SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2019

For the transition period from to

(~~419~~) (419) 248-8000

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

As of ~~July 19,~~October 18, 2019, ~~108,792,341~~108,787,465 shares of registrant’s common stock, par value $0.01 per share, were outstanding.

Table of Contents

- 4 -

PART I

ITEM 1. FINANCIAL STATEMENTS

OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(unaudited)

(in millions, except per share amounts)


	Three Months Ended September 30,						Nine Months Ended September 30,

	2019		2018		2019		2018
NET SALES	$	1,883	$	1,818	$	5,468	$	5,333
COST OF SALES	1,422		1,370		4,242		4,112
Gross margin	461		448		1,226		1,221
OPERATING EXPENSES
Marketing and administrative expenses	164		159		527		531
Science and technology expenses	21		21		65		66

Other expenses, net	1		13		16		39
Total operating expenses	186		193		608		636
OPERATING INCOME	275		255		618		585
Non-operating income	(2)		(4)		(7)		(11)
EARNINGS BEFORE INTEREST AND TAXES	277		259		625		596
Interest expense, net	33		31		101		92
Loss on extinguishment of debt	32		—		32		—
EARNINGS BEFORE TAXES	212		228		492		504
Income tax expense	61		67		159		127
Equity in net earnings / (loss) of affiliates	—		1		—		(1)
NET EARNINGS	151		162		333		376
Net earnings attributable to noncontrolling interests	1		1		1		2
NET EARNINGS ATTRIBUTABLE TO OWENS CORNING	$	150	$	161	$	332	$	374
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS
Basic	$	1.37	$	1.46	$	3.04	$	3.38
Diluted	$	1.36	$	1.45	$	3.02	$	3.35

WEIGHTED AVERAGE COMMON SHARES
Basic	109.2		110.0		109.2		110.8
Diluted	110.0		110.9		110.0		111.7

Three Months Ended
June 30, Six Months Ended
June 30,

2019 2018 2019 2018
NET SALES $ 1,918
$ 1,824
$ 3,585
$ 3,515
COST OF SALES 1,478
1,406
2,820
2,742
Gross margin 440
418
765
773
OPERATING EXPENSES

Marketing and administrative expenses 181
187
363
372
Science and technology expenses 22
22
44
45
Other expenses, net 10
6
15
26
Total operating expenses 213
215
422
443
OPERATING INCOME 227
203
343
330
Non-operating income (3 ) (3 ) (5 ) (7 )
EARNINGS BEFORE INTEREST AND TAXES 230
206
348
337
Interest expense, net 32
33
68
61
EARNINGS BEFORE TAXES 198
173
280
276
Income tax expense 59
49
98
60
Equity in net loss of affiliates (1 ) (2 ) —
(2 )
NET EARNINGS 138
122
182
214
Net earnings attributable to noncontrolling interests —
1
—
1
NET EARNINGS ATTRIBUTABLE TO OWENS CORNING $ 138
$ 121
$ 182
$ 213
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS
Basic $ 1.27
$ 1.09
$ 1.67
$ 1.92
Diluted $ 1.26
$ 1.08
$ 1.66
$ 1.90
WEIGHTED AVERAGE COMMON SHARES
Basic 109.0
110.9
109.3
111.2
Diluted 109.5
111.9
109.8
112.2

The accompanying Notes to the Consolidated Financial Statements are an integral part of this Statement.

Table of Contents

- 5 -

OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(unaudited)

(in millions)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019		2018
NET EARNINGS	$	151	$	162	$	333	$	376
Currency translation adjustment (net of tax of $(6) and $0 for the three months ended September 30, 2019 and 2018, respectively, and $(7) and $(1) for the nine months ended September 30, 2019 and 2018, respectively)	(57)		(12)		(36)		(101)
Pension and other postretirement adjustment (net of tax of $0 and $(1) for the three months ended September 30, 2019 and 2018, respectively, and $0 and $(3) for the nine months ended September 30, 2019 and 2018, respectively)	(2)		1		(1)		3
Hedging adjustment (net of tax of $(1) and $0 for the three months ended September 30, 2019 and 2018, and $0 for both the nine months ended September 30, 2019 and 2018, respectively)	1		1		—		2
COMPREHENSIVE EARNINGS	93		152		296		280
Comprehensive earnings attributable to noncontrolling interests	1		1		1		2
COMPREHENSIVE EARNINGS ATTRIBUTABLE TO OWENS CORNING	$	92	$	151	$	295	$	278

Three Months Ended
June 30, Six Months Ended
June 30,

2019 2018 2019 2018
NET EARNINGS $ 138
$ 122
$ 182
$ 214
Currency translation adjustment (net of tax of $2 and $(6) for the three months ended June 30, 2019 and 2018, respectively, and $(1) and $0 for the six months ended June 30, 2019 and 2018, respectively) 10
(74 ) 21
(89 )
Pension and other postretirement adjustment (net of tax of $0 for both the three months ended June 30, 2019 and 2018, and $0 and $(2) for the six months ended June 30, 2019 and 2018, respectively) 2
4
1
2
Hedging adjustment (net of tax of $0 for both the three months ended June 30, 2019 and 2018, and $1 and $0 for the six months ended June 30, 2019 and 2018, respectively) —
—
(1 ) 1
COMPREHENSIVE EARNINGS 150
52
203
128
Comprehensive earnings attributable to noncontrolling interests —
1
—
1
COMPREHENSIVE EARNINGS ATTRIBUTABLE TO OWENS CORNING $ 150
$ 51
$ 203
$ 127

The accompanying Notes to the Consolidated Financial Statements are an integral part of this Statement.

Table of Contents

- 6 -

OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in millions, except per share amounts)


ASSETS	June 30, 2019			December 31, 2018			ASSETS	September 30, 2019		December 31, 2018
CURRENT ASSETS							CURRENT ASSETS
Cash and cash equivalents	$	92		$	78		Cash and cash equivalents	$	35	$	78
Receivables, less allowances of $11 at June 30, 2019 and $16 at December 31, 2018	986			794
Receivables, less allowances of $10 at September 30, 2019 and $16 at December 31, 2018							Receivables, less allowances of $10 at September 30, 2019 and $16 at December 31, 2018	977		794
Inventories	1,058			1,072			Inventories	1,031		1,072
Assets held for sale	3			3

Other current assets	100			73			Other current assets	87		76
Total current assets	2,239			2,020			Total current assets	2,130		2,020
Property, plant and equipment, net	3,802			3,811			Property, plant and equipment, net	3,759		3,811
Operating lease right-of-use assets	221			—			Operating lease right-of-use assets	207		—
Goodwill	1,940			1,949			Goodwill	1,909		1,949
Intangible assets	1,753			1,779			Intangible assets	1,716		1,779
Deferred income taxes	40			43			Deferred income taxes	36		43
Other non-current assets	188			169			Other non-current assets	198		169
TOTAL ASSETS	$	10,183		$	9,771		TOTAL ASSETS	$	9,955	$	9,771
LIABILITIES AND EQUITY							LIABILITIES AND EQUITY

Current liabilities	$	1,325		$	1,278		Current liabilities	$	1,261	$	1,278
Long-term debt, net of current portion	3,404			3,362			Long-term debt, net of current portion	3,180		3,362
Pension plan liability	253			268			Pension plan liability	222		268
Other employee benefits liability	186			190			Other employee benefits liability	185		190
Non-current operating lease liabilities	155			—			Non-current operating lease liabilities	143		—
Deferred income taxes	202			141			Deferred income taxes	247		141
Other liabilities	213			208			Other liabilities	195		208

OWENS CORNING STOCKHOLDERS’ EQUITY							OWENS CORNING STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.01 per share (a)	—			—			Preferred stock, par value $0.01 per share (a)	—		—
Common stock, par value $0.01 per share (b)	1			1			Common stock, par value $0.01 per share (b)	1		1
Additional paid in capital	4,034			4,028			Additional paid in capital	4,043		4,028
Accumulated earnings	2,146			2,013			Accumulated earnings	2,272		2,013
Accumulated other comprehensive deficit	(635		)	(656		)	Accumulated other comprehensive deficit	(693)		(656)
Cost of common stock in treasury (c)	(1,141		)	(1,103		)	Cost of common stock in treasury (c)	(1,140)		(1,103)
Total Owens Corning stockholders’ equity	4,405			4,283			Total Owens Corning stockholders’ equity	4,483		4,283
Noncontrolling interests	40			41			Noncontrolling interests	39		41
Total equity	4,445			4,324			Total equity	4,522		4,324
TOTAL LIABILITIES AND EQUITY	$	10,183		$	9,771		TOTAL LIABILITIES AND EQUITY	$	9,955	$	9,771


~~(a)~~	~~10 shares authorized; none issued or outstanding at June 30, 2019 and December 31, 2018~~


~~(b)~~	~~400 shares authorized; 135.5 issued and 108.8 outstanding at June 30, 2019; 135.5 issued and 109.5 outstanding at December 31, 2018~~


~~(c)~~	~~26.7 shares at June~~ (a)10 shares authorized; none issued or outstanding at September 30, 2019 and December 31, 2018 (b)400 shares authorized; 135.5 issued and 108.8 outstanding at September 30, 2019; 135.5 issued and 109.5 outstanding at December 31, 2018 (c)26.7 shares at September 30, 2019 and 26.0 shares at December 31, 2018

~~The accompanying Notes to the Consolidated Financial Statements are an integral part of this Statement.~~

~~Table of Contents~~

~~- 7 -~~

~~OWENS CORNING AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY~~

~~(unaudited)~~

~~(in millions)~~

Common Stock
Outstanding

Treasury
Stock
APIC (a)
Accumulated
Earnings
AOCI (b) NCI (c) Total
Shares Par Value Shares Cost
Balance at December 31, 2018 109.5
$ 1
26.0
$ (1,103 ) $ 4,028
$ 2,013
$ (656 ) $ 41
$ 4,324
Net earnings attributable to Owens Corning —
—
—
—
—
44
—
—
44
Currency translation adjustment —
—
—
—
—
—
11
(1 ) 10
Pension and other postretirement adjustment (net of tax) —
—
—
—
—
—
(1 ) —
(1 )
Deferred loss on hedging transactions (net of tax) —
—
—
—
—
—
(1 ) —
(1 )
Issuance of common stock under share-based payment plans 0.4
—
(0.4 ) 14
(14 ) —
—
—
—
Purchases of treasury stock (1.3 ) —
1.3
(61 ) —
—
—
—
(61 )
Stock-based compensation expense —
—
—
—
11
—
—
—
11
Dividends declared (d) —
—
—
—
—
(24 ) —
—
(24 )
Balance at March 31, 2019 108.6
$ 1
26.9
$ (1,150 ) $ 4,025
$ 2,033
$ (647 ) $ 40
$ 4,302
Net earnings attributable to Owens Corning —
—
—
—
—
138
—
—
138
Currency translation adjustment —
—
—
—
—
—
10
—
10
Pension and other postretirement adjustment (net of tax) —
—
—
—
—
—
2
—
2
Issuance of common stock under share-based payment plans 0.2
—
(0.2 ) 9
(1 ) —
—
—
8
Stock-based compensation expense —
—
—
—
10
—
—
—
10
Dividends declared (d) —
—
—
—
—
(25 ) —
—
(25 )
Balance at June 30, 2019 108.8
$ 1
26.7
$ (1,141 ) $ 4,034
$ 2,146
$ (635 ) $ 40
$ 4,445


~~(a)~~	~~Additional Paid in Capital (APIC)~~


~~(b)~~	~~Accumulated Other Comprehensive Earnings (Deficit) (“AOCI”)~~


~~(c)~~	~~Noncontrolling Interest (“NCI”)~~


~~(d)~~	~~Quarterly dividend declarations of $0.22 per share as of June 30, 2019 and March 31, 2019~~

The accompanying Notes to the Consolidated Financial Statements are an integral part of this Statement.

Table of Contents

- 87 -

OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited)

(in millions)


	Common Stock Outstanding				Treasury Stock						APIC (a)		Accumulated Earnings		AOCI (b)		NCI (c)	Total
	Shares	Par Value		Shares	Cost
Balance at December 31, 2018	109.5	$	1	26.0	$	(1,103)	$	4,028	$	2,013	$	(656)	$	41	$	4,324
Net earnings attributable to Owens Corning	—	—		—	—		—		44		—		—		44

Currency translation adjustment	—	—		—	—		—		—		11		(1)		10
Pension and other postretirement adjustment (net of tax)	—	—		—	—		—		—		(1)		—		(1)
Deferred loss on hedging transactions (net of tax)	—	—		—	—		—		—		(1)		—		(1)

Issuance of common stock under share-based payment plans	0.4	—		(0.4)	14		(14)		—		—		—		—
Purchases of treasury stock	(1.3)	—		1.3	(61)		—		—		—		—		(61)
Stock-based compensation expense	—	—		—	—		11		—		—		—		11

Dividends declared (d)	—	—		—	—		—		(24)		—		—		(24)
Balance at March 31, 2019	108.6	$	1	26.9	$	(1,150)	$	4,025	$	2,033	$	(647)	$	40	$	4,302
Net earnings attributable to Owens Corning	—	—		—	—		—		138		—		—		138

Currency translation adjustment	—	—		—	—		—		—		10		—		10
Pension and other postretirement adjustment (net of tax)	—	—		—	—		—		—		2		—		2


Issuance of common stock under share-based payment plans	0.2	—		(0.2)	9		(1)		—		—		—		8

Stock-based compensation expense	—	—		—	—		10		—		—		—		10

Dividends declared (d)	—	—		—	—		—		(25)		—		—		(25)
Balance at June 30, 2019	108.8	$	1	26.7	$	(1,141)	$	4,034	$	2,146	$	(635)	$	40	$	4,445
Net earnings attributable to Owens Corning	—	—		—	—		—		150		—		—		150
Net earnings attributable to noncontrolling interests	—	—		—	—		—		—		—		1		1
Currency translation adjustment	—	—		—	—		—		—		(57)		(2)		(59)
Pension and other postretirement adjustment (net of tax)	—	—		—	—		—		—		(2)		—		(2)
Deferred loss on hedging transactions (net of tax)	—	—		—	—		—		—		1		—		1

Issuance of common stock under share-based payment plans	—	—		—	1		(1)		—		—		—		—

Stock-based compensation expense	—	—		—	—		10		—		—		—		10

Dividends declared (d)	—	—		—	—		—		(24)		—		—		(24)
Balance at September 30, 2019	108.8	$	1	26.7	$	(1,140)	$	4,043	$	2,272	$	(693)	$	39	$	4,522

(a)Additional Paid in Capital (APIC)

Common Stock
Outstanding

Treasury
Stock
APIC (a)
Accumulated
Earnings
AOCI (b) NCI (c) Total
Shares Par Value Shares Cost
Balance at December 31, 2017 111.5
$ 1
24.0
$ (911 ) $ 4,011
$ 1,575
$ (514 ) $ 42
$ 4,204
Net earnings attributable to Owens Corning —
—
—
—
—
92
—
—
92
Currency translation adjustment —
—
—
—
—
—
(15 ) 1
(14 )
Pension and other postretirement adjustment (net of tax) —
—
—
—
—
—
(2 ) —
(2 )
Deferred loss on hedging transactions (net of tax) —
—
—
—
—
—
1
—
1
Issuance of common stock under share-based payment plans 0.6
—
(0.6 ) 21
(21 ) —
—
—
—
Purchases of treasury stock (1.1 ) —
1.1
(113 ) —
—
—
—
(113 )
Stock-based compensation expense —
—
—
—
9
—
—
—
9
Cumulative effect of accounting change (d) —
—
—
—
—
(12 ) —
—
(12 )
Dividends declared (e) —
—
—
—
—
(24 ) —
—
(24 )
Balance at March 31, 2018 111.0
$ 1
24.5
$ (1,003 ) $ 3,999
$ 1,631
$ (530 ) $ 43
$ 4,141
Net earnings attributable to Owens Corning —
—
—
—
—
121
—
—
121
Net earnings attributable to noncontrolling interests —
—
—
—
—
—
—
1
1
Currency translation adjustment —
—
—
—
—
—
(74 ) (2 ) (76 )
Pension and other postretirement adjustment (net of tax) —
—
—
—
—
—
4
—
4
Issuance of common stock under share-based payment plans 0.2
—
(0.2 ) 13
(3 ) —
—
—
10
Purchases of treasury stock (0.3 ) —
0.3
(23 ) —
—
—
—
(23 )
Stock-based compensation expense —
—
—
—
13
—
—
—
13
Dividends declared (e) —
—
—
—
—
(23 ) —
(1 ) (24 )
Balance at June 30, 2018 110.9
$ 1
24.6
$ (1,013 ) $ 4,009
$ 1,729
$ (600 ) $ 41
$ 4,167
(b)Accumulated Other Comprehensive Earnings (Deficit) (“AOCI”)

(c)Noncontrolling Interest (“NCI”)

(d)Quarterly dividend declarations of $0.22 per share as of September 30, 2019, June 30, 2019 and March 31, 2019


~~(a)~~	~~Additional Paid in Capital (APIC)~~


~~(b)~~	~~Accumulated Other Comprehensive Earnings (Deficit) (“AOCI”)~~


~~(c)~~	~~Noncontrolling Interest (“NCI”)~~


~~(d)~~	Cumulative effect of accounting change relates to our adoption of accounting standard updates (ASU) 2014-09, "Revenue from Contracts with Customers (Topic 606)," and ASU 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory (Topic 740)."


