USG Corp.'s long-term plans call for a revival of the company's L&W Distribution arm, USG's president and chief operating officer said today.

James Metcalf, speaking in New York at the Stephens Inc. Fall Investment Conference, listed the profitable growth of USG's distribution arm as one of its three key opportunities to strengthen the company's core in the long term. "We will continue to grow L&W at the appropriate time," said Metcalf, whose presentation was webcast.

As with other parts of USG, L&W has been battered by the housing recession. It recorded an operating loss of $73 million for the third quarter, swinging from a $5 million profit in the year-earlier quarter. According to its financial reports, L&W has closed 97 locations in recent years: six in 2007, 54 in 2008, 15 in the first nine months of 2009, and another 22 in October. That leaves it with 162 distribution centers.

Company-wide, USG posted a net loss nearly triple that of a year before, to $94 million from $36 million, as sales tumbled 31.5% to $822 million from $1.2 billion. But during his presentation to analysts, Metcalf stressed the company's and the market's potential.

"The drama is over in housing," he said. "... Our balance sheet is strong, and we can eather the storm. The long-term fundamentals are positive."

Metcalf described USG as special in the building materials business because of its vertical integration. USG controls every part of its production process, from quarries and fabrication plans to the 1,400 delivery trucks in its distribution network.

In the near future, he said, the residential housing market looks likely to stir back to life, while the repair and remodeling market will snap out of a four-year downturn. Meanwhile, the commercial market is under extreme pressure. "2010 is going to be a very challenging year in the commercial construction segment," he said. Metcalf noted that while commercial sales account for just 14% of USG's total wallboard demand, it figures in two-third of the distribution business. It's possible commercial prospects won't brighten until 2011 or 2012, he said.