Owens Corning Reports First-Quarter 2018 Results

April 25, 2018

Company Grew Net Sales by 14% to $1.7 Billion; Realized and Announced
Price Actions Expected to Overcome Inflation in 2018

Insulation grew EBIT by $27 million on strong price execution and
contribution from acquisitions
Roofing reported 15% EBIT margins as material and transportation
inflation outpaced positive pricing
Composites delivered flat revenue versus a strong prior year comparison
Integration of Paroc on-track

TOLEDO, Ohio–(BUSINESS WIRE)–Owens Corning (NYSE: OC) today reported consolidated net sales of $1.7
billion in first-quarter 2018, compared with net sales of $1.5 billion
in first-quarter 2017, an increase of 14%.

First-quarter 2018 net earnings attributable to Owens Corning were $92
million, or $0.82 per diluted share, compared with $101 million, or
$0.89 per diluted share, during the comparable quarter in 2017.
First-quarter 2018 adjusted earnings were $90 million, or $0.80 per
diluted share, compared with $97 million, or $0.85 per diluted share,
during the same period one year ago (See Use of Non-GAAP Measures, See
Table 3).

ÔÇ£Owens Corning is on-track to deliver another year of strong financial
performance, despite the greater than expected inflation that we have
experienced,ÔÇØ said Chairman and Chief Executive Officer Mike Thaman.
ÔÇ£The company grew revenue in the first quarter by 14%, but inflation
negatively impacted margins in all three businesses. We had good
realization on our price actions in the quarter and have announced
additional pricing actions intended to address our inflation outlook. We
are confident in our ability to manage current market conditions and
achieve our targets, as the strong fundamentals of the businesses remain
unchanged.ÔÇØ

Consolidated First-Quarter 2018 Results

Owens Corning sustained a high level of safety performance in
first-quarter 2018, with a recordable incident rate of 0.46, compared
with 0.49 in first-quarter 2017, representing a 6% reduction.
Reported earnings before interest and taxes (EBIT) for first-quarter
2018 were $131 million, compared with $170 million during the same
period in 2017. Adjusted EBIT in first-quarter 2018 was $152 million,
down from $171 million in 2017 (See Table 2).
During first-quarter 2018, Owens Corning repurchased 1.0 million
shares of its common stock for $83 million. As of the end of the
quarter, 6.5 million shares were available for repurchase under the
current authorization.

Other Significant Matters

On February 5, 2018, the company completed the acquisition of Paroc
Group, a leading producer of mineral wool insulation in Europe,
further broadening the product portfolio and expanding the geographic
footprint of the Insulation business. The company issued $400 million
of 30-year notes at 4.4% on January 25, 2018 in association with this
transaction.

2018 Outlook

The company expects an environment consistent with consensus
expectations for U.S. housing starts and global industrial production
growth.
In Roofing, the company expects growth in both the new construction
and remodeling markets. Storm demand at historical averages would
result in a mid-single digit decline of the overall asphalt shingle
market. The components business is expected to grow at a double-digit
rate. The company continues to expect to achieve sufficient pricing in
the year to overcome the impact of asphalt and transportation cost
inflation.
In Composites, the company expects continued growth in the glass fiber
market, driven by global industrial production growth. Despite higher
than anticipated inflation in the first quarter, the company continues
to target an EBIT improvement of about $20 million, with the benefit
of market growth and improved pricing partly offset by accelerated
inflation and higher rebuild costs.
In Insulation, the company continues to expect to deliver EBIT growth
of $150 million. First-quarter price realization is ahead of the
previously disclosed expectation, but the additional progress is
anticipated to be offset by transportation inflation in 2018. The
current EBIT outlook does not include the potential benefit of future
price activity, primarily in the U.S. residential new construction
business.
The company estimates an effective tax rate of 26 percent to 28
percent. The company also continues to expect a cash tax rate of 10
percent to 12 percent on adjusted pre-tax earnings, due to the
companyÔÇÖs U.S. tax net operating loss and foreign tax credit
carryforwards.
The company expects general corporate expenses to be between $140
million and $150 million in 2018. Capital additions in 2018 are
expected to total approximately $500 million. Interest expense is
expected to be between $125 million and $130 million.
For full-year 2018, the company expects to convert adjusted earnings
into free cash flow at about 100%.

