Business Highlights
First Quarter 2017 vs. First Quarter
2016
- Net sales increase to $767 million from
$747 million
- Net income decreases to $55 million
from $67 million; adjusted net income decreases to $55 million from
$56 million
- Earnings per diluted share decreases to
$0.37 from $0.46; adjusted earnings per diluted share decreases to
$0.37 from $0.38
- Repurchased approximately $25 million
of common stock
USG Corporation (NYSE:USG), an industry leading manufacturer of
building products and innovative solutions, today reported results
for the first quarter of 2017.
“We had sound operational performance in the first quarter and
we are seeing solid demand for our products,” said Jennifer F.
Scanlon, President and CEO. “I am encouraged about our prospects
for the balance of the year, despite the uptick we are seeing in
commodity costs.”
On a consolidated basis in the first quarter of 2017, net sales
were $767 million, compared to $747 million in the first quarter of
2016. Operating profit decreased to $91 million from $116 million,
while adjusted operating profit decreased to $104 million from $120
million in the first quarter of 2017 compared to the first quarter
of 2016. Inflation in commodity costs across both the Gypsum and
Ceilings businesses was the primarily driver of the decrease in
consolidated operating profit in the first quarter of 2017.
USG generated $55 million in net income and $0.37 per diluted
share in the first quarter of 2017, compared to $67 million and
$0.46 per diluted share in the first quarter of 2016. On an
adjusted basis, net income of $55 million and diluted earnings per
share of $0.37 in the first quarter of 2017 decreased from $56
million and $0.38, respectively, in the first quarter of 2016. A
full reconciliation of GAAP to adjusted metrics is set forth on an
attached schedule.
The corporation’s Gypsum segment generated $91 million of
operating profit in the first quarter of 2017. On an adjusted
basis, operating profit of $91 million in the Gypsum segment
decreased by $15 million over the first quarter of 2016. US
wallboard price increased by 5%, while US wallboard volumes
decreased by 4% in the first quarter of 2017. US wallboard
manufacturing costs increased by $16 million due primarily to
recent inflation in waste paper and synthetic gypsum input
costs.
The Ceilings segment earned $23 million of operating profit in
the first quarter of 2017 compared to $28 million in operating
profit in the first quarter of 2016. The reduction in operating
profit was driven primarily by increased tile and grid
manufacturing costs on normalizing steel input costs, coupled with
lower volumes in the US.
The USG Boral business generated $13 million of equity income in
the first quarter of 2017, an increase of $6 million from the first
quarter of 2016, on a 16% increase in plasterboard volumes as well
as improved plasterboard price and increased sales of adjacent
products.
“Our residential and commercial construction end markets are
healthy and growing,” Ms. Scanlon said. “With innovative new
product offerings, such as the Sheetrock® Brand EcoSmart Panels
that we announced in March, we are well positioned for success in
2017.”
A conference call is being held today at 9:00 a.m. Eastern time
(8:00 a.m. Central time) during which USG senior management will
discuss the corporation’s operating results. The conference call
will be webcast on the USG website, www.usg.com, in the Investor
Relations section, where the accompanying presentation materials
can be found. The dial-in number for the conference call is
1-888-771-4371 in the United States and Canada (1-847-585-4405 for
other international callers), and the pass code is 44622363. After
the live webcast, a replay of the webcast will be available on the
USG website. In addition, a telephonic replay of the call will be
available until Friday, May 26, 2017. The replay dial-in number is
1-888-843-7419 (1-630-652-3042 for international callers), and the
pass code is 44622363.
USG Corporation
USG Corporation is an industry-leading manufacturer of building
products and innovative solutions. Headquartered in Chicago, USG
serves construction markets around the world through its United
States Gypsum Company and USG Interiors, LLC subsidiaries and its
international subsidiaries, including its USG Boral Building
Products joint venture. Its wall, ceiling, flooring, sheathing and
roofing products provide the solutions that enable customers to
build the outstanding spaces where people live, work and play. Its
USG Boral Building Products joint venture is a leading plasterboard
and ceilings producer across Asia, Australasia and the Middle East.
