10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2016

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from              to

Commission File Number 1-8864

USG CORPORATION

(Exact name of Registrant as Specified in its Charter)

Delaware	36-3329400
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
550 W. Adams Street, Chicago, Illinois	60661-3676
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (312) 436-4000

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Exchange on Which Registered
	New York Stock Exchange
Common Stock, $0.10 par value	Chicago Stock Exchange
Preferred Stock Purchase Rights (subject to Rights	New York Stock Exchange
Agreement dated December 21, 2006, as amended)	Chicago Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.    Yes   o    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x   No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    Yes  o    No  x

The aggregate market value of the registrant’s common stock held by non-affiliates computed by reference to the New York Stock Exchange closing price on June 30, 2016 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $2,346,467,078. Solely for this purpose, directors, executive officers and greater than 10% record shareholders are considered the affiliates of the registrant.

The number of shares of the registrant’s common stock outstanding as of January 31, 2017 was 146,182,904.

Documents Incorporated By Reference: Certain sections of USG Corporation’s definitive Proxy Statement for use in connection with its 2016 annual meeting of stockholders, to be filed subsequently, are incorporated by reference into Part III of this Form 10-K Report where indicated.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	13
Item 2.	Properties	14
Item 3.	Legal Proceedings	15
Item 4.	Mine Safety Disclosures	15
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6.	Selected Financial Data	18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 8.	Financial Statements and Supplementary Data	42
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	90
Item 9A.	Controls and Procedures	90
Item 9B.	Other Information	92
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	93
Item 11.	Executive Compensation	94
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	95
Item 13.	Certain Relationships and Related Transactions, and Director Independence	95
Item 14.	Principal Accounting Fees and Services	95
PART IV
Item 15.	Exhibits and Financial Statement Schedules	96
Signatures		97

PART I

Item 1. BUSINESS

In this annual report on Form 10-K, “USG,” “we,” “our” and “us” refer to USG Corporation, a Delaware corporation, and its subsidiaries included in the consolidated financial statements, except as otherwise indicated or as the context otherwise requires.

General

USG, through its subsidiaries, is a leading manufacturer of building materials and innovative solutions. We produce a wide range of products for use in new residential, new nonresidential, and residential and nonresidential repair and remodel construction as well as products used in certain industrial processes. Our businesses are cyclical in nature and sensitive to changes in general economic conditions, including, in particular, conditions in the North American housing and construction-based markets and the markets in Asia and Australasia. Our expansion via two 50/50 joint ventures we formed in 2014 with Boral Limited, referred to as USG Boral Building Products, or UBBP, into the markets of Asia, Australasia, and the Middle East has significantly increased our exposure to the economic conditions in those areas.

The effects of market conditions on our operations are discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Recent Developments

On October 31, 2016, we completed the sale of L&W Supply Corporation, or L&W, to American Builders & Contractors Supply Co., Inc., or ABC Supply, for $675 million inclusive of the final working capital adjustment. We recognized a gain of $279 million on the transaction. Additionally, we entered into a supply agreement with L&W that governs sales of wallboard and certain other products from USG to L&W.

During 2016, we retired $1.1 billion of outstanding debt consisting of our 6.3% Senior Notes due 2016, our 7.875% Senior Notes due 2020 and our 5.875% Senior Notes due 2021, and recorded a pre-tax loss on the early extinguishment of debt of $37 million.

Segments

Our operations are organized into three reportable segments: Gypsum, Ceilings and UBBP. As a result of the presentation of L&W as a discontinued operation, the results of L&W, which consisted of all of our Distribution segment, have been excluded from segment results. Additionally, the results of our Gypsum and Ceilings segments have been revised to reflect only the sales of USG products from Gypsum and Ceilings to L&W that have been sold by L&W outside the consolidated group prior to October 31, 2016. All sales to L&W subsequent to the close of the transaction are included in net sales.

The net sales of Gypsum and Ceilings accounted for approximately 83% and 17%, respectively, of our 2016 consolidated net sales. UBBP is accounted for as equity method investments, and thus, net sales of UBBP are not included in consolidated net sales.

Gypsum

BUSINESS

Our Gypsum segment manufactures and markets gypsum and related products in the United States, Canada and Mexico. It includes United States Gypsum Company, or U.S. Gypsum, in the United States, CGC Inc., or CGC, in Canada, USG Mexico, S.A. de C.V., or USG Mexico, and subsidiaries in Latin America. U.S. Gypsum is the largest manufacturer of gypsum wallboard in the United States and accounted for approximately 25% of total industry shipments of gypsum board (which includes gypsum wallboard, other gypsum-related paneling products and imports) in the United States in 2016. CGC accounted for approximately 42% of Canadian domestic shipments and is the largest manufacturer of gypsum wallboard in eastern Canada. USG Mexico is the largest manufacturer of gypsum wallboard in Mexico with more than 50% market share in 2016.

PRODUCTS

Gypsum’s products are used in a variety of building applications to construct walls, ceilings, roofs and floors of residential, commercial and institutional buildings, as well as in certain industrial applications. We also produce gypsum-based products for agricultural and industrial customers to use in a wide variety of applications, including soil conditioning, road repair, fireproofing and ceramics. The major product lines within the Gypsum segment are:

1

WALLBOARD
Sheetrock® brand gypsum wallboard and Securock® brand glass mat sheathing portfolios	Gypsum panels that provide aesthetic as well as sound-dampening, fire-retarding, abuse-resistance and moisture-control value
SURFACES
Sheetrock® brand joint compound portfolio, as well as corner bead, joint tape, and plaster	Used for finishing wallboard joints
SUBSTRATES
Durock® brand cement board	Provides water and fire-resistant assemblies for both interior and exterior applications
Fiberock® brand backerboard	Includes abuse-resistant interior wall panels, tile backer boards, and flooring underlayments
Levelrock® brand systems of poured gypsum flooring	Provides surface leveling and enhanced sound-dampening performance for residential and commercial flooring applications
Securock® brand roof board, ExoAir®  430 brand air-water barrier system and industrial gypsum	Engineered gypsum panels, designed for high performance building envelope solutions, providing structural performance, fire-resistance, and moisture and air control
Construction plaster products, sold under the brand names Red Top®, Imperial®, Diamond® and Supremo®	Used to provide a custom finish for residential and commercial interiors and provide aesthetic, sound-dampening, fire-retarding and abuse-resistance value

As the leader in lightweight innovation, we offer the industry's broadest portfolio of lightweight gypsum panels. In 2010, we introduced USG Sheetrock^® Brand UltraLight Panels, the industry's first lightweight gypsum wallboard panel for use in interior wall and ceiling applications and have continued to extend our lightweight portfolio with the introductions of:

• USG Sheetrock^® Brand UltraLight Panels Firecode 30^® and Firecode X^® for fire rated assemblies;

• USG Sheetrock^® Brand UltraLight Panels Mold Tough^®, the industry's first lighweight moisture- and mold-resistant wallboard; and,

• USG Sheetrock^® Brand MH UltraLight Gypsum Panels for manufactured housing and Gypsum Base Imperial^® for veneer plaster systems.

USG Sheetrock^® Brand UltraLight Panels accounted for 66% of all of our wallboard shipments in the United States in 2016, 65% in 2015 and 63% in 2014.

MANUFACTURING

Gypsum manufactures products at 41 plants located throughout the United States, Canada, Mexico, and Latin America.

Gypsum rock is mined or quarried at 12 company-owned locations in North America. Our mines and quarries provided approximately 49% of the gypsum used by our plants in North America in 2016.

Some of our manufacturing plants purchase or acquire synthetic gypsum and natural gypsum rock from outside sources. In 2016, outside sources of synthetic gypsum and natural gypsum rock accounted for approximately 42% and 9%, respectively, of the gypsum used in our plants.

Synthetic gypsum is a byproduct of flue gas desulphurization carried out by electric generation or industrial plants that burn coal as a fuel. The suppliers of this kind of gypsum are primarily power companies, which are required to operate scrubbing equipment for their coal-fired generating plants under federal environmental regulations. We have entered into a number of long-term supply agreements to acquire synthetic gypsum. Six of our 21 gypsum wallboard plants in operation use synthetic gypsum for all of their needs, while another six use it for a portion of their needs. Certain power companies have switched to using natural gas instead of coal for their electric generation needs. In the event more power companies switch to using natural gas instead of coal, the availability of synthetic gypsum may decrease which could result in an increase to our cost. See Item 1A, Risk Factors.

We produce wallboard paper at four company-owned production facilities located in the United States. Vertical integration in paper helps to ensure a continuous supply of high-quality paper that is tailored to the specific needs of our production processes. We augment our paper needs through purchases from outside suppliers when necessary. We did not make any material purchases of paper from outside suppliers in 2016.

2

MARKETING AND DISTRIBUTION

Our gypsum products are marketed and distributed through specialty wallboard distributors, building materials dealers, home improvement centers and other retailers and contractors. Sales of gypsum products are seasonal in the sense that sales are generally greater from spring through the middle of autumn than during the remaining part of the year.

Based on our estimates using publicly available data, internal surveys and industry shipment data for gypsum board, as reported by the Gypsum Association, we estimate that during 2016 volume demand for gypsum board was generated by:

• residential and nonresidential repair and remodel activity of about 50%,

• new residential construction of about 39%,

• new nonresidential construction of about 6%, and

• other activities, such as exports and temporary construction of about 5%.

COMPETITION

Industry shipments of gypsum board in the United States (including gypsum wallboard, other gypsum-related paneling products and imports), as reported by the Gypsum Association, were an estimated 25.0 billion square feet in 2016, up approximately 12% from 22.3 billion square feet in 2015. U.S. Gypsum’s share of the gypsum board market in the United States, which includes for comparability its shipments of USG Sheetrock^® brand gypsum wallboard, Fiberock^® brand gypsum fiber panels and Securock^® brand glass mat sheathing, was approximately 25% in 2016, down 1.3% from 2015.

The principal methods of competition are quality and range of products, including introduction of new products, location, pricing, compatibility of systems and product design features. Our principal competitors are as follows:

	United States	Canada	Mexico
National Gypsum Company	x
CertainTeed Corporation (a subsidiary of Compagnie de Saint-Gobain SA)	x	x
Georgia-Pacific (a subsidiary of Koch Industries, Inc.)	x	x
American Gypsum Company LLC (a unit of Eagle Materials Inc.)	x
Continental Building Products, Inc.	x
PABCO Gypsum (a division of PABCO Building Products)	x
Cabot Gypsum Company		x
Panel Rey, S.A. (a Grupo Promax Company)	x		x
Plaka (a unit of Comex)			x

Ceilings

BUSINESS

Our Ceilings segment manufactures and markets interior systems products in the United States, Canada, Mexico, and Latin America. Ceilings includes USG Interiors, LLC, or USG Interiors, in the United States, CGC in Canada, USG Mexico and subsidiaries in Latin America. Ceilings is a leading supplier of interior ceilings products used primarily in commercial applications. We estimate that we are the second-largest manufacturer of ceiling grid and acoustical ceiling tile.

As discussed below under USG Boral Building Products, or UBBP, on February 27, 2014, we invested with Boral Limited in UBBP and, in connection therewith, contributed to UBBP our operations in the Asia-Pacific region. As such, our Ceilings reportable segment included the results and activities of our subsidiaries in the Asia-Pacific region through February 27, 2014 within USG International.

PRODUCTS

Ceilings manufactures ceiling tile in the United States and ceiling grid in the United States, Canada and, through February 27, 2014, the Asia-Pacific region. It markets ceiling tile and ceiling grid in the United States, Canada, Mexico, Latin America, and through February 27, 2014, the Asia-Pacific region. Our integrated line of ceilings products provides qualities such as sound absorption, fire retardation and convenient access to the space above the ceiling for electrical and mechanical systems, air distribution and maintenance. Ceilings’ significant brand names include the Radar™, Eclipse™, Mars™, and Halcyon™ brands of ceiling tile and the Donn^®, DX^®, Fineline^®, Centricitee™, Identitee^® DXI™, Curvatura™ and Compasso^® brands of ceiling grid.

3

MANUFACTURING

Ceilings manufactures products at 8 plants located in the United States and Canada. Principal raw materials used to produce Ceilings’ products include mineral fiber, steel, perlite and starch. We produce some of these raw materials and obtain others from outside suppliers.

MARKETING AND DISTRIBUTION

Ceilings sells products primarily in markets related to the construction and renovation of nonresidential buildings. During 2016, approximately:

• 71% of Ceilings’ net sales were from repair and remodel activity, primarily nonresidential,

• 27% of its net sales were from new nonresidential construction, and

• 2% of its net sales were from new residential construction.

Products are marketed and distributed through a network of distributors, installation contractors and home improvement centers. Sales of Ceilings’ products are seasonal in nature and are generally weaker in the fourth quarter of the calendar year as compared to the preceding three quarters.

COMPETITION

Principal methods of competition are quality of products, service, pricing, compatibility of systems and product design features.

Our principal competitors in our Ceilings business are:

	United States	Canada	Mexico
Ceiling Tile
Armstrong World Industries, Inc.,	x	x	x
Rockfon (a subsidiary of Rockwool International A/S)	x	x
CertainTeed Corporation (a subsidiary of Compagnie de Saint-Gobain SA)	x	x	x
Odenwald Faserplattenwerk GmbH (OWA)	x	x
Ceiling Grid
WAVE (a joint venture between Armstrong World Industries, Inc. and Worthington Industries)	x	x
Chicago Metallic Corporation (a subsidiary of Rockwool International A/S)	x	x
CertainTeed Corporation (a subsidiary of Compagnie de Saint-Gobain SA)	x	x	x

USG Boral Building Products

BUSINESS

On February 27, 2014, we and certain of our subsidiaries formed 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 Limited, or Boral. These joint ventures are referred to as USG Boral Building Products, or 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. UBBP is a leader in most of the markets it serves. As part of the consideration for our 50% ownership in UBBP, we contributed to UBBP our subsidiaries and joint venture investments in Asia-Pacific, India and Oman. Our investments in UBBP are accounted for as equity method investments. Our existing wholly owned subsidiaries and consolidated variable interest entities that were contributed into the joint venture were deconsolidated as of February 27, 2014. See Note 4 to the consolidated financial statements in Part II, Item 8 of this report for additional information related to our equity method investments.

PRODUCTS

UBBP manufactures and distributes products for wall, ceiling, floor lining and exterior systems that utilize gypsum wallboard, referred to as plasterboard in the region in which UBBP operates, mineral fiber ceiling tiles, steel grid and joint compound. UBBP's significant brand names include USG Boral Sheetrock^® premium plasterboard, USG Boral NextGen^®, Elephant^®, Jayaboard^®, Durock^® and Donn^® DX^®, the world’s most widely specified and installed ceiling suspension system. UBBP launched USG Boral Sheetrock^® products, which leverages the technology in USG Sheetrock^®, in Australia, South Korea, Indonesia, Vietnam, China and Thailand. UBBP is able to sell USG Boral Sheetrock^® at a premium price in some markets and conversion rates continue to increase, which is led by Australia with a conversion rate above 75%.

4

MANUFACTURING

UBBP has 23 plasterboard lines, 3 gypsum mines and 36 other non-board lines for metal products, metal ceiling grid, ceiling tile, joint compound, and cornice throughout twelve countries in Asia, Australasia and the Middle East.

Executive Officers of the Registrant

See Part III, Item 10, Directors, Executive Officers and Corporate Governance - Executive Officers of the Registrant (as of February 8, 2017).

Other Information

RESEARCH AND DEVELOPMENT

To contribute to our high standards and our leadership in the building materials industry, we perform extensive research and development at the USG Corporate Innovation Center in Libertyville, Illinois, using open innovation models and outside partnerships. Research team members collaborate with suppliers, universities and national research laboratories to provide product support and to develop new products and technologies for our operating units. With fire, acoustical, structural and environmental testing capabilities, the research center allows us to conduct our own on-site evaluation of products and systems. Chemical analysis and materials characterization support product development and safety/quality assessment programs. Development activities can be taken to an on-site pilot plant before being transferred to a full-size plant. Research and development activities have been focused on customer preferred system solutions. We expense research and development expenditures as incurred. These expenditures amounted to $24 million, $23 million and $23 million in 2016, 2015 and 2014, respectively. UBBP also operates a research and development center in Thailand.

SUSTAINABILITY

The adoption of green building codes and standards such as the Leadership in Energy and Environmental Design, or LEED, rating system established by the U.S. Green Building Council to encourage the design and construction of buildings that are environmentally friendly, combined with an increase in customer preference for products that can assist in obtaining LEED credit or are otherwise environmentally preferable, has increased demand for products, systems and services that contribute to building sustainable spaces. Many of our products meet the requirements for the awarding of LEED credits, and we continue to develop new products and systems to address market demand for products that enable construction of buildings that require fewer natural resources to build, operate and maintain. Our competitors also have developed and introduced to the market more environmentally responsible products.

We expect that there will be increased demand over time for products, systems and services that meet regulatory and customer sustainability standards and preferences and decreased demand for products that produce significant greenhouse gas emissions. We also believe that our ability to continue to provide these products and systems to our customers will be necessary to maintain our competitive position in the marketplace.

ENERGY

Our primary supplies of energy have been adequate, and we have not been required to curtail operations as a result of insufficient supplies. Supplies are likely to remain sufficient for our projected requirements. Currently, we are using swap contracts to hedge a significant portion of our anticipated purchases of natural gas to be used in our manufacturing operations over the next 12 months and beyond. We review our positions regularly and make adjustments as market conditions warrant.

SIGNIFICANT CUSTOMERS

On a worldwide basis, for each of the years ended December 31, 2016, 2015, and 2014, The Home Depot accounted for 23%, 23% and 22% of our net consolidated sales, respectively, and L&W accounted for 19%, 18% and 18% of our consolidated net sales, respectively. Both our Gypsum and Ceilings segments had net sales to these customers in each of those years.

INTELLECTUAL PROPERTY

We consider patents, copyrights, trademarks, trade secrets, proprietary technology and similar intellectual property as critical to our success. We hold numerous patents and have registered numerous trademarks of varying duration in multiple legal jurisdictions. Further, we have filed patent applications and applications for the registration of trademarks in the United States and internationally. Although we consider our patents, licenses and trade secrets to constitute valuable assets, we do not regard any of our businesses as being materially dependent upon individual patents, trade secrets, or licenses.

OTHER

Because we fill orders upon receipt, no segment has any significant order backlog.

None of our segments has any special working capital requirements.

5

No material part of our business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of any government.

As of December 31, 2016, we had approximately 6,600 employees worldwide in our wholly-owned subsidiaries.

See Note 14 to the consolidated financial statements in Part II, Item 8 of this report for financial information pertaining to net sales and long-lived assets by geographic region and net sales, operating profit and total assets by our segments, and Item 1A, Risk Factors, for information regarding the risks associated with conducting business in international locations, as well as the possible effects that compliance with environmental laws and regulations may have on our businesses and operating results.

Available Information

We maintain a website at www.usg.com and make available at this website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission, or SEC. The information on our website is not, and will not be deemed to be, a part of this Annual Report on Form 10-K, or incorporated into any of our other filings with the SEC, except where we expressly incorporated such information. If you wish to receive a paper copy of any exhibit to our reports filed with or furnished to the SEC, the exhibit may be obtained, upon payment of reasonable expenses, by writing to: Corporate Secretary, USG Corporation, 550 West Adams Street, Chicago, Illinois 60661-3676.

6

Item 1A. RISK FACTORS

Our business, financial condition, operating results and cash flows are subject to various risks and uncertainties. We have described below significant factors that may adversely affect us and our industry. You should carefully consider these factors, together with all of the other information in this annual report on Form 10-K and in other documents that we file with the SEC, before making any investment decision about our securities.

Our businesses are cyclical, regional and seasonal in nature and subject to industry downturns.

Our businesses are cyclical and sensitive to changes in general economic conditions, including, in particular, conditions in the North American housing and construction-based markets. Housing starts and new nonresidential construction in the United States continued to recover but remained relatively flat in 2016 and still remain low by historical standards and the residential and nonresidential repair and remodel market experienced only modest increases over the past several years. Moreover, we operate in a variety of regional markets so our businesses are subject not only to general economic conditions but also to localized economic conditions in each of those regional markets. Housing and construction-based markets are impacted by broader economic circumstances, including employment, household formation, home ownership rate, existing home price trends, availability of mortgage financing, interest rates, consumer confidence, job growth and discretionary business investment, and these markets may not continue to recover or may experience a downturn. Adverse conditions in the markets or regions where we operate, or the failure of these markets or regions to return to historical levels, may have a material adverse effect on our business, financial condition, operating results and cash flows.

In addition, our businesses are seasonal, which has caused in the past, and will likely cause in the future, our quarterly results to vary significantly. Unfavorable weather conditions, such as snow or heavy rainfall, will likely reduce construction activity and adversely affect demand for our products. In particular, unfavorable weather conditions during peak construction periods, which may become more common due to the impact of climate change, could have a negative impact on our operating results.

We may not be able to maintain current price levels, or achieve price increases, for our products.

Prices for our products are affected by overall supply and demand in the markets for our products and differ by region. Market prices of building products historically have been volatile and cyclical. Currently, there is excess wallboard production capacity industry wide in the United States. Increases in the production capacity of any of our competitors, the entry of new competitors in our markets, or reductions in demand could lead to a reduction in prices and adversely affect our business, financial condition, operating results and cash flows. We implemented a price increase for wallboard effective in January 2017, however it is uncertain whether we will be able to maintain any increase in our selling prices or implement additional increases in 2017. If we are unable to maintain or implement price increases, our net sales, operating results and cash flows may be materially and adversely impacted.

We are dependent on sales to our major customers.

We face strong competition for our major customers. As is customary in our industry, we generally do not enter into long-term contracts with our customers, who may choose to reduce, delay or cancel purchases of our products at any time. If one or more of our major customers reduces, delays or cancels substantial orders, our business, financial condition, operating results and cash flows may be materially and adversely affected, particularly for the period in which the reduction, delay or cancellation occurs and also possibly for subsequent periods.

L&W is currently our largest customer in the gypsum specialty dealer channel, purchasing approximately 25% of our wallboard production in 2016, among other products we manufacture. Specialty dealers often have multiple suppliers for product categories. Following the sale of L&W, we believe L&W will diversify its supplier base, resulting in a reduction in our sales to L&W which we may not be able to replace with sales to other customers or may only be able to replace at lower prices. In connection with the closing of the sale of L&W, we entered into a supply agreement that provides for L&W to purchase minimum volumes of our wallboard and certain other products over the near term, with volume minimums generally stepping down for those products over time. We intend to address any potential loss of sales to L&W both during and after the term of the supply agreement by growing our business with current customers and serving new customers. However, our efforts to replace any potential loss of sales to L&W may not be successful, and we may experience market share loss or unfavorable pricing, in which case our net sales, operating results and cash flows may be materially and adversely impacted.

7

The number of our customers with significant buying power is increasing.

Certain of our important customers are large companies with significant buying power. In addition, consolidation currently taking place in the specialty gypsum dealer market will likely further enhance the ability of certain of our customers to seek more favorable terms, including pricing, for the products that they purchase from us. Accordingly, our ability to maintain or raise prices in the future may be limited, including during periods of raw material and other cost increases. If we are forced to reduce prices or to maintain prices during periods of increased costs, or if we lose customers because of pricing or other methods of competition, our revenues, financial condition, operating results and cash flows may be materially and adversely affected.

We operate in highly competitive markets.

The markets for our products are very competitive. Principal methods of competition include quality and range of products, including introduction of new products, location, pricing, compatibility of systems and product design features. Further, our ability to effectively compete varies by region. Actions of our competitors, or the entry of new competitors in our markets, could lead to lower pricing by us in an effort to maintain or grow our sales, negatively affect our product sales mix or lead to lower demand for our products. To achieve and/or maintain leadership positions in key product categories, we must continue to develop brand recognition and loyalty, enhance product quality and performance, introduce new products and improve our manufacturing capabilities. In addition, a number of our competitors are privately-held companies who do not incur the additional costs and reporting obligations of being a public company, which may enable those companies to compete more effectively than us.

Our facilities may experience unexpected operational difficulties or catastrophic events.

Our facilities may be forced to cease operations unexpectedly due to equipment failures or events beyond our control, such as fires, floods, earthquakes or other environmental catastrophes. Any downtime or facility damage may hinder our ability to meet customer demand and reduce our sales and could require that we make significant capital expenditures. Several of our plants, and production lines within our plants, are dedicated to specific products. If any of those plants or lines is unable to operate for a prolonged period, it would reduce our ability to effectively compete in the markets for those products, which could materially and adversely affect our business, financial condition, operating results and cash flows.

Increased costs, or decreased availability, of key raw materials or energy will increase our cost of products sold.

The cost and availability of raw materials and energy are critical to our operations. For example, we use substantial quantities of gypsum, synthetic gypsum, wastepaper, mineral fiber, steel, perlite and starch. The cost of certain of these items has been volatile, and availability has sometimes been limited. We obtain some of these materials from a limited number of suppliers or sole source suppliers, which increases the risk of unavailability. We may not be able to pass increased raw material or energy prices on to our customers in the future if the market or existing agreements with our customers do not allow us to raise the prices of our finished products. If price adjustments for our finished products significantly trail the increase in raw material or energy prices, or if we cannot effectively hedge against price increases, our operating results and cash flows may be materially and adversely affected.

Approximately 42% of the gypsum used in our wallboard plants is synthetic gypsum. Six of our 21 gypsum wallboard plants in operation use synthetic gypsum for all of their needs, while another six use it for some of their needs. The suppliers of synthetic gypsum are primarily power companies, and certain power companies have switched to using natural gas instead of coal for their electric generation needs. In addition, existing or future changes in environmental regulations may make it more difficult or costly for power companies to burn coal, which may result in a further shift away from coal-based sources of energy. In the event more power companies switch to using natural gas instead of coal, the availability of synthetic gypsum may decrease. We could incur substantial costs in connection with any significant reduction in the availability of synthetic gypsum, including costs to convert our plants to use natural gypsum, which may materially and adversely affect our business, financial condition, operating results and cash flows.

We use natural gas extensively in the production of gypsum and ceilings products in the United States, Canada and Mexico. The price of natural gas can fluctuate significantly because of fundamentals, weather, environmental or other regulatory changes, which can materially impact our hedge portfolio and our results of operations for a particular period. In an attempt to reduce our price risk related to fluctuations in natural gas prices, we enter into hedging agreements using swaps for natural gas purchases in the United States and Canada. Any substantial or extended decline in prices of, or demand for, natural gas that has been hedged could cause our production costs to be greater than those of our competitors. A significant production cost differential could have a material adverse effect on our business, financial condition, operating results and cash flows.

8

We do not have majority control over UBBP, which involves risks not otherwise present when we operate our business through wholly-owned entities.

A substantial portion of our international operations are conducted through 50/50 joint ventures with Boral Limited, or Boral. These joint ventures are referred to as UBBP. UBBP involves risks not otherwise present when we operate our business through wholly-owned entities, including:

• Certain major decisions with respect to UBBP require the majority or unanimous approval of the joint ventures’ boards or shareholders. Boral may have economic or other business interests or goals that are or become inconsistent with ours, and we may not be able to obtain approval of certain matters that would be in our best interests. In addition, we may be required to spend additional resources to resolve any dispute with Boral, which could have an adverse impact on the operations and profitability of UBBP.

• A deadlock with respect to certain fundamental decisions may result in the triggering of a sale process of UBBP. In such a case, the terms of the sale may be less attractive than if we had held onto our investment.

• UBBP is operated in accordance with the terms of a Shareholders Agreement that limits our ability to transfer our interest in UBBP. As a result, we may be unable to sell our interest in UBBP when we would otherwise like.

• UBBP may not pay dividends if such payments are, among other things, restricted pursuant to the terms of the credit facilities maintained by UBBP, inconsistent with the then-applicable strategic plan, or illegal. Accordingly, we may not receive dividend payments from UBBP in the amounts that we currently anticipate or at all, which may adversely impact our ability to receive any economic benefit from UBBP.

• If we or Boral, or certain of our respective affiliates, are subject to a change of control, or if certain other events of default under the Shareholders Agreement occur with respect to us or Boral, we or Boral, as applicable, may be required to sell our or Boral's, as applicable, entire interest in UBBP at fair market value, as determined in accordance with the Shareholders Agreement. In the event we are forced to sell our interest in UBBP, it may be under terms that are not advantageous to us. In the event Boral is forced to sell its interest in UBBP, and we are unable to acquire Boral's interest due to lack of funding or otherwise, we would not have the right to select the third party to which Boral would sell its interest.

• In certain circumstances, a capital call may be issued to the shareholders of UBBP in order to obtain additional funding for the joint ventures' operations. If we do not provide capital and Boral does, Boral may receive additional shares in UBBP, thereby diluting our interest and diminishing our rights under the Shareholders Agreement. Further, although we intend for UBBP to be self-funding, we may nonetheless determine in the future that we need to provide additional capital in order for UBBP to continue operating.

• Boral may become insolvent, refuse to make additional capital contributions or fail to meet its obligations under the Shareholders Agreement or the two share sale and subscription agreements entered into with Boral, which may result in certain liabilities to us.

• In the event we exit UBBP, we may be restricted from competing in certain markets, many of which we anticipate to be high-growth markets, until the later of the third anniversary of our exit and ten years from the commencement of UBBP.

• UBBP relies in part on new products and technology we develop. UBBP is contractually entitled to some, but not all, of our new products. If UBBP is unable to successfully implement new products to which it has a license, or if we are unable to agree on the terms for the contribution of new technology to UBBP, the joint ventures may not be able to effectively compete or grow their businesses.

• UBBP is required to protect our licensed trade secrets and confidential intellectual property in its territory, which includes countries where there is a high risk of intellectual property loss.  If UBBP is not diligent with its protections and competitors acquire our trade secrets and confidential intellectual property, then there may be a material adverse impact on our business both inside and outside of UBBP’s territory.

If any of these risks were to materialize, our business, financial condition, operating results and cash flows could be materially and adversely impacted.

9

Our international operations expose us to risks that would not otherwise be present in our U.S. operations.

International business operations, including through UBBP, and our operations in Canada and Mexico, are becoming increasingly important to our future operations, growth and prospects. Further, it is a strategic priority of ours to continue to grow and diversify our earnings by expanding in select emerging markets. Our foreign operations and our international expansion strategy subject us to a number of risks, including:

• sensitivity to general economic conditions in each of the countries in which we or UBBP operate, including, in particular, the housing and construction-based markets;

• compliance with United States laws affecting operations outside of the United States, such as the Foreign Corrupt Practices Act or similar anti-bribery laws and regulations;

• compliance with a variety of local laws and regulations, including environmental and safety laws and regulations

• changes in tax laws and the interpretation of those laws;

• imposition of more or new tariffs, quotas, trade barriers, and similar restrictions on our sales outside the United States, including cross-border intercompany sales;

• fluctuations in currency values and the impact on our consolidated and segment results;

• changes in foreign currency exchange controls;

• discriminatory or conflicting fiscal policies;

• difficulties enforcing intellectual property and contractual rights, and securing information and infrastructure, in certain jurisdictions;

• greater risk of uncollectible accounts and longer collection cycles; and

• nationalization of properties by foreign governments.

Moreover, political and economic changes or volatility, geopolitical regional conflicts, terrorist activity, political unrest, civil strife, acts of war, epidemics, public corruption and other economic or political uncertainties could interrupt and negatively affect our business operations. All of these factors could result in increased costs or decreased revenues, and could materially and adversely affect our business, financial condition, operating results and cash flows.

Our success is dependent on our ability to innovate and protect our intellectual property and other proprietary rights.

We maintain a leadership position and price premium in part because of our innovation and introduction of new products. As a result, our success also depends, in part, upon securing and enforcing our intellectual property rights. We rely on a combination of contractual rights, patent, copyright, trademark and trade secret laws to establish and protect our intellectual property. Despite our efforts to safeguard and maintain our intellectual property, the steps we have taken may be inadequate. Existing trade secret, patent, trademark and copyright laws offer only limited protection, and our patents could be invalidated or circumvented. In addition, others may develop substantially equivalent or superseding proprietary technology, or competitors may offer similar competing products that do not infringe on our intellectual property rights, thereby substantially reducing the value of our proprietary rights. Moreover, the laws of some foreign countries in which our products are or may be manufactured or sold may not protect our products or intellectual property rights to the same extent as do the laws of the United States. This risk may be heightened in connection with our investments in UBBP, because it results in the use of our intellectual property in additional foreign jurisdictions, some of which lack robust or accessible intellectual property protection enforcement mechanisms.

We intend to continue making investments in research and development to develop new and improved products and more efficient production methods in order to maintain our market leadership position. If we do not make these investments, or our investments are not successful, our revenues, operating results and market share may be materially and adversely affected.

Capital expenditures to maintain our market leadership position and expand our businesses may not achieve their intended results.

In order to standardize and automate production across our Gypsum and Ceilings businesses, we are investing in capital improvement projects, including an anticipated $300 million investment in advanced manufacturing over four years, which we believe will materially improve our operating results. In addition, many of our facilities have been in operation for many years and require capital expenditures to maintain optimal efficiency. Future downturns in our industry or businesses may prevent us from having the funds necessary to make anticipated capital expenditures, and there may be delays or cost increases in

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completing these projects. Further, our return on investment from our advanced manufacturing investments or other capital expenditures may not be sufficient to recover the expenses associated with these initiatives and we may not achieve the expected economic and competitive advantages.

A disruption in our information technology systems due to a catastrophic event or security breach could interrupt or damage our operations.

In the conduct of our business we collect, use, transmit and store data on information systems, which are vulnerable to an increasing threat of continually evolving cyber security risks. Any security breach or compromise of our information systems could significantly damage our reputation, cause the disclosure of confidential customer, employee, supplier or company information, including our intellectual property, and result in significant losses, litigation, fines and costs. The security measures we have implemented to protect against unauthorized access to our information systems and data may not be sufficient to prevent breaches. The regulatory environment related to information security, data collection and privacy is evolving, with new and constantly changing requirements applicable to our business, and compliance with those requirements could result in additional costs.

We also compete through our use and improvement of information technology. In order to remain competitive, we need to provide customers with timely, accurate, easy-to-access information about product availability, orders and delivery status using state-of-the-art systems. While we have provided manual processes for short-term failures and disaster recovery capability, a prolonged disruption of systems or other failure to meet customers’ expectations regarding the capabilities and reliability of our systems may materially and adversely affect our operating results.

Significant changes in factors and assumptions used to measure our defined benefit plan obligations, actual investment returns on pension assets and other factors could negatively impact our operating results and cash flows.

We maintain pension and postretirement plans throughout the world, with the most significant plans located in the U.S. The recognition of costs and liabilities associated with these plans for financial reporting purposes is affected by assumptions made by management and used by actuaries engaged by us to calculate the benefit obligations and the expenses recognized for these plans. The inputs used in developing the required estimates are calculated using a number of assumptions, which represent management’s best estimate of the future. The assumptions that have the most significant impact on reported results are the discount rate, the estimated long-term return on plan assets for the funded plans, retirement rates, and mortality rates and, for postretirement plans, the estimated inflation in health care costs. These assumptions are generally updated annually.

Our pension plans were underfunded by $175 million as of December 31, 2016.  Our unfunded postretirement plan liabilities were approximately $135 million as of December 31, 2016. In recent years, the declining interest rates and changes to mortality assumptions have negatively impacted the funded status of our pension and postretirement plans. In addition, volatile asset performance, most notably since 2008, has also negatively impacted the funded status of our pension plans. Funding requirements for our pension plans may become more significant. If our cash flows and capital resources are insufficient to fund our pension and postretirement plans obligations, we could be forced to reduce or delay investments and capital expenditures, seek additional capital, or restructure or refinance our indebtedness.

Compliance with environmental and safety laws and regulations could cause us to make modifications to how we manufacture our products, and could also require that we make significant capital investments or otherwise increase our costs.

We operate 49 plants in the United States, Canada, Mexico, and Latin America and 12 mines and quarries in North America. As a result, we are subject to numerous federal, state, local and foreign laws and regulations governing the protection of the environment and occupational health and safety, including laws regulating air emissions, wastewater discharges, the management and disposal of hazardous materials and wastes, and the health and safety of our employees. We are also required to obtain permits from governmental authorities for certain operations. If we were to fail to comply with these laws, regulations or permits, we could incur fines, penalties or other sanctions and be subject to private litigation. In addition, in the past we have been, and in the future could be, held responsible for costs and damages arising from any contamination at our past or present facilities or at third-party waste disposal sites. Further, new environmental and safety laws and regulations may cause us to incur material expenses relating to compliance, impact the availability and cost of raw materials and have a material and adverse impact on our operations and results.

The U.S. Congress, several states and the international community are considering measures to reduce emission of greenhouse gases, or GHGs, including carbon dioxide and methane. Some states and provinces have already adopted GHG regulation or legislation. In 2015, following a finding by the U.S. EPA that certain GHGs represent an endangerment to human health, the U.S. EPA issued its final Clean Power Plan, under which the U.S. EPA will set state-specific goals for GHG

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emissions reductions. If the rules regulating GHG emissions remain in place and withstand legal challenge, they could affect future expansions or modifications at all of our U.S. wallboard and ceiling tile plants and paper mills and may require that we incur significant costs to satisfy permitting requirements. In addition, enactment of new climate control legislation, regulatory initiatives or treaties impacting the locations where we conduct business could have a material adverse effect on our operations. For example, any new legislation, such as a “carbon tax” on energy use or establishing a “cap and trade”, could materially and adversely increase the cost of energy used in our manufacturing processes. Further, stricter regulation of emissions might require us to install emissions controls or other equipment at some or all of our manufacturing facilities, requiring significant additional capital investments.

Legal challenges to the U.S. EPA’s final rule regarding the use of synthetic gypsum, or subsequent state legislation, could also result in laws or regulations that adversely affect the classification, use, storage and disposal of synthetic gypsum. Such laws or regulations may require significant capital investments to convert those plants and lines that use synthetic gypsum to natural gypsum.

Legal and governmental proceedings, including those involving antitrust, tax, environmental, intellectual property or other matters, may result in significant costs.

We are subject to litigation and governmental proceedings in the normal course of business, including, but not limited to, a federal grand jury investigation of the gypsum drywall industry, and could become subject to additional claims in the future, some of which could become material. It may also be necessary to initiate legal proceedings in order to defend and enforce our proprietary rights. The outcome of existing legal and governmental proceedings may differ from our expectations because the outcomes of litigation and governmental proceedings are often difficult to reliably predict. Various developments can lead to changes in management’s estimates of liabilities. Those developments include judicial rulings or judgments, settlements, or regulatory developments or changes in applicable law. A future adverse ruling, settlement or unfavorable development could result in charges that could have a material adverse effect on our results of operations in any particular period, or we could be unsuccessful in protecting our intellectual property. For a more detailed discussion of certain of the legal proceedings in which we are involved, see Item 3, Legal Proceedings, below.

A small number of our stockholders could significantly influence our business, affairs and stock price.

Based on filings made with the SEC, we believe that, as of January 31, 2017, two stockholders collectively controlled approximately 40% of our common stock. Accordingly, a small number of our stockholders could affect matters requiring approval by stockholders, including the election of directors and the approval of potential business combination transactions. One or more of these stockholders may have interests that differ from other stockholders and may vote on such matters in a way that is adverse to the interests of those other stockholders. In addition, if one or more of these stockholders sell our shares, our share price may decline.

We may pursue acquisitions, joint ventures and other transactions to complement or expand our businesses, which even if completed, may involve a number of risks.

We may pursue opportunities to acquire businesses or technologies and to form joint ventures that we believe could complement, enhance or expand our current businesses or product lines or that might otherwise offer us growth opportunities. Such pursuits may be costly and unsuccessful. Even if completed, potential issues associated with these activities could include, among other things, our ability to realize the full extent of the expected returns, benefits, cost savings or synergies as a result of a transaction within the anticipated time frame, or at all, and diversion of management’s attention from day-to-day operations.

We may not be able to fully execute our stock repurchase program and may not otherwise return capital to our stockholders in the foreseeable future.

On February 1, 2017 we announced approval of a stock repurchase program in which we may repurchase up to $250 million of our common stock. There is no guarantee as to the exact number of shares or value that will be repurchased under the stock repurchase program and we may discontinue purchases at any time. Whether we make any further repurchases will depend on many factors, including but not limited to our business and financial performance, the business and market conditions at the time, including the price of our shares, and other factors that management considers relevant. Additionally, we expect to fund repurchases under our stock repurchase program through cash on hand, which may impact our ability to pursue potential strategic opportunities. Although our stock repurchase program is intended to enhance long-term stockholder value, short-term stock price fluctuations could reduce the program’s effectiveness and there can be no assurance that any stock repurchases will enhance stockholder value.

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Our credit agreement limits our ability to pay a dividend or repurchase our stock unless specified borrowing availability and fixed charge coverage ratio tests are met, and it prohibits payment of a dividend or repurchase of our stock if a default exists under the agreement. Accordingly, we may be required to cease repurchasing stock for periods of time in order to maintain compliance with our credit agreement terms. In addition, we have not paid a dividend on our common stock since the first quarter of 2001 and there can be no assurance that we will do so in the foreseeable future. If we do not pay dividends or execute on our announced stock repurchase program, investors will have to rely on the possibility of stock appreciation and sell their shares to realize a return on their investment.

If we experience an “ownership change” within the meaning of the Internal Revenue Code, utilization of our net operating loss, or NOL, carryforwards would be subject to an annual limitation.

The Internal Revenue Code imposes limitations on a corporation’s ability to utilize NOLs if it experiences an “ownership change,” which may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a rolling three-year period. If we were to experience an ownership change, utilization of our NOLs would be subject to an annual limitation that may be carried over to later years within the allowed NOL carryforward period. Notwithstanding, over the entire carryforward period, we may not be able to use all our NOLs due to the aforementioned annual limitation. If an ownership change had occurred as of December 31, 2016, our annual U.S. federal NOL utilization would have been limited to approximately $71 million per year.

These NOL carryforwards are a substantial asset for us. Although we have our stockholder rights plan and transfer restrictions in our Restated Certificate of Incorporation, which are intended to reduce the likelihood of an “ownership change” that could adversely affect our NOLs, we cannot provide assurance that these restrictions on transferability will prevent all transfers that could result in such an “ownership change.” There also can be no assurance that the transfer restrictions in our Restated Certificate of Incorporation will be enforceable against all of our stockholders absent a court determination confirming such enforceability. The transfer restrictions may be subject to challenge on legal or equitable grounds.

Our level of indebtedness requires us to dedicate a portion of our cash flow to debt payments and limits our ability to engage in certain business activities. If we are unable to fund our business activities, meet our obligations under our debt agreements or are contractually restricted from pursuing activities or transactions that we believe are in our long-term best interests, our business, financial condition, results of operations and cash flows could be adversely affected.

As of December 31, 2016, we had $1.1 billion of outstanding debt, consisting of senior notes and industrial revenue bonds. Our debt service obligations require us to dedicate a portion of our cash flow from operating activities to payments on our indebtedness, which reduces the availability to use our cash flow for other purposes, including capital expenditures, research and development efforts, potential acquisitions or investments. Our indebtedness also may increase our vulnerability to economic and industry downturns and changing market conditions and place us at a competitive disadvantage relative to competitors that have less debt. We are required to post letters of credit or cash as collateral primarily in connection with our hedging transactions, insurance programs and bonding activities. The amounts of collateral we are required to post may vary based on our financial position and credit ratings. Use of letters of credit as collateral reduces our borrowing availability under our domestic revolving credit agreement and, therefore, like the use of cash as collateral, reduces our overall liquidity and our ability to fund other business activities.

The terms of our debt agreements, including our credit facility, may also limit our ability to engage in certain activities and transactions that may be in our long-term interest. Among other things, unless we obtain approval the covenants contained in our debt agreements may restrict or limit our ability to incur additional indebtedness, pay dividends or repurchase our common stock, make guarantees, sell our assets or make other fundamental changes, engage in mergers, acquisitions and dispositions, make investments, change our business purpose, and enter into certain transactions with affiliates. We may also be required to maintain specified financial ratios, which may require that we take action to reduce our debt or to act in a manner contrary to our current business plans. Our ability to comply with these covenants and financial ratios may be affected by events beyond our control, and we may not be able to continue to meet those covenants and ratios. Breach of any of the covenants or ratios contained in the agreements governing our debt, or our inability to pay interest on, or principal of, our outstanding debt as it becomes due, could result in an event of default, in which case, our lenders could declare all amounts outstanding to be immediately due and payable. If this occurs, we may not be able to refinance the accelerated debt on favorable terms, or at all, or repay the accelerated debt, and our liquidity may be adversely impacted. 

Item 1B. UNRESOLVED STAFF COMMENTS

None

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Item 2.PROPERTIES

We operate plants, mines, quarries, and other facilities in North America. U.S. Gypsum’s Sheetrock^® brand gypsum wallboard plants operated at approximately 61% of capacity during 2016. USG Interiors’ ceiling tile plants operated at approximately 70% of capacity during 2016. The locations of our production properties in operation as of December 31, 2016, grouped by reportable segment, are as follows (plants are owned unless otherwise indicated):

Gypsum

	Gypsum wallboard and other gypsum products	Joint compound (surface preparation and joint treatment products)	Cement board	Gypsum rock (mines and quarries)	Paper for gypsum wallboard
Alabaster (Tawas City), Michigan				x
Aliquippa, Pennsylvania*	x
Auburn, Washington		x
Baltimore, Maryland**	x	x	x
Bridgeport, Alabama*	x	x
Calgary, Alberta, Canada***		x
Chamblee, Georgia		x
Dallas, Texas		x
Detroit (River Rouge), Michigan			x
East Chicago, Indiana*	x	x
Fort Dodge, Iowa		x		x
Galena Park, Texas*	x	x			x
Gypsum, Ohio		x
Hagersville, Ontario, Canada**	x	x		x
Jacksonville, Florida**	x	x
Monterrey, Nuevo Leon, Mexico	x	x	x	x
Montreal, Quebec, Canada **	x	x
New Orleans, Louisiana			x
Norfolk, Virginia*	x
North Kansas City, Missouri					x
Oakfield, New York					x
Otsego, Michigan					x
Phoenix (Glendale), Arizona***		x
Plaster City, California	x			x
Port Reading, New Jersey		x
Puebla, Puebla, Mexico	x	x
Rainier, Oregon	x
Saltillo, Coahuila, Mexico	x
San Luis Potosi, San Luis Potosi, Mexico	x			x
Shoals, Indiana**	x			x
Sigurd, Utah	x	x		x
Southard, Oklahoma				x
Sperry, Iowa**	x			x
Surrey, British Columbia, Canada***		x
Sweetwater, Texas	x			x

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	Gypsum wallboard and other gypsum products	Joint compound (surface preparation and joint treatment products)	Cement board	Gypsum rock (mines and quarries)	Paper for gypsum wallboard
Tecoman, Colima, Mexico	x			x
Torrance, California		x
Washingtonville, Pennsylvania*	x

*	Plants supplied fully by synthetic gypsum
**	Plants supplied partially by synthetic gypsum
***	Leased

OTHER PRODUCTS

We operate a mica-processing plant at Spruce Pine, North Carolina. We manufacture metal lath, plaster and drywall accessories and light gauge steel framing products at Monterrey, Nuevo Leon, Mexico, and Puebla, Puebla, Mexico. We produce plaster products at Southard, Oklahoma; Puebla, Puebla, Mexico; Saltillo, Coahuila, Mexico; and San Luis Potosi, San Luis Potosi, Mexico. We manufacture paper-faced metal corner bead at Auburn, Washington and at a leased facility in Weirton, West Virginia. We also manufacture cement panels at a leased manufacturing facility in Delavan, Wisconsin .

Ceilings

	Ceiling Grid	Ceiling Tile
Cartersville, Georgia	x
Cloquet, Minnesota		x
Greenville, Mississippi		x
Oakville, Ontario, Canada	x
Stockton, California	x
Walworth, Wisconsin		x
Westlake, Ohio	x

A coil coater and slitter plant used in the production of ceiling grid is located in Westlake, Ohio. A leased slitter plant is located in Stockton, California.

OTHER PRODUCTS

We manufacture mineral fiber products at Red Wing, Minnesota, and Walworth, Wisconsin, and metal specialty systems at Oakville, Ontario, Canada.

Item 3. LEGAL PROCEEDINGS

See Part II, Item 8, Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements, Note 19, Litigation, for information on legal proceedings, which information is incorporated herein by reference.

Item 4. MINE SAFETY DISCLOSURES

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K promulgated by the SEC is included in Exhibit 95 to this report.

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PART II

Item 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock trades on the New York Stock Exchange, or NYSE, and the Chicago Stock Exchange under the symbol USG. The NYSE is the principal market for our common stock. As of January 31, 2017, there were 2,202 record holders of our common stock. We currently do not pay dividends on our common stock. Our credit facility limits our ability to pay cash dividends on or repurchase our common stock unless specified borrowing availability and fixed charge ratios are met. See Item 8, Financial Statements and Supplementary Data, Note 6, Debt, for more information regarding these restrictions.

We did not purchase any of our equity securities during the fourth quarter of 2016.

See Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, for information regarding common stock authorized for issuance under equity compensation plans.

Pursuant to our Deferred Compensation Program for Non-Employee Directors, five of our non-employee directors deferred the $120,000 annual grant, and two of our non-employee directors deferred all or a portion of the quarterly retainer, they were entitled to receive on December 31, 2016 under our Non-Employee Director Compensation Program, into a total of 22,013 deferred stock units. These units will increase or decrease in value in direct proportion to the market value of our common stock and will be paid in cash or shares of common stock, at each director’s option, following termination of service as a director. The issuance of these deferred stock units was effected through a private placement under Section 4(a)(2) of the Securities Act and was exempt from registration under Section 5 of the Securities Act.

COMMON STOCK PRICES

The high and low sales prices of our common stock in 2016 and 2015 were as follows:

	2016				2015
	High		Low		High		Low
First quarter	$	24.81	$	16.48	$	30.99	$	25.39
Second quarter	29.52		24.91		29.08		26.00
Third quarter	30.58		25.62		32.73		25.89
Fourth quarter	32.19		23.92		28.00		22.91

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PERFORMANCE GRAPH

The following graph and table compare the cumulative total stockholder return on our common stock with the Standard and Poor’s 500 Index, or S&P 500, and the Dow Jones U.S. Construction and Materials Index, or DJUSCN, in each case assuming an initial investment of $100 and full dividend reinvestment, for the five-year period ended December 31, 2016.

	Value of Investment as of December 31,
	2011		2012		2013		2014		2015		2016
USG	$	100	$	276	$	279	$	275	$	239	$	284
S&P 500	100		116		154		174		177		198
DJUSCN	100		140		181		178		192		229

All amounts are rounded to the nearest dollar.

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Item 6. SELECTED FINANCIAL DATA

(millions, except per-share and employee data)	Years Ended December 31,
	2016			2015 (a)			2014 (a)			2013 (a)			2012 (a)
Statement of Income Data:
Net sales	$	3,017		$	2,913		$	2,904		$	2,792		$	2,494
Cost of products sold	2,312			2,263			2,279			2,232			2,085
Gross profit	705			650			625			560			409
Selling and administrative expenses	304			302			323			302			282
Litigation settlement charge (b)	—			—			48			—			—
Long-lived asset impairment charges (c)	10			—			90			—			8
Shipping operations (d)	(3		)	(7		)	15			—			—
Restructuring charges	—			—			—			4			10
Operating profit	394			355			149			254			109
Income (loss) from equity method investments	49			48			33			(1		)	(3		)
Interest expense, net	(141		)	(161		)	(178		)	(200		)	(202		)
Income and gain from sale of equity method investment to related party (e)	—			13			2			2			3
Gain on deconsolidation of subsidiaries and consolidated joint ventures (f)	—			—			27			—			—
Loss on extinguishment of debt	(37		)	(19		)	—			—			(41		)
Other income, net	9			—			—			—			—
Income (loss) from continuing operations before income taxes	274			236			33			55			(134		)
Income tax (expense) benefit (g)	(63		)	740			(7		)	(11		)	(12		)
Income (loss) from continuing operations	211			976			26			44			(146		)
Income (loss) from discontinued operations, net of tax	20			15			12			2			(34		)
Gain on sale of discontinued operations, net of tax (a)	279			—			—			—			55
Net income (loss)	510			991			38			46			(125		)
Less: Net income (loss) attributable to noncontrolling interest	—			—			1			(1		)	1
Net income (loss) attributable to USG	$	510		$	991		$	37		$	47		$	(126	)
Income (loss) from continuing operations per average common share:
Basic	1.45			6.70			0.18			0.40			(1.38		)
Diluted	1.44			6.62			0.17			0.39			(1.38		)
Balance Sheet Data (as of the end of the year):
Working capital	$	527		$	408		$	546		$	1,080		$	796
Current ratio	2.25			1.41			1.97			2.90			2.50
Cash and cash equivalents (a)	427			442			231			815			550
Property, plant and equipment, net (a)	1,707			1,771			1,891			2,088			2,082
Total assets	3,869			4,736			3,936			4,051			3,691
Long-term debt (h)	1,083			1,675			2,191			2,275			2,284
Total stockholders’ equity	1,886			1,436			408			662			19

(a) Results have been adjusted from the originally reported amounts to reflect L&W, which was sold on October 31, 2016, as a discontinued operation. We recorded a gain of $279 million on the sale of the business. See Note 3 to our consolidated financial statements in Part II, Item 8 of this report.

(b) Reflects a charge related to the settlement of the U.S. wallboard pricing class action lawsuits.

(c) Reflects long-lived asset impairment charges on mining operations in 2016 and on certain manufacturing facilities, capitalized costs for the construction of future facilities and ocean vessels in 2014. See Note 12 and Note 13 to our consolidated financial statements in Part II, Item 8 of this report.

(d) Item relates to our shipping operations. See Note 13 to our consolidated financial statements in Part II, Item 8 of this report.

(e) Reflects the gain recorded on the sale of our equity method investment in our Knauf-USG joint venture to our 50/50 joint venture partner in 2015 and our share of the net income from the equity method investment for all periods presented. See Note 4 to our consolidated financial statements in Part II, Item 8 of this report.

(f) Reflects the gain recorded on the deconsolidation and contribution to UBBP of our wholly-owned subsidiaries in Singapore, Malaysia, New Zealand, and Australia and our consolidated joint ventures in Oman. See Note 4 to our consolidated financial statements in Part II, Item 8 of this report.

(g) Income tax (expense) benefit for 2015 includes the reversal of a tax valuation allowance of $731 million. See Note 15 to our consolidated financial statements in Part II, Item 8 of this report.

(h) Amounts reflected exclude currently maturing portion of long-term debt.

18

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

USG, through its subsidiaries, is a leading manufacturer of innovative, high-performance building systems. We produce a wide range of products under recognized brand names including Sheetrock^®, Durock^®, Fiberock^®, and Securock^® serving the new residential, new nonresidential, and repair and remodel construction markets for both residential and nonresidential, enabling our customers to build the outstanding spaces where people live, work and play.

KEY STRATEGIES

We continue to focus on the following strategic priorities:

• strengthen our core businesses,

• diversify our earnings by expanding in select markets and growing our adjacent product lines, and

• differentiate USG from our competitors through innovation.

RECENT DEVELOPMENTS

On October 31, 2016, we completed the sale of L&W Supply Corporation, or L&W, to American Builders & Contractors Supply Co., Inc., or ABC Supply, for $675 million inclusive of the final working capital adjustment. We recognized a gain of $279 million on the transaction. Additionally, we entered into a supply agreement with L&W that governs sales of wallboard and certain other products from USG to L&W.

For the year ended December, 31, 2016, L&W met the criteria to be presented as discontinued operations. L&W's results of operations and related cash flows have been reclassified to discontinued operations in our consolidated statements of income and consolidated statements of cash flows, respectively, for all periods presented. The assets and liabilities of L&W as of December 31, 2015 have been reclassified to discontinued operations in our consolidated balance sheets. See Note 3 to the consolidated financial statements in Part II, Item 8 of this report for additional information related to discontinued operations.

During 2016, we retired $1.1 billion of outstanding debt consisting of our 6.3% Senior Notes due 2016, our 7.875% Senior Notes due 2020 and our 5.875% Senior Notes due 2021, and recorded a pre-tax loss on the early extinguishment of debt of $37 million.

MARKET CONDITIONS AND OUTLOOK

Our businesses are cyclical in nature and sensitive to changes in general economic conditions, including, in particular, conditions in the North American housing and construction-based markets and the markets in Asia and Australasia. Our expansion via two 50/50 joint ventures we formed with Boral Limited, referred to as USG Boral Building Products, or UBBP, into the markets of Asia, Australasia, and the Middle East has significantly increased our exposure to the economic conditions in those areas. However, the UBBP investment has helped diversify USG’s overall exposure to changes in the North American economic conditions. The markets we serve can be broadly categorized as new residential construction, new nonresidential construction and repair and remodel activity, which includes both residential and nonresidential construction.

For the new residential construction market, housing starts are a very good indicator of demand for our gypsum products. Installation of our gypsum products into a single family home typically follows a housing start by 90 to 120 days. Based on preliminary data reported by the U.S. Census Bureau, housing starts in the United States increased 5% in 2016 to 1,166,300 compared with an adjusted 1,111,900 in 2015. This followed an 11% increase in 2015 compared with 2014. For December 2016, the seasonally-adjusted annualized rate of housing starts was reported by the U.S. Census Bureau to be 1,226,000 units. While housing starts continue to increase year over year, they are still low by historical standards. Most industry analysts believe that the recovery in new residential construction will continue, although the recovery over the next few years may be modest, and that over the longer term housing starts will reach historical averages. Industry analysts’ forecasts for 2017 housing starts in the United States included in the most recent Blue Chip Economic Indicators are 1,190,000 to 1,350,000 units, based upon the average of the bottom ten and top ten forecasts included in the report, respectively. We currently estimate that 2017 housing starts in the United States will be approximately 1,250,000.

Demand for our products from new nonresidential construction is determined by floor space for which contracts are signed. Installation of gypsum and ceilings products typically follows signing of construction contracts by about 12 to 18 months. According to the most recent construction market forecast from Dodge Data & Analytics, total floor space for which new nonresidential construction contracts were signed in the United States decreased 1% in 2016 compared with 2015. This

19

followed a 2% decrease in 2015 compared with 2014 and a 14% increase in 2014 compared with 2013. Dodge Data & Analytics forecasts that total floor space for which new nonresidential construction contracts in the United States are signed will increase approximately 6% in 2017 from the 2016 level. Dodge Data & Analytics' forecast includes several building types which do not generate significant demand for our products; therefore, we anticipate new nonresidential construction growth in our business sectors in 2017 compared to 2016 will increase low to mid single digits.

The repair and remodel market includes renovation of both residential and nonresidential buildings. As a result of the low levels of new home construction in recent years, this market currently accounts for the largest portion of our sales. Many buyers begin to remodel an existing home within two years of purchase. According to the National Association of Realtors, sales of existing homes in the United States increased to 5.45 million units in 2016, reflecting a 4% increase from the 2015 level of 5.25 million units, which was a 6% increase from 2014. The generally rising levels of existing home sales and home resale values in recent years have contributed to an increase in demand for our products from the residential repair and remodel market. We currently estimate that overall repair and remodel spending in 2016 increased approximately 6% over the 2015 level and that overall repair and remodel spending growth in 2017, compared to 2016, will increase by mid single digits.

The rate of recovery in the new residential construction market, new nonresidential construction market and the repair and remodel market still remains uncertain and will depend on broader economic circumstances, including employment, household formation, the home ownership rate, existing home price trends, availability of mortgage financing, interest rates, consumer confidence, job growth and discretionary business investment. An increase in interest rates, high levels of unemployment, restrictive lending practices, a decrease in consumer confidence or other adverse economic conditions could have a material adverse effect on our business, financial condition, operating results and cash flows. Our businesses are also affected by a variety of other factors beyond our control, including the inventory of unsold homes, the level of foreclosures, home resale rates, housing affordability, office and retail vacancy rates and foreign currency exchange rates. Since we operate in a variety of geographic markets, our businesses are subject to the economic conditions in each of these geographic markets. General economic downturns or localized downturns or financial concerns in the regions where we have operations may have a material adverse effect on our business, financial condition, results of operations and cash flows.

We expect modest improvement over the next twelve months in the construction industries of Canada and Mexico. Other international markets, including those that are within the UBBP territory, provide opportunities for our operations to serve these regions. Australia is expected to experience a decline in housing starts; however, these housing starts are expected to remain above the long-term average. South Korea is expecting continued growth in its residential sector although the overall construction industry is expected to slow. Several emerging markets which are within the UBBP territory are forecast to experience steady growth. We anticipate that the results from UBBP will enable us to counteract some of the potential cyclicality in our North American business.

Our Gypsum segment has improved with the modest recovery in residential housing over the last three years, although it continues to be adversely affected by the low level of residential and other construction activity compared to historical averages. Our Ceilings segment, which primarily serves the commercial markets, has shown some improvement. However, it continues to be adversely affected by the low levels of new commercial construction activity as compared to historical averages.

Industry shipments of gypsum board in the United States (including gypsum wallboard, other gypsum-related paneling products and imports), as reported by the Gypsum Association, were an estimated 25.0 billion square feet in 2016, up approximately 12% from 22.3 billion square feet in 2015.

U.S. Gypsum shipped 5.76 billion square feet of Sheetrock^® brand gypsum wallboard in 2016, a 6% increase from 5.44 billion square feet in 2015. USG Sheetrock^® Brand UltraLight Panels accounted for approximately 66% and 65% of that volume in 2016 and 2015, respectively. U.S. Gypsum’s share of the gypsum board market in the United States, which includes, for comparability, its shipments of Sheetrock^® brand gypsum wallboard, Fiberock^® brand gypsum fiber panels and Securock^® brand glass mat sheathing, was approximately 25% in 2016, down 1% from 2015.

There is excess wallboard production capacity industry-wide in the United States. Industry capacity in the United States was approximately 33.4 billion square feet as of January 1, 2017. We estimate that the industry capacity utilization rate was approximately 77% and 70% during the fourth quarters of 2016 and 2015, respectively and approximately 75% and 68% during the full years 2016 and 2015, respectively. Based on current industry trends and forecasts, demand for gypsum wallboard is expected to increase in 2017, but the magnitude of any increase will depend on the levels of housing starts and repair and remodel activity, among other factors. We project that the industry capacity utilization rate will experience a modest growth in 2017 compared to 2016.

20

We could experience pressure on gypsum wallboard selling prices and our gross margins at these levels of capacity utilization. U.S. Gypsum implemented a price increase for wallboard effective in January 2017. However, it is uncertain that we will be able to maintain the increase or obtain additional price increases in our selling prices. If we are unable to maintain or implement price increases, our net sales, operating results and cash flows may be materially and adversely impacted.

SEGMENTS

Our operations are organized into three segments: Gypsum, Ceilings and UBBP. As a result of the presentation of L&W as a discontinued operation, the results of L&W, which consisted of all of our Distribution segment, have been excluded from segment results. Additionally, the results of our Gypsum and Ceilings segments have been revised to reflect only the sales of USG products from Gypsum and Ceilings to L&W that have been sold by L&W outside the consolidated group prior to October 31, 2016. All sales subsequent to the close of the transaction are included in net sales.

Gypsum: Our Gypsum segment manufactures and markets gypsum and related products in the United States, Canada, Mexico and Latin America. Gypsum’s products are used in a variety of building applications to construct walls, ceilings, roofs and floors of residential, commercial and institutional buildings, as well as in certain industrial applications.

Ceilings: Our Ceilings segment manufactures and markets interior systems products in the United States, Canada, Mexico and Latin America. In addition, through February 27, 2014, it also included our businesses in the Asia-Pacific region (see paragraph below regarding UBBP), which were included in USG International. Ceilings is a leading supplier of interior ceilings products used primarily in commercial applications. Ceilings manufactures ceiling tile in the United States and ceiling grid in the United States, Canada and, through February 27, 2014, in the Asia-Pacific region. It markets ceiling tile and ceiling grid in the United States, Canada, Mexico, Latin America and, through February 27, 2014, in the Asia-Pacific region.

As discussed below under USG Boral Building Products, on February 27, 2014, we contributed our Asia-Pacific operations to the joint ventures.

USG Boral Building Products (UBBP): On February 27, 2014, we formed two 50/50 joint ventures with Boral Limited, or Boral, herein referred to as UBBP. UBBP manufactures, distributes and sells certain building products, mine raw gypsum and sell natural and synthetic gypsum throughout Asia, Australasia and the Middle East (the Territory). The joint ventures also manufacture and distribute products for wall, ceiling, floor lining and exterior systems that utilize gypsum wallboard, referred to as plasterboard in the Territory, mineral fiber ceiling tiles, steel grid and joint compound.

As consideration of our 50% ownership in the joint ventures, we made total net cash payments of $514 million, contributed our operations in the Asia-Pacific region and granted UBBP a license to use certain of our intellectual property rights in the Territory. As a result of the contribution of our operations in the Asia-Pacific region, the net sales and operating profit attributable to these entities are no longer included in those corresponding line items on our consolidated statement of income subsequent to February 27, 2014. Instead, our share of the equity income from UBBP is shown within income from equity method investments. See Note 4 to our consolidated financial statements in Part II, Item 8 of this report for further discussion.

Geographic Information: In 2016, 82% of our consolidated net sales were attributable to the United States. Canada accounted for 12% of our net sales, and other foreign countries accounted for the remaining 6%.

In 2016, 35% of UBBP's net sales were attributable to Australia, 20% to South Korea, 13% to Thailand, 9% to China, and other foreign countries accounted for the remaining 23%.

CURRENCY IMPACT

The impact of currency on consolidated and segment results for 2016 and 2015 has been derived by translating current period results at the year-to-date average foreign currency rates for the period ending December 31, 2015 and December 31, 2014, respectively.

21

Consolidated Results of Operations

										Favorable (Unfavorable)
										2016 vs. 2015					2015 vs. 2014
(millions, except per-share data)	2016			2015			2014			$			%		$			%
Net sales	$	3,017		$	2,913		$	2,904		$	104		4	%	$	9		—	%
Cost of products sold	2,312			2,263			2,279			(49		)	(2	)%	16			1	%
Gross profit	705			650			625			55			8	%	25			4	%
Selling and administrative expenses	304			302			323			(2		)	(1	)%	21			7	%
Litigation settlement charge	—			—			48			—			*		48			100	%
Long-lived asset impairment charges	10			—			90			(10		)	*		90			100	%
(Recovery) loss on receivable and contract termination charge	(3		)	(6		)	15			(3		)	(50	)%	21			*
Gain on disposal of shipping operations, net	—			(1		)	—			(1		)	(100	)%	1			*
Operating profit	394			355			149			39			11	%	206			*
Income from equity method investments	49			48			33			1			2	%	15			45	%
Interest expense	(145		)	(163		)	(179		)	18			11	%	16			9	%
Interest income	4			2			1			2			100	%	1			100	%
Income and gain on sale from equity method investment to related party	—			13			2			(13		)	(100	)%	11			*
Gain on deconsolidation of subsidiaries and consolidated joint ventures	—			—			27			—			*		(27		)	(100	)%
Loss on extinguishment of debt	(37		)	(19		)	—			(18		)	(95	)%	(19		)	*
Other income, net	9			—			—			9			*		—			*
Income from continuing operations before income taxes	274			236			33			38			16	%	203			*
Income tax benefit (expense)	(63		)	740			(7		)	(803		)	*		747			*
Income from continuing operations	211			976			26			(765		)	(78	)%	950			*
Income from discontinued operations, net of tax	20			15			12			5			33	%	3			25	%
Gain on sale of discontinued operations, net of tax	279			—			—			279			*		—			*
Net income	510			991			38			(481		)	(49	)%	953			*
Less: Net income attributable to noncontrolling interest	—			—			1			—			*		(1		)	(100	)%
Net income attributable to USG	$	510		$	991		$	37		$	(481	)	(49	)%	$	954		*
Diluted earnings per share - net income	$	3.46		$	6.73		$	0.25		$	(3.27	)			$	6.48
* not meaningful

NET SALES

Consolidated net sales in 2016 increased $104 million, or 4%, compared with 2015 driven by higher net sales by both our Gypsum and Ceiling segments of $100 million and $4 million, respectively. The increase in Gypsum net sales primarily reflected higher domestic sales as a result of increased volumes of Sheetrock^® brand gypsum wallboard, Sheetrock^® brand joint compound, Durock^® brand cement board, Levelrock^® brand gypsum underlayment offset by lower prices of Sheetrock^® brand gypsum wallboard. The increase in Ceilings net sales was primarily driven by higher domestic net sales due to price improvement on ceiling tile and ceiling grid volume improvement. On a consolidated basis, foreign currency exchange rate fluctuations negatively impacted our net sales by $34 million.

Consolidated net sales in 2015 increased $9 million compared with 2014. The increase reflected an increase in sales of the Gypsum segment offset by a decrease in sales of the Ceiling segment. The higher Gypsum segment sales reflected increases in volume and average selling prices for nearly all wallboard, surfaces and substrates products offset by the elimination of shipping revenues of $71 million due to the exit of our shipping business in the second quarter of 2015. The lower Ceilings revenues in 2014 reflected the inclusion of only two months of revenue for USG International, or $7 million, prior to its contribution into the UBBP joint venture on February 27, 2014, with further declines in sales driven by the strengthening of the U.S. Dollar, offset by higher selling prices for ceiling tile. On a consolidated basis, we estimate that the strengthening of the U.S. Dollar negatively impacted our net sales by approximately $65 million compared with 2014.

GROSS PROFIT

Gross profit was $705 million in 2016 compared to $650 million in 2015. The increase was primarily due to higher volume and lower cost for nearly all wallboard, surfaces and substrates products and ceiling grid and lower cost for ceiling tile. As a percentage of net sales, gross profit was 23.4% in 2016 and 22.3% in 2015. The increase for 2016 compared with 2015 was primarily driven by higher volumes and lower cost.

As a percentage of net sales, gross profit was 22.3% in 2015 and 21.5% in 2014. The increase was primarily due to increases in volume and average selling prices for nearly all wallboard, surfaces and substrates products.

22

SELLING AND ADMINISTRATIVE EXPENSES

Selling and administrative expenses totaled $304 million in 2016, $302 million in 2015 and $323 million in 2014. As a percentage of net sales, selling and administrative expenses decreased to 10.1% in 2016 compared to 10.4% in 2015 and 11.1% in 2014. The increase of $2 million in selling and administrative expenses for 2016 included $13 million in pension settlement charges and $4 million for the remaining lease term and accelerated depreciation associated with the exit of commercial office space. Offsetting these charges are lower net compensation costs and lower marketing expenses.

The reduction in selling and administrative expenses from 2014 to 2015 was driven by management's focus on reducing discretionary spending, partially offset by higher salary, pension and incentive compensation, the absence of a $13 million pension settlement charge recorded in 2014 for our previously frozen U.K. pension plan and lower stock compensation expense driven by lower grant date fair values.

LITIGATION SETTLEMENT CHARGE

In the third quarter of 2014, we recorded a litigation settlement charge of $48 million related to the settlement of the U.S. wallboard pricing class action lawsuits.

LONG-LIVED ASSET IMPAIRMENT CHARGES

We recorded long-lived asset impairment charges of $10 million in 2016 and $90 million in 2014. There were no impairment charges on long-lived assets in 2015. The charges in 2016 resulted from the decision to indefinitely idle our mining operations in Little Narrows, Nova Scotia, Canada, after completing a review of our gypsum sourcing needs. The charges in 2014 reflected the impairment of $30 million on certain manufacturing facilities and capitalized costs for the construction of future facilities, which we do not anticipate will be built within our planning horizon, and of $60 million on two vessels owned by Gypsum Transportation Limited, or GTL. See Notes 12 and 13 to our consolidated financial statements in Part II, Item 8 of this report for additional information related to long-lived asset impairment charges.

(RECOVERY) LOSS ON RECEIVABLE AND CONTRACT TERMINATION CHARGE

In the fourth quarter of 2014, we recorded a charge of $15 million for contract costs related to a lease of an ocean vessel that were to be incurred over the remaining term without economic benefit to us and for a loss on an uncollectible receivable owed to our shipping operations by its trading partner.

In 2016 and 2015, we recovered $3 million and $6 million, respectively, of the previously deemed uncollectible receivable through a settlement agreement. See Note 13 to the consolidated financial statements in Part II, Item 8 of this report for additional information.

GAIN ON DISPOSAL OF SHIPPING OPERATIONS, NET

During the second quarter of 2015, we recorded a net gain on the disposal of our shipping operations of $1 million. This reflected a gain on sale of our two self-unloading vessels of $7 million and charges to wind down our shipping operations of $6 million.

INCOME FROM EQUITY METHOD INVESTMENTS

Income from equity method investments was $49 million in 2016, $48 million in 2015, and $33 million in 2014. The increase from 2015 to 2016 was primarily driven by an increase in our share of the net income of UBBP, which reflected higher sales and operating profit year over year offset by $8 million of long-lived asset impairment charges in China and Oman. Foreign currency exchange rate fluctuations due to the strengthening of the U.S. dollar negatively impacted our share of equity earnings by $1 million in 2016.

The increase from 2014 to 2015 primarily reflected an increase in our share of the net income of UBBP driven by both growth in the business year-over-year and twelve months of equity method income in 2015 and only ten months in 2014. Our share of equity earnings in 2015 was negatively impacted by approximately $8 million due to the strengthening of the U.S. dollar.

INTEREST EXPENSE

Interest expense was $145 million in 2016, $163 million in 2015 and $179 million in 2014. The decrease in interest expense in 2016 from 2015 primarily reflected lower debt levels and lower interest rates on our outstanding debt. The decline was driven by repayments of $1.1 billion of debt in 2016 and $21 million in 2015.

Lower interest expense in 2015 as compared to 2014 primarily reflected lower debt levels and lower interest rates on our outstanding debt. The decline was driven by the April 2014 conversion of $75 million of our 10% convertible senior notes into common stock, the August 2014 repayment of $59 million of our 9.75% Senior Notes, the February 2015 repurchase of our

23

8.375% Senior Notes due 2018, the repayment of our ship mortgage facility and lower amortization of deferred financing fees and debt discounts, offset by the issuance of our 5.5% Senior Notes due 2025.

INCOME AND GAIN ON SALE FROM EQUITY METHOD INVESTMENT TO RELATED PARTY

On December 22, 2015, we completed the disposition of our 50% share of the Knauf-USG joint venture to Knauf for a total price of €48 million in cash, or approximately $52 million. We recorded a gain of $11 million, or $6 million net of tax, on the disposition of the equity method investment. Our share of the income from the equity method investment from January 1, 2015 through December 22, 2015 amounted to $2 million, which was flat with 2014. See Note 4 to our consolidated financial statements in Part II, Item 8 of this report for additional information.

GAIN ON DECONSOLIDATION OF SUBSIDIARIES

In the first quarter of 2014, we recognized a gain of $27 million on the deconsolidation of subsidiaries as a result of our contribution of our wholly-owned subsidiaries in Singapore, India, Malaysia, New Zealand and Australia and our consolidated joint ventures in Oman into UBBP.

LOSS ON EXTINGUISHMENT OF DEBT

We recorded a loss on extinguishment of debt of $37 million in 2016 and $19 million in 2015 including premiums and write-off of unamortized debt issuance costs. The loss in 2016 was a result of the early redemption of our 6.3% Senior Notes throughout 2016 and repayment in December of our 7.875% Senior Notes and 5.875% Senior Notes. The loss in 2015 resulted from the tender offer and repurchase of our 8.375% Senior Notes due 2018.

OTHER INCOME, NET

We recorded $9 million of net other income in 2016 which included net gains on foreign currency transactions and the receipt of the remaining payments under a settlement agreement with our former trading partner of which $4 million was recorded as other income. See Note 13 to the consolidated financial statements in Part II, Item 8 of this report for additional information.

INCOME TAX EXPENSE

Income tax expense was $63 million in 2016 compared with income tax benefit of $740 million in 2015. The income tax expense in 2016 is related to tax expense from domestic, foreign, state and local jurisdictions. This expense was partially offset by foreign tax credits attributable to tax planning strategies to optimize foreign tax credit utilization and management’s intention to amend its tax returns for the tax years 2012-2014 in order to claim credits for previously deducted foreign tax.

Income tax benefit was $740 million in 2015 compared with income tax expense of $7 million in 2014. The income tax benefit in 2015 primarily resulted from the reversal of a substantial portion of our deferred tax asset valuation allowance of $731 million. In addition, tax benefits of $5 million were recorded for recently enacted Federal law changes related to alternative minimum tax credit monetization, or AMT credits. These benefits recorded were offset slightly by tax expense for certain foreign, state and local jurisdictions of $7 million. Due to the effects of reversing our deferred tax asset valuation allowance, our effective tax rate for 2015 was abnormally low.

INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX

Income from discontinued operations was $20 million for 2016, $15 million for 2015 and $12 million for 2014 and primarily reflected the income recorded by L&W prior to the sale to ABC Supply on October 31, 2016. The income in 2016 and 2014 also included a loss of $2 million and $1 million, respectively, associated with our European operations which were sold in December 2012. See Note 3 to our consolidated financial statements in Part II, Item 8 of this report for additional information.

GAIN ON SALE OF DISCONTINUED OPERATIONS, NET OF TAX

On October 31, 2016, we completed the sale of L&W to ABC Supply and received proceeds of $675 million inclusive of a $6 million final working capital adjustment that was received subsequent to year end resulting in a gain on sale, net of tax, of $279 million. See Note 3 to our consolidated financial statements in Part II, Item 8 of this report for additional information.

24

Segment Results of Operations

GYPSUM

Net sales and operating profit (loss) for the businesses comprising our Gypsum segment were as follows:

										Favorable (Unfavorable)
										2016 vs. 2015					2015 vs. 2014
(millions)	2016 (a)			2015 (b)			2014 (c)			$			%		$			%
Net Sales:
United States	$	2,135		$	2,041		$	1,913		$	94		5	%	$	128		7	%
Canada	339			321			344			18			6	%	(23		)	(7	)%
Mexico / Latin America	188			187			195			1			1	%	(8		)	(4	)%
Canadian Mining	—			6			5			(6		)	(100	)%	1			20	%
Gypsum Transportation Limited	—			10			81			(10		)	(100	)%	(71		)	(88	)%
Eliminations	(136		)	(139		)	(142		)	3			2	%	3			2	%
Total	$	2,526		$	2,426		$	2,396		$	100		4	%	$	30		1	%
Operating Profit (Loss):
United States	$	375		$	329		$	188		$	46		14	%	$	141		75	%
Canada	22			7			13			15			*		(6		)	(46	)%
Mexico / Latin America	10			24			19			(14		)	(58	)%	5			26	%
Canadian Mining	(21		)	(6		)	(3		)	(15		)	*		(3		)	(100	)%
Gypsum Transportation Limited	3			7			(52		)	(4		)	(57	)%	59			*
Total	$	389		$	361		$	165		$	28		8	%	$	196		*

* Not meaningful

(a) Operating profit in 2016 included long-lived asset impairment charges of $10 million and $2 million of severance related to Canadian Mining, pension settlement expense of $8 million related to the United States, a gain of $11 million recorded on the sale of surplus property and recovery of loss on receivable of $3 million related to GTL

(b) Operating profit in 2015 included $1 million for the net gain on sale of the ships and costs to wind-up the GTL business, a $6 million recovery of a portion of the receivable deemed uncollectible in 2014 and a pre-tax gain on the sale of assets in Mexico of $10 million.

(c) Operating profit in 2014 included a litigation charge of $48 million, which related to the United States, long-lived asset impairment charges of $90 million, of which $30 million related to United States and $60 million relates to GTL, and contract termination and loss on receivable of $15 million, which related to GTL.

UNITED STATES

As a result of the presentation of L&W as a discontinued operation, the results of our United States Gypsum business through the transaction close of October 31, 2016 were revised to reflect the sales of USG products from our United States Gypsum business to L&W that were sold by L&W outside the consolidated group through that date. All sales to L&W subsequent to that date are reflected in sales and operating profit. The year over year impact of this presentation is highlighted in the sales and operating profit (loss) tables below.

2016 COMPARED WITH 2015

Net sales in 2016 increased $94 million, or 5%, compared with 2015. The net sales increase was due to the following:

	Sales				Volume			Price
(millions)	$		%		$	%		$		%
Change to 2016 from 2015
Sheetrock® brand gypsum wallboard	46		5	%	54	6	%	(8	)	(1	)%
Sheetrock® brand joint compound	16		4	%	18	5	%	(2	)	(1	)%
Durock® brand cement board	10		8	%	8	6	%	2		2	%
Levelrock® brand gypsum underlayment	11		22	%	11	22	%	—		—	%
Other	11
Total increase in net sales	$	94	5	%

25

Net sales of USG Sheetrock^® brand gypsum wallboard increased $46 million, or 5%, reflecting a 6% increase in volume offset by a 1% decrease in average gypsum wallboard selling prices. The increase in volume was driven by higher shipments to the core channels of distribution which includes big box retailers, specialty dealers and pro dealers. The decrease in average selling prices reflected changes in mix and regional pricing differences.

Sales of Sheetrock^® brand joint compound increased $16 million driven largely by increased shipments to specialty dealers, pro dealers and big box retailers offset by a 1% decrease in average selling prices due to product mix. Durock^® brand cement board sales increased $10 million which reflected both higher volumes due to an improvement in the repair and remodel market and increased shipments to big box retailers and specialty dealers and higher average selling price of 2%. Sales of Levelrock^® brand gypsum underlayment increased by $11 million driven by higher volume which reflected an improvement in the multi-family housing construction market as well as sales of accessory products.

The increase in Other of $11 million reflected higher sales of other products of $31 million, including Fiberock® brand backerboard, Durock® brand glass-mat tile backerboard, structural panel concrete roofing and Securock® brand glass-mat roof boards and an increase in freight as a result of higher sales. Offsetting this increase in Other was a $29 million reduction in sales for inventory sold by Gypsum to L&W that was included in L&W’s inventory as of October 31, 2016.

Operating profit was $375 million in 2016 and $329 million in 2015, or a $46 million increase, and reflected the following:

	Operating Profit			Volume		Price			Cost
(millions)	$			$		$			$
Change to 2016 from 2015
Sheetrock® brand gypsum wallboard	$	23		$	24	$	(8	)	$	7
Sheetrock® brand joint compound	11			4		(2		)	9
Durock® brand cement board	4			2		2			—
Levelrock® brand gypsum underlayment	3			10		—			(7		)
Other gypsum products	11
Other	(6		)
Total increase in operating profit	$	46

The increase in operating profit in 2016 reflected gross profit improvement for Sheetrock^® brand gypsum wallboard, Sheetrock^® brand joint compound, Durock^® brand cement board and Levelrock^® brand gypsum underlayment due to the following:

• USG Sheetrock^® brand gypsum wallboard experienced higher volume of 6%, driven by shipments to big box retailers and specialty dealers, and lower per unit costs offset by 1% lower selling prices;

• The increase in gross profit of USG Sheetrock^® brand joint compound reflected higher volume of 5%, driven by shipments to specialty dealers, lower per unit costs offset by 1% lower selling prices;

• Increased volumes and price for Durock^® brand cement board;

• Higher volumes of 22% for Levelrock^® brand gypsum underlayment which was offset by higher costs.

Manufacturing costs per unit improved for USG Sheetrock^® brand gypsum wallboard which was reflected in $7 million of increased operating profit. The lower cost was driven by a reduction in per unit cost of 11% for energy costs as a result of lower natural gas prices and of 8% for fixed costs due to higher volumes. Offsetting some of these cost savings was a 4% increase in raw material costs driven by waste paper and synthetic gypsum and a 4% increase in conversion costs driven partially by higher labor costs. Manufacturing costs per unit for Sheetrock^® brand joint compound decreased due to lower raw material costs driven primarily by pails, latex, and thickener and lower fixed costs due to improved volumes.

Also driving the increase in operating profit were higher gross profits on other gypsum products of $11 million as a result of product mix offset by a decrease in Other of $6 million. Included in Other was a $13 million reduction in gross profit for inventory sold by Gypsum to L&W that was included in L&W's inventory as of October 31, 2016. Also reducing operating profit was an adjustment to customer reserves of $2 million and a pension settlement of $8 million. Offsetting this reduction in Other was higher operating profit due to a gain of $11 million recorded on the sale of surplus property, a favorable adjustment of $3 million for our asset retirement obligations and improved selling and administrative expenses of $3 million. As a percentage of net sales, selling and administrative expenses declined by 40 basis points driven primarily by lower net compensation costs.

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New housing construction increased in 2016, resulting in increased demand for gypsum wallboard, as discussed above. U.S. Gypsum shipped 5.76 billion square feet of USG Sheetrock^® brand gypsum wallboard in 2016, a 6% increase from 5.44 billion square feet in 2015. During 2016, USG Sheetrock^® Brand UltraLight Panels accounted for 66% of all of our wallboard shipments in the United States. We estimate that industry capacity utilization rates averaged approximately 75% during 2016, while U.S. Gypsum’s capacity utilization rate averaged 61%.

2015 COMPARED WITH 2014

Net sales in 2015 increased $128 million, or 7%, compared with 2014. The net sales increase was due to the following:

	Sales				Volume			Price
(millions)	$		%		$	%		$	%
Change to 2015 from 2014
Sheetrock® brand gypsum wallboard	33		4	%	19	2	%	14	2	%
Sheetrock® brand joint compound	19		6	%	14	5	%	5	1	%
Durock® brand cement board	10		9	%	4	4	%	6	5	%
Securock® brand roof board	8		18	%	8	18	%	—	—
Levelrock® brand poured flooring	8		18	%	8	18	%	—	—
Other	50
Total increase in net sales	$	128	7	%

Net sales of USG Sheetrock^® brand gypsum wallboard increased $33 million, or 4%, reflecting 2% increases in both volume and average gypsum wallboard selling prices. The increase in volume was driven by higher demand in nearly all channels, with the increase in average selling prices driven by the price increase put in place on January 1, 2015.

Sales of Sheetrock^® brand joint compound increased $19 million driven largely by increased volume to specialty dealers and big box retailers and a 1% increase in average selling prices due to the price increase that was effective in the first quarter of 2015. Durock^® brand cement board sales increased $10 million which reflected both higher volumes through big box retailers, flooring customers and specialty dealers and higher average selling prices due to the price increase that was effective in the first quarter of 2015. Sales of Securock® brand roof board and Levelrock^® increased by $16 million primarily driven by higher volume for Gyp-Fiber roof boards, Glass-Mat roof boards and Levelrock^® poured flooring.

Included in the increase in Other were higher sales of other products of $14 million, which was due to product mix and other surfaces and substrates products, none of which were individually significant. The remaining increase in Other was $36 million of sales by Gypsum to L&W that were included in L&W’s inventory at the end of 2014 that were sold through to third party customers in 2015.

Operating profit was $329 million in 2015 and $188 million in 2014, or a $141 million increase, which reflected the following:

	Operating Profit		Volume		Price		Cost
(millions)	$		$		$		$
Change to 2015 from 2014
Sheetrock® brand gypsum wallboard	$	37	$	8	$	14	$	15
Sheetrock® brand joint compound	11		3		5		3
Durock® brand cement board	2		1		5		(4		)
Securock® brand roof board	4		2		—		2
Other gypsum products	4
Other	83
Total increase in operating profit	$	141

The increase in operating profit in 2015 reflected a $58 million gross profit improvement of the products reflected above, with:

• Higher volume of 2%, driven by big box retailers and specialty dealers, higher selling prices for USG Sheetrock^® brand gypsum wallboard, and lower per unit costs;

• Higher volume of 5%, driven by specialty dealers and big box retailers, and higher selling prices for USG Sheetrock^® brand joint compound and lower per unit costs of 1%;

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• 4% higher volumes for Durock^® brand cement board through big box retailers, flooring customers and specialty dealers and higher selling prices, including freight, largely offset by an increase of per unit costs of 5%;

• Securock® brand Gyp-Fiber and Glass-Mat roof board higher volumes and per unit cost improvement.

Manufacturing costs per unit improved for USG Sheetrock^® brand gypsum wallboard driving $15 million of increased operating profit. The improved operating profit was largely driven by a reduction in energy costs led by the decline in per dekatherm cost of natural gas. The reduction in energy costs was also driven by lower usage as a result of operational initiatives. Higher conversion and fixed costs, largely attributable to increased employee costs offset some of these energy savings. Durock^® cost per unit was up from 2014 driven by increases in prices of raw materials and increased transportation costs. Per unit manufacturing costs for joint compound were lower driven by a decrease in costs of raw materials, primarily in packaging where the cost of resin declined due to the continued decrease in the price of oil, and an increase in volumes, offset by increased employee costs.

The increase in Other of $83 million reflected the absence of charges recorded in 2014 of $66 million and the revision to gross profit to reflect the presentation of L&W as discontinued operations of $17 million. The $66 million was driven by the absence in 2015 of a litigation charge of $48 million due to the settlement of the U.S. wallboard pricing class action lawsuits, long-lived asset impairment charges of $30 million related to certain manufacturing facilities and capitalized costs for the construction of future facilities, which we do not anticipate will be built within our planning horizon, and a gain of $12 million on the sale of surplus property. The $17 million was due to gross profit recorded on sales by Gypsum to L&W that were included in L&W's inventory at the end of 2014 that were sold through to third party customers during 2015.

As a percentage of net sales, selling and administrative expenses declined by 30 basis points, with management’s continued focus to reduce spending which offset higher employee salary and incentive compensation expense compared to 2014.

New housing construction increased in 2015, resulting in increased demand for gypsum wallboard, as discussed above. U.S. Gypsum shipped 5.44 billion square feet of USG Sheetrock^® brand gypsum wallboard in 2015, a 2% increase from 5.33 billion square feet in 2014. During 2015, USG Sheetrock^® Brand UltraLight Panels accounted for 65% of all of our wallboard shipments in the United States. We estimated that industry capacity utilization rates averaged approximately 68% during 2015, while U.S. Gypsum’s capacity utilization rate averaged 57%.

CANADA

2016 COMPARED WITH 2015

Net sales in 2016 were $339 million compared to net sales in 2015 of $321 million. This increase in net sales was driven primarily by a $21 million increase in net sales of gypsum wallboard, a $4 million increase in net sales of joint treatment and an adjustment of an accrual for volume rebate incentives of $4 million. The higher wallboard sales reflected higher average selling prices of 11%, largely resulting from the impact of a tariff imposed by the Canadian government on wallboard exported from the U.S., which does not impact operating profit, and unchanged volumes. Offsetting the higher sales was a $12 million negative impact due to the strengthening of the U.S. Dollar.

Operating profit was $22 million in 2016 compared with $7 million in 2015. This $15 million increase was driven by higher gross profit on gypsum wallboard of $9 million and on joint treatment of $1 million, an adjustment of an accrual for volume rebate incentives of $4 million and lower miscellaneous and selling and administrative costs of $7 million. Gross profit of gypsum wallboard improved due to higher average selling prices of 11% offset by higher per unit costs of 7% due to increased employee costs. Offsetting these increases is a $9 million unfavorable impact of foreign currency.

2015 COMPARED WITH 2014

Net sales in 2015 were $321 million compared to net sales in 2014 of $344 million. This reduction in net sales was driven by a $41 million negative impact due to the strengthening of the U.S. Dollar. The foreign currency impact was partially offset by an increase in net sales of wallboard of $26 million driven by increases in volume and selling prices of 6%.

Operating profit was $7 million in 2015 compared with $13 million in 2014. This $6 million decline is driven by a $13 million unfavorable impact of foreign currency, $3 million lower joint treatment profit driven by a reduction in volume and 13% higher cost offset by an improvement in wallboard volume and selling prices as noted above. Also contributing to the decline in operating profit is the increase in miscellaneous costs driven by higher employee costs. Selling and administrative expenses remained flat as a percentage of sales.

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MEXICO / LATIN AMERICA

2016 COMPARED WITH 2015

Net sales in Mexico and Latin America were $188 million in 2016 compared with $187 million in 2015. The increase of $1 million in sales was driven primarily by higher sales of gypsum wallboard and drywall steel in Mexico offset by a $18 million unfavorable impact of foreign currency due to the strengthening of the U.S. Dollar.

Operating profit was $10 million in 2016 compared with $24 million in 2015. The decrease of $14 million was driven by the realization of a pre-tax gain of $10 million on the disposition of surplus property in 2015 and an unfavorable impact of foreign currency of approximately $5 million.

2015 COMPARED WITH 2014

Net sales in Mexico and Latin America were $187 million in 2015 compared with $195 million in 2014. The decrease of $8 million in sales was driven by the strengthening of the U.S. Dollar, which negatively impacted net sales by approximately $16 million, which was offset by an increase in both wallboard volume and price.

