Performance Marked by Global Growth in Composites
TOLEDO, Ohio, May 7 /PRNewswire-FirstCall/ -- Owens Corning (NYSE: OC)
today reported that consolidated net sales increased 20 percent to $1.35
billion during the first quarter, compared with $1.12 billion in the first
quarter of 2007. First-quarter sales increased year-over-year as a result
of the acquisition of Saint-Gobain's reinforcements and composite fabrics
businesses in November 2007. These sales were offset by weaker demand for
the company's building materials products associated with the continued
downturn of the U.S. housing market.
The company experienced weaker demand and lower selling prices for
residential insulation as well as significant energy and raw material
inflation in the Roofing and Asphalt business. Combined with an impairment
associated with the recent divestiture of composite manufacturing assets in
Belgium and Norway, this led to a first-quarter loss from continuing
operations of $15 million, or a loss of $0.12 per diluted share. Adjusted
earnings from continuing operations were $10 million, or earnings of $0.07
per adjusted diluted share, excluding comparability items (see attached
Table 3 for a discussion and reconciliation of such items). Comparability
items affecting net earnings in the first quarter amounted to approximately
$31 million, which included items related to restructuring activities,
business acquisitions and dispositions, the employee equity program related
to the company's emergence from Chapter 11 in 2006, and asset impairments.
Consolidated First-Quarter Results
- Earnings before interest and taxes (EBIT) from continuing operations in
the first quarter of 2008 were $19 million, compared with $32 million
during the same period in 2007. Excluding comparability items (see
Table 2), adjusted EBIT from continuing operations for the first
quarter of 2008 was $54 million compared with $59 million during the
same period in 2007, a decrease of 8 percent. The decrease reflects
lower demand for building materials products and inflation in energy
and raw material costs. The decline in EBIT in the building materials
businesses was partially offset by incremental earnings resulting from
the acquisition of Saint-Gobain's reinforcements and composite fabrics
businesses, and improvement in the Composite Solutions business related
to manufacturing productivity.
- Gross margin as a percentage of consolidated net sales was 14 percent
during the first quarter of 2008, compared with 17 percent during the
same period in 2007. The decrease was the result of sales volume and
price declines in the Insulating Systems business, and the inability to
achieve price increases during the quarter to offset the impact of
inflation in energy and raw materials in the Roofing and Asphalt
business. These decreases were partially offset by improved margins in
the Composite Solutions segment.
"Business results for the first quarter were encouraging and met our
expectations," said Mike Thaman, chairman and chief executive officer. "Our
performance for the quarter validates the actions we took during the second
half of 2007 to rework our business mix. The $100 million in cost-reduction
actions that we targeted for 2008 are now fully in place.
"Our acquisition of Saint-Gobain's reinforcements and composite fabrics
businesses is paying off, delivering sales growth outside the U.S.," said
Thaman. "We are on track to achieve at least $30 million in acquisition-
related synergies in Composites in 2008 with EBIT margins approaching 10
percent, excluding metal lease expense. We are very pleased with the
performance of this segment. Our Insulating Systems business made money in
the first quarter in a very challenging U.S. housing market. Our Roofing
and Asphalt business struggled during the quarter due to a lack of
housing-related demand and escalating cost inflation. We expect stronger
performance in this business and a return to profitability in the second
quarter of the year. The strength of our Composites business and our
excellent market position in building materials will carry us through a
weak U.S. housing market in 2008."
Business Highlights
- Global demand for glass fiber reinforcement products grew during the
first quarter, leading to higher capacity utilization and improved
productivity.
- Demand for insulation products met our expectations during the first
quarter despite further weakness in the U.S. housing market.
- Owens Corning achieved a significant reduction in workplace injuries of
52 percent during the first quarter of 2008, compared with the
company's Dec. 31, 2007 rate.
Other Financial Items
- During the first quarter of 2008, depreciation and amortization from
continuing operations totaled $77 million.
