset lower manufacturing costs of $90 million and $23 million of favorable delivery and input costs.

OUTLOOK

Global glass reinforcements market demand has several economic indicators, including residential, non-residential construction and manufacturing production indices, as well as global wind installations. The Company anticipates continued impacts of economic uncertainty in a dynamic global environment, as well as competitive pricing pressure. The Company remains focused on managing costs, capital expenditures and working capital.

Corporate, Other and Eliminations

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.

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The following table summarizes these items and depreciation and amortization expense included within Corporate, Other and Eliminations:

EBIT

The impact on EBIT from Corporate, Other and Eliminations in 2024 was $798 million higher compared to 2023. The increase was primarily driven by impairment charges on the glass reinforcements strategic review, the prior year pre-tax gain on the sale of the Santa Clara, California site, loss on the sale of our building materials business in China and Korea in the current year as well as higher acquisition-related costs, partially offset by gains on sales of precious metals and lower year over year restructuring charges.

General corporate expense and other in 2024 was $26 million higher than in 2023.

OUTLOOK

In 2025, we expect general corporate expenses to range between $240 and $260 million.

LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS

Liquidity

The Company's primary sources of liquidity are its balance of Cash and cash equivalents of $361 million as of December 31, 2024, its senior revolving credit facility (the “Senior Revolving Credit Facility”) and Receivables Securitization Facility.

The Company has a $1.0 billion Senior Revolving Credit Facility that has been amended from time to time. The Senior Revolving Credit Facility was most recently amended in March 2024 to increase the borrowing limit from $800 million to $1.0 billion and extend the maturity date to March 2029. No other significant terms impacting liquidity were amended.

The Company has a $300 million Receivables Securitization Facility that has been amended from time to time. The Receivables Securitization Facility was most recently amended in March 2024 to increase the borrowing limit from $280 million to $300 million and extend the maturity date to February 2025. No other significant terms impacting liquidity were amended. With the maturity of our Receivables Securitization Facility, we may consider other sources of liquidity, including the issuance of commercial paper.

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The following table shows how the Company utilized its primary sources of liquidity:

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 December 31, 2024.

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 the Risk Factors disclosed in Item 1A of this Annual Report on Form 10-K for details on the factors that could inhibit our subsidiaries' abilities to pay dividends or make other distributions to the parent company.

We have no material off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures or other resources.

Cash Flows

Cash and cash equivalents were $361 million as of December 31, 2024, compared to $1.6 billion as of December 31, 2023. Cash and cash equivalents held by foreign subsidiaries may be subject to foreign withholding taxes upon repatriation to the U.S. As of December 31, 2024 and December 31, 2023, the Company had $95 million and $114 million, respectively, in cash and cash equivalents in certain of its foreign subsidiaries. The Company continues to assert indefinite reinvestment in accordance with Accounting 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.

Operating activities: Net cash flow provided by operating activities increased by $173 million for the twelve months ended December 31, 2024 compared to the same period in 2023. The increase in cash provided by operating activities was primarily due to lower increases in accounts payable and higher decreases in inventory when compared to the same period in 2023. These were slightly offset by increases in accounts receivable during the period.

Investing activities: Net cash flow used for investing activities increased by $3.0 billion for the twelve months ended December 31, 2024 compared to the same period in 2023. The increase was primarily driven by the Masonite acquisition and lower proceeds from sale of assets in 2024 due to the sale of the Santa Clara site in 2023.

Financing activities: Net cash flow provided by financing activities increased by $1.2 billion for the twelve months ended December 31, 2024 compared to the same period in 2023. The increase was primarily driven by net proceeds from long-term debt related to the Masonite acquisition, as well as lower treasury stock repurchases. These were slightly offset by payments related to the tender offer to purchase Masonite senior notes due 2028 and the repayment at maturity of the Company's 2024 senior notes.

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 for at least the next 12 months and foreseeable future thereafter.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

The following discussion of material cash requirements evaluates known contractual and other obligations, but does not include amounts that are contingent on events or other factors that are uncertain or unknown at this time including legal contingencies and uncertain tax positions among others. The amounts presented are based on various estimates, including estimates regarding the timing of payments, prevailing interest rates, the occurrence of certain events and other factors. Actual results may vary materially from the amounts discussed below.

Capital Expenditures

Our capital expenditures are primarily related to the maintenance and rebuild of our long-term assets, as well as investing in projects that support growth and innovation to further our enterprise strategy. Our capital expenditures were $647 million in 2024. We expect to have capital expenditures of approximately $800 million in 2025. The anticipated increase in capital expenditures in 2025 is primarily driven by growth, manufacturing productivity and sustainability projects. We expect that capital expenditures will be funded through cash flows from operations. See Note 2 and Note 6 of the Consolidated Financial Statements for additional information on Property, plant and equipment.

Long-term Debt Obligations, including Current Portion of Long-term Debt

As of December 31, 2024, the Company had $5.1 billion of total debt, which mostly consists of long-term debt relating to various outstanding senior notes. In addition, the Company's current portion of long-term debt of $38 million primarily relates to the current portion of finance leases. In the fourth quarter of 2024, the Company repaid the 2024 senior notes of $400 million at maturity. Further discussion of the amount and timing of the future scheduled maturities of our senior notes can be found in Note 14 of the Consolidated Financial Statements. There were no outstanding borrowings on our Senior Revolving Credit Facility or our Receivables Securitization Facility as of December 31, 2024.

Interest on Debt

We are obligated to make periodic interest payments at fixed rates, depending on the terms of the applicable debt agreements. Based on interest rates and scheduled maturities as of December 31, 2024, these interest obligations range from $199 million to $242 million annually over the next five years.

Finance Lease Obligations

Our finance lease obligations primarily consist of real estate, oxygen plants, computers and software and fleet vehicles. As of December 31, 2024, we had a total of $463 million of minimum finance lease payments. Further discussion of the future maturities of these lease liabilities can be found in Note 10 of the Consolidated Financial Statements.

Operating Lease Obligations

Our operating lease obligations primarily consist of real estate and material handling equipment. As of December 31, 2024, we had a total of $580 million of minimum operating lease payments. Further discussion of the future maturities of these lease liabilities can be found in Note 10 of the Consolidated Financial Statements.

Purchase Obligations

Purchase obligations are commitments to suppliers to purchase goods or services, and include take-or-pay arrangements, capital expenditures, and contractual commitments to purchase equipment. As of December 31, 2024, the total of these obligations was $411 million, inclusive of $287 million payable in the next 12 months. The Company did not include ordinary course of business purchase orders in this amount as the majority of such purchase orders may be canceled and are reflected in historical operating cash flow trends. The Company does not believe such purchase orders will adversely affect our liquidity position.

Pension Contributions

The Company has several defined benefit pension plans. The Company made cash contributions of $7 million and $18 million to the plans during the twelve months ended December 31, 2024 and 2023, respectively. The Company expects to contribute $20 million in cash to its pension plans during 2025. 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. Further discussion of the Company's defined benefit pension plans can be found in Note 15 of the Consolidated Financial Statements.

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Share Repurchases

On December 1, 2022, the Board of Directors approved a new share repurchase program under which the Company is authorized to repurchase up to an aggregate of 10 million shares of the Company’s outstanding common stock (the “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 will be at the Company’s discretion. The Company repurchased 2.6 million shares of the Company’s common stock for $433 million, inclusive of applicable taxes, under previously announced repurchase authorizations. As of December 31, 2024, 6.4 million shares remained available for repurchase under the repurchase authorizations.

Other Strategic Uses of Cash

We will evaluate and consider payments of any dividends authorized by our Board of Directors, strategic acquisitions, joint ventures, debt repurchases or repayments and other transactions to create stockholder value and enhance financial performance. Such transactions may require cash expenditures beyond current sources of liquidity or generated proceeds.

Debt

On March 1, 2024, the Company entered into an unsecured term loan agreement in an aggregate principal amount of $3.0 billion (the “364-Day Credit Facility”). On May 15, 2024, to fund a portion of the Masonite acquisition, the Company borrowed $2.8 billion using Term SOFR plus a spread on the 364-Day Credit Facility. As a result of the borrowing, the Company incurred approximately $16 million of financing fees which were amortized to Interest expense, net on the Consolidated Statements of Earnings. During the second quarter of 2024, the Company completely repaid the 364-Day Credit Facility with a combination of proceeds from the issuance of new senior notes, borrowings on the Receivables Securitization Facility and cash on hand. Based on terms of the agreement, no further amounts can be drawn.

On April 15, 2024, in connection with the acquisition of Masonite, we commenced a tender offer (the “Tender Offer”) to purchase any and all of Masonite's outstanding 5.375% Senior Notes due 2028 (the “Masonite 2028 notes”) with an aggregate value of $501 million. On May 13, 2024, 94.25% of the outstanding Masonite 2028 notes were validly tendered, with Owens Corning making a cash payment on May 16, 2024 of approximately $480 million, inclusive of $7 million of interest and $1 million premium on tender. Following the settlement of the Tender Offer, approximately $29 million of the Masonite 2028 notes that were not tendered remain outstanding, which has been recorded on the Consolidated Balance Sheets. Interest on the Masonite 2028 notes is payable semiannually in arrears on February 1 and August 1 each year.

On May 1, 2024 in connection with the acquisition of Masonite, we commenced an offer to exchange (the “Exchange Offer”) any and all of Masonite’s outstanding 3.50% Senior Notes due 2030 (the “Masonite 2030 notes”) for new 3.50% Senior Notes due 2030 of Owens Corning (the “Owens Corning 2030 notes”). On May 22, 2024, 99.51% of the outstanding Masonite 2030 notes were exchanged and we issued $373 million of aggregate principal amount of Owens Corning 2030 notes. Interest on the notes is payable semiannually in arrears on February 15 and August 15 each year, beginning on August 15, 2024. Following the settlement of the Exchange Offer, approximately $2 million of the Masonite 2030 notes that were not exchanged remain outstanding, which has been recorded on the Consolidated Balance Sheets.

On May 15, 2024, the Company initially borrowed $295 million under the Receivables Securitization Facility which was used to pay down a portion of the 364-Day Credit Facility. Subsequent to the May 15, 2024 borrowing, the Company repaid and re-borrowed on the Receivables Securitization Facility throughout the year principally to pay down the 364-Day Credit Facility. As of December 31, 2024, there was no outstanding balance on the Receivables Securitization Facility.

On May 31, 2024, the Company issued $500 million of 2027 senior notes with an annual interest rate of 5.500%, $800 million of 2034 senior notes with an annual interest rate of 5.700% and $700 million of 2054 senior notes with an annual interest rate of 5.950%. These senior notes are net of discounts and issuance costs of $4 million, $11 million and $17 million, respectively. The proceeds from these notes were used to repay a portion of the outstanding borrowings under the 364-Day Credit Facility that was used to fund a portion of the Masonite acquisition in the second quarter of 2024 and to pay related fees and expenses.

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

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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. The Company’s payment terms to the financial institutions, including the timing and amount of payments, are based on the original supplier invoices. One of the Programs includes a parent guarantee to the participating financial institution for a certain U.S. subsidiary that, at the time of the respective program’s inception in 2015, was a guarantor subsidiary of the Company’s credit agreement. The obligations are presented as Accounts payable within Total current liabilities on the Consolidated Balance Sheets and all activity related to the obligations is presented within operating activities on the Consolidated Statements of Cash Flow.

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, 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 Programs have materially impacted our current period liquidity, and do not believe that the Programs are reasonably likely to materially affect liquidity in the future.

Please refer to the Supplier Finance Programs section in Note 1 of the Consolidated Financial Statements for a rollforward of outstanding obligations under the supplier finance programs.

Derivatives

Please refer to Note 4 of the Consolidated Financial Statements.

Fair Value Measurement

Please refer to Notes 1, 4, 14, 15 and 16 of the Consolidated Financial Statements.

