Business Highlights
Second Quarter 2017 vs. Second Quarter
2016
- Net sales increased to $811 million
from $769 million
- Net income decreased to $36 million
from $74 million; adjusted net income increased to $64 million from
$61 million
- Earnings per diluted share decreased to
$0.24 from $0.50; adjusted earnings per diluted share increased to
$0.44 from $0.42
- Repurchased $72 million of common stock
under $250 million share repurchase program
USG Corporation (NYSE:USG), an industry leading manufacturer of
building products and innovative solutions, today reported results
for the second quarter of 2017.
“Our US wallboard shipments in the second quarter of 2017 were
up double-digits and were at the highest levels we have seen since
2008,” said Jennifer F. Scanlon, President and CEO. “However,
rising commodity costs and a competitive pricing environment
weighed on our operating margins and second quarter performance. We
are taking actions to address inflation and will continue our
strategic investment in advanced manufacturing to deliver
profitable growth.”
On a consolidated basis in the second quarter of 2017, net sales
were $811 million, compared to $769 million in the second quarter
of 2016. Operating profit decreased to $96 million from $122
million, while adjusted operating profit decreased to $117 million
from $127 million in the second quarter of 2017 compared to the
second quarter of 2016.
USG generated $36 million in net income and $0.24 per diluted
share in the second quarter of 2017, compared to $74 million and
$0.50 per diluted share in the second quarter of 2016. On an
adjusted basis, net income of $64 million and diluted earnings per
share of $0.44 in the second quarter of 2017 increased from $61
million and $0.42, respectively, in the second quarter of 2016. A
full reconciliation of GAAP to adjusted metrics is set forth on an
attached schedule.
The corporation’s Gypsum segment generated $90 million of
operating profit in the second quarter of 2017. On an adjusted
basis, operating profit of $95 million in the Gypsum segment
decreased by $6 million from the second quarter of 2016. US
wallboard volumes increased by 10% in the second quarter of 2017.
US wallboard price decreased by approximately 1% due primarily to
competitive pricing pressures and the impact of transitioning
certain wallboard volumes from wholly-owned distribution at L&W
Supply, which was sold in 2016, to independent distribution. US
wallboard manufacturing costs increased by $8 million due almost
exclusively to inflation in waste paper costs.
The Ceilings segment earned $23 million of operating profit in
the second quarter of 2017. On an adjusted basis, operating profit
of $24 million in the Ceilings segment decreased by $8 million from
the second quarter of 2016. The reduction in operating profit was
driven primarily by higher steel costs as well as lower ceiling
tile pricing.
The USG Boral business generated $14 million of equity income in
the second quarter of 2017, a decrease of $2 million from the
second quarter of 2016. The impact of increased plasterboard
volumes was more than offset by higher manufacturing costs and an
increase in withholding taxes on an intercompany dividend.
“This quarter we launched the Commercial Construction Index, a
new quarterly index that will help measure the health and vitality
of the commercial construction industry,” added Scanlon. "The
initial results from the survey validate our efforts to create and
bring to market innovative products like Ensemble™ Monolithic
Acoustical Ceiling Systems and Sheetrock® Brand EcoSmart Panels,
which we introduced this year. These products address challenges
faced by our industry, including speed of construction, labor
availability, and sustainability.”
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 investor relations website,
investor.usg.com, 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 45163620. 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, August 25, 2017. The replay dial-in number
is 1-888-843-7419 (1-630-652-3042 for international callers), and
the pass code is 45163620.
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, adjusted selling and administrative expenses,
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 actions to address inflation and
our strategic investment in advanced manufacturing. 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
June 30, Six months ended June 30, 2017
2016 2017 2016 Net sales $ 811 $ 769 $
1,578 $ 1,516 Cost of products sold 643 576 1,246
1,142 Gross profit 168 193 332 374 Selling and
administrative expenses 72 71 145 139 Recovery of receivable —
— — (3 ) Operating profit 96 122 187 238
