Good day, and welcome to the Owens Corning Third Quarter 2019 Earnings Conference call. [Operator Instructions] I would now like to turn the conference over to Thierry Denis, Vice President of Investor Relations. Please go ahead.

Thank you and 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 2019. Joining us today are Brian Chambers, Owens Corning's Chief Executive Officer; 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 2019. 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 this 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 will 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 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 and presentation, both of which are available on owenscorning.com. Adjusted EBIT is our primary measure of period-over-period comparison and we believe it is a meaningful measure for investors to compare our results. Consistent with our historical practice, we've excluded certain items that we believe are not representative of our ongoing operations when calculating adjusted EBIT and adjusted earnings. In the third quarter, there were no adjustments to EBIT. 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 utilizing 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 CEO, Brian Chambers, would be followed by CFO, Michael McMurray and our Q&A session. Brian?

Thanks, Thierry. Good morning, everyone, and thank you for joining us. I'd like to begin my comments today by recognizing the work and contributions of Michael McMurray. For almost 11 years with the Company, the last seven as our CFO, Michael has been instrumental in driving our success and in building a very talented finance organization. I want to thank Michael for all he has done to make Owens Corning a stronger Company and wish him the very best. We are fortunate to have Prith Gandhi, who has over 25 years of financial experience, to serve as our Interim CFO. I'll start my review of the third quarter with safety, where we continue to perform at a high level. Our results this quarter improved versus the second quarter and remain relatively consistent with the prior year, with a recordable incident rate of 0.53. Almost 60% of our sites are injury free this year, and about half of our sites remain injury free for a year or more. This reflects the ongoing commitment we all have to maintain the highest levels of safety. And now, on to our financial results. Our performance this quarter was driven by continued good commercial and operational execution, strong manufacturing productivity and disciplined cost management across the Company. We delivered revenue of $1.9 billion, which generated record adjusted EBIT of $277 million. These results reflect our continued focus on the three operating priorities I outlined during previous calls: to accelerate organic growth; to drive improved operating efficiencies; and to generate strong free cash flow. I want to take a few minutes to update you on the progress we've made in each of these key areas. In the third quarter, we delivered organic revenue growth of 4%, 5% on a constant currency basis, with adjusted EBITDA growth…

Thank you, Brian, and good morning, everyone. As Brian mentioned earlier, Owens Corning had a good third quarter, highlighted by revenue of $1.9 billion, record adjusted EBIT and significant free cash flow improvement. We had strong commercial and operational execution in the quarter, and we are positioned to deliver another year of strong earnings despite some challenging end markets. For the quarter, both revenue and adjusted EBIT grew on stronger volumes, good manufacturing productivity and good cost control, in addition, our year-to-date free cash flow improved by $200 million on strong earnings, strong working capital management and disciplined capital spending. Now, let me 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 2019 consolidated net sales of $1.9 billion, up 4% compared to sales reported for the same period in 2018. On a constant currency basis, we delivered consolidated organic revenue growth of 5%, highlighted by strong volume growth in Roofing and Composites. Adjusted EBIT for the third quarter of 2019 was a record $277 million, up $10 million compared to the same period one year ago, on stronger volumes, solid manufacturing productivity and good cost control. Net earnings attributable to Owens Corning for the third quarter were $150 million compared to $161 million for the same period last year. Adjusted earnings for the third quarter of 2019 were $179 million, or $1.63 per diluted share, compared to $174 million, or $1.57 per diluted share, in 2018. I would like to mention one item related to adjusted EPS. During the third quarter, the Company incurred a $32 million loss on the extinguishment of debt, which has been adjusted out of our results. I'll…

Thank you, Michael. Allison, we are now ready to start the Q&A session.

[Operator Instructions] The first question today will come from John Lovallo of Bank of America. Please go ahead.

Hey, guys. Thanks for taking my question. The question is on inflation. You guys outlined $16 million of production curtailment actions in the third quarter with the expectation that it will carry over to the fourth quarter. So can you help quantify how much you expect to carry over into fourth quarter? And the additional $15 million cadence in the fourth quarter...

Pardon me Mr. Lovallo. This is the operator. If you could please pose your question a little bit louder. We're having difficulty hearing you. Thank you.

Sorry. Is that better?

Way better.

Much better.

