|
Exhibit 99.2 |
February 5, 2016 USG
Corporation Fourth Quarter and Full Year 2015 Earnings Conference Call
and Webcast
This presentation contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 related to management’s expectations about
future conditions, including but not limited to, management’s outlook
for 2016. Actual business, market or other conditions may differ
materially from management’s expectations and, accordingly, may affect
our sales and profitability or other results and liquidity. Any
forward-looking statements represent our views only as of today and
should not be relied upon as representing our views as of any subsequent
date. Actual results may differ materially due to various other factors,
including: 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; our ability to
maintain or achieve price increases; our substantial indebtedness and
our ability to incur substantial additional indebtedness; capital
markets conditions and the availability of borrowings under our credit
agreement or other financings; competitive conditions, such as price,
service and product competition; certain of our customers having
significant buying power; the loss of one or more major customers and
our customers’ ability to meet their financial obligations to us;
shortages in raw materials or changes in raw material and energy costs;
our ability to successfully operate the joint venture with Boral
Limited, including risks that our joint venture partner, Boral Limited,
may not fulfill its obligations as an investor or may take actions that
are inconsistent with our objectives; volatility in the assumptions used
to determine the funded status of our pension plans; our ability to
protect our intellectual property and other proprietary rights; a
security breach of company information; changes in laws or regulations,
including environmental and safety regulations; the outcome in legal and
governmental proceedings; the occurrence of an “ownership change” within
the meaning of the Internal Revenue Code; the effects of acts of
terrorism or war upon domestic and international economies and financial
markets; and acts of God. We assume no obligation to update any
forward-looking information contained in this presentation. Additional
information concerning these and other factors may be found in our
filings with the Securities and Exchange Commission, including the “Risk
Factors” in our most recent Annual Report on Form 10-K and Quarterly
Report on Form 10-Q for the quarter ended June 30, 2015. CAUTIONARY
STATEMENTS 2
USG Corporation Fourth
Quarter 2015 Agenda Overview and Strategy Financial Results Market
Outlook Questions Closing Remarks James S. Metcalf Chairman, President
and CEO Matthew F. Hilzinger Executive VP, Chief Financial Officer James
S. Metcalf Chairman, President and CEO James S. Metcalf Chairman,
President and CEO 3
FY 2015 HIGHLIGHTS Adjusted
net income2 increases over 75% to $259 million Adjusted operating margin
expansion in all of our businesses U.S. Gypsum – 230 bps improvement to
15.7% U.S. Ceilings – 140 bps improvement to 17.3% Distribution – 70 bps
improvement to 1.9% USG Boral1 – 160 bps improvement to 12.6% Surfaces
and Substrates – $25 million of improved profit Full year 2015 SG&A of
$317 million – lower than both 2014 and 2013 levels USG Boral –
Generates $48 million of net income for USG, with $38 million of cash
dividends paid to USG Adjusted EBITDA2 of $609 million – most since 2006
Foreign currency – Unfavorable impact to net income ($28 million) and
sales ($65 million) Free cash flow3 improved to $237 million from $41
million 4 1. USG Boral results in 2014 include only 10 months of
operations. 2. See reconciliation to GAAP results in the Appendix. 3.
See calculation of free cash flow on the ‘2015 consolidated cash flow’
slide. 4
$ Millions (except EPS) FY
2015 FY 2014 Net sales$3,776$3,724 Gross profit$691$654% of net
sales18.3%17.6% SG&A$317$339 Operating profit$381$162 Net interest
expense $161$178 Income tax benefit (expense) $729($7) GAAP net
income$991$37 Diluted EPS$6.73$0.25 Adjustments1($732) $109 Adjusted net
income1$259 $146 Adjusted diluted EPS1$1.76$1.00 Adjusted EBITDA1$609 5
Q4 2015 HIGHLIGHTS Adjusted
