Owens Corning Delivers Record Full-Year 2022 Results

Owens Corning (NYSE: OC), a global building and construction materials leader, today reported fourth-quarter and full-year 2022 results.

• Reported Net Sales Increase of 15% in 2022 to $9.8 Billion
• Produced Full-Year Net Earnings of $1.2 Billion
• Expanded 2022 Adjusted EBIT Margins to 18% and Adjusted EBITDA Margins to 23%
• Delivered Diluted EPS of $12.70 and Adjusted Diluted EPS of $12.88
• Generated Operating Cash Flow of $1.8 Billion and Free Cash Flow of $1.3 Billion, Conversion of 104%
• Returned $931 Million, or 71%, of Free Cash Flow to Shareholders through Dividends and Share Repurchases

“Our strong performance in 2022 demonstrated the resiliency of our team, the strength of our businesses, and the earnings power of our company amid changing market conditions. During the year, we continued to advance our enterprise strategy, positioning the company for long-term success,” said Board Chair and Chief Executive Officer Brian Chambers. “While we anticipate our markets in 2023 will be more challenging, we remain focused on outperforming the market and delivering value for our shareholders.”

Enterprise Performance

Enterprise Strategy Highlights

• In 2022, the company continued to advance its strategy to strengthen its core building and construction products and expand into new product adjacencies, which will increase its addressable markets in higher growth segments, including:
  • The acquisition of WearDeck®, a premium producer of composite weather-resistant decking for commercial and residential applications.
  • The acquisition of Natural Polymers, LLC, an innovative manufacturer of spray polyurethane foam insulation for building and construction applications.
  • The acquisition of the remaining 50% interest in an existing joint venture based in the U.S., that produces high-quality wet-formed fiberglass mat for roofing applications.
  • The formation of a joint venture with Pultron Composites to manufacture industry-leading fiberglass rebar.
  • The sale of its European dry-use chopped strand manufacturing assets located in Chambéry, France.
• Owens Corning continues to invest in accelerating new product and process innovation to support customers and generate additional growth. In 2022, it launched 54 new or refreshed products, up 13% compared with 2021.
• Owens Corning sustained a high level of safety performance in 2022 with a recordable incident rate (RIR) of 0.65.
• Owens Corning continues to be recognized as a leader in environmental, social, and governance matters. In the fourth quarter, the company earned a place on the Dow Jones Sustainability World Index for the 13^th consecutive year.

Cash Returned to Shareholders

• During 2022, the company returned $931 million to shareholders through dividends and share repurchases. The company paid dividends of $136 million and repurchased 9.2 million shares of common stock for $795 million.
• In December 2022, Owens Corning announced its Board of Directors declared quarterly cash dividends of $0.52 per common share, an approximately 50% increase compared with the associated prior quarterly dividends.
• In December, Owens Corning’s Board of Directors approved a share repurchase authorization for up to 10 million shares of the company’s common stock. This was in addition to its previously announced share buyback program that had 4.4 million shares available for repurchase under the prior authorization as of the end of 2022.

“Earnings expansion, along with our ongoing disciplined management of working capital, operating expenses, and capital investments, drove record free cash flow generation in 2022 of $1.3 billion and conversion of 104%,” said Executive Vice President and Chief Financial Officer Ken Parks. “During the year, we returned 71% of free cash flow to shareholders through dividends and share repurchases, while deploying capital in support of our enterprise strategy. We remain committed to maintaining our investment-grade balance sheet and returning approximately 50% of free cash flow to shareholders over time through dividends and share repurchases.”

Other Notable Highlights

• As announced in December, Owens Corning completed the sale of its operations in Russia.

2022 Segment Performance

Full-Year

• Composites net sales increased 14% to $2.7 billion in 2022 compared with 2021, primarily due to higher selling prices and the favorable impact of customer mix partially offset by lower volumes and ongoing currency headwinds. EBIT increased $122 million to $498 million, with 19% EBIT margins, on higher selling prices, which offset input cost inflation and increased transportation costs as well as lower volumes and other manufacturing costs.
• Insulation net sales increased 17% to $3.7 billion compared with 2021, as a result of higher selling prices and favorable mix more than offsetting ongoing currency headwinds and slightly lower volumes. EBIT increased $166 million to $612 million, with 16% EBIT margins, on higher selling prices, which offset energy, material, and transportation inflation, production downtime, and other manufacturing costs.
• Roofing net sales increased 14% to $3.7 billion compared with 2021, primarily due to higher selling prices partially offset by lower volumes. EBIT increased $78 million to $831 million, with 23% EBIT margins, mainly due to higher selling prices, which offset cost inflation, primarily asphalt, and other manufacturing costs.

