Exhibit 99.1
USG Corporation Reports First Quarter 2015 Results
First Quarter 2015 vs. First Quarter 2014
Business Highlights
CHICAGO--(BUSINESS WIRE)--April 23, 2015--USG Corporation (NYSE:USG), a leading building products company, today reported results for the first quarter of 2015. “USG is off to a great start in 2015, led by the performance of our U.S. Gypsum and U.S. Ceilings businesses,” said James S. Metcalf, Chairman, President, and CEO. “We generated operating margin improvement in these businesses by achieving price increases, focusing on manufacturing cost control, and tailoring our spending on investments in these businesses.”
On a consolidated basis in the first quarter of 2015, net sales were $909 million, up 7 percent from the first quarter of 2014. Operating profit improved 15 percent to $76 million in the first quarter of 2015. The corporation’s adjusted operating profit was $84 million in the first quarter of 2015, which includes equity method investment income of $8 million from the USG Boral Building Products joint venture, compared to an adjusted operating profit of $69 million in the first quarter of 2014. USG generated $24 million in net income and $0.16 per diluted share in the first quarter of 2015. Adjusted net income and diluted earnings per share, which adjusts for costs incurred on a refinanced debt obligation, more than doubled in the first quarter of 2015 at $43 million and $0.29 cents per diluted share, respectively. A full reconciliation of adjusted net income to net income, adjusted earnings per share to earnings per share, and adjusted operating profit to operating profit is set forth on a schedule attached hereto.
The corporation’s Gypsum segment generated $68 million of operating profit in the first quarter of 2015, led by the United States Gypsum business that improved operating margins by 270 basis points. The United States Gypsum business realized improved volumes, lower costs, and also earned a wallboard price increase that was achieved in all channels that contributed $4 million of additional operating profit in the first quarter of 2015. Adjusting for $8 million in income from its non-core shipping business and a $7 million non-cash benefit in its mining business in the first quarter of 2014, the Gypsum segment realized $18 million of improved operating profit and 250 basis points of operating margin improvement.
“While weather conditions were more favorable, we also saw organic volume growth across all of our businesses. Our non-wallboard products in the Gypsum business also played a part in our first quarter success by generating $5 million of incremental profit,” Mr. Metcalf said.
USG announced that it has entered into agreements to sell the two ships in its non-core shipping business, Gypsum Transportation Limited (GTL), for $42 million. The sales of the ships are expected to close in April 2015.
The corporation’s Ceilings segment earned $21 million of operating profit in the first quarter of 2015, an increase of 40% over the first quarter of 2014, with United States Ceilings operating margins expanding by 630 basis points.
The corporation also revised its selling, general, and administrative (SG&A) spending outlook for the full year of 2015. “While we are seeing improvements in all of our end markets, we believe that this recovery will be more elongated than past housing and construction recoveries in the United States. To that end, we are scaling back our targeted SG&A spend in 2015 to improve free cash flow available for paying down debt,” Mr. Metcalf said. The corporation revised its projected full year 2015 SG&A expense downward by $20 million to $325 million.
“Our customers continue to recognize USG’s value proposition in the marketplace, and it’s this commitment to quality, service, and innovation that differentiates us from our competition, enables us to capture price premiums on our products, and positions the company for future success,” Mr. Metcalf said. “With demand increasing in all of our end markets in 2015, I am excited about our prospects for the full year.”
A conference call is being held today at 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. The dial-in number for the conference call is 1-800-315-2944 in the United States and Canada (1-847-413-2929 for other international callers), and the pass code is 39347583. 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 Thursday, May 7, 2015. The replay dial-in number is 1-888-843-7419 (1-630-652-3042 for international callers), and the pass code is 39347583.
