##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
  
 FORM 10-K
  X
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2009ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934For the transition period from  to
  USG CORPORATION
  Delaware
    
    36-3329400(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)550 W. Adams Street, Chicago, Illinois
    
    60661-3676(Address of Principal Executive Offices)
    
    (Zip Code)
 (312) 436-4000
 Name of Exchange onTitle of Each Class
    
    Which RegisteredNew York Stock ExchangeCommon Stock, $0.10 par value
    
    Chicago Stock ExchangePreferred Stock Purchase Rights (subject to Rights
    
    New York Stock ExchangeAgreement dated December 21, 2006, as amended)
    
    Chicago Stock Exchange
 
 x o
 o x
 x o
 o o
 o
  Large accelerated filer x
    
    Accelerated filer o
    
    Non-accelerated filer o(Do not check if a smaller reporting
company)
    
    Smaller reporting company o
 o x
 o o
   Documents Incorporated By Reference:




---



##### 



TABLE OF CONTENTS
 PART I
    
    
    
    PageItem    1.
    
    Business
    
    
    1Item    1A.
    
    Risk Factors
    
    
    7Item    1B.
    
    Unresolved Staff Comments
    
    
    15Item    2.
    
    Properties
    
    
    16Item    3.
    
    Legal Proceedings
    
    
    18Item    4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    18PART IIItem    5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
    
    
    18Item    6.
    
    Selected Financial Data
    
    
    20Item    7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item    7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    46Item    8.
    
    Financial Statements and Supplementary Data
    
    
    47Item    9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    87Item    9A.
    
    Controls and Procedures
    
    
    87Item    9A(T)
    
    Controls and Procedures
    
    
    89Item    9B.
    
    Other Information
    
    
    89PART IIIItem    10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    89Item    11.
    
    Executive Compensation
    
    
    91Item    12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    91Item    13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    91Item    14.
    
    Principal Accounting Fees and Services
    
    
    91PART IVItem    15.
    
    Exhibits and Financial Statement Schedules
    
    
    92Signatures
    
    
    97EX-10.15EX-10.30EX-10.31EX-10.32EX-10.43EX-21EX-23EX-24EX-31.1EX-31.2EX-32.1EX-32.2




---



##### Table of Contents



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
      1




---



##### Table of Contents



North American Gypsum
    ® ® ® ® ® ® ® ® ® ® ®
    2




---



##### Table of Contents




    
    residential and nonresidential repair and remodel activity generated about 54% of volume
demand for gypsum wallboard,
    
    new residential construction generated about 27% of volume demand,
    
    new nonresidential construction generated about 14% of volume demand, and
    
    other activities, such as exports and temporary construction, generated the remaining 5% of
volume demand.
    3




---



##### Table of Contents



Building Products Distribution
        Worldwide Ceilings
    ® ® ® ® ®   
 4




---



##### Table of Contents



Executive Officers of the Registrant
  Other Information
      5




---



##### Table of Contents



Available Information
 www.usg.com
 6




---



##### Table of Contents



Item 1A.   RISK FACTORS
  Our businesses have been adversely affected by recent economic conditions, including the worldwide
financial crisis and restrictive lending practices, and are cyclical in nature. Prolonged periods
of weak product demand or excess product supply may have a material adverse effect on our business,
financial condition and operating results.
     7




---



##### Table of Contents



Our customers and suppliers are exposed to risks associated with the worldwide economic downturn
and financial turmoil that could adversely affect their payment of our invoices or the continuation
of their businesses at the same level.
  Our substantial indebtedness may adversely affect our business, financial condition and operating
results.
  
    
    make it more difficult for us to satisfy our debt service obligations,
    
    require us to dedicate a substantial portion of our cash flows from operations to payments on
our indebtedness, thereby reducing the availability of our cash flows to fund working capital,
capital expenditures and other general operating requirements,
    
    limit our ability to obtain additional financing to fund our working capital requirements,
capital expenditures, acquisitions, investments, debt service obligations and other general
corporate requirements,
    
    restrict us from making strategic acquisitions or taking advantage of favorable business
opportunities,
    
    place us at a relative competitive disadvantage compared to our competitors that have
proportionately less debt,
    
    limit our flexibility to plan for, or react to, changes in our businesses and the industries
in which we operate, which may adversely affect our operating results and ability to meet our
debt service obligations,
 8




---



##### Table of Contents




    
    increase our vulnerability to the current and potentially more severe adverse general
economic and industry conditions, and
    
    limit our ability, or increase the cost, to refinance our indebtedness.
  We require a significant amount of liquidity to service our indebtedness and fund operations,
capital expenditures, research and development efforts, acquisitions and other corporate
expenditures .
    
    
    curtail operations further,
    
    reduce or delay planned capital expenditures, research and development or acquisitions,
    
    seek additional financing or restructure or refinance all or a portion of our indebtedness at
or before maturity,
    
    sell assets or businesses, and
    
    sell additional equity.
  Covenant restrictions under the agreements governing our indebtedness may limit our ability to
pursue business activities or otherwise operate our business.
  
    
    incur additional indebtedness,
    
    make guarantees,
    
    sell assets or make other fundamental changes,
 9




---



##### Table of Contents




    
    engage in mergers and acquisitions,
    
    make investments,
    
    enter into transactions with our affiliates,
    
    change our business purposes, and
    
    enter into sale and lease-back transactions.
   The loss of sales to one or more of our major customers may have a material adverse effect on our
business, financial condition and operating results.
  We face competition in each of our businesses. If we cannot successfully compete in the
marketplace, our business, financial condition and operating results may be materially and
adversely affected.
    10




---



##### Table of Contents



If costs of key raw materials, energy, fuel or employee benefits increase, or the availability of
key raw materials and energy decreases, our cost of products sold will increase and our operating
results may be materially and adversely affected.
       11




---



##### Table of Contents



If the market price of natural gas declines, it may have a material adverse effect on our business,
financial condition and operating results as a result of our hedging agreements for natural gas.
   Certain of our customers have been expanding and may continue to expand through consolidation and
internal growth, thereby possibly developing increased buying power, which may materially and
adversely affect our revenues, results of operations and financial position.
  We are subject to environmental and safety laws and regulations that may change. These laws and
regulations could cause us to make modifications to how we manufacture and price our products. They
and the effects of climate change could also require that we make significant capital investments
or otherwise increase our costs.
   12




---



##### Table of Contents



If the downturn in the markets for our businesses does not reverse or is significantly extended, we
may incur material impairment charges.
   13




---



##### Table of Contents



A small number of our stockholders could significantly influence our business and affairs.
  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.
  We may pursue acquisitions, joint ventures and other transactions that complement or expand our
businesses. We may not be able to complete proposed transactions, and even if completed, the
transactions may involve a number of risks that may result in a material adverse effect on our
business, financial condition and operating results.
  
    
    the diversion of managements attention from our existing businesses to integrate the
operations and personnel of the acquired or combined business or joint venture,
    
    possible adverse effects on our operating results during the integration process,
 14




---



##### Table of Contents




    
    failure of the acquired business or joint venture to achieve expected operational,
profitability and investment return objectives, and
    
    inability to achieve other intended objectives of the transaction.
  The seasonal nature of our businesses may materially and adversely affect the trading prices of our
securities.
  We depend on our senior management team for their expertise and leadership, and the unexpected loss
of any member could adversely affect the implementation of our business strategy or our operations.
  We do not expect to pay cash dividends on our common stock for the foreseeable future.
  
 Item 1B.   UNRESOLVED STAFF COMMENTS
  15




---



##### Table of Contents



Item 2.   PROPERTIES
 ® ®
 North American Gypsum
 GYPSUM WALLBOARD AND OTHER GYPSUM PRODUCTSAliquippa, Pa.*
    
    Plaster City, Calif.
    
    Sweetwater, TexasBaltimore, Md.**
    
    Rainier, Ore.
    
    Washingtonville, Pa.*Bridgeport, Ala.*
    
    Shoals, Ind.**
    
    Hagersville, Ontario, Canada**East Chicago, Ind.*
    
    Sigurd, Utah
    
    Montreal, Quebec, Canada *Empire, Nev.
    
    Southard, Okla.
    
    Monterrey, Nuevo Leon, MexicoGalena Park, Texas*
    
    Sperry, Iowa**
    
    Puebla, Puebla, MexicoJacksonville, Fla.**
    
    Stony Point, N.Y.**
    
    Tecoman, Colima, MexicoNorfolk, Va.*
 
 *
    
    Plants supplied fully by synthetic gypsum**
    
    Plants supplied partially by synthetic gypsum JOINT COMPOUND (SURFACE PREPARATION AND JOINT TREATMENT PRODUCTS)Auburn, Wash.
    
    Galena Park, Texas
    
    Calgary, Alberta, Canada (leased)Baltimore, Md.
    
    Gypsum, Ohio
    
    Hagersville, Ontario, CanadaBridgeport, Ala.
    
    Jacksonville, Fla.
    
    Montreal, Quebec, CanadaChamblee, Ga.
    
    Phoenix (Glendale), Ariz. (leased)
    
    Surrey, British Columbia, CanadaDallas, Texas
    
    Port Reading, N.J.
    
    Monterrey, Nuevo Leon, MexicoEast Chicago, Ind.
    
    Sigurd, Utah
    
    Puebla, Puebla, MexicoFort Dodge, Iowa
    
    Torrance, Calif.CEMENT BOARDBaltimore, Md.
    
    New Orleans, La.
    
    Monterrey, Nuevo Leon, MexicoDetroit (River Rouge), Mich.GYPSUM ROCK (MINES AND QUARRIES)Alabaster (Tawas City), Mich.
    
    Sigurd, Utah
    
    Little Narrows, Nova Scotia, CanadaEmpire, Nev.
    
    Southard, Okla.
    
    Windsor, Nova Scotia, CanadaFort Dodge, Iowa
    
    Sperry, Iowa
    
    Monterrey, Nuevo Leon, MexicoPlaster City, Calif.
    
    Sweetwater, Texas
    
    San Luis Potosi, San Luis Potosi, MexicoShoals, Ind.
    
    Hagersville, Ontario, Canada
    
    Tecoman, Colima, MexicoPAPER FOR GYPSUM WALLBOARDGalena Park, Texas
    
    Oakfield, N.Y.
    
    Otsego, Mich.North Kansas City, Mo.
 16




---



##### Table of Contents



Worldwide Ceilings
 CEILING GRIDCartersville, Ga.
    
    Dreux, France
    
    Shenzhen, China (leased)Stockton, Calif.
    
    Oakville, Ontario, Canada
    
    St. Petersburg, Russia (leased)Westlake, Ohio
    
    Peterlee, England (leased)
    
    Viersen, GermanyAuckland, New Zealand (leased)
  CEILING TILECloquet, Minn.
    
    Greenville, Miss.
    
    Walworth, Wis.
   17




---



##### Table of Contents



Item 3.   LEGAL PROCEEDINGS
  
 Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 Item 5.
    
    MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
      18




---



##### Table of Contents



2009
    
    
    2008High
    
    
    Low
    
    
    High
    
    
    LowFirst quarter
    
    $
    12.47
    
    
    $
    4.16
    
    
    $
    38.38
    
    
    $
    29.71Second quarter
    
    
    17.88
    
    
    
    7.17
    
    
    
    40.25
    
    
    
    29.48Third quarter
    
    
    19.88
    
    
    
    8.71
    
    
    
    35.00
    
    
    
    23.12Fourth quarter
    
    
    17.93
    
    
    
    12.45
    
    
    
    26.39
    
    
    
    5.50
   
 Value of Investment as of December 312004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009USG
    
    $
    100
    
    
    $
    161
    
    
    $
    136
    
    
    $
    104
    
    
    $
    23
    
    
    $
    41S&P 500
    
    
    100
    
    
    
    105
    
    
    
    121
    
    
    
    128
    
    
    
    81
    
    
    
    102DJUSCN
    
    
    100
    
    
    
    112
    
    
    
    131
    
    
    
    161
    
    
    
    92
    
    
    
    105
  19




---



##### Table of Contents



Item 6.   SELECTED FINANCIAL DATA
 USG CORPORATION
FIVE-YEAR SUMMARY
 (dollars in millions, except per-share data)
    
    Years Ended December 31,2009
    
    
    2008
    
    
    2007(a)
    
    
    2006(a)
    
    
    2005(a)Statement of Operations Data:Net sales
    
    $
    3,235
    
    
    $
    4,608
    
    
    $
    5,202
    
    
    $
    5,810
    
    
    $
    5,139Cost of products sold
    
    
    3,090
    
    
    
    4,416
    
    
    
    4,601
    
    
    
    4,426
    
    
    
    4,030Gross profit
    
    
    145
    
    
    
    192
    
    
    
    601
    
    
    
    1,384
    
    
    
    1,109Selling and administrative expenses
    
    
    304
    
    
    
    380
    
    
    
    408
    
    
    
    419
    
    
    
    352Litigation settlement income (b)
    
    
    (97)
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Restructuring and long-lived asset impairment charges
    
    
    80
    
    
    
    98
    
    
    
    26
    
    
    
    -
    
    
    
    -Goodwill and other intangible asset impairment charges
    
    
    43
    
    
    
    226
    
    
    
    -
    
    
    
    -
    
    
    
    -Asbestos claims provision (reversal) (c)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (44)
    
