Investment in Global Composites Growth Creates Balance to Building
Materials Market Weakness in 2008 TOLEDO, Ohio, Feb. 27
/PRNewswire-FirstCall/ -- Owens Corning (NYSE:OC) today reported
consolidated net sales of $4.98 billion in 2007 compared with $5.40
billion in fiscal 2006, a decrease of 7.8 percent. The reduction in
sales was primarily in the company's building materials businesses
where demand declined significantly in the new residential
construction and residential repair and remodeling markets. Owens
Corning's consolidated statement of earnings has been recast to
reflect the impact of discontinued operations following the
divestiture of its Siding Solutions and Fabwel businesses in 2007.
The results include two months of operations of the acquired
Saint-Gobain reinforcements and composite fabrics businesses. Owens
Corning achieved 2007 earnings from continuing operations of $27
million, or $0.21 per diluted share. Excluding comparability items,
adjusted earnings from continuing operations were $158 million, or
$1.21 per diluted share (see attached Table 5 for a discussion and
reconciliation of such items). Comparability items in 2007 included
items related primarily to the company's prior Chapter 11
proceedings, the employee emergence equity program, and
restructuring and other activities, which amounted to approximately
$199 million during 2007. Fourth-Quarter and Consolidated 2007
Results -- Earnings before interest and taxes (EBIT) from
continuing operations for the full year ending Dec. 31, 2007, were
$145 million compared with $407 million in fiscal 2006. Excluding
comparability items (see Table 3), adjusted EBIT from continuing
operations for 2007 was $344 million compared with $529 million
during 2006, a decrease of 35 percent. The decrease was primarily
due to lower sales in the company's building materials businesses
as the decline in the U.S. housing market continued. -- During the
fourth quarter of 2007, Owens Corning recorded sales of $1.30
billion compared with sales of $1.25 billion during the same period
in 2006, an increase of 4.0 percent. -- Fourth-quarter 2007 EBIT
from continuing operations was a loss of $46 million compared with
a loss of $1 million for the same period in 2006. Excluding
comparability items, adjusted EBIT from continuing operations for
the fourth quarter of 2007 was $85 million compared with $137
million during the same period in 2006. -- Gross margin as a
percentage of consolidated net sales was 15.6 percent during 2007
compared with 18.6 percent during fiscal 2006. Gross margin in 2007
was negatively impacted by approximately $98 million in charges
associated with curtailments in production capacity, an asset
impairment related to the company's previously announced sale of
its composite manufacturing facilities in Battice, Belgium, and
Birkeland, Norway, and the sale of inventories, the value of which
was written up as part of the acquisition of Saint-Gobain's
reinforcements and composite fabrics businesses. Gross margin in
2006 was negatively impacted by approximately $58 million in
charges associated with the sale of inventories, the value of which
was written up as a result of the adoption of fresh start
accounting and other charges associated with curtailments in
production capacity. -- Marketing and administrative expenses, as a
percentage of consolidated net sales, were 10.0 percent in 2007
compared with 9.1 percent during fiscal 2006. The increase was due
primarily to a reduction in building materials sales. "Business
results for 2007 were in line with our expectations," said Mike
Thaman, chairman and chief executive officer. "Owens Corning is
performing well through the severe downturn in the U.S. housing
market. We generated cash flow from operations of $182 million in
2007, which includes $57 million in cash out-flows related to our
emergence from Chapter 11 in 2006. We have taken aggressive action
to globalize our composites business which has transformed the
footprint of our company. We are also actively managing our
building materials capacity and cost structure to stay ahead of the
current demand weakness. "In 2008, we expect progress in our
operating margins in composites as we see the first-year benefits
of the acquisition of Saint-Gobain's reinforcements and composite
fabrics businesses," said Thaman. "We will continue to invest in
winning with our customers so that Owens Corning is well positioned
to further profit when the U.S. housing market recovers, as we know
it will." During 2007, Owens Corning acted decisively to perform
through the U.S. building materials cycle. The company: --
Completed its acquisition of Saint-Gobain's reinforcements and
composite fabrics businesses for $640 million. Owens Corning
anticipates annual synergies of more than $100 million to be
realized by the end of 2011. -- Divested its Siding Solutions and
Fabwel businesses for approximately $425 million of net proceeds.
