Exhibit 99.1
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Investors Relations: 312/606-4125
USG CORPORATION REPORTS SECOND QUARTER NET SALES OF
$914 MILLION AND NET EARNINGS OF $31 MILLION
CHICAGO, July 29, 2003 -- USG Corporation (NYSE:USG), a leading
building products company, today reported second quarter net sales of $914
million and net earnings of $31 million. Net sales increased $29 million while
net earnings declined $17 million compared with the second quarter of last year.
While sales increased, profitability was hurt by higher costs related to energy,
raw materials, employee benefits and insurance premiums. Diluted earnings per
share for the second quarter of 2003 were $0.73 compared with $1.11 in the same
period a year ago.
"We continued to grow and strengthen our core businesses during the
quarter by focusing on customer service, operating efficiencies and selective
growth opportunities," said USG Corporation Chairman, CEO and President William
C. Foote. "These improvements were not fully reflected in our bottom line,
though, due to higher cost factors, especially the rise in natural gas prices.
These cost pressures are likely to continue in the near term, and the
corporation is focusing on ways to offset them."
Net sales for the first six months of 2003 were $1,776 million versus
net sales of $1,714 million for the same period in 2002. USG reported net
earnings of $37 million for the first six months of this year compared with a
net loss of $22 million for the same period last year.
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USG CORPORATION REPORTS SECOND QUARTER RESULTS/2
Results in both six-month periods included charges related to adoption
of new accounting standards. Net earnings for the current six months include a
noncash, after-tax charge of $16 million related to the adoption of SFAS No.
143, "Accounting for Asset Retirement Obligations." Included in the six months
results of 2002 was a noncash, nontaxable charge of $96 million related to the
adoption of SFAS No. 142, "Goodwill and Other Intangible Assets." Earnings
before the cumulative effect of these accounting changes were $53 million for
the first half of 2003 and $74 million for the first half of 2002.
Diluted earnings per share for the first six months of 2003 were $0.86
compared to a diluted loss per share of $0.52 for the first six months of 2002.
Diluted earnings per share for the first six months of 2003 and 2002, before the
cumulative effect of the aforementioned accounting changes, were $1.24 and
$1.71, respectively.
For many years, USG has actively supported proposals for federal
legislation addressing asbestos personal injury claims. On July 10, 2003, the
Judiciary Committee of the United States Senate narrowly approved the Fairness
in Asbestos Injury Resolution Act of 2003 (Senate Bill 1125, the "FAIR Act"),
which is intended to establish a nationally administered trust to compensate
asbestos personal injury claimants. Commenting on the proposed legislation,
Foote said, "USG remains supportive of the efforts of Senator Orrin Hatch and
his Republican and Democratic colleagues to enact asbestos litigation reform
legislation in this session of Congress. The FAIR Act is a work in progress and
we are hopeful that Congress will find a solution that is fair to those people
who are truly suffering from an asbestos-related disease, as well as the many
employees, retirees, shareholders and others who continue to be harmed under the
current system." With the legislative process still underway, it is unclear
whether or when national legislation will be enacted or how the terms of such
legislation might affect USG.
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USG CORPORATION REPORTS SECOND QUARTER RESULTS/3
NORTH AMERICAN GYPSUM
USG's North American gypsum business recorded net sales of $566 million
and operating profit of $47 million. Net sales increased by $15 million while
operating profit declined $34 million compared to the second quarter of 2002.
The decline in profitability was primarily due to higher manufacturing and other
costs.
United States Gypsum Company ("U.S. Gypsum") recorded second quarter
2003 net sales of $512 million and operating profit of $36 million, an increase
of $9 million and a decline of $32 million, respectively, compared with the
second quarter of 2002. Most of the decline in U.S. Gypsum's operating profit
came from higher manufacturing costs and lower realized prices for the company's
SHEETROCK Brand gypsum wallboard. The increased cost of production was primarily
due to higher natural gas and waste paper prices. Market prices for natural gas
were up nearly 60 percent in the second quarter of 2003 versus the same period
in 2002.
U.S. Gypsum's nationwide average realized price of wallboard was
$100.47 per thousand square feet during the second quarter compared to $102.13
in the second quarter of last year. Shipments of U.S. Gypsum's SHEETROCK(R)
Brand gypsum wallboard remained strong in the second quarter, totaling 2.6
billion square feet, which was the same level of shipments as in the second
quarter last year.
During the second quarter, U.S. Gypsum continued to grow sales of its
complementary products and achieved record second quarter shipments of
SHEETROCK(R) Brand joint compounds, DUROCK(R) Brand cement board products and
FIBEROCK(R) Brand gypsum fiber panels. Despite this growth, profitability of
complementary products in the second quarter declined versus last year's second
quarter primarily due to higher material costs.
