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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 27, 2000.
USG Corporation
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(Exact name of registrant as specified in its charter)
Commission File Number: 1-8864
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Delaware 36-3329400
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 South Franklin Street, Chicago, Illinois 60606-4678
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 606-4000
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Item 5. OTHER EVENTS.
Plant Shutdowns
USG Corporation has recently decided to shut down two old, high-cost
production lines for its SHEETROCK brand gypsum wallboard. The company is
nearing completion of a major modernization of its gypsum wallboard capacity,
enabling it to replace old capacity with much more efficient new facilities. As
this modernization program progressed, the company previously closed four other
high-cost facilities.
On February 1, 2001, the older of two gypsum wallboard manufacturing lines
at its Fort Dodge, Iowa plant will close, eliminating approximately 150 million
square feet of high-cost capacity. The production line, which was built in 1952,
is much slower and more costly to operate than newer capacity the company has
recently built. One of those projects, a modernization and expansion of USG's
East Chicago, Ind. wallboard plant, was completed in November 1999 and will now
service some customers previously served by the old line at Fort Dodge.
The second facility, the gypsum wallboard manufacturing line at its
Oakfield, N.Y. plant, will be closed effective February 18, 2001. That will
eliminate approximately 400 million square feet of high-cost capacity in the
Northeast. The company plans to shift production to a new low-cost, high-speed
plant that it opened earlier this year in Aliquippa, Pa. The Aliquippa facility
also benefits from lower raw material costs and is located closer to major
markets. Operations at the Oakfield facility date to the 1820s, when an
underground mining operation was established. The operation was acquired by USG
when the company was founded in 1902. The current wallboard production line was
originally built in 1922 and modernized in 1980. The line closure will not
effect other operations at the plant, including a paper mill producing gypsum
liner paper.
The company is finalizing the shutdown costs associated with these
two line closures as well a recently announced salaried workforce reduction
program. Details will be announced in early January, 2001.
Market Update
Market conditions for USG's largest business unit, United States Gypsum
Company, remain very challenging, primarily due to lower demand and realized
selling prices for its SHEETROCK brand gypsum wallboard. In addition, U. S.
Gypsum Company's non-wallboard businesses, as well as USG's two other major
operating units, USG Interiors and L&W Supply, are experiencing a seasonal
slowdown in the fourth quarter that is effecting revenues and operating margins.
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Results in all three of these businesses have also been impacted by higher
motor fuel and natural gas costs which have increased production, delivery and
raw materials costs significantly.
In the first two months of the fourth quarter, total industry gypsum
wallboard shipments, including imports, are 9 percent below the level for the
same period last year. For the first eleven months of this year, shipments are
about 5 percent lower than the same period last year.
U.S. Gypsum's nationwide average realized price (the selling price less
freight to the customer) of wallboard was $98 per thousand square feet in
November, about 19 percent lower than the third quarter, 2000 average of
$121.13. Prices have declined further in December due to seasonally lower demand
and the industry oversupply situation.
The company announced on December 13 that it will be raising prices on all
SHEETROCK brand gypsum products $15 per thousand square feet effective December
26. This action is being taken due to the dramatic increase in energy costs
experienced by the company.
Since the start of the fourth quarter, market prices for natural gas have
more than doubled, rising 130 percent, and have risen 157 percent since the
beginning of the year. The impact of these increases on manufacturing costs has
been significant, although they have been mitigated somewhat by the company's
natural gas hedging program. Currently, natural gas prices in 2001 are expected
to remain well above this year's levels.
Asbestos
In asbestos liability matters, new personal injury cases against U.S.
Gypsum Company were filed at roughly the same monthly rate during October and
November as was experienced during the third quarter, when 15,300 new cases were
filed. December filings are not yet available.
The company has recently concluded that it will be able to estimate U.S.
Gypsum's liability for asbestos filings over the next few years by year-end.
Details of this quantification and an associated earnings charge will be
announced in early January 2001.
Forward Looking Statements
This Form 8-K filing 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
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economic activity, such as new housing construction, interest rates, currency
exchange rates and consumer confidence; competitive activity such as price and
product competition; 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 filing.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
USG CORPORATION
Registrant
Date: December 27, 2000 By: /s/ Richard H. Fleming
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Its: Executive Vice President
and Chief Financial Officer