-- Put in place cost-reduction initiatives to reduce company-wide
annualized operating costs in 2008 by at least $100 million. These
projects include capacity and headcount reductions, elimination of
operational costs, and reduced corporate and business unit
expenses. -- Completed the national rollout of the innovative
Duration(TM) Series Shingle featuring SureNail(R) technology six
months ahead of schedule. Other Financial Items -- In 2007,
depreciation and amortization from continuing operations totaled
$333 million, which includes $21 million of accelerated
depreciation related to curtailments in production capacity. -- At
the end of 2007, Owens Corning had net debt of $1.91 billion,
comprised of $2.05 billion of short- and long-term debt and
cash-on- hand of $135 million. -- During 2007, the company's cash
and debt positions were impacted by its acquisition of
Saint-Gobain's reinforcements and composite fabrics businesses. The
impact on net debt was partially offset by the sale of its Siding
Solutions and Fabwel businesses. -- Owens Corning's federal tax net
operating loss resulting from the distribution of cash and stock to
settle its prior Chapter 11 case was $3 billion at the end of 2007.
-- Owens Corning announced a share buy-back program in the first
quarter of 2007 under which the company is authorized to repurchase
up to 5 percent of Owens Corning's outstanding common stock. The
company did not repurchase any shares during 2007. -- The company's
continued focus on safety resulted in a 28-percent reduction in
injuries through 2007, as compared with its Dec. 31, 2006 rate.
Recent Developments In the fourth quarter of 2007, Owens Corning
commenced various cost savings projects to reduce headcount, close
facilities and curtail production, which resulted in restructuring
and other charges of $57 million. The company expects additional
charges of $7 million in 2008. Owens Corning is confident that
these cost-reduction initiatives will reduce company-wide
annualized operating costs in 2008 by at least $100 million. During
2007, Owens Corning announced its plans to divest its facilities in
Battice, Belgium, and Birkeland, Norway, to address regulatory
remedies associated with its purchase of the businesses acquired
from Saint-Gobain. The divestiture is expected to be completed
during the first quarter of 2008. On Feb. 26, 2008, Moody's
Investors Service announced that they elected to downgrade Owens
Corning's senior credit rating from Baa3 to Ba1 with a negative
outlook because of the adverse effects of the homebuilding
contraction. Outlook Owens Corning's acquisition of Saint-Gobain's
reinforcements and composite fabrics businesses will significantly
increase the company's presence in the global composites market and
diversify its exposure to the cyclical U.S. housing market. As it
begins to realize synergies from the acquisition, the company
expects operating margins in its composites business to approach
double digits in 2008, excluding the financial cost of leasing
precious metals. Most economists, including the National
Association of Home Builders, currently expect continued weakness
in the U.S. housing market through 2008, which will continue to
affect demand for Owens Corning's insulation products. Commercial
and industrial demand for insulating products is also likely to
weaken. Owens Corning will continue to focus on stimulating
insulation demand by promoting the vital role of insulation in
energy efficiency and greenhouse gas reduction, and developing new
products and customer promotions under the company's PINK is
GREEN(TM) initiative. The company currently estimates that
depreciation and amortization from continuing operations will total
approximately $315 million in 2008. Capital expenditures in 2008
are estimated to be about $325 million, which will allow the
company to invest to achieve synergies associated with its recent
composites acquisition. Owens Corning anticipates that its 2008
global effective tax rate will be approximately 30 percent. The
company expects its U.S. cash taxes will be minimal, and that its
cash effective tax rate at its international operations will be 15
percent or less in 2008. Based on U.S. housing starts of about 1
million, Owens Corning estimates that 2008 adjusted EBIT should be
at least $240 million. The company excludes from its estimate
reconciliation items as well as the financial cost of leasing
precious metals. Business Segment Highlights Composite Solutions --
Net sales for 2007 were $1.70 billion, a 23.2-percent increase from
$1.38 billion in fiscal 2006. The acquisition of Saint-Gobain's
reinforcements and composite fabrics businesses increased 2007
sales by approximately $160 million. Year-over-year improvements in
volume increased sales by approximately $70 million compared with
fiscal 2006. A positive foreign currency effect increased sales by
about $50 million. -- EBIT from continuing operations for 2007 was
$126 million compared with $154 million in fiscal 2006. However,
EBIT from continuing operations in fiscal 2006 included gains on
the sale of precious metal used in certain production tooling of
approximately $45 million and insurance recoveries of $20 million
related to a flood at the company's Taloja, India, production
facility, which were offset by approximately $8 million of downtime
cost. Excluding these items, EBIT from continuing operations
improved by $29 million in 2007, compared to fiscal 2006.
Insulating Systems -- Net sales for 2007 were $1.78 billion, a
15.2-percent decrease from $2.10 billion in fiscal 2006. Sales for
residential insulation products were significantly impacted by the
reduction in market demand in new residential construction and
repair and remodeling in the United States. Beginning in the third
quarter of 2007, the company also experienced some weakness in
commercial and industrial markets. -- EBIT from continuing
operations for 2007 was $192 million compared with $467 million in
fiscal 2006. Approximately one-third of the decline was due to
lower volumes and approximately one-third was due to lower selling
prices. In addition, results were negatively impacted by
approximately $37 million in additional depreciation and
amortization costs as a result of the adoption of fresh start
accounting. Roofing and Asphalt -- Net sales for 2007 were $1.38
billion, a 19.8-percent decrease from $1.72 billion in fiscal 2006.