Fourth-Quarter

• Composites net sales decreased 3% to $589 million in fourth-quarter 2022 compared with fourth-quarter 2021, primarily due to lower volumes and unfavorable currency translation partially offset by higher selling prices. EBIT decreased $34 million to $64 million, with 11% EBIT margins, on ongoing input cost inflation, as well as lower volumes and the impact of production downtime and other manufacturing costs, which were partially offset by higher selling prices.
• Insulation net sales increased 11% to $956 million in fourth-quarter 2022 compared with fourth-quarter 2021, as a result of higher selling prices and a full quarter of sales from Natural Polymers partially offset by lower volumes and unfavorable currency translation. EBIT increased $25 million to $153 million, with 16% EBIT margins, on higher selling prices, which offset ongoing energy, material, and transportation inflation as well as the impact related to other manufacturing costs and production downtime.
• Roofing net sales increased 12% to $799 million in fourth-quarter 2022 compared with fourth-quarter 2021, primarily due to higher selling prices partially offset by lower volumes. EBIT increased $17 million to $168 million, with 21% EBIT margins, primarily due to higher selling prices, partially offset by cost inflation, primarily asphalt, as well as the impact of other manufacturing costs and lower volumes.

First-Quarter and Full-Year 2023 Outlook

• The key economic factors that impact the company’s businesses are residential repair and remodeling activity, U.S. housing starts, global commercial construction activity, and global industrial production.
• In the near term, the company expects many of its end markets to be more challenging as the impacts of ongoing inflation, higher interest rates, and continued geopolitical uncertainties result in a decelerating global economic environment.
• For first-quarter 2023, the company expects overall performance to result in a moderate decline of net sales, versus the comparable quarter in the prior year, with EBIT margins of low to mid-teens.

Current 2023 financial outlook is presented below.

The inability to predict the amount and timing of items impacting comparability makes a detailed reconciliation of forward-looking non-GAAP financial measures, including adjusted earnings, impracticable. Please see the end of this release for more information.

Fourth-Quarter 2022 Conference Call and Presentation

Wednesday, February 15, 2023

9 a.m. Eastern Time

All Callers

• Live dial-in telephone number: U.S. 1.844.200.6205; Canada 1.833.950.0062; and other international +1.929.526.1599.
• Entry number: 687873 (Please dial in 10-15 minutes before conference call start time)
• Live webcast: https://events.q4inc.com/attendee/250747915

Telephone and Webcast Replay

• Telephone replay will be available one hour after the end of the call through February 22, 2023. In the U.S., call 1.866.813.9403. In Canada, call 1.226.828.7578. In other international locations, call +44 204.525.0658.
• Conference replay number: 431709.
• Webcast replay will be available for one year using the above link.

About Owens Corning

Owens Corning is a global building and construction materials leader committed to building a sustainable future through material innovation. Our three integrated businesses – Composites, Insulation, and Roofing – provide durable, sustainable, energy-efficient solutions that leverage our unique material science, manufacturing, and market knowledge to help our customers win and grow. We are global in scope, human in scale with approximately 19,000 employees in 31 countries dedicated to generating value for our customers and shareholders, and making a difference in the communities where we work and live. Founded in 1938 and based in Toledo, Ohio, USA, Owens Corning posted 2022 sales of $9.8 billion. For more information, 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 investors' understanding of the company's financial information. These non-GAAP measures include EBIT, adjusted EBIT, EBITDA, adjusted EBITDA, adjusted earnings, adjusted diluted earnings per share attributable to Owens Corning common stockholders ("adjusted EPS"), adjusted pre-tax earnings, and free cash flow. 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, adjusted EBIT, EBITDA, and adjusted EBITDA, Table 7 for adjusted earnings and adjusted EPS, and Table 8 for free cash flow.

For purposes of internal review of Owens Corning's 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 EBITDA, 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. The company defines free cash flow as net cash flow provided by operating activities, less cash paid for property, plant and equipment. Free cash flow is not a measure of residual cash flow available for discretionary expenditures due to the company's mandatory debt service requirements. Free cash flow is 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 any results projected in the statements. These risks, uncertainties and other factors include, without limitation: levels of residential and commercial or industrial construction activity; demand for our products; supply constraints and increases in the cost of energy, particularly natural gas, as a result of the ongoing conflict in Ukraine; availability and cost of raw materials; industry and economic conditions including, but not limited to, supply chain disruptions, recessionary conditions, inflationary pressures and interest rate volatility, that affect the market and operating conditions of our customers, suppliers or lenders; levels of global industrial production; competitive and pricing factors; relationships with key customers and customer concentration in certain areas; issues related to acquisitions, divestitures and joint ventures or expansions; climate change, weather conditions and storm activity; legislation and related regulations or interpretations, in the United States or elsewhere; domestic and international economic and political conditions, policies or other governmental actions, as well as war and civil disturbance (such as Russia's invasion of Ukraine); changes to tariff, trade or investment policies or laws; uninsured losses, including those from natural disasters, catastrophes, pandemics, theft or sabotage; environmental, product-related or other legal and regulatory liabilities, proceedings or actions; research and development activities and intellectual property protection; issues involving implementation and protection of information technology systems; foreign exchange and commodity price fluctuations; our level of indebtedness; our liquidity and the availability and cost of credit; our ability to achieve expected synergies, cost reductions and/or productivity improvements; the level of fixed costs required to run our business; levels of goodwill or other indefinite-lived intangible assets; price volatility in certain wind energy markets in the U.S.; loss of key employees and labor disputes or shortages; and defined benefit plan funding obligations; and factors detailed from time to time in the company’s Securities and Exchange Commission filings. The information in this news release speaks as of February 15, 2023, 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.

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