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ACQUISITIONS | 6 Months Ended
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Jun. 30, 2025
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] |
ACQUISITIONS | ACQUISITIONS On February 8, 2024, the Company entered into an Arrangement Agreement (the "Arrangement Agreement") with Masonite International Corporation, a British Columbia corporation ("Masonite"), pursuant to which the Company agreed to acquire all of the issued and outstanding common shares of Masonite at a purchase price of $133.00 per share (the "Arrangement"). On May 15, 2024, as determined by the Arrangement Agreement, the Company completed the acquisition of 100% of the issued and outstanding shares of Masonite for $133.00 per share in cash, without interest for a total purchase price of $3.2 billion. The acquisition was funded primarily with debt proceeds of $2.8 billion and cash on hand. Please refer to the discussion under "364-Day Credit Facility" in Note 12 of the Consolidated Financial Statements for further information. Masonite is a leading global designer, manufacturer, marketer and distributor of interior and exterior doors and door systems for the residential new construction and residential repair and remodeling markets. The addition of Masonite's market-leading doors business creates a new growth platform for the Company, strengthening the Company's position in building and construction and expanding its offering of branded residential building products. Masonite's operating results and purchase price allocation have been included in the Company's newly established Doors reportable segment from May 15, 2024, the effective date of the Arrangement, within the Consolidated Financial Statements. Doors contributed revenues of $1,094 million and earnings of $23 million to the Company for the six months ended June 30, 2025. During the six months ended June 30, 2024 Doors contributed revenues of $311 million and earnings of $25 million. Please refer to Note 3 of the Consolidated Financial Statements for further information. During the three and six months ended June 30, 2025, the Company incurred no transaction costs. During the three and six months ended June 30, 2024, the Company incurred $29 million and $47 million of transaction costs, respectively. During the three and six months ended June 30, 2025, the Company incurred $4 million and $6 million of integration costs, respectively, related to its acquisition of Masonite. During the three and six months ended June 30, 2024, the company incurred $21 million of integration costs related to its acquisition of Masonite. These expenses are included in Other expense, net on the Company's Consolidated Statements of Earnings. The fair value of the total purchase consideration transferred was determined as follows:
(In millions) | Fair Value of Purchase Consideration
Closing cash consideration | $ | 2,935 |
Pre-combination vesting portion of fair value of Masonite outstanding equity awards converted to Owens Corning time vesting RSUs | 35 |
Repayment of Masonite term loan facility | 216 |
Total transaction consideration | $ | 3,186 |
The closing cash as part of consideration was calculated at the price of $133.00 per outstanding Masonite common share. At the close of the acquisition of Masonite, there were 22.07 million Masonite common shares outstanding. The fair value of Owens Corning common stock underlying Masonite outstanding equity awards that have been converted into awards with respect to Owens Corning common stock is calculated as follows:
(In millions, except share and per share amounts) | Amount
Number of Masonite stock awards outstanding (a) | 639,608 |
Exchange ratio (b) | 0.7642
Owens Corning equity awards issued for Masonite outstanding equity awards | 488,778 |
10-day weighted average closing share price of Owens Corning common stock (c) | $ | 174.03 |
Fair value of Owens Corning time vesting RSUs issued for Masonite outstanding equity awards | $ | 85 |
Less: Fair value allocated to post-transaction compensation expense | (50) |
Fair value of awards included in transaction consideration | $ | 35 |
(a) Represents the Masonite stock awards that have been converted into Owens Corning equity awards upon completion of the acquisition of Masonite, based on awards outstanding at May 15, 2024. Masonite equity awards include awards issued under various stock incentive plans of Masonite. (b) The exchange rate was determined by the consideration amount divided by the volume weighted average closing sale price of one share of Owens Corning common stock for the ten consecutive trading days ended May 15, 2024, in accordance with the terms of the Arrangement Agreement. (c) The ten-day weighted average closing share price was calculated for the ten consecutive trading days ended May 15, 2024, in accordance with the terms of the Arrangement Agreement. On May 15, 2024, the effective date of the Arrangement, the Company transferred consideration to Masonite to repay the Masonite 2027 term loan facility (the "Masonite term loan facility"). This repayment was required by the change in control provision within the terms of the Masonite term loan facility. The Company has applied the acquisition method of accounting in accordance with Accounting Standards Codification ("ASC") Topic 805, Business Combinations, and recognized assets acquired and liabilities assumed at their fair values as of the effective date of the Arrangement, with the excess purchase consideration recorded to goodwill. The Company continued to obtain information to complete its valuation of certain assets and liabilities, during the twelve month period subsequent to the close of the transaction. During this time, the Company recorded measurement period adjustments to the purchase price allocation. The Company has finalized the valuation of the assets acquired and liabilities assumed as of May 15, 2025. The following table summarizes the acquisition date fair value net of measurement period adjustments of net tangible and intangible assets acquired, net of liabilities assumed as part of the Arrangement:
(In millions) | As originally reported | Measurement period adjustments | As adjusted
Cash and cash equivalents | $ | 282 |  | $ | — |  | $ | 282 |
Receivables, net | 330 |  | — |  | 330 |
Inventories | 379 |  | (2) |  | 377 |
Other current assets | 82 |  | (4) |  | 78 |
Property, plant and equipment, net | 861 |  | (3) |  | 858 |
Operating lease right-of-use assets | 253 |  | — |  | 253 |
Intangible assets | 1,579 |  | (221) |  | 1,358 |
Deferred income taxes | 14 |  | — |  | 14 |
Other non-current assets | 91 |  | — |  | 91 |
Total assets | 3,871 |  | (230) |  | 3,641 |
