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Saturday, October 29, 2011

Wells Fargo's Weekly Economic & Financial Commentary - October 28, 2011

- Third-quarter GDP rose 2.5 percent, supported primarily by gains in consumer spending and business investment.

. Strong improvement in the consumption of healthcare services boosted consumer spending.

. Business investment rose 13.7 percent, driven by investment in equipment and new facilities.

- Personal incomes grew a slight 0.1 percent in September, with real disposable income declining by 0.1 percent.

. Even with the slow pace of income growth, consumers increased their spending for the month by 0.6 percent.

- Housing data this week continued to reflect the slow pace of recovery for the housing industry. The pace of recovery will continue to vary considerably by region.

- State and local spending cuts continued to detract from economic growth.

- We now expect GDP to grow 1.8 percent for the year, and the stronger end to 2011 means real GDP will likely grow 2.1 percent in 2012.

Eagle Materials Inc. [American Gypsum] Reports Second Quarter Resul

DALLAS--(BUSINESS WIRE)-- Eagle Materials Inc. (NYSE: EXP) today reported financial results for the second quarter of fiscal 2012 ended September 30, 2011. Notable items for the quarter include:
  • Revenues of $134.8 million
  • Cash flow from operations of $26.4 million
  • Net earnings of $6.0 million
  • Diluted earnings per share of $0.14
Revenues increased 2% from the prior year reflecting improved sales volumes across most of our business lines. Operating earnings were down 6% due primarily to higher raw material costs in our gypsum wallboard segment. Operating cash flow was strong during the quarter, further strengthening our financial position. Prior year's net earnings include approximately $2.5 million, or $0.06 per diluted share, of tax and interest benefits associated with the final assessment from the IRS related to their audit of the Republic asset acquisition in tax years 2001 through 2006.

Gypsum Wallboard and Paperboard
Gypsum Wallboard and Paperboard's second quarter operating earnings of $1.5 million were down 71% compared to the same quarter last year. Lower wallboard average net sales prices and higher raw material costs were the primary driver of the quarterly earnings decline.

Gypsum Wallboard and Paperboard revenues for the second quarter totaled $72.3 million, a 2% increase from the same quarter a year ago. The revenue increase reflects higher wallboard sales volumes and higher paperboard sales prices, offset by lower gypsum wallboard average net sales prices.

Gypsum Wallboard sales volume for the quarter of 403 million square feet (MMSF) represents a 2% increase from the same quarter last year. The average Paperboard net sales price this quarter was $524.20 per ton, 11% higher than the same quarter a year ago. Paperboard sales volumes for the quarter were 60,000 tons, 3% lower than the same quarter a year ago.

Owens Corning Reports Record Quarterly Results

Best Earnings Performance in the Company's History

  • Improved Third-Quarter EBIT and Revenue in All Three Businesses Versus 2010
  • Delivered 21-Percent EBIT Margins Year-to-Date in Roofing
  • Improved Performance in Insulation on Strong Execution
  • Grew Composites EBIT by 14 Percent Versus 2010

Owens Corning (NYSE: OC) today reported that consolidated net sales increased 22 percent to $1.5 billion in the third quarter of 2011, compared with $1.2 billion in the same period last year.
Third-quarter 2011 adjusted earnings, based on the company's expected full-year effective tax rate of 25 percent, were $110 million, or $0.90 per diluted share, compared with $44 million, or $0.35 per diluted share, during the same period last year.  Third-quarter 2011 net earnings were $124 million, or $1.01 per diluted share, compared with net earnings of $58 million, or $0.46 per diluted share, in the third quarter of 2010.  (See Tables 1, 2 and 3 for a discussion and reconciliation of these items.)

"Owens Corning delivered record earnings performance in the third quarter," said Chairman and Chief Executive Officer Mike Thaman.  "We continue to benefit from strong execution in an uncertain economy and a resilient portfolio of market-leading businesses."

Consolidated Third-Quarter 2011 Results
  • Owens Corning's primary safety metric improved by approximately 25 percent year-to-date over the company's full-year 2010 performance.  This positions the company for a tenth consecutive year of safety improvement.
  • Third-quarter earnings before interest and taxes (EBIT) was $177 million in 2011 compared with $69 million in the third quarter of 2010.  In 2010, the company had certain items that were not the result of current operations.  After adjusting for these items, Owens Corning's third-quarter 2010 EBIT was $90 million.  (See Table 2 for a reconciliation of these items.)
  • Gross margin as a percentage of net sales was 22 percent in the third quarter of 2011 compared with 20 percent in 2010.

