Good morning and welcome to the Owens Corning Third Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Thierry Denis, Vice President of Investor Relations. Please go ahead.

Thank you, Andra. Good morning, everyone. Thank you for taking the time to join us for today's conference call in review of our business results for the third quarter 2018. Joining us today are Mike Thaman, Owens Corning's Chairman and CEO; and Michael McMurray, Chief Financial Officer. Following our presentation this morning, we will open this one-hour call to your questions. In order to accommodate as many call participants as possible, please limit yourselves to one question only. Earlier this morning, we issued a news release and filed the 10-Q that detailed our financial results for the third quarter 2018. For the purposes of our discussion today, we have prepared presentation slides that summarize our performance and results and we'll refer to these slides during the call. You can access the earnings press release, Form 10-Q and the presentation slides at our website, owenscorning.com. Refer to the Investors link under the Corporate section of our homepage. A transcript and recording of this call and the supporting slides will be available on our website for future reference. Please reference slide 2 before we begin where we offer a couple of reminders. First, today's remarks would include forward-looking statements based on our current forecasts and estimates of future events. These statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially. We undertake no obligation to update these statements beyond what is required under applicable securities laws. Please refer to the cautionary statements and the risk factors identified in our SEC filings for a more detailed explanation of the inherent risks and uncertainties affecting such forward-looking statements. Second, the presentation slides and today's remarks contain non-GAAP financial measures. Explanations and reconciliations of non-GAAP to GAAP measures may be found in the text and financial tables of our earnings press release available on owenscorning.com. Adjusted EBIT is our primary measure of period-over-period comparisons and we believe it is a meaningful measure for investors to compare our results from period to period. Consistent with our historical practice, we have excluded certain items that we believe are not representative of our ongoing operations when calculating adjusted EBIT and adjusted earnings. We adjust our effective tax rate to remove the effect of quarter-to-quarter fluctuations, which have the potential to be significant in arriving at adjusted earnings and adjusted earnings per share. We also use free cash flow and free cash flow conversion of adjusted earnings as measures helpful to investors to evaluate the company's ability to generate cash and utilize that cash to pursue opportunities that enhance shareholder value. For those of you following along with our slide presentation, we will begin on slide 4. And now, opening remarks from our Chairman and CEO, Mike Thaman, who will be followed by CFO, Mike McMurray and our Q&A session. Mike?

Thank you, Thierry. Good morning, everyone. In the third quarter, we generated 7% revenue growth and 12% adjusted EBIT growth. Adjusted EBIT grew to $267 million, an all-time record quarter despite lower market volumes and persistent inflation. Overall, we executed well in the quarter with better operating performance, solid market share positions and strong price realization. However, despite the progress, we're not where we expected to be. Inflation has persisted and volume has slowed, both of which we expect will continue through the remainder of the year. As a result, we've lowered our 2018 outlook. We expect adjusted EBIT to be in line with last year's performance of $855 million. While the year will not meet our prior expectations, we are confident in the continued earnings potential of Owens Corning in our three strong businesses. Before I talk further about financial results, I'd like to give you an update on safety. Our recordable incident rate for the third quarter was 0.36, a 22% improvement over the same period last year. This performance was among the best ever since we began reporting. Now, I'd like to review our financials and then talk about our outlook for 2018. Revenue was $1.8 billion, up 7% for the third quarter compared with the same period last year on a contribution of our Insulation acquisition and successful pricing actions in Roofing and Insulation. This was partially offset by a significant volume decline in our Roofing business. Adjusted EBIT for the quarter was $267 million, up 12%. For the quarter, Insulation revenue grew to $710 million, up 25%, while EBIT increased to $94 million, up $30 million with EBIT margins of 13%. Revenue growth was driven mainly by the Paroc acquisition and $40 million of price improvement, primarily in the U.S. residential fiberglass building insulation market.…