Operating profit was $24 million in 2015 compared with $19 million in 2014. The increase of $5 million was driven by the realization of a pre-tax gain of $10 million on the disposition of surplus property in Mexico in December 2015, improvement in energy pricing and operational efficiencies derived from Lean Six Sigma projects. Offsetting this increase was the unfavorable impact of foreign currency of approximately $6 million.

CANADIAN MINING

Net sales for our mining operation in Little Narrows, Nova Scotia, Canada, were $0 million in 2016, $6 million in 2015, and $5 million in 2014. Operating loss was $21 million in 2016, $6 million in 2015, and $3 million in 2014. In 2016, we indefinitely idled our mining operations in Little Narrows, Nova Scotia, Canada and recorded an impairment charge of long-lived assets of $10 million and severance and other charges of $2 million. 2014 included a reduction to the estimates of reclamation activities required for our mining operations in Canada that did not recur in the later years. See Note 12 to the consolidated financial statements in Part II, Item 8 of this report for additional information.

GYPSUM TRANSPORTATION LIMITED

Net sales for our shipping company GTL were $0 million in 2016, $10 million in 2015 and $81 million in 2014. The decrease of $10 million from 2015 to 2016 and the decrease of $71 million from 2014 to 2015 reflected the cancellation of a contract of affreightment in the fourth quarter of 2014 when our trading partner ceased performing under the contract. In 2015, we were party to a short term shipping contract prior to the sale of our two self-unloading vessels in April 2015. We exited our shipping operations in 2015.

We recorded operating profit of $3 million in 2016 and $7 million in 2015 and an operating loss of $52 million in 2014. The profit in 2016 reflected a recovery of a receivable of $3 million owed to GTL by its trading partner that was fully reserved for in 2014. The profit in 2015 included $1 million reflecting the gain on the sale of our ships offset by charges incurred to wind down our shipping operations and a $6 million recovery of a receivable. The operating loss in 2014 included a long-lived asset impairment charge of $60 million on two shipping vessels owned by GTL and a $15 million charge for contract costs and loss on receivable. See Note 13 to the consolidated financial statements in Part II, Item 8 of this report for additional information.

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CEILINGS

Net sales and operating profit for the businesses comprising our Ceilings segment were as follows:

										Favorable (Unfavorable)
										2016 vs. 2015					2015 vs. 2014
(millions)	2016(a)			2015			2014			$			%		$			%
Net Sales:
United States	$	467		$	464		$	469		$	3		1	%	$	(5	)	(1	)%
USG International (b)	—			—			7			—			*		(7		)	(100	)%
Canada	50			51			57			(1		)	(2	)%	(6		)	(11	)%
Mexico / Latin America	32			36			39			(4		)	(11	)%	(3		)	(8	)%
Eliminations	(49		)	(55		)	(54		)	6			11	%	(1		)	(2	)%
Total	$	500		$	496		$	518		$	4		1	%	$	(22	)	(4	)%
Operating Profit:
United States	$	101		$	80		$	76		$	21		26	%	$	4		5	%
USG International (b)	—			—			—			—			*		—			*
Canada	4			3			6			1			33	%	(3		)	(50	)%
Mexico / Latin America	4			5			7			(1		)	(20	)%	(2		)	(29	)%
Total	$	109		$	88		$	89		$	21		24	%	$	(1	)	(1	)%
* not meaningful

(a) Operating profit in 2016 included pension settlement expense of $2 million related to the United States.

(b) USG International’s net sales and operating profit for the year ended December 31, 2014 include the results through February 27, 2014 of our wholly-owned subsidiaries and consolidated joint ventures that were contributed to UBBP .

UNITED STATES

As a result of the presentation of L&W as a discontinued operation, the results of our United States Ceilings business through the transaction close of October 31, 2016 were revised to reflect the sales of USG products from our United States Ceilings business to L&W that were sold by L&W outside the consolidated group through that date. All sales to L&W subsequent to that date are reflected in sales and operating profit. The year over year impact of this presentation is highlighted in the sales and operating profit (loss) tables below.

2016 COMPARED WITH 2015

Net sales for our U.S. ceilings business increased to $467 million in 2016, a $3 million, or 1%, increase from $464 million in 2015. The increase reflected the following:

	Sales					Volume					Price
(millions)	$			%		$			%		$			%
Change to 2016 from 2015
Ceiling grid	$	3		3	%	$	5		4	%	$	(2	)	(1	)%
Ceiling tile	1			1	%	(1		)	—	%	2			1	%
Other	(1		)
Total increase in net sales	$	3		1	%

The increase in sales for ceiling grid was driven by a higher volumes of 4% offset by lower prices. The increase in volume for ceiling grid reflected improved market conditions and product mix. The increase in ceiling tile reflected higher prices offset by lower volumes. The decrease in Other included a $3 million increase in sales for inventory sold by Ceilings to L&W that was included in L&W’s inventory as of October 31, 2016.

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Operating profit of $101 million in 2016 increased $21 million, or 26%, from $80 million in 2015. The increase reflected the following:

	Operating Profit		Volume		Price			Cost
(millions)	$		$		$			$
Change to 2016 from 2015
Ceiling grid	$	7	$	3	$	(1	)	$	5
Ceiling tile	10		—		3			7
Other	4
Total increase in operating profit	$	21

The increase in operating profit reflected the improvement in volume and cost for ceiling grid and in price and cost for ceiling tile. The increase in volume for ceiling grid reflected improved market conditions and product mix. The reduction in cost of ceiling grid was largely driven by lower per unit cost for ceiling grid which reflected lower raw material costs led by lower steel prices, lower conversion reflective of improved efficiencies and fixed costs driven by increased volumes. The higher price for ceiling tile was primarily due to product mix. The lower cost for ceiling tile was due to lower costs per unit for raw materials, energy and conversion costs due to improved efficiencies. Per unit energy costs also declined as a result of favorable energy prices. Included in the increase in Other was $1 million of gross profit on sales by Ceilings to L&W that were included in L&W's inventory as of October 31, 2016. Also driving the increase in Other was a decrease in selling and administrative expenses due to lower net compensation costs offset by a pension settlement of $2 million. As a percentage of sales, selling and administrative expenses declined by 40 basis points.

2015 COMPARED WITH 2014

Net sales for our domestic ceilings business was $464 million in 2015 as compared to $469 million in 2014. The decrease of $5 million reflected the following:

	Sales					Volume					Price
(millions)	$			%		$			%		$		%
Change to 2015 from 2014
Ceiling grid	$	1		1	%	$	1		1	%	$	—	—	%
Ceiling tile	2			1	%	(1		)	—	%	3		1	%
Other	(8		)
Total decrease in net sales	$	(5	)	(1	)%

The increase in sales for ceiling tile was driven by a price increase implemented in the first quarter of 2015 which was partially offset by a reduction in volume. The decrease in sales due to Other reflected a $8 million reduction in sales for inventory sold by Ceilings to L&W that was included in L&W's inventory at the end of 2015.

Operating profit increased $4 million from $76 million in 2014 to $80 million in 2015. The increase reflected the following:

	Operating Profit			Volume			Price		Cost
(millions)	$			$			$		$
Change to 2015 from 2014
Ceiling grid	$	1		$	1		$	—	$	—
Ceiling tile	5			(1		)	3		3
Other	(2		)
Total increase in operating profit	$	4

The increase in operating profit reflected the improvement in price and cost for ceiling tile with the price contribution driven primarily by the implementation of an increase in average selling price during the first quarter of 2015. The reduction in cost was largely driven by lower per unit cost for ceiling tile reflecting lower energy costs, raw material and fixed costs led by decreases in natural gas prices and mineral wool costs, partially offset by increases in employee costs. Included in Other was $3 million of lower gross profit on sales for inventory sold by Ceilings to L&W that was included in L&W's inventory as of

31

December 31, 2015. Other includes savings from lower selling and administrative expenses, which as a percentage of sales declined by 40 basis points, driven by management’s continued focus to reduce spending which offset higher employee salary and incentive compensation expense compared to 2014.

USG INTERNATIONAL

Net sales and operating profit in 2014 for USG International, which consists only of the results of our wholly-owned subsidiaries in the Asia-Pacific region and India and our consolidated joint ventures in Oman, were $7 million and zero, respectively. We contributed these entities as part of our investments in UBBP in February 2014.

CANADA

2016 COMPARED WITH 2015

Net sales in 2016 were $50 million, a decrease of $1 million, or 2%, compared with 2015. The decrease includes an unfavorable currency impact of $2 million due to the strengthening of the U.S. Dollar and a decrease of $1 million for freight offset by improved net sales on ceiling tile.

Operating profit was $4 million in 2016 and $3 million in 2015, an increase of $1 million, which primarily reflected improved gross margin for ceiling tile of $2 million. Selling and administrative expenses as a percentage of sales remained flat from 2016 as compared to 2015.

2015 COMPARED WITH 2014

Net sales in 2015 were $51 million, a decrease of $6 million, or 11%, compared with 2014. The decrease includes an unfavorable currency impact of $6 million due to the strengthening of the U.S. Dollar. Net sales also included a decrease in ceiling grid sales of approximately $2 million offset by an increase of $3 million in sales of ceiling tile and outbound freight.

Operating profit was $3 million in 2015 and $6 million in 2014, a decrease of $3 million, which primarily reflected declines in operating profit of $1 million for ceiling grid due to a decline in grid volumes and an increase in grid cost and $1 million for ceiling tile driven by foreign currency which was partially offset by a 2% increase in tile volume. Selling and administrative expenses as a percentage of sales remained flat from 2015 as compared to 2014.

MEXICO / LATIN AMERICA

2016 COMPARED WITH 2015

Net sales in 2016 declined $4 million from 2015 to $32 million which primarily reflects a negative impact of foreign currency due to the strengthening of the U.S. Dollar. Operating profit in 2016 decreased $1 million from $5 million in 2015.

2015 COMPARED WITH 2014

Net sales in 2015 declined $3 million from 2014 to $36 million which primarily reflected a negative impact of foreign currency due to the strengthening of the U.S. Dollar. Operating profit in 2015 decreased $2 million from $7 million in 2014. This decrease reflected a negative impact of foreign currency due to the strengthening of the U.S. Dollar, partially offset by improvement in energy pricing and operational efficiencies derived from Lean Six Sigma projects. Selling and administrative expenses remained unchanged as a percentage of sales.

USG BORAL BUILDING PRODUCTS

The following reflects the net sales and operating profit as recorded by UBBP and the equity income recorded by USG:

							Favorable (Unfavorable)
							2016 vs. 2015				2015 vs. 2014
(millions)	2016		2015		2014 (a)		$		%		$		%
Net sales	$	1,052	$	1,003	$	927	$	49	5	%	$	76	8	%
Operating profit (b)	133		124		95		9		7	%	$	29	31	%
Income from equity method investments - UBBP (c)	49		48		33		1		2	%	$	15	45	%

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

(b) Operating profit in 2016 included long-lived asset impairment charges of $14 million for Oman and $8 million for China.

(c) Income from equity method investments - UBBP in 2016 included long-lived asset impairment charges of $4 million for Oman and $4 million for China.

2016 COMPARED WITH 2015

Net sales for UBBP in 2016 increased $49 million from $1.003 billion in 2015 to $1.052 billion in 2016. The increase reflected higher plasterboard shipments in South Korea, Australia, Vietnam and India offset by lower shipments in China and

32

unfavorable impact of currency translation of $17 million. Plasterboard shipments increased 4% in 2016 to 4.6 billion square feet from from 4.4 billion square feet in 2015.

Operating profit increased to $133 million in 2016 from $124 million in 2015. The increase reflected improved margins in Australia, South Korea, Vietnam and India, realized synergy savings and improved market acceptance of lightweight products offset by an impairment of long-lived assets in China of $8 million and in Oman of $14 million and an increase in selling and administrative expenses. Operating profit was negatively impacted by $2 million by the strengthening of the U.S. Dollar.

In 2015, UBBP sold USG Boral Sheetrock^® at a premium price in certain markets and experienced an increase in conversion rates, which was led by Australia with a conversion rate above 75%. Net sales in 2015 in Asia and Australasia made up approximately 64% and 36%, respectively, of total net sales for UBBP. Net sales in 2015 in South Korea, China, and Thailand represented approximately 69% of Asia's net sales. Net sales in 2015 in Australia represented almost all of Australasia's net sales.

Our share of equity income from USG Boral was $49 million in 2016 compared to $48 million in 2015. The increase from 2015 to 2016 primarily is driven by growth in the business year over year offset by impairment of long-lived asset in China of $4 million and in Oman of $4 million and unfavorable impact of foreign currency of $1 million due to the strengthening of the U.S. Dollar.

2015 COMPARED WITH 2014

Net sales for UBBP in 2015 were $1 billion, plasterboard shipments were 4.4 billion square feet, operating profit was $124 million and net income attributable to UBBP was $96 million, compared to 2014 where sales, shipments, operating profit and net income attributable to UBBP were $927 million, 3.83 billion square feet, $95 million and $67 million, respectively. The strengthening of the U.S. Dollar from 2014 to 2015 negatively impacted UBBP's net sales and net income by $105 million and $16 million, respectively.

UBBP's results included sales of USG Boral Sheetrock^®,which leverages the technology in USG Sheetrock^®, in Australia, South Korea, Indonesia, Vietnam, China and Thailand. UBBP is able to sell USG Boral Sheetrock^® at a premium price and, in some markets, conversion rates have surpassed 10%, while in Australia the conversion rate is above 30%. Net sales in Asia and Australasia made up approximately 66% and 34%, respectively, of total net sales for UBBP. Net sales in China, Indonesia, South Korea and Thailand represented approximately 81% of Asia's net sales. Net sales in Australia represented almost all of Australasia's net sales.

Our share of equity income from USG Boral was $48 million in 2015 compared to $33 million in 2014. The increase from 2014 to 2015 primarily is driven by both growth in the business year over year and twelve months of equity method income in 2015 compared to ten months in 2014. The increase from 2014 was negatively impacted by approximately $8 million due to the strengthening of the U.S. Dollar.

CORPORATE

Operating expenses for Corporate were $104 million in 2016, $94 million in 2015 and $105 million in 2014. The increase in 2016 compared to 2015 was due primarily to pension settlement charges of $10 million, $4 million in charges for the remaining lease term and accelerated depreciation associated with the exit of commercial office space and increased costs for incentive compensation offset by lower information technology spend.

The decrease in 2015 compared to 2014 reflected the absence of a pension settlement charge of $13 million for our previously frozen U.K. pension plan recorded in 2014 with further reductions driven by management’s continued focus to reduce spending, lower stock compensation expense due to lower grant date fair value offset by higher employee salary, benefit and incentive compensation expense compared to 2014.

Liquidity and Capital Resources

LIQUIDITY

As of December 31, 2016, we had $518 million of cash and cash equivalents and marketable securities compared with $672 million as of December 31, 2015. Our total liquidity was $603 million as of December 31, 2016 (including $85 million of borrowing availability under our credit facility) compared to $967 million as of December 31, 2015 (including $295 million of borrowing availability under our credit facility). The decrease in liquidity reflected the retirement of $1.1 billion in debt and an additional $100 million contribution to our pension plans, both of which were partially funded by the proceeds of $669 million received in 2016 from the sale of L&W. The lower borrowing base and borrowing availability under the credit facility is primarily a result of our lower receivables and inventory due to the sale of L&W in the fourth quarter of 2016.

We invest in cash equivalents and marketable securities pursuant to an investment policy that has preservation of principal as its primary objective. The policy includes provisions regarding diversification, credit quality and maturity profile

33

that are designed to minimize the overall risk profile of our investment portfolio. The securities in the portfolio are subject to normal market fluctuations. See Note 5 to the consolidated financial statements in Part II, Item 8 of this report for additional information regarding our investments in marketable securities.

Total debt as of December 31, 2016 and 2015 consisted of senior notes and industrial revenue bonds. Total debt amounted to $1.083 billion ($1.089 billion in aggregate principal amount less $6 million of unamortized debt issuance costs) as of December 31, 2016 and $2.175 billion ($2.189 billion in aggregate principal amount less $14 million of unamortized original issue discount and debt issuance costs) as of December 31, 2015. As of December 31, 2016 and during the year then ended, there were no borrowings under our revolving credit facility. See Note 6 to the consolidated financial statements in Part II, Item 8 of this report for additional information about our debt.

Our senior notes and industrial revenue bonds are rated by the three major credit-rating agencies: Moody’s Investors Service (Moody’s), Standard & Poor’s Global Ratings (S&P), and Fitch Ratings, Inc. (Fitch). The ratings are typically monitored by stockholders, creditors, or suppliers as an indicator of the company's viability. Additionally, the ratings of Moody’s and S&P impact the interest rate on our 7.75% senior notes maturing in 2018. See Note 6 to the consolidated financial statements in Part II, Item 8, of this report for additional information regarding the impact of changes to our credit ratings on interest rates. Below is a summary of the ratings published by the three agencies as of the date indicated:

	S&P	Moody's	Fitch
Corporate/Family rating	BB+	Ba2	BB
Outlook	Stable	Positive	Stable
Guaranteed senior notes	BB+	Ba2	BB+
All other notes and bonds	BB+	Ba3	BB
Report date	November 10, 2016	November 22, 2016	August 29, 2016

 We maintain a credit facility with a maximum borrowing limit of $180 million (including a $50 million borrowing sublimit for CGC) that is available to fund working capital needs and other general corporate purposes and matures on October 22, 2019. The facility is guaranteed by certain of our significant subsidiaries and secured by such parties’ eligible trade receivables and inventory. The maximum borrowing limit under the credit agreement may be increased up to $650 million at our request and with our lenders’ approval. In December 2016, we reduced the facility size from $450 million to $180 million due to the L&W sale and in January 2017, we amended the credit agreement to reduce payment condition threshold amounts in conjunction with the lower facility size. The credit agreement contains other covenants and events of default that are customary for similar agreements and may limit our ability to take various actions including our ability to pay a dividend or repurchase our stock.

Although the maximum borrowing limit under the credit agreement is $180 million, the credit agreement specifies the maximum principal that may be borrowed by USG and CGC is impacted by any amounts outstanding under the credit agreement, outstanding letters of credit, a borrowing base comprised of eligible trade receivables and inventory, and the minimum excess availability that may be required due to the Covenant Trigger Threshold, described below, being applicable. As of December 31, 2016, the maximum principal we could borrow after taking into account the foregoing factors was approximately $85 million.

The credit agreement contains a covenant that would require us to maintain a minimum fixed charge coverage ratio of not less than 1.0-to-1.0 in the event that excess availability falls below the "Covenant Trigger Threshold" equal to 10% of the lesser of (a) the aggregate revolving commitment and (b) the aggregate of the USG and CGC borrowing base. As of December 31, 2016, our fixed charge coverage ratio was 0.39-to-1.0 and; therefore, we are required to maintain minimum excess availability of no less than the Covenant Trigger Threshold so that the financial covenant will remain inapplicable. Currently, that amount would be approximately $14 million.

As of December 31, 2016 and during the year then ended, there were no borrowings under the facility. Had there been any borrowings as of that date, the applicable interest rate would have been 2.00% for loans in the U.S. and 1.95% for loans in Canada. Outstanding letters of credit as of December 31, 2016 totaled $38 million.

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CASH FLOWS

The following table presents a summary of our cash flows:

(millions)	2016			2015			2014
Net cash provided by (used for):
Operating activities from continuing operations	$	314		$	279		$	160
Investing activities from continuing operations	79			(61		)	(679		)
Financing activities from continuing operations	(1,129		)	(44		)	(66		)
Discontinued operations	726			47			6
Effect of exchange rate changes on cash	(5		)	(10		)	(5		)
Net increase (decrease) in cash and cash equivalents	$	(15	)	$	211		$	(584	)

Operating Activities: Higher cash flows from operating activities in 2016 compared to 2015 primarily reflected improved gross profit. Also driving the increase in operating cash flow was improved working capital. Our net cash outflow for accounts receivable, inventories, accounts payable and accrued expenses of continuing operations was lower in 2016 compared to 2015. Cash outflows for accrued expenses in 2015 included $39 million pursuant to the settlement agreement with the direct purchaser class in the U.S. wallboard pricing class action lawsuit. Excluding this payment, 2016 still reflected lower net cash outflow driven by initiatives over accounts payable offset by lower inflow from accounts receivable.

As of December 31, 2016, working capital (current assets less current liabilities) amounted to $527 million, and the ratio of current assets to current liabilities was 2.25-to-1. As of December 31, 2015, working capital amounted to $408 million, and the ratio of current assets to current liabilities was 1.41-to-1.

Higher cash flows from operating activities of $130 million in 2015 compared to 2014 primarily reflected improved gross profit in 2015, lower selling and administrative expenses and cash dividends from UBBP of $38 million. As of December 31, 2015, working capital (current assets less current liabilities) amounted to $408 million, and the ratio of current assets to current liabilities was 1.41-to-1. As of December 31, 2014, working capital amounted to $546 million, and the ratio of current assets to current liabilities was 1.97-to-1.

Investing Activities: Investing cash flows provided $79 million of net cash in 2016 and used $61 million of net cash during 2015. Net sales of marketable securities was $139 million in 2016 compared to net purchases of $76 million in 2015. Cash outflows for capital expenditures decreased in 2016 by $4 million as compared to 2015. The net increase in cash inflows from marketable securities and capital expenditures were offset by the lower cash inflows for the net proceeds of asset dispositions primarily due to the sale of a surplus property in Mexico and of our ships owned by GTL and for the disposition of our Knauf USG joint venture in 2015.

Net cash used for investing activities in 2015 was $61 million compared to $679 million during 2014. Included in 2014 was a $560 million outflow for our investments in UBBP, consisting of $500 of million of base price, $15 million of customary estimated working capital and net debt adjustments, $22 million of transaction costs, and $23 million of cash held by the wholly-owned subsidiaries that we contributed to UBBP.

Net cash used for investing activities in 2015 included higher net purchases of marketable securities of $76 million compared to $14 million in 2014. Capital expenditures for 2015 were lower at $87 million as compared to $125 million in 2014. The net increase in cash outflows related to marketable securities and capital expenditures were offset by the cash inflow for the net proceeds of asset dispositions of $58 million primarily due to the sale of a surplus property in Mexico and of our ships owned by GTL and $52 million for the disposition of our Knauf USG joint venture.

Financing Activities: The net cash used for financing activities in 2016 was driven by the repayment of $1.1 billion of debt during the year.

The net cash used for financing activities in 2015 included $365 million paid to repurchase $350 million of our 8.375% senior notes due 2018 plus tender premium offset by the $344 million of proceeds received from the issuance of $350 million of 5.5% senior notes, net of debt issuance costs and $21 million used to repay our ship mortgage facility.

Discontinued Operations: Net cash provided by discontinued operations for 2016 was $726 million compared to $47 million for 2015. The higher cash inflow reflected $669 million of cash received in 2016 for the sale of L&W and higher cash inflows for accounts payable offset by higher cash outflows for accounts receivable and inventories.

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Net cash provided by discontinued operations for 2015 was $47 million compared to $6 million for 2014. The higher cash inflow reflected higher cash inflows for inventories and accounts receivable offset by higher cash outflow for accounts payable.

LIQUIDITY OUTLOOK

In 2017, we plan to spend $200 million on capital expenditures in the normal course of our business, which includes $80 million allocated for advanced manufacturing projects to standardize and automate production across our Gypsum and Ceilings businesses. We expect to fund these capital expenditures with cash from operations or cash on hand.

Estimated future spending on approved capital expenditures for the replacement, modernization and expansion of operations totaled $121 million as of December 31, 2016 compared with $33 million as of December 31, 2015.

Interest payments for 2017 are expected to decrease to $77 million from $153 million in 2016 which reflects lower debt levels due to the repayment of $1.1 billion in debt in 2016. We intend to refinance our 7.75% senior notes due 2018, as well as our credit facility, in 2017.

On January 31, 2017, our Board of Directors approved a share repurchase program in which we may repurchase up to $250 million of our common stock. The timing and the amount of any repurchases will be determined based on market conditions and other factors. Share repurchases will be funded with available cash on hand. See Note 21 to the consolidated financial statements in Part II, Item 8 of this report.

Our undistributed foreign earnings as of December 31, 2016 are considered permanently reinvested with the exception of the earnings associated with the former holding company of the Knauf-USG joint venture that was sold in December 2015. The amount of cash and cash equivalents held by our foreign subsidiaries was $184 million as of December 31, 2016 and would be subject to material repatriation tax effects.

Since formation, UBBP was funded from its net cash flows from operations and third-party financing, and it is our intent that as an ongoing operation, UBBP will continue to self-fund. UBBP is targeting the distribution of 50% of combined after tax profits to USG and Boral, however, this dividend may be adjusted by the USG Boral board with unanimous resolution. During the second and fourth quarters of 2016, UBBP paid cash dividends on earnings through September 30, 2016 of which our 50% share totaled $47 million. We intend to use the dividends received to fund the potential obligation under the earnout described in Note 4 to the consolidated financial statements in Part II, Item 8 of this report.

In the event certain performance targets are satisfied by UBBP, we will be obligated to pay Boral an earnout payment in an amount up to $50 million in 2019, based on UBBP performance during the first five years. We have not recorded a liability for this earnout payment as we have concluded that it is currently not probable that the five-year performance target will be achieved. 

We believe that cash on hand, cash equivalents, marketable securities, cash available from future operations and our credit facility will provide sufficient liquidity to fund our operations for at least the next 12 months. Cash requirements include, among other things, capital expenditures, working capital needs, employee retirement plans funding, interest payments and other contractual obligations.

Realization of Deferred Tax Asset

As of December 31, 2016, we had federal Net Operating Loss (“NOL”) carryforwards of approximately $923 million that are available to offset future federal taxable income and will expire in the years 2028 through 2032. In addition, as of that date, we had federal alternative minimum tax credit carryforwards of approximately $45 million that are available to reduce future regular federal income taxes over an indefinite period. We also had foreign tax credit carryforwards of $143 million that are available to offset future federal taxable income and will expire in the years 2022 through 2026.

As of December 31, 2016, we had a deferred tax asset related to our state NOLs and tax credit carryforwards of $172 million. They will expire if unused in years 2018 through 2036.

At December 31, 2016, our net deferred tax assets of $488 million were offset by a valuation allowance of $51 million. The remaining valuation allowance related to certain state net operating losses that we anticipate will not be used prior to their expiration.

See Note 15 to the consolidated financial statements in Part II, Item 8 for additional information regarding income tax matters.

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Contractual Obligations and Other Commitments

As of December 31, 2016, our contractual obligations and commitments were as follows:

	Payments Due by Period
(millions)	Total		2017		2018 - 2019		2020 - 2021		Thereafter
Debt obligations (a)	$	1,089	$	—	$	500	$	—	$	589
Other long-term liabilities (b)	554		4		17		29		504
Interest payments (c)	439		77		89		66		207
Purchase obligations (d)	338		111		101		65		61
Capital expenditures (e)	121		97		24		—		—
Operating leases	115		31		48		29		7
Unrecognized tax benefits (f)	15		2		2		3		8
Earnout payment (g)	50		—		50		—		—
Total	$	2,721	$	322	$	831	$	192	$	1,376

(a) Excludes unamortized deferred issuance costs of $6 million.

(b) Other long-term liabilities primarily consist of asset retirement obligations that principally extend over a 50-year period. The majority of associated payments are payable toward the latter part of that period.

(c) Reflects estimated interest payments on debt obligations as of December 31, 2016.

(d) Purchase obligations primarily consist of contracts to purchase energy, certain raw materials and finished goods.

(e) Reflects estimates of future spending on active capital projects that were approved prior to December 31, 2016 but were not completed by that date.

(f) Reflects estimated payments (if required) of gross unrecognized tax benefits.

(g) Reflects contractual earnout payments for our investments in UBBP up to $50 million based on performance during the first five years.

The table above excludes liabilities related to both our defined benefit pension plans and postretirement benefits (retiree health care and life insurance). For 2016, our defined benefit pension plans had no minimum funding requirements under the Employee Retirement Income Security Act of 1974. We are evaluating our level of funding for pension plans and currently estimate that we will contribute approximately $74 million to our pension plans in 2017. We voluntarily provide postretirement benefits for eligible employees and retirees and estimate cash payments to be $8 million in 2017. See Note 9 to the consolidated financial statements in Part II, Item 8 for additional information on future expected cash payments for pension and other postretirement benefits.

OFF-BALANCE-SHEET ARRANGEMENTS

With the exception of letters of credit, it is not our business practice to use off-balance-sheet arrangements, such as third-party special-purpose entities.

GUARANTEES

We are party to a variety of agreements under which we may be obligated to indemnify a third party with respect to certain matters. We do not consider the maximum potential amount of future payments that we could be required to make under these agreements to be material.

Legal Contingencies

We are named as defendants in litigation arising from our operations, including lawsuits or claims arising from commercial disputes, product performance or warranties, products liability, and worksite or vehicular accidents.

In 2015, USG, United States Gypsum Company, L&W Supply Corporation, and seven other wallboard manufacturers were named as defendants in a lawsuit filed by twelve homebuilders alleging that the defendants conspired to fix the price of wallboard sold in the United States. Earlier, in 2013, class action lawsuits making similar allegations were filed in Canada on behalf of a class of purchasers of wallboard in Canada. We believe that the cost, if any, of resolving the homebuilders’ lawsuit and Canadian class action litigation will not have a material effect on our results of operations, financial position or cash flows.

In the third quarter of 2015 United States Gypsum Company was served with a federal grand jury subpoena requesting the production of company records in connection with a federal investigation of the gypsum drywall industry. Two former employees of USG have also been served with subpoenas. We believe the investigation, although a separate proceeding, is related to the same events at issue in the litigation discussed above. We are fully cooperating with the grand jury investigation. We believe we acted in full compliance with the law, and we do not expect the resolution of this matter to result in any material effect on our business, financial position, liquidity or results of operations; however, we can provide no assurances as to the scope, timing, or outcome of any such investigation. 

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See Note 19 to the consolidated financial statements in Part II, Item 8 of this report for additional information regarding litigation matters. See, also, Part I, Item 1A, Risk Factors, for information regarding the possible effects of environmental laws and regulations on our businesses.

Critical Accounting Policies

In preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United States, we make decisions that impact the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In reaching such decisions, we apply judgments based on our understanding and analysis of the relevant circumstances, current developments and historical experience. Actual amounts could differ materially from those estimated at the time the consolidated financial statements are prepared.

Our significant accounting policies are described in Note 1 to the consolidated financial statements in Part II, Item 8 of this report. Some of these significant accounting policies require us to make difficult, subjective or complex judgments or estimates. An accounting estimate is considered to be critical if it meets both of the following criteria: (1) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made and (2) different estimates reasonably could have been used, or changes in the estimate are reasonably likely to occur from period to period, that would have a material impact on the presentation of our financial condition, changes in financial condition, results of operations or cash flows. Our critical accounting estimates are as follows:

EMPLOYEE RETIREMENT PLANS

We maintain defined benefit pension plans for most of our employees. Most of these plans require employee contributions in order to accrue benefits. We also maintain plans that provide postretirement benefits (retiree health care and life insurance) for eligible existing retirees and for eligible active employees who may qualify for coverage in the future. The accounting for these plans depend on assumptions made by management, which are used by actuaries we engage to calculate the projected and accumulated benefit obligations and the annual expense recognized for these plans. The assumptions used in developing the required estimates primarily include discount rates, expected return on plan assets for the funded plans, compensation increase rates, retirement rates, mortality rates and, for postretirement benefits, retirement rates and levels of a company-provided subsidy.

We determined the assumed discount rate based on a hypothetical AA yield curve represented by a series of annualized individual discount rates. Each underlying bond issue is required to have a credit rating of Aa or better by Moody’s Investors Service or a credit rating of AA or better by Standard & Poor’s Global Ratings. We consider the underlying types of bonds and our projected cash flows of the plans in evaluating the yield curve selected. The use of a different discount rate would impact net pension and postretirement benefit costs and benefit obligations. In determining the expected return on plan assets, we use a “building block” approach, which incorporates historical experience, our pension plan investment guidelines, asset allocation, and expectations for long-term rates of return. The use of a different rate of return would impact net pension costs. A one-half percentage point change in the assumed discount rate and return on plan asset rate would have the following effects (dollars in millions):

		Increase (Decrease) in
Assumptions	Percentage Change	2017 Net Annual Benefit Cost			2016 Projected Benefit Obligation
Pension Benefits:
Discount rate	0.5% increase	$	(6	)	$	(78	)
Discount rate	0.5% decrease	6			86
Expected return on plan assets	0.5% increase	(7		)	N/A
Expected return on plan assets	0.5% decrease	7			N/A
Postretirement Benefits:
Discount rate	0.5% increase	$	(1	)	$	(8	)
Discount rate	0.5% decrease	1			9

Compensation increase rates are based on historical experience and anticipated future management actions. Retirement rates are based primarily on actual plan experience, while standard actuarial tables are used to estimate mortality rates.

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We no longer have significant exposure to health care cost trend rates due to the modifications we made to our U.S. postretirement health care plan to limit the increase in the annual amount we pay for retiree health care coverage for certain current and future retirees to 3% and to require retiree medical plan participants to purchase individual coverage in the Affordable Insurance Exchanges or individual Medicare marketplace effective January 1, 2016 using a company-funded subsidy based upon years of service at retirement.

Results that differ from these assumptions are accumulated and amortized over future periods and, therefore, generally affect the net benefit cost of future periods. The sensitivity of assumptions reflects the impact of changing one assumption at a time and is specific to conditions at the end of 2016. Economic factors and conditions could affect multiple assumptions simultaneously, and the effects of changes in assumptions are not necessarily linear.

See Note 9 to our consolidated financial statements in Part II, Item 8 of this report for additional information regarding costs, plan obligations, plan assets discount rates and other assumptions.

INCOME TAXES

We record income taxes (benefit) under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on the future tax consequences to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or paid. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the change is enacted.

A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. The need to establish valuation allowances for deferred tax assets is assessed periodically. In assessing the requirement for, and amount of, a valuation allowance in accordance with the more-likely-than-not standard, we give appropriate consideration to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with operating loss and tax credit carryforwards not expiring unused and tax planning strategies. A history of cumulative losses for a certain threshold period is a significant form of negative evidence used in the assessment, and we are required to have a policy regarding the duration of the threshold period. We believe the historical cyclical nature of our operations show economic cycles ranging from 7 to 10 years with demand troughs historically showing recovery over four years. Accordingly, we have a policy of four years as our threshold period for cumulative losses.

We weigh, based upon the level of objectivity, all available evidence in our assessment related to the realization of deferred tax assets. Our ability to generate sufficient taxable income in the future, taking into consideration state laws on NOL expirations, will determine the need for a valuation allowance.

We recognize the tax benefits of an uncertain tax position only if those benefits are more likely than not to be sustained upon examination by the relevant taxing authorities. Unrecognized tax benefits are subsequently recognized at the time the more-likely-than-not recognition threshold is met, the tax matter is effectively settled or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired, whichever is earlier.

See Note 15 to our consolidated financial statements in Part II, Item 8 of this report for additional information on deferred income taxes and valuation allowances.

Recently Issued Accounting Pronouncements

See Note 2, Recent Accounting Pronouncements, to the consolidated financial statements in Part II, Item 8 of this report for information related to new accounting standards.

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Forward-Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 related to management’s expectations about future conditions. Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date, and we undertake no obligation to update any forward-looking statement. Forward-looking statements include, but are not limited to, statements under the following headings: (1) “Business” about: (a) the availability of synthetic gypsum and energy supplies; and (b) demand for new products and systems that meet regulatory and customer sustainability standards and preferences and our ability to provide such products and systems to maintain our competitive position; (2) “Risk Factors” about significant factors that may adversely affect us and our industry; (3) “Legal Proceedings” about the outcome and effect of ongoing and future legal and governmental proceedings; and (4) “Management’s Discussion and Analysis” about: (a) market conditions and outlook, including anticipated growth in new residential and nonresidential construction and repair and remodel spending, and the construction industries in Canada and Mexico, and the anticipated growth or decline in countries in the UBBP territory and its effect on the cyclicality of our North American business; (b) demand for gypsum wallboard and industry capacity utilization rate; (c) our liquidity outlook, including our capital expenditure plans, expected interest payments, intended debt refinance, UBBP's dividend policy and our intended use of dividend funds received, including UBBP's ability to self-fund, cash requirements and adequacy of resources to fund them; (d) future contributions to our pension plans; and (e) the outcome and effect of ongoing and future legal and governmental proceedings.

Some of the risk factors that affect our business and financial results are discussed in “Risk Factors.” We wish to caution the reader that actual business, market or other conditions, including the risk factors discussed in “Risk Factors” and those described elsewhere in this report or in our other Securities and Exchange Commission filings, could cause our actual results to differ materially from those stated in the forward-looking statements.

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We use derivative instruments to manage selected commodity price and foreign currency exposures. We do not use derivative instruments for speculative trading purposes, and we typically do not hedge beyond five years.

COMMODITY PRICE RISK

We use swap contracts to manage our exposure to fluctuations in commodity prices associated with anticipated purchases of natural gas. Currently, a significant portion of our anticipated purchases of natural gas is hedged for 2017. The aggregate notional amount of these hedge contracts in place as of December 31, 2016 was 36 million mmBTUs, and they mature by December 31, 2021. We review our positions regularly and make adjustments as market and business conditions warrant. The fair value of these contracts was a $3 million unrealized gain as of December 31, 2016.

A sensitivity analysis was prepared to estimate the potential change in the fair value of our natural gas hedge contracts assuming a hypothetical 10% change in market prices. Based on the results of this analysis, which may differ from actual results, the potential change in the fair value of our natural gas hedge contracts as of December 31, 2016 and 2015 was $10 million and $6 million, respectively. This analysis does not consider the underlying exposure.

FOREIGN CURRENCY EXCHANGE RISK

We have foreign exchange forward contracts to hedge forecasted purchases of products and services denominated in foreign currencies. The notional amount of these contracts was $80 million as of December 31, 2016, and they mature by December 27, 2017. The fair value of these contracts was immaterial as of December 31, 2016.

A sensitivity analysis was prepared to estimate the potential change in the fair value of our foreign exchange forward contracts assuming a hypothetical 10% change in foreign exchange rates. Based on the results of this analysis, which may differ from actual results, the potential change in the fair value of our foreign exchange forward contracts as of December 31, 2016 and 2015 was $9 million and $11 million, respectively. This analysis does not consider the underlying exposure.

INTEREST RATE RISK

As of December 31, 2016, all of our outstanding debt was fixed-rate debt. Consequently, our debt is not subject to risk from changing interest rates.

A sensitivity analysis was prepared to estimate the potential change in fair value of our marketable securities portfolio assuming a hypothetical 100-basis-point increase in interest rates. Based on the results of this analysis, which may differ from actual results, the potential change in fair value of our marketable securities as of December 31, 2016 and 2015 was immaterial and $1 million, respectively.

See Notes 1 and 7 to the consolidated financial statements in Part II, Item 8 for additional information regarding our financial exposures.

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Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

		Page
CONSOLIDATED FINANCIAL STATEMENTS:
Statements of Income		43
Statements of Comprehensive Income (Loss)		44
Balance Sheets		45
Statements of Cash Flows		46
Statements of Stockholders’ Equity		48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
1.	Significant Accounting Policies	49
2.	Recent Accounting Pronouncements	53
3	Discontinued Operations	54
4	Equity Method Investments	56
5	Marketable Securities	58
6.	Debt	58
7.	Derivative Instruments	60
8.	Fair Value Measurements	62
9.	Employee Retirement Plans	63
10.	Share-Based Compensation	70
11.	Supplemental Balance Sheet Information	73
12.	Long-Lived Asset Impairment Charges	75
13.	Gypsum Transportation Limited	76
14.	Segments	77
15.	Income Taxes	80
16.	Earnings Per Share	83
17.	Stockholder Rights Plan	84
18.	Lease Commitments	85
19.	Litigation	85
20.	Quarterly Financial Data (unaudited)	86
21.	Subsequent Event	87
Report of Independent Registered Public Accounting Firm		88
Schedule II - Valuation and Qualifying Accounts		89

All other schedules have been omitted because they are not required or applicable or the information is included in the consolidated financial statements or notes thereto.

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USG CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(millions, except share and per-share data)	Years Ended December 31,
	2016			2015			2014
Net sales	$	3,017		$	2,913		$	2,904
Cost of products sold	2,312			2,263			2,279
Gross profit	705			650			625
Selling and administrative expenses	304			302			323
Litigation settlement charge	—			—			48
Long-lived asset impairment charges	10			—			90
(Recovery) loss on receivable and contract termination charge	(3		)	(6		)	15
Gain on disposal of shipping operations, net	—			(1		)	—
Operating profit	394			355			149
Income from equity method investments	49			48			33
Interest expense	(145		)	(163		)	(179		)
Interest income	4			2			1
Income and gain from the sale of equity method investment to related party	—			13			2
Gain on deconsolidation of subsidiaries and consolidated joint ventures	—			—			27
Loss on extinguishment of debt	(37		)	(19		)	—
Other income, net	9			—			—
Income from continuing operations before income taxes	274			236			33
Income tax (expense) benefit	(63		)	740			(7		)
Income from continuing operations	211			976			26
Income from discontinued operations, net of tax	20			15			12
Gain on sale of discontinued operations, net of tax	279			—			—
Net income	510			991			38
Less: Net income attributable to noncontrolling interest	—			—			1
Net income attributable to USG	$	510		$	991		$	37
Earnings per common share - basic:
Income from continuing operations	$	1.45		$	6.70		$	0.18
Income from and gain on sale of discontinued operations	2.04			0.11			0.08
Net income	$	3.49		$	6.81		$	0.26
Earnings per common share - diluted:
Income from continuing operations	$	1.44		$	6.62		$	0.17
Income from and gain on sale of discontinued operations	2.02			0.11			0.08
Net income	$	3.46		$	6.73		$	0.25
Average common shares	145,929,506			145,457,208			141,722,616
Average diluted common shares	147,660,979			147,246,600			144,296,316

See accompanying Notes to Consolidated Financial Statements

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USG CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(millions)	Years Ended December 31,
	2016			2015			2014
Net income	$	510		$	991		$	38
Other comprehensive income (loss), net of tax:
Derivatives qualifying as cash flow hedges:
Gain (loss) on derivatives qualifying as cash flow hedges, net of tax of $2, $4, and $0, respectively	1			(5		)	(15		)
Less: Reclassification adjustment for (loss) gain on derivatives included in net income, net of tax (benefit) of ($4), $2, and $0, respectively	(6		)	(9		)	4
Derivatives qualifying as cash flow hedges, net of tax of $6, $2, and $0, respectively	7			4			(19		)
Pension and postretirement benefits:
Changes in pension and postretirement benefits, net of tax (benefit) of ($19), $6 and ($2), respectively	(34		)	74			(272		)
Less: Amortization of prior service benefit cost included in net periodic pension cost, net of tax (benefit) of ($7), ($1) and ($1), respectively	(9		)	(7		)	(2		)
Pension and postretirement benefits, net of tax (benefit) of ($12), $7 and ($1), respectively	(25		)	81			(270		)
Foreign currency translation:
Changes in foreign currency translation, net of tax of $0 in all periods	(53		)	(67		)	(68		)
Less: Translation (loss) gain realized upon sale of foreign entities, net of tax of $0 in all periods	—			(6		)	5
Foreign currency translation, net of tax of $0 in all periods	(53		)	(61		)	(73		)
Other comprehensive (loss) income, net of tax	(71		)	24			(362		)
Comprehensive income (loss)	$	439		$	1,015		$	(324	)

See accompanying Notes to Consolidated Financial Statements

44

USG CORPORATION

CONSOLIDATED BALANCE SHEETS

(millions, except share and per share data)		As of December 31,
		2016			2015
Assets
Current Assets:
Cash and cash equivalents		$	427		$	442
Short-term marketable securities		62			194
Restricted cash		—			9
Receivables (net of reserves: 2016 - $8; 2015 - $9)		183			184
Inventories		236			219
Income taxes receivable		1			5
Other current assets		40			41
Assets related to discontinued operations		—			306
Total current assets		949			1,400
Long-term marketable securities		29			36
Property, plant and equipment, net		1,707			1,771
Deferred income taxes		492			728
Equity method investments		628			682
Other assets		64			68
Assets related to discontinued operations		—			51
Total assets		$	3,869		$	4,736
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable		$	237		$	208
Accrued expenses		175			186
Current portion of long-term debt		—			500
Income taxes payable		10			9
Litigation settlement accrual		—			9
Liabilities related to discontinued operations		—			80
Total current liabilities		422			992
Long-term debt		1,083			1,675
Deferred income taxes		4			5
Pension and other postretirement benefits		290			392
Other liabilities		184			216
Liabilities related to discontinued operations		—			20
Total liabilities		1,983			3,300
Stockholders’ Equity:
Preferred stock	– $1 par value, authorized 36,000,000 shares; outstanding - none	—			—
Common stock	– $0.10 par value; authorized 200,000,000 shares; issued: 2016 - 146,167,000 shares; 2015 - 145,667,000 shares	15			15
Additional paid-in capital		3,038			3,027
Accumulated other comprehensive loss		(385		)	(314		)
Retained earnings (accumulated deficit)		(782		)	(1,292		)
Total stockholders’ equity		1,886			1,436
Total liabilities and stockholders’ equity		$	3,869		$	4,736

See accompanying Notes to Consolidated Financial Statements

45

USG CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
(millions)	2016			2015			2014
Operating Activities
Net income	$	510		$	991		$	38
Less: Income from discontinued operations, net of tax	20			15			12
Less: Gain on sale of discontinued operations, net of tax	279			—			—
Income from continuing operations	211			976			26
Adjustments to reconcile income from continuing operations to net cash:
Depreciation, depletion, and amortization	134			131			142
Loss on extinguishment of debt	37			19			—
Litigation settlement charge	—			—			48
Long-lived asset impairment charges	10			—			90
(Recovery) loss on receivable and contract termination charge	(3		)	(6		)	15
Share-based compensation expense	18			14			20
Deferred income taxes	57			(742		)	4
Gain on asset dispositions	(9		)	(13		)	(11		)
Gain from the sale of equity method investment to related party	—			(6		)	—
Income from equity method investments	(49		)	(50		)	(35		)
Dividends received from equity method investments	47			38			—
Pension settlement	20			1			13
Gain on deconsolidation of subsidiaries and consolidated joint ventures	—			—			(27		)
(Increase) decrease in working capital, net of deconsolidation of subsidiaries and consolidated joint ventures:
Receivables	6			21			(35		)
Income taxes receivable	3			(3		)	3
Inventories	(20		)	(16		)	(11		)
Other current assets	9			1			—
Payables	21			(16		)	9
Accrued expenses	(39		)	(61		)	(9		)
(Increase) decrease in other assets	—			4			3
Decrease in pension and other postretirement benefits	(142		)	(28		)	(55		)
Decrease in other liabilities	(6		)	(7		)	(12		)
Other, net	9			22			(18		)
Net cash provided by operating activities of continuing operations	314			279			160
Net cash provided by operating activities of discontinued operations	59			52			12
Net cash provided by operating activities	$	373		$	331		$	172
Investing Activities
Purchases of marketable securities	(274		)	(246		)	(204		)
Sales or maturities of marketable securities	413			170			190
Capital expenditures	(83		)	(87		)	(125		)
Net proceeds from asset dispositions	12			58			13
Net proceeds from the sale of equity method investment to related party	—			52			—
Investments in joint ventures, including $23 of cash of contributed subsidiaries in 2014	1			—			(560		)
Insurance proceeds	1			—			3
Return (deposit) of restricted cash	9			(8		)	4
Net cash provided by (used for) investing activities of continuing operations	79			(61		)	(679		)
Net cash provided by (used for) investing activities of discontinued operations	667			(2		)	(4		)
Net cash provided by (used for) investing activities	$	746		$	(63	)	$	(683	)
Financing Activities
Issuance of debt	—			350			3
Repayment of debt	(1,131		)	(386		)	(63		)
Payment of debt issuance fees	—			(6		)	(3		)
Issuances of common stock	4			6			4
Repurchases of common stock to satisfy employee tax withholding obligations	(2		)	(8		)	(7		)
Net cash used for financing activities of continuing operations	$	(1,129	)	$	(44	)	$	(66	)
(continued on the next page)

46

USG CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
(millions)	2016			2015			2014
Effect of exchange rate changes on cash	(5		)	(10		)	(5		)
Net (decrease) increase in cash and cash equivalents from continuing operations	(741		)	164			(590		)
Net increase in cash and cash equivalents from discontinued operations	726			50			8
Change in cash balance included in discontinued operations	—			(3		)	(2		)
Net (decrease) increase in cash and cash equivalents	(15		)	211			(584		)
Cash and cash equivalents at beginning of period	442			231			815
Cash and cash equivalents at end of period	$	427		$	442		$	231
Supplemental Cash Flow Disclosures:
Interest paid, net of interest capitalized	$	153		$	158		$	172
Income taxes paid, net of refunds received	4			—			7
Noncash Investing and Financing Activities:
Amount in accounts payable for capital expenditures	15			5			15
Reversal of USG Boral Building Products earnout	(24		)	—			—
Contribution of wholly-owned subsidiaries and joint venture investments as consideration for investment in USG Boral Building Products	—			—			121
Conversion of $75 million of 10% convertible senior notes due 2018, net of discount	—			—			(73		)
Issuance of common stock upon conversion of debt	—			—			75
Accrued interest on debt conversion	—			—			(2		)

See accompanying Notes to Consolidated Financial Statements

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USG CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(millions, except share data)	Common Shares Issued (000)	Treasury Shares (000)		Common Stock		Treasury Stock			Additional Paid-in Capital			Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Stockholders' Equity			Non-controlling Interest			Total
Balance as of January 1, 2014	137,314	—		$	14	$	—		$	2,920		$	(2,320	)	$	24		$	638		$	24		$	662
Net income												37						37			1			38
Other comprehensive loss															(362		)	(362		)				(362		)
Share-based compensation									21									21						21
Stock issuances	947	166		—		4			1									5						5
Stock issuances upon debt conversion	6,507	72		—		3			72									75						75
Repurchase of common stock		(238	)			(7		)										(7		)				(7		)
Changes in noncontrolling interest																		—			(24		)	(24		)
Balance as of December 31, 2014	144,768	—		$	14	$	—		$	3,014		$	(2,283	)	$	(338	)	$	407		$	1		$	408
Net income												991						991						991
Other comprehensive income															24			24						24
Share-based compensation									15									15						15
Stock issuances	899	283		1		8			(2		)							7						7
Repurchase of common stock		(283	)			(8		)										(8		)				(8		)
Changes in noncontrolling interest																		—			(1		)	(1		)
Balance as of December 31, 2015	145,667	—		$	15	$	—		$	3,027		$	(1,292	)	$	(314	)	$	1,436		$	—		$	1,436
Net income												510						510						510
Other comprehensive loss															(71		)	(71		)				(71		)
Share-based compensation									18									18						18
Tax deficiencies in share-based compensation									(11		)							(11		)				(11		)
Stock issuances	500	85		—		2			4									6						6
Repurchases of common stock		(85	)			(2		)										(2		)				(2		)
Balance as of December 31, 2016	146,167	—		$	15	$	—		$	3,038		$	(782	)	$	(385	)	$	1,886		$	—		$	1,886

See accompanying Notes to Consolidated Financial Statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In the following Notes to Consolidated Financial Statements, “USG,” “we,” “our” and “us” refer to USG Corporation and its subsidiaries included in the consolidated financial statements, except as otherwise indicated or as the context otherwise requires.

1. Significant Accounting Policies

Nature of Operations

USG, through its subsidiaries, is a leading manufacturer of building materials. We produce a wide range of products for use in new residential, new nonresidential, and residential and nonresidential repair and remodel construction as well as products used in certain industrial processes. Our products are distributed through building materials dealers, home improvement centers and other retailers, specialty wallboard distributors, and contractors.

Segments

Our segments are structured around our key products and business units: Gypsum, Ceilings and UBBP.

Our Gypsum reportable segment is an aggregation of the operating segments of the gypsum businesses in the United States, Canada, Mexico, and Latin America, our mining operation in Little Narrows, Nova Scotia, Canada, which we indefinitely idled in 2016, and our shipping company, which we exited in 2015. Gypsum manufactures products throughout the United States, Canada, and Mexico. These products include USG Sheetrock^® brand gypsum wallboard and related products including Sheetrock^® brand joint compound, Durock^® brand cement board, Levelrock^® brand of poured gypsum flooring, Fiberock^® brand backerboard, and Securock^® brand glass mat sheathing used for building exteriors and gypsum fiber and glass mat panels used as roof cover board. Ceilings manufactures ceiling tile in the United States and ceiling grid in the United States, Canada and through February 27, 2014, the Asia-Pacific region. UBBP manufactures, distributes and sells certain building products, mines raw gypsum and sells natural and synthetic gypsum throughout Asia, Australasia and the Middle East.

Consolidation and Presentation

Our consolidated financial statements include the accounts of USG Corporation, its majority-owned subsidiaries and through February 27, 2014, variable interest entities. Entities in which we have more than a 20% but not more than 50% ownership interest are accounted for using the equity method of accounting. All intercompany balances and transactions are eliminated in consolidation.

On August 29, 2016, we announced the signing of a definitive agreement to sell L&W Supply Corporation, or L&W, our distribution business, to American Builders & Contractors Supply Co., Inc., or ABC Supply, at which time L&W met the criteria to be classified as held for sale and presented as a discontinued operation. We completed the sale on October 31, 2016.

L&W's results of operations have been reclassified to "Income from discontinued operations, net of tax" in our consolidated statements of income for all periods presented. The assets and liabilities of L&W have been reclassified to "Assets related to discontinued operations" and "Liabilities related to discontinued operations", respectively, in our consolidated balance sheet as of December 31, 2015. The cash flows associated with L&W have been reclassified to "Net cash provided by operating activities of discontinued operations" and "Net cash provided by (used for) investing activities of discontinued operations" for all periods presented. The results of L&W, which previously consisted of our Distribution segment, have been excluded from our segment results. Additionally, results of our Gypsum and Ceilings segments have been revised as a result of L&W's classification as a discontinued operation to reflect only the sales of USG products from Gypsum and Ceilings to L&W that were sold outside the consolidated group prior to October 31, 2016. All L&W sales subsequent to the close of the transaction are included in net sales on our consolidated statement of income. See Note 3 for further discussion.

Our investments with Boral in the 50/50 joint ventures, UBBP, commenced on February 27, 2014, and as a result, our share of ten months of the results of UBBP were recorded in our accompanying consolidated statement of income for the year ended December 31, 2014. See Note 4 for further description of our investments in UBBP.

Use of Estimates

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from these estimates.

Revenue Recognition

We recognize revenue when shipment is received by the customer. We enter into agreements with customers to offer rebates, generally based on achievement of specified sales levels and various marketing allowances that are common industry practice.

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Estimated reductions to revenue for customer programs and incentive offerings, including promotions and other volume–based incentives, are recorded in the period in which the sale occurs. Provisions for early payment discounts are accrued in the same period in which the related sales are recorded.

Shipping and Handling Costs

Shipping and handling costs billed to customers are included in net sales and the related costs are presented in cost of products sold.

Advertising

Advertising expenses consist of media advertising and related production costs and sponsorships. We charge advertising expenses to earnings as incurred. These expenses amounted to $12 million, $16 million and $22 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Research and Development

We charge research and development expenditures to earnings as incurred. These expenditures amounted to $24 million, $23 million and $23 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Litigation Costs

We expense litigation costs as incurred.

Income Taxes

We record income tax expense (benefit) under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or paid. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the change is enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on all available evidence, it is more likely than not that such assets will not be realized. The need to establish valuation allowances for deferred tax assets is assessed at each reporting date. In assessing the requirement for, and amount of, a valuation allowance in accordance with the more-likely-than-not standard, we give appropriate consideration to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with operating loss and tax credit carryforwards not expiring unused and tax planning strategies.

A history of cumulative losses for a certain threshold period is a significant form of negative evidence used in the assessment, and we are required to have a policy regarding the duration of the threshold period. We believe the historical cyclical nature of our operations show economic cycles ranging from 7 to 10 years with demand troughs historically showing recovery over four years. Accordingly, we have a policy of four years as our threshold period for cumulative losses.

Inventory Valuation

All of our inventories are stated at the lower of cost or market and are valued under the average cost method. Our inventories include materials, labor and applicable factory overhead costs. Depreciation associated with manufacturing assets is excluded from inventory cost but is included in cost of products sold.

Earnings per Share

Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding plus the dilutive effect, if any, of market share units, or MSUs, restricted stock units, or RSUs, performance shares, the potential exercise of outstanding stock options and the deferred shares associated with our deferred compensation program for non-employee directors.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments, primarily money market funds, with maturities of three months or less at the time of purchase.

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Marketable Securities

Marketable securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported in accumulated other comprehensive loss, or AOCI. If it is deemed that marketable securities have unrealized losses that are other than temporary, these losses will be recorded in earnings immediately. Situations in which losses may be considered other than temporary include when we have decided to sell a security or when it is more likely than not that we will be required to sell the security before we recover its amortized cost basis. Cost basis for securities sold are determined on a first-in-first-out basis.

Receivables

Receivables are recorded at net realizable value, which includes allowances for cash discounts and doubtful accounts. We review the collectability of receivables on an ongoing basis and reserve for receivables determined to be uncollectible. This determination is based on the delinquency of the account, the financial condition of the customer and our collection experience.

We include short-term financing receivables in receivables and long-term financing and loan receivables in other assets on our consolidated balance sheets. Financing and loan receivables are recorded at net realizable value which includes an allowance for credit losses. We review the collectability of financing and loan receivables on an ongoing basis and reserve for financing and loan receivables determined to be uncollectible. This determination is based on the delinquency of the account and the financial condition of the other party. As of December 31, 2016, the allowance for credit losses was immaterial.

Investments in Unconsolidated Joint Ventures

The equity method of accounting is used for investments in joint ventures that we do not consolidate, but over which we have the ability to exercise significant influence. These investments 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. If the underlying net assets in our investments are denominated in a foreign currency, we adjust the value of our investment for translation gains or losses. Profits resulting from sales with equity method investees are eliminated until realized by the investee.

At least quarterly, we review the probability of the earnout payment to Boral. At December 31, 2016, we concluded that it is currently not probable that the five-year performance target will be achieved. If our conclusion on the probability of achievement were to change, we will record a liability representing the present value of the second earnout payment with a corresponding increase to our investment.

Losses in the value of an equity method investment that are other than temporary, are recognized when the current fair value of the investment is less than its carrying value. We review our investments in equity method investments for impairment whenever factors indicate an other than temporary loss in value. If we conclude a loss in value is other than temporary, an impairment charge is recognized for the difference between the investment’s carrying value and its estimated fair value.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost. We record depreciation of property, plant and equipment on a straight-line basis over the expected useful lives of the assets. We have determined estimated useful lives to be 50 years for buildings and improvements, a range of 10 to 25 years for machinery and equipment, and a range of 5 to 7 years for computer software and systems development costs. Leasehold improvements are capitalized and amortized over the shorter of the remaining lease term or remaining economic useful life. We compute depletion on a basis calculated to spread the cost of gypsum and other applicable resources over the estimated quantities of material recoverable.

We capitalize interest during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying assets and is depreciated over the useful lives of those assets. We recorded $1 million of capitalized interest in the year ended December 31, 2016, and $3 million in the years ended December 31, 2015 and 2014. Facility start-up costs that cannot be capitalized are expensed as incurred and recorded in cost of products sold.

Property, plant and equipment is reviewed for impairment when indicators of a potential impairment are present by comparing the carrying values of the assets with their estimated future undiscounted cash flows. If we determine an impairment exists, the asset is written down to estimated fair value. 

Asset Retirement Obligations

Our asset retirement obligations include reclamation requirements as regulated by government authorities related principally to assets such as our mines, quarries, landfills, ponds and wells. The accounting for asset retirement obligations requires estimates by management about the timing of asset retirements, the cost of retirement obligations, discount and inflation rates used in determining fair values and the methods of remediation associated with our asset retirement obligations. We generally use assumptions and estimates that reflect the most likely remediation method on a site-by-site basis. Our estimated liability for

51

asset retirement obligations is revised annually, and whenever events or changes in circumstances indicate that a revision to the estimate is necessary.

In instances where a decrease in the asset retirement obligation is in excess of the related remaining net book value of the asset retirement costs, the excess is recorded to the consolidated statement of income as a reduction in cost of products sold. Asset retirement obligations are included in other liabilities on the consolidated balance sheets.

Share-Based Compensation

We award share-based compensation to employees in the form of MSUs, performance shares and RSUs and to non-employee directors in the form of shares of our common stock. All grants under share-based payment programs are accounted for at fair value at the date of grant. We recognize expense on all share-based awards to employees expected to vest over the service period, which is the shorter of the period until the employees’ retirement eligibility dates or the service period of the award. Expense is generally reduced for estimated forfeitures, which are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Derivative Instruments

We use derivative instruments to manage selected commodity price and foreign currency exposures. We do not use derivative instruments for speculative trading purposes, and we typically do not hedge beyond five years. All derivative instruments are recorded on the balance sheet at fair value. For derivatives designated as fair value hedges, the changes in the fair values of both the derivative instrument and the hedged item are recognized in earnings in the current period. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is recorded to AOCI, and is reclassified to earnings when the underlying forecasted transaction affects earnings. The ineffective portion of changes in the fair value of the derivative is reported in cost of products sold in the current period. We periodically reassess the probability of the underlying forecasted transaction occurring. For derivatives designated as net investment hedges, we record changes in fair value to AOCI. For derivatives not designated as hedging instruments, all changes in fair value are recorded to earnings in the current period.

We use swaps to hedge a significant portion of our anticipated purchases of natural gas to be used in our manufacturing operations. Generally, we hedge the cost of a majority of our anticipated purchases of natural gas over the next 12 months. However, we review our positions regularly and make adjustments as market conditions warrant. The majority of contracts currently in place are designated as cash flow hedges and the remainder are not designated as hedging instruments.

We have operations outside of the United States and use forward contracts to hedge the risk of changes in cash flows resulting from selected forecasted intercompany and third-party sales or purchases, as well as intercompany loans, denominated in non-U.S. currencies, or to hedge the risk of selected changes in our net investment in foreign subsidiaries. These contracts are designated as either cash flow or net investment hedges or are not designated as hedging instruments.

Foreign Currency Translation

We translate foreign-currency-denominated assets and liabilities into U.S. Dollars at the exchange rates existing as of the respective balance sheet dates. We translate income and expense items at the average exchange rates during the respective periods. We record translation adjustments resulting from fluctuations in exchange rates to AOCI on our consolidated balance sheets and our share of the translation adjustments recorded by our equity method investments to AOCI.

We record transaction gains and losses to earnings. In 2016, the total transaction gain was $3 million. In 2015 and 2014, the total transaction loss was $7 million and $6 million, respectively.

Fair Value Measurements

Certain assets and liabilities are required to be recorded at fair value. The estimated fair values of those assets and liabilities have been determined using market information and valuation methodologies. Changes in assumptions or estimation methods could affect the fair value estimates. However, we do not believe any such changes would have a material impact on our financial condition, results of operations or cash flows. There are three levels of inputs that may be used to measure fair value:

• Level 1 – Quoted prices for identical assets and liabilities in active markets;

• Level 2 – Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

• Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

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Certain assets and liabilities are measured at fair value on a nonrecurring basis rather than on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment or when a new liability is being established that requires fair value measurement.

2. Recent Accounting Pronouncements

In November 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which will require restricted cash to be presented with cash and cash equivalents in the statement of cash flows. The standard will be effective for us in the first quarter of 2018 and will be applied using the retrospective approach. As our restricted cash amounts are immaterial, we do not expect the adoption of ASU 2016-18 will have a significant impact to our consolidated financial statements or disclosures.

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory,” which eliminates the exception for all intra-entity transfers, except for intra-entity transfers of inventory. The significant components of the standard are 1) current and deferred income tax consequences of intra-entity asset transfers (other than inventory) will be reflected when the transaction occurs and 2) the impact of the sale, if any, is reflected in the effective tax rate for the period in which the transaction occurs. The standard will be effective for us in the first quarter of 2018 and we will adopt the new standard using a modified retrospective approach with a cumulative-effect adjustment to retained earnings. We do not expect the adoption of ASU 2016-16 will have a significant impact to our consolidated financial statements or disclosures.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The standard will be effective for us in the first quarter of 2018, there will be no impact to our consolidated cash flow statement and disclosures as we are already compliant with the provisions of the standard.

In March 2016, the FASB issued ASU 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplifies certain aspects of accounting for employee share-based payments. The standard will be effective for us in the first quarter of 2017 and will be applied in part prospectively and in part using a modified retrospective transition approach. The components of this standard that will impact our financial statements are as follows:

• Excess tax benefits and deficiencies related to stock compensation will be prospectively recognized in income tax expense instead of in equity when the awards vest or are settled. For the twelve months ended December 31, 2016 and 2015, we recorded a reduction to equity of $11 million and $0 million, respectively. Under the new standard, $9 million of tax expense and $4 million of income tax benefit would have been recognized in 2016 and 2015, respectively.

• Excess tax benefits that were previously unrecognized because the related tax deduction had not been realized through a reduction in taxes payable will be recorded on a modified retrospective basis. If we had early adopted this standard, we would have recorded a cumulative-effect adjustment to opening retained earnings of $25 million on our December 31, 2016 consolidated balance sheet.

• Upon adoption, we will elect an accounting policy to recognize forfeitures as they occur and will record a cumulative effect change to retained earnings in accordance with the modified retrospective approach. If we had early adopted this standard, we would have recorded an immaterial cumulative effect adjustment to opening retained earnings on our December 31, 2016 balance sheet.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which supersedes existing lease guidance to require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. The standard will be effective for us in the first quarter of 2019, and we will adopt the new standard using the modified retrospective approach. While we continue to evaluate the impact of the new standard, we believe the standard will require us to implement a new lease accounting system and related policies and processes. Further, we anticipate the adoption of ASU 2016-02 will have a significant impact to our consolidated balance sheets, consolidated statements of income and disclosures, but we are unable to quantify the financial statement impact at this time.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments-Overall (Topic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” which requires that most equity instruments be measured at fair value, with subsequent changes in fair value recognized in net income. The pronouncement also impacts the financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The ASU does not apply

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to equity method investments or investments in consolidated subsidiaries. The new standard will be effective for us for the first quarter of 2018, with early adoption permitted and amendments to be applied as a cumulative-effect adjustment to the balance sheet in the year of adoption. We do not expect the adoption of ASU 2016-01 will have a significant impact to our consolidated financial statements or disclosures.

In July 2015, the FASB issued ASU 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory", which changes the measurement principle for inventory from the lower of cost or market to the lower of cost or net realizable value for entities that measure inventory using the first-in, first-out (FIFO) or average cost method. The ASU defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The standard, which we will adopt using the prospective approach, is effective for us beginning January 1, 2017. ASU 2015-11 will not have an impact to our consolidated financial statements or disclosures.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Subsequently, the FASB has issued various ASUs to provide further clarification around certain aspects of ASC 606. This standard will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and we will adopt the standard on January 1, 2018. We are in the process of completing the analysis of the standard's impact on our sales to customers. While we have not completed our analysis of the impact of the provisions of this standard, we do not expect a significant impact to our financial statements or disclosure.

3.    Discontinued Operations

On October 31, 2016, we completed the sale of our L&W business to ABC Supply for total cash consideration of $675 million inclusive of the final working capital adjustment and recorded a gain on the sale of $279 million.

For the year ended December 31, 2016, L&W met the criteria to be classified as held for sale and to be presented as a discontinued operation. Accordingly, we reclassified the results of operations and the cash flows of L&W to discontinued operations in our consolidated statements of income and consolidated statements of cash flows for all periods presented. Additionally, we reclassified the assets and liabilities of L&W to discontinued operations in our consolidated balance sheets.     

The summarized financial information related to L&W that has been excluded from continuing operations and reported as a discontinued operation is as follows:

(millions)	For the year ended December 31,
	2016(a)		2015		2014
Net sales	$	1,252	$	1,428	$	1,345
Cost of products sold	1,196		1,387		1,316
Gross profit	56		41		29
Selling and administrative expenses (b)	22		15		16
Operating profit	34		26		13
Income tax expense	12		11		—
Net income from discontinued operations (c)	$	22	$	15	$	13
Gain on sale of discontinued operations	$	279	$	—	$	—

(a) Operating results for 2016 are presented for the ten months ended October 31, 2016.

(b) The ten month period ended October 31, 2016 includes transaction costs of $8 million.

(c) Years ended December 31, 2016 and 2014 include net income from discontinued operations from our European business, which were sold in 2012.

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The assets and liabilities related to discontinued operations as of December 31, 2015 are as follows:

(millions)	December 31, 2015
Accounts receivable, net	207
Inventories	95
Other current assets	4
Property, plant and equipment, net (a)	17
Intangible assets (a)	31
Other assets (a)	3
Total assets related to discontinued operations	$	357
Accounts payable	$	51
Accrued expenses	29
Other liabilities (a)	20
Total liabilities related to discontinued operations	$	100

(a) As of December 31, 2015, these balances are reflected as long-term in our consolidated balance sheet.

We retained responsibility for the benefits payable to employees of L&W from the USG pension and postretirement plans for the benefits accrued while employed by USG. As such, these liabilities are not reflected in liabilities related to discontinued operations. See Note 9 for further discussion. We also agreed to defend and indemnify L&W in connection with the pricing lawsuits. See Note 19 for discussion of the liability associated with the pricing lawsuits.

Additionally, upon the close of the sale, we entered into a supply agreement with L&W and a transition services agreement with ABC Supply to provide certain transition services. For the years ended December 31, 2016, 2015, and 2014, we recorded sales to L&W of $568 million, $531 million and $532 million that, prior to October 31, 2016, were eliminated in consolidation. We recorded a cash inflow of $102 million from L&W in the two months since the sale related to payments on trade receivables.

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4.    Equity Method Investments

Equity method investments were as follows:

	December 31, 2016			December 31, 2015
(millions)	Carrying Value		Ownership Percentage	Carrying Value		Ownership Percentage
USG Boral Building Products	$	621	50%	$	675	50%
Other equity method investments	7		33% - 50%	$	7	33% - 50%
Total equity method investments	$	628		$	682

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 Limited, or Boral. These joint ventures are herein referred to as USG Boral Building Products, or UBBP. As consideration for our 50% ownership in UBBP, we (i) made a cash payment of $514 million to Boral, (ii) contributed to UBBP our subsidiaries and joint venture investments in China, Singapore, India, Malaysia, New Zealand, Australia, the Middle East and Oman and (iii) granted to UBBP licenses to use certain of our intellectual property rights in the Territory. 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 income for the year ended December 31, 2014.

During 2016, UBBP paid cash dividends on earnings through September 2016 of which our 50% share totaled $47 million. We recorded the cash dividend in operating activities on our statements of cash flows. As of December 31, 2016, the amount of our consolidated retained earnings which represents undistributed earnings from UBBP is $44 million.

In the event certain U.S. Dollar performance targets are satisfied by UBBP, we are obligated to pay Boral two scheduled earnout payments in an aggregate amount up to $75 million. Upon inception of the joint ventures, we recorded a liability representing the present value of the first earnout payment of $25 million which was reversed in 2016 as the three-year performance target was not met. The second earnout payment of up to $50 million is based on performance over the first five years. We have concluded that it is currently not probable that the five-year performance target will be achieved. As of December 31, 2016, we had no liability recorded for the earnout payments. As of December 31, 2015, our liability for the earnout payments totaled $24 million and is included in other liabilities on our accompanying consolidated balance sheet.

Translation losses recorded in other comprehensive income were as follows:

(millions)	2016			2015			2014
Translation loss	$	(30	)	$	(23	)	$	(34	)

Transactions with UBBP

Our Gypsum segment sells products to UBBP. Total sales to UBBP for each of the years ended December 31, 2016, 2015 and 2014 were immaterial.

In 2014, in connection with the formation of UBBP, we contributed our ownership interest in a joint venture in China to UBBP but retained our loan receivable from this joint venture. As of December 31, 2016 and 2015, the loan receivable, including interest, totaled $15 million and $14 million, respectively, as included in "Other assets" on our consolidated balance sheets.

Investment in Knauf-USG Joint Venture

In 2015, we sold our 50% interest in Knauf/USG Verwaltungs GmbH and Knauf/USG Systems GmbH & Co. KG, or collectively the Knauf-USG joint venture, to our joint venture partner, Knauf Aquapanel GmbH, a subsidiary of Gebr. Knauf Verwaltungsgesellschaft KG (Knauf) for €48 million in cash, or approximately $52 million. The Knauf-USG joint venture manufactured and distributed Aquapanel^® brand cement-based panels in Europe (excluding Turkey) and all countries that were part of the former Soviet Union. Affiliates of Knauf are the beneficial owners of approximately 10% of USG's outstanding shares of common stock.

We recorded a gain of approximately $6 million, which is net of $5 million for income taxes payable on the sale.  The gross gain and our equity method income in the Knauf-USG joint venture was $13 million for the year ended December 31,

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2015 and $2 million for the year ended December 31, 2014 and is recorded in "Income and gain from the sale of equity method investment to related party" in our consolidated statement of income.

Summarized Financial Information

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

Statement of Income

	For the year ended December 31,
(millions)	2016		2015		2014 (a)
USG Boral Building Products:
Net sales	$	1,052	$	1,003	$	927
Gross profit	337		278		251
Operating profit(b)	133		124		95
Net income before taxes	142		132		101
Net income	95		101		72
Net income attributable to USG Boral Building Products	99		96		67
USG share of income from USG Boral Building Products(c)	49		48		33
Other equity method investments(d):
USG share of income from other investments accounted for using the equity method	—		2		2
Total income from equity method investments	49		50		35

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

(b) Year ended December 31, 2016 includes long-lived asset impairment charges of $8 million for China and of $14 million for Oman.

(c) Year ended December 31, 2016 includes long-lived asset impairment charges of $4 million for China and of $4 million for Oman.

(d) Amounts represent our share of income or loss from all equity method investments, other than UBBP.

Balance Sheet

(millions)	December 31, 2016		December 31, 2015
USG Boral Building Products:
Current assets	$	389	$	368
Non-current assets	903		935
Current liabilities(a)	211		197
Long-term debt	37		40
Other non-current liabilities	17		17
Shareholders' equity(b)	1,027		1,049

(a) Includes the current portion of long-term debt of $15 million and $16 million as of December 31, 2016 and 2015, respectively.

(b) Shareholders' equity includes $50 million and $60 million related to non-controlling interests as of December 31, 2016 and 2015, respectively.

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5.     Marketable Securities

Our investments in marketable securities as of December 31, 2016 and 2015 consisted of the following:

	2016				2015
(millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Corporate debt securities	$	69	$	69	$	134	$	134
U.S. government and agency debt securities	14		14		57		57
Asset-backed debt securities	2		2		21		21
Certificates of deposit	6		6		15		15
Municipal debt securities	—		—		3		3
Total marketable securities	$	91	$	91	$	230	$	230

The realized and unrealized gains and losses as of and for the years ended December 31, 2016, 2015 and 2014 were immaterial.

Contractual maturities of marketable securities as of December 31, 2016 were as follows:

(millions)	Amortized Cost		Fair Value
Due in 1 year or less	$	62	$	62
Due in 1-5 years	29		29
Total marketable securities	$	91	$	91

Actual maturities may differ from the contractual maturities because issuers of the securities may have the right to prepay them.

6.     Debt

Total debt as of December 31 consisted of the following:

(millions)	2016		2015
5.5% senior notes due 2025	$	350	$	350
5.875% senior notes due 2021	—		350
6.3% senior notes due 2016	—		500
7.75% senior notes due 2018	500		500
7.875% senior notes due 2020 (net of discount: 2016 - $0; 2015- $1)	—		249
Industrial revenue bonds (due 2028 through 2034)	239		239
Total	$	1,089	$	2,188
Less unamortized debt issuance costs	$	6	$	13
Total	$	1,083	$	2,175

Repurchase of Senior Notes

During 2016, we retired $500 million of our 6.3% Senior Notes due in 2016, referred to as the 6.3% Notes, $250 million of our 7.875% senior notes due 2020, referred to as the 7.875% Notes, and $350 million of our 5.875% senior notes due 2021, referred to as the 5.875% Notes. The early redemption of the 6.3% Notes, the 7.875% Notes and the 5.875% Notes included premiums of $30 million and accrued interest of $9 million. As a result of the repurchases, we recorded a loss on early extinguishment of debt, before tax, of $37 million including premiums, write-off of deferred financing fees, debt discount and broker fees.

In the first quarter of 2015, we repurchased $350 million of our 8.375% senior notes due in 2018, through both a cash tender offer and a subsequent notice of redemption for aggregate consideration, including tender offer premium and accrued and unpaid interest, of $377 million. As a result of the repurchases, we recorded a loss on early extinguishment of debt of $19 million including the write-off of unamortized debt issuance costs.

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Issuance of Senior Notes

In the first quarter of 2015, we issued $350 million of 5.5% senior notes due March 1, 2025. The net proceeds from the issuance of these notes and cash on hand were used to fund the repurchases of the 8.375% senior notes and all related costs and expenses. We deferred approximately $6 million of debt issuance costs that are being amortized to interest expense over the term of the notes. As of December 31, 2016 and December 31, 2015, these notes were recorded on the accompanying consolidated balance sheets at $345 million and $344 million, respectively.

Senior Notes

All of the senior notes are senior unsecured obligations and rank equally with all of our other existing and future unsecured senior indebtedness. The indentures governing the notes contain events of default, covenants and restrictions that are customary for similar transactions, including a limitation on our ability and the ability of certain of our subsidiaries to create or incur secured indebtedness.

Interest rate (a)	7.75%	5.500%
Principal net of discount (in millions) (b)	$500	$350
Maturity	January 15, 2018	March 1, 2025
Call date	Any time (c)	March 1, 2020 (d)
Mandatory redemption	at 101% plus accrued and unpaid interest in the event of a change in control and a related downgrade below investment grade by both Moody’s Investors Service and Standard & Poor’s Global Ratings	at 101% plus accrued and unpaid interest in the event of a change in control

(a) The 7.75% senior notes currently have an effective interest rate of 8.25%. The rate is subject to an adjustment of up to 2% if the debt rating is downgraded or subsequently upgraded by Moody's Investors Service and Standard & Poor's Global Ratings.

(b) Principal amounts exclude unamortized debt issuance costs.

(c) Callable at any time at a price equal to the greater of (1) 100% of the principal and (2) the sum of the present value of the remaining scheduled payments of principal and interest discounted to the redemption date on a semi-annual basis at the applicable U.S. Treasury rate plus a spread (as outlined in the applicable indenture), plus any accrued and unpaid interest on the principal amount being called.

(d) Callable at any time prior to the call date at a price equal to 100% of the principal plus a premium (as outlined in the respective indentures), plus any accrued and unpaid interest on the principal amount being called. Callable after the call date at stated redemption prices (as outlined in the applicable indenture), plus any accrued and unpaid interest on the principal amount being called.

Credit Facility

We maintain a credit facility with a maximum borrowing limit of $180 million (including a $50 million borrowing sublimit for CGC) that is available to fund working capital needs and other general corporate purposes and matures on October 22, 2019. The facility is secured by certain of our accounts receivable and inventory. The maximum borrowing limit under the credit agreement may be increased up to $650 million at our request and our lenders’ approval. In December 2016, we reduced the facility size to $180 million due to the L&W sale and in January 2017, we amended the credit agreement to reduce payment condition threshold amounts in conjunction with the lower facility size.

The credit agreement requires us to maintain a minimum fixed charge coverage ratio in the event excess availability falls below a minimum threshold. Because our excess borrowing availability of $85 million exceeds this threshold, the requirement to maintain the minimum fixed charge coverage ratio is not applicable. The credit agreement contains other covenants and events of default that are customary for similar agreements and may limit our ability to take various actions including our ability to pay a dividend or repurchase our stock. We are in compliance with all covenants in our credit facility.

As of December 31, 2016 and during the year then ended, there were no borrowings under the facility. Had there been any borrowings as of that date, the applicable interest rate would have been 2.00% for loans in the U.S. and 1.95% for loans in Canada. Outstanding letters of credit as of December 31, 2016 totaled $38 million.

Industrial Revenue Bonds

Our $239 million of industrial revenue bonds have fixed interest rates ranging from 5.5% to 6.4%. The weighted average rate of interest on our industrial revenue bonds is 5.875%. These bonds mature during the years 2028 through 2034.

OTHER INFORMATION

The fair value of our debt was $1.129 billion and $2.295 billion as of December 31, 2016 and 2015, respectively, and was determined using the fair value hierarchy of inputs described in Note 1. The decline primarily reflected the repayment of the 6.3% Notes, the 7.875% Notes, and the 5.875% Notes in 2016. The fair values were determined utilizing prices from

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independent pricing services. The vendors’ methodologies utilize various forms of market data, including but not limited to, trade data, yield, spreads, bids and offers. We review the values provided by the independent pricing service for reasonableness by comparing the valuations received from the independent pricing service to valuations from at least one other observable source. We have not adjusted the prices obtained from the independent pricing service. As a result, the fair values are classified as Level 2.

Interest accrued on our debt as of December 31, 2016 and December 31, 2015 was $31 million and $45 million, respectively.

As of December 31, 2016, the amounts of total debt outstanding maturing in each of the next five years and beyond were as follows:

(millions)	2017		2018		2019		2020		2021		After 2021
Debt maturities (principal amounts)	$	—	$	500	$	—	$	—	$	—	$	589

7.     Derivative Instruments

COMMODITY DERIVATIVE INSTRUMENTS

As of December 31, 2016, we had 36 million mmBTUs (millions of British Thermal Units) in aggregate notional amount of outstanding natural gas swap contracts to hedge forecasted purchases. All of these contracts mature by December 31, 2021. For contracts designated as cash flow hedges, the amount that remained in AOCI was a pre-tax unrealized gain of $2 million as of December 31, 2016 and an unrealized loss of $19 million as of December 31, 2015. No ineffectiveness was recorded on contracts designated as cash flow hedges in 2016, 2015, or 2014.

Changes in fair value on contracts not designated as cash flow hedges are recorded to earnings. The fair value of those contracts not designated as cash flow hedges was a $1 million unrealized gain as of December 31, 2016 and a $2 million unrealized loss as of December 31, 2015.

FOREIGN EXCHANGE DERIVATIVE INSTRUMENTS

We have foreign exchange forward contracts to hedge forecasted purchases of products and services denominated in foreign currencies. The notional amount of these contracts was $80 million as of December 31, 2016, and they mature by December 27, 2017. These forward contracts are designated as cash flow hedges and no ineffectiveness was recorded in 2016, 2015, or 2014. The fair value of these contracts that remained in AOCI was zero and an unrealized net pre-tax gain of $8 million as of December 31, 2016 and December 31, 2015, respectively.

During the third quarter of 2015, we entered into foreign exchange forward contracts to hedge a portion of our net investment in our Knauf-USG joint venture. The notional amount of these contracts was $35 million and they matured on November 16, 2015. In November 2015, we entered into a similar foreign exchange forward contract with the same critical terms that was scheduled to mature on January 31, 2016.  These forward contracts were designated as net investment hedges and no ineffectiveness was recorded. On December 22, 2015, we completed the sale and, as a result, we terminated the outstanding foreign exchange forward contract and reclassified the $1 million net gain realized for these contracts from AOCI to earnings which increased the gain on the sale of the equity method investment. See Note 4 for further discussion on the sale.

COUNTERPARTY RISK, MASTER NETTING ARRANGEMENTS AND BALANCE SHEET OFFSETTING

We are exposed to credit losses in the event of nonperformance by the counterparties to our derivative instruments. As of December 31, 2016, our derivatives were in a $3 million net asset position. All of our counterparties have investment grade credit ratings; accordingly, we anticipate that they will be able to fully satisfy their obligations under the contracts.

All of our derivative contracts are governed by master netting agreements negotiated between us and the counterparties that reduce our counterparty credit exposure. The agreements outline the conditions (such as credit ratings and net derivative fair values) upon which we, or the counterparties, are required to post collateral. As required by certain of our agreements, we had $10 million of collateral posted with our counterparties related to our derivatives as of December 31, 2016. Amounts paid as cash collateral are included in receivables on our consolidated balance sheets.

We have not adopted an accounting policy to offset fair value amounts related to derivative contracts under our master netting arrangements; therefore, individual derivative contracts are reflected on a gross basis, as either assets or liabilities, on our consolidated balance sheets, based on their fair value as of the balance sheet date.

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FINANCIAL STATEMENT INFORMATION

The following are the pre-tax effects of derivative instruments on the consolidated statements of income and the consolidated statements of comprehensive income (loss) for the years ended December 31, 2016, 2015 and 2014:

	Amount of Gain or (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives (Effective Portion)									Location of Gain or (Loss)  Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
(millions)	2016			2015			2014				2016			2015			2014
Derivatives Designated as Hedging Instruments
Commodity contracts	$	6		$	(14	)	$	(19	)	Cost of products sold	$	(15	)	$	(15	)	$	2
Foreign exchange contracts	(3		)	12			4			Cost of products sold	5			7			2
Foreign exchange contracts	—			1			—			Income and gain from the sale of equity method investment to related party	—			1			—
Total	$	3		$	(1	)	$	(15	)		$	(10	)	$	(7	)	$	4

	Location of Gain or (Loss)  Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives
(millions)		2016		2015			2014
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Cost of products sold	$	1	$	(3	)	$	(4	)
Foreign exchange contracts	Other (income) expense, net	—		2			—
Total		$	1	$	(1	)	$	(4	)

As of December 31, 2016, we had no derivatives designated as net investment or fair value hedges.

The following are the fair values of derivative instruments on the consolidated balance sheets as of December 31, 2016 and 2015:

	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value
(millions)		12/31/16		12/31/15			12/31/16		12/31/15
Derivatives Designated as Hedging Instruments
Commodity contracts	Other current assets	$	8	$	1	Accrued expenses	$	4	$	15
Commodity contracts	Other assets	3		—		Other liabilities	5		5
Foreign exchange contracts	Other current assets	1		8		Accrued expenses	1		—
Total derivatives in hedging relationships		$	12	$	9		$	10	$	20

	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value
(millions)		12/31/16		12/31/15			12/31/16		12/31/15
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Other current assets	$	1	$	—	Accrued expenses	$	—	$	2
Commodity contracts	Other assets	—		—		Other liabilities	—		—
Total derivatives not designated as hedging instruments		$	1	$	—		$	—	$	2
Total derivatives	Total assets	$	13	$	9	Total liabilities	$	10	$	22

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8. Fair Value Measurements

Certain assets and liabilities are required to be recorded at fair value. The fair values of our cash equivalents, equity mutual funds, marketable securities and derivatives were determined using the fair value hierarchy of inputs described in Note 1. The cash equivalents and equity mutual funds shown in the table below primarily consist of money market funds that are valued based on quoted prices in active markets and, as a result, are classified as Level 1. We use quoted prices, other readily observable market data and internally developed valuation models when valuing our marketable securities or derivatives and have therefore classified them as Level 2. Marketable securities are valued using a "market value" approach and values are based on quoted prices or other observable market inputs received from data providers. Derivatives are valued using the "income" approach such as discounted-cash-flow models and readily observable market data. The inputs for the valuation models are obtained from data providers and include end-of-period spot and forward natural gas prices, foreign currency exchange rates, natural gas price volatility and LIBOR and swap rates for discounting the cash flows implied from the derivative contracts.

Our assets and liabilities measured at fair value on a recurring basis were as follows:

	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)				Total
(millions)	12/31/16		12/31/15		12/31/16			12/31/15			12/31/16		12/31/15		12/31/16			12/31/15
Cash equivalents	$	38	$	223	$	34		$	25		$	—	$	—	$	72		$	248
Equity mutual funds	5		4		—			—			—		—		5			4
Marketable securities:
Corporate debt securities	—		—		69			134			—		—		69			134
U.S. government and agency debt securities	—		—		14			57			—		—		14			57
Asset-backed debt securities	—		—		2			21			—		—		2			21
Certificates of deposit	—		—		6			15			—		—		6			15
Municipal debt securities	—		—		—			3			—		—		—			3
Derivative assets	—		—		13			9			—		—		13			9
Derivative liabilities	—		—		(10		)	(22		)	—		—		(10		)	(22		)

Certain assets and liabilities are measured at fair value on a nonrecurring basis rather than on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment or when a new liability is being established that requires fair value measurement. As disclosed in Note 12 and 13, during 2016 and 2014, we recorded asset impairment charges of $10 million and $90 million, respectively. No impairment was recorded in 2015.

During 2016, we indefinitely idled our mining operations in Little Narrows, Nova Scotia, Canada. We reviewed the property, plant and equipment at Little Narrows for potential impairment by comparing the carrying values of those assets with their future undiscounted cash flows for their remaining useful lives. We measured the fair value of the machinery, equipment and buildings using measurements classified as Level 3 and recorded long-lived asset impairment charges of $10 million.

During 2014, we reviewed the carrying value of the ocean vessels owned by GTL for potential impairment by comparing the carrying value of those assets with their fair values. To determine the estimated fair value for the ocean vessels, we engaged a third-party ship broker. Management developed our estimate of fair value by considering comparable sales for similar asset types and incorporating an adjustment for the specialized nature of these assets. This fair value measurement is classified as Level 3, and we recorded a long-lived asset impairment charge of $60 million during the fourth quarter of 2014.

Also during 2014, we reviewed our property, plant and equipment for potential impairment by comparing the carrying values of those assets with their future undiscounted cash flows for their remaining useful lives. We measured the fair value of the machinery, equipment and buildings using measurements classified as Level 3 and recorded long-lived asset impairment charges of $30 million.

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9.    Employee Retirement Plans

We maintain defined benefit pension plans for most of our employees. Most of these plans require employee contributions in order to accrue benefits. Benefits payable under the plans are based on employees’ years of service and compensation during specified years of employment. Effective December 31, 2010, we amended the USG Corporation defined benefit pension plan to replace the final average pay formula with a cash balance formula for employees hired after that date. In November 2016, we amended the US pension plan to allow retirees and all terminated vested employees to take a lump-sum at all times without restriction. 

We also maintain plans that provide postretirement benefits (retiree health care and life insurance) for eligible employees. Employees hired before January 1, 2002 generally become eligible for the postretirement benefit plans when they meet minimum retirement age and service requirements. The cost of providing most postretirement benefits is shared with retirees.

We retained responsibility for the benefits payable to employees of L&W for the benefits accrued while employed by USG under the USG pension and postretirement plans upon the sale of L&W to ABC Supply. All L&W employees had the option to receive a lump sum benefit payment from the USG Corporation pension plan upon termination of their employment from USG. The total of the lump sum distributions made by the USG Corporation pension plan to both L&W employees and USG retirees or terminated vested employees during 2016 exceeded the settlement threshold and, as a result, we incurred settlement expense of $26 million. Of this amount, $15 million related to the benefits paid to terminated employees of L&W and was recorded to "Gain on sale of discontinued operations" and $11 million related to benefits paid to USG retirees or terminated vested employees, of which $7 million was recorded to "Costs of products sold" and $4 million was recorded to "Selling and administrative expenses" in our consolidated statement of income. The benefits payable to employees of L&W who did not take lump sum distributions in connection with their termination or retirement from USG are included in our benefit obligation as of December 31, 2016.

We had a curtailment to our pension and postretirement plans as a result of the L&W sale. We recorded a curtailment gain of $20 million for our USG Corporation postretirement plan to "Gain on sale of discontinued operations" in our consolidated statement of income, for those benefits no longer accruable to the employees of L&W who were not retirement eligible or did not elect retirement upon employment termination from USG.

We had maintained a pension plan for our subsidiary USG (U.K.) Ltd which had been previously frozen to permanently eliminate future benefit accruals. In December 2014, we irrevocably purchased annuities for the remaining deferred members of the plan relieving us of the responsibility of the pension benefit obligation, and recorded a settlement charge in selling and administrative expenses in the amount of $13 million.

In 2011 and 2014, we amended our U.S. postretirement benefit plan to require retiree medical plan participants to begin purchasing individual coverage in the Affordable Insurance Exchanges or individual Medicare marketplace beginning January 1, 2016 using a company-funded subsidy. The subsidy is determined based upon years of service at retirement and Medicare eligibility. The subsidy provided to retirees eligible for Medicare will end December 31, 2019. As a result of the amendments, the measurement of the accumulated postretirement benefit obligation, or APBO, was reduced and a credit to unrecognized prior service cost is being amortized into the statement of income over the average remaining service of active plan participants to retirement eligibility.