net income1 doubles to $62 million Adjusted operating margin expansion
continues in most of our businesses in the fourth quarter U.S. Gypsum –
240 bps improvement to 14.9% Wallboard pricing up 2%, flat sequentially
U.S. Ceilings – 230 bps improvement to 16.7% Tile pricing improvement in
all categories Distribution – 60 bps reduction to 1.4% USG Boral – 20
bps improvement to 14.2% Surfaces and Substrates – $5 million of
improved profit Foreign currency – Unfavorable impact to net income ($8
million) and sales ($18 million) Non-core asset dispositions drive $59
million of incremental cash 6 1. See reconciliation to GAAP results in
the Appendix. 6
$ Millions (except EPS) Q4
2015 Q4 2014 Net sales2 $925 $954 Gross profit $172 $160 % of net sales
18.6% 16.8% SG&A $80 $109 Operating profit (loss) $98 ($24) Net interest
expense $39 $44 Income tax benefit $727 — GAAP net income (loss) $812
($53) Diluted EPS $5.51 ($0.36) Release of income tax valuation
allowance ($731) — Gain on real estate, net of tax ($7) — Gain on
Knauf-USG joint venture, net of tax ($6) — GTL contract termination
charge and (recovery) loss on receivable ($6) $15 Pension settlement
charges — $13 Long-lived asset impairment charges — $60 Net income from
GTL — ($4) Adjusted net income1 $62 $31 Adjusted diluted EPS1 $0.42
$0.21 Adjusted EBITDA1 $145 $126 7
CURRENCY IMPACT
Consolidated Results Q4 2015 as reported Q4 2015 at Q4 2014 rates2
Currency impact FY 2015 as reported FY 2015 at FY 2014 rates2 Currency
impact Net sales $925 $943 ($18) $3,776 $3,841 ($65) Adjusted operating
profit1 $97 $106 ($9) $414 $443 ($29) Adjusted operating profit margin1
10.5% 11.2% (0.7%) 11.0% 11.5% (0.5%) Adjusted net income1 $62 $70 ($8)
$259 $287 ($28) Adjusted diluted EPS1 $0.42 $0.47 ($0.05) $1.76 $1.95
($0.19) 8
PLAN TO WIN Strengthen the
core - North American manufacturing and distribution - De-lever our
balance sheet Diversify the sources of our earnings - Strategic
geographic extensions - USG Boral Building Products - Adjacent
products/systems Differentiate through innovation - Differentiate USG in
the market - Focus on high performance products and solutions that
improve energy efficiency, sustainability, and speed of construction 9
Q4 2015 Highlights Adjusted
operating margin improves 180 bps to 13.0% U.S. Gypsum adjusted
operating margin improvement of 240 bps to 14.9% Wallboard pricing up 2%
year-over-year; flat sequentially Cost tailwinds driven by gas and lean
six sigma efforts offset inflation in paper, synthetic gypsum, and labor
Volumes down 3.5% on shift in pre-buy U.S. Surfaces & Substrates: $5
million of profit improvement led by joint treatment and roofing
products Lower costs drive improved profit in Canada and Mexico; offset
by $6 million FX headwind Sale of excess property in Mexico yields $7
million gain and $15 million in cash – excluded from adjusted results
GYPSUM 1. See reconciliation to GAAP results in the Appendix. 2.
Excludes sales of $19 million from Q4 2014 from our shipping operation,
GTL, that we have exited. Q4 2014 Adjusted Operating Profit1 $68 U.S.
Wallboard Price $4 U.S. Wallboard Cost $2 U.S. Wallboard Volume ($5)
U.S. Surfaces & Substrates $5 U.S. SG&A $6 Canada and Mexico $3 Foreign
Currency ($6) Q4 2015 Adjusted Operating Profit1 $77adjusted Operating
Profit Margin 13.0%, 11.2%, 1.8% 10
U.S. GYPSUM Wallboard,
Surfaces and Substrates 1. Freight revenue ($236 million for 2015, $238
million for 2014) and other gypsum sales ($56 million net for 2015, $53
million net for 2014) – included in US Gypsum – are not included in the
US Wallboard and Surfaces & Substrates tables. 2. Wallboard and Surfaces
& Substrates EBITDA has been estimated based on certain costs and
expenses being allocated to these businesses on a percentage of sales
basis. 3. See reconciliation to GAAP results in the Appendix. U.S.
Gypsum – two divisions: Wallboard: Sheetrock® brand gypsum wallboard
portfolio and Securock® glass mat sheathing Surfaces & Substrates:
Sheetrock® brand joint compound, corner bead, joint tape, plaster,
Durock® cement backerboard, Fiberock® backerboard, Levelrock® flooring,
Securock® glass mat roofing and commercial roof board, and industrial
gypsum Surfaces & Substrates sales account for almost half of U.S.
