DE | 1-33100 | 43-2109021 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
One Owens Corning Parkway Toledo, OH | 43659 |
(Address of principal executive offices) | (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition |
Item 9.01 | Financial Statements and Exhibits |
Exhibit No. | Description |
99.1 | Press Release, dated February 8, 2017 |
Owens Corning | ||
Date: February 8, 2017 | By: | /s/ Ava Harter |
Ava Harter | ||
Senior Vice President, General Counsel and Secretary |
Exhibit No. | Description |
99.1 | Press Release, February 8, 2017. |
Media Inquiries: | Investor Inquiries: | |||
Chuck Hartlage | Thierry Denis | |||
419.248.5395 | 419.248.5748 |
• | Company delivered record adjusted EBIT and free cash flow in 2016 |
• | Composites posted $264 million of EBIT, a second consecutive year of record performance |
• | Roofing produced EBIT of $486 million with 22% EBIT margins in 2016 |
• | Insulation generated $126 million of EBIT for the year |
• | Owens Corning performed at a very high level of safety in 2016, with a recordable incident rate of 0.50, compared to 0.52 in 2015. |
• | Reported earnings before interest and taxes (EBIT) for fourth-quarter 2016 were $136 million, compared with $138 million during the same period in 2015. Adjusted EBIT in fourth-quarter 2016 was $157 million, up from $136 million in 2015 (See Table 2). |
• | Reported EBIT for full-year 2016 was $699 million, compared with $548 million during 2015. Adjusted EBIT in 2016 was $746 million, up from $550 million in 2015. |
• | Operating cash flow and free cash flow improved by more than $200 million each in 2016 (See Table 7). The company delivered record free cash flow of $570 million as a result of improved earnings, strong working capital performance, and an advantaged tax position. The company converted adjusted earnings to free cash flow at a rate of 126% over the last two years, in excess of the prior guidance of about 100% over the years 2015 to 2018. |
• | During fourth-quarter 2016, Owens Corning repurchased 1.4 million shares of its common stock for $70 million. During 2016, the company repurchased 4.8 million shares for $240 million. As of the end of 2016, 9.8 million shares were available for repurchase under the current authorization. |
• | The Board of Directors declared a quarterly cash dividend of $0.20 per common share, an 11% increase compared with the same period in the prior year. The dividend will be payable on April 3, 2017, to shareholders of record as of March 10, 2017. |
• | The company expects an environment consistent with consensus expectations for U.S. housing starts and moderate global industrial production growth. |
• | In Composites, the company expects continued growth in the glass fiber market, driven by moderate global industrial production growth. In 2017, the company expects a third consecutive year of record EBIT, with growth of about $25 million primarily from improved operating performance. |
• | In Roofing, the company experienced strong growth in 2016 from new construction, reroof, and storm-related demand. In 2017, the company expects continued growth in new construction and reroof demand. This growth is not expected to offset anticipated declines in the storm markets, particularly Texas. The business will also benefit from the full-year impact of the InterWrap acquisition, which was completed in April, 2016. |
• | In Insulation, in the second half of 2016, the company experienced stable pricing and continued to recover its market share position in the U.S. residential fiberglass insulation business. In 2017, the company expects to deliver revenue growth of about $100 million with EBIT of $160 million or more. |