USG Corporation
USG Corporation is a manufacturer and distributor of innovative, high-performance building systems through its United States Gypsum Company, USG Interiors, LLC, and L&W Supply Corporation subsidiaries and its USG Boral Building Products joint venture. Headquartered in Chicago, USG's worldwide operations serve the commercial, residential, and repair and remodel construction markets, enabling our customers to build the outstanding spaces where people live, work and play. USG wall, ceiling, exterior sheathing, flooring underlayment and roofing systems provide leading-edge building solutions, while L&W Supply branch locations efficiently stock and deliver building materials throughout the United States. USG Boral Building Products is a leading plasterboard & ceilings joint venture across Asia, Australasia, and the Middle East. USG and its subsidiaries are proud sponsors of the U.S. Olympic and Paralympic teams and the Canadian Olympic team. 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, operating profit adjusted for results of GTL and non-cash benefit in its mining operations, adjusted net income, and adjusted earnings per basic share, which exclude certain items. In addition, adjusted operating profit includes the corporation’s income from its equity method investments, including the USG Boral Building Products joint venture. 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. Adjusted operating profit includes the income from the corporation's equity method investments, including the USG Boral Building Products joint venture, because management views the joint venture as a business unit, even though the corporation’s share of the joint venture is 50%. In addition, the corporation uses adjusted operating profit and adjusted net income as components in the measurement of incentive compensation. 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. 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. Actual results may differ materially due to various other factors, including: economic conditions, such as the levels of new home and other construction activity, employment levels, the availability of mortgage, construction and other financing, mortgage and other interest rates, housing affordability and supply, the levels of foreclosures and home resales, currency exchange rates and consumer confidence; capital markets conditions and the availability of borrowings under our credit agreement or other financings; our substantial indebtedness and our ability to incur substantial additional indebtedness; competitive conditions, such as price, service and product competition; shortages in raw materials; changes in raw material and energy costs; volatility in the assumptions used to determine the funded status of our pension plans; the loss of one or more major customers and our customers’ ability to meet their financial obligations to us; capacity utilization rates for us and the industry; our ability to expand into new geographic markets and the stability of such markets; 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; our ability to protect our intellectual property and other proprietary rights; changes in laws or regulations, including environmental and safety regulations; the satisfactory performance of certain business functions by third party service providers; our ability to achieve anticipated savings from cost reduction programs; the outcome in contested litigation matters; 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 | ||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
| (dollars in millions, except share and per share data) | ||||||||||
| (Unaudited) | ||||||||||
| Three months ended March 31, | ||||||||||
| 2015 | 2014 | |||||||||
| Net sales | $ | 909 | $ | 850 | ||||||
| Cost of products sold | 756 | 707 | ||||||||