Gypsum revenue with less volatility in gross margin Surfaces &
Substrates 2015 sales growth of 8% is double that of the wallboard
business Since 2004, the average gross margin percentage on Wallboard is
10% higher than for Surfaces & Substrates Since 2004, the gross margin
standard deviation for Surfaces & Substrates is substantially less
volatile at 2% and 4%, respectively, compared to Wallboard at 17% Sales
(millions) 2015 2014 Variance U.S. Wallboard $916 $883 $33 U.S. Surfaces
& Substrates $804 $746 $58 11
Q4 2015 Highlights Adjusted
operating margin2 improves 160 bps to 16.5% U.S. Ceilings adjusted
operating margin2 improvement of 230 bps to 16.7% Record fourth quarter
operating margin performance Improved pricing in all ceiling tile
categories Continued mix shift towards high-end ceilings tiles Improved
mix in ceiling grid Costs tailwinds due to lower natural gas, steel
costs, operational efficiencies Low single digit volume decrease in grid
and tile products Q4 2014 Adjusted Operating Profit1 $18 U.S. Tile &
Grid Price $2 U.S. Tile & Grid Cost $1 U.S. Tile & Grid Volume ($1)
Foreign Currency ($1) Q4 2015 Adjusted Operating Profit1 $19 12
Operating margin contracts
60 bps to 1.4% Same store sales increased 3% Wallboard volumes improved
by 3% Working capital levels improve and wallboard spread increases
Operational improvement initiatives continue to progress: Truck
utilization Inventory management Shared service efficiencies Cost
management Q4 2014 Adjusted Operating Profit1 $7 Wallboard Margin and
Volume $1 SG&A ($1) Delivery Costs ($2) Q4 2015 Adjusted Operating
Profit1 $5 13
USG BORAL 14 $ Millions Q4
2015 Q4 2014 FY 2015 FY 20141 Net Sales $261 $272 $1,003 $927 Net Sales
– Constant Currency2 $291 $272 $1,108 $927 Adjusted operating profit3
$37 $38 $126 $102 Adjusted operating profit margin 14.2% 14.0% 12.6%
11.0% Net Income attributable to USG Boral $30 $28 $96 $67 Adjustments:
Restructuring, net of tax — — — $5 Adjusted Net Income attributable to
USG Boral3 $30 $28 $96 $72 USG’s share of Adjusted Net Income
attributable to USG Boral3 $15 $14 $48 $35 USG’s share of Adjusted Net
Income attributable to USG Boral – Constant Currency2 $17 $14 $56 $35
TOTAL USG Boral Building Products Adjusted EBITDA3 $49 $47 $170 $132
USG’s share of USG Boral Building Products Adjusted EBITDA $24 $23 $85
$66 14
Q4 2015 Highlights Total
USG Boral JV Results Total JV operating margin up slightly to 14.2% On a
constant-currency basis2: Net sales expand to $291 million from $272
million Net income increases to $34 million from $28 million USG’s 50%
Portion of USG Boral Results USG’s Q4 2015 net income driven by $6
million of core results improvement $20 million cash dividend paid to
USG in Q4 ($38 for FY 2015) Business Highlights NextGen board conversion
increases 6% to 19% Manufacturing efficiencies; gypsum, energy and metal
cost tailwinds Plasterboard price up in most major geographies; volumes
down 1%, partially on regional macro headwinds USG BORAL Total USG Boral
JV Results $ Millions Q4 2015 Q4 2014 Variance Total JV Net Sales $261
$272 ($11) Total JV Operating Profit $37 $38 ($1) Total JV Adjusted
Operating Profit Margin3 14.2% 14.0% 0.2% Total JV Net Income $30 $28 $2
15
2016 OUTLOOK Volumes and
End-Market Expect overall demand to increase around 5% New residential
to 1.2 million starts; expect commercial and R&R volumes to increase 2
to 3% Input Costs Overall inflation in input costs of 1 to 2% Inflation
in labor, synthetic gypsum, paper, and transportation; deflation in
natural gas All-in natural gas expected to be down 10 to 15 percent; 75%
of anticipated volumes hedged for 2016 SG&A Expect 2016 SG&A to come in
below 2015 levels (under $317 million) Income Taxes Book taxes expected
to be between 30 to 33 percent of pre-tax profits No cash income taxes
in US; foreign taxes at ~$2 million per quarter Foreign Currency Roughly
$25 million total headwind for Canada, Mexico, and USG Boral1 USG Boral
Wallboard shipments expected to increase by 5%; USG’s portion of
adjusted net income in 2015 ($48 million) expected to increase by at
least 10% in 2016, inclusive of foreign currency headwinds Capital
Spending Around $100 million - half maintenance of business, half new
investments Debt and Pension Total interest expense of $155 million
absent debt retirement or refinancing Pension contributions of $65