• | The company estimates an effective tax rate of 32 percent to 34 percent, and a cash tax rate of 10 percent to 12 percent on adjusted pre-tax earnings, due to the company’s $1.8 billion U.S. tax net operating loss carryforward. |
• | The company expects general corporate expenses to be between $120 million and $130 million in 2017. Capital additions in 2017 are expected to total approximately $375 million. Interest expense is expected to be about $110 million. |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
NET SALES | $ | 1,383 | $ | 1,297 | $ | 5,677 | $ | 5,350 | ||||
COST OF SALES | 1,064 | 1,001 | 4,296 | 4,197 | ||||||||
Gross margin | 319 | 296 | 1,381 | 1,153 | ||||||||
OPERATING EXPENSES | ||||||||||||
Marketing and administrative expenses | 158 | 136 | 584 | 525 | ||||||||
Science and technology expenses | 22 | 20 | 82 | 73 | ||||||||
Other expenses, net | 3 | 2 | 16 | 7 | ||||||||
Total operating expenses | 183 | 158 | 682 | 605 | ||||||||
EARNINGS BEFORE INTEREST AND TAXES | 136 | 138 | 699 | 548 | ||||||||
Interest expense, net | 28 | 20 | 108 | 100 | ||||||||
Loss (gain) on extinguishment of debt | — | — | 1 | (5 | ) | |||||||
EARNINGS BEFORE TAXES | 108 | 118 | 590 | 453 | ||||||||
Less: Income tax expense | 16 | 8 | 188 | 120 | ||||||||
Equity in net earnings (loss) of affiliates | (4 | ) | — | (3 | ) | 1 | ||||||
NET EARNINGS | 88 | 110 | 399 | 334 | ||||||||
Less: Net earnings attributable to noncontrolling interests | 2 | 1 | 6 | 4 | ||||||||
NET EARNINGS ATTRIBUTABLE TO OWENS CORNING | $ | 86 | $ | 109 | $ | 393 | $ | 330 | ||||
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS | ||||||||||||
Basic | $ | 0.77 | $ | 0.94 | $ | 3.44 | $ | 2.82 | ||||
Diluted | $ | 0.76 | $ | 0.92 | $ | 3.41 | $ | 2.79 | ||||
Dividend | $ | 0.20 | $ | 0.17 | $ | 0.74 | $ | 0.68 | ||||
WEIGHTED AVERAGE COMMON SHARES | ||||||||||||
Basic | 112.8 | 116.2 | 114.4 | 117.2 | ||||||||
Diluted | 114.1 | 117.3 | 115.4 | 118.2 |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
Restructuring costs | $ | (20 | ) | $ | 2 | $ | (28 | ) | $ | (2 | ) | |
Acquisition-related costs for InterWrap and Ahlstrom transactions | (1 | ) | — | (9 | ) | — | ||||||
Recognition of InterWrap inventory fair value step-up | — | — | (10 | ) | — | |||||||
Total adjusting items | $ | (21 | ) | $ | 2 | $ | (47 | ) | $ | (2 | ) |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
NET EARNINGS ATTRIBUTABLE TO OWENS CORNING | $ | 86 | $ | 109 | $ | 393 | $ | 330 | ||||
Less: Net earnings attributable to noncontrolling interests | 2 | 1 | 6 | 4 | ||||||||
NET EARNINGS | 88 | 110 | 399 | 334 | ||||||||
Equity in net earnings (loss) of affiliates | (4 | ) | — | (3 | ) | 1 | ||||||
Income tax expense | 16 | 8 | 188 | 120 | ||||||||
EARNINGS BEFORE TAXES | 108 | 118 | 590 | 453 | ||||||||
Interest expense, net | 28 | 20 | 108 | 100 | ||||||||
Loss (gain) on extinguishment of debt | — | — | 1 | (5 | ) | |||||||
EARNINGS BEFORE INTEREST AND TAXES | 136 | 138 | 699 | 548 | ||||||||
Less: adjusting items from above | (21 | ) | 2 | (47 | ) | (2 | ) | |||||
ADJUSTED EBIT | $ | 157 | $ | 136 | $ | 746 | $ | 550 |
Twelve Months Ended December 31, | |||||||
2016 | 2015 | ||||||
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES | |||||||
Net earnings | $ | 399 | $ | 334 | |||
Adjustments to reconcile net earnings to cash provided by operating activities: | |||||||
Depreciation and amortization | 343 | 300 | |||||
Gain on sale of assets or affiliates | — | (2 | ) | ||||
