Usg (USG) 8-K Fourth quarter 2004 vs. Fourth Quarter 2003

Exhibit 99.1

Media Inquires: (312) 606-4356
Investor Relations: (312)606-4125

USG CORPORATION REPORTS FOURTH QUARTER 2004 NET SALES OF
$1.2 BILLION AND NET EARNINGS OF $85 MILLION;
NET EARNINGS FOR THE YEAR TOTAL $312 MILLION

     Fourth quarter 2004 vs. Fourth Quarter 2003

•   Net sales increased 26 percent

•   Net earnings rose 85 percent

•   Record shipments

     CHICAGO, February 1, 2005 —USG Corporation (NYSE:USG), a leading building products company, today reported fourth quarter 2004 net sales of $1.2 billion and net earnings of $85 million. Net sales and net earnings increased $242 million and $39 million, respectively, compared with the fourth quarter last year. Diluted earnings per share for the fourth quarter of 2004 were $1.97, compared with $1.07 in the fourth quarter of 2003.

     “USG’s businesses had a positive fourth quarter, finishing a year of solid performance,” said USG Corporation Chairman, President and CEO, William C. Foote.

- more -

USG CORPORATION REPORTS FOURTH QUARTER RESULTS/2

     USG achieved a record $4.5 billion in net sales in 2004, an increase of $843 million compared with 2003. Net earnings for the year more than doubled to $312 million. Diluted earnings per share for the year were $7.26. Net sales and net earnings for 2003 were $3.7 billion and $122 million, respectively. Diluted earnings per share for 2003 were $2.82. Net earnings in 2003 were reduced by a non-cash, after-tax charge of $16 million, or $0.37 per share, related to the adoption of Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations.” Earnings before the cumulative effect of this accounting charge were $138 million in 2003. Diluted earnings per share before this charge were $3.19.

     “At the start of 2004, we promised to focus on margin improvement and select growth opportunities. We were successful in these areas during the year and remain committed to this strategy in 2005,” stated Foote. “USG is well positioned to make further gains in what continues to be a favorable housing market.”

Core Business Results

North American Gypsum

     USG’s North American Gypsum business recorded net sales of $728 million and an operating profit of $120 million in the fourth quarter. Net sales increased by 23 percent compared with the fourth quarter of 2003, while operating profit improved 88 percent.

     United States Gypsum Company reported net sales of $645 million and operating profit of $97 million in the fourth quarter. Compared with the fourth quarter of 2003, net sales increased 22 percent while operating profit more than doubled. The increase in sales and profits was primarily

- more -

USG CORPORATION REPORTS FOURTH QUARTER RESULTS/3

attributable to record fourth quarter shipments and higher realized selling prices forSheetrock^® Brand gypsum wallboard. Also contributing to the improved results were record fourth quarter shipments and higher pricing for complementary products.

     U.S. Gypsum’s nationwide average realized price of gypsum wallboard was $132.02 per thousand square feet during the fourth quarter. This is 25 percent higher than in the same period a year ago and 3 percent higher than in the preceding quarter. Gypsum wallboard profit margins improved due to higher pricing levels despite higher energy and wastepaper costs. The higher fourth quarter prices reflect strong demand for wallboard and wallboard industry capacity utilization rates that exceeded 90 percent.

     U.S. Gypsum sold record volumes ofSheetrock Brand gypsum wallboard in the fourth quarter and full year. Wallboard shipments in the fourth quarter totaled 2.75 billion square feet, up from 2.65 billion square feet in last year’s record fourth quarter. U.S. Gypsum’s wallboard shipments for all of 2004 were 11.0 billion square feet, up 6 percent from last year’s record level.

     The company continued the profitable growth of its complementary products. Shipments ofSheetrock Brand joint treatment products,Durock^® Brand cement board products andFiberock^® Brand gypsum fiber panels set annual records and were the highest for any fourth quarter in U.S. Gypsum’s history. Margins improved in each product line as well.

