USG Corporation Reports First Quarter Net Sales of $826 Million and Net Earnings of $11 Million

Results Reflect Lower Prices for Gypsum Wallboard and Higher Energy Costs



Apr 25, 2001, 01:00 ET from USG Corporation

    CHICAGO, April 25 /PRNewswire/ -- USG Corporation (NYSE:  USG) today
 reported first quarter results in line with expectations outlined by the
 company in March and earlier this month.  The Corporation reported net sales
 of $826 million and net earnings of $11 million, declines of 16 percent and
 90 percent, respectively, from the year-before.  Diluted earnings per share
 for the first quarter of 2001 were $0.25 compared with $2.18 in the same
 period a year ago.
     "Our first quarter results reflect the fact that the business environment
 for our largest unit, United States Gypsum Company, remains very challenging,"
 commented Chairman, President and CEO William C. Foote.  "Continuing increases
 in wallboard industry capacity, coupled with a further decline in demand,
 depressed pricing during the quarter.  Significantly higher energy costs,
 especially natural gas prices, and harsh winter weather also held down
 results."  Several of these factors also negatively affected results in USG's
 second and third largest operating subsidiaries, L&W Supply Corporation and
 USG Interiors, Inc., respectively.
     "The Corporation continues to extend its industry leadership despite the
 soft market conditions and implement its plans to create stronger, more
 valuable businesses," continued Foote.  "Evidence of our success includes
 record first quarter shipments of wallboard and related gypsum products,
 strengthened customer relationships, market share gains in wallboard and other
 product lines, industry leading capacity utilization and improved
 manufacturing efficiencies."
 
     North American Gypsum
     USG's North American gypsum business recorded net sales of $483 million
 and operating profit of $15 million, decreases of 21 percent and 90 percent,
 respectively, from the first quarter of 2000.  The primary reasons for the
 lower results were lower average realized prices for Sheetrock brand gypsum
 wallboard and higher production costs due to increased energy costs.  These
 factors more than offset record first quarter volumes for Sheetrock brand
 wallboard and joint compounds and Durock brand cement board in the U.S.
     U.S. Gypsum Company realized first quarter 2001 net sales of $442 million
 and operating profit of $5 million, decreases of 22 percent and 96 percent,
 respectively, vs. the same period in 2000.  Last year's first quarter results
 included $22 million in asbestos costs while there was not a charge for
 asbestos in this year's first quarter.  Lower pricing for the company's gypsum
 wallboard was the primary factor adversely affecting profitability.  U.S.
 Gypsum's nationwide average realized price of wallboard was $92.31 per
 thousand square feet during the first quarter, 42 percent lower than a year
 ago.  The decline of $67.49 per thousand square feet compared to the first
 quarter of 2000 reduced operating profit by $154 million.  Market prices
 for gypsum wallboard have fallen dramatically as additional industry capacity
 has been added to the market, depressing capacity utilization rates.  The
 company estimates that the industry operated at approximately 78 percent of
 capacity during the first quarter, compared to 86 percent in the same period a
 year ago.  The trend of lower pricing continued throughout the quarter and
 U.S. Gypsum's average price in March was about $85 per thousand square feet.
     U.S. Gypsum shipments totaled 2.3 billion square feet, 5 percent above
 first quarter 2000 shipments and the highest first quarter volume in the
 company's history.  U.S. Gypsum's wallboard plants operated at 83 percent of
 capacity in the first quarter.
     The gypsum division of Canada-based CGC Inc. reported first quarter 2001
 net sales of $50 million and operating profit of $6 million.  Sales were
 unchanged while operating profit decreased 25 percent, compared to the first
 quarter of 2000.  Lower selling prices and higher energy costs for gypsum
 wallboard more than offset increased shipments of gypsum wallboard in Canada.
 
     Worldwide Ceilings
     USG's worldwide ceilings business reported first quarter 2001 net sales of
 $173 million, down 3 percent vs. the first quarter of 2000.  Most of the
 decrease in sales was attributable to lower international sales.  Operating
 profit of $9 million was down 47 percent vs. the first quarter last year,
 primarily due to the impact of higher energy costs on domestic operations.
     USG's domestic ceilings business, USG Interiors, had operating profit of
 $8 million compared with $15 million in the first quarter of 2000.  Operating
 profit of $1 million for the ceilings division of CGC Inc. was the same as
 last year's first quarter while USG International reported a breakeven level
 of operating profit, down from an operating profit of $1 million in last
 year's first quarter.
 
