plies to: OWC GLW)
Owens Corning Reports Second Quarter Results
TOLEDO, Ohio, Jul 13, 2000 /PRNewswire via COMTEX/ -- Owens Corning (NYSE: OWC)
today reported financial results for the second quarter ending June 30, 2000.
Net sales for the period of $1.295 billion were slightly below net sales of
$1.310 billion in the same period a year ago. This reflects weaker demand in
roofing, siding and insulation businesses, as construction activity slowed due
to concerns about interest rates. Composites Systems demand remained strong
during the quarter around the world and reported growth of 5%.
Net income (excluding a charge reflecting an addition to the asbestos reserve,
and the proceeds from an insurance settlement) was $61 million, or $1.04 per
share on a diluted basis, compared to $76 million, or $1.31 in the same period a
year ago. Income from operations was basically flat with the second quarter of
1999 impacted by higher raw material costs and weaker volumes offset by pricing
actions, good cost controls, and a $5 million gain from the venturing of the
Company's European Building Materials business. The decline in net income is
attributed to the small decline in income from operations coupled with higher
borrowing costs and an increased tax rate for the quarter.
The company said that the increase in 30-year mortgage rates by as much as 200
basis points in the past 18 months has slowed construction activity at the same
time that profit margins have come under pressure due to the significant
increases in material and energy costs. Effective cost controls and pricing
strategies, along with Systems Thinkingtm initiatives, have helped reduce but
have not eliminated the pressure on profit margins.
The company has completed its previously announced review of the sufficiency of
its provision for asbestos-related liabilities. In light of the expansion of the
company's National Settlement Program (NSP) by approximately 62,000 claims, the
additional recent information derived from processing claims, the higher than
expected costs to settle cases outside the NSP, and recent developments in
asbestos litigation, the company has recorded a pre-tax charge of $1 billion.
This change in the asbestos reserve does not alter the company's recently
reported estimated total asbestos cash outflows over the next five years.
As announced in June, the company received a total of $335 million from
insurance settlement payments, of which $125 million had been recorded as an
insurance receivable.
Including the charge for the addition to the asbestos litigation reserve and the
$210 million (pre-tax) gain from the insurance recovery, the company had a net
loss for the second quarter of $425 million, or $7.76 per share.
For the first six months of 2000, net income, excluding the special items
discussed above, was $109 million, or $1.89 per share on a diluted basis,
compared to $120 million, or $2.08 per share in the same period a year ago.
First-half sales were $2.552 billion, compared to $2.440 billion in the first
six months of 1999, representing slightly less than 5 percent growth for the
half. Including the addition to the asbestos reserve and the insurance recovery,
the company had a net loss of $377 million, or $6.90 per share, for the first
six months of 2000.
The company also reported that it has completed its review of the Fibreboard
asbestos liability and it confirmed the adequacy of the Fibreboard liability and
related Fibreboard Trust asset at this time. In an effort to improve the
investment returns of the Trust and assure its long-term adequacy, the company
is seeking the appointment of additional independent trustees for the purpose of
evaluating alternative investment strategies, including investments in Owens
Corning. The appointments would be made by the Texas court that retains
jurisdiction over the Trust.
Building Materials Systems
Income from operations in Building Materials was $112 million, compared to a
record $131 million in the second quarter a year ago. Building Materials sales
were $1.035 billion, compared to $1.064 billion in the second quarter of 1999.
Other than continued increased volumes in Cultured Stone and laminate shingles,
demand in other Building Materials Systems was down compared to a year ago.
Increased asphalt costs affected margins in Roofing Systems, as did higher PVC
resin costs in Exterior Systems. The company continues to focus on productivity
improvements, enhanced cost control, and market strategies to generate improved
margins.
During the quarter the company closed a joint-venture transaction for its
European Building Materials Business with Alcopor (a Swiss foam insulation
company) which generated proceeds of approximately $180 million.
Composites Systems
Income from operations in Composites Systems increased to $49 million from $33
million in the same period in 1999, as the business showed continued strong
demand and improved pricing.
Net sales increased 5.4 percent to $291 million, from $276 million during the
second quarter of 1999, reflecting the strong global demand.
Outlook
Looking ahead, the company expects that full year 2000 sales and net income will
continue to be affected by the interest rate environment, the potential for
ongoing raw material cost inflation, and other energy-related cost increases.
The company will continue to focus on productivity, Six Sigma programs and
growth initiatives, while seeking to preserve margins through its procurement
and pricing strategies. At this juncture, sales for the year are expected to be
up about 4 percent while net income, excluding the impact of insurance
recoveries and the asbestos reserve charge, will be approximately 20 percent
below the figure for 1999.
Owens Corning is a world leader in building materials systems and composites
systems. The company has sales of $5 billion and employs approximately 20,000
people worldwide. For more information, please visit Owens Corning's Website at
owenscorning.com.
This news release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
are subject to risks and uncertainties that could cause actual results to differ
materially from those projected in these statements. Further information on
factors that could affect the company's financial and other results are included
in the company's Form 10-Q and 10-K, filed with the Securities and Exchange
Commission. |
