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Owens Corning (NYSE:OC)

Q1 FY08 Earnings Call

May 07, 2008, 11:00 AM ET

Executives

Scott Deitz

Chairman of the Board and Chief Executive Officer

Duncan Palmer - CFO

- Zelman & Associates

- Garik Shmois

- Lehman Brothers

- Jack Kasprzak

- CL King & Associates

- Keith Hughes

- Imperial Capital

Vice President, Investor Relations and Corporate Communications

Michael Thaman

Analysts

- Dennis McGill

- Longbow Research

- Nitin Dahiya

- BB&T Capital Markets

- Jim Barrett

- SunTrust Robinson Humphery

- Mary Gilbert

Operator

Good day, ladies and gentlemen and welcome to the Quarter One 2008 Owens Corning Earnings Conference Call. My name is Dinese and I will be your coordinator for today. At this time all participants are in listen-only mode. We will be conducting a question-and-answer session towards the end of this conference. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Mr. Scott Deitz, VP, Investor Relations. Please proceed, sir.

Scott Deitz - Vice President, Investor Relations and Corporate Communications

Thank you, Dinese and good morning, everyone. Thanks for taking the time to join us today for our conference call and a review of our business results for the first quarter of 2008. Joining us today are Michael Thaman, Owens Corning's Chairman and Chief Executive Officer and Duncan Palmer, our Chief Financial Officer.

Following our brief presentation this morning, we will open this one-hour call to your questions. We expect that we will complete the call by the top of the hour. We ask that you limit yourselves to one question and one follow-up so that we can take as many questions as possible during the hour we have together.

Earlier this morning we issued a news release and filed a Form 10-Q detailing our results. In addition, we've posted presentation slides that we will refer to during this call. For those of you participating in the call via the Internet of if you happen to be near your computer, you can access the slides at owenscorning.com. You will find a link to the slides on our homepage. There is also a link on the Investor Section of the web site and of course this call and the supporting slides will be archived and available on our web site.

Before we begin just a few reminders, today's presentation will include forward-looking statements based on our current expectations and assumptions about our business.

These statements are subject to risks and uncertainties and our actual results could differ materially. Please refer to the cautionary statements and risk factors identified in our SEC filings for a more detailed explanation of the inherent limitations of such forward-looking statements.

We ask that you understand that certain data included within this presentation contains non-GAAP financial measures. Today's prepared remarks will exclude items that affects comparability, those excluded items are captured in our GAAP to non-GAAP reconciliations found within the financial tables of our earnings release and in our Q1 10-Q. Our discussion depending upon the context may reflect total operations, continuing operations or discontinued operations. For the most part today, we will present continuing operations. For those of you following along with our slide presentation, we will begin on slide 4.

With that I'm pleased to introduce Chairman and CEO, Mike Thaman followed CFO, Duncan Palmer.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Thanks, Scott. Good morning, everyone. Earlier today, we reported first quarter results for 2008. First quarter 2008 revenue was $1.35 billion, which represents 20% growth compared with the same quarter last year. Adjusted EBIT from ongoing operations was $54 million, which is down only 8.5% from the first quarter of 2007.

We are off to the start we had planned for. Given the opportunities that we see in our Composites business and a very challenging housing and building material market in the United States, we're pleased with the quarter.

This quarter really demonstrates the value of the portfolio actions that we took last year. 2007 marked the most significant change in our business mix in the history of our company. Our decision to divest our vinyl siding and recreational vehicle businesses and to reinvest those proceeds in our Composites business with acquisition of Saint-Gobain's composites business has created a business portfolio that performed well in the quarter. It's gratifying to see these strategic actions coming through in our financial results.

On our last call, we laid out some of the goals and critical actions for 2008. We said that we will continue to drive our safety programs in the first quarter. We reduced accidents in our company by another 52%. We said that we will reduce our costs by $100 million. That program is fully implemented.

We said that we will complete the divesture of our composites facilities in Europe. We closed that transaction last week. We said that Composites operating margins would approach double digits for 2008. They were 9.6% in the first quarter. We said that we would achieve $30 million in acquisition synergies. That's on track. We also said that we will reduce the size of our leased precious metals through productivity programs. This is also on track.

Finally, we said that we would continue to manage a strong balance sheet. We finished the quarter with net debt of slightly more than $2 billion, a good result. Given our year-to-date performance, I remain confident in our guidance of annual adjusted EBIT of $240 million for 2008.

Global growth in composites highlighted our performance during the quarter. Our acquisition of Saint-Gobain's composites business is paying on. Sales of our Composite Solutions business grew more than 80% representing about half of Owens Corning's total sales during the first quarter. Earnings were up in this business more than 150%. Growth in composites has expanded our international footprint. About 43% of Owens Corning's total sales are now outside the United States. In addition, nearly 60% of our sales is now derived outside of North American residential construction.

We are quickly capitalizing on the newly acquired composites business to serve our expanded customer base, to generate efficiencies and to realize the full promise of this opportunity. EBIT margins in composites are already approaching 10% before the financing cost associated with precious metals leasing. We are confident that we will achieve at least $30 million of synergies in 2008 and $100 million 2011. Last week we announced that we completed the sale of two of our composites manufacturing plants. This sales satisfies the European regulatory remedies required as part of the broader acquisition. We realized net proceeds of about $197 million including cash of $184 million.

We are working hard to maximize growth opportunities in composites. We recently announced an investment in our plant in Amarillo, Texas. This expansion increases our ability to meet market demand for engineered composite materials for high-end applications such as wind energy. Today we are also closer to expanding our composites presence in Russia and also in China. You'll hear more about those opportunities in the future.

Shifting to our building materials group. We continue to face a very difficult market with the near future remaining somewhat uncertain. Our insulation business made money in the first quarter. We expect our insulation business to make money for the year on the continuing strength of our commercial on industrial sales. The moderate market weakness we continue to remain disciplined by actively managing our insulation capacity and cost structure. We have taken further capacity actions and if the market weakens further, we are prepared to curtail more capacity.

Clearly, a new uncertainty that we face in all of our businesses and in insulation particular due to its weak pricing position is the inflation effect of the recent aggressive move in oil and energy cost. In the near term this will continue to pressure margins.

However, Owens' coating insulation products save energy and they reduce greenhouse gas emissions. A need to insulate and reinsulate around the world is a growth opportunity in our residential and commercial insulation business. We are on track to grow our reinsulation business by 10% in 2008.

