EXHIBIT 99.1
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USG CORPORATION REPORTS THIRD QUARTER NET SALES OF
$963 MILLION AND NET EARNINGS OF $39 MILLION
- Net sales increased 7% compared to the third quarter last year
- Net earnings declined by $5 million primarily due to higher energy costs
- Gypsum and Distribution units achieved record shipments during quarter
CHICAGO, October 24, 2003--USG Corporation (NYSE:USG), a leading building
products company, today reported third quarter 2003 net sales of $963 million
and net earnings of $39 million. Net sales increased $60 million while net
earnings declined $5 million compared with the third quarter last year. Diluted
earnings per share for the third quarter of 2003 were $0.89, compared with $1.03
a year ago.
"We achieved solid revenue growth during the quarter amid market conditions
that were mixed," commented William C. Foote, USG Corporation Chairman, CEO and
President. "Sales growth from record product shipments in USG's two largest
businesses, North American gypsum and building products distribution, more than
offset weakness in our worldwide ceilings business caused by declining
commercial construction."
Commenting on profitability, Foote explained, "We continue to grow and
strengthen our company, but we are facing many ongoing cost pressures, such as
higher raw material and energy prices. We have been working hard this year to
offset these rising operating costs and
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USG CORPORATION REPORTS THIRD QUARTER RESULTS/2
mitigate their impact on earnings. In 2003, we further improved operating
efficiencies, made better use of working capital and reduced administrative
expenses. In addition, we added capacity in our growing Sheetrock(R) Brand joint
compound and DUROCK(R) Brand cement board product lines, and continued to invest
in our building products distribution business. Additional initiatives are
underway."
Net sales for the first nine months of 2003 were $2,739 million, versus net
sales of $2,617 million for the same period in 2002. Net earnings for the first
nine months were $76 million compared to $22 million for that period last year.
Diluted earnings per share for the first nine months of 2003 were $1.75,
compared to $0.51 for the first nine months of 2002.
Results in both nine-month periods included charges related to the adoption
of new accounting standards. Net earnings for the first nine months of 2003
include a noncash, after-tax charge of $16 million related to the adoption of
Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting for
Asset Retirement Obligations." Net earnings in the first nine months of 2002
included 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 $92 million for the first
nine months of 2003 and $118 million for the same period last year. Diluted
earnings per share on that basis were $2.13 and $2.73 for the first nine months
of 2003 and 2002, respectively.
Earlier this year, the Judiciary Committee of the United States Senate
approved the Fairness in Asbestos Injury Resolution Act of 2003, a bill intended
to establish a nationally administered trust fund to compensate asbestos
personal injury claimants. Since that time, various provisions
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USG CORPORATION REPORTS THIRD QUARTER RESULTS/3
of the bill have been the subject of intense discussions. USG has been actively
and directly involved in these discussions and remains very supportive of
current efforts to pass asbestos litigation reform legislation.
Foote praised those involved in developing a bipartisan, legislative
solution to the asbestos litigation crisis, saying, "The tremendous amount of
time and effort devoted to this legislative initiative by Senators Frist, Hatch,
Daschle, Leahy and many others in Congress, together with representatives of
labor and the business community, speaks to the seriousness of the asbestos
crisis. For the sake of those suffering from asbestos-related diseases, as well
as retirees, employees, creditors and shareholders who are being harmed by the
current system, we must keep working toward an equitable solution to this
crisis."
CORE BUSINESS RESULTS
NORTH AMERICAN GYPSUM
USG's North American gypsum business recorded net sales of $600 million and
operating profit of $60 million in the third quarter. This compares with net
sales and operating profit of $552 million and $63 million, respectively, in the
third quarter last year.
United States Gypsum Company ("U.S. Gypsum") realized third quarter 2003
net sales of $540 million and operating profit of $43 million. These results
compare with net sales and operating profit of $502 million and $50 million,
respectively, in the third quarter last year. The largest factor contributing to
the decline in profitability was a lower profit margin on SHEETROCK Brand gypsum
wallboard due to increased energy costs.
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USG CORPORATION REPORTS THIRD QUARTER RESULTS/4
U.S. Gypsum shipped 2.7 billion square feet of SHEETROCK Brand gypsum
wallboard in the third quarter, a record for any quarter. Wallboard shipments
for the third quarter of 2003 were 4 percent higher than the same period a year
ago. For the first nine months of this year, shipments totaled 7.8 billion
square feet, up 1 percent from the same period last year.
U.S. Gypsum's nationwide average realized price of SHEETROCK Brand gypsum
wallboard was $101.83 per thousand square feet during the third quarter,
compared to $101.03 in the third quarter last year and $100.47 in the second
quarter this year. There was modest price improvement late in the quarter
following a price increase.
