Some notes: (a) industry demand for wallboard (20 bill sf) vs current capacity (35 bill sf) is
something to watch, and
(b) USG's race for earnings/cash generation vs debt obligations, incl interest of $150mm/yr.
Check out current wallboard pricing vs peak, and slight Q1 price uptick:
USG wallboard sales:
-Price($/000SF)-Vol(000's SF)
Q1'09... $121 1,300,000
Annual
2008 ... $111 7,200,000
2007 ... $135 9,000,000
2006 ... $180 10,800,000
2005 ... $144 11,300,000
Other Q1 notes:
USG dramatically cut costs - capacity as well as overhead - to get Q1 to close to break even (the loss was about equivalent to their quarterly interest payment). That accomplishment, plus the small uptick in wallboard prices vs LY, has given the market some confidence.
They did a decent job over the past several months of renegotiating their substantial ($1.6B) debt - got some important loan covenant relief, etc. Plus they got a $200M revolving credit line. Long-term debt is in place until 2016.
Cash in Q1 dropped from $400M to $200M as they paid down short-term debt. Interest payments on their debt are about $150M per year.
Getting to about break-even earnings in Q1 before interest suggests the possibilty of really decent upside if/when demand for wallboard rebounds. On the other hand, time is not on their side with their debt load and ongoing interest obligations, and limited cash.
They've noted that the total capacity for wallboard industry is now something like 35B sf, and demand is 20B sf, which suggests overall wallboard demand would have to increase considerably before we see significant price improvement.
USG sourced - and sold - some tainted Chinese wallboard (well under 1% of 2005 volume), and have been named in at least one suit. They believe that their exposure is probably not material, and that the liability won't rest on them but should be able to be passed through to the Chinese manufacturer.
something to watch, and
(b) USG's race for earnings/cash generation vs debt obligations, incl interest of $150mm/yr.
Check out current wallboard pricing vs peak, and slight Q1 price uptick:
USG wallboard sales:
-Price($/000SF)-Vol(000's SF)
Q1'09... $121 1,300,000
Annual
2008 ... $111 7,200,000
2007 ... $135 9,000,000
2006 ... $180 10,800,000
2005 ... $144 11,300,000
Other Q1 notes:
USG dramatically cut costs - capacity as well as overhead - to get Q1 to close to break even (the loss was about equivalent to their quarterly interest payment). That accomplishment, plus the small uptick in wallboard prices vs LY, has given the market some confidence.
They did a decent job over the past several months of renegotiating their substantial ($1.6B) debt - got some important loan covenant relief, etc. Plus they got a $200M revolving credit line. Long-term debt is in place until 2016.
Cash in Q1 dropped from $400M to $200M as they paid down short-term debt. Interest payments on their debt are about $150M per year.
Getting to about break-even earnings in Q1 before interest suggests the possibilty of really decent upside if/when demand for wallboard rebounds. On the other hand, time is not on their side with their debt load and ongoing interest obligations, and limited cash.
They've noted that the total capacity for wallboard industry is now something like 35B sf, and demand is 20B sf, which suggests overall wallboard demand would have to increase considerably before we see significant price improvement.
USG sourced - and sold - some tainted Chinese wallboard (well under 1% of 2005 volume), and have been named in at least one suit. They believe that their exposure is probably not material, and that the liability won't rest on them but should be able to be passed through to the Chinese manufacturer.
