Owens Corning Reports Fourth-Quarter and Full-Year 2011 Results

Conference Call and Presentation

Wednesday, Feb. 15, 2012

11 a.m. Eastern

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Presentation

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Table 1

Owens Corning and Subsidiaries

Consolidated Statements of Earnings

(unaudited)

(in millions, except per share amounts)

Three Months Ended

Twelve Months Ended

Dec. 31,

Dec. 31,

2011

2010

2011

2010

NET SALES

$

1,196

$

1,168

$

5,335

$

4,997

COST OF SALES

966

968

4,307

4,041

Gross margin

230

200

1,028

956

OPERATING EXPENSES

Marketing and administrative expenses

130

131

525

516

Science and technology expenses

19

21

77

76

Charges related to cost reduction actions

-

5

-

29

Other income (expense)

(7)

114

(35)

129

Total operating expenses

142

271

567

750

EARNINGS (LOSS) BEFORE INTEREST AND TAXES

88

(71)

461

206

Interest expense, net

27

25

108

110

EARNINGS (LOSS) BEFORE TAXES

61

(96)

353

96

Income tax expense (benefit)

11

14

74

(840)

Equity in net earnings of affiliates

1

1

2

4

NET EARNINGS (LOSS)

51

(109)

281

940

Less: Net earnings attributable to noncontrolling interests

1

1

5

7

NET EARNINGS (LOSS) ATTRIBUTABLE TO OWENS CORNING

$

50

$

(110)

$

276

$

933

BASIC EARNINGS (LOSS) PER COMMON SHARE

ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS

$

0.41

$

(0.89)

$

2.25

$

7.43

DILUTED EARNINGS (LOSS) PER COMMON SHARE

ATTRIBUTABLE TO OWENS CORNING COMMON

STOCKHOLDERS

$

0.41

$

(0.89)

$

2.23

$

7.37

WEIGHTED AVERAGE COMMON SHARES

Basic

120.5

123.7

122.5

125.6

Diluted

121.5

124.9

123.5

126.6

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.  Additionally, management views net precious metal lease expense as a financing item included in net interest expense rather than as a product cost included in cost of sales.  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

Twelve Months Ended

Dec. 31,

Dec. 31,

2011 

2010 

2011 

2010 

Net precious metal lease expense

$

-

$

(1)

$

-

$

(2)

Charges related to cost reduction actions and related items

-

(7)

-

(40)

Acquisition integration and transaction costs

-

(7)

-

(13)

Losses on sales of assets and other

-

(120)

-

(120)

Total adjusting items

$

-

$

(135)

$

-

$

(175)

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

Three Months Ended

Twelve Months Ended

Dec. 31,

Dec. 31,

2011

2010

2011

2010

NET EARNINGS (LOSS) ATTRIBUTABLE TO OWENS CORNING

$

50

$

(110)

$

276

$

933

Less: Net earnings attributable to noncontrolling interests

1

1

5

7

NET EARNINGS (LOSS)

51

(109)

281

940

Equity in net earnings of affiliates

1

1

2

4

Income tax expense (benefit)

11

14

74

(840)

EARNINGS (LOSS) FROM OPERATIONS BEFORE TAXES

61

(96)

353

96

Interest expense, net

27

25

108

110

EARNINGS (LOSS) FROM OPERATIONS BEFORE

88

(71)

461

206

INTEREST AND TAXES

Less: adjusting items from above

-

(135)

-

(175)

ADJUSTED EBIT

$

88

$

64

$

461

$

381

Table 3

Owens Corning and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

(in millions)

Twelve Months Ended

Dec. 31,

2011

2010

2009

NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES

Net earnings

$

281

$

940

$

67

Adjustments to reconcile net earnings to cash provided by

operating activities:

Depreciation and amortization

318

320

325

(Gain) loss on sale of businesses and fixed assets

(30)

2

(9)

Asset impairments

-

117

3

Deferred income taxes

55

(867)

17

Provision for pension and other employee benefits liabilities

36

26

40

Stock-based compensation expense

21

23

52

Other non-cash

(22)

(19)

(15)

