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Q3 presentation v6

Owens Corning provides concise summaries of its quarterly performance and outlook. The summary focused on its three businesses: Insulation, Roofing, and Composites. It discussed financial results including EBIT margins and free cash flow generation. It also outlined drivers of future growth across end markets and an acquisition that strengthens its Insulation segment.

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Owens Corning Focused on Shareholder Value Q3 2017 This presentation shared at the following event(s): 9/19/17 OC Roadshow Hosted by JP Morgan – Europe Thierry Denis, Vice President Investor Relations 9/15/17 Zelman Housing Summit – Boston Mike Thaman, Chief Executive Officer 8/29/17 OC Roadshow Hosted by KeyBanc – West Coast Michael McMurray, Chief Financial Officer
2 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 differ materially from those projected in these statements. Such risks and uncertainties include, without limitation: relationships with key customers and demand for our products; macroeconomic factors like levels of construction activity, global industrial production, industry, economic and political conditions, including new legislation, policies or other governmental actions by the new U.S. presidential administration and Congress; competitive and pricing factors; currency, commodity and interest rate fluctuations; our level of indebtedness and the availability and cost of credit; weather conditions; energy and raw material availability, price volatility and cost issues; ability to protect our intellectual property and information technology systems; labor disputes, legal and regulatory proceedings; our ability to utilize our net operating loss carry-forwards; issues related to acquisitions, divestitures and joint ventures; and, factors detailed from time to time in the Company’s SEC filings. For purposes of this presentation, any discussion referring to “year to date” or last twelve months (“LTM”) refers to the period ended on the last calendar day of the quarter preceding the date of the investor event referred to on the first page of this document. Otherwise the information in this presentation speaks as of the date of the investor event, and is subject to change. The Company does not undertake any obligation to update or revise forward-looking statements beyond what is required under applicable securities laws. Any distribution of this presentation after the date of the investor event is not intended and should not be construed as updating or confirming such information. This presentation contains references to certain "non-GAAP financial measures" as defined by the SEC, including EBIT, adjusted EBIT, adjusted earnings, adjusted EPS, adjusted pre-tax earnings, free cash flow, free cash flow conversion of adjusted earnings, free cash flow yield, operating working capital and return on capital. Management uses non-GAAP measures for various purposes, including reporting results of operations to the Board of Directors, analysis of performance and related employee compensation measures. Although management believes these measures, and exclusions from GAAP therein, provide a useful representation of performance or liquidity, non- GAAP measures should not be considered in isolation or as a substitute for the corresponding GAAP measures. A reconciliation of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP can be found in the text and tables of our most recent earnings Press Release filed with the SEC on Form 8-K and in Appendix B. When the company provides forward-looking expectations for non-GAAP measures, the most comparable GAAP measures and a reconciliation between the non-GAAP expectations and the corresponding GAAP measures are generally not available without unreasonable effort due to the variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP measures in future periods. The variability in timing and amount of adjusting items could have significant and unpredictable effects on future GAAP results. Adjusted EBIT, adjusted earnings, adjusted EPS, adjusted pre-tax earnings and return on capital exclude certain items that management does not allocate to its segment results because it believes they are not representative of the Company’s ongoing operations. Free cash flow is a non-GAAP liquidity measure used by investors, financial analysts and management to help evaluate the company's ability to generate cash to pursue opportunities that enhance shareholder value. Free cash flow is not a measure of residual cash flow available for discretionary expenditures due to the company’s mandatory debt service requirements. As a conversion ratio, free cash flow is compared to adjusted earnings. Free cash flow yield is a non-GAAP liquidity measure that management believes is useful to investors to compare a company’s ability to generate free cash flow to its market valuation. Free cash flow yield is not a measure of cash flow which accrues directly to the benefit of common stock share owners.
The Company Investment Thesis Three Strong Businesses Additional Financial Information Agenda
4 Owens Corning at a Glance 1938 Founded Over 79 Years Ago 2016 Sales Countries Around the World Employees Worldwide Consecutive Years on the Fortune 500® Three Strong Businesses $5.7 BILLION Source: Owens Corning SEC filings and Fortune Magazine 17k 33 63
5 Balanced End Market Exposure Source: Owens Corning management estimates; estimated error margin below 5%. Consolidated figures eliminate intercompany sales between reportable segments. 15% 38% 21% 26% 2016 OC REVENUE BY END MARKET U.S. & Canada Residential New Construction U.S. & Canada Repair and Remodeling U.S. & Canada Commercial and Industrial International 8% 79% 12% 1% Roofing 36% 23% 25% 16% Insulation 3% 11% 26%60% Composites
6 Owens Corning Sustainability Strategy Driving to be a Net Positive Company Employee Safety, Health & Engagement Operations Sustainability Product & Supply Chain Sustainability Energy Efficiency & Durable Material Solutions
7 Goal (2010-2020) Primary Energy -20% -17% Greenhouse Gas -50% -41% Particulate Matter 2.5 -15% -17% Toxic Air Emissions -75% -66% Waste to Landfill -70% -14% Water -35% -32% ✓ Owens Corning Footprint Progress Toward 2nd Set of 10-Year Goals Progress (2010-2015) Source: Owens Corning 2015 Global Reporting Initiative Report. Toxic air emissions include formaldehyde, ammonia, polycylic aromatic compounds, manganese and hexavalent chromium.