Okay. Great. Sorry about that guys. So an Insulation, you highlighted $16 million of production curtailment charges in the third quarter, with the expectation of some of that carrying over into the fourth quarter. Just hoping you could help us quantify that. And then there was an additional $15 million hit, I think, you talked about from a tough price compare and some issues on the technical side. Can you just clarify that those were the two big pieces in Insulation?

Yes. Thanks, John for the question. Let me start with the curtailments and then I'll answer on the back half year. You're hearing right. On the $15 million of additional, I'll give some more context on that. On the curtailments, we finished the first half with about $36 million of curtailments in the Insulation business. In the last call, we said, we thought that was going to continue into the back half, but at a declining rate. So in the third quarter, we saw and realized $16 million of these absorbed costs. And we continue to expect to see that into the fourth quarter, but again, at a declining rate. So we will be seeing some additional absorption as we finish the year in our resi insulation business, which is why we've taken some of the proactive steps that we talked about in terms of repositioning our cost structure in that business to kind of address these curtailment costs as we go into next year. In terms of the other comments around the headwinds, last year, when we look at the pricing evolution, last year we implemented three price increases. So we had prices increasing throughout 2018 and when we came into the year, we saw that our price points for high relative to our historical pricing gaps and we had to make some of those adjustments. We did that broadly through Q2, Q3. Pricing has been broadly stable in the market, but when you compare the elevated price points that were increasing through the fourth quarter of last year to relatively flat pricing here coming into this year, on a year-over-year basis that just creates a big negative pricing comp for us that we're facing into as we finish the year. And that's the piece on that. On the technical and other insulation, again, this is products that we sell primarily into commercial and industrial applications. So we see these as more project-based applications. And just when we look at our fourth quarter order book, which we get some better visibility to, relative to some of our other short cycle businesses, we're just seeing some of the projects getting pushed out, delayed, that would probably go into the first half of next year. So we just said, as we look at that order book, we think it's going to be a little less and that creates a little bit of a headwind in terms of the year-over-year comp. So we wanted to bring visibility to all that.

Our next question will come from Stephen Kim of Evercore. Please go ahead.

You gave a lot of info in those prepared remarks, but I wanted to understand a little bit better about the optimization plan. You talked about, in Kansas City that you're going to be curtailing that. Obviously, there was a competitor that announced an expansion or a build of a line there that's going to be coming online in a year or so. Wanted to understand specifically, are you shutting down a line there permanently, kind of like what you did in Santa Clara? And is that the bulk of the savings that you were referring to when you talked about it in your release? Or if you could just give us an understanding of exactly what you're doing there that may be different from what you did in Santa Clara? And then as well, that business, the Insulation segment in North America, also has the Paroc -- I'm sorry, also has the Joplin facility that ran into some issues a year or so ago. Can you talk a little bit about what's going on at Joplin right now and to what degree is the year-over-year comps in Joplin affecting your results today and what you see into 4Q?

Okay. Stephen, Thanks. So, lot to unpack here. Let me try to walk you through. Let me start with just the actions we announced. And I guess, first and foremost, these actions are really about improving our overall cost position within the business. So we have been continually focused on improving our productivity in the business through a number of investments, advanced process, controls, automation. We've been very focused on improving our process efficiencies. You would have heard us talk quite a bit at our last Investor Day around density efficiency improvements and how that's creating more throughput with our existing line. So the result of all of this hard work has really given us the opportunity now that we are producing a lot more through the existing footprint. So these actions are really about leveraging all of that work and being able to reduce our overall cost position in the business as we go forward. And we still believe we can do that and maintain servicing our current customers and also give us the flexibility to service additional market growth and share growth as we go forward. So that's the setup in terms of what's driving these actions now and why we feel confident we can continue to service our customers and service growth through a little bit smaller footprint. Let me just step back and talk about the actions that we're taking. You're right, primarily, they are being centered around our facility in Kansas City. In Kansas City, we make both batts and rolls and loosefill. So these actions are about taking the batt and roll line cold, very similar to what we did in Santa Clara, and then the difference is going to be we're also streamlining just the overall plant operations. And we're really going to…

Our next question today will come from Mike Dahl of RBC Capital Markets. Please go ahead.

