Owens Corning Fiscal Q4 and 2006 Year in Review February 28, 2007 Exhibit 99.1 *************** *************** *************** *************** *************** *************** *************** *************** *************** *************** *************** *************** *************** *************** |
2 Forward-looking Statement and Non-GAAP Measures This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these statements. The forward-looking statements speak only to the dates hereof and are subject to change. The Company does not undertake any duty to update or revise forward-looking statements. Further information on factors that could affect the company's financial and other results is included in the company's Forms 10-Q and 10-K, filed with the Securities and Exchange Commission. Additional company information is available on the Owens Corning Website: www.owenscorning.com. Certain data included within this presentation contains "non-GAAP financial measures" as defined by the Securities and Exchange Commission. 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 Form 8-K, dated February 21, 2007 and on our website referenced above. |
3 Management Representatives David Brown President and Chief Executive Officer Michael Thaman Chairman of the Board and Chief Financial Officer Scott Deitz Vice President, Investor Relations • President & CEO since 2002 • Joined Owens Corning in 1978 • Chairman of the Board since 2002 • Chief Financial Officer since 2000 • Joined Owens Corning in 1992 • VP, Investor Relations since 2006 • Joined Owens Corning in 2005 |
4 Owens Corning Today • Fiscal 2006 sales of $6.5 billion, 19,000 employees in 26 countries • Leader in building materials systems and high-performance glass composites • Best known for PINK FIBERGLAS ® home insulation • Four business segments – Insulating Systems – Composite Solutions – Roofing & Asphalt – Other Building Materials & Services 2006 Fortune Magazine Most Admired Company in the building materials category; 50+ consecutive years on the Fortune 500 |
5 Market Leadership & Our Strong Brand Equity Leading North America Market Positions • Residential Insulation • Commercial & Industrial Insulation • Manufactured Stone Veneer • Residential Shingles • Roofing Asphalts Global Leader • Glass Fiber Reinforcement Materials used for Composites |
6 Fiscal 2006 In Review • Record sales of $6.461 billion, up 2.2% over 2005 • Adjusted Income from Operations of $569 million, up 4.6% compared with $544 million in 2005 • Gross margin as a percent of sales, excluding Fresh- Start Accounting and other restructuring charges, 17.5%, compared with 18.3% in 2005 • SG&A 8.3%, compared with 8.9% in 2005 |
7 2006 Income from Operations (IFO) $433 Provision for Asbestos Litigation ($13) C-11 Related Reorganization Items $55 Other Items (1) $94 Total Adjustments $136 2006 Adjusted Income from Operations $569 2006 Depreciation and Amortization (2) $278 Adjustments to remove items impacting comparability Reconciliation of 2006 Adjusted to Reported IFO ($MM) (1) Includes the impact of inventory write-up of $44MM; write-off of in-process R&D of $21MM; restructuring activities of $55MM; gain on sale of metals of ($45MM); and other of $19MM (2) Includes $21MM write-off of in-process R&D |
8 Fiscal Q4 & Fiscal 2006 Dynamics Q4 • Downturn in U.S housing starts impacted performance, especially Insulating Systems • Below trend-line storm demand, high asphalt prices and inventories depressed Roofing & Asphalt results • Exit of HOMExperts business; improved productivity within manufactured stone veneer • Performance improvement in Composite Solutions Business, especially reinforcements, continues 2006 • Emergence from asbestos-related Chapter 11, with finality • Investment-grade credit ratings achieved • Global Composites JV with Saint- Gobain announced • Strong cash generation • R’s on Us™ introduced • Innovative Duration™ Series roofing shingle with SureNail® technology introduced |
9 Balanced Portfolio of Varied End Markets Revenue by End Market 2006 Revenue: $6.5 billion U.S. & Canada New Residential Construction 36.0 % U.S. & Canada Residential Repair & Remodeling 34.0 % U.S. & Canada Commercial & Industrial 18.0 % International 12.0 % Source: Management Estimates |
