Q2 2011 Earnings Call
July 22, 2011 11:00 am ET
Brian Moore - President and CEO
Richard Fleming - Chief Financial Officer and Executive Vice President
James Metcalf - Chief Executive Officer, President and Director
William Kelley - Principal Accounting Officer, Vice President and Controller
Daniel Oppenheim - Crédit Suisse AG
Rodny Nacier - KeyBanc Capital Markets Inc.
B.G. Dickey - Stephens Inc.
Angela Uttaro - Oppenheimer Funds
Kathryn Thompson - Thompson Research Group, LLC.
Michael Rehaut - JP Morgan Chase & Co
James Barrett - CL King & Associates, Inc.
Robert Wetenhall - RBC Capital Markets, LLC
Joshua Borstein - Longbow Research LLC
Ivan Marcuse - Northcoast Research
Joshua Pollard - Goldman Sachs Group Inc.
John Baugh - Stifel, Nicolaus & Co., Inc.
Mark Weintraub - Buckingham Research Group, Inc.
Previous Statements by USG
» USG's CEO Discusses Q1 2011 Results - Earnings Call Transcript
» USG's CEO Discusses Q4 2010 Results - Earnings Call Transcript
» USG Corporation Q2 2010 Earnings Conference Call Transcript
Thank you. Good morning, and welcome to USG Corporation's second quarter 2011 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 Relations Section of our website, 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 another -- 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 Jim Metcalf, President and CEO; and Rick Fleming, Executive Vice President and CFO.
Jim will provide a general overview of the quarter plus additional insight into some of our businesses. Rick will review the financial results for the quarter for the corporation and the business segments. We will then open up the call for questions and conclude with a few comments from Jim. Also present for the Q&A portion of the call is Bill Kelley, Vice President and Controller. Jim?
Thank you, Brian, and good morning. Thank you for joining us, and I appreciate your time and interest in USG. Last month, I had the opportunity to travel in various locations in North America to meet our employees. In every location I visited, our team exhibited a high degree of commitment and optimism about our company's long-term prospects. While it can be discouraging to battle through this very lengthy and severe market contraction the way we have, our employees can see that we are making progress.
Total sales for the second quarter for the corporation were relatively flat, down 1% versus last year, but the progress we continue to make can be seen in the fact that our operating loss was reduced by 16%. This is a significant improvement, especially when you consider that last year's second quarter included the benefit of the government housing tax credit. Regardless, it's still loss, and that's unacceptable to all of us. Our #1 focus continues to be our path to profitability.
As we manage through this recession, I can tell you that our employees are very aligned, and we are pursuing 3 strategic objectives: First, strengthening our core business. Next, diversifying the source of our earnings; and third, differentiating through product innovation. What I'd like to do is spend a couple of minutes and talk about each one of our objectives.
First, strengthening the core. Our core businesses, North American Manufacturing and Distribution are solid. They're all affected by the recession and low volume throughout our network. The actions we've taken, which you've heard in previous calls, is to streamline our operations, reduce our costs and eliminate functions that have strengthened all of our core products. Wallboard, Joint Treatment and Ceilings, as well as improving our Distribution business. These actions are producing tangible benefits right now on exceptionally low demand. We expect that those benefits and the performance of each one of these businesses will be amplified as demand improves, and we can realize the operating leverage in each one of the businesses.
Our second objective is diversifying earnings. One of the most unusual characteristics of this recession besides the severity of it and the duration is the fact that all of our U.S. market segments have declined roughly at the same time. It's been very unusual that residential, commercial and Repair and Remodel segments had been in recession simultaneously. These segments have historically been contracyclical, which have helped us to diversify our earnings in the past.
But this is not what we're dealing with in this recession, and it's had a significant impact on our results. Our plan is to further diversify our earnings, and doing it through international growth and new product adjacencies. We have successful operations outside the United States, including Canada, Mexico, and most recently, China. Unfortunately, these operations don't have the impact to counterbalance the downturn in the United States.
We are growing our joint ventures throughout the world and have technology agreements as examples of how we're going to add to our geographic diversity. We are also expanding in product adjacencies that further diversify our earnings. One example of this is commercial roofing. Our SECUROCK roofing product is relatively new, but has wonderful growth potential. This is one example of expanding a current product into a new growth segment for USG.