USG Corporation (USG)
Q3 2010 Earnings Call Transcript
October 20, 2010 11:00 am ET
Brian Moore – Director, IR
Bill Foote – Chairman and CEO
Jim Metcalf – President and COO
Rick Fleming – EVP and CFO
Dan Oppenheim – Credit Suisse
Michael Rehaut – J.P. Morgan
Jamie Baskin – Thompson Research Group
Joshua Pollard – Goldman Sachs
Josh Borstein – Longbow Research
Dennis McGill – Zelman & Associates
Jack Kasprzak – BB&T
Jim Barrett – CL King & Associates
Mark Weintraub – Buckingham Research
Bob Wetenhall – RBC Capital Markets
Previous Statements by USG
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Good morning, and welcome to USG Corporation third quarter 2010 earnings conference call and live webcast. We will be using a slide presentation in conjunction with our call today. It is available by going to the investor information section of our Web site, www.usg.com, and clicking on the link to the webcast.
Before we proceed, let me remind you that certain statements in this conference call may be forward-looking statements under Securities laws. These statements are made on the basis of management's current views and assumptions about business, market, and other conditions, and management undertakes no obligation to update these statements. The statements are also subject to a number of factors, including those listed at the end of today's press release, and actual results may be different from our current expectations.
With me today to discuss our results and our outlook are Bill Foote, USG's chairman and CEO; Jim Metcalf, president and COO; and, Rick Fleming, executive vice president and CFO.
First, Bill will comment on market conditions and the outlook for our businesses. Jim will follow with comments on how our operating units are performing. Rick will conclude with some additional comments on our results and discuss how we are managing our balance sheet and liquidity. We will then open up the call for questions and conclude with a few comments from Bill.
We would like to ensure that everyone has an opportunity to ask questions. So when we get to the Q&A session, callers are asked to limit themselves to one question and one follow-up. Bill?
Thank you, Brian. Good morning, everyone. Thank you for joining us on the call today. As always, we truly appreciate your interest and support of USG. I'd like to cover three topics this morning. I'll start with a discussion of our operating performance in the quarter. I will then describe a real highlight of the quarter, the successful rollout lightweight wallboard product, Sheetrock UltraLight. And conclude with some thoughts about the near-term and longer term prospects for our key market segments in the company.
First, our operating performance, market conditions remain very weak in the third quarter. On previous calls, we've talked about new residential construction, commercial construction R&R, and how far those segments have declined in recent years and it's truly dramatic how far they have fallen. In most cases, they're – in all cases, they're not just well below their peaks. But they are significantly below long-term averages. The good news is we reduced our operating loss since third quarter this year, compared to last year. We were able to do that despite our defense that almost all product lines. Jim and Rick will cover these results in more detail in a few minutes.
Speaking of the markets, commercial construction – I'll start with the worse and get to the better news. New commercial construction continues to decline, but with a slower rate. The residential construction appears to be – to have stabilized. And the repair and remodel market is showing modest improvement, but has certainly not returned to normalized levels. I'll come back to that in a few minutes and talk more about our outlook.
For now, the point I'd like to make is the effectiveness of our actions during this recession can be seen in our operating results. Our efforts to scale our capacity and reduce costs, our efforts too in pricing, our focus on specific market segments, and other initiatives have all contributed to a reduced operating loss despite lower shipping levels in almost all product lines. In a weak and uncertain market, we're succeeding and effectively controlling the variables within our control. And we feel very good about that.
As we have managed through the great recession, we've continued to keep one eye in the future with important strategic initiatives that help solidify USG's position as a market leader. Innovation is a core value at USG. And it's always been a contributor to our leadership success today as much as always.
In the third quarter, we began the market rollout of our revolutionary new wallboard product Sheetrock Brand UltraLight panels. This is a new half-inch wallboard product that retains the key performance characteristics of our standard Sheetrock Brand panels, but is much lighter and easier to handle. In fact, the new UltraLight panels are up to 30% lighter than competitive products.
Market reaction to the new product has been terrific. We are hearing from customers who are achieving significant productivity improvements as a result of working with the lighter weight product. Others thank us for reducing the fatigue their crews experience every day.