Sales volume was impacted by the reduction in demand in existing
home sales and related roofing repair and remodeling, the continued
decline in new residential construction in the United States and by
lower storm-related demand. Sales were lifted by the introduction
of the company's innovative Duration(TM) Series Shingle with
SureNail(R) Technology, which was made available across the United
States six months ahead of schedule. -- EBIT from continuing
operations for 2007 was $27 million compared with $72 million in
fiscal 2006. Earnings were impacted by volume reductions resulting
from a decline in residential repair and remodeling activities,
lower storm-related demand and the slowdown of new residential
construction. Other Building Materials and Services -- Net sales
for 2007 were $301 million, a 20.2-percent decrease from $377
million in fiscal 2006. The closure of the company's HOMExperts
service line in the fourth quarter of 2006 negatively impacted
sales in 2007 by $76 million. Sales of the company's Masonry
Products business within this segment were positively impacted in
2007 by the inclusion of approximately $24 million in sales from
the company's acquisition of the Modulo(TM)/ParMur Group during the
third quarter of 2006. This increase was partially offset by
declines in volume related to the continued lower demand from new
construction in the United States. -- EBIT from continuing
operations for 2007 was $14 million compared with $1 million in
fiscal 2006. The improved performance was primarily due to the
impact of closing the company's HOMExperts service line in 2006.
First-quarter 2008 results are currently scheduled to be announced
on May 7, 2008. Conference Call and Presentation Wednesday, Feb.
27, 2008 11 a.m. ET All Callers Live dial-in telephone number:
1-888-713-4209 or 1-617-213-4863 (Please dial in 10 minutes before
conference call start time) Passcode: 41140851 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 March 12, 2008 at
1-888-286-8010 or 1-617-801-6888. Passcode: 41491827. 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 53 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 19,000 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 Year-to-Date Consolidated
Statements of Earnings (Loss) (Unaudited) (in millions, except per
share amounts) Successor Combined Successor Predecessor Twelve
Twelve Two Ten Months Months Months Months Ended Ended Ended Ended
December December December October 31, 31, 31, 31, 2007 2006 2006
2006 NET SALES $4,978 $5,399 $772 $4,627 COST OF SALES 4,201 4,397
656 3,741 Gross margin 777 1,002 116 886 OPERATING EXPENSES
Marketing and administrative expenses 498 494 86 408 Science and
technology expenses 63 78 30 48 Restructure costs 28 32 20 12
Chapter 11 related reorganization items - 55 10 45 Provision
(credit) for asbestos litigation claims (recoveries) - (13) - (13)
Employee emergence equity program 37 6 6 - (Gain) loss on sale of
fixed assets and other 6 (57) 8 (65) Total operating expenses 632
595 160 435 EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE
INTEREST AND TAXES 145 407 (44) 451 Interest expense, net 122 * 29
241 Gain on settlement of liabilities subject to compromise - * -
(5,864) Fresh-start accounting adjustments - * - (2,919) EARNINGS
(LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES 23 * (73) 8,993
Income tax expense (benefit) (8) * (23) 980 EARNINGS (LOSS) FROM
CONTINUING OPERATIONS BEFORE MINORITY INTEREST AND EQUITY IN NET
EARNINGS OF AFFILIATES 31 * (50) 8,013 Minority interest and equity
in net earnings (loss) of affiliates (4) * (4) - EARNINGS (LOSS)
FROM CONTINUING OPERATIONS 27 * (54) 8,013 Discontinued Operations:
Earnings (loss) from discontinued operations, net of tax of $5,
$(5), and $45, respectively 9 * (11) 127 Gain on sale of
discontinued operations, net of tax of $40, $0, and $0,
respectively 60 * - - Total earnings (loss) from discontinued
operations 69 * (11) 127 NET EARNINGS (LOSS) $96 * $(65) $8,140
BASIC EARNINGS (LOSS) PER COMMON SHARE Earnings (loss) from
continuing operations $0.21 * $(0.42) $144.90 Earnings (loss) from
discontinued operations $0.54 * $(0.09) $2.30 DILUTED EARNINGS
(LOSS) PER COMMON SHARE Earnings (loss) from continuing operations
$0.21 * $(0.42) $133.77 Earnings (loss) from discontinued
operations $0.54 * $(0.09) $2.12 WEIGHTED AVERAGE COMMON SHARES
Basic 128.1 * 128.1 55.3 Diluted 128.8 * 128.1 59.9 * Due to
