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TRANSCRIPT
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FOCUSED ON SHAREHOLDER VALUE
E
Q4 2019This presentation shared at the following events:
12/02/19 OC Roadshow Scott Cripps, Vice President, Investor Relations
11/04/19 OC Roadshow Hosted by Wells Fargo – Texas Brian Chambers, Chief Executive Officer
10/31/19 OC Roadshow Hosted by Zelman – Boston Brian Chambers, Chief Executive Officer
10/29/19 OC Roadshow Hosted by Northcoast – St. Louis Gunner Smith, President, Roofing
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FORWARD-LOOKING STATEMENTS AND NON-GAAP MEASURESThis presentation and the associated remarks 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. Such risks and uncertainties include, without limitation: macroeconomic factors like levels of construction activity, global industrial production, and industry, economic and political conditions, including new legislation, policies or other governmental actions in the U.S. or elsewhere; relationships with key customers and demand for our products; competitive and pricing factors; changes to tariff, trade or investment policies or law; currency, commodity and interest rate fluctuations; our level of indebtedness and the availability and cost of credit; weather conditions; ability to protect our intellectual property and information technology systems; energy, transportation, raw material and other input availability, price volatility and cost issues; labor disputes, legal and regulatory proceedings; ability to utilize our net operating loss carry-forwards; uninsured losses; issues related to acquisitions, divestitures and joint ventures; achievement of expected synergies or productivity improvements; levels of goodwill or other indefinite-lived intangible assets; pension obligations; and factors detailed from time to time in the Company’s SEC filings.
The terms “year to date” or last twelve months (“LTM”) refer to the period ended on the last calendar day of the quarter preceding the date of the investor event referenced on the first page above. Otherwise the information in this presentation speaks as of the date of the investor event, and is subject to change. The Company assumes no obligation to update or revise forward-looking statements except as required by law. Any distribution of this presentation after 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, which may be referenced in the Appendix. Adjusted EBIT, adjusted EBITDA, adjusted earnings, adjusted EPS 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. When the company provides forward-looking expectations for non-GAAP measures, the most comparable GAAP measures and reconciliations to those GAAPmeasures 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.
2THE PINK PANTHER™ & © 1964-2019 Metro-Goldwyn-Mayer Studios Inc. All Rights Reserved. © 2019 Owens Corning. All Rights Reserved.
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AGENDA
Investment highlights
Three strong businesses
Additional financial information
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1
2
3
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2018 REVENUE COUNTRIES WHERE WE OPERATE
CONSECUTIVE YEARS AS A FORTUNE® 500
COMPANY
OWENS CORNING AT A GLANCE
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EMPLOYEES
20,000
INSULATION | ROOFING | COMPOSITES
Serving residential, commercial, and industrial markets
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DISCIPLINED CAPITAL ALLOCATION
MARKET-LEADING POSITIONS STRONG CASH FLOW GENERATION
INNOVATIVE PRODUCT &PROCESS TECHNOLOGIES
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We are a global building and industrial materials leader that capitalizes on market-leading positions and innovative technologies to deliver substantial free cash flow and sustainable shareholder value
COMPELLING INVESTMENT THESIS
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7%
82%
6%
5%
27%
10%
23%
40%
1%
12%
29%58%
33%
13%
33%
34%
17%
19%
17%
34%
2006 2018
GLOBAL BUSINESSES IN ATTRACTIVE END MARKETSOwens Corning
revenue by end market
U.S. residential new construction
Consolidated figures eliminate intercompany net sales between reportable segments. Source: Owens Corning management estimates; estimated error margin +/- 5%. In the residential markets, certain products are used interchangeably in both new construction and repair and remodeling, and our customers typically sell into both markets. Due to these limitations, we have used management estimates and other assumptions to allocate residential market net sales
InternationalU.S. commercial and industrial
U.S residential repair and remodeling
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2018 revenue by end market
$5.4B $7.1BRoofing CompositesInsulation
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Accelerate organic growth
PURPOSEFUL ACTIONS HAVE RESULTED IN SUSTAINABLE IMPROVEMENT
Adjusted EBIT margin
2013 - 2015
13%9%7%
2006 - 2012
2016 - 2018