- At the end of the first quarter of 2008, Owens Corning had net debt of
$2.1 billion, comprised of $2.2 billion of short- and long-term debt
and cash-on-hand of $118 million.
- 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 first 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 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 under this program during the first quarter of 2008.
Recent Developments
During the first quarter of 2008, Owens Corning reached a definitive
agreement to divest its composite manufacturing facilities in Battice,
Belgium, and Birkeland, Norway, to address regulatory remedies associated
with its purchase of the businesses acquired from Saint-Gobain. The company
completed the divestiture of these facilities on May 1, 2008. The aggregate
gross purchase price for the sale was euro 155 million ($242 million).
After costs associated with the transaction and to position the business as
an ongoing concern, Owens Corning expects to realize net proceeds of
approximately $197 million, consisting of cash proceeds of $184 million
plus the assumption of certain liabilities by the purchaser. As a result of
the sale, Owens Corning recorded an additional impairment charge of
approximately $10 million in the first quarter of 2008. These amounts are
subject to post- closing adjustments.
Outlook
Owens Corning's recent reinforcements and composite fabrics acquisition
has significantly strengthened the company's presence in the global
composites market. As Owens Corning continues to realize synergies from the
acquisition, the company expects operating margins in its composites
business to approach 10 percent in 2008, excluding the financial cost of
leasing precious metals.
Most economists expect the current weakness in the U.S. housing market
to continue throughout 2008, which will affect demand for Owens Corning's
building materials products. 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 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 operations will be 15 percent or less in 2008.
Despite the declines in U.S. housing starts, Owens Corning continues to
estimate that 2008 adjusted EBIT should be at least $240 million. The
company excludes from its estimate items impacting comparability as well as
the financial cost of leasing precious metals.
Business Segment Highlights
Composite Solutions
- Net sales for the first quarter of 2008 were $666 million, an
82-percent increase from $366 million during the same period in 2007.
The increase was driven by incremental sales associated with the recent
acquisition of Saint-Gobain's reinforcements and composite fabrics
businesses.
- EBIT from continuing operations for the first quarter of 2008 was $64
million, compared with $25 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 first quarter of 2008 were $373 million, an 11-
percent decrease from $419 million during the same period in 2007.
Sales for residential insulation products were significantly impacted
by the reduction in new residential construction and repair and
remodeling in the United States.
- EBIT from continuing operations for the first quarter of 2008 was $16
million, compared with $53 million during the same period in 2007. The
decline was primarily due to lower selling prices driven by the
weakness in the U.S. housing market.
Roofing and Asphalt
- Net sales for the first quarter of 2008 and 2007 were $306 million in
both years on generally flat volumes and price.
- EBIT from continuing operations for the first quarter of 2008 was a
loss of $17 million, compared with a loss of $8 million during the same
period in 2007. The increased loss reflected the company's inability to
achieve sufficient price increases during the quarter to offset the
impact of inflation on energy and raw materials, including asphalt.
Other Building Materials and Services
- Net sales for the first quarter of 2008 were $53 million, a 23-percent
decrease from $69 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 first quarter of 2008 was a
loss of $3 million, compared with earnings of $4 million during the
same period in 2007. The change was primarily due to the decline in
volumes and idle facility costs in Masonry Products.
Second-quarter 2008 results are currently scheduled to be announced on
July 30, 2008.
