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Owens Corning Reports 2008 Second-Quarter ResultsStrong Second-Quarter Performance Drives Improved Outlook for 2008 TOLEDO, July 30 /PRNewswire-FirstCall/ -- Owens Corning (NYSE: OC) reported today that consolidated net sales increased 23 percent to $1.6 billion during the second quarter, compared with $1.3 billion in the second quarter of 2007. Second-quarter sales increased due to the company's composites acquisition, strong global demand for glass fiber reinforcements, price increases in Roofing and Asphalt to partially offset raw material cost inflation, and storm-related demand for roofing products. The company's second-quarter earnings from continuing operations were $31 million, or $0.24 per diluted share. Adjusted earnings from continuing operations were $33 million, or $0.25 per adjusted diluted share, excluding comparability items (see attached Table 3 for a discussion and reconciliation of such items). Consolidated Second-Quarter and Six-Month Results
-- Earnings before interest and taxes (EBIT) from continuing operations in
the second quarter of 2008 were $64 million, compared with $76 million
during the same period in 2007, a decrease of 16 percent. Excluding
comparability items (see Table 2), adjusted EBIT from continuing
operations for the second quarter of 2008 was $77 million compared with
$92 million during the same period in 2007, a decrease of 16 percent.
The decrease was primarily the result of weakness in the U.S. housing
market, which impacted demand for the company's residential insulation
and other building materials. The decrease was partially offset by
incremental earnings related to the company's composites acquisition
and solid profitability in Roofing and Asphalt.
-- For the first six months, EBIT was $83 million, compared with $108
million during the same period of 2007. Excluding comparability items
(see Table 2), adjusted EBIT for the first half of 2008 was $131
million, compared with $151 million during the same period in 2007.
-- Gross margin as a percentage of consolidated net sales was 16 percent
during the second quarter of 2008, compared with 19 percent during the
same period in 2007. For the first six months of 2008, gross margin as
a percentage of sales declined 3 percentage points compared to the
first half of 2007. Insulating Systems gross margins decreased in the
second quarter and first six months of 2008 compared to 2007 due to
reductions in sales volume, price declines and the impact of inflation
in energy and raw material costs. These decreases were partially offset
by improved margins in the Composite Solutions business during the
second quarter and the first six months of 2008, and improved margins
in the Roofing and Asphalt segment in the second quarter.
-- Owens Corning continued its progress on improving the safety
performance of its global workforce. For the six-month period ending
June 30, 2008, the company reduced workplace injuries by 45 percent,
compared with its 2007 year-end rate.
"I am pleased with our second-quarter performance," said Mike Thaman, chairman and chief executive officer. "We gained momentum during the quarter as sales growth in our global composites business continued to be solid. The integration of our composites acquisition continues to be on-track and has positioned the company for improved performance. In addition, the return to profitability of our Roofing and Asphalt business added to our confidence for the year. Our balance sheet is strong, and we are now positioned for solid performance that improves our outlook for 2008." Owens Corning now estimates that 2008 adjusted EBIT will be at least $265 million, a 10-percent increase from its prior estimate of at least $240 million. Owens Corning excludes from this estimate items impacting comparability and the financial cost of leasing precious metals. Other Financial Items
-- During the first quarter of 2007, Owens Corning announced a share buy-
back program under which the company was authorized to repurchase up to
5 percent of Owens Corning's outstanding common stock. The company
repurchased approximately 1 million shares at an average price of
$23.55 under this program during the second quarter of 2008. This
represents 16 percent of the company's repurchase authorization. As of
June 30, 2008, the company had 130.7 million shares outstanding.
-- As part of the operational integration of its composites acquisition,
Owens Corning sold precious metals that resulted in a net gain of $22
million in the second quarter of 2008. The sales were part of the
company's ongoing program to reduce its operational requirements for
certain precious metals and to use the proceeds to acquire other
precious metals in order to reduce metal lease obligations.
-- At the end of the second quarter of 2008, Owens Corning had net debt of
less than $2.0 billion, comprised of $2.1 billion of short- and long-
term debt and cash-on-hand of $121 million. Owens Corning estimates
that net debt at the end of 2008 will be at or below year-end 2007.
-- Owens Corning's federal tax net operating loss carryforward resulting
from the distribution of cash and stock to settle its prior Chapter 11
case in 2006 was $3.0 billion at the end of the second quarter of 2008.
The company's U.S. cash tax rate is expected to be less than 2 percent
for at least the next five to seven years.
