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.