I have another follow-up on Insulation and two parts here, I guess. The first, with respect to these optimization actions, I think, one of the questions out there is really, understanding you want to position the business as strongly as possible from a cost standpoint. This is coming at a time when broadly speaking there has been more optimism around housing. Certainly, the homebuilders have reported more encouraging trends. So I guess to what extent are you baking in an improved outlook in 2020 housing starts into your forecast here or what is your baseline assumption as we move forward. And then, the second part, outside of North American Resi, just on the technical and the European side, given what you're experiencing in terms of some of the weakness, particularly in Europe, are there further actions that you're looking at taking there? Thanks.

Okay. Thanks Mike. Yes. Let me talk start with on the optimization side. I think we're very encouraged by some of the recent trends in terms of some housing starts acceleration. Builder confidence continues to come in. We're seeing good foot traffic. So, those are all encouraging signs. Our outlook for the next few years is really based on consensus housing starts estimates. And those would show fairly modest growth, couple of -- 2% or 3% over the next few years. And that's quite a bit different from what it was just 12 months ago, where we saw housing start estimates with mid single-digit growth rate. So we're looking at our outlook as improving certainly versus this year. We're encouraged by the signs we're seeing now in terms of starts and we're encouraged by the builder confidence, but we're setting our operational outline in terms of production relative to consensus housing estimates. So, in terms of the European business, Yes, we've seen some of the markets in Europe continue to soften. We primarily sell our mineral wool product there, our FOAMGLAS business product line there. And we're very well positioned. We like that business. We still see structural trends of more people moving to mineral wool versus foam plastic or other products. So we still think that there is a good opportunity for continued growth in Europe. I think part of this is just a little bit of the headwinds we're seeing. We're very strong in the Nordics, for example, in our mineral wool business. Those markets have declined a little more rapidly than other parts of Europe. So we're starting to see those headwinds come at us here in the fourth quarter, but we don't see any other operational changes around the market outlook in Europe.

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

Good morning. Thank you for taking my question. So I guess just sticking with Insulation, you're making these changes on the capacity side in North America ahead of that improving market environment as you just alluded to. Obviously, that new competitor capacity is also focused on loosefill. So, what are your thoughts at this point about potentially regaining pricing momentum in North America Residential? Assuming the market environment does continue to improve, is that embedded into your outlook at all next year? And how would that competitor capacity coming online potentially affect the ability to drive price improvement? Thank you.

Okay. Thanks Matthew. Again, coming back on the optimization, I do want to be clever. When we talk about taking these actions now, these actions are really a result of our ability to produce more through our existing manufacturing assets. So it is not a read on a more pessimistic market outlook. It's just a read that we can optimize our cost structure by taking these actions and still be able to produce similar amounts as we service this growth. So as we look at loosefill in general, again, we want to maintain our operational capacity there. That's why we're going to maintain the operation in Kansas City. We continue to see that as a great product line and that we should see growth in as we go forward and see the housing market continue to improve. On the pricing front, I'd say, we've been very successful over the last two years in terms of gaining price in our residential business overall. We had to make some of the pricing adjustments to get our price points back to historical competitive gaps that we've had. We did that work through the second quarter. We've been able to see our prices been broadly stable in the market. So, as we sit here today, I'd say, we'd look at -- we believe we've got price points that are competitive in the market, our product is very valuable and our customers love working with it and we see an outlook for an improving housing market. So historically, when in that situation, we've been able to realize some additional pricing gains.

The next question will come from Keith Hughes of SunTrust. Please go ahead.

Thank you. You talked about more curtailments in the fourth quarter. I guess as we look to the next several quarters, when do you think the curtailments will end and the restructuring actions you're doing, when would they be completed and we start seeing the savings from those?

Thanks Keith. Yes. Let me start with the back end, the restructuring actions, I mean, we're going to be taking those primarily in the fourth quarter, with some of those continuing down, but that would be completed by the end of the first quarter, and that's why we stated we think out of the $25 million of benefits, we're going to realize about $20 million of those into next year and then the remainder into 2021. So when we think about curtailments going forward, again, part of this is on the actions we're taking, which we are going to remove some capacity that we would have had to curtail this year, I mean, part of these actions this year are around curtailments as we were curtailing really across our broad network. This allows us to really concentrate this action around one batt and roll line and allows us to operate the other lines much more effectively and efficiently as we go forward. But we are again maintaining the capacity to service the market growth and for us to continue to restore our historical share position. So part of the curtailments going into next year is really going to be dependent on the market opportunity in terms of that, because we do want to hold capacity available for growth and we will. And we're just going to have to balance that against our share gains and against the market improvements we see. So we could potentially see some additional, where we don't bring all these curtailments back through to the bottom line next year, but that's going to be more dependent on the market acceleration.

