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Executives

James Bencomo – Director, IR & Pension Investments

Bill Foote – Chairman & CEO

Jim Metcalf – President & COO

Rick Fleming – EVP & CFO

Rick Lowes – SVP & Controller

Analysts

Dan Oppenheim – Credit Suisse

Michael Rehaut – J.P. Morgan

Garik Shmois – Longbow Research

Kenneth Zener – Macquarie

Jack Kasprzak – BB&T Capital Markets

Patrick Archambault – Goldman Sachs

Jim Barrett – CL King & Associates

Ivy Zelman – Zelman & Associates

USG Corporation (USG) Q4 2008 Earnings Call Transcript January 28, 2009 11:00 AM ET

Operator

Good morning, ladies and gentlemen, and welcome to the USG Corporation fourth quarter 2008 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Mr. James Bencomo, Director, Investor Relations and Pension Investment. Mr. Bencomo, you may begin.

James Bencomo

Thank you, Hilda, and good morning, everyone. And welcome to USG Corporation’s fourth quarter 2008 earnings conference call and live webcast. We will be using a slide presentation in conjunction with our call today. It is available by going to the Investor Information section of our Web site, www.usg.com, and clicking on the links to the webcast.

Before we proceed, please note that certain statements in this conference call may contain forward-looking statements under Securities laws. These statements are made on the basis of management's current views and assumptions about business, market, and other conditions, and management undertakes no obligation to update these statements. The statements are also subject to a number of factors, including those listed at the end of today's press release, and actual results may be different from our current expectations.

Let me also remind you that the fourth quarter and full year 2008 operating and net losses that we reported this morning are preliminary. They exclude expected non-cash charges or impairment of goodwill and other intangible assets. The amounts of the charges have not yet been determined, but we’ll be providing some background about them during the call.

With me today to discuss our results and our outlook are Bill Foote, USG’s Chairman and CEO; Jim Metcalf, President and COO; and, Rick Fleming, Executive Vice President and CFO. Bill will begin by commenting on market conditions and USG’s actions to deal with them and some thoughts on what might be ahead in 2009. Jim will then discuss market trends and the operating results in our core businesses. And Rick will conclude our prepared remarks by covering consolidated financial results as well as capital spending, debt, and liquidity. We will then open up the cal for questions, and conclude with a few comments from Bill. Also present for the Q&A portion of the call will be Rick Lowes, Senior Vice President and Controller. Let’s get started. Bill?

Bill Foote

Thank you, Jim, and good morning to all of you. We appreciate your interest in USG, particularly in these challenging times. I’m relieved to say that 2008 is finally behind us, and I wish I could say that I’m looking forward to 2009. But my customary optimism is tempered by the harsh realities we’re facing. We expect 2009 to be another tough year, but we’ve done a number of things for the company for the conditions we are likely to encounter. Jim, Rick, and I would like to review 2008 and the actions we have taken that will benefit us in 2009 and beyond.

We expected 2008 to be a difficult year, and it’s used (inaudible) perspective. Looking back to the beginning of the year, housing starts were running at an annualized rate of a little more than a million units. The blue chip consensus forecast in January one year ago was 1.1 million units. So we started the year with what seemed like reasonable demand, well off the peaks, but reasonable. The market was soft and remained that way until the third quarter when things got dramatically worse for housing and the entire global economy. By the end of the year, the annualized rate of housing starts had plunged to 550,000 units in the month of December, the lowest level ever recorded in the 50 years that these statistics have been captured.

Our market started 2008 on weak footing and were weakened even further by the global economic contraction. I won’t labor on the discussion of the macro-environment. I know every one of you fully appreciate how weak the market is and how weak it continues to be. But I would like to talk about some successes and some strategic initiatives that I think will benefit us in 2009.

First, the successes. We ran the business extremely well in 2008. We succeeded in controlling the factors that were within our control. For example, all of our key customer satisfaction metrics, such as on time delivery, were all time highs. Customer relationships are important in good markets and bad. We did not lose sight of this important objective despite the challenging operating environment.

Our safety performance was terrific. Our plants and other operations had another great year, narrowly missing the record performance of 2007. We ran the plants very efficiently, despite the low volumes we experienced. Our wallboard operating metrics were at the highest level we have achieved in the last several years. Many of these businesses were at record levels.

Our worldwide ceilings business had a record year. It seems almost inconceivable, but it’s true. Our ceilings business earned $85 million before restructuring charges of $5 million. Obviously, the first half of the year was better than the latter half, but regardless, it was a record year for that business. And we had several successful start-ups last year, including new wallboard – a new wallboard plant and a paper mill in the US, two joint treatment plants in Europe. And we’re close to taking delivery of a new (inaudible) ship on the East Coast. Those are important achievements, all the more remarkable given the environment in which we achieved them.

Aside from running the business well, we were also very proactive throughout the year in cutting costs, reducing staffing, and maintaining our financial flexibility. As the market declined in 2008, we were quick to adjust our cost structure accordingly. We implemented three separate cost reduction programs in 2008. In January, we reduced overall expenses by 5%, cutting travel by 50%, greatly reducing other discretionary spending. Seeing no signs of improvement in our markets, we made further adjustments in May, eliminating 10% of our salary positions. Later in the year, the financial meltdown in the third quarter signaled that our markets have probably weakened further, leading us to implement an even more aggressive cost reduction program that will produce more than $125 million in annual savings. Specifically, we reduced salary positions even further, this time by an additional 20%. We also made significant cuts in marketing, engineering, and technical services, and are cutting overspending by another 20%.

On the operations side of the business, we were very aggressive in removing excess capacity both in our manufacturing network and the distribution network. In 2008, six wallboard lines, two paper mills, and a drill line (inaudible) were closed.

We’re also very aggressive in streamlining our L&W distribution business. We closed and consolidated roughly 20% of our centers in response to weakening demand. L&W continues to have a national footprint and now services its customers through approximately 198 locations.

Turning now to our balanced sheet, we’ve been very, very careful to maintain our liquidity and our financial flexibility through the downturn. During the fourth quarter last year, we raised $400 million to strengthen our capital position. We also initiated discussions with our banks to modify the covenants in our bank agreements. I am pleased to say that those discussions were successful, and a new bank agreement was finalized early this month. It’s a secured facility with only one financial covenant, a fixed charge covenant ratio that applies our borrowing ability under the agreement, drops below $75 million. The other restrictive financial covenants, particularly the EBITDA covenant, were eliminated. In addition, let me remind you that we have no term debt maturities before 2016.

