OC - Earnings call transcript Q1 2018

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Operator

Good day, and welcome to the Owens Corning Q1 2018 Earnings Call. All participants will be in a listen-only mode. 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 Thierry Denis. ahead. go Please

Thierry J. Denis

XXXX. and the Brian, call everyone. you first Thank review Thank to good join taking quarter the for time business conference us for our you, results morning, for and today's

CEO; Joining us today McMurray, Mike Thaman, Financial and Chairman Officer. Owens Chief Michael Corning's are and

morning, one-hour only. limit accommodate financial issued our call as that we Following this participants this Earlier yourself questions. and your as XX-Q first we morning, to presentation please to results quarter many question one In this open possible, release the news will call order the a for to XXXX. filed our detailed

during For we performance this have the summarize today, we'll our our and that purposes discussion prepared results presentation slides refer call. of slides and these to

You A XX-Q the earnings of and before at future two the can presentation slides Refer Form website slide reminders. our homepage. website, under this reference. Investors we we be and link supporting press for Please where our the transcript couple release, our reference of of begin, a slides and owenscorning.com. will to the offer available recording on call section the Corporate access

undertake affecting to Please detailed such in will uncertainties future obligation these risks, factors current cautionary on statements forward-looking required and our update laws. more inherent for estimates no applicable to cause and our subject forecasts refer filings a the statements. explanation could that risks differ the is the statements of beyond First, factors SEC what statements based forward-looking We uncertainties to securities of risk remarks and identified events. under today's materially. are include statements other These our to and results actual

it the comparisons of owenscorning.com. measures. primary contain release and measure historical period-over-period believe of slides we share. on EBIT and and press available excluded earnings of for believe text quarter-to-quarter which be when non-GAAP in financial effective a to Adjusted our presentation found be and investors meaningful our to reconciliations our is EBIT adjusted period-to-period. measure We we calculating practice, have the have remarks non-GAAP of tables earnings remove we not GAAP compare effect items representative measures may with to earnings. adjusted our to of Second, financial rate the that in results today's our Explanations certain fluctuations, from adjust and significant Consistent tax arriving per our and the ongoing adjusted adjusted earnings potential operations are at is

cash adjusted to value. use shareholder also and flow investors helpful We free opportunities pursue earnings company's to ability of flow cash to free and evaluate utilize enhance as measures the and cash conversion cash to that generate

Thaman, with slide and those on For McMurray, be CFO, Mike four. presentation, following Michael our slide of will our you And we CEO, from remarks session. by Chairman followed our and begin Q&A opening now, along will Mike?

Michael H. Thaman

Thank morning, you, XX% revenue growth everyone. Corning Owens quarter. Thierry. generated Good this

impact saw For quarter, the Roofing. decline the three we all particularly margins, businesses, primarily greater-than-anticipated with of inflation associated in across a

overcome to for strong price anticipated transportation going We material inflation the continue forward. and year realized actions impact the expect announced results as are of to and

consistent noted positions market fundamentals our combined the execution, outlook, brief, the conditions. our recent of and In support business. continues the Corning, the that strong Our outlook to two geographic FOAMGLAS acquisitions, Paroc first expanded our with businesses quarter reach should of strong. our a full our three quarter of efforts XXXX the operational to and impact business that generate months market results be through price support be our It various of results and include and Owens

three and our of to Paroc. medium the North in include low our geographic completed America, across insulation This acquisition and Europe February, all in in we portfolio China. and products know, markets: Europe As scope acquisition expands major temperature high, you ranges our broadens

are leverage excited North the for was and their of and our mineral impacted and begun three same bring compared and to down XXXX our high with our our technology, with quality opportunities growth wool $X.X in Adjusted Insulation. market customers. the was U.S. year. company which inflation, the about to the will XX% we've position the by track America, quarter their impact were is EBIT billion, but million, XX%. transportation quarter was Roofing in All we're pronounced negatively and period on We Paroc for pleased the business. team, most Paroc up material first The integration Revenue of last $XXX in particularly businesses

give I about detail, in our update on Before program. business you our talk to results I'd safety an like

As to safety commitment I our said unconditional. is before,

on focused injury-free goal workplace. constantly an create our advancing are We to

recordable implement Our significant the X% for quarter rate last integration. was in of improvement our particularly safety efforts over to our a comparable period is extensive part year. Paroc's facilities the incident as our X.XX, given This standards

slightly for was the first of were with our than generated outlook million In review XXXX overall and quarter tracked our in business, In the impacted by million from XX%. of the EBIT of million compared the and talk strong higher EBIT delivered a in decline a year quarter volumes, EBIT market. EBIT Material XX%. expectations. year Roofing in margins in then and to XXXX. quarter million in impacted transportation that EBIT about negatively we primarily like a our delivered with by lower $XXX volumes $XX $XX with resulting the prior our performance mid-single-digit of in costs I'd below Now expected, business, performance prior $XX of we were comparison. margin quarter, our Results compared Composites margins

inflation we associated realize price quarter, experienced did March until In in late rates increase. the as the not improvement declined our announced through quarter addition, previously margin with and

building drove revenue fiberglass insulation and For bright price growth, the Volume and as product businesses by comparable producing over year, quarter, increased Paroc volume Corning. from EBIT performance. the marginal million from $XX million EBIT capacity contribution a line. million $XXX highest Owens decade. in to the our were improvement first as $XX Insulation last This residential U.S. tightness was this and or XX%. some grew spot price a expected, about EBIT Higher gains up the driven quarter in by quarter million, to to FOAMGLAS in in contributed million $XX significant the residential $X U.S. industry-wide the

May management global industry. XX-year Finally, shaping of is the well-positioned begin month, impact and and transforming executive, long-term been we after our I'd highlight well they company. delivered Marcio and He's XX both our announced our business like Sandri Composites his on performance XXth, meaningful will thank has Arnaud a to the years financial that announced business. to development. of We strong make operational company. Marcio President has phase succeed Arnaud their Throughout a retire Arnaud of wish financial Owens career will him. Last a that and as in his family new with Corning, Genis, in He his We effective Composites results. the record direction him many this for and instrumental the delivered exciting contribution in Composites, lives.