~~(e)~~	~~Quarterly dividend declarations of $0.21 per share as of June 30, 2018 and March 31, 2018~~

The accompanying Notes to the Consolidated Financial Statements are an integral part of this Statement.

Table of Contents

- 8 -

OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited)

(in millions)


	Common Stock Outstanding				Treasury Stock						APIC (a)		Accumulated Earnings		AOCI (b)		NCI (c)	Total
	Shares	Par Value		Shares	Cost
Balance at December 31, 2017	111.5	$	1	24.0	$	(911)	$	4,011	$	1,575	$	(514)	$	42	$	4,204
Net earnings attributable to Owens Corning	—	—		—	—		—		92		—		—		92

Currency translation adjustment	—	—		—	—		—		—		(15)		1		(14)
Pension and other postretirement adjustment (net of tax)	—	—		—	—		—		—		(2)		—		(2)
Deferred loss on hedging transactions (net of tax)	—	—		—	—		—		—		1		—		1

Issuance of common stock under share-based payment plans	0.6	—		(0.6)	21		(21)		—		—		—		—
Purchases of treasury stock	(1.1)	—		1.1	(113)		—		—		—		—		(113)
Stock-based compensation expense	—	—		—	—		9		—		—		—		9
Cumulative effect of accounting change (d)	—	—		—	—		—		(12)		—		—		(12)
Dividends declared (e)	—	—		—	—		—		(24)		—		—		(24)
Balance at March 31, 2018	111.0	$	1	24.5	$	(1,003)	$	3,999	$	1,631	$	(530)	$	43	$	4,141
Net earnings attributable to Owens Corning	—	—		—	—		—		121		—		—		121
Net earnings attributable to noncontrolling interests	—	—		—	—		—		—		—		1		1
Currency translation adjustment	—	—		—	—		—		—		(74)		(2)		(76)
Pension and other postretirement adjustment (net of tax)	—	—		—	—		—		—		4		—		4


Issuance of common stock under share-based payment plans	0.2	—		(0.2)	13		(3)		—		—		—		10
Purchases of treasury stock	(0.3)	—		0.3	(23)		—		—		—		—		(23)
Stock-based compensation expense	—	—		—	—		13		—		—		—		13

Dividends declared (e)	—	—		—	—		—		(23)		—		(1)		(24)
Balance at June 30, 2018	110.9	$	1	24.6	$	(1,013)	$	4,009	$	1,729	$	(600)	$	41	$	4,167
Net earnings attributable to Owens Corning	—	—		—	—		—		161		—		—		161
Net earnings attributable to noncontrolling interests	—	—		—	—		—		—		—		1		1
Currency translation adjustment	—	—		—	—		—		—		(12)		(1)		(13)
Pension and other postretirement adjustment (net of tax)	—	—		—	—		—		—		1		—		1
Deferred loss on hedging transactions (net of tax)	—	—		—	—		—		—		1		—		1

Issuance of common stock under share-based payment plans	0.1	—		(0.1)	4.0		(4.0)		—		—		—		—
Purchases of treasury stock	(1.7)	—		1.7	(101.0)		—		—		—		—		(101)
Stock-based compensation expense	—	—		—	—		12.0		—		—		—		12

Dividends declared (e)	—	—		—	—		—		(23.0)		—				(23)
Balance at September 30, 2018	109.3	$	1	26.2	$	(1,110)	$	4,017	$	1,867	$	(610)	$	41	$	4,206

(a)Additional Paid in Capital (APIC)

(b)Accumulated Other Comprehensive Earnings (Deficit) (“AOCI”)

(c)Noncontrolling Interest (“NCI”)

(d)Cumulative effect of accounting change relates to our adoption of accounting standard updates (ASU) 2014-09, "Revenue from Contracts with Customers (Topic 606)," and ASU 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory (Topic 740)."

(e)Quarterly dividend declarations of $0.21 per share as of September 30, 2018, June 30, 2018 and March 31, 2018

The accompanying Notes to the Consolidated Financial Statements are an integral part of this Statement.

Table of Contents

- 9 -

OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in millions)

Six Months Ended
June 30,

2019 2018
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES
Net earnings $ 182
$ 214
Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation and amortization 225
216
Deferred income taxes 65
33
Stock-based compensation expense 21
22
Other non-cash 5
(3 )
Changes in operating assets and liabilities (191 ) (159 )
Pension fund contribution (9 ) (7 )
Payments for other employee benefits liabilities (9 ) (10 )
Other (2 ) —
Net cash flow provided by operating activities 287
306
NET CASH FLOW USED FOR INVESTING ACTIVITIES
Cash paid for property, plant, and equipment (213 ) (304 )
Proceeds from the sale of assets or affiliates 3
14
Investment in subsidiaries and affiliates, net of cash acquired —
(1,143 )
Derivative settlements 8
—
Other —
3
Net cash flow used for investing activities (202 ) (1,430 )
NET CASH FLOW (USED FOR) PROVIDED BY FINANCING ACTIVITIES
Proceeds from long-term debt —
389
Proceeds from senior revolving credit and receivables securitization facilities 946
958
Payments on senior revolving credit and receivables securitization facilities (808 ) (700 )
Proceeds from term loan borrowing —
600
Payments on term loan borrowing (100 ) (15 )
Net decrease in short-term debt (10 ) —
Dividends paid (48 ) (46 )
Purchases of treasury stock (61 ) (136 )
Other (1 ) 1
Net cash flow (used for) provided by financing activities (82 ) 1,051
Effect of exchange rate changes on cash 12
(24 )
Net increase (decrease) in cash, cash equivalents, and restricted cash 15
(97 )
Cash, cash equivalents and restricted cash at beginning of period 85
253
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD $ 100
$ 156


	Nine Months Ended September 30,
	2019		2018
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES
Net earnings	$	333	$	376
Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation and amortization	337		323


Deferred income taxes	118		77

Stock-based compensation expense	31		34
Other non-cash	8		9
Loss on extinguishment of debt	32		—
Changes in operating assets and liabilities	(211)		(265)
Pension fund contribution	(34)		(34)
Payments for other employee benefits liabilities	(13)		(15)
Other	(5)		1
Net cash flow provided by operating activities	596		506
NET CASH FLOW USED FOR INVESTING ACTIVITIES
Cash paid for property, plant, and equipment	(314)		(425)

Proceeds from the sale of assets or affiliates	1		11
Investment in subsidiaries and affiliates, net of cash acquired	—		(1,143)

Derivative settlements	28		6



Net cash flow used for investing activities	(285)		(1,551)
NET CASH FLOW (USED FOR) PROVIDED BY FINANCING ACTIVITIES
Proceeds from long-term debt	445		389
Payments on long-term debt	(484)		—
Proceeds from senior revolving credit and receivables securitization facilities	1,701		1,534
Payments on senior revolving credit and receivables securitization facilities	(1,683)		(1,227)
Proceeds from term loan borrowing	—		600
Payments on term loan borrowing	(200)		(30)
Net decrease in short-term debt	(13)		—
Dividends paid	(72)		(70)
Purchases of treasury stock	(61)		(236)
Other	(3)		(7)
Net cash flow (used for) provided by financing activities	(370)		953
Effect of exchange rate changes on cash	16		(17)
Net decrease in cash, cash equivalents, and restricted cash	(43)		(109)
Cash, cash equivalents and restricted cash at beginning of period	85		253
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	42	$	144

The accompanying Notes to the Consolidated Financial Statements are an integral part of this Statement.

Table of Contents

- 10 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. GENERAL

Unless the context requires otherwise, the terms “Owens Corning,” “Company,” “we” and “our” in this report refer to Owens Corning, a Delaware corporation, and its subsidiaries.

The Consolidated Financial Statements included in this report are unaudited, pursuant to certain rules and regulations of the Securities and Exchange Commission, and include, in the opinion of the Company, normal recurring adjustments necessary for a fair statement of the results for the periods indicated, which, however, are not necessarily indicative of results which may be expected for the full year. The December 31, 2018 balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States ("U.S."). In connection with the Consolidated Financial Statements and Notes included in this report, reference is made to the Consolidated Financial Statements and Notes contained in the Company’s Form 10-K for the year ended December 31, 2018 (the "2018 Form 10-K"). Certain reclassifications have been made to the periods presented for 2018 to conform to the classifications used in the periods presented for 2019.

Cash, Cash Equivalents and Restricted Cash

On the Consolidated Statements of Cash Flows, the total of Cash, cash equivalents and restricted cash includes restricted cash of ~~$8 million~~, $7 million, $7 million, $8 million and $7 million as of ~~June~~September 30, 2019, December 31, 2018, ~~June~~September 30, 2018 and December 31, 2017, respectively. Restricted cash primarily represents amounts received from a counterparty related to its performance assurance on an executory contract, which is included in Other current assets on the Consolidated Balance Sheets. These amounts are contractually required to be set aside, and the counterparty can exchange the cash for another form of performance assurance at its discretion.

Accounting Pronouncements

The following table summarizes recent ASU's issued by the Financial Accounting Standards Board (FASB) that could have an impact on the Company's Consolidated Financial Statements:



Standard	Description	Effective Date for Company	Effect on the Consolidated Financial Statements
Recently adopted standard:
ASU 2016-02, "Leases (Topic 842)," as amended by ASU 2017-13, 2018-01, 2018-10, 2018-11, and 2019-01	The standard requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. The recognition and presentation of expenses will depend on classification as a finance or operating lease. Entities may elect to apply the provisions of the new leasing standard on January 1, 2019, without adjusting the comparative periods presented by recognizing a cumulative-effect adjustment to the opening balance of retained earnings.	January 1, 2019	We adopted this standard using the optional transition method in the first quarter of 2019. Please refer to Note 9 of the Consolidated Financial Statements for transition disclosures as well as other ongoing disclosure requirements.



Recently issued standard:

ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326)," as amended by ASU 2018-19, 2019-04, and 2019-05	This standard replaces the incurred loss methodology for recognizing credit losses with a current expected credit losses model and applies to all financial assets, including trade receivables. Entities will adopt the standard using a modified-retrospective approach.	January 1, 2020	We ~~are currently assessing~~do not believe the ~~impact~~adoption of this ~~standard~~guidance will have a material effect on our ~~Consolidated Financial Statements.~~consolidated financial statements. Our current accounts receivable policy (as described in Note 1 of our 2018 Form 10-K) uses historical and ~~current~~forward-looking information to estimate the amount of ~~probable~~expected credit losses in our existing accounts receivable. We ~~are in the process of analyzing~~have determined that our current systems, policies and ~~methods to~~procedures comply with the ~~use~~requirements of ~~forward-looking information to estimate expected credit losses.~~this standard.

Table of Contents

- 11 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

2. SEGMENT INFORMATION

The Company has ~~three~~3 reportable segments: Composites, Insulation and Roofing. Accounting policies for the segments are the same as those for the Company. The Company’s ~~three~~3 reportable segments are defined as follows:

Composites – ~~The Composites segment includes vertically integrated downstream activities.~~ The Company manufactures, fabricates and sells glass reinforcements in the form of fiber. Glass reinforcement materials are also used downstream by the Composites segment to manufacture and sell glass fiber products in the form of fabrics, non-wovens and other specialized products.

Insulation – Within our Insulation segment, the Company manufactures and sells fiberglass insulation into residential, commercial, industrial and other markets for both thermal and acoustical applications. It also manufactures and sells glass fiber pipe insulation, flexible duct media, bonded and granulated mineral wool insulation, cellular glass insulation and foam insulation used in above- and below-grade construction applications.

Roofing – Within our Roofing segment, the Company manufactures and sells residential roofing shingles, oxidized asphalt materials, roofing components used in residential and commercial construction and specialty applications, and synthetic packaging materials.

NET SALES

The following table summarizes our Net sales by segment and geographic region (in millions). Corporate eliminations (shown below) largely reflect intercompany sales from Composites to Roofing. External customer sales are attributed to geographic region based upon the location from which the product is sold to the external customer.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019		2018
Reportable Segments
Composites	$	531	$	508	$	1,579	$	1,560
Insulation	693		710		1,945		1,988
Roofing	713		645		2,105		1,946
Total reportable segments	1,937		1,863		5,629		5,494
Corporate eliminations	(54)		(45)		(161)		(161)
NET SALES	$	1,883	$	1,818	$	5,468	$	5,333

Three Months Ended
June 30, Six Months Ended
June 30,

2019 2018 2019 2018
Reportable Segments
Composites $ 535
$ 541
$ 1,048
$ 1,052
Insulation 661
682
1,252
1,278
Roofing 778
659
1,392
1,301
Total reportable segments 1,974
1,882
3,692
3,631
Corporate eliminations (56 ) (58 ) (107 ) (116 )
NET SALES $ 1,918
$ 1,824
$ 3,585
$ 3,515


External Customer Sales by Geographic Region
United States	$	1,273	$	1,208	$	3,670	$	3,525
Europe	310		304		920		909
Asia-Pacific	169		166		492		484
Rest of world	131		140		386		415
NET SALES	$	1,883	$	1,818	$	5,468	$	5,333

External Customer Sales by Geographic Region
United States $ 1,297
$ 1,189
$ 2,397
$ 2,317
Europe 314
326
610
605
Asia-Pacific 174
176
323
318
Rest of world 133
133
255
275
NET SALES $ 1,918
$ 1,824
$ 3,585
$ 3,515

Table of Contents

- 12 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

2. SEGMENT INFORMATION (continued)

EARNINGS BEFORE INTEREST AND TAXES

Earnings before interest and taxes (EBIT) by segment consist of net sales less related costs and expenses and are presented on a basis that is used internally for evaluating segment performance. Certain items, such as general corporate expenses or income and certain other expense or income items, are excluded from the internal evaluation of segment performance. Accordingly, these items are not reflected in EBIT for our reportable segments and are included within Corporate, Other and Eliminations.