Income from equity method investments 14 16 27 23 Interest expense
(19 ) (38 ) (39 ) (78 ) Interest income — 1 1 3 Loss on
extinguishment of debt (22 ) (2 ) (22 ) (4 ) Other (expense)
income, net (3 ) 2 (4 ) 5 Income from continuing
operations before income taxes 66 101 150 187 Income tax expense
(20 ) (34 ) (49 ) (60 ) Income from continuing operations 46 67 101
127 (Loss) income from discontinued operations, net of tax (10 ) 7
(10 ) 14 Net income $ 36 $ 74 $ 91
$ 141 Earnings per average common share
- basic: Income from continuing operations $ 0.32 $ 0.46 $ 0.69 $
0.87 (Loss) income from discontinued operations (0.07 ) 0.04
(0.07 ) 0.09 Net income $ 0.25 $ 0.50 $ 0.62 $ 0.96
Earnings per average common share - diluted: Income from continuing
operations $ 0.31 $ 0.46 $ 0.68 $ 0.86 (Loss) income from
discontinued operations (0.07 ) 0.04 (0.07 ) 0.09 Net
income $ 0.24 $ 0.50 $ 0.61 $ 0.95 Average common shares
144,526,900 145,933,165 145,753,098 145,856,220 Average diluted
common shares 146,860,939 147,994,032 148,291,473 147,321,420
USG CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share data) (Unaudited)
As of As of June 30, 2017
December 31, 2016 Assets Cash and cash
equivalents $ 371 $ 427 Short-term marketable securities 59 62
Receivables (net of reserves - 2017 - $8 and 2016 - $8) 234 183
Inventories 249 236 Income taxes receivable 1 1 Other current
assets 35 40 Total current assets 949 949 Long-term
marketable securities 33 29 Property, plant and equipment (net of
accumulated depreciation and depletion - 2017 - $2,026 and 2016 -
$1,960) 1,718 1,707 Deferred income taxes 469 492 Equity method
investments 656 628 Other assets 62 64
Total
assets $ 3,887 $ 3,869
Liabilities and
Stockholders' Equity Accounts payable $ 242 $ 237 Accrued
expenses 133 175 Income taxes payable 4 10 Total
current liabilities 379 422 Long-term debt 1,077 1,083 Deferred
income taxes 4 4 Pension and other postretirement benefits 272 290
Other liabilities 187 184 Total liabilities 1,919
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 -
143,410,000 shares and 2016 - 146,167,000 shares 15 15 Treasury
stock at cost; 2017 - 3,103,000 shares and 2016 - 0 shares (95 ) —
Additional paid-in capital 3,043 3,038 Accumulated other
comprehensive loss (329 ) (385 ) Retained earnings (accumulated
deficit) (666 ) (782 ) Total stockholders' equity 1,968
1,886
Total liabilities and stockholders' equity $
3,887 $ 3,869
Other Information: Total cash and cash equivalents and
marketable securities $ 463 $ 518 Borrowing availability under
existing credit facilities 189 85 Total Liquidity
$ 652 $ 603
USG CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars
in millions) (Unaudited) Six months ended June
30, 2017 2016 Operating Activities
Net income $ 91 $ 141 Less: (Loss) income from discontinued
operations, net of tax (10 ) 14 Income from continuing
operations 101 127 Adjustments to reconcile income from
continuing operations to net cash: Depreciation, depletion and
amortization 65 67 Loss on extinguishment of debt 22 4 Recovery of
receivable — (3 ) Share-based compensation expense 9 9 Deferred
income taxes 48 58 Gain on asset dispositions (1 ) (10 ) Income
from equity method investments (27 ) (23 ) Dividends received from
equity method investments 23 18 Pension settlement 7 2 Change in
operating assets and liabilities (117 ) (86 ) Other, net (1 ) (12 )
Net cash provided by operating activities of continuing operations
129 151 Net cash (used for) provided by operating activities of
discontinued operations (1 ) 13 Net cash provided by
operating activities $ 128 $ 164
Investing
Activities Purchases of marketable securities (54 ) (167 )
Sales or maturities of marketable securities 53 187 Capital
expenditures (72 ) (26 ) Net proceeds from asset dispositions 2 12
Other investing activities 1 10 Net cash (used for)
provided by investing activities of continuing operations (70 ) 16
Net cash (used for) provided by investing activities of
discontinued operations 6 (2 ) Net cash (used for) provided
by investing activities $ (64 ) $ 14
Financing
Activities Issuance of debt 500 — Repayment of debt (520 ) (141
) Payment of debt issuance fees (8 ) — Issuances of common stock 3
2 Repurchase of common stock (97 ) — Repurchases of common stock to
satisfy employee tax withholding obligations (4 ) (2 ) Net cash
used for financing activities of continuing operations $ (126 ) $
(141 ) Effect of exchange rate changes on cash 6 —
Net (decrease) increase in cash and cash equivalents from
continuing operations $ (61 ) $ 26 Net increase in cash and cash
equivalents from discontinued operations 5 11 Net
(decrease) increase in cash and cash equivalents (56 ) 37 Cash and
cash equivalents at beginning of period 427 442 Cash