million 16 1. Constant currency terms using applicable quarter to date
or year to date average rates vs. the US Dollar for the period ending
December 31, 2015. Note – Slide contains Management’s expectations and
beliefs for 2016. 16
2015 CONSOLIDATED CASH FLOW 17 $ Millions 12 months ended December 31, 2015 12 months ended December 31, 2014 Free cash flow (CFFO – CapEx) $237 $41 Cash flow from operations (CFFO) $331 $173 Capital expenditures (CapEx) ($94) ($132) Investments in joint ventures — ($560) Net proceeds from asset dispositions $61 $16 Net proceeds from Knauf-USG equity investment disposition $52 — Other2 ($82) ($7) Cash flow used for investing activities ($63) ($683) Cash flow used for financing activities ($44) ($66) Net cash used for discontinued operations — ($1) Effect of exchange rate on cash ($10) ($5) Increase/(decrease) in cash and cash equivalents $214 ($582) December 31, 2015 December 31, 2014 Cash and cash equivalents and marketable securities $672 $382 Total liquidity $967 $673 Total debt $2,175 $2,195 Total adjusted debt1 $2,291 $2,616 17
APPENDIX 18
In this presentation, the
corporation’s financial results are provided both in accordance with
accounting principles generally accepted in the United States of America
(GAAP) and using certain non-GAAP financial measures. In particular, the
corporation presents the non-GAAP financial measures adjusted EBITDA,
adjusted operating profit, adjusted net income, adjusted equity income
of USG Boral Building Products, or UBBP, the currency impact of various
financial metrics described on page 8, adjusted debt, USG Boral
revenues, sales and adjusted operating profit on a constant currency
basis, adjusted EBITDA per fully diluted share, adjusted net sales and
adjusted diluted earnings per share, which exclude certain items. In
addition, adjusted operating profit on a consolidated basis includes the
corporation’s equity method income from UBBP and USG’s other equity
method investments, and adjusted EBITDA on a consolidated basis includes
the corporation’s share of UBBP’s adjusted EBITDA and excludes GTL's
EBITDA. Further, management believes it is appropriate to exclude the
indicated items from UBBP equity income because the resulting UBBP
adjusted equity income can be used to evaluate the financial performance
of UBBP. The non-GAAP financial measures are included as a complement to
results provided in accordance with GAAP because management believes
these non-GAAP financial measures help investors’ ability to analyze
underlying trends in the corporation’s business, evaluate its
performance relative to other companies in its industry and provide
useful information to both management and investors by excluding certain
items that may not be indicative of the corporation’s core operating
results. Adjusted operating profit includes the adjusted equity method
income from UBBP and USG’s income from other equity investments and
adjusted EBITDA includes the corporation’s share of UBBP’s adjusted
EBITDA because management views UBBP and its other equity investments as
important businesses. Management excludes GTL's EBITDA because we exited
the shipping operation in April 2015. In addition, the corporation uses
adjusted operating profit and adjusted net income as components in the
measurement of incentive compensation. The non-GAAP measures should not
be considered a substitute for or superior to GAAP results and may vary
from others in the industry. For further information related to the
corporation’s use of non-GAAP financial measures, and the
reconciliations to the nearest GAAP measures, see the schedules attached
hereto. NON-GAAP FINANCIAL MEASURES 19
$ Millions Q4 2015 Q4 2014
Change Gypsum adjusted operating profit1 $77 $68 $9 Ceilings adjusted
operating profit1 $19 $18 $1 Distribution adjusted operating profit1 $5
$7 ($2) Adjusted equity income from USG Boral Building Products1 $15 $14
$1 Equity income from other joint ventures — $1 ($1) Corporate and
eliminations adjusted operating loss1 ($19) ($33) $14 USG Consolidated
Adjusted Operating Profit1 $97 $75 $22 Gypsum DD&A $25 $29 ($4) Ceilings
DD&A $4 $5 ($1) Distribution DD&A $3 $2 $1 Corporate and eliminations
DD&A2 $1 $1 — USG Consolidated DD&A $33 $37 ($4) Gypsum adjusted EBITDA1
$103 $97 $6 Ceilings adjusted EBITDA1 $23 $23 — Distribution adjusted
EBITDA1 $8 $9 ($1) USG's share of USG Boral Building Products adjusted