The following table summarizes EBIT by segment (in millions):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019		2018
Reportable Segments
Composites	$	67	$	64	$	191	$	195
Insulation	84		94		141		175
Roofing	143		127		368		351
Total reportable segments	294		285		700		721
Restructuring (costs) / gains	—		(7)		1		(19)
Acquisition-related costs	—		(1)		—		(16)
Recognition of acquisition inventory fair value step-up	—		—		—		(2)


General corporate expense and other	(17)		(18)		(76)		(88)
Total corporate, other and eliminations	(17)		(26)		(75)		(125)
EBIT	$	277	$	259	$	625	$	596

Three Months Ended
June 30, Six Months Ended
June 30,

2019 2018 2019 2018
Reportable Segments
Composites $ 67
$ 71
$ 124
$ 131
Insulation 42
49
57
81
Roofing 151
127
225
224
Total reportable segments 260
247
406
436
Restructuring (costs) / gains (1 ) (7 ) 1
(12 )
Acquisition-related costs —
(1 ) —
(15 )
Recognition of acquisition inventory fair value step-up —
—
—
(2 )
General corporate expense and other (29 ) (33 ) (59 ) (70 )
Total corporate, other and eliminations (30 ) (41 ) (58 ) (99 )
EBIT $ 230
$ 206
$ 348
$ 337

3. REVENUE

~~3. REVENUE~~

The following table shows a disaggregation of Net sales (in millions):


	For the three months ended September 30, 2019
Reportable Segments	Composites		Insulation		Roofing		Eliminations		Consolidated
Disaggregation Categories
U.S. residential	$	75	$	237	$	641	$	(53)	$	900
U.S. commercial and industrial	159		168		46		—		373
Europe	142		165		3		—		310
Asia-Pacific	120		46		4		(1)		169
Rest of world	35		77		19		—		131
NET SALES	$	531	$	693	$	713	$	(54)	$	1,883

For the three months ended June 30, 2019
Reportable Segments Composites Insulation Roofing Eliminations Consolidated
Disaggregation Categories
U.S. residential $ 75
$ 217
$ 707
$ (55 ) $ 944
U.S. commercial and industrial 158
158
37
—
353
Europe 150
161
4
(1 ) 314
Asia-Pacific 119
52
3
—
174
Rest of world 33
73
27
—
133
NET SALES $ 535
$ 661
$ 778
$ (56 ) $ 1,918

Table of Contents

- 13 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

3. REVENUE (continued)


	For the three months ended September 30, 2018
Reportable Segments	Composites		Insulation		Roofing		Eliminations		Consolidated
Disaggregation Categories
U.S. residential	$	62	$	260	$	560	$	(40)	$	842
U.S. commercial and industrial	157		161		52		(4)		366
Europe	142		159		3		—		304
Asia-Pacific	115		47		4		—		166
Rest of world	32		83		26		(1)		140
NET SALES	$	508	$	710	$	645	$	(45)	$	1,818


	For the three months ended June 30, 2018												For the nine months ended September 30, 2019
Reportable Segments	Composites		Insulation		Roofing		Eliminations			Consolidated		Reportable Segments	Composites		Insulation		Roofing		Eliminations		Consolidated
Disaggregation Categories												Disaggregation Categories
U.S. residential	$	75	$	226	$	578	$	(54	)	$	825	U.S. residential	$	217	$	649	$	1,900	$	(156)	$	2,610
U.S. commercial and industrial	156		160		50		(2		)	364		U.S. commercial and industrial	472		480		108		—		1,060
Europe	156		166		4		—			326		Europe	442		469		10		(1)		920
Asia-Pacific	122		51		3		—			176		Asia-Pacific	351		132		10		(1)		492
Rest of world	32		79		24		(2		)	133		Rest of world	97		215		77		(3)		386
NET SALES	$	541	$	682	$	659	$	(58	)	$	1,824	NET SALES	$	1,579	$	1,945	$	2,105	$	(161)	$	5,468


	For the nine months ended September 30, 2018
Reportable Segments	Composites		Insulation		Roofing		Eliminations		Consolidated
Disaggregation Categories
U.S. residential	$	213	$	708	$	1,696	$	(146)	$	2,471
U.S. commercial and industrial	452		469		141		(8)		1,054
Europe	455		444		10		—		909
Asia-Pacific	343		131		11		(1)		484
Rest of world	97		236		88		(6)		415
NET SALES	$	1,560	$	1,988	$	1,946	$	(161)	$	5,333

For the six months ended June 30, 2019
Reportable Segments Composites Insulation Roofing Eliminations Consolidated
Disaggregation Categories
U.S. residential $ 142
$ 413
$ 1,258
$ (103 ) $ 1,710
U.S. commercial and industrial 313
313
62
(1 ) 687
Europe 300
304
7
(1 ) 610
Asia-Pacific 231
86
6
—
323
Rest of world 62
136
59
(2 ) 255
NET SALES $ 1,048
$ 1,252
$ 1,392
$ (107 ) $ 3,585

For the six months ended June 30, 2018
Reportable Segments Composites Insulation Roofing Eliminations Consolidated
Disaggregation Categories
U.S. residential $ 151
$ 448
$ 1,137
$ (107 ) $ 1,629
U.S. commercial and industrial 295
307
89
(3 ) 688
Europe 313
285
7
—
605
Asia-Pacific 228
84
7
(1 ) 318
Rest of world 65
154
61
(5 ) 275
NET SALES $ 1,052
$ 1,278
$ 1,301
$ (116 ) $ 3,515

As of December 31, 2018, our contract liability balances (for extended warranties, downpayments and deposits, collectively) totaled $53 million, of ~~which $15~~which $16 million was recognized as revenue in the first ~~six~~nine months of 2019. As of ~~June~~September 30, 2019, our contract liability balances totaled ~~$57~~$58 million.

4. INVENTORIES

Inventories consist of the following (in millions):


	September 30, 2019		December 31, 2018
Finished goods	$	705	$	730
Materials and supplies	326		342
Total inventories	$	1,031	$	1,072

Table of Contents

- 14 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

~~4. INVENTORIES~~

~~Inventories consist of the following (in millions):~~

June 30, 2019 December 31, 2018
Finished goods $ 720
$ 730
Materials and supplies 338
342
Total inventories $ 1,058
$ 1,072

5. DERIVATIVE FINANCIAL INSTRUMENTS

The Company is exposed to, among other risks, the impact of changes in commodity prices, foreign currency exchange rates, and interest rates in the normal course of business. The Company’s risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes derivative financial instruments to offset a portion of these risks. The Company uses derivative financial instruments only to the extent necessary to hedge identified business risks, and does not enter into such transactions for trading purposes.

The Company generally does not require collateral or other security with counterparties to these financial instruments and is therefore subject to credit risk in the event of nonperformance; however, the Company monitors credit risk and currently does not anticipate nonperformance by other parties. Contracts with counterparties generally contain right of offset provisions. These provisions effectively reduce the Company’s exposure to credit risk in situations where the Company has gain and loss positions outstanding with a single counterparty. It is the Company’s policy to offset on the Consolidated Balance Sheets the amounts recognized for derivative instruments with any cash collateral arising from derivative instruments executed with the same counterparty under a master netting agreement. As of ~~June~~September 30, 2019 and December 31, 2018, the Company did not have any amounts on deposit with any of its counterparties, nor did any of its counterparties have any amounts on deposit with the Company.

Derivative Fair Values

Our derivatives consist of natural gas forward swaps, cross-currency swaps and foreign exchange forward contracts, all of which are over-the-counter and not traded through an exchange. The Company uses widely accepted valuation tools to determine fair value, such as discounting cash flows to calculate a present value for the derivatives. The models use Level 2 inputs, such as forward curves and other commonly quoted observable transactions and prices. The fair value of our derivatives and hedging instruments are all classified as Level 2 investments within the three-tier hierarchy.

Table of Contents

- 15 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

5. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

The following table presents the fair value of derivatives and hedging instruments and the respective location on the Consolidated Balance Sheets (in millions):

Fair Value at
Location June 30, 2019 December 31, 2018
Derivative assets designated as hedging instruments:
Net investment hedges:
Cross-currency swaps Other current assets $ 11
$ 9
Derivative liabilities designated as hedging instruments:
Net investment hedges:
Cross-currency swaps Other liabilities $ 18
$ 17
Cash flow hedges:
Natural gas forward swaps Current liabilities $ 3
$ 1
Derivative assets not designated as hedging instruments:
Foreign exchange forward contracts Other current assets $ 12
$ 1
Derivative liabilities not designated as hedging instruments:
Foreign exchange forward contracts Current liabilities $ 3
$ 8


		Fair Value at
	Location	September 30, 2019		December 31, 2018
Derivative assets designated as hedging instruments:
Net investment hedges:
Cross-currency swaps	Other current assets	$	12	$	9
Cross currency swaps	Other non-current assets	$	9	$	—







Derivative liabilities designated as hedging instruments:
Net investment hedges:

Cross-currency swaps	Other liabilities	$	—	$	17




Cash flow hedges:
Natural gas forward swaps	Current liabilities	$	2	$	1

Derivative assets not designated as hedging instruments:

Foreign exchange forward contracts	Other current assets	$	18	$	1
Derivative liabilities not designated as hedging instruments:

Foreign exchange forward contracts	Current liabilities	$	—	$	8

Consolidated Statements of Earnings Activity

The following table presents the impact and respective location of derivative activities on the Consolidated Statements of Earnings (in millions):


		Three Months Ended June 30,						Six Months Ended June 30,								Three Months Ended September 30,						Nine Months Ended September 30,
	Location	2019			2018			2019			2018				Location	2019		2018		2019		2018
Derivative activity designated as hedging instruments:														Derivative activity designated as hedging instruments:
Natural gas cash flow hedges:														Natural gas cash flow hedges:
Amount of loss/(gain) reclassified from AOCI (as defined below) into earnings														Amount of loss/(gain) reclassified from AOCI (as defined below) into earnings	Cost of sales	$	2	$	(1)	$	3	$	(1)

Cross-currency swap net investment hedges:														Cross-currency swap net investment hedges:
Amount of gain recognized in earnings on derivative amounts excluded from effectiveness testing	Interest expense, net	$	(3	)	$	(3	)	$	(6	)	$	(6	)	Amount of gain recognized in earnings on derivative amounts excluded from effectiveness testing	Interest expense, net	$	(3)	$	(3)	$	(9)	$	(9)

Derivative activity not designated as hedging instruments:														Derivative activity not designated as hedging instruments:
Natural gas:
Amount of loss recognized in earnings	Other expenses, net	$	1		$	—		$	1		$	—

Foreign currency:														Foreign currency:
Amount of loss/(gain) recognized in earnings (a)	Other expenses, net	$	5		$	(40	)	$	(14	)	$	(44	)
Amount of gain recognized in earnings (a)														Amount of gain recognized in earnings (a)	Other expenses, net	$	(31)	$	(10)	$	(45)	$	(54)


~~(a)~~	Gains related to foreign currency derivatives were substantially offset by net revaluation impacts on foreign currency denominated balance sheet exposures, which were also recorded in Other expenses, net. Please refer to the "Other Derivatives" section below for additional detail.

(a)Gains related to foreign currency derivatives were substantially offset by net revaluation impacts on foreign currency denominated balance sheet exposures, which were also recorded in Other expenses, net. Please refer to the "Other Derivatives" section below for additional detail.

Table of Contents

- 16 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

5. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

Consolidated Statements of Comprehensive Earnings Activity

The following table presents the impact of derivative activities on the Consolidated Statements of Comprehensive Earnings (in millions):

Amount of Loss (Gain) Recognized in Comprehensive Earnings
Three Months Ended
June 30, Six Months Ended June 30,
Hedging Type Derivative Financial Instrument 2019 2018 2019 2018
Net investment hedge Cross-currency swaps $ 10
$ (26 ) $ (3 ) $ (1 )
Cash flow hedge Natural gas forward swaps $ —
$ (1 ) $ 2
$ (2 )


		Amount of (Gain) Loss Recognized in Comprehensive Earnings
		Three Months Ended September 30,						Nine Months Ended September 30,
Hedging Type	Derivative Financial Instrument	2019		2018		2019		2018
Net investment hedge	Cross-currency swaps	$	(27)	$	(1)	$	(30)	$	(2)
Cash flow hedge	Natural gas forward swaps	$	(1)	$	—	$	1	$	(2)

Cash Flow Hedges

The Company uses a combination of derivative financial instruments, which qualify as cash flow hedges, and physical contracts to manage forecasted exposure to electricity and natural gas prices. As of ~~June~~September 30, 2019, the notional amounts of these natural gas forward swaps was 2 MMBtu (or MMBtu equivalent) based on U.S. and European indices.

Net Investment Hedges

The Company has translation exposure resulting from translating the financial statements of foreign subsidiaries into U.S. Dollars, which is recognized in Currency translation adjustment (a component of AOCI). The Company uses cross-currency forward contracts to hedge a portion of the net investment in foreign subsidiaries against fluctuations in foreign exchange rates. As of ~~June~~September 30, 2019, the notional amount of these derivative financial instruments was $516 million related to the ~~U.S~~U.S. Dollar and European Euro.

Other Derivatives

The Company uses forward currency exchange contracts to manage existing exposures to foreign exchange risk related to assets and liabilities recorded on the Consolidated Balance Sheets. As of ~~June~~September 30, 2019, the Company had notional amounts of ~~$927~~$688 million for non-designated derivative financial instruments related to foreign currency exposures in U.S. Dollars primarily related to Brazilian Real, Chinese Yuan, European Euro, Indian Rupee, ~~Japanese Yen,~~ and South Korean Won. In addition, the Company had notional amounts of ~~$142~~$146 million for non-designated derivative financial instruments related to foreign currency exposures in European Euro primarily related to the Russian Ruble, Polish Zloty and Swedish Krona.

Table of Contents

- 17 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Intangible assets and goodwill consist of the following (in millions):


June 30, 2019	Weighted Average Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
September 30, 2019									September 30, 2019	Weighted Average Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizable intangible assets:									Amortizable intangible assets:
Customer relationships	20 years	$	553	$	(152	)	$	401	Customer relationships	20 years	$	541	$	(158)	$	383
Technology	17 years	320		(143		)	177		Technology	17 years	317		(148)		169
Other	13 years	63		(30		)	33		Other	13 years	61		(31)		30
Indefinite-lived intangible assets:									Indefinite-lived intangible assets:
Trademarks		1,142		—			1,142		Trademarks		1,134				1,134
Total intangible assets		$	2,078	$	(325	)	$	1,753	Total intangible assets		$	2,053	$	(337)	$	1,716
Goodwill		$	1,940						Goodwill		$	1,909


December 31, 2018	Weighted Average Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizable intangible assets:
Customer relationships	20 years	$	554	$	(138)	$	416
Technology	17 years	321		(134)		187
Other	14 years	60		(28)		32
Indefinite-lived intangible assets:
Trademarks		1,144		—		1,144
Total intangible assets		$	2,079	$	(300)	$	1,779
Goodwill		$	1,949

December 31, 2018
Weighted
Average
Useful Life

Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Amortizable intangible assets:
Customer relationships 20 years $ 554
$ (138 ) $ 416
Technology 17 years 321
(134 ) 187
Other 14 years 60
(28 ) 32
Indefinite-lived intangible assets:
Trademarks 1,144
—
1,144
Total intangible assets $ 2,079
$ (300 ) $ 1,779
Goodwill $ 1,949

Goodwill

The Company tests goodwill and indefinite-lived intangible assets for impairment during the fourth quarter of each year, or more frequently should circumstances change or events occur that would more likely than not reduce the fair value of a reporting unit below its carrying amount. No testing was deemed necessary in the first ~~six~~nine months of 2019. The changes in the net carrying amount of goodwill by segment are as follows (in millions):


	Composites		Insulation		Roofing		Total
Balance at December 31, 2018	$	57	$	1,495	$	397	$	1,949

Foreign currency translation	—		(37)		(3)		(40)
Balance at September 30, 2019	$	57	$	1,458	$	394	$	1,909

Composites Insulation Roofing Total
Balance at December 31, 2018 $ 57
$ 1,495
$ 397
$ 1,949
Foreign currency translation —
(9 ) —
(9 )
Balance at June 30, 2019 $ 57
$ 1,486
$ 397
$ 1,940

Table of Contents

- 18 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

6. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)

Other Intangible Assets

The Other category below primarily includes franchise agreements and quarry and emission rights. The changes in the gross carrying amount of intangible assets by asset group are as follows (in millions):

Customer Relationships Technology Trademarks Other Total
Balance at December 31, 2018 $ 554
$ 321
$ 1,144
$ 60
$ 2,079
Other additions, net —
—
—
3
3
Foreign currency translation (1 ) (1 ) (2 ) —
(4 )
Balance at June 30, 2019 $ 553
$ 320
$ 1,142
$ 63
$ 2,078


	Customer Relationships		Technology		Trademarks		Other		Total
Balance at December 31, 2018	$	554	$	321	$	1,144	$	60	$	2,079

Other additions, net	—		—		—		2		2
Foreign currency translation	(13)		(4)		(10)		(1)		(28)
Balance at September 30, 2019	$	541	$	317	$	1,134	$	61	$	2,053

The estimated amortization expense for intangible assets for the next five years is as follows (in millions):


Period	Amortization
2020	$	50
2021	$	50
2022	$	45
2023	$	42
2024	$	39

Period Amortization
2020 $ 51
2021 $ 50
2022 $ 46
2023 $ 42
2024 $ 39

7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following (in millions):

June 30,
2019 December 31, 2018
Land $ 226
$ 224
Buildings and leasehold improvements 1,120
1,091
Machinery and equipment 4,852
4,628
Construction in progress 298
443
6,496
6,386
Accumulated depreciation (2,694 ) (2,575 )
Property, plant and equipment, net $ 3,802
$ 3,811


	September 30, 2019		December 31, 2018
Land	$	220	$	224
Buildings and leasehold improvements	1,114		1,091
Machinery and equipment	4,857		4,628
Construction in progress	313		443
	6,504		6,386
Accumulated depreciation	(2,745)		(2,575)
Property, plant and equipment, net	$	3,759	$	3,811

Machinery and equipment includes certain precious metals used in our production tooling, which comprise approximately 10% and 11% of total machinery and equipment as of ~~June~~September 30, 2019 and December 31, 2018. Precious metals used in our production tooling are depleted as they are consumed during the production process, which typically represents an annual expense of about 3% of the outstanding carrying value.