| Gross profit | 153 | 143 | ||||||||
| Selling and administrative expenses | 77 | 77 | ||||||||
| Operating profit | 76 | 66 | ||||||||
| Income from equity method investments | 8 | 3 | ||||||||
| Interest expense | (43 | ) | (47 | ) | ||||||
| Interest income | 1 | 1 | ||||||||
| Loss on extinguishment of debt | (19 | ) | — | |||||||
| Gain on deconsolidation of subsidiaries and consolidated joint ventures | — | 27 | ||||||||
| Other expense, net | (1 | ) | — | |||||||
| Income from continuing operations before income taxes | 22 | 50 | ||||||||
| Income tax benefit (expense) | 2 | (5 | ) | |||||||
| Net income | $ | 24 | $ | 45 | ||||||
| Basic earnings per common share | $ | 0.16 | $ | 0.33 | ||||||
| Diluted earnings per common share | $ | 0.16 | $ | 0.32 | ||||||
| Average common shares | 145,381,269 | 137,765,694 | ||||||||
| Average diluted common shares | 147,176,197 | 146,920,819 | ||||||||
| USG CORPORATION | ||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||
| (dollars in millions) | ||||||||||
| (Unaudited) | ||||||||||
| As of | As of | |||||||||
| March 31, 2015 | December 31, 2014 | |||||||||
| Assets | ||||||||||
| Cash and cash equivalents | $ | 153 | $ | 228 | ||||||
| Short-term marketable securities | 61 | 96 | ||||||||
| Restricted cash | 40 | 1 | ||||||||
| Receivables (net of reserves - $20 and $22) | 456 | 404 | ||||||||
| Inventories | 328 | 329 | ||||||||
| Income taxes receivable | 3 | 3 | ||||||||
| Deferred income taxes | 43 | 43 | ||||||||
| Other current assets | 80 | 48 | ||||||||
| Total current assets | 1,164 | 1,152 | ||||||||
| Long-term marketable securities | 28 | 58 | ||||||||
| Property, plant and equipment (net of accumulated | ||||||||||
| depreciation and depletion - $1,901 and $1,885) | 1,849 | 1,908 | ||||||||
| Deferred income taxes | 17 | 19 | ||||||||
| Equity method investments | 723 | 735 | ||||||||
| Other assets | 125 | 122 | ||||||||
| Total assets | $ | 3,906 | $ | 3,994 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||
| Accounts payable | $ | 236 | $ | 290 | ||||||
| Accrued expenses | 199 | 220 | ||||||||
| Current portion of long-term debt | 4 | 4 | ||||||||
| Income taxes payable | 1 | 1 | ||||||||
| Deferred income taxes | 2 | — | ||||||||
| Litigation settlement accrual | 48 | 48 | ||||||||
| Total current liabilities | 490 | 563 | ||||||||
| Long-term debt | 2,202 | 2,205 | ||||||||
| Deferred income taxes | 61 | 61 | ||||||||
| Pension and other postretirement benefits | 490 | 491 | ||||||||
| Other liabilities | 260 | 266 | ||||||||
| Total liabilities | 3,503 | 3,586 | ||||||||
| Stockholders' Equity: | ||||||||||
| Preferred stock | — | — | ||||||||
| Common stock | 14 | 14 | ||||||||
| Treasury stock | (4 | ) | — | |||||||
| Additional paid-in capital | 3,015 | 3,014 | ||||||||
| Accumulated other comprehensive loss | (364 | ) | (338 | ) | ||||||
| Retained earnings (accumulated deficit) | (2,259 | ) | (2,283 | ) | ||||||
| Stockholders' equity of parent | 402 | 407 | ||||||||
| Noncontrolling interest | 1 | 1 | ||||||||
| Total stockholders' equity including noncontrolling interest | 403 | 408 | ||||||||
| Total liabilities and stockholders' equity | $ | 3,906 | $ | 3,994 | ||||||
| Other Information: | ||||||||||
| Total cash and cash equivalents and marketable securities | $ | 242 | $ | 382 | ||||||
| Borrowing availability under existing credit facilities | 341 | 291 | ||||||||
| Total Liquidity | $ | 583 | $ | 673 | ||||||
| USG CORPORATION | ||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
| (dollars in millions) | ||||||||||
| (Unaudited) | ||||||||||
| Three months ended March 31, | ||||||||||
| 2015 | 2014 | |||||||||
| Operating Activities | ||||||||||
| Net income | $ | 24 | $ | 45 | ||||||
| Adjustments to reconcile income from continuing operations to net cash: | ||||||||||
