Owens Corning Reports Record Quarterly Results

26 October, 2011

Best Earnings Performance in the Company's History

TOLEDO, Ohio, Oct. 26, 2011 /PRNewswire via COMTEX/ --

  • Improved Third-Quarter EBIT and Revenue in All Three Businesses Versus 2010
  • Delivered 21-Percent EBIT Margins Year-to-Date in Roofing
  • Improved Performance in Insulation on Strong Execution
  • Grew Composites EBIT by 14 Percent Versus 2010

Owens Corning (NYSE: OC) today reported that consolidated net sales increased 22 percent to $1.5 billion in the third quarter of 2011, compared with $1.2 billion in the same period last year.

Third-quarter 2011 adjusted earnings, based on the company's expected full-year effective tax rate of 25 percent, were $110 million, or $0.90 per diluted share, compared with $44 million, or $0.35 per diluted share, during the same period last year. Third-quarter 2011 net earnings were $124 million, or $1.01 per diluted share, compared with net earnings of $58 million, or $0.46 per diluted share, in the third quarter of 2010. (See Tables 1, 2 and 3 for a discussion and reconciliation of these items.)

"Owens Corning delivered record earnings performance in the third quarter," said Chairman and Chief Executive Officer Mike Thaman. "We continue to benefit from strong execution in an uncertain economy and a resilient portfolio of market-leading businesses."

Consolidated Third-Quarter 2011 Results

  • Owens Corning's primary safety metric improved by approximately 25 percent year-to-date over the company's full-year 2010 performance. This positions the company for a tenth consecutive year of safety improvement.
  • Third-quarter earnings before interest and taxes (EBIT) was $177 million in 2011 compared with $69 million in the third quarter of 2010. In 2010, the company had certain items that were not the result of current operations. After adjusting for these items, Owens Corning's third-quarter 2010 EBIT was $90 million. (See Table 2 for a reconciliation of these items.)
  • Gross margin as a percentage of net sales was 22 percent in the third quarter of 2011 compared with 20 percent in 2010.

Other Financial Items

  • The company maintains a strong balance sheet with ample liquidity. The company refinanced its senior revolving credit facility in the quarter to extend its maturity to 2016 and reduce borrowing costs.
  • The company has repurchased 4.0 million shares of its common stock year-to-date. As of September 30, 2011, an additional 3.7 million shares remained available for repurchase.
  • Owens Corning's federal tax net operating loss carry-forward was $2.3 billion as of September 30, 2011.
  • At the end of the third quarter of 2011, excluding the impact of interest rate swaps, Owens Corning had total debt, less cash-on-hand of $1.96 billion, compared with $1.57 billion at the end of 2010.

Outlook

"The company's current-year estimate for EBIT is now in the range of $460 million to $490 million, reflecting our expectation that some portion of the storm-related demand for our Roofing products will materialize in 2012, as well as a moderated view of growth in the Composites market in 2011," Thaman said. "At the midpoint of this EBIT range, we anticipate delivering a second consecutive year of Adjusted EPS growth of nearly 40 percent."

Owens Corning outlines the following additional expectations for 2011:

As a result of tax-planning initiatives, the effective book tax rate for 2011 is now expected to be 25 percent or less. Cash taxes are expected to be less than $30 million in 2011. The company estimates a long-term effective tax rate of 25 percent to 28 percent based on the blend of effective tax rates for its U.S. and non-U.S. operations.

Depreciation and amortization expense will be approximately $330 million in 2011.

Capital expenditures in 2011 are expected to total approximately $400 million.

Next Earnings Announcement Fourth-quarter 2011 and full-year 2011 results will be announced on Wednesday, February 15, 2012.

Third-Quarter Conference Call and PresentationWednesday, October 26, 201111 a.m. Eastern Daylight Time

All Callers Live dial-in telephone number: U.S. 1-800-322-5044 or International 1-617-614-4927

Passcode: 64977007 (Please dial in 10 minutes before conference call start time.) Live webcast: http://www.owenscorning.com/investors

Telephone replay available through November 2, 2011: U.S. 1-888-286-8010 or International 1-617-801-6888 Passcode: 10726127 Replay of webcast also available at: http://www.owenscorning.com/investors

Presentation To view the slide presentation during the conference call, please log on to the live webcast at www.owenscorning.com/investors

About Owens Corning

Owens Corning (NYSE: OC) is a leading global producer of residential and commercial building materials, glass-fiber reinforcements and engineered materials for composite systems. A Fortune® 500 company for 57 consecutive years, Owens Corning is committed to driving sustainability by delivering solutions, transforming markets and enhancing lives. Founded in 1938, Owens Corning is a market-leading innovator of glass-fiber technology with sales of $5.0 billion in 2010 and approximately 15,000 employees in 28 countries on five continents. Additional information is available at www.owenscorning.com.