global mid-single-digit to housing the of a with construction to improving in storm Roofing, and and new an remodeling we overall Consensus averages our anticipate is markets. call outlook. double-digit U.S. In historical we business Return in growth growth. demand market. the result shingle both asphalt expect the in decline will grow In would continued at Components, that U.S. environment constructed rates. consistent industrial that market housing consensus global XXXX continually for a Now U.S. expectations estimates economy financial guidance, production to strong we for starts overall, expect a our and on

continue We cost recover and to costs target actions. transportation to higher pricing asphalt inflation through

– May allow levels increase anticipate target the us recover We it that increase are on and May margins about optimistic basis. price go-forward to to a should

pricing inflation and improvement the EBIT Composites, necessary improved restore first for anticipate higher-than-anticipated driven our target the actions even increase and any from to the for Overall, Roofing year. another million market in costs. further in quarter, we said, price strong by to outlook with $XX the glass Insulation, EBIT In the Additional higher quarter. lost improvement we from are million. inflation $XX increasing partially expect end I continues XXXX continue to concerns these respond fiber In of inflation likely XXXX. be pricing in by about to the $XXX quarter, significant will estimates deliver Last million. million offset actions. implemented year we through rebuild This are realization to about earnings growth first upon upgrading be profitability the included of price of $XX our to Based actions from and about

to the we've not realized from already million the required inflation be transportation our price will price Paroc potential acquisitions is May EBIT in incremental residential mineral conditions increase benefit support come our on expectations. our year. believe However, in new reflected our to market business. The overcome improvement actions, U.S. including of The any full-year price further through additional of is that $XX and on the outlook. remainder anticipated wool from progress and FOAMGLAS U.S. We growth

We realization, cash is price in his leverage Michael XX% flow convert perspective our this to full-year leverage during approximately for operating earnings From a With with remarks. additional full-company guidance the XXX%. operating we expect discuss possible. at a expect our be long-term half free to consistent first second weaker about Insulation more half. of to XX% despite will adjusted detail

three billion generating As more I converting and businesses number double-digit to margins last a XXX% revenue, earnings achieving flow. conditions in of XXXX, support important operating call, market should free all our earnings in said during $X milestones of than in cash

inflation remains quarter. the first challenges despite outlook Our unchanged in some

maximizing targets. review I'll Michael? and further Our over are underlying we're strong businesses it our details of to turn With who achieve focused our that, business. to will Michael, the growth on

Michael C. McMurray

Thank good morning you, everyone. Mike, and

by into million affected As particularly robust inflation, cost produced expectations in materials and but North strong and earnings Roofing America. in all of Mike higher actions which Across three mentioned was our growth, were the Insulation, than and inflation, driven year. we transportation segments, negatively experienced $XX approximately acquisitions coming top-line we pricing earlier, by our

taken further the strong environment, $XX with period to deliver of have actions are of and position actions achieved million a record same last along number and underway. the year year the to price first These company another We in of compared improvement quarter pricing a macro results. actions,

Now on key which our financial slide quarter. the X, summarizes for start let's data first

and of from the $XXX cost versus Depreciation over quarter the offset period by $XX Form million, diluted inflation. quarter acquisitions driven per last quarter quarter XX-Q. share diluted was the execution. first Substantial billion, The in Net accelerated million million than as million, and acquisitions of million quarter $XX more for were in compared share primary in up XXXX. $XXX same in $X.XX one Insulation per million strong Today, from more of first in XXXX. compared $X and to up Corning two Adjusted about information $XXX business $XX depreciation $X.XX period or $XX release of previously million to and amortization $XXX year-over-year million The million million announced our the EBIT million to $X.X period tables XXXX. and for our the the same progress $XXX the were sales Owens earnings depreciation price to and compared was of actions. for attributable by first news of growth XX% sales pricing was Insulation the expense XXXX reported to for incremental amortization year. $XX the of we restructuring reported Adjusted find same was XX% net consolidated or compared XXXX the XXXX driver, was resulting earnings year ago. down You'll today's financial first detailed

$XXX capital Our quarter our our $XXX items, for first million were the quarter to quarter adjusted you'll our million. of see EBIT reconciling detail million. On adjusting first X, reported $XX of of XXXX slide EBIT the additions

items $XX million For the adjusting million. with of the $XX primarily cost totaled adjusted quarter, of acquisition our out associated Paroc. We

delivered adjusted $X strengthen from last the restructuring position. also announced charges to low of year cost million We resulting actions out Composites'

by by of Now beginning as corporate EBIT turn first Insulation you to a to Adjusted we review where transportation. the revenue Composites EBIT increased where attention and decreased performance, cost as Insulation detailed compression review adjusted X, prior business. of million margin first our our comparing slide level growth by compared million highlights, EBIT was $XX $XX With were and materials offset quarter to results, $XX XXXX. turn of X, inflation, from than quarter EBIT that we General please high more I strong provide with decreased $XX key more the million the by million. financial and review our million, of respectively. of to your a Roofing expenses ask slide provide year. business XXXX $XX with

at Sales previously footprint with the expected businesses announced we growth significantly As leverage both growth we have quarter's to Together, of last on decade. closed execution, been integrations approximately acquisition are pleased facility residential. our was highlighted well, XX% strong over million, first impact of across of geographic Paroc up businesses, these The improvement first items, EBIT our the U.S. new FOAMGLAS on from and the quarter's acquisitions. in $XXX period Absent in the tempered contribution by we producing the significant quarter. for $XX than compared contribution X. call. year technologies portfolio a in quarter the the same were progressing nearly higher are the XXXX, period realization earnings insulation operational a $XX execution the and temperature the by of performance our quarter Paroc inflation on business. mineral U.S. Paroc operating call, volumes. price of long-term same EBIT and This our February and the spectrum. discussed was XX%, consistent Paroc in continued of wool was and last very and Both FOAMGLAS price goal higher residential strong headwinds best and our ago, acquisitions in the of was in transportation and excluding up Insulation million million that on EBIT on driven extend with U.S. Commercial these would FOAMGLAS primarily