In the U.S. alone that Department of Energy estimates that buildings consume more than 40% of all energy. 60 million homes in the U.S. are under insulated. Today, buildings account for 40% of all greenhouse gas emissions. Insulation is a solution. This energy-saving business will continue to grow in the years ahead. The health of our planet and the availability of low-cost energy are the issues of our time. The most cost-effective energy alternative is the energy we never consume.

In our Roofing and Asphalt business, year-over-year sales were unchanged. However, our loss increased during the period due to a lack of housing related demand and significant inflation.

To offset cost pressures we've announced and are implementing price increases in this business. We expect stronger performance for our Roofing and Asphalt business beginning in the second quarter. We are seeing benefits from price increases. We are seeing demand improvements due to the seasonality of construction and we're seen demand from spring storms in the southeast and southwestern United States.

Our Roofing and Asphalt segment will return to profitability in the second quarter of 2008. Before turning to Duncan, for more thorough review of our performance. I'll add a few words about Owens Corning's growth and our ability to create shareholder value.

Despite the current market difficulties, we continue to focus the organization on profitable growth. We have built a portfolio that can succeed in all cycles as demonstrated by this quarter. In Insulation, Roofing and Asphalt and in masonry products, Owens Corning is the leading building materials franchise.

We were pleased to learn that according to the 2008 brand study from the publishers of Builder magazine, builders selected Owens Corning PINK fiberglass insulation as the product they prefer.

In our Masonry products business, boulders chose our Cultured Stone product as the manufactured stone most recognized and most used. The same study recognized Owens Corning Roofing products as the most recognizable brand in the market. To win with our customers we must invest in ideas that help them grow their business. We must give them something to sell that's better and more appealing than what they can get from any other company. Innovation is essential.

Our new Asphalt shingle called Duration continues to satisfy customers in the United States. Other innovation highlights from the quarters, from this quarter include; in February, we announced a new masonry product line called ProStone. It's a product ideally suited for today's affordability minded builder and homeowner. In March, we announced a new manufacturing technology for our home Insulating Systems. It's a new environmentally friendly blowing agent used in our home insulation manufacturing process, thereby reducing greenhouse gas emissions and eliminating ozone depletion.

In April, we announced the first non-woven glass tissue reinforcements for direct pressure laminate flooring. This product raises fire resistance and impact performance allowing our customers to expand their market to commercial applications.

Consistent with our commitment to grow through innovation, we recently named John Hillenbrand, our Chief Innovation Officer. John is responsible for the leading our Global Science and Technology organization and bringing innovation to the marketplace. John is an excellent addition to the OC team with more than 20 years in innovation leader at DuPont.

In summary, Owens Corning is performing. Today, composites is leading the way during a difficult cyclical downturn in the U.S. housing market.

On the Building Materials side, we continue to manage our cost structure and we manage growth opportunities so that when the market returns, as we know it surely will, Owens Corning has a leverage position to satisfy customers and shareholders alike.

With that, I will turn it to Duncan for a further review of the first quarter and what we see ahead. Duncan?

Duncan Palmer - Chief Financial Officer

Thanks, Mike. Let's start on slide 5, where we detail key financial figures for the first quarter of 2008. You can find more detailed information in the financial tables of today's news release and the Form 10-Q. Today, we reported first quarter 2008 consolidated net sales of $1.35 billion, a 20% increase compared to 2007. This growth in our business has been driven by the acquisition of the Saint-Gobain group's reinforcements in composite fabrics business, which we completed in November 2007.

First quarter net loss from continuing operations totaled $15 million and diluted loss per share from continuing operations was $0.12. As a reminder, when we look at period-over-period comparability, our primary measure is adjusted earnings before interest and tax, adjusted EBIT.

In just a moment, I will review our reconciliation of items affecting comparability to get to adjusted EBIT. These items totaled $35 million in the first quarter of 2008 compared to $27 million during the same period in 2007. Our adjusted EBIT from continuing operations for the first quarter of 2008 was $54 million compared to $59 million in 2007.

Adjusted earnings from continuing operations for the first quarter of 2008 were $10 million or $0.07 per diluted share compared to $18 million or $0.13 in 2007.

In the first quarter, marketing and administrative expenses decreased by about 1 point as a percentage of sales compared to 2007, owing to the impact of our cost reduction programs and a leverage achieved as a result of the acquired business from Saint-Gobain.

Depreciation and amortization totaled $77 million for the first quarter. We currently estimate our depreciation and amortization will total approximately $315 million in 2008. Our capital expenditures totaled $52 million in the first quarter and we maintain our guidance of $325 million for the full year.

Owing to the seasonality of working capital, especially in building materials, our net debt increased in the first quarter. We ended the first quarter with total debt, net of cash on hand of $2.07 billion consistent with our expectations.

Now, if you move to slide 6, you will see an illustration of adjusted EBIT performance, again comparing first quarter 2008 with first quarter of 2007 results based on the business segment contribution. Year-on-year reduction in 2008 adjusted EBIT with the results of declines in our Insulating Systems, Roofing and Asphalt, and Other Building Materials and Services businesses with the improvement seen in composites as well as in corporate.

The improvement in corporate was primarily the result of the impact of fourth quarter 2007 cost savings projects and reduction in general corporate expenses. The $39 million growth in Composite Solutions EBIT was the result of incremental earnings from the acquisition of the Saint-Gobain business and improved manufacturing productivity.

Offsetting this improvement was a decline in Building Materials product group. This decline was primarily related to weaker demand and lower selling prices for residential insulation and significant raw materials inflation in Roofing and Asphalt.

Moving to slide 7, you can see the detail associated with the reconciliation of our first quarter of 2008 reported EBIT from continued operations of $19 million to adjusted EBIT from continued operations of $54 million. We provide this as the best comparison of our results. As part of the investment to combine the acquired Saint-Gobain business with our Composite Solutions operations, we incurred $12 million of integration cost in the first quarter.

On April 30th, we completed the sale of the Battice and Birkeland composite manufacturing facilities in Europe for net proceeds of approximately $197 million. This resulted in an additional impairment of $10 million, which we exclude from first quarter adjusted EBIT.

Next, as you have seen in prior quarters, we adjusted for the non-cash amortization of costs associated with employee emergence equity program, a total of $7 million. You will recall that shares of company stock were awarded to employees at the time of our emergence from Chapter XI in 2006. These shares have pre-vesting and will be amortized in the P&L until October 2009.

