##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 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
  Delaware
    
    36-3329400(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 550 West Adams Street, Chicago, Illinois
    
    60661-3676(Address of principal executive offices)
    
    (Zip code)
 (312) 436-4000
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ
 o o




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Table of Contents
 PagePART I FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed Consolidated Statements of Operations:
Three Months Ended March 31, 2010 and 2009
    
    
    3Condensed Consolidated Balance Sheets:
As of March 31, 2010 and December 31, 2009
    
    
    4Condensed Consolidated Statements of Cash Flows:
Three Months Ended March 31, 2010 and 2009
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosures about Market Risks
    
    
    36Item 4. Controls and Procedures
    
    
    37PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    37Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 6. Exhibits
    
    
    37Signatures
    
    
    38Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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PART I FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 USG CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended March 31,(millions, except per-share and share data)
    
    2010
    
    
    2009Net sales
    
    $
    716
    
    
    $
    864Cost of products sold
    
    
    702
    
    
    
    816Gross profit
    
    
    14
    
    
    
    48Selling and administrative expenses
    
    
    84
    
    
    
    80Restructuring and long-lived asset impairment charges
    
    
    12
    
    
    
    10Operating loss
    
    
    (82
    )
    
    
    (42
    )Interest expense
    
    
    45
    
    
    
    42Interest income
    
    
    (1
    )
    
    
    Other expense (income), net
    
    
    1
    
    
    
    (10
    )Loss before income taxes
    
    
    (127
    )
    
    
    (74
    )Income tax benefit
    
    
    (17
    )
    
    
    (32
    )Net loss
    
    $
    (110
    )
    
    $
    (42
    )Basic loss per common share
    
    $
    (1.10
    )
    
    $
    (0.42
    )Diluted loss per common share
    
    $
    (1.10
    )
    
    $
    (0.42
    )Average common shares
    
    
    99,385,442
    
    
    
    99,190,830Average diluted common shares
    
    
    99,385,442
    
    
    
    99,190,830
 See accompanying Notes to Condensed Consolidated Financial Statements.
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USG CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 As of
    
    
    As ofMarch 31,
    
    
    December 31,(millions)
    
    2010
    
    
    2009AssetsCurrent Assets:Cash and cash equivalents
    
    $
    470
    
    
    $
    690Short-term marketable securities
    
    
    43
    
    
    
    Restricted cash
    
    
    2
    
    
    
    2Receivables (net of reserves  $17 and $16)
    
    
    427
    
    
    
    357Inventories
    
    
    296
    
    
    
    289Income taxes receivable
    
    
    3
    
    
    
    20Deferred income taxes
    
    
    2
    
    
    
    2Other current assets
    
    
    69
    
    
    
    71Total current assets
    
    
    1,312
    
    
    
    1,431Long-term marketable securities
    
    
    72
    
    
    
    Property, plant and equipment (net of accumulated
depreciation and depletion  $1,602 and $1,558)
    
    
    2,403
    
    
    
    2,427Other assets
    
    
    232
    
    
    
    239Total assets
    
    $
    4,019
    
    
    $
    4,097Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    234
    
    
    $
    205Accrued expenses
    
    
    269
    
    
    
    273Current portion of long-term debt
    
    
    7
    
    
    
    7Income taxes payable
    
    
    8
    
    
    
    7Total current liabilities
    
    
    518
    
    
    
    492Long-term debt
    
    
    1,954
    
    
    
    1,955Deferred income taxes
    
    
    17
    
    
    
    17Other liabilities
    
    
    710
    
    
    
    703Commitments and contingenciesStockholders Equity:Preferred stock
    
    
    
    
    
    
    Common stock
    
    
    10
    
    
    
    10Treasury stock
    
    
    (186
    )
    
    
    (194
    )Capital received in excess of par value
    
    
    2,644
    
    
    
    2,640Accumulated other comprehensive income (loss)
    
    
    (92
    )
    
    
    (80
    )Retained earnings (deficit)
    
    
    (1,556
    )
    
    
    (1,446
    )Total stockholders equity
    
    
    820
    
    
    
    930Total liabilities and stockholders equity
    
    $
    4,019
    
    
    $
    4,097
 See accompanying Notes to Condensed Consolidated Financial Statements.
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USG CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 (millions)
    
