Owens Corning Reports First-Quarter 2012 Results

Table 1

Owens Corning and Subsidiaries

Consolidated Statements of Earnings

(unaudited)

(in millions, except per share amounts)

Three Months Ended

Mar. 31,

2012

2011

NET SALES

$       1,346

$      1,238

COST OF SALES

1,160

1,036

Gross margin

186

202

OPERATING EXPENSES

Marketing and administrative expenses

137

135

Science and technology expenses

19

19

Charges related to cost reduction actions

34

-

Other (income) expenses

8

(13)

Total operating expenses

198

141

EARNINGS (LOSS) BEFORE INTEREST AND TAXES

(12)

61

Interest expense, net

28

25

EARNINGS (LOSS) BEFORE TAXES

(40)

36

Less: Income tax expense

5

11

Equity in net earnings of affiliates

-

-

NET EARNINGS (LOSS)

(45)

25

Less: Net earnings attributable to noncontrolling interests

1

1

NET EARNINGS (LOSS) ATTRIBUTABLE TO OWENS

CORNING

$         (46)

$          24

EARNINGS (LOSS) PER COMMON SHARE ATTRIBUTABLE TO

OWENS CORNING COMMON STOCKHOLDERS

Basic

$      (0.38)

$      0.19

Diluted

$      (0.38)

$      0.19

WEIGHTED-AVERAGE COMMON SHARES

Basic

121.1

123.8

Diluted

121.1

125.3

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

March 31,

2012

2011

Charges related to cost reduction actions and related items

$

(55)

$

-

Total adjusting items

$

(55)

$

-

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

Three Months Ended

March 31,

2012

2011

NET EARNINGS (LOSS) ATTRIBUTABLE TO OWENS CORNING

$

(46)

$

24

Less: Net earnings attributable to noncontrolling interests

1

1

NET EARNINGS (LOSS)

(45)

25

Income tax expense

5

11

EARNINGS (LOSS) BEFORE TAXES

(40)

36

Interest expense, net

28

25

EARNINGS (LOSS) BEFORE INTEREST AND TAXES

(12)

61

Less: adjusting items from above

(55)

-

ADJUSTED EBIT

$

43

$

61

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

March 31,

2012

2011

RECONCILIATION TO ADJUSTED EARNINGS

Net earnings attributable to Owens Corning

$

(46)

$

24

Adjustment to remove adjusting items net of tax

43

-

Adjustment to tax expense to reflect pro forma tax rate*

14

3

ADJUSTED EARNINGS

$

11

$

27

RECONCILIATION TO ADJUSTED DILUTED EARNINGS PER SHARE

ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS

DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE

TO OWENS CORNING COMMON STOCKHOLDERS

$

(0.38)

$

0.19

Adjustment to remove adjusting items net of tax

0.35

-

Adjustment to tax expense to reflect a pro forma tax rate*

0.12

0.03

ADJUSTED DILUTED EARNINGS PER SHARE

ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS

$

0.09

$

0.22

RECONCILIATON TO DILUTED SHARES OUTSTANDING

Weighted-average shares outstanding

used for basic earnings per share

121.1

123.8

Non-vested restricted shares

-

1.0

Options to purchase common stock

-

0.5

Diluted shares outstanding

121.1

125.3

* Pro forma tax rates used were 25% in 2012 as this is the expected full-year effective tax rate, and, 21% in 2011 as this was the effective tax rate of the Company in 2011.

