Just a company, and its will to survive.
More than three years have passed since I pondered wallboard manufacturer USG's (NYS: USG) chances for survival in the face of a U.S. housing collapse that proved even scarier than Rocky III challenger "Clubber" Lang. As the following chart shows, not only is the fighter still standing, but it's looking surprisingly sure-footed considering the beating it's received on the operations front. With a 165% gain, USG easily has outperformed the S&P 500 (INDEX: ^GSPC) since that article appeared, while fellow construction materials provider Cemex (NYS: CX) and some well-known homebuilders suffered losses.
USG reported first-quarter earnings Tuesday that featured a $27 million operating profit in place of the prior-year period's $58 million loss. Citing "a modest increase in U.S. wallboard demand," the company managed to shrink its quarterly net loss to a reasonable $27 million.
From my ring-side seat, the strong condition of this fighter caught me by surprise. After so many punishing rounds of painful losses, I am impressed to find that the share count has barely budged -- looking back now over the past four years -- from 99 million shares to 105.7 million shares. That conveys to me a proven commitment to shareholder interests within USG's adaptation to the frightful downturn. Meanwhile, homebuilder PulteGroup (NYS: PHM) increased its share count by about 50% over roughly the same period. And after playing a hand in creating the crisis, Bank of America added insult to shareholders' collective injury by ballooning its share count by roughly 150% over the corresponding period.
Although USG's long-term debt has, of course, grown since the first quarter of 2008 -- expanding nearly 85% to $2.3 billion -- its cash (and equivalents) increased by 147% to a comforting $470 million. Given the very difficult business environment through which the company continues to trudge, I find the balance sheet surprisingly well conditioned to withstand additional rounds of housing's onslaught. And with the latest housing data showing a 5.8% drop in U.S. housing starts for March, I am concerned that recent optimism toward the sector may have been hoodwinked by that unseasonable winter weather. I remain cautious of the sector, particularly considering the force of the recent rally. Although I do not wish to own USG until I can confidently confirm a very real rebound in residential construction, that sentiment does not prevent me from admiring the means by which the company has held its own in the fight of a lifetime.
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At the time thisarticle was published Fool contributorChristopher Barkercan be foundblogging activelyand acting Foolishly within the CAPS community under the usernameTMFSinchiruna. Hetweets. He owns no shares in the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy.
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