As we discussed in the 2007 year-end call, we view the costs of leasing precious metals used in production tooling within our composite facilities to be a financing cost. As a result, the $4 million expense in the first quarter has been excluded from adjusted EBIT but has been included in our calculation of adjusted earnings per share.

We have also included a $2 million adjustment associated with our cost reduction program announced in the fourth quarter 2007 to close facilities and to reduce operating costs. As you will recall, we expect to achieve at least $100 million of savings through actions in our building materials businesses and co-productivities. We are now in a position to say that these actions have been fully implemented and that the savings will be achieved in 2008.

With that as the background, turn to slide 8, and we will begin a more detailed review of our business segments starting with Composites. Year-over-year, net sales in Composites were up over 80%. The growth in sales was driven by the acquisition of Saint-Gobain business. Composites is our most geographically diverse business, which is serving us well in the midst of market weakness in U.S. building materials. We estimate that in the first quarter, more than 75% of our revenue in this business was from outside U.S. compared to 63% in 2007.

First quarter EBIT was $64 million compared to $25 million in 2008, up $39 million. EBIT as a percentage of sales was 9.6% in line with our guidance for 2008 as a whole.

Next, on to slide 9, our Insulating Systems business. According to the Census Bureau, U.S. seasonally adjusted annualized housing stocks dropped 30% in March 2008 to 947,000 units compared with 1.355 million units reported in 2007. Fewer houses have been started, fewer existing homes have been sold, the mortgage credit markets are tight and home values continue to decline. Our Insulation business is clearly feeling the impact of these market conditions.

Net sales in this segment was $373 million in 2008, down 11% compared to 2007. About two thirds of this decline was due to a reduction in sales volume and product mix, the remainder was due to lower sales prices as a result of competitive pressures. EBIT for the first quarter of 2008 from this segment fell to $16 million compared with $53 million in 2007. First quarter EBIT as a percent of sales declined from 13% in 2007 to 4% in 2008.

Next, slide 10 provides an overview of our Roofing and Asphalt business. Sales of $306 million in first quarter of 2008 were the same of 2007 because of stronger sales of laminate shingle products offset by a reduction in Asphalt sales.

In the first quarter our Roofing and Asphalt segment reported a loss before interest and taxes of $17 million compared to a loss of $8 million in 2007. In addition, this loss is greater than the fourth quarter of 2007. Reduction in prices and an increase in Asphalt cost from the fourth quarter of 2007 combined to increase our loss.

Next, Other Building Materials and Services on slide 11. This segment is comprised of our masonry products business and our Construction Service business. First quarter 2008 sales of $53 million were down 23% compared to 2007, primarily due to declines in our masonry products business resulting from continued weakness in new construction and repair and remodeling. The decline in products volumes and increased idle facility cost in masonry products resulted in a first-quarter loss in the overall segment of $3 million compared to profit of $4 million in 2007.

Moving to slide 12, a couple of other items before turning to our Q&A. We continue to have Board authorization to repurchase up to 5% of our common stock. As of the end of the first quarter of 2008, we have not made any repurchases under this authorization. I would like to provide some additional guidance regarding 2008 taxes. We continue to project that our U.S. cash tax rate will be less than 2% as a result of our NOLs. We expect that our overall cash taxes paid in 2008 will be less than $40 million paid in 2007. Our 2008 effective tax rate for our U.S operations will be about 35% and our effective tax rate for non-US operations will be less than 25%. The blended average of these may vary significantly quarter-to-quarter as the mix of our business varies across the world.

Given the challenges that some of the companies in building materials are facing, we continue to be pleased with the strength of our balance sheet. Our liquidity position remains robust with $118 million in cash in hand and $648 million of unused committed credit lines available at the end of the first quarter. In addition we have received approximately $184 million in cash proceeds from the sale of the Battice and Birkeland facilities on April 30th. We have access to more than sufficient funds for our investment plans and corporate financing requirements.

With that, Scott, back to you for Q&A.

Scott Deitz - Vice President, Investor Relations and Corporate Communications

Thank you, Duncan. Thank you, Mike. Denise, we are now ready to begin the Q&A session if you'd like to poll our listeners for questions.

Question and Answer

Operator

[Operator Instructions]. And from Zelman & Associates, your first question comes from the line of Dennis McGill. Please proceeds sir.

Dennis McGill - Zelman & Associates

Good morning, guys.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Good morning, Dennis.

Dennis McGill - Zelman & Associates

My first question just has to do with the composites business. Can you help us understand what's included and excluded related to the asset sales? It would be my assumption that the revenue associated with those asset sales was included in the consolidated first quarter numbers.

Duncan Palmer - Chief Financial Officer

Yes, that's right. Let me give a little bit of background on this and then I will come to your question directly. I think most of our investors know that as a part of completing that transaction we had been given directions from the European Competition Authorities that we have two facilities in Europe we needed to divest. One was in Battice, Belgium the other was in Birkeland, Norway. Under European Competition law, you can actually close a transaction and then proceed with the remedies post-closing, which is what we chose to do. So, we closed in November. We had those two facilities on the docket [ph] to be sold. We worked with the ultimate buyer of Platinum Equity through the first quarter and ended up closing that at the end of April. The revenue and the profits from the production of those two facilities were included in our first quarter results. It will be included in April but it won't be included on an ongoing basis.

Dennis McGill - Zelman & Associates

Okay. And going forward, would that be restated, so first quarter in next year or the first quarter of this year would be restated for a discontinued operation or that continue to be in there?

Michael Thaman - Chairman of the Board and Chief Executive Officer

No. Duncan, correct me if I'm wrong but that is in our consolidated results and it will not be restated and moved to discontinued.

Duncan Palmer - Chief Financial Officer

Okay.

Duncan Palmer - Chief Financial Officer

Off the sale.

Dennis McGill - Zelman & Associates

Okay. And so when you guided for the 240 for the year, your assumption was including the profits from those asset sales for... in the three or four months that you expected to still have it prior to closing?

Michael Thaman - Chairman of the Board and Chief Executive Officer

Yes. I think it's fair to say that we knew that we would have the proceeds and earnings from those assets for some portion of 2008. I don't think that we were as precise when we actually gave our guidance that we drew the line between whether we thought we divest in February or April. This is pretty consistent with our expectations.

Dennis McGill - Zelman & Associates

Okay. And then just for our understanding, can you put a little... any parameters around whether the profitability of those assets are different than the profitability of what will be the ongoing operations?