Other Financial Items
  • The company maintains a strong balance sheet with ample liquidity.  The company refinanced its senior revolving credit facility in the quarter to extend its maturity to 2016 and reduce borrowing costs.  
  • The company has repurchased 4.0 million shares of its common stock year-to-date.  As of September 30, 2011, an additional 3.7 million shares remained available for repurchase.
  • Owens Corning's federal tax net operating loss carry-forward was $2.3 billion as of September 30, 2011.
  • At the end of the third quarter of 2011, excluding the impact of interest rate swaps, Owens Corning had total debt, less cash-on-hand of $1.96 billion, compared with $1.57 billion at the end of 2010.

Friday, October 21, 2011

Wells Fargo's Weekly Economic & Financial Commentary- October 21, 2011

- Leading indicators rose 0.2 percent in September and have risen 5.3 percent over the past three months, a pattern consistent with economic expansion, as both financial and production indicators contributed to the gain.

- The four-week moving average for jobless claims has declined for the past several weeks and now stands just above the 400,000 claim threshold.

- The Consumer Price Index rose 3.9 percent year-over-year during September, while the core CPI rose 2.0 percent.

- The 15.0 percent increase in housing starts in September was led by the multi-family segment, supporting our outlook that both nonresidential construction and apartments will contribute to growth moving forward.

. We expect housing starts to improve slowly and average 740,000 during 2012, compared to 610,000 this year.

- Existing home sales continue to place a drag on economic growth, as 30 percent of the homes sold in September were distressed properties, and 18 percent of the National Association of Realtors’ members reported a cancellation during the month.

Worthington Reports Q1 Fiscal 2012 Results

Worthington Reports First Quarter Fiscal 2012 Results

COLUMBUS, Ohio, September 28, 2011 – Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $602.4 million and net earnings of $25.7 million, or $0.35 per share, for its fiscal 2012 first quarter ended August 31, 2011. In last year’s first quarter, the Company reported net sales of $616.8 million and net earnings of $22.4 million, or $0.29 per share.

“We had a good first quarter in Steel Processing and excellent results from our ceiling grid system joint venture WAVE,” John P. McConnell, Chairman and CEO, said. “The year-over-year comparisons show strength in the areas where we have focused to improve our performance and lessen the volatility of earnings, particularly in Steel Processing. We expect to continue to perform well, barring further economic deterioration.” McConnell added, “The acquisition of the BernzOmatic product lines in Pressure Cylinders is positively contributing to that segment’s results as this business integrated quickly. We expect the Cylinders segment to stay focused on growing their market presence through new customers and additional acquisitions. We feel good about how Worthington Industries is positioned with our strong balance sheet and improved operations. However, the stalled economy, and the uncertainty surrounding it, has hindered a quicker and more robust recovery which has an impact on our customers.”

The comparison of the current quarter’s consolidated results to previous quarters is impacted by the following transactions: • Effective March 1, 2011, the Metal Framing business, including all of the related working capital and six of the 13 facilities, was contributed to a joint venture with ClarkWestern Building Systems. In exchange for the contributed assets, Worthington Industries received a 25% interest in the new joint venture, ClarkDietrich Building Systems (ClarkDietrich), as well as the assets of certain MISA Metals, Inc. (MMI) steel processing locations. Since that date, Worthington’s 25% portion of the results of ClarkDietrich are included in the equity in net income of unconsolidated affiliates line in the consolidated statement of earnings and the results of operations from the MMI assets have been included in Steel Processing.

Net sales for the first quarter ended August 31, 2011, were $602.4 million, down 2% from the comparable quarter in the prior year, when net sales were $616.8 million. The Steel Processing and Pressure Cylinders segments reported a 15% and a 24% increase in sales, respectively, aided by the MMI and Bernz acquisitions. These increases, however, were more than offset by the impact of the deconsolidation of the Company’s former metal framing and automotive body panels operations. Excluding the deconsolidated operations, net sales rose 18% from the prior year quarter primarily due to the acquisitions and higher average selling prices as the average cost of steel increased 16% over the comparable prior year quarter.