Next Earnings Announcement

Second-quarter 2018 results will be announced on Wednesday, July 25,
2018.

First-Quarter 2018 Conference Call and
Presentation

Wednesday, April 25, 2018

11 a.m. Eastern Daylight Time

All Callers

Live dial-in telephone number: U.S. 1.888.317.6003; Canada
1.866.284.3684; and other international +1.412.317.6061.

Entry number: 461-6124 (Please dial in 10-15 minutes before conference
call start time)

Live webcast: https://services.choruscall.com/links/oc180425.html

Telephone and Webcast Replay

Telephone replay will be available one hour after the end of the call
through May 2, 2018. In the U.S., call 1.877.344.7529. In Canada, call
1.855.669.9658. In other international locations, call +1.412.317.0088.

Conference replay number: 101-18-778

Replay available at https://services.choruscall.com/links/oc180425.html

Webcast replay available until April 25, 2019

About Owens Corning

Owens Corning (NYSE: OC) develops, manufactures and markets insulation,
roofing, and fiberglass composites. Global in scope and human in scale,
the companyÔÇÖs market-leading businesses use their deep expertise in
materials, manufacturing and building science to develop products and
systems that save energy and improve comfort in commercial and
residential buildings. Through its glass reinforcements business, the
company makes thousands of products lighter, stronger and more durable.
Ultimately, Owens Corning people and products make the world a better
place. Based in Toledo, Ohio, Owens Corning posted 2017 sales of $6.4
billion and employs 19,000 people in 37 countries. It has been a Fortune
500┬« company for 63 consecutive years. For more information, please
visit www.owenscorning.com.

Use of Non-GAAP Measures

Owens Corning uses non-GAAP measures in its earnings press release that
are intended to supplement investorsÔÇÖ understanding of the companyÔÇÖs
financial information. These non-GAAP measures include EBIT, adjusted
EBIT, adjusted earnings, adjusted diluted earnings per share
attributable to Owens Corning common stockholders (ÔÇ£adjusted EPSÔÇØ),
adjusted pre-tax earnings, free cash flow and free cash flow conversion.
When used to report historical financial information, reconciliations of
these non-GAAP measures to the corresponding GAAP measures are included
in the financial tables of this press release. Specifically see Table 2
for EBIT and adjusted EBIT, Table 3 for adjusted earnings and adjusted
EPS, and Table 8 for free cash flow.

For purposes of internal review of Owens CorningÔÇÖs year-over-year
operational performance, management excludes from net earnings
attributable to Owens Corning certain items it believes are not
representative of ongoing operations. The non-GAAP financial measures
resulting from these adjustments (including adjusted EBIT, adjusted
earnings, adjusted EPS and adjusted pre-tax earnings) are used
internally by Owens Corning for various purposes, including reporting
results of operations to the Board of Directors, analysis of
performance, and related employee compensation measures. Management
believes that these adjustments result in a measure that provides a
useful representation of its operational performance; however, the
adjusted measures should not be considered in isolation or as a
substitute for net earnings attributable to Owens Corning as prepared in
accordance with GAAP.

Free cash flow is a non-GAAP liquidity measure used by investors,
financial analysts and management to help evaluate the company's ability
to generate cash to pursue opportunities that enhance shareholder value.
Free cash flow is not a measure of residual cash flow available for
discretionary expenditures due to the companyÔÇÖs mandatory debt service
requirements. As a conversion ratio, free cash flow is compared to
adjusted earnings. Free cash flow and free cash flow conversion are used
internally by the company for various purposes, including reporting
results of operations to the Board of Directors of the company and
analysis of performance. Management believes that these measures provide
a useful representation of our operational performance and liquidity;
however, the measures should not be considered in isolation or as a
substitute for net cash flow provided by operating activities or net
earnings attributable to Owens Corning as prepared in accordance with
GAAP.

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 effect on our future GAAP results.

