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2012 12 07 key banc nyc roadshow

Owens Corning hosted an investor visit to discuss positioning for growth. The company maintains a goal of $1 billion in adjusted EBITDA at 1 million US housing starts. The composites business leads in an attractive growth industry, while roofing and insulation are positioned to grow with market recovery in the US housing sector. Insulation has returned to profitability and can achieve over $100 million EBIT at 1 million housing starts. Roofing fundamentals remain attractive despite near-term weakness, and the industry structure is favorable.

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Owens Corning Positioned for Growth Investor Visits Hosted by KeyBanc December 7, 2012 New York City, NY Arnaud Genis Thierry Denis President Composites Business Director Investor Relations
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 meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are any statements that are not historical facts, and they are based upon the Company’s current expectations. Because forward-looking statements involve risks and uncertainties, the Company’s actual results could differ materially from those projected in these statements. Information regarding some of the risks and uncertainties that could cause such differences can be found in the Company’s Securities and Exchange Commission (“SEC”) filings, including under Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. For purposes of this presentation, any discussion referring to “year to date” or last twelve months (“LTM”) refers to the period ended September 30, 2012. Otherwise the information in this presentation speaks as of December 7, 2012, and is subject to change. The Company does not undertake any duty to update or revise forward-looking statements. Any distribution of this presentation after December 7, 2012 is not intended and will not be construed as updating or confirming such information. This presentation contains references to certain "non-GAAP financial measures" as defined by the SEC. A reconciliation of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles can be found in our Current Report on Form 8-K furnished to the SEC on October 24, 2012. This Form 8-K and additional Company information is available on the Owens Corning website: www.owenscorning.com. Free cash flow is the change in net debt excluding the cash impact of issuing new stock, repurchasing treasury stock, and paying stockholder dividends. Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, net precious metal lease expense, and other items that management does not allocate to our segment results because it believes they are not a result of the Company’s current operations. THE PINK PANTHER™ © 1964-2012 Metro-Goldwyn-Mayer Studios Inc. All Rights Reserved. The color PINK is a registered trademark of Owens Corning. © 2012 Owens Corning. 2
Owens Corning at a Glance  Founded in 1938, an industry leader in glass fiber insulation, roofing and glass fiber reinforcements  2011 sales: $5.3 billion  15,000 employees in 28 countries  Fortune 500 company for 58 consecutive years  Component of Dow Jones Sustainability World Index  Three powerful businesses, three valuable franchises – Insulation – Roofing – Composites 3
Investment Highlights • Owens Corning maintains its goal of $1 billion of adjusted EBITDA at 1 million annual U.S. housing starts and continuing global economic growth • Free cash flow conversion of adjusted net earnings expected to be very high (up to 100% on average) over next five years • The Composites business is the leader in an attractive growth industry • The Roofing business is positioned for growth as the U.S. housing market recovers • The Insulation business is a proven franchise prepared to return to historic margins 4
Strong Portfolio Positioned for Growth ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 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 Owens Corning’s SEC filings, internal management reports, and management estimates 5
Insulation Business Q3 2012 Highlights $ (in millions) Q3 2012 Q3 2011 YTD YTD 2012 2011  Insulation delivered first profitable quarter in four years Net sales* $384 $365 $1,055 $981  Demonstrated operating leverage of over 60% EBIT $3 $(12) $(47) $(97) year-to-date EBIT as % of 1% (3)% (4)% (10)% sales D&A $28 $30 $80 $89 * before inter-segment eliminations Q3 2012 Revenue by End Market* Five-Year Financial Performance $2,000 10% U.S. & Canada New Residential Construction $1,500 5% 36% International $1,000 0% 20% U.S .& Canada Residential Repair $500 -5% & Remodeling U.S. & Canada 20% Commercial & Industrial $0 -10% 24% 2008 2009 2010 2011 LTM Sales* EBIT as % of sales *Owens Corning management estimates *In millions Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time 6
Positioned to Grow with Our Markets Insulation End-Use Expected Market Revenue CAGR Markets % of 2011 Revenue Growth Drivers 2011 – 2014 U.S. & Canada  Housing starts Residential New Building energy code adoption  10-25% Construction 34%  Household formation U.S. & Canada  Aging housing stock Repair & Remodel > 5% 22%  Energy efficiency policies U.S. & Canada  Code and “green” Commercial specification driven 5-10% & Industrial 24%  Owner operator focus  Growing middle class Latin America & Asia Pacific  Infrastructure improvements 5-10% 20%  Urbanization of China Expect Double-Digit Revenue Growth as Market Recovers Source: Owens Corning management estimates 7
