Owens Corning (OC)
Q1 2010 Earnings Call
April 28, 2010 11:00 am ET
Michael Thaman - Chairman of the Board, Chief Executive Officer, President and Chairman of Executive Committee
Duncan Palmer - Chief Financial Officer and Senior Vice President
Darrel Penner -
Keith Hughes - SunTrust Robinson Humphrey Capital Markets
Michael Rehaut - JP Morgan Chase & Co
Dennis McGill - Zelman & Associates
Garik Shmois - Longbow Research LLC
J. Keith Johnson - Morgan Keegan & Company, Inc.
Herbert Hardt - Monness
Joshua Pollard - Goldman Sachs Group Inc.
Kenneth Zener - Macquarie Research
John Kasprzak - BB&T Capital Markets
Previous Statements by OC
» Owens Corning, Inc. Q4 2009 Earnings Call Transcript
» Owens Corning Q3 2009 Earnings Call Transcript
» Owens Corning Q2 2009 Earnings Call Transcript
Good day, ladies and gentlemen, and welcome to the First Quarter 2010 Owens Corning Earnings Conference Call. My name is Marisol, and I will be your operator for today. [Operator Instructions] I will now like to hand the presentation over to Mr. Darrel Penner, Investor Relations.
Thank you, Marisol. Good morning, everyone. Thank you for taking the time to join us for today's conference call and review of our business results for the first quarter 2010. Joining us today are Mike Thaman, Owens Corning Chairman and Chief Executive Officer; and Duncan Palmer, Chief Financial Officer.
Following our presentation this morning, we will open this one-hour call to your questions. Please limit yourself to one question and one follow-up. Earlier this morning, we issued a news release and filed a 10-Q that detailed our results for the quarter. For the purposes of our discussion today, we've prepared presentation slides that summarize our performance and our results for the first quarter. We will refer to the slides during this call. You can access the slides at owenscorning.com. We have a link on our homepage and a link on the Investors section of our website. This call and the supporting slides will be recorded and available on our website for future reference.
Before we begin, we offer a couple of reminders. First, today's presentation will include forward-looking statements based on our current forecasts and estimates of future events. Second, these statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially. Please refer to the cautionary statements and the risk factors identified in our SEC filings for a more detailed explanation of the inherent limitations of such forward-looking statements.
This presentation and today's prepared remarks contain non-GAAP financial measures. Also note that GAAP to non-GAAP reconciliations are found within the financial tables of our earnings release. For those of you following along with our slide presentation, we will begin on Slide 4.
And now, opening remarks from our Chairman and CEO, Mike Thaman, followed by CFO, Duncan Palmer, and then our Q&A session. Mike?
Thank you, Darrel. Good morning, everyone. Thank you for joining us today to discuss results for the first quarter.
Owens Corning's off to a strong start in 2010. We had an outstanding first quarter and are confident that we will achieve as much as $450 million in adjusted EBIT this year. This is $100 million higher than our previous guidance and equates to about $2 of adjusted earnings per share.
Total revenue in the first quarter increased 18% to $1.3 billion compared with $1.1 billion in the first quarter of 2009. This increase was led by revenue growth in both Composites and Roofing. We delivered adjusted EBIT of $97 million in the first quarter, a threefold increase compared with the same period a year ago. Our markets are still operating well below their potential. Yet, in the first quarter, we demonstrated leverage in our Composites segment, we continued momentum in our Roofing business and we narrowed our losses in the Insulation business.
Duncan will provide more detail on the quarter, so I'll move now to a review of how Owens Corning is performing against the expectations we framed for 2010. We said that we would continue our progress in creating an injury-free workplace. During the first quarter, our focus on safety resulted in a 20% reduction in injuries compared with 2009. We said that we would drive improved profitability in Composites this year. We are well on our way. Operating leverage improved significantly during the quarter, generating a $49 million increase in EBIT and operating margins of 7%.
We said that sustaining Roofing margins in excess of 20% is an achievable goal for this year. We are on target to reach this goal, generating operating margins in Roofing of 24% in the first quarter compared with 22% a year ago. I'll provide additional comments on Roofing margins later on the call.
We said that we would work to narrow losses in the Insulation business, and we did. Despite a 19% reduction in the lagged U.S. housing starts, we trimmed our losses in the first quarter. Insulation remains a great business in a well-structured industry.
Overall, I'm extremely pleased of what we've accomplished. Composites has turned around. Momentum in Roofing continues, and Insulation is poised to capitalize on the market recovery when it takes place.
Now I'll turn to our segments and our outlook, starting with Composites. In prior calls, I provided an overview of the aggressive actions we've taken to return this segment to profitability. Let me recap. At the end of the 2008, global industrial demand collapsed. In response, we curtailed capacity in the first quarter of 2009 to produce less than we were selling. And we put tight controls in place on working capital and capital expenditure. By taking these actions, we were able to generate cash in the second quarter of 2009. As demand improved, we maintained our tight controls, and we became profitable in the third quarter. By the end of 2009, we aligned our inventories with sales volumes and have positioned the business for the strong first quarter that we reported today.
We've continued to evaluate our global manufacturing network in Composites to respond to current and future market demand. I'll detail three developments. First, we took a charge in the quarter related to improving our cost position in Europe. Based on demand, we decided not to invest in restarting a manufacturing line at our Composites plant in Alcala, Spain. We've curtailed this line in 2009. Accelerated depreciation and severance related to this action make up a substantial portion of the charge.