    Three Months Ended March 31,2010
    
    
    2009Operating ActivitiesNet loss
    
    $
    (110
    )
    
    $
    (42
    )Adjustments to reconcile net loss to net cash:Depreciation, depletion and amortization
    
    
    45
    
    
    
    56Share-based compensation expense
    
    
    12
    
    
    
    10Deferred income taxes
    
    
    
    
    
    
    (33
    )Noncash income tax benefit
    
    
    (19
    )
    
    
    Convertible debt embedded derivative
    
    
    
    
    
    
    (10
    )(Increase) decrease in working capital:Receivables
    
    
    (70
    )
    
    
    (20
    )Income taxes receivable
    
    
    16
    
    
    
    4Inventories
    
    
    (5
    )
    
    
    29Payables
    
    
    31
    
    
    
    12Accrued expenses
    
    
    (14
    )
    
    
    (53
    )Decrease in other assets
    
    
    5
    
    
    
    5Increase in other liabilities
    
    
    10
    
    
    
    9Other, net
    
    
    (3
    )
    
    
    3Net cash used for operating activities
    
    
    (102
    )
    
    
    (30
    )Investing ActivitiesCapital expenditures
    
    
    (6
    )
    
    
    (16
    )Purchases of marketable securities
    
    
    (115
    )
    
    
    Net cash used for investing activities
    
    
    (121
    )
    
    
    (16
    )Financing ActivitiesRepayment of debt
    
    
    (1
    )
    
    
    (191
    )Payment of debt issuance fees
    
    
    
    
    
    
    (8
    )Net cash used for financing activities
    
    
    (1
    )
    
    
    (199
    )Effect of exchange rate changes on cash
    
    
    4
    
    
    
    (3
    )Net decrease in cash and cash equivalents
    
    
    (220
    )
    
    
    (248
    )Cash and cash equivalents at beginning of period
    
    
    690
    
    
    
    471Cash and cash equivalents at end of period
    
    $
    470
    
    
    $
    223Supplemental Cash Flow Disclosures:Interest paid
    
    $
    43
    
    
    $
    27Income taxes (refunded) paid, net
    
    $
    (15
    )
    
    $
    
 See accompanying Notes to Condensed Consolidated Financial Statements.
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USG CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 In the following Notes to Condensed Consolidated Financial Statements, USG, we, our and us
refer to USG Corporation, a Delaware corporation, and its subsidiaries included in the condensed
consolidated financial statements, except as otherwise indicated or as the context otherwise
requires.
 1. Preparation of Financial Statements
   2. Restructuring and Long-Lived Asset Impairment Charges
    Balance
    
    
    2010 Activity
    
    
    Balanceas of
    
    
    
    
    
    
    Cash
    
    
    Asset
    
    
    as of(millions)
    
    12/31/09
    
    
    Charges
    
    
    Payments
    
    
    Impairment
    
    
    3/31/10Severance
    
    $
    4
    
    
    $
    5
    
    
    $
    (5
    )
    
    $
    
    
    
    $
    4Lease obligations
    
    
    34
    
    
    
    2
    
    
    
    (2
    )
    
    
    
    
    
    
    34Asset impairments
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    (3
    )
    
    
    Other exit costs
    
    
    2
    
    
    
    2
    
    
    
    (3
    )
    
    
    
    
    
    
    1Total
    
    $
    40
    
    
    $
    12
    
    
    $
    (10
    )
    
    $
    (3
    )
    
    $
    39
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3. Segments
  (millions)
    
    Net Sales
    
    
    Operating Profit (Loss)Three Months Ended March 31,
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009North American Gypsum
    
    $
    424
    
    
    $
    478
    
    
    $
    (35
    )
    
    $
    (21
    )Building Products Distribution
    
    
    248
    
    
    
    353
    
    
    
    (39
    )
    
    
    (10
    )Worldwide Ceilings
    
    
    165
    
    
    
    171
    
    
    
    18
    
    
    
    18Corporate
    
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    (28
    )Eliminations
    
    
    (121
    )
    
    
    (138
    )
    
    
    (3
    )
    
    
    (1
    )Total
    
    $
    716
    
    
    $
    864
    
    
    $
    (82
    )
    
    $
    (42
    )
    4. Earnings (Loss) Per Share
  WeightedAverageNet
    
    
    Shares
    
    
    Per-Share(millions, except per-share and share data)
    