Energy Codes Residential Energy Productivity 2009 – 49% Built to 2006 Code 150% 2012 – Expect 75% Built to 2009 Code 2015 – Expect 32% Build to 2012 Code Energy Efficiency Improvement (%) 100% 50% 0% no code 1987 2006 2009 2012 2015 Year of IECC IECC IECC IECC Code Goal Acceleration of Code Adoption 2006-2015 Drives Demand for Insulation Products Sources: Pacific Northwest National Laboratory, and Owens Corning management estimates IECC – International Energy Conservation Code 8
Code Changes Support Increased Glass Fiber Demand Indexed Fiberglass Insulation Use 1.5 Potential demand if 2012 codes are adopted by all states Demand at forecasted code adoption level 1 0.5 2005 2012 2016 Multi-family mix 17% 30-35% 20-25% Single family home size (SF) 2,462 2,400-2,500 ~2,500 % Owner/Contractor built* 19% ~27% 20-25% Further Code Adoption and Positive Mix Trends Drive Growth of 20% or More Over the Next Four Years * US Census Bureau Sources: North American Home Builders; US Census Bureau; Owens Corning management estimates 9
Owens Corning Insulation North American Fiberglass Network Edmonton Current Status: All lines operating Candiac Some lines down Toronto Facility mothballed Delmar Salt Lake City Mt. Vernon Kansas City Newark Nephi Santa Clara Network Management Eloy  Optimize capacity Waxahachie footprint for low cost, Fairburn best service Lakeland  Quick startup capability Ready to Serve as Markets Return to Their Potential Capacity utilization based on 2012 estimate at 700,000 U.S. starts, light density insulation Source: Owens Corning management estimates 10
Insulation Industry North American Fiberglass 2012 Industry Capacity Utilization 100% 90% 80% 70% 70% 60% 60% 50% 50% 40% 30% 20% 10% 0% Total Capacity Operating Plant Operating Lines Continued Focus on Cost Takeout and Managing Our Capacity with Demand Regionally Capacity utilization based on 2012 estimate at 700,000 U.S. starts, light-density insulation Source: Owens Corning management estimates 11
Owens Corning Insulation A Proven Franchise 30% % EBIT Avg % EBIT (15%) Well positioned to return to 20% historical margins  Improved cost and efficiency 10%  Code adoption 0%  Expected U.S. housing improvement -10% '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 Historically Delivered 15% EBIT Margins at 1.5 Million Housing Starts Source: Owens Corning management estimates and Owens Corning SEC filings, comparability may differ over time 12
Insulation Prepared for Growth and Return to Profitability • The leading market position in North American residential fiberglass insulation – Favorable industry structure • Positive demographics and code adoption drive market growth • Positioned to deliver $100 million or more of EBIT at one million annual U.S. housing starts • Anticipate EBIT margins of at least 15% at 1.5 million annual U.S. housing starts Positioned to Capitalize on Growth Source: Owens Corning management estimates, Energy Information Administration, U.S. Census Bureau average single- and multi-family housing starts from 1959-2009 13
Roofing Business Q3 2012 Highlights $ (in millions) Q3 2012 Q3 2011 YTD YTD 2012 2011  Near-term weakness in Roofing market Net sales* $471 $644 $1,664 $1,785  Achieved sequential price improvement  Fundamental industry structure and market drivers EBIT $83 $156 $289 $374 remain attractive EBIT as % of 18% 24% 17% 21% sales D&A $10 $10 $28 $31 * before inter-segment eliminations Q3 2012 Revenue by End Market* Five-Year Financial Performance $2,400 30% $2,000 25% $1,600 20% U.S. & Canada Residential Repair $1,200 15% & Remodeling U.S. & Canada 75% Commercial $800 10% & Industrial 15% $400 5% U.S. & Canada New Residential $0 0% Construction 10% 2008 2009 2010 2011 LTM Sales* EBIT as % of sales *Owens Corning management estimates *In millions Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time 14
U.S. Asphalt Shingle Industry Consolidation ’70s ’80s ’90s Current OC OC OC OC FRY GAF GAF GAF/ELK GAF ELK ELK CERTAINTEED ELK CERTAINTEED CERTAINTEED TAMKO CERTAINTEED TAMKO TAMKO TAMKO CELOTEX CELOTEX CELOTEX MANVILLE IKO MANVILLE IKO ATLAS IKO IKO BIRD GEORGIA PACIFIC ATLAS BIRD ATLAS GS ROOFING PABCO ATLAS GEORGIA PACIFIC MALARKEY GEORGIA PACIFIC GENSTAR GLOBE FLINTKOTE GLOBE PABCO GLOBE MALARKEY PABCO PABCO MALARKEY MALARKEY LUNDAY THAGARD LUNDAY THAGARD CUSTOM ROOFING CUSTOM ROOFING BIG CHIEF BEAR PHILIP CAREY Top 90% 16 13 10 4 Total 21 17 13 8 Favorable Industry Structure for the Future Source: Owens Corning management estimates and various industry sources and publications 15
U.S. Asphalt Shingle Market Improved Housing Supports Demand Growth New Construction Re-roof Major Storms Total Existing Home Sales CAGR 180 + 3% - 6% 7.5 8 8 18 7 5 3 3 2 8 3 3 22 3 16 19 5,276 5.3 6 Squares (millions) Homes (millions) 104 106 107 103 109 110 113 116 116 112 100 96 93 91 92 105 33 33 32 34 37 39 35 30 30 31 26 27 17 11 11 11 0- -0.0 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 15 Yr. Avg Total 137 144 143 136 143 144 154 161 173 155 129 135 120 108 122 140 Recovery to 15-Year Average Represents a 30% Increase in Non-Storm Demand Source: ARMA data through Q4 2011, National Association of Realtors existing home sales and Owens Corning management estimates 16