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of our financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments related to these assets, liabilities, revenues and expenses. We believe these estimates to be reasonable under the circumstances. Management bases its estimates and judgments on historical experience, expected future outcomes, and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The Company believes that the following accounting estimates are critical to our financial results:

Fair Values of Assets Acquired and Liabilities Assumed in Acquisitions

Assets acquired and liabilities assumed in a business combination are recorded at their estimated fair values on the date of acquisition. The difference between the purchase price amount and the net fair value of assets acquired and liabilities assumed is recognized as goodwill on the balance sheet if the purchase price exceeds the estimated net fair value or as a bargain purchase gain on the income statement if the purchase price is less than the estimated net fair value. We apply significant judgment in estimating the fair value of assets acquired and liabilities assumed, which involves the use of significant estimates and assumptions. Changes in these judgments or estimates can have a material impact on the valuation of the respective assets and liabilities acquired and our results of operations in periods after acquisition. The allocation of the purchase price is preliminary for up to one year after the acquisition date as more information is obtained about the fair value of assets acquired and liabilities assumed. See Note 7 of the Consolidated Financial Statements for further information on the fair values of assets acquired and liabilities assumed in recent business combinations, as well as the measurement period adjustments to the purchase price allocation.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

On May 15, 2024, the Company completed the acquisition of Masonite for a total purchase price of $3.2 billion. As part of the acquisition the Company acquired $979 million of intangible assets related to customer relationships, which mainly consists of one customer relationship. The fair value of customer relationships was determined using the multi-period excess earnings method. Key assumptions under this method are the revenue growth rate, adjusted EBITDA margin (including the adjusted terminal EBITDA margin), customer attrition rate, discount rate, tax rate and contributory asset charges.

Tax Estimates

The determination of our tax provision is complex due to operations in several tax jurisdictions outside the United States. We apply a more-likely-than-not recognition threshold for all tax uncertainties. Such uncertainties include any claims by the Internal Revenue Service for income taxes, interest, and penalties attributable to audits of open tax years.

In addition, we record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. We estimate future taxable income and the effect of tax planning strategies in our consideration of whether deferred tax assets will more likely than not be realized. In the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to reduce the net deferred tax assets would be charged to earnings in the period such determination was made. Conversely, if we were to determine that we would be able to realize our net deferred tax assets in the future in excess of their currently recorded amount, an adjustment to increase the net deferred tax assets would be credited to earnings in the period such determination was made.

Impairment of Assets

The Company exercises judgment in evaluating assets for impairment. Goodwill and other indefinite-lived intangible assets are tested for impairment annually, or when circumstances arise which indicate there may be an impairment. Long-lived assets are tested for impairment when economic conditions or management decisions indicate an impairment may exist. These tests require comparing recorded values to estimated fair values for the assets under review.

The Company has recorded its goodwill and conducted testing for potential goodwill impairment at a reporting unit level. Our reporting units represent a business for which discrete financial information is available and segment management regularly reviews the operating results. The Company has four reporting units: Roofing, Insulation, Doors and Composites.

2024 Goodwill Impairment Assessments

Goodwill is an intangible asset that is not subject to amortization; however, annual tests are required to be performed to determine whether impairment exists. Prior to performing the impairment testing process described in ASC 350-20, the guidance permits companies to assess qualitative factors to determine if it is more likely than not that a reporting unit’s fair value is less than its carrying value. If, based on the review of the qualitative factors, we determine it is not more likely than not that the fair value of a reporting unit is less than its carrying value, we would bypass the quantitative impairment test. Events and circumstances we consider in performing the qualitative assessment include macro-economic conditions, market and industry conditions, internal cost factors, and the operational stability and the overall financial performance of the reporting units. If it is more likely than not that a reporting unit’s fair value is less than or close to its carrying value, then the quantitative impairment test must be performed to determine if impairment is required.

When it is determined necessary for the Company to perform the quantitative impairment process for goodwill, we estimate fair values using a discounted cash flow approach from the perspective of a market participant, as well as the market approach. Significant assumptions used in the discounted cash flow approach are the revenue growth rates and EBIT margins used in estimating discrete period cash flow forecasts of the reporting unit, the discount rate, the reporting unit tax rate and the long-term revenue growth rate and EBIT margin used in estimating the terminal business value. The cash flow forecasts of the reporting unit are based upon management’s long-term view of our markets and are the forecasts that are used by senior management and the Board of Directors to evaluate operating performance. The discount rate utilized is management’s estimate of what the market’s weighted average cost of capital is for a company with a similar debt rating and stock volatility, as measured by beta. The reporting unit specific tax rate is based on blended global historical rates. The terminal business value is determined by applying the long-term growth rate to the latest year for which a forecast exists. For the market approach, we use market multiples derived from a set of similar companies. As part of our goodwill quantitative testing process, the Company evaluates whether there are reasonably likely changes to management’s estimates that would have a material impact on the results of the goodwill impairment testing.

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Third Quarter Goodwill Triggering Event

The annual impairment tests performed in the fourth quarter of 2023 indicated that the business enterprise value of the Composites reporting unit exceeded its carrying value by approximately 5%. Given this narrow cushion of Composites reporting unit fair value in excess of carrying value and the ongoing strategic review of the glass reinforcements business, the Company performed an interim goodwill impairment test as of September 30, 2024 for the Composites reporting unit. The interim testing indicated that the business enterprise value of the Composites reporting unit exceeded its carrying value by less than 10%.

Annual Goodwill Testing

Our annual test of goodwill for impairment was conducted as of October 1, 2024. The Company elected to perform the qualitative approach on all of its reporting units. After evaluating and weighing all relevant events and circumstances, we concluded it is more likely than not that the fair value of the Roofing and Insulation reporting units exceeds their respective carrying value amounts while the Doors reporting unit business enterprise value approximates its carrying value given the acquisition that occurred in May 2024. Given the narrow cushion of the Composites reporting unit fair value in excess of carrying value as a result of the third quarter impairment testing, the Company performed a quantitative analysis for the Composites reporting unit as of October 1, 2024. Testing indicated that the cushion remained less than 10 %.

Due to the passage of time since the last quantitative analysis, the Company elected to perform a quantitative analysis for the Roofing and Insulation reporting units. The fair value of each of our reporting units was in excess of its carrying value and thus, no impairment exists. The fair value of the Roofing and Insulation reporting units substantially exceeded the carrying value as of the date of our assessment.

Fourth Quarter Goodwill Triggering Event

Subsequent to the annual test for the Composites reporting unit, the Company performed an interim goodwill impairment test during the fourth quarter of 2024 primarily as a result of the progression of the strategic review of the glass reinforcements business. As a result of this test, we determined that no impairment existed for the reporting unit. Testing indicated that the business enterprise value for the Composites reporting unit exceeded its carrying value by less than 5%.

There was uncertainty as to the outcome of the strategic review of our glass reinforcements business and the macroeconomic factors that impact this reporting unit. The likelihood of a future impairment could be increased by a sustained downturn in these macroeconomic factors, a change in the long-term revenue growth rate or profitability for this reporting unit, or the outcome of the strategic review. The most significant assumptions used in our analysis to determine the fair value of the Composites reporting unit are the revenue growth rates, EBIT margins, long-term growth rate, and the discount rate.

If all other assumptions remain constant, a 2% decrease in the base year revenue would decrease the fair value by approximately 1%, a 1% decrease in the revenue growth rates would decrease the fair value by approximately 1%, a 50 basis point decrease in forecasted annual EBIT margins would decrease the fair value by approximately 2%, a 50 basis point decrease in the selected long-term growth rate of 2% would decrease the fair value by approximately 2%, and a 50 basis point increase in the selected discount rate of 11.5% would decrease the fair value by approximately 3%.

The following table summarizes the segment allocation of recorded goodwill on our Consolidated Balance Sheet as of December 31, 2024:

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Annual 2024 Indefinite-lived Intangible Asset Impairment Assessment

Fair values used in testing for potential impairment of our trademarks and trade names are calculated by applying an estimated market value royalty rate to the forecasted revenues of the businesses that utilize those assets. The assumed cash flows from this calculation are discounted at a rate based on a market-participant discount rate. Our annual test of indefinite-lived intangibles was conducted as of October 1, 2024. The fair value of each of our indefinite-lived intangible assets exceeded the carrying value as of the date of our assessment.

Testing indicated that the fair value of a trade name used by our European building and technical insulation business exceeded its carrying values by 3%. 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. If all other assumptions remain constant, a 50 basis point increase in the selected discount rate of 11.5% would decrease the fair value by approximately 5%, and a 50 basis point decrease in the selected long-term growth rate of 2.0% would decrease the fair value by approximately 4%. The carrying value of the European building and technical insulation trade name is $84 million as of December 31, 2024. This asset is included within the Insulation segment.

The fair value of the remaining assets substantially exceeded their carrying value as of the date of our assessment.

Long-lived Asset Recoverability and Impairment Assessments

The recoverable value for long-lived asset testing are calculated by estimating the undiscounted cash flows from the use and ultimate disposition of the asset. For impairment testing, long-lived assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. The Company groups long-lived assets based on manufacturing facilities that produce similar products either globally or within a geographic region. Management tests asset groups for potential impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

During the fourth quarter of 2024, the Company determined that certain asset groups should be tested for recoverability, primarily as a result of the progression of the strategic review of the glass reinforcements business. Recoverability of the long-lived assets was measured by comparing the carrying amount of the asset groups to the future net undiscounted cash flows expected to be generated by the asset groups. Specifically for the glass reinforcements asset group, the Company used an undiscounted cash flow model giving consideration to probability weighted cash flows of differing outcomes of the strategic review. The comparison indicated that one of the asset groups, the glass reinforcements asset group, was not recoverable.

Fair value of the glass reinforcements asset group was calculated using a discounted cash flow model and market information obtained through the strategic review to estimate the fair value of the asset group, with weighting applied. As a result of the analysis performed, the Company recorded pre-tax asset impairment charges for the amount by which the carrying value exceeded its fair value of $483 million for the year ended December 31, 2024, which is included in Impairment due to strategic review on the Consolidated Statements of Earnings. These charges include $439 million related to property, plant and equipment, $30 million related to operating lease right-of-use assets and $14 million related to definite-lived intangible assets.

The most significant assumption used in the fair value analysis was the weighting of the discounted cash flow model and market information. If all other assumptions remain constant, a 5% change in the weighting would change the fair value of the asset group by approximately 2%.

Please refer to Note 5, Note 6 and Note 10 for additional detail on impairment charges recorded in 2024.

However, changes in management intentions, market conditions, operating performance and other similar circumstances could affect the assumptions used in these impairment tests. Changes in the assumptions could result in additional impairment charges that could be material to our Consolidated Financial Statements in any given period.

Product Warranty

The Company records a liability for warranty obligations at the date the related products are sold. Most significant are the standard warranties on our roofing products. The standard warranties generally provide full coverage of labor and materials for a period of 5-10 years from the original installation date and prorated materials for the remaining life of the roof.

Our estimated cost of our standard warranty obligations is calculated using a 10-year historical average of claims paid for each major product category, the estimated future cost to manufacture the replacement shingles, and the estimated future cost for contractor labor, subject to the applicable warranty coverage, for a 20-year period from the date of installation.

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Additionally, the Company sells contractors extended warranties that extend coverage beyond our standard product warranty. The extended warranties revenue is deferred and recognized over the related coverage period, ranging from 16 to 20 years.

Pensions and Other Postretirement Benefits

Accounting for pensions and other postretirement benefits involves estimating the cost of benefits to be provided well into the future and attributing that cost over the time period each employee works. To accomplish this, extensive use is made of assumptions about investment returns, discount rates, inflation, mortality, turnover and medical costs. Changes in assumptions used could result in a material impact to our Consolidated Financial Statements in any given period.

Two key assumptions that could have a significant impact on the measurement of pension liabilities and pension expense are the discount rate and the expected return on plan assets. For our largest plan, the United States plan, the discount rate used for the December 31, 2024 measurement date is based on a yield curve approach where the expected future benefit payments are matched with a yield curve derived from certain AA-rated corporate bonds.

The result supported a discount rate of 5.65% at December 31, 2024 compared to 5.00% at December 31, 2023. A 25 basis point increase (decrease) in the discount rate would (decrease) increase the December 31, 2024 projected benefit obligation for the United States pension plan by approximately $8 million. A 25 basis point increase (decrease) in the discount rate would (decrease) increase 2025 net periodic pension cost by less than $1 million.

