Owens Corning Reports Fourth-Quarter and Full-Year 2013 Results

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,

2013

2012

2012

Charges related to cost reduction actions and related items

$

(3)

$

(27)

$

(26)

$

(136)

Net gain (loss) related to Hurricane Sandy insurance activity

31

(9)

15

(9)

Accelerated depreciation related to a change in the useful life

      of assets in Cordele, Georgia facility

(20)

-

(20)

-

      Total adjusting items

$

8

$

(36)

$

(31)

$

(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,

2013

2012

2013

2012

NET EARNINGS (LOSS) ATTRIBUTABLE TO OWENS CORNING

$

82

$

(56)

$

204

$

(19)

      Less: Net earnings attributable to noncontrolling interests

-

1

1

3

NET EARNINGS (LOSS)

82

(55)

205

(16)

      Equity in net earnings of affiliates

-

(4)

-

(4)

      Income tax expense (benefit)

(3)

(36)

68

(28)

EARNINGS (LOSS) BEFORE TAXES

79

(87)

273

(40)

      Interest expense, net

25

29

112

114

      Loss on extinguishment of debt

-

74

-

74

EARNINGS BEFORE INTEREST AND TAXES

104

16

385

148

      Less: adjusting items from above

8

(36)

(31)

(145)

ADJUSTED EBIT

$

96

$

52

$

416

$

293

Table 3

Owens Corning and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

(in millions)

Twelve Months Ended

Dec. 31,

2013

2012

2011

NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES

Net earnings (loss)

$

205

$

(16)

$

281

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

operating activities:

Depreciation and amortization

332

349

318

Gain on sale of assets or affiliates

(6)

(17)

(30)

Proceeds from Hurricane Sandy insurance claims

(58)

(20)

-

Deferred income taxes

54

(59)

55

Provision for pension and other employee benefits liabilities

23

36

36

Stock-based compensation expense

28

24

21

Other non-cash

(18)

(14)

(22)

Loss on extinguishment of debt

-

74

-

Change in working capital accounts:

Changes in receivables, net

(77)

24

(48)

Changes in inventories

(27)

(4)

(179)

Changes in accounts payable and accrued liabilities

46

23

(41)

Changes in other current assets

4

(39)

(35)

Other

-

2

41

Pension fund contribution

(39)

(50)

(117)

Payments for other employee benefits liabilities

(22)

(22)

(24)

Other

(27)

39

33

Net cash flow provided by operating activities

418

330

289

NET CASH FLOW USED FOR INVESTING ACTIVITIES

Additions to plant and equipment (including alloy)

(353)

(332)

(442)

Proceeds from the sale of assets (including alloy) or affiliates

16

59

81

Investment in subsidiaries and affiliates, net of cash acquired

(62)

-

(84)

Proceeds from Hurricane Sandy insurance claims

58

20

-

Deposit related to sale of Hangzhou, China plant

34

-

-

Net cash flow used for investing activities

(307)

(253)

(445)

NET CASH FLOW PROVIDED BY (USED FOR) FINANCING ACTIVITIES

Proceeds from senior revolving credit and receivables securitization facilities

1,063

1,877

1,912

Payments on senior revolving credit and receivables securitization facilities

(1,103)

(1,957)

(1,630)

Proceeds from long-term debt

-

599

6

Payments on long-term debt

(2)

(441)

(10)

Purchase of noncontrolling interest

-

(22)

-

Net increase (decrease) in short-term debt

(4)

(23)

26

Purchases of treasury stock

(63)

(113)

(138)

Other

2

4

8

Net cash flow provided by (used for) financing activities

(107)

(76)

174

Effect of exchange rate changes on cash

(2)

2

(18)

Net increase in cash and cash equivalents

2

3

-

Cash and cash equivalents at beginning of period

55

52

52

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

57

$

55

$

52

DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for income taxes

$

29

$

30

$

24

Cash paid during the year for interest

$

126

$

122

$

111

Table 4

Owens Corning and Subsidiaries

Consolidated Balance Sheets

(unaudited)

(in millions)

Dec. 31,

Dec. 31,

ASSETS

2013

2012

CURRENT ASSETS

Cash and cash equivalents

$

57

$

55

Receivables, less allowances of $14 at Dec. 31, 2013 and $17 at Dec. 31, 2012

683

600

Inventories

810

786

Assets held for sale - current

29

-

Other current assets

269

176

Total current assets

1,848

1,617

Property, plant and equipment, net

2,932

2,903

Goodwill

1,166

1,143

Intangible assets

1,040

1,045

Deferred income taxes

436

604

Other non-current assets

225

256

TOTAL ASSETS

$

7,647

$

7,568

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable and accrued liabilities

$

988

$

907

Short-term debt

1

5

Long-term debt – current portion

3

4

Total current liabilities

992

916

Long-term debt, net of current portion

2,024

2,076

Pension plan liability

336

480

Other employee benefits liability

242

274

Deferred income taxes

23

38

Other liabilities

200

209

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

3,938

3,925

Accumulated earnings

655

451

Accumulated other comprehensive deficit

(297)