Forward-Looking Statements

This news release 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. These forward-looking statements
are subject to risks, uncertainties and other factors and actual results
may differ materially from those results projected in the statements.
These risks, uncertainties and other factors include, without
limitation: relationships with key customers; levels of residential and
commercial construction activity; competitive and pricing factors;
levels of global industrial production; demand for our products;
industry and economic conditions that affect the market and operating
conditions of our customers, suppliers or lenders; domestic and
international economic and political conditions, including new
legislation, policies or other governmental actions in the U.S. or
elsewhere, including the impact of recent tax reform legislation and
related actions, interpretations, and regulatory guidance on our
financial condition and results of operations (including the assumptions
we make related thereto); foreign exchange and commodity price
fluctuations, our level of indebtedness; weather conditions;
availability and cost of credit; availability and cost of energy and raw
materials; issues involving implementation and protection of information
technology systems; labor disputes; legal and regulatory proceedings,
including litigation and environmental actions; our ability to utilize
net operating loss carry-forwards; research and development activities
and intellectual property protection; interest rate movements; uninsured
losses; issues related to acquisitions, divestitures and joint ventures;
achievement of expected synergies, cost reductions and/or productivity
improvements; defined benefit plan funding obligations; price volatility
in certain wind energy markets in the U.S.; and factors detailed from
time to time in the companyÔÇÖs Securities and Exchange Commission
filings. The information in this news release speaks as of April 25,
2018, and is subject to change. The company does not undertake any duty
to update or revise forward-looking statements except as required by
federal securities laws. Any distribution of this news release after
that date is not intended and should not be construed as updating or
confirming such information.

Owens Corning Investor Relations News

Table 1
Owens Corning and Subsidiaries
Consolidated Statements of Earnings
(unaudited)
(in millions, except per share amounts)
Three Months Ended
March 31,
2018	2017
NET SALES	$	1,691	$	1,478
COST OF SALES	1,336	1,136
Gross margin	355	342
OPERATING EXPENSES
Marketing and administrative expenses	185	142
Science and technology expenses	23	21
Other expenses, net	20	11
Total operating expenses	228	174
OPERATING INCOME	127	168
Non-operating income	(4	)	(2	)
EARNINGS BEFORE INTEREST AND TAXES	131	170
Interest expense, net	28	26
EARNINGS BEFORE TAXES	103	144
Income tax expense	11	43
NET EARNINGS	92	101
Net earnings attributable to noncontrolling interests	ÔÇö	ÔÇö
NET EARNINGS ATTRIBUTABLE TO OWENS CORNING	$	92	$	101
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS
Basic	$	0.83	$	0.90
Diluted	$	0.82	$	0.89
Dividend	$	0.21	$	0.20
WEIGHTED AVERAGE COMMON SHARES
Basic	111.5	112.3
Diluted	112.8	113.5

Table 2
Owens Corning and Subsidiaries
EBIT Reconciliation Schedules
(unaudited)
Adjusting income (expense) items to EBIT are shown in the table below (in millions):
Three Months Ended
March 31,
2018	2017
Restructuring costs	$	(5	)	$	ÔÇö
Acquisition-related costs	(14	)	(1	)
Recognition of acquisition inventory fair value step-up	(2	)	ÔÇö
Total adjusting items	$	(21	)	$	(1	)
The reconciliation from Net earnings attributable to Owens Corning to EBIT and Adjusted EBIT is shown in the table below (in millions):
Three Months Ended
March 31,
2018	2017
NET EARNINGS ATTRIBUTABLE TO OWENS CORNING	$	92	$	101
Net earnings attributable to noncontrolling interests	ÔÇö	ÔÇö
NET EARNINGS	92	101
Income tax expense	11	43
EARNINGS BEFORE TAXES	103	144
Interest expense, net	28	26
EARNINGS BEFORE INTEREST AND TAXES	131	170
Adjusting items from above	(21	)	(1	)
ADJUSTED EBIT	$	152	$	171

Table 3
Owens Corning and Subsidiaries
EPS Reconciliation Schedules
(unaudited)
(in millions, except per share data)