The Company Investment Thesis Three Strong Businesses Additional Financial Information Agenda
9 EBIT AND MARGINS EBIT AND MARGINS FREE CASH FLOW RETURN ON CAPITAL EBIT AND MARGINS EBIT AND MARGINS Proven Track Record of Financial Improvement ADJUSTED EBIT OPERATING WORKING CAPITAL / NET SALES $ MM $ MM Percent Percent 293 416 412 550 746 2012 2013 2014 2015 2016 17.5% 17.3% 18.0% 16.5% 14.0% 2012 2013 2014 2015 2016 54 50 341 570 2012 2013 2014 2015 2016 5.8% 7.7% 7.2% 9.3% 11.9% 2012 2013 2014 2015 2016 18% Free Cash Flow Conversion: 126% Please refer to Tables 1, 2, 3 and 7 of Appendix B for reconciliation to Owens Corning SEC filings.
10 Compelling Investment Thesis Focused on Shareholder Value Market Leading Businesses 2 Improved Portfolio, Earnings & Cash Flow 3 Attractive Macro Drivers 1 ✓ Favorable global trends ✓ Positive market outlook ✓ Leadership positions in attractive industries ✓ Valuable brands ✓ Low-cost assets ✓ Disciplined capital allocation ✓ Access to growth opportunities ✓ Improving capital intensity
11 Sustainable Improvement of Earnings Power ▪ Implemented sustainable cost improvements ▪ Drove substantial Components growth ▪ Acquired synthetic underlayment leader InterWrap ▪ Served market needs with premium products ▪ Acquired and expanded mineral fiber assets ▪ Grew business outside North America ▪ Returned engineered & regional business to record levels ▪ Lowered breakeven point ▪ Repositioned low-cost network ▪ Reduced capital intensity ▪ Accelerated pace of product innovation ▪ Demonstrated industry supply tension Adjusted EBIT Margin: Insulation Roofing Composites 13% 2007 - 10 2011 - 16 2016 9%7% Please refer to Table 1 of Appendix B for reconciliation to Owens Corning SEC filings.
12 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. Free cash flow yield is not a measure of cash flow which accrues directly to the benefit of common stock share owners. Calculation may differ from methods used by peers in similar disclosures. Peer group represents building materials companies most covered by sell-side analysts who publish on Owens Corning. For detail on the formula and GAAP reconciliation of the Owens Corning measurement, please refer to Table 4 in Appendix B. Superior Free Cash Flow Yield Within Sector Peer Average 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
13 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 shareholders  Strong cash flow outlook supports dividend growth, share repurchase and acquisitions  Benefit from $1.8B U.S. Federal N.O.L. with estimated present value of approximately $5 per share Source: Owens Corning management estimates; U.S. Federal net operating loss (“N.O.L.”) as of 12/31/2016, as reported in Owens Corning SEC filings.
The Company Investment Thesis Three Strong Businesses Additional Financial Information Agenda
15 2016 (Millions $) Insulation Roofing Composites Corporate Total Net sales 1,748 2,194 1,952 (217) 5,677 EBIT / Adj EBIT 126 486 264 (130) 746 EBIT / Adj EBIT as % of sales 7% 22% 14% 13% Portfolio Financial Profile Source: Owens Corning SEC filings. For the Corporate column, Net sales reflects intercompany eliminations and EBIT reflects General corporate expense and other as disclosed in our SEC filings. The Total column reflects total company Adjusted EBIT, which is reconciled to Owens Corning SEC filings in Table 5 of Appendix B.
16 Margin >= 10% 0%<= Margin < 10% Margin < 0% '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Insulation Roofing Composites Strong Portfolio Last 20 years of performance. Source: 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.
