þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
USG CORPORATION |
Delaware | 36-3329400 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
550 West Adams Street, Chicago, Illinois | 60661-3676 | |
(Address of principal executive offices) | (Zip code) |
Large accelerated filer þ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ |
Page | ||
(millions, except per-share and share data) | Three months ended June 30, | Six months ended June 30, | |||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net sales | $ | 970 | $ | 948 | $ | 1,879 | $ | 1,798 | |||||||
Cost of products sold | 787 | 773 | 1,543 | 1,480 | |||||||||||
Gross profit | 183 | 175 | 336 | 318 | |||||||||||
Selling and administrative expenses | 79 | 77 | 156 | 154 | |||||||||||
Gain on disposal of shipping operations, net | (1 | ) | — | (1 | ) | — | |||||||||
Operating profit | 105 | 98 | 181 | 164 | |||||||||||
Income from equity method investments | 14 | 5 | 22 | 8 | |||||||||||
Interest expense | (40 | ) | (45 | ) | (83 | ) | (92 | ) | |||||||
Interest income | — | — | 1 | 1 | |||||||||||
Loss on extinguishment of debt | — | — | (19 | ) | — | ||||||||||
Gain on deconsolidation of subsidiaries and consolidated joint ventures | — | — | — | 27 | |||||||||||
Other income, net | 1 | — | — | — | |||||||||||
Income before income taxes | 80 | 58 | 102 | 108 | |||||||||||
Income tax benefit (expense) | (1 | ) | — | 1 | (5 | ) | |||||||||
Income from continuing operations | 79 | 58 | 103 | 103 | |||||||||||
Loss from discontinued operations, net of tax | — | (1 | ) | — | (1 | ) | |||||||||
Net income | 79 | 57 | $ | 103 | $ | 102 | |||||||||
Earnings (loss) per common share - basic: | |||||||||||||||
Income from continuing operations | $ | 0.54 | $ | 0.40 | $ | 0.70 | $ | 0.74 | |||||||
Loss from discontinued operations | — | (0.01 | ) | — | (0.01 | ) | |||||||||
Net income | $ | 0.54 | $ | 0.39 | $ | 0.70 | $ | 0.73 | |||||||
Earnings (loss) per common share - diluted: | |||||||||||||||
Income from continuing operations | $ | 0.54 | $ | 0.39 | $ | 0.70 | $ | 0.72 | |||||||
Loss from discontinued operations | — | (0.01 | ) | — | (0.01 | ) | |||||||||
Net income | $ | 0.54 | $ | 0.38 | $ | 0.70 | $ | 0.71 | |||||||
Average common shares | 145,424,853 | 144,500,682 | 145,393,548 | 139,702,728 | |||||||||||
Average diluted common shares | 146,990,178 | 147,024,196 | 147,167,248 | 146,920,294 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(millions) | |||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net income | $ | 79 | $ | 57 | $ | 103 | $ | 102 | |||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Derivatives qualifying as cash flow hedges: | |||||||||||||||
Gain/(loss) on derivatives qualifying as cash flow hedges, net of tax (benefit) of ($1), $0, $0, and $0, respectively | — | (3 | ) | (1 | ) | 2 | |||||||||
Less: Reclassification adjustment for gain (loss) on derivatives included in net income, net of tax of $0 in all periods | (3 | ) | 1 | (5 | ) | 3 | |||||||||
Net derivatives qualifying as cash flow hedges | 3 | (4 | ) | 4 | (1 | ) | |||||||||
Pension and postretirement benefits: | |||||||||||||||
Changes in pension and postretirement benefits, net of tax of $0, $1, $1 and $1, respectively | (8 | ) | (12 | ) | (2 | ) | (9 | ) | |||||||
Less: Amortization of prior service credit (cost) included in net periodic pension cost, net of tax (benefit) of $0, ($1), ($1) and ($1), respectively | (2 | ) | 3 | (3 | ) | 6 | |||||||||
Net pension and postretirement benefits | (6 | ) | (15 | ) | 1 | (15 | ) | ||||||||
Foreign currency translation: | |||||||||||||||
Changes in foreign currency translation, net of tax of $0 in all periods | (5 | ) | 15 | (39 | ) | 11 | |||||||||
Less: Translation gains realized upon the deconsolidation of foreign subsidiaries, net of tax of $0 in all periods | — | — | — | 5 | |||||||||||
Net foreign currency translation | (5 | ) | 15 | (39 | ) | 6 | |||||||||
Other comprehensive loss, net of tax | $ | (8 | ) | $ | (4 | ) | $ | (34 | ) | $ | (10 | ) | |||
Comprehensive income | $ | 71 | $ | 53 | $ | 69 | $ | 92 |
(millions, except share and per share data) | June 30, 2015 | December 31, 2014 | |||||
(Unaudited) | |||||||
Assets | |||||||
Cash and cash equivalents | $ | 231 | $ | 228 | |||
Short-term marketable securities | 61 | 96 | |||||
Restricted cash | 50 | 1 | |||||
Receivables (net of reserves - $20 and $22) | 468 | 404 | |||||
Inventories | 324 | 329 | |||||
Income taxes receivable | 3 | 3 | |||||
Deferred income taxes | 42 | 43 | |||||
Other current assets | 84 | 48 | |||||
Total current assets | 1,263 | 1,152 | |||||
Long-term marketable securities | 21 | 58 | |||||
Property, plant and equipment (net of accumulated depreciation and depletion - $1,926 and $1,885) | 1,826 | 1,908 | |||||
Deferred income taxes | 17 | 19 | |||||
Equity method investments | 681 | 735 | |||||
Other assets | 122 | 122 | |||||
Total assets | $ | 3,930 | $ | 3,994 | |||
Liabilities and Stockholders’ Equity | |||||||
Accounts payable | $ | 246 | $ | 290 | |||
Accrued expenses | 205 | 220 | |||||
Current portion of long-term debt | — | 4 | |||||
Deferred income taxes | 1 | — | |||||
Income taxes payable | 1 | 1 | |||||
Litigation settlement accrual | 48 | 48 | |||||
Total current liabilities | 501 | 563 | |||||
Long-term debt | 2,188 | 2,205 | |||||
Deferred income taxes | 61 | 61 | |||||
Pension and other postretirement benefits | 451 | 491 | |||||
Other liabilities | 253 | 266 | |||||
Total liabilities | 3,454 | 3,586 | |||||
Preferred stock – $1 par value, authorized 36,000,000 shares; outstanding - none | — | — | |||||
Common stock – $0.10 par value; authorized 200,000,000 shares; issued: 2015 - 145,570,000 shares; 2014 - 144,768,000 shares | 14 | 14 | |||||
Treasury stock at cost – 2015 - 121,000 shares; 2014 - 0 shares | (3 | ) | — | ||||
Additional paid-in capital | 3,017 | 3,014 | |||||
Accumulated other comprehensive loss | (372 | ) | (338 | ) | |||
Retained earnings (accumulated deficit) | (2,180 | ) | (2,283 | ) | |||
Stockholders’ equity of parent | 476 | 407 | |||||
Noncontrolling interest | — | 1 | |||||
Total stockholders’ equity including noncontrolling interest | 476 | 408 | |||||
Total liabilities and stockholders’ equity | $ | 3,930 | $ | 3,994 |
(millions) | Six months ended June 30, | ||||||
2015 | 2014 | ||||||
Operating Activities | |||||||
Net income | $ | 103 | $ | 102 | |||
Less: Loss from discontinued operations, net of tax | — | (1 | ) | ||||
Income from continuing operations | 103 | 103 | |||||
Adjustments to reconcile net income to net cash: | |||||||
Depreciation, depletion and amortization | 72 | 77 | |||||
Loss on extinguishment of debt | 19 | — | |||||
Share-based compensation expense | 6 | 10 | |||||
Deferred income taxes | 1 | 4 | |||||
Gain on asset dispositions | (7 | ) | (12 | ) | |||
Income from equity method investments | (22 | ) | (8 | ) | |||
Dividends received from equity method investments | 18 | — | |||||
Gain on deconsolidation of subsidiaries and consolidated joint ventures | — | (27 | ) | ||||
(Increase) decrease in working capital, net of deconsolidation of subsidiaries and consolidated joint ventures: | |||||||
Receivables | (66 | ) | (54 | ) | |||
Income taxes receivable | (1 | ) | (1 | ) | |||
Inventories | 6 | (17 | ) | ||||
Other current assets | 1 | (1 | ) | ||||
Payables | (33 | ) | (18 | ) | |||
Accrued expenses | (25 | ) | (22 | ) | |||
Decrease in other assets | 1 | — | |||||
Decrease in pension and other postretirement benefits | (40 | ) | — | ||||
Decrease in other liabilities | (4 | ) | (7 | ) | |||
Other, net | 5 | (7 | ) | ||||
Net cash provided by operating activities | $ | 34 | $ | 20 | |||
Investing Activities | |||||||
Purchases of marketable securities | (32 | ) | (97 | ) | |||
Sales or maturities of marketable securities | 103 | 99 | |||||
Capital expenditures | (48 | ) | (58 | ) | |||
Net proceeds from asset dispositions | 42 | 14 | |||||
Investment in joint ventures, including $23 of cash of contributed subsidiaries in 2014 | — | (557 | ) | ||||
Insurance proceeds | 2 | 2 | |||||
Return (deposit) of restricted cash | (49 | ) | 4 | ||||
Net cash provided by (used for) investing activities | $ | 18 | $ | (593 | ) | ||
Financing Activities | |||||||
Issuance of debt | 350 | 3 | |||||
Repayment of debt | (386 | ) | (2 | ) | |||
Payment of debt issuance fees | (6 | ) | — | ||||
Issuance of common stock | 4 | 3 | |||||
Repurchases of common stock to satisfy employee tax withholding obligations | (8 | ) | (5 | ) | |||
Net cash used for financing activities | $ | (46 | ) | $ | (1 | ) | |
Effect of exchange rate changes on cash | (3 | ) | — | ||||
Net cash used for operating activities - discontinued operations | — | (1 | ) | ||||
Net increase (decrease) in cash and cash equivalents | $ | 3 | $ | (575 | ) | ||
Cash and cash equivalents at beginning of period | 228 | 810 | |||||
Cash and cash equivalents at end of period | $ | 231 | $ | 235 | |||
Supplemental Cash Flow Disclosures: | |||||||
Interest paid, net of capitalized interest | $ | 80 | $ | 86 | |||
Income taxes paid, net | 1 | 8 | |||||
Noncash Investing and Financing Activities: | |||||||
Amount in accounts payable for capital expenditures | 6 | 6 | |||||