So as we enter 2009, having made numerous changes – as we enter the year, having made numerous changes to our business. Those actions helped us to deal with the weak market last year, and has prepared the company for what is likely to be another very challenging year in 2009. We’ve looked at every area of the company to find ways to prepare for the year. We have significantly reduced overhead discretionary spending and the size of our workforce. We valued billions of feet of manufacturing capacity. And then downsized our distribution business, and cut costs there too. And we bold start our financial flexibility. With that as background, I’d like to turn the meeting over to Jim for discussion of our operations and what we’re seeing in our markets.

Jim Metcalf

Thank you, Bill. Good morning. During my comments on last quarter’s call, I described how our business in September was considerably worse than the early part of the quarter. Those trends, along with the US and global financial meltdown late in the third quarter are what prompted us to take additional steps, as Bill mentioned. These actions were centered around realigning our operations and further reducing our cost structure in preparation for 2009.

As Bill mentioned, we made major adjustments in the fourth quarter. Consistent with the way we’ve been managing our business this entire two-and-a-half year downturn. Our wallboard business was the first to feel the impact of the housing decline. We acted decisively, and we are seeing the benefits of those actions. As the downturn has expanded to other sectors of the economy, our distribution in ceilings businesses are being affected by this weak demand. We are also taking the same aggressive approach in those businesses. Throughout this prolonged downturn, we’ve been very proactive, taking action to stay ahead of a steadily declining market. I believe we are well prepared for 2009, although quite a bit depends on the market demand. We are expecting a weak market, as Bill mentioned. But if it’s worse than projected, we will continue as we have in the past, to take quick action.

Before I talk about each business, I’d like to mention a few key trends in the operations. First, in our wallboard business. There are three important dynamics that occurred in the fourth quarter. First, we continued to improve our wallboard price while increasing wallboard gross profit. Second, demand continued to be very weak with the industry shipping at lows not seen since the early 1990s. And finally, raw materials, inflation, and cost pressures started to mitigate.

Turning to our ceilings business, as we mentioned, we had a record year in 2008, with improvement in all product lines. The commercial market started to weaken in the third quarter and that trend continued into the fourth quarter of 2008.

In our distribution business, a major focus in 2008 was keeping our cost structure aligned with the declining business conditions. We closed or consolidated over 50 locations. But more importantly, we maintained our market share and continued to serve our L&W customers well.

Looking beyond the United States, the global slowdown that began in the third quarter, picked up momentum in the fourth quarter, affecting all of our operations outside of the United States. The strong dollar has also had a significant impact on our results in international business. Across all of our operations, our safety performance was excellent. Our plants reduced the number of lost time injuries by 50% compared to 2007, as Bill mentioned, which was a record year for USG.

According to Federal Safety statistics, our track record in 2008 was 14 times better than the average manufacturing company. The recognitions our plants have received reflects that outstanding performance. Several of our plants earned the prestigious OSHA Star Award for excellent safety performance, bringing our total to eight plants. We expect to add to that with over 15 of our operations in the OSHA evaluation and testing process.

Now I’d like to review each business in a little more detail starting with North American Gypsum. Demand for wallboard was extremely soft in the quarter. Our fourth quarter shipments in the United States were down 16% versus the third quarter. Industry shipments were down 17% for the same period. Despite extremely weak demand, we have achieved price improvements throughout 2008, including the fourth quarter. Our wallboard price was approximately $119 in the fourth quarter, up from $114.40 in the previous quarter. We achieved approximately 15% improvement in price in 2008, with a consistent trend of modest increases, and we will continue to seek price improvement in 2009.

In these market conditions, price is a more important financial lever to our business than volume. Our network was scaled to the market during the quarter, running at 51% in capacity. And more importantly, we optimized our network for the lowest delivered cost. We proactively adjusted our network with line closures in operating levels, and we will continue to do so based on our monthly demand forecast. The high raw material and freight costs that we experienced for most of 2008 mitigated somewhat in the fourth quarter. But we are continuing to focus on this area, looking for additional ways that we can reduce factor costs with a major emphasis on energy usage.

There were some notable achievements in 2008 and other product categories within North American Gypsum. With the launch of the new DUROCK Next Generation and a focus on FIBROCK, we have a strong portfolio of products for the tile and flooring customers. We have gained category share and unit margins remain very attractive in these categories. Gross margin dollars for DUROCK and FIBROCK have increased substantially over the last two years even with the decline and opportunity.

Now turning to the performance of our worldwide ceilings business. As Bill mentioned, it was the best performance in the history of the company. But when you look closely at 2008, you can see that the decline in the second half of the year accelerated in the fourth quarter. For the full year, worldwide ceiling sales were up over 4%. But fourth quarter sales were down 14% compared to last year.

The same trend appears in shipping volume for USG Interiors, the domestic component of worldwide ceilings. For the full year, shipping volumes at USG Interiors were about flat for ceiling tile and down modestly for grid. Comparing the fourth quarter of 2008 to the fourth quarter of 2007, volume was down 10% for tile, and grid volume was down over 30%. The impact in the timing of the economic contraction can really be seen by comparing the fourth quarter of 2008 to the previous quarter for USG Interiors, where our tile volume declined over 20% and grid volume fell by 40%. Even in these tough market conditions, we have succeeded in implementing price improvement, which has been a key component of our steadily improving ceilings earnings over the last four years. On the cost side of the equation, we’ve been aggressively reducing overhead and other costs in preparation for this declining demand in the commercial market in 2009.

Turning to our distribution business, it is feeling the effects of the economic contraction as well. In the fourth quarter, L&W supply recorded an operating loss of $43 million, including the impact of $28 million in restructuring charges. Comparing the fourth quarter of 2008 to the fourth quarter of 2007, wallboard shipments for L&W were down approximately 28%. Sales of ceiling tile and metal products actually rose 8% due to the strong relationship L&W has with commercial contractors. In fact, sales of ceiling products increased to L&W over 10% in 2008. Comparing the fourth quarter of 2008 to the third quarter, total sales at L&W decreased 17%. Sales of non-wallboard products also decreased 17%, while wallboard volume goes down 18%.

As we mentioned, we closed or consolidated 54 locations of L&W’s distribution centers in 2008, and we reduced the size of the workforce by more than 25%. Even after closing the centers, L&W remains the market leader with almost 200 locations nationwide. And the L&W staff continues to have a sharp focus on customer satisfaction. The actions we took to reduce costs in the fourth quarter at L&W will start to become apparent in the 2009 results.

