Owens Corning Inc · NYSE:OC
Owens Corning — Non-Deal Roadshow (March 2018)
50 slides from Owens Corning's roadshow presentation, Mar 28, 2018
Slide 1: This presentation shared at the following events
This presentation shared at the following events: 3/28/18 OC Roadshow Hosted by Jefferies – Texas Michael McMurray, Chief Financial Officer 3/27/18 OC Roadshow Hosted by RBC – Los Angeles / San Francisco Mike Thaman, Chief Executive Officer 3/21/18 OC Roadshow – Denver / Kansas City Thierry Denis, V
Slide 2: Forward-looking statements and non-GAAP measures
orward-looking statements and non-GAAP\measures This presentation and the associated remarks contain forward-looking statements. We caution you against relying on these statements as they involve risks and uncertainties that are difficult to predict and the Company's actual results may differ materi
Slide 3: The Company
The Company Investment Thesis Three Strong Businesses Additional Financial Information
Slide 4: Owens Corning at a glance
Owens Corning at a glance 1938 2017 A 3 19k 37 #£463 ~~ 36.4 Founded Strong Employees Countries Consecutive Sales in 2017 80 years ago businesses worldwide around years on the the world Fortune 500® (Gece Source: Owens Corning SEC filings, Fortune Magazine OWENS| ICORNING |
Slide 5: Balanced end market exposure
Balanced end market exposure 2017 Pro forma OC revenue by end market WENS| ICORNING| Roofing Insulation U.S. residential new construction U.S residential repair and remodeling . Composites U.S. commercial and industrial International Source: Owens Corning management estimates; estimated error margin
Slide 6: Investment Thesis
The Company Investment Thesis Three Strong Businesses Additional Financial Information
Slide 7: Proven track record of financial improvement
Proven track record of financial improvement $mm Adjusted EBIT Percent Return on capital 11.9% 12.2% 74g 885 9.3% 550 7.7% 7.2% 416 412 5.8% 293 2012-2013) 2014. Ss 2015 = 2016 = 2017 2012-2013) 2014. 2015 = 2016 = 2017 Free cash flow Operating working capital / net sales $mm Percent 679 570 175% 17
Slide 8: Performance is recognized by investors
Performance is recognized by investors Total shareholder return 1-year average 3-year average 5-year average 10-year average 48% =0C ™ S&P 500 OC percentile rank vs. S&P 500 Total shareholder return combines share price appreciation and dividends paid to shareholders. Annual averages calculated usin
Slide 9: Compelling investment thesis
Compelling investment thesis e oe at «@5 Attractive Market macro > leading > drivers positions
Slide 10: Purposeful actions over the decade have fueled profitability improvement
Purposeful actions over the decade have fueled profitability improvement Composites Roofing Insulation * Repositioned low-cost * Implemented sustainable cost ¢ Lowered breakeven point network and reduced capital improvements * Acquired and expanded mineral intensity * Developed and marketed a wool a
Slide 11: OC earning power has been demonstrated
O€ earning power has been demonstrated 2016 - 2017 2018 - 2015 2007 - 2012 Adjusted EBIT margin (Gece Please refer to Appendix for reconciliation to Owens Corning SEC filings OWENS| ICORNING | 11
Slide 12: Our pillars and strategies enable us to create a sustainable enterprise
Our pillars and strategiés,enable us to create a sustainable enterprise Financial strength eee Sam CUSTOMERS INVESTORS EMPLOYEES COMMUNITIES Operational excellence High-performance people innovation Customer-inspired 12
Slide 13: Superior free cash flow yield within sector
Superior free cash flow yield within sector Last 12 months 04 2017 7% 6% 5% 4% 3% 2% 1% 0% WENS| ICORNING| e@=m Peer Average SHW BLD M Peer group represents building materials companies most covered by selkside analysts who publish on Owens Coming, Calculation may differ from methods used by peers i
Slide 14: Long-term capital allocation strategy focuses on increasing shareholder return