Michael Thaman - Chairman of the Board and Chief Executive Officer

I think we are comfortable saying that those assets are about the same level of profitability as the assets we kept. Obviously, that will put hole in the business in terms of profitability in the second quarter. But what we've seen also is the synergies are coming in, there's underlying momentum in the business and we think the rest of the business will continue to catch up. And so because we're seeing an improving business, not a static business, on the one hand we will go backwards with those divestures but we also see the business moving forward pretty aggressively.

Dennis McGill - Zelman & Associates

And looking at your guidance for the year, your target of 10% EBIT I think people are probably looking at that performance, the strong performance this quarter and thinking that there's upside to that, would you say that that's a fair assumption or are those steps back what's holding you back from raising that guidance?

Michael Thaman - Chairman of the Board and Chief Executive Officer

Well, I think we're comfortable with the guidance we gave, which is we said we thought operating margins would approach double digits, maybe we are overly cautious, but when they are in double digits, we probably revise that guidance. I mean we're still approaching double digits and when we get there, we'll let you know.

Dennis McGill - Zelman & Associates

Okay. And then just changing gears, on the reinsulation side, what would be the average ticket for [inaudible] to reinsulate their house right now?

Michael Thaman - Chairman of the Board and Chief Executive Officer

Well, I mean that really varies. Obviously, it depends whether you do it yourself or whether you hire a contractor to come and do the work for you. If you were inclined to go down to your local, retail big box, Home-Depot or Lowe's or Menards and buy the insulation there, you can probably reinsulate your attics for $200 or $300 worth of material. If you called a contractor and ask the contractor to come out of the house and coat it and do a full professional job that number probably ranges more like $1000.

Dennis McGill - Zelman & Associates

Okay. So it's certainly a bigger ticket item but among the other home improvement opportunities that are out there, it's not in this period where consumers' dollars are under a lot of pressures from various angles. It's not to the point where it's stretching to reinsulate an entire house or entire attic I guess would be?

Michael Thaman - Chairman of the Board and Chief Executive Officer

Yes. I think that's fair. What we have seen in our consumer research is home owners are not as aware of the opportunity to reinsulated their attic and save money as you need them to be. So part of what we need to do is we need to build awareness there. They also probably aren't as knowledgeable about how much it costs and their estimates of what it costs tend to, at least in our research, vary on the high side. People think it's a bigger project than it is. So there is a lot of education to be done which is why every time we have an open mike effectively we talk about it because we want to make sure everyone is listening and spreads the word on that.

Dennis McGill - Zelman & Associates

Okay. Thank you, guys. I'll get back in queue.

Scott Deitz - Vice President, Investor Relations and Corporate Communicati

Thanks.

Operator

And your next question comes from the line of Garik Shmois from Longbow Research. Please proceed.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Hi, Garik.

Garik Shmois - Longbow Research

Hi. Good morning. Good quarter. Just wondering if you could clarify something on the slide presentation with respect to insulation demand in commercial holding right now. Is that your view on forward-looking construction starts in commercial and industrial or is that given the lag between when the start actually commenced versus when insulation goes into the project?

Michael Thaman - Chairman of the Board and Chief Executive Officer

I think our forward view, Garik, is that we would expect to see weakening in the commercial and industrial side of the business, probably a little bit more in commercial than in industrial. Up to now it has been holding, but we also certainly do not expect to cycle anywhere nearly as hard as what we have seen on the residential side. So, our internal plans are built around the expectation that the commercial side of the business will weaken. We've been pleased up to now that it's hanging in there pretty well for us.

Garik Shmois - Longbow Research

Okay. And can you comment on the competitive landscape now in insulation and pricing, in particular? It seems like most of the revenue decline is on the volume side and volume... and pricing hasn't fallen off certainly like we see in some of the other industries that are heavily tied to home building. Would that mix of, perhaps, two-thirds volumes, one-third pricing, do you expect that to continue going forward?

Michael Thaman - Chairman of the Board and Chief Executive Officer

Well, let me backtrack a little bit on this question to make sure there is a bit of context. Obviously, the biggest business in our insulation business three years ago was the residential side of the business. And as residential has gone through such a big cycle, it has actually shrunk as a percent of the total mix and our foam business, which is more of a materials conversion or materials pricing kind of business and also our commercial and industrial businesses have taken a much bigger percentage now of the mix in insulation than what you would have seen when we first start talking about the business two years ago. We're continuing to see the residential side as being quite price competitive.

So, in the disclosure we put out this morning in our 10-Q where we broadly quantified it as about two-thirds volume in a third price. There is a fair amount of mix in the price numbers and I would say that the price numbers in the residential side had continued to be pretty difficult for us. And we have continued to see quarter-over-quarter weakness in residential. That said when you benchmark our insulation business to some of the other building materials commodities like lumber or gypsum board, I think we try to say and I think our results have generally demonstrated that it's a different business than those others that the cyclicality of the pricing the way the market operates and the way the market contestants or competitors operate does tend to be a bit more disappointing. We don't tend to see as much of a run-up price on the upside but as a result we don't tend to see as much of price situation on the downside.

Garik Shmois - Longbow Research

Okay. Thank you very much and good luck.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Thanks.

Operator

Your next question comes from line of Nitin Dahiya from Lehman Brothers. Please proceed.

Nitin Dahiya - Lehman Brothers

Good morning.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Good morning, Nitin. How are you?

Nitin Dahiya - Lehman Brothers

Just on the insulation question, obviously there was a lot of mix in there, but if you strip out the mix and with the raw materials going up, are you seeing the pricing stabilize in the insulation business or any pricing that you're taking is that sticking?

Michael Thaman - Chairman of the Board and Chief Executive Officer

I think we are seeing inflation certainly in terms of our energy cost and our transportation costs and I think at this point that has just been for the margin compression for us. So, there have not been the industry wide pricing action that have either with any up tick in pricing or really a stabilization of pricing. I would describe what we're seeing right now in the residential insulation side of the business as a fairly kind of long, slow but orderly decline in prices and we've seen that quarter over quarter and I think we saw that in the first quarter and really our expectations for the year are built on the expectations that that will continue.

Nitin Dahiya - Lehman Brothers

I see. But on the roofing side you're getting some pricing.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Well, what we said in today's call is that we didn't see any in the first quarter and it's not affecting Duncan's remarks. We said from the first quarter sequentially versus the fourth quarter of last year, we actually lost price in what was a pretty dramatically inflationary environment for Asphalt, which is a key raw material for us. There was a fair amount of what are known in the industry as winter-buy activity but there was a fair amount of inventory liquidation going on in the part of both distribution and manufacturers, which means a difficult environment.

