þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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USG CORPORATION
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Delaware
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36-3329400
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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550 West Adams Street, Chicago, Illinois
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60661-3676
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(Address of principal executive offices)
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(Zip code)
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Large accelerated filer
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þ
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Emerging growth company
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¨
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Page
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(millions, except per-share and share data)
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Three months ended June 30,
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Six months ended June 30,
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||||||||||||
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2018
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2017
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2018
|
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2017
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||||||||
Net sales
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$
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880
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|
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$
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811
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$
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1,666
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$
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1,578
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Cost of products sold
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696
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643
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1,343
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1,251
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||||
Gross profit
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184
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|
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168
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323
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327
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||||
Selling and administrative expenses
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109
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73
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202
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|
148
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||||
Operating profit
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75
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95
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121
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179
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||||
Income from equity method investments
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12
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14
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21
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27
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||||
Interest expense
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(15
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)
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(19
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)
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(29
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)
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(39
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)
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||||
Interest income
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2
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—
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3
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1
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||||
Loss on extinguishment of debt
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—
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(22
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)
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—
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(22
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)
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||||
Other (expense) income, net
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(3
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)
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(2
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)
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—
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4
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||||
Income from continuing operations before income taxes
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71
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66
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116
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150
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||||
Income tax expense
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(13
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)
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(20
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)
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(22
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)
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(49
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)
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Income from continuing operations
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58
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46
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94
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101
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||||
Income (loss) from discontinued operations, net of tax
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—
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(10
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)
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1
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(10
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)
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||||
Net income
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$
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58
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$
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36
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$
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95
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$
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91
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Earnings per average common share - basic:
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Income from continuing operations
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$
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0.41
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$
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0.32
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$
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0.66
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$
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0.69
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Income (loss) from discontinued operations
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—
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(0.07
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)
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0.01
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(0.07
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)
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Net income
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$
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0.41
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$
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0.25
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$
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0.67
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$
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0.62
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Earnings per average common share - diluted:
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||||||||
Income from continuing operations
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$
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0.41
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$
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0.31
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$
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0.65
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$
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0.68
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Income (loss) from discontinued operations
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—
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(0.07
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)
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0.01
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(0.07
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)
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Net income
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$
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0.41
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$
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0.24
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$
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0.66