concerns regarding lack of comparability, separate historical
results of the Successor and Predecessor are presented individually
for this line item. Table 2 Owens Corning and Subsidiaries
Quarter-to-Date Consolidated Statement of Earnings (Loss)
(Unaudited) (in millions, except per share amounts) Combined
Successor Three Three Two Predecessor Months Months Months One
Month Ended Ended Ended Ended December December December October
31, 31, 31, 31, 2007 2006 2006 2006 NET SALES $1,304 $1,250 $772
$478 COST OF SALES 1,165 1,047 656 391 Gross margin 139 203 116 87
Operating Expenses Marketing and administrative expenses 133 117 86
31 Science and technology expenses 17 36 30 6 Restructure costs 31
22 20 2 Chapter 11 related reorganization items (4) 27 10 17
Provision (credit) for asbestos litigation claims - - - - Employee
emergence equity program 9 6 6 - (Gain) loss on sale of fixed
assets and other (1) (4) 8 (12) Total operating expenses 185 204
160 44 EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INTEREST
AND TAXES (46) (1) (44) 43 Interest expense, net 32 * 29 19 Gain on
settlement of liabilities subject to compromise - * - (5,864)
Fresh-start accounting adjustments - * - (2,919) EARNINGS (LOSS)
FROM CONTINUING OPERATIONS BEFORE TAXES (78) * (73) 8,807 Income
tax expense (benefit) (38) * (23) 1,149 EARNINGS (LOSS) FROM
CONTINUING OPERATIONS BEFORE MINORITY INTEREST AND EQUITY IN NET
EARNINGS OF AFFILIATES (40) * (50) 7,658 Minority interest and
equity in net earnings (loss) of affiliates - * (4) (2) EARNINGS
(LOSS) FROM CONTINUING OPERATIONS (40) * (54) 7,656 Discontinued
Operations: Earnings (loss) from discontinued operations, net of
tax of $0, $(5), and $30, respectively - * (11) 108 Gain on sale of
discontinued operations, net of tax of $1, $0, and $0, respectively
(6) * - - Total earnings (loss) from discontinued operations (6) *
(11) 108 NET EARNINGS (LOSS) $(46) * $(65) $7,764 BASIC EARNINGS
(LOSS) PER COMMON SHARE Earnings (loss) from continuing operations
$(0.31) * $(0.42) $138.45 Earnings (loss) from discontinued
operations $(0.05) * $(0.09) $1.95 DILUTED EARNINGS (LOSS) PER
COMMON SHARE Earnings (loss) from continuing operations $(0.31) *
$(0.42) $127.81 Earnings (loss) from discontinued operations
$(0.05) * $(0.09) $1.80 WEIGHTED AVERAGE COMMON SHARES Basic 128.1
* 128.1 55.3 Diluted 128.8 * 128.1 59.9 * Due to concerns regarding
lack of comparability, separate historical results of the Successor
and Predecessor are presented individually for this line item.
Table 3 Owens Corning and Subsidiaries Year-to-Date EBIT
Reconciliation Schedules (Unaudited) (in millions, except per share
amounts) When reviewing the operating performance of the company
with its Board of Directors and employees, management makes
adjustments to net earnings, earnings before interest and taxes
("EBIT") from continuing operations and diluted earnings per share.
To calculate "adjusted earnings", "adjusted EBIT" and "adjusted
diluted earnings per share", management excludes certain items from
earnings before interest and taxes from continuing operations,
including those related to the company's prior Chapter 11
proceedings, employee emergence equity program, restructuring and
other activities so as to improve comparability over time (the
"comparability items"). As described more fully in the following
financial schedules, such comparability items amounted to charges
of $199 million, $122 million, $117 million, and $5 million in the
Successor twelve months ended December 31, 2007, Combined twelve
months ended December 31, 2006, the Successor two months ended
December 31, 2006 and the Predecessor ten months ended October 31,
2006, respectively. Successor Combined Successor Predecessor Twelve
Twelve Two Ten Months Months Months Months Ended Ended Ended Ended
December December December October 31, 31, 31, 31, 2007 2006 2006
2006 RECONCILIATION TO ADJUSTED EARNINGS FROM CONTINUING OPERATIONS
BEFORE INTEREST AND TAXES: NET EARNINGS (LOSS) $96 * $(65) $8,140
Discontinued operations Earnings (loss) from discontinued
operations, net of tax of $5, $(5), and $45, respectively 9 * (11)
127 Gain on sale of discontinued operations, net of tax of $40, $0,
and $0, respectively 60 * - - Total earnings (loss) from
discontinued operations 69 * (11) 127 EARNINGS (LOSS) FROM
CONTINUING OPERATIONS 27 * (54) 8,013 Minority interest and equity
in net earnings (loss) of affiliates (4) * (4) - EARNINGS (LOSS)
FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST AND EQUITY IN
NET EARNINGS OF AFFILIATES 31 * (50) 8,013 Income tax expense
(benefit) (8) * (23) 980 EARNINGS (LOSS) FROM CONTINUING OPERATIONS
BEFORE TAXES 23 * (73) 8,993 Interest expense, net 122 * 29 241
Gain on settlement of liabilities subject to compromise - * -
(5,864) Fresh-start accounting adjustments - * - (2,919) EARNINGS
(LOSS) FROM CONTINUING OPERATIONS BEFORE INTEREST AND TAXES 145 407
(44) 451 Adjustments to remove items impacting comparability:
Chapter 11 related reorganization items $- $55 $10 $45 Asbestos
litigation (claims) recoveries - (13) - (13) Restructuring and
other (costs) credits 54 (2) 32 (34) Acquisition transaction costs
28 13 6 7 Impact of acquisition accounting 13 - - - Loss related to
the exit of our HOMExperts service line 7 - - - Employee emergence
equity program 37 6 6 - Fresh-start accounting impact - 63 63 -
Asset impairments 60 - - - Total adjustments to remove
comparability items 199 122 117 5 ADJUSTED EARNINGS FROM CONTINUING
OPERATIONS BEFORE INTEREST AND TAXES $344 $529 $73 $456 * Due to
concerns regarding lack of comparability, separate historical
results of the Successor and Predecessor are presented individually
for this line item. Table 4 Owens Corning and Subsidiaries
Quarter-to-Date EBIT Reconciliation Schedules (Unaudited) (in
millions, except per share amounts) When reviewing the operating
performance of the company with its Board of Directors and
employees, management makes adjustments to earnings before interest
and taxes ("EBIT") from continuing operations. To calculate
"adjusted EBIT", management excludes certain items from earnings
before interest and taxes from continuing operations, including
those related to the company's prior Chapter 11 proceedings,
employee emergence equity program, restructuring and other
activities so as to improve comparability over time (the
"comparability items"). As described more fully in the following
financial schedules, such comparability items amounted to charges
of $131 million, $138 million, $117 million, and $21 million in the
Successor three months ended December 31, 2007, Combined three
months ended December 31, 2006, the Successor two months ended
December 31, 2006 and the Predecessor one month ended October 31,
2006, respectively. Successor Combined Successor Predecessor Three
Three Two One Months Months Months Month Ended Ended Ended Ended
December December December October 31, 31, 31, 31, 2007 2006 2006
2006 RECONCILIATION TO ADJUSTED EARNINGS (LOSS) FROM CONTINUING
OPERATIONS BEFORE INTEREST AND TAXES: NET EARNINGS (LOSS) $(46) *
$(65) $7,764 Discontinued operations Earnings (loss) from
discontinued operations, net of tax of $0, $(5), and $30,
respectively - * (11) 108 Gain on sale of discontinued operations,
net of tax of $1, $0, and $0, respectively (6) * - - Total earnings
(loss) from discontinued operations (6) * (11) 108 EARNINGS (LOSS)
FROM CONTINUING OPERATIONS (40) * (54) 7,656 Minority interest and
equity in net earnings (loss) of affiliates - * (4) (2) EARNINGS
(LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST AND
EQUITY IN NET EARNINGS (LOSS) OF AFFILIATES (40) * (50) 7,658
Income tax expense (benefit) (38) * (23) 1,149 EARNINGS (LOSS) FROM
CONTINUING OPERATIONS BEFORE TAXES (78) * (73) 8,807 Interest
expense, net 32 * 29 19 Gain on settlement of liabilities subject
to compromise - * - (5,864) Fresh-start accounting adjustments - *
- (2,919) EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE
INTEREST AND TAXES (46) (1) (44) 43 Adjustments to remove items
impacting comparability: Chapter 11 related reorganization items
$(4) $27 $10 $17 Asbestos litigation (claims) recoveries - - - -
Restructuring and other (costs) credits 57 33 32 1 Acquisition
transaction costs 7 9 6 3 Impact of acquisition accounting 13 - - -
Loss related to the exit of our HOMExperts service line - - - -
Employee emergence equity program 9 6 6 - Fresh-start accounting
impact - 63 63 - Asset impairments 49 - - - Total adjustments to
remove comparability items 131 138 117 21 ADJUSTED EARNINGS FROM
CONTINUING OPERATIONS BEFORE INTEREST AND TAXES $85 $137 $73 $64 *
Due to concerns regarding lack of comparability, separate
historical results of the Successor and Predecessor are presented
individually for this line item. Table 5 Owens Corning and
Subsidiaries Year-to-Date EPS Reconciliation Schedules (Unaudited)
(in millions, except per share amounts) When reviewing the
