Owens Corning Reports Record Quarterly Results

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

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

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

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

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

Consolidated Third-Quarter 2011 Results

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

Other Financial Items

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

Outlook

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

Owens Corning outlines the following additional expectations for 2011:

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

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

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

Next Earnings Announcement

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

Third-Quarter Conference Call and Presentation

Wednesday, October 26, 2011

11 a.m. Eastern Daylight Time

All Callers

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

Passcode: 64977007

(Please dial in 10 minutes before conference call start time.)

Live webcast: http://www.owenscorning.com/investors

Telephone replay available through November 2, 2011: U.S. 1-888-286-8010 or International 1-617-801-6888

Passcode: 10726127

Replay of webcast also available at: http://www.owenscorning.com/investors

Presentation

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

About Owens Corning

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

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those projected in these statements. Such factors include, without limitation: economic and political conditions, including new legislation or other governmental actions; levels of residential and commercial construction activity; competitive factors; pricing factors; weather conditions; our level of indebtedness; industry and economic conditions that affect the market and operating conditions of our customers, suppliers or lenders; availability and cost of energy and materials; availability and cost of credit; interest rate movements; issues related to expansion of our production capacity; issues related to acquisitions, divestitures and joint ventures; our ability to use our net operating loss carry-forwards; achievement of expected synergies, cost reductions and/or productivity improvements; issues involving implementation of new business systems; foreign exchange fluctuations; research and development activities; difficulties in managing production capacity; labor disputes; and factors detailed from time to time in the company's Securities and Exchange Commission filings. The information in this news release speaks as of the date October 26, 2011, and is subject to change. The company does not undertake any duty to update or revise forward-looking statements. Any distribution of this news release after that date is not intended and will not be construed as updating or confirming such information.

Table 1
Owens Corning and Subsidiaries
Consolidated Statements of Earnings
(unaudited)
(in millions, except per share amounts)

			Three Months Ended				Nine Months Ended
			Sept. 30,				Sept. 30,
				2011		2010		2011		2010
NET SALES			$	1,450	$	1,186	$	4,139	$	3,829
COST OF SALES				1,133		950		3,341		3,073
		Gross margin		317		236		798		756
OPERATING EXPENSES
	Marketing and administrative expenses			119		123		395		385
	Science and technology expenses			20		19		58		55
	Charges related to cost reduction actions			-		15		-		24
	Other (income) expenses, net			1		10		(28)		15
		Total operating expenses		140		167		425		479
EARNINGS BEFORE INTEREST AND TAXES				177		69		373		277
Interest expense, net				28		28		81		85
EARNINGS BEFORE TAXES				149		41		292		192
Less: Income tax expense (benefit)				23		(19)		63		(854)
Equity in net earnings of affiliates				-		1		1		3
NET EARNINGS				126		61		230		1,049
Less: Net earnings attributable to noncontrolling interests				2		3		4		6
NET EARNINGS ATTRIBUTABLE TO OWENS CORNING			$	124	$	58	$	226	$	1,043

EARNINGS PER COMMON SHARE ATTRIBUTABLE TO
	OWENS CORNING COMMON STOCKHOLDERS
		Basic	$	1.02	$	0.46	$	1.83	$	8.27
		Diluted	$	1.01	$	0.46	$	1.82	$	8.19

WEIGHTED-AVERAGE COMMON SHARES
		Basic		121.7		125.1		123.2		126.1
		Diluted		122.6		126.6		124.2		127.4

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

Table 2
Owens Corning and Subsidiaries
EBIT Reconciliation Schedules
(unaudited)

For purposes of internal review of Owens Corning's year-over-year operational performance, management excludes from net earnings attributable to Owens Corning certain items it believes are not the result of current operations. The adjusted financial measure resulting from these adjustments is used internally by Owens Corning for various purposes, including reporting results of operations to the Board of Directors, analysis of performance, and related employee compensation measures. Although management believes that these adjustments result in a measure that provides it a useful representation of its operational performance, the adjusted measure should not be considered in isolation or as a substitute for net earnings attributable to Owens Corning as prepared in accordance with accounting principles generally accepted in the United States.