Thank you, Mike, and good morning, everyone. As Mike mentioned earlier, we delivered 7% top line growth in the third quarter, driven by our Paroc acquisition and strong pricing actions in Roofing and Insulation. We had strong operational and commercial execution in the quarter, but we experienced a smaller market opportunity. This weakness is expected to continue into the fourth quarter. As a result, we have revised our full-year outlook to be flat with last year. The strong execution in the second quarter across all three businesses delivered improved operating margins, despite lower market volumes and persistent inflation. We made substantial progress from a pricing perspective in the quarter. The actions taken have delivered about $170 million of price improvement in the first three quarters of the year. In the third quarter, pricing outpaced inflation for the first time this year. And as a result, we grew adjusted EBIT and EBITDA margins to 15% and 21%, respectively. Now, let's start on slide 5, which summarizes our key financial data for the third quarter. You'll find more detailed financial information in the tables of today's news release and the Form 10-Q. Today, we reported third quarter 2018 consolidated net sales of $1.8 billion, up 7% and over $100 million compared to sales reported for the same period in 2017, primarily driven by our Insulation business. Adjusted EBIT for the third quarter of 2018 was $267 million, up 12% compared to $239 million in the same period one year ago. Strong pricing execution in Insulation and Roofing and the impact of the Paroc acquisition overcame weaker-than-anticipated market conditions across all three businesses. Adjusted EBIT for the quarter improved to record level despite lower market volumes and persistent inflation. Net earnings attributable to Owens Corning were $161 million, up 68% compared to $96…

Thank you, Michael. Andra, we're now ready to begin the Q&A session.

We will now begin the question-and-answer session. Please limit yourself to one question. If you have further questions, you may reenter the question queue. And our first question will come from Doug Clark of Goldman Sachs. Please go ahead. Doug Clark - Goldman Sachs & Co. LLC: Hey, great thanks for taking my question, my first one is on the Insulation business and then pricing in particular, you mentioned the expected additional price increase starting January 7 in 2019. I'm just wondering if you can comment on price realization thus far t-date and kind of how you expect that going forward amid kind of weaker volume environment. And that actually might be a kind of comparable question for Roofing as well. Thanks?

Okay thanks Doug. This is Mike. As we look at 2018 Insulation results, I think a real highlight of the year is our pricing performance. We came into the year I think with very strong expectations that we were in an environment where will be able to achieve a good positive price particularly in our North American residential building Insulation business. And in fact, we've delivered against that expectation. If you look against 2017, we did have positive pricing in 2017, we carried over negative price and then realized good price, I think in the second half of 2017 in particular, we carried some price into 2018, but I think the price actions in the first part of the year or the middle part of the year were both very positive and constructive to our pricing for this year. So as we look at the market environment, we continue to see that demand level support high industry capacity utilization, so while we have some disappointment at the second half of the year may not be quite as robust as we've previously thought it would be in res, we do think the utilization levels are still relatively high and that the pricing market – that the pricing environment today is good. So we're going into next year I think with very much the same posture that we entered this year which is as long as we see reasonable amounts of market demand, we think the opportunity for us to get a recovery of the value of our product and get some margin accretive pricing in the residential Insulation business is an objective for us next year, and that's consistent with the announcement of our price increase in January. The other thing I'd like to say about Insulation and then I'll flip…

Our next question comes from John Lovallo of Bank of America. Please go ahead.

Hey, guys. Thank you for taking my questions. The first one, I just want to make sure that I'm thinking about the math here correctly on the shingle side. So in the third quarter volume for the industry was down 7.5 million units I think or about 19%. So if we have that same level of volume decline in the fourth quarter that would seem to imply about a 30% year-over-year decline for the industry, does that seem right?

Yeah John, I think that's probably about right. As we look at it we said the overall market down 10% for the full year, last year was 144 million units so where our market call would imply around 130 million units given that was flat through the first half, somewhere between the third and fourth quarter we're going to have to see a 14 million square decline or something of that order of magnitude, so I mean you're getting the numbers right. I think the key point there being that the overall market decline in units that we expect to see is going to be similar to what we managed our way through in the third quarter, so while that's not what we're looking for and we would prefer a stronger market condition in the fourth, I think we've managed through that kind of environment. The percentages could sound scarier than the unit. So when we talk about a 30% down market, it looks like we're seeing some big acceleration of the decline of the market and in fact in units we are seeing a fourth quarter, that we think will be pretty similar to what we just managed through in the third.

Our next question comes from Stephen Kim of Evercore ISI. Please go ahead.

