Owens Corning Positioned for Growth

Transcription

1 Owens Corning Positioned for Growth Q This presentation shared at the following event: 09/22/2014 Owens Corning Roadshow Milwaukee/Chicago Thierry Denis, Director IR 09/19/2014 Zelman Housing Summit Tysons Corner, VA Mike Thaman, Chief Executive Officer 09/09/2014 OC Roadshow hosted by Bank of America Boston Mike Thaman, Chief Executive Officer

2 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 the Private Securities Litigation Reform Act of Forwardlooking 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, economic and political conditions, including; 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; availability and cost of energy and raw materials; difficulties managing production capacity; issues involving implementation of new business systems; new legislation or other governmental actions; labor disputes and litigation; our ability to use our net operating loss carry-forwards; research and development activities; foreign exchange fluctuations; interest rate movements; labor disputes; 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 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 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

3 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

4 Investment Highlights Composites Roofing Market-leading business with improving economic conditions and higher utilization rates Strong business performance in a recovering U.S. housing market Insulation Progress supports confidence in return to historical profitability Three Market-Leading Businesses 4

5 Outlook and Highlights Continued to focus on building a safer workplace; year-to-date safety performance consistent with prior year Delivered adjusted EBIT of $96 million Insulation grew EBIT by $14 million, marking the 12 th consecutive quarter of performance improvement Composites delivered EBIT of $37 million on improved pricing, operating performance, and volumes Roofing volume weakness continued; market share improved versus first quarter but still below historical levels 5

6 Strong Portfolio Positioned for Growth Insulation Roofing Composites Margin >= 10% 0%<= Margin < 10% Margin < 0% Sources: Owens Corning s SEC filings since For comparability purposes, prior years have been provided based on Owens Corning s SEC filings, internal management reports, and management estimates. 6

7 Insulation Business Q Highlights Delivered 12 th consecutive quarter of EBIT improvement Improved EBIT by $14 million on higher pricing and volume growth Expect 2014 results to benefit from growth in U.S. new construction, pricing and operating leverage $ (in millions) Q Q H H 2013 Net sales* $447 $415 $802 $745 EBIT $18 $4 $19 $(17) EBIT as % of sales 4% 1% 2% (2)% D&A $26 $27 $51 $53 * before inter-segment eliminations 2013 Revenue by End Market* U.S. & Canada Commercial & Industrial 24% $2,000 $1,500 Five-Year Financial Performance 10% 5% U.S.& Canada Residential Repair & Remodeling 20% U.S. & Canada New Residential Construction 40% $1,000 $500 0% -5% International 16% *Owens Corning management estimates; estimated error margin below 5% $ LTM Sales* EBIT as % of sales *In millions -10% Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time 7

8 Owens Corning Insulation EBIT Progress $40 Q1 Q2 Q3 Q4 39 of Dollars $20 $ EBIT in Millions -$20 -$40 -$ $ Actual 2012 Actual 2013 Actual 2014 Actual Consistent Quarterly EBIT Progression Since 2011 Source: Owens Corning quarterly and annual SEC filings 8

9 Owens Corning Insulation Well Positioned to Return to Historical Margins 30% EBIT Margin Avg EBIT Margin '85-'08 (15%) 20% 10% 0% -10% '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 LTM 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; 9

10 Insulation Industry North American Fiberglass 100% 2014 Industry Capacity Utilization 90% 80% 60% 65% 75% 40% 20% 0% Total Capacity Operating Plants Operating Lines 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. 10

11 Owens Corning Insulation North American Fiberglass Network Edmonton Candiac Toronto Delmar Santa Clara Nephi Kansas City Mt. Vernon Newark Eloy 2014 Estimated Average Utilization: Near full capacity Below full capacity Not in operation Waxahachie Fairburn Lakeland Continued Discipline in OC Capacity Management Capacity utilization based as on estimated average 2014 total insulation production using melter capacity Source: Owens Corning management estimates 11