Management actions Enterprise improvement
7
Operating priorities
Implemented sustainable cost reductions across businesses
Invested in process and product technologies to fuel organic growth
Completed acquisitions delivering profitable growth and more stable earnings
Drive improved operating efficiencies
Generate strong freecash flow
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INVESTMENT HIGHLIGHTS
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OWENS CORNING $7,057 $861 12%2018 NET SALES 2018 ADJ EBIT 2018 ADJ EBITAS % OF NET SALES
#1 in North American residential fiberglass
A leader in technical insulation growth markets
$2,720 $290 11%
#2 in attractive industry generating strong operating margins
High margin Components business provides growth upside
$2,492 $434 17%
#1 in glass non-wovens
#2 in global glass fiber market$2,041 $251 12%
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THREE MARKET-LEADING BUSINESSES
Roofing
Insulation
Composites
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WELL-POSITIONED TO CAPTURE GROWTH FROM KEY SECULAR TRENDS
ENERGY EFFICIENCY PRODUCT SAFETY & SUSTAINABILITY
RENEWABLE ENERGY RISING LABOR COSTS & WORKER SHORTAGE
INVESTMENT IN INFRASTRUCTURE
Building code compliant
Fire resistant Wind turbines Roads, bridgesEasy and efficient
installation
Full temperature range solutions
Recyclable Solar homesPipes / water management
Pre-fabricated construction
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INNOVATIVE PRODUCT & PROCESS TECHNOLOGIES DELIVERING REVENUE GROWTH, IMPROVED MARGINS, AND CAPITAL EFFICIENCY
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Unique SureNail®
technologyIndustry-leading product designs
Glass material science
Sustainable high margins
Highly-specified applications
Advantaged costposition
DURATION®SHINGLES
SPECIALTY GLASS NON-WOVENS
ECOTOUCH®INSULATION
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LEVERAGING ENTERPRISE CAPABILITIES
Global footprint and scale
Commercial strength
Material science innovation
Manufacturing technologies
ROOFING
INSULATION
COMPOSITES
Safety and sustainability
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FREE CASH FLOW CONVERSION OUTPERFORMS PEER GROUP
Free cash flow conversion defined as (cash flow from operating activities – capital expenditures)/(adjusted earnings)Source: management estimates
0%
25%
50%
75%
100%
125%
Average 2016-18 free cash flow conversion
Owens CorningDow Jones U.S. Construction & Materials Index
13
EBIT margin improvement
Purposeful working capital management
Focused on operating and capital efficiency
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FOCUSED ON KEY DRIVERS OF SHAREHOLDER VALUE CREATION
Source: SEC filings, please refer to Appendix for reconciliation to Owens Corning SEC filings.
Return on capital
Adjusted EBIT marginRevenue growth
14
7.2%
9.3%
11.9% 12.2%
10.2%
2014 2015 2016 2017 2018
-0.7%
1.7%
6.1%
12.5%
10.5%
2014 2015 2016 2017 2018
7.8%
10.3%
13.1% 13.4%12.2%
2014 2015 2016 2017 2018
Free cash flow ($mm)
Free cash flow conversion: 103%
$50
$341
$570
$679
$266
2014 2015 2016 2017 2018
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CAPITAL ALLOCATION STRATEGY FOCUSES ON INCREASING TSR2016-2018: RETURNED OVER $900MM OF CASH TO SHAREHOLDERS
Cash to shareholders reflects dividends paid plus share repurchases of outstanding common stock. Source: Owens Corning SEC filings. 15
Maintain investment grade balance sheet
with flexibility to support growth and drive shareholder value
Maintain safe, sustainable, and productive operations
in our existing business
Invest in targeted growth opportunities
organic growth and bolt-on acquisitions
Capital allocation strategy Capital allocation targets over time
Return excess cash to shareholders
through dividends and share repurchases
2-3X debt/EBITDA leverage
Deploy capital in line with D&A with a focus on productivity and organic growth investments
Return at least 50% of free cash flow to shareholders
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SIGNIFICANT RECOGNITION FOR ESG LEADERSHIP
Ranked #1 seven years consecutively in the Building Products Group (top scores in environmental, social and economic for 3rd year in a row)
Earned “Gold Class” score in 2019 for the 6th consecutive year
Obtained a perfect score on 2019 Corporate Equality Index for the 15th time
Ranked 1st among 100 Best Corporate Citizens in 2019
Included in CDP’s “A List” for climate change, water and supply chain in 2017-2018
Recognized by Ethisphere as 1 of only 4 honorees in the Construction and Building Materials Industry
Earned the following ISS scores in 2019:• Environmental: 1• Social: 1 • Governance: 2
Note: recognitions and rankings as of September 2019 16
First company in the U.S. industrials sector to issue a green bond
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THREE STRONG BUSINESSES
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INSULATION BUSINESS
Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time. Revenue before inter-segment eliminations.