Long-term capital allocation strategy focuses on increasing shareholder return 1. 2. 3. Maintain investment Maintain safety of Capital allocation strategy grade balance sheet operations and * Investing in attractive that provides flexibility productivity of existing organic growth * Pursuing value-c
Slide 15: Disciplined portfolio actions have built a better company
Disciplined portfolio actions have built a better company M&A target areas M&A strategy focus areas Improving growth profile and margin structure Insulation: product and geographic expansion Roofing: core & Components 8 JQ Extending product, end-market and <2) geographic exposure Increasing the mix
Slide 16: Creating value through disciplined acquisition strategy
Creating value through disciplined acquisition strategy 1. 2. x Committed about $2b of Each acquisition accretive In 2019, the acquisitions capital to value-creating to earnings in year closed will contribute: M&A since April 2016 * Revenue of $1.2b * Run-rate synergies of approximately $60mm * EBIT
Slide 17: Impact of U.S. tax reform
Impact of U.S. tax reform * U.S. tax reform is beneficial for Owens Corning ° Lower effective tax rate expected to positively impact key financial metrics e Advantaged cash tax position largely unchanged * One-time non-cash charge of $82 million recorded in Q4 2017 2017 guidance 2018 guidance Effect
Slide 18: Three Strong Businesses
The Company Investment Thesis Three Strong Businesses Additional Financial Information 18
Slide 19: Portfolio financial profile
Portfolio financial profile 2017 Roofing Composites Corporate (S in millions) Net sales 2,001 2,553 2,068 (238) 6,384 EBIT / Adj EBIT 177 Bee) 291 (148) 855 EBIT / Adj EBIT as % of 9% 21% 14% 13% net sales Source: Owens Coming SEC filings. For the Corporate column, Net sales reflects intercompany el
Slide 20: Insulation
Insulation business * Capitalize on U.S. residential construction recovery * Drive competitive advantage through operational and commercial technology ¢ Broaden our product portfolio in commercial and industrial markets around the world Five-year financial performance $2,500 10% $2,000 8% $1,500 — 6
Slide 21: U.S. residential returning to prior performance levels
U.S. residential returning)to prior performance levels * U.S. 2017 estimated capacity utilization OC U.S. insulation contractor price index rate of light-density fiberglass operating lines in excess of 90% 110 * Demand growth has exceeded capacity 100 restarts over the past few years 90 * Favorable
Slide 22: Expanding in commercial and industrial markets globally
Expanding in commercial and industrial markets globally * Pittsburgh Corning and * < Paroc acquisitions will increase revenues from commercial & industrial markets to over 50% of Insulation globally Industrial me | ¢ Markets offer stable, mid-teen margins * Positive market drivers — Energy efficienc
Slide 23: Expanded geographical focus and broadened range of technologies
Expanded geographical focus and broadened range of technologies Europe 2 High @>PAROC : Mid @>PAROC é Low 4 FOAMGLAS 7a FOAMGLAS 4 FOAMGLAS PAROC® is a registered trademark for mineral wool insulation ‘Owens| [CORNING| 23
Slide 24: Recent acquisitions are consistent with Insulation strategy
Recent acquisitions are consistent with Insulation strategy and create shareholder value Closing Value Revenue Adj. EBITDA | EPS accretion Synergies date . Expect $20mm Pittsburgh . 2016: 2013-2016: In year of Corning | Lune 2017 | ~$560mM | soso smm | 259-2790 closing uo 0 ty . 2017: Expect €15mm P
Slide 25: Roofing
Roofing business * Track record of strong operating performance * Positive outlook based on product preference and market drivers * Components business growing above market with stable, attractive margins * Commercial & operational performance driving sustainable earnings $3,000 $2,400 $1,800 $1,200
Slide 26: Positive outlook for U.S. asphalt roofing demand
