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What changed in Owens Corning's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Owens Corning's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+290 added−268 removedSource: 10-K (2024-02-14) vs 10-K (2023-02-15)

Top changes in Owens Corning's 2023 10-K

290 paragraphs added · 268 removed · 198 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

52 edited+30 added−10 removed52 unchanged
Biggest changeOur international sales and operations are subject to risks and uncertainties, including: • difficulties and costs associated with complying with a wide variety of complex and changing laws, including securities laws, tax laws, employment and pension-related laws, competition laws, U.S. and foreign export and trading laws, and laws governing improper business practices, treaties and regulations; • limitations on our ability to enforce legal rights and remedies; • adverse domestic or international economic and political conditions, business interruption, war and civil disturbance; • changes to tax, currency, or other laws or policies that may adversely impact our ability to repatriate cash from non-United States subsidiaries, make cross-border investments, or engage in other intercompany transactions; • future tax legislation, regulations, or related guidance or interpretations; Table of Contents -11- ITEM 1A.
Biggest changeOur international sales and operations are subject to risks and uncertainties, including: • difficulties and costs associated with complying with a wide variety of complex and changing laws, including securities laws, climate-related laws, tax laws, employment and pension-related laws, competition laws, U.S. and foreign export and trading laws, and laws governing improper business practices, treaties and regulations; • limitations on our ability to enforce legal rights and remedies; • adverse domestic or international economic and political conditions, business interruption, war and civil disturbance; • changes to tax, currency, or other laws or policies that may adversely impact our ability to repatriate cash from non-United States subsidiaries, make cross-border investments, or engage in other intercompany transactions; • future tax legislation, regulations, or related guidance or interpretations; • changes to tariffs or other import or export restrictions, penalties or sanctions, including modification or elimination of international agreements covering trade or investment; • costs and availability of shipping and transportation; • nationalization or forced relocation of properties by foreign governments; • currency exchange rate fluctuations between the United States Dollar and foreign currencies; and • uncertainty with respect to any potential changes to laws, regulations and policies that could exacerbate the risks described above.
You should consider these risk factors in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K because these factors could cause our actual results and financial condition to differ materially from those projected in forward-looking statements. The Company maintains processes that aim to manage enterprise risks through identification and mitigation of those risks.
You should consider these risk factors in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K because these risk factors could cause our actual results and financial condition to differ materially from those projected in forward-looking statements. The Company maintains processes that aim to manage enterprise risks through identification and mitigation of those risks.
Acquisitions, joint ventures, production capacity expansions and divestitures involve substantial risks, including: • unforeseen difficulties in operations, technologies, products, services, accounting and personnel; • increased cybersecurity incidents; • diversion of financial and management resources from existing operations; • unforeseen difficulties related to entering geographic regions, markets or product lines where we do not have prior experience; • risks relating to obtaining sufficient financing; • difficulty in integrating the acquired business’ standards, processes, procedures and controls with our existing operations; • potential loss of key employees; • unanticipated competitive responses; • potential loss of customers or suppliers; and • undisclosed or undiscovered liabilities or claims, or retention of unpredictable future liabilities.
Acquisitions, joint ventures, production capacity expansions and divestitures involve substantial risks, including: • unforeseen difficulties in operations, technologies, products, services, accounting and personnel; • increased cybersecurity threats or incidents; • diversion of financial and management resources from existing operations; • unforeseen difficulties related to entering geographic regions, markets or product lines where we do not have prior experience; • risks relating to obtaining sufficient financing; • difficulty in integrating the acquired business’ standards, processes, procedures and controls with our existing operations; • potential loss of key employees; • unanticipated competitive responses; • potential loss of customers or suppliers; and • undisclosed or undiscovered liabilities or claims, or retention of unpredictable future liabilities.
ITEM 1. BUSINESS (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).
ITEM 1. BUSINESS (continued) Remediation activities generally involve a potential range of activities and costs related to soil, groundwater and sediment contamination. This can include pre-cleanup activities such as fact finding and investigation, risk assessment, feasibility studies, remedial action design and implementation (where actions may range from monitoring to removal of contaminants, to installation of longer-term remediation systems).
It is our ambition to be a net-positive company, that is, one whose positive impact of our people and products, is greater than the negative impact of manufacturing our products. We work to continually increase the good our people and products do while we concurrently reduce the negative environmental impact of our operations.
It is our ambition to be a net-positive company, that is, one whose positive impact of our people and products, is greater than the negative impact of manufacturing our products. We work to continually increase the good our people and products do while we concurrently strive to reduce the negative environmental impact of our operations.
Weather conditions and the level of severe storms can have a significant impact on the markets for residential and commercial construction, repair and improvement.
Weather conditions and the level of severe storms can have a significant impact on the markets for residential and commercial construction, repair and improvement projects.
Ethics and compliance efforts include our support of the Owens Corning Code of Conduct (“Code of Conduct”), which is dedicated to encouraging compliance with a range of legal guidelines and our corporate values. Our training efforts encompass the Code of Conduct and other areas of compliance and development as relevant to employees.
BUSINESS (continued) Ethics and compliance efforts include our support of the Owens Corning Code of Conduct (“Code of Conduct”), which is dedicated to encouraging compliance with a range of legal guidelines and our corporate values. Our training efforts encompass the Code of Conduct and other areas of compliance and development as relevant to employees.
As a result, we do not benefit from the visibility provided by long-term volume contracts against downturns in customer demand and sales. Further, we are not able to immediately adjust our costs in response to declines in sa les.
As a result, we do not benefit from the visibility provided by long-term volume contracts against downturns in customer demand and sales. Further, we are not able to immediately adjust our costs in response to declines in sales.
Despite our efforts, we may fail to identify or mitigate certain risks, which could have a material and adverse impact on our business, financial condition, value and results of operations. MACROECONOMIC, MARKET AND OPERATIONAL RISKS Low levels of residential, commercial or industrial construction activity can have a material adverse impact on our business and results of operations.
Despite our efforts, we may fail to identify or mitigate certain risks, which could have a material and adverse impact on our business, financial condition, value and results of operations in future periods. MACROECONOMIC, MARKET AND OPERATIONAL RISKS Low levels of residential, commercial or industrial construction activity can have a material adverse impact on our business and results of operations.
RISK FACTORS (continued) We are subject to risks relating to our information technology systems (cybersecurity), and any failure to adequately protect our critical information technology systems could materially affect our operations. We rely on information technology systems across our operations, including for management, supply chain and financial information and various other processes and transactions.
We are subject to risks relating to our information technology systems (including cybersecurity) risks, and any failure to adequately protect our critical information technology systems could materially affect our operations. We rely on information technology systems across our operations, including for management, supply chain and financial information and various other processes and transactions.
As of December 31, 2022, the composition of our Board of Directors was 60% demographically diverse, which includes gender, race, ethnicity, nationality, national origin or other elements of one’s identity. Leadership positions were comprised of approximately 29% women globally and 17% people of color in the United States.
As of December 31, 2023, the composition of our Board of Directors was 60% demographically diverse, which includes gender, race, ethnicity, nationality, national origin or other elements of one’s identity. Leadership positions were comprised of approximately 29% women globally and 18% people of color in the United States.
Volatility in financial markets and the deterioration of national and global economic conditions could materially adversely impact the Company’s operations, financial results and/or liquidity including: • the financial stability of our customers or suppliers may be compromised, which could result in reduced demand for our products, additional bad debts for the Company or non-performance by suppliers; • one or more of the financial institutions associated with our credit facilities could cease to fulfill their funding obligations, or the amount of eligible receivables under our receivables securitization facility could decrease, which could materially adversely impact our liquidity; • it may become more expensive or difficult to obtain financing or refinance the Company’s debt in the future; • the value of the Company’s assets held in pension plans may decline; and • the Company’s assets may be impaired or subject to write-down or write-off.
These changes and conditions could materially and adversely impact the Company’s operations, financial results and/or liquidity, including: • the financial stability of our customers or suppliers may be compromised, which could result in reduced demand for our products, additional bad debts for the Company or non-performance by suppliers; • one or more of the financial institutions associated with our credit facilities could cease to fulfill their funding obligations, or the amount of eligible receivables under our receivables securitization facility could decrease, which could materially and adversely impact our liquidity; • it may become more expensive or difficult to obtain financing or refinance the Company’s debt in the future; • the value of the Company’s assets held in pension plans may decline; and • the Company’s assets may be impaired or subject to write-down or write-off.
In addition, we rely on a number of third-party service providers to execute certain business processes and maintain certain information technology systems and infrastructure, and any breach of security on their part could impair our ability to effectively operate.
In addition, we rely on a number of third-party service providers to execute certain business processes and maintain certain information technology systems and infrastructure, and any breach of security on their part could impair our ability to effectively operate. Table of Contents -10- ITEM 1A.
For a discussion of the risks associated with certain applicable laws and regulations, see Item 1A, “Risk Factors.” Sustainability As a worldwide leader in our industry, we have the desire to be at the forefront of corporate sustainability efforts.
For a discussion of the risks associated with certain applicable laws and regulations, see Item 1A, “Risk Factors.” Sustainability As a worldwide leader in our industry, our goal is to be at the forefront of corporate sustainability efforts.
Availability of certain of the raw materials we use has occasionally been limited, including because of the COVID-19 pandemic, and our sourcing of some of these raw materials from a limited number of suppliers, and in some cases a sole supplier, increases the risk of unavailability.
Availability of certain of the raw materials we use has occasionally been limited, and our sourcing of some of these raw materials from a limited number of suppliers, and in some cases a sole supplier, increases the risk of unavailability.
Together, this work helps to reduce the environmental impact of our operations and lowers the embodied carbon in our products – an attribute of growing importance to our customers. Many of Owens Corning’s products are made using heavy, industrialized manufacturing processes. While we strive to go beyond all regulatory requirements, our factories do produce various emissions, including greenhouse gases.
Together, this work helps to reduce the environmental impact of our operations and lowers the embodied carbon in our products – an attribute of growing importance to our customers. Many of Owens Corning’s products are made using heavy, industrialized manufacturing processes. While we strive to continue our progress to reduce our impact, our factories produce various emissions, including greenhouse gases.
In addition, if key customers experience financial pressure or consolidate, they could attempt to demand more favorable contractual terms, which would place additional pressure on our margins and cash flows. Lower demand for our products, loss of key customers and material changes to contractual terms could materially and adversely impact our business, financial condition and results of operations.
RISK FACTORS (continued) consolidate, they could attempt to demand more favorable contractual terms, which would place additional pressure on our margins and cash flows. Lower demand for our products, loss of key customers and material changes to contractual terms could materially and adversely impact our business, financial condition and results of operations.
Our inability to effectively compete could result in the loss of customers and reduce the sales of our products, which could have a material adverse impact on our business, financial condition and results of operations. Climate change, weather conditions and storm activity could have a material adverse impact on our business, financial condition and results of operations.
Our inability to effectively compete could result in the loss of customers and reduce the sales of our products, which could have a material adverse impact on our business, financial condition and results of operations.
Our goal is to create a high-performance culture and teams that are diverse, capable and engaged. We strive to have clear objectives, effective performance management, and a structure that includes regular feedback, talent reviews, succession planning, development, and compensation analysis.
Employee Performance and Related Objectives We also focus on evaluating and managing employee performance, development, succession planning, and turnover. Our goal is to create a high-performance culture and teams that are diverse, capable and engaged. We strive to have clear objectives, effective performance management, and a structure that includes regular feedback, talent reviews, succession planning, development, and compensation analysis.
New environmental and chemical regulations could impact our ability to expand production or construct new facilities in every geographic region in which we operate. Continued and increased government and public emphasis on environmental issues is expected to result in increased future investments for environmental controls at ongoing operations, Table of Contents -12-
New environmental and chemical regulations could impact our ability to expand production or construct new facilities in every geographic region in which we operate. Continued and increased government and public emphasis on environmental issues is expected to result in increased future investments for environmental controls at ongoing operations, which will be charged against income from future operations.
We also seek to foster positive and productive relations with the labor organizations representing them. Table of Contents -6- ITEM 1. BUSINESS (continued) Owens Corning employees contribute service hours to boards, special causes and nonprofit organizations in the communities where they live and operate.
We also seek to foster positive and productive relations with the labor organizations representing them. Owens Corning employees contribute service hours to boards, special causes and nonprofit organizations in the communities where they live and operate.
Table of Contents -10- ITEM 1A. RISK FACTORS (continued) Our failure to address these risks or other problems encountered in connection with our past or future acquisitions, investments and divestitures could cause us to fail to realize the anticipated benefits of such transactions, incur unanticipated liabilities, and harm our business generally.
Our failure to address these risks or other problems encountered in connection with our past or future acquisitions, including the planned acquisition of Masonite, investments and divestitures could cause us to fail to realize the anticipated benefits of such transactions, incur unanticipated liabilities, and harm our business generally.
Any breach of our security measures could result in unauthorized access to and misappropriation of our information, corruption of data or disruption of operations or transactions, any of which could have a material adverse effect on our business.
RISK FACTORS (continued) Any breach of our security measures, or those of our third-party service providers, could result in unauthorized access to and misappropriation of our information, corruption of data or disruption of operations or transactions, any of which could have a material adverse effect on our business strategy, results of operations or financial condition.
To the extent that the required remediation procedures or timing of those procedures change, additional contamination is identified, or the financial condition of other potentially responsible parties is adversely affected, the estimate of our environmental liabilities may change.
Please see “Item 1 - Business - Environmental Control” for information on costs and accruals related to environmental remediation. To the extent that the required remediation procedures or timing of those procedures change, additional contamination is identified, or the financial condition of other potentially responsible parties is adversely affected, the estimate of our environmental liabilities may change.
This could have a material adverse impact on the demand for our products and on our financial condition and operating results. A deterioration of economic conditions may exacerbate these adverse effects and could result in a wide-ranging and prolonged impact on general business conditions, thereby negatively impacting our operations, financial results and/or liquidity. Table of Contents -9- ITEM 1A.
A deterioration of economic conditions may exacerbate these adverse effects and could result in a wide-ranging and prolonged impact on general business conditions, thereby negatively impacting our operations, financial results and/or liquidity.
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). Please see “Item 1 - Business - Environmental Control” for information on costs and accruals related to environmental remediation.
For example, 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).
We face significant competition in the markets we serve and we may not be able to compete successfully. All of the markets we serve are highly competitive. We compete with manufacturers and distributors, both within and outside the United States, in the sale of building products and composite products.
We face significant competition in the markets we serve and we may not be able to compete successfully. All of the markets we serve are highly competitive. We compete with manufacturers and distributors, both within and outside the United States. Some of our competitors may have superior financial, technical, marketing and other resources.
If we were found liable for violations of anti-corruption laws, we could be liable for criminal or civil penalties or other sanctions, which could have a material adverse impact on our business, financial condition and results of operations. We will not be insured against all potential losses and could be seriously harmed by natural disasters, catastrophes, pandemics, theft or sabotage.
If we were found liable for violations of anti-corruption laws, we could be liable for criminal or civil penalties or other sanctions, which could have a material adverse impact on our business, financial condition and results of operations.
We also face competition from the introduction by competitors of new products or technologies that may address our customers’ needs in a better manner, whether based on considerations of pricing, usability, effectiveness, sustainability, quality or other features or benefits. If we are not able to successfully commercialize our innovation efforts, we may lose market share.
We also face competition from the introduction by competitors of new products or technologies that may address our customers’ needs in a better manner, whether based on considerations of pricing, usability, effectiveness, sustainability, quality or other features or benefits. In addition, to effectively Table of Contents -11- ITEM 1A.
In addition, although no single customer represented more than 10% of our annual sales in 2022, our ability to sell some of the products in Insulation and Roofing is dependent on a limited number of customers, who account for a significant portion of such sales.
Our ability to sell some of the products in our Insulation and Roofing segments is dependent on a limited number of customers, who account for a significant portion of such sales. In 2023, we had one customer that represented 11% of our annual sales.
Furthermore, some of our sales are concentrated in certain geographic areas, and market growth that is skewed to other geographic areas may negatively impact our rate of growth or market share.
Furthermore, some of our sales are concentrated in certain geographic areas, and market growth that is skewed to other geographic areas may negatively impact our rate of growth or market share. Worldwide economic conditions and credit tightening could have a material adverse impact on the Company.
Price competition or overcapacity may limit our ability to raise prices for our products when necessary, may force us to reduce prices and may also result in reduced levels of demand for our products and cause us to lose market share.
In some cases, we face competition from manufacturers in countries able to produce similar products at lower costs. Price competition or overcapacity may limit our ability to raise prices for our products, may force us to reduce prices and may also result in reduced levels of demand for our products and cause us to lose market share.
For example, if one of the raw materials important to our business is sourced from a sole supplier, our production could be interrupted regardless of whether we have a long-term supply contract for the material.
For example, if one of the raw materials important to our business is sourced from a sole supplier, our production could be interrupted regardless of whether we have a long-term supply contract for the material. Global economic conditions may also result in global or regional supply chain issues that adversely impact our access to raw materials and supplies.
T he loss of key customers for these products, a consolidation of key customers or a significant reduction in sales to those customers, could significantly reduce our revenues from these products.
The loss of key customers for these products, a consolidation of key customers or a significant reduction in sales to those customers, could significantly reduce our revenues from these products. In addition, if key customers experience financial pressure or Table of Contents -9- ITEM 1A.
We have put in place security measures designed to protect against the misappropriation or corruption of our systems, intentional or unintentional disclosure of confidential information, or disruption of our operations.