17 Insulation Business  Track record of proven performance  Strong brand and broad product portfolio  Investment opportunities for global expansion  Confidence in return to historical profitability Source: Owens Corning SEC filings; segment reporting comparability may differ over time * In millions Sales* EBIT as % of sales Progress supports confidence in return to historical profitability INSULATION -5% 0% 5% 10% 15% $0 $500 $1,000 $1,500 $2,000 2013 2014 2015 2016 LTM
18 -10% 0% 10% 20% 30% '85 '90 '95 '00 '05 '10 '15 EBIT Margin Avg EBIT Margin '85-'08 (15%) Return to Historical Profitability Levels Historically Delivered 15% EBIT Margins at 1.5 Million Housing Starts; Expect to Average 50% Operating Leverage through the Housing Recovery Source: Owens Corning management estimates and SEC filings of Owens Corning and predecessor company. Segment reporting comparability may differ over time. ‘16 INSULATION
19 ( 0.5) ( 0.3) ( 0.2) 4.6 4.1 3.8 3.6 2005 Total Capacity Retired 2016 Total Capacity Mothballed Operating Plants Capacity Cold Lines Operating Lines Capacity Capacity Utilization: 100% 73% 85% 90% 2005 BLbs U.S. & Canada Fiberglass Industry Light Density Network Capacity and Demand Light density fiberglass demand and capacity based on assets producing batts, rolls, flexible duct media, metal building insulation, duct wrap and appliance insulation; excludes loosefill products. Capacity utilization reported in 5% increments. Source: Owens Corning management estimates as of January 2017 and various industry sources and publications (including North America Insulation Manufacturers Association); all competitive information legally obtained from appropriate 3rd party sources. 80% 85% 90% 2016 2.1 MM U.S. Housing Starts 1.2 MM U.S. Housing Starts INSULATION
20 Market Pricing Still Significantly Below Historical Levels OC U.S. New Construction Price Index 60% 70% 80% 90% 100% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Owens Corning management estimates as of January 2017. Owens Corning nominal price index based on average price of fiberglass batts to U.S. contractors. INSULATION
21 Residential Fiberglass Below Historical Levels; Non-Residential at Record Levels Residential fiberglass building insulation includes batts & rolls and loosefill sold to insulation contractors and distributors, home centers, and manufactured housing producers in the U.S. and Canada. Engineered insulation and other regions includes pipe and flexible duct media insulation, foam, mineral fiber, and all building material products sold to Latin America and Asia. Source: Owens Corning management estimates. Comparability may differ over time. Margin of error on intra-segment EBIT estimated to be below $15MM. -200 -100 0 100 200 300 400 2006 (Peak) 2009 (Trough) 2015 MM$ EBIT MM$ & Margins U.S. & Canada Residential Fiberglass Building Insulation Engineered Insulation & Other Regions 26% 17% -23% 4% 2% 14% INSULATION
22  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 strategy of geographic and product technology extension  Value contributors: o Broadens range of attractive industrial & commercial applications o Adds strong and stable margins through the cycle o Significantly strengthens our global Insulation platform o Leverages OC core glass technology strength  Business delivered revenue of over $240MM in 2016 and adjusted EBITDA margins in a 25%-27% range over last 4 years  Expect acquisition to be accretive to 2017 EPS, excluding transaction and integration costs; up to $15MM of EBIT in H2 2017  Anticipate a run rate of $20MM of operational and commercial synergies by mid-2019 Sources: Owens Corning SEC filings; management estimates and press release issued May 15, 2017 Pittsburgh Corning Acquisition Strengthens Position of Insulation Business INSULATION
23 Roofing Business  Strong market position and leading brands  Performance track record through varied market conditions  Confidence in sustaining average operating margins of mid-teens or better * In millions Sales* EBIT as % of sales Strong market position sustaining high operating margins Source: Owens Corning SEC filings; segment reporting comparability may differ over time ROOFING 0% 5% 10% 15% 20% 25% $0 $500 $1,000 $1,500 $2,000 $2,500 2013 2014 2015 2016 LTM
24 U.S. Asphalt Shingle Re-Roof Demand Drivers Replacement age ▪ Average replacement age increased driven by technological advances Major storms & other weather events ▪ Weather events drive demand and create early replacement of roofs ▪ Weather-related demand estimated based on NOAA data and insurance claims information Economic factors ▪ Existing home sales, consumer income, and borrowing capacity affect consumer decisions on timing of re-roof IMPACT LOW HIGH ROOFING
25 New Construction and Replacement Markets Growing over Last Three Years Source: Asphalt Roofing Manufacturers Association - Summary of Asphalt Roofing Industry Shipments. Management estimates based on data provided by National Oceanic and Atmospheric Administration (NOAA), National Association of Realtors, EIA, Moody’s Analytics, Oxford Economics reports, U.S. Bureau of Labor Statistics and U.S. Bureau of Economic Analysis. MM Sq. Total 136 143 145 154 161 173 155 129 135 120 108 122 118 111 107 112 133 U.S. Asphalt Shingle Market 30 31 32 34 37 39 35 26 17 11 11 11 14 17 18 19 20 71 75 81 86 87 95 77 75 73 71 63 61 59 58 60 65 68 32 34 30 27 28 21 35 25 23 21 28 31 34 30 23 24 30 3 3 2 7 8 18 8 3 22 17 6 19 11 6 6 4 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 New Construction Age Related/Economic Other Weather Events Major Storms 15 ROOFING