A reconciliation from Net earnings attributable to Owens Corning to adjusted earnings and a reconciliation from diluted earnings per share to adjusted diluted earnings per share are shown in the tables below:
Three Months Ended
March 31,
2018	2017
RECONCILIATION TO ADJUSTED EARNINGS
NET EARNINGS ATTRIBUTABLE TO OWENS CORNING	$	92	$	101
Adjustment to remove adjusting items (a)	21	1
Adjustment to remove tax benefit on adjusting items (b)	(7	)	ÔÇö
Adjustment to tax expense to reflect pro forma tax rate (c)	(16	)	(5	)
ADJUSTED EARNINGS	$	90	$	97
RECONCILIATION TO ADJUSTED DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS
DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS	$	0.82	$	0.89
Adjustment to remove adjusting items (a)	0.19	0.01
Adjustment to remove tax benefit on adjusting items (b)	(0.06	)	ÔÇö
Adjustment to tax expense to reflect pro forma tax rate (c)	(0.15	)	(0.05	)
ADJUSTED DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS	$	0.80	$	0.85
RECONCILIATION TO DILUTED SHARES OUTSTANDING
Weighted-average number of shares outstanding used for basic earnings per share	111.5	112.3
Non-vested restricted and performance shares	1.0	0.9
Options to purchase common stock	0.3	0.3
Weighted-average number of shares outstanding and common equivalent shares used for diluted earnings per share	112.8	113.5

(a)	Please refer to Table 2 "EBIT Reconciliation Schedules" for additional information on adjusting items.
(b)	The tax impact of adjusting items is based on our expected tax accounting treatment and rate for the jurisdiction of each adjusting item.
(c)	To compute adjusted earnings, we apply a full year pro forma effective tax rate to each quarter presented. For 2018, we have used a full year pro forma effective tax rate of 27%, which is the mid-point of our 2018 effective tax rate guidance of 26% to 28%. For comparability, in 2017, we have used an effective tax rate of 33%, which was our 2017 effective tax rate excluding the impact of our fourth quarter 2017 net charge related to the U.S. Tax Cuts and Jobs Act of 2017.

Table 4
Owens Corning and Subsidiaries
Consolidated Balance Sheets
(unaudited)
(in millions, except per share data)
March 31,	December 31,
ASSETS	2018	2017
CURRENT ASSETS
Cash and cash equivalents	$	140	$	246
Receivables, less allowances of $21 at March 31, 2018 and $19 at December 31, 2017	1,061	806
Inventories	943	841
Assets held for sale	3	12
Other current assets	81	80
Total current assets	2,228	1,985
Property, plant and equipment, net	3,755	3,425
Goodwill	1,962	1,507
Intangible assets, net	1,872	1,360
Deferred income taxes	155	144
Other non-current assets	241	211
TOTAL ASSETS	$	10,213	$	8,632
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	1,379	$	1,277
Short-term debt	1	1
Long-term debt ÔÇô current portion	4	4
Total current liabilities	1,384	1,282
Long-term debt, net of current portion	3,762	2,405
Pension plan liability	260	256
Other employee benefits liability	222	225
Deferred income taxes	143	37
Other liabilities	301	223
OWENS CORNING STOCKHOLDERSÔÇÖ EQUITY
Preferred stock, par value $0.01 per share (a)	ÔÇö	ÔÇö
Common stock, par value $0.01 per share (b)	1	1
Additional paid in capital	3,999	4,011
Accumulated earnings	1,631	1,575
Accumulated other comprehensive deficit	(530	)	(514	)
Cost of common stock in treasury (c)	(1,003	)	(911	)
Total Owens Corning stockholdersÔÇÖ equity	4,098	4,162
Noncontrolling interests	43	42
Total equity	4,141	4,204
TOTAL LIABILITIES AND EQUITY	$	10,213	$	8,632

(a)	10 shares authorized; none issued or outstanding at March 31, 2018, and December 31, 2017
(b)	400 shares authorized; 135.5 issued and 111.0 outstanding at March 31, 2018; 135.5 issued and 111.5 outstanding at December 31, 2017
(c)	24.5 shares at March 31, 2018, and 24.0 shares at December 31, 2017

