Owens Corning

Good day and welcome to the Owens Corning first quarter 2020 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Scott Kripps, VP of Investor Relations. Please go ahead.

Thank you and 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 2020. Joining us today are Brian Chambers, Owens Corning's Chairman and Chief Executive Officer, and Prith Gandhi, our Interim Chief Financial Officer. Following our presentation this morning, we will open this one-hour call to your questions. In order to accommodate as many call participants as possible, Please limit yourself to one question only. Earlier this morning, we issued a news release and filed a 10-Q that detailed our financial results for the first quarter 2020. For the purposes of our discussion today, we've prepared presentation slides that summarize our performance and results, and we'll refer to these slides during the call. You can access the earnings press release, form 10-Q, and presentation slides at our website, owenscorning.com. Refer to the investors link under the corporate section of our homepage. A transcript and recording of this call and the supporting slides will be available on our website for future reference. Please reference slide 2 before we begin, where we offer a couple of reminders. First, today's remarks will include forward-looking statements based on our current forecasts and estimates of future events. These statements are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially. We undertake no obligation to update these statements beyond what is required under the applicable securities laws. Please refer to the cautionary statements and the risk factors identified in our SEC filings for a more detailed explanation of the inherent risks and uncertainties affecting such forward-looking statements. Second, the presentation slides in today's remarks contain non-GAAP financial measures. Explanations and reconciliations of non-GAAP to GAAP measures may be found in the text and financial tables of our earnings press release and presentation, both of which are available on owenscorning.com. Adjusted EBIT is our primary measure of period-over-period comparisons. and we believe it's a meaningful measure for investors to compare our results. Consistent with our historical practice, we have excluded certain items that we believe are not representative of our ongoing operations when calculating adjusted EBIT and adjusted earnings. We adjust our effective tax rate to remove the effect of quarter-to-quarter fluctuations which have the potential to be significant in arriving at adjusted earnings and adjusted earnings per share. We also use free cash flow and free cash flow conversion of adjusted earnings as measures to help investors to evaluate the company's ability to generate cash and utilize that cash to pursue opportunities that enhance shareholder value. For those of you following along with our slide presentation, we'll begin on slide four. And now, opening remarks from our chairman and CEO, Brian Chambers, who will be followed by interim CFO, Prith Gandhi. Then Brian will cover our outlook before the Q&A session. Brian?