We have established a range of security measures that are designed to protect against the unauthorized access to and misappropriation of our information, corruption of data, intentional or unintentional disclosure of confidential information, or disruption of operations.
Natural gas supply shortages, or a shutdown of natural gas supply from Russia, could lead to additional price increases, energy supply rationing, or temporary reduction in our European operations, which could have a material adverse impact on our business or results of operations.
Natural gas supply shortages could lead to additional price increases, energy supply rationing, or temporary reduction in our European operations, which could have a material adverse impact on our business or results of operations. We are subject to risks and uncertainties associated with our international operations. We sell products and operate plants throughout the world.
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.
Taking these factors into account, Owens Corning estimates the costs of remediation to be paid over a period of years. The Company accrues an amount on an undiscounted basis, when a liability is probable and reasonably estimable. Actual cost may differ from these estimates for the reasons mentioned above.
Select awards and honors earned by the Company include: • Obtained a perfect score on the Human Rights Campaign’s 2022 Corporate Equality Index for the eighteenth year in a row; • Recognized as one of the “2022 World’s Most Ethical Companies” by Ethisphere Institute for the fifth year in a row; and • Ranked 1 st among the 100 Best Corporate Citizens in 2022 by 3BL Media for an unprecedented fourth year in a row More information about Owens Corning’s approach to human capital and other social issues can be found in our Sustainability Report on our website. 1 AVAILABILITY OF INFORMATION Owens Corning makes available, free of charge, through its website, the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.
More information about Owens Corning’s approach to human capital and other social issues can be found in our Sustainability Report on our website. 1 AVAILABILITY OF INFORMATION Owens Corning makes available, free of charge, through its website, the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.
Any such damage, interruption, or shutdown could cause delays or cancellation of customer orders or impede the manufacture or shipment of products, processing of transactions or reporting of financial results.
In addition, our operations in certain geographic locations may be particularly vulnerable to cybersecurity attacks or other problems. Any such damage, interruption, or shutdown could cause delays or cancellation of customer orders or impede the manufacture or shipment of products, processing of transactions or reporting of financial results.
If we are unable to increase our prices to offset the effects of inflation, then our business, operating results, and financial condition could be materially and adversely affected. Uncertainty about global economic conditions may also cause consumers of our products to reduce or postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values.
Uncertainty about global economic conditions may also cause consumers of our products to reduce or postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values. This could have a material adverse impact on the demand for our products and on our financial condition and operating results.
Owens Corning invests in research and development on climate-related risks and opportunities. Table of Contents -5- ITEM 1. BUSINESS (continued) Human Capital Resources Important to the Company’s long-term success is ensuring its people feel valued, included, and engaged – from recruitment to retirement.
Owens Corning invests in research and development on climate-related risks and opportunities. Table of Contents -5- ITEM 1. BUSINESS (continued) Human Capital Resources The Company’s long-term success is dependent upon its access to and development of management and primary employees who are sufficiently skilled and capable of the work necessary to achieve the Company’s short-and long-term business objectives.
Additionally, with our Healthy Living platform, we provide a multifaceted well-being program designed to drive sustainable, long-term change, improve the health and lives of employees, and strengthen the culture and work experience. Employee Performance and Related Objectives We also focus on managing employee performance, development, succession planning, and turnover.
For the year ended December 31, 2023, our RIR was 0.60, compared to 0.65 as reported in the same period for the prior year. Additionally, with our Healthy Living platform, we provide a multifaceted well-being program designed to drive sustainable, long-term change, improve the health and lives of employees, and strengthen the culture and work experience.
That is why Owens Corning is dedicated to fostering an environment of learning and growth within a supportive, caring culture. We are committed to providing a safe, healthy workplace and a meaningful, engaging employee experience. As of December 31, 2022, Owens Corning had approximately 19,000 employees, of which approximately 10,000 were located outside the United States.
To maintain employee engagement, Owens Corning strives to ensure its people feel valued, included, and engaged – from recruitment to retirement. That is why Owens Corning is dedicated to fostering an environment of learning and growth within a supportive, caring culture. We are committed to providing a safe, healthy workplace and a meaningful, engaging employee experience.
In addition, in order to effectively compete, we must continue to develop new products that meet changing consumer preferences and successfully develop, manufacture and market these new products.
RISK FACTORS (continued) compete, we must continue to develop new products that meet changing consumer preferences and successfully develop, manufacture and market these new products. If we are not able to successfully commercialize our innovation efforts, we may lose market share.
Liability under these laws involves inherent uncertainties. Environmental liability estimates may be affected by changing determinations of what constitutes an environmental exposure or an acceptable level of cleanup. For example, remediation activities generally involve a potential range of activities and costs related to soil and groundwater contamination.
We are also subject to laws, rules and regulations relating to certain raw materials used in our business or in our products. Liability under these laws involves inherent uncertainties. Environmental liability estimates may be affected by changing determinations of what constitutes an environmental exposure or an acceptable level of cleanup.
Changes in required remediation procedures or timing of those procedures at existing legacy sites, or discovery of contamination at additional sites, could result in material increases to the Company’s environmental obligations. Additional Government Laws and Regulations In addition to environmental laws and regulations, we are subject to various laws and regulations around the world.
At December 31, 2023, the Company had an accrual totaling $4 million for its environmental liabilities, of which the current portion is $1 million. Changes in required remediation procedures or timing of those procedures at existing legacy sites, or discovery of contamination at additional sites, could result in material increases to the Company’s environmental obligations.
Additionally, severely low temperatures may lead to significant and immediate spikes in costs of natural gas, electricity and other commodities that could negatively affect our results of operation. We are subject to risks and uncertainties associated with our international operations. We sell products and operate plants throughout the world.
Additionally, severely low or high temperatures may lead to significant and immediate spikes in costs of natural gas, electricity and other commodities that could negatively affect our results of operations. We will not be insured against all potential losses and could be seriously harmed by natural disasters, catastrophes, pandemics, theft or sabotage.
LEGAL, REGULATORY AND COMPLIANCE RISKS We may be subject to liability under and may make substantial future expenditures to comply with environmental and emerging product-based laws and regulations.
We estimate our future warranty costs based on historical trends and product sales, but we may fail to accurately estimate those costs and thereby fail to establish adequate warranty reserves for them. Warranty claims are not insurable. We may be subject to liability under and may make substantial future expenditures to comply with environmental and emerging product-based laws and regulations.
Our 2030 diversity goals set ambitious targets for Owens Corning leadership positions of 35% women globally and 22% people of color in the United States. The Company performs a biennial pay equity review with the assistance of a third-party vendor. These reviews include a robust, statistical analysis of pay equity across the majority of its global salaried workforce.
Our 2030 diversity goals set targets for our leadership positions of 35% women globally and 22% people of color in the United States. The Company has a robust pay equity system, which includes multiple processes and controls to prevent pay equity gaps from occurring.
Interest rates and inflation levels rose significantly in 2022, and the reduced affordability of mortgages and other financing options has reduced home sale transaction volumes and new construction activity.
Interest rates increased substantially in fiscal years 2022 and 2023, and may continue to increase. The combination of high interest rates and high levels of inflation have reduced the affordability of mortgages and other financing options, and increased the cost of home improvement projects.
One of our primary safety measures is the Recordable Incident Rate (“RIR”) as defined by the United States Bureau of Labor Statistics. For the year ended December 31, 2022, our RIR was 0.65, compared to 0.59 as reported in the same period a year ago.
In the fall of 2023, the Company kicked off its employee-developed “Safer Together” initiative, intended to increase employee focus and collective engagement on safety. One of our primary safety measures is the Recordable Incident Rate (“RIR”) as defined by the United States Bureau of Labor Statistics.
Our European operations can be directly affected by volatility in the cost and availability of energy, which is subject to factors outside of our control. The ongoing conflict between Russia and Ukraine has impacted Table of Contents -8- ITEM 1A.
For example, natural gas forms the primary energy source for our European operations and our European operations can be directly affected by volatility in the cost and availability of natural gas.
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Actual cost may differ from these estimates for the reasons mentioned above. At December 31, 2022, the Company had an accrual totaling $5 million for its environmental liabilities, of which the current portion is $1 million.
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Additional Government Laws and Regulations In addition to environmental laws and regulations, we are subject to various laws and regulations around the world.
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Approximately 9,000 (64%) of hourly employees are subject to collective bargaining agreements. The Company believes that its relations with employees are good. The Company focuses on a number of human capital resource objectives in managing its business which, taken together, may be material to understanding our business under certain circumstances.
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As of December 31, 2023, Owens Corning had approximately 18,000 employees, of which approximately 9,000 were located outside the United States. Approximately 8,200 (46%) of hourly employees are subject to collective bargaining agreements. The Company regularly engages its salaried, non-represented and represented primary employees to collect feedback and based on that feedback believes employee engagement and relations are good.
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Our Chief Executive Officer, along with more than a thousand other company leaders around the world, signed the CEO Action for Diversity & Inclusion pledge in 2018, signaling our commitment to advance diversity and inclusion within the workplace.
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In 2023, the Company also engaged in an Employee Value Proposition survey and considered employee feedback in formulating its value proposition, including changes to compensation and benefits offerings such as sick leave enhancements for primary employees and improvements to our facilities, including the roll-out of personal dignity spaces.
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Consistent with our commitment to “equal pay for equal work,” we remediate all identified and substantiated pay gaps through pay increases. Further, the Company has implemented processes and policies to avoid inheriting unequal pay bias of prior employers.
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Five years following the Company's pledge to diversity & inclusion, there is more work to be done, and the Company continues to pursue diversity in its workforce through diverse candidate slates, diversity on hiring committees, and development programs, and the continued focus on development of management skills needed to sustain progress in this area through the roll-out of inclusive leadership training across the organization.
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Supply constraints and increases in the cost of energy, including because of the ongoing conflict in Ukraine, could have a material adverse impact on our business or results of operations. Natural gas forms the primary energy source for our European operations, and a significant amount of natural gas in Europe is primarily sourced from Russia.
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We perform a biennial pay equity review with the assistance of a third-party vendor who utilizes a strong, statistical analysis of pay equity across our global salaried workforce. We promptly remediate all identified and substantiated pay gaps through pay increases. Table of Contents -6- ITEM 1.
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RISK FACTORS (continued) global energy markets, particularly in Europe, leading to high volatility and increased prices for natural gas and other energy supplies. Reductions in the supply of natural gas from Russia to Europe led to ongoing supply shortages in Europe in 2022.
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Select awards and honors earned by the Company include: • Earned a Top 50 ranking on the Fair 360 survey as leaders in workplace fairness; • Earned a Top 10 ranking on the 100 Best Corporate Citizens in 2023 by 3BL Media for the sixth year in a row; and • Recognized as one of the “2023 World’s Most Ethical Companies” by Ethisphere Institute for the sixth year in a row.
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Worldwide economic conditions and credit tightening could have a material adverse impact on the Company.
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You should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.
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Furthermore, inflation, which increased significantly in 2022, has and may continue to increase our operational costs and continued increases in interest rates in response to concerns about inflation may further increase economic uncertainty and heighten these risks.
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These trends have likely resulted in reduced levels of repair and remodel as well as new construction activity and demand for our products, and we expect these trends may continue for the foreseeable future.
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Some of our competitors may have superior financial, technical, marketing and other resources than we do. In some cases, we face competition from manufacturers in countries able to produce similar products at lower costs.
Added
Table of Contents -8- ITEM 1A. RISK FACTORS (continued) In addition, we are dependent on third-party freight carriers to transport some of our raw materials and products.
Removed
RISK FACTORS (continued) • changes to tariffs or other import or export restrictions, penalties or sanctions, including modification or elimination of international agreements covering trade or investment; • costs and availability of shipping and transportation; • nationalization or forced relocation of properties by foreign governments; • currency exchange rate fluctuations between the United States Dollar and foreign currencies; and • uncertainty with respect to any potential changes to laws, regulations and policies that could exacerbate the risks described above.
Added
We may be unable to transport our raw materials or products in a timely manner or at economically favorable rates in certain circumstances, particularly in cases of adverse market conditions or disruptions to transportation infrastructure. Supply constraints and increases in the cost of energy could have a material adverse impact on our business or results of operations.
Added
The cost of producing our products is sensitive to the price of energy, including its impact on transport costs which is subject to factors outside of our control. Energy prices, in particular oil and natural gas, have fluctuated in recent years.
Added
With the volatility in the current global economic climate, inflation and geopolitical events around the world, including the Russian invasion of Ukraine and the Israel-Hamas conflict, it is difficult for us to predict the complete impact of the foregoing matters on our business and results of operations.
Added
We recently announced that we have decided to review strategic alternatives for our global glass reinforcements business, consistent with our strategy to expand our building materials offering and focus on products and applications where we can build market-leading positions.
Added
While a range of options are under consideration, including a potential sale, spin-off or other strategic option, there can be no assurance that the strategic review will result in any transaction or other outcome, or that we will realize our strategic and other objectives in connection with any such transaction or outcome.
Added
Emerging issues related to our development, integration and use of artificial intelligence (“AI”) could give rise to legal or regulatory action, damage our reputation or otherwise materially harm our business . Our development, integration and use of AI technology in our operations remains in the early phases.
Added
We have started to assess the use of AI technology to drive productivity and data analytics. While we aim to develop, integrate and use AI responsibly, we may ultimately be unsuccessful in identifying or resolving issues, such as accuracy issues, cybersecurity risks, unintended biases, and discriminatory outputs, before they arise.
Added
AI is a new and emerging technology in early stages of commercial use and presents a number of risks inherent in its use, including, but not limited to, ethical considerations, public perception, intellectual property protection, regulatory compliance, privacy concerns and data security, all of which could have a material adverse effect on our business, results of operations and financial position.
Added
As a result, we cannot predict future developments in AI and related impacts to our business and our industry. If we are unable to successfully and accurately develop, integrate and use AI technology, as well as address the risks and challenges associated with AI, our business, results of operations and financial position could be negatively impacted.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

26 edited+17 added−11 removed39 unchanged
Biggest changeIn addition, energy prices could increase as a result of climate change legislation or other environmental mandates, which could have an adverse effect on our results of operations. We could face potential product liability and warranty claims, we may not accurately estimate costs related to such claims, and we may not have sufficient insurance coverage available to cover such claims.
Biggest changeWe could also face increased costs related to defending and resolving legal claims and other litigation related to climate change and the alleged impact of our operations on climate change. In addition, energy prices could increase as a result of climate change legislation or other environmental mandates, which could have an adverse effect on our results of operations.
To the extent we cannot protect our innovations or are unable to enforce our intellectual property, unauthorized use and misuse of our intellectual property or innovations could harm our competitive position and have a material adverse impact on our business, financial condition and results of operations.
To the extent we cannot protect our innovations or are unable to enforce our intellectual property rights, unauthorized use and misuse of our intellectual property or innovations could harm our competitive position and have a material adverse impact on our business, financial condition and results of operations.
Our debt level and degree of leverage could have important consequences, including the following: • our ability to obtain additional debt or equity financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes may be limited; • a substantial portion of our cash flow could be required for the payment of principal and interest on our indebtedness, and may not be available for other business purposes; • certain of our available borrowings are at variable rates of interest, exposing us to the risk of increased interest rates to borrow in the future; • if due to liquidity needs we must replace any indebtedness upon maturity, we would be exposed to the risk that we may not be able to refinance such indebtedness; • our ability to adjust to changing market conditions may be limited and place us at a competitive disadvantage compared to our competitors if they have less debt; and • we may be vulnerable in a downturn in general economic conditions or in our business, or we may be unable to carry out important capital spending.
Our debt level and degree of leverage, particularly if we complete the Masonite acquisition, could have important consequences, including the following: • our ability to obtain additional debt or equity financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes may be limited; • a substantial portion of our cash flow could be required for the payment of principal and interest on our indebtedness, and may not be available for other business purposes; • certain of our available borrowings are at variable rates of interest, exposing us to the risk of increased interest rates to borrow in the future; • if due to liquidity needs we must replace any indebtedness upon maturity, we would be exposed to the risk that we may not be able to refinance such indebtedness; • our ability to adjust to changing market conditions may be limited and place us at a competitive disadvantage compared to our competitors if they have less debt; and • we may be vulnerable in a downturn in general economic conditions or in our business, or we may be unable to carry out important capital spending.
The current and future labor markets may impact our ability to retain these individuals. Labor shortages and increased turnover rates, increases in employee and employee-related costs, and labor disputes could have a material adverse impact on our operations, results of operations, liquidity and cash flows.
The current and future labor markets may impact our ability to retain these individuals. Labor shortages and increased turnover rates, increased employee-related costs, and labor disputes could have a material adverse impact on our operations, results of operations, liquidity and cash flows.
Our results of operations in a given period may be impacted by price volatility in certain renewable-generated energy markets. In connection with our sustainability goals to reduce greenhouse gas and toxic air emissions, we entered into contracts pursuant to which we have agreed to purchase renewable-generated electricity from third parties.
Our results of operations in a given period may be impacted by price volatility in certain renewable-generated energy markets. In connection with our sustainability goals to reduce GHG and toxic air emissions, we entered into contracts pursuant to which we have agreed to purchase renewable-generated electricity from third parties.
Several factors have had and may continue to have adverse effects on the labor force available to us, including government regulations, laws and regulations related to workers’ health and safety, inflation, wage and hour practices and immigration.
Several factors have had and may continue to have adverse effects on the labor force available to us, including general economic uncertainty, government regulations, laws and regulations related to workers’ health and safety, inflation, wage and hour practices and immigration.
In addition, from time to time, we establish strategies and expectations related to climate change and other environmental matters. Our ability to achieve any such strategies or expectations is subject to numerous factors and conditions, many of which are outside of our control.