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 that could cause actual results to differ materially from those projected in these statements. Such factors include, without limitation: economic and political conditions, including new legislation or other governmental actions; levels of residential and commercial construction activity; competitive factors; pricing factors; weather conditions; our level of indebtedness; industry and economic conditions that affect the market and operating conditions of our customers, suppliers or lenders; availability and cost of energy and materials; availability and cost of credit; interest rate movements; issues related to expansion of our production capacity; issues related to acquisitions, divestitures and joint ventures; our ability to use our net operating loss carry-forwards; achievement of expected synergies, cost reductions and/or productivity improvements; issues involving implementation of new business systems; foreign exchange fluctuations; research and development activities; difficulties in managing production capacity; labor disputes; 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 the date October 26, 2011, and is subject to change. The company does not undertake any duty to update or revise forward-looking statements. Any distribution of this news release after that date is not intended and will not be construed as updating or confirming such information.

Table 1

Owens Corning and Subsidiaries

Consolidated Statements of Earnings

(unaudited)

(in millions, except per share amounts)






Three Months Ended


Nine Months Ended




Sept. 30,


Sept. 30,






2011



2010



2011



2010

NET SALES


$

1,450


$

1,186


$

4,139


$

3,829

COST OF SALES



1,133



950



3,341



3,073



Gross margin



317



236



798



756

OPERATING EXPENSES














Marketing and administrative expenses



119



123



395



385


Science and technology expenses



20



19



58



55


Charges related to cost reduction actions



-



15



-



24


Other (income) expenses, net



1



10



(28)



15



Total operating expenses



140



167



425



479

EARNINGS BEFORE INTEREST AND TAXES



177



69



373



277

Interest expense, net



28



28



81



85

EARNINGS BEFORE TAXES



149



41



292



192

Less: Income tax expense (benefit)



23



(19)



63



(854)

Equity in net earnings of affiliates



-



1



1



3

NET EARNINGS



126



61



230



1,049

Less: Net earnings attributable to noncontrolling interests



2



3



4



6

NET EARNINGS ATTRIBUTABLE TO OWENS CORNING


$

124


$

58


$

226


$

1,043
















EARNINGS PER COMMON SHARE ATTRIBUTABLE TO














OWENS CORNING COMMON STOCKHOLDERS















Basic


$

1.02


$

0.46


$

1.83


$

8.27



Diluted


$

1.01


$

0.46


$

1.82


$

8.19
















WEIGHTED-AVERAGE COMMON SHARES















Basic



121.7



125.1



123.2



126.1



Diluted



122.6



126.6



124.2



127.4


Owens Corning follows the authoritative guidance referring to "Noncontrolling Interest in Consolidated Financial Statements," effective January 1, 2009, which, among other things, changed the presentation format and certain captions of the Consolidated Statements of Earnings and Consolidated Balance Sheets. Owens Corning uses the captions recommended by this standard in its Consolidated Financial Statements such as net earnings attributable to Owens Corning and diluted earnings per common share attributable to Owens Corning common stockholders. However, in the preceding release Owens Corning has shortened this language to net earnings and earnings per share (or a slight variation thereof), respectively.

Table 2

Owens Corning and Subsidiaries

EBIT Reconciliation Schedules

(unaudited)

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 the result of current operations. The adjusted financial measure resulting from these adjustments is 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. Although management believes that these adjustments result in a measure that provides it a useful representation of its operational performance, the adjusted measure should not be considered in isolation or as a substitute for net earnings attributable to Owens Corning as prepared in accordance with accounting principles generally accepted in the United States.


