Owens Corning Reports Third-Quarter 2012 Results Results Impacted by Weak Near-Term Environment in Roofing and Composites - Insulation delivers first profitable quarter in four years on strong operating leverage - Roofing impacted by near-term demand weakness - Composites low-cost asset repositioning substantially complete; will deliver benefits in 2013 PR Newswire TOLEDO, Ohio, Oct. 24, 2012 TOLEDO, Ohio, Oct. 24, 2012 /PRNewswire/ --Owens Corning (NYSE: OC) today reported consolidated net sales of $1.28 billion in the third quarter of 2012, compared with $1.45 billion during the same period last year. Third-quarter 2012 adjusted earnings, based on the company's expected full-year effective tax rate of 25 percent, were $39 million, or $0.33 per diluted share, compared with $110 million, or $0.90 per diluted share, during the same period last year. The company reported net earnings of $44 million, or $0.37 per diluted share, compared with net earnings of $124 million, or $1.01 per diluted share, in the third quarter of 2011. (See Tables 1, 2 and 3 for a discussion and reconciliation of these items.) "We are disappointed in our third-quarter financial results," said Chairman and Chief Executive Officer Mike Thaman. "Despite these results, we are proud that our Insulation business achieved profitability in the quarter for the first time in four years, in an improving U.S. construction market. Roofing and Composites are experiencing challenging market conditions in the second half. We continue to focus on actions that will position these businesses for near-term improvement." Consolidated Third-Quarter 2012 Results oOwens Corning's safety performance in the third quarter of 2012 improved by 18 percent compared with the same period one year ago. Through September 30, 2012, the company's performance was consistent with its full-year 2011 result. oThird-quarter adjusted earnings before interest and taxes (EBIT) were $81 million in 2012, compared with EBIT of $177 million in the third quarter of 2011. In the third quarter of 2012, the company had certain items that were not the result of current operations. Before adjusting for these items, Owens Corning's third-quarter 2012 EBIT was $59 million. (See Table 2 for a reconciliation of these items.) Senior Note Offering & Stock Repurchase Activity On October 17, the company issued a new 10-year bond of $600 million at 4.2 percent and launched a tender offer for up to $250 million of bonds maturing in 2016, and $100 million maturing in 2019. The new debt structure improves the company's debt maturity profile and liquidity. In association with the tender offer, the company expects to incur a loss on debt extinguishment of approximately $75 million in the fourth quarter of 2012. During the third quarter, Owens Corning repurchased 1.1 million shares of the company's common stock for $31 million under a previously announced share repurchase program. As of September 30, 2012, 10 million shares remained available for repurchase under the company's current authorization. Outlook The company expects full-year adjusted earnings before interest and taxes (EBIT) in the range of $280 million to $310 million. The company's revised adjusted EBIT expectation for the year reflects near-term weakness in Roofing demand, higher curtailment and start-up costs in Composites as well as softer growth in global industrial production. In addition, the company will benefit this year from a recovering U.S. housing market of approximately 750,000 starts. The effects of weaker demand and further production curtailments to reach inventory goals have led to lower margin expectations for the Composites business in the fourth quarter. As previously announced, the company is taking actions in this segment to balance supply and to transform this operation into a global network of low-delivered-cost assets. The company expects the actions to optimize its global Composites manufacturing network to yield approximately $60 million of cost and productivity improvements in a modest growth environment for next year. In the Building Materials segment, Roofing weakness experienced during the latter part of the third quarter is not expected to improve for the remainder of the year. However, the company expects the factors that have driven margins in recent years will continue to deliver profitability in this business. The company expects that Insulation will improve financial performance for the remainder of the year and significantly narrow losses in 2012 on improved U.S. housing starts and operating leverage in the business. Cash taxes are expected to be about $30 million in 2012, due to the company's $2.2 billion U.S. tax net operating loss carry forward. 