operating performance of the company with its Board of Directors
and employees, management makes adjustments to net earnings,
weighted-average shares outstanding used for diluted earnings per
share and diluted earnings per share. To calculate "adjusted
earnings", "adjusted diluted shares outstanding" and "adjusted
diluted earnings per share", management excludes certain items from
net earnings and weighted-average shares outstanding, including
those related to the company's prior Chapter 11 proceedings,
employee emergence equity program, restructuring and other
activities so as to improve comparability over time (the
"comparability items"). As described more fully in the following
financial schedules, such comparability items amounted to charges
of $199 million and $117 million in the Successor twelve months
ended December 31, 2007 and the Successor two months ended December
31, 2006, respectively. Successor Successor Twelve Months Two
Months Ended Ended December 31, December 31, 2007 2006
RECONCILIATION TO ADJUSTED EARNINGS FROM CONTINUING OPERATIONS NET
EARNINGS (LOSS) $96 $(65) Discontinued operations Earnings (loss)
from discontinued operations, net of tax of $5, $(5), and $45,
respectively 9 (11) Gain on sale of discontinued operations, net of
tax of $40, $0, and $0, respectively 60 - Total earnings (loss)
from discontinued operations 69 (11) EARNINGS (LOSS) FROM
CONTINUING OPERATIONS 27 (54) Adjustments to remove items impacting
comparability: Chapter 11 related reorganization items $- $10
Asbestos litigation (claims) recoveries - - Restructuring and other
(costs) credits 54 32 Acquisition transaction costs 28 6 Impact of
acquisition accounting 13 - Loss related to the exit of our
HOMExperts service line 7 - Employee emergence equity program 37 6
Fresh-start accounting impact - 63 Asset impairments 60 - Total
adjustments to remove comparability items 199 117 Tax effect of
adjustments at 34% in 2007 and 37% in 2006 (68) (40) ADJUSTED
EARNINGS FROM CONTINUING OPERATIONS $158 $23 RECONCILIATION TO
ADJUSTED DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING
OPERATIONS: DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING
OPERATIONS $0.21 $(0.42) Total adjustments to remove comparability
items 1.52 0.89 Tax effect of adjustments at 34% in 2007 and 37% in
2006 (0.52) (0.30) ADJUSTED DILUTED EARNINGS (LOSS) PER SHARE FROM
CONTINUING OPERATIONS $1.21 $0.17 DILUTED EARNINGS (LOSS) PER SHARE
FROM DISCONTINUED OPERATIONS $0.54 $(0.09) RECONCILIATION TO
ADJUSTED DILUTED SHARES OUTSTANDING: Weighted-average shares
outstanding used for diluted earnings per share 128.8 128.1 Shares
related to employee emergence program 2.3 3.0 Adjusted diluted
shares outstanding 131.1 131.1 Table 6 Owens Corning and
Subsidiaries Quarter-to-Date EPS Reconciliation Schedules
(Unaudited) (in millions, except per share amounts) When reviewing
the operating performance of the company with its Board of
Directors and employees, management makes adjustments to net
earnings, weighted-average shares outstanding used for diluted
earnings per share and diluted earnings per share. To calculate
"adjusted earnings", "adjusted diluted shares outstanding" and
"adjusted diluted earnings per share", management excludes certain
items from net earnings and weighted-average shares outstanding,
including those related to the company's prior Chapter 11
proceedings, employee emergence equity program, restructuring and
other activities so as to improve comparability over time (the
"comparability items"). As described more fully in the following
financial schedules, such comparability items amounted to charges
of $131 million and $117 million in the Successor three months
ended December 31, 2007 and the Successor two months ended December
31, 2006, respectively. Successor Successor Three Months Two Months
Ended Ended December 31, December 31, 2007 2006 RECONCILIATION TO
ADJUSTED EARNINGS (LOSS) FROM CONTINUING OPERATIONS NET EARNINGS
(LOSS) $(46) $(65) Discontinued operations Earnings (loss) from
discontinued operations, net of tax of $0, $(5), and $30,
respectively - (11) Gain on sale of discontinued operations, net of
tax of $1, $0, and $0, respectively (6) - Total earnings (loss)
from discontinued operations (6) (11) EARNINGS (LOSS) FROM
CONTINUING OPERATIONS (40) (54) Adjustments to remove items
impacting comparability: Chapter 11 related reorganization items