Conference Call and Presentation
Wednesday, May 7, 2008
11 a.m. ET
All Callers
Live dial-in telephone number: 1-800-329-9097 or 1-617-614-4929
(Please dial in 10 minutes before conference call start time)
Passcode: 63985478
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 May 21, 2008 at 1-888-286-
8010 or 1-617-801-6888. Passcode: 80352426. 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 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
Consolidated Statements of Earnings (Loss)
(Unaudited)
(in millions, except per share amounts)
Three Months Three Months
Ended Ended
March 31, March 31,
2008 2007
NET SALES $1,353 $1,124
COST OF SALES 1,161 937
Gross margin 192 187
OPERATING EXPENSES
Marketing and administrative
expenses 142 127
Science and technology expenses 19 15
Restructuring costs (credits) 2 (2)
Chapter 11-related
reorganization items - 3
Employee emergence equity
program expense 7 8
Loss on sale of fixed assets and
other 3 4
Total operating expenses 173 155
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INTEREST AND TAXES 19 32
Interest expense, net 32 32
LOSS FROM CONTINUING OPERATIONS
BEFORE TAXES (13) -
Income tax expense 2 -
LOSS FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST AND EQUITY
IN NET EARNINGS OF AFFILIATES (15) -
Minority interest and equity in net
earnings (loss) of affiliates - -
LOSS FROM CONTINUING OPERATIONS (15) -
Earnings from discontinued
operations, net of tax of $0 - 1
NET EARNINGS (LOSS) $(15) $1
BASIC EARNINGS (LOSS) PER COMMON
SHARE
Loss from continuing operations $(0.12) $-
Earnings from discontinued
operations - 0.01
Basic net earnings (loss)
per common share $(0.12) $0.01
DILUTED EARNINGS (LOSS) PER COMMON
SHARE
Loss from continuing operations $(0.12) $-
Earnings from discontinued
operations - 0.01
Diluted net earnings
(loss) per common share $(0.12) $0.01
WEIGHTED AVERAGE COMMON SHARES
Basic 128.8 128.2
Diluted 128.8 129.0
Table 2
Owens Corning and Subsidiaries
EBIT Reconciliation Schedules
(Unaudited)
(in millions)
Because of the nature of certain items included in reported earnings
(loss) from continuing operations before interest and taxes ("EBIT"), net
earnings (loss) and diluted earnings (loss) per share, management does
not find the reported measures to be the most useful and transparent
financial measures of our year-over-year operational performance.
Certain of these comparability items, consisting of items related to
restructuring activities, business acquisitions and dispositions, the
employee emergence equity program and cost of our prior Chapter 11
proceedings, are not the result of current operations. In addition, the
reported measures also include the cost of leasing precious metals,
including the cost of leases assumed in the acquisition of Saint-Gobain's
reinforcements and composite fabrics businesses. To facilitate our
evaluation of these acquired businesses on a basis consistent with the
purchase of all precious metals necessary to operate the businesses, we
consider the net metal lease expense to be a financing cost which should
be included in interest expense in measuring our year-over-year
performance.
As described more fully in the following financial schedules, such
comparability items affecting EBIT amounted to charges of $35 million and
$27 million in the three months ended March 31, 2008 and 2007,
respectively.
Three Months Three Months
Ended Ended
March 31, March 31,
2008 2007
RECONCILIATION TO ADJUSTED EARNINGS
FROM CONTINUING OPERATIONS BEFORE
INTEREST AND TAXES:
NET EARNINGS (LOSS) $(15) $1
Earnings from discontinued
operations, net of tax of $0 - 1
LOSS FROM CONTINUING OPERATIONS (15) -
Minority interest and equity in net
earnings (loss) of affiliates - -
LOSS FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST AND EQUITY IN
NET EARNINGS OF AFFILIATES (15) -
Income tax expense 2 -
LOSS FROM CONTINUING OPERATIONS
BEFORE TAXES (13) -
Interest expense, net 32 32
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INTEREST AND TAXES 19 32
Adjustments to remove items impacting
comparability:
Chapter 11-related reorganization
items $- $3
Net metal lease expense (income) 4 (1)
Restructuring and other costs
(credits) 2 (2)
Acquisition integration and
transaction costs 12 11
Losses related to the exit of our
HOMExperts service line - 8
Employee emergence equity program
expense 7 8
Asset impairments 10 -
Total adjustments to remove
comparability items 35 27
ADJUSTED EARNINGS FROM CONTINUING
OPERATIONS BEFORE INTEREST AND TAXES $54 $59
Table 3
Owens Corning and Subsidiaries
EPS Reconciliation Schedules
(Unaudited)
(in millions, except per share amounts)
Because of the nature of certain items included in reported earnings
(loss) from continuing operations before interest and taxes ("EBIT"), net
earnings (loss) and diluted earnings (loss) per share, management does not
find the reported measures to be the most useful and transparent financial
measures of our year-over-year operational performance. Certain of these
comparability items, consisting of items related to restructuring
activities, business acquisitions and dispositions, the employee emergence
equity program and cost of our prior Chapter 11 proceedings, are not the
result of current operations. In addition, the reported measures also
include the cost of leasing precious metals, including the cost of leases
assumed in the acquisition of Saint-Gobain's reinforcements and composite
fabrics businesses. To facilitate our evaluation of these acquired
businesses on a basis consistent with the purchase of all precious metals
necessary to operate the businesses, we consider the net metal lease
expense to be a financing cost which should be included in interest
expense in measuring our year-over-year performance.
