Owens Corning Management Discusses Q4 2012 Results - Earnings Call Transcript
February 20, 2013 3:50 PM ET
Owens Corning (OC)
Q4 2012 Earnings Call
February 20, 2013 11:00 am ET
Michael H. Thaman - Chairman, Chief Executive Officer, President and Chairman of Executive Committee
Michael C. McMurray - Chief Financial Officer, Senior Vice President and Treasurer
Stephen Kim - Barclays Capital, Research Division
George L. Staphos - BofA Merrill Lynch, Research Division
Michael Jason Rehaut - JP Morgan Chase & Co, Research Division
Mike Wood - Macquarie Research
Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division
Robert C. Wetenhall - RBC Capital Markets, LLC, Research Division
Mary Ross Gilbert - Imperial Capital, LLC, Research Division
Dennis McGill - Zelman & Associates, LLC
Welcome to the Fourth Quarter 2012 Owens Corning Earnings Conference Call. My name is Larissa and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded, and I'll turn the call over to Thierry Denis, please go ahead.
Thank you, Larissa and good morning, everyone. Thank you for taking the time to join us today for the conference call in review of our business results for the fourth quarter and full year 2012. Joining us today are Mike Thaman, Owens Corning's Chairman and CEO and Michael McMurray, Chief Financial Officer. Following our presentation this morning, we will open this 1 hour call to your questions. [Operator Instructions]. Earlier this morning, we issued a news release and filed a 10-K that detailed our results for the quarter and full 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 2012. We will refer to these slides during this call. You can access the slides at our website, 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 earnings release. Consistent with our historical practice, we've excluded items that we believe are unrepresentative of our ongoing operations to arrive at adjusted EBIT, our primary measure to look at period-over-period comparisons. We believe that adjusted EBIT is helpful to investors for comparing our results from period to period. We adjust our effective tax rate to remove the FX of quarter-to-quarter fluctuations, which have the potential to be significant in arriving at adjusted earnings and adjusted earnings per share. The company's full year effective tax rate on adjusted earnings for 2012 was 23%. 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, Michael McMurray. 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 fourth quarter and full year 2012 results. Owens Corning consolidated revenue for 2012 was $5.2 billion compared to $5.3 billion 1 year ago. Full year adjusted EBIT was $293 million, down from $461 million in 2011, and adjusted earnings for the year were $131 million compared to $276 million. Fourth quarter revenue of $1.2 billion was essentially even with that in the same period 1 year ago. Adjusted EBIT for the quarter was $52 million, down from $88 million in 2011 and adjusted earnings were $13 million, down from $48 million from the fourth quarter 2011. While 2011 presented a number of financial challenges for us, I'm encouraged with the way that we finished the year, and believe that we've positioned the company well heading into 2013.
Let me now review a few of the key highlights. We continue to make progress towards our goal of creating an injury-free workplace. We reduced our rate of injury by 10% compared with our full-year 2011 performance. This marks our 11th consecutive year of safety improvement, a proud achievement for our entire team. Our Roofing business had good margin management in the fourth quarter despite weak year-end volumes. We came into 2013 with stronger margins and a more disciplined winter buy program that are experienced in 2012. We know that a strong start is critical to improved full year performance in roofing.
Our Insulation business completed the second consecutive quarter of profitability and significantly narrowed losses for the year. An improving housing market and a strong outlook, underpins our belief that we will be able to sustain our performance into 2013. We continue to focus on improving our financial performance through better pricing, volume growth and increased capacity utilization.
Our Composites business had a difficult second half due to heavy production curtailments associated with our previously announced inventory reduction plan. We are largely complete with our asset and cost actions, and expect that demand growth in 2013 will allow us to ramp up our production and return to positive operating leverage. As we look ahead to 2013, we're expecting an environment of continued strong improvement in the U.S. housing market and continued modest growth in the global economy and industrial production. We believe that this macro environment will support improvement of EBIT in each of our 3 businesses. We would expect over all corporate improvement of at least $100 million in EBIT, and we would anticipate that the rate of the U.S. housing recovery and our ability to improve margins in our Roofing and Insulation businesses will largely determine the upside to our guidance.
Before I turn it over to Michael for more financial details on the quarter and the year, I'd like to take a moment to discuss the current position and outlook in each of our businesses. Let me start with Roofing. We expect overall market conditions in Roofing to continue to improve. New construction and reroof volumes should trend higher, tracking housing starts and increased home sale activities. Store volumes are always difficult to forecast, but at average levels, would fall below 2012 demand. Given these assumptions, we'd expect the overall roofing market opportunity in 2013 to be at or above 2012 levels. Our main near-term focus has been to start the year with better margins and more discipline in our winter buy programs. Our early indications are that we are off to a better start than last year, which is very good news. In Insulation, we showed good improvement and nice operating leverage in 2012. We believe that the outlook for continued improvement in U.S. housing starts would translate into another year of improved asset utilization and better pricing levels, continuing our financial recovery, marked by a return to profitability this year. We still have a long way to go to return this business to our historical volumes, price levels and returns. We're heartened by our recent progress and are optimistic that a sustained housing recovery will provide us with the market conditions to achieve those goals.
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