USG Corporation (USG)

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Q4 2011 Earnings Call

February 06, 2012 11:00 am ET


Ken Banas -

James S. Metcalf - Chairman of the Board, Chief Executive Officer and President

Richard H. Fleming - Chief Financial Officer and Executive Vice President


Jason A. Marcus - JP Morgan Chase & Co, Research Division

Kathryn I. Thompson - Thompson Research Group, LLC.

James Barrett - CL King & Associates, Inc.

Daniel Oppenheim - Crédit Suisse AG, Research Division

Garik S. Shmois - Longbow Research LLC

Joshua Pollard - Goldman Sachs Group Inc., Research Division

Trey Grooms - Stephens Inc., Research Division

Robert C. Wetenhall - RBC Capital Markets, LLC, Research Division

Dennis McGill - Zelman & Associates, Research Division

John F. Kasprzak - BB&T Capital Markets, Research Division

Mark A. Weintraub - Buckingham Research Group, Inc.

L. Todd Vencil - Sterne Agee & Leach Inc., Research Division



Welcome to the USG Corporation Fourth Quarter 2011 Earnings Conference Call. My name is Sandra, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Mr. Ken Banas. Mr. Banas, you may begin.

Ken Banas

Thank you. Good morning, and welcome to USG Corporation's Fourth Quarter 2011 Earnings Conference Call and Live Webcast. We'll be using a slide presentation in conjunction with our call today. It is available by going to the Investor information section of our website,, 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 of our 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 the 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, Chairman, President and Chief Executive Officer; and Rick Fleming, Executive Vice President and Chief Financial Officer. 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 and the year for the corporation and the business segments. We'll then open the call for questions and conclude with a few comments from Jim. 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.


James S. Metcalf

Thank you, Ken, and good morning. Thank you for joining us, and we appreciate your interest in USG. Today, what I'd like to do is frame my remarks in the context of our strategic plan which are 3 areas: strengthening our core business, which is North American manufacturing and distribution; diversify our earnings through targeted international investments and growth through adjacent products; and third is differentiate through innovation.

As we look into 2012, we continue to see a soft market in the United States. Even with no expected help from overall demand, our #1 objective is to achieve operating profit as soon as possible. Our management team and talented professionals are aligned and very focused on that target.

Now what I'd like to do is expand on our 3-part strategy of strengthen, diversify and differentiate. First, strengthening the core. Throughout this breathtaking recession, we've been extremely focused and quite frankly, we've been spending the majority of our time and efforts here. Our core businesses in North America of wallboard, ceilings and distribution have the largest impact on our financial results. We have implemented numerous initiatives with a keen focus on safety, customers and quality. Our objective has been to significantly lower our breakeven by closing inefficient manufacturing facilities and distribution branches to position USG stronger as we exit this recession.

Strengthening the core is not just about cost reduction; it's becoming more efficient and squeezing value from our assets. For example, our Lean Six Sigma initiative has improved efficiencies at our industry-best manufacturing plants, even with these historically low capacity utilizations. We are committed to our position as the North American leader in building products, manufacturing and distribution. We believe that the actions we've taken and we're going to continue to implement will strengthen these core businesses and have a major impact on our objective of operating profit.

Our second objective is to diversify our earnings. While this recession may be unprecedented for all 3 of our major customer segments to collapse, our goal is to, if not eliminate, but smooth out the cyclicality of our business. To diversify earnings, we're working on 2 fronts: international growth and adjacent businesses. We are focusing on select international markets with attractive growth opportunities. These are markets that we will capitalize on our excellent reputation and brand of USG.

A great example of this is our business in Mexico. Our leading market position and critical mass have enabled USG Mexico to have a successful 2011, with exciting opportunities in 2012. With a solid foundation in place, we will be rolling out our newest innovation in Mexico, SHEETROCK Brand UltraLight Panels, this year. As we look ahead, China and India provide growth opportunities for us. We already have a successful ceiling tile joint venture in Beijing, and we plan on building our customer relationships and strong brands in the Far East.

We also see an opportunity to diversify our earnings through product adjacencies. An early success has been our entry into the commercial roofing business with SECUROCK roof board. This adjacent business capitalizes on our industry-leading innovation in gypsum fiber and products like FIBEROCK underlayment. Having early customer acceptance we are now moving ahead, growing our business in the adjacent commercial roofing system. What we've done is we've reallocated our resources using our weed-and-feed approach, and we are currently embarking on a 30-city product roadshow with architects and contractors as we speak.

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