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USG CORPORATION REPORTS SECOND QUARTER RESULTS/4
The gypsum division of Canada-based CGC Inc. reported second quarter
2003 net sales of $62 million and operating profit of $7 million. Sales
increased by $6 million, while operating profit remained at the same level as
the prior year. Almost all of the improvement in sales was due to the
strengthening of the Canadian dollar versus the U.S. dollar. The favorable
currency impact on profitability was offset by higher operating costs.
WORLDWIDE CEILINGS
USG's worldwide ceilings business reported second quarter net sales of
$154 million and operating profit of $9 million. Sales and operating profit
declined $4 million and $2 million, respectively, compared to the second quarter
of 2002. The decline in sales was primarily the result of continued lower levels
of demand for commercial ceiling products. Reflecting those conditions, second
quarter 2003 net sales for USG's domestic ceilings business, USG Interiors,
declined by $3 million while net sales for USG International were down $2
million, compared to the second quarter of 2002. Sales at the ceilings division
of CGC Inc. increased by $1 million in the quarter.
USG Interiors reported an operating profit of $7 million compared with
$11 million in the second quarter of 2002. The decline in profitability was
largely due to lower shipments, an increase in the cost of steel and higher
energy costs. While those cost increases have been partiallyoffset by higher
selling prices and improved operating efficiencies, margins remain under
pressure.
USG International reported an operating profit of $1 million, compared
to an operating loss of $2 million in last year's second quarter. Despite lower
sales in the quarter, profitability improved due to steps the company took to
downsize its European ceilings business in the fourth
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USG CORPORATION REPORTS SECOND QUARTER RESULTS/5
quarter of last year. The ceilings division of CGC Inc. reported an operating
profit of $1 million compared to $2 million in last year's second quarter.
Increased manufacturing costs more than offset the benefit of the stronger
Canadian dollar.
BUILDING PRODUCTS DISTRIBUTION
L&W Supply, USG's building products distribution business, reported
second quarter 2003 net sales of $325 million and operating profit of $16
million. Sales and operating profit increased $19 million and $3 million,
respectively, over the second quarter of 2002. The higher sales and profit
primarily reflect increased shipments of gypsum wallboard, improved operating
efficiencies and increased sales of complementary building products, primarily
drywall metal, joint treatment, ceiling products and roofing. L&W's wallboard
shipments set a quarterly record for the company.
L&W operates 183 locations in the U.S. that distribute a variety of
gypsum and ceilings products, as well as related building materials.
OTHER CONSOLIDATED INFORMATION
Second quarter 2003 selling and administrative expenses of $81 million
increased by $1 million versus the second quarter of 2002. Selling and
administrative expenses as a percent of net sales were 9 percent, the same level
as in last year's second quarter.
Interest expense of $2 million was incurred in the second quarter of
2003, the same level as the same period a year ago. 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
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USG CORPORATION REPORTS SECOND QUARTER RESULTS/6
this debt is not accrued or recorded. Contractual interest expense not accrued
or recorded on pre-petition debt totaled $18 million in the second quarter of
2003 and $36 million during the first half of the year.
USG incurred Chapter 11 reorganization expenses of $3 million in the
second quarter of 2003. This consisted of $5 million in legal and financial
advisory fees, partially offset by $2 million in interest income. Under SOP
90-7, interest income on cash held by entities in bankruptcy is offset against
Chapter 11 reorganization expenses.
As of June 30, 2003, USG had $788 million of cash, cash equivalents,
restricted cash and marketable securities on a consolidated basis, compared to
$768 million as of March 31, 2003. Capital expenditures in the second quarter of
2003 were $19 million compared with $23 million in the corresponding 2002
period. For the first six months of 2003, capital expenditures were $36 million
versus $38 million in the first six months of 2002.
In June, USG elected to terminate its $100 million debtor-in-possession
financing facility, which was used largely for the issuance of standby letters
of credit needed to support business operations. It was replaced with a
three-year, $100 million credit agreement with LaSalle Bank that is used
exclusively for supporting the issuance of standby letters of credit. As of June
30, 2003, $21 million in cash collateral was posted to back up outstanding
letters of credit, and this amount is reported as restricted cash on the
consolidated balance sheet. About $16 million of the cash collateral is expected
to be released during the third quarter of 2003.
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-
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related claims in a fair and equitable manner, to protect the long-term value of
USG's businesses, to maintain their leadership positions in their markets and to
protect the interests of USG's stakeholders. The Chapter 11 cases have been
consolidated for purposes of joint administration as In re: USG Corporation et
al. (case no. 01-2094).
On February 19, a federal judge in USG's case issued a Memorandum
Opinion and Order setting forth a procedure for estimating liability for
asbestos personal injury claims alleging cancer. Pursuant to the Order, on March
21, 2003, the Debtors submitted 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. At this time, the court has not issued an order regarding the Debtors'
proposals or set a date for a hearing on estimation of the Debtors' asbestos
personal injury claims.