Operating income for the current quarter was $21.2 million, essentially flat versus the comparable quarter in the prior year. Operating income for the current quarter was adversely affected by restructuring and joint venture transaction expenses. During the current quarter, the transformation team began the diagnostic phase in the Pressure Cylinders segment, incurring $1.7 million of outside consulting expenses, which are included in the restructuring and other expenses line. The $3.2 million in the joint venture transactions line relates exclusively to the wind down of the retained metal framing facilities, which continued to operate in support of the new ClarkDietrich joint venture. As of the end of the first quarter, all of these retained facilities had been closed.

Metal Framing’s net sales were $3.1 million during the quarter. The sales relate to the vinyl operation and metal framing facilities that were not contributed to the new ClarkDietrich joint venture on March 1, 2011, but continued to produce product to assist the joint venture during the transition period. As of the end of the quarter, all of the retained facilities had been closed, except for the vinyl operation. All of the retained facilities are expected to be sold within the next 12 months.   

Temple Inland Reports Q3 Results

Oct 19 (Reuters) - Temple Inland Inc , which agreed to be bought by International Paper Co , posted quarterly results below estimates, hurt by lower shipments of its corrugated packaging products.

For the third quarter, net income was $6 million, or 5 cents a share, compared with $125 million, or $1.13 a share a year ago.

Excluding items, the company earned 18 cents a share.  Revenue rose slightly to $974 million.

Analysts on average had expected earnings of 19 cents a share, before special items, on revenue of $982.6 million, according to Thomson Reuters I/B/E/S.

International Paper sealed a $3.7 billion deal to buy rival Temple Inland early last month.
Shares of Austin, Texas-based Temple Inland closed at $31.51 on Tuesday on the New York Stock Exchange. They have gained about 50 percent in value since June 6 when International Paper first made a bid for the company

USG Corporation Reports Third Quarter 2011 Results

Third Quarter 2011 vs. Third Quarter 2010
Consolidated Business Highlights

  • Sales of $792 million compared to $758 million
  • Operating loss of $76 million compared to $58 million
  • Adjusted operating loss of $17 million compared to $23 million
Business Unit Highlights

  • U.S. Gypsum wallboard shipments totaled 1,046 MMSF vs. 1,028 MMSF
  • Worldwide Ceilings operating profit of $25 million compared to $21 million
  • L&W operating loss of $17 million compared to $24 million
USG Corporation (NYSE:USG), a leading building products company, today reported third quarter 2011 net sales of $792 million, an operating loss of $76 million and a net loss of $115 million, or $1.09 per share based on 105.3 million average shares outstanding. In last year's third quarter, net sales were $758 million, the operating loss was $58 million and the net loss was $100 million, or $1.00 per share based on 100.1 million average shares outstanding.

"Many of our key markets continue to experience recessionary levels of demand that are near record lows," said James S. Metcalf, President and CEO. "To accomplish both our short-term objective of returning the company to an operating profit and our longer term aspiration of reducing volatility in our earnings, we will continue to execute our three strategic priorities: strengthening core businesses, diversifying earnings and differentiating USG through innovation. We remain confident that by pursuing these strategies USG will remain a leading building solutions provider in its key product categories and markets."

The corporation's adjusted operating loss was $17 million in the third quarter of 2011 compared to $23 million in the third quarter of 2010. Adjusted operating loss excludes restructuring charges and non-cash long-lived asset impairment charges. The majority of these charges in the third quarter of 2011 were non-cash and primarily relate to the planned closure of a gypsum quarry and ship loading facility in Windsor, Nova Scotia, Canada that were idled in the first quarter of this year. This action was taken as part of the company's objective to adapt operations to market conditions. For information regarding the amounts of the 2011 and 2010 charges, please see the Reconciliation of Adjusted Operating Loss to Reported GAAP Operating Loss schedule attached to this press release.