In addition, from time to time, we establish targets, strategies and expectations related to climate change and other environmental matters. Our ability to achieve any such targets, strategies or expectations is subject to risks and uncertainties, many of which are outside of our control.
A significant or prolonged decrease in our market capitalization, including a decline in stock price, a negative Table of Contents -15- ITEM 1A. RISK FACTORS (continued) long-term performance outlook, or an increase in discount rates could result in an impairment of our tangible and intangible assets which results when the carrying value of the Company’s assets exceed their fair value.
A significant or prolonged decrease in our market capitalization, including a decline in stock price, a negative long-term performance outlook, or an increase in discount rates could result in an impairment of our tangible and intangible assets which results when the carrying value of the Company’s assets exceed their fair value.
At least annually, we assess our goodwill and intangible assets for impairment. When we utilize a discounted cash flow methodology to calculate the fair value of our reporting units, weak demand for a specific product line or business could result in an impairment.
At least annually, we assess our goodwill and intangible assets for impairment. When we utilize a discounted cash flow methodology to calculate the fair value of our reporting units, weak demand for a specific product line or business could result Table of Contents -16- ITEM 1A. RISK FACTORS (continued) in an impairment.
If our cash flows and capital resources are insufficient to fund our pension or OPEB obligations, we could be forced to reduce or delay investments and capital expenditures, seek additional capital, or restructure or refinance our indebtedness. Table of Contents -16- ITEM 1A.
If our cash flows and capital resources are insufficient to fund our pension or OPEB obligations, we could be forced to reduce or delay investments and capital expenditures, seek additional capital, or restructure or refinance our indebtedness.
Additionally, instruments and agreements governing our future indebtedness may impose other restrictive conditions or covenants that could restrict our ability to conduct our business operations or pursue growth strategies. Table of Contents -14- ITEM 1A. RISK FACTORS (continued) Downgrades of our credit ratings could adversely impact us. Our credit ratings are important to our cost of capital.
Additionally, instruments and agreements governing our future indebtedness may impose other restrictive conditions or covenants that could restrict our ability to conduct our business operations or pursue growth strategies. Downgrades of our credit ratings could adversely impact us. Our credit ratings are important to our cost of capital.
Proposed or future laws or regulations aimed at addressing climate change, including, but not limited to, local building codes, Environmental Protection Agency regulations on greenhouse gas emissions, the European Green Deal, laws or regulations impacting energy supply, and other laws or regulations, may materially impact demand for our products or our cost of doing business.
RISK FACTORS (continued) Proposed or future laws or regulations aimed at addressing climate change, including, but not limited to, local building codes, Environmental Protection Agency regulations on greenhouse gas emissions ( “ GHG ”) , laws or regulations impacting energy supply, and other laws or regulations, may materially impact demand for our products or our cost of doing business.
Owens Corning relies on its intellectual property, including numerous patents, trademarks, trade secrets, confidential information, as well as its licensed intellectual property, to differentiate our products and brands in the marketplace.
We rely on our intellectual property, including numerous patents, trademarks, trade secrets, confidential information, as well as our licensed intellectual property, to differentiate our products and brands in the marketplace.
RISK FACTORS (continued) RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK The market price of our common stock is subject to volatility. The market price of our common stock could be subject to wide fluctuations in response to numerous factors, many of which are beyond our control.
The market price of our common stock could be subject to wide fluctuations in response to numerous factors, many of which are beyond our control.
If any significant judgment or claim is not fully insured or indemnified against, it could have a material adverse impact on our business, financial condition and results of operations. FINANCIAL RISKS Our level of indebtedness could adversely impact our business, financial condition or results of operations.
If any significant judgment or claim is not fully insured or indemnified against, it could have a material adverse impact on our business, financial condition and results of operations. FINANCIAL RISKS Our level of indebtedness could adversely impact our business, financial condition or results of operations. At December 31, 2023, we had total debt of approximately $3.0 billion.
Even if we have agreements to indemnify us, indemnifying parties may be unable or unwilling to do so. We are subject to various legal and regulatory proceedings, including litigation in the ordinary course of business, and uninsured judgments or a rise in insurance premiums may have a material adverse impact on our business, financial condition and results of operations.
RISK FACTORS (continued) We are subject to various legal and regulatory proceedings, including litigation in the ordinary course of business, and uninsured judgments or a rise in insurance premiums may have a material adverse impact on our business, financial condition and results of operations.
The major debt rating agencies routinely evaluate our debt based on a number of factors, which include financial strength and business risk as well as transparency with rating agencies and timeliness of financial reporting.
The major debt rating agencies routinely evaluate our debt based on a number of factors, which include financial strength and business risk as well as transparency with rating agencies and timeliness of financial reporting. A downgrade in our debt rating could result in increased interest on our existing variable Table of Contents -15- ITEM 1A.
Examples of such factors include, but are not limited to, evolving regulatory and other standards, processes, and assumptions, the pace of scientific and technological developments, increased costs and availability of requisite financing, market trends that may alter business opportunities, the conduct of third-party manufacturers and suppliers, constraints or disruptions to our supply chain, and changes in carbon markets.
These risks and uncertainties include, but are not limited to, our ability to execute our strategies and achieve our goals within the currently projected costs and expected timeframes, availability, use and success of on and off-site renewable energy, evolving regulatory and other standards, processes, and assumptions, the pace of scientific and technological developments, increased costs and availability of requisite financing, market trends that may alter business opportunities, the conduct of third-party manufacturers and suppliers, constraints or disruptions to our supply chain, and changes in carbon markets.
Current employees, contractors and suppliers have, and former employees, contractors and suppliers may have, access to trade secrets and confidential information regarding our operations that could be disclosed improperly and in breach of contract to our competitors or otherwise used to harm us. Table of Contents -13- ITEM 1A.
Current employees, contractors and suppliers have, and former employees, contractors and suppliers may have, access to trade secrets and confidential information regarding our operations that could be disclosed improperly and in breach of contract to our competitors or otherwise used to harm us. Third parties may also claim that we are infringing upon their intellectual property rights.
Dividends on our common stock are declared at the discretion of our Board of Directors. Since February 2014, our Board of Directors has declared a quarterly dividend on our common stock.
Table of Contents -18- ITEM 1A. RISK FACTORS (continued) Dividend payments on our common stock are not guaranteed and are declared at the discretion of our Board of Directors. Since February 2014, our Board of Directors has declared a quarterly dividend on our common stock.
Failures or delays (whether actual or perceived) in achieving our strategies or expectations related to climate change and other environmental matters could adversely affect our business, operations, and reputation, and increase risk of litigation.
There are no assurances that we will be able to successfully execute our strategies and achieve our targets. Failures or delays (whether actual or perceived) to achieve our targets or strategies related to climate change and other environmental matters could damage our reputation, customer and investor relationships, adversely affect our business, operations and increase risk of litigation.
Our businesses are capital intensive, and regularly require capital expenditures to expand operations, maintain equipment, increase operating efficiency and comply with applicable laws and regulations, leading to high fixed costs, including depreciation expense. Increased regulatory requirements for our operations could lead to additional or higher fixed costs in the future.
Our operations require substantial capital, leading to high levels of fixed costs that will be incurred regardless of our level of business activity. Our businesses are capital intensive, and regularly require capital expenditures to expand operations, maintain equipment, increase operating efficiency and comply with applicable laws and regulations, leading to high fixed costs, including depreciation expense.
Even if we believe that such intellectual property claims are without merit, defending such claims can be costly, time consuming and require significant resources. Claims of intellectual property infringement also may require us to redesign affected products, pay costly damage awards, or face injunctions prohibiting us from manufacturing, importing, marketing or selling certain of our products.
Claims of intellectual property infringement also may require us to redesign affected products, pay costly damage awards, or face injunctions prohibiting us from manufacturing, importing, marketing or selling certain of our products. Even if we have agreements to indemnify us, indemnifying parties may be unable or unwilling to do so. Table of Contents -14- ITEM 1A.
RISK FACTORS (continued) Third parties may also claim that we are infringing upon their intellectual property rights. If we are unable to successfully defend or license such alleged infringing intellectual property or if we are required to substitute similar technology from another source, our operations could be adversely affected.
If we are unable to successfully defend or license such alleged infringing intellectual property or if we are required to substitute similar technology from another source, our operations could be adversely affected. Even if we believe that such intellectual property claims are without merit, defending such claims can be costly, time consuming and require significant resources.
A downgrade in our debt rating could result in increased interest on our existing variable interest rate debt, increased interest and other expenses for future borrowings, and reduced ability for our suppliers to utilize supply chain financing programs.
RISK FACTORS (continued) interest rate debt, increased interest and other expenses for future borrowings, and reduced ability for our suppliers to utilize supply chain financing programs. Downgrades in our debt rating could also restrict our access to capital markets and affect the value and marketability of our outstanding senior notes.
Our operations depend on the availability and relative costs of labor and maintaining good relations with our personnel and the labor unions. While we have historically experienced some level of ordinary course turnover of employees, the impact of the COVID-19 pandemic and general economic uncertainty have exacerbated labor shortages and increased turnover.
Our operations depend on the availability and relative costs of labor and maintaining good relations with our personnel and the labor unions.
Removed
ITEM 1A. RISK FACTORS (continued) which will be charged against income from future operations.
Added
We believe it is likely that the scientific and political attention to issues concerning the extent and causes of climate change will continue, with new and more restrictive laws and regulations focusing on environmental, social and governance (“ESG”) initiatives that could affect our financial condition, results of operations and cash flows.
Removed
Present and future environmental laws and regulations applicable to our operations, and changes in their interpretation, may require substantial capital expenditures or may require or cause us to modify or curtail our operations, which may have a material adverse impact on our business, financial condition and results of operations.
Added
Foreign, federal, state and local regulatory and legislative bodies have enacted or proposed various legislative and regulatory measures relating to increased transparency and standardization of reporting matters that may include climate change, regulating GHG emissions, water usage, recycling of plastic materials, and energy policies, including waste tax, and other governmental charges and mandates.
Removed
Although emerging in nature, an increasing number of laws and regulations focused on product and chemical hazards, including regulations concerning the impact of product manufacturing and use on climate change, and resulting preferential product selection could also impact our ability to manufacture and sell certain products or require significant research and development investment and capital expenditures to meet regulatory requirements.
Added
As a result, we expect to be subject to overlapping, yet distinct, climate-related disclosure requirements in multiple jurisdictions.
Removed
Our products are used and have been used in a wide variety of residential, commercial and industrial applications.
Added
Compliance with foreign, federal, state and local legislation and regulations concerning climate-related disclosures, including compliance with the European Commission’s Corporate Sustainability Reporting Directive and the SEC’s proposed climate disclosure requirements, may result in additional costs and capital expenditures, and the failure to comply with such legislation and regulations could result in fines to us and could affect our business, financial condition, results of operations and cash flows.
Removed
We face an inherent business risk of exposure to product liability or other claims in the event our products are alleged to be defective or that the use of our products is alleged to have resulted in harm to others or to property. We may, in the future, incur liability if product liability lawsuits against us are successful.
Added
On February 8, 2024, we entered into a definitive agreement to acquire Masonite International Corporation ("Masonite"), subject to the satisfaction or waiver of specified conditions.
Removed
Moreover, any such lawsuits, whether or not successful, could result in adverse publicity to us, which could cause our sales to decline.
Added
We expect to incur approximately $3.0 billion of debt to pay a substantial portion of the purchase price for the acquisition of Masonite, as well as assume up to $875 million of Masonite’s senior unsecured notes.
Removed
We maintain insurance coverage to protect us against product liability claims, but that coverage may not be adequate to cover all claims that may arise or we may not be able to maintain adequate insurance coverage in the future at an acceptable cost.
Added
Increased regulatory requirements for our operations could lead to additional or higher fixed costs in the future.
Removed
Any liability not covered by insurance or that exceeds our established reserves could materially and adversely impact our business, financial condition and results of operations. In addition, consistent with industry practice, we provide warranties on many of our products.
Added
RISKS RELATED TO OUR PLANNED ACQUISITION OF MASONITE Our planned acquisition of Masonite may not occur at all or may not occur in the expected time frame, which may negatively affect the trading prices of our stock and our future business and financial results.
Removed
We may experience costs of warranty claims when the product is not performing to the satisfaction of the claimant even though it has not caused harm to others or property.
Added
Completion of the planned acquisition of Masonite is subject to the satisfaction or waiver of customary and other closing conditions. The acquisition is not assured and is subject to risks and uncertainties, including the risk that the necessary regulatory approvals or shareholder approval will not be obtained or that other closing conditions will not be satisfied.
Removed
We estimate our future warranty costs based on historical trends and product sales, but we may fail to accurately estimate those costs and thereby fail to establish adequate warranty reserves for them. Warranty claims are not insurable.
Added
We cannot predict whether and when such approvals will be received, or such conditions will be satisfied. Table of Contents -17- ITEM 1A. RISK FACTORS (continued) Our obligation to complete the planned acquisition of Masonite is not subject to a financing condition. Our obligation to complete the planned acquisition of Masonite is not subject to a financing condition.
Removed
Downgrades in our debt rating could also restrict our access to capital markets and affect the value and marketability of our outstanding notes. Our operations require substantial capital, leading to high levels of fixed costs that will be incurred regardless of our level of business activity.
Added
We have obtained committed financing for $3.0 billion to pay a substantial portion of the purchase price for the acquisition of Masonite.
Added
If any of the banks in the committed financing facility are unable to perform their commitments, we may be required to finance a portion of the purchase price of the planned acquisition at interest rates higher than currently expected. We may not realize the growth opportunities and cost synergies that are anticipated from the planned acquisition of Masonite.
Added
The benefits that are expected to result from the planned acquisition of Masonite will depend, in part, on our ability to realize the anticipated growth opportunities and cost synergies as a result of the planned acquisition. Our success in realizing these growth opportunities and cost synergies, and the timing of this realization, depends on the successful integration of Masonite.
Added
There can be no assurance that we will successfully or cost-effectively integrate Masonite. The failure to do so could have a material adverse effect on our business, financial condition, and results of operations.
Added
Even if we are able to integrate Masonite successfully, this integration may not result in the realization of the full benefits of the growth opportunities and cost synergies that we currently expect from this integration, and we cannot guarantee that these benefits will be achieved within anticipated time frames or at all.
Added
For example, we may not be able to eliminate duplicative costs. Additionally, we may incur substantial expenses in connection with the integration of Masonite. While it is anticipated that certain expenses will be incurred to achieve cost synergies, such expenses are difficult to estimate accurately, and may exceed current estimates.
Added
Accordingly, the benefits from the planned acquisition may be offset by costs incurred to, or delays in, integrating the businesses. RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK The market price of our common stock is subject to volatility.

Item 2. Properties

Properties — owned and leased real estate

5 edited+0 added−1 removed2 unchanged
Biggest changePrincipal manufacturing facilities for our Composites segment, all of which are owned by the Company, include the following: Aiken, South Carolina Jackson, Tennessee Amarillo, Texas Kimchon, Korea Anderson, South Carolina L’Ardoise, France Apeldoorn, The Netherlands Rio Claro, Brazil Danville, Illinois Taloja, India Fort Smith, Arkansas Tlaxcala, Mexico Gastonia, North Carolina Yuhang, China Insulation Our Insulation segment operates out of 42 manufacturing facilities.
Biggest changePrincipal manufacturing facilities for our Composites segment, all of which are owned by the Company, include the following: Aiken, South Carolina Hangzhou, China Amarillo, Texas Jackson, Tennessee Anderson, South Carolina Kimchon, Korea Apeldoorn, The Netherlands L’Ardoise, France Danville, Illinois Rio Claro, Brazil Fort Smith, Arkansas Taloja, India Gastonia, North Carolina Tlaxcala, Mexico We believe that these properties are in good condition and well maintained, and are suitable and adequate to carry on our business.
Principal manufacturing facilities for our Insulation segment, all of which are owned by the Company, include the following: Delmar, New York Rockford, Illinois Edmonton, Alberta, Canada Sedalia, Missouri Fairburn, Georgia Tallmadge, Ohio Guangzhou, Guandong, China Tessenderlo, Belgium Hällekis, Sweden Toronto, Ontario, Canada Joplin, Missouri Trzemeszno, Poland Kansas City, Kansas Vilnius, Lithuania Mexico City, Mexico Wabash, Indiana Newark, Ohio Waxahachie, Texas Roofing Our Roofing segment operates out of 36 manufacturing facilities.
Principal manufacturing facilities for our Insulation segment, all of which are owned by the Company, include the following: Delmar, New York Rockford, Illinois Edmonton, Alberta, Canada Sedalia, Missouri Fairburn, Georgia Tallmadge, Ohio Guangzhou, Guandong, China Tessenderlo, Belgium Hällekis, Sweden Toronto, Ontario, Canada Joplin, Missouri Trzemeszno, Poland Kansas City, Kansas Vilnius, Lithuania Mexico City, Mexico Waxahachie, Texas Newark, Ohio Composites Our Composites segment operates out of 29 manufacturing facilities.
Principal manufacturing facilities for our Roofing segment, all of which are owned by the Company, include the following: Brookville, Indiana Minneapolis, Minnesota Denver, Colorado Portland, Oregon Irving, Texas Qingdao, China Kearny, New Jersey Savannah, Georgia Medina, Ohio Silvassa, India Memphis, Tennessee Summit, Illinois We believe that these properties are in good condition and well maintained, and are suitable and adequate to carry on our business.