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The components of net pension and postretirement benefit costs are summarized in the following table:

(millions)	2016			2015			2014
Pension Benefits:
Service cost of benefits earned	$	45		$	49		$	37
Interest cost on projected benefit obligation	66			66			65
Expected return on plan assets	(89		)	(83		)	(79		)
Settlement (a)	35			1			13
Net amortization	22			39			24
Net pension cost (b)	$	79		$	72		$	60
Postretirement Benefits:
Service cost of benefits earned	$	2		$	2		$	3
Interest cost on projected benefit obligation	6			6			7
Curtailment	(20		)	—			—
Net amortization	(27		)	(31		)	(35		)
Net postretirement benefit (c)	$	(39	)	$	(23	)	$	(25	)

(a) In 2016, $26 million of the settlement charge reflects the increase in lump sum benefits paid largely driven by the sale of L&W and $9 million reflected payments from our supplemental plan. In 2014, the settlement charge related to the elimination of the benefit obligation of the UK pension plan due to the purchase of annuities.

(b) Net pension costs, excluding settlement costs, includes expenses allocated to income from discontinued operations for L&W totaling $7 million for 2016, exclusive of settlement expense, $12 million for 2015 and $8 million for 2014.

(c) Net postretirement benefit, excluding curtailment gain, includes a net benefit allocated to income from discontinued operations for L&W of $3 million for 2016, exclusive of curtailment expense, $3 million for 2015 and $3 million for 2014.

We use a December 31 measurement date for our plans. The accumulated benefit obligation, or ABO, for the defined benefit pension plans was $1.396 billion as of December 31, 2016 and $1.354 billion as of December 31, 2015.

	As of December 31,
(millions)	2016			2015
Selected information for pension plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligation	$	(39	)	$	(1,182	)
Fair value of plan assets	2			1,097
Selected information for pension plans with benefit obligations in excess of plan assets:
Benefit obligation	$	(1,384	)	$	(1,365	)
Fair value of plan assets	1,205			1,099

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The following table summarizes projected benefit obligations, plan assets and funded status as of December 31:

	Pension						Postretirement
(millions)	2016			2015			2016			2015
Change in Benefit Obligation:
Benefit obligation as of January 1	$	1,564		$	1,686		$	144		$	167
Service cost	45			49			2			2
Interest cost	66			66			6			6
Settlements	(123		)	(4		)	—			—
Curtailments	(37		)	—			(7		)	—
Participant contributions	11			11			—			3
Benefits paid	(33		)	(86		)	(7		)	(11		)
Actuarial (gain) loss	112			(119		)	(5		)	(14		)
Foreign currency translation	5			(39		)	2			(9		)
Benefit obligation as of December 31	$	1,610		$	1,564		$	135		$	144
Change in Plan Assets:
Fair value as of January 1	$	1,301		$	1,340		$	—		$	—
Actual return on plan assets	107			17			—			—
Employer contributions	167			61			7			8
Participant contributions	11			11			—			3
Benefits paid	(33		)	(86		)	(7		)	(11		)
Settlements	(123		)	(4		)	—			—
Foreign currency translation	5			(38		)	—			—
Fair value as of December 31	$	1,435		$	1,301		$	—		$	—
Funded status	$	(175	)	$	(263	)	$	(135	)	$	(144	)
Components on the Consolidated Balance Sheets:
Noncurrent assets	$	4		$	3		$	—		$	—
Current liabilities	(16		)	(9		)	(8		)	(9		)
Noncurrent liabilities	(163		)	(257		)	(127		)	(135		)
Net liability as of December 31	$	(175	)	$	(263	)	$	(135	)	$	(144	)
Pretax Components in AOCI:
Net actuarial loss	$	388		$	387		$	—		$	7
Prior service credit	(1		)	(1		)	(65		)	(108		)
Total as of December 31	$	387		$	386		$	(65	)	$	(101	)

For our defined benefit pension plans, the 2016 actuarial loss of $112 million was primarily due to a decrease in the discount rates offset by the adoption of the new mortality tables published by the Society of Actuaries used to determine the benefit obligation. The weighted-average discount rate decreased from 4.43% at December 31, 2015 to 4.02% at December 31, 2016 and increased from 4.10% at December 31, 2014 to 4.43% at December 31, 2015.

For the defined benefit pension plans, we estimate that during 2017 we will amortize from AOCI into net pension cost a net actuarial loss of $23 million and no prior service cost. For the postretirement benefit plans, we estimate that during 2017 we will amortize from AOCI into net postretirement cost a net actuarial loss of $0 million and a prior service credit of $28 million.

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ASSUMPTIONS

The following tables reflect the assumptions used in the accounting for our plans:

	Pension				Postretirement
	2016		2015		2016		2015
Weighted average assumptions used to determine benefit obligations as of December 31:
Discount rate	4.02	%	4.43	%	3.90	%	4.24	%
Compensation increase rate	3.55	%	3.55	%	N/A		N/A
Weighted average assumptions used to determine net cost for years ended December 31:
Discount rate	4.43	%	4.10	%	4.24	%	3.70	%
Expected return on plan assets	6.66	%	6.70	%	N/A		N/A
Compensation increase rate	3.55	%	3.50	%	N/A		N/A

We no longer have significant exposure to health care cost trend rates due to the modifications we made to our U.S. postretirement health care plan to limit the increase in the annual amount we pay for retiree health care coverage for certain current and future retirees to 3% and to require retiree medical plan participants to begin purchasing individual coverage in the Affordable Insurance Exchanges or individual Medicare marketplace beginning January 1, 2016 using a company-funded subsidy based upon years of service at retirement.

For the measurement of the APBO at December 31, 2016 for our Canadian postretirement health care plan, the assumed health care cost trend rates start with a 7.75% increase in 2017, followed by a gradual decline in increases to 4% for 2032. For the measurement of the APBO at December 31, 2015, the assumed health care cost trend rates started with an 8% increase in 2016, followed by a gradual decline in increases to 4% for 2032 and beyond.

A one percentage point change in the assumed health care cost trend rates would have the following effects on our Canadian plans:

(millions)	One-Percentage- Point Increase		One-Percentage- Point Decrease
Effect on total service and interest cost	$	1	$	—
Effect on postretirement benefit obligation	11		(8		)

RETIREMENT PLAN ASSETS

Investment Policies and Strategies: We have established investment policies and strategies for the defined benefit pension plans’ assets with a long-term objective of maintaining the plans’ assets at a level equal to or greater than that of their liabilities (as measured by a funded ratio of 100% or more of the ABO) and maximizing returns on the plans’ assets consistent with our moderate tolerance for risk. Contributions are made to the plans periodically as needed to meet funding targets or requirements. Factors influencing our determination to accept a moderate degree of risk include the timing of plan participants’ retirements and the resulting disbursement of retirement benefits, the liquidity requirements of the plans and our financial condition.

Our overall long-term objective is to achieve a 6.7% rate of return on plan assets with a moderate level of risk as indicated by the volatility of investment returns. This rate of return target was established using a “building block” approach. In this approach, ranges of long-term expected returns for the various asset classes in which the plans invest are estimated. The estimated ranges are primarily based on observations of historical asset returns and their historical volatility. In determining the expected returns, we also consider consensus forecasts of certain market and economic factors that influence returns, such as inflation, gross domestic product trends and dividend yields. We then calculate an overall range of likely expected rates of return by applying the expected asset returns to the plans’ target asset allocation. The most likely rate of return is then determined and is adjusted to account for investment management fees.

Our investment strategy is to invest in a diversified mix of asset classes in accordance with an asset allocation that we believe is likely to achieve our long-term target return while prudently considering risk. In order to manage risk, the plans’ pension and investment committees periodically rebalance the asset allocations as outlined by our investment policy statements. Our investment policy statements include glide paths which outline how our asset allocation would increase the portion of liability-hedging assets, such as fixed income, as our funded status improves in the future. This liability-driven investing approach is carried out by professional investment managers who help the committees in this process. The committees also monitor the investment performance of the individual investment managers compared to their benchmark returns and investment guidelines on an ongoing basis, in part through the use of quarterly investment portfolio reviews and compliance reporting by investment managers. The pension and investment committees also evaluate risk by periodically conducting asset/

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liability studies to assess the correlation of the plans’ assets and liabilities and the degree of risk in the target asset allocations. The plans limit the use of leverage to select investment strategies where leverage is typically employed, such as private equity and real estate. Certain investment managers utilize derivatives, such as swaps, bond futures, and options, as part of their investment strategies. This is done primarily to gain a desired market exposure or manage factors such as interest rate risk or duration of a bond portfolio.

The following table shows the aggregate target asset allocation on a weighted average basis for all the plans and the acceptable ranges around the targets as of December 31, 2016.

		Investment Policy
		Target		Range
Asset Categories:	Asset Category Description
Equity	Institutional commingled/pooled equity funds, equity mutual funds and direct holdings of the common stock of U.S. and non-U.S. companies; equity funds and direct holdings are invested in companies with a range of market capitalizations	39	%	35%-43%
Fixed income	U.S. Treasury securities, non-U.S. government debt securities such as Canadian federal bonds, corporate bonds of companies from diversified industries and mortgage-backed securities	50	%	46%-54%
Limited partnerships	Investments in funds that follow any of several different strategies, including investing in distressed debt, energy development, infrastructure, and hedge funds. These investments use strategies with returns normally expected to have a reduced correlation to the return of equities as compared to other asset classes and often provide a current income component that is a meaningful portion of the investment’s total return.	5	%	2%-8%
Other real assets	Primarily investments in large core, private real estate funds that directly own a diverse portfolio of properties located in the United States. It also includes an allocation to funds investing in equities of real estate and infrastructure companies	6	%	3%-10%
Cash equivalents and short-term investments	Primarily held in short-term investment funds or registered money market funds with daily liquidity	—	%	0%-5%
Total		100	%

Fair Values of Plan Assets: Pension assets are classified based on the valuation methodologies and inputs used to determine the fair value as described in Note 1.

Level 1 investments include mutual funds, or direct investments in common stocks of U.S. and non-U.S. companies that trade on liquid exchanges. These investments are valued based on the closing price on these exchanges.

Level 2 investments include primarily fixed income securities such as corporate, or government debentures, mortgage- and asset-backed securities. They are valued primarily using income and market approaches, such as pricing based on recent market transactions, and values are based on quoted prices or other observable market inputs received from data providers. Commingled funds not traded on an exchange, even though their underlying investments are common stocks traded on liquid exchanges, are also included in the Level 2 category. The net asset value of commingled funds investing in either stocks or fixed income securities is calculated by subtracting the value of any liabilities from the market value of all securities owned by a fund.

Level 3 investments include real estate, infrastructure, or direct energy investments as well as distressed securities or hedge funds. These are valued using income approach methodologies such as discounted cash flows, or market approach methodologies such as relative value (specific to equity securities), direct capitalization and comparable sales (specific to real estate investments). Some of the key inputs used to value these securities include discount rate, EBITDA multiple, yield-to-worst, yield-to-maturity, and cap rate (specific to real estate investments).

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The fair values by hierarchy of inputs as of December 31 were as follows:

	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
(millions)	2016		2015		2016		2015		2016		2015		2016			2015
Asset Categories:
Equity:
Common and preferred stock	$	66	$	55	$	—	$	—	$	—	$	—	$	66		$	55
Commingled/pooled/mutual funds (a)	—		54		490		448		—		—		490			502
Total equity	66		109		490		448		—		—		556			557
Fixed income:
U.S. government and agency debt securities	—		—		194		177		—		—		194			177
Non-U.S. government and agency debt securities	—		—		54		32		—		—		54			32
Investment-grade debt securities	—		—		197		199		—		—		197			199
High-yield debt securities	—		—		53		36		—		—		53			36
Commingled/pooled funds (a)	—		—		165		129		—		—		165			129
Mortgaged backed securities	—		—		3		—		—		—		3			—
Other	—		—		10		3		1		1		11			4
Total fixed income	—		—		676		576		1		1		677			577
Limited partnerships	—		—		—		—		103		106		103			106
Other real estate assets	—		—		16		15		38		37		54			52
Cash equivalents and short-term investments	—		—		11		10		—		—		11			10
Total	$	66	$	109	$	1,193	$	1,049	$	142	$	144	$	1,401		$	1,302
Cash on hand													—			—
Receivables													35			9
Accounts payable													(1		)	(10		)
Total													$	1,435		$	1,301

(a) Certain investments in commingled/pooled equity funds have been classified as Level 2 in 2016 and 2015 because observable quoted prices for these institutional funds are not available.

A reconciliation of the change in the fair value measurement of the defined benefit plans’ consolidated assets using significant unobservable inputs (Level 3) between January 1, 2015 and December 31, 2016 is as follows:

(millions)	Fixed Income		Other Real Estate Assets			Limited Partnerships			Total
Balance as of January 1, 2015	$	1	$	35		$	103		$	139
Realized losses	—		(1		)	—			(1		)
Unrealized gains	—		5			1			6
Purchases, sales and settlements:
Purchases	—		—			2			2
Sales	—		(2		)	—			(2		)
Settlements	—		—			—			—
Net transfers into (out of) Level 3	—		—			—			—
Balance as of December 31, 2015	$	1	$	37		$	106		$	144
Realized gains	—		1			5			6
Unrealized gains (losses)	—		2			(3		)	(1		)
Purchases, sales and settlements:
Purchases	—		—			1			1
Sales	—		(2		)	(6		)	(8		)
Settlements	—		—			—			—
Net transfers into (out of) Level 3	—		—			—			—
Balance as of December 31, 2016	$	1	$	38		$	103		$	142

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CASH FLOWS

For 2017, our defined benefit pension plans have no minimum funding requirements under the Employee Retirement Income Security Act of 1974. We are evaluating our level of funding for pension plans and currently estimate that we will contribute approximately $74 million to our pension plans in 2017. Our cash payments for postretirement plans are estimated to be $8 million in 2017.

Total benefit payments we expect to make to participants, which include payments funded from USG’s assets as well as payments from our pension plans' assets, are as follows (in millions):

Years ended December 31	Pension Benefits		Postretirement Benefits
2017(a)	$	165	$	8
2018	100		8
2019	100		9
2020	110		7
2021	114		7
2022 - 2026	580		39

(a) Pension benefits for the year ended December 31, 2017 include expected payments to L&W employees who elected lump sum upon termination from USG Corporation.

DEFINED CONTRIBUTION PLANS

Total charges for our defined contribution plans amounted to approximately $5 million, $6 million and $5 million for the years ended December 31, 2016, 2015 and 2014, respectively. These charges primarily consisted of contributions to our U.S. plan, commonly known as a 401(k) plan. The U.S. plan provides participating employees the opportunity to invest 1% to 75% of their compensation on a pretax and/or Roth after-tax basis. As of December 31, 2016, participants earn a guaranteed company match of 25% on employee contributions up to 6% of their eligible compensation. Employees are fully vested in company matching contributions after three years of participation in the plan. USG’s contributions are charged to cost of products sold and selling and administrative expenses.

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10. Share-Based Compensation

We grant share-based compensation to eligible participants under our 2016 Long-Term Incentive Plan, or New LTIP, which was approved by our Board of Directors and stockholders in 2016, and prior thereto under our Long-Term Incentive Plan, which, together with the New LTIP, is referred to as the LTIP. As of December 31, 2016, a total of 7 million shares of common stock were reserved for future grants under the New LTIP. The New LTIP authorizes the Board’s Compensation and Organization Committee to provide equity-based compensation in the form of stock options, stock appreciation rights, or SARs, restricted stock, restricted stock units, or RSUs, market share units, or MSUs, performance shares and units, and other cash incentive and share-based awards for the purpose of providing our employees, officers and non-employee directors incentives and rewards for performance. We may issue common shares upon option exercises and upon the vesting or grant of other awards under the LTIP from our authorized but unissued shares or from treasury shares.

Our expense in continuing operations for share-based arrangements was $18 million in 2016, $14 million in 2015 and $20 million in 2014 and is included in selling and administrative expense in our consolidated statements of income. No income tax benefits were recognized for share-based arrangements in the consolidated statements of income in 2016, 2015 and 2014.

Excess tax benefits related to share based compensation are the difference between the amount of deductible compensation expense reported for tax purposes and the compensation expense recorded for financial reporting purposes for a stock award. Excess tax benefits that are not realized are not reflected in additional paid-in-capital until there is a reduction to taxes payable. As a result of the NOL carryforwards for federal tax purposes in 2016, 2015 and 2014, none of the excess tax benefits with respect to exercised stock options and vestings of RSUs, MSUs and performance shares for those years has been reflected in additional paid-in-capital as of December 31, 2016. Included in our federal tax NOL carryforwards is $70 million of unrealized excess tax benefits for which a tax benefit of $26 million will be recorded in additional paid-in-capital if the loss carryforward is fully utilized.

Certain employees of L&W previously received grants of MSUs, performance shares and RSUs. The expense associated with these awards was $1 million for 2016, 2015, and 2014 and is included in "Income from discontinued operations" in our consolidated statements of income. On October 31, 2016, any unvested awards were forfeited upon the sale of L&W to ABC Supply and are included as forfeited in the respective tables below.

MARKET SHARE UNITS

We granted MSUs with the following weighted average grant date fair values:

	2016		2015		2014
Weighted average grant date fair values	$	19.59	$	30.06	$	40.20

MSUs generally vest after a three-year period based on our actual stock price performance during such period. The number of MSUs earned will vary from zero to 150% of the number of MSUs awarded depending on the actual performance of our stock price. In the case of termination of employment due to death, disability or retirement during the performance period, vesting will be pro-rated based on the number of full months employed in 2016. Awards earned will be issued at the end of the three-year period. MSUs may vest earlier in the case of a change in control in most circumstances only if there is also a related loss of employment or diminution of duties. Each MSU earned will be settled in common stock.

We estimated the fair value of each MSU granted on the date of grant using a Monte Carlo simulation that used the assumptions noted in the following table. Volatility was based on stock price history immediately prior to grant for a period commensurate with the expected term. The risk-free rate was based on zero-coupon U.S. government issues at the time of grant. The expected term represents the period from the valuation date to the end of the performance period.

Assumptions:	2016		2015		2014
Expected volatility	34.02	%	42.70	%	54.93	%
Risk-free rate	0.86	%	1.09	%	0.63	%
Expected term (in years)	2.95		2.95		2.94
Expected dividends	—		—		—

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Nonvested MSUs outstanding as of December 31, 2016 and MSU activity during 2016 were as follows:

	Weighted Number of Shares (000)		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2016	743		$	34.33
Granted	801		19.59
Vested	(304	)	40.20
Forfeited	(83	)	23.22
Nonvested at December 31, 2016	1,157		23.39

With respect to the MSUs granted in 2014, for which the three-year period ended December 31, 2016, 303,790 vested for approximately 267,335 common shares based on the actual performance of our stock price. The remaining MSUs granted in 2014 were forfeited.

Total unrecognized compensation cost related to nonvested share-based compensation awards represented by MSUs granted under the LTIP was $5 million as of December 31, 2016. We expect that cost to be recognized over a weighted average period of 1.7 years.

PERFORMANCE SHARES

We granted performance shares with the following weighted average grant date fair values:

	2016		2015		2014
Weighted average grant date fair values	$	21.10	$	30.63	$	46.46

The performance shares generally vest after a period of three years based on our total stockholder return relative to the performance of the Dow Jones U.S. Construction and Materials Index, with adjustments to that index in certain circumstances, for the three-year period. The number of performance shares earned will vary from zero to 200% of the number of performance shares awarded depending on that relative performance. Vesting will be pro-rated based on the number of full months employed during the performance period in the case of death, disability, retirement or a change in control, and pro-rated awards earned will be settled in common stock at the end of the three-year period.

We estimated the fair value of each performance share granted on the date of grant using a Monte Carlo simulation that uses the assumptions noted in the following table. Volatility was based on stock price history immediately prior to grant for a period commensurate with the expected term. The risk-free rate was based on zero coupon U.S. government issues at the time of grant. The expected term represents the period from the grant date to the end of the three-year performance period.

Assumptions:	2016		2015		2014
Expected volatility	34.02	%	42.70	%	54.93	%
Risk-free rate	0.86	%	1.09	%	0.63	%
Expected term (in years)	2.95		2.95		2.94
Expected dividends	—		—		—

Nonvested performance shares outstanding as of December 31, 2016 and performance share activity during 2016 were as follows:

	Weighted Number of Shares (000)		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2016	222		$	37.20
Granted	214		21.10
Vested	(86	)	46.46
Forfeited	(104	)	25.22
Nonvested at December 31, 2016	246		24.98

With respect to the performance shares granted in 2014, for which the three-year performance period ended December 31, 2016, 86,478 of the performance awards vested for no common shares.

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Total unrecognized compensation cost related to nonvested share-based compensation awards represented by performance shares granted under the LTIP was $2 million as of December 31, 2016. We expect that cost to be recognized over a weighted average period of 1.7 years.

RESTRICTED STOCK UNITS

We granted RSUs during 2016, 2015 and 2014 with the following weighted average grant date fair values:

	2016		2015		2014
Weighted average grant date fair values	$	23.94	$	28.56	$	32.50

RSUs granted as special retention awards, including those granted in 2016, generally vest after a specified number of years from the date of grant or at a specified date and RSUs granted with performance goals vest if those goals are attained. RSUs may vest earlier in the case of death, disability, retirement or a change in control. Each RSU is settled in a share of our common stock after the vesting period. The fair value of each RSU granted is equal to the closing market price of our common stock on the date of grant.

In 2016, we granted RSUs as special retention awards with respect to 106,000 shares of common stock that generally vest in three years from the date of grant.

RSUs outstanding as of December 31, 2016 and RSU activity during 2016 were as follows:

	Number of Shares (000)		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2016	270		$	24.49
Granted	106		23.94
Vested	(128	)	18.70
Forfeited	(20	)	26.45
Nonvested at December 31, 2016	228		27.31

As of December 31, 2016, there was $3 million of total unrecognized compensation cost related to nonvested share-based compensation awards represented by RSUs granted under the LTIP. We expect that cost to be recognized over a weighted average period of 2.6 years. The total fair value of RSUs that vested was $2 million during 2016, $4 million during 2015 and $6 million during 2014.

STOCK OPTIONS

We last granted stock options in 2012. Stock options generally become exercisable in four equal annual installments beginning one year from the date of grant, although they may become exercisable earlier in the event of death, disability, retirement or a change in control. The stock options generally expire ten years from the date of grant, or earlier in the event of death, disability or retirement.

A summary of stock options outstanding as of December 31, 2016 and of stock option activity during 2016 is presented below:

	Number of Options (000)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (millions)
Outstanding at January 1, 2016	3,496		$	28.00	2.99	$	19
Exercised	(305	)	13.71
Canceled	(1,017	)	43.93
Outstanding at December 31, 2016	2,174		$	22.55	2.78	$	22
Exercisable at December 31, 2016	2,174		$	22.55	2.78	$	22
Vested or expected to vest at December 31, 2016	2,174		$	22.55	2.78	$	22

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(millions)	2016		2015		2014
Intrinsic value of stock options exercised	$	4	$	6	$	8
Cash received from stock options exercised	$	4	$	6	$	4
Fair value of stock options vested	$	1	$	1	$	2

Intrinsic value for stock options is defined as the difference between the current market value of our common stock and the exercise price of the stock options.

NON-EMPLOYEE DIRECTOR DEFERRED STOCK UNITS

Our non-employee directors may elect to receive a portion of their compensation as deferred stock units that increase or decrease in value in direct relation to the market price of our common stock. Deferred stock units earned through December 31, 2007 will be paid in cash upon termination of board service. Deferred stock units earned thereafter will be paid in cash or shares of USG common stock, at the election of the director, upon termination of board service.

The number of deferred stock units held by non-employee directors as of December 31 was as follows:

	2016	2015	2014
Deferred stock units held by non-employee directors	220,047	193,117	164,235

We recorded expense related to these deferred stock units of $1 million in 2016, 2015 and 2014, respectively.

11.     Supplemental Balance Sheet Information

INVENTORIES

Inventories as of December 31 consisted of the following:

(millions)	2016		2015
Finished goods	$	132	$	115
Work in progress	37		36
Raw materials	67		68
Total	$	236	$	219

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of December 31 consisted of the following:

(millions)	2016			2015
Land and mineral deposits	$	116		$	127
Buildings and improvements	1,078			1,075
Machinery and equipment	2,473			2,450
	3,667			3,652
Reserves for depreciation and depletion	(1,960		)	(1,881		)
Total	$	1,707		$	1,771
Annual depreciation and depletion expense	$	129		$	125

ACCRUED EXPENSES

Accrued expenses as of December 31 consisted of the following:

(millions)	2016		2015
Self-insurance reserves	$	12	$	13
Employee compensation	35		29
Interest	31		45
Derivatives	5		17
Pension and other postretirement benefits	24		18
Environmental	18		16
Other	50		48
Total	$	175	$	186

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in the balances of each component of accumulated other comprehensive income (loss), or AOCI, are summarized in the following table:

(millions)	Derivatives			Pension and Other Postretirement Benefit Plans			Foreign Currency Translation			Total AOCI
Balance as of January 1, 2014	$	35		$	(32	)	$	21		$	24
Other comprehensive income (loss) before reclassifications	(15		)	(272		)	(68		)	(355		)
Less: Amounts reclassified from AOCI, net of tax	4			(2		)	5			7
Other comprehensive income (loss), net of tax	(19		)	(270		)	(73		)	(362		)
Balance as of December 31, 2014	$	16		$	(302	)	$	(52	)	$	(338	)
Other comprehensive loss before reclassifications	(5		)	74			(67		)	2
Less: Amounts reclassified from AOCI, net of tax	(9		)	(7		)	(6		)	(22		)
Other comprehensive loss, net of tax	4			81			(61		)	24
Balance as of December 31, 2015	$	20		$	(221	)	$	(113	)	$	(314	)
Other comprehensive income (loss) before reclassifications	1			(34		)	(53		)	(86		)
Less: Amounts reclassified from AOCI, net of tax	(6		)	(9		)	—			(15		)
Other comprehensive income (loss), net of tax	7			(25		)	(53		)	(71		)
Balance as of December 31, 2016	$	27		$	(246	)	$	(166	)	$	(385	)

Amounts reclassified from AOCI, net of tax, for the years ended December 31, 2016, 2015 and 2014 were as follows:

(millions)	2016			2015			2014
Derivatives
Net reclassification from AOCI for cash flow hedges included in cost of products sold	$	(10	)	$	(8	)	$	4
Net reclassification from AOCI for cash flow hedges included in income and gain from the sale of equity method investment to related party	—			1			—
Less: Income tax (benefit) expense on reclassification from AOCI included in income tax expense	(4		)	2			—
Net amount reclassified from AOCI	$	(6	)	$	(9	)	$	4
Pension and postretirement benefits
Net reclassification from AOCI for amortization of prior service (benefit) cost included in cost of products sold	$	(1	)	$	1		$	—
Net reclassification from AOCI for amortization of prior service (benefit) cost included in selling and administrative expenses	(12		)	(5		)	1
Net reclassification from AOCI for amortization of prior service (benefit) cost included in gain on sale of discontinued operations	(3		)	(4		)	(4		)
Less: Income tax expense on reclassification from AOCI included in income tax benefit	(7		)	(1		)	(1		)
Net amount reclassified from AOCI	$	(9	)	$	(7	)	$	(2	)
Foreign Currency Translation
Net reclassification from AOCI for translation (loss) gain realized upon the sale of foreign entities	$	—		$	(6	)	$	5
Net amount reclassified from AOCI	$	—		$	(6	)	$	5

We estimate that we will reclassify a net $2 million after-tax loss on derivatives from AOCI to earnings within the next 12 months.

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ASSET RETIREMENT OBLIGATIONS

Changes in our liability for asset retirement obligations consisted of the following:

(millions)	2016			2015
Balance as of January 1	$	119		$	123
Accretion expense	7			7
Liabilities incurred	2			1
Changes in estimated cash flows (a)	(12		)	(5		)
Liabilities settled (b)	(4		)	(2		)
Foreign currency translation	1			(5		)
Balance as of December 31	$	113		$	119

(a) Changes in estimated cash flows for the year ended December 31, 2016 includes a $8 million reduction related to one of our quarries.

(b) Liabilities settled for the year ended December 31, 2016 includes a $2 million liability that was relieved in conjunction with the sale of a surplus property.

12.    Long-Lived Asset Impairment Charges

We continuously evaluate our manufacturing and sourcing needs by considering the capacity of existing and idled plants and production lines, as well as capital projects for manufacturing facilities, relative to the demand assumptions included in our long-range plan. Although industry and economic factors have improved and we believe that the overall economic recovery is intact, they are improving at a slower pace than expected, which required us to reconsider the future utilization of idled plants and mines and production lines, and capital projects for manufacturing facilities. We recorded the following impairment charges which are included in our consolidated statements of income in "Long-lived asset impairment charges":

(millions)	2016		2015		2014
Ocean vessels	$	—	$	—	$	60
Wallboard lines or facilities	—		—		16
Previously incurred costs related to construction of future facilities	—		—		12
Indefinitely idled mining operations	10		—		—
Other	—		—		2
Total long-lived asset impairment charges	$	10	$	—	$	90

In 2016, we indefinitely idled our mining operations in Little Narrows, Nova Scotia, Canada after completing a review of our gypsum sourcing needs. As a result, we recorded impairment charges of $10 million. We also recorded severance and other charges of $2 million for the termination of employees at the Little Narrows location, which are included in "Costs of products sold". Both the impairment and severance charges relate to our Gypsum segment.

In 2014, the long-lived asset impairment charges in the Gypsum segment totaling $90 million included the following:

(a) $60 million related to two self-unloading ocean vessels that were subsequently sold in the second quarter of 2015. See Note 13 for further discussion.

(b) $16 million related to the carrying values of machinery, equipment and buildings at our temporarily idled gypsum quarry and wallboard production facility in Empire, Nevada and at our previously idled and now permanently closed gypsum wallboard line in New Orleans, Louisiana. In addition, in the third quarter of 2014 we permanently closed our wallboard line in Detroit, Michigan. No impairment charge was recorded with respect to our wallboard line in Detroit, Michigan, as these assets were previously impaired at the time the plant was originally idled.

(c) $12 million related to previously incurred and capitalized costs for the construction of two future facilities which we do not anticipate will be built within our planning horizon.

(d) $2 million related to the carrying values of machinery, equipment and buildings at our previously idled and now permanently closed paper production line in Gypsum, Ohio.

The carrying values of the machinery, equipment and buildings at the facility in Empire, Nevada, exceeded the estimated future undiscounted cash flows for the remaining useful lives of the assets and resulted in a full impairment. This facility was sold in 2016. For the production line in Gypsum, Ohio that we deemed to be permanently closed, we fully impaired the long-lived assets specific to that line.

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13.    Gypsum Transportation Limited

Gypsum Transportation Limited, or GTL, owned two self-unloading ocean vessels. The two previously owned vessels and the third previously leased vessel were used to transship iron ore in and around Sierra Leone in accordance with a contract of affreightment. During 2014, our trading partner ceased performing under the contract, and consequently, we terminated the agreement. As a result of the contract termination, we assessed the recoverability of the two owned vessels and recorded an impairment charge of $60 million. Also in 2014, we recorded a contract termination charge of $6 million for costs to be incurred for the remaining term without economic benefit to us under the lease of the third vessel and we recorded a $9 million provision for bad debt for the trade receivable from our trading partner that we deemed uncollectible.

The impairment charge for the two owned vessels is recorded within "Long-lived asset impairment charges" on our consolidated statement of income. The contract termination charge and provision for bad debt are recorded within "(Recovery) loss on receivable and contract termination charge" on our consolidated statements of income.

In April 2015, we completed the sale of our two self-unloading ocean vessels owned by GTL for $42 million and recorded a gain of $7 million on the disposition. With a portion of the proceeds from the sale, GTL repaid the outstanding loan balance under GTL’s secured loan facility agreement with DVB Bank SE and paid applicable selling costs. Additionally, we returned the third vessel leased by GTL and paid $7 million of early termination costs which were previously accrued for in 2014. In the second quarter of 2015, GTL incurred charges of $6 million to exit our shipping operations. The net impact of the gain on the sale of the vessels and charges incurred to exit the shipping operations of $1 million is recorded in “Gain on disposal of shipping operations, net” on the consolidated statement of income.

In November 2015, we entered into a release and debt settlement agreement (Settlement Agreement) to recover a portion of our loss incurred when our former trading partner ceased performing under the contract in the fourth quarter of 2014. The Settlement Agreement required payments beginning in December 2015 for a total of $14 million. The payments received to settle the $9 million loss on the trade receivable were recorded as a benefit to our consolidated statements of income when we determined the payments to be probable. We recorded a recovery of $6 million in 2015 and it is presented within the "(Recovery) loss on receivable and contract termination charge" on our consolidated statement of income. We received an additional $8 million for the recovery in 2016, of which $3 million is recorded within "(Recovery) loss on receivable and contract termination charge", $1 million is recorded within "Interest income" and $4 million is recorded within "Other income, net" on our consolidated statement of income.

GTL recorded operating profit of $3 million in 2016 and $7 million in 2015 and an operating loss of $52 million in 2014.

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14.    Segments

Our operations are organized into three reportable segments: Gypsum, Ceilings and UBBP. As discussed in Note 3, the results of our Distribution segment have been reclassified to discontinued operations. Additionally, as a result of the presentation of L&W as a discontinued operation, the results of our Gypsum and Ceilings segments have been revised to reflect only the sales of USG products from Gypsum and Ceilings to L&W that have been sold by L&W outside the consolidated group. Segment results were as follows:

GYPSUM AND CEILINGS

	For the year ended December 31,
(millions)	2016			2015			2014
Net Sales:
Gypsum	$	2,526		$	2,426		$	2,396
Ceilings	500			496			518
Eliminations	(9		)	(9		)	(10		)
Total	$	3,017		$	2,913		$	2,904
Operating Profit (Loss):
Gypsum	$	389		$	361		$	165
Ceilings	109			88			89
Corporate	(104		)	(94		)	(105		)
Total	$	394		$	355		$	149
Depreciation, Depletion and Amortization:
Gypsum	$	108		$	106		$	116
Ceilings	16			16			14
Corporate	10			9			12
Total	$	134		$	131		$	142
Capital Expenditures:
Gypsum	$	78		$	84		$	94
Ceilings	4			3			30
Corporate	1			—			1
Total	$	83		$	87		$	125
Assets:	December 31, 2016			December 31, 2015			December 31, 2014
Gypsum	$	1,920		$	1,991		$	2,104
Ceilings	241			276			285
Corporate	1,080			1,485			489
Equity method investments	628			682			735
Assets related to discontinued operations	—			357			380
Eliminations	—			(55		)	(57		)
Total	$	3,869		$	4,736		$	3,936

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GEOGRAPHIC INFORMATION

	For the year ended December 31,
(millions)	2016			2015			2014
Net Sales:
United States	$	2,625		$	2,524		$	2,400
Canada	389			379			406
Other Foreign	189			196			283
Geographic transfers	(186		)	(186		)	(185		)
Total	$	3,017		$	2,913		$	2,904
Long-lived assets, consisting of property, plant and equipment, net, by geographic location were as follows:
(millions)	December 31, 2016			December 31, 2015			December 31, 2014
Long-Lived Assets:
United States	$	1,563		$	1,605		$	1,648
Canada	80			90			112
Other Foreign	64			76			131
Total	$	1,707		$	1,771		$	1,891

UBBP	For the year ended December 31,
(millions)	2016			2015			2014 (a)
Net sales	$	1,052		$	1,003		$	927
Operating profit	133			124			95
Net income attributable to UBBP	99			96			67
Depreciation, depletion, and amortization	43			43			31
Capital expenditures	45			49			40
	December 31, 2016			December 31, 2015			December 31, 2014
Assets	$	1,292		$	1,303		$	1,435
UBBP GEOGRAPHIC INFORMATION	For the year ended December 31,
(millions)	2016			2015			2014 (a)
Net Sales:
Australia	$	381		$	345		$	312
South Korea	223			200			197
Thailand	141			145			133
China	103			120			122
Other	255			234			206
Geographic Transfers	(51		)	(41		)	(43		)
Total	$	1,052		$	1,003		$	927

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

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Long-lived assets, consisting of property, plant and equipment, net, by geographic location for UBBP were as follows:
(millions)	December 31, 2016		December 31, 2015		December 31, 2014
Long-Lived Assets:
Australia	$	217	$	216	$	245
South Korea	107		106		113
China	97		116		127
Oman	86		103		96
Thailand	75		72		72
Other	71		67		78
Total	$	653	$	680	$	731

OTHER SEGMENT INFORMATION

Segment operating profit (loss) includes all costs and expenses directly related to the segment involved and an allocation of expenses that benefit more than one segment.

Revenues are attributed to geographic areas based on the location of the assets producing the revenues. Transactions between reportable segments and geographic areas are accounted for at transfer prices that are approximately equal to market value. Geographic transfers largely reflect intercompany sales from U.S. Gypsum and USG Interiors, LLC to CGC and USG Mexico, S.A. de C.V.

For each of the years ended December 31, 2016, 2015, and 2014, The Home Depot accounted for 23%, 23% and 22% of our net consolidated sales, respectively, and L&W accounted for 19%, 18% and 18% of our consolidated net sales, respectively. Both our Gypsum and Ceilings segments had net sales to these two customers in each of those years.

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15.    Income Taxes

Income from continuing operations before income taxes consisted of the following:

(millions)	2016		2015		2014
U.S.	$	201	$	152	$	14
Foreign	73		84		19
Total	$	274	$	236	$	33

Income tax expense (benefit) on continuing operations consisted of the following:

(millions)	2016		2015			2014
Current:
Federal	$	—	$	—		$	—
Foreign	5		12			2
State	1		1			1
Total current	$	6	$	13		$	3
Deferred:
Federal	41		(631		)	—
Foreign	2		(4		)	4
State	14		(118		)	—
Total deferred	57		(753		)	4
Total	$	63	$	(740	)	$	7

For our continuing operations, differences between actual provisions for income taxes and provisions for income taxes at the U.S. federal statutory rate (35%) were as follows:

(millions)	2016			2015			2014
Taxes on income from continuing operations at U.S. federal statutory rate	$	96		$	82		$	12
Foreign earnings subject to different tax rates (a)	(3		)	(3		)	16
State income tax, net of federal benefit	10			8			1
Change in valuation allowance	—			(827		)	(5		)
Income from equity method investments (b)	(17		)	(16		)	(12		)
Withholding taxes	—			—			2
Other, net	(2		)	2			(1		)
Tax release from AOCI	—			—			(2		)
Gain on deconsolidation	—			—			(7		)
Benefits from unrecognized tax positions	—			(6		)	—
Tax expense not realized on pension loss	—			—			3
Foreign tax credits	(21		)	—			—
Tax expense on distribution of foreign earnings	—			20			—
Provision for income tax expense	$	63		$	(740	)	$	7
Effective income tax rate	22.9		%	(313.6		)%	21.2		%

(a) Foreign earnings subject to different tax rates includes amounts related to impairments and other charges associated with our shipping operations.

(b) Included in income from equity method investments are taxes associated with that income in the respective jurisdictions. These taxes, which are predominately foreign statutory rates, are at rates that are lower than the U.S. federal statutory rate.

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Significant components of deferred tax assets and liabilities as of December 31 were as follows:

(millions)	2016			2015
Deferred Tax Assets:
Net operating loss and tax credit carryforwards	$	599		$	774
Pension and postretirement benefits	112			150
Goodwill and other intangible assets	—			24
Reserves not deductible until paid	20			29
Self insurance	2			11
Capitalized interest	13			13
Inventories	6			8
Share-based compensation	28			33
Other	4			5
Deferred tax assets before valuation allowance	784			1,047
Valuation allowance	(51		)	(70		)
Total deferred tax assets	$	733		$	977
Deferred Tax Liabilities:
Property, plant and equipment	245			254
Other	—			—
Total deferred tax liabilities	245			254
Net deferred tax assets	$	488		$	723

In 2015, we reversed $731 million of our valuation allowance. We considered all positive and negative evidence and gave more weight to evidence that was objective in nature as compared to subjective evidence. Significant weight was given to evidence that directly relates to our current financial performance. As of December 31, 2015, we emerged from a four-year cumulative pre-tax loss and had five consecutive quarters of domestic pre-tax earnings. The recent domestic pre-tax operating earnings was a significant, principal piece of positive evidence, which was weighed with the underlying momentum in the business, and generally improved market and economic conditions. Other evidence included strategic actions taken by management to lower costs and our expected utilization of deferred tax assets. All of this positive evidence lead to the determination that December 31, 2015 was the appropriate time to reverse a significant portion of the valuation allowance.

During the current year, we recorded a decrease in the valuation allowance against our deferred tax assets of $19 million as of December 31, 2016, which was related to the expiration of state Net Operating Loss (NOL) carryforwards.

As of December 31, 2016, our deferred tax assets of $488 million were offset by a valuation allowance of $51 million, consisting of state deferred tax assets. The components of the valuation allowance remaining primarily relate to certain state NOL carryforwards that we anticipate will not be used prior to their expiration.

As of December 31, 2016, we had federal NOL carryforwards of approximately $923 million that are available to offset future federal taxable income and will expire in the years 2028 through 2032. In addition, as of that date, we had federal alternative minimum tax credit carryforwards of approximately $45 million that are available to reduce future regular federal income taxes over an indefinite period and foreign tax credit carryforwards of $143 million that are available to offset future federal taxable income and expire in the years 2022 through 2026. The foreign tax credits are attributable to tax planning strategies to optimize foreign tax credit utilization and management’s intention to amend its tax returns for the tax years 2012-2014 in order to claim credits for previously deducted foreign tax. In order to fully realize the U.S. federal net deferred tax assets, taxable income of approximately $1.460 billion would need to be generated during the period before their expiration.

As of December 31, 2016, we had a gross deferred tax asset of $172 million related to state NOLs and tax credit carryforwards. The NOLs will expire if unused in years 2018 through 2036. To the extent that we do not generate sufficient state taxable income within the statutory carryforward periods to utilize the NOL and tax credit carryforwards in these states, they will expire unused.

The Internal Revenue Code imposes limitations on a corporation’s ability to utilize NOLs if it experiences an “ownership change” which can result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. If we were to experience an ownership change, utilization of our NOLs would be subject to an annual limitation that may be carried over to later years within the allowed NOL carryforward period. Over the entire carryforward period, we may not be able to use all our NOLs due to the aforementioned annual limitation. If an ownership change had occurred as of December 31, 2016, our annual U.S. federal NOL utilization would have been limited to approximately $71 million per year.

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A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(millions)	2016			2015			2014
Balance as of January 1	$	18		$	22		$	22
Tax positions related to the current period:
Gross increase	—			4			2
Gross decrease	—			—			—
Tax positions related to prior periods:
Gross increase	—			—			—
Gross decrease	(3		)	(1		)	—
Settlements	—			(6		)	(2		)
Lapse of statutes of limitations	—			(1		)	—
Balance as of December 31	$	15		$	18		$	22

We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income taxes (benefit). The total amounts of interest expense and penalties recognized on our consolidated balance sheets were $1 million and $1 million, respectively, as of December 31, 2016 and 2015. The total amounts of interest and penalties recognized in our consolidated statements of income was zero in each of the three years of 2016, 2015 and 2014. The total amounts of unrecognized tax benefit that, if recognized, would affect our effective tax rate were $14 million for 2016, $17 million for 2015 and $5 million for 2014.

Our federal income tax returns for 2008 and prior years have been examined by the Internal Revenue Service. The U.S. federal statute of limitations remains open for 2006 and later years. We are under examination in various U.S. state and foreign jurisdictions. We do not believe our gross unrecognized tax benefits will change as a result. There are statutes, however, that are expiring within the next 12 months that could result in recognition of approximately $2 million of tax benefit. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from three to five years.

We do not provide for U.S. income taxes on the portion of undistributed earnings of foreign subsidiaries that is intended to be permanently reinvested. The cumulative amount of such undistributed earnings totaled approximately $324 million as of December 31, 2016. These earnings could become taxable in the United States upon the sale or liquidation of these foreign subsidiaries or upon the remittance of dividends. It is not practical to calculate the residual income tax which would result if these basis differences reversed due to the complexities of the tax law and the hypothetical nature of the calculations.

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16.    Earnings Per Share

The reconciliation of basic income per share to diluted income per share is shown in the following table:

(millions, except per-share data)	2016		2015		2014
Income from continuing operations	$	211	$	976	$	26
Net income attributable to noncontrolling interest	—		—		$	1
Income from continuing operations attributable to USG	$	211	$	976	$	25
Income from discontinued operations, net of tax	20		15		12
Gain on sale of discontinued operations, net of tax	279		—		—
Income available to USG and shareholders	$	510	$	991	$	37
Average common shares	145.9		145.5		141.7
Dilutive RSUs, MSUs, performance shares and stock options	1.8		1.6		2.4
Deferred shares associated with a deferred compensation program for non-employee directors	—		0.1		0.2
Average diluted common shares	147.7		147.2		144.3
Basic earnings per average common share:
Income from continuing operations attributable to USG	$	1.45	$	6.70	$	0.18
Income from and gain on sale of discontinued operations	2.04		0.11		0.08
Net income attributable to USG	$	3.49	$	6.81	$	0.26
Diluted earnings per average common share:
Income from continuing operations attributable to USG	$	1.44	$	6.62	$	0.17
Income from and gain on sale of discontinued operations	2.02		0.11		0.08
Net income attributable to USG	$	3.46	$	6.73	$	0.25

Stock options, RSUs, MSUs, performance shares and deferred shares associated with our deferred compensation program for non-employee directors that were not included in the computation of diluted earnings per share for those periods because their inclusion was anti-dilutive were as follows:

(millions, common shares)	2016	2015	2014
Stock options, RSUs, MSUs and performance shares	1.5	1.9	2.1
Deferred shares associated with a deferred compensation program for non-employee directors	0.2	—	—

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17.    Stockholder Rights Plan

NOL Protective Provisions of our Rights Plan

We have a stockholder rights plan that is intended to protect our substantial NOL carryforwards and related tax benefits. See Note 15 for a description of our NOL carryforwards. Under federal tax laws, we generally can use our NOLs and certain related tax credits to reduce ordinary income tax paid in our prior two tax years or on our future taxable income for up to 20 years, when they “expire” for such purposes.

Our ability to use our NOLs could be substantially limited if we experience an “ownership change,” as defined under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), and the rights plan has been designed to help prevent such an “ownership change.” Under Section 382 of the Code, an “ownership change” occurs if, over a rolling three-year period, there has been an aggregate increase of 50 percentage points or more in the percentage of our common stock owned by one or more of our “5-percent stockholders” (as determined under Section 382 of the Code).

The rights plan provides that if any person becomes the beneficial owner (as defined in the Code) of 4.9% or more of our common stock, stockholders other than the triggering stockholder will have the right to purchase additional shares of our common stock at half the market price, thereby diluting the triggering stockholder; provided that stockholders whose beneficial ownership, as defined in Section 382 of the Code, exceeded 4.9% of our common stock outstanding on February 11, 2015 will not be deemed to have triggered the rights plan, so long as they do not thereafter acquire beneficial ownership of additional common stock other than in certain specified exempt transactions.

The rights will expire at the close of business on May 31, 2019, unless earlier redeemed or exchanged. Our Board of Directors has the power to accelerate or extend the expiration date of the rights. The NOL protective provisions of the rights plan described above will be effective until the earliest of the close of business on (i) May 31, 2019, (ii) the date on which our Board of Directors determines that these provisions are no longer necessary for the protection of certain tax benefits because of the repeal of Section 382 of the Code, (iii) the first day of a taxable year as to which our Board of Directors determines that no tax benefits may be carried forward, or (iv) such other date as our Board of Directors determines that these provisions are no longer necessary for the preservation of tax benefits (the "Special Period"). After the end of the Special Period, the triggering threshold for the rights issued pursuant to the rights plan will revert to 15% of our outstanding common stock and the definition of “beneficial owner” will revert to definitions that do not track Section 382 of the Code. At our 2016 annual meeting our stockholders ratified, on an advisory basis, the extension of the term of the rights plan and the NOL protective provisions described above.

A board committee composed solely of independent directors reviews the rights plan at least once every three years to determine whether to modify the rights plan in light of all relevant factors. This review was most recently conducted in November 2015. The next review is required by the end of 2018.

Restated Certificate of Incorporation

Our Restated Certificate of Incorporation also restricts certain transfers of our common stock and includes provisions intended to further protect the tax benefits of our NOL carryforwards. Subject to certain limited exceptions, these transfer restrictions restrict any person from transferring our common stock (or any interest in our common stock) if the transfer would result in a stockholder (or several stockholders, in the aggregate, who hold their stock as a “group” under Section 382 of the Code) owning 4.9% or more of our common stock. Any direct or indirect transfer attempted in violation of these transfer restrictions would be void as of the date of the prohibited transfer as to the purported transferee, and the purported transferee would not be recognized as the owner of the shares attempted to be owned in violation of the transfer restrictions for any purpose, including for purposes of voting and receiving dividends or other distributions in respect of that common stock, or in the case of options, receiving our common stock in respect of their exercise. These restrictions are effective until the earliest of (i) the close of business on May 31, 2019, (ii) the repeal of Section 382 of the Code if our Board of Directors determines that the restrictions are no longer necessary or desirable for the preservation of tax benefits, (iii) the close of business on the first day of a taxable year as to which our Board of Directors determines that no tax benefits may be carried forward, or (iv) such other date as determined by our Board of Directors pursuant to the provisions described above.

Treatment of Berkshire Hathaway under Rights Plan and Restated Certificate of Incorporation

Pursuant to a Shareholder’s Agreement reached in 2006, Berkshire Hathaway and certain of its affiliates may acquire beneficial ownership of up to 50% of our voting stock on a fully-diluted basis without triggering the ownership thresholds in our Restated Certificate of Incorporation or the rights plan, and may acquire beneficial ownership of more than 50% of our voting stock on a fully-diluted basis without triggering the ownership thresholds in our Restated Certificate of Incorporation or the rights plan through an offer to purchase all of our common stock that remains open for at least 60 days, in each case subject to specified exceptions.

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18.    Lease Commitments

We lease some of our offices, buildings, machinery and equipment, and autos under noncancelable operating leases. These leases have various terms and renewal options. Lease expense amounted to $37 million in 2016, $36 million in 2015 and $41 million in 2014. Future minimum lease payments required under operating leases with initial or remaining noncancelable terms in excess of one year as of December 31, 2016 were as follows:

(millions)	2017		2018		2019		2020		2021		After 2021
Future minimum lease payments	$	31	$	26	$	22	$	17	$	12	$	7

19.    Litigation

WALLBOARD PRICING CLASS ACTION LAWSUITS

In the first quarter of 2015, USG, United States Gypsum Company, L&W Supply Corporation, and seven other wallboard manufacturers were named as defendants in a lawsuit filed in federal court in California by twelve homebuilders alleging that since at least September 2011, U.S. wallboard manufacturers conspired to fix and raise the price of gypsum wallboard sold in the United States and to effectuate the alleged conspiracy by ending the practice of providing job quotes on wallboard. The lawsuit was transferred to the United States District Court for the Eastern District of Pennsylvania under the title In re: Domestic Drywall Antitrust Litigation, MDL No. 2437. In the second quarter of 2016, the Court dismissed with prejudice the portions of the homebuilders’ complaint alleging a conspiracy in 2014 and 2015, ruling that there were insufficient factual allegations to allow such a claim to go forward. The homebuilders' claims alleging a conspiracy prior to 2014 have not been dismissed, and the case proceeds as to those claims. USG has agreed to defend and indemnify L&W Supply Corporation in connection with this matter.

Beginning in the third quarter of 2013, class action lawsuits making similar allegations with regard to Canada were filed in Quebec, Ontario and British Columbia courts on behalf of purchasers of wallboard in Canada and naming USG Corporation, United States Gypsum Company, CGC Inc., and other wallboard manufacturers as defendants.

We believe that the cost, if any, of resolving the homebuilders’ lawsuit and Canadian class action litigation will not have a material effect on our results of operations, financial position or cash flows.

ENVIRONMENTAL LITIGATION

We have been notified by state and federal environmental protection agencies of possible involvement as one of numerous “potentially responsible parties” in a number of Superfund sites in the United States. As a potentially responsible party, we may be responsible to pay for some part of the cleanup of hazardous waste at those sites. In most of these sites, our involvement is expected to be minimal. In addition, we are involved in environmental cleanups of other property that we own or owned. As of December 31, 2016 and December 31, 2015, we had an accrual of $18 million and $16 million, respectively, for our probable and reasonably estimable liability in connection with these matters. Our accruals take into account all known or estimated undiscounted costs associated with these sites, including site investigations and feasibility costs, site cleanup and remediation, certain legal costs, and fines and penalties, if any. However, we continue to review these accruals as additional information becomes available and revise them as appropriate. Based on the information known to us, we believe these environmental matters will not have a material effect on our results of operations, financial position or cash flows.

OTHER LITIGATION

We are named as defendants in other claims and lawsuits arising from our operations, including lawsuits or claims arising from commercial disputes, product performance, product liabilities and worksite or vehicular accidents. We believe that we have properly accrued for our probable liability in connection with these claims and suits, taking into account the probability of liability, whether our exposure can be reasonably estimated and, if so, our estimate of our liability or the range of our liability. We do not expect these or any other litigation matters involving USG to have a material effect on our results of operations, financial position or cash flows.

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20.    Quarterly Financial Data (unaudited)

	Quarter
(millions, except per-share data)	First		Second		Third		Fourth
2016
Net sales	$	747	$	769	$	767	$	734
Gross profit	181		193		181		150
Operating profit	116		122		97		59
Income from continuing operations	60		67		56		28
Income from discontinued operations, net of tax	7		7		6		—
Gain on sale of discontinued operations, net of tax	—		—		—		279
Net income	67		74		62		307
Income per average common share:
Basic (a)	0.46		0.50		0.43		2.10
Diluted (a)	0.46		0.50		0.42		2.07
2015
Net sales	$	708	$	740	$	747	$	718
Gross profit	146		170		169		165
Operating profit	72		95		94		94
Income from continuing operations(b)	20		69		68		819
Income (loss) from discontinued operations, net of tax	4		10		8		(7		)
Net income (b)	24		79		76		812
Income per average common share:
Basic (a)	0.16		0.54		0.52		5.58
Diluted (a)	0.16		0.54		0.52		5.51

(a) The sum of the four quarters is not necessarily the same as the total for the year.

(b) Income from continuing operations and net income attributable to USG for the fourth quarter of 2015 included a reversal of an income tax valuation allowance of $731 million.

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21.    Subsequent Event

On January 31, 2017, the Board of Directors approved a share repurchase program in which we may purchase up to $250 million of our common stock. Under the program, we may repurchase shares from time to time in open market transactions or in privately-negotiated transactions in accordance with applicable securities laws. We may discontinue the program at any time. The timing and the amount of any repurchases will be determined based on market conditions and other factors. Share repurchases will be funded with available cash on hand. Through date of filing, repurchases have been immaterial.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of USG Corporation:

We have audited the accompanying consolidated balance sheets of USG Corporation and subsidiaries (the “Corporation”) as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement Schedule II-Valuation and Qualifying Accounts. These consolidated financial statements and financial statement schedule are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of USG Corporation and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Corporation’s internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control — Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 8, 2017 expressed an unqualified opinion on the Corporation’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Chicago, Illinois

February 8, 2017

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USG CORPORATION

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

			Additions
(millions)	Balance at beginning of period		Charged to costs and expenses			Charged to other accounts		Deductions (a)			Balance at end of period
Year ended December 31, 2016:
Doubtful accounts	$	7	$	1		$	—	$	(3	)	$	5
Cash discounts	2		34			—		(33		)	3
Income tax valuation allowance	70		—			—		(19		)	51
Year ended December 31, 2015:
Doubtful accounts	14		(6		)	—		(1		)	7
Cash discounts	1		37			—		(36		)	2
Income tax valuation allowance	1,023		—			—		(953		)	70
Year ended December 31, 2014:
Doubtful accounts	6		8			—		—			14
Cash discounts	1		36			—		(36		)	1
Income tax valuation allowance	995		1			112		(85		)	1,023

(a) Reflects receivables written off as related to doubtful accounts, discounts allowed as related to cash discounts and reductions in the income tax valuation allowance.

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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, or the Act), have concluded that, as of the end of the fiscal year covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. 

(a) MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to management and our Board of Directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. In making this assessment, management used the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its assessment, management believes that, as of December 31, 2016, our internal control over financial reporting is effective based on those criteria.

Our independent registered public accounting firm has issued an attestation report on our internal control over financial reporting. This report appears below.

February 8, 2017

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of USG Corporation:

We have audited the internal control over financial reporting of USG Corporation and subsidiaries (the “Corporation”) as of December 31, 2016, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A corporation’s internal control over financial reporting is a process designed by, or under the supervision of, the corporation’s principal executive and principal financial officers, or persons performing similar functions, and effected by the corporation’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A corporation’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the corporation; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the corporation are being made only in accordance with authorizations of management and directors of the corporation; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the corporation’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2016 of the Corporation and our report dated February 8, 2017 expressed an unqualified opinion on those financial statements and financial statement schedule.

/s/ DELOITTE & TOUCHE LLP

Chicago, Illinois

February 8, 2017

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(c) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our “internal control over financial reporting” (as defined in Rule 13a-15(f) promulgated under the Act) identified in connection with the evaluation required by Rule 13a-15(d) promulgated under the Act that occurred during the fiscal quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. OTHER INFORMATION

On February 8, 2017, our Board of Directors (the "Board") approved our 2017 Annual Management Incentive Program (the "2017 Program"), upon the recommendation of the Compensation and Organization Committee of the Board. Under the 2017 Program, 50% of the par incentive award for each of USG’s named executive officers is based on a formula related to adjusted consolidated net earnings and 50% is based on specified operating and financial targets. The Board also approved the following operating and financial targets for USG’s named executive officers under the 2017 Program: Adjusted operating margin for consolidated, Gypsum and Ceilings operations, USG Boral Building Products adjusted EBIT, wallboard cost, selling, general and administrative expenses and growth index incremental sales. Each named executive officer has been assigned three to five of these targets, as applicable.

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PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Executive Officers of the Registrant (as of February 8, 2017):

Name	Age	Position
Jennifer F. Scanlon	50	President and Chief Executive Officer
Matthew F. Hilzinger	53	Executive Vice President and Chief Financial Officer
Brian J. Cook	59	Executive Vice President and Chief Administrative Officer
Dominic A. Dannessa	60	Executive Vice President, Chief Operations and Innovation Officer
Chris A. Rosenthal	53	Senior Vice President, Human Resources
Gregory D. Salah	54	Senior Vice President and President, North America
Michelle M. Warner	50	Senior Vice President, General Counsel and Corporate Secretary
Kenneth R. Banas	42	Vice President and Treasurer
Mary A. Martin	61	Vice President and Associate General Counsel
Jeanette A. Press	41	Vice President and Controller
Srinivas Veeramasuneni	52	Vice President, Corporate Innovation Center

Business Experience During the Last Five Years:

Jennifer F. Scanlon has served as a Director since September 2016 and President and Chief Executive Officer since November 2016. Prior thereto Ms. Scanlon held a variety of positions at USG, including Executive Vice President beginning in March 2016 and President, International beginning in September 2010. Ms. Scanlon also served as President of L&W Supply Corporation from July 2015 to October 2016 and as the chairman of the board of USG Boral Building Products from its inception until October 2016.

Matthew F. Hilzinger has served as Executive Vice President since April 2012 and Chief Financial Officer since May 2012. Prior to joining USG, he held various positions at Exelon Corporation, a utility services holding company engaged in the energy generation and delivery businesses, including serving as Executive Vice President and Chief Integration Officer in March 2012 and Senior Vice President and Chief Financial Officer prior thereto.

Brian J. Cook has served as Executive Vice President since March 2016 and Chief Administrative Officer since September 2015. He previously held a variety of human resources and labor relations positions at USG, including Senior Vice President, Human Resources and Communications from May 2013 to August 2015 and Senior Vice President, Human Resources prior thereto.

Dominic A. Dannessa has served as Executive Vice President, Chief Operations and Innovation Officer since March 2016 . He also oversees USG’s Corporate Innovation Center in Libertyville, IL. Mr. Dannessa previously served as Senior Vice President, Operations and Chief Technology Officer from September 2015 until February 2016 and prior thereto as Senior Vice President and Chief Technology Officer.

Chris A. Rosenthal has served as Senior Vice President, Human Resources since March 2016. He previously held various roles at USG, including Vice President, Human Resources from September 2015 to February 2016, Vice President, Compensation, Benefits and Corporate Services from January 2015 to August 2015, Senior Director Compensation, Benefits and Corporate Services from March 2014 to December 2014, Senior Director HR Operations from September 2012 to February 2014 and Vice President, HR, L&W Supply Corporation prior thereto.

Gregory D. Salah has served as Senior Vice President and President, North America since March 2016. Previously he served in various roles at USG, including Vice President and General Manager, North America from August 2015 to February 2016, Senior Vice President & General Manager, North American Wallboard & Surfaces, United States Gypsum Company, from December 2014 to July 2015, General Manager, US Wallboard & Surfaces from January 2013 to November 2014 and Senior Vice President, Sales and Marketing, Building Systems prior thereto.

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Michelle M. Warner joined USG as Senior Vice President, General Counsel and Corporate Secretary in January 2016. Prior to joining USG, she served in various roles at Motorola Solutions, Inc., a provider of communication infrastructure, devices, accessories, software and services, including Corporate Vice President, Deputy General Counsel and Secretary from June 2013 to December 2015 and Corporate Vice President, Law, Corporate, Securities and Transactions prior thereto.

Kenneth R. Banas has served as Vice President and Treasurer since January 2015. He previously served in various roles at USG, including Treasurer from April 2013 to December 2014 and Senior Director, Investor Relations from December 2011 to March 2013.

Mary A. Martin has served as Vice President and Associate General Counsel since July 2009.

Jeanette A. Press has served as Vice President and Controller since January 2015. She previously served as Controller from September 2012 to December 2014 and Senior Director, Accounting and Reporting from March 2011 to August 2012.

Srinivas Veeramasuneni has served as Vice President, Corporate Innovation Center since January 2015. He previously served in various roles at USG, including Senior Director, Corporate Innovation Center from December 2013 to December 2014 and Senior Director, Research prior thereto.

Committee Charters and Code of Business Conduct

Our Corporate Code of Business Conduct (applicable to directors, officers and employees), our Corporate Governance Guidelines and the charters of the committees of our Board of Directors, including the Audit Committee, Governance Committee, Compensation and Organization Committee and Finance Committee, are available through the “Investor Relations” and “Corporate Governance” links in the “Company Information” section of our Web site at www.usg.com. We will post any amendments to the Corporate Code of Business Conduct, and any waivers that are required to be disclosed by the rules of the Securities and Exchange Commission, the NYSE or the Chicago Stock Exchange, on our Web site.

Other information required by this Item 10 is included under the headings “Nominees for Election to the Board of Directors,” “Directors Continuing in Office,” “Committees of the Board of Directors,” “Audit Committee” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the definitive Proxy Statement for our annual meeting of stockholders scheduled to be held on May 10, 2017, which information is incorporated herein by reference. 

Item 11. EXECUTIVE COMPENSATION

Information required by this Item 11 is included under the headings “Compensation of Executive Officers” and “Director Compensation” in the definitive Proxy Statement for our annual meeting of stockholders scheduled to be held on May 10, 2017, which information is incorporated herein by reference.

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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information as of December 31, 2016 about equity securities that may be issued upon exercise of options under our LTIP, which was approved by our stockholders, and deferred stock units issued under our Non-Employee Director Compensation Program. The features of these plans are discussed further in Part II, Item 8, Financial Statements and Supplementary Data, Note 10, Share-Based Compensation.

Plan Category	Number of securities to be issued upon exercise of outstanding options and rights (a)	Weighted average exercise price of outstanding options and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reported in column one)
Equity compensation plans approved by stockholders	2,173,880	$	22.55	7,215,723
Equity compensation plans not approved by stockholders	220,047	—		—
Total	2,393,927	$	22.55	7,215,723

(a) Equity compensation plans not approved by stockholders includes an aggregate of 219,436 fully vested deferred stock units granted to our non-employee directors that are payable in cash or shares of common stock, at each director’s option, following termination of service as a director.  Amount does not include an aggregate of 611 fully vested deferred stock units granted to our non-employee directors that must be settled in cash.

(b) Weighted-average exercise price calculation for equity compensation plans not approved by stockholders does not reflect the inclusion of fully-vested deferred stock units granted to our non-employee directors because that type of award does not have an exercise feature.

Other information required by this Item 12 is included under the heading “Securities Ownership” in the definitive Proxy Statement for our annual meeting of stockholders scheduled to be held on May 10, 2017, which information is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information required by this Item 13 is included under the headings “Transactions with Related Persons” and “Director Independence” in the definitive Proxy Statement for our annual meeting of stockholders scheduled to be held on May 10, 2017, which information is incorporated herein by reference.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information required by this Item 14 is included under the heading “Independent Registered Public Accounting Firm Fees and Services” in the definitive Proxy Statement for our annual meeting of stockholders scheduled to be held on May 10, 2017, which information is incorporated herein by reference.

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PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) 1 and 2. See Part II, Item 8, Financial Statements and Supplementary Data, for an index of our consolidated financial statements and supplementary data schedule.

3. The information in the Exhibit Index of this Annual Report on Form 10-K is incorporated into this Item 15(a)3 by reference.

(b) The information in the Exhibit Index of this Annual Report on Form 10-K is incorporated into this Item 15(b) by reference.

(c) Separate financial statements of subsidiaries not consolidated and fifty percent or less owned persons.

(i) The consolidated financial statements of USG Boral Building Products Pte. as of and for the years ended June 30, 2016 and 2015 and for the period from January 14, 2014 to June 30, 2014, including the report of Deloitte PLT, independent auditors, for the period from January 14, 2014 (date of incorporation) to June 30, 2014, filed pursuant to Rule 3-09 of Regulation S-X, are incorporated by reference to Exhibit 99.1.

(ii) The consolidated financial statements of USG Boral Building Products Pty Limited as of and for the years ended June 30, 2016, 2015 and 2014, including the report of KPMG, independent auditors, for the year ended June 30, 2014, filed pursuant to Rule 3-09 of Regulation S-X, are incorporated by reference to Exhibit 99.2.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	USG CORPORATION
February 8, 2017
	By:	/s/ Matthew F. Hilzinger
		Matthew F. Hilzinger
		Executive Vice President and
		Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

/s/ Jennifer F. Scanlon	February 8, 2017
JENNIFER F. SCANLON
Director, President and Chief Executive Officer
(Principal Executive Officer)
/s/ Matthew F. Hilzinger	February 8, 2017
MATTHEW F. HILZINGER
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Jeanette A. Press	February 8, 2017
JEANETTE A. PRESS
Vice President and Controller
(Principal Accounting Officer)
JOSE ARMARIO, THOMAS A. BURKE,	By:	/s/ Matthew F. Hilzinger
MATTHEW CARTER, JR.,		Matthew F. Hilzinger
GRETCHEN R. HAGGERTY,		Attorney-in-fact
WILLIAM H. HERNANDEZ, BRIAN A. KENNEY,		February 8, 2017
RICHARD P. LAVIN, STEVEN F. LEER
Directors

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EXHIBIT INDEX

Exhibit Number	Exhibit
2.1	Share Sale and Subscription Agreement, dated as of October 17, 2013, by and among USG Corporation, USG Netherlands Global Holdings B.V., Boral Limited, Boral International Pty Limited, and Boral Gypsum Asia Sdn Bhd (incorporated by reference to Exhibit 2.1 to USG Corporation's Current Report on Form 8-K (File No. 001-08864) dated October 16, 2013, or the October 2013 8-K) †
2.2	Share Sale and Subscription Agreement, dated as of October 17, 2013, by and among USG Corporation, USG Foreign Investments, Ltd., USG Netherlands Global Holdings B.V., Boral Limited, Boral Building Materials Pty Limited, and Boral Australian Gypsum Limited (incorporated by reference to Exhibit 2.2 to the October 2013 8-K) †
2.3	Sale and Purchase Agreement, by and between USG Corporation and American Builders & Contractors Supply Co., Inc., dated August 27, 2016 (incorporated by reference to Exhibit 2.1 to USG Corporation's Amendment No. 1 to Current Report on Form 8-K (File No. 001-08864) dated August 29, 2016) †
3.1	Restated Certificate of Incorporation of USG Corporation (incorporated by reference to Exhibit 3.01 to USG Corporation’s Current Report on Form 8-K (File No. 001-08864) dated June 21, 2006)
3.2	Certificate of Correction of the Restated Certificate of Incorporation of USG Corporation (incorporated by reference to Exhibit 4.1 to USG Corporation’s Quarterly Report on Form 10-Q (File No. 001-08864) dated August 3, 2011)
3.3	Amendment to Restated Certificate of Incorporation of USG Corporation (incorporated by reference to Exhibit 3.1 to USG Corporation's Current Report on Form 8-K (File No. 001-08864) dated May 10, 2013)
3.4	Amendment to Restated Certificate of Incorporation of USG Corporation (incorporated by reference to Exhibit 3.1 to USG Corporation's Current Report on Form 8-K (File No. 001-08864) dated May 12, 2016, or the May 2016 8-K)
3.5	Amended and Restated By-Laws of USG Corporation, dated as of November 13, 2014 (incorporated by reference to Exhibit 3.1 to USG Corporation’s Current Report on Form 8-K (File No. 001-08864) dated November 18, 2014)
4.1	Form of Common Stock certificate (incorporated by reference to Exhibit 4.1 to the May 2016 8-K)
4.2	Rights Agreement, dated as of December 21, 2006, by and between USG Corporation and Computershare Investor Services, LLC, as rights agent (incorporated by reference to Exhibit 4.1 to USG Corporation’s Registration Statement on Form 8-A (File No. 001-08864) dated December 21, 2006)
4.3	Amendment No. 1 to Rights Agreement, dated as of December 5, 2008, by and between USG Corporation and Computershare Investor Services, LLC, as rights agent (incorporated by reference to Exhibit 4.1 to USG Corporation’s Amendment No. 1 to Form 8-A (File No. 001-08864) dated December 5, 2008)
4.4	Amendment No. 2 to Rights Agreement, dated as of March 22, 2013, by and between USG Corporation and Computershare Trust Company, N.A., as rights agent (successor-in-interest to Computershare Investor Services LLC) (incorporated by reference to Exhibit 4.1 to USG Corporation’s Amendment No. 2 to Form 8-A (File No. 001-08864) dated March 22, 2013)
4.5	Amendment No. 3 to Rights Agreement, dated as of February 11, 2015, by and between USG Corporation and Computershare Trust Company, N.A., as rights agent (successor-in-interest to Computershare Investor Services LLC) (incorporated by reference to Exhibit 4.1 to USG Corporation’s Amendment No. 3 to Form 8-A (File No. 001-08864) dated February 11, 2015)
4.6	Amendment No. 4 to Rights Agreement, dated as of November 16, 2015, by and between USG Corporation and Computershare Trust Company, N.A., as rights agent (successor-in-interest to Computershare Investor Services LLC) (incorporated by reference to Exhibit 4.1 to USG Corporation’s Amendment No. 4 to Form 8-A (File No. 001-08864) dated November 16, 2015)
4.7	Indenture, dated as of November 1, 2006, by and between USG Corporation and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.01 to USG Corporation’s Current Report on Form 8-K (File No. 001-08864) dated November 20, 2006)
4.8	Form of 7.750% Senior Note due 2018 (incorporated by reference to USG Corporation’s Current Report on Form 8-K (File No. 001-08864) dated September 26, 2007)
4.9	Agreement of Resignation, Appointment and Acceptance, dated as of October 18, 2011, by and among USG Corporation, U.S. Bank National Association and HSBC Bank USA, National Association (incorporated by reference to Exhibit 4.1 to USG Corporation’s Quarterly Report on Form 10-Q (File No. 001-08864) dated October 31, 2011)

4.10

Supplemental Indenture No. 6, dated as of February 24, 2015, by and among USG Corporation, each of United States Gypsum Company, L&W Supply Corporation, USG Foreign Investments, Ltd. and USG Interiors, LLC, as guarantors, and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to USG Corporation’s Current Report on Form 8-K (File No. 001-08864) dated February 24, 2015)

USG Corporation and certain of its consolidated subsidiaries are parties to other long-term debt instruments under which the total amount of securities authorized does not exceed 10% of the total assets of USG Corporation and its subsidiaries on a consolidated basis. Pursuant to paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K, USG Corporation agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request.

10.1	Shareholder’s Agreement, dated as of January 30, 2006, by and between USG Corporation and Berkshire Hathaway Inc. (incorporated by reference to Exhibit 10.3 to USG Corporation's Current Report on Form 8-K (File No. 001-08864) dated January 30, 2006)
10.2	Amended and Restated Registration Rights Agreement, dated as of November 26, 2008, by and between USG Corporation and Berkshire Hathaway Inc. (incorporated by reference to Exhibit 10.1 to USG Corporation's Current Report on Form 8-K (File No. 001-08864) dated November 26, 2008)
10.3	Shareholders Agreement, dated as of February 28, 2014, by and among USG Corporation, Boral International Pty Limited, Boral Building Materials Pty Limited, USG Netherlands Global Holdings B.V., USG Boral Building Products Pte Limited, USG Boral Building Products Pty Limited, and Boral Limited (incorporated by reference to Exhibit 10.1 to USG Corporation's Current Report on Form 8-K (File No. 001-08864) dated February 28, 2014) (Note: Portions of this document have been omitted pursuant to a Request for Confidential Treatment filed with the Securities and Exchange Commission)
10.4	Fourth Amendment and Restatement Agreement, dated as of October 22, 2014, among USG Corporation and CGC Inc., as borrowers, and JP Morgan Chase Bank, N.A. and JP Morgan Chase Bank, N.A., Toronto Branch, as administrative agents, and the lenders and issuing banks party thereto (incorporated by reference to Exhibit 10.18 to USG Corporation's Annual Report on Form 10-K (File No. 001-08864) dated February 12, 2015, or the 2014 10-K)
10.5	Fourth Amended and Restated Credit Agreement, dated as of October 22, 2014, among USG Corporation and CGC Inc., as borrowers, JPMorgan Chase Bank, N.A. and JP Morgan Chase Bank, N.A., Toronto Branch, as administrative agents, the lenders and issuing banks party thereto and Bank of America, N.A. and Wells Fargo Bank, N.A., as co-syndication agents (incorporated by reference to Exhibit 10.19 to the 2014 10-K)
10.6	Amended and Restated Guarantee Agreement, dated as of October 22, 2014, among USG Corporation, CGC Inc., the subsidiary guarantors party thereto and JP Morgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.20 to the 2014 10-K)
10.7	U.S. Pledge and Security Agreement, dated as of January 7, 2009, among USG Corporation, the other grantors party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.21 to the 2014 10-K)
10.8	Canadian Pledge and Security Agreement, dated as of October 22, 2014, among CGC Inc., the other grantors party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.22 to the 2014 10-K)
10.9	Amendment No. 1, dated as of January 27, 2017, to the Fourth Amended and Restated Credit Agreement, dated as of October 22, 2014, among USG and CGC Inc., as borrowers, JPMorgan Chase Bank, N.A. and JP Morgan Chase Bank, N.A., Toronto Branch, as administrative agents, the lenders and issuing banks party thereto and Bank of America, N.A. and Wells Fargo Bank, N.A., as co-syndication agents (incorporated by reference to Exhibit 10.1 to USG Corporation's Current Report on Form 8-K (File No. 001-08864) dated February 1, 2017)
10.10	Share and Asset Purchase Agreement, dated as of August 7, 2012, by and between USG Corporation and its indirect wholly owned subsidiaries, USG Foreign Investments, Ltd. and USG (U.K.) Ltd., and Knauf International GmbH and Knauf AMF Ceilings Ltd. (incorporated by reference to Exhibit 10.1 to USG Corporation's Quarterly Report on Form 10-Q (File No. 001-08864) dated October 26, 2012)
10.11	Interest and Share Purchase Agreement, dated as of September 15, 2015, by and among USG Corporation, USG Ventures-Europe GmbH, Knauf Aquapanel GmbH, Knauf/USG Verwaltungs GmbH and Knauf/USG Systems GmbH & Co. KG (incorporated by reference to Exhibit 10.2 to USG Corporation's Quarterly Report on Form 10-Q (File No. 001-08864) dated October 22, 2015, or the third quarter 2015 10-Q)
10.12	Direct Purchaser Settlement Agreement, dated February 11, 2015 (incorporated by reference to Exhibit 10.1 to USG Corporation’s Current Report on Form 8-K (File No. 001-08864) dated February 13, 2015, or the February 2015 8-K)
10.13	Indirect Purchaser Settlement Agreement, dated February 11, 2015 (incorporated by reference to Exhibit 10.2 to the February 2015 8-K)

10.14	Supply Agreement, by and among United States Gypsum Company and USG Interiors, LLC and USG Corporation, as guarantor, and L&W Supply Corporation and American Builders & Contractors Supply Co., Inc., as guarantor, dated October 31, 2016 (incorporated by reference to Exhibit 10.1 to USG Corporation’s Current Report on Form 8-K (File No. 001-08864) dated November 1, 2016) (Note: Portions of this exhibit have been omitted pursuant to a Request for Confidential Treatment filed with the Securities and Exchange Commission)
10.15	Form of Employment Agreement (incorporated by reference to Exhibit 10.1 to USG Corporation’s Current Report on Form 8-K (File No. 001-08864) dated October 2, 2008, or the October 2008 8-K)*
10.16	Employment Agreement, effective as of April 16, 2012, between USG Corporation and Matthew Hilzinger (incorporated by reference to Exhibit 10.1 to USG Corporation's Current Report on Form 8-K (File No. 001-08864) dated March 26, 2012, or the March 2012 8-K)*
10.17	Form of Employment Agreement (form used since January 1, 2015) (incorporated by reference to Exhibit 10.3 to USG Corporation's Quarterly Report on Form 10-Q (File No. 001-08864) dated July 23, 2015)*
10.18	Form of Change in Control Severance Agreement (Tier 1 Benefits) (incorporated by reference to Exhibit 10.2 to the October 2008 8-K)*
10.19	Form of Change in Control Severance Agreement (Tier 2 Benefits) (incorporated by reference to Exhibit 10.3 to the October 2008 8-K)*
10.20	Change in Control Severance Agreement, dated as of April 16, 2012, by and between USG Corporation and Matthew Hilzinger (incorporated by reference to Exhibit 10.2 to the March 2012 8-K)*
10.21	Form of Change in Control Severance Agreement (form used since August 1, 2015) (incorporated by reference to Exhibit 10.1 to the third quarter 2015 10-Q)*
10.22	Form of Indemnification Agreement (incorporated by reference to Exhibit 10.14 to USG Corporation’s Annual Report on Form 10-K (File No. 001-08864) dated February 15, 2008, or the 2007 10-K)*
10.23	USG Corporation Supplemental Retirement Plan (As Amended and Restated Effective as of January 1, 2007), dated December 10, 2008 (incorporated by reference to Exhibit 10.1 to USG Corporation’s Annual Report on Form 10-K (File No. 001-08864) dated February 20, 2009, or the 2008 10-K)*
10.24	USG Corporation Deferred Compensation Plan (Effective as of April 1, 2007) (incorporated by reference to Exhibit 10.31 to USG Corporation's Annual Report on Form 10-K (File No. 001-08864) dated February 16, 2007)*
10.25	First Amendment of USG Corporation Deferred Compensation Plan, dated December 10, 2008 (incorporated by reference to Exhibit 10.25 to the 2008 10-K)*
10.26	Second Amendment of USG Corporation Deferred Compensation Plan, dated September 5, 2012 (incorporated by reference to Exhibit 10.1 to USG Corporation's Quarterly Report on Form 10-Q (File No. 001-08864) dated October 23, 2014)*
10.27	Third Amendment of USG Corporation Deferred Compensation Plan, dated November 21, 2014 (incorporated by reference to Exhibit 10.28 to the 2014 10-K)*
10.28	USG Corporation Management Incentive Plan (as amended and restated effective May 13, 2015) (incorporated by reference to Annex B to the Proxy Statement for the Annual Meeting of Stockholders of USG Corporation held on May 13, 2015 filed with the Securities and Exchange Commission on April 2, 2015 (File No. 001-08864), or the 2015 Proxy Statement)*
10.29	2016 Annual Management Incentive Program of USG Corporation (Executive Officers Only) (incorporated by reference to Exhibit 10.26 to USG Corporation's Annual Report on Form 10-K (File No. 001-08864) dated February 10, 2016)*
10.30	2017 Annual Management Incentive Program of USG Corporation (Executive Officers Only)* **
10.31	USG Corporation Long-Term Incentive Plan (as amended effective May 13, 2015) (incorporated by reference to Annex C to the 2015 Proxy Statement)*
10.32	Form of USG Corporation Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10.1 to USG Corporation’s Current Report on Form 8-K (File No. 001-08864) dated March 28, 2007)*
10.33	Form of USG Corporation Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10.36 to the 2008 10-K)*
10.34	Form of USG Corporation Restricted Stock Units Agreement (incorporated by reference to Exhibit 10.37 to the 2008 10-K)*

10.35	Form of USG Corporation Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10.30 to USG Corporation’s Annual Report on Form 10-K (File No. 001-08864) dated February 12, 2010)*
10.36	Form of USG Corporation Market Share Units Agreement (incorporated by reference to Exhibit 10.2 to USG Corporation's Current Report on Form 8-K (File No. 001-08864) dated February 13, 2014, or the February 2014 8-K)*
10.37	Form of USG Corporation Performance Shares Agreement (incorporated by reference to Exhibit 10.3 to the February 2014 8-K)*
10.38	Form of USG Corporation Restricted Stock Units Agreement (incorporated by reference to Exhibit 10.1 to USG Corporation's Quarterly Report on Form 10-Q (File No. 001-08864) dated July 24, 2014)*
10.39	Form of USG Corporation Market Share Units Agreement (incorporated by reference to Exhibit 10.46 to the 2014 10-K)*
10.40	Form of USG Corporation Performance Shares Agreement (incorporated by reference to Exhibit 10.47 to the 2014 10-K)*
10.41	USG Corporation 2016 Long-Term Incentive Plan (incorporated by reference to Annex A to the Proxy Statement for the Annual Meeting of Stockholders of USG Corporation held on May 11, 2016 filed with the Securities and Exchange Commission on March 31, 2016 (File No. 001-08864))*
10.42	Form of USG Corporation Restricted Stock Units Agreement under the USG Corporation 2016 Long-Term Incentive Plan* **
10.43	Form of USG Corporation Market Share Units Agreement under the USG Corporation 2016 Long-Term Incentive Plan* **
10.44	Form of USG Corporation Performance Shares Agreement under the USG Corporation 2016 Long-Term Incentive Plan* **
10.45	USG Corporation Stock Compensation Program for Non-Employee Directors (as Amended and Restated Effective as of January 1, 2005) (incorporated by reference to Exhibit 10.2 to USG Corporation’s Current Report on Form 8-K (File No. 001-08864) dated November 14, 2005)*
10.46	Amendment No. 1 to the USG Corporation Stock Compensation Program for Non-Employee Directors (incorporated by reference to Exhibit 10.1 to USG Corporation’s Quarterly Report on Form 10-Q (File No. 001-08864) dated August 3, 2006)*
10.47	Amendment No. 2 to the USG Corporation Stock Compensation Program for Non-Employee Directors (incorporated by reference to Exhibit 10.8 to USG Corporation’s Quarterly Report on Form 10-Q (File No. 001-08864) dated April 30, 2007)*
10.48	USG Corporation Non-Employee Director Compensation Program (Amended and Restated February 13, 2008) (incorporated by reference to Exhibit 10.18 to the 2007 10-K)*
10.49	Amendment No. 1 to USG Corporation Non-Employee Director Compensation Program, dated November 12, 2010 (incorporated by reference to Exhibit 10.10 to USG Corporation’s Annual Report on Form 10-K (File No. 001-08864) dated February 11, 2011)*
10.50	Amendment No. 2 to USG Corporation Non-Employee Director Compensation Program, dated November 10, 2011(incorporated by reference to Exhibit 10.11 to USG Corporation's Annual Report on Form 10-K (File No. 001-08864) dated February 14, 2012)*
10.51	Amendment No. 3 to USG Corporation Non-Employee Director Compensation Program, dated November 14, 2013(incorporated by reference to Exhibit 10.14 to USG Corporation’s Annual Report on Form 10-K (File No. 001-08864) dated March 3, 2014)*
10.52	Amendment No. 4 to USG Corporation Non-Employee Director Compensation Program, dated November 13, 2014(incorporated by reference to Exhibit 10.16 to the 2014 10-K)*
10.53	Amendment No. 5 to USG Corporation Non-Employee Director Compensation Program, dated November 10, 2016* **
10.54	USG Corporation Deferred Compensation Program for Non-Employee Directors (as Amended and Restated effective December 31, 2008) (incorporated by reference to Exhibit 10.10 to the 2008 10-K)*
99.1	Financial statements as of and for the years ended June 30, 2016 and 2015 and audited financial statements as of and for the period from January 14, 2014 to June 30, 2014 of USG Boral Building Products Pte. **

99.2	Financial statements as of and for the years ended June 30, 2016 and 2015 and audited financial statements as of and for the year ended June 30, 2014 of USG Boral Building Products Pty Limited **
Other:
21	Subsidiaries **
23.1	Consent of Independent Registered Public Accounting Firm, Deloitte & Touche LLP **
23.2	Consent of Independent Registered Public Accounting Firm, Deloitte PLT**
23.3	Consent of Independent Auditors, KPMG **
24	Power of Attorney **
31.1	Rule 13a - 14(a) Certifications of USG Corporation’s Chief Executive Officer **
31.2	Rule 13a - 14(a) Certifications of USG Corporation’s Chief Financial Officer **
32.1	Section 1350 Certifications of USG Corporation’s Chief Executive Officer **
32.2	Section 1350 Certifications of USG Corporation’s Chief Financial Officer **
95	Mine Safety Disclosures **
101	The following financial information from USG Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016, formatted in XBRL (Extensible Business Reporting Language): (1) the consolidated statements of income for the years ended December 31, 2016, 2015 and 2014, (2) the consolidated statements of other comprehensive income (loss) for the years ended December 31, 2016, 2015 and 2014, (3) the consolidated balance sheets as of December 31, 2016 and 2015, (4) the consolidated statements of cash flows for the years ended December 31, 2016, 2015 and 2014, (5) the consolidated statements of stockholders’ equity for the years ended December 31, 2016, 2015 and 2014 and (6) notes to the consolidated financial statements. **

* Management contract or compensatory plan or arrangement

** Filed or furnished herewith

† Schedules and other similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant hereby undertakes to furnish supplementally copies of any of the omitted schedules and other similar attachments upon request by the Securities and Exchange Commission, provided that the registrant may request confidential treatment for any schedule or other similar attachment so furnished.

EX-10.30

EXHIBIT 10.30

Year 2017

Annual

Management Incentive

Program

(Executive Officers Only)

USG Corporation

PURPOSE

To enhance USG Corporation's ability to attract, motivate, reward and retain key employees of the Corporation and its operating subsidiaries and to align management's interests with those of the Corporation's stockholders by providing incentive award opportunities to managers who make a measurable contribution to the Corporation’s business objectives.

INTRODUCTION

This Annual Management Incentive Program (the “Program”) is in effect from January 1, 2017 through December 31, 2017. The Program is established under the USG Corporation Management Incentive Plan, as Amended and Restated effective May 13, 2015 (the “Plan”) and is subject in all respects to the terms and conditions therein.

ELIGIBILITY

Individuals eligible for participation in this Program are the Corporation’s executive officers. This Program is executive officers only.

GOALS

For the 2017 Annual Management Incentive Program, Consolidated Net Earnings adjusted for incentive plan purposes and consolidated, subsidiary and profit center Focus Targets will be determined by the USG Board of Directors after review by the Compensation and Organization Committee of the USG Board of Directors (the “Committee”). The Committee will consider recommendations submitted from management of USG Corporation.

1

AWARD VALUES

For this Program, position target incentive values are based on level of accountability and are expressed as a percent of approved annualized salary. Resulting award opportunities represent a fully competitive incentive opportunity for 100% (target) achievement of goals:

Position Title	Position Target Incentive
•President & Chief Executive Officer, USG Corporation	110%
•Executive Vice President & Chief Financial Officer, USG Corporation	75%
•Senior Vice President & General Counsel, USG Corporation •Senior Vice President, USG Corporation; President, North America	70%
•Executive Vice President, Chief Operations and Innovation Officer, USG Corporation •Executive Vice President and Chief Administrative Officer, USG Corporation	65%
•Senior Vice President, Human Resources, USG Corporation •Vice President and Associate General Counsel, USG Corporation •Vice President and Treasurer, USG Corporation •Vice President and Controller, USG Corporation •Vice President, Corporate Innovation Center, USG Corporation	45%

AWARDS

Incentive awards for all participants in this Program will be reviewed and approved by the Committee. For all participants, the annual incentive award par opportunity is the annualized salary approved by March 31, 2017 that is in effect on March 1, 2017 multiplied by the applicable position target incentive value percent.

Awards are subject to achievement of any Management Objective(s) (as defined in the Plan) established by the Committee. If such Management Objective(s) is/are not achieved, no bonuses will be paid under this Program. After the Management Objective(s) has/have been met, incentive awards for 2017 will thereafter be based on a combination of the following elements:

I. CONSOLIDATED NET EARNINGS ADJ. FOR IC PLAN PURPOSES:    50% OF INCENTIVE

Consolidated Net Earnings adjusted for incentive plan purposes will be as reported on the Corporation’s year-end financial statements with adjustments for significant non-operational charges. Such adjustments have in the past been for impairments or other non-recurring gains or charges. For all participants, this portion of the award represents 50% of the incentive par. This portion of the award will be paid once threshold is met, subject to achievement of the Management Objective(s) as noted above. The threshold award begins at 50% of segment par. The maximum award for this segment is capped at two times par. Straight line interpolation will be used to determine points between par and minimum or maximum.

For each executive officer their individual Net Earnings par and their individual factors shall be determined by the Committee.

II. FOCUS TARGETS:    50% OF INCENTIVE

Focus Targets will be measurable, verifiable and derived from the formal strategic planning process. For 2017, Focus Targets are expected to include Adjusted Operating Margin, Growth Index – Incremental Sales, Wallboard Cost, and SG&A or other operational priorities. The Focus Targets will be determined by the Committee. The award adjustment factor for this segment will range from 0.5 (after achieving a minimum threshold performance level) to 2.0 for maximum attainment, subject to achievement of the Management Objective(s) as noted above.

The weighting on any individual Focus Target generally will be in 5% increments and not be less than 10%.The weighting of all assigned Focus Targets will equal 50% of the individual’s total par.

PAYOUT CRITERIA

The maximum payment to a participant is two times the participant’s par value amount. No payments will be made beyond this two times maximum payment level.

WEIGHTINGS OF PROGRAM ELEMENTS

All Corporate Officer participants in this Program, including the most senior executives, will have the same overall weightings of 50% on Consolidated Net Earnings adjusted for incentive plan purposes and 50% on Focus Targets.

GENERAL PROVISIONS

1. If the Board, or an appropriate committee thereof, has determined that any fraud or intentional misconduct by an executive officer was a significant contributing factor to the Corporation having to restate all or a portion of its financial statement(s), the Board or committee shall take, in its discretion, such action as it deems necessary to remedy the misconduct and prevent its recurrence. In determining what remedies to pursue, the Board or committee will take into account all relevant factors, including whether the restatement was the result of fraud or intentional misconduct. The Board may, to the extent permitted by applicable law, require reimbursement of any award under this Program paid to the executive officer after January 1, 2017, if and to the extent that a) the amount of the award was calculated based upon the achievement of certain financial results that were subsequently reduced due to a restatement, b) the executive officer engaged in any fraud or intentional misconduct that caused or contributed to the need for the restatement, and c) the amount of the compensation that would have been awarded to the executive officer under this Program had the financial results been properly reported would have been lower than the amount actually awarded. The remedy specified herein shall not be exclusive and shall be in addition to every other right or remedy at law or in equity that may be available to the Corporation. If this paragraph 1 is held invalid, unenforceable or otherwise illegal, the remainder of this Program shall be deemed to be unenforceable due to a failure of consideration, and the executive officer’s rights to any incentive compensation that would otherwise be awarded under this Program shall be forfeited.

In order to be entitled to an award of compensation under this Program, an executive officer must execute a written acknowledgement that such award shall be subject to the terms and conditions of this paragraph 1.

2. The Committee reserves the right to adjust award amounts under this Program down based on its assessment of the Corporation’s overall performance relative to market conditions, provided, however, in no event may the Committee adjust an award under this Program upward.

3. The Committee shall review and approve the awards recommended eligible participants in this Program. The Committee shall submit to the Board of Directors, for its ratification, a report of the awards for all eligible participants approved by the Committee in accordance with the provisions of the Program.

4. Consistent with the terms of the Plan, the Committee shall have full power to make the rules and regulations with respect to the determination of achievement of goals and the distribution of awards. No awards will be made until the Committee has certified financial achievements (including of the Management Objective(s)) and applicable awards in writing as provided in the Plan.