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. The effective book tax rate for 2012 is expected to be about 25 percent on adjusted earnings. The company expects general corporate expenses to be less than $100 million in 2012. General corporate expenses include corporate staff and other activities that support the operations. Expenses will be higher in 2012 than in 2011,primarily due to increased pension expense. Next Earnings Announcement Fourth-quarter and full-year 2012 results will be announced on Wednesday, February 20, 2013. Third-Quarter Conference Call and Presentation Wednesday, October 24, 2012 11 a.m. Eastern Time All Callers Live dial-in telephone number: U.S. 1-800-561-2731 or International 1-617-614-3528 Participant passcode: 938-784-21 (Please dial in 10 minutes before conference call start time.) Live webcast: http://www.owenscorning.com/investors Telephone replay available through October 31, 2012: U.S. 1-888-286-8010 or International 1-617-801-6888 Participant passcode: 515-670-11 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: 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 58 consecutive years, Owens Corning is committed to driving sustainability by delivering solutions, transforming markets and enhancing lives. Celebrating its 75th anniversary in 2013, Owens Corning is a market-leading innovator of glass-fiber technology with sales of $5.3 billion in 2011 and about 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 24, 2012, 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 Sep. 30, Sep. 30, 2012 2011 2012 2011 NET SALES $ 1,276 $ 1,450 $ 4,013 $ 4,139 COST OF SALES 1,074 1,133 3,386 3,341 Gross margin 202 317 627 798 OPERATING EXPENSES Marketing and administrative 115 119 380 395 expenses Science and technology 20 20 60 58 expenses Charges related to - - 36 - cost reduction actions Other (income) 8 1 19 (28) expenses, net Total operating 143 140 495 425 expenses EARNINGS BEFORE INTEREST 59 177 132 373 AND TAXES Interest expense, net 29 28 85 81 EARNINGS BEFORE TAXES 30 149 47 292 Less: Income tax expense (14) 23 8 63 (benefit) Equity in net earnings of - - - 1 affiliates NET EARNINGS 44 126 39 230 Less: Net earnings attributable to - 2 2 4 noncontrolling interests NET EARNINGS ATTRIBUTABLE $ 44 $ 124 $ 37 $ 226 TO OWENS CORNING EARNINGS PER COMMON SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS Basic $ 0.37 $ 1.02 $ 0.31 $ 1.83 Diluted $ 0.37 $ 1.01 $ 0.31 $ 1.82 WEIGHTED-AVERAGE COMMON SHARES Basic 117.9 121.7 119.8 123.2 Diluted 118.8 122.6 120.6 124.2 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), which are related to our European restructuring actions: Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Charges related to cost reduction actions and related $ (22) $ - $ (109) $ - items Total adjusting items $ (22) $ - $ (109) $ - 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 September 30, September 30, 2012 2011 2012 2011 NET EARNINGS ATTRIBUTABLE TO OWENS CORNING $ 44 $ 124 $ 37 $ 226 Less: Net earnings attributable to - 2 2 4 noncontrolling interests NET EARNINGS 44 126 39 230 Equity in net earnings of - - - 1 affiliates Income tax expense (14) 23 8 63 (benefit) EARNINGS BEFORE TAXES 30 149 47 292 Interest expense, net 29 28 85 81 EARNINGS BEFORE INTEREST AND 59 177 132 373 TAXES Less: adjusting items from (22) - (109) - above ADJUSTED EBIT $ 81 $ 177 $ 241 $ 373 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: Nine Months Three Months Ended Ended Sep. 30, Sep. 30, 2012 2011 2012 2011 RECONCILIATION TO ADJUSTED EARNINGS Net earnings attributable $ 44 $ 124 $ 37 $ 226 to Owens Corning Adjustment to remove adjusting 17 - 82 - items net of tax Adjustment to tax expense to reflect (22) (14) (4) (10) pro forma tax rate* ADJUSTED EARNINGS $ 39 $ 110 $ 115 $ 216 RECONCILIATION TO ADJUSTED DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO OWENS CORNING COMMON $ 0.37 $ 1.01 $ 0.31 $ 1.82 STOCKHOLDERS Adjustment to remove adjusting 0.14 - 0.68 - items net of tax Adjustment to tax expense to reflect (0.18) (0.11) (0.04) (0.08) a pro forma tax rate* ADJUSTED DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO OWENS CORNING COMMON $ 0.33 $ 0.90 $ 0.95 $ 1.74 STOCKHOLDERS RECONCILIATON TO DILUTED SHARES OUTSTANDING Weighted-average shares outstanding used for basic earnings 117.9 121.7 119.8 123.2 per share Non-vested 0.6 0.6 0.5 0.6 restricted shares Options to purchase common 0.3 0.3 0.3 0.4 stock Diluted shares outstanding 118.8 122.6 120.6 124.2 * Pro forma tax rates used were 25% in 2012 as this is the expected full-year effective tax rate, and, 21% in 2011 as this was the effective tax rate of the Company in 2011. Table 4 Owens Corning and Subsidiaries Consolidated Balance Sheets (unaudited) (in