| Depreciation, depletion and amortization | 36 | 38 | ||||||||
| Loss on extinguishment of debt | 19 | — | ||||||||
| Share-based compensation expense | 3 | 5 | ||||||||
| Deferred income taxes | 1 | 1 | ||||||||
| Income from equity method investments | (8 | ) | (3 | ) | ||||||
| Gain on deconsolidation of subsidiaries and consolidated joint ventures | — | (27 | ) | |||||||
| (Increase) decrease in working capital, net of deconsolidation of subsidiaries and consolidated joint ventures: | ||||||||||
| Receivables | (54 | ) | (56 | ) | ||||||
| Income taxes receivable | (1 | ) | — | |||||||
| Inventories | (2 | ) | (12 | ) | ||||||
| Other current assets | 1 | (2 | ) | |||||||
| Payables | (43 | ) | (20 | ) | ||||||
| Accrued expenses | (23 | ) | (20 | ) | ||||||
| Decrease in other assets | — | 1 | ||||||||
| Decrease (increase) in pension and other postretirement benefits | 6 | (3 | ) | |||||||
| Decrease in other liabilities | (4 | ) | (9 | ) | ||||||
| Other, net | 3 | (2 | ) | |||||||
| Net cash used for operating activities | $ | (42 | ) | $ | (64 | ) | ||||
| Investing Activities | ||||||||||
| Purchases of marketable securities | (21 | ) | (49 | ) | ||||||
| Sales or maturities of marketable securities | 87 | 53 | ||||||||
| Capital expenditures | (29 | ) | (34 | ) | ||||||
| Net proceeds from asset dispositions | 1 | — | ||||||||
| Investment in joint ventures, including $23 of cash of contributed subsidiaries in 2014 | — | (557 | ) | |||||||
| Insurance proceeds | — | 2 | ||||||||
| Deposit of restricted cash | (39 | ) | — | |||||||
| Net cash used for investing activities | $ | (1 | ) | $ | (585 | ) | ||||
| Financing Activities | ||||||||||
| Issuance of debt | 350 | 3 | ||||||||
| Repayment of debt | (368 | ) | (1 | ) | ||||||
| Payment of debt issuance fees | (6 | ) | — | |||||||
| Issuance of common stock | 3 | 2 | ||||||||
| Repurchases of common stock to satisfy employee tax withholding obligations | (8 | ) | (5 | ) | ||||||
| Net cash used for financing activities | $ | (29 | ) | $ | (1 | ) | ||||
| (continued) | ||||||||||
| USG CORPORATION | ||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) | ||||||||||
| (dollars in millions) | ||||||||||
| (Unaudited) | ||||||||||
| Three months ended March 31, | ||||||||||
| 2015 | 2014 | |||||||||
| Effect of exchange rate changes on cash | (3 | ) | (1 | ) | ||||||
| Net decrease in cash and cash equivalents | $ | (75 | ) | $ | (651 | ) | ||||
| Cash and cash equivalents at beginning of period | 228 | 810 | ||||||||
| Cash and cash equivalents at end of period | $ | 153 | $ | 159 | ||||||
| Supplemental Cash Flow Disclosures: | ||||||||||
| Interest paid, net of interest capitalized | $ | 50 | $ | 41 | ||||||
| Income taxes paid, net of refunds received | 1 | 6 | ||||||||
| Noncash Investing and Financing Activities: | ||||||||||
| Amount in accounts payable for capital expenditures | 8 | 6 | ||||||||
| Contribution of wholly-owned subsidiaries and joint venture investments as consideration for investments in USG Boral Building Products | — | 121 | ||||||||
| USG CORPORATION | ||||||||||
| CORE BUSINESS RESULTS | ||||||||||
| (dollars in millions) | ||||||||||
| (Unaudited) | ||||||||||
| Three months ended March 31, | ||||||||||
| 2015 | 2014 (a) | |||||||||
Net Sales: | ||||||||||
| Gypsum: | ||||||||||
| United States | $ | 477 | $ | 432 | ||||||
| Canada | 76 | 76 | ||||||||
| Mexico / Latin America | 48 | 47 | ||||||||
| Gypsum Transportation Limited | 10 | 21 | ||||||||
| Canadian Mining | — | — | ||||||||
| Eliminations | (34 | ) | (31 | ) | ||||||
| Total | 577 | 545 | ||||||||
| Ceilings: | ||||||||||
| United States | 115 | 108 | ||||||||
| USG International | — | 7 | ||||||||
| Canada | 14 | 13 | ||||||||
| Mexico / Latin America | 9 | 10 | ||||||||
| Eliminations | (15 | ) | (13 | ) | ||||||
| Total | 123 | 125 | ||||||||