5. The judgment of the Committee in construing this Program or any provisions thereof, or in making any decision hereunder, shall be final and conclusive and binding upon all employees of the Corporation and its subsidiaries whether or not selected as beneficiaries hereunder, and their heirs, executors, personal representatives and assignees.

6. Nothing herein contained shall limit or affect in any manner or degree the normal and usual powers of management, exercised by the officers, and the Board of Directors or committees thereof, to change the duties or the character of employment of any employee of the Corporation or to remove the individual from the employment of the Corporation at any time, all of which rights and powers are expressly reserved.

The awards made to employees shall become a liability of the Corporation or the appropriate subsidiary as of December 31 of the year earned and all payments to be made hereunder will be made as soon as practicable, but in any event before two and one half months after December 31 of the year earned, after said awards have been approved by the Committee.

ADMINISTRATIVE GUIDELINES

1. The following administrative guidelines will be applied and administered by the Committee consistent with the requirements for “performance-based compensation” in Section 162(m) of the Internal Revenue Code and the applicable regulations thereunder.

2. Award values will be based on annualized salary in effect on March 1, 2017 for each qualifying participant. Any change in duties, dimensions or responsibilities of a current position resulting in an increase or decrease in salary range reference point or market rate will result in a pro-rata incentive award. Respective reference points, target incentive values or goals will be applied based on the actual number of full months of service at each position.

3. No award is to be paid to any participant who is not a regular full-time employee, or a part time employee as approved by the Executive Vice President and Chief Administrative Officer, USG Corporation, in good standing at the end of the calendar year to which the award applies. However, if an eligible participant with three (3) or more months of active service in the Program year subsequently retires, becomes disabled, dies, is discharged from the employment of the Company without cause, or is on an approved unpaid leave, the participant (or beneficiary) may be recommended for an award which would otherwise be payable based on goal achievement, prorated for the actual months of active service during the year.

4. Employees participating in any other incentive or bonus program of the Corporation or a Subsidiary who are transferred during the year to a position covered by this Program will be eligible to receive a potential award prorated for actual full months of service in the two positions with the respective incentive program and target incentive values to apply.

5. In the event of transfer of an employee from an assignment which does not qualify for participation in any incentive or bonus plan to a position covered by this Program, the employee is eligible to participate in this Program with any potential award prorated for the actual months of service in the position covered by this Program during the year. A minimum of three months of service in the eligible position is required.

6. Participation during the current Program year for individuals employed from outside the Corporation is possible with any award to be prorated for actual full months of service in the eligible position. A minimum of three full months of eligible service is required for award consideration.

7. Exceptions to established administrative guidelines can only be made by the Committee.

EX-10.42

EXHIBIT 10.42

USG CORPORATION
RESTRICTED STOCK UNITS AGREEMENT

WHEREAS, the “Grantee” is an employee of USG Corporation, a Delaware corporation (the “Company”), or a Subsidiary;

WHEREAS, the Compensation and Organization Committee of the Board of Directors of the Company (the “Committee”) has granted to the Grantee, and the outside directors (as such term is used for purposes of Section 162(m) of the Code) of the Board of Directors have ratified,

as set forth in the Award Summary on the Morgan Stanley Wealth Management website on the “Date of Grant”, Restricted Stock Units (as defined in the Plan) (the “RSUs”) pursuant to the USG Corporation 2016 Long-Term Incentive Plan (the “Plan”), subject to the terms and conditions of the Plan and the terms and conditions hereinafter set forth;

WHEREAS, Exhibit A to this Restricted Stock Units Agreement (this “Agreement”) contains defined terms that are used in this Agreement with initial capital letters, and other terms are defined in this Agreement for further use herein with initial capital letters; and

WHEREAS, the execution of a Restricted Stock Units Agreement substantially in the form hereof to evidence the RSUs has been authorized by a resolution of the Committee.

NOW, THEREFORE, the Company and the Grantee agree as follows:

1. Payment of RSUs. The RSUs covered by this Agreement shall become payable to the Grantee if they become nonforfeitable in accordance with Section 2, Section 3 or Section 4 hereof.

2. Vesting of RSUs. Subject to the terms and conditions of Sections 3, 4 and 5 hereof, the Grantee’s right to receive the Common Shares subject to the RSUs shall become nonforfeitable as and to the extent set forth in the Award Acceptance documentation on the Morgan Stanley Wealth Management website if the Grantee remains continuously employed until such time as is set forth therein as the Grantee’s Vest Date.

3. Effect of Change in Control. In the event of a Change in Control prior to the RSUs becoming nonforfeitable as provided in Section 2 above, and at a time when the RSUs have not been forefeited, the RSUs covered by this Agreement shall be treated in connection with such Change in Control as set forth in this Section 3. If the entity effecting the Change in Control Assumes the RSUs, Section 3(a) shall apply. If the entity effecting the Change in Control does not Assume the RSUs, Section 3(b) shall apply.

(a) RSUs Assumed by Successor: If the RSUs that are outstanding at the time of a Change in Control are Assumed by the entity effecting the Change in Control, the RSUs shall become nonforfeitable and payable to the Grantee pursuant to Section 2 above. Subject to the following sentence, all of the RSUs that are outstanding at the time of the Grantee’s termination of employment prior to the RSUs becoming nonforfeitable and payable to the Grantee shall be forfeited. Notwithstanding the preceding sentence, any RSUs that have not become nonforfeitable and payable to the Grantee shall become nonforfeitable and payable to the Grantee on the first to occur of the following events between the date on which the Change in Control occurs (the “CIC Date”) and the end of the time period referenced in Section 2 above:

(A) the involuntary termination of the Grantee’s employment for reasons other than Cause (as defined in Exhibit A);

(B) the Grantee’s voluntary termination of employment for Good Reason (as defined in Exhibit A); or

(C) the termination of the Grantee’s employment due to the Grantee’s death or Disability (as such term is defined in Exhibit A).

(b) RSUs Not Assumed by Successor. If the RSUs that are outstanding at the time of a Change in Control are not Assumed by the entity effecting the Change in Control, such RSUs shall immediately become nonforfeitable and payable to the Grantee.

4. Effect of Death or Disability. Notwithstanding Section 2 above, if the Grantee’s employment with the Company or a Subsidiary terminates due to the Grantee’s death or Disability before the RSUs become nonforfeitable, at a time when the RSUs have not been forfeited and before the occurrence of a Change in Control, the RSUs covered by this Agreement shall immediately become nonforfeitable and payable to the Grantee.

5. Other Employment Terminations. Notwithstanding any other provision herein, in the event that either (i) the Grantee’s employment shall, at a time when the RSUs remain forfeitable, terminate in a manner other than any specified in Section 3 or 4 above, or (ii) the Committee finds that the Grantee has engaged in any fraud or intentional misconduct as described in Section 20 hereof, the Grantee shall forfeit any RSUs that have not become nonforfeitable by such Grantee upon such termination or finding, as applicable. RSUs shall be considered to have been forfeited upon the event that causes such forfeiture and shall not be considered to be outstanding thereafter.

6. Form and Time of Payment of RSUs. Except as otherwise provided for in Section 9, payment for the RSUs, after and to the extent they have become nonforfeitable, shall be made in the form of Common Shares. Payment shall be made within ten (10) days following the date on which the RSUs become nonforfeitable in accordance with Section 2, Section 3 or Section 4 hereof. Upon and after payment for any RSUs pursuant to this Section 6, such RSUs shall not be considered to be outstanding. Notwithstanding the foregoing, if the event that causes the RSUs to become nonforefeitable is a Change in Control that does not constitute a change of control for purposes of Section 409A of the Code, then to the extent necessary to comply with Section 409A of the Code, payment will be made on the next date or event under the Agreement that constitutes a permissible payment date or event under Section 409A of the Code. To the extent that the Company is required to withhold federal, state, local or foreign taxes in connection with the delivery of Common Shares to the Grantee or any other person under this Agreement, the number of Common Shares to be delivered to the Grantee or such other person shall be reduced (based on the Market Value per Share on the date Common Shares are delivered to the Grantee) to provide for the taxes required to be withheld, with any fractional shares that would otherwise be delivered being rounded up to the next nearest whole share.

7. Payment of Dividend Equivalents. From and after the Date of Grant and until the earlier of (a) the time when Common Shares are delivered to the Grantee as described in Section 6 or (b) the time when the Grantee’s right to receive Common Shares upon payment of RSUs is forfeited, on the date that the Company pays a cash dividend (if any) to holders of Common Shares generally, the Grantee shall be entitled to a number of additional whole RSUs determined by dividing (i) the product of (A) the dollar amount of the cash dividend paid per Common Share on such date and (B) the total number of RSUs (including dividend equivalents paid thereon) previously credited to the Grantee as of such date, by (ii) the Market Value per Share on such date. Such dividend equivalents (if

any) shall be subject to the same terms and conditions and shall be settled or forfeited in the same manner and at the same time as the RSUs to which the dividend equivalents were credited.

8. RSUs Nontransferable. Neither the RSUs granted hereby nor any interest therein or in the Common Shares related thereto shall be transferable other than by will or the laws of descent and distribution prior to payment.

9. Adjustments. Subject to Section 11 of the Plan, in the event of any change in the aggregate number of outstanding Common Shares by reason of (a) any stock dividend, extraordinary dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, or (b) any Change in Control, merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization or partial or complete liquidation, or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing, then the Committee shall adjust the number of RSUs then held by the Grantee and the other terms of this award in such manner as to prevent dilution or enlargement of the rights of the Grantee that otherwise would result from such event. Moreover, in the event of any such transaction or event, the Committee, in its discretion, may provide in substitution for any or all of the Grantee’s rights under this Agreement such alternative consideration as it may determine to be equitable in the circumstances, subject to the provisions of Section 3 of this Agreement.

10. Compliance with Section 409A of the Code. To the extent applicable, it is intended that this Agreement and the Plan comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Codedo not apply to the Grantee. This Agreement and the Plan shall be administered in a manner consistent with this intent. Reference to Section 409A of the Code is to Section 409A of the Internal Revenue Code of 1986, as amended, and will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service. If the event triggering the right to payment under this Agreement is the Grantee’s separation from service with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code and the Grantee is a “specified employee” as determined pursuant to procedures adopted by the Company in compliance with Section 409A of the Code, the date of payment under Section 6 above shall be the first day of the seventh month after the date of the Grantee’s separation from service or, if earlier, the date of the Grantee’s death.

11. No Right to Future Grants; No Right of Employment; Extraordinary Item. In accepting the grant, the Grantee acknowledges that:  (a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, suspended or terminated by the Company at any time, as provided in the Plan and this

Agreement; (b) the grant of the RSUs is voluntary and occasional and does not create any contractual or other right to receive future grants of RSUs, or benefits in lieu of RSUs, even if RSUs have been granted repeatedly in the past; (c) all decisions with respect to future grants, if any, will be at the sole discretion of the Company; (d) the Grantee’s participation in the Plan is voluntary; (e) the RSUs are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company, its Affiliates and/or Subsidiaries, and which is outside the scope of the Grantee’s employment contract, if any; (f) the RSUs are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (g) in the event that the Grantee is an employee of an Affiliate or Subsidiary of the Company, the grant will not be interpreted to form an employment contract or relationship with the Company; and furthermore, the grant will not be interpreted to form an employment contract with the Affiliate or Subsidiary that is the Grantee’s employer; (h) the future value of the underlying Common Shares is unknown and cannot be predicted with certainty; (i) no claim or entitlement to compensation or damages arises from forfeiture or termination of the RSUs or diminution in value of the RSUs or the Common Shares and the Grantee irrevocably releases the Company, its Affiliates and/or its Subsidiaries from any such claim that may arise; and (j) notwithstanding any terms or conditions of the Plan to the contrary, in the event of the involuntary termination of the Grantee’s employment, the Grantee’s right to receive RSUs and vest in RSUs under the Plan, if any, will terminate effective as of the date that the Grantee is no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of the involuntary termination of employment, the Grantee’s right to vest in the RSUs after termination of employment, if any, will be measured by the date of termination of the Grantee’s active employment and will not be extended by any notice period mandated under local law.

12. Employee Data Privacy. The Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Grantee’s personal data as described in this document by and among, as applicable, the Company, its Affiliates and its Subsidiaries (the “Company Group”) for the exclusive purpose of implementing, administering and managing the Grantee’s participation in the Plan. The Grantee understands that the Company Group holds certain personal information about the Grantee, including, but not limited to, the Grantee’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all RSUs or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Grantee’s favor, for the purpose of implementing, administering and managing the Plan (“Data”). The Grantee understands that Data may

be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Grantee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than the Grantee’s country. The Grantee understands that the Grantee may request a list with the names and addresses of any potential recipients of the Data by contacting the Grantee’s local human resources representative. The Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Grantee’s participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Grantee may elect to deposit any Common Shares acquired. The Grantee understands that Data will be held only as long as is necessary to implement, administer and manage the Grantee’s participation in the Plan. The Grantee understands that the Grantee may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Grantee’s local human resources representative. The Grantee understands, however, that refusing or withdrawing the Grantee’s consent may affect the Grantee’s ability to participate in the Plan. For more information on the consequences of the Grantee’s refusal to consent or withdrawal of consent, the Grantee understands that the Grantee may contact the Grantee’s local human resources representative.

13. Continuous Employment. For purposes of this Agreement, the continuous employment of the Grantee with the Company or a Subsidiary shall not be deemed to have been interrupted, and the Grantee shall not be deemed to have ceased to be an employee of the Company or Subsidiary, by reason of (a) the transfer of the Grantee’s employment among the Company and its Subsidiaries or (b) an approved leave of absence.

14. Relation to Plan. This Agreement is subject to the terms and conditions of the Plan. In the event of any inconsistency between the provisions of this Agreement and the Plan, the Plan shall govern. All terms used herein with initial capital letters and not otherwise defined herein that are defined in the Plan shall have the meanings assigned to them in the Plan. The Committee acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein, have the right to determine any questions which arise in connection with the grant of the RSUs.

15. Amendments. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of the Grantee under this Agreement without the Grantee’s consent.

16. Severability. Subject to Section 20, if any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or

otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances shall not be affected, and the provisions so held to be invalid, unenforceable or otherwise illegal shall be reformed to the extent (and only to the extent) necessary to make it enforceable, valid and legal.

17. Successors and Assigns. Without limiting Section 8 hereof, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Grantee, and the successors and assigns of the Company.

18. Governing Law. This Agreement shall be governed by and construed in accordance with the internal substantive laws of the State of Delaware, without giving effect to any principle of law that would result in the application of the law of any other jurisdiction.

19. Electronic Delivery. The Company may, in its sole discretion, deliver any documents related to the RSUs and the Grantee’s participation in the Plan, or future awards that may be granted under the Plan, by electronic means or request the Grantee’s consent to participate in the Plan by electronic means. The Grantee hereby consents to receive such documents by electronic delivery and the Grantee acknowledges that by clicking on the “Accept” button on the Morgan Stanley Wealth Management web page titled “Step 3: Confirm the Review/Acceptance of your Award,” the Grantee agrees to be bound by the electronic execution of this Agreement.

20. Clawback. In accordance with Section 20(d) of the Plan, if the Committee has determined that any fraud or intentional misconduct by the Grantee was a significant contributing factor to the Company having to restate all or a portion of its financial statement(s), to the extent permitted by applicable law the Grantee shall: (a) return to the Company all RSUs and/or Common Shares that the Grantee has not disposed of that were paid out pursuant to this Agreement; and (b) with respect to any RSUs and/or Common Shares that the Grantee has disposed of that were paid out pursuant to this Agreement, pay to the Company in cash the value of such RSUs on the date such RSUs were paid out. The remedy specified herein shall not be exclusive, and shall be in addition to every other right or remedy at law or in equity that may be available to the Company. Notwithstanding any other provision of this Agreement or the Plan to the contrary, if this Section 20 is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement shall be deemed to be unenforceable due to a failure of consideration, and the Grantee’s rights to the RSUs and/or Common Shares that would otherwise be granted or paid under this Agreement shall be forfeited. Further, notwithstanding anything in this Agreement to the contrary, the Grantee acknowledges and agrees that this Agreement and the award described herein (and any settlement thereof) are subject to the terms and conditions of the Company’s clawback policy (if any) as may be in effect from time to time specifically to implement Section 10D of the Securities Exchange Act of 1934, as

amended, and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the Common Shares may be traded) (the “Compensation Recovery Policy”), and that this Section 20 shall be deemed superseded by and subject to the terms and conditions of the Compensation Recovery Policy from and after the effective date thereof.

Executed in the name and on behalf of the Company at Chicago, Illinois as of the [__] day of [______], [___].

USG CORPORATION

_____________________________

Name:

Title:

The undersigned Grantee hereby accepts the award of RSUs evidenced by this Restricted Stock Units Agreement on the terms and conditions set forth herein and in the Plan.

____________________________

Name:

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS.

EXHIBIT A TO

USG CORPORATION
RESTRICTED STOCK UNITS AGREEMENT

This Exhibit A is attached to and forms a part of the USG Corporation Restricted Stock Units Agreement, dated as of [________].

Solely for the purposes of this Agreement, the following terms shall be defined as follows:

(A) An award of RSUs shall be considered “Assumed” in connection with a Change in Control if each of the following conditions is met:

(1) The award of RSUs is converted into a replacement award that preserves the value of such award at the time of the Change in Control;

(2) the replacement award contains provisions for scheduled vesting and treatment on termination of employment (including the definitions of Cause and Good Reason) that are no less favorable to the Grantee than as set forth in this Agreement, and all other terms of the replacement award (other than the security and number of shares represented by the replacement awards) are substantially similar to, or more favorable to the Grantee than, those set forth in this Agreement; and

(3) the security represented by the replacement award, if any, is of a class that is publicly held and widely traded on an established stock exchange.

(B) “Base Pay” means the Grantee’s annual base salary rate as in effect from time to time.

(C) “Cause” shall mean that the Grantee shall have:

(1) been convicted of a criminal violation involving fraud, embezzlement or theft in connection with the Grantee’s duties or in the course of the Grantee’s employment with the Company or any Subsidiary;

(2) committed intentional wrongful damage to tangible or intangible property of the Company or any Subsidiary; or

(3) committed intentional wrongful disclosure of secret processes or confidential information of the Company or any Subsidiary.

For purposes of this Agreement, no act or failure to act on the part of the Grantee will be deemed “intentional” if it was due primarily to an error in

judgment or negligence, but will be deemed “intentional” only if done or omitted to be done by the Grantee not in good faith and without reasonable belief that the Grantee’s action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Grantee will not be deemed to have been terminated for “Cause” hereunder unless and until there shall have been delivered to the Grantee a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the Committee then in office (excluding the Grantee if the Grantee is then a member of the Committee) at a meeting of the Committee called and held for such purpose, after reasonable notice to the Grantee and an opportunity for the Grantee, together with the Grantee’s counsel (if the Grantee chooses to have counsel present at such meeting), to be heard before the Committee, finding that, in the good faith opinion of the Committee, the Grantee had committed an act constituting “Cause” as herein defined and specifying the particulars thereof in reasonable detail. Nothing herein will limit the right of the Grantee or the Grantee’s beneficiaries to contest the validity or propriety of any such determination.

(D) “Disability” shall mean that the Grantee has suffered a total disability within the meaning of the Company’s Long Term Disability Plan for Salaried Employees and is “disabled” within the meaning of Section 409A(a)(2)(C) of the Code.

(E) “Good Reason” shall mean the occurrence of any of the following events, and the failure of the Company to remedy any of the following events within 10 calendar days after receipt by the Company of written notice thereof from the Grantee:

(1) a material diminution in the Grantee’s normal duties and responsibilities, including, but not limited to, the assignment without the Grantee’s written consent of any diminished duties and responsibilities which are inconsistent with the Grantee’s positions, duties and responsibilities with the Company immediately prior to a Change in Control, or a materially adverse change in the Grantee’s reporting responsibilities or titles as in effect immediately prior to the Change in Control, whether or not resulting from an act of the Company or otherwise, or any removal of the Grantee from or any failure to re-elect the Grantee to any of such positions, except in connection with the termination of the Grantee’s employment for Disability, Retirement, or Cause or as a result of the Grantee’s death or by the Grantee other than for Good Reason;

(2) a reduction by the Company in the Grantee’s Base Pay as in effect on the Date of Grant or as the same may be increased from time to time;

(3) a change in the Grantee’s Target Annual Direct Compensation that results in an aggregate decrease in such Target Annual Direct Compensation in excess of ten percent (10%);

(4) the Company’s requiring the Grantee, without the Grantee’s written consent, to be based anywhere other than within fifty (50) miles of the Grantee’s office location immediately prior to the Change in Control, except for required travel on the Company’s business to an extent substantially consistent with business travel obligations immediately prior to the Change in Control;

(5) the failure by the Company to continue in effect any investment plan, retirement plan, savings plan, supplemental retirement plan, deferred compensation plan, supplemental investment plan, life insurance plan, health and accident plan, disability plan or other welfare benefit plan in which the Grantee was participating at the time of the Change in Control (or plans providing the Grantee with substantially similar benefits), the taking of any action by the Company which would adversely affect the Grantee’s participation or materially reduce the Grantee’s benefits or value under any of such plans or deprive the Grantee of any material fringe benefit enjoyed by the Grantee at the time of the Change in Control, or the failure by the Company to provide the Grantee with the number of paid vacation days to which the Grantee was then entitled in accordance with the Company’s normal vacation policy in effect on the date of the Change in Control; or

(6) the failure by the Company to obtain the assumption of the obligation to perform any Change in Control Severance Agreement between the Company and Grantee by any successor as contemplated in such Change in Control Severance Agreement.

(F) “Retirement” shall mean the Grantee’s retirement under a retirement plan (including, without limitation, any supplemental retirement plan) of the Company or any Subsidiary, or the Grantee’s retirement from employment with the Company or any Subsidiary after completing at least three years of continuous service with the Company or any Subsidiary and attaining the age of 62. Without limiting the generality of the foregoing, in no event shall “Retirement” include the involuntary termination of the Grantee’s employment by the Company (i) for Cause or (ii) without Cause if, as a result of such termination without Cause, the Grantee becomes eligible to receive payments on account of such termination under an employment agreement between the Grantee and the Company.

(G) “Target Annual Direct Compensation” means the sum of the Grantee’s Base Pay, target annual incentive opportunity, and the annualized value of the most recent long-term incentive award approved by the Committee prior to the Change in Control. For purposes of measuring annualized long-term incentives, the awards shall be measured on their date of grant using reasonable assumptions, including, but not limited to, fair value principles such as those identified in Financial Accounting Standards Board Accounting Standards Codification Topic 718; the value of such awards shall be annualized over the frequency of their grant.

EX-10.43

EXHIBIT 10.43

USG CORPORATION
MARKET SHARE UNITS AGREEMENT

WHEREAS, the “Grantee” is an employee of USG Corporation, a Delaware corporation (the “Company”), or a Subsidiary;

WHEREAS, the Compensation and Organization Committee of the Board of Directors of the Company (the “Committee”) has granted to the Grantee, and the outside directors (as such term is used for purposes of Section 162(m) of the Code) of the Board of Directors have ratified,

as set forth in the Award Summary on the Morgan Stanley Wealth Management website on the “Date of Grant”, a targeted number of Market Share Units pursuant to the USG Corporation 2016 Long-Term Incentive Plan (the “Plan”), subject to the terms and conditions of the Plan and the terms and conditions hereinafter set forth;

WHEREAS, Market Share Units constitute Performance Shares as defined in the Plan;

WHEREAS, all terms used in this Market Share Units Agreement (this “Agreement”) with initial capital letters that are defined in the Plan and not otherwise defined herein shall have the meanings assigned to them in the Plan; and

WHEREAS, the execution of a Market Share Units Agreement substantially in the form hereof to evidence such grant has been authorized by a resolution of the Committee.

NOW, THEREFORE, the Company and the Grantee agree as follows:

1. Grant of Market Share Units Right. Subject to the terms of the Plan, the Company hereby grants to the Grantee a target number of Market Share Units set forth on the Morgan Stanley Wealth Management website (the “Target Market Share Units”), payment of which depends on the Company’s share price performance as set forth in this Agreement.

2. Earning of Award.

(a) Performance Measure. The Grantee’s right to receive all, any portion of, or more than, the Target Market Share Units will be contingent upon the achievement of specified levels of performance of the Market Value per Share of the Common Shares, as set forth below, and will be measured over all or a portion of the period (the “Performance Period”) from January 1, 20[__] through the end of the fifteenth day in 20[__] on which the New York Stock Exchange is open for trading (the “Ratio Calculation Date”).

(b) Calculation of Award. The Grantee’s right to receive all, any portion of, or more than, the Target Market Share Units will be contingent upon the achievement of specified levels of performance of the Market Value per Share of the Common

Shares measured (as described below) as of the Ratio Calculation Date. Subject to the other terms of this Agreement, the Grantee shall earn the percentage, from 0% to 150% of the Target Market Share Units (the “Earned Market Share Unit Percentage”) set forth in the table below that corresponds to the ratio (determined to the nearest one-hundredth) of the Market Value per Share of the Common Shares measured (as described below) as of the Ratio Calculation Date divided by the Market Value per Share of the Common Shares measured (as described below) as of January 1, 20[__] (the “Ratio of Market Value”), if the Grantee remains in the continuous employ of the Company or a Subsidiary through December 31, 20[__]. For purposes of the preceding sentence, the Market Value per Share of the Common Shares measured as of January 1, 20[__] will be the average of the closing prices of the Common Shares on the New York Stock Exchange for the first fifteen days on which the New York Stock Exchange is open for trading in January of 20[__], and the Market Value per Share of the Common Shares measured as of the Ratio Calculation Date will be the average of the closing prices of the Common Shares on the New York Stock Exchange for the first fifteen days on which the New York Stock Exchange is open for trading in January of 20[__].

If The Three-Year Ratio of Market Value Is:	Then The Three-Year Earned Market Share Unit Percentage Is:
Less than 0.50	0%
0.50	50%
1.10	100%
Greater than or equal to 1.50	150%

In the event the Ratio of Market Value is between the levels set forth in the left-hand column of the above chart, the Committee shall determine the Earned Market Share Unit Percentage by mathematical straight-line interpolation.

(c) Committee Determination; Forfeiture of Market Share Units on Calculation Date. The Committee shall determine, and the outside directors (as such term is used for purposes of Section 162(m) of the Code) of the Board of Directors shall ratify, the Earned Market Share Unit Percentage at such time as such determination is required under this Agreement. If, on the Ratio Calculation Date, the Earned Market Share Unit Percentage is less than 100%, then, subject to Sections 3 and 4, the number of Market Share Units equal to the Target Market Share Units multiplied by the number of percentage points by which the Earned Market Share Unit Percentage is less than 100% shall be forfeited.

3. Effect of Change in Control. Notwithstanding anything to the contrary in this Agreement, the following provisions shall apply in connection with a Change in Control. Subject to the last sentence of this paragraph: (I) the treatment in connection with a Change in Control of any Market Share Units that are outstanding at the time of such

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Change in Control will depend upon whether the Awards made under this Agreement are Assumed (as defined in Section 3(a)(iii) below) by the entity effecting the Change in Control; (II) if the entity effecting the Change in Control Assumes the Awards made under this Agreement, Section 3(a) shall apply; and (III) if the entity effecting the Change in Control does not Assume the Awards made under this Agreement, then Section 3(b) shall apply. Notwithstanding the preceding sentence, Section 4 shall apply and the following provisions of this Section shall not apply if the Change in Control occurs after termination of the Grantee’s employment due to death, Disability or Retirement.

(a) Awards Assumed by Successor: If the awards made under this Agreement that are outstanding at the time of a Change in Control are Assumed by the entity effecting the Change in Control, the number of Market Share Units that may become payable to the Grantee shall be determined pursuant to Section 3(a)(i) below, and the circumstances in which the Grantee shall earn such number of Market Share Units are described in Section 3(a)(ii) below. Section 3(a)(iii) contains defined terms for the purposes of this Agreement.

(i) Upon the occurrence of a Change in Control prior to the Ratio Calculation Date, the number of Market Share Units that may become payable to the Grantee (the “CIC Market Share Units”) shall equal the number of Target Market Share Units that are outstanding at the time of the Change in Control multiplied by the Market Share Unit Percentage, determined pursuant to Section 2(b) above, but substituting the CIC Date for the Ratio Calculation Date and using the value ascribed to the Common Shares in the Change in Control as the Market Value per Share as of the CIC Date. If the calculation pursuant to this Section 3(a)(i) results in a Market Share Unit Percentage of less than 100%, then the number of Target Market Share Units multiplied by the number of percentage points by which the Market Share Unit Percentage is less than 100% shall be forfeited.

(ii) The CIC Market Share Units shall be earned by the Grantee if the Grantee remains employed through December 31, 20[__]. Unless clause (A), (B), or (C) below applies, all of the CIC Market Share Units that are outstanding at the time of the Grantee’s termination of employment prior to December 31, 20[__] shall be forfeited. Notwithstanding the preceding sentence, any CIC Market Share Units that have not been earned by the Grantee shall be earned on the first to occur of the following events between the CIC Date and December 31, 20[__]:

(A) the involuntary termination of the Grantee’s employment for reasons other than Cause (as defined in Section 3(a)(iii) below);

(B) the Grantee’s voluntary termination of employment for Good Reason (as defined in Section 3(a)(iii) below); or

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(C) the termination of the Grantee’s employment due to the Grantee’s death or Disability (as such terms are defined in Section 3(a)(iii) below).

(iii) Solely for the purposes of this Agreement, the following terms shall be defined as follows:

(A) A Market Share Unit award shall be considered “Assumed” in connection with a Change in Control if each of the following conditions is met:

(1) the Market Share Unit award is converted into a replacement award that preserves the value of such award at the time of the Change in Control;

(2) the replacement award contains provisions for scheduled vesting and treatment on termination of employment (including the definitions of Cause and Good Reason) that are no less favorable to the Grantee than as set forth in this Section 3(a), and all other terms of the replacement award (other than the security and number of shares represented by the replacement awards) are substantially similar to, or more favorable to the Grantee than, those set forth in this Agreement; and

(3) the security represented by the replacement award, if any, is of a class that is publicly held and widely traded on an established stock exchange.

(B) “Base Pay” means Grantee’s annual base salary rate as in effect from time to time.

(C) “Cause” shall mean that the Grantee shall have:

(1) been convicted of a criminal violation involving fraud, embezzlement or theft in connection with the Grantee’s duties or in the course of the Grantee’s employment with the Company or any Subsidiary;

(2) committed intentional wrongful damage to tangible or intangible property of the Company or any Subsidiary; or

(3) committed intentional wrongful disclosure of secret processes or confidential information of the Company or any Subsidiary.

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For purposes of this Agreement, no act or failure to act on the part of the Grantee will be deemed “intentional” if it was due primarily to an error in judgment or negligence, but will be deemed “intentional” only if done or omitted to be done by the Grantee not in good faith and without reasonable belief that the Grantee’s action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Grantee will not be deemed to have been terminated for “Cause” hereunder unless and until there shall have been delivered to the Grantee a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the Committee then in office (excluding the Grantee if the Grantee is then a member of the Committee) at a meeting of the Committee called and held for such purpose, after reasonable notice to the Grantee and an opportunity for the Grantee, together with the Grantee’s counsel (if the Grantee chooses to have counsel present at such meeting), to be heard before the Committee, finding that, in the good faith opinion of the Committee, the Grantee had committed an act constituting “Cause” as herein defined and specifying the particulars thereof in reasonable detail. Nothing herein will limit the right of the Grantee or the Grantee’s beneficiaries to contest the validity or propriety of any such determination.

(D) “Disability” shall mean that the Grantee has suffered a total disability within the meaning of the Company’s Long Term Disability Plan for Salaried Employees and is “disabled” within the meaning of Section 409A(a)(2)(C) of the Code.

(E) “Good Reason” shall mean the occurrence of any of the following events, and the failure of the Company to remedy any of the following events within 10 calendar days after receipt by the Company of written notice thereof from the Grantee:

(1) a material diminution in the Grantee’s normal duties and responsibilities, including, but not limited to, the assignment without the Grantee’s written consent of any diminished duties and responsibilities which are inconsistent with the Grantee’s positions, duties and responsibilities with the Company immediately prior to a Change in Control, or a materially adverse change in the Grantee’s reporting responsibilities or titles as in effect immediately prior to the Change in Control, whether or not resulting from an act of the Company or otherwise, or any removal of the Grantee from or any failure to re-elect the Grantee to any of such positions, except in connection with

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the termination of the Grantee’s employment for Disability, Retirement, or Cause or as a result of the Grantee’s death or by the Grantee other than for Good Reason;

(2) if the Grantee was serving as a member of the Board immediately prior to the Change in Control, either (A) the failure to elect or the removal of the Grantee as a member of the Board of the Company (or any successor thereto) or (B) if the Grantee continues to serve as a member of the Board of the Company (or any successor thereto) following the Change in Control, the Company’s securities are no longer publicly traded; provided, however, that Good Reason shall not exist if the Grantee becomes a member of the board of directors of a publicly-traded entity that as a result of the Change in Control owns the Company or substantially all of the Company’s assets either directly or through one or more subsidiaries;

(3) a reduction by the Company in the Grantee’s Base Pay as in effect on the Date of Grant or as the same may be increased from time to time;

(4) a change in the Grantee’s Target Annual Direct Compensation that results in an aggregate decrease in such Target Annual Direct Compensation in excess of ten percent (10%);

(5) the Company’s requiring the Grantee, without the Grantee’s written consent, to be based anywhere other than within fifty (50) miles of the Grantee’s office location immediately prior to the Change in Control, except for required travel on the Company’s business to an extent substantially consistent with business travel obligations immediately prior to the Change in Control;

(6) the failure by the Company to continue in effect any investment plan, retirement plan, savings plan, supplemental retirement plan, deferred compensation plan, supplemental investment plan, life insurance plan, health and accident plan, disability plan or other welfare benefit plan in which the Grantee was participating at the time of the Change in Control (or plans providing the Grantee with substantially similar benefits), the taking of any action by the Company which would adversely affect the Grantee’s participation or materially reduce the Grantee’s benefits or value under any of such plans or deprive the Grantee of any

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material fringe benefit enjoyed by the Grantee at the time of the Change in Control, or the failure by the Company to provide the Grantee with the number of paid vacation days to which the Grantee was then entitled in accordance with the Company’s normal vacation policy in effect on the date of the Change in Control; or

(7) the failure by the Company to obtain the assumption of the obligation to perform any Change in Control Severance Agreement between the Company and Grantee by any successor as contemplated in such Change in Control Severance Agreement.

(F) “Retirement” shall mean the Grantee’s retirement under a retirement plan (including, without limitation, any supplemental retirement plan) of the Company or any Subsidiary, or the Grantee’s retirement from employment with the Company or any Subsidiary after completing at least three years of continuous service with the Company or any Subsidiary and attaining the age of 62. Without limiting the generality of the foregoing, in no event shall “Retirement” include the involuntary termination of the Grantee’s employment by the Company (i) for Cause or (ii) without Cause if, as a result of such termination without Cause, the Grantee becomes eligible to receive payments on account of such termination under an employment agreement between the Grantee and the Company.

(G) “Target Annual Direct Compensation” means the sum of the Grantee’s Base Pay, target annual incentive opportunity, and the annualized value of the most recent long-term incentive award approved by the Committee prior to the Change in Control. For purposes of measuring annualized long-term incentives, the awards shall be measured on their date of grant using reasonable assumptions, including, but not limited to, fair value principles such as those identified in Financial Accounting Standards Board Accounting Standards Codification Topic 718; the value of such awards shall be annualized over the frequency of their grant.

(b) Awards Not Assumed by Successor. Upon the occurrence of a Change in Control, any unearned Market Share Unit awards outstanding at the time of the Change in Control that are not Assumed by the entity effecting the Change in Control shall immediately become earned in such amount as shall be determined in accordance with the terms outlined in Section 3(a)(i) above. Any Target Market Share Units that are not Assumed and that are not earned on the CIC Date pursuant to this Section 3(b) shall be forfeited.

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4. Termination Due to Death, Disability, Retirement. If the Grantee’s employment with the Company or a Subsidiary terminates before December 31, 20[__] and before the occurrence of a Change in Control, due to the Grantee’s death, Disability or Retirement, the Grantee shall earn, and the Company shall pay to the Grantee or his or her executor or administrator, as the case may be, at the time described in Section 6 a number of the Market Share Units that remain outstanding at the time of such death, Disability or Retirement calculated as follows:

(a) If the Grantee’s employment terminates during 20[__] due to the Grantee’s death, Disability or Retirement, the Grantee shall earn a pro rata number (based on the number of full months during 20[__] that preceded the date of the Grantee’s termination of employment due to the Grantee’s death, Disability or Retirement, divided by twelve months) of the Market Share Units that remain outstanding at the time of such termination of employment due to the Grantee’s death, Disability or Retirement and that are determined to be payable to the Grantee on the Ratio Calculation Date pursuant to Section 2(b) above on the basis of the achievement of levels of performance of the Market Value per Share of the Common Shares. Notwithstanding the foregoing, if a Change in Control occurs after the termination of the Grantee’s employment due to death, Disability or Retirement but before the end of the Performance Period, the Grantee shall earn at the time of such Change in Control the pro rata number (determined as specified above) of such number of the then-outstanding Target Market Share Units as shall be determined in accordance with Section 3(a)(i), and any Target Market Share Units that are not earned on the CIC Date pursuant to this sentence shall be forfeited.

(b) If the Grantee’s employment terminates on or after January 1, 20[__] and before December 31, 20[__] due to the Grantee’s death, Disability or Retirement, the Grantee shall earn the Market Share Units that remain outstanding at the time of such termination of employment due to the Grantee’s death, Disability or Retirement and that are determined to be payable to the Grantee on the Ratio Calculation Date pursuant to Section 2(b) above on the basis of the achievement of levels of performance of the Market Value per Share of the Common Shares. Notwithstanding the foregoing, if a Change in Control occurs after the termination of the Grantee’s employment due to death, Disability or Retirement but before the end of the Performance Period, the Grantee shall earn at the time of such Change in Control the number of the then-outstanding Target Market Share Units as shall be determined in accordance with Section 3(a)(i), and any Target Market Share Units that are not earned on the CIC Date pursuant to this sentence shall be forfeited.

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5. Forfeiture. In addition to forfeiture of the Market Share Units pursuant to other provisions of this Agreement, if either (i) the Grantee’s employment with the Company or a Subsidiary terminates before December 31, 20[__] and before the occurrence of a Change of Control, for any reason other than as set forth in Section 4 hereof or (ii) the Committee finds that the Grantee has engaged in any fraud or intentional misconduct as described in Section 20 hereof, all Market Share Units outstanding at such time will be forfeited. Market Share Units shall be considered to have been forfeited upon the event that causes such forfeiture and shall not be considered to be outstanding thereafter.

6. Form and Time of Payment of Market Share Units. Payment of any Market Share Units that become earned as set forth herein will be made in the form of Common Shares. Except as otherwise provided in Section 3 above, payment will be made as soon as practicable after the end of the Performance Period or any earlier event that causes Market Share Units to be earned, but, subject to Section 10 below, in no event shall such payment occur later than the end of the second month following the month in which the applicable Performance Period ends or such earlier event occurs. Upon and after payment of any Market Share Units pursuant to this Section 6, such Market Share Units shall not be considered to be outstanding. Notwithstanding the foregoing, if the event that causes the Market Share Units to be earned is a Change in Control that does not constitute a change of control for purposes of Section 409A of the Code, then to the extent necessary to comply with Section 409A of the Code, payment will be made on the next date or event under the Agreement that constitutes a permissible payment date or event under Section 409A of the Code. To the extent that the Company or any Subsidiary is required to withhold any federal, state, local or foreign tax in connection with the payment of earned Market Share Units pursuant to this Agreement, it shall be a condition to the receipt of such Market Share Units that the Grantee make arrangements satisfactory to the Company or such Subsidiary for payment of such taxes required to be withheld, which may include, if specifically approved by the Committee in advance, by the Company withholding Common Shares otherwise payable pursuant to this award.

7. Payment of Dividends. No dividends shall be accrued or earned with respect to the Market Share Units until such Market Share Units are earned by the Grantee and Common Shares delivered to the Grantee as provided in this Agreement.

8. Market Share Units Nontransferable. Until payment is made to the Grantee as provided herein, neither the Market Share Units granted hereby nor any interest therein or in the Common Shares related thereto shall be transferable other than by will or the laws of descent and distribution prior to payment.

9. Adjustments. Subject to Section 11 of the Plan, in the event of any change in the aggregate number of outstanding Common Shares by reason of (a) any stock dividend, extraordinary dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, or (b) any Change in Control, merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization or partial or complete liquidation, or other distribution of assets, issuance of rights or warrants to purchase

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securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing, then the Committee shall adjust the number of Market Share Units then held by the Grantee and the other terms of this award in such manner as to prevent dilution or enlargement of the rights of the Grantee that otherwise would result from such event. Moreover, in the event of any such transaction or event, the Committee, in its discretion, may provide in substitution for any or all of the Grantee’s rights under this Agreement such alternative consideration as it may determine to be equitable in the circumstances, subject to the provisions of Section 3 of this Agreement.

10. Compliance with Section 409A of the Code. To the extent applicable, it is intended that this Agreement and the Plan comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Grantee. This Agreement and the Plan shall be administered in a manner consistent with this intent. Reference to Section 409A of the Code is to Section 409A of the Internal Revenue Code of 1986, as amended, and will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service. If the event triggering the right to payment under this Agreement is the Grantee’s Retirement or other separation from service with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code and the Grantee is a “specified employee” as determined pursuant to procedures adopted by the Company in compliance with Section 409A of the Code, the date of payment under Section 6 above shall be the first day of the seventh month after the date of the Grantee’s separation from service or, if earlier, the date of the Grantee’s death.

11. No Right to Future Grants; No Right of Employment; Extraordinary Item. In accepting the grant, the Grantee acknowledges that:  (a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, suspended or terminated by the Company at any time, as provided in the Plan and this Agreement; (b) the grant of the Market Share Units is voluntary and occasional and does not create any contractual or other right to receive future grants of Market Share Units or benefits in lieu of Market Share Units, even if Market Share Units have been granted repeatedly in the past; (c) all decisions with respect to future grants, if any, will be at the sole discretion of the Company; (d) the Grantee’s participation in the Plan is voluntary; (e) the Market Share Units are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company, its Affiliates and/or Subsidiaries, and which is outside the scope of the Grantee’s employment contract, if any; (f) the Market Share Units are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (g) in the event that the Grantee is an employee of an Affiliate or Subsidiary of the Company, the grant will not be interpreted to form an employment contract or relationship with the Company; and furthermore, the grant will not be interpreted to form an employment contract with the Affiliate or Subsidiary that is the Grantee’s employer; (h) the future value of the underlying Common Shares is unknown and cannot be predicted with certainty; (i) no

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claim or entitlement to compensation or damages arises from forfeiture or termination of the Market Share Units or diminution in value of the Market Share Units or the Common Shares and the Grantee irrevocably releases the Company, its Affiliates and/or its Subsidiaries from any such claim that may arise; and (j) notwithstanding any terms or conditions of the Plan to the contrary, in the event of the involuntary termination of the Grantee’s employment, the Grantee’s right to receive Market Share Units and vest in Market Share Units under the Plan, if any, will terminate effective as of the date that the Grantee is no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of the involuntary termination of employment, the Grantee’s right to vest in the Market Share Units after termination of employment, if any, will be measured by the date of termination of the Grantee’s active employment and will not be extended by any notice period mandated under local law.

12. Continuous Employment. For purposes of this Agreement, the continuous employment of the Grantee with the Company or a Subsidiary shall not be deemed to have been interrupted, and the Grantee shall not be deemed to have ceased to be an employee of the Company or Subsidiary, by reason of (a) the transfer of the Grantee’s employment among the Company and its Subsidiaries or (b) an approved leave of absence.

13. Employee Data Privacy. The Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Grantee’s personal data as described in this document by and among, as applicable, the Company, its Affiliates and its Subsidiaries (the “Company Group”) for the exclusive purpose of implementing, administering and managing the Grantee’s participation in the Plan. The Grantee understands that the Company Group holds certain personal information about the Grantee, including, but not limited to, the Grantee’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Market Share Units or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Grantee’s favor, for the purpose of implementing, administering and managing the Plan (“Data”). The Grantee understands that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Grantee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than the Grantee’s country. The Grantee understands that the Grantee may request a list with the names and addresses of any potential recipients of the Data by contacting the Grantee’s local human resources representative. The Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Grantee’s participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Grantee may elect to deposit any Common Shares acquired. The Grantee understands that Data will be held only as long as is necessary to implement, administer and manage the Grantee’s

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participation in the Plan. The Grantee understands that the Grantee may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Grantee’s local human resources representative. The Grantee understands, however, that refusing or withdrawing the Grantee’s consent may affect the Grantee’s ability to participate in the Plan. For more information on the consequences of the Grantee’s refusal to consent or withdrawal of consent, the Grantee understands that the Grantee may contact the Grantee’s local human resources representative.

14. Relation to Plan. This Agreement is subject to the terms and conditions of the Plan. In the event of any inconsistency between the provisions of this Agreement and the Plan, the Plan shall govern. All terms used herein with initial capital letters and not otherwise defined herein that are defined in the Plan shall have the meanings assigned to them in the Plan. The Committee acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein, have the right to determine any questions which arise in connection with the grant of the Market Share Units.

15. Amendments. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of the Grantee under this Agreement without the Grantee’s consent. Notwithstanding the foregoing, the limitation requiring the consent of a Grantee to certain amendments shall not apply to any amendment that is deemed necessary by the Company to ensure compliance with Section 409A of the Code.

16. Severability. Subject to Section 20, if any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances shall not be affected, and the provisions so held to be invalid, unenforceable or otherwise illegal shall be reformed to the extent (and only to the extent) necessary to make it enforceable, valid and legal.

17. Successors and Assigns. Without limiting Section 8 hereof, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Grantee, and the successors and assigns of the Company.

18. Governing Law. This Agreement shall be governed by and construed in accordance with the internal substantive laws of the State of Delaware, without giving effect to any principle of law that would result in the application of the law of any other jurisdiction.

19. Electronic Delivery. The Company may, in its sole discretion, deliver any documents related to the Market Share Units and the Grantee’s participation in the Plan, or future awards that may be granted under the Plan, by electronic means or request the Grantee’s consent to participate in the Plan by electronic means. The Grantee hereby consents to receive such documents by electronic delivery and the Grantee acknowledges that by

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clicking on the “Accept” button on the Morgan Stanley Wealth Management web page titled “Step 3: Confirm the Review/Acceptance of your Award,” the Grantee agrees to be bound by the electronic execution of this Agreement.

20. Clawback. In accordance with Section 20(d) of the Plan, if the Committee has determined that any fraud or intentional misconduct by the Grantee was a significant contributing factor to the Company having to restate all or a portion of its financial statement(s), to the extent permitted by applicable law the Grantee shall: (a) return to the Company all Market Share Units and/or Common Shares that the Grantee has not disposed of that were paid out pursuant to this Agreement; and (b) with respect to any Market Share Units and/or Common Shares that the Grantee has disposed of that were paid out pursuant to this Agreement, pay to the Company in cash the value of such Market Share Units on the date such Market Share Units were paid out.The remedy specified herein shall not be exclusive, and shall be in addition to every other right or remedy at law or in equity that may be available to the Company. Notwithstanding any other provision of this Agreement or the Plan to the contrary, if this Section 20 is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement shall be deemed to be unenforceable due to a failure of consideration, and the Grantee’s rights to the Market Share Units and/or Common Shares that would otherwise be granted or paid under this Agreement shall be forfeited. Further, notwithstanding anything in this Agreement to the contrary, the Grantee acknowledges and agrees that this Agreement and the award described herein (and any settlement thereof) are subject to the terms and conditions of the Company’s clawback policy (if any) as may be in effect from time to time specifically to implement Section 10D of the Securities Exchange Act of 1934, as amended, and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the Common Shares may be traded) (the “Compensation Recovery Policy”), and that this Section 20 shall be deemed superseded by and subject to the terms and conditions of the Compensation Recovery Policy from and after the effective date thereof.

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Executed in the name and on behalf of the Company at Chicago, Illinois as of the [__] day of [______], [___].

USG CORPORATION

_____________________________    

Name:    

Title:     

The undersigned Grantee hereby accepts the award of Market Share Units evidenced by this Market Share Unit Agreement on the terms and conditions set forth herein and in the Plan.

_____________________________    

Name:    

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS.

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EX-10.44

EXHIBIT 10.44

USG CORPORATION
PERFORMANCE SHARES AGREEMENT

WHEREAS, the “Grantee” is an employee of USG Corporation, a Delaware corporation (the “Company”), or a Subsidiary;

WHEREAS, the Compensation and Organization Committee of the Board of Directors of the Company (the “Committee”) has granted to the Grantee, and the outside directors (as such term is used for purposes of Section 162(m) of the Code) of the Board of Directors have ratified,

as set forth in the Award Summary on the Morgan Stanley Wealth Management website on the “Date of Grant”, the number of Performance Shares (as defined in the Plan) pursuant to the USG Corporation 2016 Long-Term Incentive Plan (the “Plan”), subject to the terms and conditions of the Plan and the terms and conditions hereinafter set forth;

WHEREAS, Exhibit A to this Performance Shares Agreement (this “Agreement”) contains defined terms that are used in this Agreement with initial capital letters, and other terms are defined in this Agreement for further use herein with initial capital letters; and

WHEREAS, the execution of a Performance Shares Agreement substantially in the form hereof to evidence such grant has been authorized by a resolution of the Committee.

NOW, THEREFORE, the Company and the Grantee agree as follows:

1. Grant of Performance Share Right. Subject to the terms of the Plan, the Company hereby grants to the Grantee a targeted number of Performance Shares (the “Target Performance Shares”), payment of which depends on the Company’s performance as set forth in this Agreement and in the Statement of Performance Goals (the “Statement of Performance Goals”) approved by the Committee.

2. Earning of Award.

(a)    Performance Measure. The Grantee’s right to receive all, any portion of, or more than, the Target Performance Shares will be contingent upon the achievement of specified levels of performance of the Company’s total stockholder return (including reinvestment of dividends) relative to the performance of the Dow Jones U.S. Construction and Materials Index (“Total Stockholder Return”), as set forth in the Statement of Performance Goals and will be measured over the period from January 1, 20[__] through the end of the fifteenth day in 20[__] on which the New York Stock Exchange is open for trading (the “Performance Period”).

(b)    Below Threshold. If, upon the conclusion of the Performance Period, Total Stockholder Return for the Performance Period falls below the threshold level, as set forth in the Performance Matrix contained in the Statement of Performance Goals, no Performance Shares for the Performance Period shall become earned.

(c)    Threshold. If, upon the conclusion of the Performance Period, Total Stockholder Return for the Performance Period equals the threshold level, as set forth in the Performance Matrix contained in the Statement of Performance Goals, 35% of the Target Performance Shares for the Performance Period shall become earned.

(d)    Between Threshold and Target. If, upon the conclusion of the Performance Period, Total Stockholder Return exceeds the threshold level, but is less than the target level, as set forth in the Performance Matrix contained in the Statement of Performance Goals, the Target Performance Shares shall become earned based on performance during the Performance Period, as determined by mathematical straight-line interpolation between 35% of the Target Performance Shares and 100% of the Target Performance Shares.

(e)    Target. If, upon the conclusion of the Performance Period, Total Stockholder Return for the Performance Period equals the target level, as set forth in the Performance Matrix contained in the Statement of Performance Goals, 100% of the Target Performance Shares for the Performance Period shall become earned.

(f)    Between Target and Intermediate. If, upon the conclusion of the Performance Period, Total Stockholder Return exceeds the target level, but is less than the intermediate level, as set forth in the Performance Matrix contained in the Statement of Performance Goals the Target Performance Shares shall become earned based on performance during the Performance Period, as determined by mathematical straight-line interpolation between 100% of the Target Performance Shares and 150% of the Target Performance Shares.

(g)    Intermediate. If, upon the conclusion of the Performance Period, Total Stockholder Return for the Performance Period equals the intermediate level, as set forth in the Performance Matrix contained in the Statement of Performance Goals, 150% of the Target Performance Shares for the Performance Period shall become earned.

(h)    Between Intermediate and Maximum. If, upon the conclusion of the Performance Period, Total Stockholder Return exceeds the intermediate level, but is less than the maximum level, as set forth in the Performance Matrix contained in the Statement of Performance Goals the Target Performance Shares shall become earned based on performance during the Performance Period, as determined by mathematical straight-line interpolation between 150% of the Target Performance Shares and 200% of the Target Performance Shares.

(i)    Equals or Exceeds Maximum. If, upon the conclusion of the Performance Period, Total Stockholder Return for the Performance Period equals or exceeds the maximum level, as set forth in the Performance Matrix contained in the Statement of Performance Goals, 200% of the Target Performance Shares shall become earned.

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(j)    Conditions; Determination of Earned Award. Except as otherwise provided herein, the Grantee’s right to receive any Performance Shares is contingent upon his or her remaining in the continuous employ of the Company or a Subsidiary through December 31, 20[__]. Following the Performance Period, the Committee shall determine, and the outside directors (as such term is used for purposes of Section 162(m) of the Code) of the Board of Directors shall ratify, whether and to what extent the goals relating to Total Stockholder Return have been satisfied for the Performance Period and shall determine the number of Performance Shares that shall have become earned hereunder.

3. Effect of Change in Control. Notwithstanding anything to the contrary in this Agreement, the following provisions shall apply in connection with a Change in Control. Subject to the last sentence of this paragraph: (I) the treatment in connection with a Change in Control of any Performance Shares that are outstanding at the time of such Change in Control will depend upon whether the Awards made under this Agreement are Assumed (as defined in Exhibit A to this Agreement) by the entity effecting the Change in Control; (II) if the entity effecting the Change in Control Assumes the Awards made under this Agreement, Section 3(a) shall apply; and (III) if the entity effecting the Change in Control does not Assume the Awards made under this Agreement, then Section 3(b) shall apply. Notwithstanding the preceding sentence, Section 4 shall apply and the following provisions of this Section shall not apply if the Change in Control occurs after termination of the Grantee’s employment due to death, Disability or Retirement.

(a) Awards Assumed by Successor: If the awards made under this Agreement that are outstanding at the time of a Change in Control are Assumed by the entity effecting the Change in Control, the number of Performance Shares that may become payable to the Grantee shall be determined pursuant to Section 3(a)(i) below, and the circumstances in which the Grantee shall earn such number of Performance Shares are described in Section 3(a)(ii) below. Exhibit A to this Agreement contains defined terms for the purposes of this Agreement.

(i) Upon the occurrence of a Change in Control, the number of Performance Shares that may become payable to the Grantee (the “CIC Performance Shares”) shall be determined pursuant to Section 2 above, except that for the purposes of such calculation:

(A) the date on which the Change in Control occurs (the “CIC Date”) shall be substituted for the last day of the Performance Period in both Section 2 above and in the Statement of Performance Goals;

(B) the Performance Period shall be the period from January 1, 20[__] through the CIC Date;

(C) the value ascribed to the Common Shares in the Change in Control shall be used as the ending Stock Price of the Common Shares for

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purposes of paragraph 3(c) of the Statement of Performance Goals; and

(D) the average closing prices of the shares of the Peers shall be calculated using the 20 trading days ending on the trading day preceding the CIC Date for purposes of Section 3(c) of the Statement of Performance Goals.

(ii) The CIC Performance Shares shall become earned by the Grantee if the Grantee remains employed through December 31, 20[__]. Unless clause (A), (B) or (C) below applies, all of the CIC Performance Shares that are outstanding at the time of the Grantee’s termination of employment prior to December 31, 20[__] shall be forfeited. Notwithstanding the preceding sentence, any CIC Performance Shares that have not been earned by the Grantee pursuant to this Section 3(a)(ii) shall be earned on the first to occur of the following events between the CIC Date and December 31, 20[__]:

(A) the involuntary termination of the Grantee’s employment for reasons other than Cause (as defined in Exhibit A);

(B) the Grantee’s voluntary termination of employment for Good Reason (as defined in Exhibit A); or

(C) the termination of the Grantee’s employment due to the Grantee’s death or Disability (as such terms are defined in Exhibit A).

(b) Awards Not Assumed by Successor. Upon the occurrence of a Change in Control, any unearned Performance Shares outstanding at the time of the Change in Control that are not Assumed by the entity effecting the Change in Control shall immediately become earned in such amount as shall be determined in accordance with the terms outlined in Section 3(a)(i) above. Any Target Performance Shares that are not Assumed and that are not earned on the CIC Date pursuant to this Section 3(b) shall be forfeited.

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4. Termination Due to Death, Disability, Retirement. If the Grantee’s employment with the Company or a Subsidiary terminates before December 31, 20[__] and before the occurrence of a Change in Control due to the Grantee’s death, Disability or Retirement, the Company shall pay to the Grantee or his or her executor or administrator, as the case may be, at the time described in Section 6 and based on the level of achievement of Total Stockholder Return during the Performance Period, a pro rata number of the Target Performance Shares based on the number of full months during the Performance Period and prior to January 1, 20[__] during which the Grantee was employed by the Company, and the remaining performance shares will be forfeited. Notwithstanding the foregoing, if a Change in Control occurs after the termination of the Grantee’s employment due to death, Disability or Retirement but before the end of the Performance Period, the Grantee shall earn at the time of such Change in Control the pro rata number (determined as specified above) of such number of the Performance Shares as shall be determined in accordance with Section 3(a)(i), and any Performance Shares that are not earned on the CIC Date pursuant to this sentence shall be forfeited.

5. Forfeiture. In addition to the forfeiture of Performance Shares pursuant to other provisions of this Agreement, if either (i) the Grantee’s employment with the Company or a Subsidiary terminates before December 31, 20[__], and before the occurrence of a Change in Control, for any reason other than as set forth in Section 4 hereof or (ii) the Committee finds that the Grantee has engaged in any fraud or intentional misconduct as described in Section 20 hereof, the Performance Shares will be forfeited. Performance Shares shall be considered to have been forfeited upon the event that causes such forfeiture and shall not be considered to be outstanding thereafter.

6. Form and Time of Payment of Performance Shares. Payment of any Performance Shares that become earned as set forth herein will be made in the form of Common Shares. Except as otherwise provided in Section 3, payment will be made as soon as practicable after the end of the Performance Period, or any earlier event that causes the Performance Shares to be earned, and the determination by the Committee of the level of attainment of Total Stockholder Return, but, subject to Section 10 below, in no event shall such payment occur later than two and one-half months after the end of the Performance Period or such earlier event occurs. Upon and after payment of any Performance Shares pursuant to this Section 6, such Performance Shares shall not be considered to be outstanding. Notwithstanding the foregoing, if the event that causes the Performance Shares to be earned is a Change in Control that does not constitute a change of control for purposes of Section 409A of the Code, then to the extent necessary to comply with Section 409A of the Code, payment will be made on the next date or event under the Agreement that constitutes a permissible payment date or event under Section 409A of the Code. To the extent that the Company or any Subsidiary is required to withhold any federal, state, local or foreign tax in connection with the payment of earned Performance Shares pursuant to this Agreement, it shall be a condition to the receipt of such Performance Shares that the Grantee make arrangements satisfactory to the Company or such Subsidiary for payment of such taxes required to be withheld, which may include, if

5

specifically approved by the Committee in advance, by the Company withholding Common Shares otherwise payable pursuant to this award.

7. Payment of Dividends. No dividends shall be accrued or earned with respect to the Performance Shares until such Performance Shares are earned by the Grantee as provided in this Agreement.

8. Performance Shares Nontransferable. Until payment is made to the Grantee as provided herein, neither the Performance Shares granted hereby nor any interest therein or in the Common Shares related thereto shall be transferable other than by will or the laws of descent and distribution prior to payment.

9. Adjustments. Subject to Section 11 of the Plan, in the event of any change in the aggregate number of outstanding Common Shares by reason of (a) any stock dividend, extraordinary dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, or (b) any Change in Control, merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization or partial or complete liquidation, or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing, then the Committee shall adjust the number of Performance Shares then held by the Grantee and the other terms of this award in such manner as to prevent dilution or enlargement of the rights of the Grantee that otherwise would result from such event. Moreover, in the event of any such transaction or event, the Committee, in its discretion, may provide in substitution for any or all of the Grantee’s rights under this Agreement such alternative consideration as it may determine to be equitable in the circumstances, subject to the provisions of Section 3 of this Agreement.

10. Compliance with Section 409A of the Code. To the extent applicable, it is intended that this Agreement and the Plan comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Grantee. This Agreement and the Plan shall be administered in a manner consistent with this intent. Reference to Section 409A of the Code is to Section 409A of the Internal Revenue Code of 1986, as amended, and will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service. If the event triggering the right to payment under this Agreement is the Grantee’s Retirement or other separation from service with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code and the Grantee is a “specified employee” as determined pursuant to procedures adopted by the Company in compliance with Section 409A of the Code, the date of payment under Section 6 above shall be the first day of the seventh month after the date of the Grantee’s separation from service or, if earlier, the date of the Grantee’s death.

11. No Right to Future Grants; No Right of Employment; Extraordinary Item. In accepting the grant, the Grantee acknowledges that:  (a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, suspended or terminated by the Company at any time, as provided in the Plan and this

6

Agreement; (b) the grant of the Performance Shares is voluntary and occasional and does not create any contractual or other right to receive future grants of Performance Shares or benefits in lieu of Performance Shares, even if Performance Shares have been granted repeatedly in the past; (c) all decisions with respect to future grants, if any, will be at the sole discretion of the Company; (d) the Grantee’s participation in the Plan is voluntary; (e) the Performance Shares are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company, its Affiliates and/or Subsidiaries, and which is outside the scope of the Grantee’s employment contract, if any; (f) the Performance Shares are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (g) in the event that the Grantee is an employee of an Affiliate or Subsidiary of the Company, the grant will not be interpreted to form an employment contract or relationship with the Company; and furthermore, the grant will not be interpreted to form an employment contract with the Affiliate or Subsidiary that is the Grantee’s employer; (h) the future value of the underlying Common Shares is unknown and cannot be predicted with certainty; (i) no claim or entitlement to compensation or damages arises from forfeiture or termination of the Performance Shares or diminution in value of the Performance Shares or the Common Shares and the Grantee irrevocably releases the Company, its Affiliates and/or its Subsidiaries from any such claim that may arise; and (j) notwithstanding any terms or conditions of the Plan to the contrary, in the event of the involuntary termination of the Grantee’s employment, the Grantee’s right to receive Performance Shares and vest in Performance Shares under the Plan, if any, will terminate effective as of the date that the Grantee is no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of the involuntary termination of employment, the Grantee’s right to vest in the Performance Shares after termination of employment, if any, will be measured by the date of termination of the Grantee’s active employment and will not be extended by any notice period mandated under local law.

12. Continuous Employment. For purposes of this Agreement, the continuous employment of the Grantee with the Company or a Subsidiary shall not be deemed to have been interrupted, and the Grantee shall not be deemed to have ceased to be an employee of the Company or Subsidiary, by reason of (a) the transfer of the Grantee’s employment among the Company and its Subsidiaries or (b) an approved leave of absence.

13. Employee Data Privacy. The Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Grantee’s personal data as described in this document by and among, as applicable, the Company, its Affiliates and its Subsidiaries (the “Company Group”) for the exclusive purpose of implementing, administering and managing the Grantee’s participation in the Plan. The Grantee understands that the Company Group holds certain personal information about the Grantee, including, but not limited to, the Grantee’s name, home address and telephone

7

number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Performance Shares or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Grantee’s favor, for the purpose of implementing, administering and managing the Plan (“Data”). The Grantee understands that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Grantee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than the Grantee’s country. The Grantee understands that the Grantee may request a list with the names and addresses of any potential recipients of the Data by contacting the Grantee’s local human resources representative. The Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Grantee’s participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Grantee may elect to deposit any Common Shares acquired. The Grantee understands that Data will be held only as long as is necessary to implement, administer and manage the Grantee’s participation in the Plan. The Grantee understands that the Grantee may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Grantee’s local human resources representative. The Grantee understands, however, that refusing or withdrawing the Grantee’s consent may affect the Grantee’s ability to participate in the Plan. For more information on the consequences of the Grantee’s refusal to consent or withdrawal of consent, the Grantee understands that the Grantee may contact the Grantee’s local human resources representative.

14. Relation to Plan. This Agreement is subject to the terms and conditions of the Plan. In the event of any inconsistency between the provisions of this Agreement and the Plan, the Plan shall govern. All terms used herein with initial capital letters and not otherwise defined herein that are defined in the Plan shall have the meanings assigned to them in the Plan. The Committee acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein, have the right to determine any questions which arise in connection with the grant of the Performance Shares.

15. Amendments. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of the Grantee under this Agreement without the Grantee’s consent. Notwithstanding the foregoing, the limitation requiring the consent of a Grantee to certain amendments shall not apply to any amendment that is deemed necessary by the Company to ensure compliance with Section 409A of the Code.

16. Severability. Subject to Section 20, if any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision

8

to any other person or circumstances shall not be affected, and the provisions so held to be invalid, unenforceable or otherwise illegal shall be reformed to the extent (and only to the extent) necessary to make it enforceable, valid and legal.

17. Successors and Assigns. Without limiting Section 8 hereof, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Grantee, and the successors and assigns of the Company.

18. Governing Law. This Agreement shall be governed by and construed in accordance with the internal substantive laws of the State of Delaware, without giving effect to any principle of law that would result in the application of the law of any other jurisdiction.

19. Electronic Delivery. The Company may, in its sole discretion, deliver any documents related to the Performance Shares and the Grantee’s participation in the Plan, or future awards that may be granted under the Plan, by electronic means or request the Grantee’s consent to participate in the Plan by electronic means. The Grantee hereby consents to receive such documents by electronic delivery and the Grantee acknowledges that by clicking on the “Accept” button on the Morgan Stanley Wealth Management web page titled “Step 3: Confirm the Review/Acceptance of your Award,” the Grantee agrees to be bound by the electronic execution of this Agreement.

20. Clawback. In accordance with Section 20(d) of the Plan, if the Committee has determined that any fraud or intentional misconduct by the Grantee was a significant contributing factor to the Company having to restate all or a portion of its financial statement(s), to the extent permitted by applicable law the Grantee shall: (a) return to the Company all Performance Shares and/or Common Shares that the Grantee has not disposed of that were paid out pursuant to this Agreement; and (b) with respect to any Performance Shares and/or Common Shares that the Grantee has disposed of that were paid out pursuant to this Agreement, pay to the Company in cash the value of such Performance Shares on the date such Performance Shares were paid out.The remedy specified herein shall not be exclusive, and shall be in addition to every other right or remedy at law or in equity that may be available to the Company. Notwithstanding any other provision of this Agreement or the Plan to the contrary, if this Section 20 is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement shall be deemed to be unenforceable due to a failure of consideration, and the Grantee’s rights to the Performance Shares and/or Common Shares that would otherwise be granted or paid under this Agreement shall be forfeited. Further, notwithstanding anything in this Agreement to the contrary, the Grantee acknowledges and agrees that this Agreement and the award described herein (and any settlement thereof) are subject to the terms and conditions of the Company’s clawback policy (if any) as may be in effect from time to time specifically to implement Section 10D of the Securities Exchange Act of 1934, as amended, and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the Common Shares may be traded) (the “Compensation Recovery Policy”), and that this

9

Section 20 shall be deemed superseded by and subject to the terms and conditions of the Compensation Recovery Policy from and after the effective date thereof.

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Executed in the name and on behalf of the Company at Chicago, Illinois as of the [__] day of [______], [___].

USG CORPORATION

_____________________________    

Name:

Title:

The undersigned Grantee hereby accepts the award of Performance Shares evidenced by this Performance Shares Agreement on the terms and conditions set forth herein and in the Plan.

_____________________________    

Name:

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS.

EXHIBIT A TO

USG CORPORATION
PERFORMANCE SHARES AGREEMENT

This Exhibit A is attached to and forms a part of the USG Corporation Performance Shares Agreement, dated as of [________].

Solely for the purposes of this Agreement, the following terms shall be defined as follows:

(A) An award of Performance Shares shall be considered “Assumed” in connection with a Change in Control if each of the following conditions is met:

(1) The award of Performance Shares is converted into a replacement award that preserves the value of such award at the time of the Change in Control;

(2) the replacement award contains provisions for scheduled vesting and treatment on termination of employment (including the definitions of Cause and Good Reason) that are no less favorable to the Grantee than as set forth in this Agreement, and all other terms of the replacement award (other than the security and number of shares represented by the replacement awards) are substantially similar to, or more favorable to the Grantee than, those set forth in this Agreement; and

(3) the security represented by the replacement award, if any, is of a class that is publicly held and widely traded on an established stock exchange.

(B) “Base Pay” means the Grantee’s annual base salary rate as in effect from time to time.

(C) “Cause” shall mean that the Grantee shall have:

(1) been convicted of a criminal violation involving fraud, embezzlement or theft in connection with the Grantee’s duties or in the course of the Grantee’s employment with the Company or any Subsidiary;

(2) committed intentional wrongful damage to tangible or intangible property of the Company or any Subsidiary; or

(3) committed intentional wrongful disclosure of secret processes or confidential information of the Company or any Subsidiary.

For purposes of this Agreement, no act or failure to act on the part of the Grantee will be deemed “intentional” if it was due primarily to an error in judgment or negligence, but will be deemed “intentional” only if done or omitted to be done by the Grantee not in good faith and without

12

reasonable belief that the Grantee’s action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Grantee will not be deemed to have been terminated for “Cause” hereunder unless and until there shall have been delivered to the Grantee a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the Committee then in office (excluding the Grantee if the Grantee is then a member of the Committee) at a meeting of the Committee called and held for such purpose, after reasonable notice to the Grantee and an opportunity for the Grantee, together with the Grantee’s counsel (if the Grantee chooses to have counsel present at such meeting), to be heard before the Committee, finding that, in the good faith opinion of the Committee, the Grantee had committed an act constituting “Cause” as herein defined and specifying the particulars thereof in reasonable detail. Nothing herein will limit the right of the Grantee or the Grantee’s beneficiaries to contest the validity or propriety of any such determination.

(D) “Disability” shall mean that the Grantee has suffered a total disability within the meaning of the Company’s Long Term Disability Plan for Salaried Employees and is “disabled” within the meaning of Section 409A(a)(2)(C) of the Code.

(E) “Good Reason” shall mean the occurrence of any of the following events, and the failure of the Company to remedy any of the following events within 10 calendar days after receipt by the Company of written notice thereof from the Grantee:

(1) a material diminution in the Grantee’s normal duties and responsibilities, including, but not limited to, the assignment without the Grantee’s written consent of any diminished duties and responsibilities which are inconsistent with the Grantee’s positions, duties and responsibilities with the Company immediately prior to a Change in Control, or a materially adverse change in the Grantee’s reporting responsibilities or titles as in effect immediately prior to the Change in Control, whether or not resulting from an act of the Company or otherwise, or any removal of the Grantee from or any failure to re-elect the Grantee to any of such positions, except in connection with the termination of the Grantee’s employment for Disability, Retirement, or Cause or as a result of the Grantee’s death or by the Grantee other than for Good Reason;

(2) if the Grantee was serving as a member of the Board immediately prior to the Change in Control, either (A) the failure to elect or the removal of the Grantee as a member of the Board of the Company (or any successor thereto) or (B) if the Grantee continues to serve as a member of the Board of the Company (or any successor thereto) following the Change in Control, the Company’s securities are no longer publicly traded; provided, however, that Good Reason shall not exist if the Grantee becomes a member of the board of directors of a publicly-traded entity that as a result

13

of the Change in Control owns the Company or substantially all of the Company’s assets either directly or through one or more subsidiaries;

(3) a reduction by the Company in the Grantee’s Base Pay as in effect on the Date of Grant or as the same may be increased from time to time;

(4) a change in the Grantee’s Target Annual Direct Compensation that results in an aggregate decrease in such Target Annual Direct Compensation in excess of ten percent (10%);

(5) the Company’s requiring the Grantee, without the Grantee’s written consent, to be based anywhere other than within fifty (50) miles of the Grantee’s office location immediately prior to the Change in Control, except for required travel on the Company’s business to an extent substantially consistent with business travel obligations immediately prior to the Change in Control;

(6) the failure by the Company to continue in effect any investment plan, retirement plan, savings plan, supplemental retirement plan, deferred compensation plan, supplemental investment plan, life insurance plan, health and accident plan, disability plan or other welfare benefit plan in which the Grantee was participating at the time of the Change in Control (or plans providing the Grantee with substantially similar benefits), the taking of any action by the Company which would adversely affect the Grantee’s participation or materially reduce the Grantee’s benefits or value under any of such plans or deprive the Grantee of any material fringe benefit enjoyed by the Grantee at the time of the Change in Control, or the failure by the Company to provide the Grantee with the number of paid vacation days to which the Grantee was then entitled in accordance with the Company’s normal vacation policy in effect on the date of the Change in Control; or

(7) the failure by the Company to obtain the assumption of the obligation to perform any Change in Control Severance Agreement between the Company and Grantee by any successor as contemplated in such Change in Control Severance Agreement.

(F) “Retirement” shall mean the Grantee’s retirement under a retirement plan (including, without limitation, any supplemental retirement plan) of the Company or any Subsidiary, or the Grantee’s retirement from employment with the Company or any Subsidiary after completing at least three years of continuous service with the Company or any Subsidiary and attaining the age of 62. Without limiting the generality of the foregoing, in no event shall “Retirement” include the involuntary termination of the Grantee’s employment by the Company (i) for Cause or (ii) without Cause if, as a result of such termination without Cause, the

14

Grantee becomes eligible to receive payments on account of such termination under an employment agreement between the Grantee and the Company.

(G) “Target Annual Direct Compensation” means the sum of the Grantee’s Base Pay, target annual incentive opportunity, and the annualized value of the most recent long-term incentive award approved by the Committee prior to the Change in Control. For purposes of measuring annualized long-term incentives, the awards shall be measured on their date of grant using reasonable assumptions, including, but not limited to, fair value principles such as those identified in Financial Accounting Standards Board Accounting Standards Codification Topic 718; the value of such awards shall be annualized over the frequency of their grant.

15

EX-10.53

EXHIBIT 10.53

Amendment No. 5 to

USG Corporation

Non-Employee Director

Compensation Program

(As Amended and Restated February 13, 2008

and amended November 12, 2010, November 10, 2011,

November 14, 2013 and November 13, 2014)

Section 2 of the USG Corporation Non-Employee Director Program (As Amended and Restated February 13, 2008 and amended November 12, 2010, November 10, 2011, November 14, 2013 and November 13, 2014) is amended effective January 1, 2017 to read in its entirety as follows:

2. An additional cash retainer of $20,000 per year for the chair of the Audit Committee of the Board, $15,000 per year for the chair of the Compensation and Organization Committee of the Board, and $10,000 per year for the chairs of the other Board committees, each payable in equal quarterly installments on the last business day of each calendar quarter, and an additional cash retainer of $125,000 per year for the Board’s Non-Executive Chairman, payable in equal quarterly installments on the last business day of each calendar quarter commencing with the first quarter of 2017.

November 10, 2016

EX-21

EXHIBIT 21

SUBSIDIARIES

The following is a list of certain subsidiaries of USG Corporation as of February 8, 2017, the principal names under which such subsidiaries do business and the state or country in which each is organized. The list does not include subsidiaries which would not, if considered in the aggregate as a single subsidiary, have constituted a significant subsidiary within the meaning of Item 601(b)(21)(ii) of Regulation S-K as of December 31, 2016.

Name of Company	Organized Under Laws of
United States Gypsum Company	Delaware
USG Interiors, LLC	Delaware
USG Foreign Investments, Ltd.	Delaware
USG Netherlands Global Holdings B.V.	Netherlands
CGC Inc.	New Brunswick

EX-23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements No. 33-63554, 333-136289, 333-140949, 333-168592 and 333-211320 on Form S-8 and Registration Statement No. 333-212946 on Form S-3 of our reports dated February 8, 2017, relating to the consolidated financial statements and financial statement schedule of USG Corporation and subsidiaries and the effectiveness of USG Corporation and subsidiaries’ internal control over financial reporting, appearing in this Annual Report on Form 10-K of USG Corporation for the year ended December 31, 2016.

/s/ Deloitte & Touche LLP

Chicago, Illinois

February 8, 2017    

EX-23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in Registration Statements No. 33-63554, 333-136289, 333-140949, 333-211320 and 333-168592 on Form S-8 and Registration Statement No. 333-212946 on Form S-3 of our report dated February 10, 2015, relating to the consolidated statements of profit or loss and other comprehensive income, changes in equity, and cash flows of USG Boral Building Products Pte. Limited for the period January 14, 2014 (date of incorporation) to June 30, 2014, furnished along with the Annual Report on Form 10-K of USG Corporation for the year ended December 31, 2016.

/s/ Deloitte PLT

Chartered Accountants (AF0080)

Kuala Lumpur, Malaysia

February 8, 2017

EX-23.3

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in Registration Statements No. 33-63554, 333-136289, 333-140949, 333-168592 and 333-211320 on Form S-8 and Registration Statement No. 333-212946 on Form S-3 of USG Corporation of our report dated February 9, 2015, with respect to the consolidated statements of income, comprehensive income, changes in equity and cash flows of USG Boral Buildings Products Pty Limited and its controlled entities for the year ended June 30, 2014, which report appears in the December 31, 2016 Annual Report on Form 10-K of USG Corporation.

/s/ KPMG

Sydney, NSW Australia

February 8, 2017

EX-24

Exhibit 24

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS,that each person whose name appears below constitutes and appoints Michelle M. Warner and Matthew F. Hilzinger, and each of them, his or her true and lawful attorney(s)-in-fact and agent(s), with full power of substitution and resubstitution, for and in his or her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the year ending December 31, 2016 of USG Corporation, and any or all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitutes, may lawfully do or cause to be done by virtue hereof.

This power of attorney has been signed as of the 8^th day of February 2017 by the following persons:

/s/ Jose Armario	/s/ Brian A. Kenney
Jose Armario,	Brian A. Kenney,
Director	Director
/s/ Thomas A. Burke	/s/ Richard P. Lavin
Thomas A. Burke,	Richard P. Lavin,
Director	Director
/s/ Matthew Carter, Jr.	/s/ Steven F. Leer
Matthew Carter, Jr.,	Steven F. Leer,
Director	Non-Executive Chairman of the Board
/s/ Gretchen R. Haggerty	/s/ Jennifer F. Scanlon
Gretchen R. Haggerty,	Jennifer F. Scanlon,
Director	Director, President and
	Chief Executive Officer
/s/ William H. Hernandez
William H. Hernandez,
Director

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Jennifer F. Scanlon, certify that:

1. I have reviewed this annual report on Form 10-K of USG Corporation (the “Corporation”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Corporation as of, and for, the periods presented in this report;

4. The Corporation’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15(d)-15(f)) for the Corporation and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Corporation’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Corporation’s internal control over financial reporting that occurred during the Corporation’s most recent fiscal quarter (the Corporation’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting; and

5. The Corporation’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Corporation’s auditors and the audit committee of the Corporation’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Corporation’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Corporation’s internal control over financial reporting.

February 8, 2017	/s/ Jennifer F. Scanlon
	Jennifer F. Scanlon
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Matthew F. Hilzinger, certify that:

1. I have reviewed this annual report on Form 10-K of USG Corporation (the “Corporation”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Corporation as of, and for, the periods presented in this report;

4. The Corporation’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15(d)-15(f)) for the Corporation and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Corporation’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Corporation’s internal control over financial reporting that occurred during the Corporation’s most recent fiscal quarter (the Corporation’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting; and

5. The Corporation’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Corporation’s auditors and the audit committee of the Corporation’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Corporation’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Corporation’s internal control over financial reporting.

February 8, 2017	/s/ Matthew F. Hilzinger
	Matthew F. Hilzinger
	Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

SECTION 1350 CERTIFICATIONS

In connection with the Annual Report of USG Corporation (the “Corporation”) on Form 10-K, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jennifer F. Scanlon, President and Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

February 8, 2017	/s/ Jennifer F. Scanlon
	Jennifer F. Scanlon
	President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

SECTION 1350 CERTIFICATIONS

In connection with the Annual Report of USG Corporation (the “Corporation”) on Form 10-K, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Matthew F. Hilzinger, Executive Vice President and Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

February 8, 2017	/s/ Matthew F. Hilzinger
	Matthew F. Hilzinger
	Executive Vice President and Chief Financial Officer

EX-95

EXHIBIT 95

Mine Safety Disclosures

The operation of our ten mines and quarries in the United States is subject to regulation and inspection under the Federal Mine Safety and Health Act of 1977, or Safety Act. From time to time, inspection of our mines and quarries and their operation results in our receipt of citations or orders alleging violations of health or safety standards or other violations under the Safety Act. We are usually able to resolve the matters identified in the citations or orders with little or no assessments or penalties.

Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and rules promulgated by the Securities and Exchange Commission, or SEC, to implement that Section require that we disclose specified information about mine health and safety in our periodic reports filed with the SEC. The disclosure requirements set forth in Section 1503 and the SEC rules refer to, and are based on, the safety and health requirements applicable to mines under the Safety Act which is administered by the U.S. Labor Department's Mine Safety and Health Administration, or MSHA. Under the Safety Act, MSHA is required to inspect surface mines at least twice a year and underground mines at least four times a year to determine whether there is compliance with health and safety standards or with any citation, order or decision issued under the Safety Act and whether an imminent danger exists. MSHA also conducts spot inspections and inspections pursuant to miners' complaints.

If violations of safety or health standards are found, MSHA inspectors will issue citations to the mine operators. Among other activities under the Safety Act, MSHA also assesses and collects civil monetary penalties for violations of mine safety and health standards.

In addition, an independent adjudicative agency, the Federal Mine Safety and Health Review Commission, or FMSHRC, provides administrative trial and appellate review of legal disputes arising under the Safety Act. Most cases deal with civil penalties proposed by MSHA to be assessed against mine operators and address whether the alleged safety and health violations occurred, as well as the appropriateness of proposed penalties.

During the year ended December 31, 2016, we received 15 citations alleging health and safety violations that could significantly and substantially contribute to the cause and effect of a mine safety or health hazard under the Safety Act, or S&S violations, and 75 citations alleging other health and safety violations. We have received proposed assessments from MSHA with respect to 78 of the 90 citations. The total dollar value of the proposed assessments from MSHA with respect to those citations was $20,631. We have resolved 78 of the proposed assessments through payments of penalties aggregating $20,631. There are no proposed assessments being contested and 12 proposed assessments otherwise remain outstanding. No assessments have yet been made by MSHA with respect to the other 12 citations. Set forth below is information with respect to the gypsum mines for which citations were received during the year ended December 31, 2016:

Location of Mines/Quarries	Number of Citations for S&S Violations	Number of Citations for Non S&S Violations	Total Proposed Assessments
Alabaster, Michigan	—	3	100
Empire, Nevada	—	—	—
Fort Dodge, Iowa	3	18	$1,612
Plaster City, California	1	5	543
Shoals, Indiana	—	7	500
Sigurd, Utah	—	4	$442
Southard, Oklahoma	1	4	$731
Sperry, Iowa	7	25	$12,946
Spruce Pine, North Carolina	—	1	—
Sweetwater, Texas	3	8	3,757
Totals	15	75	$20,631

We received 1 order for unwarrantable failure to comply with mandatory health and safety standards under the Safety Act. We did not receive any orders under the Safety Act regarding withdrawal from a mine as a result of failure to abate in a timely manner a health and safety violation for which a citation was issued, any imminent danger orders under the Safety Act, any written notice from MSHA of a pattern of violations of mandatory health or safety standards that are of such a nature as could significantly and substantially contribute to the cause and effect of mine health and safety hazards under the Safety Act or any written notice from MSHA of the potential to have such a pattern during the year ended December 31, 2016. Also, there were no flagrant violations under the Safety Act and no mining-related fatalities during the year ended December 31, 2016, and no legal actions before the FMSHRC were instituted during the year ended December 31, 2016 or pending as of December 31, 2016.

EX-99.1

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF

USG BORAL BUILDING PRODUCTS PTE. LIMITED

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of profit or loss and other comprehensive income, changes in equity, and cash flows of USG Boral Building Products Pte. Limited (the “company”) and its subsidiaries (the “group”) for the period from January 14, 2014 (date of incorporation) to June 30, 2014, and the related notes to the consolidated financial statements

Directors’ Responsibility for the Consolidated Financial Statements

The directors of the company are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the group’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

(Forward)

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF

USG BORAL BUILDING PRODUCTS PTE. LIMITED

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of the operations and the cash flows of USG Boral Building Products Pte. Limited and its subsidiaries for the period from January 14, 2014 (date of incorporation) to June 30, 2014 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

DELOITTE

AF 0080

Chartered Accountants

February 10, 2015

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2016 (Unaudited) AND JUNE 30, 2015 (Unaudited)

	Note	2016	2015
		US$’000	US$’000
		Unaudited	Unaudited
ASSETS
Current assets
Cash and cash equivalents	6	104,435	119,196
Trade and other receivables	7	100,878	99,273
Prepayments		5,100	3,830
Tax recoverable		1,871	1,616
Derivative financial instruments	8	949	2
Inventories	9	49,046	49,881
Total current assets		262,279	273,798
Non-current assets
Other receivables	7	9,874	6,691
Property, plant and equipment	10	512,673	533,093
Intangible assets	11	91,523	101,550
Goodwill	12	406,425	421,544
Investment in associates	14	50,352	51,720
Deferred tax assets	15	10,909	11,443
Total non-current assets		1,081,756	1,126,041
Total assets		1,344,035	1,399,839
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables	16	134,385	134,867
Provisions	17	59	15
Loans and borrowings	18	8,084	24,073
Tax liabilities		10,723	9,301
Derivative financial instruments	8	-	1,807
Total current liabilities		153,251	170,063

(Forward)

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2016 (Unaudited) AND JUNE 30, 2015 (Unaudited)

	Note	2016	2015
		US$’000	US$’000
		Unaudited	Unaudited
Non-current liabilities
Other payables	16	4,507	-
Retirement benefit obligations	19	9,859	11,068
Provisions	17	56	59
Loans and borrowings	18	41,670	43,493
Deferred tax liabilities	15	27,904	25,747
Total non-current liabilities		83,996	80,367
Capital, reserves and non-controlling interests
Share capital	20	1,022,944	1,022,944
Reserves	21	(44,183)	(4,419)
Retained earnings		41,019	35,795
Equity attributable to owners of the company		1,019,780	1,054,320
Non-controlling interests		87,008	95,089
Total equity		1,106,788	1,149,409
Total liabilities and equity		1,344,035	1,399,839

See accompanying notes to the consolidated financial statements.    

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND

OTHER COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED JUNE 30, 2016 (Unaudited) AND JUNE 30, 2015 (Unaudited)

(With comparative figures for the period January 14, 2014 (date of incorporation) to June 30, 2014)

	Note	2016	2015	2014
		US$’000	US$’000	US$’000
		Unaudited	Unaudited
Revenue	22	650,280	700,862	246,708
Cost of sales		(472,073)	(530,421)	(185,907)
Gross profit		178,207	170,441	60,801
Other income		1,530	1,077	377
Finance income		1,628	3,132	1,780
Distribution expenses		(32,375)	(36,347)	(11,092)
Administrative expenses		(60,304)	(58,937)	(34,284)
Finance costs	23	(4,393)	(5,276)	(2,664)
Share of loss of associates	14	846	(1,034)	(866)
Profit before income tax		85,139	73,056	14,052
Income tax expense	24	(24,975)	(20,755)	(4,869)
Profit for the year	25	60,164	52,301	9,183
Other comprehensive income (loss):
Items that will not be reclassified subsequently to profit   or loss:
Actuarial (loss) gain on pension		(1,488)	121	98
Items that may be reclassified subsequently to profit   or loss:
Exchange differences on translating foreign operations		(42,469)	(56,181)	15,294
(Losses) Gains on cash flow hedges		244	(543)	377
Other comprehensive (loss) income for the financial year/period, net of tax		(43,713)	(56,603)	15,769
Total comprehensive (loss) income for the financial year/period		16,451	(4,302)	24,952

(Forward)

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND

OTHER COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED JUNE 30, 2016 (Unaudited) AND JUNE 30, 2015 (Unaudited)

(With comparative figures for the period January 14, 2014 (date of incorporation) to June 30, 2014)

	Note	2016	2015	2014
		US$’000	US$’000	US$’000
		Unaudited	Unaudited
Profit attributable to:
Owners of the company		54,527	46,229	7,249
Non-controlling interests		5,637	6,072	1,934
		60,164	52,301	9,183
Total comprehensive income (loss) attributable to:
Owners of the company		14,763	(7,958)	22,826
Non-controlling interests		1,688	3,656	2,126
		16,451	(4,302)	24,952

See accompanying notes to the consolidated financial statements.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED JUNE 30, 2016 (Unaudited) AND JUNE 30, 2015 (Unaudited)

(With comparative figures for the period January 14, 2014 (date of incorporation) to June 30, 2014

Group	Share capital	Other capital reserve	Translation   reserve	Hedging reserve	Pension reserve	Retained earnings	Attributable owners of the    Company	Non -controlling   interests	Total
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000

Balance at July 1, 2015 –   unaudited	1,022,944	34,191	(38,663)	(166)	219	35,795	1,054,320	95,089	1,149,409
Total comprehensive   income for the year:
Profit for the year	-	-	-	-	-	54,527	54,527	5,637	60,164
Other comprehensive     income/(loss) for the year	-	-	(38,520)	244	(1,488)	-	(39,764)	(3,949)	(43,713)
Total	-	-	(38,520)	244	(1,488)	54,527	14,763	1,688	16,451
Dividends paid, representing transaction with owners, recognised directly in equity (Note 26)	-	-	-	-	-	(49,303)	(49,303)	(9,769)	(59,072)
Balance at June 30, 2016 –   unaudited	1,022,944	34,191	(77,183)	78	(1,269)	41,019	1,019,780	87,008	1,106,788

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED JUNE 30, 2016 (Unaudited) AND JUNE 30, 2015 (Unaudited)

(With comparative figures for the period January 14, 2014 (date of incorporation) to June 30, 2014)

Share capital	Other capital reserve	Translation reserve	Hedging reserve	Pension reserve	Retained earnings	Attributable to owners of the company	Non -controlling interests	Total
US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000

USG BORAL BUILDING PRODUCTS PTE. LIMITED

Balance at July 1, 2014 –   unaudited	1,022,944	34,191	15,102	377	98	7,249	1,079,961	98,317	1,178,278
Total comprehensive income for the year
Profit for the year	-	-	-	-	-	46,229	46,229	6,072	52,301
Other comprehensive income (loss) for the year	-	-	(53,765)	(543)	121	-	(54,187)	(2,416)	(56,603)
Total	-	-	(53,765)	(543)	121	46,229	(7,958)	3,656	(4,302)
Dividends paid, representing transactions with owners, recognised directly in equity (Note 26)	-	-	-	-	-	(17,683)	(17,683)	(6,884)	(24,567)
Balance at June 30, 2015 –   unaudited	1,022,944	34,191	(38,663)	(166)	219	35,795	1,054,320	95,089	1,149,409

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED JUNE 30, 2016 (Unaudited) AND JUNE 30, 2015 (Unaudited)

(With comparative figures for the period January 14, 2014 (date of incorporation) to June 30, 2014)

Share capital	Other capital reserve	Translation reserve	Hedging reserve	Pension reserve	Retained earnings	Attributable to owners of the company	Non -controlling interests	Total
US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000

Balance at January 14, 2014   (date of incorporation) (Note 20)	-	-	-	-	-	-	-	-	-
Transactions with owners, recognised directly in equity
Issue of share capital (Notes 20 & 21)	1,022,944	34,191	-	-	-	-	1,057,135	-	1,057,135
Acquisition of Subsidiaries (Note 27)	-	-	-	-	-	-	-	100,560	100,560
Total comprehensive income for the period
Profit for the financial period	-	-	-	-	-	7,249	7,249	1,934	9,183
Other comprehensive income for   the financial period	-	-	15,102	377	98	-	15,577	192	15,769
Total	-	-	15,102	377	98	7,249	22,826	2,126	24,952
Dividends paid by a subsidiary (Note 26)	-	-	-	-	-	-	-	(4,369)	(4,369)
Balance at June 30, 2014	1,022,944	34,191	15,102	377	98	7,249	1,079,961	98,317	1,178,278

See accompanying notes to the consolidated financial statements

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30, 2016 (Unaudited) AND 2015 (Unaudited)

(With comparative figures for the period January 14, 2014 (date of incorporation) to June 30, 2014)

	Note	2016	2015	2014
		US$’000 Unaudited	US$’000 Unaudited	US$’000
Operating activities
Profit for the year/ period		60,164	52,301	9,183
Adjustments for:
Income tax expenses recognised in profit or loss		24,975	20,755	4,869
Share of loss of associates		(846)	1,034	866
Depreciation of property, plant and equipment		29,620	38,153	6,619
Amortisation of intangible assets		9,503	9,511	3,192
Gain on disposal of property, plant and equipment		(13)	(190)	(21)
Unrealised foreign exchange loss (gain)		423	221	(356)
Allowance for doubtful debts		10	399	1,549
Reversal of allowance for doubtful debts		(1,094)	(469)	(387)
Finance costs		4,393	5,276	2,664
Retirement benefits expenses		3,404	4,591	1,924
Allowance for inventory obsolescence   Reversal of allowance for inventory obsolescence		321  (332)	430 (2,485)	1,749 -
Finance income		(1,628)	(3,132)	(1,780)
Operating cash flows before movements in working capital		128,900	126,395	30,071
Inventories		846	3,668	544
Trade and other receivables		(104)	12,498	(25,539)
Prepayments		(1,270)	453	189
Provisions		41	(609)	568
Trade and other payables		4,025	(10,428)	35,736
Cash generated from operations		132,438	131,977	41,569
Income tax (paid) refunded		(23,553)	(20,708)	5,298
Retirement benefit obligations paid		(1,206)	(2,582)	(1,034)
Net cash from operating activities		107,679	108,687	45,833
Investing activities
Interest received		1,628	3,132	1,780
Dividends received from associate		2,214	1,680	-
Purchase of property, plant and equipment		(32,287)	(68,651)	(14,935)
Additions of intangible assets		(173)	(103)	(31)
Cash acquired from acquisition of subsidiaries	27	-	-	96,541
Proceeds on disposal of property, plant and equipment		747	821	2,559
Net cash (used in) from investing activities		(27,871)	(63,121)	85,914

(Forward)

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30, 2016 (Unaudited) AND JUNE 30, 2015 (Unaudited)

(With comparative figures for the period January 14, 2014 (date of incorporation) to June 30, 2014)

	Note	2016	2015	2014
		US$’000	US$’000	US$’000
		Unaudited	Unaudited
Financing activities
Interest paid   Amount due from associate		(4,393) (3,600)	(5,276) -	(2,664) -
Repayment of loans and borrowings		(20,168)	(140,663)	(24,527)
Proceeds from loans and borrowings		3,287	135,716	13,435
Dividends to a non-controlling interests		(9,769)	(6,884)	(4,369)
Dividends to owners of the Company		(49,303)	(17,683)	-
Net cash used in financing activities		(83,946)	(34,790)	(18,125)
Net (decrease) increase in cash and cash equivalents		(4,138)	10,776	113,622
Cash and cash equivalents at beginning of year/ period		119,196	117,077	-
Effects of exchange rate changes on the balance of   cash held in foreign currencies		(10,623)	(8,657)	3,455
Cash and cash equivalents at the end of financial   year/period	6	104,435	119,196	117,077

See accompanying notes to the consolidated financial statements.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

1 GENERAL

The company (Registration No. 201401466N) is incorporated in Singapore with its principal place of business and registered office at 8 Boon Lay Way, #02-05/06 Tradehub 21, Singapore 609964. The financial statements are expressed in United States Dollars, and all values are rounded to the nearest thousand (US$’000), unless otherwise indicated.

