Owens Corning Positioned for Growths21.q4cdn.com/855213745/files/doc_presentations/...Founded in 1938, an industry leader in glass fiber insulation, roofing and glass fiber reinforcements

Owens CorningPositioned for Growth

Q4 2014This presentation shared at the following events:

12/16/14 OC Roadshow Hosted by Wedbush – Denver & Kansas City Thierry Denis, Director Investor Relations

12/5/14 Owens Corning Roadshow – Boston Arnaud Genis, President Composites Business

12/3/2014 Citi Basic Materials Conference – New York Thierry Denis, Director Investor Relations

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 the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “believe,” “anticipate,” “appear,” “may,” “will,” “should,” “intend,” “plan,” “estimate,” “expect,” “assume,” “seek,” “forecast,” and similar reference to future periods. 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. Our future performance may be affected by risks and uncertainties including, without limitation, demand for our products; levels of residential and commercial construction activity; competitive factors; levels of global industrial production; relationships with key customers; industry and economic conditions that affect the market and operating conditions of our customers, suppliers or lenders; availability and cost of credit; our level of indebtedness; weather conditions; pricing factors; labor disputes and litigations; availability and cost of energy and raw materials; difficulties managing production capacity; issues involving implementation and protection of information technology; international economic and political conditions, including new legislation or other governmental actions; our ability to utilize our

Forward-Looking Statements and Non-GAAP Measures

technology; international economic and political conditions, including new legislation or other governmental actions; our ability to utilize our net operating loss carry-forwards; research and development activities; foreign exchange and commodity price fluctuations; interest rate movements; issues related to acquisitions, divestitures and joint ventures; uninsured losses; achievement of expected synergies, cost reductions and/or productivity improvements; defined benefit plan funding obligations; and, factors detailed from time to time in the company’s Securities and Exchange Commission 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. 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 usefulrepresentation of performance, non-GAAP measures should not be considered in isolation or as a substitute for GAAP measures. 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 Appendix A. Adjusted EBIT is earnings before interest, taxes 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.

2

Owens Corning at a Glance

� Founded in 1938, an industry leader in glass fiber insulation, roofing and glass fiber reinforcements

� 2013 net sales: $5.3 billion

� 15,000 employees in 27 countries

� Fortune 500 company for 60 consecutive years

� Component of Dow Jones Sustainability World Index for five consecutive years

3

Investment Highlights

Composites Roofing Insulation

4

Three Market-Leading Businesses

Market-leading business with improving economic

conditions and higher utilization rates

Strong business performance in a

recovering U.S. housing market

Progress supports confidence in return to historical profitability

Third-Quarter Highlights and Outlook

� Continued to focus on building a safer workplace; year-to-date safety performance consistent with prior year

� Delivered adjusted EBIT of $132 million

� Insulation grew EBIT by $25 million, marking the 13th consecutive quarter of performance improvementquarter of performance improvement

� Composites delivered EBIT of $32 million on 5th consecutive quarter of price improvement

� Roofing restored its historical market position; prices stabilized late in the quarter

5

Strong PortfolioPositioned for Growth

’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13

Insulation

Roofing

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.

6

Margin >= 10% 0%<= Margin < 10% Margin < 0%

Roofing

Composites

$ (in millions) Q3 2014 Q3 2013YTD 2014

YTD 2013

Net sales* $454 $431 $1,256 $1,176

EBIT $43 $18 $62 $1

EBIT as % of sales

9% 4% 5% 0%

D&A $25 $26 $76 $79

Insulation Business

Q3 2014 Highlights� Delivered 13th consecutive quarter of EBIT

improvement

� Grew EBIT by $25 million on higher pricing, volume growth, and better manufacturing performance

� Expect 2014 results to benefit from growth in U.S. new construction, pricing, and operating leverage