    
    
    3,100Chapter 11 reorganization expenses
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    10
    
    
    
    4Operating profit (loss)
    
    
    (185)
    
    
    
    (512)
    
    
    
    167
    
    
    
    999
    
    
    
    (2,347)Interest expense (c)
    
    
    165
    
    
    
    86
    
    
    
    105
    
    
    
    555
    
    
    
    5Interest income
    
    
    (4)
    
    
    
    (7)
    
    
    
    (22)
    
    
    
    (43)
    
    
    
    (10)Other income, net
    
    
    (9)
    
    
    
    (10)
    
    
    
    (4)
    
    
    
    (3)
    
    
    
    -Income taxes (benefit) (d)
    
    
    450
    
    
    
    (118)
    
    
    
    11
    
    
    
    193
    
    
    
    (921)Earnings (loss) before cumulative effect of accounting change
    
    
    (787)
    
    
    
    (463)
    
    
    
    77
    
    
    
    297
    
    
    
    (1,421)Cumulative effect of accounting change
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (11)Net earnings (loss)
    
    
    (787)
    
    
    
    (463)
    
    
    
    77
    
    
    
    297
    
    
    
    (1,432)Net Earnings (Loss) Per Common Share:Cumulative effect of accounting change
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (0.20)Basic
    
    
    (7.93)
    
    
    
    (4.67)
    
    
    
    0.80
    
    
    
    4.47
    
    
    
    (25.42)Diluted
    
    
    (7.93)
    
    
    
    (4.67)
    
    
    
    0.79
    
    
    
    4.46
    
    
    
    (25.42)Balance Sheet Data(as of the end of the year):Working capital
    
    $
    939
    
    
    $
    738
    
    
    $
    717
    
    
    $
    975
    
    
    $
    1,602Current ratio
    
    
    2.91
    
    
    
    1.98
    
    
    
    2.26
    
    
    
    1.55
    
    
    
    3.60Cash and cash equivalents
    
    
    690
    
    
    
    471
    
    
    
    297
    
    
    
    565
    
    
    
    936Property, plant and equipment, net
    
    
    2,427
    
    
    
    2,562
    
    
    
    2,596
    
    
    
    2,210
    
    
    
    1,946Total assets
    
    
    4,097
    
    
    
    4,719
    
    
    
    4,654
    
    
    
    5,397
    
    
    
    6,180Long-term debt (c)
    
    
    1,955
    
    
    
    1,642
    
    
    
    1,238
    
    
    
    1,439
    
    
    
    -Liabilities subject to compromise (c)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    5,340Total stockholders equity (deficit)
    
    
    930
    
    
    
    1,550
    
    
    
    2,226
    
    
    
    1,566
    
    
    
    (279)Other Information:Capital expenditures
    
    $
    44
    
    
    $
    238
    
    
    $
    460
    
    
    $
    393
    
    
    $
    198Closing stock price per common share as of December 31
    
    
    14.05
    
    
    
    8.04
    
    
    
    35.79
    
    
    
    54.80
    
    
    
    65.00Average number of employees (e)
    
    
    10,800
    
    
    
    13,600
    
    
    
    14,650
    
    
    
    14,700
    
    
    
    14,100
 
 (a)
    
    Financial information for 2005 through 2007 reflects adjustments for our change in 2008 from
the last-in, first-out method of inventory accounting to the average cost method. These
adjustments reduced cost of products sold from the amounts originally reported by $2 million
in 2007, $14 million in 2006 and $7 million in 2005.(b)
    
    Reflects settlement income, net of fees, from our lawsuit against Lafarge North America Inc.
and its parent, Lafarge S.A.(c)
    
    In connection with our five-year reorganization proceeding that concluded in 2006, U.S.
Gypsum recorded a pretax charge of $3.1 billion for asbestos claims in 2005. Interest expense
in 2006 included post-petition interest and fees of $528 million related to pre-petition
obligations. Debt of $1.005 billion as of December 31, 2005 was included in liabilities
subject to compromise.(d)
    
    Income taxes (benefit) includes noncash deferred tax asset valuation allowances of $575
million in 2009, $71 million in 2008, $(10) million in 2007, $(6) million in 2006 and $31
million in 2005.(e)
    
    As of December 31, 2009, we had approximately 10,100 employees worldwide. 20




---



##### Table of Contents



Item 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Overview
   
    
    new residential construction accounted for approximately 20% of our net sales,
    
    residential and nonresidential repair and remodel activity accounted for approximately 47% of
our net sales,
    
    new nonresidential construction accounted for approximately 31% 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
 21




---



##### Table of Contents



22




---



##### Table of Contents



®
    23




---



##### Table of Contents




    
    extend our customer satisfaction leadership;
    
    improve operating efficiencies and achieve significant cost reductions; and
    
    maintain financial flexibility.
 24




---



##### Table of Contents



Consolidated Results of Operations
 Increase
    
    
    Increase(Decrease)
    
    
    (Decrease)(dollars in millions, except per-share data)
    
    2009
    
    
    2008
    
    
    2007
    
    
    2009 vs. 2008
    
    
    2008 vs. 2007Net sales
    
    $
    3,235
    
    
    $
    4,608
    
    
    $
    5,202
    
    
    
    (30)%
    
    
    
    (11)%Cost of products sold
    
    
    3,090
    
    
    
    4,416
    
    
    
    4,601
    
    
    
    (30)%
    
    
    
    (4)%Gross profit
    
    
    145
    
    
    
    192
    
    
    
    601
    
    
    
    (24)%
    
    
    
    (68)%Selling and administrative expenses
    
    
    304
    
    
    
    380
    
    
    
    408
    
    
    
    (20)%
    
    
    
    (7)%Litigation settlement income
    
    
    (97)
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Restructuring and long-lived asset impairment charges
    
    
    80
    
    
    
    98
    
    
    
    26
    
    
    
    (18)%
    
    
    
    277%Goodwill and other intangible asset impairment charges
    
    
    43
    
    
    
    226
    
    
    
    -
    
    
    
    (81)%
    
    
    
    -Operating profit (loss)
    
    
    (185)
    
    
    
    (512)
    
    
    
    167
    
    
    
    (64)%
    
    
    
    -Interest expense
    
    
    165
    
    
    
    86
    
    
    
    105
    
    
    
    92%
    
    
    
    (18)%Interest income
    
    
    (4)
    
    
    
    (7)
    
    
    
    (22)
    
    
    
    (43)%
    
    
    
    (68)%Other income, net
    
    
    (9)
    
    
    
    (10)
    
    
    
    (4)
    
    
    
    (10)%
    
    
    
    150%Income taxes (benefit)
    
    
    450
    
    
    
    (118)
    
    
    
    11
    
    
    
    -
    
    
    
    -Net earnings (loss)
    
    
    (787)
    
    
    
    (463)
    
    
    
    77
    
    
    
    70%
    
    
    
    -Diluted earnings (loss) per share
    
    
    (7.93)
    
    
    
    (4.67)
    
    
    
    0.79
    
    
    
    70%
    
    
    
    -
   ®
 ®
 25




---



##### Table of Contents



®
 ®
          26




---



##### Table of Contents



27




---



##### Table of Contents



28




---



##### Table of Contents



Core Business Results of Operations
 Net Sales
    
    
    Operating Profit (Loss)(millions)
    
    2009
    
    
    2008
    
    
    2007
    
    
    2009(a)
    
    
    2008(b)
    
    
    2007(c)North American Gypsum:United States Gypsum Company
    
    $
    1,432
    
    
    $
    1,933
    
    
    $
    2,417
    
    
    $
    (20)
    
    
    $
    (261)
    
    
    $
    30CGC Inc. (gypsum)
    
    
    267
    
    
    
    332
    
    
    
    324
    
    
    
    7
    
    
    
    (8)
    

    
    
    15USG Mexico, S.A. de C.V.
    
    
    142
    
    
    
    201
    
    
    
    193
    
    
    
    12
    
    
    
    20
    
    
    
    26Other (d)
    
    
    40
    
    
    
    74
    
    
    
    83
    
    
    
    (8)
    

    
    
    8
    
    
    
    13Eliminations
    
    
    (111)
    

    
    
    (182)
    

    
    
    (180)
    

    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,770
    
    
    
    2,358
    
    
    
    2,837
    
    
    
    (9)
    

    
    
    (241)
    

    
    
    84Building Products Distribution:L&W Supply Corporation
    
    
    1,289
    
    
    
    1,993
    
    
    
    2,291
    
    
    
    (172)
    

    
    
    (243)
    

    
    
    91Worldwide Ceilings:USG Interiors, Inc.
    
    
    429
    
    
    
    531
    
    
    
    523
    
    
    
    53
    
    
    
    61
    
    
    
    54USG International
    
    
    222
    
    
    
    304
    
    
    
    273
    
    
    
    2
    
    
    
    (4)
    

    
    
    12CGC Inc. (ceilings)
    
    
    56
    
    
    
    61
    
    
    
    61
    
    
    
    7
    
    
    
    11
    
    
    
    9Eliminations
    
    
    (44)
    

    
    
    (50)
    

    
    
    (44)
    

    
    
    
    
    
    
    
    
    
    
    Total
    
    
    663
    
    
    
    846
    
    
    
    813
    
    
    
    62
    
    
    
    68
    
    
    
    75Corporate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (71)
    

    
    
    (97)
    

    
    
    (110)Eliminations
    
    
    (487)
    

    
    
    (589)
    

    
    
    (739)
    

    
    
    5
    
    
    
    1
    
    
    
    27Total USG Corporation
    
    $
    3,235
    
    
    $
    4,608
    
    
    $
    5,202
    
    
    $
    (185)
    

    
    $
    (512)
    

    
    $
    167
 (a)
    
    Consolidated operating loss in 2009 included:
 
    
    restructuring and long-lived asset impairment charges of $80 million, of which $39
million related to Building Products Distribution, $25 million to North American Gypsum, $5
million to Worldwide Ceilings and $11 million to Corporate;
    
    goodwill and other intangible asset impairment charges of $43 million, of which $41
million related to Building Products Distribution and $2 million to Worldwide Ceilings; and
    
    litigation settlement income, net of fees, of $97 million from our lawsuit against
Lafarge, all of which related to North American Gypsum.
 (b)
    
    Consolidated operating loss in 2008 included:
 
    
    restructuring and long-lived asset impairment charges of $98 million, of which $48
million related to North American Gypsum, $34 million to Building Products Distribution, $5
million to Worldwide Ceilings and $11 million to Corporate; and
    
    goodwill and other intangible asset impairment charges of $226 million, of which $213
million related to Building Products Distribution, $12 million to Worldwide Ceilings and $1
million to North American Gypsum.
 (c)
    
    Consolidated operating profit in 2007 included restructuring and long-lived asset impairment
charges of $26 million, of which $18 million related to North American Gypsum, $1 million to
Building Products Distribution, $2 million to Worldwide Ceilings and $5 million to Corporate.(d)
    
    Includes a shipping company in Bermuda and a mining operation in Nova Scotia, Canada
 29




---



##### Table of Contents



United States Gypsum Company - 2009 Compared With 2008 ® ®
 ®
 ®
 ® ®
 ®
 ® ® ®
 30




---



##### Table of Contents



United States Gypsum Company - 2008 Compared With 2007 ® ®
 ®
 ®
 ®
 ®
 ® ® ®
 CGC Inc. ®
  31




---



##### Table of Contents



®
 USG Mexico, S.A. de C.V.
 ®
     32




---



##### Table of Contents



USG Interiors, Inc.
   33




---



##### Table of Contents



USG International
  CGC Inc.
  34




---



##### Table of Contents



Liquidity and Capital Resources
        35




---



##### Table of Contents



(millions)
    
    2009
    
    
    2008
    
    
    2007Net cash provided by (used for):Operating activities
    
    $
    139
    
    
    $
    (165)
    
    
    $
    1,307Investing activities
    
    
    (36)
    
    
    
    (252)
    
    
    
    (730)Financing activities
    
    
    109
    
    
    
    608
    
    
    
    (853)Effect of exchange rate changes on cash
    
    
    7
    
    
    
    (17)
    
    
    
    8Net increase (decrease) in cash and cash equivalents
    
    $
    219
    
    
    $
    174
    
    
    $
    (268)
 Operating Activities
 Investing Activities
 Financing Activities
     36




---



##### Table of Contents



Cash and Cash Equivalents
 Receivables
 Inventories
 Accounts Payable
 Accrued Expenses
   Realization of Deferred Tax Asset
   37




---



##### Table of Contents



38




---



##### Table of Contents



Contractual Obligations and Other Commitments
   Payments Due by Period2011-
    
    
    2013-
    
    
    There-(millions)
    
    Total
    
    
    2010
    
    
    2012
    
    
    2014
    
    
    afterDebt obligations (a)
    
    $
    1,988
    
    
    $
    7
    
    
    $
    14
    
    
    $
    308
    
    
    $
    1,659Other long-term liabilities (b)
    
    
    696
    
    
    
    4
    
    
    
    26
    
    
    
    5
    
    
    
    661Interest payments (c)
    
    
    1,449
    
    
    
    167
    
    
    
    332
    
    
    
    325
    
    
    
    625Purchase obligations (d)
    
    
    487
    
    
    
    52
    
    
    
    89
    
    
    
    97
    
    
    