-- Owens Corning completed the divestiture of its composite manufacturing
facilities in Battice, Belgium, and Birkeland, Norway, on May 1, 2008,
for net cash proceeds of $192 million plus the assumption of certain
liabilities by the purchaser.
-- During the second quarter of 2008, depreciation and amortization from
continuing operations totaled $79 million. Owens Corning currently
estimates that depreciation and amortization from continuing operations
will total approximately $315 million in 2008.
Subsequent Events
On July 29, 2008, Owens Corning announced that it will more than double the production capacity of its glass fiber composites facility in Gous- Khrustalny, Russia, in 2009 to take advantage of strong market demand in that region. The expanded facility in Russia will produce a complete range of composite products using Owens Corning's advanced technology for glass fiber production and fabrication. Construction is planned to begin in 2008, with start-up anticipated by the end of 2009. Owens Corning acquired the Russian production facility as part of its 2007 composites acquisition. Outlook Owens Corning expects continued global strength in its composite materials business throughout 2008. The company is on-track to achieve at least $30 million in synergies in 2008 from its recent composites acquisition. Weakness in the U.S. housing market will continue to affect demand for Owens Corning's residential insulation products throughout 2008. The company will continue to focus on improved operational management, the creation of insulation demand based on the need for improved energy efficiency and greenhouse gas reductions around the world, and the development of innovative products and sales promotions under the company's PINK is Green™ initiative. Capital expenditures in 2008, excluding precious metal purchases, are now estimated to be about $350 million. The increased capital will be targeted to achieve growth and synergies in the composites business, as well as to accelerate energy reduction programs of all operations. Owens Corning had previously estimated that capital expenditures for 2008 would total $325 million. Owens Corning anticipates that its 2008 global effective tax rate will be substantially below the U.S. federal income tax rate. The company expects its U.S. cash taxes will be minimal, and that its cash effective tax rate in its foreign operations will be 15 percent or less in 2008. Business Segment Highlights
Composite Solutions
-- Net sales for the second quarter of 2008 were $660 million, a 70-
percent increase from $389 million during the same period in 2007. The
increase was primarily the result of the company's 2007 composites
acquisition and continued strong global demand for glass fiber
reinforcement products.
-- EBIT from continuing operations for the second quarter of 2008 was $71
million, compared with $26 million during the same period in 2007. The
increase was primarily due to incremental earnings associated with the
company's composites acquisition and the impact of improved
manufacturing productivity.
Insulating Systems
-- Net sales for the second quarter of 2008 were $413 million, a 6-percent
decrease from $441 million during the same period in 2007. Sales for
residential insulation products continue to be significantly impacted
by the reduction in new residential construction and repair and
remodeling in the United States.
-- EBIT from continuing operations for the second quarter of 2008 was $7
million, compared with $42 million during the same period in 2007. The
decline was primarily due to lower selling prices, and inflation in raw
materials, energy and delivery costs.
Roofing and Asphalt
-- Net sales for the second quarter of 2008 were $475 million, a 15-
percent increase from $414 million during the same period in 2007. The
increase was primarily the result of price increases to partially
offset inflation in raw materials, primarily asphalt, and delivery
costs.
-- EBIT from continuing operations for the second quarter of 2008 was $37
million, compared with $29 million during the same period in 2007. The
increase was due to improved manufacturing productivity resulting from
higher capacity utilization supported by storm-related demand.
Other Building Materials and Services
-- Net sales for the second quarter of 2008 were $69 million, a 21-percent
decrease from $87 million during the same period in 2007. The decline
was primarily the result of declines in the company's Masonry Products
business related to the lower demand from new construction and repair
and remodeling markets in the United States.
-- EBIT from continuing operations for the second quarter of 2008 was a
loss of $5 million, compared with earnings of $7 million during the
same period in 2007. The change was primarily due to the decline in
sales volumes and increased idle facility costs in Masonry Products.