2013 Revenue by End Market*

7

* before inter-segment eliminations

-10%

-5%

0%

5%

10%

$0

$500

$1,000

$1,500

$2,000

2010 2011 2012 2013 LTM

Five-Year Financial Performance

Sales* EBIT as % of sales*In millions

International

16%

U.S. & CanadaNew Residential

Construction

40%

U.S .& CanadaResidential Repair

& Remodeling

20%

U.S. & CanadaCommercial& Industrial

24%

*Owens Corning management estimates; estimated error margin below 5%

Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time


Owens Corning Insulation EBIT Progress

039

4

18

39

1

18

43

$0

$20

$40

EB

IT in

Mil

lio

ns

of

Do

lla

rs

Q1 Q2 Q3 Q4

8

Consistent Quarterly EBIT Progression Since 2011

-47-38

-12

-34

-16-21

-$80

-$60

-$40

-$20

2011 Actual 2012 Actual 2013 Actual 2014 Actual

Source: Owens Corning quarterly and annual SEC filings

EB

IT in

Mil

lio

ns

of

Do

lla

rs

10%

20%

30%

EBIT Margin Avg EBIT Margin '85-'08 (15%)

Owens Corning InsulationWell Positioned to Return to Historical Margins

-10%

0%

10%

'84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 LTM

9Source: Owens Corning management estimates and Owens Corning SEC filings, comparability may differ over time;

Historically Delivered 15% EBIT Margins at 1.5 Million Housing Starts

2014 Industry Capacity Utilization

65%

75%

90%

60%

80%

100%

Insulation IndustryNorth American Fiberglass

0%

20%

40%

Total Capacity Operating Plants Operating Lines

10

Capacity Utilization Tightening as U.S. Housing Recovers

Source: Owens Corning management estimates as of February 2014 rounded to nearest 5%. Products sold primarily to North American residential market. Excludes heavy density and loosefill products. Based on 2014 estimate of 1.1MM unlagged U.S. housing starts and other macro assumptions.

Toronto

Edmonton

Delmar

Candiac

Owens Corning Insulation North American Fiberglass Network

Eloy

Santa Clara

NewarkKansas City

WaxahachieFairburn

Mt. Vernon

Nephi

Lakeland

Continued Discipline in OC Capacity Management

Capacity utilization based as on estimated average 2014 total insulation production using melter capacitySource: Owens Corning management estimates 11

2014 Estimated Average Utilization:

Near full capacity

Below full capacity

Not in operation

Positioned to Grow with Our Markets

Insulation End-Use Markets

% of Full-Year 2013 Revenue

Expected Market Growth Drivers

Revenue CAGR2013 – 2015

U.S. and CanadaResidential New Construction

40%10-25%

U.S. and CanadaRepair and Remodel 0-10%

� Housing starts� Building energy code adoption� Household formation

� Aging housing stock

12Source: Owens Corning management estimates.CAGRs as of September 2013; estimated error margin of end-use market revenue below 5%

Repair and Remodel20%

0-10%

U.S. and CanadaCommercial and Industrial

24%5-10%

Latin America and Asia Pacific

16%

0-10%

� Aging housing stock� Energy efficiency policies

� Code and “green” specification driven

� Owner/operator focus

� Growing middle class � Infrastructure improvements� Urbanization of China

Continued Double-Digit Revenue Growth as Market Recovers


YTD 2013

Net sales* $474 $471 $1,408 $1,586

EBIT $58 $96 $200 $331

EBIT as % of sales

12% 20% 14% 21%

D&A $11 $9 $30 $28

Roofing Business

Q3 2014 Highlights� Increased volumes 7%, restored historical market

position

� Margins declined 8% primarily on lower prices

� Prices stabilized late in the quarter

� Expect full-year market to be down versus 2013


13


0%

5%

10%

15%

20%

25%

30%

$0

$400

$800

$1,200

$1,600

$2,000

$2,400

2010 2011 2012 2013 LTM


Sales* EBIT as % of sales*In millions


Construction

10%

U.S. & CanadaResidential Repair

& Remodeling

74%


15%

*Owens Corning management estimates; estimated error margin below 5%


International

1%

U.S. Asphalt Shingle Industry Consolidation

’70s ’80s ’90s Current

OCFRYGAFELK

CERTAINTEEDTAMKO

CELOTEXMANVILLE

IKOBIRD

ATLAS

OCGAFELK

CERTAINTEEDTAMKO

CELOTEXMANVILLE

IKOBIRD

ATLASGEORGIA PACIFIC

OCGAFELK

CERTAINTEEDTAMKO

CELOTEXIKO


GS ROOFING

OCGAF/ELK

CERTAINTEEDTAMKO

IKOATLASPABCO

MALARKEY

Source: Owens Corning management estimates and various industry sources and publications 14

Top 90% 16 13 10 4

Total 21 17 13 8


FLINTKOTEGLOBEPABCO

MALARKEY

LUNDAY THAGARDCUSTOM ROOFING

BIG CHIEFBEAR

PHILIP CAREY

PABCOMALARKEY

LUNDAY THAGARDCUSTOM ROOFING

GEORGIA PACIFICGENSTAR

GLOBEGLOBEPABCO

MALARKEY

MALARKEY

Favorable Industry Structure for the Future

3 3

3 2

7 8

18

8

3 22

17

6

19 11

6

7.5180

New construction

Re-roof Demand

Major StormsMM Sq.