Deferred income taxes | 136 | 64 | |||||
Provision for pension and other employee benefits liabilities | 11 | 15 | |||||
Stock-based compensation expense | 41 | 30 | |||||
Other non-cash | 4 | (11 | ) | ||||
Loss (gain) on extinguishment of debt | 1 | (5 | ) | ||||
Change in operating assets and liabilities: | |||||||
Changes in receivables, net | 55 | (71 | ) | ||||
Changes in inventories | 5 | 150 | |||||
Changes in accounts payable and accrued liabilities | 25 | 28 | |||||
Changes in other current and non-current assets | (4 | ) | (19 | ) | |||
Pension fund contribution | (63 | ) | (60 | ) | |||
Payments for other employee benefits liabilities | (18 | ) | (20 | ) | |||
Other | 8 | 9 | |||||
Net cash flow provided by operating activities | 943 | 742 | |||||
NET CASH FLOW USED FOR INVESTING ACTIVITIES | |||||||
Cash paid for property, plant and equipment | (373 | ) | (393 | ) | |||
Derivative settlements | — | 4 | |||||
Proceeds from the sale of assets or affiliates | — | 20 | |||||
Investment in subsidiaries and affiliates, net of cash acquired | (452 | ) | — | ||||
Purchases of alloy | — | (8 | ) | ||||
Proceeds from sale of alloy | — | 8 | |||||
Other | 10 | — | |||||
Net cash flow used for investing activities | (815 | ) | (369 | ) | |||
NET CASH FLOW USED FOR FINANCING ACTIVITIES | |||||||
Proceeds from senior revolving credit and receivables securitization facilities | 669 | 1,546 | |||||
Payments on senior revolving credit and receivables securitization facilities | (669 | ) | (1,652 | ) | |||
Proceeds from term loan | 300 | — | |||||
Payments on term loan | (300 | ) | — | ||||
Proceeds from long-term debt | 395 | — | |||||
Payments on long-term debt | (163 | ) | (8 | ) | |||
Dividends paid | (81 | ) | (78 | ) | |||
Net increase (decrease) in short-term debt | (6 | ) | (22 | ) | |||
Purchases of treasury stock | (247 | ) | (138 | ) | |||
Other | 14 | 19 | |||||
Net cash flow used for financing activities | (88 | ) | (333 | ) | |||
Effect of exchange rate changes on cash | (18 | ) | (11 | ) | |||
Net increase in cash and cash equivalents | 22 | 29 | |||||
Cash and cash equivalents at beginning of period | 96 | 67 | |||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 118 | $ | 96 | |||
DISCLOSURE OF CASH FLOW INFORMATION | |||||||
Cash paid during the year for income taxes | $ | 69 | $ | 33 | |||
Cash paid during the year for interest | $ | 118 | $ | 113 |
December 31, | December 31, | ||||||
2016 | 2015 | ||||||
ASSETS | |||||||
CURRENT ASSETS | |||||||
Cash and cash equivalents | $ | 112 | $ | 96 | |||
Receivables, less allowances of $9 at December 31, 2016 and $8 at December 31, 2015 | 678 | 709 | |||||
Inventories | 710 | 644 | |||||
Assets held for sale – current | 12 | 12 | |||||
Other current assets | 74 | 47 | |||||
Total current assets | 1,586 | 1,508 | |||||
Property, plant and equipment, net | 3,112 | 2,956 | |||||
Goodwill | 1,336 | 1,167 | |||||
Intangible assets, net | 1,138 | 999 | |||||
Deferred income taxes | 375 | 492 | |||||
Other non-current assets | 194 | 204 | |||||
TOTAL ASSETS | $ | 7,741 | $ | 7,326 | |||
LIABILITIES AND EQUITY | |||||||
CURRENT LIABILITIES | |||||||
Accounts payable and accrued liabilities | $ | 960 | $ | 894 | |||
Short-term debt | — | 6 | |||||
Long-term debt – current portion | 3 | 163 | |||||
Total current liabilities | 963 | 1,063 | |||||
Long-term debt, net of current portion | 2,099 | 1,702 | |||||
Pension plan liability | 367 | 397 | |||||
Other employee benefits liability | 221 | 240 | |||||
Deferred income taxes | 36 | 8 | |||||
Other liabilities | 164 | 137 | |||||
Redeemable equity | 2 | — | |||||