I think what we've seen so far in the second quarter, I mean, obviously we are 45 days into... or 35 days into the second quarter, is that some of the pricing actions for the late first quarter and second quarter are beginning to show up and we're starting to see some positive pricing in our books. We have a fair amount of catch-up to do that. I mean the inflation arrived before the pricing has started to come through and we're comfortable saying that the roofing business will return to profitability in the second quarter. But I think price management in roofing is going to be kind of a continued both challenge and opportunity for us throughout 2008.

Nitin Dahiya - Lehman Brothers

I see. But even on the top line it looked pretty good if you are flat in terms of volume, while you were gaining share?

Michael Thaman - Chairman of the Board and Chief Executive Officer

Well, I mean, we said in, I think it was in Duncan's remarks also, we had some positive mix. I mean we have been driving our duration with SureNail Technology program very aggressively in the marketplace. We do have an innovation. I think it energized our sales force to be out working with contractors, point through business facts to the distributors. That has sweetened our mix a bit, now that product cost is bit more to manufacturer. We get a bit higher price for it. So as we drive the mix, we do get some top line and we get some benefit versus the standard of coming hard at the market product [inaudible]. Some of that gets through the margin line for us. So it is the positive part that we make that happen. So mostly we are just seeing mix to a little bit better product for us, primarily related to actions we have taken for the marketing side.

Nitin Dahiya - Lehman Brothers

Okay. And lastly on cost savings, you mentioned that you have got $100 million for '08 number, and then on slides 6 you had $9 million decline in corporate cost or $9 million savings on corporate. Was that all the savings that you got in the first quarter or was that just the improvement in actual realized savings in the first quarter or later?

Duncan Palmer - Chief Financial Officer

Well we have actually realized savings throughout the entire P&L. So we have cost reductions in manufacturing that would appear above gross margin in the business units. We had SG&A reductions in the business units that would appear in the segment reports and then we had cost reductions at corporate, which would be what we have reconciled in slide 6. I'd remind you when we talked a little bit about this in the fourth quarter, because we didn't meet some of our goals last year, we also had a fairly large credit in corporate last year associated with some of our incentive compensation programs.

We have all of the salaried employees of Owens Corning on a compensation program that is related to the performance of the business. And because we didn't meet our goals last year, we actually ended up with a credit there. So we actually have had some cost creep in the corporate area which is where we take allocation for that or take the charges for that where we are seeing the need to put some money back into some of those compensation programs. So net net the $9 million cost improvement in the corporate we think is pretty good result.

Nitin Dahiya - Lehman Brothers

I see. Okay. Great. Thank you very much.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Thanks.

Operator

[Operator Instructions]. Your next question comes from the line of John Kasprzak from BB&T Capital Markets. Please proceed.

John Kasprzak - BB&T Capital Markets

Thanks. Good morning.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Good morning, John.

John Kasprzak - BB&T Capital Markets

Hi, I want just ask a little more about composites with the guidance you've given on a near 10% operating margin in '08. It's pretty nice improvement from '07. Can you just talk about what you're seeing there? I mean is it just demand driven? You're getting some leverage and maybe also if you could talk about just a little more color on the demand side, what you're seeing there?

Michael Thaman - Chairman of the Board and Chief Executive Officer

Okay. The improvement in operating margins in composites again is really throughout the entire P&L. We're seeing some very, very good markets from the demand point of view. I think, in particular, we will probably recognize that Asia has been strong, the infrastructure projects in the Middle East have been driving good demand. And then the wind energy market where we really have a very, very market position both in our fabrics business as well as our glass making business has been real star on a year-to-date basis and we think it's a real star going forward.

So, we're positioned in the right markets with the right products, which is helping us. But we are also getting a lot of improvement on the cost side. We've talked in prior calls about using... utilizing our melting technology in some of the Saint-Gobain's facilities where we melt with little bit lower batch cost, we melt with a little lower energy cost. And we do get some throughput in productivity when we put our melting package into their facilities.

Those conversions are occurring on a regular basis as we have an opportunity from the capital and an expenditure point of view to make that happen. And then we are also getting synergies below gross margin in the overhead and operating expense areas. As we put the two organizations together, I would tell you corporately, we've been able to support a bigger global footprint without a big cost debt in the corporate areas. And the composites team has been able to manage a bigger or more complex global business with about the same amount of management infrastructure that we had in the past.

So, I think it's a good new story in terms of impacting operating margins all the way through the P&L and we do think we have some runway on the demand side and the market side based on some things we've seen in the market and reasonably good demand.

John Kasprzak - BB&T Capital Markets

Your performance now looks really good. Congratulations on that, I mean, when you look farther out and think about it near 10% or so operating margin as a '08 goal, I mean, is there, that's why I am asking you to quantify unless you want but I mean, could there be further improvement beyond that?

Duncan Palmer - Chief Financial Officer

Yes. I think even in prior calls, we have said that we think double-digit operating margins is an intermediate goal. It's an asset-intensive business. We think to get to really good reinvestment economics. We probably need to see our margin get to 10% and then move further north from there. Part of that is us deploying our asset base to lower cost countries and then part of that is actually improving the overall level profitability of the industry.

The industry, I think generally has not had reinvestment economics for a while and we've seen very, very aggressive growth out of China in that business. But we are seeing from the Chinese producers that they are experiencing inflation in country, they are experiencing revaluation of their currency and they're losing some of the export incentives that they had previously and a lot of that is translating to a little bit better price environment on a global basis. And so, we think those are things that can also contribute over kind of near and long term to a little bit better price environment, a little bit better margins. We haven't guided beyond what we expect to get done in 2008. We think 2008 is a stepping stone to where we would like to get the business to in future.

John Kasprzak - BB&T Capital Markets

That's great. Thanks very much.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Thanks.

Operator

And from CL King & Associates, your next comes from the line of Jim Barrett. Please proceed, sir.

Jim Barrett - CL King & Associates

Good morning, everyone. Michael though you have touched up on it in spots, could you... when we consider that natural gas and other energy cost have gone up fairly dramatically recently, could you comment on the company's plans to or the company's need to get additional pricing this year across each of its three core businesses?

Michael Thaman - Chairman of the Board and Chief Executive Officer

Okay. Good question. I'm actually going to bump that one over to Duncan, he spends a fair amount of time looking at our inflation and the effect on our business.

