Slide 1: Owens Corning Focused on Shareholder Value
Owens Corning Focused on Shareholder Value Q3 2016 This presentation shared at the following event(s): 9/8/16 OC Roadshow Hosted by Longbow – Denver Brian Chambers, President Roofing & Asphalt 9/7/16 RBC Capital Markets Global Industrials Conference – Las Vegas Thierry Denis, VP Investor Relations 8
Slide 2: Forward-Looking Statements and Non-GAAP Measures
Forward-Looking Statements and Non-GAAP Measures This presentation consists of this slide deck and the associated remarks and comments, all of which are integrally related and are intended to be presented and understood together. This presentation contains forward-looking statements within the meani
Slide 3: Owens Corning at a Glance
Owens Corning at a Glance Founded in 1938, an industry leader in glass fiber insulation, roofing and glass fiber reinforcements 2015 net sales: $5.4 billion 16,000 employees in 25 countries Fortune 500 company for 62 consecutive years Component of Dow Jones Sustainability World Index for
Slide 4: Investment Highlights
Investment Highlights Composites Roofing Insulation Market-leading business Strong market Progress supports with improving economic position in attractive confidence in return to conditions and higher industry historical profitability utilization rates Three Market-Leading Businesses 4
Slide 5: Q2 2016 Highlights and Outlook
Q2 2016 Highlights and Outlook Maintained a high level of safety performance in Q2 2016 Delivered adjusted EBIT of $253 million Insulation achieved 20th consecutive quarter of EBIT growth Composites delivered record EBIT with 14% EBIT margins Roofing grew EBIT by $79 million; delivered 25%
Slide 6: Strong Portfolio
Strong Portfolio '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Insulation Roofing Composites Margin >= 10% 0%<= Margin < 10% Margin < 0% Sources: Owens Corning’s SEC filings since 2006. For comparability purposes, prior years have been provided based on Owen
Slide 7: Insulation Business
Insulation Business Q2 2016 Highlights $ (in millions) Q2 2016 Q2 2015 1H 2016 1H 2015 Delivered 20th consecutive quarter of EBIT growth Net sales* $414 $451 $799 $830 Grew EBIT by $7 million, primarily on improved customer mix and deflation EBIT $32 $25 $45 $32 Expect slightly negative revenu
Slide 8: Insulation EBIT Progress
Insulation EBIT Progress Q1 Q2 Q3 Q4 80 70 58 60 EBIT in Millions of Dollars 43 46 39 40 32 25 18 18 20 13 7 9 1 4 3 0 - (20) (12) (16) (21) (40) (34) (38) (47) (60) 2011 2012 2013 2014 2015 2016 Consistent Quarterly EBIT Progression Since 2011 Source: Owens Corning SEC filings. 8
Slide 9: Owens Corning Insulation: Return to Historical Profitability Levels
Owens Corning Insulation Return to Historical Profitability Levels 30% EBIT Margin Avg EBIT Margin '85-'08 (15%) 20% 10% 0% -10% '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 Historically Delivered 15% EBIT Margins at 1.5 Million Housing Starts; Expect to Average 50% Operating Leve
Slide 10: U.S. and Canada Fiberglass Industry
U.S. and Canada Fiberglass Industry Light Density Network Capacity 2005 2015 Capacity Utilization: 100% 73% 85% 90% ( 0.3) Capacity B Lbs ( 0.6) ( 0.2) 4.6 4.3 3.7 3.5 2005 Total Retired 2015 Total Mothballed Operating Cold Lines Operating Lines Capacity Capacity Plants Capacity Capacity 2.1MM 1.1 M
Slide 11: U.S. and Canada Fiberglass Industry
U.S. and Canada Fiberglass Industry Light Density Capacity and Demand Sustained Early Stage Performance Decline Trough Recovery Improvement OC U.S. New Construction Price Change in Demand/Capacity (Light Density MM Lbs) Indexed to 2006 2006 – 2008 2009 – 2011 2012 – 2015 2016E – 2018E ∆ in Demand ∆