EBITDA1 $24 $23 $1 Corporate and eliminations adjusted EBITDA1 ($13)
($26) $13 USG Consolidated Adjusted EBITDA1 $145 $126 $19 20
$ Millions 2015 2014 Change
Gypsum adjusted operating profit1 $331 $287 $44 Ceilings adjusted
operating profit1 $89 $87 $2 Distribution adjusted operating profit1 $27
$16 $11 Adjusted equity income from USG Boral Building Products1 $48 $35
$13 Equity income from other joint ventures $2 $2 — Corporate and
eliminations adjusted operating loss1 ($83) ($97) $14 USG Consolidated
Adjusted Operating Profit1 $414 $330 $84 Gypsum DD&A $105 $118 ($13)
Ceilings DD&A $16 $14 $2 Distribution DD&A $12 $11 $1 Corporate and
eliminations DD&A2 $4 $3 $1 USG Consolidated DD&A $137 $146 ($9) Gypsum
adjusted EBITDA1 $441 $404 $37 Ceilings adjusted EBITDA1 $106 $102 $4
Distribution adjusted EBITDA1 $39 $27 $12 USG's share of USG Boral
Building Products adjusted EBITDA1 $85 $66 $19 Corporate and
eliminations adjusted EBITDA1 ($62) ($73) $11 USG Consolidated Adjusted
EBITDA1 $609 $526 $83 21
ADJUSTED OPERATING PROFIT
RECONCILED TO GAAP OPERATING PROFIT $ Millions Q4 2015 Q4 2014 YTD 2015
YTD 2014 Reported GAAP Operating Profit (Loss) Gypsum $93 ($3) $348 $169
Ceilings $19 $18 $89 $87 Distribution $5 $7 $27 $16 Corporate, Other &
Eliminations ($19) ($46) ($83) ($110) Total $98 ($24) $381 $162
Adjustments to GAAP Operating Profit (Loss) Gypsum – gain on sale of
surplus property ($10) — ($10) ($12) Gypsum – Contract termination
charge and (recovery of) loss on receivable ($6) $15 ($6) $15 Gypsum –
Litigation settlement charge — — — $48 Gypsum – Long-lived asset
impairment charges — $60 — $90 Gypsum – GTL shipping operations — ($4)
($1) ($23) Corporate – Pension settlement — $13 — $13 Total ($16) $84
($17) $131 Adjusted Operating Profit (Loss) – Non-GAAP measure Gypsum
$77 $68 $331 $287 Ceilings $19 $18 $89 $87 Distribution $5 $7 $27 $16
Adjusted equity income from UBBP1 $15 $14 $48 $35 Equity income from
other joint ventures — $1 $2 $2 Corporate, Other & Eliminations ($19)
($33) ($83) ($97) Total Adjusted Operating Profit $97 $75 $414 $330 22
ADJUSTED NET INCOME
RECONCILED TO GAAP NET INCOME $ Millions Q4 2015 Q4 2014 FY 2015 FY 2014
Net Income (Loss) – GAAP Measure $812 ($53) $991 $37 Adjustments: Gain
on sale of surplus property, net of tax ($7) — ($7) ($12) Gain on sale
of equity method investment, net of tax ($6) — ($6) — Long-lived asset
impairment charges — $60 — $90 Contract termination charge (recovery)
loss on receivable ($6) $15 ($6) $15 Pension settlement charge — $13 —
$13 GTL - Shipping operations — ($4) ($1) ($22) Reduction in valuation
allowance for deferred tax assets ($731) — ($731) — Loss from
discontinued operations — — — $1 Litigation settlement charge — — — $48
USG's share of UBBP restructuring charges, net of tax — — — $2 Gain on
deconsolidation of subsidiaries and joint ventures — — — ($27)
Withholding tax on property contributed to UBBP — — — $1 Loss on
extinguishment of debt — — $19 — Adjusted Net Income – Non-GAAP Measure
$62 $31 $259 $146 23
QUARTERLY ADJUSTED EBITDA
RECONCILED TO QUARTERLY OPERATING PROFIT 24 Q4 2015 Q4 2014 $ Millions
Gyp Ceilings Distr. UBBP Corp/ Elim Q4 Gyp Ceilings Distr. UBBP Corp/
Elim Q4 GAAP Operating profit/(loss) $93 $19 $5 ($19) $98 ($3) $18 $7
($46) ($24) Interest expense, net ($39) ($39) ($44) ($44) Income tax
benefit $727 $727 — — USG's equity income from UBBP $15 $15 $14 $14 Gain
from the sale of equity method investment to related party $11 $11 $1 $1
Net income attributable to USG $812 ($53) Add: interest expense, net 1
$39 $39 $44 $44 Add: income tax benefit 1 ($727) ($727) — — Add:
depreciation, depletion, and amortization2 $25 $4 $3 $1 $33 $29 $5 $2 $1
$37 EBITDA $118 $23 $8 $8 $157 $26 $23 $9 ($30) $28 Add: share-based
compensation expense1 $5 $5 $5 $5 Add: ARO accretion expense $1 — — — $1
$1 — — — $1 Subtract: Gain on sale of surplus property ($10) — — — ($10)
— — — — — Subtract: Gain on sale of equity method investment — — — ($11)
($11) — — — — — (Subtract) Add: GTL EBITDA3 ($6) ($6) $70 $70 Add:
pension settlement charges — — — — — — — — $13 $13 Subtract: USG's
equity income from UBBP ($15) ($15) ($14) ($14) Add: USG’s share of UBBP
Adjusted EBITDA3 $24 $24 $23 $23 Adjusted EBITDA $103 $23 $8 $24 ($13)
$145 $97 $23 $9 $23 ($26) $126 24
FULL YEAR ADJUSTED EBITDA
RECONCILED TO FULL YEAR OPERATING PROFIT 25 FY 2015 FY 2014 $ Millions
