Owens Corning

Welcome to the Owens-Corning Third 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. Please note, this event is being recorded. I would now like to turn the conference over to Amber Wohlfarth. Director 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 third quarter 2020. Joining us today are Brian Chambers, Owens Corning's Chairman and Chief Executive Officer, and Ken Parks, our 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 yourselves to one question only. Earlier this morning, we issued a news release and filed a 10-Q that detailed our financial results for the third quarter 2020. For the purposes of our discussion today, we have prepared presentation slides that summarize our performance and results and will refer to these slides during this 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 a forward-looking statement 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 is 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. The tables in today's news release and the Form 10-Q include more detailed financial information. For those of you following along with our slide presentation, we will begin on slide four. And now, opening remarks from our Chairman and CEO, Brian Chambers. Brian?

Thanks, Amber. Good morning, everyone, and thank you for joining us today. I know many of you have had the opportunity to speak with Amber, our new Director of Investor Relations. I want to welcome her to our first earnings call in this role. I'd also like to take this opportunity to thank Prith Gandhi for serving as our Interim Chief Financial Officer over the past several months and welcome Ken Parks, our new CFO, to our call this morning. Ken has a proven track record of leading high-performing teams and delivering results at several diverse global organizations. We are excited to have Ken on our team. During our call this morning, I will provide an overview of our third quarter results and how we are positioning the company to capitalize on our market opportunities. Ken will then provide additional financial details on the third quarter, and then I'll come back to discuss our outlook for the fourth quarter. Our global team continues to demonstrate tremendous resiliency, adapting to changing market conditions, and working hard to service the demands of our customers. I'm incredibly proud of how our teams have worked together during these challenging times to achieve such strong financial results, delivering record quarterly EBIT, double-digit EBIT margins in all three businesses, and record free cash flow. All of this was accomplished while maintaining our focus on keeping each other as well as our customers and suppliers healthy and safe, ramping up manufacturing operations throughout the quarter to service increasing customer demand, and supporting our communities as we continue to operate through this global health crisis. Before discussing our markets and financial results in more detail, I'll start with safety. As you know, safety is a top priority for our company. Here today, 57% of our global facilities remain injury-free. In the third quarter, while we continue to perform at a high level with a recordable incident rate of 0.73, this result was above our third quarter 2019 performance and reminds us of the daily focus we must have on safety in order to achieve an injury-free workplace. Turning to financial results, Our performance this quarter was better than what we outlined during our last earnings call, as we saw customer demand continue to improve throughout the quarter in most of our end markets. Revenues were $1.9 billion, up 1% compared with the same period last year, and adjusted EBIT was $289 million, up 4%. These results continue to demonstrate the strength of our company's market-leading positions, broad product offering, and improved operating efficiencies. to generate substantial free cash flow and deliver sustainable shareholder value. On our last two calls, I've discussed four key areas we have focused on this year 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. We've managed these four priorities well through the pandemic and expect to finish the year strong while we position ourselves for 2021. Overall, we continue to see our end markets recover during the quarter, but at different rates. Our residential markets, especially in the United States, are being fueled by robust demand for new single-family housing as well as increased repair and remodeling investments as owners upgrade their homes and expand their living spaces. Our commercial and industrial markets are also seeing improvements, but we continue to expect these to recover at a slower pace as we finish 2020. In the third quarter, our roofing business delivered revenue and earnings growth. Increased storm activity and continued remodeling growth drove significantly higher market demand in the quarter. While our manufacturing and supply chain teams worked hard to service the higher demand, our volumes trailed the overall market growth due to limited inventory levels entering the quarter. We remain focused on improving our service cycles and plan to continue running our facilities at full capacity to meet near-term demand while ensuring we are positioned to support our customers and service expected market demand in 2021. In composites, Volumes also continued to improve throughout the quarter, with revenues down just 2%. Our focus on specific end markets, such as building and construction and wind energy, combined with our local supply chain model in specific geographic regions, continues to pay dividends as we grow our volumes. This, along with our continued focus to drive operational efficiencies through manufacturing productivity and network optimization, led to double-digit EBIT margins in the quarter. and in insulation, revenues also finished down 2% with EBIT margins of 11% driven primarily by the additional growth we saw in our North American residential fiberglass business. As I stated earlier, we continue to see the U.S. housing market strengthening with demand around 1.4 million units on a seasonally adjusted basis for the last three consecutive months. Given the market demand we are currently seeing and that is forecasted for 2021, We have initiated work to restart our Bats and Roll insulation line at our Kansas City facility. We would expect to have this line back up and running during the second quarter of next year. Our focus in this business has been to operate the most efficient and most flexible manufacturing network, which positions us to quickly respond to changing market conditions to service our customers and deliver strong financial performance. As we continue to adapt our operations to service a changing market environment, We remain focused on generating strong free cash flow and maintaining an investment grade balance sheet. Last quarter, we discussed our focus on evaluating our liquidity needs, prioritizing deleveraging the balance sheet, and maintaining our dividend. In the third quarter, given our cash flow, we were able to execute on all these areas, finishing the quarter with more than $1.7 billion of liquidity. Before turning it over to Ken to discuss our third quarter financial results in more detail, There is one other item I would like to cover. This morning, we announced that Ava Harder, our General Counsel, will be leaving the company at the end of November. She will become the Senior Vice President of Corporate Affairs and General Counsel at Whirlpool Corporation. During her five years with Owens Corning, Ava played a key role in shaping the direction of our company and driving our success. I appreciate the many contributions she made and wish her all the best in her new role. We are currently exploring alternatives to identify her successor, and we'll make an announcement when our evaluation is complete. With that, I'll turn it over to Ken, and then I'll return to talk about our outlook for the fourth quarter. Ken? Thanks, Brian, and good morning, everyone.