Owens Corning (OC)

Q4 2011 Earnings Call

February 15, 2012 11:00 am ET

Executives

Thierry Denis -

Michael H. Thaman - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Duncan J. Palmer - Chief Financial Officer and Senior Vice President

Analysts

Stephen Kim - Barclays Capital, Research Division

Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division

Garik S. Shmois - Longbow Research LLC

Michael Rehaut - JP Morgan Chase & Co, Research Division

Kathryn I. Thompson - Thompson Research Group, LLC.

Neil Frohnapple - Northcoast Research

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to the Fourth Quarter and Full Year 2011 Owens Corning Earnings Conference Call. My name is Shantiley, and I will be your facilitator for today's call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Thierry Denis, Director of Investor Relations. Please proceed.

Thierry Denis

Thank you, Shantiley. Good morning, everyone. Thank you for taking the time to join us today for today's conference call in review of our business results for the fourth quarter and full year 2011. Joining us today are Mike Thaman, Owens Corning's 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. [Operator Instructions]

Earlier this morning, we issued a news release and filed a 10-K that detailed the results for the year. For the purposes of our discussion today, we've prepared presentation slides that summarize our performance and results for the fourth quarter and full year 2011. We will refer to these 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.

Please reference Slide 2 before we begin where 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. Reconciliations of GAAP to non-GAAP are found within the financial tables of our earning 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, who will be followed by CFO, Duncan Palmer. Mike will then provide comments on our outlook prior to the Q&A session. Mike?

Michael H. Thaman

Thank you, Thierry, and good morning, everyone. We appreciate you joining us today to discuss our results for the fourth quarter and full year 2011. Owens Corning delivered another outstanding year. For the second consecutive year, adjusted earnings per share growth exceeded 35%. We achieved growth in revenue and EBIT in all of our businesses amid challenging marketing conditions. These results reflect strong execution in our portfolio of market-leading businesses.

As a company, we delivered adjusted EBIT of $461 million, a 21% increase over 2010 and increased earnings per share by more than 40%. Our top line performance of $5.3 billion was also strong, representing a 7% increase over 2010. During this call, Duncan and I will recap the past year, focus on the market conditions for both of our segments and outline our expectations for delivering another year of EBIT growth in 2012.

I will begin, as has been customary, by commenting on how we performed relative to the expectations we previously shared with you. For 2011, we said that we would continue our progress in creating an injury-free workplace. Our rate of injuries in 2011 improved by 27% compared with our full year 2010 performance. This marks the 10th consecutive year of safety improvement in Owens Corning. We reduced the number of injuries in our company by over 90% during this time period.

We said at the beginning of the year that full year adjusted EBIT for the company would be $475 million. We updated this estimate during the year as market conditions changed, and our 2011 adjusted EBIT of $461 million is in line with that updated guidance. We said Composites would deliver mid-single digit revenue growth and double digit margins. This business posted a 4% increase in revenue, double digit margins and EBIT improvement of $26 million. We are pleased with these results in light of the difficult conditions we faced in Europe in the second half of the year. I will detail our action plan for Composites later in my comments.

We said Roofing would achieve EBIT margins of 20% for a third consecutive year. The business delivered EBIT of $429 million and EBIT margins of 20%. We responded effectively to storm volume and demonstrated strong price execution.

We said Insulation would narrow its losses and embark on a measured path to recovery. The Insulation business achieved breakeven EBIT in the fourth quarter of 2011, the first time since the third quarter of 2008. The business has built momentum throughout the year, benefiting from the effective launch of our EcoTouch insulation, the integration of FiberTEK operations, continued improvement in our manufacturing position and good commercial execution.

Finally, we said that the company would continue to use its balance sheet to position itself for future growth. In 2011, we extended and refinanced more than $1 billion in credit facilities, and we repurchased 4 million shares. Overall, we delivered strong EPS and EBIT growth for the year and have demonstrated the power of our businesses and our people to deliver even in challenging market conditions.

Now let me turn to the market environment as we enter 2012. I'd like to start with the outlook for Composites. We saw some deceleration of global industrial production especially in Europe, which resulted in our business and the overall industry building excess inventory in 2011. This has put some supply-induced pressure on pricing particularly in Europe and Asia. As a result, we've seen low-single digit declines in prices in our Composites business as we enter 2012.

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