The expected return on plan assets in the United States was derived by taking into consideration the target plan asset allocation, historical rates of return on those assets, projected future asset class returns and net out performance of the market by active investment managers and plan related and investment related expenses paid from the plan trust. The Company uses the target plan asset allocation because we rebalance our portfolio to target on at least a quarterly basis. An asset return model was used to develop an expected range of returns on plan investments over a 20-year period, with the expected rate of return selected from a best estimate range within the total range of projected results. This process resulted in the selection of an expected return of 6.00% at the December 31, 2024 measurement date, which is used to determine net periodic pension cost for the year 2025. The expected return selected at the December 31, 2023 measurement date was 5.75%, which was used to determine the net periodic pension cost for the year 2024. A 25 basis point decrease in return on plan assets assumption would result in a respective increase of 2025 net periodic pension cost by less than $1 million.

The discount rate for our United States postretirement plan was selected using the same method as described for the pension plan. The result supported a discount rate of 5.55% at December 31, 2024 compared to 4.90% at December 31, 2023. A 25 basis point increase (decrease) in the discount rate would (decrease) increase the United States postretirement benefit obligation by approximately $2 million and (decrease) increase 2025 net periodic postretirement benefit cost by less than $1 million.

The methods corresponding to those described above are used to determine the discount rate and expected return on assets for non-U.S. pension and postretirement plans, to the extent applicable.

RECENT ACCOUNTING PRONOUNCEMENTS

Please refer to Note 1 of the Consolidated Financial Statements.

ENVIRONMENTAL MATTERS

Please refer to Note 17 of the Consolidated Financial Statements.

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ITEM 7. 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:

•levels of residential and commercial or industrial construction activity;

•demand for our products;

•industry and economic conditions including, but not limited to, supply chain disruptions, recessionary conditions, inflationary pressures and interest rate and financial markets volatility;

•changes to tariff, trade or investment policies or laws;

•availability and cost of energy and raw materials;

•competitive and pricing factors;

•relationships with key customers and customer concentration in certain areas;

•our ability to achieve expected synergies, cost reductions and/or productivity improvements;

•issues related to acquisitions, divestitures and joint ventures or expansions;

•our ability to complete the announced divestiture of our GR business on the expected terms and within the anticipated time period, or at all, which is dependent on the parties' ability to satisfy certain closing conditions;

•climate change, weather conditions and storm activity;

•legislation and related regulations or interpretations, in the United States or elsewhere;

•domestic and international economic and political conditions, policies or other governmental actions, as well as war and civil disturbance;

•uninsured losses or major manufacturing disruptions, including those from natural disasters, catastrophes, pandemics, theft or sabotage;

•environmental, product-related or other legal and regulatory liabilities, proceedings or actions;

•research and development activities and intellectual property protection;

•issues involving implementation and protection of information technology systems;

•foreign exchange and commodity price fluctuations;

•our level of indebtedness;

•our liquidity and the availability and cost of credit;

•the level of fixed costs required to run our business;

•levels of goodwill or other indefinite-lived intangible assets;

•price volatility in certain wind energy markets in the U.S.;

•loss of key employees and labor disputes or shortages; and

•defined benefit plan funding obligations.

All forward-looking statements in this Annual Report on Form 10-K should be considered in the context of the risks and other factors described herein, and in Item 1A above, and as detailed from time to time in the Company’s filings with the U.S. Securities and Exchange Commission. 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 Annual Report on Form 10-K may not occur and actual results may differ materially from those anticipated or implied in the forward-looking statements. Accordingly, users of this Annual Report on Form 10-K are cautioned not to place undue reliance on the forward-looking statements.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis (“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,” “its,” and “our” in this Annual Report on Form 10-K refer to Owens Corning and its subsidiaries.

This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

GENERAL

Owens Corning is a global building and construction materials leader committed to building a sustainable future through material innovation. The Company has three reporting segments: Roofing, Insulation and Composites. Through these lines of business, the Company manufactures and sells products worldwide. We are a market leader in many of our major product categories.

EXECUTIVE OVERVIEW

Net earnings attributable to Owens Corning were $1,196 million in 2023, compared to $1,241 million in 2022. The Company generated $1,805 million in adjusted earnings before interest and taxes (“Adjusted EBIT”) in 2023 compared to $1,762 million in 2022. See the Adjusted Earnings Before Interest and Taxes paragraph of the MD&A for further information regarding Adjusted EBIT, including the reconciliation to net earnings attributable to Owens Corning. Segment earnings before interest and taxes (“EBIT”) performance compared to 2022 increased $343 million in our Roofing segment, increased $7 million in our Insulation segment and decreased $256 million in our Composites segment. Within our Corporate, Other and Eliminations category, General corporate expenses and other increased by $51 million.

Cash and cash equivalents were $1.6 billion as of December 31, 2023, compared to $1.1 billion as of December 31, 2022. In 2023, the Company's operating activities provided $1,719 million of cash flow, compared to $1,760 million in 2022.

On February 8, 2024, the Company entered into a definitive agreement to purchase all of the outstanding shares of Masonite. The purchase price for the acquisition of Masonite is approximately $3.9 billion in cash, which we expect to fund with cash on hand and new committed financing. Masonite is a leading global designer, manufacturer, marketer and distributor of interior and exterior doors and door systems for the new construction and repair, renovation and remodeling sectors of the residential and non-residential building construction markets. The transaction was unanimously approved by the board of directors of both companies and is expected to close mid-2024, subject to regulatory and other customary closing conditions, including the approval of Masonite shareholders.

On February 9, 2024, the Company announced the decision to review strategic alternatives for its global glass reinforcements (“GR”) business, consistent with our strategy to focus on building and construction materials. The GR business, which operates within our Composites segment, supplies a wide variety of glass fiber products for applications in wind energy, infrastructure, industrial, transportation, and consumer markets. The GR business generates annual revenues of approximately $1.3 billion and has operations in 11 countries, with 18 manufacturing facilities. While a range of options are under consideration, including a potential sale, spin-off or other strategic option, there can be no assurance that the strategic review will result in any transaction or other outcome.

In the fourth quarter of 2023, the Company entered into two agreements to purchase non-participating annuity contracts from insurance companies to transfer $291 million of the Company's outstanding pension projected benefit obligations related to certain U.S. and non-U.S. pension plans. These transactions were funded with pension plan assets of $268 million. As a result of these transactions, the Company recognized a pre-tax settlement charge of $145 million in the fourth quarter of 2023 from the accelerated recognition of a pro rata portion of plan actuarial losses. This charge was recorded in Non-operating expense (income), net on the Consolidated Statements of Earnings. These transactions did not have a material effect on the plans' funded statuses.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

During the second quarter of 2023, the Company’s subsidiary, Paroc Group OY (“Paroc”), which the Company acquired in 2018, notified the appropriate European maritime regulatory authorities that specific products in its marine insulation product line may not meet certain fire safety requirements in accordance with their certifications. Paroc voluntarily withdrew these specific products from the market, issued recalls, and suspended distribution and sales of these products. Paroc continues to cooperate with the applicable regulatory and government authorities and work with its customers and end-users to assist with remediation. During 2023, the Company established an estimated liability for expected future costs related to the marine recall on our Consolidated Balance Sheet as of December 31, 2023.

As part of its review of the Paroc insulation product portfolio, the Company discovered potential nonconformances relating to certain ventilation duct insulation products. In January 2024, Paroc suspended sales of the affected insulation products as a precautionary measure while it reviews the potential nonconformances. The Company is continuing its review.

In May 2023, the Company made the decision to exit the Protective Packaging business within the Roofing segment, including the production and sale of wood packaging, metal packaging and custom products. Exiting Protective Packaging will allow the Company to focus resources on the growth of its building materials products, which supports the future growth aspirations of the enterprise. With the exit of the Protective Packaging business, the Company closed its plants in Dorval, Quebec and Mission, British Columbia, Canada. The Company also ceased operations at its Qingdao, China facility. In connection with the exit of the Protective Packaging business, the Company estimates that it will incur cash charges of approximately $15 million, primarily related to severance and other exit costs. Additionally, the Company expects to incur total non-cash charges in the range of $70 to $75 million, primarily related to accelerated depreciation of property, plant and equipment and accelerated amortization of definite-lived intangibles. The Company has exited the majority of the business and expects to generate savings of approximately $7 million annually beginning 2024. During the twelve months ended 2023, the Company recorded $78 million of charges, primarily related to accelerated depreciation, accelerated amortization and severance.

In March 2023, the Company finalized the sale of its Insulation site in Santa Clara, California for total proceeds of $234 million, net of transaction fees. Total proceeds included a non-refundable deposit of $50 million received in the third quarter 2021. As a result, the Company recognized a pre-tax gain of $189 million in the first quarter of 2023, which is recorded in Gain on sale of site on the Consolidated Statements of Earnings.

In 2023, the Company repurchased 5.4 million shares of the Company’s common stock for $629 million, inclusive of applicable taxes, under previously announced repurchase authorizations. As of December 31, 2023, 8.9 million shares remained available for repurchase under the repurchase authorizations.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

RESULTS OF OPERATIONS

Consolidated Results (in millions)

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

Net sales decreased $84 million in 2023 compared to 2022. The decrease in net sales was driven by lower sales volumes in both Insulation and Composites segments, partially offset by higher selling prices across all three segments. The remaining variance was driven by favorable customer mix, which was partially offset by the unfavorable net impact of acquisitions and divestitures.

GROSS MARGIN

Gross margin increased $67 million in 2023 compared to 2022. The increase in gross margin was driven by higher selling prices across all three segments, which was partially offset by lower sales volumes in both Insulation and Composites segments and higher production downtime. Favorable delivery and favorable customer and product mix more than offset higher input costs and the unfavorable net impact of acquisitions and divestitures.

MARKETING AND ADMINISTRATIVE EXPENSES

Marketing and administrative expenses increased $28 million in 2023 compared to 2022. The increase was driven primarily by ongoing inflationary pressures, as well as higher general corporate expenses.

GAIN ON EQUITY METHOD INVESTMENT

In 2022, the Company recognized a non-cash gain of $130 million from the remeasurement of the previously held equity method investment in Fiberteq, LLC upon the Company’s acquisition of the remaining 50% of the joint venture with IKO.

GAIN ON SALE OF SITE

In the first quarter of 2023, the Company finalized the sale of the Company's Insulation site in Santa Clara, California resulting in the recognition of a pre-tax gain of $189 million.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

OTHER EXPENSE (INCOME), NET

Other expense (income), net decreased $17 million in 2023 compared to 2022. Higher restructuring costs, lower gains on the sale of precious metals and the establishment of the estimated liability for the Paroc marine recall matter in 2023 were more than offset by the favorable comparison year-over-year to indefinite-lived intangible asset impairment charges of $96 million and the net loss from divestiture related activities.

NON-OPERATING EXPENSE (INCOME), NET

Non-operating expense (income), net increased $154 million in 2023 compared to 2022. The increase was driven by the pension settlement loss in the fourth quarter of 2023.

INTEREST EXPENSE, NET

Interest expense, net decreased $33 million in 2023 compared to 2022. The decrease was driven by higher interest income related to the increase in cash and interest rates, as well as higher capitalized interest resulting from higher construction in progress balances.

INCOME TAX EXPENSE

Income tax expense for 2023 was $401 million compared to $373 million in 2022. The Company’s effective tax rate for 2023 was 25% on pre-tax income of $1,591 million. The difference between the 25% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily due to U.S. state and local income tax expense.

The Company’s effective tax rate for 2022 was 23% on pre-tax income of $1,614 million. The difference between the 23% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily attributable to U.S. state and local income tax expense, adjustments to R&D tax credits, and other adjustments.

See Note 20 for additional information.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Restructuring, Acquisition and Divestiture-Related Costs

The Company has incurred restructuring, transaction and integration costs related to acquisitions and divestitures, along with restructuring and other exit costs in connection with its global cost reduction, product line and productivity initiatives and growth strategy. These costs are recorded within Corporate, Other and Eliminations. Please refer to Note 12 of the Consolidated Financial Statements for further information on the nature of these costs.