Positioned for Growth  Great business in a well-structured industry  Asphalt shingle market growing 5-8% (over the next 3-5 years on non-storm demand) driven by improving U.S. housing activity  Continued improvements in shingle design, cost and mix  Confidence in operating margins of mid-teens or better Strong Business Performance with Market Growth Opportunities 17
Composites Segment Q3 2012 Highlights $ (in millions) Q3 2012 Q3 2011 YTD YTD 2012 2011  Delivered $11 million of EBIT on softer demand and higher manufacturing costs Net sales* $459 $496 $1,433 $1,517  Initiated further actions to bring inventories in-line EBIT $11 $49 $68 $152 by year end EBIT as % of  Asset repositioning substantially complete; will 2% 10% 5% 10% sales deliver benefits in 2013 D&A $30 $31 $91 $97 * before inter-segment eliminations Q3 2012 Revenue by End Market* Five-Year Financial Performance U.S. & Canada $2,400 15% New Residential Construction 2% U.S. & Canada $1,800 10% Residential Repair & Remodeling 9% $1,200 5% International 61% U.S. & Canada $600 0% Commercial & Industrial 28% $0 -5% 2008 2009 2010 2011 LTM Sales* EBIT as % of sales *Owens Corning management estimates *In millions Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time 18
Owens Corning Composites The Market Leader  Discovered and commercialized glass fibers  Instrumental in proliferating use of composite materials  Innovation leader in the glass fiber industry  First mover in key emerging economies  Led industry consolidation Fibers Technical Fabrics Engineered Mats Undisputed Leader in Composites Utilizing Glass Reinforcements 19
Glass Fiber A $7 Billion Global Market • Appliances • Residential • Electronics Wind • Commercial • Recreation 8% • Water transportation Consumer & storage 11% Construction 32% Industrial 21% Transportation 28% • Factories • Cars • Mining • Trucks, buses, trains • Offshore platforms • Marine A Key Material Enabling Solutions Essential to Everyday Life Glass reinforcements market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns Source: Owens Corning management estimates 20
Glass Fiber Market Demand 30 Years Averaging 5% CAGR 5000 5% Demand Growth Driven by 3% Industrial Production Growth 4000 Glass Fiber K Tons 3000 2000 1000 0 1981 1986 1991 1996 2001 2006 2011 Sustained Growth Led by Global Industrial Production and Material Substitution Glass fiber market demand excludes E-glass yarns Sources: Fiber economic bureau, Glass Fiber Europe, Global Trade information Services, inc. and Owens Corning management estimates 21
Glass Fiber Growth: Driven by Global Industrial Production Global Glass Fiber Demand vs. Industrial Production  Excellent 30-year correlation 1981-2011 4000 4000  Glass fiber / industrial production growth multiple: Glass Fiber Market (Ktons) 3000 3000 Log Basis – 30-year average: 1.6 2000 2000 – Any 10-year period: 1.3-1.7* 1500 1500 – Any 5-year period: 1.0-2.0* 1000 1000 50 50 60 60 70 70 80 80 90 90 100 100 110 110 Industrial Production Indexed: 2005=100 Log Basis Global Glass Fiber Demand Grows at 1.6 Multiple of Industrial Production Growth *75% confidence interval; “excellent correlation” defined as >95% R2 Source: IHS Global Insight, Fiber Economic Bureau, Glass Fiber Europe, Global Trade Information Services, Inc. and Owens Corning management estimates 22
Global Glass Fiber Growth vs. Other Materials Materials Growth as a Multiple of Change in Industrial Production 3.7 1.6 1.2 0.8 0 Wood Steel Aluminum Glass Fiber Carbon Fiber Global Market Size 26 111 14 1 0.1 (Indexed to Glass Fiber) Glass Fiber Growing as a Substitute for Traditional Materials Growth multiples over 1981-2011, except carbon fiber which is 1990-2011. Global market sizes estimated in revenue USD as of 2011 Source: IHS Global Insight, Owens Corning management estimates, World Steel Association, Food and Agriculture Association of the United Nations, U.S. Geological Service 23
Market Trends Favor Owens Corning Low-Cost Global Network Change In Capacity China vs. U.S. inflation Available For Export* 300 US PPI China PPI (USD basis) 240 250 220 Glass Fiber K Tons 200 200 150 180 100 160 50 140 0 120 -50 100 -100 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Chinese Export Competitiveness Eroding * Chinese manufacturers, defined as CPIC, Jushi and Taishan, estimated capacity available for export Sources: IHS Global Insight, Owens Corning management estimates as of Feb 2012 24
Industry Structure Transformation Market Supply Demand Outside China Served by Chinese Manufacturers 25% 20% 15% 10% 5% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 China Exports Have Stabilized After Rapid Growth Source: Fiber Economic Bureau, Glass Fiber Europe, Global Trade Information Services, Inc. and Owens Corning management estimates Chinese Manufactures defined as CPIC, Jushi and Taishan 25
