8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange of 1934

March 3, 2006
(Date of earliest event reported)

USG CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation) 1-8864
(Commission File Number) 36-3329400
(IRS Employer Identification No.)

125 South Franklin Street, Chicago, Illinois 60606-4678
(Address of principal executive offices, including zip code)

(312) 606-4000
(Registrant’s telephone number, including area code)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

     o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 7.01 Regulation FD Disclosure.

     As previously disclosed, on February 17, 2006, USG Corporation announced that it had filed with the U.S. Bankruptcy Court for the District of Delaware a plan of reorganization and an accompanying disclosure statement in connection with its plan to emerge from Chapter 11 bankruptcy proceedings later this year. On March 3, 2006, we filed with the Bankruptcy Court as exhibit III to the disclosure statement projections that are intended to demonstrate the feasibility of the plan of reorganization. A copy of exhibit III to the disclosure statement is furnished as an exhibit hereto and incorporated herein by reference.

ITEM 9.01 Financial Statements and Exhibits.

(c) Exhibits. The following exhibit is being furnished as part of this Form 8-K:

Number	Description
99.1	Exhibit III (Projections) to Disclosure Statement, filed with the U.S. Bankruptcy Court for the District of Delaware on March 3, 2006.

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SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

USG CORPORATION
By:	/s/ Stanley L. Ferguson
	Stanley L. Ferguson,
	Executive Vice President and General Counsel

Date: March 3, 2006

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Exhibit III (Projections) to Disclosure Statement, filed with the U.S. Bankruptcy Court for the District of Delaware on March 3, 2006.

EX-99.1

Exhibit 99.1

USG CORPORATION
PROJECTED CONSOLIDATED FINANCIAL INFORMATION

SIGNIFICANT BUSINESS AND ECONOMIC ASSUMPTIONS

For purposes of demonstrating the feasibility of the Plan, the following financial projections (the “Projections”) were prepared by the Debtors. The Projections reflect the Debtors’ estimate of their expected consolidated results of operations, financial position and cash flows of the Reorganized Debtors and their non-debtor Affiliates (the “Company”). Accordingly, the Projections reflect the Debtors’ judgment of expected future operating performance and business conditions, which are subject to change.

The Debtors do not, as a matter of course, publish their business plans and strategies or forward looking projections of results of operations, financial position and cash flows. Accordingly, the Debtors do not anticipate that they will, and disclaim any obligation to, furnish updated business plans or projections to the holders of Claims or Equity Interests after the date of this Disclosure Statement exhibit, or to include such information in documents required to be filed with the Securities and Exchange Commission (the “SEC”) or otherwise make such information public.

In connection with the development of the Plan, the Debtors, with the assistance of various publications and resources, prepared the Projections. The Projections assume the Plan will be implemented in accordance with its stated terms. The assumptions disclosed herein are those that the Debtors believe to be significant to the Projections. Although the Debtors are of the opinion that these assumptions are reasonable under current circumstances, such assumptions are subject to inherent uncertainties, such as the size and growth of the North American residential and nonresidential construction and repair and remodel markets, industry wallboard capacity, interest rates, inflation, commodity and material prices, general economic conditions and other factors affecting the Company’s businesses. The impact of a change in any of these factors cannot be predicted with certainty. Because events and circumstances frequently do not occur as expected, there will be differences between the projected results and actual results. These differences may be material to the Projections herein.

The Projections were prepared in good faith based on assumptions believed to be reasonable and applied in a manner consistent with past practices. The Projections should be read in conjunction with the assumptions and qualifications contained herein, the risk factors described in Section VII of the Disclosure Statement and historical audited consolidated financial statements for the fiscal year ended December 31, 2005, contained in the fiscal Form 10-K included in Exhibit VIII of the Disclosure Statement.

The Projections reflect, to the best of the Debtors’ knowledge and belief, the Company’s expected results of operations, financial position and cash flows. Accordingly, the Projections reflect the Debtors’ judgment as of February 2006, the date these Projections were prepared. Consequently, actual financial results could differ significantly from projected results.

The following Projected Consolidated Financial Information is included herein:

• Summary of Significant Projection Assumptions and Accounting Policies

• Projected Consolidated Statements of Earnings for the years ending December 31, 2006 and 2007

• Projected Consolidated Balance Sheets as of December 31, 2006 and 2007

• Projected Consolidated Statements of Cash Flow for the years ending December 31, 2006 and 2007

• Notes to Projected Consolidated Financial Statements

All capitalized terms used in this exhibit and not otherwise defined have the meanings given to them in the Plan.

THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARD COMPLIANCE WITH THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

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(THE “AICPA”), THE FINANCIAL ACCOUNTING STANDARDS BOARD (THE “FASB”), OR THE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) REGARDING PROJECTIONS. FURTHERMORE, THE PROJECTIONS HAVE NOT BEEN AUDITED OR REVIEWED BY THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. THE PROJECTIONS, WHILE PRESENTED WITH NUMERICAL SPECIFICITY, ARE BASED UPON A VARIETY OF ESTIMATES AND ASSUMPTIONS, WHICH MAY NOT BE REALIZED, AND ARE SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, WHICH ARE BEYOND THE CONTROL OF THE DEBTORS. CONSEQUENTLY, THE PROJECTIONS SHOULD NOT BE REGARDED AS A REPRESENTATION OR WARRANTY BY THE DEBTORS, OR ANY OTHER PERSON, AS TO THE ACCURACY OF THE PROJECTIONS OR THAT THE PROJECTIONS WILL BE REALIZED. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PRESENTED IN THESE PROJECTIONS. HOLDERS OF CLAIMS MUST MAKE THEIR OWN DETERMINATIONS AS TO THE REASONABLENESS OF SUCH ASSUMPTIONS AND THE RELIABILITY OF THE PROJECTIONS IN MAKING THEIR DETERMINATIONS OF WHETHER TO ACCEPT OR REJECT THE PLAN, TO THE EXTENT SUCH CLAIMS ARE ALLOWED TO VOTE.

SUMMARY OF SIGNIFICANT PROJECTION ASSUMPTIONS AND ACCOUNTING POLICIES

The Projections reflect, to the best of the Debtors’ knowledge and belief, the expected consolidated results of operations, financial position and cash flows of the Company. Accordingly, the Projections reflect the Debtors’ judgment as of February 2006, the date these Projections were prepared. Consequently, actual financial results could differ significantly from projected results. The assumptions disclosed herein are those that the Debtors believe are significant to the Projections. Because events and circumstances frequently do not occur as expected, there will be differences between the projected results and actual results. These differences may be material to the Projections herein.

The Projections were prepared under two scenarios:

(i)	“No FAIR Act” — The FAIR Act is not enacted and made law by the Trigger Date, or is enacted but held unconstitutional, and therefore the Debtors would be obligated to make payments under the Contingent Payment Note to the Asbestos Personal Injury Trust.
(ii)	“With FAIR Act” — The FAIR Act is enacted and made law by the Trigger Date and is not held unconstitutional, and therefore the Debtors’ obligations under the Contingent Payment Note would be cancelled.

The Debtors do not anticipate adopting fresh start accounting under AICPA Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code.”

The Debtors, with the assistance of various publications and resources, prepared the Projections for the years ending December 31, 2006 and 2007 (“Projection Period”), respectively. The Projections are based upon a variety of estimates and assumptions, and while the Debtors have prepared the Projections in good faith and believe the assumptions to be reasonable, no assurance exists that such estimates and assumptions will ultimately be realized. The Projections should be read in conjunction with the assumptions and qualifications contained herein, the risk factors described in Section VII of the Disclosure Statement and historical audited consolidated financial statements for the fiscal year ended December 31, 2005 contained in the fiscal Form 10-K included in Exhibit VIII of the Disclosure Statement.

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General

1.	Methodology: The Projections were developed using a “bottom up” approach. The Debtors prepared operating projections for each of its businesses and/or product lines, which were then consolidated.
2.	Industry Environment: One critical assumption of the Projections is the size and growth of the North American residential and nonresidential construction and repair and remodel markets.
3.	Effective Date: The Effective Date is assumed to occur on June 30, 2006.
4.	Revenues: Consolidated revenues are projected to increase in 2006 and 2007. The Projections assume that revenue growth will be driven by the Company’s ability to increase business with existing customers, acquire new customers for their current businesses, and launch new businesses to penetrate new markets consistent with its strategic operating plan.
5.	Gross Profit: The Projections reflect new product introductions, improved manufacturing efficiencies and process improvements, sourcing and transportation initiatives and distribution network optimization. Benefits from these initiatives are assumed to offset inflation and other cost pressures.
6.	Selling and Administrative Expenses: The Projections reflect increases in selling and administrative expenses consistent with inflation estimates.
7.	Chapter 11 Reorganization Expenses: These expenses reflect bankruptcy fees net of interest income earned on cash balances through the Effective Date.
8.	Interest Expense and Interest Income: It is assumed the Company will pay a market rate of interest on the average debt outstanding. Interest income represents interest earned on cash balances after the Effective Date.
9.	Income Taxes: Income taxes are computed by adjusting book earnings before taxes (“EBT”) for projected permanent book/tax differences and applying applicable statutory tax rates to such adjusted EBT.
10.	Cash and Cash Equivalents: For purposes of the Projections, minimum cash balances of $350 million are maintained for working capital. Any excess cash balances are assumed to repay debt.
11.	Working Capital: The Projections assume that working capital increases are consistent with the revenue projections.
12.	Tax Refunds: The Debtors expect to generate significant tax refunds as a result of the funding of the Asbestos Personal Injury Trust and the payment of Postpetition Interest. These deductions will create net operating losses in 2006 and 2007 that can be carried back to offset taxable income in the 10 preceding years. Under the “No FAIR Act” scenario, the amount of U.S. federal tax refunds expected for 2006 (to be received in 2007) is $874 million and for 2007 (to be received in 2008) is $193 million. The U.S. federal tax refund for 2006 (to be received in 2007) expected under the “With FAIR Act” scenario is $243 million.
13.	Capital Spending: Capital spending is expected to remain relatively constant at approximately $400 million for the Projection Period.