As described more fully in the following financial schedules, such
comparability items affecting net earnings amounted to charges of $31
million and $28 million in the three months ended March 31, 2008 and 2007,
respectively, after the adjustment to classify net metal lease expense as
interest.
Three Months Three Months
Ended Ended
March 31, March 31,
2008 2007
RECONCILIATION TO ADJUSTED EARNINGS
FROM CONTINUING OPERATIONS
NET EARNINGS (LOSS) $(15) $1
Earnings from discontinued
operations, net of tax of $0 - 1
LOSS FROM CONTINUING OPERATIONS (15) -
Adjustments to remove items impacting
comparability:
Chapter 11-related reorganization
items $- $3
Net metal lease expense (income) 4 (1)
Restructuring and other costs
(credits) 2 (2)
Acquisition integration and
transaction costs 12 11
Losses related to the exit of our
HOMExperts service line - 8
Employee emergence equity program
expense 7 8
Asset impairments 10 -
Total adjustments to remove
comparability items 35 27
Adjustment to classify net metal
lease (expense) income as interest (4) 1
Tax effect of adjustments at 19% in
2008 and 37% in 2007 (6) (10)
ADJUSTED EARNINGS FROM CONTINUING
OPERATIONS $10 $18
RECONCILIATION TO ADJUSTED DILUTED
EARNINGS (LOSS) PER SHARE FROM
CONTINUING OPERATIONS:
DILUTED LOSS PER SHARE FROM
CONTINUING OPERATIONS $(0.12) $-
Adjustment to remove comparability
items 0.27 0.20
Adjustment to classify net metal
lease (expense) income as interest (0.03) 0.01
Tax effect of adjustments at 19% in
2008 and 37% in 2007 (0.05) (0.08)
ADJUSTED DILUTED EARNINGS PER SHARE
FROM CONTINUING OPERATIONS $0.07 $0.13
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 128.8 129.0
Shares related to employee
emergence program 2.3 3.0
Adjusted diluted shares outstanding 131.1 132.0
Table 4
Owens Corning and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
March 31, December 31,
2008 2007
ASSETS
Current Assets
Cash and cash equivalents $118 $135
Receivables, less allowances of
$23 million in 2008 and $23
million in 2007 796 721
Inventories 883 821
Restricted cash - disputed
distribution reserve 33 33
Assets held for sale - current 63 53
Other current assets 115 89
Total current assets 2,008 1,852
Property, plant and equipment,
net 2,777 2,772
Goodwill 1,173 1,174
Intangible assets 1,208 1,210
Deferred income taxes 492 487
Assets held for sale - non-
current 181 178
Other non-current assets 194 199
TOTAL ASSETS $8,033 $7,872
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued
liabilities $1,079 $1,137
Accrued interest 31 12
Short-term debt 32 47
Long-term debt - current portion 13 10
Liabilities held for sale -
current 47 40
Total current liabilities 1,202 1,246
Long-term debt, net of current
portion 2,138 1,993
Pension plan liability 125 146
Other employee benefits liability 292 293
Liabilities held for sale -non-
current 12 8
Other liabilities 192 161
Commitments and contingencies
Minority interest 36 37
Stockholders' equity 4,036 3,988
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $8,033 $7,872
Table 5
Owens Corning and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in millions)
Three Months Three Months
Ended Ended
March 31, March 31,
2008 2007
NET CASH FLOW USED FOR OPERATING