Owens Corning Composites Positioned to Win Emerging Position #1 Position China EMEA 32% 30% 24% 8% % Market % OC % Market % OC Revenue Revenue Revenue Revenue #1 Position #1 Position OC glass fiber manufacturing site Americas OC downstream fabrication site Other Asia 45% 28% 16% 17% % Market % OC % Market % OC Revenue Revenue Revenue Revenue Leading Market Positions and an Unrivaled Supply Network % Market Revenue = market revenue in region as % of global market size Sources: Owens Corning management estimates % OC Revenue = OC revenue in region as % of OC Composites global 2011 sales Definitions: EMEA: Europe, Middle East, Africa Glass reinforcements market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns 26
A Winning Business Owens Corning Global Capacity Percentage of Low Delivered Cost * Assets 75% 50% 30% 2007 2011 Mid-2010s Operating 7% 10% Mid-teens Margins Business Growing in an Attractive Market Driving Margins to Mid-Teens *Low delivered cost asset defined as delivered cost in the region at or below best competitive benchmark, glass fiber manufacturing Source: Owens Corning management estimates 27
Europe Creating a Sustainable Business 2011 OC Composites in Europe  An attractive market where Owens Corning has #1 share position  Restructuring the business in a European down cycle OC glass fiber manufacturing site – Consolidating assets representing 5% of OC downstream fabrication site global Owens Corning high-cost capacity ($130 million charge over 2012-13) OC Europe Capacity Percentage of Low – Operating remaining assets at high utilization Delivered Cost * Assets – Expanding low-cost platform in Russia 70% – Supporting Europe with low-cost global 10% network 2011 Post-restructure 2011 2013 Proliferating a Successful Business Model from Americas to Europe *Low delivered cost asset defined as delivered cost in the region at or below best competitive benchmark, glass fiber manufacturing Source: Owens Corning management estimates 28
Owens Corning Composites A Winning Business  Global megatrends, continued growth in industrial production, and ongoing material substitution support glass fiber market growth at a 5- 7% CAGR  Industry structure, inflation and currency trends favor Owens Corning’s global network  Proliferating proven low delivered cost model to further improve competitive position  Composites actions and strategy underpin mid-teen margins over the next three to five years Business Growing in an Attractive Market – Driving Margins to Mid-Teens Source: Owens Corning management estimates Low delivered cost asset defined as delivered cost in the region at or below best competitive benchmark, glass fiber manufacturing 29
Sustaining a Strong Balance Sheet  Maintaining investment-grade financial strength is a pillar of Owens Corning’s strategy  Earned investment-grade credit ratings from Standard & Poor's and Fitch  $800 million revolving credit facility maturing in 2016  $250 million accounts receivable facility, which matures in 2014  $1.8 billion senior notes outstanding with 2016, 2019, 2022 and 2036 maturities  Sustaining ample liquidity to support growth – No public debt maturity until 2016 – Plenty of headroom with respect to covenants  Capital markets remain open to Owens Corning 30
Tax Position is a Significant Asset  Benefit from $2.2 billion NOL with estimated present value of approximately $5 per share  Expect long-term book tax rate of 25% to 28% based on geographic mix of earnings and tax planning  Expect cash tax rate of 10% or less over the next few years Source: Owens Corning management estimates 31
Disciplined Capital Allocation Strategy  Drive shareholder returns by enabling organic growth and supporting the balance sheet  Maintain capital allocation strategy – Current debt level is appropriate – Pursuing attractive organic investment opportunities – Seeking acquisitions that add value to shareholders – Share buy-back: 10 million shares available for repurchase as of September 30, 2012  Continue to consider a dividend when U.S. housing recovers and Insulation returns to profitability 32
Key Financial Data ($ in millions, except per share data) Q3 2012 Q3 2011 YTD 2012 YTD 2011 Net sales $1,276 $1,450 $4,013 $4,139 Net earnings attributable to Owens Corning $44 $124 $37 $226 Diluted earnings per share attributable to Owens $0.37 $1.01 $0.31 $1.82 Corning common stockholders Earnings before interest and taxes (EBIT) $59 $177 $132 $373 Adjusted EBIT $81 $177 $241 $373 Adjusted Earnings $39 $110 $115 $216 Adjusted EPS (diluted) $0.33 $0.90 $0.95 $1.74 Adjusted EBIT as a % of sales 6% 12% 6% 9% Marketing and administrative expenses $115 $119 $380 $395 Depreciation and amortization $89 $78 $269 $243 Cash flow provided by operating activities $133 $193 $93 $59 Total debt (excluding rate swap), net of cash $2,131 $1,962 $2,131 $1,962 33
Mid-Term Guidance Mid-Term Mid-Term Mid-Term Top-Line Drivers Market Growth Financial Guidance Insulation  Housing starts  U.S. market to return  $100 million EBIT or  Code implementation to historic levels more at 1 million  Geographic growth starts Roofing  Existing home sales  5-8% CAGR in  Mid-teens or better  Storm activity non-storm demand EBIT margins Composites  Industrial production  5-7% historical  Growth to mid-teen average annual EBIT margins global market growth Source: ARMA, IHS Global Insights, U.S Fiber Economic Board, Glassfibre Europe, Moody’s and Owens Corning management estimates 34

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2012 12 07 key banc nyc roadshow

  • 1.