Five-year financial performance
EBIT as % of net salesNet sales in millions
Leverage broad portfolio in commercial and industrial markets around the world
U.S. residential construction macro environment below historical averages
Drive competitive advantage through operational and commercial technology
0%
2%
4%
6%
8%
10%
12%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2015 2016 2017 2018 LTM
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BUILT A STRONGER GLOBAL INSULATION BUSINESS
NORTH AMERICA EUROPE CHINA
HIGH
MID
LOW
TE
MP
ER
AT
UR
E R
AN
GE
PAROC® is a registered trademark for mineral wool insulation 19
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EXPANDED TECHNICAL AND OTHER BUILDING INSULATION TO DELIVER MORE STABLE AND ATTRACTIVE MARGINS
Insulation delivered 19% average EBITDA margin over the period 1985-2008
Acquisitions in technical insulation have grown and strengthened the business with attractive and stable margins
Investments in productivity and process technology enabling network optimization and a lower cost footprint
North American residential fiberglass insulation includes batts & rolls and loosefill sold to insulation contractors and distributors, home centers, and manufactured housing producers in the U.S. and Canada. Technical and other building insulation includes pipe and flexible duct media insulation, cellular glass insulation, foam, mineral fiber, and all building material products sold to Europe, Latin America and Asia. Comparability may differ over time. Margin of error on intra-segment EBITDA estimated to be below $15MM. Source: Historical data based on Owens Corning management estimates. Please refer to appendix for reconciliation to Owens Corning SEC filings. Competitive information based on legally obtained information from third parties and public sources.
(100)
0
100
200
300
400
2006(Peak)
2009(Trough)
2018E
BIT
DA
($
mm
)
North American residential fiberglass insulation
Technical and other building insulation
Insulation EBITDA and margins
% of net sales
30% 22% (11%) 13% 18% 17%
20
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ROOFING BUSINESS
Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time. Revenue before inter-segment eliminations.
EBIT as % of net salesNet sales in millions
Track record of strong operating performance
Positive outlook based on product preference and market drivers
Components business growing above market with attractive margins
Commercial & operational performance driving sustainable earnings
Five-year financial performance
0%
5%
10%
15%
20%
25%
$0
$600
$1,200
$1,800
$2,400
$3,000
2015 2016 2017 2018 LTM
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POSITIVE OUTLOOK FOR U.S. ASPHALT ROOFING DEMAND
+ + =
Housing activity below long term averages provides growth opportunity
Aging housing stock
Economic factors: existing home sales, home equity, consumer income
~40mm square average storm market in last 10 years
Weather events drive early replacement of roofs
Source: Owens Corning management estimates based on data from Principia Partners Roofing Data and RS Means – average roof size of 30 squares 22
Remodeling New constructionMajor storms & weather events
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REMODELING & NEW CONSTRUCTION MARKETS HAVE BEEN GROWING
26 17 11 11 11 14 17 18 19 20 21 22
7573
71 63 61 59 5860 65
68 7477
2523
21 28 31 34 30 2324
3034 24
3 2217
619 11 6 6
4
1515
13
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
New construction Remodeling Weather events Major storms
U.S. asphalt shingle market in mm squares
Total 129 135 120 108 122 118 111 107 112 133 144 136
Source: Owens Corning management estimates based on data provided by Asphalt Roofing Manufacturers Association - Summary of Asphalt Roofing Industry Shipments, National Oceanic and Atmospheric Administration, National Association of Realtors, U.S. Energy Information Administration, Moody’s Analytics, Oxford Economics reports, U.S. Bureau of Labor Statistics and U.S. Bureau of Economic Analysis 23
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COMPOSITES BUSINESS
Source: Owens Corning management estimates and Owens Corning SEC filings; comparability may differ over time. Revenue before inter-segment eliminations.
EBIT as % of net salesNet sales in millions
Continued global growth
Favorable industry trends
Well-positioned to leverage market growth with a capital-efficient strategy
Glass non-wovens is an attractive business with strong reinvestment economics
Five-year financial performance
0%
3%
6%
9%
12%
15%
$0
$500
$1,000
$1,500
$2,000
$2,500
2015 2016 2017 2018 LTM
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GLASS FIBER – AN $8B MARKET WITH FAVORABLE EXPOSUREMarkets
Size
Building & Construction
Transportation Consumer Industrial Power & Energy
Glass fiber market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns. Sources: Fiber Economics Bureau, GlassFibreEurope (APFE), Global Trade Information Services, Inc. and Owens Corning management estimates as of January 2019. 25
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% Market Revenue = market revenue in region as % of 2018 global market size; % OC Revenue = OC revenue in region as % of OC Composites global 2018 net sales; Glass reinforcements market defined as glass fiber reinforcements and direct conversion products as consumed, excluding yarns. Sources: Fiber Economics Bureau, GlassFibreEurope (APFE), Global Trade Information Services, Inc. and Owens Corning management estimates of 2018 global market.