     The gypsum division of Canada-based CGC Inc. reported fourth quarter 2004 net sales of $83 million, an increase of 22 percent over the same period a year ago. Operating profit was $15 million, an increase of $5 million compared with last year’s fourth quarter results. The increases in sales and profits were primarily due to higher shipments and pricing for gypsum wallboard.

- more -

USG CORPORATION REPORTS FOURTH QUARTER RESULTS/4

Worldwide Ceilings

     USG’s Worldwide Ceilings business reported fourth quarter 2004 net sales and operating profit of $164 million and $7 million, respectively. Net sales improved by $15 million, while operating profit declined by $3 million compared with last year’s fourth quarter.

     USG Interiors’ net sales increased $6 million to $115 million in the quarter. The increase in net sales reflects higher selling prices for ceiling grid and tile. Operating profit for the fourth quarter was $2 million, a decrease of $6 million compared with the fourth quarter of 2003. The decline was principally due to lower shipments of ceiling grid and the effects of higher steel costs. Steel is a major component in the production of ceiling grid and in the first half of 2004 market concerns over a global steel shortage and rising steel costs led to a surge in demand for ceiling grid. In the second half of 2004 demand for grid dropped sharply as a result of the pre-buying in the first half. In addition, the cost of steel rose throughout the year leading to higher costs to produce grid and inventory steel. These unfavorable factors were partially offset by higher selling prices for ceiling tile and grid during the quarter.

     USG International reported sales and operating profit of $50 million and $3 million, respectively, in the fourth quarter of 2004. This compared with sales of $41 million and break-even operating profit for the same period a year ago. The profit improvement was primarily due to increased demand for ceiling grid in Europe. Fourth quarter 2003 results also included a $1 million writedown related to a previously closed ceiling tile plant in Aubange, Belgium. The ceilings division of Canada-based CGC Inc. attained sales of $11 million and $2 million in operating profit. This compared with $12 million in sales and $2 million in operating profit in last year’s fourth quarter.

- more -

USG CORPORATION REPORTS FOURTH QUARTER RESULTS/5

Building Products Distribution

     L&W Supply, USG’s building products distribution business, reported record fourth quarter 2004 net sales of $452 million and operating profit of $27 million. Sales increased $118 million, while operating profit improved by $15 million, compared with the fourth quarter of 2003. The improved results reflect higher selling prices for gypsum wallboard and record fourth quarter shipments of gypsum wallboard and complementary products. L&W’s fourth quarter gypsum wallboard prices were up 21 percent compared with the same period last year. Gypsum wallboard shipments increased 6 percent versus the fourth quarter of 2003.

Business Outlook

     The Corporation’s markets in 2004 were exceptionally strong, and the outlook for 2005 is also positive. However, a decline in housing starts and increasing interest rates could reduce the level of demand from both the new housing and residential remodeling markets. While office vacancy rates currently remain at relatively high levels, the commercial construction market is showing signs of improvement. On the cost side, the Corporation expects costs of energy, raw materials and employee benefits to remain high.

Other Consolidated Information

     Selling and administrative expenses totaled $79 million and $317 million in the fourth quarter and full year 2004, respectively. These expenses were down $6 million versus the fourth quarter of 2003 and down $7 million versus 2003. For the fourth quarter and full year 2004, selling and administrative expenses as a percent of net sales were 6.8 percent and 7.0 percent, respectively. This

USG CORPORATION REPORTS FOURTH QUARTER RESULTS/6

compared with the 2003 selling and administrative expenses as a percent of net sales of 9.2 percent and 8.8 percent for the fourth quarter and full year, respectively.

     Interest expense for the fourth quarter and 12 months of 2004 was $1 million and $5 million, respectively. For the same periods in 2003, interest expense was $1 million and $6 million, respectively. Under AICPA Statement of Position 90-7 (“SOP 90-7”), “Financial Reporting by Entities in Reorganization under the Bankruptcy Code,” virtually all of USG’s outstanding debt is classified as liabilities subject to compromise, and interest expense on this debt has not been accrued or recorded since USG’s bankruptcy filing.