The following table presents the impact and respective location of total restructuring, acquisition and divestiture-related costs on the Consolidated Statements of Earnings (in millions):

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Adjusted Earnings Before Interest and Taxes (“Adjusted EBIT”)

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 (expense) income items to EBIT are shown in the table below (in millions):

The reconciliation from Net earnings (loss) attributable to Owens Corning to EBIT and Adjusted EBIT is shown in the table below (in millions):

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

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.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) by segment is a non-GAAP measure that consists of EBIT plus depreciation and amortization. Segment EBITDA is used internally by the Company for analysis of our performance.

Roofing

The table below provides a summary of net sales, EBIT, depreciation and amortization expense, and EBITDA for the Roofing segment (in millions):

NET SALES

In our Roofing segment, net sales increased $372 million in 2023 compared to 2022 due to higher sales volumes of approximately 5% and higher selling prices of $166 million. Favorable product and customer mix were partially offset by lower third-party asphalt sales of $44 million.

EBIT

In our Roofing segment, EBIT increased $343 million in 2023 compared to 2022 driven primarily by higher selling prices of $166 million. The remaining improvement was driven by favorable input costs and delivery of $80 million, higher sales volumes, and favorable customer and product mix of $48 million, which were partially offset by higher selling, general and administrative expenses and $8 million of higher production costs.

OUTLOOK

In our Roofing segment, the Company expects North American new residential construction market to temporarily remain soft. Other uncertainties that may impact Roofing demand include demand from storms and other weather-related events, demand from repair and remodeling activity, competitive pricing pressure and the cost and availability of raw materials, particularly asphalt. The Company will continue to focus on managing costs, capital expenditures and working capital.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Insulation

The table below provides a summary of net sales, EBIT, depreciation and amortization expense and EBITDA for the Insulation segment (in millions):

NET SALES

In our Insulation segment, 2023 net sales decreased $46 million compared to 2022. The decrease was driven by lower sales volumes of approximately 10%, which more than offset higher selling prices of $245 million and favorable customer and product mix. The favorable net impact of acquisitions and divestitures and $5 million of favorable impact of translating sales denominated in foreign currencies into United States dollars also contributed to the offset of decreased volumes.

EBIT

In our Insulation segment, EBIT increased $7 million in 2023 compared to 2022. Higher selling prices of $245 million more than offset lower sales volumes and $57 million of input cost inflation. Higher manufacturing costs of $29 million and higher production downtime were partially offset by favorable delivery of $21 million and favorable customer and product mix. The remaining variance was driven by the $7 million negative impact of translating profits denominated in foreign currencies into United States dollars and higher start-up costs.

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 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 U.S. housing starts.

During the fourth quarter of 2023, the average Seasonally Adjusted Annual Rate (“SAAR”) of U.S. housing starts was approximately 1.454 million starts, which is up from 1.403 million starts in the fourth quarter of 2022.

The Company expects both the North American new residential construction market and global commercial and industrial construction markets to temporarily remain soft with the weaker macro-economic outlook, higher interest rates and continued input cost inflation. The Company remains focused on managing costs, capital expenditures, and working capital.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Composites

The table below provides a summary of net sales, EBIT, depreciation and amortization expense and EBITDA for the Composites segment (in millions):

NET SALES

Net sales in our Composites segment decreased $374 million in 2023 compared to 2022. The decrease was primarily driven by lower sales volumes of approximately 12% and the net unfavorable impact of divestitures and acquisitions. Unfavorable customer mix of $16 million was partially offset by higher selling prices of $9 million and the favorable impact of translating sales denominated in foreign currencies into United States dollars.

EBIT

EBIT in our Composites segment decreased $256 million in 2023 compared to 2022. The decrease was driven by lower sales volumes, $83 million of higher production downtime and the net unfavorable impact of divestitures and acquisitions of $37 million. Higher input cost inflation of $41 million was offset by favorable delivery and higher selling prices. The remaining variance was driven by unfavorable customer mix, higher rebuild costs and the $5 million negative impact of translating profits denominated in foreign currencies into United States dollars, which was partially offset by favorable manufacturing costs.

OUTLOOK

Global glass reinforcements market demand has several economic indicators, including residential, non-residential construction and manufacturing production indices, as well as global wind installations. The Company anticipates continued impacts of economic uncertainty in a dynamic global environment, as well as competitive pricing pressure. The Company remains focused on managing costs, capital expenditures, and working capital.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

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):

EBIT

The impact on EBIT from Corporate, Other and Eliminations in 2023 was $150 million higher compared to 2022. The increase was primarily driven by pension settlement losses and higher restructuring costs, partially offset by the gain on sale of the Santa Clara, California site.

General corporate expense and other in 2023 was $51 million higher than in 2022.

OUTLOOK

In 2024, we expect general corporate expenses to range between $240 and $250 million, without considering the effect of the planned acquisition of Masonite.

LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS

Liquidity

The Company's primary sources of liquidity are its balance of Cash and cash equivalents of $1.6 billion as of December 31, 2023, 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, which matures in July 2026.

The Company has a $280 million securitization facility (the “Receivables Securitization Facility”) that has been amended from time to time, which matures in April 2024.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

The following table shows how the Company utilized its primary sources of liquidity (in millions):

The Receivables Securitization Facility and Senior Revolving Credit Facility mature in 2024 and 2026, respectively. The Company's 4.2% senior notes mature in the fourth quarter of 2024. As of December 31, 2023, the Company had $3.0 billion of total debt and cash and cash equivalents of $1.6 billion. 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 December 31, 2023.

On February 8, 2024, the Company entered into a commitment letter with Morgan Stanley Senior Funding, Inc. (“MSSF”), pursuant to which MSSF has committed to provide, subject to the satisfaction of customary closing conditions, a 364-day senior unsecured term loan facility in an aggregate principal amount of up to $3.0 billion for purposes of funding a substantial portion of the Masonite acquisition. We expect to assume up to $875 million of Masonite’s outstanding senior unsecured notes. On February 9, 2024, the three major credit rating agencies reaffirmed our investment-grade debt ratings.

Cash and cash equivalents held by foreign subsidiaries may be subject to foreign withholding taxes upon repatriation to the U.S. As of December 31, 2023 and December 31, 2022, the Company had $114 million and $188 million, respectively, in cash and cash equivalents in certain of its foreign subsidiaries. The Company continues to assert indefinite reinvestment in accordance with Accounting 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 the Risk Factors disclosed in Item 1A of this Annual Report on Form 10-K for details on the factors that could inhibit our subsidiaries' abilities to pay dividends or make other distributions to the parent company.

We have no material off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures or other resources.

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, including the planned acquisition of Masonite, 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 for at least the next 12 months and foreseeable future thereafter. We expect to use cash on hand and new committed financing to fund the purchase price of the Masonite acquisition and for any required repurchases of Masonite's outstanding senior unsecured notes.

The following discussion of material cash requirements evaluates known contractual and other obligations, but does not include amounts that are contingent on events or other factors that are uncertain or unknown at this time including legal contingencies, and uncertain tax positions among others. The amounts presented are based on various estimates, including estimates regarding the timing of payments, prevailing interest rates, the occurrence of certain events and other factors. Actual results may vary materially from the amounts discussed below.

Capital Expenditures: Our capital expenditures are primarily related to the maintenance and rebuild of our long-term assets, as well as investing in projects that support growth and innovation to further our enterprise strategy. Our capital expenditures on a

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

cash basis were $526 million in 2023. Without considering the effect of the planned acquisition of Masonite, we expect to have capital expenditures on a cash basis of approximately $550 million in 2024. The anticipated increase in capital expenditures in 2024 is primarily driven by growth, manufacturing productivity and sustainability projects across all three segments. We expect that capital expenditures will be funded through cash flows from operations. See Note 2 and Note 6 of the Consolidated Financial Statements for additional information on property, plant and equipment.

Long-term debt obligations, including current portion of long-term debt: As of December 31, 2023, total long-term debt of $3.0 billion primarily consists of various outstanding senior notes. The current portion of long-term debt includes $399 million of 4.2% senior notes maturing in the fourth quarter of 2024. Further discussion of the amount and timing of the future scheduled maturities of our senior notes can be found in Note 13 of the Consolidated Financial Statements. There were no borrowings on our Senior Revolving Credit Facility or our Receivables Securitization Facility as of December 31, 2023.

Interest on debt: We are obligated to make periodic interest payments at fixed rates, depending on the terms of the applicable debt agreements. Based on interest rates and scheduled maturities as of December 31, 2023, these interest obligations range from $99 million to $130 million annually over the next five years.

Finance lease obligations: Our finance lease obligations primarily consist of real estate, oxygen plants, computers and software, and fleet vehicles. As of December 31, 2023 we had a total of $196 million of minimum finance lease payments. Further discussion of the future maturities of these lease liabilities can be found in Note 9 of the Consolidated Financial Statements.

Operating lease obligations: Our operating lease obligations primarily consist of real estate and material handling equipment. As of December 31, 2023, we had a total of $248 million of minimum operating lease payments. Further discussion of the future maturities of these lease liabilities can be found in Note 9 of the Consolidated Financial Statements.

Purchase obligations: Purchase obligations are commitments to suppliers to purchase goods or services, and include take-or-pay arrangements, capital expenditures, and contractual commitments to purchase equipment. As of December 31, 2023, the total of these obligations was $328 million, inclusive of $241 million payable in the next 12 months. The Company did not include ordinary course of business purchase orders in this amount as the majority of such purchase orders may be canceled and are reflected in historical operating cash flow trends. The Company does not believe such purchase orders will adversely affect our liquidity position.

Pension Contributions: The Company has several defined benefit pension plans. The Company made cash contributions of $18 million and $8 million to the plans during the twelve months ended December 31, 2023 and 2022, respectively. The Company expects to contribute $20 million in cash to its pension plans during 2024. 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. Further discussion of the Company's defined benefit pension plans can be found in Note 14 of the Consolidated Financial Statements.

Other Strategic Uses of Cash: We have outstanding share repurchase authorizations and will evaluate and consider repurchasing shares of our common stock, as well as payments of any dividends authorized by our Board of Directors, strategic acquisitions, joint ventures, debt repurchases or repayments and other transactions to create stockholder value and enhance financial performance. Such transactions may require cash expenditures beyond current sources of liquidity or generated proceeds.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

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. The Company's payment terms to the financial institutions, including the timing and amount of payments, are based on the original supplier invoices. One of our Programs includes a parent guarantee to the participating financial institution for a certain U.S. subsidiary that, at the time of the respective Program’s inception in 2015, was a guarantor subsidiary of the Company’s Credit Agreement. The obligations are presented as Accounts payable within Total current liabilities on the Consolidated Balance Sheets and all activity related to the obligations is presented within operating activities on the Consolidated Statements of Cash Flow.

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, 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 Programs have materially impacted our current period liquidity, and do not believe that the Programs are reasonably likely to materially affect liquidity in the future.

Please refer to the Supplier Finance Programs section in Note 1 of the Consolidated Financial Statements for a rollforward of outstanding obligations under the supplier finance programs.

Cash Flows

The following table presents a summary of our cash balance, cash flows, and availability on credit facilities (in millions):

Operating activities: In 2023, the Company generated $1,719 million of cash from operating activities compared to $1,760 million in 2022. The decrease in cash provided by operating activities was primarily due to reductions in payables and lower earnings in 2023, which were partially offset by inventory reductions.

Investing activities: The cash used for investing activities in 2023 was $356 million compared to $623 million in 2022. This decrease was due to lower spending on acquisitions in 2023 compared to 2022 (see Note 7 for additional information). This was partially offset by higher capital spending and lower cash from derivative settlements compared to the prior year.

Financing activities: Net cash used for financing activities in 2023 was $877 million compared to $974 million in 2022. The year-over-year decrease was primarily due to lower purchases of treasury stock which were partially offset by higher 2023 dividend payments.

Derivatives

Please refer to Note 4 of the Consolidated Financial Statements.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Fair Value Measurement

Please refer to Notes 1, 4, 13, 14 and 15 of the Consolidated Financial Statements.

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of our financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments related to these assets, liabilities, revenues and expenses. We believe these estimates to be reasonable under the circumstances. Management bases its estimates and judgments on historical experience, expected future outcomes, and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The Company believes that the following accounting estimates are critical to our financial results:

Tax Estimates. The determination of our tax provision is complex due to operations in several tax jurisdictions outside the United States. We apply a more-likely-than-not recognition threshold for all tax uncertainties. Such uncertainties include any claims by the Internal Revenue Service for income taxes, interest, and penalties attributable to audits of open tax years.