Table 5
Owens Corning and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
(in millions)
Three Months Ended
March 31,
2018	2017
NET CASH FLOW (USED FOR) PROVIDED BY OPERATING ACTIVITIES
Net earnings	$	92	$	101
Adjustments to reconcile net earnings to cash (used for) provided by operating activities:
Depreciation and amortization	109	84
Deferred income taxes	1	27
Provision for pension and other employee benefits liabilities	ÔÇö	2
Stock-based compensation expense	9	10
Other non-cash	(1	)	6
Changes in operating assets and liabilities	(284	)	(204	)
Pension fund contributions	(6	)	(6	)
Payments for other employee benefits liabilities	(6	)	(8	)
Other	(4	)	(5	)
Net cash flow (used for) provided by operating activities	(90	)	7
NET CASH FLOW USED FOR INVESTING ACTIVITIES
Cash paid for property, plant and equipment	(101	)	(67	)
Proceeds from the sale of assets or affiliates	14	ÔÇö
Investment in subsidiaries and affiliates, net of cash acquired	(1,121	)	ÔÇö
Other	1	ÔÇö
Net cash flow used for investing activities	(1,207	)	(67	)
NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES
Proceeds from long-term debt	389	ÔÇö
Proceeds from senior revolving credit and receivables securitization facilities	565	194
Proceeds from term loan borrowing	600	ÔÇö
Payments on senior revolving credit and receivables securitization facilities	(197	)	(37	)
Dividends paid	(46	)	(45	)
Purchases of treasury stock	(111	)	(72	)
Other	1	3
Net cash flow provided by financing activities	1,201	43
Effect of exchange rate changes on cash	(10	)	6
Net decrease in cash, cash equivalents and restricted cash	(106	)	(11	)
Cash, cash equivalents and restricted cash at beginning of period	253	118
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	147	$	107

Table 6
Owens Corning and Subsidiaries
Segment Information
(unaudited)
Composites
The table below provides a summary of net sales, EBIT and depreciation and amortization expense for the Composites segment (in millions):
Three Months Ended
March 31,
2018	2017
Net sales	$	511	$	511
% change from prior year	ÔÇö	%	8	%
EBIT	$	60	$	71
EBIT as a % of net sales	12	%	14	%
Depreciation and amortization expense	$	37	$	36
Insulation
The table below provides a summary of net sales, EBIT and depreciation and amortization expense for the Insulation segment (in millions):
Three Months Ended
March 31,
2018	2017
Net sales	$	596	$	399
% change from prior year	49	%	4	%
EBIT	$	32	$	5
EBIT as a % of net sales	5	%	1	%
Depreciation and amortization expense	$	45	$	26
Roofing
The table below provides a summary of net sales, EBIT and depreciation and amortization expense for the Roofing segment (in millions):
Three Months Ended
March 31,
2018	2017
Net sales	$	642	$	627
% change from prior year	2	%	46	%
EBIT	$	97	$	125
EBIT as a % of net sales	15	%	20	%
Depreciation and amortization expense	$	12	$	12

Table 7
Owens Corning and Subsidiaries
Corporate, Other and Eliminations
(unaudited)
Corporate, Other and Eliminations
The table below provides a summary of EBIT and depreciation and amortization expense for the Corporate, Other and Eliminations category (in millions):
Three Months Ended
March 31,
2018	2017
Restructuring costs	$	(5	)	$	ÔÇö
Acquisition-related costs	(14	)	(1	)
Recognition of acquisition inventory fair value step-up	(2	)	ÔÇö
General corporate expense and other	(37	)	(30	)
EBIT	$	(58	)	$	(31	)
Depreciation and amortization	$	15	$	10

Table 8
Owens Corning and Subsidiaries
Free Cash Flow Reconciliation Schedule
(unaudited)
The reconciliation from net cash flow (used for) provided by operating activities to free cash flow is shown in the table below (in millions):
Three Months Ended
March 31,
2018	2017
NET CASH FLOW (USED FOR) PROVIDED BY OPERATING ACTIVITIES	$	(90	)	$	7
Less: Cash paid for property, plant and equipment	(101	)	(67	)
FREE CASH FLOW	$	(191	)	$	(60	)

Contacts

Owens Corning
Media Inquiries:
Chuck Hartlage,
419-248-5395
or
Investor Inquiries:
Thierry Denis,
419-248-5748

Owens Corning Reports First-Quarter 2018 Results

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