Duncan Palmer - Chief Financial Officer

Yes. Thanks. Obviously, we have seen inflation in raw materials and commodities across our businesses. If you look at in two different areas, one for example energy cost where we see a lot of inflation in natural gas and power costs, which effect our cost of melting glass essentially, we've had... obviously in this kind of market it's difficult for us to pass through those kind of cost on insulation. We would see our opportunity to do that as it's being linked to when the market bottoms out and we may miss an opportunity to sort of pass that through that kind of level.

On the Roofing and Asphalt side, we have historically seen that we are able to pass through Asphalt price increases soon to the marketplace and we see that continuing. Asphalt prices have increased quite significantly since quarter four last year and obviously as they linked crude oil in the end, we will continue to see some pressure on our margins in that space. But we are confident that we will be able to pass that through into the marketplace as we have seen historically and we would see that continuing. On the composites side, again we melt lot of glass, we consume a lot of energy and in that business you have seen that our operating margins are holding up and in fact are improving.

We do see some opportunity in different parts of the world, obviously different... wide variety of products and wide variety of markets for that to be opportunity in pricing there. That market remains reasonably robust from a demand standpoint and therefore there's more opportunity to pass that through in cost on the composites side. It depends on the business, depends on geography and depends on the commodity. So generally speaking, we're seeing the inflation, it does provide challenges for us, but we were able to take action where we have the ability to do so.

Jim Barrett - CL King & Associates

And Duncan, could you for the composites business, if we exclude Saint-Gobain, could you discuss the sales and margin, operating profit performance of the core Owens Corning business, if you can do that?

Duncan Palmer - Chief Financial Officer

We talk of those businesses really as being together. We manage them very much and now it's being together given that... given how integrated and our product point of view, from manufacturing point of view really makes no sense talking them any other way. And so, we are seeing that overall business as being continue to be profitable, operating margins increasing, our synergies are coming through. We are seeing great opportunities for us to use the technology and the technology that Saint-Gobain have... Owens Corning had to bring the best of both to process technology and also to as we see our synergies coming through, those also improve operating margins.

Jim Barrett - CL King & Associates

Thank you both.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Thanks, Jim.

Operator

And your next question comes from the line of West Hasfu [ph] from AllianceBernstein. Please proceed.

Unidentified Analyst

Hi, yes. Good morning and great quarter.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Good morning.

Unidentified Analyst

I guess along the lines of what Jim asked already but maybe just different way to think about it. We've seen pretty good energy inflation since the last guidance. Is basically the message that some pricing has been recovered relative to that as well as just good composites business gives you comfort with the guidance affirmation despite there is really strong inflation?

Michael Thaman - Chairman of the Board and Chief Executive Officer

I think that's a really fair summary of where we sit today. We think that our cost management and our capacity management in installation has been very good. But, we are probably seeing more inflation than we expected. And at least today the price environment, we don't see a way to go recover that. Now, it doesn't mean that we've given up on the idea that unexpected inflation should at some point begin to influence industry wide prices for insulation. At this point, we haven't seen that in the first quarter and we haven't said anything to the contrary on that. So that would probably cause us to be a little bit more concerned about our outlook in insulation than we were at the beginning of the year.

The flip side is, we've seen some of the things we need to see in roofing to know that that business can get back to profitability and contribute and we really like the way composites has come out of the blocks. And we didn't talk a lot about Other Building Materials and Services. I mean it's being impacted by the same kinds of volume weakness that we're seeing in roofing and insulation. We do expect to see it improve through the year too and start contributing. So we've got a couple pieces that will contribute a lot more than they have in the first quarter. We probably have a little bit concern about insulation in the near term and we really like the start the composites got off to.

Unidentified Analyst

Okay. Great. Thank you.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Thanks.

Operator

And from SunTrust, your next question comes from the line of Keith Hughes. Please proceed sir.

Keith Hughes - SunTrust Robinson Humphery

Thank you. Just digging a little deeper on the roofing business. Your prepared comments discussed some share gains and good business in laminate segment, was there any new product introductions there or new distribution, what's going on?

Michael Thaman - Chairman of the Board and Chief Executive Officer

Well, we have been managing a new product through the market now for about a year and half. We had an opportunity to bring to the market what we thought was some pretty new and powerful technology and we put it into a product, we call Duration, which showing our technology. The basic premise of the product is it's easier to install, so it brings a benefit to the contractor. Because of some technical issues about how the product is built, it weighs much flatter on the roof and therefore palletizes and stacks much more easily on the warehouse. So the roofing contractor has some benefit... I'm sorry, the roofing distributor has some benefit in terms of how they store and ship the product.

And then for the homeowner because of the way the products seals on the roof and because of the way it lays flat, we're able to give a better aesthetics as well as an improved wind warranty. And so those things combined have caused to be able to go out into the marketplace, tell that story at the distributor and contractor level and give that story basically into the core re-roofing market. Because of our history, how we got into the roofing market, where we have been historically, we have probably been under represented in that really kind of solid re-roof market with the big professional re-roof contactor. This has been our ability to go, earn our way into that market. It's not a market that we necessarily think, you can go get the market share any other way besides earning it. And we've been working very hard to improve our mix, bringing that product to the market in a powerful way and try to give the contractor something that they can trade up to, to give the homeowner a better roof.

We continue to also be very, very competitive on the heart of the market [inaudible] laminate. We continue to work on making that product as cost-effective than successful as they can be to make sure that we've got the whole mix of goods. And at this point, the things within our control, we feel pretty good about it in terms of roofing. The market dynamics in terms of pricing and asphalt recovery has been really the disappointment for us and we're saying that we expect to see that get better in the second quarter.

Keith Hughes - SunTrust Robinson Humphery

Is the... where your terms and conditions on the early buy in first quarter substantially different than prior year and if so how?

Michael Thaman - Chairman of the Board and Chief Executive Officer

There has been a pattern in the industry of the manufacturers and distributors working together early in the year to make sure that you position your kind of key distribution partners with inventory and that they are set to go early in the year. I don't know that we would necessarily look at the terms and conditions of what went on in the first quarter this year as being materially different than what we saw in the past. I think the big issue is they went on in an environment where asphalt prices were increasing dramatically.