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USG CORPORATION
PROJECTED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
Years Ended December 31
(dollars in millions)

	No FAIR Act *						With FAIR Act **
	2006			2007			2006			2007
Net sales	$	5,475		$	5,668		$	5,475		$	5,668
Cost of products sold		4,313			4,458			4,313			4,458
Gross profit		1,162			1,210			1,162			1,210
Selling and administrative expenses		397			409			397			409
Adjusted operating profit		765			801			765			801
Reversal of provision for asbestos claims		—			—			—			(3,050	)(a)
Chapter 11 reorganization expenses		28			—			28			—
Operating profit		737			801			737			3,851
Interest expense		494	(b)		121			494	(b)		26
Interest income		(14	)		(14	)		(25	)		(63	)
Income taxes		99			267			104			1,472
Net earnings		158			427			164			2,416
EBITDA (c)		897			944			897			944

*	The FAIR Act is not enacted and made law by the Trigger Date, or is enacted but held unconstitutional, and therefore the Debtors would be obligated to make payments under the Contingent Payment Note to the Asbestos Personal Injury Trust.
**	The FAIR Act is enacted and made law by the Trigger Date and is not held unconstitutional, and therefore the Debtors’ obligations under the Contingent Payment Note would be cancelled.

See Notes to Projected Consolidated Financial Statements.

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USG CORPORATION
PROJECTED CONSOLIDATED BALANCE SHEETS (unaudited)
As of December 31
(dollars in millions)

	No FAIR Act *				With FAIR Act **
	2006		2007		2006		2007
Assets
Current assets:
Cash and cash equivalents	$	350	$	350	$	1,383	$	1,895
Accounts receivable, net		488		498		488		498
Inventories		337		350		337		350
Income taxes receivable		880		200		249		6
Deferred income taxes		1		1		1		1
Other current assets		203		194		203		194
Total current assets		2,259		1,593		2,661		2,944
Property, plant and equipment, net		2,244		2,526		2,244		2,526
Deferred income taxes		482		53		1,108		—
Other assets		265		265		265		265
Total assets		5,250		4,437		6,278		5,735
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		299		310		299		310
Accrued expenses		336		334		336		334
Short-term debt (d)		1,150		—		3,050		—
Deferred income taxes		5		3		5		3
Income taxes payable		38		38		38		38
Total current liabilities		1,828		685		3,728		685
Long-term debt (e)		1,118		1,021		240		240
Deferred income taxes		28		28		28		112
Other liabilities		687		687		687		687
Stockholders’ equity		1,589		2,016		1,595		4,011
Total liabilities and stockholders’ equity		5,250		4,437		6,278		5,735

*	The FAIR Act is not enacted and made law by the Trigger Date, or is enacted but held unconstitutional, and therefore the Debtors would be obligated to make payments under the Contingent Payment Note to the Asbestos Personal Injury Trust.
**	The FAIR Act is enacted and made law by the Trigger Date and is not held unconstitutional, and therefore the Debtors’ obligations under the Contingent Payment Note would be cancelled.

See Notes to Projected Consolidated Financial Statements.