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$
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0.61
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Average common shares
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139,617,875
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144,526,900
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140,540,426
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145,753,098
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Dilutive awards under long-term incentive plan
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1,262,046
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2,113,193
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2,222,766
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2,317,971
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Deferred shares for non-employee directors
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—
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220,846
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—
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220,404
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Average diluted common shares
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140,879,921
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146,860,939
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142,763,192
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148,291,473
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Three months ended June 30,
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Six months ended June 30,
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(millions)
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2018
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2017
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2018
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2017
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||||||||
Net income
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$
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58
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|
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$
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36
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$
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95
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$
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91
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||||||||
Other comprehensive income (loss), net of tax:
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Derivatives qualifying as cash flow hedges:
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Gain (loss) on derivatives qualifying as cash flow hedges, net of tax (benefit) of $0, ($2), $0 and ($5), respectively
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2
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(2
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)
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2
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(8
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)
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Less: Reclassification adjustment for loss on derivatives included in net income, net of tax of $0 in all periods
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(2
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)
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(1
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)
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(2
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)
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(1
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)
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Net derivatives qualifying as cash flow hedges
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4
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(1
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4
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(7
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)
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Pension and postretirement benefits:
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Changes in pension and postretirement benefits, net of tax of $0, $2, $0 and $2, respectively
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1
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4
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3
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3
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Less: Amortization of prior service cost included in net periodic pension cost, net of tax (benefit) of $0, ($7), ($1) and ($7), respectively
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(2
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)
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(12
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)
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(3
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)
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(12
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)
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Net pension and postretirement benefits
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3
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16
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6
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15
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Foreign currency translation:
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Changes in foreign currency translation, net of tax of $0 in all periods
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(38
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)
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8
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(26
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)
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48
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Less: Translation loss realized upon sale of foreign equity method investment, net of tax (benefit) of ($2), $0, ($2) and $0, respectively
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(4
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)
|
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—
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(4
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)
|
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—
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||||
Net foreign currency translation
|
(34
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)
|
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8
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|
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(22
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)
|
|
48
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|
||||
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|
|
|
|
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||||||||
Other comprehensive income, net of tax
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$
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(27
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)
|
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$
|
23
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|
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$
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(12
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)
|
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$
|
56
|
|
|
|
|
|
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|
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||||||||
Comprehensive income
|
$
|
31
|
|
|
$
|
59
|
|
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$
|
83
|
|
|
$
|
147
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(millions, except share data)
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June 30, 2018
|
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December 31, 2017
|
||||
Assets
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|
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||||
Cash and cash equivalents
|
$
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246
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|
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$
|
394
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Short-term marketable securities
|
58
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|
|
62
|
|
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Receivables (net of reserves 2018 - $10 and 2017 - $9)
|
342
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|
|
233
|
|
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Inventories
|
265
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|
|
252
|
|
||
Income taxes receivable
|
16
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|
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15
|
|
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Other current assets
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36
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|
|
35
|
|
||
Total current assets
|
963
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|
|
991
|
|
||
Long-term marketable securities
|
38
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|
|
37
|
|
||
Property, plant and equipment (net of accumulated depreciation and depletion - 2018 - $2,111 and 2017 - $2,053)
|
1,793
|
|
|
1,762
|
|
||
Deferred income taxes
|
264
|
|
|
287
|
|
||
Equity method investments
|
666
|
|
|
686
|
|
||
Goodwill and intangible assets
|
42
|
|
|
43
|
|
||
Other assets
|
47
|
|
|
45
|
|
||
Total assets
|
$
|
3,813
|
|
|
$
|
3,851
|
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Liabilities and Stockholders’ Equity
|
|
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|
||||
Accounts payable
|
$
|
281
|
|
|
$
|
280
|
|
Accrued expenses
|
130
|
|
|
135
|
|
||
Income taxes payable
|
1
|
|
|
—
|
|
||
Total current liabilities
|
412
|
|
|
415
|
|
||
Long-term debt
|
1,078
|
|
|
1,078
|
|
||
Deferred income taxes
|
4
|
|
|
4
|
|
||
Pension and other postretirement benefits
|
277
|
|
|
326
|
|
||
Other liabilities
|
179
|
|
|
183
|
|
||
Total liabilities
|
1,950
|
|
|
2,006
|
|
||
Stockholders' Equity:
|
|
|
|
||||
Preferred stock
|
—
|
|
|
—
|
|
||
Common stock
|
15
|
|
|
15
|
|
||
Treasury stock at cost
|
(219
|
)
|
|
(169
|
)
|
||
Additional paid-in capital
|
3,040
|
|
|
3,057
|
|
||
Accumulated other comprehensive loss
|
(401
|
)
|
|
(389
|
)
|
||
Retained earnings (accumulated deficit)
|
(572
|
)
|
|
(669
|
)
|
||
Total stockholders’ equity
|
1,863
|
|
|
1,845
|
|
||
Total liabilities and stockholders’ equity
|
$
|
3,813
|
|
|
$
|
3,851
|
|
(millions)
|
Six months ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Operating Activities
|
|
|
|
||||
Net income
|
$
|
95
|
|
|
$
|
91
|
|
Less: Income (loss) from discontinued operations, net of tax
|
1
|
|
|
(10
|
)
|
||
Income from continuing operations
|
94
|
|
|
101
|
|
||
Adjustments to reconcile net income from continuing operations to net cash:
|
|
|
|
||||
Depreciation, depletion and amortization
|
76
|
|
|
65
|
|
||
Loss on extinguishment of debt
|
—
|
|
|
22
|
|
||
Share-based compensation expense
|
10
|
|
|
9
|
|
||
Deferred income taxes
|
20
|
|
|
48
|
|
||
Gain on asset dispositions
|
(13
|
)
|
|
(1
|
)
|
||
Loss on sale of equity method investment
|
8
|
|
|
—
|
|
||
Income from equity method investments
|
(21
|
)
|
|
(27
|
)
|
||
Dividends received from equity method investments
|
16
|
|
|
23
|
|
||
Pension settlement
|
—
|
|
|
7
|
|
||
Change in operating assets and liabilities
|
(176
|
)
|
|
(117
|
)
|
||
Other, net
|
4
|
|
|
(1
|
)
|
||
Net cash provided by operating activities of continuing operations
|
18
|
|
|
129
|
|
||
Net cash provided by (used for) operating activities of discontinued operations
|
1
|
|
|
(1
|
)
|
||
Net cash provided by operating activities
|
19
|
|
|
128
|
|
||
Investing Activities
|
|
|
|
||||
Purchases of marketable securities
|
(49
|
)
|
|
(54
|
)
|
||
Sales or maturities of marketable securities
|
51
|
|
|
53
|
|
||
Capital expenditures
|
(109
|
)
|
|
(72
|
)
|
||
Net proceeds from asset dispositions
|
14
|
|
|
2
|
|
||
Net proceeds from sale of equity method investment
|
3
|
|
|
—
|
|
||
Working capital adjustment from acquisition of business
|
2
|
|
|
—
|
|
||
Insurance proceeds
|
—
|
|
|
1
|
|
||
Net cash used for investing activities of continuing operations
|
(88
|
)
|
|
(70
|
)
|
||
Net cash provided by investing activities of discontinued operations
|
—
|
|
|
6
|
|
||
Net cash used for investing activities
|
(88
|
)
|
|
(64
|
)
|
||
Financing Activities
|
|
|
|
||||
Issuance of debt
|
—
|
|
|
500
|
|
||
Repayment of debt
|
—
|
|
|
(520
|
)
|
||
Payment of debt issuance fees
|
—
|
|
|
(8
|
)
|
||
Issuance of common stock
|
6
|
|
|
3
|
|
||
Repurchase of common stock
|
(76
|
)
|
|
(97
|
)
|
||
Repurchases of common stock to satisfy employee tax withholding obligations
|
(7
|
)
|
|
(4
|
)
|
||
Net cash used for financing activities of continuing operations
|
(77
|
)
|
|
(126
|
)
|
||
Effect of exchange rate changes on cash from continuing operations
|
(2
|
)
|
|
6
|
|
||
Net decrease in cash and cash equivalents from continuing operations
|
(149
|
)
|
|
(61
|
)
|
||
Net increase in cash and cash equivalents from discontinued operations
|
1
|
|
|
5
|
|
||
Net decrease in cash and cash equivalents
|
(148
|
)
|
|
(56
|
)
|
||
Cash and cash equivalents at beginning of period
|
394
|
|
|
427
|
|
||
Cash and cash equivalents at end of period
|
$
|
246
|
|
|
$
|
371
|
|
|
|
|
|
||||
Supplemental Cash Flow Disclosures
:
|
|
|
|
||||
Interest paid, net of capitalized interest
|
$
|
27
|
|
|
$
|
48
|
|
Income taxes paid, net of refunds received
|
4
|
|
|
9
|
|
||
Noncash Investing and Financing Activities:
|
|
|
|
||||
Amount in accounts payable for capital expenditures
|
13
|
|
|
7
|
|
1
.
|
Organization, Consolidation and Presentation of Financial Statements
|
(millions)
|
Three months ended June 30, 2017
|
|
Six months ended June 30, 2017
|
||||||||||||||||||||
|
As Restated
|
|
Adjustment for Adoption of
ASU 2017-07
|
|
As Previously Reported
|
|
As Restated
|
|
Adjustment for Adoption of
ASU 2017-07
|
|
As Previously Reported
|
||||||||||||
Gross profit
|
$
|
168
|
|
|
$
|
—
|
|
|
$
|
168
|
|
|
$
|
327
|
|
|
$
|
(5
|
)
|
|
$
|
332
|
|
Operating profit
|
95
|
|
|
(1
|
)
|
|
96
|
|
|
179
|
|
|
(8
|
)
|
|
187
|
|
||||||
Other income, net
|
(2
|
)
|
|
1
|
|
|
(3
|
)
|
|
4
|
|
|
8
|
|
|
(4
|
)
|
||||||
Net income
|
36
|
|
|
—
|
|
|
36
|
|
|
91
|
|
|
—
|
|
|
91
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||
(dollars in millions)
|
|
Carrying Value
|
|
Ownership Percentage
|
|
Carrying Value
|
|
Ownership Percentage
|
||||
USG Boral Building Products
|
|
$
|
664
|
|
|
50%
|
|
$
|
679
|
|
|
50%
|
Other equity method investments
|
|
2
|
|
|
50%
|
|
7
|
|
|
33% - 50%
|
||
Total equity method investments
|
|
$
|
666
|
|
|
|
|
$
|
686
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Translation (loss) gain
|
$
|
(24
|
)
|
|
$
|
(1
|
)
|
|
$
|
(21
|
)
|
|
$
|
23
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
USG Boral Building Products
|
|
|
|
|
|
|
|
||||||||
Net sales
|
$
|
297
|
|
|
$
|
287
|
|
|
$
|
584
|
|
|
$
|
563
|
|
Gross profit
|
83
|
|
|
91
|
|
|
162
|
|
|
177
|
|
||||
Operating profit
|
31
|
|
|
40
|
|
|
59
|
|
|
75
|
|
||||
Income from continuing operations before income taxes
|
35
|
|
|
44
|
|
|
67
|
|
|
82
|
|
||||
Net income
|
25
|
|
|
28
|
|
|
45
|
|
|
54
|
|
||||
Net income attributable to USG Boral Building Products
|
24
|
|
|
28
|
|
|
43
|
|
|
53
|
|
||||
USG share of income from investment accounted for using the equity method
|
12
|
|
|
14
|
|
|
21
|
|
|
27
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net Sales
:
|
|
|
|
|
|
|
|
||||||||
U.S. Wallboard and Surfaces
|
$
|
512
|
|
|
$
|
482
|
|
|
$
|
953
|
|
|
$
|
951
|
|
U.S. Performance Materials
|
105
|
|
|
100
|
|
|
197
|
|
|
186
|
|
||||
U.S. Ceilings
|
139
|
|
|
118
|
|
|
277
|
|
|
230
|
|
||||
Canada
|
121
|
|
|
104
|
|
|
232
|
|
|
200
|
|
||||
Other
|
65
|
|
|
59
|
|
|
125
|
|
|
115
|
|
||||
Eliminations
|
(62
|
)
|
|
(52
|
)
|
|
(118
|
)
|
|
(104
|
)
|
||||
Total
|
$
|
880
|
|
|
$
|
811
|
|
|
$
|
1,666
|
|
|
$
|
1,578
|
|
|
|
|
|
|
|
|
|
||||||||
Operating Profit (Loss)
:
|
|
|
|
|
|
|
|
||||||||
U.S. Wallboard and Surfaces
|
$
|
81
|
|
|
$
|
78
|
|
|
$
|
130
|
|
|
$
|
157
|
|
U.S. Performance Materials
|
(6
|
)
|
|
8
|
|
|
(5
|
)
|
|
14
|
|
||||
U.S. Ceilings
|
23
|
|
|
23
|
|
|
42
|
|
|
43
|
|
||||
Canada
|
8
|
|
|
2
|
|
|
10
|
|
|
4
|
|
||||
Other
|
4
|
|
|
1
|
|
|
8
|
|
|
2
|
|
||||
Corporate
|
(35
|
)
|
|
(17
|
)
|
|
(64
|
)
|
|
(41
|
)
|
||||
Total
|
$
|
75
|
|
|
$
|
95
|
|
|
$
|
121
|
|
|
$
|
179
|
|
|
Three months ended June 30, 2018
|
||||||||||||||||||||||
(millions)
|
U.S. Wallboard and Surfaces
|
|
U.S. Performance Materials
|
|
U.S. Ceilings
|
|
Canada
|
|
Other
|
|
Total
|
||||||||||||
Wallboard
|
$
|
270
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
68
|
|
|
$
|
19
|
|
|
$
|
357
|
|
Surfaces and industrial products
|
151
|
|
|
—
|
|
|
—
|
|
|
23
|
|
|
7
|
|
|
181
|
|
||||||
Underlayment
|
—
|
|
|
70
|
|
|
—
|
|
|
3
|
|
|
11
|
|
|
84
|
|
||||||
Building envelope and structural
|
—
|
|
|
23
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
25
|
|
||||||
Ceiling tile and grid
|
—
|
|
|
—
|
|
|
121
|
|
|
12
|
|
|
8
|
|
|
141
|
|
||||||
Specialty ceilings
|
—
|
|
|
—
|
|
|
17
|
|
|
2
|
|
|
—
|
|
|
19
|
|
||||||
Other products
|
26
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
17
|
|
|
48
|
|
||||||
Total product sales
|
447
|
|
|
93
|
|
|
138
|
|
|
114
|
|
|
63
|
|
|
855
|
|
||||||
Other miscellaneous sales
(a)
|
65
|
|
|
12
|
|
|
1
|
|
|
7
|
|
|
2
|
|
|
87
|
|
||||||
Total sales before eliminations
|
512
|
|
|
105
|
|
|
139
|
|
|
121
|
|
|
65
|
|
|
942
|
|
||||||
Eliminations
|
(30
|
)
|
|
(7
|
)
|
|
(15
|
)
|
|
(10
|
)
|
|
—
|
|
|
(62
|
)
|
||||||
Total net sales
|
$
|
482
|
|
|
$
|
98
|
|
|
$
|
124
|
|
|
$
|
111
|
|
|
$
|
65
|
|
|
$
|
880
|
|
|
Six months ended June 30, 2018
|
||||||||||||||||||||||
(millions)
|
U.S. Wallboard and Surfaces
|
|
U.S. Performance Materials
|
|
U.S. Ceilings
|
|
Canada
|
|
Other
|
|
Total
|
||||||||||||
Wallboard
|
$
|
490
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
131
|
|
|
$
|
37
|
|
|
$
|
658
|
|
Surfaces and industrial products
|
296
|
|
|
—
|
|
|
—
|
|
|
46
|
|
|
14
|
|
|
356
|
|
||||||
Underlayment
|
—
|
|
|
135
|
|
|
—
|
|
|
5
|
|
|
20
|
|
|
160
|
|
||||||
Building envelope and structural
|
—
|
|
|
41
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
43
|
|
||||||
Ceiling tile and grid
|
—
|
|
|
—
|
|
|
237
|
|
|
24
|
|
|
17
|
|
|
278
|
|
||||||
Specialty ceilings
|
—
|
|
|
—
|
|
|
33
|
|
|
4
|
|
|
—
|
|
|
37
|
|
||||||
Other products
|
50
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
33
|
|
|
91
|
|
||||||
Total product sales
|
836
|
|
|
176
|
|
|
270
|
|
|
219
|
|
|
122
|
|
|
1,623
|
|
||||||
Other miscellaneous sales
(a)
|
117
|
|
|
21
|
|
|
7
|
|
|
13
|
|
|
3
|
|
|
161
|
|
||||||
Total sales before eliminations
|
953
|
|
|
197
|
|
|
277
|
|
|
232
|
|
|
125
|
|
|
1,784
|
|
||||||
Eliminations
|
(61
|
)
|
|
(13
|
)
|
|
(27
|
)
|
|
(17
|
)
|
|
—
|
|
|
(118
|
)
|
||||||
Total net sales
|
$
|
892
|
|
|
$
|
184
|
|
|
$
|
250
|
|
|
$
|
215
|
|
|
$
|
125
|
|
|
$
|
1,666
|
|
(a)
|
Other miscellaneous sales primarily includes shipping and handling costs billed to customers.
|
5
.
|
Marketable Securities
|
|
As of June 30, 2018
|
|
As of December 31, 2017
|
||||||||||||
(millions)
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
||||||||
Corporate debt securities
|
$
|
70
|
|
|
$
|
70
|
|
|
$
|
68
|
|
|
$
|
68
|
|
U.S. government and agency debt securities
|
1
|
|
|
1
|
|
|
6
|
|
|
6
|
|
||||
Asset-backed debt securities
|
15
|
|
|
15
|
|
|
11
|
|
|
11
|
|
||||
Certificates of deposit
|
9
|
|
|
9
|
|
|
13
|
|
|
13
|
|
||||
Municipal debt securities
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
||||
Total marketable securities
|
$
|
96
|
|
|
$
|
96
|
|
|
$
|
99
|
|
|
$
|
99
|
|
(millions)
|
Amortized
Cost
|
|
Fair
Value
|
||||
Due in 1 year or less
|
$
|
58
|
|
|
$
|
58
|
|
Due in 1-5 years
|
38
|
|
|
38
|
|
||
Total marketable securities
|
$
|
96
|
|
|
$
|
96
|
|
(millions)
|
June 30,
2018 |
|
December 31,
2017 |
||||
4.875% senior notes due 2027
|
$
|
500
|
|
|
$
|
500
|
|
5.5% senior notes due 2025
|
350
|
|
|
350
|
|
||
Industrial revenue bonds (due 2028 through 2034)
|
239
|
|
|
239
|
|
||
Total
|
1,089
|
|
|
1,089
|
|
||
Less: Unamortized debt issuance costs
|
11
|
|
|
11
|
|
||
Total
|
$
|
1,078
|
|
|
$
|
1,078
|
|
(millions)
|
June 30,
2018 |
|
December 31,
2017 |
||||
Fair value of debt
|
$
|
1,115
|
|
|
$
|
1,134
|
|
Accrued interest
|
12
|
|
|
12
|
|
7
.
