Chicago, Illinois, USA, 13 November 2008 -- USG Corporation (NYSE:USG), a leading building products company, said today that its current restructuring initiatives will result in more than USD 125 million in annualized cost savings. The company also plans to reduce capital expenditures by approximately USD 190 million in 2009 compared with 2008. The cost savings are before severance costs of approximately USD 35 million to USD 45 million associated with the 20% salaried workforce reduction announced by the company last week. The majority of the severance costs are expected to be accrued in the current quarter and paid in the first quarter of 2009.
USG said in late October that it would take additional actions to adjust operations, programs, and staffing to adapt to current construction and financial market conditions. Those actions, the majority of which will be implemented in the current quarter, include significant reductions in marketing, research, and other overhead expenses, including the elimination of about 900 salaried positions.
"When the residential housing market first showed signs of weakening more than two years ago, we adopted a conservative, phased approach to stay ahead of the declining market," said William C. Foote, USG chairman and CEO. "A problem that was originally confined to the residential housing market has grown into a much broader and deeper economic contraction that is affecting all of USG's businesses in all of our markets. We are moving aggressively to cut costs and properly align our businesses for these extremely challenging conditions."
Capital Spending and Manufacturing
In addition to the USD 125 million cost reduction program, the company plans to reduce capital spending from approximately USD 240 million this year to approximately $50 million in 2009, reflecting the completion of several large capital projects. The company also expects to make an additional capacity reduction of approximately 1 billion square feet from its wallboard manufacturing network.
Commenting on the company's capital expenditures, Foote said, "We have made substantial investments in recent years in our market-leading manufacturing network. The completion of those strategic investments will allow us to significantly reduce capital spending in 2009 while still providing outstanding service for our customers."
Liquidity and Capital Resources
The company had more than USD 700 million of cash and undrawn committed credit facilities as of 31 October 2008, comprised of USD 257 million in cash, availability of USD 170 million under its receivables-backed credit agreement and availability of approximately USD 254 million under its unsecured credit facility, and approximately USD 36 million under its recently finalized ship mortgage facility. The company is required under its credit agreement to have available cash and unused committed borrowing capacity of USD 300 million.
The company has begun discussions with the lead banks under its unsecured credit agreement with respect to modifications of that agreement. Regarding the discussions with the company's lead banks, Foote said, "We are optimistic that the discussions with our banks will conclude promptly and satisfactorily."
"Severe cyclical downturns are always challenging and the necessary staffing decisions are painful, but we are committed to take the actions necessary to weather this recession and position the company for the eventual market rebound," said Foote.
USG Corporation is a Fortune 500 manufacturer and distributor of high-performance building systems through its United States Gypsum Company, USG Interiors, Inc. and L&W Supply Corporation subsidiaries. Headquartered in Chicago, Illinois, USG serves the residential and nonresidential construction markets, repair and remodel construction markets, and industrial processes. USG's wall, ceiling, flooring, and roofing products provide leading-edge building solutions for customers, while L&W Supply center locations efficiently stock and deliver building materials nationwide. For additional information, visit the USG Web site at www.usg.com.