Now turning to our operations outside of the United States. We could see the impact of the global economic contraction in all of our international markets. An issue facing our international operations that rely on US exports is the recent rise of the US Dollar.

In Canada, industry shipments were flat in 2008. Canadian Gypsum Company outperformed the industry and did gain market share. The market in Canada is contracting and economists do expect a recession in Canada. Accordingly, we implemented a cost reduction plan and reduced the size of our workforce in Canada.

In Mexico, our wallboard shipments increased 1% in 2008. The economy in Mexico is showing clear signs of entering a significant slowdown. The Mexican government is forecasting zero growth in GDP in 2009.

Our European operations set a near record for profitability in 2008. Conditions did weaken in the fourth quarter and sales volume and profitability declined from the previous quarter. In Europe, we implemented a second workforce reduction during the fourth quarter to align our cost structure as we enter 2009.

On our third quarter conference call, I said that we’ve recognized the need to adapt our operations to the market. Our wallboard business was the first to feel the impact of declining demand as far back as mid-2006. Last year, as the economic contraction expanded into the broader economy, we began taking the same type of aggressive actions at L&W supply, worldwide ceilings, and our international operations.

As Bill and I have described, we have removed costs, reduced our workforce, closed our idle manufacturing capacity, and dramatically scaled back our distribution business. We’re heading into 2009 prepared for a very difficult market. As I’d like to say, prepare for the worst and hope for the best. We will continue to be proactive to any change in market conditions. We are committed to do what it takes to weather this downturn, and most importantly, position USG for the recovery and growth.

Now I’d like to turn the call over to Rick Fleming, our CFO, who would discuss our financials.

Rick Fleming

Thanks, Jim, and good morning to all of you. As indicated, I’ll provide some details on our fourth quarter financial results, including some comments about how we are managing our finances during these difficult market conditions.

Fourth quarter 2008 net sales were $981 million, down 18% from the fourth quarter of 2007 net sales level of $1.2 billion. Our (inaudible) fourth quarter operating loss was $155 million, including $68 million of restructuring and long-lived asset impairment charges. In last year’s fourth quarter, we reported an operating loss of $49 million, which included $8 million of restructuring and impairment charges. As mentioned in our press release, these results are preliminary as they do not yet include an anticipated non-cash charge for goodwill and other intangible asset impairment, the amount of which, we are presently in the process to determining. The impairment charge will have no effect on cash or our compliance with any debt covenants.

It maybe a player with the issue of goodwill impairment, it is becoming an increasingly common event for companies whose stock prices are below book value, which has been the case for many companies recently due to illiquidity in the capital markets and the deepening recession. In USG’s case, our stock price has traded below book value since the end of last October. The impairment testing and measuring process requires an assessment of the book values and fare market values of the company’s assets at the recording unit where the goodwill resides, which for USG is primarily L&W supply. It also includes the previously matching comparison of the company’s current market capitalization relative to its book value.

The fact that USG’s stock began trading at a significant discount to book value during the fourth quarter is a big factor in our discrimination. And under the equitable accounting rules, we likely have experienced an impairment as of year-end. Currently, we expect a substantial amount of the company’s $226 million of goodwill is slightly impaired. We also will be reviewing the values of our other intangible assets. Once we’ve determined the amount of the impairment, there will be a corresponding non-cash charge to earnings. We expect to have our analysis finalized in several weeks so that it can be reflected in our 10-K.

Trade and preliminary net earnings before the goodwill and other intangible assets impairment charge, the preliminary fourth quarter 2008 net loss was $172 million, compared with the net loss of $32 million in the last year’s fourth quarter. On EPS basis, our preliminary net loss per diluted share was $1.74 for the fourth quarter, based on average diluted shares outstanding of $99.2 million. Last year’s fourth quarter loss per share was $0.32.

As mentioned, fourth quarter of 2008 results included restructuring costs of $68million, related to a workforce reduction program and the closure of several manufacturing facilities and numerous distribution locations. This restructuring impairment charge is $42 million after tax or $0.42 per share. We expect that these restructuring actions will generate a total of over $125 million of cost savings during 2009. The fourth quarter net loss also reflected a $93 million pre-tax valuation allowance, $61 million after tax, associated with the uncertainty regarding the realization of our state deferred tax assets. This item affected our tax benefit provision for the quarter, and I’ll discuss this issue in more detail in a few moments.

As both Bill and Jim mentioned, even before the latest restructuring, we had taken steps early in the year to cope with the worsening business environment. Let me describe what we’ve done to manage overhead, capital spending, and our balance sheet. I will start with overhead.

Selling, general, and administrative expense or SG&A for the fourth quarter was down $9 million or 9%, compared to the fourth quarter of 2007. For all of 2008, SG&A totaled $380 million, down $28 million or 7% from the year before. SG&A will be reduced further this year as the cost reduction program we implemented in December of 2008 becomes fully reflected in our 2009 results.

Although the steps we have taken are significant, we are prepared to take additional actions as required by business conditions. Interest expense for the fourth quarter was $27 million and totaled $86 million for the year. We are currently anticipating that our annual interest expense will be about $150 million in 2009. And this increase is due to the new 10% renewable notes, higher bank fees, and additional financing fee amortization, and right offs associated with terminated credit facilities.

Traded taxes, the effective tax benefit rate was close to 0% for the fourth quarter of 2008, which brought our year-to-date rate to about 19.5%. This unusually low tax benefit rate reflected the establishment of an additional $93 million valuation allowance, $61 million after tax in the fourth quarter to provide for the uncertainty regarding the realization of our deferred state tax assets within the applicable time limits dictated by state law for each state where we have an NOL carry forward. This additional reserve and in combination with our previously established valuation allowance has resulted in a total valuation allowance equal to 75% of our deferred state tax asset. Like goodwill, the establishment of evaluation allowance to be a non-cash charge that has no impact on current cash flow or debt covenants. Looking ahead to 2009, we anticipate a more normal tax benefit rate of 37%, depending on the mix of worldwide income.

Turning to capital spending, capital expenditures totaled $29 million in the fourth quarter, compared to $119 million in the same quarter of last year. This significantly lower level of CapEx reflects the substantial completion of a number of strategic investments including two, new low cost wallboard plants in the US and a new state-of-the-art paper mill. CapEx for 2008 totaled $238 million, down from $460 million in 2007. Given the higher level of investment that we’ve made in our operations for the past several years and the current soft business conditions, we plan to limit capital spending in 2009 to approximately $50 million. This represents a reduction of $188 million, compared to 2008 level.