    249Capital expenditures (e)
    
    
    242
    
    
    
    13
    
    
    
    32
    
    
    
    188
    
    
    
    9Operating leases
    
    
    369
    
    
    
    79
    
    
    
    113
    
    
    
    65
    
    
    
    112Unrecognized tax benefits (f)
    
    
    35
    
    
    
    6
    
    
    
    8
    
    
    
    15
    
    
    
    6Total
    
    $
    5,266
    
    
    $
    328
    
    
    $
    614
    
    
    $
    1,003
    
    
    $
    3,321
 
 (a)
    
    Excludes debt discount of $26 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 due toward
the latter part of that period.(c)
    
    Reflects estimated interest payments on debt obligations as of December 31, 2009.(d)
    
    Purchase obligations primarily consist of contracts to purchase energy and certain raw
materials.(e)
    
    Reflects estimates of future spending on capital projects that were approved prior to
December 31, 2009 but were not completed by that date.(f)
    
    Reflects estimated payments (if required) of gross unrecognized tax benefits.       Legal Contingencies
  39




---



##### Table of Contents



Critical Accounting Policies
     40




---



##### Table of Contents



41




---



##### Table of Contents



42




---



##### Table of Contents



Increase (Decrease) in20092010
    
    
    ProjectedPercentage
    
    
    Net Annual
    
    
    BenefitAssumptions
    
    Change
    
    
    Benefit Cost
    
    
    ObligationPension Benefits:Discount rate
    
    0.5% increase
    
    
    $
    (7)
    

    
    $
    (64)Discount rate
    
    0.5% decrease
    
    
    
    8
    
    
    
    70Asset return
    
    0.5% increase
    
    
    
    (5)
    

    
    
    Asset return
    
    0.5% decrease
    
    
    
    5
    
    
    
    Postretirement Benefits:Discount rate
    
    0.5% increase
    
    
    $
    (1)
    

    
    $
    (17)Discount rate
    
    0.5% decrease
    
    
    
    1
    
    
    
    19
   43




---



##### Table of Contents



Recent Accounting Pronouncements
  44




---



##### Table of Contents



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.
  45




---



##### Table of Contents



Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
          46




---



##### Table of Contents



Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 PageCONSOLIDATED FINANCIAL STATEMENTS:Statements of Operations
    
    
    48Balance Sheets
    
    
    49Statements of Cash Flows
    
    
    50Statements of Stockholders Equity
    
    
    51NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:1.
    
    Significant Accounting Policies
    
    
    522.
    
    Restructuring and Long-Lived Asset Impairment Charges
    
    
    553.
    
    Goodwill and Other Intangible Assets
    
    
    574.
    
    Debt
    
    
    595.
    
    Derivative Instruments
    
    
    626.
    
    Fair Value Measurements
    
    
    647.
    
    Employee Retirement Plans
    
    
    648.
    
    Share-Based Compensation
    
    
    699.
    
    Supplemental Balance Sheet Information
    
    
    7210.
    
    Income Taxes
    
    
    7411.
    
    Earnings (Loss) Per Share
    
    
    7712.
    
    Segments
    
    
    7813.
    
    Acquisitions
    
    
    8014.
    
    Stockholder Rights Plan
    
    
    8015.
    
    Commitments and Contingencies
    
    
    8116.
    
    Litigation
    
    
    8117.
    
    Quarterly Financial Data (unaudited)
    
    
    84Report of Independent Registered Public Accounting Firm
    
    
    85Schedule II - Valuation and Qualifying Accounts
    
    
    86
  47




---



##### Table of Contents



USG CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (millions, except per-share data)
    
    Years Ended December 31,2009
    
    
    2008
    
    
    2007Net sales
    
    $
    3,235
    
    
    $
    4,608
    
    
    $
    5,202Cost of products sold
    
    
    3,090
    
    
    
    4,416
    
    
    
    4,601Gross profit
    
    
    145
    
    
    
    192
    
    
    
    601Selling and administrative expenses
    
    
    304
    
    
    
    380
    
    
    
    408Litigation settlement income
    
    
    (97)
    
    
    
    -
    
    
    
    -Restructuring and long-lived asset impairment charges
    
    
    80
    
    
    
    98
    
    
    
    26Goodwill and other intangible asset impairment charges
    
    
    43
    
    
    
    226
    
    
    
    -Operating profit (loss)
    
    
    (185)
    
    
    
    (512)
    
    
    
    167Interest expense
    
    
    165
    
    
    
    86
    
    
    
    105Interest income
    
    
    (4)
    
    
    
    (7)
    
    
    
    (22)Other income, net
    
    
    (9)
    
    
    
    (10)
    
    
    
    (4)Earnings (loss) before income taxes
    
    
    (337)
    
    
    
    (581)
    
    
    
    88Income taxes (benefit)
    
    
    450
    
    
    
    (118)
    
    
    
    11Net earnings (loss)
    
    $
    (787)
    
    
    $
    (463)
    
    
    $
    77Basic earnings (loss) per common share
    
    $
    (7.93)
    
    
    $
    (4.67)
    
    
    $
    0.80Diluted earnings (loss) per common share
    
    $
    (7.93)
    
    
    $
    (4.67)
    
    
    $
    0.79
 The notes to consolidated financial statements are an integral part of these statements.
 48




---



##### Table of Contents



USG CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
 (millions, except share data)
    
    

    As of December 31,2009
    
    
    2008AssetsCurrent Assets:Cash and cash equivalents
    
    $
    690
    
    
    $
    471Restricted cash
    
    
    2
    
    
    
    1Receivables (net of reserves: 2009 - $16; 2008 - $15)
    
    
    357
    
    
    
    467Inventories
    
    
    289
    
    
    
    404Income taxes receivable
    
    
    20
    
    
    
    15Deferred income taxes
    
    
    2
    
    
    
    68Other current assets
    
    
    71
    
    
    
    68Total current assets
    
    
    1,431
    
    
    
    1,494Property, plant and equipment, net
    
    
    2,427
    
    
    
    2,562Deferred income taxes
    
    
    -
    
    
    
    374Goodwill
    
    
    -
    
    
    
    12Other assets
    
    
    239
    
    
    
    277Total assets
    
    $
    4,097
    
    
    $
    4,719Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    205
    
    
    $
    220Accrued expenses
    
    
    273
    
    
    
    338Short-term debt
    
    
    -
    
    
    
    190Current portion of long-term debt
    
    
    7
    
    
    
    4Income taxes payable
    
    
    7
    
    
    
    4Total current liabilities
    
    
    492
    
    
    
    756Long-term debt
    
    
    1,955
    
    
    
    1,642Deferred income taxes
    
    
    17
    
    
    
    7Other liabilities
    
    
    703
    
    
    
    764Commitments and contingenciesStockholders Equity:Preferred stock (000) - $1 par value, $1.80 convertible preferred stock (initial series);authorized 36,000 shares; outstanding - none
    
    
    -
    
    
    
    -Common stock (000) - $0.10 par value; authorized 200,000 shares;issued: 2009 - 103,972 shares; 2008 - 103,972 shares
    
    
    10
    
    
    
    10Treasury stock at cost (000) -2009 - 4,672 shares; 2008 - 4,793 shares
    
    
    (194)
    
    
    
    (199)Capital received in excess of par value
    
    
    2,640
    
    
    
    2,625Accumulated other comprehensive (loss) income
    
    
    (80)
    
    
    
    (227)Retained earnings (deficit)
    
    
    (1,446)
    
    
    
    (659)Total stockholders equity
    
    
    930
    
    
    
    1,550Total liabilities and stockholders equity
    
    $
    4,097
    
    
    $
    4,719
 The notes to consolidated financial statements are an integral part of these statements.
 49




---



##### Table of Contents



USG CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (millions)
    
    
    Years Ended December 31,2009
    
    
    2008
    
    
    2007Operating ActivitiesNet earnings (loss)
    
    $
    (787)
    
    
    $
    (463)
    
    
    $
    77Adjustments to Reconcile Net Earnings (Loss) to Net Cash:Goodwill and other intangible asset impairment charges
    
    
    43
    
    
    
    226
    
    
    
    -Depreciation, depletion and amortization
    
    
    203
    
    
    
    182
    
    
    
    176Share-based compensation expense
    
    
    21
    
    
    
    24
    
    
    
    20Deferred income taxes
    
    
    453
    
    
    
    (111)
    
    
    
    5(Gain) loss on asset dispositions
    
    
    (10)
    
    
    
    1
    
    
    
    -Convertible debt embedded derivative
    
    
    (10)
    
    
    
    (11)
    
    
    
    -(Increase) Decrease in Working Capital (net of acquisitions):Receivables
    
    
    108
    
    
    
    (37)
    
    
    
    91Income taxes receivable
    
    
    (4)
    
    
    
    22
    
    
    
    1,063Inventories
    
    
    113
    
    
    
    27
    
    
    
    5Payables
    
    
    (8)
    
    
    
    (78)
    
    
    
    (60)Accrued expenses
    
    
    (23)
    
    
    
    49
    
    
    
    (59)Decrease (increase) in other assets
    
    
    25
    
    
    
    (23)
    
    
    
    (29)Increase in other liabilities
    
    
    2
    
    
    
    25
    
    
    
    33Reorganization distribution - other
    
    
    -
    
    
    
    -
    
    
    
    (40)Other, net
    
    
    13
    
    
    
    2
    
    
    
    25Net cash provided by (used for) operating activities
    
    
    139
    
    
    
    (165)
    
    
    
    1,307Investing ActivitiesCapital expenditures
    
    
    (44)
    
    
    
    (238)
    
    
    
    (460)Investment in joint venture
    
    
    (7)
    
    
    
    (12)
    
    
    
    -(Deposit) return of restricted cash
    
    
    (1)
    
    
    
    (1)
    
    
    
    6Net proceeds from asset dispositions
    
    
    16
    
    
    
    -
    
    
    
    3Acquisitions of businesses, net of cash acquired
    
    
    -
    
    
    
    (1)
    
    
    
    (279)Net cash used for investing activities
    
    
    (36)
    
    
    
    (252)
    
    
    
    (730)Financing ActivitiesIssuance of debt
    
    
    319
    
    
    
    1,950
    
    
    
    499Repayment of debt
    
    
    (195)
    
    
    
    (1,331)
    
    
    
    (1,765)Payment of debt issuance fees
    
    
    (15)
    
    
    
    (10)
    
    
    
    (4)Excess tax benefits from share-based compensation
    
    
    -
    
    
    
    (1)
    
    
    
    (5)Proceeds from equity offering, net of fees
    
    
    -
    
    
    
    -
    
    
    
    422Net cash provided by (used for) financing activities
    
    
    109
    
    
    
    608
    
    
    
    (853)Effect of exchange rate changes on cash
    
    
    7
    
    
    
    (17)
    
    
    
    8Net increase (decrease) in cash and cash equivalents
    
    
    219
    
    
    
    174
    
    
    
    (268)Cash and cash equivalents at beginning of period
    
    
    471
    
    
    
    297
    
    
    
    565Cash and cash equivalents at end of period
    
    $
    690
    
    
    $
    471
    
    
    $
    297Supplemental Cash Flow Disclosures:Interest paid
    
    $
    139
    
    
    $
    83
    
    
    $
    90Income taxes (refunded), net
    
    
    (1)
    
    
    
    (21)
    
    
    
    (1,046)Payables adjustment for capital expenditures
    
    
    (4)
    
    
    
    (32)
    
    
    
    39
 The notes to consolidated financial statements are an integral part of these statements.
 50




---



##### Table of Contents



USG CORPORATION
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Common
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capital
    
    
    
    
    
    
    AccumulatedShares
    
    
    Treasury
    
    
    
    
    
    
    
    
    
    
    Received in
    
    
    Retained
    
    
    OtherIssued
    
    
    Shares
    
    
    Common
    
    
    Treasury
    
    
    Excess of
    
    
    Earnings
    
    
    Comprehensive(millions, except share data)
    
    (000)
    
    
    (000)
    
    
    Stock
    
    
    Stock
    
    
    Par Value
    
    
    (Deficit)
    
    
    Income (Loss)
    
    
    TotalBalance at December 31, 2006
    
    
    94,908
    
    
    
    (5,043)
    
    
    $
    9
    
    
    $
    (208)
    
    
    $
    2,176
    
    
    $
    (275)
    
    
    $
    (136)
    
    
    $
    1,566Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    77Foreign currency translation, net of tax
benefit of $1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    53Change in fair value of derivatives, net of
tax of $15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    21Change in pension and postretirement
benefit plans, net of tax of $48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    72Unrealized loss on marketable
securities, net of tax benefit of $0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1)
    
    
    
    (1)Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    222Adoption of new accounting
pronouncements, net of tax of $2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Equity offering
    
    
    9,064
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    421
    
    
    
    
    
    
    
    
    
    
    
    422Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    20Stock issuances
    
    
    
    
    
    
    122
    
    
    
    
    
    
    
    4
    
    
    
    (4)
    
    
    
    
    
    
    
    
    
    
    
    -Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6)
    
    
    
    
    
    
    
    
    
    
    
    (6)Balance at December 31, 2007
    
    
    103,972
    
    
    
    (4,921)
    
    
    $
    10
    
    
    $
    (204)
    
    
    $
    2,607
    
    
    $
    (196)
    