(364)

Cost of common stock in treasury (c)

(504)

(475)

Total Owens Corning stockholders' equity

3,793

3,538

Noncontrolling interests

37

37

Total equity

3,830

3,575

TOTAL LIABILITIES AND EQUITY

$

7,647

$

7,568

(a)

10 shares authorized; none issued or outstanding at Dec. 31, 2013 and Dec. 31, 2012

(b)

400 shares authorized; 135.5 issued and 117.8 outstanding at Dec. 31, 2013; 135.6 issued and 118.3 outstanding at Dec. 31, 2012

(c)

17.7 shares at Dec. 31, 2013 and 17.3 shares at Dec. 31, 2012

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,

2013

2012

2013

2012

Net sales

$

461

$

426

$

1,845

$

1,859

            % change from prior year

8%

-7%

-1%

-6%

EBIT

$

36

$

23

$

98

$

91

            EBIT as a % of net sales

8%

5%

5%

5%

Depreciation and amortization expense

$

31

$

32

$

130

$

123

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,

2013

2012

2013

2012

Net sales

      Insulation

$

466

$

413

$

1,642

$

1,468

      Roofing

381

350

1,967

2,014

Total Building Materials

$

847

$

763

$

3,609

$

3,482

            % change from prior year

11%

-1%

4%

-2%

EBIT

      Insulation

$

39

$

9

$

40

$

(38)

      Roofing

55

42

386

331

Total Building Materials

$

94

$

51

$

426

$

293

            EBIT as a % of net sales

11%

7%

12%

8%

Depreciation and amortization expense

      Insulation

$

25

$

25

$

104

$

105

      Roofing

10

10

38

38

Total Building Materials

$

35

$

35

$

142

$

143

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,

2013

2012

2013

2012

Charges related to cost reduction actions and related items

$

(3)

$

(27)

$

(26)

$

(136)

Net gain (loss) related to Hurricane Sandy insurance activity

31

(9)

15

(9)

Accelerated depreciation related to a change in the useful life

      of assets in Cordele, Georgia facility

(20)

-

(20)

-

General corporate expense

(34)

(22)

(108)

(91)

EBIT

$

(26)

$

(58)

$

(139)

$

(236)

Depreciation and amortization

$

31

$

13

$

60

$

83

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, 

2013

2012

2013

2012

2013

2012

2013

2012

2013

2012

RECONCILIATION TO ADJUSTED EARNINGS

Net earnings (loss) attributable to Owens Corning

$

22

$

(46)

$

49

$

39

$

51

$

44

$

82

$

(56)

$

204

$

(19)

            Adjustment to remove adjusting items net of tax

15

43

4

23

9

16

(11)

68

17

150

            Adjustment to tax expense to reflect pro forma tax rate*

(2)

14

15

5

6

(20)

(19)

1

-

-

ADJUSTED EARNINGS

$

35

$

11

$

68

$

67

$

66

$

40

$

52

$

13

$

221

$

131

RECONCILIATION TO ADJUSTED DILUTED

      EARNINGS PER SHARE ATTRIBUTABLE TO

      OWENS CORNING COMMON STOCKHOLDERS

DILUTED EARNINGS PER COMMON SHARE   

      ATTRIBUTABLE TO OWENS CORNING

      COMMON STOCKHOLDERS

$

0.18

$

(0.38)

$

0.41

$

0.32

$

0.43

$

0.37

$

0.69

$

(0.47)

$

1.71

$

(0.16)

            Adjustment to remove adjusting items net of tax

0.13

0.36

0.03

0.19

0.08

0.13

(0.09)

0.58

0.15

1.26

            Adjustment to tax expense to reflect pro forma tax rate*

(0.02)

0.11

0.13

0.04

0.05

(0.16)

(0.16)

-

-

-

ADJUSTED DILUTED EARNINGS PER SHARE ATTRIBUTABLE

      TO OWENS CORNING COMMON STOCKHOLDERS

$

0.29

$

0.09

$

0.56

$

0.55

$

0.56

$

0.34

$

0.44

$

0.11

$

1.86

$

1.10

RECONCILIATION TO DILUTED SHARES OUTSTANDING

Weighted-average shares outstanding used

       for basic earnings per share

118.5

121.1

119.1

120.8

118.0

117.9

117.6

118.0

118.2

119.4

            Non-vested restricted shares

0.6

-

0.7

0.4

0.4

0.6

0.5

-

0.4

-

            Options to purchase common stock

0.5

-

0.6

0.3

0.4

0.3

0.4

-

0.5

-

Diluted shares outstanding

119.6

121.1

120.4

121.5

118.8

118.8

118.5

118.0

119.1

119.4

*In 2013 and 2012, the quarterly tax expense was adjusted to reflect the actual full year adjusted effective tax rate of 27 percent and 23 percent, respectively.