In addition, we record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. We estimate future taxable income and the effect of tax planning strategies in our consideration of whether deferred tax assets will more likely than not be realized. In the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to reduce the net deferred tax assets would be charged to earnings in the period such determination was made. Conversely, if we were to determine that we would be able to realize our net deferred tax assets in the future in excess of their currently recorded amount, an adjustment to increase the net deferred tax assets would be credited to earnings in the period such determination was made.

Impairment of Assets. The Company exercises judgment in evaluating assets for impairment. Goodwill and other indefinite-lived intangible assets are tested for impairment annually, or when circumstances arise which indicate there may be an impairment. Long-lived assets are tested for impairment when economic conditions or management decisions indicate an impairment may exist. These tests require comparing recorded values to estimated fair values for the assets under review.

The Company has recorded its goodwill and conducted testing for potential goodwill impairment at a reporting unit level. Our reporting units represent a business for which discrete financial information is available and segment management regularly reviews the operating results. The Company has three reporting units: Roofing, Insulation and Composites.

2023 Annual Goodwill Impairment Assessment

Goodwill is an intangible asset that is not subject to amortization; however, annual tests are required to be performed to determine whether impairment exists. Prior to performing the impairment testing process described in ASC 350-20, the guidance permits companies to assess qualitative factors to determine if it is more likely than not that a reporting unit’s fair value is less than its carrying value. If, based on the review of the qualitative factors, we determine it is not more likely than not that the fair value of a reporting unit is less than its carrying value, we would bypass the quantitative impairment test. Events and circumstances we consider in performing the qualitative assessment include macro-economic conditions, market and industry conditions, internal cost factors, and the operational stability and the overall financial performance of the reporting units. If it is more likely than not that a reporting unit’s fair value is less than or close to its carrying value, then the quantitative impairment test must be performed to determine if impairment is required.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

When it is determined necessary for the Company to perform the quantitative impairment process for goodwill, we estimate fair values using a discounted cash flow approach from the perspective of a market participant. Significant assumptions used in the discounted cash flow approach are the revenue growth rates and EBIT margins used in estimating discrete period cash flow forecasts of the reporting unit, the discount rate, the reporting unit tax rate and the long-term revenue growth rate and EBIT margin used in estimating the terminal business value. The cash flow forecasts of the reporting unit are based upon management’s long-term view of our markets and are the forecasts that are used by senior management and the Board of Directors to evaluate operating performance. The discount rate utilized is management’s estimate of what the market’s weighted average cost of capital is for a company with a similar debt rating and stock volatility, as measured by beta. The reporting unit specific tax rate is based on blended global historical rates. The terminal business value is determined by applying the long-term growth rate to the latest year for which a forecast exists. As part of our goodwill quantitative testing process, the Company evaluates whether there are reasonably likely changes to management’s estimates that would have a material impact on the results of the goodwill impairment testing.

Our annual test of goodwill for impairment was conducted as of October 1, 2023. The Company elected to perform the qualitative approach on all of its reporting units: Roofing, Insulation and Composites. After evaluating and weighing all relevant events and circumstances, we concluded it is more likely than not that the fair value of the Roofing and Insulation reporting units exceeds their respective carrying value amounts. Consequently, we did not perform a quantitative analysis for the Roofing and Insulation reporting units and determined that their goodwill was not impaired for 2023.

For the Composites reporting unit, based on the qualitative assessment we concluded that it is more likely than not that the fair value of the reporting unit was less than its carrying amount. Therefore, we performed a quantitative analysis as described above. As a result of this test, we determined that no impairment existed for the reporting unit. Testing indicated that the business enterprise value for the Composites reporting unit exceeded its carrying value by approximately 5%. There is uncertainty surrounding the macroeconomic factors that impact this reporting unit and a sustained downturn in these factors or a change in the long-term revenue growth or profitability for this reporting unit could increase the likelihood of a future impairment. The most significant assumptions used in our analysis to determine the fair value of the Composites reporting unit are the discount rate and long-term growth rate. If all other assumptions remain constant, a 50 basis point increase in the selected discount rate of 11% would decrease the fair value of the Composites reporting unit by approximately 5%, and a 50 basis point decrease in the selected long-term growth rate of 2.5% would decrease the fair value of the Composites reporting unit by approximately 4%.

The following table summarizes the segment allocation of recorded goodwill on our Consolidated Balance Sheet as of December 31, 2023 (in millions):

Annual 2023 Indefinite-lived Intangible Asset Impairment Assessment

Fair values used in testing for potential impairment of our trademarks and trade names are calculated by applying an estimated market value royalty rate to the forecasted revenues of the businesses that utilize those assets. The assumed cash flows from this calculation are discounted at a rate based on a market-participant discount rate. Our annual test of indefinite-lived intangibles was conducted as of October 1, 2023. The fair value of each of our indefinite-lived intangible assets exceeded the carrying value as of the date of our assessment.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Testing indicated that the fair values of a trade name used by our European building and technical insulation business and a trademark used on global cellular glass insulation products exceeded their carrying values by 2% and 1%, respectively. 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 these assets. For the trade name used by our European building and technical insulation business, if all other assumptions remain constant, a 50 basis point increase in the selected discount rate of 12.5% would decrease the fair value by approximately 5%, and a 50 basis point decrease in the selected long-term growth rate of 2.0% would decrease the fair value by approximately 4%. For the trademark used on global cellular glass insulation products, if all other assumptions remain constant, a 50 basis point increase in the selected discount rate of 12.0% would decrease the fair value by approximately 5%, and a 50 basis point decrease in the selected long-term growth rate of 2.0% would decrease the fair value by approximately 4%.

The carrying values of the European building and technical insulation trade name and the global cellular glass insulation trademark are $90 million and $80 million, respectively. Both of these assets are included within the Insulation segment.

The fair value of the remaining assets substantially exceeded their carrying value as of the date of our assessment.

Long-lived Asset Recoverability Assessment

Fair values for long-lived asset testing are calculated by estimating the undiscounted cash flows from the use and ultimate disposition of the asset or by estimating the amount that a willing third party would pay. For impairment testing, long-lived assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. The Company groups long-lived assets based on manufacturing facilities that produce similar products either globally or within a geographic region. Management tests asset groups for potential impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We evaluated and concluded that there are not any reasonably likely changes to management’s estimates that would indicate that the carrying value of our long-lived assets is unrecoverable.

However, changes in management intentions, market conditions, operating performance and other similar circumstances could affect the assumptions used in these impairment tests. Changes in the assumptions could result in impairment charges that could be material to our Consolidated Financial Statements in any given period.

Product Warranty: The Company records a liability for warranty obligations at the date the related products are sold. Most significant are the standard warranties on our roofing products. The standard warranties generally provide full coverage of labor and materials for a period of 5-10 years from the original installation date and prorated materials for the remaining life of the roof.

Our estimated cost of our standard warranty obligations is calculated using a 5-year historical average of claims paid for each major product category, the estimated future cost to manufacture the replacement shingles, and the estimated future cost for contractor labor, subject to the applicable warranty coverage, for a 20-year period from the date of installation.

Additionally, the Company sells contractors extended warranties that extend coverage beyond our standard product warranty. The extended warranties revenue is deferred and recognized over the related coverage period, ranging from 16 to 20 years.

Pensions and Other Postretirement Benefits. Accounting for pensions and other postretirement benefits involves estimating the cost of benefits to be provided well into the future and attributing that cost over the time period each employee works. To accomplish this, extensive use is made of assumptions about investment returns, discount rates, inflation, mortality, turnover, and medical costs. Changes in assumptions used could result in a material impact to our Consolidated Financial Statements in any given period.

Two key assumptions that could have a significant impact on the measurement of pension liabilities and pension expense are the discount rate and the expected return on plan assets. For our largest plan, the United States plan, the discount rate used for the December 31, 2023 measurement date is based on a yield curve approach where the expected future benefit payments are matched with a yield curve derived from certain AA-rated corporate bonds.

The result supported a discount rate of 5.00% at December 31, 2023 compared to 5.15% at December 31, 2022. A 25 basis point increase (decrease) in the discount rate would (decrease) increase the December 31, 2023 projected benefit obligation for the United States pension plan by approximately $9 million. A 25 basis point increase (decrease) in the discount rate would (decrease) increase 2024 net periodic pension cost by less than $1 million.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

The expected return on plan assets in the United States was derived by taking into consideration the target plan asset allocation, historical rates of return on those assets, projected future asset class returns and net outperformance of the market by active investment managers and plan related and investment related expenses paid from the plan trust. The Company uses the target plan asset allocation because we rebalance our portfolio to target on at least a quarterly basis. An asset return model was used to develop an expected range of returns on plan investments over a 20-year period, with the expected rate of return selected from a best estimate range within the total range of projected results. This process resulted in the selection of an expected return of 5.75% at the December 31, 2023 measurement date, which is used to determine net periodic pension cost for the year 2024. The expected return selected at the December 31, 2022 measurement date was 5.75%, which was used to determine the net periodic pension cost for the year 2023. A 25 basis point increase (decrease) in return on plan assets assumption would result in a respective decrease (increase) of 2024 net periodic pension cost by approximately $1 million.

The discount rate for our United States postretirement plan was selected using the same method as described for the pension plan. The result supported a discount rate of 4.90% at December 31, 2023 compared to 5.10% at December 31, 2022. A 25 basis point increase (decrease) in the discount rate would (decrease) increase the United States postretirement benefit obligation by approximately $2 million and (decrease) increase 2024 net periodic postretirement benefit cost by less than $1 million.

The methods corresponding to those described above are used to determine the discount rate and expected return on assets for non-U.S. pension and postretirement plans, to the extent applicable.

RECENT ACCOUNTING PRONOUNCEMENTS

Please refer to Note 1 of the Consolidated Financial Statements.

ENVIRONMENTAL MATTERS

Please refer to Note 16 of the Consolidated Financial Statements.

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ITEM 7. 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:

•levels of residential and commercial or industrial construction activity;

•demand for our products;

•industry and economic conditions including, but not limited to, supply chain disruptions, recessionary conditions, inflationary pressures, interest rate and financial markets volatility, and the viability of banks and other financial institutions;

•availability and cost of energy and raw materials;

•levels of global industrial production;

•competitive and pricing factors;

•relationships with key customers and customer concentration in certain areas;

•issues related to acquisitions, divestitures and joint ventures or expansions, including the planned acquisition of Masonite;

•climate change, weather conditions and storm activity;

•legislation and related regulations or interpretations, in the United States or elsewhere;

•domestic and international economic and political conditions, policies or other governmental actions, as well as war and civil disturbance;

•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;

•research and development activities and intellectual property protection;

•issues involving implementation and protection of information technology systems;

•foreign exchange and commodity price fluctuations;

•our level of indebtedness; including the planned acquisition of Masonite;

•our liquidity and the availability and cost of credit;

•our ability to achieve expected synergies, cost reductions and/or productivity improvements;

•the level of fixed costs required to run our business;

•levels of goodwill or other indefinite-lived intangible assets;

•price volatility in certain wind energy markets in the U.S.;

•loss of key employees and labor disputes or shortages;

•our ability to complete and successfully integrate the Masonite acquisition;

•any material adverse changes in the business of Masonite

•the ability to obtain required regulatory, shareholder or other third-party approvals and consents and otherwise complete the Masonite acquisition;

•our ability to achieve the strategic and other objectives relating to the Masonite acquisition, including any expected synergies, and the strategic review of our GR business; and

•defined benefit plan funding obligations.

All forward-looking statements in this Annual Report on Form 10-K should be considered in the context of the risks and other factors described herein, and in Item 1A above, and as detailed from time to time in the Company’s filings with the U.S. Securities and Exchange Commission. Users of this Annual Report on Form 10-K 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 Annual Report on Form 10-K may not occur and actual results may differ materially from those anticipated or implied in the forward-looking statements. Accordingly, users of this Annual Report on Form 10-K are cautioned not to place undue reliance on the forward-looking statements.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis (“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,” “its,” and “our” in this report refer to Owens Corning and its subsidiaries.