Slide 12: Positioned to Grow
Positioned to Grow Insulation End-Use Expected Market Revenue CAGR Markets Growth Drivers 2015 – 2018 % of 2015 Revenue U.S. and Canada Housing starts Residential New Construction Building energy code adoption ++ 39% Aging housing stock U.S. and Canada Repair and Remodel Energy efficiency po
Slide 13: Roofing Business
Roofing Business Q2 2016 Highlights $ (in millions) Q2 Q2 1H 2016 1H 2015 2016 2015 Grew EBIT by $79 million for the quarter Net sales* $679 $503 $1,108 $896 Delivered 25% EBIT margins on higher volume and lower asphalt costs EBIT $169 $90 $242 $110 Expect low double digit growth of the U.S. a
Slide 14: U.S. Asphalt Shingle Re-Roof Demand Drivers
U.S. Asphalt Shingle Re-Roof Demand Drivers High Replacement age Average replacement age increased driven by technological advances Major storms & other weather events Weather events drive demand and create early Impact replacement of roofs Weather-related demand estimated based on NOAA data a
Slide 15: U.S. Asphalt Shingle Market
U.S. Asphalt Shingle Market New Construction Age Related/Economic Other Weather Events Major Storms MM Sq. 18 8 7 8 3 2 3 21 22 28 3 27 35 19 30 17 11 34 6 4 32 25 6 6 23 21 24 95 28 31 34 30 23 86 87 81 77 71 75 75 73 65 71 58 60 63 61 59 31 32 34 37 39 35 30 26 17 11 11 11 14 17 18 19 '00 '01 '02
Slide 16: Seasonal Industry Shipment Profile
Seasonal Industry Shipment Profile Q4 18% 16% 19% Historically, about 25% of full-year 23% manufacturer volumes shipped in Q1 Q3 27% 27% In 2012–2014, heavy winter discounts 26% drove distributor channel stocking and Q2 29% 32% pulled disproportional volume into Q1 Healthier 2015 shipment patt
Slide 17: Strong Market Position in Attractive Industry
Strong Market Position in Attractive Industry Track record of strong financial performance – Delivered average operating margins in excess of 20% during 2009-2013 period Re-roof demand over the last few years has been sluggish – Housing activity forecasts support some demand growth with weather-
Slide 18: InterWrap Acquisition
InterWrap Acquisition Strengthens Position of Roofing Components Business Acquired leading manufacturer of synthetic roofing underlayment and packaging materials for $450 million on April 21st, 2016 Value contributors: – InterWrap’s established track record of double-digit revenue growth – Benef
Slide 19: Composites Business
Composites Business Q2 2016 Highlights $ (in millions) Q2 Q2 1H 2016 1H 2015 2016 2015 Delivered $74 million EBIT and 14% EBIT margins Net sales* $517 $497 $990 $971 Continued price and volume momentum Anticipate continued growth in the glass fiber EBIT $74 $67 $138 $127 market driven by moder
Slide 20: Glass Fiber: A $7.5 Billion Global Market
Glass Fiber A $7.5 Billion Global Market Building & Transportation Consumer Industrial Power & Markets Construction Energy Size Glass fiber market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns. Source: Fiber Economics Bureau, GlassFibreEurope (APFE
Slide 21: Glass Fiber Market Demand
Glass Fiber Market Demand 6,000 Glass Fiber Demand Has Grown at 1.6 Multiple of Industrial Production Growth 5,000 Glass Fiber K Tons 4,000 3,000 2,000 1,000 - 1981 1998 2015 An Industry with a Proven Track Record of Growth Glass fiber market demand excludes E-glass yarns Sources: Fiber Economics Bu
Slide 22: Cost Leadership
Cost Leadership Owens Corning Composites Global Capacity Percentage of Low-Delivered Cost Assets 70% 75% 30% 2007 2013 2015 Composites Now Positioned with Low-Cost Network Low-delivered cost asset defined as delivered cost in the region at or below best competitive benchmark for glass fiber manufact
