Owens Corning

Good day and welcome to the Owens-Corning second 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 and then one on your telephone keypad. 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 Cripps, Vice President, 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 in review of our business results for the second 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 second quarter 2020. For the purposes of our discussion today, we have 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 the 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 two 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 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 helpful to 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, and then Brian will cover our outlook before our Q&A session. Brian?

Thanks, Scott. Good morning, everyone, and thank you for joining us today. Throughout this past quarter, our global team has demonstrated tremendous resiliency, continuously adapting to changing market conditions and maintaining an incredible focus on taking care of each other, supporting our customers, and maximizing our financial performance relative to the market opportunity. During our call this morning, I will provide an overview of our second quarter results and how we are managing the company during this period of uncertainty. Prith will then provide additional financial details on the second quarter, and then I'll come back to discuss our outlook for the third quarter and the remainder of the year. I will start with safety and our second quarter results. An unconditional commitment to safety has long been our guiding principle at Owens Corning, and this has served us well to address the challenges of COVID-19. In the quarter, our recordable incident rate was 0.69, a slight improvement compared with the second quarter of 2019. I'm pleased with this performance and that everyone has kept safety and caring for each other at the forefront of everything we do. Over the past several months, our executive team and dedicated COVID-19 response team have worked with our global enterprise to ensure our operations remain safe and effective for our employees, their families, and other key stakeholders. We remain vigilant in our use of personal protective equipment, health screenings, robust cleaning procedures, restrictions on business travel, and Work From Home Options as we actively monitor local health conditions and update our operating protocols as risk levels change. I would like to now move to our financial performance in the quarter. Through the strength of our market-leading businesses, innovative product and process technologies, and unique enterprise capabilities, the company delivered financial results better than what we outlined during our last earnings call as we capitalized on a faster recovery in residential and markets, particularly in the U.S., Improve Manufacturing Leverage and Strong Cost Controls. For the second quarter, revenues were $1.6 billion, down 15%, 14% on a constant currency basis compared with the same period last year, and adjusted EBIT was $167 million. Since the start of the pandemic, we've been 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, as I just discussed. 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. I remain confident that by managing these four priorities well, we will continue to deliver strong performance for the remainder of this year and position the company well for 2021. During this time of increased demand uncertainty, we have stayed closely connected with our customers and suppliers to understand and respond to shifting market conditions. After experiencing a significant drop in order volumes at the start of the second quarter, we continue to see our business improve in May and June as shelter in place restrictions began to lift and demand for our products in most of our end markets increased. As mentioned earlier, we have seen residential markets in the U.S. and also in parts of Europe recover at a faster pace than many had anticipated, which positively impacted our second quarter results. In our roofing business, after temporarily curtailing operations early in the quarter, we ramped up production to run at full capacity to service increasing demand. And in insulation, We have experienced solid demand in our North American residential fiberglass business due to the strong recovery in U.S. new construction housing. Within most of our commercial and industrial end markets, the recovery has been slower and we continue to take the necessary actions to balance our production with expected near-term demand. Given the essential products we provide and the localized nature of our supply chain, we have been able to operate our manufacturing network effectively and productively. quickly adjusting to the changing needs of our customers while managing our inventories. In addition, our team has delivered great results during the quarter around cost control. We have focused on minimizing or postponing discretionary expenses and reduced operating expenses in the quarter by over 30 million compared with last year. We are also realizing benefits from the longer-term structural changes we made prior to the pandemic in our insulation and composites businesses. In insulation, We are clearly seeing the impact of the network optimization actions implemented late last year. And in composites, we have maintained a consistent focus on manufacturing productivity and network optimization to lower our costs, which is evident in the results we delivered in the quarter despite the challenging market conditions. We maintained a strong balance sheet with access to liquidity and a well-structured debt maturity profile. While our financial position at the beginning of the quarter was strong, In May, we took advantage of favorable capital markets and successfully completed a 10-year $300 million bond issuance. This, along with our working capital management and OPEX and CAPEX controls, led to an increase in our available liquidity to approximately $1.5 billion, including almost $600 million in cash. During the second quarter, we paid down $210 million on our existing revolving credit facility. Our only near-term debt maturity is the remaining $150 million from our term loan due in February 2021. Before turning it over to Prith to discuss our second quarter financial results in more detail, there's one other item I would like to highlight. Last month, Owens Corning ranked number one on the 100 Best Corporate Citizens list for 2020 and is one of only a small number of companies that have earned this honor twice. The list ranks companies in the Russell 1000 Index for standout global environmental, social, and governance performances. We were honored by this recognition, which is evidence of our continuing commitment to integrate high ESG standards into all that we do. We believe our commitment and that of the entire business community to improving environmental, social, and governance issues is critical to addressing the extraordinary challenges we all face today with racial inequalities and other social injustices which have been compounded by the economic and health uncertainties associated with the COVID-19 pandemic. These issues have and will continue to have a tremendous impact on how we work and live. At Owens Corning, we believe in the power of our diversity and aspire to create an environment where all our employees' voices are heard and appreciated for their unique value. Our team has been and will continue to be active, vocal, and promote meaningful reform. As a company, I'm proud of our people, the work we've done so far, and what I know we will accomplish in the future. With that, I will turn it over to Prith, and then I'll return to talk about our outlook for the third quarter. Prith?