Owens Corning Inc · NYSE:OC
Owens Corning — Non-Deal Roadshow (November 2017)
44 slides from Owens Corning's roadshow presentation, Nov 1, 2017
Slide 1: Owens Corning: Focused on Shareholder Value
Owens Corning Focused on Shareholder Value Q4 2017 This presentation shared at the following event(s): 11/1/17 OC Roadshow Hosted by Evercore ISI – Texas Michael McMurray, Chief Financial Officer
Slide 2: Forward-Looking Statements and Non-GAAP Measures
Forward-Looking Statements and Non-GAAP Measures This presentation and the associated remarks and comments 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
Slide 3: Agenda
Agenda The Company Investment Thesis Three Strong Businesses Additional Financial Information
Slide 4: Owens Corning at a Glance
Owens Corning at a Glance 1938 $5.7 BILLION 17k 33 63 Founded Three Employees Countries Consecutive 2016 Over 79 Strong Worldwide Around Years on the Sales Years Ago Businesses the World Fortune 500® Source: Owens Corning SEC filings and Fortune Magazine 4
Slide 5: Balanced End Market Exposure
Balanced End Market Exposure 2016 OC REVENUE BY END MARKET 15% U.S. & Canada Residential New Construction 26% U.S. & Canada Repair and Remodeling U.S. & Canada Commercial and Industrial 38% International 21% Roofing Insulation Composites 1% 3% 12% 8% 16% 11% 36% 25% 60% 26% 79% 23% Source: Owens Cor
Slide 6: Agenda
Agenda 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 RETURN ON CAPITAL $ MM Percent 746 11.9% 550 9.3% 7.7% 7.2% EBIT 416 AND MARGINS 412 5.8% EBIT AND MARGINS 293 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 FREE CASH FLOW OPERATING WORKING CAPITAL / NET SALES $ MM Percent 570 17.5% 17.3
Slide 8: Compelling Investment Thesis
Compelling Investment Thesis 1 2 3 Attractive Market Improved Macro Leading Portfolio, Drivers Businesses Earnings & Cash Flow ✓ Favorable ✓ Leadership ✓ Disciplined global trends positions in capital allocation attractive industries ✓ Positive ✓ Access to growth market outlook ✓ Valuable brands opp
Slide 9: Sustainable Improvement of Earnings Power
Sustainable Improvement of Earnings Power 2016 2011 - 16 2007 - 10 Adjusted 9% 13% EBIT Margin: 7% ▪ Lowered breakeven point ▪ Acquired and expanded mineral wool assets ▪ Returned engineered & regional business to record levels Insulation ▪ Acquired global cellular glass leader Pittsburgh Corning ▪
Slide 10: Superior Free Cash Flow Yield Within Sector
Superior Free Cash Flow Yield Within Sector 10% 9% 8% 7% 6% 5% Peer Average 4% 3% 2% 1% 0% Source: Management estimates, based on 2016 data from CapitalIQ. Management believes this disclosure is useful to investors to compare a company’s ability to generate free cash flow to its market valuation. Fr
Slide 11: Disciplined Capital Allocation Strategy
Disciplined Capital Allocation Strategy Drive shareholder returns by enabling organic and inorganic growth and supporting the balance sheet o Maintain investment grade Capital allocation strategy o Investing in attractive organic growth o Pursuing value-creating acquisitions o Returning cash to
Slide 12: Agenda
Agenda The Company Investment Thesis Three Strong Businesses Additional Financial Information
Slide 13: Portfolio Financial Profile
Portfolio Financial Profile 2016 Insulation Roofing Composites Corporate Total (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% 22% 14% 13% sales Source: Owens Corning SEC filings. For the Corporate column, Net sales reflects inter
Slide 14: Strong Portfolio
Strong Portfolio '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Insulation Roofing Composites Margin >= 10% 0%<= Margin < 10% Margin < 0% Last 20 years of performance. Source: Owens Corning’s SEC filings since 2006. For comparability purposes, prior years have been p
Slide 15: Insulation Business
