EXHIBIT 99.1
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USG CORPORATION REPORTS FIRST QUARTER NET SALES OF
$862 MILLION AND NET EARNINGS OF $6 MILLION
Quarterly earnings include charge under a new accounting rule
CHICAGO, April 24, 2003 -- USG Corporation (NYSE:USG), a leading
building products company, today reported first quarter net sales of $862
million and net earnings of $6 million. Diluted earnings per share for the first
quarter of 2003 were $0.13. Net earnings included an 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."
"USG achieved solid results in the first quarter," reported USG
Corporation Chairman, President and CEO William C. Foote. "Demand for most of
our products and services continued to be strong and USG's operating units
remained focused on implementing their plans for improving customer service,
increasing operating efficiencies and growing their businesses. We did face
significantly higher energy costs during the quarter, but we were able to
partially offset their negative impact with productivity improvements and our
energy hedging program.
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USG CORPORATION REPORTS FIRST QUARTER RESULTS/2
"For the remainder of the year, we still expect demand for gypsum
wallboard to remain strong, supported by a healthy housing market. Challenges
include a weak commercial construction market and cost pressures in several
areas. As evidenced by our performance in this environment, our plans are
serving us well and we will stay the course in building a stronger USG,"
concluded Foote.
Net sales in the first quarter increased by $33 million, or 4 percent,
versus the $829 million achieved in the first quarter of 2002. The first quarter
net earnings of $6 million, or $0.13 per share, compared with a net loss of $70
million, or a net loss of $1.62 per share, in the same period a year ago.
Results in both periods included charges related to adoption of
accounting standards. Included in the first quarter of 2003 was an after-tax
charge of $16 million, or $0.37 per share, related to the adoption of SFAS No.
143. This standard requires the recording of the fair value of a liability for
asset retirement obligations. The Corporation's asset retirement obligations
include reclamation activities related to assets such as quarries, mines and
wells. Included in the first quarter of 2002 was a $96 million, or $2.22 per
share, non-cash, non-taxable charge related to the adoption of SFAS No. 142,
"Goodwill and Other Intangible Assets." Earnings before the effects of these
charges were $22 million, or $0.50 per share, in the first quarter of 2003, and
$26 million, or $0.60 per share, in the first quarter of 2002. See the attached
Consolidated Statement of Earnings for a reconciliation of net earnings or loss
before and after these accounting charges.
NORTH AMERICAN GYPSUM
USG's North American Gypsum business recorded first quarter 2003 net
sales of $542 million and operating profit of $38 million, an increase of 3
percent and a decline of 34 percent, respectively, from the first quarter of
2002.
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USG CORPORATION REPORTS FIRST QUARTER RESULTS/3
United States Gypsum Company realized first quarter 2003 net sales of
$496 million and operating profit of $30 million. Net sales increased by $13
million and operating profit declined by $16 million compared to the first
quarter of 2002. Most of the decline in U.S. Gypsum's operating profit came from
an increase in the cost of producing the company's Sheetrock(R) brand gypsum
wallboard. The increase was primarily due to higher energy costs. Energy is a
major component of wallboard cost and spot prices for natural gas, the major
source of energy in the manufacturing process, were nearly three times higher in
the first quarter than during the same period a year ago. Higher waste paper
prices also contributed to the higher wallboard production costs in the quarter.
U.S. Gypsum's nationwide average realized price of wallboard was $97.13
per thousand square feet during the first quarter, an increase of $1.29 per
thousand square feet compared to the first quarter last year. However, the first
quarter's average price was less than the $102.98 realized in the fourth quarter
of 2002, reflecting the effects of lower demand from both normal seasonal
factors and harsher-than-usual winter weather in certain parts of the country.
The company has announced a 10 percent price increase on all its gypsum
wallboard products for early May.
U.S. Gypsum's shipments in the first quarter totaled 2.5 billion square
feet, 3 percent lower than the very strong level experienced in the first
quarter of 2002. Shipments in the first quarter last year were the second
highest level of quarterly shipments in the company's history.
During the first quarter, U. S. Gypsum continued to grow sales of its
complementary products. The company achieved record first quarter shipments of
its Sheetrock brand joint compounds and Durock(R) brand cement board products.
To accommodate this growth and improve service, the company has recently added
production capacity for both products,
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USG CORPORATION REPORTS FIRST QUARTER RESULTS/4
including a new joint compound manufacturing facility in Glendale, Arizona, and
a new cement board production line at its Baltimore, Md., gypsum plant.
The gypsum division of Canada-based CGC Inc. reported first quarter
2003 net sales of $57 million and operating profit of $5 million. Net sales
increased by $7 million while operating profit declined by $1 million compared
to the first quarter of 2002. Sales improved largely due to higher realized
selling prices for, and increased shipments of, Sheetrock brand gypsum
wallboard. Operating profit was adversely impacted by higher energy costs.