The next question will come from Michael Rehaut of JP Morgan. Please go ahead.

I just wanted to zero in, revisit a little bit on the Roofing side. And going into the quarter, obviously, there is solid -- or during the quarter, there was solid shipment demand from an industry level. You said that the pricing though-there were lower selling prices year-over-year and you primarily just called out the fact they had lower rebates in 2018, so higher level of rebates this year. Just wanted to confirm, though, from an overall gross pricing, how would you characterize pricing trends as they progress through this year, have they been stable or is there any type of variability? And then just as a side point of clarification, you also commented that you expect next year's corporate expense to be more consistent with historical levels. That number has actually moved around a little bit over the last few years. I was hoping to get a little more clarity in terms of what that exactly meant? If that's something that you would expect perhaps your original expectations this year to be more what you'd expect for next year?

Okay. Thanks, Michael. Let me again try to take them a little bit in order here. Let me first just address your question on rebates in our comments. So again, last year -- I'm going to talk about year-over-year comps, so last year -- and it's not uncommon for manufacturers. We will have programs with distribution and we will do certain rebates around volumes and put volume incentives in place. So last year, when we were sitting in the third quarter and looking at the fourth quarter, we were seeing market volumes decline on a year-over-year basis. And so where we would have set volume incentives, we were just seeing a lower market evolve last year relative to 2017, where we had some pretty high strong demand. So that would have caused us to take back as we look at our rebate accruals and we trued those up to the market outlook. We took some of those rebates back in the third quarter and took some back in the fourth quarter which Mike alluded to. So the comp on pricing is, because we're not seeing that this year. Our volumes are stronger, that we're seeing as we restored our historical share positions in place. So we're not realizing any benefit from any rebate takes back in this quarter, don't expect to in Q4. So just to clarify that statement. In terms of pricing, I guess, I'll evolve the pricing through the year and a little bit relative to asphalt costs. So we came into the year seeing asphalt costs continuing to rise. We announced our April price increase relative to the asphalt inflation we had realized in Q1 and we were seeing in Q2. And on the last call, we had actually just announced a July price increase because we thought those asphalt costs were going to continue to increase through the quarter. In fact, what we saw is asphalt costs did increase and then they started to decline through the quarter and we started to realize a little bit of a lower cost. Now, we still realized inflation in the quarter year-over-year, because we were seeing that inflation in Q2 rolling into our Q3 results. So, anytime we source asphalt that's usually going to take us 60 days or so to work that through to the P&L. And so we were not able and weren't successful in realizing much of the July price increase. So what I would characterize the pricing environment now here in the third quarter, I would say that third quarter pricing was broadly stable to those April price points. We didn't realize any of the July pricing, but we've got those broadly stable in place and I think we would expect that pricing dynamic to continue for us. And then Michael, do you want to talk about corporate expenses?

Sure. Thanks, Brian. Mike, maybe a bit more color around corporate expense, maybe to help you think a little bit around 2019, but probably more importantly, thinking about 2020. As you'll remember, the original guide for the year on corporate expense was $140 million to $150 million. On our Q2 call, we actually took that down to $125 million to $135 million, then obviously, today, a further reduction to $110 million to $115 million for the full year. For those of you that have followed the Company for some time, historically, we've been pretty disciplined around cost and pretty disciplined around adding heads. Clearly, as we went into the year and got into the year the level of uncertainty has increased throughout the year. So we've been a bit more cautious this year around discretionary spend, and then a bit more cautious around adding heads as well. So if you look at what we expect for the full year today and think about it versus the original full year guide of $140 million to $150 million, really there's three big buckets to help you think about this as you think about what would be a good outlook for next year. So three big buckets. The first two are a little less than a third, the final bucket is a little more than a third. The first one is just basically good cost control and I'll come back and give a little bit more color around that. The second one, again, which is a little bit less than a third, would be performance-based compensation expense. So, hopefully, for the team that's in the room with me and others, hopefully, that comes back next year and people get bonuses. And then lastly, the third one, which is little bit more than a third is related to one-time items. So on a year-to-date basis, there has been about $14 million of one-time items, of which about $10 million were in the third quarter itself. So those aren't going to repeat next year. Now, specifically around the good cost control bucket, there is some stuff that is around, what I'll call, just good cost control and actually managing discretionary spend, managing headcount, that it's actually structural and that will help cost or bring cost down for next year and there some that's timing. And I'd probably put those two at 50-50. So, hopefully, that's helpful.