Yeah, thanks a lot, guys. I guess I want to ask about the Insulation. I think you had indicated that the half of the reduction was due to residential, but other product lines were also down. So I just wanted to get some clarity on that, that implies I assume that the residential Insulation business was also down 2%. Can you sort of talk about that relative to a housing starts environment that was still up fairly meaningfully, as call it almost mid-single digits most of the year. And were there any competitive factors or competitive actions that we need to be thinking about with respect to the Insulation business? And then within that also Pittsburgh Corning is something you didn't specifically call out, but that, we've understood can sometimes be lumpy. So I was wondering if there was anything particularly meaningful with respect to the slowdown in volumes you saw this quarter from Pittsburgh.

Okay. Thanks Stephen, maybe I'll just go around the horn a little bit, talking about Europe obviously our biggest exposure in Europe today is the Paroc business and I think Michael's addressed that specifically saying, we're really happy with the performance of Paroc in the quarter and that EBITDA margins in that business were quite good. As you mentioned the FOAMGLAS business the former Pittsburgh Corning business can be a bit lumpy, it also has some exposure to European commercial construction, there's a fair amount of that Insulation that goes into commercial type applications in addition to industrial. We did see, that the commercial side of the FOAMGLAS business was a little bit slower. We're seeing projects just getting done more slowly, I think you're hearing the same things in Europe as you hear in the U.S., which is labor availability issues, a lot of those are government funded. So some of that I think would probably go to the pace of government spending as well. So we feel confident that the product is still well valued in the market and that as those projects go forward we'll see that volume come, but I think the timing has been a bit off. So that is certainly one of the headwinds that we would be talking about in lowering our overall outlook for the full year. We brought Latin America and Asia down a little bit in our outlook as well. I think that's been a theme to the first couple of quarters and we don't see them catching up through the remainder of the year. Probably the one that has been a little bit more of a new story for us in the quarter, was we did see some of the North American, particularly OEM type businesses where we sell…

Our next question comes from Susan Maklari of Credit Suisse. Please go ahead. Susan Maklari - Credit Suisse Securities (USA) LLC: Thank you, good morning. I wanted to talk a little bit about inflation. You mentioned that certainly oil prices seem to be moderating a bit in the Roofing side of the business, but as you look across, the three segments Insulation, Composites and Roofing. How are you thinking about inflation going forward?

Susan maybe I'll talk about that and then maybe I'll see if Michael has any additional comments. We kind of have three different postures related to inflation across our three businesses. So I think in Roofing it's a materials conversion business, our view of inflation there is that, our team is – given the objective of recovering inflation in the price of product and I think you've seen this year that is not just asphalt cost inflation, but transportation cost. I think we have seen in terms of demonstrated performance that we've been quite effective in our ability to do that, albeit we got a little bit behind the curve earlier in the year and it took us kind of six to seven months to get caught up in the pricing, our ability to get the pricing and recover that inflation, I think it's demonstrated a positive for the year. In Insulation, we've been looking for margin accretive pricing. So we saw a lot of price deterioration that was not supported by deflation in 2006 to 2014, 2015 timeline. So we really feel like we need to get some price improvement and get prices back to where we saw our pricing levels in 2005, 2006, not just in nominal terms, but in real terms and we're still a pretty significant way off of that number. So, we have more climb to do in terms of Insulation prices. I think we came into the year expecting a little less inflation in Insulation. So, we expected the $120 million of price realization in 2018 to be more accretive to margin than in fact what it's going to be, just because it's been offset by more inflation than we had planned coming into the year. So, we're clearly overcoming the inflation in Insulation,…

I think that's pretty comprehensive, Michael.

Thanks, Mike.

Our next question is from Michael Rehaut of JPMorgan. Please go ahead.

Thanks. Good morning, everyone. A question I had was on Roofing and the pricing progress. I think there's been a lot of concern during the quarter around the ability for the distributors to pass through price. It appears obviously that, from your standpoint, you finally were able to, in the third quarter, for your own business, achieve price in excess. So, just wanted to get your sense of, what's going on from a end-market standpoint in terms of your views on the ability for the entire industry to pass through price, if that's still kind of at an acceptable rate. And then, secondly, on the Insulation EBIT reduction, you had mentioned volume – I was hoping to get a breakdown of that $40 million reduction between volume and greater-than-expected – weaker volume and greater-than-expected cost inflation. Thanks.