WORLDWIDE CEILINGS
USG's Worldwide Ceilings business reported first quarter net sales of
$147 million, a decrease of $1 million compared to the first quarter of 2002.
Both the domestic and international ceilings businesses continued to experience
weak market conditions amid declining commercial construction activity. However,
operating profit in the first quarter of 2003 was $8 million, an increase of $3
million compared to the same period last year.
USG's domestic ceilings business, USG Interiors, reported an operating
profit of $6 million compared with $7 million in the first quarter of 2002.
Profitability declined primarily due to the impact of higher energy prices and
reduced volumes compared to the first quarter of 2002. This business continues
to be challenged by a soft commercial construction market. In response, USG
Interiors has focused on enhancing its service and product offerings to
customers and managing costs.
USG International reported a profit of $1 million compared with a loss
of $3 million in last year's first quarter. As previously reported, the unit
closed its Belgium ceiling tile plant in the fourth quarter last year and took
other actions to improve profitability. Operating profit of $1 million for the
ceilings division of CGC Inc. was the same as last year's first quarter.
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USG CORPORATION REPORTS FIRST QUARTER RESULTS/5
BUILDING PRODUCTS DISTRIBUTION
L&W Supply, USG's building products distribution business, reported
first quarter 2003 net sales of $295 million compared to $275 million in the
same period a year ago. The 7 percent increase in sales was due to higher sales
of both wallboard and complementary building products. Operating profit was $8
million in the first quarter of 2003, an increase of $1 million versus the first
quarter of 2002, reflecting the improved sales level.
L&W Supply operates 181 locations in the U.S. that distribute gypsum
wallboard, metal studs, ceiling tile and grid, and other related building
materials.
OTHER CONSOLIDATED INFORMATION
First quarter 2003 selling and administrative expenses totaled $80
million, a decrease of $2 million, or 2 percent, year-over-year. Selling and
administrative expenses as a percent of net sales were 9.3 percent, down from
9.9 percent in the comparable 2002 period.
USG incurred Chapter 11 reorganization expenses of $2 million in the
first quarter of 2003 and 2002. For both periods, this consisted of $4 million
in legal and financial advisory fees, partially offset by bankruptcy-related
interest income of $2 million. Under AICPA Statement of Position 90-7 ("SOP
90-7"), "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code," interest income on USG's bankruptcy-related cash is offset against
Chapter 11 reorganization expenses.
Interest expense of $1 million was recorded in the first quarter of
2003 and 2002. Under SOP 90-7, 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. Contractual
interest expense not accrued or recorded on pre-petition debt totaled $18
million in the first quarter of 2003 and 2002. From the date of USG's bankruptcy
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USG CORPORATION REPORTS FIRST QUARTER RESULTS/6
filing through March 31, 2003, contractual interest expense not accrued or
recorded on pre-petition debt totaled $133 million.
As of March 31, 2003, USG had $768 million of cash, cash equivalents
and marketable securities on a consolidated basis, down from $830 million as of
December 31, 2002. The decrease was largely attributable to cash used to fund
seasonal working capital needs and payments associated with employee benefit and
compensation plans. Capital expenditures in the first quarter of 2003 were $17
million compared with $15 million in the corresponding 2002 period.
As of March 31, 2003, USG had a $100 million line of credit under a
debtor-in-possession financing facility. Of this total, $16 million supported
standby letters of credit and $84 million was unused.
CHAPTER 11 REORGANIZATION
On June 25, 2001, USG Corporation and 10 of its subsidiaries (the
"Debtors") filed voluntary petitions for reorganization under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court for the
District of Delaware. This action was taken to resolve asbestos-related claims
in a fair and equitable manner, to protect the long-term value of USG's
businesses and to maintain their leadership positions in their markets. The
Chapter 11 cases are being jointly administered as In re: USG Corporation et al.
(case no. 01-2094).
During the first quarter of 2003, there were several developments in
USG's bankruptcy case. January 15 was the bar date, or deadline, for filing all
claims other than asbestos-related personal injury claims against the Debtors.
An initial review of the claims filed by the bar date suggests that many are
duplicates of other proofs of claim or of liabilities previously scheduled
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USG CORPORATION REPORTS FOURTH QUARTER RESULTS/7
by the Debtors. In addition, many claims were filed against multiple Debtors or
against the wrong Debtor. The Debtors will continue evaluating the claims, but
at this time, it is not possible to determine if any change is required to our
estimate of the liability for these claims.
On February 19, a federal judge in USG's case issued a Memorandum
Opinion and Order setting forth a procedure for estimating the Debtors'
liability for asbestos personal injury claims alleging cancer. The procedure
will not address non-malignant claims at this time. Pursuant to the court order,
on March 21, the Debtors submitted to the court a proposed timetable for a bar
date for cancer claims, a proposed proof of claim form, and a plan for providing
notice of the bar date. The court has not yet ruled on the Debtors' proposal.