12 Positioned to Grow with Our Markets Insulation End-Use Markets % of Full-Year 2013 Revenue U.S. and Canada Residential New Construction 40% Expected Market Growth Drivers Housing starts Building energy code adoption Household formation Revenue CAGR % U.S. and Canada Repair and Remodel 20% U.S. and Canada Commercial and Industrial 24% Aging housing stock Energy efficiency policies Code and green specification driven Owner/operator focus 0-10% 5-10% Latin America and Asia Pacific 16% Growing middle class Infrastructure improvements Urbanization of China 0-10% Continued Double-Digit Revenue Growth as Market Recovers Source: Owens Corning management estimates. CAGRs as of September 2013; estimated error margin of end-use market revenue below 5% 12

13 Roofing Business Q Highlights Revenue down 14% primarily on weak shipments Delivered 14% EBIT margins on lower volume leverage, lower prices, and higher asphalt costs Expect full-year market to be flat to slightly down from 2013 $ (in millions) Q Q H H 2013 Net sales* $437 $508 $934 $1,115 EBIT $62 $116 $142 $235 EBIT as % of sales 14% 23% 15% 21% D&A $10 $9 $19 $19 * before inter-segment eliminations 2013 Revenue by End Market* $2,400 Five-Year Financial Performance 30% U.S. & Canada Residential Repair & Remodeling 74% U.S. & Canada Commercial & Industrial 15% U.S. & Canada New Residential Construction 10% International 1% *Owens Corning management estimates; estimated error margin below 5% $2,000 $1,600 $1,200 $800 $400 $ LTM Sales* EBIT as % of sales *In millions 25% 20% 15% 10% 5% 0% Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time 13

14 U.S. Asphalt Shingle Industry Consolidation 70s 80s 90s Current OC FRY GAF ELK CERTAINTEED TAMKO CELOTEX MANVILLE IKO BIRD ATLAS GEORGIA PACIFIC FLINTKOTE GLOBE PABCO MALARKEY LUNDAY THAGARD CUSTOM ROOFING BIG CHIEF BEAR PHILIP CAREY OC GAF ELK CERTAINTEED TAMKO CELOTEX MANVILLE IKO BIRD ATLAS GEORGIA PACIFIC GENSTAR GLOBE PABCO MALARKEY LUNDAY THAGARD CUSTOM ROOFING OC GAF ELK CERTAINTEED TAMKO CELOTEX IKO ATLAS GEORGIA PACIFIC GS ROOFING GLOBE PABCO MALARKEY OC GAF/ELK CERTAINTEED TAMKO IKO ATLAS PABCO MALARKEY Top 90% Total Favorable Industry Structure for the Future Source: Owens Corning management estimates and various industry sources and publications 14

15 U.S. Asphalt Shingle Market MM Sq. Major Storms MM Re-roof Demand New construction Total Existing Home Sales '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 ' Total Source: Asphalt Roofing Manufacturers Association, Summary of Asphalt Roofing Industry Shipments. National Association of Realtors existing home sales and Owens Corning management estimates 15

16 Great Business in Well-Structured Industry Track record of strong financial performance Delivered average operating margins in excess of 20% during period Re-roof demand over the last few years has been sluggish 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

17 Composites Segment Q Highlights Delivered EBIT of $37 million on improved pricing, operating performance, and volumes Planned furnace rebuilds under way; anticipate rebuild costs to peak in Q3 Progress in pricing supports outlook for full-year improvement at the top end of $20 million to $30 million range $ (in millions) Q Q H H 2013 Net sales* $505 $472 $982 $931 EBIT $37 $32 $64 $41 EBIT as % of sales 7% 7% 7% 4% D&A $34 $34 $68 $66 * before inter-segment eliminations U.S. & Canada Commercial & Industrial 27% 2013 Revenue by End Market* U.S. & Canada New Residential Construction 3% $2,400 $1,800 Five-Year Financial Performance 15% 10% U.S. & Canada Residential Repair & Remodeling 10% International 60% *Owens Corning management estimates; estimated error margin below 5% $1,200 $600 $ LTM Sales* EBIT as % of sales *In millions 5% 0% -5% Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time 17

18 Glass Fiber A $7 Billion Global Market Appliances Electronics Recreation Consumer 17% Wind 6% Residential Commercial Water transportation & storage Construction 35% Industrial 14% Transportation 28% Factories Mining Offshore platforms Cars Trucks, buses, trains 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 as of Feb