This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

GENERAL

Owens Corning is a global building and construction materials leader committed to building a sustainable future through material innovation. The Company has three reporting segments: Composites, Insulation and Roofing. Through these lines of business, the Company manufactures and sells products worldwide. We maintain leading market positions in many of our major product categories.

EXECUTIVE OVERVIEW

Net earnings attributable to Owens Corning were $1,241 million in 2022, compared to $995 million in 2021. The Company reported $1,723 million in earnings before interest and taxes (“EBIT”) in 2022 compared to $1,448 million in 2021. The Company generated $1,762 million in adjusted earnings before interest and taxes (“Adjusted EBIT”) in 2022 compared to $1,415 million in 2021. See the Adjusted Earnings Before Interest and Taxes paragraph of MD&A for further information regarding EBIT and Adjusted EBIT, including the reconciliation to net earnings (loss) attributable to Owens Corning. Segment EBIT performance compared to 2021 increased $122 million in our Composites segment, increased $166 million in our Insulation segment, and increased $78 million in our Roofing segment. Within our Corporate, Other and Eliminations category, General corporate expenses and other increased by $19 million.

Cash and cash equivalents were $1.1 billion as of December 31, 2022, compared to $959 million as of December 31, 2021, as a result of strong cash flow provided by operating activities. In 2022, the Company's operating activities provided $1,760 million of cash flow, compared to $1,503 million in 2021. The change was primarily driven by higher earnings.

On November 24, 2022, the Company finalized the sale of its Russian operations within the Composites and Insulation segments. As a result of this sale, the Company received $104 million, net of cash sold, in consideration and recorded a pre-tax loss of $33 million in Other expenses (income), net on the Consolidated Statements of Earnings (Loss).

On September 1, 2022, the Company acquired the remaining 50% interest in Fiberteq, LLC (“Fiberteq”), the joint venture between Owens Corning and IKO Industries, Ltd, which produces high-quality wet-formed fiberglass mat for roofing applications for $140 million, net of cash acquired. The acquisition advances the Composites strategy to focus on high-value material solutions and expands Owens Corning's capacity to produce non-woven mat. The Company's 50% interest in Fiberteq was accounted for as an equity-method investment and had a carrying value of $17 million at the acquisition date. The Company used the discounted cash flow method to remeasure the previously held equity method investment to its fair value of $147 million, resulting in the recognition of a gain of $130 million, which is recorded in Gain on equity method investment on the Consolidated Statements of Earnings (Loss). The operating results and a preliminary purchase price allocation for Fiberteq have been included in the Composites segment within the Consolidated Financial Statements since the date of the acquisition. The Company is continuing to obtain information to complete its valuation of certain assets and liabilities. During the year ended December 31, 2022, the Company recorded immaterial measurement period adjustments to the purchase price allocation. The preliminary purchase price allocation included $58 million in intangible assets, which primarily consists of customer relationships with an estimated weighted average life of 3 years, a $62 million unfavorable contract liability and $243 million in goodwill, of which 50% of the goodwill is tax deductible. The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the acquisition. The pro-forma effect of this acquisition on revenues and earnings was not material.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

On August 1, 2022, the Company acquired Natural Polymers, LLC (“Natural Polymers”), an innovative manufacturer of spray polyurethane foam insulation for building and construction applications for approximately $111 million, net of cash acquired. The acquisition advances the Owens Corning strategy to strengthen the Company's core building and construction products and expand its addressable markets into higher-growth segments. The operating results and a preliminary purchase price allocation for Natural Polymers have been included in the Insulation segment within the Consolidated Financial Statements since the date of the acquisition. The Company is continuing to obtain information to complete its valuation of certain assets and liabilities. During the year ended December 31, 2022, the Company recorded immaterial measurement period adjustments to the purchase price allocation. The preliminary purchase price allocation included $44 million in intangible assets and $62 million in goodwill, of which all is tax deductible. The intangible assets consist of definite-lived trademarks of $5 million with an estimated weighted average life of 10 years, technology of $12 million with an estimated weighted average life of 6 years and customer relationships of $27 million with an estimated weighted average life of 17 years. The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the acquisition. The pro-forma effect of this acquisition on revenues and earnings was not material.

On July 1, 2022, the Company finalized the sale of the European portion of the dry-use chopped strands (“DUCS”) product line located in Chambéry, France, within the Composites segment. As a result of this sale, the Company received $80 million, net of cash sold, in consideration and recorded a pre-tax loss of $30 million in Other expenses (income), net on the Consolidated Statements of Earnings (Loss).

On June 1, 2022, the Company acquired all of the outstanding assets of WearDeck®, a premium producer of composite weather-resistant decking for commercial and residential applications, for approximately $133 million, net of cash acquired. The acquisition advances the Composites business growth strategy to focus on high-value material solutions within the building and construction industry. The operating results and a preliminary purchase price allocation for WearDeck® have been included in the Composites segment within the Consolidated Financial Statements since the date of the acquisition. The Company is continuing to obtain information to complete its valuation of certain assets and liabilities. During the year ended December 31, 2022, the Company recorded immaterial measurement period adjustments to the purchase price allocation. The preliminary purchase price allocation included $38 million in intangible assets and $68 million in goodwill, of which $61 million is tax deductible. The intangible assets consist of definite-lived trademarks of $7 million with an estimated weighted average life of 10 years, 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 factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the acquisition. The pro-forma effect of this acquisition on revenues and earnings was not material.

On May 23, 2022, Owens Corning and Pultron Composites (“Pultron”) formed a joint venture (the “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 of $25 million 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 Company is continuing to obtain information to complete its valuation of certain assets and liabilities. The preliminary purchase price allocation included $15 million in intangible assets, consisting of technology, with an estimated weighted average life of 15 years and $42 million in goodwill, of which $37 million is tax deductible. The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the acquisition. The pro-forma effect of this acquisition on revenues and earnings was not material.

In 2022, the Company repurchased 9.0 million shares of the Company’s common stock for $779 million under a previously announced repurchase authorization. On December 1, 2022, the Company's Board of Directors approved an additional 10 million share repurchase authorization. As of December 31, 2022, 14.4 million shares remained available for repurchase under the announced repurchase authorizations.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

RESULTS OF OPERATIONS

Consolidated Results (in millions)

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

Net sales increased $1,263 million in 2022 compared to 2021. The increase in net sales was driven by higher selling prices and favorable customer mix which were partially offset by lower sales volumes and the unfavorable impact of translating sales denominated in foreign currencies into United States dollars.

GROSS MARGIN

Gross margin increased $399 million in 2022 compared to 2021. The increase in gross margin was driven by higher selling prices, partially offset by higher input cost inflation and transportation costs in all three segments. The impact of lower sales volumes in Composites and Roofing, as well as unfavorable manufacturing performance in all three segments, further offset the increase from higher selling prices.

MARKETING AND ADMINISTRATIVE EXPENSES

Marketing and administrative expenses increased $46 million in 2022 compared to 2021. The increase was driven primarily by higher general corporate expenses as business activities return to a more typical, post-pandemic level, along with ongoing inflationary pressures.

GAIN ON EQUITY METHOD INVESTMENT

As discussed above, the Company recognized a non-cash gain of $130 million from the remeasurement of the previously held equity method investment in Fiberteq upon the Company’s acquisition of the remaining 50% of the joint venture with IKO.

OTHER EXPENSES (INCOME), NET

Other expenses (income), net increased $192 million in 2022 compared to 2021. The increase in expenses was primarily driven by the unfavorable comparison year-over-year to indefinite-lived intangible asset impairment charges of $96 million and the combined $63 million loss recognized on the sale of the DUCS business in Chambery, France and the sale of our Russian operations in 2022. The remaining increase was driven by $35 million in lower gains on sale of certain precious metals compared to the same period in 2021.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

INTEREST EXPENSE, NET

Interest expense, net decreased $17 million in 2022 compared to 2021. The decrease was driven by lower long-term debt balances year-over-year due to the repayment of the senior notes due in 2022 and higher interest income.

LOSS ON EXTINGUISHMENT OF DEBT

During 2022, there were no extinguishments of debt. For the year ended December 31, 2021, the Company recognized a $9 million loss on extinguishment of debt in connection with the repayment of the remaining portion of its outstanding 2022 senior notes.

INCOME TAX EXPENSE

Income tax expense for 2022 was $373 million compared to $319 million in 2021. The Company’s effective tax rate for 2022 was 23% on pre-tax income of $1,614 million.  The difference between the 23% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily due to U.S. state and local income tax expense, adjustments to R&D tax credits, and other discrete adjustments.

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) into law, which includes a new corporate alternative minimum tax and an excise tax of 1% on the fair market value of net stock repurchases. Both provisions are effective for years after December 31, 2022. The Company is evaluating the potential future impact of the Inflation Reduction Act on its financial position and results of operations.

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 $3 million.

The Company’s effective tax rate for 2021 was 24% on pre-tax income of $1,313 million. The difference between the 24% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily attributable to U.S. state and local income tax expense, adjustments to foreign tax credits, and other discrete adjustments.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Restructuring, Acquisition and Divestiture-Related Costs

The Company has incurred restructuring, transaction and integration costs related to acquisitions and divestitures, along with restructuring and other exit costs in connection with its global cost reduction, productivity initiatives and growth strategy. These costs are recorded within Corporate, Other and Eliminations. Please refer to Note 13 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):

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Adjusted Earnings Before Interest and Taxes (“Adjusted EBIT”)

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 (expense) income items to EBIT are shown in the table below (in millions):

The reconciliation from Net earnings (loss) attributable to Owens Corning to EBIT and Adjusted EBIT is shown in the table below (in millions):

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

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):

NET SALES

Net sales in our Composites segment increased $319 million in 2022 compared to 2021. The increase was driven by higher selling prices of $443 million, partially offset by slightly lower sales volumes of approximately 5%. Favorable customer mix of $61 million was more than offset by the $76 million unfavorable impact of translating sales denominated in foreign currencies into United States dollars. The remaining variance was driven by the net impact of divestitures and acquisitions.

EBIT

EBIT in our Composites segment increased $122 million in 2022 compared to 2021. Higher selling prices of $443 million more than offset $215 million of input cost inflation and $37 million in higher transportation costs. The unfavorable impact of lower sales volumes was nearly offset by the impact of favorable customer mix. The remaining variance was driven by unfavorable manufacturing performance and the $12 million net unfavorable impact of divestitures and acquisitions.

OUTLOOK

Global glass reinforcements market demand is driven by several economic indicators including residential, non-residential construction and manufacturing production indices, as well as global wind installations. The Company is monitoring dynamic market conditions such as an evolving macroeconomic environment, including potential recessionary pressures in the Americas and Europe, input cost inflation, and primary labor availability constraints, which could have an effect on the markets in which we participate.   The Company will continue to focus on managing costs, capital expenditures, and working capital.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Insulation

The table below provides a summary of net sales, EBIT and depreciation and amortization expense for the Insulation segment (in millions):

NET SALES

In our Insulation segment, 2022 net sales increased $530 million compared to 2021. The increase was driven by higher selling prices of $573 million, partially offset by approximately 2% lower sales volumes. Favorable customer and product mix and $29 million from the acquisition of Natural Polymers were mostly offset by the $118 million unfavorable impact of translating sales denominated in foreign currencies into United States dollars.

EBIT

In our Insulation segment, EBIT increased $166 million in 2022 compared to 2021. Higher selling prices of $573 million more than offset $302 million of input cost inflation and $56 million in higher transportation costs. Favorable customer and product mix of $48 million were offset by the impact of unfavorable manufacturing performance and higher production downtime. The remaining variance was driven about equally by higher selling, general and administrative expenses, the impact of lower sales volumes and the negative impact of translating profits denominated in foreign currencies into United States dollars.

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 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 U.S. housing starts.

During the fourth quarter of 2022, the average Seasonally Adjusted Annual Rate (SAAR) of U.S. housing starts was approximately 1.403 million starts, which was down from 1.644 million starts in the fourth quarter of 2021.