| Distribution: | ||||||||||
| L&W Supply | 334 | 300 | ||||||||
| Eliminations | (125 | ) | (120 | ) | ||||||
| Total USG Corporation Net Sales | $ | 909 | $ | 850 | ||||||
Operating Profit (Loss): | ||||||||||
| Gypsum: | ||||||||||
| United States | $ | 66 | $ | 48 | ||||||
| Canada | 1 | 3 | ||||||||
| Mexico / Latin America | 4 | 4 | ||||||||
| Gypsum Transportation Limited | — | 8 | ||||||||
| Canadian Mining | (3 | ) | 2 | |||||||
| Eliminations | — | — | ||||||||
| Total | 68 | 65 | ||||||||
| Ceilings: | ||||||||||
| United States | 19 | 11 | ||||||||
| USG International | — | — | ||||||||
| Canada | 1 | 2 | ||||||||
| Mexico / Latin America | 1 | 2 | ||||||||
| Total | 21 | 15 | ||||||||
| Distribution: | ||||||||||
| L&W Supply | 4 | 1 | ||||||||
| Corporate | (23 | ) | (21 | ) | ||||||
| Eliminations | 6 | 6 | ||||||||
| Total USG Corporation Operating Profit | $ | 76 | $ | 66 | ||||||
| USG Boral Building Products (UBBP): | ||||||||||
| Net sales | $ | 228 | $ | 89 | ||||||
| Operating profit | 23 | 10 | ||||||||
| Net income attributable to UBBP | 16 | 6 | ||||||||
| USG share of income from UBBP | 8 | 3 | ||||||||
| (a) Historical results have been recast to reflect the company's change in segments effective April 1, 2014. | ||||||||||
| USG CORPORATION | |||||||
| ROLLFORWARD of QUARTERLY ADJUSTED OPERATING PROFIT | |||||||
| (dollars in millions) | |||||||
| (Unaudited) | |||||||
| Adjusted operating profit - Non-GAAP measure - Three months ended March 31, 2014 | $ | 69 | |||||
| US Wallboard | 13 | ||||||
| US Surfaces and Substrates | 5 | ||||||
| US Tile and Grid | 8 | ||||||
| Distribution | 3 | ||||||
| USG-Boral Equity Income | 5 | ||||||
| Corporate and Eliminations | (2 | ) | |||||
| GTL | (8 | ) | |||||
| Q1 2014 Asset Retirement Obligation Adjustment | (7 | ) | |||||
| Canada, Mining, and Mexico | (2 | ) | |||||
| Adjusted operating profit - Non-GAAP measure - Three months ended March 31, 2015 | $ | 84 | |||||
| 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, | |||||||||
| 2015 | 2014 | ||||||||
| Operating profit - GAAP measure | $ | 76 | $ | 66 | |||||
| Income from equity method investments | 8 | 3 | |||||||
| Adjusted operating profit - Non-GAAP measure | $ | 84 | $ | 69 | |||||
| Net income attributable to USG - GAAP measure | $ | 24 | $ | 45 | |||||
| Gain on deconsolidation of subsidiaries and consolidated joint ventures | — | (27 | ) | ||||||
| Withholding tax on property contributed to USG Boral joint venture | — | 1 | |||||||
| Loss on extinguishment of debt | 19 | — | |||||||
| Adjusted net income attributable to USG - Non-GAAP measure | $ | 43 | $ | 19 | |||||
| Earnings per average diluted common share - GAAP measure | $ | 0.16 | $ | 0.32 | |||||
| Adjustments per average diluted common share: | |||||||||
| Gain on deconsolidation of subsidiaries and consolidated joint ventures | — | (0.19 | ) | ||||||
| Withholding tax on property contributed to USG Boral joint venture | — | 0.01 | |||||||
| Loss on extinguishment of debt | $ | 0.13 | — | ||||||
| Adjusted earnings per adjusted average diluted common share – Non-GAAP measure | $ | 0.29 | $ | 0.14 | |||||
| Average diluted common shares – GAAP | 147,176,197 | 146,920,819 | |||||||
| Adjustment to remove common shares that would be antidilutive based on adjusted net income | — | (6,578,946 | ) | ||||||
| Adjusted average diluted common shares – Non-GAAP | 147,176,197 | 140,341,873 | |||||||
| Q1 2014 Gypsum operating profit - GAAP measure | $ | 65 | |||||||
| Q1 2014 GTL operating profit | (8 | ) | |||||||
| Q1 2014 Mining ARO adjustment | (7 | ) | |||||||
| Q1 2014 Gypsum operating profit, as adjusted - Non-GAAP measure | $ | 50 | |||||||
CONTACT:
USG Corporation
Media
Sasha Bigda, (312) 436-6511
sbigda@usg.com
or
Investors
Ryan Flanagan, (312) 436-5304
investorrelations@usg.com