Contribution of wholly-owned subsidiaries and joint venture investments as consideration for investment in USG Boral Building Products | — | 121 | |||||
Conversion of $75 million of 10% convertible senior notes due 2018, net of discount | — | (73 | ) | ||||
Issuance of common stock upon conversion of debt | — | 75 | |||||
Accrued interest on debt conversion | — | (2 | ) |
1. | Organization, Consolidation and Presentation of Financial Statements |
June 30, 2015 | December 31, 2014 | |||||||||||
(dollars in millions) | Carrying Value | Ownership Percentage | Carrying Value | Ownership Percentage | ||||||||
USG Boral Building Products | $ | 673 | 50% | $ | 689 | 50% | ||||||
Other equity method investments (a) | 44 | 33% - 50% | 46 | 33% - 50% | ||||||||
Total equity method investments | $ | 717 | $ | 735 |
(a) | This amount includes our investment in Knauf-USG of $36 million which as of June 30, 2015 is classified as assets held for sale and is included in other current assets. |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 (a) | |||||||||||
Translation gain (loss) | $ | (3 | ) | $ | 10 | $ | (19 | ) | $ | 11 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 (a) | |||||||||||
USG Boral Building Products: | |||||||||||||||
Net sales | $ | 264 | $ | 280 | $ | 492 | $ | 369 | |||||||
Gross profit | 70 | 80 | 131 | 102 | |||||||||||
Operating profit | 34 | 16 | 57 | 26 | |||||||||||
Income from continuing operations | 28 | 10 | 46 | 17 | |||||||||||
Net income | 28 | 10 | 46 | 17 | |||||||||||
Net income attributable to USG Boral Building Products | 26 | 9 | 42 | 15 | |||||||||||
USG share of income from investment accounted for using the equity method | 13 | 4 | 21 | 7 | |||||||||||
Other equity method investments: | |||||||||||||||
USG share of income from investments accounted for using the equity method | 1 | 1 | 1 | 1 | |||||||||||
Total income from equity method investments | 14 | 5 | 22 | 8 |
(a) | Operating results are presented for UBBP for the four months ended June 30, 2014. |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(millions) | 2015 | 2014 | 2015 | 2014 (b) | |||||||||||
Net Sales: | |||||||||||||||
Gypsum | $ | 617 | $ | 612 | $ | 1,194 | $ | 1,157 | |||||||
Ceilings (a) | 131 | 130 | 254 | 255 | |||||||||||
Distribution | 364 | 344 | 698 | 644 | |||||||||||
Eliminations | (142 | ) | (138 | ) | (267 | ) | (258 | ) | |||||||
Total | $ | 970 | $ | 948 | $ | 1,879 | $ | 1,798 | |||||||
Operating Profit (Loss): | |||||||||||||||
Gypsum | $ | 98 | $ | 95 | $ | 166 | $ | 160 | |||||||
Ceilings (a) | 25 | 24 | 46 | 39 | |||||||||||
Distribution | 9 | 4 | 13 | 5 | |||||||||||
Corporate | (24 | ) | (21 | ) | (47 | ) | (42 | ) | |||||||
Eliminations | (3 | ) | (4 | ) | 3 | 2 | |||||||||
Total | $ | 105 | $ | 98 | $ | 181 | $ | 164 |
(a) | Ceilings' net sales and operating profit for the six months ended June 30, 2014 includes the results, through February 27, 2014, of our wholly-owned subsidiaries and consolidated joint ventures that were contributed to UBBP. |
(b) | Net sales and operating profit (loss) have been recast for the periods prior to April 1, 2014 to conform with the new presentation of reportable segments. |
4. | Earnings Per Share |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(millions, except per-share data) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Income from continuing operations | $ | 79 | $ | 58 | $ | 103 | $ | 103 | |||||||
Loss from discontinued operations | — | (1 | ) | — | (1 | ) | |||||||||
Net income | 79 | 57 | 103 | 102 | |||||||||||
Effect of dilutive securities - RSUs, MSUs, performance shares and stock options | — | — | — | — | |||||||||||
Effect of dilutive securities - 10% convertible senior notes | — | — | — | 2 | |||||||||||
Effect of dilutive securities - Deferred compensation program for non-employee directors | — | — | — | — | |||||||||||
Income available to shareholders | $ | 79 | $ | 57 | $ | 103 | $ | 104 | |||||||
Average common shares | 145.4 | 144.5 | 145.4 | 139.7 | |||||||||||
Dilutive RSUs, MSUs, performance shares and stock options | 1.6 | 2.3 | 1.6 | 2.5 | |||||||||||
Common shares issuable upon conversion of our 10% convertible senior notes | — | — | — | 4.7 | |||||||||||
Deferred shares associated with a deferred compensation program for non-employee directors | — | 0.2 | 0.2 | — | |||||||||||
Average diluted common shares | 147.0 | 147.0 | 147.2 | 146.9 | |||||||||||
Earnings (loss) per average common share: | |||||||||||||||
Income from continuing operations | $ | 0.54 | $ | 0.40 | $ | 0.70 | $ | 0.74 | |||||||
Loss from discontinued operations | — | (0.01 | ) | — | (0.01 | ) | |||||||||
Earnings per average common share | $ | 0.54 | $ | 0.39 | $ | 0.70 | $ | 0.73 | |||||||
Diluted earnings (loss) per average common share: | |||||||||||||||
Income from continuing operations | $ | 0.54 | $ | 0.39 | $ | 0.70 | $ | 0.72 | |||||||
Loss from discontinued operations | — | (0.01 | ) | — | (0.01 | ) | |||||||||
Earnings per average diluted common share | $ | 0.54 | $ | 0.38 | $ | 0.70 | $ | 0.71 |
Three months ended June 30, | Six months ended June 30, | ||||||||||
(millions, common shares) | 2015 | 2014 | 2015 | 2014 | |||||||
MSUs, performance shares, RSUs and stock options | 1.8 | 2.1 | 1.9 | 2.1 | |||||||
Deferred shares associated with a deferred compensation program for non-employee directors | 0.2 | — | — | 0.2 |
5. | Marketable Securities |
As of June 30, 2015 | As of December 31, 2014 | ||||||||||||||
(millions) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||
Corporate debt securities | $ | 57 | $ | 57 | $ | 93 | $ | 93 | |||||||
U.S. government and agency debt securities | 2 | 2 | 22 | 22 | |||||||||||
Asset-backed debt securities | 12 | 12 | 17 | 17 | |||||||||||
Certificates of deposit | 9 | 9 | 18 | 18 | |||||||||||
Municipal debt securities | 2 | 2 | 4 | 4 | |||||||||||
Total marketable securities | $ | 82 | $ | 82 | $ | 154 | $ | 154 |
(millions) | Amortized Cost | Fair Value | |||||
Due in 1 year or less | $ | 61 | $ | 61 | |||
Due in 1-5 years | 21 | 21 | |||||
Total marketable securities | $ | 82 | $ | 82 |
As of June 30, 2015 | As of December 31, 2014 | ||||||||||||||||||||||
(millions) | Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net | |||||||||||||||||
Intangible Assets with Definite Lives: | |||||||||||||||||||||||
Customer relationships | $ | 70 | $ | (58 | ) | $ | 12 | $ | 70 | $ | (54 | ) | $ | 16 | |||||||||
Other | 9 | (7 | ) | 2 | 9 | (7 | ) | 2 | |||||||||||||||
Total | $ | 79 | $ | (65 | ) | $ | 14 | $ | 79 | $ | (61 | ) | $ | 18 |
(millions) | 2015 | 2016 | 2017 | 2018 and thereafter | |||||||||||
Estimated future amortization expense | $ | 4 | $ | 7 | $ | 2 | $ | 1 |
As of June 30, 2015 | As of December 31, 2014 | ||||||||||||||||||||||
(millions) | Gross Carrying Amount | Accumulated Impairment Charges | Net | Gross Carrying Amount | Accumulated Impairment Charges | Net | |||||||||||||||||
Intangible Assets with Indefinite Lives: | |||||||||||||||||||||||
Trade names | $ | 22 | $ | — | $ | 22 | $ | 22 | $ | — | $ | 22 | |||||||||||
Other | 9 | (1 | ) | 8 | 9 | (1 | ) | 8 | |||||||||||||||
Total | $ | 31 | $ | (1 | ) | $ | 30 | $ | 31 | $ | (1 | ) | $ | 30 |
(millions) | June 30, 2015 | December 31, 2014 | |||||
5.5% senior notes due 2025 | $ | 350 | $ | — | |||
5.875% senior notes due 2021 | 350 | 350 | |||||
6.3% senior notes due 2016 | 500 | 500 | |||||
7.75% senior notes due 2018, net of discount | 500 | 500 | |||||
7.875% senior notes due 2020, net of discount | 249 | 249 | |||||
8.375% senior notes due 2018 | — | 350 | |||||
Ship mortgage facility (includes current portion of long-term debt: 2015 - $0, 2014 - $4) | — | 21 | |||||
Industrial revenue bonds (due 2028 through 2034) | 239 | 239 | |||||
Total | $ | 2,188 | $ | 2,209 |
8. | Derivative Instruments |
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) | 2015 | 2014 | 2015 | 2014 | |||||||||||||
Derivatives in Cash Flow Hedging Relationships | |||||||||||||||||
Commodity contracts | $ | 1 | $ | (1 | ) | Cost of products sold | $ | (4 | ) | $ | 1 | ||||||
Foreign exchange contracts | (2 | ) | (2 | ) | Cost of products sold | 1 | — | ||||||||||
Total | $ | (1 | ) | $ | (3 | ) | $ | (3 | ) | $ | 1 |
Location of Gain or (Loss) Recognized in Income on Derivatives | Amount of Gain or (Loss) Recognized in Income on Derivatives | |||||||||
(millions) | 2015 | 2014 | ||||||||
Derivatives Not Designated as Hedging Instruments | ||||||||||
Commodity contracts | Cost of products sold | $ | — | $ | — | |||||
Total | $ | — | $ | — |
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) | 2015 | 2014 | 2015 | 2014 | |||||||||||||
Derivatives in Cash Flow Hedging Relationships | |||||||||||||||||
Commodity contracts | $ | (4 | ) | $ | 2 | Cost of products sold | $ | (7 | ) | $ | 2 | ||||||
Foreign exchange contracts | 3 | — | Cost of products sold | 2 | 1 | ||||||||||||
Total | $ | (1 | ) | $ | 2 | $ | (5 | ) | $ | 3 |
Location of Gain or (Loss) Recognized in Income on Derivatives | Amount of Gain or (Loss) Recognized in Income on Derivatives | |||||||||
(millions) | 2015 | 2014 | ||||||||
Derivatives Not Designated as Hedging Instruments | ||||||||||
Commodity contracts | Cost of products sold | $ | (1 | ) | $ | 1 | ||||
Total | $ | (1 | ) | $ | 1 |
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||||||||
