CHICAGO, Nov. 13 /PRNewswire-FirstCall/ -- USG Corporation (NYSE: USG), a leading building products company, said today that its current restructuring initiatives will result in more than $125 million in annualized cost savings. The company also plans to reduce capital expenditures by approximately $190 million in 2009 compared to 2008. The cost savings are before severance costs of approximately $35 million to $45 million associated with the 20 percent 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.

(Logo: http://www.newscom.com/cgi-bin/prnh/20010511/USGLOGO)

Cost Reductions

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 $125 million cost reduction program, the company also plans to reduce capital spending from approximately $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 one 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 $700 million of cash and undrawn committed credit facilities as of October 31, 2008, comprised of $257 million in cash, availability of $170 million under its receivables-backed credit agreement and availability of approximately $254 million under its unsecured credit facility, and approximately $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 $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, USG serves the residential and non-residential 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 http://www.usg.com.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 related to management's expectations about future conditions. Actual business, market or other conditions may differ from management's expectations and, accordingly, may affect our sales and profitability or other results and liquidity. Actual results may differ due to various other factors, including: economic conditions such as the levels of new home and other construction activity, employment levels, the availability of mortgage, construction and other financing, mortgage and other interest rates, housing affordability and supply, currency exchange rates and consumer confidence; capital markets conditions, the availability of borrowings under our credit agreements or other financings and our ability to remain in compliance with, or restructure, the financial covenants contained in our unsecured credit agreement; competitive conditions, such as price, service and product competition; shortages in raw materials; increases in raw material, energy, transportation and employee benefit costs; the timing of commencement of operation of new and upgraded manufacturing facilities; the loss of one or more major customers; capacity utilization rates; the results of a review by the Congressional Joint Committee on Taxation relating to the tax refund we received related to the payments we made to the asbestos trust; our success in integrating acquired businesses; changes in laws or regulations, including environmental and safety regulations; the effects of acts of terrorism or war upon domestic and international economies and financial markets; and acts of God. We assume no obligation to update any forward-looking information contained in this press release.

SOURCE USG Corporation