Positive outlook for U.S. asphalt roofing demand Remodeling New construction Major storms and * Strong recovery over last * Expect continued growth weather events 4 years in housing starts in * 40mm square average ¢ Aging housing stock coming years storm market in last 10 years * Economic factors: e
Slide 27: Remodeling and new construction markets growing
Remodeling and new construction markets growing U.S. asphalt shingle market in mm squares New construction Remodeling m Weather events m Major storms 75 73 65 68 as n 63 61 59 58 oe ds 17 < 1 + "4 17 18 19 20 21 2007 2008 «= 2009S 20102011.) 2012, 2013S 2014S 2015 2016 = 2017 Jota 129 135 120 108 12
Slide 28: Sustaining margins in inflationary environment
Sustaining margins in inflationary environment e@== LTMEBIT% «= Roofing flux (asphalt) $/ton 25% $500 20% $400 15% $300 LTM EBIT % 10% $200 Roofing flux (asphalt) $/ton 5% $100 Nov 2015 2016 2017 The LTM EBIT % reflects the last 12 months of performance for each measurement and is based on Owens Com
Slide 29: Components is a growth engine
Components is a growth engine Components revenue = OC Roofing Components = InterWrap 2013 2014 2015 2016 2017 Source: Owens Coming management estimates OWENS| ICORNING| 29
Slide 30: InterWrap delivering expected value
InterWrap delivering expected value 2X $60mm $20+mm __Doublestgit revenue growth Doubled the Generated $60mm ___ Delivered on Line of sight size of our of adjusted EBIT $20+mm synergy to continued Components within the first year | guidance double-digit business * Commercial revenue growth ¢ Materia
Slide 31: Composites
Composites business * Global growth continues to accelerate * Favorable industry trends continue ¢ Well-positioned to leverage market growth with a capital-efficient strategy * Glass Non-Wovens is an attractive business with strong reinvestment economics $2,500 $2,000 $1,500 $1,000 $500 $o Five-year
Slide 32: Glass fiber
Glass fiber A $7.8b market with favorable exposure Markets Source: Fiber Economics Bureau, GlassFibreEurope (APFE), Global Trade Information Services, Inc. and Owens Corning management estimates as of January 2018. 32 Glass fiber market defined as glass fiber reinforcements and direct conversion pro
Slide 33: Photo Courtesy Georgia-Pacific ©2017 GP Gypsum, LLC
• • • • • • Photo Courtesy Georgia-Pacific ©2017 GP Gypsum, LLC 33
Slide 34: Glass Non-Wovens: a strong, growing business
Glass Non-Wovens: a strong, growing business Interior wallboard Value creation Exterior wallboard Mechanical Barrier Aesthetic Greater product functionalities enable more differentiation and accelerates glass penetration Glass Non-Wovens: * Growing faster than building and construction market * Appr
Slide 35: Positioned to compete anywhere in the world
Positioned to compete anywhere in the world #1 Position 25% % Market % OC % Market % OC Revenue Revenue Revenue _ Revenue #1 Position Americas 49% Rest of world 34% | 180% ow / % Market % OC ® Glass Non-Wovens operations % Market % OC Revenue —_ Revenue ® Glass Reinforcements operations Revenue Reve
Slide 36: Favorable industry trends continue
Favorable industry trends,continue Stricter Industry regulatory consolidation environment in China High capacity utilization rates: 90+% Stable industry outlook supports mid-teen EBIT margins and public sources. Glass fiber market demand excludes E-glass yarns. All capacity data are Owens Corning ma
Slide 37: Additional Financial Information
The Company Investment Thesis Three Strong Businesses Additional Financial Information 37
Slide 38: 2017 highlights and outlook
Appendix A 2017 highlights and outlook * Revenue growth: 12%; record adjusted EBIT: $855mm * Record cash flow performance: $1b operating cash flow and $679mm free cash flow * Closed Paroc acquisition in first quarter 2018 * High level of safety performance, with recordable incident rate slightly imp
Slide 39: Key financial data - corporate