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

			Three Months Ended				Nine Months Ended
			Sept. 30,				Sept. 30,
			2011		2010		2011		2010
Charges related to cost reduction actions and related items			$	-	$	(16)	$	-	$	(33)
Acquisition, integration, transaction, and other costs				-		(4)		-		(6)
Net precious metal lease expense				-		(1)		-		(1)
	Total adjusting items		$	-	$	(21)	$	-	$	(40)


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

			Three Months Ended				Nine Months Ended
			Sept. 30,				Sept. 30,
			2011		2010		2011		2010
NET EARNINGS ATTRIBUTABLE TO
	OWENS CORNING		$	124	$	58	$	226	$	1,043
		Less: Net earnings attributable to noncontrolling interests		2		3		4		6
NET EARNINGS				126		61		230		1,049
	Equity in net earnings of affiliates			-		1		1		3
	Income tax expense (benefit)			23		(19)		63		(854)
EARNINGS BEFORE TAXES				149		41		292		192
	Interest expense, net			28		28		81		85
EARNINGS BEFORE INTEREST AND TAXES				177		69		373		277
	Less: adjusting items from above			-		(21)		-		(40)
ADJUSTED EARNINGS BEFORE INTEREST AND TAXES			$	177	$	90	$	373	$	317

Table 3
Owens Corning and Subsidiaries
EPS Reconciliation Schedules
(unaudited)
(in millions, except per share data)

For purposes of internal review of Owens Corning's year-over-year operational performance, management excludes from net earnings attributable to Owens Corning certain items it believes are not the result of current operations. The adjusted financial measures resulting from these adjustments are used internally by Owens Corning for various purposes, including reporting results of operations to the Board of Directors, analysis of performance and related employee compensation measures. Although management believes that these adjustments result in measures that provide it a useful representation of its operational performance, the adjusted measures should not be considered in isolation or as a substitute for net earnings attributable to Owens Corning as prepared in accordance with accounting principles generally accepted in the United States.

A reconciliation from net earnings attributable to Owens Corning to Adjusted Earnings and a reconciliation from diluted earnings per share to adjusted diluted earnings per share are shown in the tables below:

			Three Months Ended				Nine Months Ended
			Sept. 30,				Sept. 30,
			2011		2010		2011		2010
RECONCILIATION TO ADJUSTED EARNINGS
Net earnings attributable to Owens Corning		$	124	$	58	$	226	$	1,043
	Adjustment to remove adjusting items net of pro forma effective tax rate*		-		16		-		30
	Adjustment to tax expense to reflect pro forma tax rate*		(14)		(30)		(10)		(903)
ADJUSTED EARNINGS		$	110	$	44	$	216	$	170

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

DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS		$	1.01	$	0.46	$	1.82	$	8.19
	Adjustment to remove adjusting items net of pro forma tax rate*		-		0.13		-		0.23
	Adjustment to tax expense to reflect a pro forma tax rate*		(0.11)		(0.24)		(0.08)		(7.09)
ADJUSTED DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS		$	0.90	$	0.35	$	1.74	$	1.33

RECONCILIATION TO DILUTED SHARES OUTSTANDING
Weighted-average shares outstanding used for basic earnings per share
			121.7		125.1		123.2		126.1
	Non-vested restricted shares		0.6		1.3		0.6		1.1
	Options to purchase common stock		0.3		0.2		0.4		0.2
Diluted shares outstanding			122.6		126.6		124.2		127.4

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

Table 4
Owens Corning and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
(in millions)

				Nine Months Ended
				Sept. 30,
				2011		2010
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES
	Net earnings		$	230	$	1,049
	Adjustments to reconcile net earnings to cash provided by operating activities:
		Depreciation and amortization		243		242
		Gain on sale of businesses and fixed assets		(30)		(4)
		Deferred income taxes		29		(874)
		Provision for pension and other employee benefits liabilities		26		23
		Stock-based compensation expense		16		16
		Other non-cash		(18)		(6)
	Change in working capital			(330)		(132)
	Pension fund contribution			(104)		(29)
	Payments for other employee benefits liabilities			(17)		(19)
	Other			14		15
		Net cash flow provided by operating activities		59		281
NET CASH FLOW USED FOR INVESTING ACTIVITIES
	Additions to plant and equipment			(303)		(199)
	Investment in subsidiaries and affiliates, net of cash acquired			(84)		-
	Proceeds from the sale of assets or affiliates			81		16
		Net cash flow used for investing activities		(306)		(183)
NET CASH FLOW PROVIDED BY (USED FOR) FINANCING ACTIVITIES
	Proceeds from senior revolving credit facility			805		406
	Payments on senior revolving credit facility			(629)		(315)
	Proceeds from long-term debt			6		1
	Payments on long-term debt			(10)		(606)
	Net increase (decrease) in short-term debt			219		(8)
	Purchases of treasury stock			(138)		(102)
	Other			12		2
		Net cash flow provided by (used for) financing activities		265		(622)
Effect of exchange rate changes on cash				(20)		(5)
Net decrease in cash and cash equivalents				(2)		(529)
Cash and cash equivalents at beginning of period				52		564
CASH AND CASH EQUIVALENTS AT END OF PERIOD			$	50	$	35

