Equity Method Investments

Equity method investments were as follows:



	December 31, 2014			December 31, 2013
(millions)	Carrying Value		Ownership Percentage	Carrying Value		Ownership Percentage
USG Boral Building Products	$	689	50%	N/A		N/A
Other equity method investments	46		33% - 50%	$	73	33% - 50%
Total equity method investments	$	735		$	73

Investments in USG Boral Building Products (UBBP)

On February 27, 2014, we formed the 50/50 joint ventures, USG Boral Building Products Pte. Limited, a company organized under the laws of Singapore, and USG Boral Building Products Pty Limited, a company organized under the laws of Australia, with Boral. These joint ventures are herein referred to as UBBP. UBBP manufactures, distributes and sells certain building products, mines raw gypsum and sells natural and synthetic gypsum throughout Asia, Australasia and the Middle East (the "Territory"). The products that UBBP manufactures and distributes include products for wall, ceiling, floor lining and exterior systems that utilize gypsum wallboard, referred to as plasterboard in the region, mineral fiber ceiling tiles, steel grid and studs and joint compound.

As consideration for our 50% ownership in UBBP, we (i) made a cash payment of $515 million to Boral, which includes a $500 million base price and $15 million of customary estimated working capital and net debt adjustments, (ii) contributed to UBBP our subsidiaries and joint venture investments in China, Singapore, India, Malaysia, New Zealand, Australia, the Middle East and Oman, see Note 19, and (iii) granted to UBBP licenses to use certain of our intellectual property rights in the Territory. We funded our cash payment with the net proceeds from our October 2013 issuance of $350 million of 5.875% senior notes and cash on hand. In the event certain performance targets are satisfied by UBBP, we will be obligated to pay Boral scheduled earnout payments in an aggregate amount up to $75 million, comprised first of $25 million based on performance during the first three years after closing and then up to $50 million based on performance during the first five years after closing.

We account for our 50% investments in UBBP using the equity method of accounting, and we initially measured their carrying value at cost of approximately $676 million as of February 27, 2014. Our existing wholly-owned subsidiaries and consolidated variable interest entities that were contributed into the joint venture were deconsolidated resulting in a gain of $27 million, which is included in our consolidated statement of operations for the year ended December 31, 2014. Approximately $11 million of the gain relates to the remeasurement of our retained investment in the contributed subsidiaries to fair value, determined using a discounted cash flow model with several inputs, including a weighted-average discount rate of approximately 11% and a weighted-average long-term growth rate of approximately 2%. Additionally, we recorded a liability of $23 million representing the present value of the first earnout payment, which is included in other liabilities on our accompanying consolidated balance sheet as of December 31, 2014. We are not currently required under applicable accounting guidance to record a liability for the second earnout payment, as such, a liability has not been recorded on our consolidated balance sheet as of December 31, 2014.

All of our investments accounted for under the equity method are initially recorded at cost and subsequently adjusted for our share of the net income or loss and cash contributions and distributions to or from these entities. Because the underlying net assets in our investments are denominated in a foreign currency, translation gains or losses will impact the recorded value of our investments and, for the year ended December 31, 2014, resulted in a net loss of $34 million recorded in other comprehensive income (loss). For the year ended December 31, 2014, our accompanying consolidated statement of operations includes $35 million of income from equity method investments, representing our share of ten months of results of UBBP of $33 million and our share of income from our other equity method investments of $2 million. The amount of consolidated retained earnings which represents undistributed earnings from UBBP is $33 million.

Summarized Financial Information

Summarized financial information for our equity method investments is as follows:

Statement of Operations



	For the year ended December 31,
(millions)	2014(a)		2013	2012
USG Boral Building Products:
Net sales	$	927	N/A	N/A
Gross profit	251		N/A	N/A
Operating profit	95		N/A	N/A
Net income from continuing operations	72		N/A	N/A
Net income	72		N/A	N/A
Net income attributable to USG Boral Building Products	67		N/A	N/A
USG share of income from USG Boral Building Products	33		N/A	N/A
Other equity method investments^(b):
USG share of income from other investments accounted for using the equity method	2		1	—

Total income from equity method investments	35		1	—


(a)	Operating results are presented for UBBP for the ten months ended December 31, 2014.


(b)	Amounts represent our share of income or loss from all equity method investments, other than UBBP. For the twelve months ended December 31, 2014, the amount reflected includes two months of our share of income from equity method investments from the joint ventures which we owned prior to being contributed to UBBP on February 27, 2014.

Balance Sheet



(millions)	December 31, 2014
USG Boral Building Products:
Current assets	$	446
Non-current assets	989
Current liabilities^(c)	245
Long-term debt	46
Other non-current liabilities	21
Shareholders' equity^(d)	1,123


(c)	Includes the current portion of long-term debt of $35 million.


(d)	Shareholders' equity includes $70 million related to non-controlling interests.