Regarding the cash and debt levels, our cash balance, excluding restricted cash as of December 31st, was $471 million, compared with $159 million at the end of the third quarter. Increase in cash reflected the proceeds from the sale of the convertible notes in November plus cash used for operations and to pay down borrowings on our revolving credit facility.

Total debt was $1.84 billion as of December 31st, compared with $1.46 billion at the end of the third quarter. The increase in debt at year-end reflected the issuance of $400 million or 10% contingent convertible senior notes due 2018. This new debt, which is unsecured and has no restrictive financial covenants, has also provided us with a meaningful amount of additional liquidity. Our unsecured revolving credit facility, which contains several restrictive financial covenants, was amended and restated on January 7th to a new secured facility with only one financial covenant. That covenant, a minimum fixed charge coverage ratio of 1.1x EBITDA less CapEx to cash interest, only applies if there is less than $75 million of availability on the facility. As part of the amendment and facilitated by the liquidity added by the convertible note issuance, we eliminated a separate $170 million accounts receivable bank facility, and paid of $190 million of borrowings under the previous unsecured facility.

Finally, I should mention that in the fourth quarter, USG adopted, on a company-wide basis, the average cost method of inventory valuation, switching from the LIFO method in the United States. This change was made because it simplifies our accounting since all worldwide inventory will now be on a single costing method, it provides better comparability to our peers, and it conforms to proposed international financial reporting standards. The impact of this change was a restatement of prior quarters’ operating profit by a total of $18 million. And a supplemental schedule has been attached to the press release to show this impact by quarter.

In summary, these are truly extraordinary times for our industry. December's annualized level of housing starts recorded just last week was a record low of 550,000 units. This level represents a decline of 73% from the peak starts of $2.07 million in 2005. It is also more than 45% below the previous worst single downturn, which was 1991, when starts fell 44%, from 1.8 million to one million units.

In addition to the weakness in housing starts, we are also seeing an unprecedented weakness in repair and remodeling, a segment that we can't recall ever experiencing negative growth for more than one year, much less three or four years.

In this environment, we have taken decisive action. Since the beginning of the downturn, we have closed or curtailed six billion square feet of wallboard capacity, eliminated 3,650 salary and honorary positions, closed or consolidated 66 L&W distribution locations, implemented over $ 300 million in annualized cost savings, raised over $ 1 billion in new capital, and put in place new low cost manufacturing and distribution capacity.

Today, we have the most efficient modern manufacturing base and strongest distribution business in our history. We have lowered our breakeven levels significantly and put in place a capital structure to manage through this extreme downturn. What we don’t have today is much demand for our products, but that will change eventually. And when it does, we expect to still be here, a leader in our businesses. And when the upturn in the economy finally arrives, we'll be lean and mean and extraordinarily well positioned to capture the profitability and cash flow that comes with recovery.

Now, we'll be happy to answer any questions you may have.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator instructions) And our first question comes from Dan Oppenheim from Credit Suisse. Please go ahead.

Dan Oppenheim – Credit Suisse

Thank you very much. I was wondering – it's good to hear your thoughts in terms of the development through ’09 on the residential side. Can you talk a little bit of what you’re thinking on the commercial side? And then also, how would your plans – for this change, if you were to think about 2010 being another tough year in terms of just capacity or in terms of (inaudible)?

Jim Metcalf

Our projections for 2009 on the commercial side are around 14% for new non-res. That number probably could go down as the year unfolds. What we really do on commercials, we look at job growth and everyone knows where the job's are headed right now. So on 2010, housing starts – we're anticipating an up-tick on housing starts in 2010. As Rick has mentioned, we're at historic low levels right now. We still think that commercials going to be fairly weak on 2010.

Dan Oppenheim – Credit Suisse

Great. Then I guess the other question was in terms of the – if you would to look at the – if you were to change your view in terms of the up-tick in 2010, would you start to think differently about capacity?

Jim Metcalf

About capacity?

Dan Oppenheim – Credit Suisse

Right. In terms of overall selling down capacity, overall if you think it's going to last long?

Jim Metcalf

We have a plan, as I mentioned in my prepared comments, we look at the market every month. Housing starts have about three and a half month leading indicator on wallboard opportunity. So what you're seeing now is what the opportunity for wallboard would be in three and a half months. So we really track starts – one other thing we do, we network with our customers and get their projections as well. Just as a metric, a 100,000 housing starts upper down is about 800 million feet of total wallboard opportunity for the industry. So you can put your number on what you think housing is going to be next year and it's about 800 million feet of demand.

Next question.

Operator

Our next question comes from Michael Rehaut from J.P. Morgan.

Michael Rehaut – J.P. Morgan

Hi. Thanks, good morning.

Bill Foote

Hi, Mike.

Michael Rehaut – J.P. Morgan

First, I know you went through some of the details in terms of the liquidity and the recent note offering and amendment from the revolver. I think the stock price still reflects broad concerns around the liquidity. And I guess you mentioned that the interest expense is going to be a significantly higher hurdle for you guys in ‘09. I was wondering if you could just walk through, though, what your thoughts are there, if you plan to do anything else potentially to improve your position in ’09. And maybe just give a full rundown of where you are in terms of the revolver and how much you’ve drawn on it and other sources of shorter term financing.

Rick Fleming

Sure, Mike. It’s Rick Fleming. I’d be happy to talk about it. We have nothing drawn on the revolver. So its entire availability absent the letter of credits here presently against it is available. As you know, if we borrow it down to the last $75 million, we do have the covenant that springs in. But you are also aware that absent that spring in covenant, there is no financial covenant of a restricted nature in the existing revolver. So that was part of our recasting of the revolver. So in that regard, it’s available liquidity. Relative to the actions we are taking to continue to improve our financial flexibility, I think you’ve heard many of them before, but we have a second ship mortgage that we are working on, which we will expect to close in the first quarter for the new ship that’s being delivered. And that would be approximately $35 million. And that will be fine tuned as we get to the appraisal at the end of the quarter, and the ship is appraised at fair market value. But that seems to be the zip code we’re in.

We also have a credit line for our CGC, our Canadian facility we're working on, we've about $40 million. We are looking at surplus properties. I won't give you a target on that one yet, but we have some excess land, obviously, as we've been shutting down plants and property that we think can bring in additional liquidity. And we have a very aggressive program working capital, which we think can bring in substantial liquidity as we bring inventory management techniques to the existing supply chain, actually, that we have.