Table 5
Owens Corning and Subsidiaries
Consolidated Balance Sheets
(unaudited)
(in millions)

ASSETS			Sept. 30,		Dec. 31,
ASSETS			2011		2010
CURRENT ASSETS
	Cash and cash equivalents		$	50	$	52
	Receivables, less allowances of $15 at Sept. 30, 2011, and $19 at Dec. 31, 2010			783		546
	Inventories			746		620
	Assets held for sale - current			-		16
	Other current assets			214		174
		Total current assets		1,793		1,408
Property, plant and equipment, net				2,839		2,754
Goodwill				1,145		1,088
Intangible assets				1,079		1,090
Deferred income taxes				517		529
Assets held for sale - non-current				-		26
Other non-current assets				293		263
TOTAL ASSETS			$	7,666	$	7,158

LIABILITIES AND EQUITY
CURRENT LIABILITIES
	Accounts payable and accrued liabilities		$	960	$	942
	Short-term debt			221		1
	Long-term debt - current portion			3		5
	Liabilities held for sale - current			-		7
		Total current liabilities		1,184		955
Long-term debt, net of current portion				1,832		1,629
Pension plan liability				311		378
Other employee benefits liability				295		298
Deferred income taxes				60		75
Other liabilities				203		137
Commitments and contingencies
OWENS CORNING STOCKHOLDERS' EQUITY
	Preferred stock, par value $0.01 per share (a)			-		-
	Common stock, par value $0.01 per share (b)			1		1
	Additional paid in capital			3,900		3,876
	Accumulated earnings			420		194
	Accumulated other comprehensive deficit			(217)		(194)
	Cost of common stock in treasury (c)			(362)		(229)
		Total Owens Corning stockholders' equity		3,742		3,648
	Noncontrolling interests			39		38
Total equity				3,781		3,686
TOTAL LIABILITIES AND EQUITY			$	7,666	$	7,158

(a) 10 shares authorized; none issued or outstanding at Sept. 30, 2011, and Dec. 31, 2010
(b) 400 shares authorized; 134.4 issued and 120.9 outstanding at Sept. 30, 2011; 133.2 issued and 123.9 outstanding at Dec. 31, 2010
(c) 13.5 shares at Sept. 30, 2011, and 9.3 shares at Dec. 31, 2010

Table 6
Owens Corning and Subsidiaries
Segment and Business Information
(unaudited)

*Composites*

The table below provides a summary of net sales, EBIT and depreciation and amortization expense for the Composites segment (in millions):

		Three Months Ended				Nine Months Ended
		Sept. 30,				Sept. 30,
		2011		2010		2011		2010
Net sales		$	496	$	477	$	1,517	$	1,431
	% change from prior year		4%		6%		6%		21%

EBIT		$	49	$	43	$	152	$	116
	EBIT as a % of net sales		10%		9%		10%		8%

Depreciation and amortization expense		$	31	$	32	$	97	$	90


*Building Materials*

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

		Three Months Ended				Nine Months Ended
		Sept. 30,				Sept. 30,
		2011		2010		2011		2010
Net sales
	Insulation	$	365	$	315	$	981	$	953
	Roofing		644		404		1,785		1,507
	Other		-		23		-		66
Total Building Materials		$	1,009	$	742	$	2,766	$	2,526
	% change from prior year	36%		-21%		10%		-2%

EBIT
	Insulation	$	(12)	$	(18)	$	(97)	$	(80)
	Roofing		156		91		374		368
	Other		-		(6)		-		(16)
Total Building Materials		$	144	$	67	$	277	$	272
	EBIT as a % of net sales	14%		9%		10%		11%

Depreciation and amortization expense
	Insulation	$	30	$	34	$	89	$	94
	Roofing		10		9		31		30
Total Building Materials		$	40	$	43	$	120	$	124

Table 7
Owens Corning and Subsidiaries
Corporate, Other and Eliminations
(unaudited)

*Corporate, Other and Eliminations*

The table below provides a summary of EBIT and depreciation and amortization expense for the Corporate, Other and Eliminations category (in millions):

	Three Months Ended				Nine Months Ended
	Sept. 30,				Sept. 30,
	2011		2010		2011		2010
Charges related to cost reduction actions and related items	$	-	$	(16)	$	(17)	$	(33)
Acquisition, integration, transaction and other costs		-		(4)		-		(6)
Net precious metal lease expense		-		(1)		-		(1)
Gain on sale of Capivari, Brazil, facility		-		-		16		-
General corporate expense and other		(16)		(20)		(55)		(71)
EBIT	$	(16)	$	(41)	$	(56)	$	(111)

Depreciation and amortization	$	7	$	8	$	26	$	28