    
    $
    9
    
    
    $
    2,226Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (463)
    
    
    
    
    
    
    
    (463)Foreign currency translation,
net of tax benefit of $1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100)
    
    
    
    (100)Change in fair value of derivatives,
net of tax benefit of $20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30)
    
    
    
    (30)Change in pension and postretirement
benefit plans, net of tax benefit of $49
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (107)
    
    
    
    (107)Unrealized loss on marketable securities,
net of tax of $0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (699)Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    24Stock issuances
    
    
    
    
    
    
    128
    
    
    
    
    
    
    
    5
    
    
    
    (5)
    
    
    
    
    
    
    
    
    
    
    
    -Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1)
    
    
    
    
    
    
    
    
    
    
    
    (1)Balance at December 31, 2008
    
    
    103,972
    
    
    
    (4,793)
    
    
    $
    10
    
    
    $
    (199)
    
    
    $
    2,625
    
    
    $
    (659)
    
    
    $
    (227)
    
    
    $
    1,550Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (787)
    
    
    
    
    
    
    
    (787)Foreign currency translation,
net of tax of $0.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52
    
    
    
    52Change in fair value of derivatives,
net of tax benefit of $0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    36Change in pension and postretirement
benefit plans, net of tax benefit of $4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    59Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (640)Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21Stock issuances
    
    
    
    
    
    
    121
    
    
    
    
    
    

    
    5
    
    
    
    (5)
    
    
    
    
    
    
    
    
    
    
    
    -Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1)
    
    
    
    
    
    
    
    
    
    
    
    (1)Balance at December 31, 2009
    
    
    103,972
    
    
    
    (4,672)
    
    
    $
    10
    
    
    $
    (194)
    
    
    $
    2,640
    
    
    $
    (1,446)
    
    
    $
    (80)
    
    
    $
    930
 The notes to consolidated financial statements are an integral part of these statements.
 51




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 In the following Notes to Consolidated Financial Statements, 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
 
 1.   Significant Accounting Policies
  ®
             52




---



##### Table of Contents



53




---



##### Table of Contents



Commodity Derivative Instruments
 Foreign Exchange Derivative Instruments
     
    
    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
 54




---



##### Table of Contents




    
    Level 3  Valuations derived from valuation techniques in which one or more significant
inputs or significant value drivers are unobservable.
      
 2.   Restructuring and Long-Lived Asset Impairment Charges
       55




---



##### Table of Contents



Balance
    
    
    2009 Activity
    
    
    Balanceas of
    
    
    
    
    
    
    Cash
    
    
    Asset
    
    
    as of(millions)
    
    12/31/08
    
    
    Charges
    
    
    Payments
    
    
    Impairment
    
    
    12/31/09Severance
    
    $
    27
    
    
    $
    16
    
    
    $
    (39)
    
    
    $
    -
    
    
    $
    4Lease obligations
    
    
    23
    
    
    
    32
    
    
    
    (15)
    
    
    
    (6)
    
    
    
    34Asset impairments
    
    
    -
    
    
    
    24
    
    
    
    -
    
    
    
    (24)
    
    
    
    -Other exit costs
    
    
    -
    
    
    
    8
    
    
    
    (6)
    
    
    
    -
    
    
    
    2Total
    
    $
    50
    
    
    $
    80
    
    
    $
    (60)
    
    
    $
    (30)
    
    
    $
    40
 56




---



##### Table of Contents



3.   Goodwill and Other Intangible Assets
      57




---



##### Table of Contents



2009
    
    
    2008Building
    
    
    North
    
    
    BuildingProducts
    
    
    American
    
    
    Products
    
    
    Worldwide(millions)
    
    Distribution
    
    
    Gypsum
    
    
    Distribution
    
    
    Ceilings
    
    
    TotalBalance as of January 1:Goodwill
    
    $
    213
    
    
    $
    1
    
    
    $
    213
    
    
    $
    12
    
    
    $
    226Accumulated impairment charges
    
    
    (201)
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -$
    12
    
    
    $
    1
    
    
    $
    213
    
    
    $
    12
    
    
    $
    226Impairment charges
    
    
    (12)
    
    
    
    (1)
    
    
    
    (201)
    
    
    
    (12)
    
    
    
    (214)Balance as of December 31:Goodwill
    
    $
    213
    
    
    $
    1
    
    
    $
    213
    
    
    $
    12
    
    
    $
    226Accumulated impairment charges
    
    
    (213)
    
    
    
    (1)
    
    
    
    (201)
    
    
    
    (12)
    
    
    
    (214)$
    -
    
    
    $
    -
    
    
    $
    12
    
    
    $
    -
    
    
    $
    12
   2009
    
    
    2008Gross
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Impairment
    
    
    Accumulated
    
    
    
    
    
    
    Carrying
    
    
    Impairment
    
    
    Accumulated(millions)
    
    Amount
    
    
    Charges
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Charges
    
    
    Amortization
    
    
    NetIntangible Assets with Definite Lives:Customer relationships
    
    $
    70
    
    
    $
    -
    
    
    $
    (20)
    
    
    $
    50
    
    
    $
    70
    
    
    $
    -
    
    
    $
    (13)
    
    
    $
    57Other
    
    
    9
    
    
    
    -
    
    
    
    (4)
    
    
    
    5
    
    
    
    9
    
    
    
    -
    
    
    
    (3)
    
    
    
    6Total
    
    
    79
    
    
    
    -
    
    
    
    (24)
    
    
    
    55
    
    
    
    79
    
    
    
    -
    
    
    
    (16)
    
    
    
    63Intangible Assets with Indefinite Lives:Trade names
    
    
    53
    
    
    
    (31)
    
    
    
    -
    
    
    
    22
    
    
    
    66
    
    
    
    (13)
    
    
    
    -
    
    
    
    53Other
    
    
    9
    
    
    
    -
    
    
    
    -
    
    
    
    9
    
    
    
    9
    
    
    
    -
    
    
    
    -
    
    
    
    9Total
    
    
    62
    
    
    
    (31)
    
    
    
    -
    
    
    
    31
    
    
    
    75
    
    
    
    (13)
    
    
    
    -
    
    
    
    62Total Other Intangible Assets
    
    $
    141
    
    
    $
    (31)
    
    
    $
    (24)
    
    
    $
    86
    
    
    $
    154
    
    
    $
    (13)
    
    
    $
    (16)
    
    
    $
    125
  58




---



##### Table of Contents



4.   Debt
  (millions)
    
    2009
    
    
    20086.3% senior notes
    
    $
    500
    
    
    $
    5007.75% senior notes, net of discount
    
    
    499
    
    
    
    4999.75% senior notes, net of discount
    
    
    295
    
    
    
    -10% convertible senior notes, net of discount
    
    
    380
    
    
    
    379Ship mortgage facility
    
    
    49
    
    
    
    29Industrial revenue bonds
    
    
    239
    
    
    
    239Revolving credit facility
    
    
    -
    
    
    
    190Total
    
    $
    1,962
    
    
    $
    1,836
        59




---



##### Table of Contents



60




---



##### Table of Contents



61




---



##### Table of Contents



5.   Derivative Instruments
          62




---



##### Table of Contents



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
    
    $  (27)
    
    
    Cost of products sold
    
    $  (64)Foreign exchange contracts
    
    (2)
    
    
    Cost of products sold
    
    (1)Total
    
    $  (29)
    
    
    
    
    
    
    $  (65)
 Derivatives Not
    
    Location of Gain or (Loss)
    
    
    Amount of Gain or (Loss)Designated as Hedging
    
    Recognized in Income on
    
    
    Recognized in Income onInstruments
    
    Derivatives
    
    
    DerivativesInterest rate contracts
    
    Interest expense
    

$     (1)Interest rate contracts
    
    Other income, net
    
    
    1Commodity contracts
    
    Cost of products sold
    
    
    (4)Foreign exchange contracts
    
    Other income, net
    
    
    1Total
    
    
    
    
    
    
    $     (3)
   Derivatives
    
    Assets
    
    
    LiabilitiesDesignated as Hedging
    
    Balance Sheet
    
    Fair
    
    
    Balance Sheet
    
    FairInstruments
    
    Location
    
    Value
    
    
    Location
    
    ValueCommodity contracts
    
    Other current assets
    
    $
    2
    
    
    Accrued expenses
    
    $
    13Commodity contracts
    
    Other assets
    
    
    2
    
    
    Other liabilities
    
    
    13Total
    
    $
    4
    
    
    Total
    
    $
    26Derivatives Not
    
    Assets
    
    
    LiabilitiesDesignated as Hedging
    
    Balance Sheet
    
    Fair
    
    
    Balance Sheet
    
    
    FairInstruments
    
    Location
    
    Value
    
    
    Location
    
    
    ValueCommodity contracts
    
    Other current assets
    
    $
    1
    
    
    Accrued expenses
    
    $
    -Total Derivatives
    
    
    
    
    
    $
    5
    
    
    
    
    
    
    $
    26
 63




---



##### Table of Contents



6.   Fair Value Measurements
  Quoted Pricesin Active
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantAs of
    
    
    Identical
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs(millions)
    
    2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative assets
    
    $
    5
    
    
    $
    -
    
    
    $
    5
    
    
    $
    -Derivative liabilities
    
    
    (26)
    
    
    
    -
    
    
    
    (26)
    
    
    
    -
   
 7.   Employee Retirement Plans
    64




---



##### Table of Contents



(millions)
    
    2009
    
    
    2008
    
    
    2007Pension Benefits:Service cost of benefits earned
    
    $
    27
    
    
    $
    34
    
    
    $
    40Interest cost on projected benefit obligation
    
    
    68
    
    
    
    69
    
    
    
    67Expected return on plan assets
    
    
    (69)
    
    
    
    (77)
    
    
    
    (73)Net amortization
    
    
    5
    
    
    
    8
    
    
    
    12Net pension cost
    
    $
    31
    
    
    $
    34
    
    
    $
    46Postretirement Benefits:Service cost of benefits earned
    
    $
    7
    
    
    $
    14
    
    
    $
    15Interest cost on projected benefit obligation
    
    
    19
    
    
    
    26
    
    
    
    24Net amortization
    
    
    (14)
    
    
    
    (8)
    
    
    
    (3)Net postretirement cost
    
    $
    12
    
    
    $
    32
    
    
    $
    36
   Pension
    
    Postretirement(millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Change in Benefit Obligation:Benefit obligation as of January 1
    
    $
    975
    
    
    $
    1,125
    
    
    $
    351
    
    
    $
    411Service cost
    
    
    27
    
    
    
    34
    
    
    
    7
    
    
    
    14Interest cost
    
    
    68
    
    
    
    69
    
    
    
    19
    
    
    
    26Participant contributions
    
    
    10
    
    
    
    12
    
    
    
    6
    
    
    
    5Benefits paid
    
    
    (98)
    
    
    
    (99)
    
    
    
    (22)
    
    
    
    (19)Medicare Part D subsidy receipts
    
    
    -
    
    
    
    -
    
    
    
    1
    
    
    
    2Plan amendment
    
    
    (8)
    
    
    
    3
    
    
    
    (84)
    
    
    
    (29)Actuarial loss (gain)
    
    
    78
    
    
    
    (132)
    
    
    
    21
    
    
    
    (53)Foreign currency translation
    
    
    23
    
    
    
    (37)
    
    
    
    5
    
    
    
    (6)Benefit obligation as of December 31
    
    $
    1,075
    
    
    $
    975
    
    
    $
    304
    
    
    $
    351Change in Plan Assets:Fair value as of January 1
    
    $
    750
    
    
    $
    1,152
    
    
    $
    -
    
    
    $
    -Actual return on plan assets
    
    
    146
    
    
    
    (299)
    
    
    
    -
    
    
    
    -Employer contributions
    
    
    49
    
    
    
    22
    
    
    
    16
    
    
    
    14Participant contributions
    
    
    10
    
    
    
    12
    
    
    
    6
    
    
    
    5Benefits paid
    
    
    (98)
    
    
    
    (99)
    
    
    
    (22)
    
    
    
    (19)Foreign currency translation
    
    
    24
    
    
    
    (38)
    
    
    
    -
    
    
    
    -Fair value as of December 31
    
    $
    881
    
    
    $
    750
    
    
    $
    -
    
    
    $
    -Funded status
    
    $
    (194)
    
    
    $
    (225)
    
    
    $
    (304)
    
    
    $
    (351)
 65




---



##### Table of Contents



Pension
    
    Postretirement(millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Components on the Consolidated Balance Sheets:Noncurrent assets
    
    $
    5
    
    
    $
    10
    
    
    $
    -
    
    
    $
    -Current liabilities
    
    
    -
    
    
    
    (2)
    
    
    
    (17)
    
    
    
    (16)Noncurrent liabilities
    
    
    (199)
    
    
    
    (233)
    
    
    
    (287)
    
    
    
    (335)Net liability as of December 31
    
    $
    (194)
    
    
    $
    (225)
    
    
    $
    (304)
    
    
    $
    (351)Pretax Components in AOCI:Net actuarial loss
    
    $
    329
    
    
    $
    326
    
    
    $
    29
    
    
    $
    7Prior service cost (credit)
    
    
    3
    
    
    
    13
    
    
    
    (143)
    
    
    
    (73)Total as of December 31
    
    $
    332
    
    
    $
    339
    
    
    $
    (114)
    