The Company expects a deceleration in both the North American new residential construction market and global commercial and industrial construction markets, continued input cost inflation, supply chain uncertainties and primary labor availability constraints. The Company will continue to focus on managing costs, capital expenditures, and working capital.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Roofing

The table below provides a summary of net sales, EBIT and depreciation and amortization expense for the Roofing segment (in millions):

NET SALES

In our Roofing segment, net sales increased $449 million in 2022 compared to 2021. Higher selling prices of $522 million and higher third-party asphalt sales of $72 million were partially offset by lower sales volumes of approximately 4% and unfavorable customer and product mix.

EBIT

In our Roofing segment, EBIT increased $78 million in 2022 compared to 2021. Higher selling prices of $522 million more than offset input cost inflation, primarily asphalt, of $302 million and $34 million of higher transportation costs. Unfavorable manufacturing performance of $44 million and the impact of lower sales volumes further offset higher selling prices. The remaining variance was driven about equally by higher selling, general and administrative expenses and the impact of unfavorable customer and product mix.

OUTLOOK

In our Roofing segment, the Company expects a deceleration in the North American new residential construction market. Other uncertainties that may impact Roofing demand include demand from storms and other weather-related events, demand from repair and remodeling activity, competitive pricing pressure and the cost and availability of raw materials, particularly asphalt. The Company will continue to focus on managing costs, capital expenditures and working capital.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

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):

EBIT

In Corporate, Other and Eliminations, EBIT expenses in 2022 were $91 million higher compared to 2021. Please reference the table above for information related to the significant year over year variances.

General corporate expense and other in 2022 was $19 million higher than in 2021, driven primarily by higher general corporate expenses as business activities return to a more typical, post-pandemic level.

OUTLOOK

In 2023, we expect general corporate expenses to range between $195 and $205 million.

LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS

Liquidity

The Company's primary sources of liquidity are its balance of Cash and cash equivalents of $1.1 billion as of December 31, 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, which matures in July 2026.

The Company has a $280 million securitization facility (the “Receivables Securitization Facility”) that has been amended from time to time, which matures in April 2024.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

The following table shows how the Company utilized its primary sources of liquidity (in millions):

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. 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 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 December 31, 2022, the Company had $3.0 billion of total debt and cash and cash equivalents of $1.1 billion. 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 December 31, 2022.

Cash and cash equivalents held by foreign subsidiaries may be subject to foreign withholding taxes upon repatriation to the U.S. As of December 31, 2022 and December 31, 2021, the Company had $188 million and $156 million, respectively, in cash and cash equivalents in certain of its foreign subsidiaries. The Company continues to assert indefinite reinvestment in accordance with Accounting 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 the Risk Factors disclosed in Item 1A of this Form 10-K for details on the factors that could inhibit our subsidiaries' abilities to pay dividends or make other distributions to the parent company.

We have no material off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures or other resources.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

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.

The following discussion of material cash requirements evaluates known contractual and other obligations, but does not include amounts that are contingent on events or other factors that are uncertain or unknown at this time including legal contingencies, and uncertain tax positions among others. The amounts presented are based on various estimates, including estimates regarding the timing of payments, prevailing interest rates, the occurrence of certain events and other factors. Actual results may vary materially from the amounts discussed below.

Capital Expenditures: Our capital expenditures are primarily related to the maintenance and rebuild of our long-term assets, as well as investing in projects that support growth and innovation to further our enterprise strategy. Our capital expenditures on a cash basis were $446 million in 2022. We expect to have capital expenditures on a cash basis of approximately $520 million in 2023. The anticipated increase in capital expenditures in 2023 is primarily driven by growth and manufacturing productivity projects across all three segments. We expect that capital expenditures will be funded through cash flows from operations. See Note 2 and Note 6 of the Consolidated Financial Statements for additional information on property, plant and equipment.

Long-term debt obligations: As of December 31, 2022, total long-term debt of $3.0 billion primarily consists of various outstanding senior notes with scheduled maturities starting in 2024. Further discussion of the amount and timing of the future scheduled maturities of these senior notes can be found in Note 14 of the Consolidated Financial Statements. There were no borrowings on our Senior Revolving Credit Facility or our Receivables Securitization Facility as of December 31, 2022.

Interest on debt: We are obligated to make periodic interest payments at fixed rates, depending on the terms of the applicable debt agreements. Based on interest rates and scheduled maturities as of December 31, 2022, these interest obligations range from $99 million to $130 million annually over the next five years.

Finance lease obligations: Our finance lease obligations primarily consist of real estate, oxygen plants, computers and software, and fleet vehicles. As of December 31, 2022 we had a total of $157 million of minimum finance lease payments. Further discussion of the future maturities of these lease liabilities can be found in Note 10 of the Consolidated Financial Statements.

Operating lease obligations: Our operating lease obligations primarily consist of real estate and material handling equipment. As of December 31, 2022, we had a total of $227 million of minimum operating lease payments. Further discussion of the future maturities of these lease liabilities can be found in Note 10 of the Consolidated Financial Statements.

Purchase obligations: Purchase obligations are commitments to suppliers to purchase goods or services, and include take-or-pay arrangements, capital expenditures, and contractual commitments to purchase equipment. As of December 31, 2022, the total of these obligations was $384 million, inclusive of $269 million payable in the next 12 months. The Company did not include ordinary course of business purchase orders in this amount as the majority of such purchase orders may be canceled and are reflected in historical operating cash flow trends. The Company does not believe such purchase orders will adversely affect our liquidity position.

Pension Contributions: The Company has several defined benefit pension plans. The Company made cash contributions of $8 million and $21 million to the plans during the twelve months ended December 31, 2022 and 2021, respectively. The Company expects to contribute $25 million in cash to its pension plans during 2023. 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. Further discussion of the Company's defined benefit pension plans can be found in Note 15 of the Consolidated Financial Statements.

Other Strategic Uses of Cash: We have outstanding share repurchase authorizations and will evaluate and consider repurchasing shares of our common stock, as well as payments of any dividends authorized by our Board of Directors, strategic acquisitions, joint ventures, debt repurchases or repayments and other transactions to create stockholder value and enhance financial performance. Such transactions may require cash expenditures beyond current sources of liquidity or generated proceeds.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

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. The Company's payment terms to the financial institutions, including the timing and amount of payments, are based on the original supplier invoices. One of our programs includes a parent guarantee to the participating financial institution for a certain U.S. subsidiary that, at the time of the respective program’s inception in 2015, was a guarantor subsidiary of the Company’s Credit Agreement. The obligations are presented as Accounts payable within Total current liabilities on the Consolidated Balance Sheets and all activity related to the obligations is presented within operating activities on the Consolidated Statements of Cash Flow.

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, 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 programs have materially impacted our current period liquidity, and do not believe that the programs are reasonably likely to materially affect liquidity in the future.

Please refer to the Supplier Finance Programs section in Note 1 of the Consolidated Financial Statements for a rollforward of outstanding obligations under the supplier finance programs.

Cash Flows

The following table presents a summary of our cash balance, cash flows, and availability on credit facilities (in millions):

Cash and cash equivalents: Cash and cash equivalents as of December 31, 2022 increased $140 million compared to December 31, 2021, primarily due to higher cash flow provided by operating activities.

Operating activities: In 2022, the Company generated $1,760 million of cash from operating activities compared to $1,503 million in 2021. The change in cash provided by operating activities was primarily due to higher earnings.

Investing activities: The $246 million increase in cash used for investing activities in 2022 compared to 2021 was primarily driven by higher spending on acquisitions, partially offset by proceeds from divestitures (see Notes 7 and 8 of the Consolidated Financial Statements for further discussion related to our acquisitions and divestitures in 2022).

Financing activities: Net cash used for financing activities in 2022 was $974 million compared to $881 million in 2021. The change year-over-year was primarily due to higher purchases of treasury stock and increased dividends.

Derivatives

Please refer to Note 4 of the Consolidated Financial Statements.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Fair Value Measurement

Please refer to Notes 1, 4, 14 and 15 of the Consolidated Financial Statements.

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of our financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments related to these assets, liabilities, revenues and expenses. We believe these estimates to be reasonable under the circumstances. Management bases its estimates and judgments on historical experience, expected future outcomes, and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The Company believes that the following accounting estimates are critical to our financial results:

Tax Estimates. The determination of our tax provision is complex due to operations in several tax jurisdictions outside the United States. We apply a more-likely-than-not recognition threshold for all tax uncertainties. Such uncertainties include any claims by the Internal Revenue Service for income taxes, interest, and penalties attributable to audits of open tax years.

In addition, we record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. We estimate future taxable income and the effect of tax planning strategies in our consideration of whether deferred tax assets will more likely than not be realized. In the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to reduce the net deferred tax assets would be charged to earnings in the period such determination was made. Conversely, if we were to determine that we would be able to realize our net deferred tax assets in the future in excess of their currently recorded amount, an adjustment to increase the net deferred tax assets would be credited to earnings in the period such determination was made.

Impairment of Assets. The Company exercises judgment in evaluating assets for impairment. Goodwill and other indefinite-lived intangible assets are tested for impairment annually, or when circumstances arise which indicate there may be an impairment. Long-lived assets are tested for impairment when economic conditions or management decisions indicate an impairment may exist. These tests require comparing recorded values to estimated fair values for the assets under review.

The Company has recorded its goodwill and conducted testing for potential goodwill impairment at a reporting unit level. Our reporting units represent a business for which discrete financial information is available and segment management regularly reviews the operating results. The Company has three reporting units: Composites, Insulation and Roofing.

2022 Annual Goodwill Impairment Assessment

Goodwill is an intangible asset that is not subject to amortization; however, annual tests are required to be performed to determine whether impairment exists. Prior to performing the impairment testing process described in ASC 350-20, the guidance permits companies to assess qualitative factors to determine if it is more likely than not that a reporting unit’s fair value is less than its carrying value. If, based on the review of the qualitative factors, we determine it is not more likely than not that the fair value of a reporting unit is less than its carrying value, we would bypass the step one impairment test. Events and circumstances we consider in performing the qualitative assessment include macro-economic conditions, market and industry conditions, internal cost factors, and the operational stability and the overall financial performance of the reporting units. If it is more likely than not that a reporting unit’s fair value is less than or close to its carrying value, then the step one quantitative impairment test must be performed to determine if impairment is required.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

When it is determined necessary for the Company to perform the quantitative impairment process for goodwill, we estimate fair values using a discounted cash flow approach from the perspective of a market participant. Significant assumptions used in the discounted cash flow approach are revenue growth rates and EBIT margins used in estimating discrete period cash flow forecasts of the reporting unit, the discount rate, and the long-term revenue growth rate and EBIT margins used in estimating the terminal business value. The cash flow forecasts of the reporting unit are based upon management’s long-term view of our markets and are the forecasts that are used by senior management and the Board of Directors to evaluate operating performance. The discount rate utilized is management’s estimate of what the market’s weighted average cost of capital is for a company with a similar debt rating and stock volatility, as measured by beta. The terminal business value is determined by applying the long-term growth rate to the latest year for which a forecast exists. As part of our goodwill quantitative testing process, the Company evaluates whether there are reasonably likely changes to management’s estimates that would have a material impact on the results of the goodwill impairment testing.

Our annual test of goodwill for impairment was conducted as of October 1, 2022. The Company elected to perform the qualitative approach on all of its reporting units: Composites, Insulation and Roofing. After evaluating and weighing all relevant events and circumstances, we concluded that it is not more likely than not that the fair value of the reporting units was less than their carrying amounts. Consequently, we did not perform a step one quantitative analysis for the reporting units and determined goodwill was not impaired for 2022.

The following table summarizes the segment allocation of recorded goodwill on our Consolidated Balance Sheet as of December 31, 2022 (in millions):

Annual 2022 Indefinite-lived Intangible Asset Impairment Assessment

Fair values used in testing for potential impairment of our trademarks and trade names are calculated by applying an estimated market value royalty rate to the forecasted revenues of the businesses that utilize those assets. The assumed cash flows from this calculation are discounted at a rate based on a market-participant discount rate. Our annual test of indefinite-lived intangibles was conducted as of October 1, 2022.

Based on the results of this testing, the Company recorded pre-tax non-cash impairment charges totaling $96 million in the fourth quarter of 2022. These charges were recorded in Other expenses (income), net on the Consolidated Statements of Earnings (Loss), and were included in the Corporate, Other and Eliminations reporting category.