Principal manufacturing facilities for our Roofing segment, all of which are owned by the Company, include the following: Brookville, Indiana Minneapolis, Minnesota Denver, Colorado Portland, Oregon Irving, Texas Savannah, Georgia Kearny, New Jersey Silvassa, India Medina, Ohio Summit, Illinois Memphis, Tennessee Insulation Our Insulation segment operates out of 41 manufacturing facilities.
The Company ceased operations at the Santa Clara, California facility in the fourth quarter of 2022 and plans to complete the purchase and sale transaction in the first quarter of 2023.
The Company ceased operations at the Wabash, Indiana facility in the fourth quarter of 2023.
This number separately counts multiple roofing and asphalt manufacturing facilities that are located at the same site.
ITEM 2. PROPERTIES Roofing Our Roofing segment operates out of 33 manufacturing facilities. This number separately counts multiple roofing and asphalt manufacturing facilities that are located at the same site. In connection with our exit of the Protective Packaging business, the Company has ceased operations at the Qingdao, China facility.
Removed
ITEM 2. PROPERTIES Composites Our Composites segment operates out of 29 manufacturing facilities. We are currently expanding our operations in Fort Smith, Arkansas, and we expect this new capacity to be available in 2023. In 2022, we divested the Chambery, France and Gous, Russia facilities and acquired the Danville, Illinois (Fiberteq) facility.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

8 edited+1 added−2 removed0 unchanged
Biggest changeChambers (56) Board Chair, President and Chief Executive Officer since April 2020; formerly President and Chief Executive Officer (2019); formerly President and Chief Operating Officer (2018); formerly President, Roofing (2014) Todd W.
Biggest changeChambers (57) Board Chair, President and Chief Executive Officer since April 2020; formerly President and Chief Executive Officer (2019); formerly President and Chief Operating Officer (2018) Nicolas Del Monaco (46) President, Insulation since September 2023; formerly Senior Vice President and Managing Director, Europe (2021); formerly Vice President for Non-Wovens and Glass Reinforcements Europe (2018) Mari K.
Each executive officer holds office until his or her successor is elected and qualified or until his or her earlier resignation, retirement or removal. All those listed have been employees of Owens Corning during the past five years except as indicated. Name and Age Position* Gina A.
Each executive officer holds office until his or her successor is elected and qualified or until his or her earlier resignation, retirement or removal. All of the listed executive officers have been employees of Owens Corning during the past five years except as indicated below. Name and Age Position* Gina A.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. Table of Contents -19- INFORMATION ABOUT OUR EXECUTIVE OFFICERS The name, age and business experience during the past five years of Owens Corning’s executive officers as of January 1, 2023 are set forth below.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. Table of Contents -23- INFORMATION ABOUT OUR EXECUTIVE OFFICERS The name, age and business experience during the past five years of Owens Corning’s executive officers as of January 1, 2024 are set forth below.
Beredo (48) Executive Vice President, General Counsel and Corporate Secretary since June 2021; formerly Executive Vice President, General Counsel and Corporate Secretary of Nordson Corporation (a precision technology manufacturing company) (NASDAQ: NDSN) (2018); and Deputy General Counsel and Assistant Secretary of Nordson Corporation (2013) Brian D.
Beredo (49) Executive Vice President, General Counsel and Corporate Secretary since June 2021; formerly Executive Vice President, General Counsel and Corporate Secretary of Nordson Corporation (a precision technology manufacturing company) (NASDAQ: NDSN) (2018) Brian D.
Smith (49) President, Roofing since August 2018, formerly Vice President of Distribution Sales for Roofing (2012) * Information in parentheses indicates year during the past five years in which service in position began. The last item listed for each individual represents the position held by such individual at the beginning of the five-year period. Table of Contents -20- Part II
Smith (50) President, Roofing since August 2018 * Information in parentheses indicates year during the past five years in which service in position began. The last item listed for each individual represents the position held by such individual at the beginning of the five-year period. Table of Contents -24- Part II
Méndez-Andino (49) Executive Vice President, Chief Research and Development Officer since April 2021; formerly Vice President of Science and Technology for Insulation and Roofing (2019); formerly Vice President of Science and Technology for Insulation (2015) Kenneth S.
Méndez-Andino (50) Executive Vice President, Chief Research and Development Officer since April 2021; formerly Vice President of Science and Technology for Insulation and Roofing (2019); formerly Vice President of Science and Technology for Insulation (2015) Paula J.
Russell (45) Executive Vice President, Chief Human Resources Officer since January 2021; formerly Senior Vice President, Chief Human Resources Officer (December 2019); formerly Vice President, Chief Human Resources Officer (April 2019); formerly Vice President of Total Rewards and Center of Excellence (2018); formerly Vice President of Total Rewards (2017) Marcio A.
Russell (46) Executive Vice President, Chief Human Resources Officer since January 2021; formerly Senior Vice President, Chief Human Resources Officer (December 2019); formerly Vice President, Chief Human Resources Officer (April 2019); formerly Vice President of Total Rewards and Center of Excellence (2018) Marcio A. Sandri (60) President, Composites since May 2018 Gunner S.
Fister (48) President, Insulation since July 2019; formerly Vice President of Global Insulation and Strategy (2019); formerly Vice President and Managing Director for Europe Insulation and Global Foamglas® (2018); formerly Vice President and Managing Director for Foamglas® (2017) José L.
Fister (49) Executive Vice President and Chief Financial Officer since September 2023; formerly President, Insulation (2019); formerly Vice President of Global Insulation and Strategy (2019); formerly Vice President and Managing Director for Europe Insulation and Global Foamglas® (2018) José L.
Removed
Parks (59) Executive Vice President and Chief Financial Officer since January 2021; formerly Senior Vice President and Chief Financial Officer (2020); formerly Chief Financial Officer of Mylan N.V. (a specialty pharmaceuticals company) (NASDAQ: MYLN) (2016) Paula J.
Added
Doerfler (41) Vice President and Controller since April 2023; formerly Assistant Controller (2021); formerly Americas Accounting Director (2019); formerly Global Internal Controls Leader (2016) Todd W.
Removed
Sandri (59) President, Composites since May 2018; formerly Vice President Global Strategy and Operations, Composites (2017) Kelly J. Schmidt (57) Vice President, Controller since April 2011 Daniel T. Smith (57) Executive Vice President, Chief Growth Officer since January 2021; formerly Senior Vice President, Chief Growth Officer (2019); formerly Senior Vice President, Organization and Administration (2014) Gunner S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePerformance Graph 2017 2018 2019 2020 2021 2022 OC $ 100 $ 48 $ 73 $ 86 $ 104 $ 100 S&P 500 $ 100 $ 96 $ 126 $ 149 $ 192 $ 157 DJ Constr. & Mat. $ 100 $ 78 $ 113 $ 140 $ 209 $ 162 Peer Group $ 100 $ 84 $ 117 $ 143 $ 196 $ 139 The peer group index is comprised of the following companies: A.O Smith Corporation; Advance Drainage Systems, Inc.; Allegion plc; Armstrong World Industries, Inc.; Ball Corporation; Builders FirstSource, Inc.; Carlisle Companies Incorporated; Carrier Global Corporation; Celanese Corporation; Eastman Chemical Company; Fortune Brands Innovations, Inc.; Greif, Inc.; JELD-WEN Holding, Inc.; Johnson Controls International plc; Lennox International Inc.; Louisiana-Pacific Corporation; Masco Corporation; Masonite International Corporation; Mohawk Industries, Inc.; O-I Glass, Inc.; PPG Industries, Inc.; Resideo Technologies, Inc.; RPM International Inc.
Biggest changeSmith Corporation; Advance Drainage Systems, Inc.; Allegion plc; Armstrong World Industries, Inc.; Ball Corporation; Builders FirstSource, Inc.; Carlisle Companies Incorporated; Carrier Global Corporation; Celanese Corporation; Eastman Chemical Company; Fortune Brands Innovations, Inc.; Greif, Inc.; JELD-WEN Holding, Inc.; Johnson Controls International plc; Lennox International Inc.; Louisiana-Pacific Corporation; Masco Corporation; Masonite International Corporation; Mohawk Industries, Inc.; O-I Glass, Inc.; PPG Industries, Inc.; Resideo Technologies, Inc.; RPM International Inc.; Stanley Black & Decker, Inc.; The Sherwin-Williams Company; Trane Technologies; Trex Company, Inc.; and UFP Industries, Inc.
The criteria used in determining this new peer group included the size of the companies (measured in terms of annual revenue and market capitalization), industries and geographies in which the companies operate, stock price correlation and volatility relative to Owens Corning, and increased representation of comparator companies used by shareholder advisory firms.
The criteria used in determining this peer group included the size of the companies (measured in terms of annual revenue and market capitalization), industries and geographies in which the companies operate, stock price correlation and volatility relative to Owens Corning, and increased representation of comparator companies used by shareholder advisory firms.
ITEM 5. MARKET FOR OWENS CORNING’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Owens Corning’s common stock trades on the New York Stock Exchange under the symbol “OC.” Holders of Common Stock The number of stockholders of record of Owens Corning’s common stock on February 10, 2023 was 57.
ITEM 5. MARKET FOR OWENS CORNING’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Owens Corning’s common stock trades on the New York Stock Exchange under the symbol “OC.” Holders of Common Stock The number of stockholders of record of Owens Corning’s common stock on February 9, 2024 was 55.
Issuer Purchases of Equity Securities The following table provides information about Owens Corning’s purchases of its common stock during the three months ended December 31, 2022: 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 of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs** October 1-31, 2022 1,600,000 $ 84.54 1,600,000 5,797,220 November 1-30, 2022 1,406,133 87.81 1,400,000 4,397,220 December 1-31, 2022 1,771 91.07 — 14,397,220 Total 3,007,904 $ 86.07 3,000,000 14,397,220 * The Company retained 7,904 shares surrendered to satisfy tax withholding obligations in connection with the vesting of restricted shares granted to our employees. ** On February 14, 2022, 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 “February 2022 Repurchase Authorization”).
Issuer Purchases of Equity Securities The following table provides information about Owens Corning’s purchases of its common stock during the three months ended December 31, 2023: 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 of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs** October 1-31, 2023 1,001 $ 132.31 — 10,767,634 November 1-30, 2023 1,492,377 129.00 1,485,065 9,282,569 December 1-31, 2023 344,062 143.08 337,367 8,945,202 Total 1,837,440 $ 131.64 1,822,432 8,945,202 * The Company retained 15,008 shares surrendered to satisfy tax withholding obligations in connection with the vesting of restricted stock units granted to our employees. ** The Board of Directors approved two share repurchase programs in 2022 under which the Company is authorized to repurchase up to an aggregate of 20 million shares of the Company's outstanding common stock (the “Repurchase Authorization”).
Table of Contents -21- ITEM 5. MARKET FOR OWENS CORNING’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (continued) The Repurchase Authorization enables the Company to repurchase shares through the open market, privately negotiated, or other transactions. The actual number of shares repurchased depends on timing, market conditions and other factors and is at the Company’s discretion.
The Repurchase Authorization enables the Company to repurchase shares through the open market, privately negotiated or other transactions. The actual number of shares repurchased will depend on timing, market conditions and other factors and will be at the Company's discretion.
Performance Graph The annual changes for the five-year period shown in the graph on this page are based on the assumption that $100 had been invested in Owens Corning (OC) stock, the Standard & Poor’s 500 Stock Index (“S&P 500”), the Dow Jones U.S.
MARKET FOR OWENS CORNING’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (continued) Performance Graph The annual changes for the five-year period shown in the graph on this page are based on the assumption that $100 had been invested in Owens Corning (OC) stock, the Standard & Poor’s 500 Stock Index (“S&P 500”), and a peer group index on December 31, 2018, and that all quarterly dividends were reinvested.
The Company repurchased 3.0 million shares of its common stock for $259 million during the three months ended December 31, 2022 under the Repurchase Authorization.
The Company repurchased 1.8 million shares of its common stock for $238 million, inclusive of applicable taxes, during the three months ended December 31, 2023 under the Repurchase Authorization. As of December 31, 2023, 8.9 million shares remain available for repurchase under the Repurchase Authorization. Table of Contents -25- ITEM 5.
For December 31, 2022, the Company chose to use a self-selected peer group instead of the Dow Jones U.S. Construction & Materials Index. We have selected this new peer group consisting of the companies noted below because we believe this peer group more appropriately aligns with our specific industry, markets, and global exposure.
The total cumulative dollar returns shown on the graph represent the value that such investments would have had on December 31, 2023. We chose to use a self-selected peer group consisting of the companies noted below to include in the performance graph as we believe this peer group aligns with our specific industry, markets, and global exposure.
Removed
On December 1, 2022, the Board of Directors approved a new share buy-back program under which the Company is authorized to repurchase up to 10 million shares of the Company’s outstanding common stock (the “December 2022 Repurchase Authorization”). The December 2022 Repurchase Authorization is in addition to the February 2022 Repurchase Authorization (together, the “Repurchase Authorization”).
Added
Performance Graph 2018 2019 2020 2021 2022 2023 OC $ 100 $ 151 $ 178 $ 215 $ 206 $ 365 S&P 500 $ 100 $ 131 $ 156 $ 200 $ 164 $ 207 Peer Group $ 100 $ 140 $ 171 $ 235 $ 166 $ 222 The peer group index is comprised of the following companies: A.O.
Removed
As of December 31, 2022, approximately 14.4 million shares remained available for repurchase under the Repurchase Authorization.
Removed
Construction & Materials Index (“DJ Constr. & Mat.”), and a peer group index on December 31, 2017, and that all quarterly dividends were reinvested. The total cumulative dollar returns shown on the graph represent the value that such investments would have had on December 31, 2022.
Removed
Stanley Black & Decker, Inc.; The Sherwin-Williams Company; Trane Technologies; Trex Company, Inc.; and UFP Industries, Inc.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeThe following table presents the impact and respective location of these income (expense) items on the Consolidated Statements of Earnings (Loss) (in millions): Twelve Months Ended December 31, Location 2022 2021 2020 Restructuring costs Cost of sales $ (42) $ (14) $ (26) Restructuring costs Marketing and administrative expenses — (2) — Severance Other expenses (income), net (1) (11) (13) Other exit gains/(costs) Other expenses (income), net (5) (5) (2) Gain on sale of land in India Other expenses (income), net — 15 — Restructuring costs Non-operating (income) expense — (2) — Recognition of acquisition inventory fair value step-up Cost of sales — (1) — Acquisition and divestiture-related costs Marketing and administrative expenses (7) — — Gain on sale of Shanghai, China facility Other expenses (income), net 27 — — Loss on sale of Chambery, France DUCS business Other expenses (income), net (30) — — Gain on remeasurement of Fiberteq equity investment Gain on equity method investment 130 — — Loss on sale of Russian operations Other expenses (income), net (33) — — Total restructuring, acquisition and divestiture-related gains (costs) $ 39 $ (20) $ (41) Table of Contents -27-
Biggest changeThe following table presents the impact and respective location of total restructuring, acquisition and divestiture-related costs on the Consolidated Statements of Earnings (in millions): Twelve Months Ended December 31, Location 2023 2022 2021 Restructuring costs Cost of sales $ (102) $ (42) $ (14) Restructuring costs Marketing and administrative expenses (2) — (2) Severance Other expense (income), net (34) (1) (11) Other exit costs Other expense (income), net (31) (5) (5) Gain on sale of land in India Other expense (income), net — — 15 Restructuring costs Non-operating (income) expense — — (2) Recognition of acquisition inventory fair value step-up Cost of sales — — (1) Acquisition and divestiture-related costs Marketing and administrative expenses — (7) — Gain on sale of Santa Clara, California site Gain on sale of site 189 — — Gain on sale of Shanghai, China facility Other expense (income), net — 27 — Loss on sale of Chambery, France DUCS business Other expense (income), net — (30) — Gain on remeasurement of Fiberteq equity investment Gain on equity method investment — 130 — Loss on sale of Russian operations Other expense (income), net — (33) — Total restructuring, acquisition and divestiture-related gains (costs) $ 20 $ 39 $ (20) Table of Contents -31-
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
ITEM 6. RESERVED Table of Contents -22- ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management’s Discussion and Analysis ( “ MD&A ” ) is intended to help investors understand Owens Corning, our operations and our present business environment.
ITEM 6. RESERVED Table of Contents -26- ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management’s Discussion and Analysis ( “ MD&A ” ) is intended to help investors understand Owens Corning, our operations and our present business environment.
GENERAL Owens Corning is a global building and construction materials leader committed to building a sustainable future through material innovation. The Company has three reporting segments: Composites, Insulation and Roofing. Through these lines of business, the Company manufactures and sells products worldwide. We maintain leading market positions in many of our major product categories.
GENERAL Owens Corning is a global building and construction materials leader committed to building a sustainable future through material innovation. The Company has three reporting segments: Roofing, Insulation and Composites. Through these lines of business, the Company manufactures and sells products worldwide. We are a market leader in many of our major product categories.
MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes thereto contained in this report. Unless the context requires otherwise, the terms “Owens Corning,” “Company,” “we,” “its,” and “our” in this report refer to Owens Corning and its subsidiaries.
MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes thereto contained in this report. Unless the context requires otherwise, the terms “Owens Corning,” “Company,” “we,” “its,” and “our” in this Annual Report on Form 10-K refer to Owens Corning and its subsidiaries.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Restructuring, Acquisition and Divestiture-Related Costs The Company has incurred restructuring, transaction and integration costs related to acquisitions and divestitures, along with restructuring and other exit costs in connection with its global cost reduction, productivity initiatives and growth strategy. These costs are recorded within Corporate, Other and Eliminations.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Restructuring, Acquisition and Divestiture-Related Costs The Company has incurred restructuring, transaction and integration costs related to acquisitions and divestitures, along with restructuring and other exit costs in connection with its global cost reduction, product line and productivity initiatives and growth strategy.