     Building Products Distribution
     L&W Supply, USG's building products distribution business, reported first
 quarter 2001 net sales of $286 million and operating profit of $15 million,
 declines of 20 percent and 44 percent, respectively, vs. the first quarter of
 2000.  First quarter results reflected fewer shipping days, severe weather in
 certain regions, a slight decline in demand and declining prices for gypsum
 wallboard compared to last year's first quarter.  L&W opened two centers and
 consolidated two others during the quarter.  L&W now operates 192 locations in
 the U.S. that distribute a variety of gypsum and ceilings products, as well as
 related building materials.
 
     Other Consolidated Information
     First quarter 2001 selling and administrative expenses decreased
 $16 million, or 19 percent, year-over-year, principally due to lower levels of
 expenses related to incentive compensation, marketing programs and
 compensation and benefits.  Selling and administrative expenses as a percent
 of net sales were 8.2 percent, below the level of 8.5 percent a year ago.
     Since the beginning of 2000, eight defendants in personal injury asbestos
 lawsuits have filed Chapter 11 bankruptcy cases; as a result, settlement
 payments and further asbestos litigation against them has been stayed.  In
 response, plaintiffs have substantially increased their settlement demands to
 remaining defendants, including U.S. Gypsum.
     This development, along with a decision by the company to contest, rather
 than settle, a greater number of cases believed by the company to be non-
 meritorious, has caused a sharp increase in the average settlement cost of
 cases settled during the latter part of the first quarter.  The resulting
 impact on the company's total asbestos payments is partially offset by the
 fewer numbers of cases being settled.  In the first quarter, U.S. Gypsum's
 total asbestos-related payments, net of insurance recoveries, were
 $52 million.
     During the first quarter, 13,000 new asbestos cases were filed against
 U.S. Gypsum, the same level as the average number of cases filed quarterly
 against the company in 2000.  USG has also continued working toward the
 passage of legislation that would reform the current process for resolving
 asbestos claims.
     USG Corporation is a Fortune 500 company with subsidiaries that are market
 leaders in their key product groups: gypsum wallboard, joint compound, cement
 board and related gypsum products; ceiling tile and grid; and building
 products distribution. For more information about USG Corporation, visit the
 USG home page at http://www.usg.com .
     This press release contains forward-looking statements related to
 management's expectations about future business conditions. Actual business
 conditions may differ significantly from management's expectations and
 accordingly affect the corporation's sales and profitability. Actual results
 may differ as a result of factors over which the corporation has no control,
 including economic activity, such as new housing construction, interest rates,
 currency exchange rates and consumer confidence; competitive activity such as
 price and product competition; asbestos litigation; and increases in raw
 material and energy costs. Additional information about the factors that
 affect the corporation's financial results is included in the corporation's
 SEC filings. The corporation assumes no obligation to update the forward-
 looking information contained in this release.
 
 
                                  USG CORPORATION
                         CONSOLIDATED STATEMENT OF EARNINGS
                    (dollars in millions except per-share data)
                                    (Unaudited)
 
                                                           Three Months
                                                          ended March 31,
                                                  2001                    2000
 
     Net sales                                    $826                    $989
 
     Cost of products sold                         726                     721
 
     Selling and administrative expenses            68                      84
 
     Operating profit                               32                     184
 
     Interest expense                               14                      12
 
     Interest income                                (1)                     (2)
 
     Other expense, net                              1                       1
 
     Earnings before income taxes                   18                     173
 
     Income taxes                                    7                      67
 
     Net earnings                                   11                     106
 
 
     Basic earnings per common share              0.25                    2.19
 
     Diluted earnings per common share            0.25                    2.18
 
 
     Other Information:
     Depreciation and depletion                     27                      25
 
     Capital expenditures                           29                     116
 
     Dividends paid per common share             0.025                    0.15
 
     Average common shares                  43,406,202              48,137,789
     Average diluted common shares          43,459,017              48,388,042
 
 
 
                                USG CORPORATION
                           CONSOLIDATED BALANCE SHEET
                             (dollars in millions)
                                  (Unaudited)
 
                                                       As of            As of
                                                      March 31,        Dec. 31,
                                                       2001              2000
     Assets
     Current Assets:
     Cash and cash equivalents                           35                70
     Receivables (net of reserves - $18 and $18)        350               305
     Inventories                                        267               271
     Income taxes receivable                             33                 -
     Deferred income taxes                              168               194
     Other current assets                                75                36
 
