EXHIBIT 99.1
Media Inquires: (312) 606-4356
Investor Relations: (312) 606-4125
USG CORPORATION REPORTS FOURTH QUARTER 2003 NET SALES OF
$927 MILLION AND NET EARNINGS OF $46 MILLION;
NET EARNINGS FOR THE YEAR WERE $122 MILLION
- Net sales increased 9% for the quarter and 6% for the year
- Gypsum and Distribution units achieved record product shipments
- Higher energy and other costs hurt operating margins
CHICAGO, February 2, 2004 -- USG Corporation (NYSE:USG) today reported
fourth quarter 2003 net sales of $927 million and net earnings of $46
million. This compared with net sales and net earnings of $851 million and
$21 million, respectively, in the fourth quarter of 2002. Diluted earnings
per share for the fourth quarter of 2003 were $1.07, compared with $0.49 in
the fourth quarter of 2002.
Net sales and net earnings for the year 2003 were $3,666 million and
$122 million, respectively. Diluted earnings per share for the year 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."
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USG CORPORATION REPORTS FOURTH QUARTER RESULTS/2
Net sales and net earnings for 2002 were $3,468 million and $43
million, respectively. Diluted earnings per share for 2002 totaled $1.00.
Net earnings in 2002 included a non-cash, non-tax-deductible charge of $96
million, or $2.22 per share, related to the adoption of SFAS No. 142,
"Goodwill and Other Intangible Assets."
Earnings before the cumulative effect of these accounting changes were
$138 million in 2003 and $139 million in 2002. Diluted earnings per share
before these changes were $3.19 and $3.22 for 2003 and 2002, respectively.
"USG's businesses are healthy and profitable," said USG Corporation
Chairman, President and CEO, William C. Foote. Foote continued, "One of our
primary goals is to build and further strengthen these businesses, ensuring
that they are well-positioned for continued success when we emerge from our
asbestos-related Chapter 11 reorganization. Our results demonstrate that we
are making solid progress toward that goal."
USG's gypsum business shipped record volumes of USG SHEETROCK(R) Brand
gypsum wallboard and joint compounds, as well as DUROCK(R) Brand cement
board. Investments in recent years that added new, low-cost manufacturing
capacity enabled the company to satisfy strong market demand for those
products. The domestic ceilings business recorded weaker results in 2003
due to low industry demand and higher costs for energy and steel. However,
new marketing and distribution policies are being effectively implemented
and are expected to help improve profitability. USG also continued to
invest in its distribution business, which achieved growth in both revenue
and operating profit and expanded its presence in several markets.
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USG CORPORATION REPORTS FOURTH QUARTER RESULTS/3
"While our businesses have grown and become stronger, higher costs have
been reducing profit margins," stated Foote. "Our plans in 2004 will have a
continued focus on improving operating margins while pursuing select growth
opportunities. We will emphasize outstanding customer service, value-added
products and cost improvements in the areas of energy, production,
distribution, employee benefits and material sourcing. We have already
begun implementing a number of initiatives in these areas and will see
benefits beginning this year."
CORE BUSINESS RESULTS
NORTH AMERICAN GYPSUM
USG's North American Gypsum business recorded net sales of $591 million
and an operating profit of $64 million in the fourth quarter. Net sales
increased by 13 percent compared to the fourth quarter of 2002, while
operating profit increased by 8 percent. The increase in sales and profits
came from higher realized prices for USG SHEETROCK Brand gypsum wallboard
and record fourth quarter shipments of wallboard and other products.
United States Gypsum Company had net sales of $528 million and
operating profit of $48 million in the fourth quarter. Compared to the
fourth quarter of 2002, net sales increased by 11 percent and operating
profit rose by 2 percent.
Strong demand from new housing and residential remodeling helped U.S.
Gypsum achieve shipment records in the fourth quarter and for the entire
year. Wallboard shipments in the fourth quarter totaled 2.7 billion square
feet, 12 percent higher than shipments in the fourth quarter of 2002. U.S.
Gypsum's wallboard shipments for all of 2003 were 10.4 billion square feet,
a record volume that was 3 percent higher than 2002 shipments.
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USG CORPORATION REPORTS FOURTH QUARTER RESULTS/4
U.S. Gypsum's nationwide average realized price of wallboard was
$106.01 per thousand square feet during the fourth quarter. This is 3
percent higher than the same period a year ago and 4 percent higher than in
the preceding quarter.
U.S. Gypsum's fourth quarter and 12 months 2003 operating profit
margins were lower than in the same periods in 2002. Operating profit
margins declined primarily due to higher costs for energy, information
technology and employee benefits, as well as severance costs associated
with a salaried workforce reduction in the fourth quarter of 2003. The
workforce reduction, combined with cost savings from employee benefit
modifications and new operating efficiency programs, will help to partially
mitigate continuing cost pressures in 2004.
