Second Quarter 2009 vs. Second Quarter 2008

- Operating loss virtually unchanged despite 34 percent decline in net sales

- Unit margin improvements and other cost reductions substantially offset effects of volume declines

- Improved liquidity since March 31, 2009

CHICAGO, July 22 /PRNewswire-FirstCall/ -- USG Corporation (NYSE: USG), a leading building products company, today reported second quarter 2009 net sales of $829 million and a net loss of $53 million, or $0.53 per diluted share based on 99.2 million average diluted shares outstanding. For the same period a year ago, the corporation recorded net sales of $1.3 billion and a net loss of $37 million, or $0.37 per diluted share based on 99.1 million average diluted shares outstanding.

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"Revenues in all business segments are under pressure due to the significant declines in residential and commercial construction activity in the U.S. and abroad," said William C. Foote, Chairman and CEO. "In the U.S., our largest markets, new residential and home repair and remodeling, appear to be stabilizing, while the commercial market continues to decline.

"USG continues to stay ahead of these market declines. Our efforts to reduce costs and increase liquidity during the global economic contraction are succeeding," Foote added. "Stabilization in the domestic residential segment appears to be on the horizon and will be a welcome relief. Meanwhile, we will continue our efforts to control costs, improve liquidity and return our businesses to profitability."

The corporation's consolidated second quarter 2009 results included restructuring and long-lived asset impairment charges totaling $19 million ($12 million after-tax, or $0.12 per diluted share). The corporation's consolidated second quarter 2008 results included restructuring and long-lived asset impairment charges of $21 million ($13 million after-tax, or $0.13 per diluted share).

The corporation's liquidity at June 30, 2009 totaled $495 million, comprised of $302 million of cash and cash equivalents and $193 million of borrowing availability under its credit facilities.

Core Business Results

North American Gypsum

USG's North American Gypsum business reported second quarter 2009 net sales of $442 million and an operating loss of $20 million, which included restructuring and long-lived asset impairment charges of $11 million. Net sales of $625 million and an operating loss of $55 million were reported in last year's second quarter. North American Gypsum's operating loss for the second quarter of 2008 included $9 million in restructuring charges.

United States Gypsum Company reported second quarter 2009 net sales of $360 million and an operating loss of $25 million. This compares with second quarter 2008 net sales of $510 million and operating loss of $64 million. The operating losses in the second quarters of 2009 and 2008 included restructuring charges of $10 million and $7 million, respectively. The decline in sales was primarily attributable to a 38 percent decline in shipments of Sheetrock(R) brand gypsum wallboard. The operating loss improvement was due to increased profitability for the gypsum wallboard and joint treatment product lines, as well as significantly lower overhead and other costs resulting from restructuring actions taken during the past year.

U.S. Gypsum shipped 1.18 billion square feet of gypsum wallboard during the second quarter of 2009 compared with 1.89 billion square feet shipped during last year's second quarter and 1.31 billion square feet shipped during the first quarter of 2009. U.S. Gypsum's wallboard plants operated at approximately 46 percent of capacity during the quarter compared with 69 percent of capacity for the same period a year ago. The company estimates that the industry capacity utilization rate was below 50 percent during the second quarter of 2009. U.S. Gypsum's average realized selling price for gypsum wallboard was $120.79 per thousand square feet during the second quarter of 2009, up 10 percent from the second quarter of 2008, but down slightly from $121.42 in the first quarter of 2009.

Second quarter 2009 profit for the company's complementary product lines, which include Sheetrock brand joint treatment materials, Fiberock(R) brand gypsum fiber panels and Durock(R) brand cement boards, was slightly lower compared to the second quarter of 2008. Profitability for joint treatment products was improved but profitability in the other complementary products declined. Volumes were lower in all complementary product lines.

The gypsum division of Canada-based CGC Inc. reported second quarter 2009 net sales of $64 million, a decrease of $26 million, or 29 percent, compared with the same period a year ago. The sales decline was principally due to the unfavorable effects of currency translation resulting from a stronger U.S. dollar and lower sales of SHEETROCK brand gypsum wallboard. Operating profit of $2 million, which included $1 million in restructuring charges, was recorded in the second quarter of 2009. This compared with an operating loss of $1 million in the second quarter of 2008, which also included $1 million in restructuring charges. The improvement was due to lower costs, including selling and administrative expenses, partially offset by reduced profitability on wallboard and other products.

USG Mexico S.A. de C.V., USG's Mexico-based gypsum business, reported second quarter 2009 net sales of $34 million, down from $54 million in last year's second quarter. The decline in sales was largely attributable to lower shipments of SHEETROCK brand gypsum wallboard. Second quarter 2009 operating profit fell to $3 million from $7 million in the same period last year.

Building Products Distribution

L&W Supply Corporation and its subsidiaries, which comprise USG's building products distribution business, reported second quarter 2009 net sales of $337 million, down 38 percent compared to the second quarter of 2008. Second quarter 2009 net sales reflect lower volumes in all major product categories as a result of weaker residential and commercial construction demand. Gypsum wallboard sales declined 36 percent while sales of products other than wallboard were down 38 percent compared with last year's second quarter.

L&W Supply reported an operating loss of $26 million for the second quarter of 2009 compared to operating profit of $8 million for last year's second quarter. Both the second quarter 2009 and the second quarter 2008 losses included a $5 million restructuring charge. The second quarter 2009 results include the benefit of $27 million in lower operating expenses attributable to L&W Supply's cost reduction programs designed to mitigate the effects of lower product volumes and resultant gross profit declines. Those programs include the closure of 54 distribution centers in 2008 and nine centers in 2009, an aggressive fleet reduction program and decreases in discretionary spending. As of June 30, 2009, L&W Supply operated 190 distribution centers.

Worldwide Ceilings

USG's Worldwide Ceilings business reported second quarter 2009 net sales of $173 million compared with second quarter 2008 net sales of $237 million. Operating profit was $18 million for the second quarter of 2009, a decrease of $12 million compared to the second quarter of 2008. Second quarter 2009 operating profit included restructuring charges of $1 million while operating profit in the same period last year included restructuring charges of $2 million. The majority of the declines in sales and profit came from non-U.S. operations.

USG Interiors Inc., USG's domestic ceilings business, reported second quarter 2009 net sales of $113 million and operating profit of $17 million. This compared with net sales of $141 million and operating profit of $21 million for the second quarter of 2008. The sales results reflect lower shipments of both ceiling tile and grid because of reduced commercial construction activity. Profitability was favorably affected by a reduction in overhead spending and other cost reductions. The operating profit margin for the second quarter of 2009 was flat compared to last year's second quarter operating profit margin.

USG International reported net sales of $55 million for the second quarter of 2009, a decrease of $37 million compared with the second quarter of 2008. Operating profit was $1 million for the second quarter of 2009 compared with $4 million for the second quarter of 2008. In both periods, operating profit included $1 million of restructuring charges.