Owens ning(US:OC)2024-11-06 11:03PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents Owens Corning's unaudited consolidated financial statements for Q3 and the nine months ended September 30, 2024, reflecting significant impacts from the Masonite acquisition Consolidated Statements of Earnings This statement details the company's net sales and earnings, showing a Q3 2024 sales increase to $3.05 billion but a nine-month net earnings decrease to $905 million Consolidated Earnings Summary (in millions) | Metric | Q3 2024 | Q3 2023 | 9 Months 2024 | 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $3,046 | $2,479 | $8,135 | $7,373 | | Gross Margin | $908 | $727 | $2,455 | $2,068 | | Operating Income | $509 | $462 | $1,369 | $1,483 | | Net Earnings Attributable to Owens Corning | $321 | $337 | $905 | $1,065 | Consolidated Balance Sheets The balance sheet as of September 30, 2024, shows total assets increased to $15.05 billion and total liabilities to $9.38 billion, largely due to the Masonite acquisition Balance Sheet Highlights (in millions) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $499 | $1,615 | | Goodwill | $2,867 | $1,392 | | Intangible assets, net | $2,771 | $1,528 | | Total Assets | $15,054 | $11,237 | | Long-term debt, net of current portion | $5,028 | $2,615 | | Total Liabilities | $9,381 | $6,027 | | Total Equity | $5,673 | $5,185 | Consolidated Statements of Cash Flows This statement shows net cash from operating activities increased to $1.22 billion, while investing activities used $3.19 billion, primarily for the Masonite acquisition Cash Flow Summary (Nine Months Ended Sep 30, in millions) | Category | 2024 | 2023 | | :--- | :--- | :--- | | Net cash flow provided by operating activities | $1,216 | $1,021 | | Net cash flow used for investing activities | $(3,193) | $(219) | | Net cash flow provided by (used for) financing activities | $901 | $(585) | | Net (decrease) increase in cash | $(1,104) | $225 | Notes to Consolidated Financial Statements These notes detail accounting policies, the Masonite acquisition, the creation of the Doors segment, the strategic review of the GR business, and contingent liabilities - On May 15, 2024, the Company acquired Masonite International Corporation, a leading global manufacturer of doors, creating a new 'Doors' reportable segment1415 - The company announced a strategic review for its global glass reinforcements (GR) business, part of the Composites segment, generating approximately $1.3 billion in annual revenue24 - A subsidiary, Paroc, issued recalls for certain marine insulation products due to potential nonconformance with fire safety requirements, leading to an estimated liability on the balance sheet136 - Subsequent to the quarter end, on November 4, 2024, the company entered an agreement to sell its building materials business in China and Korea, which has annual revenues of approximately $130 million166 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial performance, the Masonite acquisition's impact on revenue and segment results, liquidity, and the strategic review of the glass reinforcements business - The acquisition of Masonite on May 15, 2024, for $3.2 billion created a new Doors reportable segment, contributing $573 million in revenue and $36 million in EBIT for Q3 2024171 Q3 2024 vs Q3 2023 Performance (in millions) | Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $3,046 | $2,479 | +23% | | Net Earnings | $321 | $337 | -5% | | Adjusted EBIT | $582 | $518 | +12% | - The company is conducting a strategic review of its global glass reinforcements (GR) business, which has annual revenues of approximately $1.3 billion177 - An interim goodwill impairment test for the Composites reporting unit as of September 30, 2024, indicated its fair value exceeded its carrying value by less than 10%, highlighting a risk of future impairment247248 Segment Results This section details Q3 2024 segment performance, showing EBIT increases for Roofing and Insulation, $36 million EBIT for the new Doors segment, and a decline for Composites EBIT by Segment - Q3 2024 vs Q3 2023 (in millions) | Segment | Q3 2024 EBIT | Q3 2023 EBIT | Change | | :--- | :--- | :--- | :--- | | Roofing | $359 | $343 | +$16 | | Insulation | $183 | $150 | +$33 | | Doors | $36 | N/A | N/A | | Composites | $61 | $80 | -$19 | - Roofing: EBIT increased due to higher selling prices and favorable product mix, offsetting lower sales volumes and higher manufacturing costs200 - Insulation: EBIT growth was driven by higher selling prices, favorable delivery costs, and lower production downtime206 - Composites: EBIT decreased primarily due to lower selling prices, higher start-up costs, and unfavorable customer mix218 Liquidity, Capital Resources and Other Related Matters This section outlines the company's liquidity, including $499 million in cash and $5.5 billion in total debt, detailing the financing and refinancing of the Masonite acquisition Liquidity Position as of Sep 30, 2024 (in millions) | Source | Amount/Availability | | :--- | :--- | | Cash and cash equivalents | $499 | | Senior Revolving Credit Facility Availability | $996 | | Receivables Securitization Facility Availability | $299 | - The company issued $2.0 billion in new senior notes (due 2027, 2034, and 2054) to repay the temporary credit facility used for the Masonite acquisition174231 - The company repurchased 2.1 million shares for $332 million during the first nine months of 2024160262 Quantitative and Qualitative Disclosures About Market Risk The company reports no material change in its market risk exposure during the first nine months of 2024, referring to its 2023 Annual Report for full details - There has been no material change in the company's exposure to market risk during the first nine months of 2024256 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period258 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls259 PART II – OTHER INFORMATION Legal Proceedings This section incorporates legal proceedings information from Note 13 of the financial statements, detailing contingent liabilities including the Paroc product recall - Information regarding legal proceedings is detailed in Note 13 of the financial statements, covering contingent liabilities and other matters260 Risk Factors The company reports no material changes to the risk factors previously disclosed in its 2023 Annual Report on Form 10-K - No material changes to the risk factors disclosed in the 2023 Form 10-K have occurred261 Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2024, the company repurchased 1.2 million shares for $202 million, with 6.9 million shares remaining available under its authorization Q3 2024 Share Repurchases | Month | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2024 | 4,527 | $174.40 | | August 2024 | 565,019 | $166.09 | | September 2024 | 661,087 | $166.68 | | Total Q3 | 1,230,633 | $166.44 | - As of September 30, 2024, 6.9 million shares remain available for repurchase under the company's 10 million share repurchase authorization approved in December 2022160262 Other Information This section discloses two executives entered Rule 10b5-1 trading plans and the company adopted new indemnification agreements for directors - Two executives, José Méndez-Andino and Gunner Smith, entered into Rule 10b5-1 trading plans for future sales of company stock264265 - The company adopted a new form of indemnification agreement for its directors on November 1, 2024266