    Owens Corning Positioned for Growth Investor Visits Hosted by KeyBanc December 7, 2012 New York City, NY Arnaud Genis Thierry Denis President Composites Business Director Investor Relations
  • 2.
    Forward-Looking Statements and Non-GAAPMeasures 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 meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are any statements that are not historical facts, and they are based upon the Company’s current expectations. Because forward-looking statements involve risks and uncertainties, the Company’s actual results could differ materially from those projected in these statements. Information regarding some of the risks and uncertainties that could cause such differences can be found in the Company’s Securities and Exchange Commission (“SEC”) filings, including under Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. For purposes of this presentation, any discussion referring to “year to date” or last twelve months (“LTM”) refers to the period ended September 30, 2012. Otherwise the information in this presentation speaks as of December 7, 2012, and is subject to change. The Company does not undertake any duty to update or revise forward-looking statements. Any distribution of this presentation after December 7, 2012 is not intended and will not be construed as updating or confirming such information. This presentation contains references to certain "non-GAAP financial measures" as defined by the SEC. A reconciliation of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles can be found in our Current Report on Form 8-K furnished to the SEC on October 24, 2012. This Form 8-K and additional Company information is available on the Owens Corning website: www.owenscorning.com. Free cash flow is the change in net debt excluding the cash impact of issuing new stock, repurchasing treasury stock, and paying stockholder dividends. Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, net precious metal lease expense, and other items that management does not allocate to our segment results because it believes they are not a result of the Company’s current operations. THE PINK PANTHER™ © 1964-2012 Metro-Goldwyn-Mayer Studios Inc. All Rights Reserved. The color PINK is a registered trademark of Owens Corning. © 2012 Owens Corning. 2
  • 3.
    Owens Corning ata Glance  Founded in 1938, an industry leader in glass fiber insulation, roofing and glass fiber reinforcements  2011 sales: $5.3 billion  15,000 employees in 28 countries  Fortune 500 company for 58 consecutive years  Component of Dow Jones Sustainability World Index  Three powerful businesses, three valuable franchises – Insulation – Roofing – Composites 3
  • 4.
    Investment Highlights • OwensCorning maintains its goal of $1 billion of adjusted EBITDA at 1 million annual U.S. housing starts and continuing global economic growth • Free cash flow conversion of adjusted net earnings expected to be very high (up to 100% on average) over next five years • The Composites business is the leader in an attractive growth industry • The Roofing business is positioned for growth as the U.S. housing market recovers • The Insulation business is a proven franchise prepared to return to historic margins 4
  • 5.
    Strong Portfolio Positioned for Growth ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 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 Owens Corning’s SEC filings, internal management reports, and management estimates 5
  • 6.
    Insulation Business Q3 2012 Highlights $ (in millions) Q3 2012 Q3 2011 YTD YTD 2012 2011  Insulation delivered first profitable quarter in four years Net sales* $384 $365 $1,055 $981  Demonstrated operating leverage of over 60% EBIT $3 $(12) $(47) $(97) year-to-date EBIT as % of 1% (3)% (4)% (10)% sales D&A $28 $30 $80 $89 * before inter-segment eliminations Q3 2012 Revenue by End Market* Five-Year Financial Performance $2,000 10% U.S. & Canada New Residential Construction $1,500 5% 36% International $1,000 0% 20% U.S .& Canada Residential Repair $500 -5% & Remodeling U.S. & Canada 20% Commercial & Industrial $0 -10% 24% 2008 2009 2010 2011 LTM Sales* EBIT as % of sales *Owens Corning management estimates *In millions Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time 6
  • 7.
    Positioned to Growwith Our Markets Insulation End-Use Expected Market Revenue CAGR Markets % of 2011 Revenue Growth Drivers 2011 – 2014 U.S. & Canada  Housing starts Residential New Building energy code adoption  10-25% Construction 34%  Household formation U.S. & Canada  Aging housing stock Repair & Remodel > 5% 22%  Energy efficiency policies U.S. & Canada  Code and “green” Commercial specification driven 5-10% & Industrial 24%  Owner operator focus  Growing middle class Latin America & Asia Pacific  Infrastructure improvements 5-10% 20%  Urbanization of China Expect Double-Digit Revenue Growth as Market Recovers Source: Owens Corning management estimates 7
  • 8.
    Energy Codes Residential Energy Productivity 2009 – 49% Built to 2006 Code 150% 2012 – Expect 75% Built to 2009 Code 2015 – Expect 32% Build to 2012 Code Energy Efficiency Improvement (%) 100% 50% 0% no code 1987 2006 2009 2012 2015 Year of IECC IECC IECC IECC Code Goal Acceleration of Code Adoption 2006-2015 Drives Demand for Insulation Products Sources: Pacific Northwest National Laboratory, and Owens Corning management estimates IECC – International Energy Conservation Code 8
  • 9.
    Code Changes Support Increased Glass Fiber Demand Indexed Fiberglass Insulation Use 1.5 Potential demand if 2012 codes are adopted by all states Demand at forecasted code adoption level 1 0.5 2005 2012 2016 Multi-family mix 17% 30-35% 20-25% Single family home size (SF) 2,462 2,400-2,500 ~2,500 % Owner/Contractor built* 19% ~27% 20-25% Further Code Adoption and Positive Mix Trends Drive Growth of 20% or More Over the Next Four Years * US Census Bureau Sources: North American Home Builders; US Census Bureau; Owens Corning management estimates 9
  • 10.
