Owens Corning

Hello and welcome to the Owens Corning Q4 Fall Year 2022 Earnings Call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star 1 on your telephone keypad. If you would like to withdraw your question, you may press star 2. I'll now hand over to your host, Amber Wolfarth, to begin. 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 fourth quarter and full year 2022. Joining us today are Brian Chambers, Owens Corning's Chair 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-K that detailed our financial results for the fourth quarter and full year 2022. 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 this call. You can access the earnings press release, Form 10-K, 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 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 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 and today's remarks contain non-GAAP financial measures. Explanations and reconciliations of non-gap-to-gap 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-K 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 chair and CEO, Brian Chambers. Brian?

Thanks, Amber. Good morning, everyone, and thank you for joining us. During our call this morning, I'll start with an overview of our results for the fourth quarter and full year and provide an update on how we are positioning the company for continued success in 2023 and beyond. Ken will then provide details on our fourth quarter and full year 2022 performance, and I'll come back to discuss what we're seeing in our markets and our outlook for the first quarter. Owens Corning delivered outstanding results in 2022, achieving record financial performance across all our businesses and consistently outperforming the markets we serve. As the year unfolded, many of our end markets began to reset as the marketplace adjusted to a changing macroeconomic environment that included the war in Europe significant inflation, labor challenges, and ongoing supply chain disruptions. Our global team demonstrated resolve and resourcefulness in the face of these challenges to deliver great financial results driven by our strong customer partnerships, unique product and process innovation, and outstanding manufacturing capabilities. In doing so, we continue to strengthen the earnings power of our company and advance our enterprise strategy in support of our mission to build a sustainable future through material innovation. Moving to our results, I'll begin as always with safety. Our commitment to safety remains a critical component to our success, and we continue to deliver world-class safety performance in 2022. During the fourth quarter, we achieved a recordable incident rate of 0.41, our best quarter of safety performance in nearly a decade. This lowered our full-year 2022 RIR to 0.65, with one-half of our global sites operating injury-free throughout the year. Financially, in the fourth quarter, we delivered revenue of $2.3 billion, a 7% increase over fourth quarter 2021. Adjusted EBIT of $333 million and adjusted EBITDA of $460 million were both up 2% versus prior year. This resulted in an adjusted EBIT margin of 15%, and an adjusted EBITDA margin of 20% for the quarter. These results were driven by our team's strong execution in a number of areas to offset inflation, manage needed production and maintenance downtimes, and capitalize on the available market opportunity as volumes declined in most of our product lines as customers adjusted to slowing demand and managed end-of-year inventory levels. For the full year we delivered record financial performance with revenues of 9.8 billion a 15% increase over 2021 and net earnings of 1.2 billion. Adjusted EBIT of 1.8 billion was up 25% year over year and adjusted EBITDA of 2.3 billion represented a 19% increase. This resulted in adjusted EBIT margins of 18% and adjusted EBITDA margins of 23% for the year. addition we generated free cash flow of 1.3 billion and returned 931 million or 71 percent of free cash flow to investors through dividends and share repurchases our full year results highlight the significant progress our team has made in advancing our strategy to strengthen our core building and construction businesses and expand into new product adjacencies that leverage our market knowledge material science expertise and manufacturing capabilities while increasing our total adjustable markets. This progress is reflected in our balanced array of strategic acquisitions and divestitures, targeted capacity additions, and investments in organic growth through new product and process innovation. Over the course of 2022, we expanded into new product lines, acquiring WearDeck, a premium producer of composite decking and structural lumber for commercial and residential applications, and Natural Polymers, an innovative manufacturer of spray polyurethane foam insulation. We also took actions to strengthen and expand existing product lines, announcing a new joint venture with Poltron Composites to produce our industry-leading fiberglass rebar, and acquired the remaining 50% interest in a US-based joint venture producing high-value nonwoven fiberglass mat for roofing applications, both of which support the pivot in our composites business into higher-value, more capital-efficient applications that leverage our core glass fiber technology in building and construction, renewable energy, and infrastructure applications. In addition, we completed the divestiture of the European portion of our dry-use chop stands product line. And in December, we completed the sale of our operations in Russia. As we begin the new year, we are on track to complete the land sale of our Santa Clara, California fiberglass installation facility. which we closed down in Q4 as part of our network optimization initiative, and start up our expanded NEFI Utah insulation facility in the second quarter. We also continue to make investments to expand our manufacturing capacity in key product lines. Following our successful 2021 launch of FOMULAR NGX insulation, which provides a significant reduction in embodied carbon, we are adding a new production facility to meet the growing demand for this sustainable building solution. This is one of many product lines we have been investing in as we accelerate our product and process innovation. In 2022, we launched 54 new or refreshed products across our global businesses, a 13% increase over the prior year. These innovations were well balanced across our core product platforms in roofing, insulation, and composites as we focus on increasing the performance, durability, and sustainability of our product offerings which brings additional value to our customers to help them win and grow in the market. Now, before I turn it over to Ken, I'd like to provide an update on our sustainability efforts, which continue to generate multiple advantages by creating additional growth opportunities and helping to fulfill our company's purpose. In November, we announced enhanced shingle recycling efforts, including a pilot asphalt shingle recycling partnership that will serve to advance our circular economy aspiration by keeping shingles out of landfills. By 2030, we intend to recycle 2 million tons of shingles annually in the US. And in December, we earned a place on the Dow Jones Sustainability World Index for the 13th consecutive year, providing further recognition of our leadership in environmental, social, and governance matters. Our strong performance in 2022 demonstrated the resiliency of our team, the strength of our businesses, and the earnings power of our company amid changing and challenging market conditions. Challenging times create great opportunities to differentiate, which we look forward to continue demonstrating in 2023 and beyond. With that view of our performance and strategic initiatives, I will now turn it over to Ken to discuss our financial results in more detail.