Owens Corning Reports Fourth-Quarter and Full-Year 2012 Results

Table 1

Owens Corning and Subsidiaries

Consolidated Statements of Earnings (Loss)

(unaudited)

(in millions, except per share amounts)

Three Months Ended

Twelve Months Ended

Dec. 31,

Dec. 31,

2012

2011

2012

2011

NET SALES

$

1,159

$

1,196

$

5,172

$

5,335

COST OF SALES

989

966

4,375

4,307

Gross margin

170

230

797

1,028

OPERATING EXPENSES

Marketing and administrative expenses

129

130

509

525

Science and technology expenses

19

19

79

77

Charges related to cost reduction actions

15

-

51

-

Other expenses (income), net

(9)

(7)

10

(35)

Total operating expenses

154

142

649

567

EARNINGS BEFORE INTEREST AND TAXES

16

88

148

461

Interest expense, net

29

27

114

108

Loss on extinguishment of debt

74

-

74

-

EARNINGS (LOSS) BEFORE TAXES

(87)

61

(40)

353

Less: Income tax expense (benefit)

(36)

11

(28)

74

Equity in net earnings of affiliates

(4)

1

(4)

2

NET EARNINGS (LOSS)

(55)

51

(16)

281

Less: Net earnings attributable to noncontrolling interests

1

1

3

5

NET EARNINGS (LOSS) ATTRIBUTABLE TO OWENS CORNING

$

(56)

$

50

$

(19)

$

276

BASIC EARNINGS (LOSS) PER COMMON SHARE

ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS

$

(0.47)

$

0.41

$

(0.16)

$

2.25

DILUTED EARNINGS (LOSS) PER COMMON SHARE

ATTRIBUTABLE TO OWENS CORNING COMMON

STOCKHOLDERS

$

(0.47)

$

0.41

$

(0.16)

$

2.23

WEIGHTED AVERAGE COMMON SHARES

Basic

118.0

120.5

119.4

122.5

Diluted

118.0

121.5

119.4

123.5

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 (Loss) 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

Twelve Months Ended

Dec. 31,

Dec. 31,

2012

2011

2012

2011

Charges related to cost reduction actions and related items

$

(27)

$

-

$

(136)

$

-

Losses related to Hurricane Sandy

(9)

-

(9)

-

Total adjusting items

$

(36)

$

-

$

(145)

$

-

The reconciliation from net earnings 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,

2012

2011

2012

2011

NET EARNINGS (LOSS) ATTRIBUTABLE TO OWENS CORNING

$

(56)

$

50

$

(19)

$

276

Less: Net earnings attributable to noncontrolling interests

1

1

3

5

NET EARNINGS (LOSS)

(55)

51

(16)

281

Equity in net earnings of affiliates

(4)

1

(4)

2

Income tax expense (benefit)

(36)

11

(28)

74

EARNINGS (LOSS) BEFORE TAXES

(87)

61

(40)

353

Interest expense, net

29

27

114

108

Loss on extinguishment of debt

74

-

74

-

EARNINGS BEFORE INTEREST AND TAXES

16

88

148

461

Less: adjusting items from above

(36)

-

(145)

-

ADJUSTED EBIT

$

52

$

88

$

293

$

461

Table 3

Owens Corning and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

(in millions)

Twelve Months Ended

Dec. 31,

2012

2011

2010

NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES

Net earnings (loss)

$

(16)

$

281

$

940

Adjustments to reconcile net earnings (loss) to cash provided by

operating activities:

Depreciation and amortization

349

318

320

(Gain) loss on sale of businesses and fixed assets

(17)

(30)

2

Asset impairments

6

-

117

Deferred income taxes

(59)

55

(867)

Provision for pension and other employee benefits liabilities

36

36

26

Stock-based compensation expense

24

21

23

Other non-cash

(14)

(22)

(19)

Loss on extinguishment of debt

74

-

-

Change in working capital

9

(262)

15

Pension fund contribution

(50)

(117)

(32)

Payments for other employee benefits liabilities

(22)

(24)

(26)

Other

10

33

(11)

Net cash flow provided by operating activities

330

289

488

NET CASH FLOW USED FOR INVESTING ACTIVITIES

Additions to plant and equipment

(332)

(442)

(314)

Investment in subsidiaries and affiliates, net of cash acquired

-

(84)

-

Proceeds from Hurricane Sandy insurance claims

20

-

-

Proceeds from the sale of assets or affiliates

59

81

65

Net cash flow used for investing activities

(253)

(445)

(249)

NET CASH FLOW PROVIDED BY (USED FOR) FINANCING ACTIVITIES

Proceeds from senior revolving credit and receivables securitization facilities

1,877

1,912

631

Payments on senior revolving credit and receivables securitization facilities

(1,957)

(1,630)

(619)

Proceeds from long-term debt

599

6

5

Payments on long-term debt

(441)

(10)

(609)

Purchases of noncontrolling interest

(22)

-

(30)

Net increase (decrease) in short-term debt

(23)

26

(10)

Purchases of treasury stock

(113)

(138)

(120)

Other

4

8

2

Net cash flow provided by (used for) financing activities

(76)

174

(750)

Effect of exchange rate changes on cash

2

(18)

(1)

Net increase (decrease) in cash and cash equivalents

3

-

(512)

Cash and cash equivalents at beginning of period

52

52

564

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

55

$

52

$

52

DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for income taxes

$

30

$

24

$

16

Cash paid during the year for interest

$

122

$

111

$

108

Table 4

Owens Corning and Subsidiaries

Consolidated Balance Sheets

(unaudited)