The Company’s effective tax rate for 2022 was 23% on pre-tax income of $1,614 million. The difference between the 23% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily due to U.S. state and local income tax expense, adjustments to R&D tax credits, and other discrete adjustments.
The Company’s effective tax rate for 2023 was 25% on pre-tax income of $1,591 million. The difference between the 25% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily due to U.S. state and local income tax expense. The Company’s effective tax rate for 2022 was 23% on pre-tax income of $1,614 million.
This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) RESULTS OF OPERATIONS Consolidated Results (in millions) Twelve Months Ended December 31, 2022 2021 2020 Net sales $ 9,761 $ 8,498 $ 7,055 Gross margin $ 2,616 $ 2,217 $ 1,610 % of net sales 27 % 26 % 23 % Marketing and administrative expenses $ 803 $ 757 $ 664 Goodwill impairment charge $ — $ — $ 944 Gain on equity method investment $ (130) $ — $ — Other expenses (income), net $ 123 $ (69) $ 58 Earnings (loss) before interest and taxes $ 1,723 $ 1,448 $ (124) Interest expense, net $ 109 $ 126 $ 132 Loss on extinguishment of debt $ — $ 9 $ — Income tax expense $ 373 $ 319 $ 129 Net earnings (loss) attributable to Owens Corning $ 1,241 $ 995 $ (383) 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.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) RESULTS OF OPERATIONS Consolidated Results (in millions) Twelve Months Ended December 31, 2023 2022 2021 Net sales $ 9,677 $ 9,761 $ 8,498 Gross margin $ 2,683 $ 2,616 $ 2,217 % of net sales 28 % 27 % 26 % Marketing and administrative expenses $ 831 $ 803 $ 757 Gain on equity method investment $ — $ (130) $ — Gain on sale of site $ (189) $ — $ — Other expense (income), net $ 106 $ 123 $ (69) Non-operating expense (income), net $ 145 $ (9) $ (10) Earnings before interest and taxes $ 1,667 $ 1,723 $ 1,448 Interest expense, net $ 76 $ 109 $ 126 Loss on extinguishment of debt $ — $ — $ 9 Income tax expense $ 401 $ 373 $ 319 Net earnings attributable to Owens Corning $ 1,196 $ 1,241 $ 995 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.
GAIN ON EQUITY METHOD INVESTMENT As discussed above, the Company recognized a non-cash gain of $130 million from the remeasurement of the previously held equity method investment in Fiberteq upon the Company’s acquisition of the remaining 50% of the joint venture with IKO. OTHER EXPENSES (INCOME), NET Other expenses (income), net increased $192 million in 2022 compared to 2021.
GAIN ON EQUITY METHOD INVESTMENT In 2022, the Company recognized a non-cash gain of $130 million from the remeasurement of the previously held equity method investment in Fiberteq, LLC upon the Company’s acquisition of the remaining 50% of the joint venture with IKO.
The difference between the 24% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily attributable to U.S. state and local income tax expense, adjustments to foreign tax credits, and other discrete adjustments. Table of Contents -26- ITEM 7.
The difference between the 23% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily attributable to U.S. state and local income tax expense, adjustments to R&D tax credits, and other adjustments. See Note 20 for additional information. Table of Contents -30- ITEM 7.
The Company generated $1,762 million in adjusted earnings before interest and taxes (“Adjusted EBIT”) in 2022 compared to $1,415 million in 2021. See the Adjusted Earnings Before Interest and Taxes paragraph of MD&A for further information regarding EBIT and Adjusted EBIT, including the reconciliation to net earnings (loss) attributable to Owens Corning.
See the Adjusted Earnings Before Interest and Taxes paragraph of the MD&A for further information regarding Adjusted EBIT, including the reconciliation to net earnings attributable to Owens Corning.
Please refer to Note 13 of the Consolidated Financial Statements for further information on the nature of these costs.
These costs are recorded within Corporate, Other and Eliminations. Please refer to Note 12 of the Consolidated Financial Statements for further information on the nature of these costs.
EXECUTIVE OVERVIEW Net earnings attributable to Owens Corning were $1,241 million in 2022, compared to $995 million in 2021. The Company reported $1,723 million in earnings before interest and taxes (“EBIT”) in 2022 compared to $1,448 million in 2021.
EXECUTIVE OVERVIEW Net earnings attributable to Owens Corning were $1,196 million in 2023, compared to $1,241 million in 2022. The Company generated $1,805 million in adjusted earnings before interest and taxes (“Adjusted EBIT”) in 2023 compared to $1,762 million in 2022.
Segment EBIT performance compared to 2021 increased $122 million in our Composites segment, increased $166 million in our Insulation segment, and increased $78 million in our Roofing segment. Within our Corporate, Other and Eliminations category, General corporate expenses and other increased by $19 million.
Segment earnings before interest and taxes (“EBIT”) performance compared to 2022 increased $343 million in our Roofing segment, increased $7 million in our Insulation segment and decreased $256 million in our Composites segment. Within our Corporate, Other and Eliminations category, General corporate expenses and other increased by $51 million.
In 2022, the Company repurchased 9.0 million shares of the Company’s common stock for $779 million under a previously announced repurchase authorization. On December 1, 2022, the Company's Board of Directors approved an additional 10 million share repurchase authorization. As of December 31, 2022, 14.4 million shares remained available for repurchase under the announced repurchase authorizations.
In 2023, the Company repurchased 5.4 million shares of the Company’s common stock for $629 million, inclusive of applicable taxes, under previously announced repurchase authorizations. As of December 31, 2023, 8.9 million shares remained available for repurchase under the repurchase authorizations. Table of Contents -28- ITEM 7.
Cash and cash equivalents were $1.1 billion as of December 31, 2022, compared to $959 million as of December 31, 2021, as a result of strong cash flow provided by operating activities. In 2022, the Company's operating activities provided $1,760 million of cash flow, compared to $1,503 million in 2021. The change was primarily driven by higher earnings.
Cash and cash equivalents were $1.6 billion as of December 31, 2023, compared to $1.1 billion as of December 31, 2022. In 2023, the Company's operating activities provided $1,719 million of cash flow, compared to $1,760 million in 2022. On February 8, 2024, the Company entered into a definitive agreement to purchase all of the outstanding shares of Masonite.
GROSS MARGIN Gross margin increased $399 million in 2022 compared to 2021. The increase in gross margin was driven by higher selling prices, partially offset by higher input cost inflation and transportation costs in all three segments.
NET SALES Net sales decreased $84 million in 2023 compared to 2022. The decrease in net sales was driven by lower sales volumes in both Insulation and Composites segments, partially offset by higher selling prices across all three segments.
NET SALES Net sales increased $1,263 million in 2022 compared to 2021. The increase in net sales was driven by higher selling prices and favorable customer mix which were partially offset by lower sales volumes and the unfavorable impact of translating sales denominated in foreign currencies into United States dollars.
The remaining variance was driven by favorable customer mix, which was partially offset by the unfavorable net impact of acquisitions and divestitures. GROSS MARGIN Gross margin increased $67 million in 2023 compared to 2022.
The remaining increase was driven by $35 million in lower gains on sale of certain precious metals compared to the same period in 2021. Table of Contents -25- ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) INTEREST EXPENSE, NET Interest expense, net decreased $17 million in 2022 compared to 2021.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) OTHER EXPENSE (INCOME), NET Other expense (income), net decreased $17 million in 2023 compared to 2022.
The increase was driven primarily by higher general corporate expenses as business activities return to a more typical, post-pandemic level, along with ongoing inflationary pressures.
MARKETING AND ADMINISTRATIVE EXPENSES Marketing and administrative expenses increased $28 million in 2023 compared to 2022. The increase was driven primarily by ongoing inflationary pressures, as well as higher general corporate expenses.
As a result of this sale, the Company received $80 million, net of cash sold, in consideration and recorded a pre-tax loss of $30 million in Other expenses (income), net on the Consolidated Statements of Earnings (Loss).
Total proceeds included a non-refundable deposit of $50 million received in the third quarter 2021. As a result, the Company recognized a pre-tax gain of $189 million in the first quarter of 2023, which is recorded in Gain on sale of site on the Consolidated Statements of Earnings.
Removed
On November 24, 2022, the Company finalized the sale of its Russian operations within the Composites and Insulation segments. As a result of this sale, the Company received $104 million, net of cash sold, in consideration and recorded a pre-tax loss of $33 million in Other expenses (income), net on the Consolidated Statements of Earnings (Loss).
Added
The purchase price for the acquisition of Masonite is approximately $3.9 billion in cash, which we expect to fund with cash on hand and new committed financing.
Removed
On September 1, 2022, the Company acquired the remaining 50% interest in Fiberteq, LLC (“Fiberteq”), the joint venture between Owens Corning and IKO Industries, Ltd, which produces high-quality wet-formed fiberglass mat for roofing applications for $140 million, net of cash acquired.
Added
Masonite is a leading global designer, manufacturer, marketer and distributor of interior and exterior doors and door systems for the new construction and repair, renovation and remodeling sectors of the residential and non-residential building construction markets.
Removed
The acquisition advances the Composites strategy to focus on high-value material solutions and expands Owens Corning's capacity to produce non-woven mat. The Company's 50% interest in Fiberteq was accounted for as an equity-method investment and had a carrying value of $17 million at the acquisition date.
Added
The transaction was unanimously approved by the board of directors of both companies and is expected to close mid-2024, subject to regulatory and other customary closing conditions, including the approval of Masonite shareholders.
Removed
The Company used the discounted cash flow method to remeasure the previously held equity method investment to its fair value of $147 million, resulting in the recognition of a gain of $130 million, which is recorded in Gain on equity method investment on the Consolidated Statements of Earnings (Loss).
Added
On February 9, 2024, the Company announced the decision to review strategic alternatives for its global glass reinforcements (“GR”) business, consistent with our strategy to focus on building and construction materials. The GR business, which operates within our Composites segment, supplies a wide variety of glass fiber products for applications in wind energy, infrastructure, industrial, transportation, and consumer markets.
Removed
The operating results and a preliminary purchase price allocation for Fiberteq have been included in the Composites segment within the Consolidated Financial Statements since the date of the acquisition. The Company is continuing to obtain information to complete its valuation of certain assets and liabilities.
Added
The GR business generates annual revenues of approximately $1.3 billion and has operations in 11 countries, with 18 manufacturing facilities. While a range of options are under consideration, including a potential sale, spin-off or other strategic option, there can be no assurance that the strategic review will result in any transaction or other outcome.
Removed
During the year ended December 31, 2022, the Company recorded immaterial measurement period adjustments to the purchase price allocation.
Added
In the fourth quarter of 2023, the Company entered into two agreements to purchase non-participating annuity contracts from insurance companies to transfer $291 million of the Company's outstanding pension projected benefit obligations related to certain U.S. and non-U.S. pension plans. These transactions were funded with pension plan assets of $268 million.
Removed
The preliminary purchase price allocation included $58 million in intangible assets, which primarily consists of customer relationships with an estimated weighted average life of 3 years, a $62 million unfavorable contract liability and $243 million in goodwill , of which 50% of the goodwill is tax deductible .
Added
As a result of these transactions, the Company recognized a pre-tax settlement charge of $145 million in the fourth quarter of 2023 from the accelerated recognition of a pro rata portion of plan actuarial losses. This charge was recorded in Non-operating expense (income), net on the Consolidated Statements of Earnings.
Removed
The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the acquisition. The pro-forma effect of this acquisition on revenues and earnings was not material. Table of Contents -23- ITEM 7.
Added
These transactions did not have a material effect on the plans' funded statuses. Table of Contents -27- ITEM 7.
Removed
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) On August 1, 2022, the Company acquired Natural Polymers, LLC (“Natural Polymers”), an innovative manufacturer of spray polyurethane foam insulation for building and construction applications for approximately $111 million, net of cash acquired.
Added
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) During the second quarter of 2023, the Company’s subsidiary, Paroc Group OY (“Paroc”), which the Company acquired in 2018, notified the appropriate European maritime regulatory authorities that specific products in its marine insulation product line may not meet certain fire safety requirements in accordance with their certifications.
Removed
The acquisition advances the Owens Corning strategy to strengthen the Company's core building and construction products and expand its addressable markets into higher-growth segments. The operating results and a preliminary purchase price allocation for Natural Polymers have been included in the Insulation segment within the Consolidated Financial Statements since the date of the acquisition.
Added
Paroc voluntarily withdrew these specific products from the market, issued recalls, and suspended distribution and sales of these products. Paroc continues to cooperate with the applicable regulatory and government authorities and work with its customers and end-users to assist with remediation.
Removed
The Company is continuing to obtain information to complete its valuation of certain assets and liabilities. During the year ended December 31, 2022, the Company recorded immaterial measurement period adjustments to the purchase price allocation. The preliminary purchase price allocation included $44 million in intangible assets and $62 million in goodwill, of which all is tax deductible.
Added
During 2023, the Company established an estimated liability for expected future costs related to the marine recall on our Consolidated Balance Sheet as of December 31, 2023. As part of its review of the Paroc insulation product portfolio, the Company discovered potential nonconformances relating to certain ventilation duct insulation products.
Removed
The intangible assets consist of definite-lived trademarks of $5 million with an estimated weighted average life of 10 years, technology of $12 million with an estimated weighted average life of 6 years and customer relationships of $27 million with an estimated weighted average life of 17 years.
Added
In January 2024, Paroc suspended sales of the affected insulation products as a precautionary measure while it reviews the potential nonconformances. The Company is continuing its review. In May 2023, the Company made the decision to exit the Protective Packaging business within the Roofing segment, including the production and sale of wood packaging, metal packaging and custom products.
Removed
The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the acquisition. The pro-forma effect of this acquisition on revenues and earnings was not material.
Added
Exiting Protective Packaging will allow the Company to focus resources on the growth of its building materials products, which supports the future growth aspirations of the enterprise. With the exit of the Protective Packaging business, the Company closed its plants in Dorval, Quebec and Mission, British Columbia, Canada. The Company also ceased operations at its Qingdao, China facility.
Removed
On July 1, 2022, the Company finalized the sale of the European portion of the dry-use chopped strands (“DUCS”) product line located in Chambéry, France, within the Composites segment.
Added
In connection with the exit of the Protective Packaging business, the Company estimates that it will incur cash charges of approximately $15 million, primarily related to severance and other exit costs.
Removed
On June 1, 2022, the Company acquired all of the outstanding assets of WearDeck®, a premium producer of composite weather-resistant decking for commercial and residential applications, for approximately $133 million, net of cash acquired. The acquisition advances the Composites business growth strategy to focus on high-value material solutions within the building and construction industry.
Added
Additionally, the Company expects to incur total non-cash charges in the range of $70 to $75 million, primarily related to accelerated depreciation of property, plant and equipment and accelerated amortization of definite-lived intangibles. The Company has exited the majority of the business and expects to generate savings of approximately $7 million annually beginning 2024.
Removed
The operating results and a preliminary purchase price allocation for WearDeck® have been included in the Composites segment within the Consolidated Financial Statements since the date of the acquisition. The Company is continuing to obtain information to complete its valuation of certain assets and liabilities.
Added
During the twelve months ended 2023, the Company recorded $78 million of charges, primarily related to accelerated depreciation, accelerated amortization and severance. In March 2023, the Company finalized the sale of its Insulation site in Santa Clara, California for total proceeds of $234 million, net of transaction fees.
Removed
During the year ended December 31, 2022, the Company recorded immaterial measurement period adjustments to the purchase price allocation. The preliminary purchase price allocation included $38 million in intangible assets and $68 million in goodwill , of which $61 million is tax deductible.
Added
The increase in gross margin was driven by higher selling prices across all three segments, which was partially offset by lower sales volumes in both Insulation and Composites segments and higher production downtime. Favorable delivery and favorable customer and product mix more than offset higher input costs and the unfavorable net impact of acquisitions and divestitures.
Removed
The intangible assets consist of definite-lived trademarks of $7 million with an estimated weighted average life of 10 years, technology of $10 million with an estimated weighted average life of 11 years and customer relationships of $21 million with an estimated weighted average life of 15 years.
Added
GAIN ON SALE OF SITE In the first quarter of 2023, the Company finalized the sale of the Company's Insulation site in Santa Clara, California resulting in the recognition of a pre-tax gain of $189 million. Table of Contents -29- ITEM 7.
Removed
The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the acquisition. The pro-forma effect of this acquisition on revenues and earnings was not material.
Added
Higher restructuring costs, lower gains on the sale of precious metals and the establishment of the estimated liability for the Paroc marine recall matter in 2023 were more than offset by the favorable comparison year-over-year to indefinite-lived intangible asset impairment charges of $96 million and the net loss from divestiture related activities.
Removed
On May 23, 2022, Owens Corning and Pultron Composites (“Pultron”) formed a joint venture (the “JV”) to manufacture and sell fiberglass rebar. The Company contributed approximately $47 million to acquire a 65.5% controlling interest and has established a redeemable noncontrolling interest of $25 million related to Pultron, the minority holder.
Added
NON-OPERATING EXPENSE (INCOME), NET Non-operating expense (income), net increased $154 million in 2023 compared to 2022. The increase was driven by the pension settlement loss in the fourth quarter of 2023. INTEREST EXPENSE, NET Interest expense, net decreased $33 million in 2023 compared to 2022.