Insulation Business Progress supports confidence in return to historical profitability $2,500 25% Track record of proven performance $2,000 20% Strong brand and broad product portfolio $1,500 15% Investment opportunities for global $1,000 10% expansion $500 5% Confidence in return to histori
Slide 16: Return to Historical Profitability Levels
Return to Historical Profitability Levels 30% EBIT Margin Avg EBIT Margin '85-'08 (15%) 20% 10% 0% -10% '85 '90 '95 '00 '05 '10 ‘16 '15 Historically Delivered 15% EBIT Margins at 1.5 Million Housing Starts; Expect to Average 50% Operating Leverage through the Housing Recovery Source: Owens Corning m
Slide 17: U.S. & Canada Fiberglass Industry Capacity and Demand
U.S. & Canada Fiberglass Industry Light Density Network Capacity and Demand 2005 2016 2.1 MM 1.2 MM U.S. Housing Starts U.S. Housing Starts Capacity Utilization: 100% 80% 73% 85% 85% 90% 90% ( 0.5) ( 0.3) ( 0.2) B Lbs 4.6 4.1 3.8 3.6 2005 Total Retired 2016 Total Mothballed Operating Cold Lines Oper
Slide 18: Market Pricing Still Significantly Below Historical Levels
Market Pricing Still Significantly Below Historical Levels OC U.S. New Construction Price Index 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 100% 90% 80% 70% 60% Source: Owens Corning management estimates as of January 2017. Owens Corning nominal price index based on average price of fiber
Slide 19: Residential Fiberglass Below Historical Levels; Non-Residential at Record Levels
Residential Fiberglass Below Historical Levels; Non-Residential at Record Levels EBIT MM$ & Margins 400 26% 300 200 17% 14% MM$ 100 4% 2% 0 -100 -23% -200 2006 2009 2015 (Peak) (Trough) U.S. & Canada Residential Fiberglass Building Insulation Engineered Insulation & Other Regions Residential fibergl
Slide 20: Pittsburgh Corning Acquisition
Pittsburgh Corning Acquisition Strengthens Position of Insulation Business Acquired global brand leader of cellular glass insulation and accessory products for approximately $560MM in cash, on a cash-free and debt-free basis, subject to regulatory approvals Consistent with Insulation business st
Slide 21: Paroc Acquisition
Paroc Acquisition Continues Transformation of Insulation Business Entered into an agreement to acquire a leading European mineral wool manufacturer for an enterprise value of approximately €900MM, subject to regulatory approvals Expands technology portfolio and geographic presence of the Insulat
Slide 22: Paroc Acquisition
Paroc Acquisition Improves Corporate Financial Outlook Estimate 2017 revenue of standalone business at €410MM, with adjusted EBITDA margins of slightly more than 20% Expect acquisition to be immediately accretive to 2018 EPS, excluding transaction and integration costs Anticipate to achieve ru
Slide 23: Paroc Acquisition
Paroc Acquisition Accesses Strong Capabilities and Compelling Market Dynamics Second largest mineral wool manufacturer in Europe Strong management team and operational capability A leading position in two attractive end-markets Building insulation Increasing energy efficiency and Thermal, acou
Slide 24: Paroc Acquisition
Paroc Acquisition Positions Owens Corning Insulation Business as a Scale 9 Manufacturer in the Attractive European Market European Insulation Business Footprint ParocFacility Facility Paroc FoamglasFacility Facility Expands European Insulation Foamglas Headquarters presence to 18 countries Headqua
Slide 25: Roofing Business
Roofing Business Strong market position sustaining high operating margins Strong market position and leading brands $2,500 25% $2,000 20% Performance track record through varied market conditions $1,500 15% $1,000 10% Confidence in sustaining average operating margins of mid-teens or better $5
Slide 26: 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 IMPACT Major storms & other weather events ▪ Weather events drive demand and create early replacement of roofs ▪ Weather-related demand estimated based on NOAA data a