The principal activity of the company is that of an investment holding company.

The group is the leading multi-country plasterboard producer in Asia, with manufacturing sites in China, Thailand, Indonesia, South Korea, Vietnam, India, Malaysia, Philippines and Oman. In addition to plasterboard manufacturing plants, the group also has ceiling tile plants, metal roll forming lines and facilities for the production of jointing compounds and industrial plasters throughout the region, as well as a gypsum mine in Oman and Thailand.

The principal activities of the subsidiaries and associates are disclosed in Note 13 and Note 14 to the consolidated financial statements.

The consolidated financial statements of the group for the year ended June 30, 2016 were authorised for issue by management on [______], 2016.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING - The consolidated financial statements have been prepared in accordance with the historical cost basis, except as disclosed in the accounting policies below, and are drawn up in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (“IASB”).

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the group takes into account the characteristics of the asset or liability which market participants would take into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2 Shared-based Payments, leasing transactions that are within the scope of IAS 17 Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 Inventories or value in use in IAS 36 Impairment of Assets.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

ADOPTION OF NEW AND REVISED STANDARDS -     At the date of authorisation of these consolidated financial statements, the following IFRS and amendments to IFRS that are relevant to the group were issued but not effective:

IFRS 9        Financial Instruments ² 

IFRS 15    Revenue from Contracts with Customers ² 

Clarification to IFRS 15     Revenue from Contracts with Customers ² 

IFRS 16    Leases⁴ 

Amendments to IAS 7 Disclosure Initiative³ 

Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised

Losses³ 

Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions¹ 

¹              Effective for annual periods beginning on or after January 1, 2018

²              Effective for annual periods beginning on or after January 1, 2018, with earlier application

permitted

³              Effective for annual periods beginning on or after January 1, 2017

⁴         Effective for annual periods beginning on or after January 1, 2019

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Management is currently evaluating the impact of the above IFRS on the financial statements of the group in the period of initial adoption.

BASIS OF CONSOLIDATION - The consolidated financial statements incorporate the financial statements of the company and entities (including structured entities) controlled by the company and its subsidiaries. Control is achieved when the company:

• Has power over the investee;

• Is exposed, or has rights, to variable returns from its involvement with the investee; and

• Has the ability to use its power to affect its returns.

The company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

When the company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The company considers all relevant facts and circumstances in assessing whether or not the company’s voting rights in an investee are sufficient to give it power, including:

• The size of the company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

• Potential voting rights held by the company, other vote holders or other parties;

• Rights arising from other contractual arrangements; and

• Any additional facts and circumstances that indicate that the company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Consolidation of a subsidiary begins when the company obtains control over the subsidiary and ceases when the company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the date the company gains control until the date when the company ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the group’s accounting policies.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Changes in the group’s ownership interests in existing subsidiaries

Changes in the group’s ownership interests in subsidiaries that do not result in the group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the company.

When the group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39, when applicable, the cost on initial recognition of an investment in an associate.

BUSINESS COMBINATIONS - Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the acquisition date fair values of assets given, liabilities incurred by the group to the former owners of the acquiree, and equity interests issued by the group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39 Financial Instruments: Recognition and Measurement, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or loss.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Where a business combination is achieved in stages, the group’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under the IFRS are recognised at their fair value at the acquisition date, except that:

• Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;

• Liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement of an acquiree’s share-based payment awards transactions with share-based payment awards transactions of the acquirer in accordance with the method in IFRS 2 Share-based Payment at the acquisition date; and

• Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

The measurement period is the period from the date of acquisition to the date the group obtains complete information about facts and circumstances that existed as of the acquisition date and is subject to a maximum of one year from acquisition date.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

FINANCIAL INSTRUMENTS - Financial assets and financial liabilities are recognised on the group’s statement of financial position when the group becomes a party to the contractual provisions of the instrument.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or where appropriate, a shorter period. Income and expense is recognised on an effective interest basis for debt instruments.

Financial assets

All financial assets are recognised and de-recognised on a trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value plus transaction costs, except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value.

Financial assets are classified into the following specified categories: financial assets “at fair value through profit or loss”, “held-to-maturity investments”, “available-for-sale” financial assets and “loans and receivables”. The classification depends on the nature and purpose of financial assets and is determined at the time of initial recognition.

Loans and receivables

Trade and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as “loans and receivables”. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest method, except for short-term receivables when the effect of discounting is immaterial.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

Objective evidence of impairment could include:

• Significant financial difficulty of the issuer or counterparty; or

• Default or delinquency in interest or principal payments; or

• It becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 30 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against an allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

For financial assets measured at amortised cost, if in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Derecognition of financial assets

The group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the group retains substantially all the risks and rewards of ownership of a transferred financial asset, the group continues to recognise the financial asset and also recognises a collateralized borrowing for the proceeds received.

Financial liabilities and equity instruments

Classification as debt or equity

Financial liabilities and equity instruments issued by the group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.  Equity instruments are recorded at the proceeds received, net of direct issue costs.

Financial liabilities

Financial liabilities are classified as either financial liabilities “at fair value through profit or loss” or other financial liabilities.

Other financial liabilities

Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, using the effective interest method, with interest expense recognised on an effective yield basis.

Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the group’s accounting policy for borrowing costs (see below).

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Derecognition of financial liabilities

The group derecognises financial liabilities when, and only when, the group's obligations are discharged, cancelled or they expire.

Derivative financial instruments and hedge accounting

The group enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risk, including foreign exchange forward contracts. Further details of derivative financial instruments are disclosed in Note 8 to the financial statements.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. The group designates certain derivatives as hedges of foreign currency risk of firm commitments (cash flow hedges).

A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

Hedge accounting

The group designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, as cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

At the inception of the hedge relationship the entity documents the relationship between the hedging instrument and hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in fair values or cash flows of the hedged item.

Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss as part of other gains and losses.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Amounts recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item is recognised in profit or loss in the same line of the statement of profit or loss and other comprehensive income as the recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously accumulated in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued when the group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any gain or loss accumulated in equity at that time remains in equity and when the forecast transaction is ultimately recognised in profit or loss, such gains and losses are recognised in profit or loss, or transferred from equity and included in the initial measurement of the cost of the asset or liability as described above. When a forecasted transaction is no longer expected to occur, the cumulative gain or loss that was accumulated in equity is recognised immediately in profit or loss.

Offsetting arrangements

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when the company and the group has a legally enforceable right to set off the recognised amounts; and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. A right to set-off must be available today rather than being contingent on a future event and must be exercisable by any of the counterparties, both in the normal course of business and in the event of default, insolvency or bankruptcy.

LEASES - Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The group as lessee

Assets held under finance leases are recognised as assets of the group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the group’s general policy on borrowing costs (see below). Contingent rentals are recognised as expenses in the periods in which they are incurred.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

INVENTORIES - Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

Mineral reserves are depreciated by the unit of productions over the estimated production from mining. Depreciation of other property, plant and equipment is charged so as to write off the cost of assets, other than properties under construction, over their estimated useful lives, using the straight-line method on the following bases:

Leasehold land        50 - 60 years

Buildings        20 - 50 years

Machinery        5 - 25 years

Office equipment, vehicles and fixtures and fittings    3 - 10 years

The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, if there is no certainty that the lessee will obtain ownership by the end of the lease term, the asset shall be fully depreciated over the shorter of the lease term and its useful life.

The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Fully depreciated assets still in use are retained in the financial statements.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

GOODWILL - Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

If, after reassessment, the group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary or the relevant cash generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

INTANGIBLE ASSETS - Intangible assets acquired separately are reported at cost less accumulated amortisation (where they have finite useful lives) and accumulated impairment losses. Intangible assets with finite useful lives are amortised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives are not amortised. Each period, the useful lives of such assets are reviewed to determine whether events and circumstances continue to support an indefinite useful life assessment for the asset.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS EXCLUDING GOODWILL - At the end of each reporting period, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired.

ASSOCIATES - An associate is an entity over which the group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the group’s share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the group’s interest in that associate (which includes any long-term interests that, in substance, form part of the group’s net investment in the associate) are not recognised, unless the group has incurred legal or constructive obligations or made payments on behalf of the associate.

Investments in associates are accounted for using the equity method from the date on which the investee becomes an associate. On acquisition of the investments in associates, any excess of the cost of the investment over the group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired.

The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the group’s investments in associates. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

When the group reduces its ownership interest in an associate but the group continues to use the equity method, the group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities.

Where a group entity transacts with an associate of the group, profits and losses are eliminated to the extent of the group’s interest in the relevant associate.

PROVISIONS - Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that the group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

A restructuring provision is recognised when the group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity.

REVENUE RECOGNITION - Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

Sale of goods

Revenue from the sale of goods is recognised when all the following conditions are satisfied:

• The group has transferred to the buyer the significant risks and rewards of ownership of the goods;

• The group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• The amount of revenue can be measured reliably;

• It is probable that the economic benefits associated with the transaction will flow to the entity; and

• The costs incurred or to be incurred in respect of the transaction can be measured reliably.

Finance income

Finance income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Dividend income

Dividend income from investments is recognised when the shareholders’ rights to receive payment has been established.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

BORROWING COSTS - Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

RETIREMENT BENEFIT COSTS - Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes in various countries, are dealt with as payments to defined contribution plans where the group’s obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.        

For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting period. Remeasuement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:

• Service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);

• Net interest expense or income; and

• Remeasurement.

The group presents the first two components of defined benefit costs in profit or loss. Curtailment gains and losses are accounted for as past service costs.

The retirement benefit obligations recognised in the statement of financial position represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service cost.  Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plan.

A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

EMPLOYEE LEAVE ENTITLEMENT - Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period.

INCOME TAX - Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the statement of profit and loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The group’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where the company and subsidiaries operate by the end of the reporting period.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised on taxable temporary differences arising on investments in subsidiaries and associates, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have enacted or substantively enacted by the end of the reporting period.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited outside profit or loss (either in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss (either in other comprehensive income or directly in equity, respectively), or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost.

FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION - The individual financial statements of each group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements of the group are presented in United States Dollars, which is the functional currency of the company and the presentation currency for the group’s consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rate of exchange prevailing on the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the end of the reporting period. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised in other comprehensive income. For such non-monetary items, any exchange component of that gain or loss is also recognised in other comprehensive income.

Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Exchange differences on transactions entered into in order to hedge certain foreign currency risks are described in the hedge accounting policies above.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the group’s foreign operations are expressed in United States Dollars using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in a separate component of equity under the header of translation reserve.

On the disposal of a foreign operation (i.e. a disposal of the group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or loss of significant influence over an associate that includes a foreign operation), all of the accumulated exchange differences in respect of that operation attributable to the group are reclassified to profit or loss. Any exchange differences that have previously been attributed to non-controlling interests are derecognised, but they are not reclassified to profit or loss.

In the case of a partial disposal (i.e. no loss of control) of a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. of associates or jointly controlled entities that do not result in the group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are recognised in other comprehensive income and accumulated in a separate component of equity under the header of translation reserve.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

CASH AND CASH EQUIVALENTS IN THE STATEMENT OF CASH FLOWS - Cash and cash equivalents in the statement of cash flows comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the group’s accounting policies, which are described in Note 2, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the group’s accounting policies

The directors are of the opinion that there are no instances of application of judgments which are expected to have a significant effect on the amounts recognised in the consolidated financial statements.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Impairment of intangible assets with indefinite useful lives

The group and the company test the intangible assets with indefinite useful lives annually or more frequently if there are indications that these intangible assets might be impaired.

The group and the company prepare cash flow forecasts derived from the most recent financial budgets approved by directors for the next five years and extrapolates cash flows for the following five years. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the cash generating units (CGUs) that the intangible assets with indefinite useful lives are allocated to. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. No impairment loss has been recognised for the group and the company based on the above basis.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (cont’d)

Impairment of mineral reserves

Included in mineral reserves of the Group (Note 10) is a mineral reserve acquired by Boonyavajara Mining Co. Ltd., a wholly-owned subsidiary of the Group, which amounted to US$5,787,000 (unaudited) (2015: US$5,554,000, unaudited). As of June 30, 2016, the subsidiary is in the process of obtaining all the necessary permissions from the relevant government authorities in Thailand in order to commence the mining operations at the new mine. The amount paid by the said subsidiary is non-refundable.

The subsidiary has obtained written permissions from the government authorities subsequent to the end of the financial year. The mining operations will commence in the next financial year and the first batch of production is expected to be delivered in January 2017. No impairment loss has been recognised for the group based on the above basis.

Depreciation of property, plant and equipment

The cost of property, plant and equipment except for capital work-in-progress, is depreciated on a straight-line basis over the assets’ useful lives. The group reviews the remaining useful lives of property, plant and equipment at the end of each reporting period and ensures consistency with previous estimates and patterns of consumption of the economic benefits that embodies the items in these assets. Changes in useful lives of property, plant and equipment may result in revision of future depreciation charges. The carrying amount of the group’s property, plant and equipment at the end of the reporting period are disclosed in Note 10.

Impairment assessment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. The carrying amount of the group’s goodwill as of June 30, 2016 amounted to US$406,425,000 (unaudited) (2015: US$421,554,000, (unaudited)). Further details are disclosed in Note 12.

Deferred tax assets

Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Significant directors’ judgement is required to determine the amount of deferred tax assets that can be recognised, based upon likely timing and level of future tax planning strategies. The unused tax losses of the group is disclosed in Note 15.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (cont’d)

Impairment of trade receivables

The group assesses at the end of each reporting period whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the group considers factors such as the probability of insolvency or significant difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. While the estimation process includes historical data and analysis, there is a significant amount of judgement applied in selecting inputs and analysing the results produced to determine the impairment allowances. The carrying amount of the group’s trade receivables at the end of the reporting period are disclosed in Note 7.

Allowance for inventories obsolescence

The group’s policy for allowance for inventories obsolescence is based on the aging analysis of inventories and on management’s judgement on the realisability of the inventories. At the end of each reporting period, management is of the opinion that the allowance for inventories obsolescence is adequate and not excessive. The carrying amount of group’s inventories at June 30, 2016 were approximately US$49,046,000 (unaudited) (2015: US$49,881,000 (unaudited), net of allowance for inventories of US$1,806,000 (unaudited) (2015: US$1,815,000 (unaudited)).

Retirement benefit obligations

The group’s defined benefit plan is determined based on actuarial valuation. The actuarial valuation involves making assumptions regarding the discount rate, future salary increases and attrition rates. Due to the long term nature of the defined benefit plan, such estimates are subject to significant uncertainty. Information on the actuarial technique and assumptions used are disclosed in Note 19.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT

(a) Categories of financial instruments

The following table sets out the financial instruments as at the end of the financial year:

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Financial assets
Loans and receivables:
Trade and other receivables (Note 7)	108,516	104,681
Cash and cash equivalents	104,435	119,196
Derivative instruments in designated hedge accounting	949	2
Financial liabilities
Other financial liabilities:
Trade and other payables	138,892	134,867
Loans and borrowings	49,754	67,566
Derivative instruments in designated hedge accounting	-	1,807

(b)    Financial risk management policies and objectives

The operations of the group are subject to various financial risks which include foreign currency risk, interest rate risk, credit risk and liquidity risk. The group has taken measures to minimise their exposure to risks and/or costs associated with the financing, investing and operating activities of the group.

The group seeks to minimise the effects of these risks by using derivative financial instruments to hedge risk exposure. The use of financial derivatives is governed by the group’s policies approved by the Board of Directors. Compliance with policies and exposure limits is monitored on an ongoing basis to mitigate risk exposures.

(i)    Foreign exchange risk management

The group transacts business in various foreign currencies. The group’s foreign exchange exposures arise mainly from the exchange rate movement of these foreign currencies against the respective entity’s functional currency.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

(b)    Financial risk management policies and objectives (cont’d)

(i)    Foreign exchange risk management (cont’d)

At the end of the financial year, the significant carrying amounts of monetary assets and monetary liabilities denominated in currencies other than the respective entity’s functional currency are as follows:

	Assets	Liabilities
	US$’000	US$’000
2016– Unaudited
United States Dollars	10,125	58,415
2015– Unaudited
United States Dollars	62,362	83,018

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

(b)    Financial risk management policies and objectives (cont’d)

(i)    Foreign exchange risk management (cont’d)

Foreign currency sensitivity

The following table details the sensitivity analysis of a 10% increase and decrease in the relevant foreign currencies against the functional currency of each group entity. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents the directors’ assessment of the reasonably possible change in foreign exchange rates.

If the relevant foreign currency strengthens/weakens by 10% against the functional currency of each group entity, profit or loss will increase/decrease by:

	Profit or loss		Profit or loss
	increase (decrease)		increase (decrease)
	+10	%	– 10%
	US$’000		US$’000
2016 – Unaudited
United States Dollars	(4,829)		4,829
2015– Unaudited
United States Dollars	(2,066)		2,066

2014
United States Dollars	(882)	882

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

(b)    Financial risk management policies and objectives (cont’d)

(ii)    Interest rate risk management

The group’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The group’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates.

The group adopts a practice to continuously seek alternative banking facilities which provide competitive interest rates to finance and/or refinance its working capital requirement.

Interest rate sensitivity

The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents the directors’ assessment of the reasonably possible change in interest rates.

If interest rates had been 100 basis points higher or lower and all other variables were held constant, the group’s profit for the financial period would increase/decrease by US$659,000 as of June 30, 2016 (unaudited) (2015: US$570,000 (unaudited)) (2014: US$110,000). This is mainly attributable to the group’s exposure to interest rates on its variable rate borrowings.

(iii)    Credit risk management

Credit risk is the risk of a financial loss to the group if a counterparty to a financial instrument fails to meet its contractual obligations. The group’s exposure to credit risk arises principally from its receivables from customers.

Directors have a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount.

As at the end of the financial year, the maximum exposure to credit risk arising from receivables is represented by the carrying amounts in the consolidated statement of financial position.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

(b)    Financial risk management policies and objectives (cont’d)

(iii)    Credit risk management (cont’d)

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

(iv)    Liquidity risk management

Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s exposure to liquidity risk arises principally from its various payables, loans and borrowings.

The group maintains a level of cash and cash equivalents and bank facilities deemed adequate by the directors to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due.            

Liquidity and interest risk analysis

Non-derivative financial liabilities

The following tables detail the remaining contractual maturity for non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the group can be required to pay. The table includes both interest and principal cash flows. The adjustment column represents the possible future cash flows attributable to the instrument included in the maturity analysis which is not included in the carrying amount of the financial liabilities on the consolidated statement of financial position.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

(iv)    Liquidity risk management (cont’d)

Non-derivative financial liabilities (cont’d)

2016	Weighted average effective interest    rate	On demand or within   1 year	Within 2 to   5 years	After  5 years	Adjustment	Total
(Unaudited)	%	US$’000	US$’000	US$’000	US$’000	US$’000
Non-interest    bearing	-	134,239	-	-	-	134,239
Variable   interest rate	1.50-13.00	5,483	10,850	29,107	(7,213)	38,227
Fixed   interest rate	2.00-8.00	2,747	9,301	4,507	(375)	16,180
		142,469	20,151	33,614	(7,588)	188,646

2015	Weighted average effective interest    rate	On demand or within   1 year	Within 2 to 5years	After  5 years	Adjustment	Total
(Unaudited)	%	US$’000	US$’000	US$’000	US$’000	US$’000
Non-interest bearing	-	134,867	-	-	-	134,867
Variable   interest rate	1.50-11.00	24,291	18,070	23,498	(8,884)	56,975
Fixed   interest rate	2.00-8.00	2,801	9,057	-	(1,267)	10,591
		161,959	27,127	23,498	(10,151)	202,433

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

(iv)    Liquidity risk management (cont’d)

Non-derivative financial assets

The following table details the expected maturity for non-derivative financial assets. The tables below have been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets except where the group and the company anticipates that the cash flow will occur in a different period. The adjustment column represents the possible future cash flows attributable to the instrument included in the maturity analysis which are not included in the carrying amount of the financial assets on the statement of financial position.

2016	Weighted average effective interest rate	On demand or within 1 year	Within 1 to 2 years	Within 2 to 5 years	After 5 years	Adjustment	Total
(Unaudited)	%	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
Non-   interest bearing	-	104,478	292	896	2,057	-	107,723
Fixed   interest rate	0.10-6.80	104,435	573	620	1,833	(2,233)	105,228
		208,913	865	1,516	3,890	(2,233)	212,951

2015	Weighted average effective interest rate	On demand or within 1 year	Within 1 to 2 years	Within 2 to 5 years	After 5 years	Adjustment	Total
(Unaudited)	%	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
Non-   interest bearing	-	99,271	569	429	1,156	-	101,425
Fixed   interest rate	1.80-6.90	119,196	474	1,035	1,783	(36)	122,452
		218,467	1,043	1,464	2,939	(36)	223,877

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

(iv)    Liquidity risk management (cont’d)

Derivative financial instruments

The following table details the liquidity analysis for derivative financial instruments. The table has been drawn up based on the undiscounted gross inflows and (outflows) on those derivatives that require gross settlement.

2016	Assets On demand or within    1 year	Liabilities On demand or within 1 year
(Unaudited)	US$’000	US$’000
Gross settled:
Foreign exchange     forward contracts	949	-

2015
(Unaudited)
Gross settled:
Foreign exchange     forward contracts	2	(1,807)

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

(v)    Fair value of financial assets and financial liabilities

The group determines fair values of various financial assets and financial liabilities in the following manner.

Fair value of financial asset and financial liability that re-measured at fair value on a recurring basis

Unaudited
Financial assets/liabilities	Fair value as at   June 30, 2016		Fair value hierarchy	Valuation technique(s)     and key input(s)	Significant unobservable      input	Relationship of unobservable inputs to fair       value
	Assets US$’000	Liabilities US$’000
Foreign currency    forward    contracts	949	-	Level 2	Discounted cash flow. Future cash flows are estimated based on forward exchange rates (from observable forward exchange rates at the end of the financial year) and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.	N/A	N/A

There were no transfer between level 1 and level 2 of the fair value hierarchy during the year (unaudited).

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

(v)    Fair value

Unaudited
Financial assets/liabilities	Fair value as at June 30, 2015 (Unaudited)		Fair value hierarchy	Valuation technique(s) and key input(s)	Significant unobservable input	Relationship of unobservable inputs to fair value
	Assets US$’000	Liabilities US$’000
Foreign currency   forward   contracts	2	1,807	Level 2	Discounted cash flow. Future cash flows are estimated   based on forward exchange   rates (from observable forward   exchange rates at the end of   the financial year) and   contract forward rates,   discounted at a rate that   reflects the credit risk of   various counterparties.	N/A	N/A

There were no transfers between level 1 and level 2 of the fair value hierarchy during the year (unaudited).

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

(v)    Fair value

Financial assets/liabilities	Fair value as at June 30, 2014		Fair value hierarchy	Valuation technique(s) and key input(s)	Significant unobservable input	Relationship of unobservable inputs to fair value
	Assets US$’000	Liabilities US$’000
Foreign currency   forward   contracts	310	115	Level 2	Discounted cash flow. Future cash flows are estimated   based on forward exchange   rates (from observable forward   exchange rates at the end of   the reporting period) and   contract forward rates,   discounted at a rate that   reflects the credit risk of   various counterparties.	N/A	N/A

There were no transfers between level 1 and level 2 of the fair value hierarchy during the period.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

Fair value of the group’s financial assets and financial liabilities that are not measured at fair value on a recurring basis (but fair value disclosures are required)

The carrying amounts of the financial assets and financial liabilities recognised at amortised cost approximate their fair values due to relatively short-term nature or immediate maturity of these financial instruments other than as stated below:

• Long Term Loan:-The carrying amounts of other non-current receivables and other non-current liabilities approximate their respective fair values as they carry floating rates or more then market rate. The fair values of other classes of financial assets and liabilities are disclosed in the respective notes to financial statements.

(c) Capital risk management policies and objectives

The group’s objectives when managing capital is to maintain a strong capital base and safeguard the group’s ability to continue as a going concern, so as to maintain investor and creditor confidence and to sustain future development of the business. The management monitors and are determined to maintain an optimal debt-to-equity ratio that complies with debt covenants.

The capital structure of the group consists of equity attributable to owners of the parent, comprising issued capital, reserves and retained earnings. The group is not subject to any externally imposed capital requirements.

The management’s strategy remained unchanged from 2015.

5 RELATED COMPANY TRANSACTIONS

Compensation of key management personnel

The remuneration of other members of key management during the financial year was as follows:

	2016	2015	2014
	US$’000	US$’000	US$’000
	Unaudited	Unaudited
Salaries and short-term benefits	6,638	6,465	1,445
Contribution to defined contribution plans	122	110	64
	6,760	6,575	1,509

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

6 CASH AND CASH EQUIVALENTS

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Cash at bank	52,416	86,148
Deposits placed with licensed banks	52,019	33,048
Cash and cash equivalents in the consolidated statement   of cash flows	104,435	119,196

The average effective interest rate and maturity of deposits at the end of the year were as follows:

	2016		2015
	Unaudited		Unaudited
Effective interest rate	2.3	%	1.80%
Maturity days	45		57

7 TRADE AND OTHER RECEIVABLES

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Current:
Trade receivables	88,636	84,377
Less: Allowance for doubtful debts	(1,589)	(980)
	87,047	83,397
Other receivables and refundable deposits	13,831	15,876
	100,878	99,273

(Forward)

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

7 TRADE AND OTHER RECEIVABLES (cont’d)

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Non-current:
Long-term loans to employees	3,026	3,256
Refundable deposits	1,012	1,063
Amount due from associate	3,600	-
Club membership	327	392
Others	1,909	1,980
	9,874	6,691

Long-term loans to employees bear interest rates at 2.0% (unaudited) (2015: 2.0% (unaudited)) per annum and are repayable within the next 2 to 16 years (unaudited) (2015: 2 to 16 years (unaudited)).

Amount due from associate which arose mainly from intercompany loan, is unsecured, interest free and repayable on demand.

The average credit period on sales of goods is 30 to 90 days (unaudited) (2015: 30 to 90 days, unaudited). No interest is charged on the outstanding trade receivables.

Trade receivables disclosed above include amounts that are past due at the end of the reporting period for which the group has not recognised an allowance for doubtful debts because there has not been a significant change in credit quality and the amounts are still considered recoverable. The group does not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by the group to the counterparty.

The table below is an analysis of trade receivables as at June 30:

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Not past due and not impaired	73,959	50,218
Past due and not impaired	13,088	33,719
	87,047	83,397

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

7 TRADE AND OTHER RECEIVABLES (cont’d)

The ageing of these trade receivables are as follows:

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Not past due	73,959	50,218
Past due 1 - 30 days	4,306	17,339
Past due 31 - 90 days	3,624	7,980
Past due more than 90 days	5,158	7,860
	87,047	83,397

Movement in the allowance for doubtful debts

At beginning of year	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
At beginning of year	980	1,255
Additions (Note 25)	10	399
Allowance no longer required (Note 25)	(1,094)	(469)
Effect of foreign currency exchange differences	1,693	(205)
At end of year	1,589	980

Impaired trade receivables are all past due more than 90 days (unaudited) (2015: 90 days (unaudited)).

In determining the recoverability of a trade receivable, the group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting date. The management believes that no further credit provision is required.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

8 DERIVATIVE FINANCIAL INSTRUMENTS

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Derivative financial assets:
Foreign currency forward contract	949	2
Derivative financial liabilities:
Foreign currency forward contract	-	1,807

The group utilises currency derivatives to hedge significant future transactions and cash flows. The group is party to a variety of forward foreign exchange contracts in the management of its exchange rate exposures. The instruments purchased are primarily denominated in the currencies of the group’s principal markets.

At the end of the reporting period, the total notional amount of outstanding forward foreign exchange contracts to which the group is committed are as follows.

	2016	2015
	US$’000 Unaudited	US$’000 Unaudited
Forward foreign exchange contracts:
- Sell United States Dollar	101,000	57,275
- Sell Singapore Dollar	-	1,783

These arrangements are designed to address significant exchange exposures and are renewed on a revolving basis as required.

The fair value of currency derivatives that are designated and effective as cash flow hedges amounting to US$244,000 (unaudited) at June 30, 2016 (2015: US$543,000 (unaudited), 2014: US$377,000) has been recognised in other comprehensive income.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

8 DERIVATIVE FINANCIAL INSTRUMENTS (cont’d)

The following table details the forward foreign currency contracts outstanding as at the end of the reporting period.

Outstanding contracts	Average exchange rate	Foreign currency	Contract value	Fair value
		’000	US$’000	US$’000
As at June 30, 2016 (Unaudited)
Sell United States Dollar
3 to 9 months
- Thai Baht	35.72	143,180	4,000	62
9 to 12 months
- Thai Baht	35.72	71,659	2,000	31
- Korean Won	1,174	111,739,000	95,000	856
Total			101,000	949
As at June 30, 2015 (Unaudited)
Sell United States Dollar
3 to 9 months
- Thai Baht	32.92	174,619	5,275	(126)
9 to 12 months
- Thai Baht	33.64	67,670	2,000	(10)
- Korean Won	1,086.67	54,554,000	50,000	(1,616)
Sell Singapore Dollar
3 to 9 months
- Thai Baht	24.11	43,434	1,337	(55)
9 to 12 months
- Thai Baht	25.29	15,179	446	2
Total			59,058	(1,805)

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

9    INVENTORIES

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Raw materials	19,080	20,216
Work-in-progress	149	218
Finished goods	23,671	23,767
Spare parts and other supplies	7,952	7,495
	50,852	51,696
Less: Allowance for inventories obsolescence	(1,806)	(1,815)
	49,046	49,881

	2016	2015	2014
	US$’000	US$’000	US$’000
	Unaudited	Unaudited
Recognised in profit or loss:
Inventories recognised as cost of sales	334,798	386,307	140,285

During the year, the group carried out a review of the allowance on inventories and the review led to the write back of allowance for slow-moving inventories of US$332,000 (unaudited) (2015: US$2,485,000 (unaudited)) (2014: US$288,000). Previous write-down has been reversed as a result of the sales of these slow-moving inventories subsequent to year end.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

10 PROPERTY, PLANT AND EQUIPMENT

	Mineral reserves and leasehold land	Buildings		Machinery, office equipment, vehicles, fixtures and fittings		Properties underconstruction		Total
	US$’000	US$’000		US$’000		US$’000		US$’000
Cost
At July 1, 2014 (unaudited)	122,519		118,479		272,972		21,380		535,350
Additions	3,768		5,672		8,761		50,761		68,962
Disposals	-		(11,561)		(3,443)		(2,053)		(17,057)
Reclassification	60,847		20,497		(30,405)		(50,939)		-
Transferred to intangible assets	-		-		-		(14)		(14)
Transferred to other receivables	(915)		-		-		-		(915)
Transferred from other receivables	1,266		-		-		-		1,266
Effect of foreign currency exchange   differences	(6,656)		(8,498)		(24,325)		(1,003)		(40,482)
At June 30, 2015 (unaudited)	180,829		124,589		223,560		18,132		547,110

(Forward)

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

10 PROPERTY, PLANT AND EQUIPMENT (cont’d)

	Mineral reserves and leasehold land	Buildings		Machinery, office equipment, vehicles, fixtures and fittings		Properties underconstruction		Total
	US$’000	US$’000		US$’000		US$’000		US$’000
Cost
At July 1, 2015 (unaudited)	180,829		124,589		223,560		18,132		547,110
Additions	991		1,814		11,320		18,162		32,287
Disposals	-		(31)		(5,480)		-		(5,511)
Reclassification	-		1,553		14,113		(15,666)		-
Transferred to intangible assets	-		-		-		-		-
Transferred to other receivables	-		-		-		-		-
Transferred from other receivables	-		-		-		-		-
Effect of foreign currency exchange   differences	(4,916)		3,147		(14,712)		(1,593)		(18,074)
At June 30, 2016 (unaudited)	176,904		131,072		228,801		19,035		555,812

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

10 PROPERTY, PLANT AND EQUIPMENT (cont’d)

Mineral reserves and leasehold land	Buildings	Machinery, office equipment, vehicles, fixtures and fittings	Properties underconstruction	Total
US$’000	US$’000	US$’000	US$’000	US$’000

Accumulated depreciation
At July 1, 2014 (unaudited)	269	3,136	3,256	-	6,661
Depreciation charge for the year	2,639	11,293	24,221	-	38,153
Disposals	-	(11,054)	(3,352)	-	(14,406)
Impairment	-	-	16	-	16
Reclassification	560	27	(587)	-	-
Effect of foreign currency exchange   differences	(211)	(3,402)	(12,794)	-	(16,407)
At June 30, 2015 (unaudited)	3,257	-	10,760	-	14,017
Depreciation charge for the year	4,273	7,001	18,346	-	29,620
Disposals	-	(1)	(4,776)	-	(4,777)
Effect of foreign currency exchange   differences	(613)	8,203	(3,311)	-	4,279
At June 30, 2016 (unaudited)	6,917	15,203	21,019	-	43,139

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

10 PROPERTY, PLANT AND EQUIPMENT (cont’d)

	Mineral reserves and leasehold land	Buildings		Machinery, office equipment, vehicles, fixtures and fittings		Properties underconstruction		Total
	US$’000	US$’000		US$’000		US$’000		US$’000
Carrying Amount
At June 30, 2016 (unaudited)	169,987		115,869		207,782		19,035		512,673
At June 30, 2015 unaudited)	177,572		124,589		212,800		18,132		533,093

As at June 30, 2016, net book value of the group’s property, plant and equipment held under finance lease arrangements totaled US$554,000 (unaudited)

(2015: US$471,000 (unaudited)).

1

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

11 INTANGIBLE ASSETS

	Software	Other intangible assets		Total
	US$’000	US$’000		US$’000
Cost
At July 1, 2014 (unaudited)	1,226		114,295		115,521
Additions	103		-		103
Transferred from property, plant and   equipment	` 14		-		14
Effect of foreign currency exchange   differences	(526)		(1,134)		(1,660)
At June 30, 2015 (unaudited)	817		113,161		113,978
Additions	167		6		173
Effect of foreign currency exchange   differences	(274)		(821)		(1,095)
At June 30, 2016 (unaudited)	710		112,346		113,056
Accumulated amortisation
At July 1, 2014 (unaudited)	408		2,977		3,385
Amortisation for the year (Note 25)	275		9,236		9,511
Effect of foreign currency exchange   differences	(319)		(149)		(468)
At June 30, 2015 (unaudited)	239		12,189		12,428
Amortisation for the year (Note 25)	281		9,222		9,503
Effect of foreign currency exchange   differences	(397)		(1)		(398)
At June 30, 2016 (unaudited)	123		21,410		21,533
Carrying amount
At June 30, 2015 (unaudited)	578		100,972		101,550
At June 30, 2016 (unaudited)	587		90,936		91,523

2

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

11 INTANGIBLE ASSETS (cont’d)

The average remaining amortisation periods for technology intellectual property and distribution network and customer relationships at June 30, 2016 are 9 years and 5 years respectively (unaudited) (2015: 10 years and 6 years (unaudited)). The average remaining amortisation period for software at June 30, 2016 is 4 years (unaudited) (2015: 4 years (unaudited)).

Technology intellectual property is licensed patents and trade secrets used by the group to manufacture and sell plasterboard, joint compound, ceiling tile, ceiling grid and other products.

Distribution network and customer relationship are network distributors through which the group indirectly sells to the end customers by geographical region.

The other intangible assets included above are mainly intangible assets with indefinite useful lives. This mainly consist of product trade names, corporate trade names and license agreements.

The carrying amounts of product trade names and corporate trade names at June 30, 2016 are US$13,845,000 (unaudited) (2015: US$13,845,000 (unaudited)) and US$5,707,000 (unaudited) (2015: US$5,707,000 (unaudited)). Product trade names and corporate trade names have high brand awareness and are used to market in each geographical region.

The carrying amount of license agreements at June 30, 2016 is US$5,918,000 (unaudited) (2015: US$5,918,000 (unaudited)). The license agreements are royalty free license agreements that exist into perpetuity.

12 GOODWILL

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
At beginning of year	421,544	444,613
Effect of foreign currency exchange differences	(15,119)	(23,069)
At end of year	406,425	421,544

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. The group tests goodwill for impairment annually or more frequently if there are indications that goodwill might be impaired.

3

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

12 GOODWILL (cont’d)

The group prepares cash flow forecasts derived from the most recent financial budgets approved by directors for the next five years and extrapolates cash flows for the following five years. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. No impairment loss has been recognised for the group based on the above basis.

As at June 30, 2016, any reasonably possible change to the key assumptions applied not likely to cause the recoverable amounts to be below the carrying amounts of the CGUs (unaudited).

Goodwill has been allocated for impairment testing purposed to the following CGUs:

	Unaudited
			Discount		Goodwill			Discount		Goodwill
	Growth		Rate		Value	Growth		Rate		Value
	Rate		Applied		2016	Rate		Applied		2015
CGUs	2016		2016		US$’000	2015		2015		US$’000
Korea	2.5	%	11.5	%	24,202	2.5	%	11.5	%	24,999
Thailand	2.5	%	12.5	%	257,143	2.5	%	12.5	%	267,941
Indonesia	3.5	%	16.3	%	72,618	3.5	%	15.5	%	73,518
China	3.0	%	12.5	%	12,241	3.0	%	12.5	%	13,107
India	4.5	%	15.3	%	6,283	4.5	%	15.5	%	6,657
Malaysia/Singapore	4.0	%	13.5	%	33,938	4.0	%	13.5	%	35,322
					406,425					421,544

4

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

13    INVESTMENT IN SUBSIDIARIES

Details of the company’s subsidiaries at June 30, 2016 (unaudited)and 2015 (unaudited) are as follows:

5

Unaudited
Name of subsidiary	Country of incorporation	Proportion of ownership interest and voting power held		Principal Activity
		2016	2015
USG Boral Building   Products Sdn. Bhd.	Malaysia	100%	100%	Investment holding
BGA Holdings Limited	Labuan, Malaysia	100%	100%	Investment holding
South Korean Plasterboard   Corporation	Labuan, Malaysia	100%	100%	Investment holding
Siamsum Corporation	Labuan, Malaysia	100%	100%	Investment holding
USG Boral Korea Co. Ltd.	South Korea	100%	100%	Manufacturing and trading of building materials
China Plasterboard   Corporation	British Virgin Islands	100%	100%	Investment holding
Boral Gypsum (Shanghai)   Co. Ltd.	China	100%	100%	Manufacturing and trading of building materials
Boral Gypsum (Chongqing)   Co. Ltd.	China	100%	100%	Manufacturing and trading of building materials
Boral Gypsum (Chengdu)   Co. Ltd.	China	100%	100%	Manufacturing and trading of building materials
Boral Plasterboard   (Shanghai) Co. Ltd 3	China	100%	96.80%	Manufacturing and trading of building materials
Boral Gypsum (Shandong)   Co. Ltd	China	100%	100%	Manufacturing and trading of building materials
Boral Management Services   Shanghai Co. Ltd.	China	100%	100%	Management services
USG Boral Building   Products India Pvt. Ltd.	India	100%	100%	Manufacturing and trading of building materials
PT Petrojaya Boral   Plasterboard	Indonesia	100%	100%	Manufacturing and trading of building materials
Boral Plasterboard   (Malaysia) Sdn. Bhd.	Malaysia	100%	100%	Inactive. Trading of building materials in 2015
Boral Plasterboard   (Marketing) Sdn. Bhd.	Malaysia	100%	100%	Trading of building materials

(Forward)

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015

6

(unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

13 INVESTMENT IN SUBSIDIARIES (cont’d)

7

Unaudited
Name of subsidiary	Country of incorporation	Proportion of ownership interest and voting power held		Principal Activity
		2016	2015
Boral Plasterboard   Philippines Inc.	Philippines	100%	100%	Trading of building materials
Boonyavajara Mining   Co. Ltd.	Thailand	100%	100%	Mining and trading
Boral Prestia Co. Ltd.	Thailand	100%	100%	Manufacturing and trading of building materials
The Siam Gypsum Industry   Co. Ltd.	Thailand	71%	71%	Investment holding
The Siam Gypsum Industry   (Saraburi) Co. Ltd.	Thailand	71%	71%	Manufacturing and trading of building materials
The Siam Gypsum Industry   (Songkla) Co. Ltd.	Thailand	71%	71%	Manufacturing and trading of building materials
SGI Development Co.Ltd.	Thailand	71%	71%	Trading of building materials
Gypsum Business Limited	Thailand	100%	100%	Investment holding
USG Boral R&D Center   Co. Ltd 1	Thailand	100%	-	Research and development
Boral Middle East FZE	UAE	100%	100%	Trading of building materials
Boral Middle East (Dubai)   L.L.C. 2	UAE	49%	49%	Trading of building materials
USG Boral Gypsum   Vietnam Co., Ltd.	Vietnam	100%	100%	Manufacturing and trading of building materials
USG Cayman Holdings Ltd	Cayman Islands	100%	100%	Investment holding
USG Asia Pacific Holdings   Pte Ltd	Singapore	100%	100%	Investment holding
USG ChinaLux S.a.r.l	Luxembourg	100%	100%	Investment holding
USG Manufacturing   Worldwide Ltd	Cayman Islands	100%	100%	Investment holding
USG Interiors (Far East)   Sdn Bhd	Malaysia	100%	100%	Manufacturing and trading of building materials
USG Interiors (Malaysia)   Sdn Bhd	Malaysia	100%	100%	Inactive. Trading of building materials in 2015
USG India Private Limited	India	100%	100%	Manufacturing and trading of building materials

(Forward)

8

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

13 INVESTMENT IN SUBSIDIARIES (cont’d)

Unaudited
Name of subsidiary	Country of incorporation	Proportion of ownership interest and voting power held		Principal Activity
		2016	2015
Pacific Interiors Supply   Pte Ltd	Singapore	100%	100%	Trading of building materials
International Resources Ltd	UAE	100%	100%	Investment holding
Zawawi Gypsum LLC	Oman	55%	55%	Mining and trading of building materials
Zawawi Drywall LLC	Oman	50%	50%	Manufacturing and trading of building materials

¹  USG Boral R&D Center Co. Ltd is incorporated in Thailand on 17 December 2015.

²  Although the company owns less than half of the voting rights of Boral Middle East (Dubai) L.L.C., it has the power to appoint and remove the majority of the board of directors and control of this entity is by their board. Consequently, the entity is controlled by the company and is consolidated in these consolidated financial statements

³  During the year, the minority shareholder, Shanghai Shipping Corporation (3.2%) was reclassified to financial liabilities in accordance to IAS 32 Financial Instruments: Presentation.

9

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

13 INVESTMENT IN SUBSIDIARIES (cont’d)

Details of non-wholly owned subsidiaries that have material non-controlling interests

The table below shows details of non-wholly owned subsidiaries of the group that have material non-controlling interests:

Name of subsidiaries	Place of incorporation and principal place of business	Proportion of ownership interests and voting rights held by non-controlling interests			Profit (loss) allocated to non-controlling interests			Accumulated non-controlling interests
						US$’000		US$’000
		2016	2015	2014	2016	2015	2014	2016	2015
		Unaudited	Unaudited		Unaudited	Unaudited		Unaudited	Unaudited
The Siam Gypsum   Industry Co. Ltd.    and its subsidiaries	Thailand	29%	29%	29%	9,062	9,052	2,446	85,064	85,926
Individually immaterial   subsidiaries with non-   controlling interests	N/A	N/A	N/A	N/A	(3,425)	(2,980)	(512)	1,944	9,163
					5,637	6,072	1,934	87,008	95,089

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

13 INVESTMENT IN SUBSIDIARIES (cont’d)

Summarised financial information in respect of the group’s subsidiaries that have material non-controlling interests is set out below. The summarised financial information below represents amounts before intragroup eliminations.

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Current assets	53,416	55,660
Non-current assets	78,344	81,634
Current liabilities	(34,963)	(36,431)
Non-current liabilities	(3,519)	(3,667)
Equity attributable to owners of the company	66,227	69,009
Non-controlling interests	27,051	28,187

	2016	2015	2014
	US$’000	US$’000	US$’000
	Unaudited	Unaudited
Revenue	124,868	135,866	47,478
Profit for the financial year	34,183	31,441	22,670
Total comprehensive income for the financial year,   net of tax	33,647	32,168	22,975
Dividends paid to non-controlling interests	9,769	6,884	4,369
Net cash inflow from operating activities	39,424	32,229	15,402
Net cash (outflow) inflow from investing activities	(5,670)	(3,151)	15,865
Net cash outflow from financing activities	(33,595)	(23,319)	(30,911)
Net cash inflow	159	5,759	356

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

14 INVESTMENT IN ASSOCIATES

	2016	2015	2014
	US$’000	US$’000	US$’000
	Unaudited	Unaudited
Cost of investment in associates	55,300	55,300	55,300
Dividends received	(3,894)	(1,680)	-
Share of post-acquisition loss	(1,054)	(1,900)	(866)
	50,352	51,720	54,434

Details of the associates are as follows:

Name of associate	Place of incorporation and operation	Proportion of ownership interest and voting power held			Principal Activity
		2016	2015	2014
		Unaudited	Unaudited
Star-USG Building   Materials Co. Ltd	China	50%	50%	50%	Manufacturing and trading of building materials
USG Middle East   Ltd	Saudi Arabia	45%	45%	45%	Manufacturing and trading of building materials

Summarised financial information in respect of the group’s associates is set out below:

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Total assets	74,061	94,709
Current liabilities	(55,241)	(54,797)
Net assets	18,820	39,912
	2016	2015	2014
	US$’000	US$’000	US$’000
	Unaudited	Unaudited
Revenue	85,311	80,829	29,384
Profit (Loss) for the financial year/period	2,697	(2,621)	(1,513)
Dividend received from associates during the   year/period	2,214	1,680	-

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

15 DEFERRED TAX ASSETS (LIABILITIES)

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
At beginning of year	(14,304)	(16,607)
Assumed at acquisition of subsidiaries (Charge) Credit to profit or loss for the year (Note 24):
Property, plant and equipment	382	326
Retirement benefit obligations	607	(746)
Others	(4,774)	667
	(3,785)	247
Effects of foreign currency exchange differences	1,094	2,056
At end of year	(16,995)	(14,304)

Certain deferred tax assets and liabilities have been offset in accordance with the group’s accounting policy. The following is the analysis of the deferred tax balances (after offset) for consolidated statement of financial position purposes:

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Deferred tax liabilities	(27,904)	(25,747)
Deferred tax assets	10,909	11,443
	(16,995)	(14,304)

Subject to the agreement by the tax authorities, at the end of the reporting period, the group has unutilised tax losses at June 30, 2016 of US$64,799,000 (unaudited) (2015: US$60,497,000 (unaudited)) available for offset against future profits. No deferred tax assets have been recognized as of June 30, 2016 (unaudited) and 2015 (unaudited) due to unpredictability of future profit streams.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

15 DEFERRED TAX ASSETS (LIABILITIES) (cont’d)

The deferred tax assets (liabilities) provided in the consolidated financial statements are in respect of the tax effects on the following:

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Deferred tax assets (before offsetting):
Temporary differences arising from:
Property, plant and equipment	8,882	9,793
Provisions and retirement benefit obligations	4,504	4,005
	13,386	13,798
Offsetting	(2,477)	(2,355)
Deferred tax assets (after offsetting)	10,909	11,443
Deferred tax liabilities (before offsetting):
Temporary differences arising from:
Property, plant and equipment	(24,967)	(27,795)
Others	(5,414)	(307)
	(30,381)	(28,102)
Offsetting	2,477	2,355
Deferred tax liabilities (after offsetting)	(27,904)	(25,747)

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

16 TRADE AND OTHER PAYABLES

2016	2015
US$’000	US$’000
Unaudited	Unaudited

Current
Trade payables	81,876	82,855
Accrued payables	972	502
Other payables	51,537	51,510
	134,385	134,867
Non-current
Other payables	4,507	-
	138,892	134,867

The average credit period for trade purchases ranges from 30 to 60 days as of June 30, 2016 (unaudited) (2015: 30 to 60 days (unaudited)). No interest is charged on the outstanding balances.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

17. PROVISIONS

	Non-Current Provision			Current Provision
	Site Restoration	Restructuring	Total	Restructuring	Litigations	Total
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
At January 14, 2014   (date of incorporation)	-	-	-	-	-	-
Assumed on acquisition of subsidiaries	50	-	50	24	41	65
Additional provision    during the period	-	-	-	536	45	581
Utilisation of provisions	(9)		(9)	-	-	-
Exchange differences    on translating foreign   operations	1	-	1	(4)	(1)	(5)
At June 30, 2014	42	-	42	556	85	641

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

17. PROVISIONS (cont’d)

	Non-Current Provision			Current Provision
	Site Restoration	Restructuring	Total	Restructuring	Litigations	Total
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
At July 1, 2014 (unaudited)	42	-	42	556	85	641
Additional provision   during the year	-	-	-	-	-	-
Utilisation of provisions	(5)		(5)	(520)	(76)	(596)
Reclassification		24	24	(24)		(24)
Exchange differences   on translating foreign   operations	(2)	-	(2)	(5)	(1)	(6)
At June 30, 2015   (unaudited)	35	24	59	7	8	15

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

17 PROVISIONS (cont’d)

	Non-Current Provision			Current Provision
	Site Restoration	Restructuring	Total	Restructuring	Litigations	Total
Group	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
	Unaudited	Unaudited	Unaudited	Unaudited	Unaudited	Unaudited
At July 1, 2015 (unaudited)	35	24	59	7	8	15
Additional provision   during the year	-	-	-	-	59	59
Utilisation of provisions	-	-	-	(6)	(8)	(14)
Reclassification	-	-	-	-	-	-
Exchange differences   on translating foreign   operations	(1)	(2)	(3)	(1)	-	(1)
At June 30, 2016   (unaudited)	34	22	56	-	59	59

10

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

18 LOANS AND BORROWINGS

	2016	2015
	US$’000 Unaudited	US$’000   Unaudited
Current
Unsecured:   - Term loans   - Revolving credits   - Bank overdrafts	900 4,096 -	900 15,832 2,807
Secured:   - Finance lease payables   - Bank overdrafts   - Term loans	282 1,481 1,325	254 662 3,618
Total current loans and borrowings	8,084	24,073
Non-current
Unsecured:
#VALUE!	-	13,361
Secured: -Term loans -Finance lease payables	41,331 339	29,849 283
Total non-current loans and borrowings	41,670	43,493
Total loans and borrowings	49,754	67,566

The remaining maturities of the loans and borrowings at the end of the reporting period are as follows:

	2016	2015
	US$’000 Unaudited	US$’000 Unaudited
More than 1 year and less than 2 years	7,625	-
More than 2 years and less than 5 years	10,727	23,075
More than 5 years	23,318	20,418
	41,670	43,493

11

Bank overdrafts are repayable on demand.

12

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

18 LOANS AND BORROWINGS (cont’d)

The weighted average interest rates per annum for loans and borrowings at the end of the reporting period are as follows:

		2016		2015
		% p.a.		% p.a.
		Unaudited		Unaudited
Term loans Revolving credits Bank overdrafts	3.77 - 8.00 1.50 - 6.50 1.80 - 13.00		3.77 – 7.00 1.50 – 6.50 1.80 – 11.00
Finance lease payables	5.00		8.00

Certain borrowings of subsidiaries with a specific financial institution is guaranteed by one of the subsidiary, USG Boral Building Products Sdn Bhd, in an agreement with the said financial institution. The guarantee covers up to a maximum of USD192,000,000 (2015: USD192,000,000.

	Minimum lease payments	Present value of minimum lease payments	Minimum lease payments	Present value of minimum lease payments
	2016	2016	2015	2015
	US$’000	US$’000	US$’000	US$’000
	Unaudited	Unaudited	Unaudited	Unaudited
Amounts payable under finance leases:
Within one year	370	282	294	254
In the second to fifth years inclusive	428	339	305	283
	798	621	599	537
Less: future finance charges	(177)	-	(62)	-
Present value of lease obligations	621	621	537	537

The Group leased certain motor vehicles under finance leases. The average lease term is 5 years (unaudited) (2015: 5 years, unaudited). The Group has option to purchase the equipment for a nominal amount at the end of the lease terms. The Group’s obligation under finance lease are secured by the leased assets.

13

14

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

19 RETIREMENT BENEFIT OBLIGATIONS

The defined benefit plan typically exposes the group to actuarial risks such as longevity risk and salary risk.

Type	Risk
Longevity risk	The present value of the defined benefits plan liability is calculated by reference to the best estimate of the mortality of plan participants during their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.
Salary risk	The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

The most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out by external actuaries in the respective countries. The present value of the defined benefit obligation and the related current service cost and past service cost, were measured using projected unit credit method.

The principal assumptions used for the purpose of the actuarial valuations were as follows:

	2016	2015
	% p.a.	% p.a.
	Unaudited	Unaudited
Discount rate	1.84 - 5.75	1.84 - 5.75
Expected return on plan assets	2.95 - 8.54	2.95 - 8.54
Future salary increase	4.50 - 10.00	4.50 - 10.00

Movement in the liability recognised in the consolidated statement of financial position:

15

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
At beginning of year	11,068	11,575
Expense recognised in profit or loss	3,404	4,591
Benefits paid	(1,206)	(2,582)
Effect of exchange differences	(3,407)	(2,516)
At end of year	9,859	11,068

16

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

19 RETIREMENT BENEFIT OBLIGATIONS (cont’d)

The amount recognised in the consolidated statement of financial position are analysed as follows:

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Present value of unfunded obligation	20,544	18,242
Fair value of plan assets	(10,685)	(7,174)
Net liability arising from retirement benefit obligations	9,859	11,068

Reconciliation of the present value of unfunded obligation are as follows:

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
At beginning of year	18,242	17,085
Benefits paid	(1,206)	(2,582)
Current service cost	2,991	4,054
Interest on obligation	413	537
Effect of foreign currency exchange differences	104	(852)
At end of year	20,544	18,242

The amounts recognised in profit or loss are as follows:

	2016	2015	2014
	US$’000	US$’000	US$’000
	Unaudited	Unaudited
Current service cost	2,991	4,054	1,745
Interest on obligation	413	537	179
	3,404	4,591	1,924

17

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

19 RETIREMENT BENEFIT OBLIGATIONS (cont’d)

Reconciliation in the fair value plan assets are as follows:

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Beginning of year	7,174	5,510
Interest income	3,740	2,273
Effect of foreign currency exchange differences	(229)	(609)
End of year	10,685	7,174

20 SHARE CAPITAL

	Unaudited		Unaudited
	2016	2015	2016	2015
	Number of shares ‘000	Number of shares ‘000	US$’000	US$’000
Issued and fully paid:
At beginning and at end of year	1,022,944	1,022,944	1,022,944	1,022,944

Fully paid ordinary shares, which have US$1 par value, carry one vote per share and a right to dividends as and when declared by the company.

18

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

21 RESERVES

Other capital reserve

Other capital reserve comprises the fair value reserve amounting to US$34,191,000 as of June 30, 2016 (unaudited) (2015: US$34,191,000 (unaudited)) which resulted from the difference between the fair value of assets contributed by Boral Limited and the USG Corporation against the total amount of shares issued to the shareholders.

Translation reserve

The translation reserve comprises foreign currency differences arising from the translation of the financial statements of the group entities to US dollars.

Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedges related to hedged transactions that have not yet occurred.

Pension reserve

The pension reserve comprised the actuarial gains and losses on pension provision.

22 REVENUE

Revenue of the group relates to sales of plasterboard, ceiling tile, metal stud, compound and plaster, and other products.

23 FINANCE COSTS

19

	2016	2015	2014
	US$’000	US$’000	US$’000
	Unaudited	Unaudited
Interest on bank overdrafts and loans	4,185	5,049	2,568
Other finance cost	208	227	96
	4,393	5,276	2,664

20

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

24 INCOME TAX EXPENSE

	2016	2015	2014
	US$’000	US$’000	US$’000
	Unaudited	Unaudited
Current tax:
Singapore	68	176	96
Foreign	21,122	20,826	7,066
Deferred tax (Note 15)	3,785	(247)	(2,293)
	24,975	20,755	4,869

Income tax is calculated at 17% of the estimated assessable profit for the year ended June 30, 2016 (unaudited) (2015: 17% (unaudited)) (17% for the period January 14, 2014 (date of inception) through June 30, 2014). Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

The total charge for the year can be reconciled to the accounting profit as follows:

21

	2016	2015	2014
	US$’000	US$’000	US$’000
	Unaudited	Unaudited
Profit before tax	85,139	73,056	14,052
Income tax expense calculated at 17%	14,474	12,420	2,389
Effects of different tax jurisdiction rates	11,279	8,411	1,363
Effects of:   Tax holidays and incentives	(5,005)	(4,122)	(1,126)
Expenses not deductible for tax purposes	220	513	531
Deferred tax asset not recognised	806	326	(18)
Movement in deferred tax balances	3,785	-	-
Recognition of previously unrecognised tax       losses	(785)	(547)	-
Overprovision of tax in prior years	(402)	(610)	-
Withholding tax	6,780	4,364	1,730
Tax exempt income	(6,177)	-	-
	24,975	20,755	4,869

22

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

25 PROFIT FOR THE FINANCIAL YEAR

Profit for the financial year has been arrived after charging/(crediting) the following:

	2016	2015	2014
	US$’000	US$’000	US$’000
	Unaudited	Unaudited
After charging:
Directors’ remuneration	5,774	6,054	1,159
Other employee benefits	81,282	79,528	27,625
Defined contribution plan expenses	4,072	4,192	293
Contribution to defined benefit plan (Note 19)	3,404	4,591	1,924
Depreciation of property, plant and equipment (Note 10)	29,620	38,153	6,619
Amortisation of intangible assets (Note 11)	9,503	9,511	3,192
Allowance on doubtful debts (Note 7)	10	399	1,549
Net foreign exchange loss	423	221	-
Allowance for inventory obsolescence	321	430	1,749
After crediting:
Interest income	1,628	2,770	1,553
Reversal of allowance for doubtful debts (Note 7)	1,094	469	387
Reversal of allowance for inventory obsolescence	332	2,485	288
Gains on disposal of property, plant and equipment	13	190	21

26 DIVIDENDS PAID

On Nov 19, 2015, a final dividend in respect of financial year ended 30 June 2015 of $15.32 per 1000 shares (total dividend of US$15,670,284) (unaudited) (2015: Nil (unaudited)) were paid to shareholders.

On Nov 19, 2015, an interim dividend in respect of financial year ended 30 June 2016 of $10.80 per 1000 shares (total dividend of US$11,052,716) (unaudited) (2015: Nil (unaudited)) were paid to shareholders.

On May 19, 2016, an interim dividend in respect of financial year ended 30 June 2016 of $22.07 per 1000 shares (total dividend of US$22,580,000) (unaudited) (2015: US$17,683,000 (unaudited)) were paid to shareholders.

23

During the financial year a subsidiary paid dividends amounting to US$9,769,000 (2015: US$6,884,000) to non-controlling interests.

24

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

27 ACQUISITION OF SUBSIDIARIES

On February 28, 2014, the group acquired all the subsidiaries as detailed in Note 13 as a result of the joint venture arrangements between USG Corporation, a company incorporated and listed in the United States of America, and Boral Limited, a company incorporated and listed in Australia. This transaction has been accounted for by the acquisition method of accounting.

Assets acquired and liabilities assumed at the date of acquisition of subsidiaries are as follows:

25

ASSETS	US$’000
Current assets
Cash and cash equivalents	96,541
Trade and other receivables	80,049
Prepayments	4,472
Tax recoverable	15,857
Derivative financial instruments	312
Inventories	53,787
Total current assets	251,018
Non-current assets
Property, plant and equipment	517,302
Intangible assets	115,365
Investment in associates	55,300
Deferred tax assets	11,471
Other receivables	7,786
Total non-current assets	707,224
Total assets	958,242
LIABILITIES
Current liabilities
Trade and other payables	109,374
Provisions	65
Loans and borrowings	40,687
Income tax payable	7,530
Derivative financial instruments	687
Total current liabilities	158,343

(Forward)

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

27 ACQUISITION OF SUBSIDIARIES (cont’d)

26

	US$’000
Non-current liabilities
Retirement benefit obligations	10,794
Provisions	50
Loans and borrowings	44,044
Deferred tax liabilities	29,754
Derivative financial liabilities	199
Total non-current liabilities	84,841
Total liabilities	243,184
Net assets acquired and liabilities assumed	715,058

The non-controlling interest in The Siam Gypsum Industry Co. Ltd. and its subsidiaries (29%), Boral Plasterboard (Shanghai) Co., Ltd. (3%), Zawawi Gypsum LLC (45%) and Zawawi Drywall LLC (50%) recognised at the acquisition date were measured by reference to the fair value of the non-controlling interests and amounted to US$88,700,000, US$800,000, US$32,200,000 and (US$21,140,000) respectively. The fair values were estimated by applying an income approach. The following were the key model inputs used in determining the fair values:

• Assumed discount rate range of 10% to 11%;

• Assumed long-term sustainable growth rates up to 9.2%; and

• Assumed adjustments because of the lack of control or lack of marketability that market participants would consider when estimating the fair values of the non-controlling interests.

Goodwill arising on acquisition:    

	US$’000
Consideration transferred	1,057,135
Plus: Non-controlling interests	100,560
Less: Fair value of identifiable net assets acquired	(715,058)
Goodwill arising on acquisition	442,637

27

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

27 ACQUISITION OF SUBSIDIARIES (cont’d)

It is not practical to disclose the information of the revenue and profit or loss of the subsidiaries for the financial period ending June 30, 2014 as though the acquisition date for the business combination that occurred during that period had been as of the date of incorporation as the completion of the business combination occurred later than the date of incorporation. Also, it is not practical to obtain the consolidation information of those subsidiaries acquired before the completion of the business combination.

Net cash inflow in acquisition of subsidiaries mainly arose from cash and cash equivalents acquired as below:

	US$’000
Cash and cash equivalents	96,541

Goodwill arose in the acquisition of subsidiaries because the cost of the combination included a control premium. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of the subsidiaries. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets

None of the goodwill arising on these acquisitions is expected to be deductible for tax purposes.

28 OPERATING LEASE COMMITMENTS

	2016	2015	2014
	US$’000	US$’000	US$’000
	Unaudited	Unaudited
Minimum lease payments under operating leases   included in the consolidated statement of profit or   loss and other comprehensive income	4,504	3,207	756

28

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

28 OPERATING LEASE COMMITMENTS (cont’d)

At the end of the reporting year, the group has outstanding commitments under non-cancellable operating leases, which fall due as follows:

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Within 1 year	4,143	3,540
Within 2 to 5 years	13,379	10,512
	17,522	14,052

Operating lease payments represent rentals payable by the group for its office premises.  Leases are negotiated for an average term of 3 to 5 years and rentals are fixed for an average of 3 years (unaudited).

29 CAPITAL COMMITMENTS

	2016	2015
	US$’000	US$’000
	Unaudited	Unaudited
Commitments for the acquisition of property, plant and equipment	51,592	38,357

30 SUBSEQUENT EVENTS

(i) Liquidation of USG Boral Gypsum (Chengdu) Co. Ltd

On November 9, 2016, the Board of Directors has decided to liquidate USG Boral Gypsum (Chengdu) Co. Ltd., a wholly-owned subsidiary incorporated in the People’s Republic of China. The said subsidiary will cease operations and complete the shutdown of the manufacturing plant in early 2017. The directors of the company have recognised the closure cost of US$3,474,000 subsequent to the end of the financial year.

29

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of June 30, 2016 (unaudited) and June 30, 2015 (unaudited) and for the years ended June 30, 2016 (unaudited), June 30, 2015 (unaudited) and for the period from January 14, 2014 (date of incorporation) through June 30, 2014

30 SUBSEQUENT EVENTS (cont’d)

(ii) Dividends declared and paid

On November 24, 2016, a final dividend of US$9.95 per 1,000 shares (total dividend US$10,182,335) was paid to shareholders in respect of financial year ended June 30, 2016.

On November 24, 2016 and December 27, 2016 respectively, interim dividends of US$9.75 per 1,000 shares (total dividend US$9,977,665) and US$14.11 per 1,000 shares (total dividend US$14,441,000) was paid to shareholders in respect of financial year ending June 30, 2017.

(iii) Impairment of Oman Impairment assessment on the recoverability of investment in subsidiaries.

Subsequent to the end of the reporting period, management has performed an exercise in estimating the recoverable amounts of its investments in subsidiaries for the half yearly internal reporting purposes.

In assessing the recoverable amounts of its investment in subsidiaries, management has assessed that there were indicators of impairment on the investments in two of its subsidiaries, Zawawi Gypsum LLC and Zawawi Drywall LLC. Consequently, management has performed an impairment review on Zawawi Gypsum LLC and Zawawi Drywall LLC and has recognised an impairment of US$31,281,000 for Zawawi Gypsum LL and US$13,231,000 for Zawawi Drywall LLC on period ended December 31, 2016.

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

C O N T E N T S

PAGE

Independent auditors’ report    1 - 2

Consolidated statements of financial position    3 - 4

Consolidated statements of profit or loss and other comprehensive income (loss)    5 - 6

Consolidated statements of changes in equity    7 - 9

Consolidated statements of cash flows    10 - 11

Notes to the consolidated financial statements    12 - 83

USG BORAL BUILDING PRODUCTS PTE. LIMITED

AND ITS SUBSIDIARIES

(Registration No. 201401466N)

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2016 (UNAUDITED) and JUNE 30, 2015 (UNAUDITED) and FOR THE PERIOD FROM JANUARY 14, 2014 (date of incorporation) THROUGH June 30, 2014

30

EX-99.2

USG Boral Building Products Pty Limited and

Controlled Entities

Full Year Financial Report

30 June 2016

ABN 84 004 231 976

USG Boral Building Products Pty Limited and Controlled Entities

TABLE OF CONTENTS Income Statement		1
Statement of Comprehensive Income		2
Balance Sheet		3
Statement of Changes in Equity		4
Statement of Cash Flows		5
Notes to the Financial Statements
1	Significant accounting policies	6
2	Profit for the year	21
3	Significant items	22
4	Income tax expense	23
5	Dividends	24
6	Cash and cash equivalents	25
7	Receivables	25
8	Inventories and work in progress	26
9	Investments accounted for using the equity method	26
10	Property, plant and equipment	29
11	Intangibles	30
12	Payables	31
13	Loans and borrowings	31
14	Income tax payable	32
15	Deferred tax assets and liabilities	32
16	Provisions	33
17	Issued capital	34
18	Reserves	34
19	Contingent liabilities	35
20	Commitments	35
21	Financial risk management	36
22	Controlled entities	38
23	Acquisitions and disposals of controlled entities and businesses	38
24	Related party disclosures	39
25	Notes to statement of cash flows	41
26	Subsequent events	41

Independent Auditors' Report - KPMG 42

Registered office

Level 3, 40 Mount Street

North Sydney, NSW, 2060

Principal place of business

3 Thackeray Street

Camellia, NSW, 2142

INCOME STATEMENT

USG Boral Building Products Pty Limited and Controlled Entities

Revenue	2	504,583		426,450		394,762
Cost of sales		(328,912	)	(267,787	)	(260,799	)
Gross profit		175,671		158,663		133,963
Selling and distribution expenses		(84,712	)	(87,823	)	(79,239	)
Administrative expenses		(39,733	)	(29,951	)	(23,052	)
Other expenses	2	(558	)	(122	)	(1,664	)
Share of net profit of associates	9	12,320		10,472		8,154
Profit before net financing costs and income tax expense		62,988		51,239		38,162
Financial income	2	988		1,498		630
Financial expenses	2	(84	)	(16	)	(4,367	)
Net financing income		904		1,482		(3,737	)
Profit before income tax expense		63,892		52,721		34,425
Income tax expense	4	(15,276	)	(12,070	)	(5,635	)
Net profit		48,616		40,651		28,790

The Income Statement should be read in conjunction with the accompanying notes which form an integral part of the financial statements.

1

STATEMENT OF COMPREHENSIVE INCOME

USG Boral Building Products Pty Limited and Controlled Entities

Net profit	48,616	40,651	28,790
Other comprehensive income
Items that may be reclassified subsequently to Income Statement:
Exchange differences on translation of foreign operations and associates taken to equity	1,175	(558)	(401)
Total comprehensive income	49,791	40,093	28,389

The Statement of Comprehensive Income should be read in conjunction with the accompanying notes which form an integral part of the financial statements.

2

BALANCE SHEET

USG Boral Building Products Pty Limited and Controlled Entities

		CONSOLIDATED
As at 30 June Note		2016 (Unaudited) A$'000	2015 (Unaudited) A$'000
CURRENT ASSETS
Cash and cash equivalents	6	33,259	41,154
Receivables	7	94,187	78,665
Inventories	8	40,013	33,933
Work in progress	8	5,900	5,743
Other assets		7,136	5,915
TOTAL CURRENT ASSETS		180,495	165,410
NON-CURRENT ASSETS
Receivables	7	7,500	11,750
Investments accounted for using the equity method	9	30,934	27,609
Property, plant and equipment	10	303,129	299,121
Intangibles	11	47,468	49,826
Deferred tax assets	15	3,837	1,092
TOTAL NON-CURRENT ASSETS		392,868	389,398
TOTAL ASSETS		573,363	554,808
CURRENT LIABILITIES
Payables	12	57,668	49,527
Loans and borrowings	13	189	241
Income tax payable	14	6,018	9,864
Provisions	16	16,003	12,183
TOTAL CURRENT LIABILITIES		79,878	71,815
NON-CURRENT LIABILITIES Provisions	16	1,056	1,169
TOTAL NON-CURRENT LIABILITIES		1,056	1,169
TOTAL LIABILITIES		80,934	72,984
NET ASSETS		492,429	481,824
EQUITY
Issued capital	17	282,240	282,240
Reserves	18	441	(734)
Retained earnings		209,748	200,318
TOTAL EQUITY		492,429	481,824

The Balance Sheet should be read in conjunction with the accompanying notes which form an integral part of the financial statements.

STATEMENT OF CHANGES IN EQUITY

USG Boral Building Products Pty Limited and Controlled Entities

CONSOLIDATED

	Issued capital	Reserves		Retained earnings		Total
For the year ended 30 June	A$'000	A$'000		A$'000		A$'000
Balance at 1 July 2015 (unaudited)	282,240	(734	)	200,318		481,824
Net profit (unaudited)	-	-		48,816		48,816
Other comprehensive income (unaudited)
Exchange differences on translation of foreign operations and associates taken to equity (unaudited)	-	1,175		-		1,175
Total comprehensive income (unaudited)	-	1,175		48,616		49,791
Transactions with owners in their capacity as owners (unaudited)
Dividends paid (unaudited)	-	-		(39,186	)	(39,186	)
Total transactions with owners in their capacity as owners (unaudited)	-	-		(39,186	)	(39,186	)
Balance at 30 June 2016 (unaudited)	282,240	441		209,748		492,429
Balance at 1 July 2014 (unaudited)	282,240	(176	)	182,365		464,429
Net profit (unaudited)	-	-		40,651		40,651
Other comprehensive income (unaudited) Exchange differences on translation of foreign operations and associates taken to equity (unaudited)	—	(558	)	—		(558	)
Total comprehensive income (unaudited)	—	(558	)	40,651		40,093
Transactions with owners in their capacity as owners (unaudited)
Dividends paid (unaudited)	—	—		(22,698	)	(22,698	)
Total transactions with owners in their capacity as owners (unaudited)	—	—		(22,698	)	(22,698	)
Balance at 30 June 2015 (unaudited)	282,240	(734	)	200,318		481,824
Balance at 1 July 2013	13,500	225		153,575		167,300
Net profit	—	—		28,790		28,790
Other comprehensive income
Exchange differences on translation of foreign operations and associates taken to equity	—	(401	)	—		(401	)
Total comprehensive income	—	(401	)	28,790		28,389
Transactions with owners in their capacity as owners
Shares issued on capitalisation of intercompany loan	212,500	—		—		212,500
Shares issued on contribution of intellectual property from Boral Limited	8,834	—		—		8,834
Shares issued on acquisition of controlled entities	17,623	—		—		17,623
Shares issued on intellectual property contribution from USG Corporation	29,783	—		—		29,783
Total transactions with owners in their capacity as owners	268,740	—		—		268,740
Balance at 30 June 2014	282,240	(176	)	182,365		464,429

The Statement of Changes in Equity should be read in conjunction with the accompanying notes which form an integral part of the financial statements.

STATEMENT OF CASH FLOWS

USG Boral Building Products Pty Limited and Controlled Entities

CONSOLIDATED

		2016 (Unaudited)	2015 (Unaudited)	2014
For the year ended 30 June	Note	A$'000	A$'000	A$'000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers		539,787	463,948	429,057
Payments to suppliers and employees		(482,947)	(413,411)	(385,482)
		56,840	50,537	43,575
Dividends received		9,000	8,000	9,000
Interest received		988	1,498	630
Borrowing costs paid		(84)	(16)	(4,367)
Income taxes paid		(21,920)	(5,249)	(3,653)
Restructure costs	3	-	(59)	(1,481)
NET CASH PROVIDED BY OPERATING ACTIVITIES	25	44,824	54,711	43,704
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(18,322)	(17,526)	(4,246)
Cash acquired on acquisition of controlled entities		-	-	7,559
Loans (to) / repayments from associates		4,250	(8,216)	(2,250)
NET CASH (USED IN)/PROVIDED BY INVESTING ACTIVITIES		(14,072)	(25,742)	1,063
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid		(39,186)	(22,698)	-
Repayment of borrowings		-	-	(21,258)
NET CASH USED IN FINANCING ACTIVITIES		(39,186)	(22,698)	(21,258)
NET CHANGE IN CASH AND CASH EQUIVALENTS		(8,434)	6,271	23,509
Movement in foreign exchange rates on cash held		539	82	(254)
Cash and cash equivalents at the beginning of the year		41,154	34,801	11,546
Cash and cash equivalents at the end of the year	25	33,259	41,154	34,801

The Statement of Cash Flows should be read in conjunction with the accompanying notes which form an integral part of the financial statements.

5

NOTES TO THE FINANCIAL STATEMENTS

1. Significant accounting policies

1.1 General information

USG Boral Building Products Pty Limited (the “Company”) is a company limited by shares incorporated and domiciled in Australia. The addresses of its registered office and principal place of business are as follows:

Registered office

Level 3

40 Mount Street

NORTH SYDNEY NSW 2060

Principal place of business

3 Thackeray Street

CAMELLIA NSW 2142

The principal activities of the Group in the course of the financial year were the manufacture, distribution and sale of plasterboard, ceilings, interior linings and associated products.

1.2 Application of new and revised Accounting Standards

At the date of authorisation of the financial statements, the Standards and Interpretations that were issued but not yet effective are listed below.

Standard/Interpretation	Effective for annual reporting periods beginning on or after	Expected to be initially applied in the financial year ending
IFRS 9 ‘Financial Instruments’, and the relevant amending standards	1 January 2018	30 June 2019
IFRS 14 ‘Regulatory Deferral Accounts’	1 January 2016	30 June 2017
IFRS 15 ‘Revenue from Contracts with Customers’	1 January 2018	30 June 2019
IFRS 16 ‘Leases’	1 January 2019	30 June 2020
‘Amendments to IFRS 11 – Accounting for Acquisitions of Interests in Joint Operations’	1 January 2016	30 June 2017
‘Amendments to IAS 16 and IAS 38 – Clarification of Acceptable Methods of Depreciation and Amortisation’	1 January 2016	30 June 2017
‘Amendments to IAS 27 – Equity Method in Separate Financial Statements’	1 January 2016	30 June 2017
‘Amendments to IFRSs – Annual Improvements to IFRSs 2012-2014 Cycle’	1 January 2016	30 June 2017
‘Amendments to IAS 1 – Disclosure Initiative’	1 January 2016	30 June 2017
‘Amendments to IFRS 10, IFRS 12 and IAS 28 – Investment Entities: Applying the Consolidation Exception’	1 January 2016	30 June 2017
‘Amendments to IAS 12 – Recognition of Deferred Tax Assets for Unrealised Losses’	1 January 2017	30 June 2018
‘Amendments to IAS 7 – Disclosure Initiative’	1 January 2017	30 June 2018
‘Amendments to IFRS 2 – Classification and Measurement of Share-based Payment Transactions’	1 January 2016	30 June 2017

At the date of authorisation of the financial statements, the following IASB Standards and IFRIC Interpretations (for which Australian equivalent Standards and Interpretations have not yet been issued) were in issue but not yet effective:

Standard/Interpretation	Effective for annual reporting periods beginning on or after	Expected to be initially applied in the financial year ending
Clarifications to IFRS 15 ‘Revenue from Contracts with Customers’	1 January 2018	30 June 2019

NOTES TO THE FINANCIAL STATEMENTS

1. Significant accounting policies (continued)

The potential effect of the revised Standards/Interpretations on the Group’s financial statements has not yet been determined.

1.3 Significant accounting policies

1.3.1 Statement of compliance

These financial statements have been prepared in accordance with International Financial Reporting Standards

(IFRS) as issued by the International Accounting Standards Board.

The financial statements comprise the consolidated financial statements of the Group. The financial statements were authorised for issue by the directors on 25 October 2016.

1.3.2 Basis of preparation

The consolidated financial statements have been prepared on the basis of historical cost, as explained in the accounting policies below.

Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. All amounts are presented in Australian dollars, unless otherwise noted.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 ‘Inventories’ or value in use in IAS 36 ‘Impairment of Assets’.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

The financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated.

All amounts and references related to the financial statements as of and for the year ended 30 June 2016 and 30

June 2015 are unaudited.

NOTES TO THE FINANCIAL STATEMENTS

1. Significant accounting policies (continued)

1.3.3 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the investee; and

• has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights in an investee are sufficient to give it power, including:

• the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

• potential voting rights held by the Company, other vote holders or other parties;

• rights arising from other contractual arrangements; and

• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated income statement and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

1.3.4 Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

NOTES TO THE FINANCIAL STATEMENTS

1. Significant accounting policies (continued)

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

• deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 ‘Income Taxes’ and IAS 19 ‘Employee Benefits’ respectively;

• liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 ‘Share-based Payment’ at the acquisition date; and

• assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 ‘Non-current Assets

Held for Sale and Discontinued Operations’ are measured in accordance with that Standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non- controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another Standard.

Where the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability is remeasured at subsequent reporting dates in accordance with IAS 39, or IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’, as appropriate, with the corresponding gain or loss being recognised in profit or loss.

Where a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to its acquisition date fair value and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

NOTES TO THE FINANCIAL STATEMENTS

1. Significant accounting policies (continued)

1.3.5 Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of the acquisition of the business (see 1.3.4 above) less accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

The Group's policy for goodwill arising on the acquisition of an associate is described at 1.3.6 below.

1.3.6 Investments in associates and joint ventures

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with IFRS 5. Under the equity method, an investment in an associate or a joint venture is initially recognised in the consolidated statement of financial position at cost

and adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of the associate or joint venture. When the Group's share of losses of an associate or a joint venture exceeds the Group's interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate or joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.

An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group's share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group's share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired.

The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 ‘Impairment of Assets’ as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount, Any impairment loss recognised forms part of the carrying amount of the investment. Any

NOTES TO THE FINANCIAL STATEMENTS

1. Significant accounting policies (continued)

reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no

re-measurement to fair value upon such changes in ownership interests.

1.3.7 Revenue recognition

1.3.7.1 Sale of goods

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

Revenue from the sale of goods is recognised when the goods are delivered and titles have passed. In relation to revenue from supply and install contracts, the majority of the agreed contract price has been recognised as revenue when the contract is substantially complete, pending completion of minor works. The remainder of the agreed contract price is recognised as revenue when those minor works are completed.

Revenue is recognised when all the following conditions are satisfied:

• the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

• the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits associated with the transaction will flow to the Group; and

• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

1.3.7.2 Dividend and interest income

Dividend income from investments is recognised when the shareholder’s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably).

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

1.3.8 Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

1.3.8.1 The Group as lessee

Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

NOTES TO THE FINANCIAL STATEMENTS

1. Significant accounting policies (continued)

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs (see 1.3.10 below). Contingent rentals are recognised as expenses in the periods in which they are incurred.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

1.3.9 Foreign currencies

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group entity are expressed in Australian dollars (‘$’), which is the functional currency of the Company and the presentation currency for the consolidated financial statements.

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non- monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise.

For the purpose of presenting these consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into Australian dollars using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (and attributed to non-controlling interests as appropriate).

On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, or a partial disposal of an interest in a joint arrangement or an associate that includes a foreign operation of which the retained interest becomes a financial asset), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss.

Goodwill and fair value adjustments to identifiable assets acquired and liabilities assumed through acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in other comprehensive income.

1.3.10 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

NOTES TO THE FINANCIAL STATEMENTS

1. Significant accounting policies (continued)

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

1.3.11 Employee benefits

1.3.11.1 Short-term and long-term employee benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered.

Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Liabilities recognised in respect of long term employee benefits (i.e. annual leave, long service leave and retirement benefits) are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.

1.3.11.2 Termination benefits

A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.

1.3.12 Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1.3.12.1 Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the consolidated income statement and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

1.3.12.2 Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

NOTES TO THE FINANCIAL STATEMENTS

1. Significant accounting policies (continued)

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax liabilities and assets are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

1.3.12.3 Current and deferred tax for the year

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

1.3.12.4 Tax consolidation

For the purposes of income taxation, USG Boral Building Products Pty Limited and its wholly-owned Australian controlled entities elected to form a tax consolidated group effective 1 March 2014. As a consequence all members of the tax consolidated group are taxed as a single entity. The head entity, USG Boral Building Products Pty

Limited and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. Despite a tax sharing and tax funding agreement not being in place, the tax consolidated group accounts for tax balances as if an agreement is in place.

1.3.13 Property, plant and equipment

Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the consolidated statement of financial position at cost, less any subsequent accumulated depreciation

and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amounts do not differ materially from those that would be determined using fair values at the end of each reporting period.

Freehold land is not depreciated.

Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation is recognised so as to write off the cost or valuation of assets (other than freehold land and properties

under construction) less their residual values over their useful lives, using the straight-line method. The estimated

useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

The depreciation and amortisation rates used for each class of asset are as follows:

For the year ended 30 June	2016 (Unaudited)	2015 (Unaudited)	2014
Buildings	12/1/2005	12/1/2005	1 - 10%
Plant and equipment	4 - 33.3%	4 - 33.3%	5 - 33.3%

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

NOTES TO THE FINANCIAL STATEMENTS

1. Significant accounting policies (continued)

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

1.3.14 Intangible assets

1.3.14.1 Intangible assets acquired separately

Intangible assets with finite lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful

lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.

1.3.14.2 Internally-generated intangible assets - research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale;

• the intention to complete the intangible asset and use or sell it;

• the ability to use or sell the intangible asset;

• how the intangible asset will generate probable future economic benefits;

• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

• the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally- generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

1.3.14.3 Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

1.3.14.4 Derecognition of intangible assets

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset are recognised in profit or loss when the asset is derecognised.

NOTES TO THE FINANCIAL STATEMENTS

1. Significant accounting policies (continued)

1.3.15 Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing fair value less the cost of disposal, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case

the impairment loss is treated as a revaluation decrease.

When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

1.3.16 Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first- in-first-out basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

1.3.17 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

NOTES TO THE FINANCIAL STATEMENTS

1. Significant accounting policies (continued)

1.3.17.1 Restructurings

A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity.

1.3.18 Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

1.3.18.1 Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest

rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

1.3.18.2 Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.

1.3.18.3 Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For all other financial assets, objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• breach of contract, such as a default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

• the disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial assets, such as trade receivables, assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

NOTES TO THE FINANCIAL STATEMENTS

1. Significant accounting policies (continued)

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount

of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

1.3.18.4 Derecognition of financial assets

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a

transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

On derecognition of a financial asset other than in its entirety (e.g. when the Group retains an option to repurchase part of a transferred asset), the Group allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is

allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

1.3.19 Financial liabilities and equity instruments

1.3.19.1 Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

1.3.19.2 Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all

NOTES TO THE FINANCIAL STATEMENTS

1. Significant accounting policies (continued)

of its liabilities. Equity instruments issued by a group entity are recognised at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

1.3.19.3 Other financial liabilities

Other financial liabilities, including borrowings and trade and other payables, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

1.3.19.4 Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

1.3.20 Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

i. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

ii. for receivables and payables which are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified within operating cash flows.

1.4 Key sources of estimation uncertainty

In the application of the Group’s accounting policies, which are described in note 1.3, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

NOTES TO THE FINANCIAL STATEMENTS

1. Significant accounting policies (continued)

Information about the principal areas in which judgement is applied is included in:

• Note 1.3.14 Intangible assets; and

• Note 1.3.15 Impairment of tangible and intangible assets other than goodwill.

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

		CONSOLIDATED
		2016	2015	2014
		(Unaudited)	(Unaudited)
For the year ended 30 June	Note	A$'000	A$'000	A$'000
2. Profit for the year REVENUE
Sale of goods		504,583	426,450	394,762
Total revenue on sale of goods		504,583	426,450	394,762
OTHER EXPENSES Significant items	3	-	59	1,481
Net foreign exchange loss		262	14	140
Net loss on sale of assets		296	49	43
Total other expenses		558	122	1,664
DEPRECIATION AND AMORTISATION EXPENSES Buildings		3,499	2,903	3,097
Plant and equipment		12,101	11,874	11,700
Other intangibles		2,462	2,462	821
Total depreciation and amortisation expenses		18,062	17,239	15,618
NET FINANCING INCOME/COSTS Interest income received or receivable from: Associated entities		564	585	546
Other parties (cash at bank and bank short-term deposits)		424	913	84
Total interest income		988	1,498	630
Interest expense paid or payable to: Related parties		-	-	4,283
Other parties		84	16	84
Total interest expense		84	16	4,367
Net financing income/(costs)		904	1,482	(3,737)
OTHER CHARGES Employee benefits expense*		90,257	73,435	100,966
Operating lease rental charges		16,547	14,859	13,894
Bad and doubtful debts expense		1,158	1,458	1,296

* Employee benefits expense includes salaries and wages, defined benefit, defined contribution expenses termination and other entitlements.

21

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

		CONSOLIDATED
		2016	2015		2014
		(Unaudited)	(Unaudited)
For the year ended 30 June	Note	A$'000	A$'000		A$'000
3. Significant items
Net profit includes the following items whose disclosure is relevant in explaining the financial performance of the Group:
Organisational restructure costs	(i)	—	(59	)	(1,481	)
Summary of significant items
Loss before tax		—	(59	)	(1,481	)
Income tax benefit		—	18		444
Net significant items		—	(41	)	(1,037	)

2016 (Unaudited) Significant items

(i) Organisational restructure costs

There was no restructuring cost incurred during the year ended 30 June 2016 (unaudited).

2015 (Unaudited) and 2014 Significant items

(i) Organisational restructure costs

The company incurred redundancy and restructuring costs of $59,000 (unaudited) and $1,481,000 during the year ended 30 June 2015 and 2014, respectively to simplify business structures and improve operational efficiency.

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

CONSOLIDATED

		2016 (Unaudited)	2015 (Unaudited)	2014
For the year ended 30 June	Note	A$'000	A$'000	A$'000
4. Income tax expense
(i) Income tax expense
Current income tax expense		16,765	12,480	8,806
Deferred income tax (benefit)/expense		(1,053)	490	(3,612)
Adjustments of deferred income tax for previous years		(1,727)	-	-
Adjustments of current income tax for previous years 1,291 (900) 441
Income tax expense attributable to profit		15,276	12,070	5,635
(ii) Reconciliation of income tax expense
Income tax expense on profit:
- at Australian tax rate 30% (2015: 30% and 2014: 30%)		19,356	15,425	10,275
- at New Zealand tax rate 28% (2015: 28% and 2014: 28%)		(176)	365	49
Share of associates' net profit		(3,696)	(3,142)	(2,446)
Restatement of deferred taxes on exit from Boral Limited tax group		-	-	(3,525)
Other items		228	322	841
Income tax expense on profit		15,712	12,970	5,194
Adjustments of deferred income tax for previous years		(1,727)	-	-
Adjustments of current income tax for previous years		1,291	(900)	441
Income tax expense attributable to profit		15,276	12,070	5,635
Income tax expense
Income tax expense excluding significant items		15,276	12,088	6,079
Income tax benefit relating to significant items 3 - (18) (444)

Total income tax expense 15,276 12,070 5,635

(iii) Tax amounts recognised directly in equity

There were no deferred tax amounts charged/(credited) directly to equity during the year ended 30 June 2016 (unaudited), 30 June 2015 (unaudited) and 30 June 2014.

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

5. Dividends

Dividends recognised by the Group are:

	Cents per share	Total amount A$'000s	Franked amount Cents per share	Date of payment
2016 (unaudited)
2016 (unaudited)	2.01	20,563	2.01	19th November, 2015
2016 (unaudited)	1.82	18,623	1.82	19th May, 2016
Total (unaudited)	3.83	39,186	3.83
2015 (unaudited)
2015 (unaudited)	2.22	22,698	2.22	18th May, 2015
Total (unaudited)	2.22	22,698	2.22
2014
2014 no dividends paid	—	—	—
Total	—	—	—

Dividend franking account

The balance of the franking account as at 30 June 2016 is $14,923,734 (unaudited) (2015: $10,278,953 (unaudited)

and 2014: $5,133,342) after adjusting for franking credits/(debits) that will arise from:

• the payment of and receipt of dividends;

• the payment/refund of the amount of the current tax liability;

and before taking into account the franking credits associated with the future declaration and payment of dividends subsequent to year end.