    
    $
    (66)
    Pension
    
    
    Postretirement2009
    
    
    2008
    
    
    2009
    
    
    2008Weighted average assumptions used to determine 
benefit obligations as of December 31:Discount rate
    
    
    5.95%
    
    
    
    6.85%
    
    
    
    5.85%
    
    
    
    6.85%Compensation increase rate
    
    
    3.50%
    
    
    
    3.50%
    
    
    
    -
    
    
    
    -Weighted average assumptions used to determine 
net cost for years ended December 31:Discount rate
    
    
    6.85%
    
    
    
    6.55%
    
    
    
    6.85%
    
    
    
    6.65%Expected return on plan assets
    
    
    7.00%
    
    
    
    7.00%
    
    
    
    -
    
    
    
    -Compensation increase rate
    
    
    3.50%
    
    
    
    4.00%
    
    
    
    -
    
    
    
    -
   One-Percentage-
    
    
    One-Percentage-(millions)
    
    Point Increase
    
    
    Point DecreaseEffect on total service and interest cost
    
    $
    -
    
    
    $
    -Effect on postretirement benefit obligation
    
    
    (4)
    
    
    
    3
  Investment Policies and Strategies:
 66




---



##### Table of Contents



Investment
PolicyTarget
    
    RangeAsset Categories:Equity securities
    
    
    60
    %
    
    
    55% - 65
    %Fixed income securities
    
    
    20
    %
    
    
    15% - 30
    %Limited partnerships
    
    
    15
    %
    
    
    7% - 17
    %Real estate funds
    
    
    5
    %
    
    
    0% - 10
    %Cash equivalents
    
    
    0
    %
    
    
    0% - 10
    %Total
    
    
    100
    %
  67




---



##### Table of Contents



Fair Values of Plan Assets:
 (millions)
    
    2009
    
    
    2008Asset Categories:Equity securities
    
    $
    572
    
    
    $
    421Fixed income securities
    
    
    191
    
    
    
    206Limited partnerships
    
    
    91
    
    
    
    80Real estate funds
    
    
    19
    
    
    
    34Cash equivalents
    
    
    8
    
    
    
    9Total
    
    $
    881
    
    
    $
    750
 Note 1.
 Quoted Pricesin Active
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(millions)
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalAsset Categories:Equity securities (a)
    
    $
    572
    
    
    $
    -
    
    
    $
    -
    
    
    $
    572Fixed income securities (b)
    
    
    190
    
    
    
    1
    
    
    
    -
    
    
    
    191Limited partnerships (c)
    
    
    -
    
    
    
    42
    
    
    
    49
    
    
    
    91Real estate funds (d)
    
    
    -
    
    
    
    -
    
    
    
    19
    
    
    
    19Cash equivalents
    
    
    8
    
    
    
    -
    
    
    
    -
    
    
    
    8Total
    
    $
    770
    
    
    $
    43
    
    
    $
    68
    
    
    $
    881
 
 (a)
    
    The majority of these funds are invested with investment managers that invest in common
stocks of large capitalization U.S. companies. Approximately 84% of these investments are
actively managed.(b)
    
    Includes investments in individual fixed income securities and in institutional funds that
invest in fixed income securities.(c)
    
    Limited partnerships include investments in funds that follow several different strategies,
including investing in distressed debt, energy development and infrastructure. These
investments use strategies with returns normally expected to have a low correlation to the
return of equities and often provide a current income component that is a meaningful portion
of the investments total return.(d)
    
    Includes investments in three different private equity real estate funds that invest
primarily in a variety of property types in geographically diverse markets across the U.S.  Real
    
    
    Limited(millions)
    
    Estate
    
    
    Partnerships
    
    
    TotalBalance as of December 31, 2008
    
    $
    34
    
    
    $
    50
    
    
    $
    84Realized gains (losses) (a)
    
    
    1
    
    
    
    1
    
    
    
    2Unrealized gains (losses)
    
    
    (15)
    
    
    
    (5)
    
    
    
    (20)Purchases, sales and settlements
    
    
    (1)
    
    
    
    3
    
    
    
    2Balance as of December 31, 2009
    
    $
    19
    
    
    $
    49
    
    
    $
    68
 
 (a)
    
    All realized gains (losses) relate to assets held at the end of the year. 68




---



##### Table of Contents



MedicareYears ended
    
    Pension
    
    
    Postretirement
    
    
    SubsidyDecember 31
    
    Benefits
    
    
    Benefits
    
    
    Receipts2010
    
    $
    51
    
    
    $
    17
    
    
    $
    22011
    
    
    51
    
    
    
    18
    
    
    
    22012
    
    
    53
    
    
    
    19
    
    
    
    22013
    
    
    65
    
    
    
    19
    
    
    
    22014
    
    
    65
    
    
    
    20
    
    
    
    22015-2019
    
    
    442
    
    
    
    111
    
    
    
    12
 
 8.   Share-Based Compensation
      69




---



##### Table of Contents



Assumptions:
    
    
    
    
    
    2009
    
    
    2008
    
    
    2007Expected volatility
    
    
    
    
    
    
    62.58%
    
    
    
    37.59%
    
    
    
    35.45%Risk-free rate
    
    
    
    
    
    
    2.63%
    
    
    
    3.20%
    
    
    
    4.55%Expected term (in years)
    
    
    
    
    
    
    6.25
    
    
    
    6.25
    
    
    
    6.25Expected dividends
    
    
    
    
    
    
    -
    
    
    
    -
    
    
    
    -A summary of stock options outstanding as of December 31, 2009 and of stock option
activity during the fiscal year then ended is presented below:WeightedWeighted
    
    
    Average
    
    
    AggregateNumber of
    
    
    Average
    
    
    Remaining
    
    
    IntrinsicOptions
    
    
    Exercise
    
    
    Contractual
    
    
    Value(000)
    
    
    Price
    
    
    Term (years)
    
    
    (millions)Outstanding at January 1, 2009
    
    
    2,469
    
    
    $
    41.81
    
    
    
    7.68
    
    
    $
    -Granted
    
    
    1,349
    
    
    
    6.86Exercised
    
    
    -
    
    
    
    -Canceled
    
    
    (106)
    
    
    
    38.54Forfeited
    
    
    (110)
    
    
    
    33.25Outstanding at December 31, 2009
    
    
    3,602
    
    
    $
    29.08
    
    
    
    7.75
    
    
    $
    10Exercisable at December 31, 2009
    
    
    1,188
    
    
    $
    42.19
    
    
    
    6.60
    
    
    $
    -Vested or expected to vest at December 31, 2009
    
    
    3,572
    
    
    $
    29.15
    
    
    
    7.86
    
    
    $
    9
      70




---



##### Table of Contents



WeightedNumber
    
    
    Averageof Shares
    
    
    Grant Date(000)
    
    
    Fair ValueNonvested at January 1, 2009
    
    
    492
    
    
    $
    43.44Granted
    
    
    838
    
    
    
    6.98Vested
    
    
    (173)
    
    
    
    42.42Forfeited
    
    
    (36)
    
    
    
    24.22Nonvested at December 31, 2009
    
    
    1,121
    
    
    $
    16.96
     Assumptions:
    
    2009
    
    
    2008
    
    
    2007Expected volatility
    
    
    60.84%
    
    
    
    35.16%
    
    
    
    30.69%Risk-free rate
    
    
    1.40%
    
    
    
    2.20%
    
    
    
    4.55%Expected term (in years)
    
    
    2.89
    
    
    
    2.92
    
    
    
    2.78%Expected dividends
    
    
    -
    
    
    
    -
    
    
    
    -
  Weighted
    
    
    WeightedNumber
    
    
    Averageof Shares
    
    
    Grant Date(000)
    
    
    Fair ValueNonvested at January 1, 2009
    
    
    217
    
    
    $
    44.70Granted
    
    
    350
    
    
    
    8.94Canceled
    
    
    (77)
    
    
    
    45.17Forfeited
    
    
    (21)
    
    
    
    25.98Nonvested at December 31, 2009
    
    
    469
    
    
    $
    18.74
 71




---



##### Table of Contents



9.      Supplemental Balance Sheet Information
   (millions)
    
    2009
    
    
    2008Finished goods and work in progress
    
    $
    232
    
    
    $
    312Raw materials
    
    
    57
    
    
    
    92Total
    
    $
    289
    
    
    $
    404PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment as of December 31 consisted of the following:(millions)
    
    2009
    
    
    2008Land and mineral deposits
    
    $
    114
    
    
    $
    136Buildings and improvements
    
    
    1,141
    
    
    
    1,133Machinery and equipment
    
    
    2,730
    
    
    
    2,6613,985
    
    
    
    3,930Reserves for depreciation and depletion
    
    
    (1,558)
    
    
    
    (1,368)Total
    
    $
    2,427
    
    
    $
    2,562
 72




---



##### Table of Contents



(millions)
    
    2009
    
    
    2008Self-insurance reserves
    
    $
    54
    
    
    $
    58Employee compensation
    
    
    48
    
    
    
    49Interest
    
    
    45
    
    
    
    33Restructuring
    
    
    21
    
    
    
    50Derivatives
    
    
    13
    
    
    
    45Other
    
    
    92
    
    
    
    103Total
    
    $
    273
    
    
    $
    338
   (millions)
    
    2009
    
    
    2008Unrecognized loss on pension and postretirement benefit plans, net of tax
    
    $
    (110)
    
    
    $
    (169)Gain (loss) on derivatives, net of tax
    
    
    1
    
    
    
    (35)Foreign currency translation, net of tax
    
    
    29
    
    
    
    (23)Total
    
    $
    (80)
    
    
    $
    (227)
  (millions)
    
    2009Loss on derivatives, net of tax benefit of $0.4 million
    
    $
    (69)Gain on unrecognized pension and postretirement benefit costs, net of tax benefit of $0.2 million
    
    
    9Total
    
    $
    60
    (millions)
    
    2009
    
    
    2008Balance as of January 1
    
    $
    89
    
    
    $
    85Accretion expense
    
    
    6
    
    
    
    5Liabilities incurred
    
    
    6
    
    
    
    3Retirements
    
    
    (2)
    
    
    
    (1)Foreign currency translation
    
    
    2
    
    
    
    (3)Balance as of December 31
    
    $
    101
    
    
    $
    89
  73




---



##### Table of Contents



10.
    
    Income Taxes
  (millions)
    
    2009
    
    
    2008
    
    
    2007U.S.
    
    $
    (359)
    
    
    $
    (618)
    
    
    $
    11Foreign
    
    
    22
    
    
    
    37
    
    
    
    77Total
    
    $
    (337)
    
    
    $
    (581)
    
    
    $
    88Income tax expense (benefit) consisted of the following:(millions)
    
    2009
    
    
    2008
    
    
    2007Current:Federal
    
    $
    3
    
    
    $
    (4)
    
    
    $
    8Foreign
    
    
    10
    
    
    
    4
    
    
    
    19State
    
    
    1
    
    
    
    (2)
    
    
    
    (5)14
    
    
    
    (2)
    
    
    
    22Deferred:Federal
    
    
    357
    
    
    
    (195)
    
    
    
    2Foreign
    
    
    4
    
    
    
    4
    
    
    
    (11)State
    
    
    75
    
    
    
    75
    
    
    
    (2)436
    
    
    
    (116)
    
    
    
    (11)Total (a)
    
    $
    450
    
    
    $
    (118)
    
    
    $
    11(a)
     Income taxes (benefit) includes noncash deferred tax asset valuation allowances of $575
million in 2009, $71 million in 2008 and $(10) million in
2007.Differences between actual provisions for income taxes and provisions for income taxes at
the U.S. federal statutory rate (35%) were as follows:(millions)
    
    2009
    
    
    2008
    
    
    2007Taxes on income at U.S. federal statutory rate
    
    $
    (118)
    
    
    $
    (203)
    
    
    $
    31Foreign earnings subject to different tax rates
    
    
    (1)
    
    
    
    (4)
    
    
    
    (8)State income tax, net of federal benefit
    
    
    (1)
    
    
    
    (21)
    
    
    
    (2)Change in valuation allowance
    
    
    575
    
    
    
    71
    
    
    
    (10)Goodwill impairment charges
    
    
    -
    
    
    
    34
    
    
    
    -Change in unrecognized tax benefits
    
    
    (7)
    
    
    
    3
    
    
    
    10Tax law changes
    
    
    -
    
    
    
    -
    
    
    
    (10)Other, net
    
    
    2
    
    
    
    2
    
    
    
    -Provision for income taxes (benefit)
    
    $
    450
    
    
    $
    (118)
    
    
    $
    11Effective income tax rate
    
    
    (133.2)%
    
    
    
    20.4%
    
    
    
    12.2%
 74




---



##### Table of Contents



(millions)
    
    2009
    
    
    2008Deferred Tax Assets:Net operating loss and tax credit carryforwards
    
    $
    706
    
    
    $
    577Pension and postretirement benefits
    
    
    238
    
    
    
    244Goodwill and other intangible assets
    
    
    27
    
    
    
    37Reserves not deductible until paid
    
    
    47
    
    
    
    35Self insurance
    
    
    13
    
    
    
    11Capitalized interest
    
    
    13
    
    
    
    12Derivative instruments
    
    
    25
    
    
    
    23Share-based compensation
    
    
    24
    
    
    
    19Deferred tax assets before valuation allowance
    
    
    1,093
    
    
    
    958Valuation allowance
    
    
    (772)
    
    
    
    (166)Total deferred tax assets
    
    $
    321
    
    
    $
    792Deferred Tax Liabilities:Property, plant and equipment
    
    
    316
    
    
    
    307State taxes
    
    
    2
    
    
    
    29Inventories
    
    
    11
    
    
    
    19Other
    
    
    7
    
    
    
    2Total deferred tax liabilities
    
    
    336
    
    
    
    357Net deferred tax (liabilities) assets
    
    $
    (15)
    
    
    $
    435
     75




---



##### Table of Contents



(millions)
    
    2009
    
    
    2008Balance as of January 1
    
    $
    47
    
    
    $
    56Tax positions related to the current period:Gross increase
    
    
    -
    
    
    
    4Gross decrease
    
    
    -
    
    
    
    -Tax positions related to prior periods:Gross increase
    
    
    2
    
    
    
    2Gross decrease
    
    
    (10)
    
    
    
    (13)Settlements
    
    
    (3)
    
    
    
    (1)Lapse of statutes of limitations
    
    
    (1)
    
    
    
    (1)Balance as of December 31
    
    $
    35
    
    
    $
    47
  76




---



##### Table of Contents



11.
    