the stabilized at impact tailwind we a earnings had make wool Let during negative will expected we progress while it we And that manufacturing new business facility remainder meaningful I'm pleased an mineral first last the the me first our operations give quarter. to this XXXX. confident be our the On said update March. for to we report in call, you on been a U.S. facility. to remain quarter, of

based full-year expectations of On the in improvement realization pricing EBIT was our actions, This previously implemented FOAMGLAS for approximately last of mineral on earning business. U.S. $XXX guidance and XXXX call, business. and in our primarily Insulation we million shared growth wool the from contributions the Paroc

we quarter, noted, first business. U.S. progress price further in in Mike As our the residential made particular, in

announced the result, price we price actions higher that million, have is first upgraded first of estimate based the our of $XX to the quarter price The through a attainment additional the quarter. full-year upon the actions price largely transportation As offset end confidence realization inflation we $XX further make than for have the of and May, to expected we will high anticipated Further million even for year. have been progress. from

operating of by full-year additional This see One approximately business. our we we be note, but expect XXXX, operating residential implemented the growth the million, for U.S. for full-year. our leverage potentially contributions to of U.S. of realization and for in mineral $XXX guidance, For benefit on of leverage associated this we second actions, the business. downtime item potential the will the XX%, first Based anticipate the our actions, Paroc to of excluding consistent Newark, upgrade wool Insulation expect FOAMGLAS our the improvement and driven operating the technology the to leverage acquisitions. with pricing cost EBIT due from continue We Pipe previously additional approximately our dependent be would half us facility. will earnings in impact this growth, at quarter pricing Ohio with XX% second primarily of on largely quarter position

the to investment and our this are Insulation business. We brings industrial excited commercial and about technology it

currency largely ask to for business. $XXX our translation were Favorable period the our your XXXX. for to sales million, lower first same Composites the flat slide as review Sales in turn volumes. you Now offset in foreign compared Composites I'll a X business attention to of quarter

in quarter's discussed XXXX and call, growth a related quarter wind early expected the volume we we difficult in volume in comparison double-digit we of the first a changes. last As from regulatory as temporary market stoppage a result in Indian to restocking, produced

in for we result, our headwinds, the recover than XXXX, last In overall expectations. was was lower of we and Composites XXXX. market than Inflation fiber financial quarter. $XX by volumes. wind performance anticipated the quarter EBIT in driven market remains Indian double-digit delivered Despite material these slightly wind million, sales $XX the period industrial higher our as transportation was the We the market same in growth. are quarter lower first market, a quite Indian and costs below on glass higher growth second EBIT and expect continued still million year confident glass half of will the the Outside the strong. margins production global

growth higher inflation expect and cost. accelerated We and market partially rebuild benefit by pricing higher offset will be the from

fourth continue is million, performance a with to a growth although record consecutive increased deliver EBIT We financial of $XX expect this to headwind guidance. about year of to inflation

will As highlighted our to quarter's expect earnings business. the about Slide year. industry is same a timing to with compared on remained the second were quarter of Global U.S. strong, rates mid-single recovering, high, rebuild overview on comp negatively the cost results. quarter half. for a Roofing remained for sales our and Shipments wind up as should higher we as industry year call, selling were digits in shingle of higher last second strong utilization growth XX prices. down And impact period performance an last ago, which India provides second million expected, primarily the result, the $XXX year-over-year. the million, produce Roofing $XX quarter the

transportation higher our down in offset prices. The was to more inflation Our compared by shingle partially the period shingle offset million, in growth quarter decline market double-digit and the as same $XX volumes in in selling million EBIT components higher-than-expected market. $XX the broadly the was track asphalt than XXXX business.

strong by being coking margins. higher crude is driven prices and inflation Asphalt

we our experienced where trucks, be and asphalt demand and based pressures as We the is flatbed inflation increase this transportation one markets. than and balance have which been outlook. inflation in outbound Strong most year. utilize a transportation Roofing current persist XXXX drivers to of our has more in business, shipping on are expect in of we shortage of for costs much and expected These trucking driven to a fueled equipment the tightest XX% the or pronounced has

May margins we long-term are our May with consistent we on that We year increase will confidence of we and levels price will the make with made A progress restore guidance. increase pleased the progress our further March rest our have successful a high to with for the increase.

Additional full-year needed consistent guidance. will be to positioned another deliver price The action our to be long-term margins, continues year achieve XXXX. XXXX Roofing with in to business strong

Strong shingle We shingles. historical in historical digits. market and long-term demand new construction growth expect – storm would demand the for mid-single down demand result continued remodeling in at being at averages

We increased grow at business the our transportation continue also to basis, to full-year double-digit cover that asphalt actions we On expect rates. costs. pricing will and Components expect a

Now provides stock our shares announced program, let of me quarter, XX, which under a at the million share of the an an repurchased XXXX. slide company's per your price we previously significant $XX.XX turn outlook first financial overview repurchase attention X of to and for share. matters In average

As available for remain shares X.X of the authorization. under company's XX, current million March repurchase

both and an of be guidance. priorities, will dividends global moderate the to we important expect to production our environment a to paying by inflation although Composites, priority. term to U.S. this we housing balance will down industrial the about is with future cash shareholders. Paroc continues As stock growth. XXXX, million, increased consensus our expect for consistent EBIT In and In starts headwind with mechanisms grow to a company be loan $XX expectations The repurchases capital deployment returning flow, free

the second demand last guidance remodeling historical of corporate provided and U.S. additional For in more with we about price any year call. we this another business. the averages offset than in Insulation, at actions on new expect full-year growth. quarter construction. growth Similar will to EBIT million, excludes would of good residential the Roofing, which Storm $XXX be In growth benefit expect market year,

Now financial please provide guidance where on I for turn the slide year. XX, items to other

rate we has better flow ratio adjusted free of earnings, improved In call, of our year translated quarter's working and cash last and in on of flow performance another conversion into advantaged free discussed about years. strong a tax strong cash XXXX, capital a excess of recent expect XXX%. conversion to earnings in position As XXX%

be the about in be million additions began expenses will expect to This about Paroc $XXX $XXX related We of includes a $XXX Capital to corporate to is between primarily of that and fourth million. line in CapEx million quarter related $XX acquisition, XXXX. construction which new the Poland million.