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 Chapter 11
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 STATEMENT OF EARNINGS
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------------------- --------------------------------
2003 2002 2003 2002
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Net sales $ 914 $ 885 $ 1,776 $ 1,714
Cost of products sold 780 718 1,525 1,415
Selling & administrative expenses 81 80 161 162
Chapter 11 reorganization expenses 3 7 5 9
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Operating profit 50 80 85 128
Interest expense 2 2 3 3
Interest income (1) (1) (2) (2)
Other income, net (5) (2) (5) (1)
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Earnings before income taxes and
cumulative effect of accounting change 54 81 89 128
Income taxes 23 33 36 54
-------------- -------------- -------------- --------------
Earnings before cumulative effect
of accounting change 31 48 53 74
-------------- -------------- -------------- --------------
Cumulative effect of accounting
change, net of tax - - (16) (96)
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Net earnings (loss) 31 48 37 (22)
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EARNINGS (LOSS) PER COMMON SHARE:
Basic and diluted before cumulative effect
of accounting change 0.73 1.11 1.24 1.71
Cumulative effect of accounting change - - (0.37) (2.22)
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Basic and diluted * 0.73 1.11 0.86 (0.52)
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OTHER INFORMATION:
Depreciation, depletion and amortization 27 25 52 51
Capital expenditures 19 23 36 38
Dividends paid per common share - - - -
Average common shares 43,045,854 43,250,655 43,097,190 43,309,735
Average diluted common shares 43,045,854 43,250,655 43,097,190 43,309,735
* The sum of the per-share components may not be the same as the total.
USG CORPORATION
CORE BUSINESS RESULTS
(DOLLARS IN MILLIONS)
(UNAUDITED)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------------- -------------------------------
2003 2002 2003 2002
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NET SALES:
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NORTH AMERICAN GYPSUM:
U.S. Gypsum Company $ 512 $ 503 $ 1,008 $ 986
CGC Inc. (gypsum) 62 56 119 106
Other subsidiaries* 35 34 63 64
Eliminations (43) (42) (82) (80)
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Total 566 551 1,108 1,076
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WORLDWIDE CEILINGS:
USG Interiors, Inc. 114 117 224 228
USG International 42 44 82 86
CGC Inc. (ceilings) 12 11 22 21
Eliminations (14) (14) (27) (29)
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Total 154 158 301 306
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BUILDING PRODUCTS DISTRIBUTION:
L&W Supply Corporation 325 306 620 581
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Eliminations (131) (130) (253) (249)
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Total USG Corporation 914 885 1,776 1,714
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OPERATING PROFIT (LOSS):
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NORTH AMERICAN GYPSUM:
U.S. Gypsum Company 36 68 66 114
CGC Inc. (gypsum) 7 7 12 13
Other subsidiaries* 4 6 7 12
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Total 47 81 85 139
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WORLDWIDE CEILINGS:
USG Interiors, Inc. 7 11 13 18
USG International 1 (2) 2 (5)
CGC Inc. (ceilings) 1 2 2 3
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Total 9 11 17 16
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BUILDING PRODUCTS DISTRIBUTION:
L&W Supply Corporation 16 13 24 20
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Corporate (18) (17) (36) (37)
Chapter 11 reorganization expenses (3) (7) (5) (9)
Eliminations (1) (1) - (1)
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Total USG Corporation 50 80 85 128
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*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 SHEET
(DOLLARS IN MILLIONS)
(UNAUDITED)
AS OF AS OF
JUNE 30, DECEMBER 31,
2003 2002
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ASSETS
Current Assets:
Cash and cash equivalents $ 529 $ 649
Short-term marketable securities 66 50
Receivables (net of reserves - $17 and $17) 369 284
Inventories 287 270
Income taxes receivable 11 14
Deferred income taxes 51 49
Restricted cash 21 -
Other current assets 76 77
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Total current assets 1,410 1,393
Long-term marketable securities 172 131
Property, plant and equipment (net of accumulated
depreciation and depletion - $761 and $701) 1,794 1,788
Deferred income taxes 190 199
Other assets 109 106
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TOTAL ASSETS 3,675 3,617
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 200 170
Accrued expenses 189 243
Income taxes payable 27 25
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Total current liabilities 416 438
Long-term debt 2 2
Other liabilities 406 370
Liabilities subject to compromise 2,255 2,272
Stockholders' Equity:
Preferred stock - -
Common stock 5 5
Treasury stock (258) (257)
Capital received in excess of par value 414 412
Accumulated other comprehensive loss (9) (32)
Retained earnings 444 407
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Total stockholders' equity 596 535
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 3,675 3,617
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