Strong 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(TM) 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 DATASOURCE:
Owens Corning CONTACT: Media, Jason Saragian, +1-419-248-8987; or
Investors, 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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