For the first nine months of 2011, the corporation reported net sales of $2.3 billion and a net loss of $290 million, or $2.80 per share based on 103.6 million average shares outstanding. For the first nine months of 2010, net sales were $2.2 billion and the net loss was $284 million, or $2.85 per diluted share based on 99.7 million average shares outstanding. The corporation's results for the first nine months of 2011 include restructuring and long-lived asset impairment charges of $70 million compared with $54 million for the first nine months of 2010.

Sunday, October 16, 2011

Wells Fargo's Monthly Economic & Financial Commentary- October 2011

- Our outlook calls for moderate, subpar GDP growth of 1.5 percent during the second half of this year and in 2012, with no change in the Federal Reserve’s policy regarding the federal funds rate.

. For the next six months, we anticipate growth will reflect modest gains in consumer spending, equipment and software spending, and improvements in commercial and residential construction.

- The Consumer Price Index is expected to rise 3.7 percent during the second half of 2011, limiting growth in real disposable income to 1.4 percent for the year.

. With the core PCE deflator approaching the Fed’s 2.0 percent implicit target, the Federal Reserve will pursue Operation Twist to lower the long end of the yield curve, but we do not expect a third round of quantitative easing.

- Last Friday’s employment report showed modest job gains and unemployment above 9.0 percent, reinforcing the message that structural unemployment has become a key issue in the jobs market.

Saturday, October 15, 2011

Wells Fargo's Weekly Economic & Financial Commentary- October 14, 2011

- Retail sales rose 1.1 percent in September, led by increases in motor vehicle purchases and strong back-to-school sales.

. The rise likely does not mark a significant shift in spending, however, as constrained credit, unwinding debt, and low confidence continue to plague consumers.

- Initial jobless claims fell to 404,000 from an upwardly-revised 405,000 last week, while the four-week moving average fell by 7,000 to 408,000.

. The Job Openings and Labor Turnover Survey showed the number of open positions declined in August, as job openings as a percentage of total employment fell to 2.3 percent from 2.4 percent in July.

- The NFIB Small Business Optimism Index rose 0.8 points to 88.9 in September, but the number of firms with plans to hire fell to 4.0 percent from 5.0 percent last month.

- Minutes from the September 20-21 FOMC meeting showed the Federal Reserve’s outlook for economic growth deteriorated, but there was no evidence of a contraction in economic activity.

. We continue to expect slow, subpar economic growth around a 1.5 to 2.0 percent annual pace in both 2H11 and 2012.

Friday, October 7, 2011

Architecture billings rebound modestly in August

The American Institute of Architects’ Architecture Billings Index (ABI) unexpectedly showed a very modest rebound in architecture firm billings in August with a score of 51.4. (A score over 50 indicates growth in firm billings.) This comes on the heels of four consecutive months of fairly substantial declines.

Wells Fargo's Weekly Economic & Financial Commentary- October 7, 2011

- The U.S. economy created 103,000 net new jobs during September, which included a one-time increase of 45,000 returning Verizon workers.

. Unemployment remained steady at 9.1 percent, while both average hourly earnings and working hours increased.

- The ISM manufacturing index beat consensus estimates in September, improving to 51.6 from 50.6 in August, while the ISM non-manufacturing index fell to 53.0 from 53.3 during the previous month.

- Domestic auto sales rose to a 4.2 million unit seasonally-adjusted annual rate despite declining consumer confidence and financial market volatility.

. Domestic light truck sales jumped to a 5.9 million unit pace from 5.4 million due to strong farm incomes and pent-up demand.

- Construction spending grew 1.4 percent during August and is up 4.8 percent over the past five months.

Saturday, October 1, 2011

Wells Fargo's Weekly Economic & Financial Commentary- September 30, 2011

-     The Consumer Confidence Index rose slightly to 45.4 during September as the expectations component improved 1.6 points to 54.0, while the present situation index fell for the fifth consecutive month to 32.5.

-     The proportion of households reporting that jobs were hard to get rose 1.5 percent in September to 50.0, the highest reading since May 1983.

-     Total personal income fell 0.1 percent in August, the first decline since October 2009, while spending on nondurable goods fell 0.4 percent following a 0.5 percent drop in July.

-     Nondefense capital goods shipments excluding aircraft increased at a 16.2 percent three-month annualized pace in August, up from a 14.2 percent pace last month.

-      Initial unemployment claims fell below 400,000 to their lowest level since early April, an encouraging sign for the labor market.