NET SALES OF $1.3 BILLION AND A NET LOSS OF $40 MILLION

Second Quarter 2008 vs. Second Quarter 2007

- Continued weakness in housing market, high raw material and energy costs hurt U.S. wallboard results

- Record Worldwide Ceilings sales and operating profit

- L&W Supply's results impacted by wallboard market weakness

- Cost reduction initiatives show positive impact

CHICAGO, July 22 /PRNewswire-FirstCall/ -- USG Corporation (NYSE: USG), a leading building products company, today reported second quarter 2008 net sales of $1.3 billion and a net loss of $40 million, or a $0.40 loss per diluted share based on 99.1 million average diluted shares outstanding. For the same period a year ago, the corporation recorded net sales of $1.4 billion and net earnings of $56 million, or $0.56 per diluted share based on 99.3 million average diluted shares outstanding.

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The corporation's consolidated second quarter 2008 results included restructuring charges totaling $21 million ($13 million after-tax, or $0.13 per diluted share) associated with salaried workforce reductions, the closing of distribution locations and expenses related to the shutdown of several manufacturing lines. The corporation's consolidated second quarter 2007 results included restructuring charges of $15 million ($9 million after-tax, or $0.09 per diluted share).

'The steep decline in the U.S. housing market, combined with unprecedented increases in the cost of key raw materials and energy, resulted in losses in our core wallboard business,' said William C. Foote, USG Chairman and CEO. 'Our other businesses are performing reasonably well, despite their own challenging market conditions.

'Our people continue to effectively manage the factors we can control,' added Foote. 'Plant operating efficiencies have improved since we closed or curtailed older, higher-cost capacity, and our safety performance continues to be outstanding. Overhead is running well below levels at the start of 2007, and operating profitability has improved since the first quarter of 2008. We have also achieved modest price improvement in some product lines and will seek further increases to help offset higher operating costs. Finally, we are keenly focused on maintaining the financial flexibility necessary during this difficult period.'

Foote concluded, 'Over the longer term, we believe that the actions we are taking now, during this steep market downturn, will position the company well when the housing market rebounds.'

For the first half of 2008, the corporation reported net sales of $2.4 billion and a net loss of $85 million, or $0.85 per diluted share based on 99.1 million average diluted shares outstanding. For the first half of 2007, net sales were $2.7 billion and net earnings were $97 million, or $1.01 per diluted share based on 95.5 million average diluted shares outstanding. The corporation's consolidated results for the first six months of 2008 included restructuring charges of $25 million ($16 million after-tax, or $0.16 per diluted share). The corporation's consolidated results for the first six months of 2007 included restructuring charges of $15 million ($9 million after-tax, or $0.10 per diluted share).

Core Business Results

North American Gypsum

USG's North American Gypsum business recorded second quarter 2008 net sales of $625 million and an operating loss of $56 million, which included restructuring charges of $9 million. Net sales of $754 million and operating profit of $42 million were reported in last year's second quarter. North American Gypsum's operating profit for the second quarter of 2007 included a $12 million restructuring charge related to salaried workforce reductions and a plant shutdown.

United States Gypsum Company reported second quarter 2008 net sales of $510 million and an operating loss of $65 million. This compares with second quarter 2007 net sales of $655 million and operating profit of $30 million. The decline in sales and operating profit was primarily attributable to significantly lower average realized selling prices. Lower shipments of SHEETROCK(R) brand gypsum wallboard also contributed to the decline. Operating profits were also reduced by higher manufacturing costs, particularly for energy and raw materials, as well as higher fuel costs.

U.S. Gypsum shipped 1.9 billion square feet of gypsum wallboard during the second quarter of 2008, compared with 2.4 billion square feet shipped during last year's second quarter and 2.1 billion square feet shipped in the first quarter of 2008. U.S. Gypsum's plants operated at approximately 69 percent of capacity during the quarter, compared with 82 percent of capacity for the same period a year ago and 76 percent of capacity during the first quarter of 2008. The company estimates that the industry operated at 64 percent of capacity during the second quarter of 2008. U.S. Gypsum's average realized selling price for gypsum wallboard was $109.81 per thousand square feet during the second quarter of 2008, down 23 percent from the second quarter of 2007 and up five percent over the first quarter of this year.

Second quarter 2008 profit for the company's complementary product lines was lower compared to the second quarter of 2007, largely due to lower volumes and higher manufacturing costs for SHEETROCK joint compounds. Profitability improved for Fiberock(R) gypsum fiber panels, due to higher shipments and selling prices and lower manufacturing costs compared to the second quarter of 2007.

The gypsum division of Canada-based CGC Inc. reported second quarter 2008 net sales of $90 million, an increase of $11 million, or 14 percent, compared with the same period a year ago. An operating loss of $1 million was recorded in the second quarter this year compared with operating profit of $1 million reported in last year's second quarter. The increase in net sales was due to the favorable effects of currency translation and improved results for complementary products, including joint treatment and gypsum fiber panels. Operating profit was affected adversely by a lower average realized selling price of gypsum wallboard.

USG Mexico S.A. de C.V., USG's Mexico-based gypsum business, reported second quarter 2008 net sales of $54 million, up $7 million, or 15 percent, from last year's second quarter. This improvement in sales was largely attributable to higher shipments of cement board and construction plasters. Operating profit rose $1 million, to $7 million, compared with the same period last year.

Building Products Distribution

L&W Supply Corporation and its subsidiaries, which comprise USG's building products distribution business, reported second quarter 2008 net sales of $542 million, a decline of $112 million, or 17 percent, compared to the second quarter of 2007.