(millions) | 6/30/15 | 12/31/14 | 6/30/15 | 12/31/14 | |||||||||||||
Derivatives in Cash Flow Hedging Relationships | |||||||||||||||||
Commodity contracts | Other current assets | $ | 1 | $ | 1 | Accrued expenses | $ | 11 | $ | 14 | |||||||
Commodity contracts | Other assets | — | — | Other liabilities | 6 | 7 | |||||||||||
Foreign exchange contracts | Other current assets | 4 | 3 | Accrued expenses | — | — | |||||||||||
Total derivatives in cash flow hedging relationships | $ | 5 | $ | 4 | $ | 17 | $ | 21 |
Derivatives Not Designated as Hedging Instruments | |||||||||||||||||
Commodity contracts | Other current assets | $ | — | $ | — | Accrued expenses | $ | 3 | $ | 4 | |||||||
Commodity contracts | Other assets | — | — | Other liabilities | 1 | 1 | |||||||||||
Total derivatives not designated as hedging instruments | $ | — | $ | — | $ | 4 | $ | 5 | |||||||||
Total derivatives | Total assets | $ | 5 | $ | 4 | Total liabilities | $ | 21 | $ | 26 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||||||||||
(millions) | 6/30/15 | 12/31/14 | 6/30/15 | 12/31/14 | 6/30/15 | 12/31/14 | 6/30/15 | 12/31/14 | |||||||||||||||||||||||
Cash equivalents | $ | 129 | $ | 93 | $ | 19 | $ | 32 | $ | — | $ | — | $ | 148 | $ | 125 | |||||||||||||||
Equity mutual funds | 4 | 4 | — | — | — | — | 4 | 4 | |||||||||||||||||||||||
Marketable securities: | |||||||||||||||||||||||||||||||
Corporate debt securities | — | — | 57 | 93 | — | — | 57 | 93 | |||||||||||||||||||||||
U.S. government and agency debt securities | — | — | 2 | 22 | — | — | 2 | 22 | |||||||||||||||||||||||
Asset-backed debt securities | — | — | 12 | 17 | — | — | 12 | 17 | |||||||||||||||||||||||
Certificates of deposit | — | — | 9 | 18 | — | — | 9 | 18 | |||||||||||||||||||||||
Municipal debt securities | — | — | 2 | 4 | — | — | 2 | 4 | |||||||||||||||||||||||
Derivative assets | — | — | 5 | 4 | — | — | 5 | 4 | |||||||||||||||||||||||
Derivative liabilities | — | — | (21 | ) | (26 | ) | — | — | (21 | ) | (26 | ) |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Pension: | |||||||||||||||
Service cost of benefits earned | $ | 12 | $ | 9 | $ | 25 | $ | 18 | |||||||
Interest cost on projected benefit obligation | 17 | 17 | 34 | 33 | |||||||||||
Expected return on plan assets | (21 | ) | (20 | ) | (42 | ) | (40 | ) | |||||||
Net amortization | 10 | 6 | 19 | 12 | |||||||||||
Net pension cost | $ | 18 | $ | 12 | $ | 36 | $ | 23 | |||||||
Postretirement: | |||||||||||||||
Service cost of benefits earned | $ | — | $ | — | $ | 1 | $ | 1 | |||||||
Interest cost on projected benefit obligation | 2 | 2 | 3 | 4 | |||||||||||
Net amortization | (8 | ) | (9 | ) | (16 | ) | (18 | ) | |||||||
Net postretirement benefit | $ | (6 | ) | $ | (7 | ) | $ | (12 | ) | $ | (13 | ) |
MSUs | Performance Shares | RSUs | |||||||||
Awards granted | 473,728 | 147,290 | 48,000 | ||||||||
Weighted average fair value | $ | 30.06 | $ | 30.63 | $ | 27.69 | |||||
Expected volatility | 42.70 | % | 42.70 | % | N/A | ||||||
Risk-free rate (a) | 1.09 | % | 1.09 | % | N/A | ||||||
Expected term (in years) (b) | 2.95 | 2.95 | N/A | ||||||||
Expected dividends | — | — | N/A |
(a) | The risk-free rate was based on zero coupon U.S. government issues at the time of grant. |
(b) | The expected term represents the period from the valuation date to the end of the performance period. |
(millions) | June 30, 2015 | December 31, 2014 | |||||
Finished goods | $ | 218 | $ | 232 | |||
Work in progress | 36 | 35 | |||||
Raw materials | 70 | 62 | |||||
Total | $ | 324 | $ | 329 |
Six months ended June 30, | |||||||
(millions) | 2015 | 2014 | |||||
Balance as of January 1 | $ | 123 | $ | 132 | |||
Accretion expense | 4 | 4 | |||||
Liabilities incurred | — | — | |||||
Changes in estimated cash flows (a) | (1 | ) | (10 | ) | |||
Liabilities settled | (1 | ) | (2 | ) | |||
Foreign currency translation | (2 | ) | (1 | ) | |||
Balance as of June 30 | $ | 123 | $ | 123 |
(a) | Changes in estimated cash flows for the six months ended June 30, 2014 included changes in estimates primarily for our gypsum quarry and ship loading facility in Windsor, Nova Scotia, Canada, which we permanently closed during the third quarter of 2011, and our mining operation in Little Narrows, Nova Scotia, Canada as a result of receiving regulatory approval of a revised reclamation plan in 2014. |
Derivatives | Defined Benefit Plans | Foreign Currency Translation | AOCI | ||||||||||||||||||||||||||||
(millions) | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||||
Balance as of January 1 | $ | 16 | $ | 35 | $ | (302 | ) | $ | (32 | ) | $ | (52 | ) | $ | 21 | $ | (338 | ) | $ | 24 | |||||||||||
Other comprehensive income (loss) before reclassifications, net of tax | (1 | ) | 2 | (2 | ) | (9 | ) | (39 | ) | 11 | (42 | ) | 4 | ||||||||||||||||||
Less: Amounts reclassified from AOCI, net of tax | (5 | ) | 3 | (3 | ) | 6 | — | 5 | (8 | ) | 14 | ||||||||||||||||||||
Net other comprehensive income (loss) | 4 | (1 | ) | 1 | (15 | ) | (39 | ) | 6 | (34 | ) | (10 | ) | ||||||||||||||||||
Balance as of June 30 | $ | 20 | $ | 34 | $ | (301 | ) | $ | (47 | ) | $ | (91 | ) | $ | 27 | $ | (372 | ) | $ | 14 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(millions) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Derivatives | ||||||||||||||||
Net reclassification from AOCI for cash flow hedges included in cost of products sold | $ | (3 | ) | $ | 1 | $ | (5 | ) | $ | 3 | ||||||
Less: Income tax expense on reclassification from AOCI included in income tax expense (benefit) | — | — | — | — | ||||||||||||
Net amount reclassified from AOCI | $ | (3 | ) | $ | 1 | $ | (5 | ) | $ | 3 | ||||||
Defined Benefit Plans | ||||||||||||||||
Net reclassification from AOCI for amortization of prior service cost included in cost of products sold | $ | (1 | ) | $ | 1 | $ | (2 | ) | $ | 3 | ||||||
Net reclassification from AOCI for amortization of prior service cost included in selling and administrative expenses | (1 | ) | 1 | (2 | ) | 2 | ||||||||||
Less: Income tax expense on reclassification from AOCI included in income tax expense (benefit) | — | (1 | ) | (1 | ) | (1 | ) | |||||||||
Net amount reclassified from AOCI | $ | (2 | ) | $ | 3 | $ | (3 | ) | $ | 6 | ||||||
Foreign Currency Translation | ||||||||||||||||
Net reclassification from AOCI for translation gains realized upon the deconsolidation of foreign subsidiaries included in selling and administrative expenses | $ | — | $ | — | $ | — | $ | 5 | ||||||||
Less: Income tax expense on reclassification from AOCI included in income tax expense (benefit) | — | — | — | — | ||||||||||||
Net amount reclassified from AOCI | $ | — | $ | — | $ | — | $ | 5 |
14. | Oman Investment |
15. | Income Taxes |
• | residential and nonresidential repair and remodel activity accounted for approximately 53% of our net sales, |
• | new residential construction accounted for approximately 18% of our net sales, |
• | new nonresidential construction accounted for approximately 24% of our net sales, and |
• | other activities accounted for approximately 5% of our net sales. |
Wallboard | Sheetrock® brand gypsum wallboard portfolio and Securock® glass mat sheathing |
Surfaces | Sheetrock® brand joint compound, corner bead, joint tape, plaster |
Substrates | Durock® cement backerboard, Fiberock® backerboard, Levelrock® flooring, Securock® glass mat roofing and commercial roof board, and industrial gypsum |
(dollars in millions, except per-share data) | 2015 | 2014 | $ Favorable (Unfavorable) | % Favorable (Unfavorable) | ||||||||||
Three months ended June 30: | ||||||||||||||
Net sales | $ | 970 | $ | 948 | $ | 22 | 2 | % | ||||||
Cost of products sold | 787 | 773 | (14 | ) | (2 | )% | ||||||||
Gross profit | 183 | 175 | 8 | 5 | % | |||||||||
Selling and administrative expenses | 79 | 77 | (2 | ) | (3 | )% | ||||||||
Gain on disposal of shipping operations, net | (1 | ) | — | 1 | * | |||||||||
Operating profit | 105 | 98 | 7 | 7 | % | |||||||||
Income from equity method investments | 14 | 5 | 9 | * | ||||||||||
Interest expense | (40 | ) | (45 | ) | 5 | 11 | % | |||||||
Other income, net | 1 | — | 1 | * | ||||||||||
Income from continuing operations before income taxes | 80 | 58 | 22 | 38 | % | |||||||||
Income tax benefit (expense) | (1 | ) | — | (1 | ) | * | ||||||||
Income from continuing operations | 79 | 58 | 21 | 36 | % | |||||||||
Loss from discontinued operations, net of tax | — | (1 | ) | 1 | 100 | % | ||||||||
Net income | $ | 79 | $ | 57 | $ | 22 | 39 | % | ||||||
Diluted earnings per share | $ | 0.54 | $ | 0.38 | $ | 0.16 | 42 | % | ||||||
Six months ended June 30: | ||||||||||||||
Net sales | $ | 1,879 | $ | 1,798 | $ | 81 | 5 | % | ||||||
Cost of products sold | 1,543 | 1,480 | (63 | ) | (4 | %) | ||||||||
Gross profit | 336 | 318 | 18 | 6 | % | |||||||||
Selling and administrative expenses | 156 | 154 | (2 | ) | (1 | )% | ||||||||
Gain on disposition of shipping operations, net | (1 | ) | — | 1 | * | |||||||||
Operating profit | 181 | 164 | 17 | 10 | % | |||||||||
Income from equity method investments | 22 | 8 | 14 | * | ||||||||||
Interest expense | (83 | ) | (92 | ) | 9 | 10 | % | |||||||
Interest income | 1 | 1 | — | — | % | |||||||||
Loss on extinguishment of debt | (19 | ) | — | (19 | ) | * | ||||||||