    Owens Corning Insulation North American Fiberglass Network Edmonton Current Status: All lines operating Candiac Some lines down Toronto Facility mothballed Delmar Salt Lake City Mt. Vernon Kansas City Newark Nephi Santa Clara Network Management Eloy  Optimize capacity Waxahachie footprint for low cost, Fairburn best service Lakeland  Quick startup capability Ready to Serve as Markets Return to Their Potential Capacity utilization based on 2012 estimate at 700,000 U.S. starts, light density insulation Source: Owens Corning management estimates 10
  • 11.
    Insulation Industry North American Fiberglass 2012 Industry Capacity Utilization 100% 90% 80% 70% 70% 60% 60% 50% 50% 40% 30% 20% 10% 0% Total Capacity Operating Plant Operating Lines Continued Focus on Cost Takeout and Managing Our Capacity with Demand Regionally Capacity utilization based on 2012 estimate at 700,000 U.S. starts, light-density insulation Source: Owens Corning management estimates 11
  • 12.
    Owens Corning Insulation A Proven Franchise 30% % EBIT Avg % EBIT (15%) Well positioned to return to 20% historical margins  Improved cost and efficiency 10%  Code adoption 0%  Expected U.S. housing improvement -10% '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 Historically Delivered 15% EBIT Margins at 1.5 Million Housing Starts Source: Owens Corning management estimates and Owens Corning SEC filings, comparability may differ over time 12
  • 13.
    Insulation Prepared forGrowth and Return to Profitability • The leading market position in North American residential fiberglass insulation – Favorable industry structure • Positive demographics and code adoption drive market growth • Positioned to deliver $100 million or more of EBIT at one million annual U.S. housing starts • Anticipate EBIT margins of at least 15% at 1.5 million annual U.S. housing starts Positioned to Capitalize on Growth Source: Owens Corning management estimates, Energy Information Administration, U.S. Census Bureau average single- and multi-family housing starts from 1959-2009 13
  • 14.
    Roofing Business Q3 2012 Highlights $ (in millions) Q3 2012 Q3 2011 YTD YTD 2012 2011  Near-term weakness in Roofing market Net sales* $471 $644 $1,664 $1,785  Achieved sequential price improvement  Fundamental industry structure and market drivers EBIT $83 $156 $289 $374 remain attractive EBIT as % of 18% 24% 17% 21% sales D&A $10 $10 $28 $31 * before inter-segment eliminations Q3 2012 Revenue by End Market* Five-Year Financial Performance $2,400 30% $2,000 25% $1,600 20% U.S. & Canada Residential Repair $1,200 15% & Remodeling U.S. & Canada 75% Commercial $800 10% & Industrial 15% $400 5% U.S. & Canada New Residential $0 0% Construction 10% 2008 2009 2010 2011 LTM Sales* EBIT as % of sales *Owens Corning management estimates *In millions Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time 14
  • 15.
    U.S. Asphalt ShingleIndustry Consolidation ’70s ’80s ’90s Current OC OC OC OC FRY GAF GAF GAF/ELK GAF ELK ELK CERTAINTEED ELK CERTAINTEED CERTAINTEED TAMKO CERTAINTEED TAMKO TAMKO TAMKO CELOTEX CELOTEX CELOTEX MANVILLE IKO MANVILLE IKO ATLAS IKO IKO BIRD GEORGIA PACIFIC ATLAS BIRD ATLAS GS ROOFING PABCO ATLAS GEORGIA PACIFIC MALARKEY GEORGIA PACIFIC GENSTAR GLOBE FLINTKOTE GLOBE PABCO GLOBE MALARKEY PABCO PABCO MALARKEY MALARKEY LUNDAY THAGARD LUNDAY THAGARD CUSTOM ROOFING CUSTOM ROOFING BIG CHIEF BEAR PHILIP CAREY Top 90% 16 13 10 4 Total 21 17 13 8 Favorable Industry Structure for the Future Source: Owens Corning management estimates and various industry sources and publications 15
  • 16.
    U.S. Asphalt ShingleMarket Improved Housing Supports Demand Growth New Construction Re-roof Major Storms Total Existing Home Sales CAGR 180 + 3% - 6% 7.5 8 8 18 7 5 3 3 2 8 3 3 22 3 16 19 5,276 5.3 6 Squares (millions) Homes (millions) 104 106 107 103 109 110 113 116 116 112 100 96 93 91 92 105 33 33 32 34 37 39 35 30 30 31 26 27 17 11 11 11 0- -0.0 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 15 Yr. Avg Total 137 144 143 136 143 144 154 161 173 155 129 135 120 108 122 140 Recovery to 15-Year Average Represents a 30% Increase in Non-Storm Demand Source: ARMA data through Q4 2011, National Association of Realtors existing home sales and Owens Corning management estimates 16
  • 17.
