TOLEDO, Ohio, Feb. 17 /PRNewswire-FirstCall/ -- Free cash flow of $335 million generated during 2009 Record results in the Roofing business Composites profitable for second half of 2009 Adjusted EPS expected to grow by 25 percent or more in 2010

Owens Corning (NYSE: OC) today reported consolidated net sales of $4.8 billion in 2009, compared with $5.8 billion in 2008. Consolidated net sales for the fourth quarter of 2009 were $1.2 billion, compared with $1.3 billion in 2008. Sales were lower because of weakness in the global economy and the U.S. housing market.

Owens Corning’s 2009 adjusted earnings were $145 million, or $1.14 per adjusted diluted share, compared with $152 million, or $1.17 per adjusted diluted share in 2008. Adjusted earnings in the fourth quarter of 2009 were $1 million, or $0.01 per adjusted diluted share, compared with $24 million, or $0.19 per adjusted diluted share, in the fourth quarter of 2008. Owens Corning’s 2009 net earnings were $64 million, or $0.50 per diluted share, compared with a net loss of $813 million, or $6.38 per diluted share. Net loss in the fourth quarter of 2009 was $21 million, or $0.17 per diluted share, compared with a net loss of $34 million, or $0.27 per diluted share in 2008. See Tables 1, 2 and 5 for a discussion and reconciliation of these items.

Record Roofing performance, significant reductions in working capital, tight control of capital spending, and a favorable tax position drove outstanding cash generation in 2009. The Company generated free cash flow of $335 million in 2009. See Table 10 for a discussion and reconciliation of these items.

Consolidated Fourth-Quarter and 2009 Results

Earnings before interest and taxes (EBIT) in 2009 were $192 million, compared with $234 million in 2008. Excluding adjusting items (see Table 3), adjusted EBIT in 2009 was $308 million, compared with $328 million in 2008.

Fourth-quarter 2009 EBIT was $2 million, compared with $26 million during 2008. Excluding adjusting items (see Table 4), adjusted EBIT in the fourth quarter of 2009 was $33 million, compared with $59 million during the same period in 2008.

Gross margin as a percentage of net sales was 18 percent in 2009, compared with 16 percent in 2008.

The Company achieved its targeted $160 million in cost savings in 2009.

Capital expenditures for 2009 totaled $232 million, excluding precious metal purchases. Depreciation and amortization expense totaled $325 million for the year.

Cash taxes in 2009 were $18 million, less than the $33 million paid in 2008.

The Company’s safety performance improved 6 percent in 2009, compared with 2008.

“I’m pleased with what we accomplished in 2009 in the face of weakness in the U.S. housing market and the global economy,” said Mike Thaman, chairman and chief executive officer. “Our Roofing business achieved record results. The actions we took in our Composites segment returned the business to profitability in the second half of the year. We generated significant cash flow during the year through reductions in working capital and capital expenditures. We finished the year with a strong balance sheet.

“Composites performance will show improvement as we see further strengthening in global demand,” Thaman said. “We will demonstrate operating leverage in Composites as we increase capacity utilization. Our Roofing business will produce another strong year. The Insulation business is expected to narrow its losses despite continuing to face a weak market.”

Outlook

Owens Corning expects that the Company’s 2010 adjusted earnings per share (EPS) will grow by 25 percent or more. Supported by a strong balance sheet and a favorable tax position, this level of earnings would translate to adjusted EBIT of $350 million or more for 2010.

In the Composites segment, the Company believes that overall demand will continue to trend upward as global industrial activity improves. The rate of market recovery remains uncertain. Production levels in 2010 will be increased to meet demand, which will result in the Company increasing capacity utilization. In addition, this segment will continue to benefit from synergies associated with the 2007 acquisition and cost-reduction actions taken in 2008 and 2009.

The Company’s Roofing business has achieved significant margin improvements through effective price discipline and gains in manufacturing and material efficiencies. Owens Corning expects that these margin improvements will continue to drive profitability despite weak demand. Uncertainties that could affect Roofing gross margins include competitive pricing pressure and the cost and availability of raw materials, mainly asphalt.

Owens Corning believes that its Insulation business will benefit from the geographic, product and channel mix of the Company’s product portfolio, which will help moderate the impact of continued demand-driven weakness associated with new construction in the United States. The Company believes demand for insulation lags U.S. residential housing starts by approximately three months. Fourth-quarter 2009 U.S. housing starts were 19 percent lower than in the fourth quarter of 2008. Therefore, it’s expected that new residential construction-related market demand in the Insulation business will be weaker in the first quarter of 2010 than it was in the first quarter of 2009.

Cash taxes are expected to be below $35 million in 2010. The Company estimates a long-term effective tax rate of 25 percent based on the blend of its U.S. and non-U.S. operations expense.