(in millions)

ASSETS

Dec. 31,

Dec. 31,

2012

2011

CURRENT ASSETS

Cash and cash equivalents

$

55

$

52

Receivables, less allowances of $17 at Dec. 31, 2012 and $15 at Dec. 31, 2011

600

610

Inventories

786

795

Other current assets

171

179

Total current assets

1,612

1,636

Property, plant and equipment, net

2,903

2,904

Goodwill

1,143

1,144

Intangible assets

1,045

1,073

Deferred income taxes

604

538

Other non-current assets

261

232

TOTAL ASSETS

$

7,568

$

7,527

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable and accrued liabilities

$

897

$

876

Short-term debt

5

28

Long-term debt – current portion

4

4

Total current liabilities

906

908

Long-term debt, net of current portion

2,076

1,930

Pension plan liability

480

435

Other employee benefits liability

274

267

Deferred income taxes

38

51

Other liabilities

219

195

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

3,925

3,907

Accumulated earnings

451

470

Accumulated other comprehensive deficit

(364)

(315)

Cost of common stock in treasury (c)

(475)

(362)

Total Owens Corning stockholders' equity

3,538

3,701

Noncontrolling interests

37

40

Total equity

3,575

3,741

TOTAL LIABILITIES AND EQUITY

$

7,568

$

7,527

(a)

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

(b)

400 shares authorized; 135.6 issued and 118.3 outstanding at Dec. 31, 2012; 134.4 issued and 120.9 outstanding at Dec. 31, 2011

(c)

17.3 shares at Dec. 31, 2012 and 13.5 shares at Dec. 31, 2011

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,

2012

2011

2012

2011

Net sales

$

426

$

459

$

1,859

$

1,976

     % change from prior year

-7%

-3%

-6%

4%

EBIT

$

23

$

49

$

91

$

201

     EBIT as a % of net sales

5%

11%

5%

10%

Depreciation and amortization expense

$

32

$

31

$

123

$

128

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.

Three Months Ended

Twelve Months Ended

Dec. 31,

Dec. 31,

2012

2011

2012

2011

Net sales

Insulation

$

413

$

387

$

1,468

$

1,368

Roofing

350

384

2,014

2,169

Total Building Materials

$

763

$

771

$

3,482

$

3,537

     % change from prior year

-1%

8%

-2%

9%

EBIT

Insulation

$

9

$

-

$

(38)

$

(97)

Roofing

42

55

331

429

Total Building Materials

$

51

$

55

$

293

$

332

     EBIT as a % of net sales

7%

7%

8%

9%

Depreciation and amortization expense

Insulation

$

25

$

27

$

105

$

116

Roofing

10

10

38

41

Total Building Materials

$

35

$

37

$

143

$

157

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,

2012

2011

2012

2011

Charges related to cost reduction actions and related items

$

(27)

$

-

$

(136)

$

(17)

Gains on sales of assets and related charges

-

-

-

16

Losses related to Hurricane Sandy

(9)

-

(9)

-

General corporate expense

(22)

(16)

(91)

(71)

EBIT

$

(58)

$

(16)

$

(236)

$

(72)

Depreciation and amortization

$

13

$

7

$

83

$

33

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,

2012

2011

2012

2011

2012

2011

2012

2011

2012

2011

RECONCILIATION TO ADJUSTED EARNINGS

Net earnings (loss) attributable to Owens Corning

$

(46)

$

24

$

39

$

78

$

44

$

124

$

(56)

$

50

$

(19)

$

276

Adjustment to remove adjusting items net of tax

43

-

23

-

16

-

68

-

150

-

Adjustment to tax expense to reflect pro forma tax rate*

14

3

5

7

(20)

(8)

1

(2)

-

-

ADJUSTED EARNINGS

$

11

$

27

$

67

$

85

$

40

$

116

$

13

$

48

$

131

$

276

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

$

0.32

$

0.62

$

0.37

$

1.01

$

(0.47)

$

0.41

$

(0.16)

$

2.23

Adjustment to remove adjusting items net of tax

0.36

-

0.19

-

0.13

-

0.58

-

1.26

-

Adjustment to tax expense to reflect pro forma tax rate*

0.11

0.03

0.04

0.06

(0.16)

(0.06)

-

(0.01)

-

-

ADJUSTED DILUTED EARNINGS PER SHARE ATTRIBUTABLE

TO OWENS CORNING COMMON STOCKHOLDERS

$

0.09

$

0.22

$

0.55

$

0.68

$

0.34

$

0.95

$

0.11

$

0.40

$

1.10

$

2.23

RECONCILIATION TO DILUTED SHARES OUTSTANDING

Weighted-average shares outstanding used

 for basic earnings per share

121.1

123.8

120.8

124

117.9

121.7

118.0

120.5

119.4

122.5

Non-vested restricted shares

-

1.0

0.4

0.9

0.6

0.6

-

0.8

-

0.7

Options to purchase common stock

-

0.5

0.3

0.5

0.3

0.3

-

0.2

-

0.3

Diluted shares outstanding

121.1

125.3

121.5

125.4

118.8

122.6

118.0

121.5

119.4

123.5

*In 2012 the quarterly tax expense was adjusted to reflect the actual full year adjusted effective tax rate of 23 percent. In 2011, the quarterly and full year tax expense was adjusted to use an effective rate of 21 percent based upon the blend of United States and non-United States operations.