POSITIONED TO COMPETE ANYWHERE IN THE WORLD
Glass Non-Wovens
Glass Reinforcements
33%
48%
% MarketRevenue
% OCRevenue
Americas
#1 Position
23% 29%
% MarketRevenue
% OCRevenue
EuropeEmerging position
#1 Position
18%13%
% MarketRevenue
% OCRevenue
Rest of world
26
26%
10%
% MarketRevenue
% OCRevenue
China
#1 Position
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ADDITIONAL FINANCIAL INFORMATION
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APPENDIX A: KEY FINANCIAL DATA – CORPORATE
Source: Owens Corning SEC filings; reportable segment totals are shown in SEC filings before intercompany eliminations, please refer to Appendix for reconciliation to Owens Corning SEC filings. 28
($ in millions, except per share data) Q3 2019 Q3 2018 YTD 2019 YTD 2018
Net sales 1,883 1,818 5,468 5,333
Net earnings attributable to Owens Corning 150 161 332 374
Diluted earnings per share (EPS) attributable to Owens Corning common stockholders
$1.36 $1.45 $3.02 $3.35
Earnings before interest and taxes (EBIT) 277 259 625 596
Earnings before interest, taxes, depreciation and amortization (EBITDA) 389 366 962 919
Adjusted EBIT 277 267 624 633
Adjusted EBITDA 389 373 961 947
Adjusted earnings 179 174 382 398
Adjusted EPS (diluted) $1.63 $1.57 $3.47 $3.56
Adjusted EBIT as a % of net sales 15% 15% 11% 12%
Adjusted EBITDA as a % of net sales 21% 21% 18% 18%
Depreciation and amortization (D&A) 112 107 337 323
Net cash flow provided by operating activities 309 200 596 506
Free cash flow 208 79 282 81
Net debt 3,155 3,533 3,155 3,533
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APPENDIX A: KEY FINANCIAL DATA – BUSINESS
Source: Owens Corning SEC filings; reportable segment totals are shown in SEC filings before intercompany eliminations
Insulation Roofing Composites
($ in millions) Q3 2019 Q3 2018 Q3 2019 Q3 2018 Q3 2019 Q3 2018
Net sales 693 710 713 645 531 508
EBIT 84 94 143 127 67 64
EBIT as % of net sales 12% 13% 20% 20% 13% 13%
D&A 48 47 14 13 37 36
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($ in millions) YTD 2019 YTD 2018 YTD 2019 YTD 2018 YTD 2019 YTD 2018
Net sales 1,945 1,988 2,105 1,946 1,579 1,560
EBIT 141 175 368 351 191 195
EBIT as % of net sales 7% 9% 17% 18% 12% 12%
D&A 146 138 40 38 114 109
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APPENDIX A: 2019 OUTLOOK
Environment consistent with consensus global industrial production growth, U.S. housing starts, and global commercial and industrial construction growth
Macro environment
Business outlook
• Strong cash flow generation
• Prioritize free cash flow to dividends & reduction of term
loan
• Additionally, free cash flow could be available for share
repurchases
• Corporate expenses: $110mm-$115mm
• Interest expense: approximately $130mm
• Capital expenditures: approximately $460mm, in-line
with D&A
• Depreciation & amortization: about $460mm
• Cash tax rate of: 9-11% and book tax rate of 26-28% on
adjusted pre-tax earnings
Other guidance items
Source: Owens Corning management estimates 30
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APPENDIX B: NON-GAAP RECONCILIATION – TABLE 1
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APPENDIX B: NON-GAAP RECONCILIATION – TABLE 2
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APPENDIX B: NON-GAAP RECONCILIATION – TABLE 3
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APPENDIX B: NON-GAAP RECONCILIATION – TABLE 4
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APPENDIX B: NON-GAAP RECONCILIATION – TABLE 5
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APPENDIX B: NON-GAAP RECONCILIATION – TABLE 6
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APPENDIX B: NON-GAAP RECONCILIATION – TABLE 7
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APPENDIX B: NON-GAAP RECONCILIATION – TABLE 8
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APPENDIX B: NON-GAAP RECONCILIATION – TABLE 9
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