USG's IRS audit prompts $25 million 2005 reported earnings, $105 million net cash outflow increase

By Caroline Salls

Pittsburgh, Sept. 12 - USG Corp.'s regular Internal Revenue Service audit for its federal income tax returns for 2000 to 2002 will result in a $25 million increase in reported earnings for 2005 and a $105 million increase in net cash outflows by the end of the year, according to a company news release.

Substantially all of the additional tax liabilities resulting from the audit will be covered by liabilities currently recorded on USG's financial statements, the release said.

In addition, a portion of the company's recorded income tax contingency reserves is no longer necessary. This will result in a $25 million increase in consolidated net income in the third quarter.

The cash outflows will include $47 million directly related to the 2000 through 2002 audit and $58 million related to 2003 and 2004.

A substantial portion of the outflows for the audited years and all the outflows for 2003 and 2004 stem from the IRS disallowing the company's current deduction of contractual interest on debt incurred before its bankruptcy filing in 2001, according to the release.

In addition, the audit is expected to result in $12 million in net cash outflows for 2000.

Payment of these amounts will be made from current cash balances. USG had $1.2 billion of cash, cash equivalents and marketable securities as of June 30.

USG, a Chicago-based building materials company, filed for bankruptcy on June 25, 2001 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 01-02094.

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