And our next question today will come from Truman Patterson of Wells Fargo. Please go ahead.

Just wanted to touch on Roofing a little bit further, I'm glad to hear the pricing seems a bit stable, but could you guys just give an update on your input costs and the outlook? It looks like transportation appears to be rolling over a little bit, asphalt seems to finally be heading lower and then you have potential tailwinds from IMO 2020, just how we should think about that going forward? And if you all have been able to find an ability to use the higher sulfur content in roofing shingle, if you've discovered any technology there?

Yes. Thanks Truman. I think it's a great point because when we talk about pricing, we're always managing pricing relative to our input cost inflation, primarily asphalt and other pieces. And really that materializes into what we look at our cash contribution margins. And our cash contribution margins continue to stay very strong relative to some of the deflation we've seen in transportation and the other outlook. So if I just talk through at a high level, I mean, from an asphalt standpoint, we have seen asphalt costs come down in Q3 relative to last year, but I would say, they remain stubbornly high relative to WTI costs. So our asphalt costs, even though they are reducing, they are still relatively high to other benchmarks. And we would expect to see some continued modest lowering of costs as we come through fourth quarter just really tied to the seasonal declines that we historically see in the business. So generally we see asphalt costs ramp up through the first half in anticipation of paving season and then sometime toward the end of the third quarter and fourth quarter, start to ramp down because paving really is the primary driver of asphalt consumption. Roofing is a secondary consumptor. So that we would expect to see pretty historical declines in reductions as we come through the fourth quarter. And then, we would expect to see that materialize on a lagged basis through our P&L. Transportation, I'd say, this year on a year-over-year basis has -- we have continued to see some deflation from our carrier base and that's been additive, particularly here in the third quarter. And we think that trend will probably continue through the rest of this year. Transportation costs are very dependent on the overall market economy. So I think with some of the industrial slowdown, manufacturing slowdown we've seen, automotive slowdown we've seen this year, I think that's contributed to some of the transportation deflation. So, not sure if that repeats next year. I think that's going to depend a bit on the economy. And then in terms of IMO 2020, the higher sulfur content, we can operate with a higher sulfur content. It does require us to put some other additives and process it a little differently. So it is little bit more difficult to run, but we can do that. But as we sit here today, I mean, we are still not getting very good intel on the outlook of this relative to our refinery partners. So, it continues to be an opportunity as we look at 2020, but we have not seen any real sustainable near-term impact in that, and don't think we start to see that potentially until we get into next year.

Our next question will come from Phil Ng of Jefferies. Please go ahead.

Hey, guys. Your technical businesses, obviously, performed quite well. I'm appreciating it's lumpy in nature, project to project, but when you think about 2020, with the macro environment being a little choppier, do you expect earnings in that segment to be up year over year and are there any levers you could use to offset any potential weakness on the macro front?

Yes. Thanks Phil. I mean as we look how that business has progressed this year, we have seen good success in a number of the applications that we operate in. And in our North American pipe and mechanical business, for example, we've introduced some new products and we've been able to grow that business. We continue to make good progress and see growth in our North American mineral wool business. Our FOAMGLAS business continues to grow. So, I think where we would see opportunity even in more challenging headwind moving forward would be around continued product introductions, where we will continue to bring some new products into the market that gives us an opportunity to grow. I think we continue to see some conversion trends. Again, by using these materials and substituting relative to other products that are on the market, we still see that there is conversion opportunities in the U.S. and Europe and in parts of Asia. So, I think, we do see opportunities even in more challenging environment to still see some positive growth in that segment for us.

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

Hi. Thank you for taking my question today and I'll give a break on asking Insulation questions and focus on Composites. I was encouraged to see an increase in demand for wind energy. Two part question. Is this demand primarily driven in the U.S. market versus China and Europe? And also for U.S. demand, to what extent do you think this growth is being driven by push to capitalize on tax incentives that will be phased out in 2020? Thank you.