    Earnings (Loss) Per Share
  WeightedNet
    
    
    
    
    
    
    AverageEarnings
    
    
    Shares
    
    
    Per-Share(millions, except share data)
    
    (Loss)
    
    
    (000)
    
    
    Amount2009:Basic loss
    
    $
    (787)
    
    
    
    99,238
    
    
    $
    (7.93
    )Diluted loss
    
    $
    (787)
    
    
    
    99,238
    
    
    $
    (7.93)2008:
    
    
    
    
    
    
    
    
    
    
    
    

Basic loss
    
    $
    (463)
    
    
    
    99,100
    
    
    $
    (4.67)Diluted loss
    
    $
    (463)
    
    
    
    99,100
    
    
    $
    (4.67)2007:Basic earnings
    
    $
    77
    
    
    
    97,088
    
    
    $
    0.80Dilutive effect of stock options
    
    
    
    
    
    
    215Diluted earnings
    
    $
    77
    
    
    
    97,303
    
    
    $
    0.79
    77




---



##### Table of Contents



12.
    
    Segments
 REPORTABLE SEGMENTS(millions)
    
    2009
    
    
    2008
    
    
    2007Net Sales:North American Gypsum
    
    $
    1,770
    
    
    $
    2,358
    
    
    $
    2,837Building Products Distribution
    
    
    1,289
    
    
    
    1,993
    
    
    
    2,291Worldwide Ceilings
    
    
    663
    
    
    
    846
    
    
    
    813Eliminations
    
    
    (487)
    
    
    
    (589)
    
    
    
    (739)Total
    
    $
    3,235
    
    
    $
    4,608
    
    
    $
    5,202Operating Profit (Loss):North American Gypsum
    
    $
    (9)
    
    
    $
    (241)
    
    
    $
    84Building Products Distribution
    
    
    (172)
    
    
    
    (243)
    
    
    
    91Worldwide Ceilings
    
    
    62
    
    
    
    68
    
    
    
    75Corporate
    
    
    (71)
    
    
    
    (97)
    
    
    
    (110)Eliminations
    
    
    5
    
    
    
    1
    
    
    
    27Total
    
    $
    (185)
    
    
    $
    (512)
    
    
    $
    167Depreciation, Depletion and Amortization:North American Gypsum
    
    $
    146
    
    
    $
    141
    
    
    $
    124Building Products Distribution
    
    
    13
    
    
    
    13
    
    
    
    14Worldwide Ceilings
    
    
    19
    
    
    
    19
    
    
    
    17Corporate
    
    
    25
    
    
    
    9
    
    
    
    21Total
    
    $
    203
    
    
    $
    182
    
    
    $
    176Capital Expenditures:North American Gypsum
    
    $
    36
    
    
    $
    213
    
    
    $
    425Building Products Distribution
    
    
    5
    
    
    
    6
    
    
    
    6Worldwide Ceilings
    
    
    3
    
    
    
    19
    
    
    
    15Corporate
    
    
    -
    
    
    
    -
    
    
    
    14Total
    
    $
    44
    
    
    $
    238
    
    
    $
    460Assets:North American Gypsum
    
    $
    2,558
    
    
    $
    2,677
    
    
    $
    2,738Building Products Distribution
    
    
    371
    
    
    
    571
    
    
    
    801Worldwide Ceilings
    
    
    391
    
    
    
    455
    
    
    
    466Corporate
    
    
    816
    
    
    
    1,068
    
    
    
    713Eliminations
    
    
    (39)
    
    
    
    (52)
    
    
    
    (64)Total
    
    $
    4,097
    
    
    $
    4,719
    
    
    $
    4,654
 78




---



##### Table of Contents



GEOGRAPHIC INFORMATION(millions)
    
    2009
    
    
    2008
    
    
    2007Net Sales:United States
    
    $
    2,725
    
    
    $
    3,942
    
    
    $
    4,568Canada
    
    
    339
    
    
    
    428
    
    
    
    426Other Foreign
    
    
    335
    
    
    
    482
    
    
    
    443Geographic transfers
    
    
    (164)
    
    
    
    (244)
    
    
    
    (235)Total
    
    $
    3,235
    
    
    $
    4,608
    
    
    $
    5,202Long-Lived Assets:United States
    
    $
    2,192
    
    
    $
    2,390
    
    
    $
    2,402Canada
    
    
    174
    
    
    
    165
    
    
    
    217Other Foreign
    
    
    300
    
    
    
    283
    
    
    
    293Total
    
    $
    2,666
    
    
    $
    2,838
    
    
    $
    2,912
         79




---



##### Table of Contents



13.
    
    Acquisitions
  California Wholesale Material Supply, Inc.
 Grupo Supremo
 
 14.
    
    Stockholder Rights Plan
   80




---



##### Table of Contents



15.
    
    Commitments and Contingencies
  
 16.
    
    Litigation
    In re Chinese-Manufactured Drywall Products Liability Litigation
 81




---



##### Table of Contents



82




---



##### Table of Contents



83




---



##### Table of Contents



17.
    
    Quarterly Financial Data (unaudited)
 Quarter(millions, except share data)
    
    First
    
    
    Second
    
    
    Third
    
    
    Fourth2009:Net sales
    
    $
    864
    
    
    $
    829
    
    
    $
    822
    
    
    $
    720Gross profit
    
    
    48
    
    
    
    51
    
    
    
    38
    
    
    
    8Operating loss
    
    
    (42)
    
    
    
    (40)
    
    
    
    (92)
    (a)
    
    
    (11)
    (b)Net loss
    
    
    (42)
    
    
    
    (53)
    
    
    
    (94)
    (a)
    
    
    (598)
    (b)Loss Per Common Share:Basic
    
    
    (0.42)
    
    
    
    (0.53)
    
    
    
    (0.96)
    (a)
    
    
    (6.02)
    (b)Diluted
    
    
    (0.42)
    
    
    
    (0.53)
    
    
    
    (0.96)
    (a)
    
    
    (6.02)
    (b)2008:Net sales
    
    $
    1,165
    
    
    $
    1,251
    
    
    $
    1,211
    
    
    $
    981Gross profit
    
    
    46
    
    
    
    76
    
    
    
    64
    
    
    
    6Operating loss
    
    
    (60)
    
    
    
    (39)
    
    
    
    (32)
    
    
    
    (381)
    (c)Net loss
    
    
    (41)
    
    
    
    (37)
    
    
    
    (36)
    
    
    
    (349)
    (c)Loss Per Common Share:Basic
    
    
    (0.42)
    
    
    
    (0.37)
    
    
    
    (0.36)
    
    
    
    (3.52)
    (c)Diluted
    
    
    (0.42)
    
    
    
    (0.37)
    
    
    
    (0.36)
    
    
    
    (3.52)
    (c)
 
 (a)
    
    Operating loss and net loss for the third quarter of 2009 included goodwill and other
intangible asset impairment charges of $41 million, or $0.41 per diluted share.(b)
    
    Operating loss and net loss for the fourth quarter of 2009 included litigation settlement
income, net of fees, of $97 million, or $0.98 per diluted share, from our lawsuit against
Lafarge. Net loss for the fourth quarter of 2009 also included a tax valuation allowance
charge of $548 million, or $5.52 per diluted share.(c)
    
    Operating loss and net loss for the fourth quarter of 2008 included goodwill and other
intangible asset impairment charges of $226 million pretax ($177 million after-tax, or $1.78
per diluted share). Net loss for the fourth quarter of 2008 also included a tax valuation
allowance charge of $61 million, or $0.62 per diluted share. 84




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal Control  Integrated Framework
 
 85




---



##### Table of Contents



USG CORPORATION
 
 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
 Beginning
    
    
    
    
    
    
    
    
    
    
    Ending(millions)
    
    Balance
    
    
    Additions (a)
    
    Deductions (b)
    
    BalanceYear ended December 31, 2009:Doubtful accounts
    
    $
    11
    
    
    $
    12
    
    
    $
    (9
    )
    
    $
    14Cash discounts
    
    
    4
    
    
    
    28
    
    
    
    (30
    )
    
    
    2Year ended December 31, 2008:Doubtful accounts
    
    
    12
    
    
    
    6
    
    
    
    (7
    )
    
    
    11Cash discounts
    
    
    5
    
    
    
    43
    
    
    
    (44
    )
    
    
    4Year ended December 31, 2007:Doubtful accounts
    
    
    11
    
    
    
    7
    (c)
    
    
    (6
    )
    
    
    12Cash discounts
    
    
    5
    
    
    
    50
    
    
    
    (50
    )
    
    
    5
 
 (a)
    
    Reflects provisions charged to earnings.(b)
    
    Reflects receivables written off as related to doubtful accounts and discounts allowed as
related to cash discounts.(c)
    
    Includes doubtful accounts from acquisitions of $3 million. 86




---



##### Table of Contents



Item 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  
 Item 9A.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  (a) MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
   Internal Control 
Integrated Framework
   87




---



##### Table of Contents



(b) REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Internal
Control  Integrated Framework
    Internal Control  Integrated Framework
  
 88




---



##### Table of Contents



(c) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
  
 Item 9A(T).
    
    CONTROLS AND PROCEDURES
  
 Item 9B.
    
    OTHER INFORMATION
   
 PART III
 
 Item 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Executive Officers of the Registrant (as of February 12, 2010):
 Name
    
    Age
    
    Present Position and Business Experience During the Last Five YearsWilliam C. Foote
    
    
    58
    
    
    Chairman and Chief Executive Officer since January 2006. 

Chairman, Chief Executive Officer and President prior thereto.James S. Metcalf
    
    
    52
    
    
    President and Chief Operating Officer since January 2006. 

Executive Vice President; President, USG Building Systems, prior thereto.Stanley L. Ferguson
    
    
    57
    
    
    Executive Vice President and General Counsel.Richard H. Fleming
    
    
    62
    
    
    Executive Vice President and Chief Financial Officer.Brian J. Cook
    
    
    52
    
    
    Senior Vice President, Human Resources.D. Rick Lowes
    
    
    55
    
    
    Senior Vice President and Controller since May 2007. 

Vice President and Controller prior thereto.Dominic A. Dannessa
    
    
    53
    
    
    Senior Vice President and Chief Technology Officer since February 2010.
Vice President and Chief Technology Officer to February 2010.
Vice President, Supply Chain, Information Technology and Corporate Efficiency Initiatives to
July 2008. Vice President; Executive Vice President, Manufacturing, USG Building Systems, to
January 2008. 
Senior Vice President, Manufacturing, United States Gypsum Company, prior
thereto.
 89




---



##### Table of Contents



Name
    
    Age
    
    Present Position and Business Experience During the Last Five YearsBrendan J. Deely
    
    
    44
    
    
    Senior Vice President since February 2010 and President and Chief Executive Officer, L&W Supply
Corporation, since May 2007.
Vice President to February 2010; President and Chief Operating Officer, L&W Supply Corporation,
to May 2007. Senior Vice President and Chief Operating Officer, L&W Supply Corporation, to
June 2005.Christopher R. Griffin
    
    
    47
    
    
    Senior Vice President since February 2010 and President, USG International and President, CGC
Inc., since January 2008.
Vice President to February 2010. President, CGC Inc., to January 2008.Fareed A. Khan
    
    
    44
    
    
    Senior Vice President since February 2010 and President, USG Building Systems, since January
2008.
Vice President to February 2010. Executive Vice President, Sales and Marketing, USG Building
Systems, to January 2008. Senior Vice President, Supply Chain and CRM and IT, United States
Gypsum Company, to January 2006.Karen L. Leets
    
    
    53
    
    
    Vice President and Treasurer.Mary A. Martin
    
    
    54
    
    
    Vice President and Associate General Counsel since July 2009. 

Associate General Counsel prior thereto.Ellis A. Regenbogen
    
    
    63
    
    
    Vice President since February 2008 and Corporate Secretary and Associate General Counsel since
October 2006. 

Associate General Counsel and Assistant Secretary to October 2006. 