Gyp Ceilings Distr. UBBP Corp/ Elim YTD 2015 Gyp Ceilings Distr. UBBP
Corp/ Elim YTD 2014 GAAP Operating profit/(loss) $348 $89 $27 ($83) $381
$169 $87 $16 ($110) $162 Interest expense, net ($161) ($161) ($178)
($178) Income tax benefit (expense) $729 $729 ($7) ($7) USG's equity
income from UBBP4 $48 $48 $33 $33 Income and gain from the sale of
equity method investment to related party $13 $13 $2 $2 Gain on
deconsolidation of subsidiaries — — $27 $27 Loss on extinguishment of
debt ($19) ($19) — — Loss from discontinued operations, net of tax — —
($1) ($1) Net income attributable to non-controlling interest — — ($1)
($1) Net income attributable to USG $991 $37 Add: interest expense, net
1 $161 $161 $178 $178 Add: income tax (benefit) expense 1 ($729) ($729)
$7 $7 Add: depreciation, depletion, and amortization2 $105 $16 $12 $4
$137 $118 $14 $11 $3 $146 EBITDA $453 $105 $39 ($37) $560 $287 $101 $27
($47) $368 Add: share-based compensation expense1 $15 $15 $21 $21 Add:
ARO accretion expense $6 $1 — — $7 $6 $1 — — $7 Add: loss on
extinguishment of debt $19 $19 — — — — — Add: litigation settlement
charge — — — — — $48 — — — $48 Add: long-lived asset impairment charges
— — — — — $30 — — — $30 Subtract: gain on sale of equity method
investment — — — ($11) ($11) — — — — — Subtract: gain on sale of surplus
property ($10) — — — ($10) ($12) — — — ($12) (Subtract) Add: GTL EBITDA3
($8) ($8) $45 $45 Add: pension settlement charges — — — — — — — — $13
$13 Subtract: USG's equity income from UBBP4 ($48) ($48) ($60) ($60)
Add: USG’s share of UBBP Adjusted EBITDA3 $85 $85 $66 $66 Adjusted
EBITDA $441 $106 $39 $85 ($62) $609 $404 $102 $27 $66 ($73) $526 25
ADJUSTED FINANCIAL RESULTS
OF USG BORAL BUILDING PRODUCTS 26 $ Millions Q4 2015 Q4 2014 FY 2015 FY
20141 Operating Profit – GAAP $37 $38 $124 $95 Adjustments: Income from
equity method investments owned by UBBP $2 $2 $9 $6 Adjustments:
Restructuring charges, pre-tax — — — $7 Adjustments: Operating profit
attributable to non-controlling interest, pre-tax ($2) ($2) ($7) ($6)
Adjusted Operating Profit – Non-GAAP $37 $38 $126 $102 Net Income
attributable to USG Boral Building Products – GAAP $30 $28 $96 $67
Adjustments: Restructuring charges, net of tax — — — $5 Adjusted Net
Income attributable to USG Boral Building Products – Non-GAAP $30 $28
$96 $72 USG share of income from equity method investments – GAAP $15
$15 $50 $35 Less: Income from equity method investments – other joint
ventures — ($1) ($2) ($2) Adjustments: USG's share of USG Boral Building
Products restructuring charges, net of tax — — — $2 Adjusted equity
income from USG Boral Building Products – Non-GAAP $15 $14 $48 $35 26
USG BORAL BUILDING PRODUCTS
ADJUSTED EBITDA RECONCILIATION 27 $ Millions Q4 2015 Q4 2014 FY 2015 FY
20141 GAAP Operating profit $37 $38 $124 $95 Income tax expense ($8)
($10) ($31) ($29) Income from equity method investments owned by UBBP $2
$2 $9 $6 Other expense ($1) — ($1) — Net Income $30 $30 $101 $72 Net
income attributable to non-controlling interest — ($2) ($5) ($5) Net
Income attributable to USG Boral Building Products $30 $28 $96 $67 Add
back: Restructuring, net of tax — — — $5 Adjusted Net Income
attributable to USG Boral Building Products $30 $28 $96 $72 Add: income
tax expense $8 $10 $31 $29 Add: depreciation, depletion, and
amortization $11 $9 $43 $31 TOTAL USG Boral Building Products Adjusted
EBITDA $49 $47 $170 $132 USG’s share of USG Boral Building Products
Adjusted EBITDA $24 $23 $85 $66 27
ADJUSTED DILUTED EPS
RECONCILED TO GAAP DILUTED EPS Q4 2015 Q4 2014 2015 2014 Income (loss)
per average diluted common share – GAAP $5.51 ($0.36) $6.73 $0.25
Adjustments per average diluted common share: Loss on discontinued
operations — — — $0.01 Gain on sale of surplus property, net of tax
($0.05) — ($0.05) ($0.08) Gain on sale of equity method investment, net
of tax ($0.04) — ($0.04) — Litigation settlement charge — — — $0.33
Long-lived asset impairment charges — $0.41 — $0.61 Contract termination
charge and (recovery) loss on receivable ($0.04) $0.10 ($0.04) $0.10 GTL
- Shipping operations — ($0.03) ($0.01) ($0.15) USG’s share of UBBP
restructuring charges, net of tax — — — $0.01 Pension settlement charge
— $0.09 — $0.09 Gain on deconsolidation of subsidiaries and consolidated
JV’s — — — ($0.18) Withholding tax on property contributed to USG Boral