Table of Contents

- 19 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

8. ACQUISITIONS

~~8. ACQUISITIONS~~

Paroc Acquisition

On February 5, 2018, the Company acquired all the outstanding equity of Paroc Group Oy ("Paroc"), a leading producer of mineral wool insulation for building and technical applications in Europe, for $1,121 million, net of cash acquired. The acquisition of Paroc expands the Company's mineral wool technology, grows its presence in the European insulation market, provides access to a variety of new end-use markets and will increase the Insulation segment's geographic sales mix outside of the U.S. and Canada. Paroc's operating results have been included in the Company’s Insulation segment within the Consolidated Financial Statements since the date of the acquisition. During the first ~~six~~nine months of 2019, the Consolidated Statements of Earnings included $38 million in Net Sales attributable to the acquisition (net sales from January 1, 2019 through February 4, 2019 that were related to the one-year post-acquisition period). The pro forma effect of this acquisition on Net sales and Net earnings attributable to Owens Corning was immaterial.

9. LEASES

ASU 2016-02 Adoption

On January 1, 2019, we adopted ASU 2016-02, "Leases (Topic 842)," and the related amendments (collectively "ASC 842"). We used the optional transition method of adoption, in which the cumulative effect of initially applying the new standard to existing leases was $237 million to record the operating lease right-of-use assets and the related liabilities as of January 1, 2019. Under this method of adoption, the comparative information in the Consolidated Financial Statements has not been revised and continues to be reported under the previously applicable lease accounting guidance (ASC 840). We elected the package of practical expedients permitted under the transition guidance, which included the carry-forward of historical lease classifications.

As of December 31, 2018, leases classified as capital leases under Accounting Standard Codification (ASC) 840 of $16 million were included in Property, plant and equipment, net. ~~As of June 30, 2019, finance~~Finance lease right-of-use assets, ~~of $16 million,~~ which were previously classified as capital leases under ASC 840, are now included in Other non-current assets. As of both December 31, 2018 and ~~June~~September 30, 2019, liabilities associated with capital leases and finance leases are included in Long-term debt, as they represent indebtedness for bank covenant purposes.

Leases

The Company leases certain equipment and facilities under both operating and finance leases expiring on various dates through 2032. The nature of these leases generally fall into the following five categories: real estate, material handling, fleet vehicles, office equipment and energy equipment.

For leases with initial terms greater than 12 months, we consider these our right-of-use assets and record the related asset and obligation at the present value of lease payments over the term. For leases with initial terms equal to or less than 12 months, we do not consider them as right-of-use assets and instead consider them short-term lease costs that are recognized on a straight-line basis over the lease term.

Many of our leases include escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when reasonably certain. These options to extend or terminate a lease are at our discretion. We have elected to take the practical expedient and not separate lease and non-lease components of contracts. We estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. Our lease agreements do not contain any material residual value guarantees.

Table of Contents

- 20 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

9. LEASES (continued)

Balance Sheet Classification

The table below presents the lease-related assets and liabilities recorded on the balance sheet (in millions):


Leases	Classification on Balance Sheet	September 30, 2019
Assets
Operating lease assets	Operating lease right-of-use assets	$	207
Finance lease assets	Other non-current assets	22
Total lease assets		$	229

Liabilities
Current
Operating	Current liabilities	$	65
Finance	Current liabilities	6
Non-Current
Operating	Non-current operating lease liabilities	143
Finance	Long-term debt, net of current portion	20
Total lease liabilities		$	234

Leases Classification on Balance Sheet June 30, 2019
Assets
Operating lease assets Operating lease right-of-use assets $ 221
Finance lease assets Other non-current assets 16
Total lease assets $ 237

Liabilities
Current
Operating Current liabilities $ 67
Finance Current liabilities 5
Non-Current
Operating Non-current operating lease liabilities 155
Finance Long-term debt, net of current portion 17
Total lease liabilities $ 244

For the three months ended ~~June~~September 30, 2019, the Company recorded $20 million of operating lease expense and $3 million of short-term lease expense. The Company had an immaterial amount of finance lease expense and variable lease expense. Cash paid for operating leases approximated operating lease expense and non-cash right-of-use asset amortization for the three months ended ~~June~~September 30, 2019. We added ~~$10~~$8 million of operating lease liabilities as a result of obtaining operating lease right-of-use assets in the three months ended ~~June~~September 30, 2019.

For the ~~six~~nine months ended ~~June~~September 30, 2019, the Company recorded ~~$40~~$60 million of operating lease expense and $6$8 million of short-term lease expense. The Company had an immaterial amount of finance lease expense and variable lease expense. Cash paid for operating leases approximated operating lease expense and non-cash right-of-use asset amortization for the ~~six~~nine months ended ~~June~~September 30, 2019. We added ~~$28~~$36 million of operating lease liabilities as a result of obtaining operating lease right-of-use assets in the ~~six~~nine months ended ~~June~~September 30, 2019.

Table of Contents

- 21 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

9. LEASES (continued)

The tables below present supplemental information related to leases as of ~~June~~September 30, ~~2019 (in millions):~~2019:



Weighted-average remaining lease term (years)			~~June~~September 30, 2019
Operating leases			~~4.3~~4.2
Finance leases			~~4.6~~4.2



Weighted-average discount rate	~~June~~September 30, 2019
Operating leases	~~3.40~~3.44	%
Finance leases	~~7.08~~6.38	%

Maturities of Lease Liabilities

As presented in our 2018 Form 10-K, the minimum future rental commitments under ASC 840 for non-cancelable operating leases with initial maturities greater than one year, payable over the remaining lives of the leases as of December 31, 2018 were (in millions):


Period	Minimum Future Rental Commitments
2019	$	83
2020	$	64
2021	$	47
2022	$	31
2023	$	18
2024 and beyond	$	27

Total rent expense was $106 million, $87 million and $79 million in the years ended December 31, 2018, 2017 and 2016, respectively.

The table below reconciles the undiscounted cash flows for each of the first five years and the total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the balance sheet as of ~~June~~September 30, 2019 (in millions):

Period Operating Leases Finance Leases
2019 (for the six months remaining in 2019) $ 40
$ 3
2020 69
6
2021 53
6
2022 35
5
2023 20
3
2024 and beyond 27
2
Total minimum lease payments 244
25
Less: implied interest 22
3
Present value of future minimum lease payments 222
22
Less: current lease obligations 67
5
Long-term lease obligations $ 155
$ 17


Period	Operating Leases		Finance Leases
2019 (for the three months remaining in 2019)	$	20	$	2
2020	70		8
2021	55		8
2022	36		6
2023	21		4
2024 and beyond	28		2
Total minimum lease payments	230		30
Less: implied interest	22		4
Present value of future minimum lease payments	208		26
Less: current lease obligations	65		6
Long-term lease obligations	$	143	$	20

As of ~~June~~September 30, 2019, we have an immaterial amount of leases that have not yet commenced.

Table of Contents

- 22 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

10. WARRANTIES

The Company records a liability for warranty obligations at the date the related products are sold. Adjustments are made as new information becomes available. Please refer to Note 1 of our 2018 Form 10-K for information about our separately-priced extended warranty contracts. A reconciliation of the warranty liability is as follows (in millions):


	Nine Months Ended September 30,
	2019		2018
Beginning balance	$	60	$	55
Amounts accrued for current year	17		16
Settlements of warranty claims	(13)		(11)
Ending balance	$	64	$	60

Six Months Ended June 30,
2019 2018
Beginning balance $ 60
$ 55
Amounts accrued for current year 11
11
Settlements of warranty claims (8 ) (6 )
Ending balance $ 63
$ 60

11. RESTRUCTURING AND ACQUISITION-RELATED COSTS

The Company may incur restructuring, transaction and integration costs related to acquisitions, and may incur restructuring costs in connection with its global cost reduction and productivity initiatives.

Restructuring Costs

Pittsburgh Corning Acquisition-Related Restructuring

On June 27, 2017, the Company acquired all the outstanding equity of Pittsburgh Corning Corporation and Pittsburgh Corning Europe NV (collectively, "Pittsburgh Corning"), the world’s leading producer of cellular glass insulation systems for commercial and industrial markets, for $563 million, net of cash acquired.

Following the acquisition of Pittsburgh Corning into the Company's Insulation segment, the Company took actions to realize expected synergies from the newly acquired operations. The Company does not expect to recognize significant incremental costs throughout 2019.

2017 Cost Reduction Actions

During the second quarter of 2017, the Company took actions to avoid future capital outlays and reduce costs in its Composites segment, mainly through decisions to close certain sub-scale manufacturing facilities in Asia Pacific (including Doudian, Peoples Republic of China and Thimmapur, India) and North America (Mexico City, Mexico and Brunswick, Maine) and to reposition assets in its Chambery, France operation. The Company expects to recognize approximately $6$7 million of incremental costs throughout 2019.

Insulation Network Optimization Restructuring

In October 2019, the Company took actions to restructure certain U.S. insulation operations and to reduce the cost structure throughout the Insulation network. Investments in productivity and process technologies enable the Company to optimize its network and improve its cost position. These actions are expected to result in cumulative incremental costs of approximately $30 million in 2019 and 2020 and generate annual savings of approximately $25 million by 2021.

Table of Contents

- 23 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

11. RESTRUCTURING AND ACQUISITION-RELATED COSTS (continued)

Consolidated Statements of Earnings Classification

The following table presents the impact and respective location of total restructuring costs on the Consolidated Statements of Earnings, which are included within Corporate, Other and Eliminations (in millions):


		Three Months Ended September 30,						Nine Months Ended September 30,
Type of cost	Location	2019		2018		2019		2018
Accelerated depreciation	Cost of sales	$	—	$	1	$	—	$	9
Other exit costs	Cost of sales	—		2		2		6
Severance	Other expenses, net	—		1		—		3
Other exit costs (gains)	Other expenses, net	—		3		(3)		1
Total restructuring costs (gains)		$	—	$	7	$	(1)	$	19

Three Months Ended June 30, Six Months Ended June 30,
Type of cost Location 2019 2018 2019 2018
Accelerated depreciation Cost of sales $ —
$ 3
$ —
$ 8
Other exit costs Cost of sales 1
2
2
4
Severance Other expenses, net —
1
—
2
Other exit costs (gains) Other expenses, net —
1
(3 ) (2 )
Total restructuring costs (gains)
$ 1
$ 7
$ (1 ) $ 12

~~Table of Contents~~

~~- 23 -~~

~~OWENS CORNING AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~


~~11.~~	~~RESTRUCTURING AND ACQUISITION-RELATED COSTS (continued)~~

Summary of Unpaid Liabilities

The following table summarizes the status of the unpaid liabilities from the Company's restructuring activities (in millions):

2017 Cost Reduction Actions Pittsburgh Corning Acquisition-Related Restructuring Total
Balance at December 31, 2018 $ 10
$ 7
$ 17
Restructuring (gains) costs (2 ) 1
(1 )
Payments (5 ) (3 ) (8 )
Non-cash items and reclassifications to other accounts 3
—
3
Balance at June 30, 2019 $ 6
$ 5
$ 11
Cumulative charges incurred $ 46
$ 21
$ 67

As of ~~June~~September 30, 2019, the remaining liability balance is comprised of ~~$11~~$8 million of severance, inclusive of $2 million of non-current severance and $9$6 million of severance the Company expects to pay over the next twelve months.

Table of Contents

- 24 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

12. DEBT

~~12. DEBT~~

Details of the Company’s outstanding long-term debt, as well as the fair values, are as follows (in millions):


	September 30, 2019						December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value

4.20% senior notes, net of discount and financing fees, due 2022	$	183	105	%	$	598	99	%
4.20% senior notes, net of discount and financing fees, due 2024	394		105	%	393		99	%
3.40% senior notes, net of discount and financing fees, due 2026	396		100	%	396		90	%
3.95% senior notes, net of discount and financing fees, due 2029	445		102	%	—		—	%
7.00% senior notes, net of discount and financing fees, due 2036	367		124	%	400		112	%
4.30% senior notes, net of discount and financing fees, due 2047	588		91	%	588		76	%
4.40% senior notes, net of discount and financing fees, due 2048	390		92	%	389		77	%

Accounts receivables securitization facility, maturing in 2022 (a)	94		100	%	75		100	%
Various finance leases, due through 2032 (a) (b)	26		100	%	24		100	%
Term loan borrowing, maturing in 2021 (a)	300		100	%	500		100	%
Other	4		n/a		8		n/a
Total long-term debt	3,187		n/a		3,371		n/a
Less – current portion (a)	7		100	%	9		100	%
Long-term debt, net of current portion	$	3,180	n/a		$	3,362	n/a

June 30, 2019 December 31, 2018
Carrying Value Fair Value Carrying Value Fair Value
4.20% senior notes, net of discount and financing fees, due 2022 $ 598
104 % $ 598
99 %
4.20% senior notes, net of discount and financing fees, due 2024 394
104 % 393
99 %
3.40% senior notes, net of discount and financing fees, due 2026 396
99 % 396
90 %
7.00% senior notes, net of discount and financing fees, due 2036 400
119 % 400
112 %
4.30% senior notes, net of discount and financing fees, due 2047 588
85 % 588
76 %
4.40% senior notes, net of discount and financing fees, due 2048 390
87 % 389
77 %
Accounts receivables securitization facility, maturing in 2022 (a) 213
100 % 75
100 %
Various finance leases, due through 2032 (a) (b) 22
100 % 24
100 %
Term loan borrowing, maturing in 2021 (a) 400
100 % 500
100 %
Other 9
n/a
8
n/a
Total long-term debt 3,410
n/a
3,371
n/a
Less – current portion (a) 6
100 % 9
100 %
Long-term debt, net of current portion $ 3,404
n/a
$ 3,362
n/a

(a) The Company determined that the book value of the above noted long-term debt instruments approximates fair value.

(b) Amounts reflected for December 31, 2018 represent capital lease obligations as recorded under ASC 840.

The fair values of the Company's outstanding long-term debt instruments were estimated using market observable inputs, including quoted prices in active markets, market indices and interest rate measurements. Within the hierarchy of fair value measurements, these are Level 2 fair values.

The Company issued $450 million of 2029 senior notes on August 12, 2019 subject to $5 million of discounts and issuance costs. Interest on the notes is payable semiannually in arrears on February 15 and August 15 each year, beginning on February 15, 2020. The proceeds from these notes were used to repay $416 million of our 2022 senior notes and $34 million of our 2036 senior notes. The Company recognized approximately $32 million of loss on extinguishment of debt in the third quarter of 2019 associated with these actions.