Restricted cash

-

-

7

Change in working capital

(262)

15

134

Pension fund contribution

(117)

(32)

(43)

Payments for other employee benefits liabilities

(24)

(26)

(25)

Other

33

(11)

(12)

Net cash flow provided by operating activities

289

488

541

NET CASH FLOW USED FOR INVESTING ACTIVITIES

Additions to plant and equipment

(442)

(314)

(243)

Investment in subsidiaries and affiliates, net of cash acquired

(84)

-

-

Proceeds from the sale of assets or affiliates

81

65

39

Net cash flow used for investing activities

(445)

(249)

(204)

NET CASH FLOW PROVIDED BY (USED FOR) FINANCING ACTIVITIES

Proceeds from senior revolving credit facility

1,547

631

260

Payments on senior revolving credit facility

(1,423)

(619)

(586)

Proceeds from long-term debt

164

5

350

Payments on long-term debt

(10)

(609)

(15)

Investment in subsidiaries and affiliates, net of cash acquired

-

(30)

-

Net increase (decrease) in short-term debt

26

(10)

(20)

Purchases of treasury stock

(138)

(120)

(3)

Other

8

2

(3)

Net cash flow provided by (used for) financing activities

174

(750)

(17)

Effect of exchange rate changes on cash

(18)

(1)

8

Net increase (decrease) in cash and cash equivalents

-

(512)

328

Cash and cash equivalents at beginning of period

52

564

236

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

52

$

52

$

564

DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for income taxes

$

24

$

16

$

18

Cash paid during the year for interest

$

111

$

108

$

113

Table 4

Owens Corning and Subsidiaries

Consolidated Balance Sheets

(unaudited)

(in millions)

Dec. 31,

Dec. 31,

ASSETS

2011

2010

CURRENT ASSETS

Cash and cash equivalents

$

52

$

52

Receivables, less allowances of $15 at Dec. 31, 2011 and $19 at Dec. 31, 2010

610

546

Inventories

795

620

Assets held for sale - current

-

16

Other current assets

179

174

Total current assets

1,636

1,408

Property, plant and equipment, net

2,904

2,754

Goodwill

1,144

1,088

Intangible assets

1,073

1,090

Deferred income taxes

538

529

Assets held for sale - non-current

-

26

Other non-current assets

232

263

TOTAL ASSETS

$

7,527

$

7,158

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable and accrued liabilities

$

876

$

942

Short-term debt

28

1

Long-term debt – current portion

4

5

Liabilities held for sale - current

-

7

Total current liabilities

908

955

Long-term debt, net of current portion

1,930

1,629

Pension plan liability

435

378

Other employee benefits liability

267

298

Deferred income taxes

51

75

Other liabilities

195

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

3,907

3,876

Accumulated earnings

470

194

Accumulated other comprehensive deficit

(315)

(194)

Cost of common stock in treasury (c)

(362)

(229)

Total Owens Corning stockholders' equity

3,701

3,648

Noncontrolling interests

40

38

Total equity

3,741

3,686

TOTAL LIABILITIES AND EQUITY

$

7,527

$

7,158

(a)

10 shares authorized; none issued or outstanding at Dec. 31, 2011 and Dec. 31, 2010

(b)

400 shares authorized; 134.4 issued and 120.9 outstanding at Dec. 31, 2011; 133.2 issued and 123.9 outstanding

at Dec. 31, 2010

(c)

13.5 shares at Dec. 31, 2011 and 9.3 shares at Dec. 31, 2010

Table 5

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 our

Composites segment (in millions):

Three Months Ended

Twelve Months Ended

Dec. 31,

Dec. 31,

2011 

2010 

2011 

2010 

Net sales

$

459

$

475

$

1,976

$

1,906

    % change from prior year

-3%

7%

4%

17%

EBIT

$

49

$

59

$

201

$

175

    EBIT as a % of net sales

11%

12%

10%

9%

Depreciation and amortization expense

$

31

$

27

$

128

$

117

Three Months Ended

Twelve Months Ended

Dec. 31,

Dec. 31,

2011 

2010 

2011 

2010 

Net sales

Insulation

$

387

$

356

$

1,368

$

1,309

Roofing

384

340

2,169

1,847

Other

-

21

-

87

Total Building Materials

$

771

$

717

$

3,537

$

3,243

    % change from prior year

8%

-4%

9%

-2%

EBIT

Insulation

$

-

$

(22)