Okay. Thanks, Michael. Talking about price, I think the way you characterize it is, in the third quarter, we finally were able to get on top of inflation. I would want to make sure that I point out. We made really good progress in the first quarter. We made really good progress in the second quarter. So, the pricing story in Roofing is not a story of suddenly in the middle of the year, the pricing environment improved for us. We've been working at this all the way through the first quarter and second quarter. The issue was we were a bit behind the curve. I can't comment specifically in terms of how the distributors are dealing with the cost inflation, their feeling from the manufacturers and our price increases. I would say, in most businesses, you faced very similar challenges to the challenges we faced, which is, can you get the timing of the cost inflation and the timing of the price realization to line up, so that you don't get margin compression? And certainly, I think that the market pricing of shingles has moved and I would expect that distributors would eventually be able to pass that through, because the product is a very valuable product. And if you look at the re-roof market, in a $10,000 to $15,000 re-roof job the price of the shingle and the cost of the shingle as typically about 20% or less of the overall project. So, in terms of price elasticity or elasticity of demand to price, there's virtually none in shingles. So, cost recovery is going to be the key and I think that's the key for both the manufacturers and the distributors. As it relates to Insulation, I said that less than half of the reduction in the outlook was related to the residential Insulation market in North America, kind of the new construction piece of it. I said we've seen some OEM and we've seen some European reductions as well. And I think the balance would be inflation-related. I think it's fair to kind of – roughly a third, a third, a third is not a bad way of looking at kind of what we've seen in terms of that reduction of how we're seeing the year.

Our next question comes from Matthew Bouley of Barclays. Please go ahead.

Hi. Thank you for taking my question. I wanted to follow-up on the Composites environment and, Mike, just your thoughts around the 2019 pricing outlook as we look ahead to the year-end negotiations. I guess, in particular, given the news that I think we've seen the announcement that your large Chinese competitor is close to opening capacity in South Carolina, so, I guess, how do you anticipate that affecting the competitive environment and pricing dynamics in the U.S? Thank you.

Matt, it's Michael. So, I mean I think kind of first and foremost, kind of thinking longer term, we've phased into inflation as other material producers have phased into inflation as well. And so, a big one that I'd call out in particular in the U.S. would be steel. So, if I think from a longer-term perspective, that is a good catalyst. Also, the market next year, I think, is expected to be decent. So, expectations for global industrial production growth are good. Utilization rates remain high and again, we think, will phase into some reasonable amount of inflation next year and I think all of those are good catalysts. Also, as you know, Chinese producers, as we sit here today, are phasing into a 10% tariff, which could likely go to 25% if there is an agreement between the U.S. and China by the end of the year. We don't think that 10% tariff is going to have a meaningful influence, because the Chinese currency over the last three or four months has deflated. That said, within our U.S. business in particular, we're positive that we should make some progress here at year-end negotiations. And that looking to 2019, with price and productivity, we think that we should be able to offset inflation in regards to the new plant that's coming up in the Carolinas and this has been in our demand model for probably three or four years. We anticipate that they will import less volumes as they bring that plant up to service, the demand they have here in the U.S.

Our next question comes from Kathryn Thompson of Thompson Research Group. Please go ahead.

Hi. Thanks for taking my questions today – or a question for today. Just in terms of – I know that you've given a lot of color on pricing for Composites and also the drivers for lower demand in the quarter and looking forward. But when you look forward into 2019 and when you look at the landscape more from a global standpoint, how should we think about tempering our expectations for both the domestic Roofing side being more realistic in terms of what we can expect with demand, also with what you're seeing in terms of demand for your other markets, both in the U.S. and Europe?

Thanks, Kathryn. So, maybe just to put a little bit more color around our reduced outlook for the second half of this year first, then I'll move forward to giving kind of a forward view of 2019. So, really if you look at our outlook for the second half, the two big drivers were, one, Roofing volumes, secondly, volumes in Europe and India and then, lastly, inflation. So, those three are about a third, a third, a third each. Again, kind of looking forward to 2019, as I said kind of previously, the overall environment is constructive. Global growth remains positive. I would remind you that this year, we phased into a very difficult comp in the front half of the year. Last year, in the front half of the year, volumes grew at a low-double-digit rate. So, as we move into next year, we phase into a bit easier comp. Again, you heard me say that utilization remains high. For Owens Corning specifically, we've done a lot on the productivity side, around the small melters that we've taken out, the new facility in India that we brought up, which is a low-cost facility, and then the strategic supply alliances that are getting put in place over the next six to nine months. And then, looking forward to next year also, better manufacturing in the first half is going to be a pretty easy comp for us as well. So – and then, Chinese tariffs are a positive price momentum, in particular in the U.S. So, kind of rolling that all together, we feel pretty good that the business should be able to grow EBIT in 2019.