Appendix A Key financial data - corporate Net sales $1,606 $1,383 $6,384 $5,677 Net earnings (loss) attributable to Owens Corning ($4) $86 $289 $393 toOwens Coming common steckhelders $0.04) $0.76 $2.55 $3.41 Earnings before interest and taxes (EBIT) $150 $136 $737 $699 a aria lies taxes, depreciati
Slide 40: Key financial data - business segments
Appendix A Key financial data - busi Insulation Roofing Composites ($ in millions) Q4 2017 04 2016 Q4 2017 04 2016 Q4 2017 04 2016 Net sales $595 $473 $560 $483 $506 $466 EBIT $79 $43 $108 $98 $74 $65 EBIT as % of sales 13% 9% 19% 20% 15% 14% D&A $35 $28 $13 $12 $37 $35 ($ in millions) 2017 2016 201
Slide 41: 2018 corporate environment and guidance
Appendix A 2018 corporate environment and guidance Macro environment Environment consistent with consensus U.S. housing starts and global industrial production > Primary guidance Other guidance items Conversion of adjusted earnings into free cash flow: about 100% Insulation: EBIT growth of approxima
Slide 42: Non-GAAP reconciliations table
Appendix B Non-GAAP reconciliations —‘table 1 The reconciliation from net earnings (loss) attributable to Owens Corning to EBIT and Adjusted EBIT is shown in the table below (in millions): Twelve Months Ended Twelve Months Ended Twelve Months Ended December 31, Total of December 31, Total of “Decemb
Slide 43: Non-GAAP reconciliations table
Appendix B Non-GAAP reconciliations —‘table 2 The calculations of net operating profit after tax (NOPAT), total capital and return on capital (ROC) are shown in the table below (in millions): Twelve Months Ended December 31, 2017 20: 2015 2014 2013 20: Numerator Adjusted EBIT (a) $ 855 $ 746 $ 550 $
Slide 44: Non-GAAP reconciliations table
Appendix B Non-GAAP reconciliations —‘table 3 The reconciliation from net cash flow provided by operating activities to free cash flow and the calculation of free cash flow conversion of adjusted earnings ("free cash flow conversion") are shown in the table below (in millions): Twelve Months Ended T
Slide 45: Non-GAAP reconciliations table
Appendix B Non-GAAP reconciliations —‘table 4 The calculation of free cash flow yield is shown in the table below (in millions, except per share amounts and percentages): Measuremen eriod Numerator Net cash flow provided by operating activities $ 1,016 Cash paid for property, plant and equipment (33
Slide 46: Non-GAAP reconciliations
Appendix B Non-GAAP reconciliations The adjusting income (expense) items and reconciliation from net earnings (loss) attributable to Owens Corning to EBIT and Adjusted EBIT are shown in the tables below (in millions): Three Months Ended ‘Twelve Months Ended December 31, December 31, 2017 2016 2017 2
Slide 47: Non-GAAP reconciliations table
Appendix B Non-GAAP reconciliations —‘table 6 A reconciliation from net eamings (loss) attributable to Owens Coming to adjusted earnings and a reconciliation from diluted earings (loss) per share to adjusted diluted eamings per share for selected periods are shown in the tables below (in millions, e
Slide 48: Non-GAAP reconciliations table
Appendix B Non-GAAP reconciliations —‘table 7 Operating working capital (a non-GAAP financial measure) is defined as receivables plus inventories less accounts payable. The reconciliation from net working capital to operating working capital is shown in the table below (in millions): re Months Ended
Slide 49: Non-GAAP reconciliations table
Appendix B Non-GAAP reconciliations —‘table 8 Net debt (a non-GAAP financial measure) is defined by the Company as total borrowings, less cash and cash equivalents and less the impact of derivatives used to hedge the borrowings. The reconciliation from total debt to net debt is shown in the table be
Slide 50: Non-GAAP reconciliations table
Appendix B Non-GAAP reconciliations —‘table 9 The reconciliations of EBITDA and adjusted EBITDA are shown in the table below (in millions): Three Months Ended Twelve Months Ended December 31, December 31, 2017 2016 2017 2016 150 $ 7377 $ 609 EBIT (a) Depreciation and amortization 102 101 371 343 EBI