Adjusting items are shown in the table below (in millions):




















Three Months Ended


Nine Months Ended




Sept. 30,


Sept. 30,





2011


2010


2011


2010

Charges related to cost reduction actions and related items

$

-


$

(16)


$

-


$

(33)

Acquisition, integration, transaction, and other costs


-



(4)



-



(6)

Net precious metal lease expense


-



(1)



-



(1)


Total adjusting items

$

-


$

(21)


$

-


$

(40)































The reconciliation from net earnings attributable to Owens Corning to Adjusted EBIT is shown in the table below (in millions):




















Three Months Ended


Nine Months Ended




Sept. 30,


Sept. 30,





2011


2010


2011


2010

NET EARNINGS ATTRIBUTABLE TO













OWENS CORNING

$

124


$

58


$

226


$

1,043



Less: Net earnings attributable to noncontrolling interests


2



3



4



6

NET EARNINGS


126



61



230



1,049


Equity in net earnings of affiliates


-



1



1



3


Income tax expense (benefit)


23



(19)



63



(854)

EARNINGS BEFORE TAXES


149



41



292



192


Interest expense, net


28



28



81



85

EARNINGS BEFORE INTEREST AND TAXES


177



69



373



277


Less: adjusting items from above


-



(21)



-



(40)

ADJUSTED EARNINGS BEFORE INTEREST AND TAXES

$

177


$

90


$

373


$

317


Table 3

Owens Corning and Subsidiaries

EPS Reconciliation Schedules

(unaudited)

(in millions, except per share data)

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 the result of current operations. The adjusted financial measures resulting from these adjustments 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. Although management believes that these adjustments result in measures that provide it a useful representation of its operational performance, 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 accounting principles generally accepted in the United States.

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


Nine Months Ended




Sept. 30,



Sept. 30,




2011



2010



2011



2010

RECONCILIATION TO ADJUSTED EARNINGS












Net earnings attributable to Owens Corning

$

124


$

58


$

226


$

1,043


Adjustment to remove adjusting items net of pro forma effective tax rate*


-



16



-



30


Adjustment to tax expense to reflect pro forma tax rate*


(14)



(30)



(10)



(903)

ADJUSTED EARNINGS

$

110


$

44


$

216


$

170














RECONCILIATION TO ADJUSTED DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS

























DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS

$

1.01


$

0.46


$

1.82


$

8.19


Adjustment to remove adjusting items net of pro forma tax rate*


-



0.13



-



0.23


Adjustment to tax expense to reflect a pro forma tax rate*


(0.11)



(0.24)



(0.08)



(7.09)

ADJUSTED DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS

$

0.90


$

0.35


$

1.74


$

1.33














RECONCILIATION TO DILUTED SHARES OUTSTANDING












Weighted-average shares outstanding used for basic earnings per share















121.7



125.1



123.2



126.1


Non-vested restricted shares


0.6



1.3



0.6



1.1


Options to purchase common stock


0.3



0.2



0.4



0.2

Diluted shares outstanding


122.6



126.6



124.2



127.4














* Pro forma tax rates used were 25% in 2011 and 2010 as this is the expected full-year effective tax rate based upon the projected blend of its U.S. and non-U.S. operations.





Table 4

Owens Corning and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

(in millions)










Nine Months Ended









Sept. 30,









2011



2010

NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES










Net earnings




$

230


$

1,049


Adjustments to reconcile net earnings to cash provided by operating activities:












Depreciation and amortization





243



242




Gain on sale of businesses and fixed assets





(30)



(4)




Deferred income taxes





29



(874)




Provision for pension and other employee benefits liabilities





26



23




Stock-based compensation expense





16



16




Other non-cash





(18)



(6)


Change in working capital





(330)



(132)


Pension fund contribution





(104)



(29)


Payments for other employee benefits liabilities





(17)



(19)


Other





14



15




Net cash flow provided by operating activities





59



281

NET CASH FLOW USED FOR INVESTING ACTIVITIES










Additions to plant and equipment





(303)



(199)


Investment in subsidiaries and affiliates, net of cash acquired





(84)



-


Proceeds from the sale of assets or affiliates





81



16




Net cash flow used for investing activities





(306)



(183)

NET CASH FLOW PROVIDED BY (USED FOR) FINANCING ACTIVITIES










Proceeds from senior revolving credit facility





805



406


Payments on senior revolving credit facility





(629)



(315)


Proceeds from long-term debt





6



1


Payments on long-term debt





(10)



(606)


Net increase (decrease) in short-term debt





219



(8)


Purchases of treasury stock





(138)



(102)


Other





12



2




Net cash flow provided by (used for) financing activities





265



(622)

Effect of exchange rate changes on cash





(20)



(5)

Net decrease in cash and cash equivalents





(2)



(529)