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

	CONSOLIDATED
	2016		2015
	(Unaudited)		(Unaudited)
As at 30 June	A$'000		A$'000
6. Cash and cash equivalents
Cash at bank and on hand	33,259		41,154
Total cash and cash equivalents	33,259		41,154
7. Receivables
Current
Trade receivables	86,945		73,508
Receivables from associated entities and related parties	9,526		6,918
	96,471		80,426
Less: Allowance for impairment	(2,284	)	(1,761	)
Total trade receivables	94,187		78,665

The Group requires all customers to pay in accordance with agreed payment terms. Included in the Group's trade receivables are debtors with a carrying value of $23,705,000 (unaudited) (2015: $21,210,000 (unaudited)), which are past due but not impaired. These relate to a number of debtors with no significant change in credit quality or history of default. The ageing analysis is as follows:

Trade receivables - past due 1-60 days	21,962	19,172
Trade receivables - past due > 60 days	1,743	2,038

Allowance for impairment

An allowance for impairment of trade receivables is raised when there is objective evidence that an individual receivable is impaired. Indicators of impairment would include significant financial difficulties of the debtor, the probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments.

The movement in the allowance for impairment in respect to trade receivables during the year was as follows: CONSOLIDATED

As at 30 June	2016 (Unaudited) A$'000	2015 (Unaudited) A$'000	2014 A$'000
Balance at the beginning of the year	(1,761)	(867)	(669)
Amounts written off during the year	635	675	1,098
Increase recognised in income statement	(1,158)	(1,569)	(1,296)
Balance at the end of the year	(2,284)	(1,761)	(867)
Non-current
Loans to associated entities	7,500	11,750	10,000
Less: Allowance for impairment	—	—	—
Total	7,500	11,750	10,000

No amounts owing by associates were past due as at 30 June 2016 (unaudited) and 30 June 2015 (unaudited).

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

	CONSOLIDATED
	2016	2015
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000
8. Inventories and work in progress
Inventories
Raw materials and consumable stores	7,275	6,243
Finished goods	32,738	27,690
Total inventories	40,013	33,933
Work in progress
Work in progress	5,900	5,743
Total work in progress	5,900	5,743

Work-in-progress is in respect of supply and install contracts. For revenue from supply and install contracts, the majority of the agreed contract price has been recognised as revenue when the contract is substantially complete, pending completion of minor works. The remainder of the agreed contract price is recognised as revenue when those minor works are completed.

9. Investments accounted for using the equity method
				CONSOLIDATED
				OWNERSHIP INTEREST		INVESTMENT CARRYING AMOUNT
				2016	2015	2016		2015
	Principal	Country of	Balance	(Unaudited)	(Unaudited)	(Unaudited)		(Unaudited)
Name	activity	incorporation	date	%	%	A$'000		A$'000
Details of investments in associates and joint ventures
Gypsum Resources Australia Pty Ltd	Trustee Company	Australia	30-Jun	50	50	—		—
Gypsum Resources Trust*	Manufacturer and distributor of Gypsum products	Australia	31-Mar	50	50	12,015		12,015
Rondo Building Services Pty Ltd	Rollform systems	Australia	30-Jun	50	50	18,919		15,594
Total investments in associates						30,934		27,609
						CONSOLIDATED
						2016		2015
						(Unaudited)		(Unaudited)
As at 30 June						A$'000		A$'000
Rondo Building Services Pty Ltd
Movements in carrying value of equity accounted investments
Balance at the beginning of the year						15,594		13,261
Share of equity accounted profit						12,320		10,472
Dividends received						(9,000	)	(8,000	)
Share of movement in currency reserve						5		(139	)
Balance at the end of the year						18,919		15,594
						CONSOLIDATED
						2016		2015
						(Unaudited)		(Unaudited)
As at 30 June						A$'000		A$'000
Gypsum Resources Trust*
Movements in carrying value of equity accounted investments
Balance at the beginning of the year						12,015		12,015		**
Share of equity accounted profit						—		—
Dividends received						—		—
Share of movement in currency reserve						—		—
Balance at the end of the year						12,015		12,015
* During the year ended 30 June 2015, the Company has reviewed its agreement with Gypsum Resources Trust and believe that this should be a joint venture and accounted for as an equity accounted investment.
** This is a loan to the Trust which is considered as part of the Investment.

26

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

9. Investments accounted for using the equity method (continued)

Rondo Building Services Pty Ltd

Summary of performance and financial position of associates and joint ventures

The Group's share of aggregate revenue, profits, assets and liabilities of associates is as follows:

	CONSOLIDATED
	2016	2015	2014
	(Unaudited)	(Unaudited)
For the year ended 30 June	A$'000	A$'000	A$'000
Associates' revenue	221,858	209,945	160,858
Associates' profit before income tax expense	36,255	30,019	23,274
Associates' income tax expense	(11,105)	(9,075)	(6,966)
Associates' net profit	25,150	20,944	16,308
The Group's share based on 50% ownership	12,320	10,472	8,154
	CONSOLIDATED
	2016	2015	2014
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000	A$'000
Associates' net assets
Current assets	74,866	74,774	60,052
Non-current assets	19,038	17,448	16,182
Total assets	93,904	92,222	76,234
Current liabilities	52,351	57,607	45,942
Non-current liabilities	2,454	2,491	3,770
Total liabilities	54,805	60,098	49,712
Net assets	39,099	32,124	26,522
The Group's share of net assets based on 50% ownership	19,549	16,062	13,261
Share of associates' commitments
Share of associates' capital expenditure commitments contracted but not provided for:
Not later than one year	1,250	1,050	1,242
Share of associates' operating lease commitments payable:
Not later than one year	3,842	3,168	3,320
Later than one year but not later than five years	10,095	8,077	9,970
Later than five years	0	0	150
Total share of associates' operating lease commitments payable	13,937	11,245	13,440

27

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

9. Investments accounted for using the equity method (continued)

Gypsum Resources Trust

Summary of performance and financial position of associates and joint ventures

The Group's share of aggregate revenue, profits, assets and liabilities of associates is as follows: CONSOLIDATED

	CONSOLIDATED
	2016	2015	2014
	(Unaudited)	(Unaudited)
For the year ended 30 June	A$'000	A$'000	A$'000
Associates' revenue	97,379	86,895	0
Associates' profit before income tax expense	0	0	0
Associates' income tax expense	0	0	0
Associates' net profit	0	0	0
The Group's share based on 50% ownership	0	0	0
	CONSOLIDATED
	2016	2015	2014
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000	A$'000
Associates' net assets
Current assets	30,273	28,280	0
Non-current assets	14,048	12,220	0
Total assets	44,321	40,500	0
Current liabilities	9,471	9,661	0
Non-current liabilities	24,029	24,029	0
Total liabilities	33,500	33,690	0
Net assets	10,821	6,810	0
The Group's share of net assets based on 50% ownership	5,411	3,405	0
Share of associates' commitments
Share of associates' capital expenditure commitments contracted but not provided for:
Not later than one year	520	0	0
Share of associates' operating lease commitments payable:
Not later than one year	434	427	0
Later than one year but not later than five years	1,737	1,796	0
Later than five years	3,371	3,537	0
Total share of associates' operating lease commitments payable	5,542	5,760	0

28

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

	CONSOLIDATED
	2016	2015	2014
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000	A$'000
10. Property, plant and equipment
Land and buildings
At cost	148,889	147,540	149,004
Less: Accumulated depreciation, amortisation and impairment	(23,306)	(19,922)	(18,085)
Total land and buildings net carrying amount	125,583	127,618	130,919
Plant and equipment
At cost	305,536	289,249	285,740
Less: Accumulated depreciation and impairment	(128,179)	(117,987)	(114,657)
Net carrying amount	177,357	171,262	171,083
Leased plant and equipment capitalised	345	345	345
Less: Accumulated amortisation	(156)	(104)	(51)
Net carrying amount	189	241	294
Total plant and equipment net carrying amount	177,546	171,503	171,377
Total	303,129	299,121	302,296
Reconciliations
	CONSOLIDATED
	2016	2015	2014
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000	A$'000
Land and buildings
Balance at the beginning of the year	127,618	130,919	131,631
Additions	548	1,129	2,385
Disposals	(139)	0	0
Leasehold improvements on operating leases	1,055	0	0
Other	0	(1,527)	0
Depreciation expense	(3,499)	(2,903)	(3,097)
Balance at the end of the year	125,583	127,618	130,919
Plant and equipment
Balance at the beginning of the year	171,503	171,377	178,207
Additions	17,774	16,397	1,861
Acquisitions through business combinations	0	0	3,146
Disposals	(157)	(49)	(43)
Other	385	(4,020)	0
Foreign exchange movement	142	(328)	(94)
Depreciation expense	(12,101)	(11,874)	(11,700)
Balance at the end of the year	177,546	171,503	171,377

29

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

	CONSOLIDATED
	2016	2015
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000
11. Intangibles
Goodwill	13,914	13,859
Other intangible assets	39,299	39,250
Less: Accumulated amortisation	(5,745)	(3,283)
Other intangible assets net carrying amount	33,554	35,967
Total intangibles net carrying amount	47,468	49,826
Reconciliation of movements in goodwill
Balance at the beginning of the year	13,859	14,021
Write off of goodwill	0	(177)
Net foreign currency exchange differences	55	15
Balance at the end of the year	13,914	13,859

There was no write off of goodwill during the year ended 30 June 2014.

Impairment testing for cash generating units containing goodwill

USG Boral Building Products Pty Limited is responsible for the manufacture and distribution of plasterboard and associated products throughout Australia and New Zealand. Sales are made direct to major builders or via a network of retail outlets consisting of wholly owned and independent distributors. For impairment purposes USG Boral Building Products Pty Limited has two Cash Generating Units (CGU): USG Boral Building Products Pty Limited operations in ("Australia") and USG Boral Building Products NZ operations in ("New Zealand"). The aggregate carrying amounts of goodwill allocated to each CGU are as follows:

	2016	2015
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000
Australia CGU	12,791	12,791
New Zealand CGU	1,123	1,068
Total	13,914	13,859

Key assumptions

The recoverable amount of the CGU was based on fair value less costs of disposal, estimated using discounted cash flows. The fair value measurement was categorised as a Level 3 fair value based on the inputs in the valuation technique used.

The key assumptions used in the estimation of the recoverable amount are set out below. The fair value less cost of disposal calculations use post-tax cash flow projections based on financial budgets and plans approved by management. Cash flows are projected over a ten year period to recognise the cyclical nature of the Australian and New Zealand building industry. Cash flows beyond the projection period are extrapolated using a growth rate of 1.5% (unaudited) for Australia and 2% (unaudited) for New Zealand during the year ended 30 June 2016 (2015: growth rate of 2.25% (unaudited) for Australia and New Zealand). This growth rate does not exceed the long-term average growth rate for the industry in which the CGU operates.

The Company's weighted cost of capital is used as a starting point for determining the discount rate. The post-tax discount rate applied to post-tax cash flows is 11% (unaudited) for Australia and New Zealand during the year ended 30 June 2016 (2015:

10.5% (unaudited) for Australia and 10.75% (unaudited) for New Zealand).

The key assumptions relate to:

- housing starts and market share, plasterboard demand, plasterboard intensity and economic activity in Australia and New

Zealand.

These assumptions have been determined with reference to current performance and taking into account external forecasts. Housing starts and plasterboard demand forecasts utilised in the cash flow projections are based on historical experiences.

The recoverable amount of the CGU's based on fair value less cost of disposal exceeds their carrying value as at 30 June 2016 (unaudited) and 30 June 2015 (unaudited).

30

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

	CONSOLIDATED
	2016	2015	2014
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000	A$'000
11. Intangibles (continued)
Reconciliation of movements in other intangibles
Balance at the beginning of the year	35,967	38,443	0
Acquisition of other intangibles	0	0	38,617
Acquisition of entities or operations	0	0	667
Amortisation expense	(2,462)	(2,462)	(821)
Net foreign currency exchange differences	49	(14)	(20)
Balance at the end of the year	33,554	35,967	38,443

Other intangible assets

Other intangible assets relate predominantly to Intellectual Property. Where appropriate, other intangible assets are amortised at rates from 5% to 20% with Intellectual Property being amortised over 11.4 years during the years ended 30 June 2016 (unaudited), 30 June 2015 (unaudited) and 30 June 2014. Amortisation expense is included in depreciation and amortisation as disclosed in note 2.

	CONSOLIDATED
	2016	2015
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000
12. Payables
Current
Trade creditors	51,056	42,805
Payables to associated entities and related parties	6,612	6,722
Total payables	57,668	49,527
13. Loans and borrowings
Current
Finance lease liabilities	189	241
Total loans and borrowings	189	241

31

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

	CONSOLIDATED
	2016	2015
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000
14. Income tax payable
Current
Current tax payable	6,018	9,864
USG Boral Building Products Pty Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 1 March 2014. USG Boral Building Products Pty Limited is the head entity of the tax consolidated group.
15. Deferred tax assets and liabilities
Recognised deferred tax balances
Deferred tax asset	6,907	5,065
Deferred tax liability	(3,070)	(3,973)
Net deferred tax assets	3,837	1,092

MOVEMENT IN TEMPORARY DIFFERENCES DURING THE YEAR

	CONSOLIDATED
	Balance at  beginning of year	Recognised in income	Other movement	Balance at end of year
As at 30 June 2016 (Unaudited)	A$'000	A$'000	A$'000	A$'000
Receivables (unaudited)	528	157	0	685
Inventories (unaudited)	(1,324)	1,324	0	0
Property, plant and equipment (unaudited)	(2,649)	(386)	(35)	(3,070)
Provisions (unaudited)	4,344	1,112	0	5,456
Other (unaudited)	193	573	0	766
Net deferred tax assets (unaudited)	1,092	2,780	(35)	3,837

	CONSOLIDATED
	Balance at beginning of year	Recognised in income	Other movement	Balance at end of year
As at 30 June 2015 (Unaudited)	A$'000	A$'000	A$'000	A$'000
Receivables (unaudited)	260	268	0	528
Inventories (unaudited)	(1,141)	(183)	0	(1,324)
Property, plant and equipment (unaudited)	(2,400)	(231)	(18)	(2,649)
Provisions (unaudited)	4,698	(354)	0	4,344
Other (unaudited)	12	10	171	193
Net deferred tax assets (unaudited)	1,429	(490)	153	1,092

32

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

	CONSOLIDATED
	2016	2015
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000
16. Provisions
Current
Employee benefits	13,851	11,830
Remediation	1,179	45
Claims	713	308
Deferred rent	260	0
Total current provisions	16,003	12,183
Non-current
Employee benefits	1,056	1,079
Other	0	90
Total non-current provisions	1,056	1,169

Remediation

Provisions are raised where there is a likelihood that site remediation costs will be incurred and the costs can be reliably measured.

Claims

Provisions are raised for liabilities arising from the ordinary course of business, in relation to claims against the Group, including insurance, legal and other claims. Where recoveries are expected in respect of such claims, these are included in other receivables.

Reconciliations	CONSOLIDATED
	2016	2015
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000
Remediation
Balance at the beginning of the year	45	519
Provisions made/(released) during the year	1,134	(474)
Balance at the end of the year	1,179	45
Claims
Balance at the beginning of the year	308	1,480
Provisions made/(released) during the year	405	(1,172)
Balance at the end of the year	713	308
Deferred rent
Balance at the beginning of the year	0	0
Provisions made during the year	260	0
Balance at the end of the year	260	0
Other
Balance at the beginning of the year	90	99
Provisions released during the year	(90)	(9)
Balance at the end of the year	0	90

33

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

	CONSOLIDATED
	2016	2015	2014
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000	A$'000
17. Issued capital
Issued and paid up capital
1,022,944,002 (unaudited) (2015:1,022,944,002 (unaudited) and 2014:1,022,944,002) ordinary shares, fully paid	282,240	282,240	282,240
Movements in ordinary issued capital
Balance at the beginning of the year	282,240	282,240	13,500
In 2014, 936,432,651 shares issued on capitalisation of intercompany loan ($212,500,000) and contribution of intellectual property from Boral Limited ($8,834,000).	0	0	221,334
In 2014, 29,226,971 shares issued on acquisition of controlled entities.	0	0	17,623
In 2014, 50,534,377 shares issued on intellectual property contribution from USG Corporation.	0	0	29,783
Balance at the end of the year	282,240	282,240	282,240

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders' meetings.

In the event of a winding up of USG Boral Building Products Pty Limited ordinary shareholders rank after creditors and are fully entitled to any proceeds of liquidation.

	CONSOLIDATED
	2016	2015	2014
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000	A$'000
18. Reserves
Foreign currency translation reserve	441	(734)	(176)
Total foreign currency translation reserve	441	(734)	(176)
Reconciliations
Foreign currency translation reserve
Balance at the beginning of the year	(734)	(176)	225
Gain/(Loss) on translation of assets and liabilities of overseas entities	1,175	(558)	(401)
Balance at the end of the year	441	(734)	(176)

Nature and purpose of reserves

Foreign currency translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentation currency of the Group.

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

19. Contingent liabilities (Unaudited)

The directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of economic benefits will be required, or the amount is not capable of reliable measurement (2015: nil (unaudited)).

A number of sites within the Group have been identified as contaminated, generally as a result of prior activities conducted at the sites, and the review and appropriate implementation of clean-up requirements for these is ongoing. For sites where the requirements can be assessed, estimated clean-up costs have been expensed or provided for. For some sites, the requirements cannot be reliably assessed at this stage.

The Company is subject to various lawsuits and claims in the ordinary course of business.

The Company is the subject of periodic information requests, investigations and audit activity by the

Australian Taxation Office.

The Company has considered all of the above claims and, where appropriate, sought independent advice and believes it holds appropriate provisions.

	CONSOLIDATED
	2016	2015
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000
20. Commitments
Capital expenditure commitments
Contracted but not provided for are payable as follows:
Not later than one year	1,866	1,805
Later than one year but not later than five years	0	0
Later than five years	0	0
Total capital expenditure commitments	1,866	1,805
The capital expenditure commitments are in respect of the purchase of plant and equipment.
Operating leases
Lease commitments in respect of operating leases are payable as follows:
Not later than one year	12,493	10,117
Later than one year but not later than five years	19,692	13,329
Later than five years	760	183
Total operating leases commitments	32,945	23,629

The Group leases property, equipment and vehicles under operating leases expiring from one to seven years. Leases generally provide the consolidated entity with a right of renewal at which time all terms are renegotiated. Some leases involve lease payments comprising a base amount plus an incremental contingent rental. Contingent rentals are based on the Consumer Price Index or operating criteria.

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

21. Financial risk management

The Group's business activities are exposed to a variety of financial risks, including credit, liquidity, foreign currency and interest rate risks. The Group does not use any derivative financial instruments to hedge these risks. The Group does not use derivative or financial instruments for trading or speculative purposes.

The use of financial derivatives is controlled by policies approved by Board of Directors.

CREDIT RISK

Exposure to credit risk

The Group has a large number of customers to which it provides products, with no single customer responsible for more than 10% of the Group's revenue (unaudited).

Management has a counterparty credit risk policy in place and the exposure to credit risk is monitored on an ongoing basis.

The carrying amount of non-derivative financial assets represents the maximum credit exposure and at the reporting date the maximum exposure was:

	CONSOLIDATED
	Carrying amount	Fair value	Carrying amount	Fair value
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	2016	2016	2015	2015
As at 30 June	A$'000	A$'000	A$'000	A$'000
Non-derivative financial assets
Receivables from associated entities and related parties	9,526	9,526	6,918	6,918
Trade and other receivables	84,661	84,661	71,747	71,747
Cash and cash equivalents	33,259	33,259	41,154	41,154
Total non-derivative financial assets	127,446	127,447	119,819	119,819

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

21. Financial risk management (continued)

LIQUIDITY RISK

Liquidity risk is the risk that the Group has insufficient funds to meet its financial obligations when they fall due. It is also associated with planning for unforeseen events or business disruptions that may cause pressure on liquidity. The Group manages liquidity risk by ensuring it has a well spread debt maturity profile and has sufficient committed undrawn facilities and cash to meet any unforseen events and business disruptions.

The following are the contractual maturities of financial liabilities:

	CONSOLIDATED
	Carrying amount	Contractual cash flows	6 months or less	6-12 months	1-2 years	2-5 years	More than 5 years
As at 30 June 2016 (Unaudited)	A$'000	A$'000	A$'000	A$'000	A$'000	A$'000	A$'000
Non-derivative financial liabilities
Payables to associated entities and related parties (unaudited)	6,612	6,612	6,612	0	0	0	0
Finance lease liabilities (unaudited)	189	189	27	162	0	0	0
Trade creditors (unaudited)	51,055	51,055	51,055	0	0	0	0
Total non-derivative financial liabilities (unaudited)	57,857	57,857	57,695	162	0	0	0

	CONSOLIDATED
	Carrying amount	Contractual cash flows	6 months or less	6-12 months	1-2 years	2-5 years	More than 5 years
As at 30 June 2015 (Unaudited)	A$'000	A$'000	A$'000	A$'000	A$'000	A$'000	A$'000
Non-derivative financial liabilities
Payables to associated entities and related parties (unaudited)	6,722	6,722	6,722	0	0	0	0
Finance lease liabilities (unaudited)	241	241	26	215	0	0	0
Trade creditors (unaudited)	42,805	42,805	42,805	0	0	0	0
Total non-derivative financial liabilities (unaudited)	49,768	49,768	49,553	215	0	0	0

Capital risk management

The capital management objectives of the Group are directed towards preservation of a strong capital base to maintain creditor and market confidence and sustain future development of the business.

Neither the Company nor any of its subsidiaries are subject to any externally imposed capital requirements

(unaudited).

Currency risk

The Group purchases the majority of its materials in Australian dollars. No material receivables or payables are held in a currency other than Australian dollars (unaudited).

Interest rate risk

The Group is exposed to interest rate risk since it has interest bearing financial assets (cash and cash equivalents).

At 30 June 2016, if interest rates had changed by +/- 1% p.a. from the year end rates with all other variables held constant, the Group's pre-tax profit for the year would have been A$332,000 higher/lower (unaudited) (2015: A$411,000 (unaudited) and 2014: A$348,000).

Fair value hierarchy

The Group has no financial assets or liabilities valued at fair value. The Group has not disclosed the fair values for financial assets and liabilities as their carrying amounts are a reasonable approximation of fair value (unaudited).

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

22. Controlled entities

The financial statements of the following entities have been consolidated to determine the results of the Group:

		Beneficial ownership by
	Country of incorporation	Consolidated entity 2016 (Unaudited) %	Consolidated entity 2015 (Unaudited) %	Consolidated entity 2014 (Unaudited) %
USG Boral Building Products Pty Ltd	Australia	100	100	100
Waratah Gypsum Pty Ltd (in liquidation)	Australia	100	100	100
Boral Plaster Fixing Pty Ltd	Australia	100	100	100
Lympike Pty Ltd	Australia	100	100	100
USG Interiors Australia Pty Ltd	Australia	100	100	100
USG Boral Building Products NZ	New Zealand	100	100	100

All the shares held by USG Boral Building Products Pty Limited in controlled entities are ordinary shares.

23. Acquisitions and disposals of controlled entities and businesses

There were no acquisitions or disposals during the years ended 30 June 2016 (unaudited) and 30 June 2015 (unaudited).

On the 28 February 2014 the Group acquired USG Interiors Australia Pty Ltd and USG Boral Building Products NZ as a result of completion of the 50/50 Joint Venture, USG Boral Building Products Pty Limited, between Boral Limited and USG Corporation.

Details of the purchase consideration, the net assets acquired and goodwill are as follows:

		A $'000
Purchase consideration
	Issue of ordinary shares	17,623
		17,623
The assets and liabilities recognised as a result of the acquisition are as follows:
		Fair Value
		A $'000
Cash and cash equivalents		7,559
Receivables		4,443
Inventories		4,239
Deposits and prepayments		449
Property, plant and equipment		3,146
Intangibles		667
Payables		(3,300)
Deferred tax liability		(896)
Net identifiable assets acquired		16,307
Goodwill		1,316
		17,623

38

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

24. Related party disclosures

CONTROLLED ENTITIES

Interests held in controlled entities are set out in note 22.

ASSOCIATED ENTITIES AND JOINT VENTURES

Interests held in associated entities and joint ventures are set out in note 9. Associated entities and joint ventures conduct business transactions with various controlled entities. Such transactions include purchases and sales of certain products, dividends and interest. All such transactions are conducted on the basis of normal commercial terms and conditions.

TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL

Key management personnel compensation

Key management personnel compensation comprises the following:

	2016	2015	2014
	(Unaudited)	(Unaudited)
For the year ended 30 June	A$'000	A$'000	A$'000
Short-term employee benefits	2,555	2,665	2,210
Post employment benefits	129	149	94
Share-based payments	0	0	277
Other long term benefits	0	0	273
Total key management personnel compensation	2,684	2,814	2,854

Key management personnel disclosures relate to those personnel that are in control of the strategic direction of the entity.

Key Management personnel and Director transactions

Transactions entered into during the year with Directors of USG Boral Building Products Pty Limited are within normal employee, customer or supplier relationships on terms and conditions no more favourable than dealings in the same circumstances on an arm’s length basis and include:

- participation in the USG Boral Short and Long Term Incentive Plans;

- reimbursement of expenses; and

- purchases of goods and services.

A number of Directors of the Company hold directorships in other entities. Several of these entities transacted with the Group on terms and conditions no more favourable than those available on an arm's length basis (unaudited).

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

24. Related party disclosures (continued)

RELATED PARTY TRANSACTIONS

On 28 February 2014, the Group became jointly owned by Boral Limited and USG Corporation.

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed on this note. Details of transactions between the Group and other related parties are disclosed below.

Trading Transactions

During the year, group entities entered into the following trading transactions with related parties that are not members of the Group:

	Sales of goods		Purchases of goods
	2016	2015	2016	2015
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
For the year ended 30 June	A$'000	A$'000	A$'000	A$'000
Subsidiaries of Boral Limited	222	203	1,315	1,118
Subsidiaries of USG Corporation	0	0	5,948	2,276
Joint Venture of Boral Limited and USG Corporation	0	0	2,763	1,166
Gypsum Resources Trust	0	0	22,876	24,149
Rondo Building Services Pty Ltd	0	0	20,244	15,719
The following balances were outstanding at the end of the reporting period:
	Amounts owed by		Amounts owed to
	related parties		related parties
	2016	2015	2016	2015
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000	A$'000	A$'000
Boral Limited	19	0	0	13
Subsidiaries of Boral Limited	8	36	920	1,208
Subsidiaries of USG Corporation	0	0	1,258	1,079
Joint Venture of Boral Limited and USG Corporation	2	931	275	266
Gypsum Resources Trust	9,455	5,926	419	1,724
Rondo Building Services Pty Ltd	42	25	3,740	2,432

All transactions with related parties were made in normal commercial terms and conditions and at market rates.

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No expense has been recognised in the current or prior periods for bad or doubtful debts in respect of the amounts owed by related parties.

Loans to related parties

	2016	2015
	(Unaudited)	(Unaudited)
As at 30 June	A$'000	A$'000
Rondo Building Services Pty Ltd	7,500	11,750

In addition to the above, certain administrative services were provided to the Company and related parties, for which

management and other administrative fees were charged and paid, being an appropriate allocation of costs incurred by relevant administrative departments.

	Compensation received		Compensation paid
	from related party		to related party
	2016	2015	2016	2015
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
For the year ended 30 June	A$'000	A$'000	A$'000	A$'000
Boral Limited	0	0	778	2,652
Subsidiaries of Boral Limited	0	0	17,104	18,534
Subsidiaries of USG Corporation	0	0	0	20
Joint Venture of Boral Limited and USG Corporation	3,260	4,301	4,039	5,318
Gypsum Resources Trust	352	303	0	0

Further, technology royalty fee of A$7,292,655 (unaudited) was expensed in relation to USG Boral Building Products Sdn Bhd, a joint venture of Boral Limited and USG Corporation during the year ended 30 June 2016 (2015: A$5,717,697 (unaudited) and 2014: nil). Appropriate royalty withholding taxes were remitted to the Australian Taxation Office in relation to the royalty fee.

40

NOTES TO THE FINANCIAL STATEMENTS

USG Boral Building Products Pty Limited and Controlled Entities

			CONSOLIDATED
			2016	2015	2014
			(Unaudited)	(Unaudited)
For the year ended 30 June		Note	A$'000	A$'000	A$'000
25. Notes to statement of cash flows
(i)	Reconciliation of cash and cash equivalents:
	Cash includes cash on hand, at bank and short-term deposits, net of outstanding bank overdrafts. Cash as at the end of the year as shown in the statement of cash flows is reconciled to the related items in the balance sheet as follows:
	Cash and cash equivalents	6	33,259	41,154	34,801
	Total cash and cash equivalents		33,259	41,154	34,801
(ii)	Reconciliation of net profit to net cash provided by operating activities:
	Net profit		48,616	40,651	28,790
	Adjustments for non-cash items:
	Depreciation and amortisation		18,062	17,239	15,618
	Discount unwinding		124	0	0
	Non-cash movement of make good provision		(1,179)	0	0
	Loss on sale of assets		296	49	43
	Non-cash equity income		(3,320)	(2,472)	846
	Net cash provided by operating activities before change in assets and liabilities		62,599	55,467	45,297
	Changes in assets and liabilities
	- Receivables		(15,522)	(7,355)	(8,383)
	- Inventories and work in progress		(6,237)	6,538	(3,927)
	- Payables		8,141	(1,576)	10,707
	- Provisions		3,707	(956)	(1,492)
	- Current and deferred taxes		(6,591)	6,821	1,982
	- Other current assets and borrowings		(1,273)	(4,228)	(480)
	Net cash provided by operating activities		44,824	54,711	43,704
(iii)	Non-cash financing and investing activities		1,179	0	0
	There were no non-cash financing and investing activities during the year ended 30 June 2015 (unaudited).
	Details of non-cash financing and investing activities during the year ended 30 June 2014 are set out in note 17 and 23.
(iv)	Restructure costs
	During the year, the Group incurred costs associated with:
	Organisational restructure costs		0	(59)	(1,481)
	Total restructure costs		0	(59)	(1,481)

CONSOLIDATED

			2016 (Unaudited)	2015 (Unaudited)	2014
For t	he year ended 30 June Note		A$'000	A$'000	A$'000
25.	Notes to statement of cash flows
(i)	Reconciliation of cash and cash equivalents:
	Cash includes cash on hand, at bank and short-term deposits, net
	of outstanding bank overdrafts. Cash as at the end of the year as
	shown in the statement of cash flows is reconciled to the related
	items in the balance sheet as follows:
	Cash and cash equivalents	6	33,259	41,154	34,801
	Total cash and cash equivalents		33,259	41,154	34,801
(ii)	Reconciliation of net profit to net cash provided by operating activities:
	Net profit		48,616	40,651	28,790
	Adjustments for non-cash items:
	Depreciation and amortisation		18,062	17,239	15,618
	Discount unwinding		124	-	-
	Non-cash movement of make good provision		(1,179)	-	-
	Loss on sale of assets		296	49	43
	Non-cash equity income		(3,320)	(2,472)	846
	Net cash provided by operating activities before change in assets and		62,599	55,467	45,297
	liabilities
	Changes in assets and liabilities
	- Receivables		(15,522)	(7,355)	(8,383)
	- Inventories and work in progress		(6,237)	6,538	(3,927)
	- Payables		8,141	(1,576)	10,707
	- Provisions		3,707	(956)	(1,492)
	- Current and deferred taxes		(6,591)	6,821	1,982
	- Other current assets and borrowings		(1,273)	(4,228)	(480)
	Net cash provided by operating activities		44,824	54,711	43,704
(iii)	Non-cash financing and investing activities		1,179	-	-

There were no non-cash financing and investing activities during the year ended 30 June 2015 (unaudited).

Details of non-cash financing and investing activities during the year ended 30 June 2014 are set out in note 17 and 23.

(iv) Restructure costs

During the year, the Group incurred costs associated with:

Organisational restructure costs -(59) (1,481) Total restructure costs - (59) (1,481)

26. Subsequent events

There has not been any matter or circumstance occurring subsequent to the end of the financial year ended 30 June 2016 (unaudited) (2015: nil (unaudited) and 2014: nil) that has significantly affected, or may significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future years.

41

Independent Auditors’ Report

The Board of Directors

USG Boral Building Products Pty Limited

We have audited the accompany consolidated financial statements of USG Boral Building Products

Pty Limited and its controlled entities, which comprise the consolidated balance sheet as of 30 June

2014, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects the financial position of USG Boral Building Products Pty Limited and its controlled entities as of 30 June 2014, and the results of their operations and cash flows for the year then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Sydney, NSW, Australia

9 February 2015

42

XML

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2016	Jan. 31, 2017	Jun. 30, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	USG CORP
Entity Central Index Key	0000757011
Document Type	10-K
Document Period End Date	Dec. 31, 2016
Amendment Flag	false
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 2,346,467,078
Entity Common Stock, Shares Outstanding		146,182,904

XML

Consolidated Statements of Operations - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Statement [Abstract]
Net sales	$ 3,017	$ 2,913	$ 2,904
Cost of products sold	2,312	2,263	2,279
Gross profit	705	650	625
Selling and administrative expenses	304	302	323
Litigation settlement charge	0	0	48
Long-lived asset impairment charges	10	0	90
(Recovery) loss on receivable and contract termination charge	(3)	(6)	15
Gain on disposal of shipping operations, net	0	(1)	0
Operating profit	394	355	149
Income from equity method investments	49	48	33
Interest expense	(145)	(163)	(179)
Interest income	4	2	1
Income and gain from the sale of equity method investment to related party	0	13	2
Gain on deconsolidation of subsidiaries and consolidated joint ventures	0	0	27
Loss on extinguishment of debt	(37)	(19)	0
Other income, net	9	0	0
Income from continuing operations before income taxes	274	236	33
Income tax (expense) benefit	(63)	740	(7)
Income from continuing operations	211	976	26
Income from discontinued operations, net of tax	20	15	12
Gain on sale of discontinued operations, net of tax	279	0	0
Net income	510	991	38
Less: Net income attributable to noncontrolling interest	0	0	1
Net income attributable to USG	$ 510	$ 991	$ 37
Basic earnings per average common share:
Income from continuing operations (in dollars per share)	$ 1.45	$ 6.70	$ 0.18
Loss from discontinued operations (in dollars per share)	2.04	0.11	0.08
Net income (in dollars per share)	3.49	6.81	0.26
Diluted earnings per average common share:
Income from continuing operations (in dollars per share)	1.44	6.62	0.17
Loss from discontinued operations (in dollars per share)	2.02	0.11	0.08
Net income (in dollars per share)	$ 3.46	$ 6.73	$ 0.25
Average common shares (in shares)	145,929,506	145,457,208	141,722,616
Average diluted common shares (in shares)	147,660,979	147,246,600	144,296,316

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Statement of Comprehensive Income [Abstract]
Net income	$ 510	$ 991	$ 38
Derivatives qualifying as cash flow hedges:
Gain (loss) on derivatives qualifying as cash flow hedges, net of tax of $2, $4, and $0, respectively	1	(5)	(15)
Less: Reclassification adjustment for (loss) gain on derivatives included in net income, net of tax (benefit) of ($4), $2, and $0, respectively	(6)	(9)	4
Derivatives qualifying as cash flow hedges, net of tax of $6, $2, and $0, respectively	7	4	(19)
Pension and postretirement benefits:
Changes in pension and postretirement benefits, net of tax (benefit) of ($19), $6 and ($2), respectively	(34)	74	(272)
Less: Amortization of prior service benefit cost included in net periodic pension cost, net of tax (benefit) of ($7), ($1) and ($1), respectively	(9)	(7)	(2)
Pension and postretirement benefits, net of tax (benefit) of ($12), $7 and ($1), respectively	(25)	81	(270)
Foreign currency translation:
Changes in foreign currency translation, net of tax of $0 in all periods	(53)	(67)	(68)
Less: Translation (loss) gain realized upon sale of foreign entities, net of tax of $0 in all periods	0	(6)	5
Foreign currency translation, net of tax of $0 in all periods	(53)	(61)	(73)
Other comprehensive (loss) income, net of tax	(71)	24	(362)
Comprehensive income (loss)	$ 439	$ 1,015	$ (324)

XML

Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Tax Effect [Abstract]
Gain (loss) on derivatives qualifying as cash flow hedges, net of tax (benefit)	$ 2	$ 4	$ 0
Less: Reclassification adjustment for gain (loss) on derivatives included in net income, net of tax (benefit)	(4)	2	0
Derivatives qualifying as cash flow hedges, net of tax (benefit)	6	2	0
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Tax [Abstract]
Changes in pension and postretirement benefits, net of tax (benefit)	(19)	6	(2)
Less: Amortization of prior service benefit (cost) included in net periodic pension cost, net of tax (benefit)	(7)	(1)	(1)
Pension and postretirement benefits, net of tax benefit	(12)	7	(1)
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax [Abstract]
Changes in foreign currency translation, net of tax	0	0	0
Less: Translation gains realized upon sale of foreign entities, net of tax	0	0	0
Foreign currency translation, net of tax	$ 0	$ 0	$ 0

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Consolidated Balance Sheets - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Current Assets:
Cash and cash equivalents	$ 427	$ 442
Short-term marketable securities	62	194
Restricted cash	0	9
Receivables (net of reserves: 2016 - $8; 2015 - $9)	183	184
Inventories	236	219
Income taxes receivable	1	5
Other current assets	40	41
Assets related to discontinued operations	0	306
Total current assets	949	1,400
Long-term marketable securities	29	36
Property, plant and equipment, net	1,707	1,771
Deferred income taxes	492	728
Equity method investments	628	682
Other assets	64	68
Assets related to discontinued operations	0	51
Total assets	3,869	4,736
Current Liabilities:
Accounts payable	237	208
Accrued expenses	175	186
Current portion of long-term debt	0	500
Income taxes payable	10	9
Litigation settlement accrual	0	9
Liabilities related to discontinued operations	0	80
Total current liabilities	422	992
Long-term debt	1,083	1,675
Deferred income taxes	4	5
Pension and other postretirement benefits	290	392
Other liabilities	184	216
Liabilities related to discontinued operations	0	20
Total liabilities	1,983	3,300
Stockholders’ Equity:
Preferred stock – $1 par value, authorized 36,000,000 shares; outstanding - none	0	0
Common stock – $0.10 par value; authorized 200,000,000 shares; issued: 2016 - 146,167,000 shares; 2015 - 145,667,000 shares	15	15
Additional paid-in capital	3,038	3,027
Accumulated other comprehensive loss	(385)	(314)
Retained earnings (accumulated deficit)	(782)	(1,292)
Total stockholders' equity	1,886	1,436
Total liabilities and stockholders’ equity	$ 3,869	$ 4,736

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Reserves on receivables	$ 8	$ 9
Preferred stock - par value (in dollars per share)	$ 1	$ 1
Preferred stock - authorized shares (in shares)	36,000,000	36,000,000
Preferred stock - outstanding shares (in shares)	0	0
Common stock - par value (in dollars per share)	$ 0.1	$ 0.1
Common stock - authorized shares (in shares)	200,000,000	200,000,000
Common stock - issued shares (in shares)	146,167,000	145,667,000

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Consolidated Statements of Cash Flows - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating Activities
Net income	$ 510	$ 991	$ 38
Income from discontinued operations, net of tax	20	15	12
Gain on sale of discontinued operations, net of tax	279	0	0
Income from continuing operations	211	976	26
Adjustments to reconcile income from continuing operations to net cash:
Depreciation, depletion, and amortization	134	131	142
Loss on extinguishment of debt	37	19	0
Litigation settlement charge	0	0	48
Long-lived asset impairment charges	10	0	90
(Recovery) loss on receivable and contract termination charge	(3)	(6)	15
Share-based compensation expense	18	14	20
Deferred income taxes	57	(742)	4
Gain on asset dispositions	(9)	(13)	(11)
Gain from the sale of equity method investment to related party	0	(6)	0
Income from equity method investments	(49)	(50)	(35)
Dividends received from equity method investments	47	38	0
Pension settlement	20	1	13
Gain on deconsolidation of subsidiaries and consolidated joint ventures	0	0	(27)
(Increase) decrease in working capital, net of deconsolidation of subsidiaries and consolidated joint ventures:
Receivables	6	21	(35)
Income taxes receivable	3	(3)	3
Inventories	(20)	(16)	(11)
Other current assets	9	1	0
Payables	21	(16)	9
Accrued expenses	(39)	(61)	(9)
(Increase) decrease in other assets	0	4	3
Decrease in pension and other postretirement benefits	(142)	(28)	(55)
Decrease in other liabilities	(6)	(7)	(12)
Other, net	9	22	(18)
Net cash provided by operating activities of continuing operations	314	279	160
Net cash provided by operating activities of discontinued operations	59	52	12
Net cash provided by operating activities of continuing operations	373	331	172
Investing Activities
Purchases of marketable securities	(274)	(246)	(204)
Sales or maturities of marketable securities	413	170	190
Capital expenditures	(83)	(87)	(125)
Net proceeds from asset dispositions	12	58	13
Net proceeds from the sale of equity method investment to related party	0	52	0
Investments in joint ventures, including $23 of cash of contributed subsidiaries in 2014	1	0	(560)
Insurance proceeds	1	0	3
Return (deposit) of restricted cash	9	(8)	4
Net cash provided by (used for) investing activities of continuing operations	79	(61)	(679)
Net cash provided by (used for) investing activities of discontinued operations	667	(2)	(4)
Net cash provided by (used for) investing activities of continuing operations	746	(63)	(683)
Financing Activities
Issuance of debt	0	350	3
Repayment of debt	(1,131)	(386)	(63)
Payment of debt issuance fees	0	(6)	(3)
Issuances of common stock	4	6	4
Repurchases of common stock to satisfy employee tax withholding obligations	(2)	(8)	(7)
Net cash used for financing activities of continuing operations	(1,129)	(44)	(66)
Effect of exchange rate changes on cash	(5)	(10)	(5)
Net (decrease) increase in cash and cash equivalents from continuing operations	(741)	164	(590)
Net increase in cash and cash equivalents from discontinued operations	726	50	8
Change in cash balance included in discontinued operations	0	(3)	(2)
Net (decrease) increase in cash and cash equivalents	(15)	211	(584)
Cash and cash equivalents at beginning of period	442	231	815
Cash and cash equivalents at end of period	427	442	231
Supplemental Cash Flow Disclosures:
Interest paid, net of interest capitalized	153	158	172
Income taxes paid, net of refunds received	4	0	7
Noncash Investing and Financing Activities:
Amount in accounts payable for capital expenditures	15	5	15
Reversal of USG Boral Building Products earnout	(24)
Contribution of wholly-owned subsidiaries and joint venture investments as consideration for investment in USG Boral Building Products	0	0	121
Conversion of $75 million of 10% convertible senior notes due 2018, net of discount	0	0	(73)
Issuance of common stock upon conversion of debt	0	0	75
Accrued interest on debt conversion	$ 0	$ 0	$ (2)

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Consolidated Statements of Cash Flows (Parenthetical) $ in Millions	12 Months Ended
	Dec. 31, 2014 USD ($)
Cash held by subsidiaries contributed to joint venture	$ 23
10% convertible senior notes due 2018
Converted debt aggregate principal amount	$ 75
Stated interest rate	10.00%

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Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands	Total	Common Stock	Treasury Stock	Additional Paid-in Capital	Retained Earnings (Deficit)	Accumulated Other Comprehensive Income (Loss)	Stockholders' Equity	Non-controlling Interest
Balance at beginning of period at Dec. 31, 2013	$ 662,000,000	$ 14,000,000	$ 0	$ 2,920,000,000	$ (2,320,000,000)	$ 24,000,000	$ 638,000,000	$ 24,000,000
Balance at beginning of period (in shares) at Dec. 31, 2013		137,314	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	38,000,000				37,000,000		37,000,000	1,000,000
Other comprehensive income (loss)	(362,000,000)					(362,000,000)	(362,000,000)
Share-based compensation	21,000,000			21,000,000			21,000,000
Stock issuances	5,000,000	$ 0	$ 4,000,000	1,000,000			5,000,000
Stock issuances (in shares)		947	166
Stock issuances upon debt conversion	75,000,000	$ 0	$ 3,000,000	72,000,000			75,000,000
Stock issuances upon debt conversion (in shares)		6,507	72
Repurchase of common stock	(7,000,000)		$ (7,000,000)				(7,000,000)
Repurchase of common stock (in shares)			(238)
Changes in noncontrolling interest	(24,000,000)						0	(24,000,000)
Balance at end of period at Dec. 31, 2014	408,000,000	$ 14,000,000	$ 0	3,014,000,000	(2,283,000,000)	(338,000,000)	407,000,000	1,000,000
Balance at end of period (in shares) at Dec. 31, 2014		144,768	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	991,000,000				991,000,000		991,000,000
Other comprehensive income (loss)	24,000,000					24,000,000	24,000,000
Share-based compensation	15,000,000			15,000,000			15,000,000
Adjustments to Additional Paid in Capital, Income Tax Deficiency from Share-based Compensation	0
Stock issuances	7,000,000	$ 1,000,000	$ 8,000,000	(2,000,000)			7,000,000
Stock issuances (in shares)		899	283
Stock issuances upon debt conversion	0
Repurchase of common stock	(8,000,000)		$ (8,000,000)				(8,000,000)
Repurchase of common stock (in shares)			(283)
Changes in noncontrolling interest	(1,000,000)						0	(1,000,000)
Balance at end of period at Dec. 31, 2015	1,436,000,000	$ 15,000,000	$ 0	3,027,000,000	(1,292,000,000)	(314,000,000)	1,436,000,000	0
Balance at end of period (in shares) at Dec. 31, 2015		145,667	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	510,000,000				510,000,000		510,000,000
Other comprehensive income (loss)	(71,000,000)					(71,000,000)	(71,000,000)
Share-based compensation	18,000,000			18,000,000			18,000,000
Adjustments to Additional Paid in Capital, Income Tax Deficiency from Share-based Compensation	(11,000,000)			(11,000,000)			(11,000,000)
Stock issuances	6,000,000	$ 0	$ 2,000,000	4,000,000			6,000,000
Stock issuances (in shares)		500	85
Stock issuances upon debt conversion	0
Repurchase of common stock	(2,000,000)		$ (2,000,000)				(2,000,000)
Repurchase of common stock (in shares)			(85)
Balance at end of period at Dec. 31, 2016	$ 1,886,000,000	$ 15,000,000	$ 0	$ 3,038,000,000	$ (782,000,000)	$ (385,000,000)	$ 1,886,000,000	$ 0
Balance at end of period (in shares) at Dec. 31, 2016		146,167	0

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Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Significant Accounting Policies

Significant Accounting Policies

Nature of Operations

USG, through its subsidiaries, is a leading manufacturer of building materials. We produce a wide range of products for use in new residential, new nonresidential, and residential and nonresidential repair and remodel construction as well as products used in certain industrial processes. Our products are distributed through building materials dealers, home improvement centers and other retailers, specialty wallboard distributors, and contractors.

Segments

Our segments are structured around our key products and business units: Gypsum, Ceilings and UBBP.

Our Gypsum reportable segment is an aggregation of the operating segments of the gypsum businesses in the United States, Canada, Mexico, and Latin America, our mining operation in Little Narrows, Nova Scotia, Canada, which we indefinitely idled in 2016, and our shipping company, which we exited in 2015. Gypsum manufactures products throughout the United States, Canada, and Mexico. These products include USG Sheetrock^® brand gypsum wallboard and related products including Sheetrock^® brand joint compound, Durock^® brand cement board, Levelrock^® brand of poured gypsum flooring, Fiberock^® brand backerboard, and Securock^® brand glass mat sheathing used for building exteriors and gypsum fiber and glass mat panels used as roof cover board. Ceilings manufactures ceiling tile in the United States and ceiling grid in the United States, Canada and through February 27, 2014, the Asia-Pacific region. UBBP manufactures, distributes and sells certain building products, mines raw gypsum and sells natural and synthetic gypsum throughout Asia, Australasia and the Middle East.

Consolidation and Presentation

Our consolidated financial statements include the accounts of USG Corporation, its majority-owned subsidiaries and through February 27, 2014, variable interest entities. Entities in which we have more than a 20% but not more than 50% ownership interest are accounted for using the equity method of accounting. All intercompany balances and transactions are eliminated in consolidation.

On August 29, 2016, we announced the signing of a definitive agreement to sell L&W Supply Corporation, or L&W, our distribution business, to American Builders & Contractors Supply Co., Inc., or ABC Supply, at which time L&W met the criteria to be classified as held for sale and presented as a discontinued operation. We completed the sale on October 31, 2016.

L&W's results of operations have been reclassified to "Income from discontinued operations, net of tax" in our consolidated statements of income for all periods presented. The assets and liabilities of L&W have been reclassified to "Assets related to discontinued operations" and "Liabilities related to discontinued operations", respectively, in our consolidated balance sheet as of December 31, 2015. The cash flows associated with L&W have been reclassified to "Net cash provided by operating activities of discontinued operations" and "Net cash provided by (used for) investing activities of discontinued operations" for all periods presented. The results of L&W, which previously consisted of our Distribution segment, have been excluded from our segment results. Additionally, results of our Gypsum and Ceilings segments have been revised as a result of L&W's classification as a discontinued operation to reflect only the sales of USG products from Gypsum and Ceilings to L&W that were sold outside the consolidated group prior to October 31, 2016. All L&W sales subsequent to the close of the transaction are included in net sales on our consolidated statement of income. See Note 3 for further discussion.

Our investments with Boral in the 50/50 joint ventures, UBBP, commenced on February 27, 2014, and as a result, our share of ten months of the results of UBBP were recorded in our accompanying consolidated statement of income for the year ended December 31, 2014. See Note 4 for further description of our investments in UBBP.

Use of Estimates

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from these estimates.

Revenue Recognition

We recognize revenue when shipment is received by the customer. We enter into agreements with customers to offer rebates, generally based on achievement of specified sales levels and various marketing allowances that are common industry practice. Estimated reductions to revenue for customer programs and incentive offerings, including promotions and other volume–based incentives, are recorded in the period in which the sale occurs. Provisions for early payment discounts are accrued in the same period in which the related sales are recorded.

Shipping and Handling Costs

Shipping and handling costs billed to customers are included in net sales and the related costs are presented in cost of products sold.

Advertising

Advertising expenses consist of media advertising and related production costs and sponsorships. We charge advertising expenses to earnings as incurred. These expenses amounted to $12 million, $16 million and $22 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Research and Development

We charge research and development expenditures to earnings as incurred. These expenditures amounted to $24 million, $23 million and $23 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Litigation Costs

We expense litigation costs as incurred.

Income Taxes

We record income tax expense (benefit) under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or paid. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the change is enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on all available evidence, it is more likely than not that such assets will not be realized. The need to establish valuation allowances for deferred tax assets is assessed at each reporting date. In assessing the requirement for, and amount of, a valuation allowance in accordance with the more-likely-than-not standard, we give appropriate consideration to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with operating loss and tax credit carryforwards not expiring unused and tax planning strategies.

A history of cumulative losses for a certain threshold period is a significant form of negative evidence used in the assessment, and we are required to have a policy regarding the duration of the threshold period. We believe the historical cyclical nature of our operations show economic cycles ranging from 7 to 10 years with demand troughs historically showing recovery over four years. Accordingly, we have a policy of four years as our threshold period for cumulative losses.

Inventory Valuation

All of our inventories are stated at the lower of cost or market and are valued under the average cost method. Our inventories include materials, labor and applicable factory overhead costs. Depreciation associated with manufacturing assets is excluded from inventory cost but is included in cost of products sold.

Earnings per Share

Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding plus the dilutive effect, if any, of market share units, or MSUs, restricted stock units, or RSUs, performance shares, the potential exercise of outstanding stock options and the deferred shares associated with our deferred compensation program for non-employee directors.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments, primarily money market funds, with maturities of three months or less at the time of purchase.

Marketable Securities

Marketable securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported in accumulated other comprehensive loss, or AOCI. If it is deemed that marketable securities have unrealized losses that are other than temporary, these losses will be recorded in earnings immediately. Situations in which losses may be considered other than temporary include when we have decided to sell a security or when it is more likely than not that we will be required to sell the security before we recover its amortized cost basis. Cost basis for securities sold are determined on a first-in-first-out basis.

Receivables

Receivables are recorded at net realizable value, which includes allowances for cash discounts and doubtful accounts. We review the collectability of receivables on an ongoing basis and reserve for receivables determined to be uncollectible. This determination is based on the delinquency of the account, the financial condition of the customer and our collection experience.

We include short-term financing receivables in receivables and long-term financing and loan receivables in other assets on our consolidated balance sheets. Financing and loan receivables are recorded at net realizable value which includes an allowance for credit losses. We review the collectability of financing and loan receivables on an ongoing basis and reserve for financing and loan receivables determined to be uncollectible. This determination is based on the delinquency of the account and the financial condition of the other party. As of December 31, 2016, the allowance for credit losses was immaterial.

Investments in Unconsolidated Joint Ventures

The equity method of accounting is used for investments in joint ventures that we do not consolidate, but over which we have the ability to exercise significant influence. These investments 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. If the underlying net assets in our investments are denominated in a foreign currency, we adjust the value of our investment for translation gains or losses. Profits resulting from sales with equity method investees are eliminated until realized by the investee.

At least quarterly, we review the probability of the earnout payment to Boral. At December 31, 2016, we concluded that it is currently not probable that the five-year performance target will be achieved. If our conclusion on the probability of achievement were to change, we will record a liability representing the present value of the second earnout payment with a corresponding increase to our investment.

Losses in the value of an equity method investment that are other than temporary, are recognized when the current fair value of the investment is less than its carrying value. We review our investments in equity method investments for impairment whenever factors indicate an other than temporary loss in value. If we conclude a loss in value is other than temporary, an impairment charge is recognized for the difference between the investment’s carrying value and its estimated fair value.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost. We record depreciation of property, plant and equipment on a straight-line basis over the expected useful lives of the assets. We have determined estimated useful lives to be 50 years for buildings and improvements, a range of 10 to 25 years for machinery and equipment, and a range of 5 to 7 years for computer software and systems development costs. Leasehold improvements are capitalized and amortized over the shorter of the remaining lease term or remaining economic useful life. We compute depletion on a basis calculated to spread the cost of gypsum and other applicable resources over the estimated quantities of material recoverable.

We capitalize interest during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying assets and is depreciated over the useful lives of those assets. We recorded $1 million of capitalized interest in the year ended December 31, 2016, and $3 million in the years ended December 31, 2015 and 2014. Facility start-up costs that cannot be capitalized are expensed as incurred and recorded in cost of products sold.

Property, plant and equipment is reviewed for impairment when indicators of a potential impairment are present by comparing the carrying values of the assets with their estimated future undiscounted cash flows. If we determine an impairment exists, the asset is written down to estimated fair value. 

Asset Retirement Obligations

Our asset retirement obligations include reclamation requirements as regulated by government authorities related principally to assets such as our mines, quarries, landfills, ponds and wells. The accounting for asset retirement obligations requires estimates by management about the timing of asset retirements, the cost of retirement obligations, discount and inflation rates used in determining fair values and the methods of remediation associated with our asset retirement obligations. We generally use assumptions and estimates that reflect the most likely remediation method on a site-by-site basis. Our estimated liability for asset retirement obligations is revised annually, and whenever events or changes in circumstances indicate that a revision to the estimate is necessary.

In instances where a decrease in the asset retirement obligation is in excess of the related remaining net book value of the asset retirement costs, the excess is recorded to the consolidated statement of income as a reduction in cost of products sold. Asset retirement obligations are included in other liabilities on the consolidated balance sheets.

Share-Based Compensation

We award share-based compensation to employees in the form of MSUs, performance shares and RSUs and to non-employee directors in the form of shares of our common stock. All grants under share-based payment programs are accounted for at fair value at the date of grant. We recognize expense on all share-based awards to employees expected to vest over the service period, which is the shorter of the period until the employees’ retirement eligibility dates or the service period of the award. Expense is generally reduced for estimated forfeitures, which are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Derivative Instruments

We use derivative instruments to manage selected commodity price and foreign currency exposures. We do not use derivative instruments for speculative trading purposes, and we typically do not hedge beyond five years. All derivative instruments are recorded on the balance sheet at fair value. For derivatives designated as fair value hedges, the changes in the fair values of both the derivative instrument and the hedged item are recognized in earnings in the current period. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is recorded to AOCI, and is reclassified to earnings when the underlying forecasted transaction affects earnings. The ineffective portion of changes in the fair value of the derivative is reported in cost of products sold in the current period. We periodically reassess the probability of the underlying forecasted transaction occurring. For derivatives designated as net investment hedges, we record changes in fair value to AOCI. For derivatives not designated as hedging instruments, all changes in fair value are recorded to earnings in the current period.

We use swaps to hedge a significant portion of our anticipated purchases of natural gas to be used in our manufacturing operations. Generally, we hedge the cost of a majority of our anticipated purchases of natural gas over the next 12 months. However, we review our positions regularly and make adjustments as market conditions warrant. The majority of contracts currently in place are designated as cash flow hedges and the remainder are not designated as hedging instruments.

We have operations outside of the United States and use forward contracts to hedge the risk of changes in cash flows resulting from selected forecasted intercompany and third-party sales or purchases, as well as intercompany loans, denominated in non-U.S. currencies, or to hedge the risk of selected changes in our net investment in foreign subsidiaries. These contracts are designated as either cash flow or net investment hedges or are not designated as hedging instruments.

Foreign Currency Translation

We translate foreign-currency-denominated assets and liabilities into U.S. Dollars at the exchange rates existing as of the respective balance sheet dates. We translate income and expense items at the average exchange rates during the respective periods. We record translation adjustments resulting from fluctuations in exchange rates to AOCI on our consolidated balance sheets and our share of the translation adjustments recorded by our equity method investments to AOCI.

We record transaction gains and losses to earnings. In 2016, the total transaction gain was $3 million. In 2015 and 2014, the total transaction loss was $7 million and $6 million, respectively.

Fair Value Measurements

Certain assets and liabilities are required to be recorded at fair value. The estimated fair values of those assets and liabilities have been determined using market information and valuation methodologies. Changes in assumptions or estimation methods could affect the fair value estimates. However, we do not believe any such changes would have a material impact on our financial condition, results of operations or cash flows. There are three levels of inputs that may be used to measure fair value:

• Level 1 – Quoted prices for identical assets and liabilities in active markets;

• Level 2 – Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

• Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Certain assets and liabilities are measured at fair value on a nonrecurring basis rather than on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment or when a new liability is being established that requires fair value measurement.

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Recent Accounting Pronouncements

12 Months Ended

Dec. 31, 2016

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In November 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which will require restricted cash to be presented with cash and cash equivalents in the statement of cash flows. The standard will be effective for us in the first quarter of 2018 and will be applied using the retrospective approach. As our restricted cash amounts are immaterial, we do not expect the adoption of ASU 2016-18 will have a significant impact to our consolidated financial statements or disclosures.

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory,” which eliminates the exception for all intra-entity transfers, except for intra-entity transfers of inventory. The significant components of the standard are 1) current and deferred income tax consequences of intra-entity asset transfers (other than inventory) will be reflected when the transaction occurs and 2) the impact of the sale, if any, is reflected in the effective tax rate for the period in which the transaction occurs. The standard will be effective for us in the first quarter of 2018 and we will adopt the new standard using a modified retrospective approach with a cumulative-effect adjustment to retained earnings. We do not expect the adoption of ASU 2016-16 will have a significant impact to our consolidated financial statements or disclosures.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The standard will be effective for us in the first quarter of 2018, there will be no impact to our consolidated cash flow statement and disclosures as we are already compliant with the provisions of the standard.

In March 2016, the FASB issued ASU 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplifies certain aspects of accounting for employee share-based payments. The standard will be effective for us in the first quarter of 2017 and will be applied in part prospectively and in part using a modified retrospective transition approach. The components of this standard that will impact our financial statements are as follows:

• Excess tax benefits and deficiencies related to stock compensation will be prospectively recognized in income tax expense instead of in equity when the awards vest or are settled. For the twelve months ended December 31, 2016 and 2015, we recorded a reduction to equity of $11 million and $0 million, respectively. Under the new standard, $9 million of tax expense and $4 million of income tax benefit would have been recognized in 2016 and 2015, respectively.

• Excess tax benefits that were previously unrecognized because the related tax deduction had not been realized through a reduction in taxes payable will be recorded on a modified retrospective basis. If we had early adopted this standard, we would have recorded a cumulative-effect adjustment to opening retained earnings of $25 million on our December 31, 2016 consolidated balance sheet.

• Upon adoption, we will elect an accounting policy to recognize forfeitures as they occur and will record a cumulative effect change to retained earnings in accordance with the modified retrospective approach. If we had early adopted this standard, we would have recorded an immaterial cumulative effect adjustment to opening retained earnings on our December 31, 2016 balance sheet.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which supersedes existing lease guidance to require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. The standard will be effective for us in the first quarter of 2019, and we will adopt the new standard using the modified retrospective approach. While we continue to evaluate the impact of the new standard, we believe the standard will require us to implement a new lease accounting system and related policies and processes. Further, we anticipate the adoption of ASU 2016-02 will have a significant impact to our consolidated balance sheets, consolidated statements of income and disclosures, but we are unable to quantify the financial statement impact at this time.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments-Overall (Topic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” which requires that most equity instruments be measured at fair value, with subsequent changes in fair value recognized in net income. The pronouncement also impacts the financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The ASU does not apply to equity method investments or investments in consolidated subsidiaries. The new standard will be effective for us for the first quarter of 2018, with early adoption permitted and amendments to be applied as a cumulative-effect adjustment to the balance sheet in the year of adoption. We do not expect the adoption of ASU 2016-01 will have a significant impact to our consolidated financial statements or disclosures.

In July 2015, the FASB issued ASU 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory", which changes the measurement principle for inventory from the lower of cost or market to the lower of cost or net realizable value for entities that measure inventory using the first-in, first-out (FIFO) or average cost method. The ASU defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The standard, which we will adopt using the prospective approach, is effective for us beginning January 1, 2017. ASU 2015-11 will not have an impact to our consolidated financial statements or disclosures.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Subsequently, the FASB has issued various ASUs to provide further clarification around certain aspects of ASC 606. This standard will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and we will adopt the standard on January 1, 2018. We are in the process of completing the analysis of the standard's impact on our sales to customers. While we have not completed our analysis of the impact of the provisions of this standard, we do not expect a significant impact to our financial statements or disclosure.

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Discontinued Operations

12 Months Ended

Dec. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

On October 31, 2016, we completed the sale of our L&W business to ABC Supply for total cash consideration of $675 million inclusive of the final working capital adjustment and recorded a gain on the sale of $279 million.

For the year ended December 31, 2016, L&W met the criteria to be classified as held for sale and to be presented as a discontinued operation. Accordingly, we reclassified the results of operations and the cash flows of L&W to discontinued operations in our consolidated statements of income and consolidated statements of cash flows for all periods presented. Additionally, we reclassified the assets and liabilities of L&W to discontinued operations in our consolidated balance sheets.     

The summarized financial information related to L&W that has been excluded from continuing operations and reported as a discontinued operation is as follows:

(millions)	For the year ended December 31,
	2016(a)		2015		2014
Net sales	$	1,252	$	1,428	$	1,345
Cost of products sold	1,196		1,387		1,316
Gross profit	56		41		29
Selling and administrative expenses (b)	22		15		16
Operating profit	34		26		13
Income tax expense	12		11		—
Net income from discontinued operations (c)	$	22	$	15	$	13
Gain on sale of discontinued operations	$	279	$	—	$	—

(a) Operating results for 2016 are presented for the ten months ended October 31, 2016.

(b) The ten month period ended October 31, 2016 includes transaction costs of $8 million.

(c) Years ended December 31, 2016 and 2014 include net income from discontinued operations from our European business, which were sold in 2012.

The assets and liabilities related to discontinued operations as of December 31, 2015 are as follows:

(millions)	December 31, 2015
Accounts receivable, net	207
Inventories	95
Other current assets	4
Property, plant and equipment, net (a)	17
Intangible assets (a)	31
Other assets (a)	3
Total assets related to discontinued operations	$	357
Accounts payable	$	51
Accrued expenses	29
Other liabilities (a)	20
Total liabilities related to discontinued operations	$	100

(a) As of December 31, 2015, these balances are reflected as long-term in our consolidated balance sheet.

We retained responsibility for the benefits payable to employees of L&W from the USG pension and postretirement plans for the benefits accrued while employed by USG. As such, these liabilities are not reflected in liabilities related to discontinued operations. See Note 9 for further discussion. We also agreed to defend and indemnify L&W in connection with the pricing lawsuits. See Note 19 for discussion of the liability associated with the pricing lawsuits.

Additionally, upon the close of the sale, we entered into a supply agreement with L&W and a transition services agreement with ABC Supply to provide certain transition services. For the years ended December 31, 2016, 2015, and 2014, we recorded sales to L&W of $568 million, $531 million and $532 million that, prior to October 31, 2016, were eliminated in consolidation. We recorded a cash inflow of $102 million from L&W in the two months since the sale related to payments on trade receivables.

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Equity Method Investments

12 Months Ended

Dec. 31, 2016

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments

Equity Method Investments

Equity method investments were as follows:

	December 31, 2016			December 31, 2015
(millions)	Carrying Value		Ownership Percentage	Carrying Value		Ownership Percentage
USG Boral Building Products	$	621	50%	$	675	50%
Other equity method investments	7		33% - 50%	$	7	33% - 50%
Total equity method investments	$	628		$	682

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 Limited, or Boral. These joint ventures are herein referred to as USG Boral Building Products, or UBBP. As consideration for our 50% ownership in UBBP, we (i) made a cash payment of $514 million to Boral, (ii) contributed to UBBP our subsidiaries and joint venture investments in China, Singapore, India, Malaysia, New Zealand, Australia, the Middle East and Oman and (iii) granted to UBBP licenses to use certain of our intellectual property rights in the Territory. 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 income for the year ended December 31, 2014.

During 2016, UBBP paid cash dividends on earnings through September 2016 of which our 50% share totaled $47 million. We recorded the cash dividend in operating activities on our statements of cash flows. As of December 31, 2016, the amount of our consolidated retained earnings which represents undistributed earnings from UBBP is $44 million.

In the event certain U.S. Dollar performance targets are satisfied by UBBP, we are obligated to pay Boral two scheduled earnout payments in an aggregate amount up to $75 million. Upon inception of the joint ventures, we recorded a liability representing the present value of the first earnout payment of $25 million which was reversed in 2016 as the three-year performance target was not met. The second earnout payment of up to $50 million is based on performance over the first five years. We have concluded that it is currently not probable that the five-year performance target will be achieved. As of December 31, 2016, we had no liability recorded for the earnout payments. As of December 31, 2015, our liability for the earnout payments totaled $24 million and is included in other liabilities on our accompanying consolidated balance sheet.

Translation losses recorded in other comprehensive income were as follows:

(millions)	2016			2015			2014
Translation loss	$	(30	)	$	(23	)	$	(34	)

Transactions with UBBP

Our Gypsum segment sells products to UBBP. Total sales to UBBP for each of the years ended December 31, 2016, 2015 and 2014 were immaterial.

In 2014, in connection with the formation of UBBP, we contributed our ownership interest in a joint venture in China to UBBP but retained our loan receivable from this joint venture. As of December 31, 2016 and 2015, the loan receivable, including interest, totaled $15 million and $14 million, respectively, as included in "Other assets" on our consolidated balance sheets.

Investment in Knauf-USG Joint Venture

In 2015, we sold our 50% interest in Knauf/USG Verwaltungs GmbH and Knauf/USG Systems GmbH & Co. KG, or collectively the Knauf-USG joint venture, to our joint venture partner, Knauf Aquapanel GmbH, a subsidiary of Gebr. Knauf Verwaltungsgesellschaft KG (Knauf) for €48 million in cash, or approximately $52 million. The Knauf-USG joint venture manufactured and distributed Aquapanel^® brand cement-based panels in Europe (excluding Turkey) and all countries that were part of the former Soviet Union. Affiliates of Knauf are the beneficial owners of approximately 10% of USG's outstanding shares of common stock.

We recorded a gain of approximately $6 million, which is net of $5 million for income taxes payable on the sale.  The gross gain and our equity method income in the Knauf-USG joint venture was $13 million for the year ended December 31, 2015 and $2 million for the year ended December 31, 2014 and is recorded in "Income and gain from the sale of equity method investment to related party" in our consolidated statement of income.

Summarized Financial Information

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

Statement of Income

	For the year ended December 31,
(millions)	2016		2015		2014 (a)
USG Boral Building Products:
Net sales	$	1,052	$	1,003	$	927
Gross profit	337		278		251
Operating profit(b)	133		124		95
Net income before taxes	142		132		101
Net income	95		101		72
Net income attributable to USG Boral Building Products	99		96		67
USG share of income from USG Boral Building Products(c)	49		48		33
Other equity method investments(d):
USG share of income from other investments accounted for using the equity method	—		2		2
Total income from equity method investments	49		50		35

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

(b) Year ended December 31, 2016 includes long-lived asset impairment charges of $8 million for China and of $14 million for Oman.

(c) Year ended December 31, 2016 includes long-lived asset impairment charges of $4 million for China and of $4 million for Oman.

(d) Amounts represent our share of income or loss from all equity method investments, other than UBBP.

Balance Sheet

(millions)	December 31, 2016		December 31, 2015
USG Boral Building Products:
Current assets	$	389	$	368
Non-current assets	903		935
Current liabilities(a)	211		197
Long-term debt	37		40
Other non-current liabilities	17		17
Shareholders' equity(b)	1,027		1,049

(a) Includes the current portion of long-term debt of $15 million and $16 million as of December 31, 2016 and 2015, respectively.

(b) Shareholders' equity includes $50 million and $60 million related to non-controlling interests as of December 31, 2016 and 2015, respectively.

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Marketable Securities

12 Months Ended

Dec. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Marketable Securities

Marketable Securities

Our investments in marketable securities as of December 31, 2016 and 2015 consisted of the following:

	2016				2015
(millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Corporate debt securities	$	69	$	69	$	134	$	134
U.S. government and agency debt securities	14		14		57		57
Asset-backed debt securities	2		2		21		21
Certificates of deposit	6		6		15		15
Municipal debt securities	—		—		3		3
Total marketable securities	$	91	$	91	$	230	$	230

The realized and unrealized gains and losses as of and for the years ended December 31, 2016, 2015 and 2014 were immaterial.

Contractual maturities of marketable securities as of December 31, 2016 were as follows:

(millions)	Amortized Cost		Fair Value
Due in 1 year or less	$	62	$	62
Due in 1-5 years	29		29
Total marketable securities	$	91	$	91

Actual maturities may differ from the contractual maturities because issuers of the securities may have the right to prepay them.

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Debt

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Debt

Debt

Total debt as of December 31 consisted of the following:

(millions)	2016		2015
5.5% senior notes due 2025	$	350	$	350
5.875% senior notes due 2021	—		350
6.3% senior notes due 2016	—		500
7.75% senior notes due 2018	500		500
7.875% senior notes due 2020 (net of discount: 2016 - $0; 2015- $1)	—		249
Industrial revenue bonds (due 2028 through 2034)	239		239
Total	$	1,089	$	2,188
Less unamortized debt issuance costs	$	6	$	13
Total	$	1,083	$	2,175

Repurchase of Senior Notes

During 2016, we retired $500 million of our 6.3% Senior Notes due in 2016, referred to as the 6.3% Notes, $250 million of our 7.875% senior notes due 2020, referred to as the 7.875% Notes, and $350 million of our 5.875% senior notes due 2021, referred to as the 5.875% Notes. The early redemption of the 6.3% Notes, the 7.875% Notes and the 5.875% Notes included premiums of $30 million and accrued interest of $9 million. As a result of the repurchases, we recorded a loss on early extinguishment of debt, before tax, of $37 million including premiums, write-off of deferred financing fees, debt discount and broker fees.

In the first quarter of 2015, we repurchased $350 million of our 8.375% senior notes due in 2018, through both a cash tender offer and a subsequent notice of redemption for aggregate consideration, including tender offer premium and accrued and unpaid interest, of $377 million. As a result of the repurchases, we recorded a loss on early extinguishment of debt of $19 million including the write-off of unamortized debt issuance costs.

Issuance of Senior Notes

In the first quarter of 2015, we issued $350 million of 5.5% senior notes due March 1, 2025. The net proceeds from the issuance of these notes and cash on hand were used to fund the repurchases of the 8.375% senior notes and all related costs and expenses. We deferred approximately $6 million of debt issuance costs that are being amortized to interest expense over the term of the notes. As of December 31, 2016 and December 31, 2015, these notes were recorded on the accompanying consolidated balance sheets at $345 million and $344 million, respectively.

Senior Notes

All of the senior notes are senior unsecured obligations and rank equally with all of our other existing and future unsecured senior indebtedness. The indentures governing the notes contain events of default, covenants and restrictions that are customary for similar transactions, including a limitation on our ability and the ability of certain of our subsidiaries to create or incur secured indebtedness.

Interest rate (a)	7.75%	5.500%
Principal net of discount (in millions) (b)	$500	$350
Maturity	January 15, 2018	March 1, 2025
Call date	Any time (c)	March 1, 2020 (d)
Mandatory redemption	at 101% plus accrued and unpaid interest in the event of a change in control and a related downgrade below investment grade by both Moody’s Investors Service and Standard & Poor’s Global Ratings	at 101% plus accrued and unpaid interest in the event of a change in control

(a) The 7.75% senior notes currently have an effective interest rate of 8.25%. The rate is subject to an adjustment of up to 2% if the debt rating is downgraded or subsequently upgraded by Moody's Investors Service and Standard & Poor's Global Ratings.

(b) Principal amounts exclude unamortized debt issuance costs.

(c) Callable at any time at a price equal to the greater of (1) 100% of the principal and (2) the sum of the present value of the remaining scheduled payments of principal and interest discounted to the redemption date on a semi-annual basis at the applicable U.S. Treasury rate plus a spread (as outlined in the applicable indenture), plus any accrued and unpaid interest on the principal amount being called.

(d) Callable at any time prior to the call date at a price equal to 100% of the principal plus a premium (as outlined in the respective indentures), plus any accrued and unpaid interest on the principal amount being called. Callable after the call date at stated redemption prices (as outlined in the applicable indenture), plus any accrued and unpaid interest on the principal amount being called.

Credit Facility

We maintain a credit facility with a maximum borrowing limit of $180 million (including a $50 million borrowing sublimit for CGC) that is available to fund working capital needs and other general corporate purposes and matures on October 22, 2019. The facility is secured by certain of our accounts receivable and inventory. The maximum borrowing limit under the credit agreement may be increased up to $650 million at our request and our lenders’ approval. In December 2016, we reduced the facility size to $180 million due to the L&W sale and in January 2017, we amended the credit agreement to reduce payment condition threshold amounts in conjunction with the lower facility size.

The credit agreement requires us to maintain a minimum fixed charge coverage ratio in the event excess availability falls below a minimum threshold. Because our excess borrowing availability of $85 million exceeds this threshold, the requirement to maintain the minimum fixed charge coverage ratio is not applicable. The credit agreement contains other covenants and events of default that are customary for similar agreements and may limit our ability to take various actions including our ability to pay a dividend or repurchase our stock. We are in compliance with all covenants in our credit facility.

As of December 31, 2016 and during the year then ended, there were no borrowings under the facility. Had there been any borrowings as of that date, the applicable interest rate would have been 2.00% for loans in the U.S. and 1.95% for loans in Canada. Outstanding letters of credit as of December 31, 2016 totaled $38 million.

Industrial Revenue Bonds

Our $239 million of industrial revenue bonds have fixed interest rates ranging from 5.5% to 6.4%. The weighted average rate of interest on our industrial revenue bonds is 5.875%. These bonds mature during the years 2028 through 2034.

OTHER INFORMATION

The fair value of our debt was $1.129 billion and $2.295 billion as of December 31, 2016 and 2015, respectively, and was determined using the fair value hierarchy of inputs described in Note 1. The decline primarily reflected the repayment of the 6.3% Notes, the 7.875% Notes, and the 5.875% Notes in 2016. The fair values were determined utilizing prices from independent pricing services. The vendors’ methodologies utilize various forms of market data, including but not limited to, trade data, yield, spreads, bids and offers. We review the values provided by the independent pricing service for reasonableness by comparing the valuations received from the independent pricing service to valuations from at least one other observable source. We have not adjusted the prices obtained from the independent pricing service. As a result, the fair values are classified as Level 2.

Interest accrued on our debt as of December 31, 2016 and December 31, 2015 was $31 million and $45 million, respectively.

As of December 31, 2016, the amounts of total debt outstanding maturing in each of the next five years and beyond were as follows:

(millions)	2017		2018		2019		2020		2021		After 2021
Debt maturities (principal amounts)	$	—	$	500	$	—	$	—	$	—	$	589

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Derivative Instruments

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

COMMODITY DERIVATIVE INSTRUMENTS

As of December 31, 2016, we had 36 million mmBTUs (millions of British Thermal Units) in aggregate notional amount of outstanding natural gas swap contracts to hedge forecasted purchases. All of these contracts mature by December 31, 2021. For contracts designated as cash flow hedges, the amount that remained in AOCI was a pre-tax unrealized gain of $2 million as of December 31, 2016 and an unrealized loss of $19 million as of December 31, 2015. No ineffectiveness was recorded on contracts designated as cash flow hedges in 2016, 2015, or 2014.

Changes in fair value on contracts not designated as cash flow hedges are recorded to earnings. The fair value of those contracts not designated as cash flow hedges was a $1 million unrealized gain as of December 31, 2016 and a $2 million unrealized loss as of December 31, 2015.

FOREIGN EXCHANGE DERIVATIVE INSTRUMENTS

We have foreign exchange forward contracts to hedge forecasted purchases of products and services denominated in foreign currencies. The notional amount of these contracts was $80 million as of December 31, 2016, and they mature by December 27, 2017. These forward contracts are designated as cash flow hedges and no ineffectiveness was recorded in 2016, 2015, or 2014. The fair value of these contracts that remained in AOCI was zero and an unrealized net pre-tax gain of $8 million as of December 31, 2016 and December 31, 2015, respectively.

During the third quarter of 2015, we entered into foreign exchange forward contracts to hedge a portion of our net investment in our Knauf-USG joint venture. The notional amount of these contracts was $35 million and they matured on November 16, 2015. In November 2015, we entered into a similar foreign exchange forward contract with the same critical terms that was scheduled to mature on January 31, 2016.  These forward contracts were designated as net investment hedges and no ineffectiveness was recorded. On December 22, 2015, we completed the sale and, as a result, we terminated the outstanding foreign exchange forward contract and reclassified the $1 million net gain realized for these contracts from AOCI to earnings which increased the gain on the sale of the equity method investment. See Note 4 for further discussion on the sale.

COUNTERPARTY RISK, MASTER NETTING ARRANGEMENTS AND BALANCE SHEET OFFSETTING

We are exposed to credit losses in the event of nonperformance by the counterparties to our derivative instruments. As of December 31, 2016, our derivatives were in a $3 million net asset position. All of our counterparties have investment grade credit ratings; accordingly, we anticipate that they will be able to fully satisfy their obligations under the contracts.

All of our derivative contracts are governed by master netting agreements negotiated between us and the counterparties that reduce our counterparty credit exposure. The agreements outline the conditions (such as credit ratings and net derivative fair values) upon which we, or the counterparties, are required to post collateral. As required by certain of our agreements, we had $10 million of collateral posted with our counterparties related to our derivatives as of December 31, 2016. Amounts paid as cash collateral are included in receivables on our consolidated balance sheets.

We have not adopted an accounting policy to offset fair value amounts related to derivative contracts under our master netting arrangements; therefore, individual derivative contracts are reflected on a gross basis, as either assets or liabilities, on our consolidated balance sheets, based on their fair value as of the balance sheet date.

FINANCIAL STATEMENT INFORMATION

The following are the pre-tax effects of derivative instruments on the consolidated statements of income and the consolidated statements of comprehensive income (loss) for the years ended December 31, 2016, 2015 and 2014:

	Amount of Gain or (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives (Effective Portion)									Location of Gain or (Loss)  Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
(millions)	2016			2015			2014				2016			2015			2014
Derivatives Designated as Hedging Instruments
Commodity contracts	$	6		$	(14	)	$	(19	)	Cost of products sold	$	(15	)	$	(15	)	$	2
Foreign exchange contracts	(3		)	12			4			Cost of products sold	5			7			2
Foreign exchange contracts	—			1			—			Income and gain from the sale of equity method investment to related party	—			1			—
Total	$	3		$	(1	)	$	(15	)		$	(10	)	$	(7	)	$	4

	Location of Gain or (Loss)  Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives
(millions)		2016		2015			2014
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Cost of products sold	$	1	$	(3	)	$	(4	)
Foreign exchange contracts	Other (income) expense, net	—		2			—
Total		$	1	$	(1	)	$	(4	)

As of December 31, 2016, we had no derivatives designated as net investment or fair value hedges.

The following are the fair values of derivative instruments on the consolidated balance sheets as of December 31, 2016 and 2015:

	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value
(millions)		12/31/16		12/31/15			12/31/16		12/31/15
Derivatives Designated as Hedging Instruments
Commodity contracts	Other current assets	$	8	$	1	Accrued expenses	$	4	$	15
Commodity contracts	Other assets	3		—		Other liabilities	5		5
Foreign exchange contracts	Other current assets	1		8		Accrued expenses	1		—
Total derivatives in hedging relationships		$	12	$	9		$	10	$	20

	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value
(millions)		12/31/16		12/31/15			12/31/16		12/31/15
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Other current assets	$	1	$	—	Accrued expenses	$	—	$	2
Commodity contracts	Other assets	—		—		Other liabilities	—		—
Total derivatives not designated as hedging instruments		$	1	$	—		$	—	$	2
Total derivatives	Total assets	$	13	$	9	Total liabilities	$	10	$	22

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Fair Value Measurements

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Certain assets and liabilities are required to be recorded at fair value. The fair values of our cash equivalents, equity mutual funds, marketable securities and derivatives were determined using the fair value hierarchy of inputs described in Note 1. The cash equivalents and equity mutual funds shown in the table below primarily consist of money market funds that are valued based on quoted prices in active markets and, as a result, are classified as Level 1. We use quoted prices, other readily observable market data and internally developed valuation models when valuing our marketable securities or derivatives and have therefore classified them as Level 2. Marketable securities are valued using a "market value" approach and values are based on quoted prices or other observable market inputs received from data providers. Derivatives are valued using the "income" approach such as discounted-cash-flow models and readily observable market data. The inputs for the valuation models are obtained from data providers and include end-of-period spot and forward natural gas prices, foreign currency exchange rates, natural gas price volatility and LIBOR and swap rates for discounting the cash flows implied from the derivative contracts.

Our assets and liabilities measured at fair value on a recurring basis were as follows:

	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)				Total
(millions)	12/31/16		12/31/15		12/31/16			12/31/15			12/31/16		12/31/15		12/31/16			12/31/15
Cash equivalents	$	38	$	223	$	34		$	25		$	—	$	—	$	72		$	248
Equity mutual funds	5		4		—			—			—		—		5			4
Marketable securities:
Corporate debt securities	—		—		69			134			—		—		69			134
U.S. government and agency debt securities	—		—		14			57			—		—		14			57
Asset-backed debt securities	—		—		2			21			—		—		2			21
Certificates of deposit	—		—		6			15			—		—		6			15
Municipal debt securities	—		—		—			3			—		—		—			3
Derivative assets	—		—		13			9			—		—		13			9
Derivative liabilities	—		—		(10		)	(22		)	—		—		(10		)	(22		)

Certain assets and liabilities are measured at fair value on a nonrecurring basis rather than on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment or when a new liability is being established that requires fair value measurement. As disclosed in Note 12 and 13, during 2016 and 2014, we recorded asset impairment charges of $10 million and $90 million, respectively. No impairment was recorded in 2015.

During 2016, we indefinitely idled our mining operations in Little Narrows, Nova Scotia, Canada. We reviewed the property, plant and equipment at Little Narrows for potential impairment by comparing the carrying values of those assets with their future undiscounted cash flows for their remaining useful lives. We measured the fair value of the machinery, equipment and buildings using measurements classified as Level 3 and recorded long-lived asset impairment charges of $10 million.

During 2014, we reviewed the carrying value of the ocean vessels owned by GTL for potential impairment by comparing the carrying value of those assets with their fair values. To determine the estimated fair value for the ocean vessels, we engaged a third-party ship broker. Management developed our estimate of fair value by considering comparable sales for similar asset types and incorporating an adjustment for the specialized nature of these assets. This fair value measurement is classified as Level 3, and we recorded a long-lived asset impairment charge of $60 million during the fourth quarter of 2014.

Also during 2014, we reviewed our property, plant and equipment for potential impairment by comparing the carrying values of those assets with their future undiscounted cash flows for their remaining useful lives. We measured the fair value of the machinery, equipment and buildings using measurements classified as Level 3 and recorded long-lived asset impairment charges of $30 million.

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Employee Retirement Plans

12 Months Ended

Dec. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Employee Retirement Plans

Employee Retirement Plans

We maintain defined benefit pension plans for most of our employees. Most of these plans require employee contributions in order to accrue benefits. Benefits payable under the plans are based on employees’ years of service and compensation during specified years of employment. Effective December 31, 2010, we amended the USG Corporation defined benefit pension plan to replace the final average pay formula with a cash balance formula for employees hired after that date. In November 2016, we amended the US pension plan to allow retirees and all terminated vested employees to take a lump-sum at all times without restriction. 

We also maintain plans that provide postretirement benefits (retiree health care and life insurance) for eligible employees. Employees hired before January 1, 2002 generally become eligible for the postretirement benefit plans when they meet minimum retirement age and service requirements. The cost of providing most postretirement benefits is shared with retirees.

We retained responsibility for the benefits payable to employees of L&W for the benefits accrued while employed by USG under the USG pension and postretirement plans upon the sale of L&W to ABC Supply. All L&W employees had the option to receive a lump sum benefit payment from the USG Corporation pension plan upon termination of their employment from USG. The total of the lump sum distributions made by the USG Corporation pension plan to both L&W employees and USG retirees or terminated vested employees during 2016 exceeded the settlement threshold and, as a result, we incurred settlement expense of $26 million. Of this amount, $15 million related to the benefits paid to terminated employees of L&W and was recorded to "Gain on sale of discontinued operations" and $11 million related to benefits paid to USG retirees or terminated vested employees, of which $7 million was recorded to "Costs of products sold" and $4 million was recorded to "Selling and administrative expenses" in our consolidated statement of income. The benefits payable to employees of L&W who did not take lump sum distributions in connection with their termination or retirement from USG are included in our benefit obligation as of December 31, 2016.

We had a curtailment to our pension and postretirement plans as a result of the L&W sale. We recorded a curtailment gain of $20 million for our USG Corporation postretirement plan to "Gain on sale of discontinued operations" in our consolidated statement of income, for those benefits no longer accruable to the employees of L&W who were not retirement eligible or did not elect retirement upon employment termination from USG.

We had maintained a pension plan for our subsidiary USG (U.K.) Ltd which had been previously frozen to permanently eliminate future benefit accruals. In December 2014, we irrevocably purchased annuities for the remaining deferred members of the plan relieving us of the responsibility of the pension benefit obligation, and recorded a settlement charge in selling and administrative expenses in the amount of $13 million.

In 2011 and 2014, we amended our U.S. postretirement benefit plan to require retiree medical plan participants to begin purchasing individual coverage in the Affordable Insurance Exchanges or individual Medicare marketplace beginning January 1, 2016 using a company-funded subsidy. The subsidy is determined based upon years of service at retirement and Medicare eligibility. The subsidy provided to retirees eligible for Medicare will end December 31, 2019. As a result of the amendments, the measurement of the accumulated postretirement benefit obligation, or APBO, was reduced and a credit to unrecognized prior service cost is being amortized into the statement of income over the average remaining service of active plan participants to retirement eligibility.

The components of net pension and postretirement benefit costs are summarized in the following table:

(millions)	2016			2015			2014
Pension Benefits:
Service cost of benefits earned	$	45		$	49		$	37
Interest cost on projected benefit obligation	66			66			65
Expected return on plan assets	(89		)	(83		)	(79		)
Settlement (a)	35			1			13
Net amortization	22			39			24
Net pension cost (b)	$	79		$	72		$	60
Postretirement Benefits:
Service cost of benefits earned	$	2		$	2		$	3
Interest cost on projected benefit obligation	6			6			7
Curtailment	(20		)	—			—
Net amortization	(27		)	(31		)	(35		)
Net postretirement benefit (c)	$	(39	)	$	(23	)	$	(25	)

(a) In 2016, $26 million of the settlement charge reflects the increase in lump sum benefits paid largely driven by the sale of L&W and $9 million reflected payments from our supplemental plan. In 2014, the settlement charge related to the elimination of the benefit obligation of the UK pension plan due to the purchase of annuities.

(b) Net pension costs, excluding settlement costs, includes expenses allocated to income from discontinued operations for L&W totaling $7 million for 2016, exclusive of settlement expense, $12 million for 2015 and $8 million for 2014.

(c) Net postretirement benefit, excluding curtailment gain, includes a net benefit allocated to income from discontinued operations for L&W of $3 million for 2016, exclusive of curtailment expense, $3 million for 2015 and $3 million for 2014.

We use a December 31 measurement date for our plans. The accumulated benefit obligation, or ABO, for the defined benefit pension plans was $1.396 billion as of December 31, 2016 and $1.354 billion as of December 31, 2015.

	As of December 31,
(millions)	2016			2015
Selected information for pension plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligation	$	(39	)	$	(1,182	)
Fair value of plan assets	2			1,097
Selected information for pension plans with benefit obligations in excess of plan assets:
Benefit obligation	$	(1,384	)	$	(1,365	)
Fair value of plan assets	1,205			1,099

The following table summarizes projected benefit obligations, plan assets and funded status as of December 31:

	Pension						Postretirement
(millions)	2016			2015			2016			2015
Change in Benefit Obligation:
Benefit obligation as of January 1	$	1,564		$	1,686		$	144		$	167
Service cost	45			49			2			2
Interest cost	66			66			6			6
Settlements	(123		)	(4		)	—			—
Curtailments	(37		)	—			(7		)	—
Participant contributions	11			11			—			3
Benefits paid	(33		)	(86		)	(7		)	(11		)
Actuarial (gain) loss	112			(119		)	(5		)	(14		)
Foreign currency translation	5			(39		)	2			(9		)
Benefit obligation as of December 31	$	1,610		$	1,564		$	135		$	144
Change in Plan Assets:
Fair value as of January 1	$	1,301		$	1,340		$	—		$	—
Actual return on plan assets	107			17			—			—
Employer contributions	167			61			7			8
Participant contributions	11			11			—			3
Benefits paid	(33		)	(86		)	(7		)	(11		)
Settlements	(123		)	(4		)	—			—
Foreign currency translation	5			(38		)	—			—
Fair value as of December 31	$	1,435		$	1,301		$	—		$	—
Funded status	$	(175	)	$	(263	)	$	(135	)	$	(144	)
Components on the Consolidated Balance Sheets:
Noncurrent assets	$	4		$	3		$	—		$	—
Current liabilities	(16		)	(9		)	(8		)	(9		)
Noncurrent liabilities	(163		)	(257		)	(127		)	(135		)
Net liability as of December 31	$	(175	)	$	(263	)	$	(135	)	$	(144	)
Pretax Components in AOCI:
Net actuarial loss	$	388		$	387		$	—		$	7
Prior service credit	(1		)	(1		)	(65		)	(108		)
Total as of December 31	$	387		$	386		$	(65	)	$	(101	)

For our defined benefit pension plans, the 2016 actuarial loss of $112 million was primarily due to a decrease in the discount rates offset by the adoption of the new mortality tables published by the Society of Actuaries used to determine the benefit obligation. The weighted-average discount rate decreased from 4.43% at December 31, 2015 to 4.02% at December 31, 2016 and increased from 4.10% at December 31, 2014 to 4.43% at December 31, 2015.

For the defined benefit pension plans, we estimate that during 2017 we will amortize from AOCI into net pension cost a net actuarial loss of $23 million and no prior service cost. For the postretirement benefit plans, we estimate that during 2017 we will amortize from AOCI into net postretirement cost a net actuarial loss of $0 million and a prior service credit of $28 million.

ASSUMPTIONS

The following tables reflect the assumptions used in the accounting for our plans:

	Pension				Postretirement
	2016		2015		2016		2015
Weighted average assumptions used to determine benefit obligations as of December 31:
Discount rate	4.02	%	4.43	%	3.90	%	4.24	%
Compensation increase rate	3.55	%	3.55	%	N/A		N/A
Weighted average assumptions used to determine net cost for years ended December 31:
Discount rate	4.43	%	4.10	%	4.24	%	3.70	%
Expected return on plan assets	6.66	%	6.70	%	N/A		N/A
Compensation increase rate	3.55	%	3.50	%	N/A		N/A

We no longer have significant exposure to health care cost trend rates due to the modifications we made to our U.S. postretirement health care plan to limit the increase in the annual amount we pay for retiree health care coverage for certain current and future retirees to 3% and to require retiree medical plan participants to begin purchasing individual coverage in the Affordable Insurance Exchanges or individual Medicare marketplace beginning January 1, 2016 using a company-funded subsidy based upon years of service at retirement.