The gypsum division of Canada-based CGC Inc. reported fourth quarter
2003 net sales of $68 million, an increase of 24 percent over the same
period a year ago. Operating profit was $10 million, an increase of $2
million compared with last year's fourth quarter results. The increases in
sales and profits were favorably impacted by a stronger Canadian dollar as
well as stronger SHEETROCK Brand gypsum wallboard and joint compound
volumes and prices.
WORLDWIDE CEILINGS
USG's Worldwide Ceilings business reported fourth quarter 2003 net
sales of $149 million, an increase of 5 percent from the fourth quarter of
2002. The business had an operating profit of $10 million, compared with an
operating loss of $2 million in last year's fourth quarter. Results in the
fourth quarter of 2002 included an $11 million charge for a plant closure
and other activities designed to make USG International's European ceilings
business more profitable.
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USG CORPORATION REPORTS FOURTH QUARTER RESULTS/5
USG Interiors' operating profit for the fourth quarter was $8 million,
an increase of $2 million compared to the fourth quarter of 2002. This
increase was principally due to improved pricing on ceiling tile products
and increased shipments of ceiling tile and grid in the quarter. For the
year, operating profit margins declined and are likely to remain under
pressure due to weak demand for commercial ceiling products and increases
in the cost of steel, energy and employee benefits. To help improve
profitability, USG Interiors is continuing to implement a margin
improvement plan that includes changes to its marketing and distribution
policies and a continued focus on operating efficiencies.
USG International had break-even results in the fourth quarter of 2003,
compared to a loss of $9 million for the same period a year ago when
results included the aforementioned $11 million charge. The ceilings
division of Canada-based CGC had a $2 million profit, compared to $1
million in the fourth quarter of 2002.
BUILDING PRODUCTS DISTRIBUTION
L&W Supply, USG's building products distribution subsidiary, reported
fourth quarter 2003 net sales of $334 million and operating profit of $12
million. Sales increased $32 million, while operating profit declined $1
million, compared to the fourth quarter of 2002.
L&W's higher sales reflect record fourth quarter shipments of gypsum
wallboard, higher selling prices for wallboard and increased sales of
complementary building products such as drywall metal, joint compound,
roofing and ceiling products. Operating profit declined primarily due to
the impact of higher gypsum wallboard and employee benefit costs.
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USG CORPORATION REPORTS FOURTH QUARTER RESULTS/6
OTHER CONSOLIDATED INFORMATION
Fourth quarter 2003 selling and administrative expenses totaled $85
million, an increase of $11 million versus the fourth quarter last year.
This increase was primarily due to higher employee and retiree benefit
costs, salaries, severance related to a salaried workforce reduction
program and expenses for a Key Employee Retention Program approved by the
bankruptcy court. For the year, selling and administrative expenses totaled
$324 million, representing 8.8 percent of net sales compared to 9.0 percent
of net sales in 2002.
Interest expense for the fourth quarter and 12 months of 2003 was $1
million and $6 million, respectively. For the same periods in 2002,
interest expense was $4 million and $8 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 is not accrued or recorded. Contractual
interest expense not accrued or recorded on pre-petition debt totaled $18
million and $71 million for the fourth quarter and 12 months of 2003,
respectively.
For the fourth quarter, USG's Chapter 11 reorganization expenses of $4
million reflected $6 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. In 2003, USG's Chapter 11
reorganization expenses totaled $11 million, reflecting $19 million of
legal and financial advisory fees, partially offset by $8 million of
bankruptcy-related interest income.
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USG CORPORATION REPORTS FOURTH QUARTER RESULTS/7
As of December 31, 2003, USG had $947 million of cash, cash
equivalents, restricted cash and marketable securities on a consolidated
basis, up from $830 million as of December 31, 2002, and $901 million on
September 30, 2003.
Capital expenditures for the fourth quarter and 12 months of 2003 were
$50 million and $111 million, respectively. Capital expenditures for the
same periods in 2002 were $36 million and $100 million, respectively.
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 January 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.
USG's bankruptcy cases were assigned to Judge Alfred M. Wolin of the
United States District Court of New Jersey. Judge Wolin is handling the
asbestos personal injury liability issues in USG's cases, and all other
issues have been assigned to a bankruptcy judge.
In November 2003, USG and the Official Committee of Unsecured Creditors
in USG's bankruptcy cases filed a motion to remove Judge Wolin from
presiding over USG's cases. Similar motions for removal were brought by
certain creditors in other asbestos-related bankruptcy cases assigned to
Judge Wolin. In November 2003, Judge Wolin issued an order staying
proceedings in USG's bankruptcy cases as well as other asbestos-related
bankruptcies assigned to him pending resolution of the motions. This stay
order applies only to proceedings relating to asbestos personal injury
claims and does not apply to matters that are pending before the bankruptcy
judge assigned to USG's cases.
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USG CORPORATION REPORTS FOURTH QUARTER RESULTS/8
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 www.usg.com.