26 Track Record of Strong Financial Performance  Delivered average EBIT margins of 18% since 2010 (ranging from 13% to 22%)  Strong market position; confidence in sustaining average EBIT margins of mid-teens or better 0 5 10 15 20 25 2010 2011 2012 2013 2014 2015 2016 % Roofing EBIT Margin Average 18% Source: Owens Corning SEC filings; segment reporting comparability may differ over time ROOFING
27  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 o Benefit from conversion of felt paper to synthetic underlayments o OC channel strength and InterWrap strong products, brands and technology o Commercial and operational synergies o Access to new markets and construction applications  Contributed $60MM of adjusted EBIT within first year  Continue to anticipate achieving a run rate of $20MM or more of commercial and operational synergies by end of 2017 Sources: Owens Corning SEC filings; management estimates and press release issued February 24, 2016 Successful InterWrap Acquisition Strengthens Position of Roofing Components Business ROOFING
28 Composites Business  A leader in a stable industry with strong growth prospects  Improving economic conditions and higher utilization rates  Transformed business delivering double-digit EBIT margins & ROC  Strategy to deliver profitable, capital efficient growth Source: Owens Corning SEC filings. Segment ROC differs from total company ROC. Please refer to Table 2 of Appendix B for explanation. * In millions Sales* EBIT as % of sales Market-leading business with improving economic conditions and higher utilization rates COMPOSITES 0% 5% 10% 15% 20% 25% $0 $500 $1,000 $1,500 $2,000 $2,500 2013 2014 2015 2016 LTM
29 Glass Fiber A $7.5 Billion Global Market With Favorable Exposure Glass fiber market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns. Source: Fiber Economics Bureau, GlassFibreEurope (APFE), Global Trade Information Services, Inc. and Owens Corning management estimates as of January 2017. Markets Size Power & EnergyConsumerBuilding & Construction Transportation Industrial COMPOSITES
30 Positioned to Compete Anywhere in the World % Market Revenue = market revenue in region as % of 2016 global market size; % OC Revenue = OC revenue in region as % of OC Composites global 2016 sales; Glass reinforcements market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns. Sources: Fiber Economics Bureau, GlassFibreEurope (APFE), Global Trade Information Services, Inc. and Owens Corning management estimates of 2016 global market. 33% 47% % Market Revenue % OC Revenue Americas #1 Position 26% 11% % Market Revenue % OC Revenue China Emerging PositionWorld headquarters Composites facilities #1 Position 23% 28% % Market Revenue % OC Revenue Europe #1 Position 18% 14% % Market Revenue % OC Revenue Rest of World COMPOSITES
31 0.5 1.8 0.8 1.7 0.9 0.8 2005-09 2010-16 2017E-19E50% 60% 70% 80% 90% 100% '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17E'18E'19E Expect Continued Supply Tension Change in global demand (MM T) Change in global capacity (MM T) EstimatedCapacityUtilization China Emergence Capacity Overbuild Tightening Capacity Price Inflection Supply Tension Improved Returns 90% Threshold COMPOSITES Glass fiber market demand excludes E-glass yarns. Sources: Fiber Economics Bureau, GlassFibreEurope (APFE), Global Trade Information Services, Inc. and Owens Corning management estimates as of May 2017 (high probability capacity additions only). Estimated demand calculated as 2016 demand grown at 1.6x growth rate of global IP per April 2017 Oxford Economics.
The Company Investment Thesis Three Strong Businesses Additional Financial Information Agenda
33  Closed Pittsburgh Corning acquisition  Improved safety performance with recordable incident rate down 11% year over year  Second-quarter adjusted EBIT of $230MM  Roofing: $155MM EBIT; 23% EBIT margins  Composites: record EBIT of $84MM; 16% EBIT margins  Insulation: $29MM EBIT; 7% EBIT margins  Repurchased 1.0MM shares in Q2  Anticipate continued growth in U.S. housing starts and moderate global industrial production growth in 2017  Expect full-year adjusted EBIT of at least $825MM Appendix A Q2 2017 Highlights and Outlook Source: Please refer to the tables in Appendix B for reconciliation of adjusted EBIT to Owens Corning SEC filings.
34 Appendix A Key Financial Data - Corporate Source: Owens Corning SEC filings; Please refer to the tables in Appendix B for reconciliation of EBIT, adjusted EBIT, adjusted earnings, adjusted EPS and free cash flow to Owens Corning SEC filings. ($ in millions, except per share data) Q2 2017 Q2 2016 Net sales $1,597 $1,545 Net earnings attributable to Owens Corning $96 $138 Diluted earnings per share (EPS) attributable to Owens Corning common stockholders $0.85 $1.19 Earnings before interest and taxes (EBIT) $190 $240 Adjusted EBIT $230 $253 Adjusted earnings $136 $151 Adjusted EPS (diluted) $1.20 $1.30 Adjusted EBIT as a % of sales 14% 16% Depreciation and amortization $84 $82 Net cash flow provided by operating activities $385 $263 Free cash flow $282 $174 Total debt (excluding rate swap), net of cash $2,483 $2,200
35 Insulation Roofing Composites ($ in millions) Q2 2017 Q2 2016 Q2 2017 Q2 2016 Q2 2017 Q2 2016 Net sales $439 $414 $684 $679 $537 $517 EBIT $29 $32 $155 $169 $84 $74 EBIT as % of sales 7% 8% 23% 25% 16% 14% D&A $27 $27 $12 $11 $35 $33 Appendix A Key Financial Data - Business Source: Owens Corning SEC filings; reportable segment totals are shown in SEC filings before intercompany eliminations
36 Appendix B Non-GAAP Reconciliations – Table 1
37 Appendix B Non-GAAP Reconciliations – Table 2
38 Appendix B Non-GAAP Reconciliations – Table 3
39 Appendix B Non-GAAP Reconciliations – Table 4
40 Appendix B Non-GAAP Reconciliations – Table 5
41 Appendix B Non-GAAP Reconciliations – Table 6
42 Appendix B Non-GAAP Reconciliations – Table 7

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Q3 presentation v6

  • 1.