$(4) $10 Asbestos litigation (claims) recoveries - - Restructuring
and other (costs) credits 57 32 Acquisition transaction costs 7 6
Impact of acquisition accounting 13 - Loss related to the exit of
our HOMExperts service line - - Employee emergence equity program 9
6 Fresh-start accounting impact - 63 Asset impairments 49 - Total
adjustments to remove comparability items 131 117 Tax effect of
adjustments at 34% in 2007 and 37% in 2006 (45) (40) ADJUSTED
EARNINGS FROM CONTINUING OPERATIONS $46 $23 RECONCILIATION TO
ADJUSTED DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING
OPERATIONS: DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING
OPERATIONS $(0.30) $(0.42) Total adjustments to remove
comparability items 1.00 0.89 Tax effect of adjustments at 34% in
2007 and 37% in 2006 (0.34) (0.30) ADJUSTED DILUTED EARNINGS (LOSS)
PER SHARE FROM CONTINUING OPERATIONS $0.36 $0.17 DILUTED EARNINGS
(LOSS) PER SHARE FROM DISCONTINUED OPERATIONS $(0.05) $(0.09)
RECONCILIATION TO ADJUSTED DILUTED SHARES OUTSTANDING:
Weighted-average shares outstanding used for diluted earnings per
share 128.8 128.1 Shares not included in above related to employee
emergence program 2.3 3.0 Adjusted diluted shares outstanding 131.1
131.1 Table 7 Owens Corning and Subsidiaries Condensed Consolidated
Balance Sheets (Unaudited) (in millions) Successor December 31,
December 31, 2007 2006 ASSETS Current Assets Cash and cash
equivalents $135 $1,089 Receivables, less allowances of $23 million
in 2007 and $26 million in 2006 721 573 Inventories 821 749
Restricted Cash - disputed distribution reserve 33 85 Assets held
for sale - current 53 - Other current assets 89 56 Total current
assets 1,852 2,552 Property, plant, and equipment, net 2,772 2,521
Goodwill 1,174 1,313 Intangible assets 1,210 1,298 Deferred income
taxes 487 549 Assets held for sale - noncurrent 178 - Other
noncurrent assets 199 237 TOTAL ASSETS $7,872 $8,470 LIABILITIES
AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and
accrued liabilities $1,137 $1,081 Accrued interest 12 39 Short term
debt 47 1,401 Long term debt - current portion 10 39 Liabilities
held for sale - current 40 - Total current liabilities 1,246 2,560
Long-term debt, net of current portion 1,993 1,296 Pension plan
liability 146 312 Other employee benefits liability 293 325
Liabilities held for sale -non- current 8 - Minority interest 37 44
Other liabilities 161 247 Stockholders' equity 3,988 3,686 TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY $7,872 $8,470 Table 8 Owens
Corning and Subsidiaries Condensed Consolidated Statements of Cash
Flows (Unaudited) (in millions) Successor Predecessor Twelve Two
Ten Months Months Months Ended Ended Ended December December
October 31, 31, 31, 2007 2006 2006 NET CASH FLOW PROVIDED BY (USED
FOR) OPERATING ACTIVITIES Net earnings (loss) $96 $(65) $8,140
Adjustments to reconcile net earnings (loss) to cash provided by
(used for) operating activities: Provision for asbestos litigation
claims - - 21 Depreciation and amortization 343 69 209 Gain on sale
of businesses and fixed assets (104) - (61) Impairment of fixed and
intangible assets and investments in affiliates 76 - 2 Deferred
income taxes - (48) 208 Provision for pension and other employee
benefits liabilities 45 8 83 Provision for post-petition
interest/fees on pre- petition debt - - 247 Fresh start accounting
adjustments, net of tax - - (2,243) Gain on settlement of
liabilities subject to compromise - - (5,864) Employee emergence
equity program 37 6 - Stock based compensation expense 5 - -
Restricted cash 52 (85) - Payments related to Chapter 11 filings
(109) (131) - Payment to 524(g) trust - - (1,250) Payment of
interest on pre- petition debt - (31) (944) (Increase) decrease in
receivables (9) 185 (78) (Increase) decrease in inventories 3 97
(103) (Increase) decrease in prepaid and other assets - 1 (36)
Increase (decrease) in accounts payable and accrued liabilities
(106) 30 (107) Proceeds from insurance for asbestos litigation
claims, excluding Fibreboard - - 18 Pension fund contribution (121)
(6) (43) Payments for other employee benefits liabilities (25) (4)
(23) Increase in restricted cash - asbestos and Fibreboard - - (87)
Other (1) (11) 8 Net cash flow provided by (used for) operating
activities 182 15 (1,903) NET CASH FLOW PROVIDED BY (USED FOR)
INVESTING ACTIVITIES Additions to plant and equipment (247) (77)
(284) Investment in subsidiaries and affiliates, net of cash