U.S. Asphalt Shingle Market

Total Existing Home Sales

MM

33 30 31 32 34 37 39 35 26

17 11 11 11 14 17

107 103

109 110 113 116 116 112

100 96 93 91 93 94 88

6

0.00'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13

Total 143 136 143 144 154 161 173 155 129 135 120 108 122 118 111

15Source: Asphalt Roofing Manufacturers Association, Summary of Asphalt Roofing Industry Shipments. National Association of Realtors existing home sales and Owens Corning management estimates

Great Business in Well-Structured Industry

� Track record of strong financial performance

– Delivered average operating margins in excess of 20% during 2009-2013 period

� Re-roof demand over the last few years has been sluggish

– Housing activity forecasts support some demand growth– Housing activity forecasts support some demand growth

– Glass fiber mat and laminate advancements in the 1980s and 1990s could be extending replacement cycle

� Confidence in average operating margins of mid-teens or better over the mid term

16


YTD 2013

Net sales* $489 $453 $1,471 $1,384

EBIT $32 $21 $96 $62

EBIT as % of sales

7% 5% 7% 4%

D&A $31 $33 $99 $99

Composites Segment

Q3 2014 Highlights� Grew earnings by 50% on 5th consecutive quarter

of price improvement

� Improved manufacturing performance offset higher rebuild expenses

� Expect full-year EBIT improvement of around $40 million driven largely by higher pricing


17


-5%

0%

5%

10%

15%

$0

$600

$1,200

$1,800

$2,400

2010 2011 2012 2013 LTM


Sales* EBIT as % of sales*In millions*Owens Corning management estimates; estimated error margin below 5%



International

60%


Construction

3%

U.S. & CanadaResidential Repair

& Remodeling

10%


27%

Glass Fiber A $7 Billion Global Market

Construction35%

Consumer17%

Wind6%

• Residential• Commercial• Water transportation

& storage

• Appliances• Electronics• Recreation

18

Transportation28%

Industrial14%

Glass reinforcements market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarnsSource: Owens Corning management estimates as of Feb 2014

• Cars• Trucks, buses, trains• Marine

• Factories• Mining• Offshore platforms

A Key Material Enabling Solutions Essential to Everyday Life

Owens Corning Composites

� Global megatrends, continued growth in industrial production, and material substitution support glass fiber market growth at a 5-7% CAGR Price RealizationPrice Realization

Cost LeadershipCost Leadership

� Strategic focus on core building material markets with sustainable solutions

� Clear agenda to deliver improved returns

19Source: Owens Corning management estimates as of February 2014

Leader in an Industry Entering a Phase of Supply Tension

Product LeadershipProduct Leadership

Capital EfficiencyCapital Efficiency

Owens Corning CompositesPositioned to Win

#1 Position Emerging Position

20Sources: Owens Corning management estimates

% Market Revenue = market revenue in region as % of 2013 global market size % OC Revenue = OC revenue in region as % of OC Composites global 2013 salesGlass reinforcements market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns

#1 Position

#1 Position

Leading Market Positions and an Unrivaled Supply Network

OC glass fiber manufacturing siteOC downstream fabrication site

3,000

4,000

5,000

Glass Fiber Market DemandG

lass F

iber

K T

on

s

Glass Fiber Demand Has Grown at 1.6 Multiple of Industrial Production Growth

-

1,000

2,000

1981 1989 1997 2005 2013

21

Gla

ss F

iber

K T

on

s

Glass fiber market demand excludes E-glass yarnsSources: Fiber Economics Bureau, Glass Fiber Europe, Global Trade Information Services, Inc. and Owens Corning management estimates

