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Owens Corning Positioned for Growth
Investor Visits Hosted by CL King & Associates June 17-18, 2013 - New York, NY
Thierry Denis Adam Bayer Director Investor Relations Leader Investor Relations
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 Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are any statements that are not historical facts, and they are based upon the Company’s current expectations. Because forward-looking statements involve risks and uncertainties, the Company’s actual results could differ materially from those projected in these statements. Information regarding some of the risks and uncertainties that could cause such differences can be found in the Company’s Securities and Exchange Commission (“SEC”) filings, including under Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
For purposes of this presentation, any discussion referring to “year to date” or last twelve months (“LTM”) refers to the period ended March 31, 2013. Otherwise the information in this presentation speaks as of June 17-18, 2013, and is subject to change. The Company does not undertake any duty to update or revise forward-looking statements. Any distribution of this presentation after June 18, 2013 is not intended and will not be construed as updating or confirming such information.
This presentation contains references to certain "non-GAAP financial measures" as defined by the SEC. A reconciliation of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles can be found in our Current Report on Form 8-K furnished to the SEC on April 24, 2013. This Form 8-K and additional Company information is available on the Owens Corning website: www.owenscorning.com. Free cash flow is the change in net debt excluding the cash impact of issuing new stock, repurchasing treasury stock, and paying stockholder dividends. Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, net precious metal lease expense, and other items that management does not allocate to our segment results because it believes they are not a result of the Company’s current operations.
THE PINK PANTHER™ © 1964-2012 Metro-Goldwyn-Mayer Studios Inc. All Rights Reserved. The color PINK is a registered trademark of Owens Corning. © 2012 Owens Corning.
Owens Corning at a Glance
Founded in 1938, an industry leader in glass fiber insulation, roofing and glass fiber reinforcements
2012 sales: $5.2 billion
15,000 employees in 27 countries
Fortune 500 company for 59 consecutive years
Component of Dow Jones Sustainability World Index
Three powerful businesses, three valuable franchises
– Insulation – Roofing – Composites
3
Investment Highlights
The Insulation business is a proven franchise prepared to return to historic margins
The Roofing business is positioned for growth as the U.S. housing market recovers
The Composites business is the leader in an attractive growth industry
4
Margin >= 10% 0%<= Margin < 10% Margin < 0%
Strong Portfolio Positioned for Growth
Insulation
Roofing
Composites
’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ‘12
Sources: Owens Corning’s SEC filings since 2006. For comparability purposes, prior years have been provided based on Owens Corning’s SEC filings, internal management reports, and management estimates 5
2012 Revenue by End Market*
$ (in millions) Q1 2013
Q1 2012 Change
Net sales* $330 $331 $(1)
EBIT $(21) $(34) $13
EBIT as % of sales (6)% (10)% 4%
D&A $26 $25 $1
6
Insulation Business
* before inter-segment eliminations
Q1 2013 Highlights Improved EBIT by $13 million
Realized meaningful pricing improvement across the business
Insulation volumes in the U.S. new residential construction market are tracking U.S. housing starts
Expect return to profitability for full-year 2013
-10%
-5%
0%
5%
10%
$0
$500
$1,000
$1,500
$2,000
2009 2010 2011 2012 LTM
Five-Year Financial Performance
Sales* EBIT as % of sales *In millions
International 19%