expected million million. to Interest available XXXX. is and be expense We $XXX is and about Depreciation million. expect $XXX to be in expense be new expected $XXX this to capacity between amortization

to carry-forwards expect our NOL, some with tax We offset will along taxes that other come. U.S. cash and significantly credits time for

of credits result our we tax earnings. initiatives, XXXX cash foreign a be rate to As of pre-tax expect to tax XX% other our adjusted NOL, and planning XX% tax

corporate XXXX six-point Our earnings, of to With the a effective be as Thierry result that, is in XX% tax question-and-answer us rate session. expected which the year the over U.S. to turn pre-tax Thierry? adjusted reform. of prior reduction I'll lead to to call XX% a tax is from

Thierry J. Denis

Q&A we're to you, Michael. Thank now the session. begin Brian, ready

Operator

All right.

will begin We the session. now question-and-answer

go of first Lovallo Bank today ahead. John from comes Our America. question with Please

John Lovallo

to at I full in stay – today's offset you guess, a and my question. pricing soon second if quarter? you the was expecting levels, inflation, Thank taking freight material terms as material were with raw if are of inflation guys. Hey to for things stay as

Michael H. Thaman

going each different be three it's to Obviously, Mike. it's John, morning, businesses. the Good of for

So inflation, as seeing in the already of but in inflation Insulation, inflation. we've challenges, through we talk price excess well we're obviously

the basis, from In already is we on saying guidance. we're realized incremental really, this already our had seen quarterly inflation improvement guided didn't $XX of of gave realized We we've had the think, price. in upgraded there said $XX amount we've we'll time see the when full-year the of of of guidance we we the already about $XX offset price an we to of improvement that EBIT call, million last we a estimate we've have So million call our business $XXX inflation from for realized. because today million million to about move on Insulation previously the price,

to So announced that price think then ahead as that's that's additional through on the rates expectation and expectation go inflation $XX the and In would price. got and obviously, one year. currently we our think we get target by inflation. today up us in increase, been back back to million of wouldn't get go the obviously, one recover would we our Insulation didn't the Roofing, eaten likely recover what quarter in imminent, was current not we any margin has beyond additional most we a May our have margin year-to-go which basis. It inflation is incremental full-year of the as it And some said we the additional opportunity first get

in that first we would quarter. we'd top we up caught But get of expect so good to the rates really the comments, increase pricing Composites, that higher we said margin have Michael inflation, I some a the additional is his basis we've that and on Roofing, on little a so increase. Most in of to a bit our that do would much the action inflation May terms it, a May expect would the get So increase margin execution. headwind some execution limited for year-to-go less to that be opportunity they back North seeing coming comments right with price, we of we're out we inflation business. We In rates need think global – in of bit inflation of target with that's margin realization Composites probably got good is the lost in summer given, of some said ahead seeing through that of get the my in the of in the get guidance but American the as petroleum-based. inflation to overcoming probably now because we're a for and challenges, is

Operator

with comes Please ahead go Our next Bouley Matthew question Barclays. from

Matthew Bouley

not wanted in I possible guess, Insulation in it is taking the to I that Understanding what specifically, what guidance, the for us outlined the but segment? where on you the question. Thank increase, – guess, to would you. that? of Hi. a that for be if is in you're for that my May. kind potential outline, price you've follow-up of what help Thank scenario could Just you gauge, including upside successful kind I

Michael H. Thaman

a you in can by what Sure. little Maybe bit I looking first just the happened quarter. at help

were last end call, guess, So January increase beginning probably the our of increase March. then mid-February, were the had, when I lines the that we announced product on on impact that the to an we for was we of one just time, see at and of

impact So we've to realization had, full what the had days, we of about January had also additional some not in increase of in probably which a increase March good the we last seeing information get additional the the XX as that the I March January as we got ability realization the would in original our say and guidance. the estimates included well mix that the our from is of upgrade to increase, increase.

of you you year, get still increase got being don't year, together the us you year, as early Obviously, the two full-year. full-year the those impact into May in of but get in as for million So realized $XX about the later those. the another relatively get later price

So we reluctant amount full-year, of the to increase to think but a a could realization that to numbers material for impact good increase. of a get be I'd we guide would to have specific price related May the really

Operator

ahead. Please question next KeyBanc. Ken with go Zener comes from The

Kenneth R. Zener

Gentlemen.

Michael H. Thaman

Good morning, Ken.

Kenneth R. Zener

to might understand that we're year therefore you are of trying expected, current of but where think year, just look get. price at transportation, remainder any – might next didn't eat remainder the because asphalt, really be versus (XX:XX:XX), price the obviously, up for So way your – we the would if exposed costs the the further to of I unfold this market price we gains incremental you how the current

question. First

Michael H. Thaman

Sure.

think take we a first me inflation then to and little that. on to think it costs be quarter-on-quarter terms of worst would year Couple start probably that talk of some are Let is Insulation. with of in see transportation and I'll inflation in through One that the about to the Roofing that costs. bit logistics Roofing, half second last did inclined we we the quarter. reasons in first In

So manage we've year. the that we're actions half elevated expect effectively. in taken we numbers freight more would going costs of the But thing a second in more comp is first to to quarter little number a against of the second the our bit

one was do of in able bit we the quarter think little a thing significantly, I were inventory. to build

service running low were prior on facilities I around the right think between with deployed customers. heard at some shorten actually calls that service associated our levels we incurring requirements our needs meet customers. be our very By responsive supply to lanes order product us across still shipping of moving about you the talk the we'll some be of inventory chain, inventories in were and of fact getting and able costs to to the

get think I'd our the other help to thing to this say quarter, with with the kind with of our in customers high in seeing we manage very, the very And second the Late was rates. those we half shipments associated in to get done probably maybe us were cost. we've shipments. proactive quarter I in those actually quarter. delayed work more volume and have of first we'll gotten is decline that freight trying shipped them we

about talk today, we freight, seeing very, they've for cases, us all directly expensive to them. in the what what think makes of their where request causes cases, for some customer I the to ship a it on current date a And got delayed and we're demand. previously we'll consumer very in So if if those sense shipment inventory were cover working to makes sense

going place terms to spend. are think we've that expectations help in management got around what inflation probably actions realistic some basis. are see we expect a our our us think overall I freight to And remainder manage I So year of in on