Table 4

Owens Corning and Subsidiaries

Consolidated Balance Sheets

(unaudited)

(in millions)

ASSETS

Mar. 31,

Dec. 31,

2012

2011

CURRENT ASSETS

Cash and cash equivalents

$

58

$

52

Receivables, less allowances of $18 at Mar. 31, 2012 and $15 at Dec. 31, 2011

889

610

Inventories

800

795

Other current assets

188

179

Total current assets

1,935

1,636

Property, plant and equipment, net

2,922

2,904

Goodwill

1,144

1,144

Intangible assets

1,066

1,073

Deferred income taxes

529

538

Other non-current assets

237

232

TOTAL ASSETS

$

7,833

$

7,527

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable and accrued liabilities

$

937

$

876

Short-term debt

22

28

Long-term debt - current portion

4

4

Total current liabilities

963

908

Long-term debt, net of current portion

2,202

1,930

Pension plan liability

430

435

Other employee benefits liability

264

267

Deferred income taxes

53

51

Other liabilities

198

195

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

3,917

3,907

Accumulated earnings

424

470

Accumulated other comprehensive deficit

(294)

(315)

Cost of common stock in treasury (c)

(367)

(362)

Total Owens Corning stockholders' equity

3,681

3,701

Noncontrolling interests

42

40

Total equity

3,723

3,741

TOTAL LIABILITIES AND EQUITY

$

7,833

$

7,527

(a)

10 shares authorized; none issued or outstanding at Mar. 31, 2012 and Dec. 31, 2011

(b)

400 shares authorized; 135.3 issued and 121.6 outstanding at Mar. 31, 2012; 134.4 issued and 120.9 outstanding at Dec. 31, 2011

(c)

13.7 shares at Mar. 31, 2012 and 13.5 shares at Dec. 31, 2011

Table 5

Owens Corning and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

(in millions)

Three Months Ended

Mar. 31,

2012

2011

NET CASH FLOW USED FOR OPERATING ACTIVITIES

Net earnings (loss)

$

(45)

$

25

Adjustments to reconcile net earnings to cash provided by operating activities:

Depreciation and amortization

89

80

Gain on sale of businesses and fixed assets

(1)

(6)

Deferred income taxes

6

(4)

Provision for pension and other employee benefits liabilities

11

8

Stock-based compensation expense

7

5

Other non-cash

(4)

(7)

Change in working capital

(232)

(239)

Pension fund contribution

(18)

(78)

Payments for other employee benefits liabilities

(6)

(7)

Other

-

10

Net cash flow used for operating activities

(193)

(213)

NET CASH FLOW USED FOR INVESTING ACTIVITIES

Additions to plant and equipment

(72)

(91)

Proceeds from the sale of assets or affiliates

4

12

Net cash flow used for investing activities

(68)

(79)

NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES

Proceeds from senior revolving credit and receivables securitization facilities

626

432

Payments on senior revolving credit and receivables securitization facilities

(352)

(133)

Payments on long-term debt

(2)

(1)

Net increase (decrease) in short-term debt

(6)

4

Purchases of treasury stock

(5)

(10)

Other

5

8

Net cash flow provided by financing activities

266

300

Effect of exchange rate changes on cash

1

1

Net increase in cash and cash equivalents

6

9

Cash and cash equivalents at beginning of period

52

52

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

58

$

61

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

Mar. 31,

2012

2011

Net sales

$

476

$

492

     % change from prior year

-3%

6%

EBIT

$

23

$

48

     EBIT as a % of net sales

5%

10%

Depreciation and amortization expense

$

30

$

34

Building Materials

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

Three Months Ended

Mar. 31,

2012

2011

Net sales

Insulation

$

331

$

290

Roofing

588

496

Total Building Materials

$

919

$

786

     % change from prior year

17%

-7%

EBIT

Insulation

$

(34)

$

(47)

Roofing

83

77

Total Building Materials

$

49

$

30

     EBIT as a % of net sales

5%

4%

Depreciation and amortization expense

Insulation

$

25

$

29

Roofing

9

10

Total Building Materials

$

34

$

39

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

Mar. 31,

2012

2011

Charges related to cost reduction actions and related items

$

(55)

$

-

General corporate expense and other

(29)

(17)

EBIT

$

(84)

$

(17)

Depreciation and amortization

$

25

$

7