Accounts payable | 196 |  | — |  | 196 |
Current operating lease liabilities | 28 |  | — |  | 28 |
Other current liabilities | 187 |  | 6 |  | 193 |
Long-term debt | 867 |  | — |  | 867 |
Non-current operating lease liabilities | 235 |  | — |  | 235 |
Deferred income taxes | 413 |  | (43) |  | 370 |
Other non-current liabilities | 32 |  | 13 |  | 45 |
Net assets acquired | 1,913 |  | (206) |  | 1,707 |
Non-controlling interest | (35) |  | — |  | (35) |
Goodwill | 1,308 |  | 206 |  | 1,514 |
Total net assets acquired | $ | 3,186 |  | $ | — |  | $ | 3,186 |
The details on the methodology and significant inputs used for fair value of valuation are outlined below. Goodwill The purchase consideration allocation resulted in $1.5 billion of goodwill. During the preliminary period, the Company increased the value of goodwill by $206 million. The goodwill is not deductible for tax purposes. 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. Receivables The fair value of receivables acquired is $330 million, with the gross contractual amount being $331 million. The Company expects $1 million to be uncollectible. Inventory The fair value of inventory was determined by the market selling price of the inventory, less the remaining manufacturing and selling costs and a normal profit margin on those manufacturing and selling efforts. The fair value of inventory has been stepped up by $18 million, this amount has been fully amortized to Cost of Sales as the inventory was sold. Property, Plant and Equipment The fair value of property, plant and equipment is $858 million and was determined using cost and market approaches. The cost approach reflects the amount that would be required to replace the asset to service capacity, this approach was used where there was historical data available. Where there was not historical data available the market approach was used, this approach reflects recent sales of identical or comparable assets. Intangible Assets The fair value of acquired intangible assets is $1.4 billion. During the preliminary period, the Company reduced the value of acquired intangibles by $221 million, as we continued to obtain information used to determine the fair value. There were no material impacts to the Consolidated Statements of Earnings as a result of this adjustment. The fair value of customer relationships was determined using the multi-period excess earnings method. Key assumptions under this method are the revenue growth rate, adjusted EBITDA margin (including the adjusted terminal EBITDA margin), customer attrition rate, discount rate, tax rate and contributory asset charges. The fair value of trade names were determined using the relief from royalty method. Key assumptions under this method are future cash flow estimates, royalty rate and discount rate.
(In millions, except useful life amounts) |  | Estimated Useful Life (in years) |  | Estimated Asset Fair Value
Customer relationships |  | 10 - 21 |  | $ | 979 |
Technology |  | 5 |  | 120 |
Trademarks and trade names (indefinite-lived) |  | Indefinite |  | 240 |
Trademarks and trade names |  | 10 |  | 19 |
Identifiable intangible assets, net |  |  |  | $ | 1,358 |
Debt The fair value of Masonite's unsecured senior notes was determined using the market approach, based on the trading value of the notes in the market. Joint Ventures and Noncontrolling Interests The Company's acquisition of Masonite included joint ventures with Dominance Industries, Inc., 45% owned, and Vanair Design Inc., 30% owned. As a result of the Masonite acquisition, we also recognized a 25% noncontrolling interest in Sacopan Inc. for the portion owned by a third party and a 50% non-controlling interest in Magna Foremost SDN BHD for the portion owned by a third party. The value of these investments and non-controlling interests were determined using an equally weighted value from the income approach and the market approach. Pro Forma Financial Information from Continuing Operations The following table summarizes, on an unaudited pro forma basis, the combined results of operations from continuing operations of the Company for the three and six months ended June 30, 2024, assuming the acquisition had occurred on January 1, 2023.
| Three Months Ended June 30, | Six Months Ended June 30,
(In millions) | 2024 | 2024
Pro Forma net sales from continuing operations | $ | 2,807 |  | $ | 5,414 |
Pro Forma net earnings from continuing operations attributable to Owens Corning | $ | 308 |  | $ | 631 |
The pro forma financial information includes certain adjustments to adhere to the Company's accounting policies and adjustments to the historical results with pro forma adjustments, net of tax, that assume the acquisition occurred on January 1, 2023. This includes removing the results of the Architectural segment that was sold by Masonite prior to the close of the Arrangement, increased depreciation expense to reflect the fair value of property, plant and equipment, and increased amortization expense related to the fair value of identifiable amortizable intangible assets. In addition, adjustments were made to reflect the interest, discount amortization, and capitalized financing cost amortization for the 2027, 2034 and 2054 senior notes that were issued to pay off the 364-Day Credit Facility in the comparative pro forma period, see Note 12 for further detail. Finally, adjustments were made to remove interest expense for the pro forma period related to the Masonite term loan facility that was paid off at closing as part of the consideration for the Arrangement. Significant adjustments to the pro forma financial information are as follows: 1.Net sales were decreased by $41 million and by $119 million for the three and six months ended June 30, 2024, respectively, to remove the sales of the Architectural segment that was sold by Masonite prior to the close of the Arrangement. 2.Net earnings were increased by $56 million for the three and six months ended June 30, 2024, to remove transaction costs incurred by Masonite. 3.Net earnings were increased by $29 million and $47 million for the three and six months ended June 30, 2024, respectively, to move transaction costs incurred by the Company to the beginning of the comparative period. 4.Net earnings were decreased by $46 million and by $90 million for the three and six months ended June 30, 2024, respectively, to give effect to the tax impact of pro forma adjustments. The pro forma financial information does not reflect any anticipated synergies or dis-synergies, operating efficiencies or cost savings that may result from the Arrangement and integration costs that may be incurred.

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