I on about that's remarks, we think, is pretty for to about Obviously, So about the times Roofing the now increase I May very May prepared our us couple to – talked, why the the rate in inflation. in the track. a getting ability margin increase. feel back critical mean, good cover we've

Operator

Please Credit Good Suisse. Maklari Thank Securities Credit go ahead. from - Susan comes Next morning. Suisse with question (USA) you. Susan LLC Maklari

Michael H. Thaman

(USA) gotten what color give us pricing seeing maybe Susan. a like geographic a Susan of competition? sounds Composites, about that little harder But - that any just for back you like of are to Securities you understand has the more business on that seeing can pricing in And global think had in power, terms you you get as Going LLC globally? while, you're there. It terms that the little changed Credit all? better sounds I it at Maklari I differences a for guess, Suisse morning, Good to it's

Michael C. McMurray

years, an Thanks, really made Yeah. a kind four mean, both from has five the if or this it's what the with we're business commercial also materials. Michael. over a competing say, I first I'd material and operational maybe remind look, business with is you I'd and last maybe pleased back of Susan, progress foremost, and other look perspective. you the that's that

the to has competing we take to that different materials with. that And responsive so be any pricing we're

that that correctly. thing material other $XXX and in you to me business period, about actually if price about my portion contracts. you to this XXXX, went the backwards both roughly the million serves Last is XXXX I'd of margin I'd year, subject over of is tune mix. The improvement also to remind we $XX annual that made million, remind a memory

I it as are we're experiencing overall global well. make As Utilization just first we so no up to this XXXX – as to XXXX difficult Indian inflation the other offset other material experiencing price that the macro in a comp move into rates later and see given doubt, experiencing, we we to or that's But our excuse good us me. that and than growth are make we year, we wind producers and given wind price And competitors actually very high, some progress, the inflation demand, going weakness is that about, going in positive good. quarter not Indian that think spoke year further remain at market we're – well the look inflation. strong progress sets price

Operator

Next ahead. Please with Associates. Rednor question & Zelman comes Scott from go

Scott Rednor

morning. Good could to Insulation hoping just speak Hi. was volume. I guys you the

that and is puts shake strong fair the the fairly balance that amount XQ there's think out, know on But and some was quarter takes of last a I year. number. there a recognizing would confusion over I where of

through think kind we how should that? could just you walk of about Mike, maybe, So

Michael H. Thaman

I share the thanks here a a to was spot phase volume. a Scott, bright the we in said where disproportionate tightness, the We've us to remarks, Yes, industry marginal would get in industry. quarter the going were for of for question. prepared growth my thesis the for in a enter is had business, due we which

tightness in like the issues, manufacturing think production of towards from capacity. quarter And capacity benefited some to some first competitors cases, our come – Corning. And A unanticipated. what capacity couple had caused the of number that's a was felt I volume we that chain additional to Owens and there supply our network that so quarter us. first our was in

quarter our into was expectations positive So the and above coming quarter. volume first the a probably

in have on we're business basis, As noted growth. headwind On to the our represented a so the a of less volume of for do our a our remainder year, retail little going go-forward basis, to you that'll mix market a some in go-forward mix in some bit we be share. be and a

new the we construction up think growth will additional side. in some I the residential pick and

So on muted a volume is still balance, to going how a we growth. of on view have much drive bit

certainly going pounds because of available more was in would will be terms certainly the demand housing. first But I pace in than more business to of than think of fourth there rate cause year is this half. by the that's second last demand the and that works what how we seasonality very pounds second, of increase there seasonality and and half year, available be just in impacted the the expect to in very, the quarter third of the

we've So could to we And Corning we think continue expect our We improved certainly position. because margins underpinning drive growth industry have that supply if growth it Owens towards overall and very most of back our would anticipate prices good where get still work that prices that were levels. Insulation previous to given get in decade below taken to the ago acceptable this outlook we've the Even got were a actions to year, they would with positive come good still of are pricing opportunity to we to to outlook back cycle. volumes and and they see them business. to supports try strong we our do the where

Operator

ahead. from Michael Nomura Next Instinet. go comes Wood question Please with

Michael Wood

whether Thank it where Hi. taking in not during And up speaking, fire that plants, price restarted. the ask terms and your plant generally time? that restart you. was competitors Thanks to attempts does market, or mothball Wanted suffered stance that my for Louisville about just the had end industry that of when how question. impacting

Michael H. Thaman

Mike, thanks. Yeah.

competitors' that to Our result what's the industry with I but specific a capacity, fact tightness the our that that, production facilities us was in who directly to you're in in and Louisville. did and obviously, were customers we we from going understanding first our there is of discussing, issues line for, product the competitors' comment which want coming of don't industry see as were some heard quarter facilities, on of looking particular,

be for and particular, in of Louisville competitors the into anticipate very of Corning most to this both rearview produce Owens That's year to product mirror cycles the certainly outlook, year. be Corning Even that's – tight remainder of we that's for year. the Our and currently the is for that for the given the for the outlook reality fade we for remainder Owens remainder of of those we the year. and anticipate anticipate going extended that a that the well the line actually going probably is market year the on

growing levels utilization. when capacity, it's happens everyone's Your question bring market about operating where at on what a competitors high of

demand to in into the market capacity brought So that's being growth. the has been service brought

that a event. natural pretty think we So that's

per an year to growing X% demand need If to meet new you going lines you're or at growth. that that's year, two industry X% or per one have

the is capacity that to perfectly logical outlook. that So kind relative fact seeing the of we're come in demand

we've a seen price year-to-date obviously, good on basis. performance So

pricing think, year. we've confidence good on able have to in the through and additional of point and, be I We have view an get optimistic should pricing bullish the we the attained already