U.S. & Canada New Residential
Construction 37%
U.S .& Canada Residential Repair
& Remodeling 20%
U.S. & Canada Commercial & Industrial
24%
*Owens Corning management estimates
Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time
Positioned to Grow with Our Markets
7 Source: Owens Corning management estimates as of Feb 2013
Insulation End-Use Markets
% of 2012 Revenue
Expected Market Growth Drivers
Revenue CAGR 2011 – 2014
U.S. & Canada Residential New
Construction 37%
10-25%
U.S. & Canada Repair & Remodel
20% > 5%
U.S. & Canada Commercial & Industrial
24%
5-10%
Latin America & Asia Pacific
19% 5-10%
Housing starts Building energy code adoption Household formation
Aging housing stock Energy efficiency policies
Code and “green” specification driven
Owner operator focus
Growing middle class Infrastructure improvements Urbanization of China
Expect Double-Digit Revenue Growth as Market Recovers
8 Sources: Pacific Northwest National Laboratory, and Owens Corning management estimates as of Feb 2013 IECC – International Energy Conservation Code
Residential Energy Productivity
Acceleration of Code Adoption 2006-2015 Drives Demand for Insulation Products
2009 – 49% Built to 2006 Code 2012 – 85% Built to 2009 Code 2015 – Expect 57% Build to 2012 Code
0%
50%
100%
150%
no code 1987 2006 2009 2012 2015
Ener
gy E
ffici
ency
Impr
ovem
ent (
%)
Energy Codes
Year of Code IECC IECC IECC IECC
Goal
0.5
1
1.5
2005 2012 2016
Demand per start at forecasted code adoption level
9
Inde
xed
Fibe
rgla
ss In
sula
tion
Use
* US Census Bureau ** SF home size 2012 Q1-Q3 average Sources: North American Home Builders; US Census Bureau; Owens Corning management estimates as of Feb 2013
Potential demand per start if 2012 codes are adopted by all states
Multi-family mix 17% 31% 20-25% Single family home size (SF) 2,462 2,509** ~2,500 % Owner/Contractor built* 19% 24% 20-25%
Code Adoption and Improving Single- / Multi-Family Mix Drives Insulation Demand Growth of 25% or more from 2012-2016
Code Changes Support Increased Glass Fiber Demand
Eloy
Santa Clara
Toronto
Edmonton
Newark Kansas City
Waxahachie
Delmar
Fairburn
Continued Discipline in Capacity Management
Current Status: All lines operating Some lines down Facility mothballed
Mt. Vernon
Candiac
Capacity utilization based as of January 1, 2013, light density insulation Source: Owens Corning management estimates
Nephi
Lakeland
Salt Lake City
Owens Corning Insulation North American Fiberglass Network
Network Management National footprint to
support regional demand recovery
10
60% 70%
90%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Total Capacity Operating Plants Operating Lines
Insulation Industry North American Fiberglass
11
2013 Industry Capacity Utilization
Capacity Utilization Tightening as U.S. Housing Recovers
Capacity utilization based on 2013 estimate at 990,000 unlagged U.S. housing starts (Source: Feb 2013 Blue Chip consensus), light-density insulation.. Source: Owens Corning management estimates as of Feb 2013
-10%
0%
10%
20%
30%
'85 '88 '91 '94 '97 '00 '03 '06 '09 '12
% EBIT Avg % EBIT (15%)
Owens Corning Insulation A Proven Franchise
12 Source: 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
Well positioned to return to
historical margins
Improved cost and efficiency
Code adoption
Expected U.S. housing improvement
2012 Revenue by End Market*
$ (in millions) Q1 2013
Q1 2012 Change
Net sales* $607 $588 $19
EBIT $119 $83 $36
EBIT as % of sales 20% 14% 6%
D&A $10 $9 $1
13
Roofing Business
* before inter-segment eliminations
Q1 2013 Highlights Achieved 20% EBIT margins
Effective price execution in Q1 resulted in improved profitability; Q2 price increase in effect
Maintain outlook on full-year market demand and expectation of improved margins over 2012
0%
5%
10%
15%
20%
25%
30%
$0
$400
$800
$1,200
$1,600
$2,000
$2,400
2009 2010 2011 2012 LTM
Five-Year Financial Performance
Sales* EBIT as % of sales *In millions
U.S. & Canada New Residential