Removed
The JV expands Owens Corning’s capability to produce high-value material solutions by combining the Company’s glass-fiber material technology, channel access and extensive industry experience with Pultron’s manufacturing expertise and process efficiency.
Added
The decrease was driven by higher interest income related to the increase in cash and interest rates, as well as higher capitalized interest resulting from higher construction in progress balances. INCOME TAX EXPENSE Income tax expense for 2023 was $401 million compared to $373 million in 2022.
Removed
The fully consolidated operating results and a preliminary purchase price allocation for the JV have been included in the Company’s Composites segment within the Consolidated Financial Statements since the date of the formation of the JV. Subsequent to the JV formation, the JV acquired assets and technology from Pultron for approximately $65 million .
Removed
The Company is continuing to obtain information to complete its valuation of certain assets and liabilities. The preliminary purchase price allocation included $15 million in intangible assets, consisting of technology, with an estimated weighted average life of 15 years and $42 million in goodwill, of which $37 million is tax deductible.
Removed
The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the acquisition. The pro-forma effect of this acquisition on revenues and earnings was not material.
Removed
The impact of lower sales volumes in Composites and Roofing, as well as unfavorable manufacturing performance in all three segments, further offset the increase from higher selling prices. MARKETING AND ADMINISTRATIVE EXPENSES Marketing and administrative expenses increased $46 million in 2022 compared to 2021.
Removed
The increase in expenses was primarily driven by the unfavorable comparison year-over-year to indefinite-lived intangible asset impairment charges of $96 million and the combined $63 million loss recognized on the sale of the DUCS business in Chambery, France and the sale of our Russian operations in 2022.
Removed
The decrease was driven by lower long-term debt balances year-over-year due to the repayment of the senior notes due in 2022 and higher interest income. LOSS ON EXTINGUISHMENT OF DEBT During 2022, there were no extinguishments of debt.
Removed
For the year ended December 31, 2021, the Company recognized a $9 million loss on extinguishment of debt in connection with the repayment of the remaining portion of its outstanding 2022 senior notes. INCOME TAX EXPENSE Income tax expense for 2022 was $373 million compared to $319 million in 2021.
Removed
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) into law, which includes a new corporate alternative minimum tax and an excise tax of 1% on the fair market value of net stock repurchases. Both provisions are effective for years after December 31, 2022.
Removed
The Company is evaluating the potential future impact of the Inflation Reduction Act on its financial position and results of operations . The realization of deferred tax assets depends on achieving a certain minimum level of future taxable income.
Removed
Management currently believes that it is at least reasonably possible that the minimum level of taxable income will be met within the next 12 months to reduce the valuation allowances of certain foreign jurisdictions by a range of zero to $3 million. The Company’s effective tax rate for 2021 was 24% on pre-tax income of $1,313 million.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

66 edited+22 added−11 removed49 unchanged
Biggest changeThese risks, uncertainties and other factors include, without limitation: • levels of residential and commercial or industrial construction activity; • demand for our products; • supply constraints and increases in the cost of energy, particularly natural gas, as a result of the ongoing conflict in Ukraine; • availability and cost of raw materials; • industry and economic conditions including, but not limited to, supply chain disruptions, recessionary conditions, inflationary pressures and interest rate volatility, that affect the market and operating conditions of our customers, suppliers or lenders; • levels of global industrial production; • competitive and pricing factors; • relationships with key customers and customer concentration in certain areas; • issues related to acquisitions, divestitures and joint ventures or expansions; • climate change, weather conditions and storm activity; • legislation and related regulations or interpretations, in the United States or elsewhere; • domestic and international economic and political conditions, policies or other governmental actions, as well as war and civil disturbance (such as Russia's invasion of Ukraine); • changes to tariff, trade or investment policies or laws; • uninsured losses, including those from natural disasters, catastrophes, pandemics, theft or sabotage; • environmental, product-related or other legal and regulatory liabilities, proceedings or actions; • research and development activities and intellectual property protection; • issues involving implementation and protection of information technology systems; • foreign exchange and commodity price fluctuations; • our level of indebtedness; • our liquidity and the availability and cost of credit; • our ability to achieve expected synergies, cost reductions and/or productivity improvements; • the level of fixed costs required to run our business; • levels of goodwill or other indefinite-lived intangible assets; • price volatility in certain wind energy markets in the U.S.; • loss of key employees and labor disputes or shortages; and • defined benefit plan funding obligations.
Biggest changeThese risks, uncertainties and other factors include, without limitation: • levels of residential and commercial or industrial construction activity; • demand for our products; • industry and economic conditions including, but not limited to, supply chain disruptions, recessionary conditions, inflationary pressures, interest rate and financial markets volatility, and the viability of banks and other financial institutions; • availability and cost of energy and raw materials; • levels of global industrial production; • competitive and pricing factors; • relationships with key customers and customer concentration in certain areas; • issues related to acquisitions, divestitures and joint ventures or expansions, including the planned acquisition of Masonite; • climate change, weather conditions and storm activity; • legislation and related regulations or interpretations, in the United States or elsewhere; • domestic and international economic and political conditions, policies or other governmental actions, as well as war and civil disturbance; • changes to tariff, trade or investment policies or laws; • uninsured losses, including those from natural disasters, catastrophes, pandemics, theft or sabotage; • environmental, product-related or other legal and regulatory liabilities, proceedings or actions; • research and development activities and intellectual property protection; • issues involving implementation and protection of information technology systems; • foreign exchange and commodity price fluctuations; • our level of indebtedness; including the planned acquisition of Masonite; • our liquidity and the availability and cost of credit; • our ability to achieve expected synergies, cost reductions and/or productivity improvements; • the level of fixed costs required to run our business; • levels of goodwill or other indefinite-lived intangible assets; • price volatility in certain wind energy markets in the U.S.; • loss of key employees and labor disputes or shortages; • our ability to complete and successfully integrate the Masonite acquisition; • any material adverse changes in the business of Masonite • the ability to obtain required regulatory, shareholder or other third-party approvals and consents and otherwise complete the Masonite acquisition; • our ability to achieve the strategic and other objectives relating to the Masonite acquisition, including any expected synergies, and the strategic review of our GR business; and • defined benefit plan funding obligations.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Fair Value Measurement Please refer to Notes 1, 4, 14 and 15 of the Consolidated Financial Statements.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Fair Value Measurement Please refer to Notes 1, 4, 13, 14 and 15 of the Consolidated Financial Statements.
Interest on debt: We are obligated to make periodic interest payments at fixed rates, depending on the terms of the applicable debt agreements. Based on interest rates and scheduled maturities as of December 31, 2022, these interest obligations range from $99 million to $130 million annually over the next five years.
Interest on debt: We are obligated to make periodic interest payments at fixed rates, depending on the terms of the applicable debt agreements. Based on interest rates and scheduled maturities as of December 31, 2023, these interest obligations range from $99 million to $130 million annually over the next five years.
For our largest plan, the United States plan, the discount rate used for the December 31, 2022 measurement date is based on a yield curve approach where the expected future benefit payments are matched with a yield curve derived from certain AA-rated corporate bonds.
For our largest plan, the United States plan, the discount rate used for the December 31, 2023 measurement date is based on a yield curve approach where the expected future benefit payments are matched with a yield curve derived from certain AA-rated corporate bonds.
The Company has an $800 million senior revolving credit facility (the “Senior Revolving Credit Facility”) that has been amended from time to time, which matures in July 2026. The Company has a $280 million securitization facility (the “Receivables Securitization Facility”) that has been amended from time to time, which matures in April 2024. Table of Contents -32- ITEM 7.
The Company has an $800 million senior revolving credit facility (the “Senior Revolving Credit Facility”) that has been amended from time to time, which matures in July 2026. The Company has a $280 million securitization facility (the “Receivables Securitization Facility”) that has been amended from time to time, which matures in April 2024. Table of Contents -36- ITEM 7.
Please refer to the Risk Factors disclosed in Item 1A of this Form 10-K for details on the factors that could inhibit our subsidiaries' abilities to pay dividends or make other distributions to the parent company.
Please refer to the Risk Factors disclosed in Item 1A of this Annual Report on Form 10-K for details on the factors that could inhibit our subsidiaries' abilities to pay dividends or make other distributions to the parent company.
The Company has three reporting units: Composites, Insulation and Roofing. 2022 Annual Goodwill Impairment Assessment Goodwill is an intangible asset that is not subject to amortization; however, annual tests are required to be performed to determine whether impairment exists.
The Company has three reporting units: Roofing, Insulation and Composites. 2023 Annual Goodwill Impairment Assessment Goodwill is an intangible asset that is not subject to amortization; however, annual tests are required to be performed to determine whether impairment exists.
Significant assumptions used in the discounted cash flow approach are revenue growth rates and EBIT margins used in estimating discrete period cash flow forecasts of the reporting unit, the discount rate, and the long-term revenue growth rate and EBIT margins used in estimating the terminal business value.
Significant assumptions used in the discounted cash flow approach are the revenue growth rates and EBIT margins used in estimating discrete period cash flow forecasts of the reporting unit, the discount rate, the reporting unit tax rate and the long-term revenue growth rate and EBIT margin used in estimating the terminal business value.
However, changes in management intentions, market conditions, operating performance and other similar circumstances could affect the assumptions used in these impairment tests. Changes in the assumptions could result in impairment charges that could be material to our Consolidated Financial Statements in any given period. Pensions and Other Postretirement Benefits.
However, changes in management intentions, market conditions, operating performance and other similar circumstances could affect the assumptions used in these impairment tests. Changes in the assumptions could result in impairment charges that could be material to our Consolidated Financial Statements in any given period.
The methods corresponding to those described above are used to determine the discount rate and expected return on assets for non-U.S. pension and postretirement plans, to the extent applicable. RECENT ACCOUNTING PRONOUNCEMENTS Please refer to Note 1 of the Consolidated Financial Statements. ENVIRONMENTAL MATTERS Please refer to Note 17 of the Consolidated Financial Statements. Table of Contents -38- ITEM 7.
The methods corresponding to those described above are used to determine the discount rate and expected return on assets for non-U.S. pension and postretirement plans, to the extent applicable. RECENT ACCOUNTING PRONOUNCEMENTS Please refer to Note 1 of the Consolidated Financial Statements. ENVIRONMENTAL MATTERS Please refer to Note 16 of the Consolidated Financial Statements. Table of Contents -43- ITEM 7.
If, based on the review of the qualitative factors, we determine it is not more likely than not that the fair value of a reporting unit is less than its carrying value, we would bypass the step one impairment test.
If, based on the review of the qualitative factors, we determine it is not more likely than not that the fair value of a reporting unit is less than its carrying value, we would bypass the quantitative impairment test.
A 25 basis point increase (decrease) in return on plan assets assumption would result in a respective decrease (increase) of 2023 net periodic pension cost by approximately $2 million. The discount rate for our United States postretirement plan was selected using the same method as described for the pension plan.
A 25 basis point increase (decrease) in return on plan assets assumption would result in a respective decrease (increase) of 2024 net periodic pension cost by approximately $1 million. The discount rate for our United States postretirement plan was selected using the same method as described for the pension plan.
Such transactions may require cash expenditures beyond current sources of liquidity or generated proceeds. Table of Contents -34- ITEM 7.
Such transactions may require cash expenditures beyond current sources of liquidity or generated proceeds. Table of Contents -38- ITEM 7.
Further discussion of the Company's defined benefit pension plans can be found in Note 15 of the Consolidated Financial Statements.
Further discussion of the Company's defined benefit pension plans can be found in Note 14 of the Consolidated Financial Statements.
If it is more likely than not that a reporting unit’s fair value is less than or close to its carrying value, then the step one quantitative impairment test must be performed to determine if impairment is required. Table of Contents -36- ITEM 7.
If it is more likely than not that a reporting unit’s fair value is less than or close to its carrying value, then the quantitative impairment test must be performed to determine if impairment is required. Table of Contents -40- ITEM 7.
The following table summarizes the segment allocation of recorded goodwill on our Consolidated Balance Sheet as of December 31, 2022 (in millions): Segment December 31, 2022 Percent of Total Composites $ 425 31 % Insulation 564 41 % Roofing 394 28 % Total goodwill $ 1,383 100 % Annual 2022 Indefinite-lived Intangible Asset Impairment Assessment Fair values used in testing for potential impairment of our trademarks and trade names are calculated by applying an estimated market value royalty rate to the forecasted revenues of the businesses that utilize those assets.
The following table summarizes the segment allocation of recorded goodwill on our Consolidated Balance Sheet as of December 31, 2023 (in millions): Segment December 31, 2023 Percent of Total Roofing $ 395 28 % Insulation 572 41 % Composites 425 31 % Total goodwill $ 1,392 100 % Annual 2023 Indefinite-lived Intangible Asset Impairment Assessment Fair values used in testing for potential impairment of our trademarks and trade names are calculated by applying an estimated market value royalty rate to the forecasted revenues of the businesses that utilize those assets.
The result supported a discount rate of 5.10% at December 31, 2022 compared to 2.70% at December 31, 2021. A 25 basis point increase (decrease) in the discount rate would (decrease) increase the United States postretirement benefit obligation by approximately $2 million and (decrease) increase 2023 net periodic postretirement benefit cost by less than $1 million.
The result supported a discount rate of 4.90% at December 31, 2023 compared to 5.10% at December 31, 2022. A 25 basis point increase (decrease) in the discount rate would (decrease) increase the United States postretirement benefit obligation by approximately $2 million and (decrease) increase 2024 net periodic postretirement benefit cost by less than $1 million.
It is not possible to identify all of the risks, uncertainties and other factors that may affect future results. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this report may not occur and actual results may differ materially from those anticipated or implied in the forward-looking statements.
It is not possible to identify all of the risks, uncertainties and other factors that may affect future results. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this Annual Report on Form 10-K may not occur and actual results may differ materially from those anticipated or implied in the forward-looking statements.
Further discussion of the amount and timing of the future scheduled maturities of these senior notes can be found in Note 14 of the Consolidated Financial Statements. There were no borrowings on our Senior Revolving Credit Facility or our Receivables Securitization Facility as of December 31, 2022.
Further discussion of the amount and timing of the future scheduled maturities of our senior notes can be found in Note 13 of the Consolidated Financial Statements. There were no borrowings on our Senior Revolving Credit Facility or our Receivables Securitization Facility as of December 31, 2023.
All forward-looking statements in this report should be considered in the context of the risks and other factors described herein, and in Item 1A above, and as detailed from time to time in the Company’s filings with the U.S. Securities and Exchange Commission.
All forward-looking statements in this Annual Report on Form 10-K should be considered in the context of the risks and other factors described herein, and in Item 1A above, and as detailed from time to time in the Company’s filings with the U.S. Securities and Exchange Commission.
Finance lease obligations: Our finance lease obligations primarily consist of real estate, oxygen plants, computers and software, and fleet vehicles. As of December 31, 2022 we had a total of $157 million of minimum finance lease payments. Further discussion of the future maturities of these lease liabilities can be found in Note 10 of the Consolidated Financial Statements.
Finance lease obligations: Our finance lease obligations primarily consist of real estate, oxygen plants, computers and software, and fleet vehicles. As of December 31, 2023 we had a total of $196 million of minimum finance lease payments. Further discussion of the future maturities of these lease liabilities can be found in Note 9 of the Consolidated Financial Statements.
As of December 31, 2022 and December 31, 2021, the Company had $188 million and $156 million, respectively, in cash and cash equivalents in certain of its foreign subsidiaries. The Company continues to assert indefinite reinvestment in accordance with Accounting Standards Codification (ASC) 740 based on the laws as of enactment of the tax legislation commonly known as the U.S.
As of December 31, 2023 and December 31, 2022, the Company had $114 million and $188 million, respectively, in cash and cash equivalents in certain of its foreign subsidiaries. The Company continues to assert indefinite reinvestment in accordance with Accounting Standards Codification (“ASC”) 740 based on the laws as of enactment of the tax legislation commonly known as the U.S.
Operating lease obligations: Our operating lease obligations primarily consist of real estate and material handling equipment. As of December 31, 2022, we had a total of $227 million of minimum operating lease payments. Further discussion of the future maturities of these lease liabilities can be found in Note 10 of the Consolidated Financial Statements.
Operating lease obligations: Our operating lease obligations primarily consist of real estate and material handling equipment. As of December 31, 2023, we had a total of $248 million of minimum operating lease payments. Further discussion of the future maturities of these lease liabilities can be found in Note 9 of the Consolidated Financial Statements.
We have no material off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures or other resources. Table of Contents -33- ITEM 7.
We have no material off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures or other resources.
Purchase obligations: Purchase obligations are commitments to suppliers to purchase goods or services, and include take-or-pay arrangements, capital expenditures, and contractual commitments to purchase equipment. As of December 31, 2022, the total of these obligations was $384 million, inclusive of $269 million payable in the next 12 months.
Purchase obligations: Purchase obligations are commitments to suppliers to purchase goods or services, and include take-or-pay arrangements, capital expenditures, and contractual commitments to purchase equipment. As of December 31, 2023, the total of these obligations was $328 million, inclusive of $241 million payable in the next 12 months.
This process resulted in the selection of an expected return of 5.75% at the December 31, 2022 measurement date, which is used to determine net periodic pension cost for the year 2023. This assumption corresponds to the 4.75% return selected at the December 31, 2021 measurement date.
This process resulted in the selection of an expected return of 5.75% at the December 31, 2023 measurement date, which is used to determine net periodic pension cost for the year 2024. The expected return selected at the December 31, 2022 measurement date was 5.75%, which was used to determine the net periodic pension cost for the year 2023.