These charges included the following within the Insulation segment: a pre-tax impairment charge of $63 million for a trade name used by our European building and technical insulation business due to the effect of a higher discount rate, associated with rising interest rates, and general economic and geopolitical uncertainty within the European markets resulting in a slightly lower profitability outlook; a pre-tax impairment charge of $12 million related to a trademark used on global cellular glass insulation products due to the effect of a higher discount rate, associated with rising interest rates, and general economic and geopolitical uncertainty within the European markets; a pre-tax impairment charge of $8 million for a trademark used on mineral wool insulation products sold in the United States due to forecasted profitability of the product line.

The remaining $13 million pre-tax impairment charge for trademarks used within the components business in our Roofing segment was due to the effect of a higher discount rate, associated with rising interest rates, and forecasted profitability of a specific product line.

The fair value of the remaining indefinite-lived intangible assets substantially exceeded the carrying value as of the date of our assessment.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Long-lived Asset Recoverability Assessment

Fair values for long-lived asset testing are calculated by estimating the undiscounted cash flows from the use and ultimate disposition of the asset or by estimating the amount that a willing third party would pay. For impairment testing, long-lived assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. The Company groups long-lived assets based on manufacturing facilities that produce similar products either globally or within a geographic region. Management tests asset groups for potential impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We evaluated and concluded that there are not any reasonably likely changes to management’s estimates that would indicate that the carrying value of our long-lived assets is unrecoverable.

However, changes in management intentions, market conditions, operating performance and other similar circumstances could affect the assumptions used in these impairment tests. Changes in the assumptions could result in impairment charges that could be material to our Consolidated Financial Statements in any given period.

Pensions and Other Postretirement Benefits. Accounting for pensions and other postretirement benefits involves estimating the cost of benefits to be provided well into the future and attributing that cost over the time period each employee works. To accomplish this, extensive use is made of assumptions about investment returns, discount rates, inflation, mortality, turnover, and medical costs. Changes in assumptions used could result in a material impact to our Consolidated Financial Statements in any given period.

Two key assumptions that could have a significant impact on the measurement of pension liabilities and pension expense are the discount rate and the expected return on plan assets. For our largest plan, the United States plan, the discount rate used for the December 31, 2022 measurement date is based on a yield curve approach where the expected future benefit payments are matched with a yield curve derived from certain AA-rated corporate bonds.

The result supported a discount rate of 5.15% at December 31, 2022 compared to 2.85% at December 31, 2021. A 25 basis point increase (decrease) in the discount rate would (decrease) increase the December 31, 2022 projected benefit obligation for the United States pension plan by approximately ($14) and $14 million, respectively. A 25 basis point increase (decrease) in the discount rate would (decrease) increase 2023 net periodic pension cost by less than $1 million.

The expected return on plan assets in the United States was derived by taking into consideration the target plan asset allocation, historical rates of return on those assets, projected future asset class returns and net outperformance of the market by active investment managers and plan related and investment related expenses paid from the plan trust. The Company uses the target plan asset allocation because we rebalance our portfolio to target on at least a quarterly basis. An asset return model was used to develop an expected range of returns on plan investments over a 20-year period, with the expected rate of return selected from a best estimate range within the total range of projected results. This process resulted in the selection of an expected return of 5.75% at the December 31, 2022 measurement date, which is used to determine net periodic pension cost for the year 2023. This assumption corresponds to the 4.75% return selected at the December 31, 2021 measurement date. A 25 basis point increase (decrease) in return on plan assets assumption would result in a respective decrease (increase) of 2023 net periodic pension cost by approximately $2 million.

The discount rate for our United States postretirement plan was selected using the same method as described for the pension plan. The result supported a discount rate of 5.10% at December 31, 2022 compared to 2.70% at December 31, 2021. A 25 basis point increase (decrease) in the discount rate would (decrease) increase the United States postretirement benefit obligation by approximately $2 million and (decrease) increase 2023 net periodic postretirement benefit cost by less than $1 million.

The methods corresponding to those described above are used to determine the discount rate and expected return on assets for non-U.S. pension and postretirement plans, to the extent applicable.

RECENT ACCOUNTING PRONOUNCEMENTS

Please refer to Note 1 of the Consolidated Financial Statements.

ENVIRONMENTAL MATTERS

Please refer to Note 17 of the Consolidated Financial Statements.

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ITEM 7. 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:

•levels of residential and commercial or industrial construction activity;

•demand for our products;

•supply constraints and increases in the cost of energy, particularly natural gas, as a result of the ongoing conflict in Ukraine;

•availability and cost of raw materials;

•industry and economic conditions including, but not limited to, supply chain disruptions, recessionary conditions, inflationary pressures and interest rate volatility, that affect the market and operating conditions of our customers, suppliers or lenders;

•levels of global industrial production;

•competitive and pricing factors;

•relationships with key customers and customer concentration in certain areas;

•issues related to acquisitions, divestitures and joint ventures or expansions;

•climate change, weather conditions and storm activity;

•legislation and related regulations or interpretations, in the United States or elsewhere;

•domestic and international economic and political conditions, policies or other governmental actions, as well as war and civil disturbance (such as Russia's invasion of Ukraine);

•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;

•research and development activities and intellectual property protection;

•issues involving implementation and protection of information technology systems;

•foreign exchange and commodity price fluctuations;

•our level of indebtedness;

•our liquidity and the availability and cost of credit;

•our ability to achieve expected synergies, cost reductions and/or productivity improvements;

•the level of fixed costs required to run our business;

•levels of goodwill or other indefinite-lived intangible assets;

•price volatility in certain wind energy markets in the U.S.;

•loss of key employees and 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 above, and as detailed from time to time in the Company’s filings with the U.S. Securities and Exchange Commission. 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.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis (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,” "its," and “our” in this report refer to Owens Corning and its subsidiaries.

This section of this Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

GENERAL

Owens Corning is a global building and construction materials leader helping customers win in the market by providing innovative and sustainable solutions. The Company has three reporting segments: Composites, Insulation and Roofing. Through these lines of business, the Company manufactures and sells products worldwide. We maintain leading market positions in many of our major product categories.

EXECUTIVE OVERVIEW

Throughout 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 the market recovery, we continue to monitor the impacts the pandemic has had on our businesses such as input cost inflation, supply chain challenges and primary labor availability, and take precautions to provide a safe environment for our employees and customers. The COVID-19 pandemic initially caused an economic downturn on a global scale, the impact of which is reflected in our financial results for 2020, which serve as the basis for comparison in the paragraphs below.

Net earnings attributable to Owens Corning were $995 million in 2021, compared to a net loss attributable to Owens Corning of $383 million in 2020. The Company reported $1,448 million in earnings before interest and taxes (EBIT) in 2021 compared to a loss of $124 million in 2020. The Company generated $1,415 million in adjusted earnings before interest and taxes (“Adjusted EBIT”) in 2021 compared to $878 million in 2020. See the Adjusted Earnings Before Interest and Taxes paragraph of MD&A for further information regarding EBIT and Adjusted EBIT, including the reconciliation to net earnings (loss) attributable to Owens Corning. Segment EBIT performance compared to 2020 increased $211 million in our Composites segment, increased $196 million in our Insulation segment, and increased $162 million in our Roofing segment. Within our Corporate, Other and Eliminations category, General corporate expenses and other increased by $32 million.

Cash and cash equivalents were $959 million as of December 31, 2021, compared to $717 million as of December 31, 2020, as a result of strong cash flow provided by operating activities. In 2021, the Company's operating activities provided $1,503 million of cash flow, compared to $1,135 million in 2020. The change was primarily driven by higher earnings and an increase in accounts payable and accrued liabilities, partially offset by higher inventories.

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 $9 million of loss on extinguishment of debt in the third quarter of 2021 associated with these actions.

On July 28, 2021, the Company entered into a purchase and sale agreement for the Company’s Insulation site 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. The Company expects to continue operations at this facility into the second half of 2022 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 depreciation of property, plant and equipment and derecognition of the carrying value of land, which will offset the gross proceeds at closing.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

On July 13, 2021, the Company acquired vliepa GmbH ("vliepa"), which specializes in the coating, printing, and finishing of nonwovens, paper, and film for the building materials industry in Europe, for $42 million, net of cash acquired. The acquisition broadens the Company’s global nonwovens portfolio to better serve European customers and accelerate growth of building and construction market applications in the region. Operating results of the acquisition and a preliminary purchase price allocation have been included in the Company’s Composites segment within the Consolidated Financial Statements beginning July 13, 2021.

In 2021, the Company repurchased 6.1 million shares of the Company’s common stock for $557 million under a previously announced repurchase authorization. As of December 31, 2021, 3.4 million shares remained available for repurchase under the previously announced repurchase authorization. On February 14, 2022 the Company's Board of Directors approved an additional 10 million share repurchase authorization.

RESULTS OF OPERATIONS

Consolidated Results (in millions)

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

Net sales increased $1,443 million in 2021 compared to 2020. The increase in net sales was primarily driven by higher sales volumes and higher selling prices across all three segments. Favorable customer mix in Composites and the favorable impact of translating sales denominated in foreign currencies into United States dollars also contributed to the increase.

GROSS MARGIN

Gross margin increased $607 million in 2021 compared to 2020. The increase in gross margin was driven by higher sales volumes in all three segments. The impact of higher selling prices in all three segments more than offset higher input cost inflation and higher transportation costs. The increase was also driven by favorable manufacturing performance in all three segments and the favorable comparison year-over-year to curtailment costs in our Composites and Insulation segments in 2020.

MARKETING AND ADMINISTRATIVE EXPENSES

Marketing and administrative expenses increased $93 million in 2021 compared to 2020. The increase was primarily driven by higher performance-based compensation, higher general corporate expenses as business activities returned to a more typical, post-pandemic level and higher wages.

GOODWILL IMPAIRMENT CHARGE

The Company recorded a 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.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

OTHER (INCOME) EXPENSES, NET

Other (income) expenses, net decreased $127 million in 2021 compared to 2020. The decrease was primarily 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 $27 million of higher gains on sale of precious metals, $25 million of gain on settlements from contracts to purchase and sell wind-generated electricity and the $15 million gain on sale of land in India.

INTEREST EXPENSE, NET

Interest expense, net decreased $6 million in 2021 compared to 2020. The decrease was driven by lower borrowings on the Senior Revolving Credit Facility, higher interest capitalized and the repayment of the term loan.

LOSS ON EXTINGUISHMENT OF DEBT

For the year ended December 31, 2021, the Company recognized a $9 million loss on extinguishment of debt in connection with the repayment of the remaining portion of its outstanding 2022 senior notes. During 2020, there were no extinguishments of debt.

INCOME TAX EXPENSE

Income tax expense for 2021 was $319 million compared to $129 million in 2020. The Company’s effective tax rate for 2021 was 24% on pre-tax income of $1,313 million.  The difference between the 24% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily due to U.S. state and local income tax expense, adjustments to foreign tax credits, 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 $3 million.

The Company’s effective tax rate for 2020 was (50)% on pre-tax losses of $256 million. The difference between the (50)% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily attributable to charges related to the impairment of goodwill and certain other indefinite-lived intangible assets recorded in the first quarter of 2020, which were largely non-deductible. In addition, non-cash charges were recorded related to adjustments to valuation allowances against certain deferred tax assets. The company also recorded an amortizable asset in the US related to its transfer of economic rights of its non-US based Intellectual Property to the U.S., as further discussed in the following paragraph.

In December 2020, the Company completed an intercompany restructuring that resulted in the transfer of certain intellectual property rights held by wholly owned foreign subsidiaries to the U.S. The intellectual property rights transferred to the U.S. resulted in a step-up in the tax basis for U.S. tax purposes resulting in the Company recognizing a deferred tax asset of $37 million and tax expense of $5 million for 2020. The recognized tax benefit of $37 million is amortizable for U.S. tax purposes over a fifteen-year period.

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 global intangible low-taxed income (GILTI), income subject to a high foreign effective tax rate. 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.

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ITEM 7. 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 in the Corporate, Other and Eliminations category. Please refer to Note 11 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):

Adjusted Earnings Before Interest and Taxes (“Adjusted EBIT”)

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 (expense) income items to EBIT are shown in the table below (in millions):

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ITEM 7. 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 Adjusted EBIT is shown in the table below (in millions):

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):