The Company issued $400 million of 2048 senior notes on January 25, 2018. Interest on the notes is payable semiannually in arrears on January 30 and July 30 each year, beginning on July 30, 2018. The proceeds from these notes were used, along with borrowings on a $600 million term loan commitment and borrowings on the Receivables Securitization Facility (as defined below), to fund the purchase of Paroc in the first quarter of 2018.

The Company issued $600 million of 2047 senior notes on June 26, 2017. Interest on the notes is payable semiannually in arrears on January 15 and July 15 each year, beginning on January 15, 2018. A portion of the proceeds from these notes was used to fund the purchase of Pittsburgh Corning in 2017 and for general corporate purposes. The remaining proceeds were used to repay $144 million of our 2019 senior notes and $140 million of our 2036 senior notes.

The Company issued $400 million of 2026 senior notes on August 8, 2016. Interest on the notes is payable semiannually in arrears on February 15 and August 15 each year, beginning on February 15, 2017. A portion of the proceeds from these notes was used to repay $158 million of our 2016 senior notes. The remaining proceeds were used to pay down portions of our Receivables Securitization Facility and for general corporate purposes.

Table of Contents

- 25 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

12. DEBT (continued)

The Company issued $400 million of 2024 senior notes on November 12, 2014. Interest on the notes is payable semiannually in arrears on June 1 and December 1 each year, beginning on June 1, 2015. A portion of the proceeds from these notes was used to repay $242 million of our 2016 senior notes and $105 million of our 2019 senior notes. The remaining proceeds were used to pay down our Senior Revolving Credit Facility (as defined below), finance general working capital needs, and for general corporate purposes.

~~Table of Contents~~

~~- 25 -~~

~~OWENS CORNING AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~12. DEBT (continued)~~

The Company issued $600 million of 2022 senior notes on October 17, 2012. Interest on the notes is payable semiannually in arrears on June 15 and December 15 each year, beginning on June 15, 2013. The proceeds of these notes were used to repay $250 million of our 2016 senior notes and $100 million of our 2019 senior notes and pay down our Senior Revolving Credit Facility.

On October 31, 2006, the Company issued $550 million of 2036 senior notes. The proceeds of these notes were used to pay certain unsecured and administrative claims, finance general working capital needs and for general corporate purposes.

Collectively, the senior notes above are referred to as the “Senior Notes.” The Senior Notes are general unsecured obligations of the Company and rank pari passu with all existing and future senior unsecured indebtedness of the Company.

The Company has the option to redeem all or part of the Senior Notes at any time at a “make-whole” redemption price. The Company is subject to certain covenants in connection with the issuance of the Senior Notes that it believes are usual and customary. The Company was in compliance with these covenants as of ~~June~~September 30, 2019.

In the first quarter of 2016, the Company terminated interest rate swaps designated to hedge a portion of the 4.20% senior notes due 2022. The residual fair value of the swaps iswas previously recognized in Long-term debt, net of current portion on the Consolidated Balance Sheets as an unamortized interest rate swap basis adjustment and accounts for ~~$4 million and~~ $5 million ~~respectively,~~ of the Other balance in the above table as of ~~June 30, 2019 and~~ December 31, 2018. As a result of the repurchase of a portion of these notes in a tender offer in the third quarter of 2019, the remaining unamortized portion of the swaps was recognized on the Consolidated Statements of Earnings as a $4 million reduction to the loss on extinguishment of debt.

Senior Revolving Credit Facility

The Company has an $800 million Senior Revolving Credit Facility that includes both borrowings and letters of credit. Borrowings under the Senior Revolving Credit Facility may be used for general corporate purposes and working capital. The Company has the discretion to borrow under multiple options, which provide for varying terms and interest rates including the United States prime rate, federal funds rate plus a spread or LIBOR plus a spread. In April 2019, the Company entered into an amendment to extend the maturity date of the Senior Revolving Credit Facility by one year to 2024.

The Senior Revolving Credit Facility contains various covenants, including a maximum allowed leverage ratio and a minimum required interest expense coverage ratio, that the Company believes are usual and customary for a senior unsecured credit agreement. The Company was in compliance with these covenants as of ~~June~~September 30, 2019. Please refer to the Credit Facility Utilization paragraph below for liquidity information as of ~~June~~September 30, 2019.

The Company obtained a term loan borrowing on October 27, 2017 for $600 million (the "Term Loan"). The Company entered into the Term Loan, in part, to pay a portion of the purchase price of the Paroc acquisition. In the first quarter of 2018, the Company borrowed on the ~~$600 million~~ Term Loan, along with borrowings on the Receivables Securitization Facility and the proceeds of the 2048 senior notes, to fund the purchase of Paroc. The ~~$600 million~~ Term Loan requires partial quarterly principal repayments, all of which have been paid as of ~~June~~September 30, 2019, and full repayment by February 2021. As of ~~June~~September 30, 2019, the Term Loan had ~~$400~~$300 million outstanding. In March 2019, the Term Loan was amended to reduce the applicable interest rate on outstanding borrowings.

The Term Loan contains various covenants, including a maximum allowed leverage ratio and a minimum required interest expense coverage ratio, that the Company believes are usual and customary for a term loan. The Company was in compliance with these covenants as of ~~June~~September 30, 2019.

Table of Contents

- 26 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

12. DEBT (continued)

Receivables Securitization Facility

Included in long-term debt on the Consolidated Balance Sheets are borrowings outstanding under a Receivables Purchase Agreement (RPA) that are accounted for as secured borrowings in accordance with ASC 860, "Accounting for Transfers and Servicing." Owens Corning Sales, LLC and Owens Corning Receivables LLC, each a subsidiary of the Company, have a $280 million RPA with certain financial institutions. The Company has the ability to borrow at the lenders' cost of funds, which approximates A-1/P-1 commercial paper rates vs. LIBOR, plus a fixed spread. In April 2019, the securitization facility (the "Receivables Securitization Facility") was amended to extend the maturity date to April 2022.

~~Table of Contents~~

~~- 26 -~~

~~OWENS CORNING AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~

~~12. DEBT (continued)~~

Owens Corning Receivables LLC’s sole business consists of the purchase or acceptance through capital contributions of trade receivables and related rights from Owens Corning Sales, LLC and the subsequent retransfer of or granting of a security interest in such trade receivables and related rights to certain purchasers who are party to the RPA. Owens Corning Receivables LLC is a separate legal entity with its own separate creditors who will be entitled, upon its liquidation, to be satisfied out of Owens Corning Receivables LLC’s assets prior to any assets or value in Owens Corning Receivables LLC becoming available to Owens Corning Receivables LLC’s equity holders. The assets of Owens Corning Receivables LLC are not available to pay creditors of the Company or any other affiliates of the Company or Owens Corning Sales, LLC.

Credit Facility Utilization

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

Short-term borrowings were $6$3 million and $16 million as of ~~June~~September 30, 2019 and December 31, 2018, respectively. The short-term borrowings for both periods consisted of various operating lines of credit and working capital facilities. Certain of these borrowings are collateralized by receivables, inventories or property. The borrowing facilities are typically for one-year renewable terms. The weighted average interest rate on all short-term borrowings was approximately ~~8.5%~~8.2% and 3.0% for ~~June~~September 30, 2019 and December 31, 2018, respectively.

Table of Contents

- 27 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

13. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS


~~13.~~	~~PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS~~

Pension Plans

The Company sponsors defined benefit pension plans. Under the plans, pension benefits are based on an employee’s years of service and, for certain categories of employees, qualifying compensation. Company contributions to these pension plans are determined by an independent actuary to meet or exceed minimum funding requirements. In our non-U.S. plans, the unrecognized cost of any retroactive amendments and actuarial gains and losses are amortized over the average future service period of plan participants expected to receive benefits. In our U.S. plans, the unrecognized cost of any retroactive amendments and actuarial gains and losses are amortized over the average remaining life expectancy of the inactive participants as substantially all of the plan participants are inactive.

The following tables provide information regarding pension expense recognized (in millions):


	Three Months Ended September 30,
	2019										2018
	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total
Components of Net Periodic Pension Cost
Service cost	$	1	$	1	$	2	$	1	$	1	$	2
Interest cost	9		3		12		9		3		12
Expected return on plan assets	(13)		(4)		(17)		(14)		(4)		(18)

Amortization of actuarial loss	3		1		4		3		1		4




Net periodic pension cost (income)	$	—	$	1	$	1	$	(1)	$	1	$	—

Three Months Ended June 30,
2019 2018

U.S. Non-U.S. Total U.S. Non-U.S. Total
Components of Net Periodic Pension Cost
Service cost $ 1
$ 1
$ 2
$ 1
$ 2
$ 3
Interest cost 9
3
12
8
4
12
Expected return on plan assets (13 ) (4 ) (17 ) (13 ) (4 ) (17 )
Amortization of actuarial loss 3
1
4
3
—
3
Net periodic pension cost (income) $ —
$ 1
$ 1
$ (1 ) $ 2
$ 1

The Company expects to contribute approximately $25 million in cash to the U.S. pension plans and another $14 million to non-U.S. plans during 2019. The Company made cash contributions of $9$34 million to the plans during the ~~six~~nine months ended ~~June~~September 30, 2019.

On September 25, 2019, the Company entered into an agreement to purchase a non-participating annuity contract from an insurance company to transfer $89 million of the Company's outstanding pension projected benefit obligations related to certain U.S. pension plans. The transaction closed on October 2, 2019 and was funded with pension plan assets of $83 million. As a result of this transaction, the Company will recognize a pre-tax settlement charge of approximately $45 million in the fourth quarter of 2019 from the accelerated recognition of a pro rata portion of plan actuarial losses. This charge will be recorded in Non-operating (income) expense on the Consolidated Statements of Earnings. The transaction is not expected to have a material impact on the plan's funded status.

Table of Contents

- 28 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

13. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS (continued)

Postemployment and Postretirement Benefits Other than Pension Plans ("OPEB")

The Company maintains healthcare and life insurance benefit plans for certain retired employees and their dependents. The health care plans in the United States are non-funded and pay either (1) stated percentages of covered medically necessary expenses, after subtracting payments by Medicare or other providers and after stated deductibles have been met, or (2) fixed amounts of medical expense reimbursement.

~~Table of Contents~~

~~- 28 -~~

~~OWENS CORNING AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~


~~13.~~	~~PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS (continued)~~

Three Months Ended
June 30, Six Months Ended
June 30,

2019 2018 2019 2018
Components of Net Periodic Benefit Cost
Service cost $ —
$ —
$ —
$ 1
Interest cost 2
1
4
3
Amortization of prior service credit (1 ) (1 ) (2 ) (2 )
Amortization of actuarial gain (2 ) (1 ) (4 ) (3 )
Net periodic benefit income $ (1 ) $ (1 ) $ (2 ) $ (1 )

14. CONTINGENT LIABILITIES AND OTHER MATTERS

~~CONTINGENT LIABILITIES AND OTHER MATTERS~~

The Company may be involved in various legal and regulatory proceedings relating to employment, antitrust, tax, product liability, environmental and other matters (collectively, “Proceedings”). The Company regularly reviews the status of such Proceedings along with legal counsel. Liabilities for such Proceedings are recorded when it is probable that the liability has been incurred and when the amount of the liability can be reasonably estimated. Liabilities are adjusted when additional information becomes available. Management believes that the amount of any reasonably possible losses in excess of any amounts accrued, if any, with respect to such Proceedings or any other known claim, including the matters described below under the caption Environmental Matters (the “Environmental Matters”), are not material to the Company’s financial statements. Management believes that the ultimate disposition of the Proceedings and the Environmental Matters will not have a material adverse effect on the Company’s financial condition. While the likelihood is remote, the disposition of the Proceedings and Environmental Matters could have a material impact on the results of operations, cash flows or liquidity in any given reporting period.

Litigation and Regulatory Proceedings

The Company is involved in litigation and regulatory proceedings from time to time in the regular course of its business. The Company believes that adequate provisions for resolution of all contingencies, claims and pending matters have been made for probable losses that are reasonably estimable.

Environmental Matters

The Company has established policies and procedures designed to ensure that its operations are conducted in compliance with all relevant laws and regulations and that enable the Company to meet its high standards for corporate sustainability and environmental stewardship. Our manufacturing facilities are subject to numerous foreign, federal, state and local laws and regulations relating to the presence of hazardous materials, pollution and protection of the environment, including emissions to air, reductions of greenhouse gases, discharges to water, management of hazardous materials, handling and disposal of solid wastes, and remediation of contaminated sites. All Company manufacturing facilities operate using an ISO 14001 or equivalent environmental management system. The Company’s ~~2020~~2030 Sustainability Goals include significant global reductions in energy use, water consumption, waste to landfill, and emissions of greenhouse gases, fine particulate matter and toxic air emissions.

Table of Contents

- 29 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

14. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

Owens Corning is involved in remedial response activities and is responsible for environmental remediation at a number of sites, including certain of its currently owned or formerly owned plants. These responsibilities arise under a number of laws, including, but not limited to, the Federal Resource Conservation and Recovery Act, and similar state or local laws pertaining to the management and remediation of hazardous materials and petroleum. The Company has also been named a potentially responsible party under the U.S. Federal Superfund law, or state equivalents, at a number of disposal sites. The Company became involved in these sites as a result of government action or in connection with business acquisitions. As of ~~June~~September 30, 2019, the Company was involved with a total of 2221 sites worldwide, including 87 Superfund and state equivalent sites and 14 owned or formerly owned sites. None of the liabilities for these sites are individually significant to the Company.

~~Table of Contents~~

~~- 29 -~~

~~OWENS CORNING AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~


~~14.~~	~~CONTINGENT LIABILITIES AND OTHER MATTERS (continued)~~

Remediation activities generally involve a potential range of activities and costs related to soil and groundwater contamination. This can include pre-cleanup activities such as fact-finding and investigation, risk assessment, feasibility studies, remedial action design and implementation (where actions may range from monitoring to removal of contaminants, to installation of longer-term remediation systems). A number of factors affect the cost of environmental remediation, including the number of parties involved in a particular site, the determination of the extent of contamination, the length of time the remediation may require, the complexity of environmental regulations, variability in clean-up standards, the need for legal action, and changes in remediation technology. Taking these factors into account, Owens Corning has predicted the costs of remediation reasonably estimated to be paid over a period of years. The Company accrues an amount on an undiscounted basis, consistent with the reasonable estimates of these costs when it is probable that a liability has been incurred. Actual cost may differ from these estimates for the reasons mentioned above. At ~~June~~September 30, 2019, the Company had an accrual totaling ~~$12~~$8 million for these costs, of which the current portion is $7$4 million. Changes in required remediation procedures or timing of those procedures, or discovery of contamination at additional sites, could result in material increases to the Company’s environmental obligations.

15. STOCK COMPENSATION

On April 18, 2019, the Company’s stockholders approved the Owens Corning 2019 Stock Plan (the “2019 Stock Plan”) which authorizes grants of stock options, stock appreciation rights, restricted stock awards, restricted stock units, bonus stock awards and performance stock awards. At ~~June~~September 30, 2019, the number of shares remaining available under the 2019 Stock Plan for all stock awards was approximately 4.0 million.

The Company did not grant any stock options during the ~~six~~nine months ended ~~June~~September 30, 2019. The Company calculates a weighted-average grant-date fair value using a Black-Scholes valuation model for options granted. Compensation expense for options is measured based on the fair market value of the option on the date of grant, and is recognized on a straight-line basis over a four-year vesting period. In general, the exercise price of each option awarded was equal to the market price of the Company’s common stock on the date of grant, and an option’s maximum term is 10 years.

The Company did not recognize any stock option expense during the ~~six~~nine months ended ~~June~~September 30, 2019. During the ~~six~~nine months ended ~~June~~September 30, 2018, the Company recognized expense of less than $1 million related to the Company's stock options. As of ~~June~~September 30, 2019, there was no0 unrecognized compensation cost related to stock options. The total aggregate intrinsic value of options outstanding as of ~~June~~September 30, 2019 was ~~$10~~$11 million.