    Loss
    
    
    (000)
    
    
    AmountThree Months Ended March 31, 2010:Basic loss
    
    $
    (110
    )
    
    
    99,385
    
    
    $
    (1.10
    )Diluted loss
    
    $
    (110
    )
    
    
    99,385
    
    
    $
    (1.10
    )Three Months Ended March 31, 2009:Basic loss
    
    $
    (42
    )
    
    
    99,191
    
    
    $
    (0.42
    )Diluted loss
    
    $
    (42
    )
    
    
    99,191
    
    
    $
    (0.42
    )
   -7-




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5. Marketable Securities
  Amortized
    
    
    Fair(millions)
    
    Cost
    
    
    ValueCorporate debt securities
    
    $
    70
    
    
    $
    70U.S. government and agency debt securities
    
    
    16
    
    
    
    16Asset-backed debt securities
    
    
    15
    
    
    
    15Non-U.S. government debt securities
    
    
    4
    
    
    
    4Certificates of deposit
    
    
    10
    
    
    
    10Total marketable securities
    
    $
    115
    
    
    $
    115
  Amortized
    
    
    Fair(millions)
    
    Cost
    
    
    ValueDue in 1 year or less
    
    $
    43
    
    
    $
    43Due in 1-5 years
    
    
    57
    
    
    
    57100
    
    
    
    100Asset-backed debt securities
    
    
    15
    
    
    
    15Total marketable securities
    
    $
    115
    
    
    $
    115
 6. Intangible Assets
  As of March 31, 2010
    
    
    As of December 31, 2009Gross
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Impairment
    
    
    Accumulated
    
    
    
    
    
    
    Carrying
    
    
    Impairment
    
    
    Accumulated(millions)
    
    Amount
    
    
    Charges
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Charges
    
    
    Amortization
    
    
    NetIntangible Assets with Definite Lives:Customer relationships
    
    $
    70
    
    
    $
    
    
    
    $
    (22
    )
    
    $
    48
    
    
    $
    70
    
    
    $
    
    
    
    $
    (20
    )
    
    $
    50Other
    
    
    9
    
    
    
    
    
    
    
    (4
    )
    
    
    5
    
    
    
    9
    
    
    
    
    
    
    
    (4
    )
    
    
    5Total
    
    
    79
    
    
    
    
    
    
    
    (26
    )
    
    
    53
    
    
    
    79
    
    
    
    
    
    
    
    (24
    )
    
    
    55Intangible Assets with Indefinite Lives:Trade names
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    53
    
    
    
    (31
    )
    
    
    
    
    
    
    22Other
    
    
    9
    
    
    
    (1
    )
    
    
    
    
    
    
    8
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    9Total
    
    
    31
    
    
    
    (1
    )
    
    
    
    
    
    
    30
    
    
    
    62
    
    
    
    (31
    )
    
    
    
    
    
    
    31Total Other Intangible Assets
    
    $
    110
    
    
    $
    (1
    )
    
    $
    (26
    )
    
    $
    83
    
    
    $
    141
    
    
    $
    (31
    )
    
    $
    (24
    )
    
    $
    86
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7. Debt
  As of
    
    
    As ofMarch 31,
    
    
    December 31,(millions)
    
    2010
    
    
    20096.3% senior notes
    
    $
    500
    
    
    $
    5007.75% senior notes, net of discount
    
    
    499
    
    
    
    4999.75% senior notes, net of discount
    
    
    295
    
    
    
    29510% convertible senior notes, net of discount
    
    
    381
    
    
    
    380Ship mortgage facility
    
    
    47
    
    
    
    49Industrial revenue bonds
    
    
    239
    
    
    
    239Total
    
    $
    1,961
    
    
    $
    1,962
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8. Derivative Instruments
       -11-




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Amount of Gain or (Loss)Recognized in
    
    
    Location of Gain or (Loss)
    
    Amount of Gain or (Loss)Derivatives in
    
    Other Comprehensive
    
    
    Reclassified from
    
    Reclassified fromCash Flow Hedging
    
    Income on Derivatives
    
    
    AOCI into Income
    
    AOCI into IncomeRelationships
    
    (Effective Portion)
    
    
    (Effective Portion)
    
    (Effective Portion)Commodity contracts
    
    $
    (12
    )
    