Wallboard manufacturing costs were higher in the third quarter compared to
the same period last year, primarily due to increased energy costs. Market
prices for natural gas, a major source of energy for the company, were up over
50 percent in the third quarter of this year compared to the same period last
year. Increased production efficiencies at the company's wallboard plants offset
a portion of the cost increase. Higher energy and raw material costs also
reduced profit margins on U.S. Gypsum's complementary products.
The gypsum business of Canada-based CGC Inc. reported third quarter 2003
net sales of $69 million, which is $13 million higher than last year's third
quarter. Operating profit of $11 million increased from $7 million in last
year's third quarter. Most of the improvement in results was due to higher
shipments of SHEETROCK Brand gypsum wallboard products and a stronger Canadian
dollar.
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USG CORPORATION REPORTS THIRD QUARTER RESULTS/5
WORLDWIDE CEILINGS
USG's worldwide ceilings business recorded net sales of $157 million and
operating profit of $12 million in the third quarter. This compared with net
sales and operating profit of $162 million and $15 million, respectively, in the
third quarter of 2002. Most of the decline in sales and profit was attributable
to USG's domestic ceilings subsidiary, USG Interiors.
USG Interiors had operating profit of $10 million in the third quarter,
compared with $13 million for the same period last year. Higher energy and steel
costs, combined with lower shipments of ceiling grid and tile, were the primary
reasons for the decrease in operating profit. These factors more than offset the
benefit of improved pricing the company achieved in most of its ceiling product
lines.
USG International had break-even results in the third quarter of 2003,
compared to a profit of $1 million for the same period a year ago. Third quarter
2003 results included a $1 million writedown related to a previously closed
ceiling tile plant in Aubange, Belgium. The ceilings business of Canada-based
CGC contributed $2 million in operating profit, $1 million higher than last
year.
BUILDING PRODUCTS DISTRIBUTION
L&W Supply Corporation ("L&W"), USG's building products distribution
subsidiary, reported third quarter 2003 net sales of $341 million, compared to
$317 million in the same period a year ago. The increase in revenues was due to
record shipments of gypsum wallboard and complementary building products,
primarily drywall metal, joint treatment and roofing.
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USG CORPORATION REPORTS THIRD QUARTER RESULTS/6
Operating profit for L&W was $17 million in the quarter versus $18 million
in the third quarter of 2002. The decline was mainly due to higher product
costs. As of September 30, 2003, L&W operated 185 locations in the U.S.,
distributing a variety of gypsum and ceiling products, as well as related
building materials.
OTHER CONSOLIDATED INFORMATION
Third quarter 2003 selling and administrative expenses totaled $78 million,
an increase of $2 million versus the third quarter of 2002. Selling and
administrative expenses were 8 percent of net sales in the third quarter, the
same level as in the third quarter of 2002. Selling and administrative expenses
totaled $239 million for the first nine months of 2003 compared to $238 million
for that period last year. These amounts were 9 percent of net sales in both
nine-month periods.
Interest expense of $2 million and $5 million was incurred in the third
quarter and first nine months of 2003, respectively. This compares with interest
expense of $1 million and $4 million in the same periods last year. 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 is not accrued or recorded. Contractual interest expense not accrued
or recorded on pre-petition debt totaled $17 million and $53 million in the
third quarter and first nine months of 2003, respectively.
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USG CORPORATION REPORTS THIRD QUARTER RESULTS/7
For the third quarter, USG's Chapter 11 reorganization expenses of $2
million reflected $4 million of legal and financial advisory fees, partially
offset by $2 million of interest income earned by the USG companies in Chapter
11. Under SOP 90-7, interest income earned on cash accumulated as a result of
the Chapter 11 filing is recorded as an offset to Chapter 11 reorganization
expenses.
As of September 30, 2003, USG had $901 million of cash, cash equivalents,
restricted cash and marketable securities on a consolidated basis, up from $788
million as of June 30, 2003, and $830 million as of December 31, 2002. Capital
expenditures for the third quarter and first nine months of 2003 were $25
million and $61 million, respectively. Expenditures for the same periods last
year were $26 million and $64 million, respectively.
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. For more information about USG
Corporation, visit the USG home page at http://www.usg.com.