Cash and cash equivalents at beginning of period





52



564

CASH AND CASH EQUIVALENTS AT END OF PERIOD




$

50


$

35


Table 5

Owens Corning and Subsidiaries

Consolidated Balance Sheets

(unaudited)

(in millions)


ASSETS


Sept. 30,


Dec. 31,


2011


2010

CURRENT ASSETS








Cash and cash equivalents


$

50


$

52


Receivables, less allowances of $15 at Sept. 30, 2011, and $19 at Dec. 31, 2010



783



546


Inventories



746



620


Assets held for sale - current



-



16


Other current assets



214



174



Total current assets



1,793



1,408

Property, plant and equipment, net



2,839



2,754

Goodwill



1,145



1,088

Intangible assets



1,079



1,090

Deferred income taxes



517



529

Assets held for sale - non-current



-



26

Other non-current assets



293



263

TOTAL ASSETS


$

7,666


$

7,158










LIABILITIES AND EQUITY







CURRENT LIABILITIES








Accounts payable and accrued liabilities


$

960


$

942


Short-term debt



221



1


Long-term debt - current portion



3



5


Liabilities held for sale - current



-



7



Total current liabilities



1,184



955

Long-term debt, net of current portion



1,832



1,629

Pension plan liability



311



378

Other employee benefits liability



295



298

Deferred income taxes



60



75

Other liabilities



203



137

Commitments and contingencies







OWENS CORNING STOCKHOLDERS' EQUITY








Preferred stock, par value $0.01 per share (a)



-



-


Common stock, par value $0.01 per share (b)



1



1


Additional paid in capital



3,900



3,876


Accumulated earnings



420



194


Accumulated other comprehensive deficit



(217)



(194)


Cost of common stock in treasury (c)



(362)



(229)



Total Owens Corning stockholders' equity



3,742



3,648


Noncontrolling interests



39



38

Total equity



3,781



3,686

TOTAL LIABILITIES AND EQUITY


$

7,666


$

7,158










(a) 10 shares authorized; none issued or outstanding at Sept. 30, 2011, and Dec. 31, 2010

(b) 400 shares authorized; 134.4 issued and 120.9 outstanding at Sept. 30, 2011; 133.2 issued and 123.9 outstanding at Dec. 31, 2010

(c) 13.5 shares at Sept. 30, 2011, and 9.3 shares at Dec. 31, 2010


Table 6

Owens Corning and Subsidiaries

Segment and Business 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


Nine Months Ended



Sept. 30,


Sept. 30,



2011


2010


2011


2010

Net sales

$

496


$

477


$

1,517


$

1,431


% change from prior year


4%



6%



6%



21%














EBIT

$

49


$

43


$

152


$

116


EBIT as a % of net sales


10%



9%



10%



8%














Depreciation and amortization expense

$

31


$

32


$

97


$

90



Building Materials

The table below provides a summary of net sales, EBIT and depreciation and amortization expense for the Building Materials segment and our businesses within this segment (in millions):
















Three Months Ended


Nine Months Ended


Sept. 30,


Sept. 30,



2011


2010


2011


2010

Net sales













Insulation

$

365


$

315


$

981


$

953


Roofing


644



404



1,785



1,507


Other


-



23



-



66

Total Building Materials

$

1,009


$

742


$

2,766


$

2,526


% change from prior year

36%


-21%


10%


-2%














EBIT













Insulation

$

(12)


$

(18)


$

(97)


$

(80)


Roofing


156



91



374



368


Other


-



(6)



-



(16)

Total Building Materials

$

144


$

67


$

277


$

272


EBIT as a % of net sales

14%


9%


10%


11%














Depreciation and amortization expense













Insulation

$

30


$

34


$

89


$

94


Roofing


10



9



31



30

Total Building Materials

$

40


$

43


$

120


$

124


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


Nine Months Ended



Sept. 30,


Sept. 30,



2011


2010


2011


2010

Charges related to cost reduction actions and related items

$

-


$

(16)


$

(17)


$

(33)

Acquisition, integration, transaction and other costs


-



(4)



-



(6)

Net precious metal lease expense


-



(1)



-



(1)

Gain on sale of Capivari, Brazil, facility


-



-



16



-

General corporate expense and other


(16)



(20)



(55)



(71)

EBIT

$

(16)


$

(41)


$

(56)


$

(111)














Depreciation and amortization

$

7


$

8


$

26


$

28


SOURCE Owens Corning