USG's CEO Discusses Q1 2012 Results - Earnings Call Transcript


Q1 2012 Earnings Call

April 17, 2012 11:00 am ET


Ken Banas -

James S. Metcalf - Chairman of the Board, Chief Executive Officer and President

Richard H. Fleming - Chief Financial Officer and Executive Vice President


Michael Rehaut - JP Morgan Chase & Co, Research Division

Daniel Oppenheim - Crédit Suisse AG, Research Division

Kathryn I. Thompson - Thompson Research Group, LLC.

Garik S. Shmois - Longbow Research LLC

James Barrett - CL King & Associates, Inc.

Trey Grooms - Stephens Inc., Research Division

Joshua Pollard - Goldman Sachs Group Inc., Research Division

Robert C. Wetenhall - RBC Capital Markets, LLC, Research Division

Dennis McGill - Zelman & Associates, Research Division

John F. Kasprzak - BB&T Capital Markets, Research Division

L. Todd Vencil - Sterne Agee & Leach Inc., Research Division



Welcome to the USG Corporation First Quarter 2012 Earnings Conference Call. My name is Monica, and I will be the moderator for today's call. [Operator Instructions] Please note that this conference is being recorded.

I will now turn the call over to Ken Banas. Mr. Banas, you may begin.

Ken Banas

Good morning, and welcome to USG Corporation's First Quarter 2012 Earnings Conference Call and Live Webcast. We'll be using a slide presentation in conjunction with our call today. It is available by going to the Investor Information section of our website,, and clicking on the link to the webcast.

Before we proceed, let me remind you that certain statements in this conference call may be forward-looking statements under securities laws. These statements are made on the basis of management’s current views and assumptions of our business, market and other conditions and management undertakes no obligation to update these statements. The statements are also subject to a number of factors, including those listed at the end of the press release, and actual results may be different from our current expectations.

With me today to discuss our results and our outlook are Jim Metcalf, Chairman, President and Chief Executive Officer; and Rick Fleming, Executive Vice President and Chief Financial Officer. Jim will provide a general overview of the quarter, plus additional insight into some of our businesses. Rick will then review the financial results for the quarter for the corporation and the business segments. We'll then open the call for questions and conclude with a few comments from Jim. [Operator Instructions] Jim?

James S. Metcalf

Thank you, Ken, and good morning, and thank you for joining us. As always, we appreciate your interest in USG. Today, I've several areas I'd like to discuss with you, starting with an executive management transition that's currently underway. Rick Fleming, who's been with USG for more than 30 years, has elected to retire later this year. Rick has served as our CFO for the last 20 years and has done a brilliant job developing financial strategies in all kinds of markets, from rapid growth to sharp contractions. I'm sure many of you this morning who know Rick share my admiration for his sharp intellect, calm demeanor and his thoughtful personality. Speaking for everyone at USG, Rick, I'd like to say you'll be greatly missed.

While we'll all miss Rick, we're very excited to welcome Matt Hilzinger, who will become our CFO on May 1. Matt comes to us from the Exelon Corporation where he was Chief Financial Officer. Matt is a very experienced financial executive who I'm confident will make great contributions to USG in the years ahead. Many of you already know Matt, and we're planning our Investor Relations schedule to create opportunities for you to see him again. I feel very fortunate to work with 2 of the top financial leaders around.

Now turning to operations. We had some encouraging trends in the first quarter. Operating safely, focusing on our customers and lowering our breakeven have been some of our key actions. We recorded an operating profit in the quarter, which I've said on previous calls is our main focus, even with little help from market demand. Operating profit is just the first step towards positive earnings and cash flow. And one quarter certainly doesn't make a trend, but I feel this is a very important milestone for us. Our people at USG, throughout manufacturing, distribution, sales and all the staff units have worked very, very hard to get to this point. And I'd really like to take this time to congratulate every USG person on their efforts.

There are a number of areas that contributed to our improved performance. Our market-leading lightweight products led by SHEETROCK Brand UltraLight Panels and our new UltraLight joint treatment are performing very well, profitably growing the category and helping our customers with innovative new products.

Another contributor to the first quarter results was our new pricing strategy that eliminated wallboard job quotes. It also established a single price for the year, which gave greater price certainty to our customers. Both U.S. Gypsum and L&W Supply achieved improved margins in this category.

In addition, we believe the market in the U.S. improved modestly, led by Residential Repair and Remodel, which was up approximately 10%. Now this segment is where we are well positioned with our big-box customers, and our shipments improved compared to both last year and the fourth quarter. These results continue to support our focus on innovation and providing our customers with value-added solutions.

Other areas of the company had solid performances as well. L&W Supply continues to makes great strides, improvements coming from all product categories. The significant organizational changes that were implemented last year are proving to be very, very effective. L&W is focused on the commercial contractor, providing value on core products like steel, installation and ceilings and a sharp focus on margin improvement through efficiencies in the operations. I'm very confident that L&W is on the right track.

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