    Owens Corning Focused onShareholder Value Q3 2017 This presentation shared at the following event(s): 9/19/17 OC Roadshow Hosted by JP Morgan – Europe Thierry Denis, Vice President Investor Relations 9/15/17 Zelman Housing Summit – Boston Mike Thaman, Chief Executive Officer 8/29/17 OC Roadshow Hosted by KeyBanc – West Coast Michael McMurray, Chief Financial Officer
  • 2.
    2 Forward-Looking Statements andNon-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 differ materially from those projected in these statements. Such risks and uncertainties include, without limitation: relationships with key customers and demand for our products; macroeconomic factors like levels of construction activity, global industrial production, industry, economic and political conditions, including new legislation, policies or other governmental actions by the new U.S. presidential administration and Congress; competitive and pricing factors; currency, commodity and interest rate fluctuations; our level of indebtedness and the availability and cost of credit; weather conditions; energy and raw material availability, price volatility and cost issues; ability to protect our intellectual property and information technology systems; labor disputes, legal and regulatory proceedings; our ability to utilize our net operating loss carry-forwards; issues related to acquisitions, divestitures and joint ventures; and, factors detailed from time to time in the Company’s SEC filings. For purposes of this presentation, any discussion referring to “year to date” or last twelve months (“LTM”) refers to the period ended on the last calendar day of the quarter preceding the date of the investor event referred to on the first page of this document. Otherwise the information in this presentation speaks as of the date of the investor event, and is subject to change. The Company does not undertake any obligation to update or revise forward-looking statements beyond what is required under applicable securities laws. Any distribution of this presentation after the date of the investor event is not intended and should not be construed as updating or confirming such information. This presentation contains references to certain "non-GAAP financial measures" as defined by the SEC, including EBIT, adjusted EBIT, adjusted earnings, adjusted EPS, adjusted pre-tax earnings, free cash flow, free cash flow conversion of adjusted earnings, free cash flow yield, operating working capital and return on capital. Management uses non-GAAP measures for various purposes, including reporting results of operations to the Board of Directors, analysis of performance and related employee compensation measures. Although management believes these measures, and exclusions from GAAP therein, provide a useful representation of performance or liquidity, non- GAAP measures should not be considered in isolation or as a substitute for the corresponding GAAP measures. A reconciliation of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP can be found in the text and tables of our most recent earnings Press Release filed with the SEC on Form 8-K and in Appendix B. When the company provides forward-looking expectations for non-GAAP measures, the most comparable GAAP measures and a reconciliation between the non-GAAP expectations and the corresponding GAAP measures are generally not available without unreasonable effort due to the variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP measures in future periods. The variability in timing and amount of adjusting items could have significant and unpredictable effects on future GAAP results. Adjusted EBIT, adjusted earnings, adjusted EPS, adjusted pre-tax earnings and return on capital exclude certain items that management does not allocate to its segment results because it believes they are not representative of the Company’s ongoing operations. Free cash flow is a non-GAAP liquidity measure used by investors, financial analysts and management to help evaluate the company's ability to generate cash to pursue opportunities that enhance shareholder value. Free cash flow is not a measure of residual cash flow available for discretionary expenditures due to the company’s mandatory debt service requirements. As a conversion ratio, free cash flow is compared to adjusted earnings. Free cash flow yield is a non-GAAP liquidity measure that management believes is useful to investors to compare a company’s ability to generate free cash flow to its market valuation. Free cash flow yield is not a measure of cash flow which accrues directly to the benefit of common stock share owners.
  • 3.
    The Company Investment Thesis ThreeStrong Businesses Additional Financial Information Agenda
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    4 Owens Corning ata Glance 1938 Founded Over 79 Years Ago 2016 Sales Countries Around the World Employees Worldwide Consecutive Years on the Fortune 500® Three Strong Businesses $5.7 BILLION Source: Owens Corning SEC filings and Fortune Magazine 17k 33 63
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    5 Balanced End MarketExposure Source: Owens Corning management estimates; estimated error margin below 5%. Consolidated figures eliminate intercompany sales between reportable segments. 15% 38% 21% 26% 2016 OC REVENUE BY END MARKET U.S. & Canada Residential New Construction U.S. & Canada Repair and Remodeling U.S. & Canada Commercial and Industrial International 8% 79% 12% 1% Roofing 36% 23% 25% 16% Insulation 3% 11% 26%60% Composites
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    6 Owens Corning SustainabilityStrategy Driving to be a Net Positive Company Employee Safety, Health & Engagement Operations Sustainability Product & Supply Chain Sustainability Energy Efficiency & Durable Material Solutions
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    7 Goal (2010-2020) Primary Energy -20%-17% Greenhouse Gas -50% -41% Particulate Matter 2.5 -15% -17% Toxic Air Emissions -75% -66% Waste to Landfill -70% -14% Water -35% -32% ✓ Owens Corning Footprint Progress Toward 2nd Set of 10-Year Goals Progress (2010-2015) Source: Owens Corning 2015 Global Reporting Initiative Report. Toxic air emissions include formaldehyde, ammonia, polycylic aromatic compounds, manganese and hexavalent chromium.