For additional information, visit www.usg.com.
Non-GAAP Financial
Measures
In this press release, the corporation’s financial results are
provided both in accordance with accounting principles generally
accepted in the United States of America (GAAP) and using certain
non-GAAP financial measures. In particular, the corporation
presents the non-GAAP financial measures adjusted operating profit,
adjusted net income, and adjusted earnings per diluted share, which
exclude certain items. The non-GAAP financial measures are included
as a complement to results provided in accordance with GAAP because
management believes these non-GAAP financial measures help
investors’ ability to analyze underlying trends in the
corporation’s business, evaluate its performance relative to other
companies in its industry and provide useful information to both
management and investors by excluding certain items that may not be
indicative of the corporation’s core operating results. In
addition, adjusted operating profit includes the income from the
corporation's equity method investments, including USG Boral
Building Products, because management views the joint ventures as a
business unit, even though the corporation’s share of the joint
venture is 50%. In addition, the corporation uses adjusted net
income as a component in the measurement of incentive compensation.
Prior year adjusted results also exclude results from Gypsum
Transportation Limited (GTL), a shipping operation that the
corporation has exited. Adjustments to net earnings are shown net
of the tax effect computed at applicable statutory rates. The
non-GAAP measures should not be considered a substitute for or
superior to GAAP results and may vary from others in the industry.
For further information related to the corporation’s use of
non-GAAP financial measures, and reconciliations to the nearest
GAAP measures, see the schedules attached hereto.
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
related to management’s expectations about future conditions,
including but not limited to, our prospects, growing end markets,
and our success in 2017. Actual business, market or other
conditions may differ materially from management’s expectations
and, accordingly, may affect our sales and profitability or other
results and liquidity. Any forward-looking statements represent our
views only as of today and should not be relied upon as
representing our views as of any subsequent date and we undertake
no obligation to update any forward-looking statement. Actual
results may differ materially due to various other factors,
including: economic conditions, such as employment, household
formation, home ownership rate, existing home price trends,
availability of mortgage financing, interest rates, consumer
confidence, job growth and discretionary business investment; our
ability to maintain or achieve price increases; the loss of one or
more major customers; the impact on our performance and financial
results due to the disposition of L&W Supply, one of our
largest customers; competitive conditions, such as price, quality
and range of products; unexpected operational difficulties or
catastrophic events at our facilities; an increasing number of our
customers having significant buying power; increased costs, or
decreased availability, of key raw materials or energy; our ability
to successfully operate the joint venture with Boral Limited,
including risks that our joint venture partner, Boral Limited, may
not fulfill its obligations as an investor or may take actions that
are inconsistent with our objectives; exposure to risks of
operating internationally; our ability to innovate and protect our
intellectual property and other proprietary rights; our ability to
make capital expenditures and achieve the expected return on
investment; a disruption in our information technology systems;
significant changes in factors and assumptions used to measure our
defined benefit plan obligations; changes in laws or regulations,
including environmental and safety regulations; the outcome in
legal and governmental proceedings; the ability of a small number
of stockholders to influence our business and stock price; our
ability to successfully pursue and complete acquisitions, joint
ventures and other transactions to complement or expand our
businesses; our ability to return capital to stockholders; the
occurrence of an “ownership change” within the meaning of the
Internal Revenue Code; ability to incur substantial additional
indebtedness; the effects of acts of terrorism or war upon domestic
and international economies and financial markets; and acts of God.
We assume no obligation to update any forward-looking information
contained in this press release. Additional information concerning
these and other factors may be found in our filings with the
Securities and Exchange Commission, including the “Risk Factors” in
our most recent Annual Report on Form 10-K.