Third-quarter 2008 results are currently scheduled to be announced on Oct. 29, 2008. Conference Call and Presentation Wednesday, July 30, 2008 11 a.m. ET All Callers Live dial-in telephone number: 1-866-700-0133 or 1-617-213-8831 (Please dial in 10 minutes before conference call start time) Passcode: 10734453 Presentation To view the slide presentation during the conference call, please log on to the live webcast at http://www.owenscorning.com/investors . A telephone replay will be available through August 13, 2008 at 1-888-286-8010 or 1-617-801-6888. Passcode: 43774917. A replay of the webcast will also be available at http://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 54 consecutive years, Owens Corning is committed to driving sustainability through 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 billion in 2007 and 18,000 employees in 26 countries on five continents. Additional information is available at http://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, many of which are outside the control of the company, which could cause actual results to differ materially from those projected in these statements and from the company's historical results and experience. Such factors include competitive factors, pricing pressures, availability and cost of energy and materials, acquisitions and achievement of expected synergies therefrom, general economic conditions and factors detailed from time to time in the company's Securities and Exchange Commission filings. Since it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results, the above list should not be considered a complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and the company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Table 1
Owens Corning and Subsidiaries
Consolidated Statements of Earnings
(Unaudited)
(in millions, except per share data)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
NET SALES $1,574 $1,282 $2,927 $2,406
COST OF SALES 1,327 1,044 2,488 1,981
Gross Margin 247 238 439 425
OPERATING EXPENSES
Marketing and administrative expenses 165 136 307 263
Science and technology expenses 17 16 36 31
Restructuring costs (credits) 4 - 6 (2)
Chapter 11-related reorganization items - - - 3
Employee emergence equity program
expense 7 12 14 20
(Gain) loss on sale of fixed assets
and other (10) (2) (7) 2
Total operating expenses 183 162 356 317
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INTEREST AND TAXES 64 76 83 108
Interest expense, net 29 31 61 63
EARNINGS FROM CONTINUING OPERATIONS
BEFORE TAXES 35 45 22 45
Income tax expense 2 14 4 14
EARNINGS FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST AND EQUITY
IN NET EARNINGS (LOSS) OF AFFILIATES 33 31 18 31
Minority interest and equity in net
earnings (loss) of affiliates (2) (2) (2) (2)
EARNINGS FROM CONTINUING OPERATIONS 31 29 16 29
Earnings from discontinued operations,
net of tax of $2 million for each of
the three months and six months ended
June 30, 2007 - - - 1
NET EARNINGS $31 $29 $16 $30
BASIC EARNINGS PER COMMON SHARE
Earnings from continuing operations $0.24 $0.23 $0.12 $0.23
Earnings from discontinued
operations - - - -
Basic net earnings per
common share $0.24 $0.23 $0.12 $0.23
DILUTED EARNINGS PER COMMON SHARE
Earnings from continuing
operations $0.24 $0.22 $0.12 $0.22
Earnings from discontinued
operations - - - 0.01
Diluted net earnings per
common share $0.24 $0.22 $0.12 $0.23
WEIGHTED AVERAGE COMMON SHARES
Basic 128.9 128.3 128.8 128.3
Diluted 130.4 129.4 129.8 129.3
Table 2
Owens Corning and Subsidiaries
EBIT Reconciliation Schedules
(Unaudited)
(in millions)
Because of the nature of certain items included in net earnings, management does not find the reported measure to be the most useful and transparent financial measure of our year-over-year operational performance. Management evaluates the performance of the company excluding certain items it believes are not the result of current operations, and therefore affect comparability. Additionally, management views net precious metal lease (expense) income as a financing item included in net interest expense rather than as a product cost included in cost of sales. The items affecting comparability as well as a reconciliation from our adjusted measure to net earnings are presented below. Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
ITEMS AFFECTING COMPARABILITY
Chapter 11-related reorganization
items $- $- $- $(3)
Net precious metal lease (expense)
income (2) 2 (6) 3
Restructuring and other (costs) credits (4) - (6) 2
Acquisition integration and transaction
costs (20) (7) (32) (18)
Gains (losses) on sales of assets and
other 20 1 20 (7)
Employee emergence equity program
