USG Corporation

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USG Corporation
Type	Public (NYSE: USG)
Founded	1901
Headquarters	Chicago, Illinois, USA
Key people	William C. Foote, CEO
Industry	Industrial goods
Products	Building materials
Revenue	$5.72 billion USD (2006)
Operating income	$1.13 billion USD (2006)
Net income	$1.58 billion (2006)
Employees	14,100
Website	www.usg.com

USG Corporation (NYSE: USG), also known as United States Gypsum Corporation, is a Fortune 500 (rank 420 in 2006)^[1] company that manufactures construction materials. USG Corporation was organized on January 1, 1985 as the holding company of its subsidiaries. The corporate offices are located at 550 West Adams in Chicago, Illinois.

USG Corporation has six subsidiaries:

• United States Gypsum Company
• USG Interiors, Inc.
• L&W Supply Corporation
• CGC Inc.
• USG International
• USG Mexico S.A. de C.V.

Contents 1 United States Gypsum Company - a USG Corp. subsidiary 1.1 Hostile Takeover Attempt 1.2 Bankruptcy 1.3 Corporate Headquarters Building 1.4 Plaster City, California Facility 1.4.1 Active Narrow Gauge Railroad 2 References 2.1 Footnotes 2.2 Book references 2.3 Web references

[edit] United States Gypsum Company - a USG Corp. subsidiary

United States Gypsum Company was incorporated on December 27, 1901, and is a subsidiary of USG Corporation. The company was formed by consolidating 30 gypsum and plaster companies. This resulted in forming the first nationwide gypsum company in the United States.

The company is the largest distributor of wallboard in the United States and the largest manufacturer of gypsum products in North America. The company produces the popular SHEETROCK® gypsum wallboard as well as the FIBEROCK® Brand Panels and SECUROCK™ Brand Roof Board. In 2004 the company had net sales of $2.474 billion and 6,772 employees. The company operates 21 gypsum board plants in the United States and has 14 gypsum mines and quarries in the United States, Canada and Mexico.^[2]

To transport gypsum rock from various quarries, the company owns and operates a fleet of oceangoing cargo ships based in Bermuda.

Comedian Bob Newhart worked as an accountant for the United States Gypsum Company in 1955 and 1956.

USG is a major consumer of synthetic gypsum, a waste byproduct of Flue gas desulfurization. The company operates seven paper mills that produce high-grade wallboard paper from 100% recycled paper.

In 1999, a record 25 USG plants exceeded 1,000,000 safe hours, and 39 plants worked 1,000 days without a lost workday. In the 75-year history of the safety sentinel program, USG has been awarded the MSHA's "Sentinels of Safety" award 15 times-more than any other company.

In 2004, Chicago magazine named USG as one of the 25 best companies to work for in the Chicago metropolitan area.

In 2006, Fortune Magazine ranked USG #1 in the most admired companies in the building materials, glass industry with an overall score of 7.25.

[edit] Hostile Takeover Attempt

In October of 1987, Texas oilman Cyril Wagner, Jr. and Jack Brown attempted a hostile takeover of USG. Working as Desert Partners, L. P. Wagner and Brown bought 9.9% of USG's outstanding stock. USG decided to fight off this attempt by offering $42 per share ($37 in cash and $5 in pay in kind debenture) plus a stub stock worth $7. Desert Partners was unable to match the offer and lost the proxy fight at a shareholder's meeting. To pay for the offer USG took a poison pill by borrowing $1.6 billion from 135 banks and issued $600 million in 13.25% subordinated debentures due in 2000 and $379 million in 16% pay-in-kind debentures due in 2008. To help pay for all the new debt USG sold off subsidiaries Castlegate; A. P. Green; Masonite; DAP and Wiss, Janney, Elstner & Associates. USG also sold off its construction metals plants, a paper-bag plant, and a lime plant. USG also sold off its headquarters building at 101 South Wacker Drive in Chicago and its corporate jets and instituted large work-force reductions.

Unfortunately the sell off and workforce reduction of 7% were not enough to allow USG to service the debt payments ($800,000 per day) in the economic downturn. The poison pill was too much for the corporation to survive.

[edit] Bankruptcy

In March 17, 1993, USG filed a pre-packaged bankruptcy petition that included a 50-to-1 reverse stock split. USG's stock dipped to 28 cents per share and the corporation emerged from bankruptcy 38 days later on May 6, 1993. The corporation's debt was reduced by $1.4 billion and interest costs dropped from $320 million per year to $170 million per year. The plan worked and USG re-emerged to be a highly profitable corporation.