Gain on deconsolidation of subsidiaries and consolidated joint ventures | — | 27 | (27 | ) | (100 | )% | ||||||||
Income from continuing operations before income taxes | 102 | 108 | (6 | ) | (6 | %) | ||||||||
Income tax benefit (expense) | 1 | (5 | ) | 6 | * | |||||||||
Income from continuing operations | 103 | 103 | — | — | % | |||||||||
Loss from discontinued operations, net of tax | — | (1 | ) | 1 | 100 | % | ||||||||
Net income | $ | 103 | $ | 102 | $ | 1 | 1 | % | ||||||
Diluted earnings per share | $ | 0.70 | $ | 0.71 | $ | (0.01 | ) | (1 | %) | |||||
*not meaningful |
Three months ended June 30: | Six months ended June 30: | ||||||||||||||||||||||||||||
Favorable (Unfavorable) | Favorable (Unfavorable) | ||||||||||||||||||||||||||||
(millions) | 2015 | 2014 | $ | % | 2015 | 2014(a) | $ | % | |||||||||||||||||||||
Net sales: | |||||||||||||||||||||||||||||
United States | $ | 516 | $ | 488 | $ | 28 | 6 | % | $ | 993 | $ | 920 | $ | 73 | 8 | % | |||||||||||||
Canada | 87 | 90 | (3 | ) | (3 | )% | 163 | 166 | (3 | ) | (2 | )% | |||||||||||||||||
Mexico / Latin America | 48 | 48 | — | — | % | 96 | 95 | 1 | 1 | % | |||||||||||||||||||
Gypsum Transportation Limited | — | 21 | (21 | ) | (100 | )% | 10 | 42 | (32 | ) | (76 | )% | |||||||||||||||||
Canadian Mining | 2 | 1 | 1 | 100 | % | 2 | 1 | 1 | 100 | % | |||||||||||||||||||
Eliminations | (36 | ) | (36 | ) | — | — | % | (70 | ) | (67 | ) | (3 | ) | (4 | )% | ||||||||||||||
Total | $ | 617 | $ | 612 | $ | 5 | 1 | % | $ | 1,194 | $ | 1,157 | $ | 37 | 3 | % | |||||||||||||
Operating profit (loss): | |||||||||||||||||||||||||||||
United States | $ | 91 | $ | 83 | $ | 8 | 10 | % | $ | 157 | $ | 131 | $ | 26 | 20 | % | |||||||||||||
Canada | 3 | 5 | (2 | ) | (40 | )% | 4 | 8 | (4 | ) | (50 | )% | |||||||||||||||||
Mexico / Latin America | 5 | 4 | 1 | 25 | % | 9 | 8 | 1 | 13 | % | |||||||||||||||||||
Gypsum Transportation Limited | 1 | 6 | (5 | ) | (83 | )% | 1 | 14 | (13 | ) | (93 | )% | |||||||||||||||||
Canadian Mining | (2 | ) | (3 | ) | 1 | 33 | % | (5 | ) | (1 | ) | (4 | ) | * | |||||||||||||||
Total | $ | 98 | $ | 95 | $ | 3 | 3 | % | $ | 166 | $ | 160 | $ | 6 | 4 | % |
(a) | Results for the first three months of 2014 have been recast to reflect our change in segments. |
Sales | Volume | Price | |||||||||||||||
(millions) | $ | % | $ | % | $ | % | |||||||||||
Change to Q2 2015 from Q2 2014 | |||||||||||||||||
Sheetrock® brand gypsum wallboard | $ | 12 | 6 | % | $ | 9 | 4 | % | $ | 3 | 2 | % | |||||
Sheetrock® brand joint compound | 4 | 5 | % | 2 | 3 | % | 2 | 2 | % | ||||||||
Roof board | 4 | 29 | % | 4 | 29 | % | — | — | % | ||||||||
Other | 8 | ||||||||||||||||
Total increase in net sales | $ | 28 | 6 | % |
Operating Profit | Volume | Price | Cost | ||||||||||||
(millions) | $ | $ | $ | $ | |||||||||||
Change to Q2 2015 from Q2 2014 | |||||||||||||||
Sheetrock® brand gypsum wallboard | $ | 14 | $ | 4 | $ | 3 | $ | 7 | |||||||
Sheetrock® brand joint compound | 4 | 1 | 2 | 1 | |||||||||||
Roof board | 1 | 1 | — | — | |||||||||||
Other | (11 | ) | |||||||||||||
Total increase in operating profit | $ | 8 |
Three months ended June 30: | Six months ended June 30: | ||||||||||||||||||||||||||||
Favorable (Unfavorable) | Favorable (Unfavorable) | ||||||||||||||||||||||||||||
(millions) | 2015 | 2014 | $ | % | 2015 | 2014(a)(b) | $ | % | |||||||||||||||||||||
Net sales: | |||||||||||||||||||||||||||||
United States | $ | 121 | $ | 120 | $ | 1 | 1 | % | $ | 236 | $ | 228 | $ | 8 | 4 | % | |||||||||||||
USG International (a) | — | — | — | — | % | — | 7 | (7 | ) | (100 | )% | ||||||||||||||||||
Canada | 14 | 15 | (1 | ) | (7 | )% | 28 | 28 | — | — | % | ||||||||||||||||||
Mexico / Latin America | 8 | 7 | 1 | 14 | % | 17 | 17 | — | — | % | |||||||||||||||||||
Eliminations | (12 | ) | (12 | ) | — | — | % | (27 | ) | (25 | ) | (2 | ) | (8 | )% | ||||||||||||||
Total | $ | 131 | $ | 130 | $ | 1 | 1 | % | $ | 254 | $ | 255 | $ | (1 | ) | — | % | ||||||||||||
Operating profit: | |||||||||||||||||||||||||||||
United States | $ | 23 | $ | 21 | $ | 2 | 10 | % | $ | 42 | $ | 32 | $ | 10 | 31 | % | |||||||||||||
USG International (a) | — | — | — | — | % | — | — | — | — | % | |||||||||||||||||||
Canada | 1 | 2 | (1 | ) | (50 | )% | 2 | 4 | (2 | ) | (50 | )% | |||||||||||||||||
Mexico / Latin America | 1 | 1 | — | — | % | 2 | 3 | (1 | ) | (33 | )% | ||||||||||||||||||
Total | $ | 25 | $ | 24 | $ | 1 | 4 | % | $ | 46 | $ | 39 | $ | 7 | 18 | % |
(a) | USG International’s net sales and operating profit for the six months ended June 30, 2014 include the results of our wholly-owned subsidiaries and consolidated joint ventures that were contributed to UBBP on February 27, 2014. |
(b) | Results for the first three months of 2014 have been recast to reflect our change in segments. |
Sales | Volume | Price | |||||||||||||||
(millions) | $ | % | $ | % | $ | % | |||||||||||
Change to Q2 2015 from Q2 2014 | |||||||||||||||||
Ceiling grid | $ | (1 | ) | (3 | )% | $ | (1 | ) | (3 | )% | $ | — | — | % | |||
Ceiling tile | 2 | 2 | % | 1 | 1 | % | 1 | 1 | % | ||||||||
Total increase in net sales | $ | 1 | 1 | % |
Operating Profit | Volume | Price | Cost | ||||||||||||
(millions) | $ | $ | $ | $ | |||||||||||
Change to Q2 2015 from Q2 2014 | |||||||||||||||
Ceiling grid | $ | (1 | ) | $ | — | $ | — | $ | (1 | ) | |||||
Ceiling tile | 3 | — | 1 | 2 | |||||||||||
Total increase in operating profit | $ | 2 |
Three months ended June 30: | Six months ended June 30: | ||||||||||||||||||||||||||||
Favorable (Unfavorable) | Favorable (Unfavorable) | ||||||||||||||||||||||||||||
(millions) | 2015 | 2014 | $ | % | 2015 | 2014 | $ | % | |||||||||||||||||||||
Net sales | $ | 364 | $ | 344 | $ | 20 | 6 | % | $ | 698 | $ | 644 | $ | 54 | 8 | % | |||||||||||||
Operating profit | 9 | 4 | 5 | * | 13 | 5 | 8 | * | |||||||||||||||||||||
*not meaningful |
Three months ended June 30: | Six months ended June 30: | ||||||||||||||||||||||||||||
Favorable (Unfavorable) | Favorable (Unfavorable) | ||||||||||||||||||||||||||||
(millions) | 2015 | 2014 | $ | % | 2015 | 2014 | $ | % | |||||||||||||||||||||
Net sales | $ | 264 | $ | 280 | $ | (16 | ) | (6 | )% | $ | 492 | $ | 369 | $ | 123 | 33 | % | ||||||||||||
Operating profit | 34 | 16 | 18 | * | 57 | 26 | 31 | * | |||||||||||||||||||||
Income from equity method investments - UBBP | $ | 13 | $ | 4 | $ | 9 | * | $ | 21 | $ | 7 | $ | 14 | * | |||||||||||||||
*not meaningful |
Six months ended June 30, | |||||||
(millions) | 2015 | 2014 | |||||
Net cash provided by (used for): | |||||||
Operating activities | $ | 34 | $ | 20 | |||
Investing activities | 18 | (593 | ) | ||||
Financing activities | (46 | ) | (1 | ) | |||
Discontinued operations | — | (1 | ) | ||||
Effect of exchange rate changes on cash | (3 | ) | — | ||||
Net increase (decrease) in cash and cash equivalents | $ | 3 | $ | (575 | ) |
• | economic conditions, such as the levels of new home and other construction activity, employment levels, the availability of mortgage, construction and other financing, mortgage and other interest rates, housing affordability and supply, the levels of foreclosures and home resales, currency exchange rates and consumer confidence; |
• | capital markets conditions and the availability of borrowings under our credit agreement or other financings; |
• | our substantial indebtedness and our ability to incur substantial additional indebtedness; |
• | competitive conditions, such as price, service and product competition; |
• | shortages in raw materials; |
• | changes in raw material and energy costs; |
• | volatility in the assumptions used to determine the funded status of our pension plans; |
• | the loss of one or more major customers and our customers’ ability to meet their financial obligations to us; |
• | capacity utilization rates for us and the industry; |
• | our ability to expand into new geographic markets and the stability of such markets; |
• | our ability to successfully operate USG Boral Building Products, including risks that our joint ventures partner, Boral, may not fulfill its obligations as an investor or may take actions that are inconsistent with our objectives; |
• | our ability to protect our intellectual property and other proprietary rights; |
• | changes in laws or regulations, including environmental and safety regulations; |
• | the satisfactory performance of certain business functions by third party service providers; |
• | our ability to achieve anticipated savings from cost reduction programs; |
• | the outcome in contested litigation matters; |
• | the effects of acts of terrorism or war upon domestic and international economies and financial markets; and |
• | acts of God. |
(a) | Evaluation of disclosure controls and procedures. |
(b) | Changes in internal control over financial reporting. |
10.1 | USG Corporation Management Incentive Plan (as amended and restated effective May 13, 2015) (incorporated by reference to Annex B to the Proxy Statement for the Annual Meeting of Stockholders of USG Corporation held on May 13, 2015, or the 2015 Proxy Statement) |
10.2 | USG Corporation Long-Term Incentive Plan (as amended and restated effective May 13, 2015 (incorporated by reference to Annex C to the 2015 Proxy Statement) |
10.3 | Form of Employment Agreement (form used since January 1, 2015) * |