Associate General Counsel  Securities and Governance, Sears Holdings Corporation, to April
2006. Assistant General Counsel  Corporate and Securities, Sears, Roebuck and Co., to April
2005.Jeffrey P. Rodewald
    
    
    55
    
    
    Vice President, Employee Benefits, Safety and Corporate Services since July 2009.

Senior Director, Employee Benefits, Safety and Corporate Services to July 2009. Director,
Employee Benefits, USG Corporation, and Vice President, Human Resources, USG International, to
September 2007. Director, Human Resources, USG Corporation, and Vice President, Human
Resources, USG International, to January 2006.Jennifer F. Scanlon
    
    
    43
    
    
    Vice President and Chief Information Officer since February 2008. 

Director, Information Technology, and Chief Information Officer to February 2008. Director,
CRM/SCM Strategy and Implementation, USG Building Systems, to May 2007.
 Committee Charters and Code of Business Conduct
 www.usg.com .
  90




---



##### Table of Contents



Item 11.
    
    EXECUTIVE COMPENSATION
  
 Item 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  Number of securitiesremaining available forfuture issuance underNumber of securities to
    
    
    
    Weighted average
    
    
    
    equity compensationbe issued upon exercise
    
    
    
    exercise price of
    
    
    
    plans (excludingof outstanding options
    
    
    
    outstanding options and
    
    
    
    securities reported inPlan Category
    
    
    and rights
    
    
    
    rights
    
    
    
    column one)Equity compensation
plans approved by
stockholders
    
    
    
    3,586,522
    
    
    
    
    $29.01
    
    
    
    
    2,638,138Equity compensation
plans not approved
by stockholders
    
    
    
    -
    
    
    
    
    -
    
    
    
    
    -Total
    
    
    
    3,586,522
    
    
    
    
    $29.01
    
    
    
    
    2,638,138
  
 Item 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 Item 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
  91




---



##### Table of Contents



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. Exhibits
 Exhibit Number
    
    Exhibit
 Plan of Reorganization:
 2.1
    
    First Amended Joint Plan of Reorganization of USG Corporation and its Debtor Subsidiaries
(incorporated by reference to Exhibit 2.01 to USG Corporations Current Report on Form 8-K
filed June 21, 2006, or the June 2006 8-K)2.2
    
    Order Confirming First Amended Joint Plan of Reorganization (incorporated by reference to
Exhibit 2.02 to the June 2006 8-K)
 Articles of Incorporation and By-Laws:
 3.1
    
    Restated Certificate of Incorporation of USG Corporation (incorporated by reference to
Exhibit 3.0 to the June 2006 8-K)3.2
    
    Certificate of Designation of Junior Participating Preferred Stock, Series D, of USG
Corporation (incorporated by reference to Exhibit A of Exhibit 4 to USG Corporations Current
Report on Form 8-K dated March 27, 1998)3.3
    
    Amended and Restated By-Laws of USG Corporation, dated as of May 13, 2009 (incorporated by
reference to Exhibit 3.1 to USG Corporations Current Report on Form 8-K dated May 19, 2009)
 Instruments Defining the Rights of Security Holders, Including Indentures:
 4.1
    
    Form of Common Stock certificate (incorporated by reference to Exhibit 4.1 to USG
Corporations Annual Report on Form 10-K dated February 16, 2007)4.2
    
    Rights Agreement, dated as of December 21, 2006, 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 dated December 21, 2006)4.3
    
    Amendment to Rights Agreement, dated as of December 5, 2008, to the 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 Amendment
No. 1 to Form 8-A dated December 5, 2008)4.4
    
    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 dated November 20, 2006, or the November 2006 8-K)4.5
    
    Supplemental Indenture No. 1, dated as of November 17, 2006, by and between USG Corporation
and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit
4.02 to the
 92




---



##### Table of Contents



November 2006 8-K)4.6
    
    Form of 7.750% Senior Note due 2018 (incorporated by reference to USG Corporations Current
Report on Form 8-K dated September 26, 2007)4.7
    
    Indenture, dated as of November 1, 2008, by and between USG Corporation and Wells Fargo Bank,
National Association, as trustee (incorporated by reference to Exhibit 4.1 to USG
Corporations Current Report on Form 8-K dated November 26, 2008, or the November 2008 8-K)4.8
    
    Supplemental Indenture No. 1, dated as of November 26, 2008, by and between USG Corporation
and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit
4.2 to the November 2008 8-K)4.9
    
    Agreement of Resignation, Appointment and Acceptance, dated as of February 11, 2009, by and
among USG Corporation, HSBC Bank USA, National Association and Wells Fargo Bank, N.A.
(incorporated by reference to Exhibit 10.1 to USG Corporations Quarterly Report on Form 10-Q
dated May 4, 2009)4.10
    
    Supplemental Indenture No. 2, dated as of August 4, 2009, between USG Corporation, each of
United States Gypsum Company, L&W Supply Corporation, USG Foreign Investments, Ltd. and USG
Interiors, Inc. and HSBC Bank USA, National Association, as trustee (incorporated by reference
to Exhibit 4.01 to USG Corporations Current Report on Form 8-K dated August 4, 2009)
  Material Contracts:
 10.1
    
    Amendment and Restatement of USG Corporation Supplemental Retirement Plan, effective as of
January 1, 2007 and dated December 10, 2008 (incorporated by reference to Exhibit 10.1 to USG
Corporations Annual Report on Form 10-K dated February 20, 2009, or the 2008 10-K) *10.2
    
    Form of Employment Agreement (incorporated by reference to Exhibit 10.1 to USG Corporations
Current Report on Form 8-K dated October 2, 2008, or the First October 2008 8-K) *10.3
    
    Form of Change in Control Severance Agreement (Tier 1 Benefits) (incorporated by reference to
Exhibit 10.2 to the First October 2008 8-K) *10.4
    
    Form of Change in Control Severance Agreement (Tier 2 Benefits) (incorporated by reference to
Exhibit 10.3 to the First October 2008 8-K) *10.5
    
    Form of Indemnification Agreement (incorporated by reference to Exhibit 10.14 to USG
Corporations Annual Report on Form 10-K dated February 15, 2008, or the 2007 10-K) *10.6
    
    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 dated November 14, 2005) *10.7
    
    Amendment No. 1 to the USG Corporation Stock Compensation Program for Non-Employee Directors
(as Amended and Restated as of January 1, 2005) (incorporated by reference to Exhibit 10.1 to
USG Corporations Quarterly Report on Form 10-Q dated August 3, 2006, or the second quarter
2006 10-Q) *
 93




---



##### Table of Contents



10.8
    
    Amendment No. 2 to the USG Corporation Stock Compensation Program for Non-Employee Directors
(as Amended and Restated as of January 1, 2005) (incorporated by reference to Exhibit 10.8 to
USG Corporations Quarterly Report on Form 10-Q dated April 30, 2007) *10.9
    
    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) *10.10
    
    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) *10.11
    
    Second Amended and Restated Credit Agreement, dated as of January 7, 2009 among USG
Corporation, the Lenders Party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent,
and Goldman Sachs Credit Partners, L.P., as Syndication Agent (incorporated by reference to
Exhibit 10.2 to USG Corporations Current Report on Form 8-K dated January 12, 2009, or the
January 2009 8-K)10.12
    
    Guarantee Agreement, dated as of January 7, 2009 among USG Corporation, the subsidiary
guarantors party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated
by reference to Exhibit 10.3 to the January 2009 8-K)10.13
    
    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 10.4 to the January 2009 8-K)10.14
    
    2009 Annual Management Incentive Program of USG Corporation (Executive Officers Only)
(incorporated by reference to Exhibit 10.1 to USG Corporations Current Report on Form 8-K
dated March 12, 2009) *10.15
    
    2010 Annual Management Incentive Program of USG Corporation (Executive Officers Only) * **10.16
    
    Annual Base Salaries of Named Executive Officers of USG Corporation (incorporated by
reference to Exhibit 10.3 to USG Corporations Quarterly Report on Form 10-Q dated April 29,
2008) *10.17
    
    USG Corporation Deferred Compensation Plan (incorporated by reference to Exhibit 10.31 to
USG Corporations Annual Report on Form 10-K dated February 16, 2007) *10.18
    
    First Amendment of USG Corporation Deferred Compensation Plan, effective as of April 1, 2007
and dated December 10, 2008 (incorporated by reference to Exhibit 10.25 to the 2008 10-K) *10.19
    
    USG Corporation Long-Term Incentive Plan (incorporated by reference to Annex C to the Proxy
Statement for the Annual Meeting of Stockholders of USG Corporation held on May 10, 2006, or
the 2006 Proxy Statement) *10.20
    
    Amendment No. 1 to the USG Corporation Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.8 to the second quarter 2006 10-Q) *10.21
    
    Form of USG Corporation Nonqualified Stock Option Agreement (incorporated by reference to
Exhibit 10.9 to the second quarter 2006 10-Q) *10.22
    
    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 dated March 28, 2007, or the
March 2007 8-K) *10.23
    
    Form of USG Corporation Restricted Stock Units Agreement (incorporated by reference to
Exhibit 10.10 to the second quarter 2006 10-Q) *
 94




---



##### Table of Contents



10.24
    
    Form of USG Corporation Restricted Stock Units Agreement (Annual Grant) (incorporated by
reference to Exhibit 10.2 to the March 2007 8-K) *10.25
    
    Form of USG Corporation Restricted Stock Units Agreement (Retention Grant) (incorporated by
reference to Exhibit 10.3 to the March 2007 8-K) *10.26
    
    Form of USG Corporation Performance Shares Agreement (incorporated by reference to Exhibit
10.4 to the March 2007 8-K) *10.27
    
    Form of USG Corporation Nonqualified Stock Option Agreement (incorporated by reference to
Exhibit 10.36 to the 2008 10-K) *10.28
    
    Form of USG Corporation Restricted Stock Units Agreement (incorporated by reference to
Exhibit 10.37 to the 2008 10-K) *10.29
    
    Form of USG Corporation Performance Shares Agreement (incorporated by reference to Exhibit
10.38 to the 2008 10-K) *10.30
    
    Form of USG Corporation Nonqualified Stock Option Agreement * **10.31
    
    Form of USG Corporation Restricted Stock Units Agreement * **10.32
    
    Form of USG Corporation Performance Shares Agreement * **10.33
    
    Changes to Equity Awards for Compliance With Section 409A (incorporated by reference to
Exhibit 10.39 to the 2008 10-K) *10.34
    
    USG Corporation Management Incentive Plan (incorporated by reference to Annex B to the 2006
Proxy Statement) *10.35
    
    Equity Commitment Agreement, dated January 30, 2006, by and between USG Corporation and
Berkshire Hathaway Inc. (incorporated by reference to Exhibit 10.2 to USG Corporations
Current Report on Form 8-K dated January 30, 2006, or the January 2006 8-K)10.36
    
    Shareholders Agreement, entered into as of January 30, 2006, by and between USG Corporation
and Berkshire Hathaway Inc. (incorporated by reference to Exhibit 10.3 to the January 2006
8-K)10.37
    
    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 the November 2008 8-K)10.38
    
    Equity Purchase Agreement dated as of February 25, 2007 among L&W Supply Corporation, Joseph
George Zucchero, JCSG Holdings Corporation, the Joseph G. Zucchero Family Trust dated
September 12, 1998 and the entities listed on Exhibit A-1 thereto (incorporated by reference
to Exhibit 10.1 to USG Corporations Current Report on Form 8-K dated February 27, 2007)10.39
    
    Secured Loan Facility Agreement, dated October 21, 2008, between Gypsum Transportation
Limited and DVB Bank SE, as lender, agent and security trustee (incorporated by reference to
Exhibit 10.1 to USG Corporations Current Report on Form 8-K dated October 27, 2008, or the
Second October 2008 8-K)10.40
    
    Guarantee and Indemnity Agreement, dated October 21, 2008, between USG Corporation and DVB
Bank SE, as agent (incorporated by reference to Exhibit 10.2 to the Second October 2008 8-K)
 95




---



##### Table of Contents



10.41
    
    Form of Deed of Covenants between Gypsum Transportation Limited and DVB Bank SE, as
mortgagee (incorporated by reference to Exhibit 10.3 to the Second October 2008 8-K)10.42
    
    Form of Deed of Assignment between Gypsum Transportation Limited and DVB Bank SE, as
assignee (incorporated by reference to Exhibit 10.4 to the Second October 2008 8-K)10.43
    
    Second Supplemental Agreement, dated November 10, 2009, to Secured Loan Facility Agreement
dated October 21, 2008 between Gypsum Transportation Limited, USG Corporation and DVB Bank SE,
as lender, agent and security trustee **10.44
    
    Credit Agreement, dated as of June 30, 2009, between CGC Inc. and The Toronto-Dominion Bank
(incorporated by reference to Exhibit 10.1 to USG Corporations Current Report on Form 8-K
dated July 6, 2009)10.45
    
    Securities Purchase Agreement, dated November 21, 2008, between USG Corporation and
Berkshire Hathaway Inc. (incorporated by reference to Exhibit 1.1 to the November 2008 8-K)10.46
    
    Securities Purchase Agreement, dated November 21, 2008, between USG Corporation and Fairfax
Financial Holdings Limited (incorporated by reference to Exhibit 1.2 to the November 2008 8-K)10.47
    
