USG Corporation Reports 2012 Second Quarter Results

Second Quarter 2012 vs. Second Quarter 2011

Consolidated Business Highlights

  • Sales increased 8 percent to $825 million
  • Operating profit of $31 million compared to operating loss of $21 million
  • Adjusted operating profit of $31 million compared to adjusted operating loss of $19 million

Business Unit Highlights

  • U.S. Gypsum wallboard shipments totaled 1.15 BSF vs. 0.99 BSF
  • U.S. Gypsum average wallboard price of $132.09 per thousand square feet vs. $111.55
  • Worldwide Ceilings operating profit was flat at $22 million
  • L&W same store net sales increased 11 percent
  • SHEETROCK® Brand UltraLight Panels accounted for 44 percent of all USG wallboard shipments in the United States

CHICAGO--()--USG Corporation (NYSE:USG), a leading building products company, today reported second quarter 2012 net sales of $825 million, up 8 percent from second quarter 2011 net sales of $761 million. USG’s second quarter operating profit was $31 million compared to a $21 million operating loss in the second quarter of 2011. The second quarter 2012 net loss after-tax was $57 million, or $0.53 per share. This result compares to a $70 million net loss in the second quarter of 2011, or $0.69 per share.

“We are pleased to build on the positive operating profit in the first quarter with another quarter of improved results,” said James S. Metcalf, Chairman, President and CEO. “In addition, our recent announcement of a joint venture that will enable us to sell SHEETROCK® Brand gypsum wallboard in India is a major step forward in our efforts to diversify USG’s sources of earnings. We intend to move quickly with our partner, the Zawawi Group of Oman, to establish the mining and manufacturing operations in Oman with the goal of commencing the sale of rock to the regional cement industry and wallboard in the Indian market toward the end of next year.”

The corporation’s adjusted operating profit was $31 million in the second quarter of 2012, which compares to an adjusted operating loss of $19 million in the second quarter of 2011. A reconciliation of adjusted operating profit to operating profit is set forth on a schedule attached hereto. The net loss in the second quarter of 2012 includes $41 million in charges associated with the extinguishment of debt. Excluding those charges, the adjusted net loss in the second quarter of 2012 was $16 million, or $0.15 per share, based on the average common shares of 106,089,602.

“Our businesses performed well in the second quarter despite weak demand compared to long-term averages,” Metcalf said. “We are seeing the signs of a recovery in our core markets, and will continue to focus on reducing costs and improving margins as we work towards positive net earnings.”

A conference call is being held today at 10:00 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 (1-847-413-2929 for international callers), and the pass code is 32677225. 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 3, 2012. The replay dial-in number is 1-888-843-7419 (1-630-652-3042 for international callers), and the pass code is 32677225.

USG Corporation is a manufacturer and distributor of high-performance building systems through its United States Gypsum Company, USG Interiors, LLC, L&W Supply Corporation and other subsidiaries. Headquartered in Chicago, USG’s worldwide operations serve the residential and non-residential construction markets, repair and remodel construction markets, and industrial processes. USG’s wall, ceiling, flooring and roofing products provide leading-edge building solutions for customers, while L&W Supply branch locations efficiently stock and deliver building materials nationwide. For additional information, visit the USG website at www.usg.com.

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 from management’s expectations and, accordingly, may affect our sales and profitability or other results and liquidity. Actual results may differ 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; competitive conditions, such as price, service and product competition; shortages in raw materials; changes in raw material, energy, transportation and employee benefit costs; 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; changes in laws or regulations, including environmental and safety regulations; the outcome in contested litigation matters; our ability to complete surplus asset sales and other divestitures; 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.

       
USG CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions except per share data)
(Unaudited)
 
Three Months Six Months
ended June 30, ended June 30,
2012 2011 2012 2011
 
 
Net sales $ 825 $ 761 $ 1,637 $ 1,482
 
Cost of products sold   716     708     1,418     1,393  
 
Gross profit 109 53 219 89
 
Selling and administrative expenses 78 72 159 157
 

Restructuring and long-lived asset impairment charges

  -     2     2     11  
 
Operating profit (loss) 31 (21 ) 58 (79 )
 
Interest expense 52 52 104 104
Interest income (1 ) (2 ) (2 ) (4 )
Loss on extinguishment of debt 41 - 41 -
Other income, net   (2 )   (2 )   (1 )   (2 )
 