    Positioned for Growth  Great business in a well-structured industry  Asphalt shingle market growing 5-8% (over the next 3-5 years on non-storm demand) driven by improving U.S. housing activity  Continued improvements in shingle design, cost and mix  Confidence in operating margins of mid-teens or better Strong Business Performance with Market Growth Opportunities 17
  • 18.
    Composites Segment Q3 2012 Highlights $ (in millions) Q3 2012 Q3 2011 YTD YTD 2012 2011  Delivered $11 million of EBIT on softer demand and higher manufacturing costs Net sales* $459 $496 $1,433 $1,517  Initiated further actions to bring inventories in-line EBIT $11 $49 $68 $152 by year end EBIT as % of  Asset repositioning substantially complete; will 2% 10% 5% 10% sales deliver benefits in 2013 D&A $30 $31 $91 $97 * before inter-segment eliminations Q3 2012 Revenue by End Market* Five-Year Financial Performance U.S. & Canada $2,400 15% New Residential Construction 2% U.S. & Canada $1,800 10% Residential Repair & Remodeling 9% $1,200 5% International 61% U.S. & Canada $600 0% Commercial & Industrial 28% $0 -5% 2008 2009 2010 2011 LTM Sales* EBIT as % of sales *Owens Corning management estimates *In millions Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time 18
  • 19.
    Owens Corning Composites TheMarket Leader  Discovered and commercialized glass fibers  Instrumental in proliferating use of composite materials  Innovation leader in the glass fiber industry  First mover in key emerging economies  Led industry consolidation Fibers Technical Fabrics Engineered Mats Undisputed Leader in Composites Utilizing Glass Reinforcements 19
  • 20.
    Glass Fiber A $7 Billion Global Market • Appliances • Residential • Electronics Wind • Commercial • Recreation 8% • Water transportation Consumer & storage 11% Construction 32% Industrial 21% Transportation 28% • Factories • Cars • Mining • Trucks, buses, trains • Offshore platforms • Marine A Key Material Enabling Solutions Essential to Everyday Life Glass reinforcements market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns Source: Owens Corning management estimates 20
  • 21.
    Glass Fiber MarketDemand 30 Years Averaging 5% CAGR 5000 5% Demand Growth Driven by 3% Industrial Production Growth 4000 Glass Fiber K Tons 3000 2000 1000 0 1981 1986 1991 1996 2001 2006 2011 Sustained Growth Led by Global Industrial Production and Material Substitution Glass fiber market demand excludes E-glass yarns Sources: Fiber economic bureau, Glass Fiber Europe, Global Trade information Services, inc. and Owens Corning management estimates 21
  • 22.
    Glass Fiber Growth: Driven by Global Industrial Production Global Glass Fiber Demand vs. Industrial Production  Excellent 30-year correlation 1981-2011 4000 4000  Glass fiber / industrial production growth multiple: Glass Fiber Market (Ktons) 3000 3000 Log Basis – 30-year average: 1.6 2000 2000 – Any 10-year period: 1.3-1.7* 1500 1500 – Any 5-year period: 1.0-2.0* 1000 1000 50 50 60 60 70 70 80 80 90 90 100 100 110 110 Industrial Production Indexed: 2005=100 Log Basis Global Glass Fiber Demand Grows at 1.6 Multiple of Industrial Production Growth *75% confidence interval; “excellent correlation” defined as >95% R2 Source: IHS Global Insight, Fiber Economic Bureau, Glass Fiber Europe, Global Trade Information Services, Inc. and Owens Corning management estimates 22
  • 23.
    Global Glass FiberGrowth vs. Other Materials Materials Growth as a Multiple of Change in Industrial Production 3.7 1.6 1.2 0.8 0 Wood Steel Aluminum Glass Fiber Carbon Fiber Global Market Size 26 111 14 1 0.1 (Indexed to Glass Fiber) Glass Fiber Growing as a Substitute for Traditional Materials Growth multiples over 1981-2011, except carbon fiber which is 1990-2011. Global market sizes estimated in revenue USD as of 2011 Source: IHS Global Insight, Owens Corning management estimates, World Steel Association, Food and Agriculture Association of the United Nations, U.S. Geological Service 23
  • 24.
    Market Trends FavorOwens Corning Low-Cost Global Network Change In Capacity China vs. U.S. inflation Available For Export* 300 US PPI China PPI (USD basis) 240 250 220 Glass Fiber K Tons 200 200 150 180 100 160 50 140 0 120 -50 100 -100 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Chinese Export Competitiveness Eroding * Chinese manufacturers, defined as CPIC, Jushi and Taishan, estimated capacity available for export Sources: IHS Global Insight, Owens Corning management estimates as of Feb 2012 24
  • 25.
    Industry Structure Transformation Market Supply Demand Outside China Served by Chinese Manufacturers 25% 20% 15% 10% 5% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 China Exports Have Stabilized After Rapid Growth Source: Fiber Economic Bureau, Glass Fiber Europe, Global Trade Information Services, Inc. and Owens Corning management estimates Chinese Manufactures defined as CPIC, Jushi and Taishan 25
  • 26.