joint venture — — — $0.01 Reduction in valuation allowance for deferred
tax assets ($4.96) — ($4.96) — Loss on extinguishment on debt — — $0.13
— Adjusted earnings per adjusted average diluted common share – Non-GAAP
$0.42 $0.21 $1.76 $1.00 Average diluted common shares – GAAP 147,263,303
144,837,591 147,246,600 144,296,316 Adjustment to remove common shares
that would be antidilutive based on adjusted net income — 2,355,825 —
2,797,618 Adjusted average diluted common shares – Non-GAAP 147,263,303
147,193,416 147,246,600 147,093,934 28
GTL EBITDA AND ADJUSTED
SALES RECONCILIATIONS $ Millions Q4 2015 Q4 2014 FY 2015 FY
2014 GAAP Operating profit (loss) $6 ($71) $7 ($52) Interest income
(expense), net — $1 ($1) ($1) Net income attributable to non-controlling
interest — ($1) — ($2) Net income (loss) attributable to USG $6 ($71)
$6 ($55) Add: interest (income) expense, net — ($1) $1 $1 Add:
depreciation, depletion, and amortization — $2 $1 $9 EBITDA $6 ($70) $8
($45)
US GYPSUM ADJUSTED EBITDA RECONCILIATION $ Millions FY 2015 FY 2014 GAAP Operating profit $316 $192 Add: depreciation, depletion, and amortization $93 $93 EBITDA $409 $285 Add: ARO accretion expense $5 $5 Subtract: gain on sale of surplus property — ($12) Add: litigation settlement charge — $48 Add: long-lived asset impairment charges — $30 Adjusted EBITDA $414 $356
ADJUSTED DEBT RECONCILED TO GAAP DEBT $ Millions December 31, 2015 December 31, 2014 Total short-term and long-term Debt – GAAP $2,175 $2,195 Operating leases $217 $237 Postretirement benefit obligations $265 $333 Asset retirement obligations $77 $80 Accrued interest not included in reported debt $45 $44 Workers compensation/self insurance $16 $14 Excess cash ($504) ($287) Total adjustments1 $116 $421 Adjusted Debt $2,291 $2,616
ADJUSTED EBITDA PER DILUTED SHARE $ Millions (except per-share and share data) Q1 2015 Q2 2015 Q3 2015 Q4 2015 YTD 2015 Adjusted EBITDA $131 $169 $164 $145 $609 Average diluted common shares 147,176,197 146,990,178 147,534,779 147,263,303 147,246,600 Adjusted EBITDA per average diluted common share $0.89 $1.15 $1.11 $0.98 $4.14
USG’s Stockholder Rights
Plan and Protective Amendment restricts beneficial ownership in excess
of 4.9% We have a stockholder rights plan, or the Rights Plan,
established under the terms of a rights agreement dated December 21,
2006, as amended, with Computershare Trust Company N.A., as Rights
Agent, or the Rights Agreement. The Rights Plan was initially intended
to protect our stockholders from coercive takeover practices or takeover
bids that are inconsistent with their best interests. However, in 2013
and 2015, the Board adopted amendments to the Rights Agreement,
discussed below, intended to protect our substantial NOL carryforwards
and related tax benefits. The Board also recommended, and on May 9, 2013
our stockholders approved, an amendment to our Restated Certificate of
Incorporation, or the Protective Amendment, also intended to protect our
NOL carryforwards and related tax benefits. On March 22, 2013, our board
of directors approved an amendment to the Rights Agreement in an effort
to protect our NOL carryforwards and related tax benefits. Our ability
to use our NOLs could be substantially reduced if we experience an
“ownership change,” as defined under Section 382 of the Internal Revenue
Code of 1986, as amended (the "Code"), and the Rights Agreement has been
designed to prevent such an “ownership change.” “Ownership changes”
generally relate to the cumulative change in ownership among
stockholders with an ownership interest of 5% or more (as determined
under the Code’s rules) over a rolling three-year period. Our
stockholders ratified, on an advisory basis, the March 22, 2013
amendment to our Rights Agreement at our 2013 annual meeting of
stockholders. The Rights Agreement, as amended, provides that if any
person becomes the beneficial owner of 4.9% or more of our common stock,
stockholders other than the 4.9% triggering stockholder will have the
right to purchase additional shares of our common stock at half the
market price, thereby diluting the triggering stockholder; provided that
stockholders whose beneficial ownership, as defined in Section 383 of
the Code, exceeded 4.9% of our common stock outstanding on February 11,
2015 will not be deemed to have triggered the Rights Agreement, as