The expected return on plan assets in the United States was derived by taking into consideration the target plan asset allocation, historical rates of return on those assets, projected future asset class returns and net outperformance of the market by active investment managers and plan related and investment related expenses paid from the plan trust.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) The expected return on plan assets in the United States was derived by taking into consideration the target plan asset allocation, historical rates of return on those assets, projected future asset class returns and net outperformance of the market by active investment managers and plan related and investment related expenses paid from the plan trust.
The Company made cash contributions of $8 million and $21 million to the plans during the twelve months ended December 31, 2022 and 2021, respectively. The Company expects to contribute $25 million in cash to its pension plans during 2023.
The Company made cash contributions of $18 million and $8 million to the plans during the twelve months ended December 31, 2023 and 2022, respectively. The Company expects to contribute $20 million in cash to its pension plans during 2024.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Long-lived Asset Recoverability Assessment Fair values for long-lived asset testing are calculated by estimating the undiscounted cash flows from the use and ultimate disposition of the asset or by estimating the amount that a willing third party would pay.
Long-lived Asset Recoverability Assessment Fair values for long-lived asset testing are calculated by estimating the undiscounted cash flows from the use and ultimate disposition of the asset or by estimating the amount that a willing third party would pay.
We expect that our cash on hand, coupled with future cash flows from operations and other available sources of liquidity, including our Senior Revolving Credit Facility and our Receivables Securitization Facility, will provide ample liquidity to enable us to meet our cash requirements.
We expect that our cash on hand, coupled with future cash flows from operations and other available sources of liquidity, including our Senior Revolving Credit Facility and our Receivables Securitization Facility, will provide ample liquidity to enable us to meet our cash requirements for at least the next 12 months and foreseeable future thereafter.
The result supported a discount rate of 5.15% at December 31, 2022 compared to 2.85% at December 31, 2021. A 25 basis point increase (decrease) in the discount rate would (decrease) increase the December 31, 2022 projected benefit obligation for the United States pension plan by approximately ($14) and $14 million, respectively.
The result supported a discount rate of 5.00% at December 31, 2023 compared to 5.15% at December 31, 2022. A 25 basis point increase (decrease) in the discount rate would (decrease) increase the December 31, 2023 projected benefit obligation for the United States pension plan by approximately $9 million.
Users of this report should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.
Users of this Annual Report on Form 10-K should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.
Accordingly, users of this report are cautioned not to place undue reliance on the forward-looking statements. Table of Contents -39-
Accordingly, users of this Annual Report on Form 10-K are cautioned not to place undue reliance on the forward-looking statements. Table of Contents -44-
Cash Flows The following table presents a summary of our cash balance, cash flows, and availability on credit facilities (in millions): Twelve Months Ended December 31, 2022 2021 2020 Cash and cash equivalents $ 1,099 $ 959 $ 717 Net cash flow provided by operating activities $ 1,760 $ 1,503 $ 1,135 Net cash flow used for investing activities $ (623) $ (377) $ (205) Net cash flow used for financing activities $ (974) $ (881) $ (358) Availability on the Senior Revolving Credit Facility $ 796 $ 796 $ 796 Availability on the Receivables Securitization Facility $ 279 $ 279 $ 279 Cash and cash equivalents: Cash and cash equivalents as of December 31, 2022 increased $140 million compared to December 31, 2021, primarily due to higher cash flow provided by operating activities.
Cash Flows The following table presents a summary of our cash balance, cash flows, and availability on credit facilities (in millions): Twelve Months Ended December 31, 2023 2022 2021 Cash and cash equivalents $ 1,615 $ 1,099 $ 959 Net cash flow provided by operating activities $ 1,719 $ 1,760 $ 1,503 Net cash flow used for investing activities $ (356) $ (623) $ (377) Net cash flow used for financing activities $ (877) $ (974) $ (881) Availability on the Senior Revolving Credit Facility $ 796 $ 796 $ 796 Availability on the Receivables Securitization Facility $ 279 $ 279 $ 279 Operating activities: In 2023, the Company generated $1,719 million of cash from operating activities compared to $1,760 million in 2022.
Adjusting (expense) income items to EBIT are shown in the table below (in millions): Twelve Months Ended December 31, 2022 2021 2020 Restructuring costs $ (48) $ (34) $ (41) Gain on sale of land in India — 15 — Gains on sale of certain precious metals 18 53 26 Goodwill impairment charge — — (944) Intangible assets impairment charge (96) — (43) Recognition of acquisition inventory fair value step-up — (1) — Acquisition and divestiture-related costs (7) — — Gain on sale of Shanghai, China facility 27 — — Gain on remeasurement of Fiberteq equity investment 130 — — Loss on sale of Chambery, France DUCS business (30) — — Loss on sale of Russian operations (33) — — Total adjusting items $ (39) $ 33 $ (1,002) The reconciliation from Net earnings (loss) attributable to Owens Corning to EBIT and Adjusted EBIT is shown in the table below (in millions): Twelve Months Ended December 31, 2022 2021 2020 NET EARNINGS (LOSS) ATTRIBUTABLE TO OWENS CORNING $ 1,241 $ 995 $ (383) Net (loss) attributable to non-redeemable and redeemable noncontrolling interests — — (2) NET EARNINGS (LOSS) 1,241 995 (385) Equity in net earnings of affiliates — 1 — Income tax expense 373 319 129 EARNINGS (LOSS) BEFORE TAXES 1,614 1,313 (256) Interest expense, net 109 126 132 Loss on extinguishment of debt — 9 — EARNINGS (LOSS) BEFORE INTEREST AND TAXES 1,723 1,448 (124) Less: Adjusting items from above (39) 33 (1,002) ADJUSTED EBIT $ 1,762 $ 1,415 $ 878 Table of Contents -28- ITEM 7.
Adjusting (expense) income items to EBIT are shown in the table below (in millions): Twelve Months Ended December 31, 2023 2022 2021 Restructuring costs $ (169) $ (48) $ (34) Gain on sale of land in India — — 15 Gains on sale of certain precious metals 2 18 53 Intangible assets impairment charge — (96) — Recognition of acquisition inventory fair value step-up — — (1) Pension settlement losses (145) — — Acquisition and divestiture-related costs — (7) — Gain on sale of Santa Clara, California site 189 — — Gain on sale of Shanghai, China facility — 27 — Gain on remeasurement of Fiberteq equity investment — 130 — Paroc marine recall (15) — — Loss on sale of Chambery, France DUCS business — (30) — Loss on sale of Russian operations — (33) — Total adjusting items $ (138) $ (39) $ 33 The reconciliation from Net earnings (loss) attributable to Owens Corning to EBIT and Adjusted EBIT is shown in the table below (in millions): Twelve Months Ended December 31, 2023 2022 2021 NET EARNINGS ATTRIBUTABLE TO OWENS CORNING $ 1,196 $ 1,241 $ 995 Net loss attributable to non-redeemable and redeemable noncontrolling interests (3) — — NET EARNINGS 1,193 1,241 995 Equity in net earnings of affiliates 3 — 1 Income tax expense 401 373 319 EARNINGS BEFORE TAXES 1,591 1,614 1,313 Interest expense, net 76 109 126 Loss on extinguishment of debt — — 9 EARNINGS BEFORE INTEREST AND TAXES 1,667 1,723 1,448 Less: Adjusting items from above (138) (39) 33 ADJUSTED EBIT $ 1,805 $ 1,762 $ 1,415 Table of Contents -32- ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Corporate, Other and Eliminations The table below provides a summary of EBIT and depreciation and amortization expense for the Corporate, Other and Eliminations category (in millions): Twelve Months Ended December 31, 2022 2021 2020 Restructuring costs $ (48) $ (34) $ (41) Gain on sale of land in India — 15 — Gains on sale of certain precious metals 18 53 26 Goodwill impairment charge — — (944) Intangible assets impairment charge (96) — (43) Recognition of acquisition inventory fair value step-up — (1) — Acquisition and divestiture-related costs (7) — — Gain on sale of Shanghai, China facility 27 — — Gain on remeasurement of Fiberteq equity investment 130 — — Loss on sale of Chambery, France DUCS business (30) — — Loss on sale of Russian operations (33) — — General corporate expense and other (179) (160) (128) EBIT $ (218) $ (127) $ (1,130) Depreciation and amortization $ 88 $ 73 $ 74 EBIT In Corporate, Other and Eliminations, EBIT expenses in 2022 were $91 million higher compared to 2021.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Corporate, Other and Eliminations The table below provides a summary of EBIT and depreciation and amortization expense for the Corporate, Other and Eliminations category (in millions): Twelve Months Ended December 31, 2023 2022 2021 Restructuring costs $ (169) $ (48) $ (34) Gain on sale of land in India — — 15 Gains on sale of certain precious metals 2 18 53 Intangible assets impairment charge — (96) — Recognition of acquisition inventory fair value step-up — — (1) Pension settlement losses (145) — — Acquisition and divestiture-related costs — (7) — Gain on sale of Santa Clara, California site 189 — — Gain on sale of Shanghai, China facility — 27 — Gain on remeasurement of Fiberteq equity investment — 130 — Paroc marine recall (15) — — Loss on sale of Chambery, France DUCS business — (30) — Loss on sale of Russian operations — (33) — General corporate expense and other (230) (179) (160) EBIT $ (368) $ (218) $ (127) Depreciation and amortization $ 163 $ 88 $ 73 EBIT The impact on EBIT from Corporate, Other and Eliminations in 2023 was $150 million higher compared to 2022.
Capital Expenditures: Our capital expenditures are primarily related to the maintenance and rebuild of our long-term assets, as well as investing in projects that support growth and innovation to further our enterprise strategy. Our capital expenditures on a cash basis were $446 million in 2022.
Capital Expenditures: Our capital expenditures are primarily related to the maintenance and rebuild of our long-term assets, as well as investing in projects that support growth and innovation to further our enterprise strategy. Our capital expenditures on a Table of Contents -37- ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Insulation The table below provides a summary of net sales, EBIT and depreciation and amortization expense for the Insulation segment (in millions): Twelve Months Ended December 31, 2022 2021 2020 Net sales $ 3,714 $ 3,184 $ 2,607 % change from prior year 17 % 22 % -2 % EBIT $ 612 $ 446 $ 250 EBIT as a % of net sales 16 % 14 % 10 % Depreciation and amortization expense $ 206 $ 208 $ 201 NET SALES In our Insulation segment, 2022 net sales increased $530 million compared to 2021.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Insulation The table below provides a summary of net sales, EBIT, depreciation and amortization expense and EBITDA for the Insulation segment (in millions): Twelve Months Ended December 31, 2023 2022 2021 Net sales $ 3,668 $ 3,714 $ 3,184 % change from prior year -1 % 17 % 22 % EBIT $ 619 $ 612 $ 446 EBIT as a % of net sales 17 % 16 % 14 % Depreciation and amortization expense $ 210 $ 206 $ 208 EBITDA $ 829 $ 818 $ 654 EBITDA as a % of net sales 23 % 22 % 21 % NET SALES In our Insulation segment, 2023 net sales decreased $46 million compared to 2022.
During the fourth quarter of 2022, the average Seasonally Adjusted Annual Rate (SAAR) of U.S. housing starts was approximately 1.403 million starts, which was down from 1.644 million starts in the fourth quarter of 2021.
During the fourth quarter of 2023, the average Seasonally Adjusted Annual Rate (“SAAR”) of U.S. housing starts was approximately 1.454 million starts, which is up from 1.403 million starts in the fourth quarter of 2022.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Material Cash Requirements Our anticipated uses of cash include capital expenditures, working capital needs, share repurchases, meeting financial obligations, payments of any dividends authorized by our Board of Directors, acquisitions, restructuring actions and pension contributions.
Material Cash Requirements Our anticipated uses of cash include capital expenditures, working capital needs, share repurchases, meeting financial obligations, payments of any dividends authorized by our Board of Directors, acquisitions, including the planned acquisition of Masonite, restructuring actions and pension contributions.
A 25 basis point increase (decrease) in the discount rate would (decrease) increase 2023 net periodic pension cost by less than $1 million.
A 25 basis point increase (decrease) in the discount rate would (decrease) increase 2024 net periodic pension cost by less than $1 million. Table of Contents -42- ITEM 7.
OUTLOOK In 2023, we expect general corporate expenses to range between $195 and $205 million. LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS Liquidity The Company's primary sources of liquidity are its balance of Cash and cash equivalents of $1.1 billion as of December 31, 2022, its Senior Revolving Credit Facility and its Receivables Securitization Facility (each as defined below).
LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS Liquidity The Company's primary sources of liquidity are its balance of Cash and cash equivalents of $1.6 billion as of December 31, 2023, its Senior Revolving Credit Facility and its Receivables Securitization Facility (each as defined below).
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): As of December 31, 2022 Senior Revolving Credit Facility Receivables Securitization Facility Facility size $ 800 $ 280 Collateral capacity limitation on availability N/A — Outstanding borrowings — — Outstanding letters of credit 4 1 Availability on facility $ 796 $ 279 On August 19, 2021, the Company issued a make-whole call to repay the remaining portion of its outstanding 2022 senior notes, and the redemption was completed in the third quarter of 2021.
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): As of December 31, 2023 Senior Revolving Credit Facility Receivables Securitization Facility Facility size $ 800 $ 280 Collateral capacity limitation on availability N/A — Outstanding borrowings — — Outstanding letters of credit 4 1 Availability on facility $ 796 $ 279 The Receivables Securitization Facility and Senior Revolving Credit Facility mature in 2024 and 2026, respectively.
Higher selling prices of $522 million and higher third-party asphalt sales of $72 million were partially offset by lower sales volumes of approximately 4% and unfavorable customer and product mix. EBIT In our Roofing segment, EBIT increased $78 million in 2022 compared to 2021.
Favorable product and customer mix were partially offset by lower third-party asphalt sales of $44 million. EBIT In our Roofing segment, EBIT increased $343 million in 2023 compared to 2022 driven primarily by higher selling prices of $166 million.
As of December 31, 2022, the Company had $3.0 billion of total debt and cash and cash equivalents of $1.1 billion. The agreements governing our Senior Revolving Credit Facility and Receivables Securitization Facility contain various covenants that we believe are usual and customary. These covenants include a maximum allowed leverage ratio.
The Company's 4.2% senior notes mature in the fourth quarter of 2024. As of December 31, 2023, the Company had $3.0 billion of total debt and cash and cash equivalents of $1.6 billion. The agreements governing our Senior Revolving Credit Facility and Receivables Securitization Facility contain various covenants that we believe are usual and customary.
The increase was driven by higher selling prices of $443 million, partially offset by slightly lower sales volumes of approximately 5%. Favorable customer mix of $61 million was more than offset by the $76 million unfavorable impact of translating sales denominated in foreign currencies into United States dollars.
The decrease was primarily driven by lower sales volumes of approximately 12% and the net unfavorable impact of divestitures and acquisitions. Unfavorable customer mix of $16 million was partially offset by higher selling prices of $9 million and the favorable impact of translating sales denominated in foreign currencies into United States dollars.
The remaining variance was driven about equally by higher selling, general and administrative expenses, the impact of lower sales volumes and the negative impact of translating profits denominated in foreign currencies into United States dollars.
The remaining variance was driven by the $7 million negative impact of translating profits denominated in foreign currencies into United States dollars and higher start-up costs.
Composites The table below provides a summary of net sales, EBIT and depreciation and amortization expense for the Composites segment (in millions): Twelve Months Ended December 31, 2022 2021 2020 Net sales $ 2,660 $ 2,341 $ 1,960 % change from prior year 14 % 19 % -5 % EBIT $ 498 $ 376 $ 165 EBIT as a % of net sales 19 % 16 % 8 % Depreciation and amortization expense $ 175 $ 162 $ 159 NET SALES Net sales in our Composites segment increased $319 million in 2022 compared to 2021.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Composites The table below provides a summary of net sales, EBIT, depreciation and amortization expense and EBITDA for the Composites segment (in millions): Twelve Months Ended December 31, 2023 2022 2021 Net sales $ 2,286 $ 2,660 $ 2,341 % change from prior year -14 % 14 % 19 % EBIT $ 242 $ 498 $ 376 EBIT as a % of net sales 11 % 19 % 16 % Depreciation and amortization expense $ 172 $ 175 $ 162 EBITDA $ 414 $ 673 $ 538 EBITDA as a % of net sales 18 % 25 % 23 % NET SALES Net sales in our Composites segment decreased $374 million in 2023 compared to 2022.
The Company elected to perform the qualitative approach on all of its reporting units: Composites, Insulation and Roofing. After evaluating and weighing all relevant events and circumstances, we concluded that it is not more likely than not that the fair value of the reporting units was less than their carrying amounts.
After evaluating and weighing all relevant events and circumstances, we concluded it is more likely than not that the fair value of the Roofing and Insulation reporting units exceeds their respective carrying value amounts. Consequently, we did not perform a quantitative analysis for the Roofing and Insulation reporting units and determined that their goodwill was not impaired for 2023.
EBIT In our Insulation segment, EBIT increased $166 million in 2022 compared to 2021. Higher selling prices of $573 million more than offset $302 million of input cost inflation and $56 million in higher transportation costs. Favorable customer and product mix of $48 million were offset by the impact of unfavorable manufacturing performance and higher production downtime.
EBIT In our Insulation segment, EBIT increased $7 million in 2023 compared to 2022. Higher selling prices of $245 million more than offset lower sales volumes and $57 million of input cost inflation. Higher manufacturing costs of $29 million and higher production downtime were partially offset by favorable delivery of $21 million and favorable customer and product mix.