Construction 11%
U.S. & Canada Residential Repair
& Remodeling 73% U.S. & Canada
Commercial & Industrial
16%
*Owens Corning management estimates
Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time
Source: Owens Corning management estimates and various industry sources and publications
U.S. Asphalt Shingle Industry Consolidation
14
Top 90% 16 13 10 4 Total 21 17 13 8
’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
PABCO MALARKEY
LUNDAY THAGARD CUSTOM ROOFING
OC GAF ELK
CERTAINTEED TAMKO
CELOTEX MANVILLE
IKO BIRD
ATLAS GEORGIA PACIFIC
GENSTAR GLOBE
GLOBE PABCO
MALARKEY
OC GAF ELK
CERTAINTEED TAMKO
CELOTEX IKO
ATLAS GEORGIA PACIFIC
GS ROOFING
OC GAF/ELK
CERTAINTEED TAMKO
IKO ATLAS PABCO
MALARKEY
Favorable Industry Structure for the Future
33 33 30 31 32 34 37 39 35 26 17 11 11 11 14 26
106 107 103 109 110 113 116 116 112 100 96 93 91 93 94 104
5 3 3
3 2 7
8 18 8
3 22
17 6
19 11
9
0.0
7.5
0
180
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 15 Yr. Avg
New Construction Re-roof Major Storms Total Existing Home Sales
U.S. Asphalt Shingle Market Improved Housing Supports Demand Growth
15
Recovery to 15-Year Average Represents a 20% Increase in Non-Storm Demand
Total 144 143 136 143 144 154 161 173 155 129 135 120 108 122 118 139
- 5% CAGR
+ 3%
Source: Asphalt Roofing Manufacturers Association, Summary of Asphalt Roofing Industry Shipments. National Association of Realtors existing home sales and Owens Corning management estimates
5.3
Positioned for Growth
Great business in a well-structured industry
Asphalt shingle market growing 5-8% (over the next 3-5 years on non-storm demand) driven by improving U.S. housing activity
Continued improvements in shingle design, cost and mix
Confidence in operating margins of mid-teens or better
16
Strong Business Performance with Market Growth Opportunities
Source: Owens Corning management estimates as of Feb 2013
2012 Revenue by End Market*
$ (in millions) Q1 2013
Q1 2012 Change
Net sales* $459 $476 $(17)
EBIT $9 $23 $(14)
EBIT as % of sales 2% 5% (3)%
D&A $32 $30 $2
17
Composites Segment
* before inter-segment eliminations
Q1 2013 Highlights Lower production levels and input cost inflation
generated an unfavorable quarter-over-quarter comparison
Planned asset ramp-up complete; expect higher utilization rates throughout remainder of 2013
Full-year 2013 margins expected to exceed 2012
-5%
0%
5%
10%
15%
$0
$600
$1,200
$1,800
$2,400
2009 2010 2011 2012 LTM
Five-Year Financial Performance
Sales* EBIT as % of sales *In millions
International 62%
U.S. & Canada New Residential
Construction 3%
U.S. & Canada Residential Repair
& Remodeling 9%
U.S. & Canada Commercial & Industrial
26%
*Owens Corning management estimates
Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time
Glass Fiber A $7 Billion Global Market
18
Construction 34%
Transportation 27%
Industrial 15%
Consumer 16%
Wind 8%
Glass reinforcements market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns Source: Owens Corning management estimates as of Feb 2013
• Residential • Commercial • Water transportation
& storage
• Cars • Trucks, buses, trains • Marine
• Factories • Mining • Offshore platforms
• Appliances • Electronics • Recreation
A Key Material Enabling Solutions Essential to Everyday Life
-
1,000
2,000
3,000
4,000
5,000
1981 1989 1997 2005
Sustained Growth Led by Global Industrial Production and Material Substitution
Glass Fiber Market Demand 30 Years Averaging 5% CAGR
19
Gla
ss F
iber
K T
ons
Glass fiber market demand excludes E-glass yarns Sources: Fiber economic bureau, Glass Fiber Europe, Global Trade information Services, inc. and Owens Corning management estimates
5% Demand Growth Driven by 3% Industrial Production Growth
2012
20
0
0.9 1.1
1.6
3.8
Wood Steel Aluminum Glass Fiber Carbon Fiber
Global Glass Fiber Growth vs. Other Materials
Materials Growth as a Multiple of Change in Industrial Production
Global Market Size (Indexed to Glass Fiber)