Table of Contents

- 30 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)


~~15.~~	~~STOCK COMPENSATION (continued)~~

15. STOCK COMPENSATION (continued)

The following table summarizes the Company’s stock option activity:

Six Months Ended
June 30, 2019

Number of
Options
Weighted-
Average
Exercise Price
Beginning Balance 478,875
$ 37.18
Exercised (7,800 ) 13.89
Ending Balance 471,075
$ 37.57

The following table summarizes information about the Company’s options outstanding and exercisable:

Options Outstanding Options Exercisable

Options
Outstanding
Weighted-Average Number Exercisable at June 30, 2019 Weighted-Average
Range of Exercise Prices
Remaining
Contractual Life
Exercise
Price
Remaining
Contractual Life
Exercise
Price
$25.45- $42.16 471,075
3.57 $ 37.57
471,075
3.57 $ 37.57

Restricted Stock Awards and Restricted Stock Units

The Company has granted restricted stock awards and restricted stock units (collectively referred to as “restricted stock”) as a part of its long-term incentive plan. Compensation expense for restricted stock is measured based on the market price of the stock at date of grant and is recognized on a straight-line basis over the vesting period, which is typically three or four years. The Stock Plan allows alternate vesting schedules for death, disability, and retirement.

During the three and ~~six~~nine months ended ~~June~~September 30, 2019, the Company recognized expense of $7 million and ~~$14~~$21 million, respectively, related to the Company's restricted stock. During the three and ~~six~~nine months ended ~~June~~September 30, 2018, the Company recognized expense of $5$6 million and ~~$11~~$17 million, respectively, related to the Company's restricted stock. As of ~~June~~September 30, 2019, there was ~~$45~~$37 million of total unrecognized compensation cost related to restricted stock. That cost is expected to be recognized over a weighted-average period of ~~2.32~~2.20 years. The total fair value of shares vested during the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 was $20 million and $22 million, respectively.

The following table summarizes the Company’s restricted stock activity:

Six Months Ended June 30, 2019

Number of Shares/Units
Weighted-Average
Grant-Date
Fair Value
Beginning Balance 1,479,374
$ 52.30
Granted 498,682
52.50
Vested (371,794 ) 53.07
Forfeited (29,475 ) 64.84
Ending Balance 1,576,787
$ 51.90


	Nine Months Ended September 30, 2019
	Number of Shares/Units	Weighted-Average Grant-Date Fair Value
Beginning Balance	1,479,374	$	52.30
Granted	514,860	52.64
Vested	(373,225)	53.08
Forfeited	(76,544)	62.24
Ending Balance	1,544,465	$	51.65

Performance Stock Awards and Performance Stock Units

The Company has granted performance stock awards and performance stock units (collectively referred to as “PSUs”) as a part of its long-term incentive plan. All outstanding performance grants will fully settle in stock. The amount of stock ultimately distributed from all performance shares is contingent on meeting internal company-based metrics or an external-based stock performance metric.

Table of Contents

- 31 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)


~~15.~~	~~STOCK COMPENSATION (continued)~~

15. STOCK COMPENSATION (continued)

In the ~~six~~nine months ended ~~June~~September 30, 2019, the Company granted both internal company-based and external-based metric PSUs.

Internal based metrics

The internal company-based metrics are based on various Company metrics and typically vest over a three-year period. The amount of stock distributed will vary from 0% to 200% of PSUs awarded depending on each award's design and performance versus the internal Company-based metrics.

The initial fair value for all internal Company-based metric PSUs assumes that the performance goals will be achieved and is based on the grant date stock price. This assumption is monitored quarterly and if it becomes probable that such goals will not be achieved or will be exceeded, compensation expense recognized will be adjusted and previous surplus compensation expense recognized will be reversed or additional expense will be recognized. The expected term represents the period from the grant date to the end of the vesting period. Pro-rata vesting may be utilized in the case of death, disability or approved retirement and awards, if earned, will be paid at the end of the vesting period.

External-based metrics

The external-based metrics vest after a three-year period. Outstanding grants are based on the Company's total stockholder return relative to the performance of the companies constituting the former S&P Building & Construction Industry Index or Dow Jones Construction and Materials Index. The amount of stock distributed will vary from 0% to 200% of PSUs awarded depending on the relative stockholder return performance.

The Company estimated the fair value of the external-based metric performance stock grants using a Monte Carlo simulation. The external-based metric performance stock granted in 2019 uses various assumptions that include expected volatility of 26.7%, and a risk free interest rate of 2.5%, both of which were based on an expected term of 2.90 years. Expected volatility was based on a benchmark study of our peers. The risk-free interest rate was based on zero coupon U.S. Treasury bills at the time of grant. The expected term represents the period from the grant date to the end of the three-year performance period. Compensation expense for external-based metric PSUs is measured based on the grant date fair value and is recognized on a straight-line basis over the vesting period. Pro-rata vesting may be utilized in the case of death, disability or approved retirement, and awards, if earned, will be paid at the end of the three-year period.

During the three and ~~six~~nine months ended ~~June~~September 30, 2019, the Company recognized expense of $2 million and $5$6 million, respectively, related to the Company's PSUs. During the three and ~~six~~nine months ended ~~June~~September 30, 2018, the Company recognized expense of $6$5 million and $9$14 million, respectively, related to the Company's PSUs. As of ~~June~~September 30, 2019, there was ~~$18~~$13 million of total unrecognized compensation cost related to PSUs. That cost is expected to be recognized over a weighted-average period of ~~1.83~~1.70 years.

The following table summarizes the Company’s PSU activity:

Six Months Ended
June 30, 2019

Number
of PSUs
Weighted-Average
Grant-Date
Fair Value
Beginning Balance 360,977
$ 75.23
Granted 205,350
58.40
Forfeited (4,600 ) 82.07
Ending Balance 561,727
$ 69.02

Table of Contents

- 32 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

15. STOCK COMPENSATION (continued)

Employee Stock Purchase Plan

On April 18, 2013, the Company’s stockholders approved the Owens Corning Employee Stock Purchase Plan (ESPP). The ESPP is a tax-qualified plan under Section 423 of the Internal Revenue Code. The purchase price of shares purchased under the ESPP is equal to 85% of the lower of the fair market value of shares of Owens Corning common stock at the beginning or ending of the

~~Table of Contents~~

~~- 32 -~~

~~OWENS CORNING AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(unaudited)~~


~~15.~~	~~STOCK COMPENSATION (continued)~~

During the three and ~~six~~nine months ended ~~June~~September 30, 2019, the Company recognized expense of $1 million and $2$4 million, respectively, related to the Company's ESPP. During the three and ~~six~~nine months ended ~~June~~September 30, 2018, the Company recognized expense of $1 million and $2$3 million, respectively, related to the Company's ESPP. As of ~~June~~September 30, 2019, there was $2$1 million of total unrecognized compensation cost related to the ESPP.

16. EARNINGS PER SHARE

The following table is a reconciliation of weighted-average shares for calculating basic and diluted earnings per-share (in millions, except per share amounts):

For the three and ~~six~~nine months ended ~~June~~September 30, 2019, the number of shares used in the calculation of diluted earnings per share did not include ~~0.3 million non-vested restricted shares and~~ 0.1 million non-vested performance shares, due to their anti-dilutive effect. For the three and ~~six~~nine months ended ~~June~~September 30, 2018, the number of shares used in the calculation of diluted earnings per share did not include 0.3 million non-vested restricted shares and ~~0.2~~0.3 million non-vested performance shares, due to their anti-dilutive effect.

On October 24, 2016, the Board of Directors approved a share buy-back program under which the Company is authorized to repurchase up to 10 million shares of the Company’s outstanding common stock (the “Repurchase Authorization”). 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 is at the Company’s discretion. The Company repurchased 1.0 million shares of its common stock for $48 million during the ~~six~~nine months ended ~~June~~September 30, 2019, under the Repurchase Authorization. As of ~~June~~September 30, 2019, 3.6 million shares remain available for repurchase under the Repurchase Authorization.

Table of Contents

- 33 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

17. INCOME TAXES

The following table provides the Income tax expense (in millions) and effective tax rate for the periods indicated:


	Three Months Ended September 30,									Nine Months Ended September 30,
	2019			2018			2019			2018
Income tax expense	$	61		$	67		$	159		$	127
Effective tax rate	29		%	29		%	32		%	25		%

Three Months Ended June 30, Six Months Ended June 30,

2019 2018 2019 2018
Income tax expense $ 59
$ 49
$ 98
$ 60
Effective tax rate 30 % 28 % 35 % 22 %

The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the three months ended ~~June~~September 30, 2019 is primarily due to U.S. state and local income tax expense, the impact of U.S. federal taxes on foreign earnings, an increase in tax valuation allowances recorded against certain foreign deferred tax assets and other discrete adjustments. The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the ~~six~~nine months ended ~~June~~September 30, 2019 is primarily due to U.S. state and local income tax expense, the impact of U.S. federal taxes on foreign earnings, legislative changes, an increase in tax valuation allowances recorded against certain foreign deferred tax assets and other discrete adjustments.

On March 6, 2019, the U.S. Treasury and the IRS proposed regulations that provide guidance on determining the amount of a domestic corporation’s deduction for the global intangible low-taxed income (GILTI) and foreign-derived intangible income (FDII) recently added by the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The proposed regulations provide special rules in determining the deduction amount which adjusted the Company’s 2018 tax estimate resulting in an increase to tax expense of $12 million for the ~~six~~nine months ended ~~June~~September 30, 2019.

The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the three months ended ~~June~~September 30, 2018 is primarily due to U.S. state and local income tax expense, the impact of higher foreign tax rates, ~~and~~ an increase in U.S. federal tax expense on foreign ~~earnings.~~earnings and other discrete adjustments offset by a reversal of a valuation allowance recorded in prior years against certain European net deferred tax assets. The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the ~~six~~nine months ended ~~June~~September 30, 2018 is primarily due to U.S. state and local income tax expense, the impact of higher foreign tax rates, an increase in U.S. federal tax expense on foreign earnings, offset by excess tax benefits related to stock compensation, a reversal of a valuation allowance recorded in prior years against certain European net deferred tax assets and other discrete adjustments.

The Company continues to assert indefinite reinvestment in accordance with ASC 740 based on the laws as of enactment of the Tax Act.

Table of Contents

- 34 -

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

18. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE DEFICIT

The following table summarizes the changes in accumulated other comprehensive income (deficit) (in millions):


	Three Months Ended September 30,						Nine Months Ended September 30,

	2019		2018		2019		2018
Currency Translation Adjustment
Beginning balance	$	(285)	$	(272)	$	(306)	$	(183)
Net investment hedge amounts classified into AOCI, net of tax	22		1		24		2




Loss on foreign currency translation	(79)		(13)		(60)		(103)
Other comprehensive loss, net of tax	(57)		(12)		(36)		(101)
Ending balance	$	(342)	$	(284)	$	(342)	$	(284)
Pension and Other Postretirement Adjustment
Beginning balance	$	(349)	$	(329)	$	(350)	$	(331)
Amounts reclassified from AOCI to net earnings, net of tax (a)	1		1		2		3
Amounts classified into AOCI, net of tax	(3)		—		(3)		—









Other comprehensive (loss)/income, net of tax	(2)		1		(1)		3
Ending balance	$	(351)	$	(328)	$	(351)	$	(328)
Hedging Adjustment
Beginning balance	$	(1)	$	1	$	—	$	—



Amounts classified into AOCI, net of tax	1		1		—		2








Other comprehensive income, net of tax	1		1		—		2
Ending balance	$	—	$	2	$	—	$	2
Total AOCI ending balance	$	(693)	$	(610)	$	(693)	$	(610)

Three Months Ended
June 30, Six Months Ended
June 30,

2019 2018 2019 2018
Currency Translation Adjustment
Beginning balance $ (295 ) $ (198 ) $ (306 ) $ (183 )
Net investment hedge amounts classified into AOCI, net of tax (8 ) 20
2
1
Gain/(loss) on foreign currency translation 18
(94 ) 19
(90 )
Other comprehensive income/(loss), net of tax 10
(74 ) 21
(89 )
Ending balance $ (285 ) $ (272 ) $ (285 ) $ (272 )
Pension and Other Postretirement Adjustment
Beginning balance $ (351 ) $ (333 ) $ (350 ) $ (331 )
Amounts reclassified from AOCI to net earnings, net of tax (a) 1
1
1
2
Amounts classified into AOCI, net of tax 1
3
—
—
Other comprehensive gain, net of tax 2
4
1
2
Ending balance $ (349 ) $ (329 ) $ (349 ) $ (329 )
Hedging Adjustment
Beginning balance $ (1 ) $ 1
$ —
$ —
Amounts classified into AOCI, net of tax —
—
(1 ) 1
Other comprehensive (loss)/income, net of tax —
—
(1 ) 1
Ending balance $ (1 ) $ 1
$ (1 ) $ 1
Total AOCI ending balance $ (635 ) $ (600 ) $ (635 ) $ (600 )

(a)These AOCI components are included in the computation of total Pension and OPEB expense and are recorded in Non-operating income. See Note 13 for additional information.

Table of Contents

- 35 -

ITEM 2. 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” and “our” in this report refer to Owens Corning and its subsidiaries.

GENERAL

Owens Corning is a leading global producer of residential and commercial building materials and of glass fiber reinforcements and other materials for composites. The Company has three reportable segments: Composites, Insulation and Roofing. Through these lines of business, we manufacture and sell products worldwide. We maintain leading market positions in many of our major product categories.

EXECUTIVE OVERVIEW

Net earnings attributable to Owens Corning were ~~$138~~$150 million in the ~~second~~third quarter of 2019, compared to ~~$121~~$161 million in the same period of 2018. The Company reported ~~$230~~$277 million in earnings before interest and taxes (EBIT) for the ~~second~~third quarter of 2019 compared to ~~$206~~$259 million in the same period of 2018. The Company generated ~~$231~~$277 million in adjusted earnings before interest and taxes (“Adjusted EBIT”) for the ~~second~~third quarter of 2019 compared to ~~$214~~$267 million in the same period of 2018. See the Adjusted Earnings Before Interest and Taxes paragraph of the MD&A for further information regarding EBIT and Adjusted EBIT, including the reconciliation to net earnings attributable to Owens Corning. ~~Second~~Third quarter of 2019 EBIT performance compared to the same period of 2018 increased ~~$24~~$16 million and $3 million in our Roofing ~~segment~~and Composites segments, respectively, and decreased ~~$7 million and $4~~$10 million in our Insulation ~~and Composites segments, respectively.~~segment. Within our Corporate, Other and Eliminations category, General corporate expense and other decreased by $4$1 million.

In our Insulation segment, EBIT in the ~~second~~third quarter of 2019 was ~~$42~~$84 million compared to ~~$49~~$94 million in the same period of ~~2018,~~2018. The $10 million decrease was primarily due to production curtailment actions taken in our North American residential fiberglass business. In our Composites segment, EBIT was $67 million in the ~~second~~third quarter of 2019 compared to ~~$71~~$64 million in the same period of 2018, primarily due to higher ~~input cost inflation.~~sales volumes. In our Roofing segment, EBIT in the ~~second~~third quarter of 2019 was ~~$151~~$143 million compared to $127 million in the same period in 2018, primarily due to higher sales volumes.

In the ~~six~~nine months ended ~~June~~September 30, 2019, the Company's operating activities provided ~~$287~~$596 million of cash flow, compared to ~~$306~~$506 million in the same period in 2018. The change was primarily driven by ~~year-over-year increase~~a reduction in ~~receivables~~inventories from the prior year-end.

In August 2019, the Company issued $450 million of 2029 senior notes with an annual interest rate of 3.95%. The proceeds from the notes were used to repay portions of its outstanding 2022 senior notes and 2036 senior notes. The Company recognized approximately $32 million of loss on extinguishment of debt in ~~2019.~~the third quarter of 2019 associated with these actions.

The Company did not repurchase any shares of its common stock during the ~~second~~third quarter of 2019 under a previously announced repurchase authorization (the "Share Repurchase Authorization"). As of ~~June~~September 30, 2019, 3.6 million shares remained available for repurchase under the Share Repurchase Authorization.