So we feel pretty good about the situation as mentioned up and drawing the revolver. You heard the cash level at year-end $471 million. So at this point, as I say, we feel that we’re able to weather the downturn and get to the other side with adequate liquidity.

Michael Rehaut – J.P. Morgan

Okay. And just to make sure I understand the, $35 million on the ship mortgage and the credit line of $40 million, would that just be additional dry powder? You wouldn't necessarily – that wouldn’t increase your cash position?

Rick Fleming

That would be additional dry powder, although the ship mortgage temps would be a funded activity. So that would actually be cash in the tel [ph], but the $40 million for CGC would be dry powder.

Michael Rehaut – J.P. Morgan

And the letters of credit right now are about $80 million?

Rick Fleming

They are.

Michael Rehaut – J.P. Morgan

Okay. Second question, just with L&W, you obviously continued to do restructuring there. But even absent of that, obviously, the challenges to the margins remain. You said that you expect the benefits to start flowing through in ’09. But I was wondering if you can give us an idea in terms of annualized cost savings from those actions?

Jim Metcalf

Yes. This is Jim Metcalf. What we're anticipating is around $50 million in cost savings for the actions that we've had in 2008. L&W also is – they're fine tuning their operations on a daily basis, with shipments that are close to the contractors. And what's nice about L&W, a lot of our locations are leased so we can move in and out of markets, so fairly efficiently. We wanted at the end of the year is to get prepared for 2009. L&W is very focused on receivables as well, and we think that they're in a position with their footprint right now to weather the storm.

Michael Rehaut – J.P. Morgan

That $50 million is just for L&W?

Jim Metcalf

Yes it is.

Michael Rehaut – J.P. Morgan

Okay. Last one if I could, just on the US North American Gypsum. Obviously, you’ve continued to have some success in repairing your price, but the margins continue to stay, excluding the restructuring charges around negative 12% in the last couple of quarters, negative 11, negative 12. Any type of view, obviously, you're getting hit on the other side by negative leverage. But any additional type of actions, I guess, maybe from the 4Q restructuring charges that might help repair that margin in ‘09. Certainly, you're still getting a drag from volume, but any type of thoughts there you could share with us?

Jim Metcalf

Yes. First on wallboard itself, actually are spread throughout 2008 improved. So with the price improvements that we – we started out the first quarter of 2008 around the $104, and as I mentioned we're around $119 in 4Q. So even with inflation, we have some cost pressures throughout the year. Our margins on wallboard, the product category, did improve in the fourth quarter and more positive. We have taken very aggressive measures in December, we focused in three areas on the gypsum business. We focused on positions. As you’ve seen in our previous announcements we have taken out approximately a thousand positions company wide. Majority of those positions were in the US gypsum organization.

We also focused on programs. We have stopped spending. I mean quite frankly there's some programs that we aren’t – that we backed off on some of our sponsorships, our marketing sponsorships. As Bill mentioned, we cut aggressively in some areas, some back office areas. So were very focused on the programs. And we really scrubbed the portfolio. We looked at products that were not contributing from a profitability standpoint.

So it's really three areas, positions, programs, and the portfolio. And we took very aggressive action. And we feel that the $125 million cost savings program, a large percentage of that, would be hitting the gypsum results.

Michael Rehaut – J.P. Morgan

Okay. Just to make sure I have the numbers right, I thought the North American Gypsum extra charges was about $53 million loss, which is a negative 12.3 margin for the quarter or 12.8, do I have that right?

Jim Metcalf

Yes, that’s right.

Michael Rehaut – J.P. Morgan

Okay. That is a little bit worse than the last quarter at restructuring, so. Okay. I just want to make sure I was looking at that right.

Jim Metcalf

Yes. That includes deterioration of course in CGC for example and some of the other non-US gypsum operations.

Bill Foote

Right. You look at US Gypsum, Mike, it's actually a little bit better after restructuring, quarter-on-quarter.

Michael Rehaut – J.P. Morgan

Okay. All right. Thank you.

Rick Fleming

And Mike, it’s Rick. You’ve focused on $150 million of interest and that was a P&L number. I should just give a running, your precise model on cash flow, I should mention to you and your colleagues that cash interest is $138 million. The difference is deferred financing fee, amortization, and the write off of financing fees associated with the terminated credit facilities.

Michael Rehaut – J.P. Morgan

Okay. Perfect. Thanks, Rick.

Operator

Our next question comes from Garik Shmois from Longbow Research. Please go ahead.

Garik Shmois – Longbow Research

Hi. Good morning. I was wondering if you could talk more about wallboard prices, just within capacity utilization rates, where they are. I’m just wondering how comfortable you are in your ability to hold pricing in 2009?

Jim Metcalf

That’s a daily chore for us. We were fairly successful in 2008 at getting price up. And we feel we have a value preposition as a company even with all the reductions I just mentioned, we are the industry leader, and we provide value to our customers. And we have a price increase as we speak in the market. And we are going to continue to return to profitability on price.

It's not an easy task in this type of capacity utilization. But if you go back 12 months, we were running in the 60s and 70s and did get some price improvements. So we're going to be extremely aggressive on price improvement. What we also look at is – a key metric is our wallboard gross profits, so were looking not only at gaining price improvement, but also reducing our costs, our factory costs so our spread improves.

Garik Shmois – Longbow Research

Is it possible to quantify what the pull back and some raw material cost and possibly in energy. Is it possible to quantify the maybe potential impact per thousand square feet manufacturing?

Jim Metcalf

We saw from 3Q to 4Q, some as I said the cost did mitigate. We're looking at all raw material costs and we are hedged on our natural gas. But other raw material costs, we’re starting to see some improvement. And we do not disclose that right now, but we have a very aggressive strategic sourcing group that sits down with each one of our vendors in making sure that were getting proper pricing for all of our raw materials. But we’re hoping we see some headwind there as well.

Garik Shmois – Longbow Research

Okay. And just lastly on the natural gas, I think at the end – and we last talked last quarter, I think it was it was – you were at 50% hedged. I think 50 per MCF for ’09. Can you just give an update where you stand right now?

Bill Foote

Those are still good numbers, but half hedged for ‘09 in the mid $9 per deck of therm area. If you look at the futures curve right now for ‘09, it's about $5.00 a deck a therm share.

Garik Shmois – Longbow Research

Great. Thanks a lot.

Operator

Our next question comes from Kenneth Zener from Macquarie. Please go ahead.

Kenneth Zener – Macquarie

Good morning.

Jim Metcalf

Good morning, Ken.