31.1 | Rule 13a-14(a) Certifications of USG Corporation’s Chief Executive Officer * |
31.2 | Rule 13a-14(a) Certifications of USG Corporation’s Chief Financial Officer * |
32.1 | Section 1350 Certifications of USG Corporation’s Chief Executive Officer * |
32.2 | Section 1350 Certifications of USG Corporation’s Chief Financial Officer * |
95 | Mine Safety Disclosures * |
101 | The following financial information from USG Corporation’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2015, formatted in XBRL (Extensible Business Reporting Language): (1) the consolidated statements of operations for the three and six months ended June 30, 2015 and 2014, (2) the consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2015 and 2014, (3) the consolidated balance sheets as of June 30, 2015 and December 31, 2014, (4) the consolidated statements of cash flows for the six months ended June 30, 2015 and 2014 and (5) notes to the consolidated financial statements. * |
* | Filed or furnished herewith |
USG CORPORATION | ||||
By | /s/ James S. Metcalf | |||
James S. Metcalf, | ||||
Chairman, President and Chief Executive Officer | ||||
By | /s/ Matthew F. Hilzinger | |||
Matthew F. Hilzinger, | ||||
Executive Vice President and Chief Financial Officer | ||||
By | /s/ Jeanette A. Press | |||
Jeanette A. Press, | ||||
Vice President, Controller and Principal Accounting Officer | ||||
July 23, 2015 | ||||
Exhibit Number | Exhibit |
10.1 | USG Corporation Management Incentive Plan (as amended and restated effective May 13, 2015) (incorporated by reference to Annex B to the Proxy Statement for the Annual Meeting of Stockholders of USG Corporation held on May 13, 2015, or the 2015 Proxy Statement) |
10.2 | USG Corporation Long-Term Incentive Plan (as amended and restated effective May 13, 2015 (incorporated by reference to Annex C to the 2015 Proxy Statement) |
10.3 | Form of Employment Agreement (form used since January 1, 2015) * |
31.1 | Rule 13a-14(a) Certifications of USG Corporation’s Chief Executive Officer * |
31.2 | Rule 13a-14(a) Certifications of USG Corporation’s Chief Financial Officer * |
32.1 | Section 1350 Certifications of USG Corporation’s Chief Executive Officer * |
32.2 | Section 1350 Certifications of USG Corporation’s Chief Financial Officer * |
95 | Mine Safety Disclosures * |
101 | The following financial information from USG Corporation’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2015, formatted in XBRL (Extensible Business Reporting Language): (1) the consolidated statements of operations for the three and six months ended June 30, 2015 and 2014, (2) the consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2015 and 2014, (3) the consolidated balance sheets as of June 30, 2015 and December 31, 2014, (4) the consolidated statements of cash flows for the six months ended June 30, 2015 and 2014 and (5) notes to the consolidated financial statements. * |
* | Filed or furnished herewith |
1. | Certain Definitions. Certain words or phrases with initial capital letters not otherwise defined herein shall have the meanings set forth in Section 9 hereof. |
2. | Employment. The Company shall employ the Executive, and the Executive accepts employment with the Company, as of the Effective Date, upon the terms and conditions set forth in this Agreement for the period beginning on the Effective Date and ending as provided in Section 5 hereof (the “Employment Period”). |
3. | Position and Duties. During the Employment Period, the Executive shall serve as the [TITLE] of the Company effective [DATE] and shall have the normal duties, responsibilities and authority of an executive serving in such position, subject to the power of the Chief Executive Officer to expand or limit such duties, responsibilities and authority, either generally or in specific instances. The Executive shall perform the Executive’s duties and responsibilities to the best of the Executive’s abilities in a diligent, trustworthy, businesslike and efficient manner. |
4. | Compensation and Benefits. |
(a) | Salary. The Company agrees to pay the Executive a salary (“Base Salary”) during the Employment Period in installments based on the Company’s practices as may be in effect |
(b) | Incentive Plans. The Executive shall be eligible to participate in the Company’s annual and long-term incentive plans, on a basis comparable to other similarly situated executives of the Company. |
(c) | Expense Reimbursement. The Company shall reimburse the Executive for all reasonable expenses incurred by the Executive during the Employment Period in the course of performing the Executive’s duties under this Agreement that are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company’s requirements applicable generally with respect to reporting and documentation of such expenses. To the extent that the right to receive such reimbursement would constitute a “deferral of compensation” under Section 409A of the Code, any such reimbursement shall be made not later than the last day of the Executive’s tax year following the year in which the Executive incurs the expense. In no event will the amount of expenses so reimbursed by the Company in one year affect the amount of expenses eligible for reimbursement to be provided in any other taxable year. |
(d) | Standard Executive Benefits. The Executive shall be entitled during the Employment Period to participate (on the same basis as other similarly situated executives of the Company) in the Company’s benefit plans (including health and life insurance, retirement and investment plans (including supplements thereto), vacation, perquisites and other benefits, but excluding, except as hereinafter provided in Section 6, any severance pay program or policy of the Company) for which substantially all other similarly situated executives of the Company are from time to time generally eligible, as determined from time to time by the Board or a committee of the Board. |
(e) | Indemnification. The Executive shall be eligible to enter into the Company’s standard Indemnification Agreement that is entered into with other similarly situated senior executives of the Company. |
5. | Employment Period. |
(a) | Except as hereinafter provided, the Employment Period shall begin on the Effective Date and shall extend until [DATE], with automatic one-year renewals thereafter unless either party notifies the other at least 120 days before the scheduled expiration date that the Employment Period is not to renew. |
(b) | Notwithstanding (a) above, the Employment Period shall end early upon the first to occur of any of the following events: |
(i) | the Executive’s death; |
(ii) | the Company’s termination of the Executive’s employment on account of Disability; |
(iii) | a Termination for Cause; |
(iv) | a Termination without Cause; or |
(v) | a Voluntary Termination. |
6. | Post-Employment Period Payments. |
(a) | At the end of the Employment Period for any reason, the Executive shall cease to have any rights to salary, bonus, expense reimbursements or other benefits, except that the Executive shall be entitled to receive: (i) on the sixty-first (61st) day after the Termination Date, any Base Salary which has accrued but is unpaid, any reimbursable expenses which have been incurred but are unpaid, and payment for any unexpired vacation days which have accrued under the Company’s or a Subsidiary’s vacation policy but are unused, as of the end of the Employment Period, (ii) any plan benefits which by their terms extend beyond termination of the Executive’s employment (but only to the extent provided in any such benefit plan in which the Executive has participated as an employee of the Company or a Subsidiary and excluding, except as hereinafter provided in Section 6, any severance pay program or policy of the Company or a Subsidiary), (iii) payments or benefits payable pursuant to the terms of any annual and/or long-term incentive plan of the Company or a Subsidiary in accordance with the terms thereof, and (iv) any benefits to which the Executive is entitled under Part 6 of Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as amended (“COBRA”). In addition, the Executive shall be entitled to the additional benefits and amounts described in the succeeding subsections of this Section 6, in the circumstances described in such subsections. |
(b) | If the Employment Period ends pursuant to Section 5 hereof on account of death, a Voluntary Termination, a Termination for Cause or a termination on account of the Executive’s Disability, the Company shall make no further payments to the Executive except as contemplated in Section 6(a) above. |
(c) | If the Employment Period ends early pursuant to Section 5 on account of a Termination without Cause, the Executive shall be entitled to the payments contemplated in Section 6(a) above and as set forth below: |
(i) | On the sixty-first (61st) day after the Termination Date, the Executive shall be entitled to a lump sum payment in an amount equal to [one (1)/two (2)]1 times the sum of (A) Base Salary (at the highest rate in effect for any period within two years prior to the Termination Date), plus (B) annual bonus (in an amount equal to target annual bonus for the year in which the Termination Date occurs). |
