Owens Corning Inc · NYSE:OC
Owens Corning — Non-Deal Roadshow (December 2017)
48 slides from Owens Corning's roadshow presentation, Dec 7, 2017
Slide 1: This presentation shared at the following events
This presentation shared at the following events: 12/07/17 OC Roadshow – New York Thierry Denis, VP Investor Relations 12/01/17 OC Roadshow Hosted by JP Morgan – Boston Michael McMurray, Chief Financial Officer 12/01/17 OC Roadshow Hosted by RBC – Baltimore Mike Thaman, Chief Executive Officer 11/29
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 2016 @ 3 #1%k $838 £63 ~ 65.7 Founded Strong Employees Countries Consecutive Sales in 2016 79 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 2016 OC revenue by end market 12% |8% Roofing Insulation US. & Canada residential new construction U.S. & Canada repair and remodelin . a i g Composites U.S. & Canada commercial and industrial 1) International Source: Owens Corning management estimates; estimated error m
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 Adjusted EBIT $mm 76 = 844 550 416 412 293 Return on capital Percent 11.9% 12.1% 9.3% 7.7% 712% 5.8% 2012 2013 2014 2015 2016 2017 Consensus Free cash flow $mm 570 622 341 54 50 2012 2013 2014 2015 2016 2017 Consensus Operating working capital / net sales
Slide 8: Performance is recognized by investors
Performance is recognized by investors Total shareholder return 1-year average 65% 3-year average 5-year average 10-year average =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 LTM 2011 - 2016 2007 - 2010 Adjusted EBIT 7% margin Please refer to Appendix for reconciliation to Owens Coming SEC filings OWENS| ICORNING| rn
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 Q3 2017 7% e@=m Peer Average 6% 5% 4% 3% 2% : ty 0% oc FBHS MAS BLD SHW SWK USG BECN MHK S&P 500 peers in similar disclosures, Please refer to the Appendix for further explanation of this measure, including the formula and GAAP reconciliatio
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 Extending product, end-market and “+ geographic exposure Increasing the mix of e
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: Three Strong Businesses
The Company Investment Thesis Three Strong Businesses Additional Financial Information 17
Slide 18: Portfolio financial profile
Portfolio financial profile 2016 Roofing Composites Corporate (S in millions) Net sales 1,748 2,194 1,952 (217) 5,677 EBIT / Adj EBIT 126 486 264 (130) 746 EBIT / Adj EBIT as % of 7% 29% 14% 13% sales Source: Owens Coming SEC filings. For the Corporate column, Net sales reflects intercompany elimina
Slide 19: Insulation business
Insulation business * Capitalize on U.S. residential construction recovery technology around the world Five-year financial performance $2,500 $2,000 $1,500 — = $1,000 — = $500 — = $o 2013 2014 2015 2016 LTM Sales in millions = EBIT as % of sales Source: Owens Coming SEC filings; segment reporting co
Slide 20: U.S. residential returning to prior performance levels
U.S. residential returning)to prior performance levels * U.S. 2017 estimated capacity utilization 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 utilization rates are expected to continue
Slide 21: Expanding in commercial and industrial markets globally
Expanding in commercial and industrial markets globally * Pittsburgh Corning and * < Paroc (pending) acquisitions will increase revenues from commercial & industrial markets to 50% of Insulation Industrial me | ¢ Markets offer stable, mid-teen margins * Positive market drivers — Energy efficiency po
Slide 22: Expanded geographical focus and broadened range of technologies
Expanded geographical focus and broadened range of technologies Europe China 2 High @>PAROC | Thermafiber. : Mid @>PAROC’ FOAMLLAR 5 Low 7 FOAMGLAS FOAMGLAS The pending acquisition of Paroc Group is subject to regulatory approvals and other customary closing conditions. PAROC® is a registered tradem
Slide 23: 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 | Ue 2017 | ~$560mM | goposmm | 25%-27% closing run rate by Expect €15mm Expected
Slide 24: Roofing business
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 Five-year financial perform
Slide 25: 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 * 38mm square average ¢ Aging housing stock coming years storm market in last 10 years * Economic factors: e
Slide 26: Remodeling and new construction markets growing
Remodeling and new construction markets growing U.S. asphalt shingle market in mm squares New construction Remodeling Weather events Major storms 75 73 65 68 73 ih 63 61 59 58 60 _ wy 1 1 "1 14 17 18 19 20 21 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E total 129 135 120 108 122 118