USG CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (dollars in millions, except share and per share
data) (Unaudited) Three months ended March
31, 2017 2016 Net sales $ 767 $ 747 Cost
of products sold 603 566 Gross profit 164 181 Selling
and administrative expenses 73 68 Recovery of receivable —
(3 ) Operating profit 91 116 Income from equity method investments
13 7 Interest expense (20 ) (40 ) Interest income 1 2 Loss on
extinguishment of debt — (2 ) Other (expense) income, net (1 ) 3
Income from continuing operations before income taxes 84 86
Income tax expense (29 ) (26 ) Income from continuing operations 55
60 Income from discontinued operations, net of tax — 7
Net income $ 55 $ 67 Earnings
per average common share - basic: Income from continuing operations
$ 0.38 $ 0.41 Income from discontinued operations — 0.05
Net income $ 0.38 $ 0.46 Earnings per average common
share - diluted: Income from continuing operations $ 0.37 $ 0.41
Income from discontinued operations — 0.05 Net income
$ 0.37 $ 0.46 Average common shares 146,309,994 145,819,026
Average diluted common shares 148,730,354 146,986,392
USG
CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share data) (Unaudited)
As of As of March 31,
2017 December 31, 2016 Assets Cash and
cash equivalents $ 341 $ 427 Short-term marketable securities 69 62
Receivables (net of reserves - 2017 - $8 and 2016 - $8) 264 183
Inventories 243 236 Income taxes receivable 1 1 Other current
assets 35 40 Total current assets 953 949 Long-term
marketable securities 24 29 Property, plant and equipment (net of
accumulated depreciation and depletion - 2017 - $1,995 and 2016 -
$1,960) 1,715 1,707 Deferred income taxes 493 492 Equity method
investments 665 628 Other assets 62 64
Total
assets $ 3,912 $ 3,869
Liabilities and
Stockholders' Equity Accounts payable $ 233 $ 237 Accrued
expenses 126 175 Current portion of long-term debt 500 — Income
taxes payable 10 10 Total current liabilities 869 422
Long-term debt 584 1,083 Deferred income taxes 4 4 Pension and
other postretirement benefits 292 290 Other liabilities 187
184 Total liabilities 1,936 1,983 Stockholders' Equity:
Preferred stock – $1 par value, authorized 36,000,000 shares;
outstanding - none — — Common stock – $0.10 par value; authorized
200,000,000 shares; issued: 2017 - 146,513,000 shares and 2016 -
146,167,000 shares 15 15 Treasury stock at cost – 2017- 721,000
shares and 2016 - 0 shares (24 ) — Additional paid-in capital 3,039
3,038 Accumulated other comprehensive loss (352 ) (385 ) Retained
earnings (accumulated deficit) (702 ) (782 ) Total stockholders'
equity 1,976 1,886
Total liabilities and
stockholders' equity $ 3,912 $ 3,869
Other Information: Total cash
and cash equivalents and marketable securities $ 434 $ 518
Borrowing availability under existing credit facilities 125
85 Total Liquidity $ 559 $ 603
USG CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (dollars in millions) (Unaudited)
Three months ended March 31, 2017
2016 Operating Activities Net income $ 55 $ 67 Less:
Income from discontinued operations, net of tax — 7
Income from continuing operations 55 60 Adjustments to
reconcile income from continuing operations to net cash:
Depreciation, depletion and amortization 33 34 Loss on
extinguishment of debt — 2 Recovery of receivable — (3 )
Share-based compensation expense 4 4 Deferred income taxes 29 25
Income from equity method investments (13 ) (7 ) Pension settlement
— 2 Change in operating assets and liabilities (138 ) (158 ) Other,
net 1 (5 ) Net cash used for operating activities of
continuing operations (29 ) (46 ) Net cash provided by operating
activities of discontinued operations (1 ) 16 Net cash used
for operating activities $ (30 ) $ (30 )
Investing
Activities Purchases of marketable securities (24 ) (79 ) Sales
or maturities of marketable securities 22 84 Capital expenditures