Typically in the roofing business, because of the alternative demand for asphalt primarily being paving, we tend to see some seasonality in the price of asphalt. It's more expensive in the summer, tends to be a little bit cheaper in the winter and because of the really rapid run up crude oil prices, this winter really played against pipe and we saw asphalt prices running up which is very unusual. I don't know that from an industry point of view that was dealt with very effectively by the industry participants and now that's the issue that we are all trying to work through in terms of getting our businesses back to profitability.

Keith Hughes - SunTrust Robinson Humphery

All right, thank you.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Thanks.

Operator

Your next question comes from the line of Mary Gilbert from Imperial Capital. Please proceed.

Mary Gilbert - Imperial Capital

That would be Mary Gilbert. Thank you. Yes, I had a question could you just tell us what the revenues were from Battice and Birkeland in the quarter and also the operating income associated with it or I suppose we could just use the same margin? And then could you also give us what the volume increases were on a pro forma basis? In other words looking at the business as it is today considering the Saint-Gobain acquisition, what is sort of a pro forma volume increases that you are seeing?

Duncan Palmer - Chief Financial Officer

Well, Mary, we've made a decision not to break out the Battice and Birkeland

divestiture. There is... you get to some point in a business where you are always going to have things going on and obviously with the acquisition of Saint-Gobain in the fall that was a big material event. We challenged the team to get the business put together to run it, to get this divestiture turn and to give us a business plan that we can believe in and based on that business plan that's where we felt comfortable. On the last call and again on this call saying that we thought the overall business for 2008 would have operating margin approaching double digits. So that includes our internal understanding of Battice and Birkeland and the divestiture and the impact that's going to have in the business. And I think that's probably in some total what we are going to say about the impact of those divestitures on the business.

Mary Gilbert - Imperial Capital

Okay. So we can't sort of look at the first quarter and say, let's say, $80 million to $85 million of the revenues in composites of the $666 million represented Battice and Birkeland?

Duncan Palmer - Chief Financial Officer

I mean obviously we are going to have investors who are going to make their own estimates but we are not going to disclose on that.

Mary Gilbert - Imperial Capital

Okay. And then what about volume increases. What kind of volume increases were we seeing?

Michael Thaman - Chairman of the Board and Chief Executive Officer

In total we saw positive volume is kind of measured by tonnage. In the first quarter on a global basis. I think it would have come through more strongly really in the top line had not one of our really big markets be than the roofing business. So in the U.S. we make both the product called wet chop [ph] and we also make non woven product called [inaudible] who have a primary end-user market which is roofing and we not only serve our on roofing business, we are actually a commercial trader of both web chop and roofing mat in the roofing industry as a supplier to some of the other manufacturers in roofing. And that business has obviously been sequentially weaker and so it's a negative against the volume growth. But when you go out to the regions of the world, Asia has been growing for us, Europe had some real spots of positive growth like with energy and exports in the Middle-East and then we are seeing a bit of weakness with automotive and some of the other markets in Europe. I think we'd say the same thing in the U.S. But the overall industry restructuring that's taking place is absorbing the volume situations seems to be in a pretty reasonable way.

Mary Gilbert - Imperial Capital

Okay. Could you talk about capacity, because you indicated earlier, you did expand capacity in Texas and then you talked about on the call that you're planning to expand capacity in Russia and in China, are you coming up against capacity currently with the demand that you're seeing or could you talk about some of those dynamics?

Michael Thaman - Chairman of the Board and Chief Executive Officer

One of the big dynamics in the industry and this is... has been publicly announced by Saint-Gobain, is as a part of our acquisition of their business, we had to complete the remedy in Europe but they also retained a composite manufacturing facility in the U.S. in a city called Wichita Falls, Texas and they had had that business on for sale really from the time we said we would do joint venture to the time we said we do an acquisition and then even post-acquisition. And in the first quarter, they did announce that it was their intention to shut that facility down, which I think is really a byproduct of two issues. One is, you got to make sure that you continue to invest in your high-cost facilities in order to get them lower cost which is some of the things you're seeing us doing at Amarillo. And then the second impact is the precious metals that used in manufacturing today are quite valuable. So, you don't have good returns or line of site to good returns.

Some of the facilities actually get to the point of having reasonably high liquidation values. With Saint-Gobain making that announcement that they intend to shut down the Wichita Falls, there are some fairly significant product shortages in North America today. We're working very hard to make sure that our capacity is configured in a way that we can support those really core markets where we can grow and where we can win over the long term. And I think we'll be able to do that.

Mary Gilbert - Imperial Capital

Okay. And so... and then what about China and Russia?

Michael Thaman - Chairman of the Board and Chief Executive Officer

Well, obviously, the markets where we're seeing good volume growth would be Eastern Europe, Russia as well as Asia and in particular, China. And we have a nice footprint in Russia that we acquired with the acquisition of Vetrotex. We think it can be very, very low cost platform, not just for Russia but also for Eastern Europe and even to some extent for exports all the way in the Western Europe. We've been studying that, we've been making trips over to Russia evaluating our opportunities there and we don't have anything announced today besides we're making progress of configuring what we think could be a good investment for us in Russia. Same thing is true in China.

The domestic China composites market is growing very, very well. We have some products and capabilities and facilities there that we could be doing more if we add more capacity and we're looking hard at our manufacturing configuration and our footprint of assets over there to also be able to get the position in China we would like to have for the mid and long term. And that's really probably on a little bit like on line versus we are in Russia. But those are two core investments to build our composites business that we're working hard at.

Mary Gilbert - Imperial Capital

Okay. And then finally, what challenges are you facing from a pricing standpoint? You kind of indicated in a Q that there were some... you're challenged to raise prices in certain segments. Could you talk about that and does that related to continued pressure in China? And how you kind of see that unfolding on a go-forward basis?

Michael Thaman - Chairman of the Board and Chief Executive Officer

Mary, your question is related to composites or related to rates generally?

Mary Gilbert - Imperial Capital

It's related to composites.

Michael Thaman - Chairman of the Board and Chief Executive Officer

It's composites. Part of it is, there are certain markets where we probably don't have as much of a product performance advantage. And as a result, the pricing dynamics tend to be more commodity driven, supply and demand driven, so we would see some places where it's a little bit more difficult for us to recover our inflation and catch-up. Some of the inflation we've seen over the last four or five years that haven't really been captured in the market by us and by the manufacturers. The other thing we're seeing is the composites business and our customers tend to work a bit more contractually with us than we would see in the building material side of the business where it's more kind of a purchase order invoice cycle.