Operator

comes question ahead. with East Next Stephen Fargo. from Please Wells go

Stephen East

bear year. just us, sort to likelihood you Mike, you Mike. Obviously, magnitudes. you what rest could in through the of morning, both if Good of as might market sort numbers move looking for Insulation could and handicap price handicap but maybe Insulation, more we has you. think this able and the maybe of potential both at Thank Roofing the hikes of be

Michael H. Thaman

of give us I'd given couple obviously markets. that our for you benchmarks nature to to kind against. a it's give benchmark of difficult competitive I mean outlook the

the up marketplace as competitively of the one is is prices of of March Roofing first That pricing increase. result the baked the moving market. where are terms we kind So quarter into in in a price already in

increase, been well I Owens announced As increase is said, there still Corning. would, below that We have price a May levels. prices are that's even Roofing that by with XXXX

saw period. not to able were time slowly deflation. that in came period than our deflation, saw what period – shingle we oil improve for the a we're came where down margins time So of we They so bit we during more of during prices down terms a of oil

last of that environment the in were offset inflect in demonstrated certainly get that's of the price oil not is a to this oil for We in That's we're inflation. been certainly we've history. seen up. we Now market not price and back that year. to any oil able But year seen to going is pricing view rising recent getting our level impact

shingles where today So as recently seen as of good we've XXXX, more that they time. growth and expensive market than of period were during are the

a valuable As in well XXXX that's I peaks, In we're we're product. so real below. terms. terms nominal still It's below said on very side, the well well, Insulation

level see an is impact that somehow the in the don't on that's So I pricing our that's demand a price on has outlook there product. for

Stephen East

you. All right. That's helpful. Thank

Michael H. Thaman

you. Thank

Operator

Please Stephen Kim go ISI. ahead. Next question Evercore with from comes

Stephen Kim

make try Yeah. on to we're respect Roofing the crystal Thanks sure wanted I very that to much saying guys. clear to with guidance. just margin you're what

to could all you bring successful you're realization that the You other May that the because bring with be clear didn't long-term increase had was guidance as of or I consistent asphalt million about or margins increase, and XQ. consistent then rest specifically think basically want transport. that your May for margins as think you transportation were a also that said costs increase to that asphalt this quarter But that something long-term part able $X you talking inputs you be guidance even I about that saying May And soon mentioned to that some year. with a Since you mention inputs expected offset year. headwind not of your this as in you would

talking transport, covering were category. but I just want just so of the you sure all this not and to that other or about make asphalt And those

Michael H. Thaman

and kind a little question. Okay. Thank you, around your margins of reconcile Stephen. bit to me get then just let Well,

Q were So What $XX costs first million, was disclosed million improvement those million to logistics, two is margins the input XX%. and and our quarter which so $XX in our three price points inflation we in net is about the sales. from of $XX of of

in consistent I would So a XX% We pretty had touch mix performance what we've really have little the closer and think we're years fourth. kind XX%, and type and bit typically because without in third quarter tail we producing in of where geographic below then then quarter to tend been the the little that of that to that inflation a a margin margin good get some mix, more channel business we in off normalized bit which have when it reasons just seen first able second cover been other the number with is start we to better historically margin. the and a

And we're result with, $XX million obviously, on increase in first out quarterly quarter of say the of a is what only price second bit on trying So we're inflation. would of up saw as I the as margin to a million of second would the little year, May round half coming get What inflation into in numbers, of three behind we points of the caught inflation. doing terms obviously, in of the then probably of half we $XX get see year. we of the

bump should another unless get better little prices. a bit up oil comps the see we in So

the of inflation added inflation. the to cost question, cost versus input nuance You asphalt

of reading million InterWrap that we remaining of to on cost. we as all a have – So inflation it sizable of and of $XX acquisition see which fairly $XX read cost seen we've polypropylene. which I'm that would The we $X sorry, Polypropylene, careful if comes part our – inflation, of of input attributed you million a off a our $XX had million we asphalt attribute of Q, business is as now million, oil-based underlayment also feedstock. you

included is $X portion how the significant price we That of terms a that our in would million in come So remaining have with of in pricing different so polypropylene. outlook, we arrangements would underlayment capture underlayment then we're that business also contracted that our of market, some allow have but in things moving clauses us other prices the to escalator market and and cost.

productivity. cost through we're So able handle we through to is pricing feel There input good some that Typically, non-oil-related inflation. or about that.

job Our every manufacturing wonderful team down single year. driving cost of does a

on that can get deeply to too cost view back grinding as the is get the guidance asphalt offset logistics, with into – would our the the increase numbers, of of price margins. impact getting I business consistent enough consistent long-term guidance and with our us without inflation can – we for to get inflation to So we says which enough broad margins that point think,

Operator

Next Eisner question Goldman Sam ahead. Please from Sachs. comes with go

Samuel H. Eisner

and Yeah. Thanks guys. much morning so

Michael H. Thaman

Sam. Morning,

Samuel H. Eisner

how a to got the you $XX that follow-up guess, based question long-term for then the little quick you one. headwinds for or a secondarily, Are XX% are about we million on when XX% I cited two-part saying on recent inflation the the report in you Day? level number the that that of a about most first quarter, just that So entirety think the then you I XXXX? of used think overall be on this margins should would Analyst answer. because And confused

Michael H. Thaman

Okay.

set if business that's are the target coming for. what the quarter what years we delivered this of many for or we last quarter first on guidance at of year. performance, have three about you'd looking history. performance I long-term the we we at margins. points bit Certainly, where was our year, in margin first margin a being That's you where the terms our said would the XX% commentary about So Day, see below what My for the that's based business guidance we off think history, is margin into is of expectations XX% And of in that delivered that. look Investor