Slide 27: New Construction and Replacement Markets Growing over Last Three Years
New Construction and Replacement Markets Growing over Last Three Years U.S. Asphalt Shingle Market New Construction Age Related/Economic Other Weather Events Major Storms 18 MM Sq. 8 7 8 3 2 3 21 22 15 28 3 27 19 30 35 17 34 11 32 6 6 4 25 6 23 30 21 24 95 28 31 34 30 23 86 87 81 77 71 75 75 73 65 6
Slide 28: Track Record of Strong Financial Performance
Track Record of Strong Financial Performance Roofing EBIT Margin 25 Delivered average EBIT 20 margins of 18% since Average 18% 2010 (ranging from 13% to 22%) 15 % 10 Strong market position; confidence in sustaining 5 average EBIT margins of mid-teens or better 0 2010 2011 2012 2013 2014 2015 201
Slide 29: Successful InterWrap Acquisition
Successful InterWrap Acquisition Strengthens Position of Roofing Components Business Acquired and integrated leading manufacturer of synthetic roofing underlayment and packaging materials for $452MM on April 21st, 2016 Value contributors: o Established track record of double-digit revenue growth
Slide 30: Composites Business
Composites Business Market-leading business with improving economic conditions and higher utilization rates A leader in a stable industry with strong growth $2,500 25% prospects $2,000 20% Improving economic conditions and higher $1,500 15% utilization rates $1,000 10% Transformed business del
Slide 31: Glass Fiber: A $7.5 Billion Global Market
Glass Fiber A $7.5 Billion Global Market With Favorable Exposure Markets Building & Transportation Consumer Industrial Power & Energy Construction Size Glass fiber market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns. Source: Fiber Economics Bureau
Slide 32: Positioned to Compete Anywhere in the World
Positioned to Compete Anywhere in the World World headquarters #1 Position Emerging Position Composites facilities Europe China 28% 26% 23% 11% % Market % OC % Market % OC Revenue Revenue Revenue Revenue #1 Position #1 Position Americas Rest of World 47% 33% 18% 14% % Market % OC % Market % OC Reven
Slide 33: Expect Continued Supply Tension
Expect Continued Supply Tension China Emergence Tightening Capacity Supply Tension Capacity Overbuild Price Inflection Improved Returns '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17E '18E '19E 100% 1.8 1.7 90% Threshold Estimated Capacity Utilization 90% Change in global demand (MM T) 80% 0.9
Slide 34: Agenda
Agenda The Company Investment Thesis Three Strong Businesses Additional Financial Information
Slide 35: 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: $64MM EBIT; 11% EBIT margins Return
Slide 36: Key Financial Data - Corporate
Appendix A Key Financial Data - Corporate ($ in millions, except per share Q3 Q3 YTD YTD data) 2017 2016 2017 2016 Net sales $1,703 $1,518 $4,778 $4,294 Net earnings attributable to Owens Corning $96 $112 $293 $307 Diluted earnings per share (EPS) attributable to Owens Corning common $0.85 $0.97 $2.
Slide 37: Key Financial Data - Business
Appendix A Key Financial Data - Business Insulation Roofing Composites ($ 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 Source: Owens Corning SE
Slide 38: Non-GAAP Reconciliations – Table
Appendix B Non-GAAP Reconciliations – Table 1 38
Slide 39: Non-GAAP Reconciliations – Table
Appendix B Non-GAAP Reconciliations – Table 2 39
Slide 40: Non-GAAP Reconciliations – Table
Appendix B Non-GAAP Reconciliations – Table 3 40
Slide 41: Non-GAAP Reconciliations – Table
Appendix B Non-GAAP Reconciliations – Table 4 41
Slide 42: Non-GAAP Reconciliations – Table
Appendix B Non-GAAP Reconciliations – Table 5 42
Slide 43: Non-GAAP Reconciliations – Table
Appendix B Non-GAAP Reconciliations – Table 6 43
Slide 44: Non-GAAP Reconciliations – Table
Appendix B Non-GAAP Reconciliations – Table 7 44