So, people do contract for their annual requirements. There are some longer-term contracts as people look at their supply chain and make sure that they can satisfy their needs for gas supplied to Wind Energy or their needs for glass supply to big infrastructure projects and as a member of that chain, we would sometimes enter into contractual agreements and so as a result just moving pricing composites is a little bit different than the dynamic we have in building materials where we announce the price increase and see whether we can get at this step.

Mary Gilbert - Imperial Capital

Okay, great. Thank you, that's helpful.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Thanks, Mary.

Scott Deitz - Vice President, Investor Relations and Corporate Communicati

Denise, I think we will take one more question and then we will turn it back over to Mike for any closing thoughts. So, there can be a quick question.

Operator

Okay, your final question will come from the line of Raul Sha [ph] from AVC Investment Management [ph].

Unidentified Analyst

Hi, good morning.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Hi, Raul.

Unidentified Analyst

I apologize, I don't quite understand your full-year guidance so if you can indulge me for a minute. I believe it in the last call you guys said that composites should generate $2.1 billion to $2.3 billion in revenue and looking at the first quarter I guess the... I think there is a very good chance you should reach that $2.3 billion mark. And EBIT margins already at 9.6% and likely to increase going forward but even using 9.6% on $2.3 billion implies $220 million in EBIT and if I deduct, let's say, $50 million for corporate EBIT that implies only $35 million EBIT for the other three businesses which did roughly $230 million of EBIT last year and you said you are in track to generate $100 million in cost savings and I'm just trying to understand that is that... are you being ultraconservative when you say at least $240 million or is that you actually think there's a chance that the three businesses Insulation, Roofing and other could go from $230 million to only $35 million in spite of the $100 million in cost savings?

Duncan Palmer - Chief Financial Officer

Well, I mean, thanks to a very powerful question and we don't give guidance by segment, I mean with the exception of some of the things we specifically said, but operating margins in Composites and Insulation being profitable for the year and Roofing being profitable beginning of the second quarter. But the math that you are doing is I think a reasonable conclusion based on the pieces of guidance we have given and I guess what I would point out is if you go back a year earlier from 2006 to 2007, our building materials businesses declined quite significantly in terms of their EBIT contribution in a marketplace that from a new construction point of view declined about 25% which is again the kind of year-over-year decline in the marketplace that we are expecting this year.

So to a certain extent well, it's not necessarily the market we want to live in, it does take a fair amount of heavy lifting to flatten out the curve of the deleveraging of cost you get by $100 million and wanted to keep these businesses profitable in the market that we are in. We do believe that in total our building materials business will contribute profit this year. We do believe that individually that they will be profitable this year. So we're running our segments for profitability but in terms of overall contribution it's really a composites year but I would also add and we haven't talked about this on the call, the longer we are at a million housing starts the stronger the recovery that we'd expect to see and one of the things we are working very hard on is to make sure that we manage our building materials businesses in such a way that when the market does recover we get tremendous leverage both on the cost side and the volume side and also on the pricing side.

So I think you summarized our portfolio reasonably well and from an investor point of view, we now have, I think, demonstrated what a great composites business could look like. And I think our history has demonstrated what great building materials properties we really do own and operate here. And those two combined is really what we're looking forward to have the day we can talk about a roaring building materials business and roaring composites business and real strength of this portfolio.

Unidentified Analyst

I appreciate that and I understand it. It makes sense to be conservative. But, I just want to make sure that we are not missing something or misunderstanding the business. So when you say actually it's $240 million, even $300 million EBIT is possible all obviously a function to what extent housing deteriorates or stabilizes?

Michael Thaman - Chairman of the Board and Chief Executive Officer

Yes. I would be uncomfortable giving any other guidance than the guidance we've given today, which is we still feel comfortable that $240 million... achieving $240 million of EBIT is a good goal for us this year. Obviously, as the year goes by, if we see good things or negative things, we're going to communicate those to our investors and if we need to update our guidance, we will.

Unidentified Analyst

Okay. Thank you for your time.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Okay. Thanks.

Scott Deitz - Vice President, Investor Relations and Corporate Communications

Denise, I think we'll conclude the Q&A session there. My apologies to those remaining in the queue that we haven't gotten to your questions yet. However, if you call later this afternoon, we will return as many calls as we can. Mike will be doing a CNBC interview at 1:20 Eastern Time. We'll be returning phone calls for few minutes between now and 1 o'clock and then will be back on the phone again late today. Also I'd want to remind those listening in that we're currently expecting that we will announce our second quarter results on July 30th. With that I'll turn it over to Mike to close the call.

Michael Thaman - Chairman of the Board and Chief Executive Officer

Thanks, Scott. First and foremost, I want to thank all of you for joining us today. We certainly appreciate your continued interest in our company and we look forward to speaking with you again when we do the second quarter call as Scott mentioned. I repeat something I said from our... my prepared remarks.

This quarter really does demonstrate the value of the portfolio actions that we took last year. And I would tell you, in a tough market, I think it's gratifying for me, it's gratifying for the management team, I think it's gratifying for the people of Owens Corning to see the strategic actions starting to come through in the financial results. And that really is what we've seen today and I think it shapes how we're looking at 2008 and beyond. We believe the company is performing.

We are encouraged by our results. We met our own internal expectations and believe that we are making the progress that we need to make against the goals we set for our business this year. Clearly, our company's performance has been improved by the global growth of our composites business. We not only love that business, we love what that does for our company in terms of the globalizing our business, giving us a more global footprint and really giving us talented feet on the street in a lot of the corners of the world where we haven't been to begin thinking about how to grow Owens Corning globally.

Finally, and I said this a little bit in response to the last call, it's important to recognize with these building materials businesses that as tough as the market is today, it will be that good some day in the future. And what we look at is the franchise value of our businesses, how do we make sure that we continue to own businesses that are in great markets, that have good industry structures where we have the premier franchise in that marketplace. We think that's the portfolio of building materials businesses we have today.

The challenge we've given the management teams over there is to deliver results in the near term but make sure that we are also building our results for the long term. We work in the cost side away from the customer but I would say that the amount of money we are spending today facing our customers is as much or more than what we spent in the past and we are still getting a good profitability out of those businesses in building up that franchise. And we think that's what our investors should expect of us, that's what we expect of ourselves and we are happy with where we are at this point.

So with that I will close out. Thank you again for your interest and we'll talk to you again in the second quarter. Bye-bye.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.

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Source: Owens Corning Q1 2008 Earnings Call Transcript
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