Now typically the from shape margin lag of in anomaly view, year. a margin first a expectation an point From rate quarter – that that from inflation quarter then of is and the first point bit business typically a first the our the last but through a was we a of in on of quarter, curve, rate view volume the view, good. year of is point bit general because the of improve pretty

margin rates have would a we so that that it's get set. to to back going it basis. to we type Obviously, So going year-to-go quickly, in that and pricing to expect target to happen XX% quarter that, third do for order have that would the move do that would in happen to we've we're here on relatively to second

come points first in XX%. or three then we're five quarter. back So What are wouldn't the year-to-go focused getting just missing basis, missing of were we've XX% of the if obviously closer we points a said getting be on margin to from on though we're margin quarter quarter we the is second margins first and we the back to margins recapture in and them

cetera, is margins out in that and action on need back do that. to we're which in XX%-type we need focus all be achieve and to margin of is to to not year-to-go able order getting sufficient et going get probably to there during to XX%. get to conditions order It'll very basis, of volumes, a that our on target, achievable. we're year. certainly, to this market or But back depend Probably done think whether May summer this to that So May of would target another get not be coming then that above full-year to is pricing able

Operator

comes Research. question ahead. Please Next Garik from Shmois with go Longbow

Garik S. Shmois

thanks. Yeah,

Just a follow-up on point. that last

storm second future difficult down assuming comparisons Roofing year, normal and Just wondering, pricing in single-digit, actions? second let's high the the confidence Roofing be in is in say, very of given just that your a going support you've half, pricing, low-teens, strong are volumes getting got year, to to the further half in enough market the

Michael H. Thaman

I mean, obviously, we Yeah, it is. believe

materials, have it ago lot years different than about think inflation mean, conversation a a today living I I'm the materials. materials they in about these there's market. across and Roofing, an the I of are talking pricing all inflationary distributors what talking moving most markedly who using the been make I'm sets the two to through is not building market in are of would buying in building the and environment reselling living, are sure skill make and order that their

So well. they they see manage to incentive have inflation to that an want

inflation. We that very going have are communicate that on go to have able incentive manage inflation an are where we to non-material openly to so too. think they related prices They other

some margin of that then cover or opportunity pricing experiencing. on the advanced from their margins sustain they So the to using their moving are try they products to margins their comes to inflation sell and improve that

expectations I So manufacturer think, out distributors in well environment, and that generally thought inflationary do provided well, an customer. the between our are

is make the to goals So is business not, we're the business in I how our the of the in the we that achieve our do downstream manage in And with one customers. goals environment are market way, conversation conflict some seeing inflation market goals. think we our sure where

some hope that the environment really pricing hold. comparable So we if able volumes half second then we've get like begin here to in for a And we basis, quarter. good anybody, in would second deflationary we'll not were demonstrated to done in March feel a the that to would that even so decline that on is

Operator

The go ahead. Keith SunTrust. question with next Hughes Please from comes

Keith Hughes

guess, but with volumes? I'm seen and us Insulation, here, down of in demand sure has weather give indication role April, – played either, you Yes, you've Roofing kind or inflection an Insulation. I Roofing in within up in any if terms some could or of just if

Michael H. Thaman

the volumes. think that mean, goes our would in inventory. good I I we into is Roofing question. it's order typically, don't that product necessarily a see quarter, first a in it Keith,

So about market market. to and feel of a a start In a weather because customers our the to of lot slow got northern about had sell-through they talk here. up the to how get we part the country, for those we feel a the bad lot try

of bit has has a so storm of The last versus was You've last got very the been year, southwest weaker year. a the some strong regional differences little it's bit based Florida been because comping carryover so weaker demand, it on strong. little very

things. we say see of regional some associated So I would specific with differences kind

been On side, Insulation very, been for the market's soon as it's our asking as product it. tight, we very really customers can the the so ship

feel So Inventories channel. I have there as that's a for tight out don't like inventory in the we been have much pretty us manufacturer.

paces a so now. result, And we're is think market I demand the right as is what demand what that seeing

Operator

The RBC Please comes Michael question Capital with next Markets. ahead. from Eisen go

Michael Eisen

that hoping Corning. second could guys about and was I gentlemen. to take morning, Paroc talk a Good Pittsburgh you

there? those in came relative to results end expectations? see demand the how outlook wanted And market anticipated. And the integration that your think for is businesses better were just I I the your process from initial than is to going how had

Michael C. McMurray

Sure. This Michael. is

first low quarter start the very both I'll maybe are integrating high then results. But go So acquisitions very, and around specifically I'll well.

bit which is we're going than highlighted probably within sooner Pittsburgh little last that So deal. so we that's going which markets originally a closed that February, air expected business Corning an had off year, markets, closed activities advanced middle in of where with coming the Corning, one line even and we we anticipated well. start. see actually bit on end growth growth. acquisition bit but Pittsburgh say our of obviously, of or is are expectation actually when demand LNG, broadly in Obviously, we the – are a with through closed on better, I'd we to we quite key pocket, in growth strong is case seeing line on a integration Paroc, we expectations, a broadly the so the early

$XX businesses Specifically, EBIT, have our may seasonality North not acquisitions million delivered to similar below about At you high million of expectations. mistaken, tell the or American $X Insulation folks' quarter both to I a that itself, original which I'm if have business. been level,

Corning business has so But at will the why tracking again, an things a Pittsburgh results on little a that's particular a kind of then bit and little in bit bit case. business, a where low. quarter first maybe lumpy acquisitions high well in And industrial quarter-to-quarter. move above are around performing or were the And very level,

Operator

with ahead. Kathryn go from question Thompson Group. Thompson comes next Please Our Research

Kathryn Ingram Thompson

you. Thank

in follow-on in from contribution quick have quarter quarter a was the appreciated a acquisitions, that having Just to $X full – what's What to from in from question, million understanding your $XX don't acquisitions. impact Paroc, the EBIT you think understand, to quarter it's full the more included had important is million that portfolio. that contribution, dynamic then But businesses focus. for the versus finally, a the there I different these acquired top pricing it resi full And and quarter? realization been line for

versus that just how the differentiation Thank If you could in approached resi? on you. just is points few have pricing a market of