26 55 12 1 0.15
Growth multiples over 1981-2012, except carbon fiber 1990-2012 and wood 1990-2011. Global market sizes estimated in revenue USD as of 2011 for wood, 2012 for others. Source: IHS Global Insight, Owens Corning management estimates, World Steel Association, Food and Agriculture Association of the United Nations, U.S. Geological Survey
Glass Fiber Growing as a Substitute for Traditional Materials
-150
-100
-50
0
50
100
150
200
250
300
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 100
110
120
130
140
150
160
170
180
190
200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
US PPI China PPI (USD basis)
Market Trends Favor Owens Corning Low-Cost Global Network
Change In Chinese Capacity Available For Export* China vs. U.S. inflation
21 * Chinese manufacturers, defined as CPIC, Jushi and Taishan, estimated capacity available for export Sources: IHS Global Insight, Owens Corning management estimates as of Feb 2013
Chinese Export Competitiveness Eroding
Gla
ss F
iber
K T
ons
0%
5%
10%
15%
20%
25%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Demand Outside China Served by Manufacturing in China
22 Source: Fiber Economic Bureau, Glass Fiber Europe, Global Trade Information Services, Inc. and Owens Corning management estimates Manufacturing in China defined as CPIC, Jushi and Taishan
Industry Structure Transformation Market Supply
China Exports Have Stabilized After Rapid Growth
Owens Corning Composites Positioned to Win
23
Sources: Owens Corning management estimates Definitions: EMEA: Europe, Middle East, Africa
% Market Revenue = market revenue in region as % of global market size % OC Revenue = OC revenue in region as % of OC Composites global 2012 sales Glass reinforcements market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns
#1 Position
31%
49%
% Market Revenue
% OC Revenue
Americas
#1 Position
25% 24%
% Market Revenue
% OC Revenue
EMEA
Emerging Position
25%
7%
% Market Revenue
% OC Revenue
China
#1 Position
20% 17%
% Market Revenue
% OC Revenue
Other Asia
Leading Market Positions and an Unrivaled Supply Network
OC glass fiber manufacturing site OC downstream fabrication site
A Winning Business
24
Owens Corning Composites Global Capacity
Percentage of Low Delivered Cost * Assets
30% 60%
75%
Mid-2010s 2012 2007
*Low delivered cost asset defined as delivered cost in the region at or below best competitive benchmark, glass fiber manufacturing Source: Owens Corning management estimates as of Feb 2013
0.5
1.1 1.1
1.7
0.3 0.5
2005-09 2010-12 2013-16 Change in global demand (MM T) Change in global capacity (MM T)
0.1 / yr 0.3 / yr 0.4 / yr 0.1 / yr 0.3 / yr 0.1 / yr 50%
60%
70%
80%
90%
100%
110%
Estim
ated
Cap
acity
Util
izat
ion
Glass Fiber Industry Capacity
25
Glass Fiber Industry Estimated Capacity Utilization
Tighter Capacity Environment Glass fiber market demand excludes E-glass yarns Sources: Fiber economic bureau, Glass Fiber Europe, Global Trade information Services, inc. and Owens Corning management estimates as of Apr 2013
Supply Tension
Over 20% of global capacity will need to be rebuilt in China between 2013 and 2016
Owens Corning does not expect to add incremental melting capacity before 2015
(high probability additions)
2004 2006 2008 2010 2012 2014 2016
Chinese Emergence
Capacity Overbuild
Macro Adjustment
Excess Inventory
Supply Tension Return on
Capital
Glass Fiber Industry Phases Signs of a New Era
26
High Utilization Rates and Reinvestment Economics Support Higher Returns
2005 – 2009 2010 – 2012 2013 – 2016
Owens Corning Composites A Winning Business
Global megatrends, continued growth in industrial production, and ongoing material substitution support glass fiber market growth at a 5-7% CAGR
Proliferating proven low delivered cost model to further improve competitive position
Glass fiber reinvestment economics in China are changing, as costs increase, currency appreciates, and furnaces require rebuilding