|
Derivative Instruments
|
Derivative Instruments
|
Type
|
Hedged Item
|
Aggregate Notional Amount
|
Contracts Maturing Through
|
Commodity
|
Natural gas swaps
|
Purchases of natural gas
|
48 million mmBTUs*
|
December 31, 2022
|
Foreign Exchange
|
Forward contracts
|
Purchases of products and services denominated in a foreign currency
|
$119 million
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Amount of Gain or (Loss)
Recognized in
Other Comprehensive Income on Derivatives (Effective Portion)
|
|
Location of Gain or (Loss)
Reclassified from
AOCI into Income
(Effective Portion)
|
|
Amount of Gain or (Loss) Reclassified from
AOCI into Income
(Effective Portion)
|
||||||||||||
(millions)
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
||||||||
Derivatives in Cash Flow Hedging Relationships
|
|
|
|
|
|
|
|
|
|
||||||||
Commodity contracts
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
Cost of products sold
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
Foreign exchange contracts
|
2
|
|
|
(3
|
)
|
|
Cost of products sold
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
2
|
|
|
$
|
(4
|
)
|
|
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
|
Amount of Gain or (Loss)
Recognized in
Other Comprehensive Income on Derivatives (Effective Portion)
|
|
Location of Gain or (Loss)
Reclassified from
AOCI into Income
(Effective Portion)
|
|
Amount of Gain or (Loss) Reclassified from
AOCI into Income
(Effective Portion)
|
||||||||||||
(millions)
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
||||||||
Derivatives in Cash Flow Hedging Relationships
|
|
|
|
|
|
|
|
|
|
||||||||
Commodity contracts
|
$
|
(3
|
)
|
|
$
|
(10
|
)
|
|
Cost of products sold
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
Foreign exchange contracts
|
5
|
|
|
(3
|
)
|
|
Cost of products sold
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
2
|
|
|
$
|
(13
|
)
|
|
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
|
|
Location of Gain or (Loss)
Recognized in Income
on Derivatives
|
|
Amount of Gain or (Loss) Recognized in Income
on Derivatives
|
||||||
(millions)
|
|
|
|
2018
|
|
2017
|
||||
Derivatives Not Designated as Hedging Instruments
|
|
|
|
|
|
|
||||
Commodity contracts
|
|
Cost of products sold
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
Total
|
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
Balance Sheet
Location
|
Fair Value
|
|
Balance Sheet
Location
|
Fair Value
|
||||||||||||
|
|
||||||||||||||||
(millions)
|
|
6/30/18
|
|
12/31/17
|
|
|
6/30/18
|
|
12/31/17
|
||||||||
Derivatives in Cash Flow Hedging Relationships
|
|
|
|
|
|
|
|
|
|
||||||||
Commodity contracts
|
Other current assets
|
$
|
1
|
|
|
$
|
1
|
|
|
Accrued expenses
|
$
|
6
|
|
|
$
|
6
|
|
Commodity contracts
|
Other assets
|
2
|
|
|
1
|
|
|
Other liabilities
|
12
|
|
|
8
|
|
||||
Foreign exchange contracts
|
Other current assets
|
2
|
|
|
—
|
|
|
Accrued expenses
|
—
|
|
|
3
|
|
||||
Foreign exchange contracts
|
Other assets
|
2
|
|
|
—
|
|
|
Other liabilities
|
—
|
|
|
—
|
|
||||
Total derivatives in cash flow hedging relationships
|
|
$
|
7
|
|
|
$
|
2
|
|
|
|
$
|
18
|
|
|
$
|
17
|
|
Derivatives Not Designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
|
||||||||
Commodity contracts
|
Other current assets
|
$
|
—
|
|
|
$
|
—
|
|
|
Accrued expenses
|
$
|
—
|
|
|
$
|
—
|
|
Total derivatives not designated as hedging instruments
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total derivatives
|
Total assets
|
$
|
7
|
|
|
$
|
2
|
|
|
Total liabilities
|
$
|
18
|
|
|
$
|
17
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||||||||||
(millions)
|
6/30/18
|
|
12/31/17
|
|
6/30/18
|
|
12/31/17
|
|
6/30/18
|
|
12/31/17
|
|
6/30/18
|
|
12/31/17
|
||||||||||||||||
Cash equivalents
|
$
|
44
|
|
|
$
|
124
|
|
|
$
|
33
|
|
|
$
|
24
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
77
|
|
|
$
|
148
|
|
Equity mutual funds
|
6
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
6
|
|
||||||||
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Corporate debt securities
|
—
|
|
|
—
|
|
|
70
|
|
|
68
|
|
|
—
|
|
|
—
|
|
|
70
|
|
|
68
|
|
||||||||
U.S. government and agency debt securities
|
—
|
|
|
—
|
|
|
1
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
6
|
|
||||||||
Asset-backed debt securities
|
—
|
|
|
—
|
|
|
15
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
11
|
|
||||||||
Certificates of deposit
|
—
|
|
|
—
|
|
|
9
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
13
|
|
||||||||
Municipal debt securities
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||||||
Derivative assets
|
—
|
|
|
—
|
|
|
7
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
2
|
|
||||||||
Derivative liabilities
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
(17
|
)
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Pension:
|
|
|
|
|
|
|
|
||||||||
Service cost of benefits earned
|
$
|
12
|
|
|
$
|
11
|
|
|
$
|
24
|
|
|
$
|
21
|
|
Interest cost on projected benefit obligation
|
16
|
|
|
15
|
|
|
32
|
|
|
31
|
|
||||
Expected return on plan assets
|
(24
|
)
|
|
(23
|
)
|
|
(48
|
)
|
|
(46
|
)
|
||||
Settlement
|
—
|
|
|
20
|
|
|
—
|
|
|
20
|
|
||||
Net amortization
|
8
|
|
|
5
|
|
|
16
|
|
|
10
|
|
||||
Net pension cost
|
$
|
12
|
|
|
$
|
28
|
|
|
$
|
24
|
|
|
$
|
36
|
|
Postretirement:
|
|
|
|
|
|
|
|
||||||||
Service cost of benefits earned
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Interest cost on projected benefit obligation
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
||||
Net amortization
|
(6
|
)
|
|
(6
|
)
|
|
(12
|
)
|
|
(12
|
)
|
||||
Net postretirement benefit
|
$
|
(4
|
)
|
|
$
|
(4
|
)
|
|
$
|
(8
|
)
|
|
$
|
(8
|
)
|
|
MSUs
|
|
Performance Shares
|
|
RSUs
|
||||||
Awards granted
|
428,574
|
|
|
103,819
|
|
|
44,000
|
|
|||
Weighted average fair value
(a)
|
$
|
34.22
|
|
|
$
|
34.21
|
|
|
$
|
36.92
|
|
Expected volatility
(b)
|
32.62
|
%
|
|
32.61
|
%
|
|
N/A
|
|
|||
Risk-free rate
(c)
|
2.37
|
%
|
|
2.37
|
%
|
|
N/A
|
|
|||
Expected term (in years)
(d)
|
2.95
|
|
|
2.95
|
|
|
N/A
|
|
|||
Expected dividends
|
—
|
|
|
—
|
|
|
N/A
|
|
(a)
|
Fair value of MSUs and performance shares is estimated on the date of grant using the Monte Carlo simulation utilizing the assumptions outlined above. Fair value of RSUs is equal to the closing price of our common stock on the date of grant.
|
(b)
|
The expected volatility rate is based on stock price history immediately prior to grant for a period commensurate with the expected term.
|
(c)
|
The risk-free rate is based on zero coupon U.S. government issues at the time of grant.
|
(d)
|
The expected term represents the period from the valuation date to the end of the performance period.
|
|
MSUs
|
Performance Shares
|
RSUs
|
Maximum shares/units earned
|
Varies from 0% to 150% of the number of MSUs awarded depending on the actual performance of our stock price
|
Varies from 0% to 200% of the number of performance shares awarded depending on the performance of our total stockholder return relative to the performance of the Dow Jones U.S. Construction and Materials Index
(a)
|
100%
|
Vesting Provisions
|
Three-year performance period
|
Three-year performance period
|
Specified number of years from the grant date
|
Vesting in the case of termination of employment due to death, disability, retirement or change in control during performance period
(b)
|
Pro-rated based on the number of full months employed in 2018 with awards issued at the end of the three-year period
|
Pro-rated based on the number of full months employed during the performance period with awards issued at the end of the three-year period
|
Varies
|
Settlement
|
Settled in common stock at the end of the performance or vesting period
|
(a)
|
Adjustments to the performance of the Dow Jones U.S. Construction and Materials Index may be made to reflect changes in the companies included in the index during the performance period.
|
(b)
|
Early vesting for MSUs, performance shares and RSUs in situations where there is a change in control also requires a related loss of employment or diminution of duties in certain circumstances.