Michael H. Thaman

back it's is quarter. we're based transportation-based We're then Northern bit obviously, I'll and and inflation or to inflation have about Michael about that the primarily remind is, European talk you pricing a it like Kathryn, business. inflation, not seeing little talking challenges let we start Paroc dynamic, by turn kinds seeing and inflation. me a U.S. asphalt the the here I'd the over of primary there. to issues to

competitive of And an what three and Corning, say, I is being see similar, the market global very in it by dynamics. a business. would that, It's product a doing of quite and of a transportation set our it's product, so is range Roofing. in first our relative value through Roofing, I got been that Europe. truckload the for costs typical of outstanding say, than both would causes happy we've different margins owning volumes months So kind really in management job team with very, and we've the dynamics the business, technical managing in really the the there that's portion the significant less we Insulation product the cost seen $XX,XXX then business, has Northern would we've good determined in business. and Pittsburgh terms Insulation valuable is what and to much pricing the Insulation in And product a of European a a of the of goods or very where be to got

you get themes more So apply. These congested of on about valuable market. bottlenecked don't you get if products, or the out call the U.S. transportation that really talked we've

feel Roofing really today. we we're businesses ability our those some very challenges So that don't those the of addressing in to in price and good margin both and businesses manage our and in Insulation business about have

Michael C. McMurray

then... And

Operator

Oh, I'm sorry.

Michael C. McMurray

had Kathryn well. as going handle the Yeah. follow-on that And I then question was to

closed when to in full early gave acquisition for regards in So guidance year. the Paroc, we the February, we

and we million take revenue, $XXX Obviously, a million the $XXX going didn't it have own So of XX/XXths of we of EBIT. year for on to full EBITDA you're million $XX said to that, of because full basis, year.

as the And impact North dissimilar this earlier, business. so said – business in Insulation and is seasonality our to And not that's has I first largely American quarter. then all that

Operator

comes ahead. The go Please with next from question Jefferies. Ng Phil

Philip Ng

Hey, guys.

type It pricing. markets momentum But You're seen like been momentum. of are still a strong this Insulation it's pretty since the we've while seeing very on tight. sounds

us historically many market Thanks. the past? market seen how the So increases has tight price inflation, can a you in rising with in remind

Michael H. Thaman

then when the to that Sure, a was involved Yeah. that well way I all of And to was the time business I pretty per back of had and back couple a of of CFO we start kind typically into there that with really go of would on to spring. you opportunity an of increase an in an got the increase. year mid-summer, to kick potentially And middle increase the demand the would the peak in would be increases time. time, my period over I XXXX-XXXX third Phil. kind kind in going good then as early timeframe a year season, be year, period recollection of of was at go back of cadence that mean, so which I would that three is kind

needed say, significantly because Corning less get that back trough levels, believe had of maybe for we were gone that through we urgency to cycle. acceptable decade. view, I from the Owens more that prices had to last would through we So, guess, profitable we've point just an haven't to we the I gigantic

case, the past more demonstrated in think in because in Once on steeper I I it than has with of climb, the it gets different climb terms quickly. not probably have can pretty this our that's the business we think So, But to climb ability. what its climb. is been

Thierry J. Denis

we Hey, question Brian, offer remarks. this is room probably we looks before Thierry. closing have like, more It one some for

Operator

Okay.

today JPMorgan. with question from go final will be ahead. Please Michael Our Rehaut

Michael Jason Rehaut

you appreciate comments same somewhat EBIT to wire expectations. with guidance. the price just in get incremental said a Composites to time, inflation the back, sneaking does a But to of headwind opportunity you kind circle to reiteration be limited appear million of the little in improvement I that of there's of Mike, here. the guess, at North America, under the incremental the me to bit and a wanted $XX Thanks. I your about

$XX just wanted I around there you some cautionary remarks be improvement, million to to So, understand, that. kind – but the reiterated seems of

what are that just If the to we kind veering you're little So, us below that help downside if indeed quantify closer of could something towards million bit what? to $XX kind kind of you of to $XX it's million? maybe a or is $XX million, think

Michael C. McMurray

to Hey, happy question. take Mike, I'm Michael, it's the

no it's inflation maybe is we the impact anticipated. related all mean, out. predominantly get either signaled a than that call confident second it seeing But can the growth we on point that North higher Obviously, truck of and so in reasonably bit Insulation, it point done. is to half, we're but we substantially earnings as a is the overall wanted in was or material. headwind, than comes Composites in on that not a I the Roofing of today, would America, and And transportation. to predominantly that of doubt value I So, the that's bit so Composites we that a out the little are higher we

bit we're comp difficult the gets half easier. coming off second comp first quarter. from Obviously, The a the

it year had the last got actually in third credit well. second the also in quarter soft the in of of event, the We event then And half last year. as

the feel of did don't guidance, we a want about introduce to it's but material. pretty caution, So little but good I think bit we

Operator

Thierry With that, back will to closing our This over Denis remarks. turn session. like conference any conclude the I'd to question-and-answer for

Thierry J. Denis

actually, Very offer for Thaman good. Well, closing remarks. some thank today's you, call. everyone, will for Mike joining us And

Michael H. Thaman

positions. price, think that where great Thierry. have And quarter. headwinds are, Okay. the businesses disturbed had in directly really some thought think importantly, that have changed of that a some recover financial we quarter Most to where we our how very margin little so our experienced, bit a have addressed that given also to we've and ability Obviously, a fundamentals of bit issues industries due of in we business. managing know we'd so quarter. the is produce we given terms great and we market results, was ability expectations rates, we quarter had we the noisier than we inflation timing costs the in be in power the our in hoped this little believe Thank We unexpected back the those to and you, pricing first our go it we the we're issue logistics

guidance that than weaker full little the haven't go we really and first any despite as off year, the will our for moved quarter substantive We the fact points was improve of the bit expected. year a we of through we

And really fact really for industries us. the forward you we're great the the financials first driven the on that by through results showing continues outstanding and confidence the with our second, outstanding quarter second of to and year. joining looking we to in delivering looking and we're performance businesses, the So, Thanks for positions. third better market talking out forward accelerating have great that's another come call. in fourth fundamentally of We remainder quarter improved And that unabated, forward look the year. to again and seeing really

Operator

very now The much presentation. you conference attending has for concluded. Thank today's

disconnect may your You lines. now

Owens Corning (OC) 25 Apr 182018 Q1 Earnings call transcript