(39 ) (14 ) Other investing activities — 9 Net cash
used for investing activities of continuing operations (41 ) — Net
cash provided by (used for) investing activities of discontinued
operations 6 (1 ) Net cash used for investing activities $
(35 ) $ (1 )
Financing Activities Repayment of debt —
(64 ) Issuances of common stock 3 — Repurchase of common stock (25
) — Repurchases of common stock to satisfy employee tax withholding
obligations (3 ) (1 ) Net cash used for financing activities of
continuing operations $ (25 ) $ (65 ) Effect of exchange
rate changes on cash 4 1 Net decrease in cash and cash
equivalents from continuing operations $ (91 ) $ (110 ) Net
increase in cash and cash equivalents from discontinued operations
5 15 Net decrease in cash and cash equivalents (86 )
(95 ) Cash and cash equivalents at beginning of period 427
442 Cash and cash equivalents at end of period $ 341
$ 347
USG CORPORATION SEGMENT BUSINESS RESULTS
(dollars in millions) (Unaudited) Three
months ended March 31, 2017 2016
Net
Sales
Gypsum United States $ 555 $ 536 Canada 83 82 Mexico / Latin
America 49 44 Canadian Mining — — Eliminations (38 ) (34 ) Total
649 628
Ceilings United States 112 115 Canada 13 13 Mexico /
Latin America 7 8 Eliminations (12 ) (15 ) Total 120 121
Eliminations (2 ) (2 )
Total USG Corporation Net Sales $ 767
$ 747
Operating Profit
(Loss)
Gypsum United States $ 90 $ 101 Canada 1 6 Mexico / Latin
America 1 2 Canadian Mining (1 ) (3 ) Gypsum Transportation Limited
— 3 Total 91 109
Ceilings United States 21 26
Canada 1 1 Mexico / Latin America 1 1 Total 23 28
Corporate (23 ) (21 )
Total USG Corporation Operating
Profit $ 91 $ 116
USG Boral Building
Products (UBBP) Net sales $ 276 $ 229 Operating profit 35 23
Net income attributable to UBBP 25 14 USG share of income from UBBP
13 7
USG CORPORATION RECONCILIATION OF NON-GAAP MEASURES
TO GAAP MEASURES (dollars in millions, except share and per
share data) (Unaudited) Three months ended
March 31, 2017 2016 Operating profit -
GAAP measure $ 91 $ 116 Income from
equity method investments 13 7 GTL recovery of receivable /
shipping operations — (3 )
Adjusted operating profit -
Non-GAAP measure $ 104 $ 120
Gypsum operating profit - GAAP measure
$ 91 $ 109 GTL recovery of receivable /
shipping operations — (3 )
Gypsum adjusted operating
profit - Non-GAAP measure $ 91 $
106 UBBP operating profit - GAAP
measure $ 35 $ 23 Income from
equity method investments owned by UBBP 3 2 Operating (profit) loss
attributable to non-controlling interest, pre-tax (1 ) (2 )
Severance charges — 1
UBBP adjusted operating
profit - Non-GAAP measure $ 37 $
24 Net income - GAAP measure $
55 $ 67 Income from discontinued operations,
net of tax — (7 ) Loss on extinguishment of debt — 2 GTL recovery
of receivable — (8 ) Tax expense (benefit) on adjustments (a) —
2
Adjusted net income - Non-GAAP measure
$ 55 $ 56
Earnings per average diluted common share - GAAP measure
$ 0.37 $ 0.46 Adjustments per average
diluted common share: Income from discontinued operations, net of
tax — (0.05 ) Loss on extinguishment of debt — 0.01 GTL recovery of
receivable — (0.05 ) Tax expense (benefit) on adjustments (a) —
0.01
Adjusted earnings per adjusted average
diluted common share – Non-GAAP measure $ 0.37
$ 0.38 Average diluted common
shares – GAAP 148,730,354 146,986,392 Adjustment
to add common shares that would be dilutive based on adjusted net
income — —
Adjusted average diluted common shares
– Non-GAAP 148,730,354 146,986,392
(a) - Tax effect on adjustments is calculated using country
specific statutory rates.
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version on businesswire.com: http://www.businesswire.com/news/home/20170427005293/en/
USG CorporationMediaKathleen Prause(312)
436-6607kprause@usg.comorInvestorsRyan Flanagan(312)
436-5304investorrelations@usg.com
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