We expect to have capital expenditures on a cash basis of approximately $520 million in 2023. The anticipated increase in capital expenditures in 2023 is primarily driven by growth and manufacturing productivity projects across all three segments. We expect that capital expenditures will be funded through cash flows from operations.
The anticipated increase in capital expenditures in 2024 is primarily driven by growth, manufacturing productivity and sustainability projects across all three segments. We expect that capital expenditures will be funded through cash flows from operations. See Note 2 and Note 6 of the Consolidated Financial Statements for additional information on property, plant and equipment.
As part of our goodwill quantitative testing process, the Company evaluates whether there are reasonably likely changes to management’s estimates that would have a material impact on the results of the goodwill impairment testing. Our annual test of goodwill for impairment was conducted as of October 1, 2022.
The terminal business value is determined by applying the long-term growth rate to the latest year for which a forecast exists. As part of our goodwill quantitative testing process, the Company evaluates whether there are reasonably likely changes to management’s estimates that would have a material impact on the results of the goodwill impairment testing.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Roofing The table below provides a summary of net sales, EBIT and depreciation and amortization expense for the Roofing segment (in millions): Twelve Months Ended December 31, 2022 2021 2020 Net sales $ 3,658 $ 3,209 $ 2,695 % change from prior year 14 % 19 % 2 % EBIT $ 831 $ 753 $ 591 EBIT as a % of net sales 23 % 23 % 22 % Depreciation and amortization expense $ 62 $ 59 $ 59 NET SALES In our Roofing segment, net sales increased $449 million in 2022 compared to 2021.
Roofing The table below provides a summary of net sales, EBIT, depreciation and amortization expense, and EBITDA for the Roofing segment (in millions): Twelve Months Ended December 31, 2023 2022 2021 Net sales $ 4,030 $ 3,658 $ 3,209 % change from prior year 10 % 14 % 19 % EBIT $ 1,174 $ 831 $ 753 EBIT as a % of net sales 29 % 23 % 23 % Depreciation and amortization expense $ 64 $ 62 $ 59 EBITDA $ 1,238 $ 893 $ 812 EBITDA as a % of net sales 31 % 24 % 25 % NET SALES In our Roofing segment, net sales increased $372 million in 2023 compared to 2022 due to higher sales volumes of approximately 5% and higher selling prices of $166 million.
The discount rate utilized is management’s estimate of what the market’s weighted average cost of capital is for a company with a similar debt rating and stock volatility, as measured by beta. The terminal business value is determined by applying the long-term growth rate to the latest year for which a forecast exists.
The discount rate utilized is management’s estimate of what the market’s weighted average cost of capital is for a company with a similar debt rating and stock volatility, as measured by beta. The reporting unit specific tax rate is based on blended global historical rates.
The Company expects a deceleration in both the North American new residential construction market and global commercial and industrial construction markets, continued input cost inflation, supply chain uncertainties and primary labor availability constraints. The Company will continue to focus on managing costs, capital expenditures, and working capital. Table of Contents -30- ITEM 7.
The Company expects both the North American new residential construction market and global commercial and industrial construction markets to temporarily remain soft with the weaker macro-economic outlook, higher interest rates and continued input cost inflation. The Company remains focused on managing costs, capital expenditures, and working capital. Table of Contents -34- ITEM 7.
The remaining variance was driven by the net impact of divestitures and acquisitions. EBIT EBIT in our Composites segment increased $122 million in 2022 compared to 2021. Higher selling prices of $443 million more than offset $215 million of input cost inflation and $37 million in higher transportation costs.
EBIT EBIT in our Composites segment decreased $256 million in 2023 compared to 2022. The decrease was driven by lower sales volumes, $83 million of higher production downtime and the net unfavorable impact of divestitures and acquisitions of $37 million. Higher input cost inflation of $41 million was offset by favorable delivery and higher selling prices.
The increase was driven by higher selling prices of $573 million, partially offset by approximately 2% lower sales volumes. Favorable customer and product mix and $29 million from the acquisition of Natural Polymers were mostly offset by the $118 million unfavorable impact of translating sales denominated in foreign currencies into United States dollars.
The decrease was driven by lower sales volumes of approximately 10%, which more than offset higher selling prices of $245 million and favorable customer and product mix. The favorable net impact of acquisitions and divestitures and $5 million of favorable impact of translating sales denominated in foreign currencies into United States dollars also contributed to the offset of decreased volumes.
Other uncertainties that may impact Roofing demand include demand from storms and other weather-related events, demand from repair and remodeling activity, competitive pricing pressure and the cost and availability of raw materials, particularly asphalt. The Company will continue to focus on managing costs, capital expenditures and working capital. Table of Contents -31- ITEM 7.
OUTLOOK In our Roofing segment, the Company expects North American new residential construction market to temporarily remain soft. Other uncertainties that may impact Roofing demand include demand from storms and other weather-related events, demand from repair and remodeling activity, competitive pricing pressure and the cost and availability of raw materials, particularly asphalt.
The assumed cash flows from this calculation are discounted at a rate based on a market-participant discount rate. Our annual test of indefinite-lived intangibles was conducted as of October 1, 2022. Based on the results of this testing, the Company recorded pre-tax non-cash impairment charges totaling $96 million in the fourth quarter of 2022.
The assumed cash flows from this calculation are discounted at a rate based on a market-participant discount rate. Our annual test of indefinite-lived intangibles was conducted as of October 1, 2023. The fair value of each of our indefinite-lived intangible assets exceeded the carrying value as of the date of our assessment. Table of Contents -41- ITEM 7.
Financing activities: Net cash used for financing activities in 2022 was $974 million compared to $881 million in 2021. The change year-over-year was primarily due to higher purchases of treasury stock and increased dividends. Derivatives Please refer to Note 4 of the Consolidated Financial Statements. Table of Contents -35- ITEM 7.
The year-over-year decrease was primarily due to lower purchases of treasury stock which were partially offset by higher 2023 dividend payments. Derivatives Please refer to Note 4 of the Consolidated Financial Statements. Table of Contents -39- ITEM 7.
OUTLOOK Global glass reinforcements market demand is driven by several economic indicators including residential, non-residential construction and manufacturing production indices, as well as global wind installations.
OUTLOOK Global glass reinforcements market demand has several economic indicators, including residential, non-residential construction and manufacturing production indices, as well as global wind installations. The Company anticipates continued impacts of economic uncertainty in a dynamic global environment, as well as competitive pricing pressure. The Company remains focused on managing costs, capital expenditures, and working capital.
See Note 2 and Note 6 of the Consolidated Financial Statements for additional information on property, plant and equipment. Long-term debt obligations: As of December 31, 2022, total long-term debt of $3.0 billion primarily consists of various outstanding senior notes with scheduled maturities starting in 2024.
Long-term debt obligations, including current portion of long-term debt: As of December 31, 2023, total long-term debt of $3.0 billion primarily consists of various outstanding senior notes. The current portion of long-term debt includes $399 million of 4.2% senior notes maturing in the fourth quarter of 2024.
We were in compliance with these covenants as of December 31, 2022. Cash and cash equivalents held by foreign subsidiaries may be subject to foreign withholding taxes upon repatriation to the U.S.
On February 9, 2024, the three major credit rating agencies reaffirmed our investment-grade debt ratings. Cash and cash equivalents held by foreign subsidiaries may be subject to foreign withholding taxes upon repatriation to the U.S.
Investing activities: The $246 million increase in cash used for investing activities in 2022 compared to 2021 was primarily driven by higher spending on acquisitions, partially offset by proceeds from divestitures (see Notes 7 and 8 of the Consolidated Financial Statements for further discussion related to our acquisitions and divestitures in 2022).
This decrease was due to lower spending on acquisitions in 2023 compared to 2022 (see Note 7 for additional information). This was partially offset by higher capital spending and lower cash from derivative settlements compared to the prior year. Financing activities: Net cash used for financing activities in 2023 was $877 million compared to $974 million in 2022.
The unfavorable impact of lower sales volumes was nearly offset by the impact of favorable customer mix. The remaining variance was driven by unfavorable manufacturing performance and the $12 million net unfavorable impact of divestitures and acquisitions.
The remaining variance was driven by unfavorable customer mix, higher rebuild costs and the $5 million negative impact of translating profits denominated in foreign currencies into United States dollars, which was partially offset by favorable manufacturing costs.
Operating activities: In 2022, the Company generated $1,760 million of cash from operating activities compared to $1,503 million in 2021. The change in cash provided by operating activities was primarily due to higher earnings.
The decrease in cash provided by operating activities was primarily due to reductions in payables and lower earnings in 2023, which were partially offset by inventory reductions. Investing activities: The cash used for investing activities in 2023 was $356 million compared to $623 million in 2022.
Removed
The Company is monitoring dynamic market conditions such as an evolving macroeconomic environment, including potential recessionary pressures in the Americas and Europe, input cost inflation, and primary labor availability constraints, which could have an effect on the markets in which we participate. The Company will continue to focus on managing costs, capital expenditures, and working capital.
Added
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) by segment is a non-GAAP measure that consists of EBIT plus depreciation and amortization. Segment EBITDA is used internally by the Company for analysis of our performance.
Removed
Higher selling prices of $522 million more than offset input cost inflation, primarily asphalt, of $302 million and $34 million of higher transportation costs. Unfavorable manufacturing performance of $44 million and the impact of lower sales volumes further offset higher selling prices.
Added
The remaining improvement was driven by favorable input costs and delivery of $80 million, higher sales volumes, and favorable customer and product mix of $48 million, which were partially offset by higher selling, general and administrative expenses and $8 million of higher production costs.
Removed
The remaining variance was driven about equally by higher selling, general and administrative expenses and the impact of unfavorable customer and product mix. OUTLOOK In our Roofing segment, the Company expects a deceleration in the North American new residential construction market.
Added
The Company will continue to focus on managing costs, capital expenditures and working capital. Table of Contents -33- ITEM 7.
Removed
Please reference the table above for information related to the significant year over year variances. General corporate expense and other in 2022 was $19 million higher than in 2021, driven primarily by higher general corporate expenses as business activities return to a more typical, post-pandemic level.
Added
The increase was primarily driven by pension settlement losses and higher restructuring costs, partially offset by the gain on sale of the Santa Clara, California site. General corporate expense and other in 2023 was $51 million higher than in 2022.
Removed
The Company recognized approximately $9 million of loss on extinguishment of debt in the third quarter of 2021 associated with these actions. The Company issued $300 million of 2030 senior notes on May 12, 2020. Interest on the notes is payable semiannually in arrears on June 1 and December 1 each year, beginning on December 1, 2020.
Added
OUTLOOK In 2024, we expect general corporate expenses to range between $240 and $250 million, without considering the effect of the planned acquisition of Masonite.
Removed
The proceeds from these notes were used for general corporate purposes. The Receivables Securitization Facility and Senior Revolving Credit Facility mature in 2024 and 2026, respectively. The Company has no significant debt maturities of senior notes before the fourth quarter of 2024.
Added
These covenants include a maximum allowed leverage ratio. We were in compliance with these covenants as of December 31, 2023. On February 8, 2024, the Company entered into a commitment letter with Morgan Stanley Senior Funding, Inc.
Removed
Consequently, we did not perform a step one quantitative analysis for the reporting units and determined goodwill was not impaired for 2022.
Added
(“MSSF”), pursuant to which MSSF has committed to provide, subject to the satisfaction of customary closing conditions, a 364-day senior unsecured term loan facility in an aggregate principal amount of up to $3.0 billion for purposes of funding a substantial portion of the Masonite acquisition. We expect to assume up to $875 million of Masonite’s outstanding senior unsecured notes.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+0 added−0 removed12 unchanged
Biggest changeThe following table shows how a one percentage point increase / decrease in interest rates would impact the fair market value of the senior notes: Senior Notes Maturity Year As of December 31, 2022: 2024 2026 2029 2030 2036 2047 2048 Increase in interest rates Decrease in fair value 2% 3% 6% 6% 8% 12% 12% Decrease in interest rates Increase in fair value 2% 3% 6% 7% 10% 15% 15% Senior Notes Maturity Year As of December 31, 2021: 2024 2026 2029 2030 2036 2047 2048 Increase in interest rates Decrease in fair value 3% 4% 6% 7% 10% 15% 15% Decrease in interest rates Increase in fair value 3% 4% 7% 8% 11% 18% 18% Commodity Price Risk The Company is exposed to changes in prices of commodities used in its operations, primarily associated with energy, such as natural gas, and raw materials, such as asphalt and polystyrene.
Biggest changeThe following table shows how a one percentage point increase / decrease in interest rates would impact the fair market value of the senior notes: Senior Notes Maturity Year As of December 31, 2023: 2024 2026 2029 2030 2036 2047 2048 Increase in interest rates Decrease in fair value 1% 2% 5% 5% 8% 13% 13% Decrease in interest rates Increase in fair value 1% 3% 5% 6% 9% 16% 16% Senior Notes Maturity Year As of December 31, 2022: 2024 2026 2029 2030 2036 2047 2048 Increase in interest rates Decrease in fair value 2% 3% 6% 6% 8% 12% 12% Decrease in interest rates Increase in fair value 2% 3% 6% 7% 10% 15% 15% Commodity Price Risk The Company is exposed to changes in prices of commodities used in its operations, primarily associated with energy, such as natural gas, and raw materials, such as asphalt and polystyrene.
As of December 31, 2022, the Company had no borrowings on its Senior Revolving Credit Facility or Receivables Securitization Facility, with the balance of other floating-rate debt of $1 million.
As of December 31, 2023, the Company had no borrowings on its Senior Revolving Credit Facility or Receivables Securitization Facility, with the balance of other floating-rate debt of $1 million.
As of December 31, 2021, the Company had no borrowings on its Senior Revolving Credit Facility or Receivables Securitization Facility, with the balance of other floating rate debt of $6 million. Cash and cash equivalents were $1.1 billion and $959 million at December 31, 2022 and 2021, respectively.
As of December 31, 2022, the Company had no borrowings on its Senior Revolving Credit Facility or Receivables Securitization Facility, with the balance of other floating rate debt of $1 million. Cash and cash equivalents were $1.6 billion and $1.1 billion at December 31, 2023 and 2022, respectively.
Based on the year-end outstanding balances on floating rate debt, a one percentage point increase (decrease) in interest rates at December 31, 2022 and 2021 would increase (decrease) our annual net interest expense by less than $1 million for each year. Table of Contents -40- ITEM 7A.
Based on the year-end outstanding balances on floating rate debt, a one percentage point increase (decrease) in interest rates at December 31, 2023 and 2022 would increase (decrease) our annual net interest expense by less than $1 million for each year. Table of Contents -45- ITEM 7A.
As of December 31, 2021, the potential change in fair value for such financial instruments from an increase (decrease) of 10% in the quoted foreign currency exchange rates would be a (decrease) increase of approximately $36 million and $36 million, respectively. We have translation exposure resulting from translating the financial statements of foreign subsidiaries into United States Dollars.
As of December 31, 2022, the potential change in fair value for such financial instruments from an increase (decrease) of 10% in the quoted foreign currency exchange rates would be a (decrease) increase of approximately $7 million and $5 million, respectively. We have translation exposure resulting from translating the financial statements of foreign subsidiaries into United States Dollars.
This amount excludes the offsetting impact of the price risk inherent in the physical purchase of the underlying commodities. Table of Contents -41-
This amount excludes the offsetting impact of the price risk inherent in the physical purchase of the underlying commodities. Table of Contents -46-
These transactional risks are mitigated through the use of derivative financial instruments and balancing of cash deposits and loans. The net fair value of derivative financial instruments used to limit exposure to foreign currency risk was a liability of $1 million and a liability of $7 million as of December 31, 2022 and 2021, respectively.
These transactional risks are mitigated through the use of derivative financial instruments and balancing of cash deposits and loans. The net fair value of derivative financial instruments used to limit exposure to foreign currency risk was a liability of less than $1 million and a liability of $1 million as of December 31, 2023 and 2022, respectively.
The potential change in fair value at December 31, 2022 and 2021 resulting from an increase (decrease) of 10% in the underlying commodity prices would be an increase (decrease) of $8 million for 2022 and an increase (decrease) of $6 million for 2021.
The potential change in fair value at December 31, 2023 and 2022 resulting from an increase (decrease) of 10% in the underlying commodity prices would be an increase (decrease) of $4 million for 2023 and an increase (decrease) of $8 million for 2022.
As of December 31, 2022, the potential change in fair value for such financial instruments from an increase (decrease) of 10% in the quoted foreign currency exchange rates would be a (decrease) increase of approximately $7 million and $5 million, respectively.
As of December 31, 2023, the potential change in fair value for such financial instruments from an increase (decrease) of 10% in the quoted foreign currency exchange rates would be a (decrease) increase of approximately $4 million and $3 million, respectively.
Exposures are related to the United States Dollar primarily relative to the Brazilian Real, Chinese Yuan, European Euro, Hong Kong Dollar, Indian Rupee, and South Korean Won exchange rates. Also, there are additional exposures related to the European Euro primarily versus the Polish Złoty and Norwegian Krone.
Exposures are related to the United States Dollar primarily relative to the Brazilian Real, Indian Rupee, Chinese Yuan, Hong Kong Dollar, South Korean Won, and the European Euro exchange rates. Also, there are additional exposures related to the European Euro primarily versus the Polish Złoty, British Pound Sterling, and the U.S. Dollar.
At December 31, 2022 and 2021, the net fair value of such swap contracts was a liability of $30 million and an asset of $11 million, respectively.
At December 31, 2023 and 2022, the net fair value of such swap contracts was a liability of $15 million and a liability of $30 million, respectively.

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