    Owens Corning Composites Positioned to Win Emerging Position #1 Position China EMEA 32% 30% 24% 8% % Market % OC % Market % OC Revenue Revenue Revenue Revenue #1 Position #1 Position OC glass fiber manufacturing site Americas OC downstream fabrication site Other Asia 45% 28% 16% 17% % Market % OC % Market % OC Revenue Revenue Revenue Revenue Leading Market Positions and an Unrivaled Supply Network % Market Revenue = market revenue in region as % of global market size Sources: Owens Corning management estimates % OC Revenue = OC revenue in region as % of OC Composites global 2011 sales Definitions: EMEA: Europe, Middle East, Africa Glass reinforcements market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns 26
  • 27.
    A Winning Business Owens Corning Global Capacity Percentage of Low Delivered Cost * Assets 75% 50% 30% 2007 2011 Mid-2010s Operating 7% 10% Mid-teens Margins Business Growing in an Attractive Market Driving Margins to Mid-Teens *Low delivered cost asset defined as delivered cost in the region at or below best competitive benchmark, glass fiber manufacturing Source: Owens Corning management estimates 27
  • 28.
    Europe Creating a Sustainable Business 2011 OC Composites in Europe  An attractive market where Owens Corning has #1 share position  Restructuring the business in a European down cycle OC glass fiber manufacturing site – Consolidating assets representing 5% of OC downstream fabrication site global Owens Corning high-cost capacity ($130 million charge over 2012-13) OC Europe Capacity Percentage of Low – Operating remaining assets at high utilization Delivered Cost * Assets – Expanding low-cost platform in Russia 70% – Supporting Europe with low-cost global 10% network 2011 Post-restructure 2011 2013 Proliferating a Successful Business Model from Americas to Europe *Low delivered cost asset defined as delivered cost in the region at or below best competitive benchmark, glass fiber manufacturing Source: Owens Corning management estimates 28
  • 29.
    Owens Corning Composites A Winning Business  Global megatrends, continued growth in industrial production, and ongoing material substitution support glass fiber market growth at a 5- 7% CAGR  Industry structure, inflation and currency trends favor Owens Corning’s global network  Proliferating proven low delivered cost model to further improve competitive position  Composites actions and strategy underpin mid-teen margins over the next three to five years Business Growing in an Attractive Market – Driving Margins to Mid-Teens Source: Owens Corning management estimates Low delivered cost asset defined as delivered cost in the region at or below best competitive benchmark, glass fiber manufacturing 29
  • 30.
    Sustaining a StrongBalance Sheet  Maintaining investment-grade financial strength is a pillar of Owens Corning’s strategy  Earned investment-grade credit ratings from Standard & Poor's and Fitch  $800 million revolving credit facility maturing in 2016  $250 million accounts receivable facility, which matures in 2014  $1.8 billion senior notes outstanding with 2016, 2019, 2022 and 2036 maturities  Sustaining ample liquidity to support growth – No public debt maturity until 2016 – Plenty of headroom with respect to covenants  Capital markets remain open to Owens Corning 30
  • 31.
    Tax Position isa Significant Asset  Benefit from $2.2 billion NOL with estimated present value of approximately $5 per share  Expect long-term book tax rate of 25% to 28% based on geographic mix of earnings and tax planning  Expect cash tax rate of 10% or less over the next few years Source: Owens Corning management estimates 31
  • 32.
    Disciplined Capital AllocationStrategy  Drive shareholder returns by enabling organic growth and supporting the balance sheet  Maintain capital allocation strategy – Current debt level is appropriate – Pursuing attractive organic investment opportunities – Seeking acquisitions that add value to shareholders – Share buy-back: 10 million shares available for repurchase as of September 30, 2012  Continue to consider a dividend when U.S. housing recovers and Insulation returns to profitability 32
  • 33.
    Key Financial Data ($in millions, except per share data) Q3 2012 Q3 2011 YTD 2012 YTD 2011 Net sales $1,276 $1,450 $4,013 $4,139 Net earnings attributable to Owens Corning $44 $124 $37 $226 Diluted earnings per share attributable to Owens $0.37 $1.01 $0.31 $1.82 Corning common stockholders Earnings before interest and taxes (EBIT) $59 $177 $132 $373 Adjusted EBIT $81 $177 $241 $373 Adjusted Earnings $39 $110 $115 $216 Adjusted EPS (diluted) $0.33 $0.90 $0.95 $1.74 Adjusted EBIT as a % of sales 6% 12% 6% 9% Marketing and administrative expenses $115 $119 $380 $395 Depreciation and amortization $89 $78 $269 $243 Cash flow provided by operating activities $133 $193 $93 $59 Total debt (excluding rate swap), net of cash $2,131 $1,962 $2,131 $1,962 33
  • 34.
    Mid-Term Guidance Mid-Term Mid-Term Mid-Term Top-Line Drivers Market Growth Financial Guidance Insulation  Housing starts  U.S. market to return  $100 million EBIT or  Code implementation to historic levels more at 1 million  Geographic growth starts Roofing  Existing home sales  5-8% CAGR in  Mid-teens or better  Storm activity non-storm demand EBIT margins Composites  Industrial production  5-7% historical  Growth to mid-teen average annual EBIT margins global market growth Source: ARMA, IHS Global Insights, U.S Fiber Economic Board, Glassfibre Europe, Moody’s and Owens Corning management estimates 34