(ii) | On the sixty-first (61st) day after the Termination Date, the Executive shall be entitled to a lump sum payment equal to the total cost (including both the Executive’s and the Company’s portion of such costs as paid while the Executive was employed) of continuing the medical, dental, vision, long-term disability and life insurance benefits (excluding benefits under the executive death benefit plan) substantially similar to those that the Executive was receiving or entitled to receive immediately prior to the Termination Date for a period of eighteen (18) months; provided, however, if any benefit described in this Section 6(c)(ii) is subject to tax, the Company will pay to the Executive, at the same time the lump sum cash payment is made, an additional amount such that after payment by the Executive or the Executive’s dependents or beneficiaries, as the case may be, of all taxes so imposed, the recipient retains an amount equal to such taxes. |
(iii) | The Executive shall be entitled to outplacement services for a time period (not less than six (6) months) established by the Company, by a firm selected by the Company in its sole discretion, and at the expense of the Company; provided, however, that all such outplacement services must be completed by December 31 of the second calendar year following the calendar year in which the Termination Date occurs and the Company will be required to make all payments to the Executive for such outplacement services by December 31 of the third calendar year following the calendar year in which the Termination Date occurs. |
(iv) | Notwithstanding anything to the contrary contained in this Agreement, if any payment or reimbursement, or the provision of any benefit under this Agreement that is paid or provided upon the Executive's "separation from service" with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code would constitute a “deferral of compensation” under Section 409A of the Code and the Executive is a “specified employee” (as determined pursuant to procedures adopted by the Company in compliance with Section 409A of the Code) on the date of the Executive’s “separation from service” with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code, the |
(d) | It is expressly understood that the Company’s payment obligations under Section 6(c) shall cease in the event the Executive breaches any of his or her agreements in Section 7 hereof and, in the event of any such breach, the Executive shall repay in cash immediately to the Company any amounts previously paid to the Executive under Section 6(c) of this Agreement. |
(e) | The Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise. |
7. | Competitive Activity; Confidentiality; Nonsolicitation. |
(a) | Acknowledgements and Agreements. The Executive hereby acknowledges and agrees that in the performance of the Executive’s duties for the Company during the Employment Period, the Executive will be brought into frequent contact, either in person, by telephone or through the mails, with existing and potential customers of the Company throughout the United States. The Executive also agrees that trade secrets and confidential information of the Company, more fully described in Section 7(i) of this Agreement, gained by the Executive during the Executive’s association with the Company, have been developed by the Company through substantial expenditures of time, effort and money and constitute valuable and unique property of the Company. The Executive further understands and agrees that the foregoing makes it necessary for the protection of the business of the Company that the Executive not compete with the Company during the Employment |
(b) | Covenants During the Employment Period. During the Employment Period, the Executive will not compete with the Company anywhere that the Company conducts its business. In accordance with this restriction, but without limiting its terms, during the Employment Period, the Executive will not: |
(v) | enter into or engage in any business which competes with the business of the Company; |
(vi) | solicit customers, business, patronage or orders for, or sell, any products and services in competition with, or for any business that competes with, the business of the Company; |
(vii) | divert, entice or otherwise take away any customers, business, patronage or orders of the Company or attempt to do so; or |
(viii) | promote or assist, financially or otherwise, any person, firm, association, partnership, corporation or other entity engaged in any business which competes with the business of the Company. |
(c) | Covenants Following Termination. For a period of two (2) years following the termination of the Executive’s employment for any reason, unless the Executive is entitled to severance benefits under a severance agreement between the Executive and the Company providing for payment of benefits upon a termination of employment following a change in control of the Company and containing covenants made by the Executive with respect to the subject matter of this Section 7(c) (a “Severance Agreement”), in which case those covenants contained in such Severance Agreement shall apply to the Executive in lieu of the application of this Section 7, the Executive will not: |
(i) | enter into or engage in any business which competes with the Company’s business within the United States; |
(ii) | solicit customers, business, patronage or orders for, or sell, any products and services in competition with, or for any business, wherever located, that competes with, the Company’s business within the United States; |
(iii) | divert, entice or otherwise take away any customers, business, patronage or orders of the Company within the United States, or attempt to do so; or |
(iv) | promote or assist, financially or otherwise, any person, firm, association, partnership, corporation or other entity engaged in any business which competes with the Company’s business within the United States. |
(d) | Indirect Competition. For the purposes of Sections 7(b) and 7(c), but without limitation thereof, the Executive will be in violation thereof if the Executive engages in any or all of the activities set forth therein directly as an individual on the Executive’s own account, or indirectly as a general partner, joint venturer, employee, agent, salesperson, consultant, officer and/or director of any firm, association, partnership, corporation or other entity, or as a limited partner, member or stockholder of any limited partnership, limited liability company, or corporation in which the Executive or the Executive’s spouse, child or parent owns, directly or indirectly, individually or in the aggregate, more than five percent (5%) of the limited partnership interests, limited liability company interests or outstanding stock, as the case may be. |
(e) | The Company. For purposes of this Section 7, the Company shall include any and all Subsidiaries of the Company. |
(f) | The Company’s Business. For the purposes of Sections 7(b), 7(c), 7(j) and 7(k), the Company’s business is defined to be the manufacture and distribution of gypsum wallboard, joint compound and related gypsum products, cement board, gypsum fiber panels, ceiling panels and grid, the distribution of building products and any future businesses the Company may enter, as further described in any and all manufacturing, marketing and sales manuals and materials of the Company as the same may be altered, amended, supplemented or otherwise changed from time to time, or of any other products or services substantially similar to or readily substitutable for any such described products and services. |
(g) | Extension. If it shall be judicially determined that the Executive has violated any of the Executive’s obligations under Section 7(c), then the period applicable to each obligation that the Executive shall have been determined to have violated shall automatically be extended by a period of time equal in length to the period during which such violation(s) occurred. |
(h) | Non-Solicitation. Until the expiration of three (3) years following the Termination Date, the Executive will not directly or indirectly at any time solicit or induce or attempt to solicit or induce any employee(s), sales representative(s), agent(s) or consultant(s) of the Company and/or of its Subsidiaries to terminate their employment, representation or other association with the Company and/or its Subsidiaries. |
(i) | Further Covenants. |