Table of Contents

- 36 -

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

RESULTS OF OPERATIONS

Consolidated Results (in millions)


	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,									Nine Months Ended September 30,
	2019			2018			2019			2018				2019			2018			2019			2018
Net sales	$	1,918		$	1,824		$	3,585		$	3,515		Net sales	$	1,883		$	1,818		$	5,468		$	5,333
Gross margin	$	440		$	418		$	765		$	773		Gross margin	$	461		$	448		$	1,226		$	1,221
% of net sales	23		%	23		%	21		%	22		%	% of net sales	24		%	25		%	22		%	23		%
Marketing and administrative expenses	$	181		$	187		$	363		$	372		Marketing and administrative expenses	$	164		$	159		$	527		$	531

Earnings before interest and taxes	$	230		$	206		$	348		$	337		Earnings before interest and taxes	$	277		$	259		$	625		$	596
Interest expense, net	$	32		$	33		$	68		$	61		Interest expense, net	$	33		$	31		$	101		$	92
Loss on extinguishment of debt													Loss on extinguishment of debt	$	32		$	—		$	32		$	—
Income tax expense	$	59		$	49		$	98		$	60		Income tax expense	$	61		$	67		$	159		$	127
Net earnings attributable to Owens Corning	$	138		$	121		$	182		$	213		Net earnings attributable to Owens Corning	$	150		$	161		$	332		$	374

The Consolidated Results discussion below provides a summary of our results and the trends affecting our business, and should be read in conjunction with the more detailed Segment Results discussion that follows.

NET SALES

In the ~~second~~third quarter and year-to-date 2019, net sales increased ~~$94~~$65 million and ~~$70~~$135 million, respectively, compared to the same periods in 2018. For the ~~second~~third quarter, the increase in net sales was driven by the impact of higher sales volumes in our Roofing and Composites segments, partially offset by the unfavorable impact of translating sales denominated in foreign currencies into United States dollars. For the year-to-date comparison, the increase in net sales was driven by the impact of higher sales volumes in our Roofing and Composites segments and higher selling prices in our Roofing ~~segment,~~and Insulation segments, partially offset by the unfavorable impact of ~~lower~~translating sales ~~volumes~~denominated in ~~our Insulation segment.~~foreign currencies into United States dollars.

GROSS MARGIN

In the ~~second~~third quarter and year-to-date 2019, gross margin increased ~~$22~~$13 million and $5 million, respectively, compared to the same ~~period in 2018. Year-to-date 2019 gross margin decreased $8 million compared to the same period~~periods in 2018. For the ~~second~~third quarter, the increase was driven by the impact of higher sales volumes in our Roofing segment. For the year-to-date comparison, the ~~decrease~~increase was driven by higher ~~input cost inflation~~selling prices in ~~all three~~our Roofing and Insulation segments and ~~production curtailment actions taken~~higher sales volumes in our ~~Insulation~~Roofing segment.

MARKETING AND ADMINISTRATIVE EXPENSES

In the ~~second~~third quarter ~~and year-to-date~~ 2019, marketing and administrative expenses increased $5 million compared to the same period in 2018. Year-to-date marketing and administrative expenses decreased $6$4 million ~~and $9 million, respectively,~~ compared to the same period in 2018. For the ~~second~~third quarter, the increase in marketing and administrative expenses was primarily driven by the comparison to lower performance-based compensation in the same period in the prior year. For the year-to-date comparison, the decrease in marketing and administrative expenses was primarily driven by lower general corporate expenses.

INTEREST EXPENSE, NET

In the ~~second~~third quarter 2019, interest expense, net was flat compared to the same period in 2018. For the year-to-date 2019, interest expense, net increased $7$9 million, primarily due to a decrease in interest income earned on ~~lower~~ cash balances and ~~higher long-term debt balances during~~lower interest capitalized.

LOSS ON EXTINGUISHMENT OF DEBT

During the ~~first~~third quarter of ~~2019.~~2019, the Company recognized a $32 million loss on extinguishment of debt in connection with the repurchase of a portion of its outstanding 2022 senior notes and 2036 senior notes in a tender offer.

Table of Contents

- 37 -

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

INCOME TAX EXPENSE

Income tax expense for the three and ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$59~~$61 million and ~~$98~~$159 million, respectively. For the ~~second~~third quarter 2019, the Company's effective tax rate was ~~30%~~29% and for the ~~six~~nine months ended ~~June~~September 30, 2019, the Company's effective tax rate was ~~35%~~32%. The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the three months ended ~~June~~September 30, 2019 is primarily due to U.S. state and local income tax expense, the impact of U.S. federal taxes on foreign earnings, an increase in valuation allowances recorded against certain foreign tax assets and other discrete adjustments. The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the ~~six~~nine months ended ~~June~~September 30, 2019 is primarily due to U.S. state and local income tax expense, the impact of U.S. federal taxes on foreign earnings, legislative changes, an increase in tax valuation allowances recorded against certain foreign deferred tax assets and other discrete adjustments.

~~Table of Contents~~

~~- 37 -~~

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

The realization of deferred tax assets depends on achieving a certain minimum level of future taxable income. Management currently believes that an immaterial amount of valuation allowances of certain foreign jurisdictions could be reduced within the next 12 months.

Income tax expense for the three and ~~six~~nine months ended ~~June~~September 30, 2018 was ~~$49~~$67 million and ~~$60~~$127 million, respectively. For the ~~second~~third quarter 2018, the Company's effective tax rate was ~~28%~~29% and for the ~~six~~nine months ended ~~June~~September 30, 2018, the Company's effective tax rate was ~~22%~~25%.

The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the three months ended ~~June~~September 30, 2018, was primarily due to U.S. state and local income tax expense, the impact of higher foreign tax rates, ~~and~~ an increase in U.S. federal tax expense on foreign ~~earnings.~~earnings and other discrete adjustments, offset by a reversal of a valuation allowance recorded in prior years against certain European net deferred tax assets. The difference between the effective tax rate and the U.S. federal statutory tax rate of 21% for the ~~six~~nine months ended ~~June~~September 30, 2018 is primarily due to U.S. state and local income tax expense, the impact of higher foreign tax rates, an increase in U.S. federal tax expense on foreign earnings, offset by excess tax benefits related to stock compensation, a reversal of a valuation allowance recorded in prior years against certain European net deferred tax assets and other discrete adjustments.

Restructuring and Acquisition-Related Costs

The Company has incurred restructuring, transaction and integration costs related to acquisitions, along with restructuring costs in connection with its global cost reduction and productivity initiatives. These costs are recorded within Corporate, Other and Eliminations. Please refer to Notes 8 and 11 of the Consolidated Financial Statements for further information on the nature of these costs.

Table of Contents

- 38 -

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

The following table presents the impact and respective location of these income (expense) items on the Consolidated Statements of Earnings (in millions):


		Three Months Ended September 30,						Nine Months Ended September 30,
	Location	2019		2018		2019		2018
Restructuring costs	Cost of sales	$	—	$	(3)	$	(2)	$	(15)
Restructuring (costs) / gains	Other expenses, net	—		(4)		3		(4)
Acquisition-related costs	Marketing and administrative expenses	—		(1)		—		(7)
Acquisition-related costs	Other expenses, net	—		—		—		(9)
Recognition of acquisition inventory fair value step-up	Cost of sales	—		—		—		(2)
Total restructuring, acquisition and integration-related (costs) / gains		$	—	$	(8)	$	1	$	(37)

Three Months Ended June 30, Six Months Ended June 30,
Location 2019 2018 2019 2018
Restructuring costs Cost of sales $ (1 ) $ (5 ) $ (2 ) $ (12 )
Restructuring (costs) / gains Other expenses, net —
(2 ) 3
—
Acquisition-related costs Marketing and administrative expenses —
(1 ) —
(6 )
Acquisition-related costs Other expenses, net —
—
—
(9 )
Recognition of acquisition inventory fair value step-up Cost of sales —
—
—
(2 )
Total restructuring, acquisition and integration-related (costs) / gains
$ (1 ) $ (8 ) $ 1
$ (29 )

Adjusted Earnings Before Interest and Taxes

Adjusted EBIT is a non-GAAP measure that excludes certain items that management does not allocate to our segment results because it believes they are not representative of the Company's ongoing operations. Adjusted EBIT is used internally by the Company for various purposes, including reporting results of operations to the Board of Directors of the Company, analysis of performance and related employee compensation measures. Although management believes that these adjustments result in a measure that provides a useful representation of our operational performance, the adjusted measure should not be considered in isolation or as a substitute for Net earnings attributable to Owens Corning as prepared in accordance with accounting principles generally accepted in the United States.

~~Table of Contents~~

~~- 38 -~~

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019		2018
Restructuring (costs) / gains	$	—	$	(7)	$	1	$	(19)
Acquisition-related costs	—		(1)		—		(16)
Recognition of acquisition inventory fair value step-up	—		—		—		(2)


Total adjusting items	$	—	$	(8)	$	1	$	(37)

Three Months Ended
June 30, Six Months Ended
June 30,
2019 2018 2019 2018
Restructuring (costs) / gains $ (1 ) $ (7 ) $ 1
$ (12 )
Acquisition-related costs —
(1 ) —
(15 )
Recognition of acquisition inventory fair value step-up —
—
—
(2 )
Total adjusting items $ (1 ) $ (8 ) $ 1
$ (29 )

Table of Contents

- 39 -

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019		2018
NET EARNINGS ATTRIBUTABLE TO OWENS CORNING	$	150	$	161	$	332	$	374
Net earnings attributable to noncontrolling interests	1		1		1		2
NET EARNINGS	151		162		333		376
Equity in net earnings / (loss) of affiliates	—		1		—		(1)
Income tax expense	61		67		159		127
EARNINGS BEFORE TAXES	212		228		492		504
Interest expense, net	33		31		101		92
Loss on extinguishment of debt	32		—		32		—
EARNINGS BEFORE INTEREST AND TAXES	277		259		625		596
Adjusting items from above	—		(8)		1		(37)
ADJUSTED EBIT	$	277	$	267	$	624	$	633

Three Months Ended
June 30, Six Months Ended June 30,

2019 2018 2019 2018
NET EARNINGS ATTRIBUTABLE TO OWENS CORNING $ 138
$ 121
$ 182
$ 213
Net earnings attributable to noncontrolling interests —
1
—
1
NET EARNINGS 138
122
182
214
Equity in net loss of affiliates (1 ) (2 ) —
(2 )
Income tax expense 59
49
98
60
EARNINGS BEFORE TAXES 198
173
280
276
Interest expense, net 32
33
68
61
EARNINGS BEFORE INTEREST AND TAXES 230
206
348
337
Adjusting items from above (1 ) (8 ) 1
(29 )
ADJUSTED EBIT $ 231
$ 214
$ 347
$ 366

Segment Results

EBIT by segment consists of net sales less related costs and expenses and is presented on a basis that is used internally for evaluating segment performance. Certain items, such as general corporate expenses or income and certain other expense or income items, are excluded from the internal evaluation of segment performance. Accordingly, these items are not reflected in EBIT for our reportable segments and are included in the Corporate, Other and Eliminations category, which is presented following the discussion of our reportable segments.

Composites

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


	Three Months Ended September 30,									Nine Months Ended September 30,
	2019			2018			2019			2018
Net sales	$	531		$	508		$	1,579		$	1,560
% change from prior year	5		%	-1		%	1		%	—		%
EBIT	$	67		$	64		$	191		$	195
EBIT as a % of net sales	13		%	13		%	12		%	13		%
Depreciation and amortization expense	$	37		$	36		$	114		$	109

Three Months Ended
June 30, Six Months Ended
June 30,

2019 2018 2019 2018
Net sales $ 535
$ 541
$ 1,048
$ 1,052
% change from prior year -1 % 1 % — % — %
EBIT $ 67
$ 71
$ 124
$ 131
EBIT as a % of net sales 13 % 13 % 12 % 12 %
Depreciation and amortization expense $ 38
$ 36
$ 77
$ 73

~~Table of Contents~~

~~- 39 -~~

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

NET SALES

In our Composites segment, net sales in the ~~second~~third quarter 2019 ~~decreased $6~~increased $23 million compared to the same period in 2018. The positive impact of higher sales volumes of about 4%7% was ~~more than~~partially offset by the negative impact of translating sales denominated in foreign currencies into United States dollars and lower selling prices of ~~$15 million and unfavorable customer mix.~~$4 million.

For the year-to-date 2019, net sales in our Composites segment ~~decreased $4~~increased $19 million compared to the same period in 2018. The positive impact of higher sales volumes of ~~about 4%~~5% was ~~more than~~partially offset by the $45 million negative impact of translating sales denominated in foreign currencies into United States dollars, ~~of $36 million and~~ unfavorable customer ~~mix.~~mix and slightly lower selling prices.

Table of Contents

- 40 -

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

EBIT

In our Composites segment, EBIT in the ~~second~~third quarter of 2019 ~~decreased $4~~increased $3 million compared to the same period in 2018. The positive impact of ~~favorable manufacturing performance~~higher sales volumes and lower rebuild and start-up costs of $9 million ~~and~~was partially offset by lower ~~transportation costs was offset by~~selling prices, higher input cost inflation, and the unfavorable impact of translating sales and costs denominated in foreign currencies into United States dollars. ~~Unfavorable product mix accounted for the year-over-year decline.~~

For the year-to-date 2019, EBIT in our Composites segment decreased $7$4 million compared to the same period in 2018. The ~~positive~~unfavorable impact of ~~$13 million of improved manufacturing performance, lower transportation costs and higher volumes was offset by~~ higher input cost inflation of ~~$16 million. The~~$17 million, lower selling prices, the $5 million unfavorable impact of translating sales and costs denominated in foreign currencies into United States dollars and unfavorable product and customer mix ~~accounted for~~was partially offset by the ~~year-over-year decline.~~positive impact of improved manufacturing performance, higher sales volumes and lower rebuild and start-up costs.

OUTLOOK

Global glass reinforcements market demand has historically grown with global industrial production and we believe this relationship will continue. In 2019, we expect ~~continued~~our volume growth to exceed growth in global industrial ~~production growth, with a moderated growth outlook in North America and Europe.~~production.

Insulation

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


	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,									Nine Months Ended September 30,
	2019			2018			2019			2018				2019			2018			2019			2018
Net sales	$	661		$	682		$	1,252		$	1,278		Net sales	$	693		$	710		$	1,945		$	1,988
% change from prior year	-3		%	55		%	-2		%	53		%	% change from prior year	-2		%	25		%	-2		%	41		%
EBIT	$	42		$	49		$	57		$	81		EBIT	$	84		$	94		$	141		$	175
EBIT as a % of net sales	6		%	7		%	5		%	6		%	EBIT as a % of net sales	12		%	13		%	7		%	9		%
Depreciation and amortization expense	$	49		$	46		$	98		$	91		Depreciation and amortization expense	$	48		$	47		$	146		$	138

In our Insulation segment, net sales in the ~~second~~third quarter of 2019 decreased ~~$21~~$17 million compared to the same period in 2018. Higher selling prices of ~~$21~~$6 million were more than offset by lower sales volumes of about 4%2% and the ~~$18~~$10 million unfavorable impact of translating sales denominated in foreign currencies into United States dollars.

For the year-to-date 2019, net sales in our Insulation segment decreased ~~$26~~$43 million compared to the same period in 2018. Higher selling prices of ~~$43~~$49 million and the $38 million impact of our acquisition of Paroc (net sales from January 1, 2019 through February 4, 2019 that were related to the one-year post-acquisition period) were largely offset by lower sales volumes of about 6%4%. The unfavorable impact of translating sales denominated in foreign currencies into United States dollars reduced net sales by ~~$30~~$40 million compared to the same period in 2018.

~~Table of Contents~~

~~- 40 -~~

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

In our Insulation segment, EBIT in the ~~second~~third quarter of 2019 decreased ~~by $7~~$10 million compared to the same period in 2018. The impact of higher selling prices ~~was largely~~ offset ~~by the impact of lower sales volumes and~~ higher input cost inflation of $9$6 million. Production curtailment actions primarily taken in our North American residential fiberglass business in the ~~second~~third quarter of 2019 resulted in ~~$20~~$16 million of lower fixed cost absorption on lower production volumes compared to the same period in 2018. ~~Lower rebuild and start-up costs of $11~~The $6 million ~~were partially offset by the unfavorable~~ impact of ~~translating~~favorable manufacturing performance more than offset the impact of lower sales ~~denominated in foreign currencies into United States dollars.~~volumes.