For the measurement of the APBO at December 31, 2016 for our Canadian postretirement health care plan, the assumed health care cost trend rates start with a 7.75% increase in 2017, followed by a gradual decline in increases to 4% for 2032. For the measurement of the APBO at December 31, 2015, the assumed health care cost trend rates started with an 8% increase in 2016, followed by a gradual decline in increases to 4% for 2032 and beyond.

A one percentage point change in the assumed health care cost trend rates would have the following effects on our Canadian plans:

(millions)	One-Percentage- Point Increase		One-Percentage- Point Decrease
Effect on total service and interest cost	$	1	$	—
Effect on postretirement benefit obligation	11		(8		)

RETIREMENT PLAN ASSETS

Investment Policies and Strategies: We have established investment policies and strategies for the defined benefit pension plans’ assets with a long-term objective of maintaining the plans’ assets at a level equal to or greater than that of their liabilities (as measured by a funded ratio of 100% or more of the ABO) and maximizing returns on the plans’ assets consistent with our moderate tolerance for risk. Contributions are made to the plans periodically as needed to meet funding targets or requirements. Factors influencing our determination to accept a moderate degree of risk include the timing of plan participants’ retirements and the resulting disbursement of retirement benefits, the liquidity requirements of the plans and our financial condition.

Our overall long-term objective is to achieve a 6.7% rate of return on plan assets with a moderate level of risk as indicated by the volatility of investment returns. This rate of return target was established using a “building block” approach. In this approach, ranges of long-term expected returns for the various asset classes in which the plans invest are estimated. The estimated ranges are primarily based on observations of historical asset returns and their historical volatility. In determining the expected returns, we also consider consensus forecasts of certain market and economic factors that influence returns, such as inflation, gross domestic product trends and dividend yields. We then calculate an overall range of likely expected rates of return by applying the expected asset returns to the plans’ target asset allocation. The most likely rate of return is then determined and is adjusted to account for investment management fees.

Our investment strategy is to invest in a diversified mix of asset classes in accordance with an asset allocation that we believe is likely to achieve our long-term target return while prudently considering risk. In order to manage risk, the plans’ pension and investment committees periodically rebalance the asset allocations as outlined by our investment policy statements. Our investment policy statements include glide paths which outline how our asset allocation would increase the portion of liability-hedging assets, such as fixed income, as our funded status improves in the future. This liability-driven investing approach is carried out by professional investment managers who help the committees in this process. The committees also monitor the investment performance of the individual investment managers compared to their benchmark returns and investment guidelines on an ongoing basis, in part through the use of quarterly investment portfolio reviews and compliance reporting by investment managers. The pension and investment committees also evaluate risk by periodically conducting asset/liability studies to assess the correlation of the plans’ assets and liabilities and the degree of risk in the target asset allocations. The plans limit the use of leverage to select investment strategies where leverage is typically employed, such as private equity and real estate. Certain investment managers utilize derivatives, such as swaps, bond futures, and options, as part of their investment strategies. This is done primarily to gain a desired market exposure or manage factors such as interest rate risk or duration of a bond portfolio.

The following table shows the aggregate target asset allocation on a weighted average basis for all the plans and the acceptable ranges around the targets as of December 31, 2016.

		Investment Policy
		Target		Range
Asset Categories:	Asset Category Description
Equity	Institutional commingled/pooled equity funds, equity mutual funds and direct holdings of the common stock of U.S. and non-U.S. companies; equity funds and direct holdings are invested in companies with a range of market capitalizations	39	%	35%-43%
Fixed income	U.S. Treasury securities, non-U.S. government debt securities such as Canadian federal bonds, corporate bonds of companies from diversified industries and mortgage-backed securities	50	%	46%-54%
Limited partnerships	Investments in funds that follow any of several different strategies, including investing in distressed debt, energy development, infrastructure, and hedge funds. These investments use strategies with returns normally expected to have a reduced correlation to the return of equities as compared to other asset classes and often provide a current income component that is a meaningful portion of the investment’s total return.	5	%	2%-8%
Other real assets	Primarily investments in large core, private real estate funds that directly own a diverse portfolio of properties located in the United States. It also includes an allocation to funds investing in equities of real estate and infrastructure companies	6	%	3%-10%
Cash equivalents and short-term investments	Primarily held in short-term investment funds or registered money market funds with daily liquidity	—	%	0%-5%
Total		100	%

Fair Values of Plan Assets: Pension assets are classified based on the valuation methodologies and inputs used to determine the fair value as described in Note 1.

Level 1 investments include mutual funds, or direct investments in common stocks of U.S. and non-U.S. companies that trade on liquid exchanges. These investments are valued based on the closing price on these exchanges.

Level 2 investments include primarily fixed income securities such as corporate, or government debentures, mortgage- and asset-backed securities. They are valued primarily using income and market approaches, such as pricing based on recent market transactions, and values are based on quoted prices or other observable market inputs received from data providers. Commingled funds not traded on an exchange, even though their underlying investments are common stocks traded on liquid exchanges, are also included in the Level 2 category. The net asset value of commingled funds investing in either stocks or fixed income securities is calculated by subtracting the value of any liabilities from the market value of all securities owned by a fund.

Level 3 investments include real estate, infrastructure, or direct energy investments as well as distressed securities or hedge funds. These are valued using income approach methodologies such as discounted cash flows, or market approach methodologies such as relative value (specific to equity securities), direct capitalization and comparable sales (specific to real estate investments). Some of the key inputs used to value these securities include discount rate, EBITDA multiple, yield-to-worst, yield-to-maturity, and cap rate (specific to real estate investments).

The fair values by hierarchy of inputs as of December 31 were as follows:

	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
(millions)	2016		2015		2016		2015		2016		2015		2016			2015
Asset Categories:
Equity:
Common and preferred stock	$	66	$	55	$	—	$	—	$	—	$	—	$	66		$	55
Commingled/pooled/mutual funds (a)	—		54		490		448		—		—		490			502
Total equity	66		109		490		448		—		—		556			557
Fixed income:
U.S. government and agency debt securities	—		—		194		177		—		—		194			177
Non-U.S. government and agency debt securities	—		—		54		32		—		—		54			32
Investment-grade debt securities	—		—		197		199		—		—		197			199
High-yield debt securities	—		—		53		36		—		—		53			36
Commingled/pooled funds (a)	—		—		165		129		—		—		165			129
Mortgaged backed securities	—		—		3		—		—		—		3			—
Other	—		—		10		3		1		1		11			4
Total fixed income	—		—		676		576		1		1		677			577
Limited partnerships	—		—		—		—		103		106		103			106
Other real estate assets	—		—		16		15		38		37		54			52
Cash equivalents and short-term investments	—		—		11		10		—		—		11			10
Total	$	66	$	109	$	1,193	$	1,049	$	142	$	144	$	1,401		$	1,302
Cash on hand													—			—
Receivables													35			9
Accounts payable													(1		)	(10		)
Total													$	1,435		$	1,301

(a) Certain investments in commingled/pooled equity funds have been classified as Level 2 in 2016 and 2015 because observable quoted prices for these institutional funds are not available.

A reconciliation of the change in the fair value measurement of the defined benefit plans’ consolidated assets using significant unobservable inputs (Level 3) between January 1, 2015 and December 31, 2016 is as follows:

(millions)	Fixed Income		Other Real Estate Assets			Limited Partnerships			Total
Balance as of January 1, 2015	$	1	$	35		$	103		$	139
Realized losses	—		(1		)	—			(1		)
Unrealized gains	—		5			1			6
Purchases, sales and settlements:
Purchases	—		—			2			2
Sales	—		(2		)	—			(2		)
Settlements	—		—			—			—
Net transfers into (out of) Level 3	—		—			—			—
Balance as of December 31, 2015	$	1	$	37		$	106		$	144
Realized gains	—		1			5			6
Unrealized gains (losses)	—		2			(3		)	(1		)
Purchases, sales and settlements:
Purchases	—		—			1			1
Sales	—		(2		)	(6		)	(8		)
Settlements	—		—			—			—
Net transfers into (out of) Level 3	—		—			—			—
Balance as of December 31, 2016	$	1	$	38		$	103		$	142

CASH FLOWS

For 2017, our defined benefit pension plans have no minimum funding requirements under the Employee Retirement Income Security Act of 1974. We are evaluating our level of funding for pension plans and currently estimate that we will contribute approximately $74 million to our pension plans in 2017. Our cash payments for postretirement plans are estimated to be $8 million in 2017.

Total benefit payments we expect to make to participants, which include payments funded from USG’s assets as well as payments from our pension plans' assets, are as follows (in millions):

Years ended December 31	Pension Benefits		Postretirement Benefits
2017(a)	$	165	$	8
2018	100		8
2019	100		9
2020	110		7
2021	114		7
2022 - 2026	580		39

(a) Pension benefits for the year ended December 31, 2017 include expected payments to L&W employees who elected lump sum upon termination from USG Corporation.

DEFINED CONTRIBUTION PLANS

Total charges for our defined contribution plans amounted to approximately $5 million, $6 million and $5 million for the years ended December 31, 2016, 2015 and 2014, respectively. These charges primarily consisted of contributions to our U.S. plan, commonly known as a 401(k) plan. The U.S. plan provides participating employees the opportunity to invest 1% to 75% of their compensation on a pretax and/or Roth after-tax basis. As of December 31, 2016, participants earn a guaranteed company match of 25% on employee contributions up to 6% of their eligible compensation. Employees are fully vested in company matching contributions after three years of participation in the plan. USG’s contributions are charged to cost of products sold and selling and administrative expenses.

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Share-Based Compensation

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation

We grant share-based compensation to eligible participants under our 2016 Long-Term Incentive Plan, or New LTIP, which was approved by our Board of Directors and stockholders in 2016, and prior thereto under our Long-Term Incentive Plan, which, together with the New LTIP, is referred to as the LTIP. As of December 31, 2016, a total of 7 million shares of common stock were reserved for future grants under the New LTIP. The New LTIP authorizes the Board’s Compensation and Organization Committee to provide equity-based compensation in the form of stock options, stock appreciation rights, or SARs, restricted stock, restricted stock units, or RSUs, market share units, or MSUs, performance shares and units, and other cash incentive and share-based awards for the purpose of providing our employees, officers and non-employee directors incentives and rewards for performance. We may issue common shares upon option exercises and upon the vesting or grant of other awards under the LTIP from our authorized but unissued shares or from treasury shares.

Our expense in continuing operations for share-based arrangements was $18 million in 2016, $14 million in 2015 and $20 million in 2014 and is included in selling and administrative expense in our consolidated statements of income. No income tax benefits were recognized for share-based arrangements in the consolidated statements of income in 2016, 2015 and 2014.

Excess tax benefits related to share based compensation are the difference between the amount of deductible compensation expense reported for tax purposes and the compensation expense recorded for financial reporting purposes for a stock award. Excess tax benefits that are not realized are not reflected in additional paid-in-capital until there is a reduction to taxes payable. As a result of the NOL carryforwards for federal tax purposes in 2016, 2015 and 2014, none of the excess tax benefits with respect to exercised stock options and vestings of RSUs, MSUs and performance shares for those years has been reflected in additional paid-in-capital as of December 31, 2016. Included in our federal tax NOL carryforwards is $70 million of unrealized excess tax benefits for which a tax benefit of $26 million will be recorded in additional paid-in-capital if the loss carryforward is fully utilized.

Certain employees of L&W previously received grants of MSUs, performance shares and RSUs. The expense associated with these awards was $1 million for 2016, 2015, and 2014 and is included in "Income from discontinued operations" in our consolidated statements of income. On October 31, 2016, any unvested awards were forfeited upon the sale of L&W to ABC Supply and are included as forfeited in the respective tables below.

MARKET SHARE UNITS

We granted MSUs with the following weighted average grant date fair values:

	2016		2015		2014
Weighted average grant date fair values	$	19.59	$	30.06	$	40.20

MSUs generally vest after a three-year period based on our actual stock price performance during such period. The number of MSUs earned will vary from zero to 150% of the number of MSUs awarded depending on the actual performance of our stock price. In the case of termination of employment due to death, disability or retirement during the performance period, vesting will be pro-rated based on the number of full months employed in 2016. Awards earned will be issued at the end of the three-year period. MSUs may vest earlier in the case of a change in control in most circumstances only if there is also a related loss of employment or diminution of duties. Each MSU earned will be settled in common stock.

We estimated the fair value of each MSU granted on the date of grant using a Monte Carlo simulation that used the assumptions noted in the following table. Volatility was based on stock price history immediately prior to grant for a period commensurate with the expected term. The risk-free rate was based on zero-coupon U.S. government issues at the time of grant. The expected term represents the period from the valuation date to the end of the performance period.

Assumptions:	2016		2015		2014
Expected volatility	34.02	%	42.70	%	54.93	%
Risk-free rate	0.86	%	1.09	%	0.63	%
Expected term (in years)	2.95		2.95		2.94
Expected dividends	—		—		—

Nonvested MSUs outstanding as of December 31, 2016 and MSU activity during 2016 were as follows:

	Weighted Number of Shares (000)		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2016	743		$	34.33
Granted	801		19.59
Vested	(304	)	40.20
Forfeited	(83	)	23.22
Nonvested at December 31, 2016	1,157		23.39

With respect to the MSUs granted in 2014, for which the three-year period ended December 31, 2016, 303,790 vested for approximately 267,335 common shares based on the actual performance of our stock price. The remaining MSUs granted in 2014 were forfeited.

Total unrecognized compensation cost related to nonvested share-based compensation awards represented by MSUs granted under the LTIP was $5 million as of December 31, 2016. We expect that cost to be recognized over a weighted average period of 1.7 years.

PERFORMANCE SHARES

We granted performance shares with the following weighted average grant date fair values:

	2016		2015		2014
Weighted average grant date fair values	$	21.10	$	30.63	$	46.46

The performance shares generally vest after a period of three years based on our total stockholder return relative to the performance of the Dow Jones U.S. Construction and Materials Index, with adjustments to that index in certain circumstances, for the three-year period. The number of performance shares earned will vary from zero to 200% of the number of performance shares awarded depending on that relative performance. Vesting will be pro-rated based on the number of full months employed during the performance period in the case of death, disability, retirement or a change in control, and pro-rated awards earned will be settled in common stock at the end of the three-year period.

We estimated the fair value of each performance share granted on the date of grant using a Monte Carlo simulation that uses the assumptions noted in the following table. Volatility was based on stock price history immediately prior to grant for a period commensurate with the expected term. The risk-free rate was based on zero coupon U.S. government issues at the time of grant. The expected term represents the period from the grant date to the end of the three-year performance period.

Assumptions:	2016		2015		2014
Expected volatility	34.02	%	42.70	%	54.93	%
Risk-free rate	0.86	%	1.09	%	0.63	%
Expected term (in years)	2.95		2.95		2.94
Expected dividends	—		—		—

Nonvested performance shares outstanding as of December 31, 2016 and performance share activity during 2016 were as follows:

	Weighted Number of Shares (000)		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2016	222		$	37.20
Granted	214		21.10
Vested	(86	)	46.46
Forfeited	(104	)	25.22
Nonvested at December 31, 2016	246		24.98

With respect to the performance shares granted in 2014, for which the three-year performance period ended December 31, 2016, 86,478 of the performance awards vested for no common shares.

Total unrecognized compensation cost related to nonvested share-based compensation awards represented by performance shares granted under the LTIP was $2 million as of December 31, 2016. We expect that cost to be recognized over a weighted average period of 1.7 years.

RESTRICTED STOCK UNITS

We granted RSUs during 2016, 2015 and 2014 with the following weighted average grant date fair values:

	2016		2015		2014
Weighted average grant date fair values	$	23.94	$	28.56	$	32.50

RSUs granted as special retention awards, including those granted in 2016, generally vest after a specified number of years from the date of grant or at a specified date and RSUs granted with performance goals vest if those goals are attained. RSUs may vest earlier in the case of death, disability, retirement or a change in control. Each RSU is settled in a share of our common stock after the vesting period. The fair value of each RSU granted is equal to the closing market price of our common stock on the date of grant.

In 2016, we granted RSUs as special retention awards with respect to 106,000 shares of common stock that generally vest in three years from the date of grant.

RSUs outstanding as of December 31, 2016 and RSU activity during 2016 were as follows:

	Number of Shares (000)		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2016	270		$	24.49
Granted	106		23.94
Vested	(128	)	18.70
Forfeited	(20	)	26.45
Nonvested at December 31, 2016	228		27.31

As of December 31, 2016, there was $3 million of total unrecognized compensation cost related to nonvested share-based compensation awards represented by RSUs granted under the LTIP. We expect that cost to be recognized over a weighted average period of 2.6 years. The total fair value of RSUs that vested was $2 million during 2016, $4 million during 2015 and $6 million during 2014.

STOCK OPTIONS

We last granted stock options in 2012. Stock options generally become exercisable in four equal annual installments beginning one year from the date of grant, although they may become exercisable earlier in the event of death, disability, retirement or a change in control. The stock options generally expire ten years from the date of grant, or earlier in the event of death, disability or retirement.

A summary of stock options outstanding as of December 31, 2016 and of stock option activity during 2016 is presented below:

	Number of Options (000)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (millions)
Outstanding at January 1, 2016	3,496		$	28.00	2.99	$	19
Exercised	(305	)	13.71
Canceled	(1,017	)	43.93
Outstanding at December 31, 2016	2,174		$	22.55	2.78	$	22
Exercisable at December 31, 2016	2,174		$	22.55	2.78	$	22
Vested or expected to vest at December 31, 2016	2,174		$	22.55	2.78	$	22

(millions)	2016		2015		2014
Intrinsic value of stock options exercised	$	4	$	6	$	8
Cash received from stock options exercised	$	4	$	6	$	4
Fair value of stock options vested	$	1	$	1	$	2

Intrinsic value for stock options is defined as the difference between the current market value of our common stock and the exercise price of the stock options.

NON-EMPLOYEE DIRECTOR DEFERRED STOCK UNITS

Our non-employee directors may elect to receive a portion of their compensation as deferred stock units that increase or decrease in value in direct relation to the market price of our common stock. Deferred stock units earned through December 31, 2007 will be paid in cash upon termination of board service. Deferred stock units earned thereafter will be paid in cash or shares of USG common stock, at the election of the director, upon termination of board service.

The number of deferred stock units held by non-employee directors as of December 31 was as follows:

	2016	2015	2014
Deferred stock units held by non-employee directors	220,047	193,117	164,235

We recorded expense related to these deferred stock units of $1 million in 2016, 2015 and 2014, respectively.

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Supplemental Balance Sheet Information

12 Months Ended

Dec. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Supplemental Balance Sheet Information

Supplemental Balance Sheet Information

INVENTORIES

Inventories as of December 31 consisted of the following:

(millions)	2016		2015
Finished goods	$	132	$	115
Work in progress	37		36
Raw materials	67		68
Total	$	236	$	219

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of December 31 consisted of the following:

(millions)	2016			2015
Land and mineral deposits	$	116		$	127
Buildings and improvements	1,078			1,075
Machinery and equipment	2,473			2,450
	3,667			3,652
Reserves for depreciation and depletion	(1,960		)	(1,881		)
Total	$	1,707		$	1,771
Annual depreciation and depletion expense	$	129		$	125

ACCRUED EXPENSES

Accrued expenses as of December 31 consisted of the following:

(millions)	2016		2015
Self-insurance reserves	$	12	$	13
Employee compensation	35		29
Interest	31		45
Derivatives	5		17
Pension and other postretirement benefits	24		18
Environmental	18		16
Other	50		48
Total	$	175	$	186

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in the balances of each component of accumulated other comprehensive income (loss), or AOCI, are summarized in the following table:

(millions)	Derivatives			Pension and Other Postretirement Benefit Plans			Foreign Currency Translation			Total AOCI
Balance as of January 1, 2014	$	35		$	(32	)	$	21		$	24
Other comprehensive income (loss) before reclassifications	(15		)	(272		)	(68		)	(355		)
Less: Amounts reclassified from AOCI, net of tax	4			(2		)	5			7
Other comprehensive income (loss), net of tax	(19		)	(270		)	(73		)	(362		)
Balance as of December 31, 2014	$	16		$	(302	)	$	(52	)	$	(338	)
Other comprehensive loss before reclassifications	(5		)	74			(67		)	2
Less: Amounts reclassified from AOCI, net of tax	(9		)	(7		)	(6		)	(22		)
Other comprehensive loss, net of tax	4			81			(61		)	24
Balance as of December 31, 2015	$	20		$	(221	)	$	(113	)	$	(314	)
Other comprehensive income (loss) before reclassifications	1			(34		)	(53		)	(86		)
Less: Amounts reclassified from AOCI, net of tax	(6		)	(9		)	—			(15		)
Other comprehensive income (loss), net of tax	7			(25		)	(53		)	(71		)
Balance as of December 31, 2016	$	27		$	(246	)	$	(166	)	$	(385	)

Amounts reclassified from AOCI, net of tax, for the years ended December 31, 2016, 2015 and 2014 were as follows:

(millions)	2016			2015			2014
Derivatives
Net reclassification from AOCI for cash flow hedges included in cost of products sold	$	(10	)	$	(8	)	$	4
Net reclassification from AOCI for cash flow hedges included in income and gain from the sale of equity method investment to related party	—			1			—
Less: Income tax (benefit) expense on reclassification from AOCI included in income tax expense	(4		)	2			—
Net amount reclassified from AOCI	$	(6	)	$	(9	)	$	4
Pension and postretirement benefits
Net reclassification from AOCI for amortization of prior service (benefit) cost included in cost of products sold	$	(1	)	$	1		$	—
Net reclassification from AOCI for amortization of prior service (benefit) cost included in selling and administrative expenses	(12		)	(5		)	1
Net reclassification from AOCI for amortization of prior service (benefit) cost included in gain on sale of discontinued operations	(3		)	(4		)	(4		)
Less: Income tax expense on reclassification from AOCI included in income tax benefit	(7		)	(1		)	(1		)
Net amount reclassified from AOCI	$	(9	)	$	(7	)	$	(2	)
Foreign Currency Translation
Net reclassification from AOCI for translation (loss) gain realized upon the sale of foreign entities	$	—		$	(6	)	$	5
Net amount reclassified from AOCI	$	—		$	(6	)	$	5

We estimate that we will reclassify a net $2 million after-tax loss on derivatives from AOCI to earnings within the next 12 months.

ASSET RETIREMENT OBLIGATIONS

Changes in our liability for asset retirement obligations consisted of the following:

(millions)	2016			2015
Balance as of January 1	$	119		$	123
Accretion expense	7			7
Liabilities incurred	2			1
Changes in estimated cash flows (a)	(12		)	(5		)
Liabilities settled (b)	(4		)	(2		)
Foreign currency translation	1			(5		)
Balance as of December 31	$	113		$	119

(a) Changes in estimated cash flows for the year ended December 31, 2016 includes a $8 million reduction related to one of our quarries.

(b) Liabilities settled for the year ended December 31, 2016 includes a $2 million liability that was relieved in conjunction with the sale of a surplus property.

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Long-Lived Asset Impairment Charges

12 Months Ended

Dec. 31, 2016

Restructuring and Related Activities [Abstract]

Long-Lived Asset Impairment Charges

Long-Lived Asset Impairment Charges

We continuously evaluate our manufacturing and sourcing needs by considering the capacity of existing and idled plants and production lines, as well as capital projects for manufacturing facilities, relative to the demand assumptions included in our long-range plan. Although industry and economic factors have improved and we believe that the overall economic recovery is intact, they are improving at a slower pace than expected, which required us to reconsider the future utilization of idled plants and mines and production lines, and capital projects for manufacturing facilities. We recorded the following impairment charges which are included in our consolidated statements of income in "Long-lived asset impairment charges":

(millions)	2016		2015		2014
Ocean vessels	$	—	$	—	$	60
Wallboard lines or facilities	—		—		16
Previously incurred costs related to construction of future facilities	—		—		12
Indefinitely idled mining operations	10		—		—
Other	—		—		2
Total long-lived asset impairment charges	$	10	$	—	$	90

In 2016, we indefinitely idled our mining operations in Little Narrows, Nova Scotia, Canada after completing a review of our gypsum sourcing needs. As a result, we recorded impairment charges of $10 million. We also recorded severance and other charges of $2 million for the termination of employees at the Little Narrows location, which are included in "Costs of products sold". Both the impairment and severance charges relate to our Gypsum segment.

In 2014, the long-lived asset impairment charges in the Gypsum segment totaling $90 million included the following:

(a) $60 million related to two self-unloading ocean vessels that were subsequently sold in the second quarter of 2015. See Note 13 for further discussion.

(b) $16 million related to the carrying values of machinery, equipment and buildings at our temporarily idled gypsum quarry and wallboard production facility in Empire, Nevada and at our previously idled and now permanently closed gypsum wallboard line in New Orleans, Louisiana. In addition, in the third quarter of 2014 we permanently closed our wallboard line in Detroit, Michigan. No impairment charge was recorded with respect to our wallboard line in Detroit, Michigan, as these assets were previously impaired at the time the plant was originally idled.

(c) $12 million related to previously incurred and capitalized costs for the construction of two future facilities which we do not anticipate will be built within our planning horizon.

(d) $2 million related to the carrying values of machinery, equipment and buildings at our previously idled and now permanently closed paper production line in Gypsum, Ohio.

The carrying values of the machinery, equipment and buildings at the facility in Empire, Nevada, exceeded the estimated future undiscounted cash flows for the remaining useful lives of the assets and resulted in a full impairment. This facility was sold in 2016. For the production line in Gypsum, Ohio that we deemed to be permanently closed, we fully impaired the long-lived assets specific to that line.

Gypsum Transportation Limited

Gypsum Transportation Limited, or GTL, owned two self-unloading ocean vessels. The two previously owned vessels and the third previously leased vessel were used to transship iron ore in and around Sierra Leone in accordance with a contract of affreightment. During 2014, our trading partner ceased performing under the contract, and consequently, we terminated the agreement. As a result of the contract termination, we assessed the recoverability of the two owned vessels and recorded an impairment charge of $60 million. Also in 2014, we recorded a contract termination charge of $6 million for costs to be incurred for the remaining term without economic benefit to us under the lease of the third vessel and we recorded a $9 million provision for bad debt for the trade receivable from our trading partner that we deemed uncollectible.

The impairment charge for the two owned vessels is recorded within "Long-lived asset impairment charges" on our consolidated statement of income. The contract termination charge and provision for bad debt are recorded within "(Recovery) loss on receivable and contract termination charge" on our consolidated statements of income.

In April 2015, we completed the sale of our two self-unloading ocean vessels owned by GTL for $42 million and recorded a gain of $7 million on the disposition. With a portion of the proceeds from the sale, GTL repaid the outstanding loan balance under GTL’s secured loan facility agreement with DVB Bank SE and paid applicable selling costs. Additionally, we returned the third vessel leased by GTL and paid $7 million of early termination costs which were previously accrued for in 2014. In the second quarter of 2015, GTL incurred charges of $6 million to exit our shipping operations. The net impact of the gain on the sale of the vessels and charges incurred to exit the shipping operations of $1 million is recorded in “Gain on disposal of shipping operations, net” on the consolidated statement of income.

In November 2015, we entered into a release and debt settlement agreement (Settlement Agreement) to recover a portion of our loss incurred when our former trading partner ceased performing under the contract in the fourth quarter of 2014. The Settlement Agreement required payments beginning in December 2015 for a total of $14 million. The payments received to settle the $9 million loss on the trade receivable were recorded as a benefit to our consolidated statements of income when we determined the payments to be probable. We recorded a recovery of $6 million in 2015 and it is presented within the "(Recovery) loss on receivable and contract termination charge" on our consolidated statement of income. We received an additional $8 million for the recovery in 2016, of which $3 million is recorded within "(Recovery) loss on receivable and contract termination charge", $1 million is recorded within "Interest income" and $4 million is recorded within "Other income, net" on our consolidated statement of income.

GTL recorded operating profit of $3 million in 2016 and $7 million in 2015 and an operating loss of $52 million in 2014.

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Gypsum Transportation Limited

12 Months Ended

Dec. 31, 2016

Restructuring and Related Activities [Abstract]

Gypsum Transportation Limited

Long-Lived Asset Impairment Charges

We continuously evaluate our manufacturing and sourcing needs by considering the capacity of existing and idled plants and production lines, as well as capital projects for manufacturing facilities, relative to the demand assumptions included in our long-range plan. Although industry and economic factors have improved and we believe that the overall economic recovery is intact, they are improving at a slower pace than expected, which required us to reconsider the future utilization of idled plants and mines and production lines, and capital projects for manufacturing facilities. We recorded the following impairment charges which are included in our consolidated statements of income in "Long-lived asset impairment charges":

(millions)	2016		2015		2014
Ocean vessels	$	—	$	—	$	60
Wallboard lines or facilities	—		—		16
Previously incurred costs related to construction of future facilities	—		—		12
Indefinitely idled mining operations	10		—		—
Other	—		—		2
Total long-lived asset impairment charges	$	10	$	—	$	90

In 2016, we indefinitely idled our mining operations in Little Narrows, Nova Scotia, Canada after completing a review of our gypsum sourcing needs. As a result, we recorded impairment charges of $10 million. We also recorded severance and other charges of $2 million for the termination of employees at the Little Narrows location, which are included in "Costs of products sold". Both the impairment and severance charges relate to our Gypsum segment.

In 2014, the long-lived asset impairment charges in the Gypsum segment totaling $90 million included the following:

(a) $60 million related to two self-unloading ocean vessels that were subsequently sold in the second quarter of 2015. See Note 13 for further discussion.

(b) $16 million related to the carrying values of machinery, equipment and buildings at our temporarily idled gypsum quarry and wallboard production facility in Empire, Nevada and at our previously idled and now permanently closed gypsum wallboard line in New Orleans, Louisiana. In addition, in the third quarter of 2014 we permanently closed our wallboard line in Detroit, Michigan. No impairment charge was recorded with respect to our wallboard line in Detroit, Michigan, as these assets were previously impaired at the time the plant was originally idled.

(c) $12 million related to previously incurred and capitalized costs for the construction of two future facilities which we do not anticipate will be built within our planning horizon.

(d) $2 million related to the carrying values of machinery, equipment and buildings at our previously idled and now permanently closed paper production line in Gypsum, Ohio.

The carrying values of the machinery, equipment and buildings at the facility in Empire, Nevada, exceeded the estimated future undiscounted cash flows for the remaining useful lives of the assets and resulted in a full impairment. This facility was sold in 2016. For the production line in Gypsum, Ohio that we deemed to be permanently closed, we fully impaired the long-lived assets specific to that line.

Gypsum Transportation Limited

Gypsum Transportation Limited, or GTL, owned two self-unloading ocean vessels. The two previously owned vessels and the third previously leased vessel were used to transship iron ore in and around Sierra Leone in accordance with a contract of affreightment. During 2014, our trading partner ceased performing under the contract, and consequently, we terminated the agreement. As a result of the contract termination, we assessed the recoverability of the two owned vessels and recorded an impairment charge of $60 million. Also in 2014, we recorded a contract termination charge of $6 million for costs to be incurred for the remaining term without economic benefit to us under the lease of the third vessel and we recorded a $9 million provision for bad debt for the trade receivable from our trading partner that we deemed uncollectible.

The impairment charge for the two owned vessels is recorded within "Long-lived asset impairment charges" on our consolidated statement of income. The contract termination charge and provision for bad debt are recorded within "(Recovery) loss on receivable and contract termination charge" on our consolidated statements of income.

In April 2015, we completed the sale of our two self-unloading ocean vessels owned by GTL for $42 million and recorded a gain of $7 million on the disposition. With a portion of the proceeds from the sale, GTL repaid the outstanding loan balance under GTL’s secured loan facility agreement with DVB Bank SE and paid applicable selling costs. Additionally, we returned the third vessel leased by GTL and paid $7 million of early termination costs which were previously accrued for in 2014. In the second quarter of 2015, GTL incurred charges of $6 million to exit our shipping operations. The net impact of the gain on the sale of the vessels and charges incurred to exit the shipping operations of $1 million is recorded in “Gain on disposal of shipping operations, net” on the consolidated statement of income.

In November 2015, we entered into a release and debt settlement agreement (Settlement Agreement) to recover a portion of our loss incurred when our former trading partner ceased performing under the contract in the fourth quarter of 2014. The Settlement Agreement required payments beginning in December 2015 for a total of $14 million. The payments received to settle the $9 million loss on the trade receivable were recorded as a benefit to our consolidated statements of income when we determined the payments to be probable. We recorded a recovery of $6 million in 2015 and it is presented within the "(Recovery) loss on receivable and contract termination charge" on our consolidated statement of income. We received an additional $8 million for the recovery in 2016, of which $3 million is recorded within "(Recovery) loss on receivable and contract termination charge", $1 million is recorded within "Interest income" and $4 million is recorded within "Other income, net" on our consolidated statement of income.

GTL recorded operating profit of $3 million in 2016 and $7 million in 2015 and an operating loss of $52 million in 2014.

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Segments

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Segments

Segments

Our operations are organized into three reportable segments: Gypsum, Ceilings and UBBP. As discussed in Note 3, the results of our Distribution segment have been reclassified to discontinued operations. Additionally, as a result of the presentation of L&W as a discontinued operation, the results of our Gypsum and Ceilings segments have been revised to reflect only the sales of USG products from Gypsum and Ceilings to L&W that have been sold by L&W outside the consolidated group. Segment results were as follows:

GYPSUM AND CEILINGS

	For the year ended December 31,
(millions)	2016			2015			2014
Net Sales:
Gypsum	$	2,526		$	2,426		$	2,396
Ceilings	500			496			518
Eliminations	(9		)	(9		)	(10		)
Total	$	3,017		$	2,913		$	2,904
Operating Profit (Loss):
Gypsum	$	389		$	361		$	165
Ceilings	109			88			89
Corporate	(104		)	(94		)	(105		)
Total	$	394		$	355		$	149
Depreciation, Depletion and Amortization:
Gypsum	$	108		$	106		$	116
Ceilings	16			16			14
Corporate	10			9			12
Total	$	134		$	131		$	142
Capital Expenditures:
Gypsum	$	78		$	84		$	94
Ceilings	4			3			30
Corporate	1			—			1
Total	$	83		$	87		$	125
Assets:	December 31, 2016			December 31, 2015			December 31, 2014
Gypsum	$	1,920		$	1,991		$	2,104
Ceilings	241			276			285
Corporate	1,080			1,485			489
Equity method investments	628			682			735
Assets related to discontinued operations	—			357			380
Eliminations	—			(55		)	(57		)
Total	$	3,869		$	4,736		$	3,936

GEOGRAPHIC INFORMATION

	For the year ended December 31,
(millions)	2016			2015			2014
Net Sales:
United States	$	2,625		$	2,524		$	2,400
Canada	389			379			406
Other Foreign	189			196			283
Geographic transfers	(186		)	(186		)	(185		)
Total	$	3,017		$	2,913		$	2,904
Long-lived assets, consisting of property, plant and equipment, net, by geographic location were as follows:
(millions)	December 31, 2016			December 31, 2015			December 31, 2014
Long-Lived Assets:
United States	$	1,563		$	1,605		$	1,648
Canada	80			90			112
Other Foreign	64			76			131
Total	$	1,707		$	1,771		$	1,891

UBBP	For the year ended December 31,
(millions)	2016			2015			2014 (a)
Net sales	$	1,052		$	1,003		$	927
Operating profit	133			124			95
Net income attributable to UBBP	99			96			67
Depreciation, depletion, and amortization	43			43			31
Capital expenditures	45			49			40
	December 31, 2016			December 31, 2015			December 31, 2014
Assets	$	1,292		$	1,303		$	1,435
UBBP GEOGRAPHIC INFORMATION	For the year ended December 31,
(millions)	2016			2015			2014 (a)
Net Sales:
Australia	$	381		$	345		$	312
South Korea	223			200			197
Thailand	141			145			133
China	103			120			122
Other	255			234			206
Geographic Transfers	(51		)	(41		)	(43		)
Total	$	1,052		$	1,003		$	927

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

Long-lived assets, consisting of property, plant and equipment, net, by geographic location for UBBP were as follows:
(millions)	December 31, 2016		December 31, 2015		December 31, 2014
Long-Lived Assets:
Australia	$	217	$	216	$	245
South Korea	107		106		113
China	97		116		127
Oman	86		103		96
Thailand	75		72		72
Other	71		67		78
Total	$	653	$	680	$	731

OTHER SEGMENT INFORMATION

Segment operating profit (loss) includes all costs and expenses directly related to the segment involved and an allocation of expenses that benefit more than one segment.

Revenues are attributed to geographic areas based on the location of the assets producing the revenues. Transactions between reportable segments and geographic areas are accounted for at transfer prices that are approximately equal to market value. Geographic transfers largely reflect intercompany sales from U.S. Gypsum and USG Interiors, LLC to CGC and USG Mexico, S.A. de C.V.

For each of the years ended December 31, 2016, 2015, and 2014, The Home Depot accounted for 23%, 23% and 22% of our net consolidated sales, respectively, and L&W accounted for 19%, 18% and 18% of our consolidated net sales, respectively. Both our Gypsum and Ceilings segments had net sales to these two customers in each of those years.

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Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income from continuing operations before income taxes consisted of the following:

(millions)	2016		2015		2014
U.S.	$	201	$	152	$	14
Foreign	73		84		19
Total	$	274	$	236	$	33

Income tax expense (benefit) on continuing operations consisted of the following:

(millions)	2016		2015			2014
Current:
Federal	$	—	$	—		$	—
Foreign	5		12			2
State	1		1			1
Total current	$	6	$	13		$	3
Deferred:
Federal	41		(631		)	—
Foreign	2		(4		)	4
State	14		(118		)	—
Total deferred	57		(753		)	4
Total	$	63	$	(740	)	$	7

For our continuing operations, differences between actual provisions for income taxes and provisions for income taxes at the U.S. federal statutory rate (35%) were as follows:

(millions)	2016			2015			2014
Taxes on income from continuing operations at U.S. federal statutory rate	$	96		$	82		$	12
Foreign earnings subject to different tax rates (a)	(3		)	(3		)	16
State income tax, net of federal benefit	10			8			1
Change in valuation allowance	—			(827		)	(5		)
Income from equity method investments (b)	(17		)	(16		)	(12		)
Withholding taxes	—			—			2
Other, net	(2		)	2			(1		)
Tax release from AOCI	—			—			(2		)
Gain on deconsolidation	—			—			(7		)
Benefits from unrecognized tax positions	—			(6		)	—
Tax expense not realized on pension loss	—			—			3
Foreign tax credits	(21		)	—			—
Tax expense on distribution of foreign earnings	—			20			—
Provision for income tax expense	$	63		$	(740	)	$	7
Effective income tax rate	22.9		%	(313.6		)%	21.2		%

(a) Foreign earnings subject to different tax rates includes amounts related to impairments and other charges associated with our shipping operations.

(b) Included in income from equity method investments are taxes associated with that income in the respective jurisdictions. These taxes, which are predominately foreign statutory rates, are at rates that are lower than the U.S. federal statutory rate.

Significant components of deferred tax assets and liabilities as of December 31 were as follows:

(millions)	2016			2015
Deferred Tax Assets:
Net operating loss and tax credit carryforwards	$	599		$	774
Pension and postretirement benefits	112			150
Goodwill and other intangible assets	—			24
Reserves not deductible until paid	20			29
Self insurance	2			11
Capitalized interest	13			13
Inventories	6			8
Share-based compensation	28			33
Other	4			5
Deferred tax assets before valuation allowance	784			1,047
Valuation allowance	(51		)	(70		)
Total deferred tax assets	$	733		$	977
Deferred Tax Liabilities:
Property, plant and equipment	245			254
Other	—			—
Total deferred tax liabilities	245			254
Net deferred tax assets	$	488		$	723

In 2015, we reversed $731 million of our valuation allowance. We considered all positive and negative evidence and gave more weight to evidence that was objective in nature as compared to subjective evidence. Significant weight was given to evidence that directly relates to our current financial performance. As of December 31, 2015, we emerged from a four-year cumulative pre-tax loss and had five consecutive quarters of domestic pre-tax earnings. The recent domestic pre-tax operating earnings was a significant, principal piece of positive evidence, which was weighed with the underlying momentum in the business, and generally improved market and economic conditions. Other evidence included strategic actions taken by management to lower costs and our expected utilization of deferred tax assets. All of this positive evidence lead to the determination that December 31, 2015 was the appropriate time to reverse a significant portion of the valuation allowance.

During the current year, we recorded a decrease in the valuation allowance against our deferred tax assets of $19 million as of December 31, 2016, which was related to the expiration of state Net Operating Loss (NOL) carryforwards.

As of December 31, 2016, our deferred tax assets of $488 million were offset by a valuation allowance of $51 million, consisting of state deferred tax assets. The components of the valuation allowance remaining primarily relate to certain state NOL carryforwards that we anticipate will not be used prior to their expiration.

As of December 31, 2016, we had federal NOL carryforwards of approximately $923 million that are available to offset future federal taxable income and will expire in the years 2028 through 2032. In addition, as of that date, we had federal alternative minimum tax credit carryforwards of approximately $45 million that are available to reduce future regular federal income taxes over an indefinite period and foreign tax credit carryforwards of $143 million that are available to offset future federal taxable income and expire in the years 2022 through 2026. The foreign tax credits are attributable to tax planning strategies to optimize foreign tax credit utilization and management’s intention to amend its tax returns for the tax years 2012-2014 in order to claim credits for previously deducted foreign tax. In order to fully realize the U.S. federal net deferred tax assets, taxable income of approximately $1.460 billion would need to be generated during the period before their expiration.

As of December 31, 2016, we had a gross deferred tax asset of $172 million related to state NOLs and tax credit carryforwards. The NOLs will expire if unused in years 2018 through 2036. To the extent that we do not generate sufficient state taxable income within the statutory carryforward periods to utilize the NOL and tax credit carryforwards in these states, they will expire unused.

The Internal Revenue Code imposes limitations on a corporation’s ability to utilize NOLs if it experiences an “ownership change” which can result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. If we were to experience an ownership change, utilization of our NOLs would be subject to an annual limitation that may be carried over to later years within the allowed NOL carryforward period. Over the entire carryforward period, we may not be able to use all our NOLs due to the aforementioned annual limitation. If an ownership change had occurred as of December 31, 2016, our annual U.S. federal NOL utilization would have been limited to approximately $71 million per year.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(millions)	2016			2015			2014
Balance as of January 1	$	18		$	22		$	22
Tax positions related to the current period:
Gross increase	—			4			2
Gross decrease	—			—			—
Tax positions related to prior periods:
Gross increase	—			—			—
Gross decrease	(3		)	(1		)	—
Settlements	—			(6		)	(2		)
Lapse of statutes of limitations	—			(1		)	—
Balance as of December 31	$	15		$	18		$	22

We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income taxes (benefit). The total amounts of interest expense and penalties recognized on our consolidated balance sheets were $1 million and $1 million, respectively, as of December 31, 2016 and 2015. The total amounts of interest and penalties recognized in our consolidated statements of income was zero in each of the three years of 2016, 2015 and 2014. The total amounts of unrecognized tax benefit that, if recognized, would affect our effective tax rate were $14 million for 2016, $17 million for 2015 and $5 million for 2014.

Our federal income tax returns for 2008 and prior years have been examined by the Internal Revenue Service. The U.S. federal statute of limitations remains open for 2006 and later years. We are under examination in various U.S. state and foreign jurisdictions. We do not believe our gross unrecognized tax benefits will change as a result. There are statutes, however, that are expiring within the next 12 months that could result in recognition of approximately $2 million of tax benefit. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from three to five years.

We do not provide for U.S. income taxes on the portion of undistributed earnings of foreign subsidiaries that is intended to be permanently reinvested. The cumulative amount of such undistributed earnings totaled approximately $324 million as of December 31, 2016. These earnings could become taxable in the United States upon the sale or liquidation of these foreign subsidiaries or upon the remittance of dividends. It is not practical to calculate the residual income tax which would result if these basis differences reversed due to the complexities of the tax law and the hypothetical nature of the calculations.

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Earnings Per Share

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The reconciliation of basic income per share to diluted income per share is shown in the following table:

(millions, except per-share data)	2016		2015		2014
Income from continuing operations	$	211	$	976	$	26
Net income attributable to noncontrolling interest	—		—		$	1
Income from continuing operations attributable to USG	$	211	$	976	$	25
Income from discontinued operations, net of tax	20		15		12
Gain on sale of discontinued operations, net of tax	279		—		—
Income available to USG and shareholders	$	510	$	991	$	37
Average common shares	145.9		145.5		141.7
Dilutive RSUs, MSUs, performance shares and stock options	1.8		1.6		2.4
Deferred shares associated with a deferred compensation program for non-employee directors	—		0.1		0.2
Average diluted common shares	147.7		147.2		144.3
Basic earnings per average common share:
Income from continuing operations attributable to USG	$	1.45	$	6.70	$	0.18
Income from and gain on sale of discontinued operations	2.04		0.11		0.08
Net income attributable to USG	$	3.49	$	6.81	$	0.26
Diluted earnings per average common share:
Income from continuing operations attributable to USG	$	1.44	$	6.62	$	0.17
Income from and gain on sale of discontinued operations	2.02		0.11		0.08
Net income attributable to USG	$	3.46	$	6.73	$	0.25

Stock options, RSUs, MSUs, performance shares and deferred shares associated with our deferred compensation program for non-employee directors that were not included in the computation of diluted earnings per share for those periods because their inclusion was anti-dilutive were as follows:

(millions, common shares)	2016	2015	2014
Stock options, RSUs, MSUs and performance shares	1.5	1.9	2.1
Deferred shares associated with a deferred compensation program for non-employee directors	0.2	—	—

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Stockholder Rights Plan

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

Stockholder Rights Plan

Stockholder Rights Plan

NOL Protective Provisions of our Rights Plan

We have a stockholder rights plan that is intended to protect our substantial NOL carryforwards and related tax benefits. See Note 15 for a description of our NOL carryforwards. Under federal tax laws, we generally can use our NOLs and certain related tax credits to reduce ordinary income tax paid in our prior two tax years or on our future taxable income for up to 20 years, when they “expire” for such purposes.

Our ability to use our NOLs could be substantially limited if we experience an “ownership change,” as defined under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), and the rights plan has been designed to help prevent such an “ownership change.” Under Section 382 of the Code, an “ownership change” occurs if, over a rolling three-year period, there has been an aggregate increase of 50 percentage points or more in the percentage of our common stock owned by one or more of our “5-percent stockholders” (as determined under Section 382 of the Code).

The rights plan provides that if any person becomes the beneficial owner (as defined in the Code) of 4.9% or more of our common stock, stockholders other than the triggering stockholder will have the right to purchase additional shares of our common stock at half the market price, thereby diluting the triggering stockholder; provided that stockholders whose beneficial ownership, as defined in Section 382 of the Code, exceeded 4.9% of our common stock outstanding on February 11, 2015 will not be deemed to have triggered the rights plan, so long as they do not thereafter acquire beneficial ownership of additional common stock other than in certain specified exempt transactions.

The rights will expire at the close of business on May 31, 2019, unless earlier redeemed or exchanged. Our Board of Directors has the power to accelerate or extend the expiration date of the rights. The NOL protective provisions of the rights plan described above will be effective until the earliest of the close of business on (i) May 31, 2019, (ii) the date on which our Board of Directors determines that these provisions are no longer necessary for the protection of certain tax benefits because of the repeal of Section 382 of the Code, (iii) the first day of a taxable year as to which our Board of Directors determines that no tax benefits may be carried forward, or (iv) such other date as our Board of Directors determines that these provisions are no longer necessary for the preservation of tax benefits (the "Special Period"). After the end of the Special Period, the triggering threshold for the rights issued pursuant to the rights plan will revert to 15% of our outstanding common stock and the definition of “beneficial owner” will revert to definitions that do not track Section 382 of the Code. At our 2016 annual meeting our stockholders ratified, on an advisory basis, the extension of the term of the rights plan and the NOL protective provisions described above.

A board committee composed solely of independent directors reviews the rights plan at least once every three years to determine whether to modify the rights plan in light of all relevant factors. This review was most recently conducted in November 2015. The next review is required by the end of 2018.

Restated Certificate of Incorporation

Our Restated Certificate of Incorporation also restricts certain transfers of our common stock and includes provisions intended to further protect the tax benefits of our NOL carryforwards. Subject to certain limited exceptions, these transfer restrictions restrict any person from transferring our common stock (or any interest in our common stock) if the transfer would result in a stockholder (or several stockholders, in the aggregate, who hold their stock as a “group” under Section 382 of the Code) owning 4.9% or more of our common stock. Any direct or indirect transfer attempted in violation of these transfer restrictions would be void as of the date of the prohibited transfer as to the purported transferee, and the purported transferee would not be recognized as the owner of the shares attempted to be owned in violation of the transfer restrictions for any purpose, including for purposes of voting and receiving dividends or other distributions in respect of that common stock, or in the case of options, receiving our common stock in respect of their exercise. These restrictions are effective until the earliest of (i) the close of business on May 31, 2019, (ii) the repeal of Section 382 of the Code if our Board of Directors determines that the restrictions are no longer necessary or desirable for the preservation of tax benefits, (iii) the close of business on the first day of a taxable year as to which our Board of Directors determines that no tax benefits may be carried forward, or (iv) such other date as determined by our Board of Directors pursuant to the provisions described above.

Treatment of Berkshire Hathaway under Rights Plan and Restated Certificate of Incorporation

Pursuant to a Shareholder’s Agreement reached in 2006, Berkshire Hathaway and certain of its affiliates may acquire beneficial ownership of up to 50% of our voting stock on a fully-diluted basis without triggering the ownership thresholds in our Restated Certificate of Incorporation or the rights plan, and may acquire beneficial ownership of more than 50% of our voting stock on a fully-diluted basis without triggering the ownership thresholds in our Restated Certificate of Incorporation or the rights plan through an offer to purchase all of our common stock that remains open for at least 60 days, in each case subject to specified exceptions.

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Lease Commitments

12 Months Ended

Dec. 31, 2016

Lease Commitments [Abstract]

Lease Commitments

Lease Commitments

We lease some of our offices, buildings, machinery and equipment, and autos under noncancelable operating leases. These leases have various terms and renewal options. Lease expense amounted to $37 million in 2016, $36 million in 2015 and $41 million in 2014. Future minimum lease payments required under operating leases with initial or remaining noncancelable terms in excess of one year as of December 31, 2016 were as follows:

(millions)	2017		2018		2019		2020		2021		After 2021
Future minimum lease payments	$	31	$	26	$	22	$	17	$	12	$	7

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Litigation

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Litigation

Litigation

WALLBOARD PRICING CLASS ACTION LAWSUITS

In the first quarter of 2015, USG, United States Gypsum Company, L&W Supply Corporation, and seven other wallboard manufacturers were named as defendants in a lawsuit filed in federal court in California by twelve homebuilders alleging that since at least September 2011, U.S. wallboard manufacturers conspired to fix and raise the price of gypsum wallboard sold in the United States and to effectuate the alleged conspiracy by ending the practice of providing job quotes on wallboard. The lawsuit was transferred to the United States District Court for the Eastern District of Pennsylvania under the title In re: Domestic Drywall Antitrust Litigation, MDL No. 2437. In the second quarter of 2016, the Court dismissed with prejudice the portions of the homebuilders’ complaint alleging a conspiracy in 2014 and 2015, ruling that there were insufficient factual allegations to allow such a claim to go forward. The homebuilders' claims alleging a conspiracy prior to 2014 have not been dismissed, and the case proceeds as to those claims. USG has agreed to defend and indemnify L&W Supply Corporation in connection with this matter.

Beginning in the third quarter of 2013, class action lawsuits making similar allegations with regard to Canada were filed in Quebec, Ontario and British Columbia courts on behalf of purchasers of wallboard in Canada and naming USG Corporation, United States Gypsum Company, CGC Inc., and other wallboard manufacturers as defendants.

We believe that the cost, if any, of resolving the homebuilders’ lawsuit and Canadian class action litigation will not have a material effect on our results of operations, financial position or cash flows.

ENVIRONMENTAL LITIGATION

We have been notified by state and federal environmental protection agencies of possible involvement as one of numerous “potentially responsible parties” in a number of Superfund sites in the United States. As a potentially responsible party, we may be responsible to pay for some part of the cleanup of hazardous waste at those sites. In most of these sites, our involvement is expected to be minimal. In addition, we are involved in environmental cleanups of other property that we own or owned. As of December 31, 2016 and December 31, 2015, we had an accrual of $18 million and $16 million, respectively, for our probable and reasonably estimable liability in connection with these matters. Our accruals take into account all known or estimated undiscounted costs associated with these sites, including site investigations and feasibility costs, site cleanup and remediation, certain legal costs, and fines and penalties, if any. However, we continue to review these accruals as additional information becomes available and revise them as appropriate. Based on the information known to us, we believe these environmental matters will not have a material effect on our results of operations, financial position or cash flows.

OTHER LITIGATION

We are named as defendants in other claims and lawsuits arising from our operations, including lawsuits or claims arising from commercial disputes, product performance, product liabilities and worksite or vehicular accidents. We believe that we have properly accrued for our probable liability in connection with these claims and suits, taking into account the probability of liability, whether our exposure can be reasonably estimated and, if so, our estimate of our liability or the range of our liability. We do not expect these or any other litigation matters involving USG to have a material effect on our results of operations, financial position or cash flows.

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Quarterly Financial Data (unaudited)

12 Months Ended

Dec. 31, 2016

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data (unaudited)

Quarterly Financial Data (unaudited)

	Quarter
(millions, except per-share data)	First		Second		Third		Fourth
2016
Net sales	$	747	$	769	$	767	$	734
Gross profit	181		193		181		150
Operating profit	116		122		97		59
Income from continuing operations	60		67		56		28
Income from discontinued operations, net of tax	7		7		6		—
Gain on sale of discontinued operations, net of tax	—		—		—		279
Net income	67		74		62		307
Income per average common share:
Basic (a)	0.46		0.50		0.43		2.10
Diluted (a)	0.46		0.50		0.42		2.07
2015
Net sales	$	708	$	740	$	747	$	718
Gross profit	146		170		169		165
Operating profit	72		95		94		94
Income from continuing operations(b)	20		69		68		819
Income (loss) from discontinued operations, net of tax	4		10		8		(7		)
Net income (b)	24		79		76		812
Income per average common share:
Basic (a)	0.16		0.54		0.52		5.58
Diluted (a)	0.16		0.54		0.52		5.51

(a) The sum of the four quarters is not necessarily the same as the total for the year.

(b) Income from continuing operations and net income attributable to USG for the fourth quarter of 2015 included a reversal of an income tax valuation allowance of $731 million.

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Subsequent Event

12 Months Ended

Dec. 31, 2016

Statement of Stockholders' Equity [Abstract]

Subsequent Events [Text Block]

Subsequent Event

On January 31, 2017, the Board of Directors approved a share repurchase program in which we may purchase up to $250 million of our common stock. Under the program, we may repurchase shares from time to time in open market transactions or in privately-negotiated transactions in accordance with applicable securities laws. We may discontinue the program at any time. The timing and the amount of any repurchases will be determined based on market conditions and other factors. Share repurchases will be funded with available cash on hand. Through date of filing, repurchases have been immaterial.

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Schedule II - Valuation And Qualifying Accounts

12 Months Ended

Dec. 31, 2016

Valuation and Qualifying Accounts [Abstract]

Schedule II - Valuation And Qualifying Accounts

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

			Additions
(millions)	Balance at beginning of period		Charged to costs and expenses			Charged to other accounts		Deductions (a)			Balance at end of period
Year ended December 31, 2016:
Doubtful accounts	$	7	$	1		$	—	$	(3	)	$	5
Cash discounts	2		34			—		(33		)	3
Income tax valuation allowance	70		—			—		(19		)	51
Year ended December 31, 2015:
Doubtful accounts	14		(6		)	—		(1		)	7
Cash discounts	1		37			—		(36		)	2
Income tax valuation allowance	1,023		—			—		(953		)	70
Year ended December 31, 2014:
Doubtful accounts	6		8			—		—			14
Cash discounts	1		36			—		(36		)	1
Income tax valuation allowance	995		1			112		(85		)	1,023

(a) Reflects receivables written off as related to doubtful accounts, discounts allowed as related to cash discounts and reductions in the income tax valuation allowance.

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Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In November 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which will require restricted cash to be presented with cash and cash equivalents in the statement of cash flows. The standard will be effective for us in the first quarter of 2018 and will be applied using the retrospective approach. As our restricted cash amounts are immaterial, we do not expect the adoption of ASU 2016-18 will have a significant impact to our consolidated financial statements or disclosures.

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory,” which eliminates the exception for all intra-entity transfers, except for intra-entity transfers of inventory. The significant components of the standard are 1) current and deferred income tax consequences of intra-entity asset transfers (other than inventory) will be reflected when the transaction occurs and 2) the impact of the sale, if any, is reflected in the effective tax rate for the period in which the transaction occurs. The standard will be effective for us in the first quarter of 2018 and we will adopt the new standard using a modified retrospective approach with a cumulative-effect adjustment to retained earnings. We do not expect the adoption of ASU 2016-16 will have a significant impact to our consolidated financial statements or disclosures.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The standard will be effective for us in the first quarter of 2018, there will be no impact to our consolidated cash flow statement and disclosures as we are already compliant with the provisions of the standard.

In March 2016, the FASB issued ASU 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplifies certain aspects of accounting for employee share-based payments. The standard will be effective for us in the first quarter of 2017 and will be applied in part prospectively and in part using a modified retrospective transition approach. The components of this standard that will impact our financial statements are as follows:

• Excess tax benefits and deficiencies related to stock compensation will be prospectively recognized in income tax expense instead of in equity when the awards vest or are settled. For the twelve months ended December 31, 2016 and 2015, we recorded a reduction to equity of $11 million and $0 million, respectively. Under the new standard, $9 million of tax expense and $4 million of income tax benefit would have been recognized in 2016 and 2015, respectively.

• Excess tax benefits that were previously unrecognized because the related tax deduction had not been realized through a reduction in taxes payable will be recorded on a modified retrospective basis. If we had early adopted this standard, we would have recorded a cumulative-effect adjustment to opening retained earnings of $25 million on our December 31, 2016 consolidated balance sheet.

• Upon adoption, we will elect an accounting policy to recognize forfeitures as they occur and will record a cumulative effect change to retained earnings in accordance with the modified retrospective approach. If we had early adopted this standard, we would have recorded an immaterial cumulative effect adjustment to opening retained earnings on our December 31, 2016 balance sheet.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which supersedes existing lease guidance to require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. The standard will be effective for us in the first quarter of 2019, and we will adopt the new standard using the modified retrospective approach. While we continue to evaluate the impact of the new standard, we believe the standard will require us to implement a new lease accounting system and related policies and processes. Further, we anticipate the adoption of ASU 2016-02 will have a significant impact to our consolidated balance sheets, consolidated statements of income and disclosures, but we are unable to quantify the financial statement impact at this time.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments-Overall (Topic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” which requires that most equity instruments be measured at fair value, with subsequent changes in fair value recognized in net income. The pronouncement also impacts the financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The ASU does not apply to equity method investments or investments in consolidated subsidiaries. The new standard will be effective for us for the first quarter of 2018, with early adoption permitted and amendments to be applied as a cumulative-effect adjustment to the balance sheet in the year of adoption. We do not expect the adoption of ASU 2016-01 will have a significant impact to our consolidated financial statements or disclosures.

In July 2015, the FASB issued ASU 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory", which changes the measurement principle for inventory from the lower of cost or market to the lower of cost or net realizable value for entities that measure inventory using the first-in, first-out (FIFO) or average cost method. The ASU defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The standard, which we will adopt using the prospective approach, is effective for us beginning January 1, 2017. ASU 2015-11 will not have an impact to our consolidated financial statements or disclosures.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Subsequently, the FASB has issued various ASUs to provide further clarification around certain aspects of ASC 606. This standard will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and we will adopt the standard on January 1, 2018. We are in the process of completing the analysis of the standard's impact on our sales to customers. While we have not completed our analysis of the impact of the provisions of this standard, we do not expect a significant impact to our financial statements or disclosure.

Nature of Operations

Nature of Operations

USG, through its subsidiaries, is a leading manufacturer of building materials. We produce a wide range of products for use in new residential, new nonresidential, and residential and nonresidential repair and remodel construction as well as products used in certain industrial processes. Our products are distributed through building materials dealers, home improvement centers and other retailers, specialty wallboard distributors, and contractors.

Segments

Segments

Our segments are structured around our key products and business units: Gypsum, Ceilings and UBBP.

Our Gypsum reportable segment is an aggregation of the operating segments of the gypsum businesses in the United States, Canada, Mexico, and Latin America, our mining operation in Little Narrows, Nova Scotia, Canada, which we indefinitely idled in 2016, and our shipping company, which we exited in 2015. Gypsum manufactures products throughout the United States, Canada, and Mexico. These products include USG Sheetrock^® brand gypsum wallboard and related products including Sheetrock^® brand joint compound, Durock^® brand cement board, Levelrock^® brand of poured gypsum flooring, Fiberock^® brand backerboard, and Securock^® brand glass mat sheathing used for building exteriors and gypsum fiber and glass mat panels used as roof cover board. Ceilings manufactures ceiling tile in the United States and ceiling grid in the United States, Canada and through February 27, 2014, the Asia-Pacific region. UBBP manufactures, distributes and sells certain building products, mines raw gypsum and sells natural and synthetic gypsum throughout Asia, Australasia and the Middle East.

Consolidation and Presentation

Consolidation and Presentation

Our consolidated financial statements include the accounts of USG Corporation, its majority-owned subsidiaries and through February 27, 2014, variable interest entities. Entities in which we have more than a 20% but not more than 50% ownership interest are accounted for using the equity method of accounting. All intercompany balances and transactions are eliminated in consolidation.

On August 29, 2016, we announced the signing of a definitive agreement to sell L&W Supply Corporation, or L&W, our distribution business, to American Builders & Contractors Supply Co., Inc., or ABC Supply, at which time L&W met the criteria to be classified as held for sale and presented as a discontinued operation. We completed the sale on October 31, 2016.

L&W's results of operations have been reclassified to "Income from discontinued operations, net of tax" in our consolidated statements of income for all periods presented. The assets and liabilities of L&W have been reclassified to "Assets related to discontinued operations" and "Liabilities related to discontinued operations", respectively, in our consolidated balance sheet as of December 31, 2015. The cash flows associated with L&W have been reclassified to "Net cash provided by operating activities of discontinued operations" and "Net cash provided by (used for) investing activities of discontinued operations" for all periods presented. The results of L&W, which previously consisted of our Distribution segment, have been excluded from our segment results. Additionally, results of our Gypsum and Ceilings segments have been revised as a result of L&W's classification as a discontinued operation to reflect only the sales of USG products from Gypsum and Ceilings to L&W that were sold outside the consolidated group prior to October 31, 2016. All L&W sales subsequent to the close of the transaction are included in net sales on our consolidated statement of income. See Note 3 for further discussion.

Our investments with Boral in the 50/50 joint ventures, UBBP, commenced on February 27, 2014, and as a result, our share of ten months of the results of UBBP were recorded in our accompanying consolidated statement of income for the year ended December 31, 2014. See Note 4 for further description of our investments in UBBP.

Use of Estimates

Use of Estimates

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from these estimates.

Revenue Recognition

Revenue Recognition

We recognize revenue when shipment is received by the customer. We enter into agreements with customers to offer rebates, generally based on achievement of specified sales levels and various marketing allowances that are common industry practice. Estimated reductions to revenue for customer programs and incentive offerings, including promotions and other volume–based incentives, are recorded in the period in which the sale occurs. Provisions for early payment discounts are accrued in the same period in which the related sales are recorded.

Shipping and Handling Costs

Shipping and Handling Costs

Shipping and handling costs billed to customers are included in net sales and the related costs are presented in cost of products sold.

Advertising

Advertising

Advertising expenses consist of media advertising and related production costs and sponsorships. We charge advertising expenses to earnings as incurred. These expenses amounted to $12 million, $16 million and $22 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Research and Development

Research and Development

We charge research and development expenditures to earnings as incurred. These expenditures amounted to $24 million, $23 million and $23 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Litigation Costs

Litigation Costs

We expense litigation costs as incurred.

Income Taxes

Income Taxes

We record income tax expense (benefit) under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or paid. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the change is enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on all available evidence, it is more likely than not that such assets will not be realized. The need to establish valuation allowances for deferred tax assets is assessed at each reporting date. In assessing the requirement for, and amount of, a valuation allowance in accordance with the more-likely-than-not standard, we give appropriate consideration to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with operating loss and tax credit carryforwards not expiring unused and tax planning strategies.

A history of cumulative losses for a certain threshold period is a significant form of negative evidence used in the assessment, and we are required to have a policy regarding the duration of the threshold period. We believe the historical cyclical nature of our operations show economic cycles ranging from 7 to 10 years with demand troughs historically showing recovery over four years. Accordingly, we have a policy of four years as our threshold period for cumulative losses.

Inventory Valuation

Inventory Valuation

All of our inventories are stated at the lower of cost or market and are valued under the average cost method. Our inventories include materials, labor and applicable factory overhead costs. Depreciation associated with manufacturing assets is excluded from inventory cost but is included in cost of products sold.

Earnings per Share

Earnings per Share

Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding plus the dilutive effect, if any, of market share units, or MSUs, restricted stock units, or RSUs, performance shares, the potential exercise of outstanding stock options and the deferred shares associated with our deferred compensation program for non-employee directors.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments, primarily money market funds, with maturities of three months or less at the time of purchase.

Marketable Securities

Marketable Securities

Marketable securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported in accumulated other comprehensive loss, or AOCI. If it is deemed that marketable securities have unrealized losses that are other than temporary, these losses will be recorded in earnings immediately. Situations in which losses may be considered other than temporary include when we have decided to sell a security or when it is more likely than not that we will be required to sell the security before we recover its amortized cost basis. Cost basis for securities sold are determined on a first-in-first-out basis.

Receivables

Receivables

Receivables are recorded at net realizable value, which includes allowances for cash discounts and doubtful accounts. We review the collectability of receivables on an ongoing basis and reserve for receivables determined to be uncollectible. This determination is based on the delinquency of the account, the financial condition of the customer and our collection experience.

We include short-term financing receivables in receivables and long-term financing and loan receivables in other assets on our consolidated balance sheets. Financing and loan receivables are recorded at net realizable value which includes an allowance for credit losses. We review the collectability of financing and loan receivables on an ongoing basis and reserve for financing and loan receivables determined to be uncollectible. This determination is based on the delinquency of the account and the financial condition of the other party. As of December 31, 2016, the allowance for credit losses was immaterial.

Investments in Unconsolidated Joint Ventures

Investments in Unconsolidated Joint Ventures

The equity method of accounting is used for investments in joint ventures that we do not consolidate, but over which we have the ability to exercise significant influence. These investments 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. If the underlying net assets in our investments are denominated in a foreign currency, we adjust the value of our investment for translation gains or losses. Profits resulting from sales with equity method investees are eliminated until realized by the investee.

At least quarterly, we review the probability of the earnout payment to Boral. At December 31, 2016, we concluded that it is currently not probable that the five-year performance target will be achieved. If our conclusion on the probability of achievement were to change, we will record a liability representing the present value of the second earnout payment with a corresponding increase to our investment.

Losses in the value of an equity method investment that are other than temporary, are recognized when the current fair value of the investment is less than its carrying value. We review our investments in equity method investments for impairment whenever factors indicate an other than temporary loss in value. If we conclude a loss in value is other than temporary, an impairment charge is recognized for the difference between the investment’s carrying value and its estimated fair value.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment is recorded at cost. We record depreciation of property, plant and equipment on a straight-line basis over the expected useful lives of the assets. We have determined estimated useful lives to be 50 years for buildings and improvements, a range of 10 to 25 years for machinery and equipment, and a range of 5 to 7 years for computer software and systems development costs. Leasehold improvements are capitalized and amortized over the shorter of the remaining lease term or remaining economic useful life. We compute depletion on a basis calculated to spread the cost of gypsum and other applicable resources over the estimated quantities of material recoverable.

We capitalize interest during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying assets and is depreciated over the useful lives of those assets. We recorded $1 million of capitalized interest in the year ended December 31, 2016, and $3 million in the years ended December 31, 2015 and 2014. Facility start-up costs that cannot be capitalized are expensed as incurred and recorded in cost of products sold.

Property, plant and equipment is reviewed for impairment when indicators of a potential impairment are present by comparing the carrying values of the assets with their estimated future undiscounted cash flows. If we determine an impairment exists, the asset is written down to estimated fair value. 

Asset Retirement Obligations

Asset Retirement Obligations

Our asset retirement obligations include reclamation requirements as regulated by government authorities related principally to assets such as our mines, quarries, landfills, ponds and wells. The accounting for asset retirement obligations requires estimates by management about the timing of asset retirements, the cost of retirement obligations, discount and inflation rates used in determining fair values and the methods of remediation associated with our asset retirement obligations. We generally use assumptions and estimates that reflect the most likely remediation method on a site-by-site basis. Our estimated liability for asset retirement obligations is revised annually, and whenever events or changes in circumstances indicate that a revision to the estimate is necessary.

In instances where a decrease in the asset retirement obligation is in excess of the related remaining net book value of the asset retirement costs, the excess is recorded to the consolidated statement of income as a reduction in cost of products sold. Asset retirement obligations are included in other liabilities on the consolidated balance sheets.

Share-Based Compensation

Share-Based Compensation

We award share-based compensation to employees in the form of MSUs, performance shares and RSUs and to non-employee directors in the form of shares of our common stock. All grants under share-based payment programs are accounted for at fair value at the date of grant. We recognize expense on all share-based awards to employees expected to vest over the service period, which is the shorter of the period until the employees’ retirement eligibility dates or the service period of the award. Expense is generally reduced for estimated forfeitures, which are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Derivative Instruments

Derivative Instruments

We use derivative instruments to manage selected commodity price and foreign currency exposures. We do not use derivative instruments for speculative trading purposes, and we typically do not hedge beyond five years. All derivative instruments are recorded on the balance sheet at fair value. For derivatives designated as fair value hedges, the changes in the fair values of both the derivative instrument and the hedged item are recognized in earnings in the current period. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is recorded to AOCI, and is reclassified to earnings when the underlying forecasted transaction affects earnings. The ineffective portion of changes in the fair value of the derivative is reported in cost of products sold in the current period. We periodically reassess the probability of the underlying forecasted transaction occurring. For derivatives designated as net investment hedges, we record changes in fair value to AOCI. For derivatives not designated as hedging instruments, all changes in fair value are recorded to earnings in the current period.

We use swaps to hedge a significant portion of our anticipated purchases of natural gas to be used in our manufacturing operations. Generally, we hedge the cost of a majority of our anticipated purchases of natural gas over the next 12 months. However, we review our positions regularly and make adjustments as market conditions warrant. The majority of contracts currently in place are designated as cash flow hedges and the remainder are not designated as hedging instruments.

We have operations outside of the United States and use forward contracts to hedge the risk of changes in cash flows resulting from selected forecasted intercompany and third-party sales or purchases, as well as intercompany loans, denominated in non-U.S. currencies, or to hedge the risk of selected changes in our net investment in foreign subsidiaries. These contracts are designated as either cash flow or net investment hedges or are not designated as hedging instruments.

Foreign Currency Translation

Foreign Currency Translation

We translate foreign-currency-denominated assets and liabilities into U.S. Dollars at the exchange rates existing as of the respective balance sheet dates. We translate income and expense items at the average exchange rates during the respective periods. We record translation adjustments resulting from fluctuations in exchange rates to AOCI on our consolidated balance sheets and our share of the translation adjustments recorded by our equity method investments to AOCI.

We record transaction gains and losses to earnings. In 2016, the total transaction gain was $3 million. In 2015 and 2014, the total transaction loss was $7 million and $6 million, respectively.

Fair Value Measurements

Fair Value Measurements

Certain assets and liabilities are required to be recorded at fair value. The estimated fair values of those assets and liabilities have been determined using market information and valuation methodologies. Changes in assumptions or estimation methods could affect the fair value estimates. However, we do not believe any such changes would have a material impact on our financial condition, results of operations or cash flows. There are three levels of inputs that may be used to measure fair value:

• Level 1 – Quoted prices for identical assets and liabilities in active markets;

• Level 2 – Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

• Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Certain assets and liabilities are measured at fair value on a nonrecurring basis rather than on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment or when a new liability is being established that requires fair value measurement.

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Discontinued Operations (Tables)

12 Months Ended

Dec. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Summarized financial information of discontinued operations

The summarized financial information related to L&W that has been excluded from continuing operations and reported as a discontinued operation is as follows:

(millions)	For the year ended December 31,
	2016(a)		2015		2014
Net sales	$	1,252	$	1,428	$	1,345
Cost of products sold	1,196		1,387		1,316
Gross profit	56		41		29
Selling and administrative expenses (b)	22		15		16
Operating profit	34		26		13
Income tax expense	12		11		—
Net income from discontinued operations (c)	$	22	$	15	$	13
Gain on sale of discontinued operations	$	279	$	—	$	—

(a) Operating results for 2016 are presented for the ten months ended October 31, 2016.

(b) The ten month period ended October 31, 2016 includes transaction costs of $8 million.

(c) Years ended December 31, 2016 and 2014 include net income from discontinued operations from our European business, which were sold in 2012.

The assets and liabilities related to discontinued operations as of December 31, 2015 are as follows:

(millions)	December 31, 2015
Accounts receivable, net	207
Inventories	95
Other current assets	4
Property, plant and equipment, net (a)	17
Intangible assets (a)	31
Other assets (a)	3
Total assets related to discontinued operations	$	357
Accounts payable	$	51
Accrued expenses	29
Other liabilities (a)	20
Total liabilities related to discontinued operations	$	100

(a) As of December 31, 2015, these balances are reflected as long-term in our consolidated balance sheet.

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Equity Method Investments (Tables)

12 Months Ended

Dec. 31, 2016

Equity Method Investments and Joint Ventures [Abstract]

Schedule of equity method investments

Equity method investments were as follows:

	December 31, 2016			December 31, 2015
(millions)	Carrying Value		Ownership Percentage	Carrying Value		Ownership Percentage
USG Boral Building Products	$	621	50%	$	675	50%
Other equity method investments	7		33% - 50%	$	7	33% - 50%
Total equity method investments	$	628		$	682

Schedule of translation gains or losses recorded in other comprehensive income

Translation losses recorded in other comprehensive income were as follows:

(millions)	2016			2015			2014
Translation loss	$	(30	)	$	(23	)	$	(34	)

Statement of operations from equity method investments

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

Statement of Income

	For the year ended December 31,
(millions)	2016		2015		2014 (a)
USG Boral Building Products:
Net sales	$	1,052	$	1,003	$	927
Gross profit	337		278		251
Operating profit(b)	133		124		95
Net income before taxes	142		132		101
Net income	95		101		72
Net income attributable to USG Boral Building Products	99		96		67
USG share of income from USG Boral Building Products(c)	49		48		33
Other equity method investments(d):
USG share of income from other investments accounted for using the equity method	—		2		2
Total income from equity method investments	49		50		35

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

(b) Year ended December 31, 2016 includes long-lived asset impairment charges of $8 million for China and of $14 million for Oman.

(c) Year ended December 31, 2016 includes long-lived asset impairment charges of $4 million for China and of $4 million for Oman.

(d) Amounts represent our share of income or loss from all equity method investments, other than UBBP.

Balance Sheet from equity method investments

Balance Sheet

(millions)	December 31, 2016		December 31, 2015
USG Boral Building Products:
Current assets	$	389	$	368
Non-current assets	903		935
Current liabilities(a)	211		197
Long-term debt	37		40
Other non-current liabilities	17		17
Shareholders' equity(b)	1,027		1,049

(a) Includes the current portion of long-term debt of $15 million and $16 million as of December 31, 2016 and 2015, respectively.

(b) Shareholders' equity includes $50 million and $60 million related to non-controlling interests as of December 31, 2016 and 2015, respectively.

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Marketable Securities (Tables)

12 Months Ended

Dec. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Schedule of investments in marketable securities

Our investments in marketable securities as of December 31, 2016 and 2015 consisted of the following:

	2016				2015
(millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Corporate debt securities	$	69	$	69	$	134	$	134
U.S. government and agency debt securities	14		14		57		57
Asset-backed debt securities	2		2		21		21
Certificates of deposit	6		6		15		15
Municipal debt securities	—		—		3		3
Total marketable securities	$	91	$	91	$	230	$	230

Schedule of contractual maturities of marketable securities

Contractual maturities of marketable securities as of December 31, 2016 were as follows:

(millions)	Amortized Cost		Fair Value
Due in 1 year or less	$	62	$	62
Due in 1-5 years	29		29
Total marketable securities	$	91	$	91

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Debt (Tables)

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Schedule of total debt

The indentures governing the notes contain events of default, covenants and restrictions that are customary for similar transactions, including a limitation on our ability and the ability of certain of our subsidiaries to create or incur secured indebtedness.

Interest rate (a)	7.75%	5.500%
Principal net of discount (in millions) (b)	$500	$350
Maturity	January 15, 2018	March 1, 2025
Call date	Any time (c)	March 1, 2020 (d)
Mandatory redemption	at 101% plus accrued and unpaid interest in the event of a change in control and a related downgrade below investment grade by both Moody’s Investors Service and Standard & Poor’s Global Ratings	at 101% plus accrued and unpaid interest in the event of a change in control

(a) The 7.75% senior notes currently have an effective interest rate of 8.25%. The rate is subject to an adjustment of up to 2% if the debt rating is downgraded or subsequently upgraded by Moody's Investors Service and Standard & Poor's Global Ratings.

(b) Principal amounts exclude unamortized debt issuance costs.

(c) Callable at any time at a price equal to the greater of (1) 100% of the principal and (2) the sum of the present value of the remaining scheduled payments of principal and interest discounted to the redemption date on a semi-annual basis at the applicable U.S. Treasury rate plus a spread (as outlined in the applicable indenture), plus any accrued and unpaid interest on the principal amount being called.

(d) Callable at any time prior to the call date at a price equal to 100% of the principal plus a premium (as outlined in the respective indentures), plus any accrued and unpaid interest on the principal amount being called. Callable after the call date at stated redemption prices (as outlined in the applicable indenture), plus any accrued and unpaid interest on the principal amount being called.

Total debt as of December 31 consisted of the following:

(millions)	2016		2015
5.5% senior notes due 2025	$	350	$	350
5.875% senior notes due 2021	—		350
6.3% senior notes due 2016	—		500
7.75% senior notes due 2018	500		500
7.875% senior notes due 2020 (net of discount: 2016 - $0; 2015- $1)	—		249
Industrial revenue bonds (due 2028 through 2034)	239		239
Total	$	1,089	$	2,188
Less unamortized debt issuance costs	$	6	$	13
Total	$	1,083	$	2,175

Schedule of amounts of total debt outstanding maturing in each of next five years and beyond

As of December 31, 2016, the amounts of total debt outstanding maturing in each of the next five years and beyond were as follows:

(millions)	2017		2018		2019		2020		2021		After 2021
Debt maturities (principal amounts)	$	—	$	500	$	—	$	—	$	—	$	589

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Derivative Instruments (Tables)

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of pretax effects of derivative instruments

The following are the pre-tax effects of derivative instruments on the consolidated statements of income and the consolidated statements of comprehensive income (loss) for the years ended December 31, 2016, 2015 and 2014:

	Amount of Gain or (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives (Effective Portion)									Location of Gain or (Loss)  Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
(millions)	2016			2015			2014				2016			2015			2014
Derivatives Designated as Hedging Instruments
Commodity contracts	$	6		$	(14	)	$	(19	)	Cost of products sold	$	(15	)	$	(15	)	$	2
Foreign exchange contracts	(3		)	12			4			Cost of products sold	5			7			2
Foreign exchange contracts	—			1			—			Income and gain from the sale of equity method investment to related party	—			1			—
Total	$	3		$	(1	)	$	(15	)		$	(10	)	$	(7	)	$	4

	Location of Gain or (Loss)  Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives
(millions)		2016		2015			2014
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Cost of products sold	$	1	$	(3	)	$	(4	)
Foreign exchange contracts	Other (income) expense, net	—		2			—
Total		$	1	$	(1	)	$	(4	)

Schedule of fair values of derivative instruments

The following are the fair values of derivative instruments on the consolidated balance sheets as of December 31, 2016 and 2015:

	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value
(millions)		12/31/16		12/31/15			12/31/16		12/31/15
Derivatives Designated as Hedging Instruments
Commodity contracts	Other current assets	$	8	$	1	Accrued expenses	$	4	$	15
Commodity contracts	Other assets	3		—		Other liabilities	5		5
Foreign exchange contracts	Other current assets	1		8		Accrued expenses	1		—
Total derivatives in hedging relationships		$	12	$	9		$	10	$	20

	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value
(millions)		12/31/16		12/31/15			12/31/16		12/31/15
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Other current assets	$	1	$	—	Accrued expenses	$	—	$	2
Commodity contracts	Other assets	—		—		Other liabilities	—		—
Total derivatives not designated as hedging instruments		$	1	$	—		$	—	$	2
Total derivatives	Total assets	$	13	$	9	Total liabilities	$	10	$	22

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Schedule of assets and liabilities measured at fair value on a recurring basis

Our assets and liabilities measured at fair value on a recurring basis were as follows:

	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)				Total
(millions)	12/31/16		12/31/15		12/31/16			12/31/15			12/31/16		12/31/15		12/31/16			12/31/15
Cash equivalents	$	38	$	223	$	34		$	25		$	—	$	—	$	72		$	248
Equity mutual funds	5		4		—			—			—		—		5			4
Marketable securities:
Corporate debt securities	—		—		69			134			—		—		69			134
U.S. government and agency debt securities	—		—		14			57			—		—		14			57
Asset-backed debt securities	—		—		2			21			—		—		2			21
Certificates of deposit	—		—		6			15			—		—		6			15
Municipal debt securities	—		—		—			3			—		—		—			3
Derivative assets	—		—		13			9			—		—		13			9
Derivative liabilities	—		—		(10		)	(22		)	—		—		(10		)	(22		)

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Employee Retirement Plans (Tables)

12 Months Ended

Dec. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Summary of components of net pension and postretirement benefits costs

The components of net pension and postretirement benefit costs are summarized in the following table:

(millions)	2016			2015			2014
Pension Benefits:
Service cost of benefits earned	$	45		$	49		$	37
Interest cost on projected benefit obligation	66			66			65
Expected return on plan assets	(89		)	(83		)	(79		)
Settlement (a)	35			1			13
Net amortization	22			39			24
Net pension cost (b)	$	79		$	72		$	60
Postretirement Benefits:
Service cost of benefits earned	$	2		$	2		$	3
Interest cost on projected benefit obligation	6			6			7
Curtailment	(20		)	—			—
Net amortization	(27		)	(31		)	(35		)
Net postretirement benefit (c)	$	(39	)	$	(23	)	$	(25	)

(a) In 2016, $26 million of the settlement charge reflects the increase in lump sum benefits paid largely driven by the sale of L&W and $9 million reflected payments from our supplemental plan. In 2014, the settlement charge related to the elimination of the benefit obligation of the UK pension plan due to the purchase of annuities.

Schedule of accumulated benefit obligation for the defined benefit pension plans

	As of December 31,
(millions)	2016			2015
Selected information for pension plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligation	$	(39	)	$	(1,182	)
Fair value of plan assets	2			1,097
Selected information for pension plans with benefit obligations in excess of plan assets:
Benefit obligation	$	(1,384	)	$	(1,365	)
Fair value of plan assets	1,205			1,099

Summary of projected benefit obligations, plan assets and funded status

The following table summarizes projected benefit obligations, plan assets and funded status as of December 31:

	Pension						Postretirement
(millions)	2016			2015			2016			2015
Change in Benefit Obligation:
Benefit obligation as of January 1	$	1,564		$	1,686		$	144		$	167
Service cost	45			49			2			2
Interest cost	66			66			6			6
Settlements	(123		)	(4		)	—			—
Curtailments	(37		)	—			(7		)	—
Participant contributions	11			11			—			3
Benefits paid	(33		)	(86		)	(7		)	(11		)
Actuarial (gain) loss	112			(119		)	(5		)	(14		)
Foreign currency translation	5			(39		)	2			(9		)
Benefit obligation as of December 31	$	1,610		$	1,564		$	135		$	144
Change in Plan Assets:
Fair value as of January 1	$	1,301		$	1,340		$	—		$	—
Actual return on plan assets	107			17			—			—
Employer contributions	167			61			7			8
Participant contributions	11			11			—			3
Benefits paid	(33		)	(86		)	(7		)	(11		)
Settlements	(123		)	(4		)	—			—
Foreign currency translation	5			(38		)	—			—
Fair value as of December 31	$	1,435		$	1,301		$	—		$	—
Funded status	$	(175	)	$	(263	)	$	(135	)	$	(144	)
Components on the Consolidated Balance Sheets:
Noncurrent assets	$	4		$	3		$	—		$	—
Current liabilities	(16		)	(9		)	(8		)	(9		)
Noncurrent liabilities	(163		)	(257		)	(127		)	(135		)
Net liability as of December 31	$	(175	)	$	(263	)	$	(135	)	$	(144	)
Pretax Components in AOCI:
Net actuarial loss	$	388		$	387		$	—		$	7
Prior service credit	(1		)	(1		)	(65		)	(108		)
Total as of December 31	$	387		$	386		$	(65	)	$	(101	)

Schedule of assumptions used in the accounting for the plans

The following tables reflect the assumptions used in the accounting for our plans:

	Pension				Postretirement
	2016		2015		2016		2015
Weighted average assumptions used to determine benefit obligations as of December 31:
Discount rate	4.02	%	4.43	%	3.90	%	4.24	%
Compensation increase rate	3.55	%	3.55	%	N/A		N/A
Weighted average assumptions used to determine net cost for years ended December 31:
Discount rate	4.43	%	4.10	%	4.24	%	3.70	%
Expected return on plan assets	6.66	%	6.70	%	N/A		N/A
Compensation increase rate	3.55	%	3.50	%	N/A		N/A

Schedule of effect of one percentage point change in the assumed health care cost trend rates

A one percentage point change in the assumed health care cost trend rates would have the following effects on our Canadian plans:

(millions)	One-Percentage- Point Increase		One-Percentage- Point Decrease
Effect on total service and interest cost	$	1	$	—
Effect on postretirement benefit obligation	11		(8		)

Schedule of aggregate target asset allocation on a weighted average basis for all the plans and the acceptable ranges around the targets

The following table shows the aggregate target asset allocation on a weighted average basis for all the plans and the acceptable ranges around the targets as of December 31, 2016.

		Investment Policy
		Target		Range
Asset Categories:	Asset Category Description
Equity	Institutional commingled/pooled equity funds, equity mutual funds and direct holdings of the common stock of U.S. and non-U.S. companies; equity funds and direct holdings are invested in companies with a range of market capitalizations	39	%	35%-43%
Fixed income	U.S. Treasury securities, non-U.S. government debt securities such as Canadian federal bonds, corporate bonds of companies from diversified industries and mortgage-backed securities	50	%	46%-54%
Limited partnerships	Investments in funds that follow any of several different strategies, including investing in distressed debt, energy development, infrastructure, and hedge funds. These investments use strategies with returns normally expected to have a reduced correlation to the return of equities as compared to other asset classes and often provide a current income component that is a meaningful portion of the investment’s total return.	5	%	2%-8%
Other real assets	Primarily investments in large core, private real estate funds that directly own a diverse portfolio of properties located in the United States. It also includes an allocation to funds investing in equities of real estate and infrastructure companies	6	%	3%-10%
Cash equivalents and short-term investments	Primarily held in short-term investment funds or registered money market funds with daily liquidity	—	%	0%-5%
Total		100	%

Schedule of fair values by hierarchy of inputs

The fair values by hierarchy of inputs as of December 31 were as follows:

	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
(millions)	2016		2015		2016		2015		2016		2015		2016			2015
Asset Categories:
Equity:
Common and preferred stock	$	66	$	55	$	—	$	—	$	—	$	—	$	66		$	55
Commingled/pooled/mutual funds (a)	—		54		490		448		—		—		490			502
Total equity	66		109		490		448		—		—		556			557
Fixed income:
U.S. government and agency debt securities	—		—		194		177		—		—		194			177
Non-U.S. government and agency debt securities	—		—		54		32		—		—		54			32
Investment-grade debt securities	—		—		197		199		—		—		197			199
High-yield debt securities	—		—		53		36		—		—		53			36
Commingled/pooled funds (a)	—		—		165		129		—		—		165			129
Mortgaged backed securities	—		—		3		—		—		—		3			—
Other	—		—		10		3		1		1		11			4
Total fixed income	—		—		676		576		1		1		677			577
Limited partnerships	—		—		—		—		103		106		103			106
Other real estate assets	—		—		16		15		38		37		54			52
Cash equivalents and short-term investments	—		—		11		10		—		—		11			10
Total	$	66	$	109	$	1,193	$	1,049	$	142	$	144	$	1,401		$	1,302
Cash on hand													—			—
Receivables													35			9
Accounts payable													(1		)	(10		)
Total													$	1,435		$	1,301

(a) Certain investments in commingled/pooled equity funds have been classified as Level 2 in 2016 and 2015 because observable quoted prices for these institutional funds are not available.

Reconciliation of the change in the fair value measurement of the defined benefit plans’ consolidated assets

A reconciliation of the change in the fair value measurement of the defined benefit plans’ consolidated assets using significant unobservable inputs (Level 3) between January 1, 2015 and December 31, 2016 is as follows:

(millions)	Fixed Income		Other Real Estate Assets			Limited Partnerships			Total
Balance as of January 1, 2015	$	1	$	35		$	103		$	139
Realized losses	—		(1		)	—			(1		)
Unrealized gains	—		5			1			6
Purchases, sales and settlements:
Purchases	—		—			2			2
Sales	—		(2		)	—			(2		)
Settlements	—		—			—			—
Net transfers into (out of) Level 3	—		—			—			—
Balance as of December 31, 2015	$	1	$	37		$	106		$	144
Realized gains	—		1			5			6
Unrealized gains (losses)	—		2			(3		)	(1		)
Purchases, sales and settlements:
Purchases	—		—			1			1
Sales	—		(2		)	(6		)	(8		)
Settlements	—		—			—			—
Net transfers into (out of) Level 3	—		—			—			—
Balance as of December 31, 2016	$	1	$	38		$	103		$	142

Schedule of expected benefit payments

Total benefit payments we expect to make to participants, which include payments funded from USG’s assets as well as payments from our pension plans' assets, are as follows (in millions):

Years ended December 31	Pension Benefits		Postretirement Benefits
2017(a)	$	165	$	8
2018	100		8
2019	100		9
2020	110		7
2021	114		7
2022 - 2026	580		39

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Share-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Weighted average grant date fair values of MSUs

We granted MSUs with the following weighted average grant date fair values:

	2016		2015		2014
Weighted average grant date fair values	$	19.59	$	30.06	$	40.20

Schedule of MSUs valuation assumptions

We estimated the fair value of each MSU granted on the date of grant using a Monte Carlo simulation that used the assumptions noted in the following table. Volatility was based on stock price history immediately prior to grant for a period commensurate with the expected term. The risk-free rate was based on zero-coupon U.S. government issues at the time of grant. The expected term represents the period from the valuation date to the end of the performance period.

Assumptions:	2016		2015		2014
Expected volatility	34.02	%	42.70	%	54.93	%
Risk-free rate	0.86	%	1.09	%	0.63	%
Expected term (in years)	2.95		2.95		2.94
Expected dividends	—		—		—

Schedule of nonvested MSUs outstanding and activity

Nonvested MSUs outstanding as of December 31, 2016 and MSU activity during 2016 were as follows:

	Weighted Number of Shares (000)		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2016	743		$	34.33
Granted	801		19.59
Vested	(304	)	40.20
Forfeited	(83	)	23.22
Nonvested at December 31, 2016	1,157		23.39

Weighted average grant date fair values of performance shares

We granted performance shares with the following weighted average grant date fair values:

	2016		2015		2014
Weighted average grant date fair values	$	21.10	$	30.63	$	46.46

Schedule of performance based units valuation assumptions

We estimated the fair value of each performance share granted on the date of grant using a Monte Carlo simulation that uses the assumptions noted in the following table. Volatility was based on stock price history immediately prior to grant for a period commensurate with the expected term. The risk-free rate was based on zero coupon U.S. government issues at the time of grant. The expected term represents the period from the grant date to the end of the three-year performance period.