(i) | The Executive will keep in strict confidence, and will not, without the prior written consent of the Company or as may otherwise be required by law or legal process, directly or indirectly, at any time during or after the Executive’s employment with the Company, disclose, furnish, disseminate, make available or, except in the course of performing the Executive’s duties of employment, use any trade secrets or non-public confidential business and technical information of the Company or its customers or vendors, including without limitation as to when or how the Executive may have acquired such information before or during employment. Such confidential information shall include, without limitation, the Company’s unique non-public confidential selling, manufacturing and servicing methods and business techniques, training, service and business manuals, promotional materials, training courses and other training and instructional materials, vendor and product information, customer and prospective customer lists, other customer and prospective customer information and other business information. The Executive specifically acknowledges that all such non-public confidential information, whether reduced to writing, maintained on any form of electronic media, or maintained in the Executive’s mind or memory and whether compiled by the Company and/or the Executive, derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from its disclosure or use, that reasonable efforts have been made by the Company to maintain the secrecy of such information, that such information is the sole property of the Company and that any retention and use of such information by the Executive during the Executive’s employment with the Company (except in the course of performing the Executive’s duties and obligations to the Company) or after the termination of the Executive’s employment shall constitute a misappropriation of the Company’s trade secrets. |
(ii) | The Executive agrees that upon termination of the Executive’s employment with the Company, for any reason, the Executive shall return to the Company, in good condition, all property of the Company, including without limitation, the originals and all copies of any materials which contain, reflect, summarize, describe, analyze or refer or relate to any items of information listed in Section 7(i)(i) of this Agreement. In the event that such items are not so returned, the Company will have the right to charge the Executive for all reasonable damages, costs, attorneys’ fees and other expenses incurred in searching for, taking, removing and/or recovering such property. |
(j) | Discoveries and Inventions; Work Made for Hire. |
(i) | The Executive hereby assigns and agrees to assign to the Company, its successors, assigns or nominees, all of the Executive’s rights to any discoveries, inventions and improvements, whether patentable or not, made, conceived or suggested, either solely or jointly with others, by the Executive while in the Company’s employ with the use of the Company’s time, material or facilities or in any way within or related to the existing or contemplated scope of the Company’s business. Any discovery, invention or improvement relating to any subject matter with which the Company was concerned during the Executive’s employment and made, conceived or suggested by the Executive, either solely or jointly with others, within one (1) year following termination of the Executive’s employment under this Agreement or any successor agreements shall be irrebuttably presumed to have been so made, conceived or suggested in the course of such employment with the use of the Company’s time, materials or facilities. Upon request by the Company with respect to any such discoveries, inventions or improvements, the Executive will execute and deliver to the Company, at any time during or after the Executive’s employment, all appropriate documents for use in applying for, obtaining and maintaining such domestic and foreign patents as the Company may desire, and all proper assignments therefor, when so requested, at the expense of the Company, but without further or additional consideration. |
(ii) | The Executive acknowledges that, to the extent permitted by law, all work papers, reports, documentation, drawings, photographs, negatives, tapes and masters therefor, prototypes and other materials (hereinafter, “items”), including without limitation, any and all such items generated and maintained on any form of electronic media, generated by the Executive during the Executive’s employment with the Company shall be considered a “work made for hire” and that ownership of any and all copyrights in any and all such items shall belong to the Company. The item will recognize the Company as the copyright owner, will contain all proper copyright notices, e.g., “(creation date) USG Corporation, All Rights Reserved,” and will be in condition to be registered or otherwise placed in compliance with registration or other statutory requirements throughout the world. |
(k) | Communication of Contents of Agreement. During the Executive’s employment and for two (2) years thereafter, the Executive will communicate the contents of this Agreement to any person, firm, association, partnership, corporation or other entity which the Executive intends to be employed by, associated with, or represent and which is engaged in a business that is competitive to the business of the Company. |
(l) | Non-Disparagement. The Executive and his immediate family agree to refrain from criticizing or making disparaging or derogatory comments about the Company or any |
(m) | Relief. The Executive acknowledges and agrees that the remedy at law available to the Company for breach of any of the Executive’s obligations under this Agreement would be inadequate. The Executive therefore agrees that, in addition to any other rights or remedies that the Company may have at law or in equity, temporary and permanent injunctive relief may be granted in any proceeding which may be brought to enforce any provision contained in Sections 7(b), 7(c), 7(h), 7(i), 7(j) 7(k) and 7(l) of this Agreement, without the necessity of proof of actual damage. |
(n) | Reasonableness. The Executive acknowledges that the Executive’s obligations under this Section 7 are reasonable in the context of the nature of the Company’s business and the competitive injuries likely to be sustained by the Company if the Executive was to violate such obligations. The Executive further acknowledges that this Agreement is made in consideration of, and is adequately supported by, the agreement of the Company to perform its obligations under this Agreement and by other consideration, which the Executive acknowledges constitutes good, valuable and sufficient consideration. |
8. | Section 280G. The amounts payable to the Executive under Section 6 may be adjusted as set forth in this Section 8 if the sum (the “combined amount”) of the amounts payable under Section 6 and all other payments or benefits which the Executive has received or has the right to receive from the Company which are defined in Section 280G(b)(2)(A)(i) of the Code, would, but for the application of this Section 8, constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code). In such event, the combined amount shall be reduced to the minimum extent necessary (but in no event to less than zero) so that no portion of any such payment or benefit, as so reduced, constitutes a parachute payment; provided, however, that the foregoing reduction shall be made only if and to the extent that such reduction would result in an increase in the aggregate payments and benefits to be provided to the Executive, determined on an after-tax basis (taking into account the excise tax imposed pursuant to Section 4999 of the Code, or any successor provision thereto, any tax imposed by any comparable provision of state law, and any applicable federal, state and local income taxes). To the extent the reduction referred to in the second sentence of this Section 8 applies, such reduction shall be made to the combined amount by reduction of the aggregate amount of the lump sum payments described in Sections 6(c)(i) and 6(c)(ii) of this Agreement and, to the extent further reductions are required, in such payments due to the Executive as the Company may determine. Any determinations required to be made under this Section 8 shall be made by the Company’s independent accountants, which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the date of termination or such earlier time as is requested by the Company, and shall be made at the expense of the Company. The fact that the Executive’s right to payments or benefits may be |
9. | Definitions. |
(a) | “Board” means the Board of Directors of the Company. |
(b) | “Cause” means that, prior to the termination of the Employment Period, the Executive shall have: |
(i) | committed a felony or a fraud; |
(ii) | engaged in conduct that brings the Company or any of its Subsidiaries into substantial public disgrace or disrepute; |
(iii) | committed gross negligence or gross misconduct with respect to the Company or any of its Subsidiaries; |
(iv) | repudiated this Agreement or abandoned employment with the Company; |
(v) | failed to follow the directives of the Board or the Chief Executive Officer and such failure is not cured within five (5) business days after written notice thereof to the Executive from the Company; |
(vi) | breached any of the agreements in Section 7 hereof; |
(vii) | breached a material employment policy of the Company which is not cured within five (5) business days after written notice thereof to the Executive from the Company; or |
(viii) | committed any other breach of this Agreement which is material and which is not cured within thirty (30) days after written notice thereof to the Executive from the Company. |
(c) | “Code” means the Internal Revenue Code of 1986, as amended. |
(d) | “Disability” means the Executive’s having become unable (as determined in good faith by the Chief Executive Officer), with reasonable accommodations, to regularly perform the Executive’s duties hereunder by reason of illness or incapacity. |