Michael, maybe I'll add one more comment just specific to the Roofing market. With our currentness of the Roofing market, you come up with an overall estimate in 2018 of around 130 million squares. 130 million squares is still a very healthy market. We publish in our investor deck the last 10 or 12 years of overall market demand. You can see over the last three years as we've been in the 130 to 145 range with obviously the high watermark being 2017 where we had a very large storm year. I think more importantly, the new construction and remodel portion of that market has been continuing to grow. So, when we say we think we've got a little bit easier comp going into next year in Roofing in general, both how it impacts Composites, but also it impacts our Roofing market, we would expect going into next year that there's no reason we wouldn't see growth off of the 130. We'd expect new construction to show some growth based on housing start forecast. We'd expect the remodel market to continue to get better based on people getting equity in their homes and unemployment being very low and new storms now will be kind of a tailwind in terms of a comp and that storm activity this year was below average. So, as you go into next year, we think all three segments of the market could potentially show growth. That's good news for our Composites business. It's great news for our Roofing business. So, we think we've made a transition through 2018 where we really do have a very good market in an historical context, but also a market we can grow off of going into next year.

Our next question comes from Justin Speer of Zelman & Associates. Please go ahead. Justin Andrew Speer - Zelman & Associates: Hey, guys. I just wanted to touch base on the Insulation segment and some of the other one-off items you mentioned last quarter in Composites. If you could just walk us through with some of the operational headwinds that you had in those respective businesses and how they're progressing, notably the Joplin facility, I know that's been an issue. And lastly, as you think to next year, the capital needs of the business and thinking about rebuilds or anything like that, kind of help us map out next year?

Yeah. Thanks, Justin. Maybe I'll talk a little bit about this year and then maybe Michael can offer some color about next year. I think you'd hear from our comments that we accomplish what we needed to accomplish to get our operating performance turned around coming out of the second quarter. So, we feel like in the third quarter, the major projects we had going on in Composites are now completed, the melter in India is up and running, some of the disruptions we had had, which were both planned and unplanned, in Composites were really finished out by July. Same thing on the Insulation side of the business, we had said on the last call that our objective was to get most of our capacity rebuilt in the first half of the year to have it be available for production in the second half of the year. We had a pretty sizable rebuild that was really completed by the time of the last call, but it carried over a bit into July in terms of the timing on when it hit our numbers. But we were confident on the last call that Insulation was running well, Composites would be running well and that Roofing has been running well. Specifically, with respect to Joplin and I think we said on the last call that we thought we were going to turn that into a tailwind in the second half and that really was not going to be a big theme in our outlook in Insulation. I think based on our comments today, you can conclude that that was exactly what happened and that we do now have that position where it should be additive on a quarter-on-quarter basis to our earnings on a go-forward basis, which is the position we wanted to get into. So, a lot of the operating nuances or drama maybe that we had in the second quarter which was obviously frustrating to us is really behind us and we are back to what we know how to do, which is we are manufacturing well and I think executing well in the marketplace. Mike, do you have any comments on kind of color for next year?

Yeah. Justin, so rebuilds, we had two this year. We'll have two next year. So, from a rebuild expense, things should comp relatively similarly. The one difference is, this year, we brought up the large facility in India, which we won't be doing that next year. Obviously, it will be up and running. So, that's bit of a tailwind.

Our next question comes from Ken Zener of KeyBanc. Please go ahead.

Good morning, gentlemen.

Ken.

Kudos to getting Army (52:30) shipments public since July by the way. So, you're facing rising inputs cost, I get it. You're recovering your cost and that's good, right, it goes to industry structure, but it's a mid slowing volumes and the third, a third, a third, I got that, but specific to – and Roofing, it's variable costs. So I understand that as well. So, in Insulation and fiberglass, just to kind of cut through the chase, if we say if utilization falls, let's say, 5% and half of that would be new capacities, so a new plant opens up somewhere and just for kicks, housing demand goes down, so that would be the other part of the 5% compression utilization rates, what would kind of happen within a historical context, if you could just give us some of that stuff if you actually have a 5% swing in utilization rates? Thank you.