Loss before income taxes (59 ) (69 ) (84 ) (177 )
 
Income tax (benefit) expense   (2 )   1     -     (2 )
 
Net loss $ (57 ) $ (70 ) $ (84 ) $ (175 )
 
Basic loss per common share $ (0.53 ) $ (0.69 ) $ (0.79 ) $ (1.70 )
Diluted loss per common share $ (0.53 ) $ (0.69 ) $ (0.79 ) $ (1.70 )
 
Average common shares 106,089,602 103,550,643 105,839,241 103,286,025
Average diluted common shares 106,089,602 103,550,643 105,839,241 103,286,025

   
USG CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
(Unaudited)
 
As of As of
June 30, December 31,
2012 2011
 
Assets
Current Assets:
Cash and cash equivalents $ 405 $ 365
Short-term marketable securities 74 164
Restricted cash 18 1
Receivables (net of reserves - $18 and $18) 371 324
Inventories 307 305
Income taxes receivable 6 8
Deferred income taxes 3 4
Other current assets   44     55  
Total current assets 1,228 1,226
 
Long-term marketable securities 54 122
Property, plant and equipment (net of accumulated
depreciation and depletion - $1,706 and $1,637) 2,108 2,117
Deferred income taxes 24 25
Other assets   235     229  
 
Total Assets $ 3,649   $ 3,719  
 
 
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 228 $ 233
Accrued expenses 252 266
Current portion of long-term debt 7 7
Deferred income taxes 12 12
Income taxes payable   5     7  
Total current liabilities 504 525
 
Long-term debt 2,305 2,297
Deferred income taxes 6 6
Other liabilities 703 735
Commitments and contingencies
 
Stockholders' Equity:
Preferred stock - -
Common stock 11 10
Treasury stock - -
Capital received in excess of par value 2,589 2,561
Accumulated other comprehensive loss (157 ) (174 )
Retained earnings (deficit)   (2,325 )   (2,241 )
Stockholders' equity of parent 118 156
Noncontrolling interest   13     -  
Total stockholders' equity including noncontrolling interest   131     156  
 
Total Liabilities and Stockholders' Equity $ 3,649   $ 3,719  
         
Other Information:
Total cash and cash equivalents and marketable securities $ 533 $ 651
Borrowing availability from lines of credit   212     183  
Total Liquidity   $ 745     $ 834  

   
USG CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
(Unaudited)
 
Six Months
ended June 30,
2012 2011
 
Operating Activities
Net loss $ (84 ) $ (175 )
Adjustments to reconcile net loss to net cash:
Depreciation, depletion and amortization 79 85
Loss on extinguishment of debt 41 -
Long-lived asset impairment charges 1 1
Share-based compensation expense 13 16
Deferred income taxes 2 1
Noncash income tax benefit (4 ) (3 )
Gain on asset dispositions (7 ) (1 )
(Increase) decrease in working capital:
Receivables (48 ) (54 )
Income taxes receivable 2 1
Inventories (2 ) (23 )
Prepaid expenses 3 (6 )
Payables (4 ) 19
Accrued expenses (4 ) (13 )
Decrease (increase) in other assets 1 (12 )
(Decrease) increase in other liabilities (4 ) 6
Other, net   (2 )   4  
Net cash used for operating activities   (17 )   (154 )
 
Investing Activities
Purchases of marketable securities (70 ) (221 )
Sales or maturities of marketable securities 227 176
Capital expenditures (28 ) (25 )
Acquisition of mining rights (16 ) -
Net proceeds from asset dispositions 14 1
Investments in joint ventures (11 ) -
Loan to joint venture (4 ) (4 )
(Deposit) return of restricted cash   (16 )   2  
Net cash provided by (used for) investing activities   96     (71 )
 
Financing Activities
Issuance of debt 248 -
Repayment of debt (280 ) (3 )
Payment of debt issuance fees (5 ) -
Issuance of common stock 1 -

Repurchases of common stock to satisfy employee tax withholding obligations

  (5 )   (3 )
Net cash used for financing activities   (41 )   (6 )
 
Effect of exchange rate change on cash 2 4
 
Net increase (decrease) in cash & cash equivalents 40 (227 )
Cash and cash equivalents at beginning of period   365     629  
Cash and cash equivalents at end of period $ 405   $ 402  
 
Supplemental Cash Flow Disclosures:
Interest paid $ 105 $ 97
Income taxes paid, net 2 8
Amount in accounts payable for capital expenditures 2 2