(e) | “Release Agreement” means an agreement, in substantially the form customarily used by the Company for similarly situated executives of the Company in similar instances, pursuant to which the Executive releases, to the extent permitted by law, all current or future claims, known or unknown, arising on or before the date of the release against the Company, its subsidiaries and its officers. |
(f) | “Subsidiary” means a corporation, company or other entity (i) at least 50 percent of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture or unincorporated association), but at least 50 percent of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company. |
(g) | “Termination Date” means the date on which the Executive’s employment is terminated by the Company or any Subsidiary. |
(h) | “Termination for Cause” means the Company’s termination of the Executive’s employment for Cause. |
(i) | “Termination without Cause” means the Company’s termination of the Executive’s employment other than a Termination for Cause. |
(j) | “Voluntary Termination” means Executive’s termination of the Executive’s employment for any reason, including retirement. |
10. | Representations. |
(a) | Executive Representations. The Executive represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by the Executive does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which the Executive is a party or by which the Executive is bound, (ii) the Executive is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of the Executive, enforceable in accordance with its terms. |
(b) | Company Representation. The Company represents and warrants to the Executive that upon the execution and delivery of this Agreement by the Executive, this Agreement shall |
11. | Release Agreement. No payments shall be made under Section 6(c) hereof unless the Executive, on or before the sixtieth (60th) day following the Executive’s Termination Date, (i) signs and returns the Release Agreement within the number of days that the Company determines is required under applicable law, but in no event more than forty-five (45) days after the Company delivers the Release Agreement to the Executive and (ii) does not revoke the Release Agreement within the time period provided therein, such time period not to exceed seven (7) days. If the Executive becomes entitled to payments under Section 6(c) hereof, the Company shall deliver to the Executive a copy of the Company’s standard form of Release Agreement within seven (7) days of the Executive’s Termination Date. |
12. | Survival. Subject to any limits on applicability contained therein, Section 7 hereof shall survive and continue in full force in accordance with its terms notwithstanding any termination of the Employment Period. |
13. | Withholding of Taxes. The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as the Company is required to withhold pursuant to any applicable law, regulation or ruling. |
14. | Notices. For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as FedEx or UPS, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive office and to the Executive at the Executive’s principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address will be effective only upon receipt. |
15. | Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid or unenforceable provision had never been contained herein. |
16. | Complete Agreement. This Agreement embodies the complete agreement and understanding between the parties with respect to the employment of the Executive and the subject matter hereof |
17. | Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original and both of which taken together shall constitute one and the same agreement. |
18. | Successors and Assigns. This Agreement shall bind and inure to the benefit of and be enforceable by the Executive, the Company and their respective heirs, executors, personal representatives, successors and assigns, except that neither party may assign any rights or delegate any obligations hereunder without the prior written consent of the other party. The Executive hereby consents to the assignment by the Company of all of its rights and obligations hereunder to any successor to the Company by merger or consolidation or purchase of all or substantially all of the Company’s assets, provided such transferee or successor assumes the liabilities of the Company hereunder. |
19. | Governing Law. The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Delaware and federal law, without giving effect to the principles of conflict of laws of such State, except as expressly provided herein. |
20. | Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and the Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement. |
21. | Section 409A of the Code. Each payment or reimbursement and the provision of each benefit under this Agreement shall be considered to be a separate payment and not one of a series of payments for purposes of Section 409A of the Code. To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Executive. This Agreement shall be administered in a manner consistent with this intent. Reference to Section 409A of the Code is to Section 409A of the Internal Revenue Code of 1986, as amended, and will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service. |
USG CORPORATION | |
By: | |
Name: | |
Title: | |
Executive | |
1. | I have reviewed this quarterly report on Form 10-Q of USG Corporation (the “Corporation”); |
2. | 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; |
3. | 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; |
4. | 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: |
(a) | 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; |
(b) | 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; |
(c) | 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 |
(d) | 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 |
5. | 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): |
(a) | 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 |
(b) | 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. |
July 23, 2015 | /s/ James S. Metcalf |
James S. Metcalf | |
Chairman, President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of USG Corporation (the “Corporation”); |
2. | 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; |
3. | 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; |
4. | 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: |
(a) | 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; |
(b) | 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; |
(c) | 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 |
(d) | 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 |
5. | 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): |
(a) | 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 |
(b) | 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. |
July 23, 2015 | /s/ Matthew F. Hilzinger |
Matthew F. Hilzinger | |
Executive Vice President and Chief Financial Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. |
July 23, 2015 | /s/ James S. Metcalf |
James S. Metcalf | |
Chairman, President and Chief Executive Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. |
July 23, 2015 | /s/ Matthew F. Hilzinger |
Matthew F. Hilzinger | |
Executive Vice President and Chief Financial Officer |
Location of Mines/Quarries | Number of Citations for S&S Violations | Number of Citations for Non S&S Violations | Total Proposed Assessments |
Alabaster, Michigan | 1 | 2 | $560 |
Empire, Nevada (closed) | — | — | — |
Fort Dodge, Iowa | — | — | — |
Plaster City, California | — | — | — |
Shoals, Indiana | — | 1 | — |
Sigurd, Utah | 2 | 3 | 1,150 |
Southard, Oklahoma | 2 | 2 | 2,391 |
Sperry, Iowa | 2 | 8 | — |
Spruce Pine, North Carolina | — | — | — |
Sweetwater, Texas | — | — | — |
Totals | 7 | 16 | $4,101 |
Equity Method Investments (Details) - USD ($) $ in Millions |
Jun. 30, 2015 |
Dec. 31, 2014 |
Feb. 27, 2014 |
---|---|---|---|
Schedule of Equity Method Investments [Line Items] | |||
Equity method investments | $ 717 | $ 735 | |
USG Boral Building Products | |||
Schedule of Equity Method Investments [Line Items] | |||
Equity method investments | $ 673 | $ 689 | $ 676 |
Ownership percentage | 50.00% | 50.00% | 50.00% |
Other equity method investments | |||
Schedule of Equity Method Investments [Line Items] | |||
Equity method investments | $ 44 | $ 46 | |
Other equity method investments | Minimum | |||
Schedule of Equity Method Investments [Line Items] | |||
Ownership percentage | 33.00% | 33.00% | |
Other equity method investments | Maximum | |||
Schedule of Equity Method Investments [Line Items] | |||
Ownership percentage | 50.00% | 50.00% |
Marketable Securities (Details 1) - USD ($) $ in Millions |
Jun. 30, 2015 |
Dec. 31, 2014 |
---|---|---|
Contractual maturities of marketable securities | ||
Due in 1 year or less, amortized cost | $ 61 | |
Due in 1-5 years, amortized cost | 21 | |
Marketable securities, amortized cost | 82 | $ 154 |
Due in 1 year or less, fair value | 61 | |
Due in 1-5 years, fair value | 21 | |
Marketable securities, fair value | $ 82 | $ 154 |
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