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 | 3,984 | 3,965 | |||||
Accumulated earnings | 1,377 | 1,055 | |||||
Accumulated other comprehensive deficit | (710 | ) | (670 | ) | |||
Cost of common stock in treasury (c) | (803 | ) | (612 | ) | |||
Total Owens Corning stockholders’ equity | 3,849 | 3,739 | |||||
Noncontrolling interests | 40 | 40 | |||||
Total equity | 3,889 | 3,779 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 7,741 | $ | 7,326 |
(b) | 400 shares authorized; 135.5 issued and 112.7 outstanding at December 31, 2016; 135.5 issued and 115.9 outstanding December 31, 2015 |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
Net sales | $ | 466 | $ | 445 | $ | 1,952 | $ | 1,902 | ||||
% change from prior year | 5 | % | -3 | % | 3 | % | -1 | % | ||||
EBIT | $ | 65 | $ | 44 | $ | 264 | $ | 232 | ||||
EBIT as a % of net sales | 14 | % | 10 | % | 14 | % | 12 | % | ||||
Depreciation and amortization expense | $ | 35 | $ | 33 | $ | 138 | $ | 125 |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
Net sales | $ | 473 | $ | 518 | $ | 1,748 | $ | 1,850 | ||||
% change from prior year | -9 | % | 6 | % | -6 | % | 6 | % | ||||
EBIT | $ | 43 | $ | 70 | $ | 126 | $ | 160 | ||||
EBIT as a % of net sales | 9 | % | 14 | % | 7 | % | 9 | % | ||||
Depreciation and amortization expense | $ | 28 | $ | 26 | $ | 106 | $ | 101 |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
Net sales | $ | 483 | $ | 368 | $ | 2,194 | $ | 1,766 | ||||
% change from prior year | 31 | % | 8 | % | 24 | % | 1 | % | ||||
EBIT | $ | 98 | $ | 53 | $ | 486 | $ | 266 | ||||
EBIT as a % of net sales | 20 | % | 14 | % | 22 | % | 15 | % | ||||
Depreciation and amortization expense | $ | 12 | $ | 10 | $ | 46 | $ | 39 |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
Restructuring costs | $ | (20 | ) | $ | 2 | $ | (28 | ) | $ | (2 | ) | |
Acquisition-related costs for InterWrap and Ahlstrom transactions | (1 | ) | — | (9 | ) | — | ||||||
Recognition of InterWrap inventory fair value step-up | — | — | (10 | ) | — | |||||||
General corporate expense and other | (49 | ) | (31 | ) | (130 | ) | (108 | ) | ||||
EBIT | $ | (70 | ) | $ | (29 | ) | $ | (177 | ) | $ | (110 | ) |
Depreciation and amortization | $ | 26 | $ | 7 | $ | 53 | $ | 35 |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | December 31, | ||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
RECONCILIATION TO ADJUSTED EARNINGS | ||||||||||||||||||||||||||||||
Net earnings attributable to Owens Corning | $ | 57 | $ | 18 | $ | 138 | $ | 91 | $ | 112 | $ | 112 | $ | 86 | $ | 109 | $ | 393 | $ | 330 | ||||||||||
Adjustment to remove adjusting items (a) | 2 | 2 | 13 | — | 11 | 2 | 21 | (2) | 47 | 2 | ||||||||||||||||||||
Adjustment to remove tax benefit on adjusting items (b) | (1) | (1) | (4) | — | (1) | — | (5) | — | (11) | (1) | ||||||||||||||||||||
Adjustment to remove significant tax reserve reversals (c) | — | — | — | — | — | — | (10) | (27) | (10) | (27) | ||||||||||||||||||||
Adjustment to tax expense to reflect pro forma tax rate (c) | 4 | 3 | 4 | (1 | ) | 3 | (1 | ) | (11 | ) | (1 | ) | — | — | ||||||||||||||||
ADJUSTED EARNINGS | $ | 62 | $ | 22 | $ | 151 | $ | 90 | $ | 125 | $ | 113 | $ | 81 | $ | 79 | $ | 419 | $ | 304 | ||||||||||
RECONCILIATION TO ADJUSTED DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS | ||||||||||||||||||||||||||||||
DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS | $ | 0.49 | $ | 0.15 | $ | 1.19 | $ | 0.77 | $ | 0.97 | $ | 0.95 | $ | 0.76 | $ | 0.92 | $ | 3.41 | $ | 2.79 | ||||||||||