"While these developments represent important progress in our case,
much still remains to be done. We plan to continue our efforts to keep our
Chapter 11 reorganization moving forward," stated Foote.
USG Corporation is a Fortune 500 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.
# # #
This report contains forward-looking statements related to management's
expectations about future conditions. The effects of the Chapter11
reorganization of USG and its principal domestic subsidiaries and the conduct,
outcome and costs of the Chapter 11 reorganization, as well as the ultimate
costs associated with the Corporation's asbestos litigation, may differ from
management's expectations. Actual business or other conditions may also differ
significantly 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, interest rates, currency exchange rates and
consumer confidence; competitive conditions such as price and product
competition; shortages in raw materials; increases in raw material and energy
costs; and the unpredictable effects of the global war on terrorism upon
domestic and international economies and financial markets. The Corporation
assumes no obligation to update any forward-looking information contained in
this report.
USG CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in millions except per share data)
(Unaudited)
<Table>
<Caption>
Three Months
ended March 31,
-----------------------------------
2003 2002
------------- --------------
Net sales $ 862 $ 829
Cost of products sold 745 697
Selling and administrative expenses 80 82
Chapter 11 reorganization expenses 2 2
------------- --------------
Operating profit 35 48
Interest expense 1 1
Interest income (1) (1)
Other expense, net - 1
------------- --------------
Earnings before income taxes and
cumulative effect of accounting changes 35 47
Income taxes 13 21
------------- --------------
Earnings before cumulative effect
of accounting changes 22 26
Cumulative effect of accounting changes (16) (96)
------------- --------------
Net earnings (loss) 6 (70)
============= ==============
Earnings (loss) per common share:
Basic and diluted before cumulative effect
of accounting changes 0.50 0.60
Cumulative effect of accounting changes (0.37) (2.22)
------------- --------------
Basic and diluted 0.13 (1.62)
============= ==============
Other Information:
Depreciation, depletion and amortization 25 26
Capital expenditures 17 15
Dividends paid per common share - -
Average common shares 43,137,883 43,354,025
Average diluted common shares 43,137,883 43,354,025
</Table>
USG CORPORATION
CORE BUSINESS RESULTS
(dollars in millions)
(Unaudited)
<Table>
<Caption>
NET SALES OPERATING PROFIT (LOSS)
- --------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 2003 2002 2003 2002
- --------------------------------------------------------------------------------------------------------------------------
NORTH AMERICAN GYPSUM:
U.S. Gypsum Company $ 496 $ 483 $ 30 $ 46
CGC Inc. (gypsum) 57 50 5 6
Other subsidiaries* 28 30 3 6
Eliminations (39) (38) - -
- --------------------------------------------------------------------------------------------------------------------------
Total 542 525 38 58
- --------------------------------------------------------------------------------------------------------------------------
WORLDWIDE CEILINGS:
USG Interiors, Inc. 110 111 6 7
USG International 40 42 1 (3)
CGC Inc. (ceilings) 10 10 1 1
Eliminations (13) (15) - -
- --------------------------------------------------------------------------------------------------------------------------
Total 147 148 8 5
- --------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS DISTRIBUTION:
L&W Supply Corporation 295 275 8 7
- --------------------------------------------------------------------------------------------------------------------------
Corporate - - (18) (20)
Chapter 11 reorganization expenses - - (2) (2)
Eliminations (122) (119) 1 -
- --------------------------------------------------------------------------------------------------------------------------
Total USG Corporation 862 829 35 48
- --------------------------------------------------------------------------------------------------------------------------
</Table>
*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)
<Table>
<Caption>
AS OF AS OF
MARCH 31, DECEMBER 31,
2003 2002
------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 592 $ 649
Short-term marketable securities 47 50
Receivables (net of reserves - $17 and $17) 355 284
Inventories 286 270
Income taxes receivable 14 14
Deferred income taxes 49 49
Other current assets 73 77
------------- -------------
Total current assets 1,416 1,393
Long-term marketable securities 129 131
Property, plant and equipment (net of accumulated
depreciation and depletion - $733 and $701) 1,789 1,788
Deferred income taxes 197 199
Other assets 106 106
------------- -------------
Total Assets 3,637 3,617
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 199 170
Accrued expenses 192 243
Income taxes payable 23 25
------------- -------------
Total current liabilities 414 438
Long-term debt 2 2
Other liabilities 398 370
Liabilities subject to compromise 2,271 2,272
STOCKHOLDERS' EQUITY:
Preferred stock - -
Common stock 5 5
Treasury stock (258) (257)
Capital received in excess of par value 413 412
Accumulated other comprehensive loss (21) (32)
Retained earnings 413 407
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Total stockholders' equity 552 535
------------- -------------
Total Liabilities and Stockholders' Equity 3,637 3,617
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</Table>