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||
(millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
MSUs, performance shares, RSUs and stock options
|
—
|
|
|
0.7
|
|
|
—
|
|
|
0.9
|
|
(millions)
|
June 30, 2018
|
|
December 31, 2017
|
||||
Finished goods
|
$
|
153
|
|
|
$
|
140
|
|
Work in progress
|
39
|
|
|
39
|
|
||
Raw materials
|
73
|
|
|
73
|
|
||
Total
|
$
|
265
|
|
|
$
|
252
|
|
(millions)
|
June 30, 2018
|
|
December 31, 2017
|
||||
Self-insurance reserves
|
$
|
14
|
|
|
$
|
12
|
|
Employee compensation
|
16
|
|
|
17
|
|
||
Interest
|
12
|
|
|
12
|
|
||
Derivatives
|
6
|
|
|
9
|
|
||
Pension and other postretirement benefits
|
17
|
|
|
17
|
|
||
Environmental
|
13
|
|
|
17
|
|
||
Other
|
52
|
|
|
51
|
|
||
Total
|
$
|
130
|
|
|
$
|
135
|
|
|
Six months ended June 30,
|
||||||
(millions)
|
2018
|
|
2017
|
||||
Balance as of January 1
|
$
|
118
|
|
|
$
|
113
|
|
Accretion expense
|
3
|
|
|
3
|
|
||
Liabilities settled
|
(1
|
)
|
|
—
|
|
||
Foreign currency translation
|
(1
|
)
|
|
1
|
|
||
Balance as of June 30
|
$
|
119
|
|
|
$
|
117
|
|
|
2018
|
|
2017
|
||||||||||
(millions, except share data)
|
Treasury Shares (000)
|
|
Treasury Stock
|
|
Treasury Shares (000)
|
|
Treasury Stock
|
||||||
Balance as of January 1
|
(5,571
|
)
|
|
$
|
(169
|
)
|
|
—
|
|
|
$
|
—
|
|
Repurchase of common stock for tax withholdings related to stock-based compensation
|
(204
|
)
|
|
(7
|
)
|
|
(107
|
)
|
|
(3
|
)
|
||
Repurchase of common stock under share repurchase program
(a)
|
(2,156
|
)
|
|
(76
|
)
|
|
(3,161
|
)
|
|
(97
|
)
|
||
Stock reissuances
|
918
|
|
|
33
|
|
|
165
|
|
|
5
|
|
||
Balance as of June 30
|
(7,013
|
)
|
|
$
|
(219
|
)
|
|
(3,103
|
)
|
|
$
|
(95
|
)
|
(a)
|
The Merger Agreement limits our ability to repurchase shares of our common stock, subject to certain exceptions, and share repurchases under the program will not continue so long as the Merger Agreement is in effect and has not been terminated.
|
|
Derivatives
|
|
Defined Benefit Plans
|
|
Foreign
Currency Translation
|
|
AOCI
|
||||||||||||||||||||||||
(millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||||
Balance as of January 1
|
$
|
16
|
|
|
$
|
27
|
|
|
$
|
(297
|
)
|
|
$
|
(246
|
)
|
|
$
|
(108
|
)
|
|
$
|
(166
|
)
|
|
$
|
(389
|
)
|
|
$
|
(385
|
)
|
Other comprehensive income (loss) before reclassifications, net of tax
|
2
|
|
|
(8
|
)
|
|
3
|
|
|
3
|
|
|
(26
|
)
|
|
48
|
|
|
(21
|
)
|
|
43
|
|
||||||||
Less: Amounts reclassified from AOCI, net of tax
|
(2
|
)
|
|
(1
|
)
|
|
(3
|
)
|
|
(12
|
)
|
|
(4
|
)
|
|
—
|
|
|
(9
|
)
|
|
(13
|
)
|
||||||||
Net other comprehensive income (loss)
|
4
|
|
|
(7
|
)
|
|
6
|
|
|
15
|
|
|
(22
|
)
|
|
48
|
|
|
(12
|
)
|
|
56
|
|
||||||||
Balance as of June 30
|
$
|
20
|
|
|
$
|
20
|
|
|
$
|
(291
|
)
|
|
$
|
(231
|
)
|
|
$
|
(130
|
)
|
|
$
|
(118
|
)
|
|
$
|
(401
|
)
|
|
$
|
(329
|
)
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Derivatives
|
|
|
|
|
|
|
|
||||||||
Net reclassification from AOCI for cash flow hedges included in cost of products sold
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
Less: Income tax benefit on reclassification from AOCI included in income tax expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net amount reclassified from AOCI
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
||||||||
Defined Benefit Plans
|
|
|
|
|
|
|
|
||||||||
Net reclassification in AOCI for amortization of prior service cost included in other income, net
|
$
|
(2
|
)
|
|
$
|
(7
|
)
|
|
$
|
(4
|
)
|
|
$
|
(7
|
)
|
Net reclassification from AOCI for amortization of prior service cost included in (loss) income from discontinued operations, net of tax
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
||||
Less: Income tax benefit on reclassification from AOCI included in income tax expense
|
—
|
|
|
(3
|
)
|
|
(1
|
)
|
|
(3
|
)
|
||||
Net amount reclassified from AOCI
|
$
|
(2
|
)
|
|
$
|
(12
|
)
|
|
$
|
(3
|
)
|
|
$
|
(12
|
)
|
|
|
|
|
|
|
|
|
||||||||
Foreign Currency Translation
|
|
|
|
|
|
|
|
||||||||
Net reclassification from AOCI for translation gains realized upon the sale of foreign equity method investment included in other (expense) income, net
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
(6
|
)
|
|
$
|
—
|
|
Less: Income tax expense on reclassification from AOCI included in income tax expense (benefit)
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
||||
Net amount reclassified from AOCI
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(dollars in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Income tax expense
|
$
|
13
|
|
|
$
|
20
|
|
|
$
|
22
|
|
|
$
|
49
|
|
Effective tax rate
|
18.3
|
%
|
|
30.3
|
%
|
|
19.0
|
%
|
|
32.7
|
%
|
WALLBOARD
|
|
USG Sheetrock
®
brand gypsum wallboard and Securock
®
brand glass mat sheathing portfolios
|
Gypsum panels that provide aesthetic as well as sound-dampening, fire-retarding, abuse-resistance and moisture-control value
|
SURFACES
|
|
USG Sheetrock
®
brand joint compound portfolio, as well as corner bead, joint tape, and plaster
|
Used for finishing wallboard joints
|
Construction plaster products, sold under the brand names Red Top
®
, Imperial
®
, Diamond
®
and Supremo™ and industrial gypsum
|
Used to provide a custom finish for residential and nonresidential interiors and provide aesthetic, sound-dampening, fire-retarding and abuse-resistance value
|
UNDERLAYMENT
|
|
USG Durock
®
brand cement board
|
Provides water and fire-resistant assemblies for both interior and exterior applications
|
Fiberock
®
brand backerboard
|
Includes abuse-resistant interior wall panels, tile backer boards, and flooring underlayments
|
USG Durock™ brand shower systems
|
A fully bonded waterproofing system for tiled shower installations
|
USG Performance Flooring, including Levelrock
®
brand systems of poured gypsum flooring
|
Provides surface leveling, enhanced sound-dampening and fire-resistant performance for residential and nonresidential flooring applications
|
BUILDING ENVELOPE
|
|
Securock
®
ExoAir
®
430 air barrier system
|
Integrated gypsum sheathing panels with pre-applied fluid air barrier membrane that provides structural performance and moisture, mold and air control
|
Securock
®
brand roof board portfolios
|
Roof boards for use in low-slope nonresidential roofing systems that provides moisture, mold and fire resistant value
|
STRUCTURAL
|
|
USG Structural Panels
|
High-strength, reinforced factory made concrete panels for use in subfloor, roof deck, foundation walls and other noncombustible applications
|
End Market
|
Lead time
|
Metric
|
Source
|
Market Condition/Outlook
|
New
Residential |
Installation of gypsum products
(a)
into a single family home typically follows a housing start by 90-120 days