For the year-to-date 2019, EBIT in our Insulation segment decreased ~~$24~~$34 million compared to the same period in ~~2018.~~2018 primarily due to lower sales volumes. The impact of higher selling prices was more than offset by ~~the impact of lower sales volumes and higher input cost inflation of $16 million. Production~~production curtailment actions primarily taken in our North American residential fiberglass business, ~~in the first half of 2019~~which resulted in ~~$36~~$52 million of lower fixed cost absorption on lower production ~~volumes compared to the same period in 2018.~~volumes. Favorable manufacturing performance and the favorable impact of lower rebuild and

Table of Contents

- 41 -

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

start-up costs were partially offset by higher input cost inflation of $22 million and higher selling, general and administrative ~~costs and the unfavorable impact of translating sales denominated in foreign currencies into United States dollars.~~costs.

The outlook for Insulation demand is driven by new North American residential construction, remodeling and repair activity; and commercial and industrial construction activity in the United States, Canada, Europe and Asia-Pacific. Demand for 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.~~starts, and we expect slightly negative growth in U.S. housing starts in 2019. During the ~~second~~third quarter of 2019, the average Seasonally Adjusted Annual Rate (SAAR) of U.S. housing starts was approximately ~~1.263~~1.282 million, up from an annual average of approximately ~~1.260~~1.233 million starts in the ~~second~~third quarter of 2018.

~~While the outlook for U.S. housing starts in 2019 remains uncertain, we~~We believe the geographic, product and channel mix of our portfolio may continue to moderate the impact of market demand-driven variability associated with the U.S. housing market.

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

In our Roofing segment, net sales in the ~~second~~third quarter of 2019 increased ~~by $119~~$68 million compared to the same period in 2018. The increase was primarily driven by higher sales volumes of about ~~13%~~12% on higher shingle volumes ~~$18 million of~~and higher third-party asphalt sales. Slightly lower selling prices, ~~and favorable product mix.~~primarily as a result of the comparison to lower rebates associated with volume targets in the same period in the prior year, offset higher sales volumes.

For the year-to-date 2019, net sales in our Roofing segment increased ~~$91~~$159 million compared to the same period in 2018. The increase was driven by ~~$51~~higher sales volumes of about 5% on higher shingle volumes, $37 million of higher selling prices, ~~slightly higher sales volumes and~~ favorable product ~~mix.~~mix and higher third-party asphalt sales.

In our Roofing segment, EBIT in the ~~second~~third quarter of 2019 increased ~~by $24~~$16 million compared to the same period in 2018. The increase was primarily driven by higher sales volumes. ~~Higher~~Slightly lower selling prices were partially offset by lower transportation costs.

For the year-to-date 2019, EBIT in our Roofing segment increased $17 million compared to the same period in 2018. The favorable impact of higher selling prices of ~~$18~~$37 million ~~were~~and higher sales volumes largely offset by$50 million higher ~~asphalt inflation.~~input cost inflation and the unfavorable impact of lower first quarter production volumes compared to the same period a year ago. The ~~remainder~~favorable impact of ~~the favorable year-over-year variance was due to favorable product mix and~~ lower transportation costs ~~partially offset by other input cost inflation.~~and product mix accounted for the year-over-year increase.

Table of Contents

- 4142 -

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

In our Roofing segment, we expect the factors that have driven strong margins in recent years, such as growth from remodeling demand, along with higher sales of roofing components, to continue to deliver profitability. Uncertainties that may impact our Roofing margins include demand from storm and other weather events, demand from new construction, competitive pricing pressure and the cost and availability of raw materials, particularly asphalt.

The table below provides a summary of EBIT and depreciation and amortization expense for the Corporate, Other and Eliminations category (in millions):

In Corporate, Other and Eliminations, EBIT losses for the ~~second~~third quarter and year-to-date 2019 were lower by ~~$11~~$9 million and ~~$41~~$50 million, respectively, compared to the same periods in 2018. EBIT improvement in both the ~~second~~third quarter and year-to-date 2019 was primarily driven by lower restructuring and acquisition-related costs and lower general corporate expense and other. See details of these costs in the table above and further explained in both the Restructuring and Acquisition-Related Costs paragraph of MD&A and Note 11 of the Consolidated Financial Statements.

General corporate expense and other for the ~~second~~third quarter and year-to-date 2019 was lower by $4$1 million and ~~$11~~$12 million, respectively, compared to the same periods in 2018, primarily driven by lower general corporate expenses.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization in the ~~second~~third quarter ofand year-to-date 2019 was relatively flat compared to the same periods in 2018. ~~For the year-to-date 2019, Depreciation and amortization was lower by $3 million, primarily due to higher accelerated depreciation recorded in 2018 related to our restructuring actions.~~

LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS

The Company's primary external sources of liquidity are 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 with a maturity date in May 2024.

~~Table of Contents~~

~~- 42 -~~

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

Table of Contents

- 43 -

ITEM 2. 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):


	Balance at September 30, 2019
	Senior Revolving Credit Facility		Receivables Securitization Facility
Facility size or borrowing limit	$	800	$	280
Collateral capacity limitation on availability	—		—
Outstanding borrowings	—		94
Outstanding letters of credit	9		3
Availability on facility	$	791	$	183

Balance at June 30, 2019
Senior Revolving Credit Facility Receivables Securitization Facility
Facility size or borrowing limit $ 800
$ 280
Collateral capacity limitation on availability —
—
Outstanding borrowings —
213
Outstanding letters of credit 9
3
Availability on facility $ 791
$ 64
The Company issued $450 million of 2029 senior notes on August 12, 2019 subject to $5 million of discounts and issuance costs. Interest on the 2029 senior notes is payable semiannually in arrears on February 15 and August 15 each year, beginning on February 15, 2020. The proceeds from the 2029 senior notes were used to repay portions of the 2022 senior notes and 2036 senior notes. The Company recognized approximately $32 million of loss on extinguishment of debt in the third quarter of 2019 associated with these actions.

The Receivables Securitization Facility and Senior Revolving Credit Facility mature in 2022 and 2024, respectively. The Company also has a term loan (the "Term Loan"), which requires minimum quarterly principal repayments, all of which have been paid as of ~~June~~September 30, 2019, and full repayment by February 2021. As of ~~June~~September 30, 2019, the Term Loan had ~~$400~~$300 million outstanding. The company has no significant debt maturities of senior notes before 2022. As of ~~June~~September 30, 2019, the Company had ~~$3.4~~$3.2 billion of total debt and cash and cash equivalents of ~~$92~~$35 million.

Cash and cash equivalents held by foreign subsidiaries may be subject to foreign withholding taxes upon repatriation to the U.S. As of ~~June~~September 30, 2019, and December 31, 2018, the Company had ~~$92~~$35 million and $67 million, respectively, in cash and cash equivalents in certain of our foreign subsidiaries. The Company continues to assert indefinite reinvestment in accordance with ASC 740 based on the laws as of enactment of the tax legislation commonly known as the U.S. Tax Cuts and Jobs Act of 2017.

As a holding company, we have no operations of our own and most of our assets are held by our direct and indirect subsidiaries. Dividends and other payments or distributions from our subsidiaries will be used to meet our debt service and other obligations and to enable us to pay dividends to our stockholders. Please refer to page 13 of the Risk Factors disclosed in Item 1A of the Company's Form 10-K for the year ended December 31, 2018 (the "2018 Form 10-K") for details on the factors that could inhibit our subsidiaries' ability to pay dividends or make other distributions to the parent company.

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 Receivables Securitization Facility, will provide ample liquidity to enable us to meet our cash requirements. Our anticipated uses of cash include capital expenditures, working capital needs, pension contributions, meeting financial obligations, payments of quarterly dividends as authorized by our Board of Directors, acquisitions and reducing outstanding amounts under the Senior Revolving Credit Facility, Receivables Securitization Facility and Term Loan.

We have outstanding share repurchase authorizations and will evaluate and consider repurchasing shares of our common stock, as well as strategic acquisitions, divestitures, joint ventures and other transactions to create stockholder value and enhance financial performance. Such transactions may require cash expenditures beyond current sources of liquidity to generate proceeds.

The agreements governing our Senior Revolving Credit Facility, Receivables Securitization Facility and Term Loan contain various covenants that we believe are usual and customary. These covenants include a maximum allowed leverage ratio and a minimum required interest expense coverage ratio. We were in compliance with these covenants as of ~~June~~September 30, 2019.

Table of Contents

- 4344 -

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

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

Operating activities: For the ~~six~~nine months ended ~~June~~September 30, 2019, the Company's operating activities provided ~~$287~~$596 million of cash compared to ~~$306~~$506 million ~~used~~provided in the same period in 2018. The change in cash ~~used~~provided by operating activities was primarily due to a larger ~~increase~~decrease in operating assets and liabilities (mainly a reduction in inventories from ~~higher receivables)~~the prior year-end) in 2019 compared to the same period of 2018.

Investing activities: Net cash flow used for investing activities decreased ~~$1,228~~$1,266 million for the ~~six~~nine months ended ~~June~~September 30, 2019 compared to the same period of 2018, primarily driven by lower spending on acquisitions and lower cash paid for property, plant, and equipment compared to the same period in the prior year.

Financing activities: Net cash used for financing activities was ~~$82~~$370 million for the ~~six~~nine months ended ~~June~~September 30, 2019, compared to net cash provided by financing activities of ~~$1,051~~$953 million in the same period in 2018. The change of ~~$1,133~~$1,323 million was primarily due to higher long-term debt inflows to fund the purchase of Paroc in the first quarter of 2018 and higher payments on the Term Loan in 2019 (see Note 12 of the Consolidated Financial Statements and the Liquidity section above for further discussion of activities related to debt).

Capital Expenditures: The Company will continue a balanced approach to the use of its cash flows. Operational cash flow will be used to fund the Company’s growth and innovation. Capital expenditures in 2019 are expected to be approximately ~~$475~~$460 million, which is ~~roughly $15 million greater than~~in-line with expected depreciation and amortization. Capital spending in excess of depreciation and amortization is primarily due to growth projects in our Composites and Insulation segments, including the construction of a Paroc mineral wool insulation manufacturing line in Poland that was in progress at the date of acquisition. The Company will also continue to evaluate projects and acquisitions that provide opportunities for growth in our businesses, and invest in them when they meet our strategic and financial criteria.

Tax Net Operating Losses and U.S Foreign Tax Credits

There have been no material changes to the disclosure in our 2018 Form 10-K.



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	OC	New York Stock Exchange



Large Accelerated Filer	þ	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	☐
Emerging growth company	☐



External Customer Sales by Geographic Region
United States	$	1,297	$	1,189	$	2,397	$	2,317
Europe	314		326		610		605
Asia-Pacific	174		176		323		318
Rest of world	133		133		255		275
NET SALES	$	1,918	$	1,824	$	3,585	$	3,515



	For the six months ended June 30, 2019
Reportable Segments	Composites		Insulation		Roofing		Eliminations			Consolidated
Disaggregation Categories
U.S. residential	$	142	$	413	$	1,258	$	(103	)	$	1,710
U.S. commercial and industrial	313		313		62		(1		)	687
Europe	300		304		7		(1		)	610
Asia-Pacific	231		86		6		—			323
Rest of world	62		136		59		(2		)	255
NET SALES	$	1,048	$	1,252	$	1,392	$	(107	)	$	3,585



	For the six months ended June 30, 2018
Reportable Segments	Composites		Insulation		Roofing		Eliminations			Consolidated
Disaggregation Categories
U.S. residential	$	151	$	448	$	1,137	$	(107	)	$	1,629
U.S. commercial and industrial	295		307		89		(3		)	688
Europe	313		285		7		—			605
Asia-Pacific	228		84		7		(1		)	318
Rest of world	65		154		61		(5		)	275
NET SALES	$	1,052	$	1,278	$	1,301	$	(116	)	$	3,515



		Amount of Loss (Gain) Recognized in Comprehensive Earnings
		Three Months Ended June 30,					Six Months Ended June 30,
Hedging Type	Derivative Financial Instrument	2019		2018			2019			2018
Net investment hedge	Cross-currency swaps	$	10	$	(26	)	$	(3	)	$	(1	)
Cash flow hedge	Natural gas forward swaps	$	—	$	(1	)	$	2		$	(2	)



		Three Months Ended June 30,				Six Months Ended June 30,
Type of cost	Location	2019		2018		2019			2018
Accelerated depreciation	Cost of sales	$	—	$	3	$	—		$	8
Other exit costs	Cost of sales	1		2		2			4
Severance	Other expenses, net	—		1		—			2
Other exit costs (gains)	Other expenses, net	—		1		(3		)	(2		)
Total restructuring costs (gains)		$	1	$	7	$	(1	)	$	12


	Nine Months Ended September 30, 2019
	Number of Options	Weighted- Average Exercise Price
Beginning Balance	478,875	$	37.18
Exercised	(34,400)	29.42


Ending Balance	444,475	$	37.78



	Six Months Ended June 30, 2019
	Number of Options		Weighted- Average Exercise Price
Beginning Balance	478,875		$	37.18
Exercised	(7,800	)	13.89
Ending Balance	471,075		$	37.57


	Options Outstanding						Options Exercisable
	Options Outstanding	Weighted-Average				Number Exercisable at September 30, 2019	Weighted-Average
Range of Exercise Prices			Remaining Contractual Life		Exercise Price				Remaining Contractual Life	Exercise Price
$25.45- $42.16	444,475	3.34	$	37.78	444,475	3.34	$	37.78



	Six Months Ended June 30, 2019
	Number of Shares/Units		Weighted-Average Grant-Date Fair Value
Beginning Balance	1,479,374		$	52.30
Granted	498,682		52.50
Vested	(371,794	)	53.07
Forfeited	(29,475	)	64.84
Ending Balance	1,576,787		$	51.90


	Nine Months Ended September 30, 2019
	Number of PSUs	Weighted-Average Grant-Date Fair Value
Beginning Balance	360,977	$	75.23
Granted	205,350	58.40
Forfeited	(42,750)	69.83
Ending Balance	523,577	$	69.07


~~(a)~~	~~These AOCI components are included in the computation of total Pension and OPEB expense and are recorded in Non-operating income. See Note 13 for additional information.~~



Period	Total Number of Shares (or Units) Purchased		Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs**	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs**
April 1-30, 2019	3,634		$	53.34	—	3,581,726
May 1-31, 2019	1,082		51.20		—	3,581,726
June 1-30, 2019	—		—		—	3,581,726
Total	4,716	*	$	52.85	—	3,581,726


*	~~The Company retained an aggregate of 4,716~~ * The Company retained an aggregate of 170 shares surrendered to satisfy tax withholding obligations in connection with the vesting of restricted shares granted to our employees.



Exhibit Number		Description


~~3.1~~






















4.1		~~Second Amended and Restated Bylaws of the Company, effective~~Eleventh Supplemental Indenture, dated as of ~~June 19,~~August 12, 2019, ~~(filed herewith).~~

~~10.1~~	~~Second Amendment to Second Amended and Restated Receivables Purchase Agreement, dated April 8, 2019 (filed herewith).~~

~~10.2~~	~~Extension Agreement, dated April 9, 2019, to the Credit Agreement~~ by and among Owens Corning and BofA Securities, Inc., Citigroup Global Markets Inc., and Wells Fargo ~~Bank, National Association and other signatory lenders (filed herewith).~~Securities, LLC as representatives of the several underwriters named therein (incorporated by reference to Exhibit 4.1 to Owens Corning’s Current Report on Form 8-K (File No. 1-33100), filed August 12, 2019.

4.2		Form of 3.950% Senior Note due 2029 (incorporated by reference to Exhibit 4.2 to Owens Corning’s Current Report on Form 8-K (File No. 1-33100), filed August 12, 2019.

31.1		Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) (filed herewith).

31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) (filed herewith).

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (furnished herewith).

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (furnished herewith).

101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded with the Inline XBRL document.

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

104		The cover page from this Quarterly Report on Form 10-Q, formatted as Inline XBRL.