expense (7) (12) (14) (20)
Asset impairments - - (10) -
Total items affecting
comparability $(13) $(16) $(48) $(43)
RECONCILIATION TO ADJUSTED EARNINGS
FROM CONTINUING OPERATIONS BEFORE
INTEREST AND TAXES
NET EARNINGS $31 $29 $16 $30
Earnings from discontinued
operations, net of tax of $2 million
for each of the three months and six
months ended June 30, 2007 - - - 1
EARNINGS FROM CONTINUING OPERATIONS 31 29 16 29
Minority interest and equity in net
earnings (loss) of affiliates (2) (2) (2) (2)
EARNINGS FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST AND EQUITY
IN NET EARNINGS (LOSS) OF AFFILIATES 33 31 18 31
Income tax expense 2 14 4 14
EARNINGS FROM CONTINUING OPERATIONS
BEFORE TAXES 35 45 22 45
Interest expense, net 29 31 61 63
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INTEREST AND TAXES 64 76 83 108
Adjustment to remove items affecting
comparability 13 16 48 43
ADJUSTED EARNINGS FROM CONTINUING
OPERATIONS BEFORE INTEREST AND TAXES $77 $92 $131 $151
Table 3
Owens Corning and Subsidiaries
EPS Reconciliation Schedules
(Unaudited)
(in millions, except per share data)
Because of the nature of certain items included in net earnings, management does not find the reported measure to be the most useful and transparent financial measure of our year-over-year operational performance. Management evaluates the performance of the company excluding certain items it believes are not the result of current operations, and therefore affect comparability. Additionally, management views net precious metal lease (expense) income as a financing item included in net interest expense rather than as a product cost included in cost of sales. The items affecting comparability as well as a reconciliation from our adjusted measure to net earnings are presented below. Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
ITEMS AFFECTING COMPARABILITY
Chapter 11-related reorganization
items $- $- $- $(3)
Net precious metal lease (expense)
income (2) 2 (6) 3
Restructuring and other (costs)
credits (4) - (6) 2
Acquisition integration and transaction
costs (20) (7) (32) (18)
Gains (losses) on sales of assets and
other 20 1 20 (7)
Employee emergence equity program
expense (7) (12) (14) (20)
Asset impairments - - (10) -
Total items affecting
comparability $(13) $(16) $(48) $(43)
RECONCILIATION TO ADJUSTED EARNINGS
FROM CONTINUING OPERATIONS
NET EARNINGS $31 $29 $16 $30
Earnings from discontinued operations,
net of tax of $2 million for each of
the three months and six months
ended June 30, 2007 - - - 1
EARNINGS FROM CONTINUING OPERATIONS 31 29 16 29
Adjustment to remove items affecting
comparability 13 16 48 43
Adjustment to classify net metal
lease (expense) income as interest (2) 2 (6) 3
Tax effect of adjustments of 82%*,
33%, 38% and 35%, respectively (9) (6) (16) (16)
ADJUSTED EARNINGS FROM CONTINUING
OPERATIONS $33 $41 $42 $59
RECONCILIATION TO ADJUSTED DILUTED
EARNINGS PER SHARE FROM CONTINUING
OPERATIONS:
DILUTED EARNINGS PER SHARE FROM
CONTINUING OPERATIONS $0.24 $0.22 $0.12 $0.22
Adjustment to remove items
affecting comparability 0.10 0.12 0.36 0.33
Adjustment to classify net precious
metal lease (expense) income as
interest (0.02) 0.02 (0.05) 0.02
Tax effect of adjustments of 82%*,
33%, 38% and 35%, respectively (0.07) (0.05) (0.12) (0.12)
ADJUSTED DILUTED EARNINGS PER SHARE
FROM CONTINUING OPERATIONS $0.25 $0.31 $0.31 $0.45
DILUTED EARNINGS PER SHARE FROM
DISCONTINUED OPERATIONS $- $- $- $0.01
RECONCILIATION TO ADJUSTED DILUTED
SHARES OUTSTANDING:
Weighted-average shares outstanding
used for diluted earnings per share 130.4 129.4 129.8 129.3
Shares related to employee
emergence program 2.3 2.8 2.3 2.8
Adjusted diluted shares outstanding 132.7 132.2 132.1 132.1
*The 82% tax rate on the items impacting comparability for the three months ended June 30, 2008 is the result of gains on sales of assets having a 0% effective tax rate, while all other items produced a net tax benefit at an effective rate of 34%. Table 4
Owens Corning and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(in millions)
June 30, December 31,
2008 2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents $121 $135
Receivables, less allowances of $24 million
in 2008 and $23 million in 2007 957 721
Inventories 823 821
Restricted cash - disputed distribution
reserve 31 33
Assets held for sale - current 6 53
Other current assets 141 89
Total current assets 2,079 1,852
Property, plant and equipment, net 2,804 2,772
Goodwill 1,175 1,174
Intangible assets 1,210 1,210
Deferred income taxes 504 487
Assets held for sale - non-current 8 178
Other non-current assets 238 199
TOTAL ASSETS $8,018 $7,872
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $1,184 $1,137