# # #
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 TWELVE MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
-------------------------------- --------------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Net sales $ 927 $ 851 $ 3,666 $ 3,468
Cost of products sold 780 720 3,121 2,884
Selling & administrative expenses 85 74 324 312
Chapter 11 reorganization expenses 4 2 11 14
------------ ------------ ------------ ------------
Operating profit 58 55 210 258
Interest expense 1 4 6 8
Interest income (1) (1) (4) (4)
Other income, net (4) (1) (9) (2)
------------ ------------ ------------ ------------
Earnings before income taxes and
cumulative effect of accounting change 62 53 217 256
Income taxes 16 32 79 117
------------ ------------ ------------ ------------
Earnings before cumulative effect
of accounting change 46 21 138 139
------------ ------------ ------------ ------------
Cumulative effect of accounting
change, net of tax - - (16) (96)
------------ ------------ ------------ ------------
Net earnings 46 21 122 43
============ ============ ============ ============
EARNINGS (LOSS) PER COMMON SHARE:
Basic and diluted before cumulative effect
of accounting change 1.07 0.49 3.19 3.22
Cumulative effect of accounting change - - (0.37) (2.22)
------------ ------------ ------------ ------------
Basic and diluted 1.07 0.49 2.82 1.00
============ ============ ============ ============
OTHER INFORMATION:
Depreciation, depletion and amortization 32 29 112 106
Capital expenditures 50 36 111 100
Dividends paid per common share - - - -
Average common shares 43,049,917 43,247,516 43,075,361 43,282,258
Average diluted common shares 43,050,931 43,247,516 43,075,517 43,282,258
USG CORPORATION
CORE BUSINESS RESULTS
(DOLLARS IN MILLIONS)
(UNAUDITED)
THREE MONTHS TWELVE MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
----------------------------- -----------------------------
2003 2002 2003 2002
-------- -------- -------- --------
NET SALES:
NORTH AMERICAN GYPSUM:
U.S. Gypsum Company $ 528 $ 474 $ 2,076 $ 1,962
CGC Inc. (gypsum) 68 55 256 217
Other subsidiaries* 39 37 141 137
Eliminations (44) (43) (174) (165)
-------- -------- -------- --------
Total 591 523 2,299 2,151
-------- -------- -------- --------
WORLDWIDE CEILINGS:
USG Interiors, Inc. 109 102 446 450
USG International 41 44 168 176
CGC Inc. (ceilings) 12 10 45 40
Eliminations (13) (14) (52) (56)
-------- -------- -------- --------
Total 149 142 607 610
-------- -------- -------- --------
BUILDING PRODUCTS DISTRIBUTION:
L&W Supply Corporation 334 302 1,295 1,200
-------- -------- -------- --------
Eliminations (147) (116) (535) (493)
-------- -------- -------- --------
Total USG Corporation 927 851 3,666 3,468
======== ======== ======== ========
OPERATING PROFIT (LOSS):
NORTH AMERICAN GYPSUM:
U.S. Gypsum Company 48 47 157 211
CGC Inc. (gypsum) 10 8 33 28
Other subsidiaries* 6 4 19 22
-------- -------- -------- --------
Total 64 59 209 261
-------- -------- -------- --------
WORLDWIDE CEILINGS:
USG Interiors, Inc. 8 6 31 37
USG International - (9) 2 (13)
CGC Inc. (ceilings) 2 1 6 5
-------- -------- -------- --------
Total 10 (2) 39 29
-------- -------- -------- --------
BUILDING PRODUCTS DISTRIBUTION:
L&W Supply Corporation 12 13 53 51
-------- -------- -------- --------
Corporate (21) (17) (77) (71)
Chapter 11 reorganization expenses (4) (2) (11) (14)
Eliminations (3) 4 (3) 2
-------- -------- -------- --------
Total USG Corporation 58 55 210 258
======== ======== ======== ========
*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
DECEMBER 31, DECEMBER 31,
2003 2002
--------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 700 $ 649
Short-term marketable securities 64 50
Restricted cash 7 -
Receivables (net of reserves - $15 and $17) 321 284
Inventories 280 270
Income taxes receivable 26 14
Deferred income taxes 43 33
Other current assets 57 77
--------- ---------
Total current assets 1,498 1,377
Long-term marketable securities 176 131
Property, plant and equipment (net of accumulated
depreciation and depletion - $816 and $701) 1,818 1,788
Deferred income taxes 178 234
Goodwill 39 30
Other assets 90 76
--------- ---------
TOTAL ASSETS 3,799 3,636
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 202 170
Accrued expenses 206 243
Current portion of long-term debt 1 -
Income taxes payable 5 25
--------- ---------
Total current liabilities 414 438
Long-term debt 1 2
Deferred income taxes 23 19
Other liabilities 429 370
Liabilities subject to compromise 2,243 2,272
Commitments and contingencies - -
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 (1) (32)
Retained earnings 529 407
--------- ---------
Total stockholders' equity 689 535
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 3,799 3,636
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