Owens Corning Reports Second-Quarter 2013 Results

Table 1

Owens Corning and Subsidiaries

Consolidated Statements of Earnings (Loss)

 (unaudited)

(in millions, except per share amounts)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2013

2012

2013

2012

NET SALES

$

1,347

$

1,391

$

2,697

$

2,737

COST OF SALES

1,080

1,152

2,217

2,312

Gross margin

267

239

480

425

OPERATING EXPENSES

Marketing and administrative expenses

134

128

267

265

Science and technology expenses

20

21

38

40

Charges related to cost reduction actions

1

2

2

36

Other (income) expenses, net

(6)

3

(2)

11

Total operating expenses

149

154

305

352

EARNINGS BEFORE INTEREST AND TAXES

118

85

175

73

Interest expense, net

29

28

58

56

EARNINGS BEFORE TAXES

89

57

117

17

Less: Income tax expense

39

17

45

22

Equity in net earnings of affiliates

-

-

-

-

NET EARNINGS (LOSS)

50

40

72

(5)

Less: Net earnings attributable to noncontrolling interests

1

1

1

2

NET EARNINGS (LOSS) ATTRIBUTABLE TO OWENS CORNING

$

49

$

39

$

71

$

(7)

EARNINGS (LOSS) PER COMMON SHARE ATTRIBUTABLE TO

OWENS CORNING COMMON STOCKHOLDERS

Basic

$

0.41

$

0.32

$

0.60

$

(0.06)

Diluted

$

0.41

$

0.32

$

0.59

$

(0.06)

WEIGHTED-AVERAGE COMMON SHARES

Basic

119.1

120.8

118.8

120.9

Diluted

120.4

121.5

119.9

120.9

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

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

Charges related to cost reduction actions and related items

$

(3)

$

(32)

$

(12)

$

(87)

Loss related to Hurricane Sandy

(3)

-

(14)

-

$

(6)

$

(32)

$

(26)

$

(87)

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

NET EARNINGS (LOSS) ATTRIBUTABLE TO

OWENS CORNING

$

49

$

39

$

71

$

(7)

Less: Net earnings attributable to noncontrolling interests

1

1

1

2

NET EARNINGS (LOSS) 

50

40

72

(5)

Equity in net earnings of affiliates

1

-

-

-

-

Income tax expense

39

17

45

22

EARNINGS BEFORE TAXES

89

57

117

17

Interest expense, net

29

28

58

56

EARNINGS BEFORE INTEREST AND TAXES

118

85

175

73

Less: adjusting items from above

(6)

(32)

(26)

(87)

ADJUSTED EBIT

$

124

$

117

$

201

$

160

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

Six  Months Ended

June 30, 

June 30, 

2013

2012

2013

2012

RECONCILIATION TO ADJUSTED EARNINGS

Net earnings (loss) attributable to Owens Corning

$

49

$

39

$

71

$

(7)

Adjustment to remove adjusting items net of tax

4

23

19

66

Adjustment to tax expense to reflect pro forma tax rate*

16

5

14

19

ADJUSTED EARNINGS

$

69

$

67

$

104

$

78

RECONCILIATION TO ADJUSTED DILUTED EARNINGS PER SHARE

ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS

DILUTED EARNINGS (LOSS) PER COMMON SHARE ATTRIBUTABLE

TO OWENS CORNING COMMON STOCKHOLDERS

$

0.41

$

0.32

$

0.59

$

(0.06)

Adjustment to remove adjusting items net of tax

0.03

0.19

0.16

0.55

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

0.13

0.04

0.12

0.16

ADJUSTED DILUTED EARNINGS PER SHARE

ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS

$

0.57

$

0.55

$

0.87

$

0.65

RECONCILIATION TO DILUTED SHARES OUTSTANDING

Weighted-average shares outstanding

used for basic earnings per share

119.1

120.8

118.8

120.9

Non-vested restricted shares

0.7

0.4

0.6

-

Options to purchase common stock

0.6

0.3

0.5

-

Diluted shares outstanding

120.4

121.5

119.9

120.9

* Pro forma tax rate used in 2013 was 26.5% (midpoint of guidance), and, 23% in 2012 as this was the adjusted effective tax rate of the Company in 2012.