    Cost of products sold
    
    $
    (5
    )Foreign exchange contracts
    
    
    (1
    )
    
    Cost of products sold
    
    
    Total
    
    $
    (13
    )
    
    
    
    $
    (5
    )
 Derivatives Not
    
    Location of Gain or (Loss)
    
    Amount of Gain or (Loss)Designated as Hedging
    
    Recognized in Income on
    
    Recognized in Income onInstruments
    
    Derivatives
    
    DerivativesCommodity contracts
    
    Cost of products sold
    
    $
    (1
    )Foreign exchange contracts
    
    Other income, net
    
    
    (1
    )Total
    
    
    
    $
    (2
    )
  Derivatives
    
    Assets
    
    
    LiabilitiesDesignated as Hedging
    
    Balance Sheet
    
    Fair
    
    
    Balance Sheet
    
    FairInstruments
    
    Location
    
    Value
    
    
    Location
    
    ValueCommodity contracts
    
    Other current assets
    
    $
    2
    
    
    Accrued expenses
    
    $
    19Commodity contracts
    
    Other assets
    
    
    1
    
    
    Other liabilities
    
    
    15Foreign exchange contracts
    
    Other current assets
    
    
    
    
    
    Accrued expenses
    
    
    1Total
    
    
    
    $
    3
    
    
    
    
    $
    35
 Derivatives Not
    
    Assets
    
    
    LiabilitiesDesignated as Hedging
    
    Balance Sheet
    
    Fair
    
    
    Balance Sheet
    
    FairInstruments
    
    Location
    
    Value
    
    
    Location
    
    ValueCommodity contracts
    
    Other current assets
    
    $
    1
    
    
    Accrued expenses
    
    $
    Foreign exchange contracts
    
    Other current assets
    
    
    
    
    
    Accrued expenses
    
    
    1Total
    
    
    
    $
    1
    
    
    
    
    $
    1
  -12-




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9. Fair Value Measurements
   Quoted PricesIn Active
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(millions)
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalDerivative assets
    
    $
    
    
    
    $
    4
    
    
    $
    
    
    
    $
    4Derivative liabilities
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    (36
    )Marketable securities:Corporate debt securities
    
    
    
    
    
    
    70
    
    
    
    
    
    
    
    70U.S. government and agency debt securities
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    16Asset-backed debt securities
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    15Non-U.S. government debt securities
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4Certificates of deposit
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    10
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10. Employee Retirement Plans
  Three Months Ended March 31,(millions)
    
    2010
    
    
    2009Pension:Service cost of benefits earned
    
    $
    7
    
    
    $
    6Interest cost on projected benefit obligation
    
    
    16
    
    
    
    16Expected return on plan assets
    
    
    (16
    )
    
    
    (17
    )Net amortization
    
    
    4
    
    
    
    1Net pension cost
    
    $
    11
    
    
    $
    6Postretirement:Service cost of benefits earned
    
    $
    2
    
    
    $
    2Interest cost on projected benefit obligation
    
    
    4
    
    
    
    6Net amortization
    
    
    (4
    )
    
    
    (2
    )Net postretirement cost
    
    $
    2
    
    
    $
    6
   11. Share-Based Compensation
      -14-




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12. Supplemental Balance Sheet Information
   As of
    
    
    As ofMarch 31,
    
    
    December 31,(millions)
    
    2010
    
    
    2009Finished goods and work in progress
    
    $
    244
    
    
    $
    232Raw materials
    
    
    52
    
    
    
    57Total
    
    $
    296
    
    
    $
    289
   Three Months Ended March 31,(millions)
    
    2010
    
    
    2009Balance as of January 1
    
    $
    101
    
    
    $
    89Accretion expense
    
    
    2
    
    
    
    1Balance as of March 31
    
    $
    103
    
    
    $
    90
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13. Income Taxes
        -16-




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14. Comprehensive Income (Loss)
  Three Months Ended March 31,(millions)
    
    2010
    
    
    2009Net loss
    
    $
    (110
    )
    
    $
    (42
    )Derivatives, net of tax
    
    
    (8
    )
    
    
    (9
    )Pension and postretirement benefit plans, net of tax
    
    
    (17
    )
    
    
    (5
    )Foreign currency translation, net of tax
    
    
    13
    
    
    
