Highest Quarterly Net Sales Since Q3 2007
USG Corporation (NYSE:USG), an industry-leading manufacturer of building products and innovative solutions, today reported financial results for the second quarter of 2018. As compared to 2017’s second quarter, results for 2018’s second quarter are below:
- Net sales of $880 million up $69 million, or 9%
- Operating profit of $75 million down $20 million, or 21%
- Net income of $58 million up $22 million, or 61%
- Diluted EPS of $0.41 up $0.17, or 71%
As compared to 2017’s second quarter, non-GAAP financial measures for 2018’s second quarter are below:
- Adjusted operating profit of $96 million down $13 million, or 12%
- Adjusted net income of $70 million up $6 million, or 9%
- Adjusted diluted EPS of $0.50 up $0.06, or 14%
Consolidated Second Quarter Results
Second quarter 2018 net sales were $880 million on a consolidated basis, compared to $811 million in the second quarter of 2017. Operating profit decreased to $75 million from $95 million, while adjusted operating profit decreased to $96 million from $109 millionin the second quarter of 2018 compared to the second quarter of 2017. The lower operating profit in the second quarter of 2018 was driven primarily by higher planned SG&A costs to support USG’s Customer-First strategy and rising costs, including higher transportation costs.
USG recorded $58 million in net income, or $0.41 per diluted share, for the second quarter of 2018, compared to net income of $36 million, or $0.24 per diluted share, in the second quarter of 2017. On an adjusted basis, net income of $70 million, or $0.50 per diluted share, for the second quarter of 2018 increased from $64 million, or $0.44 per diluted share, in the second quarter of 2017. A full reconciliation of GAAP to adjusted metrics is provided in the attached schedule.
The Company remains on track with Advanced Manufacturing, which delivered $6 million of incremental EBITDA this quarter. The program is expected to deliver $25 million of incremental EBITDA in 2018. In addition, the 2018 adjusted SG&A target of $355 millionhas not changed.
U.S. Wallboard & Surfaces
The U.S. Wallboard & Surfaces segment net sales for the second quarter of 2018 increased $30 million, or 6%, compared with the second quarter of 2017. The segment generated $81 million of operating profit in the second quarter of 2018. On an adjusted basis, operating profit of $68 million decreased by $10 million compared to the second quarter of 2017. Wallboard price increased 2% from the second quarter of 2017 due primarily to a January 2018 price increase. In addition, wallboard volumes increased 2% compared to the second quarter of 2017. However, wallboard costs were $12 million higher than the prior year primarily due to rising input and transportation costs.
U.S. Performance Materials
The U.S. Performance Materials segment net sales increased by $5 million, or 5%, year over year due to a higher average realized selling price. The segment generated $6 million of operating loss in the second quarter of 2018 partially due to proactively terminating a longstanding marketing contract, which resulted in an $8 million loss. On an adjusted basis, operating profit of $2 million in the U.S. Performance Materials segment declined by $6 million compared to the second quarter of 2017 primarily due to rising input costs and SG&A investments to accelerate the adoption of new products.
U.S. Ceilings
The U.S. Ceilings segment net sales increased $21 million, or 18%, compared to the second quarter of 2017. The segment generated $23 million of operating profit in the second quarter of 2018. On an adjusted basis, operating profit of $27 million increased by $4 million from the second quarter of 2017 primarily due to improved pricing and volumes across tile and grid products.
USG Boral
USG Boral net sales increased $10 million, or 3%, compared to the second quarter of 2017. The segment generated $12 million of equity income in the second quarter of 2018, which is a $2 million decrease compared to the second quarter of 2017 primarily due to higher input costs and SG&A expenses.
Pending Knauf and USG Merger
On June 11, 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 would be paid following shareholder approval of the transaction. The transaction is expected to close in early 2019, subject to customary closing conditions, including approval by USG stockholders and regulatory approvals.
Second 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 second quarter of 2018. The Company plans to file its Quarterly Report on Form 10-Q for the second quarter with the SEC on or about July 25, 2018.
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.