Owens Corning Inc · NYSE:OC
Owens Corning — Zelman Housing Summit – Boston 2018
50 slides from Owens Corning's conference presentation, Sep 27, 2018
Slide 1: Zelman Housing Summit – Boston
This presentation shared at the following event: 09/27/18 Zelman Housing Summit – Boston Mike Thaman, Chief Executive Officer
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 £64 ~~ 6.4, Founded Strong Employees Countries Consecutive Net sales in 80 years ago businesses worldwide around years on the 2017 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 Roofing 81% 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 +/- 5%. In
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% 746 855 9.3% 550 7.7% 7.2% 416 412 5.8% 293 2012 «2013-2014. 2015. 2016 = 2017 2012 «2013, 2014. «2015S 2016 = 2017 Free cash flow Operating working capital / net sales $mm Percent 679 570 175% 17.3%
Slide 8: Compelling investment thesis
Compelling investment thesis e oe at «@5 Attractive Market macro > leading > drivers positions
Slide 9: 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 10: 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 | 10
Slide 11: 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 11
Slide 12: Superior free cash flow yield within sector
Superior free cash flow yield within sector Last 12 months Q2 2018 7% 6% 5% 4% 3% 2% 1% 0% WENS| ICORNING| oc Peer average S&P 500 Peer group represents building materials companies most covered by sell-side analysts who publish on Owens Coming, Calculation may differ from methods used by peers in s
Slide 13: Long-term capital allocation strategy focuses on increasing shareholder return
Long-term capital allocation strategy focuses on increasing shareholder return 1. 2. J. 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 14: Disciplined portfolio actions have built a better company
Disciplined portfolio actions have built a better company M&A target areas Insulation: product and geographic expansion Roofing: core & Components Composites: downstream applications ‘Owens| [CORNING| M&A strategy focus areas Improving growth profile and margin structure 8 JQ Extending product, end-
Slide 15: Creating value through disciplined acquisition strategy
Creating value through disciplined acquisition strategy 1. 2. 3. 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 * EBI
Slide 16: 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 17: Three Strong Businesses
The Company Investment Thesis Three Strong Businesses Additional Financial Information 17
Slide 18: 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 eli
Slide 19: 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 _——a — 8% $1,
Slide 20: 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 21: 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 and attractive margins * Positive market drivers — Energy effi
Slide 22: Expanded geographical focus and broadened range of technologies
Expanded geographical focus and broadened range of technologies Europe c) = High ®>PAROC’ o s &S = Mid ®>PAROC E e Low fj FOAMGLAS 7a FOANMGLAS fj FOAMGLAS PAROC® is a registered trademark for mineral wool insulation ‘Owens| [CORNING| 22
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 . . 7 . Expect $20mm Pittsburgh June 2017 | ~$560mm 2016: 2018 2078: In year of run rate by Corning $240+mm 25%-27% closing mid-2019 2017: Expect
Slide 24: Built a stronger global Insulation business with through-the-cycle earnings power
Built a stronger global Insulation business with significant through-the-cycle earnings power Insulation EBITDA $mm and margins 400 30% 18% ¢ Insulation delivered 19% 300 average EBITDA margin over the period 1985-2008 22% = 200 19% ¢ Fiberglass building a . . . ay . insulation capacity utilization
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 Five-year financial perform
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 7 63 61 59 58 o ds 17 ~ 1 < "4 17 18 19 20 21 2007 2008 «= 2009S 2010S «2011S 2012, 2013S 2014S 20152018 = 2017 Total 129 135 120 108 1
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 Cor
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 __Doubleigit 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 ¢ Material s
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 Five-year financial performance $2,500 15% $2
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% | 18% ow / % Market % OC ® Glass Non-Wovens operations % Market % OC Revenue —_ Revenue ® Glass Reinforcements operations Revenue Reven
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: Q2 2018 highlights and outlook
Appendix A Q2 2018 highlights and outlook * Sustained high level of safety performance * Revenue growth: 14%; adjusted EBIT: $214mm * Insulation: grew revenue by over 50%; increased EBIT by $20mm * Roofing: delivered $127mm of EBIT, with 19% margins * Composites: delivered $541mm of revenue; $71mm o
Slide 39: Key financial data - corporate
Appendix A Key financial data - corporate ($ in millions, except per share data) g2208 =| = g22017, | ~—yTo2018 YTD 2017 Net sales $1,824 $1,597 $3,515 $3,075 Net earnings attributable to Owens Corning $121 $96 $213 $197 Divedeanesnn swe Ees)awbusbe'? gio «goes, $g0 7 Earnings before interest and ta
Slide 40: Key financial data - businesses
Appendix A Key financial data - busi Insulation Roofing Composites (S in millions) Q2 2018 Q2 2017 Q2 2018 Q2 2017 Q2 2018 Q2 2017 Net sales $682 $439 $659 $684 $541 $537 EBIT $49 $29 $127 $155 $71 $84 EBIT as % of net 7% 7% 19% 23% 13% 16% sales D&A $46 $27 $13 $12 $36 $35 (S in millions) Ytd 2018
Slide 41: Non-GAAP reconciliations: EBIT and Adjusted EBIT
Appendix B 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 End: Twelve Months Ended Twelve Months Ended December 31, Total of December 31, Total of December 31, Total of 2013 to 2016 to 2007
Slide 42: Non-GAAP reconciliations: return on capital
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 43: Non-GAAP reconciliations: free cash flow
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 44: Non-GAAP reconciliations: free cash flow yield
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): (A) Twelve Months (B) {C) Ended Six Months Six Months (A) - (B) + (C)= December 31, Ended Ended Measurement 2017 June 30, 2017 Ju
Slide 45: Non-GAAP reconciliations: adjusting items to EBIT
Appendix B Non-GAAP reconciliations —‘table 5 The adjusting income (expense) items to EBIT are shown in the tables below (in millions): Three Months Six Months Twelve Months Ended Ended Ended December 31, June 30, June 30, 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2017 2018 2017 2018 Re
Slide 46: Non-GAAP reconciliations: adjusted earnings and EPS
Appendix B Non-GAAP reconciliations —‘table 6 A reconciliation from net earnings attributable to Owens Coming to adjusted earnings and a reconciliation from diluted earnings per share to adjusted diluted earnings per share for selected periods are shown in the tables below (in millions, except per s
Slide 47: Non-GAAP reconciliations: operating working capital
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): Tw Months Ended
Slide 48: Non-GAAP reconciliations: EBITDA
Appendix B Non-GAAP reconciliations —‘table 8 The reconciliation of Net earings attributable to Owens Corning to Earnings before interest and taxes ("EBIT") and adjusted EBIT, and a reconciliation from EBIT to Eamings before interest, taxes, depreciation and amortization ("EBITDA") and adjusted EBIT
Slide 49: Non-GAAP reconciliations: net debt
Appendix B Non-GAAP reconciliations —‘table 9 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: Insulation EBITDA margins
Appendix B Non-GAAP reconciliations —‘table 10 The calculation of Insulation EBITDA Margins is outlined below, dating back to 1985 (in millions): (A) (A) Exclude (A) Exclude Segment/ Segment/ Segment/ Non- Segment / Non- Business Business Business Insulation Insulation Business Insulation Insulation