Slide 23: Owens Corning Composites: Positioned to Win
Owens Corning Composites Positioned to Win #1 Position Emerging Position Europe China 28% 27% 23% 12% % Market % OC % Market % OC Revenue Revenue Revenue Revenue #1 Position Americas #1 Position 47% OC glass fiber manufacturing site 33% OC downstream fabrication site Rest of World 17% 13% % Market %
Slide 24: Industry Structure – China
Industry Structure – China China Capacity Additions and Rebuild Requirements 1000 Additions / 800 Rebuilds 2005-11 2012-18 Variance % ($B) 600 Millions of $ Additions 3.6 1.4 (61%) 400 Rebuilds 0.3 1.3 333% 200 Total 3.9 2.7 (31%) 0 2005 2007 2009 2011 2013 2015 2017 Capacity Additions Capacity Rebu
Slide 25: Glass Fiber Industry
Glass Fiber Industry Estimated Capacity China Emergence Tightening Capacity Supply Tension Capacity Overbuild Price Inflection Improved Returns '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16E '17E '18E 100% 1.7 1.7 90% Estimated Capacity Utilization 90% Threshold 80% Change in global demand (MM T)
Slide 26: Owens Corning Composites: Focused on Creating Shareholder Value
Owens Corning Composites Focused on Creating Shareholder Value Strategy is delivering double-digit EBIT margins and return on capital A leader in glass fiber market with strong growth and stable industry structure Positioned well to capture opportunity in specialty glass non-wovens Evolving
Slide 27: Sustaining a Strong Balance Sheet
Sustaining a Strong Balance Sheet Maintaining investment-grade financial strength is a pillar of Owens Corning’s strategy Maintained investment-grade credit ratings from Standard & Poor's and Fitch $800 million revolving credit facility maturing in 2020 $250 million accounts receivable secur
Slide 28: Tax Position is a Significant Asset
Tax Position is a Significant Asset Benefit from $2.0 billion U.S. Federal N.O.L. with estimated present value of approximately $5 per share Delivering cash tax savings of about $60MM per year Expect long-term book tax rate of 32% to 34% based on geographic mix of earnings and tax planning C
Slide 29: Disciplined Capital Allocation Strategy
Disciplined Capital Allocation Strategy Drive shareholder returns by enabling organic and inorganic growth and supporting the balance sheet – Maintain investment grade Capital allocation strategy – Investing in attractive organic growth – Pursuing value-creating acquisitions – Returning excess c
Slide 30: 2015 Cash Deployment
2015 Cash Deployment Strategy 2015 Base Capex $285MM First priorities for cash Cash Interest $113MM Foundation Fund with cash flow from $78MM Dividend operations Growth Capex High-return investments $108MM Discretionary Discretionary Opportunities Discretionary cash returned to Opportunities
Slide 31: Key Financial Data
Key Financial Data ($ in millions, except per share data) Q2 2016 Q2 2015 1H 2016 1H 2015 Net sales $1,545 $1,403 $2,776 $2,606 Net earnings attributable to Owens Corning $138 $91 $195 $109 Diluted earnings per share attributable to Owens $1.19 $0.77 $1.67 $0.92 Corning common stockholders Earnings
Slide 32: 2016 Corporate Environment & Guidance
2016 Corporate Environment & Guidance Macro Environment Consensus U.S. housing starts reach 1.2 million Expect moderate global industrial production growth Primary Guidance Other Guidance Items Expect full-year adjusted EBIT of $700MM or Corporate expenses of $120-$130MM more, and free cash
Slide 33: Appendix A: Non-GAAP Reconciliations
Appendix A Non-GAAP Reconciliations
Slide 34: Appendix A: Non-GAAP Reconciliations
Appendix A Non-GAAP Reconciliations
Slide 35: Appendix A: Non-GAAP Reconciliations
Appendix A Non-GAAP Reconciliations