10 Business Segment Overview (1) Percentages by segment based on revenue of $6.6B before corporate eliminations (2) Percentages based on segment results before reconciliation to income (loss) before income tax expense 2006 Income Before Income Tax Expense: $711 million (2) Insulating Systems 32% Roofing and Asphalt 26% Composite Solutions 23% Other Building Materials & Services 19% Insulating Systems 66% Roofing and Asphalt 10% Composite Solutions 22% Other Building Materials & Services 2% 2006 Revenue: $6.5 billion (1) |
11 Insulating Systems 2006 Revenue by End Market U.S. & Canada New Residential Construction 60% U.S. & Canada Repair & Remodeling 13% U.S. & Canada Commercial & Industrial 19% International 8% Financial performance ($MM) 500 1,000 1,500 2,000 $2,500 2003 2004 2005 2006 0% 5% 10% 15% 20% 25% Sales IFO Margin Management Estimates Based on Channel and Product Mix |
12 Roofing & Asphalt 2006 Revenue by End Market U.S. & Canada Commercial & Industrial 12% U.S. & Canada New Residential Construction 21% U.S. & Canada Residential Repair & Remodeling 67% 500 1,000 1,500 2,000 2003 2004 2005 2006 0% 2% 4% 6% 8% 10% Financial performance ($MM) Sales IFO Margin Management Estimates Based on Channel and Product Mix |
13 Other Building Materials & Services 2006 Revenue by End Market U.S. & Canada New Residential Construction 55% U.S. & Canada Residential Repair & Remodeling 42% U.S. & Canada Commercial & Industrial 3% 200 400 600 800 1,000 1,200 $1,400 2003 2004 2005 2006 0% 2% 4% 6% 8% 10% • Manufactured Stone Veneer • Vinyl Siding, Norandex/Reynolds Distribution (Exploring Strategic alternatives) • Franchising/Construction Services Financial performance ($MM) Sales IFO Margin Management Estimates Based on Channel and Product Mix |
14 Composite Solutions 2006 Revenue by End Market U.S. & Canada Commercial & Industrial 36% U.S. & Canada Residential Repair & Remodeling 13% U.S. & Canada New Residential Construction 4% International 47% 200 400 600 800 1,000 1,200 1,400 1,600 $1,800 2003 2004 2005 2006 0% 4% 8% 12% Financial performance ($MM) Sales IFO Margin Management Estimates Based on Channel and Product Mix |
15 Strategic Actions • Signed JV agreement to merge OC’s composites and reinforcements business with Saint-Gobain’s – Estimated world-wide revenues of $1.8 billion, 10,000 employees – Strengthened presence in developed and emerging markets – Owens Corning 60% ownership; Saint-Gobain 40% – OC option to purchase after 4 years • Exploring strategic alternatives for Siding Solutions Business & Fabwel unit; mid-year completion • Owens Corning share buy-back program – Authorized to purchase up to 5% of Owens Corning’s outstanding common stock – At current share price, represents approximately $200 million – Promote total return and value to shareholders |
16 2007 Outlook • Housing start slow down continues well into 2007 • First quarter weak, results improving through the year • Insulating Systems Business to lag starts by 90 days • Roofing & Asphalt improvement expected through the year • JV completed with continued improvement in composites results through the year • As a result of emergence, NOL of $2.8 billion resulting in estimated cash taxes to be 10% to 15% of pre-tax income for the next five to seven years • Owens Corning’s Adjusted Income from Operations estimated to exceed $415 million in 2007, based on current NAHB forecasts for 2007 US. housing starts |
17 Owens Corning Financial Strategies • Financial performance & discipline – Strong operational Cash Flow to foster growth and innovation – Continued focus on Return on Net Assets in excess of Cost of Capital • Balanced use of Free Cash Flow – Maintain strong balance sheet and sustain investment-grade credit profile – Invest maintenance capital – estimated at 80% of depreciation – Invest remainder of depreciation to improve and grow operations – Focused and disciplined organic growth and acquisitions – Support shareholder returns |
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