and cash equivalents at end of period $ 371 $ 479
USG CORPORATION SEGMENT BUSINESS RESULTS (dollars
in millions) (Unaudited) Three months
ended June 30, Six months ended June 30, 2017
2016 2017 2016
Net
Sales
Gypsum United States $ 582 $ 539 $ 1,137 $ 1,075 Canada 92
86 175 168 Mexico / Latin America 52 49 101 93 Canadian Mining — —
— — Eliminations (38 ) (38 ) (76 ) (72 ) Total 688 636 1,337 1,264
Ceilings United States 118 124 230 239 Canada 12 14 25 27
Mexico / Latin America 7 8 14 16 Eliminations (11 ) (11 ) (23 ) (26
) Total 126 135 246 256 Eliminations (3 ) (2 ) (5 ) (4 )
Total USG Corporation Net Sales $ 811 $ 769 $
1,578 $ 1,516
Operating Profit
(Loss)
Gypsum United States $ 87 $ 106 $ 177 $ 207 Canada 2 5 3 11
Mexico / Latin America 2 4 3 6 Canadian Mining (1 ) (3 ) (2 ) (6 )
Gypsum Transportation Limited — — — 3
Total 90 112 181 221
Ceilings United States 23 29 44 55
Canada — 2 1 3 Mexico / Latin America — 1 1 2
Total 23 32 46 60 Corporate (17 ) (22 ) (40 ) (43 )
Total USG Corporation Operating Profit $ 96 $ 122
$ 187 $ 238
USG Boral Building
Products (UBBP) Net sales $ 287 $ 273 $ 563 $ 502 Operating
profit 40 41 75 64 Net income attributable to UBBP 28 32 53 46 USG
share of income from UBBP 14 16 27 23
USG CORPORATION
RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES
(dollars in millions, except share and per share data)
(Unaudited) Three months ended June 30,
Six months ended June 30, 2017 2016
2017 2016 Operating profit - GAAP
$ 96 $ 122 $ 187 $
238 Income from equity method investments 14 16 27 23
Pension settlement charge 7 — 7 — Gain on sale of surplus property
— (11 ) — (11 ) GTL recovery of receivable / shipping operations —
— — (3 )
Adjusted operating profit -
Non-GAAP $ 117 $ 127
$ 221 $ 247
Gypsum operating profit - GAAP $ 90 $
112 $ 181 $ 221 Pension
settlement charge 5 — 5 — Gain on sale of surplus property — (11 )
— (11 ) GTL recovery of receivable — — — (3 )
Gypsum adjusted operating profit - Non-GAAP $
95 $ 101 $ 186
$ 207 US Gypsum operating
profit - GAAP $ 87 $ 106 $
177 $ 207 Pension settlement charge 5 — 5 —
Gain on sale of surplus property — (11 ) — (11 )
US Gypsum adjusted operating profit - Non-GAAP $
92 $ 95 $ 182
$ 196 Ceilings operating
profit - GAAP $ 23 $ 32 $
46 $ 60 Pension settlement charge 1 —
1 —
Ceilings adjusted operating profit -
Non-GAAP $ 24 $ 32
$ 47 $ 60 US
Ceilings operating profit - GAAP $ 23 $
29 $ 44 $ 55 Pension settlement
charge 1 — 1 —
US Ceilings adjusted
operating profit - Non-GAAP $ 24 $
29 $ 45 $ 55
UBBP operating profit - GAAP $
40 $ 41 $ 75 $ 64
Income from equity method investments owned by UBBP 5 4 8 6
Operating profit attributable to non-controlling interest, pre-tax
(2 ) (2 ) (3 ) (4 ) Severance charge — — — 1
UBBP adjusted operating profit - Non-GAAP $
43 $ 43 $ 80
$ 67 Selling and
Administrative Expenses - GAAP $ 72 $
71 $ 145 $ 139 Pension
settlement charge (2 ) — (2 ) —
Adjusted Selling
and Administrative Expenses - Non-GAAP $ 70
$ 71 $ 143
$ 139 USG CORPORATION
RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES
(dollars in millions, except share and per share data)
(Unaudited) Three months ended June 30, Six
months ended June 30, 2017 2016 2017
2016 Net income - GAAP $ 36 $
74 $ 91 $ 141 Loss (income) from
discontinued operations, net of tax 10 (7 ) 10 (14 ) Loss on
extinguishment of debt 22 2 22 4 Pension settlement charge 7 — 7 —
Gain on sale of surplus property — (11 ) — (11 ) GTL recovery of
receivable — — — (8 ) Tax expense (benefit) on adjustments (a) (11
) 3 (11 ) 5
Adjusted net income - Non-GAAP
$ 64 $ 61 $
119 $ 117 Earnings per
average diluted common share - GAAP $ 0.24
$ 0.50 $ 0.61 $ 0.95
Adjustments per average diluted common share: Loss (income) from
discontinued operations, net of tax 0.07 (0.04 ) 0.07 (0.09 ) Loss
on extinguishment of debt 0.15 0.02 0.15 0.03 Pension settlement
charge 0.05 — 0.05 — Gain on sale of surplus property — (0.08 ) —
(0.08 ) GTL recovery of receivable — — — (0.05 ) Tax expense
(benefit) on adjustments (a) (0.07 ) 0.02 (0.07 ) 0.04
Adjusted earnings per adjusted average diluted common
share – Non-GAAP $ 0.44 $
0.42 $ 0.81 $ 0.80
Average diluted common shares – GAAP
146,860,939 147,994,032 148,291,473
147,321,420 Adjustment to add common shares that would be
dilutive based on adjusted net income — — — —
Adjusted average diluted common shares – Non-GAAP
146,860,939 147,994,032
148,291,473 147,321,420
(a) - Tax effect on adjustments is
calculated using country specific statutory rates.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170726005160/en/
USG CorporationMediaKathleen Prause(312)
436-6607kprause@usg.comorInvestorsRyan Flanagan(312)
436-5304investorrelations@usg.com
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