Kenneth Zener – Macquarie

Just to explain, I think, natural gas, can put a little more – you guys are 50% hedged. Is that hedged out like your old forecast or is that in it’s actual absolute volume that your tied to in terms of the natural gas hedge?

Rick Fleming

That’s basically today's level of consumption.

Kenneth Zener – Macquarie

Okay. So at today's level. And then, so the other pieces of paper that goes in and that’s – I guess you don’t want to kind of disclose that change that you guys had on a quarter-to-quarter?

Jim Metcalf

We've seen some paper prices have started to come down.

Kenneth Zener – Macquarie

So I guess given that utilization rates are still up, can you just talk about as you guys reduce your cost and pricing. It obviously bounced back from where it was. Can you talk about how you think the relationship is between the falling cost position and the price that the industry is going to seek?

Jim Metcalf

Can you repeat the question please?

Kenneth Zener – Macquarie

Sure. As your guys cost position declines, obviously, that would somehow mitigate the need for end of market pricing to go up. Can you talk about how you think that’s going to impact the pricing as the industry's cost curve declines?

Jim Metcalf

Okay. Throughout the year we really did not have our pricing discussions with our customers because of raw materials. We talked about the profitability of the industry. We talked about how we invest in research, marketing, and the things we provide our customers. So we wanted to make sure – because you can live or die by that sword. That’s going to make 2009 a little trickier on price improvements for us because there is always a competitive situation. But we feel that with the value that we provide the customers, as Bill mentioned, our on time delivery, our invoice accuracy, the things we provide that are very important to our customers that they are going through this difficult time with us, that even with raw materials, hopefully giving us some favorable results, we still will be able to improve prices slightly in this very tough market. At the end of the day, the industry needs to return to profitability.

Kenneth Zener – Macquarie

All right. And I guess the restructuring benefit that you guys are expecting, the $125 million. How is that split between SG&A and COGS?

Rick Fleming

It’s Rick Fleming. The SG&A component, just to give you a rough rule of thumb last year with our one restructuring program, we had a reduction in SG&As, as you could see, of $28 million. The one we did in December was almost a double dose if you will. So expect twice that reduction in SG&A, or obviously close to $56 million. As a rule of thumb, and the balance will be in cost of sales.

Kenneth Zener – Macquarie

Okay. So that’s about – okay, half and half. And then I guess with ceiling, with the forecast for non-res going down, obviously, in ceiling it sounded like – you said 20% quarter-over-quarter decline in tile and 40% in grid, is that correct?

Rick Fleming

Yes.

Kenneth Zener – Macquarie

With the margins, I realized they were slightly positive when you add back in the restructuring. How do you guys think about as that grinds through ‘09 in terms of your operating profit – margins?

Jim Metcalf

We have gone through a very tough time in the ceilings business going back to 2001 when the market was very – the commercial market was very, very tough. And we've done it before, and we’re going to face this market in the same way. We’re going to – we've reduced costs as I have said. We've been very aggressive in our restructuring in December. We are going to continue to focus on what we do best, just call on our architects, support our commercial distributors, and get as many job specs as we can. Through the timeframe that I mentioned, 2001 to 2004 in that very tough commercial market, we did get price improvement. So we feel there’s still an opportunity to continue to focus on our margins. They are going to be under pressure, but we’re going to get some help with natural gas and some raw materials because those affect the ceilings business as well.

So we have a two-year – we’re looking ahead of this two years, but we’ve done this before. And we’re going to try to focus on the segments that are going to be profitable. There’s going to be some spending, hopefully, in schools that we see over the next 24 months with some of the stimulus packages that we see. We’re very focused on school spending, and being all over the ceiling business there.

So I’m not saying it’s going to be an easy market, but we’re prepared for it. We have our two plants, our two main plants. We have done a lot of work there, Rick says, about our capital spending over the last few years. We have very efficient operations. And we have a very focused business unit that’s just focused on the ceilings business. And I think they’re the best in the industry.

Kenneth Zener – Macquarie Research

I appreciate that. Is the ceiling–

Jim Metcalf

Ken let me just – let’s jump on this to another caller.

Kenneth Zener – Macquarie Research

That’s fine.

Jim Metcalf

Queue on it or you can get back to me if you would.

Kenneth Zener – Macquarie Research

Appreciate it.

Jim Metcalf

Appreciate it.

Operator

Our next question comes from Jack Kasprzak from BB&T Capital Markets.

Jack Kasprzak – BB&T Capital Markets

Thanks. Good morning, everyone.

Jim Metcalf

Hi, Jack.

Bill Foote

Hi, Jack.

Jack Kasprzak – BB&T Capital Markets

Do you guys have an estimate for where industry capacity is. Or are there some capacity closures, permanent closures announced in the last six months or so?

Jim Metcalf

We’re looking at the rearview mirror a little bit. We feel the industry is running right now around – we’re at 51, the industry is probably at 52, 53. The reason we’re a little lower is we turned on our Washingtonville, Pennsylvania plant late last year. But just to give you an overview of what has been taken out. In 2008, USG took out approximately 1.75 billion feet. And those plants were Boston, Fort Dodge. And then we did a line closures at Baltimore, Jacksonville, Stony Point, and Plaster City.

A competition in that timeframe took out approximately three billion feet of capacity in 2008, with an additional of about a billion feet announced for 2009. So if you look at what has come out of the industry, the last really year and a half is almost seven billion feet of capacity. We’re projecting the industry in 2009, the total industry is going to be running – our current projection is around 20.5 to 21 billion feet. So this is the lowest opportunity in demand we’ve seen, as I’ve mentioned, since the early 90s.

Jack Kasprzak – BB&T Capital Markets

20.5 to 21 billion square feet is ‘09 shipment or volume estimate for the industry. And the level of absolute capacity in billions of square feet, if the industry has taken off six or seven, but there’s been some additions that we’re in the 36 billion square-foot range of capacity?

Jim Metcalf

No. You’re around 35.

Jack Kasprzak – BB&T Capital Markets

Okay, 35. And so that’s obviously still a big gap. And you mentioned earlier about scrubbing your portfolio. I mean is that ongoing on the wallboard side? Could you see taking more wallboard capacity out given this gap?

Jim Metcalf

As I said in my prepared comments, we monitor this every month. We look at our projections. We look at our network optimization on lowest delivered cost. And if there’s another down leg in demand, we are prepared to do that.

Jack Kasprzak – BB&T Capital Markets

And quickly, to the degree there is any, I guess there would be some, ‘09 CapEx estimate and ‘09 D&A?