Slide 27: Sustaining margins in inflationary environment
Sustaining margins in inflationary environment e@=e LTMEBIT% «= Roofing flux (asphalt) $/ton 25% $500 20% $400 15% $300 LTM EBIT % Roofing flux (asphalt) $/ton 10% $200 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 28: Components is a growth engine
Components is a growth engine Components revenue = OC Roofing Components = InterWrap 2013 2014 2015 2016 2017E Source: Owens Coming management estimates OWENS| ICORNING| 28
Slide 29: 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 30: Composites business
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 Five-year financial performance $2,500 25% $2
Slide 31: Glass fiber
Glass fiber A $7.5b market with favorable exposure Markets Source: Fiber Economics Bureau, GlassFibreEurope (APFE), Global Trade Information Services, Inc. and Owens Corning management estimates as of January 2017. 31 Glass fiber market defined as glass fiber reinforcements and direct conversion pro
Slide 32: Photo Courtesy Georgia-Pacific ©2017 GP Gypsum, LLC
• • • • • • Photo Courtesy Georgia-Pacific ©2017 GP Gypsum, LLC 32
Slide 33: 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 34: Positioned to compete anywhere in the world
Positioned to compete anywhere in the world #1 Position % Market % OC Revenue Revenue % Market % OC Revenue _ Revenue ¢ #1 Position Rest of world | 18% 4 gop @ Glass Non-Wovens operations % Market % OC Revenue Revenue #1 Position ‘ Americas 47% 33% % Market %OC Revenue — Revenue ® Glass Reinforcemen
Slide 35: Glass fiber demand grows at 1.6 multiple of global industrial production
Glass fiber demand grows at 1.6 multiple of global industrial production 1 Global industrial production growth I Global glass fiber market growth IB Capacity additions 2014 - 2016 2017E - 2019E and public sources. Glass fiber market demand excludes E-glass yarns. All capacity data are Owens Corning
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: Q3 2017 highlights and outlook
Appendix A Q3 2017 highlights and outlook * Improved safety performance with recordable incident rate down 8% year over year * Third-quarter adjusted EBIT of $239mm * Roofing: $147mm EBIT; 22% EBIT margins * Composites: $62mm EBIT; 12% EBIT margins * Insulation: $64mm EBIT; 11% EBIT margins * Return
Slide 39: Key financial data - corporate
Appendix A Key financial data - corporate ($ in millions, except per share data) 03 2017 93206 YTD 2017 YTD 2016 Net sales $1,703 $1,518 $4,778 $4,294 Net earnings attributable to Owens Corning $96 $112 $293 $307 Died earings posh EFS)sbwtble yg gor $50 =f Earnings before interest and taxes (EBIT) $
Slide 40: Key financial data - business segments
Appendix A Key financial data - busi Insulation Roofing Composites ($ in millions) Q3 2017 Q3 2016 Q3 2017 Q3 2016 Q3 2017 Q3 2016 Net sales $568 $476 $682 $603 $514 $496 EBIT $64 $38 $147 $146 $62 $61 EBIT as % of sales 11% 8% 22% 24% 12% 12% D&A $36 $26 $13 $13 $36 $36 ($ in millions) YTD 2017, Ss
Slide 41: Non-GAAP reconciliations - table
Appendix B Non-GAAP reconc iations —‘table 1 The reconciliation from net earings (loss) attributable to Owens Corning to EBIT and to Adjusted EBIT is shown in the table below (in millions): Net earnings (loss) attributable to Twelve Months Ended December 31, 2007 2008 2009 2010 Total of 2007 to 2010
Slide 42: 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): nded December 31, 2016 2013 201 Numerator Adjusted EBIT (a) $ 746 $ 550 $ 412 $ 416 $ 293 nia Less: Taxe
Slide 43: 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 of adjusted earnings ("free cash flow conversion") are shown in the table below (in millions): Total of Three Months Ended Nine
Slide 44: 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): Three Months Nine Months Ended Ended December 31, September 30, Measurement 2016 2017 Period Numerator Net cash flow provided by
Slide 45: Non-GAAP reconciliations - table
Appendix B Non-GAAP reconciliations The adjusting income (expense) items and reconciliation from net earnings attributable to Owens Coming to EBIT and to Adjusted EBIT are shown in the tables below (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Re
Slide 46: Non-GAAP reconciliations - table
Appendix B Non-GAAP reconciliations —‘table 6 reconciliation from net earnings (loss) attributable to Owens Corning to adjusted earnings and a reconciliation from diluted earings per share to adjusted diluted earnings per share for selected periods are shown in the tables below (in millions, except
Slide 47: Non-GAAP reconciliations - table
Appendix B Non-GAAP reconc iations —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): 2016 elve Months
Slide 48: 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