     For the fourth quarter, USG’s Chapter 11 reorganization expenses of $2 million reflected $7 million of legal and financial advisory fees, partially offset by $5 million of interest income earned by the USG companies in Chapter 11. Under SOP 90-7, interest income on USG’s bankruptcy-related cash is offset against Chapter 11 reorganization expenses. In 2004, USG’s Chapter 11 reorganization expenses totaled $12 million, reflecting $24 million of legal and financial advisory fees, partially offset by $12 million of bankruptcy-related interest income.

     As of December 31, 2004, USG had $1.2 billion of cash, cash equivalents, restricted cash and marketable securities, up from $947 million as of December 31, 2003, and $1.1 billion on September 30, 2004. Capital expenditures for the fourth quarter and 12 months of 2004 were $58 million and $138 million, respectively. Capital expenditures for the same periods in 2003 were $50 million and $111 million, respectively.

- more -

USG CORPORATION REPORTS FOURTH QUARTER RESULTS/7

Chapter 11 Reorganization

     USG and its principal domestic subsidiaries (collectively “USG”) filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code on June 25, 2001. This action was taken to resolve asbestos claims in a fair and equitable manner, protect the long-term value of the businesses, and maintain market leadership positions.

     Judge Joy Flowers Conti, a district court judge who was recently assigned to USG’s chapter 11 cases, entered an order in December stating that she will hear matters relating to estimation of USG’s liability for asbestos personal injury claims. At this time it has not been determined how the estimation process will proceed and what issues will be considered. An initial hearing to hear arguments regarding the method that the court should use to estimate asbestos personal injury liability has been scheduled for March 31, 2005.

     USG Corporation is aFortune500 company with subsidiaries that are market leaders in their key product groups: gypsum wallboard, joint compound and related gypsum products; cement board; gypsum fiber panels; ceiling panels and grid; and building products distribution. For more information about USG Corporation, visit the USG home page at www.usg.com.

# # #

This press release contains forward-looking statements related to management’s expectations about future conditions. The effects of USG’s Chapter 11 reorganization and the conduct, outcome and costs of the Chapter 11 cases, as well as the ultimate costs associated with the corporation’s asbestos litigation, including the possible impact of any asbestos-related legislation, may differ from management’s expectations. Actual business, market or other conditions may also differ from management’s expectations and accordingly affect the corporation’s sales and profitability or other results. Actual results may differ due to various other factors, including economic conditions such as the levels of construction activity, employment levels, interest rates, currency exchange rates and consumer confidence; competitive conditions such as price and product competition; shortages in raw materials; increases in raw material, energy and employee benefit costs; loss of one or more significant customers; and the unpredictable effects of acts of terrorism or war upon domestic and international economies and financial markets. USG Corporation assumes no obligation to update any forward-looking information contained in this press release.

USG CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(dollars in millions except per share data)
(Unaudited)

	Three Months						Twelve Months
	ended December 31,						ended December 31,
	2004			2003			2004			2003
Net sales	$	1,169		$	927		$	4,509		$	3,666
Cost of products sold		953			780			3,672			3,121
Gross profit		216			147			837			545
Selling and administrative expenses		79			85			317			324
Chapter 11 reorganization expenses		2			4			12			11
Operating profit		135			58			508			210
Interest expense		1			1			5			6
Interest income		(2	)		(1	)		(6	)		(4	)
Other income, net		(3	)		(4	)		—			(9	)
Earnings before income taxes and cumulative effect of accounting change		139			62			509			217
Income taxes		54			16			197			79
Earnings before cumulative effect of accounting change		85			46			312			138
Cumulative effect of accounting change, net of tax		—			—			—			(16	)
Net earnings		85			46			312			122
Basic earnings per common share:
Before cumulative effect of accounting change		1.98			1.07			7.26			3.19
Cumulative effect of accounting change		—			—			—			(0.37	)
Basic earnings per common share		1.98			1.07			7.26			2.82
Diluted earnings per common share:
Before cumulative effect of accounting change		1.97			1.07			7.26			3.19
Cumulative effect of accounting change		—			—			—			(0.37	)
Diluted earnings per common share		1.97			1.07			7.26			2.82
Other Information:
Depreciation, depletion and amortization		37			32			120			112
Capital expenditures		58			50			138			111
Dividends paid per common share		—			—			—			—
Average common shares		43,092,836			43,049,917			43,024,534			43,075,361
Average diluted common shares		43,236,878			43,050,931			43,024,534			43,075,517