millions) ASSETS Sep. 30, Dec. 31, 2012 2011 CURRENT ASSETS Cash and cash equivalents $ 51 $ 52 Receivables, less allowances of $19 at 770 610 Sep. 30, 2012, and $15 at Dec. 31, 2011 Inventories 793 795 Other current assets 155 179 Total current assets 1,769 1,636 Property, plant and equipment, net 2,912 2,904 Goodwill 1,144 1,144 Intangible assets 1,050 1,073 Deferred income taxes 564 538 Other non-current assets 253 232 TOTAL ASSETS $ 7,692 $ 7,527 LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 867 $ 876 Short-term debt 19 28 Long-term debt – current portion 6 4 Total current liabilities 892 908 Long-term debt, net of current portion 2,191 1,930 Pension plan liability 420 435 Other employee benefits liability 259 267 Deferred income taxes 43 51 Other liabilities 207 195 Commitments and contingencies OWENS CORNING STOCKHOLDERS' EQUITY Preferred stock, par value $0.01 per - - - share (a) Common stock, par value $0.01 per share 1 1 (b) Additional paid in capital 3,917 3,907 Accumulated earnings 507 470 Accumulated other comprehensive deficit (305) (315) Cost of common stock in treasury (c) (475) (362) Total Owens Corning stockholders' 3,645 3,701 equity Noncontrolling interests 35 40 Total equity 3,680 3,741 TOTAL LIABILITIES AND EQUITY $ 7,692 $ 7,527 (a) 10 shares authorized; none issued or outstanding at Sep. 30, 2012, and Dec. 31, 2011 (b) 400 shares authorized; 135.5 issued and 118.2 outstanding at Sep. 30, 2012; 134.4 issued and 120.9 outstanding at Dec. 31, 2011 (c) 17.3 shares at Sep. 30, 2012, and 13.5 shares at Dec. 31, 2011 Table 5 Owens Corning and Subsidiaries Consolidated Statements of Cash Flows (unaudited) (in millions) Nine Months Ended Sep. 30, 2012 2011 NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES Net earnings $ 39 $ 230 Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation and amortization 269 243 Gain on sale of businesses and fixed assets (3) (30) Deferred income taxes (25) 29 Provision for pension and other employee 33 26 benefits liabilities Stock-based compensation expense 18 16 Other non-cash (9) (18) Change in working capital (171) (330) Pension fund contribution (42) (104) Payments for other employee benefits liabilities (17) (17) Other 1 14 Net cash flow provided by operating 93 59 activities NET CASH FLOW USED FOR INVESTING ACTIVITIES Additions to plant and equipment (235) (303) Investment in subsidiaries and affiliates, net of cash - (84) acquired Proceeds from the sale of assets or affiliates 12 81 Net cash flow used for investing activities (223) (306) NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES Proceeds from senior revolving credit and receivables 1,205 1,007 securitization facilities Payments on senior revolving credit and receivables (929) (629) securitization facilities Proceeds from long-term debt - 6 Payments on long-term debt (13) (10) Net increase (decrease) in short-term debt (9) 17 Purchases of noncontrolling interest (22) - Purchases of treasury stock (113) (138) Other 9 12 Net cash flow provided by financing 128 265 activities Effect of exchange rate changes on cash 1 (20) Net decrease in cash and cash equivalents (1) (2) Cash and cash equivalents at beginning of period 52 52 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 51 $ 50 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 Sep. 30, Sep. 30, 2012 2011 2012 2011 Net sales $ 459 $ 496 $ 1,433 $ 1,517 % change from prior -7% 4% -6% 6% year EBIT $ 11 $ 49 $ 68 $ 152 EBIT as a % of net 2% 10% 5% 10% sales Depreciation and $ 30 $ 31 $ 91 $ 97 amortization expense 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 Sep. 30, Sep. 30, 2012 2011 2012 2011 Net sales Insulation $ 384 $ 365 $ 1,055 $ 981 Roofing 471 644 1,664 1,785 Total Building Materials $ 855 $ 1,009 $ 2,719 $ 2,766 % change from -15% 36% -2% 10% prior year EBIT Insulation $ 3 $ (12) $ (47) $ (97) Roofing 83 156 289 374 Total Building Materials $ 86 $ 144 $ 242 $ 277 EBIT as a % of net 10% 14% 9% 10% sales Depreciation and amortization expense Insulation $ 28 $ 30 $ 80 $ 89 Roofing 10 10 28 31 Total Building Materials $ 38 $ 40 $ 108 $ 120 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 Sep. 30, Sep. 30, 2012 2011 2012 2011 Charges related to cost reduction actions and $ (22) $ - $ (109) $ (17) related items Gain on sale of Capivari, - - - 16 Brazil, facility General corporate expense (16) (16) (69) (55) and other EBIT $ (38) $ (16) $ (178) $ (56) Depreciation and $ 21 $ 7 $ 70 $ 26 amortization SOURCE Owens Corning Website: http://www.owenscorning.com Contact: Media Inquiries: Matt Schroder, +1-419-248-8987, or Investor Inquiries: Thierry Denis, +1-419-248-5748
Owens Corning Reports Third-Quarter 2012 Results
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