Owens Corning

5. GOODWILL AND OTHER INTANGIBLE ASSETS

The Company tests goodwill and indefinite-lived intangible assets for impairment as of October 1st each year, or more frequently should circumstances change or events occur that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

Goodwill

The changes in the net carrying amount of goodwill by segment are as follows:

Third Quarter Triggering Event

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

Annual Impairment Test

The annual tests performed in the fourth quarter of 2024 and 2023 resulted inno impairment of goodwill. The Company elected to perform the qualitative approach on all of its reporting units. After evaluating and weighing all relevant events and circumstances, we concluded it is more likely than not that the fair value of the Roofing and Insulation reporting units exceeds their respective carrying value amounts while the Doors reporting unit business enterprise value approximates its carrying value given the acquisition that occurred in May 2024.

Given the narrow cushion of Composites reporting unit fair value in excess of carrying value as a result of the third quarter of 2024 impairment testing, the Company performed a quantitative analysis for the Composites reporting unit as of October 1, 2024. Testing indicated that the cushion remained less than 10%.

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

Fourth Quarter Triggering Event

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

There was uncertainty as to the outcome of the strategic review of our glass reinforcements business and the macroeconomic factors that impact this reporting unit. The likelihood of a future impairment could be increased by a sustained downturn in these macroeconomic factors, a change in the long-term revenue growth or profitability for this reporting unit, or the outcome of the strategic review.

As part of our quantitative testing process for goodwill of the Composites reporting unit, we estimate fair value using a discounted cash flow approach from the perspective of a market participant, as well as the market approach. For the market approach, we use market multiples derived from a set of similar companies. Significant assumptions used in the discounted cash flow approach are the revenue growth rates, EBIT margins, long-term growth rate, and the discount rate. The terminal business value is determined by applying the long-term growth rate to the latest year for which a forecast exists.

Other Intangible Assets

Other intangible assets consist of the following:

(a) Other primarily includes emissions rights.

Indefinite-Lived Intangible Assets

Fair values used in testing for potential impairment of our trademarks and trade names are calculated using the relief-from-royalty method by applying an estimated market value royalty rate to the forecasted revenues of the businesses that utilize those assets. The assumed cash flows from this calculation are discounted at a rate based on a market participant discount rate.

The annual test performed in the fourth quarter of 2024 resulted inno impairment of indefinite-lived intangible assets.

As of December 31, 2024, there isone indefinite-lived intangible asset that is at an increased risk of impairment, of which is used by our Insulation segment and was partially impaired in the fourth quarter of 2022. A change in the estimated long-term revenue growth rate or discount rate for the segment could increase the likelihood of a future impairment. The following table presents the carrying values of this asset as of December 31, 2024:

All remaining indefinite-lived intangible assets substantially exceeded their carrying values as of December 31, 2024.

The annual test performed in the fourth quarter of 2023 resulted in no impairment of indefinite-lived intangible assets. As of December 31, 2023, there weretwo indefinite-lived intangible assets that were at an increased risk of impairment, both of which are used by our Insulation segment and were partially impaired in the fourth quarter of 2022.

The annual tests performed in the fourth quarter of 2022 resulted in impairment offive of the Company's indefinite-lived intangible assets. Based on the results of this testing, the Company recorded pre-tax non-cash impairment charges totaling $96 million in the fourth quarter of 2022. These charges were recorded in Other expense, net on the Consolidated Statements of Earnings, and were included in the Corporate, Other and Eliminations reporting category.

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

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

Definite-Lived Intangible Assets

The Company amortizes the cost of other intangible assets over their estimated useful lives which, individually, range up to 25 years. The Company's future cash flows are not materially impacted by its ability to extend or renew agreements related to its amortizable intangible assets.

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

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

The primary assumption used in the fair value analysis was the weighting of the discounted cash flow model and market information. The fair value measurements are classified as Level 3 within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement" due to the unobservable inputs used.

Amortization expense for intangible assets for the years ended December 31, 2024, 2023 and 2022 was $132 million, $94 million and $55 million, respectively. In 2023, amortization expense included $25 million of accelerated amortization related to restructuring actions further explained in Note 13 to the Consolidated Financial Statements.

The estimated amortization expense for intangible assets for the next five years is as follows: