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USG CORP. REPORTS OPERATING PROFIT FOR 1991; NET LOSS REFLECTS RECESSION AND HIGH INTEREST EXPENSE

 USG CORP. REPORTS OPERATING PROFIT FOR 1991;
 NET LOSS REFLECTS RECESSION AND HIGH INTEREST EXPENSE
 CHICAGO, Jan. 31 /PRNewswire/ -- USG Corp. (NYSE: USG) today reported 1991 operating profit of $133 million on net sales of $1,712 million. However, in spite of healthy operating profits, USG reported a loss from continuing operations of $141 million for the year, or $2.53 per share, primarily as a result of continuing high levels of interest expense. Including a second quarter charge of $20 million related to the divestiture of DAP Inc., which was sold in the third quarter, the net loss in 1991 was $161 million, or $2.91 per share.
 "It is important to note that in spite of an unprecedented and prolonged downturn in construction activity, we posted a significant level of operating profit," said USG Chairman and Chief Executive Officer Eugene B. Connolly. "This is in stark contrast to other major building materials manufacturers, many of whom operated at a loss or close to breakeven in 1991."
 Connolly attributed the superior results to USG's ongoing cost savings initiatives and extensive capital spending during the 1980s. During 1991, USG continued to operate its plants profitably at 88 percent of capacity, as opposed to the rest of the gypsum industry whose capacity utilization fell to approximately 70 percent. The strong operating performance allowed USG to increase its share of the wallboard market to 36 percent -- exemplifying its position as the industry's lowest cost and highest quality wallboard manufacturer.
 "The fact is that our results are closely tied to housing starts," Connolly continued. "1991 was the fifth consecutive year of decline in the housing industry and marked the deepest downturn since 1945. Housing starts declined approximately 15 percent in 1991 and have declined by over 43 percent since 1986. These conditions have significantly reduced the demand for building products," he said. "As a result, wallboard prices have fallen to their lowest levels since 1978. When these industry factors are combined with our continuing high level of corporate interest expense, they produce an after-tax loss. That is why we need to fix our balance sheet soon."
 For 1990, net sales and operating profit were $1,915 million and $195 million, respectively. The loss from continuing operations in 1990 was $54 million or $.99 per share, while the net loss was $90 million or $1.65 per share.
 Operating profit in 1990 was lowered by pre-tax restructuring charges of $18 million recorded in last year's fourth quarter. The net loss in 1990 included an after-tax provision of $41 million related to the divestiture of DAP. This provision was recorded in the fourth quarter of 1990 in connection with USG's announcement of its intention to sell DAP as part of a long-term plan to restructure debt. 1990's loss from continuing operations and net loss were mitigated somewhat by a pre-tax nonrecurring gain of $34 million on the sale of USG's corporate headquarters building in the first quarter.
 In the fourth quarter of 1991, USG's operating profit was $26 million on net sales of $417 million. The fourth quarter net loss was $43 million, or $0.78 per share.
 Fourth quarter 1990 operating profit amounted to $11 million after deducting the earlier-mentioned restructuring charges, while net sales were $453 million. The loss from continuing operations was $47 million, or $0.87 per share. The net loss in last year's fourth quarter was $88 million, or $1.61 per share, including the $41 million DAP reserve.
 "The bottom-line numbers tell just part of the story," Connolly said. "I am very proud of the performance by USG employees in 1991. Their determination to not only weather this recession, but actually improve our operations, demonstrates pride, commitment and confidence in the corporation's future. Their hard work positions USG with outstanding upside potential and the ability to take full advantage of the economic recovery when it occurs."
 USG continues its efforts towards the restructuring of its debt. Management has been holding frequent discussions with the bank group steering committee and regular discussions with the subordinated bondholder committees. The goal of these discussions is to develop a consensual plan of restructuring that carries the endorsement of both the bank group steering committee and the two bondholder committees. USG is hopeful that the terms of this plan can be announced sometime in early 1992, with the goal of achieving completion later this year.
 Reporting on developments with these creditor groups, Connolly said that the two bondholder committees had indicated that they were prepared to recommend a transaction in which all the subordinated debt would be exchanged entirely for the corporation's common stock, as compared to the original exchange proposal in which holders of the 13-1/4 percent bonds would have received a new debt security in addition to common stock. Connolly also mentioned that discussions with the bank group steering committee were centered on a term sheet for presentation to the entire bank group. The term sheet, he indicated, would deal with the issues described in the corporation's recent SEC filing -- rates of interest on the bank debt, principal amortization schedule and provisions addressing the company's need for future liquidity and flexibility -- in a way to permit the corporation to execute its business plan in continued weak market.
 Connolly pointed out that, as of Dec. 31, 1991, USG's cash balance remained strong at $155 million. This figure excludes the $84 million of restricted cash from the sale of DAP.
 "Unfortunately, we do not anticipate a significant recovery for construction in 1992," Connolly said. "Earnings will improve when the economic climate supports greater construction activity. Until that time, USG will continue its successful focus on cutting operating costs and improving employee productivity."
 USG is a Fortune 250 building products manufacturer whose subsidiaries are market leaders in gypsum wallboard, joint compound and related gypsum products, ceiling tile and grid, and building products distribution.
 USG CORP.
 Condensed Consolidated Statement of Earnings (A)
 (in millions of dollars except per share figures)
 Periods ended: Three months Year ended
 Dec. 31 1991 1990 1991 1990
 Net sales $417 $453 $1,712 $1,915
 Gross profit 76 83 327 416
 Selling & admin. expenses 50 54 194 203
 Restructuring exps. -- 18 -- 18
 Operating profit 26 11 133 195
 Interest expense, net 81 72 322 284
 Other expense, net 2 1 5 5
 Nonrecurring gain -- -- -- (34)
 Taxes on income (14) (15) (53) (6)
 Loss from cont. opers. (43) (47) (141) (54)
 Discontinued operations:
 Operating earnings,
 net of taxes -- -- -- 5
 Reserve for DAP Inc.
 divestiture,
 net of taxes -- (41) (20) (41)
 Net loss (43) (88) (161) (90)
 Loss per common share:
 Continuing operations (0.78) (0.87) (2.53) (0.99)
 Discontinued operations -- (0.74) (0.38) (0.66)
 Net loss (0.78) (1.61) (2.91) (1.65)
 Average number of
 shares outstanding 55,845,854 55,122,541 55,658,252 54,791,979
 (A) -- Results for 1991 and 1990 reflect the results of DAP Inc. as discontinued operations up to the time of its disposition on Sept. 20, 1991.
 -0- 1/31/92
 /CONTACT: USG Corporate Communications Dept., 312-606-4124, or USG Investor Communications Dept., 312-606-5594/
 (USG) CO: USG Corp. ST: Illinois IN: CST SU: ERN


TS -- NY034 -- 5600 01/31/92 12:19 EST
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Date:Jan 31, 1992
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