|
Housing starts
(seasonally adjusted)
|
U.S. Census Bureau
|
6/30/2018 - 1.173 million
Actual 2017 - 1.203 million |
Industry forecast (Blue Chip Economic Indicators)
|
2018 - 1.27 million to 1.36 million
(b)
|
|||
USG forecast
|
2018 estimated - 1.25 million
(c)
|
|||
New Nonresidential
|
Installation of gypsum
(a)
and ceilings products typically follows signing of construction contracts by about 12 to 18 months
|
Change in floor space for which contracts are signed
|
Dodge Data & Analytics
|
2017 - 2% increase
|
Industry forecast (Dodge Data & Analytics)
(d)
|
2018 - 3% increase
|
|||
USG forecast
|
2018 estimated to increase by low to mid single digits
|
|||
Repair and Remodel
(e)
|
Remodels typically begin within two years from purchase
|
Sales of existing homes (seasonally adjusted)
|
National Association of Realtors
|
6/30/2018 - 5.38 million
6/30/2017 - 5.50 million
Actual 2017 - 5.51 million
|
Overall repair and remodel spending for gypsum products
|
USG forecast
|
2018 spending estimated to increase by low to mid single digits
|
(a)
|
Gypsum products include products manufactured and marketed by our U.S. Wallboard and Surfaces segment and Fiberock
®
brand gypsum fiber panels manufactured and marketed by our U.S. Performance Materials segment.
|
(b)
|
Forecast based on the average of the bottom ten and top ten forecasts included in the report, respectively.
|
(c)
|
USG estimate is based on the seasonally adjusted annual rate of housing starts.
|
(d)
|
Dodge Data & Analytics' forecast includes several building types which do not generate significant demand for our products.
|
(e)
|
The repair and remodel market includes renovation of both residential and nonresidential buildings.
|
U.S. Industry Information
|
Metric
|
Source
|
Market Condition/Outlook
|
U.S. industry shipments of gypsum board
(a)
|
Billion of square feet (bsf)
|
Gypsum Association
|
First six months 2018 - 12.9 bsf
First six months 2017 - 12.4 bsf |
USG forecast
|
2018 expected to increase low single digits from 25.7 bsf in 2017
|
||
U.S. wallboard capacity
|
Billion of square feet (bsf)
|
USG estimate
|
1/1/2018 - 34.0 bsf
|
U.S. industry capacity utilization rate
|
Annualized shipments as a percentage of industry capacity
|
USG estimate
|
First six months 2018 - 74%
First six months 2017 - 73%
|
(a)
|
Gypsum board include products manufactured and marketed by our U.S. Wallboard and Surfaces segment and Fiberock
®
brand gypsum fiber panels manufactured and marketed by our U.S. Performance Materials segment.
|
(dollars in millions, except per-share data)
|
2018
|
|
2017
|
|
$ Favorable (Unfavorable)
|
|
% Favorable (Unfavorable)
|
|||||||
Three months ended June 30:
|
|
|
|
|
|
|
|
|||||||
Net sales
|
$
|
880
|
|
|
$
|
811
|
|
|
$
|
69
|
|
|
9
|
%
|
Cost of products sold
|
696
|
|
|
643
|
|
|
(53
|
)
|
|
(8
|
)%
|
|||
Gross profit
|
184
|
|
|
168
|
|
|
16
|
|
|
10
|
%
|
|||
Selling and administrative expenses
|
109
|
|
|
73
|
|
|
(36
|
)
|
|
(49
|
)%
|
|||
Operating profit
|
75
|
|
|
95
|
|
|
(20
|
)
|
|
(21
|
)%
|
|||
Income from equity method investments
|
12
|
|
|
14
|
|
|
(2
|
)
|
|
(14
|
)%
|
|||
Interest expense
|
(15
|
)
|
|
(19
|
)
|
|
4
|
|
|
21
|
%
|
|||
Interest income
|
2
|
|
|
—
|
|
|
2
|
|
|
*
|
|
|||
Loss on extinguishment of debt
|
—
|
|
|
(22
|
)
|
|
22
|
|
|
*
|
|
|||
Other expense, net
|
(3
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
(50
|
)%
|
|||
Income from continuing operations before income taxes
|
71
|
|
|
66
|
|
|
5
|
|
|
8
|
%
|
|||
Income tax expense
|
(13
|
)
|
|
(20
|
)
|
|
7
|
|
|
35
|
%
|
|||
Income from continuing operations
|
58
|
|
|
46
|
|
|
12
|
|
|
26
|
%
|
|||
Income (loss) from discontinued operations, net of tax
|
—
|
|
|
(10
|
)
|
|
10
|
|
|
*
|
|
|||
Net income
|
$
|
58
|
|
|
$
|
36
|
|
|
$
|
22
|
|
|
61
|
%
|
Diluted earnings per share - net income
|
$
|
0.41
|
|
|
$
|
0.24
|
|
|
$
|
0.17
|
|
|
71
|
%
|
|
|
|
|
|
|
|
|
|||||||
Six months ended June 30:
|
|
|
|
|
|
|
|
|||||||
Net sales
|
$
|
1,666
|
|
|
$
|
1,578
|
|
|
$
|
88
|
|
|
6
|
%
|
Cost of products sold
|
1,343
|
|
|
1,251
|
|
|
(92
|
)
|
|
(7
|
)%
|
|||
Gross profit
|
323
|
|
|
327
|
|
|
(4
|
)
|
|
(1
|
)%
|
|||
Selling and administrative expenses
|
202
|
|
|
148
|
|
|
(54
|
)
|
|
(36
|
)%
|
|||
Operating profit
|
121
|
|
|
179
|
|
|
(58
|
)
|
|
(32
|
)%
|
|||
Income from equity method investments
|
21
|
|
|
27
|
|
|
(6
|
)
|
|
(22
|
)%
|
|||
Interest expense
|
(29
|
)
|
|
(39
|
)
|
|
10
|
|
|
26
|
%
|
|||
Interest income
|
3
|
|
|
1
|
|
|
2
|
|
|
*
|
|
|||
Loss on extinguishment of debt
|
—
|
|
|
(22
|
)
|
|
22
|
|
|
*
|
|
|||
Other income, net
|
—
|
|
|
4
|
|
|
(4
|
)
|
|
*
|
|
|||
Income before continuing operations before income taxes
|
116
|
|
|
150
|
|
|
(34
|
)
|
|
(23
|
)%
|
|||
Income tax expense
|
(22
|
)
|
|
(49
|
)
|
|
27
|
|
|
55
|
%
|
|||
Income from continuing operations
|
94
|
|
|
101
|
|
|
(7
|
)
|
|
(7
|
)%
|
|||
Income (loss) from discontinued operations, net of tax
|
1
|
|
|
(10
|
)
|
|
11
|
|
|
*
|
|
|||
Net income
|
$
|
95
|
|
|
$
|
91
|
|
|
$
|
4
|
|
|
4
|
%
|
Diluted earnings per share - net income
|
$
|
0.66
|
|
|
$
|
0.61
|
|
|
$
|
0.05
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|||||||
*not meaningful
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30:
|
||||||||||||||||||||||||||
|
|
|
|
|
Favorable (Unfavorable)
|
|
|
|
|
|
Favorable (Unfavorable)
|
||||||||||||||||||
(millions)
|
2018
|
|
2017
|
|
$
|
|
%
|
|
2018
|
|
2017
|
|
$
|
|
%
|
||||||||||||||
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
U.S. Wallboard and Surfaces
|
$
|
512
|
|
|
$
|
482
|
|
|
$
|
30
|
|
|
6
|
%
|
|
$
|
953
|
|
|
$
|
951
|
|
|
$
|
2
|
|
|
—
|
%
|
U.S. Performance Materials
|
105
|
|
|
100
|
|
|
5
|
|
|
5
|
%
|
|
197
|
|
|
186
|
|
|
11
|
|
|
6
|
%
|
||||||
U.S. Ceilings
|
139
|
|
|
118
|
|
|
21
|
|
|
18
|
%
|
|
277
|
|
|
230
|
|
|
47
|
|
|
20
|
%
|
||||||
Canada
|
121
|
|
|
104
|
|
|
17
|
|
|
16
|
%
|
|
232
|
|
|
200
|
|
|
32
|
|
|
16
|
%
|
||||||
Other
|
65
|
|
|
59
|
|
|
6
|
|
|
10
|
%
|
|
125
|
|
|
115
|
|
|
10
|
|
|
9
|
%
|
||||||
Eliminations
|
(62
|
)
|
|
(52
|
)
|
|
(10
|
)
|
|
(19
|
)%
|
|
(118
|
)
|
|
(104
|
)
|
|
(14
|
)
|
|
(13
|
)%
|
||||||
Total
|
$
|
880
|
|
|
$
|
811
|
|
|
$
|
69
|
|
|
9
|
%
|
|
$
|
1,666
|
|
|
$
|
1,578
|
|
|
$
|
88
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating profit (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
U.S. Wallboard and Surfaces
|
$
|
81
|
|
|
$
|
78
|
|
|
$
|
3
|
|
|
4
|
%
|
|
$
|
130
|
|
|
$
|
157
|
|
|
$
|
(27
|
)
|
|
(17
|
)%
|
U.S. Performance Materials
|
(6
|
)
|
|
8
|
|
|
(14
|
)
|
|
(175
|
)%
|
|
(5
|
)
|
|
14
|
|
|
(19
|
)
|
|
(136
|
)%
|
||||||
U.S. Ceilings
|
23
|
|
|
23
|
|
|
—
|
|
|
—
|
%
|
|
42
|
|