Adjustment to remove adjusting items | 0.02 | 0.02 | 0.11 | — | 0.10 | 0.02 | 0.18 | (0.02 | ) | 0.41 | 0.02 | |||||||||||||||||||
Adjustment to remove tax benefit on adjusting items | (0.01 | ) | (0.01 | ) | (0.03 | ) | — | (0.01 | ) | — | (0.04 | ) | — | (0.10 | ) | (0.01 | ) | |||||||||||||
Adjustment to remove significant tax reserve reversals | — | — | — | — | — | — | (0.09 | ) | (0.23 | ) | (0.09 | ) | (0.23 | ) | ||||||||||||||||
Adjustment to tax expense to reflect pro forma tax rate | 0.03 | 0.03 | 0.03 | (0.01) | 0.02 | (0.01) | (0.09) | (0.01 | ) | — | — | |||||||||||||||||||
ADJUSTED DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO OWENS CORNING COMMON STOCKHOLDERS | $ | 0.53 | $ | 0.19 | $ | 1.30 | $ | 0.76 | $ | 1.08 | $ | 0.96 | $ | 0.72 | $ | 0.66 | $ | 3.63 | $ | 2.57 | ||||||||||
RECONCILIATION TO DILUTED SHARES OUTSTANDING | ||||||||||||||||||||||||||||||
Weighted average shares outstanding used for basic earnings per share | 115.5 | 117.8 | 115.1 | 117.5 | 114.1 | 117.2 | 112.8 | 116.2 | 114.4 | 117.2 | ||||||||||||||||||||
Non-vested restricted shares and performance shares | 0.6 | 0.3 | 0.8 | 0.4 | 0.9 | 0.7 | 1.0 | 0.7 | 0.8 | 0.6 | ||||||||||||||||||||
Options to purchase common stock | 0.4 | 0.4 | 0.5 | 0.4 | 0.4 | 0.4 | 0.3 | 0.4 | 0.2 | 0.4 | ||||||||||||||||||||
Diluted shares outstanding | 116.5 | 118.5 | 116.4 | 118.3 | 115.4 | 118.3 | 114.1 | 117.3 | 115.4 | 118.2 |
(a) | Please refer to Table 2 "EBIT Reconciliation Schedules" for additional information on adjusting items. |
(b) | The tax impact of adjusting items is based on our expected tax accounting treatment and rate for the jurisdiction of each adjusting item. |
(c) | To compute adjusted earnings, we apply a full year pro forma effective tax rate to each quarter presented. For 2016, we have used an effective tax rate of 33%, which was our 2016 effective tax rate excluding the reversal (recorded in the fourth quarter of 2016) of valuation allowances against certain European net deferred tax assets. For comparability, in 2015, we have used an effective tax rate of 33% that excludes the reversal of a valuation allowance recorded in prior years against certain Canadian net deferred tax assets. |
Three Months Ended December 31, | Twelve Months Ended December 31, | Trailing 24 Months | |||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | |||||||||||
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES | $ | 264 | $ | 332 | $ | 943 | $ | 742 | $ | 1,685 | |||||
Cash paid for property, plant and equipment | (92 | ) | (127 | ) | (373 | ) | (393 | ) | (766 | ) | |||||
Purchases of alloy | — | — | — | (8 | ) | (8 | ) | ||||||||
FREE CASH FLOW | $ | 172 | $ | 205 | $ | 570 | $ | 341 | $ | 911 | |||||
ADJUSTED EARNINGS (a) | $ | 81 | $ | 79 | $ | 419 | $ | 304 | $ | 723 | |||||
FREE CASH FLOW CONVERSION (b) | n/a | n/a | 136 | % | 112 | % | 126 | % |
(a) | Please refer to Table 6 "EPS Reconciliation Schedules" for the reconciliation from net earnings attributable to Owens Corning to adjusted earnings. |
(b) | We compute free cash flow conversion on annual basis only due to the seasonality of our businesses. |
T
MCN4L&5)I)K@PAYF19##"%BERR(Z;GD*(&;;SAB #$F^)<$4VG$6[_8M1B:2:
M=F"FS/FI;@2I@Y47#B*1PP$9.XY6@9.5OK2Q
MN/(,4UY>K87$#.-]K/Y4LCJQ ^?'E@H0%#QR)(" <4 95Q\2Q:16-U+:G[/>
MRWBW#K)G[+#:7'V=KAAM^=-Q5Y,8,:%F^8*: -Z^\91V#WZ-$TGV VB1!&!:
MXEO /*C7.%3,C*NXD@ ES@"@1H:7J&K27)M]2M(84:,NLUO<>
:]:6]DZ+I33W-I(Q4%KB>*!Y',;'[L4#H(LKS)+Y@SM09
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M_P#1%O02SZ,H$9NKZ1::[:2Z??QK-;7"E'1NA![CN&!P580VD\4X0P1@,8I%<*2'R VW!(
MY&: N?2M CSKXJ>$AXQ\/7-D@S
@H]F^!?BW_A&?$4=M,VVUU0"VDR<*)