acquired (620) - (47) Proceeds from the sale of assets or
affiliates 437 - 82 Net cash flow used for investing activities
(430) (77) (249) NET CASH FLOW PROVIDED BY (USED FOR) FINANCING
ACTIVITIES Payment of equity commitment fees - - (115) Proceeds
from long-term debt 617 5 21 Payments on long-term debt (85) (5)
(13) Proceeds from revolving credit facility 713 - - Payments on
revolving credit facility (573) - - Payment of contingent note to
524(g) trust (1,390) - - Net increase (decrease) in short-term debt
(13) 1 3 Payments to pre-petition lenders - (55) (1,461) Proceeds
from issuance of bonds - - 1,178 Proceeds from issuance of new
stock - - 2,187 Debt issuance costs - - (10) Other - - 2 Net cash
flow provided by (used for) financing activities (731) (54) 1,792
Effect of exchange rate changes on cash 25 - 6 NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS (954) (116) (354) Cash and
cash equivalents at beginning of period 1,089 1,205 1,559 CASH AND
CASH EQUIVALENTS AT END OF PERIOD $135 $1,089 $1,205 Table 9 Owens
Corning and Subsidiaries Year-to-Date Business Segment Information
(Unaudited) (in millions) Successor Combined Successor Predecessor
Twelve Twelve Two Ten Months Months Months Months Ended Ended Ended
Ended December December December October 31, 31, 31, 31, 2007 2006
2006 2006 NET SALES Insulating Systems $1,776 $2,097 $331 $1,766
Roofing and Asphalt 1,375 1,723 167 1,556 Other Building Materials
and Services 301 377 60 317 Composite Solutions 1,695 1,382 227
1,155 Total reportable segments 5,147 5,579 785 4,794 Corporate
Eliminations (169) (180) (13) (167) Consolidated $4,978 $5,399 $772
$4,627 EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INTEREST
AND TAXES Insulating Systems $192 $467 $59 $408 Roofing and Asphalt
27 72 (23) 95 Other Building Materials and Services 14 1 (1) 2
Composite Solutions 126 154 37 117 Total reportable segments $359
$694 $72 $622 RECONCILIATION TO CONSOLIDATED EARNINGS (LOSS) FROM
CONTINUING OPERATIONS BEFORE INTEREST AND TAXES Chapter 11 related
reorganization items $- $(55) $(10) $(45) Asbestos litigation
(claims) recoveries - 13 - 13 Restructuring and other (costs)
credits (54) (43) (32) (11) Acquisition transaction costs (28) (13)
(6) (7) Impact of acquisition accounting (13) - - - Loss related to
the exit of our HOMExperts service line (7) - - - Employee
emergence equity program (37) (6) (6) - Fresh-start accounting
impact - (63) (63) - Asset impairments (60) - - - General corporate
expense (15) (120) 1 (121) CONSOLIDATED EARNINGS (LOSS) FROM
CONTINUING OPERATIONS BEFORE INTEREST AND TAXES $145 $407 $(44)
$451 Table 10 Owens Corning and Subsidiaries Quarter-to-Date
Business Segment Information (Unaudited) (in millions) Combined
Successor Predecessor Three Three Two One Months Months Months
Month Ended Ended Ended Ended December December December October
31, 31, 31, 31, 2007 2006 2006 2006 NET SALES Insulating Systems
$454 $527 $331 $196 Roofing and Asphalt 276 303 167 136 Other
Building Materials and Services 67 92 60 32 Composite Solutions 543
354 227 127 Total reportable segments 1,340 1,276 785 491 Corporate
Eliminations (36) (26) (13) (13) Consolidated $1,304 $1,250 $772
$478 EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INTEREST AND
TAXES Insulating Systems $55 $108 $59 $49 Roofing and Asphalt (9)
(25) (23) (2) Other Building Materials and Services (4) (1) (1) -
Composite Solutions 46 50 37 13 Total reportable segments $88 $132
$72 $60 RECONCILIATION TO CONSOLIDATED EARNINGS FROM CONTINUING
OPERATIONS BEFORE INTEREST AND TAXES Chapter 11 related
reorganization items $4 $(27) $(10) $(17) Asbestos litigation
recoveries - - - - Restructuring and other (costs) credits (57)
(33) (32) (1) Acquisition transaction costs (7) (9) (6) (3) Impact
of acquisition accounting (13) - - - Loss related to the exit of
our HOMExperts service line - - - - Employee emergence equity
program (9) (6) (6) - Fresh-start accounting impact - (63) (63) -
Asset impairments (49) - - - General corporate expense (3) 5 1 4
CONSOLIDATED EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE
INTEREST AND TAXES $(46) $(1) $(44) $43 DATASOURCE: Owens Corning
CONTACT: Media Inquiries: Jason Saragian, +1-419-248-8987, or
Investor Inquiries: Scott Deitz, +1-419-248-8935, both of Owens
Corning Web site: http://www.owenscorning.com/ Company News
On-Call: http://www.prnewswire.com/comp/677350.html
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