$

(97)

$

(102)

Roofing

55

37

429

405

Other

-

(6)

-

(22)

Total Building Materials

$

55

$

9

$

332

$

281

    EBIT as a % of net sales

7%

1%

9%

9%

Depreciation and amortization expense

Insulation

$

27

$

23

$

116

$

117

Roofing

10

12

41

42

Other

-

9

-

9

Total Building Materials

$

37

$

44

$

157

$

168

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

Twelve Months Ended

Dec. 31,

Dec. 31,

2011 

2010 

2011 

2010 

Net precious metal lease expense

$

-

$

(1)

$

-

$

(2)

Charges related to cost reduction actions and related items

-

(7)

(17)

(40)

Acquisition integration and transaction costs

-

(7)

-

(13)

Gains (losses) on sales of assets and related charges

-

(120)

16

(120)

General corporate expense

(16)

(4)

(71)

(75)

EBIT

$

(16)

$

(139)

$

(72)

$

(250)

Depreciation and amortization

$

7

$

7

$

33

$

35

Table 6

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

Three Months Ended

Three Months Ended

Three Months Ended

Three Months Ended

Twelve  Months Ended

March 31,

June 30,

September 30,

December 31,

December 31,

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

RECONCILIATION TO ADJUSTED EARNINGS

Net earnings (loss) attributable to Owens Corning

$

24

$

48

$

78

$

937

$

124

$

58

$

50

$

(110)

$

276

$

933

Adjustment to remove adjusting

items net of pro forma effective tax rate*

-

11

-

4

-

15

-

101

-

131

Adjustment to tax expense to reflect pro forma tax rate*

3

(6)

7

(868)

(8)

(29)

(2)

38

-

(865)

ADJUSTED EARNINGS

$

27

$

53

$

85

$

73

$

116

$

44

$

48

$

29

$

276

$

199

RECONCILIATION TO ADJUSTED DILUTED

EARNINGS PER SHARE ATTRIBUTABLE TO

OWENS CORNING COMMON STOCKHOLDERS

DILUTED EARNINGS PER COMMON SHARE    

ATTRIBUTABLE TO OWENS CORNING

COMMON STOCKHOLDERS

$

0.19

$

0.38

$

0.62

$

7.33

$

1.01

$

0.46

$

0.41

$

(0.89)

$

2.23

$

7.37

Adjustment to remove adjusting items net of pro forma tax rate*

-

0.09

-

0.03

-

0.12

-

0.82

-

1.03

Adjustment to tax expense to reflect pro forma tax rate*

0.03

(0.05)

0.06

(6.79)

(0.06)

(0.23)

(0.01)

0.30

-

(6.83)

ADJUSTED DILUTED EARNINGS PER SHARE ATTRIBUTABLE

TO OWENS CORNING COMMON STOCKHOLDERS

$

0.22

$

0.42

$

0.68

$

0.57

$

0.95

$

0.35

$

0.40

$

0.23

$

2.23

$

1.57

RECONCILIATION TO DILUTED SHARES OUTSTANDING

Weighted-average shares outstanding used

for basic earnings per share

123.8

126.5

124.0

126.8

121.7

125.1

120.5

123.7

122.5

125.6

Non-vested restricted shares

1.0

0.7

0.9

0.7

0.6

1.3

0.8

1.0

0.7

0.8

Options to purchase common stock

0.5

0.3

0.5

0.4

0.3

0.2

0.2

0.2

0.3

0.2

Diluted shares outstanding

125.3

127.5

125.4

127.9

122.6

126.6

121.5

124.9

123.5

126.6

*In 2011 the quarterly tax expense was adjusted to reflect the actual full year effective tax rate of 21 percent. In 2010, the quarterly and full year tax expense was adjusted to use an effective rate of 25 percent based upon the projected blend of United States and non-United States operations.