    (13
    )Total comprehensive loss
    
    $
    (122
    )
    
    $
    (69
    )
  As of
    
    
    As ofMarch 31,
    
    
    December 31,(millions)
    
    2010
    
    
    2009Unrecognized loss on pension and postretirement benefit plans, net of tax
    
    $
    (127
    )
    
    $
    (110
    )Gain (loss) on derivatives, net of tax
    
    
    (7
    )
    
    
    1Foreign currency translation, net of tax
    
    
    42
    
    
    
    29Total
    
    $
    (92
    )
    
    $
    (80
    )
  15. Litigation
   Federal Court Litigation. In re Chinese-Manufactured Drywall Products Liability
Litigation
  -18-




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State Court Litigation.
   Summary.
   -19-




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-20-




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 In the following Managements Discussion and Analysis of Financial Condition and Results of
Operations, USG, we, our and us refer to USG Corporation, a Delaware corporation, and its
subsidiaries included in the condensed consolidated financial statements, except as otherwise
indicated or as the context otherwise requires.
 Overview
   
    
    residential and nonresidential repair and remodel activity accounted for approximately 49% of
our net sales,
 
    
    new nonresidential construction accounted for approximately 28% of our net sales,
 
    
    new residential construction accounted for approximately 21% of our net sales, and
 
    
    other activities accounted for approximately 2% of our net sales.
  North American Gypsum ® ® ® ®
 Building Products Distribution
 Worldwide Ceilings
 Geographic Information
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®
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
    
    extend our customer satisfaction leadership;
 
    
    improve operating efficiencies and achieve significant cost reductions; and
 
    
    maintain financial flexibility.
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Consolidated Results of Operations
 % Increase(dollars in millions, except per-share data)
    
    2010
    
    
    2009
    
    
    (Decrease)Three Months ended March 31:Net sales
    
    $
    716
    
    
    $
    864
    
    
    
    (17
    )%Cost of products sold
    
    
    702
    
    
    
    816
    
    
    
    (14
    )%Gross profit
    
    
    14
    
    
    
    48
    
    
    
    (71
    )%Selling and administrative expenses
    
    
    84
    
    
    
    80
    
    
    
    5
    %Restructuring and long-lived asset impairment charges
    
    
    12
    
    
    
    10
    
    
    
    20
    %Operating loss
    
    
    (82
    )
    
    
    (42
    )
    
    
    95
    %Interest expense
    
    
    45
    
    
    
    42
    
    
    
    7
    %Interest income
    
    
    (1
    )
    
    
    
    
    
    
    Other expense (income), net
    
    
    1
    
    
    
    (10
    )
    
    
    Income tax benefit
    
    
    (17
    )
    
    
    (32
    )
    
    
    (47
    )%Net loss
    
    
    (110
    )
    
    
    (42
    )
    
    
    162
    %Diluted loss per share
    
    
    (1.10
    )
    
    
    (0.42
    )
    
    
    162
    %
  ®
  ®
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Core Business Results of Operations
 (millions)
    
    Net Sales
    
    
    Operating Profit (Loss)Three Months ended March 31,
    
    2010
    
    
    2009
    
    
    2010(a)
    
    
    2009(b)North American Gypsum:U.S. Gypsum Company
    
    $
    332
    
    
    $
    403
    
    
    $
    (37
    )
    
    $
    (21
    )CGC Inc. (gypsum)
    
    
    76
    
    
    
    61
    
    
    
    7
    
    
    
    (1
    )USG Mexico, S.A. de C.V.
    
    
    36
    
    
    
    35
    
    
    
    3
    
    
    
    2Other (c)
    
    
    6
    
    
    
    10
    
    
    
    (8
    )
    
    
    (1
    )Eliminations
    
    
    (26
    )
    
    
    (31
    )
    
    
    
    
    
    
    Total
    
    
    424
    
    
    
    478
    
    
    
    (35
    )
    
    
    (21
    )Building Products Distribution:L&W Supply Corporation
    
    
    248
    
    
    
    353
    
    
    
    (39
    )
    
    
    (10
    )Worldwide Ceilings:USG Interiors, Inc.
    
