The company reported quarterly consolidated net sales of $1.722 billion during the second quarter, compared with $1.590 billion in the second quarter of 2005, representing an 8.3 percent increase from the prior year.
"We're pleased with the results of the second quarter that reflected an environment of strong demand for many of our products," said Dave Brown, president and chief executive officer. "While continued cost increases in energy-related commodities impacted most of our product lines, we were able to offset in part the impact of those higher costs through price increases and improved productivity.
"We continue to make significant progress toward emergence from Chapter 11 in 2006," said Mr. Brown. "Reaching agreement with our creditors on a plan of reorganization and the Bankruptcy Court approval of our disclosure statement have paved the way for our company to exit Chapter 11. In preparation for emergence, Standard & Poor's (S&P) and Moody's both announced their intent to assign an investment-grade credit rating to Owens Corning, which affirms our company's strong balance sheet and market leadership.
"We recently announced that we are in discussions with Saint-Gobain to form a reinforcement and composite fabrics joint venture that would better serve customers around the world," said Mr. Brown. "Combined with our planned acquisition of the Modulo(TM)/ParMur Group in Europe, these initiatives would further expand our company's global business."
Highlights of Consolidated 2006 Second Quarter and Six-Month Results:
- Second quarter income from operations was $168 million, compared with $169 million for the same period of 2005.
- For the first six months, income from operations was $283 million, compared with a loss from operations of $4.112 billion for the same period of 2005. The loss from operations for the first six months of 2005 was primarily a result of an additional $4.342 billion provision for asbestos liability, which the company recognized in the first quarter of 2005.
- Net sales for the first six months were $3.323 billion, compared with $2.992 billion in the first six months of 2005, representing an 11.1 percent increase from the prior year. The increase was driven by strong demand for building materials products and improved prices for certain products.
- For the first six months, cash flow from operations totaled $79 million, compared with $54 million in the prior year period. The increase was due primarily to an increase in income from operations.
- For the first six months, the company's continued focus on employee safety resulted in a 17 percent reduction in injuries compared with the year ended December 31, 2005.
Gross margin for the second quarter was 17.2 percent compared with 19.6 percent in the prior year period. While gross margin improved in Insulating Systems, it was more than offset by reductions due to inflation in material, energy and transportation costs, the temporary unavailability of manufacturing capacity in India and Brazil due to maintenance and expansion, and price reductions in other business segments.
Selling, General and Administrative (SG&A) expenses, as a percentage of consolidated net sales for the second quarter, were 8.1 percent compared with 8.9 percent in the second quarter of 2005. For the first six months of 2006, SG&A expenses were 8.2 percent compared with 8.9 percent in the prior year period. The improvement in the expense ratio reflects the increase in the company's net sales.
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