USG Corporation Reports Fourth Quarter and Full Year 2018 Results
USG Corporation (NYSE:USG), an industry-leading manufacturer of building products and innovative solutions, today reported financial results for the fourth quarter and full year of 2018.
Results for 2018’s fourth quarter as compared to 2017’s fourth quarter are below:
- Net sales of $819 million down $12 million, or 1%
- Operating profit of $37 million down $46 million, or 55%
- Net income of $42 million up $111 million, or 161%
- Diluted EPS of $0.30 up $0.79, or 161%
Non-GAAP financial measures for 2018’s fourth quarter as compared to 2017’s fourth quarter are below:
- Adjusted operating profit of $55 million down $45 million, or 45%
- Adjusted net income of $37 million down $40 million, or 52%
- Adjusted diluted EPS of $0.26 down $0.27, or 51%
Results for full year 2018 as compared to full year 2017 are below:
- Net sales of $3.3 billion up $132 million, or 4%
- Operating profit of $227 million down $126 million, or 36%
- Net income of $196 million up $108 million, or 123%
- Diluted EPS of $1.38 up $0.78, or 130%
Non-GAAP financial measures for full year 2018 as compared to full year 2017 are below:
- Adjusted operating profit of $309 million down $103 million, or 25%
- Adjusted net income of $218 million down $46 million, or 17%
- Adjusted diluted EPS of $1.51 down $0.29, or 16%
Consolidated Results
Fourth quarter 2018 net sales were $819 million on a consolidated basis, compared to $831 million in the fourth quarter of 2017. Operating profit decreased to $37 million from $83 million, while adjusted operating profit decreased to $55 million from $100 million in the fourth quarter of 2018 compared to the fourth quarter of 2017. The lower operating profit in the fourth quarter of 2018 was driven primarily by lower sales partially due to the comparative timing of announced wallboard price increases and associated lack of pre-buy in the fourth quarter of 2018, higher costs across each of our segments, and higher planned selling and administrative expenses to support USG’s Customer- First strategy.
USG recorded $42 million in net income, or $0.30 per diluted share, for the fourth quarter of 2018, compared to a net loss of $69 million, or ($0.49) per diluted share, in the fourth quarter of 2017. The net loss in the fourth quarter of 2017 includes $145 million of income tax expense resulting from the Tax Cuts and Jobs Act. On an adjusted basis, net income of $37 million, or $0.26 per diluted share, for the fourth quarter of 2018 decreased from $77 million, or $0.53 per diluted share, in the fourth quarter of 2017.
USG recorded full year 2018 net sales of $3.3 billion, net income of $196 million, and diluted earnings per share of $1.38 compared to net sales of $3.2 billion, net income of $88 million and diluted earnings per share of $0.60 in 2017. On an adjusted basis, the Company generated full year 2018 net income of $218 million, or diluted earnings per share of $1.51. For comparative purposes, on an adjusted basis, USG recorded net income of $264 million, or diluted earnings per share of $1.80, for the full year of 2017.
U.S. Wallboard & Surfaces
The U.S. Wallboard & Surfaces segment net sales for the fourth quarter of 2018 decreased $12 million, or 2%, compared with the fourth quarter of 2017. The segment generated $54 million of operating profit in the fourth quarter of 2018 compared to operating profit of $78 million in the fourth quarter of 2017. On an adjusted basis, operating profit of $54 million decreased by $24 million compared to the fourth quarter of 2017. Wallboard volumes decreased 8% compared to the fourth quarter of 2017, outpacing industry volumes by 2%. Wallboard price increased 5% from the fourth quarter of 2017 due primarily to January 2018and June 2018 price increases. However, wallboard costs were $18 million higher than the prior year quarter primarily due to higher input costs, which were partially offset by $5 million in cost savings in the fourth quarter 2018 due to the Company’s Advanced Manufacturing initiative.
U.S. Performance Materials
The U.S. Performance Materials segment net sales decreased by $1 million, or 1%, compared with the fourth quarter of 2017 due to lower shipments, which was partially offset with higher average realized selling prices. The segment generated $2 million of operating loss in the fourth quarter of 2018 compared to operating profit of $4 million in the fourth quarter of 2017. On an adjusted basis, operating loss of $2 million declined by $6 million compared to the fourth quarter of 2017 primarily due to higher input costs and SG&A investments to accelerate the future adoption of new products.
U.S. Ceilings
The U.S. Ceilings segment net sales decreased $1 million, or 1%, compared to the fourth quarter of 2017. The segment generated $12 million of operating profit in the fourth quarter of 2018 compared to operating profit of $24 million in the fourth quarter of 2017. On an adjusted basis, operating profit of $15 million decreased by $9 million from the fourth quarter of 2017, primarily due to lower volumes and higher costs across tile and grid products, which was partially offset by higher realized average selling prices.
USG Boral
USG Boral net sales decreased $20 million, or 6%, compared to the fourth quarter of 2017. The decrease is primarily due to the unfavorable impact of currency translation of $14 million and lower wallboard shipments. The segment generated $9 million of equity income in the fourth quarter of 2018, which is a $8 million decrease compared to the fourth quarter of 2017 primarily due to a reduction in sales coupled with higher input costs.
Pending Knauf and USG Merger
On June 11, 2018, Gebr. Knauf KG (Knauf) and USG announced that they had entered into a definitive merger agreement pursuant to which Knauf will acquire all the outstanding shares of USG. Under the terms of the merger agreement, USG stockholders will receive $44 per share, which consists of $43.50 per share in cash payable upon closing of the transaction and a $0.50 per share conditional special dividend that was paid on October 2, 2018, following stockholder approval of the transaction. The transaction is expected to close in early 2019, subject to customary closing conditions, including receipt of regulatory approvals.
Fourth Quarter 2018 Conference Call
In light of the announced transaction with Knauf, the Company will not hold a conference call for its results for the fourth quarter and full year 2018. The Company plans to file its Annual Report on Form 10-K for the full year with the SEC on or about February 14, 2019.
The full text of USG’s 4Q18 earnings release, including all tables, may be accessed at usg.gcs-web.com
About 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 Gypsum, Performance Materials, Ceilings, and USG Boral divisions. 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.