    
    103
    
    
    
    118
    
    
    
    12
    
    
    
    15USG International
    
    
    57
    
    
    
    52
    
    
    
    3
    
    
    
    1CGC Inc. (ceilings)
    
    
    17
    
    
    
    13
    
    
    
    3
    
    
    
    2Eliminations
    
    
    (12
    )
    
    
    (12
    )
    
    
    
    
    
    
    Total
    
    
    165
    
    
    
    171
    
    
    
    18
    
    
    
    18Corporate
    
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    (28
    )Eliminations
    
    
    (121
    )
    
    
    (138
    )
    
    
    (3
    )
    
    
    (1
    )Total
    
    $
    716
    
    
    $
    864
    
    
    $
    (82
    )
    
    $
    (42
    )
 (a)
    
    The consolidated operating loss for the first quarter of 2010 included restructuring and
long-lived asset impairment charges totaling $12 million. On a segment basis, $8 million of
the charges related to Building Products Distribution and $4 million to North American Gypsum.(b)
    
    The consolidated operating loss for the first quarter of 2009 included restructuring and
long-lived asset impairment charges totaling $10 million. On a segment basis, $2 million of
the charges related to North American Gypsum, $1 million to Building Products Distribution and
$7 million to Corporate.(c)
    
    Includes a shipping company in Bermuda and a mining operation in Nova Scotia, Canada.   United States Gypsum Company ® ®
 ®
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®
 ®
 ® ®
 ® ® ®
 CGC Inc. ®
 USG Mexico, S.A. de C.V.
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USG Interiors, Inc.
   USG International
 CGC Inc.
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Liquidity and Capital Resources
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(millions)Three Months ended March 31,
    
    2010
    
    
    2009Net cash provided by (used for):Operating activities
    
    $
    (102
    )
    
    $
    (30
    )Investing activities
    
    
    (121
    )
    
    
    (16
    )Financing activities
    
    
    (1
    )
    
    
    (199
    )Effect of exchange rate changes on cash
    
    
    4
    
    
    
    (3
    )Net decrease in cash and cash equivalents
    
    $
    (220
    )
    
    $
    (248
    )
 Operating Activities
 Investing Activities
 Financing Activities
     Cash and Cash Equivalents and Marketable Securities:
 Receivables:
 Inventories:
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Accounts Payable:
 Accrued Expenses:
     Realization of Deferred Tax Asset
     -32-




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Legal Contingencies
     Critical Accounting Policies
   -34-




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Forward-Looking Statements
  
    
    economic conditions, such as the levels of new home and other construction activity,
employment levels, the availability of mortgage, construction and other financing, mortgage
and other interest rates, housing affordability and supply, the levels of foreclosures and
home resales, currency exchange rates and consumer confidence;
 
    
    capital markets conditions and the availability of borrowings under our credit agreement or
other financings;
 
    
    competitive conditions, such as price, service and product competition;
 
    
    shortages in raw materials;
 
    
    changes in raw material, energy, transportation and employee benefit costs;
 
    
    the loss of one or more major customers and our customers ability to meet their financial
obligations to us;
 
    
    capacity utilization rates;
 
    
    changes in laws or regulations, including environmental and safety regulations;
 
    
    the outcome in contested litigation matters;
 
    
    the effects of acts of terrorism or war upon domestic and international economies and
financial markets; and
 
    
    acts of God.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
           -36-




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ITEM 4. CONTROLS AND PROCEDURES
 (a)
    
    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 quarter
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.(b)
    
    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 March 31,
2010 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
 
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 (a)
    
    Pursuant to our Deferred Compensation Program for Non-Employee Directors, two of our
non-employee directors deferred their quarterly retainers for service as directors that were
payable on March 31, 2010 into a total of approximately 2,467 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 the 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(2) of the Securities Act of 1933, as
amended, and was exempt from registration under Section 5 of that Act.
 
 ITEM 6. EXHIBITS
 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 *
 *
    
    Filed or furnished herewith  -37-




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SIGNATURES
  USG CORPORATIONBy:
    /s/ William C. FooteWilliam C. Foote,Chairman and Chief Executive OfficerBy:
    /s/ Richard H. FlemingRichard H. Fleming,Executive Vice President and
Chief Financial OfficerBy:
    /s/ William J. Kelley Jr.William J. Kelley Jr.,Vice President and Controller   -38-




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EXHIBIT INDEX
 ExhibitNumber
    
    Exhibit31.1
    
    
    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 *
 *
    
    Filed or furnished herewith  -39-