Historical Glass Fiber Market Growth Averaging 5%

1.1

1.7

80%

90%

100%

2004 2006 2008 2010 2012 2014 2016

Glass Fiber Industry Estimated Capacity

90% Threshold

Est

ima

ted

Ca

pa

city

Uti

liza

tio

n

China Emergence

Capacity Overbuild

Macro Adjustment

Excess Inventory

Supply Tension

Improved Returns

0.5

1.1

0.9

0.4

0.5

2005-09 2010-12 2013-16

50%

60%

70%

80%

22

Tighter Capacity Environment Expected in the Near Term

Glass fiber market demand excludes E-glass yarnsSources: Fiber Economics Bureau, Glass Fiber Europe, Global Trade Information Services, Inc. and Owens Corning management estimates as of September 2014

(high probability additions)

0.1/ yr 0.3/ yr 0.1/ yr 0.1/ yr0.4/ yr 0.2/ yr

Change in global demand (MM T)

Change in global capacity (MM T)

Est

ima

ted

Ca

pa

city

Uti

liza

tio

n

Owens Corning Composites Focused on Creating Shareholder Value

� Significant actions, including capital and cash restructuring, to achieve goal of 75% low-delivered cost

– Extensive restructuring of high-cost assets in Europe, Japan and Canada

– Successful sale and closure of a high-cost facility in China

– Constructed several new low-cost production lines, while essentially – Constructed several new low-cost production lines, while essentially maintaining flat overall capacity

– Entered into creative alliances with China-based manufacturers

� Suspended melting capacity investments since 2012

� Delivered five consecutive quarters of price improvement

23

Business Actions Have Contributed to ROC Improvement

Sustaining a Strong Balance Sheet

� Maintaining investment-grade financial strength is a pillar of Owens Corning’s strategy

� Maintained investment-grade credit ratings from Standard & Poor's and Fitch

� $800 million revolving credit facility maturing in 2018

� $250 million accounts receivable facility, which matures in 2016

� $1.9 billion senior notes outstanding with 2016, 2019, 2022, 2024 and 2036 maturities

� Sustaining ample liquidity to support growth

� Capital markets remain open to Owens Corning

24

Tax Position is a Significant Asset

� Benefit from $2.1 billion NOL with estimated present value of approximately $5 per share

� Delivering cash tax savings of about $60 million per year

� Expect long-term book tax rate of 28% to 30% based � Expect long-term book tax rate of 28% to 30% based on geographic mix of earnings and tax planning

� Cash tax rate of 10% to 12% over the next few years

25Source: Owens Corning management estimates

Disciplined Capital Allocation Strategy

� Drive shareholder returns by enabling organic and inorganic growth and supporting the balance sheet

– Maintain investment grade

� Capital allocation strategy

– Investing in attractive organic growth– Investing in attractive organic growth

– Returning excess cash to shareholders

– Pursuing value-creating acquisitions

� Quarterly dividend initiated in 2014 conveys confidence in long-term financial outlook and cash flow generation

� As of September 30, 2014, 7.7 million shares remain available for repurchase under existing authorization

26

Key Financial Data

($ in millions, except per share data) Q3 2014 Q3 2013 YTD 2014 YTD 2013

Net sales $1,382 $1,320 $4,015 $4,017

Net earnings attributable to Owens Corning $52 $51 $193 $122

Diluted earnings per share attributable to Owens Corning common stockholders

$0.44 $0.43 $1.63 $1.02

Earnings before interest and taxes (EBIT) $107 $106 $288 $281

27

Adjusted EBIT $132 $119 $305 $320

Adjusted Earnings $74 $66 $154 $169

Adjusted EPS (diluted) $0.63 $0.56 $1.30 $1.42

Adjusted EBIT as a % of sales 10% 9% 8% 8%

Marketing and administrative expenses $110 $128 $372 $395

Depreciation and amortization $75 $78 $229 $235

Cash flow from operating activities $179 $173 $62 $158

Total debt (excluding rate swap), net of cash $2,131 $2,115 $2,131 $2,115

Appendix ANon-GAAP Reconciliations

28

Appendix ANon-GAAP Reconciliations

29

Documents

Owens Corning Positioned for Growths21.q4cdn.com/855213745/files/doc_presentations/...Founded in 1938, an industry leader in glass fiber insulation, roofing and glass fiber reinforcements