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USG CORPORATION
PROJECTED CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited)
Years Ended December 31
(dollars in millions)

	No FAIR Act *						With FAIR Act **
	2006			2007			2006			2007
EBITDA (c)	$	897		$	944		$	897		$	944
Gross reorganization fees		(40	)		—			(40	)		—
Working capital increase		(36	)		(15	)		(36	)		(15	)
Interest received (paid)		33			(97	)		44			47
Income taxes refunded (paid)		(32	)		840			(32	)		(39	)
Capital expenditures		(430	)		(425	)		(430	)		(425	)
Cash from operations		392			1,247			403			512
Rights Offering proceeds (f)		1,800			—			1,800			—
Payments to Asbestos Personal Injury Trust (g)		(2,800	)		(1,150	)		(900	)		—
Payments to unsecured creditors (h)		(1,365	)		—			(1,365	)		—
Administrative and priority claims (i)		(132	)		—			(132	)		—
Debt borrowings (repayment) (j)		878			(97	)		—			—
Cash used for restructuring activities		(1,619	)		(1,247	)		(597	)		—
Beginning cash		1,577	(k)		350			1,577	(k)		1,383
Ending cash		350			350			1,383			1,895

*	The FAIR Act is not enacted and made law by the Trigger Date, or is enacted but held unconstitutional, and therefore the Debtors would be obligated to make payments under the Contingent Payment Note to the Asbestos Personal Injury Trust.
**	The FAIR Act is enacted and made law by the Trigger Date and is not held unconstitutional, and therefore the Debtors’ obligations under the Contingent Payment Note would be cancelled.

See Notes to Projected Consolidated Financial Statements.

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USG CORPORATION
NOTES TO PROJECTED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(a)	Under the ”With FAIR Act” scenario, it is assumed that $3.05 billion of asbestos reserves established in 2005 is reversed in 2007 once any constitutional challenges which are filed within 60 days of the Trigger Date have been resolved in favor of the FAIR Act in 2007.
(b)	Unless otherwise treated differently under the Plan, all Allowed Claims in Classes 3 through 6 and Class 8 would receive payment in full in cash plus Postpetition Interest on the Effective Date under the Plan. The majority of such Postpetition Interest is included as interest expense in 2006.
(c)	EBITDA reflects earnings before interest, taxes, depreciation, depletion and amortization.
(d)	Reflects Contingent Payment Note due to Asbestos Personal Injury Trust.
(e)	Reflects $240 million of Reinstated Class 5 Industrial Revenue Bond Claims plus additional borrowings, if needed, under new debt agreements to fund payments under the Plan and to provide for working capital needs for operations. While the new debt agreements have not been established, it is assumed that the average interest rate on outstanding borrowings will be at market rates.
(f)	Under the Plan, the Debtors would generate proceeds of approximately $1.8 billion through the Rights Offering.
(g)	Under the Plan, the Debtors would satisfy all Class 7 Asbestos Personal Injury Claims with cash payments to the Asbestos Personal Injury Trust as outlined below (dollars in millions):

	No FAIR Act		With FAIR Act
June 30, 2006	$	890	$	890
December 31, 2006		1,910		10
June 30, 2007		1,150		—
		3,950		900

(h)	Under the Plan, the Debtors would distribute approximately $1.4 billion in cash, including Postpetition Interest through the Effective Date, to satisfy Allowed Claims in Classes 3 through 6 and Class 8.
(i)	Includes fees payable in connection with the Rights Offering and fees to execute new debt agreements.
(j)	Reflects borrowings (repayments) necessary to fund payments under the Plan and maintain minimum cash balances of $350 million for working capital.
(k)	Reflects the total of cash and cash equivalents, restricted cash and marketable securities as of December 31, 2005.

THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARD COMPLIANCE WITH THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (THE “AICPA”), THE FINANCIAL ACCOUNTING STANDARDS BOARD (THE “FASB”), OR THE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) REGARDING PROJECTIONS. FURTHERMORE, THE PROJECTIONS HAVE NOT BEEN AUDITED OR REVIEWED BY THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. THE PROJECTIONS, WHILE PRESENTED WITH NUMERICAL SPECIFICITY, ARE BASED UPON A VARIETY OF ESTIMATES AND ASSUMPTIONS, WHICH MAY NOT BE REALIZED, AND ARE SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, WHICH ARE BEYOND THE CONTROL OF THE DEBTORS. CONSEQUENTLY, THE PROJECTIONS SHOULD NOT BE REGARDED AS A REPRESENTATION OR WARRANTY BY THE DEBTORS, OR ANY OTHER PERSON, AS TO THE ACCURACY OF THE PROJECTIONS OR THAT THE PROJECTIONS WILL BE REALIZED. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PRESENTED IN THESE PROJECTIONS. HOLDERS OF CLAIMS MUST MAKE THEIR OWN DETERMINATIONS AS TO THE REASONABLENESS OF SUCH ASSUMPTIONS AND THE RELIABILITY OF THE PROJECTIONS IN MAKING THEIR DETERMINATIONS OF WHETHER TO ACCEPT OR REJECT THE PLAN, TO THE EXTENT SUCH CLAIMS ARE ALLOWED TO VOTE.

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