Accrued interest 11 12
Short-term debt 44 47
Long-term debt - current portion 7 10
Liabilities held for sale - current - 40
Total current liabilities 1,246 1,246
Long-term debt, net of current portion 2,049 1,993
Pension plan liability 117 146
Other employee benefits liability 293 293
Liabilities held for sale - non-current - 8
Other liabilities 215 161
Commitments and contingencies
Minority interest 44 37
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.01 per share
10 million shares authorized; none issued or
outstanding at June 30, 2008 and December 31,
2007 - -
Common stock, par value $0.01 per share
400 million shares authorized; 131.7 million
and 130.8 million issued and outstanding at
June 30, 2008 and December 31, 2007,
respectively 1 1
Additional paid in capital 3,807 3,784
Accumulated earnings 47 31
Accumulated other comprehensive earnings 224 173
Cost of common stock in treasury; 1.0
million shares at June 30, 2008 (25) (1)
Total stockholders' equity 4,054 3,988
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $8,018 $7,872
Table 5
Owens Corning and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
(in millions)
Six Months Ended Six Months Ended
June 30, June 30,
2008 2007
NET CASH FLOW USED FOR OPERATING ACTIVITIES
Net earnings $16 $30
Adjustments to reconcile net earnings to
cash used for operating activities:
Depreciation and amortization 156 158
Gain on sale of businesses and fixed assets (22) (1)
Impairment of fixed and intangible assets 11 11
Deferred income taxes (26) (8)
Provision for pension and other employee
benefits liabilities 22 21
Employee emergence equity program expense 14 20
Stock-based compensation expense 11 6
Decrease in restricted cash - disputed
distribution reserve 2 20
Payments related to Chapter 11 filings (3) (16)
Increase in receivables (246) (215)
Increase in inventories (12) (80)
Increase in prepaid and other assets (14) -
Increase (decrease) in accounts payable
and accrued liabilities 13 (121)
Pension fund contribution (37) (57)
Payments for other employee benefits
liabilities (14) (15)
Other 4 5
Net cash flow used for operating
activities (125) (242)
NET CASH FLOW PROVIDED BY (USED FOR) INVESTING
ACTIVITIES
Additions to plant and equipment (147) (111)
Investment in subsidiaries and affiliates,
net of cash acquired - (29)
Proceeds from the sale of assets or
affiliates 225 12
Net cash flow provided by (used
for) investing activities 78 (128)
NET CASH FLOW PROVIDED BY (USED FOR) FINANCING
ACTIVITIES
Proceeds from long-term debt 12 609
Payments on long-term debt (6) (66)
Proceeds from revolving credit facility 275 383
Payments on revolving credit facility (230) (118)
Payment of note payable to 524(g) Trust - (1,390)
Net decrease in short-term debt (5) (4)
Purchases of treasury stock (19) -
Net cash flow provided by (used
for) financing activities 27 (586)
Effect of exchange rate changes on cash 6 2
NET DECREASE IN CASH AND CASH EQUIVALENTS (14) (954)
Cash and cash equivalents at beginning of period 135 1,089
CASH AND CASH EQUIVALENTS AT END OF PERIOD $121 $135
Table 6
Owens Corning and Subsidiaries
Business Segment Information
(Unaudited)
(in millions)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
NET SALES
Reportable Segments
Composite Solutions $660 $389 $1,326 $755
Insulating Systems 413 441 786 860
Roofing and Asphalt 475 414 781 720
Other Building Materials and Services 69 87 122 156
Total reportable segments 1,617 1,331 3,015 2,491
Corporate eliminations (43) (49) (88) (85)
Consolidated net sales $1,574 $1,282 $2,927 $2,406
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS BEFORE INTEREST AND TAXES
Reportable Segments
Composite Solutions $71 $26 $135 $51
Insulating Systems 7 42 23 95
Roofing and Asphalt 37 29 20 21
Other Building Materials and Services (5) 7 (8) 11
Total reportable segments $110 $104 $170 $178
RECONCILIATION TO CONSOLIDATED EARNINGS
FROM CONTINUING OPERATIONS BEFORE
INTEREST AND TAXES
Chapter 11-related reorganization
items $- $- $- $(3)
Net precious metal lease (expense)
income (2) 2 (6) 3
Restructuring and other (costs) credits (4) - (6) 2
Acquisition integration and transaction
costs (20) (7) (32) (18)
Gains (losses) on sales of assets
and other 20 1 20 (7)
Employee emergence equity program
expense (7) (12) (14) (20)
Asset impairments - - (10) -
General corporate expense (33) (12) (39) (27)
CONSOLIDATED EARNINGS FROM CONTINUING
OPERATIONS BEFORE INTEREST AND TAXES $64 $76 $83 $108
SOURCE: Owens Corning CONTACT: Media, Jason Saragian, +1-419-248-8987; or Investors, Scott Web site: http://www.owenscorning.com/ Company News On-Call: http://www.prnewswire.com/comp/677350.html
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