In July 25, 2001, USG once again declared Chapter 11 bankruptcy to manage the growing asbestos litigation costs. USG was the eighth company in the previous 18 months that had been forced to utilize Chapter 11 to resolve asbestos claims. In the previous two decades, 27 companies filed for protection under Chapter 11 because of asbestos litigation. Since 1994, U.S. Gypsum was named in more than 250,000 asbestos-related personal injury claims, and paid more than $450 million (before insurance) to manage and resolve asbestos-related litigation. USG received more than 22,000 new claims since the beginning 2001. USG’s asbestos personal injury costs (before insurance) rose from $30 million in 1997 to more than $160 million in 2000, and were expected to exceed $275 million in 2001.

On February 17, 2006 USG announced a Joint Plan of Reorganization to emerge from Chapter 11.[1] Under the agreement, USG would create a trust to pay asbestos personal injury claims. USG's bank lenders, bondholders and trade suppliers would be paid in full with interest. Stockholders would retain ownership of the company. To pay for the trust USG would use cash it had accumulated during the bankruptcy, new long-term debt, a tax rebate from the federal government, and an innovative rights offering. Existing USG stock owners would be issued rights to buy new USG stock at a set price of $40 per share. These rights could be exercised or sold. The $1.8 billion rights offering would be backstopped by Berkshire Hathaway Inc., meaning Berkshire Hathaway would buy all the new shares not bought. For the service, USG would pay Berkshire Hathaway a $67 million non-refundable fee.

On June 20, 2006 USG announced their Plan of Reorganization was confirmed by two judges for the United States Bankruptcy Court and the United States District Court for the District of Delaware, allowing the company to complete the bankruptcy case and emerge from Chapter 11. USG announced a $900 million payment to the new trust was made that day and two subsequent payments totaling $3.05 billion would be made within the next 12 months if Congress failed to enact legislation establishing a national asbestos personal injury trust fund, such as the FAIR Act.

[edit] Corporate Headquarters Building

USG moved its corporate headquarters 125 S. Franklin in Chicago in 1992. The building, known as the USG building, is part of the dual tower AT&T – USG complex. The AT&T Corporate Center building was completed 1989. The building was designed by Adrian D. Smith, FAIA, RIBA Design Partner at Skidmore, Owings and Merrill and constructed by Morse Diesel within its $110 million construction budget. The USG building is 538 ft tall, houses 35 floors and 1.1 million square feet of space. The USG Building includes 12,000 square feet of retail, a 650 seat restaurant expansion and two levels of below grade parking for 160 cars. USG has its own entrance with a lobby and occupies the first 9 floors exclusively and parts of the 11th floor. The building uses Italian marble as cladding and also in the highly ornate interior. The interior also features gold leaf and satin-finish brown and American oak wood trim. Parts of the building lobbies were used in the filming of the 1994 movie Ri¢hie Ri¢h.

In 2005, USG announced it would not be renewing its lease at the 125 S Franklin building and that it would move to a new building to be constructed at 550 W. Adams developed by Fitfield Companies. The base building architect is De Stefano + Partners and The Environments Group providing the interior space design and construction. USG entered a 15-year lease with plans to occupy the building in early 2007. The new building will be occupied 65% by USG and 10% by Humana Inc. As an incentive for USG to remain in the downtown Chicago area, the city of Chicago created a redevelopment agreement[2] that contributed $6.5 million to the construction of the new building. In turn, USG agreed to maintain at least 500 full-time equivalent jobs at all times for a period of ten years at the new corporate headquarters.

[edit] Plaster City, California Facility

USG has a large gypsum quarry and plant located 10 miles west of El Centro, California along I-8 at a location known as Plaster City. The Plaster City location makes SHEETROCK® brand gypsum panels. The quarry, located in the Fish Creek Mountains ^[3] of Imperial County, is estimated to contain a deposit of 25 million tons of gypsum.^[4]

[edit] Active Narrow Gauge Railroad

USG operates an active narrow gauge railway, the last industrial narrow gauge railway in the United States. The 3 ft (914 mm) gauge line runs north for 20.5 miles from the plant at Plaster City (formerly known as Maria) to the gypsum quarry. The line hauls gypsum rock from the quarry to the plant. Various sources show the total mileage of the track between 15 and 26 miles.

The line was originally built by the Imperial Gypsum Company Railroad and was owned by the Imperial Valley Gypsum and Oil Corporation. The railroad built from the San Diego & Arizona Eastern Railway at Plaster City to the quarry. Surveying commenced in April 1921, grading on October 3, 1921 and construction was completed on September 15, 1922. Commercial operation commenced on October 14, 1922. The total distance of the line was 19.63 miles. Just two years after completion of the line (1924), the track was sold to the Pacific Portland Cement Company.

USG purchased the line from Pacific Portland Cement in 1946. In 1947 the first diesel engine was operated on the line.

The USG plant at Plaster City is also served by the Union Pacific Railroad (UP) and the Carrizo Gorge Railway (CZRY) which is owned by the San Diego & Arizona Eastern Railway (SDAE).

[edit] References

[edit] Footnotes