Table 4

Owens Corning and Subsidiaries

Consolidated Balance Sheets

(unaudited)

(in millions)

June 30,

Dec. 31,

2013

2012

CURRENT ASSETS

Cash and cash equivalents

$

72

$

55

Receivables, less allowances of $15 at June 30,2013, and $17 at Dec. 31, 2012

789

600

Inventories

820

786

Other current assets

245

176

Total current assets

1,926

1,617

Property, plant and equipment, net

2,881

2,903

Goodwill

1,167

1,143

Intangible assets

1,051

1,045

Deferred income taxes

561

604

Other non-current assets

199

256

TOTAL ASSETS

$

7,785

$

7,568

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable and accrued liabilities

$

918

$

907

Short-term debt

21

5

Long-term debt – current portion

3

4

Total current liabilities

942

916

Long-term debt, net of current portion

2,250

2,076

Pension plan liability

455

480

Other employee benefits liability

267

274

Deferred income taxes

35

38

Other liabilities

207

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

3,953

3,925

Accumulated earnings

522

451

Accumulated other comprehensive deficit

(399)

(364)

Cost of common stock in treasury (c)

(484)

(475)

Total Owens Corning stockholders' equity

3,593

3,538

Noncontrolling interests

36

37

Total equity

3,629

3,575

TOTAL LIABILITIES AND EQUITY

$

7,785

$

7,568

(a)

10 shares authorized; none issued or outstanding at June 30,2013, and Dec. 31, 2012

(b)

400 shares authorized; 135.5 issued and 119.1 outstanding at June 30,2013; 135.6 issued and 118.3 outstanding at Dec. 31, 2012

(c)

16.4 shares at June 30,2013, and 17.3 shares at Dec. 31, 2012

Table 5

Owens Corning and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

(in millions)

Six Months Ended

June 30,

2013

2012

NET CASH FLOW USED FOR OPERATING ACTIVITIES

Net earnings (loss)

$

72

$

(5)

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

Depreciation and amortization

157

180

Gain on sale of businesses and fixed assets

-

(3)

Deferred income taxes

37

8

Provision for pension and other employee benefits liabilities

18

23

Stock-based compensation expense

14

13

Other non-cash

(12)

(7)

Change in working capital

(254)

(209)

Pension fund contribution

(20)

(30)

Payments for other employee benefits liabilities

(11)

(12)

Other

(13)

2

Net cash flow used for operating activities

(12)

(40)

NET CASH FLOW USED FOR INVESTING ACTIVITIES

Additions to plant and equipment

(125)

(163)

Investment in subsidiaries and affiliates, net of cash acquired

(52)

-

Proceeds from Hurricane Sandy insurance claims

15

-

Proceeds from the sale of assets or affiliates

-

7

Net cash flow used for investing activities

(162)

(156)

NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES

Proceeds from senior revolving credit and receivables securitization facilities

799

933

Payments on senior revolving credit and receivables securitization facilities

(621)

(648)

Payments on long-term debt

(1)

(6)

Net increase (decrease) in short-term debt

15

(4)

Purchases of treasury stock

(9)

(82)

Other

11

6

Net cash flow provided by financing activities

194

199

Effect of exchange rate changes on cash

(3)

(1)

Net increase in cash and cash equivalents

17

2

Cash and cash equivalents at beginning of period

55

52

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

72

$

54

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

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

Net sales

$

472

$

498

$

931

$

974

     % change from prior year

-5%

-6%

-4%

-5%

EBIT

$

32

$

34

$

41

$

57

     EBIT as a % of net sales

7%

7%

4%

6%

Depreciation and amortization expense

$

34

$

31

$

66

$

61

Building Materials

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

Net sales

Insulation

$

415

$

340

$

745

$

671

Roofing

508

605

1,115

1,193

Total Building Materials

$

923

$

945

$

1,860

$

1,864

     % change from prior year

-2%

-3%

0%

6%

EBIT

Insulation

$

4

$

(16)

$

(17)

$

(50)

Roofing

116

123

235

206

Total Building Materials

$

120

$

107

$

218

$

156

     EBIT as a % of net sales

13%

11%

12%

8%

Depreciation and amortization expense

Insulation

$

27

$

27

$

53

$

52

Roofing

9

9

19

18

Total Building Materials

$

36

$

36

$

72

$

70

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

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

Charges related to cost reduction actions and related items

$

(3)

$

(32)

$

(12)

$

(87)

Losses related to Hurricane Sandy

(3)

-

(14)

-

General corporate expense and other

(28)

(24)

(58)

(53)

EBIT

$

(34)

$

(56)

$

(84)

$

(140)

Depreciation and amortization

$

9

$

24

$

19

$

49