ACTIVITIES
Net earnings (loss) $(15) $1
Adjustments to reconcile net
earnings (loss) to cash used
for operating activities:
Depreciation and
amortization 77 77
Gain on sale of businesses
and fixed assets - (1)
Impairment of fixed and
intangible assets and
investment in affiliates 10 -
Deferred income taxes (10) (9)
Provision for pension and
other employee benefits
liabilities 11 11
Employee emergence equity
program expense 7 8
Stock-based compensation
expense 5 -
Payments related to Chapter 11
filings (1) (8)
Increase in receivables (65) (117)
Increase in inventories (57) (94)
(Increase) decrease in prepaid
and other assets (5) 2
Decrease in accounts payable and
accrued liabilities (48) (124)
Pension fund contribution (24) (9)
Payments for other employee
benefits liabilities (8) (7)
Other 16 (16)
Net cash flow used for
operating activities (107) (286)
NET CASH FLOW USED FOR INVESTING
ACTIVITIES
Additions to plant and
equipment (52) (42)
Investment in subsidiaries and
affiliates, net of cash
acquired - (1)
Proceeds from the sale of
assets or affiliates 2 12
Net cash flow used for
investing activities (50) (31)
NET CASH FLOW PROVIDED BY (USED FOR)
FINANCING ACTIVITIES
Proceeds from long-term debt 12 609
Payments on long-term debt (2) (6)
Proceeds from revolving credit
facility 175 110
Payments on revolving credit
facility (40) -
Payment of contingent note to
524(g) trust - (1,390)
Net decrease in short-term debt (17) (2)
Net cash flow provided
by (used for)
financing activities 128 (679)
Effect of exchange rate changes on
cash 12 -
NET DECREASE IN CASH AND CASH
EQUIVALENTS (17) (996)
Cash and cash equivalents at
beginning of period 135 1,089
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $118 $93
Table 6
Owens Corning and Subsidiaries
Year-to-Date Business Segment Information
(Unaudited)
(in millions)
Three Months Three Months
Ended Ended
March 31, March 31,
2008 2007
NET SALES
Composite Solutions $666 $366
Insulating Systems 373 419
Roofing and Asphalt 306 306
Other Building Materials and
Services 53 69
Total reportable segments 1,398 1,160
Corporate Eliminations (45) (36)
Consolidated $1,353 $1,124
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS BEFORE INTEREST AND TAXES
Composite Solutions 64 25
Insulating Systems $16 $53
Roofing and Asphalt (17) (8)
Other Building Materials and
Services (3) 4
Total reportable segments $60 $74
RECONCILIATION TO CONSOLIDATED EARNINGS
FROM CONTINUING OPERATIONS BEFORE INTEREST
AND TAXES
Chapter 11-related
reorganization items $- $(3)
Metal lease financing
(expense) income (4) 1
Restructuring and other
(costs) credits (2) 2
Acquisition integration and
transaction costs (12) (11)
Losses related to the exit of
our HOMExperts service line - (8)
Employee emergence equity
program expense (7) (8)
Asset impairments (10) -
General corporate expense (6) (15)
CONSOLIDATED EARNINGS FROM CONTINUING
OPERATIONS BEFORE INTEREST AND TAXES $19 $32
SOURCE Owens Corning
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CONTACT:
Media Inquiries, Jason Saragian,
+1-419-248-8987, or Investor Inquiries: Scott Deitz,
+1-419-248-8935, both of Owens Corning
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