19 Owens Corning Composites Positioned to Win #1 Position Emerging Position #1 Position OC glass fiber manufacturing site OC downstream fabrication site #1 Position Leading Market Positions and an Unrivaled Supply Network Sources: 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 sales Glass reinforcements market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns 19

20 Glass Fiber Market Demand 5,000 4,000 Glass Fiber Demand Has Grown at 1.6 Multiple of Industrial Production Growth Glass Fibe er K Tons 3,000 2,000 1, Historical Glass Fiber Market Growth Averaging 5% Glass fiber market demand excludes E-glass yarns Sources: Fiber Economics Bureau, Glass Fiber Europe, Global Trade Information Services, Inc. and Owens Corning management estimates 20

21 Glass Fiber Industry Phases Signs of a New Era China Emergence Capacity Overbuild Macro Adjustment Excess Inventory Supply Tension Improved Returns High Utilization Rates and Reinvestment Economics Support Higher Returns 21

22 Glass Fiber Industry Estimated Capacity 100% Estimated Capac city Utilization 90% 80% 70% 60% Supply Tension (high probability additions) 90% Threshold Change in global demand (MM T) Change in global capacity (MM T) 50% 0.1/ yr 0.3/ yr 0.4/ yr 0.1/ yr 0.2/ yr 0.1/ yr Tighter Capacity Environment Expected in the Near Term Glass fiber market demand excludes E-glass yarns Sources: Fiber Economics Bureau, Glass Fiber Europe, Global Trade Information Services, Inc. and Owens Corning management estimates as of September

23 Price Realization EBIT Margin Industry Capacity Utilization Historical highs in China Global 30-year lows Widespread idle and curtailed factories China delays startups Global tightness Sharp recovery causes supply shock Demand outpaces restart of idle capacity China capacity all operational Europe negative; slower global growth Large inventory builds OC Pricing ~$100MM gain ~$50MM loss ~$100MM gain ~$30MM loss (all in 2012) Margin: 10%+ Margin: 0% - 10% Margin: < 0% Tight Industry Capacity has Provided Significant Pricing Opportunity in the Recent Past Sources: Owens Corning s SEC filings since For comparability purposes, prior years have been provided based on Owens Corning s SEC filings, internal management reports, and management estimates. 23

24 Owens Corning Composites Global megatrends, continued growth in industrial production, and material substitution support glass fiber market growth at a 5-7% CAGR Strategic focus on core building material markets with sustainable solutions Cost Leadership Price Realization Product Leadership Capital Efficiency Clear agenda to deliver improved returns Leader in an Industry Entering a Phase of Supply Tension Source: Owens Corning management estimates as of February

25 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 $1.8 billion senior notes outstanding with 2016, 2019, 2022 and 2036 maturities Sustaining ample liquidity to support growth Capital markets remain open to Owens Corning 25

26 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 on geographic mix of earnings and tax planning Cash tax rate of 10% to 12% over the next few years Source: Owens Corning management estimates 26

27 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 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 June 30, 2014, 7.7 million shares remain available for repurchase under existing authorization 27

28 Key Financial Data ($ in millions, except per share data) Q Q H H 2013 Net sales $1,355 $1,347 $2,633 $2,697 Net earnings attributable to Owens Corning $21 $49 $141 $71 Diluted earnings per share attributable to Owens Corning common stockholders $0.18 $0.41 $1.19 $0.59 Earnings before interest and taxes (EBIT) $73 $118 $181 $175 Adjusted EBIT $96 $124 $173 $201 Adjusted Earnings $45 $68 $80 $103 Adjusted EPS (diluted) $0.38 $0.56 $0.68 $0.86 Adjusted EBIT as a % of sales 7% 9% 7% 7% Marketing and administrative expenses $130 $134 $262 $267 Depreciation and amortization $78 $79 $154 $157 Cash flow from (used for) operating activities $155 $164 $(117) $(15) Total debt (excluding rate swap), net of cash $2,194 $2,180 $2,194 $2,180 28

29 Appendix A Non-GAAP Reconciliations 29

30 Appendix A Non-GAAP Reconciliations 30