  • 8.
    The Company Investment Thesis ThreeStrong Businesses Additional Financial Information Agenda
  • 9.
    9 EBIT AND MARGINS EBITAND MARGINS FREE CASH FLOW RETURN ON CAPITAL EBIT AND MARGINS EBIT AND MARGINS Proven Track Record of Financial Improvement ADJUSTED EBIT OPERATING WORKING CAPITAL / NET SALES $ MM $ MM Percent Percent 293 416 412 550 746 2012 2013 2014 2015 2016 17.5% 17.3% 18.0% 16.5% 14.0% 2012 2013 2014 2015 2016 54 50 341 570 2012 2013 2014 2015 2016 5.8% 7.7% 7.2% 9.3% 11.9% 2012 2013 2014 2015 2016 18% Free Cash Flow Conversion: 126% Please refer to Tables 1, 2, 3 and 7 of Appendix B for reconciliation to Owens Corning SEC filings.
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    10 Compelling Investment Thesis Focusedon Shareholder Value Market Leading Businesses 2 Improved Portfolio, Earnings & Cash Flow 3 Attractive Macro Drivers 1 ✓ Favorable global trends ✓ Positive market outlook ✓ Leadership positions in attractive industries ✓ Valuable brands ✓ Low-cost assets ✓ Disciplined capital allocation ✓ Access to growth opportunities ✓ Improving capital intensity
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    11 Sustainable Improvement ofEarnings Power ▪ Implemented sustainable cost improvements ▪ Drove substantial Components growth ▪ Acquired synthetic underlayment leader InterWrap ▪ Served market needs with premium products ▪ Acquired and expanded mineral fiber assets ▪ Grew business outside North America ▪ Returned engineered & regional business to record levels ▪ Lowered breakeven point ▪ Repositioned low-cost network ▪ Reduced capital intensity ▪ Accelerated pace of product innovation ▪ Demonstrated industry supply tension Adjusted EBIT Margin: Insulation Roofing Composites 13% 2007 - 10 2011 - 16 2016 9%7% Please refer to Table 1 of Appendix B for reconciliation to Owens Corning SEC filings.
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    12 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. Free cash flow yield is not a measure of cash flow which accrues directly to the benefit of common stock share owners. Calculation may differ from methods used by peers in similar disclosures. Peer group represents building materials companies most covered by sell-side analysts who publish on Owens Corning. For detail on the formula and GAAP reconciliation of the Owens Corning measurement, please refer to Table 4 in Appendix B. Superior Free Cash Flow Yield Within Sector Peer Average 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
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    13 Disciplined Capital AllocationStrategy  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 shareholders  Strong cash flow outlook supports dividend growth, share repurchase and acquisitions  Benefit from $1.8B U.S. Federal N.O.L. with estimated present value of approximately $5 per share Source: Owens Corning management estimates; U.S. Federal net operating loss (“N.O.L.”) as of 12/31/2016, as reported in Owens Corning SEC filings.
  • 14.
    The Company Investment Thesis ThreeStrong Businesses Additional Financial Information Agenda
  • 15.
    15 2016 (Millions $) Insulation RoofingComposites Corporate Total Net sales 1,748 2,194 1,952 (217) 5,677 EBIT / Adj EBIT 126 486 264 (130) 746 EBIT / Adj EBIT as % of sales 7% 22% 14% 13% Portfolio Financial Profile Source: Owens Corning SEC filings. For the Corporate column, Net sales reflects intercompany eliminations and EBIT reflects General corporate expense and other as disclosed in our SEC filings. The Total column reflects total company Adjusted EBIT, which is reconciled to Owens Corning SEC filings in Table 5 of Appendix B.
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    16 Margin >= 10%0%<= Margin < 10% Margin < 0% '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Insulation Roofing Composites Strong Portfolio Last 20 years of performance. Source: 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.
