Company Delivers Strong Operating Cash Flow; Board of Directors Approves Additional Share Repurchase Authorization for up to 10 Million Shares

Transcription

1 Third-Quarter 2016 Results Company Delivers Strong Operating Cash Flow; Board of Directors Approves Additional Share Repurchase Authorization for up to 10 Million Shares Mike Thaman Chairman & Chief Executive Officer Michael McMurray Chief Financial Officer October 26,

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 are based on factors such as, 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; 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 and cost issues; ability to protect our intellectual property and information technology systems; labor disputes, legal and regulatory proceedings; our ability to utilize net operating loss carry-forwards; issues related to acquisitions, divestitures and joint ventures, including related synergies; 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, including adjusted EBIT, adjusted earnings, adjusted EPS, adjusted pre-tax earnings and free cash flow. 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, 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 the text and Tables 2, 3, and 8 of the Press Release filed on Form 8-K on the date of this presentation. Adjusted EBIT is earnings before interest, taxes and other items that management does not allocate to our segment results because we believe they are not a result of the Company s current operations. Free cash flow is net cash flow provided by operating activities minus the sum of cash paid for property, plant, and equipment and purchases of alloy. 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. 2

3 Third-Quarter Business Results Today s Presentation Third-Quarter Review Financial Results Questions and Discussion Closing Remarks Mike Thaman Michael McMurray All Mike Thaman 3

4 Highlights and Outlook Maintained a high level of safety performance Delivered record third-quarter adjusted EBIT Insulation produced $38 million of EBIT Composites delivered EBIT of $61 million with 12% EBIT margins Roofing grew EBIT to $146 million, a 42% increase Improved free cash flow performance by $262 million YTD Board of Directors approved an additional share repurchase authorization for up to 10 million shares Anticipate continued growth in U.S. housing starts and moderate global industrial production growth in 2016 Continue to expect full-year adjusted EBIT of $700 million or more 4

5 Key Financial Data ($ in millions, except per share data) Q Q YTD 2016 YTD 2015 Net sales $1,518 $1,447 $4,294 $4,053 Net earnings attributable to Owens Corning $112 $112 $307 $221 Diluted earnings per share attributable to Owens Corning common stockholders $0.97 $0.95 $2.65 $1.87 Earnings before interest and taxes (EBIT) $207 $196 $563 $410 Adjusted EBIT $218 $198 $589 $414 Adjusted Earnings $125 $113 $337 $225 Adjusted EPS (diluted) $1.09 $0.96 $2.91 $1.91 Adjusted EBIT as a % of sales 14% 14% 14% 10% Depreciation and amortization $84 $73 $242 $224 Net cash flow provided by operating activities $353 $304 $679 $410 Free cash flow $259 $214 $398 $136 Total debt (excluding rate swap), net of cash $2,046 $1,917 $2,046 $1,917 5

6 ($ millions) Reconciliation from Q Adjusted EBIT to Q EBIT $218 $(11) $ Q Adj EBIT Acquisition & Restructuring Costs Q EBIT 6

7 Adjusted EBIT ($ millions) Adjusted EBIT by Business Q Compared with Q $43 $0 ($20) ($3) $ $ Q Adj EBIT Roofing Composites Insulation Corporate & Other Q Adj EBIT 7

8 Insulation Business Q Highlights Insulation delivered $38MM of EBIT EBIT declined by $20MM primarily on lower production volumes Expect 2016 revenue could be down by about 5%, and EBIT margin down 1% Announced Q4 decision to retire 200MM lbs residential fiberglass facility (currently mothballed) $ (in millions) Q Q YTD 2016 YTD 2015 Net sales* $476 $502 $1,275 $1,332 EBIT $38 $58 $83 $90 EBIT as % of sales 8% 12% 7% 7% D&A $26 $25 $78 $75 * before inter-segment eliminations 2015 Revenue by End Market* Commercial & Industrial 24% $2,000 $1,500 Five-Year Financial Performance 15% 10% U.S.& Canada Residential Repair & Remodeling 22% New Residential Construction 39% $1,000 $500 5% 0% International 15% *Owens Corning management estimates; estimated error margin below 5% $ LTM Sales* EBIT as % of sales *In millions -5% Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time 8

9 Composites Business Q Highlights Delivered EBIT of $61MM with 12% EBIT margins Price and volume continued to contribute to performance Anticipate continued growth in the glass fiber market driven by moderate global IP growth Expect the business to improve EBIT by about $30 million in 2016 $ (in millions) Q Q YTD 2016 YTD 2015 Net sales* $496 $486 $1,486 $1,457 EBIT $61 $61 $199 $188 EBIT as % of sales 12% 13% 13% 13% D&A $36 $29 $103 $92 * before inter-segment eliminations Commercial & Industrial 29% 2015 Revenue by End Market* New Residential Construction 2% $2,400 $1,800 Five-Year Financial Performance 16% 12% Residential Repair & Remodeling 9% International 60% *Owens Corning management estimates; estimated error margin below 5% $1,200 $600 $ LTM Sales* EBIT as % of sales *In millions 8% 4% 0% Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time 9

10 Roofing Business Q Highlights Grew EBIT to $146MM, a 42% increase Delivered 24% EBIT margins on higher volume and lower asphalt costs Expect low-teen market growth for 2016, including modest demand from Hurricane Matthew $ (in millions) Q Q YTD 2016 YTD 2015 Net sales* $603 $502 $1,711 $1,398 EBIT $146 $103 $388 $213 EBIT as % of sales 24% 21% 23% 15% D&A $13 $10 $34 $29 * before inter-segment eliminations 2015 Revenue by End Market* $2,500 Five-Year Financial Performance 25% Residential Repair & Remodeling 76% Commercial & Industrial 13% New Residential Construction 10% International 1% *Owens Corning management estimates; estimated error margin below 5% $2,000 $1,500 $1,000 $500 $ LTM Sales* EBIT as % of sales *In millions 20% 15% 10% 5% 0% Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time 10

11 Significant Financial Matters Declared a cash dividend of $0.18 per share, payable on November 2, 2016 to shareholders of record as of October 17, 2016 Repurchased 1.6 million shares of common stock in Q3 for $86 million The Board of Directors approved an additional share repurchase authorization for up to 10 million shares Issued $400 million 10-year bond to redeem higher-interest rate notes and repaid term loan associated with the InterWrap financing 11

12 2016 Outlook & Guidance U.S. housing starts at consensus level Expect moderate global industrial production growth Anticipate strong conversion ratio of adjusted earnings to free cash flow Expect full-year adjusted EBIT of $700 million or more, and free cash flow of about $450 million 12

13 2016 Other Financial Guidance Now expect corporate expenses at the bottom half of the $120 million to $130 million guidance range Capital additions of approximately $385 million, including an estimated $50 million for the completion of a mineral fiber facility Depreciation and amortization of about $320 million Interest expenses expected to be $110 million including the financing of the InterWrap acquisition U.S. tax N.O.L. of $2.0 billion is estimated to significantly offset cash taxes for some time to come Estimate cash taxes of 10% to 12% and book tax rate of 32% to 34% on adjusted pre-tax earnings Note: U.S. tax N.O.L balance as of 12/31/

14 Third-Quarter 2016 Results Questions and Discussion Mike Thaman Chairman & Chief Executive Officer Michael McMurray Chief Financial Officer October 26,