Composites materials remain a great value vs. other materials
Our focus is on offsetting inflation and returning margins to levels that support investment
27 Source: Owens Corning management estimates as of Feb 2013 Low delivered cost asset defined as delivered cost in the region at or below best competitive benchmark, glass fiber manufacturing
Business Growing in an Attractive Market
Sustaining a Strong Balance Sheet
Maintaining investment-grade financial strength is a pillar of Owens Corning’s strategy
Earned investment-grade credit ratings from Standard & Poor's and Fitch
$800 million revolving credit facility maturing in 2016
$250 million accounts receivable facility, which matures in 2014
$1.8 billion senior notes outstanding with 2016, 2019, 2022 and 2036 maturities
Sustaining ample liquidity to support growth
Capital markets remain open to Owens Corning
28
Tax Position is a Significant Asset
Benefit from $2.3 billion NOL with estimated present value of approximately $5 per share
Expect long-term book tax rate of 25% to 28% based on geographic mix of earnings and tax planning
Cash tax rate approximately 10% to 12% over the next few years
29 Source: Owens Corning management estimates as of Feb 2013
Disciplined Capital Allocation Strategy
Drive shareholder returns by enabling organic growth and supporting the balance sheet
Maintain capital allocation strategy
– Current debt level is appropriate
– Pursuing attractive organic investment opportunities
– Seeking acquisitions that add value to shareholders
– Share buy-back: 10 million shares available for repurchase as of March 31, 2013
Continue to consider a dividend when U.S. housing recovers and Insulation returns to profitability
30
Key Financial Data
31
($ in millions, except per share data) Q1 2013 Q1 2012
Net sales $1,350 $1,346
Net earnings (loss) attributable to Owens Corning $22 $(46)
Diluted earnings (loss) per share attributable to Owens Corning common stockholders $0.18 $(0.38)
Earnings (loss) before interest and taxes (EBIT) $57 $(12)
Adjusted EBIT $77 $43
Adjusted Earnings $35 $11
Adjusted EPS (diluted) $0.29 $0.09
Adjusted EBIT as a % of sales 6% 3%
Marketing and administrative expenses $133 $137
Depreciation and amortization $78 $89
Cash flow used for operating activities $179 $193
Total debt, net of cash $2,253 $2,170
2013 Corporate Environment & Guidance
32
Macro Environment
U.S. housing starts generally forecasted in the range of 900,000-1,000,000
Moderate global industrial production growth driving below-trend growth in glass fiber market
Primary Guidance
Expect adjusted EBIT to grow at least $100MM with potential upside
Expect margin performance improvement in each business
Pace of U.S. housing recovery and its impact on Building Materials margins will likely determine upside to guidance
Corporate expenses of about $120MM Capital expenditures around $380MM,
including Kearny roofing plant rebuild Depreciation & amortization about $315MM Cash tax rate of 10-12% and book tax rate of
25-28% on adjusted pre-tax earnings
Source: Owens Corning management estimates as of Apr 2013
Other Guidance Items
2013 Business Environment & Guidance
33
Roofing Insulation Composites
2013 margins to exceed 2012 Return to profitability 2013 margins to exceed 2012
Lower winter incentives, announced price increases
Growth in U.S.
residential new construction
Growth potential
in re-roofing
Storm comps vs. last year
Growth in U.S. residential new construction Asset capacity
utilization to tighten in 2013 Improved pricing
Current prices significantly below historical average
Higher capacity utilization and benefit of asset transformation Global market
growth Growth in U.S.
residential new construction
Financial Guidance
Source: IHS Global Insights, Moody’s and Owens Corning management estimates as of Apr 2013
First-quarter asset ramp up Nominal prices
flat with continued inflation Uncertain pace
of recovery in Europe, Brazil and India