Assumptions:	2016		2015		2014
Expected volatility	34.02	%	42.70	%	54.93	%
Risk-free rate	0.86	%	1.09	%	0.63	%
Expected term (in years)	2.95		2.95		2.94
Expected dividends	—		—		—

Summary of nonvested performance share outstanding and performance share activity

Nonvested performance shares outstanding as of December 31, 2016 and performance share activity during 2016 were as follows:

	Weighted Number of Shares (000)		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2016	222		$	37.20
Granted	214		21.10
Vested	(86	)	46.46
Forfeited	(104	)	25.22
Nonvested at December 31, 2016	246		24.98

Weighted average grant date fair values of RSUs

We granted RSUs during 2016, 2015 and 2014 with the following weighted average grant date fair values:

	2016		2015		2014
Weighted average grant date fair values	$	23.94	$	28.56	$	32.50

Summary of nonvested RSUs outstanding and activity

RSUs outstanding as of December 31, 2016 and RSU activity during 2016 were as follows:

	Number of Shares (000)		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2016	270		$	24.49
Granted	106		23.94
Vested	(128	)	18.70
Forfeited	(20	)	26.45
Nonvested at December 31, 2016	228		27.31

Summary of stock options outstanding and stock option activity

STOCK OPTIONS

We last granted stock options in 2012. Stock options generally become exercisable in four equal annual installments beginning one year from the date of grant, although they may become exercisable earlier in the event of death, disability, retirement or a change in control. The stock options generally expire ten years from the date of grant, or earlier in the event of death, disability or retirement.

A summary of stock options outstanding as of December 31, 2016 and of stock option activity during 2016 is presented below:

	Number of Options (000)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (millions)
Outstanding at January 1, 2016	3,496		$	28.00	2.99	$	19
Exercised	(305	)	13.71
Canceled	(1,017	)	43.93
Outstanding at December 31, 2016	2,174		$	22.55	2.78	$	22
Exercisable at December 31, 2016	2,174		$	22.55	2.78	$	22
Vested or expected to vest at December 31, 2016	2,174		$	22.55	2.78	$	22

(millions)	2016		2015		2014
Intrinsic value of stock options exercised	$	4	$	6	$	8
Cash received from stock options exercised	$	4	$	6	$	4
Fair value of stock options vested	$	1	$	1	$	2

Intrinsic value for stock options is defined as the difference between the current market value of our common stock and the exercise price of the stock options.

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Supplemental Balance Sheet Information (Tables)

12 Months Ended

Dec. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of inventories

Inventories as of December 31 consisted of the following:

(millions)	2016		2015
Finished goods	$	132	$	115
Work in progress	37		36
Raw materials	67		68
Total	$	236	$	219

Schedule of property, plant and equipment

Property, plant and equipment as of December 31 consisted of the following:

(millions)	2016			2015
Land and mineral deposits	$	116		$	127
Buildings and improvements	1,078			1,075
Machinery and equipment	2,473			2,450
	3,667			3,652
Reserves for depreciation and depletion	(1,960		)	(1,881		)
Total	$	1,707		$	1,771
Annual depreciation and depletion expense	$	129		$	125

Schedule of accrued expenses

Accrued expenses as of December 31 consisted of the following:

(millions)	2016		2015
Self-insurance reserves	$	12	$	13
Employee compensation	35		29
Interest	31		45
Derivatives	5		17
Pension and other postretirement benefits	24		18
Environmental	18		16
Other	50		48
Total	$	175	$	186

Schedule of changes in balances of each component of accumulated other comprehensive income (loss)

Changes in the balances of each component of accumulated other comprehensive income (loss), or AOCI, are summarized in the following table:

(millions)	Derivatives			Pension and Other Postretirement Benefit Plans			Foreign Currency Translation			Total AOCI
Balance as of January 1, 2014	$	35		$	(32	)	$	21		$	24
Other comprehensive income (loss) before reclassifications	(15		)	(272		)	(68		)	(355		)
Less: Amounts reclassified from AOCI, net of tax	4			(2		)	5			7
Other comprehensive income (loss), net of tax	(19		)	(270		)	(73		)	(362		)
Balance as of December 31, 2014	$	16		$	(302	)	$	(52	)	$	(338	)
Other comprehensive loss before reclassifications	(5		)	74			(67		)	2
Less: Amounts reclassified from AOCI, net of tax	(9		)	(7		)	(6		)	(22		)
Other comprehensive loss, net of tax	4			81			(61		)	24
Balance as of December 31, 2015	$	20		$	(221	)	$	(113	)	$	(314	)
Other comprehensive income (loss) before reclassifications	1			(34		)	(53		)	(86		)
Less: Amounts reclassified from AOCI, net of tax	(6		)	(9		)	—			(15		)
Other comprehensive income (loss), net of tax	7			(25		)	(53		)	(71		)
Balance as of December 31, 2016	$	27		$	(246	)	$	(166	)	$	(385	)

Schedule of amounts reclassified from accumulated other comprehensive income, net of tax

Amounts reclassified from AOCI, net of tax, for the years ended December 31, 2016, 2015 and 2014 were as follows:

(millions)	2016			2015			2014
Derivatives
Net reclassification from AOCI for cash flow hedges included in cost of products sold	$	(10	)	$	(8	)	$	4
Net reclassification from AOCI for cash flow hedges included in income and gain from the sale of equity method investment to related party	—			1			—
Less: Income tax (benefit) expense on reclassification from AOCI included in income tax expense	(4		)	2			—
Net amount reclassified from AOCI	$	(6	)	$	(9	)	$	4
Pension and postretirement benefits
Net reclassification from AOCI for amortization of prior service (benefit) cost included in cost of products sold	$	(1	)	$	1		$	—
Net reclassification from AOCI for amortization of prior service (benefit) cost included in selling and administrative expenses	(12		)	(5		)	1
Net reclassification from AOCI for amortization of prior service (benefit) cost included in gain on sale of discontinued operations	(3		)	(4		)	(4		)
Less: Income tax expense on reclassification from AOCI included in income tax benefit	(7		)	(1		)	(1		)
Net amount reclassified from AOCI	$	(9	)	$	(7	)	$	(2	)
Foreign Currency Translation
Net reclassification from AOCI for translation (loss) gain realized upon the sale of foreign entities	$	—		$	(6	)	$	5
Net amount reclassified from AOCI	$	—		$	(6	)	$	5

Schedule of changes in liability for asset retirement obligations

Changes in our liability for asset retirement obligations consisted of the following:

(millions)	2016			2015
Balance as of January 1	$	119		$	123
Accretion expense	7			7
Liabilities incurred	2			1
Changes in estimated cash flows (a)	(12		)	(5		)
Liabilities settled (b)	(4		)	(2		)
Foreign currency translation	1			(5		)
Balance as of December 31	$	113		$	119

(a) Changes in estimated cash flows for the year ended December 31, 2016 includes a $8 million reduction related to one of our quarries.

(b) Liabilities settled for the year ended December 31, 2016 includes a $2 million liability that was relieved in conjunction with the sale of a surplus property.

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Long-Lived Asset Impairment Charges (Tables)

12 Months Ended

Dec. 31, 2016

Restructuring and Related Activities [Abstract]

Schedule of impairment charges

We recorded the following impairment charges which are included in our consolidated statements of income in "Long-lived asset impairment charges":

(millions)	2016		2015		2014
Ocean vessels	$	—	$	—	$	60
Wallboard lines or facilities	—		—		16
Previously incurred costs related to construction of future facilities	—		—		12
Indefinitely idled mining operations	10		—		—
Other	—		—		2
Total long-lived asset impairment charges	$	10	$	—	$	90

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Segments (Tables)

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Schedule of reportable segment results

GYPSUM AND CEILINGS

	For the year ended December 31,
(millions)	2016			2015			2014
Net Sales:
Gypsum	$	2,526		$	2,426		$	2,396
Ceilings	500			496			518
Eliminations	(9		)	(9		)	(10		)
Total	$	3,017		$	2,913		$	2,904
Operating Profit (Loss):
Gypsum	$	389		$	361		$	165
Ceilings	109			88			89
Corporate	(104		)	(94		)	(105		)
Total	$	394		$	355		$	149
Depreciation, Depletion and Amortization:
Gypsum	$	108		$	106		$	116
Ceilings	16			16			14
Corporate	10			9			12
Total	$	134		$	131		$	142
Capital Expenditures:
Gypsum	$	78		$	84		$	94
Ceilings	4			3			30
Corporate	1			—			1
Total	$	83		$	87		$	125
Assets:	December 31, 2016			December 31, 2015			December 31, 2014
Gypsum	$	1,920		$	1,991		$	2,104
Ceilings	241			276			285
Corporate	1,080			1,485			489
Equity method investments	628			682			735
Assets related to discontinued operations	—			357			380
Eliminations	—			(55		)	(57		)
Total	$	3,869		$	4,736		$	3,936

Schedule of geographic information

GEOGRAPHIC INFORMATION

	For the year ended December 31,
(millions)	2016			2015			2014
Net Sales:
United States	$	2,625		$	2,524		$	2,400
Canada	389			379			406
Other Foreign	189			196			283
Geographic transfers	(186		)	(186		)	(185		)
Total	$	3,017		$	2,913		$	2,904
Long-lived assets, consisting of property, plant and equipment, net, by geographic location were as follows:
(millions)	December 31, 2016			December 31, 2015			December 31, 2014
Long-Lived Assets:
United States	$	1,563		$	1,605		$	1,648
Canada	80			90			112
Other Foreign	64			76			131
Total	$	1,707		$	1,771		$	1,891

UBBP Reporting

UBBP	For the year ended December 31,
(millions)	2016			2015			2014 (a)
Net sales	$	1,052		$	1,003		$	927
Operating profit	133			124			95
Net income attributable to UBBP	99			96			67
Depreciation, depletion, and amortization	43			43			31
Capital expenditures	45			49			40
	December 31, 2016			December 31, 2015			December 31, 2014
Assets	$	1,292		$	1,303		$	1,435
UBBP GEOGRAPHIC INFORMATION	For the year ended December 31,
(millions)	2016			2015			2014 (a)
Net Sales:
Australia	$	381		$	345		$	312
South Korea	223			200			197
Thailand	141			145			133
China	103			120			122
Other	255			234			206
Geographic Transfers	(51		)	(41		)	(43		)
Total	$	1,052		$	1,003		$	927

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

Long-lived assets, consisting of property, plant and equipment, net, by geographic location for UBBP were as follows:
(millions)	December 31, 2016		December 31, 2015		December 31, 2014
Long-Lived Assets:
Australia	$	217	$	216	$	245
South Korea	107		106		113
China	97		116		127
Oman	86		103		96
Thailand	75		72		72
Other	71		67		78
Total	$	653	$	680	$	731

UBBP	For the year ended December 31,
(millions)	2016			2015			2014 (a)
Net sales	$	1,052		$	1,003		$	927
Operating profit	133			124			95
Net income attributable to UBBP	99			96			67
Depreciation, depletion, and amortization	43			43			31
Capital expenditures	45			49			40
	December 31, 2016			December 31, 2015			December 31, 2014
Assets	$	1,292		$	1,303		$	1,435
UBBP GEOGRAPHIC INFORMATION	For the year ended December 31,
(millions)	2016			2015			2014 (a)
Net Sales:
Australia	$	381		$	345		$	312
South Korea	223			200			197
Thailand	141			145			133
China	103			120			122
Other	255			234			206
Geographic Transfers	(51		)	(41		)	(43		)
Total	$	1,052		$	1,003		$	927

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Schedule of income from continuing operations before income taxes

Income from continuing operations before income taxes consisted of the following:

(millions)	2016		2015		2014
U.S.	$	201	$	152	$	14
Foreign	73		84		19
Total	$	274	$	236	$	33

Schedule of income tax expense (benefit) on continuing operations

Income tax expense (benefit) on continuing operations consisted of the following:

(millions)	2016		2015			2014
Current:
Federal	$	—	$	—		$	—
Foreign	5		12			2
State	1		1			1
Total current	$	6	$	13		$	3
Deferred:
Federal	41		(631		)	—
Foreign	2		(4		)	4
State	14		(118		)	—
Total deferred	57		(753		)	4
Total	$	63	$	(740	)	$	7

Schedule of differences between actual provisions for income taxes and provisions for income taxes at the U.S. federal statutory rate

For our continuing operations, differences between actual provisions for income taxes and provisions for income taxes at the U.S. federal statutory rate (35%) were as follows:

(millions)	2016			2015			2014
Taxes on income from continuing operations at U.S. federal statutory rate	$	96		$	82		$	12
Foreign earnings subject to different tax rates (a)	(3		)	(3		)	16
State income tax, net of federal benefit	10			8			1
Change in valuation allowance	—			(827		)	(5		)
Income from equity method investments (b)	(17		)	(16		)	(12		)
Withholding taxes	—			—			2
Other, net	(2		)	2			(1		)
Tax release from AOCI	—			—			(2		)
Gain on deconsolidation	—			—			(7		)
Benefits from unrecognized tax positions	—			(6		)	—
Tax expense not realized on pension loss	—			—			3
Foreign tax credits	(21		)	—			—
Tax expense on distribution of foreign earnings	—			20			—
Provision for income tax expense	$	63		$	(740	)	$	7
Effective income tax rate	22.9		%	(313.6		)%	21.2		%

(a) Foreign earnings subject to different tax rates includes amounts related to impairments and other charges associated with our shipping operations.

(b) Included in income from equity method investments are taxes associated with that income in the respective jurisdictions. These taxes, which are predominately foreign statutory rates, are at rates that are lower than the U.S. federal statutory rate.

Schedule of components of deferred tax assets and liabilities

Significant components of deferred tax assets and liabilities as of December 31 were as follows:

(millions)	2016			2015
Deferred Tax Assets:
Net operating loss and tax credit carryforwards	$	599		$	774
Pension and postretirement benefits	112			150
Goodwill and other intangible assets	—			24
Reserves not deductible until paid	20			29
Self insurance	2			11
Capitalized interest	13			13
Inventories	6			8
Share-based compensation	28			33
Other	4			5
Deferred tax assets before valuation allowance	784			1,047
Valuation allowance	(51		)	(70		)
Total deferred tax assets	$	733		$	977
Deferred Tax Liabilities:
Property, plant and equipment	245			254
Other	—			—
Total deferred tax liabilities	245			254
Net deferred tax assets	$	488		$	723

Reconciliation of the beginning and ending amount of unrecognized tax benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(millions)	2016			2015			2014
Balance as of January 1	$	18		$	22		$	22
Tax positions related to the current period:
Gross increase	—			4			2
Gross decrease	—			—			—
Tax positions related to prior periods:
Gross increase	—			—			—
Gross decrease	(3		)	(1		)	—
Settlements	—			(6		)	(2		)
Lapse of statutes of limitations	—			(1		)	—
Balance as of December 31	$	15		$	18		$	22

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Reconciliation of basic income per share to diluted income per share

The reconciliation of basic income per share to diluted income per share is shown in the following table:

(millions, except per-share data)	2016		2015		2014
Income from continuing operations	$	211	$	976	$	26
Net income attributable to noncontrolling interest	—		—		$	1
Income from continuing operations attributable to USG	$	211	$	976	$	25
Income from discontinued operations, net of tax	20		15		12
Gain on sale of discontinued operations, net of tax	279		—		—
Income available to USG and shareholders	$	510	$	991	$	37
Average common shares	145.9		145.5		141.7
Dilutive RSUs, MSUs, performance shares and stock options	1.8		1.6		2.4
Deferred shares associated with a deferred compensation program for non-employee directors	—		0.1		0.2
Average diluted common shares	147.7		147.2		144.3
Basic earnings per average common share:
Income from continuing operations attributable to USG	$	1.45	$	6.70	$	0.18
Income from and gain on sale of discontinued operations	2.04		0.11		0.08
Net income attributable to USG	$	3.49	$	6.81	$	0.26
Diluted earnings per average common share:
Income from continuing operations attributable to USG	$	1.44	$	6.62	$	0.17
Income from and gain on sale of discontinued operations	2.02		0.11		0.08
Net income attributable to USG	$	3.46	$	6.73	$	0.25

Schedule of ant-dilutive securities excluded from computation of diluted earnings (loss) per share

Stock options, RSUs, MSUs, performance shares and deferred shares associated with our deferred compensation program for non-employee directors that were not included in the computation of diluted earnings per share for those periods because their inclusion was anti-dilutive were as follows:

(millions, common shares)	2016	2015	2014
Stock options, RSUs, MSUs and performance shares	1.5	1.9	2.1
Deferred shares associated with a deferred compensation program for non-employee directors	0.2	—	—

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Lease Commitments (Tables)

12 Months Ended

Dec. 31, 2016

Lease Commitments [Abstract]

Schedule of future minimum lease payments required under operating leases

Future minimum lease payments required under operating leases with initial or remaining noncancelable terms in excess of one year as of December 31, 2016 were as follows:

(millions)	2017		2018		2019		2020		2021		After 2021
Future minimum lease payments	$	31	$	26	$	22	$	17	$	12	$	7

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Quarterly Financial Data (unaudited) (Tables)

12 Months Ended

Dec. 31, 2016

Quarterly Financial Information Disclosure [Abstract]

Schedule of quarterly financial information

	Quarter
(millions, except per-share data)	First		Second		Third		Fourth
2016
Net sales	$	747	$	769	$	767	$	734
Gross profit	181		193		181		150
Operating profit	116		122		97		59
Income from continuing operations	60		67		56		28
Income from discontinued operations, net of tax	7		7		6		—
Gain on sale of discontinued operations, net of tax	—		—		—		279
Net income	67		74		62		307
Income per average common share:
Basic (a)	0.46		0.50		0.43		2.10
Diluted (a)	0.46		0.50		0.42		2.07
2015
Net sales	$	708	$	740	$	747	$	718
Gross profit	146		170		169		165
Operating profit	72		95		94		94
Income from continuing operations(b)	20		69		68		819
Income (loss) from discontinued operations, net of tax	4		10		8		(7		)
Net income (b)	24		79		76		812
Income per average common share:
Basic (a)	0.16		0.54		0.52		5.58
Diluted (a)	0.16		0.54		0.52		5.51

(a) The sum of the four quarters is not necessarily the same as the total for the year.

(b) Income from continuing operations and net income attributable to USG for the fourth quarter of 2015 included a reversal of an income tax valuation allowance of $731 million.

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Significant Accounting Policies - Consolidation and Presentation (Details)	Dec. 31, 2016
Minimum
Schedule of Equity Method Investments [Line Items]
Ownership percentage interest	20.00%
Maximum
Schedule of Equity Method Investments [Line Items]
Ownership percentage interest	50.00%

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Significant Accounting Policies - Advertising (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Accounting Policies [Abstract]
Advertising expense	$ 12	$ 16	$ 22

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Significant Accounting Policies - Research and Development (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Accounting Policies [Abstract]
Research and development expenditures	$ 24	$ 23	$ 23

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Significant Accounting Policies - Income Taxes (Details)	12 Months Ended
	Dec. 31, 2016
Valuation Allowance [Line Items]
Recovery of Demand Troughs	4 years
Threshold Period for Cumulative Losses	4 years
Minimum
Valuation Allowance [Line Items]
Economic Cycle	7 years
Maximum
Valuation Allowance [Line Items]
Economic Cycle	10 years

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Significant Accounting Policies - Property, Plant and Equipment (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Capitalized interest	$ 1	$ 3	$ 3
Buildings and improvements
Property, Plant and Equipment [Line Items]
Expected useful life	50 years
Machinery and equipment | Minimum
Property, Plant and Equipment [Line Items]
Expected useful life	10 years
Machinery and equipment | Maximum
Property, Plant and Equipment [Line Items]
Expected useful life	25 years
Computer software and systems development costs | Minimum
Property, Plant and Equipment [Line Items]
Expected useful life	5 years
Computer software and systems development costs | Maximum
Property, Plant and Equipment [Line Items]
Expected useful life	7 years

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Significant Accounting Policies - Derivative instruments (Details)	12 Months Ended
	Dec. 31, 2016
Accounting Policies [Abstract]
Typical hedging period	5 years
Period of anticipated natural gas purchases typically hedged	12 months

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Significant Accounting Policies - Foreign Currency Translation (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Accounting Policies [Abstract]
Transaction gain (loss)	$ (3)	$ 7	$ 6

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Recent Accounting Pronouncements Recent Accounting Pronouncements (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Adjustments to Additional Paid in Capital, Income Tax Deficiency from Share-based Compensation	$ 11,000,000	$ 0
Accounting Standards Update 2016-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Adjustments to Additional Paid in Capital, Income Tax Deficiency from Share-based Compensation	9,000,000	$ 4,000,000
Unrecognized tax benefits	$ 25,000,000

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Discontinued Operations - Textuals (Details) - USD ($) $ in Millions	2 Months Ended	3 Months Ended				12 Months Ended
	Dec. 31, 2016	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Discontinued Operations and Disposal Groups [Abstract]
Cash consideration for discontinued operations	$ 675	$ 675				$ 675
Gain on sale of discontinued operations, net of tax		$ 279	$ 0	$ 0	$ 0	279	$ 0	$ 0
Sales to discontinued operations previously eliminated in consolidation						$ 568	$ 531	$ 532
Cash inflow from discontinued operations	$ 102

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Discontinued Operations - Summarized Income Statement (Details) - USD ($) $ in Millions	3 Months Ended				12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2016		Dec. 31, 2015	Dec. 31, 2014
Discontinued Operations and Disposal Groups [Abstract]
Net sales					$ 1,252	[1]	$ 1,428	$ 1,345
Cost of products sold					1,196	[1]	1,387	1,316
Gross profit					56	[1]	41	29
Selling and administrative expenses (b)					22	[1],[2]	15	16
Operating profit					34	[1]	26	13
Income tax expense					12	[1]	11	0
Net income from discontinued operations (c)					22	[1],[3]	15	13
Gain on sale of discontinued operations, net of tax	$ 279	$ 0	$ 0	$ 0	279		$ 0	$ 0
Transaction costs related to sale					$ 8

[1] Operating results for 2016 are presented for the ten months ended October 31, 2016.

[2] The ten month period ended October 31, 2016 includes transaction costs of $8 million.

[3] Years ended December 31, 2016 and 2014 include net income from discontinued operations from our European business, which were sold in 2012.

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Discontinued Operations - Summarized Balance Sheet (Details) $ in Millions	Dec. 31, 2015 USD ($)
Discontinued Operations and Disposal Groups [Abstract]
Accounts receivable, net	$ 207
Inventories	95
Other current assets	4
Property, plant and equipment, net (a)	17	[1]
Intangible assets (a)	31	[1]
Other assets (a)	3	[1]
Total assets related to discontinued operations	357
Accounts payable	51
Accrued expenses	29
Other liabilities (a)	20	[1]
Total liabilities related to discontinued operations	$ 100

[1] As of December 31, 2015, these balances are reflected as long-term in our consolidated balance sheet.

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Equity Method Investments - Schedule of Investments (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015	Feb. 27, 2014
Schedule of Equity Method Investments [Line Items]
Equity method investments	$ 628	$ 682
Minimum
Schedule of Equity Method Investments [Line Items]
Ownership percentage interest	20.00%
Maximum
Schedule of Equity Method Investments [Line Items]
Ownership percentage interest	50.00%
USG Boral Building Products
Schedule of Equity Method Investments [Line Items]
Equity method investments	$ 621	$ 675
Ownership percentage interest	50.00%	50.00%	50.00%
Other equity method investments
Schedule of Equity Method Investments [Line Items]
Equity method investments	$ 7	$ 7
Other equity method investments | Minimum
Schedule of Equity Method Investments [Line Items]
Ownership percentage interest	33.00%	33.00%
Other equity method investments | Maximum
Schedule of Equity Method Investments [Line Items]
Ownership percentage interest	50.00%	50.00%

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Equity Method Investments - Textuals (Details) € in Millions, $ in Millions			12 Months Ended
	Dec. 22, 2015 USD ($)	Feb. 27, 2014 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Sep. 15, 2015 USD ($)	Sep. 15, 2015 EUR (€)
Schedule of Equity Method Investments [Line Items]
Payments to acquire equity method investments		$ 514
Gain on deconsolidation of subsidiaries and consolidated joint ventures			$ 0	$ 0	$ 27
Cash dividends received			47	38	0
Present value of contingent liability for contingent consideration for equity method investment			0	24
Translation loss			(53)	(67)	(68)
Expected purchase price of joint venture						$ 52	€ 48
Income taxes payable on sale	$ 5
Income and gain from the sale of equity method investment to related party			0	13	2
USG Boral Building Products
Schedule of Equity Method Investments [Line Items]
Loan receivable from related party			$ 15	$ 14
Knauf
Schedule of Equity Method Investments [Line Items]
Percentage of beneficial ownership of affiliates			10.00%
USG Boral Building Products
Schedule of Equity Method Investments [Line Items]
Ownership percentage interest		50.00%	50.00%	50.00%
Cash dividends received			$ 47
Consolidated retained earnings which represents undistributed earnings			44
Contingent consideration amount (up to)		$ 75
Contingent consideration for first performance period		$ 25
First performance period for contingent consideration		3 years
Contingent consideration for second performance period (up to)		$ 50
Second performance period for contingent consideration		5 years
Translation loss			$ (30)	$ (23)	(34)
USG Boral Building Products | Boral
Schedule of Equity Method Investments [Line Items]
Ownership percentage by joint venture partner			50.00%
Knauf USG
Schedule of Equity Method Investments [Line Items]
Ownership percentage interest			50.00%
Gain on sale of investment	$ 6
Income and gain from the sale of equity method investment to related party				$ 13	$ 2

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Equity Method Investments - Statement of Operations (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2016		Dec. 31, 2015	Dec. 31, 2014
Schedule of Equity Method Investments [Line Items]
Income (loss) from equity method investments		$ 49		$ 50	$ 35
USG Boral Building Products
Schedule of Equity Method Investments [Line Items]
Net sales		1,052		1,003	927	[1]
Gross profit		337		278	251	[2]
Net income before taxes		142		132	101	[2]
Net income		95		101	72	[2]
Net income attributable to USG Boral Building Products		99		96	67	[2]
Income (loss) from equity method investments		49	[3]	48	33	[2]
Other equity method investments
Schedule of Equity Method Investments [Line Items]
Income (loss) from equity method investments	[4]	0		2	2
USG Boral Building Products | USG Boral Building Products
Schedule of Equity Method Investments [Line Items]
Net sales		1,052		1,003	927	[2]
Operating profit		133	[5]	$ 124	$ 95	[2]
China | Operating Profit [Member]
Schedule of Equity Method Investments [Line Items]
Long-lived asset impairment charges		8
China | Equity Method Income [Member]
Schedule of Equity Method Investments [Line Items]
Long-lived asset impairment charges		4
Oman | Operating Profit [Member]
Schedule of Equity Method Investments [Line Items]
Long-lived asset impairment charges		14
Oman | Equity Method Income [Member]
Schedule of Equity Method Investments [Line Items]
Long-lived asset impairment charges		$ 4

[1] Operating results are presented for UBBP for the ten months ended December 31, 2014.

[2] Operating results are presented for UBBP for the ten months ended December 31, 2014.

[3] Year ended December 31, 2016 includes long-lived asset impairment charges of $4 million for China and of $4 million for Oman.

[4] Amounts represent our share of income or loss from all equity method investments, other than UBBP.

[5] Year ended December 31, 2016 includes long-lived asset impairment charges of $8 million for China and of $14 million for Oman.

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Equity Method Investments - Balance Sheet (Details) - USG Boral Building Products - USD ($) $ in Millions		Dec. 31, 2016	Dec. 31, 2015
Schedule of Equity Method Investments [Line Items]
Current assets		$ 389	$ 368
Non-current assets		903	935
Current liabilities	[1]	211	197
Long-term debt		37	40
Other non-current liabilities		17	17
Shareholders' equity	[2]	1,027	1,049
Current portion of long-term debt		15	16
Shareholders' equity related to non-controlling interests		$ 50	$ 60

[1] Includes the current portion of long-term debt of $15 million and $16 million as of December 31, 2016 and 2015, respectively.

[2] Shareholders' equity includes $50 million and $60 million related to non-controlling interests as of December 31, 2016 and 2015, respectively.

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Marketable Securities - Investments in Marketable Securities (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 91	$ 230
Fair Value	91	230
Corporate debt securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	69	134
Fair Value	69	134
U.S. government and agency debt securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	14	57
Fair Value	14	57
Asset-backed debt securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	2	21
Fair Value	2	21
Certificates of deposit
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	6	15
Fair Value	6	15
Municipal debt securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	0	3
Fair Value	$ 0	$ 3

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Marketable Securities - Contractual Maturities of Marketable Securities (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Amortized Cost
Due in 1 year or less	$ 62
Due in 1-5 years	29
Total marketable securities	91
Fair Value
Due in 1 year or less	62
Due in 1-5 years	29
Total marketable securities	$ 91	$ 230

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Debt - Total Debt (Details) - USD ($) $ in Millions	Dec. 31, 2016		Dec. 31, 2015	Feb. 24, 2015
Debt Instrument [Line Items]
Long-term debt	$ 1,089		$ 2,188
Less unamortized debt issuance costs	6		13
Total	1,083		2,175
5.5% senior notes due 2025
Debt Instrument [Line Items]
Long-term debt	350	[1]	350
Less unamortized debt issuance costs				$ 6
Total	$ 345		$ 344
Stated interest rate	5.50%	[2]	5.50%
5.875% senior notes due 2021
Debt Instrument [Line Items]
Long-term debt	$ 0		$ 350
Stated interest rate	5.875%		5.875%
6.3% senior notes due 2016
Debt Instrument [Line Items]
Long-term debt	$ 0		$ 500
Stated interest rate	6.30%		6.30%
7.75% senior notes due 2018
Debt Instrument [Line Items]
Long-term debt	$ 500	[1]	$ 500
Stated interest rate	7.75%	[3],[4]	7.75%
7.875% senior notes due 2020 (net of discount: 2016 - $0; 2015- $1)
Debt Instrument [Line Items]
Long-term debt	$ 0		$ 249
Stated interest rate	7.875%		7.875%
Unamortized discount	$ 0		$ 1
Industrial revenue bonds (due 2028 through 2034)
Debt Instrument [Line Items]
Long-term debt	$ 239		$ 239

[1] Principal amounts exclude unamortized debt issuance costs.

[2] Callable at any time prior to the call date at a price equal to 100% of the principal plus a premium (as outlined in the respective indentures), plus any accrued and unpaid interest on the principal amount being called. Callable after the call date at stated redemption prices (as outlined in the applicable indenture), plus any accrued and unpaid interest on the principal amount being called.

[3] Callable at any time at a price equal to the greater of (1) 100% of the principal and (2) the sum of the present value of the remaining scheduled payments of principal and interest discounted to the redemption date on a semi-annual basis at the applicable U.S. Treasury rate plus a spread (as outlined in the applicable indenture), plus any accrued and unpaid interest on the principal amount being called.

[4] The 7.75% senior notes currently have an effective interest rate of 8.25%. The rate is subject to an adjustment of up to 2% if the debt rating is downgraded or subsequently upgraded by Moody's Investors Service and Standard & Poor's Global Ratings.

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Debt - Repurchase of Senior Notes and Issuance of Senior Notes (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016		Dec. 31, 2015	Dec. 31, 2014	Mar. 31, 2015	Feb. 24, 2015
Debt Instrument [Line Items]
Loss on early extinguishment of debt	$ 37		$ 19	$ 0
Debt issuance cost	6		13
Long term debt net of unamortized debt issuance costs	$ 1,083		$ 2,175
6.3% senior notes due 2016
Debt Instrument [Line Items]
Stated interest rate	6.30%		6.30%
Repurchase amount	$ 500
Premiums paid on early redemption of debt	30
Accrued interest on early redemption of debt	$ 9
7.875% senior notes due 2020
Debt Instrument [Line Items]
Stated interest rate	7.875%		7.875%
Repurchase amount	$ 250
5.875% senior notes due 2021
Debt Instrument [Line Items]
Stated interest rate	5.875%		5.875%
Repurchase amount	$ 350
8.375% senior notes due 2018
Debt Instrument [Line Items]
Stated interest rate	8.375%
Repurchase amount					$ 350
Aggregate consideration						$ 377
5.5% senior notes due 2025
Debt Instrument [Line Items]
Stated interest rate	5.50%	[1]	5.50%
Face amount of notes						350
Debt issuance cost						$ 6
Long term debt net of unamortized debt issuance costs	$ 345		$ 344

[1] Callable at any time prior to the call date at a price equal to 100% of the principal plus a premium (as outlined in the respective indentures), plus any accrued and unpaid interest on the principal amount being called. Callable after the call date at stated redemption prices (as outlined in the applicable indenture), plus any accrued and unpaid interest on the principal amount being called.

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Debt - Senior Notes (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016		Dec. 31, 2015
Debt Instrument [Line Items]
Amount of debt outstanding	$ 1,089		$ 2,188
7.75% senior notes due 2018
Debt Instrument [Line Items]
Stated interest rate	7.75%	[1],[2]	7.75%
Effective interest rate	8.25%
Amount of debt outstanding	$ 500	[3]	$ 500
Percentage of purchase price of notes at their principal amount	101.00%
Percentage of principal amount of the notes being redeemed	100.00%
7.75% senior notes due 2018 | Maximum
Debt Instrument [Line Items]
Interest rate adjustment (as a percent)	2.00%
5.5% senior notes due 2025
Debt Instrument [Line Items]
Stated interest rate	5.50%	[4]	5.50%
Amount of debt outstanding	$ 350	[3]	$ 350
Percentage of purchase price of notes at their principal amount	101.00%
Percentage of principal amount of the notes being redeemed	100.00%

[1] Callable at any time at a price equal to the greater of (1) 100% of the principal and (2) the sum of the present value of the remaining scheduled payments of principal and interest discounted to the redemption date on a semi-annual basis at the applicable U.S. Treasury rate plus a spread (as outlined in the applicable indenture), plus any accrued and unpaid interest on the principal amount being called.

[2] The 7.75% senior notes currently have an effective interest rate of 8.25%. The rate is subject to an adjustment of up to 2% if the debt rating is downgraded or subsequently upgraded by Moody's Investors Service and Standard & Poor's Global Ratings.

[3] Principal amounts exclude unamortized debt issuance costs.

[4] Callable at any time prior to the call date at a price equal to 100% of the principal plus a premium (as outlined in the respective indentures), plus any accrued and unpaid interest on the principal amount being called. Callable after the call date at stated redemption prices (as outlined in the applicable indenture), plus any accrued and unpaid interest on the principal amount being called.

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Debt - Credit Facility (Details)	Dec. 31, 2016 USD ($)
Line of credit
Line of Credit Facility [Line Items]
Maximum borrowing limit	$ 180,000,000
Maximum allowable borrowings	650,000,000
Current borrowing capacity	$ 85,000,000
Applicable interest rate	2.00%
Letters of credit outstanding	$ 38,000,000
Line of credit | CGC, Inc.
Line of Credit Facility [Line Items]
Maximum borrowing limit	$ 50,000,000
CGC CAD
Line of Credit Facility [Line Items]
Applicable interest rate	1.95%

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Debt - Industrial Revenue Bonds (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Line of Credit Facility [Line Items]
Amount of debt outstanding	$ 1,089	$ 2,188
Industrial revenue bonds
Line of Credit Facility [Line Items]
Amount of debt outstanding	$ 239	$ 239
Weighted average interest rate	5.875%
Minimum | Industrial revenue bonds
Line of Credit Facility [Line Items]
Stated interest rate	5.50%
Maximum | Industrial revenue bonds
Line of Credit Facility [Line Items]
Stated interest rate	6.40%

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Debt - Other Information (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Debt Disclosure [Abstract]
Fair value of debt	$ 1,129	$ 2,295
Interest accrued on debt	31	$ 45
Debt maturities (principal amounts)
2017	0
2018	500
2019	0
2020	0
2021	0
After 2021	$ 589

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Derivative Instruments - Textuals (Details) MMBTU in Millions		12 Months Ended
	Dec. 22, 2015 USD ($)	Dec. 31, 2016 USD ($) MMBTU	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Sep. 30, 2015 USD ($)
Derivative Instruments, Gain (Loss) [Line Items]
Net liability position of derivatives		$ (3,000,000)
Collateral provided to counterparties related to derivatives		$ 10,000,000
Commodity contracts
Derivative Instruments, Gain (Loss) [Line Items]
Aggregate notional amount | MMBTU		36
Ineffectiveness recorded on contracts			$ 0	$ 0
Unrealized loss		$ 1,000,000	2,000,000
Commodity contracts | Derivatives Designated as Hedging Instruments
Derivative Instruments, Gain (Loss) [Line Items]
Ineffectiveness recorded on contracts		0
Commodity contracts | Derivatives | Derivatives Designated as Hedging Instruments
Derivative Instruments, Gain (Loss) [Line Items]
Unrealized gain (loss) remaining in AOCI		(2,000,000)	(19,000,000)
Foreign exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Gain reclassified from AOCI to earnings	$ 1,000,000
Foreign exchange contracts | Derivatives Designated as Hedging Instruments
Derivative Instruments, Gain (Loss) [Line Items]
Ineffectiveness recorded on contracts		0	0	$ 0
Notional amounts of foreign exchange forward contracts		80,000,000
Foreign exchange contracts | Derivatives in Net Investment Hedging Relationships
Derivative Instruments, Gain (Loss) [Line Items]
Notional amounts of foreign exchange forward contracts					$ 35,000,000
Foreign exchange contracts | Derivatives | Derivatives Designated as Hedging Instruments
Derivative Instruments, Gain (Loss) [Line Items]
Unrealized gain (loss) remaining in AOCI		$ 0	$ 8,000,000

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Derivative Instruments - Pretax Effects of Derivative Instruments (Details) - USD ($) $ in Millions		12 Months Ended
	Dec. 22, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Foreign exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	$ 1
Derivatives Designated as Hedging Instruments
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives (Effective Portion)		$ 3	$ (1)	$ (15)
Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)		(10)	(7)	4
Derivatives Designated as Hedging Instruments | Commodity contracts | Derivatives Designated as Hedging Instruments
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives (Effective Portion)		6	(14)	(19)
Derivatives Designated as Hedging Instruments | Commodity contracts | Cost of products sold | Derivatives Designated as Hedging Instruments
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)		(15)	(15)	2
Derivatives Designated as Hedging Instruments | Foreign exchange contracts | Derivatives Designated as Hedging Instruments
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives (Effective Portion)		(3)	12	4
Derivatives Designated as Hedging Instruments | Foreign exchange contracts | Derivatives in Net Investment Hedging Relationships
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives (Effective Portion)		0	1	0
Derivatives Designated as Hedging Instruments | Foreign exchange contracts | Cost of products sold | Derivatives Designated as Hedging Instruments
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)		5	7	2
Derivatives Designated as Hedging Instruments | Foreign exchange contracts | Income and gain from the sale of equity method investment to related party | Derivatives in Net Investment Hedging Relationships
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)		0	1	0
Derivatives Not Designated as Hedging Instruments
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Income on Derivatives		1	(1)	(4)
Derivatives Not Designated as Hedging Instruments | Commodity contracts | Cost of products sold
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Income on Derivatives		1	(3)	(4)
Derivatives Not Designated as Hedging Instruments | Foreign exchange contracts | Other (income) expense, net
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Income on Derivatives		$ 0	$ 2	$ 0

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Derivative Instruments - Fair Values of Derivative Instruments (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Fair values of derivative instruments on the consolidated balance sheets
Total assets	$ 13	$ 9
Total liabilities	10	22
Derivatives Not Designated as Hedging Instruments
Fair values of derivative instruments on the consolidated balance sheets
Total assets	1	0
Total liabilities	0	2
Commodity contracts | Other current assets | Derivatives Not Designated as Hedging Instruments
Fair values of derivative instruments on the consolidated balance sheets
Total assets	1	0
Commodity contracts | Other assets | Derivatives Not Designated as Hedging Instruments
Fair values of derivative instruments on the consolidated balance sheets
Total assets	0	0
Commodity contracts | Accrued expenses | Derivatives Not Designated as Hedging Instruments
Fair values of derivative instruments on the consolidated balance sheets
Total liabilities	0	2
Commodity contracts | Other liabilities | Derivatives Not Designated as Hedging Instruments
Fair values of derivative instruments on the consolidated balance sheets
Total liabilities	0	0
Derivatives Designated as Hedging Instruments | Derivatives Designated as Hedging Instruments
Fair values of derivative instruments on the consolidated balance sheets
Total assets	12	9
Total liabilities	10	20
Derivatives Designated as Hedging Instruments | Commodity contracts | Other current assets | Derivatives Designated as Hedging Instruments
Fair values of derivative instruments on the consolidated balance sheets
Total assets	8	1
Derivatives Designated as Hedging Instruments | Commodity contracts | Other assets | Derivatives Designated as Hedging Instruments
Fair values of derivative instruments on the consolidated balance sheets
Total assets	3	0
Derivatives Designated as Hedging Instruments | Commodity contracts | Accrued expenses | Derivatives Designated as Hedging Instruments
Fair values of derivative instruments on the consolidated balance sheets
Total liabilities	4	15
Derivatives Designated as Hedging Instruments | Commodity contracts | Other liabilities | Derivatives Designated as Hedging Instruments
Fair values of derivative instruments on the consolidated balance sheets
Total liabilities	5	5
Derivatives Designated as Hedging Instruments | Foreign exchange contracts | Other current assets | Derivatives Designated as Hedging Instruments
Fair values of derivative instruments on the consolidated balance sheets
Total assets	1	8
Derivatives Designated as Hedging Instruments | Foreign exchange contracts | Accrued expenses | Derivatives Designated as Hedging Instruments
Fair values of derivative instruments on the consolidated balance sheets
Total liabilities	$ 1	$ 0

XML

Fair Value Measurements - Assets and Liabilities Measured at Fair Value (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	$ 72	$ 248
Equity mutual funds	5	4
Marketable securities	91	230
Derivative assets	13	9
Derivative liabilities	(10)	(22)
Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	69	134
U.S. government and agency debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	14	57
Asset-backed debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	2	21
Certificates of deposit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	6	15
Municipal debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	3
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	38	223
Equity mutual funds	5	4
Derivative assets	0	0
Derivative liabilities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. government and agency debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Asset-backed debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Certificates of deposit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Municipal debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	34	25
Equity mutual funds	0	0
Derivative assets	13	9
Derivative liabilities	(10)	(22)
Significant Other Observable Inputs (Level 2) | Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	69	134
Significant Other Observable Inputs (Level 2) | U.S. government and agency debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	14	57
Significant Other Observable Inputs (Level 2) | Asset-backed debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	2	21
Significant Other Observable Inputs (Level 2) | Certificates of deposit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	6	15
Significant Other Observable Inputs (Level 2) | Municipal debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	3
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Equity mutual funds	0	0
Derivative assets	0	0
Derivative liabilities	0	0
Significant Unobservable Inputs (Level 3) | Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Significant Unobservable Inputs (Level 3) | U.S. government and agency debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Significant Unobservable Inputs (Level 3) | Asset-backed debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Significant Unobservable Inputs (Level 3) | Certificates of deposit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	0	0
Significant Unobservable Inputs (Level 3) | Municipal debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketable securities	$ 0	$ 0

XML

Fair Value Measurements - Textuals (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-lived asset impairment charges		$ 10	$ 0	$ 90
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-lived asset impairment charges		10		30
Self-unloading ocean vessels
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-lived asset impairment charges		$ 0	$ 0	$ 60
Self-unloading ocean vessels | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-lived asset impairment charges	$ 60

XML

Employee Retirement Plans - Textuals (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2016		Dec. 31, 2015	Dec. 31, 2014
Defined Benefit Plan Disclosure [Line Items]
Minimum Funding Requirements, Defined Benefit Plans		$ 0
Accumulated benefit obligation		$ 1,396		$ 1,354
Minimum funded percentage of ABO		100.00%
Estimated future employer benefit plan contribution		$ 74
Defined Contribution Plans Disclosure [Abstract]
Total charges for defined contribution plans		$ 5		6
Minimum contribution percentage		1.00%
Maximum contribution percentage		75.00%
Employees earned a guaranteed company on contributions (as a percent)		25.00%
Employees earned a guaranteed company match on eligible compensation (up to) (as a percent)		6.00%
Vested period company matching contributions for employee		3 years
USG Corporation Retirement Plan
Defined Benefit Plan Disclosure [Line Items]
Settlement charge		$ 26
Pension
Defined Benefit Plan Disclosure [Line Items]
Settlement charge		35	[1]	1	$ 13	[1]
Actuarial gain		$ (112)		$ 119
Weighted-average discount rate		4.02%		4.43%	4.10%
Net actuarial loss		$ 23
Prior service cost (credit)		$ 0
Expected return on plan assets (as a percent)		6.66%		6.70%
Expected future benefit payments in next twelve months	[2]	$ 165
Postretirement Benefits
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Recognized Net Gain (Loss) Due to Curtailments		20		$ 0	$ 0
Actuarial gain		$ 5		$ 14
Weighted-average discount rate		3.90%		4.24%
Net actuarial loss		$ 0
Prior service cost (credit)		(28)
Expected future benefit payments in next twelve months		$ 8
U.S. Postretirement Health Care Plan
Defined Benefit Plan Disclosure [Line Items]
Annual increase to contributions health care cost (as a percent)		3.00%
Canadian Postretirement Health Care Plan
Defined Benefit Plan Disclosure [Line Items]
Assumed health care cost trend rate		7.75%		8.00%
Ultimate health care cost trend rate		4.00%		4.00%
Cost of products sold | Pension
Defined Benefit Plan Disclosure [Line Items]
Settlement charge		$ 7
Income and gain from the sale of equity method investment to related party | Pension
Defined Benefit Plan Disclosure [Line Items]
Settlement charge		15
Income and gain from the sale of equity method investment to related party | U.S. Postretirement Health Care Plan
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Recognized Net Gain (Loss) Due to Curtailments		(20)
Income from continuing operations before income taxes | Pension
Defined Benefit Plan Disclosure [Line Items]
Settlement charge		11
Selling and administrative expenses | Pension
Defined Benefit Plan Disclosure [Line Items]
Settlement charge		$ 4

[1] In 2016, $26 million of the settlement charge reflects the increase in lump sum benefits paid largely driven by the sale of L&W and $9 million reflected payments from our supplemental plan. In 2014, the settlement charge related to the elimination of the benefit obligation of the UK pension plan due to the purchase of annuities.

[2] Pension benefits for the year ended December 31, 2017 include expected payments to L&W employees who elected lump sum upon termination from USG Corporation.

XML

Employee Retirement Plans - Components of Net Pension and Postretirement Benefit Costs (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2016		Dec. 31, 2015	Dec. 31, 2014
Pension Benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost of benefits earned		$ 45		$ 49	$ 37
Interest cost on projected benefit obligation		66		66	65
Expected return on plan assets		(89)		(83)	(79)
Settlement		35	[1]	1	13	[1]
Net amortization		22		39	24
Net pension cost (b)	[2]	79		72	60
USG Corporation Retirement Plan
Defined Benefit Plan Disclosure [Line Items]
Settlement		26
Postretirement Benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost of benefits earned		2		2	3
Interest cost on projected benefit obligation		6		6	7
Defined Benefit Plan, Recognized Net Gain (Loss) Due to Curtailments		20		0	0
Net amortization		(27)		(31)	(35)
Net pension cost (b)	[3]	(39)		(23)	(25)
Supplemental Employee Retirement Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Settlement		9
Income and gain from the sale of equity method investment to related party | Pension Benefits
Defined Benefit Plan Disclosure [Line Items]
Settlement		15
Income from discontinued operations, net of tax | Pension Benefits
Defined Benefit Plan Disclosure [Line Items]
Settlement		7		12	8
Income from discontinued operations, net of tax | Postretirement Benefits
Defined Benefit Plan Disclosure [Line Items]
Settlement		$ 3		$ 3	$ 3

[1] In 2016, $26 million of the settlement charge reflects the increase in lump sum benefits paid largely driven by the sale of L&W and $9 million reflected payments from our supplemental plan. In 2014, the settlement charge related to the elimination of the benefit obligation of the UK pension plan due to the purchase of annuities.

[2] Net pension costs, excluding settlement costs, includes expenses allocated to income from discontinued operations for L&W totaling $7 million for 2016, exclusive of settlement expense, $12 million for 2015 and $8 million for 2014.

[3] Net postretirement benefit, excluding curtailment gain, includes a net benefit allocated to income from discontinued operations for L&W of $3 million for 2016, exclusive of curtailment expense, $3 million for 2015 and $3 million for 2014.

XML

Employee Retirement Plans - Accumulated Benefit Obligation (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Selected information for pension plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligation	$ (39)	$ (1,182)
Fair value of plan assets	2	1,097
Selected information for pension plans with benefit obligations in excess of plan assets:
Benefit obligation	(1,384)	(1,365)
Fair value of plan assets	$ 1,205	$ 1,099

XML

Employee Retirement Plans - Projected Benefit Obligations (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Change in Plan Assets:
Fair value as of beginning of period	$ 1,301
Fair value as of end of period	1,435	$ 1,301
Components on the Consolidated Balance Sheets:
Current liabilities	(24)	(18)
Noncurrent liabilities	(290)	(392)
Pension
Change in Benefit Obligation:
Benefit obligation as of beginning of period	1,564	1,686
Service cost	45	49	$ 37
Interest cost	66	66	65
Settlements	(123)	(4)
Curtailments	(37)	0
Participant contributions	11	11
Benefits paid	(33)	(86)
Actuarial (gain) loss	112	(119)
Foreign currency translation	5	(39)
Benefit obligation as of end of period	1,610	1,564	1,686
Change in Plan Assets:
Fair value as of beginning of period	1,301	1,340
Actual return on plan assets	107	17
Employer contributions	167	61
Participant contributions	11	11
Benefits paid	(33)	(86)
Settlements	(123)	(4)
Foreign currency translation	5	(38)
Fair value as of end of period	1,435	1,301	1,340
Funded status	(175)	(263)
Components on the Consolidated Balance Sheets:
Noncurrent assets	4	3
Current liabilities	(16)	(9)
Noncurrent liabilities	(163)	(257)
Net liability as of December 31	(175)	(263)
Pretax Components in AOCI:
Net actuarial loss	388	387
Prior service credit	(1)	(1)
Total as of end of year	387	386
Postretirement
Change in Benefit Obligation:
Benefit obligation as of beginning of period	144	167
Service cost	2	2	3
Interest cost	6	6	7
Settlements	0	0
Curtailments	(7)	0
Participant contributions	0	3
Benefits paid	(7)	(11)
Actuarial (gain) loss	(5)	(14)
Foreign currency translation	2	(9)
Benefit obligation as of end of period	135	144	167
Change in Plan Assets:
Fair value as of beginning of period	0	0
Actual return on plan assets	0	0
Employer contributions	7	8
Participant contributions	0	3
Benefits paid	(7)	(11)
Settlements	0	0
Foreign currency translation	0	0
Fair value as of end of period	0	0	$ 0
Funded status	(135)	(144)
Components on the Consolidated Balance Sheets:
Noncurrent assets	0	0
Current liabilities	(8)	(9)
Noncurrent liabilities	(127)	(135)
Net liability as of December 31	(135)	(144)
Pretax Components in AOCI:
Net actuarial loss	0	7
Prior service credit	(65)	(108)
Total as of end of year	$ (65)	$ (101)

XML

Employee Retirement Plans - Assumptions (Details)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Pension
Weighted average assumptions used to determine benefit obligations as of December 31:
Discount rate	4.02%	4.43%	4.10%
Compensation increase rate	3.55%	3.55%
Weighted average assumptions used to determine net cost for years ended December 31:
Discount rate	4.43%	4.10%
Expected return on plan assets (as a percent)	6.66%	6.70%
Compensation increase rate	3.55%	3.50%
Postretirement
Weighted average assumptions used to determine benefit obligations as of December 31:
Discount rate	3.90%	4.24%
Weighted average assumptions used to determine net cost for years ended December 31:
Discount rate	4.24%	3.70%

XML

Employee Retirement Plans - One Percentage Point Change Effects (Details) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($)
Defined Benefit Plan, Effect of One-Percentage Point Change in Assumed Health Care Cost Trend Rates [Abstract]
Effect on total service and interest cost, one-percentage-point increase	$ 1
Effect on total service and interest cost, one-percentage-point decrease	0
Effect on postretirement benefit obligation, one-percentage-point increase	11
Effect on postretirement benefit obligation, one-percentage-point decrease	$ (8)

XML

Employee Retirement Plans - Target Asset Allocation and Acceptable Ranges (Details)	12 Months Ended
	Dec. 31, 2016
Defined Benefit Plan Disclosure [Line Items]
Target plan asset allocations (as a percent)	100.00%
Equity
Defined Benefit Plan Disclosure [Line Items]
Target plan asset allocations (as a percent)	39.00%
Target plan asset allocations, range minimum (as a percent)	35.00%
Target plan asset allocations, range maximum (as a percent)	43.00%
Fixed income
Defined Benefit Plan Disclosure [Line Items]
Target plan asset allocations (as a percent)	50.00%
Target plan asset allocations, range minimum (as a percent)	46.00%
Target plan asset allocations, range maximum (as a percent)	54.00%
Limited partnerships
Defined Benefit Plan Disclosure [Line Items]
Target plan asset allocations (as a percent)	5.00%
Target plan asset allocations, range minimum (as a percent)	2.00%
Target plan asset allocations, range maximum (as a percent)	8.00%
Other real assets
Defined Benefit Plan Disclosure [Line Items]
Target plan asset allocations (as a percent)	6.00%
Target plan asset allocations, range minimum (as a percent)	3.00%
Target plan asset allocations, range maximum (as a percent)	10.00%
Cash equivalents and short-term investments
Defined Benefit Plan Disclosure [Line Items]
Target plan asset allocations (as a percent)	0.00%
Target plan asset allocations, range minimum (as a percent)	0.00%
Target plan asset allocations, range maximum (as a percent)	5.00%

XML

Employee Retirement Plans - Fair Values by Hierarchy of Inputs (Details) - USD ($) $ in Millions		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		$ (1,435)	$ (1,301)
Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(142)	(144)	$ (139)
Common and preferred stock
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(66)	(55)
Common and preferred stock | Quoted Prices in Active Markets for Identical Assets (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(66)	(55)
Common and preferred stock | Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Common and preferred stock | Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Commingled/pooled/mutual funds (a)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	[1]	(490)	(502)
Commingled/pooled/mutual funds (a) | Quoted Prices in Active Markets for Identical Assets (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	[1]	0	(54)
Commingled/pooled/mutual funds (a) | Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	[1]	(490)	(448)
Commingled/pooled/mutual funds (a) | Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	[1]	0	0
Total equity
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(556)	(557)
Total equity | Quoted Prices in Active Markets for Identical Assets (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(66)	(109)
Total equity | Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(490)	(448)
Total equity | Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
U.S. government and agency debt securities
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(194)	(177)
U.S. government and agency debt securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
U.S. government and agency debt securities | Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(194)	(177)
U.S. government and agency debt securities | Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Non-U.S. government and agency debt securities
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(54)	(32)
Non-U.S. government and agency debt securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Non-U.S. government and agency debt securities | Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(54)	(32)
Non-U.S. government and agency debt securities | Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Investment-grade debt securities
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(197)	(199)
Investment-grade debt securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Investment-grade debt securities | Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(197)	(199)
Investment-grade debt securities | Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
High-yield debt securities
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(53)	(36)
High-yield debt securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
High-yield debt securities | Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(53)	(36)
High-yield debt securities | Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Commingled/pooled funds (a)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	[1]	(165)	(129)
Commingled/pooled funds (a) | Quoted Prices in Active Markets for Identical Assets (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	[1]	0	0
Commingled/pooled funds (a) | Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	[1]	(165)	(129)
Commingled/pooled funds (a) | Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	[1]	0	0
Mortgage backed securities
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(3)	0
Mortgage backed securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Mortgage backed securities | Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(3)	0
Mortgage backed securities | Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Other
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(11)	(4)
Other | Quoted Prices in Active Markets for Identical Assets (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Other | Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(10)	(3)
Other | Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(1)	(1)
Total fixed income
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(677)	(577)
Total fixed income | Quoted Prices in Active Markets for Identical Assets (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Total fixed income | Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(676)	(576)
Total fixed income | Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(1)	(1)	(1)
Limited partnerships
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(103)	(106)
Limited partnerships | Quoted Prices in Active Markets for Identical Assets (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Limited partnerships | Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Limited partnerships | Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(103)	(106)	(103)
Other Real Estate Assets
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(54)	(52)
Other Real Estate Assets | Quoted Prices in Active Markets for Identical Assets (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Other Real Estate Assets | Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(16)	(15)
Other Real Estate Assets | Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(38)	(37)	$ (35)
Cash equivalents and short-term investments
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(11)	(10)
Cash equivalents and short-term investments | Quoted Prices in Active Markets for Identical Assets (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Cash equivalents and short-term investments | Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(11)	(10)
Cash equivalents and short-term investments | Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Total
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(1,401)	(1,302)
Total | Quoted Prices in Active Markets for Identical Assets (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(66)	(109)
Total | Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(1,193)	(1,049)
Total | Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(142)	(144)
Cash on hand
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		0	0
Receivables
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		(35)	(9)
Accounts payable
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets		$ (1)	$ (10)

[1] Certain investments in commingled/pooled equity funds have been classified as Level 2 in 2016 and 2015 because observable quoted prices for these institutional funds are not available.

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Employee Retirement Plans - Reconciliation of Change in Fair Value Measurement of Defined Benefit Plans' Consolidated Assets (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Change in Plan Assets:
Fair value as of beginning of period	$ 1,301
Fair value as of end of period	1,435	$ 1,301
Significant Unobservable Inputs (Level 3)
Change in Plan Assets:
Fair value as of beginning of period	144	139
Realized gains (losses)	6	(1)
Unrealized gains (losses)	(1)	6
Purchases	1	2
Sales	(8)	(2)
Settlements	0	0
Net transfers into (out of) Level 3	0	0
Fair value as of end of period	142	144
Fixed income
Change in Plan Assets:
Fair value as of beginning of period	577
Fair value as of end of period	677	577
Fixed income | Significant Unobservable Inputs (Level 3)
Change in Plan Assets:
Fair value as of beginning of period	1	1
Realized gains (losses)	0	0
Unrealized gains (losses)	0	0
Purchases	0	0
Sales	0	0
Settlements	0	0
Net transfers into (out of) Level 3	0	0
Fair value as of end of period	1	1
Other Real Estate Assets
Change in Plan Assets:
Fair value as of beginning of period	52
Fair value as of end of period	54	52
Other Real Estate Assets | Significant Unobservable Inputs (Level 3)
Change in Plan Assets:
Fair value as of beginning of period	37	35
Realized gains (losses)	1	(1)
Unrealized gains (losses)	2	5
Purchases	0	0
Sales	(2)	(2)
Settlements	0	0
Net transfers into (out of) Level 3	0	0
Fair value as of end of period	38	37
Limited partnerships
Change in Plan Assets:
Fair value as of beginning of period	106
Fair value as of end of period	103	106
Limited partnerships | Significant Unobservable Inputs (Level 3)
Change in Plan Assets:
Fair value as of beginning of period	106	103
Realized gains (losses)	5	0
Unrealized gains (losses)	(3)	1
Purchases	1	2
Sales	(6)	0
Settlements	0	0
Net transfers into (out of) Level 3	0	0
Fair value as of end of period	$ 103	$ 106

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Employee Retirement Plans - Expected Benefit Payments (Details) $ in Millions	Dec. 31, 2016 USD ($)
Pension Benefits
Defined Benefit Plan, Expected Future Benefit Payments, Fiscal Year Maturity [Abstract]
2017	$ 165	[1]
2018	100
2019	100
2020	110
2021	114
2022 - 2026	580
Postretirement Benefits
Defined Benefit Plan, Expected Future Benefit Payments, Fiscal Year Maturity [Abstract]
2017	8
2018	8
2019	9
2020	7
2021	7
2022 - 2026	$ 39

[1] Pension benefits for the year ended December 31, 2017 include expected payments to L&W employees who elected lump sum upon termination from USG Corporation.

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Share-Based Compensation - Textuals (Details)	12 Months Ended
	Dec. 31, 2016 USD ($) Installment shares	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Number of shares reserved for future grant under the LTIP (in shares) | shares	7,000,000
Income tax benefits on share based arrangements	$ 0	$ 0	$ 0
Assumptions:
Expense for share-based arrangements	18,000,000	14,000,000	20,000,000
Operating loss carryforwards	923,000,000
Unrecognized tax benefits resulting in NOL carryforward	15,000,000	18,000,000	22,000,000	$ 22,000,000
Employee stock option
Assumptions:
Excess tax benefit from option exercises	0	0	0
Operating loss carryforwards	70,000,000
Unrecognized tax benefits resulting in NOL carryforward	$ 26,000,000
Stock Options
Number of annual installments | Installment	4
Vesting period	1 year
Expiration period of stock options	10 years
MSUs
Equity Instruments Other than Options, Additional Disclosures
Minimum number of performance shares earned (as a percent)	0.00%
Maximum number of performance shares earned (as a percent)	150.00%
Awards vested (in shares) | shares	303,790
Number of shares vested | shares	267,335
Unrecognized compensation cost	$ 5,000,000
Weighted average period for recognition of unrecognized compensation cost	1 year 8 months 15 days
Stock Options
Vesting period	3 years
RSUs
Equity Instruments Other than Options, Additional Disclosures
Awards vested (in shares) | shares	128,000
Unrecognized compensation cost	$ 3,000,000
Weighted average period for recognition of unrecognized compensation cost	2 years 7 months 6 days
Fair value of RSUs that vested in period	$ 2,000,000	4,000,000	6,000,000
Stock Options
Vesting period	3 years
Performance shares
Equity Instruments Other than Options, Additional Disclosures
Minimum number of performance shares earned (as a percent)	0.00%
Maximum number of performance shares earned (as a percent)	200.00%
Awards vested (in shares) | shares	86,478
Number of shares vested | shares	0
Unrecognized compensation cost	$ 2,000,000
Weighted average period for recognition of unrecognized compensation cost	1 year 8 months
Stock Options
Vesting period	3 years
Income from discontinued operations, net of tax
Assumptions:
Expense for share-based arrangements	$ 1,000,000	$ 1,000,000	$ 1,000,000

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Share-Based Compensation - MSUs Assumptions (Details) - MSUs - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Assumptions:
Weighted average grant date fair value (in dollars per share)	$ 19.59	$ 30.06	$ 40.20
Expected volatility (as a percent)	34.02%	42.70%	54.93%
Risk-free rate	0.86%	1.09%	0.63%
Expected term	2 years 11 months 13 days	2 years 11 months 13 days	2 years 11 months 10 days
Expected dividends	$ 0	$ 0	$ 0

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Share-Based Compensation - MSUs Activity (Details) - MSUs - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Weighted Number of Shares
Nonvested at beginning of period (in shares)	743,000
Granted (in shares)	801,000
Vested (in shares)	(303,790)
Forfeited (in shares)	(83,000)
Nonvested at end of period (in shares)	1,157,000	743,000
Weighted Average Grant Date Fair Value
Nonvested at January 1 (in dollars per share)	$ 34.33
Granted (in dollars per share)	19.59	$ 30.06	$ 40.20
Vested (in dollars per share)	40.20
Forfeited (in dollars per share)	23.22
Nonvested at December 31 (in dollars per share)	$ 23.39	$ 34.33

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Share-Based Compensation - Performance Shares Assumptions (Details) - Performance shares - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Assumptions:
Weighted average grant date fair value (in dollars per share)	$ 21.10	$ 30.63	$ 46.46
Expected volatility (as a percent)	34.02%	42.70%	54.93%
Risk-free rate	0.86%	1.09%	0.63%
Expected term	2 years 11 months 13 days	2 years 11 months 13 days	2 years 11 months 10 days
Expected dividends	$ 0	$ 0	$ 0

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Share-Based Compensation - Performance Shares Activity (Details) - Performance shares - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Weighted Number of Shares
Nonvested at beginning of period (in shares)	222,000
Granted (in shares)	214,000
Vested (in shares)	(86,478)
Forfeited (in shares)	(104,000)
Nonvested at end of period (in shares)	246,000	222,000
Weighted Average Grant Date Fair Value
Nonvested at January 1 (in dollars per share)	$ 37.20
Granted (in dollars per share)	21.10	$ 30.63	$ 46.46
Vested (in dollars per share)	46.46
Forfeited (in dollars per share)	25.22
Nonvested at December 31 (in dollars per share)	$ 24.98	$ 37.20

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Share-Based Compensation - RSUs Activity (Details) - RSUs - $ / shares shares in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Number of Shares
Nonvested at beginning of period (in shares)	270
Granted (in shares)	106
Vested (in shares)	(128)
Forfeited (in shares)	(20)
Nonvested at end of period (in shares)	228	270
Weighted Average Grant Date Fair Value
Nonvested at January 1 (in dollars per share)	$ 24.49
Granted (in dollars per share)	23.94	$ 28.56	$ 32.50
Vested (in dollars per share)	18.70
Forfeited (in dollars per share)	26.45
Nonvested at December 31 (in dollars per share)	$ 27.31	$ 24.49

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Share-Based Compensation - RSU Assumptions (Details) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
RSUs
Assumptions:
Weighted average grant date fair value (in dollars per share)	$ 23.94	$ 28.56	$ 32.50

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Share-Based Compensation - Summary of Stock Options (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Number of Options
Outstanding at beginning of period (in shares)	3,496
Exercised (in shares)	(305)
Canceled (in shares)	(1,017)
Outstanding at end of period (in shares)	2,174	3,496
Exercisable (in shares)	2,174
Weighted Average Exercise Price
Outstanding at beginning of period (in dollars per share)	$ 28.00
Exercised (in dollars per share)	13.71
Canceled (in dollars per share)	43.93
Outstanding at end of period (in dollars per share)	22.55	$ 28.00
Exercisable (in dollars per share)	$ 22.55
Options Activity, Weighted Remaining Contractual Term and Aggregate Intrisic Value
Outstanding weighted average remaining contractual term (years)	2 years 9 months 10 days	2 years 11 months 26 days
Exercisable weighted average remaining contractual term (years)	2 years 9 months 10 days
Outstanding aggregate intrinsic value	$ 22	$ 19
Exercisable aggregate intrinsic value	$ 22
Vested or expected to vest
Number of options	2,174
Weighted average exercise price (in dollars per share)	$ 22.55
Weighted Average Remaining Contractual Term (years)	2 years 9 months 10 days
Aggregate intrinsic value	$ 22
Employee stock option
Vested or expected to vest
Intrinsic value of stock options	4	6	$ 8
Cash received from exercise of stock options	4	6	4
Fair value of stock options vested	$ 1	$ 1	$ 2

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Share-Based Compensation - Non-employee deferred stock units (Details) - Non Employee Director Deferred Stock [Member] - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Board of Director Awards
Deferred stock unit expense	$ 1	$ 1	$ 1
Number of deferred stock units held by non-employee directors (in shares)	220,047	193,117	164,235

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Supplemental Balance Sheet Information - Inventories (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Inventory, Net [Abstract]
Finished goods	$ 132	$ 115
Work in progress	37	36
Raw materials	67	68
Total	$ 236	$ 219

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Supplemental Balance Sheet Information - Property, Plant and Equipment (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Abstract]
Land and mineral deposits	$ 116	$ 127
Buildings and improvements	1,078	1,075
Machinery and equipment	2,473	2,450
Property, plant and equipment, gross	3,667	3,652
Reserves for depreciation and depletion	(1,960)	(1,881)
Total	1,707	1,771
Annual depreciation and depletion expense	$ 129	$ 125

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Supplemental Balance Sheet Information - Accrued Expenses (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Accrued Liabilities, Current [Abstract]
Self-insurance reserves	$ 12	$ 13
Employee compensation	35	29
Interest	31	45
Derivatives	5	17
Pension and other postretirement benefits	24	18
Environmental	18	16
Other	50	48
Total	$ 175	$ 186

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Supplemental Balance Sheet Information - Changes in Balances of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Balance at beginning of period	$ (314)	$ (338)	$ 24
Other comprehensive income (loss) before reclassifications	(86)	2	(355)
Less: Amounts reclassified from AOCI, net of tax	(15)	(22)	7
Other comprehensive (loss) income, net of tax	(71)	24	(362)
Balance at end of period	(385)	(314)	(338)
Derivatives
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Balance at beginning of period	20	16	35
Other comprehensive income (loss) before reclassifications	1	(5)	(15)
Less: Amounts reclassified from AOCI, net of tax	(6)	(9)	4
Other comprehensive (loss) income, net of tax	7	4	(19)
Balance at end of period	27	20	16
Pension and Other Postretirement Benefit Plans
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Balance at beginning of period	(221)	(302)	(32)
Other comprehensive income (loss) before reclassifications	(34)	74	(272)
Less: Amounts reclassified from AOCI, net of tax	(9)	(7)	(2)
Other comprehensive (loss) income, net of tax	(25)	81	(270)
Balance at end of period	(246)	(221)	(302)
Foreign Currency Translation
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Balance at beginning of period	(113)	(52)	21
Other comprehensive income (loss) before reclassifications	(53)	(67)	(68)
Less: Amounts reclassified from AOCI, net of tax	0	(6)	5
Other comprehensive (loss) income, net of tax	(53)	(61)	(73)
Balance at end of period	$ (166)	$ (113)	$ (52)

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Supplemental Balance Sheet Information - Amounts Reclassified from AOCI (Details) - USD ($) $ in Millions	3 Months Ended				12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Cost of products sold					$ (2,312)	$ (2,263)	$ (2,279)
Net reclassification from AOCI for cash flow hedges included in income and gain from the sale of equity method investment to related party					0	13	2
Selling and administrative expenses					(304)	(302)	(323)
Gain on sale of discontinued operations, net of tax	$ 279	$ 0	$ 0	$ 0	279	0	0
Less: Income tax expense on reclassification from AOCI included in income tax benefit					63	(740)	7
Net income					510	991	38
Derivatives | Reclassification out of accumulated other comprehensive income
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Cost of products sold					10	8	(4)
Net reclassification from AOCI for cash flow hedges included in income and gain from the sale of equity method investment to related party					0	1	0
Less: Income tax expense on reclassification from AOCI included in income tax benefit					4	(2)	0
Net income					(6)	(9)	4
Pension and postretirement benefits | Reclassification out of accumulated other comprehensive income
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Cost of products sold					1	(1)	0
Selling and administrative expenses					12	5	(1)
Gain on sale of discontinued operations, net of tax					(3)	(4)	(4)
Less: Income tax expense on reclassification from AOCI included in income tax benefit					7	1	(1)
Net income					(9)	(7)	(2)
Foreign Currency Translation | Reclassification out of accumulated other comprehensive income
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Selling and administrative expenses					0	(6)	(5)
Net income					$ 0	$ (6)	$ 5

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Supplemental Balance Sheet Information - Textuals (Details) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Net after-tax loss on derivatives reclassified from AOCI	$ 2

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Supplemental Balance Sheet Information - Asset Retirement Obligations (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016		Dec. 31, 2015
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward]
Balance as of beginning of period	$ 119		$ 123
Accretion expense	7		7
Liabilities incurred	2		1
Changes in estimated cash flows (a)	(12)	[1]	(5)
Liabilities settled (b)	(4)	[2]	(2)
Foreign currency translation	1		(5)
Balance as of end of period	113		$ 119
Changes in estimated cash flows related to quarries	(8)
Liabilities settled in conjunction with sale of surplus property	$ 2

[1] Changes in estimated cash flows for the year ended December 31, 2016 includes a $8 million reduction related to one of our quarries.

[2] Liabilities settled for the year ended December 31, 2016 includes a $2 million liability that was relieved in conjunction with the sale of a surplus property.

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Long-Lived Asset Impairment Charges - Impairment Charges (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Restructuring Cost and Reserve [Line Items]
Long-lived asset impairment charges	$ 10	$ 0	$ 90
Self-unloading ocean vessels
Restructuring Cost and Reserve [Line Items]
Long-lived asset impairment charges	0	0	60
Machinery and equipment | Empire, Nevada and New Orleans, Louisiana
Restructuring Cost and Reserve [Line Items]
Long-lived asset impairment charges	0	0	16
Machinery and equipment | Gypsum, Ohio
Restructuring Cost and Reserve [Line Items]
Long-lived asset impairment charges	0	0	2
Future manufacturing facilities
Restructuring Cost and Reserve [Line Items]
Long-lived asset impairment charges	0	0	12
Closed Gypsum Quarry and Ship Loading Facility [Member]
Restructuring Cost and Reserve [Line Items]
Long-lived asset impairment charges	$ 10	$ 0	$ 0

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Long-Lived Asset Impairment Charges - Textuals (Details) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($) facility	Dec. 31, 2014 USD ($)	Apr. 30, 2015 ocean_vessel
Restructuring Cost and Reserve [Line Items]
Long-lived asset impairment charges	$ 10	$ 0	$ 90
Severance and other charges	2
Self-unloading ocean vessels | ocean_vessel				2
Future facilities | facility		2
Self-unloading ocean vessels
Restructuring Cost and Reserve [Line Items]
Long-lived asset impairment charges	0	$ 0	60
Machinery and equipment | Empire, Nevada and New Orleans, Louisiana
Restructuring Cost and Reserve [Line Items]
Long-lived asset impairment charges	0	0	16
Machinery and equipment | Gypsum, Ohio
Restructuring Cost and Reserve [Line Items]
Long-lived asset impairment charges	0	0	2
Future manufacturing facilities
Restructuring Cost and Reserve [Line Items]
Long-lived asset impairment charges	$ 0	$ 0	$ 12

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Gypsum Transportation Limited (Details) $ in Millions	1 Months Ended	3 Months Ended								12 Months Ended
	Apr. 30, 2015 USD ($) ocean_vessel	Dec. 31, 2016 USD ($)	Sep. 30, 2016 USD ($)	Jun. 30, 2016 USD ($)	Mar. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Sep. 30, 2015 USD ($)	Jun. 30, 2015 USD ($)	Mar. 31, 2015 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Property, Plant and Equipment [Line Items]
Self-unloading ocean vessels | ocean_vessel	2
Long-lived asset impairment charges										$ 10	$ 0	$ 90
Contract termination charge												6
Proceeds from sale of assets										12	58	13
Gain on asset disposition										9	13	11
Early termination costs paid	$ 7
Cost to exit shipping operations								$ 6
Gain on disposal of shipping operations, net										0	1	0
Contract termination and (recovery) loss on receivable										3	6	(15)
Recovered receivable in interest income										1
Recovered receivable in other income										4
Recovered receivable per release and debt settlement agreement										8
Operating profit (loss)		$ 59	$ 97	$ 122	$ 116	$ 94	$ 94	$ 95	$ 72	394	355	149
Gypsum Transportation Limited
Property, Plant and Equipment [Line Items]
Operating profit (loss)										3	7	(52)
GTL trading partner
Property, Plant and Equipment [Line Items]
Provision for bad debt												9
Receivable per release and debt settlement agreement						14					14
Loss on trade receivable						$ 9					9
Self-unloading ocean vessels
Property, Plant and Equipment [Line Items]
Long-lived asset impairment charges										$ 0	$ 0	$ 60
Proceeds from sale of assets	42
Gain on asset disposition	$ 7

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Segments - Textuals (Details) - segment	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Segment Reporting [Abstract]
Number of reportable segments	3
Net Sales | Home Depot, Inc.
Segment Reporting Information [Line Items]
Percentage of major customer net sales	23.00%	23.00%	22.00%
Net Sales | L&W Supply
Segment Reporting Information [Line Items]
Percentage of major customer net sales	19.00%	18.00%	18.00%

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Segments - Gypsum and Ceilings (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Net Sales:
Net sales	$ 734	$ 767	$ 769	$ 747	$ 718	$ 747	$ 740	$ 708	$ 3,017	$ 2,913	$ 2,904
Operating Profit (Loss):
Operating profit (loss)	59	$ 97	$ 122	$ 116	94	$ 94	$ 95	$ 72	394	355	149
Depreciation, Depletion and Amortization:
Depreciation, depletion and amortization									134	131	142
Capital Expenditures:
Capital expenditures									83	87	125
Assets	3,869				4,736				3,869	4,736	3,936
Operating Segments | Gypsum
Net Sales:
Net sales									2,526	2,426	2,396
Operating Profit (Loss):
Operating profit (loss)									389	361	165
Depreciation, Depletion and Amortization:
Depreciation, depletion and amortization									108	106	116
Capital Expenditures:
Capital expenditures									78	84	94
Assets	1,920				1,991				1,920	1,991	2,104
Operating Segments | Ceilings
Net Sales:
Net sales									500	496	518
Operating Profit (Loss):
Operating profit (loss)									109	88	89
Depreciation, Depletion and Amortization:
Depreciation, depletion and amortization									16	16	14
Capital Expenditures:
Capital expenditures									4	3	30
Assets	241				276				241	276	285
Eliminations
Net Sales:
Net sales									(9)	(9)	(10)
Capital Expenditures:
Assets	0				(55)				0	(55)	(57)
Corporate
Operating Profit (Loss):
Operating profit (loss)									(104)	(94)	(105)
Depreciation, Depletion and Amortization:
Depreciation, depletion and amortization									10	9	12
Capital Expenditures:
Capital expenditures									1	0	1
Assets	1,080				1,485				1,080	1,485	489
Equity method investments
Capital Expenditures:
Assets	628				682				628	682	735
Segment Reconciling Items
Capital Expenditures:
Assets	$ 0				$ 357				$ 0	$ 357	$ 380

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Segments - Geographic Information (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Geographic Areas, Revenues from External Customers [Abstract]
Net sales	$ 734	$ 767	$ 769	$ 747	$ 718	$ 747	$ 740	$ 708	$ 3,017	$ 2,913	$ 2,904
Geographic Areas, Long-Lived Assets [Abstract]
Long-lived assets	1,707				1,771				1,707	1,771	1,891
Reportable geographical components | United States
Geographic Areas, Revenues from External Customers [Abstract]
Net sales									2,625	2,524	2,400
Geographic Areas, Long-Lived Assets [Abstract]
Long-lived assets	1,563				1,605				1,563	1,605	1,648
Reportable geographical components | Canada
Geographic Areas, Revenues from External Customers [Abstract]
Net sales									389	379	406
Geographic Areas, Long-Lived Assets [Abstract]
Long-lived assets	80				90				80	90	112
Reportable geographical components | Other Foreign
Geographic Areas, Revenues from External Customers [Abstract]
Net sales									189	196	283
Geographic Areas, Long-Lived Assets [Abstract]
Long-lived assets	$ 64				$ 76				64	76	131
Geographic transfers
Geographic Areas, Revenues from External Customers [Abstract]
Net sales									$ (186)	$ (186)	$ (185)

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Segments - UBBP (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016		Dec. 31, 2015	Dec. 31, 2014
Segment Reporting Information [Line Items]
Assets	$ 3,869		$ 4,736	$ 3,936
USG Boral Building Products
Segment Reporting Information [Line Items]
Net sales	1,052		1,003	927	[1]
Net income attributable to UBBP	99		96	67	[2]
Depreciation, depletion, and amortization	43		43	31
Capital expenditures	45		49	40
Assets	1,292		1,303	1,435
Geographic Areas, Long-Lived Assets [Abstract]
Long-lived assets	653		680	731
USG Boral Building Products | Reportable geographical components | Australia
Segment Reporting Information [Line Items]
Net sales	381		345	312	[1]
Geographic Areas, Long-Lived Assets [Abstract]
Long-lived assets	217		216	245
USG Boral Building Products | Reportable geographical components | South Korea
Segment Reporting Information [Line Items]
Net sales	223		200	197	[1]
Geographic Areas, Long-Lived Assets [Abstract]
Long-lived assets	107		106	113
USG Boral Building Products | Reportable geographical components | Thailand
Segment Reporting Information [Line Items]
Net sales	141		145	133	[1]
Geographic Areas, Long-Lived Assets [Abstract]
Long-lived assets	75		72	72
USG Boral Building Products | Reportable geographical components | China
Segment Reporting Information [Line Items]
Net sales	103		120	122	[1]
Geographic Areas, Long-Lived Assets [Abstract]
Long-lived assets	97		116	127
USG Boral Building Products | Reportable geographical components | Oman
Geographic Areas, Long-Lived Assets [Abstract]
Long-lived assets	86		103	96
USG Boral Building Products | Reportable geographical components | Other
Segment Reporting Information [Line Items]
Net sales	255		234	206	[1]
Geographic Areas, Long-Lived Assets [Abstract]
Long-lived assets	71		67	78
USG Boral Building Products | Geographic transfers
Segment Reporting Information [Line Items]
Net sales	(51)		(41)	(43)	[1]
USG Boral Building Products | USG Boral Building Products
Segment Reporting Information [Line Items]
Net sales	1,052		1,003	927	[2]
Operating profit	$ 133	[3]	$ 124	$ 95	[2]

[1] Operating results are presented for UBBP for the ten months ended December 31, 2014.

[2] Operating results are presented for UBBP for the ten months ended December 31, 2014.

[3] Year ended December 31, 2016 includes long-lived asset impairment charges of $8 million for China and of $14 million for Oman.

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Income Taxes - Income from Continuing Operations (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income (loss) before income taxes
U.S.	$ 201	$ 152	$ 14
Foreign	73	84	19
Income from continuing operations before income taxes	$ 274	$ 236	$ 33

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Income Taxes - Income Tax Expense (Benefit) on Continuing Operations (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Current:
Federal	$ 0	$ 0	$ 0
Foreign	5	12	2
State	1	1	1
Income tax expense (benefit) on continuing operations	6	13	3
Deferred:
Federal	41	(631)	0
Foreign	2	(4)	4
State	14	(118)	0
Deferred income tax expense (benefit) on continuing operations	57	(753)	4
Provision for income tax expense	$ 63	$ (740)	$ 7

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Income Taxes - Differences Between Provisions for Income Taxes (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Differences between actual provisions for income taxes and provisions for income taxes at the U.S. federal statutory rate (35%)
Taxes on income from continuing operations at U.S. federal statutory rate		$ 96	$ 82	$ 12
Foreign earnings subject to different tax rates	[1]	(3)	(3)	16
State income tax, net of federal benefit		10	8	1
Change in valuation allowance		0	(827)	(5)
Income from equity method investments	[2]	(17)	(16)	(12)
Withholding taxes		0	0	2
Other, net		(2)	2	(1)
Tax release from AOCI		0	0	(2)
Gain on deconsolidation		0	0	(7)
Benefits from unrecognized tax positions		0	(6)	0
Tax expense not realized on pension loss		0	0	3
Foreign tax credits		(21)	0	0
Tax expense on distribution of foreign earnings		0	20	0
Provision for income tax expense		$ 63	$ (740)	$ 7
Effective income tax rate		22.90%	(313.60%)	21.20%

[1] Foreign earnings subject to different tax rates includes amounts related to impairments and other charges associated with our shipping operations.

[2] Included in income from equity method investments are taxes associated with that income in the respective jurisdictions. These taxes, which are predominately foreign statutory rates, are at rates that are lower than the U.S. federal statutory rate.

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Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Deferred Tax Assets:
Net operating loss and tax credit carryforwards	$ 599	$ 774
Pension and postretirement benefits	112	150
Goodwill and other intangible assets	0	24
Reserves not deductible until paid	20	29
Self insurance	2	11
Capitalized interest	13	13
Inventories	6	8
Share-based compensation	28	33
Other	4	5
Deferred tax assets before valuation allowance	784	1,047
Valuation allowance	(51)	(70)
Total deferred tax assets	733	977
Deferred Tax Liabilities:
Property, plant and equipment	245	254
Other	0	0
Total deferred tax liabilities	245	254
Net deferred tax assets	$ 488	$ 723

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Income Taxes - Textuals (Details) - USD ($)	3 Months Ended	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Federal statutory rate		35.00%	35.00%	35.00%
Amount related to evaluation for need for valuation allowance against deferred tax assets	$ 731,000,000	$ (731,000,000)
Decrease in valuation allowance against deferred tax assets		(19,000,000)
Income Tax Examination [Line Items]
Net deferred tax assets	723,000,000	488,000,000	$ 723,000,000
Valuation allowance	70,000,000	51,000,000	70,000,000
Approximate federal net operating loss carryforwards		923,000,000
Approximate federal alternative minimum tax credit carryforwards		45,000,000
Foreign deferred tax assets		143,000,000
Minimum taxable income needed to fully realize the U.S. federal net deferred tax assets		1,460,000,000
State deferred tax assets		$ 172,000,000
Percentage of change in ownership (more than)		50.00%
Period of change in ownership		3 years
Annual U.S. federal NOL utilization		$ 71,000,000
Total amounts of tax penalties and interest expense recognized on consolidated balance sheet	1,000,000	1,000,000	1,000,000
Total amounts of interest and penalties recognized in consolidated statements of operations		0
Total amount of unrecognized tax benefit that would affect our effective tax rate	$ 17,000,000	$ 14,000,000	$ 17,000,000	$ 5,000,000
Income tax examinations, possible period for resolution		12 months
Undistributed earnings		$ 324,000,000
Minimum
Income Tax Examination [Line Items]
Period of statutes of limitations		3 years
Maximum
Income Tax Examination [Line Items]
Period of statutes of limitations		5 years

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Income Taxes - Reconciliation of Unrecognized Tax Benefits (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Reconciliation of the beginning and ending amount of unrecognized tax benefits
Balance as of beginning of period	$ 18	$ 22	$ 22
Tax positions related to the current period:
Gross increase	0	4	2
Gross decrease	0	0	0
Tax positions related to prior periods:
Gross increase	0	0	0
Gross decrease	(3)	(1)	0
Settlements	0	(6)	(2)
Lapse of statutes of limitations	0	(1)	0
Balance as of end of period	$ 15	$ 18	$ 22

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Earnings Per Share - Reconciliation of Basic Income Per Share to Diluted Income Per Share (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended																12 Months Ended
	Dec. 31, 2016		Sep. 30, 2016		Jun. 30, 2016		Mar. 31, 2016		Dec. 31, 2015		Sep. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Earnings Per Share [Abstract]
Income from continuing operations	$ 28		$ 56		$ 67		$ 60		$ 819	[1]	$ 68	[1]	$ 69	[1]	$ 20	[1]	$ 211	$ 976	$ 26
Net income attributable to noncontrolling interest																	0	0	1
Income from continuing operations attributable to USG																	211	976	25
Income from discontinued operations, net of tax	0		6		7		7		$ (7)		$ 8		$ 10		$ 4		20	15	12
Gain on sale of discontinued operations, net of tax	$ 279		$ 0		$ 0		$ 0										279	0	0
Income available to USG and shareholders																	$ 510	$ 991	$ 37
Average common shares (in shares)																	145,929,506	145,457,208	141,722,616
Dilutive RSUs, MSUs, performance shares and stock options (in shares)																	1,800,000	1,600,000	2,400,000
Deferred shares associated with a deferred compensation program for non-employee directors (in shares)																	0	100,000	200,000
Average diluted common shares (in shares)																	147,660,979	147,246,600	144,296,316
Basic earnings per average common share:
Income from continuing operations (in dollars per share)	$ 2.10	[2]	$ 0.43	[2]	$ 0.50	[2]	$ 0.46	[2]	$ 5.58	[2]	$ 0.52	[2]	$ 0.54	[2]	$ 0.16	[2]	$ 1.45	$ 6.70	$ 0.18
Loss from discontinued operations (in dollars per share)																	2.04	0.11	0.08
Net income (in dollars per share)																	3.49	6.81	0.26
Diluted earnings per average common share:
Income from continuing operations (in dollars per share)	$ 2.07	[2]	$ 0.42	[2]	$ 0.50	[2]	$ 0.46	[2]	$ 5.51	[2]	$ 0.52	[2]	$ 0.54	[2]	$ 0.16	[2]	1.44	6.62	0.17
Loss from discontinued operations (in dollars per share)																	2.02	0.11	0.08
Net income (in dollars per share)																	$ 3.46	$ 6.73	$ 0.25

[1] Income from continuing operations and net income attributable to USG for the fourth quarter of 2015 included a reversal of an income tax valuation allowance of $731 million.

[2] The sum of the four quarters is not necessarily the same as the total for the year.

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Earnings Per Share - Anti-Dilutive Securities (Details) - shares shares in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Stock options, RSUs, MSUs and performance shares
Earnings (Loss) Per Share [Line Items]
Anti-dilutive securities excluded from computation of diluted earnings (loss) per share (in shares)	1.5	1.9	2.1
Deferred shares associated with a deferred compensation program for non-employee directors
Earnings (Loss) Per Share [Line Items]
Anti-dilutive securities excluded from computation of diluted earnings (loss) per share (in shares)	0.2	0.0	0.0

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Stockholder Rights Plan (Details)	12 Months Ended
	Dec. 31, 2016	May 09, 2013	Mar. 22, 2013
Equity [Abstract]
Period of cumulative change in ownership	3 years
Aggregate increase in common stock owned	50.00%
Ownership interest to cause cumulative change in ownership (or more than) (as a percent)	5.00%
Beneficial owner of common stock percentage (or more than)		4.90%	4.90%
Triggering threshold for rights issued pursuant to the plan	15.00%
Period of review	3 years
Beneficial ownership percentage post standstill period (up to)	50.00%
Beneficial owner of common stock percentage in future (more than)	50.00%
Period of offer to purchase common stock	60 days

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Lease Commitments - Textuals (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Lease Commitments [Abstract]
Lease expense	$ 37	$ 36	$ 41

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Lease Commitments - Future Minimum Lease Payments (Details) $ in Millions	Dec. 31, 2016 USD ($)
Future minimum lease payments
2017	$ 31
2018	26
2019	22
2020	17
2021	12
After 2021	$ 7

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Litigation (Details) $ in Millions	Dec. 31, 2016 USD ($) Defendants Homebuilder	Dec. 31, 2015 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Number of defendants named in lawsuit | Defendants	7
Number of homebuilders asserting individual claims | Homebuilder	12
Accrual potential liability for environmental cleanup | $	$ 18	$ 16

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Quarterly Financial Data (unaudited) - Quarterly Financial Data (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended																12 Months Ended
	Dec. 31, 2016		Sep. 30, 2016		Jun. 30, 2016		Mar. 31, 2016		Dec. 31, 2015		Sep. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Quarterly Financial Information Disclosure [Abstract]
Net sales	$ 734		$ 767		$ 769		$ 747		$ 718		$ 747		$ 740		$ 708		$ 3,017	$ 2,913	$ 2,904
Gross profit	150		181		193		181		165		169		170		146		705	650	625
Operating profit (loss)	59		97		122		116		94		94		95		72		394	355	149
Income (loss) from continuing operations	28		56		67		60		819	[1]	68	[1]	69	[1]	20	[1]	211	976	26
Income from discontinued operations, net of tax	0		6		7		7		(7)		8		10		4		20	15	12
Gain on sale of discontinued operations, net of tax	279		0		0		0										279	0	0
Net income (loss) attributable to USG	$ 307		$ 62		$ 74		$ 67		$ 812	[1]	$ 76	[1]	$ 79	[1]	$ 24	[1]	$ 510	$ 991	$ 37
Income per average common share:
Basic (in dollars per share)	$ 2.10	[2]	$ 0.43	[2]	$ 0.50	[2]	$ 0.46	[2]	$ 5.58	[2]	$ 0.52	[2]	$ 0.54	[2]	$ 0.16	[2]	$ 1.45	$ 6.70	$ 0.18
Diluted (in dollars per share)	$ 2.07	[2]	$ 0.42	[2]	$ 0.50	[2]	$ 0.46	[2]	$ 5.51	[2]	$ 0.52	[2]	$ 0.54	[2]	$ 0.16	[2]	$ 1.44	$ 6.62	$ 0.17

[1] Income from continuing operations and net income attributable to USG for the fourth quarter of 2015 included a reversal of an income tax valuation allowance of $731 million.

[2] The sum of the four quarters is not necessarily the same as the total for the year.

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Quarterly Financial Data (unaudited) - Textuals (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2016
Quarterly Financial Information Disclosure [Abstract]
Reversal of income tax valuation allowance	$ 731	$ (731)

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Schedule II - Valuation And Qualifying Accounts (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Doubtful accounts
Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at beginning of period	$ 7	$ 14	$ 6
Charged to costs and expenses	1	(6)	8
Charged to other accounts	0	0	0
Deductions	(3)	(1)	0
Balance at end of period	5	7	14
Cash discounts
Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at beginning of period	2	1	1
Charged to costs and expenses	34	37	36
Charged to other accounts	0	0	0
Deductions	(33)	(36)	(36)
Balance at end of period	3	2	1
Income tax valuation allowance
Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at beginning of period	70	1,023	995
Charged to costs and expenses	0	0	1
Charged to other accounts	0	0	112
Deductions	(19)	(953)	(85)
Balance at end of period	$ 51	$ 70	$ 1,023