Thanks, Ken. I mean, obviously, it's a hypothetical question. So, let me try and take it apart into kind of the pieces of our outlook on what we would see that we think would be most likely. We don't see new capacity with the exception of the capacity that we're currently holding. So, there was competitive capacity that came online this year. I think based on our outlook for the full year and housing starts growing up to kind of 1.3 million, we thought that capacity was going to be absorbed in pretty easily. I think with the market being a little bit more sideways, that's where you're seeing us have a little bit less volume opportunity in the second half, because our posture was, as that capacity got absorbed in, the growth in the market would create an opportunity for us in terms of some additional demand growth that today we're probably not seeing, because we're not seeing enough growth to give us that. I think if we were sideways next year, next year would look just like this year, which is the industry capacity would be generally loaded with us holding some additional capacity available to meet demand growth. I think what you'd expect for us to do is, in increases in the market, we'd be prepared to bring that capacity to the market to meet demand. If we saw some decline in the market, we have rebuilds and other activities that give us the opportunity to adjust our production. So, I think we would adjust our production to the demand outlook as we saw it. Obviously in small changes in demand, that's a good thing for us to be doing. I think if you saw bigger changes in demand, that gets to a broader set of questions, but at this point, I don't think in consensus, there are many folks who see housing getting into a big decline, I think there is more concern it's going to go sideways. And I think we're prepared for a sideways environment to continue to deliver great earnings growth in Insulation.

Our next question comes from Stephen East of Wells Fargo. Please go ahead.

Hey. Good morning, guys. This is actually Truman Patterson on for Stephen. How you're doing?

Good. How are you?

Good. Good. Hey, just first question, wanted to touch on the Roofing industry volumes in 2019. I know you guys are looking for a bit of a snapback if you will or a little bit of an improvement, but back half of 2018 is down pretty materially. Do you think that industry volumes continue this trend in the first half of 2019, even thinking with a very modest benefit from Hurricane Florence and Michael?

I think we'd have a pretty balanced outlook to the first half of 2019. I think likely in our outlook, we're not expecting much impact of Florence and Michael this year just because in the case of Florence, the flooding was so extensive and in the case of Michael, the damage was so extensive that the amount of construction activity that needs to be completed in order to bring Roofing into those markets is real. Having said that, I think both of them obviously were events that are going to create demand for building materials, including Roofing and Insulation. We'd expect to start seeing that in material terms probably in the first half of next year. We did have some carryover into the first half of this year related to the storms that were in late 2017, but we also had relatively weak storm activity in the first half of 2018. So, I think if you go on balance and say it's an average storm year, we'd expect to have some carryover, which would probably comp negatively to the carryover we had this year, but we could potentially have new storms that would comp positively to what we had this year. We would expect though a positive comp on re-roof demand. We'd expect a little bit more balanced geographic mix, which would benefit Owens Corning a bit more. So, I think we're looking at a good first half next year and then I think we are also looking at probably an overall up-market next year provided we have average storms.

Our next question comes from Mike Wood of Nomura Instinet. Please go ahead.

Hi. Thanks for taking my question. Your inventory typically falls 2Q to 3Q. Looks like it was up this year quarter-over-quarter about 5% and you are expecting a slower backdrop in fourth quarter. So, can you talk about where your inventory got heavy, if you're addressing it and whether or not your guidance for fourth quarter includes a de-stock with production inefficiencies?

Hey. It's Michael. No problem. So, yeah. So, if you look at working capital year-to-date, it's up about $180 million versus last year with the biggest driver being inventories. Of that, the single biggest driver is Roofing, where inventory dollars are up about $110 million versus last year. I'll remind you, I think, on previous calls, we ended last year with finished goods in Roofing at a level that was too, too low. It was a decade low inventory level. So, we needed to build some inventory back into Roofing this year. So, just looking at the $110 million build year-over-year, it's about $45 million related to asphalt inflation, that's both in raw materials and in finished goods, and then the balance are $65 million is related that we actually have higher finish goods, half in shingles and half in components. And then, to answer your question directly, yes, we will be taking some curtailments in the fourth quarter in Roofing to make sure that we have our inventories right-sized. The next biggest driver year-on-year is Insulation not nearly as significant. It's up about $30 million, primarily driven by lower sales in the third quarter. And again, we'll be taking some curtailments there in the fourth quarter to get our inventories in the right spot. And then lastly, Composites up just a little bit, mostly planned and largely related to some of the big rebuilds and startup activity that we had where we actually had to move some volumes that had been already certified by our customers. And so, again, we expect to make some progress in the fourth quarter in getting that back to a more normal level.