amended, so long as they do not thereafter acquire additional common
stock other than in certain specified exempt transactions. The Board
approved an amendment to the Rights Agreement in February 2015 to align
the definition of “Beneficial Owner” and “Beneficially Own” with Section
382 of the Code. The NOL protective provisions in the Rights Agreement
adopted in 2013 were scheduled to expire on March 22, 2016 and the
Rights Agreement was scheduled to expire on January 2, 2017. In
connection with a required triennial review of the Rights Agreement, the
Board approved, and on November 16, 2015 the Company entered into,
another amendment to the Rights Agreement to extend the term of the
Rights Agreement, as well as the NOL protective provisions adopted in
2013, to May 31, 2019, subject to other earlier termination events as
described therein. Accordingly, the 4.9% threshold described above is
now effective until the earlier of (i) May 31, 2019, (ii) the date on
which our Board determines that the amendment is no longer necessary for
the provision of certain tax benefits because of the repeal of Section
382 of the Code, (iii) the first day of a taxable year as to which our
Board determines that no tax benefits may be carried forward, or (iv)
such other date as our Board determines that the amendment is no longer
necessary for the preservation of tax benefits. The rights issued
pursuant to the Rights Agreement will expire on May 31, 2019. However,
our Board has the power to accelerate or extend the expiration date of
the rights. In addition, a board committee composed solely of
independent directors reviews the Rights Agreement at least once every
three years to determine whether to modify the Rights Plan in light of
all relevant factors. This review was most recently conducted in
November 2015. The next review is required by the end of 2018. On May 9,
2013, we filed an amendment to our Restated Certificate of
Incorporation, or the Protective Amendment, that restricts certain
transfers of our common stock. The Protective Amendment is intended to
protect the tax benefits of our NOL carryforwards. Subject to certain
limited exceptions, the Protective Amendment's transfer restrictions
restrict any person from transferring our common stock (or any interest
in our common stock) if the transfer would result in a stockholder (or
several stockholders, in the aggregate, who hold their stock as a
“group” under Section 382 of the Code) owning 4.9% or more of our common
stock. Any direct or indirect transfer attempted in violation of the
Protective Amendment would be void as of the date of the prohibited
transfer as to the purported transferee, and the purported transferee
would not be recognized as the owner of the shares attempted to be owned
in violation of the Protective Amendment for any purpose, including for
purposes of voting and receiving dividends or other distributions in
respect of that common stock, or in the case of options, receiving our
common stock in respect of their exercise. The Protective Amendment is
effective until the earlier of (i) May 9, 2016, (ii) the repeal of
Section 382 of the Code if our board of directors determines that the
Protective Amendment is no longer necessary for the preservation of tax
benefits, (iii) the first day of a taxable year as to which our board of
directors determines that no tax benefits may be carried forward, or
(iv) such other date as determined by our board of directors pursuant to
the Protective Amendment. On November 12, 2015, our board of directors
also recommended that stockholders vote to extend the Protective
Amendment until May 31, 2019 (subject to other earlier termination
events as described in the Protective Amendment). Pursuant to a
Shareholder's Agreement reached in 2006, Berkshire Hathaway and certain
of its affiliates may acquire beneficial ownership of up to 50% of our
voting stock on a fully-diluted basis without triggering the ownership
thresholds in the Protective Amendment or Rights Agreement, and may
acquire beneficial ownership of more than 50% of our voting stock on a
fully-diluted basis without triggering the ownership thresholds in the
Protective Amendment or Rights Agreement through an offer to purchase
all of our common stock that remains open for at least 60 days, in each
case subject to specified exceptions. STOCKHOLDER RIGHTS PLAN AND
PROTECTIVE AMENDMENT 33