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    17 Insulation Business  Trackrecord of proven performance  Strong brand and broad product portfolio  Investment opportunities for global expansion  Confidence in return to historical profitability Source: Owens Corning SEC filings; segment reporting comparability may differ over time * In millions Sales* EBIT as % of sales Progress supports confidence in return to historical profitability INSULATION -5% 0% 5% 10% 15% $0 $500 $1,000 $1,500 $2,000 2013 2014 2015 2016 LTM
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    18 -10% 0% 10% 20% 30% '85 '90 '95'00 '05 '10 '15 EBIT Margin Avg EBIT Margin '85-'08 (15%) Return to Historical Profitability Levels Historically Delivered 15% EBIT Margins at 1.5 Million Housing Starts; Expect to Average 50% Operating Leverage through the Housing Recovery Source: Owens Corning management estimates and SEC filings of Owens Corning and predecessor company. Segment reporting comparability may differ over time. ‘16 INSULATION
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    19 ( 0.5) ( 0.3) (0.2) 4.6 4.1 3.8 3.6 2005 Total Capacity Retired 2016 Total Capacity Mothballed Operating Plants Capacity Cold Lines Operating Lines Capacity Capacity Utilization: 100% 73% 85% 90% 2005 BLbs U.S. & Canada Fiberglass Industry Light Density Network Capacity and Demand Light density fiberglass demand and capacity based on assets producing batts, rolls, flexible duct media, metal building insulation, duct wrap and appliance insulation; excludes loosefill products. Capacity utilization reported in 5% increments. Source: Owens Corning management estimates as of January 2017 and various industry sources and publications (including North America Insulation Manufacturers Association); all competitive information legally obtained from appropriate 3rd party sources. 80% 85% 90% 2016 2.1 MM U.S. Housing Starts 1.2 MM U.S. Housing Starts INSULATION
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    20 Market Pricing StillSignificantly Below Historical Levels OC U.S. New Construction Price Index 60% 70% 80% 90% 100% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Owens Corning management estimates as of January 2017. Owens Corning nominal price index based on average price of fiberglass batts to U.S. contractors. INSULATION
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    21 Residential Fiberglass BelowHistorical Levels; Non-Residential at Record Levels Residential fiberglass building insulation includes batts & rolls and loosefill sold to insulation contractors and distributors, home centers, and manufactured housing producers in the U.S. and Canada. Engineered insulation and other regions includes pipe and flexible duct media insulation, foam, mineral fiber, and all building material products sold to Latin America and Asia. Source: Owens Corning management estimates. Comparability may differ over time. Margin of error on intra-segment EBIT estimated to be below $15MM. -200 -100 0 100 200 300 400 2006 (Peak) 2009 (Trough) 2015 MM$ EBIT MM$ & Margins U.S. & Canada Residential Fiberglass Building Insulation Engineered Insulation & Other Regions 26% 17% -23% 4% 2% 14% INSULATION
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    22  Acquired globalbrand 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 strategy of geographic and product technology extension  Value contributors: o Broadens range of attractive industrial & commercial applications o Adds strong and stable margins through the cycle o Significantly strengthens our global Insulation platform o Leverages OC core glass technology strength  Business delivered revenue of over $240MM in 2016 and adjusted EBITDA margins in a 25%-27% range over last 4 years  Expect acquisition to be accretive to 2017 EPS, excluding transaction and integration costs; up to $15MM of EBIT in H2 2017  Anticipate a run rate of $20MM of operational and commercial synergies by mid-2019 Sources: Owens Corning SEC filings; management estimates and press release issued May 15, 2017 Pittsburgh Corning Acquisition Strengthens Position of Insulation Business INSULATION
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    23 Roofing Business  Strongmarket position and leading brands  Performance track record through varied market conditions  Confidence in sustaining average operating margins of mid-teens or better * In millions Sales* EBIT as % of sales Strong market position sustaining high operating margins Source: Owens Corning SEC filings; segment reporting comparability may differ over time ROOFING 0% 5% 10% 15% 20% 25% $0 $500 $1,000 $1,500 $2,000 $2,500 2013 2014 2015 2016 LTM
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    24 U.S. Asphalt ShingleRe-Roof Demand Drivers Replacement age ▪ Average replacement age increased driven by technological advances Major storms & other weather events ▪ Weather events drive demand and create early replacement of roofs ▪ Weather-related demand estimated based on NOAA data and insurance claims information Economic factors ▪ Existing home sales, consumer income, and borrowing capacity affect consumer decisions on timing of re-roof IMPACT LOW HIGH ROOFING
  • 25.
    25 New Construction andReplacement Markets Growing over Last Three Years Source: Asphalt Roofing Manufacturers Association - Summary of Asphalt Roofing Industry Shipments. Management estimates based on data provided by National Oceanic and Atmospheric Administration (NOAA), National Association of Realtors, EIA, Moody’s Analytics, Oxford Economics reports, U.S. Bureau of Labor Statistics and U.S. Bureau of Economic Analysis. MM Sq. Total 136 143 145 154 161 173 155 129 135 120 108 122 118 111 107 112 133 U.S. Asphalt Shingle Market 30 31 32 34 37 39 35 26 17 11 11 11 14 17 18 19 20 71 75 81 86 87 95 77 75 73 71 63 61 59 58 60 65 68 32 34 30 27 28 21 35 25 23 21 28 31 34 30 23 24 30 3 3 2 7 8 18 8 3 22 17 6 19 11 6 6 4 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 New Construction Age Related/Economic Other Weather Events Major Storms 15 ROOFING
  • 26.
    26 Track Record ofStrong Financial Performance  Delivered average EBIT margins of 18% since 2010 (ranging from 13% to 22%)  Strong market position; confidence in sustaining average EBIT margins of mid-teens or better 0 5 10 15 20 25 2010 2011 2012 2013 2014 2015 2016 % Roofing EBIT Margin Average 18% Source: Owens Corning SEC filings; segment reporting comparability may differ over time ROOFING
  • 27.