     Total current assets                               928               876
 
     Property, plant and equipment (net of
      reserves for depreciation and depletion
       - $489 and $470)                               1,826             1,830
     Deferred income taxes                              189               257
     Other assets                                       309               251
 
     Total Assets                                     3,252             3,214
 
 
     Liabilities and Stockholders' Equity
     Current Liabilities:
     Accounts payable                                   193               200
     Accrued expenses                                   260               280
     Taxes on income                                      -                19
     Notes payable                                        8                 6
     Current portion of long-term debt                  131               141
     Curent portion of asbestos reserve                 275               250
 
     Total current liabilities                          867               896
 
     Long-term debt                                     647               564
     Long-term asbestos reserve                         855               935
     Other liabilities                                  370               355
 
     Stockholders' Equity:
     Preferred stock                                      -                 -
     Common stock                                         5                 5
     Treasury stock                                    (256)             (256)
     Capital received in excess of par
      value                                             411               411
     Accumulated other comprehensive loss                (6)              (45)
 
 
                                  USG CORPORATION
                               CORE BUSINESS RESULTS
                               (dollars in millions)
                                    (Unaudited)
 
                                                Net Sales     Operating Profit
     Three Months Ended March 31,             2001     2000     2001     2000
 
     North American Gypsum:
     U.S. Gypsum Company                      $442     $567       $5     $141
     CGC Inc. (gypsum)                          50       50        6        8
     Other subsidiaries*                        24       24        4        5
     Eliminations                              (33)     (31)       -        -
     Total                                     483      610       15      154
 
     Worldwide Ceilings:
     USG Interiors, Inc.                       126      127        8       15
     USG International                          54       59        -        1
     CGC Inc. (ceilings)                        11       11        1        1
     Eliminations                              (18)     (19)       -        -
     Total                                     173      178        9       17
 
     Building Products Distribution:
     L&W Supply Corporation                    286      356       15       27
 
     Corporate                                   -        -       (8)     (16)
     Eliminations                             (116)    (155)       1        2
     Total USG Corporation                     826      989       32      184
 
 
     *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.
 
 
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SOURCE USG Corporation
    CHICAGO, April 25 /PRNewswire/ -- USG Corporation (NYSE:  USG) today
 reported first quarter results in line with expectations outlined by the
 company in March and earlier this month.  The Corporation reported net sales
 of $826 million and net earnings of $11 million, declines of 16 percent and
 90 percent, respectively, from the year-before.  Diluted earnings per share
 for the first quarter of 2001 were $0.25 compared with $2.18 in the same
 period a year ago.
     "Our first quarter results reflect the fact that the business environment
 for our largest unit, United States Gypsum Company, remains very challenging,"
 commented Chairman, President and CEO William C. Foote.  "Continuing increases
 in wallboard industry capacity, coupled with a further decline in demand,
 depressed pricing during the quarter.  Significantly higher energy costs,
 especially natural gas prices, and harsh winter weather also held down
 results."  Several of these factors also negatively affected results in USG's
 second and third largest operating subsidiaries, L&W Supply Corporation and
 USG Interiors, Inc., respectively.
     "The Corporation continues to extend its industry leadership despite the
 soft market conditions and implement its plans to create stronger, more
 valuable businesses," continued Foote.  "Evidence of our success includes
 record first quarter shipments of wallboard and related gypsum products,
 strengthened customer relationships, market share gains in wallboard and other
 product lines, industry leading capacity utilization and improved
 manufacturing efficiencies."
 
     North American Gypsum
     USG's North American gypsum business recorded net sales of $483 million
 and operating profit of $15 million, decreases of 21 percent and 90 percent,
 respectively, from the first quarter of 2000.  The primary reasons for the
 lower results were lower average realized prices for Sheetrock brand gypsum
 wallboard and higher production costs due to increased energy costs.  These
 factors more than offset record first quarter volumes for Sheetrock brand
 wallboard and joint compounds and Durock brand cement board in the U.S.
     U.S. Gypsum Company realized first quarter 2001 net sales of $442 million
 and operating profit of $5 million, decreases of 22 percent and 96 percent,
 respectively, vs. the same period in 2000.  Last year's first quarter results
 included $22 million in asbestos costs while there was not a charge for
 asbestos in this year's first quarter.  Lower pricing for the company's gypsum
 wallboard was the primary factor adversely affecting profitability.  U.S.
 Gypsum's nationwide average realized price of wallboard was $92.31 per
 thousand square feet during the first quarter, 42 percent lower than a year
 ago.  The decline of $67.49 per thousand square feet compared to the first
 quarter of 2000 reduced operating profit by $154 million.  Market prices
 for gypsum wallboard have fallen dramatically as additional industry capacity
 has been added to the market, depressing capacity utilization rates.  The
 company estimates that the industry operated at approximately 78 percent of
 capacity during the first quarter, compared to 86 percent in the same period a
 year ago.  The trend of lower pricing continued throughout the quarter and
 U.S. Gypsum's average price in March was about $85 per thousand square feet.
     U.S. Gypsum shipments totaled 2.3 billion square feet, 5 percent above
 first quarter 2000 shipments and the highest first quarter volume in the
 company's history.  U.S. Gypsum's wallboard plants operated at 83 percent of
 capacity in the first quarter.
     The gypsum division of Canada-based CGC Inc. reported first quarter 2001
 net sales of $50 million and operating profit of $6 million.  Sales were
 unchanged while operating profit decreased 25 percent, compared to the first
 quarter of 2000.  Lower selling prices and higher energy costs for gypsum
 wallboard more than offset increased shipments of gypsum wallboard in Canada.
 
     Worldwide Ceilings
     USG's worldwide ceilings business reported first quarter 2001 net sales of
 $173 million, down 3 percent vs. the first quarter of 2000.  Most of the
 decrease in sales was attributable to lower international sales.  Operating
 profit of $9 million was down 47 percent vs. the first quarter last year,
 primarily due to the impact of higher energy costs on domestic operations.
     USG's domestic ceilings business, USG Interiors, had operating profit of
 $8 million compared with $15 million in the first quarter of 2000.  Operating
 profit of $1 million for the ceilings division of CGC Inc. was the same as
 last year's first quarter while USG International reported a breakeven level
 of operating profit, down from an operating profit of $1 million in last
 year's first quarter.
 
     Building Products Distribution
     L&W Supply, USG's building products distribution business, reported first
 quarter 2001 net sales of $286 million and operating profit of $15 million,
 declines of 20 percent and 44 percent, respectively, vs. the first quarter of
 2000.  First quarter results reflected fewer shipping days, severe weather in
 certain regions, a slight decline in demand and declining prices for gypsum
 wallboard compared to last year's first quarter.  L&W opened two centers and
 consolidated two others during the quarter.  L&W now operates 192 locations in
 the U.S. that distribute a variety of gypsum and ceilings products, as well as
 related building materials.
 
     Other Consolidated Information
     First quarter 2001 selling and administrative expenses decreased
 $16 million, or 19 percent, year-over-year, principally due to lower levels of
 expenses related to incentive compensation, marketing programs and
 compensation and benefits.  Selling and administrative expenses as a percent
 of net sales were 8.2 percent, below the level of 8.5 percent a year ago.
     Since the beginning of 2000, eight defendants in personal injury asbestos
 lawsuits have filed Chapter 11 bankruptcy cases; as a result, settlement
 payments and further asbestos litigation against them has been stayed.  In
 response, plaintiffs have substantially increased their settlement demands to
 remaining defendants, including U.S. Gypsum.
     This development, along with a decision by the company to contest, rather
 than settle, a greater number of cases believed by the company to be non-
 meritorious, has caused a sharp increase in the average settlement cost of
 cases settled during the latter part of the first quarter.  The resulting
 impact on the company's total asbestos payments is partially offset by the
 fewer numbers of cases being settled.  In the first quarter, U.S. Gypsum's
 total asbestos-related payments, net of insurance recoveries, were
 $52 million.
     During the first quarter, 13,000 new asbestos cases were filed against
 U.S. Gypsum, the same level as the average number of cases filed quarterly
 against the company in 2000.  USG has also continued working toward the
 passage of legislation that would reform the current process for resolving
 asbestos claims.
     USG Corporation is a Fortune 500 company with subsidiaries that are market
 leaders in their key product groups: gypsum wallboard, joint compound, cement
 board and related gypsum products; ceiling tile and grid; and building
 products distribution. For more information about USG Corporation, visit the
 USG home page at http://www.usg.com .
     This press release contains forward-looking statements related to
 management's expectations about future business conditions. Actual business
 conditions may differ significantly from management's expectations and
 accordingly affect the corporation's sales and profitability. Actual results
 may differ as a result of factors over which the corporation has no control,
 including economic activity, such as new housing construction, interest rates,
 currency exchange rates and consumer confidence; competitive activity such as
 price and product competition; asbestos litigation; and increases in raw
 material and energy costs. Additional information about the factors that
 affect the corporation's financial results is included in the corporation's
 SEC filings. The corporation assumes no obligation to update the forward-
 looking information contained in this release.
 
 
                                  USG CORPORATION
                         CONSOLIDATED STATEMENT OF EARNINGS
                    (dollars in millions except per-share data)
                                    (Unaudited)
 
                                                           Three Months
                                                          ended March 31,
                                                  2001                    2000
 
     Net sales                                    $826                    $989
 
     Cost of products sold                         726                     721
 
     Selling and administrative expenses            68                      84
 
     Operating profit                               32                     184
 
     Interest expense                               14                      12
 
     Interest income                                (1)                     (2)
 
     Other expense, net                              1                       1
 
     Earnings before income taxes                   18                     173
 
     Income taxes                                    7                      67
 
     Net earnings                                   11                     106
 
 
     Basic earnings per common share              0.25                    2.19
 
     Diluted earnings per common share            0.25                    2.18
 
 
     Other Information:
     Depreciation and depletion                     27                      25
 
     Capital expenditures                           29                     116
 
     Dividends paid per common share             0.025                    0.15
 
     Average common shares                  43,406,202              48,137,789
     Average diluted common shares          43,459,017              48,388,042
 
 
 
                                USG CORPORATION
                           CONSOLIDATED BALANCE SHEET
                             (dollars in millions)
                                  (Unaudited)
 
                                                       As of            As of
                                                      March 31,        Dec. 31,
                                                       2001              2000
     Assets
     Current Assets:
     Cash and cash equivalents                           35                70
     Receivables (net of reserves - $18 and $18)        350               305
     Inventories                                        267               271
     Income taxes receivable                             33                 -
     Deferred income taxes                              168               194
     Other current assets                                75                36
 
     Total current assets                               928               876
 
     Property, plant and equipment (net of
      reserves for depreciation and depletion
       - $489 and $470)                               1,826             1,830
     Deferred income taxes                              189               257
     Other assets                                       309               251
 
     Total Assets                                     3,252             3,214
 
 
     Liabilities and Stockholders' Equity
     Current Liabilities:
     Accounts payable                                   193               200
     Accrued expenses                                   260               280
     Taxes on income                                      -                19
     Notes payable                                        8                 6
     Current portion of long-term debt                  131               141
     Curent portion of asbestos reserve                 275               250
 
     Total current liabilities                          867               896
 
     Long-term debt                                     647               564
     Long-term asbestos reserve                         855               935
     Other liabilities                                  370               355
 
     Stockholders' Equity:
     Preferred stock                                      -                 -
     Common stock                                         5                 5
     Treasury stock                                    (256)             (256)
     Capital received in excess of par
      value                                             411               411
     Accumulated other comprehensive loss                (6)              (45)
 
 
                                  USG CORPORATION
                               CORE BUSINESS RESULTS
                               (dollars in millions)
                                    (Unaudited)
 
                                                Net Sales     Operating Profit
     Three Months Ended March 31,             2001     2000     2001     2000
 
     North American Gypsum:
     U.S. Gypsum Company                      $442     $567       $5     $141
     CGC Inc. (gypsum)                          50       50        6        8
     Other subsidiaries*                        24       24        4        5
     Eliminations                              (33)     (31)       -        -
     Total                                     483      610       15      154
 
     Worldwide Ceilings:
     USG Interiors, Inc.                       126      127        8       15
     USG International                          54       59        -        1
     CGC Inc. (ceilings)                        11       11        1        1
     Eliminations                              (18)     (19)       -        -
     Total                                     173      178        9       17
 
     Building Products Distribution:
     L&W Supply Corporation                    286      356       15       27
 
     Corporate                                   -        -       (8)     (16)
     Eliminations                             (116)    (155)       1        2
     Total USG Corporation                     826      989       32      184
 
 
     *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.
 
 
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 SOURCE  USG Corporation