|
43
|
|
|
(1
|
)
|
|
(2
|
)%
|
||||||
Canada
|
8
|
|
|
2
|
|
|
6
|
|
|
300
|
%
|
|
10
|
|
|
4
|
|
|
6
|
|
|
150
|
%
|
||||||
Other
|
4
|
|
|
1
|
|
|
3
|
|
|
300
|
%
|
|
8
|
|
|
2
|
|
|
6
|
|
|
300
|
%
|
||||||
Corporate
|
(35
|
)
|
|
(17
|
)
|
|
(18
|
)
|
|
(106
|
)%
|
|
(64
|
)
|
|
(41
|
)
|
|
(23
|
)
|
|
(56
|
)%
|
||||||
Total
|
$
|
75
|
|
|
$
|
95
|
|
|
$
|
(20
|
)
|
|
(21
|
)%
|
|
$
|
121
|
|
|
$
|
179
|
|
|
$
|
(58
|
)
|
|
(32
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
* Not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
Volume
|
|
Price
|
||||||||||||
(millions)
|
$
|
%
|
|
$
|
%
|
|
$
|
%
|
|||||||||
Change to Q2 2018 from Q2 2017
|
|
|
|
|
|
|
|
|
|||||||||
USG Sheetrock® brand gypsum wallboard
|
$
|
10
|
|
4
|
%
|
|
$
|
5
|
|
2
|
%
|
|
$
|
5
|
|
2
|
%
|
USG Sheetrock
®
brand joint compound
|
7
|
|
7
|
%
|
|
4
|
|
4
|
%
|
|
3
|
|
3
|
%
|
|||
Other
|
13
|
|
|
|
|
|
|
|
|
||||||||
Total increase in net sales
|
$
|
30
|
|
|
|
|
|
|
|
|
|
Operating Profit
|
|
Volume
|
|
Price
|
|
Cost
|
||||||||
(millions)
|
$
|
|
$
|
|
$
|
|
$
|
||||||||
Change to Q2 2018 from Q2 2017
|
|
|
|
|
|
|
|
||||||||
USG Sheetrock
®
brand gypsum wallboard
|
$
|
(5
|
)
|
|
$
|
2
|
|
|
$
|
5
|
|
|
$
|
(12
|
)
|
USG Sheetrock
®
brand joint compound
|
(1
|
)
|
|
1
|
|
|
3
|
|
|
(5
|
)
|
||||
Other
|
9
|
|
|
|
|
|
|
|
|||||||
Total increase in operating profit
|
$
|
3
|
|
|
|
|
|
|
|
|
Sales
|
|
Volume
|
|
Price
|
||||||||||||
(millions)
|
$
|
%
|
|
$
|
%
|
|
$
|
%
|
|||||||||
Change to Q2 2018 from Q2 2017
|
|
|
|
|
|
|
|
|
|||||||||
USG Durock
®
brand cement board
|
$
|
2
|
|
7
|
%
|
|
$
|
1
|
|
3
|
%
|
|
$
|
1
|
|
4
|
%
|
USG Performance Flooring
|
2
|
|
12
|
%
|
|
2
|
|
12
|
%
|
|
—
|
|
—
|
%
|
|||
Securock
®
brand roof boards
|
2
|
|
12
|
%
|
|
—
|
|
—
|
%
|
|
2
|
|
12
|
%
|
|||
USG Structural Panels
|
(2
|
)
|
(41
|
)%
|
|
(2
|
)
|
(41
|
)%
|
|
—
|
|
—
|
%
|
|||
Other
|
1
|
|
|
|
|
|
|
|
|
||||||||
Total increase in net sales
|
$
|
5
|
|
|
|
|
|
|
|
|
|
Operating Profit
|
|
Volume
|
|
Price
|
|
Cost
|
||||||||
(millions)
|
$
|
|
$
|
|
$
|
|
$
|
||||||||
Change to Q2 2018 from Q2 2017
|
|
|
|
|
|
|
|
||||||||
USG Durock
®
brand cement board
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
USG Performance Flooring
|
—
|
|
|
2
|
|
|
—
|
|
|
(2
|
)
|
||||
Securock
®
brand roof boards
|
—
|
|
|
—
|
|
|
2
|
|
|
(2
|
)
|
||||
USG Structural Panels
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||
Other
|
(14
|
)
|
|
|
|
|
|
|
|||||||
Total decrease in operating profit
|
$
|
(14
|
)
|
|
|
|
|
|
|
|
Sales
|
|
Volume
|
|
Price
|
||||||||||||
(millions)
|
$
|
%
|
|
$
|
%
|
|
$
|
%
|
|||||||||
Change to Q2 2018 from Q2 2017
|
|
|
|
|
|
|
|
|
|||||||||
Ceiling grid
|
$
|
8
|
|
18
|
%
|
|
$
|
4
|
|
9
|
%
|
|
$
|
4
|
|
9
|
%
|
Ceiling tile
|
5
|
|
4
|
%
|
|
3
|
|
3
|
%
|
|
2
|
|
1
|
%
|
|||
Other
|
8
|
|
|
|
|
|
|
|
|
||||||||
Total increase in net sales
|
$
|
21
|
|
|
|
|
|
|
|
|
|
Operating Profit
|
|
Volume
|
|
Price
|
|
Cost
|
||||||||
(millions)
|
$
|
|
$
|
|
$
|
|
$
|
||||||||
Change to Q2 2018 from Q2 2017
|
|
|
|
|
|
|
|
||||||||
Ceiling grid
|
$
|
4
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
(1
|
)
|
Ceiling tile
|
1
|
|
|
1
|
|
|
2
|
|
|
(2
|
)
|
||||
Other
|
(5
|
)
|
|
|
|
|
|
|
|||||||
Total change in operating profit
|
$
|
—
|
|
|
|
|
|
|
|
|
Three months ended June 30:
|
|
Six months ended June 30:
|
||||||||||||||||||||||||||
|
|
|
|
|
Favorable (Unfavorable)
|
|
|
|
|
|
Favorable (Unfavorable)
|
||||||||||||||||||
(millions)
|
2018
|
|
2017
|
|
$
|
|
%
|
|
2018
|
|
2017
|
|
$
|
|
%
|
||||||||||||||
Net sales
|
$
|
297
|
|
|
$
|
287
|
|
|
$
|
10
|
|
|
3
|
%
|
|
$
|
584
|
|
|
$
|
563
|
|
|
$
|
21
|
|
|
4
|
%
|
Operating profit
|
31
|
|
|
40
|
|
|
(9
|
)
|
|
(23
|
)%
|
|
59
|
|
|
75
|
|
|
(16
|
)
|
|
(21
|
)%
|
||||||
Income from equity method investments - UBBP
|
12
|
|
|
14
|
|
|
(2
|
)
|
|
(14
|
)%
|
|
21
|
|
|
27
|
|
|
(6
|
)
|
|
(22
|
)%
|
|
Six months ended June 30,
|
||||||
(millions)
|
2018
|
|
2017
|
||||
Net cash provided by (used for):
|
|
|
|
||||
Operating activities from continuing operations
|
$
|
18
|
|
|
$
|
129
|
|
Investing activities from continuing operations
|
(88
|
)
|
|
(70
|
)
|
||
Financing activities from continuing operations
|
(77
|
)
|
|
(126
|
)
|
||
Discontinued operations
|
1
|
|
|
5
|
|
||
Effect of exchange rate changes on cash
|
(2
|
)
|
|
6
|
|
||
Net (decrease) increase in cash and cash equivalents
|
$
|
(148
|
)
|
|
$
|
(56
|
)
|
(a)
|
Evaluation of disclosure controls and procedures.
|
(b)
|
Changes in internal control over financial reporting.
|
Issuer Purchases of Equity Securities
|
||||||||||||||
Period
|
|
Total number of shares purchased
|
|
Average price paid per share
|
|
Total number of shares repurchased as part of publicly announced plans or programs
|
|
Approximate dollar value of shares that may yet be purchased under the plans or programs
(millions)
|
||||||
April 1, 2018 to April 30, 2018
|
|
344,084
|
|
|
$
|
40.14
|
|
|
344,084
|
|
|
$
|
240
|
|
May 1, 2018 to May 31, 2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
240
|
|
June 1, 2018 to June 30, 2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
240
|
|
Total
|
|
344,084
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344,084
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*
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Filed or furnished herewith
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**
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Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission; provided, however, that the registrant may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedules so furnished.
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USG CORPORATION
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By
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/s/ Jennifer F. Scanlon
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Jennifer F. Scanlon,
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Director, President and Chief Executive Officer
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By
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/s/ Matthew F. Hilzinger
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Matthew F. Hilzinger,
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Executive Vice President and Chief Financial Officer
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By
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/s/ Jeanette A. Press
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Jeanette A. Press,
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Vice President, Controller and Principal Accounting Officer