Jim Metcalf

That’s $50 million for the CapEx DNA runs around $180 million.

Jack Kasprzak – BB&T Capital Markets

Okay. Great. thank you very much.

Jim Metcalf

Thank you.

Operator

Our next question comes from Patrick Archambault from Goldman Sachs. Please go ahead.

Patrick Archambault – Goldman Sachs

Hi, yes. I just wanted to follow up a little bit on some of the cash questions. On the working capital front, it seems like for the fourth quarter, it was a small benefit to you. I think maybe $20 million or $25 million by my estimate. Would you agree with that? And would that be, perhaps, maybe the trend rate we should think about on an annualized basis as we get into ’09, maybe as a percentage of sales or something, how would we dimension that, would be my first question.

Rick Fleming

The fourth quarter numbers, if you’re just looking at the balance sheet, reflect the conversion from FIFO to – from LIFO to FIFO. So you have to take that into account. So having said that, the actual reduction in inventory levels was a higher number. And we have a great initiative right now in that area. We still believe we can take more out of inventory, and of course we see both will trend with the level of business.

In terms of a target for working capital, we are in the process of setting that right now. If you look at just the ratios we’ve been running, it’s close to 13%. We think once again, we can do better, and we have a team of people working hard to improve upon that by at least a half a point.

Patrick Archambault – Goldman Sachs

Okay. Great. That’s very helpful.

Rick Fleming

And LIFO reserve, I should mention, it’s a $72 million balance sheet item. So take that on account when you look at the working capital at year-end. When switching from FIFO – from LIFO to FIFO, it would’ve increased book inventories by that amount, but it wasn’t cash.

Patrick Archambault – Goldman Sachs

Okay. All right. On just one follow up on cash, have you given the cash costs that you guys will expend this year just for your restructuring program?

Rick Lowes

Yes. It’s Rick Lowes, Controller. We’ve accrued approximately $50 million for the cash costs for the restructuring program. Most of that will be paid in the first quarter.

Bill Foote

Accrued as of year-end.

Rick Lowes

Accrued as of year-end.

Patrick Archambault – Goldman Sachs

Okay. So the balance being – the balance of cost being, I guess, it’s non-cash write downs and that sort of thing.

Rick Fleming

In ‘09, if we had more restructuring, there’d be more restructuring costs. But for what we have on the table right now, we’ve accrued for it.

Patrick Archambault – Goldman Sachs

And I guess, last one, in terms – on the cash front. Have you said what your minimum operating cash is just for excluding restructuring, just for day-to-day ops?

Rick Fleming

So our worldwide cash balance that we have on our – any given day or period of the month?

Patrick Archambault – Goldman Sachs

Yes.

Rick Fleming

Roughly is $75 million to $100 million.

Patrick Archambault – Goldman Sachs

Yes. Okay. All right. And I guess, one last kind of housekeeping one, the other income loss of, I believe it was $12 million for the quarter, can you just elaborate a little bit on that?

Rick Fleming

I’m going to have our controller explain this to you. You’re going to get into convertible accounting. He’ll do it very briefly.

Rick Lowes

This might be something easier to do offline, but $10 million of that really has to do with the convertible debt that we issued in November. We have to revalue that. It’s a change from the issue date to the year-end. And the derivative of that was $20 million and half that got reversed (inaudible), but at $75 million. I better take you offline with that. I may have to adjust to–

Rick Fleming

Rick will talk you through, the (inaudible).

Patrick Archambault – Goldman Sachs

Okay. Great. Those were the questions I had. Thanks.

James Bencomo

Thank you. Hilda, we’ll take two more calls. We’re a little past the top of the hour, and then we’ll make our concluding remarks.

Operator

Very well, Mr. Bencomo. Our next question comes from Jim Barrett from CL King & Associates. Please go ahead.

Jim Barrett – CL King & Associates

Good morning, everyone.

Jim Metcalf

Good morning, Jim.

Jim Barrett – CL King & Associates

Jim, considering your reduced loss ex the restructuring charge in Q4 in US Gypsum. Is that a reasonable expectation as we move through ‘09 given your view of construction activity that the losses will be lower than they were in the corresponding period in ‘08?

Jim Metcalf

Well I’ll tell you, I sure hope it is.

Jim Barrett – CL King & Associates

All right.

Jim Metcalf

We are very focused, Jim, on taking out, as we’ve talked about, excess capacity, growing our spread on wallboard. And what we’ve also done is we have re-organized, two years ago, with a major focus on our non-wallboard products. That’s joint treatment, DUROCK, FIBROCK. We have focused business units there. So this isn’t just looking at wallboards. We want to make sure we’re getting our unfair share of the products that – also contribute. So we are starting the year with a positive gross profit compared to last year, so that’s the good news. The other news is, we have a real volume issue. As we indicated there, there’s just not a lot of demand out there. And we’re working real hard to improve the trends.

Jim Barrett – CL King & Associates

And then, secondly, given where we are in the cycle, can you generally describe the pricing discipline you’re seeing in the wallboard industry, and the ceiling industry, and for that matter, for complementary products, any surprises there?

Jim Metcalf

Well I don’t want to talk about competition. But I will say, what we are doing and we have a very disciplined approach, our pricing policies are done at the corporate office. It’s done at the most senior level. We make sure that we have constant communication with our customers. And we have that same discipline not only for wallboard, but actually we have, as I mentioned a few minutes ago, we have that same discipline on ceiling tile as well. So we are going to continue to grow our pricing in all product categories and (inaudible) discipline we’ve done over the last few years.

Jim Barrett – CL King & Associates

Thank you very much.

Jim Metcalf

Thanks, Jim.

Operator

And our final question comes from Ivy Zelman from Zelman & Associates.

Ivy Zelman – Zelman & Associates

Hey, good afternoon, guys. Maybe I missed it, but quickly on the housing starts, your 20 billion to 21 billion, and 20.5 billion, what does that assume for ‘09 annual starts? And I guess the question Jim is, what would constitute another leg down in order for you to consider, or at that point, reconsider taking out capacity? That’s the first question. If you want to grab that one, I have a follow up please.

Jim Metcalf

Thank you, Ivy. In our projection we have 650 for this year for 2009 on housing starts, and as I mentioned earlier, a hundred thousand starts is about 800 million feet of opportunity. We also look at – we have R&R down about 9%, and commercial down just short, we’re in the mid-teens.