    Registration Rights Agreement, dated as of November 26, 2008, between USG Corporation and
Fairfax Financial Holdings Limited (incorporated by reference to Exhibit 10.2 to the November
2008 8-K)
 Other:
 21
    
    Subsidiaries **23
    
    Consent of Independent Registered Public Accounting Firm **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 **
 
 *
    
    Management contract or compensatory plan or arrangement**
    
    Filed or furnished herewith 96




---



##### Table of Contents



SIGNATURES
  USG CORPORATIONFebruary 12, 2010By:
    /s/ Richard H. FlemingRichard H. FlemingExecutive Vice President and
Chief Financial Officer  /s/ William C. Foote
    
    
    
    
    
    February 12, 2010WILLIAM C. FOOTEDirector, Chairman and Chief Executive Officer(Principal Executive Officer)/s/ Richard H. Fleming
    
    
    
    
    
    February 12, 2010RICHARD H. FLEMINGExecutive Vice President andChief Financial Officer(Principal Financial Officer)/s/ D. Rick Lowes
    
    
    
    
    
    February 12, 2010D. RICK LOWESSenior Vice President and Controller(Principal Accounting Officer)JOSE ARMARIO, ROBERT L. BARNETT,
    )
    
    
    By:
    
    /s/ Richard H. FlemingLAWRENCE M. CRUTCHER, W. DOUGLAS FORD,
    )
    
    
    
    
    Richard H. FlemingWILLIAM H. HERNANDEZ, RICHARD P. LAVIN,
    )
    
    
    
    
    Attorney-in-factSTEVEN F. LEER, MARVIN E. LESSER,
    )
    
    
    
    
    February 12, 2010JAMES S. METCALF, JUDITH A. SPRIESER,
    )Directors
    
    
    )
 97




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Exhibit2.1
    
    First Amended Joint Plan of Reorganization of USG Corporation and its Debtor Subsidiaries
(incorporated by reference to Exhibit 2.01 to USG Corporations Current Report on Form 8-K
filed June 21, 2006, or the June 2006 8-K)2.2
    
    Order Confirming First Amended Joint Plan of Reorganization (incorporated by reference to
Exhibit 2.02 to the June 2006 8-K)3.1
    
    Restated Certificate of Incorporation of USG Corporation (incorporated by reference to
Exhibit 3.0 to the June 2006 8-K)3.2
    
    Certificate of Designation of Junior Participating Preferred Stock, Series D, of USG
Corporation (incorporated by reference to Exhibit A of Exhibit 4 to USG Corporations Current
Report on Form 8-K dated March 27, 1998)3.3
    
    Amended and Restated By-Laws of USG Corporation, dated as of May 13, 2009 (incorporated by
reference to Exhibit 3.1 to USG Corporations Current Report on Form 8-K dated May 19, 2009)4.1
    
    Form of Common Stock certificate (incorporated by reference to Exhibit 4.1 to USG
Corporations Annual Report on Form 10-K dated February 16, 2007)4.2
    
    Rights Agreement, dated as of December 21, 2006, 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 dated December 21, 2006)4.3
    
    Amendment to Rights Agreement, dated as of December 5, 2008, to the 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 Amendment
No. 1 to Form 8-A dated December 5, 2008)4.4
    
    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 dated November 20, 2006, or the November 2006 8-K)4.5
    
    Supplemental Indenture No. 1, dated as of November 17, 2006, by and between USG Corporation
and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit
4.02 to the November 2006 8-K)4.6
    
    Form of 7.750% Senior Note due 2018 (incorporated by reference to USG Corporations Current
Report on Form 8-K dated September 26, 2007)4.7
    
    Indenture, dated as of November 1, 2008, by and between USG Corporation and Wells Fargo Bank,
National Association, as trustee (incorporated by reference to Exhibit 4.1 to USG
Corporations Current Report on Form 8-K dated November 26, 2008, or the November 2008 8-K)4.8
    
    Supplemental Indenture No. 1, dated as of November 26, 2008, by and between USG Corporation
and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit
4.2 to the November 2008 8-K)




---



##### Table of Contents



4.9
    
    Agreement of Resignation, Appointment and Acceptance, dated as of February 11, 2009, by and
among USG Corporation, HSBC Bank USA, National Association and Wells Fargo Bank, N.A.
(incorporated by reference to Exhibit 10.1 to USG Corporations Quarterly Report on Form 10-Q
dated May 4, 2009)4.10
    
    Supplemental Indenture No. 2, dated as of August 4, 2009, between USG Corporation, each of
United States Gypsum Company, L&W Supply Corporation, USG Foreign Investments, Ltd. and USG
Interiors, Inc. and HSBC Bank USA, National Association, as trustee (incorporated by reference
to Exhibit 4.01 to USG Corporations Current Report on Form 8-K dated August 4, 2009)10.1
    
    Amendment and Restatement of USG Corporation Supplemental Retirement Plan, effective as of
January 1, 2007 and dated December 10, 2008 (incorporated by reference to Exhibit 10.1 to USG
Corporations Annual Report on Form 10-K dated February 20, 2009, or the 2008 10-K) *10.2
    
    Form of Employment Agreement (incorporated by reference to Exhibit 10.1 to USG Corporations
Current Report on Form 8-K dated October 2, 2008, or the First October 2008 8-K) *10.3
    
    Form of Change in Control Severance Agreement (Tier 1 Benefits) (incorporated by reference to
Exhibit 10.2 to the First October 2008 8-K) *10.4
    
    Form of Change in Control Severance Agreement (Tier 2 Benefits) (incorporated by reference to
Exhibit 10.3 to the First October 2008 8-K) *10.5
    
    Form of Indemnification Agreement (incorporated by reference to Exhibit 10.14 to USG
Corporations Annual Report on Form 10-K dated February 15, 2008, or the 2007 10-K) *10.6
    
    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 dated November 14, 2005) *10.7
    
    Amendment No. 1 to the USG Corporation Stock Compensation Program for Non-Employee Directors
(as Amended and Restated as of January 1, 2005) (incorporated by reference to Exhibit 10.1 to
USG Corporations Quarterly Report on Form 10-Q dated August 3, 2006, or the second quarter
2006 10-Q) *10.8
    
    Amendment No. 2 to the USG Corporation Stock Compensation Program for Non-Employee Directors
(as Amended and Restated as of January 1, 2005) (incorporated by reference to Exhibit 10.8 to
USG Corporations Quarterly Report on Form 10-Q dated April 30, 2007) *10.9
    
    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) *10.10
    
    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) *10.11
    
    Second Amended and Restated Credit Agreement, dated as of January 7, 2009 among USG
Corporation, the Lenders Party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent,
and Goldman Sachs Credit Partners, L.P., as Syndication Agent (incorporated by reference to
Exhibit 10.2 to USG Corporations Current Report on Form 8-K dated January 12, 2009, or the
January 2009 8-K)10.12
    
    Guarantee Agreement, dated as of January 7, 2009 among USG Corporation, the subsidiary
guarantors party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated
by reference to Exhibit 10.3 to the January 2009 8-K)




---



##### Table of Contents



10.13
    
    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 10.4 to the January 2009 8-K)10.14
    
    2009 Annual Management Incentive Program of USG Corporation (Executive Officers Only)
(incorporated by reference to Exhibit 10.1 to USG Corporations Current Report on Form 8-K
dated March 12, 2009) *10.15
    
    2010 Annual Management Incentive Program of USG Corporation (Executive Officers Only) * **10.16
    
    Annual Base Salaries of Named Executive Officers of USG Corporation (incorporated by
reference to Exhibit 10.3 to USG Corporations Quarterly Report on Form 10-Q dated April 29,
2008) *10.17
    
    USG Corporation Deferred Compensation Plan (incorporated by reference to Exhibit 10.31 to
USG Corporations Annual Report on Form 10-K dated February 16, 2007) *10.18
    
    First Amendment of USG Corporation Deferred Compensation Plan, effective as of April 1, 2007
and dated December 10, 2008 (incorporated by reference to Exhibit 10.25 to the 2008 10-K) *10.19
    
    USG Corporation Long-Term Incentive Plan (incorporated by reference to Annex C to the Proxy
Statement for the Annual Meeting of Stockholders of USG Corporation held on May 10, 2006, or
the 2006 Proxy Statement) *10.20
    
    Amendment No. 1 to the USG Corporation Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.8 to the second quarter 2006 10-Q) *10.21
    
    Form of USG Corporation Nonqualified Stock Option Agreement (incorporated by reference to
Exhibit 10.9 to the second quarter 2006 10-Q) *10.22
    
    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 dated March 28, 2007, or the
March 2007 8-K) *10.23
    
    Form of USG Corporation Restricted Stock Units Agreement (incorporated by reference to
Exhibit 10.10 to the second quarter 2006 10-Q) *10.24
    
    Form of USG Corporation Restricted Stock Units Agreement (Annual Grant) (incorporated by
reference to Exhibit 10.2 to the March 2007 8-K) *10.25
    
    Form of USG Corporation Restricted Stock Units Agreement (Retention Grant) (incorporated by
reference to Exhibit 10.3 to the March 2007 8-K) *10.26
    
    Form of USG Corporation Performance Shares Agreement (incorporated by reference to Exhibit
10.4 to the March 2007 8-K) *10.27
    
    Form of USG Corporation Nonqualified Stock Option Agreement (incorporated by reference to
Exhibit 10.36 to the 2008 10-K) *10.28
    
    Form of USG Corporation Restricted Stock Units Agreement (incorporated by reference to
Exhibit 10.37 to the 2008 10-K) *10.29
    
    Form of USG Corporation Performance Shares Agreement (incorporated by reference to Exhibit
10.38 to the 2008 10-K) *




---



##### Table of Contents



10.30
    
    Form of USG Corporation Nonqualified Stock Option Agreement * **10.31
    
    Form of USG Corporation Restricted Stock Units Agreement * **10.32
    
    Form of USG Corporation Performance Shares Agreement * **10.33
    
    Changes to Equity Awards for Compliance With Section 409A (incorporated by reference to
Exhibit 10.39 to the 2008 10-K) *10.34
    
    USG Corporation Management Incentive Plan (incorporated by reference to Annex B to the 2006
Proxy Statement) *10.35
    
    Equity Commitment Agreement, dated January 30, 2006, by and between USG Corporation and
Berkshire Hathaway Inc. (incorporated by reference to Exhibit 10.2 to USG Corporations
Current Report on Form 8-K dated January 30, 2006, or the January 2006 8-K)10.36
    
    Shareholders Agreement, entered into as of January 30, 2006, by and between USG Corporation
and Berkshire Hathaway Inc. (incorporated by reference to Exhibit 10.3 to the January 2006
8-K)10.37
    
    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 the November 2008 8-K)10.38
    
    Equity Purchase Agreement dated as of February 25, 2007 among L&W Supply Corporation, Joseph
George Zucchero, JCSG Holdings Corporation, the Joseph G. Zucchero Family Trust dated
September 12, 1998 and the entities listed on Exhibit A-1 thereto (incorporated by reference
to Exhibit 10.1 to USG Corporations Current Report on Form 8-K dated February 27, 2007)10.39
    
    Secured Loan Facility Agreement, dated October 21, 2008, between Gypsum Transportation
Limited and DVB Bank SE, as lender, agent and security trustee (incorporated by reference to
Exhibit 10.1 to USG Corporations Current Report on Form 8-K dated October 27, 2008, or the
Second October 2008 8-K)10.40
    
    Guarantee and Indemnity Agreement, dated October 21, 2008, between USG Corporation and DVB
Bank SE, as agent (incorporated by reference to Exhibit 10.2 to the Second October 2008 8-K)10.41
    
    Form of Deed of Covenants between Gypsum Transportation Limited and DVB Bank SE, as
mortgagee (incorporated by reference to Exhibit 10.3 to the Second October 2008 8-K)10.42
    
    Form of Deed of Assignment between Gypsum Transportation Limited and DVB Bank SE, as
assignee (incorporated by reference to Exhibit 10.4 to the Second October 2008 8-K)10.43
    
    Second Supplemental Agreement, dated November 10, 2009, to Secured Loan Facility Agreement
dated October 21, 2008 between Gypsum Transportation Limited, USG Corporation and DVB Bank SE,
as lender, agent and security trustee **10.44
    
    Credit Agreement, dated as of June 30, 2009, between CGC Inc. and The Toronto-Dominion Bank
(incorporated by reference to Exhibit 10.1 to USG Corporations Current Report on Form 8-K
dated July 6, 2009)10.45
    
    Securities Purchase Agreement, dated November 21, 2008, between USG Corporation and
Berkshire Hathaway Inc. (incorporated by reference to Exhibit 1.1 to the November 2008 8-K)10.46
    
    Securities Purchase Agreement, dated November 21, 2008, between USG Corporation and Fairfax




---



##### Table of Contents



Financial Holdings Limited (incorporated by reference to Exhibit 1.2 to the November 2008
8-K)10.47
    
    Registration Rights Agreement, dated as of November 26, 2008, between USG Corporation and
Fairfax Financial Holdings Limited (incorporated by reference to Exhibit 10.2 to the November
2008 8-K)21
    
    Subsidiaries **23
    
    Consent of Independent Registered Public Accounting Firm **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 **
 
 *
    
    Management contract or compensatory plan or arrangement**
    
    Filed or furnished herewith