    27  Acquired andintegrated 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 o Benefit from conversion of felt paper to synthetic underlayments o OC channel strength and InterWrap strong products, brands and technology o Commercial and operational synergies o Access to new markets and construction applications  Contributed $60MM of adjusted EBIT within first year  Continue to anticipate achieving a run rate of $20MM or more of commercial and operational synergies by end of 2017 Sources: Owens Corning SEC filings; management estimates and press release issued February 24, 2016 Successful InterWrap Acquisition Strengthens Position of Roofing Components Business ROOFING
  • 28.
    28 Composites Business  Aleader in a stable industry with strong growth prospects  Improving economic conditions and higher utilization rates  Transformed business delivering double-digit EBIT margins & ROC  Strategy to deliver profitable, capital efficient growth Source: Owens Corning SEC filings. Segment ROC differs from total company ROC. Please refer to Table 2 of Appendix B for explanation. * In millions Sales* EBIT as % of sales Market-leading business with improving economic conditions and higher utilization rates COMPOSITES 0% 5% 10% 15% 20% 25% $0 $500 $1,000 $1,500 $2,000 $2,500 2013 2014 2015 2016 LTM
  • 29.
    29 Glass Fiber A $7.5Billion Global Market With Favorable Exposure Glass fiber market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns. Source: Fiber Economics Bureau, GlassFibreEurope (APFE), Global Trade Information Services, Inc. and Owens Corning management estimates as of January 2017. Markets Size Power & EnergyConsumerBuilding & Construction Transportation Industrial COMPOSITES
  • 30.
    30 Positioned to CompeteAnywhere in the World % Market Revenue = market revenue in region as % of 2016 global market size; % OC Revenue = OC revenue in region as % of OC Composites global 2016 sales; Glass reinforcements market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns. Sources: Fiber Economics Bureau, GlassFibreEurope (APFE), Global Trade Information Services, Inc. and Owens Corning management estimates of 2016 global market. 33% 47% % Market Revenue % OC Revenue Americas #1 Position 26% 11% % Market Revenue % OC Revenue China Emerging PositionWorld headquarters Composites facilities #1 Position 23% 28% % Market Revenue % OC Revenue Europe #1 Position 18% 14% % Market Revenue % OC Revenue Rest of World COMPOSITES
  • 31.
    31 0.5 1.8 0.8 1.7 0.9 0.8 2005-09 2010-16 2017E-19E50% 60% 70% 80% 90% 100% '05'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17E'18E'19E Expect Continued Supply Tension Change in global demand (MM T) Change in global capacity (MM T) EstimatedCapacityUtilization China Emergence Capacity Overbuild Tightening Capacity Price Inflection Supply Tension Improved Returns 90% Threshold COMPOSITES Glass fiber market demand excludes E-glass yarns. Sources: Fiber Economics Bureau, GlassFibreEurope (APFE), Global Trade Information Services, Inc. and Owens Corning management estimates as of May 2017 (high probability capacity additions only). Estimated demand calculated as 2016 demand grown at 1.6x growth rate of global IP per April 2017 Oxford Economics.
  • 32.
    The Company Investment Thesis ThreeStrong Businesses Additional Financial Information Agenda
  • 33.
    33  Closed PittsburghCorning acquisition  Improved safety performance with recordable incident rate down 11% year over year  Second-quarter adjusted EBIT of $230MM  Roofing: $155MM EBIT; 23% EBIT margins  Composites: record EBIT of $84MM; 16% EBIT margins  Insulation: $29MM EBIT; 7% EBIT margins  Repurchased 1.0MM shares in Q2  Anticipate continued growth in U.S. housing starts and moderate global industrial production growth in 2017  Expect full-year adjusted EBIT of at least $825MM Appendix A Q2 2017 Highlights and Outlook Source: Please refer to the tables in Appendix B for reconciliation of adjusted EBIT to Owens Corning SEC filings.
  • 34.
    34 Appendix A Key FinancialData - Corporate Source: Owens Corning SEC filings; Please refer to the tables in Appendix B for reconciliation of EBIT, adjusted EBIT, adjusted earnings, adjusted EPS and free cash flow to Owens Corning SEC filings. ($ in millions, except per share data) Q2 2017 Q2 2016 Net sales $1,597 $1,545 Net earnings attributable to Owens Corning $96 $138 Diluted earnings per share (EPS) attributable to Owens Corning common stockholders $0.85 $1.19 Earnings before interest and taxes (EBIT) $190 $240 Adjusted EBIT $230 $253 Adjusted earnings $136 $151 Adjusted EPS (diluted) $1.20 $1.30 Adjusted EBIT as a % of sales 14% 16% Depreciation and amortization $84 $82 Net cash flow provided by operating activities $385 $263 Free cash flow $282 $174 Total debt (excluding rate swap), net of cash $2,483 $2,200
  • 35.
    35 Insulation Roofing Composites ($in millions) Q2 2017 Q2 2016 Q2 2017 Q2 2016 Q2 2017 Q2 2016 Net sales $439 $414 $684 $679 $537 $517 EBIT $29 $32 $155 $169 $84 $74 EBIT as % of sales 7% 8% 23% 25% 16% 14% D&A $27 $27 $12 $11 $35 $33 Appendix A Key Financial Data - Business Source: Owens Corning SEC filings; reportable segment totals are shown in SEC filings before intercompany eliminations
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