A leg down would obviously – a hundred thousand housing starts. If you look at 800 million, we’re about a third of that, so you can run that math. Really, it’s what we’re looking at is also regional demand. The demand is very, very different, obviously, in the southeast than it is in the far west. And that would dictate to us what plants would come out. We do have a list of the plants, our mid-range plants that would come out with any type of demand change. But the 20.5, we could probably get down to 20 and we would still have the network we have. But we’re ready for the next leg down if necessary.

Ivy Zelman – Zelman & Associates

Thanks Jim. Second question that springs up something again, I apologize, I was trying to listen to the whole thing, but one of the challenges that L&W you highlighted is, at least I think you mentioned that you’re focused on receivables, we continue to see, unfortunately, so many distributors being challenged to get working capital advancements. We also see, of course, builders unable to meet obligations. And just I don’t know if you discussed bad debt reserves and what you have expensed this quarter versus last quarter, and what you’re seeing in trends in ability to collect on those challenging receivables.

Jim Metcalf

Yes. Our receivables, just on the L&W side, we have had a slippage on a couple of days. Our bad debt is surprisingly – well not surprisingly, but we’re pleased that it’s very, very low. Historically, we’ve been very good on bad debt. We watch it everyday. We have field credit managers in the field with contractors. We’re very careful about any type of long term builder programs. All the builder programs have been reset at the beginning of this year. The good news about L&W, we really focused on, kind of the, cream of the crop on both commercial and residential contractors. And we have a very specific instructions in the field on lean rights and what we do with collecting our money. So it is a challenge. L&W is on the frontline with the contractors, with a high percentage of their business being in the commercial business, that does give us an advantage.

Ivy Zelman – Zelman & Associates

Did you guys have reserves for 2009 on bad debt expense increasing?

Rick Lowes

It’s Rick Lowes again. We do. Actually, our reserve balance overall in the company is in the $15 million to $16 million range. And as Jim says, we have great experience throughout our whole business and have very little slippage in our days outstanding in 2008. We see that not changing in 2009.

Jim Metcalf

We watch it like a hawk, Ivy.

Ivy Zelman – Zelman & Associates

Yes. It’s hard with a lot of companies failing, is what I guess I’m trying to focus on. And lastly, I’ll sneak it in and I appreciate you guys including me. You mentioned new products, the DUROCK Next Generation and FIBROCK. And obviously, you guys are seeing nice gross margins or improvement there. One of the challenges you’re going to have as all companies, if ’09 is as challenging as we all know it could be, is I think is one question alluded to, how do you keep pushing price? And with utilizations down as much as they are, aren’t you at risk of the market just not being able to digest that? And, if that’s the case, is there a contingency plans in place? And I guess that relates to more headcount reductions, or what’s the next phase unfortunately if there’s a bare case. Can you kind of walk us through how you guys are thinking about it?

Jim Metcalf

Well as we’ve said, we’ve been on this on the gypsum side since mid-2006. So we have actually trigger points that I’m not going to get into this morning on our business of what would have to happen. Along with our trigger points, we have action plans that would follow. We had trigger points established in 2008 that tripped. And that’s why we came around at the back half of the year with our major restructuring.

On the price side, it is challenging. I don’t disagree with you. We’re not only focused on the price of each product, but we’re focused on the spread. And I think as we continue to give our customers some new products and some value added products, it gives them something different to talk to their customers about in this very tough market. So we do have a contingency plan with trigger points, and it’s in the drawer.

Ivy Zelman – Zelman & Associates

Hey, Jim, one more sneaking in. Commercial, you guys talked about how it’s similar. You went through the tough times and the tech bust and commercial markets imploding. What scares you most about commercial because it’s obviously very different with companies not meeting debt obligations and credit markets really tight or even unavailable, where can you be wrong on commercial? And therefore, what are you looking for to watch it every month or day? Or how do you gauge that market?

Jim Metcalf

Well one number we look at is the job growth or lack of growth. I mean, when the industry is losing four, five hundred thousand jobs in a month that is a critical issue for us, particularly on office construction. Commercial’s broken down in, as you know, many segments, but we still think the public – some hospital work, which is the ceilings business as well as our wallboard business, and schools are still going to be fairly, fairly robust in this market, particularly if there’s any type of a stimulus package. But on the ceiling tile, we have about an 18-month lag. So we’re watching job growth, we’re watching the credit markets. And if you look at our commercial business, it’s about 13%. The new commercial business is about 13% of our opportunity.

Ivy Zelman – Zelman & Associates

Okay. Thanks, Jim.

Jim Metcalf

You’re welcome.

Bill Foote

Thanks, Ivy.

James Bencomo

Thanks, Ivy, and thanks for all the questions. Bill, some concluding comments.

Bill Foote

Yes. Thank you all for your questions. As we look to the remainder of 2009 and through into ’10, we expect both the residential and non-residential markets to remain very weak. The residential market is burdened with the very high level of unsold homes, tight mortgage policies, and consumer confidence levels that are very negatively affected by the recession.

The commercial market, as we have just been talking, is expected to decline as well as the result of the same forces, tight credit and job losses. Accordingly, we’re planning for a decreased demand for products and services in 2009. And as Jim as well said, that’s where we set our plans for decreased opportunity. And we have contingency plans if it’s even weaker than that. We will remain focused on four things that we believe are essential to get through this.

One is serving our customers; two is our financial flexibility; three is our operational efficiency and scaling our operations; and lastly, cost control. These are all factors that are within our control. We’re doing everything we can to manage – actively manage our way through this and stay on top of those things we can control. As recently as three years ago, this company was structured to service domestic market – housing market of 2 million homes. Demand today is at 30% of that level. With commercial now declining rapidly and weak international markets.

We’ve made many, many changes in the business. We believe we’re capable of riding out this downturn and well positioned to take advantage of a rebound. The core businesses are solid. We have the best customer relationships, the best brands, the best manufacturing assets, the best distribution platform, and the best people. We plan to endure this downturn and be positioned to take advantage of the upcoming morning – dusk.

Thanks for your time today and your support of the company.

James Bencomo

Thank you, Bill. That will conclude our conference call, there is a taped replay of the call that’s available starting in just a few hours by dialing 1-888-843-8996 and entering the pass code 22959595. And also understand there were some difficulties with our webcast today. If you had trouble accessing our website, I apologize for that. There is a replay that will be available on our Web site as well as a telephonic replay. Thanks so much again, and appreciate you joining us.

Operator

Thank you, ladies and gentlemen. This concludes your conference call. Thank you for participating. You may now disconnect.

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Source: USG Corporation Q4 2008 Earnings Call Transcript
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