Andra, this is Thierry. It looks like we have time for one more question and then we'll close with the final remarks.

And our last question is from Phil Ng of Jefferies. Please go ahead.

Hey, guys. Thanks for fitting me in. Good to see you being caught up from a price/cost standpoint in 3Q, but just curious what you are thinking in terms of inflation going forward. Any outlook on what are freight, asphalt, just some of the inflation category for Insulation and Composites.

Sure, Phil. Obviously, we'd be lousy in forecasting oil prices. So, we saw a pretty good run-up in oil probably from about this time last year through to the May-June timeframe. As we sit here today, it looks like we are in a little bit calmer environment. I'm not as concerned about that as it relates to Roofing, because we have demonstrated ability to go get material cost inflation in the price of a shingle. Obviously, we buy a lot of chemicals and other things that come off of kind of the oil-based petrochemical complex. So, oil price inflation would be a real driver of inflation for us across Composites and Insulation related to chemicals. Related to freight, we had kind of two themes on freight early in the year, I think we were down to one. So, earlier in the year, we were seeing increases in freight rates and we are also seeing some real congestion pricing in the freight market, where certain lanes had gotten very, very expensive. I think we've taken a really good set of management actions to address some of the congestion pricing. We still have some freight lanes that are very expensive. We've got teams working on some cross-border flows from Mexico to the U.S. and some other places where there are legitimately expensive freight lanes that we are trying to figure out how to manage more effectively. So, going into next year, I don't think that congestion pricing around freight will be as prevalent for us as it was, say, in the first quarter because of management action. We do expect, though, just based on availability that we are going to see continued inflation in freight laning cost. So, we are planning going into next year that we'll see inflation certainly on the freight side and we do expect we'll see some inflation across the rest of the business, although not probably as strong as what we've seen this year with the run in oil. And the one exception I'd call out is we have seen energy prices in Europe make a pretty big move here over the course of the last quarter and I think we're planning going into next year that that's not something that reverses itself.

This concludes our question-and-answer session. I would like to turn the conference back over to Thierry Denis for any closing remarks.

And give, Andra. I want to thank everybody for joining the call today and with that, I'll hand it back over to Mike Thaman for his final remarks.

Thanks, Thierry. I think if you listen to the call and you listen to our prepared remarks, I mean overall, we were satisfied with our execution in the third quarter, so – whereas a quarter ago, I think we called out a few execution issues that we needed to get fixed. I think, by and large, what you are hearing on this report is both operationally and commercially to the extent there were gaps in our execution in the second quarter, we've reversed those and we're back to operating well. Our financial outlook obviously was short of our prior expectation, but I think in absolute terms, our financial performance in the third quarter stands up. We had double-digit operating margins in all three of our businesses. We grow EBIT – we grew EBIT faster than revenue. A bit of a novelty I guess. Michael's comments, all three of our businesses were 20% EBITDA margins in the third quarter, I think just a testament to the strength of our businesses to the strength of their cost positions, the talent of our folks and our ability to get value in the marketplace. Obviously, the market was a bit choppier or weaker in the third quarter. We anticipate that will continue in the fourth. We think that's some adjusting to maybe a little bit slower growth expectations. We don't think it's a churn in the market that's causing us to believe our markets are getting ready to go negative. We're in good shape and well positioned to be able to take advantage of any growth, but I think we've also built the company in a way that if we see slower growth, we still have the ability to power earnings across all three businesses as we head into 2019. Obviously, the big headwind for us this year is the Roofing market that's going to be down 10% overall. That's a big and very profitable business for us. So, the fact we are going to overcome a reduction in top line and an associated reduction in EBIT in our Roofing business and get the rest of Owens Corning back to 2017 levels is a good achievement given the amount of inflation and the level of demand growth we've seen in other markets. So, the simple conclusion for the year is despite the fact that we do have weaker expectations for the second half, we do think we'll finish the year strongly and we also believe that Owens Corning all three of our businesses are positioned for EBIT growth in 2019. With that, I'll conclude the call and that we look forward to talking to all of you after the 1st of the year. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.