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
SOURCE Owens Corning
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