Thanks, Scott. Good morning, everyone, and thank you for joining us. All of us are dealing with the unprecedented challenges and impact of the COVID-19 pandemic. It has and will continue to change how we live and work. But extraordinary times create the opportunity for extraordinary actions. And that is what we are seeing in communities around the world as we work together to take care of those in need, ensure essential businesses are operating, and take the necessary precautions to prevent the spread of this devastating virus. Within Owens Corning, Our teams around the globe have responded to this crisis with compassion and resolve. Through the many individual acts of support, including the work of the OC Foundation, we will continue to offer our help as a company. And to everyone who has been directly or indirectly affected by the virus, my sincerest wish is for a full and fast recovery for you and your loved ones. Given the current environment, I will make a few comments on our first quarter safety results and financial performance. but we'll spend a majority of my time on how we are managing our business through the COVID-19 pandemic. Prith will then provide some additional details on the first quarter and then I'll come back to discuss our views on the second quarter and the remainder of the year. Our commitment to safety is unconditional and in the first quarter, our recordable incident rate was 0.47, a 37% improvement compared with the same quarter in 2019. I'm very pleased with this performance and that everyone has remained focused on creating an injury-free workplace during this difficult time. Financially for the quarter, we delivered results in line with the expectations we outlined during our last earnings call, despite the additional market impact from the COVID-19 outbreak and governmental actions in Europe and North America, which started in March. Revenues were $1.6 billion, down 4%, 3% on a constant currency basis compared with the same period last year. and adjusted EBIT was 116 million, consistent with last year. I'm very proud of our team's execution in this challenging environment, as well as our ability to quickly respond to changing market conditions. As part of our first quarter earnings release, we also announced non-cash impairment charges of 987 million, which were triggered by the recent decline in the company's market valuation and near-term economic uncertainties created by the COVID-19 pandemic. Prith will provide more details on this in his comments. If you are following along with the slides, please turn to slide five. During this extraordinary time, we are focused on four key areas to ensure the strength and continuity of our business. First, keeping our employees and other key stakeholders healthy and safe. Second, staying closely connected to our customers, our suppliers, and our markets. Third, rapidly adapting our businesses to near-term changes in market conditions while remaining focused on positioning us for long-term success. And fourth, ensuring a strong balance sheet with access to capital as needed. By managing these four areas well, I believe we will come through this crisis stronger than ever. In January, we formed a dedicated COVID-19 response team to assist our Asia Pacific business leaders to manage through the coronavirus outbreak in China. As the virus spread throughout the world, we expanded this team to work in daily coordination with our executive team to ensure our operations remain safe and effective through the many global shelter-in-place restrictions. During this time, we have implemented enhanced operating protocols to ensure the safety and well-being of our employees, their families, and our stakeholders. We are taking every precaution, including robust cleaning procedures, use of personal protective equipment, social distancing, employee health screenings, restrictions on business travel, and work from home requirements at all of our locations, consistent with the guidance of the U.S. Centers for Disease Control and Prevention, World Health Organization, and local, state and government mandates. In addition, we've enhanced sick leave and other health care benefits for our employees to provide assistance and relieve them of financial hardship during this difficult time. And we have recently given our U.S. salaried employees the opportunity to reduce their work schedules while maintaining health care benefits to balance demands both inside and outside of work. We are also committed to continuing to serve our customers with the high quality products and services they have come to expect from us. Our operations and products have been deemed essential across the US and other global locations. Our products are necessary to help protect, repair, and maintain the safety of our homes and other critical commercial and industrial structures. In addition, our materials are critical to the continuity of other essential businesses in areas such as infrastructure, energy, transportation, and construction. We've received numerous letters from customers thanking us for maintaining continuity of supply. and we are thankful to our suppliers for doing the same. We are all working together to solve common issues and keep the essential supply chain operating effectively and in some cases providing materials that are essential to the structures and equipment that help in the efforts against COVID-19. By design, the majority of our manufacturing facilities are located within the country or region of the customers we serve. This has proven beneficial and has limited disruptions in our ability to secure raw materials locally and deliver products to our customers. Our teams have remained resilient and worked well with our customers, suppliers, and community partners to find creative ways to continue to operate safely and effectively. As expected, we have seen customer demand slow dramatically in recent weeks. As a result, we have taken proactive steps to balance production across our network and have temporarily curtailed operations at facilities with adequate inventory to meet near-term demand. Moving forward, we will continue to evaluate the market environment and adjust our manufacturing to meet the needs of our customers and manage our inventories. Over the past several years, we have taken actions to ensure a strong balance sheet with access to liquidity and a well-structured debt maturity profile. We currently have about 900 million of available liquidity, including 234 million in cash. During the first quarter, we borrowed 400 million on our existing revolving credit facility for normal seasonal working capital needs and to strengthen our cash position. Given the uncertain market environment, we are focused on reducing or postponing noncritical expenses, including capital investments. Our only near-term debt maturity is the remaining $150 million from our term loans due in February 2021. While our current financial position is strong, we will continue to evaluate our liquidity needs and options to reinforce our balance sheet as we see trends develop in the market. Throughout the first quarter, Our team has demonstrated a tremendous resiliency and positive attitude. This, combined with our strong customer connections and balance sheet, positions us to come through this crisis stronger than ever. Before turning it over to Pris to discuss our first quarter results, there is one other item I would like to highlight. Owens Corning has a long-standing commitment to sustainability. It is central to our purpose and drives our actions on a daily basis. Last week, we published our 14th Annual Sustainability Report. detailing our progress toward our 2020 sustainability goals and introducing new metrics to quantify our progress toward our ambitious 2030 goals. I would encourage you to review our report as it highlights and recognizes the efforts and achievements of our 19,000 employees. With that, I'll turn it over to Prith, and then I'll return to talk about our outlook.