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USG CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(dollars in millions except per share data)
(Unaudited)
<Table>
<Caption>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------------------- ---------------------------------
2003 2002 2003 2002
--------------- -------------- -------------- --------------
Net sales $ 963 $ 903 $ 2,739 $ 2,617
Cost of products sold 816 749 2,341 2,164
Selling & administrative expenses 78 76 239 238
Chapter 11 reorganization expenses 2 3 7 12
--------------- -------------- -------------- --------------
Operating profit 67 75 152 203
Interest expense 2 1 5 4
Interest income (1) (1) (3) (3)
Other income, net - - (5) (1)
--------------- -------------- -------------- --------------
Earnings before income taxes and
cumulative effect of accounting change 66 75 155 203
Income taxes 27 31 63 85
--------------- -------------- -------------- --------------
Earnings before cumulative effect
of accounting change 39 44 92 118
--------------- -------------- -------------- --------------
Cumulative effect of accounting
change, net of tax - - (16) (96)
--------------- -------------- -------------- --------------
Net earnings 39 44 76 22
=============== ============== ============== ==============
EARNINGS (LOSS) PER COMMON SHARE:
Basic and diluted before cumulative effect
of accounting change 0.89 1.03 2.13 2.73
Cumulative effect of accounting change - - (0.37) (2.22)
--------------- -------------- -------------- --------------
Basic and diluted * 0.89 1.03 1.75 0.51
=============== ============== ============== ==============
OTHER INFORMATION:
Depreciation, depletion and amortization 28 26 80 77
Capital expenditures 25 26 61 64
Dividends paid per common share - - - -
Average common shares 43,053,106 43,251,295 43,082,925 43,292,083
Average diluted common shares 43,054,141 43,251,295 43,082,925 43,292,083
</Table>
* The sum of the per-share components may not be the same as the total.
USG CORPORATION
CORE BUSINESS RESULTS
(dollars in millions)
(Unaudited)
<Table>
<Caption>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------------- -------------------------------
2003 2002 2003 2002
------------- ------------- -------------- -------------
NET SALES:
NORTH AMERICAN GYPSUM:
U.S. Gypsum Company $ 540 $ 502 $ 1,548 $ 1,488
CGC Inc. (gypsum) 69 56 188 162
Other subsidiaries* 39 36 102 100
Eliminations (48) (42) (130) (122)
------------- ------------- -------------- -------------
Total 600 552 1,708 1,628
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WORLDWIDE CEILINGS:
USG Interiors, Inc. 113 120 337 348
USG International 45 46 127 132
CGC Inc. (ceilings) 11 9 33 30
Eliminations (12) (13) (39) (42)
------------- ------------- -------------- -------------
Total 157 162 458 468
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BUILDING PRODUCTS DISTRIBUTION:
L&W Supply Corporation 341 317 961 898
------------- ------------- -------------- -------------
Eliminations (135) (128) (388) (377)
------------- ------------- -------------- -------------
Total USG Corporation 963 903 2,739 2,617
============= ============= ============== =============
OPERATING PROFIT (LOSS):
NORTH AMERICAN GYPSUM:
U.S. Gypsum Company 43 50 109 164
CGC Inc. (gypsum) 11 7 23 20
Other subsidiaries* 6 6 13 18
------------- ------------- -------------- -------------
Total 60 63 145 202
------------- ------------- -------------- -------------
WORLDWIDE CEILINGS:
USG Interiors, Inc. 10 13 23 31
USG International - 1 2 (4)
CGC Inc. (ceilings) 2 1 4 4
------------- ------------- -------------- -------------
Total 12 15 29 31
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BUILDING PRODUCTS DISTRIBUTION:
L&W Supply Corporation 17 18 41 38
------------- ------------- -------------- -------------
Corporate (20) (17) (56) (54)
Chapter 11 reorganization expenses (2) (3) (7) (12)
Eliminations - (1) - (2)
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Total USG Corporation 67 75 152 203
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</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 SHEET
(dollars in millions)
(Unaudited)
<Table>
<Caption>
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
2003 2002
-------------- --------------
ASSETS
Current Assets:
Cash and cash equivalents $ 660 $ 649
Short-term marketable securities 64 50
Restricted cash 6 -
Receivables (net of reserves - $14 and $17) 370 284
Inventories 281 270
Income taxes receivable 18 14
Deferred income taxes 56 49
Other current assets 60 77
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Total current assets 1,515 1,393
Long-term marketable securities 171 131
Property, plant and equipment (net of accumulated
depreciation and depletion - $784 and $701) 1,790 1,788
Deferred income taxes 168 199
Other assets 109 106
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TOTAL ASSETS 3,753 3,617
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 228 170
Accrued expenses 204 243
Income taxes payable 7 25
-------------- --------------
Total current liabilities 439 438
Long-term debt 2 2
Other liabilities 440 370
Liabilities subject to compromise 2,252 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 (24) (32)
Retained earnings 483 407
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Total stockholders' equity 620 535
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 3,753 3,617
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</Table>