       
USG CORPORATION
CORE BUSINESS RESULTS
(dollars in millions)
(Unaudited)
 
Three Months Six Months
ended June 30, ended June 30,
2012 2011 2012 2011

Net Sales:

 
North American Gypsum:
United States Gypsum Company $ 368 $ 322 $ 749 $ 640
CGC Inc. (gypsum) 83 76 167 152
USG Mexico, S.A. de C.V. 40 40 80 81
Other subsidiaries* 11 7 19 14
Eliminations   (29 )   (25 )   (56 )   (51 )
Total   473     420     959     836  
 
Building Products Distribution:
L&W Supply Corporation   293     270     563     513  
 
Worldwide Ceilings:
USG Interiors, Inc. 113 112 232 222
USG International 60 55 119 116
CGC Inc. (ceilings) 16 18 34 37
Eliminations   (12 )   (12 )   (25 )   (25 )
Total   177     173     360     350  
 
Eliminations   (118 )   (102 )   (245 )   (217 )
Total USG Corporation $ 825   $ 761   $ 1,637   $ 1,482  
 
 

Operating Profit (Loss):

 
North American Gypsum:
United States Gypsum Company $ 26 $ (21 ) $ 55 $ (50 )
CGC Inc. (gypsum) 2 2 5 5
USG Mexico, S.A. de C.V. 4 5 9 10
Other subsidiaries*   (1 )   (2 )   (6 )   (10 )
Total   31     (16 )   63     (45 )
 
Building Products Distribution:
L&W Supply Corporation   (7 )   (14 )   (13 )   (36 )
 
Worldwide Ceilings:
USG Interiors, Inc. 17 15 40 33
USG International 2 3 5 7
CGC Inc. (ceilings)   3     4     6     8  
Total   22     22     51     48  
 
Corporate (17 ) (15 ) (39 ) (44 )
Eliminations   2     2     (4 )   (2 )
Total USG Corporation $ 31   $ (21 ) $ 58   $ (79 )
 
* Includes our shipping company and, for 2011, our mining operation in Nova Scotia, Canada.

       
USG CORPORATION
RECONCILIATION of ADJUSTED OPERATING PROFIT (LOSS) to REPORTED GAAP OPERATING PROFIT (LOSS)
(dollars in millions)
(Unaudited)
 
Three Months Six Months
ended June 30, ended June 30,
2012 2011 2012 2011
 
Adjusted Operating Profit (Loss):
North American Gypsum $ 32 $ (14 ) $ 66 $ (36 )
Building Products Distribution (9 ) (14 ) (15 ) (35 )
Worldwide Ceilings 23 22 52 48
Corporate (17 ) (15 ) (39 ) (43 )
Eliminations   2     2     (4 )   (2 )
Total   31     (19 )   60     (68 )
 

 

Restructuring and Long-Lived Asset Impairment Charges:

North American Gypsum 1 2 3 9
Building Products Distribution (2 ) - (2 ) 1
Worldwide Ceilings 1 - 1 -
Corporate   -     -     -     1  
Total   -     2     2     11  
 
 
Reported GAAP Operating Profit (Loss):
North American Gypsum 31 (16 ) 63 (45 )
Building Products Distribution (7 ) (14 ) (13 ) (36 )
Worldwide Ceilings 22 22 51 48
Corporate (17 ) (15 ) (39 ) (44 )
Eliminations   2     2     (4 )   (2 )
Total   31     (21 )   58     (79 )
 
References to Adjusted Operating Profit (Loss) are non-GAAP measures. Management believes this information provides investors with a more useful comparison of the corporation's ongoing business performance.

               
UNITED STATES GYPSUM COMPANY
WALLBOARD REALIZED SELLING PRICES AND SHIPMENTS
     
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Full Year
Year Price   Volume Price   Volume Price   Volume Price   Volume Price   Volume
2012 $130.43 1.16 $132.09 1.15
 
2011 $109.15 0.99 $111.55 0.99 $111.66 1.05 $112.59 1.09 $111.27 4.11
 
Wallboard price reflects amount per one thousand square feet.
Volume expressed in billions of square feet.

Contacts

USG Corporation
Media Inquiries: 312/436-4356
Investor Relations: 312/436-6098

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Contacts

USG Corporation
Media Inquiries: 312/436-4356
Investor Relations: 312/436-6098