Thanks, Kathryn. It's Michael. Yes. So, I mean, your question is around wind energy demand. I mean, quite, quite frankly, in looking at kind of the full year of '19, wind energy demand actually has been pretty good across the globe, whether you look at North America, Europe and Asia Pacific, even India, which is below our expectations, has demonstrated good nice growth quarter-on-quarter since last year. And then looking at the folks that actually estimate the amount of gigawatts that are going to go in next year, the outlook for next year is pretty favorable again across all three regions. So there seems to be some good tailwinds there as we move into 2020.

Our next question today will come from Michael Wood of Nomura Instinet. Please go ahead.

Hi. Good morning. Could you give some color in terms of your roofing volumes versus the ARMA data that was out, I know you had talked about potentially gaining some market share. Why that didn't occur? And potentially what that means in terms of shelf space and your presence there?

Yes, Michael. Thanks for the question. Just specific to Q3 on our volumes relative to the market, ARMA would have reported manufacturing shipments for shingles up about 16%. I've seen some other numbers out there, but they kind of report accessory materials and a lot of things. But on the shingle side it was up about 16%, our reported volumes is up 12%, really two things impacting our volumes not related to shingles. So our shingle shipments track with the market, but we will export shingles. We did see quite a bit of softness, particularly in Canada and some other markets, so if we go to that, that contributed to some declining volumes in our roofing business overall. And then little bit of lower shipments in our external asphalt sales. So, relative to our performance to the ARMA market, we were right in line, but we had some headwinds in a couple of other areas that impacted the volumes overall. I think just relative to the year and the quarter, I think, third quarter market shipments were strong, but as we talk to contractors and distributors, we think the out-the-door sales were strong as well. It was a dry quarter after a wet spring. There was good roofing demand. So I think distributors shipped out at a pretty consistent rate than what they bought in in the quarter. So we didn't see anybody building inventories, but we do see this progression as we move into Q4 that we do expect to be down in Q4 on market shipments relative to last year. But again, when you look at the year-over-year comps, last year there was about 3 main squares that we had estimated, there was some inventory build in the channel. We don't expect that to come back this quarter. So when you think about fundamental kind of out-the-door sales and underlying demand, we think the demand environment stays strong through Q4. It's always a little bit difficult to predict because it's very weather-dependent. The northern part of the country, if it gets cold in a hurry, it tends to shorten the roofing season. But in terms of just fundamental out-the-door sales demand, we think that's going to stay strong. We're talking about a year-over-year comp being down really because we don't expect to see a big inventory build as distributors just run out their inventories through the end of the year as opposed to pre-buying for 2020.

Hey, Alison, it's Thierry. It looks like we have time for maybe one more question before we offer some final comment.

Okay. Thank you, sir. Our next question will come from Garik Shmois of Longbow Research. Please go ahead.

Hi. Thanks. Thanks for squeezing me in. And our best of work, Michael, in the future, I wanted to ask on Insulation, with all the restructuring actions in North American insulation, how should we think about incremental margins moving forward? Just given the expected increase in market volumes, should we still think of it as maybe a 50% incremental or just given the restructuring actions, is there any change in that outlook?

Yes. I think we're certainly taking the cost actions here because we want to improve the fundamental cost structure of the business. And I think that's going to improve certainly some of the earnings potential as we go forward into next year around the res side. And then we talked about our technical and other insulation continued to generate some strong growth. I think some of this is going to depend a bit on the market opportunity because within our residential installation business, we still have a lot of fixed cost leverage that we need to get out of production and volume growth. So I think our operating margins and margin improvement is beyond that. It is going to be a little bit dependent on the market dynamics that we see. But we are optimistic in terms of a growing housing market to generate improved volumes and that should improve our earnings within the business.

This will conclude our question and answer session. At this time, I'd like to turn the conference back over to Thierry Denis for any closing remarks.

Well, very good. Thank you everyone for joining us for today's call. And actually, I'll turn it back to Brian for closing comments.

It's, okay. Thanks, Thierry, and thanks everyone for your questions. I think in summary, I'm pleased with our overall financial performance and our commercial and operational execution in the third quarter. We've made substantial progress against all three of our operating priorities and are seeing the positive results of our work through strong revenue growth. We delivered record adjusted EBIT and improved cash flow, all that creating value for our shareholders. So, as we finished 2019 and start 2020, I believe, we are well prepared to capitalize on our market opportunities and are well positioned to sustain our financial performance. So thank you very much for your interest in our Company and for your time today.

The conference is now concluded. We thank you for attending today's presentation. You may now disconnect your line.