USG Corp. Reports Fourth Quarter and Full Year 2016 Results and Announces $250 Million Share Repurchase Program
USG Corporation (NYSE:USG), an industry leading manufacturer of building products and innovative solutions, today reported results for the fourth quarter and full year of 2016. The company also announced a $250 million share repurchase program.
Business Highlights
Full Year 2016 vs. Full Year 2015
- Net sales increase to $3.0 billion from $2.9 billion
- Operating profit increases to $394 million from $355 million; adjusted operating profit increases to $470 million from $388 million
- Net income decreases to $510 million from $991 million; adjusted net income increases to $251 million from $244 million
- US Gypsum operating margins increase to 17.6% from 16.1%; US Ceilings operating margins increase to 21.6% from 17.2%
Fourth Quarter 2016 vs. Fourth Quarter 2015
- Net sales increase to $734 million from $718 million
- Operating profit decreases to $59 million from $94 million; adjusted operating profit increases to $96 million from $93 million
- Net income decreases to $307 million from $812 million; adjusted net income decreases to $65 million from $69 million
“We are in a stronger financial position than we have been in for many years,” said Jennifer F. Scanlon, President and CEO. “In 2016 we expanded adjusted operating margins in our Gypsum, Ceilings, and USG Boral businesses. We finished the year on a high note by paying off $900 million of debt and today we announced a $250 million share repurchase program to return capital to our shareholders.”
As a result of the sale of the corporation’s building product distribution business to ABC Supply, which closed on October 31, 2016, results for L&W Supply have been recorded as a discontinued operation in the fourth quarter and full year of 2016, and for all prior periods presented. Relating to the sale of L&W Supply, net income in the fourth quarter includes $279 million of gain on sale of discontinued operations. Additionally, for comparative purposes, in the fourth quarter of 2015 the corporation released an income tax valuation allowance which drove an income tax benefit of $738 million in the fourth quarter of 2015, compared to income tax benefit of $15 million in the fourth quarter of 2016 driven by effective tax planning.
On a consolidated basis in the fourth quarter of 2016, net sales were $734 million, compared to $718 million in the fourth quarter of 2015. Operating profit decreased to $59 million from $94 million, while adjusted operating profit increased to $96 million from $93 million in the fourth quarter of 2016 compared to the fourth quarter of 2015.
USG generated $307 million in net income and $2.07 per diluted share in the fourth quarter of 2016, compared to $812 million and $5.51 per diluted share in the fourth quarter of 2015. On an adjusted basis, net income of $65 million and diluted earnings per share of $0.44 in the fourth quarter of 2016 decreased from $69 million and $0.47, respectively, in the fourth quarter of 2015. A full reconciliation of GAAP to adjusted metrics is set forth on an attached schedule.
The corporation’s Gypsum segment generated $79 million of operating profit in the fourth quarter of 2016. On an adjusted basis, operating profit of $87 million in the Gypsum segment improved by $4 million over the fourth quarter of 2015. US wallboard volumes increased by 2%. Excluding the impact of reduced export volumes, US wallboard volumes were up over 7% in the fourth quarter of 2016 compared to the fourth quarter of 2015. Surfaces and substrates products drove $3 million of improved profitability in the fourth quarter.
The Ceilings segment earned $16 million of operating profit in the fourth quarter of 2016. On an adjusted basis, operating profit of $18 million was unchanged from the fourth quarter of 2015. While volumes in the US Ceilings business were flat domestically, sales of exported ceiling products were lower in the fourth quarter of 2016 compared to the fourth quarter of 2015. Cost efficiencies in the US Ceilings business offset the impact of lower volumes.
The USG Boral business generated $12 million of equity income in the fourth quarter of 2016. On an adjusted basis, equity income of $16 million increased by $1 million from the fourth quarter of 2015 on improved plasterboard price and volume and increased sales of adjacent products.
USG recorded full year 2016 net sales of $3.0 billion, net income of $510 million, and diluted earnings per share of $3.46 compared to net sales of $2.9 billion, net income of $991 million, and diluted earnings per share of $6.73 in 2015. On an adjusted basis, the corporation generated full year 2016 net income of $251 million and diluted earnings per share of $1.70. For comparative purposes, on an adjusted basis, USG recorded net income of $244 million and diluted earnings per share of $1.65 for the full year of 2015.
USG Corporation also announced today that its Board of Directors approved a share repurchase program to purchase up to $250 million of its common stock. Although the Board of Directors did not set an expiration date for the share repurchase program, the corporation expects to execute the $250 million program over the next 12-18 months. Repurchases are expected be made from free cash flow generated from the business. Based on the January 31, 2017 closing share price, approximately 8 million shares, or 6 percent of the company’s market capitalization as of January 31, 2017, could be repurchased. The corporation may repurchase shares from time to time in the open market or in other privately negotiated transactions, subject to market conditions.
“2016 was a transformative year for USG Corporation,” Ms. Scanlon said. “With a strong balance sheet and a renewed focus on our core manufacturing business, we enter 2017 excited about the opportunities ahead and anticipating growth in every end market we serve.”
The full text of USG’s 4Q16 earnings release, including all tables, and an archived replay of the company’s Feb. 1 conference call webcast may be accessed on the USG website, www.usg.com, in the Investor Relations section, where the accompanying presentation materials can be found. In addition, a telephonic replay of the call will be available until Friday, March 3, 2017. The replay dial-in number is 1-888-843-7419 (1-630-652-3042 for international callers), and the pass code is 44096361.
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.