USG CORPORATION
CORE BUSINESS RESULTS
(dollars in millions)
(Unaudited)

	Three Months						Twelve Months
	ended December 31,						ended December 31,
	2004			2003			2004			2003
Net Sales:
North American Gypsum:
U.S. Gypsum Company	$	645		$	528		$	2,474		$	2,076
CGC Inc. (gypsum)		83			68			297			256
Other subsidiaries*		49			39			178			141
Eliminations		(49	)		(44	)		(196	)		(174	)
Total		728			591			2,753			2,299
Worldwide Ceilings:
USG Interiors, Inc.		115			109			488			446
USG International		50			41			200			168
CGC Inc. (ceilings)		11			12			51			45
Eliminations		(12	)		(13	)		(51	)		(52	)
Total		164			149			688			607
Building Products Distribution:
L&W Supply Corporation		452			334			1,738			1,295
Eliminations		(175	)		(147	)		(670	)		(535	)
Total USG Corporation		1,169			927			4,509			3,666
Operating Profit:
North American Gypsum:
U.S. Gypsum Company		97			48			348			157
CGC Inc. (gypsum)		15			10			49			33
Other subsidiaries*		8			6			31			19
Total		120			64			428			209
Worldwide Ceilings:
USG Interiors, Inc.		2			8			42			31
USG International		3			—			12			2
CGC Inc. (ceilings)		2			2			8			6
Total		7			10			62			39
Building Products Distribution:
L&W Supply Corporation		27			12			103			53
Corporate		(17	)		(21	)		(73	)		(77	)
Chapter 11 reorganization expenses		(2	)		(4	)		(12	)		(11	)
Eliminations		—			(3	)		—			(3	)
Total USG Corporation		135			58			508			210

*Includes USG Mexico, S.A. de C.V., a building products business in Mexico, Gypsum Transportation Limited, a shipping company in Bermuda, and USG Canadian Mining Ltd., a mining operation in Nova Scotia.

USG CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
(Unaudited)

	As of			As of
	December 31,			December 31,
	2004			2003
Assets
Current Assets:
Cash and cash equivalents	$	756		$	700
Short-term marketable securities		138			64
Restricted cash		43			7
Receivables (net of reserves — $14 and $15)		413			321
Inventories		338			280
Income taxes receivable		24			26
Deferred income taxes		25			43
Other current assets		53			57
Total current assets		1,790			1,498
Long-term marketable securities		312			176
Property, plant and equipment (net of accumulated depreciation and depletion — $878 and $816)		1,853			1,818
Deferred income taxes		152			178
Goodwill		43			39
Other assets		128			90
Total Assets		4,278			3,799
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable		270			202
Accrued expenses		224			206
Current portion of long-term debt		1			1
Income taxes payable		75			5
Total current liabilities		570			414
Long-term debt		—			1
Deferred income taxes		25			23
Other liabilities		417			429
Liabilities subject to compromise		2,242			2,243
Commitments and contingencies					—
Stockholders’ Equity:
Preferred stock		—			—
Common stock		5			5
Treasury stock		(256	)		(258	)
Capital received in excess of par value		417			414
Accumulated other comprehensive income (loss)		17			(1	)
Retained earnings		841			529
Total stockholders’ equity		1,024			689
Total Liabilities and Stockholders’ Equity		4,278			3,799