General corporate expense in 2010 is estimated to be between $60 million and $70 million. General corporate expense includes corporate staff and activities not directly related to the operations of the Company’s segments.

The Company currently estimates that depreciation and amortization expense will be about $325 million in 2010. Capital expenditures in 2010, excluding precious metal purchases, are estimated to be higher than the $232 million invested in 2009, but less than depreciation and amortization expense expected in 2010. This level of investment will allow the Company to maintain its current asset platform and to complete the new Reinforcements plant that is under construction in China.

Other Financial Items

At the end of 2009, Owens Corning had net debt of $1.65 billion, compared with $1.98 billion in 2008, an improvement of 17 percent. See Table 10.

Current cash on hand of $564 million coupled with future cash flows and other sources will provide ample liquidity to meet the Company’s cash requirements. Owens Corning has no significant debt maturities until the fourth quarter of 2011 and remains well within compliance of the financial covenants in its senior revolving credit facility and senior term-loan facility.

In October of 2009, Standard & Poor’s Ratings Services affirmed its BBB- rating on Owens Corning and improved the outlook to stable from negative.

In December of 2009, Fitch Ratings initiated coverage of Owens Corning and assigned a BBB- rating with a stable outlook.

Owens Corning’s federal tax net operating loss carryforward was $2.6 billion at the end of 2009.

Business Segment Highlights

Composites NET SALES

Lower sales volumes, resulting from reduced demand levels, represented approximately two-thirds of the decrease in net sales for 2009, compared with 2008. Demand for the Company’s Reinforcements products decreased in December of 2008 to 45 percent below the average monthly demand for the first 11 months of 2008 because of the global economic slow down. Demand increased each quarter in 2009, and it was stronger in the fourth quarter of 2009 than in the fourth quarter of 2008. The inclusion of four months of sales from two plants in Europe divested in 2008 also negatively affected the 2009 to 2008 comparison. The remainder of the decrease was related to unfavorable product mix, lower selling prices and unfavorable currency translation.

EBIT Owens Corning’s Composites segment EBIT was $241 million lower in 2009 than in 2008. The decline was primarily driven by lower sales volumes, including the impact of underutilization of production capacity. Lower selling prices, partially offset by lower marketing and administrative expenses, also impacted EBIT for the Composites segment. This segment includes a portfolio of various products across several geographic regions including Europe, the Americas and Asia-Pacific. The Company increased selling prices in many regions and products to partially recover inflation during the second half of 2008. In the European Reinforcements business, however, first-quarter 2009 selling prices deteriorated from the fourth quarter of 2008 because of significant declines in composites demand. This region continued to experience competitive pressure resulting in gradual declines in price through the first nine months of 2009. However, prices began to increase during the fourth quarter.

Building Materials

NET SALES

Net sales in the Building Materials segment were lower in 2009 compared with 2008, primarily driven by demand weakness resulting from lower U.S. housing starts.

Sales in the Roofing business were comparable year-over-year as higher selling prices offset lower sales volumes. The Company increased selling prices in the Roofing business in the months leading up to the fourth quarter of 2008 to recover inflation in raw material costs, particularly asphalt. Since that time, selling prices have remained generally stable. Lower demand, associated with both reduced storm activity and reduced new residential construction, resulted in a decreased level of sales volumes.

In the Insulation business, lower sales volumes represented more than three-fourths of the decline in net sales. Insulation demand was down primarily because of the lower level of U.S. housing starts. Lagged U.S. housing starts for 2009 were 43 percent lower than those for the same period in the prior year, according to data reported by the United States Census Bureau. The Company’s Insulation business includes a diverse portfolio with a geographic mix of the United States, Canada, Asia-Pacific, and Latin America; a market mix of residential, commercial, industrial, and other markets; and a channel mix of retail, contractor and distribution. In aggregate, these sectors moderated the impact of lower U.S. housing starts on overall insulation demand.

EBIT

The substantial increase in EBIT in the Building Materials segment was driven by unit margin improvements in the Roofing business, which were partially offset by lower EBIT performance in the rest of the segment.

In Owens Corning’s Roofing business, higher unit margins accounted for the year-over-year increase in EBIT. The EBIT margin momentum from the fourth quarter of 2008 continued throughout 2009 as a result of generally stable selling prices and deflation in raw material costs, primarily asphalt.

In the Insulation business, lower sales volumes, including the impact of underutilization of the Company’s production capacity, accounted for substantially all of the decrease in EBIT. Other items impacting EBIT were slight price declines in certain sectors, which were offset by improved manufacturing productivity; deflation in raw material costs; and lower marketing and administrative expenses.

Owens Corning took actions across the Building Materials segment during 2008 and 2009 to reduce production capacity and align cost structure with market demand in response to the continued weak U.S. housing market.

First-quarter 2010 results will be announced on Wednesday, April 28, 2010.