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July 25, 2018
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1.
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I have reviewed this quarterly report on Form 10-Q of USG Corporation (the “Corporation”);
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Corporation as of, and for, the periods presented in this report;
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4.
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The Corporation’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15(d)-15(f)) for the Corporation and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the Corporation’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the Corporation’s internal control over financial reporting that occurred during the Corporation’s most recent fiscal quarter (the Corporation’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting; and
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5.
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The Corporation’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Corporation’s auditors and the audit committee of the Corporation’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Corporation’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the Corporation’s internal control over financial reporting.
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July 25, 2018
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/s/ Jennifer F. Scanlon
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Jennifer F. Scanlon
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President and Chief Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of USG Corporation (the “Corporation”);
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Corporation as of, and for, the periods presented in this report;
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4.
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The Corporation’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15(d)-15(f)) for the Corporation and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the Corporation’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the Corporation’s internal control over financial reporting that occurred during the Corporation’s most recent fiscal quarter (the Corporation’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting; and
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5.
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The Corporation’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Corporation’s auditors and the audit committee of the Corporation’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Corporation’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the Corporation’s internal control over financial reporting.
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July 25, 2018
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/s/ Matthew F. Hilzinger
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Matthew F. Hilzinger
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Executive Vice President and Chief Financial Officer
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(1)
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
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July 25, 2018
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/s/ Jennifer F. Scanlon
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Jennifer F. Scanlon
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President and Chief Executive Officer
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(1)
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
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July 25, 2018
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/s/ Matthew F. Hilzinger
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Matthew F. Hilzinger
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Executive Vice President and Chief Financial Officer
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Location of Mines/Quarries
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Number of Citations for S&S Violations
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Number of Citations for Non S&S Violations
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Total Proposed Assessments
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Alabaster, Michigan
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—
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—
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$—
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Fort Dodge, Iowa
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—
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—
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—
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Plaster City, California
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—
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—
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—
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Shoals, Indiana
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1
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2
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494
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Sigurd, Utah
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—
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2
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—
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Southard, Oklahoma
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—
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2
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—
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Sperry, Iowa
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1
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5
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901
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Spruce Pine, North Carolina
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—
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—
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—
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Sweetwater, Texas
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—
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—
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—
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Totals
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2
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11
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$1,395
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